Ontrak (OTRK) 10-Q 13 Nov 13 2013 Q3 Quarterly report Financial data

Document_And_Entity_Informatio

Document And Entity Information	9 Months Ended
	Sep. 30, 2013	Nov. 13, 2013
Document and Entity Information [Abstract]	'	'
Entity Registrant Name	'CATASYS, INC.	'
Document Type	'10-Q	'
Current Fiscal Year End Date	'--12-31	'
Entity Common Stock, Shares Outstanding	'	18,835,571
Amendment Flag	'false	'
Entity Central Index Key	'0001136174	'
Entity Current Reporting Status	'Yes	'
Entity Voluntary Filers	'No	'
Entity Filer Category	'Smaller Reporting Company	'
Entity Well-known Seasoned Issuer	'No	'
Document Period End Date	30-Sep-13	'
Document Fiscal Year Focus	'2013	'
Document Fiscal Period Focus	'Q3	'

Condensed_Consolidated_Balance

Condensed Consolidated Balance Sheets (current period unaudited) (USD $)	Sep. 30, 2013		Dec. 31, 2012
Current assets	'		'
Cash and cash equivalents	$422,000		$3,153,000
Receivables, net of allowance for doubtful accounts of $9 and $0, respectively	113,000		69,000
Receivables from related party	269,000		173,000
Prepaids and other current assets	119,000		227,000
Total current assets	923,000		3,622,000
Long-term assets	'		'
Property and equipment, net of accumulated depreciation of $4,501 and $4,668, respectively	44,000		59,000
Intangible assets, net of accumulated amortization of $995 and $892, respectively	945,000		1,048,000
Deposits and other assets	175,000		205,000
Total Assets	2,087,000		4,934,000
Current liabilities	'		'
Accounts payable	1,268,000		1,642,000
Accrued compensation and benefits	1,217,000		958,000
Deferred revenue	667,000		278,000
Other accrued liabilities	1,314,000		1,120,000
Total current liabilities	4,466,000		3,998,000
Long-term liabilities	'		'
Deferred rent and other long-term liabilities	'		18,000
Capital leases	18,000		18,000
Warrant liabilities	14,196,000		14,658,000
Total Liabilities	18,680,000		18,692,000
Stockholders' deficit	'		'
Preferred stock, $0.0001 par value; 50,000,000 shares authorized; no shares issued and outstanding	0		0
Common stock, $0.0001 par value; 500,000,000 shares authorized; 14,285,569 and 12,022,853 shares issued and outstanding at September 30, 2013 and December 31, 2012, respectively	2,000	[1]	1,000	[1]
Additional paid-in-capital	209,121,000		208,776,000
Accumulated deficit	-225,716,000		-222,535,000
Total Stockholders' deficit	-16,593,000		-13,758,000
Total Liabilities and Stockholders' Deficit	$2,087,000		$4,934,000
[1]	The financial statements have been retroactively restated to reflect the 10-for-1 reverse stock split that occurred on May 6, 2013.

Condensed_Consolidated_Balance1

Condensed Consolidated Balance Sheets (current period unaudited) (Parentheticals) (USD $)	Sep. 30, 2013	Dec. 31, 2012
In Thousands, except Share data, unless otherwise specified
Allowance For Doubtful Accounts (in Dollars)	$9	$0
Property and equipment, accumulated depreciation (in Dollars)	4,501	4,668
Intangible assets, accumulated amortization (in Dollars)	$995	$892
Preferred stock par value (in Dollars per share)	$0.00	$0.00
Preferred stock, shares authorized	50,000,000	50,000,000
Preferred stock, shares issued	0	0
Preferred stock, shares outstanding	0	0
Common stock, par value (in Dollars per share)	$0.00	$0.00
Common stock, shares authorized	500,000,000	500,000,000
Common stock,shares issued	14,285,569	12,022,853
Common stock, shares outstanding	14,285,569	12,022,853

Condensed_Consolidated_Stateme

Condensed Consolidated Statements of Operations (unaudited) (USD $)	3 Months Ended				9 Months Ended
In Thousands, except Per Share data, unless otherwise specified	Sep. 30, 2013		Sep. 30, 2012		Sep. 30, 2013	Sep. 30, 2012
Revenues	'		'		'	'
Healthcare services revenues	$109		$100		$315	$226
License and management services revenues	21		40		83	136
Total revenues	130		140		398	362
Operating expenses	'		'		'	'
Cost of services	221		197		628	618
General and administrative	1,415		1,946		4,651	6,629
Impairment losses	'		'		'	189
Depreciation and amortization	42		69		131	227
Total operating expenses	1,678		2,212		5,410	7,663
Loss from operations	-1,548		-2,072		-5,012	-7,301
Interest expense	-1		-1		-771	-2,697
Change in fair value of warrant liability	2,231		1,818		2,607	4,127
Income/(Loss) from operations before provision for income taxes	682		-255		-3,176	-5,871
Provision for income taxes	2		2		5	18
Net Income/(Loss)	$680		($257)		($3,181)	($5,889)
Basic and diluted net income (loss) per share:*	'		'		'	'
Basic net income (loss) per share* (in Dollars per share)	$0.05	[1]	($0.04)	[1]	($0.24)	($1.23)
Basic weighted number of shares outstanding* (in Shares)	14,286		5,908		13,429	4,802
Diluted net income (loss) per share* (in Dollars per share)	$0.04		($0.04)		($0.24)	($1.23)
Diluted weighted number of shares outstanding* (in Shares)	19,364		5,908		13,429	4,802
[1]	The financial statements have been retroactively restated to reflect the 10-for-1 reverse stock split that occurred on May 6, 2013.

Condensed_Consolidated_Stateme1

Condensed Consolidated Statement of Cash Flows (unaudited) (USD $)	9 Months Ended
	Sep. 30, 2013	Sep. 30, 2012
Operating activities:	'	'
Net loss	($3,181,000)	($5,889,000)
Adjustments to reconcile net income (loss) to net cash used in operating activities:	'	'
Depreciation and amortization	131,000	227,000
Amortization of debt discount and issuance costs included in interest expense	769,000	2,681,000
Provision for doubtful accounts	9,000	-4,000
Share-based compensation expense	165,000	1,963,000
Fair value adjustment on warrant liability	-2,607,000	-4,127,000
Impairment losses	'	189,000
(Gain) or loss on disposition of assets	'	-1,000
Changes in current assets and liabilities:	'	'
Receivables	-149,000	-40,000
Prepaids and other current assets	137,000	24,000
Deferred revenue	389,000	221,000
Accounts payable and other accrued liabilities	57,000	229,000
Net cash used in operating activities	-4,280,000	-4,527,000
Investing activities:	'	'
Deposits and other assets	'	-3,000
Net cash used in investing activities	'	-3,000
Financing activities:	'	'
Proceeds from the issuance of common stock and warrants	1,535,000	4,287,000
Proceeds from the exercise of warrants	23,000	'
Proceeds from financing notes	'	975,000
Capital lease obligations	-9,000	-7,000
Net cash provided by financing activities	1,549,000	5,255,000
Net increase (decrease) in cash and cash equivalents	-2,731,000	725,000
Cash and cash equivalents at beginning of period	3,153,000	771,000
Cash and cash equivalents at end of period	422,000	1,496,000
Supplemental disclosure of cash paid	'	'
Income taxes	37,000	93,000
Supplemental disclosure of non-cash activity	'	'
Beneficial conversion feature related to financing	'	253,000
Property and equipment acquired through capital leases and other financing	13,000	31,000
Conversion of Debt [Member]	'	'
Supplemental disclosure of non-cash activity	'	'
Common stock issued	'	975,000
Services [Member]	'	'
Supplemental disclosure of non-cash activity	'	'
Common stock issued	'	309,000
Exercise Of Warrants [Member]	'	'
Supplemental disclosure of non-cash activity	'	'
Common stock issued	$156,000	'

Note_1_Basis_of_Consolidation_

Note 1 - Basis of Consolidation, Presentation and Going Concern	9 Months Ended
	Sep. 30, 2013
Disclosure Text Block [Abstract]	'
Organization, Consolidation and Presentation of Financial Statements Disclosure [Text Block]	'
	Note 1. Basis of Consolidation, Presentation and Going Concern
	The accompanying unaudited interim condensed consolidated financial statements for Catasys, Inc. and our subsidiaries have been prepared in accordance with generally accepted accounting principles in the United States of America (“U.S. GAAP”) and instructions to Form 10-Q and, therefore, do not include all disclosures necessary for a complete presentation of financial position, results of operations, and cash flows in conformity with U.S. GAAP. In our opinion, all adjustments, consisting of normal recurring adjustments, considered necessary for a fair presentation have been included.  Interim results are not necessarily indicative of the results that may be expected for the entire fiscal year. The accompanying financial information should be read in conjunction with the financial statements and the notes thereto in our most recent Annual Report on Form 10-K, from which the December 31, 2012 balance sheet have been derived.
	Our financial statements have been prepared on the basis that we will continue as a going concern. At September 30, 2013, cash and cash equivalents amounted to $422,000 and we had a working capital deficit of approximately $3.5 million. In October 2013, we closed on a financing of approximately $2.6 million. We have incurred significant operating losses and negative cash flows from operations since our inception. During the nine months ended September 30, 2013, our cash used in operating activities amounted to $4.3 million. We anticipate that we could continue to incur negative cash flows and net losses for the next twelve months. The financial statements do not include any adjustments relating to the recoverability of the carrying amount of the recorded assets or the amount of liabilities that might result from the outcome of this uncertainty. As of September 30, 2013, these conditions raised substantial doubt as to our ability to continue as a going concern.
	Our ability to fund our ongoing operations and continue as a going concern is dependent on our increasing fees from existing contracts and signing and generating fees from new and existing contracts for our Catasys managed care programs and the success of management’s plans to increase revenue and continue to control expenses. We operated our programs in Kansas, Louisiana, Massachusetts, and Oklahoma during the third quarter of 2013. In 2013, we signed two agreements with national health plans to provide services to their members in New Jersey and Ohio, West Virginia, Kentucky, and Indiana, respectively. We commenced enrollment for Humana, one of the national insurers in the fourth quarter of 2013, and we expect to continue to expand enrollment with Humana and commence enrollment with the other national insurer during the fourth quarter of 2013. During the nine months ending September 30, 2013, we have generated increased fees from our launched programs over the same period in the prior year, and we expect to continue to increase enrollment and fees from our programs throughout this year both from existing programs and the contracts we signed in 2013. In addition, we are involved in contract negotiations with other potential customers that we expect to sign in the fourth quarter. However, there can be no assurance that we will generate such fees or sign additional contracts. We continue to look for areas to reduce our operating expenses.
	We and our Chief Executive Officer are party to a litigation in which the plaintiffs assert causes of action for conversion, a request for an order to set aside fraudulent conveyance and breach of contract. A judgment in our favor was entered by the court in November 2012, however the plaintiff has appealed the judgment. While we believe the plaintiffs’ claims are without merit and we intend to continue to vigorously defend the case, there can be no assurance that the litigation will be resolved in our favor. If this case is decided against us or our Chief Executive Officer, it may cause us to pay substantial damages, and other related fees. Regardless of whether this litigation is resolved in our favor, any lawsuit to which we are a party will likely be expensive and time consuming to defend or resolve. Costs of defense and any damages resulting from litigation, a ruling against us or a settlement of the litigation could have a significant negative impact on our liquidity, including our cash flows.
	Based on the provisions of our management services agreement (“MSA”) between us and our managed professional medical corporation, we have determined that our managed professional medical corporation constitutes a variable interest entity, and that we are the primary beneficiary as defined in Financial Accounting Standards Board (“FASB”) Interpretation No. 46R “Consolidation of Variable Interest Entities, an Interpretation of Accounting Research Bulletin No. 51” (“FIN 46R”).  Accordingly, we are required to consolidate the revenue and expenses of our managed professional medical corporation. See Management Services Agreement heading under Note 2, Summary of Significant Accounting Policies, for more discussion.
	All intercompany transactions and balances have been eliminated in consolidation.

