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Organization and Description of Business and Accounting Policies | 12 Months Ended
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Jan. 01, 2016
Accounting Policies [Abstract] |
Basis of Presentation and Significant Accounting Policies [Text Block] | Note 1 — Organization and Description of Business and Accounting Policies Organization and Description of Business STAAR Surgical Company and subsidiaries (the “Company”), a Delaware corporation, was first incorporated in 1982 for the purpose of developing, producing, and marketing intraocular lenses (“IOLs”) and other products for minimally invasive ophthalmic surgery. Principal products are IOLs and implantable Collamer lenses (“ICLs”). IOLs are prosthetic intraocular lenses used to restore vision that has been adversely affected by cataracts, and include the Company’s lines of silicone and Collamer IOLs and the Preloaded Injector (a silicone or acrylic IOL preloaded into a single-use disposable injector). ICLs, consisting of the Company’s ICL and Toric implantable Collamer lenses (“TICL”), are intraocular lenses used to correct refractive conditions such as myopia (near-sightedness), hyperopia (far-sightedness) and astigmatism. As of January 1, 2016, the Company’s significant subsidiaries consisted of:
| ⋅ | STAAR Surgical AG, a wholly owned subsidiary formed in Switzerland that markets and distributes ICLs and Preloaded IOLs.
| ⋅ | STAAR Japan, a wholly owned subsidiary that markets and distributes Preloaded IOLs and ICLs.
| ⋅ | STAAR Surgical Cayman, Inc., a wholly owned subsidiary formed to develop, maintain, and own intellectual property underlying the Company’s products marketed, distributed, and sold worldwide, excluding the Americas.
The Company operates as one operating segment, the ophthalmic surgical market, for financial reporting purposes (see Note 16). Principles of Consolidation The accompanying consolidated financial statements include the accounts of STAAR Surgical and its wholly-owned subsidiaries and have been prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”). All significant intercompany balances and transactions have been eliminated. Fiscal Year and Interim Reporting Periods The Company’s fiscal year ends on the Friday nearest December 31 and each of the Company’s quarterly reporting periods generally consists of 13 weeks. Fiscal year 2015 is based on a 52-week period, 2014 is based on a 52-week period and fiscal year 2013 is based on a 53-week period. Foreign Currency The functional currency of the Company’s Japanese subsidiary, STAAR Japan, Inc., is the Japanese yen. The functional currency of the Company’s Swiss subsidiary, STAAR Surgical AG, is the U.S. dollar. Assets and liabilities of the Company’s Japanese subsidiary are translated at rates of exchange in effect at the close of the period. Sales and expenses are translated at the weighted average of exchange rates in effect during the period. The resulting translation gains and losses are deferred and are shown as a separate component in the Consolidated Statements of Comprehensive Loss. During 2015, 2014, and 2013, the net foreign translation gain (losses) were $31,000, $(955,000) and $(1,327,000), respectively, and net foreign currency transaction gains (losses), included in the consolidated statements of operations under other expenses, net were, $(949,000), $(896,000), and $39,000, respectively. Revenue Recognition The Company recognizes revenue when realized or realizable and earned, which is when the following criteria are met: persuasive evidence of an arrangement exists; delivery has occurred; the sale price is fixed or determinable; and collectability is reasonably assured. The Company records revenue from non-consignment product sales when title and risk of ownership has been transferred, which is typically at shipping point, except for certain customers and for the STAAR Japan subsidiary, which is typically recognized when the product is received by the customer. The Company does not have significant deferred revenues as of January 1, 2016 as delivery to the customer is generally made within the same or the next day of shipment. The Company presents sales tax it collects from its customers on a net basis (excluded from revenues). The Company’s products are marketed to ophthalmic surgeons, hospitals, ambulatory surgery centers or vision centers, and distributors. IOLs may be offered to surgeons and hospitals on a consignment basis. The Company maintains title and risk of loss of consigned inventory and recognizes revenue for consignment inventory when the Company is notified that the IOL has been implanted. ICLs are sold only to certified surgeons who have completed requisite training or for use in scheduled training surgeries. As a result, STAAR partially mitigates the risk that the revenue it recognizes on shipment of ICLs would need to be reversed because of a surgeon’s failure to qualify for its use. The Company sells certain injector parts to an unrelated customer and supplier (collectively referred to as “supplier”) whereby these injector part sales are either made as a final sale to the supplier or, are sold to be reprocessed by the supplier into finished goods inventory (a preloaded acrylic IOL). These finished goods are then sold back to the Company at an agreed upon, contractual price. The Company makes a profit margin on either type of sale with the supplier and each type of sale is made under separate purchase and sales orders between the two parties resulting in cash settlement for the orders sold or repurchased. For