10-K

UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549
FORM 10-K
(Mark One)
☒	ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
	For the fiscal year ended December 31, 2013
	Or
☐	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
	For the transition period from _________________ to _______________________
Commission file number: 000-51030
TearLab Corp.
(Exact name of registrant as specified in its charter)
Delaware		59-3434771
(State or other jurisdiction of incorporation or organization)		(I.R.S. Employer Identification Number)
9980 Huennekens St., Suite 100 San Diego, California		92121
(Address of principal executive offices)		(Zip Code)
Registrant's telephone number, including area code: (858) 455-6006
SECURITIES REGISTERED PURSUANT TO SECTION 12(b) OF THE ACT:
Title of each class COMMON STOCK, $0.001 PAR VALUE		Name of each exchange on which registered The Nasdaq Stock Market LLC (The Nasdaq Capital Market)
SECURITIES REGISTERED PURSUANT TO SECTION 12(G) OF THE ACT: NONE
Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes ☐   No ☒
Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. Yes ☐   No ☒
Indicate by check mark whether the Registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the Registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒   No ☐
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).    Yes ☒No ☐
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of the Registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. ☒
Indicate by check mark whether the Registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of "large accelerated filer," "accelerated filer" and "smaller reporting company" in Rule 12b-2 of the Exchange Act.
Large accelerated filer ☐         Accelerated filer ☒                          Non-accelerated filer ☐                             Smaller reporting company ☐
(Do not check if a smaller reporting company)
Indicate by check mark if the Registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐   No ☒
The aggregate market value of the voting common stock held by non-affiliates of the Registrant (assuming officers, directors and 10% stockholders are affiliates), based on the last sale price for such stock on June 30, 2013: $270,400,174. The Registrant has no non-voting common stock.
As of March  10, 2014, there were 33,573,735 shares of the Registrant's common stock outstanding.
DOCUMENTS INCORPORATED BY REFERENCE
Portions of the Registrant's Proxy Statement for the 2014 Annual Meeting of Stockholders of the Registrant to be held on June 11, 2014 are incorporated by reference into Part III of this Form 10-K.
The Registrant makes available free of charge on or through its website (http://www.tearlab.com) its Annual Report on Form 10-K, Quarterly Reports on Form 10-Q, Current Reports on Form 8-K and any amendments to those reports filed or furnished pursuant to Section 13(a) or 15(d) of the Securities Exchange Act of 1934. The material is made available through the Registrant's website as soon as reasonably practicable after the material is electronically filed with or furnished to the U.S. Securities and Exchange Commission, or SEC. All of the Registrant's filings may be read or copied at the SEC's Public Reference Room at 100 F Street, N.E., Room 1580, Washington D.C. 20549. Information on the hours of operation of the SEC's Public Reference Room can be obtained by calling the SEC at 1-800-SEC-0330. The SEC maintains a website (http://www.sec.gov) that contains reports and proxy and information statements of issuers that file electronically.

TEARLAB CORPORATION

Form 10-K – ANNUAL REPORT

For the Fiscal Year Ended December 31, 2013

Table of Contents

		Page
	PART I
Item 1.	Business	3
Item 1A.	Risk Factors	11
Item 2.	Properties	20
Item 3.	Legal Proceedings	21
Item 4.	Mine Safety Disclosures	21
	PART II
Item 5.	Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities	21
Item 6.	Selected Financial Data	23
Item 7.	Management's Discussion and Analysis of Financial Condition and Results of Operations	25
Item 7A.	Quantitative and Qualitative Disclosures about Market Risk	38
Item 8.	Financial Statements and Supplementary Data	39
Item 9.	Changes in and Disagreements With Accountants on Accounting and Financial Disclosure	64
Item 9A.	Controls and Procedures	64
Item 9B.	Other Information	65
	PART III
Item 10.	Directors, Executive Officers and Corporate Governance	66
Item 11.	Executive Compensation	66
Item 12.	Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters	66
Item 13.	Certain Relationships and Related Transactions, and Director Independence	66
Item 14.	Principal Accountant Fees and Services	66
	PART IV
Item 15.	Exhibits and Financial Statement Schedules	67

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PART I

SPECIAL NOTE REGARDING FORWARD LOOKING STATEMENTS

This Annual Report on Form 10-K contains forward-looking statements relating to future events and our future performance within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. In some cases, you can identify forward-looking statements by terms such as "may", "will", "should", "could", "would”, “hope", "expects", "plans", "intends", "anticipates", "believes", "estimates", "projects", "predicts", "potential" and similar expressions intended to identify forward-looking statements. These forward-looking statements include, without limitation, statements relating to future events, future results, and future economic conditions in general and statements about:

● Our future strategy, structure, and business prospects;

● The planned commercialization of our current product;

● The size and growth of the potential markets for our product and technology;

● The adequacy of current, and the development of new distributor, reseller, and supplier relationships, and our efforts to expand relationships with distributors and resellers in additional countries;

● Our anticipated expansion of United States and international sales and operations;

● Our ability to obtain and protect our intellectual property and proprietary rights;

● The results of our clinical trials;

● Our plan to continue to develop and execute our conference and podium strategy to ensure visibility and evidence-based positioning of the TearLab® Osmolarity System among eye care professionals;

● Our anticipated sales to customers in the United States.

● Our ability to obtain reimbursement for patient testing with the TearLab System;

● Our efforts to assist our customers in obtaining their CLIA waiver or providing them with support from certified professionals;

● The adequacy of our funding and our forecast of the period of time through which our financial resources will be adequate to support our operations; and

● Use of cash, cash needs and ability to raise capital.

These statements involve known and unknown risks, uncertainties and other factors, including the risks described in Part I, Item 1A. of this Annual Report on Form 10-K, which may cause our actual results, performance or achievements to be materially different from any future results, performances, time frames or achievements expressed or implied by the forward-looking statements. Given these risks, uncertainties and other factors, you should not place undue reliance on these forward-looking statements. Information regarding market and industry statistics contained in this Annual Report on Form 10-K is included based on information available to us that we believe is accurate. It is generally based on academic and other publications that are not produced for purposes of securities offerings or economic analysis. We have not reviewed or included data from all sources and cannot assure you of the accuracy of the market and industry data we have included.

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Corporate Information

TearLab Corp. was incorporated as OccuLogix, Inc. in Delaware in 2002. Unless the context requires otherwise, in this report the terms "the Company," "we," "us" and "our" refer to TearLab Corp. and our subsidiaries. References to "$" or "dollars" shall mean U.S. dollars unless otherwise indicated. References to "C$" shall mean Canadian dollars.

ITEM 1.     Business.

Overview

We are an in-vitro diagnostic company based in San Diego, California. We have commercialized a proprietary tear testing platform, the TearLab® Osmolarity System that enables eye care practitioners to test for highly sensitive and specific biomarkers using nanoliters of tear film at the point-of-care. Our first product measures tear film osmolarity for the diagnosis of Dry Eye Disease, or DED. Our results are included in our financial statements, which are included under Item 8 to this Annual Report on Form 10-K.

TearLab Research, Inc.

TearLab Research, Inc., our wholly-owned subsidiary, develops technologies to enable eye care practitioners to test a wide range of biomarkers (chemistries, metabolites (i.e. glucose), genes and proteins) at the point-of-care. Commercializing that tear testing platform is now the focus of our business.

The Company's first product, the TearLab® Osmolarity System, enables the rapid measurement of tear osmolarity in the doctor's office. Osmolarity is a quantitative and highly specific biomarker that has been shown to assist in the diagnosis and disease management of DED. Based on data from the largest studies of dry eye to date, the Women’s Health Study (WHS), and the Physicians’ Health Study (PHS), and other studies, it has been estimated that about 3.23 million women and 1.68 million men, for a total of 4.91 million Americans 50 years and older have dry eye. Tens of millions more have less severe symptoms and probably a more episodic manifestation of the disease that is notable only during contact with some adverse contributing factor(s), such as low humidity or contact lens wear. The innovation of the TearLab® Osmolarity System is its ability to precisely and rapidly measure osmolarity in nanoliter volumes of tear samples, using a highly efficient and novel tear collection system at the point of care. Historically, eye care researchers have relied on expensive instruments to perform tear biomarker analysis. In addition to their cost, these conventional systems are slow, highly variable in their measurement readings, and not categorized as waived by the United States Food and Drug Administration, or FDA, under regulations promulgated under the Clinical Laboratory Improvement Amendments, or CLIA..

The TearLab® Osmolarity System consists of the following three components: (1) the TearLab disposable, which is a single-use microfluidic microchip; (2) the TearLab Pen, which is a hand-held device that interfaces with the TearLab disposable; and (3) the TearLab Reader, which is a small desktop unit that allows for the docking of the TearLab Pen and provides a quantitative reading for the operator.

In October 2008, the TearLab® Osmolarity System received CE mark approval, clearing the way for sales in the European Union and all countries recognizing the CE mark. In connection with the CE mark clearance, while our current focus is on developing our business in the United States, we do have agreements with numerous distributors for distribution of the TearLab® Osmolarity System in Europe and Asia.

On May 19, 2009, we announced that we received 510(k) clearance from the FDA. We submitted a CLIA waiver application for the TearLab® Osmolarity System to the FDA on May 27, 2010. On March 4, 2011, we announced that we had received a communication from the FDA that the data we submitted was not sufficient to gain approval of our CLIA waiver application. On December 5, 2011, we announced that we had received a communication from the FDA indicating that, based on a supervisory review of the Company's appeal, the FDA had granted our petition for a waiver under CLIA for the TearLab Osmolarity System. On January 23, 2012, we announced that after reviewing and accepting labeling submitted to it by the Company, the FDA had granted the waiver categorization under CLIA for the TearLab® Osmolarity System. The CLIA waiver reduces the regulatory paperwork and related administrative time for customers. In the United States, we sell directly to our customers and do not utilize distributors.

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On December 8, 2009 we announced that Health Canada issued a Medical Device License for the TearLab® Osmolarity System. The Health Canada license allowed us to immediately begin marketing the system in Canada. On August 20, 2009, we entered into an agreement with a distributor, Science with Vision, for exclusive distribution of the TearLab Osmolarity System in Canada. We began selling products through the Canadian distributor in 2010.

On September 3, 2013, the Company and Science with Vision Inc. agreed to terminate the distribution agreement including exclusive distribution rights of TearLab products and began selling directly in Canada.

Current Status and Recent Financing

On July 16, 2009, we announced that we had entered into and closed an agreement with certain investors whereby the investors agreed to provide financing, or the Financing, to the Company through the purchase of convertible secured notes, in the aggregate amount of $1.55 million. On August 31, 2009, an additional $200,000 of financing was received by the Company to bring the aggregate total funding received to $1.75 million. In connection with the Financing, the Company issued warrants to purchase shares of common stock equal in value to ten percent of the aggregate principal amount of the notes. The exercise price of the warrants is $1.60 per common share. On June 13, 2011 the outstanding liability related to the Notes was converted to common stock. The conversion price of the Notes was $1.3186 per share. We recognized interest expense related to the Notes of $0, $0, and $95,000 for the years ended December 31, 2013, 2012, and 2011, respectively.

On January 8, 2010, we obtained commitments for the sale of 3,244,766 shares of our common stock for an aggregate of approximately $3,000,000 in a private placement. 1,886,291 of such shares were issued in January 2010 with the remainder being issued in March 2010, following stockholder approval for the sale of such additional shares. The price per share, sold in the private placement was $0.92456, which is equal to 80% of the volume weighted average price of our common stock for the 10 trading days ending on the day immediately preceding the January 8, 2010 closing date.

On March 18, 2010, we sold 1,552,795 shares of our common stock and warrants to purchase an additional 621,118 shares of our common stock for gross proceeds of approximately $5,000,000. The purchase price for the shares and warrants was $3.22 per unit (each unit consisting of one share and a warrant to purchase 0.4 shares of common stock). The exercise price of the warrants is $4.00 per share. The warrants were exercisable at any time during the period commencing on September 19, 2010 and ending on September 19, 2011. These warrants were not exercised and expired at the end of the period.

On June 13, 2011, the Company issued 1,629,539 shares of its common stock and warrants to purchase 109,375 shares of its common stock in consideration of conversion and retirement of the Company's outstanding July and August 2009 debt obligations in the aggregate amount of $2,149,000, with associated issuance costs of $41,000. The exercise price of the warrants is $1.60 per common share representing the price per share equal to the closing bid price per share of the Company's common stock on the NASDAQ stock market on July 15, 2009. The warrants have a five year life and to date no warrants have been exercised.

On June 30, 2011, the Company sold 3,846,154 shares of its common stock and warrants to purchase approximately 3,846,154 shares of its common stock for gross proceeds of approximately $7,000,000. The investors purchased the shares and warrants for $1.82 per unit (each unit consisting of one share and a warrant to purchase one share of common stock). The exercise price of the warrants is $1.86 per share. The warrants are exercisable at any time until June 30, 2016. During 2013, 1,571,136 warrants were exercised for gross proceeds of $676,000.

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On April 16, 2012, the Company closed an underwritten public offering of 3.45 million shares of its common stock at a price to the public of $3.60 per share. The Company received gross proceeds of $12,420,000, with associated costs of $1,194,000.

On July 18, 2012, the Company closed an underwritten registered direct financing of 2.5 million shares of its common stock at a price of $3.17 per share. The Company received gross proceeds of $7,925,000, with associated costs of $524,000.

On September 17, 2012, the Company issued 316,779 shares of restricted stock units to its management team as settlement of an outstanding liability for previously accrued bonuses related to achievement of CLIA waiver status. The costs basis of the shares granted was $3.72, the closing price of the Company's stock on the date of grant, for a total value of $1,181,000. The shares were issued in accordance with the Company's amended 2002 Stock Incentive Plan and were fully vested on the date of grant.

On July 30, 2013, the Company closed an underwritten public offering of 2.99 million shares of its common stock at a price to the public of $13.50 per share. The Company received gross proceeds of $40,365,000, with associated costs of $3,036,000.

Industry

Point-of-care Testing and Dry Eye Disease, or DED

The global market for point-of-care testing is currently $4.5 billion annually or 15% of the $30 billion global market for in-vitro diagnostic products. Approximately 75% of all laboratory tests today are performed at centralized clinical laboratories. However, there is an increasing frequency of diagnostic testing being performed at the point-of-care due to several factors, including a need for rapid testing in acute care situations, the benefits of patient monitoring and disease management, streamlining therapeutic decision making and the overall trend toward personalized medicine. We believe that advances in bio-detection technologies that can simplify and accelerate the rate of performing complex diagnostic tests at the point-of-care, and that are reimbursed, will drive utilization and overall point-of-care testing market growth.

TearLab's first product is the TearLab® Osmolarity System. This test can be performed at the point-of-care for the measurement of osmolarity, a quantitative and highly specific biomarker that has shown to assist in the diagnosis and disease management of DED. There are estimated to be between 20 and 40 million people with DED in the United States alone, and this condition is estimated to account for up to one-third of all visits to U.S. eye care professionals.

Each time a person blinks, his or her eyes are resurfaced with a thin layer of a complex fluid known as the tear film. The tear film works to protect eyes from the outside world. Bacteria, viruses, sand, freezing winds and salt water (inclusive of most environmental factors) will not damage eyes when the tear film is intact. However, when compromised, a deficient tear film can be an exceedingly painful and disruptive condition. The tear film consists of three components: (i) an innermost mucin layer (produced by the surface cells); (ii) the aqueous layer (the water in tears, produced by the lacrimal gland); and (iii) an oily lipid layer which limits evaporation of the tears (produced by the meibomian glands, located at the margins of the eyelids). The apparatus of the ocular surface forms an integrated unit. When working correctly, the tear film presents a smooth optical surface essential for clear vision and proper immunity. Androgen deficiency and chronic inflammation of the lacrimal or meibomian gland may lead to the condition known as dry eye, which has been likened to arthritis of the eye, and results in a compromised, fragile tear film.

DED is often seen as a result of aging, diabetes, prostate cancer therapy, HIV, autoimmune diseases such as Sjögren's syndrome and rheumatoid arthritis, LASIK surgery, contact lens wear, menopause and as a side effect of hormone replacement therapy. Numerous commonly prescribed and over-the-counter medications also can cause, or contribute to, the manifestation of DED.

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There are millions of Americans who suffer from contact lens-induced DED, and 10% to 15% of these patients revert to frame wear annually due to dryness and discomfort. There are between 500,000 and 1.5 million LASIK procedures performed in the U.S each year, and about 50% of patients experience DED post-operatively.

Diagnostic Alternatives for Dry Eye Disease

Existing diagnostic assays are highly subjective, do not correlate well with symptoms, are invasive for patients and may require up to an hour of operator time to perform. All of these factors have constrained the diagnosis and treatment of the DED patient population. As physicians have not had access to objective, quantitative diagnostic assays that correlate well with symptoms and disease pathogenesis, it has been difficult for them to differentiate DED symptoms from other eye diseases that present with very similar symptoms, such as non-infectious ocular allergies or infectious bacterial or viral diseases. To treat DED effectively and to mitigate the emotional and physical effects of this disease, it will be critical to equip physicians with objective, quantitative measurements of disease pathogenesis so they can determine more accurately the most efficacious treatments for their patients.

Osmolarity in DED presents itself as an increase in the salt concentration of the tear film. For over 50 years, studies have shown that tear film osmolarity is the ideal clinical marker for diagnosing DED, providing an objective, quantitative measurement of disease pathogenesis. Measuring osmolarity also serves as an effective disease management tool by providing physicians with an ability to personalize therapeutic intervention and to track patient outcomes quantitatively. Osmolarity testing could also provide physicians with a tool to identify patients at risk for dropping out of contact lens wear early in disease progression, as well as an invaluable test to guide the type and duration of therapy prior to, and following refractive surgery.

The main challenge in measuring osmolarity at the point-of-care is the vanishingly small volume of tear available for testing. Older laboratory osmometers require upwards of ten microliters of fluid to produce a single reading. In addition, these instruments are not particularly suitable for use in a physician's office, since they require continual calibration, cleaning and maintenance. Existing osmometers currently are marketed primarily to reference and hospital laboratories for the measurement of osmolarity in blood, urine and other serum samples.

TearLab's Product

Our TearLab® Osmolarity System is an integrated testing system comprised of: (1) the TearLab disposable, which is a single-use microfluidic microchip; (2) the TearLab Pen, which is a hand-held device that interfaces with the TearLab disposable; and (3) the TearLab Reader, which is a small desktop unit that allows for the docking of the TearLab Pen and provides a quantitative reading for the operator. The innovation of the TearLab® Osmolarity System is its ability to measure precisely rapidly, and inexpensively biomarkers in nanoliter volumes of tear samples or approximately 1,000 times less volume than required for older laboratory devices.

The operator of the TearLab® Osmolarity System, most likely a technician, collects the tear sample from the patient's eye in the TearLab disposable, using the TearLab Pen. After the tear has been collected, the operator places the Pen into the Reader. The TearLab Reader then will display an osmolarity reading to the operator. Following the completion of the test, the TearLab disposable will be discarded and a new TearLab disposable will be readied for the next test. The entire process, from sample to answer, should require approximately two minutes or less to complete.

We are currently engaged in commercial manufacturing of the TearLab® Osmolarity System. In October 2008, the TearLab® Osmolarity System received CE mark approval, clearing the way for sales in the European Union and all countries recognizing the CE mark. In connection with the CE mark clearance, we have entered into multi-year agreements with numerous distributors for distribution of the TearLab® Osmolarity System. In December 2009, Health Canada issued a Medical Device License for the TearLab® Osmolarity System allowing us to market our product in Canada.

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In May 2009, we received 510(k) approval from the FDA to aid in the diagnosis of patients with signs and symptoms of DED. The 510(k) enables us to sell our product to customers that have moderate or high complexity CLIA certificates in the United States. In addition, we have been awarded ISO 13485 certification for our quality management system. ISO 13485 is an internationally-accepted standard of quality management for medical device manufacturers.

On March 4, 2011, the Company announced that it was in receipt of a communication from the FDA indicating that the data submitted by the Company was not sufficient to gain approval of its CLIA waiver categorization application for the TearLab® Osmolarity System. The Company's appealed to the FDA and on December 5, 2011, we announced that we had received a communication from the FDA indicating that, based on a supervisory review of the Company’s appeal, the FDA had granted our petition for a waiver under CLIA for the TearLab® Osmolarity System. On January 23, 2012, we announced that after reviewing and accepting labeling submitted to it by the Company, the FDA had granted the Waiver categorization under CLIA for the TearLab® Osmolarity System.

While our current focus is on building our business in the United States, we do have distributorship agreements in place in Europe and Asia.

Competition

To date, we have identified one laboratory technology that claims to be able to measure the osmolarity of nanoliter tear samples, the LacriPen. This device is listed as "under development" by Lacrisciences, LLC (Washington, DC, US). This device does not have FDA 510(k) clearance nor a CLIA waiver, and is not at the commercial stage at this time. One other non-osmolarity based in vitro diagnostic test for dry eye has recently been developed by RPS, Inc., of Sarasota Florida. RPS has commercialized a tear test for dry eye that measures MMP-9 in Canada. This test is not yet FDA cleared and does not have a CLIA waiver.  In addition, ATD (Advanced Tear Diagnostics) has a CLIA classification of Moderately Complex in the United States. This system measures lactoferrin and IgE in human tears.

As there are no commercially available instruments to measure tear film osmolarity at the point-of-care, TearLab views existing DED diagnostic tests, such as the Schirmer Test and ocular surface staining, as its primary source of competition.

Tear film break-up time, or TBUT, is another test performed to evaluate tear film stability. However, it is subjective, requires a physician to instill a carefully controlled amount of fluorescein dye into the eye and requires a stopwatch to determine the endpoint. TBUT has been shown to be unreliable as a determinant of DED since shortened TBUT does not always correlate well with other signs or symptoms.

Tests like impression cytology and corneal staining, although indicative of relatively late stage phenomena in DED, are subjective, qualitative and generally do not correlate to disease pathogenesis. The Schirmer Test is an imprecise marker of tear function since its diagnostic results vary significantly.

Although, at the present time, there does not appear to be a direct competitor to the TearLab® Osmolarity System, many industry participants have much greater resources than us. This means that those industry participants may be able to make greater investments in research and development, marketing, promotion and sales, than we are capable of right now or will be capable of during the foreseeable future.

Principal Suppliers

We rely on two suppliers based in the United States for the manufacture of the Readers and Pens which are key components of the TearLab® Osmolarity System. We also rely on a single supplier, MiniFAB (Aust) Pty Ltd. located in Australia, for the manufacture of the test cards which is also a key component of the TearLab® Osmolarity System.

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Patents and Proprietary Rights 

We own or have exclusive licenses to multiple patents and applications relating to the TearLab® Osmolarity System and related technology and processes:

• eight issued U.S. patents; relating to the TearLab® Osmolarity System and related technology and processes and have applied for a number of other patents in the United States and other jurisdictions;

• three pending U.S. patent applications;

• eighteen pending patent applications in countries/regions other than the United States, including six applications in Europe, four applications in Japan, three applications in Canada, two in Australia, one application in Brazil and two applications in Mexico; and

• one granted Australian patent, one granted Chinese patent and one granted Mexican patent.

We intend to rely on know-how, continuing technological innovation and in-licensing opportunities to further develop our proprietary position. Our ability to obtain intellectual property protection for the TearLab® Osmolarity System and related technology and processes, and our ability to operate without infringing the intellectual property rights of others and to prevent others from infringing our intellectual property rights, will have a substantial impact on our ability to succeed in our business. Although we intend to seek to protect our proprietary position by, among other methods, continuing to file patent applications, the patent position of companies like TearLab is generally uncertain and involves complex legal and factual questions. Our ability to maintain and solidify a proprietary position for our technology will depend on our success in obtaining effective claims and enforcing those claims once granted. We do not know whether any part of our patent applications will result in the issuance of any patents. Our issued patents, those that may be issued in the future or those licensed to us, may be challenged, invalidated or circumvented, which could limit our ability to stop would-be competitors from marketing tests identical to the TearLab® Osmolarity System.

In addition to patent protection, we have registered the TearLab trademark in the United States, the European Union, Japan, Korea, Mexico, the Russian Federation and Turkey. Our TearLab trademark applications are pending in Canada and China.

Government Regulation

Government authorities in the United States and other countries extensively regulate, among other things, the research, development, testing, manufacture, labeling, promotion, advertising, distribution and marketing of our product, which is a medical device. In the United States, the FDA regulates medical devices under the Federal Food, Drug, and Cosmetic Act and implementing regulations. Failure to comply with the applicable FDA requirements, both before and after approval, may subject us to administrative and judicial sanctions, such as a delay in approving or refusal by the FDA to approve pending applications, warning letters, product recalls, product seizures, total or partial suspension of production or distribution, injunctions, administrative fines or criminal prosecution.

Unless exempted by regulation, medical devices may not be commercially distributed in the United States unless they have been cleared or approved by the FDA. Medical devices are classified into one of the three classes, Class I, II or III, on the basis of the controls necessary to reasonably assure their safety and effectiveness. Class I devices are subject to general controls, such as labeling, pre-market notification and adherence to good manufacturing practices. The TearLab® Osmolarity System is a Class I, non-exempt device and qualifies for the 510(k) procedure. Under the FDA's Section 510(k) procedure, the manufacturer provides a pre-market notification that it intends to begin marketing the product, and shows that the product is substantially equivalent to another legally marketed product, that it has the same intended use and is as safe and effective as a legally marketed device and does not raise different questions of safety and effectiveness than does a legally marketed device. In some cases, the submission must include data from human clinical studies. Marketing may commence when the FDA issues a clearance letter finding substantial equivalence. On May 19, 2009, we announced that we received FDA 510(k) clearance of the TearLab® Osmolarity System.

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After a device receives 510(k) clearance, any modification to the device that could significantly affect its safety or effectiveness, or that would constitute a major change in its intended use, would require a new 510(k) clearance or an approval of a Premarket Approval, or PMA. A PMA is the FDA process of scientific or regulatory review to evaluate the safety and effectiveness of Class III medical devices which are those devices which support or sustain human life, are of substantial importance in preventing impairment of human health, or which present a potential, unreasonable risk of illness or injury. Although the FDA requires the manufacturer to make the initial determination regarding the effect of a modification to the device that is subject to 510(k) clearance, the FDA can review the manufacturer's determination at any time and require the manufacturer to seek another 510(k) clearance or an approval of a PMA.

CLIA is intended to ensure the quality and reliability of clinical laboratories in the United States by mandating specific standards in the areas of personnel qualifications, administration, and participation in proficiency testing, patient test management, quality control, quality assurance and inspections. The regulations promulgated under CLIA establish three levels of in vitro diagnostic tests: (1) waiver; (2) moderately complex; and (3) highly complex. The standards applicable to a clinical laboratory depend on the level of diagnostic tests it performs. A CLIA waiver is available to clinical laboratory test systems if they meet certain requirements established by the statute. Waived tests are simple laboratory examinations and procedures employing methodologies that are so simple and accurate as to render the likelihood of erroneous results negligible or to pose no reasonable risk of harm to patients if the examinations or procedures are performed incorrectly. These tests are waived from regulatory oversight of the user other than the requirement to follow the manufacturer's labeling and directions for use.

On March 4, 2011, the Company announced that it was in receipt of a communication from the FDA indicating that the data submitted by the Company was not sufficient to gain approval of its CLIA waiver categorization application for the TearLab® Osmolarity System. The Company appealed to the FDA and on December 5, 2011, we announced that we had received a communication from the FDA indicating that, based on a supervisory review of the Company's appeal, the FDA had granted our petition for a waiver under CLIA for the TearLab® Osmolarity System. On January 23, 2012, we announced that after reviewing and accepting labeling submitted to it by the Company, the FDA had granted the waiver categorization under CLIA for the TearLab® Osmolarity System.

Regardless of whether a medical device requires FDA clearance or approval, a number of other FDA requirements apply to the device, its manufacturer and those who distribute it. Device manufacturers must be registered and their products listed with the FDA, and certain adverse events and product malfunctions must be reported to the FDA. The FDA also regulates the product labeling, promotion and, in some cases, advertising, of medical devices. In addition, manufacturers and their suppliers must comply with the FDA's quality system regulation which establishes extensive requirements for quality and manufacturing procedures. Thus, suppliers, manufacturers and distributors must continue to spend time, money and effort to maintain compliance, and failure to comply can lead to enforcement action. The FDA periodically inspects facilities to ascertain compliance with these and other requirements.

Research and Development Expenditure

Our research and development expense was $1.1 million, $2.2 million and $1.3 million in the years ended December 31, 2013, 2012 and 2011, respectively.

Employees

On December 31, 2013, we had 101 full-time employees.

Available Information

Our corporate Internet address is www.tearlab.com. At the Investor Relations section of this website, we make available free of charge our Annual Report on Form 10-K, our Annual Proxy statement, our quarterly reports on Form 10-Q, any Current Reports on Form 8-K, and any amendments to these reports, as soon as reasonably practicable after we electronically file them with, or furnish them to, the U.S. Securities and Exchange Commission, or the SEC. The information found on our website is not part of this Annual Report on Form 10-K. In addition to our website, the SEC maintains an Internet site at www.sec.gov that contains reports, proxy and information statements, and other information regarding us and other issuers that file electronically with the SEC.

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ITEM 1A.     RISK FACTORS

This Annual Report contains forward-looking statements that involve risks and uncertainties that could cause our actual results to differ materially from those discussed in this Annual Report.  These risks and uncertainties include the following:

Risks Relating to our Business

 Our near-term success is highly dependent on the success of the TearLab® Osmolarity System, and we cannot be certain that it will be successfully commercialized in the United States.

 The TearLab® Osmolarity System is currently our only product.  Our product is currently sold outside of the United States pursuant to CE mark approval; in Canada pursuant to a Health Canada Medical Device License; and in the United States as a result of having received 510(k) approval from the U.S. Food and Drug Administration, or the FDA, to market the TearLab® Osmolarity System to those reference and physician operated laboratories with Clinical Laboratory Improvement Act, or CLIA, waiver certifications.   Even though the TearLab® Osmolarity System has received all regulatory approvals in the United States, it may never be successfully commercialized.  If the TearLab® Osmolarity System is not as successfully commercialized as expected, we may not be able to generate revenue, become profitable or continue our operations.  Any failure of the TearLab® Osmolarity System to be successfully commercialized in the United States would have a material adverse effect on our business, operating results, financial condition and cash flows and could result in a substantial decline in the price of our common stock.

Our near-term success is highly dependent on increasing sales of the TearLab® Osmolarity System outside the United States, and we cannot be certain that we will successfully increase such sales.

Our product is currently sold outside of the United States pursuant to CE mark approval and Health Canada Approval in Canada.  Our near-term success is highly dependent on increasing our international sales.  We may also be required to register our product with health departments in our foreign market countries.  A failure to successfully register in such markets would negatively affect our sales in any such markets.  In addition, import taxes are levied on our product in certain foreign markets.  These foreign markets include Turkey, Spain, Italy and France.  Other countries may adopt taxation codes on imported products.  Increases in such taxes or other restrictions on our product could negatively affect our ability to import, distribute and price our product.

Our commitment to purchase minimum levels of product from our suppliers may result in the purchase of excess quantities of product if we are not able to successfully commercialize the TearLab® Osmolarity System.

On August 1, 2011, we entered into a manufacturing and development agreement, or the Manufacturing Agreement, with MiniFAB (Aust) Pty Ltd, or MiniFAB.  Pursuant to the terms of the Manufacturing Agreement, MiniFAB will manufacture and supply test cards for us.  The Manufacturing Agreement specifies minimum order quantities that will require us to purchase approximately USD $17.4 million (AUD$19.7 million) in test cards from MiniFAB for the years 2014 and 2015.  Each year, we must purchase the covered test cards exclusively from MiniFAB until the minimum order quantity for such year has been met.  The Manufacturing Agreement has a ten-year initial term and may be terminated by either party if the other party is in breach or becomes insolvent.  If terminated for any reason other than a default by MiniFAB, we will be obligated to pay a termination fee based on the cost of products manufactured by MiniFAB, but not yet invoiced, repayment of capital invested by MiniFAB, less depreciation calculated in accordance with Australian accounting standards, and the expected profit to MiniFAB had the remaining minimum order quantities been purchased by us.

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The usage of test cards purchased under the minimum purchase commitment with MiniFAB is predicated upon significant increases in revenue from the TearLab products as compared to the year ended December 31, 2013 and prior periods. If we are not able to commercialize the TearLab® Osmolarity System sufficiently to sell the minimum order quantities required by the MiniFab Agreement, we will be required to purchase test cards that we may be unable to use and that may become obsolete, which would have a potentially adverse effect on our financial position, results of operations and cash flows.

Our limited working capital and history of losses have resulted in doubts as to whether we will be able to continue as a going concern.

In the years ended December 31, 2013 and 2012, we have prepared our consolidated financial statements on the basis that we would continue as a going concern.  However, we have incurred losses in each year since our inception. Our net working capital balance at December 31, 2013 was $34.3 million, which represents a $25.0 million increase in the balance from our working capital of $9.3 million at December 31, 2012.  

Although current levels of cash flows are negative, management believes the Company's existing cash will be sufficient to cover its operating and other cash demands for at least the next 12 months.

 Our consolidated financial statements do not include any adjustments relating to the recoverability and classification of recorded asset amounts or the amounts and classification of liabilities that might be necessary if we were not able to continue as a going concern.

We have incurred losses since inception and anticipate that we will incur continued losses for the foreseeable future.

 We have incurred losses in each year since our inception.  As of December 31, 2013, we had an accumulated deficit of $435.7 million.  Our losses have resulted primarily from expenses incurred in research and development of our product candidates from the former retina and glaucoma business divisions.  We do not know when or if we will successfully commercialize the TearLab® Osmolarity System in the United States. As a result, and because of the numerous risks and uncertainties facing us, it is difficult to provide the extent of any future losses or the time required to achieve profitability, if at all.  Any failure of our product to become and remain profitable would adversely affect the price of our common stock and our ability to raise capital and continue operations.

We have outstanding liabilities, which could adversely affect our ability to adjust our business to respond to competitive pressures and to obtain sufficient funds to satisfy our future research and development needs, and to defend our intellectual property.

As of December 31, 2013, our total liabilities were approximately $8.6 million.   Our significant liability service requirements could adversely affect our ability to operate our business and may limit our ability to take advantage of potential business opportunities.  For example, our liabilities present the following risks:

● our liabilities increase our vulnerability to economic downturns and adverse competitive and industry conditions and could place us at a competitive disadvantage compared to those of our competitors that are less leveraged;

● our liabilities could limit our flexibility in planning for, or reacting to, changes in our business and our industry and could limit our ability to pursue other business opportunities, borrow money for operations or capital in the future and implement our business strategies; and

● our liabilities may restrict us from raising additional funds on satisfactory terms to fund working capital, capital expenditures, product development efforts, strategic acquisitions, investments and alliances, and other general corporate requirements.

 If we are at any time unable to generate sufficient cash flow to service our liabilities when payment is due, we may be required to attempt to renegotiate the terms of the instruments relating to the liabilities, seek to refinance all or a portion of the liabilities or obtain financing.  There can be no assurance that we will be able to successfully renegotiate such terms, that any such refinancing would be possible or that any additional financing could be obtained on terms that are favorable or acceptable to us.

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We may not be able to raise the capital necessary to fund our operations.

 Since inception, we have funded our operations through debt and equity financings, including the 2009 convertible secured debt financings, the 2010 private placement and registered direct common stock financings and the 2011 private placement financings, the exercise of warrants in March 2012 by warrant holders, the April 2012 public offering financing,the July 2012 registered direct financing, and underwritten public offering of common stock in July 2013.As of the date of filing of this quarterly Form 10-K, we estimate that our cash and cash equivalents will be sufficient to meet our operating activities and other demands for at least the next 12 months. However, our prospects for obtaining additional financing are uncertain. Additional capital may not be available on terms favorable to us, or at all.  If financing is available, it may not be sufficient for us to continue as a going concern and it may be on terms that adversely affect the interest of our existing stockholders.  In addition, future financings could result in significant dilution of existing stockholders and adversely affect the economic interests of existing stockholders.

We will face challenges in bringing the TearLab® Osmolarity System to market in the United States and may not succeed in executing our business plan.

 There are numerous risks and uncertainties inherent in the development of new medical technologies.  In addition to our requirement for additional capital, our ability to bring the TearLab® Osmolarity System to market in the United States and to execute our business plan successfully is subject to the following risks, among others:

● Our clinical trials may not succeed.  Clinical testing is expensive and can take longer than originally anticipated.  The outcomes of clinical trials are uncertain, and failure can occur at any stage of the testing.   We could encounter unexpected problems, which could result in a delay in efforts to complete clinical trials supporting our commercialization efforts.

● The TearLab® Osmolarity System is rated under a CLIA waiver certification which requires our customers to be certified under the CLIA waiver requirements to be reimbursed under Medicare, including certain parallel state requirements. If our customers are unwilling or unable to comply with such requirements, it could have an adverse effect on their acceptance of and on our ability to market the TearLab® Osmolarity System in the United States.

● Our suppliers and we will be subject to numerous FDA requirements covering the design, testing, manufacturing, quality control, labeling, advertising, promotion and export of the TearLab® Osmolarity System and other matters.  If our suppliers or we fail to comply with these regulatory requirements, the TearLab® Osmolarity System could be subject to restrictions or withdrawals from the market and we could become subject to penalties.

● Even though we successfully obtained the sought-after FDA approvals, we may be unable to commercialize the TearLab® Osmolarity System successfully in the United States.  Successful commercialization will depend on a number of factors, including, among other things, achieving widespread acceptance of the TearLab® Osmolarity System among physicians, establishing adequate sales and marketing capabilities, addressing competition effectively, the ability to obtain and enforce patents to protect proprietary rights from use by would-be competitors, key personnel retention and ensuring sufficient manufacturing capacity and inventory to support commercialization plans.

Our business is subject to health care industry cost-containment measures that could result in reduced sales of our TearLab® Osmolarity System.

Most of our customers rely on third-party payers, including government programs and private health insurance plans, to reimburse some or all of the cost of the procedures which use our TearLab® Osmolarity System. The continuing efforts of governmental authorities, insurance companies, and other health care payers to contain or reduce these costs could lead to patients being unable to obtain approval for payment from these third-party payers. If patients cannot obtain third-party payer payment approval, the use of our TearLab® Osmolarity System may decline significantly and our customers may reduce or eliminate the use of our system. The cost-containment measures that health care providers are instituting, both in the U.S. and internationally, could harm our ability to operate profitably. For example, managed care organizations have successfully negotiated volume discounts for pharmaceuticals. While this type of discount pricing does not currently exist for the medical systems we supply, if managed care or other organizations were able to affect discount pricing for such systems, it could result in lower prices to our customers from their customers and, in turn, reduce the amounts we can charge our customers for our products.

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If we are subject to regulatory enforcement action as a result of our failure to comply with regulatory requirements, our commercial operations would be harmed.

 While we received the 510(k) clearance and CLIA waiver that we were seeking, we will be subject to significant ongoing regulatory requirements, and if we fail to comply with these requirements, we could be subject to enforcement action by the FDA or state agencies, including:

● adverse publicity, warning letters, fines, injunctions, consent decrees and civil penalties;

● repair, replacement, refunds, recall or seizure of our product;

● operating restrictions or partial suspension or total shutdown of production;

● delay or refusal of our requests for 510(k) clearance or premarket approval of new products or of new intended uses or modifications to our existing product;

● refusal to grant export approval for our products;

● withdrawing 510(k) clearances or premarket approvals that have already been granted; and

● criminal prosecution.

If the government initiated any of these enforcement actions, our business could be harmed.

We are required to demonstrate and maintain compliance with the FDA's Quality System Regulation, or the QSR.  The QSR is a complex regulatory scheme that covers the methods and documentation of the design, testing, control, manufacturing, labeling, quality assurance, packaging, storage and shipping of our products.  The FDA must determine that the facilities which manufacture and assemble our products that are intended for sale in the United States, as well as the manufacturing controls and specifications for these products, are compliant with applicable regulatory requirements, including the QSR.  The FDA enforces the QSR through periodic unannounced inspections. The FDA has not yet inspected our facilities, and we cannot assure you that we will pass any future FDA inspection.  Our failure, or the failure of our suppliers, to take satisfactory corrective action in response to an adverse QSR inspection could result in enforcement actions, including a public warning letter, a shutdown of our manufacturing operations, a recall of our product, civil or criminal penalties or other sanctions, which would significantly harm our available inventory and sales and cause our business to suffer.  