Note_2_Summary_of_Significant_

Note 2 - Summary of Significant Accounting Policies	9 Months Ended
	Sep. 30, 2013
Accounting Policies [Abstract]	'
Significant Accounting Policies [Text Block]	'
	Note 2. Summary of Significant Accounting Policies
	Revenue Recognition
	Healthcare Services
	Our Catasys contracts are generally designed to provide revenues to us on a monthly basis based on enrolled members. To the extent our contracts may include a minimum performance guarantee, we reserve a portion of the monthly fees that may be at risk until the performance measurement period is completed. To the extent we receive case rates that are not subject to the performance guarantees, we recognize the case rate ratably over twelve months.
	License and Management Services
	Our license and management services revenues are primarily derived from our managed treatment center, which we include in our condensed consolidated financial statements, and which are derived from charging fees directly to patients for treatment and are recorded when services are provided. Revenues from patients treated with our proprietary treatment program are recorded based on the number of days of treatment completed during the period as a percentage of the total number treatment days for the treatment program. Revenues for other services are recognized when services are rendered.
	Cost of Services
	Healthcare Services
	Cost of healthcare services consists primarily of salaries related to our care coaches, healthcare provider claims payments, and fees charged by our third party administrators for processing these claims. Healthcare services cost of services is recognized in the period in which an eligible member receives services. We contract with doctors and licensed behavioral healthcare professionals, on a fee-for-services basis. We determine that a member has received services when we receive a claim or in the absence of a claim, by utilizing member data recorded in the eOnTrakTM database within the contracted timeframe, with all required billing elements correctly completed by the service provider.
	License and Management Services
	Cost of license and management services primarily represents direct costs associated with providing care to patients that are incurred in connection with our managed treatment center. Costs are recognized in the periods in which medical treatment is provided. Such costs include, but are not limited to, direct labor costs, medical supplies and medications.
	Cash Equivalents and Concentration of Credit Risk
	We consider all highly liquid investments with an original maturity of three months or less to be cash equivalents. Financial instruments that potentially subject us to a concentration of credit risk consist of cash and cash equivalents, and accounts receivable. Cash is deposited with what we believe are highly credited, quality financial institutions. The deposited cash may exceed Federal Deposit Insurance Corporation (“FDIC”) insured limits.
	For the nine months ended September 30, 2013, one customer accounted for approximately 64% of revenues and three customers accounted for approximately 91% of accounts receivable.
	Basic and Diluted Income (Loss) per Share
	Basic income (loss) per share is computed by dividing the net income (loss) to common stockholders for the period by the weighted average number of common shares outstanding during the period. Diluted income (loss) per share is computed by dividing the net income (loss) for the period by the weighted average number of common and dilutive common equivalent shares outstanding during the period.
	Common equivalent shares, consisting of 5,077,669 incremental common shares for the three months ended September 30, 2013, issuable upon the exercise of stock options and warrants have been included in the diluted earnings per share calculation. These shares have not been included for the three and nine month ended September 30, 2012 or the nine months ended September 2013 because their effect is anti-dilutive.
			Three Months Ended						Nine Months Ended
			30-Sep						30-Sep
	(in thousands, except per share amounts)		2013			2012			2013			2012
	Numerator
	Net income (loss)		$	680		$	(257	)	$	(3,181	)	$	(5,889	)
	Denominator
	Weighted-average common shares outstanding			14,286			5,908			13,429			4,802
	Shares used in calculation - basic			14,286			5,908			13,429			4,802
	Shares issuable for stock options and warrants			5,078			-			-			-
	Shares used in calculation - diluted			19,364			5,908			13,429			4,802
	Net income (loss) per share
	Basic		$	0.05		$	(0.04	)	$	(0.24	)	$	(1.23	)
	Diluted		$	0.04		$	(0.04	)	$	(0.24	)	$	(1.23	)
	Share-Based Compensation
	Our 2010 Stock Incentive Plan, as amended, (the “Plan”), provides for the issuance of up to 1,825,000 shares of our common stock. Incentive stock options (ISOs) under Section 422A of the Internal Revenue Code and non-qualified options (NSOs) are authorized under the Plan. We have granted stock options to executive officers, employees, members of our board of directors, and certain outside consultants. The terms and conditions upon which options become exercisable vary among grants, but option rights expire no later than ten years from the date of grant and employee and board of director awards generally vest over three to five years. At September 30, 2013, we had 482,177 vested and unvested shares outstanding and 1,285,586 shares available for future awards.
	Share-based compensation expense attributable to continuing operations amounted to $48,000 and $165,000 for the three and nine months ended September 30, 2013, compared with $371,000 and $2.0 million, respectively, for the same periods in 2012.
	Stock Options – Employees and Directors
	We measure and recognize compensation expense for all share-based payment awards made to employees and directors based on estimated fair values on the date of grant. We estimate the fair value of share-based payment awards using the Black Scholes option-pricing model. The value of the portion of the award that is ultimately expected to vest is recognized as expense over the requisite service periods in the condensed consolidated statements of operations subsequent to January 1, 2006. We account for share-based awards to employees and directors using the intrinsic value method under previous FASB rules, allowable prior to January 1, 2006. Under the intrinsic value method, no share-based compensation expense had been recognized in our consolidated statements of operations for awards to employees and directors because the exercise price of our stock options equaled the fair market value of the underlying stock at the date of grant.
	Share-based compensation expense recognized for employees and directors for the three and nine months ended September 30, 2013, was $47,000 and $141,000, compared with $273,000 and $1.6 million for the same periods in 2012, respectively.
	Share-based compensation expense recognized in our condensed consolidated statements of operations for the three and nine months ended September 30, 2013 and 2012, includes compensation expense for share-based payment awards granted prior to, but not yet vested, as of January 1, 2006, based on the grant date fair value estimated in accordance with the pro-forma provisions of Statement of Financial Accounting Standards (“SFAS”) 123, and for the share-based payment awards granted subsequent to January 1, 2006 based on the grant date fair value estimated in accordance with the provisions of the Accounting Standards Codification (“ASC”) 718. For share-based awards issued to employees and directors, share-based compensation is attributed to expense using the straight-line single option method. Share-based compensation expense recognized in our condensed consolidated statements of operations for the three and nine months ended September 30, 2013 and 2012, is based on awards ultimately expected to vest, reduced for estimated forfeitures. Accounting rules for stock options require forfeitures to be estimated at the time of grant and revised, if necessary, in subsequent periods if actual forfeitures differ from those estimates.
	During the three and nine months ended September 30, 2013, there were no options granted to employees, compared with 0 and 50,000 options granted to employees at the weighted average per share exercise price of $0.00 and $0.44, for the same periods in 2012, respectively. All of the options were issued at the fair market value of our common stock on the date of grant. Employee and director stock option activity for the three and nine months ended September 30, 2013 are as follows:
			Shares			Weighted Avg.
						Exercise Price
	Balance December 31, 2012			486,000		$	26.46
	Granted			-		$	-
	Canceled			(20,000	)	$	33.72
	Balance March 31, 2013			466,000		$	22.73
	Granted			-		$	-
	Canceled			(1,000	)	$	39.37
	Balance June 30, 2013			465,000		$	22.69
	Granted			-		$	-
	Canceled			(4,000	)	$	379.44
	Balance September 30, 2013			461,000		$	19.59
	The expected volatility assumptions have been based on the historical and expected volatility of our stock, measured over a period generally commensurate with the expected term. The weighted average expected option term for the three and nine months ended September 30, 2013 and 2012, reflects the application of the simplified method prescribed in SEC Staff Accounting Bulletin (“SAB”) No. 107 (and as amended by SAB 110), which defines the life as the average of the contractual term of the options and the weighted average vesting period for all option tranches.
	As of September 30, 2013, there was $92,000 of total unrecognized compensation costs related to non-vested share-based compensation arrangements granted under the Plan. That cost is expected to be recognized over a weighted-average period of approximately 0.94 years.
	Stock Options and Warrants – Non-employees
	We account for the issuance of options and warrants for services from non-employees for services by estimating the fair value of warrants issued using the Black-Scholes pricing model. This model’s calculations include the option or warrant exercise price, the market price of shares on grant date, the weighted average risk-free interest rate, the expected life of the option or warrant, and the expected volatility of our stock and the expected dividends.
	For options and warrants issued as compensation to non-employees for services that are fully vested and non-forfeitable at the time of issuance, the estimated value is recorded in equity and expensed when the services are performed and benefit is received. For unvested shares, the change in fair value during the period is recognized in expense using the graded vesting method.
	There were no options issued to non-employees for the three and nine months ended September 30, 2013 and 2012, respectively. Share-based compensation expense relating to stock options and warrants recognized for non-employees amounted to $1,000 and $23,000 for the three and nine months ended September 30, 2013, and $61,000 and $81,000 for the three and nine months ended September 30, 2012, respectively.
	Non-employee stock option activity for the three and nine months ended September 30, 2013, are as follows:
			Shares			Weighted Avg.
						Exercise Price
	Balance December 31, 2012			22,000		$	48.97
	Canceled			(1,000	)	$	1,953.03
	Balance March 31, 2013			21,000		$	45.72
	Canceled			-		$	-
Balance June 30, 2013			21,000		$	45.72
Canceled			-		$	-
Balance September 30, 2013			21,000		$	28.4
Common Stock
In April 2013, we entered into securities purchase agreements (the “April Agreements”) with several investors, including Crede CG II, LLC (“Crede”), an affiliate of Terren S. Peizer, Chairman and Chief Executive Officer of the Company, and Shamus, LLC (“Shamus”), an affiliate of the Company, relating to the sale and issuance of an aggregate of 2,192,857 shares of common stock and warrants (the “April Warrants”) to purchase an aggregate of 2,192,857 shares of common stock at an exercise price of $0.70 per share for aggregate gross proceeds of approximately $1.5 million (the “April Offering”). The April Agreements provide that in the event that we effectuate a reverse stock split of our common stock within 24 months of the closing date of the April Offering (the “Reverse Split”) and the volume weighted average price (“VWAP”) of the common stock during the 20 trading days following the effective date of the Reverse Split (the “VWAP Period”) declines from the closing price on the trading date immediately prior to the effective date of the Reverse Split, that we shall issue additional shares of common stock (the “Adjustment Shares”). We effectuated a reverse split on May 6, 2013, and no Adjustment Shares were issued.
There were no shares of common stock issued in exchange for various services or settlement of claims during the three and nine months ended September 30, 2013, compared with 0 and 312,500 valued at $0 and $72,000, for the same period in 2012, respectively. The costs associated with shares issued for services are being amortized to share-based compensation expense on a straight-line basis over the related service periods. For the three and nine months ended September 30, 2013, share-based compensation expense relating to all common stock issued for consulting services was $1,000 and $23,000 compared with $61,000 and $81,000, for the same periods in 2012, respectively.
Income Taxes
We have recorded a full valuation allowance against our otherwise recognizable deferred tax assets as of September 30, 2013.  As such, we have not recorded a provision for income tax for the period ended September 30, 2013.  We utilize the liability method of accounting for income taxes as set forth in ASC 740. Under the liability method, deferred taxes are determined based on the temporary differences between the financial statement and tax basis of assets and liabilities using tax rates expected to be in effect during the years in which the basis differences reverse. A valuation allowance is recorded when it is more likely than not that some of the deferred tax assets will not be realized. In determining the need for valuation allowances we consider projected future taxable income and the availability of tax planning strategies.  After evaluating all positive and negative historical and perspective evidences, management has determined it is more likely than not that our deferred tax assets will not be realized.
We assess our income tax positions and record tax benefits for all years subject to examination based upon our evaluation of the facts, circumstances and information available at the reporting date. For those tax positions where there is a greater than 50% likelihood that a tax benefit will be sustained, we have recorded the largest amount of tax benefit that may potentially be realized upon ultimate settlement with a taxing authority that has full knowledge of all relevant information. For those income tax positions where there is less than 50% likelihood that a tax benefit will be sustained, no tax benefit has been recognized in the financial statements.  Based on management's assessment of the facts, circumstances and information available, management has determined that all of the tax benefits for the period ended September 30, 2013 should be realized.
Fair Value Measurements
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. Assets and liabilities recorded at fair value in the condensed consolidated balance sheets are categorized based upon the level of judgment associated with the inputs used to measure fair value. The fair value hierarchy distinguishes between (1) market participant assumptions developed based on market data obtained from independent sources (observable inputs) and (2) an entity’s own assumptions about market participant assumptions developed based on the best information available in the circumstances (unobservable inputs). The fair value hierarchy consists of three broad levels, which gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (Level I) and the lowest priority to unobservable inputs (Level III). The three levels of the fair value hierarchy are described below:
Level Input:		Input Definition:
Level I		Inputs are unadjusted, quoted prices for identical assets or liabilities in active markets at the measurement date.
Level II		Inputs, other than quoted prices included in Level I, that are observable for the asset or liability through corroboration with market data at the measurement date.
Level III		Unobservable inputs that reflect management’s best estimate of what market participants would use in pricing the asset or liability at the measurement date.
The following table summarizes fair value measurements by level at September 30, 2013 for assets and liabilities measured at fair value:
			2013
(in thousands)
		Level I			Level II			Level III			Total
Certificates of deposit		$	175		$	-		$	-		$	175
Total assets		$	175		$	-		$	-		$	175
Warrant liabilities		$	-		$	-		$	14,196		$	14,196
Total liabilities		$	-		$	-		$	14,196		$	14,196
Financial instruments classified as Level III in the fair value hierarchy as of September 30, 2013, represent our liabilities measured at market value on a recurring basis which include warrant liabilities resulting from recent debt and equity financings. In accordance with current accounting rules, the warrant liabilities are being marked-to-market each quarter-end until they are completely settled. The warrants are valued using the Black-Scholes option-pricing model, using both observable and unobservable inputs and assumptions consistent with those used in our estimate of fair value of employee stock options. See Warrant Liabilities below.
The following table summarizes our fair value measurements using significant Level III inputs, and changes therein, for the three and nine months ended September 30, 2013:
(Dollars in thousands)		Level III
		Warrant
		Liabilities
Balance as of December 31, 2012		$	14,658
Reclassification to equity			(129	)
Change in fair value			(4,360	)
Net realized gains (losses)			-
Balance as of March 31, 2013		$	10,169
Reclassification to equity			(27	)
Change in fair value			3,985
Net purchases (sales)			2,301
Net realized gains (losses)			-
Balance as of June 30, 2013		$	16,428
Reclassification to equity			-
Change in fair value			(2,232	)
Net purchases (sales)			-
Net unrealized gains (losses)			-
Balance as of September 30, 2013		$	14,196
Intangible Assets
As of September 30, 2013, the gross and net carrying amounts of intangible assets that are subject to amortization are as follows:
(In thousands)		Gross			Accumulated			Net			Amortization
		Carrying			Amortization			Balance			Period
		Amount									(in years)
Intellectual property		$	1,940		$	(995	)	$	945			8
During the three and nine months ended September 30, 2013, we did not acquire any new intangible assets and at September 30, 2013, all of our intangible assets consisted of intellectual property, which is not subject to renewal or extension. We had no intangible impairment for the three and nine months ended September 30, 2013. We had no intangible impairment for the three months ended September 30, 2012 and $189,000 for the nine months ended September 30, 2012.
Additionally, it is important to note that our overall business model, business operations and future prospects of our business have not changed materially since we performed the reviews and analysis noted above, with the exception of the timing, and annualized amounts of expected revenue.
Estimated remaining amortization expense for intangible assets for the current year and each of the next five years ending December 31 is as follows:
(In thousands)
Year		Amount
2013 (3 months)		$	33
2014		$	132
2015		$	132
2016		$	132
2017		$	132
Property and Equipment
Property and equipment are stated at cost, less accumulated depreciation. Additions and improvements to property and equipment are capitalized at cost. Expenditures for maintenance and repairs are charged to expense as incurred. Depreciation is computed using the straight-line method over the estimated useful lives of the related assets, which range from two to seven years for furniture and equipment. Leasehold improvements are amortized over the lesser of the estimated useful lives of the assets or the related lease term, which is typically five to seven years.
Variable Interest Entities
Generally, an entity is defined as a Variable Interest Entity (“VIE”) under current accounting rules if it has (a) equity that is insufficient to permit the entity to finance its activities without additional subordinated financial support from other parties, or (b) equity investors that cannot make significant decisions about the entity’s operations, or that do not absorb the expected losses or receive the expected returns of the entity. When determining whether an entity that is a business qualifies as a VIE, we also consider whether (i) we participated significantly in the design of the entity, (ii) we provided more than half of the total financial support to the entity, and (iii) substantially all of the activities of the VIE either involve us or are conducted on our behalf. A VIE is consolidated by its primary beneficiary, which is the party that absorbs or receives a majority of the entity’s expected losses or expected residual returns.
As discussed under the heading Management Services Agreement below, we have an MSA with a managed medical corporation. Under this MSA, the equity owner of the affiliated medical group has only a nominal equity investment at risk, and we absorb or receive a majority of the entity’s expected losses or expected residual returns. We participate significantly in the design of this MSA. We also agree to provide working capital loans to allow for the medical group to pay for its obligations. Substantially all of the activities of this managed medical corporation either involve us or are conducted for our benefit, as evidenced by the fact that under the MSA, we agree to provide and perform all non-medical management and administrative services for the medical group. Payment of our management fee is subordinate to payments of the obligations of the medical group, and repayment of the working capital loans is not guaranteed by the equity owner of the affiliated medical group or other third party. Creditors of the managed medical corporation do not have recourse to our general credit.
Based on the design and provisions of this MSA and the working capital loans provided to the medical group, we have determined that the managed medical corporation is a VIE, and that we are the primary beneficiary as defined in the current accounting rules. Accordingly, we are required to consolidate the revenues and expenses of the managed medical corporation.
Management Services Agreement
We have an executed MSA with a medical professional corporation and related treatment center. Under the MSA, we license to the treatment center the right to use our proprietary treatment programs and related trademarks and provide all required day-to-day business management services, including, but not limited to:
	●	general administrative support services;
	●	information systems;
	●	recordkeeping;
	●	scheduling;
	●	billing and collection;
	●	marketing and local business development; and
	●	obtaining and maintaining all federal, state and local licenses, certifications and regulatory permits.
The treatment center retains the sole right and obligation to provide medical services to its patients and to make other medically related decisions, such as the choice of medical professionals to hire or medical equipment to acquire and the ordering of drugs.
In addition, we provide office space to the treatment center on a non-exclusive basis, and we are responsible for all costs associated with rent and utilities. The treatment center pays us a monthly fee equal to the aggregate amount of (a) our costs of providing management services (including reasonable overhead allocable to the delivery of our services and including salaries, rent, equipment, and tenant improvements incurred for the benefit of the medical group, provided that any capitalized costs will be amortized over a five-year period), (b) 10%-15% of the foregoing costs, and (c) any performance bonus amount, as determined by the treatment center at its sole discretion. The treatment center’s payment of our fee is subordinate to payment of the treatment center's obligations, including physician fees and medical group employee compensation.
We have also agreed to provide a credit facility to the treatment center to be available as a working capital loan, with interest at the Prime Rate plus 2%.  Funds are advanced pursuant to the terms of the MSA described above. The notes are due on demand or upon termination of the MSA. At September 30, 2013, there was one outstanding credit facility under which $12.9 million was outstanding. Our maximum exposure to loss could exceed this amount, and cannot be quantified as it is contingent upon the amount of losses incurred by the treatment center that we are required to fund under the credit facility.
Under the MSA, the equity owner of the affiliated treatment center has only a nominal equity investment at risk, and we absorb or receive a majority of the entity’s expected losses or expected residual returns. We also agree to provide working capital loans to allow for the treatment center to pay for its obligations. Substantially all of the activities of the managed medical corporation either involves us or are conducted for our benefit, as evidenced by the facts that (i) the operations of the managed medical corporation is conducted primarily using our licensed protocols and (ii) under the MSA, we agree to provide and perform all non-medical management and administrative services for the treatment center. Payment of our management fee is subordinate to payments of the obligations of the treatment center, and repayment of the working capital loans is not guaranteed by the equity owner of the affiliated treatment center or other third party. Creditors of the managed medical corporation do not have recourse to our general credit. Based on these facts, we have determined that the managed medical corporation is a VIE and that we are the primary beneficiary as defined in current accounting rules.  Accordingly, we are required to consolidate the assets, liabilities, revenues and expenses of the managed treatment center.
The amounts and classification of assets and liabilities of the VIE included in our condensed consolidated balance sheets as of September 30, 2013 and December 31, 2012, are as follows:
(in thousands)		September 30,			(audited)
		2013			December 31,
					2012
Cash and cash equivalents		$	3		$	11
Receivables, net			25			19
Total assets		$	28			30
Accounts payable			13			15
Note payable to Catasys, Inc.			12,904			12,267
Total liabilities		$	12,917			12,282
Warrant Liabilities
In April 2013, we entered into the April Agreements with several investors relating to the sale and issuance of an aggregate of 2,192,857 shares of common stock and warrants to purchase an aggregate of 2,192,857 shares of common stock at an exercise price of $0.70 per share for aggregate gross proceeds of approximately $1.5 million (the “April Offering”). The April Agreements provide that in the event that we effectuate a Reverse Split and the VWAP period declines from the closing price on the trading date immediately prior to the effective date of the Reverse Split, that we shall issue the Adjustment Shares. We effectuated a reverse split on May 6, 2013, and no Adjustment Shares were issued.
The April Warrants expire in April 2018, and contain anti-dilution provisions. As a result, if we, in the future, issue or grant any rights to purchase any of our common stock, or other securities convertible into our common stock, for a per share price less than the exercise price of the April Warrants, the exercise price of the April Warrants will be reduced to such lower price, subject to customary exceptions. In the event that Adjustment Shares are issued, the number of shares that may be purchased under the April Warrants shall be increased by an amount equal to the Adjustment Shares. In addition, the exercise price is subject to adjustment in the event that the VWAP during the VWAP period is less than the exercise price prior to the VWAP Period.
We have issued warrants to purchase common stock in July 2010, October 2010, November 2010, December 2011, February 2012, April 2012, May 2012, September 2012, December 2012, April 2013, and when we amended and restated the Highbridge senior secured note in July 2008. The warrants are being accounted for as liabilities in accordance with FASB accounting rules, due to provisions in some warrants that protect the holders from declines in our stock price and a requirement to deliver registered shares upon exercise of the warrants, which is considered outside our control.  The warrants are marked-to-market each reporting period, using the Black-Scholes pricing model, until they are completely settled or expire.
For the three and nine months ended September 30, 2013, we recognized a non-operating gain of $2.2 million and $2.6 million, compared with a non-operating gain of $1.8 million and $4.1 million for the same periods in 2012, respectively, related to the revaluation of our warrant liabilities.
Recently Issued or Newly Adopted Accounting Standards
In December 2011, the FASB issued Accounting Standards Update (“ASU”) No. 2011-11, Disclosures about Offsetting Assets and Liabilities (“ASU 2011-11”). The amendments in this update require enhanced disclosures around financial instruments and derivative instruments that are either (1) offset in accordance with either ASC 210-20-45 or ASC 815-10-45 or (2) subject to an enforceable master netting arrangement or similar agreement, irrespective of whether they are offset in accordance with either ASC 210-20-45 or ASC 815-10-45. An entity should provide the disclosures required by those amendments retrospectively for all comparative periods presented. The amendments are effective during interim and annual periods beginning after December 31, 2012. The adoption of ASU No. 2011-11 did not have a material effect on our consolidated financial statements or disclosures.
In February 2013, the FASB issued ASU 2013-02, Reporting of Amounts Reclassified Out of Accumulated Other Comprehensive Income, (“ASU 2013-02”). ASU 2013-02 amends ASC 220, Comprehensive Income (“ASC 220”), and requires entities to present the changes in the components of accumulated other comprehensive income for the current period. Entities are required to present separately the amount of the change that is due to reclassifications, and the amount that is due to current period other comprehensive income. These changes are permitted to be shown either before or net-of-tax and can be displayed either on the face of the financial statements or in the footnotes. ASU 2013-02 was effective for our interim and annual periods beginning January 1, 2013. The adoption of ASU 2013-02 did not have a material effect on our consolidated financial position or results of operations.
In July 2013, the FASB issued ASU 2013-11, Income Taxes (Topic 740): Presentation of an Unrecognized Tax Benefit When a Net Operating Loss Carryforward, a Similar Tax Loss, or a Tax Credit Carryforward Exists, (“ASU 2013-02”), which eliminates diversity in practice for the presentation of an unrecognized tax benefit when a net operating loss carryforward, a similar tax loss or a tax credit carryforward is available to reduce the taxable income or tax payable that would result from disallowance of a tax position. ASU 2013-11 affects only the presentation of such amounts in an entity’s balance sheet and is effective for fiscal years beginning after December 15, 2013 and interim periods within those years. Early adoption is permitted. We are evaluating the impact, if any, of the adoption of ASU 2013-11 on our balance sheet.

