What changed in this filing

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Item 1. Financial Statements

2020-11-09 compared with 2020-08-10 · 303 added, 280 removed, 504 unchanged (54% of the section changed)

3 unchanged sentences

(IN THOUSANDS EXCEPT SHARE AND PER SHARE DATA)

September 30,

2020 December 31,

CURRENT ASSETS

8 unchanged sentences

Total property, equipment and right-of-use assets 813,563 813,272

Goodwill 470,685 441,973

Other intangible assets 57,152 42,994

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Deposits and other 37,707 36,996

Total assets $ 1,717,866 $ 1,646,986

LIABILITIES AND EQUITY

14 unchanged sentences

Common stock - $ 0.0001 par value, 200,000,000 shares authorized;

51,554,760 and 50,314,328 shares issued and outstanding at June 30, 2020 and December 31, 2019, respectively

51,596,098 and 50,314,328 shares issued and outstanding at September 30, 2020 and December 31, 2019, respectively

Additional paid-in-capital 306,079 262,865

3 unchanged sentences

Noncontrolling interests 88,916 81,454

Total equity 246,121 233,139

Total liabilities and equity $ 1,717,866 $ 1,646,986

4 unchanged sentences

Three Months Ended

Six Months Ended

September 30, Nine Months Ended

September 30,

2020 2019 2020 2019

Service fee revenue $ 256,730 $ 261,908 $ 660,760 $ 762,751

Revenue under capitation arrangements 35,046 30,784 103,145 90,587

Total revenue

Total service revenue 291,776 292,692 763,905 853,338

Provider relief funding 221 — 25,696 —

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Depreciation and amortization 21,247 20,490 64,536 60,193

(Gain) loss on sale and disposal of equipment and other

Loss on sale and disposal of equipment and other 342 917 543 1,990

Severance costs 571 52 1,647 1,054

Total operating expenses 268,622 275,842 774,821 807,234

INCOME (LOSS) FROM OPERATIONS

INCOME FROM OPERATIONS 23,375 16,850 14,780 46,104

OTHER INCOME AND EXPENSES

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Total other expenses 9,325 9,942 32,543 31,788

(LOSS) INCOME BEFORE INCOME TAXES

Benefit from (provision for) income taxes

NET (LOSS) INCOME

INCOME (LOSS) BEFORE INCOME TAXES 14,050 6,908 ( 17,763 ) 14,316

(Provision for) benefit from income taxes ( 3,825 ) ( 1,816 ) 5,029 ( 3,556 )

NET INCOME (LOSS) 10,225 5,092 ( 12,734 ) 10,760

Net income attributable to noncontrolling interests 4,069 1,897 8,063 6,400

NET (LOSS) INCOME ATTRIBUTABLE TO RADNET, INC.

NET INCOME (LOSS) ATTRIBUTABLE TO RADNET, INC.

COMMON STOCKHOLDERS $ 6,156 $ 3,195 $ ( 20,797 ) $ 4,360

BASIC NET (LOSS) INCOME PER SHARE ATTRIBUTABLE TO RADNET, INC.

BASIC NET INCOME (LOSS) PER SHARE ATTRIBUTABLE TO RADNET, INC.

COMMON STOCKHOLDERS $ 0.12 $ 0.06 $ ( 0.41 ) $ 0.09

DILUTED NET (LOSS) INCOME PER SHARE ATTRIBUTABLE TO RADNET, INC.

DILUTED NET INCOME (LOSS) PER SHARE ATTRIBUTABLE TO RADNET, INC.

COMMON STOCKHOLDERS $ 0.12 $ 0.06 $ ( 0.41 ) $ 0.09

WEIGHTED AVERAGE SHARES OUTSTANDING

Basic 51,358,603 49,807,460 50,746,380 49,597,138

Diluted 51,955,815 50,360,360 50,746,380 50,113,306

The accompanying notes are an integral part of these financial statements.

AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)

(IN THOUSANDS)

Three Months Ended June 30,

Six Months Ended June 30,

NET (LOSS) INCOME

Three Months Ended September 30, Nine Months Ended September 30,

2020 2019 2020 2019

NET INCOME (LOSS) $ 10,225 $ 5,092 $ ( 12,734 ) $ 10,760

Foreign currency translation adjustments 11 ( 23 ) 6 ( 28 )

Change in fair value of cash flow hedge, net of taxes 195 ( 5,283 ) ( 18,764 ) ( 14,481 )

Change in fair value of cash flow hedge from prior periods reclassified to earnings

COMPREHENSIVE LOSS

Change in fair value of cash flow hedge from prior periods reclassified to earnings, net of taxes 969 — 1,861 —

COMPREHENSIVE INCOME (LOSS) 11,400 ( 214 ) ( 29,631 ) ( 3,749 )

Less comprehensive income attributable to noncontrolling interests 4,069 1,897 8,063 6,400

COMPREHENSIVE LOSS ATTRIBUTABLE TO

COMPREHENSIVE INCOME (LOSS) ATTRIBUTABLE TO

COMMON STOCKHOLDERS $ 7,331 $ ( 2,111 ) $ ( 37,694 ) $ ( 10,149 )

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(IN THOUSANDS EXCEPT SHARE DATA)

The following table summarizes changes in the Company’s consolidated stockholders' equity, including noncontrolling interest, during the three months ended June 30, 2020 and June 30, 2019 .

Additional Paid-In

Accumulated Other

The following table summarizes changes in the Company’s consolidated stockholders' equity, including noncontrolling interest, during the three months ended September 30, 2020 and September 30, 2019.

Common Stock Additional Paid-In

Capital Accumulated Other

Comprehensive

Income (Loss)

Income (Loss) Accumulated

Deficit Total

Radnet, Inc.'s

Noncontrolling

BALANCE - April 1, 2020

Equity Noncontrolling

Interests Total

Shares Amount

BALANCE - July 1, 2020 51,554,760 $ 5 $ 304,012 $ ( 26,098 ) $ ( 130,111 ) $ 147,808 $ 85,448 $ 233,256

Issuance of common stock under the equity compensation plan 37,000 — — — — — — —

Issuance of common stock under the DeepHealth equity compensation plan 4,338 — — — — — — —

Stock-based compensation expense — — 2,067 — — 2,067 — 2,067

Issuance of common stock for sale of unregistered securities for the DeepHealth acquisition

Distributions paid to noncontrolling interests — — — — — — ( 601 ) ( 601 )

Change in cumulative foreign currency translation adjustment — — — 11 — 11 — 11

Change in fair value cash flow hedge, net of taxes

Change in fair value of cash flow hedge from prior periods reclassified to earnings

BALANCE-JUNE 30, 2020

BALANCE - April 1, 2019

Issuance of common stock upon exercise of options

Change in fair value of cash flow hedge, net of taxes — — — 195 — 195 — 195

Change in fair value of cash flow hedge from prior periods reclassified to earnings, net of taxes — — — 969 — 969 — 969

Other — — — — ( 1 ) ( 1 ) — ( 1 )

Net income — — — — 6,156 6,156 4,069 10,225

BALANCE-SEPTEMBER 30, 2020 51,596,098 $ 5 $ 306,079 $ ( 24,923 ) $ ( 123,956 ) $ 157,205 $ 88,916 $ 246,121

BALANCE - July 1, 2019 50,127,234 $ 5 $ 257,607 $ ( 6,942 ) $ ( 116,752 ) $ 133,918 $ 78,512 $ 212,430

Issuance of common stock under the equity compensation plan 25,000 — — — — — — —

Stock-based compensation expense — — 1,356 — — 1,356 — 1,356

Forfeiture of restricted stock

Purchase of noncontrolling interests

Issuance of common stock for purchase of membership interest in HVRA 101,902 — 1,500 — — 1,500 — 1,500

Change in cumulative foreign currency translation adjustment — — — ( 23 ) — ( 23 ) — ( 23 )

Change in fair value cash flow hedge, net of taxes — — — ( 5,283 ) — ( 5,283 ) — ( 5,283 )

BALANCE-JUNE 30, 2019

Other — — — ( 2 ) 2 — — —

Net income — — — — 3,195 3,195 1,897 5,092

BALANCE-SEPTEMBER 30, 2019 50,254,136 $ 5 $ 260,463 $ ( 12,250 ) $ ( 113,555 ) $ 134,663 $ 80,409 $ 215,072

The accompanying notes are an integral part of these financial statements.

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(IN THOUSANDS EXCEPT SHARE DATA)

The following table summarizes changes in the Company’s consolidated stockholders' equity, including noncontrolling interest, during the six months ended June 30, 2020 and June 30, 2019 .

Additional Paid-In

Accumulated Other

The following table summarizes changes in the Company’s consolidated stockholders' equity, including noncontrolling interest, during the nine months ended September 30, 2020 and September 30, 2019.

