Biotelemetry 10-Q 26 Apr 16 2016 Q1 Quarterly report Financial data

Document and Entity Information

Document and Entity Information - shares	3 Months Ended
	Mar. 31, 2016	Apr. 22, 2016
Document and Entity Information
Entity Registrant Name	BioTelemetry, Inc.
Entity Central Index Key	1,574,774
Document Type	10-Q
Document Period End Date	Mar. 31, 2016
Amendment Flag	false
Current Fiscal Year End Date	--12-31
Entity Current Reporting Status	Yes
Entity Filer Category	Accelerated Filer
Entity Common Stock, Shares Outstanding		27,894,727
Document Fiscal Year Focus	2,016
Document Fiscal Period Focus	Q1

CONSOLIDATED BALANCE SHEETS

CONSOLIDATED BALANCE SHEETS - USD ($) $ in Thousands	Mar. 31, 2016	Dec. 31, 2015
Current assets:
Cash and cash equivalents	$ 22,841	$ 18,986
Accounts receivable, net of allowance for doubtful accounts of $11,698 and $11,185 at March 31, 2016 and December 31, 2015, respectively	16,420	15,179
Other accounts receivable, net of allowance for doubtful accounts of $494 and $416 at March 31, 2016 and December 31, 2015, respectively	8,063	8,997
Inventory	2,865	2,378
Prepaid expenses and other current assets	1,549	1,505
Total current assets	51,738	47,045
Property and equipment, net	26,267	25,554
Intangible assets, net	19,515	19,981
Goodwill	29,831	29,831
Other assets	1,580	1,732
Total assets	128,931	124,143
Current liabilities:
Accounts payable	10,413	8,496
Accrued liabilities	9,727	11,230
Current portion of capital leases	253	287
Current portion of long-term debt	1,250	1,250
Deferred revenue	2,621	2,625
Total current liabilities	24,264	23,888
Deferred tax liability	1,254	1,233
Long-term portion of capital leases	51	101
Long-term debt	21,686	21,944
Deferred rent	1,017	1,051
Total liabilities	48,272	48,217
Stockholders' equity:
Common stock-$.001 par value as of March 31, 2016 and December 31, 2015; 200,000,000 shares authorized as of March 31, 2016 and December 31, 2015; 27,635,158 and 27,277,939 shares issued and outstanding at March 31, 2016 and December 31, 2015, respectively	28	27
Paid-in capital	272,830	272,070
Accumulated other comprehensive loss	(10)	(12)
Accumulated deficit	(192,189)	(196,159)
Total stockholders' equity	80,659	75,926
Total liabilities and stockholders' equity	$ 128,931	$ 124,143

CONSOLIDATED BALANCE SHEETS (Pa

CONSOLIDATED BALANCE SHEETS (Parenthetical) - USD ($) $ in Thousands	Mar. 31, 2016	Dec. 31, 2015
CONSOLIDATED BALANCE SHEETS
Accounts receivable, allowance for doubtful accounts (in dollars)	$ 11,698	$ 11,185
Other receivable, allowance for doubtful accounts (in dollars)	$ 494	$ 416
Common stock, par value (in dollars per share)	$ 0.001	$ 0.001
Common stock, shares authorized	200,000,000	200,000,000
Common stock, shares issued	27,635,158	27,277,939
Common stock, shares outstanding	27,635,158	27,277,939

CONSOLIDATED STATEMENTS OF OPER

CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME (LOSS) - USD ($) $ in Thousands	3 Months Ended
	Mar. 31, 2016	Mar. 31, 2015
Revenues:
Healthcare	$ 41,149	$ 34,981
Research	5,393	5,428
Technology	2,098	3,026
Total revenues	48,640	43,435
Cost of revenues:
Healthcare	13,162	13,177
Research	3,255	2,953
Technology	1,596	2,082
Total cost of revenues	18,013	18,212
Gross profit	30,627	25,223
Operating expenses:
General and administrative	12,336	11,397
Sales and marketing	7,545	7,183
Bad debt expense	2,638	2,349
Research and development	1,786	1,965
Other charges	1,788	1,860
Total operating expenses	26,093	24,754
Income from operations	4,534	469
Interest and other loss, net	(423)	(390)
Income before income taxes	4,111	79
Provision for income taxes	(141)	(148)
Net income (loss)	3,970	(69)
Other comprehensive loss:
Foreign currency translation gain (loss)	2	(11)
Comprehensive income (loss)	$ 3,972	$ (80)
Net income (loss) per common share:
Basic (in dollars per share)	$ 0.15	$ 0
Diluted (in dollars per share)	$ 0.14	$ 0
Weighted average number of common shares outstanding:
Basic (in shares)	27,370,825	26,934,707
Diluted (in shares)	29,181,876	26,934,707

