Document And Entity Information
Document And Entity Information - shares | 6 Months Ended | |
Jun. 30, 2016 | Aug. 12, 2016 | |
Document Information [Line Items] | ||
Entity Registrant Name | CATASYS, INC. | |
Entity Central Index Key | 1,136,174 | |
Trading Symbol | cats | |
Current Fiscal Year End Date | --12-31 | |
Entity Filer Category | Smaller Reporting Company | |
Entity Current Reporting Status | Yes | |
Entity Voluntary Filers | No | |
Entity Well-known Seasoned Issuer | No | |
Entity Common Stock, Shares Outstanding (in shares) | 55,053,458 | |
Document Type | 10-Q | |
Document Period End Date | Jun. 30, 2016 | |
Document Fiscal Year Focus | 2,016 | |
Document Fiscal Period Focus | Q2 | |
Amendment Flag | false |
Condensed Consolidated Balance
Condensed Consolidated Balance Sheets (Current Period Unaudited) - USD ($) | Jun. 30, 2016 | Dec. 31, 2015 |
Current assets | ||
Cash and cash equivalents | $ 52,000 | $ 916,000 |
Receivables, net of allowance for doubtful accounts of $0 and $0, respectively | 909,000 | 590,000 |
Prepaids and other current assets | 330,000 | 575,000 |
Total current assets | 1,291,000 | 2,081,000 |
Long-term assets | ||
Property and equipment, net of accumulated depreciation of $1,543 and $1,491, respectively | 407,000 | 412,000 |
Deposits and other assets | 371,000 | 387,000 |
Total Assets | 2,069,000 | 2,880,000 |
Current liabilities | ||
Accounts payable | 734,000 | 753,000 |
Accrued compensation and benefits | 1,905,000 | 1,703,000 |
Deferred revenue | 2,801,000 | 1,683,000 |
Other accrued liabilities | 586,000 | 682,000 |
Short term debt, related party, net of discount of $0 and $0, respectively | 6,105,000 | |
Short term derivative liability | 5,192,000 | |
Total current liabilities | 17,323,000 | 4,821,000 |
Long-term liabilities | ||
Deferred rent and other long-term liabilities | 158,000 | 198,000 |
Capital leases | 56,000 | 66,000 |
Long term debt, related party, net of discount of $0 and $0, respectively | 3,662,000 | |
Long term derivative liability | 2,348,000 | |
Warrant liabilities | 1,919,000 | 509,000 |
Total Liabilities | 19,456,000 | 11,604,000 |
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; 55,007,761 and 55,007,761 shares issued and outstanding at June 30, 2016 and December 31, 2015, respectively | 6,000 | 6,000 |
Additional paid-in-capital | 253,402,000 | 253,053,000 |
Accumulated deficit | (270,795,000) | (261,783,000) |
Total Stockholders' Deficit | (17,387,000) | (8,724,000) |
Total Liabilities and Stockholders' Deficit | $ 2,069,000 | $ 2,880,000 |
Condensed Consolidated Balance3
Condensed Consolidated Balance Sheets (Current Period Unaudited) (Parentheticals) - USD ($) | Jun. 30, 2016 | Dec. 31, 2015 |
Receivables, allowance for doubtful accounts | $ 0 | $ 0 |
Property and equipment, accumulated dereciation | 1,543,000 | 1,491,000 |
Short term debt, net of discount | 0 | 0 |
Long term debt, net of discount | $ 0 | $ 0 |
Preferred stock, par value (in dollars per share) | $ 0.0001 | $ 0.0001 |
Preferred stock, shares authorized (in shares) | 50,000,000 | 50,000,000 |
Preferred stock, shares issued (in shares) | 0 | 0 |
Preferred stock, shares outstanding (in shares) | 0 | 0 |
Common stock, par value (in dollars per share) | $ 0.0001 | $ 0.0001 |
Common stock, shares authorized (in shares) | 500,000,000 | 500,000,000 |
Common stock, shares issued (in shares) | 55,007,761 | 55,007,761 |
Common stock, shares outstanding (in shares) | 55,007,761 | 55,007,761 |
Condensed Consolidated Statemen
Condensed Consolidated Statements of Operations (Unaudited) - USD ($) | 3 Months Ended | 6 Months Ended | ||
Jun. 30, 2016 | Jun. 30, 2015 | Jun. 30, 2016 | Jun. 30, 2015 | |
Revenues: | ||||
Healthcare services revenues | $ 1,223,000 | $ 472,000 | $ 1,951,000 | $ 905,000 |
Operating expenses | ||||
Cost of healthcare services | 1,162,000 | 529,000 | 2,128,000 | 935,000 |
General and administrative | 2,136,000 | 2,422,000 | 4,323,000 | 5,156,000 |
Depreciation and amortization | 32,000 | 30,000 | 64,000 | 64,000 |
Total operating expenses | 3,330,000 | 2,981,000 | 6,515,000 | 6,155,000 |
Loss from operations | (2,107,000) | (2,509,000) | (4,564,000) | (5,250,000) |
Other Income | 10,000 | 10,000 | 75,000 | 21,000 |
Interest expense | (591,000) | (1,110,000) | (924,000) | (1,112,000) |
Loss on exchange of warrants | (4,410,000) | (4,410,000) | ||
Change in fair value of warrant liability | (522,000) | 7,434,000 | (750,000) | 9,908,000 |
Change in fair value of derivative liability | (1,507,000) | (2,844,000) | ||
Loss from operations before provision for income taxes | (4,717,000) | (585,000) | (9,007,000) | (843,000) |
Provision for income taxes | 3,000 | 2,000 | 5,000 | 4,000 |
Net Loss | $ (4,720,000) | $ (587,000) | $ (9,012,000) | $ (847,000) |
Basic and diluted net loss from operations per share: (in dollars per share) | $ (0.09) | $ (0.02) | $ (0.16) | $ (0.03) |
Basic and diluted weighted number of shares outstanding (in shares) | 55,008 | 35,375 | 55,008 | 30,358 |
Condensed Consolidated Stateme5
Condensed Consolidated Statement of Cash Flows (Unaudited) - USD ($) | 6 Months Ended | |
Jun. 30, 2016 | Jun. 30, 2015 | |
Common Stock Issued for Consulting Services [Member] | ||
Adjustments to reconcile net income (loss) to net cash used in operating activities: | ||
Issuance of stock and warrants for services | $ 172,000 | |
Warrants Issued for Services [Member] | ||
Adjustments to reconcile net income (loss) to net cash used in operating activities: | ||
Issuance of stock and warrants for services | 56,000 | |
Net loss | (9,012,000) | (847,000) |
Depreciation and amortization | 64,000 | 63,000 |
Amortization of debt discount and issuance costs included in interest expense | 660,000 | 1,056,000 |
Provision for doubtful account | 20,000 | 75,000 |
Deferred rent | (45,000) | (34,000) |
Share-based compensation expense | 349,000 | 1,037,000 |
Loss on exchange of warrants | 4,410,000 | |
Fair Value Adjustment of Warrants | 750,000 | (9,908,000) |
Fair value adjustment on derivative liability | 2,844,000 | |
Changes in current assets and liabilities: | ||
Receivables | (339,000) | 230,000 |
Prepaids and other current assets | 245,000 | 118,000 |
Deferred revenue | 1,118,000 | 499,000 |
Accounts payable and other accrued liabilities | 397,000 | 478,000 |
Net cash used in operating activities | (2,949,000) | (2,595,000) |
Investing activities: | ||
Purchases of property and equipment | (26,000) | (16,000) |
Deposits and other assets | 16,000 | |
Net cash used in investing activities | (10,000) | (16,000) |
Financing activities: | ||
Proceeds from the issuance of convertible debenture | 2,000,000 | |
Proceeds from bridge loan | 2,185,000 | 250,000 |
Transaction Costs | (185,000) | |
Capital lease obligations | (90,000) | (10,000) |
Net cash provided by financing activities | 2,095,000 | 2,055,000 |
Net decrease in cash and cash equivalents | (864,000) | (556,000) |
Cash and cash equivalents at beginning of period | 916,000 | 708,000 |
Cash and cash equivalents at end of period | 52,000 | 152,000 |
Supplemental disclosure of cash paid | ||
Income taxes | 37,000 | 34,000 |
Supplemental disclosure of non-cash activity | ||
Property and equipment acquired through capital leases and other financing | $ 43,000 |
Note 1 - Basis of Consolidation
Note 1 - Basis of Consolidation, Presentation and Going Concern | 6 Months Ended |
Jun. 30, 2016 | |
Notes to Financial Statements | |
