Stockholders' Equity

12 Months Ended

Dec. 30, 2011

Stockholders' Equity

Note 14 — Stockholders’ Equity

Common Stock

During fiscal year 2011, the Company issued 155,000 shares of restricted stock to certain employees. Restricted shares are issued at fair market value on the date of grant, vest over a period of one to four years, and are subject to forfeiture until vested or the service period is achieved and the restriction is lapsed or terminated.    As the restriction lapses and the stock vests, the expense is included in stock-based compensation. As of December 30, 2011 none of these restricted shares had vested.

Share-Based Payments

The Company issues new shares upon option exercise once the optionee remits payment for the exercise price. The compensation cost that has been charged against income is set forth below (in thousands):

	Fiscal Year Ended
	December 30, 2011		December 31, 2010		January 1, 2010
Stock based compensation expense	$	1,361	$	852	$	926
Restricted stock expense		466		285		194
Common stock issued to employees		—		—		286
Consultant compensation		87		111		22
Total	$	1,914	$	1,248	$	1,428

There was no net income tax benefit recognized in the consolidated statements of operations for share-based compensation arrangements as the Company fully offsets net deferred tax assets with a valuation allowance (see Note 12).  In addition, the Company capitalized $121,000, $85,000, and $118,000 of stock based compensation to inventory for the fiscal years ended December 30, 2011, December 31, 2010, and January 1, 2010, respectively, and recognizes those amounts as expense in Cost of Sales as the inventory is sold.

Stock Option Plans

In fiscal year 2003, the Board of Directors approved the 2003 Omnibus Equity Incentive Plan (the “2003 Plan”) authorizing awards of equity compensation, including options to purchase common stock and restricted shares of common stock. The 2003 Plan amends restates and replaces the 1991 Stock Option Plan, the 1995 Consultant Stock Plan, the 1996 Non-Qualified Stock Plan and the 1998 Stock Option Plan (the “Restated Plans”). Under provisions of the 2003 Plan, all of the unissued shares in the Restated Plans are reserved for issuance in the 2003 Plan. Each year the number of shares reserved for issuance under the 2003 Plan has been increased as necessary to provide that 2% of the total shares of common stock outstanding on the immediately preceding December 31 would be reserved for issuance, up to a maximum of 1,586,371 additional shares, and a maximum total of 6,500,000 shares issuable under the 2003 Plan and all of the Restated Plans incorporated in it. The 6,500,000 maximum shares were reached on January 1, 2007. On May 19, 2010, the stockholders of STAAR approved the Restated 2003 Omnibus Plan, which increased the number of shares available for grants under the Plan by 2,000,000 shares and extended the term of the plan to May 18, 2020.

Shares subject to grants under the 2003 Omnibus Plan and Restated Plans that lapse or terminate in accordance with their terms become available for new grants under the 2003 Omnibus Plan. As of December 30, 2011, approximately 1,712,198 shares were authorized and available for grants under the 2003 Omnibus Plan. The 2003 Plan provides for various forms of stock-based incentives. To date, of the available forms of awards under the 2003 Plan, the Company has granted only stock options and restricted stock. Options under the plan are granted at fair market value on the date of grant, become exercisable generally over a three- or four-year service period, or as determined by the Board of Directors, and expire over periods not exceeding 10 years from the date of grant. Certain option and share awards provide for accelerated vesting if there is a change in control (as defined in the 2003 Plan). Restricted stock grants under the 2003 Plan generally vest over a period of one, three or four years. Pursuant to the plan, options for 3,058,778 shares were outstanding at December 30, 2011 with exercise prices ranging between $0.95 and $10.77 per share. There were 155,000 shares of restricted stock outstanding at December 30, 2011.

In fiscal year 1998, the Board of Directors approved the 1998 Stock Option Plan, authorizing the granting of options to purchase common stock or awards of common stock. Pursuant to the plan, options for 5,000 shares were outstanding at December 30, 2011 with an exercise price of $3.60 per share.  No further awards may be made under this plan.

During the fiscal year ended December 30, 2011, officers, employees and others exercised 850,958 options from the 1995, 1998, and 2003 stock option plans at prices ranging from $0.95 to $7.86 resulting in net cash proceeds to the Company totaling $3,343,000.

