Accounting Policies, by Policy (Policies) | 12 Months Ended |
Dec. 31, 2013 |
Accounting Policies [Abstract] | ' |
Consolidation, Policy [Policy Text Block] | ' |
Basis of Consolidation and Presentation and Going Concern |
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Our consolidated financial statements include the accounts of the company, our wholly-owned subsidiaries, and a managed professional medical corporation. Based on the provisions of the management service agreement between us and a medical corporation, we have determined that the medical corporation is a variable interest entity (VIE), and that we are the primary beneficiary as defined in the Financial Accounting Standards Board (FASB) rules for accounting for variable interest entities. Accordingly, we are required to consolidate the revenues and expenses of the managed medical corporation. |
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Our financial statements have been prepared on the basis that we will continue as a going concern. At December 31, 2013, cash and cash equivalents amounted to $1.1 million and we had a working capital deficit of approximately $2.4 million. We have incurred significant operating losses and negative cash flows from operations since our inception. During the year ended December 31, 2013, our cash used in operating activities amounted $5.9 million. We anticipate continuing 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 December 31, 2013, these conditions raised substantial doubt as to our ability to continue as a going concern. |
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Our ability to fund our ongoing operations and continue as a going concern is dependent on signing and generating fees from existing and new contracts for our Catasys managed care programs and the success of management’s plans to increase revenue and continue to control expenses. We are operating programs in Kansas, Massachusetts, Oklahoma, Louisiana, Kentucky, West Virginia, and Wisconsin. The programs in Kentucky and West Virginia commenced enrollment in the fourth quarter of 2013 and the Wisconsin program, which represents our first managed care Medicaid health plan customer, commenced enrollment in the first quarter of 2014. In March 2013, we signed an agreement with a national health plan to provide services to their members in New Jersey, which we expect to commence enrollment in the second quarter of 2014. We have generated fees from the launched programs and expect to increase enrollment and fees throughout 2014. However, there can be no assurance that we will generate such fees. In addition, we continue to seek ways to streamline our operating expenses. |
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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. While the trial and appellate courts have ruled in our favor the plaintiff has filed a request to appeal to the state of Supreme Court. 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 ultimately 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 our liquidity, including our cash flows. |
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All inter-company transactions have been eliminated in consolidation. |
Use of Estimates, Policy [Policy Text Block] | ' |
Use of Estimates |
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The preparation of financial statements in conformity with generally accepted accounting principles in the United States (GAAP) requires management to make estimates and assumptions that affect the reported amounts in the financial statements and disclosed in the accompanying notes. Significant areas requiring the use of management estimates include expense accruals, accounts receivable allowances, accrued claims payable, the useful life of depreciable and amortizable assets, the evaluation of asset impairment, the valuation of warrant liabilities, and shared-based compensation. Actual results could differ from those estimates. |
Revenue Recognition, Policy [Policy Text Block] | ' |
Revenue Recognition |
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Healthcare Services |
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Our Catasys contracts are generally designed to provide cash fees 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 performance guarantees we recognize the case rate ratably over twelve months. |
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License and Management Services |
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Our license and management services revenues are derived from our managed treatment center, which we include in our 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. |
Cost of Sales, Policy [Policy Text Block] | ' |
Cost of Services |
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Healthcare Services |
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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-service 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. |
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License and Management Services |
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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. |
Share-based Compensation, Option and Incentive Plans Policy [Policy Text Block] | ' |
Share-Based Compensation |
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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 December 31, 2013, we had an aggregate of 482,177 vested and unvested shares outstanding and 1,285,586 shares available for future awards. |
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Total share-based compensation expense on a consolidated basis amounted to $213,000 and $2.2 million for the years ended December 31, 2013 and 2012, respectively. |
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Stock Options – Employees and Directors |
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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 consolidated statements of operations. |