Note_3_Segment_Information

Note 3 - Segment Information	9 Months Ended
	Sep. 30, 2013
Segment Reporting [Abstract]	'
Segment Reporting Disclosure [Text Block]	'
	Note 3. Segment Information
	We manage and report our operations through two business segments: healthcare services and license and management services. We evaluate segment performance based on total assets, revenue and income or loss before provision for income taxes. Our assets are included within each discrete reporting segment. In the event that any services are provided to one reporting segment by the other, the transactions are valued at the market price. No such services were provided during the three and nine months ended September 30, 2013 and 2012. Summary financial information for our two reportable segments are as follows:
	(in thousands)	Three Months Ended						Nine Months Ended
		September 30,						September 30,
		2013			2012			2013			2012
	Healthcare services
	Revenues	$	109		$	100		$	315		$	226
	Income (loss) before provision for income taxes	$	924		$	66		$	(2,441	)	$	(4,714	)
	Assets *		1,117			2,068			1,117			2,068
	License and management services
	Revenues	$	21		$	40		$	83		$	136
	Loss before provision for income taxes	$	(242	)	$	(321	)	$	(735	)	$	(1,157	)
	Assets *		970			1,603			970			1,603
	Consolidated continuing operations
	Revenues	$	130		$	140		$	398		$	362
	Income (loss) before provision for income taxes	$	682		$	(255	)	$	(3,176	)	$	(5,871	)
	Assets *		2,087			3,671			2,087			3,671
	* Assets are reported as of September 30.
	Healthcare Services
	Catasys’ integrated substance dependence solutions combine innovative medical and psychosocial treatments with elements of traditional disease management, case management and ongoing member support to help organizations treat and manage substance dependent populations to impact both the medical and behavioral health costs associated with substance dependence and the related co-morbidities.
	We are currently marketing our integrated substance dependence solutions to managed care health plans on a case rate, monthly fee basis, or fee-for-service basis, which involves educating third party payors on the disproportionately high cost of their substance dependent population and demonstrating the potential for improved clinical outcomes and reduced cost associated with using our Catasys programs. We are operating our programs in Kansas, Massachusetts, Louisiana, and Oklahoma. In 2013, we signed two agreements with national health plans to provide services to their members in New Jersey and Kentucky, Ohio, West Virginia, and Indiana, respectively. We have launched enrollment in Kentucky and West Virginia in October 2013 and expect to commence enrollment in the remaining states by the end of the fourth quarter of 2013.
	The following table summarizes the operating results for Healthcare Services for the three and nine months ended September 30, 2013 and 2012:
	(in thousands)	Three Months Ended						Nine Months Ended
		September 30,						September 30,
		2013			2012			2013			2012
	Revenues	$	109		$	100		$	315		$	226
	Operating Expenses
	Cost of healthcare services	$	162		$	135		$	454		$	427
	General and administrative expenses
	Salaries and benefits		916			1,187			2,874			4,275
	Other expenses		330			531			1,246			1,662
	Depreciation and amortization		7			(2	)		18			6
	Total operating expenses	$	1,415		$	1,851		$	4,592		$	6,370
	Loss from operations	$	(1,306	)	$	(1,751	)	$	(4,277	)	$	(6,144	)
	Interest and other income		-			-			-			-
	Interest expense		(1	)		(1	)		(771	)		(2,697	)
	Change in fair value of warrant liabilities		2,231			1,818			2,607			4,127
	Income/(loss) before provision for income taxes	$	924		$	66		$	(2,441	)	$	(4,714	)
	License and Management Services
	Our license and management services segment primarily represents our managed treatment office, which offers a range of addiction treatment and mental health services.
	The following table summarizes the operating results for License and Management Services for the three and nine months September 30, 2013 and 2012:
	(In thousands)	Three months ended						Nine months ended
		September 30,						September 30,
		2013			2012			2013			2012
	Revenues
	U.S. licensees	$	-		$	-		$	6		$	14
	Managed treatment center		21			40			77			122
	Total license and management revenues	$	21		$	40		$	83		$	136
	Operating expenses
	Cost of license and management services	$	59		$	63		$	174		$	191
	General and administrative expenses
	Salaries and benefits		114			150			358			465
	Other expenses		55			77			173			227
	Impairment losses		-			-			-			189
	Depreciation and amortization		35			71			113			221
	Total operating expenses	$	263		$	361		$	818		$	1,293
	Loss from operations	$	(242	)	$	(321	)	$	(735	)	$	(1,157	)
	Interest and other income		-			-			-			-
	Interest expense		-			-			-			-
	Loss before provision for income taxes	$	(242	)	$	(321	)	$	(735	)	$	(1,157	)

Note_4_Receivable_Related_Part

Note 4 - Receivable - Related Party	9 Months Ended
	Sep. 30, 2013
Related Party Transactions [Abstract]	'
Related Party Transactions Disclosure [Text Block]	'
	Note 4. Related Party Disclosure
	In December 2010, we entered into a three-year sublease agreement with Xoftek, Inc., an affiliate of our Chairman and Chief Executive Officer (“CEO”), to sublease approximately one-third of our office space for a three-year term for a monthly rent of approximately $11,000 per month. The related party receivable as of September 30, 2013 and December 31, 2012 was $269,000 and $173,000, respectively. We have received approximately $81,000 in payments through September 30, 2013.
	Crede, an affiliate of our Chairman and CEO, and Shamus, an affiliate of the Company, participated in our April 2013 Offering. They received approximately 2,055,715 shares of common stock and warrants to purchase an aggregate 2,055,715 shares of common stock at a price of $0.70 per share, for gross proceeds of approximately $1.4 million.

