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:    July 4, 2014
	Or
¨	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
	For the transition period from          to

Commission file number: 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 ¨

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 ¨

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):

¨ Large accelerated filer þ Accelerated filer ¨ Non-accelerated filer (Do not check if a smaller
reporting company) ¨ Smaller reporting company

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

The registrant has 38,593,330 shares of common stock, par value $0.01 per share, issued and outstanding as of July 24, 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.	12
Item 3.	Quantitative and Qualitative Disclosures About Market Risk.	20
Item 4.	Controls and Procedures.	21
PART II – OTHER INFORMATION
Item 1.	Legal Proceedings.	21
Item 1A.	Risk Factors.	22
Item 4.	Mine Safety Disclosures.	23
Item 5.	Other Information.	23
Item 6.	Exhibits.	23

STAAR SURGICAL COMPANY

CONDENSED CONSOLIDATED BALANCE SHEETS

(In thousands, except par value amounts)

(Unaudited)

	July 4, 2014			January 3, 2014
ASSETS
Current assets:
Cash and cash equivalents	$	19,186		$	22,954
Accounts receivable trade, net of allowance for doubtful accounts of $1,461 and $1,449, respectively		12,700			10,731
Inventories, net		14,932			12,514
Prepaids, deposits and other current assets		3,539			3,503
Deferred income taxes		384			373
Total current assets		50,741			50,075
Property, plant and equipment, net		9,320			7,405
Intangible assets, net		1,206			1,380
Goodwill		1,786			1,786
Deferred income taxes		647			626
Other assets		672			659
Total assets	$	64,372		$	61,931
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Line of credit	$	4,900		$	4,750
Accounts payable		5,269			6,263
Deferred income taxes		738			739
Obligations under capital leases		445			288
Other current liabilities		5,833			6,372
Total current liabilities		17,185			18,412
Obligations under capital leases		629			141
Deferred income taxes		1,735			1,654
Asset retirement obligations		134			157
Pension liability		2,858			2,715
Total liabilities		22,541			23,079
Commitments and contingencies (Note 12)
Stockholders’ equity:
Common stock, $0.01 par value; 60,000 shares authorized; 38,361 and 37,911 shares issued and outstanding at July 4, 2014 and January 3, 2014		384			379
Additional paid-in capital		176,204			170,246
Accumulated other comprehensive income		446			282
Accumulated deficit		(135,203	)		(132,055	)
Total stockholders’ equity		41,831			38,852
Total liabilities and stockholders’ equity	$	64,372		$	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						Six Months Ended
	July 4, 2014			June 28, 2013			July 4, 2014			June 28, 2013
Net sales	$	20,048		$	18,164		$	40,226		$	36,165
Cost of sales		6,381			5,544			12,675			10,891
Gross profit		13,667			12,620			27,551			25,274
General and administrative		5,321			3,923			10,717			7,881
Marketing and selling		7,026			5,659			13,164			10,945
Research and development		2,498			1,686			5,981			3,052
Medical device tax		47			45			87			104
Other general and administrative expenses		165			613			334			1,514
Operating income (loss)		(1,390	)		694			(2,732	)		1,778
Other income (expense):
Interest income		10			8			18			15
Interest expense		(34	)		(41	)		(67	)		(96	)
Gain (loss) on foreign currency transactions		(134	)		77			(68	)		(264	)
Other income, net		126			139			287			230
Other income (expense), net		(32	)		183			170			(115	)
Income (loss) before provision for income taxes		(1,422	)		877			(2,562	)		1,663
Provision for income taxes		367			599			586			914
Net income (loss)	$	(1,789	)	$	278		$	(3,148	)	$	749
Net income (loss) per share - basic	$	(0.05	)	$	0.01		$	(0.08	)	$	0.02
Net income (loss) per share - diluted	$	(0.05	)	$	0.01		$	(0.08	)	$	0.02
Weighted average shares outstanding - basic		38,168			36,496			37,970			36,461
Weighted average shares outstanding - diluted		38,168			38,342			37,970			37,887

See accompanying notes to the condensed consolidated financial statements.

2

STAAR SURGICAL COMPANY

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)

(In thousands, except par value amounts)

(Unaudited)

	Three Months Ended						Six Months Ended
	July 4, 2014			June 28, 2013			July 4, 2014			June 28, 2013
Net income (loss)	$	(1,789	)	$	278		$	(3,148	)	$	749
Other comprehensive income (loss):
Defined benefit pension plans:
Net change in plan assets		(11	)		(18	)		(23	)		(30	)
Reclassification into earnings		6			14			12			19
Impact of change in discount rate		(558	)		—			(558	)		—
Curtailment gain		537			—			537			—
Foreign currency translation gain (loss)		291			(230	)		302			(894	)
Tax effect		(103	)		(1	)		(106	)		(5	)
Other comprehensive income (loss), net of tax		162			(235	)		164			(910	)
Comprehensive income (loss), net of tax	$	(1,627	)	$	43		$	(2,984	)	$	(161	)

See accompanying notes to the condensed consolidated financial statements.

3

STAAR SURGICAL COMPANY

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(In thousands)

(Unaudited)

	Six Months Ended
	July 4, 2014			June 28, 2013
Cash flows from operating activities:
Net income (loss)	$	(3,148	)	$	749
Adjustments to reconcile net income (loss) to net cash (used in)  provided by operating activities:
Depreciation of property and equipment		981			840
Amortization of intangibles		213			225
Deferred income taxes		57			129
Fair value adjustment of warrant		—			(27	)
Loss on disposal of property and equipment		—			59
Change in net pension liability		83			57
Stock-based compensation expense		3,183			2,019
Accretion of asset retirement obligation		2			7
Provision for sales returns and bad debts		1			111
Changes in working capital:
Accounts receivable		(1,895	)		(2,229	)
Inventories		(2,093	)		71
Prepaids, deposits and other current assets		(20	)		(507	)
Accounts payable		(874	)		(1,123	)
Other current liabilities		(554	)		(25	)
Net cash (used in) provided by operating activities		(4,064	)		356
Cash flows from investing activities:
Cash proceeds from sale of equipment		68			—
Acquisition of property and equipment		(2,269	)		(2,017	)
Net cash used in investing activities		(2,201	)		(2,017	)
Cash flows from financing activities:
Repayment of capital lease obligations		(251	)		(478	)
Proceeds from exercise of stock options		2,632			952
Net cash provided by financing activities		2,381			474
Effect of exchange rate changes on cash and cash equivalents		116			(763	)
Decrease in cash and cash equivalents		(3,768	)		(1,950	)
Cash and cash equivalents, at beginning of the period		22,954			21,675
Cash and cash equivalents, at end of the period	$	19,186		$	19,725

See accompanying notes to the condensed consolidated financial statements.

4

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. Certain information and footnote disclosures normally included in comprehensive financial statements have been condensed or omitted pursuant to such rules and regulations, although the Company believes that the disclosures made are adequate to make the information not misleading. 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 six months ended July 4, 2014 and June 28, 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 six months ended July 4, 2014 and June 28, 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 disclosures to conform to the current period’s presentation.

New Accounting Pronouncements

In June 2014, the FASB issued ASU 2014-12, “Compensation – Stock Compensation (Topic 718): Accounting for Shared Based Payments When the Terms of an Award Provide That a Performance Target Could Be Achieved After the Requisite Service Period (a consensus of the FASB Emerging Issues Task Force)”. ASU 2014-12 is effective for fiscal years, and interim periods within those years, beginning after December 15, 2015. The Company is assessing the impact, if any, to the consolidated financial statements.

In May 2014, the FASB issued ASU 2014-09, “Revenue from Contracts with Customers (Topic 606)”. This guidance includes the required steps to achieve the core principle that an entity should recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. This guidance is effective for fiscal years and interim periods beginning after December 15, 2016. Early adoption is not permitted. The Company expects to adopt this guidance when effective, and the impact on its consolidated financial statements is not currently estimable.

Note 2 — Inventories

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

	July 4,		January 3,
	2014		2014
Raw materials and purchased parts	$	1,867	$	1,367
Work-in-process		1,769		913
Finished goods		12,463		11,029
		16,099		13,309
Less: inventory reserves		1,167		795
	$	14,932	$	12,514

5

Note 3 — Prepaids, Deposits, and Other Current Assets

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

	July 4,		January 3,
	2014		2014
Prepaid and deposits	$	1,990	$	2,157
Value added tax (VAT) receivable		631		618
Deferred charges for foreign profits		340		362
Other current assets		578		366
	$	3,539	$	3,503

Note 4 — Property, Plant and Equipment

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

	July 4,		January 3,
	2014		2014
Machinery and equipment	$	16,670	$	16,225
Furniture and fixtures		5,455		4,837
Leasehold improvements		7,573		6,552
		29,698		27,614
Less: accumulated depreciation		20,378		20,209
	$	9,320	$	7,405

Note 5 – Amortizable Intangible Assets

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

	July 4, 2014							January 3, 2014
	Gross  Carrying Amount		Accumulated Amortization			Net		Gross  Carrying Amount		Accumulated Amortization			Net
Amortized intangible assets:
Patents and licenses	$	10,657	$	(10,173	)	$	484	$	10,637	$	(10,057	)	$	580
Customer relationships		1,537		(999	)		538		1,490		(894	)		596
Developed technology		977		(793	)		184		947		(743	)		204
Total	$	13,171	$	(11,965	)	$	1,206	$	13,074	$	(11,694	)	$	1,380

Note 6 – Other Current Liabilities

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

	July 4,  2014		January 3,  2014
Accrued salaries and wages	$	1,770	$	1,630
Accrued bonuses		1,107		935
Accrued severance		350		731
Accrued income taxes		317		485
Accrued audit fees		310		328
Accrued commissions		296		528
Accrued insurance		154		551
Other(1)		1529		1,184
	$	5,833	$	6,372

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

6

Note 7 – Pension Plans

During the three months ended July 4, 2014, pursuant to the Manufacturing Consolidation Project, the Company terminated certain employees in its Swiss subsidiary resulting in a Swiss pension plan curtailment as defined by ASC 715-30-35, Defined Benefit Plans – Pensions, Settlements, Curtailments, and Certain Termination Benefits. The curtailment resulted in a decrease of $1.2 million in the Swiss pension plan’s projected benefit obligation, of which $0.7 million was used to distribute cash payments to employees resulting in a decrease in plan assets. The remaining $0.5 million was recorded as a curtailment gain measured in accordance with ASC 715-30-35-93. However, since the Swiss pension plan’s accumulated other comprehensive loss, immediately preceding the curtailment exceeded the curtailment gain, the curtailment gain was fully offset against the loss and no gain was recognized in earnings.

As of July 4, 2014, the discount rate, one of the key assumptions used to calculate the Swiss pension plan’s projected benefit obligation, was reduced from 2.5% to 2%, resulting in an increase to the projected benefit obligation of $0.6 million recorded through an offsetting increase in the accumulated other comprehensive loss account of the Swiss pension plan.

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 July 4, 2014			Three Months Ended June 28, 2013			Six Months Ended July 4, 2014			Six Months Ended June 28, 2013
Service cost	$	117		$	80		$	233		$	204
Interest cost		36			25			71			52
Expected return on plan assets		(28	)		(24	)		(55	)		(48	)
Net amortization of transitional obligation		—			—			—			3
Actuarial loss recognized in current period		6			14			12			19
	$	131		$	95		$	261		$	230

During the six months ended July 4, 2014 and June 28, 2013, the Company made cash contributions totaling approximately $276,000 and $115,000 to its Swiss pension plan and does not expect to make any additional cash contributions during the remainder of 2014, as the Company has met the annual contribution requirement. The Company is not required to and does not make contributions to its Japan pension plan.

Note 8 — Basic and Diluted Income Per Share

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

	Three Months Ended						Six Months Ended
	July 4, 2014			June 28, 2013			July 4, 2014			June 28, 2013
Numerator:
Net income (loss)	$	(1,789	)	$	278		$	(3,148	)	$	749
Denominator:
Weighted average common shares and denominator for basic calculation:
Weighted average common shares outstanding		38,400			36,830			38,247			36,745
Less: Unvested restricted stock		(232	)		(334	)		(277	)		(284	)
Denominator for basic calculation		38,168			36,496			37,970			36,461
Weighted average effects of dilutive equity-based compensation awards:
Stock options		—			999			—			746
Restricted stock		—			139			—			94
Warrants		—			708			—			586
Denominator for diluted calculation		38,168			38,342			37,970			37,887
Net income (loss) per share – basic	$	(0.05	)	$	0.01		$	(0.08	)	$	0.02
Net income (loss) per share - diluted	$	(0.05	)	$	0.01		$	(0.08	)	$	0.02

7

The following tables sets forth (in thousands) the weighted average number of options and warrants to purchase shares of common stock and restricted stock, which were not included in the calculation of diluted per share amounts because the effects would be anti-dilutive.

	Three Months Ended				Six Months Ended
	July 4, 2014		June 28, 2013		July 4, 2014		June 28, 2013
Options		2,216		1,262		2,117		1,428
Restricted stock and units		195		25		280		110
Warrants		526		—		527		—
Total		2,937		1,287		2,924		1,538

Note 9 — Geographic and Product Data

The Company markets and sells its products in over 60 countries and has two manufacturing sites in the United States. During the quarter ended July 4, 2014, the Company completed the consolidation of its Swiss manufacturing facility to the U.S. Other than the United States, Japan, Korea, China, Spain, France and Germany, the Company does not conduct business in any country in which its sales exceed 5% of consolidated sales. Sales are 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				Six Months Ended
	July 4,		June 28,		July 4,		June 28,
	2014		2013		2014		2013
Japan	$	4,549	$	4,648	$	9,557	$	9,387
United States		2,926		3,154		5,801		6,394
China		2,535		2,230		4,759		4,301
Korea		1,952		1,834		4,573		3,869
Spain		1,474		1,163		3,092		2,454
France		1,190		595		2,136		1,127
Germany		1,015		611		1,912		1,126
Other		4,407		3,929		8,396		7,507
Total	$	20,048	$	18,164	$	40,226	$	36,165

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				Six Months Ended
	July 4,		June 28,		July 4,		June 28,
	2014		2013		2014		2013
ICLs	$	12,172	$	11,261	$	24,413	$	21,892
IOLs		6,428		5,863		13,041		12,211
Core products		18,600		17,124		37,454		34,103
Other surgical products		1,448		1,040		2,772		2,062
Total	$	20,048	$	18,164	$	40,226	$	36,165

One customer accounted for 11% of net sales for the three and six months ended July 4, 2014. This customer accounted for 11% and 10% of net sales for the three and six months ended June 28, 2013. One customer accounted for 12% of net sales for the six months ended July 4, 2014. This customer accounted for 10% and 11% of net sales for the three and six months ended June 28, 2013, respectively.

8

The Company sells its products internationally, which subjects the Company to several potential risks including regional/country economic conditions and regulatory requirements, 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.

Note 10 — Stock-Based Compensation

The cost that has been charged against income for stock-based compensation is set forth below (in thousands):

	Three Months Ended				Six Months Ended
	July 4, 2014		June 28, 2013		July 4, 2014		June 28, 2013
Employee stock options	$	675	$	666	$	1,472	$	1,492
Restricted stock		232		252		525		435
Restricted stock units		764		—		1,152		—
Nonemployee stock options		12		66		34		92
Total	$	1,683	$	984	$	3,183	$	2,019

The Company recorded stock-based compensation expense in the following categories on the accompanying consolidated statements of operations (in thousands):

	Three Months Ended				Six Months Ended
	July 4, 2014		June 28, 2013		July 4, 2014		June 28, 2013
Cost of sales	$	39	$	25	$	77	$	50
General and administrative		1,033		646		1,970		1,357
Marketing and selling		306		212		580		382
Research and development		305		101		556		230
Total	$	1,683	$	984	$	3,183	$	2,019

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 stock options, restricted stock, unrestricted stock grants, and restricted stock units (RSUs). 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 options and stock awards provide for accelerated vesting if there is a change in control or certain-pre-established financial metrics are met. Pursuant to the Plan, options for 3,276,770 shares were outstanding at July 4, 2014 with exercise prices ranging between $0.95 and $17.62 per share. Restricted stock grants under the Plan generally vest over a period of between one to three years. There were 229,500 shares of restricted stock and 299,000 RSUs outstanding at July 4, 2014. As of July 4, 2014, there were 1,998,046 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 weighted-average assumptions noted in the following table. Expected volatilities are based on historical volatility of the Company’s stock. The expected term of options granted is derived from the historical exercises and post-vesting cancellations and represents the period of time that options granted are expected to be outstanding. The Company has calculated a 7% 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						Six Months Ended
	July 4, 2014			June 28, 2013			July 4, 2014			June 28, 2013
Expected dividend yield		0	%		0	%		0	%		0	%
Expected volatility		56	%		72	%		55	%		73	%
Risk-free interest rate		1.30	%		0.70	%		1.29	%		0.62	%
Expected term (in years)		4.12			4.12			4.12			4.12

9

A summary of option activity under the Plan as of July 4, 2014 is presented below:

	Options Shares (000’s)
Outstanding at January 3, 2014		3,299
Granted		576
Exercised		(564	)
Forfeited or expired		(34	)
Outstanding at July 4, 2014		3,277
Exercisable at July 4, 2014		2,082

Warrants outstanding and exercisable as of July 4, 2014 and January 3, 2014 were 700,000.

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

	Restricted Shares (000’s)			Restricted Units (000’s)
Outstanding at January 3, 2014		341			135
Granted		29			304
Exercised		(140	)		(135	)
Forfeited		—			(5	)
Outstanding at July 4, 2014		230			299

Note 11 — Income Taxes

The provision for income taxes is determined using an estimated annual effective tax rate.  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 de-recognition 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 $586,000 and $914,000 for the six months ended July 4, 2014 and June 28, 2013, respectively, primarily benefiting in the current six-month period from the mix of pre-tax earnings in lower- and zero- rate foreign jurisdictions.  There are no unrecognized tax benefits as of any period presented. 

Note 12 — Commitments and Contingencies

Litigation and Claims

From time to time the Company may be subject to various claims and legal proceedings arising out of the normal course of our business. The Company expenses legal costs as incurred. These claims and legal proceedings may relate to contractual rights and obligations, securities or employment matters, or claims of product liability. The most significant of these actions and proceedings is described below. STAAR maintains insurance coverage for product liability and certain securities claims. Legal proceedings can extend for several years, and the matter described below concerning the Company is at very early stages of the legal process. As a result, this matter has not yet progressed sufficiently through discovery and/or development of important factual information and legal issues to enable the Company to determine whether the proceeding is material to the Company or to estimate a range of possible loss, if any. Unless otherwise disclosed, the Company is unable to estimate the possible loss or range of loss for the legal proceedings described below. While it is not possible to accurately predict or determine the eventual outcomes of this matter, an adverse determination in one or more of these items currently pending could have a material adverse effect on the Company's consolidated results of operations, financial position or cash flows.

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Todd v. STAAR

On July 8, 2014, a putative securities class action lawsuit was filed by Edward Todd against the Company and three officers in federal court located in Los Angeles, California. The plaintiff claims that STAAR made misleading statements to and omitted material information from the Company’s investors between February 27, 2013 and June 30, 2014 about alleged regulatory violations at the Company’s Monrovia manufacturing facility. The Company was served with the Complaint on July 21, 2014.Although the ultimate outcome of this action cannot be determined with certainty, the Company believes that the allegations in the Complaint are without merit. The Company intends to vigorously defend against this lawsuit. The Company intends to file a motion to dismiss the complaint, when appropriate, in the ongoing proceeding.

