XML 37 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, 2014
Accounting Policies [Abstract] |
Significant Accounting Policies [Text Block] | NOTE 2. BASIS OF PRESENTATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Reverse stock s plit At our annual meeting of stockholders held on July 15, 2014, the stockholders approved an amendment to the Certificate of Incorporation, as described in our proxy statement dated June 26, 2014, to effect a reverse stock split of our outstanding common stock at a ratio ranging from 1-for- 7 to 1-for- 15, with such ratio determined by our Board of Directors in its discretion without further approval from the stockholders. The Board of Directors subsequently authorized proceeding with the reverse stock split at a ratio of 1-for- 10. On July 16, 2014, we filed a Certificate of Amendment to our Certificate of Incorporation effecting the reverse stock split effective at 5pm ET on July 16, 2014. Immediately after the July 16, 2014 effective date, we had 8,024,813 shares of common stock issued and outstanding. All share and per share amounts have been retroactively restated to reflect the reverse split. Effective at the same time as the reverse split, the authorized number of shares of our common stock was proportionately decreased from 150,000,000 shares to 15,000,000 shares. The par value remained the same. Basis of p resentation The condensed consolidated financial statements (“financial statements”) include the accounts of the Company and its subsidiaries, Energy Focus LED Solutions, LLC (“EFLS”) 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, 2014 and 2013 pursuant to the rules and regulations of the 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 United States have been condensed or omitted pursuant to such rules and regulations. The accompanying financial data and information should be read in conjunction with our Annual Report on Form 10-K for the fiscal year ended December 31, 2013 (“2013 Annual Report”). In the opinion of management, the accompanying financial statements contain all normal and recurring adjustments necessary to present fairly our Condensed Consolidated Balance Sheets as of September 30, 2014 and December 31, 2013, Condensed Consolidated Statements of Operations for the three and nine months ended September 30, 2014 and 2013, Condensed Consolidated Statements of Comprehensive Loss for the three and nine months ended September 30, 2014 and 2013, and Condensed Consolidated Statements of Cash Flows for the nine months ended September 30, 2014 and 2013. The preparation of financial statements in accordance with GAAP in the United States requires management to make estimates and assumptions that affect the amounts reported in our 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 us 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 of 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 determination of the fair value of financial instruments and evaluation of long-lived assets for impairment requires considerable judgment. Actual results could differ from those estimates and such differences could be material. Our independent public accounting firm has issued an opinion in connection with our 2013 Annual Report raising substantial doubt as to our ability to continue as a going concern. The interim financial statements have been prepared assuming we 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. Reclassifications Certain prior year amounts have been reclassified within the financial statements, and related notes thereto, to be consistent with current year presentation. See our discussion of the reclassification of discontinued operations in Note 3, Discontinued Operations. Recent accounting pronouncements In July 2013, the Financial Accounting Standard Board (FASB) issued Accounting Standards Update (ASU) No. 2013-11, Presentation of an Unrecognized Tax Benefit When a Net Operating Loss Carryforward, a Similar Tax Loss, or a Tax Credit Carryforward Exists, which amends ASC 740, Income Taxes. The amendments provide guidance on the financial statement presentation of an unrecognized tax benefit, as either a reduction of a deferred tax asset or as a liability, when a net operating loss carryforward, similar tax loss, or a tax credit carryforward exists. The amendments are effective for fiscal years, and interim periods within those years, beginning after December 15, 2013 and may be applied on either a prospective or retrospective basis. The adoption of this ASU did not materially impact our disclosures. In May 2014, the FASB issued ASU No. 2014-09, Revenue Recognition - Revenue from Contracts with Customers, which is a comprehensive revenue recognition standard that will supersede nearly all existing revenue recognition guidance under U.S. GAAP. The standard is effective for interim and annual periods beginning after December 15, 2016, and either full retrospective adoption or modified retrospective adoption is permitted. We are in the process of evaluating the impact of the standard. Update to s ignificant accounting p olicies There have been no material changes to our significant accounting policies, as compared to the significant accounting policies described in our 2013 Annual Report. Loss per s hare Basic loss per share is computed by dividing the net loss available to common stockholders 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 and warrants, 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 |  |  | Nine months ended |