Common Stock Additional Paid-In

Capital Accumulated Other

Comprehensive

Income (Loss)

Income (Loss) Accumulated

Deficit Total

Radnet, Inc.'s

Noncontrolling

Equity Noncontrolling

Interests Total

Shares Amount

BALANCE - January 1, 2020 50,314,328 $ 5 $ 262,865 $ ( 8,026 ) $ ( 103,159 ) $ 151,685 $ 81,454 $ 233,139

Issuance of common stock under the equity compensation plan 453,817 — — — — — — —

Issuance of common stock under the DeepHealth equity compensation plan 4,338 — — — — — — —

Stock-based compensation expense — — 10,203 — — 10,203 — 10,203

Issuance of common stock for sale of unregistered securities for the DeepHealth acquisition 823,615 — 33,011 — — 33,011 — 33,011

Distributions paid to noncontrolling interests — — — — — — ( 601 ) ( 601 )

Change in cumulative foreign currency translation adjustment — — — 6 — 6 — 6

Change in fair value cash flow hedge, net of taxes — — — ( 18,764 ) — ( 18,764 ) — ( 18,764 )

Change in fair value of cash flow hedge from prior periods reclassified to earnings

BALANCE-JUNE 30, 2020

Change in fair value of cash flow hedge from prior periods reclassified to earnings, net of taxes — — — 1,861 — 1,861 — 1,861

Net loss — — — — ( 20,797 ) ( 20,797 ) 8,063 ( 12,734 )

BALANCE-SEPTEMBER 30, 2020 51,596,098 $ 5 $ 306,079 $ ( 24,923 ) $ ( 123,956 ) $ 157,205 $ 88,916 $ 246,121

BALANCE - January 1, 2019 48,977,485 $ 5 $ 242,835 $ 2,259 $ ( 117,915 ) $ 127,184 $ 73,069 $ 200,253

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Contribution from noncontrolling partner — — — — — — 750 750

Issuance of common stock for purchase of Nulogix 101,902 — 1,500 — — 1,500 — 1,500

Change in cumulative foreign currency translation adjustment — — — ( 28 ) — ( 28 ) — ( 28 )

Change in fair value cash flow hedge, net of taxes — — — ( 14,481 ) — ( 14,481 ) — ( 14,481 )

BALANCE-JUNE 30, 2019

Net income — — — — 4,360 4,360 6,400 10,760

BALANCE-SEPTEMBER 30, 2019 50,254,136 $ 5 $ 260,463 $ ( 12,250 ) $ ( 113,555 ) $ 134,663 $ 80,409 $ 215,072

The accompanying notes are an integral part of these financial statements.

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(IN THOUSANDS)

Six Months Ended June 30,

Nine Months Ended September 30,

CASH FLOWS FROM OPERATING ACTIVITIES

Net (loss) income $ ( 12,734 ) $ 10,760

Adjustments to reconcile net loss to net cash provided by operating activities:

Adjustments to reconcile net (loss) income to net cash provided by operating activities:

Depreciation and amortization 64,536 60,193

Amortization of operating lease right-of-use assets 50,769 49,948

Equity in earnings of joint ventures

Distributions from joint ventures

Equity in earnings of joint ventures, net of dividends 530 ( 2,148 )

Amortization of deferred financing costs and loan discount 3,266 3,103

5 unchanged sentences

Change in fair value of contingent consideration

( 145 ) ( 1,749 )

Changes in operating assets and liabilities, net of assets acquired and liabilities assumed in purchase transactions:

1 unchanged sentence

Other current assets 13,522 ( 1,569 )

Other assets ( 700 ) ( 5,770 )

Deferred taxes ( 7,640 ) ( 4,230 )

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Proceeds from the sale of equity interests in a joint venture — 132

Nulogix return of capital — 792

Equity contributions in existing and purchase of interest in joint ventures ( 1,631 ) ( 103 )

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Payments on term loan debt ( 32,472 ) ( 29,918 )

Additional deferred finance costs on revolving loan amendment ( 741 ) —

Proceeds from debt issuance, net of issuing costs — 97,144

Proceeds from Payment Protection Program 4,023 —

Distributions paid to noncontrolling interests ( 601 ) ( 1,818 )

Proceeds from sale of noncontrolling interest — 5,275

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Supplemental Schedule of Non-Cash Investing and Financing Activities

We acquired equipment and certain leasehold improvements for approximately $ 31.8 million and $ 14.0 million during the six months ended June 30, 2020 and 2019 , respectively, which were not paid for as of June 30, 2020 and 2019 , respectively.

We acquired equipment and certain leasehold improvements for approximately $ 28.1 million and $ 14.1 million during the nine months ended September 30, 2020 and 2019, respectively, which were not paid for as of September 30, 2020 and 2019 , respectively.

The offsetting amounts due were recorded in our condensed consolidated balance sheet under accounts payable, accrued expenses and other.

On June 1, 2020, we completed our stock purchase of DeepHealth, Inc.

by issuing 823,615 shares of our common stock to purchase all of Deep Health's shares and share equivalents.

by issuing 823,615 shares of our common stock to purchase all of DeepHealth's shares and share equivalents.

The shares were ascribed a value of $ 13.9 million.

We recorded under accrued expenses an accrual of equity interest distribution to noncontrolling interests of $ 1.8 million at June 30, 2019, which was paid in July 2019.

On August 1, 2019 we issued RadNet common stock in the amount of $ 1.5 million to acquire 75 % controlling interest in our formerly 25 % owned joint venture Nulogix.

See Note 2, Significant Accounting Policies, for further information.

We transferred approximately $ 4.3 million in net assets to our new joint venture, Ventura County Imaging Group, LLC in March 2019.

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NOTE 1 – NATURE OF BUSINESS AND BASIS OF PRESENTATION

We are a national provider of freestanding, fixed-site outpatient diagnostic imaging services with operations in six U.S.

At June 30, 2020 , we operated directly or indirectly through joint ventures with hospitals, 332 centers located in California, Delaware, Florida, Maryland, New Jersey, and New York.

We are a national provider of freestanding, fixed-site outpatient diagnostic imaging services with operations in seven U.S.

At September 30, 2020, we operated, directly or indirectly through joint ventures with hospitals, 334 centers located in Arizona, California, Delaware, Florida, Maryland, New Jersey, and New York.

Our centers provide physicians with imaging capabilities to facilitate the diagnosis and treatment of diseases and disorders.

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We consolidate the revenue and expenses, assets and liabilities of the Group.

The Group on a combined basis recognized $ 26.9 million and $ 38.9 million of revenue, net of management services fees to RadNet, for the three months ended June 30, 2020 and 2019 , respectively and $ 26.9 million and $ 38.9 million of operating expenses for the three months ended June 30, 2020 and 2019 , respectively.

RadNet recognized $ 116.4 million and $ 159.2 million of total billed net service fee revenue for the three months ended June 30, 2020 , and 2019 , respectively, for management services provided to the Group relating primarily to the technical portion of billed revenue.

The Group on a combined basis recognized $ 66.4 million and $ 76.3 million of revenue, net of management services fees to RadNet, for the six months ended June 30, 2020 and 2019 , respectively and $ 66.4 million and $ 76.3 million of operating expenses for the six months ended June 30, 2020 and 2019 , respectively.

RadNet recognized $ 264.3 million and $ 301.6 million

of total billed net service fee revenue for the six months ended June 30, 2020 , and 2019 , respectively, for management services provided to the Group relating primarily to the technical portion of billed revenue.

The Group on a combined basis recognized $ 38.3 million and $ 40.6 million of revenue, net of management services fees to RadNet, for the three months ended September 30, 2020 and 2019, respectively and $ 38.3 million and $ 40.6 million of operating expenses for the three months ended September 30, 2020 and 2019, respectively.

RadNet recognized $ 169.0 million and $ 154.5 million of total billed net service fee revenue for the three months ended September 30, 2020, and 2019, respectively, for management services provided to the Group relating primarily to the technical portion of billed revenue.

The Group on a combined basis recognized $ 104.8 million and $ 116.9 million of revenue, net of management services fees to RadNet, for the nine months ended September 30, 2020 and 2019, respectively and $ 104.8 million and $ 116.9 million of operating expenses for the nine months ended September 30, 2020 and 2019, respectively.

RadNet recognized $ 433.3 million

and $ 456.1 million of total billed net service fee revenue for the nine months ended September 30, 2020, and 2019, respectively, for management services provided to the Group relating primarily to the technical portion of billed revenue.

The cash flows of the Group are included in the accompanying condensed consolidated statements of cash flows.

All intercompany balances and transactions have been eliminated in consolidation.

In our condensed consolidated balance sheets at June 30, 2020 and December 31, 2019 , we have included approximately $ 76.6 million and $ 100.3 million , respectively, of accounts receivable and approximately $ 12.5 million and $ 7.0 million of accounts payable and accrued liabilities related to the Group, respectively.

In our condensed consolidated balance sheets at September 30, 2020 and December 31, 2019, we have included approximately $ 84.5 million and $ 100.3 million, respectively, of accounts receivable and approximately $ 10.7 million and $ 7.0 million of accounts payable and accrued liabilities related to the Group, respectively.

The creditors of the Group do not have recourse to our general credit and there are no other arrangements that could expose us to losses on their behalf.

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ScriptSender, LLC is dependent on the Company to finance its own activities, and as such we determined that it is a VIE but we are not a primary beneficiary since we do not have the power to direct the activities of the entity that most significantly impact the entity’s economic performance.

At all of our centers not serviced by the Group we have entered into long-term contracts (typically 40 years) with independent radiology groups to provide physician services at those centers.

At all of our centers not serviced by the Group we have entered into long-term contracts (typically up to 40 years) with independent radiology groups to provide physician services at those centers.

These radiology practices provide professional services, including supervision and interpretation of diagnostic imaging procedures, in our diagnostic imaging centers.