Note 13 — Manufacturing Consolidation Project and Tax Strategy

From fiscal 2011 through June 2014, 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 increasing 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 had manufactured its products in four facilities worldwide (Monrovia, Ca., Aliso Viejo, Ca., Nidau, Switzerland, and Ichikawa City, Japan). As of June 2014, all international production has been consolidated into the Monrovia site. Aliso Viejo is expected to integrate into Monrovia in the middle of 2015.

The Company has invested approximately $6.3 million since inception of these initiatives, including $334,000 incurred during the six months ended July 4, 2014, and future expenses, if any, are not expected to be material. These consolidation 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 six-month period ended July 4, 2014 (in thousands):

	Termination Benefits			Other  Associated Costs			Total
Liability at January 3, 2014	$	731		$	28		$	759
Costs incurred and charged to expense		212			122			334
Cash payments		(593	)		(150	)		(743	)
Liability at July 4, 2014	$	350		$	—		$	350

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

This information should be read in conjunction with the condensed consolidated financial statements and the notes thereto included in Part I, Item 1 of this Quarterly Report and with Management’s Discussion and Analysis of Financial Condition and Results of Operations for the year ended January 3, 2014 contained in our 2013 Annual Report on Form 10-K.

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 approval of 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 the business consolidation plans and the timetable for those plans; statements of belief, including as to achieving 2014 growth plans or metrics; expected regulatory activities (including any costs or activities related thereto) 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.

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®, Elastimide®, nanoFLEX®, nanoPOINT^TM, CentraFLOW® AquaPORT®, Epiphany® and AquaFlow^TM 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 in the U.S. in 2006.

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· The Visian 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 Submissions.”

· STAAR currently sells several versions of the Visian ICL and Visian TICL globally; the 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 iridotomy procedure prior to implanting the ICL.

· 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 (i) from 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 a single-piece preloaded acrylic IOL and the KS-X(s) is a three piece preloaded acrylic IOL. The KS IOL line is available in Japan and on a limited basis in Europe.

· The 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 other 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 the demand of injector parts.

Operations

STAAR operates its global administrative headquarters and a manufacturing facility in Monrovia, California, conducts materials manufacturing in Aliso Viejo, California and also maintains products manufacturing capabilities in Nidau, Switzerland. STAAR operates administrative and distribution facilities in Nidau, Switzerland through its wholly owned subsidiary STAAR Surgical AG, and in Chiba Prefecture, Japan through its wholly owned subsidiary STAAR Japan Inc.

STAAR has completed a project to consolidate its international manufacturing into a single site at its Monrovia, California location as of July 4, 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 second quarter of 2014, all IOLs and ICLs were manufactured in the U.S. This project, which is subject to significant risks, is further described under Note 13, “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.

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STAAR’s objectives for 2014 are guided by two principal strategic goals: to achieve profitability and to lay the groundwork for future profitable growth. In pursuit of these goals, STAAR has aligned its business initiatives during 2014 along five objectives it uses to gauge its success for the year. Those objectives are as follows:

· Increase total revenue by 8% to 10%.

- As discussed below in “Results of Operations,” our total revenue increased by 10% in the second quarter of 2014. Total revenue increased by 11% in the first half of 2014.

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

- As discussed below in “Results of Operations,” ICL sales grew by 8% in the second quarter of 2014. ICL sales grew by 12% for the first half 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 decreased by 130 basis points to 68.2% in the second quarter of 2014, compared to 69.5% in the second quarter of 2013, and decreased to 68.5% for the first half of 2014, compared to 69.9% during the first half of 2013. While the Company expects to increase gross profit margins during the second half of 2014, we do not expect to achieve this metric for the full year.

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

- As discussed below in “Results of Operations,” we reported a net loss of $1.8 million in the second quarter of 2014 and a net loss of $3.1 million for the first half of 2014.

· Manage the manufacturing consolidation with no material disruption to customer supply requirements or quality.

- As of the end of the second quarter of 2014, we completed the transfer of manufacturing from our Nidau, Switzerland location, completing the consolidation of our international manufacturing sites.

Other Highlights

Gross profit margin for the second quarter of 2014 was 68.2% compared to 69.5% in the second quarter of 2013. Our gross margin expansion was limited during the quarter primarily due to the geographic mix of increased KS-10L sales, manufacturing transition of our ICLs from Switzerland to the U.S. and a higher mix of low margin injector part sales. We continue to experience downward pressure on gross margin driven by the increased supply of preloaded injectors to our third party vendor for their preloaded acrylic IOL products. We expect this to expand during the second half of 2014 as their demand for the product increases. Our costing for ICLs manufactured in the U.S. continues to improve and we expect it to continue through the second half of 2014. We expect gross margins to improve during the second half of 2014 based upon increased rate of growth in ICL products, customer adoption of new products, combined with improved ICL manufacturing costs and higher selling prices. Our net loss for the second quarter of 2014 was primarily driven by the increased investments in R&D and Sales and Marketing, as well as additional costs in General and Administrative.

In the second quarter of 2014, ICL revenue grew in Europe, Middle East, Latin America and Africa (EMEA) region by 22%, in Asia Pacific (APAC) region by 2% and declined in North America by 1%. Sales were particularly strong, compared to the second quarter of 2013, in France (47% growth), Germany (21% growth), and Spain (26% growth). Further market penetration of the ICL with CentraFLOW technology contributed to the sales growth. ICL revenue in Japan declined 32% as refractive procedures in Japan continued to experience downward pressure.

IOL revenue in the second quarter of 2014 increased 10% primarily due to increased sales of KS-IOL products in the European markets and increased sales in China. Sales were particularly strong, compared to the second quarter of 2013, in EMEA (117% growth) and China (65% growth). Sales in Japan, which represents 46% of the Company’s total IOL sales, declined 10% in the second quarter of 2014. Our third party supplier of components for the KS-IOL product line increased the quantity of KS-IOL products delivered to us during the second quarter of 2014, and we expect the supply of KS-IOL products from our supplier to continue to increase throughout 2014.

As of the end of the second quarter of 2014, we ceased manufacturing products in our Nidau, Switzerland location, thus completing the transfer of manufacturing to the U.S. In the second quarter of 2014, we incurred approximately $0.2 million in consolidation-related cost.

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On June 30, 2014, we received CE Market approval for our Preloaded ICL with enhanced optics. We also continue our development efforts for 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 first half of 2015.

Status of Regulatory Submissions

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). As discussed in our “Risk Factors” contained in our Form 10-K filed on March 12, 2014 – “FDA compliance issues have delayed approvals and we expect to devote significant resources to maintaining compliance in the future,” on May 27, 2014, we received a Warning Letter from the FDA citing alleged violations of current good manufacturing practice (“cGMP”) regulations that were identified by the FDA during an inspection of the Company’s manufacturing facility in Monrovia, California between February 10, 2014 and March 21, 2014. To summarize, the Warning Letter observations require remedial action in four general areas: designs control documentation; validation of software for an on-line calculator; data collection and trending of ICL vault complaints; and shelf life data on the ICL product. The Warning Letter provides that, until the Company addresses the deficiencies to the FDA’s satisfaction, the FDA will not approve premarket applications (“PMAs”) for the Company’s Class III devices where the applications are reasonably related to the cGMP violations cited in the Warning Letter. The FDA has not provided us with a timeline for follow-up after the advisory panel meeting regarding a timeline for a decision on the PMA Supplement for the TICL, which has remained pending for over eight years, and it is unclear whether the Warning Letter will ultimately impact the timing of a potential approval. While the PMA supplement remains pending, we cannot predict when, or if, the FDA will grant approval of the TICL for use in the United States.

On April 14, 2014, STAAR submitted a PMA Supplement seeking approval of calculator software for the ICL. On July 16, 2014, we received a deficiency letter requesting that we revise the acceptable range of data for the corneal thickness and contact lens sphere fields, clarify that the anterior chamber depth field should include corneal thickness, and provide a list of any known software anomalies (i.e., bugs). We expect to appropriately and promptly revise the software fields and provide the requested data regarding software anomalies.

On May 15, 2014, the China Food and Drug Administration (CFDA) conducted an expert panel meeting regarding the Visian ICL with CentraFLOW technology. The CFDA sent the Company questions after the meeting to which the Company has prepared a response and expects to hear from CFDA within 105 working days.

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.

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.

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 six months ended July 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.

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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.

	Percentage of Net Sales for Three Months						Percentage of Net Sales for  Six Months
	July 4, 2014			June 28, 2013			July 4, 2014			June 28, 2013
Net sales		100.0	%		100.0	%		100.0	%		100.0	%
Cost of sales		31.8			30.5			31.5			30.1
Gross profit		68.2			69.5			68.5			69.9
General and administrative		26.5			21.6			26.6			21.8
Marketing and selling		35.0			31.2			32.7			30.3
Research and development		12.5			9.3			14.9			8.4
Medical device tax		0.3			0.2			0.3			0.3
Other general and administrative expenses		0.8			3.4			0.8			4.2
		75.1			65.7			75.3			65.0
Operating income (loss)		(6.9	)		3.8			(6.8	)		4.9
Other income (loss), net		(0.2	)		1.0			0.4			(0.3	)
Income (loss) before provision for income taxes		(7.1	)		4.8			(6.4	)		4.6
Provision for income taxes		1.8			3.3			1.4			2.5
Net income (loss)		(8.9	)%		1.5	%		(7.8	)%		2.1	%

Net Sales

	Three Months Ended				Fav/ (Unfav) % Change			Six Months Ended				Fav/ (Unfav) % Change
	July 4, 2014		June 28, 2013		2014 vs. 2013			July 4,  2014		June 28, 2013		2014 vs. 2013
Net sales	$	20,048	$	18,164		10.4	%	$	40,226	$	36,165		11.2	%
ICL		12,172		11,261		8.1			24,413		21,892		11.5
IOL		6,428		5,863		9.6			13,041		12,211		6.8
Other		1,448		1,040		39.2			2,772		2,062		34.4

Net sales for the three months ended July 4, 2014 were $20.0 million, an increase of 10.4% compared to the $18.2 million reported during the three months ended June 28, 2013. Net sales for the six months ended July 4, 2014 were $40.2 million, an 11.2% increase compared with $36.2 million reported during the six months ended June 28, 2013. The effect of exchange rates had a negative impact on sales of $0.1 million and $0.7 million, respectively, for the three and six months ended July 4, 2014.

Total ICL sales for the three months ended July 4, 2014 were $12.2 million, an increase of 8.1% compared with $11.3 million reported during the three months ended June 28, 2013. The increase in ICL sales for the quarter is due to increased sales in Europe, Middle East, Africa and Latin America (EMEA) +22%, and Asia Pacific +2%, partially offset by a 1% decline in North America sales. Total ICL sales for the six months ended July 4, 2014 were $24.4 million, an increase of 11.5% compared with $21.9 million reported during the six months ended June 28, 2013. The increase in ICL sales for the six month period is due to increased sales in Europe, Middle East, Africa and Latin America (EMEA) +24%, and Asia Pacific +9%, partially offset by an 8% decline in North America sales. ICL sales represented 60.7% of our total sales for the three and six months ended July 4, 2014, compared to 62.0% and 60.5% for the three and six month periods ended June 28, 2013.

Total IOL sales for the three months ended July 4, 2014 were $6.4 million, an increase of 9.6%, when compared with $5.9 million for the three months ended June 28, 2013. Total IOL sales for the six months ended July 4, 2014 were $13.0 million, an increase of 6.8%, when compared with $12.2 million for the six months ended June 28, 2013. The increase in IOL sales for the three and six month periods ended July 4, 2014, is due to increased sales of our acrylic preloaded IOL, particularly in Europe, which grew 117% and 92% new during the same periods, respectively. The increase in acrylic preloaded IOL sales for the three and six month periods ended July 4, 2014, was partially offset by a 19% and 5%, respective decrease in other IOL sales. IOL sales represent 32.1% and 32.4% of sales for the three and six months ended July 4, 2014, compared to 32.3% and 33.8% for the three and six month periods ended June 28, 2013.

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Other product sales for the three and six months ended July 4, 2014 were $1.4 million and $2.8 million, an increase of 39.2% and 34.4%, respectively, when compared with $1.0 million and $2.1 million for the three and six months ended June 28, 2013. The increase in other product sales was due to the increase in injector part sales to a third party supplier.

Gross Profit

	Three Months Ended						Fav/ (Unfav)   % Change			Six Months Ended						Fav/ (Unfav)   % Change
	July 4, 2014			June 28, 2013			2014 vs. 2013			July 4,  2014			June 28, 2013			2014 vs. 2013
Gross Profit	$	13,667		$	12,620			8.3	%	$	27,551		$	25,274			9.0	%
Gross Profit Margin		68.2	%		69.5	%					68.5	%		69.9	%

Gross profit for the second quarter was $13.7 million, or 68.2% of net sales, compared with $12.6 million, or 69.5% of net sales, in the prior year period. Three key factors drove a 450 basis point negative impact on the gross margin during the quarter; two of which should improve and one remain negative during the second half. The increased geographical sales mix of KS-IOL products had a negative impact of approximately 230 basis points. This should improve with the increasing growth rate of KS-IOL sales within our higher margin markets. Secondly, the increase of lower margin IOL injectors to a third party drove a negative impact of 80 basis points. This factor should continue to be a headwind during the second half. Finally, the transition of ICL production to the U.S. had a negative impact of 140 basis points. This should improve the second half, as it has in the first half, with increased manufacturing experience in the U.S. and the transfer of management from Switzerland. An increase of 3% in the average prices on ICLs had a positive impact on gross margin during the second quarter. The Company expects higher average prices for both ICLs and IOLs will have a positive impact during the second half of the year.

During the first six months of 2014, gross profit was $27.6 million, or 68.5% of revenue, compared with $25.3 million, or 69.9% of revenue, in the prior year period. Three key factors drove a 290 basis point negative impact on the gross margin during the first six months of 2014.   The increased geographical sales mix of KS-IOL products had a negative impact of approximately 110 basis points.  Secondly, the increase of lower margin IOL injectors to a third party drove a negative impact of 60 basis points.  Finally, the transition of ICL production of ICLs to the U.S. had a negative impact of 120 basis points.  An increase of 2% in the average prices on ICLs had a positive impact on gross margin.

General and Administrative

	Three Months Ended						Fav/ (Unfav) % Change			Six Months Ended						Fav/ (Unfav)   % Change
	July 4, 2014			June 28, 2013			2014 vs. 2013			July 4,  2014			June 28, 2013			2014 vs. 2013
General and Administrative	$	5,321		$	3,923			(35.6	)%	$	10,717		$	7,881			(36.0	)%
Percentage of Net Sales		26.5	%		21.6	%					26.6	%		21.8	%

General and administrative expenses increased by 35.6% to $5.3 million in the second quarter of 2014 from the $3.9 million reported in the second quarter of 2013. General and administrative expenses for the six months ended July 4, 2014 were $10.7 million, an increase of 36.0% when compared with $7.9 million reported last year. The increase is due to an increase in compensation expenses, including stock based compensation and bonuses and increased tax consulting expenses.

Marketing and Selling

	Three Months Ended						Fav/ (Unfav) % Change			Six Months Ended						Fav/ (Unfav) % Change
	July 4, 2014			June 28, 2013			2014 vs. 2013			July 4,  2014			June 28, 2013			2014 vs. 2013
Marketing and Selling	$	7,026		$	5,659			(24.2	)%	$	13,164		$	10,945			(20.3	)%
Percentage of Net Sales		35.0	%		31.2	%					32.7	%		30.3	%

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Marketing and selling expenses increased 24.2% to $7.0 million in the second quarter of 2014, compared with $5.7 million in the second quarter of 2013. Marketing and selling expenses for the six months ended July 4, 2014 were $13.2 million, an increase of 20.3% when compared with $11.0 million reported last year. The increase is due to an increase in compensation expense, including stock based compensation and an increase in trade show and promotional expense.

Research and Development

	Three Months Ended						Fav/ (Unfav) % Change			Six Months Ended						Fav/ (Unfav)  % Change
	July 4, 2014			June 28, 2013			2014 vs. 2013			July 4,  2014			June 28, 2013			2014 vs. 2013
Research and Development	$	2,498		$	1,686			(48.2	)%	$	5,981		$	3,052			(96.0	)%
Percentage of Net Sales		12.5	%		9.3	%					14.9	%		8.4	%

Research and development expense increased in the second quarter of 2014, by 48.2% to $2.5 million, compared with $1.7 million in the second quarter of 2013. Research and development expense for the six months ended July 4, 2014 was $6.0 million, an increase of 96.0%, when compared with $3.1 million reported last year. The increase for the quarter is due to increased compensation expense, including stock based compensation, increased consulting expenses associated with the recent FDA warning letter, and increased development costs of the Preloaded ICL and the V6a ICL. The increase in expense for the six month period is for the same reasons noted above but also due to the FDA panel costs of the first quarter.

Other General and Administrative Expenses

	Three Months Ended						Fav/ (Unfav) % Change			Six Months Ended						Fav/ (Unfav) % Change
	July 4 , 2014			June 28, 2013			2014 vs. 2013			July 4,  2014			June 28, 2013			2014 vs. 2013
Other General and Administrative Expenses	$	0.165		$	0.613			73.1	%	$	0.334		$	1,514			77.9	%
Percentage of Net Sales		0.8	%		3.4	%					0.8	%		4.2	%

Other general and administrative expenses for the quarter were $0.2 million, compared with $0.6 million in the second quarter of 2013. Other general and administrative expenses for the six months ended July 4, 2014 were $0.3 million, compared with $1.5 million, during the first six months of 2013. The Company has completed the transfer of its international manufacturing to the U.S. and does not anticipate reporting material additional expenses during the remainder of 2014.

Other Income, (Expense) Net

	Three Months Ended					Fav/ (Unfav) % Change			Six Months Ended					Fav/ (Unfav) % Change
	July 4, 2014			June 28, 2013		2014 vs. 2013			July 4,  2014		June 28, 2013			2014 vs. 2013
Other Income (Expense), Net	$	(0.032	)	$	0.183		—	*	$	0.170	$	(0.115	)		—	*

*   Denotes change is greater than +100%.

The year over year change in other income (expense), net for both periods is due to changes in foreign currency gains and losses, decreased interest expense, and fluctuations in royalty income.

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Income Taxes

The provision for income taxes is determined using an estimated annual effective tax rate.  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 de-recognition 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.

Income tax provision for the quarter ended July 4, 2014 was $0.4 million, compared to $0.6 million reported in the comparative period last year. During the six months ended July 4, 2014 and June 28, 2013, the tax provision was $0.6 million and $0.9 million, respectively. The current year provisions principally benefitted from the mix of pre-tax earnings in the Company’s lower- and zero- rate foreign jurisdictions.  There are no unrecognized tax benefits as of any period presented.  

Tax benefits from manufacturing consolidation are being partially realized during the year with greater realization anticipated in 2015.

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, including the cost associated with the manufacturing consolidation plan previously discussed by us and further described in Note 13, “Manufacturing Consolidation Project and Tax Strategy.” If the need for financing arises, STAAR cannot assure that it will be available on acceptable terms, 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.

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 July 4, 2014 and January, 2014, respectively, STAAR had $19.2 million and $23.0 million, of cash and cash equivalents.

Net cash used in operating activities for the six months ended July 4, 2014 and June 28, 2013, respectively, was $4.1 million, compared to cash used in operating activities of $0.4 million for the six months ended June 28, 2013. Net cash provided by operations for the six months ended July 4, 2014 consisted of net loss of $3.1 million and a decrease in working capital of $5.4 million, offset by $4.5 million in non-cash items.

Net cash used in investing activities for the six months ended July 4, 2014 and June 28, 2013, respectively, was $2.2 million and $2.0 million. Net cash used in investing activities was due to acquisition of property, plant and equipment.

Net cash provided by financing activities was $2.4 million and $0.5 million for the six months ended July 4, 2014 and June 28, 2013, respectively. Net cash provided by financing activities for the six months ended July 4, 2014 consisted of $2.6 million in proceeds from stock options, partially offset by $0.3 million in capital lease repayments.

