As a result of the passage of the Affordable Care Act, manufacturers of certain medical devices are subject to an excise tax, applicable to sales of taxable medical devices beginning January 1, 2013. Several devices that are manufactured by our Technology segment are subject to these taxes. The tax equals 2.3% of the sale price of the applicable medical device. As a manufacturer, we are responsible for remitting these taxes to the federal government. ~~However, on December 18, 2015, the~~The Consolidated Appropriations Act of 2016, ~~among other things,~~enacted on December 18, 2015, included a moratorium on the medical devices tax commencing on January 1, 2016 and ending on

Health Insurance Portability and Accountability Act of 1996.The Health Insurance Portability and Accountability Act ~~("HIPAA"~~(“HIPAA”) was enacted by the United States Congress in 1996. Numerous state and federal laws govern the collection, dissemination, use and confidentiality of patient and other health information, including the administrative simplification and privacy provisions of HIPAA. Historically, state law has governed confidentiality issues, and HIPAA preserves these laws to the extent they are more protective of a ~~patient's~~patient’s privacy or provide the patient with greater access to his or her health information. As a result of the implementation of the HIPAA regulations, many states are considering revisions to their existing laws and regulations that may or may not be more stringent or burdensome than the federal HIPAA provisions. HIPAA applies directly to covered entities, which include health plans, health care clearinghouses and many health care providers. The HIPAA statute, as amended by the Health Information Technology for Economic and Clinical Health (“HITECH”) Act in 2009, and its implementation rules are concerned primarily with the privacy of protected health information when it is used and/or disclosed; the confidentiality, integrity and availability of electronic health information; notifying federal regulators and impacted patients in the event of a breach of unsecured protected health information; and the content and format of certain identified electronic health care transactions. The laws governing health care information privacy and security impose civil and criminal penalties for their violation and can require substantial expenditures of financial and other resources for information technology system modifications and for ongoing operational compliance.

Medicare.Medicare is a federal program administered by CMS and its Medicare administrative contractors. The Medicare program provides qualified persons with health care benefits that cover the major costs of medical care within prescribed limits, subject to certain deductibles and co-payments. The Medicare program has established guidelines for local and national coverage determinations and reimbursement of certain equipment, supplies and services, which are subject to change. The methodology for determining coverage status and the basis and amount of Medicare reimbursement varies based upon, among other factors, the setting in which a Medicare beneficiary receives health care items and services.

The Medicare program is subject to statutory and regulatory changes, retroactive and prospective rate adjustments, administrative rulings, interpretations of policy, Medicare administrative contractor determinations and government funding restrictions. All of these policies may materially increase or decrease the rate of program payments to health care facilities and other health care suppliers and practitioners, including those paid for our cardiac monitoring services. Any changes in federal

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legislation, regulations or other policies affecting Medicare coverage or reimbursement relative to our cardiac monitoring services could have an adverse effect on our performance.

~~Our~~

Certain of our facilities ~~in Malvern, PA, San Francisco, CA, Ewing, NJ and Eagan, MN~~ are enrolled in Medicare as Independent Diagnostic Testing Facilities ~~("IDTFs"~~(“IDTFs”)~~, which~~. An IDTF is defined by CMS as an entity independent of a hospital or ~~physician's~~physician’s office in which diagnostic tests are performed by licensed or certified non-physician personnel under appropriate physician supervision. Medicare has set very detailed performance standards that every IDTF must meet in order to obtain or maintain its billing privileges, including requirements to, among other things, operate in compliance with all applicable federal and state licensure and regulatory requirements for the health and safety of patients; maintain a physical facility on an appropriate site meeting specific criteria; have a comprehensive liability insurance policy of at least $0.3 million per location; disclose certain ownership information; have its testing equipment calibrated and maintained in accordance with specific standards; have technical staff on duty with the appropriate credentials to perform tests; and permit on-site inspections.

Environmental Regulation.We use materials and products regulated under environmental laws, primarily in the manufacturing and sterilization processes. While it is difficult to quantify, we believe the ongoing cost of compliance with environmental protection laws and regulations will not have a material impact on our business, financial position or results of operations.

Section 1502 of the Dodd Frank Wall Street Reform and Consumer Protection Act was adopted to further the humanitarian goal of ending the violent conflict and human rights abuses in the Democratic Republic of the Congo and adjoining countries ~~("DRC"~~(“DRC”). This conflict has been partially financed by the exploitation and trade of tantalum, tin, tungsten and gold (so called ~~"conflict minerals"~~“conflict minerals”) that originate from mines or smelters in the region. ~~SEC~~United States Securities and Exchange Commission (“SEC”) rules adopted in August 2012 under Section 1502 require reporting companies to disclose annually on Form SD whether any such minerals that are necessary to the functionality or production of products they manufactured, or for which they contracted the manufacture, during the prior calendar year did, in fact, originate in the DRC and, if so, if the related revenue was used to support the conflict and/or abuses.

Some of the products ~~manufactured by Braemar, UMI, BioTelemetry Denmark and Telcare~~we manufacture may contain tantalum, tin, tungsten and/or gold. Consequently, in compliance with ~~United States Securities and Exchange Commission ("SEC")~~SEC rules, we have adopted a policy on conflict minerals, which can be found on our website, and have implemented a supply chain due diligence and risk mitigation process with reference to the Organization for Economic Cooperation and Development ~~("OECD"~~(“OECD”) guidance approved by the SEC to assess and report annually whether our products are ~~"conflict~~“conflict free."

”

We support efforts to end the violence and human rights abuses in the mining of certain minerals in the DRC. We expect our suppliers to comply with the OECD guidance and industry standards and to ensure that their supply chain conforms to our policy and the OECD guidance. We will mitigate identified risks by working directly with our suppliers; however, we may need to alter our sources of supply or modify our product design if circumstances require. We may incur certain costs in order to comply with these disclosure requirements, including for due diligence to determine the source of the subject minerals used in our products and other potential changes to products, processes or sources of supply as a consequence of such verification activities. In addition, these rules could adversely affect the sourcing, supply and pricing of materials used in our products throughout the supply chain beyond our control, whether or not the subject minerals are ~~"conflict~~“conflict free."

”

The design, manufacture and marketing of medical devices and services of the types we produce entail an inherent risk of product liability claims. In addition, we provide information to health care providers and payors upon which determinations affecting medical care are made, and claims may be made against us resulting from adverse medical consequences to patients resulting from the information we provide. To protect ourselves from product liability claims, we maintain professional liability and general liability insurance on a ~~"claims made"~~“claims made” basis. Insurance coverage under such policies is contingent upon a policy being in effect when a claim is made, regardless of when the events which caused the claim occurred. While, as of the date of this Annual Report on Form 10-K, a material product liability claim has never been made against us and we believe our insurance policies are adequate in amount and coverage for our current operations, there can be no assurance that the coverage maintained by us is sufficient to cover all future

As of December 31, ~~2016,~~2017, we employed ~~1,087~~approximately 1,600 employees. None of our employees are represented by a collective bargaining agreement. We consider our relationship with our employees to be good.

We file electronically with the SEC our annual reports on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K and amendments to those reports filed or furnished pursuant to Section 13(a) or 15(d) of the Securities Exchange Act of 1934 ("(“Exchange ~~Act"~~Act”). We make these reports available on our website at~~http://~~www.gobio.com, free of charge. Copies of these reports are made available as soon as reasonably practicable after we electronically file such material with, or furnish it to, the SEC. Further copies of these reports are located at the ~~SEC's~~SEC’s Public Reference Room at 100 F Street, NE, Washington, D.C. 20549. Information on the operation of the Public Reference Room can be obtained by calling the SEC at 1-800-SEC-0330. The SEC maintains a website that contains reports, proxy and information statements, and other information regarding our filings, at~~http://~~www.sec.gov.

The factors discussed below are cautionary statements that identify important factors and risks that could cause actual results to differ materially from those anticipated by the forward-looking statements contained in this Annual Report on Form 10-K. For more information regarding the forward-looking statements contained in this report, see the Table of Contents of this Annual Report on Form 10-K. You should carefully consider the risks and uncertainties described below, together with all of the other information included in this Annual Report on Form 10-K, in considering our business and prospects. The risks and uncertainties described below are not the only ones facing BioTelemetry. Additional risks and uncertainties not presently known to us may also impair our business operations. The occurrence of any of the following risks could affect our business, liquidity, results of operations, financial condition or cash flows.

U.S. income tax reform efforts could have a ~~history~~material impact on our business. On December 22, 2017, the Tax Cuts and Jobs Act (“TCJA”) was signed into law. The TCJA enacts broad changes to the existing U.S. federal income tax code, including reducing the federal corporate income tax rate from 35% to 21% beginning in 2018, amongst many other complex provisions. The ultimate impact of ~~net losses and future profitability is uncertain.~~

~~We previously incurred net losses for each annual period~~such tax reforms may differ from our ~~inception through December 31, 2014. For~~current estimates due to changes in interpretations and assumptions made by us as well as the ~~year ended December 31, 2014,~~issuance of any further regulations or guidance that may alter the operation of the U.S. federal income tax code. Various uncertainties also exist in terms of how U.S. states and any foreign countries within which we ~~realized a net loss of $9.8 million. For the years ended December 31, 2016 and 2015, we achieved net~~operate will react to these U.S. federal income ~~of $53.4 million and $7.4 million, respectively. We may not be able to sustain or increase profitability~~tax reforms, which could have additional impacts on ~~a quarterly or annual basis. As of December 31, 2016, we had a total accumulated deficit of approximately $142.7 million.~~

our business.

The Medicare program is administered by CMS, which imposes extensive and detailed requirements on medical product and services providers, including, but not limited to, rules that govern how we structure our relationships with physicians, how and when we submit reimbursement claims, how we operate our monitoring ~~facilities~~centers and how and where we provide our arrhythmia monitoring solutions. Our failure to comply with applicable Medicare rules could result in the discontinuation of

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our reimbursement under the Medicare payment program, a requirement to return funds already paid to us, civil monetary penalties, criminal penalties and/or exclusion from the Medicare program.

We receive reimbursement for our products and services from commercial payors and from Medicare administrative contractors with jurisdiction in the state where the services are performed. In addition, our prescribing physicians receive reimbursement for professional interpretation of the information provided by our products and services from commercial payors or Medicare. Average commercial reimbursement rates have declined over a three and five year period. When commercial payors combine their operations, the combined company may elect to reimburse for our products and services at the lowest rate paid by any of the participants in the consolidation. If one of the payors participating in the consolidation does not reimburse for one of our products or services, the combined company may elect not to reimburse for such product or service. Additionally, commercial payors can typically terminate these contracts by providing between 60 and 120 ~~days~~days’ prior notice at any time following the end of the initial term of the agreement. In addition, CMS may reduce the reimbursement rate for our services, as it has in the past. CMS updates the reimbursement rate via the Medicare physician fee schedule annually. Furthermore, CMS has adopted a complex new system for reimbursing Medicare physician services as required by the Medicare Access and CHIP Reauthorization Act of 2015. Under the new program, which began January 1, 2017, physicians will either report under the Merit-based Incentive Payment System or an Advanced Alternative Payment Model, and their 2017 performance will impact ~~2018~~2019 rates. CMS published a final rule on November 16, 2017, modifying program requirements for performance year 2018. The rule designates use of certain patient-generated health data with an active feedback loop as a “high” weighted activity for purposes of the Advancing Care Information bonus. We cannot predict the impact of this new framework on reimbursement for our services. A decrease in Medicare or commercial reimbursement rates or termination of commercial payor contracts would adversely affect our financial results.

We have several monitoring ~~facilities in Malvern, PA, Eagan, MN, Ewing, NJ and San Francisco, CA~~centers throughout the United States that analyze the data obtained from cardiac monitors and report the results to physicians. In order for us to receive reimbursement from Medicare and some commercial payors, our monitoring centers must be certified as IDTFs. Certification as an IDTF requires that we follow strict regulations governing how ~~the center operates,~~our monitoring centers operate, such as requirements regarding the experience and certifications of the technicians who review data transmitted from our monitors. These rules and regulations vary from location to location and are subject to change. If they change, we may have to change the operating procedures at our monitoring ~~facilities,~~centers, which could increase our costs significantly. If we fail to obtain and maintain IDTF certification, our services may no

Accreditation is required by most of our managed care payors and became a mandatory requirement for all Medicare durable medical equipment, prosthetics, orthotics and supplies ~~("DMEPOS"~~(“DMEPOS”) providers effective October 1, 2009. In 2016, we acquired Telcare, a diabetes care management company. In 2017, Telcare completed a nationwide accreditation renewal process conducted by the Healthcare Quality Association on Accreditation, which renewed our accreditation for another three years. The Company will undergo the next survey cycle in 2020. If we lose accreditation, our failure to maintain accreditation could have ~~a material~~an adverse effect on our business, financial condition, results of operations, cash flow, capital resources and liquidity.

Section 6002 of the Affordable Care Act requires certain medical device manufacturers that produce devices covered by the Medicare and ~~state~~ Medicaid programs to report annually to the government certain payments to physicians and teaching hospitals. If we fail to appropriately track and report such payments to the government, we could be subject to civil fines and penalties, which could adversely affect the results of our operations.

As part of our business operations, we submit claims on behalf of patients directly to, and receive payments from, Medicare, Medicaid and other third-party payors. We are subject to extensive government regulation, including requirements for submitting reimbursement claims under appropriate codes and maintaining certain documentation to support our claims. Medicare contractors and Medicaid agencies periodically conduct pre-and post-payment reviews and other audits of claims and are under increasing pressure to more closely scrutinize health care claims and supporting documentation. We have previously been ~~and are currently~~ subject to pre-and post-payment reviews as well as audits of claims under ~~CMS'~~CMS’ Recovery Audit Program and may experience such reviews and audits of claims in the future. Such reviews and similar audits of our claims could result in material delays in payment, as well as material recoupments or denials, which would reduce our net sales and profitability, or result in our exclusion from participation in the Medicare or Medicaid programs. We are also subject to similar review and audits from private payors, which may ~~also~~ result in material delays in payment and material recoupments and denials. In addition, state agencies may conduct investigations or submit requests for information relating to claims data submitted to private payors.

Medicare, our largest payor, represents a significant percentage of our revenue. For the year ended December 31, ~~2016,~~2017, Medicare accounted for ~~33%~~approximately 34% of our total revenue. No other payor accounted for more than ~~10%~~4% of total revenue. Our agreements with commercial payors typically allow either party to the contract to terminate the contract by providing between 60 and 120 ~~days~~days’ prior written notice to the other party at any time following the end of the initial term of the contract. Our commercial payors may elect to terminate or not to renew their contracts with us for any reason and, in some instances,

The use and disclosure of certain health care information by health care providers and their business associates have come under increased public scrutiny. Federal standards under HIPAA establish rules concerning how individually-identifiable health information may be used, disclosed and protected. Historically, state law had governed confidentiality issues, and HIPAA preserves these laws to the extent they are more protective of a ~~patient's~~patient’s privacy or provide the patient with more access to his or her health information. Additionally, ~~the 2009 Health Information Technology for Economic and Clinical Health Act~~HITECH and associated changes to HIPAA impose additional requirements relating to the

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privacy, security and transmission of individually identifiable health information. We must operate our business in a manner that complies with all applicable laws, both federal and state, and that does not jeopardize the ability of our customers to comply with all applicable laws. We believe that our operations are consistent with these legal standards. Nevertheless, these laws and regulations present risks for health care providers and their business associates that provide services to patients in multiple states. As we continue to see how government regulators and courts interpret and enforce ~~HIPAA's~~HIPAA’s requirements, we may need to adjust our interpretations of these laws and regulations over time. If a challenge to our activities is successful, it could have an adverse effect on our operations, may require us to forego relationships with customers in certain states and may restrict the territory available to us to expand our business. In addition, even if our interpretations of HIPAA and other federal and state laws and regulations are correct, we could be held liable for unauthorized uses or disclosures of patient information as a result of inadequate systems and controls to protect this information or as a result of the theft of information by unauthorized computer programmers who penetrate our network security.

Violation of these laws against us could have a material adverse effect on our business, financial condition and results of operations. For example, in 2011, we experienced the theft of two unencrypted laptop computers and, as a result, were required to provide notices under the HIPAA Breach Notification ~~Rule.~~Rule and were subsequently investigated by the United States Department of Health and Human Services' Office for Civil Rights (“OCR”). Although we have been in compliance with our obligations stemming from these incidents, ~~there has yet~~and believe that our operations are consistent with these legal standards imposed by HIPAA, to ~~be an outcome~~avoid the uncertainty of administrative enforcement proceedings or protracted litigation, we elected to settle the ~~ongoing~~ investigation by OCR in April 2017 by paying $2.5 million and entering into ~~the thefts~~a 3-year corrective action plan. This settlement did not contain any admission of liability by the United States Department of Health and Human Services' Office for Civil Rights. We are unable to predict what action, if any, might be taken in the future by the Office for Civil Rights or other governmental authorities as a result of this investigation or what impact, if any, the outcome of this matter might have on our results of operations.

Company.

As part of its approval process, the FDA has provided guidance reinforcing the need for cardiac safety testing of all compounds entering the blood stream. The requirements vary based on the type and history of each compound. This testing is accomplished by different methods, including cardiac imaging such as MUGA and ECG analysis, ~~including~~which involves measuring the QT/QTc interval for prolongation. We function as a core lab and have developed proprietary systems and processes to receive cardiac imaging

In December 2015, the FDA published a report which called into question the need for certain QT studies. In a series of public meetings throughout 2016 discussing the report, FDA speakers indicated that certain studies were no longer mandatory and ~~indicated~~ that future regulations will include some combination of traditional study types along with early phase Exposure Response modeling. ~~A new FDA White Paper is expected in 2017 which will clarify~~Further guidance around the performance of QT ~~studies.~~studies from the FDA is expected. We cannot assess the impact of this expected guidance at this time, but it may substantially decrease our revenue and profitability in our Research segment.

The devices that we manufacture are classified as medical devices and are subject to extensive regulation by the FDA. Further, we maintain establishment registration with the FDA as a distributor of medical devices. FDA regulations govern manufacturing, labeling, promotion, distribution, importing, exporting, shipping and sale of these devices. Our devices and our arrhythmia detection algorithms

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have 510(k) Clearance status from the FDA. Modifications to our devices or our algorithms that could significantly affect safety or effectiveness, or that could constitute a significant change in intended use, would require a new clearance from the FDA. If in the future we make changes to our devices or our algorithms, the FDA could determine that such modifications require new FDA clearance, and we may not be able to obtain such FDA clearances timely, or at all.

We are subject to continuing regulation by the FDA, including quality regulations applicable to the manufacture of our devices and various reporting regulations, as well as regulations that govern the promotion and advertising of medical devices. The FDA could find that we have failed to comply with one of these requirements, which could result in a wide variety of enforcement actions, ranging from a warning letter to one or more severe sanctions. These sanctions could include fines, injunctions and civil penalties; recall or seizure of devices; operating restrictions, partial suspension or total shutdown of production; refusal to grant 510(k) Clearance of new components or algorithms; withdrawing 510(k) Clearance already granted to one or more of our existing components or algorithms; and criminal prosecution. Any of these enforcement actions could be costly and significantly harm our business, financial condition and results of operations.

Our operations may be directly or indirectly affected by various broad state and federal health care fraud and abuse laws, including the Federal Healthcare ~~Programs'~~Programs’ Anti-Kickback Statute and the Federal False Claims Act. For some of our services, we directly bill physicians or other health care entities, that, in turn, bill payors. Although we believe such payments and practices are proper and in compliance with laws and regulations, we may be subject to claims asserting that we have violated these laws and regulations. If our past or present operations are found to be in violation of these laws, we or our officers may be subject to civil or criminal penalties, including large monetary penalties, damages, fines, imprisonment and exclusion from Medicare and Medicaid program participation. Furthermore, if we knowingly file, or ~~"cause"~~“cause” the filing of, false claims for reimbursement with government programs such as Medicare and Medicaid, we may be subject to substantial civil penalties, including treble damages. The Federal False

As mentioned above, we are subject to rigorous regulation by the FDA and numerous other federal, state and foreign governmental authorities. These authorities have been increasing their scrutiny of our industry. We occasionally receive subpoenas or other requests for information from state and federal governmental agencies, including, among others, the United States Department of Justice and the Office of Inspector General of the U.S. Department of Health and Human Services. These investigations typically relate primarily to financial arrangements with health care providers, regulatory compliance and product promotional practices.

Compliance with applicable United States and foreign laws and regulations, such as import and export requirements, anti-corruption laws, tax laws, foreign exchange controls and cash repatriation restrictions, data privacy requirements, environmental laws, labor laws and anti-competition regulations, increases the costs of doing business in foreign jurisdictions. Although we have implemented policies and procedures to comply with these laws and regulations, a violation by our employees, contractors or agents could nevertheless occur. In some cases, compliance with the laws and regulations of one country could violate the laws and regulations of another country. Violations of these laws and regulations could materially adversely affect our brand, international growth efforts and business.

We also could be affected by other risks associated with international activities including, but not limited to, economic and labor conditions, increased duties, taxes (including taxes related to our international operations) and other costs and political instability. Margins on sales of our products in foreign countries, and on sales of products that include components obtained from foreign suppliers, could be materially adversely affected by international trade regulations, including duties, tariffs and antidumping penalties. For the year ended December 31, 2017, our international operations comprised less than 1% of our total

Our business and competitive positions are in part dependent upon our ability to protect our proprietary technology. To protect our proprietary rights, we rely on a combination of trademark, copyright, patent, trade secret and other intellectual property laws, employment, confidentiality and invention assignment agreements with our employees and contractors, and confidentiality agreements and protective contractual provisions with other third parties. We attempt to protect our intellectual property position by filing trademark applications and United States and international patent applications related to our proprietary technology, inventions and improvements that are important to the development of our business.

We do not believe that any single patent, trademark or other intellectual property right of ours, or combination of our intellectual property rights, is likely to prevent others from competing with us using a similar business model. There are many issued patents and patent applications held by others in our industry and the electronics field. Our competitors may independently develop technologies that are substantially similar or superior to our technologies, or design around our patents or other intellectual property to avoid infringement. In addition, we may not apply for a patent relating to products or processes that are patentable, we may fail to receive any patent for which we apply or have applied, and any patent owned by us or issued to us could be circumvented, challenged, invalidated, or held to be unenforceable or rights granted thereunder may not adequately protect our technology or provide a competitive advantage to us. If a third-party challenges the validity of any patents or proprietary rights of ours, we may become involved in intellectual property disputes and litigation that would be costly and time-consuming. All of our patents will eventually expire. Some of our patents, including patents protecting significant elements of our technology, will expire between ~~2017~~2018 and ~~2020,~~2032, at which point we can no longer enforce these against third parties to prevent them from making, using, selling, offering to sell or importing our current clinical device. While we have several patents expiring between ~~2017~~2018 and ~~2020,~~2032, including patents that relate, in part, to our key products, our technology is typically covered by several patents, creating a system of protected technology. The expiration of our patents could expose us to more competition and have an adverse impact on our business.

Although third parties may infringe on our patents and other intellectual property rights, we may not be aware of any such infringement, or we may be aware of potential infringement but elect not to seek to prevent such infringement or pursue any claim of infringement, and the third-party may continue its potentially infringing activities. Any decision whether or not to take further action in response to potential infringement of our patent or other intellectual property rights may be based on a variety of factors, such as the potential costs and benefits of taking such action, and business and legal issues and circumstances. Litigation of claims of infringement of a patent or other intellectual property rights may be costly and time-consuming, may divert the attention of key management personnel and

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may not be successful or result in any significant recovery of compensation for any infringement or enjoining of any infringing activity. Litigation or licensing discussions may also involve or lead to counterclaims that could be brought by a potential infringer to challenge the validity or enforceability of our patents and other intellectual property.

To protect our trade secrets and other proprietary information, we generally require our employees, consultants, contractors and outside collaborators to enter into written non-disclosure agreements. These agreements, however, may not provide adequate protection to prevent any unauthorized use, misappropriation or disclosure of our trade secrets, know-how or other proprietary information. These

Our success is dependent, in part, upon our ability to avoid infringing the patents or proprietary rights of others. The cardiac monitoring industry is characterized by a large number of patents and patent ~~filing.~~filings. Competitors may have filed applications for, or have been issued, patents and may obtain additional patents and proprietary rights related to devices, services or processes that we use to compete. We may not be aware of all of the patents or patent applications potentially adverse to our interests that may have been filed or issued to others.

United States patent applications may be kept confidential while pending in the Patent and Trademark Office. If other companies have or obtain patents relating to our products or services, we may be required to obtain licenses to those patents or to develop or obtain alternative technology. We may not be able to obtain any such licenses on acceptable terms, or at all. Any failure to obtain such licenses could impair or foreclose our ability to make, use, market or sell our products and services.

Based on the fact that we may pose a competitive threat to some companies who own or control various patents, it is possible that one or more third parties may assert a patent infringement claim seeking damages and to enjoin the manufacture, use, sale and marketing of our products and services. If a third-party asserts that we have infringed on its patent or proprietary rights, we may become involved in intellectual property disputes and litigation that would be costly and time-consuming and could impair or foreclose our ability to make, use, market or sell our products and services. Lawsuits may have already been filed against us without our knowledge. Additionally, we may receive notices from other third parties suggesting or asserting that we are infringing their patents and inviting us to license such patents. We do not believe that we are infringing on any other ~~party's~~party’s patents or that a license to any such patents is necessary. Should litigation over such patents arise, we intend to vigorously defend against any allegation of infringement.

If we are found to infringe on the patents or intellectual property rights of others, we may be required to pay damages, stop the infringing activity or obtain licenses or rights to the patents or other intellectual property in order to use, manufacture, market or sell our products and services. Any required license may not be available to us on acceptable terms, or at all. If we succeed in obtaining such licenses, payments under such licenses would reduce any earnings from our products. In addition, licenses may be non-exclusive and, accordingly, our competitors may have access to the same technology as that which may be licensed to us. If we fail to obtain a required license or are unable to alter the design of our product candidates to make a license unnecessary, we may be unable to manufacture, use, market or sell our products and services, which could significantly affect our ability to achieve, sustain or grow our commercial business.

We have grown through acquisitions of companies and technology, including our acquisitions of the assets of the ePatch Division of DELTA in April 2016, VirtualScopics in May 2016, ~~and~~ Telcare in December ~~2016.~~2016 and LifeWatch in July 2017. Acquisitions involve risks associated with our assumption of the liabilities of an acquired company, which may be liabilities that we were or are unaware of at the time of the acquisition, potential write-offs of acquired assets and potential loss of the acquired ~~company's~~company’s key employees or customers. Physician, patient and customer satisfaction or performance problems with an acquired business,

Furthermore, integrating acquired companies or new technologies into our business may prove more difficult than we anticipate. We may encounter difficulties in successfully integrating our operations, technologies, services and personnel with that of the acquired company, and our financial and management resources may be diverted from our existing operations. Offices in multiple states create a strain on our ability to effectively manage our operations and key personnel. If we elect to consolidate our facilities, we may lose key personnel unwilling to relocate to the consolidated facility, may have difficulty hiring appropriate personnel at the consolidated facility and may have difficulty providing continuity of service through the consolidation.

We believe that our existing cash and cash equivalents, together with our term loan and revolving credit facility pursuant to our Credit Agreement with ~~Healthcare Financial Solutions, LLC ("HFS"), the successor in interest to The General Electric Capital Corporation,~~SunTrust Bank and Lenders named therein, will be sufficient to meet our anticipated cash requirements for the foreseeable future. However, our future funding requirements will depend on many factors, including:

•

If we decide to raise additional capital in the future, such capital may not be available on reasonable terms, or at all. If we raise additional funds by issuing equity securities, dilution to existing stockholders would result. If we raise additional funds by incurring debt financing, the terms of the

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debt may involve significant cash payment obligations as well as covenants and financial ratios that may restrict our ability to operate our business.

As of December 31, ~~2016,~~2017, we had outstanding ~~debt under~~term loan pursuant to our ~~credit facility~~Credit Agreement with ~~HFS~~SunTrust Bank and Lenders named therein of ~~$25.8 million.~~$199.4 million, net of $5.6 million of deferred financing costs. We may borrow additional amounts in the future and use the proceeds from any future borrowing for general corporate purposes, future acquisitions or expansion of our business.

Our incurrence of this debt, and any increases in our levels of debt, may adversely affect our operating results and financial condition by, among other things:

•

Our current credit facility imposes restrictions on us, including restrictions on our ability to create liens on our assets, incur additional indebtedness, make acquisitions or dispose of assets, and also requires us to maintain compliance with specified financial ratios. Our ability to comply with these ratios may be affected by events beyond our control. If we breach any of the covenants and do not obtain a waiver from our lender, then, subject to applicable cure periods, our outstanding indebtedness could be declared immediately due and payable.