Organization, Consolidation and Presentation of Financial Statements Disclosure [Text Block] | Note 1. Basis of Consolidation, Presentation and Going Concern The accompanying unaudited condensed consolidated financial statements for Catasys, Inc. and its 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 included in our most recent Annual Report on Form 10-K for the year-ended December 31, 2015, from which the balance sheets, as of December 31, 2015, have been derived. Our financial statements have been prepared on the basis that we will continue as a going concern. At June 30, 2016, cash and cash equivalents was $52,000 and we had a working capital deficit of approximately $16 million. In July 2016, we amended and restated the June 2016 promissory note with Acuitas Group Holdings, LLC (“Acuitas”), a limited liability company, 100% owned by our Chief Executive Officer and Chairman, to increase the amount of the promissory note by $570,000, for a total of $2.8 million principal amount. We have incurred significant operating losses and negative cash flows from operations since our inception. During the six months ended June 30, 2016, our cash used in operating activities was $2.9 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 June 30, 2016, these conditions raised substantial doubt as to our ability to continue as a going concern. We expect our current cash resources to cover expenses through September 2016; however delays in cash collections, revenue, or unforeseen expenditures could negatively impact our estimate. We are in need of additional capital, however, there is no assurance that additional capital can be timely raised in an amount which is sufficient for us or on terms favorable to us and our stockholders, if at all. If we do not obtain additional capital, there is a significant doubt as to whether we can continue to operate as a going concern and we will need to curtail or cease operations or seek bankruptcy relief. If we discontinue operations, we may not have sufficient funds to pay any amounts to stockholders. Our ability to fund our ongoing operations and continue as a going concern is dependent on increasing the number of members that are eligible for our programs by signing new contracts and generating fees from existing and new contracts for our managed care programs and the success of management’s plans to increase revenue and continue to control expenses. We currently operate our On Trak |
Note 2 - Summary of Significant
Note 2 - Summary of Significant Accounting Policies | 6 Months Ended |
Jun. 30, 2016 | |
Notes to Financial Statements | |
Significant Accounting Policies [Text Block] | Note 2. Summary of Significant Accounting Policies Revenue Recognition 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 the performance guarantees, we recognize the case rate ratably over the twelve months of the program. Cost of 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 On Trak TM 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. 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. As of June 30, 2016, we had no cash and cash equivalents exceeding federally insured limits. For the six months ended June 30, 2016, two customers accounted for approximately 77% of the Company’s revenues and two customers accounted for approximately 85% 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 4,866,927 and 2,635,635 incremental common shares for the six months ended June 30, 2016 and 2015, respectively, issuable upon the exercise of stock options and warrants have been excluded from the diluted earnings per share calculation as their effect is anti-dilutive. 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 June 30, 2016, we had 1,464,154 vested and unvested shares outstanding and 303,609 shares available for future awards under the Plan. Share-based compensation expense attributable to continuing operations were $174,000 and $349,000 for the three and six months ended June 30, 2016, compared with $209,000 and $1.0 million for the same periods in 2015, respectively. 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. Share-based compensation expense recognized for employees and directors for the three and six months ended June 30, 2016 was $174,000 and $349,000, compared with $208,000 and $1 million, for the same periods in 2015, respectively. 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 six months ended June 30, 2016 and 2015 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. There were no options granted to employees and directors during the three and six months ended June 30, 2016, compared with 1,050,000 options granted to directors and 250,000 options granted to employees during the same period in 2015 under the Plan. Employee and director stock option activity for the three and six months ended June 30, 2016 are as follows: Weighted Avg. Shares Exercise Price Balance December 31, 2015 1,471,000 $ 6.49 Granted - $ - Cancelled (7,000 ) $ 10.38 Balance March 31, 2016 1,464,000 $ 6.49 Granted - $ - Cancelled - $ - Balance June 30, 2016 1,464,000 $ 6.49 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 six months ended June 30, 2016 and 2015, reflects the application of the simplified method prescribed in Securities and Exchange Commission (“SEC”) Staff Accounting Bulletin (“SAB”) No. 107 (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 June 30, 2016, there was $667,000 of total unrecognized compensation cost 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 1.35 years. Stock Options and Warrants – Non-employees We account for the issuance of options and warrants for services from non-employees 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 six months ended June 30, 2016 and 2015, respectively. Share-based compensation expense relating to stock options and warrants recognized for non-employees was $0 and $0 for the three and six months ended June 30, 2016 and $1,000 and $3,000 for the three and six months ended June 30, 2015, respectively. There was no non-employee stock option activity for the three and six months ended June 30, 2016. Common Stock There were no shares of common stock issued for investor relations or consulting services during the three and six months ended June 30, 2016 compared to 0 and 76,000 shares issued for the same periods in 2015, respectively. Generally, the costs associated with shares issued for services are being amortized to the related expense on a straight-line basis over the related service periods. Income Taxes We have recorded a full valuation allowance against our otherwise recognizable deferred tax assets as of June 30, 2016. As such, we have not recorded a provision for income tax for the period ended June 30, 2016. We utilize the liability method of accounting for income taxes as set forth in ASC 740, Income Taxes. 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. 