XML 35 R8.htm IDEA: XBRL DOCUMENT
v2.4.0.8

Note 2 - Basis of Presentation and Summary of Significant Accounting Policies | 9 Months Ended
--- | ---
Sep. 30, 2013
Accounting Policies [Abstract] |
Significant Accounting Policies [Text Block] | NOTE 2. BASIS OF PRESENTATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Basis of Presentation The financial statements include the accounts of the Company and its subsidiaries, Stones River Companies, LLC (“SRC”) doing business as Energy Focus LED Solutions in Nashville, Tennessee, and Crescent Lighting Limited (“CLL”) located in the United Kingdom. All significant inter-company balances and transactions have been eliminated. We have prepared the accompanying financial data for the three and nine months ended September 30, 2013 and 2012 pursuant to the rules and regulations of the U.S. Securities and Exchange Commission (“SEC”). Certain information and footnote disclosures normally included in financial statements prepared in accordance with generally accepted accounting principles (“GAAP”) in the U.S. have been condensed or omitted pursuant to such rules and regulations. The accompanying financial data and information should be read in conjunction with our 2012 Annual Report on Form 10-K. In the opinion of management, the accompanying condensed consolidated financial statements contain all normal and recurring adjustments necessary to present fairly our Condensed Consolidated Balance Sheets as of September 30, 2013 and December 31, 2012, Condensed Consolidated Statements of Comprehensive Income for the three and nine months ended September 30, 2013 and 2012, Condensed Consolidated Statements of Operations for the three and nine months ended September 30, 2013 and 2012, and Condensed Consolidated Statements of Cash Flows for the nine months ended September 30, 2013 and 2012. The preparation of condensed consolidated financial statements in accordance with GAAP in the U.S. requires management to make estimates and assumptions that affect the amounts reported in our condensed consolidated financial statements and accompanying notes. Management bases its estimates on historical experience and various other assumptions believed to be reasonable. Although these estimates are based on management’s best knowledge of current events and actions that may impact the company in the future, actual results may be different from the estimates. Estimates include, but are not limited to, the establishment of reserves for accounts receivable, sales returns, inventory obsolescence and warranty claims; the useful lives for property, equipment, and intangible assets; revenues recognized on a percentage-of-completion basis; and stock-based compensation. In addition, estimates and assumptions associated with the evaluation of long-lived assets for impairment requires considerable judgment. Actual results could differ from those estimates and such differences could be material. The Company’s independent registered public accounting firm has issued an opinion in connection with the Company’s 2012 Annual Report on Form 10-K raising substantial doubt about the Company’s ability to continue as a going concern. The interim financial statements have been prepared assuming the Company will continue to operate as a going concern, which contemplates the realization of assets and the settlement of liabilities in the normal course of business. The interim financial statements do not include any adjustments to reflect the possible future effects on the recoverability and classification of assets or the amounts and classification of liabilities that may result from uncertainty related to our ability to continue as a going concern. Update to Significant Accounting Policies There have been no material changes to our significant accounting policies, as compared to the significant accounting policies described in our Annual Report on Form 10-K for the fiscal year ended December 31, 2012. Earnings (Loss) per Share Basic loss per share is computed by dividing the net loss available to common shareholders by the weighted average number of common shares outstanding for the period. Diluted loss per share is computed giving effect to all dilutive potential common shares that were outstanding during the period. Dilutive potential common shares consist of incremental shares upon exercise of stock options, warrants, and conversion of convertible subordinated promissory notes unless the effect would be anti-dilutive. A reconciliation of basic and diluted loss per share is provided as follows (in thousands, except per share amounts):
|  | Three months ended September 30, |  |  | Nine Months Ended September 30, |
|  | 2013 |  |  | 2012 |  |  | 2013 |  |  | 2012 |
Basic and diluted loss per share: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Net loss |  | $ | (1,651 | ) |  | $ | (928 | ) |  | $ | (3,758 | ) |  | $ | (3,695 | )
Basic and diluted loss per share: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Weighted average shares outstanding |  |  | 49,158 |  |  |  | 44,542 |  |  |  | 46,712 |  |  |  | 40,241 |
Basic and diluted net loss per share |  | $ | (0.03 | ) |  | $ | (0.02 | ) |  | $ | (0.08 | ) |  | $ | (0.09 | )
Options and warrants to purchase approximately 14,319,000 and 15,283,000 shares of common stock, were outstanding at September 30, 2013 and 2012, respectively, but were not included in the calculation of diluted net loss per share because their inclusion would have been anti-dilutive. Stock-Based Compensation The Company’s stock-based compensation plan is described in detail in its 2012 Annual Report on Form 10-K. The following table summarizes the Company’s stock-based compensation (in thousands):
|  | Three months ended September 30, |  |  | Nine months ended September 30, |
|  | 2013 |  |  | 2012 |  |  | 2013 |  |  | 2012 |
Cost of sales |  | $ | 1 |  |  | $ | - |  |  | $ | 2 |  |  | $ | - |
Research and development |  |  | 11 |  |  |  | 7 |  |  |  | 26 |  |  |  | 19 |
Sales and marketing |  |  | 8 |  |  |  | 6 |  |  |  | 23 |  |  |  | 20 |
General and administrative |  |  | 33 |  |  |  | 29 |  |  |  | 98 |  |  |  | 107 |
Total stock-based compensation |  | $ | 53 |  |  | $ | 42 |  |  | $ | 149 |  |  | $ | 146 |
At September 30, 2013 and 2012, the Company has unamortized stock-based compensation expense of $249 thousand and $241 thousand, respectively. These costs will be charged to expense and amortized using a straight-line amortization method in future periods through the third quarter of 2016. The weighted average period over which this unearned compensation is expected to be recognized is approximately 1.6 years. The fair value of each stock option is estimated on the date of grant using the Black-Scholes option pricing model. Estimates utilized in the calculation include the expected life of the option, risk-free interest rate, and expected volatility, and are further comparatively detailed as follows:
|  | Nine months ended September 30, |
|  | 2013 |  |  | 2012 |
Fair value of options issued |  | $ | 0.17 |  |  | $ | 0.15 |
Exercise price |  | $ | 0.25 |  |  | $ | 0.27 |
Expected life of option (years) |  |  | 7.2 |  |  |  | 5.6 |
Risk-free interest rate |  |  | 1.3 | % |  |  | 0.8 | %
Expected volatility |  |  | 90.2 | % |  |  | 59.0 | %
Dividend yield |  |  | 0 | % |  |  | 0 | %
Option activity under the Company’s stock plans during the nine months ended September 30, 2013 was as follows:
|  | Options |  |  | Weighted Average Exercise Price |  |  | Weighted Average Remaining Contractural Term (in Years) |
Outstanding as of December 31, 2012 |  |  | 2,184,583 |  |  | $ | 2.20 |  |  |  |  |
Granted |  |  | 1,684,500 |  |  |  | 0.25 |  |  |  |  |
Exercised |  |  | - |  |  |  | - |  |  |  |  |
Cancelled/forfeited |  |  | (651,377 | ) |  |  | 0.52 |  |  |  |  |
Outstanding as of September 30, 2013 |  |  | 3,217,706 |  |  | $ | 1.52 |  |  |  | 7.3 |
Exercisable as of September 30, 2013 |  |  | 1,875,274 |  |  | $ | 2.35 |  |  |  | 6.0 |
Additionally, the Company granted 51,219 restricted stock units during the third quarter ended September 30, 2013. The fair market value on the date of grant was $0.41 per share. The shares vest one year from the grant date. Product Warranties The Company warrants finished goods against defects in material and workmanship under normal use and service for periods generally between one and five years for products and labor. Settlement costs consist of actual amounts expensed for warranty services which are largely a result of third-party service calls and the costs of replacement products. A liability for the estimated future costs under product warranties is maintained for products outstanding under warranty and is included in “Accrued liabilities” in the Condensed Consolidated Balance Sheets. The warranty activity for the respective periods is as follows (in thousands):
|  | Three months ended September 30, |  |  | Nine months ended September 30, |
|  | 2013 |  |  | 2012 |  |  | 2013 |  |  | 2012 |
Balance at the beginning of the period |  | $ | 150 |  |  | $ | 125 |  |  | $ | 159 |  |  | $ | 100 |
Accruals for warranties issued |  |  | 7 |  |  |  | 52 |  |  |  | 46 |  |  |  | 110 |
Settlements made during the period (in cash or in kind) |  |  | (17 | ) |  |  | (18 | ) |  |  | (65 | ) |  |  | (51 | )
Balance at the end of the period |  | $ | 140 |  |  | $ | 159 |  |  | $ | 140 |  |  | $ | 159 |