Our business is based on successfully attracting and retaining talented ~~employees.~~employees, including our executive team. The market for highly-skilled workers and leaders in our industry is extremely competitive. If we are less successful in our recruiting efforts, or if we are unable to retain key employees, our ability to develop and deliver successful products and services may be adversely affected.

The success of our cardiac monitoring and INR testing businesses are dependent upon physicians prescribing our services. Our success in obtaining prescriptions will be directly influenced by a number of factors, including:

•

If we are unable to educate physicians regarding the benefits of our products and obtain sufficient prescriptions for our services, revenue from the provision of our cardiac monitoring and INR solutions could potentially decrease.

Many commercial payors refuse to enter into contracts to reimburse the fees associated with medical devices or services that such payors determine to be ~~"experimental~~“experimental and investigational."” Commercial payors typically label medical devices or services as ~~"experimental~~“experimental and ~~investigational"~~investigational” until such devices or services have demonstrated product superiority evidenced by a randomized clinical trial. We completed a clinical trial in March 2007 that showed that ~~MCOT™~~MCT provided higher diagnostic yield than traditional loop event monitoring. Prior to our clinical trial, ~~MCOT™~~MCT was labeled ~~"experimental~~“experimental and ~~investigational"~~investigational” by numerous commercial payors. Since the trial was published in March 2007, we have obtained contracts with most of these commercial payors that previously labeled ~~MCOT™~~MCT as ~~"experimental~~“experimental and investigational."” We have not obtained contracts with certain remaining commercial payors however, and these payors have informed us that they do not believe the data from this trial justifies the removal of the experimental designation. As a result, these commercial payors may refuse to reimburse the technical and professional fees associated with ~~MCOT™.~~

MCT.

If commercial payors decide not to reimburse our products or services or the related services provided by physicians, or the rates of such reimbursement change, or if we fail to properly administer claims, our revenue could be adversely affected.

As of December 31, ~~2016,~~2017, we have balances owed to us from one customer, Medicare, representing approximately ~~11%~~21% of our total gross accounts receivable. We maintain an allowance for doubtful accounts based on the collections history and aging of outstanding receivables, as well as for any specific instances we become aware of that may preclude us from reasonably assuring collection on outstanding balances. Determining the allowance for doubtful accounts is judgmental in nature and often involves the use of significant estimates. A determination that requires a change in our estimates could have a materially adverse effect on our financial condition and operating results.

When a physician prescribes cardiac monitoring to a patient, our customer service department begins the patient set-up process. While our goal is to provide each patient with the appropriate device in a timely manner, we have experienced, and may in the future experience, delays due to the availability of devices, primarily when converting to a new generation of device or in connection with the increase in prescriptions following potential acquisitions of other companies.

We may also experience shortages of devices due to manufacturing difficulties. Multiple suppliers provide the components used in our devices, but our Minnesota ~~New Jersey~~ and Massachusetts facilities are registered and approved by the FDA as the manufacturer of record of our devices. Our manufacturing operations could be disrupted by fire, earthquake or other natural disaster, a labor-related disruption, failure in supply or other logistical channels, electrical outages or other reasons. If there were a disruption to our facilities in Minnesota ~~New Jersey~~ or Massachusetts, we would be unable to manufacture devices until we have restored and re-qualified our manufacturing capability or developed alternative manufacturing facilities.

Our success in obtaining future cardiac monitor prescriptions from physicians is dependent upon our ability to promptly deliver devices to our patients, and a failure in this regard would have an adverse effect on our revenue and growth prospects.

The success of our MCT, BGM and wireless event services is dependent upon our ability to transmit and process data. Our MCT, BGM and wireless event devices rely on third-party wireless carriers to transmit data over their data networks. We are dependent upon these third-party wireless carriers to provide data transmission services to us through our various agreements. If we fail to maintain these relationships, or if we lose wireless carrier services, we would be forced to seek alternative providers of data transmission services, which might not be available on commercially reasonable terms, or at all.

As we expand our commercial activities, an increased burden will be placed upon our data processing systems and the equipment upon which they rely. Interruptions of our data networks, or the data networks of our wireless carriers for any extended length of time, loss of stored data or other computer problems could have a material adverse effect on our business and operating results. Frequent or persistent interruptions in our cardiac monitoring services could cause permanent harm to our reputation and could cause current or potential users of our remote monitoring services or prescribing physicians to believe that our systems are unreliable, leading them to switch to our competitors. Such interruptions could result in liability claims and litigation against us for damages or injuries resulting from the disruption in service.

War, terrorism, geopolitical uncertainties, public health issues and other business interruptions have caused and could cause damage or disruption to commerce and the economy, and thus could have a material adverse effect on us, our suppliers, logistics providers and customers. Our business operations are subject to interruption by, among others, natural disasters, whether as a result of climate change or otherwise, fire, power shortages, nuclear power plant accidents and other industrial accidents, terrorist attacks and other hostile acts, labor disputes, public health issues and other events beyond our control. Such events could decrease demand for our products, make it difficult or impossible for us to make and deliver products to our customers or to receive components from its suppliers, and create delays and inefficiencies in our supply chain. Our potential customers and monitoring centers could be impacted by natural disasters such as hurricanes, tornados and earthquakes. In the event of a natural disaster, we could incur significant losses, require substantial recovery time and experience significant expenditures in order to resume operations.

The market for cardiac monitoring solutions is evolving rapidly and becoming increasingly competitive. Our industry is highly fragmented and characterized by a small number of large providers and a large number of smaller regional service providers. These third parties compete with us in marketing to payors and prescribing physicians, recruiting and retaining qualified personnel, acquiring technology and developing solutions complementary to our programs. In addition, as companies with substantially greater resources than ours enter our market, we will face increased competition. If our competitors are better able to develop and patent cardiac monitoring solutions than us, or develop more effective or less expensive cardiac monitoring solutions that render our solutions obsolete or non-competitive, or deploy

We operate in an intensely competitive industry that experiences rapid technological developments, changes in industry standards, changes in patient requirements and frequent new product introductions and improvements. If we are unable to respond quickly and successfully to these developments, we may lose our competitive position, and our products or technologies may become uncompetitive or obsolete. To compete successfully, we must maintain a successful research and development effort, develop new products and production processes and improve our existing products and processes at the same pace or ahead of our competitors. Our research and development efforts are aimed at solving increasingly complex problems, as well as creating new technologies, and we do not expect that all of our projects will be successful. If our research and development efforts are unsuccessful, our future results of operations could be materially affected.

We are increasingly dependent on sophisticated information technology for our products and infrastructure. We rely on information technology systems to process, transmit and store electronic information in our day-to-day operations. The size and complexity of our information technology systems makes them vulnerable to increasingly sophisticated cyber-attacks, malicious intrusion, breakdown, destruction, loss of data privacy or other significant disruption. Our information systems require an ongoing commitment of significant resources to maintain, protect and enhance existing systems and develop new systems to keep pace with continuing changes in information processing technology, evolving systems and regulatory standards, the increasing need to protect patient and customer information and changing customer patterns. As a result of technology initiatives, recently enacted regulations, changes in our system platforms and integration of new business acquisitions, we have been consolidating and integrating the number of systems we operate and have upgraded and expanded our information systems capabilities.

In addition, third parties may attempt to hack into our products or systems and may obtain data relating to patients with our products or our proprietary information. If we fail to maintain or protect our information systems and data integrity effectively, we could lose existing customers, have difficulty attracting new customers, have problems in determining product cost estimates and establishing appropriate pricing, have difficulty preventing, detecting and controlling fraud, have disputes with customers, physicians and other health care professionals, have regulatory sanctions or penalties imposed, have increases in operating expenses, incur expenses or lose revenue as a result of a data privacy breach or suffer other adverse consequences. There can be no assurance that our process of consolidating the number of systems we operate, upgrading and expanding our information systems capabilities, protecting and enhancing our systems and developing new systems to keep pace with continuing changes in information processing technology will be successful or that additional systems issues will not arise in the future. Any significant breakdown, intrusion, interruption, corruption or destruction of these systems, as well as any data breaches, could have a material adverse effect on our business.

Changes in the health care industry directed at controlling health care costs or perceived over-utilization of cardiac monitoring solutions could reduce the volume of services ordered by physicians. If more health care cost controls are broadly instituted throughout the health care industry, the volume of cardiac monitoring solutions could decrease, resulting in pricing pressure and declining demand for our services, which could harm our operating results. In addition, it has been suggested that some physicians order cardiac monitoring solutions, even when the services may have limited clinical utility, primarily to establish a record for defense in the event of a claim of medical malpractice against the physician. Legal changes increasing the difficulty of initiating medical malpractice cases, known as tort reform, could reduce the number of our services prescribed as physicians respond to reduced risks of litigation, which could harm our operating results.

The Affordable Care Act makes the most sweeping and fundamental changes to the United States health care system since the creation of Medicare and Medicaid. The Affordable Care Act includes a large number of health-related

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provisions expanding Medicaid eligibility, requiring most individuals to have health insurance, establishing new regulations on health plans, establishing health insurance exchanges, requiring manufacturers to report payments or other transfers of value made to physicians and teaching hospitals and modifying certain payment systems to encourage more cost-effective care.

~~Further, on June 28, 2012, the United States Supreme Court upheld the vast majority of this landmark health reform law.~~

Several provisions of the Affordable Care Act specifically affect the medical equipment industry. In addition to changes in Medicare DMEPOS reimbursement and an expansion of the DMEPOS competitive bidding program, the Affordable Care Act provides that for sales on or after January 1, 2013, manufacturers, producers and importers of taxable medical devices must pay an annual excise tax of 2.3% of the price for which the devices are sold. Subsequent legislation, ~~(Pub. L. 114-113)~~the Consolidated Appropriations Act of 2016, includes a two-year moratorium on the medical device excise ~~tax; it does not apply to sales during~~tax commencing on January 1, 2016 and ending on December 31, 2017.

Budget legislation signed in January 2018 extended that moratorium through December 31, 2019.

The Affordable Care Act also establishes enhanced Medicare and Medicaid program integrity provisions, including expanded documentation requirements for Medicare DMEPOS orders, more stringent procedures for screening Medicare and Medicaid DMEPOS suppliers, and new disclosure requirements regarding manufacturer payments to physicians and teaching hospitals, along with broader expansion of federal fraud and abuse authorities. ~~The Affordable Care~~Subsequent legislation made additional changes to the DMEPOS reimbursement policy. For instance, the Consolidated Appropriations Act of 2016 caps Medicaid durable medical equipment reimbursement rates at Medicare fee-for-service rates applicable in ~~whole, or in part, may~~the state, including applicable competitive bidding rates, beginning January 1, 2019, and the 21st Century Cures Act moved up implementation of this provision to January 1, 2018. There can be ~~repealed.~~

no assurances that future legislation will not adversely impact reimbursement for our products and services.

In addition, various health care reform proposals have also emerged at the state level. We cannot predict the full effect that these laws or any future legislation or regulation will have on us. However, the implementation of new legislation and regulation may lower reimbursements for our products, reduce medical prescriptions for our services and adversely affect our business.

We currently assemble and manufacture our ~~devices in our Eagan, MN, Ewing, NJ~~cardiac monitoring and ~~Concord, MA facilities.~~BGM devices. We purchase INR monitoring devices from third parties. In order to maintain compliance with FDA and other regulatory requirements, our manufacturing facilities must be periodically reevaluated and qualified under a quality system to ensure they meet production and quality standards. Suppliers of components and products used to manufacture MCT, BGM, event, ~~Holter~~ and ~~Pacemaker~~Holter devices and the manufacturers of the monitors used in INR services must also comply with FDA regulatory requirements, which often require significant resources and subject us and our suppliers to potential regulatory inspections and stoppages. If we or our suppliers do not maintain regulatory approval for our manufacturing operations, our business could be adversely affected.

Medicare DMEPOS suppliers (other than certain exempted professionals) must be accredited by an approved accreditation organization as meeting DMEPOS quality standards adopted by CMS. Medicare suppliers also are required to meet surety bond requirements. In addition, Medicare DMEPOS suppliers must comply with Medicare supplier standards in order to obtain and retain billing privileges, including meeting all applicable federal and state licensure and regulatory requirements. ~~In addition,~~Furthermore, many of our managed care contracts for the provision of diabetes services require that we qualify as an accredited DMEPOS supplier. CMS periodically expands or otherwise clarifies the Medicare DMEPOS supplier standards. We believe we are in compliance with these requirements. If we fail to maintain our Medicare accreditation status and/or do not comply with Medicare surety bond or supplier standard requirements in the future, or if these requirements are changed or expanded, it could adversely affect our profits and results of operations.

We currently rely on a limited number of suppliers of components for the devices that we manufacture. If these suppliers became unable to provide components in the volumes needed or at an acceptable price, we would have to identify and qualify acceptable replacements from alternative sources of supply. The process of qualifying suppliers is lengthy. Delays or interruptions in the supply of our required components could limit or stop our ability to provide sufficient quantities of devices on a timely basis and meet demand for our services, which could have a material adverse effect on our business, financial condition and results of operations.

The design, manufacture and marketing of services of the types we provide entail an inherent risk of product liability claims. Any such claims against us may require us to incur significant defense costs, irrespective of whether such claims have merit. In addition, we provide information to health care providers and payors upon which determinations affecting medical care are made, and claims may be made against us resulting from adverse medical consequences to patients resulting from the information we provide. In addition, we may become subject to liability in the event that the devices we use fail to correctly record or transfer patient information or if we provide incorrect information to patients or health care providers using our services.

Our liability insurance is subject to deductibles and coverage limitations. In addition, our current insurance may not continue to be available to us on acceptable terms, if at all, and, if available, the coverage may not be adequate to protect us against any future claims. If we are unable to obtain insurance at an acceptable cost or on acceptable terms with adequate coverage or otherwise protect against any claims against us, we ~~will~~would be exposed to significant liabilities, which may adversely affect our business and results of operations.

The Dodd Frank Wall Street Reform and Consumer Protection Act contains provisions to improve transparency and accountability concerning the supply of certain minerals, known as conflict minerals, originating from the DRC. Due to the materials used in certain of the products manufactured by our subsidiaries, ~~Braemar, UMI and Telcare,~~ we must comply with annual disclosure and reporting rules adopted by the SEC by assessing whether the subject minerals contained in ~~Braemar and UMI's~~our products originated in the DRC. Our supply chain is complex since we do not source our minerals directly from the original mine or smelter. Consequently, we incur costs in complying with these disclosure requirements, including for due diligence to determine the source of the subject minerals used in our products and other potential changes to products, processes or sources of supply as a consequence of such verification activities. The rules may adversely affect the sourcing, supply and pricing of materials used in our products throughout the supply chain beyond our control, whether or not the subject minerals are ~~"conflict~~“conflict free."” Also, we may face reputational challenges if we determine that certain of our products contain minerals not determined to be conflict free or if we are unable to sufficiently verify the origins for all subject minerals used in our products through our diligence process.

We are reliant on the ability and willingness of pharmaceutical, clinical research and biotechnology companies to continue to ~~spend on clinical research to~~ outsource the types of research services that we

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provide. As such, we are impacted and subject to risks, uncertainties and trends that affect companies in these industries. Any downturn in these industries or reduction in spending or outsourcing could adversely affect our business.

Future issuance in connection with acquisitions and sales of a substantial number of shares of our common stock in the public market could occur at any time. These sales, or the perception in the market that the holders of a large number of shares intend to sell shares, could reduce the market price of our common stock. As of December 31, ~~2016,~~2017, we had ~~28,261,503~~32,460,668 outstanding shares of ~~vested~~ common stock. In addition, we ~~have 3,568,434~~had 3,574,439 stock options and ~~592,349~~467,129 restricted stock units ~~("RSUs"~~(“RSUs”) outstanding to purchase shares of our common stock that will become exercisable over the next four years or vest over the next three years. ~~Additionally, as of December 31, 2016,~~Further, we had ~~132,992 performance stock units ("PSUs"), which remain unvested. Further, we have 100,000~~150,000 performance stock options ~~which have become~~that are exercisable. If exercised, vested or earned, additional shares would become available for sale.

Our amended and restated certificate of incorporation and bylaws contain provisions that may make the acquisition of our Company more difficult without the approval of our Board of Directors. These provisions:

•

In addition, because we are incorporated in Delaware, we are subject to Section 203 of the Delaware General Corporation Law which, subject to certain exceptions, prohibits stockholders owning in excess of 15% of our outstanding voting stock from merging or combining with us. These anti-takeover provisions and other provisions under Delaware law could discourage, delay or prevent a transaction involving a change of control of our Company, even if doing so would benefit our stockholders. These provisions could also discourage proxy contests and make it more difficult for our stockholders to elect directors of their choosing and cause us to take other corporate actions such stockholders desire.

We previously incurred net losses for each annual period from our inception through December 31, 2014. For the years ended December 31, 2016 and 2015, we achieved net income attributable to the Company of $53.4 million and $7.4 million, respectively; for the year ended December 31, 2017 we realized a net loss attributable to the Company of $16.0 million. We may not be able to sustain or increase profitability on a quarterly or annual basis. As of December 31, 2017, we had a total accumulated deficit of approximately $158.7 million.

We have deferred tax assets that include net operating loss carryforwards that can be used to offset taxable income in future periods and reduce income taxes payable in those future periods. The ultimate realization of deferred tax assets is dependent upon the generation of future taxable income during the periods in which those temporary differences are deductible. The timing and manner in which we can utilize our net operating loss carryforward and future income tax deductions in any year may be limited

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by provisions of the Internal Revenue Code ~~("IRC"~~(“IRC”) regarding the change in ownership of corporations. Such limitation may have an impact on the ultimate realization of our carryforwards and future tax deductions. Section 382 of the IRC ("(“Section ~~382"~~382”) imposes limitations on a ~~corporation's~~corporation’s ability to utilize net operating losses if it experiences an ~~"ownership~~“ownership change."” In general terms, an ownership change may result from transactions increasing the ownership of certain stockholders in the stock of a corporation by more than 50 percentage points over a three-year period. Any unused annual limitation may be carried over to later years, and the amount of the limitation may under certain circumstances be increased by the built-in gains in assets held by us at the time of the change that are recognized in the five-year period after the change. Currently, a portion of our loss carryforwards ~~are~~is limited under Section 382.

We are subject to income taxes in many U.S. and certain foreign jurisdictions, which requires significant judgment in determining our effective income tax rate and in evaluating tax positions, particularly those related to uncertain tax positions. We have provided for uncertain tax positions when such tax positions do not meet the recognition thresholds or measurement standards prescribed by the accounting standard for uncertain tax positions. Changes in uncertain tax positions or other adjustments resulting from tax audits and settlements with taxing authorities, including related interest and penalties, impact our effective tax rate. When particular tax matters arise, a number of years could elapse before such matters are audited and finally resolved. We believe our positions are appropriate, however, federal, state, or foreign tax authorities could disagree. If the settlement of any unrecognized tax reserves is different than accrued, it would impact our effective rate in the year of resolution. Any resolution of a tax matter may require the adjustment of tax assets or tax liabilities and/or the use of cash in the year of resolution.

As of December 31, ~~2016,~~2017, we ~~lease facilities in~~operate the following ~~locations:~~

•: ~~61,000 square feet of space for our~~leased facilities:

From time to time, in the ordinary course of business and like others in the industry, we receive requests for information from government agencies in connection with their regulatory or investigational authority or are involved in traditional employment or business litigation. We review such requests and notices and take appropriate action.

The final outcome of any current or future litigation or governmental or internal investigations cannot be accurately predicted, nor can we predict any resulting penalties, fines or other sanctions that may be imposed at the discretion of federal or state regulatory authorities. We record accruals for such contingencies to the extent that we ~~concludes~~conclude it is probable that a liability has been incurred and the amount of the loss can be estimated.

~~CardioNet v. ScottCare Litigation~~For further details on the material legal proceedings to which we are currently a party, which is incorporated herein by reference, please refer to

~~In May 2012, CardioNet, Inc. ("CardioNet") filed suit against The ScottCare Corporation~~“Part II; Item 8. Financial Statements and Ambucor Health Solutions, Inc. ("ScottCare") in the United States District Court for the Eastern District of Pennsylvania (Civil Action No. 2:12-CV-2516- PBT) for patent infringement under the same five CardioNet patents that were at issue in the Mednet litigation, relatedSupplementary Data; Notes to the making, use, sale and offering for sale of the ScottCare TeleSentry Mobile Cardiac Telemetry device and monitoring services. CardioNet is seeking an injunction against each defendant, as well as monetary damages. ScottCare has asserted counterclaims alleging the patents in the suit are invalid and not infringed. The trial court heard argument on motions for summary judgment and motions to limit expert testimony in June 2015, but has not yet issued rulings on these motions. ScottCare has dropped all invalidity challenges with respect to one of the patents in the suit. The parties are awaiting a trial date. Consistent with the accounting for contingent liabilities, no accrual has been recorded in the consolidated financial statements. We are vigorously pursuing our claims and defending against the counterclaims.

Consolidated Financial Statements; Note 18. Legal Proceedings”~~CardioNet v. InfoBionic~~ below.

CardioNet, LLC and Braemar Manufacturing, LLC (collectively, "CardioNet") filed a patent infringement lawsuit against InfoBionic, Inc. ("InfoBionic") in May 2015, in the United States District Court for the District of Massachusetts ("District Court"), and filed an amended complaint in March 2016. CardioNet asserts that InfoBionic's MoMe™ Kardia System infringes CardioNet's United States Patent Nos. 6,225,901, 6,940,403, 7,212,850, 7,907,996, RE43,767 and 7,099,715 relating to collection and reporting of data. CardioNet seeks an injunction and enhanced damages for willful infringement because InfoBionic had prior knowledge of some or all of the asserted patents. CardioNet is also asserting claims for unfair competition and misappropriation of trade secrets due to its discovery that InfoBionic is in unauthorized possession of confidential and proprietary CardioNet materials, including source code. The District Court held a claim construction hearing in November 2016. CardioNet is

Not Applicable.

In connection with the tender offer and subsequent acquisition of LifeWatch, from the acquisition date through December 31, 2017 we issued 3,635,646 shares of BioTelemetry Common Stock. The tender offer was subject to a Tier I exemption pursuant to Rule 14d-1(c) of the Securities Exchange Act of 1934, as amended, and the issuance of BioTelemetry Common Stock in connection therewith was exempt from registration under the Securities Act of 1933, as amended, pursuant to Rule 802 thereof, because Life Watch is a foreign private issuer and U.S. holders held less than 10% of the LifeWatch Shares that were the subject of the tender offer.

Subsequent to December 31, 2017, in accordance with the squeeze-out procedures under Swiss Law, we issued 58,786 shares to the remaining LifeWatch stockholders.

Our common stock is traded on ~~The~~the NASDAQ Global Select Market under the symbol, ~~"BEAT."~~“BEAT.” The following table sets forth the range of high and low ~~closing~~ sale prices of our common stock for the periods indicated:

~~2016~~

Quarter Ended
High Low
December 31, 2016
$ 23.35 $ 15.35
September 30, 2016
21.30 16.08
June 30, 2016
17.42 11.13
March 31, 2016
12.94 9.44

~~2015~~



	2017				2016
Quarter Ended	High		Low		High		Low
March 31	$	29.50	$	21.05	$	13.35	$	8.74
June 30	34.00		26.45		17.68		10.96
September 30	39.20		28.80		21.42		15.86
December 31	34.70		23.30		24.10		15.25

Quarter Ended
High Low
December 31, 2015
$ 14.15 $ 11.55
September 30, 2015
16.68 8.94
June 30, 2015
10.02 7.99
March 31, 2015
11.02 8.79

As of February ~~17, 2017,~~15, 2018, there were ~~28,370,987~~32,531,365 shares of our common stock outstanding. Also as of that date, we had ~~approximately~~ 55 holders of ~~record.~~

record (this does not include persons whose stock is in nominee or “street name” accounts through brokers).

We have never declared or paid any cash dividends on our capital stock. We currently intend to retain all available funds and any future earnings to support our operations and finance the growth and development of our business. We do not intend to pay cash dividends on our common stock for the foreseeable future. Any future determination related to dividend policy will be made at the discretion of our Board of Directors.

The graph below compares the total stockholder return of an investment of $100 on December 31, ~~2011~~2012 through December 31, ~~2016~~2017 for (i) our common stock (ii) The NASDAQ Health Care Index and (iii) The Russell 2000 Index. Each of the three measures of cumulative total return assumes reinvestment of dividends, if any. The stock price performance shown on the graph below is based on historical data and is not indicative of future stock price performance.

Information regarding our equity compensation plans is incorporated by reference from our Proxy Statement, unless our Proxy Statement is not filed on or before May 1, 2018, in which case we will amend this Form 10-K to provide the omitted information in accordance with the requirements of Instruction G to Form 10-K.

The selected financial data set forth below are derived from our consolidated financial statements. The statement of operations data for the years ended December 31, 2017, 2016 ~~2015~~ and ~~2014,~~2015, and the balance sheet data at December 31, ~~2016~~2017 and ~~2015~~2016 are derived from our audited consolidated financial statements included elsewhere in this ~~report.~~Annual Report on Form 10-K. The statement of operations data for the years ended December 31, ~~2013~~2014 and ~~2012~~2013 and the balance sheet data at December 2015, 2014 ~~2013~~ and ~~2012~~2013 are derived from our audited consolidated financial statements, which are not included herein.

Certain reclassifications have been made below to prior period statements to conform to the current period presentation.

You should read the following discussion and analysis of our financial condition and results of our operations in conjunction with our consolidated financial statements and the related notes to those statements included elsewhere in this ~~report.~~Annual Report on Form 10-K. This discussion contains ~~forward looking~~forward-looking statements reflecting our current expectations that involve risks and uncertainties. Our actual results and the timing of events may differ materially from those contained in these ~~forward looking~~forward-looking statements due to a number of factors—see ~~"Cautionary Statement~~“Cautionary Note Regarding ~~Forward Looking Statements"~~Forward-Looking Statements” and “Part I; Item ~~1A "Risk~~1A; Risk Factors."” We ~~are~~report on a calendar year end, and except where otherwise indicated below, ~~"2016"~~“2017” refers to the year ended December 31, 2017, “2016” refers to the year ended December 31, 2016 ~~"2015"~~and “2015” refers to the year ended December 31, ~~2015 and "2014" refers to the year ended December 31, 2014.~~2015.

We provide ~~cardiac~~ monitoring services ~~cardiac monitoring~~and digital population health management for healthcare providers, medical device manufacturing and centralized core laboratory ~~services.~~services for clinical research. We operate under three reportable segments: (1) Healthcare, (2) Research and (3) Technology. The Healthcare segment is focused on the diagnosis and monitoring of cardiac arrhythmias or heart rhythm disorders. We offer cardiologists and electrophysiologists, neurologists and primary care physicians a full spectrum of solutions which provides them with a single source of cardiac monitoring services. These services range from the differentiated ~~mobile cardiac telemetry service ("MCT") service marketed as Mobile Cardiac Outpatient Telemetry™ ("MCOT™") or External Cardiac Ambulatory Telemetry ("ECAT"),~~MCT to ~~wireless and trans telephonic~~ event, Holter, extended wear Holter, Pacemaker and ~~International Normalized Ratio ("INR")~~INR monitoring. The Research segment is engaged in central core laboratory services providing cardiac monitoring, imaging services, scientific consulting and data management services for drug and medical device trials. The Technology segment focuses on the development, manufacturing, testing and marketing of ~~medical~~cardiovascular and blood glucose monitoring devices to medical companies, clinics and hospitals.

~~Our~~

On July 12, 2017, we acquired, through our wholly owned subsidiary Cardiac Monitoring Holding Company, LLC, approximately 97% of the outstanding shares of LifeWatch AG (“LifeWatch”) for aggregate consideration of 3,615,840 shares of BioTelemetry common stock with a fair value of $116.8 million and cash in the amount of $165.8 million. On that date, we acquired control of LifeWatch AG and began consolidating its financial statements. In September 2017, we purchased 343,525 additional shares of LifeWatch for cash consideration of $4.8 million and the issuance of 19,806 of our shares with a fair value of $0.6 million. We completed the acquisition of the remaining shares in December 2017, for aggregate consideration of $2.9 million in cash and 58,786 shares with a fair market value of $2.0 million which was settled in early January 2018. LifeWatch is ~~traded on The NASDAQ Global Select Market under our symbol "BEAT."~~

~~Recent Acquisitions~~

included in the Healthcare segment.