Note_5_Restatement_of_Financia

Note 5 - Restatement of Financial Statements	9 Months Ended
	Sep. 30, 2013
Accounting Changes and Error Corrections [Abstract]	'
Accounting Changes and Error Corrections [Text Block]	'
	Note 5. Restatement of Financial Statements
	The financial statements have been retroactively restated to reflect the 10-for-1 reverse stock split that occurred on May 6, 2013.

Note_6_Subsequent_Events

Note 6 - Subsequent Events	9 Months Ended
	Sep. 30, 2013
Subsequent Events [Abstract]	'
Subsequent Events [Text Block]	'
	Note 6. Subsequent Events
	In October 2013, we entered into securities purchase agreements with several investors, including Crede CG III, Ltd. (“Crede III”), an affiliate of Terren S. Peizer, Chairman and Chief Executive Officer of the Company, and Shamus, an affiliate of the Company, relating to the sale and issuance of an aggregate of 4,550,002 shares of common stock, and warrants (the “October Warrants”) to purchase an aggregate of 4,550,002 shares of Common Stock at an exercise price of $0.58 per share for aggregate gross proceeds of approximately $2.6 million. The October Warrants expire in October 2018, and contain anti-dilution provisions. As a result, if we, in the future, issue or grant any rights to purchase any of our Common Stock, or other security convertible into our Common Stock, for a per share price less than the exercise price of the October Warrants, the exercise price of the October Warrants will be reduced to such lower price, subject to customary exceptions.
	Among other things, the Agreements provide that in the event that the Company effectuates a reverse stock split of its Common Stock within 24 months of the closing date of the Offering (the “Reverse Split”) and the volume weighted average price (“VWAP”) of the Common Stock during the 20 trading days following the effective date of the Reverse Split (the “VWAP Period”) declines from the closing price on the trading date immediately prior to the effective date of the Reverse Split, that the Company issue additional shares of Common Stock (the “Adjustment Shares"). The number of Adjustment Shares shall be calculated as the lesser of (a) 20% of the number of shares of Common Stock originally purchased by such investor and still held by the investor as of the last day of the VWAP Period, and (b) the number of shares originally purchased by such investor and still held by such investor as of the last day of the VWAP Period multiplied by the percentage decline in the VWAP during the VWAP Period. All prices and number of shares of Common Stock shall be adjusted for the Reverse Split and any other stock splits or stock dividends.

Accounting_Policies_by_Policy_

Accounting Policies, by Policy (Policies)

9 Months Ended

Sep. 30, 2013

Accounting Policies [Abstract]

'

Revenue Recognition, Policy [Policy Text Block]

'

Revenue Recognition

Healthcare Services

Our Catasys contracts are generally designed to provide revenues to us on a monthly basis based on enrolled members. To the extent our contracts may include a minimum performance guarantee, we reserve a portion of the monthly fees that may be at risk until the performance measurement period is completed. To the extent we receive case rates that are not subject to the performance guarantees, we recognize the case rate ratably over twelve months.

License and Management Services

Our license and management services revenues are primarily derived from our managed treatment center, which we include in our condensed consolidated financial statements, and which are derived from charging fees directly to patients for treatment and are recorded when services are provided. Revenues from patients treated with our proprietary treatment program are recorded based on the number of days of treatment completed during the period as a percentage of the total number treatment days for the treatment program. Revenues for other services are recognized when services are rendered.

Cost of Sales, Policy [Policy Text Block]

'

Services

Our Catasys contracts are generally designed to provide revenues to us on a monthly basis based on enrolled members. To the extent our contracts may include a minimum performance guarantee, we reserve a portion of the monthly fees that may be at risk until the performance measurement period is completed. To the extent we receive case rates that are not subject to the performance guarantees, we recognize the case rate ratably over twelve months.

License and Management Services

Our license and management services revenues are primarily derived from our managed treatment center, which we include in our condensed consolidated financial statements, and which are derived from charging fees directly to patients for treatment and are recorded when services are provided. Revenues from patients treated with our proprietary treatment program are recorded based on the number of days of treatment completed during the period as a percentage of the total number treatment days for the treatment program. Revenues for other services are recognized when services are rendered.

Cost of Services

Healthcare Services

Cost of healthcare services consists primarily of salaries related to our care coaches, healthcare provider claims payments, and fees charged by our third party administrators for processing these claims. Healthcare services cost of services is recognized in the period in which an eligible member receives services. We contract with doctors and licensed behavioral healthcare professionals, on a fee-for-services basis. We determine that a member has received services when we receive a claim or in the absence of a claim, by utilizing member data recorded in the eOnTrakTM database within the contracted timeframe, with all required billing elements correctly completed by the service provider.

License and Management Services

Cost of license and management services primarily represents direct costs associated with providing care to patients that are incurred in connection with our managed treatment center. Costs are recognized in the periods in which medical treatment is provided. Such costs include, but are not limited to, direct labor costs, medical supplies and medications.

Cash and Cash Equivalents, Policy [Policy Text Block]

'

Cash Equivalents and Concentration of Credit Risk

We consider all highly liquid investments with an original maturity of three months or less to be cash equivalents. Financial instruments that potentially subject us to a concentration of credit risk consist of cash and cash equivalents, and accounts receivable. Cash is deposited with what we believe are highly credited, quality financial institutions. The deposited cash may exceed Federal Deposit Insurance Corporation (“FDIC”) insured limits.

For the nine months ended September 30, 2013, one customer accounted for approximately 64% of revenues and three customers accounted for approximately 91% of accounts receivable.

Earnings Per Share, Policy [Policy Text Block]

'

Basic and Diluted Income (Loss) per Share

Basic income (loss) per share is computed by dividing the net income (loss) to common stockholders for the period by the weighted average number of common shares outstanding during the period. Diluted income (loss) per share is computed by dividing the net income (loss) for the period by the weighted average number of common and dilutive common equivalent shares outstanding during the period.

Common equivalent shares, consisting of 5,077,669 incremental common shares for the three months ended September 30, 2013, issuable upon the exercise of stock options and warrants have been included in the diluted earnings per share calculation. These shares have not been included for the three and nine month ended September 30, 2012 or the nine months ended September 2013 because their effect is anti-dilutive.

Share-based Compensation, Option and Incentive Plans Policy [Policy Text Block]

'

Share-Based Compensation

Our 2010 Stock Incentive Plan, as amended, (the “Plan”), provides for the issuance of up to 1,825,000 shares of our common stock. Incentive stock options (ISOs) under Section 422A of the Internal Revenue Code and non-qualified options (NSOs) are authorized under the Plan. We have granted stock options to executive officers, employees, members of our board of directors, and certain outside consultants. The terms and conditions upon which options become exercisable vary among grants, but option rights expire no later than ten years from the date of grant and employee and board of director awards generally vest over three to five years. At September 30, 2013, we had 482,177 vested and unvested shares outstanding and 1,285,586 shares available for future awards.

Share-based compensation expense attributable to continuing operations amounted to $48,000 and $165,000 for the three and nine months ended September 30, 2013, compared with $371,000 and $2.0 million, respectively, for the same periods in 2012.

Stock Options – Employees and Directors

We measure and recognize compensation expense for all share-based payment awards made to employees and directors based on estimated fair values on the date of grant. We estimate the fair value of share-based payment awards using the Black Scholes option-pricing model. The value of the portion of the award that is ultimately expected to vest is recognized as expense over the requisite service periods in the condensed consolidated statements of operations subsequent to January 1, 2006. We account for share-based awards to employees and directors using the intrinsic value method under previous FASB rules, allowable prior to January 1, 2006. Under the intrinsic value method, no share-based compensation expense had been recognized in our consolidated statements of operations for awards to employees and directors because the exercise price of our stock options equaled the fair market value of the underlying stock at the date of grant.

Share-based compensation expense recognized for employees and directors for the three and nine months ended September 30, 2013, was $47,000 and $141,000, compared with $273,000 and $1.6 million for the same periods in 2012, respectively.

Share-based compensation expense recognized in our condensed consolidated statements of operations for the three and nine months ended September 30, 2013 and 2012, includes compensation expense for share-based payment awards granted prior to, but not yet vested, as of January 1, 2006, based on the grant date fair value estimated in accordance with the pro-forma provisions of Statement of Financial Accounting Standards (“SFAS”) 123, and for the share-based payment awards granted subsequent to January 1, 2006 based on the grant date fair value estimated in accordance with the provisions of the Accounting Standards Codification (“ASC”) 718. For share-based awards issued to employees and directors, share-based compensation is attributed to expense using the straight-line single option method. Share-based compensation expense recognized in our condensed consolidated statements of operations for the three and nine months ended September 30, 2013 and 2012, is based on awards ultimately expected to vest, reduced for estimated forfeitures. Accounting rules for stock options require forfeitures to be estimated at the time of grant and revised, if necessary, in subsequent periods if actual forfeitures differ from those estimates.

During the three and nine months ended September 30, 2013, there were no options granted to employees, compared with 0 and 50,000 options granted to employees at the weighted average per share exercise price of $0.00 and $0.44, for the same periods in 2012, respectively. All of the options were issued at the fair market value of our common stock on the date of grant. Employee and director stock option activity for the three and nine months ended September 30, 2013 are as follows:

Shares

Weighted Avg.

Exercise Price

Balance December 31, 2012

486,000

$

26.46

Granted

-

$

-

Canceled

(20,000

)

$

33.72

Balance March 31, 2013

466,000

$

22.73

Granted

-

$

-

Canceled

(1,000

)

$

39.37

Balance June 30, 2013

465,000

$

22.69

Granted

-

$

-

Canceled

(4,000

)

$

379.44

Balance September 30, 2013

461,000

$

19.59

The expected volatility assumptions have been based on the historical and expected volatility of our stock, measured over a period generally commensurate with the expected term. The weighted average expected option term for the three and nine months ended September 30, 2013 and 2012, reflects the application of the simplified method prescribed in SEC Staff Accounting Bulletin (“SAB”) No. 107 (and as amended by SAB 110), which defines the life as the average of the contractual term of the options and the weighted average vesting period for all option tranches.

As of September 30, 2013, there was $92,000 of total unrecognized compensation costs related to non-vested share-based compensation arrangements granted under the Plan. That cost is expected to be recognized over a weighted-average period of approximately 0.94 years.

Stock Options and Warrants – Non-employees

We account for the issuance of options and warrants for services from non-employees for services by estimating the fair value of warrants issued using the Black-Scholes pricing model. This model’s calculations include the option or warrant exercise price, the market price of shares on grant date, the weighted average risk-free interest rate, the expected life of the option or warrant, and the expected volatility of our stock and the expected dividends.

For options and warrants issued as compensation to non-employees for services that are fully vested and non-forfeitable at the time of issuance, the estimated value is recorded in equity and expensed when the services are performed and benefit is received. For unvested shares, the change in fair value during the period is recognized in expense using the graded vesting method.

There were no options issued to non-employees for the three and nine months ended September 30, 2013 and 2012, respectively. Share-based compensation expense relating to stock options and warrants recognized for non-employees amounted to $1,000 and $23,000 for the three and nine months ended September 30, 2013, and $61,000 and $81,000 for the three and nine months ended September 30, 2012, respectively.

Non-employee stock option activity for the three and nine months ended September 30, 2013, are as follows:

Shares

Weighted Avg.

Stockholders' Equity, Policy [Policy Text Block]

'

Common Stock

In April 2013, we entered into securities purchase agreements (the “April Agreements”) with several investors, including Crede CG II, LLC (“Crede”), an affiliate of Terren S. Peizer, Chairman and Chief Executive Officer of the Company, and Shamus, LLC (“Shamus”), an affiliate of the Company, relating to the sale and issuance of an aggregate of 2,192,857 shares of common stock and warrants (the “April Warrants”) to purchase an aggregate of 2,192,857 shares of common stock at an exercise price of $0.70 per share for aggregate gross proceeds of approximately $1.5 million (the “April Offering”). The April Agreements provide that in the event that we effectuate a reverse stock split of our common stock within 24 months of the closing date of the April Offering (the “Reverse Split”) and the volume weighted average price (“VWAP”) of the common stock during the 20 trading days following the effective date of the Reverse Split (the “VWAP Period”) declines from the closing price on the trading date immediately prior to the effective date of the Reverse Split, that we shall issue additional shares of common stock (the “Adjustment Shares”). We effectuated a reverse split on May 6, 2013, and no Adjustment Shares were issued.

