10-Q

UNITED STATES SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark One)

(X) QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended:March 31, 2015

(  ) 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 Corporation

(Exact name of registrant as

specified in its charter)

Delaware	59 343 4771
(State or other jurisdiction of incorporation or organization)	(I.R.S. Employer Identification No.)

9980 Huennekens Street., Suite 100, San Diego, CA 92121

(Address of principal executive offices)

(858) 455-6006

(Registrant’s telephone number, including area code)

Indicate by check mark whether the registrant (1) 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, everyInteractive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during thepreceding 12 months (or for such shorter period that the registrant was required to submit and post such files).

Yes  ☒   No  ☐

Indicate by check mark whether 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 ☐ (Do not check if a smaller reporting company)                   Smaller reporting company ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act):     Yes  ☐   No  ☒

Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date: 33,658,153 as of May 4, 2015.

1

PART I.	FINANCIAL INFORMATION	4
Item 1.	Financial Statements (Unaudited)	4
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	22
Item 3.	Quantitative and Qualitative Disclosures about Market Risk	31
Item 4.	Controls and Procedures	32
PART II.	OTHER INFORMATION	32
Item 1.	Legal Proceedings	32
Item 1A.	Risk Factors	32
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	45
Item 3.	Defaults Upon Senior Securities	45
Item 4.	Mine Safety Disclosures	45
Item 5.	Other Information	45
Item 6.	Exhibits	46

2

SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS

This Quarterly Report on Form 10-Q 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," "expects," "plans," "intends," "anticipates," "believes," "estimates," "projects," "predicts," “pursue,” "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 certifications 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 II, Item 1A.  of this Quarterly Report on Form 10-Q, 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 Quarterly Report on Form 10-Q 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.

Unless the context indicates or requires otherwise, in this Quarterly Report on Form 10-Q, references to the “Company” shall mean TearLab Corporation or TearLab Corp. and its subsidiaries. References to “$” or “dollars” shall mean U.S. dollars unless otherwise indicated.

3

TearLab Corporation

PART I.	FINANCIAL INFORMATION
ITEM 1.	FINANCIAL STATEMENTS (Unaudited)

4

TearLab Corporation

CONDENSED CONSOLIDATED BALANCE SHEETS

(expressed in U.S. dollars except number of shares)

(Unaudited)

($ 000’s except number of shares)

	March 31,			December 31,
	2015			2014
	(Unaudited)
ASSETS
Current assets
Cash	$	23,315		$	16,338
Accounts receivable, net		2,320			2,480
Inventory		3,175			2,986
Prepaid expenses and other current assets		997			890
Total current assets		29,807			22,694
Fixed assets, net		4,360			4,504
Patents and trademarks, net		73			80
Intangible assets, net		3,215			3,596
Other non-current assets		186			157
Total assets	$	37,641		$	31,031
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities
Accounts payable	$	2,461		$	2,202
Accrued liabilities		2,699			3,765
Deferred Rent		153			174
Obligations under warrants		143			256
Total current liabilities		5,456			6,397
Long-term debt		14,620			—
Total liabilities		20,076			6,397
Exchange right		250			250
Commitments and contingencies (Note 12)
Stockholders’ equity
Capital stock
Preferred Stock, $0.001 par value, authorized 10,000,000, none outstanding		—			—
Common stock, $0.001 par value, 65,000,000 authorized, 33,658,153 and 33,641,302 issued and outstanding at March 31, 2015 and December 31, 2014, respectively		34			34
Additional paid-in capital		485,008			483,909
Accumulated deficit		(467,727	)		(459,559	)
Total stockholders’ equity		17,315			24,384
Total liabilities and stockholders’ equity	$	37,641		$	31,031

See accompanying notes to interim condensed consolidated financial statements

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TearLab Corporation

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS

(expressed in U.S. dollars except number of shares)

(Unaudited)

($ 000’s except number of shares and (loss) per share)

	Three months ended
	March 31,
	2015			2014
Product sales	$	4,092		$	3,453
Reader equipment rentals		1,316			758
Total revenue	$	5,408		$	4,211
Costs and operating expenses
Cost of goods sold (excluding amortization of intangible assets)		2,387			1,926
Cost of goods sold - reader equipment depreciation		392			273
General and administrative		3,637			3,127
Clinical, regulatory and research & development		1,404			575
Sales and marketing		5,278			3,928
Amortization of intangible assets		381			303
Total operating expenses		13,479			10,132
Loss from operations		(8,071	)		(5,921	)
Other income (expense)
Interest income (expense)		(140	)		7
Amortization of deferred financing charge		(15	)		-
Changes in fair value of warrant obligations		113			307
Other, net		(55	)		50
Total other income (expense)		(97	)		364
Net loss and comprehensive loss	$	(8,168	)	$	(5,557	)
Weighted average shares outstanding - basic		33,642,720			33,550,404
Net loss per share – basic	$	(0.24	)	$	(0.17	)
Weighted average shares outstanding - diluted		33,692,507			33,732,227
Net loss per share – diluted	$	(0.25	)	$	(0.17	)

See accompanying notes to interim condensed consolidated financial statements

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TearLab Corporation

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(expressed in U.S. dollars)

(Unaudited)

($ 000’s)

	Three months ended
	March 31,
	2015			2014
OPERATING ACTIVITIES
Net loss for the period	$	(8,168	)	$	(5,557	)
Adjustments to reconcile net loss to cash used in operating activities:
Stock-based compensation		1,061			813
Depreciation of fixed assets		414			297
Amortization of patents and trademarks		7			7
Amortization of intangible assets		382			303
Changes in fair value of warrant obligations		(113	)		(307	)
Loss on disposal of fixed assets		-			2
Amortization of deferred financing charges		15			-
Interest accrued		51			-
Net change in working capital and non-current asset balances related to operations		(683	)		860
Cash used in operating activities		(7,034	)		(3,582	)
INVESTING ACTIVITIES
Additions to fixed assets, net of proceeds		(581	)		(880	)
Cash paid for business acquisition		-			(1,400	)
Cash used in investing activities		(581	)		(2,280	)
FINANCING ACTIVITIES
Term loan		14,554			-
Proceeds from the exercise of options		38			137
Cost of issuance of shares		-			(30	)
Cash provided by financing activities		14,592			107
Increase (decrease) in cash and cash equivalents during the period		6,977			(5,755	)
Cash, beginning of period		16,338			37,778
Cash, end of period	$	23,315		$	32,023

See accompanying notes to interim consolidated financial statements

7

TearLab Corporation

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

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

 (Unaudited)

1. BASIS OF PRESENTATION

Nature of Operations

TearLab Corporation (formerly OccuLogix, Inc.) ("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 condensed 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 consolidated balance sheet at December 31, 2014 has been derived from the audited financial statements at that date but does not include all of the information and footnotes required by accounting principles generally accepted in the United States for complete financial statements.

The accompanying condensed 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 $8.2 million for the three months ended March 31, 2015 and $23.7 million for the year ended December 31, 2014. The Company's working capital surplus at March 31, 2015 is $24.4 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 $23.3 million at March 31, 2015 combined with the recent senior term loan agreement providing us with access to up to $35.0 million in gross proceeds, including $15.0 million which was made available to us on March 4, 2015 and anticipated cash flows provided by sales of its products in calendar year 2015 will be sufficient to fund its cash requirements through at least March 31, 2016.

A successful transition to attaining profitable operations is dependent upon obtaining sufficient financing to fund the Company’s planned expenses and achieving a level of revenues adequate to support the Company’s cost structure.  If events or circumstances occur such that we do not meet our operating plan during the first half the 2015, we may be required during the third quarter of 2015 to reduce operating expenses and reduce the planned levels of inventory and fixed assets which could have an adverse impact on our ability to achieve our intended business objectives.

2. SIGNIFICANT ACCOUNTING POLICIES

These unaudited interim condensed consolidated financial statements have been prepared using significant accounting policies that are consistent with the policies used in preparing the Company’s audited consolidated financial statements for the year ended December 31, 2014. Management believes that all adjustments necessary for the fair presentation of results, consisting of normally recurring items, have been included in the unaudited condensed consolidated financial statements for the interim periods presented. The preparation of financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, disclosure of contingent assets and liabilities at the date of the financial statements, and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. The principal areas of judgment relate to revenue and inventory reserves, impairment of long-lived and intangible assets, and the fair value of stock options and warrants. 

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TearLab Corporation

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) collectibility 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.

Our revenues are primarily derived from the sale of disposable test cards. We sell our proprietary TearLab® Osmolarity System and related test cards to our customers, who are primarily eye care professionals, for use in osmolarity testing procedures. Our products are generally shipped from our primary distribution and warehousing operations facility located in San Diego, California. The Company’s sales are currently direct to customers in the United States, Canada and the United Kingdom and to distributors in South America, Europe and Asia.

The Company enters into contracts where revenue is derived either from agreements whereby the customer is provided the right to use the TearLab® Osmolarity System (reader equipment) at no separate cost to the customer in consideration for a minimum purchase commitment of disposables over the related contract term (referred to as either “Use Agreements”, “Masters Agreements” or “Flex Agreements”), or from agreements with sales of multiple deliverables, such as the reader equipment and disposable test cards (referred to as “Purchase Agreements”).

The company recognizes its revenue as being either product sales revenue (primarily for the sale of test cards) or reader equipment rental revenue (for either the explicit or the implicit lease of the reader to the customer). For the implicit lease revenue, revenue is calculated based on the fair value of the readers, recognized proportionately with respect to the fair value of the test cards. Purchase commitments for Use Agreements and Flex Agreements are expressed in the agreement for a specified period of time (generally one to three years), and the purchase commitment for Masters Agreements is implied for large physician practices with an expectation of purchasing certain levels of test cards. The Company recovers the cost of providing the reader equipment in the amount charged for disposables. These agreements are treated as operating leases as collectability of the minimum lease payments is not reasonably predictable at the outset of the arrangement. Accordingly, revenue is recognized over the defined contract term as disposable test cards are shipped. When reader equipment is placed with a customer at no separate cost, the Company retains title to the equipment and it remains capitalized on the Company’s consolidated balance sheet as equipment classified within fixed assets, net. The equipment is depreciated on a straight-line basis once shipped to a customer location over its estimated useful life and depreciation expense is included in Cost of Goods Sold within the consolidated statement of operations and comprehensive loss.

Revenue recognition for Purchase Agreements 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 2014 and the three months ended March 31, 2015 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.

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TearLab Corporation

Although the Company typically has a no return policy for its products, the Company has established a 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 $69,000 and $77,000 as of March 31, 2015 and December 31, 2014, respectively, has reduced revenue and is included in accounts receivable.

Warrant liabilities

The Company issued several rounds of warrants related to various debt and equity transactions which occurred in 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), net 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 reclassified 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 option-pricing model, based on the 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 degree of subjectivity involved when using option pricing models to estimate warrant liability and the assumptions used in the Black-Scholes option-pricing model are moderately judgmental.

Acquisition

On March 14, 2014, the Company acquired the net assets of the OcuHub business unit from AOAExcel, Inc., the for-profit subsidiary of the American Optometric Association ("AOA") in an all-cash transaction for $1.4 million and a working capital deficit of $201,000. Of the net purchase price, $1,564,000 was allocated to intangible assets, $38,000 to property, plant and equipment, $30,000 to prepaid expense and $230,000 to accrued liabilities. The acquisition was accounted for as a business combination in accordance with the authoritative guidance. The allocation of initial purchase price is based on our valuation of the fair value of tangible and intangible assets acquired and liabilities assumed as of the Closing, and these estimates are subject to adjustments. The fair value assigned to intangible assets has been determined primarily by using a variation of the income approach known as the discounted cash flow method, which estimates the value based on the present value of the after-tax free cash flows attributable to owning the intangible asset.

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TearLab Corporation

Recent Accounting Pronouncements

In May 2014, the Financial Accountings Standards Board issued Accounting Standards Update No. 2014-09, Revenue from Contracts with Customers, or ASU 2014-09, which requires an entity to recognize the amount of revenue to which it expects to be entitled for the transfer of promised goods or services to customers. Early application is not permitted. On April 1, 2015, the FASB voted to propose a deferral of the effective date of the standard by one year which would result in the new standard being effective for the Company at the beginning of its first quarter of fiscal year 2018. The Company has not yet completed its assessment of the impact of the new standard, including possible transition alternatives, on the Company's financial statements.

In August 2014, the Financial Accountings Standards Board issued guidance which requires management to assess an entity’s ability to continue as a going concern and to provide related disclosures in certain circumstances. Under the new guidance, disclosures are required when conditions give rise to substantial doubt about an entity’s ability to continue as a going concern within one year from the financial statement issuance date. The guidance is effective for annual periods ending after December 15, 2016, and all annual and interim periods thereafter. Early application is permitted. The adoption of this guidance will not have any impact on the Company’s financial position and results of operations and, at this time, the Company does not expect any impact on its disclosures.

In April 2015, the FASB issued authoritative guidance that requires debt issuance costs related to a recognized debt liability to be presented on the balance sheet as a direct deduction from the debt liability rather than as an asset. While adoption of this guidance is required for fiscal years beginning after December 15, 2015, the Company has elected to adopt this guidance early, as of March 31, 2015.

3. BALANCE SHEET DETAILS  

 Accounts receivable

	March 31,			December 31,
(in thousands)	2015			2014
Trade receivables	$	2,703		$	2,904
Allowance for doubtful accounts		(383	)		(424	)
	$	2,320		$	2,480

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TearLab Corporation

Inventory

Inventory is recorded at the lower of cost or market and consists of finished goods. Inventory is accounted for on a first-in, first-out basis.

