tdoc_Current_Folio_10Q

Table of Contents

 

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 


 

Form 10-Q

 

QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

 

For the quarterly period ended September 30, 2015

 

or

 

TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

 

For the transition period from                      to                     

 

Commission File Number: 001-37477

 


 

TELADOC, INC.

(Exact name of registrant as specified in its charter)

 

Delaware

 

04-3705970

(State of incorporation)

 

(I.R.S. Employer Identification No.)

 

 

 

2 Manhattanville Road, Suite 203

 

 

Purchase, New York

 

10577

(Address of principal executive office)

 

(Zip code)

 

(203) 635-2002

(Registrant’s telephone number including area code)

 


 

Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes   No 

 

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes    No  

 

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. (Check one):

 

Large accelerated filer

Accelerated filer

Non-accelerated filer

Smaller reporting company

 

 

 

(Do not check if a smaller reporting company)

 

 

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act.) Yes    No  

 

As of October 31, 2015, the Registrant had 38,453,687 shares of Common Stock outstanding.

 

 

 


 

Table of Contents

TELADOC, INC.

 

QUARTERLY REPORT ON FORM 10-Q

For the period ended September 30, 2015

 

TABLE OF CONTENTS

 

 

 

Page
Number

 

 

 

PART I 

Financial Information

Item 1. 

Financial Statements

 

Consolidated Balance Sheets as of September 30, 2015 (unaudited) and December 31, 2014

 

Consolidated Statements of Operations (unaudited) for the quarter and nine months ended September 30, 2015 and 2014

 

Consolidated Statements of Comprehensive (Loss) Income (unaudited) for the quarter and nine months ended September 30, 2015 and 2014

 

Consolidated Statements of Convertible Preferred Stock and Stockholders’ Equity (Deficit) (unaudited) for the nine months ended September 30, 2015

 

Consolidated Statements of Cash Flows (unaudited) for the nine months ended September 30, 2015 and 2014

 

Notes to Unaudited Consolidated Financial Statements

Item 2. 

Management’s Discussion and Analysis of Financial Condition and Results of Operations

26 

Item 3. 

Quantitative and Qualitative Disclosures About Market Risk

39 

Item 4. 

Controls and Procedures

39 

PART II 

Other Information

40 

Item 1. 

Legal Proceedings

40 

Item 1A. 

Risk Factors

40 

Item 2. 

Unregistered Sales of Equity Securities and Use of Proceeds

40 

Item 6. 

Exhibits

41 

Signatures 

42 

Exhibit Index 

43 

 

 

 

 

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Table of Contents

PART I

FINANCIAL INFORMATION

ITEM1. Financial Statements 

 

TELADOC, INC.  

 

CONSOLIDATED BALANCE SHEETS  

(In thousands, except share and per share data)

 

 

 

 

 

 

 

 

 

    

 

    

 

 

 

 

September 30,

 

December 31,

 

 

 

2015

 

2014

 

 

 

 

 

 

 

 

Assets

 

 

 

 

 

 

 

Current assets:

 

 

 

 

 

 

 

Cash and cash equivalents

 

$

54,064

 

$

46,436

 

Short-term investments

 

 

97,934

 

 

 —

 

Accounts receivable, net of allowance of $1,267 and $1,785, respectively

 

 

9,370

 

 

6,839

 

Due from officer

 

 

 —

 

 

253

 

Prepaid expenses and other current assets

 

 

2,547

 

 

1,122

 

Deferred taxes

 

 

33

 

 

12

 

Total current assets

 

 

163,948

 

 

54,662

 

Property and equipment, net

 

 

5,852

 

 

1,065

 

Goodwill

 

 

56,342

 

 

28,454

 

Intangible assets, net

 

 

16,854

 

 

7,530

 

Other assets

 

 

284

 

 

296

 

Total assets

 

$

243,280

 

$

92,007

 

Liabilities, convertible preferred stock and stockholders’ equity (deficit)

 

 

 

 

 

 

 

Current liabilities:

 

 

 

 

 

 

 

Accounts payable

 

$

2,056

 

$

2,210

 

Accrued expenses and other current liabilities

 

 

8,045

 

 

3,918

 

Accrued compensation

 

 

5,956

 

 

3,358

 

Long-term bank and other debt-current portion

 

 

1,250

 

 

833

 

Total current liabilities

 

 

17,307

 

 

10,319

 

Other liabilities

 

 

6,517

 

 

2,767

 

Deferred taxes

 

 

1,056

 

 

494

 

Long term bank and other debt

 

 

25,863

 

 

25,196

 

Commitments and contingencies

 

 

 

 

 

 

 

Convertible preferred stock, $0.001 par value; 50,479,286 shares authorized as of September 30, 2015 and December 31, 2014; no shares issued and outstanding as of September 30, 2015 and 50,452,939 shares issued and outstanding as of December 31, 2014; liquidation preference of $117,914 as of December 31, 2014

 

 

 —

 

 

117,914

 

Redeemable common stock, $0.001 par value; no shares issued or outstanding as of September 30, 2015 and 113,294 shares issued and outstanding as of December 31, 2014

 

 

 —

 

 

2,852

 

Stockholders’ equity (deficit):

 

 

 

 

 

 

 

Common stock, $0.001 par value; 75,000,000 shares authorized as of September 30, 2015 and December 31, 2014; 38,441,130 shares and 2,037,999 shares issued and outstanding as of September 30, 2015 and December 31, 2014

 

 

38

 

 

2

 

Additional paid-in capital

 

 

307,998

 

 

4,953

 

Accumulated deficit

 

 

(115,503)

 

 

(72,490)

 

Accumulated other comprehensive income

 

 

4

 

 

 —

 

Total stockholders’ equity (deficit)

 

 

192,537

 

 

(67,535)

 

Total liabilities, convertible preferred stock and stockholders’ equity (deficit)

 

$

243,280

 

$

92,007

 

 

See accompanying notes to unaudited consolidated financial statements.

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TELADOC, INC.  

