Significant Accounting Policies (Policies)

3 Months Ended

Mar. 31, 2017

Use of Estimates, Policy [Policy Text Block]

Use of Estimates

The preparation of the accompanying condensed consolidated financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions about future events. These estimates and the underlying assumptions affect the amounts of assets and liabilities reported, disclosures about contingent assets and liabilities, and reported amounts of revenue and expenses. Such estimates include the valuation of accounts receivable, inventories, intangible assets and other long-lived assets, legal contingencies, and customer incentives, among others. These estimates and assumptions are based on management’s best estimates and judgments. Management evaluates its estimates and assumptions on an on

-going basis using historical experience and other factors, including the current economic environment, which management believes to be reasonable under the circumstances. The Company adjusts such estimates and assumptions when facts and circumstances dictate. Illiquid credit markets, volatile equity, foreign currency and energy markets and declines in consumer spending have combined to increase the uncertainty inherent in such estimates and assumptions. As future events and their effects cannot be determined with precision, actual results could differ significantly from these estimates. Changes in those estimates resulting from continuing changes in the economic environment will be reflected in the financial statements in future periods.

Cash and Cash Equivalents, Restricted Cash and Cash Equivalents, Policy [Policy Text Block]

Restricted Cash

As of

March

31,

2017

and

December

31,

2016,

as required by the Company’s

five

-year term loan (as amended from time to time, the “Medley Term Loan”) with Medley Capital Corporation (“Medley”), the Company was required to maintain a minimum restricted cash balance of

$3.0

million to collateralize the Medley Term Loan.

Trade and Other Accounts Receivable, Policy [Policy Text Block]

Accounts Receivable

The Company records accounts receivable at the invoiced amount when its products are shipped to customers or upon the completion of specific milestone billing requirements. The Company’s receivable balance is recorded net of allowances for amounts not expected to be collected from customers. This allowance for doubtful accounts is the Company’s best estimate of probable credit losses in the Company’s existing accounts receivable. Estimates used in determining the allowance for doubtful accounts are based on historical collection experience, aging of receivables and known collectability issues. The Company writes off accounts receivable when it becomes apparent, based upon age or customer circumstances that such amounts will not be collected. The Company reviews its allowance for doubtful accounts on a quarterly basis. Recovery of bad debt amounts previously written off is recorded as a reduction of bad debt expense in the period the payment is collected. Generally, the Company does not require collateral for its accounts receivable and does not regularly charge interest on past due amounts. As of

March

31,

2017

and

December

31,

2016,

the Company’s allowance for doubtful accounts was

$341,000

and

$324,000,

respectively.

As of

March

31,

2017,

$2.0

million of eligible accounts receivable were pledged as collateral for the

three

-year asset based revolving credit facility (as amended from time to time, the “FCC ABL”) entered into on

April

25,

2014

with FCC, LLC d/b/a First Capital (“First Capital”). First Capital sold the FCC ABL to ACF FinCo I LP (“Ares”) in

May

2015,

and the FCC ABL, as amended from time to time, is hereinafter referred to as the “Ares ABL”.

Fair Value of Financial Instruments, Policy [Policy Text Block]

Fair Value Measurements

The Company utilizes valuation techniques that maximize the use of observable inputs and minimize the use of unobservable inputs to the extent possible. The Company determines fair value based on assumptions that market participants would use in pricing an asset or liability in the principal or most advantageous market. When considering market participant assumptions in fair value measurements, the following fair value hierarchy distinguishes between observable and unobservable inputs, which are categorized in

one

of the following levels:

•

Level

Inputs: Unadjusted quoted prices in active markets for identical assets or liabilities accessible to the reporting entity at the measurement date.

•

Level

Inputs: Other than quoted prices included in Level

inputs that are observable for the asset or liability, either directly or indirectly, for substantially the full term of the asset or liability.

•

Level

Inputs: Unobservable inputs for the asset or liability used to measure fair value to the extent that observable inputs are not available, thereby allowing for situations in which there is little, if any, market activity for the asset or liability at measurement date.

Revenue Recognition, Policy [Policy Text Block]

Revenue Recognition

The Company records revenue when its products are shipped and title passes to customers. When sales of products are subject to certain customer acceptance terms, revenue from such sales is recognized once these terms have been met. The Company also provides its customers with limited rights of return for non-conforming shipments or product warranty claims.

Standard Product Warranty, Policy [Policy Text Block]

Product Warranties

The Company generally provides a

five

-year limited warranty covering defective materials and workmanship of its products and such warranty

may

require the Company to repair, replace or reimburse the purchaser for the purchase price of the product. The estimated costs related to warranties are accrued at the time products are sold based on various factors, including the Company’s stated warranty policies and practices, the historical frequency of claims and the cost to repair or replace its products under warranty. The following table summarizes changes in the warranty liability for the

three

months ended

March

31,

2017:

Warranty liability as of December 31, 2016	$	2,598,567
Additions to liability		83,999
Less warranty costs		(201,772	)
Warranty liability as of March 31, 2017	$	2,480,794

New Accounting Pronouncements, Policy [Policy Text Block]

Recent Accounting Pronouncements Not Yet Adopted

Revenue Recognition

May

2014,

the FASB issued ASU

2014

09,

which will replace most existing revenue recognition guidance in United States generally accepted accounting principles (“GAAP”) and is intended to improve and converge the financial reporting requirements for revenue from contracts with customers with

International Financial Reporting Standards (“IFRS”). The core principle of ASU

2014

is that an entity should recognize revenue for the transfer of goods or services equal to the amount that it expects to be entitled to receive for those goods or services. ASU

2014

also requires additional disclosures about the nature, timing and uncertainty of revenue and cash flows arising from customer contracts, including significant judgments and changes in judgments. ASU

2014

allows for both retrospective and prospective methods of adoption and is effective for

annual reporting periods beginning after

December

15,

2017,

and interim periods within those annual periods. Early application is permitted but not before annual reporting periods beginning after

December

15,

2016.