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 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 June 30, 2016 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 June 30, 2016 for assets and liabilities measured at fair value: Balance at June 30, 2016 (Amounts in thousands) Level I Level II Level III Total Certificates of deposit 106 - - 106 Total assets 106 - - 106 Warrant liabilities - - 1,919 1,919 Derivative Liability 5,192 5,192 Total liabilities - - 7,111 7,111 Financial instruments classified as Level III in the fair value hierarchy as of June 30, 2016, represent our liabilities measured at market value on a recurring basis which include warrant liabilities and derivative liabilities resulting from recent debt and equity financings. In accordance with current accounting rules, the warrant liabilities and derivative liabilities are being marked-to-market each quarter-end until they are completely settled. The warrants and derivatives 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 Derivative Liabilities The following table summarizes our fair value measurements using significant Level III inputs, and changes therein, for the three and six months ended June 30, 2016: Level III Level III Warrant Derivative (Dollars in thousands) Liabilities (Dollars in thousands) Liabilities Balance as of December 31, 2015 $ 509 Balance as of December 31, 2015 $ 2,348 Issuance of warrants 216 Issuance of warrants - Change in fair value 228 Change in fair value 1,337 Balance as of March 31, 2016 $ 953 Balance as of March 31, 2016 $ 3,685 Issuance (exercise) of warrants, net 444 Issuance (exercise) of warrants, net - Change in fair value 522 Change in fair value 1,507 Balance as of June 30, 2016 $ 1,919 Balance as of June 30, 2016 $ 5,192 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. Warrant Liabilities In March 2016, we entered into a promissory note with Acuitas, pursuant to which we received aggregate gross proceeds of $900,000 for the sale of $900,000 in principal amount (the "March 2016 Promissory Note"). The March 2016 Promissory Note is due within 30 business days of demand by Acuitas (the "Maturity Date"), and carries an interest rate on any unpaid principal amount of 8% per annum until the Maturity Date, after which the interest will increase to 12% per annum. In addition, we issued Acuitas five-year warrants to purchase an aggregate 450,000 shares of our common stock, at an exercise price of $0.47 per share, which warrants include, subject to certain exceptions, a full-ratchet anti-dilution protection ( the “March 2016 Warrants”). The number of warrants were subsequently increased to 640,909 and the exercise price of the March 2016 Warrants were subsequently reduced to $0.33 per share based upon the May 2016 Promissory Note. In April 2016, we amended and restated the March 2016 Promissory Note to increase the amount by $400,000, for a total of $1.3 million (the “April 2016 Promissory Note”). In connection with the amendment, we issued Acuitas five-year warrants to purchase an additional 200,000 shares of our common stock, at an exercise price of $0.47 per share, which warrants include, subject to certain exceptions, a full-ratchet anti-dilution protection ( the “April 2016 Warrants”). The number of warrants were subsequently increased to 284,848 and the exercise price of the April 2016 Warrants were subsequently reduced to $0.33 per share based upon the May 2016 Promissory Note. In May 2016, we amended and restated the April 2016 Promissory Note to increase the amount by $405,000, for a total of $1.7 million (the “May 2016 Promissory Note”). In connection with the amendment, we issued Acuitas five-year warrants to purchase an additional 306,818 shares of our common stock, at an exercise price of $0.33 per share, which warrants include, subject to certain exceptions, a full-ratchet anti-dilution protection ( the “May 2016 Warrants”). In June 2016, we amended and restated the May 2016 Promissory Note to increase the amount by $480,000, for a total of $2.2 million (the “June 2016 Promissory Notes”). In connection with the amendment, we issued Acuitas five-year warrants to purchase an additional 363,636 shares of our common stock, at an exercise price of $0.33 per share, which warrants include, subject to certain exceptions, a full-ratchet anti-dilution protection ( the “June 2016 Warrants”). The warrant liability associated with the March 2016 Warrants, April 2016 Warrants, May 2016 Warrants, and June 2016 Warrants was calculated using the Black-Scholes model based upon the following assumptions: June 30 , 201 6 Expected volatility 133.19% Risk-free interest rate 0.71% - 1.01% Weighted average expected lives in years 0.49 - 5 Expected dividend 0% We have issued warrants to purchase common stock in December 2011, February 2012, April 2015, July 2015, March 2016, April 2016, May 2016, and June 2016. The warrants are being accounted for as liabilities in accordance with FASB accounting rules, due to anti-dilution 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 six months ended June 30, 2016 and 2015, we recognized a loss of $522,000 and $750,000, respectively, compared with a gain of $7.4 million and $9.9 million for the same periods in 2015, respectively, related to the revaluation of our warrant liabilities. Derivative Liability In July 2015, we entered into a $3.55 million 12% Original Issue Discount Convertible Debenture due January 18, 2016 with Acuitas (the “July 2015 Convertible Debenture”). The conversion price of the July 2015 Convertible Debenture is $1.90 per share, subject to adjustments, including for issuances of common stock and common stock equivalents below the then current conversion or exercise price, as the case may be. In October 2016, we entered into an amendment of the July 2015 Convertible Debenture which extended the maturity date of the Convertible Debenture from January 18, 2016 to January 18, 2017. In addition, the conversion price of July 2015 Convertible Debenture was subsequently adjusted to to $0.30 per share. The July 2015 Convertible Debentures are unsecured, bear interest at a rate of 12% per annum payable in cash or shares of common stock, subject to certain conditions, at our option, and are subject to mandatory prepayment upon the consummation of certain future financings. The derivative liability associated with the July 2015 Convertible Debenture was calculated using the Black-Scholes model based upon the following assumptions: June 30 , 201 6 Expected volatility 133.19 % Risk-free interest rate 0.36 % Weighted average expected lives in years 0.55 Expected dividend 0 % The expected volatility assumption for the six months ended June 30, 2016 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 2015 reflect the application of the simplified method set out in SEC 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. For the three and six months ended June 30, 2016, we recognized a loss of $1.5 million and $2.8 million, respectively, compared with a $0 for the same periods in 2015, related to the revaluation of our derivative liability. Recently Issued or Newly Adopted Accounting Standards In April 2016, the FASB issued Accounting Standards Update (“ASU”) 2016-10, Revenue from Contracts with Customers (Topic 606) In March 2016, the FASB issued ASU 2016-09, Compensation — Stock Compensation (Topic 718): Improvements to Employee Share-Based Payment Accounting The adoption of ASU 2016-09 did not have a material effect on our consolidated financial positon or results of operations. In February 2015, the FASB issued ASU 2015-02, Consolidation (Topic 810): Amendments to the Consolidation Analysis In August 2014, the FASB issued FASB ASU 2014-15, Presentation of Financial Statements—Going Concern (Subtopic 205-40): Disclosure of Uncertainties about an Entity’s Ability to Continue as a Going Concern, . changes to the disclosure of uncertainties about an entity’s ability to continue as a going concern. Under U.S. GAAP, continuation of a reporting entity as a going concern is presumed as the basis for preparing financial statements unless and until the entity’s liquidation becomes imminent. Even if an entity’s liquidation is not imminent, there may be conditions or events that raise substantial doubt about the entity’s ability to continue as a going concern. Because there is no guidance in U.S. GAAP about management’s responsibility to evaluate whether there is substantial doubt about an entity’s ability to continue as a going concern or to provide related note disclosures, there is diversity in practice whether, when, and