	March 31,			December 31,
(in thousands)	2015			2014
Finished goods	$	3,177		$	2,990
Inventory reserves		(2	)		(4	)
	$	3,175		$	2,986

The Company evaluates inventory for estimated excess quantities and obsolescence, based on expected future sales levels and projections of future demand, and establishes inventory reserves for obsolete and excess inventories. 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 (Note 12). The purchase commitment contains required minimum annual purchases and a total purchase commitment under the manufacturing agreement. As part of its analysis of excess or obsolete inventories, the Company considers future annual minimum purchases, estimated future usage and the expiry dating of the cards to determine if any inventory reserve is needed.

Prepaid expenses and other current assets

(in thousands)	March 31,		December 31,
	2015		2014
Prepaid trade shows	$	150	$	177
Prepaid insurance		209		301
Manufacturing deposits		246		182
Subscriptions		39		82
Other fees and services		336		142
Other current assets		17		6
	$	997	$	890

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TearLab Corporation

Fixed assets

(in thousands)	March 31,			December 31,
	2015			2014
Capitalized TearLab equipment	$	5,770		$	5,655
Leasehold improvements		51			51
Computer equipment and software		932			819
Furniture and office equipment		310			267
Medical equipment		425			426
	$	7,488		$	7,218
Less accumulated depreciation		(3,128	)		(2,714	)
	$	4,360		$	4,504

Depreciation expense was $414,000 and $297,000 during the three months ended March 31, 2015 and 2014, respectively.

Patents and trademarks

(in thousands)	March 31,			December 31,
	2015			2014
Patents	$	236		$	236
Trademarks		32			32
		268			268
Accumulated amortization		(195	)		(188	)
	$	73		$	80

Amortization expense of patents and trademarks was $7,000 during the three months ended March 31, 2015 and 2014.

Accrued liabilities

(in thousands)	March 31,		December 31,
	2015		2014
Due to professionals	$	378	$	787
Due to employes and directors		1,522		1,589
Goods received but not yet invoiced		-		17
Sales and use tax liabilities		233		221
Royalty liability		309		330
Readers and tests cards in transit		8		-
Other		249		821
	$	2,699	$	3,765

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TearLab Corporation

4. INTANGIBLE ASSETS

The Company's intangible assets consist of the value of TearLab® Technology acquired in the acquisition of TearLab Research and the value of the OcuHub platform technology acquired in the acquisition of the OcuHub business unit from AOAExcel.  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.  The OcuHub platform technology consists of the right to access and commercialize the OcuHub cloud-based technology platform which facilitates an effective and efficient shared care model providing secure connectivity between doctors, patients, institutions and payers. The OcuHub platform technology is being amortized using the straight-line method over an estimated useful life of 5 years. Amortization expense for the three months ended March 31, 2015 and 2014 was $382,000 and $303,000, respectively.

Intangible assets subject to amortization consist of the following:

(in thousands)	March 31, 2015				December 31 2014
			Accumulated				Accumulated
	Cost		Amortization		Cost		Amortization
TearLab® technology	$	12,172	$	10,195	$	12,172	$	9,892
OcuHub platform technology		1,564		326		1,564		248
	$	13,736	$	10,521	$	13,736	$	10,140

The estimated amortization expense for the intangible assets for the remainder of 2015 and each of the remaining five years is as follows:

	Amortization of
(in thousands)	intangible assets
Remainder of 2015	$	1,145
2016		1,379
2017		313
2018		313
2019		65
	$	3,215

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TearLab Corporation

5. TERM LOAN

On March 4, 2015, the Company executed a term loan agreement with CRG LP and certain of its affiliate funds (“CRG”) as lenders providing the Company with access of up to $35,000,000 under the arrangement. The Company received $15,000,000 in gross proceeds under the arrangement on March 4, 2015, and additional amounts up to $20,000,000 are available to TearLab, at its option, through July 2016 subject to the satisfaction of certain revenue milestones and other borrowing conditions. The agreement has a term of six years and bears interest at 13% per annum, with quarterly payments of interest only for the first four years. While interest on the loan is accrued at 13% per annum, the Company may elect to make interest-only payments at 8.5% per annum. The unpaid interest of 4.5% is added to the principal of the loan and is subject to additional accrued interest. The accrued interest can be deferred and paid together with the principal in the fifth and sixth years.

At March 31, 2015, the principal balance outstanding under the CRG LP Term Loan was $15,051,000. Financing and legal fees were recorded as a $446,000 direct discount to the long-term debt which is being amortized with the effective interest method. The company has elected early adoption of the authoritative accounting guidance that requires debt issuance costs related to a recognized debt liability to be presented on the balance sheet as a direct deduction from the debt liability rather than as an asset.

The agreement provides for prepayment fees of 5% of the outstanding balance of the loan if the loan is repaid prior to December 31, 2015. The prepayment fee is reduced 1% per year for each subsequent year until maturity.

The loan is collateralized by all assets of the Company. Additionally, the terms of the Term Loan Agreement contain various affirmative and negative covenants agreed to by the Company. Among them, the Company must attain minimum certain annual revenues and minimum cash threshold levels. The minimum annual revenue threshold level required by the Term Loan is $25.0 million for calendar year 2015. The minimum cash balance required is $5.0 million, subject to certain conditions.

If the Company does not have annual revenues greater or equal to the annual revenue covenant in a calendar year, the Company will have to raise subordinated debt or equity ( the “CRG Equity Cure” ) equal to twice the difference between the annual revenue and the revenue covenant, with the total proceeds from this financing to be used to reduce the principal of the CRG LP Term Loan. In the event the Company does not achieve the minimum revenue threshold and it cannot complete the CRG Equity Cure, it may be in default of the Term Loan. In the event of a default, we may be required to repay any outstanding amounts earlier than anticipated, and the lenders may foreclose on their security interest in our assets.

Borrowings under the term loan are subject to certain conditions, including the non-occurrence of a material adverse change in our business or operations (financial or otherwise), or a material impairment of the prospect of repayment of obligations.

As of March 31, 2015, the Company was in compliance with all of the covenants.

6. 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 three months ended March 31 2013 was $0, and the outstanding accounts receivable balances due at December 31, 2013 was $0. 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 quarter ended September 30, 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. The Company’s chairman of the board of directors and chief executive officer has a material financial interest in Science with Vision. After this agreement was terminated in 2013, it did not have any financial impact in either the three months ended March 31, 2014 or the three months ended March 31, 2015.

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TearLab Corporation

7. 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.

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 three months ended March 31, 2015.

At March 31, 2015, the Company had a liability for warrants to purchase 219,604 shares of common stock at an exercise price of $1.86 per share valued at $143,000 (Note 8). The warrant liability is classified as a Level 3 fair value measurement.

The following table provides a reconciliation for the warrant liability measured at fair value using significant unobservable inputs (Level 3) for the three months ended March 31, 2015 (in thousands):

	Fair Value Measurements
	Using Significant
	Unobservable Inputs (Level 3)
Balance of warrant liability at January 1, 2015	$	256
Warrant exercises		-
Change in fair value of warrant liability included in other (income) / expense		(113	)
Balance of warrant liability at March 31, 2015	$	143

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TearLab Corporation

8. STOCKHOLDERS’ EQUITY

(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

The Company has funded operations over the years through the issuance of equity in public and private offerings including 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 $3,055,000.

(c) Stock Incentive Plan

The Company has a stock incentive plan, the 2002 Stock Incentive Plan (the "Stock Incentive Plan"), under which up to 6,200,000 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 has been granted to a prospective employee, prospective consultant or prospective director 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 incentive 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.

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 requisite service period. The amount of expense recognized during the period is affected by subjective assumptions, including: estimates of the Company’s future volatility, the expected term for its stock options, option exercise behavior, the number of options expected to ultimately vest, and the timing of vesting for the Company’s share-based awards.

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TearLab Corporation

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

	Three months ended
(in thousands)	March 31,
	2015		2014
General and administrative	$	504	$	527
Clinical, regulatory and research and development		99		41
Sales and marketing		458		245
Stock-based compensation expense before income taxes	$	1,061	$	813

(d) Employee Stock Purchase Plan

In July 2014, the Company’s Board of Directors adopted the 2014 Employee Stock Purchase Plan, or the ESPP, which was approved by the Company's stockholders in June 2014 at the Company's Annual Meeting of Stockholders. A total of 671,500 shares of the Company’s common stock are reserved for issuance under the plan, which permits eligible employees to purchase common stock at a discount through payroll deductions.

The price at which stock is purchased under the ESPP is equal to 90% of the fair market value of the common stock on the first or the last day of the offering period, whichever is lower. Generally, each offering under the ESPP will be for a period of six months as determined by the Company's Board of Directors. Employees may invest up to 20% of their gross compensation through payroll deductions. In no event may an employee invest more than $25,000 worth of stock in the plan during each calendar year or more than 5,000 shares per offering period. During the year ended December 31, 2014, the Company received employee contributions totaling $114,000 and issued 47,902 shares of common stock.

As the ESPP is a compensatory plan as defined by the authoritative guidance for stock compensation, stock-based compensation expense of $19,000 is applicable to the three months ended March 31, 2015. The fair value of each purchase option under the ESPP is estimated at the beginning of each six-month offering period using the Black-Scholes model with the following weighted-average assumptions.

Volatility	71	%
Expected life (in years)	0.5
Risk-free interest rate	0.12	%
Dividend yield	0	%

(e) Warrants

On June 13, 2011, the Company issued 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. 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. There were 74,063 of these warrants outstanding at March 31, 2015 and December 31, 2014.

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TearLab Corporation

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 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 March 31, 2015. The Company estimated the fair value of the warrants at the date of issuance using the Black Scholes option 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.

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. The Company remeasures the fair value of the warrants 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 estimated fair value of the 2011 Warrants at March 31, 2015 was determined using the Black-Scholes option-pricing model with the following assumptions:

Volatility	70	%
Expected life of Warrants (in years)	1.25
Risk-free interest rate	0.34	%
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 three months ended March 31, 2014 certain holders of 2011 Warrants exercised warrants for 304,945 shares of common stock. The Company received $0 in proceeds from the cashless exercises during the three month period ended March 31, 2014. 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 $2,616,000, an increase of $263,000 from the previous value at December 31, 2013. This increase was recorded as an expense in other income (expense) in the condensed consolidated statement of operations and comprehensive loss for the three months ended March 31, 2014.

The Company recorded 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 estimated the fair value of the remaining warrants as of March 31, 2015 to be $143,000, a decrease of $113,000 from the previous value at December 31, 2014. This amount was recorded as income to other income (expense) in the condensed consolidated statement of operations and comprehensive loss for the three months ended March 31, 2015.

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TearLab Corporation

The following table provides activity for the Warrants outstanding through March 31, 2015 (in thousands, except weighted average exercise prices):

				Weighted
	Number of			average
	warrants			exercise
	outstandng			price
Oustanding, December 2013		599		$	1.83
Exercised		(305	)		1.86
Expired		-			-
Outstanding, March 31, 2014		294			1.79
Exercised		-			-
Expired		-			-
Outstanding, March 31, 2015		294		$	1.79

(f) Exchange Right

In August 2014, the Company sold membership units in OcuHub LLC, a Delaware limited liability company and a wholly owned subsidiary of TearLab Corporation. The membership units sold generated cash proceeds of $250,000 in exchange for 2% ownership of OcuHub LLC. In connection with the sale of the membership units, the new members received an exchange right allowing the units to be exchanged upon written notice and during a specified exchange window for shares in our common stock. The first available exchange window follows the one year anniversary date of the purchase of membership units. The variable number of shares of common stock provided upon exchange is equal to the initial capital contribution amount received for the membership units sold divided by the closing sales price of TearLab Corporation common stock during the respective exchange window. Due to the exchange right option available to the membership unit holders, the entire loss from continuing operations related to OcuHub LLC of $788,000 for the three months ended March 31, 2015 has been attributed to TearLab Corporation within the consolidated financial statements.

9. COMPREHENSIVE INCOME (LOSS)

For the three months ended March 31, 2015 and 2014, comprehensive loss was equal to net loss for each period.

10. NETINCOME (LOSS) PER SHARE

Basic income (loss) per share is calculated by dividing net income (loss) by the weighted average number of common shares and vested restricted stock units outstanding. Diluted income (loss) per share is computed by dividing net income (loss), less any dilutive amounts recorded during the period for the change in fair value of warrant liabilities, by the weighted average number of common shares and vested restricted stock units outstanding and the weighted average number of dilutive common stock equivalents, from stock options, warrants, and non-vested restricted stock units. Common stock equivalents are only included in the diluted earnings per share calculation when their effect is dilutive. Diluted loss per share for the three months ended March 31, 2015 and the three months ended March 31, 2014 includes the dilutive impact of the gain recorded from the Company's June 30, 2011 warrants.