parts that are sold as a final sale, the Company recognizes a sale consistent with its routine revenue recognition policies as disclosed above and those sales are included as part of other sales in total net sales. For the injector parts that are sold to be reprocessed into finished goods, the Company does not recognize revenue on these sales in accordance with ASC 845-10, Purchases and Sales of Inventory with the Same Counterparty. Instead, the Company records the transaction at its carrying value, deferring any profit margin as contra-inventory, until the finished goods inventory is sold to an end-customer (not the supplier) at which point the Company records the sale and the related cost of sale, including the release of the deferred cost of sale in inventory, related to these finished goods. For all sales, the Company is considered the principal in the transaction as the Company, among other factors, is the primary obligor in the arrangement, bears general inventory risk, credit risk, has latitude in establishing the sales price, is responsible for authorized and general sales returns risk and therefore, sales and cost of sales are reported separately in the consolidated statement of operations instead of a single, net amount. Cost of sales includes cost of production, freight and distribution, royalties, and inventory provisions, net of any purchase discounts. The Company generally permits returns of product if the product is returned within the time allowed by its return policies and records an allowance for estimated returns at the time revenue is recognized. The Company’s allowance for estimated returns considers historical trends and experience, the impact of new product launches, the entry of a competitor, availability of timely and pertinent information and the various terms and arrangements offered, including sales with extended credit terms. Sales are reported net of estimated returns. The Company performs ongoing credit evaluations of its customers and adjusts credit limits based on customer payment history and credit worthiness, as determined by the Company’s review of its customers’ current credit information. The Company continuously monitors collections and payments from customers and maintains a provision for estimated credit losses and uncollectible accounts based upon its historical experience and any specific customer collection issues that have been identified. Amounts determined to be uncollectible are written off against the allowance for doubtful accounts. Use of Estimates The consolidated financial statements have been prepared in conformity with GAAP and, as such, include amounts based on significant estimates and judgments of management with consideration given to materiality. Significant estimates used include determining valuation allowances for uncollectible trade receivables, sales returns reserves, obsolete and excess inventory, deferred income taxes, and tax reserves, including valuation allowances for deferred tax assets, pension liabilities, evaluation of asset impairment, in determining the useful life of depreciable and definite-lived intangible assets, and in the variables and assumptions used to calculate and record stock-based compensation. Actual results could differ materially from those estimates.
Cash and Cash Equivalents The Company considers all highly liquid investments purchased with a maturity of three months or less to be cash equivalents. The Company maintains cash deposits with major banks which from time to time may exceed federally insured limits. The Company periodically assesses the financial condition of the institutions and believes that the risk of any loss is minimal. Concentration of Credit Risk and Revenues Financial instruments that potentially subject the Company to credit risk principally consist of trade receivables. This risk is limited due to the large number of customers comprising the Company’s customer base, and their geographic dispersion. As of January 1, 2016, there was one customer with a trade receivable balance that represented 10% or more of consolidated trade receivables. As of January 2, 2015, there were two customers with trade receivables balances that represented 10% or more of consolidated trade receivables. Ongoing credit evaluations of customers’ financial condition are performed and, generally, no collateral is required. The Company maintains reserves for potential credit losses and such losses, in the aggregate, have not exceeded management’s expectations. There were two customers who accounted for 15% and 10% of the Company’s consolidated net sales in fiscal 2015, one customer that accounted for 11% in fiscal 2014 and two customers that accounted for 10% and 11% in fiscal 2013. Fair Value of Financial Instruments Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. To increase the comparability of fair value measures, the following hierarchy prioritizes the inputs to valuation methodologies used to measure fair value ( ASC 820-10-50):
| · | Level 1 – Inputs to the valuation methodology are quoted prices (unadjusted) for identical assets or liabilities in active markets.
| · | Level 2 – Inputs to the valuation methodology include quoted prices for similar assets or liabilities in active markets, and inputs that are observable for the assets or liability, either directly or indirectly, for substantially the full term of the financial instruments.
| · | Level 3 – Inputs to the valuation methodology are unobservable; that reflect management’s own assumptions about the assumptions market participants would make and significant to the fair value.
