Note 10 - Stockholders' Equity

3 Months Ended

Mar. 31, 2015

Stockholders' Equity Note [Abstract]

Stockholders' Equity Note Disclosure [Text Block]

NOTE 10. STOCKHOLDERS’ EQUITY

Warrants

A summary of warrant activity for the three months ended March 31, 2015 is shown as follows:

	Warrants Outstanding			Weighted Average Exercise Price During Period
Outstanding at December 31, 2014		969,549		$	4.61
Exercised		(580,000	)		4.30
Cancelled/forfeited		(55,000	)		4.30
Expired		(240,000	)		5.34
Outstanding at March 31, 2015		94,549		$	4.82

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 2014 Plan is described in further detail in our 2014 Annual Report.

Stock-based compensation expense is attributable to stock options and restricted stock unit awards. For all stock-based awards, we recognize expense using a straight-line amortization method.

The following table summarizes stock-based compensation expense and the impact it had on operations for the periods indicated (in thousands):

	Three months ended
	March 31,
	2015		2014
Cost of sales	$	3	$	2
Product development		3		(1	)
Selling, general, and administrative		106		122
Total stock-based compensation	$	112	$	123

Total unearned stock-based compensation was $1.1 million at March 31, 2015, compared to $601 thousand at March 31, 2014. These costs will be charged to expense and amortized on a straight line basis in subsequent periods. The weighted average period over which the unearned compensation at March 31, 2015 is expected to be recognized is approximately 2.6 years.

Stock options

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:

	Three months ended
	March 31,
	2015			2014
Fair value of options issued	$	4.07		$	3.25
Exercise price	$	5.47		$	4.23
Expected life of option (in years)		5.9			5.6
Risk-free interest rate		1.7	%		1.8	%
Expected volatility		91.3	%		98.0	%
Dividend yield		0	%		0	%

A summary of option activity under all plans for the three months ended March 31, 2015 is shown as follows:

	Number of Options			Weighted Average Exercise Price Per Share		Weighted Average Remaining Contractual Life (in years)
Outstanding at December 31, 2014		459,271		$	8.95
Granted		208,500			5.47
Exercised		(321	)		2.30
Cancelled/forfeited		(47,947	)		6.35
Outstanding at March 31, 2015		619,503		$	7.98		8.5
Vested and expected to vest at March 31, 2015		545,159		$	7.35		8.4
Exercisable at March 31, 2015		304,654		$	10.71		7.5

Restricted stock units

A summary of restricted stock unit activity under all plans for the three months ended March 31, 2015 is shown as follows:

	Restricted Stock Units		Weighted Average Grant Date Fair Value		Weighted Average Remaining Contractual Life (in years)
Outstanding at December 31, 2014		-	$	-
Granted		60,750		5.47
Outstanding at March 31, 2015		60,750	$	5.47		2.0