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TearLab Corporation

The following securities were not included in the calculation of diluted earnings per share because their effects were anti-dilutive (in thousands):

	Three Months Ended
	March 31,
	2015		2014
Stock options		6,400		5,572
Warrants		74		74
Total		6,474		5,646

11. CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

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

	Three Months Ended
(in thousands)	March 31,
	2015			2014
Accounts receivable, net	$	160		$	474
Inventory		(189	)		(292	)
Prepaid expenses and other assets		(96	)		92
Other non-current assets		(40	)		(7	)
Accounts payable		272			911
Accrued liabilities		(769	)		(352	)
Deferred rent/revenue		(21	)		34
	$	(683	)	$	860

The following table lists those items that have been excluded from the condensed consolidated statements of cash flows as they relate to non-cash transactions and additional cash flow information:

	Three months ended
	March 31,
(in thousands)	2015		2014
Reclass of warrant liabilities to Stockholders Equity upon exercise of warrants		-	$	2,616
Additions to fixed assets included in accounts payable and accrued liabilities	$	311	$	4

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TearLab Corporation

12. COMMITMENTS AND CONTINGENCIES

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 $7.9 million (AUD$10.3 million) in test cards from MiniFAB through the end of 2015 of which $1.8 million (AUD $2.4 million) has been on order as of March 31,2015. The Company is also subject to annual minimum order commitments under the Manufacturing Agreement. 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 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.

The Company has evaluated its 2015 outstanding purchase commitment with MiniFab to determine the potential amount of liability the Company may be obligated to pay if it doesn’t meet its annual order commitment. Having reviewed the submitted orders for test cards to MiniFAB for the three months ended March 31, 2015, if the Company does not: 1) order the sufficient additional test cards to meet the 2015 minimum order commitment under the agreement or 2) seek to modify the existing minimum order quantity with MiniFab, the Company will be subject to liquidated damages estimated at $6.1 million (AUD $7.9 million).   

ITEM 2. 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 condensed consolidated financial statements and related notes, included in Item 1 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 now 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, Portugal, 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 are selling directly to the customer in Canada and the United Kingdom.

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TearLab Corporation

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 requiring our customers to obtain their moderate complexity CLIA certification or providing them with support from certified professionals. A CLIA waiver greatly reduces the regulatory compliance for our customers.

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. 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.

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.

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") in an all cash transaction for $1.4 million. OcuHub, powered by AT&T and Covisint, facilitates an effective and efficient shared care model with a single sign-on portal, which simplifies secure connectivity between doctors, patients, institutions and payers. It is a subscription-based service that is HIPAA compliant and eliminates the need for a complex and expensive IT structure.

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. On March 4, 2015, the Company executed a term loan agreement with CRG LP and certain of its affiliate funds (“CRG”) as lenders providing the Company with access of up to $35.0 million under the arrangement. The Company received $15.0 million in gross proceeds under the arrangement on March 4, 2015, and additional amounts up to $20.0 million are available to TearLab, at its option, through July 2016 subject to the satisfaction of certain revenue milestones and other borrowing conditions. While our cash of $23.3 million as of March 31, 2015 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 will be required to raise additional capital to fund our operations.

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TearLab Corporation

RESULTS OF OPERATIONS

Revenue, Cost of Sales and Gross Margin

	Three Months Ended March 31,
(in thousands)
	2015			2014			Change
TearLab revenue	$	5,408		$	4,211		$	1,197
TearLab – cost of sales		2,779			2,199			580
TearLab gross profit		2,629			2,012			617
Gross profit percentage		49	%		48	%

Revenues

TearLab Revenue

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.

TearLab revenue increased by $1,197,000 or 28% for the three months ended March 31, 2015 as compared to the prior year quarter. The increase is driven from an increase in test card sales of $1,232,000, offset by a decline of $43,000 in reader sales, compared with the three months ended March 31, 2014. Test card volume increase is consistent with the significant increase of new customers signed into the Company’s Flex programs and its high volume large multi-doctor practice programs for domestic customers.

TearLab Cost of Sales

TearLab cost of sales includes costs of goods sold, 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 costs of sales for the three months ended March 31, 2015 increased by $580,000 or 26% compared to the prior year fiscal period primarily due to the increase in sales volume of TearLab test cards, as the Company focuses its sales activities on its Flex customer sales programs and its high volume large multi-doctor practice programs.

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TearLab Corporation

TearLab Gross Margin

TearLab gross margin for the three months ended March 31, 2015 increased by $617,000 or 31% compared to the prior year fiscal period. The increase is mainly due to higher sales volume. The gross margin percentage of revenue for the quarter ended March 31, 2015 was 49% as compared to 48% for the prior year fiscal period which is primarily due to a reduction in our purchase price for test cards.

Operating Expenses

	Three Months Ended March 31,
(in thousands)
	2015		2014		Change
Amortization of intangible assets	$	381	$	303	$	78
General and administrative		3,637		3,127		510
Clinical, regulatory and research and development		1,404		575		829
Sales and marketing		5,278		3,928		1,350
Operating expenses	$	10,700	$	7,933	$	2,767

General and Administrative Expenses 

With the closing of the OcuHub acquisition on March 14, 2014, the three-month period ended March 31, 2014 only included OcuHub operating expenses for a small portion of this period.  For the three months ended March 31, 2015, general and administrative increased by $510,000 or 16% as compared with the corresponding prior year period.

While the total headcount in the general and administrative departments dropped by three, employee salary costs increased by $236,000, primarily due to the timing of the OcuHub acquisition. Administrative expenses and professional services expenses increased $152,000 and $76,000, respectively, in the three months ended March 31, 2015 when compared with the three months ended March 31, 2014. We are continuing to focus our efforts on controlling costs by reviewing and improving upon our existing business processes and cost structure.

Clinical, Regulatory and Research and Development Expenses 

Total clinical, regulatory and research and development expenses increased by $829,000 or 144% during the three months ended March 31, 2015, as compared with the corresponding prior year period. Total headcount in these departments increased by one person. The expense increase in comparing the three months ended March 31, 2015 with the corresponding period in the prior year was mainly due to an increase in external product development costs of $779,000, an increase in employee salary costs of $77,000 and an increase in stock option expenses of $65,000, offset by a decrease in research and development costs of $117,000.

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TearLab Corporation

Sales and Marketing Expense 

Sales and marketing expenses increased by $1,350,000 or 34% in the three months ended March 31, 2015, as compared with the comparable period in fiscal 2014. Total headcount in these departments increased by fifteen people, primarily due to the hiring of people to fill vacant sales positions. The total expenses increased primarily due to a $935,000 increase in employee salary costs, a $190,000 increase in stock option expense, and a $275,000 increase in marketing project costs, offset by a $82,000 decrease in professional services costs.

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.

Amortization of Intangible Assets

Amortization expense of intangible assets for the three months ended March 31, 2015 was $381,000, as compared to the $303,000 in the prior year fiscal period, with the increase of $78,000 having resulted from the OcuHub acquisition.

Other Income (Expense)

	Three Months Ended March 31,
(in thousands)
	2015			2014		Change
Interest income (expense)	$	(140	)	$	7	$	(147	)
Amortization of deferred financing charge		(15	)		-		(15	)
Changes in fair value of warrant obligations		113			307		(194	)
Other (net )		(55	)		50		(105	)
Other income	$	(97	)	$	364	$	(461	)

Interest Income (Expense)

For the three months ended March 31, 2015, interest expense represented $146,000 the interest for the CRG term loan, of which $95,000 was paid in cash and $51,000 was deferred interest, offset by $6,000 in interest received for the Company’s cash and cash equivalents. Interest income of $7,000 for the three months ended March 31, 2014 consisted of interest received for the Company’s cash and cash equivalents.

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TearLab Corporation

Amortization of Deferred Financing Charge

In recording the CRG term loan, the Company recorded a discount on long-term debt, representing a loan financing fee and certain legal expenses associated with the financing. This discount is being amortized using the effective interest method. The amortization expense in the three months ended March 31, 2015 was $15,000. There was no comparable cost in the three months ended March 31, 2014.

Changes in Fair Value of Warrants Obligations

The Company is 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 for the applicable period. The Company recorded income related to a decrease in the fair value of warrant obligations of $113,000 for the three months ended March 31, 2015. The amount was recorded as income to other income (expense) in the condensed consolidated statement of operations for the three months ended March 31, 2015.

At the beginning of the three month period ended March 31, 2014, the Company had a total of 524,549 warrants subject to fair value re-measurement each quarter. During the first quarter of 2014 certain holders of warrants exercised 304,945 warrants. The Company is required to record the outstanding warrants at fair value at the time of exercise, 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 warrants during the first quarter 2014 to be $2,616,000, an increase of $263,000 from the previous value at December 31, 2013. This increase was recorded as a $263,000 charge to other income (expense) in the condensed consolidated statement of operations for the three months ended March 31, 2014. This charge was offset by a $570,000 reduction in the fair value of warrant obligations, resulting in other income of $307,000 in the three months ended March 31, 2014.

Other (net)

Other income (loss) for the three months ended March 31, 2015 and 2014 consists primarily of foreign exchange transaction gains and losses, based on fluctuations of the Company’s foreign denominated currencies.

Liquidity and Capital Resources

(in thousands)	March 31,			December 31,
	2015			2014			Change
Cash and cash equivalents	$	23,315		$	16,338		$	6,977
Percentage of total assets		62	%		53	%
Working capital	$	24,351		$	16,297		$	8,054

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TearLab Corporation

Cash increased from $16.3 million to $23.3 million in the three months ended March 31, 2015. On March 4, 2015, the Company executed a term loan agreement with CRG LP and certain of its affiliate funds (“CRG”) as lenders providing the Company with access of up to $35.0 million under the arrangement. The Company received $15.0 million in gross proceeds under the arrangement on March 4, 2015.

Financial Condition    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 US dollar and Australian dollar may be material. In the 12 months ended March 31, 2015, the exchange rate incurred to purchase Australian dollars to pay our Australian supplier fluctuated from $0.76 USD to $0.94 USD per $1.00 AUS. 

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 to support our operating needs and to become cash flow positive.

If the Company is successful in accessing the remaining available funds available under the term loan agreement with CRG LP, we believe that we have sufficient funding to meet operational needs until the Company becomes cash flow positive from operations, but if we are not able to 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.

Further, a successful transition to attaining profitable operations is dependent upon obtaining sufficient financing to fund the Company’s planned expenses and achieving a level of revenues adequate to support the Company’s cost structure. If events or circumstances occur such that we do not meet our operating plan during the first half of 2015, we may be required during the third quarter of 2015 to reduce operating expenses and reduce the planned levels of inventory and fixed assets which could have an adverse impact on our ability to achieve our intended business objectives.

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TearLab Corporation

Indebtedness

On March 4, 2015, the Company executed a term loan agreement with CRG LP and certain of its affiliate funds (“CRG”) as lenders, which provided the Company with access of up to $35.0 million under the arrangement. The Company received $15.0 million in gross proceeds under the arrangement on March 4, 2015, and additional amounts up to $20.0 million are available to TearLab, at its option, through September 2016 subject to the satisfaction of certain revenue milestones and other borrowing conditions. The agreement has a term of six years and bears interest at 13% per annum, with quarterly payments of interest only for the first four years. At the Company’s option, during the first four years a portion of the interest payments may be deferred and paid together with the principal in the fifth and sixth years.

The minimum annual revenue threshold level required by the Term Loan for calendar year 2015 is $25.0 million. The minimum cash balance required is $5.0 million, subject to certain conditions.

If the Company does not have annual revenues greater or equal to the annual revenue covenant in a calendar year, the Company will have to raise subordinated debt or equity (the “CRG Equity Cure”) equal to twice the difference between the annual revenue and the revenue covenant, with the total proceeds from this financing to be used to reduce the principal of the CRG LP Term Loan. In the event the Company does not achieve the minimum revenue threshold and it cannot complete the CRG Equity Cure, it may be in default of the Term Loan. In the event of a default, we may be required to repay any outstanding amounts earlier than anticipated, and the lenders may foreclose on their security interest in our assets.

Ongoing Sources and Uses of Cash

We anticipate that our cash and cash equivalents and cash generated from increased revenues and the senior term loan agreement 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 our primary uses of cash will be to fund our operating expenses and pursuing and maintaining 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

(in thousands)	Three months ended March 31,
	2015			2014			Change
Cash used in operating activities	$	(7,034	)	$	(3,582	)	$	(3,452	)
Cash used in investing activities		(581	)		(2,280	)		1,699
Cash provided by financing activities		14,592			107			14,485
Net increase (decrease) in cash and cash equivalents during the period	$	6,977		$	(5,755	)	$	12,732

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TearLab Corporation

Cash Used in Operating Activities

Net cash used to fund our operating activities during the three months ended March 31, 2015 was $7,034,000.  Net loss during the three month period was $8,168,000. The non-cash items which comprise a portion of the net loss during that period consist primarily of the amortization of intangible assets, patents and trademarks, depreciation of fixed assets, stock-based compensation and changes in the fair value of warrant obligations in the aggregate total of $1,817,000.

The net change in working capital and non-current asset balances related to operations for the three months ended March 31, 2015 and 2014 consists of the following:

	Three Months Ended
(in thousands)	March 31,
	2015			2014
Accounts receivable, net	$	160		$	474
Inventory		(189	)		(292	)
Prepaid expenses and other assets		(96	)		92
Other non-current assets		(40	)		(7	)
Accounts payable		272			911
Accrued liabilities		(769	)		(352	)
Deferred rent/revenue		(21	)		34
	$	(683	)	$	860

Cash Used in Investing Activities

Net cash used in investing activities for the three months ended March 31, 2015 and 2014 was $581,000 and $2,280,000, respectively, to acquire fixed assets, primarily TearLab Osmolarity systems related to the Company’s annual test card commitment programs or its high volume large multi doctor practice programs. In addition, $1,400,000 of cash was used in March 2014 to acquire the net assets of the OcuHub business unit from AOAExcel, Inc.

Cash Provided by Financing Activities

On March 4, 2015, the Company executed a term loan agreement with CRG LP and certain of its affiliate funds (“CRG”) as lenders providing the Company with access of up to $35.0 million under the arrangement. The Company received $14,554,000 million in net proceeds under the arrangement on March 4, 2015.