 

CONSOLIDATED STATEMENTS OF OPERATIONS 

(In thousands, except share and per share data, unaudited)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Quarters Ended September 30,

 

Nine Months Ended September 30,

 

 

 

2015

 

2014

 

2015

 

2014

 

Revenue

    

$

19,973

    

$

10,905

    

$

54,745

    

$

30,601

 

Cost of revenue

 

 

4,488

 

 

2,151

 

 

14,563

 

 

6,160

 

Gross profit

 

 

15,485

 

 

8,754

 

 

40,182

 

 

24,441

 

Operating expenses:

 

 

 

 

 

 

 

 

 

 

 

 

 

Advertising and marketing

 

 

5,284

 

 

1,984

 

 

14,356

 

 

5,938

 

Sales

 

 

5,111

 

 

3,263

 

 

13,190

 

 

8,441

 

Technology and development

 

 

3,941

 

 

1,960

 

 

10,050

 

 

5,216

 

General and administrative

 

 

12,253

 

 

4,754

 

 

40,708

 

 

12,131

 

Depreciation and amortization

 

 

1,491

 

 

650

 

 

3,317

 

 

1,618

 

Loss from operations

 

 

(12,595)

 

 

(3,857)

 

 

(41,439)

 

 

(8,903)

 

Interest (expense), net

 

 

(489)

 

 

(510)

 

 

(1,699)

 

 

(914)

 

Net loss before taxes

 

 

(13,084)

 

 

(4,367)

 

 

(43,138)

 

 

(9,817)

 

Income tax provision (benefit)

 

 

162

 

 

162

 

 

(125)

 

 

227

 

Net loss

 

 

(13,246)

 

 

(4,529)

 

 

(43,013)

 

 

(10,044)

 

Preferred stock dividend

 

 

 —

 

 

(834)

 

 

 —

 

 

(2,920)

 

Accretion of preferred stock

 

 

 —

 

 

(168)

 

 

 —

 

 

(168)

 

Net loss available to common stockholders

 

$

(13,246)

 

$

(5,531)

 

$

(43,013)

 

$

(13,132)

 

Net loss per share, basic and diluted

 

$

(0.37)

 

$

(2.68)

 

$

(3.15)

 

$

(7.21)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Weighted-average shares used to compute basic and diluted net loss per share

 

 

36,099,556

 

 

2,060,075

 

 

13,668,420

 

 

1,821,832

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Pro forma net loss per share, basic and diluted

 

$

(0.35)

 

 

 

 

$

(1.14)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Weighted-average shares used to compute basic and diluted pro forma net loss per share

 

 

38,378,118

 

 

 

 

 

37,600,271

 

 

 

 

 

See accompanying notes to unaudited consolidated financial statements.

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TELADOC, INC.  

 

CONSOLIDATED STATEMENTS OF COMPREHENSIVE (LOSS) INCOME 

(In thousands, unaudited)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Quarters Ended September 30,

 

Nine Months Ended September 30,

 

 

 

2015

 

2014

 

2015

 

2014

 

Net loss

    

$

(13,246)

    

$

(4,529)

    

$

(43,013)

    

$

(10,044)

 

Other comprehensive income, net of tax

 

 

 

 

 

 

 

 

 

 

 

 

 

 Net change in unrealized gains on available-for-sale securities

 

 

4

 

 

 —

 

 

4

 

 

 —

 

Other comprehensive income, net of tax

 

 

4

 

 

 —

 

 

4

 

 

 —

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Comprehensive loss

 

$

(13,242)

 

$

(4,529)

 

$

(43,009)

 

$

(10,044)

 

 

 

See accompanying notes to unaudited consolidated financial statements

 

 

 

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TELADOC, INC.  

 

CONSOLIDATED STATEMENTS OF CONVERTIBLE PREFERRED STOCK

AND STOCKHOLDERS’ EQUITY (DEFICIT)

(In thousands, except share data, unaudited)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

    

 

 

 

 

 

 

 

 

 

 

 

 

 

Accumulated

 

 

 

 

 

Convertible

    

Redeemable

 

 

 

 

    

Additional

    

 

 

    

Other

    

Total

 

 

 

Preferred Stock

 

Common Stock

 

Common Stock

 

Paid-In

 

Accumulated

 

Comprehensive

 

Stockholders’

 

 

    

Shares

    

Amount

    

Shares

    

Amount

    

Shares

    

Amount

    

Capital

    

Deficit

    

Income

    

Equity (Deficit)

 

Balance as of December 31, 2014

 

50,452,939

 

$

117,914

 

113,294

 

$

2,852

 

2,037,999

 

$

2

 

$

4,953

 

$

(72,490)

 

$

 —

 

$

(67,535)

 

Exercise of stock options

 

 —

 

 

 —

 

 —

 

 

 —

 

241,583

 

 

0

 

 

326

 

 

 —

 

 

 —

 

 

326

 

Exercise of warrants

 

 —

 

 

 —

 

 —

 

 

 —

 

59,281

 

 

0

 

 

(0)

 

 

 —

 

 

 —

 

 

 —

 

Issuance of stock in acquisition

 

 —

 

 

 —

 

 —

 

 

 —

 

1,051,033

 

 

1

 

 

16,774

 

 

 —

 

 

 —

 

 

16,775

 

Issuance of stock in connection with IPO, net of $17,144 issuance costs

 

 —

 

 

 —

 

 —

 

 

 —

 

9,487,500

 

 

9

 

 

163,109

 

 

 —

 

 

 —

 

 

163,118

 

Conversion of convertible preferred stock

 

(50,452,939)

 

 

(117,914)

 

 —

 

 

 —

 

25,450,440

 

 

26

 

 

117,888

 

 

 —

 

 

 —

 

 

117,914

 

Conversion of redeemable common stock

 

 —

 

 

 —

 

(113,294)

 

 

(2,852)

 

113,294

 

 

0

 

 

2,852

 

 

 —

 

 

 —

 

 

2,852

 

Stock-based compensation

 

 —

 

 

 —

 

 —

 

 

 —

 

 —

 

 

 —

 

 

2,096

 

 

 —

 

 

 —

 

 

2,096

 

Other comprehensive income, net of tax

 

 —

 

 

 —

 

 —

 

 

 —

 

 —

 

 

 —

 

 

 —

 

 

 —

 

 

4

 

 

4

 

Net loss

 

 —

 

 

 —

 

 —

 

 

 —

 

 —

 

 

 —

 

 

 —

 

 

(43,013)

 

 

 —

 

 

(43,013)

 

Balance as of September 30, 2015

 

 —

 

$

 —

 

 —

 

$

 —

 

38,441,130

 

$

38

 

$

307,998

 

$

(115,503)

 

$

4

 

$

192,537

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

See accompanying notes to unaudited consolidated financial statements.