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Credit Facilities, Contractual Obligations and Commitments

Accrued Termination Benefits for Manufacturing Consolidations Project

The Company has accrued $0.4 million as of July 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 $4.9 million based on the rate of exchange on July 4, 2014), at an interest rate equal to the Tokyo short-term prime interest rate (approximately 1.475% as of July 4, 2014). The Company had 500,000,000 Yen outstanding on the line of credit as of July 4, 2014 and January 3, 2014 (approximately $4.9 million and $4.8 million based on the foreign currency exchange rates on July 4, 2014 and January 3, 2014). As of July 4, 2014 there were no available borrowings under the line.

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 July 4, 2014), to be used for working capital purposes. There were no borrowings outstanding as of July 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	July 4, 2014			January 3, 2014
2014	$	270		$	303
2015		432			142
2016		335			6
2017		133			—
Thereafter		—			—
Total minimum lease payments	$	1,170		$	451
Less: interest		(96	)		(22	)
Total lease obligation	$	1,074		$	429
Current	$	445		$	288
Long-term	$	629		$	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 in 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.

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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.

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 July 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, securities or employment matters, or claims of product liability or regulatory actions. The most significant of these actions, proceedings and investigations are described below. STAAR maintains insurance coverage for product liability and certain securities claims. Legal proceedings can extend for several years, and the matters described below concerning the Company are at very early stages of the legal and administrative process. As a result, these matters have not yet progressed sufficiently through discovery and/or development of important factual information and legal issues to enable the Company to determine whether the proceedings are material to the Company or to estimate a range of possible loss, if any. Unless otherwise disclosed, the Company is unable to estimate the possible loss or range of loss for the legal proceedings described below. While it is not possible to accurately predict or determine the eventual outcomes of these items, an adverse determination in one or more of these items currently pending could have a material adverse effect on the Company's consolidated results of operations, financial position or cash flows.

Securities and Exchange Commission Informal Inquiry

In a letter dated July 3, 2014, the United States Securities and Exchange Commission (“SEC”) advised STAAR that it is conducting an informal inquiry into compliance with U.S. securities laws. The letter requested documents concerning any FDA inspections, investigations, observations, noted violations, or warnings since January 1, 2014. The Company intends to fully cooperate with this informal inquiry. On July 25, 2014, the Company sent the SEC documents responsive to the request.

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Todd v. STAAR

On July 8, 2014, a punitive securities class action lawsuit was filed by Edward Todd against STAAR and three officers in the federal court located in Los Angeles, California. The plaintiff claims that STAAR made misleading statements to and omitted material information from our investors between February 27, 2013 and June 30, 2014 about alleged regulatory violations at STAAR’s Monrovia manufacturing facility. On July 21, 2014, the Company was served with the Complaint. Although the ultimate outcome of this action cannot be determined with certainty, the Company believes that the allegations in the Complaint are without merit. The Company intends to vigorously defend against this lawsuit. The Company intends to file a motion to dismiss the complaint, when appropriate, in the ongoing proceeding.

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 the following risk factors, in addition to other information contained in this report and 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, 3014. Such risks and uncertainties could materially adversely affect our business, financial condition or operating results.

FDA compliance issues at our manufacturing facilities may impact the timeline for review and approval of our products and we expect to devote significant resources to maintaining compliance in the future.

The FDA’s Center for Devices and Radiological Health regularly inspects our facilities to determine whether we are in compliance with the FDA Quality System Regulation, which governs such things as manufacturing practices, validation, testing, quality control, product labeling and complaint handling, and our compliance with FDA Medical Device Reporting regulations and other FDA regulations. The FDA also regularly inspects for compliance with regulations governing advertising and promotional activities as well as clinical investigations.

While we believe that we are substantially in compliance with the FDA’s Quality System Regulations, past quality system deficiencies observed at certain of our facilities have led to FDA Warning Letters and the issuance of such Warning Letters may delay our efforts to obtain new product approvals while we resolve the deficiencies citied therein. For example, on May 27, 2014, we received a Warning Letter from the FDA citing violations of current good manufacturing practice (“cGMP”) regulations that were identified by FDA during an inspection of the Company’s manufacturing facility in Monrovia, California between February 10, 2014 and March 21, 2014. The violations set forth in the Warning Letter principally relate to inadequate documentation and procedures at the facility. The Warning Letter does not restrict production or shipment of the Company’s commercialized devices from this facility, but does confirm that, until the Company addresses the deficiencies to the FDA’s satisfaction, the FDA will not approve premarket applications (“PMAs”) for the Company’s Class III devices where the applications are reasonably related to the cGMP violations cited in the Warning Letter. The FDA has not provided us with a timeline for follow-up after the advisory panel meeting regarding the TICL and it therefore remains unclear whether the Warning Letter applies to the PMA Supplement and whether it will independently impact the timing of a potential approval of this PMA Supplement, which has been pending since 2006. While the PMA supplement remains pending, we cannot provide any assurance that we will ultimately obtain approval in a timely fashion, or at all.

Our ability to continue our U.S. business depends on vigilance in our compliance with FDA regulations. Accordingly, our management expects to continue to devote significant resources and attention to those efforts for the foreseeable future. We cannot ensure that our efforts will be successful. Any failure to demonstrate substantial compliance with FDA regulations can result in enforcement actions that terminate, suspend or severely restrict our ability to continue manufacturing and selling medical devices. Please see the related risks discussed in “Part I-Item 1A-Risk Factors” of the Company’s Form 10-K for the fiscal year ended January 3, 2014 under the headings “—We are subject to extensive government regulation, which increases our costs and could prevent us from selling our products” and “— We are subject to federal and state regulatory investigations.”

If we suffer loss to our facilities due to catastrophe, or if our manufacturing site fails to be in compliance with regulatory approvals, our operations could be seriously harmed.

Following consolidation of international manufacturing to our facilities in California, we manufacture our principal products at a single approved site (though we maintain manufacturing capability in Switzerland). Our facilities could suffer catastrophic loss due to fire, flood, earthquake, terrorism or other natural or man-made disasters and we would need to obtain additional regulatory approvals in order to manufacture our product at any new manufacturing site. Our California facilities are in an area where earthquakes could cause catastrophic loss. If our facilities were to experience a catastrophic loss, or found not to be in substantial compliance with regulatory requirements, it could disrupt our operations, delay production, shipments and revenue and result in large expenses to repair or replace the facility, as well as lost customers or sales. Our insurance for property damage and business interruption may not be sufficient to cover any particular loss. We do not carry insurance or reserve funds for interruptions or potential losses arising from earthquakes, terrorism or regulatory actions.

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ITEM 4.              MINE SAFETY DISCLOSURES

Not Applicable.

ITEM 5.              OTHER INFORMATION

Not Applicable.

ITEM 6.              EXHIBITS

3.1	Certificate of Incorporation, as amended to date.(1)
3.2	Amended and Restated By-laws.(1)
4.4	Form of Certificate for Common Stock, par value $0.01 per share.(2)
†4.5	Amended and Restated 2003 Omnibus Equity Incentive Plan, and form of Option Grant and Stock Option Agreement.*
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 July 4, 2014, 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 (Loss), (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 Current Report on Form 8-K filed with the Commission on June 11, 2014.
(2)	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.

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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:  July 31, 2014	By:	/s/ STEPHEN P. BROWN
		Stephen P. Brown
	Chief Financial Officer
	(on behalf of the Registrant and as its
	principal financial officer)

24

EX-4.5

Exhibit 4.5

STAAR SURGICAL COMPANY

AMENDED AND RESTATED

2003 OMNIBUS EQUITY INCENTIVE PLAN

(Effective June 9, 2014)

The Company, by action of its Board, hereby amends and restates in its entirety, effective as of the Restatement Date, the STAAR Surgical Company Amended and Restated 2003 Omnibus Equity Incentive Plan, with the following provisions:

1. Purpose and Scope.

(a) Purpose. The purpose of the Plan is to promote and advance the interests of the Company and its stockholders by enabling the Company and its Affiliates to attract, retain and motivate officers, directors, employees and independent contractors by providing for performance-based benefits, and to strengthen the mutuality of interests between such persons and the Company’s stockholders. The Plan is designed to meet this intent by offering performance- based stock and cash incentives and other equity-based incentive awards, thereby providing a proprietary interest in pursuing the long-term growth, profitability and financial success of the Company.

(b) Scope. The Plan amends, restates and replaces in its entirety the STAAR Surgical Company Amended and Restated 2003 Omnibus Equity Incentive Plan as last amended in May 2013 and as in effect immediately prior to this amendment and restatement.

2. Definitions. For purposes of the Plan, the following terms shall have the meanings set forth below, provided however, that if a Participant’s employment agreement or Award agreement (or other written agreement executed by and between Participant and the Company) expressly includes defined terms that expressly are different from and/or conflict with the below defined terms contained in this Plan then the defined terms contained in the employment agreement or Award agreement (or other written agreement executed by and between Participant and the Company) shall govern and shall supersede the below definitions:

“Affiliate” means any parent or subsidiary (as defined in Sections 424(e) and (f) of the Code) of the Company, and that qualifies as an eligible issuer of service recipient stock, as that term is defined in Treasury Regulations Section 1.409A-1(b)(5)(iii)(E).

“ASC” means Accounting Standards Codification.

“Award” means an award or grant made to a Participant under Sections 6 through 10, inclusive, of the Plan.

“Board” means the Board of Directors of the Company.

“Change in Control” means the occurrence of any one (or more) of the following events:

(i) Any person, including a group as defined in Section 13(d)(3) of the Exchange Act, becomes the beneficial owner of stock of the Company with respect to which twenty-five percent (25%) or more of the total number of votes for the election of the Board may be cast;

(ii) As a result of, or in connection with, any cash tender offer, exchange offer, merger or other business combination, sale of assets or contested election, or combination of the foregoing, persons who were directors of the Company immediately prior to such event shall cease to constitute a majority of the Board;

(iii) The stockholders of the Company shall approve an agreement providing either for a transaction in which the Company will cease to be an independent publicly owned corporation or for a sale or other disposition of all or substantially all the assets of the Company; or

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(iv) acquisition in a single or series of related transactions, including without limitation a tender offer or exchange offer, by any person or related group of persons (other than the Company or by a Company-sponsored employee benefit plan), of beneficial ownership (within the meaning of Rule 13d-3 of the Exchange Act) of securities possessing more than fifty percent (50%) of the total combined voting power of the Company’s outstanding securities.

Notwithstanding the foregoing, the formation of a holding company for the Company in which the stockholdings of the holding company after its formation are substantially the same as for the Company immediately prior to the holding company formation does not constitute a Change in Control for purposes of the Plan.

“Code” means the Internal Revenue Code of 1986, as amended and in effect from time to time, or any successor thereto, together with rules, regulations and authoritative interpretations promulgated thereunder.

“Committee” means the committee of the Board that is provided for in Section 3 of the Plan.

“Common Stock” means the common stock of the Company or any security of the Company issued in substitution, exchange or lieu thereof.

“Company” means STAAR Surgical Company, a Delaware corporation.

“Consultant” means any natural person who performs bona fide services for the Company or an Affiliate as a consultant or advisor, excluding Employees and Non-Employee Directors.

“Date of Grant” means the effective date as of which the Committee (or the Board, as the case may be) grants an Award to a Participant.

“Disability” or “Disabled” means total and permanent disability as defined in Section 22(e)(3) of the Code.

“Employee” means any individual who is a common-law employee of the Company or an Affiliate.

“Exchange Act” means the Securities Exchange Act of 1934, as amended and in effect from time to time, or any successor thereto, together with rules, regulations and authoritative interpretations promulgated thereunder.

“Fair Market Value” means the fair market value per share of the Common Stock determined in accordance with Treasury Regulations Section 1.409A- 1(b)(5)(iv), and to the extent permitted under such Regulations shall be on any given date, the closing price for the Common Stock on such date, or, if the Common Stock was not traded on such date, on the next preceding day on which the Common Stock was traded, determined in accordance with the following rules:

(i) If the Common Stock is admitted to trading or listing on The Nasdaq Global Market or any other national securities exchange registered under the Exchange Act, the closing price for any day shall be the last reported sale price, or in the case no such reported sale takes place on such date, the average of the last reported bid and ask prices, in either case on the principal national securities exchange on which the Common Stock is admitted to trading or listed;

(ii) If the Common Stock is not listed or admitted to trading on any national securities exchange, the last sale price of the Common Stock on the OTC Bulletin Board or, in the case no such reported sale takes place, the average of the closing bid and ask prices on such date; or

(iii) If the Common Stock is not listed or admitted to trading on any national securities exchange and is not quoted on the OTC Bulletin Board, the average of the closing bid and ask prices on such date as furnished by any member of the Financial Industry Regulatory Authority, selected from time to time by the Committee for that purpose.

“FASB” means the Financial Accounting Standards Board.

“Incentive Stock Option” means any Stock Option granted pursuant to the provisions of Section 6 of the Plan that is intended to be and is specifically designated as an “incentive stock option” within the meaning of Section 422 of the Code.

“ISO Limit” means the maximum aggregate number of shares of Common Stock that are permitted to be issued pursuant to the exercise of Incentive Stock Options granted under the Plan as described in Section 4(b).

“Non-Employee Director” means a non-Employee member of the Board.

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“Non-Qualified Stock Option” means any Stock Option granted pursuant to the provisions of Section 6 of the Plan that is not an Incentive Stock Option.

“Optioned Stock” means the shares of Common Stock that are subject to a Stock Option.

“Participant” means an Employee, Non-Employee Director, or Consultant of the Company or an Affiliate who is granted an Award under the Plan.

“Performance Award” means an Award granted pursuant to the provisions of Section 9 of the Plan, the vesting of which is contingent on the attainment of specified performance criteria.

“Performance Criteria” means the criteria (and adjustments) that the Committee selects for an Award for purposes of establishing the Performance Goal or Performance Goals for a Performance Period, determined as follows:

(A) The Performance Criteria that shall be used to establish Performance Goals are the following: (i) revenue, (ii) earnings, or earnings before interest, taxes, depreciation and amortization, or EBITDA, (iii) earnings per share, (iv) stock price, (v) operating cash flow, (vi) net income, (vii) profit margins, operating margins, gross margins or cash margins, (viii) revenue growth, (ix) pre- or after-tax income (before or after allocations of corporate overhead and bonuses), (x) return on equity, (xi) total shareholder return, (xii) return on assets or net assets, (xiii) appreciation in and/or maintenance of the price of the Common Stock, (xiv) market share, (xv) gross profits, (xvi) economic value- added models or equivalent metrics, (xvii) comparisons with various stock market indices, (xviii) reductions in costs, (xix) cash flow or cash flow per share, (xx) return on capital (including return on total capital or return on invested capital), (xxi) cash flow return on investment, (xxii) improvement in or attainment of expense levels or working capital levels, (xxiii) year-end cash, (xxiv) debt reductions, (xxv) stockholder equity, (xxvi) regulatory or litigation achievements, (xxvii) implementation, completion or attainment of measurable objectives with respect to business development, new products or services, budgets, regulatory or business risks, acquisitions, divestitures or recruiting and maintaining personnel, (xxviii) earnings, (xxix) expenses, (xxx) cost of goods sold, (xxxi) working capital, (xxxii) price/earnings ratio, (xxxiii) debt or debt-to-equity, (xxxiv) accounts receivable, (xxxv) writeoffs, (xxxvi) assets, (xxxvii) liquidity, (xxxviii) operations, (xxxix) research or related milestones, (xl) intellectual property (e.g., patents), (xli) product development, (xlii) information technology, (xliii) financings, (xliv) product quality control, (xlv) management, (xlvi) human resources, (xlvii) corporate governance, (xlviii) compliance program, (xlix) internal controls, (xlxi) policies and procedures, (xlxii) accounting and reporting, (xlxiii) strategic alliances, (xlxiv) licensing and partnering, (xlxv) site, plant or building development, and/or (xlxvi) any combination of the foregoing, any of which may be measured either in absolute terms, or changes in growth or reduction, or as compared to any incremental increase or decrease or as compared to results of a peer group or index. Such Performance Goals also may be based solely by reference to the Company’s performance or the performance of a Subsidiary, Affiliate, division, business segment or business unit of the Company, or based upon the relative performance of other companies or upon comparisons of any of the indicators of performance relative to other companies.

(B) The Committee may, in its sole discretion, provide that one or more objectively determinable adjustments shall be made to one or more of the Performance Goals. Such adjustments may include one or more of the following: (i) items related to a change in or provisions under tax law, accounting principles or other such laws or provisions affecting reported results; (ii) items relating to financing activities; (iii) expenses for restructuring or productivity initiatives; (iv) other non-operating items; (v) items related to reorganizations or restructuring programs or divestitures or acquisitions; (vi) items attributable to the business operations of any entity acquired by the Company during the Performance Period; (vii) items related to asset write-downs or the disposal of a business or segment of a business; (viii) items related to discontinued operations that do not qualify as a segment of a business under U.S. Generally Accepted Accounting Principles; (ix) items attributable to any stock dividend, stock split, combination or exchange of shares occurring during the Performance Period; (x) any other items of significant income or expense which are determined to be appropriate adjustments; (xi) items relating to unusual or extraordinary corporate transactions, events or developments, (xii) items related to amortization of acquired intangible assets; (xiii) items that are outside the scope of the Company’s core, on-going business activities; (xiv) items relating to any other unusual or nonrecurring events or changes in applicable laws, accounting principles or business conditions and/or items of gain, loss or expense determined to be extraordinary or unusual in nature or infrequent in occurrence; or (xv) litigation or claim judgments or settlements. For all Awards intended to qualify as performance-based compensation, such determinations shall be made within the time prescribed by, and otherwise in compliance with, Section 162(m) of the Code.

C-3

“Performance Goals” means for a Performance Period, one or more goals established in writing by the Committee for the Performance Period based upon one or more Performance Criteria. Depending on the Performance Criteria used to establish such Performance Goals, the Performance Goals may be expressed in terms of overall Company performance or the performance of a Parent, Subsidiary, Affiliate, division, business unit, or an individual. The achievement of each Performance Goal shall be determined in accordance with U.S. Generally Accepted Accounting Principles to the extent applicable.

“Performance Period” means one or more periods of time, which may be of varying and overlapping durations, as the Committee may select, over which the attainment of one or more Performance Goals will be measured for the purpose of determining a Participant’s right to, and the payment of, an Award.

“Performance Share Grant” means an Award of units representing shares of Common Stock granted pursuant to the provisions of Section 9 of the Plan.

“Performance Unit Grant” means an Award of monetary units granted pursuant to the provisions of Section 9 of the Plan.

“Plan” means this Amended and Restated STAAR Surgical Company 2003 Omnibus Equity Incentive Plan, as set forth herein and as it may be hereafter amended and from time to time and in effect.

“Prior Plans” means the STAAR Surgical Company 2003 Omnibus Equity Incentive Plan as last amended May 19, 2010 and as in effect immediately prior to this amendment and restatement; the 1991 Stock Option Plan of STAAR Surgical Company; the 1995 STAAR Surgical Company Consultant Stock Plan; the 1996 STAAR Surgical Company Non-Qualified Stock Plan; the 1998 STAAR Surgical Company Stock Plan; and the STAAR Surgical Company Stock Option Plan and Agreement for Chief Executive Officer. Each award or grant outstanding under a Prior Plan shall continue to be governed by the terms of that Prior Plan. Any shares of Common Stock available for Awards under the Prior Plans, including shares that become available pursuant to Section 4(b)(iii) of the Plan, shall be treated as part of the pool of shares of Common Stock available for Awards under the Plan.

“Qualified Note” means a recourse note, with a market rate of interest, that may, at the discretion of the Committee, be secured by Optioned Stock or otherwise.