On December 1, 2016, ~~the Company~~we entered into a Share and Asset Purchase Agreement ~~("Agreement"~~(“Agreement”) with Telcare, Inc. ~~("Telcare"~~(“Telcare”) pursuant to which ~~the Company~~we acquired the stock of Telcare Medical Supply, Inc. and certain assets of Telcare. The total consideration paid at closing amounted to $7.0 million in cash, with the potential for a performance-based earn out up to $5.0 million upon reaching certain milestones, as defined in the Agreement. The fair value of the total consideration transferred in the acquisition, including contingent consideration, was $9.7 million at the acquisition date. Telcare is included in the Technology segment.

On May 11, 2016, ~~the Company~~we completed the acquisition of VirtualScopics, Inc. ~~("VirtualScopics"~~(“VirtualScopics”), a leading provider of clinical trial imaging solutions. The all cash Tender Offer commenced on April 8, 2016 and

On April 1, 2016, ~~the Company~~we entered into an Asset Purchase Agreement ~~("APA"~~(“APA”) with DELTA Danish Electronics, Light, and Acoustics ~~("DELTA"~~(“DELTA”), pursuant to which ~~the Company~~we acquired substantially all of the assets of the ePatch division of DELTA, inclusive of all products and indications currently under development. The total consideration paid at closing amounted to $3.0 million in cash and 244,519 shares of ~~the Company's~~our common stock valued at $2.9 million. In addition, there is the potential for a performance-based earn out up to $3.0 million upon reaching certain milestones, as defined in the APA. The fair value of the total consideration transferred in the acquisition, including

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contingent consideration, was $6.5 million at the acquisition date. ePatch is included in the Technology segment.

~~In June 2014, we completed~~

On December 22, 2017, the ~~acquisition of~~Tax Cuts and Jobs Act was signed into law. The TCJA reduced the assets of RadCore Lab, LLC ("RadCore"), an imaging core lab serving the biopharmaceutical and medical device research market. This acquisition broadens our offerings and adds new oncology, musculoskeletal and neurological imaging capabilities, supported by a state-of-the-art, cloud-based analysis platform. RadCore is included in the Research segment.

In April 2014, we completed the acquisition of substantially all of the assets of Biomedical Systems Corporation's ("BMS") cardiac event monitoring, Holter monitoring and mobile telemetry monitoring services. The acquisition gave us accessU.S. corporate income tax rate from 35% to ~~internally developed Holter software and to established customer relationships and is primarily included in the Healthcare segment.~~

In January 2014, we completed the acquisition of Mednet Healthcare Technologies, Inc., Heartcare Corporation of America, Inc., Universal Medical, Inc. and Universal Medical Laboratory, Inc. (together, "Mednet"). Mednet provides cardiac monitoring services and is an original equipment manufacturer of cardiac monitoring devices. The acquisition gave us access to established customer relationships and is included in the Healthcare and Technology segments.

~~Reimbursement—Healthcare~~

We are dependent on reimbursement for our patient services by government and commercial insurance payors. Medicare reimbursement rates for our MCT, event, Holter, Pacemaker and INR monitoring services have been established nationally by the Centers for Medicare and Medicaid Services ("CMS") and fluctuate periodically based on the annually published CMS rates.

~~In addition to government reimbursement through Medicare, we have successfully secured contracts with most national and regional commercial payors for our monitoring services.~~

~~During 2016, CMS published updated rates for remote cardiac monitoring services~~21% effective January 1, 2018. We are required to revalue our U.S. deferred tax assets and liabilities at the new federal corporate income tax rate as of the date of enactment of the TCJA and to include the rate change effect in the tax provision for the period ended December 31, 2017. As a result, we recognized a $8.0 million deferred tax expense based on a reasonable estimate of the re-measurement of our deferred tax assets and liabilities as of December 22, 2017. This significantly increased the effective tax rate for the period ended December 31, 2017 ~~which will result~~in comparison to the effective tax rates for the last two comparable periods. As part of U.S. international tax reform, the TCJA imposes a transition tax on certain accumulated foreign earnings aggregated across all non-U.S. subsidiaries, net of foreign deficits. As we are in an ~~approximate 3% decrease in our Medicare MCT reimbursement~~aggregate net foreign deficit position for 2017. Commercial pricing for our services declined in 2014 and increased in 2015 and 2016. Average commercial pricing is expected to slightly decline in 2017. Commercial pricing is affected by numerous factors, including the current Medicare reimbursement rates, competitive pressures and our ability to successfully negotiate favorable terms in our agreements and the perceived value and effectiveness of our services. Over time, we expect continued pricing pressure on the ratesU.S. tax purposes, we are ~~able to obtain with our commercial payors.~~

not liable for the transition tax.

The discussion and analysis of our financial condition and results of operations are based on our financial statements, which we have prepared in accordance with generally accepted accounting principles. The preparation of these financial statements requires us to make estimates and assumptions that affect the reported amount of assets and liabilities, revenues and expenses and related disclosures. We base our estimates and judgments on historical experience and on various other factors that we believe to be reasonable under the circumstances; however, actual results may differ from these estimates. We review our estimates and judgments on an ongoing basis.

We believe that the following accounting policies and estimates are most critical to a full understanding and evaluation of our reported financial results. Our significant accounting policies are more fully described in “Part II; Item 8. Financial Statements and Supplementary Data; Notes to Consolidated Financial Statements; Note ~~2 to our consolidated financial statements.~~

~~Table~~2. Summary of ~~Contents~~Significant Accounting Policies”

below.

Research revenue includes revenue for core laboratory services. Our Research revenue is provided on a fee-for-service basis, and revenue is recognized as the related services are performed. We also provide consulting services on a time and materials basis, and this revenue is recognized as the services are performed. Our site support revenue, consisting of equipment rentals and sales along with related supplies and logistics management, are recognized at the time of sale or over the rental period. Under a typical contract, customers pay us a portion of our fee for these services upon contract execution as an upfront ~~deposit, some of which is typically nonrefundable upon contract termination.~~deposit. Unearned revenue, including upfront deposits, ~~are~~is deferred, and then recognized as the services are performed.

For arrangements with multiple deliverables, the revenue is allocated to each element (both delivered and undelivered items) based on their relative selling prices or ~~management's~~management’s best estimate of their selling prices, when vendor-specific or third-party evidence is unavailable.

We record reimbursements received for out-of-pocket expenses, including freight, as revenue in the accompanying consolidated statements of operations and comprehensive income (loss).

Technology revenue includes revenue received from the sale of products, product repairs and supplies to medical companies, clinics and hospitals. Our Technology revenue is recognized when products are shipped, or as services are completed.

Healthcare accounts receivable isare related to the Healthcare segment and isare recorded at the time revenue is recognized, net of contractual allowances, and are presented on the consolidated balance sheet net of allowance for doubtful accounts. The ultimate collection of accounts receivable may not be known for several months after services have been provided and billed. We record an allowance for doubtful accounts based on the aging of receivables using historical data. The percentages and amounts used to record bad debt expense and the allowance for doubtful accounts are supported by various methods and analyses, including current and historical cash collections and the aging of receivables by payor. Because of continuing changes in the health care industry and third-party reimbursement, it is possible that our estimates could change, which could have a material impact on our operations and cash flows.

Other accounts receivable isare related to the Technology and Research segments and isare recorded at the time revenue is recognized, or when products are shipped or services are performed. We estimate

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the allowance for doubtful accounts on a specific account basis, and consider several factors in our analysis including customer specific information and the aging of the account.

We will ~~write-off~~write off receivables when the likelihood for collection is remote and when we believe collection efforts have been fully exhausted and we do not intend to devote additional resources in attempting to collect. We perform write-offs on a monthly basis. In the Healthcare segment, we ~~wrote-off $8.4~~wrote off $8.8 million and ~~$7.1~~$8.4 million of receivables for the years ended December 31, ~~2016~~2017 and ~~2015,~~2016, respectively. The impact

ASC 718,Compensation—Stock Compensation ("(“ASC ~~718"~~718”), addresses the accounting for share-based payment transactions in which an enterprise receives employee services in exchange for (i) equity instruments of the enterprise or (ii) liabilities that are based on the fair value of the ~~enterprise's~~enterprise’s equity instruments or that may be settled by the issuance of such equity instruments. ASC 718 requires that an entity measure the cost of equity-based service awards based on the grant-date fair value of the award and recognize the cost of such awards over the period during which the employee is required to provide service in exchange for the award (the vesting period). ASC 718 requires that an entity measure the cost of liability-based service awards based on current fair value that is remeasured subsequently at each reporting date through the settlement date. We also use the provisions of ASC 505-50,Equity Based Payments to Non-Employees ("(“ASC ~~505-50"~~505-50”), to account for stock-based compensation awards issued to non-employees for services. Such awards for services are recorded at either the fair value of the services rendered or the instruments issued in exchange for such services, whichever is more readily determinable, using the measurement date guidelines enumerated in ASC 505-50.

Stock-based compensation expense is only recognized for outstanding performance stock units (“PSUs”) where the performance conditions are deemed probable for achievement. For PSUs deemed probable for achievement, stock-based compensation expense is recognized ratably over the expected vesting period. Performance stock options (“PSOs”) are valued and stock-based compensation expense is only recognized once the performance conditions of the outstanding PSOs have been met.

We have historically recorded stock-based compensation expense based on the number of options or restricted stock units we expect to vest using our historical forfeiture experience and periodically update those forfeiture rates to apply to new grants. While we early adopted ASU 2016-09 in the year ended December 31, 2016, we have elected to continue to estimate forfeitures under the true-up provision of ASC 718. ASC 718 requires forfeitures to be estimated at the time of grant and revised, if necessary, in subsequent periods if actual forfeitures differ from estimates. Forfeitures are estimated based on our historical experience.

We estimate the fair value of our ~~share-based awards~~stock options to employees and directors using the Black-Scholes option valuation model. The Black-Scholes option valuation model requires the use of certain subjective assumptions. The most significant of these assumptions are the estimates of the expected volatility of the market price of our stock and the expected term of the award. We base our estimates of expected volatility on the historical volatility of our stock price. The expected term represents the period of time that stock-based awards granted are expected to be outstanding. Other assumptions used in the Black-Scholes option valuation model include the risk-free interest rate and expected dividend yield. The risk-free interest rate for periods pertaining to the contractual life of each option is based on the United States Treasury yield of a similar duration in effect at the time of grant. We have never paid, and do not expect to pay, dividends in the foreseeable future. ~~The fair value of our stock-based awards was estimated at the date of grant using the following assumptions:~~

Year Ended
December 31,

2016 2015 2014
Expected volatility
64.4 % 66.5 % 62.8 %
Expected term (in years)
7.96 6.72 6.49
Weighted average risk-free interest rate
1.61 % 1.68 % 1.85 %
Expected dividends
0.0 % 0.0 % 0.0 %

~~While we early adopted Accounting Standards Update ("ASU") 2016-09,~~~~Improvements to Employee Share-Based Payment Accounting~~ ~~("ASU 2016-09") in the year ended December 31, 2016, we have elected to continue to estimate forfeitures under the true-up provision of ASC 718. ASC 718 requires~~

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forfeitures to be estimated at the time of grant and revised, if necessary, in subsequent periods if actual forfeitures differ from estimates. Forfeitures are estimated based on our historical experience.

Goodwill and Acquired Intangible Assets

Goodwill is the excess of the purchase price of an acquired business over the amounts assigned to assets acquired and liabilities assumed in a business combination. In accordance withASC 350 ~~Intangibles—~~, Intangibles

For the purpose of performing our goodwill impairment analysis, we consider our business to be ~~comprised~~composed of three reporting units: Healthcare, Technology and Research. When performing a ~~qualitative~~quantitative analysis, we calculate the fair value of the reporting units utilizing a weighting of the income and market approaches. The income approach is based on a discounted cash flow methodology that includes assumptions for, among other things, forecasted income, cash flow, growth rates, income tax rates, expected tax benefits and long-term discount rates, all of which require significant judgment. The market approach utilizes our market data as well as market data from publicly-traded companies that are similar to us. There are inherent uncertainties related to these factors and the judgment applied in the analysis. We believe that the combination of an income and a market approach provides a reasonable basis to estimate the fair value of our reporting units.

Acquired intangible assets are recorded at fair value on the acquisition date. The estimated fair values and useful lives of intangible assets are determined by assessing many factors, including estimates of future operating performance and cash flows of the acquired business, the characteristics of the intangible assets and the experience of the acquired business. Independent appraisal firms may assist with the valuation of acquired assets. The impairment test for indefinite-lived intangible assets other than goodwill consists of a comparison of the fair value of the indefinite-lived intangible asset to the carrying value of the asset. We estimate the fair value of the indefinite-lived intangibles using the relief from royalty method.

We performed an impairment analysis of goodwill and indefinite-lived intangible assets for the years ended December 31, 2017, 2016 ~~2015~~ and ~~2014. No~~2015. There was no goodwill impairment ~~charges were~~ recorded as a result of these analyses.

During our impairment testing of our intangible assets for the year ended December 31, 2017, considering the LifeWatch integration and forward-looking integration plans, we determined that certain trade names and internally developed software costs ceased being used and were no longer going to be used and were therefore impaired, resulting in $11.0 million of intangible asset impairment charges included within the Corporate and Other segment as a component of other costs within the other charges line in our consolidated statements of operations and comprehensive income/(loss). There were no other intangible asset impairments for the year ended December 31, 2017.

At December 31, 2016 and 2015, we performed our required annual impairment test of indefinite-lived intangible assets. Based on these impairment tests, we determined that there was no impairment.

We account for income taxes under the liability method, as described in ASC 740, Income Taxes (“ASC 740”). Deferred income taxes are recognized for the tax consequences of temporary differences

We record uncertain tax positions in accordance with ASC 740 on the basis of a two-step process in which (i) we determine whether it is more likely than not that the tax positions will be sustained on the basis of the technical merits of the position and (ii) for those tax positions that meet the more-likely-than-not recognition threshold, we recognize the largest amount of tax benefit that is more than 50 percent likely to be realized upon ultimate settlement with the related tax authority.

The vast majority of our revenue is derived from cardiac monitoring services in our Healthcare segment. The amount of Healthcare revenue generated is based on the number of patients enrolled through physician prescriptions and the rates reimbursed to us by commercial payors, physicians, patients and Medicare. MCT Medicare pricing ~~will decrease 3%~~was down slightly in 2017 ~~according to the recent reimbursement rates announced by CMS. This is after an 8% MCT Medicare price increase in 2016.~~and will be flat for 2018. Over time, ~~patient services reimbursement may decline, consistent with the economic life cycle of a~~

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~~successful premium service, as a result of competition and the introduction of new technologies. Event, Holter, Pacemaker and INR monitoring services utilize widely accepted technologies, and~~ we expect the price to remain relatively ~~constant or slightly decline in the long-term.~~stable. We expect volumes to grow in the long-term as the market grows and we continue to gain market share.

Revenue is generated in the Research segment through various study and consulting services, which ~~includes~~include activities such as core lab services, project management, data management, equipment rental and customer support. Research revenue is driven by our ability to enter into service contracts at various phases of the pharmaceutical drug development ~~lifecycle.~~life cycle. We expect volume to increase as a result of ~~our acquisition of VirtualScopics and~~ our growing capabilities as a multi-service provider. Negotiated pricing for service contracts is subject to market pressures, and as a result has decreased slightly over the last few years. We expect revenue from the Research segment to increase over the long-term as we continue to increase our study volume.

Revenue is generated in the Technology segment from the sale of cardiac and blood glucose monitoring products to third-party distributors and service providers in our Technology segment. Technology revenue is driven by the number of the units purchased by our customers and the relative per unit pricing for various products. The sales volume for our Technology segment has ~~declined from historical levels as we have focused on increasing our production capacity on~~increased in the ~~manufacture~~current year with integration of ~~devices for our Healthcare segment and development of new technology.~~Telcare. We expect our Technology segment revenue to increase over the long-term as we grow our new ~~products enter the market.~~

products.

Gross profit consists of revenue less the cost of revenue.

Cost of revenue for the Healthcare segment includes:

•

Cost of revenue for the Research segment includes:

•

Cost of revenue for the Technology segment includes the cost of materials and labor related to the manufacture of our products and product repair services.

We expect multiple factors to influence our gross profit margins in the foreseeable future. IfChanges in reimbursement ~~rates decline in our Healthcare segment, it would have an adverse effect on our gross profit margin. Payor~~and payor mix are two such factors. While we expect reimbursement to be stable, payor mix is unpredictable and dependent on the insurance coverage of patients that are prescribed our services. We have a history of lowering the average cost of revenues as we increase volume. We expect to continue to achieve efficiencies in cost of revenue through process improvements, as well as from a reduction in the cost of our devices. We also expect to realize synergies from our LifeWatch acquisition. These factors will have a favorable impact on our gross profit margins. While these factors could be offsetting, it is difficult to predict how they will influence our gross profit margins.

If we experience volume or selling price declines in our Technology segment, or service contract pricing, it would have an adverse effect on our gross profit margin. We expect the cost of products sold and repairs to remain relatively consistent.

General and administrative expense consists primarily of salaries and benefits related to general and administrative personnel, ~~stock-based compensation,~~ management ~~bonus,~~bonuses, professional fees primarily related to legal and audit fees, amortization related to intangible assets, facilities expenses and the related overhead.

Sales and marketing expense consists primarily of salaries, benefits and commissions related to sales, travel and entertainment costs, marketing and contracting personnel. Also included are marketing programs such as trade shows and advertising campaigns.

Research and development expense consists primarily of salaries and benefits of personnel, as well as subcontractors who work on new product development and sustaining engineering of our existing products.

We account for expenses associated with our acquisitions and certain litigation as other charges as incurred. These expenses were primarily a result of legal fees related to activities surrounding our acquisitions, including integration activities subsequent to our acquisitions and patent litigation in which we are the ~~plaintiff~~plaintiff. Other charges, including intangible and ~~activities surrounding our acquisitions. Other charges~~fixed asset impairments, are costs that are not considered necessary to the ongoing business operations.

Interest expense consists primarily of the interest accrued related to our term loan, capital leases and where applicable, our revolving credit agreement, along with the amortization of deferred debt acquisition costs.

Loss on extinguishment of debt consists primarily of the costs incurred related to the write off of the unamortized debt issuance costs when we settled our prior credit agreements.

Loss on equity method investment represents our portion of the results of operations of our equity method investee.

Other non-operating expense, net represents other infrequently occurring non-operating items including settlement charges and foreign exchange gains/(losses).

Net loss attributable to noncontrolling interests consists of the post-acquisition activity of the portion of LifeWatch that we had not yet acquired during the period from July 12, 2017 through December 31, 2017 as well as the 45% of LifeWatch Turkey that we do not own over that same period.

Total revenue for the year ended December 31, 2017 increased due primarily to the Healthcare segment, which was affected by the acquisition of LifeWatch, along with increased patient volumes as well as a favorable service mix. While overall pricing was stable, we saw a decline in our Medicare rates. Research revenue increased due to the full year impact of the acquisition of our imaging business, VirtualScopics, which was acquired in May 2016, partially offset by lower cardiac study volumes.

General and administrative expense increased for the year ended December 31, 2017 due primarily to the $19.9 million impact from our recent acquisitions, primarily LifeWatch, a $6.0 million impact from intangible asset amortization attributed to LifeWatch, as well as a $2.2 million increase in technology costs, offset partially by $0.7 million in headcount related savings. The increase in the general and administrative expense as a percent of ~~$29.8~~revenue was the result of the intangible asset amortization recorded stemming from the LifeWatch acquisition.

The increase to sales and marketing expense for the year ended December 31, 2017 was due primarily to the $10.7 million ~~or 16.7%.~~ impact from our recent acquisitions, primarily LifeWatch, and $2.2 million in added employee related costs exclusive of our recent acquisitions, partially offset by approximately $5.0 million of synergies obtained from the recent acquisitions and $1.1 million due to lower sales meetings costs. Sales and marketing expense decreased as a percentage of revenue due to the leverage and synergies obtained from our acquired businesses.

The increase in bad debt expense for the year ended December 31, 2017 was due to increased revenue from our recently acquired business and the timing of revenue and collections. Substantially all of our bad debt expense relates to the Healthcare segment. Bad debt expense in the Research segments was minimal and is recorded on a specific account basis.

Research and development expense for the year ended December 31, 2017 increased due primarily to the $5.2 million impact from our recent acquisitions, primarily LifeWatch, offset partially by $2.7 million of synergies obtained from the recent acquisitions and other cost savings.

The increase in other charges for the year ended December 31, 2017 was primarily related to $12.0 million of asset impairment charges, $4.9 million in additional professional fees, $4.1 million of severance and employee related costs, and $1.5 million of legal fees, primarily related to the acquisition of LifeWatch. These charges were partially offset by a $2.6 million decrease in the fair value of acquisition-related consideration recognized for previous acquisitions.

Total other expense for the year ended December 31, 2017 increased due primarily to $3.1 million of interest expense resulting from our new credit agreement entered into concurrent with our LifeWatch acquisition and a $2.5 million non-operating charge for our settlement with the Office of Civil Rights related to the theft of two unencrypted laptop computers in 2011. Additionally, we incurred a $1.3 million non-operating charge related to the derivative instrument premium for the acquisition of LifeWatch, and a $0.5 million loss on the extinguishment of our previous credit agreement with Healthcare Financial Solutions, LLC, offset partially by a non-operating gain of approximately $1.3 million related to the favorable settlement with the former owner of Mednet.

For the year ended December 31, 2017, we recognized a net tax provision primarily due to the re-measurement of our deferred tax assets and liabilities at the new federal corporate rate of 21 percent, which total $8.0 million.

For the year ended December 31, 2016, we recognized a net tax benefit due primarily to a $51.6 million benefit related to the release of our valuation allowance. The release of our valuation allowance was partially offset by adjustments to deferred taxes and state taxes levied on fiscal 2016 taxable income.

Healthcare revenue increased ~~$19.7 million~~for the year ended December 31, 2016 due to increased patient volumes as well as higher MCT Medicare pricing. In addition, Research revenue increased ~~$10.7 million~~ due to the acquisition of VirtualScopics. These increases were partially offset by a decrease in Technology revenue ~~of $0.6 million~~ due to lower sales volume resulting from customers delaying purchases as they await the release of upgraded devices, partially offset by increases due to current year acquisitions.

The increase in gross margin percentage for the year ended December 31, 2016 from $106.6 million for the year ended December 31, 2015, an increase of $22.9 million, or 21.5%. Gross profit as a percentage of revenue increased to 62.1% for the year ended December 31, 2016 compared to 59.7% for the year ended December 31, 2015. The increase in gross margin percentage was due to Healthcare volume efficiencies and higher Healthcare pricing, as well as reduced costs related to shipping and device communication. These increases were slightly offset by the impact of our acquisitions, which carry lower profit margins than our existing business.

General and administrative expense ~~was $55.9 million~~ for the year ended December 31, 2016 ~~compared to $47.9 million for the year ended December 31, 2015. The increase of $8.0 million, or 16.7%, was~~increased due to the addition of $3.8 million from our acquired businesses, as well as a $2.6 million increase in employee related costs and a $1.6 million increase in stock compensation expense. $1.3 million of the increase in stock compensation expense related to a performance bonus awarded to a ~~third-party. As a percentage of total revenue, general and administrative expense was 26.8% for both the year ended December 31, 2016 and the year ended December 31, 2015.~~

third‑party.

Sales and marketing expense ~~was $28.6 million~~ for the year ended December 31, 2016 ~~compared to $27.9 million for the year ended December 31, 2015. The increase of $0.7 million, or 2.5%, was~~increased due to the addition of $0.9 million from our acquired businesses, partially offset by a $0.2 million decrease in employee related costs. ~~As a percentage of total revenue, sales and marketing~~

Bad debt expense ~~was 13.7%~~ for the year ended December 31, 2016 ~~compared to 15.6% for the year ended December 31, 2015.~~

~~Bad Debt Expense.~~ ~~Bad debt expense was $9.9 million for the year ended December 31, 2016 compared to $8.0 million for the year ended December 31, 2015. The increase of $1.9 million, or 23.4%, was~~increased due to the timing of revenue and collections. Substantially all of our bad debt expense relates to the Healthcare segment. Bad debt expense in the Technology and Research segments was minimal and is recorded on a specific account basis. ~~As a percentage of total revenue, bad debt~~

Research and development expense ~~was 4.8%~~ for the year ended December 31, 2016 ~~compared to 4.5% for the year ended December 31, 2015.~~

~~Research and Development Expense.~~ ~~Research and development expense was $8.4 million for the year ended December 31, 2016 compared to $7.1 million for the year ended December 31, 2015. The increase of $1.3 million, or 17.5%, was~~increased due to the addition of $1.0 million from our acquired businesses as well as a $0.2 million increase in consulting costs and a $0.1 million increase in employee related expenses. ~~As a percent of total revenue, research and development expense was 4.0%~~

Other charges for ~~both~~ the year ended December 31, 2016 ~~and the year ended December 31, 2015.~~

~~Other Charges.~~ ~~Other charges were $8.6 million for the year ended December 31, 2016. Legal~~consisted of legal charges of $7.2 million ~~were~~ related primarily to patent litigation cases in which we are the ~~plaintiff. Professional~~plaintiff, professional fees of $0.7 million, ~~and~~ severance and employee related costs of $0.6 million and $0.1 million of other acquisition related costs ~~were primarily associated with activities surrounding~~from our 2016 acquisitions.

Other charges ~~are costs that management does not consider necessary to the ongoing business operations. Other charges were 4.1% of total revenue~~ for the year ended December 31, ~~2016.~~

~~Other charges were $6.1 million for the year ended December 31, 2015. Legal~~2015 consisted of legal charges of $5.8 million ~~were~~ related primarily to patent ~~litigation. The~~litigation and severance and employee related costs of $0.3 million ~~were~~ associated with activities surrounding our 2014 acquisitions.

Total other ~~loss, net was $2.2 million~~expense for the year ended December 31, 2016 ~~compared~~increased due primarily to ~~$1.6 million for the year ended December 31, 2015. The $0.6 million increase was~~increased interest expense related to our borrowings under our Revolving Loans as well as due to recognizing our share of our equity method ~~investee's loss as well as an increase in interest expense due to increased borrowings under~~investee’s loss.

For the ~~Revolving Loans.~~

~~Income Taxes.~~ Atyear ended December 31, 2016, ~~our effective tax rate was a benefit of 238.8% and~~ we recognized a net tax benefit ~~of $37.7 million. This includes~~due primarily to a $51.6 million benefit related to the release of our valuation allowance. The release of our valuation allowance was partially offset by adjustments to deferred taxes and state taxes levied on ~~current~~fiscal 2016 taxable income.

For the year ~~taxable income. At December 31, 2015, our effective tax rate was a provision of 5.9% and we had income tax expense of $0.5 million for the year~~

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ended December 31, 2015, we recognized a tax provision due primarily ~~due~~ to Alternative Minimum Tax ~~("AMT"~~(“AMT”) levied on ~~current year~~fiscal 2015 taxable income net of allowable AMT net operating loss carryovers, as well as an increase in the deferred tax liability created by the book to tax differences on ~~indefinite-lived~~indefinite‑lived assets.

~~Net Income.~~ ~~We recognized net income of $53.4 million for the year ended December 31, 2016 compared to a net income of $7.4 million for the year ended December 31, 2015.~~

~~Years Ended December 31, 2015~~

The following table highlights certain cash flow activities:

Non-cash adjustments to ~~4.4% for the year ended December 31, 2014.~~

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~~Other Charges.~~ ~~Other charges were $6.1 million for the year ended December 31, 2015. Legal charges of $5.8 million were related~~income primarily relate to patent litigation. The severance and employee related costs of $0.3 million were associated with activities surrounding our 2014 acquisitions. Other charges were 3.4% of total revenue for the year ended December 31, 2015.

Other charges were $7.1 million for the year ended December 31, 2014. Legal charges of $4.7 million were related to patent litigation, the Civil Investigative Demand and acquisition related matters which were net of a $0.9 million reversal of a legal accrual related to the Mednet acquisition. The severance and employee related costs of $1.7 million and professional fees of $0.7 million were associated with activities surrounding the 2014 acquisitions. Other charges are costs that management does not consider necessary to the ongoing business operations. Other charges were 4.3% of total revenue for the year ended December 31, 2014.

~~Interest and Other Loss, net.~~ Interest and other loss, net was $1.6 million for the year ended December 31, 2015 compared to $7.8 million for the year ended December 31, 2014. The $6.2 million decrease was due to the non-operating charge of $6.4 million that we recorded in 2014 for the settlement with the Department of Justice. This decrease was partially offset by an increase related to additional interest expense due to the expanded debt capacity that we secured in the fourth quarter 2014.