 Assumptions

The fair value of each option award is estimated on the date of grant using a Black-Scholes option valuation model applying the assumptions noted in the following table. Expected volatilities are based on historical volatility of the Company’s stock. The Company uses historical data to estimate option exercise and employee termination behavior. The expected term of options granted is derived from the historical exercise activity over the past 15 years, and represents the period of time that options granted are expected to be outstanding.  The Company has calculated a 10.05% estimated forfeiture rate used in the model for fiscal year 2011 option grants based on historical forfeiture experience.  The risk-free rate for periods within the contractual life of the option is based on the U.S. Treasury yield curve in effect at the time of grant.

	Fiscal Year Ended
	December 30, 2011			December 31, 2010			January 1, 2010
Expected dividend yield		0	%		0	%		0	%
Expected volatility		77	%		80	%		74	%
Risk-free interest rate		1.82	%		2.13	%		1.92	%
Expected term (in years)		5.49			5.60		5.5

A summary of option activity under the Plans as of December 30, 2011 is presented below:

Options	Shares (000’s)			Weighted- Average Exercise Price		Weighted- Average Remaining Contractual Term		Aggregate Intrinsic Value (000’s)
Outstanding at December 31, 2010		3,331			4.35
Granted		695			5.91
Exercised		(851	)		3.93
Forfeited or expired		(111	)		5.21
Outstanding at December 30, 2011		3,064		$	4.79		6.51	$	17,369
Exercisable at December 30, 2011		1,979		$	4.48		5.14		11,894

The weighted-average grant-date fair value of options granted during the fiscal years ended December 30, 2011, December 31, 2010, and January 1, 2010, was $3.85, $3.13, and $0.96 per option respectively.  The total fair value of options vested during fiscal years ended December 30, 2011, December 31, 2010, and January 1, 2010, was $1,049,000, $1,143,000, and $1,194,000, respectively. The total intrinsic value of options exercised during the fiscal years ended December 30, 2011, December 31, 2010, and January 1, 2010, was $2,533,000, $701,000, and $1,000, respectively.

A summary of the Company’s non-vested options as of December 30, 2011 and changes during the period is presented below:

Nonvested Options	Options (000’s)			Weighted- Average Grant Date Fair Value
Nonvested at December 31, 2010		885		$	2.89
G  Granted		694			4.16
V  Vested		(383	)		2.70
F   Forfeited		(111	)		3.78
N  Nonvested at December 30, 2011		1,085		$	5.35

As of December 30, 2011, there was $2.5 million of total unrecognized compensation cost related to non-vested share-based compensation arrangements granted under the Plans. That cost is expected to be recognized over a weighted-average period of 2.00 years.

The following table summarizes information about stock options outstanding and exercisable at December 30, 2011 (in thousands, except per share data):

Range of Exercise Prices		Number Outstanding at December 30, 2011		Options Outstanding Weighted-Average Remaining Contractual Life	Weighted-Average Exercise Price		Number Exercisable at December 30, 2011		Weighted-Average Exercise Price
$	0.95		60	7.25 years	$	0.95		39		0.95
$	1.56 to $ 2.30		394	6.29 years	$	2.21		394	$	2.21
$	2.45 to $ 3.60		312	7.24 years	$	3.23		181	$	3.10
$	3.75 to $5.29		815	5.31 years	$	4.30		680	$	4.21
$	5.39 to $7.32		1,251	7.44 years	$	5.86		516	$	6.19
$	7.50 to $8.12		232	4.98 years	$	8.21		169	$	7.94
			3,064	6.51 years	$	4.79		1,979	$	4.48

A summary of warrants to purchase Company stock issued to Broadwood as discussed inNote 10 as of December 30, 2011 is presented below:

Warrants	Shares (000’s)		Weighted- Average Exercise Price		Weighted- Average Remaining Contractual Term		Aggregate Intrinsic Value (000’s)
Outstanding at December 31, 2010		1,470	$	4.10
Granted		—		—
Exercised		—		—
Forfeited or expired		—		—
Outstanding at December 30, 2011		1,470	$	4.10		2.62	$	6,020
Exercisable at December 30, 2011		1,470	$	4.10		2.62	$	6,020