The carrying values reflected in the consolidated balance sheets for cash and cash equivalents, trade accounts receivable, prepayments and other current assets, accounts payable, other current liabilities and line of credit approximate their fair values because of the short maturity of these instruments. Inventories, Net Inventories, net are valued at the lower of cost, determined on a first-in, first-out basis, or market. Inventories include the costs of raw material, labor, and manufacturing overhead, work in process and finished goods. Inventories also include deferred margins for certain injector parts described under the revenue recognition policy. The Company provides estimated inventory allowances for excess, expiring, slow moving and obsolete inventory as well as inventory whose carrying value is in excess of net realizable value to properly reflect inventory at the lower of cost or market. Property, Plant and Equipment Property, plant and equipment are recorded at cost. Depreciation on property, plant, and equipment is computed using the straight-line method over the estimated useful lives of the assets as noted below. Leasehold improvements are amortized over the lesser of the estimated useful lives of the assets or the related lease term. Major improvements are capitalized and minor replacements, maintenance and repairs are charged to expense as incurred. The estimated useful lives of assets are as follows:
Machinery and equipment |  |  | 5-10 years |
Furniture and equipment |  |  | 3-7 years |
Computer and peripherals |  |  | 2-5 years |
Leasehold improvements |  |  | (a) |
| (a) | The estimated useful life of leasehold improvements is the shorter of the useful life of the asset or the term of the associated leases.
Goodwill Goodwill, which has an indefinite life, is not amortized but instead is tested for impairment on an annual basis or between annual tests if an event occurs or circumstances change that would indicate the carrying amount may be impaired. Impairment testing for goodwill is done at the reporting unit level. Reporting units can be one level below the operating segment level, and can be combined when reporting units within the same operating segment have similar economic characteristics. The Company has determined that its reporting units have similar economic characteristics, and therefore, can be combined into one reporting unit for the purposes of goodwill impairment testing. The Company performed its annual impairment test and determined that its goodwill was not impaired. As of January 1, 2016 and January 2, 2015, the carrying value of goodwill was $1.8 million. Long-Lived Assets The Company reviews property, plant, and equipment and intangible assets, excluding goodwill, for impairment whenever events or changes in circumstances indicate the carrying amount of an asset may not be recoverable. The Company measures recoverability of these assets by comparing the carrying value of such assets to the estimated undiscounted future cash flows the assets are expected to generate. When the estimated undiscounted future cash flows are less than their carrying amount, an impairment loss is recognized equal to the difference between the assets’ fair value and their carrying value. A review of long lived assets was conducted as of January 1, 2016 and January 2, 2015 and no impairment was identified. Amortization is computed on the straight-line basis, which is the Company’s best estimate of the economic benefits realized over the estimated useful lives of the assets which range from 3 to 20 years for patents, certain acquired rights and licenses, 10 years for customer relationships, and 3 to 10 years for developed technology. Research and Development Costs Expenditures for research activities relating to product development and improvement are charged to expense as incurred. Advertising Costs Advertising costs, which are included in marketing and selling expenses, are expensed as incurred. Advertising costs were $2.5 million, $2.8 million, and $2.1 million for fiscal 2015, 2014, and 2013, respectively. Income Taxes The Company recognizes deferred tax assets and liabilities for temporary differences between the financial reporting basis and the tax basis of the Company’s assets and liabilities, net operating loss and credit carryforwards, and uncertainty in income taxes, on a jurisdiction-by-jurisdiction basis. Valuation allowances, or reductions to deferred tax assets, are recognized if, based on the weight of available evidence, it is more likely than not that some portion or all of the deferred tax asset may not be realized or realizable in the jurisdiction in which they arise. The impact on deferred taxes of changes in tax rates and laws, if any, are applied to the years during which temporary differences are expected to be settled and reflected in the financial statements in the period of enactment.