“Re-Price” means that the Company has lowered or reduced the exercise price of outstanding Stock Options and/or outstanding Stock Appreciation Rights and/or outstanding other equity Awards for any Participant(s) in a manner described by SEC Regulation S-K Item 402(d)(2)(viii) (or as described in any successor provision(s) or definition(s)). For avoidance of doubt, Re-Price also includes any exchange of Stock Options or Stock Appreciation Rights for other Awards or cash.

“Restatement Date” means June 9, 2014.

“Restricted Award” means an Award granted pursuant to the provisions of Section 8 of the Plan.

“Restricted Stock Grant” means an Award of shares of Common Stock granted pursuant to the provisions of Section 8 of the Plan.

“Restricted Unit Grant” means an Award of units representing shares of Common Stock granted pursuant to the provisions of Section 8 of the Plan.

“SEC” means the Securities and Exchange Commission.

“Service” means the performance of services for the Company (or any Affiliate) by an Employee, Non-Employee Director, or Consultant, as determined by the Committee in its sole discretion. Service shall not be considered interrupted in the case of (i) any leave of absence approved by the Company or (ii) transfers between locations of the Company or between the Company and any Affiliate, or any successor. A leave of absence approved by the Company shall include sick leave, military leave, or any other personal leave approved by an authorized representative of the Company. For purposes of Incentive Stock Options, no such leave may exceed three (3) months, unless reemployment upon expiration of such leave is guaranteed by statute or contract, including Company policies. If reemployment upon expiration of a leave of absence approved by the Company is not so guaranteed, then any exercises of the Incentive Stock Option occurring more than six months after commencement of such leave shall cease to be treated as an Incentive Stock Option and shall be treated for tax purposes as the exercise of a Non-Qualified Stock Option.

“Stock Appreciation Right” means an Award to benefit from the appreciation of Common Stock granted pursuant to the provisions of Section 7 of the Plan.

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“Stock Option” means an Award to purchase shares of Common Stock granted pursuant to the provisions of Section 6 of the Plan.

“Subsidiary” means any corporation or entity which is a subsidiary of the Company within the meaning of Section 424(f) of the Code and that qualifies as an eligible issuer of service recipient stock, as that term is defined in Treasury Regulations Section 1.409A-1(b)(5)(iii)(E).

“Ten Percent Stockholder” means a person who owns stock (after taking into account the constructive ownership rules of Section 424(d) of the Code) possessing more than ten percent (10%) of the total combined voting power of all classes of stock of the Company (or any Affiliate).

“Terminated for Cause” means any discharge of a Participant’s Service because of personal dishonesty, willful misconduct, breach of fiduciary duty involving personal profit, continuing intentional or habitual failure to perform stated duties, violation of any law (other than minor traffic violations or similar misdemeanor offenses not involving moral turpitude), or material breach of any provision of an employment or independent contractor agreement with the Company.

“Termination Date” means the date on which a Participant’s Service terminates, as determined by the Committee in its sole discretion.

3. Administration.

(a) The Plan shall be administered by a committee appointed by the Board. The Committee shall be comprised solely of not less than two persons who are “outside directors” within the meaning of Section 162(m)(4)(C) of the Code and “non-employee directors” within the meaning of Rule 16b-3 of the Exchange Act. Members of the Committee shall serve at the pleasure of the Board and the Board may from time to time remove members from, or add members to, the Committee. No person who is not an “outside director” within the meaning of Section 162(m)(4)(C) of the Code and a “non-employee director” within the meaning of Rule 16b-3 of the Exchange Act may serve on the Committee. Appointment to the Committee of any person who is not an “outside director” and a “non-employee director” shall automatically be null and void, and any person on the Committee who ceases to be an “outside director” and a “non-employee director” shall automatically and without further action cease to be a member of the Committee.

(b) A majority of the members of the Committee shall constitute a quorum for the transaction of business. Action approved in writing by a majority of the members of the Committee then serving shall be as effective as if the action had been taken by unanimous vote at a meeting duly called and held.

(c) The Committee is authorized to construe and interpret the Plan, to promulgate, amend, and rescind rules and procedures relating to the implementation of the Plan, and to make all other determinations necessary or advisable for the administration of the Plan. This includes without limitation: determining which individuals are to receive Awards; determining the type, number, vesting requirements, Performance Goals (or other objective/subjective goals (if any)) and their degree of satisfaction, and other features and conditions of such Awards and amending such Awards; correcting any defect, supplying any omission, or reconciling or clarifying any inconsistency in the Plan or any Award agreement; accelerating the vesting or extending the post- termination exercise term, or waiving restrictions, of Awards at any time and under such terms and conditions as it deems appropriate; permitting or denying, in its discretion, a Participant’s request to transfer an Award; and granting Awards to persons who are foreign nationals on such terms and conditions different from those specified in the Plan, which may be necessary or desirable to foster and promote achievement of the purposes of the Plan, and adopting such modifications, procedures, and/or subplans (with any such subplans attached as appendices to the Plan) and the like as may be necessary or desirable to comply with provisions of the laws or regulations of other countries or jurisdictions to ensure the viability of the benefits from Awards granted to Participants employed in such countries or jurisdictions, or to meet the requirements that permit the Plan to operate in a qualified or tax efficient manner, and/or comply with applicable foreign laws or regulations.

Any determination, decision, or action of the Committee in connection with the construction, interpretation, administration, or application of the Plan shall be binding upon all Participants and any person claiming under or through any Participant. Although the Committee is anticipated to make certain Awards that constitute “qualified performance-based compensation” within the meaning of Section 162(m)(4)(C) of the Code and Treasury Regulation Section 1.162-27(e), the Committee is also expressly authorized to make Awards that do not constitute “qualified performance-based compensation” within the meaning of those provisions. By way of example, and not by way of limitation, the Committee, in its sole and absolute discretion, may issue an Award that is not based on a Performance Goal, as set forth in (i) below, but is based solely on continued Service.

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(d) The Committee may employ or retain persons other than members of the Committee to assist the Committee to carry out its responsibilities under such conditions and limitations as it may prescribe, except that the Committee may not delegate its authority with regard to selection for participation in and the granting of Awards to persons subject to Section 16 of the Exchange Act or with regard to any of its duties under Section 162(m) of the Code necessary for awards under the Plan to constitute “qualified performance-based compensation” within the meaning of Section 162(m)(4)(C) of the Code and Treasury Regulation Section 1.162-27(e).

(e) The Committee is expressly authorized to make such modifications to the Plan as are necessary to effectuate the intent of the Plan as a result of any changes in the income tax, accounting, or securities law treatment of Participants and the Plan.

(f) The Company shall effect the granting of Awards under the Plan in accordance with the determinations made by the Committee, by execution of instruments in writing in such form as approved by the Committee. However, no Award may be Re-Priced under this Plan unless such Re-Pricing is approved by Company stockholders.

(g) The Committee may not increase an Award once granted, although it may grant additional Awards to the same Participant.

(h) The Committee shall keep the Board informed as to its actions and make available to the Board its books and records. Although the Committee has the authority to establish and administer the Plan, the Board reserves the right at any time to abolish the Committee and have the independent members of the Board administer the Plan instead.

(i) In the case of an Award that is intended to constitute “qualified performance-based compensation” within the meaning of Section 162(m)(4)(C) of the Code and Treasury Regulation Section 1.162-27(e), the Committee shall establish in writing at the time of making the Award the Performance Goal(s) that must be satisfied for payment pursuant to the Award and the amount payable upon satisfaction of those Performance Goal(s). Such Performance Goal(s) shall be established (1) while the outcome of attaining such Performance Goal(s) is substantially uncertain, (2) not later than 90 days after the commencement of the period of service to which the Performance Goal(s) relates (but in any event not later than after 25% of the period of service has elapsed) or (3) at such other time as is permitted under Treasury Regulations Section 1.162-27(e)(2). In carrying out these duties, the Committee shall use objective written standards for establishing both the Performance Goal(s) and the amount of compensation such that a third party with knowledge of the relevant facts would be able to determine whether and to what extent the Performance Goal(s) has been satisfied and the amount of compensation payable. The Committee may in its discretion provide a copy of the document(s) setting forth such standards to the affected Participant and shall retain such written material in its permanent books and records.

(j) In the case of remuneration that is intended to constitute “qualified performance-based compensation” within the meaning of Section 162(m)(4)(C) of the Code and Treasury Regulation Section 1.162-27(e), the Committee’s actions shall be undertaken in conformity with the rules of Code Section 162(m)(4)(C)(ii) and Treasury Regulations promulgated thereunder. In the case of remuneration that is not intended to constitute “qualified performance-based compensation” within the meaning of Section 162(m)(4)(C) of the Code and Treasury Regulation Section 1.162-27(e), the Committee and the Board shall make such disclosures to and seek such approval from the stockholders of the Company as they reasonably determine are required by law.

(k) To the extent required under Code Section 162(m)(4)(C) and the regulations promulgated thereunder, before any payment of qualified performance- based remuneration under the Plan, the Committee must certify in writing that the Performance Goals and any other material terms of the Award were in fact satisfied. Such certification shall be kept with the permanent books and records of the Committee.

(l) The Committee shall use its good faith best efforts to comply with the requirements of Section 162(m)(4)(C) of the Code and the regulations promulgated thereunder for Awards that are intended to constitute “qualified performance-based compensation,” but shall have no liability to the Company or any recipient or any other person in the event one or more Awards do not so qualify.

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4. Duration of and Common Stock Subject to the Plan.

(a) Term. The Plan, as amended and restated hereby, shall become effective as of the Restatement Date, subject to ratification by the stockholders of the Company within twelve (12) months after the Restatement Date. In the event that the stockholders of the Company do not ratify the Plan (as amended and restated hereby) within twelve (12) months after the Restatement Date, any Awards which were issued after the Restatement Date and which were dependent on the incremental number of shares allocated to Plan Section 4(b) or achievement of a new Performance Goal which each were added by this restatement shall be rescinded automatically. Unless sooner terminated by the Board, the Plan shall continue until May 18, 2020 when the Plan shall terminate, and no Awards may be granted under the Plan thereafter. The termination of the Plan shall not affect the Awards that are outstanding on the Plan’s termination date.

(b) Shares of Common Stock Subject to the Plan. The maximum total number of shares of Common Stock with respect to which aggregate stock Awards may be granted under the Plan (including shares of Common Stock subject to outstanding Awards under the Prior Plans) shall be 11,250,000. In addition, the ISO Limit cannot exceed 11,250,000 Shares.

(i) All of the amounts stated in this Paragraph (b) are subject to adjustment as provided in Section 15 below.

(ii) For the purpose of computing the total number of shares of Common Stock available for Awards under the Plan, there shall be counted against the foregoing limitations the number of shares of Common Stock subject to issuance upon exercise or used for payment or settlement of Awards.

(iii) If any Awards under this Plan or a Prior Plan are forfeited, terminated, expire unexercised, settled or paid in cash in lieu of stock or exchanged for other Awards, the shares of Common Stock which were theretofore subject to such Awards shall again be available for Awards under the Plan to the extent of such forfeiture or expiration of such Awards.

(c) Source of Common Stock. Common Stock which may be issued under the Plan may be either authorized and unissued stock or issued stock that has been reacquired by the Company. No fractional shares of Common Stock shall be issued under the Plan.

5. Eligibility. Incentive Stock Options may only be granted to Employees of the Company or a Subsidiary corporation. Employees, Non- Employee Directors, and Consultants of the Company or a Subsidiary are eligible to receive Non-Qualified Stock Options, Stock Appreciation Rights, Restricted Awards, Performance Awards and other Awards under the Plan.

6. Stock Options. Stock options granted under the Plan may be in the form of Incentive Stock Options or Non-Qualified Stock Options (collectively referred to as “Stock Options”). Stock Options shall be subject to written Stock Option agreements containing the terms and conditions set forth below and such additional terms and conditions, not inconsistent with the express provisions of the Plan, as the Committee shall deem desirable in its sole and absolute discretion.

(a) Grant. Stock Options shall be granted under the Plan on such terms and conditions not inconsistent with the provisions of the Plan and pursuant to written agreements with the Participants in such form or forms as the Committee may from time to time approve in its sole and absolute discretion. The terms of individual Stock Option agreements need not be identical. Each Stock Option agreement shall state specifically whether it is intended to be an Incentive Stock Option agreement or a Non-Qualified Stock Option agreement provided however that if an agreement does not so specify or there is ambiguity as to what type of Stock Option it is, then the Stock Option shall be a Non- Qualified Stock Option. Stock Options may be granted alone or in addition to other Awards under the Plan.

(b) Exercise Price. Except as otherwise provided for in Paragraph (f) below, the exercise price per share of Common Stock purchasable under a Stock Option shall be determined by the Committee at the time of grant but shall not be less than one hundred percent (100%) of the Fair Market Value of the stock subject to the option on the Date of Grant of the Stock Option.

(c) Option Term. The term of each Stock Option shall be fixed by the Committee. However, the term of any Stock Option shall not exceed ten (10) years from the Date of Grant of such Stock Option.

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(d) Exercisability. A Stock Option shall be exercisable at such time or times and subject to such terms and conditions as shall be determined by the Committee at the Date of Grant and set forth in the written Stock Option agreement. A written Stock Option agreement may, if permitted pursuant to its terms, become exercisable in full upon the occurrence of events selected by the Committee that are beyond the control of the Participant (including, but not limited to, a Change in Control).

(e) Method of Exercise. A Stock Option may be exercised, in whole or in part, by giving written notice of exercise to the Committee specifying the number of shares of Common Stock to be purchased. Such notice shall be accompanied by payment in full of the exercise price (i) in cash or (ii) if acceptable to the Committee, in shares of Common Stock already owned by the Participant or a Qualified Note. The Committee may also permit Participants, either on a selective or aggregate basis, to simultaneously exercise Stock Options and sell the shares of Common Stock thereby acquired, pursuant to a brokerage or similar arrangement, approved in advance by the Committee, and use the proceeds from such sale as payment of part or all of the exercise price of such shares; provided, that such payment would not cause the Company to recognize added compensation expense for financial reporting purposes or cause the Award to be treated under liability accounting for financial reporting purposes or to violate Section 402 of the Sarbanes-Oxley Act of 2002, as determined by the Committee in its sole discretion.

(f) Special Rules for Incentive Stock Options. The terms specified below shall be applicable to all Incentive Stock Options. Stock Options which are not specifically designated as Incentive Stock Options when issued under the Plan shall not be subject to the terms of this Paragraph.

(i) Ten Percent Stockholder. If any Employee to whom an Incentive Stock Option is granted is a Ten Percent Stockholder, then the exercise price of the Incentive Stock Option shall not be less than one hundred ten percent (110%) of the Fair Market Value of the Common Stock on the Date of Grant of such Incentive Stock Option, and the term of the Incentive Stock Option shall not exceed five (5) years from the Date of Grant of such option.

(ii) Dollar Limitation. The aggregate Fair Market Value of the Optioned Stock (determined as of the Date of Grant of each Stock Option) with respect to Stock Options granted to any Employee under the Plan (or any other option plan of the Company or any Affiliate) that may for the first time become exercisable as Incentive Stock Options during any one calendar year shall not exceed one hundred thousand dollars ($100,000). To the extent the Employee holds two or more such Stock Options which become exercisable for the first time in the same calendar year, the foregoing limitation on the exercisability of such Stock Options as Incentive Stock Options shall be applied in the order in which such Stock Options are granted. Any Stock Options in excess of such limitation shall automatically be treated as Non-Qualified Stock Options.

7. Stock Appreciation Rights. The grant of Stock Appreciation Rights under the Plan shall be subject to the following terms and conditions and such additional terms and conditions, not inconsistent with the express provisions of the Plan, as the Committee shall deem desirable in its sole and absolute discretion. The terms of each Stock Appreciation Right granted shall be set forth in a written agreement between the Company and the Participant receiving such grant. The terms of such agreements need not be identical.

(a) Stock Appreciation Rights. A Stock Appreciation Right is an Award determined by the Committee entitling a Participant to receive an amount equal to the excess, if any, of the Fair Market Value of a share of Common Stock on a date concluding a measuring period fixed by the Committee upon granting the Stock Appreciation Right, over the Fair Market Value of a share of Common Stock on the Date of Grant of the Stock Appreciation Right, multiplied by the number of shares of Common Stock subject to the Stock Appreciation Right.

(b) Grant. A Stock Appreciation Right may be granted in addition to or completely independently of any other Award under the Plan. Upon grant of a Stock Appreciation Right, the Committee shall select and inform the Participant regarding the number of shares of Common Stock subject to the Stock Appreciation Right and the date that constitutes the close of the measuring period.

(c) Measuring Period. A Stock Appreciation Right shall accrue in value from the Date of Grant over a time period established by the Committee. In the written Stock Appreciation Right agreement, the Committee may also provide (but is not required to provide) that a Stock Appreciation Right shall be automatically payable on one or more specified dates prior to the normal end of the measuring period upon the occurrence of events selected by the Committee (including, but not limited to, a Change in Control) that are beyond the control of the Participant.

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(d) Form of Payment. Payment pursuant to a Stock Appreciation Right may be made, as the Committee shall determine in its sole and absolute discretion: (i) in cash, (ii) in shares of Common Stock or (iii) in any combination of the above. The Committee may elect to make this determination either at the time the Stock Appreciation Right is granted, at the time of payment or at any time between such dates.

8. Restricted Awards. Restricted Awards granted under the Plan may be in the form of either Restricted Stock Grants or Restricted Unit Grants. Restricted Awards shall be subject to the following terms and conditions and such additional terms and conditions, not inconsistent with the express provisions of the Plan, as the Committee shall deem desirable in its sole and absolute discretion and that are in compliance with Code Section 409A and the applicable Treasury Regulations promulgated thereunder. The Restricted Awards shall be pursuant to a written agreement executed both by the Company and the Participant. The terms of such written agreements need not be identical.

(a) Restricted Stock Grants. A Restricted Stock Grant is an Award of shares of Common Stock transferred to a Participant subject to such terms and conditions as the Committee deems appropriate, as set forth in Paragraph (d) below.

(b) Restricted Unit Grants. A Restricted Unit Grant is an Award of units (with each unit having a value equivalent to one share of Common Stock) granted to a Participant subject to such terms and conditions as the Committee deems appropriate, including, without limitation, the requirement that the Participant forfeit all or a portion of such units upon termination of Service for specified reasons within a specified period of time, and restrictions on the sale, assignment, transfer or other disposition of such units.

(c) Grants of Awards. Restricted Awards may be granted under the Plan in such form and on such terms and conditions as the Committee may from time to time approve. Restricted Awards may be granted alone or in addition to other Awards under the Plan. Subject to the terms of the Plan, the Committee shall determine the number of Restricted Awards to be granted to a Participant and the Committee may impose different terms and conditions (including Performance Goals) on any particular Restricted Award made to any Participant. Each Participant receiving a Restricted Stock Grant shall generally be issued a stock certificate in respect of such shares of Common Stock. Such certificate shall be registered in the name of such Participant, shall be accompanied by a stock power duly executed by such Participant, and shall bear an appropriate legend referring to the terms, conditions and restrictions applicable to such Award. The certificate evidencing the shares shall be held in custody by the Company until the restrictions imposed thereon shall have lapsed or been removed.