CONSOLIDATED STATEMENTS OF CASH

CONSOLIDATED STATEMENTS OF CASH FLOWS - USD ($) $ in Thousands	3 Months Ended
	Mar. 31, 2016	Mar. 31, 2015
Operating activities
Net income ( loss)	$ 3,970	$ (69)
Adjustments to reconcile net income (loss) to net cash provided by (used in) operating activities:
Provision for doubtful accounts	2,638	2,349
Depreciation	2,587	2,052
Decrease in deferred rent	(34)	(14)
Deferred income tax expense	21	148
Stock-based compensation	1,178	1,120
Amortization of intangibles	679	900
Accretion of discount on debt	55	49
Changes in operating assets and liabilities:
Accounts receivable	(2,945)	(2,959)
Inventory	(487)	(456)
Prepaid expenses and other assets	108	322
Accounts payable	1,917	(1,198)
Accrued and other liabilities	(1,505)	(450)
Liability associated with the Civil Investigative Demand		(6,400)
Net cash provided by (used in) operating activities	8,182	(4,606)
Investing activities
Purchases of property and equipment and investment in internally developed software	(3,513)	(2,072)
Net cash used in investing activities	(3,513)	(2,072)
Financing activities
Payments related to the exercising of stock options and vesting of RSUs	(417)	(900)
Repayment of long-term debt	(313)
Principal payments on capital lease obligations	(84)	(136)
Net cash used in financing activities	(814)	(1,036)
Net increase (decrease) in cash and cash equivalents	3,855	(7,714)
Cash and cash equivalents - beginning of period	18,986	20,007
Cash and cash equivalents - end of period	22,841	12,293
Supplemental disclosure of cash flow information
Cash paid for interest	342	15
Cash paid for taxes	$ 13	$ 22