The Company recognizes the income tax benefit from an uncertain tax position when it is more likely than not that, based on technical merits, the position will be sustained upon examination, including resolutions of any related appeals or litigation processes. The amount of tax benefit recorded, if any, is limited to the amount that is greater than 50 percent likely to be realized upon settlement with the taxing authority (that has full knowledge of all relevant information). Accrued interest, if any, related to uncertain tax positions is included as a component of income tax expense, and penalties, if incurred, are recognized as a component of operating income or loss. The Company does not have any uncertain tax positions as of any of the periods presented. The Company did not incur significant interest and penalties for any period presented. Basic and Diluted Net Income (Loss) Per Share The Company has only one class of common stock and no participating securities which would require the two-class method of calculating basic earnings per share. Basic per share information is calculated by dividing net income (loss) by the weighted average number of shares outstanding, net of unvested restricted stock and unvested restricted stock units, during the period. Diluted per share information is calculated by dividing net income (loss) by the weighted average number of shares outstanding, adjusted for the effects of potentially dilutive common stock, which are comprised of outstanding warrants, stock options, unvested restricted stock and restricted stock units, during the period, using the treasury-stock method. See Note 15. Employee Defined Benefit Plans The Company maintains a passive pension plan (the “Swiss Plan”) covering employees of its Swiss subsidiary. The Swiss Plan conforms to the features of a defined benefit plan. The Company also maintains a noncontributory defined benefit pension plan which covers substantially all of the employees of STAAR Japan. The Company recognizes the funded status, or difference between the fair value of plan assets and the projected benefit obligations of the pension plan on the statement of financial position, with a corresponding adjustment to accumulated other comprehensive income (loss). If the projected benefit obligation exceeds the fair value of plan assets, then that difference or unfunded status represents the pension liability. The Company records a net periodic pension cost in the consolidated statement of operations. The liabilities and annual income or expense of both plans are determined using methodologies that involve several actuarial assumptions, the most significant of which are the discount rate and the expected long-term rate of asset return (asset returns and fair-value of plan assets are applicable for the Swiss Plan only). The fair values of plan assets are determined based on prevailing market prices (see Note 10). Stock-Based Compensation Stock-based compensation expense for all stock-based compensation awards granted is based on the grant-date fair value. The Company recognizes these compensation costs on a straight-line basis over the requisite service period of the award, which is generally the option vesting term of three to four years for executives and employees, and one year for members of its Board of Directors (see Notes 11 and 18). The Company also, at times, issues restricted stock to its executive officers, employees, and members of its Board of Directors (the Board), which are restricted and unvested common shares issued at fair market value on the date of grant. For the restricted shares issued to the Board, the restricted stock vests over a one-year service period, for executives and employees, it is typically a three-year service period, and are subject to forfeiture (or acceleration, depending upon the circumstances) until vested or the service period is completed. Restricted stock compensation expense is recognized on a straight-line basis over the requisite service period of one to three years, based on the grant-date fair value of the stock. Restricted stock is considered legally issued and outstanding on the grant date (see Notes 11, 15, and 18). The Company issues restricted stock units (“RSUs”) (see Note 11), which can have only a service condition or a performance contingent restricted stock award based upon the Company meeting certain internally established performance conditions that vest only if those conditions are met or exceeded and the grantee is still employed with the Company. Restricted stock unit compensation expense is recognized on a straight-line basis over the requisite service period. The Company recognizes compensation cost for the performance condition RSUs if and when the Company concludes that it is probable that the performance condition will be achieved, net of an estimate of pre-vesting forfeitures, over the requisite service period based on the grant-date fair value of the stock. The Company reassesses the probability of vesting at each reporting period and adjusts compensation cost based on its probability assessment. Once the RSUs are vested, equivalent common shares will be issued or issuable to the grantee and therefore the RSUs are not included in total common shares issued and outstanding until vested (see Notes 11, 15 and 18). The Company accounts for options granted to persons other than employees and directors under ASC 505-50, Equity –Based Payments to Non-Employees. The fair value of such options is re-measured each reporting period using the Black-Scholes option-pricing model and income or expense is recognized over the vesting period for changes to the fair value for the unvested options. As the options vest, no such re-measurement is necessary or performed. Comprehensive Income (Loss) The Company presents comprehensive income (loss) in two separate but not consecutive consolidated financial statements, the Consolidated Statements of Operations and the Consolidated Statements of Comprehensive Loss. Total comprehensive income (loss) includes, in addition to net income (loss), changes in equity that are excluded from the consolidated statements of operations and are recorded directly into a separate section of stockholders’ equity on the consolidated balance sheets. The following table summarizes the changes in the accumulated balances for each component of accumulated other comprehensive income (loss) attributable to the Company for the years ended January 1, 2016, January 2, 2015, and January 3, 2014 (in thousands):