(d) Restriction Period. Restricted Awards shall provide that in order for a Participant to vest in such Awards, the Participant must continuously provide Service, subject to relief for specified reasons, for such period as the Committee may designate at the time of the Award (“Restriction Period”). If the Committee so provides in the written agreement with the Participant, a Restricted Award may also be subject to satisfaction of such performance goals as are set forth in such agreement. During the Restriction Period, a Participant may not sell, assign, transfer, pledge, encumber, or otherwise dispose of shares of Common Stock received under a Restricted Stock Grant. The Committee, in its sole discretion, may provide for the lapse of restrictions during the Restriction Period upon the occurrence of events selected by the Committee that are beyond the control of the Participant (including, but not limited to, a Change in Control or, if necessary to comply with Code Section 409A, an event described in Code Section 409A(a)(2)(A)(v)). Upon expiration of the applicable Restriction Period (or lapse of restrictions during the Restriction Period where the restrictions lapse in installments or by action of the Committee), the Participant shall be entitled to receive his or her Restricted Award or portion thereof, as the case may be.

(e) Payment of Awards. A Participant who receives a Restricted Stock Grant shall be paid solely by release of the restricted stock at the termination of the Restriction Period (whether in one payment, in installments or otherwise). A Participant shall be entitled to receive payment for a Restricted Unit Grant (or portion thereof) in an amount equal to the aggregate Fair Market Value of the shares of Common Stock covered by such Award upon the expiration of the applicable Restriction Period. Payment in settlement of a Restricted Unit Grant shall be made as soon as practicable following the conclusion of the specified Restriction Period, as the Committee shall determine in its sole and absolute discretion: (i) in cash, (ii) in shares of Common Stock equal to the number of units granted under the Restricted Unit Grant with respect to which such payment is made, or (iii) in any combination of the above. The Committee may elect to make this determination either at the time the Award is granted, at the time of payment or at any time in between such dates.

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(f) Rights as a Stockholder. A Participant shall have, with respect to the shares of Common Stock received under a Restricted Stock Grant, all of the rights of a stockholder of the Company, including the right to vote the stock, and the right to receive any cash dividends. Such cash dividends shall be withheld, however, until their release upon lapse of the restrictions under the Restricted Award. Stock dividends issued with respect to the shares covered by a Restricted Stock Grant shall be treated as additional shares under the Restricted Stock Grant and shall be subject to the same restrictions and other terms and conditions as apply to shares under the Restricted Stock Grant with respect to which the dividends are issued.

9. Performance Awards. Performance Awards granted under the Plan may be in the form of either Performance Share Grants or Performance Unit Grants. Performance Awards shall be subject to written agreements which shall contain the terms and conditions set forth below and such additional terms and conditions, not inconsistent with the express provisions of the Plan, as the Committee shall deem desirable in its sole and absolute discretion and that are in compliance with Code Section 409A and the applicable Treasury Regulations promulgated thereunder. Such agreements need not be identical.

(a) Performance Share Grants. A Performance Share Grant is an Award of units (with each unit equivalent in value to one share of Common Stock) granted to a Participant subject to such terms and conditions as the Committee deems appropriate, including, without limitation, the requirement that the Participant forfeit such units (or a portion of such units) in the event certain performance criteria are not met within a designated period of time.

(b) Performance Unit Grants. A Performance Unit Grant is an Award of units (with each unit representing such monetary amount as designated by the Committee) granted to a Participant subject to such terms and conditions as the Committee deems appropriate, including, without limitation, the requirement that the Participant forfeit such units (or a portion of such units) in the event certain performance criteria are not met within a designated period of time.

(c) Grants of Awards. Performance Awards shall be granted under the Plan pursuant to written agreements with the Participant in such form as the Committee may from time to time approve. Performance Awards may be granted alone or in addition to other Awards under the Plan. Subject to the terms of the Plan, the Committee shall determine the number of Performance Awards to be granted to a Participant and the Committee may impose different terms and conditions on any particular Performance Award made to any Participant.

(d) Performance Goals and Performance Periods. Performance Awards shall provide that, in order for a Participant to vest in such Awards, specified Performance Goals must be achieved over a designated Performance Period. The Performance Goals and Performance Period shall be established by the Committee, in its sole and absolute discretion. The Committee shall establish Performance Goals for each Performance Period while the outcome is substantially uncertain and at such time as is permitted under Treasury Regulations Section 1.162-27(e)(2). The Committee shall also establish a schedule or schedules for such Performance Period setting forth the portion of the Performance Award which will be earned or forfeited based on the degree of achievement of the Performance Goals actually achieved or exceeded.

(e) Payment of Awards. In the case of a Performance Share Grant, the Participant shall be entitled to receive payment for each unit earned in an amount equal to the aggregate Fair Market Value of the shares of Common Stock covered by such Award as of the end of the Performance Period. In the case of a Performance Unit Grant, the Participant shall be entitled to receive payment for each unit earned in an amount equal to the dollar value of each unit times the number of units earned. The Committee, pursuant to the written agreement with the Participant, may make such Performance Awards payable in whole or in part upon the occurrence of events selected by the Committee that are beyond the control of the Participant (including, but not limited to, a Change in Control or, if necessary to comply with Code Section 409A, an event described in Code Section 409A(a)(2)(A)(v)). Payment in settlement of a Performance Award shall generally be made as soon as practicable following the conclusion of the Performance Period, as the Committee may determine in its sole and absolute discretion: (i) in cash, (ii) in shares of Common Stock, or (iii) in any combination of the above. The Committee may elect to make this determination either at the time the Award is granted, at the time of payment, or at any time between such dates.

10. Other Stock-Based and Combination Awards.

(a) Subject to compliance with Code Section 409A, the Committee may grant other Awards under the Plan pursuant to which Common Stock is or may in the future be acquired, or Awards denominated in stock units, including ones valued using measures other than market value. Such other stock-based grants may be granted either alone or in addition to any other type of Award granted under the Plan.

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(b) The Committee may also grant Awards under the Plan in combination with other Awards or in exchange of Awards, or in combination with or as alternatives to grants or rights under any other employee plan of the Company, including the plan of any acquired entity.

(c) Subject to the provisions of the Plan, the Committee shall have authority to determine the individuals to whom and the time or times at which the Awards shall be made, the number of shares of Common Stock to be granted or covered pursuant to such Awards, and any and all other conditions and/or terms of the Awards.

11. Deferral Elections. Subject to compliance with Code Section 409A (and in particular, Code Section 409A(a)(4)), the Committee may permit a Participant to elect to defer his or her receipt of the payment of cash or the delivery of shares of Common Stock that would otherwise be due to such Participant by virtue of the exercise, earn out or vesting of an Award made under the Plan. If any such election is permitted, the Committee shall establish rules and procedures for such payment deferrals, including the possible (a) payment or crediting of reasonable interest on such deferred amounts credited in cash, and (b) the payment or crediting of dividend equivalents in respect of deferrals credited in units of Common Stock. Neither the Company nor the Committee shall be responsible to any person in the event that the payment deferral does not result in deferral of income for tax purposes.

12. Dividend Equivalents. Awards of Stock Options, Stock Appreciation Rights, Restricted Unit Grants, Performance Share Grants, and other stock-based Awards may, in the sole and absolute discretion of the Committee, earn dividend equivalents. In respect of any such Award which is outstanding on a dividend record date for Common Stock, the Participant may be credited with an amount equal to the amount of cash or stock dividends that would have been paid on the shares of Common Stock covered by such Award had such shares been issued and outstanding on such dividend record date. Subject to compliance with Code Section 409A, the Committee shall establish such rules and procedures governing the crediting of dividend equivalents, including the timing, form of payment, and payment contingencies of such dividend equivalents, as it deems appropriate or necessary.

13. Termination of Service. Subject to compliance with Code Section 409A, the terms and conditions under which an Award may be exercised after a Participant’s termination of Service shall be determined by the Committee and reflected in the written agreement with the Participant concerning the Award.

14. Non-Transferability of Awards. No Award under the Plan, and no rights or interest therein, shall be assignable or transferable by a Participant except by will or the laws of descent and distribution. Subject to the foregoing, during the lifetime of a Participant, Awards are exercisable only by, and payments in settlement of Awards will be payable only to, the Participant or his or her legal representative if the Participant is Disabled. Notwithstanding the foregoing, the Committee in its sole and absolute discretion may elect to permit the transferability of an Award in certain circumstances.

15. Adjustments on Changes in Capitalization, Etc.

(a) The existence of the Plan and the Awards granted hereunder shall not affect or restrict in any way the right or power of the Board or the stockholders of the Company to make or authorize any adjustment, recapitalization, reorganization or other change in the Company’s capital structure or its business, any merger or consolidation of the Company, any issue of bonds, debentures, preferred or prior preference stocks ahead of or affecting the Common Stock or the rights thereof, the dissolution or liquidation of the Company, or any sale or transfer of all or any part of its assets or business, or any other corporate act or proceeding.

(b) In the event of any change in capitalization affecting the Common Stock after the Restatement Date, such as a stock dividend, stock split, recapitalization, merger, consolidation, split-up, combination, exchange of stock, other form of reorganization, or any other change affecting the Common Stock, such proportionate adjustments, if any, as the Committee in its discretion may deem appropriate to reflect such change shall be made with respect to (i) the aggregate number of shares of Common Stock for which Awards in respect thereof may be granted under the Plan, (ii) the maximum number of shares of Common Stock which may be sold or awarded to any Participant, (iii) the number of shares of Common Stock covered by each outstanding Award, (iv) the price per share in respect of outstanding Awards, and (v) the ISO Limit. Such adjustments shall be made by the Committee so that the adjustments shall not result in an adverse accounting consequence under FASB ASC Topic 718, and any successor thereof. The Committee’s determination with respect to the adjustments shall be final, binding, and conclusive.

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(c) The Committee may also make such adjustments in the number of shares covered by, and the price or other value of any outstanding Awards in the event of a spin-off or other distribution (other than normal cash dividends) of Company assets to stockholders.

16. Change in Control. To the extent that the Committee, in its sole discretion, determines that the payments provided in Subsection (a) through (d) below do not constitute an “excess parachute payment” under Code Section 280G and do not violate Code Section 409A, and except as the Committee may in its discretion otherwise provide in any Award agreement, to provide for compliance with Code Section 409A or otherwise, in the event of a Change in Control:

(a) All outstanding Stock Options shall vest in their entirety and become exercisable immediately prior to the specified effective date of the Change in Control (and remain exercisable until the time of termination specified in the relevant Award agreement), unless such Stock Options are either (i) replaced or assumed by the successor corporation or its parent company pursuant to options providing substantially equal value and having substantially equivalent provisions as the Stock Options granted under the Plan or (ii) the Stock Options are affirmed by the Company;

(b) Notwithstanding paragraph (a) above, all Stock Options issued to non-employee directors shall vest in their entirety and become exercisable immediately prior to the specified effective date of the Change in Control (and remain exercisable until the time of termination specified in the relevant Award agreement) irrespective of whether such Stock Options are replaced or assumed by the successor corporation or its parent company or are affirmed by the Company;

(c) All restrictions and conditions of the Restricted Stock Grants and Restricted Unit Grants then outstanding shall be deemed fully satisfied as of the effective date of the Change in Control; and

(d) The Performance Share Grants and Performance Unit Grants shall be deemed to have been fully earned and payable as of the effective date of the Change in Control.

17. Amendment and Termination. Without further approval of the stockholders, the Board may at any time terminate the Plan, or may amend it from time to time in such respects as the Board may deem advisable; provided that the Board may not, without approval of the stockholders, make any amendment which would (a) increase the aggregate number of shares of Common Stock which may be issued under the Plan (except for adjustments pursuant to Section 15 above), (b) materially modify the requirements as to eligibility for participation in the Plan, or (c) materially increase the benefits accruing to Participants under the Plan. Notwithstanding the above, the Board may amend the Plan to take into account changes in applicable securities laws, federal income tax laws and other applicable laws. Further, should the provisions of Rule 16b-3, or any successor rule, under the Exchange Act be amended, the Board may amend the Plan in accordance with any modifications to that rule without the need for stockholder approval.

18. Miscellaneous Matters.

(a) Tax Withholding.

(i) The Company’s obligation to deliver Common Stock and/or pay any amount under the Plan shall be subject to the satisfaction of all applicable federal, state, local, and foreign tax withholding requirements.

(ii) The Committee may, in its discretion, provide the Participants or their successors with the right to use previously vested Common Stock in satisfaction of all or part of the taxes incurred by such Participants in connection with the Plan; provided, however, that this form of payment shall be limited to the withholding amount calculated using the minimum applicable statutory rates. Such right may be provided to any such holder in either or both of the following formats:

1. Stock Withholding: The election to have the Company withhold, from the Common Stock otherwise issuable under the Plan, a portion of the Common Stock with an aggregate Fair Market Value equal to the taxes calculated using the minimum applicable statutory rates.

2. Stock Delivery: The election to deliver to the Company, at the time the taxes are required to be withheld, one or more shares of Common Stock previously acquired by the Participant or his or her successor with an aggregate Fair Market Value equal to the taxes calculated using the minimum applicable statutory rates.

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(b) Not an Employment or Service Contract. Neither the adoption of the Plan nor the granting of any Award shall confer upon any Participant any right to continue in the Service of the Company or an Affiliate, nor shall it interfere in any way with the right of the Company or an Affiliate to terminate the Services of any of its Employees, Non-Employee Directors, or Consultants at any time, with or without cause.

(c) Unfunded Plan. The Plan shall be unfunded and the Company shall not be required to segregate any assets that may at any time be represented by Awards under the Plan. Any liability of the Company to any person with respect to any Award under the Plan shall be based solely upon any written contractual obligations that may be effected pursuant to the Plan. No such obligation of the Company shall be deemed to be secured by any pledge of, or other encumbrance on, any property of the Company.

(d) Annulment of Awards. The grant of any Award under the Plan payable in cash is provisional until cash is paid in settlement thereof. The grant of any Award payable in Common Stock is provisional until the Participant becomes entitled to the certificate in settlement thereof. Where approval for an Award sought pursuant to Section 162(m)(4)(C)(ii) of the Code is not granted by the Company’s stockholders, the Award shall be annulled automatically. In the event the Service of a Participant is Terminated for Cause, any Award which is provisional shall be annulled as of the date of such termination for cause.

(e) Other Company Benefit and Compensation Programs. Payments and other benefits received by a Participant under an Award made pursuant to the Plan shall not be deemed a part of a Participant’s regular, recurring compensation for purposes of the termination indemnity or severance pay law of any state. Furthermore, such benefits shall not be included in, or have any effect on, the determination of benefits under any other employee benefit plan or similar arrangement provided by the Company or a Subsidiary unless expressly so provided by such other plan or arrangement, or except where the Committee expressly determines that inclusion of an Award or portion of an Award should be included. Awards under the Plan may be made in combination with or in addition to, or as alternatives to, grants, awards or payments under any other Company or Subsidiary plans. The Company or any Subsidiary may adopt such other compensation programs and additional compensation arrangements (in addition to the Plan) as it deems necessary to attract, retain, and motivate officers, directors, employees or independent contractors for their service with the Company and its Subsidiaries.

(f) Securities Law Restrictions. No shares of Common Stock shall be issued under the Plan unless counsel for the Company shall be satisfied that such issuance will be in compliance with applicable federal and state securities laws. Certificates for shares of Common Stock delivered under the Plan may be subject to such stock-transfer orders and other restrictions as the Committee may deem advisable under the rules, regulations, and other requirements of the SEC, any stock exchange upon which the Common Stock is then listed, and any applicable federal or state securities law. The Committee may cause a legend or legends to be put on any such certificates to make appropriate reference to such restrictions.

(g) Award Agreement. Each Participant receiving an Award under the Plan shall enter into a written agreement with the Company in a form specified by the Committee agreeing to the terms and conditions of the Award and such related matters as the Committee shall, in its sole and absolute discretion, determine.

(h) Costs of Plan. The costs and expenses of administering the Plan shall be borne by the Company.

(i) Governing Law. The Plan and all actions taken thereunder shall be governed by and construed in accordance with the laws of the State of Delaware.

(j) Compliance with Section 409A of the Code. It is the Company’s intent that the Plan comply in all respects with Code Section 409A and the applicable regulations promulgated thereunder. If any provision of the Plan is found not to be in compliance with Code Section 409A and the applicable regulations promulgated thereunder, that provision shall be deemed to have been amended or deleted as and to the extent necessary to comply with Code Section 409A and the applicable regulations promulgated thereunder, and the remaining provisions of the Plan shall continue in full force and effect, without change. All transactions under the Plan shall be executed in accordance with the requirements of Code Section 409A and the applicable regulations promulgated thereunder.

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Any payment made pursuant to any Award shall be considered a separate payment and not one of a series of payments for purposes of Code Section 409A. Notwithstanding the foregoing or anything elsewhere in the Plan or an Award agreement to the contrary, if upon a Participant’s “separation from service” (as defined under Code Section 409A) he/she is then a “specified employee” (as defined under Code Section 409A), then solely to the extent necessary to comply with Code Section 409A and avoid the imposition of taxes under Code Section 409A, the Company shall defer payment of “nonqualified deferred compensation” subject to Code Section 409A payable as a result of and within six (6) months following such separation from service under this Plan until the earlier of (i) the first business day of the seventh month following the Participant’s separation from service, or (ii) ten (10) days after the Company receives written confirmation of the Participant’s death. Any such delayed payments shall be made without interest. While it is intended that all payments and benefits provided under the Plan or an Award will be exempt from or comply with Code Section 409A, the Company makes no representation or covenant to ensure that the payments under the Plan or an Award are exempt from or compliant with Code Section 409A. In no event whatsoever shall the Company be liable if a payment or benefit under the Plan or an Award is challenged by any taxing authority or for any additional tax, interest or penalties that may be imposed on a Participant by Code Section 409A or any damages for failing to comply with Code Section 409A. The Participant will be entirely responsible for any and all taxes on any benefits payable to such Participant as a result of the Plan or an Award. If the applicable Award agreement or Participant’s employment agreement provides for Code Section 409A related provisions other than what is specified above in this Section 18(j), then such provisions in the Award or employment agreement shall govern.

(k) Maximum Limits. Awards will be limited to the following per Employee, per calendar year, maximum amounts:

(1)	Stock Options	200,000 shares of Common Stock
(2)	Stock Appreciation Rights	200,000 shares of Common Stock
(3)	Restricted Stock	200,000 shares of Common Stock
(4)	Restricted Units	200,000 shares of Common Stock
(5)	Performance Shares	200,000 shares of Common Stock
(6)	Aggregate of Above Awards	400,000 shares of Common Stock
(7)	Performance Units	Aggregate of $2,000,000

The numerical limits expressed in the foregoing subparts (1) through (7) shall in each case be doubled with respect to Awards granted to an Employee during the calendar year of the Employee’s commencement of employment with the Company or during the first calendar year that the Employee becomes a “Covered Employee” within the meaning of Code Section 162(m). The numerical limits expressed in the foregoing subparts (1) through (6) shall be subject to adjustment under Section 15.

With respect to Awards intended to qualify as performance-based compensation under Code Section 162(m), the Committee may provide (but is not required to provide) in the written agreement with the Participant that acceleration in payment of an Award shall also be subject to discounting to reasonably reflect the time value of money using any reasonable discount rate selected by the Committee in accordance with Treasury Regulations under Code Section 162(m).

(l) Indemnification. To the maximum extent permitted by applicable law, each member of the Committee, or of the Board, or any persons (including without limitation Employees) who are delegated by the Board or Committee to perform administrative functions in connection with the Plan, shall be indemnified and held harmless by the Company against and from (i) any loss, cost, liability, or expense that may be imposed upon or reasonably incurred by him or her in connection with or resulting from any claim, action, suit, or proceeding to which he or she may be a party or in which he or she may be involved by reason of any action taken or failure to act under the Plan or any Award agreement, and (ii) from any and all amounts paid by him or her in settlement thereof, with the Company’s approval, or paid by him or her in satisfaction of any judgment in any such claim, action, suit, or proceeding against him or her, provided he or she shall give the Company an opportunity, at its own expense, to handle and defend the same before he or she undertakes to handle and defend it on his or her own behalf. The foregoing right of indemnification shall not be exclusive of any other rights of indemnification to which such persons may be entitled under the Company’s Certificate of Incorporation or Bylaws, by contract, as a matter of law, or otherwise, or under any power that the Company may have to indemnify them or hold them harmless.

