10-Q

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

________________

Form 10-Q

(Mark One)

þ	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
	For the quarterly period ended:    April 4, 2014
	Or
o	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: 0-11634

________________

STAAR SURGICAL COMPANY

(Exact name of registrant as specified in its charter)

Delaware	95-3797439
(State or other jurisdiction of incorporation or organization)	(I.R.S. Employer Identification No.)

1911 Walker Avenue

Monrovia, California 91016

(Address of principal executive offices)

(626) 303-7902

(Registrant’s telephone number, including area code))

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes þ     No o

Indicate by check mark whether the Registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the Registrant was required to submit and post such files).  Yes þ     No o

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. (Check one):

o Large accelerated filer þ Accelerated filer o Non-accelerated filer (Do not check if a smaller reporting company) o 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 o     No þ

The registrant has 38,391,311 shares of common stock, par value $0.01 per share, issued and outstanding as of May 6, 2014.

STAAR SURGICAL COMPANY

INDEX

			PAGE
			NUMBER
PART I – FINANCIAL INFORMATION
	Item 1.	Financial Statements (Unaudited).	1
	Item 2.	Management's Discussion and Analysis of Financial Condition and Results of Operations.	11
	Item 3.	Quantitative and Qualitative Disclosures About Market Risk.	18
	Item 4.	Controls and Procedures.	18
PART II – OTHER INFORMATION
	Item 1.	Legal Proceedings.	19
	Item 1A.	Risk Factors.	19
	Item 4.	Mine Safety Disclosures.	19
	Item 5.	Other Information.	19
	Item 6.	Exhibits.	19

STAAR SURGICAL COMPANY

CONDENSED CONSOLIDATED BALANCE SHEETS

(In thousands, except par value amounts)

(Unaudited)

	April 4, 2014			January 3, 2014
ASSETS
Current assets:
Cash and cash equivalents	$	21,070		$	22,954
Accounts receivable trade, net		11,101			10,731
Inventories, net		13,785			12,514
Prepaids, deposits and other current assets		4,770			3,503
Deferred income taxes		377			373
Total current assets		51,103			50,075
Property, plant and equipment, net		8,832			7,405
Intangible assets, net		1,288			1,380
Goodwill		1,786			1,786
Deferred income taxes		631			626
Other assets		668			659
Total assets	$	64,308		$	61,931
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Line of credit	$	4,800		$	4,750
Accounts payable		6,161			6,263
Deferred income taxes		738			739
Obligations under capital leases		265			288
Other current liabilities		6,379			6,372
Total current liabilities		18,343			18,412
Obligations under capital leases		119			141
Deferred income taxes		1,683			1,654
Asset retirement obligations		130			157
Pension liability		2,775			2,715
Total liabilities		23,050			23,079
Commitments and contingencies (Note 12)
Stockholders’ equity:
Common stock, $0.01 par value; 60,000 shares authorized; 38,123 and 37,911 shares issued and outstanding at April 4, 2014 and January 3, 2014, respectively		381			379
Additional paid-in capital		174,007			170,246
Accumulated other comprehensive income		284			282
Accumulated deficit		(133,414	)		(132,055	)
Total stockholders’ equity		41,258			38,852
Total liabilities and stockholders’ equity	$	64,308		$	61,931

See accompanying notes to the condensed consolidated financial statements.

1

STAAR SURGICAL COMPANY

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(In thousands, except per share amounts)

(Unaudited)

	Three Months Ended
	April 4, 2014			March 29, 2013
Net sales	$	20,178		$	18,001
Cost of sales		6,294			5,347
Gross profit		13,884			12,654
General and administrative		5,396			3,958
Marketing and selling		6,138			5,286
Research and development		3,484			1,366
Medical device tax		40			59
Other general and administrative expenses		168			901
Operating income (loss)		(1,342	)		1,084
Other income (expense):
Interest income		9			35
Interest expense		(33	)		(83	)
Gain (loss) on foreign currency transactions		66			(341	)
Other income, net		160			90
Total other income (expense), net		202			(299	)
Income (loss) before provision for income taxes		(1,140	)		785
Provision for income taxes		219			314
Net income (loss)	$	(1,359	)	$	471
Net income (loss) per share – basic	$	(0.04	)	$	0.01
Net income (loss) per share – diluted	$	(0.04	)	$	0.01
Weighted average shares outstanding – basic		37,794			36,427
Weighted average shares outstanding – diluted		37,794			37,418

See accompanying notes to the condensed consolidated financial statements.

2

STAAR SURGICAL COMPANY

CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS

(In thousands)

(Unaudited)

	Three Months Ended
	April 4, 2014			March 29, 2013
Net income (loss)	$	(1,359	)	$	471
Other comprehensive income (loss):
Defined Benefit Pension Plans:
Net change in plan assets		(11	)		(11	)
Reclassification into earnings		6			8
Foreign currency translation		11			(672	)
Tax effect		(4	)		—
Other comprehensive income (loss), net of tax		2			(675	)
Comprehensive loss	$	(1,357	)	$	(204	)

See accompanying notes to the condensed consolidated financial statements.

3

STAAR SURGICAL COMPANY

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(In thousands)

(Unaudited)

	Three Months Ended
	April 4, 2014			March 29, 2013
Cash flows from operating activities:
Net income (loss)	$	(1,359	)	$	471
Adjustments to reconcile net income (loss) to net cash used in operating activities:
Depreciation of property and equipment		453			369
Amortization of intangibles		106			117
Deferred income taxes		24			7
Fair value adjustment of warrant		—			(27	)
Gain on disposal of property and equipment		—			(28	)
Change in net pension liability		45			58
Stock-based compensation expense		1,500			1,034
Accretion of asset retirement obligation		1			5
Provision for sales return and bad debt expense		(55	)		27
Changes in working capital:
Accounts receivable		(295	)		(322	)
Inventories		(1,137	)		288
Prepaids, deposits and other current assets		(1,270	)		(581	)
Accounts payable		(610	)		(1,328	)
Other current liabilities		3			(522	)
Net cash used in operating activities		(2,594	)		(432	)
Cash flows from investing activities:
Acquisition of property and equipment		(1,414	)		(1,218	)
Net cash used in investing activities		(1,414	)		(1,218	)
Cash flows from financing activities:
Repayment of capital lease obligations		(46	)		(242	)
Proceeds from exercise of stock options		2,188			23
Net cash provided by (used in) financing activities		2,142			(219	)
Effect of exchange rate changes on cash and cash equivalents		(18	)		(563	)
Decrease in cash and cash equivalents		(1,884	)		(2,432	)
Cash and cash equivalents, at beginning of the period		22,954			21,675
Cash and cash equivalents, at end of the period	$	21,070		$	19,243

See accompanying notes to the condensed consolidated financial statements.

4

STAAR SURGICAL COMPANY

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

April 4, 2014

(Unaudited)

Note 1 — Basis of Presentation and Significant Accounting Policies

The consolidated financial statements of the Company present the financial position, results of operations, and cash flows of STAAR Surgical Company and its wholly owned subsidiaries. All significant intercompany accounts and transactions have been eliminated. The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States (“GAAP”) for interim financial information and with the instructions to Form 10-Q and Article 10 of Regulation S-X of the Securities Exchange Commission. In accordance with those rules and regulations certain information and footnote disclosures normally included in comprehensive financial statements have been condensed or omitted pursuant to such rules and regulations. The consolidated balance sheet as of January 3, 2014 derives from the audited financial statements at that date, but does not include all the information and footnotes required by GAAP. These financial statements should be read in conjunction with the audited financial statements and notes thereto included in the Company’s Annual Report on Form 10-K for the year ended January 3, 2014.

The condensed consolidated financial statements for the three months ended April 4, 2014 and March 29, 2013, in the opinion of management, include all adjustments, consisting only of normal recurring adjustments, necessary for a fair presentation of the Company’s financial condition and results of operations. The results of operations for the three months ended April 4, 2014 and March 29, 2013 are not necessarily indicative of the results to be expected for any other interim period or for the entire year.  

Each of the Company's reporting periods ends on the Friday nearest to the quarter ending date and generally consists of 13 weeks.  Unless the context indicates otherwise “we,” “us,” the “Company,” and “STAAR” refer to STAAR Surgical Company and its consolidated subsidiaries.

Prior Year Reclassifications

Certain reclassifications have been made to the prior periods’ unaudited condensed financial statements and related note disclosures to conform to current period’s presentation.

5

Note 2 — Inventories

Inventories, net are stated at the lower of cost, determined on a first-in, first-out basis, or market and consisted of the following (in thousands):

	April 4,		January 3,
	2014		2014
Raw materials and purchased parts	$	1,281	$	1,367
Work-in-process		1,032		913
Finished goods		12,448		11,029
		14,761		13,309
Less: inventory reserves		976		795
	$	13,785	$	12,514

Note 3 — Prepaids, Deposits, and Other Current Assets

Prepaids, deposits, and other current assets consisted of the following (in thousands):

	April 4,		January 3,
	2014		2014
Prepaids and deposits	$	2,820	$	2,157
Value added tax (VAT) receivable		681		618
Deferred charge for foreign profits		280		362
Other current assets		989		366
	$	4,770	$	3,503

Note 4 — Property, Plant and Equipment

Property, plant and equipment consisted of the following (in thousands):

	April 4,		January 3,
	2014		2014
Machinery and equipment	$	17,011	$	16,225
Furniture and fixtures		4,980		4,837
Leasehold improvements		7,516		6,552
		29,507		27,614
Less: accumulated depreciation		20,675		20,209
	$	8,832	$	7,405

Note 5 – Amortizable Intangible Assets

Amortizable intangible assets consisted of the following (in thousands):

	April 4, 2014							January 3, 2014
	Gross Carrying Amount		Accumulated Amortization			Net		Gross Carrying Amount		Accumulated Amortization			Net
Amortized intangible assets:
Patents and licenses	$	10,644		(10,114	)	$	530	$	10,637	$	(10,057	)	$	580
Customer relationships		1,506		(941	)		565		1,490		(894	)		596
Developed technology		957		(764	)		193		947		(743	)		204
Total	$	13,107	$	(11,819	)	$	1,288	$	13,074	$	(11,694	)	$	1,380

6

Note 6 – Other Current Liabilities

Other current liabilities consisted of the following (in thousands):

	April 4, 2014		January 3, 2014
Accrued salaries and wages	$	2,691	$	1,630
Accrued severance		837		731
Accrued bonuses		583		935
Accrued insurance		373		551
Accrued audit fees		231		328
Accrued commission		229		528
Accrued income taxes		173		485
Other(1)		1,262		1,184
	$	6,379	$	6,372

⁽¹⁾No item in “Other” above exceeds 5% of the total other current liabilities

Note 7 – Pension Plans

The following table summarizes the components of net periodic pension cost recorded for the Company’s defined benefit pension plans (in thousands):

	Three Months Ended April 4, 2014			Three Months Ended March 29, 2013
Service cost	$	116		$	124
Interest cost		35			27
Expected return on plan assets		(27	)		(23	)
Net amortization of transitional obligation (a)		—			3
Amortization of prior service cost (a)		—			—
Actuarial loss, recognized in current period (a)		6			5
	$	130		$	136

(a) Amounts reclassified from accumulated other comprehensive income.

During the three months ended April 4, 2014 and March 29, 2013, the Company made cash contributions totaling approximately $69,000 and $59,000 to its Swiss pension plan and expects to make additional cash contributions totaling approximately $217,000 during the remainder of 2014. The Company is not required to and does not make contributions to its Japan pension plan.

Note 8 — Basic and Diluted Income (Loss) Per Share

The following table sets forth the computation of basic and diluted net income (loss) per share (in thousands except per share amounts):

	Three Months Ended
	April 4, 2014			March 29, 2013
Numerator:
Net income (loss)	$	(1,359	)	$	471
Denominator:
Weighted average common shares and denominator for basic calculation:
Weighted average common shares outstanding		38,116			36,660
Less: Unvested restricted stock		322			233
Denominator for basic calculation		37,794			36,427
Weighted average effects of potentially dilutive common stock:
Stock options		—			522
Warrants		—			400
Restricted stock		—			69
Denominator for diluted calculation		37,794			37,418
Net income (loss) per share – basic	$	(0.04	)	$	0.01
Net income (loss) per share – diluted	$	(0.04	)	$	0.01

7

For the three months ended April 4, 2014, stock options, warrants, restricted stock and restricted stock units totaling approximately 2,798,000 weighted-average shares of common stock were excluded from the calculation of diluted loss per share, as the effect of including them would have been anti-dilutive, as it would have reduced the loss per share.

For the three months ended March 29, 2013, stock options to purchase approximately 2,035,000 weighted- average common shares and 98,000 weighted-average restricted stock were not included in the computation of diluted earnings per share because the effect of including them would have been anti-dilutive.

Note 9 — Geographic and Product Data

The Company markets and sells its products in over 60 countries and has manufacturing sites in the United States and Switzerland. Other than the United States, Japan, Korea, China, and Spain the Company does not conduct business in any country in which its sales exceed 5% of consolidated sales. Sales are generally attributed to countries based on location of customers. The composition of the Company’s net sales to unaffiliated customers is set forth below (in thousands):

	Three Months Ended
	April 4, 2014		March 29, 2013
Japan	$	5,008	$	4,739
United States		2,874		3,240
China		2,225		2,071
Korea		2,621		2,035
Spain		1,618		1,291
Other		5,832		4,625
Total	$	20,178	$	18,001

100% of the Company’s sales are generated from the ophthalmic surgical product segment and therefore the Company operates as one operating segment for financial reporting purposes. The Company’s principal products are implantable Collamer lenses (“ICLs”) used in refractive surgery and intraocular lenses (“IOLs”) used in cataract surgery. The composition of the Company’s net sales by product line is as follows (in thousands):

	Three Months Ended
	April 4, 2014		March 29, 2013
ICLs	$	12,241	$	10,631
IOLs		6,613		6,347
Core products		18,854		16,978
Other Surgical Products		1,324		1,023
Total	$	20,178	$	18,001

The Company sells its products internationally, which subjects the Company to several potential risks, including fluctuating foreign currency exchange rates (to the extent the Company’s transactions are not in U.S. dollars), regulation of fund transfers by foreign governments, United States and foreign export and import duties and tariffs, and political instability.