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generally accepted accounting principles for complete financial statements;

however, in the opinion of our management, all adjustments consisting of normal recurring adjustments necessary for a fair presentation of the financial position, results of operations and cash flows for the interim periods ended June 30, 2020 and 2019 have been made.

The results of operations for any interim period are not necessarily indicative of the results for a full year.

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Management continually reviews the contractual estimation process to consider and incorporate updates to laws and regulations and the frequent changes in managed care contractual terms resulting from contract renegotiations and renewals.

As it relates to the consolidated medical group, this service fee revenue includes payments for both the professional medical interpretation revenue recognized by them as well as the payment for all other aspects related to our providing the imaging services, for which we earn management fees.

As it relates to the Group, this service fee revenue includes payments for both the professional medical interpretation revenue recognized by them as well as the payment for all other aspects related to our providing the imaging services, for which we earn management fees.

As it relates to others centers, this service fee revenue is earned through providing the use of our diagnostic imaging equipment and the provision of technical services as well as providing administration services such as clerical and administrative personnel, bookkeeping and accounting services, billing and collection, provision of medical and office supplies, secretarial, reception and transcription services, maintenance of medical records, and advertising, marketing and promotional activities.

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Revenue under capitation arrangements is recognized in the period in which we are obligated to provide services to plan enrollees under contracts with various health plans.

We typically experience some seasonality to our revenue stream.

During the first quarter of each year we generally experience the lowest volumes of procedures and the lowest level of revenue for any quarter during the year.

It is common for inclement weather to result in patient appointment cancellations and, in some cases, imaging center closures.

Second, in recent years, we have observed greater participation in high deductible health plans by patients.

As these high deductibles reset in January for most of these patients, we have observed that patients utilize medical services less during the first quarter, when securing medical care will result in significant out-of-pocket expenditures.

Our total revenues during the three and six months ended June 30, 2020 and 2019 are presented in the table below based on an allocation of the estimated transaction price with the patient between the primary patient classification of insurance coverage (in thousands):

Our total service revenues during the three and nine months ended September 30, 2020 and 2019 are presented in the table below based on an allocation of the estimated transaction price with the patient between the primary patient classification of insurance coverage (in thousands):

Three Months Ended

Six Months Ended

September 30, Nine Months Ended

September 30,

2020 2019 2020 2019

Commercial insurance $ 160,524 $ 163,152 $ 412,415 $ 475,064

Medicare 62,704 61,599 154,847 175,825

Medicaid 7,098 7,128 18,072 21,564

Workers' compensation/personal injury 7,183 10,865 25,705 32,950

2 unchanged sentences

Teleradiology and Software revenue 2,349 4,412 8,319 12,861

Other 5,869 6,875 15,617 20,878

Service fee revenue 256,730 261,908 660,760 762,751

Revenue under capitation arrangements 35,046 30,784 103,145 90,587

Total revenue

PROVIDER RELIEF FUNDING - In the second quarter of 2020, we received approximately $ 25.5 million in funding from The Provider Relief Fund that offered government assistance to eligible providers throughout the healthcare system in support of certain expenses or lost revenue attributable to the coronavirus pandemic.

Generally, the department of Health and Human Services ("HHS") does not intend to recoup funds as long as a provider's lost revenue and increased expenses exceed the amount of provider relief funding one has received.

HHS reserves the right to audit Relief Fund recipients in the future to ensure that this requirement is met and collect any Relief Fund amounts that were made in error or exceed lost revenue or increased expenses due to the pandemic.

Failure to comply with the terms and conditions may be grounds for recoupment.

Total service revenue $ 291,776 $ 292,692 $ 763,905 $ 853,338

COVID-19 PANDEMIC AND CARES ACT FUNDING - On March 11, 2020 the World Health Organization (WHO) designated COVID-19 as a global pandemic.

Patient volumes and the related revenues for our services were significantly impacted during the latter portion of the first quarter through the middle of the third quarter of 2020 as a result of federal, state and local government mandated restrictions requiring many people to remain at home and forced the closure of or limitations on certain businesses, as well as suspended elective procedures by health care facilities.

Many of these restrictions have been eased or completely lifted across the states the Company operates in however, we are unable to predict the future impact of the pandemic on our operations.

During the nine months ended September 30, 2020, we received $ 39.4 million of accelerated Medicare payments, $ 5.0 million from Blue Cross, $ 25.7 million from the general distribution and $ 4.0 million from the Paycheck Protection Program established through the Coronavirus Aid, Relief and Economic Security (“CARES”) Act.

The accelerated Medicare payments are recorded under the caption “ Deferred Revenue“ in our condensed consolidated balance sheet and will be repaid beginning in 2021.

The general distribution funds were accounted for as government grants and recognized as other revenue, once reasonable assurance that the applicable terms and conditions required to retain the funds were met, under the caption “Provider relief funding” in our condensed Consolidated Statements of Operations

During the three months ended September 30, 2020, the Department of Health and Human Services significantly changed the measurement of Provider Relief Funds that providers are able to retain.

We received approximately $ 0.2 million in

funding and based on our assessment of the likelihood of meeting the applicable terms and conditions of the general distribution we continue to recognized the funds received as other revenue.

The CARES Act also providers for a payment deferral of the employer portion of Social Security tax incurred during the pandemic, allowing half of such payroll taxes to be deferred until December 2021 and the remaining half until December 2022.

At September 30, 2020, the Company had deferred $ 10.8 million of Social Security taxes.

These payment deferrals are recorded as payroll tax liability under the caption “Accounts payable, accrued expenses and other” in our condensed consolidated balance sheet.

We believe the extent of the COVID-19 pandemic’s impact on our operating results and financial condition has been and will continue to be driven by many factors, most of which are beyond our control and ability to forecast.

Such factors include, but are not limited to, the scope and duration of stay-at-home practices, business closures and restrictions, suspensions of elective procedures and continued decline in procedure volumes for an indeterminable length of time and incremental expenses required for supplies and personal protective equipment.

Because of these uncertainties, we cannot estimate the length or impact of the pandemic on our business.

If we incur declines in cash flows and results of operations, such declines could have an impact on the inputs and assumptions used in significant accounting estimates, including implicit prices concessions related to uninsured patient accounts, and potential impairment of goodwill and long-lived assets.

During the third quarter of 2020, procedure volumes increased and have had a positive impact on our patient revenue.

However, the impact of COVID-19 in future periods may vary and could adversely impact our results of operations.

RECLASSIFICATION –We have reclassified certain amounts previously classified as held for sale related to property and equipment and goodwill to conform to our 2020 presentation.

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In regards to the credit loss standard, we have concluded that the historical credit loss experienced across our receivable portfolio is materially similar to any current expected credit losses estimated under the Current Expected Credit Loss ("CECL") model.

In 2018 and 2019 we entered into factoring agreements with various institutions and sold certain accounts receivable under non-recourse agreements.

In 2018 and 2019 we entered into factoring agreements with various institutions and sold certain accounts receivable under non-recourse agreements in exchange for notes receivables from the buyers.

These transactions are accounted for as a reduction in accounts receivable as the agreements transfer effective control over and risk related to the receivables to the buyers.

Proceeds on notes receivables are reflected as operating activities on our statement of cash flows and on our balance sheet as prepaid expenses and other current assets for the current portion and deposits and other for the long term portion.

At June 30, 2020 we have $ 22.5 million , net of discount, remaining to be collected on these agreements.

At September 30, 2020 we have $ 20.4 million remaining to be collected on these agreements.

We do not utilize factoring arrangements as an integral part of our financing for working capital.

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In the event of a significant past due balance, as the sold receivables were already revalued and recorded at net realizable value, we can mitigate the expected credit loss by offsetting any collections from the underlying factored receivables and not remitting that to the counter party.

DEFERRED REVENUE - Deferred revenue represents liability for payments received for performance obligations which have yet to be satisfied and is offen associated with sales of our eRad subsidiary.

In April of 2020, we received approximately $ 39.4 million in advanced Medicare payments from the Centers for Medicare and Medicaid Services ("CMS") as part of the expanded Accelerated and Advance Payment Program under the Coronavirus Aid, Relief, and Economic Security (CARES) Act.

DEFERRED REVENUE - As noted above, in April of 2020, we received approximately $ 39.4 million in advanced Medicare payments from the Centers for Medicare and Medicaid Services ("CMS") as part of the expanded Accelerated and Advance Payment Program under the Coronavirus Aid, Relief, and Economic Security (CARES) Act.

As these payments are required to be repaid to CMS beginning 120 days after their receipt through offsets from new Medicare claims over a three month period, we have recorded amounts received to deferred revenue which will be amortized as Medicare reimbursements are earned.

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DEFERRED FINANCING COSTS - Costs of financing are deferred and amortized using the effective interest rate method.

Deferred financing costs, net of accumulated amortization, were $ 1.3 million and $ 1.6 million , as of June 30, 2020 and December 31, 2019 , respectively and related to our line of credit.

In conjunction with our Sixth and Seventh Amendments to our First Lien Credit Agreement (as defined below), a net addition of approximately $ 0.7 million was added to deferred financing costs in the second quarter of 2019.

Deferred financing costs, net of accumulated amortization, were $ 1.9 million and $ 1.6 million, as of September 30, 2020 and December 31, 2019, respectively and related to our Barclays line of credit.

See Note 5, Credit Facilities and Notes Payable for more information.