There were no shares of common stock issued in exchange for various services or settlement of claims during the three and nine months ended September 30, 2013, compared with 0 and 312,500 valued at $0 and $72,000, for the same period in 2012, respectively. The costs associated with shares issued for services are being amortized to share-based compensation expense on a straight-line basis over the related service periods. For the three and nine months ended September 30, 2013, share-based compensation expense relating to all common stock issued for consulting services was $1,000 and $23,000 compared with $61,000 and $81,000, for the same periods in 2012, respectively.

Income Taxes

We have recorded a full valuation allowance against our otherwise recognizable deferred tax assets as of September 30, 2013.  As such, we have not recorded a provision for income tax for the period ended September 30, 2013.  We utilize the liability method of accounting for income taxes as set forth in ASC 740. Under the liability method, deferred taxes are determined based on the temporary differences between the financial statement and tax basis of assets and liabilities using tax rates expected to be in effect during the years in which the basis differences reverse. A valuation allowance is recorded when it is more likely than not that some of the deferred tax assets will not be realized. In determining the need for valuation allowances we consider projected future taxable income and the availability of tax planning strategies.  After evaluating all positive and negative historical and perspective evidences, management has determined it is more likely than not that our deferred tax assets will not be realized.

We assess our income tax positions and record tax benefits for all years subject to examination based upon our evaluation of the facts, circumstances and information available at the reporting date. For those tax positions where there is a greater than 50% likelihood that a tax benefit will be sustained, we have recorded the largest amount of tax benefit that may potentially be realized upon ultimate settlement with a taxing authority that has full knowledge of all relevant information. For those income tax positions where there is less than 50% likelihood that a tax benefit will be sustained, no tax benefit has been recognized in the financial statements.  Based on management's assessment of the facts, circumstances and information available, management has determined that all of the tax benefits for the period ended September 30, 2013 should be realized.

Fair Value Measurements

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. Assets and liabilities recorded at fair value in the condensed consolidated balance sheets are categorized based upon the level of judgment associated with the inputs used to measure fair value. The fair value hierarchy distinguishes between (1) market participant assumptions developed based on market data obtained from independent sources (observable inputs) and (2) an entity’s own assumptions about market participant assumptions developed based on the best information available in the circumstances (unobservable inputs). The fair value hierarchy consists of three broad levels, which gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (Level I) and the lowest priority to unobservable inputs (Level III). The three levels of the fair value hierarchy are described below:

Level Input:

Input Definition:

Level I

Inputs are unadjusted, quoted prices for identical assets or liabilities in active markets at the measurement date.

Level II

Inputs, other than quoted prices included in Level I, that are observable for the asset or liability through corroboration with market data at the measurement date.

Level III

Unobservable inputs that reflect management’s best estimate of what market participants would use in pricing the asset or liability at the measurement date.

The following table summarizes fair value measurements by level at September 30, 2013 for assets and liabilities measured at fair value:

2013

(in thousands)

Level I

Level II

Level III

Total

Certificates of deposit

$

175

$

-

$

-

$

175

Total assets

$

175

$

-

$

-

$

175

Warrant liabilities

$

-

$

-

$

14,196

$

14,196

Total liabilities

$

-

$

-

$

14,196

$

14,196

Financial instruments classified as Level III in the fair value hierarchy as of September 30, 2013, represent our liabilities measured at market value on a recurring basis which include warrant liabilities resulting from recent debt and equity financings. In accordance with current accounting rules, the warrant liabilities are being marked-to-market each quarter-end until they are completely settled. The warrants are valued using the Black-Scholes option-pricing model, using both observable and unobservable inputs and assumptions consistent with those used in our estimate of fair value of employee stock options. See Warrant Liabilities below.

The following table summarizes our fair value measurements using significant Level III inputs, and changes therein, for the three and nine months ended September 30, 2013:

(Dollars in thousands)

Level III

Warrant

Liabilities

Balance as of December 31, 2012

$

14,658

Reclassification to equity

(129

)

Change in fair value

(4,360

)

Net realized gains (losses)

-

Balance as of March 31, 2013

$

10,169

Reclassification to equity

(27

)

Change in fair value

3,985

Net purchases (sales)

2,301

Net realized gains (losses)

-

Balance as of June 30, 2013

$

16,428

Reclassification to equity

-

Change in fair value

(2,232

)

Net purchases (sales)

-

Net unrealized gains (losses)

-

Balance as of September 30, 2013

$

14,196

Intangible Assets

As of September 30, 2013, the gross and net carrying amounts of intangible assets that are subject to amortization are as follows:

(In thousands)

Gross

Accumulated

Net

Amortization

Carrying

Amortization

Balance

Period

Amount

(in years)

Intellectual property

$

1,940

$

(995

)

$

945

8

During the three and nine months ended September 30, 2013, we did not acquire any new intangible assets and at September 30, 2013, all of our intangible assets consisted of intellectual property, which is not subject to renewal or extension. We had no intangible impairment for the three and nine months ended September 30, 2013. We had no intangible impairment for the three months ended September 30, 2012 and $189,000 for the nine months ended September 30, 2012.

Additionally, it is important to note that our overall business model, business operations and future prospects of our business have not changed materially since we performed the reviews and analysis noted above, with the exception of the timing, and annualized amounts of expected revenue.

Estimated remaining amortization expense for intangible assets for the current year and each of the next five years ending December 31 is as follows:

(In thousands)

Year

Amount

2013 (3 months)

$

33

2014

$

132

2015

$

132

2016

$

132

2017

$

132

Property and Equipment

Property and equipment are stated at cost, less accumulated depreciation. Additions and improvements to property and equipment are capitalized at cost. Expenditures for maintenance and repairs are charged to expense as incurred. Depreciation is computed using the straight-line method over the estimated useful lives of the related assets, which range from two to seven years for furniture and equipment. Leasehold improvements are amortized over the lesser of the estimated useful lives of the assets or the related lease term, which is typically five to seven years.

Variable Interest Entities

Generally, an entity is defined as a Variable Interest Entity (“VIE”) under current accounting rules if it has (a) equity that is insufficient to permit the entity to finance its activities without additional subordinated financial support from other parties, or (b) equity investors that cannot make significant decisions about the entity’s operations, or that do not absorb the expected losses or receive the expected returns of the entity. When determining whether an entity that is a business qualifies as a VIE, we also consider whether (i) we participated significantly in the design of the entity, (ii) we provided more than half of the total financial support to the entity, and (iii) substantially all of the activities of the VIE either involve us or are conducted on our behalf. A VIE is consolidated by its primary beneficiary, which is the party that absorbs or receives a majority of the entity’s expected losses or expected residual returns.

As discussed under the heading Management Services Agreement below, we have an MSA with a managed medical corporation. Under this MSA, the equity owner of the affiliated medical group has only a nominal equity investment at risk, and we absorb or receive a majority of the entity’s expected losses or expected residual returns. We participate significantly in the design of this MSA. We also agree to provide working capital loans to allow for the medical group to pay for its obligations. Substantially all of the activities of this managed medical corporation either involve us or are conducted for our benefit, as evidenced by the fact that under the MSA, we agree to provide and perform all non-medical management and administrative services for the medical group. Payment of our management fee is subordinate to payments of the obligations of the medical group, and repayment of the working capital loans is not guaranteed by the equity owner of the affiliated medical group or other third party. Creditors of the managed medical corporation do not have recourse to our general credit.

Based on the design and provisions of this MSA and the working capital loans provided to the medical group, we have determined that the managed medical corporation is a VIE, and that we are the primary beneficiary as defined in the current accounting rules. Accordingly, we are required to consolidate the revenues and expenses of the managed medical corporation.

Management Services Agreement

We have an executed MSA with a medical professional corporation and related treatment center. Under the MSA, we license to the treatment center the right to use our proprietary treatment programs and related trademarks and provide all required day-to-day business management services, including, but not limited to:

●

general administrative support services;

●

information systems;

●

recordkeeping;

●

scheduling;

●

billing and collection;

●

marketing and local business development; and

●

obtaining and maintaining all federal, state and local licenses, certifications and regulatory permits.

The treatment center retains the sole right and obligation to provide medical services to its patients and to make other medically related decisions, such as the choice of medical professionals to hire or medical equipment to acquire and the ordering of drugs.

In addition, we provide office space to the treatment center on a non-exclusive basis, and we are responsible for all costs associated with rent and utilities. The treatment center pays us a monthly fee equal to the aggregate amount of (a) our costs of providing management services (including reasonable overhead allocable to the delivery of our services and including salaries, rent, equipment, and tenant improvements incurred for the benefit of the medical group, provided that any capitalized costs will be amortized over a five-year period), (b) 10%-15% of the foregoing costs, and (c) any performance bonus amount, as determined by the treatment center at its sole discretion. The treatment center’s payment of our fee is subordinate to payment of the treatment center's obligations, including physician fees and medical group employee compensation.

We have also agreed to provide a credit facility to the treatment center to be available as a working capital loan, with interest at the Prime Rate plus 2%.  Funds are advanced pursuant to the terms of the MSA described above. The notes are due on demand or upon termination of the MSA. At September 30, 2013, there was one outstanding credit facility under which $12.9 million was outstanding. Our maximum exposure to loss could exceed this amount, and cannot be quantified as it is contingent upon the amount of losses incurred by the treatment center that we are required to fund under the credit facility.

Under the MSA, the equity owner of the affiliated treatment center has only a nominal equity investment at risk, and we absorb or receive a majority of the entity’s expected losses or expected residual returns. We also agree to provide working capital loans to allow for the treatment center to pay for its obligations. Substantially all of the activities of the managed medical corporation either involves us or are conducted for our benefit, as evidenced by the facts that (i) the operations of the managed medical corporation is conducted primarily using our licensed protocols and (ii) under the MSA, we agree to provide and perform all non-medical management and administrative services for the treatment center. Payment of our management fee is subordinate to payments of the obligations of the treatment center, and repayment of the working capital loans is not guaranteed by the equity owner of the affiliated treatment center or other third party. Creditors of the managed medical corporation do not have recourse to our general credit. Based on these facts, we have determined that the managed medical corporation is a VIE and that we are the primary beneficiary as defined in current accounting rules.  Accordingly, we are required to consolidate the assets, liabilities, revenues and expenses of the managed treatment center.

The amounts and classification of assets and liabilities of the VIE included in our condensed consolidated balance sheets as of September 30, 2013 and December 31, 2012, are as follows:

(in thousands)

September 30,

(audited)

2013

December 31,

2012

Cash and cash equivalents

$

3

$

11

Receivables, net

25

19

Total assets

$

28

30

Accounts payable

13

15

Note payable to Catasys, Inc.

12,904

12,267

Total liabilities

$

12,917

12,282

Warrant Liabilities

In April 2013, we entered into the April Agreements with several investors relating to the sale and issuance of an aggregate of 2,192,857 shares of common stock and warrants to purchase an aggregate of 2,192,857 shares of common stock at an exercise price of $0.70 per share for aggregate gross proceeds of approximately $1.5 million (the “April Offering”). The April Agreements provide that in the event that we effectuate a Reverse Split and the VWAP period declines from the closing price on the trading date immediately prior to the effective date of the Reverse Split, that we shall issue the Adjustment Shares. We effectuated a reverse split on May 6, 2013, and no Adjustment Shares were issued.

Income Tax, Policy [Policy Text Block]

'

Income Taxes

We have recorded a full valuation allowance against our otherwise recognizable deferred tax assets as of September 30, 2013.  As such, we have not recorded a provision for income tax for the period ended September 30, 2013.  We utilize the liability method of accounting for income taxes as set forth in ASC 740. Under the liability method, deferred taxes are determined based on the temporary differences between the financial statement and tax basis of assets and liabilities using tax rates expected to be in effect during the years in which the basis differences reverse. A valuation allowance is recorded when it is more likely than not that some of the deferred tax assets will not be realized. In determining the need for valuation allowances we consider projected future taxable income and the availability of tax planning strategies.  After evaluating all positive and negative historical and perspective evidences, management has determined it is more likely than not that our deferred tax assets will not be realized.

We assess our income tax positions and record tax benefits for all years subject to examination based upon our evaluation of the facts, circumstances and information available at the reporting date. For those tax positions where there is a greater than 50% likelihood that a tax benefit will be sustained, we have recorded the largest amount of tax benefit that may potentially be realized upon ultimate settlement with a taxing authority that has full knowledge of all relevant information. For those income tax positions where there is less than 50% likelihood that a tax benefit will be sustained, no tax benefit has been recognized in the financial statements.  Based on management's assessment of the facts, circumstances and information available, management has determined that all of the tax benefits for the period ended September 30, 2013 should be realized.

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

'

Fair Value Measurements

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. Assets and liabilities recorded at fair value in the condensed consolidated balance sheets are categorized based upon the level of judgment associated with the inputs used to measure fair value. The fair value hierarchy distinguishes between (1) market participant assumptions developed based on market data obtained from independent sources (observable inputs) and (2) an entity’s own assumptions about market participant assumptions developed based on the best information available in the circumstances (unobservable inputs). The fair value hierarchy consists of three broad levels, which gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (Level I) and the lowest priority to unobservable inputs (Level III). The three levels of the fair value hierarchy are described below:

Level Input:

Input Definition:

Level I

Inputs are unadjusted, quoted prices for identical assets or liabilities in active markets at the measurement date.