If we are unable to fully comply with federal and state "fraud and abuse laws," we could face substantial penalties, which may adversely affect our business, financial condition and results of operations.

We are subject to various laws pertaining to health care fraud and abuse, including the U.S. Anti- Kickback Statute, physician self-referral laws (the "Stark Law"), the U.S. False Claims Act, the U.S. False Statements Statute, the Physician Payment Sunshine Act, and state law equivalents to these U.S. federal laws, which may not be limited to government-reimbursed items and may not contain identical exceptions. Violations of these laws are punishable by criminal and civil sanctions, including, in some instances, civil and criminal penalties, damages, fines, exclusion from participation in U.S. federal and state health care programs, including Medicare and Medicaid, and the curtailment or restructuring of operations. Any action against us for violation of these laws could have a significant impact on our business. In addition, we are subject to the U.S. Foreign Corrupt Practices Act. Any action against us for violation by us or our agents or distributors of this act could have a significant impact on our business.

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If we fail to comply with contractual obligations and applicable laws and regulations governing the handling of patient identifiable medical information, we could suffer material losses or be adversely affected by exposure to material penalties and liabilities.

Many, if not all of our customers, are covered entities under the Health Insurance Portability and Accountability Act of August 1996 or HIPAA. As part of the operation of our business, we provide reimbursement assistance to certain of our customers and as a result we act in the capacity of a business associate with respect to any patient-identifiable medical information, or PHI, we receive in connection with these services. We and our customers must comply with a variety of requirements related to the handling of patient information, including laws and regulations protecting the privacy, confidentiality and security of PHI. The provisions of HIPAA require our customers to have business associate agreements with us under which we are required to appropriately safeguard the PHI we create or receive on their behalf. Further, we and our customers are required to comply with HIPAA security regulations that require us and them to implement certain administrative, physical and technical safeguards to ensure the confidentiality, integrity and availability of electronic PHI, or EPHI. We are required by regulation and contract to protect the security of EPHI that we create, receive, maintain or transmit for our customers consistent with these regulations. To comply with our regulatory and contractual obligations, we may have to reorganize processes and invest in new technologies. We also are required to train personnel regarding HIPAA requirements. If we, or any of our employees or consultants, are unable to maintain the privacy, confidentiality and security of the PHI that is entrusted to us, we and/or our customers could be subject to civil and criminal fines and sanctions and we could be found to have breached our contracts with our customers. Under the HITECH Act and recent omnibus revisions to the HIPAA regulations, we are directly subject to HIPAA's criminal and civil penalties for breaches of our privacy and security obligations and are required to comply with security breach notification requirements. The direct applicability of the HIPAA privacy and security provisions and compliance with the notification requirements requires us to incur additional costs and may restrict our business operations.

Our patents may not be valid, and we may not obtain and enforce patents to protect our proprietary rights from use by would-be competitors.  Companies with other patents could require us to stop using or pay to use required technology.

 Our owned and licensed patents may not be valid, and we may not obtain and enforce patents and to maintain trade secret protection for our technology.  The extent to which we are unable to do so could materially harm our business.

We have applied for, and intend to continue to apply for, patents relating to the TearLab® Osmolarity System and related technology and processes.  Such applications may not result in the issuance of any patents, and any patents now held or that may be issued may not provide adequate protection from competition.  Furthermore, it is possible that patents issued or licensed to us may be challenged successfully.  In that event, if we have a preferred competitive position because of any such patents, any preferred position would be lost.  If we are unable to secure or to continue to maintain a preferred position, the TearLab® Osmolarity System could become subject to competition from the sale of generic products.

Patents issued or licensed to us may be infringed by the products or processes of others.  The cost of enforcing patent rights against infringers, if such enforcement is required, could be significant and the time demands could interfere with our normal operations.  There has been substantial litigation and other proceedings regarding patent and other intellectual property rights in the pharmaceutical, biotechnology and medical technology industries.  We could become a party to patent litigation and other proceedings.  The cost to us of any patent litigation, even if resolved in our favor, could be substantial.  Some of our would-be competitors may sustain the costs of such litigation more effectively than we can because of their greater financial resources.  Litigation also may absorb significant management time.

Unpatented trade secrets, improvements, confidential know-how and continuing technological innovation are important to our future scientific and commercial success.  Although we attempt, and will continue to attempt, to protect our proprietary information through reliance on trade secret laws and the use of confidentiality agreements with corporate partners, collaborators, employees and consultants and other appropriate means, these measures may not effectively prevent disclosure of our proprietary information, and, in any event, others may develop independently, or obtain access to, the same or similar information.

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Certain of our patent rights are licensed to us by third parties.  If we fail to comply with the terms of these license agreements, our rights to those patents may be terminated, and we will be unable to conduct our business.

It is possible that a court may find us to be infringing upon validly issued patents of third parties.  In that event, in addition to the cost of defending the underlying suit for infringement, we may have to pay license fees and/or damages and may be enjoined from conducting certain activities.  Obtaining licenses under third-party patents can be costly, and such licenses may not be available at all.

We may face future product liability claims.

 The testing, manufacturing, marketing and sale of therapeutic and diagnostic products entail significant inherent risks of allegations of product liability.  Our past use of the RHEO™ System and the components of the SOLX Glaucoma System in clinical trials and the commercial sale of those products may have exposed us to potential liability claims.  Our use of the TearLab® Osmolarity System and its commercial sale could also expose us to liability claims.  All of such claims might be made directly by patients, health care providers or others selling the products.  We carry clinical trials and product liability insurance to cover certain claims that could arise, or that could have arisen, during our clinical trials or during the commercial use of our products.  We currently maintain clinical trials and product liability insurance with aggregate annual coverage limits of $2,000,000.  Such coverage, and any coverage obtained in the future, may be inadequate to protect us in the event of successful product liability claims, and we may not increase the amount of such insurance coverage or even renew it.  A successful product liability claim could materially harm our business.  In addition, substantial, complex or extended litigation could result in the incurrence of large expenditures and the diversion of significant resources.

 We have entered into a number of related party transactions with suppliers, creditors, stockholders, officers and other parties, each of which may have interests which conflict with those of our public stockholders.

 We have entered into several related party transactions with our suppliers, creditors, stockholders, officers and other parties, each of which may have interests which conflict with those of our public stockholders.

If we do not introduce new commercially successful products in a timely manner, our products may become obsolete over time, customers may not buy our products and our revenue and profitability may decline.

 Demand for our products may change in ways we may not anticipate because of:

● evolving customer needs;

● the introduction of new products and technologies; and

● evolving industry standards.

Without the timely introduction of new commercially successful products and enhancements, our products may become obsolete over time, in which case our sales and operating results would suffer.  The success of our new product offerings will depend on several factors, including our ability to:

● properly identify and anticipate customer needs;

● commercialize new products in a cost-effective and timely manner;

● manufacture and deliver products in sufficient volumes on time;

● obtain and maintain regulatory approval for such new products;

● differentiate our offerings from competitors' offerings;

● achieve positive clinical outcomes; and

● provide adequate medical and/or consumer education relating to new products.

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 Moreover, innovations generally will require a substantial investment in research and development before we can determine the commercial viability of these innovations and we may not have the financial resources necessary to fund these innovations.  In addition, even if we successfully develop enhancements or new generations of our products, these enhancements or new generations of products may not produce revenue in excess of the costs of development and they may be quickly rendered obsolete by changing customer preferences or the introduction by our competitors of products embodying new technologies or features.

We rely on a single supplier of each of the key components of the TearLab® Osmolarity System and are vulnerable to fluctuations in the availability and price of our suppliers' products and services.

We purchase each of the key components of the TearLab® Osmolarity System from single third-party suppliers.  Our supplier may not provide the components or other products needed by us in the quantities requested, in a timely manner or at a price we are willing to pay.  In the event we were unable to renew our agreements with our supplier or they were to become unable or unwilling to continue to provide important components in the required volumes and quality levels or in a timely manner, or if regulations affecting the components were to change, we would be required to identify and obtain acceptable replacement supply sources.  We may not be able to obtain alternative suppliers or vendors on a timely basis, or at all, which could disrupt or delay, or halt altogether, our ability to manufacture or deliver the TearLab® Osmolarity System.  If any of these events should occur, our business, financial condition, cash flows and results of operations could be materially adversely affected.

We face intense competition, and our failure to compete effectively could have a material adverse effect on our results of operations.

We face intense competition in the markets for ophthalmic products and these markets are subject to rapid and significant technological change.  Although we have no direct competitors, we have numerous potential competitors in the United States and abroad.  We face potential competition from industry participants marketing conventional technologies for the measurement of osmolarity and other in-lab testing technologies, and commercially available methods, such as the Schirmer Test and ocular surface staining.  Many of our potential competitors have substantially more resources and a greater marketing scale than we do.  If we are unable to develop and produce or market our products to effectively compete against our competitors, our operating results will materially suffer.

If we lose key personnel, or we do not attract and retain highly qualified personnel on a cost-effective basis, it would be more difficult for us to manage our existing business operations and to identify and pursue new growth opportunities.

Our success depends, in large part, upon our ability to attract and retain highly qualified scientific, clinical, manufacturing and management personnel.  In addition, any difficulties in retaining key personnel or managing this growth could disrupt our operations.  Future growth will require us to continue to implement and improve our managerial, operational and financial systems, and to continue to recruit, train and retain, additional qualified personnel, which may impose a strain on our administrative and operational infrastructure.  The competition for qualified personnel in the medical technology field is intense.  We are highly dependent on our continued ability to attract, motivate and retain highly qualified management, clinical and scientific personnel.

Due to our limited resources, we may not effectively recruit, train and retain additional qualified personnel.  If we do not retain key personnel or manage our growth effectively, we may not implement our business plan effectively.

Furthermore, we have not entered into non-competition agreements with our key employees.  In addition, we do not maintain "key person" life insurance on any of our officers, employees or consultants.  The loss of the services of existing personnel, the failure to recruit additional key scientific, technical and managerial personnel in a timely manner, and the loss of our employees to our competitors would harm our research and development programs and our business.

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If we fail to establish and maintain proper and effective internal controls, our ability to produce accurate financial statements on a timely basis could be impaired, which would adversely affect our consolidated operating results, our ability to operate our business and our stock price.

Ensuring that we have adequate internal financial and accounting controls and procedures in place to produce accurate financial statements on a timely basis is a costly and time-consuming effort that needs to be re-evaluated frequently.  Failure on our part to maintain effective internal financial and accounting controls would cause our financial reporting to be unreliable, could have a material adverse effect on our business, operating results, financial condition and cash flows, and could cause the trading price of our common stock to fall dramatically.

Maintaining proper and effective internal controls will require substantial management time and attention and may result in our incurring substantial incremental expenses, including with respect to increasing the breadth and depth of our finance organization to ensure that we have personnel with the appropriate qualifications and training in certain key accounting roles and adherence to certain control disciplines within the accounting and reporting function.  Any failure in internal controls or any errors or delays in our financial reporting would have a material adverse effect on our business and results of operations and could have a substantial adverse impact on the trading price of our common stock.

Our management is responsible for establishing and maintaining adequate internal control over financial reporting to provide reasonable assurance regarding the reliability of our financial reporting and the preparation of financial statements for external purposes in accordance with U.S. GAAP.  Our management does not expect that our internal control over financial reporting will prevent or detect all errors and all fraud.  A control system, no matter how well designed and operated, can provide only reasonable, not absolute, assurance that the control system's objectives will be met.  Our management has identified control deficiencies in the past and may identify additional deficiencies in the future.

We cannot be certain that the actions we are taking to improve our internal controls over financial reporting will be sufficient or that any changes processes and procedures can be completed in a timely manner.  In future periods, if the process required by Section 404 of the Sarbanes-Oxley Act of 2002 reveals material weaknesses or significant deficiencies, the correction of any such material weaknesses or significant deficiencies could require additional remedial measures which could be costly and time-consuming.  In addition, we may be unable to produce accurate financial statements on a timely basis.  Any of the foregoing could cause investors to lose confidence in the reliability of our consolidated financial statements, which could cause the market price of our common stock to decline and make it more difficult for us to finance our operations and growth.

We may need to raise additional capital in the future. Such capital may not be available to us on reasonable terms, if at all, when or as we require additional funding. If we issue additional shares of our common stock or other securities that may be convertible into, or exercisable or exchangeable for, our common stock, our existing stockholders, would experience further dilution.

We expect that we will seek to raise additional capital from time to time in the future. Such financings may involve the issuance of debt, equity and/or securities convertible into or exercisable or exchangeable for our equity securities. These financings may not be available to us on reasonable terms or at all when and as we require funding. Any failure to obtain additional working capital when required would have a material adverse effect on our business and financial condition, our ability to continue as a going concern and would be expected to result in a decline in our stock price. If we consummate such financings, the terms of such financings may adversely affect the interests of our existing stockholders. Any issuances of our common stock, preferred stock, or securities such as warrants or notes that are convertible into, exercisable or exchangeable for, our capital stock, would have a dilutive effect on the voting and economic interest of our existing stockholders.

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Our financial results may vary significantly from year-to-year due to a number of factors, which may lead to volatility in the trading price of our common stock.

Our annual revenue and results of operations have varied in the past and may continue to vary significantly from year-to-year. The variability in our annual results of operations may lead to volatility in our stock price as research analysts and investors respond to these annual fluctuations. These fluctuations are due to numerous factors that are difficult to forecast, including:

● fluctuations in demand for our products;

● changes in customer budget cycles and capital spending;

● seasonal variations in customer operations that could occur during holiday or summer vacation periods;

● tendencies among some customers to defer purchase decisions to the end of the quarter;

● the large unit value of our systems;

● changes in our pricing and sales policies or the pricing and sales policies of our competitors;

● our ability to design, manufacture and deliver products to our customers in a timely and cost effective manner;

● quality control or yield problems in our manufacturing operations;

● our ability to timely obtain adequate quantities of the components used in our products;

● new product introductions and enhancements by us and our competitors;

● unanticipated increases in costs or expenses;

● our complex, variable and, at times, lengthy sales cycle;

● global economic conditions; and

● fluctuations in foreign currency exchange rates.

In addition, we may experience seasonal variations in our customer operations such as could occur during holiday vacation periods. For example, one of our principal target markets consists of private ophthalmic and optometric practices, and our operating results in the quarter ending September 30 of each fiscal year could be adversely affected by summer vacation periods. The foregoing factors, as well as other factors, could materially and adversely affect our quarterly and annual results of operations. In addition, a significant amount of our operating expenses are relatively fixed due to our manufacturing, research and development, and sales and general administrative efforts. Any failure to adjust spending quickly enough to compensate for a revenue shortfall could magnify the adverse impact of such revenue shortfall on our results of operations. We expect that our sales will continue to fluctuate on a quarterly basis and our financial results for some periods may differ from those projected by securities analysts, which could significantly decrease the price of our common stock.

The trading price of our common stock may be volatile.

 The market prices for, and the trading volumes of, securities of medical device companies, such as ours, have been historically volatile.  The market has experienced, from time to time, significant price and volume fluctuations unrelated to the operating performance of particular companies.  The market price of our common shares may fluctuate significantly due to a variety of factors, including:

● the results of pre-clinical testing and clinical trials by us, our collaborators and/or our competitors;

● technological innovations or new diagnostic products;

● governmental regulations;

● developments in patent or other proprietary rights;

● litigation;

● public concern regarding the safety of products developed by us or others;

● comments by securities analysts;

● the issuance of additional shares to obtain financing or for acquisitions;

● general market conditions in our industry or in the economy as a whole; and

● political instability, natural disasters, war and/or events of terrorism.

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 In addition, the stock market has experienced extreme price and volume fluctuations that have often been unrelated or disproportionate to the operating performance of individual companies.  Broad market and industry factors may seriously affect the market price of our stock, regardless of actual operating performance.  In the past, securities class action litigation often follows periods of volatility in the overall market and market price of a particular company's securities. This litigation, if instituted against us, could result in substantial costs and a diversion of our management's attention and resources.

Because we do not expect to pay dividends on our common stock, stockholders will benefit from an investment in our common stock only if it appreciates in value.

We have never paid cash dividends on our common stock and have no present intention to pay any dividends in the future.  We are not profitable and may not earn sufficient revenues to meet all operating cash needs for at least several years, if at all.  As a result, we intend to use all available cash and liquid assets in the development of our business.  Any future determination about the payment of dividends will be made at the discretion of our board of directors and will depend upon our earnings, if any, our capital requirements, our operating and financial conditions and on such other factors as our board of directors may deem relevant.  As a result, the success of an investment in our common stock will depend upon any future appreciation in its value.  There is no guarantee that our common stock will appreciate in value or even maintain the price at which stockholders have purchased their shares.

Warrant holders will not be entitled to any of the rights of common stockholders, but will be subject to all changes made with respect thereto.

If you hold warrants, you will not be entitled to any rights with respect to our common stock (including, without limitation, voting rights and rights to receive any dividends or other distributions on our common stock), but you will be subject to all changes affecting our common stock.  You will have rights with respect to our common stock only if you receive our common stock upon exercise of the warrants and only as of the date when you become a record owner of the shares of our common stock upon such exercise.  For example, if a proposed amendment to our charter or bylaws requires stockholder approval and the record date for determining the stockholders of record entitled to vote on the amendment occurs prior to the date that you are deemed to be the owner of the shares of our common stock due upon exercise of your warrants, you will not be entitled to vote on the amendment; although, you will nevertheless be subject to any changes in the powers, preferences or special rights of our common stock.

We can issue shares of preferred stock that may adversely affect the rights of holders of our common stock.

 Our certificate of incorporation authorizes us to issue up to 10,000,000 shares of preferred stock with designations, rights, and preferences determined from time to time by our board of directors.  Accordingly, our board of directors is empowered, without stockholder approval, to issue preferred stock with dividend, liquidation, conversion, voting or other rights superior to those of holders of our common stock.  For example, an issuance of shares of preferred stock could:

● adversely affect the voting power of the holders of our common stock;

● make it more difficult for a third party to gain control of us;

● discourage bids for our common stock at a premium;

● limit or eliminate any payments that the holders of our common stock could expect to receive upon our liquidation; or

● otherwise adversely affect the market price or our common stock.

ITEM 2.     Properties.

Our world-wide headquarters, located in San Diego, California, occupies approximately 14,700 square feet of commercial and industrial space. We use this space for administrative, sales, marketing, research and development, and finance activities. The current arrangement extends to June 30, 2018. The total future minimum obligation under this lease is $222,000 for 2014.

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We believe that the San Diego, California facility is suitable and adequate to support our current operations. We believe that if our existing facilities are not adequate to meet our business requirements long-term, additional space will be available on commercially reasonable terms.

ITEM 3.     Legal Proceedings.

We are not aware of any material litigation involving us that is outstanding, threatened or pending.

ITEM 4.     Mine Safety Disclosures.

Not applicable.

PART II

ITEM 5.     Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities.

Market for Common Equity

Our common stock trades on the NASDAQ Capital Market ("NASDAQ") under the symbol "TEAR" and the Toronto Stock Exchange ("TSX") under the symbol "TLB".

The following table sets forth the range of high and low sales prices per share of our common stock on both the NASDAQ and the TSX for the fiscal periods indicated.

	Common Stock Prices
	Fiscal 2013				Fiscal 2012
	High		Low		High		Low
NASDAQ Capital Market
First Quarter	$	7.05	$	4.11	$	3.89	$	1.07
Second Quarter		12.97		6.59		4.88		2.75
Third Quarter		15.18		10.53		4.10		3.07
Fourth Quarter		12.39		8.31		4.78		3.65
TSX
First Quarter	C$	7.21	C$	4.13	C$	3.85	C$	1.10
Second Quarter		13.25		6.70		4.62		2.84
Third Quarter		15.30		10.89		3.98		3.10
Fourth Quarter		12.61		9.00		4.70		3.77

The closing share price for our common stock on March 10, 2014 as reported by NASDAQ, was $7.70. The closing share price for our common stock on March 10, 2014, as reported by TSX, was C$8.84.

As of March 10, 2014, there were approximately 90 stockholders of record of our common stock.

Dividend Policy

We have never declared or paid any cash dividends on shares of our capital stock. We currently intend to retain all available funds to support operations and to finance the growth and development of our business. Any determination related to payments of future dividends will be at the discretion of our board of directors after taking into account various factors that our board of directors deems relevant, including our financial condition, operating results, current and anticipated cash needs, plans for expansion and debt restrictions, if any.

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Sales of Unregistered Securities

None.

Stock Performance Graph

The following graph compares the cumulative total stockholder return data for our common stock to the cumulative return of (i) the NASDAQ Composite Index and (ii) the NASDAQ Medical Equipment Index for the period beginning December 31, 2008, and ending on December 31, 2013. The graph assumes that $100 was invested on December 31, 2008, and assumes reinvestment of dividends. The stock price performance on the following graph is not necessarily indicative of future stock price performance.

This performance graph shall not be deemed''filed'' for purposes of Section 18 of the Exchange Act, or incorporated by reference into any filing of TearLab Corp. under the Securities Act, or the Exchange Act, except as shall be expressly set forth by specific reference in such filing.

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ITEM 6.     Selected Financial Data.

The following selected financial data should be read in conjunction with our consolidated financial statements, the related notes thereto and the information contained in "Item 7 – Management's Discussion and Analysis of Financial Condition and Results of Operations.” The consolidated statement of income data, consolidated balance sheet data, and consolidated other data set forth below as of and for the years ended December 31, 2013, 2012, 2011, 2010, and 2009, have been derived from our audited consolidated financial statements. Historical results are not necessarily indicative of the results to be expected for future periods; the risk factors set forth in Part I, Item 1A, "Risk Factors," of this report also discuss material uncertainties that could cause the data reflected below not to be indicative of our future financial condition or results of operations. We declared no cash dividends during the periods presented.

	Year Ended December 31,
	2009			2010			2011			2012			2013
	(in thousands, except per share data)
Consolidated Statements of Comprehensive Loss Data:
Revenue	$	869		$	1,701		$	2,124		$	3,960		$	14,645
Cost of goods sold		568			849			1,626			2,295			8,146
Gross profit		301			852			498			1,665			6,499
Operating expenses
Amortization of intangible assets		1,215			1,215			1,215			1,215			1,215
General and administrative		3,245			3,753			3,842			4,770			8,942
Clinical, regulatory and research and development		1,121			1,365			1,304			2,241			1,095
Sales and marketing		646			1,463			2,195			5,471			13,021
Total operating expenses		6,227			7,796			8,556			13,697			24,273
Other income (expense), net		(362	)		261			(751	)		(7,280	)		(11,216	)
Loss from operations before income taxes		(6,288	)		(6,683	)		(8,809	)		(19,312	)		(28,990	)
Recovery of income taxes		1,903			—			—			—			—
Net loss	$	(4,385	)	$	(6,683	)	$	(8,809	)	$	(19,312	)	$	(28,990	)
Per Share Data:
Net loss per share — basic and diluted	$	(0.44	)	$	(0.47	)	$	(0.50	)	$	(0.76	)	$	(0.94	)
Weighted average number of shares used in per share calculations — basic and diluted		9,855			14,098			17,745			25,490			30,759

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	As of December 31,
	2009			2010			2011			2012			2013
	(in thousands)
Consolidated Balance Sheet Data:
Cash and cash equivalents	$	106		$	2,726		$	2,807		$	15,437		$	37,778
Working capital (deficiency)		(2,132	)		420			(767	)		9,341			34,297
Total assets		9,733			11,535			10,538			24,139			49,957
Convertible notes payable and accrued interest (including current portion due to stockholders)		1,281			1,697			28			—			—
Total liabilities		2,976			3,658			5,018			9,295			8,589
Common stock		10			15			20			29			33
Additional paid-in capital		378,790			386,588			393,035			421,662			477,172
Accumulated deficit		(372,043	)		(378,726	)		(387,535	)		(406,847	)		(435,837	)
Total stockholders' equity		6,757			7,877			5,520			14,844			41,368

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ITEM 7.     Management's Discussion and Analysis of Financial Condition and Results of Operations.

The following discussion and analysis of our financial condition and results of operations should be read in conjunction with our consolidated financial statements and related notes, included in Item 8 of this Report. Unless otherwise specified, all dollar amounts are U.S. dollars.

Overview

We are an in vitro diagnostic company that has developed a proprietary tear testing platform, the TearLab® Osmolarity System. The TearLab test measures tear film osmolarity for diagnosis of Dry Eye Disease, or DED. Tear osmolarity is a quantitative and highly specific biomarker that has been shown to correlate with DED. The TearLab test enables the rapid measurement of tear osmolarity in a doctor's office. Commercializing our Point-of-Care tear testing platform is the focus of our business.

In October 2008, the TearLab® Osmolarity System received CE mark approval, clearing the way for sales in the European Union and all countries recognizing the CE mark. In connection with the CE mark clearance, we have entered into multi-year agreements with numerous distributors for distribution of the TearLab® Osmolarity System. Currently, we have signed distribution agreements in each of the following countries: Spain, Germany, France, Turkey, Ukraine, Bulgaria, Belgium, Netherlands, Switzerland, Finland, Sweden, Denmark, Norway, South Korea, Australia, Russia, Hungary, Greece, Slovakia, Argentina, the Czech Republic, a sales representation agreement in Japan and we sell directly to the customer in the United Kingdom.

On May 19, 2009, we announced that we received 510(k) clearance from the U.S. Food and Drug Administration, or FDA. The 510(k) clearance allows us to market the TearLab® Osmolarity System to those reference and physician operated laboratories with CLIA certifications allowing them to perform moderate and high complexity tests. Considering that most of our target customers currently are eye care practitioners without such certifications, it was necessary that we obtained a CLIA waiver from the FDA for the TearLab® Osmolarity System as well as assisting our customers in obtaining their CLIA certification. A CLIA waiver greatly reduces the regulatory compliance for our customers.

On January 23, 2012, we announced that after we submitted labeling to the FDA, it reviewed and accepted such labeling, and granted the waiver categorization under CLIA for the TearLab® Osmolarity System.

On October 19, 2010 we announced that a unique new Current Procedural Terminology, or CPT, code that will apply to the TearLab Osmolarity test had been published by the American Medical Association, or AMA. The new code became effective January 1, 2011. The new CPT code for the TearLab Osmolarity test is: 83861; Microfluidic analysis utilizing an integrated collection and analysis device, tear osmolarity (For microfluidic tear osmolarity of both eyes, report 83861 twice). This code falls under the Chemistry sub-section of the Pathology and Laboratory section of the CPT Codebook and was listed under the 2010 Clinical Laboratory Fee Schedule by the Centers for Medicare and Medicaid Services, or CMS. Reimbursement by CMS was set at $24.01 per eye and was only available for offices that had a Moderate Complex CLIA certificate. Under the 2011 Clinical Laboratory Fee Schedule listed by CMS the reimbursement rate was reduced to $23.58 and was applicable to a majority of states in the U.S. On December 13, 2011, we announced that CMS published instructions for updates to the clinical laboratory fee schedule for 2012, including a revised reimbursement rate for the TearLab® Osmolarity Test, effective January 1, 2012. The payment code of 83861 that currently applies to the TearLab Osmolarity Test will be cross-walked or paired with code 84081. At current 2014 reimbursement rates, payment code 83861 would be reimbursed in every state by CMS at $22.54 per eye. This decision by CMS provides level reimbursement for and equal access to the TearLab Osmolarity Test across all of the United States, which was not the case in 2011.

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Our success is highly dependent on our ability to increase sales of our testing platform in the United States as well as Europe and other countries recognizing the CE mark and in Canada where we have a Medical Device License. Meeting these objectives requires that we have sufficient capital to fund our operations. While our cash of $37.8 million as of December 31, 2013 may be insufficient to fund our long-term planned operations and our ability to generate increased revenues is uncertain, management believes that we have sufficient cash to fund our operations at current levels for at least the next 12 months. In spite of having adequate funding at this time we continue to evaluate various financing possibilities. If our revenues do not increase sufficiently to meet operational needs, we would be required to raise additional capital to fund our operations.

RESULTS OF OPERATIONS

Revenues, Cost of Goods Sold and Gross Margin

For the years ended December 31,

(in thousands)

	2013			Change			2012			Change			2011
Revenue	$	14,645			270	%	$	3,960			86	%	$	2,124
Cost of goods sold	$	8,146			255	%	$	2,295			41	%	$	1,626
Gross margin	$	6,499			290	%	$	1,665			234	%	$	498
Percentage of total revenues		44	%					42	%					23	%

Revenues

TearLab revenue consists of sales of the TearLab® Osmolarity System, which is a hand-held tear film test for the measurement of tear osmolarity, a quantitative and highly specific biomarker that has shown to correlate with dry eye disease "DED").

The TearLab® Osmolarity System consists of the following three components: (1) the TearLab disposable, which is a single-use microfluidic lab test card; (2) the TearLab pen, which is a hand-held device that interfaces with the TearLab disposable; and (3) the TearLab reader, which is a small desktop unit that allows for the docking of the TearLab disposable and the TearLab pen and provides a quantitative reading for the operator.

Having received 510(k) approval from the FDA in the United States, we have begun selling to customers in the United States who hold CLIA moderate and high complexity certificates and actively supported and assisted our customers to obtain their moderate complexity CLIA certificates or provided them with support from certified professionals. Having obtained a CLIA waiver certificate in early 2012, we will continue to actively support our customers in obtaining their CLIA waiver documentation which will allow us to sell our product to the approximately 50,000 eye care practitioners in the United States that are candidates to operate under a CLIA waiver certification.

We are working with our established distributors in Europe and Asia to increase sales. The ability for re-imbursement to be obtained in many of those countries where we have distributors will facilitate our ability to increase sales and stimulate the commercialization process. In countries where we have distributors, we are supporting physicians in local clinical trials and providing them with the required guidance to understand the relationship between DED and osmolarity and how to manage their patients with objective diagnostic data. In the United Kingdom, we are selling directly to the customer and will monitor the success of this approach to determine whether to expand direct selling on other European and Asian countries.

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TearLab revenue increased by $10,685,000 or 270% for the year ended December 31, 2013 as compared to the prior year. The increase is primarily driven from test card sales volume representing $10,489,000 of the total increase from the prior year. Test card volume increase is consistent with the significant increase of new customers signed onto the Company's annual test card commitment programs and its high volume large multi-doctor practice programs for domestic customers.

TearLab revenue increased by $1,836,000 or 86% for the year ended December 31, 2012 as compared to the prior year period. The increase is primarily driven from domestic sales growth in the United States following the receipt of a CLIA waiver certificate for the TearLab® Osmolarity System in early 2012.

Cost of Goods Sold

TearLab cost of sales includes costs of goods sold, depreciation, warranty, and royalty costs. Our cost of goods sold consists primarily of costs for the manufacture of the TearLab® Osmolarity System, including the costs we incur for the purchase of component parts from our suppliers, applicable freight and shipping costs, fees related to warehousing and logistics inventory management.

TearLab cost of sales for the year ended December 31, 2013 increased by $5,851,000 or 255% compared to the prior year primarily due to the increase in sales volume of TearLab test cards, as the Company focuses its sales activities to its domestic customers on its annual test card commitment programs and its high volume large multi-doctor practice programs.

TearLab cost of sales for the year ended December 31, 2012 increased by $669,000 or 41% compared to the prior year primarily due to the increase in domestic sales and partially offset by the inclusion of an excess inventory reserve provision charge of $490,000 included in the cost of sales in the prior year.

Gross Margin

TearLab gross margin for the year ended December 31, 2013 increased by $4,834,000 or 290% compared to the prior year. The increase is mainly due to higher sales volume. The gross margin percentage of revenue for the year ended December 31, 2013 was 44% as compared to 42% for the prior year fiscal period which is primarily due to lower cost associated with test cards sold during the year due to a weakening Australian dollar at the time of purchasing test card inventory.

TearLab gross margin for the year ended December 31, 2012 increased by $1,167,000 or 234% compared to the prior year. The increase is mainly due to higher sales volume and a non-recurring excess inventory reserve provision charge of $490,000 included in the cost of sales in the prior year. The gross margin percentage of revenue for the year ended December 31, 2013 was 42% as compared to 23% for the prior year fiscal period which is primarily due to the impact of the non-recurring excess inventory reserve provision charge of $490,000 included in the cost of sales in the prior year coupled with an increase in domestic sales from annual test card commitment programs whereby upfront costs reduce initial margins related to these contracts.

Operating Expenses

For the years ended December 31,

(in thousands)

	2013		Change			2012		Change			2011
Amortization of intangible assets	$	1,215		0	%	$	1,215		0	%	$	1,215
General and administrative		8,942		87	%		4,770		24	%	$	3,842
Clinical, regulatory and research and development		1,095		(51%	)		2,241		72	%		1,304
Sales and marketing		13,021		138	%		5,471		149	%		2,195
Total operating expenses	$	24,273		77	%	$	13,697		60	%	$	8,556

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Amortization of Intangible Assets

Amortization expense of intangible assets remained unchanged for the years ended December 31, 2013, 2012, and 2011, as there were no adjustments to the Company's cost basis or estimated useful life of the underlying assets.

General and Administrative Expenses

For the year ended December 31, 2013, general and administrative expenses increased by $4,172,000 or 87% as compared with the prior year, primarily due to an increase of $957,000 in employee salary expense driven by a 95% increase in headcount, an increase of $1,309,000 in stock-based compensation expense related to options granted to new employees and the board of directors, an increase of $1,054,000 in professional fees and legal costs, an increase of $432,000 in administrative expenses, travel and public company costs and a $168,000 increase for director fees in the current year.

For the year ended December 31, 2012, general and administrative expenses increased by $928,000 or 24% as compared with the prior year, primarily due to an increase of $641,000 in employee salary expense which included a non-recurring CLIA bonus accrual of $445,000, an increase of $188,000 in stock-based compensation expense, an increase of $65,000 in fees related to corporate activities and an increase of $21,000 in administrative expenses.

Clinical, Regulatory and Research and Development 

For the year ended December 31, 2013, clinical, regulatory and research and development expenses decreased by $1,146,000 or 51%, as compared with the prior year. The decrease was mainly due to a $289,000 decrease in professional and legal fees, $201,000 decrease in stock-based compensation expense due to the conclusion of the option service vesting period in the prior year, $360,000 lower employee costs primarily due to the inclusion of a CLIA bonus accrual in the prior year, and a decrease of $261,000 in clinical trial and development costs over the prior year.

For the year ended December 31, 2012, clinical, regulatory and research and development expenses increased by $937,000 or 72%, as compared with the prior year. The increase was mainly due to an increase of $281,000 in stock-based compensation expense, $381,000 increase in employee related costs (including a non-cash CLIA bonus accrual increase of $346,000 related to the increased market value of TearLab's shares), increased product development costs of $376,000, increased clinical trial costs in 2012 of $48,000, offset by lower professional fees of $162,000 regarding regulatory and clinical activities.   

Sales and Marketing Expenses

For the year ended December 31, 2013, sales and marketing expenses increased by $7,550,000 or 138% as compared with the prior year. The increase is attributable to a $3,773,000 increase in employee costs driven by an increase of 117% in headcount and business development costs, $818,000 increase in travel costs associated with the increased market penetration of the TearLab product in the United States, $918,000 increase in marketing and advertising expense, $1,188,000 of increased stock-based compensation expense and $367,000 increase in bad debt expense in addition to a distribution contract termination charge in September 2013 of $190,000 to Science with Vision Inc., a related party.

For the year ended December 31, 2012, sales and marketing expenses increased by $3,276,000 or 149% as compared with the prior year. The increase is attributable to a $1,391,000 increase in employee salary expense which included a non-recurring CLIA bonus accrual of $296,000 and was primarily driven by the transition from a contracted sales force to an internal TearLab sales team, an increase of $481,000 in stock-based compensation expense, $322,000 increase in travel costs, $1,027,000 increase in marketing and advertising expense and increased administrative costs of $52,000 consistent with increased commercialization efforts in the United States.

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The cornerstone of our sales and marketing strategy to date has been to increase awareness of our products among eye care professionals and, in particular, the key opinion leaders in the eye care professions. We assist key opinion leaders in performing clinical trials to generate increased data to provide an increased understanding in the use of the TearLab® Osmolarity System for diagnostic, treatment and monitoring of patients. Presently we are primarily focused on increasing sales in North America and we continue to develop and execute our conference and podium strategy to ensure visibility and evidence-based positioning of the TearLab® Osmolarity System among eye care professionals.

Other Income (Expense), Net

For the years ended December 31,

(in thousands)

	2013			Change			2012			Change			2011
Interest income	$	35			17	%	$	30			400	%	$	6
Changes in fair value of warrant obligation		(11,105	)		(52	)%		(7,296	)		(7862	)%		94
Warrant issue costs		—			0	%		—			100	%		(303	)
Interest expense		—			0	%		—			100	%		(95	)
Amortization of deferred financing charges and beneficial conversion features		—			100	%		—			100	%		(402	)
Other, net expense		(146	)		(943	)%		(14	)		73	%		(51	)
	$	(11,216	)		(55	)%	$	(7,280	)		(869	)%	$	(751	)

Interest Income

Interest income consists of interest income earned on our cash and cash equivalents. The fluctuations in interest income during years ended December 31, 2013, 2012 and 2011, are due to fluctuations in the Company's average cash and variations in average interest rates.

Changes in Fair Value of Warrant Obligation

The Company recorded expense related to changes in the fair value of warrant obligations of $11,105,000 and $7,296,000 for the years ended December 31, 2013 and 2012, respectively, while recording income of $94,000 for the year ended December 31, 2011.

During the year ended December 31, 2013 certain holders of 2011 Warrants exercised 1,571,136 warrants. The Company received $693,000 in proceeds from these exercises. The Company is required to record the outstanding warrants at fair value at the time of exercise, before moving the fair value into additional paid-in capital, resulting in an adjustment to the warrant obligations, with any gain or loss recorded in earnings of the applicable reporting period. The Company, therefore, estimated the fair value of the exercised 2011 Warrants at their respective exercise dates to be $13,297,000, an increase of $8,620,000 from the previous value at December 31, 2012 of $4,677,000. The fair value was determined using the Black- Scholes Merton option pricing model and the increase was recorded as an expense in other income (expense) in the consolidated statement of operations and comprehensive loss for the year ended December 31, 2013.

During the year ended December 31, 2012, certain holders of 2011 Warrants exercised 1,750,469 warrants. The Company received $3,262,000 in proceeds from these exercises. The Company estimated the fair value of the exercised 2011 Warrants at their respective exercise dates to be $4,014,000, an increase of $2,668,000 from the previous value at December 31, 2011 of $1,346,000. The fair value was determined using the Black-Scholes Merton option pricing model with the following weighted average assumptions for volatility of 97%, 4.3 years expected life and a risk free rate of 0.85%. This increase was recorded as an expense in other income (expense) in the consolidated statement of operations and comprehensive loss for the year ended December 31, 2012. There were no similar warrant exercises for the year ended December 31, 2011.

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In addition, the Company is also required to record the outstanding warrants at fair value at the end of each reporting period, resulting in an adjustment to the warrant obligations, with any gain or loss recorded in earnings of the applicable reporting period. The Company, therefore, estimated the fair value of the remaining warrants as of December 31, 2013 to be $4,046,000, an increase of $2,485,000 from the previous value at December 31, 2012. These amounts were recorded as a charge to other income (expense) in the consolidated statement of comprehensive loss for the year ended December 31, 2013, the primary driver of this change being a change in Black-Scholes Merton option pricing model valuation inputs for our increased stock price.

An increase of $3,282,000 and a decrease of $94,000 at December 31, 2012 and 2011, respectively, in the fair value of warrant obligations are recorded in other income expense for the years ended December 31, 2012 and 2011, respectively.

Interest Expense

In the third quarter of 2009, the Company closed an agreement with certain investors whereby the investors agreed to provide financing, or the Financing, to the Company through the purchase of convertible secured notes, in the aggregate amount of $1.75 million.  The convertible secured notes, or the Notes, evidencing the Financing, were to mature on the second anniversary of their issuance, bearing interest at a rate of 12% per annum and were convertible into shares of the Company's common stock upon the request of holders of 51% or more of the outstanding principal amount of the Notes at any time after August 31, 2009 and prior to maturity. On June 13, 2011, the Notes were converted to common stock, with interest expense of $0, $0, and $95,000 recorded for the years ended December 31, 2013, 2012, and 2011, respectively.