Summary of Significant Accounti

Summary of Significant Accounting Policies	3 Months Ended
	Mar. 31, 2016
Summary of Significant Accounting Policies
Summary of Significant Accounting Policies	1. Summary of Significant Accounting Policies The accompanying unaudited consolidated financial statements have been prepared in accordance with U.S. generally accepted accounting principles for interim financial information and the requirements of Form 10-Q and Article 10 of Regulation S-X. Accordingly, these consolidated financial statements do not include all of the information and footnotes necessary for a complete presentation of financial position, results of operations and cash flows. In the opinion of management, these consolidated financial statements reflect all adjustments which are of a normal recurring nature and necessary for a fair presentation of BioTelemetry, Inc.’s (“BioTelemetry,” “Company,” “we,” “our” or “us” ) financial position as of March 31, 2016 and December 31, 2015, the results of operations for the three months ended March 31, 2016 and 2015 and cash flows for the three months ended March 31, 2016 and 2015. The financial data and other information disclosed in these notes to the financial statements related to the three months ended March 31, 2016 and 2015 are unaudited. The results for the three months ended March 31, 2016 are not necessarily indicative of the results to be expected for any future period. Net Income (Loss) We compute net income (loss) per share in accordance with ASC 260, Earnings Per Share. Basic net income (loss) per share is computed by dividing net income (loss) by the weighted average number of common shares outstanding during the period. Diluted net income (loss) per share is computed by giving effect to all potential dilutive common shares, including stock options and RSUs. The following table presents the calculation of basic net income (loss) per share: Three Months Ended March 31, 2016 2015 (Net income (loss) in thousands) Numerator: Net income (loss) $ $ ) Denominator: Weighted average shares used in computing basic net income (loss) per share Potential dilutive common shares due to dilutive stock option and restricted stock units — Weighted average shares used in computing diluted net income (loss) per share Net income (loss) per share: Basic net income (loss) per share $ $ ) Diluted net income (loss) per share $ $ ) If the outstanding vested options or RSUs were exercised or converted into common stock, the result would be anti-dilutive for the three months ended March 31, 2015. Accordingly, basic and diluted net loss per share are the same for the three months ended March 31, 2015. Additionally, certain stock options, which are priced higher than the market price of our shares as of March 31, 2016, would be anti-dilutive and therefore have been excluded from the weighted average shares used in computing diluted net income (loss) per share. These options could become dilutive in future periods. Fair Value of Financial Instruments The fair value of financial instruments is defined as the amount at which the instrument could be exchanged in a current transaction between willing parties. Our financial instruments consist primarily of cash and cash equivalents, accounts receivable, other accounts receivable, accounts payable, short-term and long-term debt. With the exception of the long-term debt, the carrying value of these financial instruments approximates their fair value because of their short-term nature (classified as Level 1). For long-term debt, which is classified as Level 2, the fair value was determined to be $23,750 as of March 31, 2016. This is equal to the nominal value, which is the carrying value, exclusive of debt discount and deferred charges. We did not have any Level 3 assets or liabilities for the periods ended March 31, 2016 and December 31, 2015. Cash and Cash Equivalents Cash and cash equivalents are defined as cash on hand, demand deposits, liquid investments and money market funds with maturity from date of purchase of 90 days or less that are readily convertible into cash and have minimal interest rate risk. Cash and cash equivalents are primarily held in U.S. financial institutions or in custodial accounts with U.S. financial institutions. Accounts Receivable and Allowance for Doubtful Accounts Accounts receivable related to the Healthcare segment are recorded at the time revenue is recognized, net of contractual allowances, and are presented on the 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 company specific 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 healthcare industry and third party reimbursement, it is possible that our estimates of collectability could change, which could have a material impact on our operations and cash flows. Other accounts receivable related to the Research and Technology segments are recorded at the time revenue is recognized, or when products are shipped or services are performed. We estimate the allowance for doubtful accounts on a specific account basis and consider several factors in our analysis, including customer specific information and aging of the account. We 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 $2,046 and $1,575 of receivables for the three months ended March 31, 2016 and 2015, respectively. The impact was a reduction of gross receivables and a reduction in the allowance for doubtful accounts. There were no material write-offs in the Research and Technology segments. We recorded bad debt expense of $2,638 and $2,349, for the three months ended March 31, 2016 and 2015, respectively. Equity Method Investments We account for investments using the equity method of accounting if the investment provides us the ability to exercise significant influence, but not control, over the investee. Significant influence is generally deemed to exist if the Company’s ownership interest in the voting stock of the investee ranges between 20% and 50%, although other factors, such as representation on the investee’s board of directors, are considered in determining whether the equity method of accounting is appropriate. Under the equity method of accounting, the investment is recorded at cost in the consolidated balance sheets under Other assets and adjusted for dividends received and our share of the investee’s earnings or losses together with other-than-temporary impairments which are recorded through Interest and other loss, net in the consolidated statements of operations. In December 2015, we acquired approximately 29% of the outstanding stock of Well Bridge Health, Inc. through the conversion of an outstanding note receivable and the related accrued interest. The investment is accounted for under the equity method. At the time of acquisition, the equity method basis difference of $891 was allocated to equity method goodwill. As of March 31, 2016, $1,079 was recorded under Other assets for the investment. For the three months ended March 31, 2016, no dividends were received and our share of the investee’s loss of $21 was recorded under Interest and other loss, net. 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 with ASC 350, Intangibles — Goodwill and Other , goodwill is reviewed for impairment annually, or when events arise that could indicate that impairment exists. The provisions of ASC 350 require that we perform a two-step impairment test. In the first step, we compare the fair value of our reporting units to the carrying value of the reporting units. If the carrying value of the net assets assigned to the reporting units exceeds the fair value of the reporting units, then the second step of the impairment test is performed in order to determine the implied fair value of the reporting units’ goodwill. If the carrying value of the reporting units’ goodwill exceeds the implied fair value, an impairment loss equal to the difference is recorded. For the purpose of performing our goodwill impairment analysis, we consider our business to be comprised of three reporting units: Healthcare, Research and Technology. 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. 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 intangibles 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. Recent Accounting Pronouncements Accounting Pronouncements Not Yet Adopted In March 2016, the FASB issued ASU 2016-09, Improvements to Employee Share-Based Payment Accounting . The standard will revise accounting for share-based compensation arrangements, including the income tax impact and classification on the statement of cash flows. The standard is effective for annual and interim periods beginning after December 15, 2016. Early adoption is permitted. We are currently evaluating the impact the adoption of this standard will have 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 sheets 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. Early adoption is permitted. We are currently evaluating the impact the adoption of this standard will have on our consolidated financial statements. In May 2014 and August 2015, the FASB issued ASU 2014-09 and 2015-14, respectively, Revenue from Contracts with Customers , which provides guidance for revenue recognition. The standards will require revenue recognized to represent the transfer of promised goods or services to customers in an amount that reflects the consideration in which a company expects to receive in exchange for those goods or services. The standards also requires new, expanded disclosures regarding revenue recognition. The standards will be effective January 1, 2018 with early adoption permissible beginning January 1, 2017. We are currently evaluating the transition method we will elect and the impact the adoption of this standard will have on our consolidated financial statements.

Inventory

Inventory	3 Months Ended
	Mar. 31, 2016
Inventory
Inventory	2. Inventory Inventory consists of the following: March 31, 2016 December 31, 2015 Raw materials $ $ Finished goods Total inventories $ $ Inventories, which include purchased parts, materials, direct labor and applied manufacturing overhead, are stated at the lower of cost or net realizable value, with cost determined by use of the first-in, first-out method.

Other Charges

Other Charges	3 Months Ended
	Mar. 31, 2016
Other Charges
Other Charges	3. 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 statement of operations and record the related accrual in the “ Accrued liabilities” line on our balance sheet. These costs are primarily disclosed as Severance and employee related costs below. We account for expenses associated with integration and certain litigation as Other Charges as incurred. These costs are primarily disclosed as Legal fees and Professional fees below. These expenses were primarily a result of legal fees related to patent litigation and activities surrounding our acquisitions. A summary of these expenses is as follows: Three Months Ended March 31, 2016 2015 Legal fees $ $ Professional fees Severance and employee related costs Total $ $