Level II

Inputs, other than quoted prices included in Level I, that are observable for the asset or liability through corroboration with market data at the measurement date.

Level III

Unobservable inputs that reflect management’s best estimate of what market participants would use in pricing the asset or liability at the measurement date.

The following table summarizes fair value measurements by level at September 30, 2013 for assets and liabilities measured at fair value:

2013

(in thousands)

Level I

Level II

Level III

Total

Certificates of deposit

$

175

$

-

$

-

$

175

Total assets

$

175

$

-

$

-

$

175

Warrant liabilities

$

-

$

-

$

14,196

$

14,196

Total liabilities

$

-

$

-

$

14,196

$

14,196

Financial instruments classified as Level III in the fair value hierarchy as of September 30, 2013, represent our liabilities measured at market value on a recurring basis which include warrant liabilities resulting from recent debt and equity financings. In accordance with current accounting rules, the warrant liabilities are being marked-to-market each quarter-end until they are completely settled. The warrants are valued using the Black-Scholes option-pricing model, using both observable and unobservable inputs and assumptions consistent with those used in our estimate of fair value of employee stock options. See Warrant Liabilities below.

Goodwill and Intangible Assets, Policy [Policy Text Block]

'Intangible Assets

As of September 30, 2013, the gross and net carrying amounts of intangible assets that are subject to amortization are as follows:

(In thousands)

Gross

Accumulated

Net

Amortization

Carrying

Amortization

Balance

Period

Amount

(in years)

Intellectual property

$

1,940

$

(995

)

$

945

8

During the three and nine months ended September 30, 2013, we did not acquire any new intangible assets and at September 30, 2013, all of our intangible assets consisted of intellectual property, which is not subject to renewal or extension. We had no intangible impairment for the three and nine months ended September 30, 2013. We had no intangible impairment for the three months ended September 30, 2012 and $189,000 for the nine months ended September 30, 2012.

Additionally, it is important to note that our overall business model, business operations and future prospects of our business have not changed materially since we performed the reviews and analysis noted above, with the exception of the timing, and annualized amounts of expected revenue.

Property, Plant and Equipment, Policy [Policy Text Block]

'

Property and Equipment

Property and equipment are stated at cost, less accumulated depreciation. Additions and improvements to property and equipment are capitalized at cost. Expenditures for maintenance and repairs are charged to expense as incurred. Depreciation is computed using the straight-line method over the estimated useful lives of the related assets, which range from two to seven years for furniture and equipment. Leasehold improvements are amortized over the lesser of the estimated useful lives of the assets or the related lease term, which is typically five to seven years.

Consolidation, Variable Interest Entity, Policy [Policy Text Block]

'

Variable Interest Entities

Generally, an entity is defined as a Variable Interest Entity (“VIE”) under current accounting rules if it has (a) equity that is insufficient to permit the entity to finance its activities without additional subordinated financial support from other parties, or (b) equity investors that cannot make significant decisions about the entity’s operations, or that do not absorb the expected losses or receive the expected returns of the entity. When determining whether an entity that is a business qualifies as a VIE, we also consider whether (i) we participated significantly in the design of the entity, (ii) we provided more than half of the total financial support to the entity, and (iii) substantially all of the activities of the VIE either involve us or are conducted on our behalf. A VIE is consolidated by its primary beneficiary, which is the party that absorbs or receives a majority of the entity’s expected losses or expected residual returns.

As discussed under the heading Management Services Agreement below, we have an MSA with a managed medical corporation. Under this MSA, the equity owner of the affiliated medical group has only a nominal equity investment at risk, and we absorb or receive a majority of the entity’s expected losses or expected residual returns. We participate significantly in the design of this MSA. We also agree to provide working capital loans to allow for the medical group to pay for its obligations. Substantially all of the activities of this managed medical corporation either involve us or are conducted for our benefit, as evidenced by the fact that under the MSA, we agree to provide and perform all non-medical management and administrative services for the medical group. Payment of our management fee is subordinate to payments of the obligations of the medical group, and repayment of the working capital loans is not guaranteed by the equity owner of the affiliated medical group or other third party. Creditors of the managed medical corporation do not have recourse to our general credit.

Based on the design and provisions of this MSA and the working capital loans provided to the medical group, we have determined that the managed medical corporation is a VIE, and that we are the primary beneficiary as defined in the current accounting rules. Accordingly, we are required to consolidate the revenues and expenses of the managed medical corporation.

Management Services Agreement

We have an executed MSA with a medical professional corporation and related treatment center. Under the MSA, we license to the treatment center the right to use our proprietary treatment programs and related trademarks and provide all required day-to-day business management services, including, but not limited to:

●

general administrative support services;

●

information systems;

●

recordkeeping;

●

scheduling;

●

billing and collection;

●

marketing and local business development; and

●

obtaining and maintaining all federal, state and local licenses, certifications and regulatory permits.

The treatment center retains the sole right and obligation to provide medical services to its patients and to make other medically related decisions, such as the choice of medical professionals to hire or medical equipment to acquire and the ordering of drugs.

In addition, we provide office space to the treatment center on a non-exclusive basis, and we are responsible for all costs associated with rent and utilities. The treatment center pays us a monthly fee equal to the aggregate amount of (a) our costs of providing management services (including reasonable overhead allocable to the delivery of our services and including salaries, rent, equipment, and tenant improvements incurred for the benefit of the medical group, provided that any capitalized costs will be amortized over a five-year period), (b) 10%-15% of the foregoing costs, and (c) any performance bonus amount, as determined by the treatment center at its sole discretion. The treatment center’s payment of our fee is subordinate to payment of the treatment center's obligations, including physician fees and medical group employee compensation.

We have also agreed to provide a credit facility to the treatment center to be available as a working capital loan, with interest at the Prime Rate plus 2%.  Funds are advanced pursuant to the terms of the MSA described above. The notes are due on demand or upon termination of the MSA. At September 30, 2013, there was one outstanding credit facility under which $12.9 million was outstanding. Our maximum exposure to loss could exceed this amount, and cannot be quantified as it is contingent upon the amount of losses incurred by the treatment center that we are required to fund under the credit facility.

Under the MSA, the equity owner of the affiliated treatment center has only a nominal equity investment at risk, and we absorb or receive a majority of the entity’s expected losses or expected residual returns. We also agree to provide working capital loans to allow for the treatment center to pay for its obligations. Substantially all of the activities of the managed medical corporation either involves us or are conducted for our benefit, as evidenced by the facts that (i) the operations of the managed medical corporation is conducted primarily using our licensed protocols and (ii) under the MSA, we agree to provide and perform all non-medical management and administrative services for the treatment center. Payment of our management fee is subordinate to payments of the obligations of the treatment center, and repayment of the working capital loans is not guaranteed by the equity owner of the affiliated treatment center or other third party. Creditors of the managed medical corporation do not have recourse to our general credit.

Revenue Recognition, Sales of Services [Policy Text Block]

'

Management Services Agreement

We have an executed MSA with a medical professional corporation and related treatment center. Under the MSA, we license to the treatment center the right to use our proprietary treatment programs and related trademarks and provide all required day-to-day business management services, including, but not limited to:

●

general administrative support services;

●

information systems;

●

recordkeeping;

●

scheduling;

●

billing and collection;

●

marketing and local business development; and

●

obtaining and maintaining all federal, state and local licenses, certifications and regulatory permits.

The treatment center retains the sole right and obligation to provide medical services to its patients and to make other medically related decisions, such as the choice of medical professionals to hire or medical equipment to acquire and the ordering of drugs.

In addition, we provide office space to the treatment center on a non-exclusive basis, and we are responsible for all costs associated with rent and utilities. The treatment center pays us a monthly fee equal to the aggregate amount of (a) our costs of providing management services (including reasonable overhead allocable to the delivery of our services and including salaries, rent, equipment, and tenant improvements incurred for the benefit of the medical group, provided that any capitalized costs will be amortized over a five-year period), (b) 10%-15% of the foregoing costs, and (c) any performance bonus amount, as determined by the treatment center at its sole discretion. The treatment center’s payment of our fee is subordinate to payment of the treatment center's obligations, including physician fees and medical group employee compensation.

We have also agreed to provide a credit facility to the treatment center to be available as a working capital loan, with interest at the Prime Rate plus 2%.  Funds are advanced pursuant to the terms of the MSA described above. The notes are due on demand or upon termination of the MSA. At September 30, 2013, there was one outstanding credit facility under which $12.9 million was outstanding. Our maximum exposure to loss could exceed this amount, and cannot be quantified as it is contingent upon the amount of losses incurred by the treatment center that we are required to fund under the credit facility.

Under the MSA, the equity owner of the affiliated treatment center has only a nominal equity investment at risk, and we absorb or receive a majority of the entity’s expected losses or expected residual returns. We also agree to provide working capital loans to allow for the treatment center to pay for its obligations. Substantially all of the activities of the managed medical corporation either involves us or are conducted for our benefit, as evidenced by the facts that (i) the operations of the managed medical corporation is conducted primarily using our licensed protocols and (ii) under the MSA, we agree to provide and perform all non-medical management and administrative services for the treatment center. Payment of our management fee is subordinate to payments of the obligations of the treatment center, and repayment of the working capital loans is not guaranteed by the equity owner of the affiliated treatment center or other third party. Creditors of the managed medical corporation do not have recourse to our general credit. Based on these facts, we have determined that the managed medical corporation is a VIE and that we are the primary beneficiary as defined in current accounting rules.  Accordingly, we are required to consolidate the assets, liabilities, revenues and expenses of the managed treatment center.

Derivatives, Policy [Policy Text Block]

'

Warrant Liabilities

In April 2013, we entered into the April Agreements with several investors relating to the sale and issuance of an aggregate of 2,192,857 shares of common stock and warrants to purchase an aggregate of 2,192,857 shares of common stock at an exercise price of $0.70 per share for aggregate gross proceeds of approximately $1.5 million (the “April Offering”). The April Agreements provide that in the event that we effectuate a Reverse Split and the VWAP period declines from the closing price on the trading date immediately prior to the effective date of the Reverse Split, that we shall issue the Adjustment Shares. We effectuated a reverse split on May 6, 2013, and no Adjustment Shares were issued.

The April Warrants expire in April 2018, and contain anti-dilution provisions. As a result, if we, in the future, issue or grant any rights to purchase any of our common stock, or other securities convertible into our common stock, for a per share price less than the exercise price of the April Warrants, the exercise price of the April Warrants will be reduced to such lower price, subject to customary exceptions. In the event that Adjustment Shares are issued, the number of shares that may be purchased under the April Warrants shall be increased by an amount equal to the Adjustment Shares. In addition, the exercise price is subject to adjustment in the event that the VWAP during the VWAP period is less than the exercise price prior to the VWAP Period.

We have issued warrants to purchase common stock in July 2010, October 2010, November 2010, December 2011, February 2012, April 2012, May 2012, September 2012, December 2012, April 2013, and when we amended and restated the Highbridge senior secured note in July 2008. The warrants are being accounted for as liabilities in accordance with FASB accounting rules, due to provisions in some warrants that protect the holders from declines in our stock price and a requirement to deliver registered shares upon exercise of the warrants, which is considered outside our control.  The warrants are marked-to-market each reporting period, using the Black-Scholes pricing model, until they are completely settled or expire.

For the three and nine months ended September 30, 2013, we recognized a non-operating gain of $2.2 million and $2.6 million, compared with a non-operating gain of $1.8 million and $4.1 million for the same periods in 2012, respectively, related to the revaluation of our warrant liabilities.

New Accounting Pronouncements, Policy [Policy Text Block]

'

Recently Issued or Newly Adopted Accounting Standards

In December 2011, the FASB issued Accounting Standards Update (“ASU”) No. 2011-11, Disclosures about Offsetting Assets and Liabilities (“ASU 2011-11”). The amendments in this update require enhanced disclosures around financial instruments and derivative instruments that are either (1) offset in accordance with either ASC 210-20-45 or ASC 815-10-45 or (2) subject to an enforceable master netting arrangement or similar agreement, irrespective of whether they are offset in accordance with either ASC 210-20-45 or ASC 815-10-45. An entity should provide the disclosures required by those amendments retrospectively for all comparative periods presented. The amendments are effective during interim and annual periods beginning after December 31, 2012. The adoption of ASU No. 2011-11 did not have a material effect on our consolidated financial statements or disclosures.

In February 2013, the FASB issued ASU 2013-02, Reporting of Amounts Reclassified Out of Accumulated Other Comprehensive Income, (“ASU 2013-02”). ASU 2013-02 amends ASC 220, Comprehensive Income (“ASC 220”), and requires entities to present the changes in the components of accumulated other comprehensive income for the current period. Entities are required to present separately the amount of the change that is due to reclassifications, and the amount that is due to current period other comprehensive income. These changes are permitted to be shown either before or net-of-tax and can be displayed either on the face of the financial statements or in the footnotes. ASU 2013-02 was effective for our interim and annual periods beginning January 1, 2013. The adoption of ASU 2013-02 did not have a material effect on our consolidated financial position or results of operations.

In July 2013, the FASB issued ASU 2013-11, Income Taxes (Topic 740): Presentation of an Unrecognized Tax Benefit When a Net Operating Loss Carryforward, a Similar Tax Loss, or a Tax Credit Carryforward Exists, (“ASU 2013-02”), which eliminates diversity in practice for the presentation of an unrecognized tax benefit when a net operating loss carryforward, a similar tax loss or a tax credit carryforward is available to reduce the taxable income or tax payable that would result from disallowance of a tax position. ASU 2013-11 affects only the presentation of such amounts in an entity’s balance sheet and is effective for fiscal years beginning after December 15, 2013 and interim periods within those years. Early adoption is permitted. We are evaluating the impact, if any, of the adoption of ASU 2013-11 on our balance sheet.

