Note 2 - Variable Interest Entity

9 Months Ended

Sep. 30, 2014

Disclosure Text Block [Abstract]

Variable Interest Entity Disclosure [Text Block]

2. VARIABLE INTEREST ENTITY

Connect was formed in June 2013 to develop and commercialize the Connect programs. Connect programs provide healthcare organizations the technology to engage patients through real-time identification and management of individual patient needs, preferences, risks, and experiences.  The platform ensures that organizations have access to a longitudinal view of the patient to more effectively manage patient engagement across the continuum of care. NRC has a 49% ownership interest in Connect. NG Customer-Connect, LLC holds 25% interest, and the remaining 26% is held by Illuminate Health, LLC. NRC has agreed to lease certain employees to Connect. In return for a fee, Connect services the Company’s discharge call program clients. NRC has made capital contributions of $2.5 million to Connect. Profits and losses are allocated under the hypothetical liquidation at book value approach.

NRC is deemed the primary beneficiary of Connect. An entity is considered the primary beneficiary of a variable interest entity if it has both the power to direct the activities of the variable interest entity that most significantly impact the variable interest entity’s economic performance and an obligation to absorb losses or the right to receive benefits that could potentially be significant to the variable interest entity. Connect is thinly capitalized and relies on NRC advances and reimbursements to fund its operations. Together, NRC and NRC associates hold a majority of the voting rights on Connect’s board of directors and has the ability to direct the majority of Connect’s operations.

NRC has a future obligation to purchase the other equity units in Connect when certain targeted events have been achieved. If, at any time, there is at least $12.5 million of annual recurring contract value, including the NRC contracts being serviced, and the members have approved a financial statement showing a pro forma minimum 35% EBITDA margin for revenue on a going-forward basis, then within 90 days thereafter NRC is required to purchase from the other members, and the other members shall be required to sell to NRC, all of their equity units not owned by NRC. As of September 30, 2014, the price at which NG Customer Connect, LLC and Illuminate Health LLC had the obligation to sell their equity units to NRC was $0.

The Company’s condensed consolidated financial statements reflect Connect’s net operating losses of $376,000 and $1,096,000 for the three and nine-month periods ended September 30, 2014, respectively, and $391,000 and $471,000, respectively for the three and nine-month periods ended September 30, 2013. Connect’s assets and liabilities were $833,000 and $266,000 as of September 30, 2014, and $649,000 and $186,000 as of December 31, 2013, respectively.