Stockholders' Equity

Stockholders' Equity	3 Months Ended
	Mar. 31, 2016
Stockholders' Equity
Stockholders' Equity	4. Stockholders’ Equity Stock-Based Compensation Stock options, restricted stock units (“RSUs”), performance stock units (“PSUs”) and performance stock options (“PSOs”) are granted under the BioTelemetry, Inc. 2008 Equity Incentive Plan (“EIP”). In January 2016, the number of shares available for grant was increased by 1,091,118 shares, per the EIP documents. At March 31, 2016, approximately 2,826,773 shares remain available for purchase under the EIP. We recognized $1,178 and $1,120 of stock-based compensation expense for the three months ended March 31, 2016 and 2015, respectively. Stock option, RSU and PSU activity is summarized as follows: Stock Options Restricted Stock Units Performance Stock Units Number of Shares Weighted Average Exercise Price Number of Shares Weighted Average Grant Date Fair Value Number of Shares Weighted Average Grant Date Fair Value Stock outstanding as of December 31, 2015 $ $ $ Granted — — Cancelled/Forfeited ) ) — — Exercised/Vested ) ) — — Stock outstanding as of March 31, 2016 $ $ $ Stock compensation expense is only recognized for outstanding PSUs where the performance conditions are deemed probable for achievement. For PSUs deemed probable for achievement, stock compensation expense is recognized ratably over the expected vesting period. For the three months ended March 31, 2016 we incurred PSU expenses of $89. No PSU expense was recorded for the three months ended March 31, 2015. In 2015, 200,000 PSOs were granted. There were no forfeitures or vesting of PSOs during the three months ended March 31, 2016. Stock compensation expense will only be recognized once the performance conditions of the outstanding PSOs have been met. Through March 31, 2016, no stock compensation expense has been recognized related to the PSOs. Employee Stock Purchase Plan In the three months ended March 31, 2016, 77,698 shares were purchased in accordance with the Employee Stock Purchase Plan (“ESPP”). Net proceeds from the issuance of shares of common stock under the ESPP for the three months ended March 31, 2016 were $232. In January 2016, the number of shares available for grant was increased by 272,779 shares, per the ESPP documents. At March 31, 2016, approximately 698,366 shares remain available for purchase under the ESPP.

Income Taxes

Income Taxes	3 Months Ended
	Mar. 31, 2016
Income Taxes
Income Taxes	5. Income Taxes The income tax provision for interim periods is determined using an estimated annual effective tax rate adjusted for discrete items, if any, which are taken into account in the quarterly period in which they occur. We review and update our estimated annual effective tax rate each quarter. At March 31, 2016, our estimated annual effective tax rate was 3.42%. Income tax expense of $141 was recorded for the three months ended March 31, 2016, primarily due to Alternative Minimum Tax (“AMT”) levied on current year taxable income net of allowable AMT net operating loss carryovers . At March 31, 2015, our estimated annual effective tax rate was 7.10%. We recorded a tax provision of $148 for the three months ended March 31, 2015, which include s a discrete charge of $117 related to a deferred tax liability recorded for indefinite lived intangibles. As of March 31, 2016, in accordance with ASC 740, we maintained a full valuation allowance against net deferred tax assets, with the exception of the deferred tax liability recorded for indefinite lived intangibles. We will continue to maintain a full valuation allowance until such time we can reasonably estimate the probability of realizing a benefit from the deferred tax assets.

Credit Agreement

Credit Agreement	3 Months Ended
	Mar. 31, 2016
Credit Agreement
Credit Agreement	6. Credit Agreement On December 30, 2014, we entered into a Credit Agreement with Healthcare Financial Solutions, LLC, (“HFS”), previously The General Electric Capital Corporation (“GE Capital”) , as agent for the lenders (“Lenders”), and as a Lender and swingline lender. Pursuant to the Credit Agreement, the Lenders agreed to make loans to us as follows; (i) Term Loans in an amount of $25,000 as of the closing date with an uncommitted ability to increase such Term Loans up to an amount not to exceed $10,000, and (ii) Revolving Loans up to $15,000, which remain undrawn as of March 31, 2016. The loan is recorded on our balance sheet as of March 31, 2016 in the amount of $22,936, which is net of a debt discount of $744 related to fees paid to HFS and deferred charges of $70 . The HFS loans bear interest at an annual rate of LIBOR plus 4.0%, subject to a LIBOR floor of 1.0%. The outstanding principal of the Term Loan will be paid as follows; (i) beginning April 1, 2015, the principal amount of the Term Loan will be repaid, on a quarterly basis, in installments of $312, plus accrued interest, (ii) beginning January 1, 2018, the principal amount of the Term Loan will be repaid, on a quarterly basis, in installments of $625, plus accrued interest, and (iii) the remaining $16,563 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 Loans are 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 Cardiocore Lab Ltd. and BioTelemetry Belgium BVBA. The 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 March 31, 2016, we were in compliance with all covenants.