how an entity discloses the relevant conditions and events in its financial statements. As a result, these changes require an entity’s management to evaluate whether there are conditions or events, considered in the aggregate, that raise substantial doubt about the entity’s ability to continue as a going concern within one year after the date that financial statements are issued. Substantial doubt is defined as an indication that it is probable that an entity will be unable to meet its obligations as they become due within one year after the date that financial statements are issued. If management has concluded that substantial doubt exists, then the following disclosures should be made in the financial statements: (i) principal conditions or events that raised the substantial doubt, (ii) management’s evaluation of the significance of those conditions or events in relation to the entity’s ability to meet its obligations, (iii) management’s plans that alleviated the initial substantial doubt or, if substantial doubt was not alleviated, management’s plans that are intended to at least mitigate the conditions or events that raise substantial doubt, and (iv) if the latter in (iii) is disclosed, an explicit statement that there is substantial doubt about the entity’s ability to continue as a going concern. ASU 2014-15 is effective for periods beginning after December 15, 2016. The adoption of ASU 2013-15 will not have a material effect on our consolidated financial position or results of operations. |
Note 3 - Related Party Disclosu
Note 3 - Related Party Disclosure | 6 Months Ended |
Jun. 30, 2016 | |
Notes to Financial Statements | |
Related Party Transactions Disclosure [Text Block] | Note 3. Related Party Disclosure In March 2016, we entered into the March 2016 Promissory Note and March 2016 Warrants to Acuitas. In April 2016, we entered into the April 2016 Promissory Note and issued the April 2016 Warrant to Acuitas. In May 2016, we entered into the May 2016 Promissory Note and issued the May 2016 Warrant to Acuitas. In June 2016, we entered into the June 2016 Promissory Notes and issued the June 2016 Warrants to Acuitas. In addition, we have accounts payable outstanding with Mr. Peizer for travel and expenses of $166,000 as of June 30, 2016. We also have $969,000 in deferred salary owed to Mr. Peizer as of June 30, 2016. |
Note 4 - Short-term Debt
Note 4 - Short-term Debt | 6 Months Ended |
Jun. 30, 2016 | |
Notes to Financial Statements | |
Debt Disclosure [Text Block] | Note 4. Short-term Debt In March 2016, we entered into a promissory note with Acuitas, pursuant to which we received aggregate gross proceeds of $900,000 for the sale of $900,000 in principal amount (the "March 2016 Promissory Note"). The March 2016 Promissory Note is due within 30 business days of demand by Acuitas (the "Maturity Date"), and carries an interest rate on any unpaid principal amount of 8% per annum until the Maturity Date, after which the interest will increase to 12% per annum. In addition, we issued Acuitas five-year warrants to purchase an aggregate 450,000 shares of our common stock, at an exercise price of $0.47 per share, which warrants include, subject to certain exceptions, a full-ratchet anti-dilution protection ( the “March 2016 Warrants”). The number of warrants were subsequently increased to 640,909 and the exercise price of the March 2016 Warrants were subsequently reduced to $0.33 per share based upon the May 2016 Promissory Note. In April 2016, we amended and restated the March 2016 Promissory Note to increase the amount by $400,000, for a total of $1.3 million (the “April 2016 Promissory Note”). In connection with the amendment, we issued Acuitas five-year warrants to purchase an additional 200,000 shares of our common stock, at an exercise price of $0.47 per share, which warrants include, subject to certain exceptions, a full-ratchet anti-dilution protection ( the “April 2016 Warrants”). The number of warrants were subsequently increased to 284,848 and the exercise price of the April 2016 Warrants were subsequently reduced to $0.33 per share based upon the May 2016 Promissory Note. In May 2016, we amended and restated the April 2016 Promissory Note to increase the amount by $405,000, for a total of $1.7 million (the “May 2016 Promissory Note”). In connection with the amendment, we issued Acuitas five-year warrants to purchase an additional 306,818 shares of our common stock, at an exercise price of $0.33 per share, which warrants include, subject to certain exceptions, a full-ratchet anti-dilution protection ( the “May 2016 Warrants”). In June 2016, we amended and restated the May 2016 Promissory Note to increase the amount by $480,000, for a total of $2.2 million (the “June 2016 Promissory Notes”). In connection with the amendment, we issued Acuitas five-year warrants to purchase an additional 363,636 shares of our common stock, at an exercise price of $0.33 per share, which warrants include, subject to certain exceptions, a full-ratchet anti-dilution protection ( the “June 2016 Warrants”). |
Note 5 - Subsequent Event
Note 5 - Subsequent Event | 6 Months Ended |
Jun. 30, 2016 | |
Notes to Financial Statements | |
Subsequent Events [Text Block] | Note 5. Subsequent Event In July 2016, we amended the June 2016 Promissory Notes with Acuitas to increase the amount of the June 2016 Promissory Notes by $570,000, for a total of $2.8 million in principle amount (the “July 2016 Promissory Notes”). In connection with the amendment, we issued Acuitas five-year warrants to purchase an additional 431,818 shares of our common stock, at an exercise price of $0.33 per share, which warrants include, subject to certain exceptions, a full-ratchet anti-dilution protection (the “July 2015 Warrants”). In August 2016, Acuitas loaned us $225,000. No terms were discussed nor were any agreements executed in connection with such loan, but we currently contemplate that the $225,000 will either be paid back out of our next significant financing or invested in to such financing. On August 15, 2016, we entered into subscription agreements (each, the Subscription Agreement”) with three accredited investors, including Shamus, LLC, a company owned by David E. Smith, a member of our board of directors (collectively, the “Investors”), pursuant to which we issued to the Investors short-term senior promissory notes in the aggregate principal amount of $2,750,000 (the “Notes”) and five-year warrants to purchase aggregate of up to 875,000 shares of our common stock, at an exercise price of $1.10 per share (the “Warrants”). The Notes bear accrued interest on the unpaid principal amount of 8.0% per annum, which shall be increased to 10% in the event of default. The maturity date of the Notes is December 15, 2016, on which date we shall pay the outstanding principal amount and all accrued interest. In addition, the Notes are mandatorily payable in the event we close a public offering of our securities of at least $10.0 million. The Warrants include price protection provision pursuant to which, subject to certain exempt issuances, the then exercise price of the Warrants will be adjusted, in the case we issue shares of our common stock for consideration per share less than the then exercise price of the Warrants, to the lowest consideration per share for the shares issued or sold in such transaction. The price protection will be in effect until the earliest of (i) the termination date of the Warrants (August 15, 2021), (ii) such time as the Warrants are exercised or (iii) contemporaneously with the listing of our shares of common stock on a registered national securities exchange . |