Amortization of Deferred Finance Charges and Beneficial Conversion Features

As a result of the financing that the Company completed in July and August 2009, or the Financing, and which resulted in the purchase of $1.75 million in convertible secured notes by the investors, or the Notes, investors were in a position to convert the Notes at a conversion price of $1.3186 per share at a time when the common shares of the Company were trading at $1.75 (July 15^th) and $1.70 (August 31^st) providing them with a beneficial conversion feature. The Company valued this feature at $728,000 and the amortization of this amount was expensed over the term of the Notes until conversion in June 2011. As such, amortization expense for the years ended December 31, 2013, 2012, and 2011 was $0, $0 and $314,000, respectively.

Investors in the Financing received 109,375 warrants at an exercise price of $1.60 upon conversion of the Notes. The Company valued these warrants using the Black-Scholes Merton option pricing model at a value of $163,000. The amortization of this amount was recorded over the term of the Notes until they were converted in June 2011 and amounted to $0, $0 and $69,000 for the years ended December 31, 2013, 2012 and 2011, respectively.

Issuance costs of the Financing totaled $87,000 and have been allocated to cost of equity and to deferred finance charges. The amortization of deferred finance charges was recorded over the term of the Notes until they were converted in June 2011 and amounted to $0, $0 and $19,000 for the years ended December 31, 2013, 2012, and 2011, respectively.

Other Income (Expense)

Other expense for the years ended December 31, 2013, 2012 and 2011consists primarily of foreign exchange gains and losses, based on fluctuations of the Company's foreign denominated currencies.

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Liquidity and Capital Resources

	As of December 31, ($ in thousands)
	2013			2012
Cash and cash equivalents	$	37,778		$	15,437
Percentage of total assets		76	%		64	%
Working capital	$	34,297		$	9,341

Financial Condition

Management believes that we have sufficient cash to fund our operations at current levels for at least the next 12 months.

Our forecast of the period of time through which our financial resources will be adequate to support our operations is a forward-looking statement and involves risks and uncertainties. Actual results could vary as a result of a number of factors. We have based this estimate on assumptions that may prove to be wrong, and we could utilize our available capital resources sooner than we currently expect. Our future funding requirements will depend on many factors, including but not limited to:

● whether government and third-party payers agree to reimburse the TearLab® Osmolarity System;

● whether eye care professionals engage in the process of obtaining their CLIA waiver certification;

● the costs and timing of building the infrastructure to market and sell the TearLab Osmolarity System;

● the cost and results of continuing development of the TearLab® Osmolarity System;

● the costs of filing, prosecuting, defending and enforcing any patent claims and other intellectual property rights;

● the effect of competing technological and market developments and

● Our purchases of test cards are in Australian dollars and fluctuations in the exchange rate between the U.S. dollar and Australian dollar may be material. For example, in 2013 we purchased Australian dollars to pay to our Australian supplier and the exchange rate between the U.S. and Australian dollar fluctuated from $0.89 USD to $1.05 USD per $1.00 AUD.

At the present time, our only product is the TearLab® Osmolarity System, and although we have received 510(k) approval from the FDA and a CLIA waiver approval from the FDA, at this time, we do not know when we can expect to begin to generate significant revenues from the TearLab® Osmolarity System in the United States.

We believe that we have sufficient funding to meet operational needs until the Company generates positive cash flow from operations. However, if we do not achieve a cash positive operating position in the future we may need to raise additional funds, and our prospects for obtaining that capital are uncertain. Additional capital may not be available on terms favorable to us, or at all. In addition, future financings could result in significant dilution of existing stockholders.

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Ongoing Sources and Uses of Cash

We anticipate that our cash and cash equivalents and cash generated from increased revenues, will be sufficient to sustain our operations for at least the next 12 months.   We continually evaluate various financing possibilities but we typically expect our primary sources of cash will be related to the collection of accounts receivable and, to a lesser degree, interest income on our cash balances. Our accounts receivable collections will be impacted by our ability to grow our point-of-care revenue.

We expect to use our cash primarily to fund our operating expenses and pursue and maintain our patents and trademarks. In addition, dependent on available funds, we expect to expend cash to improve production capability of the TearLab test, to further improve the performance of the TearLab test, and to pursue additional applications for the lab-on-a-chip technology.

Changes in Cash Flows

Years ended December 31,

(in thousands)

	2013			Change			2012			Change			2011
Cash used in operating activities	$	(13,234	)	$	(4,086	)	$	(8,800	)	$	(2,826	)	$	(5,974	)
Cash used in investing activities		(2,905	)		(2,684	)		(569	)		(413	)		(156	)
Cash provided by financing activities		38,480			16,481			21,999			15,788			6,211
Net increase in cash and cash equivalents during the year	$	22,341		$	9,711		$	12,630		$	12,549		$	81

Cash Used in Operating Activities

Net cash used to fund our operating activities during the year ended December 31, 2013 was $13,234,000 which is lower than our net loss of $28,833,000 primarily due to non-cash charges. The non-cash charges which comprise a portion of the net loss during that period consist primarily of the amortization of intangible assets, fixed assets, patents and trademarks, warrant obligation expense and stock-based compensation expense in the aggregate total of $16,560,000.

Net cash used to fund our operating activities during the year ended December 31, 2012 was $8,800,000 which is lower than our net loss of $19,312,000 primarily due to non-cash charges. The non-cash charges which comprise a portion of the net loss during that period consist primarily of the amortization of intangible assets, fixed assets, patents and trademarks, non-cash bonuses paid in common shares and stock-based compensation expense in the aggregate total of $11,299,000.

The net change in non-cash working capital and non-current asset balances related to operations for the years ended December 31, 2013, 2012 and 2011 consists of the following (in thousands):

	2013			2012			2011
Accounts receivable		(2,650	)		(557	)		(5	)
Due from related parties		15			(11	)		126
Inventory		978			(965	)		(343	)
Prepaid expenses		(302	)		(197	)		132
Other current assets		50			(25	)		(20	)
Other non-current assets		(12	)		(27	)		—
Accounts payable		(436	)		849			(135	)
Accrued liabilities		1,329			146			374
Deferred rent/revenue		67			—			(128	)
	$	(961	)	$	(787	)	$	1

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Explanations of the more significant net changes in working capital and non-current asset balances are as follows:

● Accounts receivable increased in 2013, 2012 and 2011 as a result of increased revenues in 2013, 2012 and 2011 related to sales of the TearLab® Osmolarity System.

● Inventory decreased in 2013 primarily due to record sales in the fourth quarter of 2013 coupled with the timing of test card shipments at year-end. Inventory increased in 2012 and 2011 primarily due to the increase in inventory purchases to support the projected ramp up in commercialization of the TearLab products.

● Prepaid expenses increased in 2013 from 2012 mainly due to the timing of annual payments made, increased prepaid insurance costs and prepaid deposits with contract manufacturer.

● Accounts payable movement year over year is primarily due to the timing of payment cycles and the increase in commercial activities.

● Accrued liabilities have increased in each of 2013, 2012 and 2011 as a result of royalties, commissions and sales related taxes due as a result of increasing sales. Amounts due to professionals, employees and inventory suppliers have also increased. The 2012 increase is primarily the result of the CLIA bonus accrued as a result of TearLab achieving CLIA waiver status for the TearLab® Osmolarity System.

● In 2013, deferred rent increased from $0 in 2012 and is primarily related to the new office lease in San Diego. The decrease in deferred revenue in 2011 arose from the amortization of licensing fees and shipment of product previously paid for.

Cash used in Investing Activities

Net cash used in investing activities for the years ended December 31, 2013, 2012 and 2011 was $2,905,000, $569,000 and $156,000, respectively, which we used to acquire fixed assets, net of disposals.

Cash Provided by Financing Activities

Net cash provided by financing activities for the year ended December 31, 2013 was $38,480,000 and is primarily made up of $40,365,000 raised during 2013 from the issuance common stock in a public offering, both offset by costs incurred in these transactions of $3,036,000, as well as $693,000 raised as a result of warrant exercises and $458,000 raised as a result of option exercises.

Net cash provided by financing activities for the year ended December 31, 2012 was $21,999,000 and is primarily made up of $12,420,000 raised during 2012 from the issuance common stock in a public offering, $7,925,000 raised during 2012 in a registered direct offering both offset by costs incurred in these transactions of $1,718,000, as well as $3,262,000 raised as a result of warrant exercises and $110,000 raised as a result of option exercises. 

Net cash provided by financing activities for the year ended December 31, 2011 was $6,211,000 and is made up primarily of $7,000,000 raised during 2011 from the issuance of common stock in a PIPE transaction, offset by $789,000 in financing fees and fees for services related to the PIPE transaction. Contractual Obligations and Contingencies

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The following table (in thousands) summarizes our contractual commitments as of December 31, 2013 and the effect those commitments are expected to have on liquidity and cash flow in future periods.

	Payments Due by Period
	Total		Less than 1 year		1 to 3 years		More than 3 years
Purchase commitments	$	17,442	$	8,278	$	9,164	$	—
Operating leases		1,336		229		621		486
Royalty payments		980		70		140		770
Total	$	19,758	$	8,577	$	9,925	$	1,256

Purchase commitment obligations represent our contractually obligated minimum purchase requirements as outlined in a manufacturing and development agreement for test cards for the Company. The agreement is denominated in AUD and as such actual amounts paid in USD may differ.

Off-Balance-Sheet Arrangements

As of December 31, 2013, we did not have any material off-balance-sheet arrangements as defined in Item 303(a)(4)(ii) of SEC Regulation S-K.

Critical Accounting Policies and Estimates

Our discussion and analysis of our financial condition and results of operations is based upon our audited consolidated financial statements, which have been prepared in accordance with accounting principles generally accepted in the United States. The preparation of these financial statements requires us to make estimates and judgments that affect the reported amount of assets, liabilities, sales and expenses, and related disclosure of contingent assets and liabilities. On an ongoing basis, we evaluate our estimates, including those related to our intangible assets, uncollectible receivables, inventories, debt and equity instruments and stock-based compensation. We base our estimates on historical experience and on various other assumptions that we believe to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying value of assets and liabilities that are not readily apparent from other sources. Because this can vary in each situation, actual results may differ from these estimates under different assumptions or conditions.

We believe the following critical accounting policies affect our more significant judgments and estimates used in the preparation of our audited consolidated financial statements.

Revenue recognition

We recognize revenue when all four of the following criteria are met: (i) persuasive evidence that an arrangement exists; (ii) delivery of the products has occurred; (iii) the selling price is fixed or determinable; and (iv) collectability is reasonably assured. Amounts received in excess of revenue recognizable are deferred.

Subsequent to the launch of the TearLab® Osmolarity System for DED in the fourth quarter of 2008, the Company's revenues have been derived from sales consisting of hardware and related disposables. The Company currently sells to countries in North America, Europe, and Asia, and generally transacts through distributors outside of the United States. The Company records revenue when all of its obligations are completed, which is generally upon shipment of the Company's products.

In 2013, the majority of our revenues are derived from the sale of disposable test cards and we expect
this trend to continue for the foreseeable future. We provide the use of our proprietary TearLab Systems at no cost to our customers, who are primarily eye care professionals, who in turn purchase the disposable test cards for use in osmolarity testing procedures. Our disposable test cards are currently shipped from our primary distribution and warehousing operations facility located in San Diego, California. We generally recognize revenue for disposables test cards when the test cards are shipped to the customers.

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The Company enters into contracts where revenue is derived from multiple deliverables containing a mix of products, which generally includes either the sale or the right to use a TearLab® Osmolarity System and sales of a fixed number of test cards. The Company either sells readers and test cards as a combined unit with no future commitments on behalf of the client or allows the customer to use the readers with a commitment to fulfill a minimum purchase obligation, typically over a three year period. Revenue recognition for contracts with multiple deliverables is based on the individual units of accounting determined to exist in the contract. A delivered item is considered a separate unit of accounting when the delivered item has value to the customer on a stand-alone basis. Items are considered to have stand-alone value when they are sold separately by any vendor or when the customer could resell the item on a stand-alone basis. Considering that test cards are essential to the operation of a TearLab reader, there is no alternative vendor for the test cards and no indication that a secondary market for the TearLab readers is established, the deliverables under the contracts entered into during 2013 and 2012 do not meet criteria for separation under the multiple-element arrangements guidance. Consideration is allocated at the inception of the contract to all deliverables based on their relative selling price. The relative selling price for each deliverable is determined using vendor specific objective evidence (VSOE) of selling price or third-party evidence of selling price if VSOE does not exist. If neither VSOE nor third-party evidence exists, the Company uses its best estimate of the selling price for the deliverable. The Company recognizes revenue for each of the elements only when it determines that all applicable recognition criteria have been met.

Although the Company typically has a no return policy for its products, the Company has established a return reserve for product sales that contain an implicit right of return. The Company reserves for estimated returns or refunds by reducing revenues at the time of shipment based on historical experience. The reserve reduces revenue and is included in accounts receivable.

Accounts receivable and allowance for doubtful accounts

The Company's accounts receivable consist primarily of trade receivables from customers and are generally unsecured and due within 30 days. The Company evaluates the collectability of its accounts receivable based on a combination of factors. Expected credit losses related to trade receivables are recorded as an allowance for doubtful accounts in the Consolidated Balance Sheets as of December 31, 2013 and 2012. The allowance for doubtful accounts is charged to sales and marketing expense and accounts receivable are written off as uncollectible and deducted from the allowance after appropriate collection efforts have been exhausted. The carrying value of accounts receivable approximates their fair value due to their short term nature.

Inventory valuation and reserves

Inventory is recorded at the lower of cost (based on first in, first out basis) or market and consists of finished goods. Inventory is periodically reviewed for evidence of slow-moving or obsolete items, and the estimated reserve is based on management's reviews of inventories on hand, compared to estimated future usage and sales, reviewing product shelf-life, and assumptions about the likelihood of obsolescence. The Company has entered into a long term purchase commitment to buy the test cards from MiniFAB. The purchase commitment contains required minimum annual purchases. As part of our consideration of excess or obsolete inventory, the Company considers future annual minimum purchases, estimated future usage and the expiry dating of the cards in its analysis of any inventory reserve needed. The usage of the minimum purchase commitment is predicated upon significant increases in revenues from TearLab products as compared to 2013 and prior years.

During the years ended December 31, 2013, 2012 and 2011, we recognized a provision for excess and obsolete inventory of $14,000, $62,000 and $490,000, respectively, and recovery of $0, $66,000 and $5,000, respectively. At December 31, 2013, we estimated that we would fully utilize the minimum commitment of cards and that a provision for future loss was not required.

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Valuation of intangible and other long-lived assets.

We periodically assess the carrying value of intangible and other long-lived assets, which requires us to make assumptions and judgments regarding the future cash flows of these assets. The assets are considered to be impaired if we determine that the carrying value may not be recoverable based upon our assessment of the following events or changes in circumstances:

● the asset's ability to continue to generate income from operations and positive cash flow in future periods;

● loss of legal ownership or title to the asset;

● significant changes in our strategic business objectives and utilization of the asset(s); and

● the impact of significant negative industry or economic trends.

If the assets are considered to be impaired, the impairment we recognize is the amount by which the carrying value of the assets exceeds the fair value of the assets. Fair value is determined by a combination of third party sources and discontinued cash flows. In addition, we base the useful lives and related amortization or depreciation expense on our estimate of the period that the assets will generate revenues or otherwise be used by us. We also periodically review the lives assigned to our intangible assets to ensure that our initial estimates do not exceed any revised estimated periods from which we expect to realize cash flows from the technologies. If a change were to occur in any of the above-mentioned factors or estimates, the likelihood of a material change in our reported results would increase.

As of December 31, 2013, the net book value of identifiable intangible assets that are subject to amortization equaled $3,494,000 and the net book value of fixed assets equaled $3,429,000.

We determined that, as of December 31, 2013 and 2012, there have been no significant events which may have affected the carrying value of TearLab® technology. However, our prior history of losses and losses incurred during the current fiscal year reflects a potential indication of impairment, thus requiring management to assess whether TearLab Research, Inc.'s technology was impaired as of December 31, 2013 and 2012. Based on management's estimates of forecasted undiscounted cash flows as of December 31, 2013 and 2012, we concluded that there was no indication of an impairment of the TearLab technology in either fiscal period.

Stock-based compensation

We use the fair value method to account for share-based payments in accordance with the authoritative guidance for stock compensation. The fair value of each option award is estimated on the date of grant using a Black-Scholes-Merton option pricing model, or Black-Scholes model, that uses assumptions regarding a number of complex and subjective variables. These variables include, but are not limited to, our expected stock price volatility, actual and projected employee stock option exercise behaviors, risk-free interest rate and expected dividends. The Company's computation of expected volatility is based on the historical volatility of the Company's common stock over a period of time equal to the expected term of the stock options.Due to the lack of sufficient historical data, the Company's computation of expected life was estimated using the "simplified’ “method as provided in SAB Topic 14 as options granted by the Company meet the criteria of "plain vanilla" options as defined in SAB Topic 14. Under this approach, estimated life is calculated to be the mid-point between the vesting date and the end of the contractual period. The risk-free interest rates are based on the U.S. Treasury yield in effect at the time of the grant. Since we do not expect to pay dividends on our common stock in the foreseeable future, we estimated the dividend yield to be 0%. Forfeitures are estimated at the time of grant and revised, if necessary, in subsequent periods if actual forfeitures differ from those estimates. We estimate pre-vesting forfeitures based on our historical experience.

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If factors change and we employ different assumptions for determination of fair value in future periods, the share-based compensation expense that we record may differ significantly from what we have recorded in the current period. There is a high degree of subjectivity involved when using option pricing models to estimate share-based compensation. Certain share-based payments, such as employee stock options, may expire worthless or otherwise result in zero intrinsic value as compared to the fair values originally estimated on the grant date and reported in our consolidated financial statements. Alternatively, values may be realized from these instruments that are significantly in excess of the fair values originally estimated on the grant date and reported in our consolidated financial statements. There is currently no market-based mechanism or other practical application to verify the reliability and accuracy of the estimates stemming from these valuation models, nor is there a means to compare and adjust the estimates to actual values. Although the fair value of employee share-based awards is determined in accordance with authoritative guidance on stock compensation using an option-pricing model, that value may not be indicative of the fair value observed in a willing buyer/willing seller market transaction.

As of December 31, 2013, $10,791,000 of total unrecognized compensation cost related to stock options is expected to be recognized over a weighted-average period of 3.49 years.

Warrant liabilities

The Company issued several rounds of warrants related to various debt and equity transactions that occurred in 2007, 2010 and 2011. The Company accounts for its warrants issued in accordance with US GAAP accounting guidance under ASC 815 applicable to derivative instruments, which requires every derivative instrument within its scope to be recorded on the balance sheet as either an asset or liability measured at its fair value, with changes in fair value recognized in earnings.  Based on this guidance, the Company determined that the Company's warrants do not meet the criteria for classification as equity.  Accordingly, the Company classified the warrants as current liabilities. The warrants are subject to remeasurement at each balance sheet date, with any change in fair value recognized as a component of other income (expense), net in the statements of operations. We estimated the fair value of these warrants at the respective balance sheet dates using the Black-Scholes Merton option pricing model as described in the stock-based compensation section above, based on the estimated market value of the underlying common stock at the valuation measurement date, the remaining contractual term of the warrant, risk-free interest rates and expected dividends on and expected volatility of the price of the underlying common stock. Option pricing models employ subjective factors to estimate warrant liability; and, therefore, the assumptions used in the Black-Scholes Merton option pricing model are moderately judgmental.

Income taxes

We recognize the tax benefit from an uncertain tax position only if it is more likely than not that the tax position will be sustained on examination by the taxing authorities, based on the technical merits of the position. The tax benefits recognized in the consolidated financial statements from such a position should be measured based on the largest benefit that has a greater than 50% likelihood of being realized upon ultimate settlement. Change of control rules under Section 382 of the U.S. Internal Revenue Code may substantially reduce our ability to utilize prior tax losses.

Income taxes are accounted for under the asset and liability method. Deferred tax assets and liabilities are recognized for the expected future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases and operating loss and tax credit carryforwards. We measure deferred tax assets and liabilities using the enacted tax rates expected to apply to taxable income in the years in which we expect to recover or settle those temporary differences. We recognize the effect of a change in tax rates on deferred tax assets and liabilities in income in the period that includes the enactment date. A valuation allowance is established when it is "more likely than not" the future realization of all or some of the deferred tax assets will not be achieved. For further explanation of our provision for income taxes, see Note 6, labeled ''Income Taxes,'' of the Notes to Consolidated Financial Statements included in Item 8.

For information on the recent accounting pronouncements impacting our business, see Note 2 of the Notes to Consolidated Financial Statements included in Item 8.

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ITEM 7A.     Quantitative and Qualitative Disclosures about Market Risk.

Currency Fluctuations and Exchange Risk

Our sales are denominated primarily in U.S. dollars with minimal sales in Euros and pounds sterling, while a minor portion of our expenses are in Canadian dollars, Australian dollars and Pounds sterling. Our purchases of test cards are in Australian dollars. We cannot predict any future trends in the exchange rate of the Canadian dollar, Australian dollar, Euro or Pound sterling against the U.S. dollar. Any strengthening of the Canadian dollar, Australian dollar, Euro or Pound sterling in relation to the U.S. dollar would increase the U.S. dollar cost of our operations, and affect our U.S. dollar measured results of operations. We maintain bank accounts in Canadian dollars, Australian dollars, Euros and Pound sterling to meet short term operating requirements. Based on the balances in the Canadian dollar, Australian dollar, Euro and Pound sterling denominated bank accounts at December 31, 2013, hypothetical increases of $0.01 in the value of the Canadian dollar, the Australian dollar, the Euro and the Pound sterling in relation to the U.S. dollar would not have a material impact on our results of our operations. We do not engage in any hedging or other transactions intended to manage these risks. In the future, we may undertake hedging or other similar transactions or invest in market risk sensitive instruments if we determine that is advisable to offset these risks.

Interest Rate Risk

The primary objective of our investment activity is to preserve principal while maximizing interest income we receive from our cash resources, without increasing risk. We believe this will minimize our market risk. We do not use interest rate derivative transactions to manage our interest rate risk. We reduce our exposure to interest rate risk by investing in savings or money market accounts. Declines in interest rates over an extended period of time will reduce our interest income while an increase over an extended period of time will increase our interest income. A reduction of interest rate by 100 basis points over the 12 months ended December 31, 2013 would reduce interest income by $35,000 to $0.

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ITEM 8.     Financial Statements and Supplementary Data.

Consolidated Financial Statements

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

The Board of Directors and Stockholders of TearLab Corp.

We have audited the accompanying consolidated balance sheets of TearLab Corp. as of December 31, 2013 and 2012, and the related consolidated statements of operations and comprehensive loss, stockholders’ equity, and cash flows for each of the three years in the period ended December 31, 2013. Our audits also included the financial statement schedule listed in the Index at Item 15(a). These financial statements and schedule are the responsibility of the Company’s management. Our responsibility is to express an opinion on these financial statements and schedule based on our audits.

We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those 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.

In our opinion, the financial statements referred to above present fairly, in all material respects, the consolidated financial position of TearLab Corp. at December 31, 2013 and 2012, and the consolidated results of its operations and its cash flows for each of the three years in the period ended December 31, 2013, in conformity with U.S. generally accepted accounting principles. Also, in our opinion, the related financial statement schedule, when considered in relation to the basic financial statements taken as a whole, presents fairly in all material respects the information set forth therein.

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), TearLab Corp.’s internal control over financial reporting as of December 31, 2013, based on criteria established in Internal Control — Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (1992 framework) and our report dated March 17, 2014 expressed an unqualified opinion thereon.

/s/ Ernst & Young LLP

San Diego, California                                                                                                                                                       

March 17, 2014

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TearLab Corp.

CONSOLIDATED BALANCE SHEETS

(in thousands, except share and per share data)

	As of December 31,
	2013			2012
ASSETS
Current assets
Cash and cash equivalents	$	37,778		$	15,437
Accounts receivable, net		3,524			889
Inventory		885			1,863
Prepaid expenses		689			387
Other current assets		10			60
Total current assets		42,886			18,636
Fixed assets, net		3,429			630
Patents and trademarks, net		108			136
Intangible assets, net		3,494			4,709
Other non-current assets		40			28
Total assets	$	49,957		$	24,139
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities
Accounts payable	$	631		$	1,067
Accrued liabilities		3,844			1,989
Deferred rent		67			—
Obligations under warrants		4,047			6,239
Total current liabilities		8,589			9,295
Commitments and contingencies (Note 8)
Stockholders' equity
Preferred Stock, $0.001 par value, 10,000,000 authorized, none outstanding		—			—
Common Stock, $0.001 par value, 65,000,000 authorized, 33,288,701 issued and outstanding at December 31, 2013 and 65,000,000 authorized, 28,741,653 issued and outstanding at December 31, 2012		33			29
Additional paid-in capital		477,172			421,662
Accumulated deficit		(435,837	)		(406,847	)
Total stockholders' equity		41,368			14,844
Total liabilities and stockholders' equity	$	49,957		$	24,139

See accompanying notes to consolidated financial statements.

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TearLab Corp.

CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS

(in thousands, except per share data)

	Years ended December 31,
	2013			2012			2011
Revenue	$	14,645		$	3,960		$	2,124
Cost of goods sold (excluding amortization of intangibles)		8,146			2,295			1,626
Gross profit		6,499			1,665			498
Operating expenses
Amortization of intangibles assets		1,215			1,215			1,215
General and administrative		8,942			4,770			3,842
Clinical, regulatory and research & development		1,095			2,241			1,304
Sales and marketing		13,021			5,471			2,195
Total operating expenses		24,273			13,697			8,556
Loss from operations		(17,774	)		(12,032	)		(8,058	)
Other income (expenses)
Interest income		35			30			6
Changes in fair value of warrant obligations		(11,105	)		(7,296	)		94
Interest expense		—			—			(95	)
Amortization of deferred financing charges, warrants & beneficial conversion values		—			—			(705	)
Other, net		(146	)		(14	)		(51	)
Total other income (expenses), net		(11,216	)		(7,280	)		(751	)
Net loss and comprehensive loss	$	(28,990	)	$	(19,312	)	$	(8,809	)
Weighted average number of shares outstanding – basic and diluted		30,759,305			25,490,186			17,744,736
Net loss per common share – basic and diluted	$	(0.94	)	$	(0.76	)	$	(0.50	)

See accompanying notes to consolidated financial statements.

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TearLab Corp.

CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY

(in thousands, except share data)

	Common stock				Additional paid-in capital			Accumulated deficit			Stockholders' equity
	Shares		Amount
Balance, December 31, 2010		14,775,366	$	15	$	386,588		$	(378,726	)	$	7,877
Stock-based compensation		—		—		490			—			490
Shares issued in convertible debt conversion		1,629,539		1		2,106			—			2,107
Shares issued in PIPE financing		3,846,154		4		3,545			—			3,549
Shares issued to Greybrook Capital for advisory services provided		163,934		—		306			—			306
Net loss and comprehensive loss		—		—		—			(8,809	)		(8,809	)
Balance, December 31, 2011		20,414,993	$	20	$	393,035		$	(387,535	)	$	5,520
Stock-based compensation		—		—		1,441			—			1,441
Warrants exercised		1,765,497		2		7,274			—			7,276
Shares issued in public and registered direct offerings		5,950,000		6		20,339			—			20,345
Restricted stock units issued		316,779		1		1,181			—			1,182
Issue costs of equity financings		—		—		(1,718	)		—			(1,718	)
Options exercised		294,384		—		110			—			110
Net loss and comprehensive loss		—		—		—			(19,312	)		(19,312	)
Balance, December 31, 2012		28,741,653	$	29	$	421,662		$	(406,847	)	$	14,844
Stock-based compensation		—		—		3,738			—			3,738
Warrants exercised		1,375,194		1		13,988			—			13,989
Shares issued in public and registered direct offerings		2,990,000		3		40,362			—			40,365
Issue costs of equity financings		—		—		(3,036	)		—			(3,036	)
Options exercised		181,854		—		458			—			458
Net loss and comprehensive loss		—		—		—			(28,990	)		(28,990	)
Balance, December 31, 2013		33,288,701	$	33	$	477,172		$	(435,837	)	$	41,368

See accompanying notes to consolidated financial statements.

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TearLab Corp.

CONSOLIDATED STATEMENTS OF CASH FLOWS

(in thousands)

	Years ended December 31,
	2013			2012			2011
OPERATING ACTIVITIES
Net loss for the year	$	(28,990	)	$	(19,312	)	$	(8,809	)
Adjustments to reconcile net loss to cash used in operating activities:
Stock-based compensation		3,738			1,441			490
Depreciation of fixed assets		624			137			83
Amortization of patents and trademarks		28			28			28
Amortization of intangible assets		1,215			1,215			1,215
Amortization of deferred financing charges, warrants & beneficial conversion values		—			—			402
Non-cash interest accrued on convertible debt funding		—			—			96
Non-cash advisory fees paid to Greybrook in common shares		—			—			311
Non-cash bonuses paid to management in common shares		—			1,182			—
Warrant issuance costs		—			—			303
Change in fair value of warrant obligation		11,105			7,296			(94	)
Loss on disposal of fixed assets		7			—			—
Net change in working capital and non-current asset balances related to operations		(961	)		(787	)		1
Cash used in operating activities		(13,234	)		(8,800	)		(5,974	)
INVESTING ACTIVITIES
Additions to fixed assets, net of proceeds		(2,905	)		(569	)		(156	)
Cash used in investing activities		(2,905	)		(569	)		(156	)
FINANCING ACTIVITIES
Proceeds from the exercise of common stock options		458			110			—
Proceeds from issuance of shares in a public offering		40,365			12,420			—
Proceeds from issuance of shares in an underwritten registered financing					7,925			—
Proceeds from the exercise of warrants		693			3,262			—
Proceeds from issuance of shares and warrants in a private placement financing		—			—			7,000
Costs of issuance of shares and warrants in public offering, private placement and registered direct financings		(3,036	)		(1,718	)		(789	)
Cash provided by financing activities		38,480			21,999			6,211
Net increase in cash and cash equivalents during the year		22,341			12,630			81
Cash and cash equivalents, beginning of year		15,437			2,807			2,726
Cash and cash equivalents, end of year	$	37,778		$	15,437		$	2,807

See accompanying notes to consolidated financial statements.

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TearLab Corp.

Notes to Consolidated Financial Statements

(expressed in U.S. dollars except as otherwise noted)

1. Basis of Presentation

TearLab Corp. ("TearLab" or the "Company"), a Delaware corporation, is an ophthalmic device company that is commercializing a proprietary in vitro diagnostic tear testing platform, the TearLab® test for dry eye disease, or DED, which enables eye care practitioners to test for highly sensitive and specific biomarkers using nanoliters of tear film at the point-of-care.

The accompanying consolidated financial statements include the accounts of the Company and all of its wholly owned subsidiaries. Intercompany accounts and transactions have been eliminated on consolidation.

The accompanying consolidated financial statements have been prepared on the going concern basis, which assumes that the Company will continue to operate as a going concern and which contemplates the realization of assets and the satisfaction of liabilities and commitments in the normal course of business. However, the Company has sustained substantial losses of $29.0 million, $19.3 million, and $8.8 million for the years ended December 31, 2013, 2012, and 2011, respectively. The Company's working capital surplus at December 31, 2013 is $34.3 million. Based on the Company's annual operating plan approved by the Board of Directors, management believes the Company's existing cash and cash equivalents of $37.8 million at December 31, 2013 combined with anticipated cash flows provided by sales of its products in calendar year 2014 will be sufficient to fund its cash requirements through at least December 31, 2014.

2. SIGNIFICANT ACCOUNTING POLICIES

Use of estimates

The preparation of financial statements in conformity with U.S. Generally Accepted Accounting Principles (''GAAP'') 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 consolidated financial statements and the reported amounts of revenue and expenses during the reporting periods. Actual results could differ from those estimates. The principal areas of judgment relate to revenue, receivables and inventory reserves, impairment of long-lived and intangible assets, and the fair value of stock options and warrants. 

Concentrations and risk

Credit risk

Financial instruments, which potentially subject the Company to concentrations of credit risk, consist primarily of cash and accounts receivable. The Company limits its exposure to credit loss by placing its cash with high credit quality financial institutions.

During fiscal 2013, the Company derived 100% of its revenue from the sale of the TearLab® Osmolarity product. Customers representing revenue in excess of 10% in prior years were:

	Years ended December 31,
	2013		2012		2011
Alcon Research Ltd.		*		*		11	%
Bon Optic VertriebsgesellschaftmbH		*		*		10	%

* Less than 10% for period presented 

Currently, there are two suppliers for the reader and pen components of the TearLab® Osmolarity System and one supplier for the test cards. 

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Fair value of financial instruments

The Company's financial instruments consist principally of cash and cash equivalents, accounts receivable, accounts payable and accrued expenses. The carrying amounts of financial instruments such as cash equivalents, accounts receivable, accounts payable and accrued expenses approximate the related fair values due to the short-term maturities of these instruments.

Cash and cash equivalents

The Company considers all highly liquid investments that are readily convertible into cash and have an original maturity of three months or less at the time of purchase to be cash equivalents.

Accounts receivable and allowance for doubtful accounts

The Company's accounts receivable consist primarily of trade receivables from customers and are generally unsecured and due within 30 days. The carrying value of accounts receivable approximates their fair value due to their short term nature. The Company evaluates the collectability of its accounts receivable based on a combination of factors. Expected credit losses related to trade receivables are recorded as an allowance for doubtful accounts. The allowance for doubtful accounts is charged to sales and marketing expense and accounts receivable are written off as uncollectible and deducted from the allowance after appropriate collection efforts have been exhausted. Charges for bad debt expense has been $377,000, $10,000, $32,000 for the years ended December 31, 2013, 2012 and 2011 respectively.

Inventory

Inventory is recorded at the lower of cost (based on first in, first out basis) or market and consists of purchased finished goods. Inventory is periodically reviewed for evidence of slow-moving or obsolete items, and the estimated reserve is based on management's reviews of inventories on hand, compared to estimated future usage and sales, reviewing product shelf-life, and assumptions about the likelihood of obsolescence. Once written down, the adjustments are considered permanent and are not reversed until the related inventory is sold.

Fixed assets

Property and equipment are carried at cost less accumulated depreciation and amortization. Depreciation is computed using the straight-line method over the estimated useful lives of the assets, ranging from three to seven years. Maintenance and repairs are expensed as incurred. The Company reviews property and equipment for impairment whenever events or changes in circumstances indicate that the carrying value of an asset may not be recoverable. An impairment loss would be recognized when estimated future undiscounted cash flows relating to the asset are less than its carrying amount. An impairment loss is measured as the amount by which the carrying amount of an asset exceeds its fair value.

Impairment of long-lived assets

The Company periodically assesses the carrying value of intangible and other long-lived assets, and whenever events or changes in circumstances indicate that the carrying amount of an asset might not be recoverable. The assets are considered to be impaired if the Company determines that the carrying value may not be recoverable based upon its assessment, which includes consideration of the following events or changes in circumstances:

● the asset's ability to continue to generate income from operations and positive cash flow in future periods;

● loss of legal ownership or title to the asset;

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● significant changes in the Company's strategic business objectives and utilization of the asset(s); and

● the impact of significant negative industry or economic trends.

If the assets are considered to be impaired, the impairment recognized is the amount by which the carrying value of the assets exceeds the fair value of the assets. Fair value is determined by a combination of data from third party sources and the application of discounted cash flow models to project cash flows from the asset. In addition, the Company bases the useful lives and related amortization or depreciation expense on an estimate of the period that the assets will generate revenues or otherwise be used. The Company also periodically reviews the lives assigned to long-lived assets to ensure that the initial estimates do not exceed any revised estimated periods from which the Company expects to realize cash flows from its assets.

Patents and trademarks

Patents and trademarks are recorded at historical cost and are amortized using the straight-line method over their estimated useful lives, not to exceed 15 years.

Intangible Assets

Intangible assets are recorded at historical cost and are amortized using the straight line-line method over their estimated useful life of 10 years.

Product Warranties

The Company generally provides a 12 month warranty on its TearLab® Osmolarity System and related disposables. The Company accrues the estimated cost of this warranty at the time revenue is recorded and charges warranty expense to cost of goods sold. Warranty reserves are established based on historical experience with failure rates and the number of systems covered by warranty. Warranty reserves are depleted as systems and disposables are replaced. The Company reviews warranty reserves quarterly and, if necessary, make adjustments. The activities in the warranty reserve are as follows (in thousands):

	Years ended December 31,
	2013			2012			2011
Balance at beginning of year	$	107		$	36		$	51
Charges to cost of goods sold		271			196			56
Costs applied to liability		(198	)		(125	)		(71	)
Balance at end of year	$	180		$	107		$	36

Income Taxes

A deferred tax asset or liability is determined based on the difference between the financial statement and tax basis of assets and liabilities as measured by the enacted tax rates which will be in effect when these differences reverse. The Company provides a valuation allowance against net deferred tax assets unless, based upon the available evidence, it is more likely than not that the deferred tax assets will be realized.

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Revenue recognition

Revenue is recognized when all four of the following criteria are met: (i) persuasive evidence that an arrangement exists; (ii) delivery of the products has occurred; (iii) the selling price is fixed or determinable; and (iv) collectability is reasonably assured. The Company's timing of revenue recognition is impacted by factors such as passage of title, payments and customer acceptance. Amounts received in excess of revenue recognizable are deferred.

The Company enters into contracts where revenue is derived from multiple deliverables containing a mix of products, which generally includes either the sale or the right to use a TearLab® Osmolarity System and sales of a fixed number of test cards. The Company has multiple revenue programs, in which it either sells readers and test cards as a combined unit with no future commitments on behalf of the client, provides the use of readers to large practices with an expectation of purchasing certain levels of test cards or allows the customer to use the readers with a commitment to fulfill a minimum purchase obligation, typically over a three year period. Revenue recognition for contracts with multiple deliverables is based on the individual units of accounting determined to exist in the contract. A delivered item is considered a separate unit of accounting when the delivered item has value to the customer on a stand-alone basis. Items are considered to have stand-alone value when they are sold separately by any vendor or when the customer could resell the item on a stand-alone basis. Considering that test cards are essential to the operation of a TearLab reader, there is no alternative vendor for the test cards and no indication that a secondary market for the TearLab readers is established, the deliverables under the contracts entered into during 2013 and 2012 do not meet criteria for separation under the multiple-element arrangements guidance. Consideration is allocated at the inception of the contract to all deliverables based on their relative selling price. The relative selling price for each deliverable is determined using vendor specific objective evidence (VSOE) of selling price or third-party evidence of selling price if VSOE does not exist. If neither VSOE nor third-party evidence exists, the Company uses its best estimate of the selling price for the deliverable. The Company recognizes revenue for each of the elements only when it determines that all applicable recognition criteria have been met. The TearLab® Osmolarity System for Dry Eye Disease (''DED'') consists of hardware and related disposable test cards. In 2013 and 2012, the Company's revenues have been derived primarily from programs where customers are given the use of a TearLab® Osmolarity System in exchange for various programs to purchase test cards. The Company's sales are currently direct to customers in the United States, Canada and the United Kingdom and to distributors in Europe and Asia. The Company records revenue when all of its obligations are completed which is generally upon shipment of the Company's products.

Although the Company has a no return policy for its products, the Company has established a return reserve for product sales that contain an implicit right of return. The Company reserves for estimated returns or refunds by reducing revenues at the time of shipment based on historical experience. The reserve of $173,000 and $71,000 as of December 31, 2013 and December 31, 2012, respectively, has reduced revenue and is included in accounts receivable.

Cost of goods sold

Cost of goods sold includes the costs the Company incurs for the purchase of the TearLab® Systems sold and related freight and shipping costs, fees related to warehousing and logistics inventory management associated with conducting business and depreciation of reader systems. The Company recorded $912,000, $255,000 and $187,000 in shipping and handling fees for the years ended December 31, 2013, 2012 and 2011, respectively.