~~Income Taxes.~~ At December 31, 2015, our effective tax rate was a provision of 5.9% and we had income tax expense of $0.5 million for the year ended December 31, 2015, primarily due to AMT levied on current year taxable income net of allowable AMT net operating loss carryovers, as well as an increase in the deferred tax liability created by the book to tax differences on indefinite-lived intangible assets. At December 31, 2014, our effective tax rate was a benefit of 19.1% and we recorded $2.5 million of a tax benefit for the year ended December 31, 2014 related to the Mednet acquisition that occurred in January 2014. This was partially offset by $0.2 million in tax expense primarily for state income tax.

~~Net Income (Loss).~~ ~~We recognized net income of $7.4 million for the year ended December 31, 2015 compared to a net loss of $9.8 million for the year ended December 31, 2014.~~

~~Liquidity and Capital Resources~~

As of December 31, 2016, our principal source of liquidity was cash and cash equivalents of $23.1 million and net accounts receivable of $26.9 million. We had working capital of $28.1 million as of December 31, 2016.

We generated $38.9 million of cash from operations for the twelve months ended December 31, 2016. Our ongoing operations during this period resulted in net income of $53.4 million, which was offset by $7.0 million of non-cash income. Non-cash income related to our non-cash tax benefit, partially offset by bad debt, depreciation, amortization and stock compensation ~~expense. Additionally, $7.5 million of cash was used for working capital.~~

We used $36.2 million of cash in investing activities for the twelve months ended December 31, 2016. We used $7.0 million for the acquisition of Telcare, $15.0 million, net of cash acquired, for the acquisition of VirtualScopics and $3.0 million for the acquisition of the ePatch division of DELTA. In addition, forexpense offset by any non-cash tax benefit. For the year ended December 31, 2016, we ~~used $10.9~~released a $51.6 million tax valuation allowance on the basis of management’s reassessment of the amount of deferred income tax assets that are more‑likely‑than‑not to be realized, which was a component of the non-cash adjustments recognized.

During the year ended December 31, 2017 we acquired LifeWatch for $161.5 million cash along with $117.4 million in common stock. During the year ended December 31, 2016, we acquired Telcare for ~~capital purchases, primarily related to~~$7.0 million cash, VirtualScopics for approximately $15.0 million, and the ~~investment~~ePatch division of DELTA for $3.0 million cash along with $2.9 million in ~~medical devices~~common stock.

In conjunction with the LifeWatch acquisition, we established a new Credit Agreement with SunTrust Bank and Lenders named therein in the ~~Healthcare~~amount of $205.0 million and ~~Research segments for use in our ongoing operations and~~extinguished the ~~investment in internally developed software.~~

~~On December 30, 2014, we entered into a $25.0 million term loan and $15.0 million revolving credit facility with~~ previous

~~Accounting Pronouncements Not Yet Adopted~~

In January 2017, the FASB issued ASU 2017-04,Simplifying the Test for Goodwill Impairment. The standard eliminates step two in the current two-step impairment test under ASC 350. Under the new standard, a goodwill impairment ~~will be~~is recorded for any excess of a reporting ~~unit's~~unit’s carrying value over its fair value. A prospective transition approach is required. The standard is effective for annual and interim reporting periods beginning after December 15, 2019 with early adoption permitted for annual and interim goodwill impairment testing dates after January 1, 2017. Our adoption of this standard in the fourth quarter of 2017 did not have a material impact on our consolidated financial statements.

In May 2017, the FASB released ASU 2017-09, Scope of Modification Accounting, which clarifies the changes to terms or conditions of a share based payment award that requires application of modification accounting under Topic 718. A change to an award should be accounted for as a modification unless the fair value of the modified award is the same as the original award, the vesting conditions do not change and the classification as an equity or liability instrument does not change. This update is effective for annual reporting periods, and interim periods within those annual periods, beginning after December 15, 2017. Early application is permitted and prospective application is required for awards modified on or

In January 2017, the FASB released ASU 2017-01, Business Combinations: Clarifying the Definition of a Business, which clarifies the definition of a business with the objective of adding guidance to assist entities with evaluating whether transactions should be accounted for as acquisitions or disposals of assets or businesses. The amendments in this ASU should be applied prospectively and are effective for fiscal years beginning after December 15, 2017, including interim periods within those fiscal years, with early adoption permitted. No disclosures are required at transition. We will adopt ~~the~~this standard ~~at the time of our 2017 goodwill impairment testing date~~effective January 1, 2018 and do not expect the standard to have a material impact on our consolidated financial statements.

In February 2016, the FASB issued ASU 2016-02,Leases. The standard will require lessees to recognize most leases on their balance sheet and makes selected changes to lessor accounting. The standard is effective for annual and interim reporting periods beginning after December 15, 2018. A modified retrospective transition approach is required, with certain practical expedients available. We are currently evaluating the impact the adoption of this standard will have on our consolidated financial statements.

~~In July 2015, the FASB issued ASU 2015-11,~~~~Simplifying the Measurement of Inventory~~. The standard will require inventory to be measured at the lower of cost or net realizable value. The guidance will not apply to inventories for which cost is determined using the last-in, first-out method or the retail inventory method. The standard is effective for annual and interim reporting periods beginning after December 15, 2016. We are currently evaluating the impact that the adoption of this standard will have on Telcare, which was acquired in December 2016. We do not expect the adoption of this standard to have a material impact on the other components of our business.

In May 2014, the FASB issued ASU 2014-09,Revenue from Contracts with Customers (“ASU 2014-09), which has been updated through several revisions and clarifications since its original ~~issuance.~~issuance (collectively, the “Standard”). The ~~standard~~Standard will require revenue recognized to represent the transfer of promised goods or services to customers at an amount that reflects the consideration which a company expects to receive in exchange for those goods or services. The ~~standard~~Standard also requires new, expanded disclosures regarding revenue recognition. The ~~standard~~Standard is effective January 1, 2018.

We completed the detailed review of our contract portfolio and revenue streams to identify potential differences in accounting resulting from adopting the Standard.

We implemented the following controls with respect to assessing the potential impact of adopting the Standard:

We have determined the following pertaining to the impact of adopting ASU 2014-09:

In addition, the remaining significant implementation matters to be addressed prior to fully adopting ASU 2014-09 include finalizing the transition adjustment analysis on our consolidated financial statements, and finalizing updates to our business processes, systems and controls to comply with ASU 2014-09.

We expect to complete our assessment of the full financial impact of ASU 2014-09 before filing our 10-Q for the three months ended March 31, 2018 which will include the required financial reporting disclosures under ASU 2014-09.

On July 12, 2017, the Company, through its wholly owned subsidiary Cardiac Monitoring Holding Company, LLC, acquired approximately 97.0% of the outstanding shares of LifeWatch AG for aggregate consideration of 3,615,840 shares of BioTelemetry common stock with a fair value of $116.8 million and cash in the amount of $165.8 million. On that date, we acquired control of LifeWatch and began consolidating its financial statements.

Through December 31, 2017, we purchased 343,525 additional shares of LifeWatch for cash consideration of $4.8 million and the issuance of 19,806 shares with a fair value of $0.6 million. We acquired the remaining untendered LifeWatch shares pursuant to a squeeze-out procedure in accordance with Swiss law and takeover regulation related to the offering occurring in early January 2018, with the settlement of $2.9 million cash, which was recorded as a component of accrued liabilities in our consolidated balance sheets, and 58,786 shares with a fair market value of $2.0 million, which was recorded as a component of paid-in capital in our consolidated balance sheets, both as of December 31, 2017. As of December 31, 2017, we owned 100% of LifeWatch.

Also on July 12, 2017, in connection with the closing of the acquisition of LifeWatch, and refinancing of its existing debt, we entered into a Credit Agreement pursuant to which the Company obtained loans as follows; (i) a term loan (funded on July 12, 2017) in an aggregate principal amount equal to $205.0 million, the proceeds of which were used to (a) pay our existing General Electric Credit Agreement of $24.9 million and acquired LifeWatch debt of $3.0 million, (b) pay a portion of the cash consideration for the acquisition of LifeWatch, and (c) pay related transaction fees and expenses of the acquisition of LifeWatch; and (ii) a $50.0 million revolving credit facility for ongoing working capital purposes, which remains undrawn. The term loan will be repaid in quarterly installments beginning January 1, 2018, with ~~early adoption permissible beginning~~the remaining principal balance repaid on or before July 12, 2022.

The acquisition of LifeWatch strengthens our position as the leader in wireless medicine, creating the foremost connected health platform, significantly enhancing our ability to improve quality of life and reduce cost of care. We accounted for the transaction as a business combination, and as such, all assets acquired and liabilities assumed were recorded at their estimated fair values. The excess of the fair value of the purchase price over the fair value of the net assets acquired has been recognized as goodwill, which represents the expected future benefits arising from the assembled workforce and other synergies attributable to cost savings opportunities. We recognized $183.5 million of goodwill as a result of the acquisition, all of which has been assigned to the Healthcare segment. None of this goodwill will be deductible for tax purposes.

The amounts below represent our preliminary fair value estimates as of December 31, 2017 and are subject to subsequent adjustment as additional information is obtained during the applicable measurement period. Measurement period adjustments recorded during the fourth quarter of 2017 consisted primarily of increasing customer relationships by $17.5 million, increasing acquired technology by $0.9 million, increasing other long-term liabilities by $21.7 million, decreasing deferred tax liabilities by $7.5 million and decreasing fixed assets by $2.0 million. The primary areas of these preliminary estimates that are not yet finalized related to certain tangible assets acquired and liabilities assumed, including deferred taxes, unrecorded tax provisions and identifiable intangible assets. We expect to finalize all accounting for the acquisition of LifeWatch within one year of the acquisition date.

We have integrated the operations of LifeWatch which are included as components of our Healthcare segment. As a result of this integration, it is impracticable to disclose the amount of revenue and earnings/(loss) attributable to LifeWatch for the period from July 12, 2017 to December 31, 2017.

We incurred $31.0 million of acquisition related costs related to LifeWatch for the year ended December 31, 2017. These costs were included in other charges in our consolidated statements of operations and comprehensive income/(loss).

The following unaudited pro forma financial information has been prepared using historical financial results of BioTelemetry and LifeWatch as if the acquisition had occurred as of January 1, ~~2017. We are currently evaluating the transition method we will elect. We are evaluating the specific impacts the standard will have on Healthcare revenue, particularly~~2016. Certain adjustments related to the ~~valuation~~elimination of ~~revenue, accounts receivable~~transaction costs, as well as the addition of depreciation and ~~bad debt expense.~~amortization related to fair value adjustments on the tangible and identifiable intangible assets acquired, have been reflected for the purposes of the unaudited pro forma financial information presented below. We

Pro forma financial information for the ~~standard will have on Research revenue, which involves reviewing a large number of long-term contracts. We do not expect the standard to have a material impact on Technology revenue.~~

~~3. Acquisitions~~

periods presented is summarized as follows:

On December 1, 2016, the Company, through its ~~wholly-owned~~wholly owned subsidiary BioTelemetry Care Management, LLC, entered into the Agreement with Telcare pursuant to which the Company acquired the stock of Telcare Medical Supply, Inc. and certain assets of Telcare Inc. The total consideration paid

~~Table of Contents~~

~~BIOTELEMETRY, INC.~~

~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)~~

~~Years Ended December 31, 2016, 2015 and 2014~~

~~(In thousands, except share and per share amounts)~~

~~3. Acquisitions (Continued)~~

at closing amounted to ~~$7,000~~$7.0 million in cash, with the potential for a performance-based earn out up to ~~$5,000~~$5.0 million upon reaching certain ~~financial~~revenue milestones. The fair value of the total consideration transferred in the acquisition, including the fair value of the contingent consideration, was ~~$9,700~~$9.7 million at the acquisition date.

The acquisition of Telcare provides us the opportunity to apply our expertise in remote monitoring to the diabetes market and increases our presence in the digital population health management market. We accounted for the transaction as a business combination, and as such, all assets acquired and liabilities assumed were recorded at their estimated fair values. The excess of the fair value of the purchase price over the fair value of the net assets acquired has been recognized as goodwill, which represents the expected future benefits arising from the assembled workforce and other synergies attributable to cost savings opportunities. ~~The Company~~We recognized ~~$3,363~~$2.2 million of goodwill as a result of the acquisition, all of which has been assigned to the Technology segment. We expect ~~$578~~$0.3 million of this goodwill will be deductible for tax purposes.

The amounts below represent our ~~preliminary~~final fair value estimates, ~~as of~~which were completed in the fourth quarter ending December 31, ~~2016~~2017. Measurement period adjustments reducing the valuation of inventory of $0.3 million and ~~are subject~~$0.1 million were recorded in the second and third quarters of 2017, respectively, and a $1.5 million adjustment, increasing deferred tax assets and reducing deferred revenue, prior to ~~subsequent adjustment as additional information is obtained~~completing our valuation during the ~~applicable measurement period. The primary areas~~fourth quarter of these preliminary estimates that are not yet finalized related to certain tangible assets acquired and liabilities assumed, including deferred taxes and inventory, as well as the identifiable intangible assets. The Company expects to finalize all accounting for the acquisition of Telcare within one year of the acquisition date.

2017.

The acquisition has been included within the consolidated results of operations and financial condition from the date of the acquisition. ~~For the period from December 1, 2016 to December 31, 2016, Telcare contributed revenue of $1,081 and net income of $286 to our consolidated results of operations.~~

The following unaudited pro forma financial information has been prepared using historical financial results of ~~the Company~~BioTelemetry and Telcare as if the acquisition had occurred as of January 1, 2015. Certain adjustments related to the elimination of transaction costs, as well as the addition of depreciation and amortization related to fair value adjustments on the tangible and identifiable intangible assets acquired, have been reflected for the purposes of the unaudited pro forma financial information presented below. We believe the assumptions used in preparing the unaudited pro forma financial information are reasonable, but not necessarily indicative of actual results should the acquisition have occurred on January 1, 2015.

On March 25, 2016, the Company, through its ~~wholly-owned~~wholly owned subsidiary BioTelemetry Research Acquisition Corporation, entered into a definitive Agreement and Plan of Merger ("(“Merger ~~Agreement"~~Agreement”) with VirtualScopics, Inc. (“VirtualScopics”), a leading provider of clinical trial imaging solutions. Under the terms of the Merger Agreement, ~~the Company~~we purchased: (i) any and all outstanding shares of ~~VirtualScopics'~~VirtualScopics’ $0.001 par value common stock for $4.05 per share; (ii) any and all outstanding shares of ~~VirtualScopics'~~VirtualScopics’ $0.001 par value Series A and Series B Convertible Preferred Stock for $336.30 per share; and (iii) any and all outstanding shares of ~~VirtualScopics'~~VirtualScopics’ $0.001 par value Series C-1 Convertible Preferred Stock for $920.00 per share. The all cash acquisition of VirtualScopics was

~~Table of Contents~~

~~BIOTELEMETRY, INC.~~

~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)~~

~~Years Ended December 31, 2016, 2015 and 2014~~

~~(In thousands, except share and per share amounts)~~

~~3. Acquisitions (Continued)~~

completed on May 11, 2016. The total consideration paid at closing amounted to ~~$14,970,~~$15.0 million, net of cash acquired of ~~$849.~~

$0.8 million.

The acquisition of VirtualScopics expands ~~the Company's~~our existing clinical research offerings and gives ~~the Company~~us further access to established customer relationships. We accounted for the transaction as a business combination, and as such, all assets acquired and liabilities assumed were recorded at their estimated fair values. The excess of the consideration paid over the fair value of the net assets acquired has been recognized as goodwill, which represents the expected future benefits arising from the assembled workforce and other synergies attributable to cost savings opportunities. ~~The Company~~We recognized ~~$4,693~~$4.3 million of goodwill as a result of the acquisition, all of which has been assigned to the Research segment. ~~We do not expect that any~~None of this goodwill will be deductible for tax purposes.

The amounts below represent our ~~preliminary~~final fair value estimates, aswhich were completed in the second quarter of ~~December 31, 2016 and are subject to subsequent adjustment as additional information is obtained during the applicable measurement period. A measurement~~2017. Measurement period ~~adjustment was~~adjustments were recorded in the fourth quarter of 2016 related to the recognition of a ~~$272~~$0.3 million deferred tax ~~liability. The primary area~~liability, and in the second quarter of ~~these preliminary allocations that are not yet finalized related~~2017 primarily to ~~certain liabilities assumed. The Company expects to finalize all accounting for the acquisition~~recognize $0.3 million of ~~VirtualScopics within one year of the acquisition date.~~

deferred tax assets resulting from state net operating losses.

The total consideration and related ~~preliminary~~ allocation for VirtualScopics is summarized as follows:


	Amount		Weighted Average Life (Years)
(in thousands, except lives)					Amount		Weighted Average Life (Years)
Fair value of assets acquired:
Cash and cash equivalents	$	849			$	849
Other accounts receivable		3,679			3,679
Inventory		111			111
Prepaid expenses and other current assets		396			396
Property and equipment		500			500
Deferred taxes					20
Identifiable intangible assets:
Customer relationships		5,200		12	5,200		12
Technology		2,000		10	2,000		10
Backlog		3,100		4	3,100		4

Total identifiable intangible assets		10,300			10,300

Total assets acquired		15,835			15,855

Fair value of liabilities assumed:
Accounts payable		325			325
Accrued liabilities		3,003			2,945
Current portion of capital lease obligations		59			59
Current portion of long-term debt		91			91
Deferred revenue		700			700
Deferred tax liability		272
Long-term capital lease obligations		162			162
Long-term debt		97			97

Total liabilities assumed		4,709			4,379

Total identifiable net assets		11,126			11,476
Goodwill		4,693			4,343

Net assets acquired	$	15,819			$	15,819

The acquisition has been included within the consolidated results of operations and financial condition from the date of the acquisition. For the period from May 11, 2016 to December 31, 2016, VirtualScopics contributed revenue of ~~$12,264~~approximately $12.3 million and net income of ~~$1,442~~approximately $1.4 million to our consolidated results of operations.

The following unaudited pro forma financial information has been prepared using historical financial results of ~~the Company~~BioTelemetry and VirtualScopics as if the acquisition had occurred as of January 1, 2015. Certain adjustments related to the elimination of transaction costs and acquisition-related indebtedness, as well as the addition of depreciation and amortization related to fair value adjustments

~~Table of Contents~~

~~BIOTELEMETRY, INC.~~

~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)~~

~~Years Ended December 31, 2016, 2015 and 2014~~

~~(In thousands, except share and per share amounts)~~

~~3. Acquisitions (Continued)~~

on the tangible and identifiable intangible assets acquired, have been reflected for the purposes of the unaudited pro forma financial information presented below. No adjustments for synergies or certain other expected benefits of the acquisition have been included. We believe the assumptions used in preparing the unaudited pro forma

Pro forma financial information for the periods presented is summarized as follows:

Year Ended December 31,
Unaudited pro forma information
2016 2015
Revenue
$ 214,271 $ 191,230

Net income
$ 55,413 $ 7,232

Net income per common share:

Basic
$ 1.98 $ 0.27

Diluted
$ 1.82 $ 0.25

Weighted average number of common shares outstanding:

Basic
27,920,150 27,116,300

Diluted
30,489,081 29,089,211



(pro forma, unaudited, in thousands, except per share amounts)	Year Ended December 31, 2016		Year Ended December 31, 2015
Revenue	$	214,271	$	191,230
Net income	55,413		7,232
Net income per common share:
Basic	$	1.98	$	0.27
Diluted	$	1.82	$	0.25

ePatch Division of DELTA Danish Electronics, Light, and Acoustics

On April 1, 2016, ~~the Company,~~we, through ~~its wholly-owned~~our wholly owned subsidiary BioTelemetry Technology ApS, entered into an ~~APA~~Asset Purchase Agreement (“APA”) with DELTA, pursuant to which ~~the Company~~we acquired substantially all of the assets of the ePatch division of DELTA, inclusive of all products and indications currently under development. The total consideration paid at closing amounted to ~~$3,000~~$3.0 million in cash and 244,519 shares of ~~the Company's~~our common stock valued at ~~$2,885.~~$2.9 million. In addition, there is the potential for a performance-based earn out up to ~~$3,000~~$3.0 million upon reaching certain regulatory and revenue milestones, as defined in the APA. The fair value of the total consideration transferred in the ePatch acquisition, including the fair value of the contingent consideration, was ~~$6,490~~$6.5 million at the acquisition date.

The ePatch acquisition is expected to generate future cost savings for ~~the Company~~us and will provide control over proprietary components for ~~the Company's~~our next generation ~~MCOT~~^TMMCT device. We accounted for the transaction as a business combination, and as such, all assets acquired and liabilities assumed were recorded at their estimated fair values. The excess of the fair value of the purchase price over the fair value of the net assets acquired has been recognized as goodwill, which represents the expected future benefits arising from the assembled workforce and other synergies attributable to cost savings opportunities. ~~The Company~~We recognized ~~$3,181~~$3.2 million of goodwill as a result of the acquisition, all of which has been assigned to the Technology ~~segment. We~~segment, and we expect all of this goodwill to be deductible for tax purposes.

The total consideration and related ~~preliminary~~ allocation for the ePatch acquisition is summarized as follows:


	Amount		Weighted Average Life (Years)
(in thousands, except lives)				Amount		Weighted Average Life (Years)
Fair value of assets acquired:
Inventory	$	100		$	100
Property and equipment		175		175
Identifiable intangible assets:
Customer relationships		400	10	400		10
Technology		2,800	10	2,800		10
Trade names		100	Indefinite	100		Indefinite

Total identifiable intangible assets		3,300		3,300

Total assets acquired		3,575		3,575

Fair value of liabilities assumed:
Accrued liabilities		266		266

Total liabilities assumed		266		266

Total identifiable net assets		3,309		3,309
Goodwill		3,181		3,181

Net assets acquired	$	6,490		$	6,490

While the ePatch acquisition provides control over proprietary components of our next generation cardiac monitoring device, the acquisition did not have a material effect on our consolidated results of operations.

~~Contingent Consideration~~

The APA includes the potential for a performance-based earn out up to ~~$3,000~~$3.0 million upon reaching certain regulatory and revenue milestones. The fair value of the contingent consideration associated with the ePatch acquisition was ~~$605~~$0.6 million as of the acquisition date and ~~at December 31, 2016 and is~~was included as a component of other liabilities in the accompanying consolidated balance sheets.

~~Table of Contents~~

~~BIOTELEMETRY, INC.~~

~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)~~

~~Years Ended December 31, 2016, 2015 and 2014~~

~~(In thousands, except share and per share amounts)~~

~~3. Acquisitions (Continued)~~

~~The following summarizes the changes in our~~ For further details regarding contingent consideration, ~~during the year ended December 31, 2016:~~

refer to “Note 5. Fair Value Measurements” below.

Total Contingent Consideration
Balance at December 31, 2015
—
Purchase price contingent consideration
$ 605

Balance at December 31, 2016
$ 605

~~RadCore Lab, LLC~~

On June 3, 2014, we acquired the assets of RadCore Lab, an imaging core lab serving the biopharmaceutical and medical device research market. This acquisition broadens our offerings and adds new oncology, musculoskeletal and neurological imaging capabilities, supported by a state-of-the-art, cloud-based analysis platform. We paid $400 in cash at closing and 22,513 shares of our common stock, valued at $200 at closing. While this acquisition provides growth potential, the acquisition of RadCore did not have a material effect on our consolidated financial condition, results of operations or cash flows.

~~Biomedical Systems Corporation~~

On April 3, 2014, we completed the acquisition of substantially all of the assets of BMS cardiac event monitoring, Holter monitoring and mobile telemetry monitoring services. The acquisition gave us access to internally developed Holter software and to established customer relationships. We paid $8,000 in cash at closing and 62,859 shares of our common stock, valued at $650 at closing. While the acquisition has been included within the consolidated results of operations and financial condition from the date of the acquisition, BMS did not have a material effect on our consolidated results of operations or cash flows.

~~Table of Contents~~

~~BIOTELEMETRY, INC.~~

~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)~~

~~Years Ended December 31, 2016, 2015 and 2014~~

~~(In thousands, except share and per share amounts)~~

~~3. Acquisitions (Continued)~~

~~The purchase price allocation was completed in the first quarter of 2015. The amounts below represent the final fair value of assets acquired.~~

Amount Weighted
Average Life
(Years)
Fair value of assets acquired:

Property and equipment
$ 882
Identifiable intangible assets:

Customer relationships
2,100 15
Technology
1,849 4
Covenants not to compete
260 7

Total identifiable intangible assets
4,209

Total assets acquired
5,091

Goodwill
3,559

Net assets acquired
$ 8,650

Goodwill recorded in connection with this acquisition is attributable to synergies expected to arise from cost savings opportunities. All of the recorded goodwill is included in the Healthcare segment.

~~Mednet Healthcare Technologies, Inc.~~

On January 31, 2014, we acquired Mednet. Mednet provides cardiac monitoring services and is an original equipment manufacturer of cardiac monitoring devices. The acquisition gave us access to established customer relationships. Upon the closing of the transaction, we acquired all of the issued and outstanding capital stock, and Mednet became a wholly-owned subsidiary. We paid $5,500 in cash at closing and 128,866 shares of our common stock, valued at $940 at closing. In addition, as a result of the acquisition, we assumed indebtedness from Mednet in the aggregate amount of $9,720, including interest. The acquisition has been included within the consolidated results of operations and financial condition from the date of the acquisition.

~~Table of Contents~~

~~BIOTELEMETRY, INC.~~

~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)~~

~~Years Ended December 31, 2016, 2015 and 2014~~

~~(In thousands, except share and per share amounts)~~

~~3. Acquisitions (Continued)~~

~~The purchase price allocation was completed in the first quarter of 2015. The amounts below represent the final fair value of assets acquired.~~

Amount Weighted
Average Life
(Years)
Fair value of assets acquired:

Cash and cash equivalents
$ (199 )
Healthcare accounts receivable
3,879
Inventory
311
Property and equipment
3,429
Other assets
317
Identifiable intangible assets:

Customer relationships
6,500 13
Technology
1,600 5
Covenants not to compete
420 5
Tradename
700 Indefinite

Total identifiable intangible assets
9,220

Total assets acquired
16,957

Fair value of liabilities assumed:

Accounts payable
4,427
Accrued liabilities
2,932
Other liabilities
3,027
Long-term debt, capital leases, note payable and related interest
9,720

Total liabilities assumed
20,106

Total identifiable net assets
(3,149 )
Goodwill
9,589

Net assets acquired
$ 6,440

Goodwill recorded in connection with this acquisition is attributable to the assembled workforce and synergies expected to arise from cost savings opportunities. All of the recorded goodwill is included in the Healthcare segment.

The unaudited pro forma information below presents combined results of operations as if the acquisition had occurred at the beginning of the period presented instead of January 31, 2014. The pro forma information presented below does not include anticipated synergies or certain other expected

~~Table of Contents~~

~~BIOTELEMETRY, INC.~~

~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)~~

~~Years Ended December 31, 2016, 2015 and 2014~~

~~(In thousands, except share and per share amounts)~~

~~3. Acquisitions (Continued)~~

~~benefits of the acquisition and should not be used as a predictive measure of our future results of operations. Mednet contributed $23,355 in revenue for the year ended December 31, 2014.~~

Unaudited pro forma information
Year ended
December 31, 2014
Revenue
$ 170,076

Net loss
(8,014 )

Net loss per common share:

Basic and diluted
$ (0.30 )

Weighted average number of shares:

Basic and diluted
26,444,626

4. Inventory

Inventory consists of the following:

December 31,

2016 2015
Raw materials and supplies
$ 2,866 $ 2,115
Finished goods
2,310 263

Total inventory
$ 5,176 $ 2,378



	December 31,
(In thousands)	2017		2016
Raw materials and supplies	$	3,128	$	2,866
Finished goods	2,204		2,310
Total inventory	$	5,332	$	5,176

Inventory, which includes purchased parts, materials, direct labor and applied manufacturing overhead, is stated at the lower of cost or net realizable value, with cost determined by use of the first-in, first-out method.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

5. Fair Value Measurements

The fair value of our liabilities measured at fair value on a recurring basis is summarized as follows:



(in thousands)	Balance at December 31, 2017		Level 1	Level 2	Level 3
Liabilities
Contingent consideration	$	700	—	—	$	700



(in thousands)	Balance at December 31, 2016		Level 1	Level 2	Level 3
Liabilities
Contingent consideration	$	3,305	—	—	$	3,305

We have determined that our long term debt, classified as Level 2, has a fair value consistent with its carry value, exclusive of debt discount and deferred charges, of $199.4 million and $25.2 million as of December 31, 2017 and 2016, respectively.

Contingent consideration represents our contingent milestone payment obligations related to our acquisitions and is measured at fair value, based on significant inputs not observable in the market, which represents a Level 3 measurement within the fair value hierarchy. The valuation of contingent consideration uses assumptions we believe would be made by a market participant. We assess these estimates on an ongoing basis as additional data impacting the assumptions is obtained. The balances of the fair value of contingent consideration are recognized within other long-term liabilities on our consolidated balance sheets. Adjustments to contingent consideration are recorded in other charges in the consolidated statements of operations and comprehensive income/(loss).