Significant Accounting Policies
Significant Accounting Policies (Policies) | 6 Months Ended |
Jun. 30, 2016 | |
Accounting Policies [Abstract] | |
Revenue Recognition, Policy [Policy Text Block] | Revenue Recognition 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 the performance guarantees, we recognize the case rate ratably over the twelve months of the program. |
Cost of Sales, Policy [Policy Text Block] | Cost of 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 On Trak TM |
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. 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. As of June 30, 2016, we had no cash and cash equivalents exceeding federally insured limits. For the six months ended June 30, 2016, two customers accounted for approximately 77% of the Company’s revenues and two customers accounted for approximately 85% 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 4,866,927 and 2,635,635 incremental common shares for the six months ended June 30, 2016 and 2015, respectively, issuable upon the exercise of stock options and warrants have been excluded from the diluted earnings per share calculation as their effect is anti-dilutive. |
Share-based Compensation, Option and Incentive Plans Policy [Policy Text Block] | 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. Share-based compensation expense recognized for employees and directors for the three and six months ended June 30, 2016 was $174,000 and $349,000, compared with $208,000 and $1 million, for the same periods in 2015, respectively. 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 six months ended June 30, 2016 and 2015 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. There were no options granted to employees and directors during the three and six months ended June 30, 2016, compared with 1,050,000 options granted to directors and 250,000 options granted to employees during the same period in 2015 under the Plan. Employee and director stock option activity for the three and six months ended June 30, 2016 are as follows: Weighted Avg. Shares Exercise Price Balance December 31, 2015 1,471,000 $ 6.49 Granted - $ - Cancelled (7,000 ) $ 10.38 Balance March 31, 2016 1,464,000 $ 6.49 Granted - $ - Cancelled - $ - Balance June 30, 2016 1,464,000 $ 6.49 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 six months ended June 30, 2016 and 2015, reflects the application of the simplified method prescribed in Securities and Exchange Commission (“SEC”) Staff Accounting Bulletin (“SAB”) No. 107 (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 June 30, 2016, there was $667,000 of total unrecognized compensation cost 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 1.35 years. Stock Options and Warrants – Non-employees We account for the issuance of options and warrants for services from non-employees 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 six months ended June 30, 2016 and 2015, respectively. Share-based compensation expense relating to stock options and warrants recognized for non-employees was $0 and $0 for the three and six months ended June 30, 2016 and $1,000 and $3,000 for the three and six months ended June 30, 2015, respectively. There was no non-employee stock option activity for the three and six months ended June 30, 2016. |
Stockholders' Equity, Policy [Policy Text Block] | Common Stock There were no shares of common stock issued for investor relations or consulting services during the three and six months ended June 30, 2016 compared to 0 and 76,000 shares issued for the same periods in 2015, respectively. Generally, the costs associated with shares issued for services are being amortized to the related expense on a straight-line basis over the related service periods. |
Income Tax, Policy [Policy Text Block] | Income Taxes We have recorded a full valuation allowance against our otherwise recognizable deferred tax assets as of June 30, 2016. As such, we have not recorded a provision for income tax for the period ended June 30, 2016. We utilize the liability method of accounting for income taxes as set forth in ASC 740, Income Taxes. 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. 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 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 June 30, 2016 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 June 30, 2016 for assets and liabilities measured at fair value: Balance at June 30, 2016 (Amounts in thousands) Level I Level II Level III Total Certificates of deposit 106 - - 106 Total assets 106 - - 106 Warrant liabilities - - 1,919 1,919 Derivative Liability 5,192 5,192 Total liabilities - - 7,111 7,111 Financial instruments classified as Level III in the fair value hierarchy as of June 30, 2016, represent our liabilities measured at market value on a recurring basis which include warrant liabilities and derivative liabilities resulting from recent debt and equity financings. In accordance with current accounting rules, the warrant liabilities and derivative liabilities are being marked-to-market each quarter-end until they are completely settled. The warrants and derivatives 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 Derivative Liabilities The following table summarizes our fair value measurements using significant Level III inputs, and changes therein, for the three and six months ended June 30, 2016: Level III Level III Warrant Derivative (Dollars in thousands) Liabilities (Dollars in thousands) Liabilities Balance as of December 31, 2015 $ 509 Balance as of December 31, 2015 $ 2,348 Issuance of warrants 216 Issuance of warrants - Change in fair value 228 Change in fair value 1,337 Balance as of March 31, 2016 $ 953 Balance as of March 31, 2016 $ 3,685 Issuance (exercise) of warrants, net 444 Issuance (exercise) of warrants, net - Change in fair value 522 Change in fair value 1,507 Balance as of June 30, 2016 $ 1,919 Balance as of June 30, 2016 $ 5,192 |
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. |
Warrant Liabilities, Policy [Policy Text Block] | Warrant Liabilities In March 2016, we entered into a promissory note with Acuitas, pursuant to which we received aggregate gross proceeds of $900,000 for the sale of $900,000 in principal amount (the "March 2016 Promissory Note"). The March 2016 Promissory Note is due within 30 business days of demand by Acuitas (the "Maturity Date"), and carries an interest rate on any unpaid principal amount of 8% per annum until the Maturity Date, after which the interest will increase to 12% per annum. In addition, we issued Acuitas five-year warrants to purchase an aggregate 450,000 shares of our common stock, at an exercise price of $0.47 per share, which warrants include, subject to certain exceptions, a full-ratchet anti-dilution protection ( the “March 2016 Warrants”). The number of warrants were subsequently increased to 640,909 and the exercise price of the March 2016 Warrants were subsequently reduced to $0.33 per share based upon the May 2016 Promissory Note. In April 2016, we amended and restated the March 2016 Promissory Note to increase the amount by $400,000, for a total of $1.3 million (the “April 2016 Promissory Note”). In connection with the amendment, we issued Acuitas five-year warrants to purchase an additional 200,000 shares of our common stock, at an exercise price of $0.47 per share, which warrants include, subject to certain exceptions, a full-ratchet anti-dilution protection ( the “April 2016 Warrants”). The number of warrants were subsequently increased to 284,848 and the exercise price of the April 2016 Warrants were