During the three months ended March 31, 2015, the Company issued 16,851 shares of common stock as a result of the exercise of options for gross proceeds of $38,000. During the three months ended March 31, 2014, the Company issued 41,431 shares of common stock as a result of the exercise of options for gross proceeds of $137,000.  

Off-Balance-Sheet Arrangements

As of March 31, 2015, we did not have any material off-balance-sheet arrangements as defined in Item 303(1)(4)(ii) of SEC Regulation S-K.

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TearLab Corporation

Critical Accounting Policies and Estimates

Management’s discussion and analysis of our financial condition and results of operations are based upon our condensed consolidated financial statements which are prepared in accordance with accounting principles that are generally accepted in the United States. The preparation of these financial statements requires us to make estimates and judgments that affect the reported amounts of assets and liabilities, related disclosure of contingent assets and liabilities at the date of the financial statements, and the reported amounts of revenues and expenses during the reporting period. We continually evaluate our estimates and judgments, the most critical of which are those related to revenue recognition and inventory valuation. We base our estimates and judgments on historical experience and other factors that we believe to be reasonable under the circumstances. Materially different results can occur as circumstances change and additional information becomes known.

There were no significant changes during the three months ended March 31, 2015 to the items that we disclosed as our critical accounting policies and estimates in Management’s Discussion and Analysis of Financial Condition and Results of Operations in the Company’s Annual Report on Form 10-K for the year ended December 31, 2014. For further clarification with regards to the Company’s specific policies for revenue recognition, see Note 2 of the Notes to the Unaudited Condensed Consolidated Financial Statements for the three months ended March 31, 2015 included in Item 1.

Recent Accounting Pronouncements

For information on the recent accounting pronouncements impacting our business, see Note 2 of the Notes to the unaudited Condensed Consolidated Financial Statements for the three months ended March 31, 2015 included in Item 1.

ITEM 3. 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 March 31, 2015, 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 impact our results of our operations by less than $30,000. 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

Our interest payments to CRG are based on a fixed contractual interest rate of 13%.

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TearLab Corporation

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 March 31, 2015 would reduce interest income by $6,000.

ITEM 4. CONTROLS AND PROCEDURES.

(a) 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 this 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 March 31, 2015 our disclosure controls and procedures were effective at the reasonable assurance level.

(b) Changes in Internal Control over Financial Reporting.

During the first quarter of 2015, there were no changes in our internal control over financial reporting that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

PART II. OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS.

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

ITEM 1A. RISK FACTORS.

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.

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TearLab Corporation

 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.

We may not be able to generate sufficient cash to service our indebtedness, which currently consists of our credit facility with CRG LP. We may not be able to satisfy our minimum revenue and cash covenants, as required by the CRG LP term loan. If our annual sales revenue levels do not meet or exceed the levels required by the CRG covenants, we will be required to raise additional equity or subordinated debt, with the proceeds paid to reduce the outstanding principal of the CRG term loan. This financing could dilute existing shareholders and impact the value of their investment.

On March 4, 2015, the Company executed a term loan agreement with CRG LP and certain of its affiliate funds (“CRG”) as lenders, which provided the Company with access of up to $35.0 million under the arrangement. The Company received $15.0 million in gross proceeds under the arrangement on March 4, 2015, and additional amounts up to $20.0 million are available to TearLab, at its option, through September 2016 subject to the satisfaction of certain revenue milestones and other borrowing conditions. The agreement has a term of six years and bears interest at 13% per annum, with quarterly payments of interest only for the first four years. At the Company’s option, during the first four years a portion of the interest payments may be deferred and paid together with the principal in the fifth and sixth years. While interest on the loan is accrued at 13% per annum, the Company may elect to make interest-only payments at 8.5% per annum. The unpaid interest of 4.5% is added to the principal of the loan and is subject to accruing interest. The agreement provides for prepayment fees of 5% of the outstanding balance of the loan if the loan is repaid prior to December 31, 2015. The prepayment fee is reduced 1% per year for each subsequent year until maturity.

Our ability to make scheduled payments or to refinance our debt obligations depends on numerous factors, including the amount of our cash reserves and our actual and projected financial and operating performance. These amounts and our performance are subject to certain financial and business factors, as well as prevailing economic and competitive conditions, some of which may be beyond our control. We cannot assure you that we will maintain a level of cash reserves or cash flows from operating activities sufficient to permit us to pay the principal, premium, if any, and interest on our existing or future indebtedness. If our cash flows and capital resources are insufficient to fund our debt service obligations, we may be forced to reduce or delay capital expenditures, sell assets or operations, seek additional capital or restructure or refinance our indebtedness. We cannot assure you that we would be able to take any of these actions, or that these actions would permit us to meet our scheduled debt service obligations. In addition, in the event of our breach of the term loan agreement with CRG, we may not be allowed to draw additional amounts under the agreement, we may be required to repay any outstanding amounts earlier than anticipated, and the lenders may foreclose on their security interest in our assets.

The loan is collateralized by all assets of the Company. Additionally, the terms of the Term Loan Agreement contain various affirmative and negative covenants agreed to by the Company. Among them, the Company must attain minimum certain annual revenues and minimum cash threshold levels. The minimum annual revenue threshold levels required by the Term Loan are $25.0 million, $35.0 million, $45.0 million, $60.0 million, $75.0 million and $85.0 million for calendar years 2015, 2016, 2017, 2018 2019 and 2020, respectively. The minimum cash balance required is $5.0 million, subject to certain conditions.

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TearLab Corporation

If the Company does not have annual revenues greater or equal to the annual revenue covenant in a calendar year, the Company will have to raise subordinated debt or equity (the “CRG Equity Cure”) equal to twice the difference between the annual revenue and the revenue covenant, with the total proceeds from this financing to be used to reduce the principal of the CRG LP Term Loan. We cannot assure you that we will be able to achieve the annual revenue thresholds and the daily cash threshold. We cannot assure you that we would be able to raise the financing for the CRG Equity Cure, if required. In addition, in the event of our breach of the term loan agreement with CRG, we may not be allowed to draw additional amounts under the agreement, we may be required to repay any outstanding amounts earlier than anticipated, and the lenders may foreclose on their security interest in our assets.

Borrowings under the term loan are subject to certain conditions, including the non-occurrence of a material adverse change in our business or operations (financial or otherwise), or a material impairment of the prospect of repayment of obligations.

Our existing term loan agreement contains restrictive and financial covenants that may limit our operating flexibility.

Our existing term loan agreement with CRG contains certain restrictive covenants that limit our ability to incur additional indebtedness and liens, merge with other companies or consummate certain changes of control, acquire other companies, engage in new lines of business, make certain investments, pay dividends, transfer or dispose of assets, amend certain material agreements or enter into various specified transactions. We therefore may not be able to engage in any of the foregoing transactions unless we obtain the consent of the lender or terminate the term loan agreement. There is no guarantee that we will be able to generate sufficient cash flow or sales to meet the financial covenants or pay the principal and interest under the agreement. Furthermore, there is no guarantee that future working capital, borrowings or equity financing will be available to repay or refinance the amounts outstanding under the agreement.

Our near-term success is 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 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.   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.

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TearLab Corporation

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 $7.9 million (AUD$10.3 million) in test cards from MiniFAB in 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.

The usage of test cards purchased under the minimum purchase commitment with MiniFAB is predicated upon maintaining revenue from the TearLab products as compared to the year ended December 31, 2014. 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, 2014 and the three months ended March 31, 2015, 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 March 31, 2014 was $24.4 million, which represents a $8.0 million increase in the balance from our working capital of $16.3 million at December 31, 2014.  

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 considering the recent senior term loan agreement providing us access to $35.0 million in gross proceeds including $15.0 which was received on March 4, 2015.

 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 March 31, 2015, we had an accumulated deficit of $467.7 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.

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TearLab Corporation

As of March 31, 2015, our total liabilities were approximately $20.1 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 high level of liability presents 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 liability obligations 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 level of 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.

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 exercise of warrants and options in 2013, the underwritten public offering in July 2013, as well as the senior term debt agreement in March 2015.  As of the date of filing of this quarterly Form 10-Q, 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, considering the recent senior term loan agreement providing us access to $35.0 million including $15.0 in gross proceeds which was received on March 4, 2015. 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.

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TearLab Corporation

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.

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.

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TearLab Corporation

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.

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.  

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TearLab Corporation

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.

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.

39

TearLab Corporation

 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 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 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.

40

TearLab Corporation

 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 limited number of suppliers 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 a limited number of 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.

41

TearLab Corporation

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.

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.

42

TearLab Corporation

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.

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.

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TearLab Corporation

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.

 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.  In addition, pursuant to the term loan agreement with the CRG loan, we are precluded from paying any cash dividends. 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.

44

TearLab Corporation

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. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS.

None.

ITEM 3. DEFAULTS UPON SENIOR SECURITIES.

Not applicable.

ITEM 4. MINE SAFETY DISCLOSURES

Not applicable.

ITEM 5. OTHER INFORMATION.

None.

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TearLab Corporation

ITEM 6. EXHIBITS

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)
10.1#	Nonstatutory Stock Option Agreement, dated April 21, 2014, by and between the Company and Paul Smith.	Exhibit 10.1 to the Registrant's Current Report on Form 8-K filed with the Commission on April 21, 2014 (file no. 000-51030)
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

#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.

+In accordance with Item 601(b)(32)(ii) of Regulation S-K and SEC Release No. 33-8238 and 34-47986, Final Rule: Management’s Reports on Internal Control Over Financial Reporting and Certification of Disclosure in Exchange Act Periodic Reports, the certifications furnished pursuant to this item will not be deemed “filed” for purposes of Section 18 of the Exchange Act (15 U.S.C. 78r), or otherwise subject to the liability of that section. Such certification will not be deemed to be incorporated by reference into any filing under the Securities Act or the Exchange Act, except to the extent that the registrant specifically incorporates it by reference

46

TearLab Corporation

SIGNATURE

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

		TearLab Corp.
		(Registrant)
Date:	May 8, 2015	/s/ Elias Vamvakas
		Elias Vamvakas
		Chief Executive Officer

47

EX-31.1

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 Quarterly Report on Form 10-Q of TearLab Corporation ;

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:  May 8, 2015

/s/ Elias Vamvakas

Elias Vamvakas

Chief Executive Officer

EX-31.2

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 Quarterly Report on Form 10-Q of TearLab Corporation.;

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: May 8, 2015

/s/ William Dumencu

William G. Dumencu

Chief Financial Officer and Treasurer

EX-32.1

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 Quarterly Report on Form 10-Q of TearLab Corporation (the “Company”) for the quarter ended March 31, 2015, 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:     May 8, 2015

EX-32.2

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 Quarterly Report on Form 10-Q of TearLab Corporation (the “Company”) for the quarter ended March 31, 2015, 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:   May 8, 2015

XML

Note 7 - Fair Value Measurements (Details Textual) (USD $)	Mar. 31, 2015	Mar. 31, 2014	Dec. 31, 2013
Class of Warrant or Right, Number of Securities Called by Warrants or Rights	219,604
Class of Warrant or Right, Exercise Price of Warrants or Rights	$ 1.86	$ 1.79	$ 1.83
Warrants and Rights Outstanding	$ 143,000

XML

Note 11 - Significant Non-Cash Transactions (Details) (USD $) In Thousands, unless otherwise specified	3 Months Ended
	Mar. 31, 2015	Mar. 31, 2014
Reclass of warrant liabilities to Stockholders Equity upon exercise of warrants		$ 2,616
Additions to fixed assets included in accounts payable and accrued liabilities	$ 311	$ 4

XML

Note 10 - Outstanding Common Stock Equivalents not Included in the Calculation of Net Income or Loss Per Share (Details) In Thousands, unless otherwise specified	3 Months Ended
	Mar. 31, 2015	Mar. 31, 2014
Antidilutive securities (in shares)	6,474	5,646
Equity Option [Member]
Antidilutive securities (in shares)	6,400	5,572
Warrant [Member]
Antidilutive securities (in shares)	74	74

XML

Note 3 - Accrued Liabilities (Details) (USD $) In Thousands, unless otherwise specified	Mar. 31, 2015	Dec. 31, 2014
Due to professionals	$ 378	$ 787
Due to employes and directors	1,522	1,589
Goods received but not yet invoiced		17
Sales and use tax liabilities	233	221
Royalty liability	309	330
Readers and tests cards in transit	8
Other	249	821
	$ 2,699	$ 3,765

XML

Note 1 - Basis of Presentation (Details Textual) (USD $)	3 Months Ended		12 Months Ended	0 Months Ended
	Mar. 31, 2015	Mar. 31, 2014	Dec. 31, 2014	Mar. 04, 2015	Dec. 31, 2013
Net Income (Loss) Attributable to Parent	$ (8,168,000)	$ (5,557,000)	$ (23,700,000)
Working Capital	24,400,000
Cash and Cash Equivalents, at Carrying Value	23,315,000	32,023,000	16,338,000		37,778,000
CRG [Member]
Term Loan, Maximum Borrowing Capacity				35,000,000
Proceeds from Issuance of Long-term Debt				$ 15,000,000

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Note 8 - Total Stock-Based Compensation Expense Resulting from Stock Options (Details) (USD $)	3 Months Ended
	Mar. 31, 2015	Mar. 31, 2014
Stock-based compensation expense	$ 1,061,000	$ 813,000
General and Administrative Expense [Member]
Stock-based compensation expense	504,000	527,000
Research and Development Expense [Member]
Stock-based compensation expense	99,000	41,000
Selling and Marketing Expense [Member]
Stock-based compensation expense	$ 458,000	$ 245,000