(m) Restrictions. Any Award shall be subject to such Company policies (including without limitation any policies on insider trading, recoupment of compensation, stock ownership requirements) and transfer restrictions as the Company or Committee may determine. Such restrictions shall apply in addition to any restrictions that may apply to holders of Shares or Employees generally and shall also comply to the extent necessary with applicable law.

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(n) Policy on Recoupment. The Company may (i) cause the cancellation of any Award, (ii) require reimbursement of any Award by a Participant and (iii) effect any other right of recoupment of equity or other compensation provided under this Plan or otherwise in accordance with Company policies as may be adopted and/or modified from time to time by the Company and/or applicable law (each, a “Clawback Policy”). In addition, a Participant may be required to repay to the Company certain previously paid compensation, whether provided under this Plan or an Award agreement or otherwise, in accordance with the Clawback Policy. By accepting an Award, a Participant is also agreeing to be bound by the Company’s Clawback Policy which may be amended from time to time by the Company in its discretion (including without limitation to comply with applicable laws or stock exchange requirements) and is further agreeing that all of the Participant’s Awards (and/or awards issued under any of the Prior Plans) may be unilaterally amended by the Company to the extent needed to comply with the Clawback Policy.

	STAAR SURGICAL COMPANY, a Delaware corporation
	By: Samuel Gesten
	Its: Secretary
Date: June 9, 2014

C-15

Stock Option No.  2014-

STAAR SURGICAL COMPANY
2003 OMNIBUS EQUITY INCENTIVE PLAN
NOTICE OF STOCK OPTION GRANT

You have been granted the following option to purchase Common Stock of STAAR Surgical Company, a Delaware corporation (the “Company”):

Name of Optionee:
Total Number of Shares Granted (“Optioned Stock”):
Type of Option	x  Incentive Stock Option ¨  Non-Qualified Stock Option
Exercise Price Per Share:	$XX.XX
Date of Grant:	XXXX XX, 2014
Date Exercisable	This option may be exercised with respect to the first 33-1/3% of the Optioned Stock when the Optionee completes 12 months of continuous Service after the Vesting Commencement Date. This option may be exercised with respect to an additional 33-1/3% of the Optioned Stock when the Optionee completes each year of continuous Service thereafter.
Vesting Commencement Date:	XXXX XX, 2014
Expiration Date:	XXXX XX, 2024

By your signature and the signature of the Company’s representative below, you and the Company agree that this option is granted under and governed by the terms and conditions of the STAAR Surgical Company 2003 Omnibus Equity Incentive Plan and the Stock Option Agreement, both of which are attached to and made a part of this document.

OPTIONEE	STAAR SURGICAL COMPANY
________________________________________ signature	________________________________________ William Goodmen Vice President, Global Human Resources
________________________________________ print name	________________________________________ date

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STAAR SURGICAL COMPANY
2003 OMNIBUS EQUITY INCENTIVE PLAN

STOCK OPTION AGREEMENT

1.Definitions.  Unless otherwise defined herein, the terms defined in the STAAR Surgical Company 2003 Omnibus Equity Incentive Plan, as Amended (the “Plan”) shall have the same defined meanings in this Stock Option Agreement (“Agreement”).

2.Grant of Option.  Effective as of the date of grant set forth on the Notice of Stock Option Grant attached hereto (the “Date of Grant”), STAAR Surgical Company (the “Company”) grants to the optionee named in the Notice of Stock Option Grant (“Optionee”) the right and option (the “Option”) to purchase, all or any part of such number of shares of Common Stock at such exercise price per share as are set forth on the Notice of Stock Option Grant. The Option shall be exercisable from time to time in accordance with the provisions of this Agreement during a period expiring on the expiration date set forth on the Notice of Stock Option Grant (the “Expiration Date”) or earlier in accordance with Section 5 below. This Option is intended to be an Incentive Stock Option or a Non-Qualified Stock Option, as provided in the Notice of Stock Option Grant.

3.Vesting.  The Option shall become exercisable to purchase, and shall vest with respect to, such percentage of the shares covered hereby (rounded to the nearest whole share) as may be set forth on the Notice of Stock Option Grant hereof. In each case the number of shares which may be purchased shall be calculated to the nearest full share. The Optionee shall cease vesting in the Option on the Optionee’s Termination Date.

4.Manner of Exercise.  Each exercise of the Option shall be by means of a written notice of exercise delivered to the Committee, specifying the number of shares to be purchased and accompanied by payment to the Committee of the full purchase price of the shares to be purchased solely (i) in cash or by check payable to the order of the Company, (ii) by delivery of Mature Shares already owned by, and in the possession of, the Optionee, valued at their Fair Market Value, or (iii) (x) by a Qualified Note made by Optionee in favor of the Company, upon the terms and conditions determined by the Committee including, to the extent the Committee determines appropriate, a security interest in the shares issuable upon exercise or other property, or (y) through a “cashless exercise,” in either case complying with applicable law (including, without limitation, state and federal margin requirements), or any combination thereof; provided, however, that such payment of the exercise price would not cause the Company to recognize compensation expense for financial reporting purposes or to violate Section 402 of the Sarbanes-Oxley Act of 2002, as determined by the Committee in its sole discretion. Shares of Common Stock (including Mature Shares) used to satisfy the exercise price of this Option shall be valued at their Fair Market Value determined on the date of exercise (or if such date is not a business day, as of the close of the business day immediately preceding such date). This Option may not be exercised for a fraction of a share and no partial exercise of this Option may be for less than (a) one hundred (100) shares or (b) the total number of shares then eligible for exercise, if less than one hundred (100) shares.

The Option may be exercised (i) during the lifetime of the Optionee only by the Optionee or his or her legal representative if the Optionee is Disabled; and (ii) after the Optionee’s death by his or her transferees by will or the laws of descent or distribution.

5.Termination of Service; Death or Disability.  Upon termination of the Optionee’s Service, other than due to death or Disability, the Option shall be exercisable until the earlier of (i) the Expiration Date or (ii) a date three (3) months after the Optionee’s Termination Date, to the extent exercisable on the Termination Date, and shall thereafter expire and be void and of no further force or effect. If the Optionee dies or becomes Disabled while the Optionee is in Service with the Company or an Affiliate, the Option shall expire on the earlier of (i) the Expiration Date or (ii) a date one (1) year after the date of such death or Disability, to the extent exercisable on the date of death or Disability, and shall thereafter expire and be void and of no further force or effect. During such period after death, the Option may, to the extent that it remained unexercised (but exercisable by the Optionee according to the Option’s terms) on the date of such death, be exercised by the person or persons to whom the Optionee’s rights under the Option shall pass by the Optionee’s will or by the laws of descent and distribution.

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6.Shares to be Issued in Compliance with Federal Securities Laws and Exchange Rules.  By accepting the Option, the Optionee represents and agrees, for the Optionee and his or her legal successors (by will or the laws of descent and distribution), that none of the shares purchased upon exercise of the Option will be acquired with a view to any sale, transfer or distribution of said shares in violation of the Securities Act of 1933, as amended (the “Securities Act”), and the rules and regulations promulgated thereunder, or any applicable state “blue sky” laws. If required by the Committee at the time the Option is exercised, the Optionee or any other person entitled to exercise the Option shall furnish evidence satisfactory to the Company (including a written and signed representation) to such effect in form and substance satisfactory to the Company, including an indemnification of the Company in the event of any violation of the Securities Act or state blue sky laws by such person. The Company shall use its reasonable efforts to take all necessary and appropriate action to assure that the shares issuable upon the exercise of this Option shall be issued in full compliance with the Securities Act, state blue sky laws and all applicable listing requirements of any principal securities exchange on which shares of the same class are listed.

7.Withholding of Taxes.  As a condition to the exercise of this Option, the Optionee shall make such arrangements as the Committee may require for the satisfaction of any federal, state, local, or foreign withholding tax obligations that may arise in connection with such exercise. The Optionee shall also make such arrangements as the Committee may require for the satisfaction of any federal, state, local, or foreign withholding tax obligations that may arise in connection with the disposition of shares of Common Stock acquired by exercising this Option.

8.Payment of Withholding.  The Optionee will pay to the Company an amount equal to the withholding amount (or the Company may withhold such amount from the Optionee’s salary) in cash. At the Committee’s election, the Optionee may pay the withholding amount with shares of Common Stock; provided, however, that payment in stock shall be limited to the withholding amount calculated using the minimum statutory rates.

9.No Assignment.  The Option and all other rights and privileges granted hereby shall not be transferred, either voluntarily or by operation of law otherwise than by will or the laws of descent and distribution. Upon any attempt to so transfer or otherwise dispose of this Option or any other right or privileges granted hereby contrary to the provisions hereof, this Option and all rights and privileges contained herein shall immediately become null and void and of no further force or effect.

10.Adjustment for Reorganizations, Stock Splits, etc.  If the outstanding shares of Common Stock (or any other class of shares or securities which shall have become issuable upon the exercise of this Option pursuant to this sentence) are increased, decreased, changed into or exchanged for a different number or kind of shares or securities of the Company through reorganization, recapitalization, reclassification, stock dividend, stock split, reverse stock split or other similar transaction, an appropriate and proportionate adjustment shall be made in the maximum number and kind of shares receivable upon the exercise of this Option, without change in the total price applicable to the unexercised portion of this Option, but with a corresponding adjustment in the price for each share or other unit of any security covered by this Option.

Upon the dissolution or liquidation of the Company, or upon a reorganization, merger or consolidation of the Company with one or more corporations as a result of which the Company is not the surviving corporation, or upon a sale of substantially all the property or more than eighty percent (80%) of the then outstanding stock of the Company to another corporation, this Option shall terminate; provided, however, that notwithstanding the foregoing, the Committee shall provide in writing in connection with such transaction for the appropriate satisfaction of this Option by one or more of the following alternatives (separately or in combination): (i) for this Option to become immediately exercisable notwithstanding the provisions of Sections 3 and 4; (ii) for the assumption by the successor corporation of this Option or the substitution by such corporation therefor of a new option covering the stock of the successor corporation or its affiliates with appropriate adjustments as to the number and kind of shares and prices; (iii) for the continuance of the Plan by such successor corporation in which event the Plan and this Option shall continue in the manner and under the terms so provided; or (iv) for the payment in cash or stock in lieu of and in complete satisfaction of this Option.

Adjustments under this Section shall be made by the Committee, whose determination as to what adjustments shall be made, and the extent thereof, shall be final, binding and conclusive. No fractional shares of stock shall be issued under this Option on any such adjustment.

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11.Participation by the Optionee in Other Company Plans.  Nothing herein contained shall affect the right of the Optionee to participate in and receive benefits under and in accordance with the then current provisions of any pension, insurance, profit sharing or other employee welfare plan or program of the Company or of any Affiliate.

12.No Rights as a Stockholder Until Issuance of Stock Certificate.  Neither the Optionee nor any other person legally entitled to exercise this Option shall be entitled to any of the rights or privileges of a stockholder of the Company in respect of any shares issuable upon any exercise of the Option unless and until a certificate or certificates representing such shares shall have been actually issued and delivered to the Optionee. No shares shall be issued and delivered upon the exercise of this Option unless and until there shall have been full compliance with all applicable requirements of the Securities Act (whether by registration or satisfaction of an exemption therefrom), all applicable listing requirements of a national securities exchange on which shares of the same class are listed and any other requirements of law or of any regulatory bodies having jurisdiction over such issuance and delivery.

13.Not an Employment or Service Contract.  Nothing herein contained shall be construed as an agreement by the Company or any of its Affiliates, express or implied, to employ the Optionee or contract for the Optionee’s services, to restrict the Company’s or such Affiliate’s right to discharge the Optionee or cease contracting for the Optionee’s services or to modify, extend or otherwise affect in any manner whatsoever, the terms of any employment agreement or contract for services which may exist between the Optionee and the Company or any of its Affiliates.

14.Agreement Subject to the Plan.  The Option hereby granted is subject to, and the Company and the Optionee agree to be bound by, all of the terms and conditions of the Plan, as the same shall be amended from time to time in accordance with the terms thereof, but no such amendment shall adversely affect the Optionee’s rights under this Option without the prior written consent of the Optionee.

The next page is the signature page.

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15.Execution.   The interpretation, performance and enforcement of this Agreement shall be governed by the internal substantive laws of the State of California.

COMPANY:	STAAR SURGICAL COMPANY
	________________________________________ William Goodmen Vice President, Global Human Resources
	Date:________________________________
OPTIONEE:	By:__________________________________
	Date:________________________________

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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:  July 31, 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:     July 31, 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 July 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:    July 31, 2014	/s/ BARRY CALDWELL
	Barry Caldwell President, Chief Executive Officer, and Director (principal executive officer)
Dated:    July 31, 2014	/s/ STEPEHEN 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.

XML

Basic and Diluted Income Per Share (Details) (USD $) In Thousands, except Per Share data, unless otherwise specified	3 Months Ended		6 Months Ended
	Jul. 04, 2014	Jun. 28, 2013	Jul. 04, 2014	Jun. 28, 2013
Numerator:
Net income (loss)	$ (1,789)	$ 278	$ (3,148)	$ 749
Weighted average common shares and denominator for basic calculation:
Weighted average common shares outstanding	38,400	36,830	38,247	36,745
Less: Unvested restricted stock	(232)	(334)	(277)	(284)
Denominator for basic calculation	38,168	36,496	37,970	36,461
Weighted average effects of dilutive equity-based compensation awards:
Stock options	0	999	0	746
Restricted stock	0	139	0	94
Warrants	0	708	0	586
Denominator for diluted calculation	38,168	38,342	37,970	37,887
Net income (loss) per share - basic (in dollars per share)	$ (0.05)	$ 0.01	$ (0.08)	$ 0.02
Net income (loss) per share - diluted (in dollars per share)	$ (0.05)	$ 0.01	$ (0.08)	$ 0.02

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Stock-Based Compensation (Details Textual) (USD $)	6 Months Ended
	Jul. 04, 2014	Jan. 03, 2014
Schedule of Employee Service Share-based Compensation [Line Items]
Common stock, shares outstanding	38,361,000	37,911,000
Estimated Forfeiture Rate	7.00%
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	229,500
Share-based Compensation Arrangement by Share-based Payment Award, Number of Shares Available for Grant	1,998,046
Restricted Stock [Member] | Maximum [Member]
Schedule of Employee Service Share-based Compensation [Line Items]
Share-based Compensation Arrangement by Share-based Payment Award, Award Vesting Period	3 years
Restricted Stock [Member] | Minimum [Member]
Schedule of Employee Service Share-based Compensation [Line Items]
Share-based Compensation Arrangement by Share-based Payment Award, Award Vesting Period	1 year
Restricted Stock Units (RSUs) [Member]
Schedule of Employee Service Share-based Compensation [Line Items]
Common stock, shares outstanding	299,000
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	3,276,000
Lower Range of Exercise Prices	$ 0.95
Upper Range of Exercise Prices	$ 17.62
Employee Service Share-based Compensation, Nonvested Awards, Total Compensation Cost Not yet Recognized, Period for Recognition	10 years

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Stock-Based Compensation (Details 2)	3 Months Ended		6 Months Ended
	Jul. 04, 2014	Jun. 28, 2013	Jul. 04, 2014	Jun. 28, 2013
Schedule of Employee Service Share-based Compensation [Line Items]
Expected dividend yield	0.00%	0.00%	0.00%	0.00%
Expected volatility	56.00%	72.00%	55.00%	73.00%
Risk-free interest rate	1.30%	0.70%	1.29%	0.62%
Expected term (in years)	4 years 1 month 13 days	4 years 1 month 13 days	4 years 1 month 13 days	4 years 1 month 13 days

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Property, Plant and Equipment (Details) (USD $) In Thousands, unless otherwise specified	Jul. 04, 2014	Jan. 03, 2014
Property, Plant and Equipment [Line Items]
Machinery and equipment	$ 16,670	$ 16,225
Furniture and fixtures	5,455	4,837
Leasehold improvements	7,573	6,552
Property, Plant and Equipment, Gross	29,698	27,614
Less: accumulated depreciation	20,378	20,209
Property, Plant and Equipment, Net	$ 9,320	$ 7,405

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Other Current Liabilities (Tables)

6 Months Ended

Jul. 04, 2014

Other Liabilities Disclosure [Abstract]

Schedule of Accrued Liabilities [Table Text Block]

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

	July 4, 2014		January 3, 2014
Accrued salaries and wages	$	1,770	$	1,630
Accrued bonuses		1,107		935
Accrued severance		350		731
Accrued income taxes		317		485
Accrued audit fees		310		328
Accrued commissions		296		528
Accrued insurance		154		551
Other(1)		1,529		1,184
	$	5,833	$	6,372

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

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Manufacturing Consolidation Project and Tax Strategy (Details) (USD $) In Thousands, unless otherwise specified	6 Months Ended
	Jul. 04, 2014
Schedule Of Restructuring Reserve By Type Of Cost [Line Items]
Liability at January 3, 2014	$ 759
Costs incurred and charged to expense	334
Cash payments	(743)
Liability at April 4, 2014	350
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	212
Cash payments	(593)
Liability at April 4, 2014	350
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	122
Cash payments	(150)
Liability at April 4, 2014	$ 0

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Geographic and Product Data (Details 1) (USD $) In Thousands, unless otherwise specified	3 Months Ended		6 Months Ended
	Jul. 04, 2014	Jun. 28, 2013	Jul. 04, 2014	Jun. 28, 2013
Product Information [Line Items]
Net sales	$ 20,048	$ 18,164	$ 40,226	$ 36,165
Implantable Collamer Lenses [Member]
Product Information [Line Items]
Net sales	12,172	11,261	24,413	21,892
Intraocular Lenses [Member]
Product Information [Line Items]
Net sales	6,428	5,863	13,041	12,211
Core products [Member]
Product Information [Line Items]
Net sales	18,600	17,124	37,454	34,103
Other surgical products [Member]
Product Information [Line Items]
Net sales	$ 1,448	$ 1,040	$ 2,772	$ 2,062

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Pension Plans (Details) (USD $) In Thousands, unless otherwise specified	3 Months Ended		6 Months Ended
	Jul. 04, 2014	Jun. 28, 2013	Jul. 04, 2014	Jun. 28, 2013
Defined Benefit Plans and Other Postretirement Benefit Plans Table Text Block [Line Items]
Service cost	$ 117	$ 80	$ 233	$ 204
Interest cost	36	25	71	52
Expected return on plan assets	(28)	(24)	(55)	(48)
Net amortization of transitional obligation	0	0	0	3
Actuarial loss recognized in current period	6	14	12	19
Net periodic pension cost	$ 131	$ 95	$ 261	$ 230

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Stock-Based Compensation (Details 3) In Thousands, unless otherwise specified	6 Months Ended
	Jul. 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	576
Options, Exercised, Shares	(564)
Options, Forfeited or expired, Shares	(34)
Options,Outstanding at July 4, 2014	3,277
Options,Exercisable at July 4, 2014	2,082
Restricted Stock [Member]
Schedule of Employee Service Share-based Compensation [Line Items]
Options,Outstanding at January 3, 2014	341
Options, Granted, shares	29
Options, Exercised, Shares	(140)
Options, Forfeited or expired, Shares	0
Options,Outstanding at July 4, 2014	230
Restricted Stock Units (RSUs) [Member]
Schedule of Employee Service Share-based Compensation [Line Items]
Options,Outstanding at January 3, 2014	135
Options, Granted, shares	304
Options, Exercised, Shares	(135)
Options, Forfeited or expired, Shares	(5)
Options,Outstanding at July 4, 2014	299

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Prepaids, Deposits, and Other Current Assets