A single customer has accounted for 13% and 11% of net sales for the three months ended April 4, 2014 and March 29, 2013, respectively.

8

Note 10 — Stock-Based Compensation

Stock-based compensation is set forth below (in thousands):

	Three Months Ended
	April 4, 2014		March 29, 2013
Employee stock expense	$	797	$	821
Restricted stock expense		293		188
Restricted unit expense		388		—
Consultant compensation		22		25
Total	$	1,500	$	1,034

Stock Option Plans

The Amended and Restated 2003 Omnibus Equity Incentive Plan (“the Plan”) provides for various forms of stock-based incentives. To date, of the available forms of awards under the Plan, the Company has granted only stock options, restricted stock, unrestricted share grants, and performance contingent stock units. Options under the plan are granted at fair market value on the date of grant, become exercisable over a three year 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 Plan). Pursuant to the Plan, options for 3,346,875 shares were outstanding at April 4, 2014 with exercise prices ranging between $0.95 and $16.59 per share. Restricted stock grants under the Plan generally vest over a period between one to four years. There were 252,685 shares of restricted stock and 290,500 restricted stock units (RSUs) outstanding at April 4, 2014. As of April 4, 2014, there were 694,296 shares authorized and available for grants under the Plan.

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 6.92% estimated forfeiture rate based on historical forfeiture experience. The risk-free rate is based on the U.S. Treasury yield curve corresponding to the expected term at the time of the grant.

	Three Months Ended
	April 4, 2014			March 29, 2013
Expected dividend yield		0	%		0	%
Expected volatility		55.25	%		73.44	%
Risk-free interest rate		1.28	%		0.61	%
Expected term (in years)		4.12			4.12

A summary of option activity under the Plan for the period ended April 4, 2014 is presented below:

	Options Shares (000’s)
Outstanding at January 3, 2014		3,299
Granted		383
Exercised		(328	)
Forfeited or expired		(7	)
Outstanding at April 4, 2014		3,347
Exercisable at April 4, 2014		2,274

Warrants outstanding and exercisable for the period ended April 4, 2014 and January 3, 2014 were 700,000, respectively.

9

A summary of restricted stock and restricted stock units activity under the Plan for the period ended April 4, 2014 is presented below:

	Restricted Shares (000’s)			Restricted Units (000’s)
Outstanding at January 3, 2014		341			135
Granted		2			291
Vested		(90	)		(135	)
Forfeited		—			—
Outstanding at April 4, 2014		253			291

Note 11 — Income Taxes

The provision for income taxes is determined using an estimated annual effective tax rate, which is generally less than the U.S. federal statutory rate, primarily due to the Company’s net operating losses in the U.S. and certain lower- or zero-rate foreign jurisdictions where the Company operates.  The effective tax rate may be subject to fluctuations during the year as new information is obtained, which may affect the assumptions used to estimate the annual effective tax rate, including factors such as the mix of pre-tax earnings in the various tax jurisdictions applicable to the Company, valuation allowances against deferred tax assets, the recognition or derecognition of tax benefits related to uncertain tax positions, if any, and changes in or the interpretation of tax laws in jurisdictions where the Company conducts business.  

The Company recorded an income tax provision of $219,000 and $314,000 for the three months ended April 4, 2014 and March 29, 2013, respectively, partially benefiting in the current quarter from the mix of pre-tax earnings in lower-rate foreign jurisdictions.  There are no unrecognized tax benefits as of any period presented.   

Note 12 — Manufacturing Consolidation Project and Tax Strategy

From fiscal 2011 through 2013, the Company has devoted significant resources to two initiatives: a project to consolidate global manufacturing, and development of a strategy to optimize its global organization for tax purposes. The goal of these initiatives is to further improve upon gross profit margin by streamlining operations, thereby reducing costs and to increase profits in the U.S., to enable the Company to utilize its approximately $122 million in net operating loss carryforwards and at the same time, reduce income taxes in foreign jurisdictions where it pays tax. STAAR currently manufactures its products in three facilities worldwide (Monrovia, Ca., Aliso Viejo, Ca., and Nidau, Switzerland). It has developed a plan to consolidate its manufacturing in a single site at its Monrovia, California location which is expected to be substantially completed by the middle of 2014. 

The Company has invested approximately $6.1 million since inception of these initiatives, including $168,000 incurred during the three months ended April 4, 2014 and, approximately $100,000 remaining to be incurred during the remainder of fiscal year 2014. These expenses are included in the other general and administrative expenses in the consolidated statements of operations.  Expenditures to date have largely consisted of severance, employee costs, professional fees to advisors and consultants.

A summary of the activity for these initiatives is presented below for the period ended April 4, 2014 (in thousands):

	Termination Benefits			Other Associated Costs			Total
Liability at January 3, 2014	$	731		$	28		$	759
Costs incurred and charged to expense		106			62			168
Cash payments		(16	)		(62	)		(78	)
Liability at April 4, 2014	$	821		$	28		$	849

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ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

The matters addressed in this Item 2 that are not historical information constitute “forward-looking statements” 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, including statements about any of the following: any projections of earnings, revenue, sales, profit margins, cash, effective tax rate or any other financial items; the plans, strategies, and objectives of management for future operations or prospects for achieving such plans; metrics for 2014; statements regarding new products, including but not limited to, expectations for success of new products in the U.S. or international markets or government approval or commercialization of new products (including the Toric ICL in the U.S.); future economic conditions or size of market opportunities; expected IOL backorder position; expected costs of Monrovia facility expansion; expected costs and savings from business consolidation plans and the timetable for those plans; statements of belief, including as to achieving 2014 growth plans or metrics; expected regulatory activities and approvals, product launches, and any statements of assumptions underlying any of the foregoing. Although we believe that the expectations reflected in these forward-looking statements are reasonable, such statements are inherently subject to risks and STAAR can give no assurances that its expectations will prove to be correct. Actual results could differ materially from those described in this report because of numerous factors, many of which are beyond the control of STAAR. These factors include, without limitation, those described in our Annual Report on Form 10-K for the fiscal year ended January 3, 2014. STAAR undertakes no obligation to update these forward-looking statements to reflect events or circumstances after the date of this report or to reflect actual outcomes.

The following discussion should be read in conjunction with STAAR’s interim condensed financial statements and the related notes provided under “Item 1— Financial Statements” above.

Overview

STAAR Surgical Company (“we,” “us,” the “Company,” and “STAAR”) designs, develops, manufactures and sells implantable lenses and delivery systems for the eye. We are the world’s leading manufacturer of intraocular lenses used in “refractive” surgery, and we also make lenses for use in surgery to treat cataracts. All of the lenses we make are foldable, which allows the surgeon to insert them into the eye through a small incision during minimally invasive surgery. Refractive surgery is performed to treat the type of visual disorders that have traditionally been corrected using eyeglasses or contact lenses. We refer to our lenses used in refractive surgery as “implantable Collamer® lenses” or “ICLs” and market them under the Visian® brand name. The field of refractive surgery includes both lens-based procedures, using products like the Visian ICL®, and laser-based procedures like LASIK. Successful refractive surgery can correct common vision disorders such as myopia, hyperopia and astigmatism. Cataract surgery is a common outpatient procedure where the eye’s natural lens that has become cloudy with age is removed and replaced with an artificial lens called an intraocular lens (IOL) to restore the patient’s vision.

STAAR®, Visian®, Collamer®, STAARVISC®, Elastimide®, nanoFLEX®, nanoPOINT™, CentraFLOW® AquaPORT®, Epiphany® and AquaFlow™ are trademarks or registered trademarks of STAAR in the U.S. and other countries.

Collamer® is the brand name for STAAR’s proprietary collagen copolymer lens material.

Products

A detailed description of STAAR’s business appears in our Annual Report on Form 10-K for the fiscal year ended January 3, 2014, along with a glossary explaining many of the specialized terms used in describing our products and our business. We recommend that readers unfamiliar with STAAR refer to that description.

ICLs - Implantable Collamer Lenses for Refractive Surgery. Sales of refractive lenses make up over sixty (60%) percent of our total sales. Made from our proprietary biocompatible Collamer material, highlights of STAAR’s family of Visian ICL products are as follows:

· The Visian ICL treats refractive disorders such as myopia (near-sightedness) and hyperopia (far-sightedness). STAAR began selling the Visian ICL outside the U.S. in 1996 and inside the U.S. in 2006.

· The Visian Toric ICL™, or TICL™, treats myopic and hyperopic patients with astigmatism. Astigmatism is a condition that causes blurred vision when an irregular shape of the cornea prevents light from focusing properly on the retina. STAAR has been selling the Visian TICL outside the U.S. since 2002. STAAR remains in dialogue with the FDA regarding its PMA Supplement submission seeking approval to sell the TICL in the U.S. This matter is further discussed below under, “Status of Regulatory Submission.”

· STAAR currently sells several versions of the Visian ICL and Visian TICL globally; the original V4, the V4b, which expands the population of eligible patients to individuals in the lower diopter range (from -3.0 to +3.0), and the V4c, which includes the proprietary CentraFLOW technology (a port in the center of the myopic ICL and TICL) that eliminates the need for a peripheral iridectomy or irodotomy procedure prior to implanting the ICL.

11

· STAAR’s goal is to position the Visian ICL and TICL products throughout the world as primary choices for refractive surgery.

IOLs - Intraocular Lenses for Cataract Surgery. Our range of foldable IOLs for patients undergoing cataract surgery includes the following:

· Aspheric IOLs, available in single-piece and three-piece designs made from (i) Collamer, STAAR’s proprietary biocompatible collagen copolymer lens material, and (ii) from silicone. Aspheric IOLs are designed to improve the patient’s quality of vision when compared to earlier spherical IOL designs. The three piece aspheric silicone is sold preloaded in certain markets outside of the U.S. The Collamer three piece lens is only marketed and sold in the U.S.

· The nanoFLEX IOL, a single-piece Collamer aspheric IOL that can be implanted through a micro-incision with a single-use disposable nanoPOINT injector system, is available in the U.S and territories that accept the CE Mark.

· The Preloaded IOL line consists of a three-piece silicone and a three piece and single piece acrylic IOL preloaded into a single-use disposable injector which is currently available outside the U.S. The acrylic IOL Preloaded line utilizes an acrylic lens sourced from another manufacturer. The KS-SP is the single-piece preloaded acrylic IOL and the KS-X is the three piece preloaded acrylic IOL. The KS IOL line is available in Japan and on a limited basis in Europe.

· STAAR Toric IOL is a single piece silicone toric IOL, used in cataract surgery to treat preexisting astigmatism and is currently only marketed in the U.S.

Because most cataract patients are elderly, government agencies or government sponsored entities generally pay all or part of the cost of IOLs in our major markets, including the U.S. As a result, cataract procedure volumes will likely remain relatively stable even under adverse conditions in the general economy. However, changes in reimbursement policy under these agencies and entities can reduce our selling prices or reduce the volume of cataract procedures.

Other Surgical Products. We also sell certain instruments, devices, and injector parts. Although we have been deemphasizing these products since 2009 because of their lower overall gross profit margins, we expect that sales of these products will continue to increase due to an increase in demand of injector parts.

Operations

STAAR operates its global administrative headquarters and a manufacturing facility in Monrovia, California, and also maintains product manufacturing facilities in Nidau, Switzerland, and materials manufacturing in Aliso Viejo, California.

STAAR has implemented a project to consolidate its product manufacturing into a single site at its Monrovia, California location by the middle of 2014, which we expect to yield significant savings in cost of goods, lower our global administrative and regulatory costs and reduce income taxes. As of the end of the first quarter of 2014, all IOLs and approximately 41% of ICLs were manufactured in the U.S. This project, which is subject to significant risks, is further described under Note 12, “Manufacturing Consolidation Project and Tax Strategy.”

Strategy and Key Operational Metrics

STAAR’s strategy is to be valued as a leading global provider of innovative intraocular lens system technologies. STAAR employs a commercialization strategy that focuses on achieving sustainable profitable growth.

STAAR’s key operational metrics for 2014 are guided by two principal strategic goals: to achieve and maintain profitability and to lay the groundwork for further growth. In pursuit of these goals, STAAR has aligned its business initiatives during 2014 along five key annual metrics it will use to gauge its success for the year. Those metrics are as follows:

· Increase total revenue by 8% to 10% for the full year.

- As discussed below in “Results of Operations,” our total revenue increased by 12% in the first quarter of 2014.

· Grow ICL sales by 20% for the full year.

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- As discussed below in “Results of Operations,” ICL sales grew by 15% in the first quarter of 2014.

· Increase gross profit margins by 300 basis points to 72.7% for the full year.

- As discussed below in “Results of Operations,” our gross profit declined by 150 basis points to 68.8% in the first quarter of 2014 compared to 70.3% in the first quarter of 2014.

· Achieve profitability on a GAAP basis for the full year.

- As discussed below in “Results of Operations,” we reported a net loss of $1.4 million in the first quarter of 2014.

· Complete our manufacturing consolidation project by the middle of 2014 with no material disruption to customer supply requirements or quality.

- Our consolidation efforts are proceeding according to plans and we expect this to continue through completion in the middle of 2014.

Other Highlights

In the first quarter of 2014, ICL revenue grew in the Europe, Middle East and Africa (EMEA) region by 27%, in the Asia Pacific (APAC) region by 17% and declined in North America by 14%. Sales were particularly strong in portions of the EMEA and APAC region where the ICL with CentraFLOW technology is available for sale. IOL revenue in the first quarter of 2014 increased four (4%) percent primarily due to increased sales of KS-IOL products in the European markets and increased sales of preloaded silicone IOLs in Japan. Our third party supplier of components for the KS-IOL product line increased the quantity of KS-IOL products delivered to us. We extended the term of our supply agreement with our supplier and we expect the supply of KS-IOL components from our supplier to continue to increase throughout 2014.