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Upon the conclusion of the measurement period or final determination of the values of assets acquired or liabilities assumed, whichever comes first, any subsequent adjustments are recorded to our consolidated statements of operations.

GOODWILL AND INDEFINITE LIVED INTANGIBLES - Goodwill at June 30, 2020 totaled $ 467.8 million .

Indefinite lived intangible assets at June 30, 2020 were $ 11.3 million .

GOODWILL AND INDEFINITE LIVED INTANGIBLES - Goodwill at September 30, 2020 totaled $ 470.7 million.

Indefinite lived intangible assets at September 30, 2020 were $ 11.3 million.

Goodwill and Indefinite Lived Intangibles are recorded as a result of business combinations.

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In addition to the annual impairment test, we regularly assess if an event has occurred which would require interim impairment testing.

We considered the current and expected future economic and market conditions surrounding the novel strain of coronavirus ("COVID-19") pandemic and did not identify an indication of goodwill impairment being more likely than not through June 30, 2020 .

Activity in goodwill for the six months ended June 30, 2020 is provided below (in thousands):

Activity in goodwill for the nine months ended September 30, 2020 is provided below (in thousands):

Balance as of December 31, 2019 $ 441,973

2 unchanged sentences

Goodwill acquired through the acquisition of DeepHealth, Inc.

Balance as of June 30, 2020

Goodwill acquired through the acquisition of AZ-Tech Radiology & Open MRI, LLC 2,882

Balance as of September 30, 2020 $ 470,685

INCOME TAXES - Income tax expense is computed using an asset and liability method and using expected annual effective tax rates.

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For net deferred tax assets we consider estimates of future taxable income in determining whether our net deferred tax assets are more likely than not to be realized.

We recorded an income tax benefit of $ 4.5 million , or an effective tax rate of 33.3 % , for the three months ended June 30, 2020 compared to an income tax expense of $ 3.0 million , or an effective tax rate of 28.1 % for the three months ended June 30, 2019 .

We recorded an income tax benefit of $ 8.9 million , or an effective tax rate of 27.8 % , for the six months ended June 30, 2020 compared to an income tax expense of $ 1.7 million , or an effective tax rate of 23.5 % for the six months ended June 30, 2019 .The income tax rates for the three and six months ended June 30, 2020 diverge from the federal statutory rate due to (i) noncontrolling interests due to the controlled partnerships;

We recorded an income tax expense of $ 3.8 million, or an effective tax rate of 27.2 %, for the three months ended September 30, 2020 compared to an income tax expense of $ 1.8 million, or an effective tax rate of 26.3 % for the three months ended September 30, 2019.

We recorded an income tax benefit of $ 5.0 million, or an effective tax rate of 28.3 %, for the nine months ended September 30, 2020 compared to an income tax expense of $ 3.6 million , or an effective tax rate of 24.8 % for the nine months ended September 30, 2019.The income tax rates for the three and nine months ended September 30, 2020 diverge from the federal statutory rate due to (i) noncontrolling interests due to the controlled partnerships;

(ii) effects of state income taxes;

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Lease expense for lease payments is recognized on a straight-line basis over the lease term.

For a contract in which we are a lessee that contains fixed payments for both lease and non-lease components, we have elected to account for the components as a single lease component, as permitted.

For finance leases, interest expense on the lease liability is recognized using the effective interest method and amortization of the right-of-use asset is recognized on a straight-line basis over the shorter of the estimated useful life of the asset or the lease term.

For a contract in which we are a lessee that contains fixed

payments for both lease and non-lease components, we have elected to account for the components as a single lease component, as permitted.

For finance leases, interest expense on the lease liability is recognized using the effective interest method and amortization of the ROU asset is recognized on a straight-line basis over the shorter of the estimated useful life of the asset or the lease term.

ROU assets are tested for impairment if circumstances suggest that the carrying amount may not be recoverable.

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The Restated Plan was approved by our stockholders at our annual stockholders meeting on June 8, 2017.

We have reserved for issuance under the Restated Plan 14,000,000 shares of common stock.

We can issue options, stock awards, stock appreciation rights, stock units and cash awards under the Restated Plan.

Certain options granted under the Restated Plan to employees are intended to qualify as incentive stock options under existing tax regulations.

Stock options and warrants generally vest over three to five years and expire five to ten years from date of grant.

We have reserved 14,000,000 shares of common stock for issuance under the Restated Plan which can be issued in the form of options, stock awards, stock appreciation rights, stock units, and cash awards.

Stock options generally vest over three to five years and expire five to ten years from date of grant.

We determine the compensation expense for each stock option award using the Black Scholes, or similar valuation model.

Those models require that our management make certain estimates concerning risk free interest rates and volatility in the trading price of our common stock.

The compensation expense recognized for all equity-based awards is recognized over the awards’ service periods.

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See Note 4, Facility Acquisitions and Note 6, Stock-Based Compensation, for more information.

COMPREHENSIVE LOSS - ASC 220 establishes rules for reporting and displaying comprehensive loss or income and its components.

Our unrealized gains or losses on foreign currency translation adjustments, interest rate cap and swap agreements are included in comprehensive loss and are included in the consolidated statements of comprehensive loss for the three and six months ended June 30, 2020 and 2019 .

COMPREHENSIVE INCOME (LOSS) - ASC 220 establishes rules for reporting and displaying comprehensive income or loss and its components.

Our unrealized gains or losses on foreign currency translation adjustments, interest rate cap and swap agreements are included in comprehensive loss and are included in the consolidated statements of comprehensive income (loss) for the three and nine months ended September 30, 2020 and 2019 .

COMMITMENTS AND CONTINGENCIES - We are party to various legal proceedings, claims, and regulatory, tax or government inquiries and investigations that arise in the ordinary course of business.

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change in fair value) is reported as a component of comprehensive loss in the consolidated statement of equity since such hedge has been determined to be effective.

See Fair Value Measurements section below for the fair value of the 2016 Caps at June 30, 2020 .

See Fair Value Measurements section below for the fair value of the 2016 Caps at September 30, 2020.

A tabular presentation of the effect of derivative instruments on our consolidated statement of comprehensive loss of the 2016 Caps is as follows (amounts in thousands):

For the three months ended June 30, 2020

April 1, 2020 Balance

Amount of comprehensive gain recognized on derivative net of taxes

June 30, 2020 Balance

Accumulated Other Comprehensive Loss, net of taxes

Liabilities and Equity

For the six months ended June 30, 2020

January 1, 2020 Balance

Amount of comprehensive gain recognized on derivative net of taxes

June 30, 2020 Balance

Accumulated Other Comprehensive Loss, net of taxes

Liabilities and Equity

For the three months ended September 30, 2020

Account July 1, 2020 Balance Amount of comprehensive gain recognized on derivative net of taxes September 30, 2020 Balance Location

Accumulated Other Comprehensive Loss, net of taxes ( 1,409 ) 195 ( 1,214 ) Liabilities and Equity

For the nine months ended September 30, 2020

Account January 1, 2020 Balance Amount of comprehensive gain recognized on derivative net of taxes September 30, 2020 Balance Location

Accumulated Other Comprehensive Loss, net of taxes ( 1,877 ) 663 ( 1,214 ) Liabilities and Equity

In the second quarter of 2019, we entered into four forward interest rate agreements ("2019 Swaps").

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The remaining gain or loss, if any, is recognized currently in earnings.

As a result of the economic impact of the coronavirus pandemic, which precipitated a reduction in interest rates , the cash flows for our $ 400,000,000 notional interest rate swap contract locked in at 2.05 % due October 2025 does not match the cash flows for our First Lien Term Loans and so we have determined that they are not currently effective as cash flow hedges.

Accordingly, all changes in their fair value after April 1, 2020 will be recognized in earnings.

As of April 1, 2020, the total change in fair value relating to swap due October 2025 included in other comprehensive income was approximately $ 21.4 million , net of taxes.

This amount will be amortized to interest expense through October 2025 at $ 0.3 million per month.

A tabular presentation of the effect of derivative instruments on our consolidated statement of comprehensive loss of the 2019 swaps which remain effective is as follows (amounts in thousands):

For the three months ended June 30, 2020

April 1, 2020 Balance

Amount of comprehensive loss recognized on derivative net of taxes

Amount of loss reclassified out of accumulated OCI into income (prior period effective portion)

June 30, 2020 Balance

Accumulated Other Comprehensive Loss, net of taxes

Liabilities and Equity

For the six months ended June 30, 2020

January 1, 2020 Balance

Amount of comprehensive loss recognized on derivative net of taxes

Amount of loss reclassified out of accumulated OCI into income (prior period effective portion)

June 30, 2020 Balance

Accumulated Other Comprehensive Loss, net of taxes

Liabilities and Equity

A tabular presentation of the effect of derivative instruments on our statement of operations of the 2019 Swaps for the Swaps that became ineffective during the second quarter is as follows (amounts in thousands):

For the three months ended June 30, 2020

Ineffective interest rate swap

Amount of loss recognized in income on derivative (current period ineffective portion)

Location of loss recognized in Income on derivative (current period ineffective portion)

Amount of loss reclassified from accumulated OCI into income (prior period effective portion)

Location of gain (Loss) reclassified from accumulated OCI into income (prior period effective portion)

Interest rate contracts

Other income (expense)

Interest income (expense)

See Fair Value Measurements section below for the fair value of the 2016 caps and 2019 swaps at June 30, 2020 .

