Note 2 - Significant Accounting Policies

6 Months Ended

Jun. 30, 2011

Significant Accounting Policies [Text Block]

(2)  Significant Accounting Policies

Impairment of Long-Lived Assets

Long-lived assets are comprised of property and equipment and intangible assets.  We review our long-lived assets for impairment whenever events or changes in circumstances indicate that the carrying amount of the asset may not be recoverable.  We compare an estimate of undiscounted future cash flows produced by the asset, or by the appropriate grouping of assets, to the carrying value to determine whether impairment exists.  If an asset is determined to be impaired, we measure the loss based on quoted market prices in active markets, if available.  If quoted market prices are not available, we estimate the fair value based on various valuation techniques, including a discounted value of estimated future cash flow and fundamental analysis.  We report an asset to be disposed of at the lower of its carrying value or its estimated net realizable value.

Revenue Recognition

We record revenues only upon the occurrence of all of the following conditions:

• We have received a binding purchase order or similar commitment from the customer or distributor authorized by a representative empowered to commit the purchaser (evidence of a sale).

• The purchase price has been fixed, based on the terms of the purchase order.

• We have delivered the product from our manufacturing plant to a common carrier acceptable to the purchaser.  Our customary shipping terms are FOB shipping point. Because of the need for controlled conditions during shipment, we suggest, but leave to the purchaser’s discretion, acquiring insurance for the value of the shipment.  If the purchaser elects to insure the shipment, the insurance is at the purchaser’s expense.

• We deem the collection of the amount invoiced probable.  To eliminate the credit risk associated with international distributors with whom we have had little or no experience, we require prepayment of all or a substantial portion of the order or a letter of credit before shipment.

Except in the event of verified product defect, we do not permit product returns.  Our products must be maintained under rigidly controlled conditions that we cannot control after the product has been shipped to the customer.

We provide no price protection.  Subject to the conditions noted above, we recognize revenue upon shipment of product.

Royalty Revenue

Royalty Revenue is recognized upon receipt of the semi-annual royalty data from the licensee, as designated in the royalty agreement, and when collectability is assured.

Segment and Geographic Information

Our operations are currently focused on the development and sale of HIV diagnostics.  The following table summarizes our product sales revenues by product for the three and six months ended June 30, 2011 and 2010 (in thousands):

	Three months ended				Six months ended
	June 30,				June 30,
	2011		2010		2011		2010
AwareTM BEDTM HIV-1 Incidence Test	$	54	$	36	$	240	$	122
AwareTM Rapid HIV diagnostic tests		28		21		52		65
All other		15		2		27		3
Revenue from product sales	$	97	$	59	$	319	$	190
Revenue from raw material sourcing	$	38		-	$	79	$	-
Total Revenue	$	135		59	$	398	$	190

Sales to international customers accounted for approximately 79% and 69% of our revenues in the second quarter of 2011 and 2010, respectively.  Four customers accounted for approximately 76% of our second quarter 2011 revenue.  Four customers accounted for approximately 73% of our second quarter 2010 revenue.

International sales accounted for approximately 79% and 67% of our revenues for the six months ended June 30 of 2011 and 2010, respectively. Four customers accounted for approximately 60% of our revenue for the six months ended June 30, 2011. Five customers accounted for approximately 57% of our revenue for the six months ended June 30, 2010.  

Net Loss Per Share

We compute basic net loss per share by dividing net loss by the weighted average number of shares of common stock outstanding during the periods presented.  The computation of diluted loss per common share is similar to the computation of basic net loss per share, except that the denominator is increased for the assumed conversion of convertible securities and the exercise of options and warrants, to the extent they are dilutive, using the treasury stock method.  The weighted average number of shares used in computing basic and diluted net loss per share are the same for the periods presented in these unaudited condensed consolidated financial statements.  Outstanding options and warrants for 6,175,001 shares and 12,310,936 shares were excluded from the computation of loss per share for the three and six month periods ended June 30, 2011 and 2010, respectively, as their effect are anti-dilutive.  The computation of loss per share also excludes 200,157,439 shares issuable upon the conversion of 8% Convertible Notes, including 8% Convertible Notes issued in payment of interest, and 7% Notes issued under the Marr Credit Facility for the three and six month periods ended June 30, 2010, as their effect is also anti-dilutive.

Use of Estimates

The preparation of financial statements in conformity with generally accepted accounting principles requires us to make estimates and assumptions that affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities at the date of the financial statements, and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.

Reclassifications

We made certain reclassifications to prior-period amounts to conform to the second quarter 2011 financial statements presentation.

Stock-Based Compensation Expense

We measure stock-based compensation at the grant date based on the award’s fair value and recognize the expense ratably over the requisite vesting period, net of estimated forfeitures, for all stock-based awards granted after January 1, 2006 and all stock based awards granted prior to, but not vested as of, January 1, 2006.

We have elected to calculate the fair value of option awards based on the Black-Scholes option-pricing model. The Black-Scholes model requires various assumptions, including expected option life and volatility.  If we significantly change any of the assumptions used in the Black-Scholes model or the estimated forfeiture rate, stock-based compensation expense may differ materially in the future from that recorded in the current period.

Adoption of New Accounting Pronouncements

In January 2010, the Financial Accounting Standards Board (“FASB”), issued guidance to amend the disclosure requirements related to recurring and nonrecurring fair value measurements. Other than requiring additional disclosures, adoption of this new guidance did not have a material impact on the Company’s financial statements.

In April 2010, the FASB issued guidance on applying the milestone method of revenue recognition for milestone payments for achieving specific performance measures when those payments are related to uncertain future events. The guidance is effective on a prospective basis to milestones achieved in fiscal years, and interim periods within those years, beginning January 1, 2011. The adoption of this new guidance did not have a material impact on the Company’s financial statements.

In April 2011, the FASB issued guidance to achieve common fair value measurement and disclosure requirements between GAAP and International Financial Reporting Standards. This guidance amends current fair value measurement and disclosure guidance to include increased transparency around valuation inputs and investment categorization. The guidance is effective for fiscal years and interim periods beginning after December 15, 2011. The adoption of this new guidance will not have a material impact on the Company’s financial statements.

In June 2011, the FASB issued guidance regarding presentation of other comprehensive income in the financial statements. This guidance will eliminate the option under GAAP to present other comprehensive income in the statement of changes in equity. Under the guidance, the Company will have the option to present the components of net income and comprehensive income in either one or two consecutive financial statements. The guidance is effective for fiscal years, and interim periods within those years, beginning after December 15, 2011. The adoption of this new guidance will not have a material impact on the Company’s financial statements.