STAAR continued its manufacturing consolidation efforts in the first quarter of 2014 and we expect to complete transferring manufacturing activities from Nidau, Switzerland to Monrovia, California by the middle of 2014 (See “Operations,” above). In the first quarter of 2014 we incurred $0.2 million in consolidation-related costs and we expect to spend an additional $0.1 million during the remainder of 2014 to complete the transfer from Switzerland. After we complete these manufacturing transfer activities, we target gross margins nearing eighty (80%) percent for our manufactured products and an effective tax rate of approximately ten percent.

At the end of the first quarter, the Company had approximately 26,500 ICLs in finished goods inventory, compared to approximately 17,100 ICLs in inventory at the end of the fourth quarter. This inventory build is consistent with management’s plan to assure adequate supply and quality of product throughout this consolidation project process and to prepare for the potential U.S. launch for the TICL.

In markets where both the ICL and TICL are approved for sale, approximately forty (40%) percent of units sold are TICLs. In the event the FDA approves the TICL, assuming the U.S. market follows the sales patterns of other markets, we expect that total U.S. ICL sales (meaning ICLs and TICLs) could double in the first full year after launch.

Our Preloaded ICL with enhanced optics remains in development and we expect CE Market approval by mid-2014. Also in development is an ICL with an enhanced optic to add near-vision enhancement of up to two diopters which could address early onset of presbyopia. We are targeting availability in the EU for this product in early 2015.

Status of Regulatory Submission

Regarding our PMA Supplement submission to the FDA seeking approval of the TICL, on March 14, 2014 a FDA Ophthalmic Devices Panel of the Medical Devices Advisory Committee voted favorably in response to the three questions posed to it by the FDA’s Division of Ophthalmic, Neurological and Ear, Nose and Throat Devices (regarding the TICL’s safety and effectiveness as well as whether the TICL’s benefits outweigh its risks). STAAR cannot predict when, or if, the FDA will grant approval of the TICL for use in the United States.

On October 9, 2012, STAAR submitted a clinical study protocol regarding the ICL with CentraFLOW technology. On December 12, 2013, we met with the FDA in Washington D.C. to discuss the protocol and we remain in dialogue with the FDA regarding a revised proposed protocol.

On March 3, 2014, the Japanese Ministry of Health, Labor and Welfare approved the Visian ICL with CentraFLOW technology for marketing and sale in Japan.

Critical Accounting Policies

This Management's Discussion and Analysis of Financial Condition and Results of Operations discusses and analyzes data in our unaudited Condensed Consolidated Financial Statements, which we have prepared in accordance with U.S. generally accepted accounting principles. Preparation of these financial statements requires management to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenue and expenses, and related disclosure of contingent assets and liabilities. Management bases its estimates on historical experience and on various other assumptions that it believes to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Senior management has discussed the development, selection and disclosure of these estimates with the Audit Committee of our Board of Directors. Actual conditions may differ from our assumptions and actual results may differ from our estimates.

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An accounting policy is deemed critical if it requires an accounting estimate to be made based on assumptions about matters that are highly uncertain at the time the estimate is made, if different estimates reasonably could have been used, or if changes in the estimate that are reasonably likely to occur could materially impact the financial statements. Management believes that there have been no significant changes during the three months ended April 4, 2014 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 our Annual Report on Form 10-K for the fiscal year ended January 3, 2014.

Results of Operations

The following table shows the percentage of our total sales represented by the specific items listed in our statements of operations for the periods indicated, and the percentage by which these items increased or decreased over the prior period.

	Percentage of Net Sales for Three Months						Percentage Change for Three Months
	April 4, 2014			March 29, 2013			2014 vs. 2013
Net sales		100.0	%		100.0	%		12.1	%
Cost of sales		31.2			29.7			17.7
Gross profit		68.8			70.3			9.7
General and administrative		26.7			22.0			36.3
Marketing and selling		30.4			29.4			16.1
Research and development		17.3			7.6				*
Medical device tax		0.2			0.3			(32.2	)
Other general and administrative expenses		0.9			5.0			(81.4	)
		75.5			64.3			31.6
Operating  income (loss)		(6.7	)		6.0				*
Other income (expense), net		1.1			(1.7	)			*
Income (loss) before provision for income taxes		(5.6	)		4.3				*
Provision for income taxes		1.1			1.7			(30.3	)
Net income (loss)		(6.7	)%		2.6	%			*

*     Denotes change is greater than +100%.

Net Sales

	Three Months Ended				Percentage Change for Three Months
	April 4, 2014		March 29, 2013		2014 vs. 2013
Net sales	$	20,178	$	18,001		12	%
ICL		12,241		10,631		15
IOL		6,613		6,347		4
Other		1,324		1,023		29

Net sales for the three months ended April 4, 2014 were $20.2 million, an increase of 12% compared with $18.0 million reported during the same period of 2013. Changes in currency had a $0.6 million unfavorable impact on net sales for the first quarter of 2014.

Total ICL sales for the three months ended April 4, 2014 were $12.2 million, an increase of 15% compared with $10.6 million reported during the same period of 2013. The increase in ICL sales is due to increased sales in Europe, Middle East, Africa and Latin America (EMEA) +27%, and Asia Pacific (APAC) +17%, partially offset by a 14% decline in North America sales. Sales growth in EMEA was led by Spain +26%, Latin America + 58%, and Germany +34%. Sales growth in APAC was led by Korea +29% and China +25%. ICL volume increased by 14% and average selling prices (ASPs) increased 1%. ICL sales represented 60.7% and 59.1% of consolidated net sales, respectively, for the three months ended April 4, 2014 and March 29, 2013.

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Total IOL sales for the three months ended April 4, 2014 were $6.6 million, an increase of 4% compared with $6.3 million reported during the same period of 2013. IOL sales were negatively impacted due to approximately $500,000 in backorders from the Company’s acrylic IOL supplier and the negative effect of foreign currency exchange which totaled $482,000. IOL unit volume increased 16% driven by a 22% increase in silicone preloaded IOL sales in Japan and a 59% increase in acrylic preloaded IOL sales in EMEA as a result of increased supply. IOL sales represented 32.8% and 35.3% of consolidated net sales respectively, for the three months ended April 4, 2014 and March 29, 2013.

Other product sales for the three months ended April 4, 2014 were $1.3 million, an increase of 29% compared with the $1.0 million reported during the same period of 2013. This increase was due to increased sales of acrylic preloaded injector parts to the Company’s acrylic lens supplier to support the buildup of acrylic preloaded product supply for their markets.

Gross Profit

	Three Months Ended						Percentage Change for Three Months
	April 4, 2014			March 29, 2013			2014 vs. 2013
Gross Profit	$	13,884		$	12,654			10	%
Gross Profit Margin		68.8	%		70.3	%

Gross profit for the first quarter was $13.9 million, or 68.8% of revenue, compared with $12.7 million, or 70.3% of revenue, in the prior year period. Gross margin expansion was limited by three primary factors: 1) manufacturing inefficiencies in the U.S. and overhead absorption issues in Switzerland resulting in higher costs as the company transfers ICL production from Switzerland to the U.S.; 2) increased low margin IOL injector part sales; and 3) a decrease in overall IOL average selling prices based on geographic mix. The negative factors were partially offset by increased average selling prices of ICLs.

General and Administrative

	Three Months Ended						Percentage Change for Three Months
	April 4, 2014			March 29, 2013			2014 vs. 2013
General and Administrative	$	5,396		$	3,958			36	%
Percentage of Sales		26.7	%		22.0	%

General and administrative expenses for the quarter were $5.4 million, an increase of 36% when compared with $4.0 million reported last year. The increase is due primarily to increased compensation and recruiting costs.

Marketing and Selling

	Three Months Ended						Percentage Change for Three Months
	April 4, 2014			March 29, 2013			2014 vs. 2013
Marketing and Selling	$	6,138		$	5,286			16	%
Percentage of Sales		30.4	%		29.4	%

Marketing and selling expenses for the quarter were $6.1 million, an increase of 16% when compared with $5.3 million reported last year. The increase is due primarily to increased promotional spending and costs associated with expansion of the U.S. sales team in anticipation of FDA approval to commercialize the TICL in the U.S.

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Research and Development

	Three Months Ended						Percentage Change for Three Months
	April, 2014			March 29, 2013			2014 vs. 2013
Research and Development	$	3,484		$	1,366			—	*
Percentage of Sales		17.3	%		7.6	%

*    Denotes change is greater than +100%.

Research and development expenses for the quarter were $3.5 million, an increase of 155% when compared with $1.4 million reported last year. The increase is driven by the cost of preparing for and attending the March 4, 2014 FDA advisory panel meeting (previously scheduled for February 14, 2014, then postponed due to a snowstorm), which totaled $1.4 million during the quarter and new product development associated with V5 ICL.

Other General and Administrative Expenses

	Three Months Ended						Percentage Change for Three Months
	April 4, 2014			March 29, 2013			2014 vs. 2013
Other General and Administrative Expenses	$	168		$	901			(81	)%
Percentage of Sales		0.9	%		5.0	%

Other general and administrative expenses for the quarter were $0.1 million, compared with $0.9 million reported last year. The decrease is due to lower expenses associated with the Company’s manufacturing consolidation project which the Company anticipates will largely be completed by the end of the second quarter of 2014.

Other Income (Expense), Net

	Three Months Ended					Percentage Change for Three Months
	April 4, 2014		March 29, 2013			2014 vs. 2013
Other Income (Expense), Net	$	202	$	(299	)		—	*

*     Denotes change is greater than +100%.

Other income for the quarter was $0.2 million compared to other expense of $0.3 million in the first quarter of 2013. The increase in other income is due to foreign currency transaction gains recorded in the first quarter of 2014, compared to foreign currency transaction losses recorded during the first quarter of 2013 and an increase in royalty income.

Income taxes

	Three Months Ended				Percentage Change for Three Months
	April 4, 2014		March 29, 2013		2014 vs. 2013
Provision for income taxes	$	219	$	314		(30	)%

The provision for income taxes is determined using an estimated annual effective tax rate. Income tax provision for the quarter was $0.2 million, compared to $0.3 million reported last year, partially benefiting in the current quarter from the mix of pre-tax earnings in the Company’s lower-rate foreign jurisdictions.  There are no unrecognized tax benefits as of any period presented.  Based on current year projections, the Company expects the estimated annual effective tax rate to be 30%.

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We do not expect to fully realize the tax benefits associated with our manufacturing consolidation project until after this project has been fully implemented, which is scheduled for completion in the middle of 2014.

Liquidity and Capital Resources

STAAR’s liquidity requirements arise from the funding of our working capital needs, primarily inventory and accounts receivable. Our primary sources for working capital and capital expenditures are cash flows from operating activities, proceeds from the exercise of stock options, and borrowings under our credit facilities. Our liquidity also depends, in part, on customers paying within credit terms, and any extended delays in payments or changes in credit terms given to major customers may have an impact on STAAR’s cash flow. In addition, any abnormal product returns or pricing adjustments may also affect our short-term funding.

STAAR believes its current cash balances, coupled with cash flow from operating activities will be sufficient to meet its working capital requirements for the foreseeable future. If the need for financing arises, STAAR cannot assure that it will be available on acceptable terms, or if at all. STAAR’s Japanese and Swiss subsidiaries have bank lines of credit in place for working capital purpose, but STAAR does not maintain such a credit line in the U.S. STAAR Japan line of credit is currently fully drawn.

To the extent STAAR’s cash balances exceed levels needed for working capital and as a cushion for unforeseen demands, STAAR intends to invest its cash in expanding and improving its business. It does not anticipate paying dividends from its earnings for the foreseeable future.

Overview of Changes in Cash and Cash Equivalents and Other Working Capital Accounts.

As of April 4, 2014, January 3, 2014, and March 29, 2013, respectively, STAAR had $21.0 million, $22.9 million, and $19.2 million of cash and cash equivalents.

Net cash used in operating activities was $2.6 million for the three months ended April 4, 2014 and $0.4 million for the three months ended March 29, 2013 and consisted of net loss of $1.4 million, plus $2.1 million in non-cash items, offset by a $3.3 million increase in net working capital for the three months ended April 4, 2014.

Net cash used in investing activities was $1.4 million for the three months ended April 4, 2014, compared to $1.2 million in net cash used in investing activities for the three months ended March 29, 2013. Net cash used in investing activities was due to the acquisition of property, plant and equipment.

Net cash provided by financing activities was $2.1 million for the three months ended April 4, 2014, compared with $0.2 million in net cash used in financing activities for the three months ended March 29, 2013. The increase in cash provided by financing activities was due to increase in proceeds from exercise of stock options.

Credit Facilities, Contractual Obligations and Commitments

Accrued Termination Benefits for Manufacturing Consolidations Project

The Company has accrued $0.8 million as of April 4, 2014 in termination benefit costs in connection with its manufacturing consolidation project. The accrual represents STAAR’s current best estimate of the termination benefits that will be paid to the eligible employees.

Lines of Credit

The Company’s wholly owned Japanese subsidiary, STAAR Japan, has an agreement, as amended on December 28, 2012, with Mizuho Bank, which provides for borrowings of up to 500,000,000 Yen (approximately $4.8 million based on the rate of exchange on April 4, 2014), at an interest rate equal to the Tokyo short-term prime interest rate (approximately 1.475% as of April 4, 2014). The line of credit expires July 4, 2014, but the Company expects the bank will renew. The Company had 500,000,000 Yen outstanding on the line of credit as of April 4, 2014 and January 3, 2014 (approximately $4.8 million and $4.8 million based on the foreign currency exchange rates on April 4, 2014 and January 3, 2014). As of April 4, 2014 there were no available borrowings under the line.