The following table provides a reconciliation of the beginning and ending balances of contingent payments associated with acquisitions during the years ended December 31, 2017 and December 31, 2016:



	Year ended
(in thousands)	December 31, 2017			December 31, 2016
Beginning balance	$	3,305		$	—
Purchase price contingent consideration	—			3,305
Changes in fair value of contingent consideration	(2,605		)	—
Ending balance	$	700		$	3,305

During the year ended December 31, 2017, the fair value of the contingent consideration related to the ePatch acquisition decreased $0.6 million as it is no longer probable that any of the contingencies will be met. Additionally during the year, the fair value of the contingent consideration related to the Telcare acquisition was reduced by $2.0 million as a result of reducing the probability of attaining all the revenue contingencies.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

6. Property and Equipment

Property and equipment consists of the following:


			December 31,
	Estimated Useful Life (Years)		December 31,						Estimated Useful Life (Years)	December 31,
	Estimated Useful Life (Years)		2016			2015			Estimated Useful Life (Years)
(In thousands, except years)									Estimated Useful Life (Years)	2017			2016
Cardiac monitoring devices, device parts and components		3 - 5	$	55,825		$	52,087		Estimated Useful Life (Years)	$	76,039		$	55,825
Computers and purchased software		3 - 5		18,027			15,392		3 - 5	22,357			18,027
Equipment, tools and molds		3 - 5		6,666			5,858		3 - 5	7,857			6,666
Furniture and fixtures		7		1,467			1,863
Furniture, fixtures and other									5 - 7	2,104			1,467
Leasehold improvements		Life of lease		3,171			3,049		*	5,434			3,171
Capital leases		3 - 7		737			1,884		3 - 7	7,305			737

Total property and equipment, at cost				85,893			80,133			121,096			85,893
Less accumulated depreciation				(60,070	)		(54,579	)		(71,902		)	(60,070		)

Total property and equipment, net			$	25,823		$	25,554			$	49,194		$	25,823



* shorter of useful life or term of lease

~~Table of Contents~~

~~BIOTELEMETRY, INC.~~

~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)~~

~~Years Ended December 31, 2016, 2015 and 2014~~

~~(In thousands, except share and per share amounts)~~

~~5. Property and Equipment (Continued)~~

Depreciation expense associated with property and equipment, inclusive of amortization of assets recorded under capital leases, was ~~$10,547, $8,987~~$18.3 million, $10.5 million and ~~$8,858,~~$9.0 million, for the years ended December 31, 2017, 2016 and 2015, respectively.

During the year ended December 31, 2017, considering the LifeWatch integration and ~~2014, respectively.~~

6.forward-looking integration plans, we determined that certain software ceased being used and was no longer going to be used and was therefore impaired, resulting in $1.1 million of impairment charges included within the Corporate and Other segment as a component of other costs within the other charges line in our consolidated statements of operations and comprehensive income/(loss). There were no fixed asset impairments for the year ended December 31, 2016.

Goodwill was recognized at the time of our acquisitions. The following table presents the carrying amount of goodwill allocated to our reportable segments, as ~~of December 31, 2016 and 2015 was $41,068 and $29,831, respectively. The increase in~~well as the changes to goodwill during the ~~year~~years ended December 31, ~~2016 relates to our current year acquisitions.~~

~~The changes in the carrying amounts of goodwill by segment were as follows:~~

2017 and 2016:

Reporting Segment

Healthcare Research Technology Total
Balance at December 31, 2014
$ 14,489 $ 11,950 $ 3,157 $ 29,596
Goodwill acquired during the year
235 — — 235

Balance at December 31, 2015
$ 14,724 $ 11,950 $ 3,157 $ 29,831

Goodwill acquired during the year
— 4,693 6,544 11,237

Balance at December 31, 2016
$ 14,724 $ 16,643 $ 9,701 $ 41,068



	Reporting Segment
(in thousands)	Healthcare			Research			Technology			Total
Balance at December 31, 2015	$	14,724		$	11,950		$	3,157		$	29,831
Initial goodwill acquired	—			4,633			6,171			10,804
Measurement period adjustments	—			60			373			433
Balance at December 31, 2016	14,724			16,643			9,701			41,068
Initial goodwill acquired	186,456			—			—			186,456
Measurement period adjustments	(2,907		)	(350		)	(1,162		)	(4,419		)
Balance at December 31, 2017	$	198,273		$	16,293		$	8,539		$	223,105

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

The goodwill acquired in the Healthcare segment is due to the LifeWatch acquisition; Research relates to the VirtualScopics acquisition; Technology represents our ePatch and Telcare acquisitions. Refer to “Note 3. Acquisitions” above for details related to the measurement period adjustments.

At December 31, 2017, 2016 ~~2015~~ and ~~2014,~~2015, we performed our required annual impairment test of goodwill. Based on these impairment tests, we determined that there was no goodwill impairment. The carrying amount of our goodwill as of December 31, 2017 and 2016 was $223.1 million and $41.1 million, respectively.

The gross carrying amounts and accumulated amortization of our intangible assets as of December 31, 2017 and 2016 are as follows:



	Estimated Useful Life (Years)	December 31,
(In thousands, except years)	Estimated Useful Life (Years)	2017			2016
Customer relationships	5 - 15	$	143,174		$	16,700
Technology including internally developed software	3 - 10	15,953			21,135
Backlog	1 - 4	6,860			6,860
Covenants not to compete	5 - 7	1,040			1,040
Total intangible assets, gross		167,027			45,735
Customer relationships		(10,868		)	(3,809		)
Technology including internally developed software		(8,573		)	(6,588		)
Backlog		(5,052		)	(4,176		)
Covenants not to compete		(827		)	(690		)
Total accumulated amortization		(25,320		)	(15,263		)
Indefinite-lived trade names		—			3,000
Total intangible assets, net		$	141,707		$	33,472

During our intangible asset impairment testing for the year ended December 31, 2017, considering the LifeWatch integration and forward-looking integration plans, we determined that certain trade names and internally developed software costs ceased being used and were no longer going to be used and were therefore impaired, resulting in $11.0 million of intangible asset impairment charges included within the Corporate and Other segment as a component of other costs within the other charges line in our consolidated statements of operations and comprehensive income/(loss). There were no other intangible asset impairments for the year ended December 31, 2017.

At December 31, 2016 and 2015, we performed our required annual impairment test of indefinite-lived intangible assets. Based on these impairment tests, we determined that there was no impairment.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS ~~(Continued)~~

~~Years Ended December 31, 2016, 2015 and 2014~~

~~(In thousands, except share and per share amounts)~~

~~6. Goodwill and Intangible Assets (Continued)~~

~~The gross carrying amounts and accumulated amortization of our intangible assets as of December 31, 2016 and 2015 are as follows:~~

(continued)

December 31,

Estimated
Useful Life
(Years)

2016 2015
Customer relationships
5 - 15 $ 16,700 $ 10,700
Technology including internally developed software
3 - 10 21,135 13,522
Backlog
1 - 4 6,860 3,760
Covenants not to compete
5 - 7 1,040 1,040

Total intangible assets, gross
45,735 29,022

Customer relationships
(3,809 ) (2,520 )
Technology including internally developed software
(6,588 ) (5,422 )
Backlog
(4,176 ) (3,109 )
Covenants not to compete
(690 ) (490 )

Total accumulated amortization
(15,263 ) (11,541 )

Indefinite-lived trade names
3,000 2,500

Total intangible assets, net
$ 33,472 $ 19,981

The estimated amortization expense for finite-lived intangible assets for the next five years and thereafter is summarized as follows at December 31, ~~2016:~~

2017:


2017	$	4,670

(in thousands)			(in thousands)
Fiscal Year			Fiscal Year
2018		4,888	2018	$	16,718
2019		4,401	2019	16,231
2020		3,850	2020	15,420
2021		3,424	2021	14,687
2022			2022	14,238
Thereafter		9,239	Thereafter	64,413

Total estimated amortization	$	30,472	Total estimated amortization	$	141,707

Amortization expense for the years ended December 31, 2017, 2016 and 2015 was $10.2 million, $3.7 million and ~~2014 was $3,722, $3,501~~$3.5 million, respectively. The 2017 amortization expense excludes impairment charges of $3.0 million related to indefinite-lived trade names and ~~$3,692, respectively.~~

$8.0 million related to developed technology and customer relationships. See 7.“Note. 12 Other Charges” below.

8. Equity Method Investment

In December 2015, we acquired an ownership interest in Well Bridge Health, Inc. ~~("WellBridge"~~(“WellBridge”) through the conversion of an outstanding note receivable and the related accrued interest. The investment is accounted for under the equity method. In December 2015, the equity method basis difference of ~~$891~~$0.9 million was allocated to equity method goodwill. Our Chief Executive Officer sits on Wellbridge’s Board of Directors, and therefore WellBridge is considered a related party. Except for our continued investment in WellBridge through capital contributions, there were no related party transactions.

As of December 31, ~~2016,~~2017, our investment

~~Table of Contents~~

~~BIOTELEMETRY, INC.~~

~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)~~

~~Years Ended December 31, 2016, 2015 and 2014~~

~~(In thousands, except share and per share amounts)~~

~~7. Equity Method Investment (Continued)~~

in WellBridge represented ~~30%~~32.1% of its outstanding stock. A summary of our investment in Wellbridge is as follows:

Year Ended
December 31,
2016
January 1, 2016 balance
$ 1,100
Capital contributions
312
Loss in equity method investment
(287 )

December 31, 2016 balance
$ 1,125



	Year ended December 31,
(in thousands)	2017			2016
Beginning balance	$	1,125		$	1,100
Capital contributions	690			312
Loss in equity method investment	(384		)	(287		)
Ending balance	$	1,431		$	1,125

8.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

9. Accrued ~~Expenses~~

Liabilities

Accrued ~~expenses~~liabilities consists of the following:


	December 31,
	2016		2015		December 31,
(in thousands)					2017		2016
Accrued compensation	$	7,831	$	6,454	$	13,086	$	7,831
Accrued professional fees		2,841		1,858	1,587		2,841
Accrued taxes		250		234
Accrued squeeze-out					2,885		—
Accrued restructuring					1,605		—
Accrued non-income taxes					588		250
Accrued interest		330		327	306		330
Other		2,446		2,357	7,300		2,446

Total	$	13,698	$	11,230	$	27,357	$	13,698

9.

10. Credit Agreement

Credit Agreements

Concurrent with the acquisition of LifeWatch, as discussed in

“Note 3. Acquisitions” above, we entered into a credit agreement with SunTrust Bank, as a lender and an agent for the lenders (the “Lenders”) (together, the “SunTrust Credit Agreement”). Pursuant to the credit agreement, the Lenders agreed to make loans to the Company as follows; (i) a term loan in an aggregate principal amount equal to $205.0 million; and (ii) a $50.0 million revolving credit facility for ongoing working capital purposes. The proceeds of the loans were used to pay our existing GE Credit Agreement of $24.9 million and acquired LifeWatch debt of $3.0 million, pay a portion of the consideration for the acquisition of LifeWatch and pay related transaction fees and expenses of the acquisition of LifeWatch.

The loans bear interest at an annual rate, at the election of the Company, of (i) with respect to LIBOR rate loans, LIBOR plus the applicable margin and (ii) with respect to base rate loans, the Base Rate (the “prime rate” as published in the Wall Street Journal plus the applicable margin). The applicable margin for both LIBOR and Base Rate loans is determined by reference to the Company’s Consolidated Total Net Leverage Ratio, as defined in the credit agreement. As of December 31, 2017, the applicable margin is 2.00% for LIBOR loans and 1.00% for base rate loans.

The outstanding principal of the loan will be paid as follows:

Beginning January 1, 2018, the principal amount of the term loan will be repaid, on a quarterly basis, in installments of approximately $0.5 million, plus accrued interest;

Beginning January 1, 2019, the principal amount of the term loan will be repaid, on a quarterly basis, in installments of approximately $1.3 million, plus accrued interest;

Beginning January 1, 2020, the principal amount of the term loan will be repaid, on a quarterly basis, in installments of approximately $3.8 million, plus accrued interest;

Beginning January 1, 2021, the principal amount of the term loan will be repaid, on a quarterly basis, in installments of approximately $5.1 million, plus accrued interest;

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The remaining principal balance will be repaid on or before July 12, 2022 (or such earlier date upon an acceleration of the loans by Lenders upon an event of default or termination by the Company).

The loans are secured by substantially all of the assets of the Company and by a pledge of the capital stock of the Company’s U.S. based subsidiaries as well as a pledge of 65% of the capital stock of its first tier material foreign subsidiaries, including 65% of the capital stock the Company owns of LifeWatch.

The carrying amount of the term loan was $199.4 million as of December 31, 2017, which is the principal amount outstanding, net of $5.6 million of unamortized deferred financing costs to be amortized over the remaining term of the credit facility. The revolving credit facility is subject to an unused commitment fee, which is determined by reference to the our Consolidated Total Net Leverage Ratio, as defined in the credit agreement. Our unused commitment fee as of December 31, 2017 was 0.3% and the revolving credit facility remains undrawn as of that date.

On December 30, 2014, we entered into a Credit Agreement with Healthcare Financial Solutions, LLC, ~~("HFS"~~(“HFS”), previously The General Electric Capital Corporation ("(“GE ~~Capital"~~Capital”), as agent for the lenders ~~("Lenders"~~(“Lenders”), and as a lender and swingline ~~lender.~~lender (the “General Electric Credit Agreement”). Pursuant to the General Electric Credit Agreement, the Lenders agreed to make loans to us as follows: (i) Term Loans in an amount of ~~$25,000~~$25.0 million as of the closing date with an uncommitted ability to increase such Term Loans up to an amount not to exceed ~~$10,000~~$10.0 million and (ii) Revolving Loans up to ~~$15,000.~~$15.0 million. As of December 31, 2016, ~~$3,000~~$3.0 million was drawn on the Revolving Loans. The loan, inclusive of Term Loans and Revolving Loans, iswas recorded on our consolidated balance sheet as of December 31, 2016 in the amount of ~~$25,161,~~$25.2 million, which is net of a debt discount and deferred charges of ~~$651.~~

$0.7 million.

The loans ~~bear~~bore interest at an annual rate of LIBOR plus 4.0%, subject to a LIBOR floor of 1.0%. The outstanding principal of the Term Loans ~~will~~was to be paid as follows:

•

beginning April 1, 2015, the principal amount of the Term Loans ~~will be~~were repaid, on a quarterly basis, in installments of ~~$312,~~$0.3 million, plus accrued interest;

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~~BIOTELEMETRY, INC.~~

~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)~~

~~Years Ended December 31, 2016, 2015 and 2014~~

~~(In thousands, except share and per share amounts)~~

~~9. Credit Agreement (Continued)~~

•: ~~beginning January 1, 2018, the principal amount of the Term Loans will be repaid, on a quarterly basis, in installments of $625, plus accrued interest; and~~
•: beginning October 1, 2019, the remaining $16,563, along with any outstanding Revolving Loans, will be paid in full on or before December 30, 2019, or such earlier date upon an acceleration of the Term Loan by the Lenders upon an event of default or termination by us.

The loan iswas secured by substantially all of our assets and by a pledge of the capital stock of our U.S. based subsidiaries as well as a pledge of 65% of the capital stock of our foreign subsidiaries.

As noted above, this agreement was paid off with the proceeds of the SunTrust Credit Agreement in 2017.

Covenants

The SunTrust Credit Agreement contains affirmative and financial covenants regarding the operations of our business and certain negative covenants that, among other things, limit our ability to incur additional indebtedness, grant certain liens, make certain investments, merge or consolidate, make certain restricted payments and engage in certain asset dispositions, including a sale of all, or substantially all, of our property. As of December 31, ~~2016,~~2017, we were in compliance with our covenants.

The Credit Agreement also contains excess payment terms based on the Company's financial position. No excess payments will become due in 2017 as a result of our financial position as of December 31, 2016.

Debt Extinguishment

~~In December 2014, we used the proceeds of the loan to repay in full the $17,411 outstanding balances of the existing debt.~~

In connection with ~~this repayment,~~the SunTrust Credit Agreement, we ~~incurred~~paid the $24.9 million outstanding indebtedness under the Credit Agreement between the Company and Healthcare Financial Solutions, LLC, previously the General Electric Capital Corporation, as agent for the lenders, and as a lender, and we terminated the General Electric Credit Agreement. We wrote‑off the unamortized deferred financing fees

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

related to the existing debt ~~extinguishment loss~~ of ~~$372,~~$0.5 million, which is included in ~~interest and other (loss), net~~loss on extinguishment of debt in our consolidated statements of operations and comprehensive ~~income~~ income/(loss). ~~This loss includes a pre-payment penalty paid as well as the write-off of the unamortized deferred financing fees related to the existing debt.~~

~~10. Commitments and Contingencies~~

11. Leases

We lease our principal administrative and service facilities as well as office equipment under non-cancelable operating leases expiring at various dates through ~~2026.~~2028. The terms of the leases are renewable at the end of the lease term. Payments made under operating leases are charged to operations on a straight-line basis over the period of the lease. Differences between straight-line expense and cash payments are recorded as deferred rent. Rent expense was ~~$4,217, $3,777~~$5.8 million, $4.2 million and ~~$3,721~~$3.8 million for the years ended December 31, 2017, 2016 and 2015, ~~and 2014,~~ respectively.

We have entered into and acquired capital leases with various expiration dates through 2020 which were used to finance equipment, furniture and monitoring devices.

~~Table of Contents~~

~~BIOTELEMETRY, INC.~~

~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)~~

~~Years Ended December 31, 2016, 2015 and 2014~~

~~(In thousands, except share and per share amounts)~~

~~10. Commitments and Contingencies (Continued)~~

Future minimum lease payments under non-cancelable operating and capital leases are summarized as follows at December 31, ~~2016:~~

2017:


	Operating Leases		Capital Leases
2017	$	3,992	$	162
(in thousands)					Operating Leases		Capital Leases
2018		3,720		66	$	5,871	$	4,023
2019		2,660		35	4,240		1,358
2020		2,335		25	3,768		128
2021		1,140		—	2,535		—
2022					1,726		—
Thereafter		3,174		—	5,515		—

Total minimum lease payments	$	17,021	$	288	$	23,655	$	5,509

~~11.~~

12. Other Charges

We account for expenses associated with exit or disposal activities in accordance with ASC 420,Exit or Disposal Cost Obligations, and record the expenses in other charges in our consolidated statements of operations and comprehensive ~~income~~ income/(loss), and record the related accrual in the accrued expenses line of our consolidated balance sheets.

We account for expenses associated with our acquisitions and certain litigation as other charges as incurred. These expenses were primarily a result of legal fees related to patent litigation in which we are the plaintiff and activities surrounding our acquisitions. Other charges are costs that are not considered necessary to the ongoing business operations. A summary of these expenses is as follows:

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)


	Year ended December 31,
	2016		2015		2014		Year ended December 31,
(in thousands)							2017			2016		2015
Asset impairment charges							$	12,045		$	—	$	—
Legal fees	$	7,177	$	5,764	$	4,691	8,689			7,177		5,764
Professional fees		719		50		669	5,614			719		50
Severance and employee related costs		645		249		1,738	4,747			645		249
Change in fair value of contingent consideration							(2,605		)	—		—
Other costs		98		—		—	2,946			98		—

Total	$	8,639	$	6,063	$	7,098	$	31,436		$	8,639	$	6,063

~~12. Shareholders'~~

During the year ended December 31, 2017, in conjunction with the LifeWatch integration and forward-looking integration plans, we determined that certain trade names and software costs ceased being used and were no longer going to be used and were therefore impaired. We recognized impairment charges within the Corporate and Other segment of $1.1 million related to purchased software, $3.0 million related to indefinite-lived trade names and $8.0 million related to certain developed technology and customer relationships. Professional fees, severance and employee related costs increased primarily due to integration activities related to the LifeWatch acquisition. The change in fair value of contingent consideration is partially the result of the contingent consideration related to the ePatch acquisition being written off as it is no longer probable that any of the contingencies will be met. Additionally during the year, the fair value of the contingent consideration related to the Telcare acquisition was reduced as a result of reducing the probability of attaining all the revenue contingencies.

13. Equity

Common Stock

As of December 31, ~~2016~~2017 and ~~2015,~~2016, we were authorized to issue 200,000,000 shares of common stock. As of December 31, ~~2016~~2017 and ~~2015,~~2016, we had 32,460,668 and 28,261,503 shares issued and ~~27,277,939 shares~~ outstanding, respectively.

~~Table~~ Subsequent to December 31, 2017, in accordance with the squeeze-out procedures under Swiss Law, we issued 58,786 shares to the remaining stockholders of ~~Contents~~LifeWatch. See

~~BIOTELEMETRY, INC.~~“Note 3. Acquisitions”

~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)~~ above for further details related to the LifeWatch acquisition.

~~Years Ended~~

Preferred Stock

As of December 31, 2017, we were authorized to issue 10,000,000 shares of preferred stock. As of December 31, 2016, ~~2015 and 2014~~

~~(In thousands, except share and per share amounts)~~

~~12. Shareholders' Equity (Continued)~~

~~Preferred Stock~~

~~We maintain~~we maintained an unregistered blank check preferred stock ~~class.~~class, and no shares were authorized. As of December 31, ~~2016~~2017 and ~~2015,~~2016, there were no shares ~~authorized and~~of preferred stock issued or outstanding.

Noncontrolling Interest

As of December 31, 2017, the noncontrolling interest of $1.1 million on our consolidated balance sheet represents our partner’s share of the accumulated deficit recorded within LifeWatch Turkey. See “Note 1. Summary of Significant Accounting Policies; l) Noncontrolling Interests” above for further details.

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14. Stock-Based Compensation

~~2008 Equity~~

We have three stock plans: our 2017 Omnibus Incentive Plan

~~Our~~ (“OIP”), our 2008 Equity Incentive Plan (the ~~"2008 Plan"~~“2008 Plan”) ~~became effective on March 18, 2008.~~and our 2003 Equity Incentive Plan (the “2003 Plan”). The ~~2008 Plan permits our Board~~OIP is the only remaining stock plan actively granting new stock options or units. The purpose of ~~Directors~~these stock plans was, and the OIP is, to grant incentive stock options to employees and non-qualified stock options, ~~restricted stock,~~RSUs, performance stock and other stock-based incentive awards to officers, directors, employees and consultants. ~~On that~~The Plans are administered by our Board of Directors (the “Board”) or its delegates. The number, type, exercise price, and vesting terms of awards are determined by the Board or its delegates in accordance with the terms of the Plans. The options granted expire on a date ~~we began granting options to purchase shares of common stock~~specified by the Board, but generally not more than ten years from the grant date. Stock option grants to employees ~~executives, directors~~generally vest over four years while RSUs generally vest over three years.

2017 Omnibus Incentive Plan

In May 2017, the stockholders and ~~consultants.~~Board approved the OIP, which replaces the 2008 Plan. Stock options, RSUs, PSUs and PSOs are granted under the OIP. At December 31, 2017, 2,753,252 shares remain available for grant under the OIP.

2008 Equity Incentive Plan

Our 2008 Plan became effective on March 18, 2008 and replaced our 2003 Plan. Under the terms of the 2008 Plan, all available shares in the 2003 ~~Equity Incentive~~ Plan ~~("the 2003 Plan")~~ share reserve automatically rolled into the 2008 Plan. Any cancellations or forfeitures of granted options under the 2003 Plan also automatically roll into the 2008 Plan. Beginning on January 1, 2009, and each year thereafter, the number of options available to be granted under the plan ~~will increase~~increased by the lesser of 4% of the total number of common shares outstanding or 1,500,000 shares.

Options granted under the 2008 Plan have exercise prices not less than the fair market value at the date of grant and have an expiration date of no greater than 10 years from the date of grant. There is no predetermined vesting schedule provided in the 2008 Plan, and vesting is determined by the Board of Directors on the date of grant.

The 2008 Plan had 2,637,019 shares available for grant as of December 31, ~~2016.~~

2016; there are no shares available to grant under the 2008 Plan subsequent to the approval of the OIP.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS ~~(Continued)~~

~~Years Ended December 31, 2016, 2015 and 2014~~

~~(In thousands, except share and per share amounts)~~

~~12. Shareholders' Equity (Continued)~~

(continued)

Stock option activity is summarized for the years ended December 31, 2017, 2016 ~~2015~~ and ~~2014~~2015 as follows:

Number of
Shares Weighted
Average
Exercise Price
Options outstanding as of December 31, 2013
3,135,934 $ 5.83

Granted
582,012 8.45
Cancelled
(310,303 ) 6.55
Exercised
(156,791 ) 3.37

Options outstanding as of December 31, 2014
3,250,852 $ 6.40

Granted
427,786 10.39
Cancelled
(181,777 ) 11.32
Exercised
(76,342 ) 3.82

Options outstanding as of December 31, 2015
3,420,519 $ 6.69

Granted
519,770 13.44
Cancelled
(49,709 ) 9.97
Exercised
(322,146 ) 4.56

Options outstanding as of December 31, 2016
3,568,434 $ 7.82



	Stock Options				Performance Stock Options
	Number of Shares		Weighted Average Exercise Price		Number of Shares		Weighted Average Exercise Price
Outstanding as of December 31, 2014	3,250,852		$	6.40	—		—
Granted	427,786		10.39		200,000		$	19.89
Forfeited	(181,777	)	11.32		—		—
Exercised	(76,342	)	3.82		—		—
Outstanding as of December 31, 2015	3,420,519		$	6.69	200,000		$	19.89
Granted	519,770		13.44		—		—
Forfeited	(49,709	)	9.97		—		—
Exercised	(322,146	)	4.56		—		—
Outstanding as of December 31, 2016	3,568,434		$	7.82	200,000		$	19.89
Granted	543,881		31.12		—		—
Forfeited	(154,510	)	16.22		—		—
Exercised	(383,366	)	9.91		(50,000	)	18.33
Outstanding as of December 31, 2017	3,574,439		$	10.78	150,000		$	20.41

The PSOs met their performance criteria, vested, and were priced as follows:



Performance Achievement Date	Number of Shares	Weighted Average Exercise Price
October 4, 2016	100,000	$	18.33
January 13, 2017	100,000	$	21.45

A summary of total outstanding stock options as of December 31, ~~2016~~2017 is as follows:

Options Outstanding Options Exercisable
Range of Exercise Prices
Number
Outstanding Weighted
Average
Remaining
Contractual
Life (in Years) Weighted
Average
Exercise Price Number
Exercisable Weighted
Average
Remaining
Contractual
Life (in Years) Weighted
Average
Exercise Price
$1.93 - $3.17
1,076,215 5.57 $ 2.67 1,056,215 5.56 $ 2.68
$3.18 - $6.43
379,454 4.01 4.58 375,704 3.99 4.57
$6.44 - $9.87
1,242,539 5.88 7.92 876,341 4.84 7.44
$9.88 - $15.74
399,002 8.20 10.55 174,103 8.10 10.32
$15.75 - $30.00
456,224 5.91 19.25 228,724 2.16 20.47
$30.01 - $30.98
15,000 1.63 30.98 15,000 1.63 30.98

$1.93 - $30.98
3,568,434 5.83 $ 7.82 2,726,087 4.97 $ 6.61



	Options Outstanding				Options Exercisable
Range of Exercise Prices	Number Outstanding	Weighted Average Remaining Contractual Life (in Years)	Weighted Average Exercise Price		Number Exercisable	Weighted Average Remaining Contractual Life (in Years)	Weighted Average Exercise Price
$1.93 - $6.50	1,296,231	4.2	$	3.17	1,296,231	4.2	$	3.17
$6.51 - $10.00	1,136,472	4.8	7.88		952,756	4.3	7.62
$10.01 - $20.00	606,190	6.5	14.02		407,990	5.8	13.79
$20.01 - $30.00	375,546	8.2	23.57		174,068	7.0	21.93
$30.01 - $37.15	310,000	9.2	36.10		15,000	0.6	30.98
$1.93 - $37.15	3,724,439	5.6	$	11.17	2,846,045	4.6	$	7.48

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS ~~(Continued)~~

~~Years Ended December 31, 2016, 2015 and 2014~~

~~(In thousands, except share and per share amounts)~~

~~12. Shareholders' Equity (Continued)~~

(continued)

The table below summarizes certain additional information with respect to our options:

(In thousands)
2016 2015 2014
Aggregate intrinsic value of options outstanding at year-end
$ 52,671 $ 19,436 $ 15,258
Aggregate intrinsic value of options exercisable at year-end
43,750 16,124 9,918
Aggregate intrinsic value of options exercised during the year
3,546 662 840
Weighted average grant date fair value per option
9.47 6.58 5.00

~~Total cash received from the exercise of stock options for the year ended December 31, 2016, 2015 and 2014 was $1,470, $291 and $529, respectively.~~

~~RSU activity is summarized for the years ended December 31, 2016, 2015 and 2014 as follows:~~



	Year Ended December 31,
(In thousands, except per share amounts)	2017		2016		2015
Aggregate intrinsic value of options outstanding at year-end	$	71,680	$	52,671	$	19,436
Aggregate intrinsic value of options exercisable at year-end	63,834		43,750		16,124
Aggregate intrinsic value of options exercised during the year	7,562		3,546		662
Cash received from the exercise of stock options	4,714		1,470		291
Weighted average grant date fair value per option	$	18.05	$	9.47	$	6.58

Number
of Shares Weighted Average
Grant Date Fair
Value
RSUs outstanding as of December 31, 2013
857,656 $ 3.15

Granted
292,079 8.48
Forfeited
(89,664 ) 3.30
Vested
(195,437 ) 6.27

RSUs outstanding as of December 31, 2014
864,634 $ 4.23

Granted
328,060 9.70
Forfeited
(50,642 ) 6.90
Vested
(451,116 ) 3.89

RSUs outstanding as of December 31, 2015
690,936 $ 6.85

Granted
225,198 11.06
Forfeited
(11,905 ) 9.50
Vested
(311,880 ) 4.08

RSUs outstanding as of December 31, 2016
592,349 $ 9.86

~~In addition, a summary of total outstanding RSUs as of December 31, 2016 is as follows:~~

~~Range of Grant Date Fair Value~~		~~RSUs~~ ~~Outstanding~~

~~$7.44 - $9.57~~			~~326,207~~
~~$9.58 - $15.74~~			~~266,142~~

~~$7.44 - $15.74~~			~~592,349~~

~~Table of Contents~~

~~BIOTELEMETRY, INC.~~

~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)~~

~~Years Ended December 31, 2016, 2015 and 2014~~

~~(In thousands, except share and per share amounts)~~

~~12. Shareholders' Equity (Continued)~~

~~Performance stock unit ("PSU") activity is summarized for the years ended December 31, 2016, 2015 and 2014 as follows:~~

Number
of Shares Weighted Average
Grant Date Fair
Value
PSUs outstanding as of December 31, 2013
— —

Granted
284,423 $ 8.68
Forfeited
— —
Vested
— —

PSUs outstanding as of December 31, 2014
284,423 $ 8.68

Granted
— —
Forfeited
�� (18,433 ) 8.68
Vested
— —

PSUs outstanding as of December 31, 2015
265,990 $ 8.68

Granted
— —
Forfeited
— —
Vested
(132,998 ) 8.68

PSUs outstanding as of December 31, 2016
132,992 $ 8.68

Stock-based compensation expense is only recognized for outstanding PSUs where the performance conditions are deemed probable for achievement. For PSUs deemed probable for achievement, stock-based compensation expense is recognized ratably over the expected vesting period. For the years ended December 31, 2016, 2015 and 2014, we incurred PSU expenses of $444, $711 and $0, respectively. We do not expect to recognize any stock-based compensation expense over the year ended December 31, 2017 related to outstanding PSUs.

