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Item 7. Management’s Discussion and Analysis

2021-03-16 compared with 2020-03-16 · 282 added, 311 removed, 300 unchanged (66% of the section changed)

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We have developed our medical imaging business through a combination of organic growth, acquisitions and joint venture formations, and derive substantially all of our revenue from fees charged for the diagnostic imaging services performed at our facilities.

In 2019, we expanded our presence in the Kern County, California area with the acquisition of Kern Radiology in Bakersfield.

Combined with our already established presence, we are now a leading imaging operator in the greater Bakersfield, California area.

We made additional acquisitions and formed partnerships to strengthen our positions in California, New York and New Jersey.

Turning our focus to our imaging technology and work-flow processes, we have increased our efforts in Artificial Intelligence (AI) by acquiring the remaining 75% that we did not already own in Nulogix, Inc.

and formed a partnership with Whiterabbit.ai to use AI and other technologies to create new solutions for breast cancer imaging.

During 2020, facing the novel strain of the coronavirus ("COVID-19"), we began experiencing reduced procedure volumes at the end of the first quarter which intensified through mid year but did return to 90% of pre-COVID-19 pace in the third quarter and remained consistent throughout the fourth quarter.

To respond to the pandemic during the year we adjusted our business operations, inclusive of concentrating patient traffic to larger imaging centers, negotiating payment terms with vendors and landlords, initiating employee furloughs, compensation reductions, and telecommuting.

The arrival of the mRNA vaccine to protect against the virus is a welcome development.

As inoculations ramp up across the country and other mitigation procedures continue, we can begin to look forward to a return of normal business operations.

Despite the impact of COVID, we continued to invest and position for future growth.

We continued to grow through acquisition, being a new entrant in Arizona marketplace and on the east coast adding to our presence in New Jersey and the New York city area.

In our related businesses we increased our focus on Artificial Intelligence with our acquisition of DeepHealth Inc.

while exiting our Imaging on Call teleradiology operations.

The following table shows our facilities in operation at year end and revenues for the years ended December 31, 2020, 2019 and 2018:

Years Ended December 31,

2020 2019 2018

Facilities in operation 331 335 344

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In addition, our experience with capitation arrangements over the last several years has provided us with the expertise to manage utilization and pricing effectively, resulting in a predictable stream of revenue.

Our service fee revenue, net of contractual allowances and discounts, the provision for bad debts, and revenue under capitation arrangements for the years ended December 31, are summarized in the following table (in thousands):

Our service fee revenue, net of contractual allowances and discounts, implicit price concessions, and revenue under capitation arrangements for the years ended December 31, are summarized in the following table (in thousands):

Years Ended December 31,

2020 2019 2018

Commercial insurance $ 584,035 $ 642,341 $ 542,011

Medicare 217,928 237,427 192,881

Medicaid 25,619 28,283 25,615

Workers' compensation/personal injury 33,478 42,792 34,193

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Imaging on call and software 10,798 17,317 16,261

Service fee revenue, net of contractual allowances and discounts

Provision for bad debts

Net service fee revenue

Other 23,297 24,555 18,781

Service fee revenue 931,722 1,028,236 868,741

Revenue under capitation arrangements 140,118 125,943 106,405

Total net revenue

Total revenue $ 1,071,840 $ 1,154,179 $ 975,146

We typically experience some seasonality to our business.

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Years Ended December 31,

2020 2019 2018

MRI 293 288 273

CT 175 168 162

PET/CT 67 62 59

Mammography 315 303 289

Ultrasound 689 662 632

X-ray 376 343 308

Nuclear Medicine 57 50 53

Fluoroscopy 117 120 117

Total equipment 2,089 1,996 1,893

Facility Acquisitions, Equity Investments and Formation of Joint Ventures

Facility Acquisitions, Dispositions, Equity Investments and Formation of Joint Ventures

The following discussion summarizes certain details concerning our acquisition or disposition of facilities, our equity investment and our joint venture transaction.

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Facility acquisitions

In October and November 2020, we completed our acquisition of certain assets of ZP Atlantic LLC, and ZP Elmhurst LLC.

We made a fair value determination of the acquired assets and assumed liabilities and the following were recorded (in thousands):

ZP Atlantic ZP Elmhurst

Property and Equipment $ 7,931 $ 10,681

Right of Use Assets 6,181 12,571

Other Assets 62 75

Intangible Assets 50 50

Right of Use Liabilities (6,181) (12,571)

Goodwill 828 1,463

TOTAL $ 8,871 $ 12,269

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 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.