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In August 2010, the Company’s wholly-owned Swiss subsidiary, STAAR Surgical AG, entered into a credit agreement with Credit Suisse (the “Bank”). The credit agreement provides for borrowings of up to 1,000,000 Swiss Francs (approximately $1.1 million at the rate of exchange on April 4, 2014), to be used for working capital purposes. There were no borrowings outstanding as of April 4, 2014 and the full amount of the line was available for borrowing.

Covenant Compliance

The Company is in compliance with the covenants of its credit facilities as of the date of this report. 

Capital Lease Obligations

STAAR leases certain property, plant, and equipment under non-cancelable capital lease agreements. These leases vary in amount, duration, and rates.

Estimated future minimum payments under capital lease obligations were as follows (in thousands):

Fiscal Year	April 4, 2014			January 3, 2014
2014	$	215		$	303
2015		160			142
2016		23			6
2017		3			—
Thereafter		—			—
Total minimum lease payments	$	401		$	451
Less: interest		(17	)		(22	)
Total lease obligation	$	384		$	429
Current	$	265		$	288
Long-term	$	119		$	141

Off-Balance Sheet Arrangements

We do not have any off-balance sheet arrangements, as that term is defined in the rules of the SEC, that have or are reasonably likely to have a current or future effect on our financial condition, changes in financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources that are material to investors.

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

There have been no material changes to the Company’s qualitative and quantitative market risk since the disclosure in the Company’s Annual Report on Form 10-K for the year ended January 3, 2014.

ITEM 4. CONTROLS AND PROCEDURES

Disclosure 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 CEO and CFO, of the effectiveness of the design and operation of the disclosure controls and procedures of STAAR Surgical Company and its subsidiaries (the “Company”). Based on that evaluation, our CEO and CFO concluded, as of the end of the period covered by this quarterly report on Form 10-Q, that our disclosure controls and procedures were effective. For purposes of this statement, the term “disclosure controls and procedures” means controls and other procedures of the Company that are designed to ensure that information required to be disclosed by the Company in the reports that it files or submits under the Securities Exchange Act (15 U.S.C. 78a et seq.) is recorded, processed, summarized and reported, within the time periods specified in the Commission's rules and forms. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed by an issuer in the reports that it files or submits under the Act is accumulated and communicated to the issuer's management, including its principal executive and principal financial officers, or persons performing similar functions, as appropriate to allow timely decisions regarding required disclosure.

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Our management, including the CEO and the CFO, do not expect that our disclosure controls and procedures or our internal control over financial reporting will necessarily prevent all fraud or material errors. An internal control system, no matter how well conceived and operated, can provide only reasonable, not absolute, assurance that the objectives of the control system are met. Further, the design of a control system must reflect the fact that there are resource constraints, and the benefits of controls must be considered relative to their costs. Because of the inherent limitations on all internal control systems, our internal control system can provide only reasonable assurance of achieving its objectives and no evaluation of controls can provide absolute assurance that all control issues and instances of fraud, if any, within our Company have been detected. These inherent limitations include the realities that judgments in decision-making can be faulty, and that breakdowns can occur because of simple error or mistake. Additionally, controls can be circumvented by the individual acts of some persons, by collusion of two or more people, or by management override of the control. The design of any system of internal control is also based in part upon certain assumptions about the likelihood of future events, and can provide only reasonable, not absolute, assurance that any design will succeed in achieving its stated goals under all potential future conditions. Over time, controls may become inadequate because of changes in circumstances, or the degree of compliance with the policies and procedures may deteriorate.

Changes in Internal Control over Financial Reporting

There were no changes in our internal control over financial reporting during the quarter ended April 4, 2014 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

From time to time the Company may be subject to various claims and legal proceedings arising out of the normal course of our business. These claims and legal proceedings may relate to contractual rights and obligations, employment matters, or claims of product liability. STAAR maintains insurance coverage for product liability claims. While the Company does not believe that any of the claims known is likely to have a material adverse effect on its financial condition or results of operations, new claims or unexpected results of existing claims could lead to significant financial harm.

ITEM 1A. RISK FACTORS

Our short and long-term success is subject to many factors that are beyond our control. Investors and prospective investors should consider carefully, in addition to other information contained in this report, the risks and uncertainties described in “Part I—Item 1A—Risk Factors” of the Company’s Form 10-K for the fiscal year ended January 3, 2014. Such risks and uncertainties could materially adversely affect our business, financial condition or operating results.

ITEM 4. MINE SAFETY DISCLOSURES

Not Applicable.

ITEM 5. OTHER INFORMATION

On April 11, 2014, the Company entered into an Amendment Agreement with Nidek Co., Ltd., which extended the term during which STAAR would supply injectors to Nidek and Nidek would supply acrylic lenses to STAAR to December 31, 2016.

ITEM 6. EXHIBITS

3.1	Certificate of Incorporation, as amended to date.(1)
3.2	By-laws, as amended to date.(2)
†4.2	1991 Stock Option Plan of STAAR Surgical Company.(4)
†4.3	1998 STAAR Surgical Company Stock Plan, adopted April 17, 1998.(5)

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4.4	Form of Certificate for Common Stock, par value $0.01 per share.(6)
†4.5	Amended and Restated 2003 Omnibus Equity Incentive Plan, and form of Option Grant and Stock Option Agreement.(3)
**10.98	Amendment Agreement between STAAR Surgical AG and Nidek Co., Ltd., dated April 11, 2014. *
31.1	Certification Pursuant to Rule 13a-14(a) of the Securities Exchange Act of 1934, Adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. *
31.2	Certification Pursuant to Rule 13a-14(a) of the Securities Exchange Act of 1934, Adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. *
32.1	Certification Pursuant to 18 U.S.C. Section 1350, Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. *
101	Financial statements from the quarterly report on Form 10-Q of STAAR Surgical Company for the quarter ended March 29, 2013, formatted in XBRL, are filed herewith and include: (i) the Condensed Consolidated Balance Sheets, (ii) the Condensed Consolidated Statements of Operations, (iii) the Consolidated Statements of Comprehensive Income, (iv) the Condensed Consolidated Statements of Cash Flows, and (v) the Notes to Condensed Consolidated Financial Statements tagged as blocks of text. *

(1)	Incorporated by reference to the Company’s Annual Report on Form 10-K for the fiscal year ended December 28, 2007, as filed with the Commission on March 12, 2008.
(2)	Incorporated by reference to the Company’s Current Report on Form 8-K filed with the Commission on May 23, 2006.
(3)	Incorporated by reference to the Company’s Quarterly Report on Form 10-Q for quarter ended July 2, 2010, filed with the Commission on August 11, 2010.
(4)	Incorporated by reference to the Company’s Registration Statement on Form S-8, File No. 033-76404, as filed with the Commission on March 11, 1994.
(5)	Incorporated by reference to the Company’s Proxy Statement for its Annual Meeting of Stockholders held on May 29, 1998, filed with the Commission on May 1, 1998.
(6)	Incorporated by reference to Exhibit 4.1 to Amendment No. 1 to the Company’s Registration Statement on Form 8-A/A, as filed with the Commission on April 18, 2003.
*	Filed herewith.
†	Management contract or compensatory plan or arrangement.
**	Portions of this exhibit were omitted pursuant to a request for confidential treatment and filed separately.

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SIGNATURES

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.

	STAAR SURGICAL COMPANY
Date:  May 14, 2014	By:	/s/ STEPHEN P. BROWN
	Stephen P. Brown
	Chief Financial Officer
	(on behalf of the Registrant and as its
	principal financial officer)

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EX-10.98

AMENDMENT

変更契約書

This AMENDMENT (“Amendment”) is made and entered into as of April 11, 2014 between STAAR Surgical AG (“STAAR AG”), a Swiss corporation, having its principal place of business at Hauptstrasse 104, 2560 Nidau, Switzerland, as assignee and 100% parent company of STAAR Japan, G.K., having its principal place of business at NBF Shin-Urayasu-Tower 5F, 1-5-2, Irifune, Urayasu City, Chiba 279-0012, Japan (each a wholly owned subsidiary of STAAR Surgical Company (“STAAR SURGICAL”), a Delaware corporation, having its principal place of business at 1911 Walker Avenue, Monrovia, California 91016 U.S.A), and NIDEK CO., LTD. (“NIDEK”), a Japanese corporation, having its principal place of business at 34-14 Maehama, Hiroishi-cho, Gamagori, Aichi 443-0038, Japan.

本変更契約書（以下「本変更契約」という）は、２０１４年４月１１日付で、スイス ニーダウ ２５６０ ハウプト通り１０４に本店を有するスター サージカル AG（以下「スターAG」という）と、日本愛知県蒲郡市拾石町前浜３４番地１４に本店を有する日本法人株式会社ニデック（以下「ニデック」という）との間で締結される。スターAGは、千葉県浦安市入船１－５－２ＮＢＦ新浦安タワー５階に本店を有する日本法人スター・ジャパン合同会社からの契約承継者として、また、スター・ジャパン合同会社の100%親会社として、本変更契約を締結する。（なお、スター サージカル AG、スター・ジャパン合同会社いずれも、米国９１０１６カリフォルニア州モンロビア ウォーカー通り１９１１に本店を有するデラウェア州法人スター サージカル カンパニー（以下「スターサージカル」という）の完全所有下にある子会社である。）

RECITAL

前文

STAAR Japan, G.K. and NIDEK entered into several agreements, including the following:

Basic Contract: Sales Transaction for Injector Product, dated May 23, 2005;

Basic Contract: Sales Transaction of Non-Sterilized Intraocular Lens, dated May 23, 2005;

Memorandum: Sales Transaction, dated January 28, 2009;

Basic Contract: Second Generation of Acrylic Preset Basic Agreement, dated January 28, 2009;

Contract: Supply Agreement, dated January 28, 2009;

Memorandum: Sales Transaction for Injector, dated May 1, 2011;

Memorandum: Sales Transaction of Non-Sterilized Intraocular Lens, dated May 1, 2011; and

Supplement and Amendment to Acrylic Preset Basic Agreements, dated August 24, 2012 (“2012 Agreement”).

The above-referenced documents (with the exception of the 2012 Agreement) are collectively referred to as “the Original Contracts”. All of the above-reference agreements (including the 2012 Agreement) are sometimes collectively referred to as “the Agreements.”

STAAR AG has assumed the rights and obligation under the Agreements from STAAR Japan, G.K. by entering into the Assignment and Assumption Agreement, dated April 11, 2014.

STAAR AG and NIDEK are willing to amend the Agreements in accordance with the terms of this Amendment, and in order to induce Nidek to enter into this Amendment, STAAR SURGICAL agrees to guarantee to NIDEK performance of STAA AG under the Agreements and this Amendment.

NOW, THEREFORE, the parties agree as follows:

スター・ジャパン合同会社およびニデックは、次に掲げる契約を含む複数の契約を締結した。

２００５年５月２３日締結のインジェクター製品の売買取引基本契約書

２００５年５月２３日締結の未滅菌眼内レンズ製品の売買取引基本契約書

２００９年１月２８日締結の売買基本取引契約に係わる覚書

２００９年１月２８日締結の第二世代アクリル・プリセット基本契約書

２００９年１月２８日締結のアクリル・プリセット供給保証契約書

２０１１年５月　１日締結のインジェクター売買取引覚書

２０１１年５月　１日締結の未滅菌眼内レンズ売買取引覚書

２０１２年８月２４日締結のアクリル・プリセット基本契約書に関する追加・変更契約書（以下「２０１２年契約」という）

上記の契約書（ただし、２０１２年契約を除く）を総称して、「原契約」というものとする。また、上記の契約書（２０１２年契約を含む）を総称して、「本件原契約」というものとする。

スターAGは、２０１４年４月１１日付の債権譲渡および債務引受に関する契約書をもって、スター・ジャパン合同会社から、本件原契約における債権債務を継承している。

スターAGおよびニデックは、本変更契約の定めにしたがって、本件原契約を変更することを望んでいる。スター サージカルは、ニデックの本契約締結を促すために、ニデックに対し、スターAGの本件原契約および本変更契約の履行を保証することに同意している。

したがって、本変更契約の当事者は、以下の通り合意する。

1. Extension of the Term

第１条（契約期間の変更）

1. The Section 6 of the 2012 Agreement shall be changed as follows:

１．２０１２年契約第６条を、次のように変更する。

6. Duration.

This Agreement shall become effective as of the date first above written and shall terminate as of December 31, 2016; provided that this Agreement will be automatically extended for subsequent one (1) year periods with identical terms and conditions as set forth in this Agreement unless either STAAR or NIDEK gives the other party written notice one year prior to the end of the current term or any extended term.

第６条（有効期間）

本契約は、冒頭に記載された日付において発効し、２０１６年１２月３１日まで有効とする。なお、本契約は、期間満了の１年前までにスターまたはニデックのいずれからも書面による通知がないときは、同一条件で更に１年間継続するものとし、その後もこの例によるものとする。

2. The Section 9 b. of the 2012 Agreement shall be changed as follows:

２．２０１２年契約第９条第２項を、次のように変更する。

9. Amendment to the Original Contracts.

b. STAAR and NIDEK hereby agree to extend the termination date of all of the agreements that are part of the Original Contracts to December 31, 2016; provided that such agreements that are part of the Original Contracts will be automatically extended for subsequent one (1) year periods with identical terms and conditions as set forth in the Original Contracts unless either STAAR or NIDEK gives the other party written notice not to renew any of the agreements that are part of the Original Contracts one year prior to the end of the current term (December 31, 2016) or any extended term. Notwithstanding the foregoing, STAAR or NIDEK may stop purchasing non-sterilized Lenses or Injectors (excluding the purchase of Injectors necessary for the outsourcing of the Manufacturing) by giving the other party written notice two (2) months prior to the end of the current term (December 31, 2016) or any extended term.