subsequently reduced to $0.33 per share based upon the May 2016 Promissory Note. In May 2016, we amended and restated the April 2016 Promissory Note to increase the amount by $405,000, for a total of $1.7 million (the “May 2016 Promissory Note”). In connection with the amendment, we issued Acuitas five-year warrants to purchase an additional 306,818 shares of our common stock, at an exercise price of $0.33 per share, which warrants include, subject to certain exceptions, a full-ratchet anti-dilution protection ( the “May 2016 Warrants”). In June 2016, we amended and restated the May 2016 Promissory Note to increase the amount by $480,000, for a total of $2.2 million (the “June 2016 Promissory Notes”). In connection with the amendment, we issued Acuitas five-year warrants to purchase an additional 363,636 shares of our common stock, at an exercise price of $0.33 per share, which warrants include, subject to certain exceptions, a full-ratchet anti-dilution protection ( the “June 2016 Warrants”). The warrant liability associated with the March 2016 Warrants, April 2016 Warrants, May 2016 Warrants, and June 2016 Warrants was calculated using the Black-Scholes model based upon the following assumptions: June 30 , 201 6 Expected volatility 133.19% Risk-free interest rate 0.71% - 1.01% Weighted average expected lives in years 0.49 - 5 Expected dividend 0% We have issued warrants to purchase common stock in December 2011, February 2012, April 2015, July 2015, March 2016, April 2016, May 2016, and June 2016. The warrants are being accounted for as liabilities in accordance with FASB accounting rules, due to anti-dilution 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 six months ended June 30, 2016 and 2015, we recognized a loss of $522,000 and $750,000, respectively, compared with a gain of $7.4 million and $9.9 million for the same periods in 2015, respectively, related to the revaluation of our warrant liabilities. |
Derivatives, Policy [Policy Text Block] | Derivative Liability In July 2015, we entered into a $3.55 million 12% Original Issue Discount Convertible Debenture due January 18, 2016 with Acuitas (the “July 2015 Convertible Debenture”). The conversion price of the July 2015 Convertible Debenture is $1.90 per share, subject to adjustments, including for issuances of common stock and common stock equivalents below the then current conversion or exercise price, as the case may be. In October 2016, we entered into an amendment of the July 2015 Convertible Debenture which extended the maturity date of the Convertible Debenture from January 18, 2016 to January 18, 2017. In addition, the conversion price of July 2015 Convertible Debenture was subsequently adjusted to to $0.30 per share. The July 2015 Convertible Debentures are unsecured, bear interest at a rate of 12% per annum payable in cash or shares of common stock, subject to certain conditions, at our option, and are subject to mandatory prepayment upon the consummation of certain future financings. The derivative liability associated with the July 2015 Convertible Debenture was calculated using the Black-Scholes model based upon the following assumptions: June 30 , 201 6 Expected volatility 133.19 % Risk-free interest rate 0.36 % Weighted average expected lives in years 0.55 Expected dividend 0 % The expected volatility assumption for the six months ended June 30, 2016 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 2015 reflect the application of the simplified method set out in SEC 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. For the three and six months ended June 30, 2016, we recognized a loss of $1.5 million and $2.8 million, respectively, compared with a $0 for the same periods in 2015, related to the revaluation of our derivative liability. |
New Accounting Pronouncements, Policy [Policy Text Block] | Recently Issued or Newly Adopted Accounting Standards In April 2016, the FASB issued Accounting Standards Update (“ASU”) 2016-10, Revenue from Contracts with Customers (Topic 606) In March 2016, the FASB issued ASU 2016-09, Compensation — Stock Compensation (Topic 718): Improvements to Employee Share-Based Payment Accounting The adoption of ASU 2016-09 did not have a material effect on our consolidated financial positon or results of operations. In February 2015, the FASB issued ASU 2015-02, Consolidation (Topic 810): Amendments to the Consolidation Analysis In August 2014, the FASB issued FASB ASU 2014-15, Presentation of Financial Statements—Going Concern (Subtopic 205-40): Disclosure of Uncertainties about an Entity’s Ability to Continue as a Going Concern, . changes to the disclosure of uncertainties about an entity’s ability to continue as a going concern. Under U.S. GAAP, continuation of a reporting entity as a going concern is presumed as the basis for preparing financial statements unless and until the entity’s liquidation becomes imminent. Even if an entity’s liquidation is not imminent, there may be conditions or events that raise substantial doubt about the entity’s ability to continue as a going concern. Because there is no guidance in U.S. GAAP about management’s responsibility to evaluate whether there is substantial doubt about an entity’s ability to continue as a going concern or to provide related note disclosures, there is diversity in practice whether, when, and how an entity discloses the relevant conditions and events in its financial statements. As a result, these changes require an entity’s management to evaluate whether there are conditions or events, considered in the aggregate, that raise substantial doubt about the entity’s ability to continue as a going concern within one year after the date that financial statements are issued. Substantial doubt is defined as an indication that it is probable that an entity will be unable to meet its obligations as they become due within one year after the date that financial statements are issued. If management has concluded that substantial doubt exists, then the following disclosures should be made in the financial statements: (i) principal conditions or events that raised the substantial doubt, (ii) management’s evaluation of the significance of those conditions or events in relation to the entity’s ability to meet its obligations, (iii) management’s plans that alleviated the initial substantial doubt or, if substantial doubt was not alleviated, management’s plans that are intended to at least mitigate the conditions or events that raise substantial doubt, and (iv) if the latter in (iii) is disclosed, an explicit statement that there is substantial doubt about the entity’s ability to continue as a going concern. ASU 2014-15 is effective for periods beginning after December 15, 2016. The adoption of ASU 2013-15 will not have a material effect on our consolidated financial position or results of operations. |
Note 2 - Summary of Significa12
Note 2 - Summary of Significant Accounting Policies (Tables) | 6 Months Ended |
Jun. 30, 2016 | |
Notes Tables | |
Schedule of Share-based Compensation, Stock Options, Activity [Table Text Block] | Weighted Avg. Shares Exercise Price Balance December 31, 2015 1,471,000 $ 6.49 Granted - $ - Cancelled (7,000 ) $ 10.38 Balance March 31, 2016 1,464,000 $ 6.49 Granted - $ - Cancelled - $ - Balance June 30, 2016 1,464,000 $ 6.49 |
Schedule of Fair Value, Assets and Liabilities Measured on Recurring Basis [Table Text Block] | Balance at June 30, 2016 (Amounts in thousands) Level I Level II Level III Total Certificates of deposit 106 - - 106 Total assets 106 - - 106 Warrant liabilities - - 1,919 1,919 Derivative Liability 5,192 5,192 Total liabilities - - 7,111 7,111 |
