Note 2 - Variable Interest Entity

6 Months Ended

Jun. 30, 2015

Notes to Financial Statements

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 $2.8 million to Connect, and will make additional capital contributions for up to $1.3 million on an as-needed basis as determined by the Board of Directors of Connect. Profits and losses are allocated under the hypothetical liquidation at book value approach.

NRC is deemed the primary beneficiary of Connect and therefore consolidates this entity. 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.

The Company’s condensed consolidated financial statements reflect Connect’s net operating losses of $221,000 and $389,000 for three-month periods ended June 30, 2015 and 2014, and $511,000 and $720,000 for the six-month periods ended June 30, 2015 and 2014, respectively. Connect’s assets and liabilities were $366,000 and $401,000 as of June 30, 2015, and $784,000 and $309,000 as of December 31, 2014, respectively.

In July 2015, NRC acquired all of NG Customer-Connect, LLC’s interest, and a portion of Illuminate Health LLC’s interest, in Connect. See Subsequent Events in Note 11.