第９条（原契約の変更）

２．スターとニデックとは、本契約をもって、原契約の有効期間を、全て、２０１６年１２月３１日まで延長することに同意する。なお、原契約については、変更後の期間（２０１６年１２月３１日）満了の１年前までにスターまたはニデックのいずれからも契約を更新しない旨の書面による通知がないときは、同一条件で更に１年間継続するものとし、その後もこの例によるものとする。前記の定めにもかかわらず、未滅菌のレンズの購入、または、インジェクターの購入（製造委託に必要なインジェクターの購入は除く）に関しては、スターまたはニデックは、期間（２０１６年１２月３１日）満了の２ヶ月前までに書面により相手方に通知することにより期間満了日において取引を終了することができるものとする。

2. Minimum Purchase Quantity

第２条（最低購入数量）

1. The Section 9 d. shall be supplemented to the 2012 Agreement as follows:

１．２０１２年契約第９条に、次の第４項を追加する。

9 d. STAAR and NIDEK hereby agree that the minimum purchase quantity of Injector for a period from January 1, 2014 to December 31, 2014 (“2014 Injector Minimum Purchase Quantity”) shall be ***. STAAR shall supply NIDEK with the 2014 Injector Minimum Purchase Quantity and NIDEK shall purchase the 2014 Injector Minimum Purchase Quantity from STAAR. STAAR and NIDEK shall mutually agree upon the monthly delivery schedule of such Quantity and endeavor to follow the schedule.

STAAR and NIDEK shall mutually agree upon the minimum purchase quantity of Injector for the year 2015 by December 31, 2014. STAAR and NIDEK shall mutually agree upon the minimum purchase quantity of Injector for the year 2016 by December 31, 2015.

第９条（原契約の変更）

４．スターおよびニデックは、2014年1月1日より2014年12月31日までの期間におけるインジェクターの最低購入数量（以下「2014年インジェクター最低購入数量」という）を、***本とすることに同意する。スターは、2014年インジェクター最低購入数量を、ニデックに供給するものとし、ニデックは、2014年インジェクター最低購入数量を、スターから購入するものとする。スターおよびニデックは、両者間において、当該数量の月別納入計画表に合意し、鋭意これに従うものとする。

2015年のインジェクターの最低購入数量は、2014年12月31日までに、両者間において合意する。2016年のインジェクターの最低購入数量は、2015年12月31日までに、両者間において合意する。 

2. The Section 4.1 of the 2012 Agreement shall be changed as follows:

２．２０１２年契約第４条第１項を、次のように変更する。

4. Minimum Purchase Quantity.

1. STAAR and NIDEK hereby agree that the minimum purchase quantity of the Finished Product for a period from January 1, 2014 to December 31, 2014 (“2014 Finished Product Minimum Purchase Quantity”) shall be ***. Subject to STAAR’s fulfillment of the supply of the minimum quantity of Injector, NIDEK shall supply STAAR with the 2014 Finished Product Minimum Purchase Quantity and STAAR shall purchase the 2014 Finished Product Minimum Purchase Quantity from NIDEK. STAAR and NIDEK shall mutually agree upon the monthly delivery schedule of such Quantity and endeavor to follow the schedule.

STAAR and NIDEK shall mutually agree upon the minimum purchase quantity of Finished Product for the year 2015 by December 31, 2014. STAAR and NIDEK shall mutually agree upon the minimum purchase quantity of Finished Product for the year 2016 by December 31, 2015.

第４条（最低購入数量）

１．スターおよびニデックは、2014年1月1日より2014年12月31日までの期間における最終製品の最低購入数量（以下「2014年最終製品最低購入数量」という）を、*** 個とすることに同意する。スターによりインジェクターの最低購入数量が供給されることを条件として、ニデックは、2014年最終製品最低購入数量を、スターに供給するものとし、スターは、2014年最終製品最低購入数量を、ニデックから購入するものとする。スターおよびニデックは、両者間において、当該数量の月別納入計画表に合意し、鋭意これに従うものとする。

2015年の最終製品の最低購入数量は、2014年12月31日までに、両者間において合意する。2016年の最終製品の最低購入数量は、2015年12月31日までに、両者間において合意する。

3. Allocation in Case of Supply Shortage

第３条（供給不足時の数量割当）

1. The Section 9 e. shall be supplemented to the 2012 Agreement as follows:

１．２０１２年契約第９条に、次の第５項を追加する。

9 e. If STAAR cannot supply NIDEK with the 2014 Injector Minimum Purchase Quantity in accordance with the Section 9 d. (on a monthly basis) due to manufacturing constraints, after using commercially reasonable efforts to supply the requested quantity, the Injector that is actually supplied to NIDEK by STAAR during the year 2014 shall be allocated as follows; provided, however, that the quantity necessary for testing or evaluation and the quantity of loss at the time of manufacturing shall be excluded from the allocated quantity before NIDEK supplies Finished Product to STAAR:

(i) Allocation to STAAR

(The quantity of Injector that is actually supplied to NIDEK by STAAR during the year 2014) x (***)

(ii) Allocation to NIDEK

(The quantity of Injector that is actually supplied to NIDEK by STAAR during the year 2014) x (***)

The above method of calculation shall apply to the year 2015 and 2016 in the same way.

(For the avoidance of doubt and as an example, if the quantity of Injector actually supplied to NIDEK by STAAR during the year 2014 is ***, it will be allocated as follows:

(i) Allocation to STAAR

x (***) = ***

(ii) Allocation to NIDEK

x (***) = ***.

The above-referenced allocation is subject to revision for equitable purposes, as will be discussed by the parties.

第９条（原契約の変更）

５．ニデックの要求数量を供給するために、スターが商業的に見て合理的な努力を尽くしてもなお、製造上の制約により、スターが第９条第４項の定めにしたがって（月次ベースで）2014年インジェクター最低購入数量をニデックに供給できない場合、2014年にスターが実際にニデックに供給したインジェクターは、次の通りに割当てるものとする。ただし、ニデックがスターに最終製品を供給する際には、割当てられた数量から、試験・評価のために必要な数量および製造時にロスする数量を除外するものとする。

（１）スターへの割当数量

（2014年にスターがニデックに実際に供給したインジェクターの数量）

×（*** ）

（２）ニデックへの割当数量

（2014年にスターがニデックに実際に供給したインジェクターの数量）

×（*** ）

なお、2015年および2016年についても、同様の方法によるものとする。

（例えば、仮に2014年にスターが実際にニデックに供給したインジェクターの数量が 本であった場合、次の通りとなる。

（１）スターへの割当数量

　 × ( *** )）＝ *** 個

　　　　（２）ニデックへの割当数量

　 × ( *** )＝ *** 個　）

なお、前述の割当方法は、双方にとっての公平性を確保するために、両者協議に基づき、改訂する場合がある。

2 The Section 4.2 shall be supplemented to the 2012 Agreement as follows:

２．２０１２年契約第４条に、次の第２項を追加する。

4.2 If NIDEK cannot supply STAAR with the 2014 Finished Product Minimum Purchase Quantity in accordance with the Section 4.1 (on a monthly basis) due to manufacturing constraints, after using commercially reasonable efforts to supply the requested quantity, the Finished Product that is actually manufactured by NIDEK during the year 2014 shall be allocated as follows; provided, however, that the quantity necessary for testing or evaluation and the quantity of loss at the time of manufacturing shall be excluded from the allocated quantity before NIDEK supplies Finished Product to STAAR:

(i) Allocation to STAAR

(The quantity of Finished Product that is actually manufactured by NIDEK during the year 2014) x (***)

(ii) Allocation to NIDEK

(The quantity of Finished Product that is actually manufactured by NIDEK during the year 2014) x (***)

The above method of calculation shall apply to the year 2015 and 2016 in the same way.

The above-referenced allocation is subject to revision for equitable purposes, as will be discussed by the parties.

第４条（最低購入数量）

２．スターの要求数量を供給するために、ニデックが商業的に見て合理的な努力を尽くしてもなお、製造上の制約により、ニデックが第４条第１項の定めにしたがって（月次ベースで）2014年最終製品最低購入数量をスターに供給できない場合、2014年にニデックが実際に製造した最終製品は、次の通りに割当てるものとする。ただし、ニデックがスターに最終製品を供給する際には、割当てられた数量から、試験・評価のために必要な数量および製造時にロスする数量を除外するものとする。

（１）スターへの割当数量

（2014年にニデックが実際に製造した最終製品の数量）

×（***）

（２）ニデックへの割当数量

（2014年にニデックが実際に製造した最終製品の数量）

×（*** ）

なお、2015年および2016年についても、同様の方法によるものとする。

なお、前述の割当方法は、双方にとっての公平性を確保するために、両者協議に基づき、改訂する場合がある。

4. Governing Law and Jurisdiction

第４条（準拠法・裁判管轄）

1. This Amendment shall be governed by and construed in accordance with the laws of Japan. Japanese text and English text in this Amendment shall have the same force and effect.

2. The parties hereby agree to submit to the exclusive jurisdiction of the Tokyo District Court of Japan with respect to any matter arising out of or relating to this Amendment or the Agreements.

１．本変更契約は、日本法に準拠し、日本法に従って解釈される。本変更契約における日本語および英語は、いずれも同等の効力を有する。

２．本変更契約または本件原契約に起因してまたは関連して紛争が生じたときは、東京地方裁判所をもって専属的合意管轄裁判所とする。

5. Others

第５条（その他）

1. STAAR SURGICAL jointly guarantees to NIDEK the full payment, performance and observance by STAAR AG of the terms and conditions to be made, performed or observed by STAAR AG under the Agreements and this Amendment.

2. Each party will use commercially reasonable efforts to supply lenses, Injectors or other products ordered by the other party above the minimum purchase quantities set for in this Amendment. Except as otherwise amended hereby, the Agreements remain unmodified and continue in full force and effect.

１．スター サージカルは、本件原契約および本変更契約に基づき、スターAGによって支払われ履行され遵守されるべき条件を、スターAGが完全に支払い履行し遵守することを、ニデックに対し、連帯して保証する。

２．いずれの契約当事者も、相手方から本変更契約に定める最低購入数量を超えるレンズ、インジェクターまたはその他の製品の注文を受けた場合、当該インジェクターまたは製品を供給するために、商業的に見て合理的な努力を尽くすものとする。本変更契約による定めを除き、本件原契約に変更はないものとし、本件原契約に定める通り、有効に存続するものとする。

IN WITNESS WHEREOF, the parties have caused this Amendment to be executed on the date first above written.

以上、本変更契約の当事者は、本変更契約の冒頭に記載された日付において、本変更契約を締結し署名する。

STAAR Surgical AG

ー サージカル  AG

By:
Name:	Hans Blickensdoerfer
氏名:	ハンス ブリッケンスドーファー
Title:	President Europe, Middle East, Latin America
役職:	欧州 中東 ラテンアメリカ 代表

NIDEK CO., LTD.

株式会社ニデック

By:
Name:	Tsuneo Matsuhisa
氏名:	松久 恒夫
Title:	Senior Managing Director and Executive Manager, Eye Care Division
役職:	専務取締役 アイケア事業部長

Seen and accepted:

上記を確認し、同意します。

STAAR Surgical Company (STAA)

スター サージカル カンパニー

By: 

Name: Barry Caldwell

氏名: バリー　コールドウェル

Title: Chief Executive Officer

役職: 最高経営責任者

EX-31.1

Exhibit 31.1

Certifications

I, Barry Caldwell, certify that:

1. I have reviewed this quarterly report on Form 10-Q of STAAR Surgical Company;

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(s) 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 our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

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

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

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(s) and I have disclosed, based on our 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 functions):

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.

Date:  May 14, 2014	/s/ BARRY CALDWELL
	Barry Caldwell
	President, Chief Executive Officer, and
	Director (principal executive officer)

EX-31.2

Exhibit 31.2

Certifications

I, Stephen P. Brown, certify that:

1. I have reviewed this quarterly report on Form 10-Q of STAAR Surgical Company;

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(s) 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 our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

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

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

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(s) and I have disclosed, based on our 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 functions):

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.

Date:     May 14, 2014	/s/ STEPHEN P. BROWN
	Stephen P. Brown
	Chief Financial Officer
	(principal financial officer)

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 filing of the Quarterly Report on Form 10-Q for the period ended April 4, 2014 (the “Report”) by STAAR Surgical Company (“Registrant”), each of the undersigned hereby certifies that:

1. The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended, and

2. The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of Registrant as of and for the periods presented in the Report.

Dated:    May 14, 2014	/s/ BARRY CALDWELL
	Barry Caldwell
	President, Chief Executive Officer,
	and Director (principal executive officer)
Dated:    May 14, 2014	/s/ STEPHEN P. BROWN
	Stephen P. Brown
	Chief Financial Officer
	(principal financial officer)

A signed original of this written statement required by 18 U.S.C. Section 1350 has been provided to STAAR Surgical Company and will be furnished to the Securities and Exchange Commission or its staff upon request.