Clinical, regulatory and research & development costs

Clinical and regulatory costs attributable to the performance of contract services are recognized as an expense as the services are performed. Non-refundable, up-front fees paid in connection with these contracted services are deferred and recognized as an expense over the estimated term of the related contract.

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Stock-based compensation

The Company accounts for stock-based compensation expense for its employees in accordance with US GAAP guidance related to stock-based compensation. Under this guidance, stock-based compensation cost is estimated at the grant date based on the fair value of the award and is recognized as an expense ratably over the requisite service period of the award. The Company uses the Black-Scholes Merton option pricing model for determining the fair value for all its awards and will recognize compensation cost on a straight-line basis over the awards' vesting periods.

Advertising Costs

Advertising costs are expensed as incurred. Total advertising costs for each of the years ended December 31, 2013, 2012 and 2011 were $0.4 million, $0.3 million and $0.2 million, respectively.

Warrant liabilities

The Company issued several rounds of warrants related to various debt and equity transactions which occurred in 2010 and 2011. The Company accounts for its warrants issued in accordance with the US GAAP accounting guidance under Accounting Standards Codification (ASC) 815 applicable to derivative instruments, which requires every derivative instrument within its scope to be recorded on the balance sheet as either an asset or liability measured at its fair value, with changes in fair value recognized in earnings.  Based on this guidance, the Company determined that the Company's warrants do not meet the criteria for classification as equity.  Accordingly, the Company classified the warrants as current liabilities. The warrants are subject to remeasurement at each balance sheet date with any change in fair value recognized as a component of other income (expense), in the statements of operations and comprehensive loss. Warrants are also remeasured at fair value immediately prior to being exercised, and the resulting fair value is reclassed into additional paid-in capital, net of any applicable exercise proceeds. The Company estimated the fair value of these warrants at the respective balance sheet dates using the Black-Scholes Merton option pricing model as described in the stock-based compensation section above, based on the estimated market value of the underlying common stock at the valuation measurement date, the remaining contractual term of the warrant, risk-free interest rates and expected dividends on and expected volatility of the price of the underlying common stock. There is a moderate degree of subjectivity involved when using option pricing models to estimate warrant liability and the assumptions used in the Black-Scholes Merton option pricing model are moderately judgmental.

Foreign currency transactions

The Company's functional and reporting currency is the U.S. dollar. The assets and liabilities of the Company's Canadian operations are maintained in U.S. dollars. Monetary assets and liabilities denominated in foreign currencies are translated into U.S. dollars at exchange rates in effect at the consolidated balance sheet dates, and non-monetary assets and liabilities are translated at exchange rates in effect on the date of the transaction. Revenue and expenses are translated into U.S. dollars at average exchange rates prevailing during the year. Resulting exchange gains (losses) of: ($131,000), ($15,000), ($29,000) are included in other income (expense) in the years ended December 31, 2013, 2012 and 2011, respectively.

Geographic information

The following table provides geographic information related to the Company's revenues (in thousands):

	United States		Canada		Rest of World		Total
December 31, 2013
Revenues	$	13,844	$	121	$	680	$	14,645
December 31, 2012
Revenues	$	3,564	$	59	$	337	$	3,960

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Comprehensive loss

Comprehensive income (loss) is defined as the change in equity during a period from transactions and other events and circumstances from non-owner sources. Comprehensive income (loss) generally includes unrealized gains or losses on the Company's marketable securities and foreign currency translation adjustments. In all the periods presented, the Company's comprehensive loss equaled net loss for the period.

Net loss per share

Basic earnings per share (''EPS'') excludes dilutive securities and is computed by dividing net loss available to common stockholders by the weighted average number of shares of common stock outstanding for the year. Diluted EPS reflects the potential dilution that could occur if securities or other contracts to issue common stock were exercised or converted and the resulting additional shares are dilutive because their inclusion decreases the amount of EPS.

The following are potentially dilutive securities which have not been used in the calculation of diluted loss per share as they are anti-dilutive (in thousands):

	December 31,
	2013		2012		2011
Stock options		5,537		4,100		3,691
Warrants		599		2,183		4,087
Total		6,136		6,283		7,778

Recent accounting pronouncements

Effective January 1, 2013, the Company adopted the FASB's requirements for presentation of reclassifications out of accumulated other comprehensive income (AOCI). The guidance requires companies to report, in one place, information about reclassifications out of AOCI and to present reclassifications by component when reporting changes in AOCI balances. The adoption of this authoritative guidance did not have an impact on the Company's financial position or results of operations.

In July 2013, the FASB issued Accounting Standards Update, or ASU, No. 2013-11, Presentation of an Unrecognized Tax Benefit When a Net Operating Loss Carryforward, a Similar Tax Loss, or a Tax Credit Carryforward Exists. ASU 2013-11 provides explicit guidance on the financial statement presentation of an unrecognized tax benefit when a net operating loss carryforward, a similar tax loss, or a tax credit carryforward exists. The guidance is effective prospectively for fiscal years, and interim periods within those years, beginning after December 15, 2013, with an option for early adoption. We intend to adopt this guidance at the beginning of our first quarter of fiscal year 2014 and do not believe the adoption of this standard will have a material impact on our financial position, results of operations or related financial statement disclosures.

In July 2012, the FASB issued Accounting Standards Update, or ASU, No. 2012-02, Testing Indefinite-Lived Intangible Assets for Impairment. ASU 2012-02 gives an entity the option to first assess qualitative factors to determine whether it is more likely than not that an indefinite-lived intangible asset is impaired. If, after assessing the totality of events and circumstances, an entity concludes that it is not more likely than not that the indefinite-lived intangible asset is impaired, then the entity is not required to take further action. This guidance became effective for annual and interim impairment tests performed for fiscal years beginning after September 15, 2012, with early adoption permitted. The Company adopted the provisions of the guidance in the fourth quarter of 2013. The adoption did not have a material impact on the Company's financial position or results of operations.

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3. BALANCE SHEET DETAILS

Accounts receivable

(in thousands)	December 31,
	2013			2012
Trade receivables	$	3,939		$	910
Due from related parties		—			15
Allowance for doubtful accounts		(415	)		(36	)
	$	3,524		$	889

Inventory

(in thousands)	December 31,
	2013			2012
Finished goods	$	899		$	1,863
Inventory reserves		(14	)		—
	$	885		$	1,863

The Company evaluates inventory for estimated excess quantities and obsolescence, based on expected future sales levels and projections of future demand, with the excess inventory provided for. In addition, the Company assesses the impact of changing technology and market conditions. The Company has entered into a long term purchase commitment to buy the test cards from MiniFAB. The purchase commitment contains required minimum annual purchases. As part of our consideration of excess or obsolete inventory, the Company considers future annual minimum purchases, estimated future usage and the expiry dating of the cards in its analysis of any inventory reserve needed. The usage of the minimum purchase commitment is predicated upon significant increases in revenues from TearLab products as compared to 2013 and prior years.

Prepaid expenses

(in thousands)	December 31,
	2013		2012
Prepaid trade shows	$	162	$	159
Prepaid insurance		227		131
Manufacturing deposits		104		—
Subscriptions		86		1
Other fees and services		110		96
	$	689	$	387

Fixed Assets

(in thousands)	December 31,
	2013			2012
Furniture and office equipment	$	221		$	115
Leasehold improvements		47			—
Computer equipment and software		386			203
Capitalized TearLab equipment readers		3,640			582
Medical equipment		401			373
		4,695			1,273
Accumulated depreciation		(1,266	)		(643	)
	$	3,429		$	630

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Depreciation expense was $624,000, $137,000, and $83,000, during the years ended December 31, 2013, 2012, and 2011, respectively.

Patents and trademarks

(in thousands)	December 31,
	2013			2012
Patents	$	236		$	236
Trademarks		32			32
		268			268
Accumulated amortization		(160	)		(132	)
	$	108		$	136

Amortization expense was $28,000, $28,000, and $28,000 during the years ended December 31, 2013, 2012, and 2011, respectively.

These patents and trademarks are amortized, using the straight-line method, over an estimated useful life of 10 years from the date of approval of the patents and trademarks.

Estimated aggregate amortization expense for patents and trademarks at December 31, 2013 is as follows (in thousands):

2014	$	28
2015		28
2016		28
2017		24
Total	$	108

Accrued liabilities

(in thousands)	December 31,
	2013		2012
Due to professionals	$	616	$	258
Due to employees and directors		1,503		1,052
Goods received but not yet invoiced		207		17
Sales and use tax liabilities		527		99
Royalty liabilitiy		281		122
Readers and test cards in transit		368		100
Other		342		341
	$	3,844	$	1,989

4. INTANGIBLE ASSETS

The Company's intangible assets consist of the value of TearLab^® Technology acquired in the acquisition of TearLab Research, Inc. The TearLab Technology consists of a disposable lab card and card reader, supported by an array of patents and patent applications that are either held or in-licensed by the Company. The TearLab Technology is being amortized using the straight-line method over an estimated useful life of 10 years. Amortization expense for each of the years ended December 31, 2013, 2012 and 2011 was $1,215,000.

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Intangible assets subject to amortization consist of the following (in thousands):

	December 31, 2013				December 31, 2012
	Cost		Accumulated Amortization		Cost		Accumulated Amortization
TearLab® technology	$	12,172	$	8,678	$	12,172	$	7,463

Estimated future amortization expense related to intangible assets with finite lives at December 31, 2013 is as follows (in thousands):

	Amortization of intangible assets
2014		1,215
2015		1,215
2016		1,064
Total	$	3,494

The Company determined that, as of December 31, 2013, there have been no significant events which may affect the carrying value of its TearLab technology. However, the Company's prior history of losses and losses incurred during the current fiscal year reflect a potential indication of impairment, thus requiring management to assess whether the Company's TearLab technology was impaired as of December 31, 2013. Based on management's estimates of forecasted undiscounted cash flows as of December 31, 2013, the Company concluded that there is no indication of an impairment of the Company's TearLab technology. Therefore, no impairment charge was recorded during any of the three years ended December 31, 2013.

5. RELATED PARTY TRANSACTIONS

On August 20, 2009, the Company entered into a distribution agreement with Science with Vision Inc., pursuant to which Science with Vision obtained exclusive Canadian distribution rights with respect to the Company's products.  The Company began selling products through the Canadian distributor in 2010. The Company's chairman of the board of directors and chief executive officer has a material financial interest in Science with Vision. Sales to this distributor for the years ended December 31, 2013 and 2012 were $0 and $59,000, respectively, and the outstanding accounts receivable balances due at December 31, 2013 and December 31, 2012 were $0 and $15,000, respectively.

On September 3, 2013, the Company and Science with Vision Inc. agreed to terminate the distribution agreement including exclusive distribution rights of TearLab products in Canada. In consideration of the termination agreement, the Company agreed to a one-time payment to Science with Vision Inc. of $200,000 Canadian dollars and a royalty on all sales in Canada of products for which Science with Vision Inc. had exclusive distribution rights. The one-time payment resulted in a charge of $190,000 USD during the year ended December 31, 2013 and is recorded within sales and marketing expense. Royalties are recorded as cost of goods sold in the income statement in the period in which revenue is recognized for the associated products sold. At December 31, 2013 the Company has recorded an accrued liability of $3,000 related to royalties due to Science with Vision which is reported as a current liability. The Company's chairman of the board of directors and chief executive officer has a material financial interest in Science with Vision.

On November 2, 2009, the Company, entered into a capital advisory agreement for a two year period with Greybrook Capital Inc., or Greybrook, which was amended on January 8, 2010.  Pursuant to the terms of the agreement, as amended, Greybrook was to receive $200,000 in cash or 163,934 common shares for its services. On April 14, 2011 the Company issued 163,934 common shares to Greybrook to satisfy the outstanding liability related to both years. The Company’s chairman of the board of directors and chief executive officer, is a principal with, and holds a material financial interest in Greybrook.

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6. INCOME TAXES

Geographic sources of loss from continuing operations before income tax are as follows:

	December 31,
	2013		2012			2011
Domestic	$	28,155	$	19,222	$	8,589
Foreign		835		90		220
Total loss from continuing operations before income taxes		28,990		19,312		8,809

Significant components of the Company's deferred tax assets and liabilities are as follows (in thousands):

		December 31,
	2013			2012
Deferred tax assets
Intangible assets	$	413		$	345
Stock options		1,955			5,643
Accruals and other		742			519
Net operating loss carry forwards		14,449			11,240
		17,559			17,747
Valuation allowance		(16,244	)		(15,838	)
Deferred tax asset		1,315			1,909
Deferred tax liability
Intangible assets		(1,315	)		(1,909	)
Deferred tax liability		(1,315	)		(1,909	)
Deferred taxes, net	$	—		$	—

The following is a reconciliation of the recovery of income taxes between those that are expected, based on enacted tax rates and laws, to those currently reported (in thousands):

	December 31,
	2013			2012			2011
Loss for the year before income taxes	$	(28,990	)	$	(19,312	)	$	(8,809	)
Expected recovery of income taxes		(9,886	)		(6,759	)		(3,083	)
State income tax, net of federal benefit		(440	)		(1,070	)		(404	)
Stock-based compensation		204			64			103
Warrants		3,776			2,958			82
Non-deductible interest		—			—			38
Deferred state tax rate adjustment		899			(92	)		30
Expiration of options		3,761			—			—
Adjustment to deferred assets		1,138			187			1,236
Non-deductible expenses & other		112			32			69
Change in valuation allowance		406			4,680			1,929
Total recovery of income taxes	$	—		$	—		$	—

Income taxes are recorded in accordance with authoritative guidance for accounting for income taxes, which requires the recognition of deferred tax assets and liabilities to reflect the future tax consequences of the events that have been recognized in the Company's consolidated financial statements or tax returns. Measurement of the deferred items is based on enacted tax laws. In the event of differences between the financial reporting bases and tax bases of the Company's assets, an assessment regarding the Company ability to realize the future benefits of the deferred tax assets is required. The Company records a valuation allowance to reduce the deferred tax assets to the amount that is more likely than not to be realized. Management has considered future taxable income and ongoing tax planning strategies in assessing the need for the valuation allowance. In the event the Company were to determine that it would be able to realize the deferred tax assets in the future in excess of their net recorded amounts, an adjustment to the deferred tax assets would increase the income in the period such determination was made. Likewise, should the Company determine that it would not be able to realize all or part of the net deferred tax assets in the future, an adjustment to the deferred tax assets would be charged to income in the period such determination was made.

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In July 2006, the “FASB” issued additional guidance which requires the impact of an uncertain income tax position on the income tax return must be recognized at the largest amount that is more-likely-than-not to be sustained upon audit by the relevant taxing authority. An uncertain income tax position will not be recognized if it has less than a 50% likelihood of being sustained. Additionally, the provisions under this guidance also provides guidance on derecognition, measurement, classification, interest and penalties, accounting in interim periods, disclosure and transition. The Company adopted the provisions under this guidance on January 1, 2007. The adoption of these provisions had no impact on the Company's consolidated financial position or results of operations. At December 31, 2013 and 2012, the Company has no unrecognized income tax benefits and no material uncertain tax positions.

During the year ended December 31, 2012, a change of ownership for tax purposes causing Section 382 restrictions on the utilization of net operating losses occurred.  The Company is in the process of updating the Section 382 analysis for 2013. No additional ownership changes are expected to arise from the 2013 Section 382 update. The ownership change in 2012, while limiting the annual utilization of net operating losses, will not cause the carryforwards generated subsequent to the Company's last ownership change in October 2008 to expire unused. In general, an ownership change, as defined by Section 382, results from transactions increasing ownership of certain stockholders or public groups in the stock of the corporation by more than 50 percentage points over a three-year period. Utilization of net operating loss carryforwards are subject to annual limitations under Section 382 of the Internal Revenue Code of 1986, and similar state provisions whenever an ownership change has occurred. The ownership changes described above will limit the annual amount of net operating loss carryforwards that can be utilized to offset future taxable income.

At December 31, 2013, the Company had federal net operating loss carryforwards of approximately $39.1 million, state net operating loss carryforwards of approximately $31.7 million and Canadian net operating loss carryforwards of approximately $15.1 million. The federal net operating loss carryforwards begin to expire in 2017, the state net operating loss carryforwards begin to expire in 2014 and the Canadian net operating loss carryforwards begin to expire in 2015. The federal and state net operating loss carryovers reflected in the deferred tax table above do not include any net operating loss carryover which would expire unutilized solely as a result of 382 limitations arising in connection with the 2008 ownership change. As of December 31, 2013, the Company has approximately $1.4 million of net operating loss carryforwards related to stock option exercises which will result in an increase to additional paid-in capital and a decrease in income taxes payable at the time when the tax loss carryforwards are utilized.

The Company's policy is to recognize interest and penalties related to income tax matters in other expense. Because the Company has generated net operating losses since inception for both state and federal purposes, no additional tax liability, penalties or interest have been recognized for balance sheet or income statement purposes as of and for the three years ended December 31, 2013.

The Company does not expect a significant change in the amount of its unrecognized tax benefits within the next 12 months. Therefore, it is not expected that the change in the Company's unrecognized tax benefits will have a significant impact on the Company's results of operations or financial position.

All of the federal income tax returns for the Company and its subsidiaries remain open since their respective dates of incorporation due to the existence of net operating losses. The Company and its subsidiaries have not been, nor are they currently, under examination by the Internal Revenue Service or the Canada Revenue Agency.

State and provincial income tax returns are generally subject to examination for a period of between three and five years after their filing. However, due to the existence of net operating losses, all state income tax returns of the Company and its subsidiaries since their respective dates of incorporation are subject to re-assessment. The state impact of any federal changes remains subject to examination by various states for a period of up to one year after formal notification to the states. The Company and its subsidiaries have not been, nor are they currently, under examination by any state tax authority.

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7.   CONVERTIBLENOTES PAYABLE AND ACCRUED INTEREST

In July 2009, the Company entered into an agreement with certain investors whereby the investors agreed to provide financing (the ''Financing'') to the Company through the purchase of convertible secured notes (''the Notes''), in the aggregate amount of $1.55 million. On August 31, 2009, an additional $200,000 of financing was received by the Company to bring the aggregate total funding received to $1.75 million. The Notes evidencing the Financing, were to mature on the second anniversary of their issuance (“the Maturity Date”), bearing interest at a rate of 12% per annum and were convertible into shares of the Company's common stock upon the request of holders of 51% or more of the outstanding principal amount of the Notes at any time after August 31, 2009 and prior to the Maturity Date. The conversion price of the Notes was $1.3186. The Notes were secured by substantially all of the assets of the Company.

On June 13, 2011 (Conversion date), upon the request of holders of more than 51% of the outstanding principal amount of the Notes, the Company issued 1,629,539 shares of its common stock in consideration of the conversion and retirement of the Company's outstanding Financing obligations in the aggregate amount of $2,149,000, of which $399,000 was accrued interest through the Conversion date, (the Conversion). In connection with the Conversion, the Company issued warrants with a life of five years to purchase 109,375 shares of common stock (the ''Financing Warrants''). The exercise price of the Financing Warrants is $1.60 per common share. The fair value of the warrants totaling $163,000, calculated using the Black-Scholes Merton option pricing model, was initially recorded at the date of Financing in additional paid-in capital and accreted over the term of the Notes through the Conversion date. The Company recorded amortization charges related to the Financing Warrants of $0, $0 and $69,000 for the years ended December 31, 2013, 2012 and 2011, respectively, included in other income (expense).

As the conversion price of the Notes reflected a price discounted from the fair market value of the Company's common stock, there was a deemed beneficial conversion feature associated with the Financing. The Company recorded $728,000 representing the value of the beneficial conversion feature at the date of the Financing in additional paid-in capital. The value of the beneficial conversion was being amortized over the term of the Notes through the Conversion date with charges $0, $0 and $314,000 for the years ended December 31, 2013, 2012 and 2011, respectively, included in other income (expense).

The Company incurred $87,000 in legal and consulting expenses related to the Financing which was allocated to deferred finance charges for $43,000 and cost of equity for $44,000 in proportion to the allocation of the Financing amount between equity and liabilities. The value of the deferred charges was amortized over the term of the Notes through the Conversion date and expenses of $0, $0 and $19,000 for the years ended December 31, 2013, 2012 and 2011, respectively, are included in other income (expense).

8.   COMMITMENTS AND CONTINGENCIES

Commitments

The Company has commitments relating to operating leases recognized on a straight line basis over the term of the lease for rental of office space and equipment from unrelated parties, expiring at various times from January 1, 2012 through June 30, 2018. The total future minimum obligation under these various leases for 2014, 2015, 2016, 2017 and 2018 is $256,000, $334,000, $343,000, $353,000 and $177,000, respectively. Rent expensed under these leases was $223,000, $143,000, and $142,000 for the years ended December 31, 2013, 2012, and 2011, respectively. The Company leases office facilities under an operating lease agreement. The initial term of the lease is five years and includes periodic rent increases and a renewal option.

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On March 12, 2003, TearLab entered into a patent license and royalty agreement with the University of California San Diego to obtain an exclusive license to make, use, sell, offer for sale, and import TearLab technology in development. Starting in 2009, the Company was required to make minimum royalty payments of $35,000 or 5.5% of gross sales per year, whichever is higher. However, if this new technology is combined with existing technology, the maximum royalty payable on the sale of the combined products would be 5.5% of gross sales per year. As the new technology is currently in development, there is no revenue and the minimum royalty payment of $35,000 is applicable. Future minimum royalty payments under this agreement as of December 31, 2013 are approximately as follows (in thousands):

2014	$	35
2015		35
2016		35
2017		35
2018		35
Thereafter		315
Total	$	490

Effective October 1, 2006, TearLab entered into a patent license and royalty agreement with the University of California San Diego to obtain a second exclusive license to make, use, sell, offer for sale, and import existing TearLab technology. The Company is required to make royalty payments of $35,000 or 5.5% of gross sales per year, whichever is higher. Additionally, the Company is required to pay a royalty of 30% of any sublicense fees it receives prior to receiving FDA approval and 25% of any sub-license fees it receives after FDA approval. The Company incurred fees of $807,000, $213,000 and $145,000 under this agreement during the years ended December 31, 2013, 2012 and 2011, respectively. The Company had $243,000 and $122,000 in accrued royalties at December 31, 2013 and 2012, respectively. Future minimum royalty payments under this agreement as of December 31, 2013 are approximately as follows (in thousands):

2014	$	35
2015		35
2016		35
2017		35
2018		35
Thereafter		315
Total	$	490

On February 23, 2009, the Company entered into an agreement for the manufacturing of its TearLab® reader and pens with a third party manufacturing company. The agreement is in effect for three years after the start of production and can be renewed for one-year. The Company has no minimum commitment. Upon termination or cancellation of the agreement, the Company is liable for inventory and materials remaining at the manufacturer's facilities at 110% of the manufacturer's cost. At December 31, 2013, the manufacturer maintained inventory and materials with a value of approximately $30,000, all of which had been purchased to meet manufacturing requirements of purchase orders issued by the Company.

On August 1, 2011, the Company, through its subsidiary, TearLab Research, Inc., entered into a manufacturing and development agreement, or the Manufacturing Agreement, with MiniFAB (Aust) Pty Ltd, or MiniFAB. Pursuant to the terms of the Manufacturing Agreement, MiniFAB will manufacture and supply test cards for the Company. The Manufacturing Agreement specifies minimum order quantities that will require the Company to purchase approximately $26.8 million (AUD$30.2 million) in test cards from MiniFAB from inception of the agreement through the end of 2015. The agreement is denominated in AUD$ so the actual amounts paid in USD may vary. The agreement also has annual minimum order commitments under the Manufacturing Agreement. The Company met the annual minimum order commitment for the year ended December 31, 2013 and had no purchase obligation under the Manufacturing Agreement as of December 31, 2013. The Company has a commitment for 2014 of $8.3 million representing a minimum commitment to purchase 3,000,000 test cards. The Manufacturing Agreement has a ten year initial term and may be terminated by either party if the other party is in breach or becomes insolvent. If terminated for any reason other than a default by MiniFAB, the Company will be obligated to pay a termination fee based on the cost of products manufactured by MiniFAB, but not yet invoiced, repayment of capital invested by MiniFAB, less depreciation calculated in accordance with Australian accounting standards, and the expected profit to MiniFAB had the remaining minimum order quantities been purchased by the Company.

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Future minimum purchase commitments under this agreement as of December 31, 2013 are approximately as follows (in millions):

2014	$	8.3
2015		9.1
Total	$	17.4

Contingencies

During the ordinary course of business activities, the Company may be contingently liable for litigation and a party to claims. Currently the Company is not party to any litigation.

9. FAIR VALUE MEASUREMENTS

The Company measures certain assets and liabilities in accordance with authoritative guidance which requires fair value measurements be classified and disclosed in one of the following three categories:

● Level 1: Quoted prices (unadjusted) in active markets that are accessible at the measurement date for assets or liabilities.

● Level 2: Observable prices that are based on inputs not quoted on active markets, but corroborated by market data.

● Level 3: Unobservable inputs are used when little or no market data is available.

As of December 31, 2013 and 2012, assets and liabilities are classified based on the lowest level of input that is significant to the fair value measurements. The Company reviews the fair value hierarchy classification on a quarterly basis. Changes in the ability to observe valuation inputs may result in a reclassification of levels for certain securities within the fair value hierarchy. The Company did not have any assets or liabilities in Level 1 and Level 2, and no transfers to or from Level 3 of the fair value measurement hierarchy during the years ended December 31, 2013 and 2012.

At December 31, 2013, the Company has a liability for warrants to purchase 524,549 shares of common stock at an exercise price of $1.86 per share valued at $4,047,000 (Note 10). All warrant liabilities are classified as Level 3 fair value measurements.

The following table provides a reconciliation for all liabilities measured at fair value using significant unobservable inputs (Level 3) for the year ended December 31, 2013 (in thousands):

	Fair Value Measurements Using Significant Unobservable Inputs (Level 3)
Balance of warrant liability at January 1, 2013	$	6,239
Reclass of warrant liability to stockholder’s equity upon exercise		(13,297	)
Change in fair value of warrant liability included in other (income) / expense		11,105
Balance of warrant liability at December 31, 2013	$	4,047

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10. CAPITAL STOCK

(a) Authorized share capital

The total number of authorized shares of common stock of the Company is 65,000,000. Each share of common stock has a par value of $0.001 per share. The total number of authorized shares of preferred stock of the Company is 10,000,000. Each share of preferred stock has a par value of $0.001 per share.

(b) Common stock

On April 14, 2011 pursuant to the capital advisory agreement (Note 5), as amended, the Company issued 163,934 shares of common stock to Greybrook. Elias Vamvakas, Chairman of the Company's board of directors and acting Chief Executive Officer, is a principal with, and holds a material financial interest in, Greybrook.

On June 13, 2011, the Company issued 1,629,539 shares of its common stock as well as warrants (''Financing Warrants'') to purchase 109,375 shares of its common stock in consideration of conversion and retirement of the Company's outstanding July and August 2009 debt obligations and related accrued interest in the aggregate amount of $2,149,000 with associated costs of $41,000. The exercise price of the Financing Warrants is $1.60 per common share representing the price per share equal to the closing bid price per share of the Company's common stock on the NASDAQ stock market on July 15, 2009.

On June 30, 2011, the Company closed a private placement financing in which 3,846,154 shares of common stock and warrants to purchase 3,846,154 shares of common stock for gross proceeds of approximately $7,000,000 were issued, with associated costs of $703,000, of which $303,000 was related to warrants and $400,000 to common shares. Of the gross proceeds $3,549,000 were recorded as share equity and the remaining $3,451,000 was determined to be the value of the warrants issued in the financing. The investors purchased the shares and warrants for $1.82 per unit (each unit consisting of one share and one warrant to purchase shares of common stock). The exercise price of the warrants is $1.86 per share. The warrants are exercisable at any time from the date of issuance until June 30, 2016. During 2013, 1,571,136 warrants were exercised for gross proceeds of $676,000.

On April 16, 2012, the Company closed an underwritten public offering of 3.45 million shares of its common stock at a price to the public of $3.60 per share. The Company received gross proceeds of $12,420,000, with associated costs of $1,194,000.

On July 18, 2012, the Company closed an underwritten registered direct financing of 2.5 million shares of its common stock at a price of $3.17 per share. The Company received gross proceeds of $7,925,000, with associated costs of $524,000.

On September 17, 2012 the Company issued 316,779 shares of restricted stock units to its management team as settlement of an outstanding liability for previously accrued bonuses related to achievement of CLIA waiver status. The costs basis of the shares granted was $3.72, the closing price of the Company's stock on the date of grant, for a total value of $1,182,000. The shares were issued in accordance with the Company's amended 2002 Stock Incentive Plan and were fully vested on the date of grant.

On July 30, 2013, the Company closed an underwritten public offering of 2.99 million shares of its common stock at a price to the public of $13.50 per share. The Company received gross proceeds of $40,365,000, with associated costs of $3,036,000.

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(c) Stock Option Plan

The Company has a stock option plan, the 2002 Stock Incentive Plan (the "Stock Incentive Plan"), which was most recently amended on June 7, 2013 in order to increase the shares reserved under the Stock Option Plan by 1,000,000. Under the Stock Incentive Plan, up to 5,200,000 options are available for grant to employees, directors and consultants. Options granted under the Stock Incentive Plan may be either incentive stock options or non-statutory stock options. Under the terms of the Stock Incentive Plan, the exercise price per share for an incentive stock option shall not be less than the fair market value of a share of stock on the effective date of grant and the exercise price per share for non-statutory stock options shall not be less than 85% of the fair market value of a share of stock on the date of grant. No option granted to a holder of more than 10% of the Company's common stock shall have an exercise price per share less than 110% of the fair market value of a share of stock on the effective date of grant.

Options granted are typically service-based options. Generally, options expire 10 years after the date of grant. No incentive stock options granted to a 10% owner optionee shall be exercisable after the expiration of five years after the effective date of grant of such option, no option granted to a prospective employee, prospective consultant or prospective director may become exercisable prior to the date on which such person commences service, and with the exception of an option granted to an officer, director or consultant, no option shall become exercisable at a rate less than 20% per annum over a period of five years from the effective date of grant of such option unless otherwise approved by the Board. Shares issued upon option exercise result in new shares issued by the Company.

The Company accounts for stock-based compensation under the authoritative guidance which requires that share-based payment transactions with employees be recognized in the financial statements based on their fair value and recognized as compensation expense over the vesting period. The Company uses the Black-Scholes Merton option pricing model to calculate the fair value of the stock options. The weighted-average fair value of stock options granted during the years ended December 31, 2013, 2012 and 2011 was $8.96, $2.93, and $1.20, respectively.

The following table sets forth the total stock-based compensation expense resulting from stock options included in the Company's consolidated statements of consolidated loss (in thousands):

	Year ended December 31,
	2013		2012		2011
General and administrative	$	1,837	$	528	$	340
Clinical and regulatory		174		375		93
Sales and marketing		1,727		538		57
Stock-based compensation expense before income taxes	$	3,738	$	1,441	$	490

The estimated fair value of stock options for the periods presented was determined using the Black-Scholes Merton option pricing model with the following weighted-average assumptions:

	Year ended December 31,
	2013			2012			2011
Volatility		101	%		104	%		105	%
Weighted average Expected life of options (years)	5.89			5.74			5.36
Risk-free interest rate		1.43	%		0.88	%		1.49	%
Dividend yield		0	%		0	%		0	%

The Company's computation of expected volatility is based on the historical volatility of the Company's common stock over a period of time equal to the expected term of the stock options. Due to the lack of sufficient historical data, the Company's computation of weighted average expected life was estimated using the simplified method as prescribed by the Securities and Exchange Commission. Under this approach, estimated life is calculated to be the mid-point between the vesting date and the end of the contractual period. The risk-free interest rate for an award is based on the U.S. Treasury yield curve with a term equal to the expected life of the award on the date of grant.

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A summary of the options issued during the year ended December 31, 2013 and the total number of options outstanding as of that date and changes since December 31, 2010 are set forth below:

	Number of Options Outstanding			Weighted Average Exercise Price		Weighted Average Remaining Contractual Life (years)		Aggregate Intrinsic Value
Outstanding, December 31, 2010		3,576,543		$	3.46		7.18	$	899,010
Granted		238,278			1.56
Exercised		—			—
Forfeited/cancelled/expired		(124,167	)		3.14
Outstanding, December 31, 2011		3,690,654			3.34		7.06	$	269,587
Granted		720,250			3.69
Exercised		(294,384	)		0.37
Forfeited/cancelled/expired		(17,178	)		10.37
Outstanding, December 31, 2012		4,099,342			3.54		7.14	$	6,798,973
Granted		1,837,500			9.78
Exercised		(181,854	)		2.52
Forfeited/cancelled/expired		(218,193	)		11.07
Outstanding, December 31, 2013		5,536,795		$	4.91		6.89	$	27,256,235
Vested or expected to vest, December 31, 2013		3,964,837		$	3.81		5.90	$	25,370,479
Exercisable, December 31, 2013		3,469,444		$	3.29		5.96	$	24,067,198

The aggregate intrinsic value at December 31, 2013 represents the total pre-tax intrinsic value, calculated as the difference between the Company's closing stock price on the last trading day of the respective fiscal year and the exercise price, multiplied by the number of shares that would have been received by the option holders if the options that could be exercised had been exercised on such date.

Net cash proceeds from the exercise of common stock options were $458,000, $110,000 and $0 for the years ended December 31, 2013, 2012 and 2011, respectively. No income tax benefit was realized from stock option exercises during the years ended December 31, 2013, 2012 and 2011. The Company presents excess tax benefits from the exercise of stock options, if any, as financing cash flows rather than operating cash flows.

The total intrinsic value of options exercised was $2,038,000, $923,000, and $0 during the years ended December 31, 2013, 2012 and 2011, respectively. The total fair value of stock options vested during the years ended December 31, 2013, 2012, and 2011 was $720,000, $530,000 and $512,000, respectively.

As of December 31, 2013, $10,791,000 of total unrecognized compensation cost related to stock options is expected to be recognized over a weighted-average period of 3.49 years.

As of December 31, 2013, the Company had zero options remaining in the Stock Option Plan available for grant.

As of December 31, 2013, the Company had granted 337,500 options to certain employees and consultants which require shareholder approval to increase the option pool by at least 203,100 options before the options granted become exercisable. If shareholder approval is not obtained by December 13, 2014 to increase the option pool, then these options shall expire and will be returned to the Plan. These options vest one-third annually on the anniversary of its grant date of December 13, 2013.

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(d) Warrants

On February 6, 2007, the Company issued warrants to investors and a transaction advisor (''2007 Warrants''). The 2007 Warrants were exercisable immediately into an aggregate of 131,497 shares of the Company's common stock at $46.25 per common share. These warrants expired during the first quarter of 2012 with no warrants having been exercised. On June 13, 2011, the Company issued 1,629,539 shares of its common stock as well as warrants (''Financing Warrants'') to purchase 109,375 shares of its common stock in consideration of conversion and retirement of the Company's outstanding July and August 2009 debt obligations in the aggregate amount of $2,149,000 with associated costs of $41,000. The exercise price of the Financing Warrants is $1.60 per common share representing the price per share equal to the closing bid price per share of the Company's common stock on the NASDAQ stock market on July 15, 2009. During 2013, 12,813 warrants were exercised for gross proceeds of $18,000.

On June 30, 2011, the Company closed a private placement financing in which 3,846,154 shares of common stock and warrants (''2011 Warrants'') to purchase 3,846,154 shares of common stock for gross proceeds of approximately $7,000,000 were issued. The investors purchased the shares and warrants for $1.82 per unit (each unit consisting of one share and one warrant to purchase shares of common stock). The exercise price of the warrants is $1.86 per share. The warrants are exercisable at any time from the date of issuance until June 30, 2016. The Company's estimated the fair value of the warrants at the date of issuance using the Black-Scholes Merton option pricing model with a 101% volatility, 5.0 years expected life and a risk-free interest rate of 1.76%. The fair value of $5,518,000 was classified as a current liability as the Company determined that these warrants do not meet the criteria for classification as equity. During 2013, 1,571,136 warrants were exercised for gross proceeds of $676,000.

The Company accounts for the 2011 Warrants in accordance with US GAAP guidance applicable to derivative instruments. The Company determined that the 2011 Warrants do not meet the criteria for classification as equity. Accordingly, the Company classified the 2011 Warrants as current liabilities at December 31, 2013.

The Company initially allocated the total proceeds received, pursuant to the Securities Purchase Agreement, to the shares of common stock and warrants issued based on their relative fair values. This resulted in an allocation of $3,012,000 of proceeds to warrant liability. Since under the derivative guidance the Company is required to record the derivatives at fair value, the Company therefore estimated the fair value of the warrants on the issuance date to be $5,518,000, and recorded the increase to the warrant liability of $2,506,000 as a charge other expense in its consolidated statements of comprehensive loss as of June 30, 2011. Transaction costs associated with the issuance of the warrants of $303,000 were immediately expensed and included as warrant issuance costs in the Company's consolidated statements of comprehensive loss.

The estimated fair value of the 2011 Warrants at December 31, 2013 was determined using the Black-Scholes Merton option pricing model with the following weighted average assumptions:

Volatility	79	%
Expected life of Warrants (years)	2.50
Risk-free interest rate	0.58	%
Dividend yield	0	%

The fair value of the 2011 warrants is highly sensitive to the changes in the Company's stock price and stock price volatility.

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During the year ended December 31, 2013 certain holders of 2011 Warrants exercised 1,571,136warrants. The Company received $693,000 in proceeds from these exercises. The Company is required to record the outstanding warrants at fair value at the time of exercise, before moving the fair value into additional paid-in capital, resulting in an adjustment to the warrant obligations, with any gain or loss recorded in earnings of the applicable reporting period. The Company, therefore, estimated the fair value of the exercised 2011 Warrants at their respective exercise dates to be $13,297,000, an increase of $8,620,000 from the previous value at December 31, 2012 of $4,014,000. The fair value was determined using the Black- Scholes Merton option pricing model and the increase was recorded as an expense in other income (expense) in the consolidated statement of operations and comprehensive loss for the year ended December 31, 2013.

During the year ended December 31, 2012, certain holders of 2011 Warrants exercised 1,750,469warrants. The Company received $3,256,000 in proceeds from these exercises. The Company estimated the fair value of the exercised 2011 Warrants at their respective exercise dates to be $4,014,000, an increase of $2,668,000 from the previous value at December 31, 2011 of $1,346,000. The fair value was determined using the Black-Scholes Merton option pricing model with the following weighted average assumptions for volatility of 97%, 4.3 years expected life and a risk free rate of 0.85%. This increase was recorded as an expense in other income (expense) in the consolidated statement of operations and comprehensive loss for the year ended December 31, 2012. There were no similar warrant exercises for the year ended December 31, 2011.

The Company is also required to record the outstanding warrants at fair value at the end of each reporting period, resulting in an adjustment to the warrant obligations, with any gain or loss recorded in earnings of the applicable reporting period. The Company, therefore, estimated the fair value of the remaining warrants as of December 31, 2013 to be $4,046,000, an increase of $2,485,000 from the previous value at December 31, 2012. This amount was recorded as a charge to other income (expense) in the consolidated statement of operations and comprehensive loss for the year ended December 31, 2013.

On June 13, 2011, in connection with the conversion of the notes payable and accrued interest (see Note 6), the Company issued warrants with a life of five years to purchase 109,375 shares of common stock. The exercise price of these warrants is $1.60 per common share representing the price per share equal to the closing bid price per share of the Company's common stock on the NASDAQ stock market on July 15, 2009. The Company recorded $163,000 representing the fair value of the warrants, calculated using the Black-Scholes Merton option pricing model, at the date of the Financing in additional paid-in capital. The value of the warrants was accreted over the term of the Notes until their conversion in June 2011. During the years ended December 31, 2013 and 2012 certain holders of these warrants exercised 12,813 and 22,500 warrants, with $18,000 and $6,000 in proceeds received from these exercised warrants, respectively. As the estimated fair value of these warrants had been previously accreted over the term on the related Notes, no further accounting of these warrants is required. There were no similar warrant exercises for the year ended December 31, 2011.