Segment Information

Segment Information	3 Months Ended
	Mar. 31, 2016
Segment Information
Segment Information	7. Segment Information We operate under three segments: Healthcare, Research and Technology. The Healthcare segment is focused on the diagnosis and monitoring of cardiac arrhythmias or heart rhythm disorders with our comprehensive suite of cardiac monitoring solutions in a healthcare setting. Our Research segment is engaged in central core laboratory services providing cardiac monitoring, imaging, 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 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 and development costs incurred by the Technology segment for the benefit of the other segments, as well as the elimination of costs associated with intercompany revenue are included in Corporate and Other. Also included in Corporate and Other is net interest expense and other financing expenses as well as the loss from equity method investments. We do not allocate assets to the individual segments. For the three months ended: Healthcare Research Technology Corporate and Other Consolidated March 31, 2016 Revenues $ $ $ — $ Intersegment revenues — — ) — Income (loss) before income taxes ) Depreciation and amortization ) Capital expenditures — Healthcare Research Technology Corporate and Other Consolidated March 31, 2015 Revenues $ $ $ — $ Intersegment revenues — — ) — Income (loss) before income taxes ) Depreciation and amortization Capital expenditures —

Subsequent Events

Subsequent Events	3 Months Ended
	Mar. 31, 2016
Subsequent Events
Subsequent Events	8. Subsequent Events On April 1, 2016, we acquired the assets of the ePatch division of DELTA Danish Electronics, Light and Acoustics (“DELTA”), inclusive of all products and indications currently under development by the ePatch division. The transaction consisted of upfront consideration of $3.0 million in cash and $3.0 million in BioTelemetry restricted stock with the potential for an additional performance-based earn-out of up to $3.0 million in cash. On March 25, 2016, we entered into a definitive agreement to acquire VirtualScopics, Inc. (“VirtualScopics”), a provider of clinical trial imaging solutions and announced our intention to make a tender offer. On April 8, 2016, we commenced the all cash tender offer for all outstanding common and preferred shares of VirtualScopics. In the tender offer, we offered investors $4.05 per share for VirtualScopics’ common stock, $336.30 per share for VirtualScopics’ Series A and Series B Convertible Preferred Stock and $920.00 per share for VirtualScopics’ Series C-1 Convertible Preferred Stock. The total purchase consideration is approximately $15.5 million.