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There were no new stock options granted during 2013. The estimated weighted average fair values of options granted during 2012 was $3.30 per share, and were calculated using the Black-Scholes pricing model based on the following assumptions: |
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| | 2012 | | | | | | | | | | | | | | |
Expected volatility | | | 151 | % | | | | | | | | | | | | | |
Risk-free interest rate | | | 1.02 | % | | | | | | | | | | | | | |
Weighted average expected lives in years | | | 6 | | | | | | | | | | | | | | |
Expected dividend | | | 0 | % | | | | | | | | | | | | | |
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The expected volatility assumption for 2012 was based on the historical volatility of our stock, measured over a period generally commensurate with the expected term. The weighted average expected lives in years for 2012 reflect the application of the simplified method set out in Security and Exchange Commission (SEC) Staff Accounting Bulletin (SAB) 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. We use historical data to estimate the rate of forfeitures assumption for awards granted to employees. |
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We have elected to adopt the detailed method prescribed in FASB’s accounting rules for share-based compensation expense for calculating the beginning balance of the additional paid-in capital pool (APIC pool) related to the tax effects of employee share-based compensation, and to determine the subsequent impact on the APIC pool and consolidated statements of cash flows of the tax effects of employee share-based compensation awards that were outstanding upon adoption of such rules on January 1, 2006. |
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Stock Options and Warrants – Non-employees |
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We account for the issuance of stock options and warrants for services from non-employees by estimating the fair value of stock options and warrants issued using the Black-Scholes pricing model. This model’s calculations incorporate the exercise price, the market price of shares on grant date, the weighted average risk-free interest rate, expected life of the option or warrant, expected volatility of our stock and expected dividends. |
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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. |
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From time to time, we have retained terminated employees as part-time consultants upon their resignation from the company. Because the employees continue to provide services to us, their options continue to vest in accordance with the original terms. Due to the change in classification of the option awards, the options are considered modified at the date of termination. The modifications are treated as exchanges of the original awards in return for the issuance of new awards. At the date of termination, the unvested options are no longer accounted for as employee awards under FASB’s accounting rules for share-based expense but are instead accounted for as new non-employee awards. The accounting for the portion of the total grants that have already vested and have been previously expensed as equity awards is not changed. We recorded no expense during 2013 and 2012, respectively, associated with modified liability awards. |
Income Tax, Policy [Policy Text Block] | ' |
Income Taxes |
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We account for income taxes using the liability method in accordance with Accounting Standards Committee (“ASC”) 740 “Income Taxes” (formerly SFAS 109, “Accounting for Income Taxes”). To date, no current income tax liability has been recorded due to our accumulated net losses. Deferred tax assets and liabilities are recognized for temporary differences between the financial statement carrying amounts of assets and liabilities and the amounts that are reported in the tax returns. Deferred tax assets and liabilities are recorded on a net basis; however, our net deferred tax assets have been fully reserved by a valuation allowance due to the uncertainty of our ability to realize future taxable income and to recover our net deferred tax assets. |
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In June 2006, the FASB issued FASB Interpretation No. 48 (FIN 48), “Accounting for Uncertainty in Income Taxes” (incorporated into ASC 740), which clarifies the accounting for uncertainty in income taxes. FIN 48 requires that companies recognize in the consolidated financial statements the impact of a tax position if that position is more likely than not of being sustained on audit based on the technical merits of the position. FIN 48 also provides guidance on de-recognition, classification, interest and penalties, accounting in interim periods and disclosure. The provisions of FIN 48 are effective for fiscal years beginning after December 15, 2006. We adopted FIN 48 on January 1, 2007, with no impact to our consolidated financial statements. |
Earnings Per Share, Policy [Policy Text Block] | ' |
Basic and Diluted Loss per Share |
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Basic loss per share is computed by dividing the net loss to common stockholders for the period by the weighted average number of common shares outstanding during the period. Diluted loss per share is computed by dividing the net loss for the period by the weighted average number of common and dilutive common equivalent shares outstanding during the period. Basic and diluted loss per share has been adjusted retroactively for the 10-for-1 reverse stock split that occurred on May 6, 2013. |
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Common equivalent shares, consisting of approximately 18,342,335 and 11,730,069 of incremental common shares as of December 31, 2013 and 2012, respectively, issuable upon the exercise of stock options and warrants, have been excluded from the diluted loss per share calculation because their effect is anti-dilutive. |