Fair Value, Liabilities Measured on Recurring Basis, Unobservable Input Reconciliation [Table Text Block] | Level III Level III Warrant Derivative (Dollars in thousands) Liabilities (Dollars in thousands) Liabilities Balance as of December 31, 2015 $ 509 Balance as of December 31, 2015 $ 2,348 Issuance of warrants 216 Issuance of warrants - Change in fair value 228 Change in fair value 1,337 Balance as of March 31, 2016 $ 953 Balance as of March 31, 2016 $ 3,685 Issuance (exercise) of warrants, net 444 Issuance (exercise) of warrants, net - Change in fair value 522 Change in fair value 1,507 Balance as of June 30, 2016 $ 1,919 Balance as of June 30, 2016 $ 5,192 |
Fair Value Measurements, Recurring and Nonrecurring, Valuation Techniques [Table Text Block] | June 30 , 201 6 Expected volatility 133.19% Risk-free interest rate 0.71% - 1.01% Weighted average expected lives in years 0.49 - 5 Expected dividend 0% June 30 , 201 6 Expected volatility 133.19 % Risk-free interest rate 0.36 % Weighted average expected lives in years 0.55 Expected dividend 0 % |
Note 1 - Basis of Consolidati13
Note 1 - Basis of Consolidation, Presentation and Going Concern (Details Textual) - USD ($) | 6 Months Ended | |||
Jun. 30, 2016 | Jun. 30, 2015 | Dec. 31, 2015 | Dec. 31, 2014 | |
Chairman and Chief Executive Officer [Member] | Acuitas [Member] | ||||
Ownership Percentage by Related Party | 100.00% | |||
Proceeds from Issuance of Debt | $ 570,000 | |||
Debt Instrument, Face Amount | 2,800,000 | |||
Cash and Cash Equivalents, at Carrying Value | 52,000 | $ 152,000 | $ 916,000 | $ 708,000 |
Working Capital Deficit | 16,000,000 | |||
Net Cash Provided by (Used in) Operating Activities | $ (2,949,000) | $ (2,595,000) |
Note 2 - Summary of Significa14
Note 2 - Summary of Significant Accounting Policies (Details Textual) | 1 Months Ended | 3 Months Ended | 6 Months Ended | ||||||||
Jun. 30, 2016USD ($)$ / sharesshares | May 31, 2016USD ($)$ / sharesshares | Apr. 30, 2016USD ($)$ / sharesshares | Mar. 31, 2016USD ($)$ / sharesshares | Jun. 30, 2016USD ($)$ / sharesshares | Mar. 31, 2016USD ($)$ / sharesshares | Jun. 30, 2015USD ($)shares | Jun. 30, 2016USD ($)$ / sharesshares | Jun. 30, 2015USD ($)shares | Oct. 31, 2015$ / shares | Jul. 31, 2015USD ($)$ / shares | |
Sales Revenue, Net [Member] | Customer Concentration Risk [Member] | Two Customers [Member] | |||||||||||
Concentration Risk, Number of Customers | 2 | ||||||||||
Concentration Risk, Percentage | 77.00% | ||||||||||
Accounts Receivable [Member] | Customer Concentration Risk [Member] | Two Customers [Member] | |||||||||||
Concentration Risk, Number of Customers | 2 | ||||||||||
Concentration Risk, Percentage | 85.00% | ||||||||||
Twenty Ten Stock Incentive Plan [Member] | Minimum [Member] | |||||||||||
Share-based Compensation Arrangement by Share-based Payment Award, Award Vesting Period | 3 years | ||||||||||
Twenty Ten Stock Incentive Plan [Member] | Maximum [Member] | |||||||||||
Share-based Compensation Arrangement by Share-based Payment Award, Award Vesting Period | 5 years | ||||||||||
Twenty Ten Stock Incentive Plan [Member] | Employees and Directors [Member] | |||||||||||
Allocated Share-based Compensation Expense | $ 174,000 | $ 208,000 | $ 349,000 | $ 1,000,000 | |||||||
Share-based Compensation Arrangement by Share-based Payment Award, Options, Grants in Period, Gross | shares | 0 | 0 | |||||||||
Twenty Ten Stock Incentive Plan [Member] | Director [Member] | |||||||||||
Share-based Compensation Arrangement by Share-based Payment Award, Options, Grants in Period, Gross | shares | 1,050,000 | 1,050,000 | |||||||||
Twenty Ten Stock Incentive Plan [Member] | Employees [Member] | |||||||||||
Share-based Compensation Arrangement by Share-based Payment Award, Options, Grants in Period, Gross | shares | 250,000 | 250,000 | |||||||||
Twenty Ten Stock Incentive Plan [Member] | |||||||||||
Share-based Compensation Arrangement by Share-based Payment Award, Number of Shares Authorized | shares | 1,825,000 | 1,825,000 | 1,825,000 | ||||||||
Share-based Compensation Arrangement by Share-based Payment Award, Expiration Period | 10 years | ||||||||||
Minimum [Member] | Furniture and Equipment [Member] | |||||||||||
Property, Plant and Equipment, Useful Life | 2 years | ||||||||||
Minimum [Member] | Leasehold Improvements [Member] | |||||||||||
Property, Plant and Equipment, Useful Life | 5 years | ||||||||||
Maximum [Member] | Furniture and Equipment [Member] | |||||||||||
Property, Plant and Equipment, Useful Life | 7 years | ||||||||||
Maximum [Member] | Leasehold Improvements [Member] | |||||||||||
Property, Plant and Equipment, Useful Life | 7 years | ||||||||||
Employees and Directors [Member] | |||||||||||
Share-based Compensation Arrangement by Share-based Payment Award, Options, Grants in Period, Gross | shares | |||||||||||
Stock Options and Warrants Nonemployees [Member] | |||||||||||
Allocated Share-based Compensation Expense | $ 0 | $ 1,000 | $ 0 | $ 3,000 | |||||||
Share-based Compensation Arrangement by Share-based Payment Award, Options, Grants in Period, Gross | shares | 0 | 0 | 0 | 0 | |||||||
Common Stock [Member] | |||||||||||
Stock Issued During Period, Shares, Issued for Services | shares | 0 | 0 | 0 | 76,000 | |||||||
Acuitas [Member] | March 2016 Promissory Note [Member] | |||||||||||
Proceeds from Issuance of Debt | $ 900,000 | ||||||||||
Debt Instrument, Term | 30 days | ||||||||||
Debt Instrument, Interest Rate, Stated Percentage | 8.00% | 8.00% | |||||||||
Debt Instrument, Interest Rate, Stated Percentage After Maturity Date | 12.00% | ||||||||||
Debt Instrument, Face Amount | $ 900,000 | $ 900,000 | |||||||||
Acuitas [Member] | April 2016 Promissory Note [Member] | |||||||||||
Proceeds from Issuance of Debt | $ 400,000 | ||||||||||
Debt Instrument, Face Amount | $ 1,300,000 | ||||||||||
Acuitas [Member] | May 2016 Promissory Note [Member] | |||||||||||
Proceeds from Issuance of Debt | $ 405,000 | ||||||||||
Debt Instrument, Face Amount | $ 1,700,000 | ||||||||||
Acuitas [Member] | June 2016 Promissory Notes [Member] | |||||||||||
Proceeds from Issuance of Debt | $ 480,000 | ||||||||||
Debt Instrument, Face Amount | 2,200,000 | $ 2,200,000 | $ 2,200,000 | ||||||||
Short-term Debt | $ 2,200,000 | $ 2,200,000 | $ 2,200,000 | ||||||||
Acuitas [Member] | |||||||||||
Warrant Term | 5 years | 5 years | 5 years | 5 years | |||||||
Class of Warrant or Right, Number of Securities Called by Warrants or Rights | shares | 363,636 | 306,818 | 200,000 | 450,000 | 363,636 | 450,000 | 363,636 | ||||
Class of Warrant or Right, Exercise Price of Warrants or Rights | $ / shares | $ 0.33 | $ 0.33 | $ 0.47 | $ 0.47 | $ 0.33 | $ 0.47 | $ 0.33 | ||||
Class of Warrant or Right, Outstanding | shares | 284,848 | 640,909 | 640,909 | ||||||||
July 2015 Convertible Debenture [Member] | Acuitas [Member] | |||||||||||
Debt Instrument, Interest Rate, Stated Percentage | 12.00% | ||||||||||
Debt Instrument, Face Amount | $ 3,550,000 | ||||||||||
Debt Instrument, Convertible, Conversion Price | $ / shares | $ 0.30 | $ 1.90 | |||||||||
Cash, Uninsured Amount | $ 0 | $ 0 | $ 0 | ||||||||
Antidilutive Securities Excluded from Computation of Earnings Per Share, Amount | shares | 4,866,927 | 2,635,635 | |||||||||
Share-based Compensation Arrangement by Share-based Payment Award, Options, Vested and Expected to Vest, Outstanding, Number | shares | 1,464,154 | 1,464,154 | 1,464,154 | ||||||||
Share-based Compensation Arrangement by Share-based Payment Award, Number of Shares Available for Grant | shares | 303,609 | 303,609 | 303,609 | ||||||||
Share-based Compensation | $ 174,000 | $ 209,000 | $ 349,000 | $ 1,037,000 | |||||||