As a result of the economic impact of the coronavirus pandemic, which precipitated a reduction in interest rates , the cash flows for both our $ 400,000,000 notional interest rate swap contract locked in at 2.05 % due October 2025 and our $ 100,000,000 notional interest rate swap contract locked in at 1.96 % do not match the cash flows for our First Lien Term Loans and so we have determined that they are not currently effective as cash flow hedges.

Accordingly, all changes in their fair value after April 1, 2020 for the $ 400,000,000 notional and after July 1, 2020 for the $ 100,000,000 notional will be recognized in earnings.

As of July 1, 2020, the total change in fair value relating to swaps included in other comprehensive income was approximately $ 24.4 million, net of taxes.

This amount will be amortized to interest expense through October 2025 at approximately $ 0.4 million per month.

A tabular presentation of the effect of derivative instruments on our consolidated statement of comprehensive loss of the 2019 swaps which remain ineffective is as follows (amounts in thousands):

For the three months ended September 30, 2020

Account July 1, 2020 Balance Amount of comprehensive loss recognized on derivative net of taxes Amount of loss reclassified out of accumulated OCI into income (prior period effective portion), net of taxes September 30, 2020 Balance Location

Accumulated Other Comprehensive Loss, net of taxes $ ( 24,406 ) $ — $ 969 $ ( 23,437 ) Liabilities and Equity

For the nine months ended September 30, 2020

Account January 1, 2020 Balance Amount of comprehensive loss recognized on derivative net of taxes Amount of loss reclassified out of accumulated OCI into income (prior period effective portion), net of taxes September 30, 2020 Balance Location

Accumulated Other Comprehensive Loss, net of taxes $ ( 5,870 ) $ ( 19,428 ) $ 1,861 $ ( 23,437 ) Liabilities and Equity

A tabular presentation of the effect of derivative instruments on our statement of operations of the 2019 Swaps for the Swaps that became ineffective during the third quarter is as follows (amounts in thousands):

For the three months ended September 30, 2020

Ineffective interest rate swap Amount of loss recognized in income on derivative (current period ineffective portion) Location of loss recognized in Income on derivative (current period ineffective portion) Amount of loss reclassified from accumulated OCI into income (prior period effective portion) Location of gain (Loss) reclassified from accumulated OCI into income (prior period effective portion)

Interest rate contracts $ ( 679 ) Other income (expense) $ ( 1,312 ) Equity and Interest Expense

For the nine months ended September 30, 2020

Interest rate contracts $ ( 4,523 ) Other income (expense) $ ( 2,204 ) Equity and Interest Expense

See Fair Value Measurements section below for the fair value of the 2016 caps and 2019 swaps at September 30, 2020.

FAIR VALUE MEASUREMENTS – Assets and liabilities subject to fair value measurements are required to be disclosed within a fair value hierarchy.

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The tables below summarize the estimated fair values of certain of our financial assets that are subject to fair value measurements, and the classification of these assets on our condensed consolidated balance sheets, as follows (in thousands):

As of June 30, 2020

As of September 30, 2020

Level 1 Level 2 Level 3 Total

Current and long term liabilities

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As of December 31, 2019

Level 1 Level 2 Level 3 Total

Current and long term liabilities

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The table below summarizes the estimated fair value compared to our face value of our long-term debt as follows (in thousands):

As of June 30, 2020

Total Fair Value

Total Face Value

As of September 30, 2020

Level 1 Level 2 Level 3 Total Fair Value Total Face Value

First Lien Term Loans and SunTrust Term Loan $ — $ 663,140 $ — $ 663,140 $ 673,227

As of December 31, 2019

Total Face Value

Level 1 Level 2 Level 3 Total Total Face Value

First Lien Term Loans and SunTrust Term Loan $ — $ 708,948 $ — $ 708,948 $ 705,699

As of June 30, 2020 and at December 31, 2019 our Barclays revolving credit facility had no balance outstanding.

Our SunTrust revolving credit facility relating to our consolidated subsidiary NJIN, had no principal amount outstanding at June 30, 2020 and at December 31, 2019 .

As of September 30, 2020 and at December 31, 2019 our Barclays revolving credit facility had no balance outstanding.

Our SunTrust revolving credit facility relating to our consolidated subsidiary NJIN, had no principal amount outstanding at September 30, 2020 and at December 31, 2019.

The estimated fair value of our long-term debt, which is discussed in Note 5, was determined using Level 2 inputs primarily related to comparable market prices.

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EARNINGS PER SHARE - Earnings per share is based upon the weighted average number of shares of common stock and common stock equivalents outstanding, net of common stock held in treasury, as follows (in thousands except share and per share data):

Three Months Ended June 30,

Six Months Ended June 30,

Net loss (income) attributable to RadNet, Inc.'s common stockholders

BASIC AND DILUTED NET (LOSS) INCOME PER SHARE ATTRIBUTABLE TO RADNET, INC.'S COMMON STOCKHOLDERS

Three Months Ended September 30, Nine Months Ended September 30,

2020 2019 2020 2019

Net income (loss) attributable to RadNet, Inc.'s common stockholders $ 6,156 $ 3,195 $ ( 20,797 ) $ 4,360

BASIC NET INCOME (LOSS) PER SHARE ATTRIBUTABLE TO RADNET, INC.'S COMMON STOCKHOLDERS

Weighted average number of common shares outstanding during the period 51,358,603 49,807,460 50,746,380 49,597,138

Basic and diluted net (loss) income per share attributable to RadNet, Inc.'s common stockholders

DILUTED NET INCOME PER SHARE ATTRIBUTABLE TO RADNET, INC.'S COMMON STOCKHOLDERS

Basic net income (loss) per share attributable to RadNet, Inc.'s common stockholders $ 0.12 $ 0.06 $ ( 0.41 ) $ 0.09

DILUTED NET INCOME (LOSS) PER SHARE ATTRIBUTABLE TO RADNET, INC.'S COMMON STOCKHOLDERS

Weighted average number of common shares outstanding during the period 51,358,603 49,807,460 50,746,380 49,597,138

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Weighted average number of common shares used in calculating diluted net income per share 51,955,815 50,360,360 50,746,380 50,113,306

Diluted net income per share attributable to RadNet, Inc.'s common stockholders

For the three and six months ended June 30, 2020 we excluded all outstanding options and restricted stock awards in the calculation of diluted earnings per share because their effect would be antidilutive.

Diluted net income (loss) per share attributable to RadNet, Inc.'s common stockholders $ 0.12 $ 0.06 $ ( 0.41 ) $ 0.09

Stock options and non vested restricted awards excluded from the computation of diluted per share amounts as their effect would be antidilutive:

Nonvested restricted stock subject to service vesting — — 331,659 —

Shares issuable upon the exercise of stock options:

48,948 — 933,370 —

EQUITY INVESTMENTS AT FAIR VALUE–Accounting guidance requires entities to measure equity investments at fair value, with any changes in fair value recognized in net income.

If there is no readily determinable fair value, the guidance allows entities the ability to measure investments at cost less impairment.

As of June 30, 2020 , we have three equity investments for which a fair value is not readily determinable and therefore the total amounts invested are recognized at cost as follows:

Medic Vision:

If there is no readily determinable fair value, the guidance allows entities the ability to measure investments at cost, adjusted for observable price changes and impairments, with changes recognized in net income.

As of September 30, 2020, we have three equity investments for which a fair value is not readily determinable and therefore the total amounts invested are recognized at cost as follows:

Medic Vision Imaging Solutions Ltd., based in Israel, specializes in software packages that provide compliant radiation dose structured reporting and enhanced images from reduced dose CT scans.

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In accordance with accounting guidance , as we exercise no significant influence over Medic Vision’s operations, the investment is recorded at its cost of $ 1.2 million, given that the fair value is not readily determinable.

No impairment in our investment was identified as of June 30, 2020 .

Turner Imaging:

No observable price changes or impairment in our investment was identified as of September 30, 2020.

Turner Imaging Systems, based in Utah, develops and markets portable X-ray imaging systems that provide a user the ability to acquire X-ray images wherever and whenever they are needed.

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On January 1, 2019 we funded a convertible promissory note in the amount of $ 0.1 million that converted to additional 80,000 shares December 21, 2019.

No impairment in our investment was identified as of June 30, 2020 .

WhiteRabbit.ai Inc:

No observable price changes impairment in our investment was identified as of September 30, 2020.

WhiteRabbit.ai Inc., based in California, is currently developing an artificial intelligence suite which aims to improve the speed and accuracy of cancer detection in radiology and improve patient care.

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To leverage their artificial intelligence expertise, we entered into a software subscription service contract to assist our radiology work flow and advanced them $ 4.0 million for future software subscription fees that is recorded as a prepaid expense in Prepaid and Other Current assets in our consolidated balance sheets.

No impairment in our investment or the loan receivable was identified as of June 30, 2020 .

No observable price changes or impairment in our investment or the loan receivable was identified as of September 30, 2020.

INVESTMENT IN JOINT VENTURES – We have 12 unconsolidated joint ventures with ownership interests ranging from 35 % to 55 %.

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We evaluate our investment in joint ventures, including cost in excess of book value (equity method goodwill) for impairment whenever indicators of impairment exist.

No indicators of impairment existed as of June 30, 2020 .

No indicators of impairment existed as of September 30, 2020.