Note_2_Summary_of_Significant_1

Note 2 - Summary of Significant Accounting Policies (Tables)	9 Months Ended
	Sep. 30, 2013
Note 2 - Summary of Significant Accounting Policies (Tables) [Line Items]	'
Schedule of Earnings Per Share, Basic and Diluted [Table Text Block]	'
		Three Months Ended						Nine Months Ended
		30-Sep						30-Sep
	(in thousands, except per share amounts)	2013			2012			2013			2012
	Numerator
	Net income (loss)	$	680		$	(257	)	$	(3,181	)	$	(5,889	)
	Denominator
	Weighted-average common shares outstanding		14,286			5,908			13,429			4,802
	Shares used in calculation - basic		14,286			5,908			13,429			4,802
	Shares issuable for stock options and warrants		5,078			-			-			-
	Shares used in calculation - diluted		19,364			5,908			13,429			4,802
	Net income (loss) per share
	Basic	$	0.05		$	(0.04	)	$	(0.24	)	$	(1.23	)
	Diluted	$	0.04		$	(0.04	)	$	(0.24	)	$	(1.23	)
Schedule of Fair Value, Assets and Liabilities Measured on Recurring Basis [Table Text Block]	'
			2013
	(in thousands)
		Level I			Level II			Level III			Total
	Certificates of deposit	$	175		$	-		$	-		$	175
	Total assets	$	175		$	-		$	-		$	175
	Warrant liabilities	$	-		$	-		$	14,196		$	14,196
	Total liabilities	$	-		$	-		$	14,196		$	14,196
Fair Value, Liabilities Measured on Recurring Basis, Unobservable Input Reconciliation [Table Text Block]	'
	(Dollars in thousands)	Level III
		Warrant
		Liabilities
	Balance as of December 31, 2012	$	14,658
	Reclassification to equity		(129	)
	Change in fair value		(4,360	)
	Net realized gains (losses)		-
	Balance as of March 31, 2013	$	10,169
	Reclassification to equity		(27	)
	Change in fair value		3,985
	Net purchases (sales)		2,301
	Net realized gains (losses)		-
	Balance as of June 30, 2013	$	16,428
	Reclassification to equity		-
	Change in fair value		(2,232	)
	Net purchases (sales)		-
	Net unrealized gains (losses)		-
	Balance as of September 30, 2013	$	14,196
Schedule of Finite-Lived Intangible Assets [Table Text Block]	'
	(In thousands)	Gross			Accumulated			Net			Amortization
		Carrying			Amortization			Balance			Period
		Amount									(in years)
	Intellectual property	$	1,940		$	(995	)	$	945			8
Schedule of Finite-Lived Intangible Assets, Future Amortization Expense [Table Text Block]	'
	(In thousands)
	Year	Amount
	2013 (3 months)	$	33
	2014	$	132
	2015	$	132
	2016	$	132
	2017	$	132
Condensed Cash Flow Statement [Table Text Block]	'
	(in thousands)	September 30,			(audited)
		2013			December 31,
					2012
	Cash and cash equivalents	$	3		$	11
	Receivables, net		25			19
	Total assets	$	28			30
	Accounts payable		13			15
	Note payable to Catasys, Inc.		12,904			12,267
	Total liabilities	$	12,917			12,282
Employees and Directors [Member]	'
Note 2 - Summary of Significant Accounting Policies (Tables) [Line Items]	'
Schedule of Share-based Compensation, Stock Options, Activity [Table Text Block]	'
		Shares			Weighted Avg.
					Exercise Price
	Balance December 31, 2012		486,000		$	26.46
	Granted		-		$	-
	Canceled		(20,000	)	$	33.72
	Balance March 31, 2013		466,000		$	22.73
	Granted		-		$	-
	Canceled		(1,000	)	$	39.37
	Balance June 30, 2013		465,000		$	22.69
	Granted		-		$	-
	Canceled		(4,000	)	$	379.44
	Balance September 30, 2013		461,000		$	19.59
Nonemployees [Member]	'
Note 2 - Summary of Significant Accounting Policies (Tables) [Line Items]	'
Schedule of Share-based Compensation, Stock Options, Activity [Table Text Block]	'
		Shares			Weighted Avg.
					Exercise Price
	Balance December 31, 2012		22,000		$	48.97
	Canceled		(1,000	)	$	1,953.03
	Balance March 31, 2013		21,000		$	45.72
	Canceled		-		$	-
	Balance June 30, 2013		21,000		$	45.72
	Canceled		-		$	-
	Balance September 30, 2013		21,000		$	28.4

Note_3_Segment_Information_Tab

Note 3 - Segment Information (Tables)	9 Months Ended
	Sep. 30, 2013
Note 3 - Segment Information (Tables) [Line Items]	'
Schedule of Segment Reporting Information, by Segment [Table Text Block]	'
	(in thousands)	Three Months Ended						Nine Months Ended
		September 30,						September 30,
		2013			2012			2013			2012
	Healthcare services
	Revenues	$	109		$	100		$	315		$	226
	Income (loss) before provision for income taxes	$	924		$	66		$	(2,441	)	$	(4,714	)
	Assets *		1,117			2,068			1,117			2,068
	License and management services
	Revenues	$	21		$	40		$	83		$	136
	Loss before provision for income taxes	$	(242	)	$	(321	)	$	(735	)	$	(1,157	)
	Assets *		970			1,603			970			1,603
	Consolidated continuing operations
	Revenues	$	130		$	140		$	398		$	362
	Income (loss) before provision for income taxes	$	682		$	(255	)	$	(3,176	)	$	(5,871	)
	Assets *		2,087			3,671			2,087			3,671
Healthcare Services [Member]	'
Note 3 - Segment Information (Tables) [Line Items]	'
Condensed Income Statement [Table Text Block]	'
	(in thousands)	Three Months Ended						Nine Months Ended
		September 30,						September 30,
		2013			2012			2013			2012
	Revenues	$	109		$	100		$	315		$	226
	Operating Expenses
	Cost of healthcare services	$	162		$	135		$	454		$	427
	General and administrative expenses
	Salaries and benefits		916			1,187			2,874			4,275
	Other expenses		330			531			1,246			1,662
	Depreciation and amortization		7			(2	)		18			6
	Total operating expenses	$	1,415		$	1,851		$	4,592		$	6,370
	Loss from operations	$	(1,306	)	$	(1,751	)	$	(4,277	)	$	(6,144	)
	Interest and other income		-			-			-			-
	Interest expense		(1	)		(1	)		(771	)		(2,697	)
	Change in fair value of warrant liabilities		2,231			1,818			2,607			4,127
	Income/(loss) before provision for income taxes	$	924		$	66		$	(2,441	)	$	(4,714	)
License and Management Services [Member]	'
Note 3 - Segment Information (Tables) [Line Items]	'
Schedule of Segment Reporting Information, by Segment [Table Text Block]	'
	(In thousands)	Three months ended						Nine months ended
		September 30,						September 30,
		2013			2012			2013			2012
	Revenues
	U.S. licensees	$	-		$	-		$	6		$	14
	Managed treatment center		21			40			77			122
	Total license and management revenues	$	21		$	40		$	83		$	136
	Operating expenses
	Cost of license and management services	$	59		$	63		$	174		$	191
	General and administrative expenses
	Salaries and benefits		114			150			358			465
	Other expenses		55			77			173			227
	Impairment losses		-			-			-			189
	Depreciation and amortization		35			71			113			221
	Total operating expenses	$	263		$	361		$	818		$	1,293
	Loss from operations	$	(242	)	$	(321	)	$	(735	)	$	(1,157	)
	Interest and other income		-			-			-			-
	Interest expense		-			-			-			-
	Loss before provision for income taxes	$	(242	)	$	(321	)	$	(735	)	$	(1,157	)

Note_1_Basis_of_Consolidation_1

Note 1 - Basis of Consolidation, Presentation and Going Concern (Details) (USD $)	9 Months Ended				1 Months Ended
	Sep. 30, 2013	Sep. 30, 2012	Dec. 31, 2012	Dec. 31, 2011	Oct. 31, 2013
					Subsequent Event [Member]
Note 1 - Basis of Consolidation, Presentation and Going Concern (Details) [Line Items]	'	'	'	'	'
Cash and Cash Equivalents, at Carrying Value	$422,000	$1,496,000	$3,153,000	$771,000	'
Working Capital Deficit	3,500,000	'	'	'	'
Proceeds from Notes Payable	'	975,000	'	'	2,600,000
Net Cash Provided by (Used in) Operating Activities	($4,280,000)	($4,527,000)	'	'	'

Note_2_Summary_of_Significant_2

Note 2 - Summary of Significant Accounting Policies (Details) (USD $)	1 Months Ended		3 Months Ended		9 Months Ended
	Apr. 30, 2013	Apr. 30, 2012	Sep. 30, 2013	Sep. 30, 2012	Sep. 30, 2013	Sep. 30, 2012
Note 2 - Summary of Significant Accounting Policies (Details) [Line Items]	'	'	'	'	'	'
Antidilutive Securities Excluded from Computation of Earnings Per Share, Amount (in Shares)	'	'	5,077,669	'	'	'
Share-based Compensation Arrangement by Share-based Payment Award, Number of Shares Authorized (in Shares)	'	'	1,825,000	'	1,825,000	'
Share-based Compensation Arrangement by Share-based Payment Award, Options, Vested and Expected to Vest, Outstanding, Number (in Shares)	'	'	482,177	'	482,177	'
Share-based Compensation Arrangement by Share-based Payment Award, Number of Shares Available for Grant (in Shares)	'	'	1,285,586	'	1,285,586	'
Allocated Share-based Compensation Expense	'	'	$48,000	$371,000	$165,000	$2,000,000
Share-based Compensation	'	'	'	'	165,000	1,963,000
Share-based Compensation Arrangement by Share-based Payment Award, Options, Grants in Period, Gross (in Shares)	'	'	0	0	0	50,000
Share-based Compensation Arrangements by Share-based Payment Award, Options, Grants in Period, Weighted Average Exercise Price (in Dollars per share)	'	'	'	$0	'	$0.44
Employee Service Share-based Compensation, Nonvested Awards, Compensation Cost Not yet Recognized	'	'	92,000	'	92,000	'
Employee Service Share-based Compensation, Nonvested Awards, Compensation Cost Not yet Recognized, Period for Recognition	'	'	'	'	'343 days	'
Stock Issued During Period, Shares, New Issues (in Shares)	2,192,857	2,192,857	'	'	'	'
Class of Warrant or Right, Number of Securities Called by Warrants or Rights (in Shares)	2,192,857	2,192,857	'	'	'	'
Share Price (in Dollars per share)	$0.70	'	'	'	'	'
Proceeds from Issuance or Sale of Equity	1,500,000	1,500,000	'	'	1,535,000	4,287,000
Stock Issued During Period, Shares, Issued for Services (in Shares)	'	'	'	0	'	312,500
Stock Issued During Period, Value, Issued for Services	'	'	'	0	'	72,000
Impairment of Intangible Assets, Finite-lived	'	'	0	0	0	189,000
Debt Instrument, Basis Spread on Variable Rate	'	'	'	'	2.00%	'
Line of Credit Facility, Amount Outstanding	'	'	12,900,000	'	12,900,000	'
Class of Warrant or Right, Exercise Price of Warrants or Rights (in Dollars per Item)	'	0.7	'	'	'	'
Derivative, Loss on Derivative	'	'	2,200,000	1,800,000	2,600,000	4,100,000
Employees and Directors [Member]	'	'	'	'	'	'
Note 2 - Summary of Significant Accounting Policies (Details) [Line Items]	'	'	'	'	'	'
Share-based Compensation	'	'	47,000	273,000	141,000	1,600,000
Nonemployees [Member]	'	'	'	'	'	'
Note 2 - Summary of Significant Accounting Policies (Details) [Line Items]	'	'	'	'	'	'
Share-based Compensation	'	'	1,000	61,000	23,000	81,000
Consulting Services [Member]	'	'	'	'	'	'
Note 2 - Summary of Significant Accounting Policies (Details) [Line Items]	'	'	'	'	'	'
Share-based Compensation	'	'	$1,000	$61,000	$23,000	$81,000
Furniture and Equipment [Member] | Maximum [Member]	'	'	'	'	'	'
Note 2 - Summary of Significant Accounting Policies (Details) [Line Items]	'	'	'	'	'	'
Property, Plant and Equipment, Useful Life	'	'	'	'	'7 years	'
Revenue [Member]	'	'	'	'	'	'
Note 2 - Summary of Significant Accounting Policies (Details) [Line Items]	'	'	'	'	'	'
Concentration Risk, Percentage	'	'	'	'	64.00%	'
Account Receivable [Member]	'	'	'	'	'	'
Note 2 - Summary of Significant Accounting Policies (Details) [Line Items]	'	'	'	'	'	'
Concentration Risk, Percentage	'	'	'	'	91.00%	'
Minimum [Member]	'	'	'	'	'	'
Note 2 - Summary of Significant Accounting Policies (Details) [Line Items]	'	'	'	'	'	'
Share-based Compensation Arrangement by Share-based Payment Award, Award Vesting Period	'	'	'	'	'3 years	'
Percentage of Costs	'	'	10.00%	'	10.00%	'
Maximum [Member]	'	'	'	'	'	'
Note 2 - Summary of Significant Accounting Policies (Details) [Line Items]	'	'	'	'	'	'
Share-based Compensation Arrangement by Share-based Payment Award, Award Vesting Period	'	'	'	'	'5 years	'
Percentage of Costs	'	'	15.00%	'	15.00%	'