As initial purchase consideration, we issued 915,132 shares at $16.93 per share (823,615 issued at execution, with up to 91,517 shares to be issued 18 months after acquisition subject to adjustment for any indemnification claims).

The transaction was accounted for as an acquisition of a business and total purchase consideration determined to be approximately $34.6 million including i) 823,615 shares issued on the date of closing with fair value of $13.9 million, ii) a liability of 91,517 shares with a fair value of $1.5 million to be issued 18 months after acquisition subject to adjustment for any indemnification claims and will be marked to market in subsequent periods, iii) replacement awards attributable to pre-combination service issued to DeepHealth option holders with allocated fair value of $2.0 million, iv) acquisition date fair value of contingent consideration of $17.0 million and v) $0.1 million in closing costs reimbursed to the seller.

The fair values of replacement awards attributable to pre-combination service and contingent consideration are recorded in additional paid in capital upon closing of the transaction.

For the contingent consideration, there are three arrangements that will be settled in a fixed number of shares upon achievement of three individual specific milestones which are mutually exclusive of each other, with 390,789, 586,184, and 195,393 shares, respectively, issuable for each milestone arrangement.

The fair value of the contingent consideration was estimated at the date of acquisition based on our share price and estimated probability of the achievement of the respective milestones.

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 $23.3 million in goodwill.

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.

On March 2, 2020 our consolidated subsidiary New Jersey Imaging Networks ("NJIN") completed the acquisition of certain assets of MRI at Woodbridge, LLC consisting of a single multi-modality imaging center located in Avenel, New Jersey for cash consideration of $2.6 million.

NJIN made a fair value determination of the acquired assets and assumed liabilities and approximately $0.5 million in property and equipment, $1.1 million in right-of-use assets, $0.3 million in intangible assets, $1.1 million in operating lease liabilities, $0.1 million in finance lease liabilities, and $1.8 million in goodwill were recorded.

On January 2, 2020 we completed our acquisition of certain assets of Olney Open MRI, LLC, consisting of a single multi-modality imaging center located in Columbia, Maryland for cash consideration of $1.8 million.

We have made a fair value determination of the acquired assets and assumed liabilities and approximately $0.8 million in property and equipment, $1.3 million in right-of-use assets, $0.3 million in intangible assets, $1.3 million in operating lease liabilities and $0.6 million in goodwill were recorded.

On August 1, 2019 we completed a step-up acquisition upon the dissolution of our former 49% owned joint venture, Garden State Radiology LLC ("GSRN").

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GSRN became our wholly owned subsidiary with the withdrawal of the 51% majority partner for the full ownership of one center with no other consideration.

We made a fair value determination of our original 49% interest which resulted in a step-up gain of approximately

$1.3 million .

We determined a fair value of the remaining acquired imaging center of $3.1 million in assets and $426,000 in liabilities were recognized.

We recorded $1,000 in other assets, $679,000 in fixed assets, $426,000 in right-of-use assets, $426,000 in operating lease liabilities, and $2.0 million in goodwill.

We made a fair value determination of our original 49% interest which resulted in a step-up gain of approximately $1.3 million.

We determined a fair value of the remaining acquired imaging center of $3.1 million in assets and $0.4 million in liabilities were recognized.

We recorded $1.0 thousand in other assets, $0.7 million in fixed assets, $0.4 million in right-of-use assets, $0.4 million in operating lease liabilities, and $2.0 million in goodwill.

On August 1, 2019 we completed a step-up acquisition of our former 25% owned joint venture, Nulogix, via a stock issuance of RadNet common shares valued at $1.5 million to obtain the remaining 75% outstanding Nulogix shares.

We made a fair value determination of the acquired assets and approximately $189,000 in fixed assets, $732,000 in intangible assets, $278,000 in deferred tax liability and goodwill of $1.3 million were recorded.

We also made a fair value determination of our 25% pre-existing interest in the business and recognized a loss of $504,000 which is included in operating expenses within the consolidated statements of operations.

We made a fair value determination of the acquired assets and approximately $0.2 million in fixed assets, $0.7 million in intangible assets, $0.3 million in deferred tax liability and goodwill of $1.3 million were recorded.

We also made a fair value determination of our 25% pre-existing interest in the business and recognized a loss of $0.5 million which is included in operating expenses within the consolidated statements of operations.

On April 1, 2019 we completed our acquisition of certain assets of Kern Radiology Imaging Systems Inc., consisting of four multi-modality imaging centers located in Bakersfield, California for purchase consideration of $19.3 million.