The following table provides activity for the Warrants issued and outstanding during the three years ended December 31, 2013 (in thousands, except weighted average exercise prices):

	Number of warrants outstanding			Weighted average exercise price
Outstanding, December 31, 2011		4,087			3.28
Granted		(1,773	)		1.86
Expired		(131	)		46.25
Outstanding, December 31, 2012		2,183			1.85
Exercised		(1,571	)		1.86
Outstanding, December 31, 2013		612		$	1.83

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11. CONSOLIDATED STATEMENTS OF CASH FLOWS

The net change in working capital and non-current asset balances related to operations consists of the following (in thousands):

	Years ended December 31,
	2013			2012			2011
Accounts receivable	$	(2,650	)	$	(557	)	$	(5	)
Due from related parties		15			(11	)		126
Inventory		978			(965	)		(343	)
Prepaid expenses		(302	)		(197	)		132
Other current assets		50			(25	)		(20	)
Other non-current assets		(12	)		(27	)		—
Accounts payable		(436	)		849			(135	)
Accrued liabilities		1,329			146			374
Deferred rent/revenue		67			—			(128	)
	$	(961	)	$	(787	)	$	1

The following table lists the non-cash transactions and additional cash flow information (in thousands):

	Years ended December 31,
	2013		2012		2011
Warrant issued in registered direct financing		—		—		3,012
Common stock issued in consideration of management bonuses		—		1,182		—
Common stock issued in consideration of notes payable and accrued interest conversion		—		—		2,107
Additions to fixed assets		526		—		—

There were no interest or income taxes paid for the years ended December 31, 2013, 2012 and 2011.

Employee Retirement Plan

The Company has a 401(k) retirement plan under which all full-time employees may contribute up to 100% of their annual salary, within IRS limits. The Company has not made any contributions to these retirement plan in the years ended December 31, 2013, 2012 and 2011.

12. SUBSEQUENT EVENTS

On March 14, 2014, we announced the closing of the acquisition of the assets of the OcuHub business unit from AOAExcel, Inc., the for-profit subsidiary of the American Optometric Association (“AOA”). As of the close of the transaction, the OcuHub purchased assets and business activities will be operated out of a fully-owned subsidiary of TearLab. The net purchase price was $1.4 million and was paid in cash. The Company is in the process of completing the analysis of the accounting treatment of the transaction.

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13. QUARTERLY FINANCIAL DATA (UNAUDITED)

The following tables in the opinion of management, reflect all adjustments, consisting of normal recurring adjustments necessary for the fair presentation of results for the periods presented (in thousands, except per share data):

	Fiscal 2013 Quarter Ended ($ 000's)
	March 31			June 30			September 30			December 31
Revenue(i)	$	2,475		$	3,525		$	4,207		$	4,438
Gross profit (i)		1,059			1,395			1,930			2,115
Loss from operations (i)		(3,162	)		(5,279	)		(3,829	)		(5,504	)
Net loss (i)(ii)	$	(8,574	)	$	(12,025	)	$	(4,240	)	$	(4,151	)
Weighted average number of shares outstanding basic(i)		28,756			29,178			31,914			33,129
Net loss per common share basic (i)(ii)	$	(0.30	)	$	(0.41	)	$	(0.13	)	$	(0.13	)
Weighted average number of shares outstanding diluted		28,756			29,178			31,914			33,679
Net loss per common share diluted (i)(ii)	$	(0.30	)	$	(0.41	)	$	(0.13	)	$	(0.17	)

	Fiscal 2012 Quarter Ended ($ 000’s)
	March 31			June 30			September 30			December 31
Revenue(i)	$	422		$	716		$	1,211		$	1,610
Gross profit (i)		91			375			519			680
Loss from operations (i)		(2,503	)		(2,533	)		(3,673	)		(3,324	)
Net loss (i)	$	(9,099	)	$	(1,974	)	$	(4,587	)	$	(3,652	)
Weighted average number of shares outstanding basic(i)		20,673			24,919			27,703			28,607
Net loss per common share basic (i)	$	(0.44	)	$	(0.08	)	$	(0.17	)	$	(0.13	)
Weighted average number of shares outstanding diluted		20,673			26,042			27,703			28,607
Net loss per common share diluted (i)	$	(0.44	)	$	(0.10	)	$	(0.17	)	$	(0.13	)

(i)

Net loss per share basic and diluted are computed independently for the quarters presented. Therefore, the sum of the quarterly per share information may not be equal to the annual per share information. Also totals may not add to the financials statements due to rounding.

(ii)

During the fourth quarter of 2013, we identified an immaterial error in our interim consolidated financial statements primarily pertaining to the three month period ended September 30, 2013 driven by certain stock-based compensation assumptions for option grants issued subject to shareholder approval. We corrected the immaterial error in the fourth quarter of 2013, resulting in an increase to operating expenses and net loss by $268,000 and an increase to basic and diluted loss per share of $0.01 for the three months ended December 31, 2013. The error does not affect results from operations for the year ended December 31, 2013. Based on management's evaluation of the materiality of the error from a qualitative and quantitative perspective as required by authoritative guidance, we concluded that correcting the error had no material impact on any of the Company's previously issued interim financial statements, would be immaterial to the fourth quarter results for 2013 and had no effect on the trend of financial results.

ITEM 9.     Changes in and Disagreements With Accountants on Accounting and Financial Disclosure.

Not applicable.

ITEM 9A.     Controls and Procedures.

Evaluation of Disclosure Controls and Procedures

We maintain disclosure controls and procedures that are designed to ensure that information required to be disclosed in our reports under the Securities Exchange Act of 1934, as amended, is recorded, processed, summarized and reported within the time periods specified in the Securities and Exchange Commission's rules and forms, and that such information is accumulated and communicated to the our management, including our chief executive officer and chief financial officer, as appropriate, to allow timely decisions regarding required disclosure. Further, the design of a control system must reflect the fact that there are resource constraints, and the benefit of controls must be considered relative to their costs. In designing and evaluating the disclosure controls and procedures, management recognizes that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving the desired control objectives, and management necessarily is required to apply its judgment in evaluating the cost-benefit relationship of possible controls and procedures.

As of the end of the period covered by the report, we carried out an evaluation, under the supervision and with the participation of our management, including our chief executive officer and chief financial officer, of the effectiveness of the design and operation of our disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)). Based on that evaluation, our chief executive officer and chief financial officer concluded that, as at December 31, 2013 our disclosure controls and procedures were effective at the reasonable assurance level.

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MANAGEMENT'S REPORT ON INTERNAL CONTROL OVER FINANCIAL REPORTING

Our management is responsible for establishing and maintaining adequate internal control over financial reporting, as such term is defined in Exchange Act Rules 13a-15(f) and 15d-15(f). Because of its inherent limitations, internal control over financial reporting may not prevent or detect all misstatements. Therefore, even those systems determined to be effective can provide only reasonable assurance with respect to financial statement preparation and presentation.

We conducted an evaluation of the effectiveness of our internal control over financial reporting based on the framework in Internal Control—Integrated Framework published by the Committee of Sponsoring Organizations of the Treadway Commission (1992 framework) . Based on our evaluation under the framework, our management has concluded that the Company's internal control over financial reporting was effective as of December 31, 2013. Ernst & Young LLP, the Company's independent registered public accounting firm, has issued an attestation report on the effectiveness of Company's internal control over financial reporting which is included herein.

Changes in Internal Control over Financial Reporting

There has been no change in our internal control over financial reporting that occurred during the most recent fiscal quarter that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

The Board of Directors and Shareholders of TearLab Corp.

We have audited TearLab Corp.’s internal control over financial reporting as of December 31, 2013, based on criteria established in Internal Control—Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (1992 framework) (the COSO criteria). TearLab Corp.’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 included in the accompanying Management’s Report on Internal Control over Financial Reporting. Our responsibility is to express an opinion on the company’s internal control over financial reporting based on our audit.

We conducted our audit in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those 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, assessing the risk that a material weakness exists, testing and evaluating the design and operating effectiveness of internal control based on the assessed risk, and performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion.

A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded 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) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements.

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.

In our opinion, TearLab Corp. maintained, in all material respects, effective internal control over financial reporting as of December 31, 2013, based on the COSO criteria.

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), the consolidated balance sheets of TearLab Corp. as of December 31, 2013 and 2012 and the related consolidated statements of operations and comprehensive loss, stockholders’ equity and cash flows for each of the three years in the period ended December 31, 2013 of TearLab Corp. and our report dated March 17, 2014 expressed an unqualified opinion thereon.

/s/ Ernst & Young LLP

San Diego, California

March 17, 2014

ITEM 9B.     Other Information.

None.

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PART III

ITEM 10.     Directors, Executive Officers and Corporate Governance.

The information required by this item will be set forth in our 2014 Proxy Statement and is incorporated in this report by reference.

ITEM 11.     Executive Compensation.

The information required by this item will be set forth in our 2014 Proxy Statement and is incorporated in this report by reference.

ITEM 12.     Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters.

The information required by this item will be set forth in our 2014 Proxy Statement and is incorporated in this report by reference.

ITEM 13.     Certain Relationships and Related Transactions, and Director Independence.

The information required by this item will be set forth in our 2014 Proxy Statement and is incorporated in this report by reference.

ITEM 14.     Principal Accountant Fees and Services.

The information required by this item will be set forth in our 2014 Proxy Statement and is incorporated in this report by reference.

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PART IV

ITEM 15.     Exhibits and Financial Statement Schedules.

(a)     The following documents are filed as part of the report:

(1)     Financial Statements included in PART II of this report:

Included in PART II of this report:	Page
Report of Independent Registered Public Accounting Firm	36
Consolidated Balance Sheets as of December 31, 2013 and December 31, 2012	38
Consolidated Statements of Operations and Comprehensive Loss for the three years ended December 31, 2013	39
Consolidated Statements of Stockholders' Equity for the three years ended December 31, 2013	40
Consolidated Statements of Cash Flows for the three years ended December 31, 2013	41
Notes to Consolidated Financial Statements	42

(2)     Financial Statement Schedules:

SCHEDULE II -- VALUATION AND QUALIFYING ACCOUNTS 

	Balance at beginning of period		Provision		Write-off and recoveries			Balance at end of period
(in thousands)
Fiscal 2011
Bad debt reserves	$	13	$	32	$	(3	)	$	42
Product warranties		51		56		(71	)		36
Return reserve		73		8		(71	)		10
Fiscal 2012
Bad debt reserves		42		10		(16	)		36
Product warranties		36		196		(125	)		107
Return reserve		10		102		(41	)		71
Fiscal 2013
Bad debt reserves		36		377		2			415
Product warranties	$	107	$	271	$	(198	)	$	180
Return reserve		71		474		(372	)		173

(3) List of exhibits required by Item 601 of Regulation S-K. See part (b) below.

(b)     Exhibits: The following exhibits are filed as a part of this report:

All other financial statement schedules have been omitted because they are not applicable, not required or the information required is shown in the financial statements or the notes thereto.

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Exhibit Number		Exhibit Description	Incorporated by Reference
3.1		Amended and Restated Certificate of Incorporation of the Registrant currently in effect	Exhibit 3.3 to the Registrant's Current Report on Form 8-K filed with the Commission on October 9, 2008 (file no. 000-51030)
3.2		Amended and Restated By-Laws of the Registrant currently in effect	Exhibit 3.4 to the Registrant's Registration Statement on Form S-1/A No. 3, filed with the Commission on November 16, 2004 (file no. 333-118024)
3.3		Certificate of Amendment to Amended and Restated Certificate of Incorporation	Exhibit 3.2 to the Registrant's Current Report on Form 8-K filed with the Commission on October 9, 2008 (file no. 000-51030)
3.4		Certificate of Amendment to Amended and Restated Certificate of Incorporation	Exhibit 3.1 to the Registrant's Current Report on Form 8-K filed with the Commission on May 19, 2010 (file no. 000-51030)
3.5		Certificate of Amendment to Amended and Restated Certificate of Incorporation	Exhibit 3.4 to the Registrant's Post Effective Amendment No. 1 to Form S-3 filed with the Commission on July 15, 2013 (file no. 333-189372)
4.1		Form of Common Stock Purchase Warrant Agreement	Exhibit A to the Registrant's free writing prospectus filed with the Commission on March 15, 2010 (file no. 333-157269)
4.2		Form of Common Stock Purchase Warrant Agreement	Exhibit 10.3 to the Registrant's Current Report on Form 8-K filed with the Commission on July 16, 2009 (file no. 000-51030)
10.1		License Agreement between TearLab, Inc. and The Regents of the University of California dated March 12, 2003.	Exhibit 10.48 to the Registrant's Annual Report on Form 10-K/A, filed with the Commission on March 29, 2007 (file no. 000-51030) (Portions of this exhibit have been omitted pursuant to a request for confidential treatment.)
10.2		Amendment No. 1, dated June 9, 2003, to the License Agreement between TearLab, Inc. and The Regents of the University of California dated March 12, 2003.	Exhibit 10.49 to the Registrant's Annual Report on Form 10-K/A, filed with the Commission on March 29, 2007 (file no. 000-51030)
10.3		Amendment No. 2, dated September 5, 2005, to the License Agreement between TearLab, Inc. and The Regents of the University of California dated March 12, 2003.	Exhibit 10.50 to the Registrant's Annual Report on Form 10-K/A, filed with the Commission on March 29, 2007 (file no. 000-51030) (Portions of this exhibit have been omitted pursuant to a request for confidential treatment.)
10.4		Amendment No. 3, dated July 7, 2006, to the License Agreement between TearLab, Inc. and The Regents of the University of California dated March 12, 2003.	Exhibit 10.51 to the Registrant's Annual Report on Form 10-K/A, filed with the Commission on March 29, 2007 (file no. 000-51030)
10.5		Amendment No. 4, dated October 9, 2006, to the License Agreement between TearLab, Inc. and The Regents of the University of California dated March 12, 2003.	Exhibit 10.52 to the Registrant's Annual Report on Form 10-K/A, filed with the Commission on March 29, 2007 (file no. 000-51030)
10.6		Terms of Business, dated February 5, 2007, between Invetech Pty Ltd. and TearLab, Inc.	Exhibit 10.30 to the Registrant's Annual Report on Form 10-K, filed with the Commission on March 17, 2008 (file no. 000-51030)
10.7		Amendment No. 5, dated June 29, 2007, to the License Agreement between TearLab, Inc. and The Regents of the University of California dated March 12, 2003. (Portions of this exhibit have been omitted pursuant to a request for confidential treatment).	Exhibit 10.31 to the Registrant's Annual Report on Form 10-K, filed with the Commission on March 17, 2008 (file no. 000-51030)
10.8	#	2002 Stock Option Plan, as amended and restated on June 7, 2013.	Exhibit 10.01 to the Registrant's Current Report on Form 8-K filed with the Commission on June 6, 2012 (file no. 000-51030)
10.9	#	Employment Agreement, dated as of February 25, 2008, between the Registrant and William G. Dumencu.	Exhibit 10.52 to the Registrant's Annual Report on Form 10-K, filed with the Commission on March 17, 2008 (file no. 000-51030)
10.10	#	Securities Purchase Agreement, dated as of March 14, 2010, by and between the Registrant and certain investors.	Registrant's free writing prospectus filed with the Commission on March 15, 2010 (file no. 333-157269)
10.11		Form of Director and Affiliate Letter Agreement	Exhibit 10.5 to the Registrant's Current Report on Form 8-K filed with the Commission on July 16, 2009 (file no. 000-51030)
10.12		Deed and Amendment, dated December 22, 2011, to Manufacturing and Development Agreement by and between TearLab Research, Inc. and MiniFAB AB (Aust) Pty Ltd. Dated August 1, 2011 (Portions of this exhibit have been omitted pursuant to a request for confidential treatment).	Exhibit 10.1 to the Registrant's Current Report on Form 8-K filed with the Commission on December 29, 2011 (file no. 000-51030)
10.13		Manufacturing and Development Agreement by and between TearLab Research, Inc. and MiniFAB (Aust) Pty Ltd, dated August 1, 2011. (Portions of this exhibit have been omitted pursuant to a request for confidential treatment).	Exhibit 10.1 to the Registrant's Current Report on Form 8-K filed with the Commission on August 25, 2011 (file no. 000-51030)

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Exhibit Number		Exhibit Description	Incorporated by Reference
10.14		Purchase Agreement, dated as of April 11, 2012, by and between the Registrant and Craig-Hallum Capital Group LLC.	Exhibit 10.1 to the Registrant's Current Report on Form 8-K filed with the Commission on April 11, 2012 (file no. 000-51030)
10.15	#	Form Change of Control Severance Agreement (for US executives).	Exhibit 10.1 to the Registrant's Current Report on Form 8-K filed with the Commission on June 21, 2013 (file no. 000-51030)
10.16	#	Form Change of Control Severance Agreement (for Canadian executives).	Exhibit 10.2 to the Registrant's Current Report on Form 8-K filed with the Commission on June 21, 2013 (file no. 000-51030)
10.17		Executive Employment Agreement, dated June 7, 2013, by and between the Registrant and Elias Vamvakas	Exhibit 10.2 to the Registrant's Current Report on Form 8-K filed with the Commission on June 7, 2013 (file no. 000-51030)
10.18	#	Offer Letter, dated September 24, 2013, by and between the Registrant and Joseph Jensen.	Exhibit 10.1# to the Registrant's Current Report on Form 8-K filed with the Commission on October 1, 2013 (file no. 000-50789)
10.19	#	Nonstatutory Stock Option Agreement, dated October 21, 2013, by and between the Company and Joseph Jensen.	Exhibit 10.1# to the Registrant's Current Report on Form 8-K filed with the Commission on October 21, 2013 (file no. 000-50789)
10.20		Asset Purchase Agreement, dated March 14, 2014 by and among AOA Excel, Inc., Occulogix LLC and TearLab Corporation.	Exhibit 10.1 to the Registrant's Current Report on Form 8-K filed with the Commission on March 17, 2014 (file no. 000-51030)
14.1		Code of Conduct of the Registrant.
21.1		Subsidiaries of Registrant.	Exhibit 21.1 to the Registrant's Registration Statement on Form S-1, filed with the Commission on July 28, 2011 (file no. 333-175861)
23.1		Consent of Independent Registered Public Accounting Firm.
24.1		Power of Attorney (included on signature page).
31.1		CEO's Certification required by Rule 13A-14(a) of the Securities Exchange Act of 1934.
31.2		CFO's Certification required by Rule 13A-14(a) of the Securities Exchange Act of 1934.
32.1		CEO's Certification of periodic financial reports pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, U.S.C. Section 1350.
32.2		CFO's Certification of periodic financial reports pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, U.S.C. Section 1350.
101.INS*		XBRL Instance.
101.SCH*		XBRL Taxonomy Schema.
101.CAL*		XBRL Taxonomy Extension Calculation.
101.DEF*		XBRL Taxonomy Extension Definition.
101.LAB*		XBRL Taxonomy Extension Labels.
101.PRE*		XBRL Taxonomy Extension Presentation

* * *

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#Management compensatory plan, contract or arrangement

● XBRL information is furnished and not filed or a part of a registration statement or prospectus for purposes of sections 11 or 12 of the Securities Act of 1933, as amended, is deemed not filed for purposes of section 18 of the Securities Exchange Act of 1924, as amended, and otherwise is not subject to liability under these sections.

Copies of the exhibits filed with this Annual Report on Form 10-K or incorporated by reference herein do not accompany copies hereof for distribution to stockholders of the Registrant. The Registrant will furnish a copy of any of such exhibits to any stockholder requesting the same for a nominal charge to cover duplicating costs.

POWER OF ATTORNEY

The registrant and each person whose signature appears below hereby appoint Elias Vamvakas and William G. Dumencu as attorney-in-fact with full power of substitution, severally, to execute in the name and on behalf of the registrant and each such person, individually and in each capacity stated below, one or more amendments to this Annual Report on Form 10-K, which amendments may make such changes in this Annual Report as the attorney-in-fact acting in the premises deems appropriate and to file any such amendments to this Annual Report on Form 10-K with the Securities and Exchange Commission.

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SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this Annual Report on Form 10-K to be signed on its behalf by the undersigned thereunto duly authorized.

Dated: March 17, 2014	TearLab Corp.
	By:   /s/ Elias Vamvakas
	Elias Vamvakas
	Chief Executive Officer

Pursuant to the requirements of the Securities Exchange Act of 1934, this Annual Report on Form 10-K has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated.

Dated: March 17, 2014	By:   /s/ Elias Vamvakas
	Elias Vamvakas Chief Executive Officer and Chairman of Board of Directors
Dated: March 17, 2014	By:   /s/ William G. Dumencu
	William G. Dumencu Chief Financial Officer and Treasurer
Dated: March 17, 2014	By:   /s/ Anthony Altig
	Anthony Altig  Director
Dated: March 17, 2014	By:   /s/ Thomas N. Davidson, Jr.
	Thomas N. Davidson, Jr. Director
Dated: March 17, 2014	By:   /s/ Adrienne L. Graves
	Adrienne L. Graves Director
Dated: March 17, 2014	By:   /s/ Richard L. Lindstrom, M.D.
	Richard L. Lindstrom, M.D. Director
Dated: March 17, 2014	By:   /s/ Donald Rindell
	Donald Rindell Director
Dated: March 17, 2014	By:   /s/ Paul Karpecki
	Paul Karpecki Director
Dated: March 17, 2014	By:   /s/ Brock Wright
	Brock Wright Director

EX-23

Exhibit 23.1

CONSENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

We consent to the incorporation by reference in the following Registration Statements:

(1) Registration Statement (Form S-3 Nos.333-189372 and 333-190116) of TearLab Corporation; and

(2) Registration Statement (Form S-8 Nos. 333-124505, 333-155163, 333-181949, and 333-191838) pertaining to the 2002 Stock Option Plan, as amended, and Nonstatutory Stock Option Agreement of TearLab Corporation (formerly OccuLogix, Inc. and formerly Vascular Sciences Corp.)

of our reports dated March 17, 2014, with respect to the consolidated financial statements and schedule of TearLab Corp. and to the effectiveness of internal control over financial reporting of TearLab Corp. included in this Annual Report (Form 10-K) for the year ended December 31, 2013.

/s/ ERNST & YOUNG LLP

San Diego, California

March 17, 2014

EX-31

Exhibit 31.1

CERTIFICATION PURSUANT TO RULE 13A-14 OR 15D-14 OF THE SECURITIES EXCHANGE ACT OF 1934, AS ADOPTED PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002

I, Elias Vamvakas, certify that:

1. I have reviewed this Annual Report on Form 10-K of TearLab Corp.;

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

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

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

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

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

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

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

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

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

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

Dated:  March 17 , 2014

/s/ Elias Vamvakas

Elias Vamvakas

Chief Executive Officer

EX-31

Exhibit 31.2

CERTIFICATION PURSUANT TO RULE 13A-14 OR 15D-14 OF THE SECURITIES EXCHANGE ACT OF 1934, AS ADOPTED PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002

I, William G. Dumencu, certify that:

1. I have reviewed this Annual Report on Form 10-K of TearLab Corp.;

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

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

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

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

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

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

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

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

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

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

Dated: March 17, 2014

/s/ William Dumencu

William G. Dumencu

Chief Financial Officer and Treasurer

EX-32

Exhibit 32.1

CERTIFICATION PURSUANT TO

18 U.S.C SECTION 1350,

AS ADOPTED PURSUANT TO

SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the Annual Report on Form 10-K of TearLab Corp. (the “Company”) for the year ended December 31, 2013, as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Elias Vamvakas, Chief Executive Officer of the Company, certify, pursuant to 18 U.S.C. section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that to the best of my knowledge:

1. The Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

2. The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

By:	/s/ Elias Vamvakas
	Elias Vamvakas
	Chief Executive Officer

Dated:     March 17, 2014

EX-32

Exhibit 32.2

CERTIFICATION PURSUANT TO

18 U.S.C SECTION 1350,

AS ADOPTED PURSUANT TO

SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the Annual Report on Form 10-K of TearLab Corp. (the “Company”) for the year ended December 31, 2013, as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, William G. Dumencu, Chief Financial Officer and Treasurer of the Company, certify, pursuant to 18 U.S.C. section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that to the best of my knowledge:

1. The Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

2. The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

By:	/s/ William G. Dumencu
	William G. Dumencu
	Chief Financial Officer and  Treasurer

Dated:   March 17, 2014

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Note 3 - Balance Sheet Details (Details) - Inventory (USD $) In Thousands, unless otherwise specified	Dec. 31, 2013	Dec. 31, 2012
Inventory [Abstract]
Finished goods	$ 899	$ 1,863
Inventory reserves	(14)	0
	$ 885	$ 1,863

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Note 8 - Commitments and Contingencies (Details)	12 Months Ended				12 Months Ended
	Dec. 31, 2013 USD ($)	Dec. 31, 2012 USD ($)	Dec. 31, 2011 USD ($)	Dec. 31, 2013 AUD	Dec. 31, 2013 Patent License And Royalty Agreement 2003 [Member] USD ($)	Dec. 31, 2013 Patent License And Royalty Agreement 2006 [Member] USD ($)	Dec. 31, 2013 Sub-License Fees [Member] Before FDA Approval [Member]	Dec. 31, 2013 Sub-License Fees [Member] After FDA Approval [Member]
Note 8 - Commitments and Contingencies (Details) [Line Items]
Operating Leases, Future Minimum Payments Due, Next Twelve Months	$ 256,000
Operating Leases, Future Minimum Payments, Due in Two Years	334,000
Operating Leases, Future Minimum Payments, Due in Three Years	343,000
Operating Leases, Future Minimum Payments, Due in Four Years	353,000
Operating Leases, Future Minimum Payments, Due in Five Years	177,000
Operating Leases, Rent Expense	223,000	143,000	142,000
Purchase Commitment, Remaining Minimum Amount Committed	26,800,000			30,200,000	35,000	35,000
Royalty Rate					5.50%	5.50%	30.00%	25.00%
Royalty Expense	807,000	213,000	145,000
Accrued Royalties	243,000	122,000
Percentage Of Manufacturer's Cost, Agreement Contingency	110.00%
Loss Contingency, Estimate of Possible Loss	30,000
Purchase Commitment, Remaining Minimum Amount Committed (in Dollars)	26,800,000			30,200,000	35,000	35,000
Contractual Obligation, Due in Next Twelve Months	$ 8,300,000				$ 35,000	$ 35,000
Long-term Purchase Commitment, Minimum Quantity Required	3,000,000
Long-term Purchase Commitment, Time Period	ten

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Note 5 - Related Party Transactions (Details)			12 Months Ended		3 Months Ended	12 Months Ended		0 Months Ended	12 Months Ended
	Dec. 31, 2013 USD ($)	Dec. 31, 2012 USD ($)	Dec. 31, 2013 Science With Vision Inc. [Member] Termination Of Distribution Agreement [Member] USD ($)	Dec. 31, 2013 Science With Vision Inc. [Member] Termination Of Distribution Agreement [Member] CAD	Mar. 31, 2012 Science With Vision Inc. [Member] USD ($)	Dec. 31, 2013 Science With Vision Inc. [Member] USD ($)	Dec. 31, 2012 Science With Vision Inc. [Member] USD ($)	Apr. 14, 2011 Greybrook Capital Inc. [Member]	Dec. 31, 2011 Greybrook Capital Inc. [Member] USD ($)
Note 5 - Related Party Transactions (Details) [Line Items]
Revenue from Related Parties					$ 59,000	$ 0
Due from Related Parties, Current						0	15,000
Related Party Transaction, Expenses from Transactions with Related Party (in Dollars)			190,000	200,000
Related Party Transaction, Expenses from Transactions with Related Party			190,000	200,000
Accrued Royalties, Current	281,000	122,000				3,000
Professional and Contract Services Expense									$ 200,000
Share-based Goods and Nonemployee Services Transaction, Shares Approved for Issuance (in Shares)									163,934
Share-based Goods and Nonemployee Services Transaction, Securities Issued								163,934

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Schedule II -- Valuation and Qualifying Acoounts (Details) - Valuation and Qualifying Accounts (USD $) In Thousands, unless otherwise specified	12 Months Ended
	Dec. 31, 2013	Dec. 31, 2012	Dec. 31, 2011
Allowance for Doubtful Accounts [Member]
Fiscal 2011
Balance at beginning of period	$ 36	$ 42	$ 13
Provision	377	10	32
Write-off and recoveries	2	(16)	(3)
Balance at end of period	415	36	42
Warranty Reserves [Member]
Fiscal 2011
Balance at beginning of period	107	36	51
Provision	271	196	56
Write-off and recoveries	(198)	(125)	(71)
Balance at end of period	180	107	36
Allowance for Sales Returns [Member]
Fiscal 2011
Balance at beginning of period	71	10	73
Provision	474	102	8
Write-off and recoveries	(372)	(41)	(71)
Balance at end of period	$ 173	$ 71	$ 10

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Note 8 - Commitments and Contingencies (Details) - Future Royalty Payments (USD $) In Thousands, unless otherwise specified	Dec. 31, 2013
Note 8 - Commitments and Contingencies (Details) - Future Royalty Payments [Line Items]
2014	$ 8,300
2015	8,300
2016	9,100
Total	17,400
Patent License And Royalty Agreement 2003 [Member]
Note 8 - Commitments and Contingencies (Details) - Future Royalty Payments [Line Items]
2014	35
2015	35
2016	35
2017	35
2018	35
Thereafter	315
Total	490
Patent License And Royalty Agreement 2006 [Member]
Note 8 - Commitments and Contingencies (Details) - Future Royalty Payments [Line Items]
2014	35
2015	35
2016	35
2017	35
2018	35
Thereafter	315
Total	$ 490

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Note 4 - Intangible Assets (Details) - Intangible Assets Subject to Amortization (USD $) In Thousands, unless otherwise specified	12 Months Ended
	Dec. 31, 2013	Dec. 31, 2012
Acquired Finite-Lived Intangible Assets [Line Items]
TearLab® technology	$ 160	$ 132
TearLab Technology [Member]
Acquired Finite-Lived Intangible Assets [Line Items]
TearLab® technology	12,172	12,172
TearLab® technology	$ 8,678	$ 7,463

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Note 2 - Significant Accounting Policies (Details) - Customers Representing Revenue in Excess of 10%	12 Months Ended
	Dec. 31, 2013		Dec. 31, 2012		Dec. 31, 2011
Revenue, Major Customer [Line Items]
Customer representing revenue	10.00%
Alcon Research Ltd. [Member] | Customer Concentration Risk [Member] | Sales Revenue, Net [Member]
Revenue, Major Customer [Line Items]
Customer representing revenue		[1]		[1]	11.00%
Bon Optic VertriebsgesellschaftmbH [Member] | Customer Concentration Risk [Member] | Sales Revenue, Net [Member]
Revenue, Major Customer [Line Items]
Customer representing revenue		[1]		[1]	10.00%

[1] Less than 10% for period presented

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Note 9 - Fair Value Measurements (Details) (USD $)				12 Months Ended
	Mar. 31, 2013	Jun. 30, 2011	Jun. 13, 2011	Dec. 31, 2013 Warrants 1 [Member]
Note 9 - Fair Value Measurements (Details) [Line Items]
Class of Warrant or Right, Number of Securities Called by Warrants or Rights			109,375	524,549
Investment Warrants, Exercise Price				$ 1.86
Warrants and Rights Outstanding	$ 4,046,000	$ 5,518,000	$ 163,000	$ 4,047,000

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Note 6 - Income Taxes (Tables)

12 Months Ended

Dec. 31, 2013

Income Tax Disclosure [Abstract]

Schedule of Income before Income Tax, Domestic and Foreign [Table Text Block]

	December 31,
	2013		2012			2011
Domestic	$	28,155	$	19,222	$	8,589
Foreign		835		90		220
Total loss from continuing operations before income taxes		28,990		19,312		8,809

Schedule of Deferred Tax Assets and Liabilities [Table Text Block]

		December 31,
	2013			2012
Deferred tax assets
Intangible assets	$	413		$	345
Stock options		1,955			5,643
Accruals and other		742			519
Net operating loss carry forwards		14,449			11,240
		17,559			17,747
Valuation allowance		(16,244	)		(15,838	)
Deferred tax asset		1,315			1,909
Deferred tax liability
Intangible assets		(1,315	)		(1,909	)
Deferred tax liability		(1,315	)		(1,909	)
Deferred taxes, net	$	—		$	—

Schedule of Effective Income Tax Rate Reconciliation [Table Text Block]

	December 31,
	2013			2012			2011
Loss for the year before income taxes	$	(28,990	)	$	(19,312	)	$	(8,809	)
Expected recovery of income taxes		(9,886	)		(6,759	)		(3,083	)
State income tax, net of federal benefit		(440	)		(1,070	)		(404	)
Stock-based compensation		204			64			103
Warrants		3,776			2,958			82
Non-deductible interest		—			—			38
Deferred state tax rate adjustment		899			(92	)		30
Expiration of options		3,761			—			—
Adjustment to deferred assets		1,138			187			1,236
Non-deductible expenses & other		112			32			69
Change in valuation allowance		406			4,680			1,929
Total recovery of income taxes	$	—		$	—		$	—

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Note 6 - Income Taxes (Details) - Geographic Sources of (Loss) Income from Continuing Operation before Income Tax (USD $) In Thousands, unless otherwise specified	12 Months Ended
	Dec. 31, 2013	Dec. 31, 2012	Dec. 31, 2011
Geographic Sources of (Loss) Income from Continuing Operation before Income Tax [Abstract]
Domestic	$ 28,155	$ 19,222	$ 8,589
Foreign	835	90	220
Total loss from continuing operations before income taxes	$ 28,990	$ 19,312	$ 8,809

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Note 3 - Balance Sheet Details (Details) - Patents and Trademarks (USD $) In Thousands, unless otherwise specified	Dec. 31, 2013	Dec. 31, 2012
Finite-Lived Intangible Assets [Line Items]
Finite-lived intangible assets	$ 268	$ 268
Accumulated amortization	(160)	(132)
	108	136
Patents [Member]
Finite-Lived Intangible Assets [Line Items]
Finite-lived intangible assets	236	236
Trademarks [Member]
Finite-Lived Intangible Assets [Line Items]
Finite-lived intangible assets	$ 32	$ 32

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Note 3 - Balance Sheet Details (Details) (USD $)	12 Months Ended
	Dec. 31, 2013	Dec. 31, 2012	Dec. 31, 2011
Note 3 - Balance Sheet Details (Details) [Line Items]
Depreciation	$ 624,000	$ 137,000	$ 83,000
Amortization Of Patents And Trademarks	28,000	28,000	28,000
Finite-Lived Intangible Asset, Useful Life	10 years
Patents and Trademarks [Member]
Note 3 - Balance Sheet Details (Details) [Line Items]
Amortization Of Patents And Trademarks	$ 28,000	$ 28,000	$ 28,000
Finite-Lived Intangible Asset, Useful Life	10 years

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Note 6 - Income Taxes (Details) - Reconciliation of Income Taxes (USD $) In Thousands, unless otherwise specified	12 Months Ended
	Dec. 31, 2013	Dec. 31, 2012	Dec. 31, 2011
Reconciliation of Income Taxes [Abstract]
Loss for the year before income taxes	$ (28,990)	$ (19,312)	$ (8,809)
Expected recovery of income taxes	(9,886)	(6,759)	(3,083)
State income tax, net of federal benefit	(440)	(1,070)	(404)
Stock-based compensation	204	64	103
Warrants	3,776	2,958	82
Non-deductible interest			38
Deferred state tax rate adjustment	899	(92)	30
Expiration of options	3,761
Adjustment to deferred assets	1,138	187	1,236
Non-deductible expenses & other	112	32	69
Change in valuation allowance	$ 406	$ 4,680	$ 1,929

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Note 12 - Subsequent Events (Details) (Subsequent Event [Member], OcuHub Business Unit [Member], USD $) In Millions, unless otherwise specified	3 Months Ended
	Mar. 17, 2014
Subsequent Event [Member] | OcuHub Business Unit [Member]
Note 12 - Subsequent Events (Details) [Line Items]
Business Combination, Consideration Transferred	$ 1.4

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Note 10 - Capital Stock (Details) - Estimated Fair Value Assumptions	12 Months Ended
	Dec. 31, 2013	Dec. 31, 2012	Dec. 31, 2011
Note 10 - Capital Stock (Details) - Estimated Fair Value Assumptions [Line Items]
Volatility	101.00%	104.00%	105.00%
Weighted average Expected life of options (years)	5 years 324 days	5 years 270 days	5 years 131 days
Risk-free interest rate	1.43%	0.88%	1.49%
Dividend yield	0.00%	0.00%	0.00%
2011 Warrants [Member]
Note 10 - Capital Stock (Details) - Estimated Fair Value Assumptions [Line Items]
Volatility	79.00%
Weighted average Expected life of options (years)	2 years 6 months
Risk-free interest rate	0.58%
Dividend yield	0.00%

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Note 4 - Intangible Assets (Details) - Intangible Asset Estimated Future Amortization Expense (USD $) In Thousands, unless otherwise specified	Dec. 31, 2013
Intangible Asset Estimated Future Amortization Expense [Abstract]
2014	$ 1,215
2015	1,215
2016	1,064
Total	$ 3,494

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Note 3 - Balance Sheet Details

12 Months Ended

Dec. 31, 2013

Disclosure Text Block Supplement [Abstract]

Supplemental Balance Sheet Disclosures [Text Block]

3. BALANCE SHEET DETAILS

Accounts receivable

(in thousands)	December 31,
	2013			2012
Trade receivables	$	3,939		$	910
Due from related parties		—			15
Allowance for doubtful accounts		(415	)		(36	)
	$	3,524		$	889

Inventory

(in thousands)	December 31,
	2013			2012
Finished goods	$	899		$	1,863
Inventory reserves		(14	)		—
	$	885		$	1,863

The Company evaluates inventory for estimated excess quantities and obsolescence, based on expected future sales levels and projections of future demand, with the excess inventory provided for. In addition, the Company assesses the impact of changing technology and market conditions. The Company has entered into a long term purchase commitment to buy the test cards from MiniFAB. The purchase commitment contains required minimum annual purchases. As part of our consideration of excess or obsolete inventory, the Company considers future annual minimum purchases, estimated future usage and the expiry dating of the cards in its analysis of any inventory reserve needed. The usage of the minimum purchase commitment is predicated upon significant increases in revenues from TearLab products as compared to 2013 and prior years.

Prepaid expenses

(in thousands)	December 31,
	2013		2012
Prepaid trade shows	$	162	$	159
Prepaid insurance		227		131
Manufacturing deposits		104		—
Subscriptions		86		1
Other fees and services		110		96
	$	689	$	387

Fixed Assets

(in thousands)	December 31,
	2013			2012
Furniture and office equipment	$	221		$	115
Leasehold improvements		47			—
Computer equipment and software		386			203
Capitalized TearLab equipment readers		3,640			582
Medical equipment		401			373
		4,695			1,273
Accumulated depreciation		(1,266	)		(643	)
	$	3,429		$	630

Depreciation expense was $624,000, $137,000, and $83,000, during the years ended December 31, 2013, 2012, and 2011, respectively.

Patents and trademarks

(in thousands)	December 31,
	2013			2012
Patents	$	236		$	236
Trademarks		32			32
		268			268
Accumulated amortization		(160	)		(132	)
	$	108		$	136

Amortization expense was $28,000, $28,000, and $28,000 during the years ended December 31, 2013, 2012, and 2011, respectively.

These patents and trademarks are amortized, using the straight-line method, over an estimated useful life of 10 years from the date of approval of the patents and trademarks.