Performance stock options ("PSOs") are valued and stock-based compensation expense is only recognized once the performance conditions of the outstanding PSOs have been met. For the years ended December 31, 2016, 2015 and 2014, we incurred PSO expenses of $1,297, $0 and $0, respectively. During 2016, 100,000 PSOs vested which have an exercise price of $18.33, a vest date fair value of $12.97 and an expected and contractual term of 10 years.

~~Table of Contents~~

~~BIOTELEMETRY, INC.~~

~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)~~

~~Years Ended December 31, 2016, 2015 and 2014~~

~~(In thousands, except share and per share amounts)~~

~~12. Shareholders' Equity (Continued)~~

~~PSO activity is summarized for the years ended December 31, 2016 and 2015 as follows:~~

		~~Number~~ ~~of Shares~~

~~PSOs outstanding as of December 31, 2014~~			—



~~Granted~~			~~200,000~~
~~Cancelled~~			—

~~PSOs outstanding as of December 31, 2015~~			~~200,000~~



~~Granted~~			—
~~Cancelled~~			—

~~PSOs outstanding as of December 31, 2016~~			~~200,000~~

We estimate the fair value of our share-based awards using the Black-Scholes option valuation model. The Black-Scholes option valuation model requires the use of certain subjective assumptions. The most significant of these assumptions are the estimates of the expected volatility of the market price of our stock and the expected term of the award. We base our estimates of expected volatility on the historical average of our stock price. The expected term represents the period of time that share-based awards granted are expected to be outstanding. Other assumptions used in the Black-Scholes option valuation model include the risk-free interest rate and expected dividend yield. The risk-free interest rate for periods pertaining to the contractual life of each option is based on the U.S. Treasury yield of a similar duration in effect at the time of grant. We have never paid, and do not expect to pay, dividends in the foreseeable future.

~~The fair value of our share-based awards was estimated at the date of grant using the following weighted average assumptions:~~

Year Ended
December 31,

2016 2015 2014
Expected volatility
64.4 % 66.5 % 62.8 %
Expected term (in years)
7.96 6.72 6.49
Weighted average risk-free interest rate
1.61 % 1.68 % 1.85 %
Expected dividends
0.0 % 0.0 % 0.0 %

Based on our historical experience of options and RSUs that cancel before becoming fully vested, we have assumed an annualized forfeiture rate of 8.57% for options, 6.43% for RSUs and 0.00% for PSOs and PSUs. While we early adopted ASU 2016-09 in the year ended December 31, 2016, we have elected to continue to estimate forfeitures under the true-up provision of ASC 718. We will record additional expense if the actual forfeiture rate is lower than estimated, and will record a recovery of prior expense if the actual forfeiture rate is higher than estimated.

The total compensation cost of options granted but not yet vested at December 31, ~~2016, 2015 and 2014~~2017 was ~~$5,858, $3,608 and $2,744, respectively, which is expected to be recognized over a weighted~~

~~Table of Contents~~

~~BIOTELEMETRY, INC.~~

~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)~~

~~Years Ended December 31, 2016, 2015 and 2014~~

~~(In thousands, except share and per share amounts)~~

~~12. Shareholders' Equity (Continued)~~

average period of 2.91 years, 2.66 years and 2.68 years, respectively. Unvested stock options as of December 31, 2016 and 2015 were 842,347 and 837,915, respectively. As of December 31, 2016 and 2015, the weighted average grant date fair values per unvested option were $7.58 and $4.82, respectively.

~~The stock-based compensation expense related to unvested RSUs not yet recognized at December 31, 2016, 2015 and 2014 was approximately $3,036, $2,869 and $1,979, respectively,~~$11.0 million, which is expected to be recognized over a weighted average period of ~~1.43~~approximately three years.

The fair value of stock options was estimated at the date of grant using the following weighted average assumptions:



	Year Ended December 31,
	2017		2016		2015
Expected volatility	59.2	%	64.4	%	66.5	%
Expected term (in years)	7.3		8.0		6.7
Weighted average risk-free interest rate	2.08	%	1.61	%	1.68	%
Expected dividends	0.0	%	0.0	%	0.0	%

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

RSU activity is summarized for the years ~~1.69 years~~ended December 31, 2017, 2016 and ~~1.50 years, respectively. Unvested~~2015 as follows:



	Restricted Stock Units				Performance Stock Units
	Number of Shares		Weighted Average Grant Date Fair Value		Number of Shares		Weighted Average Grant Date Fair Value
Units outstanding as of December 31, 2014	864,634		$	4.23	284,423		$	8.68
Granted	328,060		9.70		—		—
Forfeited	(50,642	)	6.90		(18,433	)	8.68
Vested	(451,116	)	3.89		—		—
Units outstanding as of December 31, 2015	690,936		6.85		265,990		8.68
Granted	225,198		11.06		—		—
Forfeited	(11,905	)	9.50		—		—
Vested	(311,880	)	4.08		(132,998	)	8.68
Units outstanding as of December 31, 2016	592,349		9.86		132,992		8.68
Granted	117,614		25.98		—		—
Forfeited	(48,974	)	13.57		(132,992	)	8.68
Vested	(193,860	)	9.31		—		—
Units outstanding as of December 31, 2017	467,129		$	13.76	—		$	—

In addition, a summary of total outstanding RSUs as of December 31, ~~2016~~2017 is as follows:



Range of Grant Date Fair Value		RSUs Outstanding
$8.93 - $9.75		154,335
$9.76 - $10.36		184,395
$10.37 - $33.05		128,399
$8.93 - $33.05		467,129

Additional information about our RSUs and ~~2015 were 592,349 and 690,936, respectively. As~~PSUs is summarized as follows:



	Year Ended December 31,
(In thousands)	2017		2016		2015
Aggregate market value of RSUs vested during the year	$	4,768	$	3,826	$	4,460
Aggregate market value of PSUs vested during the year	—		2,093		—

The total compensation cost of RSUs granted but not yet vested at December 31, ~~2016 and 2015, the~~2017 was $3.2 million, which is expected to be recognized over a weighted average ~~grant date fair values per unvested RSU were $9.86 and $6.85, respectively.~~

period of approximately one year.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

Employee Stock Purchase Plan

In July 2008, we made available an Employee Stock Purchase Plan ~~("ESPP"~~(“2008 ESPP”) in which substantially all of our full-time employees became eligible to participate effective March 18, 2008. Under the 2008 ESPP, employees may contribute through payroll deductions up to 15% of their compensation toward the purchase of our common stock, or ~~$21,~~$21,500, whichever is lower. The price per share is equal to the lower of 85% of the fair market price on the first day of the offering period, or 85% of the fair market price on the day of purchase. Proceeds received from the issuance of shares are credited to ~~shareholders'~~stockholders’ equity in the period that the shares are issued. In ~~2016, 150,888~~May 2017, the Board of Directors and stockholders approved the BioTelemetry, Inc. 2017 Employee Stock Purchase Plan (“2017 ESPP”), with 500,000 shares reserved for issuance under the 2017 ESPP, which will replace the 2008 ESPP. The contribution limits, price discount and the offering periods remain the same under the 2017 ESPP. In 2017, an aggregate of 95,215 shares were purchased in accordance with the ~~ESPP.~~Plans. Net proceeds from the issuance of shares of common stock under the ~~ESPP~~Plans for the year ended December 31, ~~2016~~2017 were ~~$1,049. In January 2016, the number of shares available for grant was increased by 272,779, per the ESPP documents.~~$1.4 million. At December 31, ~~2016, 625,176~~2017, 452,751 shares remain available for purchase under the 2017 ESPP.

Our aggregate stock-based compensation expense is summarized as follows:



	Year Ended December 31,
(In thousands)	2017		2016		2015
Stock options	$	3,183	$	2,030	$	1,782
Performance stock options	1,534		1,297		—
Restricted stock units	2,273		2,211		2,039
Performance stock units	—		444		711
Employee stock purchase plan	690		520		420
Total stock-based compensation expense	$	7,680	$	6,502	$	4,952

For the years ended December 31, 2017, and 2016, ~~2015~~we recognized $1.5 million and ~~2014, we incurred ESPP expenses~~$1.7 million of ~~$520, $420 and $408, respectively.~~

~~13.~~tax benefit from stock options exercised during the period as a component of our income tax provision/(benefit).

15. Employee Benefit Plan

We sponsor a 401(k) Retirement Savings Plan (the ~~"Plan"~~“Plan”) for all eligible employees who meet certain requirements. Participants may contribute, on a pre-tax basis, up to the maximum allowable amount pursuant to Section 401(k) of the Internal Revenue Code ~~("IRC"~~(“IRC”). The plan also includes a Roth feature, allowing after-tax contributions, up to the maximum allowable amount pursuant to Section 401(k) of the IRC. We are not required to contribute to the Plan. In January 2014, we adopted an amendment to the Plan that allowed for an employer matching contribution of 100% of the first 3% of the ~~employees'~~employees’ salary, and 50% of the next 2% of the ~~employees'~~employees’ salary. For the years ended December 31, 2017, 2016 ~~2015~~ and ~~2014,~~2015, we contributed ~~$2,115, $1,786~~$2.6 million, $2.1 million and ~~$1,483,~~$1.8 million, respectively. Employer contributions vest immediately.

~~14. Income Taxes~~

~~We have deferred income tax assets totaling $47,636 at December 31, 2016, consisting primarily of federal and state net operating loss and credit carryforwards. Our benefit from income taxes~~ Additionally, we sponsor an immaterial pension plan for ~~2016~~

five participants in Switzerland.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS ~~(Continued)~~

~~Years Ended December 31, 2016, 2015 and 2014~~

~~(In thousands, except share and per share amounts)~~

~~14.~~(continued)

16. Income Taxes ~~(Continued)~~

~~of $37,667 primarily relates to the reduction of our valuation allowance, partially offset by adjustments to deferred taxes and state taxes levied on current year taxable income.~~

Deferred taxes result from temporary differences between the carrying amounts of assets and liabilities used for financial reporting purposes and the amounts used for income tax purposes. As of December 31, 2016, our deferred income tax assets were primarily the result of federal and state net operating losses, stock-based compensation and allowance for doubtful accounts. A valuation allowance of $95 and $49,759 was recorded against our deferred income tax asset balance as of December 31, 2016 and 2015, respectively. For the year ended December 31, 2016, we recorded a release of federal and state valuation allowance of $51,630 on the basis of management's reassessment of the amount of deferred income tax assets that are more-likely-than-not to be realized.

As of each reporting date, the Company's management considers new evidence, both positive and negative, that could impact management's view with regard to future realization of deferred income tax assets. As of December 31, 2016, management determined that sufficient positive evidence exists to conclude that it is more-likely-than-not that the net deferred income tax assets of $36,636 are realizable, and therefore, reduced the valuation allowance accordingly.

The ~~significant~~ components of our ~~deferred~~provision for/(benefit from) income taxes are summarized as follows:

December 31,

2016 2015
Deferred tax assets:

Net operating loss carryforwards
$ 33,404 $ 36,149
Research and development and AMT credit carryforwards
912 5,115
Stock option grants
5,602 7,483
Allowance for doubtful accounts
4,965 4,473
Deferred revenue
885 964
Other, net
1,868 1,576

Total deferred tax assets
47,636 55,760
Less valuation allowance
(95 ) (49,759 )

Net deferred tax assets
47,541 6,001
Deferred tax liabilities:

Property, plant and equipment
(3,604 ) (3,027 )
Intangible assets
(7,124 ) (4,031 )
Prepaid insurance
(177 ) (176 )

Total deferred tax liabilities
(10,905 ) (7,234 )

Net deferred tax asset (liability)
$ 36,636 $ (1,233 )



	Year Ended December 31,
(in thousands)	2017			2016			2015
Current:
Federal	$	273		$	321		$	173
State	424			153			50
Total provision for income taxes	697			474			223
Deferred:
Federal	6,201			(32,484		)	220
State	(151		)	(5,657		)	25
Total deferred provision for/(benefit from) income taxes	6,050			(38,141		)	245
Total provision for/(benefit from) income taxes	$	6,747		$	(37,667	)	$	468

~~Table of Contents~~

~~BIOTELEMETRY, INC.~~

~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)~~

~~Years Ended December 31, 2016, 2015 and 2014~~

~~(In thousands, except share and per share amounts)~~

~~14. Income Taxes (Continued)~~

Reconciliations between expected income taxes computed at the federal rate of 35% for each of the years ended December 31, 2017, 2016 and 2015, and ~~2014, and~~ the ~~(benefit~~provision for/(benefit from) ~~provision for~~ income taxes is as follows:

Years ended December 31,

2016 2015 2014
Income tax provision (benefit) at statutory rate
$ 5,520 $ 2,763 $ (4,237 )
State income tax, net of federal benefit
259 (239 ) 4
Research and development
— 634 (626 )
Deferred tax asset adjustments
4,336 — —
Unrecognized tax benefit
3,559 — —
Other
289 549 411
(Decrease) increase in valuation allowance
(51,630 ) (3,239 ) 2,135

(Benefit from) provision for income taxes
$ (37,667 ) $ 468 $ (2,313 )



	Years ended December 31,
(in thousands)	2017			2016			2015
Income tax (benefit)/provision at statutory rate	$	(3,638	)	$	5,520		$	2,763
State income tax, net of federal benefit	177			259			(239		)
Research and development	—			—			634
Permanent difference	(392		)	—			—
Deferred tax asset adjustments	485			4,336			—
Tax Reform impact	8,048			—			—
Unrecognized tax benefit	—			3,559			—
Foreign rate differential	1,107			—			—
Other	(16		)	289			549
Increase/(decrease) in valuation allowance	976			(51,630		)	(3,239		)
Provision for/(benefit from) income taxes	$	6,747		$	(37,667	)	$	468

At December 31, ~~2016,~~2017, we had federal net operating loss carryforwards of approximately ~~$86,868~~$140.4 million to offset future federal taxable income expiring in various years starting in ~~2024~~2023 through ~~2036.~~2037. At December 31, ~~2016,~~2017, we had state net operating loss carryforwards of ~~$43,203,~~$83.5 million, which expire in various years starting in ~~2017~~2018 through ~~2036.~~

2037. We also had $121.2 million of foreign net operating loss carryforwards, for which we have recorded a valuation allowance against most of the net operating loss balance and expire in various years starting in 2018 through 2024.

The timing and manner in which we can utilize our net operating loss carryforwards and future income tax deductions in any year may be limited by provisions of the IRC. Section 382 of the IRC imposes limitations on a ~~corporation's~~corporation’s ability to utilize net operating losses if it experiences an ~~"ownership~~“ownership change." ”

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

Section 383 of the IRC imposes similar limitations on other tax attributes such as research and development credits. Currently, a portion of our loss carryforwards is limited under Section 382 and therefore, is not included in the total net operating losses disclosed above.

~~The components of our (benefit from) provision for income taxes are summarized as follows:~~

Year Ended
December 31,

2016 2015
Current:

Federal
$ 321 $ 173
State
153 50

Total provision for income taxes
474 223

Deferred:

Federal
(32,484 ) 220
State
(5,657 ) 25

Total deferred (benefit from) provision for income taxes
(38,141 ) 245

Total (benefit from) provision for income taxes
$ (37,667 ) $ 468

~~Table of Contents~~

~~BIOTELEMETRY, INC.~~

~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)~~

~~Years Ended December 31, 2016, 2015 and 2014~~

~~(In thousands, except share and per share amounts)~~

~~14. Income Taxes (Continued)~~

The U.S. Internal Revenue Service concluded its examination of our U.S. federal tax returns for all years through 2011. Because of net operating losses, our U.S. federal tax returns statutes for those years will remain subject to examination until the losses are utilized. Additionally, state tax return statutes generally remain open due to operating losses.

~~During 2016, we identified an uncertain~~

We have deferred income tax ~~position related~~assets totaling $57.7 million at December 31, 2017, consisting primarily of federal and state net operating loss and credit carryforwards, stock-based compensation, non-deductible accruals and allowance for doubtful accounts. Our provision from income taxes for 2017 of $6.7 million primarily relates to the re-measurement of our ~~research~~deferred tax assets and ~~development credits.~~liabilities at the new federal corporate rate of 21 percent.

Deferred taxes result from temporary differences between the carrying amounts of assets and liabilities used for financial reporting purposes and the amounts used for income tax purposes. As of December 31, ~~2015~~2017, our deferred income tax assets were primarily the result of federal and ~~2014, we have not identified any uncertain~~state net operating losses, stock-based compensation, non-deductible accruals and allowance for doubtful accounts. A valuation allowance of $6.0 million and $0.1 million was recorded against our deferred income tax ~~positions and therefore, we have no tax reserve recorded~~asset balance as of December 31, ~~2015~~2017 and ~~2014.~~2016, respectively.

As of each reporting date, our management considers new evidence, both positive and negative, that could impact management’s view with regard to future realization of deferred income tax assets.

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The significant components of our deferred taxes are as follows:



	December 31,
(in thousands)	2017			2016
Deferred tax assets:
Net operating loss carryforwards	$	38,245		$	33,404
Research and development and AMT credit carryforwards	1,198			912
Stock option grants	4,300			5,602
Property and equipment	690			—
Non-deductible accruals	4,471			—
Transaction costs	2,361			—
Allowance for doubtful accounts	5,324			4,965
Deferred revenue	937			885
Other, net	158			1,868
Total deferred tax assets	57,684			47,636
Less valuation allowance	(6,032		)	(95		)
Net deferred tax assets	51,652			47,541
Deferred tax liabilities:
Property and equipment	—			(3,604		)
Intangible assets	(33,854		)	(7,124		)
Prepaid insurance	(117		)	(177		)
Total deferred tax liabilities	(33,971		)	(10,905		)
Net deferred tax asset/(liability)	$	17,681		$	36,636

On December 22, 2017, the U.S. government enacted comprehensive tax legislation commonly referred to as the Tax Cuts and Jobs Act (the “TCJA”). The TCJA makes broad and complex changes to the U.S. tax code, including, but not limited to, (1) reducing the U.S. federal corporate tax rate from 35 percent to 21 percent; (2) requiring companies to pay a one-time transition tax on certain unrepatriated earnings of foreign subsidiaries; (3) generally eliminating U.S. federal income taxes on dividends from foreign subsidiaries; (4) requiring a current inclusion in U.S. federal taxable income of certain earnings of controlled foreign corporations; (5) eliminating the corporate alternative minimum tax (AMT) and changing how existing AMT credits can be realized; (6) creating the base erosion anti-abuse tax (BEAT), a new minimum tax; (7) creating a new limitation on deductible interest expense; and (8) changing rules related to uses and limitations of net operating loss carryforwards created in tax years beginning after December 31, 2017.

The SEC staff issued SAB 118, which provides guidance on accounting for the tax effects of the TCJA. SAB 118 provides a measurement period that should not extend beyond one year from the TCJA enactment date for companies to complete the accounting under ASC 740. In accordance with SAB 118, a company must reflect the income tax effects of those aspects of the TCJA for which the accounting under ASC 740 is complete. To the extent that a company’s accounting for certain income tax effects of the TCJA is incomplete but it is able to determine a reasonable estimate, it must record a provisional estimate in the financial statements. If a company cannot determine a provisional estimate to be included in the financial statements, it should continue to apply ASC 740 on the basis of the provisions of the tax laws that were in effect immediately before the enactment of the TCJA.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

Our accounting for the following elements of the TCJA is incomplete. However, we were able to make reasonable estimates of certain effects and, therefore, recorded provisional adjustments as follows:

Reduction of US federal corporate tax rate: The TCJA reduces the corporate tax rate to 21 percent, effective January 1, 2018. For certain of our DTAs and DTLs, we have recorded a provisional net decrease of $8.0 million, with a corresponding net adjustment to deferred income tax expense for the year ended December 31, 2017. While we are able to make a reasonable estimate of the impact of the reduced corporate rate, it may be affected by other analyses related to the TCJA, including, but not limited to, our calculation of deemed repatriation of deferred foreign income and the state tax effect of adjustments made to federal temporary differences.

Deemed Repatriation Transition Tax: As part of U.S. international tax reform, the TCJA imposes a transition tax on certain accumulated foreign earnings aggregated across all non-U.S. subsidiaries, net of foreign deficits. As we are in an aggregate net foreign deficit position for U.S. tax purposes, we are not liable for the transition tax. However, we are continuing to gather additional information to more precisely compute our aggregate net foreign deficit position.

Cost recovery: While we have not yet completed all of the computations necessary or completed an inventory of our 2017 expenditures that qualify for immediate expensing, we have recorded a provisional benefit of $1.1 million based on our current intent to fully expense all qualifying expenditures.

Global intangible low-taxed income: The TJCA subjects a U.S. shareholder to current tax on global intangible low-taxed income (“GILTI”) earned by certain foreign subsidiaries. The FASB Staff Q&A, Topic 740 No. 5, Accounting for Global Intangible Low-Taxed Income, states that an entity can make an accounting policy election to either recognize deferred taxes for temporary differences expected to reverse as GILTI in future years or provide for the tax expense related to GILTI in the year the tax is incurred. We have elected to recognize the tax on GILTI as a period expense in the period the tax is incurred.

During 2017, in connection with our acquisitions, we identified uncertain tax positions for periods prior to our ownership related to items recorded through purchase accounting. The following summarizes the changes in our ~~uncertain~~unrecognized tax ~~positions during the year ended December 31, 2016:~~

benefit:

Total Uncertain Tax Positions
Balance at December 31, 2015
—
Additions to uncertain tax positions related to prior years
$ 3,899

Balance at December 31, 2016
$ 3,899



	Year ended
(in thousands)	December 31, 2017		December 31, 2016
Unrecognized tax benefit at the beginning of the year	$	3,899	$	—
Additions to uncertain tax positions related to current year	35,811		—
Additions to uncertain tax positions related to prior years	—		3,899
Unrecognized tax benefit at the end of the year	$	39,710	$	3,899

The balance of unrecognized tax benefits, if recognized, would affect the effective tax rate.

As of December 31, 2017, we have recorded a net reserve of $22.0 million for uncertain tax positions as a component of other long-term liabilities within our consolidated balance sheets. The unrecognized tax benefit, or a portion of an unrecognized tax benefit, is presented in the financial statements as a reduction to a deferred tax asset for a net operating loss carryforward, a similar tax loss, or a tax credit carryforward.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

We recognize interest and penalties related to unrecognized tax benefits on the income tax expense line in the accompanying consolidated statements of operations and comprehensive ~~income~~ income/(loss). As of December 31, ~~2016,~~2017, we have not recorded any interest and penalties on our uncertain tax positions.

It is reasonably possible that a portion of these unrecognized tax benefits could be resolved within the next twelve months that may result in a decrease in our effective tax rate.

~~15.~~

17. Segment Information

We operate under three reportable segments: Healthcare, Research and Technology. The Healthcare segment is focused on the diagnosis and monitoring of cardiac arrhythmias or heart rhythm ~~disorders~~disorders. We offer cardiologists and electrophysiologists, neurologists and primary care physicians a full spectrum of solutions which provides them with ~~our comprehensive suite~~a single source of cardiac monitoring ~~solutions in a health care setting.~~services. The Research segment is engaged in central core laboratory services providing cardiac monitoring, imaging services, scientific consulting and data management services for drug and medical device trials. The Technology segment focuses on the development, manufacturing, testing and marketing of ~~medical~~cardiovascular and blood glucose monitoring devices to medical companies, clinics and hospitals. Intercompany revenue relating to the manufacturing of devices by the Technology segment for the other segments is included on the intersegment revenue line.

Expenses that can be specifically identified with a segment have been included as deductions in determining pre-tax segment income. Any remaining expenses including ~~research~~integration, restructuring and ~~development costs incurred by the Technology segment for the benefit of the~~ other ~~segments~~charges, as well as the elimination of costs associated with intercompany revenue are included in Corporate and Other. Also

~~Table of Contents~~

~~BIOTELEMETRY, INC.~~

~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)~~

~~Years Ended December 31, 2016, 2015 and 2014~~

~~(In thousands, except share and per share amounts)~~

~~15. Segment Information (Continued)~~

included in Corporate and Other is our net interest expense and other financing expenses. We do not allocate assets to the individual segments.

During the year ended December 31, 2017 we reclassified research and development costs not utilized by our Research segment from the Corporate and Other segment to the Healthcare segment to synchronize our external reporting with the way our chief operating decision maker reviews the segment performance and makes decisions about the reportable segments.