We made a fair value determination of the acquired assets and assumed liabilities and approximately $10.1 million in property and equipment, $9.7 million in right-of-use assets, $36,000 in other assets, $3.4 million in intangible assets, $14.5 million in operating lease liabilities, and $10.5 million in goodwill were recorded.

We made a fair value determination of the acquired assets and assumed liabilities and approximately $10.1 million in property and equipment, $9.7 million in right-of-use assets, $36.0 thousand in other assets, $3.4 million in intangible assets, $14.5 million in operating lease liabilities, and $10.5 million in goodwill were recorded.

On April 1, 2019 we completed our acquisition of certain assets of Zilkha Radiology Inc.

consisting of two multi-modality centers located in Islip, New York for purchase consideration of $4.5 million.

We made a fair value determination of the acquired assets and assumed liabilities and approximately $2.2 million in property and equipment, $5.1 million in right-of-use assets, $100,000 in intangible assets, $5.1 million in operating lease liabilities, $332,000 in finance lease liabilities and $2.6 million in goodwill were recorded.

We made a fair value determination of the acquired assets and assumed liabilities and approximately $2.2 million in property and equipment, $5.1 million in right-of-use assets, $0.1 million in intangible assets, $5.1 million in operating lease liabilities, $0.3 million in finance lease liabilities and $2.6 million in goodwill were recorded.

On February 28, 2019, one of our Variable Interest Entities (VIEs), Lenox Hill Radiology and Medical Imaging Associates, P.C.

("LHR"), purchased the membership interest of Hudson Valley Radiology Associates, P.L.L.C.

("HVRA") for $6.0 million of RadNet common stock and contingent consideration valued at $680,000 to guarantee the share value issued for a period of six months post acquisition date.

LHR has performed a fair value purchase price allocation and recorded equipment of $10,000 , a covenant not to compete of $50,000 , trade name of $380,000 , other intangible assets of $340,000 and goodwill of $3.1 million from the transaction.

("HVRA") for $6.0 million of RadNet common stock and contingent consideration valued at $0.7 million to guarantee the share value issued for a period of six months post acquisition date.

LHR has performed a fair value purchase price allocation and recorded equipment of $10.0 thousand, a covenant not to compete of $50.0 thousand, trade name of $0.4 million, other intangible assets of $0.3 million and goodwill of $3.1 million from the transaction.

In connection with the acquisition, RadNet also settled against the purchase consideration, $2.8 million, net of taxes, of an unfavorable vendor contract with HVRA stemming from the previous acquisition of Radiologix, Inc.

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On February 1, 2019, our majority owned subsidiary, West Valley Imaging Group, LLC ("WVIG") completed its acquisition of certain assets of West Valley Imaging Center, LLC ("West Valley"), consisting of a single multi-modality imaging center located in West Hills, CA for purchase consideration of $3.0 million all of which was initially funded by the Company.

We have made a fair value determination of the acquired assets and approximately $300,000 in equipment and fixed assets, $7,000 in other assets, $200,000 in intangible assets and $2.5 million in goodwill were recorded.

Subsequent to the transaction, our partner in WVIG, Cedars Sinai Medical Center, contributed $750,000 in cash to maintain its 25% economic interest in the venture.

On December 3, 2018 we completed our acquisition of certain assets of Orange County Diagnostics Imaging Center consisting of five multi-modality imaging centers located in Orange County, California for purchase consideration of $6.6 million.

We have made a fair valuation determination of the acquired assets and approximately $23,000 of current assets, $69,000 of other assets, $2.8 million of leaseholds and equipment, a $50,000 of covenant not to compete, and $3.6 million of goodwill were recorded.

On November 5, 2018 we completed our acquisition of certain assets of Arcadia Radiology Imaging consisting of one multi-modality imaging center and one women’s center located in Arcadia, California for purchase consideration of $3.8 million.

We have made a fair value determination of the acquired assets and approximately $20,000 of other assets, $819,000 of leaseholds, $80,000 equipment, $300,000 in covenants not to compete, and $2.6 million of goodwill were recorded.

On November 1, 2018 we completed our acquisition of certain assets of Southern California Diagnostic Imaging consisting of a multi-modality imaging center located in Santa Ana, California for purchase consideration of $1.4 million.

We have made a fair value determination of the acquired assets and approximately $18,000 of other assets, $1.2 million of leasehold improvements, $110,000 of equipment, $50,000 of covenants not to compete, and $41,000 of goodwill were recorded.