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Note 5 - CRG LP Term Loan (Details Textual) (USD $)	0 Months Ended	3 Months Ended
	Mar. 04, 2015	Mar. 31, 2015
Long-term Debt, Excluding Current Maturities		$ 14,620,000
CRG [Member] | Interest-Only Payments Rate [Member]
Debt Instrument, Interest Rate, Stated Percentage	8.50%
CRG [Member] | Unpaid Interest Rate Added to Principal of Loan [Member]
Debt Instrument, Interest Rate, Stated Percentage	4.50%
CRG [Member]
Debt Instrument, Interest Only Quarterly Payments, Period	4 years
Term Loan, Maximum Borrowing Capacity	35,000,000
Proceeds from Issuance of Long-term Debt	15,000,000
Term Loan, Remaining Borrowing Capacity	20,000,000
Debt Instrument, Term	6 years
Debt Instrument, Interest Rate, Stated Percentage	13.00%
Long-term Debt, Excluding Current Maturities		15,051,000
Debt Instrument, Unamortized Discount		446,000
Term Loan, Prepayment Fee Rate		5.00%
Term Loan, Annual Prepayment Fee Rate Reduction		1.00%
Debt Instrument, Covenant, Minimum Annual Revenue Threshold		25,000,000
Debt Instrument, Covenant, Minimum Cash Balance		$ 5,000,000

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Note 11 - Net Change in Non-Cash Working Capital Balances Related to Operations (Details) (USD $) In Thousands, unless otherwise specified	3 Months Ended
	Mar. 31, 2015	Mar. 31, 2014
Accounts receivable, net	$ 160	$ 474
Inventory	(189)	(292)
Prepaid expenses and other assets	(96)	92
Other non-current assets	(40)	(7)
Accounts payable	272	911
Accrued liabilities	(769)	(352)
Deferred rent/revenue	(21)	34
	$ (683)	$ 860

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Note 4 - Intangible Assets

3 Months Ended

Mar. 31, 2015

Notes to Financial Statements

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 and the value of the OcuHub platform technology acquired in the acquisition of the OcuHub business unit from AOAExcel.  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.  The OcuHub platform technology consists of the right to access and commercialize the OcuHub cloud-based technology platform which facilitates an effective and efficient shared care model providing secure connectivity between doctors, patients, institutions and payers. The OcuHub platform technology is being amortized using the straight-line method over an estimated useful life of 5 years. Amortization expense for the three months ended March 31, 2015 and 2014 was $382,000 and $303,000, respectively.

Intangible assets subject to amortization consist of the following:

(in thousands)	March 31, 2015				December 31 2014
			Accumulated				Accumulated
	Cost		Amortization		Cost		Amortization
TearLab® technology	$	12,172	$	10,195	$	12,172	$	9,892
OcuHub platform technology		1,564		326		1,564		248
	$	13,736	$	10,521	$	13,736	$	10,140

The estimated amortization expense for the intangible assets for the remainder of 2015 and each of the remaining five years is as follows:

	Amortization of
(in thousands)	intangible assets
Remainder of 2015	$	1,145
2016		1,379
2017		313
2018		313
2019		65
	$	3,215

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Note 8 - Estimated Fair Value Assumptions under ESSP (Details) (Employee Stock Purchase Plan 2014 [Member])	3 Months Ended
	Mar. 31, 2015
Employee Stock Purchase Plan 2014 [Member]
Volatility	71.00%
Expected life (in years)	182 days
Risk-free interest rate	0.12%
Dividend yield	0.00%

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Note 3 - Inventory (Details) (USD $) In Thousands, unless otherwise specified	Mar. 31, 2015	Dec. 31, 2014
Finished goods	$ 3,177	$ 2,990
Inventory reserves	(2)	(4)
	$ 3,175	$ 2,986

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Note 3 - Accounts Receivable, Net (Details) (USD $) In Thousands, unless otherwise specified	Mar. 31, 2015	Dec. 31, 2014
Trade receivables	$ 2,703	$ 2,904
Allowance for doubtful accounts	(383)	(424)
	$ 2,320	$ 2,480

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Note 8 - Estimated Fair Value Assumptions for Warrants (Details) (Two Thousand Eleven Warrants [Member])	3 Months Ended
	Mar. 31, 2015
Two Thousand Eleven Warrants [Member]
Volatility	70.00%
Expected life (in years)	1 year 91 days
Risk-free interest rate	0.34%
Dividend yield	0.00%

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Note 3 - Prepaid Expenses and Other Current Assets (Details) (USD $) In Thousands, unless otherwise specified	Mar. 31, 2015	Dec. 31, 2014
Prepaid trade shows	$ 150	$ 177
Prepaid insurance	209	301
Manufacturing deposits	246	182
Subscriptions	39	82
Other fees and services	336	142
Other current assets	17	6
	$ 997	$ 890

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Note 3 - Fixed Assets (Details) (USD $) In Thousands, unless otherwise specified	Mar. 31, 2015	Dec. 31, 2014
Property plant and equipment	$ 7,488	$ 7,218
Less accumulated depreciation	(3,128)	(2,714)
	4,360	4,504
Capitalized TearLab Equipment [Member]
Property plant and equipment	5,770	5,655
Leasehold Improvements [Member]
Property plant and equipment	51	51
Computer Equipment and Software [Member]
Property plant and equipment	932	819
Furniture and Fixtures [Member]
Property plant and equipment	310	267
Medical Equipment [Member]
Property plant and equipment	$ 425	$ 426

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Note 3 - Balance Sheet Details

3 Months Ended

Mar. 31, 2015

Notes to Financial Statements

Supplemental Balance Sheet Disclosures [Text Block]

3 . BALANCE SHEET DETAILS  

Accounts receivable

	March 31,			December 31,
(in thousands)	2015			2014
Trade receivables	$	2,703		$	2,904
Allowance for doubtful accounts		(383	)		(424	)
	$	2,320		$	2,480

Inventory

Inventory is recorded at the lower of cost or market and consists of finished goods. Inventory is accounted for on a first-in, first-out basis.

	March 31,			December 31,
(in thousands)	2015			2014
Finished goods	$	3,177		$	2,990
Inventory reserves		(2	)		(4	)
	$	3,175		$	2,986

The Company evaluates inventory for estimated excess quantities and obsolescence, based on expected future sales levels and projections of future demand, and establishes inventory reserves for obsolete and excess inventories. 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 (Note 12). The purchase commitment contains required minimum annual purchases and a total purchase commitment under the manufacturing agreement. As part of its analysis of excess or obsolete inventories, the Company considers future annual minimum purchases, estimated future usage and the expiry dating of the cards to determine if any inventory reserve is needed.

Prepaid

expenses and other current assets

(in thousands)	March 31,		December 31,
	2015		2014
Prepaid trade shows	$	150	$	177
Prepaid insurance		209		301
Manufacturing deposits		246		182
Subscriptions		39		82
Other fees and services		336		142
Other current assets		17		6
	$	997	$	890

Fixed

a

ssets

(in thousands)	March 31,			December 31,
	2015			2014
Capitalized TearLab equipment	$	5,770		$	5,655
Leasehold improvements		51			51
Computer equipment and software		932			819
Furniture and office equipment		310			267
Medical equipment		425			426
	$	7,488		$	7,218
Less accumulated depreciation		(3,128	)		(2,714	)
	$	4,360		$	4,504

Depreciation expense was $414,000 and $297,000 during the three months ended March 31, 2015 and 2014, respectively.

Patents and trademarks

(in thousands)	March 31,			December 31,
	2015			2014
Patents	$	236		$	236
Trademarks		32			32
		268			268
Accumulated amortization		(195	)		(188	)
	$	73		$	80

Amortization expense of patents and trademarks was $7,000 during the three months ended March 31, 2015 and 2014.

Accrued liabilities

(in thousands)	March 31,		December 31,
	2015		2014
Due to professionals	$	378	$	787
Due to employes and directors		1,522		1,589
Goods received but not yet invoiced		-		17
Sales and use tax liabilities		233		221
Royalty liability		309		330
Readers and tests cards in transit		8		-
Other		249		821
	$	2,699	$	3,765

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Note 3 - Patents and Trademarks (Details) (USD $) In Thousands, unless otherwise specified	Mar. 31, 2015	Dec. 31, 2014
Accumulated amortization	$ (10,521)	$ (10,140)
	3,215
Patents [Member]
Finite-lived intangible assets	236	236
Trademarks [Member]
Finite-lived intangible assets	32	32
Patents And Trademarks [Member]
Finite-lived intangible assets	268	268
Accumulated amortization	(195)	(188)
	$ 73	$ 80

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Note 7 - Reconciliation for All Liabilities Measured at Fair Value Using Significant Unobservable Inputs (Details) (USD $)	3 Months Ended
	Mar. 31, 2015
Balance of warrant liability at January 1, 2015	$ 256,000
Warrant exercises	0
Change in fair value of warrant liability included in other (income) / expense	(113,000)
Balance of warrant liability at March 31, 2015	$ 143,000

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Condensed Consolidated Balance Sheets (Current Period Unaudited) (USD $)	Mar. 31, 2015	Dec. 31, 2014
Current assets
Cash	$ 23,315,000	$ 16,338,000
Accounts receivable, net	2,320,000	2,480,000
Inventory	3,175,000	2,986,000
Prepaid expenses and other current assets	997,000	890,000
Total current assets	29,807,000	22,694,000
Fixed assets, net	4,360,000	4,504,000
Patents and trademarks, net	73,000	80,000
Intangible assets, net	3,215,000	3,596,000
Other non-current assets	186,000	157,000
Total assets	37,641,000	31,031,000
Current liabilities
Accounts payable	2,461,000	2,202,000
Accrued liabilities	2,699,000	3,765,000
Deferred Rent	153,000	174,000
Obligations under warrants	143,000	256,000
Total current liabilities	5,456,000	6,397,000
Long-term debt	14,620,000
Total liabilities	20,076,000	6,397,000
Exchange right	250,000	250,000
Commitments and contingencies (Note 12)
Stockholders’ equity
Preferred Stock, $0.001 par value, authorized 10,000,000, none outstanding	0	0
Common stock, $0.001 par value, 65,000,000 authorized, 33,658,153 and 33,641,302 issued and outstanding at March 31, 2015 and December 31, 2014, respectively	34,000	34,000
Additional paid-in capital	485,008,000	483,909,000
Accumulated deficit	(467,727,000)	(459,559,000)
Total stockholders’ equity	17,315,000	24,384,000
Total liabilities and stockholders’ equity	$ 37,641,000	$ 31,031,000

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Note 8 - Activity for the Warrants Outstanding (Details) (USD $) In Thousands, except Per Share data, unless otherwise specified	3 Months Ended
	Mar. 31, 2014
Oustanding (in shares)	599
Oustanding, December 2013 (in dollars per share)	$ 1.83
Exercised (in shares)	(305)
Exercised (in dollars per share)	$ 1.86
Outstanding (in shares)	294
Outstanding (in dollars per share)	$ 1.79

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Note 1 - Basis of Presentation

3 Months Ended

Mar. 31, 2015

Notes to Financial Statements

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

1. BASIS OF PRESENTATION

Nature of Operations

TearLab Corporation (formerly OccuLogix, Inc.)

 ("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 condensed 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 consolidated balance sheet at December 31, 2014 has been derived from the audited financial statements at that date but does not include all of the information and footnotes required by accounting principles generally accepted in the United States for complete financial statements.

The accompanying condensed 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 $8.2 million for the three months ended March 31, 2015 and $23.7 million for the year ended December 31, 2014. The Company's working capital surplus at March 31, 2015 is $24.4 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 $23.3 million at March 31, 2015 combined with the recent senior term loan agreement providing us with access to up to $35.0 million in gross proceeds, including $15.0 million which was made available to us on March 4, 2015 and anticipated cash flows provided by sales of its products in calendar year 2015 will be sufficient to fund its cash requirements through at least March 31, 2016.

A successful transition to attaining profitable operations is dependent upon obtaining sufficient financing to fund the Company’s planned expenses and achieving a level of revenues adequate to support the Company’s cost structure.  If events or circumstances occur such that we do not meet our operating plan during the first half the 2015, we may be required during the third quarter of 2015 to reduce operating expenses and reduce the planned levels of inventory and fixed assets which could have an adverse impact on our ability to achieve our intended business objectives.