6 Months Ended

Jul. 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):

	July 4,		January 3,
	2014		2014
Prepaid and deposits	$	1,990	$	2,157
Value added tax (VAT) receivable		631		618
Deferred charges for foreign profits		340		362
Other current assets		578		366
	$	3,539	$	3,503

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Geographic and Product Data (Details Textual)	6 Months Ended	3 Months Ended		6 Months Ended		3 Months Ended	6 Months Ended
	Jul. 04, 2014	Jul. 04, 2014 Customer One [Member]	Jun. 28, 2013 Customer One [Member]	Jul. 04, 2014 Customer One [Member]	Jun. 28, 2013 Customer One [Member]	Jun. 28, 2013 Customer Two [Member]	Jul. 04, 2014 Customer Two [Member]	Jun. 28, 2013 Customer Two [Member]
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 two manufacturing sites in the United States. During the quarter ended July 4, 2014, the Company completed the consolidation of its Swiss manufacturing facility to the U.S. Other than the United States, Japan, Korea, China,Spain, France and Germany,the Company does not conduct business in any country in which its sales exceed 5% of consolidated sales.
Segment Sales To Consolidated Sales Percentage	100.00%
Concentration Risk, Percentage		11.00%	11.00%	11.00%	10.00%	10.00%	12.00%	11.00%

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Stock-Based Compensation (Tables)

6 Months Ended

Jul. 04, 2014

Stockholders' Equity Note [Abstract]

Schedule Of Compensation Cost [Table Text Block]

The cost that has been charged against income for stock-based compensation is set forth below (in thousands):

	Three Months Ended				Six Months Ended
	July 4, 2014		June 28, 2013		July 4, 2014		June 28, 2013
Employee stock options	$	675	$	666	$	1,472	$	1,492
Restricted stock		232		252		525		435
Restricted stock units		764		—		1,152		—
Nonemployee stock options		12		66		34		92
Total	$	1,683	$	984	$	3,183	$	2,019

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

The Company recorded stock-based compensation expense in the following categories on the accompanying consolidated statements of operations (in thousands):

	Three Months Ended				Six Months Ended
	July 4, 2014		June 28, 2013		July 4, 2014		June 28, 2013
Cost of sales	$	39	$	25	$	77	$	50
General and administrative		1,033		646		1,970		1,357
Marketing and selling		306		212		580		382
Research and development		305		101		556		230
Total	$	1,683	$	984	$	3,183	$	2,019

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				Six Months Ended
	July 4, 2014		June 28, 2013		July 4, 2014		June 28, 2013
Expected dividend yield	0	%	0	%	0	%	0	%
Expected volatility	56	%	72	%	55	%	73	%
Risk-free interest rate	1.30	%	0.70	%	1.29	%	0.62	%
Expected term (in years)	4.12		4.12		4.12		4.12

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

A summary of option activity under the Plan as of July 4, 2014 is presented below:

	Options Shares (000’s)
Outstanding at January 3, 2014	3,299
Granted	576
Exercised	(564)
Forfeited or expired	(34)
Outstanding at July 4, 2014	3,277
Exercisable at July 4, 2014	2,082

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

	Restricted Shares (000’s)	Restricted Units (000’s)
Outstanding at January 3, 2014	341	135
Granted	29	304
Exercised	(140)	(135)
Forfeited	—	(5)
Outstanding at July 4, 2014	230	299

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Geographic and Product Data (Tables)

6 Months Ended

Jul. 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				Six Months Ended
	July 4,		June 28,		July 4,		June 28,
	2014		2013		2014		2013
Japan	$	4,549	$	4,648	$	9,557	$	9,387
United States		2,926		3,154		5,801		6,394
China		2,535		2,230		4,759		4,301
Korea		1,952		1,834		4,573		3,869
Spain		1,474		1,163		3,092		2,454
France		1,190		595		2,136		1,127
Germany		1,015		611		1,912		1,126
Other		4,407		3,929		8,396		7,507
Total	$	20,048	$	18,164	$	40,226	$	36,165

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				Six Months Ended
	July 4,		June 28,		July 4,		June 28,
	2014		2013		2014		2013
ICLs	$	12,172	$	11,261	$	24,413	$	21,892
IOLs		6,428		5,863		13,041		12,211
Core products		18,600		17,124		37,454		34,103
Other surgical products		1,448		1,040		2,772		2,062
Total	$	20,048	$	18,164	$	40,226	$	36,165

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Stock-Based Compensation (Details) (USD $) In Thousands, unless otherwise specified	3 Months Ended		6 Months Ended
	Jul. 04, 2014	Jun. 28, 2013	Jul. 04, 2014	Jun. 28, 2013
Schedule of Employee Service Share-based Compensation [Line Items]
Employee stock options	$ 675	$ 666	$ 1,472	$ 1,492
Restricted stock	232	252	525	435
Restricted stock units	764	0	1,152	0
Nonemployee stock options	12	66	34	92
Total	$ 1,683	$ 984	$ 3,183	$ 2,019

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Manufacturing Consolidation Project and Tax Strategy (Tables)

6 Months Ended

Jul. 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 six-month  period ended July 4, 2014 (in thousands):

	Termination Benefits		Other  Associated Costs		Total
Liability at January 3, 2014	$	731	$	28	$	759
Costs incurred and charged to expense		212		122		334
Cash payments		(593)		(150)		(743)
Liability at July 4, 2014	$	350	$	—	$	350

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Inventories (Details) (USD $) In Thousands, unless otherwise specified	Jul. 04, 2014	Jan. 03, 2014
Public Utilities, Inventory [Line Items]
Raw materials and purchased parts	$ 1,867	$ 1,367
Work-in-process	1,769	913
Finished goods	12,463	11,029
Inventory, Gross	16,099	13,309
Less: inventory reserves	1,167	795
Inventory, Net	$ 14,932	$ 12,514

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Inventories

6 Months Ended

Jul. 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 value and consisted of the following (in thousands):

	July 4,		January 3,
	2014		2014
Raw materials and purchased parts	$	1,867	$	1,367
Work-in-process		1,769		913
Finished goods		12,463		11,029
		16,099		13,309
Less: inventory reserves		1,167		795
	$	14,932	$	12,514

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Prepaids, Deposits, and Other Current Assets (Details) (USD $) In Thousands, unless otherwise specified	Jul. 04, 2014	Jan. 03, 2014
Prepaid Expense and Other Assets, Current [Line Items]
Prepaid and deposits	$ 1,990	$ 2,157
Value added tax (VAT) receivable	631	618
Deferred charges for foreign profits	340	362
Other current assets	578	366
Prepaid Expenses Deposits and Other Assets Current	$ 3,539	$ 3,503

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Basic and Diluted Income Per Share (Details 1) In Thousands, unless otherwise specified	3 Months Ended		6 Months Ended
	Jul. 04, 2014	Jun. 28, 2013	Jul. 04, 2014	Jun. 28, 2013
Antidilutive Securities Excluded from Computation of Earnings Per Share [Line Items]
Antidilutive Securities Excluded from Computation of Earnings Per Share, Amount	2,937	1,287	2,924	1,538
Options [Member]
Antidilutive Securities Excluded from Computation of Earnings Per Share [Line Items]
Antidilutive Securities Excluded from Computation of Earnings Per Share, Amount	2,216	1,262	2,117	1,428
Restricted Stock [Member]
Antidilutive Securities Excluded from Computation of Earnings Per Share [Line Items]
Antidilutive Securities Excluded from Computation of Earnings Per Share, Amount	195	25	280	110
Warrant [Member]
Antidilutive Securities Excluded from Computation of Earnings Per Share [Line Items]
Antidilutive Securities Excluded from Computation of Earnings Per Share, Amount	526	0	527	0

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CONDENSED CONSOLIDATED BALANCE SHEETS (USD $) In Thousands, unless otherwise specified	Jul. 04, 2014	Jan. 03, 2014
Current assets:
Cash and cash equivalents	$ 19,186	$ 22,954
Accounts receivable trade, net of allowance for doubtful accounts of $1,461 and $1,449, respectively	12,700	10,731
Inventories, net	14,932	12,514
Prepaids, deposits and other current assets	3,539	3,503
Deferred income taxes	384	373
Total current assets	50,741	50,075
Property, plant and equipment, net	9,320	7,405
Intangible assets, net	1,206	1,380
Goodwill	1,786	1,786
Deferred income taxes	647	626
Other assets	672	659
Total assets	64,372	61,931
Current liabilities:
Line of credit	4,900	4,750
Accounts payable	5,269	6,263
Deferred income taxes	738	739
Obligations under capital leases	445	288
Other current liabilities	5,833	6,372
Total current liabilities	17,185	18,412
Obligations under capital leases	629	141
Deferred income taxes	1,735	1,654
Asset retirement obligations	134	157
Pension liability	2,858	2,715
Total liabilities	22,541	23,079
Commitments and contingencies (Note 12)
Stockholders' equity:
Common stock, $0.01 par value; 60,000 shares authorized; 38,361 and 37,911 shares issued and outstanding at July 4, 2014 and January 3, 2014	384	379
Additional paid-in capital	176,204	170,246
Accumulated other comprehensive income	446	282
Accumulated deficit	(135,203)	(132,055)
Total stockholders’ equity	41,831	38,852
Total liabilities and stockholders’ equity	$ 64,372	$ 61,931

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Stock-Based Compensation (Details 1) (USD $) In Thousands, unless otherwise specified	3 Months Ended		6 Months Ended
	Jul. 04, 2014	Jun. 28, 2013	Jul. 04, 2014	Jun. 28, 2013
Schedule of Employee Service Share-based Compensation [Line Items]
Share-based Compensation Arrangement by Share-based Payment Award, Compensation Cost	$ 1,683	$ 984	$ 3,183	$ 2,019
Cost of Sales [Member]
Schedule of Employee Service Share-based Compensation [Line Items]
Share-based Compensation Arrangement by Share-based Payment Award, Compensation Cost	39	25	77	50
General and Administrative Expense [Member]
Schedule of Employee Service Share-based Compensation [Line Items]
Share-based Compensation Arrangement by Share-based Payment Award, Compensation Cost	1,033	646	1,970	1,357
Selling and Marketing Expense [Member]
Schedule of Employee Service Share-based Compensation [Line Items]
Share-based Compensation Arrangement by Share-based Payment Award, Compensation Cost	306	212	580	382
Research and Development Expense [Member]
Schedule of Employee Service Share-based Compensation [Line Items]
Share-based Compensation Arrangement by Share-based Payment Award, Compensation Cost	$ 305	$ 101	$ 556	$ 230

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CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (USD $) In Thousands, unless otherwise specified	6 Months Ended
	Jul. 04, 2014	Jun. 28, 2013
Cash flows from operating activities:
Net income (loss)	$ (3,148)	$ 749
Adjustments to reconcile net income (loss) to net cash (used in) provided by operating activities:
Depreciation of property and equipment	981	840
Amortization of intangibles	213	225
Deferred income taxes	57	129
Fair value adjustment of warrant	0	(27)
Loss on disposal of property and equipment	0	59
Change in net pension liability	83	57
Stock-based compensation expense	3,183	2,019
Accretion of asset retirement obligation	2	7
Provision for sales returns and bad debts	1	111
Changes in working capital:
Accounts receivable	(1,895)	(2,229)
Inventories	(2,093)	71
Prepaids, deposits and other current assets	(20)	(507)
Accounts payable	(874)	(1,123)
Other current liabilities	(554)	(25)
Net cash (used in) provided by operating activities	(4,064)	356
Cash flows from investing activities:
Cash proceeds from sale of equipment	68	0
Acquisition of property and equipment	(2,269)	(2,017)
Net cash used in investing activities	(2,201)	(2,017)
Cash flows from financing activities:
Repayment of capital lease obligations	(251)	(478)
Proceeds from exercise of stock options	2,632	952
Net cash provided by financing activities	2,381	474
Effect of exchange rate changes on cash and cash equivalents	116	(763)
Decrease in cash and cash equivalents	(3,768)	(1,950)
Cash and cash equivalents, at beginning of the period	22,954	21,675
Cash and cash equivalents, at end of the period	$ 19,186	$ 19,725

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Other Current Liabilities (Details) (USD $) In Thousands, unless otherwise specified	Jul. 04, 2014		Jan. 03, 2014
Other Liabilities, Current [Line Items]
Accrued salaries and wages	$ 1,770		$ 1,630
Accrued bonuses	1,107		935
Accrued severance	350		731
Accrued income taxes	317		485
Accrued audit fees	310		328
Accrued commissions	296		528
Accrued insurance	154		551
Other	1,529	[1]	1,184	[1]
Other Liabilities, Current	$ 5,833		$ 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)

6 Months Ended

Jul. 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):

	July 4,		January 3,
	2014		2014
Prepaid and deposits	$	1,990	$	2,157
Value added tax (VAT) receivable		631		618
Deferred charges for foreign profits		340		362
Other current assets		578		366
	$	3,539	$	3,503

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Other Current Liabilities (Details Textual)	6 Months Ended
	Jul. 04, 2014
Other Liabilities, Current [Line Items]
Percentage Of Other Current Liabilities	5.00%

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Amortizable Intangible Assets (Tables)

6 Months Ended

Jul. 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):

	July 4, 2014						January 3, 2014
	Gross Carrying Amount		Accumulated Amortization		Net		Gross Carrying Amount		Accumulated Amortization		Net
Amortized intangible assets:
Patents and licenses	$	10,657	$	(10,173)	$	484	$	10,637	$	(10,057)	$	580
Customer relationships		1,537		(999)		538		1,490		(894)		596
Developed technology		977		(793)		184		947		(743)		204
Total	$	13,171	$	(11,965)	$	1,206	$	13,074	$	(11,694)	$	1,380

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Basis of Presentation and Significant Accounting Policies

6 Months Ended

Jul. 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. Certain information and footnote disclosures normally included in comprehensive financial statements have been condensed or omitted pursuant to such rules and regulations, although the Company believes that the disclosures made are adequate to make the information not misleading. 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 six months ended July 4, 2014 and June 28, 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 six months ended July 4, 2014 and June 28, 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 disclosures to conform to the current period’s presentation.

New Accounting Pronouncements

In June 2014, the FASB issued ASU 2014-12, “Compensation – Stock Compensation (Topic 718): Accounting for Shared Based Payments When the Terms of an Award Provide That a Performance Target Could Be Achieved After the Requisite Service Period (a consensus of the FASB Emerging Issues Task Force)”. ASU 2014-12 is effective for fiscal years, and interim periods within those years, beginning after December 15, 2015. The Company is assessing the impact, if any, to the consolidated financial statements.

In May 2014, the FASB issued ASU 2014-09, “Revenue from Contracts with Customers (Topic 606)”. This guidance includes the required steps to achieve the core principle that an entity should recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. This guidance is effective for fiscal years and interim periods beginning after December 15, 2016. Early adoption is not permitted. The Company expects to adopt this guidance when effective, and the impact on its consolidated financial statements is not currently estimable.

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CONDENSED CONSOLIDATED BALANCE SHEETS [Parenthetical] (USD $) In Thousands, except Per Share data, unless otherwise specified	Jul. 04, 2014	Jan. 03, 2014
Allowance for Doubtful Accounts Receivable	$ 1,461	$ 1,449
Common stock, par value (in dollars per share)	$ 0.01	$ 0.01
Common stock, shares authorized	60,000	60,000
Common stock, shares issued	38,361	37,911
Common stock, shares outstanding	38,361	37,911

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Income Taxes

6 Months Ended

Jul. 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.  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 de-recognition 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 $586,000 and $914,000 for the six months ended July 4, 2014 and June 28, 2013, respectively, primarily benefiting in the current six-month period from the mix of pre-tax earnings in lower- and zero- rate foreign jurisdictions.  There are no unrecognized tax benefits as of any period presented.

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Document And Entity Information	6 Months Ended
	Jul. 04, 2014	Jul. 24, 2014
Document Information [Line Items]
Document Type	10-Q
Amendment Flag	false
Document Period End Date	Jul. 04, 2014
Document Fiscal Year Focus	2014
Document Fiscal Period Focus	Q2
Trading Symbol	STAA
Entity Common Stock, Shares Outstanding		38,593,330
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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Commitments and Contingencies

6 Months Ended

Jul. 04, 2014

Commitments and Contingencies Disclosure [Abstract]

Commitments and Contingencies Disclosure [Text Block]

Note 12 — Commitments and Contingencies

Litigation and Claims

From time to time the Company may be subject to various claims and legal proceedings arising out of the normal course of our business. The Company expenses legal costs as incurred. These claims and legal proceedings may relate to contractual rights and obligations, securities or employment matters, or claims of product liability. The most significant of these actions and proceedings is described below. STAAR maintains insurance coverage for product liability and certain securities claims. Legal proceedings can extend for several years, and the matter described below concerning the Company is at very early stages of the legal process. As a result, this matter has not yet progressed sufficiently through discovery and/or development of important factual information and legal issues to enable the Company to determine whether the proceeding is material to the Company or to estimate a range of possible loss, if any. Unless otherwise disclosed, the Company is unable to estimate the possible loss or range of loss for the legal proceedings described below. While it is not possible to accurately predict or determine the eventual outcomes of this matter, an adverse determination in one or more of these items currently pending could have a material adverse effect on the Company's consolidated results of operations, financial position or cash flows.

Todd v. STAAR

On July 8, 2014, a putative securities class action lawsuit was filed by Edward Todd against the Company and three officers in federal court located in Los Angeles, California. The plaintiff claims that STAAR made misleading statements to and omitted material information from the Company’s investors between February 27, 2013 and June 30, 2014 about alleged regulatory violations at the Company’s Monrovia manufacturing facility. The Company was served with the Complaint on July 21, 2014. Although the ultimate outcome of this action cannot be determined with certainty, the Company believes that the allegations in the Complaint are without merit. The Company intends to vigorously defend against this lawsuit. The Company intends to file a motion to dismiss the complaint, when appropriate, in the ongoing proceeding.