 

 

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TELADOC, INC.  

 

CONSOLIDATED STATEMENTS OF CASH FLOWS 

(In thousands, unaudited)

 

 

 

 

 

 

 

 

 

 

 

Nine Months Ended September 30,

 

 

 

2015

 

2014

 

Cash flows used in operating activities:

    

 

    

    

 

    

 

Net loss

 

$

(43,013)

 

$

(10,044)

 

Adjustments to reconcile net loss to net cash used in operating activities:

 

 

 

 

 

 

 

Depreciation and amortization

 

 

3,317

 

 

1,618

 

Allowance for doubtful accounts

 

 

1,418

 

 

766

 

Stock-based compensation

 

 

2,096

 

 

428

 

Deferred income taxes

 

 

(125)

 

 

227

 

Accretion of interest

 

 

241

 

 

67

 

Changes in operating assets and liabilities:

 

 

 

 

 

 

 

Accounts receivable

 

 

(3,415)

 

 

(3,851)

 

Due from officer

 

 

253

 

 

 —

 

Prepaid expenses and other current assets

 

 

(1,573)

 

 

(76)

 

Other assets

 

 

13

 

 

(83)

 

Accounts payable

 

 

(769)

 

 

508

 

Accrued expenses and other current liabilities

 

 

600

 

 

2,230

 

Accrued compensation

 

 

2,516

 

 

1,148

 

Other liabilities

 

 

4,064

 

 

(13)

 

Net cash used in operating activities

 

 

(34,377)

 

 

(7,075)

 

Cash flows used in investing activities:

 

 

 

 

 

 

 

Purchase of property and equipment

 

 

(5,481)

 

 

(736)

 

Purchase of internal software

 

 

(1,174)

 

 

(495)

 

Purchase of marketable securities

 

 

(100,556)

 

 

 —

 

Proceeds from the liquidation/maturity of marketable securities

 

 

2,509

 

 

 —

 

Acquisition of business, net of cash acquired

 

 

(17,767)

 

 

(13,844)

 

Net cash used in investing activities

 

 

(122,469)

 

 

(15,075)

 

Cash flows from financing activities:

 

 

 

 

 

 

 

Proceeds from the exercise of stock options and warrants

 

 

326

 

 

646

 

Proceeds from issuance of convertible preferred stock

 

 

 —

 

 

50,082

 

Proceeds from borrowing under bank and other debt

 

 

6,800

 

 

19,700

 

Repayment of bank and other debt

 

 

(5,770)

 

 

 —

 

Proceeds from issuance of common stock under IPO

 

 

163,118

 

 

 —

 

Net cash provided by financing activities

 

 

164,474

 

 

70,428

 

Net decrease in cash and cash equivalents

 

 

7,628

 

 

48,278

 

Cash and cash equivalents at beginning of year

 

 

46,436

 

 

3,212

 

Cash and cash equivalents at end of year

 

$

54,064

 

$

51,490

 

Interest paid:

 

$

1,368

 

$

534

 

 

See accompanying notes to unaudited consolidated financial statements.

 

 

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TELADOC, INC.  

 

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

 

Note 1. Organization and Description of Business

Teladoc, Inc. was incorporated in the State of Texas in June 2002 and changed its state of incorporation to the State of Delaware in October 2008. Unless the context otherwise requires, Teladoc, Inc., together with its subsidiaries, is referred to herein as “Teladoc” or the “Company”. The Company’s principal executive offices are located in Purchase, New York and Dallas, Texas. Teladoc is the nation’s largest telehealth company.

On July 7, 2015, Teladoc closed on its initial public offering (the “IPO”) in which the Company issued and sold 9,487,500 shares of common stock, including the exercise of an underwriter option to purchase additional shares, at an issuance price of $19.00 per share.  The Company received net proceeds of $163.1 million after deducting underwriting discounts and commissions of $12.6 million as well as other offering expenses of $4.5 million. On July 7, 2015, all of the Company’s then-outstanding convertible preferred stock converted into an aggregate of 25.5 million shares of common stock and all of the Company’s redeemable common stock converted into 113,294 shares of common stock. 

The Company completed the acquisitions of Consult A Doctor, Inc. (“CADR”) in 2013, AmeriDoc, LLC (“AmeriDoc”) in 2014, Compile, Inc. d/b/a BetterHelp (“BetterHelp”) in 2015 and Stat Health Services Inc. (“StatDoc”) in 2015, four companies engaged in telehealth activities similar to those of Teladoc. Additionally in 2015, the Company acquired certain assets from Gateway to Provider Access, Inc. (“Gateway”) which is engaged in the marketing, selling and administering the Company’s services through other third parties. Upon the effective date of each respective merger, each entity merged with and into Teladoc.

 

Note 2. Basis of Presentation and Principles of Consolidation

Basis of Presentation and Principles of Consolidation

The accompanying unaudited consolidated financial statements of the Company have been prepared in accordance with U.S. generally accepted accounting principles (“GAAP”) and applicable rules and regulations of the Securities and Exchange Commission (the “SEC”) regarding interim financial reporting. In the opinion of the Company’s management, the accompanying unaudited consolidated financial statements contain all adjustments (consisting of normal recurring accruals and adjustments) necessary to present fairly the financial position, results of operations and cash flows of the Company at the dates and for the periods indicated. The interim results for the quarter and nine months ended September 30, 2015 are not necessarily indicative of results for the full 2015 fiscal year or any other future interim periods. As such, the information included in this quarterly report on Form 10-Q should be read in conjunction with the consolidated financial statements and accompanying notes included in the Company’s final prospectus filed with the SEC pursuant to Rule 424(b) under the Securities Act of 1933, as amended, on June 30, 2015 (the “Prospectus”). 