Summary of Significant Accoun14

Summary of Significant Accounting Policies (Policies)	3 Months Ended
	Mar. 31, 2016
Summary of Significant Accounting Policies
Net Income (loss)	Net Income (Loss) We compute net income (loss) per share in accordance with ASC 260, Earnings Per Share. Basic net income (loss) per share is computed by dividing net income (loss) by the weighted average number of common shares outstanding during the period. Diluted net income (loss) per share is computed by giving effect to all potential dilutive common shares, including stock options and RSUs. The following table presents the calculation of basic net income (loss) per share: Three Months Ended March 31, 2016 2015 (Net income (loss) in thousands) Numerator: Net income (loss) $ $ ) Denominator: Weighted average shares used in computing basic net income (loss) per share Potential dilutive common shares due to dilutive stock option and restricted stock units — Weighted average shares used in computing diluted net income (loss) per share Net income (loss) per share: Basic net income (loss) per share $ $ ) Diluted net income (loss) per share $ $ ) If the outstanding vested options or RSUs were exercised or converted into common stock, the result would be anti-dilutive for the three months ended March 31, 2015. Accordingly, basic and diluted net loss per share are the same for the three months ended March 31, 2015. Additionally, certain stock options, which are priced higher than the market price of our shares as of March 31, 2016, would be anti-dilutive and therefore have been excluded from the weighted average shares used in computing diluted net income (loss) per share. These options could become dilutive in future periods.
Fair Value of Financial Instruments	Fair Value of Financial Instruments The fair value of financial instruments is defined as the amount at which the instrument could be exchanged in a current transaction between willing parties. Our financial instruments consist primarily of cash and cash equivalents, accounts receivable, other accounts receivable, accounts payable, short-term and long-term debt. With the exception of the long-term debt, the carrying value of these financial instruments approximates their fair value because of their short-term nature (classified as Level 1). For long-term debt, which is classified as Level 2, the fair value was determined to be $23,750 as of March 31, 2016. This is equal to the nominal value, which is the carrying value, exclusive of debt discount and deferred charges. We did not have any Level 3 assets or liabilities for the periods ended March 31, 2016 and December 31, 2015.
Cash and Cash Equivalents	Cash and Cash Equivalents Cash and cash equivalents are defined as cash on hand, demand deposits, liquid investments and money market funds with maturity from date of purchase of 90 days or less that are readily convertible into cash and have minimal interest rate risk. Cash and cash equivalents are primarily held in U.S. financial institutions or in custodial accounts with U.S. financial institutions.
Accounts Receivable and Allowance for Doubtful Accounts	Accounts Receivable and Allowance for Doubtful Accounts Accounts receivable related to the Healthcare segment are recorded at the time revenue is recognized, net of contractual allowances, and are presented on the 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 company specific 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 healthcare industry and third party reimbursement, it is possible that our estimates of collectability could change, which could have a material impact on our operations and cash flows. Other accounts receivable related to the Research and Technology segments are recorded at the time revenue is recognized, or when products are shipped or services are performed. We estimate the allowance for doubtful accounts on a specific account basis and consider several factors in our analysis, including customer specific information and aging of the account. We 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 $2,046 and $1,575 of receivables for the three months ended March 31, 2016 and 2015, respectively. The impact was a reduction of gross receivables and a reduction in the allowance for doubtful accounts. There were no material write-offs in the Research and Technology segments. We recorded bad debt expense of $2,638 and $2,349, for the three months ended March 31, 2016 and 2015, respectively.
Equity Method Investments	Equity Method Investments We account for investments using the equity method of accounting if the investment provides us the ability to exercise significant influence, but not control, over the investee. Significant influence is generally deemed to exist if the Company’s ownership interest in the voting stock of the investee ranges between 20% and 50%, although other factors, such as representation on the investee’s board of directors, are considered in determining whether the equity method of accounting is appropriate. Under the equity method of accounting, the investment is recorded at cost in the consolidated balance sheets under Other assets and adjusted for dividends received and our share of the investee’s earnings or losses together with other-than-temporary impairments which are recorded through Interest and other loss, net in the consolidated statements of operations. In December 2015, we acquired approximately 29% of the outstanding stock of Well Bridge Health, Inc. through the conversion of an outstanding note receivable and the related accrued interest. The investment is accounted for under the equity method. At the time of acquisition, the equity method basis difference of $891 was allocated to equity method goodwill. As of March 31, 2016, $1,079 was recorded under Other assets for the investment. For the three months ended March 31, 2016, no dividends were received and our share of the investee’s loss of $21 was recorded under Interest and other loss, net.
Goodwill and Acquired Intangible Assets	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 with ASC 350, Intangibles — Goodwill and Other , goodwill is reviewed for impairment annually, or when events arise that could indicate that impairment exists. The provisions of ASC 350 require that we perform a two-step impairment test. In the first step, we compare the fair value of our reporting units to the carrying value of the reporting units. If the carrying value of the net assets assigned to the reporting units exceeds the fair value of the reporting units, then the second step of the impairment test is performed in order to determine the implied fair value of the reporting units’ goodwill. If the carrying value of the reporting units’ goodwill exceeds the implied fair value, an impairment loss equal to the difference is recorded. For the purpose of performing our goodwill impairment analysis, we consider our business to be comprised of three reporting units: Healthcare, Research and Technology. 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. 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 intangibles 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.
Recent Accounting Pronouncements	Recent Accounting Pronouncements Accounting Pronouncements Not Yet Adopted In March 2016, the FASB issued ASU 2016-09, Improvements to Employee Share-Based Payment Accounting . The standard will revise accounting for share-based compensation arrangements, including the income tax impact and classification on the statement of cash flows. The standard is effective for annual and interim periods beginning after December 15, 2016. Early adoption is permitted. We are currently evaluating the impact the adoption of this standard will have 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 sheets 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. Early adoption is permitted. We are currently evaluating the impact the adoption of this standard will have on our consolidated financial statements. In May 2014 and August 2015, the FASB issued ASU 2014-09 and 2015-14, respectively, Revenue from Contracts with Customers , which provides guidance for revenue recognition. The standards will require revenue recognized to represent the transfer of promised goods or services to customers in an amount that reflects the consideration in which a company expects to receive in exchange for those goods or services. The standards also requires new, expanded disclosures regarding revenue recognition. The standards will be effective January 1, 2018 with early adoption permissible beginning January 1, 2017. We are currently evaluating the transition method we will elect and the impact the adoption of this standard will have on our consolidated financial statements.

Summary of Significant Accoun15

Summary of Significant Accounting Policies (Tables)	3 Months Ended
	Mar. 31, 2016
Summary of Significant Accounting Policies
Schedule of calculation of basic and diluted net Income (loss) per share	Three Months Ended March 31, 2016 2015 (Net income (loss) in thousands) Numerator: Net income (loss) $ $ ) Denominator: Weighted average shares used in computing basic net income (loss) per share Potential dilutive common shares due to dilutive stock option and restricted stock units — Weighted average shares used in computing diluted net income (loss) per share Net income (loss) per share: Basic net income (loss) per share $ $ ) Diluted net income (loss) per share $ $ )

Inventory (Tables)

Inventory (Tables)	3 Months Ended
	Mar. 31, 2016
Inventory
Schedule of inventory	March 31, 2016 December 31, 2015 Raw materials $ $ Finished goods Total inventories $ $

Other Charges (Tables)

Other Charges (Tables)	3 Months Ended
	Mar. 31, 2016
Other Charges
Summary of expenses related to other charges	Three Months Ended March 31, 2016 2015 Legal fees $ $ Professional fees Severance and employee related costs Total $ $

Stockholders' Equity (Tables)