On October 1, 2018 we obtained control over the operations of New Jersey Imaging Network (NJIN), formerly a joint venture, consisting of eighteen multi-modality imaging centers located throughout the state of New Jersey for no consideration through an agreement with the other equity interest holder.

The change in control was effective upon the execution of an Irrevocable Proxy Agreement with the joint venture partner and third amendment of the operating agreement, which provided RadNet with the ability to make unilateral operating decisions.

We have made a fair value determination of the acquired net assets and

approximately $11.6 million of net working capital, $235,000 of other assets, $34.4 million of property and equipment, $582,000 of trade name.

$106.1 million of goodwill, $1.0 million in net unfavorable lease contracts, $5.2 million of assumed equipment debt, and $60.0 million of assumed bank debt were recorded.

We also made a fair value determination of our 49% pre existing interest in the business of approximately $42.5 million and we recognized fair value of non controlling interest of $44.3 million on the date of the transaction.

The re-measurement in valuation from an existing equity investment in joint venture resulted in a gain of $39.5 million which is included in Other Income within the consolidated statements of operations.

On October 1, 2018 we acquired certain assets of Medical Arts Radiology consisting of a 10 multi-modality imaging centers located in Long Island, New York.

Total purchase consideration of $59.6 million consisted of cash in the amount of $50.9 million, issuance of 531,560 RadNet common shares valued at $8.0 million on the acquisition date and contingent consideration valued at $739,000 to guarantee the share value issued for a period of twelve months post acquisition date.

We also assumed $2.7 million in equipment debt.

We have made a value determination of the acquired assets and approximately $2.7 million of net working capital, $224,000 of other assets, $16.0 million of property and equipment, $24,000 in a covenant not to compete, $1.4 million for its trade name, unfavorable lease contracts of $130,000 and $40.7 million of goodwill were recorded.

On September 1, 2018 we completed our acquisition of certain assets of Washington Heights Medical Management, LLC, consisting of a multi-modality imaging center located in New York, New York, for $3.3 million in cash.

We have made a fair value determination of the acquired assets and approximately $43,000 other assets, $904,000 of leaseholds and equipment, $50,000 in a covenant not to compete, and $2.3 million of goodwill were recorded.

On April 1, 2018 we completed our acquisition of certain assets of Women’s Imaging Specialists in Healthcare, consisting of a single multi-modality center located in the city of Fresno California, for purchase consideration of $5.1 million in cash.

We have made a fair value determination of the acquired assets and approximately $636,000 of fixed assets and equipment, $143,000 in intangible covenants not to compete, $53,000 in intangible trade name, and $4.3 million in goodwill were recorded.

On April 1, 2018 we completed our acquisition of certain assets of Valley Metabolic Imaging LLC, consisting of a single multi-modality center located in Fresno, California, for purchase consideration of $1.7 million in cash.

We have made a fair value determination of the acquired assets and approximately $ 22,000 of fixed assets and equipment, $183,000 in intangible covenants not to compete, and $1.5 million in goodwill were recorded.

On April 1, 2018 we completed our acquisition of certain assets of Sierra Imaging Associates LLC, consisting of a single multi-modality center located in Clovis, California, for purchase consideration of $1.5 million in cash.

We have made a fair value determination of the acquired assets and approximately $270,000 of fixed assets and equipment, $83,000 in intangible covenants not to compete, and $1.1 million in goodwill were recorded.

On February 22, 2018 we completed our acquisition of certain assets of Imaging Services Company of New York, LLC, consisting of a single multi-modality center located in New York, New York, for purchase consideration of $5.8 million.

We have made a fair value determination of the acquired assets and approximately $3.0 million in fixed asset and equipment, a $100,000 covenant not to compete, and $2.7 million in goodwill were recorded.

On January 1, 2018 we formed Beach Imaging Group, LLC (“Beach Imaging”) and contributed the operations of 24 imaging facilities spread across southern Los Angeles and Orange Counties.

On the same day, MemorialCare Medical Foundation contributed $22.3 million in cash, $7.6 million in fixed assets, $7.4 million in equipment, and $545,000 in goodwill.

As part of the formation, the Beach Imaging assumed $4.0 million in capital lease debt.

As a result of the transaction, the Company will retain a 60% controlling interest in Beach Imaging and MemorialCare Medical Foundation will retain a 40% noncontrolling interest in Beach Imaging.

We have made a fair value determination of the acquired assets and approximately $0.3 million in equipment and fixed assets, $7.0 thousand in other assets, $0.2 million in intangible assets and $2.5 million in goodwill were recorded.