The unaudited consolidated financial statements include the results of Teladoc, a professional association and six professional corporations: Teladoc Physicians, P.A., Teladoc Physicians, P.C. formed and operated in Alaska; Teladoc Physicians, P.C. formed and operated in California; Teladoc Physicians, P.C. formed and operated in Colorado; Teladoc Physicians, P.C. formed and operated in Michigan; Teladoc Physicians, P.C. formed and operated in New Jersey; and Teladoc Physicians, P.C. formed and operated in New York (collectively, the “Association”).

Teladoc Physicians, P.A. is party to a Services Agreement by and among it and the six professional corporations noted above pursuant to which each professional corporation provides services to Teladoc Physicians, P.A. Each professional corporation is established pursuant to the requirements of its respective domestic jurisdiction governing the corporate practice of medicine.

The Company holds a variable interest in the Association which contracts with physicians and other health professionals in order to provide services to Teladoc. The Association is considered a variable interest entity (“VIE”) since it does not have sufficient equity to finance its activities without additional subordinated financial support. An enterprise having a controlling financial interest in a VIE, must consolidate the VIE if it has both power and benefits—that is, it has (1) the power to direct the activities of a VIE that most significantly impact the VIE’s economic performance (power) and (2) the obligation to absorb losses of the VIE that potentially could be significant to the VIE or

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TELADOC, INC.  

 

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

 

the right to receive benefits from the VIE that potentially could be significant to the VIE (benefits). The Company has the power and rights to control all activities of the Association and funds and absorbs all losses of the VIE.

Total revenue and net loss for the VIE were $2.9 million and $(1.0) million, respectively, for the quarter ended September 30, 2015 and $1.3 million and $(1.0) million, respectively, for the quarter ended September 30, 2014. Total revenue and net loss for the VIE were $9.3 million and $(4.9) million, respectively, for the nine months ended September 30, 2015 and $4.2 million and $(2.3) million, respectively, for the nine months ended September 30, 2014. The VIE’s total assets were $1.6 million and $2.1 million at September 30, 2015 and December 31, 2014, respectively. Total liabilities for the VIE were $15.6 million and $11.2 million at September 30, 2015 and December 31, 2014, respectively. The VIEs total stockholders’ deficit was $14.0 million and $9.1 million at September 30, 2015 and December 31, 2014, respectively.

All intercompany transactions and balances have been eliminated. 

There have been no changes to the significant accounting policies described in the Prospectus that have had a material impact on the consolidated financial statements and related notes. 

Business Combinations

The Company accounts for its business combinations using the acquisition method of accounting. The cost of an acquisition is measured as the aggregate of the acquisition date fair values of the assets transferred and liabilities assumed by the Company to the sellers and equity instruments issued. Transaction costs directly attributable to the acquisition are expensed as incurred. Identifiable assets and liabilities acquired or assumed are measured separately at their fair values as of the acquisition date. The excess of (i) the total costs of acquisition over (ii) the fair value of the identifiable net assets of the acquiree is recorded as goodwill.

Use of Estimates

The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the amounts reported in the consolidated financial statements and accompanying notes. The Company bases its estimates on historical experience, current business factors, and various other assumptions that the Company believes are necessary to consider to form a basis for making judgments about the carrying values of assets and liabilities, the recorded amounts of revenue and expenses, and the disclosure of contingent assets and liabilities. The Company is subject to uncertainties such as the impact of future events, economic and political factors, and changes in the Company’s business environment; therefore, actual results could differ from these estimates. Accordingly, the accounting estimates used in the preparation of the Company’s consolidated financial statements will change as new events occur, as more experience is acquired, as additional information is obtained and as the Company’s operating environment evolves.

Changes in estimates are made when circumstances warrant. Such changes in estimates and refinements in estimation methodologies are reflected in reported results of operations; if material, the effects of changes in estimates are disclosed in the notes to the consolidated financial statements. Significant estimates and assumptions by management affect the allowance for doubtful accounts, the carrying value of long‑lived assets (including goodwill and intangible assets), the carrying value, capitalization and amortization of software development costs, client performance guarantees, the calculation of a contingent liability in connection with an earn‑out, the provision for income taxes and related deferred tax accounts, certain accrued liabilities, revenue recognition, contingencies, litigation and related legal accruals and the value attributed to employee stock options and other stock‑based awards.

Net Loss Per Share

Basic and Diluted Net Loss Per Share

Basic net loss per share is computed by dividing the net loss by the weighted-average number of shares of common stock of the Company outstanding during the period. Diluted net loss per share is computed by giving effect to all potential shares of common stock of the Company, including the Preferred Stock and outstanding stock options and

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TELADOC, INC.  

 

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

 

warrants, to the extent dilutive. As a result of the Company’s net loss position, basic and diluted net loss per share was the same for each period presented as all preferred stock, warrants and options would be anti-dilutive.

The following table presents the calculation of basic and diluted net loss per share for the Company’s common stock (in thousands, except net loss per share data):

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Quarters Ended 

 

Nine Months Ended 

 

 

 

September 30,

 

September 30,

 

 

    

2015

    

2014

    

2015

    

2014

 

Net loss

 

$

(13,246)

 

$

(4,529)

 

$

(43,013)

 

$

(10,044)

 

Preferred stock dividends

 

 

 —

 

 

(834)

 

 

 —

 

 

(2,920)

 

Accretion of preferred stock

 

 

 —

 

 

(168)

 

 

 —

 

 

(168)

 

Net loss available to common stockholders

 

$

(13,246)

 

$

(5,531)

 

$

(43,013)

 

$

(13,132)

 

Weighted-average shares used to compute basic and diluted net loss per share

 

 

36,100

 

 

2,060

 

 

13,668

 

 

1,822

 

Net loss per share, basic and diluted

 

$

(0.37)

 

$

(2.68)

 

$

(3.15)

 

$

(7.21)

 

 

Unaudited Pro Forma Net Loss per Share

The holders of a majority of the outstanding shares of the Preferred Stock (voting as a single class on an as-converted basis, including holders of at least a majority of the outstanding shares of Series F Preferred Stock) approved the automatic conversion of the Preferred Stock into common stock of the Company upon the closing of an initial public offering of the common stock of the Company at a per share price of at least $12.00 (prior to underwriting discounts and commissions) that results in aggregate proceeds to the Company of at least $75.0 million (net of underwriting discounts and commissions). Accordingly on July 7, 2015, all of the Company’s then outstanding preferred stock converted into common stock.