Joint venture investment contribution

In the month of August 2020, we made additional cash contributions to our Santa Monica Imaging Group, LLC partnership in the amount of $ 1.6 million in support of its expanded operations.

We maintain our 35 % economic interest in the partnership.

Joint venture investment and financial information

The following table is a summary of our investment in joint ventures during the six months ended June 30, 2020 (in thousands):

The following table is a summary of our investment in joint ventures during the nine months ended September 30, 2020 (in thousands):

Balance as of December 31, 2019 $ 34,470

Equity in earnings in these joint ventures 5,176

Balance as of June 30, 2020

We charged management service fees from the centers underlying these joint ventures of approximately $ 3.3 million and $ 1.8 million for the three months ended June 30, 2020 and 2019 , respectively.

and $ 5.9 million and $ 3.9 million for the six months ended June 30, 2020 and 2019 , respectively.

Distribution of earnings ( 5,706 )

Equity contributions in existing joint ventures 1,631

Balance as of September 30, 2020 $ 35,571

We charged management service fees from the centers underlying these joint ventures of approximately $ 2.7 million and $ 1.8 million for the three months ended September 30, 2020 and 2019, respectively, and $ 8.6 million and $ 7.8 million for the nine months ended September 30, 2020 and 2019, respectively.

We eliminate any unrealized portion of our management service fees with our equity in earnings of joint ventures.

The following table is a summary of key balance sheet data for these joint ventures as of June 30, 2020 and December 31, 2019 and income statement data for the six months ended June 30, 2020 and 2019 (in thousands):

The following table is a summary of key balance sheet data for these joint ventures as of September 30, 2020 and December 31, 2019 and income statement data for the nine months ended September 30, 2020 and 2019 (in thousands):

Balance Sheet Data:

June 30, 2020

December 31, 2019

September 30, 2020 December 31, 2019

Current assets $ 26,618 $ 27,427

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Total book value of other joint venture partner interests $ 34,835 $ 32,374

Income statement data for the six months ended June 30,

Income statement data for the nine months ended September 30, 2020 2019

Net revenue $ 78,988 $ 80,115

Net income $ 13,651 $ 13,718

NOTE 3 – RECENT ACCOUNTING AND REPORTING STANDARDS

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Acquisitions:

On August 31, 2020 we completed our acquisition of certain assets of AZ-Tech Radiology & Open MRI, LLC, consisting of eight multi-modality imaging centers located in the Phoenix, Arizona area for purchase consideration of $ 5.5 million.

We made a preliminary fair value determination of the acquired assets and assumed liabilities and approximately $ 2.5 million in property and equipment, $ 7.6 million in right-of-use assets, $ 0.1 million in other assets, $ 7.6 million in operating lease liabilities, and $ 2.9 million in goodwill were recorded.

On June 1, 2020, we completed our acquisition of all the equity interests of DeepHealth Inc., ("DeepHealth") an artificial intelligence and machine learning company in an all stock purchase.

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We preliminarily recorded $ 0.1 million in current assets, $ 3.5 million in deferred tax liabilities, $ 14.8 million in intangible assets, primarily in-process research and development ("IPR&D'), and $ 23.4 million in goodwill.

The goodwill is primarily attributable to expected post-acquisition synergies from integrating Deep Health’s assembled workforce and IPR&D technologies.

The goodwill is primarily attributable to expected post-acquisition synergies from integrating DeepHealth’s assembled workforce and IPR&D technologies.

The fair values of the identifiable intangible assets related to IPR&D were determined by the income method and the assets will not be amortized until completion.

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NOTE 5 – CREDIT FACILITIES AND NOTES PAYABLE

As of June 30, 2020 and December 31, 2019 our debt obligations consisted of the following (in thousands):

As of September 30, 2020 and December 31, 2019 our debt obligations consisted of the following (in thousands):

September 30,

2020 December 31,

First Lien Term Loans collateralized by RadNet's tangible and intangible assets $ 620,727 $ 649,824

Discounts on First Lien Term Loans ( 10,669 ) ( 13,579 )

Term Loan Agreement collateralized by NJIN's tangible and intangible assets

SunTrust Term Loan Agreement collateralized by NJIN's tangible and intangible assets 52,500 55,875

Paycheck Protection Program loans at 1 % due April 2022

Equipment notes payable at interest rates ranging from 4.4% to 4.6%, due through 2020, collateralized by medical equipment

Equipment note payable at 4.6 %, due through 2020, collateralized by medical equipment

Total debt obligations 666,642 692,395

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Long term portion debt obligations $ 627,179 $ 652,704

Senior Secured Credit Facilities

At June 30, 2020 , our Barclays credit facilities were comprised of one tranche of term loans (“First Lien Term Loans”) and a revolving credit facility of $ 137.5 million (the “Barclays Revolving Credit Facility”), both of which are provided pursuant to the Amended and Restated First Lien Credit and Guaranty Agreement dated as of July 1, 2016 (as amended, the “First Lien Credit Agreement”).

At June 30, 2020 , our SunTrust credit facilities, which relate to our consolidated subsidiary NJIN, were comprised of one term loan (the "SunTrust Term Loan") and a revolving credit facility of $ 30.0 million (the "SunTrust Revolving Credit Facility") both of which are provided pursuant to the SunTrust Restated Credit Agreement (as described below).

As of June 30, 2020 , we were in compliance with all covenants under our credit facilities.

Deferred financing costs at June 30, 2020 , net of accumulated amortization, was $ 1.3 million and is specifically related to our Barclays Revolving Credit Facility.

Included in our condensed consolidated balance sheets at June 30, 2020 are $ 630.4 million of First Lien Term Loans and $ 53.6 million of SunTrust Term Loan debt for a combined total of $ 684.1 million of total term loan debt (exclusive of unamortized discounts of $ 11.6 million ) in thousands:

Total Carrying

Included in our condensed consolidated balance sheets at September 30, 2020 are $ 620.7 million of First Lien Term Loans and $ 52.5 million of SunTrust Term Loan debt for a combined total of $ 673.2 million of total term loan debt (exclusive of unamortized discounts of $ 10.7 million) in thousands:

Face Value Discount Total Carrying

First Lien Term Loans $ 620,727 $ ( 10,669 ) $ 610,058

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Total Term Loans $ 673,227 $ ( 10,669 ) $ 662,558

We had no balance under our $ 137.5 million Barclays Revolving Credit Facility at June 30, 2020 and have reserved an additional $ 6.3 million for certain letters of credit.

The remaining $ 131.2 million of our Barclays Revolving Credit Facility was available to draw upon as of June 30, 2020 .

We had no balance under our $ 30.0 million SunTrust Revolving Credit Facility related to our consolidated subsidiary NJIN at June 30, 2020 .

We had no balance under our $ 195.0 million Barclays Revolving Credit Facility at September 30, 2020 and have reserved $ 6.3 million for certain letters of credit.

The remaining $ 188.7 million of our Barclays Revolving Credit Facility was available to draw upon as of September 30, 2020.

We had no balance under our $ 30.0 million SunTrust Revolving Credit Facility related to our consolidated subsidiary NJIN at September 30, 2020.

Senior Secured Credit Facilities

Barclays Credit Facilities:

At September 30, 2020, (a) our Barclays credit facilities were comprised of one tranche of term loans (“First Lien Term Loans”) and a revolving credit facility of $ 195.0 million (the “Barclays Revolving Credit Facility”) and (b) our SunTrust credit facilities, which relate to our consolidated subsidiary NJIN, were comprised of one term loan (the "SunTrust Term Loan") and a revolving credit facility of $ 30.0 million (the "SunTrust Revolving Credit Facility").

As of September 30, 2020, we were in compliance with all covenants under our credit facilities.

Deferred financing costs at September 30, 2020, net of accumulated amortization, was $ 1.9 million and is specifically related to our Barclays Revolving Credit Facility.

Our First Lien Term Loans bear interest at either an Adjusted Eurodollar Rate or a Base Rate, plus an applicable margin according to the following schedule:

First Lien Leverage Ratio Eurodollar Rate Spread Base Rate Spread

> 5.50x 4.50 % 3.50 %

> 4.00x but ≤ 5.50x 3.75 % 2.75 %

>3.50x but ≤ 4.00x 3.50 % 2.50 %

≤ 3.50x 3.25 % 2.25 %

At September 30, 2020 the effective Adjusted Eurodollar Rate and the Base Rate for the First Lien Term Loans was 1.00 % and 3.25 %, respectively and the applicable margin for Adjusted Eurodollar Rate and Base Rate borrowings was 3.75 % and 2.75 %, respectively.

The First Lien Credit Agreement provides for quarterly payments of principal under the First Lien Term Loans in the amount of approximately $ 9.7 million.

The First Lien Term Loans will mature on July 21, 2023 unless otherwise accelerated under the terms of the First Lien Credit Agreement.

SunTrust Credit Facilities:

Our SunTrust Term Loan bears interest at either an Adjusted Eurodollar Rate or a Base Rate, plus an applicable margin according to the following schedule:

Pricing Level Leverage Ratio Applicable Margin for Eurodollar Loans Applicable Margin for Base Rate Loans Applicable Margin for Letter of Credit Fees Applicable Percentage for Commitment Fee

I Greater than or equal to 3.00 :1.00

II Less than 3.00 :1.00 but greater than or equal to 2.50 :1.00

III Less than 2.50 :1.00 but greater than or equal to

IV Less than 2.00 :1.00 but greater than or equal to 1.50 :1.00

V Less than 1.50 :1.00

The loans and other obligations outstanding under the SunTrust Restated Credit Agreement currently bear applicable margin and fees based on Pricing Level III described above.