Subsequent to the transaction, our partner in WVIG, Cedars Sinai Medical Center, contributed $0.8 million in cash to maintain its 25% economic interest in the venture.

On June 1, 2020 we completed our sale of certain assets of our Imaging On Call subsidiary for approximately $1.0 thousand.

With this transaction, we have exited the teleradiology business.

Equity Investments

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

On March 24, 2017, we acquired an initial 12.50% equity interest in Medic Vision - Imaging Solutions Ltd for $1.0 million.

We also received an option to exercise warrants to acquire up to an additional 12.50% equity interest for $1.4 million within one year from the initial share purchase date, if exercised in full.

On March 1, 2018 we exercised our warrant in part and acquired an additional 1.96% for $0.2 million.

Our initial equity interest has been diluted to 12.25% and our total equity investment stands at 14.21%.

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 observable price changes or impairment in our investment was noted as of the year ended December 31, 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 $143,000 that converted to an additional 80,000 preferred shares on October 11, 2019.

No impairment in our investment was noted for the year ended December 31, 2019 .

No observable price changes or impairment in our investment was noted for the year ended December 31, 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.

On November 5, 2019 we acquired an equity interest in the company for $1.0 million and also loaned the company $2.5 million in support of its operations.

No impairment in our investment was noted for the year ended December 31, 2019 .

No observable price changes or impairment in our investment was noted for the year ended December 31, 2020.

Formation of new joint ventures

Effective November 1 2020, Arizona Diagnostic Radiology Group LLC ("ADRG"), an entity we formed in conjunction with CHI National Services Inc.

("CHI"), assumed operational and managerial oversight of our Arizona centers.

We hold a 49% economic interest and CHI holds 51% economic interest in ADRG and we account for the venture under the equity method.

The entity was formed in part to leverage CHI's established presence in the Phoenix, Arizona market as a major health care provider.

On February 13, 2019 we formed a wholly owned subsidiary, Ventura County Imaging Group, LLC ("VCIG").

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For its contribution, RadNet transferred net assets of three wholly owned multi-modality imaging centers.

Dignity Health contributed approximately $800,000 in assets to acquire 5% economic interest and paid RadNet $5.3 million for an additional 35% economic interest.

Dignity Health contributed approximately $0.8 million in assets to acquire 5% economic interest and paid RadNet $5.3 million for an additional 35% economic interest.

We maintain controlling economic interest in VCIG and fully consolidate the results into our financial statements.

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RadNet accounts for our share of the venture under the equity method.

On January 1, 2019, CSMC purchased from us an additional five percent economic interest in SMIG valued at $134,000 .

On January 1, 2019, CSMC purchased from us an additional 5% percent economic interest in SMIG valued at $0.1 million.

As a result of the transaction, our economic interest in SMIG has been reduced to 35%.

We recorded a loss of $2,000 on the transaction.

We recorded a loss of $2.0 thousand on the transaction.

Change in control of existing joint ventures

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for cash consideration of $2.0 million.

On August 1, 2019 we completed via the issuance of RadNet common stock valued at $1.5 million , the acquisition of the remaining 75% economic interest and we now consolidate the financial statements of Nulogix.

On October 1, 2018, we obtained control over the operations of NJIN through an agreement with the other equity interest holder for no cash consideration.

As such, we consolidated the financial statements of NJIN effective that date.

The economic interest of each party remained the same after consolidation.

On August 1, 2019 we completed via the issuance of RadNet common stock valued at $1.5 million, the acquisition of the remaining 75% economic interest and we now consolidate the financial statements of Nulogix as a wholly owned subsidiary.

Results of Operations

The following table sets forth, for the periods indicated, the percentage that certain items in the statements of operations bears to net revenue for the years 2019 and 2018 and net revenue before provision for bad debts for the year 2017 .

The following table sets forth, for the periods indicated, the percentage that certain items in the statements of operations bears to net revenue for the years 2020, 2019 and 2018.

Years Ended December 31,

Service fee revenue, net of contractual allowances and discounts

Provision for bad debts

Net service fee revenue

2020 2019 2018

Service fee revenue 86.9 % 89.1 % 89.1 %

Revenue under capitation arrangements 13.1 % 10.9 % 10.9 %

Total net revenue

Total Revenue 100.0 % 100.0 % 100.0 %

Provider relief funding 2.5 % — % — %

OPERATING EXPENSES

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Depreciation and amortization 8.1 % 7.0 % 7.5 %

(Gain) loss on sale and disposal of equipment

Loss (gain) on sale and disposal of equipment 0.1 % 0.2 % (0.2) %

Loss on impairment 0.4 % — % 0.4 %

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Interest expense 4.3 % 4.2 % 4.5 %