Pro forma basic and diluted net loss per share were computed to give effect to the IPO in which the Company issued and sold 9,487,500 shares of common stock and the conversion of the Preferred Stock into common stock of the Company using the if‑converted method as though the conversion and reclassification had occurred as of the beginning of the first period presented or the original date of issuance, if later.

The following table presents the calculation of basic and diluted pro forma net loss per share (in thousands, except net loss per share data):

 

 

 

 

 

 

 

 

 

 

 

Quarter Ended 

 

Nine Months Ended 

 

 

 

    

September 30, 2015

    

September 30, 2015

 

 

Net loss available to common stockholders

 

$

(13,246)

 

$

(43,013)

 

 

Pro forma net loss per share, basic and diluted

 

$

(0.35)

 

$

(1.14)

 

 

Pro forma net loss per share - weighted average shares

 

 

38,378

 

 

37,600

 

 

 

 

 

 

 

 

 

 

 

Basic net loss per share - weighted average shares

 

 

36,100

 

 

13,668

 

 

Shares sold in IPO

 

 

618

 

 

6,499

 

 

Preferred conversion

 

 

1,660

 

 

17,433

 

 

Pro forma net loss per share - weighted average shares

 

 

38,378

 

 

37,600

 

 

 

Segment Information

The Company’s chief operating decision maker, its Chief Executive Officer (“CEO”), reviews the financial information presented on a consolidated basis for purposes of allocating resources and evaluating its financial performance. Accordingly, the Company has determined that it operates in a single reporting segment—health services.

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TELADOC, INC.  

 

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

 

Revenue Recognition

The Company offers two types of subscription access revenue contracts: (i) contracts that provide for a fixed monthly charge for access and unlimited visits per Member, as defined below, and (ii) contracts that provide for a fixed monthly charge for access and a contractually defined cost for each visit. Any visit fee revenue that is not included in the subscription access revenue is recognized when the service has been provided to the Member.

The Company recognizes a substantial portion of its revenue from contracts that provide employers and health plans and consumers (“Clients”) with subscription access to the Company’s network of physicians and other healthcare professionals (“Providers”) on a subscription basis for a fixed monthly fee which entitles the Client and the Client’s employees and their beneficiaries (“Members”) to unlimited consultations (“visits”). The commercial contracts are generally for a one-year term and have an automatic renewal feature for additional years.

The Company commences revenue recognition for the subscription access service on the date that the services are made available to the Client and its Members, which is considered the implementation date, provided all of the following criteria are met:

·

there is an executed subscription agreement;

·

the Member has access to the service;

·

collection of the fees is reasonably assured; and

·

the amount of fees to be paid by the Client and Member is fixed and determinable.

Subscription Access Revenue

Subscription access revenue recognition commences on the date that the Company’s services are made available to the Client, which is considered the implementation date, provided all of the other criteria described above are met. Revenue is recognized over the term of the Client contract and is based on the terms in the Client contracts, which can provide for a variable periodic fee based upon the actual number of Members.

Revenue From Visit Fees

Revenue from visits is comprised of all revenue that is earned in connection with the completion of a visit. The Company recognizes revenue as the visits are completed.

The Company’s contracts do not generally contain refund provisions for fees earned related to services performed. However, certain of the Company’s contracts include client performance guarantees that are based upon minimum Member utilization and guarantees by the Company for specific service level performance of the Company’s services. If client performance guarantees are not being realized, the Company deducts from revenue an estimate of the amount that will be due at the end of the respective client’s contractual period. The Company issued credits amounting to approximately $0.2 million and $0.1 million for the quarters ended September 30, 2015 and 2014, respectively, and $0.4 million and $0.3 million for the nine months ended September 30, 2015 and 2014, respectively.

 

Cash and Cash Equivalents

 

Cash includes currency on hand and time deposits with banks or other financial institutions. Cash equivalents represent highly liquid investments including money market funds and other marketable securities with original maturities of three months or less when purchased.

Short-Term Investments

 

The Company holds short-term investments in marketable securities primarily consist of corporate bonds,

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TELADOC, INC.  

 

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

 

commercial paper and asset backed securities with maturities of less than one year. These short-term investments are classified as available-for-sale and are carried at fair value with unrealized gains (losses) recorded as a separate component of stockholders’ equity in accumulated other comprehensive income. Any realized gains (losses) are recognized in the consolidated statements of operations upon disposition of the securities.

Accounts Receivable and Allowance for Doubtful Accounts

Accounts receivable are recorded at the invoiced amount, net of allowances for doubtful accounts. The allowance for doubtful accounts is based on the Company’s assessment of the collectability of accounts. The Company regularly reviews the adequacy of the allowance for doubtful accounts by considering the age of each outstanding invoice and the collection history of each customer to determine whether a specific allowance is appropriate. Accounts receivable deemed uncollectable are charged against the allowance for doubtful accounts when identified.

Property and Equipment

Property and equipment are stated at cost less accumulated depreciation. Depreciation is recorded using the straight‑line method over the estimated useful lives of the respective asset as follows:

 

 

 

 

Computer equipment

    

3 years

 

Furniture and equipment

 

5 years

 

Leasehold improvements

 

Shorter of the lease term or the estimated useful lives of the improvements

 

Maintenance and repairs are charged to expense as incurred, and improvements are capitalized. When assets are retired or otherwise disposed of, the cost and accumulated depreciation are removed from the accounts, and any resulting gain or loss is reflected in the consolidated statement of operations in the period realized.

Internal‑Use Software

Internal‑use software is included in intangible assets and is amortized on a straight‑line basis over 3 years.

For development costs related to software development tools that enable the Company’s Members and Providers to interact, the Company capitalizes costs incurred during the application development stage. Costs related to minor upgrades, minor enhancements and maintenance activities are expensed as incurred.