Stockholders' Equity (Tables)	3 Months Ended
	Mar. 31, 2016
Stockholders' Equity
Summary of stock option and restricted stock units and performance stock units activity	Stock Options Restricted Stock Units Performance Stock Units Number of Shares Weighted Average Exercise Price Number of Shares Weighted Average Grant Date Fair Value Number of Shares Weighted Average Grant Date Fair Value Stock outstanding as of December 31, 2015 $ $ $ Granted — — Cancelled/Forfeited ) ) — — Exercised/Vested ) ) — — Stock outstanding as of March 31, 2016 $ $ $

Segment Information (Tables)

Segment Information (Tables)	3 Months Ended
	Mar. 31, 2016
Segment Information
Summary of financial information concerning the entity's reportable segments	Healthcare Research Technology Corporate and Other Consolidated March 31, 2016 Revenues $ $ $ — $ Intersegment revenues — — ) — Income (loss) before income taxes ) Depreciation and amortization ) Capital expenditures — Healthcare Research Technology Corporate and Other Consolidated March 31, 2015 Revenues $ $ $ — $ Intersegment revenues — — ) — Income (loss) before income taxes ) Depreciation and amortization Capital expenditures —

Summary of Significant Accoun20

Summary of Significant Accounting Policies - Net Income(Loss) (Details) - USD ($) $ / shares in Units, $ in Thousands	3 Months Ended
	Mar. 31, 2016	Mar. 31, 2015
Numerator:
Net income (loss)	$ 3,970	$ (69)
Denominator:
Weighted average shares used in computing basic net income (loss) per share	27,370,825	26,934,707
Potential dilutive common shares due to dilutive stock option and restricted stock units	1,811,051
Weighted average shares used in computing diluted net loss per share	29,181,876	26,934,707
Net income (loss) per common share:
Basic net income (loss) per share	$ 0.15	$ 0
Diluted net income (loss) per share	$ 0.14	$ 0

Summary of Significant Accoun21

Summary of Significant Accounting Policies - A/R and Allowance for Doubtful (Details) - USD ($) $ in Thousands	3 Months Ended
	Mar. 31, 2016	Mar. 31, 2015
Accounts receivable and allowance for doubtful accounts
Fair value of long-term debt	$ 23,750
Bad debt expense	2,638	$ 2,349
Healthcare
Accounts receivable and allowance for doubtful accounts
Write-off of receivables	$ 2,046	$ 1,575

Summary of Significant Accoun22

Summary of Significant Accounting Policies - Equity Method Investments (Details) $ in Thousands	3 Months Ended
	Mar. 31, 2016USD ($)segment	Dec. 31, 2015USD ($)
Segment Information
Number of reportable segments | segment	3
Well Bridge Health, Inc
Equity Method Investments
Percentage of ownership acquired		29.00%
Dividends from equity investment	$ 0
Loss from equity investment	21
Well Bridge Health, Inc | Goodwill
Equity Method Investments
Equity method investment		$ 891
Well Bridge Health, Inc | Other Assets
Equity Method Investments
Equity method investment	$ 1,079

Inventory (Details)

Inventory (Details) - USD ($) $ in Thousands	Mar. 31, 2016	Dec. 31, 2015
Inventory
Raw materials and supplies	$ 2,479	$ 2,115
Finished goods	386	263
Total inventories	$ 2,865	$ 2,378

Other Charges (Details)

Other Charges (Details) - USD ($) $ in Thousands	3 Months Ended
	Mar. 31, 2016	Mar. 31, 2015
Other Charges
Legal fees	$ 1,369	$ 1,628
Professional fees	168	12
Severance and employee related costs	251	220
Total	$ 1,788	$ 1,860

Stockholders' Equity (Details)

Stockholders' Equity (Details) - USD ($) $ / shares in Units, $ in Thousands	1 Months Ended	3 Months Ended		12 Months Ended
	Jan. 31, 2016	Mar. 31, 2016	Mar. 31, 2015	Dec. 31, 2015
Stock-Based Compensation
Stock based compensation		$ 1,178	$ 1,120
Stock options
Number of Shares
Balance at the beginning of the period (in shares)	3,420,519	3,420,519
Granted (in shares)		282,270
Cancelled/Forfeited (in shares)		(19,422)
Exercised (in shares)		(125,650)
Balance at the end of the period (in shares)		3,557,717		3,420,519
Weighted Average Exercise Price
Balance at the beginning of the period (in dollars per share)	$ 6.69	$ 6.69
Granted (in dollars per share)		9.67
Cancelled (in dollars per share)		8.38
Exercised (in dollars per share)		3.37
Balance at the end of the period (in dollars per share)		$ 7.04		$ 6.69
RSUs
Number of Shares
Balance at the beginning of the period (in shares)	690,936	690,936
Granted (in shares)		177,212
Forfeited (in shares)		(7,405)
Vested (in shares)		(271,793)
Balance at the end of the period (in shares)		588,950		690,936
Weighted Average Grant Date Fair Value
Balance at the beginning of the period (in dollars per shares)	$ 6.85	$ 6.85
Granted (in dollars per share)		9.87
Forfeited (in dollars per share)		9.57
Vested (in dollars per share)		2.87
Balance at the end of the period (in dollars per shares)		$ 9.57		$ 6.85
PSUs
Stock-Based Compensation
Stock based compensation		$ 89	$ 0
Number of Shares
Balance at the beginning of the period (in shares)	265,990	265,990
Balance at the end of the period (in shares)		265,990		265,990
Weighted Average Grant Date Fair Value
Balance at the beginning of the period (in dollars per shares)	$ 8.68	$ 8.68
Balance at the end of the period (in dollars per shares)		$ 8.68		$ 8.68
PSOs
Stock-Based Compensation
Stock based compensation		$ 0
Number of Shares
Granted (in shares)				200,000
Number of Shares
Forfeited (in shares)		0
Vested (in shares)		0
2008 Option Plan
Stock-Based Compensation
Common stock available for grant (in shares)		2,826,773
2008 Option Plan | Stock options
Stock-Based Compensation
Increase in the number of options available to be granted (in shares)	1,091,118