Meaningful use incentive

Equity in earnings of joint ventures (0.7) % (0.7) % (1.2) %

Gain on re-measurement of pre-existing interest — % (0.1) % (4.1) %

Gain on sale of imaging centers and medical practice

Gain on return of common stock

Gain on extinguishment of debt (0.4) % — % — %

Other expenses — % 0.1 % — %

Total other expenses

Total other expenses (income) 3.4 % 3.5 % (0.8) %

INCOME BEFORE INCOME TAXES (0.1) % 2.6 % 4.0 %

Provision for income taxes

Benefit from (provision for) income taxes (0.1) % (0.5) % — %

NET INCOME (0.2) % 2.0 % 3.9 %

Net income attributable to noncontrolling interests 1.2 % 0.8 % 0.6 %

NET INCOME ATTRIBUTABLE TO RADNET, INC.

NET (LOSS) INCOME ATTRIBUTABLE TO RADNET, INC.

COMMON STOCKHOLDERS (1.4) % 1.3 % 3.3 %

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For the discussion below, same centers are those that were in continuous operation from January 1, 2019 through December 31, 2020.

Total Net Revenue

Year Ended December 31,

$ Increase/(Decrease)

Total Revenue inclusive of Provider Relief Funding for 2020

In Thousands Year Ended December 31,

Revenue 2020 2019 $ Increase/(Decrease) % Change

Total Revenue $1,098,104 $1,154,179 ($56,075) (4.9)%

Same Center Revenue $1,038,780 $1,093,317 ($54,537) (5.0)%

Higher same center revenue experienced for the period resulted from increased volume of advanced radiology modalities, with MRI, CT and PET procedures rising at 4.7%, 6.2% and 7.8% respectively over the same period last year.

Our procedure volumes for the year ended December 31, 2020 were affected by the COVID-19 pandemic, which precipitated an approximate 12.3% decrease in same center procedural volumes year over year.

Mitigating the income decline is $26.3 million received in Provider Relief funding, which, per the official designation of the program, was used to offset lost revenues and incremental expenses.

This comparison excludes revenue contributions from centers that were acquired or divested subsequent to January 1, 2019.

For the twelve months ended December 31, 2019 , net service fee revenue from centers that were acquired or divested subsequent to January 1, 2018 and excluded from the above comparison was $182.6 million .

For the twelve months ended December 31, 2020, net service fee revenue from centers

that were acquired or divested subsequent to January 1, 2019 and excluded from the above comparison was $59.3 million.

For the twelve months ended December 31, 2019, net service fee revenue from centers that were acquired or divested subsequent to January 1, 2019 and excluded from the above comparison was $60.9 million.

Operating Expenses

Cost of operations for the twelve months ended December 31, 2019 increased approximately $139.3 million , or 14.7% , from $944.3 million for the twelve months ended December 31, 2018 to $1.1 billion for the twelve months ended December 31, 2019 .

As a percentage of net revenue, operating expenses declined from 89% for the twelve months ended December 31, 2018 to approximately 87% for the twelve months ended December 31, 2019 .

Total operating expenses for the twelve months ended December 31, 2020 decreased approximately $21.9 million, or 2.0%, from $1.08 billion for the twelve months ended December 31, 2019 to $1.06 billion for the twelve months ended December 31, 2020.

The following table sets forth our cost of operations and total operating expenses for the twelve months ended December 31, 2020 and 2019 (in thousands):

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Other operating expenses *

208,993 204,332

Cost of operations 965,902 999,692

Depreciation and amortization 86,795 80,607

(Gain) loss on sale and disposal of equipment

Loss on sale and disposal of equipment 1,200 2,383

Loss on impairment 4,170 —

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Salaries and professional reading fees, excluding stock-based compensation and severance

Year Ended December 31,

Salaries and Professional Fees

$ Increase/(Decrease)

The rise in same center salaries and professional fees was precipitated by increased physician cost due to greater procedure volume and added personnel and existing employee wage and benefit increases in support of operations.

In Thousands Year Ended December 31,

Salaries and Professional Fees 2020 2019 $ Increase/(Decrease) % Change

Total $591,338 $634,179 ($42,841) (6.8)%

Same Center $561,720 $602,448 ($40,728) (6.8)%

The decrease in salaries expense was a result of staff furloughs and payroll reductions initiated in response to the COVID-19 crisis and later sustained by the implementation of efficiencies garnered from a review of operational workflows.