Employee Service Share-based Compensation, Nonvested Awards, Compensation Cost Not yet Recognized | $ 667,000 | 667,000 | $ 667,000 | ||||||||
Employee Service Share-based Compensation, Nonvested Awards, Compensation Cost Not yet Recognized, Period for Recognition | 1 year 127 days | ||||||||||
Fair Value Adjustment of Warrants | 522,000 | (7,434,000) | $ 750,000 | (9,908,000) | |||||||
Fair Value, Net Derivative Asset (Liability) Measured on Recurring Basis, Unobservable Inputs Reconciliation, Gain (Loss) Included in Earnings | $ (1,500,000) | $ 0 | $ (2,800,000) | $ 0 |
Note 2 - Employee and Director
Note 2 - Employee and Director Stock Option Activity (Details) - Employees and Directors [Member] - $ / shares | 3 Months Ended | 6 Months Ended | |
Jun. 30, 2016 | Mar. 31, 2016 | Jun. 30, 2016 | |
Balance (in shares) | 1,464,000 | 1,471,000 | 1,471,000 |
Balance (in dollars per share) | $ 6.49 | $ 6.49 | $ 6.49 |
Share-based Compensation Arrangement by Share-based Payment Award, Options, Grants in Period, Gross | |||
Granted (in dollars per share) | |||
Cancelled (in shares) | (7,000) | ||
Cancelled (in dollars per share) | $ 10.38 | ||
Balance (in shares) | 1,464,000 | 1,464,000 | 1,464,000 |
Balance (in dollars per share) | $ 6.49 | $ 6.49 | $ 6.49 |
Granted (in dollars per share) | |||
Cancelled (in dollars per share) | $ 10.38 |
Note 2 - Fair Value, Assets and
Note 2 - Fair Value, Assets and Liabilities Measured on Recurring Basis (Details) - USD ($) | Jun. 30, 2016 | Dec. 31, 2015 |
Fair Value, Inputs, Level 1 [Member] | ||
Certificates of deposit | $ 106,000 | |
Total assets | 106,000 | |
Warrant liabilities | ||
Derivative Liability | ||
Total liabilities | ||
Fair Value, Inputs, Level 2 [Member] | ||
Certificates of deposit | ||
Total assets | ||
Warrant liabilities | ||
Derivative Liability | ||
Total liabilities | ||
Fair Value, Inputs, Level 3 [Member] | ||
Certificates of deposit | ||
Total assets | ||
Warrant liabilities | 1,919,000 | |
Derivative Liability | 5,192,000 | |
Total liabilities | 7,111,000 | |
Certificates of deposit | 106,000 | |
Total assets | 106,000 | |
Warrant liabilities | 1,919,000 | $ 509,000 |
Derivative Liability | 5,192,000 | |
Total liabilities | $ 7,111,000 |
Note 2 - Fair Value Measurement
Note 2 - Fair Value Measurements Using Significant Level III Inputs (Details) - Fair Value, Inputs, Level 3 [Member] - USD ($) $ in Thousands | 3 Months Ended | |
Jun. 30, 2016 | Mar. 31, 2016 | |
Warrants [Member] | ||
Balance | $ 953 | $ 509 |
Issuance of warrants | 444 | 216 |
Change in fair value | 522 | 228 |
Balance | 1,919 | 953 |
Derivative Financial Instruments, Liabilities [Member] | ||
Balance | 3,685 | 2,348 |
Issuance of warrants | ||
Change in fair value | 1,507 | 1,337 |
Balance | $ 5,192 | $ 3,685 |
Note 2 - Fair Value Assumptions
Note 2 - Fair Value Assumptions (Details) | 6 Months Ended |
Jun. 30, 2016 | |
Derivative Liability [Member] | |
Expected volatility | 133.19% |
Risk-free interest rate | 0.36% |
Weighted average expected lives in years | 200 days |
Expected dividend | 0.00% |
Warrant Liability [Member] | Minimum [Member] | |
Risk-free interest rate | 0.71% |
Weighted average expected lives in years | 178 days |
Warrant Liability [Member] | Maximum [Member] | |
Risk-free interest rate | 1.01% |
Weighted average expected lives in years | 5 years |
Warrant Liability [Member] | |
Expected volatility | 133.19% |
Expected dividend | 0.00% |
Note 3 - Related Party Disclo19
Note 3 - Related Party Disclosure (Details Textual) - USD ($) | Jun. 30, 2016 | Dec. 31, 2015 |
Chairman and Chief Executive Officer [Member] | Deferred Salaries [Member] | ||
Due to Officers or Stockholders, Current | $ 969,000 | |
Chairman and Chief Executive Officer [Member] | ||
Accounts Payable, Current | 166,000 | |
Accounts Payable, Current | $ 734,000 | $ 753,000 |
Note 4 - Short-term Debt (Detai
Note 4 - Short-term Debt (Details Textual) - USD ($) | 1 Months Ended | |||
Jun. 30, 2016 | May 31, 2016 | Apr. 30, 2016 | Mar. 31, 2016 | |
Acuitas [Member] | March 2016 Promissory Note [Member] | ||||
Proceeds from Issuance of Debt | $ 900,000 | |||
Debt Instrument, Face Amount | $ 900,000 | |||
Debt Instrument, Term | 30 days | |||
Debt Instrument, Interest Rate, Stated Percentage | 8.00% | |||
Debt Instrument, Interest Rate, Stated Percentage After Maturity Date | 12.00% | |||
Acuitas [Member] | April 2016 Promissory Note [Member] | ||||
Proceeds from Issuance of Debt | $ 400,000 | |||
Debt Instrument, Face Amount | $ 1,300,000 | |||
Acuitas [Member] | May 2016 Promissory Note [Member] | ||||
Proceeds from Issuance of Debt | $ 405,000 | |||
Debt Instrument, Face Amount | $ 1,700,000 | |||
Acuitas [Member] | June 2016 Promissory Notes [Member] | ||||
Proceeds from Issuance of Debt | $ 480,000 | |||
Debt Instrument, Face Amount | $ 2,200,000 | |||
Acuitas [Member] | ||||
Warrant Term | 5 years | 5 years | 5 years | 5 years |
Class of Warrant or Right, Number of Securities Called by Warrants or Rights | 363,636 | 306,818 | 200,000 | 450,000 |
Class of Warrant or Right, Exercise Price of Warrants or Rights | $ 0.33 | $ 0.33 | $ 0.47 | $ 0.47 |
Class of Warrant or Right, Outstanding | 284,848 | 640,909 |
Note 5 - Subsequent Event (Deta
Note 5 - Subsequent Event (Details Textual) - USD ($) | Aug. 15, 2016 | Aug. 12, 2016 | Jul. 31, 2016 | Jun. 30, 2016 | May 31, 2016 | Apr. 30, 2016 | Mar. 31, 2016 |
Acuitas [Member] | July 2016 Promissory Note [Member] | Subsequent Event [Member] | |||||||
Proceeds from Issuance of Debt | $ 570,000 | ||||||
Debt Instrument, Face Amount | $ 2,800,000 | ||||||
Acuitas [Member] | Subsequent Event [Member] | |||||||
Proceeds from Issuance of Debt | $ 225,000 | ||||||
Senior Promissory Note [Member] | Subsequent Event [Member] | Acuitas [Member] | Exchanged Senior Demand Notes [Member] | |||||||
Debt Instrument, Face Amount | $ 2,800,000 | ||||||
Senior Promissory Note [Member] | Subsequent Event [Member] | Three Accredited Investors [Member] | |||||||
Debt Instrument, Face Amount | $ 2,750,000 | ||||||
Senior Promissory Note [Member] | Subsequent Event [Member] | |||||||
Debt Instrument, Interest Rate, Stated Percentage | 8.00% | ||||||
Debt Default, Annual Percentage | 10.00% | ||||||
Minimum Proceeds from Sale of Securities, Notes Become Mandatorily Payable | $ 10,000,000 | ||||||
Senior Demand Notes [Member] | Subsequent Event [Member] | Acuitas [Member] | |||||||
Extinguishment of Debt, Amount | $ 2,800,000 | ||||||
Subsequent Event [Member] | Acuitas [Member] | Additional Warrants [Member] | |||||||
Class of Warrant or Right, Number of Securities Called by Warrants or Rights | 893,940 | ||||||
Class of Warrant or Right, Exercise Price of Warrants or Rights | $ 1.10 | ||||||
Subsequent Event [Member] | Acuitas [Member] | |||||||
Warrant Term | 5 years | ||||||
Class of Warrant or Right, Number of Securities Called by Warrants or Rights | 2,028,029 | 431,818 | |||||
Class of Warrant or Right, Exercise Price of Warrants or Rights | $ 1.10 | $ 0.33 | |||||
Subsequent Event [Member] | Three Accredited Investors [Member] | |||||||
Warrant Term | 5 years | ||||||
Class of Warrant or Right, Number of Securities Called by Warrants or Rights | 875,000 | ||||||
Class of Warrant or Right, Exercise Price of Warrants or Rights | $ 1.10 | ||||||
Acuitas [Member] | |||||||
Warrant Term | 5 years | 5 years | 5 years | 5 years | |||
Class of Warrant or Right, Number of Securities Called by Warrants or Rights | 363,636 | 306,818 | 200,000 | 450,000 | |||
Class of Warrant or Right, Exercise Price of Warrants or Rights | $ 0.33 | $ 0.33 | $ 0.47 | $ 0.47 |