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Note 4 - Intangible Assets Subject to Amortization (Details) (USD $) In Thousands, unless otherwise specified	3 Months Ended	12 Months Ended
	Mar. 31, 2015	Dec. 31, 2014
Cost	$ 13,736	$ 13,736
Accumulated Amortization	10,521	10,140
TearLab Technology [Member]
Cost	12,172	12,172
Accumulated Amortization	10,195	9,892
Ocuhub Platform Technology [Member]
Cost	1,564	1,564
Accumulated Amortization	$ 326	$ 248

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Note 8 - Stockholders' Equity (Tables)

3 Months Ended

Mar. 31, 2015

Notes Tables

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

	Three months ended
(in thousands)	March 31,
	2015		2014
General and administrative	$	504	$	527
Clinical, regulatory and research and development		99		41
Sales and marketing		458		245
Stock-based compensation expense before income taxes	$	1,061	$	813

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

				Weighted
	Number of			average
	warrants			exercise
	outstandng			price
Oustanding, December 2013		599		$	1.83
Exercised		(305	)		1.86
Expired		-			-
Outstanding, March 31, 2014		294			1.79
Exercised		-			-
Expired		-			-
Outstanding, March 31, 2015		294		$	1.79

Two Thousand Eleven Warrants [Member]

Notes Tables

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

Volatility	70	%
Expected life of Warrants (in years)	1.25
Risk-free interest rate	0.34	%
Dividend yield	0	%

Employee Stock Purchase Plan 2014 [Member]

Notes Tables

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

Volatility	71	%
Expected life (in years)	0.5
Risk-free interest rate	0.12	%
Dividend yield	0	%

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Note 4 - Intangible Asset Future Amortization Expense (Details) (USD $) In Thousands, unless otherwise specified	Mar. 31, 2015
Remainder of 2015	$ 1,145
2016	1,379
2017	313
2018	313
2019	65
	$ 3,215

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Note 11 - Condensed Consolidated Statements of Cash Flows (Tables)

3 Months Ended

Mar. 31, 2015

Notes Tables

Cash Flow, Operating Capital [Table Text Block]

	Three Months Ended
(in thousands)	March 31,
	2015			2014
Accounts receivable, net	$	160		$	474
Inventory		(189	)		(292	)
Prepaid expenses and other assets		(96	)		92
Other non-current assets		(40	)		(7	)
Accounts payable		272			911
Accrued liabilities		(769	)		(352	)
Deferred rent/revenue		(21	)		34
	$	(683	)	$	860

Schedule of Other Significant Noncash Transactions [Table Text Block]

	Three months ended
	March 31,
(in thousands)	2015		2014
Reclass of warrant liabilities to Stockholders Equity upon exercise of warrants		-	$	2,616
Additions to fixed assets included in accounts payable and accrued liabilities	$	311	$	4

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Note 2 - Significant Accounting Policies

3 Months Ended

Mar. 31, 2015

Notes to Financial Statements

Significant Accounting Policies [Text Block]

2. SIGNIFICANT ACCOUNTING POLICIES

These unaudited interim condensed consolidated financial statements have been prepared using significant accounting policies that are consistent with the policies used in preparing the Company’s audited consolidated financial statements for the year ended December 31, 2014. Management believes that all adjustments necessary for the fair presentation of results, consisting of normally recurring items, have been included in the unaudited condensed consolidated financial statements for the interim periods presented. The preparation of financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, disclosure of contingent assets and liabilities at the date of the financial statements, and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. The principal areas of judgment relate to revenue and inventory reserves, impairment of long-lived and intangible assets, and the fair value of stock options and warrants. 

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) collectibility 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.

Our revenues are primarily derived from the sale of disposable test cards. We sell our proprietary TearLab® Osmolarity System and related test cards to our customers, who are primarily eye care professionals, for use in osmolarity testing procedures. Our products are generally shipped from our primary distribution and warehousing operations facility located in San Diego, California. The Company’s sales are currently direct to customers in the United States, Canada and the United Kingdom and to distributors in South America, Europe and Asia.

The Company enters into contracts where revenue is derived either from agreements whereby the customer is provided the right to use the TearLab® Osmolarity System (reader equipment) at no separate cost to the customer in consideration for a minimum purchase commitment of disposables over the related contract term (referred to as either “Use Agreements”, “Masters Agreements” or “Flex Agreements”), or from agreements with sales of multiple deliverables, such as the reader equipment and disposable test cards (referred to as “Purchase Agreements”).

The company recognizes its revenue as being either product sales revenue (primarily for the sale of test cards) or reader equipment rental revenue (for either the explicit or the implicit lease of the reader to the customer). For the implicit lease revenue, revenue is calculated based on the fair value of the readers, recognized proportionately with respect to the fair value of the test cards.

Purchase commitments for Use Agreements and Flex Agreements are expressed in the agreement for a specified period of time (generally one to three years), and the purchase commitment for Masters Agreements is implied for large physician practices with an expectation of purchasing certain levels of test cards. The Company recovers the cost of providing the reader equipment in the amount charged for disposables. These agreements are treated as operating leases as collectability of the minimum lease payments is not reasonably predictable at the outset of the arrangement. Accordingly, revenue is recognized over the defined contract term as disposable test cards are shipped. When reader eq

uipment is placed with a customer at no separate cost, the Company retains title to the equipment and it remains capitalized on the Company’s consolidated balance sheet as equipment classified within fixed assets, net. The equipment is depreciated on a straight-line basis once shipped to a customer location over its estimated useful life and depreciation expense is included in Cost of Goods Sold within the consolidated statement of operations and comprehensive loss.

Revenue recognition for Purchase Agreements 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 2014 and the three months ended March 31, 2015 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 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 $69,000 and $77,000 as of March 31, 2015 and December 31, 2014, respectively, has reduced revenue and is included in accounts receivable.

Warrant liabilities

The Company issued several rounds of warrants related to various debt and equity transactions which occurred in 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), net 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 reclassified 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 option-pricing model, based on the 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 degree of subjectivity involved when using option pricing models to estimate warrant liability and the assumptions used in the Black-Scholes option-pricing model are moderately judgmental.

Acquisition

On March 14, 2014, the Company acquired the net assets of the OcuHub business unit from AOAExcel, Inc., the for-profit subsidiary of the American Optometric Association ("AOA") in an all-cash transaction for $1.4 million and a working capital deficit of $201,000. Of the net purchase price, $1,564,000 was allocated to intangible assets, $38,000 to property, plant and equipment, $30,000 to prepaid expense and $230,000 to accrued liabilities. The acquisition was accounted for as a business combination in accordance with the authoritative guidance. The allocation of initial purchase price is based on our valuation of the fair value of tangible and intangible assets acquired and liabilities assumed as of the Closing, and these estimates are subject to adjustments. The fair value assigned to intangible assets has been determined primarily by using a variation of the income

approach

known as the discounted cash flow method, which estimates the value based on the present value of the after-tax free cash flows attributable to owning the intangible asset.

Recent Accounting Pronouncements

In May 2014, the Financial Accountings Standards Board issued Accounting Standards Update No. 2014-09, Revenue from Contracts with Customers, or ASU 2014-09, which requires an entity to recognize the amount of revenue to which it expects to be entitled for the transfer of promised goods or services to customers. Early application is not permitted. On April 1, 2015, the FASB voted to propose a deferral of the effective date of the standard by one year which would result in the new standard being effective for the Company at the beginning of its first quarter of fiscal year 2018. The Company has not yet completed its assessment of the impact of the new standard, including possible transition alternatives, on the Company's financial statements.

In August 2014, the Financial Accountings Standards Board issued guidance which requires management to assess an entity’s ability to continue as a going concern and to provide related disclosures in certain circumstances. Under the new guidance, disclosures are required when conditions give rise to substantial doubt about an entity’s ability to continue as a going concern within one year from the financial statement issuance date. The guidance is effective for annual periods ending after December 15, 2016, and all annual and interim periods thereafter. Early application is permitted. The adoption of this guidance will not have any impact on the Company’s financial position and results of operations and, at this time, the Company does not expect any impact on its disclosures.

In April 2015, the FASB issued authoritative guidance that requires debt issuance costs related to a recognized debt liability to be presented on the balance sheet as a direct deduction from the debt liability rather than as an asset. While adoption of this guidance is required for fiscal years beginning after December 15, 2015, the Company has elected to adopt this guidance early, as of March 31, 2015.

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Condensed Consolidated Balance Sheets (Current Period Unaudited) (Parentheticals) (USD $)	Mar. 31, 2015	Dec. 31, 2014
Preferred stock, par value (in dollars per share)	$ 0.001	$ 0.001
Preferred stock, authorized (in shares)	10,000,000	10,000,000
Preferred stock, outstanding (in shares)	0	0
Common stock, par value (in dollars per share)	$ 0.001	$ 0.001
Common stock, authorized (in shares)	65,000,000	65,000,000
Common stock, issued (in shares)	33,658,153	33,641,302
Common stock, outstanding (in shares)	33,658,153	33,641,302

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Note 12 - Commitments and Contingencies

3 Months Ended

Mar. 31, 2015

Notes to Financial Statements

Commitments and Contingencies Disclosure [Text Block]

12. COMMITMENTS AND CONTINGENCIES

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 $7.9 million (AUD$10.3 million) in test cards from MiniFAB through the end of 2015 of which $1.8 million (AUD $2.4 million) has been on order as of March 31,2015. The Company is also subject to annual minimum order commitments under the Manufacturing Agreement. 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 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.

The Company has evaluated its 2015 outstanding purchase commitment with MiniFab to determine the potential amount of liability the Company may be obligated to pay if it doesn’t meet its annual order commitment. Having reviewed the submitted orders for test cards to MiniFAB for the three months ended March 31, 2015, if the Company does not: 1) order the sufficient additional test cards to meet the 2015 minimum order commitment under the agreement or 2) seek to modify the existing minimum order quantity with MiniFab, the Company will be subject to liquidated damages estimated at $6.1 million (AUD $7.9 million).   

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Document And Entity Information	3 Months Ended
	Mar. 31, 2015	May 04, 2015
Entity Registrant Name	TearLab Corp
Entity Central Index Key	0001299139
Current Fiscal Year End Date	--12-31
Entity Filer Category	Accelerated Filer
Entity Current Reporting Status	Yes
Entity Voluntary Filers	No
Entity Well-known Seasoned Issuer	No
Entity Common Stock, Shares Outstanding (in shares)		33,658,153
Document Type	10-Q
Document Period End Date	Mar. 31, 2015
Document Fiscal Year Focus	2015
Document Fiscal Period Focus	Q1
Amendment Flag	false

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Significant Accounting Policies (Policies)

3 Months Ended

Mar. 31, 2015

Accounting Policies [Abstract]

Basis of Accounting, Policy [Policy Text Block]

These unaudited interim condensed consolidated financial statements have been prepared using significant accounting policies that are consistent with the policies used in preparing the Company’s audited consolidated financial statements for the year ended December 31, 2014. Management believes that all adjustments necessary for the fair presentation of results, consisting of normally recurring items, have been included in the unaudited condensed consolidated financial statements for the interim periods presented. The preparation of financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, disclosure of contingent assets and liabilities at the date of the financial statements, and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. The principal areas of judgment relate to revenue and inventory reserves, impairment of long-lived and intangible assets, and the fair value of stock options and warrants. 

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) collectibility 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.

Our revenues are primarily derived from the sale of disposable test cards. We sell our proprietary TearLab® Osmolarity System and related test cards to our customers, who are primarily eye care professionals, for use in osmolarity testing procedures. Our products are generally shipped from our primary distribution and warehousing operations facility located in San Diego, California. The Company’s sales are currently direct to customers in the United States, Canada and the United Kingdom and to distributors in South America, Europe and Asia.

The Company enters into contracts where revenue is derived either from agreements whereby the customer is provided the right to use the TearLab® Osmolarity System (reader equipment) at no separate cost to the customer in consideration for a minimum purchase commitment of disposables over the related contract term (referred to as either “Use Agreements”, “Masters Agreements” or “Flex Agreements”), or from agreements with sales of multiple deliverables, such as the reader equipment and disposable test cards (referred to as “Purchase Agreements”).

The company recognizes its revenue as being either product sales revenue (primarily for the sale of test cards) or reader equipment rental revenue (for either the explicit or the implicit lease of the reader to the customer). For the implicit lease revenue, revenue is calculated based on the fair value of the readers, recognized proportionately with respect to the fair value of the test cards.

Purchase commitments for Use Agreements and Flex Agreements are expressed in the agreement for a specified period of time (generally one to three years), and the purchase commitment for Masters Agreements is implied for large physician practices with an expectation of purchasing certain levels of test cards. The Company recovers the cost of providing the reader equipment in the amount charged for disposables. These agreements are treated as operating leases as collectability of the minimum lease payments is not reasonably predictable at the outset of the arrangement. Accordingly, revenue is recognized over the defined contract term as disposable test cards are shipped. When reader eq

uipment is placed with a customer at no separate cost, the Company retains title to the equipment and it remains capitalized on the Company’s consolidated balance sheet as equipment classified within fixed assets, net. The equipment is depreciated on a straight-line basis once shipped to a customer location over its estimated useful life and depreciation expense is included in Cost of Goods Sold within the consolidated statement of operations and comprehensive loss.

Revenue recognition for Purchase Agreements 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 2014 and the three months ended March 31, 2015 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 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 $69,000 and $77,000 as of March 31, 2015 and December 31, 2014, respectively, has reduced revenue and is included in accounts receivable.

Derivatives, Policy [Policy Text Block]

Warrant liabilities

The Company issued several rounds of warrants related to various debt and equity transactions which occurred in 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), net 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 reclassified 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 option-pricing model, based on the 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 degree of subjectivity involved when using option pricing models to estimate warrant liability and the assumptions used in the Black-Scholes option-pricing model are moderately judgmental.

Business Combinations Policy [Policy Text Block]

Acquisition

On March 14, 2014, the Company acquired the net assets of the OcuHub business unit from AOAExcel, Inc., the for-profit subsidiary of the American Optometric Association ("AOA") in an all-cash transaction for $1.4 million and a working capital deficit of $201,000. Of the net purchase price, $1,564,000 was allocated to intangible assets, $38,000 to property, plant and equipment, $30,000 to prepaid expense and $230,000 to accrued liabilities. The acquisition was accounted for as a business combination in accordance with the authoritative guidance. The allocation of initial purchase price is based on our valuation of the fair value of tangible and intangible assets acquired and liabilities assumed as of the Closing, and these estimates are subject to adjustments. The fair value assigned to intangible assets has been determined primarily by using a variation of the income

approach

known as the discounted cash flow method, which estimates the value based on the present value of the after-tax free cash flows attributable to owning the intangible asset.