	Healthcare		Research		Technology		Corporate and Other			Consolidated
*2016*
(in thousands)												Healthcare		Research		Technology		Corporate and Other			Consolidated
2017
Revenue	$	165,664	$	32,565	$	10,103		—		$	208,332	$	234,385	$	38,790	$	13,601	$	—		$	286,776
Intersegment revenue		—		—		11,456	$	(11,456	)		—	—		—		14,793		(14,793		)	—
Income (loss) before income taxes		60,362		2,229		3,862		(50,683	)		15,770
Income/(loss) before income taxes												52,054		1,214		3,807		(67,471		)	(10,396		)
Depreciation and amortization		10,216		3,837		517		(301	)		14,269	29,255		4,148		1,045		(5,887		)	28,561
Capital expenditures		8,885		1,941		73		—			10,899	12,542		1,274		749		(868		)	13,697

97

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

Healthcare Research Technology Corporate
and Other Consolidated
2015

Revenue
$ 145,963 $ 21,853 $ 10,697 — $ 178,513
Intersegment revenue
7 — 10,224 $ (10,231 ) —
Income (loss) before income taxes
44,559 540 4,390 (41,593 ) 7,896
Depreciation and amortization
7,790 3,676 371 651 12,488
Capital expenditures
9,155 4,373 72 — 13,600



(reclassified, in thousands)	Healthcare		Research		Technology		Corporate and Other			Consolidated
2016
Revenue	$	165,664	$	32,565	$	10,103	$	—		$	208,332
Intersegment revenue	—		—		11,456		(11,456		)	—
Income/(loss) before income taxes	53,025		2,229		3,862		(43,346		)	15,770
Depreciation and amortization	10,216		3,837		517		(301		)	14,269
Capital expenditures	8,885		1,941		73		—			10,899


	Healthcare		Research			Technology		Corporate and Other			Consolidated
*2014*
(reclassified, in thousands)														Healthcare		Research		Technology		Corporate and Other			Consolidated
2015
Revenue	$	133,178	$	19,744		$	13,656		—		$	166,578		$	145,963	$	21,853	$	10,697	$	—		$	178,513
Intersegment revenue		—		—			7,789	$	(7,789	)		—		7		—		10,224		(10,231		)	—
Income (loss) before income taxes		27,792		(701	)		6,681		(45,878	)		(12,106	)
Income/(loss) before income taxes														38,322		540		4,390		(35,356		)	7,896
Depreciation and amortization		8,157		3,710			502		181			12,550		7,790		3,676		371		651			12,488
Capital expenditures		11,488		1,077			216		—			12,781		9,155		4,373		72		—			13,600

~~16.~~

18. Legal Proceedings

The final outcome of any current or future litigation or governmental or internal investigations cannot be accurately predicted, nor can we predict any resulting penalties, fines or other sanctions that may be imposed at the discretion of federal or state regulatory authorities. We record accruals for such contingencies to the extent that we conclude it is probable that a liability has been incurred and the amount of the loss can be estimated.

~~CardioNet v.~~

Mednet Settlement

In the third quarter of 2017, a settlement was reached with the selling stockholder of Mednet Healthcare Technologies, Inc., Heartcare Corporation of America, Inc., Universal Medical, Inc., and Universal Medical Laboratory, Inc. (together, “Mednet”), whereby 79,333 shares of BioTelemetry common stock with a fair value of $2.8 million were returned to the Company. These shares were part of the consideration paid in the acquisition of Mednet and had been subject to certain terms and conditions set forth in the Stock Purchase Agreement (the “Agreement”). In accordance with the terms of the Agreement, we sought indemnification for alleged breaches of certain representations and warranties. Accordingly, in 2016 we recorded a $1.4 million indemnification asset. However, as a result of the settlement’s fair value exceeding the indemnification asset recorded, a gain of $1.3 million was recorded as a component of other non-operating expense, net in the consolidated statements of operations for the year ended December 31, 2017.

United States Department of Health and Human Services’ Office for Civil Rights Settlement

In 2011, we experienced the theft of two unencrypted laptop computers and, as a result, were required to provide notices under the HIPAA Breach Notification Rule to the United States Department of Health and Human Services’ Office for Civil Rights (“OCR”). During the first quarter of 2017, the OCR concluded its investigation into the matter and reached a settlement agreement with us. Per the agreement, we paid

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BIOTELEMETRY, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

the OCR $2.5 million and agreed to submit a two-year corrective action plan. We did not admit any liability or wrongdoing. As a result of the settlement, we recorded a non-operating charge of $2.5 million to other non-operating expense, net in the consolidated statements of operations and comprehensive income/(loss) for the year ended December 31, 2017.

ZTech, Inc., Biorita LLC, and the Cleveland Clinic Foundation Arbitration

In January 2017, ZTech, Inc., Biorita LLC, and the Cleveland Clinic Foundation (the “Claimants”) filed an arbitration demand against LifeWatch with the American Arbitration Association. Claimants alleging that LifeWatch violated the 2015 Stock Purchase Agreement for the purchase of FlexLife Health, Inc., a remote international normalized ratio monitoring business. The demand alleges LifeWatch did not make commercially reasonable efforts to achieve certain conditions precedent and did not have a reasonable basis for terminating the business line. Claimants seek liquidated damages and attorneys’ fees. We are vigorously defending against these claims and are seeking recovery of attorneys’ fees related to our defense. The arbitration hearing was held in February 2018, and we are awaiting a decision. While we believe that the risk of loss in this arbitration is improbable, we cannot determine, nor can we estimate, the range of potential loss. Accordingly, as we do not believe that a loss is probable, in accordance with authoritative guidance on the evaluation of loss contingencies, we have not recorded an accrual related to this matter.

ScottCare Litigation

In May 2012, CardioNet, Inc. ~~("CardioNet"~~(“CardioNet”) filed suit against The ScottCare Corporation and Ambucor Health Solutions, Inc. ~~("ScottCare"~~(“ScottCare”) in the U.S. District Court for the Eastern District of Pennsylvania ~~(Civil Action No. 2:12-CV-2516- PBT)~~ for patent ~~infringement under the same five CardioNet patents that were at issue in the Mednet litigation, related to the making, use, sale and~~

~~Table of Contents~~

~~BIOTELEMETRY, INC.~~

~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)~~

~~Years Ended December 31, 2016, 2015 and 2014~~

~~(In thousands, except share and per share amounts)~~

~~16. Legal Proceedings (Continued)~~

~~offering for sale of the ScottCare TeleSentry Mobile Cardiac Telemetry device and monitoring services. CardioNet is~~infringement. We are seeking an injunction against each defendant, as well as monetary damages. ScottCare has asserted counterclaims alleging the patents in the suit are invalid and not infringed. The trial court heard argument on motions for summary judgment and motions to limit expert testimony in June 2015, but has not yet issued rulings on these motions. ScottCare has dropped all invalidity challenges with respect to one of the patents in the suit. The parties are awaiting a trial date. ~~Consistent with the accounting for contingent liabilities, no accrual has been recorded in the consolidated financial statements.~~ We are vigorously pursuing our claims and defending against the counterclaims.

~~CardioNet v.~~ The probable outcome of this matter cannot be determined, nor can we estimate a range of potential loss. Therefore, in accordance with authoritative guidance on the evaluation of loss contingencies, we have not recorded an accrual related to this matter.

InfoBionic

Litigation

CardioNet, LLC and Braemar Manufacturing, LLC ~~(collectively, "CardioNet")~~ filed a patent infringement lawsuit against InfoBionic, Inc. ~~("InfoBionic"~~(“InfoBionic”) in May 2015, in the U.S. District Court for the District of Massachusetts, ~~("District Court"),~~ and filed an amended complaint in March 2016. CardioNet asserts that InfoBionic's MoMe™ Kardia System infringes CardioNet's U.S. Patent Nos. 6,225,901, 6,940,403, 7,212,850, 7,907,996, RE43,767 and 7,099,715 relating to collection and reporting of data. CardioNet seeksWe are seeking an injunction and enhanced damages for willful infringement because InfoBionic had prior knowledge of some or all of the asserted patents. ~~CardioNet is~~We are also asserting claims for unfair competition and misappropriation of trade secrets due to its discovery that InfoBionic is in unauthorized possession of confidential and proprietary ~~CardioNet~~materials of ours, including source code. A trial date has not been set.

In March 2017, we filed a second infringement action in the same District Court asserting infringement of one additional patent seeking an injunction and enhanced damages for willful infringement. InfoBionic moved to dismiss the complaint in this action in June 2017, and the parties are awaiting a ruling from the Court.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

We also initiated an arbitration proceeding against InfoBionic with the American Arbitration Association in July 2017 asserting claims of misappropriation of trade secrets, unfair competition, and unjust enrichment as a result of our discovery that InfoBionic is in unauthorized possession of our confidential and proprietary materials, including source code. ~~The District Court held a claim construction hearing in November 2016. CardioNet is~~We are seeking ~~leave to add an infringement claim for CardioNet's U.S. Patent No. 7,941,207 to the complaint. Dates for expert discovery~~monetary and ~~trial have not been set.~~

injunctive relief.

In response to ~~CardioNet's~~our infringement assertion, ~~in August 2015,~~ InfoBionic filed several petitions at the ~~U.S.~~United States Patent and Trademark Office ~~("USPTO"~~(“USPTO”) for Inter Partes review ~~("IPR"~~(“IPR”) of ~~the '901, '403, '850, and '996 patents. In February 2016, the USPTO denied institution~~certain of ~~the August 2015 petitions for the '850 and '996 patents. In June 2016, InfoBionic filed a second set of petitions directed to the '850 and '996~~our patents. The USPTO denied institution of ~~that second set~~IPR regarding certain patents and found certain of ~~petitions~~our claims in ~~December 2016.~~our patents to be unpatentable. In December 2016, the USPTO also upheld the validity of claim 10 of the '403 patent, but found that the other challenged claims of the '901 and '403 patents are unpatentable. The '901 and '403 patents were set to expire in March 2017. InfoBionic is estopped from presenting any invalidity defense at the court that it raised or could have raised in the IPR for claim 10 of the '403 patent. In late JanuaryJuly 2017 ~~InfoBionic~~we filed an ~~IPR petition~~appeal with the Federal Circuit challenging the '767 patent. CardioNet's preliminary response is due in late April or early May 2017, and a decision regarding institution will issue in late July or early August 2017. If the Patent Trial and Appeal Board denies institution, then the proceeding is over. If the Appeal Board decides to institute, a final written decision would be expected in late summer of 2018.

unpatentability findings.

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BIOTELEMETRY, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS ~~(Continued)~~

~~Years Ended December 31, 2016, 2015 and 2014~~

~~(In thousands, except share and per share amounts)~~

~~17.~~(continued)

19. Quarterly Financial Data (Unaudited)

The following tables summarize the unaudited quarterly financial data for the last two fiscal years. Net Income, basic net income per share and diluted net income per share for the first three quarters of 2016 have been recast in accordance with the adoption of ASU 2016-09.

First
Quarter Second
Quarter Third
Quarter Fourth
Quarter

(in thousands, except per share amount)

2016

Total revenue
$ 48,640 $ 52,680 $ 53,055 $ 53,957
Gross profit
30,627 32,921 32,866 33,036
Other charges
1,788 1,659 2,397 2,795
Income from operations
4,534 5,121 4,966 3,391
Net income
4,097 4,697 4,195 40,448
Basic net income per share
$ 0.15 $ 0.17 $ 0.15 $ 1.43
Diluted net income per share
$ 0.14 $ 0.15 $ 0.14 $ 1.30
2015

Total revenue
$ 43,435 $ 44,812 $ 43,492 $ 46,774
Gross profit
25,223 26,733 26,337 28,264
Other charges
1,860 1,210 1,392 1,601
Income from operations
469 2,585 3,006 3,458
Net (loss) income
(69 ) 2,171 2,478 2,848
Basic net (loss) income per share
$ (0.00 ) $ 0.08 $ 0.09 $ 0.10
Diluted net (loss) income per share
$ (0.00 ) $ 0.08 $ 0.08 $ 0.10



(in thousands, except per share amounts)	First Quarter		Second Quarter		Third Quarter			Fourth Quarter
2017
Total revenue	$	55,881	$	58,129	$	81,023		$	91,743
Gross profit	32,909		35,967		49,069			54,425
Net income/(loss)	196		1,726		(2,564		)	(16,501		)
Net income/(loss) attributable to BioTelementry, Inc.	196		1,726		(2,285		)	(15,593		)
Basic net income/(loss) per share attributable to BioTelemetry, Inc.	$	0.01	$	0.06	$	(0.07	)	$	(0.48	)
Diluted net income/(loss) per share attributable to BioTelemetry, Inc.	$	0.01	$	0.05	$	(0.07	)	$	(0.48	)

2016
Total revenue	$	48,640	$	52,680	$	53,055		$	53,957
Gross profit	30,627		32,921		32,866			33,036
Net income	4,097		4,697		4,195			40,448
Net income attributable to BioTelementry, Inc.	4,097		4,697		4,195			40,448
Basic net income per share attributable to BioTelemetry, Inc.	$	0.15	$	0.17	$	0.15		$	1.43
Diluted net income per share attributable to BioTelemetry, Inc.	$	0.14	$	0.15	$	0.14		$	1.30

~~Table of Contents~~

Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure

None.

Item ~~9A.~~9A Controls and Procedures

Evaluation of Disclosure Controls and Procedures

Prior to the filing of this Annual Report on Form 10-K, an evaluation was performed under the supervision of and with the participation of our management, including the Chief Executive Officer ~~("CEO"~~(“CEO”) and Chief Financial Officer ~~("CFO"~~(“CFO”), of the effectiveness of our disclosure controls and procedures. Based on the evaluation, the CEO and CFO have concluded that, as of December 31, ~~2016,~~2017, our disclosure controls and procedures are effective to ensure that information required to be disclosed in reports that it files or submits under the Exchange Act, is recorded, processed, summarized and reported within the time periods specified in SEC rules and forms, and is accumulated and communicated to our management, as appropriate, to allow timely decisions regarding required disclosure. It should be noted that the design of any system of controls is based in part upon certain assumptions about the likelihood of future events, and there can be no assurance that any design will succeed in achieving its stated goals under all potential future conditions, regardless of how remote.

Changes in Internal Control over Financial Reporting

~~There was~~

On July 12, 2017, we completed the acquisition of LifeWatch. We are in the process of integrating the acquired LifeWatch entities and our management is in the process of evaluating any related changes to our internal control over financial reporting as a result of this integration. Except for any changes relating to this integration, there has been no change in our internal control over financial reporting (as defined in Rules 13a-15(f) ~~or 240.15d-15(f)~~and 15d-15(f) under the Exchange Act) ~~during~~for the ~~fourth fiscal quarter~~year ended December 31, ~~2016~~2017, that ~~has~~ materially affected or isare reasonably likely to materially affect our internal control over financial reporting.

~~MANAGEMENT'S~~

MANAGEMENT’S REPORT ON INTERNAL CONTROL OVER FINANCIAL REPORTING

Management is responsible for establishing and maintaining adequate internal control over financial reporting as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act. Our internal control over financial reporting is designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. Our internal control over financial reporting includes those policies and procedures that:

~~(i)~~: ~~pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of our assets;~~
~~(ii)~~: provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with U.S. generally accepted accounting principles, and that receipts and expenditures of the Company are being made only in accordance with authorizations of management and directors; and
~~(iii)~~: ~~provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of our assets that could have a material effect on the financial statements.~~


(i)	pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of our assets;


(ii)	provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with U.S. generally accepted accounting principles, and that our receipts and expenditures are being made only in accordance with authorizations of management and directors; and


(iii)	provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of our assets that could have a material effect on the financial statements.

Because of inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

The effectiveness of ~~the Company's~~our internal control over financial reporting did not include the internal controls of ~~BioTelemetry Technology ApS, VirtualScopics, Inc., Telcare Medical Supply, Inc., or Telcare Acquisition, LLC,~~LifeWatch, which were included in ~~the Company's~~our consolidated financial statements for

~~Table of Contents~~

the year ended December 31, ~~2016,~~2017, due to the timing of the acquisitions. ~~These entities comprise 20% and 24%~~LifeWatch comprised 19% of total assets and 40% of net assets ~~respectively,~~ as of December 31, ~~2016 and 7% of revenues for the year then ended.~~

2017.

Our management assessed the effectiveness of our internal control over financial reporting as of December 31, ~~2016.~~2017. In making this assessment, management used the criteria set forth by the Committee of Sponsoring Organizations of the Treadway Commission ~~("COSO"~~(“COSO”) in Internal Control—Integrated Framework (2013). Based on ~~management's~~management’s assessment and those criteria, management has concluded that our internal control over financial reporting was effective as of December 31, ~~2016.~~

2017.

The effectiveness of our internal control over financial reporting as of December 31, ~~2016~~2017 has been audited by Ernst & Young LLP, an independent registered public accounting firm, as stated in their report included in this Annual Report on Form 10-K.

~~Table of Contents~~

Report of Independent Registered Public Accounting Firm

The Stockholders and the Board of Directors ~~and Shareholders~~
of BioTelemetry, Inc.

Opinion on Internal Control over Financial Reporting

We have audited BioTelemetry, Inc.'s’s internal control over financial reporting as of December 31, ~~2016,~~2017, based on criteria established in Internal ~~Control—Integrated~~Control-Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (2013 framework) (the ~~"COSO criteria")~~COSO criteria). In our opinion, BioTelemetry, Inc.'s (the Company) maintained, in all material respects, effective internal control over financial reporting as of December 31, 2017, based on the COSO criteria.

As indicated in the accompanying Management’s Report on Internal Control over Financial Reporting, management’s assessment of and conclusion on the effectiveness of internal control over financial reporting did not include the internal controls of Lifewatch AG, which is included in the 2017 consolidated financial statements of the Company and constituted 19% and 40% of total and net assets, respectively, as of December 31, 2017. Our audit of internal control over financial reporting of the Company also did not include an evaluation of the internal control over financial reporting of Lifewatch AG.

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the consolidated balance sheets of the Company as of December 31, 2017 and 2016, the related consolidated statements of operations and comprehensive income/(loss), cash flows and equity for each of the three years in the period ended December 31, 2017, and the related notes and schedule listed in the Index at Item 15(a) of the Company and our report dated February 26, 2018 expressed an unqualified opinion thereon.

Basis for Opinion

The Company’s management is responsible for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control over financial reporting included in the accompanying ~~Management's~~Management’s Report on Internal Control over Financial Reporting. Our responsibility is to express an opinion on the ~~company's~~Company’s internal control over financial reporting based on our audit.

We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audit in accordance with the standards of the ~~Public Company Accounting Oversight Board (United States).~~PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects.

Our audit included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, testing and evaluating the design and operating effectiveness of internal control based on the assessed risk, and performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion.

Definition and Limitations of Internal Control Over Financial Reporting

A ~~company's~~company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A ~~company's~~company’s internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the ~~company's~~company’s assets that could have a material effect on the financial statements.

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

As indicated in the accompanying Management's Report on Internal Control over Financial Reporting, management's assessment of and conclusion on the effectiveness of internal control over financial reporting did not include the internal controls of BioTelemetry Technology ApS, VirtualScopics, Inc., Telcare Medical Supply, Inc. or Telcare Acquisition, LLC (collectively, "the Acquired Companies") which are included in the 2016 consolidated financial statements of BioTelemetry, Inc. and constituted 20% and 24% of total and net assets, respectively, as of December 31, 2016 and 7% of revenues for the year then ended. Our audit of internal control over financial reporting of BioTelemetry, Inc. also did not include an evaluation of the internal control over financial reporting of the Acquired Companies.

~~In our opinion, BioTelemetry, Inc. maintained, in all material respects, effective internal control over financial reporting as of December 31, 2016, based on the COSO criteria.~~

~~We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), the consolidated balance sheets of BioTelemetry, Inc. as of~~

~~Table of Contents~~

December 31, 2016 and 2015 and the related consolidated statements of operations and comprehensive income (loss), cash flows and shareholders' equity for each of the three years in the period ended December 31, 2016 of BioTelemetry, Inc. and our report dated February 22, 2017 expressed an unqualified opinion thereon.



		/s/ ERNST & YOUNG LLP

Philadelphia, Pennsylvania
February 26, 2018

~~Philadelphia, Pennsylvania~~
~~February 22, 2017~~

~~Table of Contents~~

Item 9B. Other Information

None.

PART III

~~Table of Contents~~

~~Part III~~

Item 10. Directors, Executive Officers and Corporate Governance

Information with respect to this Item is incorporated by reference from our definitive proxy statement in connection with the ~~2017~~2018 Annual Meeting of Stockholders, or the Proxy Statement, unless the Proxy Statement is not filed by ~~April 30, 2017,~~May 1, 2018, in which case we will amend this Form 10-K to provide the omitted information in accordance with the requirements of Instruction G to Form 10-K.

BioTelemetry emphasizes the importance of professional business conduct and ethics through its corporate governance initiatives. Our Board of Directors has adopted a code of business conduct and ethics that applies to all employees, directors and officers, including our principal executive officer and principal financial officer. Our corporate governance information and materials, including our Code of Business Conduct and Ethics, are posted under ~~"Corporate Governance"~~“Corporate Governance” in the Investors section of our website atwww.gobio.com. Our Board of Directors regularly reviews corporate governance developments and modifies these materials and practices as warranted. To the extent we make amendments to or grant waivers from our Code of Business Conduct and Ethics in the future, we intend to disclose the amendments and waivers on our website.

Item 11. Executive Compensation

Information required by this Item is incorporated by reference from the Proxy Statement unless the Proxy Statement is not filed on or before ~~April 30, 2017,~~May 1, 2018, in which case we will amend this Form 10-K to provide the omitted information in accordance with the requirements of Instruction G to Form 10-K.

~~Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters~~

Item 12 Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters

Information required by this Item is incorporated by reference from the Proxy Statement unless the Proxy Statement is not filed on or before ~~April 30, 2017,~~May 1, 2018, in which case we will amend this Form 10-K to provide the omitted information in accordance with the requirements of Instruction G to Form 10-K.

Item 13. Certain Relationships and Related Transactions, and Director Independence

Information ~~with respect to~~required by this Item is incorporated by reference from the Proxy Statement unless the Proxy Statement is not filed on or before ~~April 30, 2017,~~May 1, 2018, in which case we will amend this Form 10-K to provide the omitted information in accordance with the requirements of Instruction G to Form 10-K.

Item 14. Principal Accountant Fees and Services

Information required by this Item is incorporated by reference from the Proxy Statement unless the Proxy Statement is not filed on or before ~~April 30, 2017,~~May 1, 2018, in which case we will amend this Form 10-K to provide the omitted information in accordance with the requirements of Instruction G to Form 10-K.

PART IV

~~Table of Contents~~

~~Part IV~~

Item 15. Exhibits and Financial Statement Schedules

~~(a)~~

~~The following financial statements, schedules and exhibits are filed as part of this report:~~

1.

~~Financial Statements~~~~—The Financial Statements required by this item are listed on the Index to Financial Statements in Part II, Item 8 of this report.~~

2.

~~Financial Statement Schedules~~

•


(a)	The following financial statements, schedules and exhibits are filed as part of this Annual Report on Form 10-K


1.	Financial Statements—The Financial Statements required by this item are listed on the Index to Financial Statements in Part II, Item 8 of this Annual Report on Form 10-K.


2.	Financial Statement Schedules

Schedule II—Valuation and Qualifying Accounts and Reserves; and

•

Other financial statement schedules are not included because they are not required or the information is otherwise shown in the financial statements or notes thereto.

3.

~~Exhibits~~~~—The exhibits listed on the accompanying Exhibit Index are filed as part of, or are incorporated by reference into, this report.~~

~~(b)~~

~~See Item 15(a)(3) above.~~

~~(c)~~

~~See Item 15(a)(2) above.~~


3.	Exhibits—The exhibits listed on the accompanying Exhibit Index are filed as part of, or are incorporated by reference into, this Annual Report on Form 10-K.


(b)	See Item 15(a)(3) above.


(c)	See Item 15(a)(2) above.

Item 16. Form 10-K Summary

None.

~~Table of Contents~~

SCHEDULE II


	Beginning Balance		Additions Charged to Expense		Deductions From Reserve			Ending Balance
(in thousands)										Beginning Balance		Additions		Deductions			Ending Balance
Allowance for Doubtful Accounts
Year ended December 31, 2017										$	12,863	$	13,291	$	(9,173	)	$	16,981
Year ended December 31, 2016	$	11,601	$	9,931	$	(8,669	)	$	12,863	$	11,601	$	9,931	$	(8,669	)	$	12,863
Year ended December 31, 2015	$	10,662	$	8,047	$	(7,108	)	$	11,601	$	10,662	$	8,047	$	(7,108	)	$	11,601
Year ended December 31, 2014	$	7,640	$	9,347	$	(6,325	)	$	10,662

~~Table of Contents~~

~~EXHIBIT INDEX~~

Exhibit
Number Description
2.1 Stock Purchase Agreement by and among CardioNet, LLC, Mednet Healthcare Technologies, Inc., Heartcare Corporation of America, Inc., Universal Medical, Inc., Universal Medical Laboratory, Inc. and Frank Movizzo, dated as of January 31, 2014 (Incorporated by reference to Exhibit 2.1 to the Registrant's Form 8-K filed, February 3, 2014).

2.2 Agreement and Plan of Reorganization, dated as of April 22, 2013, by and among CardioNet, Inc., the Registrant and BioTelemetry Merger Sub, Inc. (incorporated by reference to the Registrant's registration statement on Form S-4 and amendments thereto (File No. 333-188058)).

2.3 * Share and Asset Purchase Agreement, dated December 1, 2016, by and among Telcare Acquisition, LLC, BioTelemetry Care Management, LLC, BioTelemetry, Inc. and Telcare, Inc.

3.1 Certificate of Incorporation of BioTelemetry, Inc. (incorporated by reference to the Registrant's registration statement on Form S-4 and amendments thereto (File No. 333-188058)).

3.2 Bylaws of BioTelemetry, Inc. (incorporated by reference to the Registrant's registration statement on Form S-4 and amendments thereto (File No. 333-188058))

10.1 BioTelemetry, Inc. Form of Indemnity Agreement (incorporated by reference to Exhibit 10.1 to BioTelemetry, Inc.'s registration statement on Form S-1 and amendments thereto (File No. 333-145547)).

10.2 (1) BioTelemetry, Inc. 2008 Equity Incentive Plan and Form of Stock Option Agreement thereunder (incorporated by reference to Exhibit 10.2(1) to BioTelemetry, Inc.'s registration statement on Form S-4 and amendments thereto (File No. 333-188058)).

10.3 (1) BioTelemetry, Inc. 2008 Non-Employee Directors' Stock Option Plan and Form of Stock Option Agreement thereunder (incorporated by reference to Exhibit 10.4 to CardioNet, Inc.'s registration statement on Form S-1 and amendments thereto (File No. 333-145547)).

10.4 (1) BioTelemetry, Inc. 2008 Employee Stock Purchase Plan and Form of Offering Document thereunder (incorporated by reference to Exhibit 10.5 to CardioNet, Inc.'s registration statement on Form S-1 and amendments thereto (File No. 333-145547)).

10.5 (1) CardioNet, Inc. Long Term Incentive Plan (incorporated by reference to Exhibit 10.2 to CardioNet, Inc.'s Current Report on Form 8-K filed October 28, 2008 (File No. 001-33993)).

10.6 (1) CardioNet, Inc. Compensation Program for Non-Employee Directors (incorporated by reference to Exhibit 99.5 to the Registrant's Current Report on Form 8-K filed January 28, 2009 (File No. 001- 33993)).

10.7 (1) Employment Agreement, dated as of June 15, 2010, between Joseph H. Capper and CardioNet, Inc. (incorporated by reference to Exhibit 99.2 to CardioNet, Inc.'s Current Report on Form 8-K filed June 18, 2010 (File No. 001-33993)).



(in thousands)	Beginning Balance		Additions		Deductions			Ending Balance
Tax Valuation Allowance
Year ended December 31, 2017	$	95	$	5,937	$	—		$	6,032
Year ended December 31, 2016	$	49,759	$	1,966	$	(51,630	)	$	95
Year ended December 31, 2015	$	52,998	$	1,734	$	(4,973	)	$	49,759

~~Table of Contents~~

Exhibit
Number Description
10.8 (1) Employment Agreement, dated as of January 28, 2010, between CardioNet, Inc. and Heather Getz (incorporated by reference to Exhibit 10.36 to CardioNet, Inc.'s Annual Report on Form 10-K filed February 23, 2010 (File No. 001-33993)).

10.9 (1) Employment Agreement, dated as of December 7, 2010, between CardioNet, Inc. and Daniel Wisniewski (incorporated by reference to Exhibit 10.38 to CardioNet, Inc.'s Annual Report on Form 10-K, filed February 25, 2010(File No. 001-33993)).

10.10 (1) Employment Agreement dated as of February 7, 2011, between CardioNet, Inc. and Peter Ferola (incorporated by reference to Exhibit 10.1 to CardioNet, Inc.'s Quarterly Report on Form 10-Q dated May 6, 2011(File No. 001-33993)).

10.11 (1) Employment Agreement dated as of July 30, 2010, between CardioNet, Inc. and Fred Anthony Broadway III (incorporated by reference to Exhibit 10.26 to CardioNet, Inc.'s Annual Report on Form 10-K filed February 22, 2013(File No. 001-33993)).

10.12 (1)* Third Amendment To Credit Agreement dated December 1, 2016, issued in favor of Healthcare Financial Solutions, LLC.

10.13 (1) Asset Purchase Agreement by and between CardioNet, LLC and Biomedical Systems Corporation dated as of March 19, 2014 (incorporated by reference to Exhibit 2.1 to the Registrant's Current Report on Form 8-K filed March 20, 2014).

23 Consent of Ernst & Young LLP.

31.1 * Certification of Chief Executive Officer pursuant to Rules 13a-14(a) and 15d-14(a) promulgated under the Securities and Exchange Act of 1934, as amended.