Cash and Cash Equivalents, Policy [Policy Text Block] | ' |
Cash and Cash Equivalents |
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We consider all highly liquid investments with an original maturity of three months or less to be cash equivalents. |
Marketable Securities, Policy [Policy Text Block] | ' |
Marketable Securities |
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Investments include certificates of deposits with maturity dates greater than three months when purchased. These investments are classified as deposits, are reflected in long terms assets as part of deposits and other assets and are stated at fair market value. |
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Our marketable securities consisted of investments with the following maturities as of December 31, 2013 and 2012: |
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(in thousands) | | Fair Market Value | | | Less than 1 Year | | | More than 10 Years | | | | | | |
Balance at December 31, 2012 | | | | | | | | | | | | | | | | | |
Certificates of deposit | | $ | 175 | | | $ | 175 | | | $ | - | | | | | | |
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Balance at December 31, 2013 | | | | | | | | | | | | | | | | | |
Certificates of deposit | | $ | 175 | | | $ | 175 | | | $ | - | | | | | | |
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The carrying value of all securities presented above approximated fair market value at December 31, 2013 and 2012, respectively. |
Fair Value of Financial Instruments, Policy [Policy Text Block] | ' |
Fair Value Measurements |
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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: |
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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. | | | | | | | | | | | | | | | |
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The following tables summarize fair value measurements by level at December 31, 2013 and 2012, respectively, for assets and liabilities measured at fair value on a recurring basis: |
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| | | Balance at December 31, 2012 | |
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(Amounts in thousands) | | Level I | | | Level II | | | | Level III | | | Total | |
Certificates of deposit | | | 175 | | | | - | | | | | - | | | | 175 | |
Total assets | | | 175 | | | | - | | | | | - | | | | 175 | |
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Warrant liabilities | | | - | | | | - | | | | | 14,658 | | | | 14,658 | |
Total liabilities | | | - | | | | - | | | | | 14,658 | | | | 14,658 | |
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| | | Balance at December 31, 2013 | |
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(Amounts in thousands) | | Level I | | | Level II | | | | Level III | | | Total | |
Certificates of deposit | | | 175 | | | | - | | | | | - | | | | 175 | |
Total assets | | | 175 | | | | - | | | | | - | | | | 175 | |
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Warrant liabilities | | | - | | | | - | | | | | 16,347 | | | | 16,347 | |
Total liabilities | | | - | | | | - | | | | | 16,347 | | | | 16,347 | |
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We measure warrant liabilities issued from our debt and equity financings on a recurring basis. 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. Significant increases (decreases) in any of these inputs could result in significantly lower (higher) fair value measurement. Generally, a change in the assumption used for the expected term is accompanied by a change in the assumption used for the risk free rate and the expected stock. See Warrant Liabilities below. |
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The following table summarizes our fair value measurements using significant Level III inputs, and changes therein, for the years ended December 31, 2013 and 2012: |
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(Dollars in thousands) | | Level III Warrant Liabilities | | | | | | | | | | | | | | |
Balance as of December 31, 2011 | | $ | 4,528 | | | | | | | | | | | | | | |
Change in fair value | | | (2,724 | ) | | | | | | | | | | | | | |
Issuance of Warrants | | | 12,854 | | | | | | | | | | | | | | |
Balance as of December 31, 2012 | | $ | 14,658 | | | | | | | | | | | | | | |
Reclassification to equity | | | (156 | ) | | | | | | | | | | | | | |
Change in fair value | | | (5,392 | ) | | | | | | | | | | | | | |
Issuance of Warrants | | | 7,237 | | | | | | | | | | | | | | |
Balance as of December 31, 2013 | | $ | 16,347 | | | | | | | | | | | | | | |
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Fair Value Information about Financial Instruments Not Measured at Fair Value |
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FASB rules regarding fair value disclosures of financial instruments requires disclosure of fair value information about certain financial instruments for which it is practical to estimate that value. The carrying amounts reported in our consolidated balance sheets for cash, cash equivalents, accounts receivable, accounts payable and accrued liabilities approximate fair value because of the immediate or short-term maturity of these financial instruments. There was no outstanding debt for the years ending December 31, 2013 and 2012, respectively. Considerable judgment is required to develop estimates of fair value. Accordingly, the estimates are not necessarily indicative of the amounts we could realize in a current market exchange. The use of different market assumptions and/or estimation methodologies may have a material effect on the estimated fair value amounts. |
Goodwill and Intangible Assets, Policy [Policy Text Block] | ' |
Intangible Assets |
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Intellectual Property |