New Accounting Pronouncements, Policy [Policy Text Block]

Recent Accounting Pronouncements

In May 2014, the Financial Accountings Standards Board issued Accounting Standards Update No. 2014-09, Revenue from Contracts with Customers, or ASU 2014-09, which requires an entity to recognize the amount of revenue to which it expects to be entitled for the transfer of promised goods or services to customers. Early application is not permitted. On April 1, 2015, the FASB voted to propose a deferral of the effective date of the standard by one year which would result in the new standard being effective for the Company at the beginning of its first quarter of fiscal year 2018. The Company has not yet completed its assessment of the impact of the new standard, including possible transition alternatives, on the Company's financial statements.

In August 2014, the Financial Accountings Standards Board issued guidance which requires management to assess an entity’s ability to continue as a going concern and to provide related disclosures in certain circumstances. Under the new guidance, disclosures are required when conditions give rise to substantial doubt about an entity’s ability to continue as a going concern within one year from the financial statement issuance date. The guidance is effective for annual periods ending after December 15, 2016, and all annual and interim periods thereafter. Early application is permitted. The adoption of this guidance will not have any impact on the Company’s financial position and results of operations and, at this time, the Company does not expect any impact on its disclosures.

In April 2015, the FASB issued authoritative guidance that requires debt issuance costs related to a recognized debt liability to be presented on the balance sheet as a direct deduction from the debt liability rather than as an asset. While adoption of this guidance is required for fiscal years beginning after December 15, 2015, the Company has elected to adopt this guidance early, as of March 31, 2015.

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Condensed Consolidated Statements of Operations and Comprehensive Loss (Unaudited) (USD $)	3 Months Ended
	Mar. 31, 2015	Mar. 31, 2014
Product sales	$ 4,092,000	$ 3,453,000
Reader equipment rentals	1,316,000	758,000
Total revenue	5,408,000	4,211,000
Costs and operating expenses
Cost of goods sold (excluding amortization of intangible assets)	2,387,000	1,926,000
Cost of goods sold - reader equipment depreciation	392,000	273,000
General and administrative	3,637,000	3,127,000
Clinical, regulatory and research & development	1,404,000	575,000
Sales and marketing	5,278,000	3,928,000
Amortization of intangible assets	382,000	303,000
Total operating expenses	13,479,000	10,132,000
Loss from operations	(8,071,000)	(5,921,000)
Other income (expense)
Interest income (expense)	(140,000)	7,000
Amortization of deferred financing charge	(15,000)
Changes in fair value of warrant obligations	113,000	307,000
Other, net	(55,000)	50,000
Total other income (expense)	(97,000)	364,000
Net loss and comprehensive loss	$ (8,168,000)	$ (5,557,000)
Weighted average shares outstanding - basic (in shares)	33,642,720	33,550,404
Net loss per share – basic (in dollars per share)	$ (0.24)	$ (0.17)
Weighted average shares outstanding - diluted (in shares)	33,692,507	33,732,227
Net loss per share – diluted (in dollars per share)	$ (0.25)	$ (0.17)

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Note 7 - Fair Value Measurements

3 Months Ended

Mar. 31, 2015

Notes to Financial Statements

Fair Value Disclosures [Text Block]

7 . 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.

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 three months ended March 31, 2015.

At March 31, 2015, the Company had a liability for warrants to purchase 219,604 shares of common stock at an exercise price of $1.86 per share valued at $143,000 (Note 8). The warrant liability is classified as a Level 3 fair value measurement.

The following table provides a reconciliation for the warrant liability measured at fair value using significant unobservable inputs (Level 3) for the three months ended March 31, 2015 (in thousands):

	Fair Value Measurements
	Using Significant
	Unobservable Inputs (Level 3)
Balance of warrant liability at January 1, 2015	$	256
Warrant exercises		-
Change in fair value of warrant liability included in other (income) / expense		(113	)
Balance of warrant liability at March 31, 2015	$	143

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Note 6 - Related Party Transactions

3 Months Ended

Mar. 31, 2015

Notes to Financial Statements

Related Party Transactions Disclosure [Text Block]

6. 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 three months ended March 31 2013 was $0, and the outstanding accounts receivable balances due at December 31, 2013 was $0. 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 quarter ended September 30, 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. The Company’s chairman of the board of directors and chief executive officer has a material financial interest in Science with Vision. After this agreement was terminated in 2013, it did not have any financial impact in either the three months ended March 31, 2014 or the three months ended March 31, 2015.

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Note 10 - Net Income (Loss) Per Share (Tables)

3 Months Ended

Mar. 31, 2015

Notes Tables

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

	Three Months Ended
	March 31,
	2015		2014
Stock options		6,400		5,572
Warrants		74		74
Total		6,474		5,646

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Note 3 - Balance Sheet Details (Tables)

3 Months Ended

Mar. 31, 2015

Notes Tables

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

	March 31,			December 31,
(in thousands)	2015			2014
Trade receivables	$	2,703		$	2,904
Allowance for doubtful accounts		(383	)		(424	)
	$	2,320		$	2,480

Schedule of Inventory, Current [Table Text Block]

	March 31,			December 31,
(in thousands)	2015			2014
Finished goods	$	3,177		$	2,990
Inventory reserves		(2	)		(4	)
	$	3,175		$	2,986

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

(in thousands)	March 31,		December 31,
	2015		2014
Prepaid trade shows	$	150	$	177
Prepaid insurance		209		301
Manufacturing deposits		246		182
Subscriptions		39		82
Other fees and services		336		142
Other current assets		17		6
	$	997	$	890

Property, Plant and Equipment [Table Text Block]

(in thousands)	March 31,			December 31,
	2015			2014
Capitalized TearLab equipment	$	5,770		$	5,655
Leasehold improvements		51			51
Computer equipment and software		932			819
Furniture and office equipment		310			267
Medical equipment		425			426
	$	7,488		$	7,218
Less accumulated depreciation		(3,128	)		(2,714	)
	$	4,360		$	4,504

Schedule of Accrued Liabilities [Table Text Block]

(in thousands)	March 31,		December 31,
	2015		2014
Due to professionals	$	378	$	787
Due to employes and directors		1,522		1,589
Goods received but not yet invoiced		-		17
Sales and use tax liabilities		233		221
Royalty liability		309		330
Readers and tests cards in transit		8		-
Other		249		821
	$	2,699	$	3,765

Patents And Trademarks [Member]

Notes Tables

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

(in thousands)	March 31,			December 31,
	2015			2014
Patents	$	236		$	236
Trademarks		32			32
		268			268
Accumulated amortization		(195	)		(188	)
	$	73		$	80

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Note 10 - Net Income (Loss) Per Share

3 Months Ended

Mar. 31, 2015

Notes to Financial Statements

Earnings Per Share [Text Block]

10. NET INCOME ( LOSS) PER SHARE

Basic income (loss) per share is calculated by dividing net income (loss) by the weighted average number of common shares and vested restricted stock units outstanding. Diluted income (loss) per share is computed by dividing net income (loss), less any dilutive amounts recorded during the period for the change in fair value of warrant liabilities, by the weighted average number of common shares and vested restricted stock units outstanding and the weighted average number of dilutive common stock equivalents, from stock options, warrants, and non-vested restricted stock units. Common stock equivalents are only included in the diluted earnings per share calculation when their effect is dilutive. Diluted loss per share for the three months ended March 31, 2015 and the three months ended March 31, 2014 includes the dilutive impact of the gain recorded from the Company's June 30, 2011 warrants.

The following securities were not included in the calculation of diluted earnings per share because their effects were anti-dilutive

(in thousands)

:

	Three Months Ended
	March 31,
	2015		2014
Stock options		6,400		5,572
Warrants		74		74
Total		6,474		5,646

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Note 8 - Stockholders' Equity

3 Months Ended

Mar. 31, 2015

Notes to Financial Statements

Stockholders' Equity Note Disclosure [Text Block]

8 . STOCKHOLDERS’ EQUITY

(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

The Company has funded operations over the years through the issuance of equity in public and private offerings including 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 $3,055,000.

(c) Stock Incentive Plan

The Company has a stock incentive plan, the 2002 Stock Incentive Plan (the "Stock Incentive Plan"), under which up to 6,200,000 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 has been granted to a prospective employee, prospective consultant or prospective director 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 incentive 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.

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 requisite service period. The amount of expense recognized during the period is affected by subjective assumptions, including: estimates of the Company’s future volatility, the expected term for its stock options, option exercise behavior, the number of options expected to ultimately vest, and the timing of vesting for the Company’s share-based awards.

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

	Three months ended
(in thousands)	March 31,
	2015		2014
General and administrative	$	504	$	527
Clinical, regulatory and research and development		99		41
Sales and marketing		458		245
Stock-based compensation expense before income taxes	$	1,061	$	813

(d) Employee Stock Purchase Plan

In July 2014, the Company’s Board of Directors adopted the 2014 Employee Stock Purchase Plan, or the ESPP, which was approved by the Company's stockholders in June 2014 at the Company's Annual Meeting of Stockholders. A total of 671,500 shares of the Company’s common stock are reserved for issuance under the plan, which permits eligible employees to purchase common stock at a discount through payroll deductions.

The price at which stock is purchased under the ESPP is equal to 90% of the fair market value of the common stock on the first or the last day of the offering period, whichever is lower. Generally, each offering under the ESPP will be for a period of six months as determined by the Company's Board of Directors. Employees may invest up to 20% of their gross compensation through payroll deductions. In no event may an employee invest more than $25,000 worth of stock in the plan during each calendar year or more than 5,000 shares per offering period. During the year ended December 31, 2014, the Company received employee contributions totaling $114,000 and issued 47,902 shares of common stock.

As the ESPP is a compensatory plan as defined by the authoritative guidance for stock compensation, stock-based compensation expense of $19,000 is applicable to the three months ended March 31, 2015. The fair value of each purchase option under the ESPP is estimated at the beginning of each six-month offering period using the Black-Scholes model with the following weighted-average assumptions.

Volatility	71	%
Expected life (in years)	0.5
Risk-free interest rate	0.12	%
Dividend yield	0	%

(e) Warrants

On June 13, 2011, the Company issued 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. 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. There were 74,063 of these warrants outstanding at March 31, 2015 and December 31, 2014.

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 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 March 31, 2015. The Company estimated the fair value of the warrants at the date of issuance using the Black Scholes option 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.

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. The Company remeasures the fair value of the warrants 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 estimated fair value of the 2011 Warrants at March 31, 2015 was determined using the Black-Scholes option-pricing model with the following assumptions:

Volatility	70	%
Expected life of Warrants (in years)	1.25
Risk-free interest rate	0.34	%
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 three months ended March 31, 2014 certain holders of 2011 Warrants exercised warrants for 304,945 shares of common stock. The Company received $0 in proceeds from the cashless exercises during the three month period ended March 31, 2014. 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 $2,616

,000, an increase of $263,000 from the previous value at December 31, 2013.

This increase was recorded as an expense in other income (expense) in the condensed consolidated statement of operations and comprehensive loss for the three months ended March 31, 2014.

The Company recorded 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 estimated the fair value of the remaining warrants as of March 31, 2015 to be $143,000, a decrease of $113,000 from the previous value at December 31, 2014. This amount was recorded as income to other income (expense) in the condensed consolidated statement of operations and comprehensive loss for the three months ended March 31, 2015.

The following table provides activity for the Warrants outstanding through March 31, 2015 (in thousands, except weighted average exercise prices):

				Weighted
	Number of			average
	warrants			exercise
	outstandng			price
Oustanding, December 2013		599		$	1.83
Exercised		(305	)		1.86
Expired		-			-
Outstanding, March 31, 2014		294			1.79
Exercised		-			-
Expired		-			-
Outstanding, March 31, 2015		294		$	1.79

(f)

Exchange Right

In August 2014, the Company sold membership units in OcuHub LLC, a Delaware limited liability company and a wholly owned subsidiary of TearLab Corporation. The membership units sold generated cash proceeds of $250,000 in exchange for 2% ownership of OcuHub LLC. In connection with the sale of the membership units, the new members received an exchange right allowing the units to be exchanged upon written notice and during a specified exchange window for shares in our common stock. The first available exchange window follows the one year anniversary date of the purchase of membership units. The variable number of shares of common stock provided upon exchange is equal to the initial capital contribution amount received for the membership units sold divided by the closing sales price of TearLab Corporation common stock during the respective exchange window. Due to the exchange right option available to the membership unit holders, the entire loss from continuing operations related to OcuHub LLC of

$788,000 for the three months ended March 31, 2015 has been attributed to TearLab Corporation within the consolidated financial statements.

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Note 9 - Comprehensive Income (Loss)

3 Months Ended

Mar. 31, 2015

Notes to Financial Statements

Comprehensive Income (Loss) Note [Text Block]

9 . COMPREHENSIVE INCOME (LOSS)

For the three months ended March 31, 2015 and 2014, comprehensive loss was equal to net loss for each period.