The loans outstanding under the SunTrust Restated Credit Agreement currently bear interest based on a three month Eurodollar election of 2.00 %, plus the applicable margin.

The scheduled amortization of the SunTrust Term Loan began December 31, 2018 with quarterly payments of $ 0.8 million, representing annual amortization equal to 5.00 % of the original principal amount of the SunTrust Term Loan.

At scheduled intervals, the quarterly amortization increases by $ 0.4 million, with the remaining balance to be paid at maturity.

The SunTrust Term Loan will mature on August 1, 2023 unless otherwise accelerated under the terms of the SunTrust credit facility.

Revolving Credit Facilities

Barclays Revolving Credit Facility

Revolving loans borrowed under the Barclays Revolving Credit Facility bear interest at either an Adjusted Eurodollar Rate or a Base Rate plus an applicable margin.

Rates of the applicable margin for borrowing under the Revolving Credit Facility also change depending on our leverage ratio and are the same rates as noted in the schedule above for First Lien Term Loans.

As of September 30, 2020, the effective interest rate payable on revolving loans was 6.00 %.

Letters of credit issued under the Barclays Revolving Credit Facility, letter of credit fees accrue at the applicable margin of Adjusted Eurodollar Rate, currently 3.75 % , and fronting fees accrue at 0.25 % per annum, in each case on the average aggregate daily maximum amount available to be drawn under all letters of credit issued under the First Lien Credit Agreement.

In addition, a commitment fee of 0.50 % per annum accrues on the unused revolver commitments under the Revolving Credit Facility.

The Barclays Revolving Credit Facility will terminate on the earliest to occur of July 1, 2023 or its earlier termination to specific events of default pursuant to the First Lien Credit Agreement.

Our Barclays Revolving Credit Facility was amended in August 2020 to add $ 57.5 million of revolving commitments and extend the maximum borrowing capacity to $ 195.0 million.

Total issue costs added in relation to the eighth amendment amounted to approximately $ 0.7 million and was capitalized as deferred financing costs and will be amortized over the remaining term of the agreement.

SunTrust Revolving Credit Facility

Our SunTrust Revolving Credit Facility is available to NJIN for funding requirements, with an available borrowing limit of $ 30.0 million.

Revolving loan borrowed under the SunTrust Revolving Credit Facility bear interest at either an Adjusted Eurodollar Rate or a Base Rate plus an applicable margin.

Rates of the applicable margin for borrowing under the Revolving Credit Facility also change depending on our leverage ration and are the same rates noted in the schedule above for the SunTrust Term Loan.

The SunTrust Revolving Credit Facility terminates on August 31, 2023 unless all amounts outstanding otherwise have been declared or have automatically become due and payable (whether by acceleration or otherwise).

NJIN has not borrowed against the revolving credit line.

Recent Amendments to credit facilities:

Barclays Credit Facilities:

On August 28, 2020, RadNet, Inc.

entered into Amendment No.

8, Consent and Incremental Joinder Agreement to Credit and Guaranty Agreement "the Eighth Amendment".

The Eighth Amendment amends the First Lien Credit Agreement to add $ 57.5 million of revolving commitments to the Barclays Revolving Credit Facility extending the maximum borrowing capacity under the revolving credit facility to $ 195.0 million while leaving the maturity date of July 1, 2023 unchanged.

Total issue costs added in relation to the Eighth Amendment amounted to approximately $ 0.7 million and was capitalized as deferred financing costs and will be amortized over the remaining term of the agreement.

On April 18, 2019 we entered into the following two amendments to the First Lien Credit Agreement:

(i) Amendment No.

6, Consent and Incremental Joinder Agreement to Credit and Guaranty Agreement (the “Sixth Amendment”);

and (ii) Amendment No.

7 to Credit and Guaranty Agreement (the “Seventh Amendment”).

The Sixth Amendment amended the First Lien Credit Agreement to issue $ 100.0 million in incremental First Lien Term Loans and to add an additional $ 20.0 million of revolving commitments to the Barclay's Revolving Credit Facility.

The Seventh Amendment amended the First Lien Credit Agreement to extend the maturity date of the Barclays Revolving Credit Facility by an additional two years to July 1, 2023, unless sooner terminated in accordance with the terms of the First Lien Credit Agreement.

Total issue costs added in relation to the Sixth and Seventh amendments in 2019 amounted to approximately $ 4.4 million.

Of this amount, $ 2.1 million was identified and capitalized as discount on debt, $ 0.7 million was capitalized as deferred financing costs, and $ 1.6 million was expensed.

Amounts capitalized will be amortized over the remaining term of the agreement.

Paycheck Protection Program

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The funds are administered by the Small Business Administration (SBA), through approved lenders and do not require collateral or personal guarantees.

We received our loans based on being a Medicare

We received our loans based on being a Medicare provider.

The terms and conditions for participation require entities to certify that economic uncertainty related to the COVID-19 pandemic makes the loan necessary to support their current operations, and that they will use the funds to retain workers (e.g., by paying salaries, providing paid sick/medical leave and health insurance benefits) and pay certain debts (mortgage obligations) and expenses (e.g.

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Certain of our consolidated subsidiaries received four loans totaling $ 4.0 million.

We have accounted for the funds received as debt and recognize a liability for the full amount of proceeds received.

We have accounted for the funds received as debt and recorded a liability for the full amount of proceeds received.

Interest will be accrued over the term of the loans.

If we meet the eligibility requirements for forgiveness the amounts forgiven will be recognized in the income statement as a gain on loan extinguishment in accordance with accounting guidance.

The following relates to our Barclays financing activities:

2019 Amendments to the First Lien Credit Agreement:

On April 18, 2019 we entered into the following two new amendments to the First Lien Credit Agreement:

(i) Amendment No.

6, Consent and Incremental Joinder Agreement to Credit and Guaranty Agreement dated as of April 18, 2019 (the “Sixth Amendment”);

and (ii) Amendment No.

7 to Credit and Guaranty Agreement dated as of April 18, 2019 (the “Seventh Amendment”).

The Seventh Amendment amends the First Lien Credit Agreement to extend the maturity date of the Barclays Revolving Credit Facility by an additional two years to July 1, 2023, unless sooner terminated in accordance with the terms of the First Lien Credit Agreement.

Total issue costs added in relation to the amendments in 2019 amounted to approximately $ 4.4 million .

Of this amount, $ 2.1 million was identified and capitalized as discount on debt, $ 0.7 million was capitalized as deferred financing costs, and $ 1.6 million was expensed.

Amounts capitalized will be amortized over the remaining term of the agreement.

Terms of Barclays Credit Facilities:

First Lien Term Loans:

First Lien Term Loans bear interest at either an Adjusted Eurodollar Rate or a Base Rate plus an applicable margin.

Rates of the applicable margin for borrowing under the First Lien Credit Agreement will alter depending on our leverage ratio, according to the following schedule:

First Lien Leverage Ratio

Eurodollar Rate Spread

Base Rate Spread

> 4.00x but ≤ 5.50x

>3.50x but ≤ 4.00x

At June 30, 2020 the effective Adjusted Eurodollar Rate and the Base Rate for the First Lien Term Loans was 1.00 % and 3.25 % , respectively and the applicable margin for Adjusted Eurodollar Rate and Base Rate borrowings was 3.75 % and 2.75 % , respectively.

The First Lien Credit Agreement provides for quarterly payments of principal under the First Lien Term Loans in the amount of approximately $ 9.7 million .

Maturity Date.

The maturity date for the First Lien Term Loans shall be on the earliest to occur of (i) July 1, 2023, and (ii) the date on which all First Lien Term Loans shall become due and payable in full under the First Lien Credit Agreement, whether by acceleration or otherwise.

Additional Borrowing.

Under the First Lien Credit Agreement, we can elect to request (i) an increase to the existing Barclays Revolving Credit Facility and/or (ii) issue additional First Lien Term Loans, provided that the aggregate amount of such increases and additions does not exceed (a) $ 100.0 million and (b) as long as the First Lien Leverage Ratio (as defined in the First Lien Credit Agreement) would not exceed 4.00:1.00 after giving effect to such incremental facilities, an uncapped amount of incremental facilities, in each case subject to the conditions and limitations set forth in the First Lien Credit Agreement.

Each lender approached to provide all or a portion of any incremental facility may elect or decline, in its sole discretion, to provide an incremental commitment or loan.

Barclays Revolving Credit Facility:

Revolving loans borrowed under the Revolving Credit Facility bear interest at either an Adjusted Eurodollar Rate or a Base Rate plus an applicable margin.

As of June 30, 2020 , the effective interest rate payable on revolving loans was 6.00 % .

Letters of Credit:

For letters of credit issued under the Revolving Credit Facility, letter of credit fees accrue at the applicable margin of Adjusted Eurodollar Rate, currently 3.75 % , and fronting fees accrue at 0.25 % per annum, in each case on the average aggregate daily maximum amount available to be drawn under all letters of credit issued under the First Lien Credit Agreement.

In addition a commitment fee of 0.50 % per annum accrues on the unused revolver commitments under the Revolving Credit Facility.