Estimated aggregate amortization expense for patents and trademarks at December 31, 2013 is as follows (in thousands):

2014	$	28
2015		28
2016		28
2017		24
Total	$	108

Accrued liabilities

(in thousands)	December 31,
	2013		2012
Due to professionals	$	616	$	258
Due to employees and directors		1,503		1,052
Goods received but not yet invoiced		207		17
Sales and use tax liabilities		527		99
Royalty liabilitiy		281		122
Readers and test cards in transit		368		100
Other		342		341
	$	3,844	$	1,989

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Note 10 - Capital Stock (Details) - Stock Options Activity (USD $)	12 Months Ended
	Dec. 31, 2013	Dec. 31, 2012	Dec. 31, 2011	Dec. 31, 2010
Stock Options Activity [Abstract]
Number of Options Outstanding	5,536,795	4,099,342	3,690,654	3,576,543
Weighted Average Exercise Price	$ 4.91	$ 3.54	$ 3.34	$ 3.46
Weighted Average Remaining Contractual Life (years)	6 years 324 days	7 years 51 days	7 years 21 days	7 years 65 days
Aggregate Intrinsic Value	$ 27,256,235	$ 6,798,973	$ 269,587	$ 899,010
Vested or expected to vest, December 31, 2013	3,964,837
Vested or expected to vest, December 31, 2013	$ 3.81
Vested or expected to vest, December 31, 2013	5 years 328 days
Vested or expected to vest, December 31, 2013	25,370,479
Exercisable, December 31, 2013	3,469,444
Exercisable, December 31, 2013	$ 3.29
Exercisable, December 31, 2013	5 years 350 days
Exercisable, December 31, 2013	$ 24,067,198
Granted-Number of Options Outstanding	1,837,500	720,250	238,278
Granted-Weighted Average Exercise Price	$ 9.78	$ 3.69	$ 1.56
Exercised-Number of Options Outstanding	(181,854)	(294,384)
Exercised-Weighted Average Exercise Price	$ 2.52	$ 0.37
Forfeited/cancelled/expired-Number of Options Outstanding	(218,193)	(17,178)	(124,167)
Forfeited/cancelled/expired-Weighted Average Exercise Price	$ 11.07	$ 10.37	$ 3.14

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Note 3 - Balance Sheet Details (Details) - Estimated Aggregate Amortization Expense for Patents and Trademarks (USD $) In Thousands, unless otherwise specified	Dec. 31, 2013
Note 3 - Balance Sheet Details (Details) - Estimated Aggregate Amortization Expense for Patents and Trademarks [Line Items]
2014	$ 1,215
2015	1,215
2016	1,064
Total	3,494
Patents and Trademarks [Member]
Note 3 - Balance Sheet Details (Details) - Estimated Aggregate Amortization Expense for Patents and Trademarks [Line Items]
2014	28
2015	28
2016	28
2017	24
Total	$ 108

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Note 11 - Consolidated Statements of Cash Flows (Tables)

12 Months Ended

Dec. 31, 2013

Supplemental Cash Flow Elements [Abstract]

Cash Flow, Operating Capital [Table Text Block]

	Years ended December 31,
	2013			2012			2011
Accounts receivable	$	(2,650	)	$	(557	)	$	(5	)
Due from related parties		15			(11	)		126
Inventory		978			(965	)		(343	)
Prepaid expenses		(302	)		(197	)		132
Other current assets		50			(25	)		(20	)
Other non-current assets		(12	)		(27	)		—
Accounts payable		(436	)		849			(135	)
Accrued liabilities		1,329			146			374
Deferred rent/revenue		67			—			(128	)
	$	(961	)	$	(787	)	$	1

Schedule of Other Significant Noncash Transactions [Table Text Block]

	Years ended December 31,
	2013		2012		2011
Warrant issued in registered direct financing		—		—		3,012
Common stock issued in consideration of management bonuses		—		1,182		—
Common stock issued in consideration of notes payable and accrued interest conversion		—		—		2,107
Additions to fixed assets		526		—		—

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Note 10 - Capital Stock (Tables)

12 Months Ended

Dec. 31, 2013

Note 10 - Capital Stock (Tables) [Line Items]

Schedule of Employee Service Share-based Compensation, Allocation of Recognized Period Costs [Table Text Block]

	Year ended December 31,
	2013		2012		2011
General and administrative	$	1,837	$	528	$	340
Clinical and regulatory		174		375		93
Sales and marketing		1,727		538		57
Stock-based compensation expense before income taxes	$	3,738	$	1,441	$	490

Schedule of Share-based Compensation, Stock Options, Activity [Table Text Block]

	Number of Options Outstanding			Weighted Average Exercise Price		Weighted Average Remaining Contractual Life (years)		Aggregate Intrinsic Value
Outstanding, December 31, 2010		3,576,543		$	3.46		7.18	$	899,010
Granted		238,278			1.56
Exercised		—			—
Forfeited/cancelled/expired		(124,167	)		3.14
Outstanding, December 31, 2011		3,690,654			3.34		7.06	$	269,587
Granted		720,250			3.69
Exercised		(294,384	)		0.37
Forfeited/cancelled/expired		(17,178	)		10.37
Outstanding, December 31, 2012		4,099,342			3.54		7.14	$	6,798,973
Granted		1,837,500			9.78
Exercised		(181,854	)		2.52
Forfeited/cancelled/expired		(218,193	)		11.07
Outstanding, December 31, 2013		5,536,795		$	4.91		6.89	$	27,256,235
Vested or expected to vest, December 31, 2013		3,964,837		$	3.81		5.90	$	25,370,479
Exercisable, December 31, 2013		3,469,444		$	3.29		5.96	$	24,067,198

Schedule of Stockholders' Equity Note, Warrants or Rights [Table Text Block]

	Number of warrants outstanding			Weighted average exercise price
Outstanding, December 31, 2011		4,087			3.28
Granted		(1,773	)		1.86
Expired		(131	)		46.25
Outstanding, December 31, 2012		2,183			1.85
Exercised		(1,571	)		1.86
Outstanding, December 31, 2013		612		$	1.83

2007 Warrants [Member]

Note 10 - Capital Stock (Tables) [Line Items]

Schedule of Share-based Payment Award, Stock Options, Valuation Assumptions [Table Text Block]

	Year ended December 31,
	2013			2012			2011
Volatility		101	%		104	%		105	%
Weighted average Expected life of options (years)	5.89			5.74			5.36
Risk-free interest rate		1.43	%		0.88	%		1.49	%
Dividend yield		0	%		0	%		0	%

Volatility	79	%
Expected life of Warrants (years)	2.50
Risk-free interest rate	0.58	%
Dividend yield	0	%

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Note 8 - Commitments and Contingencies (Details) - Future Minimum Purchase Commitments (USD $) In Millions, unless otherwise specified	Dec. 31, 2013
Future Minimum Purchase Commitments [Abstract]
2014	$ 8.3
2015	9.1
Total	$ 17.4

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Note 3 - Balance Sheet Details (Details) - Accrued Liabilities (USD $) In Thousands, unless otherwise specified	Dec. 31, 2013	Dec. 31, 2012
Accrued Liabilities [Abstract]
Due to professionals	$ 616	$ 258
Due to employees and directors	1,503	1,052
Goods received but not yet invoiced	207	17
Sales and use tax liabilities	527	99
Royalty liabilitiy	281	122
Readers and test cards in transit	368	100
Other	342	341
	$ 3,844	$ 1,989

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Note 13 - Quarterly Financial Data (Unaudited) (Tables)

12 Months Ended

Dec. 31, 2013

Quarterly Financial Information Disclosure [Abstract]

Schedule of Quarterly Financial Information [Table Text Block]

	Fiscal 2013 Quarter Ended ($ 000's)
	March 31			June 30			September 30			December 31
Revenue(i)	$	2,475		$	3,525		$	4,207		$	4,438
Gross profit (i)		1,059			1,395			1,930			2,115
Loss from operations (i)		(3,162	)		(5,279	)		(3,829	)		(5,504	)
Net loss (i)	$	(8,574	)	$	(12,025	)	$	(4,240	)	$	(4,151	)
Weighted average number of shares outstanding basic(i)		28,756			29,178			31,914			33,129
Net loss per common share basic (i)	$	(0.30	)	$	(0.41	)	$	(0.13	)	$	(0.13	)
Weighted average number of shares outstanding diluted		28,756			29,178			31,914			33,679
Net loss per common share diluted (i)	$	(0.30	)	$	(0.41	)	$	(0.13	)	$	(0.17	)

	Fiscal 2012 Quarter Ended ($ 000’s)
	March 31			June 30			September 30			December 31
Revenue(i)	$	422		$	716		$	1,211		$	1,610
Gross profit (i)		91			375			519			680
Loss from operations (i)		(2,503	)		(2,533	)		(3,673	)		(3,324	)
Net loss (i)	$	(9,099	)	$	(1,974	)	$	(4,587	)	$	(3,652	)
Weighted average number of shares outstanding basic(i)		20,673			24,919			27,703			28,607
Net loss per common share basic (i)	$	(0.44	)	$	(0.08	)	$	(0.17	)	$	(0.13	)
Weighted average number of shares outstanding diluted		20,673			26,042			27,703			28,607
Net loss per common share diluted (i)	$	(0.44	)	$	(0.10	)	$	(0.17	)	$	(0.13	)

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Note 1 - Basis of Presentation (Details) (USD $)	3 Months Ended																12 Months Ended
	Dec. 31, 2013		Sep. 30, 2013		Jun. 30, 2013		Mar. 31, 2013		Dec. 31, 2012		Sep. 30, 2012		Jun. 30, 2012		Mar. 31, 2012		Dec. 31, 2013	Dec. 31, 2012	Dec. 31, 2011	Dec. 31, 2010
Disclosure Text Block [Abstract]
Net Income (Loss) Attributable to Parent	$ (4,151,000)	[1]	$ (4,240,000)	[1]	$ (12,025,000)	[1]	$ (8,574,000)	[1]	$ (3,652,000)	[1]	$ (4,587,000)	[1]	$ (1,974,000)	[1]	$ (9,099,000)	[1]	$ (28,990,000)	$ (19,312,000)	$ (8,809,000)
Working Capital	34,300,000																34,300,000
Cash and Cash Equivalents, at Carrying Value	$ 37,778,000								$ 15,437,000								$ 37,778,000	$ 15,437,000	$ 2,807,000	$ 2,726,000

[1] Net loss per share basic and diluted are computed independently for the quarters presented. Therefore, the sum of the quarterly per share information may not be equal to the annual per share information. Also totals may not add to the financials statements due to rounding.

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Note 2 - Significant Accounting Policies

12 Months Ended

Dec. 31, 2013

Accounting Policies [Abstract]

Significant Accounting Policies [Text Block]

2. SIGNIFICANT ACCOUNTING POLICIES

Use of estimates

The preparation of financial statements in conformity with U.S. Generally Accepted Accounting Principles (''GAAP'') 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 consolidated financial statements and the reported amounts of revenue and expenses during the reporting periods. Actual results could differ from those estimates. The principal areas of judgment relate to revenue, receivables and inventory reserves, impairment of long-lived and intangible assets, and the fair value of stock options and warrants. 

Concentrations and risk

Credit risk

Financial instruments, which potentially subject the Company to concentrations of credit risk, consist primarily of cash and accounts receivable. The Company limits its exposure to credit loss by placing its cash with high credit quality financial institutions.

During fiscal 2013, the Company derived 100% of its revenue from the sale of the TearLab® Osmolarity product. Customers representing revenue in excess of 10% in prior years were:

	Years ended December 31,
	2013		2012		2011
Alcon Research Ltd.		*		*		11	%
Bon Optic VertriebsgesellschaftmbH		*		*		10	%

* Less than 10% for period presented 

Currently, there are two suppliers for the reader and pen components of the TearLab® Osmolarity System and one supplier for the test cards. 

Fair value of financial instruments

The Company's financial instruments consist principally of cash and cash equivalents, accounts receivable, accounts payable and accrued expenses. The carrying amounts of financial instruments such as cash equivalents, accounts receivable, accounts payable and accrued expenses approximate the related fair values due to the short-term maturities of these instruments.

Cash and cash equivalents

The Company considers all highly liquid investments that are readily convertible into cash and have an original maturity of three months or less at the time of purchase to be cash equivalents.

Accounts receivable and allowance for doubtful accounts

The Company's accounts receivable consist primarily of trade receivables from customers and are generally unsecured and due within 30 days. The carrying value of accounts receivable approximates their fair value due to their short term nature. The Company evaluates the collectability of its accounts receivable based on a combination of factors. Expected credit losses related to trade receivables are recorded as an allowance for doubtful accounts. The allowance for doubtful accounts is charged to sales and marketing expense and accounts receivable are written off as uncollectible and deducted from the allowance after appropriate collection efforts have been exhausted. Charges for bad debt expense has been $377,000, $10,000, $32,000 for the years ended December 31, 2013, 2012 and 2011 respectively.

Inventory

Inventory is recorded at the lower of cost (based on first in, first out basis) or market and consists of purchased finished goods. Inventory is periodically reviewed for evidence of slow-moving or obsolete items, and the estimated reserve is based on management's reviews of inventories on hand, compared to estimated future usage and sales, reviewing product shelf-life, and assumptions about the likelihood of obsolescence. Once written down, the adjustments are considered permanent and are not reversed until the related inventory is sold.

Fixed assets

Property and equipment are carried at cost less accumulated depreciation and amortization. Depreciation is computed using the straight-line method over the estimated useful lives of the assets, ranging from three to seven years. Maintenance and repairs are expensed as incurred. The Company reviews property and equipment for impairment whenever events or changes in circumstances indicate that the carrying value of an asset may not be recoverable. An impairment loss would be recognized when estimated future undiscounted cash flows relating to the asset are less than its carrying amount. An impairment loss is measured as the amount by which the carrying amount of an asset exceeds its fair value.

Impairment of long-lived assets

The Company periodically assesses the carrying value of intangible and other long-lived assets, and whenever events or changes in circumstances indicate that the carrying amount of an asset might not be recoverable. The assets are considered to be impaired if the Company determines that the carrying value may not be recoverable based upon its assessment, which includes consideration of the following events or changes in circumstances:

● the asset's ability to continue to generate income from operations and positive cash flow in future periods;

● loss of legal ownership or title to the asset;

● significant changes in the Company's strategic business objectives and utilization of the asset(s); and

● the impact of significant negative industry or economic trends.

If the assets are considered to be impaired, the impairment recognized is the amount by which the carrying value of the assets exceeds the fair value of the assets. Fair value is determined by a combination of data from third party sources and the application of discounted cash flow models to project cash flows from the asset. In addition, the Company bases the useful lives and related amortization or depreciation expense on an estimate of the period that the assets will generate revenues or otherwise be used. The Company also periodically reviews the lives assigned to long-lived assets to ensure that the initial estimates do not exceed any revised estimated periods from which the Company expects to realize cash flows from its assets.

Patents and trademarks

Patents and trademarks are recorded at historical cost and are amortized using the straight-line method over their estimated useful lives, not to exceed 15 years.

Intangible Assets

Intangible assets are recorded at historical cost and are amortized using the straight line-line method over their estimated useful life of 10 years.

Product Warranties

The Company generally provides a 12 month warranty on its TearLab® Osmolarity System and related disposables. The Company accrues the estimated cost of this warranty at the time revenue is recorded and charges warranty expense to cost of goods sold. Warranty reserves are established based on historical experience with failure rates and the number of systems covered by warranty. Warranty reserves are depleted as systems and disposables are replaced. The Company reviews warranty reserves quarterly and, if necessary, make adjustments. The activities in the warranty reserve are as follows (in thousands):

	Years ended December 31,
	2013			2012			2011
Balance at beginning of year	$	107		$	36		$	51
Charges to cost of goods sold		271			196			56
Costs applied to liability		(198	)		(125	)		(71	)
Balance at end of year	$	180		$	107		$	36

Income Taxes

A deferred tax asset or liability is determined based on the difference between the financial statement and tax basis of assets and liabilities as measured by the enacted tax rates which will be in effect when these differences reverse. The Company provides a valuation allowance against net deferred tax assets unless, based upon the available evidence, it is more likely than not that the deferred tax assets will be realized.

Revenue recognition

Revenue is recognized when all four of the following criteria are met: (i) persuasive evidence that an arrangement exists; (ii) delivery of the products has occurred; (iii) the selling price is fixed or determinable; and (iv) collectability is reasonably assured. The Company's timing of revenue recognition is impacted by factors such as passage of title, payments and customer acceptance. Amounts received in excess of revenue recognizable are deferred.

The Company enters into contracts where revenue is derived from multiple deliverables containing a mix of products, which generally includes either the sale or the right to use a TearLab® Osmolarity System and sales of a fixed number of test cards. The Company has multiple revenue programs, in which it either sells readers and test cards as a combined unit with no future commitments on behalf of the client, provides the use of readers to large practices with an expectation of purchasing certain levels of test cards or allows the customer to use the readers with a commitment to fulfill a minimum purchase obligation, typically over a three year period. Revenue recognition for contracts with multiple deliverables is based on the individual units of accounting determined to exist in the contract. A delivered item is considered a separate unit of accounting when the delivered item has value to the customer on a stand-alone basis. Items are considered to have stand-alone value when they are sold separately by any vendor or when the customer could resell the item on a stand-alone basis. Considering that test cards are essential to the operation of a TearLab reader, there is no alternative vendor for the test cards and no indication that a secondary market for the TearLab readers is established, the deliverables under the contracts entered into during 2013 and 2012 do not meet criteria for separation under the multiple-element arrangements guidance. Consideration is allocated at the inception of the contract to all deliverables based on their relative selling price. The relative selling price for each deliverable is determined using vendor specific objective evidence (VSOE) of selling price or third-party evidence of selling price if VSOE does not exist. If neither VSOE nor third-party evidence exists, the Company uses its best estimate of the selling price for the deliverable. The Company recognizes revenue for each of the elements only when it determines that all applicable recognition criteria have been met. The TearLab® Osmolarity System for Dry Eye Disease (''DED'') consists of hardware and related disposable test cards. In 2013 and 2012, the Company's revenues have been derived primarily from programs where customers are given the use of a TearLab® Osmolarity System in exchange for various programs to purchase test cards. The Company's sales are currently direct to customers in the United States, Canada and the United Kingdom and to distributors in Europe and Asia. The Company records revenue when all of its obligations are completed which is generally upon shipment of the Company's products.

Although the Company has a no return policy for its products, the Company has established a return reserve for product sales that contain an implicit right of return. The Company reserves for estimated returns or refunds by reducing revenues at the time of shipment based on historical experience. The reserve of $173,000 and $71,000 as of December 31, 2013 and December 31, 2012, respectively, has reduced revenue and is included in accounts receivable.

Cost of goods sold

Cost of goods sold includes the costs the Company incurs for the purchase of the TearLab® Systems sold and related freight and shipping costs, fees related to warehousing and logistics inventory management associated with conducting business and depreciation of reader systems. The Company recorded $912,000, $255,000 and $187,000 in shipping and handling fees for the years ended December 31, 2013, 2012 and 2011, respectively.

Clinical, regulatory and research & development costs

Clinical and regulatory costs attributable to the performance of contract services are recognized as an expense as the services are performed. Non-refundable, up-front fees paid in connection with these contracted services are deferred and recognized as an expense over the estimated term of the related contract.

Stock-based compensation

The Company accounts for stock-based compensation expense for its employees in accordance with US GAAP guidance related to stock-based compensation. Under this guidance, stock-based compensation cost is estimated at the grant date based on the fair value of the award and is recognized as an expense ratably over the requisite service period of the award. The Company uses the Black-Scholes Merton option pricing model for determining the fair value for all its awards and will recognize compensation cost on a straight-line basis over the awards' vesting periods.

Advertising Costs

Advertising costs are expensed as incurred. Total advertising costs for each of the years ended December 31, 2013, 2012 and 2011 were $0.4 million, $0.3 million and $0.2 million, respectively.

Warrant liabilities

The Company issued several rounds of warrants related to various debt and equity transactions which occurred in 2010 and 2011. The Company accounts for its warrants issued in accordance with the US GAAP accounting guidance under Accounting Standards Codification (ASC) 815 applicable to derivative instruments, which requires every derivative instrument within its scope to be recorded on the balance sheet as either an asset or liability measured at its fair value, with changes in fair value recognized in earnings.  Based on this guidance, the Company determined that the Company's warrants do not meet the criteria for classification as equity.  Accordingly, the Company classified the warrants as current liabilities. The warrants are subject to remeasurement at each balance sheet date with any change in fair value recognized as a component of other income (expense), in the statements of operations and comprehensive loss. Warrants are also remeasured at fair value immediately prior to being exercised, and the resulting fair value is reclassed into additional paid-in capital, net of any applicable exercise proceeds. The Company estimated the fair value of these warrants at the respective balance sheet dates using the Black-Scholes Merton option pricing model as described in the stock-based compensation section above, based on the estimated market value of the underlying common stock at the valuation measurement date, the remaining contractual term of the warrant, risk-free interest rates and expected dividends on and expected volatility of the price of the underlying common stock. There is a moderate degree of subjectivity involved when using option pricing models to estimate warrant liability and the assumptions used in the Black-Scholes Merton option pricing model are moderately judgmental.

Foreign currency transactions

The Company's functional and reporting currency is the U.S. dollar. The assets and liabilities of the Company's Canadian operations are maintained in U.S. dollars. Monetary assets and liabilities denominated in foreign currencies are translated into U.S. dollars at exchange rates in effect at the consolidated balance sheet dates, and non-monetary assets and liabilities are translated at exchange rates in effect on the date of the transaction. Revenue and expenses are translated into U.S. dollars at average exchange rates prevailing during the year. Resulting exchange gains (losses) of: ($131,000), ($15,000), ($29,000) are included in other income (expense) in the years ended December 31, 2013, 2012 and 2011, respectively.

Geographic information

The following table provides geographic information related to the Company's revenues (in thousands):

	United States		Canada		Rest of World		Total
December 31, 2013
Revenues	$	13,844	$	121	$	680	$	14,645
December 31, 2012
Revenues	$	3,564	$	59	$	337	$	3,960

Comprehensive loss

Comprehensive income (loss) is defined as the change in equity during a period from transactions and other events and circumstances from non-owner sources. Comprehensive income (loss) generally includes unrealized gains or losses on the Company's marketable securities and foreign currency translation adjustments. In all the periods presented, the Company's comprehensive loss equaled net loss for the period.

Net loss per share

Basic earnings per share (''EPS'') excludes dilutive securities and is computed by dividing net loss available to common stockholders by the weighted average number of shares of common stock outstanding for the year. Diluted EPS reflects the potential dilution that could occur if securities or other contracts to issue common stock were exercised or converted and the resulting additional shares are dilutive because their inclusion decreases the amount of EPS.

The following are potentially dilutive securities which have not been used in the calculation of diluted loss per share as they are anti-dilutive (in thousands):

	December 31,
	2013		2012		2011
Stock options		5,537		4,100		3,691
Warrants		599		2,183		4,087
Total		6,136		6,283		7,778

Recent accounting pronouncements

Effective January 1, 2013, the Company adopted the FASB's requirements for presentation of reclassifications out of accumulated other comprehensive income (AOCI). The guidance requires companies to report, in one place, information about reclassifications out of AOCI and to present reclassifications by component when reporting changes in AOCI balances. The adoption of this authoritative guidance did not have an impact on the Company's financial position or results of operations.

In July 2013, the FASB issued Accounting Standards Update, or ASU, No. 2013-11, Presentation of an Unrecognized Tax Benefit When a Net Operating Loss Carryforward, a Similar Tax Loss, or a Tax Credit Carryforward Exists. ASU 2013-11 provides explicit guidance on the financial statement presentation of an unrecognized tax benefit when a net operating loss carryforward, a similar tax loss, or a tax credit carryforward exists. The guidance is effective prospectively for fiscal years, and interim periods within those years, beginning after December 15, 2013, with an option for early adoption. We intend to adopt this guidance at the beginning of our first quarter of fiscal year 2014 and do not believe the adoption of this standard will have a material impact on our financial position, results of operations or related financial statement disclosures.

In July 2012, the FASB issued Accounting Standards Update, or ASU, No. 2012-02, Testing Indefinite-Lived Intangible Assets for Impairment. ASU 2012-02 gives an entity the option to first assess qualitative factors to determine whether it is more likely than not that an indefinite-lived intangible asset is impaired. If, after assessing the totality of events and circumstances, an entity concludes that it is not more likely than not that the indefinite-lived intangible asset is impaired, then the entity is not required to take further action. This guidance became effective for annual and interim impairment tests performed for fiscal years beginning after September 15, 2012, with early adoption permitted. The Company adopted the provisions of the guidance in the fourth quarter of 2013. The adoption did not have a material impact on the Company's financial position or results of operations.

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Note 2 - Significant Accounting Policies (Details) (USD $)	12 Months Ended
	Dec. 31, 2013	Dec. 31, 2012	Dec. 31, 2011
Note 2 - Significant Accounting Policies (Details) [Line Items]
Concentration Risk, Percentage	10.00%
Provision for Doubtful Accounts	$ 377,000	$ 10,000	$ 32,000
Finite-Lived Intangible Asset, Useful Life	10 years
Revenue Recognition, Sales Returns, Reserve for Sales Returns	173,000	71,000
Shipping, Handling and Transportation Costs	912,000	255,000	187,000
Advertising Expense	400,000	300,000	200,000
Foreign Currency Transaction Gain (Loss), before Tax	$ 131,000	$ 15,000	$ 29,000
Patents and Trademarks [Member]
Note 2 - Significant Accounting Policies (Details) [Line Items]
Finite-Lived Intangible Asset, Useful Life	10 years
Minimum [Member]
Note 2 - Significant Accounting Policies (Details) [Line Items]
Property, Plant and Equipment, Estimated Useful Lives	three
Maximum [Member] | Patents and Trademarks [Member]
Note 2 - Significant Accounting Policies (Details) [Line Items]
Finite-Lived Intangible Asset, Useful Life	15 years
Maximum [Member] | Other Intangible Assets [Member]
Note 2 - Significant Accounting Policies (Details) [Line Items]
Finite-Lived Intangible Asset, Useful Life	10 years
Maximum [Member]
Note 2 - Significant Accounting Policies (Details) [Line Items]
Property, Plant and Equipment, Estimated Useful Lives	seven

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Note 3 - Balance Sheet Details (Details) - Prepaid Expenses (USD $) In Thousands, unless otherwise specified	Dec. 31, 2013	Dec. 31, 2012
Prepaid Expenses [Abstract]
Prepaid trade shows	$ 162	$ 159
Prepaid insurance	227	131
Manufacturing deposits	104
Subscriptions	86	1
Other fees and services	110	96
	$ 689	$ 387

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Note 7 - Convertible Notes Payable and Accrued Interest (Details) (USD $)	0 Months Ended	1 Months Ended	0 Months Ended		1 Months Ended		12 Months Ended
	Jul. 30, 2013	Jul. 18, 2012	Apr. 16, 2012	Jun. 13, 2011	Jun. 30, 2011	Aug. 31, 2009	Dec. 31, 2013	Dec. 31, 2012	Dec. 31, 2011	Mar. 31, 2013	Jul. 31, 2009
Note 7 - Convertible Notes Payable and Accrued Interest (Details) [Line Items]
Convertible Notes Payable						$ 200,000					$ 1,550,000
Proceeds from Convertible Debt						1,750,000
Debt Instrument, Interest Rate, Stated Percentage						12.00%
Minimum Percentage Threshold Of Outstanding Principle Amount For Debt Conversion						51.00%
Debt Instrument, Convertible, Conversion Price (in Dollars per share)						$ 1.3186
Debt Conversion, Converted Instrument, Shares Issued (in Shares)				1,629,539
Debt Conversion, Converted Instrument, Amount				2,149,000					2,107,000
Class of Warrant or Right, Number of Securities Called by Warrants or Rights (in Shares)				109,375
Class of Warrant or Right, Exercise Price of Warrants or Rights (in Dollars per Item)				1.60			1.83	1.85	3.28
Warrants and Rights Outstanding				163,000	5,518,000					4,046,000
Amortization of Financing Costs									705,000
Amortization of Debt Discount (Premium)							0	0	19,000
Payments of Stock Issuance Costs	3,036,000	524,000	1,194,000		703,000		3,036,000	1,718,000	789,000
Financing Warrants [Member]
Note 7 - Convertible Notes Payable and Accrued Interest (Details) [Line Items]
Class of Warrant or Right, Number of Securities Called by Warrants or Rights (in Shares)				109,375
Class of Warrant or Right, Exercise Price of Warrants or Rights (in Dollars per Item)				1.60
Amortization of Financing Costs							0	0	69,000
Debt Instrument, Convertible, Beneficial Conversion Feature							728,000
Legal And Consulting Expenses Relating To Financing Member
Note 7 - Convertible Notes Payable and Accrued Interest (Details) [Line Items]
Debt Issuance Cost							87,000
Deferred Finance Costs, Net							43,000
Payments of Stock Issuance Costs							44,000
Accrued Interest [Member]
Note 7 - Convertible Notes Payable and Accrued Interest (Details) [Line Items]
Debt Conversion, Converted Instrument, Amount				399,000
Beneficial Conversion [Member]
Note 7 - Convertible Notes Payable and Accrued Interest (Details) [Line Items]
Amortization of Debt Discount (Premium)							$ 0	$ 0	$ 314,000

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Consolidated Balance Sheets (USD $) In Thousands, unless otherwise specified	Dec. 31, 2013	Dec. 31, 2012
Current assets
Cash and cash equivalents	$ 37,778	$ 15,437
Accounts receivable, net	3,524	889
Inventory	885	1,863
Prepaid expenses	689	387
Other current assets	10	60
Total current assets	42,886	18,636
Fixed assets, net	3,429	630
Patents and trademarks, net	108	136
Intangible assets, net	3,494	4,709
Other non-current assets	40	28
Total assets	49,957	24,139
Current liabilities
Accounts payable	631	1,067
Accrued liabilities	3,844	1,989
Deferred rent	67
Obligations under warrants	4,047	6,239
Total current liabilities	8,589	9,295
Stockholders' equity
Preferred Stock, $0.001 par value, 10,000,000 authorized, none outstanding	0	0
Common Stock, $0.001 par value, 65,000,000 authorized, 33,288,701 issued and outstanding at December 31, 2013 and 65,000,000 authorized, 28,741,653 issued and outstanding at December 31, 2012	33	29
Additional paid-in capital	477,172	421,662
Accumulated deficit	(435,837)	(406,847)
Total stockholders' equity	41,368	14,844
Total liabilities and stockholders' equity	$ 49,957	$ 24,139

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Note 4 - Intangible Assets (Details) (USD $)	12 Months Ended
	Dec. 31, 2013	Dec. 31, 2012	Dec. 31, 2011
Disclosure Text Block [Abstract]
Finite-Lived Intangible Asset, Useful Life	10 years
Amortization of Intangible Assets	$ 1,215,000	$ 1,215,000	$ 1,215,000

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Consolidated Statements of Cash Flows (USD $)	12 Months Ended
	Dec. 31, 2013	Dec. 31, 2012	Dec. 31, 2011
OPERATING ACTIVITIES
Net loss for the year	$ (28,990,000)	$ (19,312,000)	$ (8,809,000)
Adjustments to reconcile net loss to cash used in operating activities:
Stock-based compensation	3,738,000	1,441,000	490,000
Depreciation of fixed assets	624,000	137,000	83,000
Amortization of patents and trademarks	28,000	28,000	28,000
Amortization of intangible assets	1,215,000	1,215,000	1,215,000
Amortization of deferred financing charges, warrants & beneficial conversion values			402,000
Non-cash interest accrued on convertible debt funding			96,000
Non-cash advisory fees paid to Greybrook in common shares			311,000
Non-cash bonuses paid to management in common shares		1,182,000
Warrant issuance costs			303,000
Change in fair value of warrant obligation	11,105,000	7,296,000	(94,000)
Loss on disposal of fixed assets	7,000
Net change in working capital and non-current asset balances related to operations	(961,000)	(787,000)	1,000
Cash used in operating activities	(13,234,000)	(8,800,000)	(5,974,000)
INVESTING ACTIVITIES
Additions to fixed assets, net of proceeds	(2,905,000)	(569,000)	(156,000)
Cash used in investing activities	(2,905,000)	(569,000)	(156,000)
FINANCING ACTIVITIES
Proceeds from the exercise of common stock options	458,000	110,000	0
Proceeds from the exercise of warrants	676,000	3,262,000
Proceeds from issuance of shares and warrants in a private placement financing			7,000,000
Costs of issuance of shares and warrants in public offering, private placement and registered direct financings	(3,036,000)	(1,718,000)	(789,000)
Cash provided by financing activities	38,480,000	21,999,000	6,211,000
Net increase in cash and cash equivalents during the year	22,341,000	12,630,000	81,000
Cash and cash equivalents, beginning of year	15,437,000	2,807,000	2,726,000
Cash and cash equivalents, end of year	37,778,000	15,437,000	2,807,000
Public Offering [Member]
FINANCING ACTIVITIES
Proceeds from debt and equity securities	40,365,000	12,420,000
Underwritten Registered Financing [Member]
FINANCING ACTIVITIES
Proceeds from debt and equity securities		$ 7,925,000

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Note 10 - Capital Stock (Details) (USD $)	0 Months Ended	1 Months Ended		0 Months Ended			1 Months Ended	3 Months Ended	6 Months Ended	12 Months Ended											12 Months Ended				6 Months Ended	12 Months Ended		1 Months Ended		12 Months Ended				0 Months Ended	12 Months Ended		1 Months Ended		6 Months Ended	12 Months Ended			1 Months Ended	12 Months Ended			1 Months Ended			6 Months Ended
	Jul. 30, 2013	Sep. 17, 2012	Jul. 18, 2012	Apr. 16, 2012	Jun. 13, 2011	Apr. 14, 2011	Jun. 30, 2011	Mar. 31, 2013	Jun. 30, 2011	Dec. 31, 2013	Dec. 31, 2013	Dec. 31, 2012	Dec. 31, 2011	Dec. 31, 2013 Granted Options Subject To Shareholder Approval To Increase Option Pool [Member]	Jun. 30, 2011 Combined Common Stock and Warrant Unit [Member] 2011 Warrants [Member]	Dec. 31, 2012 Exercised [Member] 2011 Warrants [Member] Estimated Fair Value [Member]	Dec. 31, 2013 Exercised [Member] 2011 Warrants [Member]	Dec. 31, 2012 Exercised [Member] 2011 Warrants [Member]	Dec. 31, 2011 Exercised [Member] 2011 Warrants [Member]	Jun. 07, 2013 Increase in Shares Authorized [Member]	Dec. 31, 2013 Non-Statutory Stock Options [Member]	Dec. 31, 2013 Options Granted to Holder of More Than 10% of Company's Common Stock [Member] Minimum [Member]	Dec. 31, 2013 Employee Stock Option [Member]	Dec. 31, 2013 Employee Stock Option [Member] Minimum [Member]	Jun. 13, 2011 Conversion of Notes Payable and Accrued Interest, Warrants [Member]	Dec. 31, 2013 Conversion of Notes Payable and Accrued Interest, Warrants [Member]	Dec. 31, 2012 Conversion of Notes Payable and Accrued Interest, Warrants [Member]	Jun. 30, 2011 Private Placement Financing [Member]	Jun. 30, 2011 Warrants 1 [Member]	Dec. 31, 2013 Combined Common Stock and Warrant Unit [Member]	Jun. 30, 2011 Combined Common Stock and Warrant Unit [Member]	Jun. 30, 2011 Shares Per Unit [Member]	Feb. 06, 2007 2007 Warrants [Member]	Jun. 13, 2011 Financing Warrants [Member]	Dec. 31, 2013 Financing Warrants [Member]	Jun. 30, 2011 2011 Warrants [Member] Shares Per Unit [Member]	Jun. 30, 2011 2011 Warrants [Member] Private Placement Financing [Member]	Jun. 30, 2011 2011 Warrants [Member]	Jun. 30, 2011 2011 Warrants [Member]	Dec. 31, 2013 2011 Warrants [Member]	Dec. 31, 2012 2011 Warrants [Member]	Dec. 31, 2013 Warrant Liability [Member]	Jun. 30, 2011 Common Stock [Member]	Dec. 31, 2013 Common Stock [Member]	Dec. 31, 2012 Common Stock [Member]	Dec. 31, 2011 Common Stock [Member]	Jun. 30, 2011 Share Equity [Member]	Jun. 30, 2011 Warrants 1 [Member]	Jun. 07, 2013 Employees Directors and Consultants Member]	Jun. 30, 2011 Shares Per Unit [Member]
Note 10 - Capital Stock (Details) [Line Items]
Common Stock, Shares Authorized (in Shares)										65,000,000	65,000,000	65,000,000
Common Stock, Par or Stated Value Per Share (in Dollars per share)										$ 0.001	$ 0.001	$ 0.001
Preferred Stock, Shares Authorized (in Shares)										10,000,000	10,000,000	10,000,000
Preferred Stock, Par or Stated Value Per Share (in Dollars per share)										$ 0.001	$ 0.001	$ 0.001
Stock Issued During Period, Shares, New Issues (in Shares)	2,990,000		2,500,000	3,450,000		163,934																						3,846,154						1,629,539			3,846,154				1,750,469			2,990,000	5,950,000	3,846,154				1
Share-based Compensation Arrangement by Share-based Payment Award, Shares Issued in Period (in Shares)					1,629,539
Class of Warrant or Right, Number of Securities Called by Warrants or Rights (in Shares)					109,375																				109,375			3,846,154				1	131,497	109,375		1	3,846,154
Debt Instrument, Increase, Accrued Interest					$ 2,149,000
Payment of Financing and Stock Issuance Costs					41,000				303,000				(303,000)																					41,000
Class of Warrant or Right, Exercise Price of Warrants or Rights (in Dollars per Item)					1.60					1.83	1.83	1.85	3.28												1.60						1.86		46.25	1.60				1.86	1.86
Proceeds from Issuance or Sale of Equity							7,000,000																																								3,549,000	3,451,000
Payments of Stock Issuance Costs	3,036,000		524,000	1,194,000			703,000				3,036,000	1,718,000	789,000																303,000														400,000
Sale of Stock, Price Per Share (in Dollars per share)	$ 13.50		$ 3.17	$ 3.60											$ 1.82																$ 1.82
Class of Warrant or Right, Outstanding (in Shares)										612,000	612,000	2,183,000	4,087,000																			1
Warrants Exercised (in Shares)										1,571,000																12,813	22,500			1,571,136										1,571,136
Proceeds from Warrant Exercises											676,000	3,262,000														18,000	6,000								18,000					676,000	3,256,000	3,012,000
Proceeds from Issuance of Common Stock	40,365,000		7,925,000	12,420,000																																		7,000,000
Stock Issued During Period, Shares, Restricted Stock Award, Gross (in Shares)		316,779																																											316,779
Share Price (in Dollars per share)		$ 3.72
Stock Issued During Period, Value, Restricted Stock Award, Gross		1,182,000										1,182,000																																	1,000
Share-based Compensation Arrangement by Share-based Payment Award, Number of Shares Authorized (in Shares)																				1,000,000
Share-based Compensation Arrangement by Share-based Payment Award, Number of Shares Available for Grant (in Shares)										0	0																																						5,200,000
Share-based Compensation Arrangement by Share-based Payment Award, Purchase Price of Common Stock, Percent																					85.00%	110.00%
Share-based Compensation Arrangement by Share-based Payment Award, Expiration Period																							10 years
Share-based Compensation Arrangement by Share-based Payment Award, Award Vesting Period											5 years
Share-based Compensation Arrangement by Share-based Payment Award, Award Vesting Rights, Percentage																								20.00%
Share-based Compensation Arrangement by Share-based Payment Award, Options, Grants in Period, Weighted Average Grant Date Fair Value (in Dollars per share)											$ 8.96	$ 2.93	$ 1.20
Proceeds from Stock Options Exercised											458,000	110,000	0
Employee Service Share-based Compensation, Tax Benefit Realized from Exercise of Stock Options											0	0	0
Share-based Compensation Arrangement by Share-based Payment Award, Options, Exercises in Period, Intrinsic Value											2,038,000	923,000	0
Share-based Compensation Arrangement by Share-based Payment Award, Options, Vested in Period, Fair Value											720,000	530,000	512,000
Employee Service Share-based Compensation, Nonvested Awards, Compensation Cost Not yet Recognized																							10,791,000
Employee Service Share-based Compensation, Nonvested Awards, Compensation Cost Not yet Recognized, Period for Recognition																							3 years 178 days
Share-based Compensation Arrangement by Share-based Payment Award, Options, Grants in Period, Gross (in Shares)											1,837,500	720,250	238,278	337,500
Increase In Option Pool Required Before Options Granted Become Exercisable (in Shares)											203,100
Share-based Compensation Arrangement by Share-based Payment Award, Award Vesting Rights											one-third
Stock Issued During Period, Value, New Issues											40,365,000	20,345,000	3,549,000																					2,149,000										3,000	6,000	4,000
Fair Value Assumptions, Expected Volatility Rate												97.00%																											101.00%
Fair Value Assumptions, Expected Term												4 years 109 days																											5 years
Fair Value Assumptions, Risk Free Interest Rate								0.85%																															1.76%
Warrants and Rights Outstanding					163,000		5,518,000	4,046,000	5,518,000							4,014,000	13,297,000	4,014,000	1,346,000						163,000													5,518,000	5,518,000
Increase (Decrease) in Derivative Liabilities									$ 2,506,000		$ 2,485,000																													$ 8,620,000	$ 2,668,000
Warrant Term																									5 years

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Note 2 - Significant Accounting Policies (Details) - Geographic Information for the Company's Fixed Assets and Revenues (USD $) In Thousands, unless otherwise specified	3 Months Ended																12 Months Ended
	Dec. 31, 2013		Sep. 30, 2013		Jun. 30, 2013		Mar. 31, 2013		Dec. 31, 2012		Sep. 30, 2012		Jun. 30, 2012		Mar. 31, 2012		Dec. 31, 2013	Dec. 31, 2012	Dec. 31, 2011
Revenues from External Customers and Long-Lived Assets [Line Items]
Revenue	$ 4,438	[1]	$ 4,207	[1]	$ 3,525	[1]	$ 2,475	[1]	$ 1,610	[1]	$ 1,211	[1]	$ 716	[1]	$ 422	[1]	$ 14,645	$ 3,960	$ 2,124
UNITED STATES
Revenues from External Customers and Long-Lived Assets [Line Items]
Revenue																	13,844	3,564
CANADA
Revenues from External Customers and Long-Lived Assets [Line Items]
Revenue																	121	59
Rest of World [Member]
Revenues from External Customers and Long-Lived Assets [Line Items]
Revenue																	$ 680	$ 337

[1] Net loss per share basic and diluted are computed independently for the quarters presented. Therefore, the sum of the quarterly per share information may not be equal to the annual per share information. Also totals may not add to the financials statements due to rounding.