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Basic and Diluted Income (Loss) Per Share (Details Textual)	3 Months Ended
	Apr. 04, 2014	Mar. 29, 2013 Common Stock [Member]	Mar. 29, 2013 Restricted Stock [Member]
Schedule Of Basic And Diluted Income Per Share [Line Items]
Antidilutive Securities Excluded from Computation of Earnings Per Share, Amount	2,798,000	2,035,000	98,000

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Manufacturing Consolidation Project and Tax Strategy (Details) (USD $) In Thousands, unless otherwise specified	3 Months Ended
	Apr. 04, 2014
Schedule Of Restructuring Reserve By Type Of Cost [Line Items]
Liability at January 3, 2014	$ 759
Costs incurred and charged to expense	168
Cash payments	(78)
Liability at April 4, 2014	849
Termination Benefits [Member]
Schedule Of Restructuring Reserve By Type Of Cost [Line Items]
Liability at January 3, 2014	731
Costs incurred and charged to expense	106
Cash payments	(16)
Liability at April 4, 2014	821
Other Associated Costs [Member]
Schedule Of Restructuring Reserve By Type Of Cost [Line Items]
Liability at January 3, 2014	28
Costs incurred and charged to expense	62
Cash payments	(62)
Liability at April 4, 2014	$ 28

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Stock-Based Compensation (Details Textual) (USD $)	3 Months Ended
	Apr. 04, 2014	Jan. 03, 2014
Schedule of Employee Service Share-based Compensation [Line Items]
Common stock, shares outstanding	38,123,000	37,911,000
Estimated Forfeiture Rate	6.92%
Share based Compensation Arrangement By Share Based Payment Award Fair Value Assumptions Expected Term Of Options Granted	15 years
Class of Warrant or Right, Outstanding	700,000
Warrants And Rights Exercisable		700,000
Restricted Stock [Member]
Schedule of Employee Service Share-based Compensation [Line Items]
Common stock, shares outstanding	252,685
Share-based Compensation Arrangement by Share-based Payment Award, Number of Shares Available for Grant	694,296
Restricted Stock Units (RSUs) [Member]
Schedule of Employee Service Share-based Compensation [Line Items]
Common stock, shares outstanding	290,500
2003 Stock Option Plan [Member]
Schedule of Employee Service Share-based Compensation [Line Items]
Share-based Compensation Arrangement by Share-based Payment Award, Options, Outstanding, Number, Beginning Balance	3,347,000
Lower Range of Exercise Prices	$ 0.95
Upper Range of Exercise Prices	$ 16.59
Employee Service Share-based Compensation, Nonvested Awards, Total Compensation Cost Not yet Recognized, Period for Recognition	10 years

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Amortizable Intangible Assets (Details) (USD $) In Thousands, unless otherwise specified	Apr. 04, 2014	Jan. 03, 2014
Amortized intangible assets:
Amortizable intangible assets, Gross Carrying Amount	$ 13,107	$ 13,074
Amortizable intangible assets, Accumulated Amortization	(11,819)	(11,694)
Amortizable intangible assets, Net	1,288	1,380
Patents and Licenses [Member]
Amortized intangible assets:
Amortizable intangible assets, Gross Carrying Amount	10,644	10,637
Amortizable intangible assets, Accumulated Amortization	(10,114)	(10,057)
Amortizable intangible assets, Net	530	580
Customer relationships [Member]
Amortized intangible assets:
Amortizable intangible assets, Gross Carrying Amount	1,506	1,490
Amortizable intangible assets, Accumulated Amortization	(941)	(894)
Amortizable intangible assets, Net	565	596
Developed technology [Member]
Amortized intangible assets:
Amortizable intangible assets, Gross Carrying Amount	957	947
Amortizable intangible assets, Accumulated Amortization	(764)	(743)
Amortizable intangible assets, Net	$ 193	$ 204

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Pension Plans (Tables)

3 Months Ended

Apr. 04, 2014

Defined Benefit Pension Plans and Defined Benefit Postretirement Plans Disclosure [Abstract]

Schedule of Net Benefit Costs [Table Text Block]

The following table summarizes the components of net periodic pension cost recorded for the Company’s defined benefit pension plans (in thousands):

	Three Months Ended April 4, 2014		Three Months Ended March 29, 2013
Service cost	$	116	$	124
Interest cost		35		27
Expected return on plan assets		(27)		(23)
Net amortization of transitional obligation (a)		—		3
Amortization of prior service cost (a)		—		—
Actuarial loss, recognized in current period (a)		6		5
	$	130	$	136

(a) Amounts reclassified from accumulated other comprehensive income.

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Geographic and Product Data (Details Textual)	3 Months Ended
	Apr. 04, 2014	Mar. 29, 2013
Geographic and Product Data [Line Items]
Disclosure on Geographic Areas, Description of Revenue from External Customers	The Company markets and sells its products in over 60 countries and has manufacturing sites in the United States and Switzerland. Other than the United States, Japan, Korea, China, and Spain the Company does not conduct business in any country in which its sales exceed 5% of consolidated sales. Sales are generally attributed to countries based on location of customers.100% of the Company’s sales are generated from the ophthalmic surgical product segment and therefore the Company operates as one operating segment for financial reporting purposes.
Number of Countries in which Entity Operates	60
Segment Sales To Consolidated Sales Percentage	100.00%
Single Customer [Member]
Geographic and Product Data [Line Items]
Concentration Risk, Percentage	13.00%	11.00%

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Pension Plans (Details Textual) (Swiss Plan [Member], USD $)	3 Months Ended
	Apr. 04, 2014	Mar. 29, 2013
Swiss Plan [Member]
Defined Benefit Plans and Other Postretirement Benefit Plans Table Text Block [Line Items]
Defined Benefit Plan, Contributions By Employer	$ 69,000	$ 59,000
Defined Benefit Plans, Estimated Future Employer Contributions in Current Fiscal Year	$ 217,000

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Income Taxes (Details Textual) (USD $) In Thousands, unless otherwise specified	3 Months Ended
	Apr. 04, 2014	Mar. 29, 2013
Income Taxes [Line Items]
Income Tax Expense (Benefit)	$ 219	$ 314

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Prepaids, Deposits, and Other Current Assets

3 Months Ended

Apr. 04, 2014

Prepaid Expenses Deposits and Other Current Assets Disclosure [Abstract]

Prepaid Expenses Deposits and Other Current Assets Disclosure [Text Block]

Note 3 — Prepaids, Deposits, and Other Current Assets

Prepaids, deposits, and other current assets consisted of the following (in thousands):

	April 4,		January 3,
	2014		2014
Prepaids and deposits	$	2,820	$	2,157
Value added tax (VAT) receivable		681		618
Deferred charge for foreign profits		280		362
Other current assets		989		366
	$	4,770	$	3,503

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Stock-Based Compensation (Details) (USD $) In Thousands, unless otherwise specified	3 Months Ended
	Apr. 04, 2014	Mar. 29, 2013
Schedule of Employee Service Share-based Compensation [Line Items]
Employee stock expense	$ 797	$ 821
Restricted expense	293	188
Consultant compensation	22	25
Total	1,500	1,034
Restricted Stock Units (RSUs) [Member]
Schedule of Employee Service Share-based Compensation [Line Items]
Restricted expense	$ 388	$ 0

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Manufacturing Consolidation Project and Tax Strategy (Tables)

3 Months Ended

Apr. 04, 2014

Manufacturing Consolidation Project and Tax Strategy Disclosure [Abstract]

Schedule of Restructuring Reserve by Type of Cost [Table Text Block]

A summary of the activity for these initiatives is presented below for the period ended April 4, 2014 (in thousands):

	Termination Benefits		Other Associated Costs		Total
Liability at January 3, 2014	$	731	$	28	$	759
Costs incurred and charged to expense		106		62		168
Cash payments		(16)		(62)		(78)
Liability at April 4, 2014	$	821	$	28	$	849

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Stock-Based Compensation (Tables)

3 Months Ended

Apr. 04, 2014

Stockholders' Equity Note [Abstract]

Schedule Of Compensation Cost [Table Text Block]

Stock-based compensation is set forth below (in thousands):

	Three Months Ended
	April 4, 2014		March 29, 2013
Employee stock expense	$	797	$	821
Restricted stock expense		293		188
Restricted unit expense		388		—
Consultant compensation		22		25
Total	$	1,500	$	1,034

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

The risk-free rate is based on the U.S. Treasury yield curve corresponding to the expected term at the time of the grant.

	Three Months Ended
	April 4, 2014			March 29, 2013
Expected dividend yield		0	%		0	%
Expected volatility		55.25	%		73.44	%
Risk-free interest rate		1.28	%		0.61	%
Expected term (in years)		4.12			4.12

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

A summary of option activity under the Plan for the period ended April 4, 2014 is presented below:

	Options Shares (000’s)
Outstanding at January 3, 2014		3,299
Granted		383
Exercised		(328)
Forfeited or expired		(7)
Outstanding at April 4, 2014		3,347
Exercisable at April 4, 2014		2,274

A summary of restricted stock and restricted stock units activity under the Plan for the period ended April 4, 2014 is presented below:

	Restricted Shares (000’s)		Restricted Units (000’s)
Outstanding at January 3, 2014		341		135
Granted		2		291
Vested		(90)		(135)
Forfeited		—		—
Outstanding at April 4, 2014		253		291

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Stock-Based Compensation (Details 1)	3 Months Ended
	Apr. 04, 2014	Mar. 29, 2013
Schedule of Employee Service Share-based Compensation [Line Items]
Expected dividend yield	0.00%	0.00%
Expected volatility	55.25%	73.44%
Risk-free interest rate	1.28%	0.61%
Expected term (in years)	4 years 1 month 13 days	4 years 1 month 13 days

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Inventories (Details) (USD $) In Thousands, unless otherwise specified	Apr. 04, 2014	Jan. 03, 2014
Public Utilities, Inventory [Line Items]
Raw materials and purchased parts	$ 1,281	$ 1,367
Work-in-process	1,032	913
Finished goods	12,448	11,029
Inventory, Gross	14,761	13,309
Less: inventory reserves	976	795
Inventory, Net	$ 13,785	$ 12,514

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Prepaids, Deposits, and Other Current Assets (Details) (USD $) In Thousands, unless otherwise specified	Apr. 04, 2014	Jan. 03, 2014
Prepaid Expense and Other Assets, Current [Line Items]
Prepaids and deposits	$ 2,820	$ 2,157
Value added tax (VAT) receivable	681	618
Deferred charge for foreign profits	280	362
Other current assets	989	366
Prepaid Expenses Deposits and Other Assets Current	$ 4,770	$ 3,503

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Inventories

3 Months Ended

Apr. 04, 2014

Inventory Disclosure [Abstract]

Inventory Disclosure [Text Block]

Note 2 — Inventories

Inventories, net are stated at the lower of cost, determined on a first-in, first-out basis, or market and consisted of the following (in thousands):

	April 4,		January 3,
	2014		2014
Raw materials and purchased parts	$	1,281	$	1,367
Work-in-process		1,032		913
Finished goods		12,448		11,029
		14,761		13,309
Less: inventory reserves		976		795
	$	13,785	$	12,514

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Property, Plant and Equipment (Details) (USD $) In Thousands, unless otherwise specified	Apr. 04, 2014	Jan. 03, 2014
Property, Plant and Equipment [Line Items]
Machinery and equipment	$ 17,011	$ 16,225
Furniture and fixtures	4,980	4,837
Leasehold improvements	7,516	6,552
Property, Plant and Equipment, Gross	29,507	27,614
Less: accumulated depreciation	20,675	20,209
Property, Plant and Equipment, Net	$ 8,832	$ 7,405

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Geographic and Product Data (Details) (USD $) In Thousands, unless otherwise specified	3 Months Ended
	Apr. 04, 2014	Mar. 29, 2013
Geographic and Product Data [Line Items]
Net sales	$ 20,178	$ 18,001
Japan [Member]
Geographic and Product Data [Line Items]
Net sales	5,008	4,739
United States [Member]
Geographic and Product Data [Line Items]
Net sales	2,874	3,240
China [Member]
Geographic and Product Data [Line Items]
Net sales	2,225	2,071
Korea [Member]
Geographic and Product Data [Line Items]
Net sales	2,621	2,035
Spain [Member]
Geographic and Product Data [Line Items]
Net sales	1,618	1,291
Other [Member]
Geographic and Product Data [Line Items]
Net sales	$ 5,832	$ 4,625

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CONDENSED CONSOLIDATED BALANCE SHEETS (USD $) In Thousands, unless otherwise specified	Apr. 04, 2014	Jan. 03, 2014
Current assets:
Cash and cash equivalents	$ 21,070	$ 22,954
Accounts receivable trade, net	11,101	10,731
Inventories, net	13,785	12,514
Prepaids, deposits and other current assets	4,770	3,503
Deferred income taxes	377	373
Total current assets	51,103	50,075
Property, plant and equipment, net	8,832	7,405
Intangible assets, net	1,288	1,380
Goodwill	1,786	1,786
Deferred income taxes	631	626
Other assets	668	659
Total assets	64,308	61,931
Current liabilities:
Line of credit	4,800	4,750
Accounts payable	6,161	6,263
Deferred income taxes	738	739
Obligations under capital leases	265	288
Other current liabilities	6,379	6,372
Total current liabilities	18,343	18,412
Obligations under capital leases	119	141
Deferred income taxes	1,683	1,654
Asset retirement obligations	130	157
Pension liability	2,775	2,715
Total liabilities	23,050	23,079
Commitments and contingencies (Note 12)
Stockholders' equity:
Common stock, $0.01 par value; 60,000 shares authorized; 38,123 and 37,911 shares issued and outstanding at April 4, 2014 and January 3, 2014, respectively	381	379
Additional paid-in capital	174,007	170,246
Accumulated other comprehensive income	284	282
Accumulated deficit	(133,414)	(132,055)
Total stockholders' equity	41,258	38,852
Total liabilities and stockholders' equity	$ 64,308	$ 61,931

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Stock-Based Compensation (Details 2) In Thousands, unless otherwise specified	3 Months Ended
	Apr. 04, 2014
Employee Stock Option [Member]
Schedule of Employee Service Share-based Compensation [Line Items]
Options,Outstanding at January 3, 2014	3,299
Options, Granted, shares	383
Options, Exercised, Shares	(328)
Options, Forfeited or expired, Shares	(7)
Options,Outstanding at April 4, 2014	3,347
Options,Exercisable at April 4, 2014	2,274
Restricted Stock [Member]
Schedule of Employee Service Share-based Compensation [Line Items]
Options,Outstanding at January 3, 2014	341
Options, Granted, shares	2
Options,Vested,Shares	(90)
Options, Forfeited or expired, Shares	0
Options,Exercisable at April 4, 2014	253
Restricted Stock Units (RSUs) [Member]
Schedule of Employee Service Share-based Compensation [Line Items]
Options,Outstanding at January 3, 2014	135
Options, Granted, shares	291
Options,Vested,Shares	(135)
Options, Forfeited or expired, Shares	0
Options,Exercisable at April 4, 2014	291