Note_2_Summary_of_Significant_3

Note 2 - Summary of Significant Accounting Policies (Details) - Common equivalent shares, consisting of 13,763,147 incremental common shares for the three months en (USD $)	3 Months Ended		9 Months Ended
In Thousands, except Per Share data, unless otherwise specified	Sep. 30, 2013	Sep. 30, 2012	Sep. 30, 2013	Sep. 30, 2012
Numerator	'	'	'	'
Net income (loss) (in Dollars)	$680	($257)	($3,181)	($5,889)
Denominator	'	'	'	'
Weighted-average common shares outstanding	14,286	5,908	13,429	4,802
Shares issuable for stock options and warrants	5,078	'	'	'
Shares used in calculation - basic	14,286	5,908	13,429	4,802
Shares issuable for stock options and warrants	5,078	'	'	'
Shares used in calculation - diluted	19,364	5,908	13,429	4,802
Net income (loss) per share	'	'	'	'
Basic (in Dollars per share)	$0.05	($0.04)	($0.24)	($1.23)
Diluted (in Dollars per share)	$0.04	($0.04)	($0.24)	($1.23)

Note_2_Summary_of_Significant_4

Note 2 - Summary of Significant Accounting Policies (Details) - Employee and Director Stock Option Activity (Employees and Directors [Member], USD $)	3 Months Ended
	Sep. 30, 2013	Jun. 30, 2013	Mar. 31, 2013
Employees and Directors [Member]	'	'	'
Note 2 - Summary of Significant Accounting Policies (Details) - Employee and Director Stock Option Activity [Line Items]	'	'	'
Shares Outstanding	465,000	466,000	486,000
Weighted Average Exercise Price of Shares Outstanding (in Dollars per share)	$22.69	$22.73	$26.46
Shares Canceled	-4,000	-1,000	-20,000
Weighted Average Exercise Price of Shares Canceled (in Dollars per share)	$379.44	$39.37	$33.72
Shares Outstanding	461,000	465,000	466,000
Weighted Average Exercise Price of Shares Outstanding (in Dollars per share)	$19.59	$22.69	$22.73

Note_2_Summary_of_Significant_5

Note 2 - Summary of Significant Accounting Policies (Details) - Non-Employee Stock Option Activity (Nonemployees [Member], USD $)	3 Months Ended
	Mar. 31, 2013	Sep. 30, 2013	Jun. 30, 2013
Nonemployees [Member]	'	'	'
Note 2 - Summary of Significant Accounting Policies (Details) - Non-Employee Stock Option Activity [Line Items]	'	'	'
Shares Outstanding	22,000	21,000	21,000
Weighted Average Exercise Price of Shares Outstanding (in Dollars per share)	$48.97	$28.40	$45.72
Shares Canceled	-1,000	'	'
Weighted Average Exercise Price of Shares Canceled (in Dollars per share)	$1,953.03	'	'
Shares Outstanding	21,000	21,000	21,000
Weighted Average Exercise Price of Shares Outstanding (in Dollars per share)	$45.72	$28.40	$45.72

Note_2_Summary_of_Significant_6

Note 2 - Summary of Significant Accounting Policies (Details) - Fair Value, Assets And Liabilities Measured On Recurring Basis (USD $)	Sep. 30, 2013
Note 2 - Summary of Significant Accounting Policies (Details) - Fair Value, Assets And Liabilities Measured On Recurring Basis [Line Items]	'
Certificates of deposit	$175
Total assets	175
Warrant liabilities	14,196
Total liabilities	14,196
Fair Value, Inputs, Level 1 [Member]	'
Note 2 - Summary of Significant Accounting Policies (Details) - Fair Value, Assets And Liabilities Measured On Recurring Basis [Line Items]	'
Certificates of deposit	175
Total assets	175
Fair Value, Inputs, Level 3 [Member]	'
Note 2 - Summary of Significant Accounting Policies (Details) - Fair Value, Assets And Liabilities Measured On Recurring Basis [Line Items]	'
Warrant liabilities	14,196
Total liabilities	$14,196

Note_2_Summary_of_Significant_7

Note 2 - Summary of Significant Accounting Policies (Details) - Fair Value Measurements Using Significant Level III Inputs (USD $)	3 Months Ended
In Thousands, unless otherwise specified	Sep. 30, 2013	Jun. 30, 2013	Mar. 31, 2013
Fair Value Measurements Using Significant Level III Inputs [Abstract]	'	'	'
Balance	$16,428	$10,169	$14,658
Reclassification to equity	'	-27	-129
Change in Fair Value	-2,232	3,985	-4,360
Net Purchases (sales)	'	2,301	'
Balance	$14,196	$16,428	$10,169

Note_2_Summary_of_Significant_8

Note 2 - Summary of Significant Accounting Policies (Details) - Gross and Net carrying Amounts of Intangible Assets Subject to Amortization (USD $)	9 Months Ended
In Thousands, unless otherwise specified	Sep. 30, 2013	Dec. 31, 2012
Gross and Net carrying Amounts of Intangible Assets Subject to Amortization [Abstract]	'	'
Intellectual property	$1,940	'
Intellectual property	-995	-892
Intellectual property	$945	$1,048
Intellectual property	'8 years	'

Note_2_Summary_of_Significant_9

Note 2 - Summary of Significant Accounting Policies (Details) - Estimated Remaining Amortization Expense for Intangible Assets (USD $)	Sep. 30, 2013
In Thousands, unless otherwise specified
Estimated Remaining Amortization Expense for Intangible Assets [Abstract]	'
2013 (3 months)	$33
2014	132
2015	132
2016	132
2017	$132

Recovered_Sheet1

Note 2 - Summary of Significant Accounting Policies (Details) - Amounts and Classification of Assets and Liabilities of the VIE (USD $)	Sep. 30, 2013	Dec. 31, 2012	Sep. 30, 2012	Dec. 31, 2011
Condensed Cash Flow Statements, Captions [Line Items]	'	'	'	'
Cash and cash equivalents	$422,000	$3,153,000	$1,496,000	$771,000
Accounts payable	1,268,000	1,642,000	'	'
Amounts of VIE Included in Consolidated Balance Sheets [Member]	'	'	'	'
Condensed Cash Flow Statements, Captions [Line Items]	'	'	'	'
Cash and cash equivalents	3,000	11,000	'	'
Receivables, net	25,000	19,000	'	'
Total assets	28,000	30,000	'	'
Accounts payable	13,000	15,000	'	'
Note payable to Catasys, Inc.	12,904,000	12,267,000	'	'
Total liabilities	$12,917,000	$12,282,000	'	'

Note_3_Segment_Information_Det

Note 3 - Segment Information (Details)	9 Months Ended
	Sep. 30, 2013
Segment Reporting [Abstract]	'
Number of Operating Segments	2
Number of Reportable Segments	2

Note_3_Segment_Information_Det1

Note 3 - Segment Information (Details) - Segment Reporting Information, by Segment (USD $)	3 Months Ended				9 Months Ended
In Thousands, unless otherwise specified	Sep. 30, 2013		Sep. 30, 2012		Sep. 30, 2013		Sep. 30, 2012		Dec. 31, 2012
Segment Reporting Information [Line Items]	'		'		'		'		'
Revenues	$109		$100		$315		$226		'
Assets *	2,087		'		2,087		'		4,934
Revenues	130		140		398		362		'
Revenues	21		40		83		136		'
Healthcare Services [Member]	'		'		'		'		'
Segment Reporting Information [Line Items]	'		'		'		'		'
Revenues	109		100		315		226		'
Income/(loss) before provision for income taxes	924		66		-2,441		-4,714		'
Assets *	1,117	[1]	2,068	[1]	1,117	[1]	2,068	[1]	'
License and Management Services [Member]	'		'		'		'		'
Segment Reporting Information [Line Items]	'		'		'		'		'
Income/(loss) before provision for income taxes	-242		-321		-735		-1,157		'
Assets *	970	[1]	1,603	[1]	970	[1]	1,603	[1]	'
Revenues	21		40		83		136		'
Consolidated Continuing Operations [Member]	'		'		'		'		'
Segment Reporting Information [Line Items]	'		'		'		'		'
Income/(loss) before provision for income taxes	682		-255		-3,176		-5,871		'
Assets *	2,087	[1]	3,671	[1]	2,087	[1]	3,671	[1]	'
Revenues	$130		$140		$398		$362		'
[1]	Assets are reported as of September 30.

Note_3_Segment_Information_Det2

Note 3 - Segment Information (Details) - Operating Results for Healthcare Services (USD $)	3 Months Ended		9 Months Ended
In Thousands, unless otherwise specified	Sep. 30, 2013	Sep. 30, 2012	Sep. 30, 2013	Sep. 30, 2012
Condensed Income Statements, Captions [Line Items]	'	'	'	'
Revenues	$109	$100	$315	$226
Operating Expenses	'	'	'	'
Cost of healthcare services	221	197	628	618
General and administrative expenses	'	'	'	'
Depreciation and amortization	42	69	131	227
Loss from operations	-1,548	-2,072	-5,012	-7,301
Interest expense	1	1	771	2,697
Change in fair value of warrant liabilities	-2,231	-1,818	-2,607	-4,127
Healthcare Services [Member]	'	'	'	'
Condensed Income Statements, Captions [Line Items]	'	'	'	'
Revenues	109	100	315	226
Operating Expenses	'	'	'	'
Cost of healthcare services	162	135	454	427
General and administrative expenses	'	'	'	'
Salaries and benefits	916	1,187	2,874	4,275
Other expenses	330	531	1,246	1,662
Depreciation and amortization	7	-2	18	6
Total operating expenses	1,415	1,851	4,592	6,370
Loss from operations	-1,306	-1,751	-4,277	-6,144
Interest expense	-1	-1	-771	-2,697
Change in fair value of warrant liabilities	2,231	1,818	2,607	4,127
Income/(loss) before provision for income taxes	$924	$66	($2,441)	($4,714)

Note_3_Segment_Information_Det3

Note 3 - Segment Information (Details) - Operating Results for License and Management Services (USD $)	3 Months Ended		9 Months Ended
In Thousands, unless otherwise specified	Sep. 30, 2013	Sep. 30, 2012	Sep. 30, 2013	Sep. 30, 2012
Revenues	'	'	'	'
Revenues	$21	$40	$83	$136
Operating expenses	'	'	'	'
Cost of license and management services	221	197	628	618
General and administrative expenses	'	'	'	'
Depreciation and amortization	42	69	131	227
Loss from operations	-1,548	-2,072	-5,012	-7,301
Loss before provision for income taxes	682	-255	-3,176	-5,871
U.S. Licensees [Member]	'	'	'	'
Revenues	'	'	'	'
Revenues	'	'	6	14
Managed Treatment Centers [Member]	'	'	'	'
Revenues	'	'	'	'
Revenues	21	40	77	122
License and Management Services [Member]	'	'	'	'
Revenues	'	'	'	'
Revenues	21	40	83	136
Operating expenses	'	'	'	'
Cost of license and management services	59	63	174	191
General and administrative expenses	'	'	'	'
Salaries and benefits	114	150	358	465
Other expenses	55	77	173	227
Impairment losses	'	'	'	189
Depreciation and amortization	35	71	113	221
Total operating expenses	263	361	818	1,293
Loss from operations	-242	-321	-735	-1,157
Loss before provision for income taxes	($242)	($321)	($735)	($1,157)

Note_4_Receivable_Related_Part1

Note 4 - Receivable - Related Party (Details) (USD $)	1 Months Ended		9 Months Ended			3 Months Ended	33 Months Ended
	Apr. 30, 2013	Apr. 30, 2012	Sep. 30, 2013	Sep. 30, 2012	Dec. 31, 2012	Sep. 30, 2013	Sep. 30, 2013
						April 2013 [Member]	Per Month [Member]
Note 4 - Receivable - Related Party (Details) [Line Items]	'	'	'	'	'	'	'
Operating Leases, Rent Expense	'	'	'	'	'	'	$11,000
Due from Related Parties, Current	'	'	269,000	'	173,000	'	'
Due to Related Parties	'	'	81,000	'	'	'	'
Stock Issued During Period, Shares, New Issues (in Shares)	2,192,857	2,192,857	'	'	'	2,055,715	'
Class of Warrant or Right, Number of Securities Called by Warrants or Rights (in Shares)	2,192,857	2,192,857	'	'	'	2,055,715	'
Class of Warrant or Right, Exercise Price of Warrants or Rights (in Dollars per Item)	'	0.7	'	'	'	0.7	'
Proceeds from Issuance or Sale of Equity	$1,500,000	$1,500,000	$1,535,000	$4,287,000	'	$1,400,000	'

Note_5_Restatement_of_Financia1

Note 5 - Restatement of Financial Statements (Details)	0 Months Ended
	6-May-13
Accounting Changes and Error Corrections [Abstract]	'
Stockholders' Equity, Reverse Stock Split	'10-for-1

Note_6_Subsequent_Events_Detai

Note 6 - Subsequent Events (Details) (USD $)	Apr. 30, 2013	Apr. 30, 2012	Oct. 31, 2013	Oct. 31, 2013
In Millions, except Share data, unless otherwise specified			Subsequent Event [Member]	Subsequent Event [Member]
			Warrant [Member]	Investor [Member]
			Investor [Member]
Note 6 - Subsequent Events (Details) [Line Items]	'	'	'	'
Sale of Stock, Number of Shares Issued in Transaction	'	'	4,550,002	'
Class of Warrant or Right, Number of Securities Called by Warrants or Rights	2,192,857	2,192,857	'	4,550,002
Investment Warrants, Exercise Price (in Dollars per share)	'	'	'	$0.58
Proceeds from Issuance of Warrants (in Dollars)	'	'	'	$2.60
Percent of Common Shares Purchased By Investor	'	'	'	20.00%