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Note 11 - Condensed Consolidated Statements of Cash Flows

3 Months Ended

Mar. 31, 2015

Notes to Financial Statements

Cash Flow, Supplemental Disclosures [Text Block]

1 1 . CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

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

	Three Months Ended
(in thousands)	March 31,
	2015			2014
Accounts receivable, net	$	160		$	474
Inventory		(189	)		(292	)
Prepaid expenses and other assets		(96	)		92
Other non-current assets		(40	)		(7	)
Accounts payable		272			911
Accrued liabilities		(769	)		(352	)
Deferred rent/revenue		(21	)		34
	$	(683	)	$	860

The following table lists those items that have been excluded from the condensed consolidated statements of cash flows as they relate to non-cash transactions and additional cash flow information:

	Three months ended
	March 31,
(in thousands)	2015		2014
Reclass of warrant liabilities to Stockholders Equity upon exercise of warrants		-	$	2,616
Additions to fixed assets included in accounts payable and accrued liabilities	$	311	$	4

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Note 4 - Intangible Assets (Details Textual) (USD $)	3 Months Ended
	Mar. 31, 2015	Mar. 31, 2014
Finite-Lived Intangible Asset, Useful Life	10 years
Amortization of Intangible Assets	$ 382,000	$ 303,000
Ocuhub Platform Technology [Member]
Finite-Lived Intangible Asset, Useful Life	5 years

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Note 7 - Fair Value Measurements (Tables)

3 Months Ended

Mar. 31, 2015

Notes Tables

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, 2015	$	256
Warrant exercises		-
Change in fair value of warrant liability included in other (income) / expense		(113	)
Balance of warrant liability at March 31, 2015	$	143

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Note 2 - Significant Accounting Policies (Details Textual) (USD $)	3 Months Ended	12 Months Ended	0 Months Ended
	Mar. 31, 2015	Dec. 31, 2014	Mar. 14, 2014
Revenue Recognition, Sales Returns, Reserve for Sales Returns	$ 69,000	$ 77,000
Minimum [Member]
Customer Purchase Commitment Period	1 year
Maximum [Member]
Customer Purchase Commitment Period	3 years
OcuHub Business Unit [Member]
Business Combination, Consideration Transferred			1,400,000
Acquired Working Capital Deficit			(201,000)
Business Combination, Recognized Identifiable Assets Acquired and Liabilities Assumed, Intangible Assets, Other than Goodwill			1,564,000
Business Combination, Recognized Identifiable Assets Acquired and Liabilities Assumed, Property, Plant, and Equipment			38,000
Business Combination, Recognized Identifiable Assets Acquired and Liabilities Assumed, Current Assets, Prepaid Expense and Other Assets			30,000
Business Combination, Recognized Identifiable Assets Acquired and Liabilities Assumed, Current Liabilities, Other			$ 230,000

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Note 12 - Commitments and Contingencies (Details Textual) In Millions, unless otherwise specified	3 Months Ended
	Mar. 31, 2015 USD ($)	Mar. 31, 2015 AUD	Aug. 01, 2011 USD ($)	Aug. 01, 2011 AUD
Purchase Commitment, Remaining Minimum Amount Committed	$ 1.8	2.4	$ 7.9	10.3
Long-term Purchase Commitment, Period	10 years	10 years
Loss Contingency, Estimate of Possible Loss	$ 6.1	7.9

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Note 8 - Stockholders' Equity (Details Textual) (USD $)	1 Months Ended		3 Months Ended		1 Months Ended	12 Months Ended	1 Months Ended
	Jul. 30, 2013	Jun. 30, 2011	Mar. 31, 2015	Mar. 31, 2014	Jul. 31, 2014	Dec. 31, 2014	Aug. 31, 2014	Dec. 31, 2013	Jun. 13, 2011
Class of Warrant or Right, Outstanding			294,000	294,000				599,000
Common Stock, Shares Authorized			65,000,000			65,000,000
Common Stock, Par or Stated Value Per Share			$ 0.001			$ 0.001
Preferred Stock, Shares Authorized			10,000,000			10,000,000
Preferred Stock, Par or Stated Value Per Share			$ 0.001			$ 0.001
Stock Issued During Period, Shares, New Issues	2,990,000
Share Price	$ 13.50
Proceeds from Issuance of Common Stock	$ 40,365,000
Payments of Stock Issuance Costs	3,055,000			30,000
Allocated Share-based Compensation Expense			1,061,000	813,000
Class of Warrant or Right, Number of Securities Called by Warrants or Rights			219,604
Class of Warrant or Right, Exercise Price of Warrants or Rights			$ 1.86	$ 1.79				$ 1.83
Proceeds from Issuance or Sale of Equity		7,000,000
Price Per Unit Issued Consisting of One Share and One Warrant		$ 1.82
Number of Common Share in Each Unit Issued		1
Number of Warrant in Each Unit Issued		1
Warrants and Rights Outstanding			143,000
Warrants Exercised				305,000
Financing Warrants [Member]
Class of Warrant or Right, Outstanding			74,063			74,063
Class of Warrant or Right, Number of Securities Called by Warrants or Rights									109,375
Class of Warrant or Right, Exercise Price of Warrants or Rights									$ 1.60
Two Thousand Eleven Warrants [Member]
Class of Warrant or Right, Number of Securities Called by Warrants or Rights		3,846,154
Class of Warrant or Right, Exercise Price of Warrants or Rights		$ 1.86
Fair Value Assumptions, Expected Volatility Rate		101.00%
Fair Value Assumptions, Expected Term		5 years
Fair Value Assumptions, Risk Free Interest Rate		1.76%
Warrants and Rights Outstanding		5,518,000	143,000	2,616,000
Proceeds from Issuance of Warrants		3,012,000
Warrants Exercised				304,945
Proceeds from Warrant Exercises				0
Increase (Decrease) in Derivative Liabilities			(113,000)	263,000
Stock Incentive Plan [Member] | Employees, Directors and Consultants [Member]
Share-based Compensation Arrangement by Share-based Payment Award, Number of Shares Available for Grant			6,200,000
Stock Incentive Plan [Member] | Non-Statutory Stock Options [Member] | Minimum [Member]
Share-based Compensation Arrangement by Share-based Payment Award, Purchase Price of Common Stock, Percent			85.00%
Stock Incentive Plan [Member] | Options Granted to Holder of More than 10% of Company's Common Stock [Member] | Minimum [Member]
Share-based Compensation Arrangement by Share-based Payment Award, Purchase Price of Common Stock, Percent			110.00%
Stock Incentive Plan [Member] | Options Granted to Holder of More than 10% of Company's Common Stock [Member]
Share-based Compensation Arrangement by Share-based Payment Award, Award Vesting Period			5 years
Stock Incentive Plan [Member] | Employee Stock Option [Member] | Minimum [Member]
Share-based Compensation Arrangement by Share-based Payment Award, Award Vesting Rights, Percentage			20.00%
Stock Incentive Plan [Member] | Employee Stock Option [Member]
Share-based Compensation Arrangement by Share-based Payment Award, Expiration Period			10 years
Stock Incentive Plan [Member]
Ownership Percentage of Company's Common Stock Used as a Factor in Determining the Exercise Price Per Share of Options Granted			10.00%
Employee Stock Purchase Plan 2014 [Member]
Share-based Compensation Arrangement by Share-based Payment Award, Purchase Price of Common Stock, Percent					90.00%
Common Stock, Capital Shares Reserved for Future Issuance					671,500
Employee Stock Purchase Plan Offering Period					180 days
Share-based Compensation, Employee Stock Purchase Plan Contribution Percentage					20.00%
Share-based Compensation, Employee Stock Purchase Plan Contribution Maximum Amount					25,000
Share-based Compensation, Employee Stock Purchase Plan Contribution Maximum Shares					5,000
Stock Issued During Period, Value, Employee Stock Purchase Plan						114,000
Stock Issued During Period, Shares, Employee Stock Purchase Plans						47,902
Allocated Share-based Compensation Expense			19,000
Private Placement [Member]
Stock Issued During Period, Shares, New Issues		3,846,154
OcuHub Business Unit [Member]
Proceeds From Sale of Membership Units							250,000
Membership Unit Percentage							2.00%
Exchange Right Term							1 year
Income (Loss) from Continuing Operations, Including Portion Attributable to Noncontrolling Interest			$ 788,000

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Condensed Consolidated Statements of Cash Flows (Unaudited) (USD $)	3 Months Ended
	Mar. 31, 2015	Mar. 31, 2014
OPERATING ACTIVITIES
Net loss for the period	$ (8,168,000)	$ (5,557,000)
Adjustments to reconcile net loss to cash used in operating activities:
Stock-based compensation	1,061,000	813,000
Depreciation of fixed assets	414,000	297,000
Amortization of patents and trademarks	7,000	7,000
Amortization of intangible assets	382,000	303,000
Changes in fair value of warrant obligations	(113,000)	(307,000)
Loss on disposal of fixed assets		2,000
Amortization of deferred financing charges	15,000
Interest accrued	51,000
Net change in working capital and non-current asset balances related to operations	(683,000)	860,000
Cash used in operating activities	(7,034,000)	(3,582,000)
INVESTING ACTIVITIES
Additions to fixed assets, net of proceeds	(581,000)	(880,000)
Cash paid for business acquisition		(1,400,000)
Cash used in investing activities	(581,000)	(2,280,000)
FINANCING ACTIVITIES
Term loan	14,554,000
Proceeds from the exercise of options	38,000	137,000
Cost of issuance of shares		(30,000)
Cash provided by financing activities	14,592,000	107,000
Increase (decrease) in cash and cash equivalents during the period	6,977,000	(5,755,000)
Cash, beginning of period	16,338,000	37,778,000
Cash, end of period	$ 23,315,000	$ 32,023,000

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Note 5 - CRG LP Term Loan

3 Months Ended

Mar. 31, 2015

Notes to Financial Statements

Debt Disclosure [Text Block]

5. TERM LOAN

On March 4, 2015, the Company executed a term loan agreement with CRG LP and certain of its affiliate funds (“CRG”) as lenders providing the Company with access of up to $35,000,000 under the arrangement. The Company received $15,000,000 in gross proceeds under the arrangement on March 4, 2015, and additional amounts up to $20,000,000 are available to TearLab, at its option, through July 2016 subject to the satisfaction of certain revenue milestones and other borrowing conditions. The agreement has a term of six years and bears interest at 13% per annum, with quarterly payments of interest only for the first four years. While interest on the loan is accrued at 13% per annum, the Company may elect to make interest-only payments at 8.5% per annum. The unpaid interest of 4.5% is added to the principal of the loan and is subject to additional accrued interest. The accrued interest can be deferred and paid together with the principal in the fifth and sixth years.

At March 31, 2015, the principal balance outstanding under the CRG LP Term Loan was $15,051,000.

Financing and legal fees were recorded as a $446,000 direct discount to the long-term debt which is being amortized with the effective interest method.

The company has elected early adoption of the authoritative accounting guidance

that requires debt issuance costs related to a recognized debt liability to be presented on the balance sheet as a direct deduction from the debt liability rather than as an asset.

The agreement provides for prepayment fees of 5% of the outstanding balance of the loan if the loan is repaid prior to December 31, 2015. The prepayment fee is reduced 1% per year for each subsequent year until maturity.

The loan is collateralized by all assets of the Company. Additionally, the terms of the Term Loan Agreement contain various affirmative and negative covenants agreed to by the Company. Among them, the Company must attain minimum certain annual revenues and minimum cash threshold levels

. The minimum annual revenue threshold level required by the Term Loan is $25.0 million for calendar year 2015. The minimum cash balance required is $5.0 million, subject to certain conditions.

If the Company does not have annual revenues greater or equal to the annual revenue covenant in a calendar year, the Company will have to raise subordinated debt or equity ( the “CRG Equity Cure” ) equal to twice the difference between the annual revenue and the revenue covenant, with the total proceeds from this financing to be used to reduce the principal of the CRG LP Term Loan. In the event the Company does not achieve the minimum revenue threshold and it cannot complete the CRG Equity Cure, it may be in default of the Term Loan. In the event of a default, we may be required to repay any outstanding amounts earlier than anticipated, and the lenders may foreclose on their security interest in our assets.

Borrowings under the term loan are subject to certain conditions, including the non-occurrence of a material adverse change in our business or operations (financial or otherwise), or a material impairment of the prospect of repayment of obligations.

As of March 31, 2015, the Company was in compliance with all of the covenants.

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Note 3 - Balance Sheet Details (Details Textual) (USD $)	3 Months Ended
	Mar. 31, 2015	Mar. 31, 2014
Amortization Of Patents And Trademarks	$ 7,000	$ 7,000
Depreciation	414,000	297,000
Patents And Trademarks [Member]
Amortization Of Patents And Trademarks	$ 7,000	$ 7,000

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Note 6 - Related Party Transactions (Details Textual) (Science With Vision Inc. [Member])	0 Months Ended	3 Months Ended
	Sep. 03, 2013 Termination of Distribution Agreement [Member] CAD	Sep. 30, 2013 Termination of Distribution Agreement [Member] USD ($)	Mar. 31, 2013 USD ($)	Dec. 31, 2013 USD ($)
Revenue from Related Parties			$ 0
Due from Related Parties, Current				0
Related Party Transaction, Expenses from Transactions with Related Party	200,000	$ 190,000

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Note 4 - Intangible Assets (Tables)

3 Months Ended

Mar. 31, 2015

Notes Tables

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

(in thousands)	March 31, 2015				December 31 2014
			Accumulated				Accumulated
	Cost		Amortization		Cost		Amortization
TearLab® technology	$	12,172	$	10,195	$	12,172	$	9,892
OcuHub platform technology		1,564		326		1,564		248
	$	13,736	$	10,521	$	13,736	$	10,140

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

	Amortization of
(in thousands)	intangible assets
Remainder of 2015	$	1,145
2016		1,379
2017		313
2018		313
2019		65
	$	3,215