This comparison excludes expenses from centers that were acquired or divested subsequent to January 1, 2019.

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Stock-based compensation increased $3.7 million, or 42.1%, to approximately $12.4 million for the twelve months ended December 31, 2020 compared to $8.7 million for the twelve months ended December 31, 2019.

This increase was driven by the higher fair value of RSA’s awarded and vested in the year ended December 31, 2019 as compared to RSA’s awarded and vested in the same period in 2018.

This increase

was driven by the higher fair value of RSA’s awarded and vested in the year ended December 31, 2020 as compared to RSA’s awarded and vested in the same period in 2019.

Building and equipment rental

Year Ended December 31,

Building & Equipment Rental

$ Increase/(Decrease)

The increase in same center building and equipment rental expenses relates to new imaging centers, lease extensions at current centers, and radiology equipment leases to support increased scan volumes and expanded service offerings.

In Thousands Year Ended December 31,

Building & Equipment Rental 2020 2019 $ Increase/(Decrease) % Change

Total $108,202 $106,495 $1,707 1.6%

Same Center $99,483 $98,482 $1,001 1.0%

This comparison excludes expenses from centers that were acquired or divested subsequent to January 1, 2019.

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Medical supplies

Year Ended December 31,

Medical Supplies Expense

$ Increase/(Decrease)

Same center medical supplies increase was attributable to higher procedure volumes of advanced radiology modalities.

In Thousands Year Ended December 31,

Medical Supplies Expense 2020 2019 $ Increase/(Decrease) % Change

Total $44,964 $45,955 ($991) (2.2)%

Same Center $40,894 $42,384 $(1,490) (3.5)%

The drop in medical supplies expense was related to decreased use of contrast agents driven by volume reduction in our advanced imaging modalities of CT and PET, which were reduced a combined 10% year over year due to COVID-19.

This comparison excludes expenses from centers that were acquired or divested subsequent to January 1, 2019.

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Other operating expenses

Year Ended December 31,

Other Operating Expenses

$ Increase/(Decrease)

In Thousands Year Ended December 31,

Other Operating Expenses 2020 2019 $ Increase/(Decrease) % Change

Total $208,993 $204,332 $4,661 2.3%

Same Center $196,484 $190,398 $6,086 3.2%

The increase in other operating expenses relates to higher billing fees and charges for outside services.

This comparison excludes expenses from centers that were acquired or divested subsequent to January 1, 2019.

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Depreciation and amortization

Year Ended December 31,

Depreciation & Amortization

$ Increase/(Decrease)

The decrease in same center depreciation and amortization is primarily due to several of our assets completing their depreciation schedules subsequent to the end of our fourth quarter of 2018.

In Thousands Year Ended December 31,

Depreciation & Amortization 2020 2019 $ Increase/(Decrease) % Change

Total $86,795 $80,607 $6,188 7.7%

Same Center $81,337 $75,190 $6,147 8.2%

The increase in same center depreciation and amortization is primarily due to additional equipment and leasehold improvements placed in service in the twelve months ending December 31, 2020 compared to the same period in 2019.

This comparison excludes expenses from centers that were acquired or divested subsequent to January 1, 2019.

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Loss on sale and disposal of equipment

We recorded a loss on the sale of equipment of approximately $2.4 million for the twelve months ended December 31, 2019 and a gain on disposal of equipment of approximately $2.1 million for the twelve months ended December 31, 2018 .

We recorded a loss on the sale of equipment of approximately $1.2 million and $2.4 million for each of the twelve months ended December 31, 2020 and 2019, respectively.

Severance Costs

We incurred severance expenses of $1.6 million for the twelve months ended December 31, 2019 and $1.9 million for the twelve months ended December 31, 2018 .

We incurred total severance expense of $4.4 million and $1.6 million for each of the twelve months ended December 31, 2020 and 2019, respectively, an increase of $2.7 million or 168.9%, which was related to payroll reduction charges.

Impairment Charges

During the current year of 2020, we ceased employing certain indefinite lived trade names with a total value of $4.2 million and they were written off in full.

We recorded impairment charges to our Imaging On Call reporting unit of $3.9 million for the twelve months ended December 31, 2018, with goodwill representing $3.8 million of the total and the remainder being a write off the Imaging On Call trade name of approximately $100,000.

We did not record any impairment charges for the twelve months ended December 31, 2019 .