|  | Foreign Currency Translation |  | Defined Benefit Pension Plan- Japan |  | Defined Benefit Pension Plan- Switzerland |  | Accumulated Other Comprehensive Income (Loss) |
Balance at December 28, 2012 |  | $ | 2,106 |  | $ | 296 |  | $ | (822) |  | $ | 1,580 |
Other comprehensive income (loss) |  |  | (861) |  |  | (126) |  |  | 280 |  |  | (707) |
Tax effect |  |  | (466) |  |  | (63) |  |  | (62) |  |  | (591) |
Balance at January 3, 2014 |  |  | 779 |  |  | 107 |  |  | (604) |  |  | 282 |
Other comprehensive income (loss) |  |  | (1,527) |  |  | 23 |  |  | (359) |  |  | (1,863) |
Tax effect |  |  | 572 |  |  | (9) |  |  | (52) |  |  | 511 |
Balance at January 2, 2015 |  |  | (176) |  |  | 121 |  |  | (1,015) |  |  | (1,070) |
Other comprehensive income (loss) |  |  | 52 |  |  | (38) |  |  | (576) |  |  | (562) |
Tax effect |  |  | (21) |  |  | 12 |  |  | 61 |  |  | 52 |
Balance at January 1, 2016 |  | $ | (145) |  | $ | 95 |  | $ | (1,530) |  | $ | (1,580) |
Recent Accounting Pronouncements In February 2016, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2016-02, “Leases (Topic 842)”, which requires lessees recognize assets and liabilities for leases with lease terms greater than twelve months in the statement of financial position. Leases will be classified as either finance or operating, with classification affecting the pattern of expense recognition in the income statement. ASU 2016-02 also requires improved disclosures to help users of financial statements better understand the amount, timing and uncertainty of cash flows arising from leases. The update is effective for fiscal years beginning after December 15, 2018, including interim reporting periods within that reporting period. Early adoption is permitted. The Company is currently evaluating the impact the adoption of ASU 2016-02 will have on its consolidated financial statements. In November 2015, the FASB issued ASU 2015-17, “Income Taxes (Topic 740)”: Balance Sheet Classification of Deferred Taxes”, which changes how deferred taxes are classified on company’s balance sheets. The ASU eliminates the current requirement to present deferred tax liabilities and assets as current and noncurrent on the balance sheet. Instead, companies will be required to classify all deferred tax assets and liabilities as noncurrent. The amendments are effective for annual financial statements beginning after December 15, 2016, and interim periods within those annual periods. The Company is currently evaluating the impact the adoption of ASU 2015-17 will have on its consolidated financial statements. In May 2014, the FASB issued ASU 2014-09, “Revenue from Contracts with Customers (Topic 606)”, which supersedes nearly all existing revenue recognition guidance under GAAP. The core principle of ASU 2014-09 is to recognize revenues when promised goods or services are transferred to customers in an amount that reflects the consideration to which an entity expects to be entitled for those goods or services. ASU 2014-09 defines a five-step process to achieve this core principle and, in doing so, more judgment and estimates may be required within the revenue recognition process than are required under existing GAAP. The revised revenue standard is effective for public entities for annual periods beginning after December 15, 2017, and interim periods therein, using either of the following transition methods: (i) a full retrospective approach reflecting the application of the standard in each prior reporting period with the option to elect certain practical expedients, or (ii) a retrospective approach with the cumulative effect of initially adopting ASU 2014-09 recognized at the date of adoption (which includes additional footnote disclosures). The Company is currently evaluating the impact of the Company’s pending adoption of ASU 2014-09 on the Company’s financial statements and has not yet determined the method by which it will adopt the standard in fiscal 2018. In July 2015, the FASB issued ASU 2015-11, “Simplifying the Measurement of Inventory” that replaces the existing accounting standards for the measurement of inventory. ASU 2015-11 requires a company to measure inventory at the lower of cost and net realizable value. Net realizable value is defined as the “estimated selling prices in the ordinary course of business, less reasonably predictable costs of completion, disposal and transportation”. The effective date of ASU 2015-11 is for annual reporting periods beginning after December 15, 2016, including interim periods within those annual reporting periods. The Company does not expect the adoption of ASU 2015-11 will have a material effect on its consolidated financial statements. Prior Year Reclassifications Certain reclassifications have been made in the fiscal 2014 and 2013 financial statements to conform to the fiscal 2015 presentation. During the fiscal year ended January 1, 2016, the Company reclassified $127,000 and $203,000 presented as medical device excise tax in the consolidated statements of operations for the years ended January 2, 2015 and January 3, 2014, respectively, and included those expenses in general and administrative expenses for the current year presentation and, $75,000 from other current liabilities to other long-term liabilities in the consolidated balance sheet as of January 2, 2015 and related note disclosures to conform to current period’s presentation.

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