X
- Details
Name: | us-gaap_AccountingPoliciesAbstract
Namespace Prefix: | us-gaap_
Data Type: | xbrli:stringItemType
Balance Type: | na
Period Type: | duration

X
- Definition The entire disclosure for all significant accounting policies of the reporting entity. + References Reference 1: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 235 -SubTopic 10 -Section 50 -Paragraph 3 -URI http://asc.fasb.org/extlink&oid=6367646&loc=d3e18780-107790 Reference 2: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 235 -SubTopic 10 -Section 50 -Paragraph 1 -URI http://asc.fasb.org/extlink&oid=6367646&loc=d3e18726-107790 Reference 3: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 235 -SubTopic 10 -Section 50 -Paragraph 6 -URI http://asc.fasb.org/extlink&oid=6367646&loc=d3e18861-107790 Reference 4: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 235 -SubTopic 10 -Section 50 -Paragraph 2 -URI http://asc.fasb.org/extlink&oid=6367646&loc=d3e18743-107790 Reference 5: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 235 -SubTopic 10 -Section 50 -Paragraph 5 -URI http://asc.fasb.org/extlink&oid=6367646&loc=d3e18854-107790 + Details
Name: | us-gaap_SignificantAccountingPoliciesTextBlock
Namespace Prefix: | us-gaap_
Data Type: | nonnum:textBlockItemType
Balance Type: | na
Period Type: | duration