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Intellectual property consists primarily of the costs associated with acquiring certain technology, patents, patents pending, know-how and related intangible assets with respect to programs for treatment of dependence to alcohol, cocaine, methamphetamines other addictive stimulants, and anxiety. These long-term assets are stated at cost and are being amortized on a straight-line basis over the life of the respective patents, or patent applications, which is approximately seven years at December 31, 2013. |
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Impairment of Long-Lived Assets |
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Long-lived assets such as property, equipment and intangible assets subject to amortization are reviewed for impairment whenever events or circumstances indicate that the carrying amount of these assets may not be recoverable. In reviewing for impairment, we compare the carrying value of such assets to the estimated undiscounted future cash flows expected from the use of the assets and their eventual disposition. When the estimated undiscounted future cash flows are less than their carrying amount, an impairment loss is recognized equal to the difference between the assets’ fair value and their carrying value. |
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We performed an impairment analysis on intellectual property at December 31, 2013. For certain intangible assets, we considered numerous factors and we determined that the carrying value was not recoverable, and exceeded the fair-value. We recorded an impairment charge of $795,000 for these assets at December 31, 2013. We determined that the estimated lives of the remaining intellectual property properly reflected the current remaining economic lives of the assets. |
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We performed an impairment analysis on intellectual property at December 31, 2012. For certain intangible assets, we considered numerous factors and we determined that the carrying value was not recoverable, and exceeded the fair-value. We recorded an impairment charge of $656,000 for these assets at December 31, 2012. We determined that the estimated lives of the remaining intellectual property properly reflected the current remaining economic lives of the assets. |
Property, Plant and Equipment, Policy [Policy Text Block] | ' |
Property and Equipment |
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Property and equipment are stated at cost, less accumulated depreciation and amortization. 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. Construction in progress is not depreciated until the related asset is placed into service. |
Lease, Policy [Policy Text Block] | ' |
Capital Leases |
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Assets held under capital leases include computer equipment, and are recorded at the lower of the net present value of the minimum lease payments or the fair value of the leased asset at the inception of the lease. Depreciation expense is computed using the straight-line method over the estimated useful lives of the assets. All lease agreements meet at least one of the four requirements of a capital lease in accordance with ASC 840 of the codification. |
Consolidation, Variable Interest Entity, Policy [Policy Text Block] | ' |
Variable Interest Entities |
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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. |
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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. |
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Based on the design and provisions of this MSA and the working capital loan 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 current accounting rules. Accordingly, we are required to consolidate the revenues and expenses of such managed medical corporation. |
Derivatives, Policy [Policy Text Block] | ' |
Warrant Liabilities |
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In April 2013, we entered into the 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, 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 Offering provides 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. |
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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. In October 2013, we completed a private placement at $0.58 per share and the warrant shares associated with the April Offering were reduced to $0.58 per share. |
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In October 2013, we entered into the securities and purchase agreements with several investors including Crede III and Shamus, 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 Offering”). The October Offering provides 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. |
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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 securities 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. In the event that Adjustment Shares are issued, the number of shares that may be purchased under the October 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. |
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In April 2012, we entered into security purchase agreements with several investors, including Crede III and David Smith, relating to the sale and issuance of an aggregate of 2,144,005shares of common stock and warrants (the “April 2012 Warrants”) to purchase an aggregate of 2,144,005 shares of common stock at an exercise price of $1.60 per share for aggregate gross proceeds of approximately $3,430,000 (the “April 2012 Offering”). The April 2012 Offering provide that in the event that the Company effectuates 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 the Company shall issue 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. |