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CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (USD $) In Thousands, unless otherwise specified	3 Months Ended
	Apr. 04, 2014	Mar. 29, 2013
Cash flows from operating activities:
Net income (loss)	$ (1,359)	$ 471
Adjustments to reconcile net income (loss) to net cash used in operating activities:
Depreciation of property and equipment	453	369
Amortization of intangibles	106	117
Deferred income taxes	24	7
Fair value adjustment of warrant	0	(27)
Gain on disposal of property and equipment	0	(28)
Change in net pension liability	45	58
Stock-based compensation expense	1,500	1,034
Accretion of asset retirement obligation	1	5
Provision for sales return and bad debt expense	(55)	27
Changes in working capital:
Accounts receivable	(295)	(322)
Inventories	(1,137)	288
Prepaids, deposits and other current assets	(1,270)	(581)
Accounts payable	(610)	(1,328)
Other current liabilities	3	(522)
Net cash used in operating activities	(2,594)	(432)
Cash flows from investing activities:
Acquisition of property and equipment	(1,414)	(1,218)
Net cash used in investing activities	(1,414)	(1,218)
Cash flows from financing activities:
Repayment of capital lease obligations	(46)	(242)
Proceeds from exercise of stock options	2,188	23
Net cash provided by (used in) financing activities	2,142	(219)
Effect of exchange rate changes on cash and cash equivalents	(18)	(563)
Decrease in cash and cash equivalents	(1,884)	(2,432)
Cash and cash equivalents, at beginning of the period	22,954	21,675
Cash and cash equivalents, at end of the period	$ 21,070	$ 19,243

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Other Current Liabilities (Details Textual)	3 Months Ended
	Apr. 04, 2014
Other Liabilities, Current [Line Items]
Percentage Of Other Current Liabilities	5.00%

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Property, Plant and Equipment (Tables)

3 Months Ended

Apr. 04, 2014

Property, Plant and Equipment [Abstract]

Property, Plant and Equipment [Table Text Block]

Property, plant and equipment consisted of the following (in thousands):

	April 4,		January 3,
	2014		2014
Machinery and equipment	$	17,011	$	16,225
Furniture and fixtures		4,980		4,837
Leasehold improvements		7,516		6,552
		29,507		27,614
Less: accumulated depreciation		20,675		20,209
	$	8,832	$	7,405

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Pension Plans (Details) (USD $) In Thousands, unless otherwise specified	3 Months Ended
	Apr. 04, 2014		Mar. 29, 2013
Defined Benefit Plans and Other Postretirement Benefit Plans Table Text Block [Line Items]
Service cost	$ 116		$ 124
Interest cost	35		27
Expected return on plan assets	(27)		(23)
Net amortization of transitional obligation (a)	0	[1]	3	[1]
Amortization of prior service cost (a)	0	[1]	0	[1]
Actuarial loss, recognized in current period (a)	6	[1]	5	[1]
Net periodic pension cost	$ 130		$ 136

[1] Amounts reclassified from accumulated other comprehensive income.

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Other Current Liabilities (Tables)

3 Months Ended

Apr. 04, 2014

Other Liabilities Disclosure [Abstract]

Schedule of Accrued Liabilities [Table Text Block]

Other current liabilities consisted of the following (in thousands):

	April 4, 2014		January 3, 2014
Accrued salaries and wages	$	2,691	$	1,630
Accrued severance		837		731
Accrued bonuses		583		935
Accrued insurance		373		551
Accrued audit fees		231		328
Accrued commission		229		528
Accrued income taxes		173		485
Other(1)		1,262		1,184
	$	6,379	$	6,372

⁽¹⁾No item in “Other” above exceeds 5% of the total other current liabilities

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Basis of Presentation and Significant Accounting Policies

3 Months Ended

Apr. 04, 2014

Accounting Policies [Abstract]

Basis of Presentation and Significant Accounting Policies [Text Block]

Note 1 — Basis of Presentation and Significant Accounting Policies

The consolidated financial statements of the Company present the financial position, results of operations, and cash flows of STAAR Surgical Company and its wholly owned subsidiaries. All significant intercompany accounts and transactions have been eliminated. The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States (“GAAP”) for interim financial information and with the instructions to Form 10-Q and Article 10 of Regulation S-X of the Securities Exchange Commission. In accordance with those rules and regulations certain information and footnote disclosures normally included in comprehensive financial statements have been condensed or omitted pursuant to such rules and regulations. The consolidated balance sheet as of January 3, 2014 derives from the audited financial statements at that date, but does not include all the information and footnotes required by GAAP. These financial statements should be read in conjunction with the audited financial statements and notes thereto included in the Company’s Annual Report on Form 10-K for the year ended January 3, 2014.

The condensed consolidated financial statements for the three months ended April 4, 2014 and March 29, 2013, in the opinion of management, include all adjustments, consisting only of normal recurring adjustments, necessary for a fair presentation of the Company’s financial condition and results of operations. The results of operations for the three months ended April 4, 2014 and March 29, 2013 are not necessarily indicative of the results to be expected for any other interim period or for the entire year.  

Each of the Company's reporting periods ends on the Friday nearest to the quarter ending date and generally consists of 13 weeks.  Unless the context indicates otherwise “we,” “us,” the “Company,” and “STAAR” refer to STAAR Surgical Company and its consolidated subsidiaries.

Prior Year Reclassifications

Certain reclassifications have been made to the prior periods’ unaudited condensed financial statements and related note disclosures to conform to current period’s presentation.

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CONDENSED CONSOLIDATED BALANCE SHEETS [Parenthetical] (USD $) In Thousands, except Per Share data, unless otherwise specified	Apr. 04, 2014	Jan. 03, 2014
Common stock, par value (in dollars per share)	$ 0.01	$ 0.01
Common stock, shares authorized	60,000	60,000
Common stock, shares issued	38,123	37,911
Common stock, shares outstanding	38,123	37,911

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Income Taxes

3 Months Ended

Apr. 04, 2014

Income Tax Disclosure [Abstract]

Income Tax Disclosure [Text Block]

Note 11 — Income Taxes

The provision for income taxes is determined using an estimated annual effective tax rate, which is generally less than the U.S. federal statutory rate, primarily due to the Company’s net operating losses in the U.S. and certain lower- or zero-rate foreign jurisdictions where the Company operates.  The effective tax rate may be subject to fluctuations during the year as new information is obtained, which may affect the assumptions used to estimate the annual effective tax rate, including factors such as the mix of pre-tax earnings in the various tax jurisdictions applicable to the Company, valuation allowances against deferred tax assets, the recognition or derecognition of tax benefits related to uncertain tax positions, if any, and changes in or the interpretation of tax laws in jurisdictions where the Company conducts business.  

The Company recorded an income tax provision of $219,000 and $314,000 for the three months ended April 4, 2014 and March 29, 2013, respectively, partially benefiting in the current quarter from the mix of pre-tax earnings in lower-rate foreign jurisdictions.  There are no unrecognized tax benefits as of any period presented.

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Document And Entity Information	3 Months Ended
	Apr. 04, 2014	May 06, 2014
Document Information [Line Items]
Document Type	10-Q
Amendment Flag	false
Document Period End Date	Apr. 04, 2014
Document Fiscal Year Focus	2014
Document Fiscal Period Focus	Q1
Trading Symbol	STAA
Entity Common Stock, Shares Outstanding		38,391,311
Entity Registrant Name	STAAR SURGICAL CO
Entity Central Index Key	0000718937
Current Fiscal Year End Date	--01-03
Entity Filer Category	Accelerated Filer

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Manufacturing Consolidation Project and Tax Strategy

3 Months Ended

Apr. 04, 2014

Manufacturing Consolidation Project and Tax Strategy Disclosure [Abstract]

Manufacturing Consolidation Project and Tax Strategy Disclosure [Text Block]

Note 12 — Manufacturing Consolidation Project and Tax Strategy

From fiscal 2011 through 2013, the Company has devoted significant resources to two initiatives: a project to consolidate global manufacturing, and development of a strategy to optimize its global organization for tax purposes. The goal of these initiatives is to further improve upon gross profit margin by streamlining operations, thereby reducing costs and to increase profits in the U.S., to enable the Company to utilize its approximately $122 million in net operating loss carryforwards and at the same time, reduce income taxes in foreign jurisdictions where it pays tax. STAAR currently manufactures its products in three facilities worldwide (Monrovia, Ca., Aliso Viejo, Ca., and Nidau, Switzerland). It has developed a plan to consolidate its manufacturing in a single site at its Monrovia, California location which is expected to be substantially completed by the middle of 2014. 

The Company has invested approximately $6.1 million since inception of these initiatives, including $168,000 incurred during the three months ended April 4, 2014 and, approximately $100,000 remaining to be incurred during the remainder of fiscal year 2014. These expenses are included in the other general and administrative expenses in the consolidated statements of operations.  Expenditures to date have largely consisted of severance, employee costs, professional fees to advisors and consultants.

A summary of the activity for these initiatives is presented below for the period ended April 4, 2014 (in thousands):

	Termination Benefits		Other Associated Costs		Total
Liability at January 3, 2014	$	731	$	28	$	759
Costs incurred and charged to expense		106		62		168
Cash payments		(16)		(62)		(78)
Liability at April 4, 2014	$	821	$	28	$	849

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CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (USD $) In Thousands, except Per Share data, unless otherwise specified	3 Months Ended
	Apr. 04, 2014	Mar. 29, 2013
Net sales	$ 20,178	$ 18,001
Cost of sales	6,294	5,347
Gross profit	13,884	12,654
General and administrative	5,396	3,958
Marketing and selling	6,138	5,286
Research and development	3,484	1,366
Medical device tax	40	59
Other general and administrative expenses	168	901
Operating income (loss)	(1,342)	1,084
Other income (expense):
Interest income	9	35
Interest expense	(33)	(83)
Gain (loss) on foreign currency transactions	66	(341)
Other income, net	160	90
Total other income (expense), net	202	(299)
Income (loss) before provision for income taxes	(1,140)	785
Provision for income taxes	219	314
Net income (loss)	$ (1,359)	$ 471
Net income (loss) per share - basic (in dollars per share)	$ (0.04)	$ 0.01
Net income (loss) per share - diluted (in dollars per share)	$ (0.04)	$ 0.01
Weighted average shares outstanding - basic (in shares)	37,794	36,427
Weighted average shares outstanding - diluted (in shares)	37,794	37,418

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Other Current Liabilities

3 Months Ended

Apr. 04, 2014

Other Liabilities Disclosure [Abstract]

Other Liabilities Disclosure [Text Block]

Note 6 – Other Current Liabilities

Other current liabilities consisted of the following (in thousands):

	April 4, 2014		January 3, 2014
Accrued salaries and wages	$	2,691	$	1,630
Accrued severance		837		731
Accrued bonuses		583		935
Accrued insurance		373		551
Accrued audit fees		231		328
Accrued commission		229		528
Accrued income taxes		173		485
Other(1)		1,262		1,184
	$	6,379	$	6,372

⁽¹⁾No item in “Other” above exceeds 5% of the total other current liabilities

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Amortizable Intangible Assets

3 Months Ended

Apr. 04, 2014

Goodwill and Intangible Assets Disclosure [Abstract]

Intangible Assets Disclosure [Text Block]

Note 5 – Amortizable Intangible Assets

Amortizable intangible assets consisted of the following (in thousands):

	April 4, 2014						January 3, 2014
	Gross Carrying Amount		Accumulated Amortization		Net		Gross Carrying Amount		Accumulated Amortization		Net
Amortized intangible assets:
Patents and licenses	$	10,644		(10,114)	$	530	$	10,637	$	(10,057)	$	580
Customer relationships		1,506		(941)		565		1,490		(894)		596
Developed technology		957		(764)		193		947		(743)		204
Total	$	13,107	$	(11,819)	$	1,288	$	13,074	$	(11,694)	$	1,380

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Amortizable Intangible Assets (Tables)

3 Months Ended

Apr. 04, 2014

Goodwill and Intangible Assets Disclosure [Abstract]

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

Amortizable intangible assets consisted of the following (in thousands):

	April 4, 2014						January 3, 2014
	Gross Carrying Amount		Accumulated Amortization		Net		Gross Carrying Amount		Accumulated Amortization		Net
Amortized intangible assets:
Patents and licenses	$	10,644		(10,114)	$	530	$	10,637	$	(10,057)	$	580
Customer relationships		1,506		(941)		565		1,490		(894)		596
Developed technology		957		(764)		193		947		(743)		204
Total	$	13,107	$	(11,819)	$	1,288	$	13,074	$	(11,694)	$	1,380

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Basis of Presentation and Significant Accounting Policies (Policies)

3 Months Ended

Apr. 04, 2014

Accounting Policies [Abstract]

Basis of Accounting, Policy [Policy Text Block]

The consolidated financial statements of the Company present the financial position, results of operations, and cash flows of STAAR Surgical Company and its wholly owned subsidiaries. All significant intercompany accounts and transactions have been eliminated. The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States (“GAAP”) for interim financial information and with the instructions to Form 10-Q and Article 10 of Regulation S-X of the Securities Exchange Commission. In accordance with those rules and regulations certain information and footnote disclosures normally included in comprehensive financial statements have been condensed or omitted pursuant to such rules and regulations. The consolidated balance sheet as of January 3, 2014 derives from the audited financial statements at that date, but does not include all the information and footnotes required by GAAP. These financial statements should be read in conjunction with the audited financial statements and notes thereto included in the Company’s Annual Report on Form 10-K for the year ended January 3, 2014.