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Note 11 - Consolidated Statements of Cash Flows (Details) - Net Change in Non-Cash Working Capital Balances Related to Operations (USD $) In Thousands, unless otherwise specified	12 Months Ended
	Dec. 31, 2013	Dec. 31, 2012	Dec. 31, 2011
Net Change in Non-Cash Working Capital Balances Related to Operations [Abstract]
Accounts receivable	$ (2,650)	$ (557)	$ (5)
Due from related parties	15	(11)	126
Inventory	978	(965)	(343)
Prepaid expenses	(302)	(197)	132
Other current assets	50	(25)	(20)
Other non-current assets	(12)	(27)
Accounts payable	(436)	849	(135)
Accrued liabilities	1,329	146	374
Deferred rent/revenue	67		(128)
	$ (961)	$ (787)	$ 1

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Note 2 - Significant Accounting Policies (Tables)

12 Months Ended

Dec. 31, 2013

Accounting Policies [Abstract]

Schedule of Revenue by Major Customers by Reporting Segments [Table Text Block]

	Years ended December 31,
	2013		2012		2011
Alcon Research Ltd.		*		*		11	%
Bon Optic VertriebsgesellschaftmbH		*		*		10	%

Schedule of Product Warranty Liability [Table Text Block]

	Years ended December 31,
	2013			2012			2011
Balance at beginning of year	$	107		$	36		$	51
Charges to cost of goods sold		271			196			56
Costs applied to liability		(198	)		(125	)		(71	)
Balance at end of year	$	180		$	107		$	36

Schedule of Revenue from External Customers and Long-Lived Assets, by Geographical Areas [Table Text Block]

	United States		Canada		Rest of World		Total
December 31, 2013
Revenues	$	13,844	$	121	$	680	$	14,645
December 31, 2012
Revenues	$	3,564	$	59	$	337	$	3,960

Schedule of Antidilutive Securities Excluded from Computation of Earnings Per Share [Table Text Block]

	December 31,
	2013		2012		2011
Stock options		5,537		4,100		3,691
Warrants		599		2,183		4,087
Total		6,136		6,283		7,778

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Note 2 - Significant Accounting Policies (Details) - Antidilutive Securities Excluded from Earnings Per Share In Thousands, unless otherwise specified	12 Months Ended
	Dec. 31, 2013	Dec. 31, 2012	Dec. 31, 2011
Antidilutive Securities Excluded from Computation of Earnings Per Share [Line Items]
Antidilutive securities	6,136	6,283	7,778
Equity Option [Member]
Antidilutive Securities Excluded from Computation of Earnings Per Share [Line Items]
Antidilutive securities	5,537	4,100	3,691
Warrant [Member]
Antidilutive Securities Excluded from Computation of Earnings Per Share [Line Items]
Antidilutive securities	599	2,183	4,087

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Note 4 - Intangible Assets (Tables)

12 Months Ended

Dec. 31, 2013

Disclosure Text Block [Abstract]

Schedule of Finite-Lived Intangible Assets Acquired as Part of Business Combination [Table Text Block]

	December 31, 2013				December 31, 2012
	Cost		Accumulated Amortization		Cost		Accumulated Amortization
TearLab® technology	$	12,172	$	8,678	$	12,172	$	7,463

Schedule of Finite-Lived Intangible Assets, Future Amortization Expense [Table Text Block]

	Amortization of intangible assets
2014		1,215
2015		1,215
2016		1,064
Total	$	3,494

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Note 13 - Quarterly Financial Data (Unaudited) (Details) (USD $)	3 Months Ended
	Dec. 31, 2013
Note 13 - Quarterly Financial Data (Unaudited) (Details) [Line Items]
Quantifying Misstatement in Current Year Financial Statements, Increase to Basic and Diluted Loss per Share	$ 0.01
Increase to Operating Expenses and Net Loss [Member]
Note 13 - Quarterly Financial Data (Unaudited) (Details) [Line Items]
Quantifying Misstatement in Current Year Financial Statements, Amount	$ 268,000

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Note 1 - Basis of Presentation

12 Months Ended

Dec. 31, 2013

Disclosure Text Block [Abstract]

Organization, Consolidation and Presentation of Financial Statements Disclosure [Text Block]

1. Basis of Presentation

TearLab Corp. ("TearLab" or the "Company"), a Delaware corporation, is an ophthalmic device company that is commercializing a proprietary in vitro diagnostic tear testing platform, the TearLab® test for dry eye disease, or DED, which enables eye care practitioners to test for highly sensitive and specific biomarkers using nanoliters of tear film at the point-of-care.

The accompanying consolidated financial statements include the accounts of the Company and all of its wholly owned subsidiaries. Intercompany accounts and transactions have been eliminated on consolidation.

The accompanying consolidated financial statements have been prepared on the going concern basis, which assumes that the Company will continue to operate as a going concern and which contemplates the realization of assets and the satisfaction of liabilities and commitments in the normal course of business. However, the Company has sustained substantial losses of $29.0 million, $19.3 million, and $8.8 million for the years ended December 31, 2013, 2012, and 2011, respectively. The Company's working capital surplus at December 31, 2013 is $34.3 million. Based on the Company's annual operating plan approved by the Board of Directors, management believes the Company's existing cash and cash equivalents of $37.8 million at December 31, 2013 combined with anticipated cash flows provided by sales of its products in calendar year 2014 will be sufficient to fund its cash requirements through at least December 31, 2014.

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Consolidated Balance Sheets (Parentheticals) (USD $)	Dec. 31, 2013	Dec. 31, 2012
Preferred stock par value (in Dollars per share)	$ 0.001	$ 0.001
Preferred stock, authorized	10,000,000	10,000,000
Preferred stock, outstanding	0	0
Common stock, par value (in Dollars per share)	$ 0.001	$ 0.001
Common stock, authorized	65,000,000	65,000,000
Common stock, issued	33,288,701	28,741,653
Common stock, outstanding	33,288,701	28,741,653

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Note 11 - Consolidated Statements of Cash Flows

12 Months Ended

Dec. 31, 2013

Supplemental Cash Flow Elements [Abstract]

Cash Flow, Supplemental Disclosures [Text Block]

11. CONSOLIDATED STATEMENTS OF CASH FLOWS

The net change in working capital and non-current asset balances related to operations consists of the following (in thousands):

	Years ended December 31,
	2013			2012			2011
Accounts receivable	$	(2,650	)	$	(557	)	$	(5	)
Due from related parties		15			(11	)		126
Inventory		978			(965	)		(343	)
Prepaid expenses		(302	)		(197	)		132
Other current assets		50			(25	)		(20	)
Other non-current assets		(12	)		(27	)		—
Accounts payable		(436	)		849			(135	)
Accrued liabilities		1,329			146			374
Deferred rent/revenue		67			—			(128	)
	$	(961	)	$	(787	)	$	1

The following table lists the non-cash transactions and additional cash flow information (in thousands):

	Years ended December 31,
	2013		2012		2011
Warrant issued in registered direct financing		—		—		3,012
Common stock issued in consideration of management bonuses		—		1,182		—
Common stock issued in consideration of notes payable and accrued interest conversion		—		—		2,107
Additions to fixed assets		526		—		—

There were no interest or income taxes paid for the years ended December 31, 2013, 2012 and 2011.

Employee Retirement Plan

The Company has a 401(k) retirement plan under which all full-time employees may contribute up to 100% of their annual salary, within IRS limits. The Company has not made any contributions to these retirement plan in the years ended December 31, 2013, 2012 and 2011.

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Document And Entity Information (USD $)	12 Months Ended
	Dec. 31, 2013	Mar. 10, 2014	Jun. 30, 2013
Document and Entity Information [Abstract]
Entity Registrant Name	TearLab Corp
Document Type	10-K
Current Fiscal Year End Date	--12-31
Entity Common Stock, Shares Outstanding		33,573,735
Entity Public Float			$ 270,400,174
Amendment Flag	false
Entity Central Index Key	0001299139
Entity Current Reporting Status	Yes
Entity Voluntary Filers	No
Entity Filer Category	Accelerated Filer
Entity Well-known Seasoned Issuer	No
Document Period End Date	Dec. 31, 2013
Document Fiscal Year Focus	2013
Document Fiscal Period Focus	FY

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Note 12 - Subsequent Events

12 Months Ended

Dec. 31, 2013

Subsequent Events [Abstract]

Subsequent Events [Text Block]

12. SUBSEQUENT EVENTS

On March 14, 2014, we announced the closing of the acquisition of the assets of the OcuHub business unit from AOAExcel, Inc., the for-profit subsidiary of the American Optometric Association (“AOA”). As of the close of the transaction, the OcuHub purchased assets and business activities will be operated out of a fully-owned subsidiary of TearLab. The net purchase price was $1.4 million and was paid in cash. The Company is in the process of completing the analysis of the accounting treatment of the transaction.

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Consolidated Statements of Operations and Comprehensive Loss (USD $)	12 Months Ended
	Dec. 31, 2013	Dec. 31, 2012	Dec. 31, 2011
Revenue	$ 14,645,000	$ 3,960,000	$ 2,124,000
Cost of goods sold (excluding amortization of intangibles)	8,146,000	2,295,000	1,626,000
Gross profit	6,499,000	1,665,000	498,000
Operating expenses
Amortization of intangibles assets	1,215,000	1,215,000	1,215,000
General and administrative	8,942,000	4,770,000	3,842,000
Clinical, regulatory and research & development	1,095,000	2,241,000	1,304,000
Sales and marketing	13,021,000	5,471,000	2,195,000
Total operating expenses	24,273,000	13,697,000	8,556,000
Loss from operations	(17,774,000)	(12,032,000)	(8,058,000)
Other income (expenses)
Interest income	35,000	30,000	6,000
Changes in fair value of warrant obligations	(11,105,000)	(7,296,000)	94,000
Interest expense			(95,000)
Amortization of deferred financing charges, warrants & beneficial conversion values			(705,000)
Other, net	(146,000)	(14,000)	(51,000)
Total other income (expenses), net	(11,216,000)	(7,280,000)	(751,000)
Net loss and comprehensive loss	$ (28,990,000)	$ (19,312,000)	$ (8,809,000)
Weighted average number of shares outstanding – basic and diluted (in Shares)	30,759,305	25,490,186	17,744,736
Net loss per common share – basic and diluted (in Dollars per share)	$ (0.94)	$ (0.76)	$ (0.50)

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Note 6 - Income Taxes

12 Months Ended

Dec. 31, 2013

Income Tax Disclosure [Abstract]

Income Tax Disclosure [Text Block]

6. INCOME TAXES

Geographic sources of loss from continuing operations before income tax are as follows:

	December 31,
	2013		2012			2011
Domestic	$	28,155	$	19,222	$	8,589
Foreign		835		90		220
Total loss from continuing operations before income taxes		28,990		19,312		8,809

Significant components of the Company's deferred tax assets and liabilities are as follows (in thousands):

		December 31,
	2013			2012
Deferred tax assets
Intangible assets	$	413		$	345
Stock options		1,955			5,643
Accruals and other		742			519
Net operating loss carry forwards		14,449			11,240
		17,559			17,747
Valuation allowance		(16,244	)		(15,838	)
Deferred tax asset		1,315			1,909
Deferred tax liability
Intangible assets		(1,315	)		(1,909	)
Deferred tax liability		(1,315	)		(1,909	)
Deferred taxes, net	$	—		$	—

The following is a reconciliation of the recovery of income taxes between those that are expected, based on enacted tax rates and laws, to those currently reported (in thousands):

	December 31,
	2013			2012			2011
Loss for the year before income taxes	$	(28,990	)	$	(19,312	)	$	(8,809	)
Expected recovery of income taxes		(9,886	)		(6,759	)		(3,083	)
State income tax, net of federal benefit		(440	)		(1,070	)		(404	)
Stock-based compensation		204			64			103
Warrants		3,776			2,958			82
Non-deductible interest		—			—			38
Deferred state tax rate adjustment		899			(92	)		30
Expiration of options		3,761			—			—
Adjustment to deferred assets		1,138			187			1,236
Non-deductible expenses & other		112			32			69
Change in valuation allowance		406			4,680			1,929
Total recovery of income taxes	$	—		$	—		$	—

Income taxes are recorded in accordance with authoritative guidance for accounting for income taxes, which requires the recognition of deferred tax assets and liabilities to reflect the future tax consequences of the events that have been recognized in the Company's consolidated financial statements or tax returns. Measurement of the deferred items is based on enacted tax laws. In the event of differences between the financial reporting bases and tax bases of the Company's assets, an assessment regarding the Company ability to realize the future benefits of the deferred tax assets is required. The Company records a valuation allowance to reduce the deferred tax assets to the amount that is more likely than not to be realized. Management has considered future taxable income and ongoing tax planning strategies in assessing the need for the valuation allowance. In the event the Company were to determine that it would be able to realize the deferred tax assets in the future in excess of their net recorded amounts, an adjustment to the deferred tax assets would increase the income in the period such determination was made. Likewise, should the Company determine that it would not be able to realize all or part of the net deferred tax assets in the future, an adjustment to the deferred tax assets would be charged to income in the period such determination was made.

In July 2006, the “FASB” issued additional guidance which requires the impact of an uncertain income tax position on the income tax return must be recognized at the largest amount that is more-likely-than-not to be sustained upon audit by the relevant taxing authority. An uncertain income tax position will not be recognized if it has less than a 50% likelihood of being sustained. Additionally, the provisions under this guidance also provides guidance on derecognition, measurement, classification, interest and penalties, accounting in interim periods, disclosure and transition. The Company adopted the provisions under this guidance on January 1, 2007. The adoption of these provisions had no impact on the Company's consolidated financial position or results of operations. At December 31, 2013 and 2012, the Company has no unrecognized income tax benefits and no material uncertain tax positions.

During the year ended December 31, 2012, a change of ownership for tax purposes causing Section 382 restrictions on the utilization of net operating losses occurred.  The Company is in the process of updating the Section 382 analysis for 2013. No additional ownership changes are expected to arise from the 2013 Section 382 update. The ownership change in 2012, while limiting the annual utilization of net operating losses, will not cause the carryforwards generated subsequent to the Company's last ownership change in October 2008 to expire unused. In general, an ownership change, as defined by Section 382, results from transactions increasing ownership of certain stockholders or public groups in the stock of the corporation by more than 50 percentage points over a three-year period. Utilization of net operating loss carryforwards are subject to annual limitations under Section 382 of the Internal Revenue Code of 1986, and similar state provisions whenever an ownership change has occurred. The ownership changes described above will limit the annual amount of net operating loss carryforwards that can be utilized to offset future taxable income.

At December 31, 2013, the Company had federal net operating loss carryforwards of approximately $39.1 million, state net operating loss carryforwards of approximately $31.7 million and Canadian net operating loss carryforwards of approximately $15.1 million. The federal net operating loss carryforwards begin to expire in 2017, the state net operating loss carryforwards begin to expire in 2014 and the Canadian net operating loss carryforwards begin to expire in 2015. The federal and state net operating loss carryovers reflected in the deferred tax table above do not include any net operating loss carryover which would expire unutilized solely as a result of 382 limitations arising in connection with the 2008 ownership change. As of December 31, 2013, the Company has approximately $1.4 million of net operating loss carryforwards related to stock option exercises which will result in an increase to additional paid-in capital and a decrease in income taxes payable at the time when the tax loss carryforwards are utilized.

The Company's policy is to recognize interest and penalties related to income tax matters in other expense. Because the Company has generated net operating losses since inception for both state and federal purposes, no additional tax liability, penalties or interest have been recognized for balance sheet or income statement purposes as of and for the three years ended December 31, 2013.

The Company does not expect a significant change in the amount of its unrecognized tax benefits within the next 12 months. Therefore, it is not expected that the change in the Company's unrecognized tax benefits will have a significant impact on the Company's results of operations or financial position.

All of the federal income tax returns for the Company and its subsidiaries remain open since their respective dates of incorporation due to the existence of net operating losses. The Company and its subsidiaries have not been, nor are they currently, under examination by the Internal Revenue Service or the Canada Revenue Agency.

State and provincial income tax returns are generally subject to examination for a period of between three and five years after their filing. However, due to the existence of net operating losses, all state income tax returns of the Company and its subsidiaries since their respective dates of incorporation are subject to re-assessment. The state impact of any federal changes remains subject to examination by various states for a period of up to one year after formal notification to the states. The Company and its subsidiaries have not been, nor are they currently, under examination by any state tax authority.

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Note 5 - Related Party Transactions

12 Months Ended

Dec. 31, 2013

Related Party Transactions [Abstract]

Related Party Transactions Disclosure [Text Block]

5. RELATED PARTY TRANSACTIONS

On August 20, 2009, the Company entered into a distribution agreement with Science with Vision Inc., pursuant to which Science with Vision obtained exclusive Canadian distribution rights with respect to the Company's products.  The Company began selling products through the Canadian distributor in 2010. The Company's chairman of the board of directors and chief executive officer has a material financial interest in Science with Vision. Sales to this distributor for the years ended December 31, 2013 and 2012 were $0 and $59,000, respectively, and the outstanding accounts receivable balances due at December 31, 2013 and December 31, 2012 were $0 and $15,000, respectively.

On September 3, 2013, the Company and Science with Vision Inc. agreed to terminate the distribution agreement including exclusive distribution rights of TearLab products in Canada. In consideration of the termination agreement, the Company agreed to a one-time payment to Science with Vision Inc. of $200,000 Canadian dollars and a royalty on all sales in Canada of products for which Science with Vision Inc. had exclusive distribution rights. The one-time payment resulted in a charge of $190,000 USD during the year ended December 31, 2013 and is recorded within sales and marketing expense. Royalties are recorded as cost of goods sold in the income statement in the period in which revenue is recognized for the associated products sold. At December 31, 2013 the Company has recorded an accrued liability of $3,000 related to royalties due to Science with Vision which is reported as a current liability. The Company's chairman of the board of directors and chief executive officer has a material financial interest in Science with Vision.

On November 2, 2009, the Company, entered into a capital advisory agreement for a two year period with Greybrook Capital Inc., or Greybrook, which was amended on January 8, 2010.  Pursuant to the terms of the agreement, as amended, Greybrook was to receive $200,000 in cash or 163,934 common shares for its services. On April 14, 2011 the Company issued 163,934 common shares to Greybrook to satisfy the outstanding liability related to both years. The Company’s chairman of the board of directors and chief executive officer, is a principal with, and holds a material financial interest in Greybrook.

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Note 3 - Balance Sheet Details (Tables)

12 Months Ended

Dec. 31, 2013

Note 3 - Balance Sheet Details (Tables) [Line Items]

Schedule of Accounts, Notes, Loans and Financing Receivable [Table Text Block]

(in thousands)	December 31,
	2013			2012
Trade receivables	$	3,939		$	910
Due from related parties		—			15
Allowance for doubtful accounts		(415	)		(36	)
	$	3,524		$	889

Schedule of Inventory, Current [Table Text Block]

(in thousands)	December 31,
	2013			2012
Finished goods	$	899		$	1,863
Inventory reserves		(14	)		—
	$	885		$	1,863

Deferred Costs, Capitalized, Prepaid, and Other Assets Disclosure [Table Text Block]

(in thousands)	December 31,
	2013		2012
Prepaid trade shows	$	162	$	159
Prepaid insurance		227		131
Manufacturing deposits		104		—
Subscriptions		86		1
Other fees and services		110		96
	$	689	$	387

Property, Plant and Equipment [Table Text Block]

(in thousands)	December 31,
	2013			2012
Furniture and office equipment	$	221		$	115
Leasehold improvements		47			—
Computer equipment and software		386			203
Capitalized TearLab equipment readers		3,640			582
Medical equipment		401			373
		4,695			1,273
Accumulated depreciation		(1,266	)		(643	)
	$	3,429		$	630

Schedule of Finite-Lived Intangible Assets, Future Amortization Expense [Table Text Block]

	Amortization of intangible assets
2014		1,215
2015		1,215
2016		1,064
Total	$	3,494

Schedule of Accrued Liabilities [Table Text Block]

(in thousands)	December 31,
	2013		2012
Due to professionals	$	616	$	258
Due to employees and directors		1,503		1,052
Goods received but not yet invoiced		207		17
Sales and use tax liabilities		527		99
Royalty liabilitiy		281		122
Readers and test cards in transit		368		100
Other		342		341
	$	3,844	$	1,989

Patents and Trademarks [Member]

Note 3 - Balance Sheet Details (Tables) [Line Items]

Schedule of Finite-Lived Intangible Assets [Table Text Block]

(in thousands)	December 31,
	2013			2012
Patents	$	236		$	236
Trademarks		32			32
		268			268
Accumulated amortization		(160	)		(132	)
	$	108		$	136

Schedule of Finite-Lived Intangible Assets, Future Amortization Expense [Table Text Block]

2014	$	28
2015		28
2016		28
2017		24
Total	$	108

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Note 13 - Quarterly Financial Data (Unaudited)

12 Months Ended

Dec. 31, 2013

Quarterly Financial Information Disclosure [Abstract]

Quarterly Financial Information [Text Block]

13. QUARTERLY FINANCIAL DATA (UNAUDITED)

The following tables in the opinion of management, reflect all adjustments, consisting of normal recurring adjustments necessary for the fair presentation of results for the periods presented (in thousands, except per share data):

	Fiscal 2013 Quarter Ended ($ 000's)
	March 31			June 30			September 30			December 31
Revenue(i)	$	2,475		$	3,525		$	4,207		$	4,438
Gross profit (i)		1,059			1,395			1,930			2,115
Loss from operations (i)		(3,162	)		(5,279	)		(3,829	)		(5,504	)
Net loss (i)	$	(8,574	)	$	(12,025	)	$	(4,240	)	$	(4,151	)
Weighted average number of shares outstanding basic(i)		28,756			29,178			31,914			33,129
Net loss per common share basic (i)	$	(0.30	)	$	(0.41	)	$	(0.13	)	$	(0.13	)
Weighted average number of shares outstanding diluted		28,756			29,178			31,914			33,679
Net loss per common share diluted (i)	$	(0.30	)	$	(0.41	)	$	(0.13	)	$	(0.17	)

	Fiscal 2012 Quarter Ended ($ 000’s)
	March 31			June 30			September 30			December 31
Revenue(i)	$	422		$	716		$	1,211		$	1,610
Gross profit (i)		91			375			519			680
Loss from operations (i)		(2,503	)		(2,533	)		(3,673	)		(3,324	)
Net loss (i)	$	(9,099	)	$	(1,974	)	$	(4,587	)	$	(3,652	)
Weighted average number of shares outstanding basic(i)		20,673			24,919			27,703			28,607
Net loss per common share basic (i)	$	(0.44	)	$	(0.08	)	$	(0.17	)	$	(0.13	)
Weighted average number of shares outstanding diluted		20,673			26,042			27,703			28,607
Net loss per common share diluted (i)	$	(0.44	)	$	(0.10	)	$	(0.17	)	$	(0.13	)

(i)

Net loss per share basic and diluted are computed independently for the quarters presented. Therefore, the sum of the quarterly per share information may not be equal to the annual per share information. Also totals may not add to the financials statements due to rounding.

(ii)

During the fourth quarter of 2013, we identified an immaterial error in our interim consolidated financial statements primarily pertaining to the three month period ended September 30, 2013 driven by certain stock-based compensation assumptions for option grants issued subject to shareholder approval. We corrected the immaterial error in the fourth quarter of 2013, resulting in an increase to operating expenses and net loss by $268,000 and an increase to basic and diluted loss per share of $0.01 for the three months ended December 31, 2013. The error does not affect results from operations for the year ended December 31, 2013. Based on management's evaluation of the materiality of the error from a qualitative and quantitative perspective as required by authoritative guidance, we concluded that correcting the error had no material impact on any of the Company's previously issued interim financial statements, would be immaterial to the fourth quarter results for 2013 and had no effect on the trend of financial results.

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Note 9 - Fair Value Measurements

12 Months Ended

Dec. 31, 2013

Fair Value Disclosures [Abstract]

Fair Value Disclosures [Text Block]

9. FAIR VALUE MEASUREMENTS

The Company measures certain assets and liabilities in accordance with authoritative guidance which requires fair value measurements be classified and disclosed in one of the following three categories:

● Level 1: Quoted prices (unadjusted) in active markets that are accessible at the measurement date for assets or liabilities.

● Level 2: Observable prices that are based on inputs not quoted on active markets, but corroborated by market data.

● Level 3: Unobservable inputs are used when little or no market data is available.

As of December 31, 2013 and 2012, assets and liabilities are classified based on the lowest level of input that is significant to the fair value measurements. The Company reviews the fair value hierarchy classification on a quarterly basis. Changes in the ability to observe valuation inputs may result in a reclassification of levels for certain securities within the fair value hierarchy. The Company did not have any assets or liabilities in Level 1 and Level 2, and no transfers to or from Level 3 of the fair value measurement hierarchy during the years ended December 31, 2013 and 2012.

At December 31, 2013, the Company has a liability for warrants to purchase 524,549 shares of common stock at an exercise price of $1.86 per share valued at $4,047,000 (Note 10). All warrant liabilities are classified as Level 3 fair value measurements.

The following table provides a reconciliation for all liabilities measured at fair value using significant unobservable inputs (Level 3) for the year ended December 31, 2013 (in thousands):

	Fair Value Measurements Using Significant Unobservable Inputs (Level 3)
Balance of warrant liability at January 1, 2013	$	6,239
Reclass of warrant liability to stockholder’s equity upon exercise		(13,297	)
Change in fair value of warrant liability included in other (income) / expense		11,105
Balance of warrant liability at December 31, 2013	$	4,047

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Note 10 - Capital Stock (Details) - Total Stock-Based Compensation Expense Resulting from Stock Options (USD $) In Thousands, unless otherwise specified	12 Months Ended
	Dec. 31, 2013	Dec. 31, 2012	Dec. 31, 2011
Employee Service Share-based Compensation, Allocation of Recognized Period Costs [Line Items]
Stock-based compensation expense	$ 3,738	$ 1,441	$ 490
General and Administrative Expense [Member]
Employee Service Share-based Compensation, Allocation of Recognized Period Costs [Line Items]
Stock-based compensation expense	1,837	528	340
Research and Development Expense [Member]
Employee Service Share-based Compensation, Allocation of Recognized Period Costs [Line Items]
Stock-based compensation expense	174	375	93
Selling and Marketing Expense [Member]
Employee Service Share-based Compensation, Allocation of Recognized Period Costs [Line Items]
Stock-based compensation expense	$ 1,727	$ 538	$ 57

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Note 7 - Convertible Notes Payable and Accrued Interest

12 Months Ended

Dec. 31, 2013

Debt Disclosure [Abstract]

Debt Disclosure [Text Block]

7.   CONVERTIBLE NOTES PAYABLE AND ACCRUED INTEREST

In July 2009, the Company entered into an agreement with certain investors whereby the investors agreed to provide financing (the ''Financing'') to the Company through the purchase of convertible secured notes (''the Notes''), in the aggregate amount of $1.55 million. On August 31, 2009, an additional $200,000 of financing was received by the Company to bring the aggregate total funding received to $1.75 million. The Notes evidencing the Financing, were to mature on the second anniversary of their issuance (“the Maturity Date”), bearing interest at a rate of 12% per annum and were convertible into shares of the Company's common stock upon the request of holders of 51% or more of the outstanding principal amount of the Notes at any time after August 31, 2009 and prior to the Maturity Date. The conversion price of the Notes was $1.3186. The Notes were secured by substantially all of the assets of the Company.

On June 13, 2011 (Conversion date), upon the request of holders of more than 51% of the outstanding principal amount of the Notes, the Company issued 1,629,539 shares of its common stock in consideration of the conversion and retirement of the Company's outstanding Financing obligations in the aggregate amount of $2,149,000, of which $399,000 was accrued interest through the Conversion date, (the Conversion). In connection with the Conversion, the Company issued warrants with a life of five years to purchase 109,375 shares of common stock (the ''Financing Warrants''). The exercise price of the Financing Warrants is $1.60 per common share. The fair value of the warrants totaling $163,000, calculated using the Black-Scholes Merton option pricing model, was initially recorded at the date of Financing in additional paid-in capital and accreted over the term of the Notes through the Conversion date. The Company recorded amortization charges related to the Financing Warrants of $0, $0 and $69,000 for the years ended December 31, 2013, 2012 and 2011, respectively, included in other income (expense).

As the conversion price of the Notes reflected a price discounted from the fair market value of the Company's common stock, there was a deemed beneficial conversion feature associated with the Financing. The Company recorded $728,000 representing the value of the beneficial conversion feature at the date of the Financing in additional paid-in capital. The value of the beneficial conversion was being amortized over the term of the Notes through the Conversion date with charges $0, $0 and $314,000 for the years ended December 31, 2013, 2012 and 2011, respectively, included in other income (expense).

The Company incurred $87,000 in legal and consulting expenses related to the Financing which was allocated to deferred finance charges for $43,000 and cost of equity for $44,000 in proportion to the allocation of the Financing amount between equity and liabilities. The value of the deferred charges was amortized over the term of the Notes through the Conversion date and expenses of $0, $0 and $19,000 for the years ended December 31, 2013, 2012 and 2011, respectively, are included in other income (expense).

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Note 8 - Commitments and Contingencies

12 Months Ended

Dec. 31, 2013

Commitments and Contingencies Disclosure [Abstract]

Commitments and Contingencies Disclosure [Text Block]

8.   COMMITMENTS AND CONTINGENCIES

Commitments

The Company has commitments relating to operating leases recognized on a straight line basis over the term of the lease for rental of office space and equipment from unrelated parties, expiring at various times from January 1, 2012 through June 30, 2018. The total future minimum obligation under these various leases for 2014, 2015, 2016, 2017 and 2018 is $256,000, $334,000, $343,000, $353,000 and $177,000, respectively. Rent expensed under these leases was $223,000, $143,000, and $142,000 for the years ended December 31, 2013, 2012, and 2011, respectively. The Company leases office facilities under an operating lease agreement. The initial term of the lease is five years and includes periodic rent increases and a renewal option.

On March 12, 2003, TearLab entered into a patent license and royalty agreement with the University of California San Diego to obtain an exclusive license to make, use, sell, offer for sale, and import TearLab technology in development. Starting in 2009, the Company was required to make minimum royalty payments of $35,000 or 5.5% of gross sales per year, whichever is higher. However, if this new technology is combined with existing technology, the maximum royalty payable on the sale of the combined products would be 5.5% of gross sales per year. As the new technology is currently in development, there is no revenue and the minimum royalty payment of $35,000 is applicable. Future minimum royalty payments under this agreement as of December 31, 2013 are approximately as follows (in thousands):

2014	$	35
2015		35
2016		35
2017		35
2018		35
Thereafter		315
Total	$	490

Effective October 1, 2006, TearLab entered into a patent license and royalty agreement with the University of California San Diego to obtain a second exclusive license to make, use, sell, offer for sale, and import existing TearLab technology. The Company is required to make royalty payments of $35,000 or 5.5% of gross sales per year, whichever is higher. Additionally, the Company is required to pay a royalty of 30% of any sublicense fees it receives prior to receiving FDA approval and 25% of any sub-license fees it receives after FDA approval. The Company incurred fees of $807,000, $213,000 and $145,000 under this agreement during the years ended December 31, 2013, 2012 and 2011, respectively. The Company had $243,000 and $122,000 in accrued royalties at December 31, 2013 and 2012, respectively. Future minimum royalty payments under this agreement as of December 31, 2013 are approximately as follows (in thousands):

2014	$	35
2015		35
2016		35
2017		35
2018		35
Thereafter		315
Total	$	490

On February 23, 2009, the Company entered into an agreement for the manufacturing of its TearLab® reader and pens with a third party manufacturing company. The agreement is in effect for three years after the start of production and can be renewed for one-year. The Company has no minimum commitment. Upon termination or cancellation of the agreement, the Company is liable for inventory and materials remaining at the manufacturer's facilities at 110% of the manufacturer's cost. At December 31, 2013, the manufacturer maintained inventory and materials with a value of approximately $30,000, all of which had been purchased to meet manufacturing requirements of purchase orders issued by the Company.

On August 1, 2011, the Company, through its subsidiary, TearLab Research, Inc., entered into a manufacturing and development agreement, or the Manufacturing Agreement, with MiniFAB (Aust) Pty Ltd, or MiniFAB. Pursuant to the terms of the Manufacturing Agreement, MiniFAB will manufacture and supply test cards for the Company. The Manufacturing Agreement specifies minimum order quantities that will require the Company to purchase approximately $26.8 million (AUD$30.2 million) in test cards from MiniFAB from inception of the agreement through the end of 2015. The agreement is denominated in AUD$ so the actual amounts paid in USD may vary. The agreement also has annual minimum order commitments under the Manufacturing Agreement. The Company met the annual minimum order commitment for the year ended December 31, 2013 and had no purchase obligation under the Manufacturing Agreement as of December 31, 2013. The Company has a commitment for 2014 of $8.3 million representing a minimum commitment to purchase 3,000,000 test cards. The Manufacturing Agreement has a ten year initial term and may be terminated by either party if the other party is in breach or becomes insolvent. If terminated for any reason other than a default by MiniFAB, the Company will be obligated to pay a termination fee based on the cost of products manufactured by MiniFAB, but not yet invoiced, repayment of capital invested by MiniFAB, less depreciation calculated in accordance with Australian accounting standards, and the expected profit to MiniFAB had the remaining minimum order quantities been purchased by the Company.

Future minimum purchase commitments under this agreement as of December 31, 2013 are approximately as follows (in millions):

2014	$	8.3
2015		9.1
Total	$	17.4

Contingencies

During the ordinary course of business activities, the Company may be contingently liable for litigation and a party to claims. Currently the Company is not party to any litigation.

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Note 10 - Capital Stock

12 Months Ended

Dec. 31, 2013

Stockholders' Equity Note [Abstract]

Stockholders' Equity Note Disclosure [Text Block]

10. CAPITAL STOCK

(a) Authorized share capital

The total number of authorized shares of common stock of the Company is 65,000,000. Each share of common stock has a par value of $0.001 per share. The total number of authorized shares of preferred stock of the Company is 10,000,000. Each share of preferred stock has a par value of $0.001 per share.

(b) Common stock

On April 14, 2011 pursuant to the capital advisory agreement (Note 5), as amended, the Company issued 163,934 shares of common stock to Greybrook. Elias Vamvakas, Chairman of the Company's board of directors and acting Chief Executive Officer, is a principal with, and holds a material financial interest in, Greybrook.

On June 13, 2011, the Company issued 1,629,539 shares of its common stock as well as warrants (''Financing Warrants'') to purchase 109,375 shares of its common stock in consideration of conversion and retirement of the Company's outstanding July and August 2009 debt obligations and related accrued interest in the aggregate amount of $2,149,000 with associated costs of $41,000. The exercise price of the Financing Warrants is $1.60 per common share representing the price per share equal to the closing bid price per share of the Company's common stock on the NASDAQ stock market on July 15, 2009.

On June 30, 2011, the Company closed a private placement financing in which 3,846,154 shares of common stock and warrants to purchase 3,846,154 shares of common stock for gross proceeds of approximately $7,000,000 were issued, with associated costs of $703,000, of which $303,000 was related to warrants and $400,000 to common shares. Of the gross proceeds $3,549,000 were recorded as share equity and the remaining $3,451,000 was determined to be the value of the warrants issued in the financing. The investors purchased the shares and warrants for $1.82 per unit (each unit consisting of one share and one warrant to purchase shares of common stock). The exercise price of the warrants is $1.86 per share. The warrants are exercisable at any time from the date of issuance until June 30, 2016. During 2013, 1,571,136 warrants were exercised for gross proceeds of $676,000.

On April 16, 2012, the Company closed an underwritten public offering of 3.45 million shares of its common stock at a price to the public of $3.60 per share. The Company received gross proceeds of $12,420,000, with associated costs of $1,194,000.

On July 18, 2012, the Company closed an underwritten registered direct financing of 2.5 million shares of its common stock at a price of $3.17 per share. The Company received gross proceeds of $7,925,000, with associated costs of $524,000.

On September 17, 2012 the Company issued 316,779 shares of restricted stock units to its management team as settlement of an outstanding liability for previously accrued bonuses related to achievement of CLIA waiver status. The costs basis of the shares granted was $3.72, the closing price of the Company's stock on the date of grant, for a total value of $1,182,000. The shares were issued in accordance with the Company's amended 2002 Stock Incentive Plan and were fully vested on the date of grant.

On July 30, 2013, the Company closed an underwritten public offering of 2.99 million shares of its common stock at a price to the public of $13.50 per share. The Company received gross proceeds of $40,365,000, with associated costs of $3,036,000.

(c) Stock Option Plan

The Company has a stock option plan, the 2002 Stock Incentive Plan (the "Stock Incentive Plan"), which was most recently amended on June 7, 2013 in order to increase the shares reserved under the Stock Option Plan by 1,000,000. Under the Stock Incentive Plan, up to 5,200,000 options are available for grant to employees, directors and consultants. Options granted under the Stock Incentive Plan may be either incentive stock options or non-statutory stock options. Under the terms of the Stock Incentive Plan, the exercise price per share for an incentive stock option shall not be less than the fair market value of a share of stock on the effective date of grant and the exercise price per share for non-statutory stock options shall not be less than 85% of the fair market value of a share of stock on the date of grant. No option granted to a holder of more than 10% of the Company's common stock shall have an exercise price per share less than 110% of the fair market value of a share of stock on the effective date of grant.

Options granted are typically service-based options. Generally, options expire 10 years after the date of grant. No incentive stock options granted to a 10% owner optionee shall be exercisable after the expiration of five years after the effective date of grant of such option, no option granted to a prospective employee, prospective consultant or prospective director may become exercisable prior to the date on which such person commences service, and with the exception of an option granted to an officer, director or consultant, no option shall become exercisable at a rate less than 20% per annum over a period of five years from the effective date of grant of such option unless otherwise approved by the Board. Shares issued upon option exercise result in new shares issued by the Company.

The Company accounts for stock-based compensation under the authoritative guidance which requires that share-based payment transactions with employees be recognized in the financial statements based on their fair value and recognized as compensation expense over the vesting period. The Company uses the Black-Scholes Merton option pricing model to calculate the fair value of the stock options. The weighted-average fair value of stock options granted during the years ended December 31, 2013, 2012 and 2011 was $8.96, $2.93, and $1.20, respectively.