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The April 2012 Warrants expire in April 2017, 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 2012 Warrants, the exercise price of the April 2012 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 2012 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. |
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In May 2012, we entered into a securities purchase agreement with an accredited investor, on the same terms of the April 2012 Offering disclosed above, relating to the sale and issuance of 25,000 shares of common stock and warrants to purchase an aggregate of 25,000 shares of common stock at an exercise price of $1.60 per share, for gross proceeds of $40,000. |
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In May 2012, we issued warrants to purchase an aggregate of 12,000 shares of common stock at an exercise price of $1.60 per share, associated with financing costs. |
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In June 2012, we issued 6,250 restricted shares of common stock to a consultant for investor relation services to be performed beginning June 2012 and ending November 2012. |
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In September 2012, we entered into securities purchase agreements with several investors including Crede III and David Smith, relating to the sale and issuance of an aggregate of 1,719,000 shares of the Company’s common stock and warrants (the “September Warrants”) to purchase an aggregate of 1,719,000 shares of common stock, at an exercise price of $1.00 per share, for aggregate gross proceeds of approximately $1.7 million (the “September Offering”). The foregoing issuances triggered anti-dilution provisions in certain of the Company’s outstanding warrants. As a result, the exercise price of these warrants decreased to $1.00 per share, however, the number of shares issuable under these warrants remained unchanged. The September Offering provide that in the event that the Company effectuates a Reverse Split of its common stock within 24 months of the closing date of the September Offering and the VWAP of the common stock during 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 shall issue 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. |
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The September Warrants expire in September 2017, 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 September Warrants, the exercise price of the September 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 September 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. |
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In December 2012, we entered into securities purchase agreements with several investors including Crede III and David Smith, relating to the sale and issuance of an aggregate of 4,712,143 shares of the Company’s common stock and warrants (the “December Warrants”) to purchase an aggregate of 4,712,143 shares of common stock, at an exercise price of $0.70 per share, for aggregate gross proceeds of approximately $3.3 million (the “December Offering”). The foregoing issuances triggered anti-dilution provisions in certain of the Company’s outstanding warrants. As a result, the exercise price of these warrants decreased to $0.70 per share, however, the number of shares issuable under these warrants remained unchanged. The December Offering provide that in the event that the Company effectuates a Reverse Split of its common stock within 24 months of the closing date of the December Offering and the VWAP of the common stock during 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 shall issue 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. |
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The December Warrants expire in December 2017, 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 September Warrants, the exercise price of the September 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 December 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. |
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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, October 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. |
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For the years ended December 31, 2013 and 2012, we recognized a gain of $5.4 million and $2.7 million, respectively, related to the revaluation of our warrant liabilities. |
Concentration Risk, Credit Risk, Policy [Policy Text Block] | ' |
Concentration of Credit Risk |
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Financial instruments, which potentially subject us to a concentration of risk, include cash and accounts receivable. All of our customers are based in the United States at this time and we are not subject to exchange risk for accounts receivable. |
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The Company maintains its cash in domestic financial institutions subject to insurance coverage issued by the Federal Deposit Insurance Corporation (FDIC). Under FDIC rules, the company is entitled to aggregate coverage as defined by the Federal regulation per account type per separate legal entity per financial institution. The Company has incurred no losses as a result of any credit risk exposures. |
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For the year ended December 31, 2013, two customers accounted for approximately 76% of revenues and four customers accounted for approximately 91% of accounts receivable. |
New Accounting Pronouncements, Policy [Policy Text Block] | ' |
Recently Issued or Newly Adopted Accounting Pronouncements |
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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. |
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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. |
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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. The adoption of ASU 2013-11 did not have a material effect on our consolidated financial position or results of operations. |