Management expects to adopt ASU No.

2014

for annual reporting periods beginning after

December

15,

2017,

including interim reporting periods within that reporting year. While Management is still in its assessment process, the Company generally does not expect the impact of the adoption of this ASU to be significant to its consolidated financial statements, it is still evaluating the impact on the disclosures in the notes to consolidated financial statements. Management currently expects to apply ASU

2014

retrospectively with the cumulative effect of initially applying the ASU recognized at the date of initial application recorded as an adjustment to retained earnings, referred to as the "Modified Retrospective Approach."

Leases

February

2016,

the FASB issued ASU

2016

02,

“Leases (Topic

842)”.

ASU

2016

introduces a lessee model that brings most leases on the balance sheet. The new standard also aligns many of the underlying principles of the new lessor model with those in ASC

606,

the FASB's new revenue recognition standard (e.g., those related to evaluating when profit can be recognized). Furthermore, ASU

2016

addresses other concerns related to the current leases model. For example, ASU

2016

eliminates the requirement in current GAAP for an entity to use bright-line tests in determining lease classification. The standard also requires lessors to increase the transparency of their exposure to changes in value of their residual assets and how they manage that exposure. The Company is required to adopt ASU

2016

for periods beginning after

December

15,

2018,

including interim periods, with early adoption permitted. Management is currently evaluating the method of adoption of this ASU on the Company’s consolidated financial statements, but expects that it will not have a material impact on the consolidated financial statements since the Company’s lease commitments are not material and are not for extended periods of time.

Cash Flows

November

2016,

the FASB issued ASU

2016

18,

which requires that amounts generally described as restricted cash and restricted cash equivalents should be included with cash and cash equivalents when reconciling the beginning-of-period and end-of-period total amounts shown on the statement of cash flows. This update is effective for annual and interim periods beginning after

December

15,

2017,

with early adoption permitted. The Company is currently assessing the effect that adoption will have on its consolidated financial statements.

- Definition

Disclosure of accounting policy for trade and other accounts receivables. This disclosure may include the basis at which such receivables are carried in the entity's statements of financial position (for example, net realizable value), how the entity determines the level of its allowance for doubtful accounts, when impairments, charge-offs or recoveries are recognized, and the entity's income recognition policies for such receivables, including its treatment of related fees and costs, its treatment of premiums, discounts or unearned income, when accrual of interest is discontinued, how the entity records payments received on nonaccrual receivables and its policy for resuming accrual of interest on such receivables. If the enterprise holds a large number of similar loans, disclosure may include the accounting policy for the anticipation of prepayments and significant assumptions underlying prepayment estimates for amortization of premiums, discounts, and nonrefundable fees and costs.

+ References

Reference 1: http://www.xbrl.org/2003/role/presentationRef
-Publisher FASB
-Name Accounting Standards Codification
-Topic 310
-SubTopic 10
-Section 50
-Paragraph 11B
-Subparagraph (b)
-URI http://asc.fasb.org/extlink&oid=84173941&loc=SL6953423-111524

Reference 2: http://www.xbrl.org/2003/role/presentationRef
-Publisher FASB
-Name Accounting Standards Codification
-Topic 942
-SubTopic 210
-Section S99
-Paragraph 1
-Subparagraph (SX 210.9-03(9))
-URI http://asc.fasb.org/extlink&oid=6876686&loc=d3e534808-122878

Reference 3: 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=84158767&loc=d3e18780-107790

Reference 4: http://www.xbrl.org/2003/role/presentationRef
-Publisher FASB
-Name Accounting Standards Codification
-Topic 310
-SubTopic 20
-Section 50
-Paragraph 1
-URI http://asc.fasb.org/extlink&oid=84159169&loc=d3e10133-111534

Reference 5: http://www.xbrl.org/2003/role/presentationRef
-Publisher FASB
-Name Accounting Standards Codification
-Topic 210
-SubTopic 10
-Section S99
-Paragraph 1
-Subparagraph (SX 210.5-02(3))
-URI http://asc.fasb.org/extlink&oid=6877327&loc=d3e13212-122682

Reference 6: http://www.xbrl.org/2003/role/presentationRef
-Publisher FASB
-Name Accounting Standards Codification
-Topic 944
-SubTopic 210
-Section S99
-Paragraph 1
-Subparagraph (SX 210.7-03(a)(5))
-URI http://asc.fasb.org/extlink&oid=6879938&loc=d3e572229-122910

Reference 7: http://www.xbrl.org/2003/role/presentationRef
-Publisher FASB
-Name Accounting Standards Codification
-Topic 210
-SubTopic 10
-Section S99
-Paragraph 1
-Subparagraph (SX 210.5-02(4))
-URI http://asc.fasb.org/extlink&oid=6877327&loc=d3e13212-122682

Reference 8: http://www.xbrl.org/2003/role/presentationRef
-Publisher FASB
-Name Accounting Standards Codification
-Topic 310
-SubTopic 10
-Section 50
-Paragraph 15
-Subparagraph (d)
-URI http://asc.fasb.org/extlink&oid=84173941&loc=d3e5212-111524

Reference 9: http://www.xbrl.org/2003/role/presentationRef
-Publisher FASB
-Name Accounting Standards Codification
-Topic 310
-SubTopic 10
-Section 50
-Paragraph 6
-URI http://asc.fasb.org/extlink&oid=84173941&loc=d3e5093-111524

+ Details

LIGHTING SCIENCE GROUP CORP 10-Q