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CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (USD $) In Thousands, except Per Share data, unless otherwise specified	3 Months Ended		6 Months Ended
	Jul. 04, 2014	Jun. 28, 2013	Jul. 04, 2014	Jun. 28, 2013
Net sales	$ 20,048	$ 18,164	$ 40,226	$ 36,165
Cost of sales	6,381	5,544	12,675	10,891
Gross profit	13,667	12,620	27,551	25,274
General and administrative	5,321	3,923	10,717	7,881
Marketing and selling	7,026	5,659	13,164	10,945
Research and development	2,498	1,686	5,981	3,052
Medical device tax	47	45	87	104
Other general and administrative expenses	165	613	334	1,514
Operating income (loss)	(1,390)	694	(2,732)	1,778
Other income (expense):
Interest income	10	8	18	15
Interest expense	(34)	(41)	(67)	(96)
Gain (loss) on foreign currency transactions	(134)	77	(68)	(264)
Other income, net	126	139	287	230
Other income (expense), net	(32)	183	170	(115)
Income (loss) before provision for income taxes	(1,422)	877	(2,562)	1,663
Provision for income taxes	367	599	586	914
Net income (loss)	$ (1,789)	$ 278	$ (3,148)	$ 749
Net income (loss) per share - basic (in dollars per share)	$ (0.05)	$ 0.01	$ (0.08)	$ 0.02
Net income (loss) per share - diluted (in dollars per share)	$ (0.05)	$ 0.01	$ (0.08)	$ 0.02
Weighted average shares outstanding - basic (in shares)	38,168	36,496	37,970	36,461
Weighted average shares outstanding - diluted (in shares)	38,168	38,342	37,970	37,887

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Other Current Liabilities

6 Months Ended

Jul. 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):

	July 4, 2014		January 3, 2014
Accrued salaries and wages	$	1,770	$	1,630
Accrued bonuses		1,107		935
Accrued severance		350		731
Accrued income taxes		317		485
Accrued audit fees		310		328
Accrued commissions		296		528
Accrued insurance		154		551
Other(1)		1,529		1,184
	$	5,833	$	6,372

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

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Amortizable Intangible Assets

6 Months Ended

Jul. 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):

	July 4, 2014						January 3, 2014
	Gross Carrying Amount		Accumulated Amortization		Net		Gross Carrying Amount		Accumulated Amortization		Net
Amortized intangible assets:
Patents and licenses	$	10,657	$	(10,173)	$	484	$	10,637	$	(10,057)	$	580
Customer relationships		1,537		(999)		538		1,490		(894)		596
Developed technology		977		(793)		184		947		(743)		204
Total	$	13,171	$	(11,965)	$	1,206	$	13,074	$	(11,694)	$	1,380

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Property, Plant and Equipment (Tables)

6 Months Ended

Jul. 04, 2014

Property, Plant and Equipment [Abstract]

Property, Plant and Equipment [Table Text Block]

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

	July 4,		January 3,
	2014		2014
Machinery and equipment	$	16,670	$	16,225
Furniture and fixtures		5,455		4,837
Leasehold improvements		7,573		6,552
		29,698		27,614
Less: accumulated depreciation		20,378		20,209
	$	9,320	$	7,405

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Manufacturing Consolidation Project and Tax Strategy

6 Months Ended

Jul. 04, 2014

Manufacturing Consolidation Project and Tax Strategy Disclosure [Abstract]

Manufacturing Consolidation Project and Tax Strategy Disclosure [Text Block]

Note 13 — Manufacturing Consolidation Project and Tax Strategy

From fiscal 2011 through June 2014, 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  increasing 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 had manufactured its products in four facilities worldwide (Monrovia, Ca., Aliso Viejo, Ca., Nidau, Switzerland, and Ichikawa City, Japan). As of June 2014, all international production has been consolidated into the Monrovia site. Aliso Viejo is expected to integrate into Monrovia in the middle of 2015.

The Company has invested approximately $6.3 million since inception of these initiatives, including $334,000 incurred during the six months ended July 4, 2014, and future expenses, if any, are not expected to be material. These consolidation 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 six-month  period ended July 4, 2014 (in thousands):

	Termination Benefits		Other  Associated Costs		Total
Liability at January 3, 2014	$	731	$	28	$	759
Costs incurred and charged to expense		212		122		334
Cash payments		(593)		(150)		(743)
Liability at July 4, 2014	$	350	$	—	$	350

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Geographic and Product Data

6 Months Ended

Jul. 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 two manufacturing sites in the United States. During the quarter ended July 4, 2014, the Company completed the consolidation of its Swiss manufacturing facility to the U.S. Other than the United States, Japan, Korea, China, Spain, France and Germany, the Company does not conduct business in any country in which its sales exceed 5% of consolidated sales. Sales are 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				Six Months Ended
	July 4,		June 28,		July 4,		June 28,
	2014		2013		2014		2013
Japan	$	4,549	$	4,648	$	9,557	$	9,387
United States		2,926		3,154		5,801		6,394
China		2,535		2,230		4,759		4,301
Korea		1,952		1,834		4,573		3,869
Spain		1,474		1,163		3,092		2,454
France		1,190		595		2,136		1,127
Germany		1,015		611		1,912		1,126
Other		4,407		3,929		8,396		7,507
Total	$	20,048	$	18,164	$	40,226	$	36,165

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				Six Months Ended
	July 4,		June 28,		July 4,		June 28,
	2014		2013		2014		2013
ICLs	$	12,172	$	11,261	$	24,413	$	21,892
IOLs		6,428		5,863		13,041		12,211
Core products		18,600		17,124		37,454		34,103
Other surgical products		1,448		1,040		2,772		2,062
Total	$	20,048	$	18,164	$	40,226	$	36,165

One customer accounted for 11% of net sales for the three and six months ended July 4, 2014. This customer accounted for 11% and 10% of net sales for the three and six months ended June 28, 2013. One customer accounted for 12% of net sales for the six months ended July 4, 2014. This customer accounted for 10% and 11% of net sales for the three and six months ended June 28, 2013, respectively.

The Company sells its products internationally, which subjects the Company to several potential risks including regional/country economic conditions and regulatory requirements, 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.

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Pension Plans

6 Months Ended

Jul. 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

During the three months ended July 4, 2014, pursuant to the Manufacturing Consolidation Project, the Company terminated certain employees in its Swiss subsidiary resulting in a Swiss pension plan curtailment as defined by ASC 715-30-35, Defined Benefit Plans – Pensions, Settlements, Curtailments, and Certain Termination Benefits. The curtailment resulted in a decrease of $1.2 million in the Swiss pension plan’s projected benefit obligation, of which $0.7 million was used to distribute cash payments to employees resulting in a decrease in plan assets. The remaining $0.5 million was  recorded as a curtailment gain measured in accordance with ASC 715-30-35-93. However, since the Swiss pension plan’s accumulated other comprehensive loss, immediately preceding the curtailment exceeded the curtailment gain, the curtailment gain was fully offset against the loss and no gain was recognized in earnings

As of July 4, 2014, the discount rate, one of the key assumptions used to calculate the Swiss pension plan’s projected benefit obligation, was reduced from 2.5% to 2%, resulting in an increase to the projected benefit obligation of $0.6 million recorded through an offsetting increase in the accumulated other comprehensive loss account of the Swiss pension plan.

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 July 4, 2014		Three Months Ended June 28, 2013		Six Months Ended July 4, 2014		Six Months Ended June 28, 2013
Service cost	$	117	$	80	$	233	$	204
Interest cost		36		25		71		52
Expected return on plan assets		(28)		(24)		(55)		(48)
Net amortization of transitional obligation		—		—		—		3
Actuarial loss recognized in current period		6		14		12		19
	$	131	$	95	$	261	$	230

  During the six months ended July 4, 2014 and June 28, 2013, the Company made cash contributions totaling approximately $276,000 and $115,000 to its Swiss pension plan and does not expect to make any additional cash contributions during the remainder of 2014 , as the Company has met the annual contribution requirement. The Company is not required to and does not make contributions to its Japan pension plan.

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Basic and Diluted Income Per Share

6 Months Ended

Jul. 04, 2014

Earnings Per Share [Abstract]

Earnings Per Share [Text Block]

Note 8 — Basic and Diluted Income Per Share

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

	Three Months Ended				Six Months Ended
	July 4, 2014		June 28, 2013		July 4, 2014		June 28, 2013
Numerator:
Net income (loss)	$	(1,789)	$	278	$	(3,148)	$	749
Denominator:
Weighted average common shares and denominator for basic calculation:
Weighted average common shares outstanding		38,400		36,830		38,247		36,745
Less: Unvested restricted stock		(232)		(334)		(277)		(284)
Denominator for basic calculation		38,168		36,496		37,970		36,461
Weighted average effects of dilutive equity-based compensation awards:
Stock options		—		999		—		746
Restricted stock		—		139		—		94
Warrants		—		708		—		586
Denominator for diluted calculation		38,168		38,342		37,970		37,887
Net income (loss) per share – basic	$	(0.05)	$	0.01	$	(0.08)	$	0.02
Net income (loss) per share - diluted	$	(0.05)	$	0.01	$	(0.08)	$	0.02

 

The following tables sets forth (in thousands) the weighted average number of options and warrants to purchase shares of common stock and restricted stock, which were not included in the calculation of diluted per share amounts because the effects would be anti-dilutive.

	Three Months Ended		Six Months Ended
	July 4, 2014	June 28, 2013	July 4, 2014	June 28, 2013
Options	2,216	1,262	2,117	1,428
Restricted stock and units	195	25	280	110
Warrants	526	—	527	—
Total	2,937	1,287	2,924	1,538

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Stock-Based Compensation

6 Months Ended

Jul. 04, 2014

Stockholders' Equity Note [Abstract]

Stockholders' Equity Note Disclosure [Text Block]

Note 10 — Stock-Based Compensation

The cost that has been charged against income for stock-based compensation is set forth below (in thousands):

	Three Months Ended				Six Months Ended
	July 4, 2014		June 28, 2013		July 4, 2014		June 28, 2013
Employee stock options	$	675	$	666	$	1,472	$	1,492
Restricted stock		232		252		525		435
Restricted stock units		764		—		1,152		—
Nonemployee stock options		12		66		34		92
Total	$	1,683	$	984	$	3,183	$	2,019

The Company recorded stock-based compensation expense in the following categories on the accompanying consolidated statements of operations (in thousands):

	Three Months Ended				Six Months Ended
	July 4, 2014		June 28, 2013		July 4, 2014		June 28, 2013
Cost of sales	$	39	$	25	$	77	$	50
General and administrative		1,033		646		1,970		1,357
Marketing and selling		306		212		580		382
Research and development		305		101		556		230
Total	$	1,683	$	984	$	3,183	$	2,019

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 stock options, restricted stock, unrestricted stock grants, and restricted stock units (RSUs). 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 options and stock awards provide for accelerated vesting if there is a change in control or certain-pre-established financial metrics are met. Pursuant to the Plan, options for 3,276,770 shares were outstanding at July 4, 2014 with exercise prices ranging between $0.95 and $17.62 per share. Restricted stock grants under the Plan generally vest over a period of between one to three years. There were 229,500 shares of restricted stock and 299,000 RSUs outstanding at July 4, 2014. As of July 4, 2014, there were 1,998,046 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 weighted-average assumptions noted in the following table. Expected volatilities are based on historical volatility of the Company’s stock. The expected term of options granted is derived from the historical exercises and post-vesting cancellations and represents the period of time that options granted are expected to be outstanding. The Company has calculated a 7% 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				Six Months Ended
	July 4, 2014		June 28, 2013		July 4, 2014		June 28, 2013
Expected dividend yield	0	%	0	%	0	%	0	%
Expected volatility	56	%	72	%	55	%	73	%
Risk-free interest rate	1.30	%	0.70	%	1.29	%	0.62	%
Expected term (in years)	4.12		4.12		4.12		4.12

A summary of option activity under the Plan as of July 4, 2014 is presented below:

	Options Shares (000’s)
Outstanding at January 3, 2014	3,299
Granted	576
Exercised	(564)
Forfeited or expired	(34)
Outstanding at July 4, 2014	3,277
Exercisable at July 4, 2014	2,082

Warrants outstanding and exercisable as of July 4, 2014 and January 3, 2014 were 700,000.

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

	Restricted Shares (000’s)	Restricted Units (000’s)
Outstanding at January 3, 2014	341	135
Granted	29	304
Exercised	(140)	(135)
Forfeited	—	(5)
Outstanding at July 4, 2014	230	299

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Amortizable Intangible Assets (Details) (USD $) In Thousands, unless otherwise specified	Jul. 04, 2014	Jan. 03, 2014
Amortized intangible assets:
Amortizable intangible assets, Gross Carrying Amount	$ 13,171	$ 13,074
Amortizable intangible assets, Accumulated Amortization	(11,965)	(11,694)
Amortizable intangible assets, Net	1,206	1,380
Patents and Licenses [Member]
Amortized intangible assets:
Amortizable intangible assets, Gross Carrying Amount	10,657	10,637
Amortizable intangible assets, Accumulated Amortization	(10,173)	(10,057)
Amortizable intangible assets, Net	484	580
Customer relationships [Member]
Amortized intangible assets:
Amortizable intangible assets, Gross Carrying Amount	1,537	1,490
Amortizable intangible assets, Accumulated Amortization	(999)	(894)
Amortizable intangible assets, Net	538	596
Developed technology [Member]
Amortized intangible assets:
Amortizable intangible assets, Gross Carrying Amount	977	947
Amortizable intangible assets, Accumulated Amortization	(793)	(743)
Amortizable intangible assets, Net	$ 184	$ 204

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Manufacturing Consolidation Project and Tax Strategy (Details Textual) (USD $)	6 Months Ended
	Jul. 04, 2014
Schedule Of Restructuring Reserve By Type Of Cost [Line Items]
Estimated Cost Of Project Year Three And Half	$ 6,300,000
Operating Loss Carryforwards	122,000,000
Restructuring Charges, Total	$ 334,000

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Inventories (Tables)

6 Months Ended

Jul. 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 value and consisted of the following (in thousands):

	July 4,		January 3,
	2014		2014
Raw materials and purchased parts	$	1,867	$	1,367
Work-in-process		1,769		913
Finished goods		12,463		11,029
		16,099		13,309
Less: inventory reserves		1,167		795
	$	14,932	$	12,514

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Pension Plans (Tables)

6 Months Ended

Jul. 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 July 4, 2014		Three Months Ended June 28, 2013		Six Months Ended July 4, 2014		Six Months Ended June 28, 2013
Service cost	$	117	$	80	$	233	$	204
Interest cost		36		25		71		52
Expected return on plan assets		(28)		(24)		(55)		(48)
Net amortization of transitional obligation		—		—		—		3
Actuarial loss recognized in current period		6		14		12		19
	$	131	$	95	$	261	$	230

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Income Taxes (Details Textual) (USD $) In Thousands, unless otherwise specified	3 Months Ended		6 Months Ended
	Jul. 04, 2014	Jun. 28, 2013	Jul. 04, 2014	Jun. 28, 2013
Income Taxes [Line Items]
Income Tax Expense (Benefit)	$ 367	$ 599	$ 586	$ 914

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Geographic and Product Data (Details) (USD $) In Thousands, unless otherwise specified	3 Months Ended		6 Months Ended
	Jul. 04, 2014	Jun. 28, 2013	Jul. 04, 2014	Jun. 28, 2013
Geographic and Product Data [Line Items]
Net sales	$ 20,048	$ 18,164	$ 40,226	$ 36,165
Japan [Member]
Geographic and Product Data [Line Items]
Net sales	4,549	4,648	9,557	9,387
United States [Member]
Geographic and Product Data [Line Items]
Net sales	2,926	3,154	5,801	6,394
China [Member]
Geographic and Product Data [Line Items]
Net sales	2,535	2,230	4,759	4,301
Korea [Member]
Geographic and Product Data [Line Items]
Net sales	1,952	1,834	4,573	3,869
Spain [Member]
Geographic and Product Data [Line Items]
Net sales	1,474	1,163	3,092	2,454
France [Member]
Geographic and Product Data [Line Items]
Net sales	1,190	595	2,136	1,127
Germany [Member]
Geographic and Product Data [Line Items]
Net sales	1,015	611	1,912	1,126
Other [Member]
Geographic and Product Data [Line Items]
Net sales	$ 4,407	$ 3,929	$ 8,396	$ 7,507

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CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS) (USD $) In Thousands, unless otherwise specified	3 Months Ended		6 Months Ended
	Jul. 04, 2014	Jun. 28, 2013	Jul. 04, 2014	Jun. 28, 2013
Net income (loss)	$ (1,789)	$ 278	$ (3,148)	$ 749
Defined benefit pension plans:
Net change in plan assets	(11)	(18)	(23)	(30)
Reclassification into earnings	6	14	12	19
Impact of change in discount rate	(558)	0	(558)	0
Curtailment gain	537	0	537	0
Foreign currency translation gain (loss)	291	(230)	302	(894)
Tax effect	(103)	(1)	(106)	(5)
Other comprehensive income (loss), net of tax	162	(235)	164	(910)
Comprehensive income (loss), net of tax	$ (1,627)	$ 43	$ (2,984)	$ (161)

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Property, Plant and Equipment

6 Months Ended

Jul. 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):

	July 4,		January 3,
	2014		2014
Machinery and equipment	$	16,670	$	16,225
Furniture and fixtures		5,455		4,837
Leasehold improvements		7,573		6,552
		29,698		27,614
Less: accumulated depreciation		20,378		20,209
	$	9,320	$	7,405

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Basic and Diluted Income Per Share (Tables)

6 Months Ended

Jul. 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 per share (in thousands except per share amounts):

	Three Months Ended				Six Months Ended
	July 4, 2014		June 28, 2013		July 4, 2014		June 28, 2013
Numerator:
Net income (loss)	$	(1,789)	$	278	$	(3,148)	$	749
Denominator:
Weighted average common shares and denominator for basic calculation:
Weighted average common shares outstanding		38,400		36,830		38,247		36,745
Less: Unvested restricted stock		(232)		(334)		(277)		(284)
Denominator for basic calculation		38,168		36,496		37,970		36,461
Weighted average effects of dilutive equity-based compensation awards:
Stock options		—		999		—		746
Restricted stock		—		139		—		94
Warrants		—		708		—		586
Denominator for diluted calculation		38,168		38,342		37,970		37,887
Net income (loss) per share – basic	$	(0.05)	$	0.01	$	(0.08)	$	0.02
Net income (loss) per share - diluted	$	(0.05)	$	0.01	$	(0.08)	$	0.02

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

The following tables sets forth (in thousands) the weighted average number of options and warrants to purchase shares of common stock and restricted stock, which were not included in the calculation of diluted per share amounts because the effects would be anti-dilutive.

	Three Months Ended		Six Months Ended
	July 4, 2014	June 28, 2013	July 4, 2014	June 28, 2013
Options	2,216	1,262	2,117	1,428
Restricted stock and units	195	25	280	110
Warrants	526	—	527	—
Total	2,937	1,287	2,924	1,538

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Pension Plans (Details Textual) (USD $)	3 Months Ended		6 Months Ended
	Jul. 04, 2014	Jun. 28, 2013	Jul. 04, 2014	Jun. 28, 2013
Defined Benefit Plans and Other Postretirement Benefit Plans Table Text Block [Line Items]
Defined Benefit Plan, Recognized Net Gain (Loss) Due to Settlements and Curtailments	$ 1,200,000
Defined Benefit Plan, Recognized Net Gain (Loss) Due to Settlements	700,000
Defined Benefit Plan, Recognized Net Gain (Loss) Due to Curtailments	537,000	0	537,000	0
Defined Benefit Plan, Benefit Obligation	600,000		600,000
Maximum [Member]
Defined Benefit Plans and Other Postretirement Benefit Plans Table Text Block [Line Items]
Defined Benefit Plan, Funded Percentage	2.50%		2.50%
Minimum [Member]
Defined Benefit Plans and Other Postretirement Benefit Plans Table Text Block [Line Items]
Defined Benefit Plan, Funded Percentage	2.00%		2.00%
Swiss Plan [Member]
Defined Benefit Plans and Other Postretirement Benefit Plans Table Text Block [Line Items]
Defined Benefit Plan, Contributions By Employer			$ 276,000	$ 115,000

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Basis of Presentation and Significant Accounting Policies (Policies)

6 Months Ended

Jul. 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. Certain information and footnote disclosures normally included in comprehensive financial statements have been condensed or omitted pursuant to such rules and regulations, although the Company believes that the disclosures made are adequate to make the information not misleading. 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 six months ended July 4, 2014 and June 28, 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 six months ended July 4, 2014 and June 28, 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 disclosures to conform to the current period’s presentation.

New Accounting Pronouncements, Policy [Policy Text Block]

New Accounting Pronouncements

In June 2014, the FASB issued ASU 2014-12, “Compensation – Stock Compensation (Topic 718): Accounting for Shared Based Payments When the Terms of an Award Provide That a Performance Target Could Be Achieved After the Requisite Service Period (a consensus of the FASB Emerging Issues Task Force)”. ASU 2014-12 is effective for fiscal years, and interim periods within those years, beginning after December 15, 2015. The Company is assessing the impact, if any, to the consolidated financial statements.

In May 2014, the FASB issued ASU 2014-09, “Revenue from Contracts with Customers (Topic 606)”. This guidance includes the required steps to achieve the core principle that an entity should recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. This guidance is effective for fiscal years and interim periods beginning after December 15, 2016. Early adoption is not permitted. The Company expects to adopt this guidance when effective, and the impact on its consolidated financial statements is not currently estimable.