Goodwill and Other Intangible Assets

Goodwill represents the excess of the purchase price over the fair value of the net tangible and intangible assets acquired in a business combination. Goodwill is not amortized, but is tested for impairment annually on October 1 or more frequently if events or changes in circumstances indicate that the asset may be impaired. The Company’s impairment tests are based on a single operating segment and reporting unit structure. The goodwill impairment test involves a two‑ step process. The first step involves comparing the fair value of the Company’s reporting unit to its carrying value, including goodwill. The fair value of the reporting unit is estimated using a discounted cash flows analysis. If the carrying value of the reporting unit exceeds its fair value, the second step of the test is performed by comparing the carrying value of the goodwill in the reporting unit to its implied fair value. An impairment charge is recognized for the excess of the carrying value of goodwill over its implied fair value.

The Company’s annual goodwill impairment test resulted in no impairment charges in any of the periods presented in the consolidated financial statements.

Other intangible assets resulted from business acquisitions and include Client relationships, non‑compete agreements, software and trademarks. Client relationships are amortized over a period 10 years for CADR, AmeriDoc and StatDoc,  6 years for Gateway, and 2 years for BetterHelp, in relation to expected future cash flows. Non‑compete agreements are amortized over a period of 3 to 5 years using the straight‑line method, software is amortized over a

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TELADOC, INC.  

 

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

 

period of 5 years using the straight-line method and trademarks are amortized over a period of 3 years using the straight‑line method.

Stock‑Based Compensation

All stock‑based compensation is measured based on the grant date fair value of the awards and recognized on a straight‑line basis over the period during which the employee is required to perform services in exchange for the award (generally requiring a four-year vesting period for each award). The Company estimates the fair value of employee stock options using the Black‑Scholes option‑pricing model.

Income Taxes

The Company accounts for income taxes using the liability method, under which deferred tax assets and liabilities are determined based on the future tax consequences attributable to differences between the financial reporting carrying amounts of existing assets and liabilities and their respective tax bases and tax credit and net operating loss carryforwards. Deferred tax assets and liabilities are measured using the enacted tax rates that are expected to be in effect when the differences are expected to reverse.

The Company assesses the likelihood that deferred tax assets will be recovered from future taxable income, and a valuation allowance is established when necessary to reduce deferred tax assets to the amounts more likely than not expected to be realized.

The Company recognizes and measures uncertain tax positions using a two‑ step approach. The first step is to evaluate the tax position taken or expected to be taken by determining if the weight of available evidence indicates that it is more likely than not that the tax position will be sustained in an audit, including resolution of any related appeals or litigation processes. The second step is to measure the tax benefit as the largest amount that is more than 50% likely to be realized upon ultimate settlement. Significant judgment is required to evaluate uncertain tax positions. The Company evaluates its uncertain tax positions on a regular basis. Its evaluations are based on a number of factors, including changes in facts and circumstances, changes in tax law, correspondence with tax authorities during the course of audit and effective settlement of audit issues.

Reclassifications

Certain prior year amounts have been reclassified to conform to the current year presentation.

Recently Issued Accounting Pronouncements

In May 2014, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) No. 2014-09, Revenue from Contracts with Customers (Topic 606), to achieve a consistent application of revenue recognition within the U.S., resulting in a single revenue model to be applied by reporting companies under GAAP. Under the new model, recognition of revenue occurs when a customer obtains control of promised goods or services in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. In addition, the revised guidance requires that reporting companies disclose the nature, amount, timing, and uncertainty of revenue and cash flows arising from contracts with customers. The revised guidance is effective for the Company beginning in the quarter ending March 31, 2018; early adoption is allowed. The revised guidance is required to be applied retrospectively to each prior reporting period presented or retrospectively with the cumulative effect of initially applying it recognized at the date of initial application. The Company has not yet determined the impact the revised guidance will have on its consolidated financial statements.

In June 2014, the FASB issued ASU No. 2014-12, Accounting for Share-Based Payments When the Terms of an Award Provide That a Performance Target Could Be Achieved after the Requisite Service Period, requiring that a performance target that affects vesting and that could be achieved after the requisite service period be treated as a performance condition. The amendments in this guidance are effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2015. The Company is currently evaluating the potential impact of this guidance on its financial disclosures and results.

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TELADOC, INC.  

 

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

 

In August 2014, the FASB issued ASU 2014-15, Presentation of Financial Statements—Going Concern. This guidance addresses management’s responsibility to evaluate whether there is substantial doubt about an entity’s ability to continue as a going concern and to provide related footnote disclosures. Management’s evaluation should be based on relevant conditions and events that are known and reasonably knowable at the date that the financial statements are issued. ASU 2014-15 is effective for interim or annual periods beginning after December 15, 2016. Early adoption is permitted. The Company does not expect to early adopt this guidance and is currently evaluating the impact of the adoption of this guidance on its financial disclosures and results.

In April 2015, the FASB issued ASU 2015-03, Interest—Imputation of Interest (Subtopic 835-30): Simplifying the Presentation of Debt Issuance Costs, which requires that debt issuance costs related to a recognized debt liability be presented in the balance sheet as a direct deduction from the carrying amount of that debt liability, consistent with debt discounts. The revised guidance is effective for the Company beginning in the quarter ending March 31, 2016 and is required to be applied retrospectively. Early adoption is permitted. The Company is currently evaluating the potential impact of this guidance on its financial disclosures and results.

 

 

Note 3. Business Acquisitions

On July 31, 2015, the Company acquired certain assets from Gateway for $1.5 million, subject to post-closing working capital adjustments as defined in the purchase agreement.  Gateway is engaged in the marketing, selling and administering the Company’s services through other third parties and as a result, the price in excess of the net assets acquired (less than $0.1 million) was allocated to client relationships. The acquisition transaction costs were less than $0.1 million. The acquisition was considered an asset acquisition for tax purposes. 

On June 17, 2015, the Company completed the acquisition of StatDoc through a merger in which StatDoc became a wholly-owned subsidiary of the Company. The aggregate merger consideration paid by the Company in connection with the acquisition was $30.1 million, which was comprised of $13.3 million of cash and $16.8 million of the Company’s common stock (or 1,051,033 shares), subject to post-closing working capital adjustments as defined in the Agreement and Plan of Merger governing the acquisition. During the quarter ended September 30, 2015, the post-closing working capital adjustment was finalized favorably to the Company in the amount of less than $0.1 million. Fair value of the common stock was determined based on market data from similar healthcare enterprises. StatDoc is a telemedicine provider, focused on managed care, health system and self-insured clients. The acquisition was considered a stock acquisition for tax purposes and as such, the goodwill resulting from this acquisition is not tax deductible. The total associated transaction costs of the acquisition were $0.3 million. Since the acquisition, StatDoc has been integrated with the Company’s existing business.