Maturity Date:

The Revolving Credit Facility will terminate on the earliest to occur of (i) July 1, 2023, (ii) the date we voluntarily agree to permanently reduce the Revolving Credit Facility to zero pursuant to section 2.13(b) of the First Lien Credit Agreement, and (iii) the date the Revolving Credit Facility is terminated due to specific events of default pursuant to section 8.01 of the First Lien Credit Agreement.

The following relates to our SunTrust financing activities:

Amended and Restated Revolving Credit and Term Loan Agreement

On August 31, 2018, our subsidiary, NJIN, entered into the Amended and Restated Revolving Credit and Term Loan Agreement (as amended, the "SunTrust Restated Credit Agreement") as borrower with SunTrust Bank and other financial institutions as lenders and to provide NJIN aggregate credit facilities of $ 90.0 million as categorized below:

SunTrust Term Loan:

Pursuant to the SunTrust Restated Credit Agreement, the lenders thereunder made a term loan to NJIN in the amount of $ 60.0 million .

The SunTrust Term Loan is repayable in scheduled quarterly amounts (as described below) and has a maturity date of the earlier of (i) August 31, 2023 and (ii) the date on which the principal amount of the SunTrust Term Loan has been declared or automatically has become due and payable (whether by acceleration or otherwise).

SunTrust Revolving Credit Facility:

The SunTrust Restated Credit Agreement establishes a $ 30.0 million revolving credit facility available to NJIN for funding requirements.

The SunTrust Revolving Credit Facility terminates on the earliest of (i) August 31, 2023, (ii) the voluntary termination thereof by NJIN pursuant to Section 2.8 of the SunTrust Restated Credit Agreement, or (iii) the date on which all amounts outstanding under the SunTrust Restated Credit Agreement have been declared or have automatically become due and payable (whether by acceleration or otherwise).

NJIN has not borrowed against the revolving credit line.

Interest rates and fees of the applicable margin for borrowing under the SunTrust Restated Credit Agreement adjust depending on our leverage ratio, according to the following table:

Pricing Level

Leverage Ratio

Applicable Margin for Eurodollar Loans

Applicable Margin for Base Rate Loans

Applicable Margin for Letter of Credit Fees

Applicable Percentage for Commitment Fee

Greater than or equal to 3.00:1.00

Less than 3.00:1.00 but greater than or equal to 2.50:1.00

Less than 2.50:1.00 but greater than or equal to

Less than 2.00:1.00 but greater than or equal to 1.50:1.00

Less than 1.50:1.00

The loans and other obligations outstanding under the SunTrust Restated Credit Agreement currently bear applicable margin and fees based on Pricing Level III described above.

The loans outstanding under the SunTrust Restated Credit Agreement currently bear interest based on a three month Eurodollar election of 1.45 % , plus the applicable margin.

The scheduled amortization of the SunTrust Term Loan began December 31, 2018 with quarterly payments of $ 0.8 million , representing annual amortization equal to 5.00 % of the original principal amount of the SunTrust Term Loan.

At scheduled intervals, the quarterly amortization increases by $ 0.4 million , with the remaining balance to be paid at maturity.

NOTE 6 – STOCK-BASED COMPENSATION

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Stock options generally vest over 3 to 5 years and expire 5 to 10 years from the date of grant.

As of June 30, 2020 , we had outstanding options to acquire 527,899 shares of our common stock, of which options to acquire 298,863 shares were exercisable.

The following summarizes all of our option transactions for the six months ended June 30, 2020 :

As of September 30, 2020, we had outstanding options to acquire 527,899 shares of our common stock, of which options to acquire 298,863 shares were exercisable.

The following summarizes all of our option transactions for the nine months ended September 30, 2020:

Outstanding Options

Under the 2006 Plan

Weighted Average

Under the 2006 Plan Shares Weighted Average

Exercise price

Per Common Share

Weighted Average

Per Common Share Weighted Average

Contractual Life

(in years) Aggregate

Balance, December 31, 2019 478,951 $ 8.21

Balance, June 30, 2020

Exercisable at June 30, 2020

Aggregate intrinsic value in the table above represents the total pretax intrinsic value (the difference between our closing stock price on June 30, 2020 and the exercise price, multiplied by the number of in-the-money options as applicable) that would have been received by the holder had all holders exercised their options on June 30, 2020 .

No options were exercised during the six months ended June 30, 2020 .

As of June 30, 2020 , total unrecognized stock-based compensation expense related to non-vested employee awards was $ 0.9 million which is expected to be recognized over a weighted average period of approximately 1.85 years .

Granted 48,948 20.43

Balance, September 30, 2020 527,899 9.34 6.59 $ 3,419,956

Exercisable at September 30, 2020 298,863 7.48 5.85 2,353,438

Aggregate intrinsic value in the table above represents the total pretax intrinsic value (the difference between our closing stock price on September 30, 2020 and the exercise price, multiplied by the number of in-the-money options as applicable) that would have been received by the holder had all holders exercised their options on September 30, 2020.

No options were exercised during the nine months ended September 30, 2020.

As of September 30, 2020, total unrecognized stock-based compensation expense related to non-vested employee awards was $ 0.7 million which is expected to be recognized over a weighted average period of approximately 1.68 years.

DeepHealth Options

During the second quarter of fiscal 2020, in connection with the completion of the DeepHealth acquisition, we granted 412,434 options at a grant date fair value of $ 16.93 per share unit to DeepHealth employees in replacement of their stock options that were outstanding as of the closing date.

As of June 30, 2020 , total unrecognized stock based compensation expense related to non-vested DeepHealth options was approximately $ 5.0 million which is expected to recognized over a weighted average period of approximately 2.82 years .

As of September 30, 2020, total unrecognized stock based compensation expense related to non-vested DeepHealth options was approximately $ 4.3 million which is expected to be recognized over a weighted average period of approximately 2.53 years.

Outstanding Options

Under the Deep Health Plan

Weighted Average

Under the Deep Health Plan Shares Weighted Average

Exercise price

Per Common Share

Weighted Average

Per Common Share Weighted Average

Contractual Life

(in years) Aggregate

Balance, December 31, 2019 —

Granted, June 1, 2020 412,434 $ —

Balance, June 30, 2020

Exercisable at June 30, 2020

Exercised ( 6,963 ) —

Balance, September 30, 2020 405,471 — 8.65 $ 6,223,980

Exercisable at September 30, 2020 24,211 — 8.65 371,639

Restricted Stock Awards

The Restated Plan permits the award of restricted stock awards (“RSA’s”).

As of June 30, 2020 , we have issued a total of 6,539,393 RSA’s of which 319,659 were unvested at June 30, 2020 .

The following summarizes all unvested RSA’s activities during the six months ended June 30, 2020 :

Weighted-Average

As of September 30, 2020, we have issued a total of 6,551,872 RSA’s of which 331,659 were unvested at September 30, 2020.

The following summarizes all unvested RSA’s activities during the nine months ended September 30, 2020:

RSA's Weighted-Average

Term (Years) Weighted-Average

RSA's unvested at December 31, 2019 387,934 $ 11.61

Changes during the period

RSA's unvested at June 30, 2020

Granted 457,596 $ 19.66

Vested ( 513,871 ) $ 15.47

RSA's unvested at September 30, 2020 331,659 1.11 $ 16.67

We determine the fair value of all RSA’s based on the closing price of our common stock on the award date.

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These awards are valued and expensed based on the closing price of our common stock on the date of award.

During the six months ended June 30, 2020 awards totaling 1,078 shares were granted.

In summary, of the 14,000,000 shares of common stock reserved for issuance under the Restated Plan, at June 30, 2020 , we had issued 15,359,316 total shares between options, RSA’s and other stock awards.

During the nine months ended September 30, 2020 awards totaling 26,078 shares were granted.

In summary, of the 14,000,000 shares of common stock reserved for issuance under the Restated Plan, at September 30, 2020, we had issued 15,384,316 total shares between options, RSA’s and other stock awards.

With options canceled and RSA’s forfeited amounting to 3,281,040 and 61,703 shares, respectively, there remain 1,958,427 shares available under the Restated Plan for future issuance.

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NOTE 7 – SUBSEQUENT EVENTS

Acquisitions:

On May 15,2020 , we agreed to acquire certain assets of AZ-Tech Radiology & Open MRI, LLC, consisting of 8 multi-modality imaging centers located in the Phoenix, Arizona area for purchase consideration of $ 4.0 million .

We expect the transaction to close August 31, 2020.

The assets will be acquired from Whiterabbit.ai Inc., a company in which we hold an equity investment.

Collaborative Agreement:

On August 6, 2020, RadNet and Hologic, Inc.

announced a comprehensive collaboration to improve breast cancer care, including the co-development of Artificial Intelligence tools, data-sharing and an upgrade of RadNet’s fleet of Hologic mammography units to cutting-edge technology.

Hologic, Inc.

is a medical technology company primarily focused on improving women’s health and well-being through early detection and treatment.

Formation of majority owned subsidiary

On November 1, 2020 we formed in conjunction with Simi Valley Hospital and Health Services ("Simi Adventist") the Simi Valley Imaging Group, LLC (“SVIG”), consisting of three multi-modality imaging centers located in Simi Valley, CA.

RadNet will hold a 60 % economic interest in SVIG and Simi Adventist will have the remaining 40 % interest.

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-Q

Item 1. Financial Statements