|  | September 30, |  |  | September 30, |
|  | 2014 |  |  | 2013 |  |  | 2014 |  |  | 2013 |
Basic and diluted loss per share: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Net loss |  | $ | (403 | ) |  | $ | (1,651 | ) |  | $ | (5,095 | ) |  | $ | (3,758 | )
Basic and diluted loss per share: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Weighted average shares outstanding |  |  | 8,781 |  |  |  | 4,916 |  |  |  | 7,276 |  |  |  | 4,671 |
Basic and diluted net loss per share |  | $ | (0.05 | ) |  | $ | (0.34 | ) |  | $ | (0.70 | ) |  | $ | (0.80 | )
Options, warrants and convertible securities representing approximately 174,853 and 2,407,422 shares of common stock were excluded from the loss per share calculation for the three months ended September 30, 2014 and 2013, respectively, and 990,449 and 1,464,113 for the nine months ended September 30, 2014 and 2013, respectively, because their inclusion would have been anti-dilutive. Stock-based compensation On May 6, 2014, our Board of Directors approved the Energy Focus, Inc. 2014 Stock Incentive Plan (the “2014 Plan”). The 2014 Plan was approved by the stockholders at our annual meeting on July 15, 2014, after which no further awards could be issued under the Energy Focus, Inc. 2008 Incentive Stock Plan (the “2008 Plan”). The 2014 Plan allows for awards up to 600,000 shares of common stock and expires on July 15, 2024. The 2008 Plan is described in detail in our 2013 Annual Report. The following table summarizes our stock-based compensation (in thousands):
|  | Three months ended |  |  | Nine months ended |
|  | September 30, |  |  | September 30, |
|  | 2014 |  |  | 2013 |  |  | 2014 |  |  | 2013 |
Cost of sales |  | $ | 4 |  |  | $ | 1 |  |  | $ | 10 |  |  | $ | 2 |
Research and development |  |  | 3 |  |  |  | 11 |  |  |  | 5 |  |  |  | 26 |
Selling, general, and administrative |  |  | 145 |  |  |  | 41 |  |  |  | 395 |  |  |  | 121 |
Total stock-based compensation |  | $ | 152 |  |  | $ | 53 |  |  | $ | 410 |  |  | $ | 149 |
Total unearned compensation was $485 thousand related to stock-based compensation at September 30, 2014, compared to $236 thousand at September 30, 2013. These costs will be charged to expense and amortized on a straight-line basis in subsequent periods through the third quarter of 2016. The weighted average period over which the unearned compensation is expected to be recognized is approximately 2.1 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, |
|  | 2014 |  |  | 2013 |
Fair value of options issued |  | $ | 3.44 |  |  | $ | 1.72 |
Exercise price |  | $ | 4.48 |  |  | $ | 2.47 |
Expected life of option (in years) |  |  | 5.6 |  |  |  | 7.2 |
Risk-free interest rate |  |  | 1.79 | % |  |  | 1.32 | %
Expected volatility |  |  | 97.93 | % |  |  | 90.24 | %
Dividend yield |  |  | 0 | % |  |  | 0 | %
Option activity under our stock plans during the nine months ended September 30, 2014 was as follows:
|  | Options |  |  | Weighted Average Exercise Price |  |  | Weighted Average Remaining Contractual Term (in years) |
Outstanding as of December 31, 2013 |  |  | 286,188 |  |  | $ | 15.30 |  |  |  |  |
Granted |  |  | 278,000 |  |  |  | 4.58 |  |  |  |  |
Exercised |  |  | (3,000 | ) |  |  | 2.30 |  |  |  |  |
Cancelled/forfeited |  |  | (94,632 | ) |  |  | 14.32 |  |  |  |  |
Outstanding as of September 30, 2014 |  |  | 466,556 |  |  | $ | 9.19 |  |  |  | 8.2 |
Vested and expected to vest as of September 30, 2014 |  |  | 429,781 |  |  | $ | 8.18 |  |  |  | 8.2 |
Exercisable as of September 30, 2014 |  |  | 244,648 |  |  | $ | 13.32 |  |  |  | 7.3 |
Product w arranties We warrant 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 |  |  | Nine months ended |
|  | September 30, |  |  | September 30, |
|  | 2014 |  |  | 2013 |  |  | 2014 |  |  | 2013 |
Balance at the beginning of the period |  | $ | 68 |  |  | $ | 150 |  |  | $ | 75 |  |  | $ | 159 |
Accruals for warranties issued |  |  | 32 |  |  |  | 7 |  |  |  | 48 |  |  |  | 46 |
Settlements made during the period (in cash or in kind) |  |  | (24 | ) |  |  | (17 | ) |  |  | (47 | ) |  |  | (65 | )
Balance at the end of the period |  | $ | 76 |  |  | $ | 140 |  |  | $ | 76 |  |  | $ | 140 |

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