On January 23, 2015, the Company completed the acquisition of BetterHelp, through a merger in which BetterHelp became a wholly‑owned subsidiary of the Company. The merger consideration paid by the Company in connection with this acquisition consisted of (i) $3.3 million net of cash acquired and (ii) earn‑out payments equal to 15% of the annual net revenue of the BetterHelp business for three years following closing. The Company computed the value of these future payments from internally produced revenue projections and recorded a contingent liability in the amount of $2.4 million which is considered as additional purchase consideration. The Company also issued an unsecured, subordinated promissory note in the amount of $1.0 million, with all principal and interest at a rate of 5% per annum being payable on the third anniversary of the closing to the selling shareholder and another executive of BetterHelp. If the employment of the promissory note holders is terminated, then they forfeit their right to receive the promissory note. As such, the Company has determined the promissory note to be compensatory and is accruing the expense over the service term. BetterHelp was acquired to help the Company expand its operations in the direct‑to‑consumer behavioral health sector. The acquisition was considered a stock acquisition for tax purposes and as such, the goodwill resulting from this acquisition is not tax deductible. The total associated transaction costs of the acquisition were $0.1 million.

On May 1, 2014, the Company completed the acquisition of AmeriDoc, a company engaged in telehealth activities similar to Teladoc, through the purchase of 100% of AmeriDoc’s outstanding members’ interests for

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TELADOC, INC.  

 

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

 

$17.2 million, net of cash acquired, including a $3.5 million promissory note and adjustments for working capital in the amount of $0.2 million. AmeriDoc was acquired to help the Company expand its initial investment in the local and regional insurance broker markets to reach clients that previously did not have access to the Company’s services. Upon the effective date of the merger, AmeriDoc merged with and into Teladoc. The acquisition was considered an asset acquisition for tax purposes and as such, the goodwill resulting from this acquisition is tax deductible. The total associated transaction costs of the acquisition were $0.2 million.

The acquisitions described above were accounted for using the acquisition method of accounting, which requires, among other things, the assets acquired and the liabilities assumed be recognized at their fair values as of the acquisition date. The results of the acquisitions were included within the consolidated financial statements commencing on the respective aforementioned acquisition dates.

The following table summarizes the fair value estimates of the assets acquired and liabilities assumed at each acquisition date. The Company, with the assistance of a  third-party valuation expert, estimated the fair value of the acquired tangible and intangible assets.

Identifiable assets acquired and liabilities assumed (in thousands):

 

 

 

 

 

 

 

 

 

 

 

 

    

StatDoc

    

BetterHelp

    

AmeriDoc

 

Purchase price

 

$

29,991

 

$

5,749

 

$

17,214

 

Less:

 

 

 

 

 

 

 

 

 

 

Cash

 

 

360

 

 

89

 

 

57

 

Accounts receivable

 

 

419

 

 

11

 

 

458

 

Other assets

 

 

70

 

 

4

 

 

18

 

Client relationships

 

 

3,220

 

 

141

 

 

2,980

 

Non-compete agreements

 

 

1,070

 

 

910

 

 

520

 

Internal software

 

 

2,960

 

 

780

 

 

 —

 

Trademarks

 

 

 —

 

 

140

 

 

 —

 

Accounts payable

 

 

(609)

 

 

(6)

 

 

(43)

 

Deferred tax

 

 

 —

 

 

(666)

 

 

 —

 

Other liabilities

 

 

(700)

 

 

(340)

 

 

(257)

 

Goodwill

 

$

23,201

 

$

4,686

 

$

13,481

 

The amount allocated to goodwill reflects the benefits Teladoc expects to realize from the growth of the respective acquisitions operations.

The Company’s unaudited pro forma revenue and net loss for the quarters ended September 30, 2014 and 2015 and for the nine months ended September 30, 2014 and 2015 below have been prepared as if AmeriDoc, BetterHelp and StatDoc had been purchased on January 1, 2014. Unaudited pro forma financial statement results including the results of Gateway would not differ materially from the Company’s historically reported financial statement results.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Pro Forma

 

 

 

Quarters Ended

 

Nine Months Ended 

 

 

 

September 30,

 

September 30,

 

(in thousands)

 

2015

 

2014

 

2015

 

2014

 

Revenue

    

$

19,973

    

$

11,884

    

$

56,569

    

$

34,814

 

Net loss

 

$

(13,246)

 

$

(5,627)

 

$

(46,056)

 

$

(15,373)

 

 

 

 

The pro forma financial information above is not necessarily indicative of what the Company’s consolidated results actually would have been if the acquisitions had been completed at the beginning of the respective periods. In addition, the pro forma information above does not attempt to project the Company’s future results.

 

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TELADOC, INC.  

 

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

 

Note 4. Intangible Assets, Net

Intangible assets, net consist of the following (in thousands):

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Weighted

 

 

 

 

 

 

 

 

 

 

 

 

Average

 

 

    

 

 

    

Accumulated

    

Net Carrying

    

Remaining

  

 

 

Gross Value

 

Amortization

 

Value

 

Useful Life

 

September 30, 2015

 

 

 

 

 

 

 

 

 

 

 

 

Client relationships

 

$

11,651

 

$

(2,755)

 

$

8,896

 

8.1

 

Non-compete agreements

 

 

3,410

 

 

(1,092)

 

 

2,318

 

2.5

 

Trademarks

 

 

140

 

 

(32)

 

 

108

 

2.3

 

Software

 

 

6,798

 

 

(1,266)

 

 

5,532

 

3.8

 

Intangible assets, net

 

$

21,999

 

$

(5,145)

 

$

16,854

 

 

 

December 31, 2014

 

 

 

 

 

 

 

 

 

 

 

 

Client relationships

 

$

6,790

 

$

(1,565)

 

$

5,225

 

8.5

 

Non-compete agreements

 

 

1,430

 

 

(474)

 

 

956

 

2.9

 

Software

 

 

1,885

 

 

(536)

 

 

1,349

 

2.8

 

Intangible assets, net

 

$

10,105

 

$

(2,575)

 

$

7,530

 

 

 

Amortization expense for intangible assets was $1.2 million and $0.6 million for the quarters ended September 30, 2015 and 2014, respectively and $2.6 million and $1.4 million for the nine months ended September 30, 2015 and 2014, respectively.