The following table sets forth the total stock-based compensation expense resulting from stock options included in the Company's consolidated statements of consolidated loss (in thousands):

	Year ended December 31,
	2013		2012		2011
General and administrative	$	1,837	$	528	$	340
Clinical and regulatory		174		375		93
Sales and marketing		1,727		538		57
Stock-based compensation expense before income taxes	$	3,738	$	1,441	$	490

The estimated fair value of stock options for the periods presented was determined using the Black-Scholes Merton option pricing model with the following weighted-average assumptions:

	Year ended December 31,
	2013			2012			2011
Volatility		101	%		104	%		105	%
Weighted average Expected life of options (years)	5.89			5.74			5.36
Risk-free interest rate		1.43	%		0.88	%		1.49	%
Dividend yield		0	%		0	%		0	%

The Company's computation of expected volatility is based on the historical volatility of the Company's common stock over a period of time equal to the expected term of the stock options. Due to the lack of sufficient historical data, the Company's computation of weighted average expected life was estimated using the simplified method as prescribed by the Securities and Exchange Commission. Under this approach, estimated life is calculated to be the mid-point between the vesting date and the end of the contractual period. The risk-free interest rate for an award is based on the U.S. Treasury yield curve with a term equal to the expected life of the award on the date of grant.

A summary of the options issued during the year ended December 31, 2013 and the total number of options outstanding as of that date and changes since December 31, 2010 are set forth below:

	Number of Options Outstanding			Weighted Average Exercise Price		Weighted Average Remaining Contractual Life (years)		Aggregate Intrinsic Value
Outstanding, December 31, 2010		3,576,543		$	3.46		7.18	$	899,010
Granted		238,278			1.56
Exercised		—			—
Forfeited/cancelled/expired		(124,167	)		3.14
Outstanding, December 31, 2011		3,690,654			3.34		7.06	$	269,587
Granted		720,250			3.69
Exercised		(294,384	)		0.37
Forfeited/cancelled/expired		(17,178	)		10.37
Outstanding, December 31, 2012		4,099,342			3.54		7.14	$	6,798,973
Granted		1,837,500			9.78
Exercised		(181,854	)		2.52
Forfeited/cancelled/expired		(218,193	)		11.07
Outstanding, December 31, 2013		5,536,795		$	4.91		6.89	$	27,256,235
Vested or expected to vest, December 31, 2013		3,964,837		$	3.81		5.90	$	25,370,479
Exercisable, December 31, 2013		3,469,444		$	3.29		5.96	$	24,067,198

The aggregate intrinsic value at December 31, 2013 represents the total pre-tax intrinsic value, calculated as the difference between the Company's closing stock price on the last trading day of the respective fiscal year and the exercise price, multiplied by the number of shares that would have been received by the option holders if the options that could be exercised had been exercised on such date.

Net cash proceeds from the exercise of common stock options were $458,000, $110,000 and $0 for the years ended December 31, 2013, 2012 and 2011, respectively. No income tax benefit was realized from stock option exercises during the years ended December 31, 2013, 2012 and 2011. The Company presents excess tax benefits from the exercise of stock options, if any, as financing cash flows rather than operating cash flows.

The total intrinsic value of options exercised was $2,038,000, $923,000, and $0 during the years ended December 31, 2013, 2012 and 2011, respectively. The total fair value of stock options vested during the years ended December 31, 2013, 2012, and 2011 was $720,000, $530,000 and $512,000, respectively.

As of December 31, 2013, $10,791,000 of total unrecognized compensation cost related to stock options is expected to be recognized over a weighted-average period of 3.49 years.

As of December 31, 2013, the Company had zero options remaining in the Stock Option Plan available for grant.

As of December 31, 2013, the Company had granted 337,500 options to certain employees and consultants which require shareholder approval to increase the option pool by at least 203,100 options before the options granted become exercisable. If shareholder approval is not obtained by December 13, 2014 to increase the option pool, then these options shall expire and will be returned to the Plan. These options vest one-third annually on the anniversary of its grant date of December 13, 2013.

(d) Warrants

On February 6, 2007, the Company issued warrants to investors and a transaction advisor (''2007 Warrants''). The 2007 Warrants were exercisable immediately into an aggregate of 131,497 shares of the Company's common stock at $46.25 per common share. These warrants expired during the first quarter of 2012 with no warrants having been exercised. On June 13, 2011, the Company issued 1,629,539 shares of its common stock as well as warrants (''Financing Warrants'') to purchase 109,375 shares of its common stock in consideration of conversion and retirement of the Company's outstanding July and August 2009 debt obligations in the aggregate amount of $2,149,000 with associated costs of $41,000. The exercise price of the Financing Warrants is $1.60 per common share representing the price per share equal to the closing bid price per share of the Company's common stock on the NASDAQ stock market on July 15, 2009. During 2013, 12,813 warrants were exercised for gross proceeds of $18,000.

On June 30, 2011, the Company closed a private placement financing in which 3,846,154 shares of common stock and warrants (''2011 Warrants'') to purchase 3,846,154 shares of common stock for gross proceeds of approximately $7,000,000 were issued. The investors purchased the shares and warrants for $1.82 per unit (each unit consisting of one share and one warrant to purchase shares of common stock). The exercise price of the warrants is $1.86 per share. The warrants are exercisable at any time from the date of issuance until June 30, 2016. The Company's estimated the fair value of the warrants at the date of issuance using the Black-Scholes Merton option pricing model with a 101% volatility, 5.0 years expected life and a risk-free interest rate of 1.76%. The fair value of $5,518,000 was classified as a current liability as the Company determined that these warrants do not meet the criteria for classification as equity. During 2013, 1,571,136 warrants were exercised for gross proceeds of $676,000.

The Company accounts for the 2011 Warrants in accordance with US GAAP guidance applicable to derivative instruments. The Company determined that the 2011 Warrants do not meet the criteria for classification as equity. Accordingly, the Company classified the 2011 Warrants as current liabilities at December 31, 2013.

The Company initially allocated the total proceeds received, pursuant to the Securities Purchase Agreement, to the shares of common stock and warrants issued based on their relative fair values. This resulted in an allocation of $3,012,000 of proceeds to warrant liability. Since under the derivative guidance the Company is required to record the derivatives at fair value, the Company therefore estimated the fair value of the warrants on the issuance date to be $5,518,000, and recorded the increase to the warrant liability of $2,506,000 as a charge other expense in its consolidated statements of comprehensive loss as of June 30, 2011. Transaction costs associated with the issuance of the warrants of $303,000 were immediately expensed and included as warrant issuance costs in the Company's consolidated statements of comprehensive loss.

The estimated fair value of the 2011 Warrants at December 31, 2013 was determined using the Black-Scholes Merton option pricing model with the following weighted average assumptions:

Volatility	79	%
Expected life of Warrants (years)	2.50
Risk-free interest rate	0.58	%
Dividend yield	0	%

The fair value of the 2011 warrants is highly sensitive to the changes in the Company's stock price and stock price volatility.

During the year ended December 31, 2013 certain holders of 2011 Warrants exercised 1,571,136 warrants. The Company received $693,000 in proceeds from these exercises. The Company is required to record the outstanding warrants at fair value at the time of exercise, before moving the fair value into additional paid-in capital, resulting in an adjustment to the warrant obligations, with any gain or loss recorded in earnings of the applicable reporting period. The Company, therefore, estimated the fair value of the exercised 2011 Warrants at their respective exercise dates to be $13,297,000, an increase of $8,620,000 from the previous value at December 31, 2012 of $4,014,000. The fair value was determined using the Black- Scholes Merton option pricing model and the increase was recorded as an expense in other income (expense) in the consolidated statement of operations and comprehensive loss for the year ended December 31, 2013.

During the year ended December 31, 2012, certain holders of 2011 Warrants exercised 1,750,469 warrants. The Company received $3,256,000 in proceeds from these exercises. The Company estimated the fair value of the exercised 2011 Warrants at their respective exercise dates to be $4,014,000, an increase of $2,668,000 from the previous value at December 31, 2011 of $1,346,000. The fair value was determined using the Black-Scholes Merton option pricing model with the following weighted average assumptions for volatility of 97%, 4.3 years expected life and a risk free rate of 0.85%. This increase was recorded as an expense in other income (expense) in the consolidated statement of operations and comprehensive loss for the year ended December 31, 2012. There were no similar warrant exercises for the year ended December 31, 2011.

The Company is also required to record the outstanding warrants at fair value at the end of each reporting period, resulting in an adjustment to the warrant obligations, with any gain or loss recorded in earnings of the applicable reporting period. The Company, therefore, estimated the fair value of the remaining warrants as of December 31, 2013 to be $4,046,000, an increase of $2,485,000 from the previous value at December 31, 2012. This amount was recorded as a charge to other income (expense) in the consolidated statement of operations and comprehensive loss for the year ended December 31, 2013.

On June 13, 2011, in connection with the conversion of the notes payable and accrued interest (see Note 6), the Company issued warrants with a life of five years to purchase 109,375 shares of common stock. The exercise price of these warrants is $1.60 per common share representing the price per share equal to the closing bid price per share of the Company's common stock on the NASDAQ stock market on July 15, 2009. The Company recorded $163,000 representing the fair value of the warrants, calculated using the Black-Scholes Merton option pricing model, at the date of the Financing in additional paid-in capital. The value of the warrants was accreted over the term of the Notes until their conversion in June 2011. During the years ended December 31, 2013 and 2012 certain holders of these warrants exercised 12,813 and 22,500 warrants, with $18,000 and $6,000 in proceeds received from these exercised warrants, respectively. As the estimated fair value of these warrants had been previously accreted over the term on the related Notes, no further accounting of these warrants is required. There were no similar warrant exercises for the year ended December 31, 2011.

The following table provides activity for the Warrants issued and outstanding during the three years ended December 31, 2013 (in thousands, except weighted average exercise prices):

	Number of warrants outstanding			Weighted average exercise price
Outstanding, December 31, 2011		4,087			3.28
Granted		(1,773	)		1.86
Expired		(131	)		46.25
Outstanding, December 31, 2012		2,183			1.85
Exercised		(1,571	)		1.86
Outstanding, December 31, 2013		612		$	1.83

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Note 11 - Consolidated Statements of Cash Flows (Details) (USD $)	12 Months Ended
	Dec. 31, 2013	Dec. 31, 2012	Dec. 31, 2011
Supplemental Cash Flow Elements [Abstract]
Income Taxes Paid	$ 0	$ 0	$ 0
Interest Paid	0	0	0
Defined Contribution Plan, Maximum Annual Contributions Per Employee, Percent			100.00%
Defined Contribution Plan, Employer Discretionary Contribution Amount	$ 0	$ 0	$ 0

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Note 11 - Consolidated Statements of Cash Flows (Details) - Significant Non-Cash Transactions (USD $)	0 Months Ended	12 Months Ended
	Jun. 13, 2011	Dec. 31, 2013	Dec. 31, 2012	Dec. 31, 2011
Significant Non-Cash Transactions [Abstract]
Warrant issued in registered direct financing				$ 3,012,000
Common stock issued in consideration of management bonuses			1,182,000
Common stock issued in consideration of notes payable and accrued interest conversion	2,149,000			2,107,000
Additions to fixed assets		$ 526,000

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Note 10 - Capital Stock (Details) - Activity for the Warrants Outstanding (USD $) In Thousands, except Per Share data, unless otherwise specified	12 Months Ended
	Dec. 31, 2013	Dec. 31, 2012	Dec. 31, 2011	Jun. 13, 2011
Activity for the Warrants Outstanding [Abstract]
Number of warrants outstanding	612	2,183	4,087
Weighted average exercise price (in Dollars per Item)	1.83	1.85	3.28	1.60
Exercised	(1,571)
Exercised (in Dollars per share)	$ 1.86
Granted		(1,773)
Granted (in Dollars per share)		$ 1.86
Expired		(131)
Expired (in Dollars per share)		$ 46.25

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Note 2 - Significant Accounting Policies (Details) - Warranty Reserve (USD $) In Thousands, unless otherwise specified	12 Months Ended
	Dec. 31, 2013	Dec. 31, 2012	Dec. 31, 2011
Warranty Reserve [Abstract]
Balance at beginning of year	$ 107	$ 36	$ 51
Charges to cost of goods sold	271	196	56
Costs applied to liability	(198)	(125)	(71)
Balance at end of year	$ 180	$ 107	$ 36

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Note 6 - Income Taxes (Details) - Deferred Tax Assets and Liabilities (USD $) In Thousands, unless otherwise specified	Dec. 31, 2013	Dec. 31, 2012
Deferred tax assets
Intangible assets	$ 413	$ 345
Stock options	1,955	5,643
Accruals and other	742	519
Net operating loss carry forwards	14,449	11,240
	17,559	17,747
Valuation allowance	(16,244)	(15,838)
Deferred tax asset	1,315	1,909
Deferred tax liability
Intangible assets	(1,315)	(1,909)
Deferred tax liability	$ (1,315)	$ (1,909)

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Accounting Policies, by Policy (Policies)

12 Months Ended

Dec. 31, 2013

Accounting Policies [Abstract]

Use of Estimates, Policy [Policy Text Block]

Use of estimates

The preparation of financial statements in conformity with U.S. Generally Accepted Accounting Principles (''GAAP'') 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 consolidated financial statements and the reported amounts of revenue and expenses during the reporting periods. Actual results could differ from those estimates. The principal areas of judgment relate to revenue, receivables and inventory reserves, impairment of long-lived and intangible assets, and the fair value of stock options and warrants.

Concentration Risk, Credit Risk, Policy [Policy Text Block]

Concentrations and risk

Credit risk

Financial instruments, which potentially subject the Company to concentrations of credit risk, consist primarily of cash and accounts receivable. The Company limits its exposure to credit loss by placing its cash with high credit quality financial institutions.

During fiscal 2013, the Company derived 100% of its revenue from the sale of the TearLab® Osmolarity product. Customers representing revenue in excess of 10% in prior years were:

	Years ended December 31,
	2013		2012		2011
Alcon Research Ltd.		*		*		11	%
Bon Optic VertriebsgesellschaftmbH		*		*		10	%

* Less than 10% for period presented 

Currently, there are two suppliers for the reader and pen components of the TearLab® Osmolarity System and one supplier for the test cards.

Fair Value of Financial Instruments, Policy [Policy Text Block]

Fair value of financial instruments

The Company's financial instruments consist principally of cash and cash equivalents, accounts receivable, accounts payable and accrued expenses. The carrying amounts of financial instruments such as cash equivalents, accounts receivable, accounts payable and accrued expenses approximate the related fair values due to the short-term maturities of these instruments.

Cash and Cash Equivalents, Policy [Policy Text Block]

Cash and cash equivalents

The Company considers all highly liquid investments that are readily convertible into cash and have an original maturity of three months or less at the time of purchase to be cash equivalents.

Receivables, Policy [Policy Text Block]

Accounts receivable and allowance for doubtful accounts

The Company's accounts receivable consist primarily of trade receivables from customers and are generally unsecured and due within 30 days. The carrying value of accounts receivable approximates their fair value due to their short term nature. The Company evaluates the collectability of its accounts receivable based on a combination of factors. Expected credit losses related to trade receivables are recorded as an allowance for doubtful accounts. The allowance for doubtful accounts is charged to sales and marketing expense and accounts receivable are written off as uncollectible and deducted from the allowance after appropriate collection efforts have been exhausted. Charges for bad debt expense has been $377,000, $10,000, $32,000 for the years ended December 31, 2013, 2012 and 2011 respectively.

Inventory, Policy [Policy Text Block]

Inventory

Inventory is recorded at the lower of cost (based on first in, first out basis) or market and consists of purchased finished goods. Inventory is periodically reviewed for evidence of slow-moving or obsolete items, and the estimated reserve is based on management's reviews of inventories on hand, compared to estimated future usage and sales, reviewing product shelf-life, and assumptions about the likelihood of obsolescence. Once written down, the adjustments are considered permanent and are not reversed until the related inventory is sold.

Property, Plant and Equipment, Policy [Policy Text Block]

Fixed assets

Property and equipment are carried at cost less accumulated depreciation and amortization. Depreciation is computed using the straight-line method over the estimated useful lives of the assets, ranging from three to seven years. Maintenance and repairs are expensed as incurred. The Company reviews property and equipment for impairment whenever events or changes in circumstances indicate that the carrying value of an asset may not be recoverable. An impairment loss would be recognized when estimated future undiscounted cash flows relating to the asset are less than its carrying amount. An impairment loss is measured as the amount by which the carrying amount of an asset exceeds its fair value.

Impairment or Disposal of Long-Lived Assets, Policy [Policy Text Block]

Impairment of long-lived assets

The Company periodically assesses the carrying value of intangible and other long-lived assets, and whenever events or changes in circumstances indicate that the carrying amount of an asset might not be recoverable. The assets are considered to be impaired if the Company determines that the carrying value may not be recoverable based upon its assessment, which includes consideration of the following events or changes in circumstances:

● the asset's ability to continue to generate income from operations and positive cash flow in future periods;

● loss of legal ownership or title to the asset;

● significant changes in the Company's strategic business objectives and utilization of the asset(s); and

● the impact of significant negative industry or economic trends.

If the assets are considered to be impaired, the impairment recognized is the amount by which the carrying value of the assets exceeds the fair value of the assets. Fair value is determined by a combination of data from third party sources and the application of discounted cash flow models to project cash flows from the asset. In addition, the Company bases the useful lives and related amortization or depreciation expense on an estimate of the period that the assets will generate revenues or otherwise be used. The Company also periodically reviews the lives assigned to long-lived assets to ensure that the initial estimates do not exceed any revised estimated periods from which the Company expects to realize cash flows from its assets.

Intangible Assets, Finite-Lived, Policy [Policy Text Block]

Patents and trademarks

Patents and trademarks are recorded at historical cost and are amortized using the straight-line method over their estimated useful lives, not to exceed 15 years.

Goodwill and Intangible Assets, Policy [Policy Text Block]

Intangible Assets

Intangible assets are recorded at historical cost and are amortized using the straight line-line method over their estimated useful life of 10 years.

Standard Product Warranty, Policy [Policy Text Block]

Product Warranties

The Company generally provides a 12 month warranty on its TearLab® Osmolarity System and related disposables. The Company accrues the estimated cost of this warranty at the time revenue is recorded and charges warranty expense to cost of goods sold. Warranty reserves are established based on historical experience with failure rates and the number of systems covered by warranty. Warranty reserves are depleted as systems and disposables are replaced. The Company reviews warranty reserves quarterly and, if necessary, make adjustments. The activities in the warranty reserve are as follows (in thousands):

	Years ended December 31,
	2013			2012			2011
Balance at beginning of year	$	107		$	36		$	51
Charges to cost of goods sold		271			196			56
Costs applied to liability		(198	)		(125	)		(71	)
Balance at end of year	$	180		$	107		$	36

Income Tax, Policy [Policy Text Block]

Income Taxes

A deferred tax asset or liability is determined based on the difference between the financial statement and tax basis of assets and liabilities as measured by the enacted tax rates which will be in effect when these differences reverse. The Company provides a valuation allowance against net deferred tax assets unless, based upon the available evidence, it is more likely than not that the deferred tax assets will be realized.

Revenue Recognition, Policy [Policy Text Block]

Revenue recognition

Revenue is recognized when all four of the following criteria are met: (i) persuasive evidence that an arrangement exists; (ii) delivery of the products has occurred; (iii) the selling price is fixed or determinable; and (iv) collectability is reasonably assured. The Company's timing of revenue recognition is impacted by factors such as passage of title, payments and customer acceptance. Amounts received in excess of revenue recognizable are deferred.

The Company enters into contracts where revenue is derived from multiple deliverables containing a mix of products, which generally includes either the sale or the right to use a TearLab® Osmolarity System and sales of a fixed number of test cards. The Company has multiple revenue programs, in which it either sells readers and test cards as a combined unit with no future commitments on behalf of the client, provides the use of readers to large practices with an expectation of purchasing certain levels of test cards or allows the customer to use the readers with a commitment to fulfill a minimum purchase obligation, typically over a three year period. Revenue recognition for contracts with multiple deliverables is based on the individual units of accounting determined to exist in the contract. A delivered item is considered a separate unit of accounting when the delivered item has value to the customer on a stand-alone basis. Items are considered to have stand-alone value when they are sold separately by any vendor or when the customer could resell the item on a stand-alone basis. Considering that test cards are essential to the operation of a TearLab reader, there is no alternative vendor for the test cards and no indication that a secondary market for the TearLab readers is established, the deliverables under the contracts entered into during 2013 and 2012 do not meet criteria for separation under the multiple-element arrangements guidance. Consideration is allocated at the inception of the contract to all deliverables based on their relative selling price. The relative selling price for each deliverable is determined using vendor specific objective evidence (VSOE) of selling price or third-party evidence of selling price if VSOE does not exist. If neither VSOE nor third-party evidence exists, the Company uses its best estimate of the selling price for the deliverable. The Company recognizes revenue for each of the elements only when it determines that all applicable recognition criteria have been met. The TearLab® Osmolarity System for Dry Eye Disease (''DED'') consists of hardware and related disposable test cards. In 2013 and 2012, the Company's revenues have been derived primarily from programs where customers are given the use of a TearLab® Osmolarity System in exchange for various programs to purchase test cards. The Company's sales are currently direct to customers in the United States, Canada and the United Kingdom and to distributors in Europe and Asia. The Company records revenue when all of its obligations are completed which is generally upon shipment of the Company's products.

Although the Company has a no return policy for its products, the Company has established a return reserve for product sales that contain an implicit right of return. The Company reserves for estimated returns or refunds by reducing revenues at the time of shipment based on historical experience. The reserve of $173,000 and $71,000 as of December 31, 2013 and December 31, 2012, respectively, has reduced revenue and is included in accounts receivable.

Cost of Sales, Policy [Policy Text Block]

Cost of goods sold

Cost of goods sold includes the costs the Company incurs for the purchase of the TearLab® Systems sold and related freight and shipping costs, fees related to warehousing and logistics inventory management associated with conducting business and depreciation of reader systems. The Company recorded $912,000, $255,000 and $187,000 in shipping and handling fees for the years ended December 31, 2013, 2012 and 2011, respectively.

Research and Development Expense, Policy [Policy Text Block]

Clinical, regulatory and research & development costs

Clinical and regulatory costs attributable to the performance of contract services are recognized as an expense as the services are performed. Non-refundable, up-front fees paid in connection with these contracted services are deferred and recognized as an expense over the estimated term of the related contract.

Share-based Compensation, Option and Incentive Plans Policy [Policy Text Block]

Stock-based compensation

The Company accounts for stock-based compensation expense for its employees in accordance with US GAAP guidance related to stock-based compensation. Under this guidance, stock-based compensation cost is estimated at the grant date based on the fair value of the award and is recognized as an expense ratably over the requisite service period of the award. The Company uses the Black-Scholes Merton option pricing model for determining the fair value for all its awards and will recognize compensation cost on a straight-line basis over the awards' vesting periods.

Advertising Costs, Policy [Policy Text Block]

Advertising Costs

Advertising costs are expensed as incurred. Total advertising costs for each of the years ended December 31, 2013, 2012 and 2011 were $0.4 million, $0.3 million and $0.2 million, respectively.

Derivatives, Policy [Policy Text Block]

Warrant liabilities

The Company issued several rounds of warrants related to various debt and equity transactions which occurred in 2010 and 2011. The Company accounts for its warrants issued in accordance with the US GAAP accounting guidance under Accounting Standards Codification (ASC) 815 applicable to derivative instruments, which requires every derivative instrument within its scope to be recorded on the balance sheet as either an asset or liability measured at its fair value, with changes in fair value recognized in earnings.  Based on this guidance, the Company determined that the Company's warrants do not meet the criteria for classification as equity.  Accordingly, the Company classified the warrants as current liabilities. The warrants are subject to remeasurement at each balance sheet date with any change in fair value recognized as a component of other income (expense), in the statements of operations and comprehensive loss. Warrants are also remeasured at fair value immediately prior to being exercised, and the resulting fair value is reclassed into additional paid-in capital, net of any applicable exercise proceeds. The Company estimated the fair value of these warrants at the respective balance sheet dates using the Black-Scholes Merton option pricing model as described in the stock-based compensation section above, based on the estimated market value of the underlying common stock at the valuation measurement date, the remaining contractual term of the warrant, risk-free interest rates and expected dividends on and expected volatility of the price of the underlying common stock. There is a moderate degree of subjectivity involved when using option pricing models to estimate warrant liability and the assumptions used in the Black-Scholes Merton option pricing model are moderately judgmental.

Foreign Currency Transactions and Translations Policy [Policy Text Block]

Foreign currency transactions

The Company's functional and reporting currency is the U.S. dollar. The assets and liabilities of the Company's Canadian operations are maintained in U.S. dollars. Monetary assets and liabilities denominated in foreign currencies are translated into U.S. dollars at exchange rates in effect at the consolidated balance sheet dates, and non-monetary assets and liabilities are translated at exchange rates in effect on the date of the transaction. Revenue and expenses are translated into U.S. dollars at average exchange rates prevailing during the year. Resulting exchange gains (losses) of: ($131,000), ($15,000), ($29,000) are included in other income (expense) in the years ended December 31, 2013, 2012 and 2011, respectively.

Segment Reporting, Policy [Policy Text Block]

Geographic information

The following table provides geographic information related to the Company's revenues (in thousands):

	United States		Canada		Rest of World		Total
December 31, 2013
Revenues	$	13,844	$	121	$	680	$	14,645
December 31, 2012
Revenues	$	3,564	$	59	$	337	$	3,960

Comprehensive Income, Policy [Policy Text Block]

Comprehensive loss

Comprehensive income (loss) is defined as the change in equity during a period from transactions and other events and circumstances from non-owner sources. Comprehensive income (loss) generally includes unrealized gains or losses on the Company's marketable securities and foreign currency translation adjustments. In all the periods presented, the Company's comprehensive loss equaled net loss for the period.

Earnings Per Share, Policy [Policy Text Block]

Net loss per share

Basic earnings per share (''EPS'') excludes dilutive securities and is computed by dividing net loss available to common stockholders by the weighted average number of shares of common stock outstanding for the year. Diluted EPS reflects the potential dilution that could occur if securities or other contracts to issue common stock were exercised or converted and the resulting additional shares are dilutive because their inclusion decreases the amount of EPS.

The following are potentially dilutive securities which have not been used in the calculation of diluted loss per share as they are anti-dilutive (in thousands):

	December 31,
	2013		2012		2011
Stock options		5,537		4,100		3,691
Warrants		599		2,183		4,087
Total		6,136		6,283		7,778

New Accounting Pronouncements, Policy [Policy Text Block]

Recent accounting pronouncements

Effective January 1, 2013, the Company adopted the FASB's requirements for presentation of reclassifications out of accumulated other comprehensive income (AOCI). The guidance requires companies to report, in one place, information about reclassifications out of AOCI and to present reclassifications by component when reporting changes in AOCI balances. The adoption of this authoritative guidance did not have an impact on the Company's financial position or results of operations.

In July 2013, the FASB issued Accounting Standards Update, or ASU, No. 2013-11, Presentation of an Unrecognized Tax Benefit When a Net Operating Loss Carryforward, a Similar Tax Loss, or a Tax Credit Carryforward Exists. ASU 2013-11 provides explicit guidance on the financial statement presentation of an unrecognized tax benefit when a net operating loss carryforward, a similar tax loss, or a tax credit carryforward exists. The guidance is effective prospectively for fiscal years, and interim periods within those years, beginning after December 15, 2013, with an option for early adoption. We intend to adopt this guidance at the beginning of our first quarter of fiscal year 2014 and do not believe the adoption of this standard will have a material impact on our financial position, results of operations or related financial statement disclosures.

In July 2012, the FASB issued Accounting Standards Update, or ASU, No. 2012-02, Testing Indefinite-Lived Intangible Assets for Impairment. ASU 2012-02 gives an entity the option to first assess qualitative factors to determine whether it is more likely than not that an indefinite-lived intangible asset is impaired. If, after assessing the totality of events and circumstances, an entity concludes that it is not more likely than not that the indefinite-lived intangible asset is impaired, then the entity is not required to take further action. This guidance became effective for annual and interim impairment tests performed for fiscal years beginning after September 15, 2012, with early adoption permitted. The Company adopted the provisions of the guidance in the fourth quarter of 2013. The adoption did not have a material impact on the Company's financial position or results of operations.

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Note 8 - Commitments and Contingencies (Tables)

12 Months Ended

Dec. 31, 2013

Commitments and Contingencies Disclosure [Abstract]

Schedule of Future Royalty Payments [Table Text Block]

2014	$	35
2015		35
2016		35
2017		35
2018		35
Thereafter		315
Total	$	490

2014	$	35
2015		35
2016		35
2017		35
2018		35
Thereafter		315
Total	$	490

Contractual Obligation, Fiscal Year Maturity Schedule [Table Text Block]

2014	$	8.3
2015		9.1
Total	$	17.4

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Note 6 - Income Taxes (Details) (USD $) In Millions, unless otherwise specified	12 Months Ended
	Dec. 31, 2013
Note 6 - Income Taxes (Details) [Line Items]
Increase In Ownership Of Certain Stockholders Or Public Groups In The Stock Of Corporation	50.00%
Number Of Years For Increase In Ownership Of Certain Stockholders Or Public Groups In The Stock Of Corporation	3 years
Open Period Subject To Examination After Formal Notification To The States	1 year
Operating Loss Carryforwards Related To Stock Option Exercises [Member]
Note 6 - Income Taxes (Details) [Line Items]
Operating Loss Carryforwards	$ 1.4
Domestic Tax Authority [Member]
Note 6 - Income Taxes (Details) [Line Items]
Operating Loss Carryforwards	39.1
State and Local Jurisdiction [Member]
Note 6 - Income Taxes (Details) [Line Items]
Operating Loss Carryforwards	31.7
Foreign Tax Authority [Member]
Note 6 - Income Taxes (Details) [Line Items]
Operating Loss Carryforwards	$ 15.1
Minimum [Member]
Note 6 - Income Taxes (Details) [Line Items]
Open Period Subject To Examination For State And Provincial Income Tax Returns	3 years
Maximum [Member]
Note 6 - Income Taxes (Details) [Line Items]
Open Period Subject To Examination For State And Provincial Income Tax Returns	5 years

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Note 3 - Balance Sheet Details (Details) - Fixed Assets (USD $) In Thousands, unless otherwise specified	Dec. 31, 2013	Dec. 31, 2012
Property, Plant and Equipment [Line Items]
Property plant and equipment	$ 4,695	$ 1,273
Accumulated depreciation	(1,266)	(643)
	3,429	630
Furniture and Fixtures [Member]
Property, Plant and Equipment [Line Items]
Property plant and equipment	221	115
Leasehold Improvements [Member]
Property, Plant and Equipment [Line Items]
Property plant and equipment	47
Computer Equipment and Software [Member]
Property, Plant and Equipment [Line Items]
Property plant and equipment	386	203
Capitalized TearLab Equipment [Member]
Property, Plant and Equipment [Line Items]
Property plant and equipment	3,640	582
Medical Equipment [Member]
Property, Plant and Equipment [Line Items]
Property plant and equipment	$ 401	$ 373

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Consolidated Statements of Shareholders' Equity (USD $)	Common Stock [Member]	Additional Paid-in Capital [Member]	Retained Earnings [Member]	Total
Balance, at Dec. 31, 2010	$ 15,000	$ 386,588,000	$ (378,726,000)	$ 7,877,000
Balance, shares (in Shares) at Dec. 31, 2010	14,775,366
Stock-based compensation		490,000		490,000
Shares issued in public and registered direct offerings	4,000	3,545,000		3,549,000
Shares issued in public and registered direct offerings (in Shares)	3,846,154
Shares issued in convertible debt conversion	1,000	2,106,000		2,107,000
Shares issued in convertible debt conversion (in Shares)	1,629,539
Shares issued in PIPE financing	4,000	3,545,000		3,549,000
Shares issued in PIPE financing (in Shares)	3,846,154
Shares issued to Greybrook Capital for advisory services provided		306,000		306,000
Shares issued to Greybrook Capital for advisory services provided (in Shares)	163,934
Net loss and comprehensive loss			(8,809,000)	(8,809,000)
Balance, at Dec. 31, 2011	20,000	393,035,000	(387,535,000)	5,520,000
Balance, shares (in Shares) at Dec. 31, 2011	20,414,993
Stock-based compensation		1,441,000		1,441,000
Warrants exercised	2,000	7,274,000		7,276,000
Warrants exercised (in Shares)	1,765,497
Shares issued in public and registered direct offerings	6,000	20,339,000		20,345,000
Shares issued in public and registered direct offerings (in Shares)	5,950,000
Restricted stock units issued	1,000	1,181,000		1,182,000
Restricted stock units issued (in Shares)	316,779
Issue costs of equity financings		(1,718,000)		(1,718,000)
Options exercised		110,000		110,000
Options exercised (in Shares)	294,384			294,384
Shares issued in PIPE financing	6,000	20,339,000		20,345,000
Shares issued in PIPE financing (in Shares)	5,950,000
Net loss and comprehensive loss			(19,312,000)	(19,312,000)
Balance, at Dec. 31, 2012	29,000	421,662,000	(406,847,000)	14,844,000
Balance, shares (in Shares) at Dec. 31, 2012	28,741,653
Stock-based compensation		3,738,000		3,738,000
Warrants exercised	1,000	13,988,000		13,989,000
Warrants exercised (in Shares)	1,375,194
Shares issued in public and registered direct offerings	3,000	40,362,000		40,365,000
Shares issued in public and registered direct offerings (in Shares)	2,990,000
Issue costs of equity financings		(3,036,000)		(3,036,000)
Options exercised		458,000		458,000
Options exercised (in Shares)	181,854			181,854
Shares issued in PIPE financing	3,000	40,362,000		40,365,000
Shares issued in PIPE financing (in Shares)	2,990,000
Net loss and comprehensive loss			(28,990,000)	(28,990,000)
Balance, at Dec. 31, 2013	$ 33,000	$ 477,172,000	$ (435,837,000)	$ 41,368,000
Balance, shares (in Shares) at Dec. 31, 2013	33,288,701

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Note 4 - Intangible Assets

12 Months Ended

Dec. 31, 2013

Disclosure Text Block [Abstract]

Intangible Assets Disclosure [Text Block]

4. INTANGIBLE ASSETS

The Company's intangible assets consist of the value of TearLab^® Technology acquired in the acquisition of TearLab Research, Inc. The TearLab Technology consists of a disposable lab card and card reader, supported by an array of patents and patent applications that are either held or in-licensed by the Company. The TearLab Technology is being amortized using the straight-line method over an estimated useful life of 10 years. Amortization expense for each of the years ended December 31, 2013, 2012 and 2011 was $1,215,000.

Intangible assets subject to amortization consist of the following (in thousands):

	December 31, 2013				December 31, 2012
	Cost		Accumulated Amortization		Cost		Accumulated Amortization
TearLab® technology	$	12,172	$	8,678	$	12,172	$	7,463

Estimated future amortization expense related to intangible assets with finite lives at December 31, 2013 is as follows (in thousands):

	Amortization of intangible assets
2014		1,215
2015		1,215
2016		1,064
Total	$	3,494

The Company determined that, as of December 31, 2013, there have been no significant events which may affect the carrying value of its TearLab technology. However, the Company's prior history of losses and losses incurred during the current fiscal year reflect a potential indication of impairment, thus requiring management to assess whether the Company's TearLab technology was impaired as of December 31, 2013. Based on management's estimates of forecasted undiscounted cash flows as of December 31, 2013, the Company concluded that there is no indication of an impairment of the Company's TearLab technology. Therefore, no impairment charge was recorded during any of the three years ended December 31, 2013.

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Note 9 - Fair Value Measurements (Details) - Reconciliation for All Liabilities Measured at Fair Value Using Significant Unobservable Inputs (USD $) In Thousands, unless otherwise specified	12 Months Ended
	Dec. 31, 2013
Reconciliation for All Liabilities Measured at Fair Value Using Significant Unobservable Inputs [Abstract]
Balance of warrant liability	$ 6,239
Reclass of warrant liability to stockholder’s equity upon exercise	(13,297)
Change in fair value of warrant liability included in other (income) / expense	11,105
Balance of warrant liability	$ 4,047

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Note 13 - Quarterly Financial Data (Unaudited) (Details) - Selected Consolidated Statement of Operations Data (USD $) In Thousands, except Per Share data, unless otherwise specified	3 Months Ended																12 Months Ended
	Dec. 31, 2013		Sep. 30, 2013		Jun. 30, 2013		Mar. 31, 2013		Dec. 31, 2012		Sep. 30, 2012		Jun. 30, 2012		Mar. 31, 2012		Dec. 31, 2013	Dec. 31, 2012	Dec. 31, 2011
Selected Consolidated Statement of Operations Data [Abstract]
Revenue(i)	$ 4,438	[1]	$ 4,207	[1]	$ 3,525	[1]	$ 2,475	[1]	$ 1,610	[1]	$ 1,211	[1]	$ 716	[1]	$ 422	[1]	$ 14,645	$ 3,960	$ 2,124
Gross profit (i)	2,115	[1]	1,930	[1]	1,395	[1]	1,059	[1]	680	[1]	519	[1]	375	[1]	91	[1]	6,499	1,665	498
Loss from operations (i)	(5,504)	[1]	(3,829)	[1]	(5,279)	[1]	(3,162)	[1]	(3,324)	[1]	(3,673)	[1]	(2,533)	[1]	(2,503)	[1]	(17,774)	(12,032)	(8,058)
Net loss (i)	$ (4,151)	[1]	$ (4,240)	[1]	$ (12,025)	[1]	$ (8,574)	[1]	$ (3,652)	[1]	$ (4,587)	[1]	$ (1,974)	[1]	$ (9,099)	[1]	$ (28,990)	$ (19,312)	$ (8,809)
Weighted average number of shares outstanding basic(i) (in Shares)	33,129	[1]	31,914	[1]	29,178	[1]	28,756	[1]	28,607	[1]	27,703	[1]	24,919	[1]	20,673	[1]
Net loss per common share basic (i) (in Dollars per share)	$ (0.13)	[1]	$ (0.13)	[1]	$ (0.41)	[1]	$ (0.30)	[1]	$ (0.13)	[1]	$ (0.17)	[1]	$ (0.08)	[1]	$ (0.44)	[1]
Weighted average number of shares outstanding diluted (in Shares)	33,679		31,914		29,178		28,756		28,607		27,703		26,042		20,673
Net loss per common share diluted (i) (in Dollars per share)	$ (0.17)	[1]	$ (0.13)	[1]	$ (0.41)	[1]	$ (0.30)	[1]	$ (0.13)	[1]	$ (0.17)	[1]	$ (0.10)	[1]	$ (0.44)	[1]

[1] Net loss per share basic and diluted are computed independently for the quarters presented. Therefore, the sum of the quarterly per share information may not be equal to the annual per share information. Also totals may not add to the financials statements due to rounding.

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Note 9 - Fair Value Measurements (Tables)

12 Months Ended

Dec. 31, 2013

Fair Value Disclosures [Abstract]

Fair Value, Liabilities Measured on Recurring Basis, Unobservable Input Reconciliation [Table Text Block]

	Fair Value Measurements Using Significant Unobservable Inputs (Level 3)
Balance of warrant liability at January 1, 2013	$	6,239
Reclass of warrant liability to stockholder’s equity upon exercise		(13,297	)
Change in fair value of warrant liability included in other (income) / expense		11,105
Balance of warrant liability at December 31, 2013	$	4,047

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Note 3 - Balance Sheet Details (Details) - Accounts Receivable, Net (USD $) In Thousands, unless otherwise specified	Dec. 31, 2013	Dec. 31, 2012
Accounts Receivable, Net [Abstract]
Trade receivables	$ 3,939	$ 910
Due from related parties		15
Allowance for doubtful accounts	(415)	(36)
	$ 3,524	$ 889

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Schedule II -- Valuation and Qualifying Acoounts

12 Months Ended

Dec. 31, 2013

Valuation and Qualifying Accounts [Abstract]

Schedule of Valuation and Qualifying Accounts Disclosure [Text Block]

SCHEDULE II -- VALUATION AND QUALIFYING ACCOUNTS 

	Balance at beginning of period		Provision		Write-off and recoveries			Balance at end of period
(in thousands)
Fiscal 2011
Bad debt reserves	$	13	$	32	$	(3	)	$	42
Product warranties		51		56		(71	)		36
Return reserve		73		8		(71	)		10
Fiscal 2012
Bad debt reserves		42		10		(16	)		36
Product warranties		36		196		(125	)		107
Return reserve		10		102		(41	)		71
Fiscal 2013
Bad debt reserves		36		377		2			415
Product warranties	$	107	$	271	$	(198	)	$	180
Return reserve		71		474		(372	)		173