Note 11 - Warrants

6 Months Ended

Jun. 30, 2013

Warrants [Abstract]

Warrants [Text Block]

Note 11. Warrants

Common Stock Warrants

Following is a summary of all warrant activity for the first six months of 2013:

Warrants	Number of Warrants Issued			Weighted Average Exercise Price
Warrants outstanding at December 31, 2012		7,863,653		$	3.37
Warrants granted in connection with the Preferred Stock Offering, as more fully described in Note 9		6,036,219		$	1.18
Warrants exercised for common stock		(71,250	)		3.25
Warrants outstanding at June 30, 2013		13,828,622		$	2.42
Aggregate intrinsic value of outstanding warrants at June 30, 2013	$	-
Weighted average remaining contractual terms (in years)		4.0

During the first six months of 2013, the Company received gross proceeds of approximately $0.2 million from the exercise of warrants to purchase 71,250 shares of common stock.

Common Stock Warrant Liability

In September 2009, the Company closed a registered direct offering with a select group of institutional investors that raised gross proceeds of $7.1 million and net proceeds of $6.3 million.  In connection with this registered direct offering, the Company issued 2,018,153 shares of its common stock and warrants to purchase 1,009,076 shares of common stock. The warrants have an exercise price of $5.24 per share and are exercisable at any time on or after the six month anniversary of the date of issuance and on or prior to 66 months after the date of issuance.  Under the terms of the warrants, upon certain transactions, including a merger, tender offer or sale of all or substantially all of the assets of the Company, each warrant holder may elect to receive a cash payment in exchange for the warrant, in an amount determined by application of the Black-Scholes option valuation model. Accordingly, pursuant to ASC 815.40, Derivative Instruments and Hedging - Contracts in Entity’s Own Equity, the warrants are recorded as a liability and then marked to market each period through the Statement of Operations in other income or expense. At the end of each subsequent quarter, the Company will revalue the fair value of the warrants and the change in fair value will be recorded as a change to the warrant liability and the difference will be recorded through the Statement of Operations in other income or expense.

As more fully described in Note 9, concurrent with the closing of the Common Stock Offering, the institutional investors agreed to waive their rights to exercise the Waived Warrants to purchase 6,294,674 shares of common stock of the Company until the Company has obtained stockholders’ approval of increasing the number of its authorized shares of common stock in conjunction with the proposed reverse stock split of its outstanding shares of common stock. In accordance with ASC 815-40, Derivative Instruments and Hedging - Contracts in Entity’s Own Equity, the Waived Warrants are required to be liability classified immediately after the closing of the Common Stock Offering on June 3, 2013 because there were an insufficient number of common shares authorized to satisfy the terms of the Waived Warrants if they were exercised.  Therefore, the Company has reclassified the fair value of the Waived Warrants totaling approximately $9.1 million from equity to a liability as of June 3, 2013.  The Waived Warrants are required to be recorded at fair value at each balance sheet date with changes in fair value recorded in earnings.   

The fair value of the warrants at June 30, 2013 and December 31, 2012 was $4,733,817 and $4,283,932, respectively, calculated using the Black-Scholes option-pricing model with the following ranges of assumptions:

	June 30, 2013					December 31, 2012
Risk-free interest rate		0.36	-	1.41	%		0.73	%
Expected volatility		103.4	-	147.3	%		92.0	%
Expected life (in years)		0.9	-	4.7			1.13
Expected forfeiture rate			0.0		%		0.0	%
Expected dividend yield			0.00		%		0.00	%

In connection with the Common Stock Offering, the Company recorded an additional warrant liability of $9.1 million immediately after the closing of the Common Stock Offering. As a result of this change in the warrant liability in the aggregate at June 30, 2013, the Company recorded a non-cash benefit of $8.7 million in the six months ended June 30, 2013. The following is a summary of the changes in the common stock warrant liability for the six months ended June 30, 2013:

Beginning balance as of January 1, 2013	$	4,283,932
Warrant liability classification (see Note 9)		9,110,302
Gain from the adjustment for the change in fair value included in net income		(8,660,417	)
Ending balance as of June 30, 2013	$	4,733,817