Stockholders' Equity - Employee

Stockholders' Equity - Employee Stock Purchase Plan (Details) - Employee Stock Purchase Plan - USD ($) $ in Thousands	1 Months Ended	3 Months Ended
	Jan. 31, 2015	Mar. 31, 2016
Employee stock purchase plan
Common stock purchased (in shares)		77,698
Net proceeds from the issuance of shares of common stock (in dollars)		$ 232
Increase in number of shares available for grant	272,779
Number of remaining shares available for purchase		698,366

Income Taxes (Details)

Income Taxes (Details) - USD ($) $ in Thousands	3 Months Ended
	Mar. 31, 2016	Mar. 31, 2015
Income Taxes
Estimated annual effective tax rate (as a percent)	3.42%	7.10%
Income tax expense (benefit)	$ 141	$ 148
Mednet
Income Taxes
Income tax expense (benefit)		(148)
State income tax expense (benefit)		$ 117

Credit Agreement (Details)

Credit Agreement (Details) - USD ($) $ in Thousands	Dec. 30, 2014	Mar. 31, 2016
HSF | Term Loan
Credit Agreement
Maximum borrowing capacity	$ 25,000
Additional uncommitted borrowing capacity	10,000
Loan balance net of original issue discount		$ 22,936
Original issue discount		$ 744
Deferred Long-term Liability Charges	70
HSF | Revolving Loan
Credit Agreement
Maximum borrowing capacity	15,000
GE Capital
Credit Agreement
Percentage of capital stock of Cardiocore Lab Ltd. and BioTelemetry Belgium pledged to secure loan		65.00%
GE Capital | LIBOR
Credit Agreement
Debt instrument, basis spread on variable rate (as a percent)		4.00%
LIBOR floor (as a percent)		1.00%
GE Capital | Term Loan | April 2015 to December 2017
Credit Agreement
Principal amount of quarterly installment payments	312
GE Capital | Term Loan | January 2018 to September 2019
Credit Agreement
Principal amount of quarterly installment payments	625
GE Capital | Term Loan | October 2019 to December 2019
Credit Agreement
Principal amount of quarterly installment payments	$ 16,563

Segment Information (Details)

Segment Information (Details) $ in Thousands	3 Months Ended
	Mar. 31, 2016USD ($)item	Mar. 31, 2015USD ($)
Segment information
Number of operating segments | item	3
Revenues	$ 48,640	$ 43,435
Income (loss) before income taxes	4,111	79
Depreciation and amortization	3,266	2,952
Capital expenditures	3,513	2,072
Healthcare
Segment information
Revenues	41,149	34,981
Capital expenditures	2,690	1,148
Research
Segment information
Revenues	5,393	5,428
Capital expenditures	809	856
Technology
Segment information
Revenues	2,098	3,026
Capital expenditures	14	68
Operating segments | Healthcare
Segment information
Income (loss) before income taxes	14,200	8,889
Depreciation and amortization	2,481	1,809
Operating segments | Research
Segment information
Income (loss) before income taxes	18	377
Depreciation and amortization	804	908
Operating segments | Technology
Segment information
Revenues	3,392	991
Income (loss) before income taxes	946	913
Depreciation and amortization	50	94
Corporate and Other
Segment information
Revenues	(3,392)	(991)
Income (loss) before income taxes	(11,053)	(10,100)
Depreciation and amortization	$ (69)	$ 141

Subsequent Events (Details)

Subsequent Events (Details) - Subsequent event - USD ($) $ / shares in Units, $ in Millions	Apr. 08, 2016	Apr. 01, 2016
ePatch Division
Subsequent events
Cash consideration paid under purchase agreement		$ 3
Value of common stock issued under the Purchase Agreement		3
Additional performance-based earn-out		$ 3
VirtualScopics
Subsequent events
Total purchase consideration	$ 15.5
VirtualScopics | Series A and B Convertible Preferred Stock
Subsequent events
Business Acquisition, Share Price	$ 336.30
VirtualScopics | Series C-1 Convertible Preferred Stock
Subsequent events
Business Acquisition, Share Price	920
VirtualScopics | Common Stock
Subsequent events
Business Acquisition, Share Price	$ 4.05