KEY ACCOUNTING POLICIES - Note 3	9 Months Ended
Sep. 30, 2013
Risks and Uncertainties [Abstract]
KEY ACCOUNTING POLICIES - Note 3	3. KEY ACCOUNTING POLICIES Revenue Recognition We evaluate the performance criteria and terms of our collaborative research and development agreements to determine whether revenue should be recognized under a performance-based method or milestone method. Significant items included in our evaluation are the following: the nature of our obligation under the agreement, whether provisions leading to variable revenues exist whether any payments are required to be repaid, whether the deliverables should be treated as one unit of accounting or separated into multiple units, whether substantive milestones exist, whether milestone payments are commensurate with either our level of effort or the increase in value of the customer's rights, and whether a licensing agreement exists. In March 2013, we entered into and began work under a $4.6 million collaborative research and development agreement with a customer researching and developing commercial applications for our technology. Our contributions under the collaborative agreement include research services, components, and prototype devices and fixtures. Development revenues to be realized are subject to successful completion of the deliverables as defined in the collaborative research and development agreement. Based on the terms of this agreement, we recognize development revenue as work progresses on the agreement and as our customer accepts the deliverables using a proportional method based on the lesser of the cumulative proportion of total planned costs to be incurred under the agreement or the cash payments received plus outstanding billings for work accepted by the customer. Since our collaborative agreements generally require some level of technology development, the actual costs required to complete a contract can vary from our estimates. The proportional revenue recognition method we use for collaborative research and development agreements includes adjustments for revisions to estimated total agreement costs. Each period, we evaluate total estimated costs for each agreement and include any significant revisions in the period we become aware of changes in estimated total costs. The costs for work performed under collaborative research and development agreements are expensed in the periods incurred and included in the Statement of Operations in research and development expense. For both the three and nine months ended September 30, 2013, three commercial customers accounted for approximately 89% of our total revenue. At September 30, 2013, one commercial customer accounted for 52% of our net accounts receivable balance. Warrant liability Based on the terms of the warrants we issued in May and September 2013, we have determined that they should be classified as a liability given that the warrants could result in the issuance of a variable number of shares of common stock based on a conditional exchange provision that is outside of our control at any point when the share price of our common stock is equal to or less than the stated warrant exercise prices. At the date of issuance, and as of September 30, 2013, our common stock was trading at a value less than the stated exercise prices. As such, the holders may elect to exchange the warrants for a variable number of shares of common stock as determined by a negotiated formula included in the warrants. However, the warrants limit the number of shares that may be issued under this exchange provision to one share of common stock for each warrant exchanged. Changes in the market value of our common stock may increase or decrease the number of shares to be issued under this exchange feature. At each balance sheet date, we evaluate the fair value of the warrants and any change in value is recorded as a non-operating gain or loss on the statement of operations. Due to the varying exercise and exchange features of the warrants, the determination of the fair value of the warrant liability may vary depending on our common stock share price. If the share price of our common stock is less than the exercise price of the warrant per the terms of the agreement, we will calculate the fair value of the warrant liability as the fair value of the common stock that would be required to be issued to settle the exchange feature of the warrant obligation. If the share price of our common stock is greater than the exercise price of the warrant per the terms of the agreement, we will utilize a binomial option pricing model as the exchange feature provided per the agreement will no longer be available to the holder.

KEY ACCOUNTING POLICIES - Note 3

9 Months Ended

Sep. 30, 2013

3. KEY ACCOUNTING POLICIES

Revenue Recognition

We evaluate the performance criteria and terms of our collaborative research and development agreements to determine whether revenue should be recognized under a performance-based method or milestone method. Significant items included in our evaluation are the following:

the nature of our obligation under the agreement,
whether provisions leading to variable revenues exist
whether any payments are required to be repaid,
whether the deliverables should be treated as one unit of accounting or separated into multiple units,
whether substantive milestones exist,
whether milestone payments are commensurate with either our level of effort or the increase in value of the customer's rights, and
whether a licensing agreement exists.

In March 2013, we entered into and began work under a $4.6 million collaborative research and development agreement with a customer researching and developing commercial applications for our technology. Our contributions under the collaborative agreement include research services, components, and prototype devices and fixtures. Development revenues to be realized are subject to successful completion of the deliverables as defined in the collaborative research and development agreement.

Based on the terms of this agreement, we recognize development revenue as work progresses on the agreement and as our customer accepts the deliverables using a proportional method based on the lesser of the cumulative proportion of total planned costs to be incurred under the agreement or the cash payments received plus outstanding billings for work accepted by the customer. Since our collaborative agreements generally require some level of technology development, the actual costs required to complete a contract can vary from our estimates. The proportional revenue recognition method we use for collaborative research and development agreements includes adjustments for revisions to estimated total agreement costs. Each period, we evaluate total estimated costs for each agreement and include any significant revisions in the period we become aware of changes in estimated total costs. The costs for work performed under collaborative research and development agreements are expensed in the periods incurred and included in the Statement of Operations in research and development expense.

For both the three and nine months ended September 30, 2013, three commercial customers accounted for approximately 89% of our total revenue. At September 30, 2013, one commercial customer accounted for 52% of our net accounts receivable balance.

Warrant liability

Based on the terms of the warrants we issued in May and September 2013, we have determined that they should be classified as a liability given that the warrants could result in the issuance of a variable number of shares of common stock based on a conditional exchange provision that is outside of our control at any point when the share price of our common stock is equal to or less than the stated warrant exercise prices. At the date of issuance, and as of September 30, 2013, our common stock was trading at a value less than the stated exercise prices. As such, the holders may elect to exchange the warrants for a variable number of shares of common stock as determined by a negotiated formula included in the warrants. However, the warrants limit the number of shares that may be issued under this exchange provision to one share of common stock for each warrant exchanged. Changes in the market value of our common stock may increase or decrease the number of shares to be issued under this exchange feature.

At each balance sheet date, we evaluate the fair value of the warrants and any change in value is recorded as a non-operating gain or loss on the statement of operations. Due to the varying exercise and exchange features of the warrants, the determination of the fair value of the warrant liability may vary depending on our common stock share price. If the share price of our common stock is less than the exercise price of the warrant per the terms of the agreement, we will calculate the fair value of the warrant liability as the fair value of the common stock that would be required to be issued to settle the exchange feature of the warrant obligation. If the share price of our common stock is greater than the exercise price of the warrant per the terms of the agreement, we will utilize a binomial option pricing model as the exchange feature provided per the agreement will no longer be available to the holder.

- Definition

The entire disclosure for any concentrations existing at the date of the financial statements that make an entity vulnerable to a reasonably possible, near-term, severe impact. This disclosure informs financial statement users about the general nature of the risk associated with the concentration, and may indicate the percentage of concentration risk as of the balance sheet date.

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