The condensed consolidated financial statements for the three months ended April 4, 2014 and March 29, 2013, in the opinion of management, include all adjustments, consisting only of normal recurring adjustments, necessary for a fair presentation of the Company’s financial condition and results of operations. The results of operations for the three months ended April 4, 2014 and March 29, 2013 are not necessarily indicative of the results to be expected for any other interim period or for the entire year.  

Each of the Company's reporting periods ends on the Friday nearest to the quarter ending date and generally consists of 13 weeks.  Unless the context indicates otherwise “we,” “us,” the “Company,” and “STAAR” refer to STAAR Surgical Company and its consolidated subsidiaries.

Reclassification, Policy [Policy Text Block]

Prior Year Reclassifications

Certain reclassifications have been made to the prior periods’ unaudited condensed financial statements and related note disclosures to conform to current period’s presentation.

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Geographic and Product Data

3 Months Ended

Apr. 04, 2014

Segment Reporting [Abstract]

Segment Reporting Disclosure [Text Block]

Note 9 — Geographic and Product Data

The Company markets and sells its products in over 60 countries and has manufacturing sites in the United States and Switzerland. Other than the United States, Japan, Korea, China, and Spain the Company does not conduct business in any country in which its sales exceed 5% of consolidated sales. Sales are generally attributed to countries based on location of customers. The composition of the Company’s net sales to unaffiliated customers is set forth below (in thousands):

	Three Months Ended
	April 4, 2014		March 29, 2013
Japan	$	5,008	$	4,739
United States		2,874		3,240
China		2,225		2,071
Korea		2,621		2,035
Spain		1,618		1,291
Other		5,832		4,625
Total	$	20,178	$	18,001

100% of the Company’s sales are generated from the ophthalmic surgical product segment and therefore the Company operates as one operating segment for financial reporting purposes. The Company’s principal products are implantable Collamer lenses (“ICLs”) used in refractive surgery and intraocular lenses (“IOLs”) used in cataract surgery. The composition of the Company’s net sales by product line is as follows (in thousands):

	Three Months Ended
	April 4, 2014		March 29, 2013
ICLs	$	12,241	$	10,631
IOLs		6,613		6,347
Core products		18,854		16,978
Other Surgical Products		1,324		1,023
Total	$	20,178	$	18,001

The Company sells its products internationally, which subjects the Company to several potential risks, including fluctuating foreign currency exchange rates (to the extent the Company’s transactions are not in U.S. dollars), regulation of fund transfers by foreign governments, United States and foreign export and import duties and tariffs, and political instability.

A single customer has accounted for 13% and 11% of net sales for the three months ended April 4, 2014 and March 29, 2013, respectively.

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Pension Plans

3 Months Ended

Apr. 04, 2014

Defined Benefit Pension Plans and Defined Benefit Postretirement Plans Disclosure [Abstract]

Pension and Other Postretirement Benefits Disclosure [Text Block]

Note 7 – Pension Plans

The following table summarizes the components of net periodic pension cost recorded for the Company’s defined benefit pension plans (in thousands):

	Three Months Ended April 4, 2014		Three Months Ended March 29, 2013
Service cost	$	116	$	124
Interest cost		35		27
Expected return on plan assets		(27)		(23)
Net amortization of transitional obligation (a)		—		3
Amortization of prior service cost (a)		—		—
Actuarial loss, recognized in current period (a)		6		5
	$	130	$	136

(a) Amounts reclassified from accumulated other comprehensive income.

During the three months ended April 4, 2014 and March 29, 2013, the Company made cash contributions totaling approximately $69,000 and $59,000 to its Swiss pension plan and expects to make additional cash contributions totaling approximately $217,000 during the remainder of 2014. The Company is not required to and does not make contributions to its Japan pension plan.

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Basic and Diluted Income (Loss) Per Share

3 Months Ended

Apr. 04, 2014

Earnings Per Share [Abstract]

Earnings Per Share [Text Block]

Note 8 — Basic and Diluted Income (Loss) Per Share

The following table sets forth the computation of basic and diluted net income (loss) per share (in thousands except per share amounts):

	Three Months Ended
	April 4, 2014		March 29, 2013
Numerator:
Net income (loss)	$	(1,359)	$	471
Denominator:
Weighted average common shares and denominator for basic calculation:
Weighted average common shares outstanding		38,116		36,660
Less: Unvested restricted stock		322		233
Denominator for basic calculation		37,794		36,427
Weighted average effects of potentially dilutive common stock:
Stock options		—		522
Warrants		—		400
Restricted stock		—		69
Denominator for diluted calculation		37,794		37,418
Net income (loss) per share – basic	$	(0.04)	$	0.01
Net income (loss) per share – diluted	$	(0.04)	$	0.01

For the three months ended April 4, 2014, stock options, warrants, restricted stock and restricted stock units totaling approximately 2,798,000 weighted-average shares of common stock were excluded from the calculation of diluted loss per share, as the effect of including them would have been anti-dilutive, as it would have reduced the loss per share.

For the three months ended March 29, 2013, stock options to purchase approximately 2,035,000 weighted- average common shares and 98,000 weighted-average restricted stock were not included in the computation of diluted earnings per share because the effect of including them would have been anti-dilutive.

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Stock-Based Compensation

3 Months Ended

Apr. 04, 2014

Stockholders' Equity Note [Abstract]

Stockholders' Equity Note Disclosure [Text Block]

Note 10 — Stock-Based Compensation

Stock-based compensation is set forth below (in thousands):

	Three Months Ended
	April 4, 2014		March 29, 2013
Employee stock expense	$	797	$	821
Restricted stock expense		293		188
Restricted unit expense		388		—
Consultant compensation		22		25
Total	$	1,500	$	1,034

Stock Option Plans

The Amended and Restated 2003 Omnibus Equity Incentive Plan (“the Plan”) provides for various forms of stock-based incentives. To date, of the available forms of awards under the Plan, the Company has granted only stock options, restricted stock, unrestricted share grants, and performance contingent stock units. Options under the plan are granted at fair market value on the date of grant, become exercisable over a three year 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 Plan). Pursuant to the Plan, options for 3,346,875 shares were outstanding at April 4, 2014 with exercise prices ranging between $0.95 and $16.59 per share. Restricted stock grants under the Plan generally vest over a period between one to four years. There were 252,685 shares of restricted stock and 290,500 restricted stock units (RSUs) outstanding at April 4, 2014. As of April 4, 2014, there were 694,296 shares authorized and available for grants under the Plan.

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 6.92% estimated forfeiture rate based on historical forfeiture experience. The risk-free rate is based on the U.S. Treasury yield curve corresponding to the expected term at the time of the grant.

	Three Months Ended
	April 4, 2014			March 29, 2013
Expected dividend yield		0	%		0	%
Expected volatility		55.25	%		73.44	%
Risk-free interest rate		1.28	%		0.61	%
Expected term (in years)		4.12			4.12

A summary of option activity under the Plan for the period ended April 4, 2014 is presented below:

	Options Shares (000’s)
Outstanding at January 3, 2014		3,299
Granted		383
Exercised		(328)
Forfeited or expired		(7)
Outstanding at April 4, 2014		3,347
Exercisable at April 4, 2014		2,274

Warrants outstanding and exercisable for the period ended April 4, 2014 and January 3, 2014 were 700,000, respectively.

A summary of restricted stock and restricted stock units activity under the Plan for the period ended April 4, 2014 is presented below:

	Restricted Shares (000’s)		Restricted Units (000’s)
Outstanding at January 3, 2014		341		135
Granted		2		291
Vested		(90)		(135)
Forfeited		—		—
Outstanding at April 4, 2014		253		291

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Other Current Liabilities (Details) (USD $) In Thousands, unless otherwise specified	Apr. 04, 2014		Jan. 03, 2014
Other Liabilities, Current [Line Items]
Accrued salaries and wages	$ 2,691		$ 1,630
Accrued severance	837		731
Accrued bonuses	583		935
Accrued insurance	373		551
Accrued audit fees	231		328
Accrued commission	229		528
Accrued income taxes	173		485
Other!(1)!	1,262	[1]	1,184	[1]
Other Liabilities, Current	$ 6,379		$ 6,372

[1] No item in “Other” above exceeds 5% of the total other current liabilities

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Prepaids, Deposits, and Other Current Assets (Tables)

3 Months Ended

Apr. 04, 2014

Prepaid Expenses and Other Current Assets Disclosure [Abstract]

Schedule Of Prepaid Expenses [Table Text Block]

Prepaids, deposits, and other current assets consisted of the following (in thousands):

	April 4,		January 3,
	2014		2014
Prepaids and deposits	$	2,820	$	2,157
Value added tax (VAT) receivable		681		618
Deferred charge for foreign profits		280		362
Other current assets		989		366
	$	4,770	$	3,503

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Basic and Diluted Income (Loss) Per Share (Tables)

3 Months Ended

Apr. 04, 2014

Earnings Per Share [Abstract]

Schedule of Earnings Per Share, Basic and Diluted [Table Text Block]

The following table sets forth the computation of basic and diluted net income (loss) per share (in thousands except per share amounts):

	Three Months Ended
	April 4, 2014		March 29, 2013
Numerator:
Net income (loss)	$	(1,359)	$	471
Denominator:
Weighted average common shares and denominator for basic calculation:
Weighted average common shares outstanding		38,116		36,660
Less: Unvested restricted stock		322		233
Denominator for basic calculation		37,794		36,427
Weighted average effects of potentially dilutive common stock:
Stock options		—		522
Warrants		—		400
Restricted stock		—		69
Denominator for diluted calculation		37,794		37,418
Net income (loss) per share – basic	$	(0.04)	$	0.01
Net income (loss) per share – diluted	$	(0.04)	$	0.01

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Manufacturing Consolidation Project and Tax Strategy (Details Textual) (USD $)	3 Months Ended
	Apr. 04, 2014
Schedule Of Restructuring Reserve By Type Of Cost [Line Items]
Estimated Cost Of Project	$ 6,100,000
Cost Of Project	168,000
Estimated Cost Of Project Capital	100,000
Operating Loss Carryforwards	$ 122,000,000

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Geographic and Product Data (Details 1) (USD $) In Thousands, unless otherwise specified	3 Months Ended
	Apr. 04, 2014	Mar. 29, 2013
Product Information [Line Items]
Net sales	$ 20,178	$ 18,001
Implantable Collamer Lenses [Member]
Product Information [Line Items]
Net sales	12,241	10,631
Intraocular Lenses [Member]
Product Information [Line Items]
Net sales	6,613	6,347
Core products [Member]
Product Information [Line Items]
Net sales	18,854	16,978
Other Surgical Products [Member]
Product Information [Line Items]
Net sales	$ 1,324	$ 1,023

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CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS (USD $) In Thousands, unless otherwise specified	3 Months Ended
	Apr. 04, 2014	Mar. 29, 2013
Net income (loss)	$ (1,359)	$ 471
Defined Benefit Pension Plans:
Net change in plan assets	(11)	(11)
Reclassification into earnings	6	8
Foreign currency translation	11	(672)
Tax effect	(4)	0
Other comprehensive income (loss), net of tax	2	(675)
Comprehensive loss	$ (1,357)	$ (204)

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Property, Plant and Equipment

3 Months Ended

Apr. 04, 2014

Property, Plant and Equipment [Abstract]

Property, Plant and Equipment Disclosure [Text Block]

Note 4 — Property, Plant and Equipment

Property, plant and equipment consisted of the following (in thousands):

	April 4,		January 3,
	2014		2014
Machinery and equipment	$	17,011	$	16,225
Furniture and fixtures		4,980		4,837
Leasehold improvements		7,516		6,552
		29,507		27,614
Less: accumulated depreciation		20,675		20,209
	$	8,832	$	7,405

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Geographic and Product Data (Tables)

3 Months Ended

Apr. 04, 2014

Segment Reporting [Abstract]

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

The composition of the Company’s net sales to unaffiliated customers is set forth below (in thousands):

	Three Months Ended
	April 4, 2014		March 29, 2013
Japan	$	5,008	$	4,739
United States		2,874		3,240
China		2,225		2,071
Korea		2,621		2,035
Spain		1,618		1,291
Other		5,832		4,625
Total	$	20,178	$	18,001

Revenue from External Customers by Products and Services [Table Text Block]

The composition of the Company’s net sales by product line is as follows (in thousands):

	Three Months Ended
	April 4, 2014		March 29, 2013
ICLs	$	12,241	$	10,631
IOLs		6,613		6,347
Core products		18,854		16,978
Other Surgical Products		1,324		1,023
Total	$	20,178	$	18,001

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Basic and Diluted Income (Loss) Per Share (Details) (USD $) In Thousands, except Per Share data, unless otherwise specified	3 Months Ended
	Apr. 04, 2014	Mar. 29, 2013
Numerator:
Net income (loss)	$ (1,359)	$ 471
Weighted average common shares and denominator for basic calculation:
Weighted average common shares outstanding	38,116	36,660
Less: Unvested restricted stock	322	233
Denominator for basic calculation	37,794	36,427
Weighted average effects of potentially dilutive common stock:
Stock options	0	522
Warrants	0	400
Denominator for diluted calculation	37,794	37,418
Net income (loss) per share - basic (in dollars per share)	$ (0.04)	$ 0.01
Net income (loss) per share - diluted (in dollars per share)	$ (0.04)	$ 0.01
Restricted Stock [Member]
Weighted average effects of potentially dilutive common stock:
Restricted stock	0	69

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Inventories (Tables)

3 Months Ended

Apr. 04, 2014

Inventory Disclosure [Abstract]

Schedule of Inventory, Current [Table Text Block]

Inventories, net are stated at the lower of cost, determined on a first-in, first-out basis, or market and consisted of the following (in thousands):

	April 4,		January 3,
	2014		2014
Raw materials and purchased parts	$	1,281	$	1,367
Work-in-process		1,032		913
Finished goods		12,448		11,029
		14,761		13,309
Less: inventory reserves		976		795
	$	13,785	$	12,514