31.2 * Certification of Chief Financial Officer pursuant to Rules 13a-14(a) and 15d-14(a) promulgated under the Securities and Exchange Act of 1934, as amended.

32 * Certification of Chief Executive Officer and Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

101.INS XBRL Instance Document.

101.DEF XBRL Taxonomy Extension Definition Linkbase Document.

101.SCH XBRL Taxonomy Extension Schema Document.

101.CAL XBRL Taxonomy Extension Calculation Linkbase Document.

101.LAB XBRL Taxonomy Extension Label Linkbase Document.

101.PRE XBRL Taxonomy Extension Presentation Linkbase Document.

*: ~~Filed herewith.~~
†: ~~Confidential treatment has been granted with respect to certain portions of this exhibit. Omitted portions have been filed separately with the Securities and Exchange Commission.~~
~~(1)~~: ~~Indicates a management plan or compensatory plan or arrangement.~~

~~Table of Contents~~

EXHIBIT INDEX

Incorporated by Reference
Exhibit
Number
Description Form File No. Exhibit Filing Date Filed Herewith
2.3
Share and Asset Purchase Agreement, dated December 1, 2016, by and among Telcare Acquisition, LLC, BioTelemetry Care Management, LLC, BioTelemetry, Inc. and Telcare, Inc.
10-K 000-55039 2.3 February 22, 2017
2.4
Transaction Agreement by and among Lifewatch AG, Biotelemetry, Inc. and Cardiac Monitoring Holding Company, LLC, dated April 4, 2017
10-Q 000-55039 2.1 November 7, 2017
3.1
Certificate of Incorporation of BioTelemetry, Inc.
10-Q 000-55039 3.1 August 8, 2017
3.2
Bylaws of BioTelemetry, Inc.
10-Q 000-55039 3.2 August 8, 2017
10.1
BioTelemetry, Inc. Form of Indemnity Agreement
S-1 333-145547 10.1 August 17, 2007
10.2*
BioTelemetry, Inc. 2017 Omnibus Incentive Plan
S-8 333-218228 10.1 May 25, 2017
10.3*
BioTelemetry, Inc. 2008 Non-Employee Directors’ Stock Option Plan and Form of Stock Option Agreement thereunder
S-1 333-145547 10.4 February 28, 2008
10.4*
BioTelemetry, Inc. 2017 Employee Stock Purchase Plan
S-8 333-218228 10.2 May 25, 2017
10.5*
CardioNet, Inc. Long Term Incentive Plan
8-K 001-33993 10.2 October 28, 2008
10.6*
CardioNet, Inc. Compensation Program for Non-Employee Directors
8-K 001-33993 99.5 January 28, 2009
10.7*
Employment Agreement, dated as of June 15, 2010, between Joseph H. Capper and CardioNet, Inc.
8-K 001-33993 99.2 June 18, 2010
10.8*
Employment Agreement, dated as of January 28, 2010, between CardioNet, Inc. and Heather Getz
10-K 001-33993 10.36 February 23, 2010
10.9*
Employment Agreement, dated as of December 7, 2010, between CardioNet, Inc. and Daniel Wisniewski
10-K 001-33993 10.38 February 25, 2011
10.10*
Employment Agreement dated as of February 7, 2011, between CardioNet, Inc. and Peter Ferola
10-Q 001-33993 10.1 May 6, 2011
10.11*
Employment Agreement dated as of July 30, 2010, between CardioNet, Inc. and Fred Anthony Broadway III
10-K 001-33993 10.26 February 22, 2013
10.12
Credit Agreement by and among Biotelemetry, Inc. and SunTrust Bank, as agent for the lenders and swingline lender, dated July 12, 2017
10-Q 000-55039 10.1 November 7, 2017
21
Subsidiaries of BioTelemetry, Inc.
†
23
Consent of Ernst & Young LLP.
†

Incorporated by Reference

Exhibit

Number

Description

Form

File No.

Exhibit

Filing Date

Filed Herewith

31.1

Certification of Chief Executive Officer pursuant to Rules 13a-14(a) and 15d-14(a) promulgated under the Securities and Exchange Act of 1934, as amended.

†

31.2

Certification of Chief Financial Officer pursuant to Rules 13a-14(a) and 15d-14(a) promulgated under the Securities and Exchange Act of 1934, as amended.

†

32

Certification of Chief Executive Officer and Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

†

101.INS

XBRL Instance Document.

101.DEF

XBRL Taxonomy Extension Definition Linkbase Document.

101.SCH

XBRL Taxonomy Extension Schema Document.

101.CAL

XBRL Taxonomy Extension Calculation Linkbase Document.

101.LAB

XBRL Taxonomy Extension Label Linkbase Document.

101.PRE

XBRL Taxonomy Extension Presentation Linkbase Document.


*	Indicates a management plan or compensatory plan or arrangement.

SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the ~~Registrant~~registrant has duly caused this ~~Report~~report to be signed on its behalf by the undersigned, thereunto duly authorized.



Date:	February ~~22, 2017~~	26, 2018	BioTelemetry, Inc.
		~~By:~~
		By:		/s/ JOSEPH H. CAPPER
				Joseph H. Capper President and Chief Executive Officer

Pursuant to the requirements of the Securities Exchange Act of 1934, this ~~Report~~report has been signed below by the following persons on behalf of the ~~Registrant~~registrant and in the capacities and on the dates indicated.



	Signature		~~Title~~		~~Date~~
		Title		Date

/s/ JOSEPH H. CAPPER ~~Joseph H. Capper~~				President and Chief Executive Officer (Principal Executive Officer)		February ~~22, 2017~~26, 2018
Joseph H. Capper

/s/ HEATHER C. GETZ ~~Heather C. Getz, CPA~~				Executive Vice President and Chief Financial Officer (Principal Financial and Accounting Officer)		February ~~22, 2017~~26, 2018
Heather C. Getz, CPA

/s/ KIRK E. GORMAN		Chairman and Director		February 26, 2018
Kirk E. Gorman		Chairman and Director		February 26, 2018		~~Chairman and Director~~	~~February 22, 2017~~

/s/ ANTHONY J. CONTI		Director		February 26, 2018
Anthony J. Conti		Director		February 26, 2018		~~Director~~	~~February 22, 2017~~

/s/ JOSEPH A. FRICK		Director		February 26, 2018
Joseph A. Frick		Director		February 26, 2018		~~Director~~	~~February 22, 2017~~

/s/ COLIN HILL ~~Colin Hill~~		Director		~~Director~~		February ~~22, 2017~~26, 2018
Colin Hill		Director		~~Director~~

/s/ REBECCA RIMEL ~~Rebecca Rimel~~		Director		~~Director~~		February ~~22, 2017~~26, 2018
Rebecca Rimel		Director		~~Director~~

/s/ ROBERT J. RUBIN		Director		February 26, 2018
Robert J. Rubin, M.D.		Director		February 26, 2018		~~Director~~	~~February 22, 2017~~

112



ý		~~ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934~~
~~For the fiscal year ended December 31, 2016~~
OR
o		~~TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934~~
~~For the transition period from N/A to N/A~~



DELAWARE (State or other jurisdiction of incorporation or organization)		46-2568498 (I.R.S. Employer Identification No.)

1000 Cedar Hollow Road #102 Malvern, Pennsylvania (Address of principal executive offices)		19355 (Zip Code)



	Title of ~~Each Class~~		each class	Name of ~~Each Exchange~~each exchange on ~~Which Registered~~which registered
Common Stock, $0.001 par value		NASDAQ ~~Stock~~Global Select Market ~~LLC~~



Large accelerated filer oý	Accelerated filer ýo	Non-accelerated filer o (Do not check if a smaller reporting company)	Smaller reporting company o	Emerging growth company o

				~~Page~~


~~PART I~~		Page
PART I
Item 1.	Business	4
Item 1A.	Risk Factors	14
Item 1B.	Unresolved Staff Comments	31
Item 2.	Properties	31
Item 3.	Legal Proceedings	31
Item 4.	Mine Safety Disclosures	32

~~Item 1.~~		~~Business~~			4
~~Item 1A.~~		~~Risk Factors~~			13
~~Item 1B.~~		~~Unresolved Staff Comments~~			28
~~Item 2.~~		~~Properties~~			28
~~Item 3.~~		~~Legal Proceedings~~			29
~~Item 4.~~		~~Mine Safety Disclosures~~			30
PART II
Item 5.		Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities			3133
Item 6.		Selected Financial Data			3234
Item 7.		Management's Discussion and Analysis of Financial Condition and Results of Operations			3437
Item 7A.		Quantitative and Qualitative Disclosures About Market Risk			4653
Item 8.		Financial Statements and Supplementary Data			4754
Item 9.		Changes in and Disagreements with Accountants on Accounting and Financial Disclosure			90102
Item 9A.		Controls and Procedures			90102
Item 9B.		Other Information			94106
~~PART III~~
PART III ~~Item 10.~~
Item 10.	Directors, Executive Officers and Corporate Governance			95107
Item 11.		Executive Compensation			95107
Item 12.		Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters			95107
Item 13.		Certain Relationships and Related Transactions, and Director Independence			95107
Item 14.		Principal Accountant Fees and Services			95107
~~PART IV~~
PART IV ~~Item 15.~~
Item 15.	Exhibits and Financial Statement Schedules			96108
~~Exhibit Index~~ Item 16.	Form 10-K Summary		98109
Exhibit Index ~~Signatures~~		110
Signatures			~~100~~112



Location	Use	Segment(s)	Square feet	Lease expiry
Malvern, PA	Corporate shared services, operations and monitoring	C, H	61,000	2021
Rosemont, IL	Customer support center, distribution, and administrative	H, T	56,000	2019
Ewing, NJ	Monitoring	H	28,000	2018
Eagan, MN	Monitoring and manufacturing	H, T	24,000	2022
Rochester, NY	Research	R	22,000	2028
San Francisco, CA	Monitoring	H	17,000	2019
Rehovot, Israel	Research, development and manufacturing	H	17,000	2018
Chester, PA	Distribution center	H	16,000	2020
Rockville, MD	Research	R	16,000	2026
Phoenix, AZ	Distribution center	H	11,000	2020
San Diego, CA	Research, development and engineering	T	8,000	2020
Concord, MA	Research and development and distribution	T	7,000	2018
Norfolk, VA	Monitoring	H	5,000	2018


Item 5.	Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities

Quarter Ended	High		Low

December 31, 2016	$	23.35	$	15.35
September 30, 2016		21.30		16.08
June 30, 2016		17.42		11.13
March 31, 2016		12.94		9.44

Quarter Ended	High		Low

December 31, 2015	$	14.15	$	11.55
September 30, 2015		16.68		8.94
June 30, 2015		10.02		7.99
March 31, 2015		11.02		8.79


Company/Index	Base Period 12/31/2011		12/31/2012		12/31/2013		12/31/2014		12/31/2015		12/31/2016		Company/Index	Base Period Dec 31, 2012	Dec 31, 2013	Dec 31, 2014	Dec 31, 2015	Dec 31, 2016	Dec 31, 2017
BioTelemetry, Inc.	$	100.00	$	96.20	$	335.02	$	423.21	$	492.83	$	943.04	BioTelemetry, Inc.	100.00	348.25	439.91	512.28	980.26	1,311.40
NASDAQ Health Care Index		100.00		127.24		199.82		256.70		274.30		227.91	NASDAQ Health Care Index	100.00	157.04	201.75	215.59	180.19	219.87
Russell 2000 Index		100.00		116.35		161.52		169.42		161.95		196.45	Russell 2000 Index	100.00	138.82	145.62	139.19	168.85	193.58



	Year Ended				Change
(In thousands, except percentages)	December 31, 2017		December 31, 2016		$		%
Healthcare	$	234,385	$	165,664	$	68,721	41.5	%
Research	38,790		32,565		6,225		19.1	%
Technology	13,601		10,103		3,498		34.6	%
Total revenue	$	286,776	$	208,332	$	78,444	37.7	%



	Year Ended
(In thousands, except ratios)	December 31, 2017		December 31, 2016
Cash and cash equivalents	$	36,022	$	23,052
Healthcare accounts receivable, net of allowance for doubtful accounts	25,190		14,594
Other accounts receivable, net of allowance for doubtful accounts	13,296		12,261
Availability under revolving credit facility	50,000		12,000

Working capital	$	39,153	$	28,053
Current ratio	1.8		1.9

Total capital lease obligations	$	5,509	$	288
Total debt	$	199,356	$	25,161


	(in thousands) Payments due by period
Contractual obligations	Total		2017		2018		2019		2020		2021		Beyond
															Payments due by period
(in thousands)															Total		Less than 1 year		1-3 Years		3-5 Years		More than 5 Years
Operating lease obligations	$	17,021		3,992		3,720		2,660		2,335		1,140		3,174	$	23,655	$	5,871	$	8,008	$	4,261	$	5,515
Capital lease obligations		288		162		66		35		25		—		—	5,509		4,023		1,486		—		—
Debt and interest obligations		29,379		2,511		3,676		23,192		—		—		—
Debt and interest obligations⁽¹⁾															236,083		8,197		34,776		193,110		—
Purchase obligations															2,184		2,184		—		—		—
Total⁽²⁾⁽³⁾															$	267,431	$	20,275	$	44,270	$	197,371	$	5,515


⁽²⁾	In connection with certain acquisitions completed in 2016, we have contingent consideration obligations payable to the sellers in these transactions upon the achievement of certain milestones. The maximum aggregate undiscounted amounts potentially payable not included in the table above total $5.0 million.



		/s/ ERNST & YOUNG LLP

We have served as BioTelemetry Inc.’s auditors since 2004.

Philadelphia, Pennsylvania
February 26, 2018


	Shareholders' Equity
	Common Stock								Accumulated Other Comprehensive Loss									BioTelemetry, Inc. Equity
	Common Stock					Paid-in Capital						Accumulated Deficit			Total Shareholders' Equity											Accumulated Other Comprehensive Income/(Loss)
	Shares			Amount		Paid-in Capital						Accumulated Deficit			Total Shareholders' Equity		Accumulated Other Comprehensive Loss	Common Stock				Paid-in Capital							Accumulated Deficit				Noncontrolling Interests				Total Equity
Balance December 31, 2013		25,812,754		$	26	$	260,597			—		$	(193,794	)	$	66,829													Accumulated Deficit				Noncontrolling Interests				Total Equity
Exercise of stock options and purchase of shares related to the employee stock purchase plan		503,036			1		1,050			—			—			1,051
(in thousands, except shares)																		Shares		Amount		Paid-in Capital			Paid-in Capital							Accumulated Other Comprehensive Income/(Loss)	Accumulated Deficit			Accumulated Other Comprehensive Income/(Loss)	Noncontrolling Interests			Accumulated Other Comprehensive Income/(Loss)	Total Equity
Balance December 31, 2014																		26,693,248		$	27		$	—	Paid-in Capital								Accumulated Deficit				Noncontrolling Interests				Total Equity
Share issuances related to stock compensation plans																		719,564		—		1,222				—			—				—				1,222
Stock-based compensation		195,437			—		4,037			—			—			4,037		—		—		4,952				—				—				—				4,952
Shares withheld to cover taxes on vesting of share based awards																		(167,090	)	—		(1,575		)		—				—				—				(1,575		)
Issuance of stock related to business combinations		182,021			—		1,552			—			—			1,552		32,217		—		235				—				—				—				235
Net loss		—			—		—			—			(9,793	)		(9,793	)

Balance December 31, 2014		26,693,248			27		267,236			—			(203,587	)		63,676
Exercise of stock options and purchase of shares related to the employee stock purchase plan		268,448			—		1,222			—			—			1,222
Currency translation adjustment																		—		—		—				(12		)		—				—				(12		)
Net income																		—		—		—				—				7,428				—				7,428
Balance December 31, 2015																		27,277,939		27		272,070				(12		)		(196,159		)		—				75,926
Share issuances related to stock compensation plans																		917,912		1		2,518				—				—				—				2,519
Stock-based compensation		451,116			—		4,952			—			—			4,952		—		—		6,502				—				—				—				6,502
RSUs withheld to cover taxes		(167,090	)		—		(1,575	)		—			—			(1,575	)
Shares withheld to cover taxes on vesting of share based awards																		(178,867	)	—		(2,333		)		—				—				—				(2,333		)
Issuance of stock related to 2014 business combination		32,217			—		235			—			—			235		244,519		—		2,885				—				—				—				2,885
Currency translation adjustment		—			—		—		$	(12	)		—			(12	)	—		—		—				(22		)		—				—				(22		)
Net income		—			—		—			—			7,428			7,428		—		—		—				—				53,437				—				53,437

Balance December 31, 2015		27,277,939			27		272,070			(12	)		(196,159	)		75,926
Exercise of stock options and purchase of shares related to the employee stock purchase plan		473,034			1		2,518			—			—			2,519
Balance December 31, 2016																		28,261,503		28		281,642				(34		)		(142,722		)		—				138,914
Share issuances related to stock compensation plans																		722,441		—		6,071				—				—				—				6,071
Stock-based compensation		444,878			—		6,502			—			—			6,502		—		—		7,680				—				—				—				7,680
RSUs and PSUs withheld to cover taxes		(178,867	)		—		(2,333	)		—			—			(2,333	)
Shares withheld to cover taxes on vesting of share based awards																		(79,589	)	—		(1,933		)		—				—				—				(1,933		)
Issuance of stock related to business combination		244,519			—		2,885			—			—			2,885		3,615,840		4		116,788				—				—				11,224				128,016
Acquisition of noncontrolling interest																		19,806		—		2,022				—				—				(11,091		)		(9,069		)
Common stock returned in legal settlement																		(79,333	)	—		(2,753		)		—				—				—				(2,753		)
Currency translation adjustment		—			—		—			(22	)		—			(22	)	—		—		—				(80		)		—				—				(80		)
Net income		—			—		—			—			53,437			53,437

Balance December 31, 2016		28,261,503		$	28	$	281,642		$	(34	)	$	(142,722	)	$	138,914



Net loss																		—		—		—				—				(15,956		)		(1,187		)		(17,143		)
Balance December 31, 2017																		32,460,668		$	32	$	409,517			$	(114	)		$	(158,678	)		$	(1,054	)		$	249,703


Level 1 -	Quoted prices in active markets for an identical asset or liability.


Level 2 -	Inputs that are observable for the asset or liability, either directly or indirectly through market corroboration, for substantially the full term of the asset or liability.


Level 3 -	Inputs that are unobservable for the asset or liability, based on our own assumptions about the assumptions a market participant would use in pricing the asset or liability.

	Year Ended December 31,

Unaudited pro forma information	2016		2015
Revenue	$	212,538	$	182,755

Net income	$	50,693	$	948

Net income per common share:
Basic	$	1.82	$	0.03



Diluted	$	1.66	$	0.03



Weighted average number of common shares outstanding:
Basic		27,920,150		27,116,300



Diluted		30,489,081		29,089,211

	Total Contingent Consideration

Balance at December 31, 2015		—
Purchase price contingent consideration	$	2,700

Balance at December 31, 2016	$	2,700

	Amount			Weighted Average Life (Years)

Fair value of assets acquired:
Cash and cash equivalents	$	(199	)
Healthcare accounts receivable		3,879
Inventory		311
Property and equipment		3,429
Other assets		317
Identifiable intangible assets:
Customer relationships		6,500		13
Technology		1,600		5
Covenants not to compete		420		5
Tradename		700		Indefinite

Total identifiable intangible assets		9,220

Total assets acquired		16,957

Fair value of liabilities assumed:
Accounts payable		4,427
Accrued liabilities		2,932
Other liabilities		3,027
Long-term debt, capital leases, note payable and related interest		9,720

Total liabilities assumed		20,106

Total identifiable net assets		(3,149	)
Goodwill		9,589

Net assets acquired	$	6,440

Unaudited pro forma information	Year ended December 31, 2014

Revenue	$	170,076

Net loss		(8,014	)

Net loss per common share:
Basic and diluted	$	(0.30	)



Weighted average number of shares:
Basic and diluted		26,444,626

	Year Ended December 31, 2016

January 1, 2016 balance	$	1,100
Capital contributions		312
Loss in equity method investment		(287	)

December 31, 2016 balance	$	1,125

			Weighted Average Exercise Price

Options outstanding as of December 31, 2013	3,135,934		$	5.83



Granted	582,012			8.45
Cancelled	(310,303	)		6.55
Exercised	(156,791	)		3.37

Options outstanding as of December 31, 2014	3,250,852		$	6.40



Granted	427,786			10.39
Cancelled	(181,777	)		11.32
Exercised	(76,342	)		3.82

Options outstanding as of December 31, 2015	3,420,519		$	6.69



Granted	519,770			13.44
Cancelled	(49,709	)		9.97
Exercised	(322,146	)		4.56

Options outstanding as of December 31, 2016	3,568,434		$	7.82

			Weighted Average Grant Date Fair Value

RSUs outstanding as of December 31, 2013	857,656		$	3.15



Granted	292,079			8.48
Forfeited	(89,664	)		3.30
Vested	(195,437	)		6.27

RSUs outstanding as of December 31, 2014	864,634		$	4.23



Granted	328,060			9.70
Forfeited	(50,642	)		6.90
Vested	(451,116	)		3.89

RSUs outstanding as of December 31, 2015	690,936		$	6.85



Granted	225,198			11.06
Forfeited	(11,905	)		9.50
Vested	(311,880	)		4.08

RSUs outstanding as of December 31, 2016	592,349		$	9.86

				Weighted Average Grant Date Fair Value

PSUs outstanding as of December 31, 2013		—			—



Granted		284,423		$	8.68
Forfeited		—			—
Vested		—			—

PSUs outstanding as of December 31, 2014		284,423		$	8.68



Granted		—			—
Forfeited	��	(18,433	)		8.68
Vested		—			—

PSUs outstanding as of December 31, 2015		265,990		$	8.68



Granted		—			—
Forfeited		—			—
Vested		(132,998	)		8.68

PSUs outstanding as of December 31, 2016		132,992		$	8.68

	Healthcare		Research		Technology		Corporate and Other			Consolidated

*2015*
Revenue	$	145,963	$	21,853	$	10,697		—		$	178,513
Intersegment revenue		7		—		10,224	$	(10,231	)		—
Income (loss) before income taxes		44,559		540		4,390		(41,593	)		7,896
Depreciation and amortization		7,790		3,676		371		651			12,488
Capital expenditures		9,155		4,373		72		—			13,600

	First Quarter			Second Quarter		Third Quarter		Fourth Quarter

	(in thousands, except per share amount)
2016
Total revenue	$	48,640		$	52,680	$	53,055	$	53,957
Gross profit		30,627			32,921		32,866		33,036
Other charges		1,788			1,659		2,397		2,795
Income from operations		4,534			5,121		4,966		3,391
Net income		4,097			4,697		4,195		40,448
Basic net income per share	$	0.15		$	0.17	$	0.15	$	1.43
Diluted net income per share	$	0.14		$	0.15	$	0.14	$	1.30
2015
Total revenue	$	43,435		$	44,812	$	43,492	$	46,774
Gross profit		25,223			26,733		26,337		28,264
Other charges		1,860			1,210		1,392		1,601
Income from operations		469			2,585		3,006		3,458
Net (loss) income		(69	)		2,171		2,478		2,848
Basic net (loss) income per share	$	(0.00	)	$	0.08	$	0.09	$	0.10
Diluted net (loss) income per share	$	(0.00	)	$	0.08	$	0.08	$	0.10


Item 12	Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters

		Description

2.1		Stock Purchase Agreement by and among CardioNet, LLC, Mednet Healthcare Technologies, Inc., Heartcare Corporation of America, Inc., Universal Medical, Inc., Universal Medical Laboratory, Inc. and Frank Movizzo, dated as of January 31, 2014 (Incorporated by reference to Exhibit 2.1 to the Registrant's Form 8-K filed, February 3, 2014).

2.2		Agreement and Plan of Reorganization, dated as of April 22, 2013, by and among CardioNet, Inc., the Registrant and BioTelemetry Merger Sub, Inc. (incorporated by reference to the Registrant's registration statement on Form S-4 and amendments thereto (File No. 333-188058)).

2.3	*	Share and Asset Purchase Agreement, dated December 1, 2016, by and among Telcare Acquisition, LLC, BioTelemetry Care Management, LLC, BioTelemetry, Inc. and Telcare, Inc.

3.1		Certificate of Incorporation of BioTelemetry, Inc. (incorporated by reference to the Registrant's registration statement on Form S-4 and amendments thereto (File No. 333-188058)).

3.2		Bylaws of BioTelemetry, Inc. (incorporated by reference to the Registrant's registration statement on Form S-4 and amendments thereto (File No. 333-188058))

10.1		BioTelemetry, Inc. Form of Indemnity Agreement (incorporated by reference to Exhibit 10.1 to BioTelemetry, Inc.'s registration statement on Form S-1 and amendments thereto (File No. 333-145547)).

10.2	(1)	BioTelemetry, Inc. 2008 Equity Incentive Plan and Form of Stock Option Agreement thereunder (incorporated by reference to Exhibit 10.2(1) to BioTelemetry, Inc.'s registration statement on Form S-4 and amendments thereto (File No. 333-188058)).

10.3	(1)	BioTelemetry, Inc. 2008 Non-Employee Directors' Stock Option Plan and Form of Stock Option Agreement thereunder (incorporated by reference to Exhibit 10.4 to CardioNet, Inc.'s registration statement on Form S-1 and amendments thereto (File No. 333-145547)).

10.4	(1)	BioTelemetry, Inc. 2008 Employee Stock Purchase Plan and Form of Offering Document thereunder (incorporated by reference to Exhibit 10.5 to CardioNet, Inc.'s registration statement on Form S-1 and amendments thereto (File No. 333-145547)).

10.5	(1)	CardioNet, Inc. Long Term Incentive Plan (incorporated by reference to Exhibit 10.2 to CardioNet, Inc.'s Current Report on Form 8-K filed October 28, 2008 (File No. 001-33993)).

10.6	(1)	CardioNet, Inc. Compensation Program for Non-Employee Directors (incorporated by reference to Exhibit 99.5 to the Registrant's Current Report on Form 8-K filed January 28, 2009 (File No. 001- 33993)).

10.7	(1)	Employment Agreement, dated as of June 15, 2010, between Joseph H. Capper and CardioNet, Inc. (incorporated by reference to Exhibit 99.2 to CardioNet, Inc.'s Current Report on Form 8-K filed June 18, 2010 (File No. 001-33993)).

		Description

10.8	(1)	Employment Agreement, dated as of January 28, 2010, between CardioNet, Inc. and Heather Getz (incorporated by reference to Exhibit 10.36 to CardioNet, Inc.'s Annual Report on Form 10-K filed February 23, 2010 (File No. 001-33993)).

10.9	(1)	Employment Agreement, dated as of December 7, 2010, between CardioNet, Inc. and Daniel Wisniewski (incorporated by reference to Exhibit 10.38 to CardioNet, Inc.'s Annual Report on Form 10-K, filed February 25, 2010(File No. 001-33993)).

10.10	(1)	Employment Agreement dated as of February 7, 2011, between CardioNet, Inc. and Peter Ferola (incorporated by reference to Exhibit 10.1 to CardioNet, Inc.'s Quarterly Report on Form 10-Q dated May 6, 2011(File No. 001-33993)).

10.11	(1)	Employment Agreement dated as of July 30, 2010, between CardioNet, Inc. and Fred Anthony Broadway III (incorporated by reference to Exhibit 10.26 to CardioNet, Inc.'s Annual Report on Form 10-K filed February 22, 2013(File No. 001-33993)).

10.12	(1)*	Third Amendment To Credit Agreement dated December 1, 2016, issued in favor of Healthcare Financial Solutions, LLC.

10.13	(1)	Asset Purchase Agreement by and between CardioNet, LLC and Biomedical Systems Corporation dated as of March 19, 2014 (incorporated by reference to Exhibit 2.1 to the Registrant's Current Report on Form 8-K filed March 20, 2014).

23		Consent of Ernst & Young LLP.

31.1	*	Certification of Chief Executive Officer pursuant to Rules 13a-14(a) and 15d-14(a) promulgated under the Securities and Exchange Act of 1934, as amended.

31.2	*	Certification of Chief Financial Officer pursuant to Rules 13a-14(a) and 15d-14(a) promulgated under the Securities and Exchange Act of 1934, as amended.

32	*	Certification of Chief Executive Officer and Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

101.INS		XBRL Instance Document.

101.DEF		XBRL Taxonomy Extension Definition Linkbase Document.

101.SCH		XBRL Taxonomy Extension Schema Document.

101.CAL		XBRL Taxonomy Extension Calculation Linkbase Document.

101.LAB		XBRL Taxonomy Extension Label Linkbase Document.

101.PRE		XBRL Taxonomy Extension Presentation Linkbase Document.