Periodic amortization that will be charged to expense over the remaining life of the intangible assets as of September 30, 2015 is as follows (in thousands):

 

 

 

 

 

Years Ending December 31,

 

 

 

 

2015 (October 1st to December 31st)  

    

$

1,180

 

2016

 

 

4,307

 

2017

 

 

3,741

 

2018

 

 

2,694

 

2019

 

 

1,949

 

Thereafter

 

 

2,983

 

 

 

$

16,854

 

 

 

Note 5. Goodwill

Goodwill consists of the following (in thousands):

 

 

 

 

 

 

 

 

 

    

As of September 30,

    

As of December 31,

 

 

 

2015

 

2014

 

Beginning balance

 

$

28,454

 

$

14,786

 

Additions associated with acquisitions

 

 

27,888

 

 

13,668

 

Goodwill

 

$

56,342

 

$

28,454

 

 

 

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TELADOC, INC.  

 

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

 

Note 6. Accrued Expenses and Other Current Liabilities

Accrued expenses and other current liabilities consist of the following (in thousands):

 

 

 

 

 

 

 

 

 

    

As of September 30,

    

As of December 31,

 

 

 

2015

 

2014

 

Professional fees

 

$

1,532

 

$

963

 

Consulting fees

 

 

1,198

 

 

1,118

 

Legal fees

 

 

1,384

 

 

389

 

Contingent liability payments earned

 

 

432

 

 

 —

 

Lease abandonment

 

 

383

 

 

 —

 

Other

 

 

3,116

 

 

1,448

 

Total

 

$

8,045

 

$

3,918

 

 

Note 7. Fair Value Measurements

The Company measures its financial assets and liabilities at fair value at each reporting period using a fair value hierarchy that requires it to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value. A financial instrument’s classification within the fair value hierarchy is based upon the lowest level of input that is significant to the fair value measurement. Three levels of inputs may be used to measure fair value:

Level 1—Observable inputs that reflect quoted prices (unadjusted) for identical assets or liabilities in active markets.

Level 2—Include other inputs that are directly or indirectly observable in the marketplace.

Level 3—Unobservable inputs that are supported by little or no market activity.

The Company measures its cash equivalents at fair value on a recurring basis. The Company classifies its cash equivalents within Level 1 and Level 2 because they are valued using observable inputs that reflect quoted prices for identical assets in active markets and quoted prices directly or indirectly in active market.

The Company measures its short-term investments at fair value on a recurring basis and classifies such as Level 2. They are valued using observable inputs that reflect quoted prices directly or indirectly in active market.

The Company measures its contingent consideration at fair value on a recurring basis and classifies such as Level 3. The Company estimates the fair value of contingent consideration as the present value of the expected contingent payments, determined using the weighted probability of the possible payments.

The Company’s cash and cash equivalents and short-term investments cost basis approximate the fair value.

The following tables present information about the Company’s assets and liabilities that are measured at fair value on a recurring basis using the above input categories (in thousands):

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

September 30, 2015

 

 

Level 1

 

Level 2

 

Level 3

 

Total

Cash and cash equivalents

 

$

49,901

 

$

4,163

 

$

 —

 

$

54,064

Short-term investments

 

$

 —

 

$

97,934

 

$

 —

 

$

97,934

Contingent liability

 

$

 —

 

$

 —

 

$

2,608

 

$

2,608

 

 

15


 

Table of Contents

TELADOC, INC.  

 

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

December 31, 2014

 

 

 

Level 1

 

Level 2

 

Level 3

 

Total

 

Cash and cash equivalents

    

$

46,436

    

$

 —

    

$

 —

    

$

46,436

 

There were no transfers  between fair value measurement levels during the nine months ended September 30, 2015.

The change in fair value of the Company’s contingent liability is recorded in general and administrative expenses in the consolidated statements of operations. The following table reconciles the beginning and ending balance of the Company’s Level 3 contingent liability:

 

 

 

 

 

 

    

 

    

 

Fair value at inception

 

$

2,391

 

Payments earned

 

 

(432)

 

Change in fair value

 

 

649

 

Fair value at September 30, 2015

 

$

2,608

 

 

 

Note 8. Long Term Bank and Other Debt

Long‑term bank and other debt consist of the following (in thousands):

 

 

 

 

 

 

 

 

 

    

As of September 30,

    

As of December 31,

 

 

 

2015

 

2014

 

SVB Revolving Advance facility

 

$

6,500

 

$

4,700

 

SVB Term Loan facility

 

 

4,479

 

 

5,000

 

SVB Mezzanine Term Loan less debt discount of $116 and $171 for warrants

 

 

12,884

 

 

12,829

 

Subordinated Promissory Note

 

 

3,250

 

 

3,500

 

Total

 

 

27,113

 

 

26,029

 

Less: current portion

 

 

(1,250)

 

 

(833)

 

Long term bank and other debt

 

$

25,863

 

$

25,196

 

Long term bank and other debt are stated at amortized cost, which approximates fair value.

In May 2014, the Company entered into an Amended and Restated Loan and Security Agreement with Silicon Valley Bank (“SVB”) that provided for a Revolving Advance facility and a Term Loan facility (the “Amended Term Loan facility”). The Revolving Advance facility provides for borrowings up to $12.0 million based on 300% of the Company’s monthly recurring revenue, as defined therein. Borrowings under the Revolving Advance facility were $4.7 million at December 31, 2014, and the facility carries interest at a rate of 0.75% above the prime rate per annum and matures in April 2016. Interest payments are payable monthly in arrears. The Company entered into an amendment to the Revolving Advance Facility in March 2015 that extended its maturity to April 2017. &nb