Interest expense

Year Ended December 31,

Interest Expense

$ Increase/(Decrease)

In Thousands Year Ended December 31,

Interest Expense 2020 2019 $ Increase/(Decrease) % Change

Total Interest Expense $45,882 $48,044 ($2,162) (4.5)%

Interest related to derivatives* $6,206 $(1,125)

Interest related to amortization** $4,413 $4,184

Adjusted Interest Expense*** $35,263 $44,985 $(9,722) (21.6)%

*Includes combined non cash amortization of deferred loan costs and discount on issuance of debt.

Excluding interest related to amortization, interest expense the twelve months ended December 31, 2019 compared to the twelve months ended December 31, 2018 increased $4.3 million or 11.0% .

The main drivers behind the increase were the interest payments on assumed debt of the New Jersey Imaging Network and the additional term loan debt stemming from the Sixth Amendment to the First Lien Term Loan.

*Includes interest on 2016 caps and 2019 swaps.

**Includes combined noncash amortization of deferred loan coasts and discount on issuance of debt

***Includes interest related to our term loans, revolving credit line,notes, finance leases and other

The reduction in interest expense solely paid on our debt and lease obligations corresponds to lowered variable LIBOR and Prime interest rates paid on our term loan and revolving debt in reaction to market conditions surrounding COVID-19.

See “Liquidity and Capital Resources” below for more details on our credit facilities.

To mitigate our future interest expense exposure the Company has entered into two forward interest rate cap agreements.

See Derivative Instruments section of Note 2 to the consolidated financial statements included in this annual report on Form 10-K and ITEM 7a, Quantitative and Qualitative Disclosure About Market Risk below for more details on our derivative transactions.

To mitigate our future interest expense exposure the Company has entered into a forward interest rate agreements.

See the Derivative Instruments section of Note 2 to the consolidated financial statements included in this annual report on Form 10-K and ITEM 7a, Quantitative and Qualitative Disclosure About Market Risk below for more details on our derivative transactions.

Equity in earnings from unconsolidated joint ventures

For the twelve months ended December 31, 2019 we recognized equity in earnings from unconsolidated joint ventures of $8.3 million versus $11.4 million for the twelve months ended December 31, 2018 , a decrease of $3.0 million or 26.6% .

The decrease was related to the assumption of operational control of the New Jersey Imaging Network which became a consolidated subsidiary on October 1, 2018.

For the twelve months ended December 31, 2020 we recognized equity in earnings from unconsolidated joint ventures of $7.9 million versus $8.3 million for the twelve months ended December 31, 2019, a decrease of $0.4 million or 4.9%, related to market conditions stemming from the COVID-19 pandemic.

Non-cash change in fair value of interest rate hedge

We recorded expense of approximately $2.5 million for the ineffective portion of our 2019 swaps for the year ended December 31, 2020.

See the Derivative Instruments section of Note 2 to the consolidated financial statements included in this annual report on Form 10-K.

Gain on re-measurement valuation of pre-existing interest

On August 1, 2019 we completed a step-up acquisition upon the dissolution of our former 49% owned joint venture, Garden State Radiology LLC ("GSRN").

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

instances, we made a fair value determination of our original interests, and recorded a step-up gain of approximately $1.3 million for the GSRN and recognized a a loss of $504,000 on our 25% pre-existing interest in Nulogix.

In sum we recorded a net gain on re-measurement of approximately $800,000 for the year ended December 31, 2019 on these transactions.

On October 1, 2018 we completed an step-up acquisition of New Jersey Imaging Network, formerly a joint venture.

The change in control was effective upon the execution of an agreement which provided RadNet with the ability to make unanimous operating decisions.

Upon a fair value determination of our 49% interest in the business of approximately $42.5 million, the step-up in valuation from an existing investment caused us to recognize a gain of $39.5 million for the year ended December 31, 2018.

Other expenses / income

For the year ended ended December 31, 2019 we recorded approximately $1.3 million of other expenses and for the year ended December 31, 2018 we recorded approximately $181,000 of other income, respectively.

In August of 2019 we completed step-up acquisitions of two of our then equity method joint ventures, Garden State Radiology and Nulogix.

Upon the fair value determination of our interests in both ventures, we recognized a step-up gain of $0.8 million for the year ended December 31, 2019.

Gain on extinguishment of debt

In December 2020, we met the eligibility requirements for forgiveness of loans received under The Paycheck Protection Program and recorded a gain on extinguishment of debt of approximately $4.0 million.

See Note 8 Credit Facilities and Notes Payable included in this annual report on Form 10-K.

Other expenses

For the years ended ended December 31, 2020 and December 31, 2019 we recorded approximately $0.1 million and $1.3 million of other expenses respectively.

Provision for income taxes

We had a tax provision for the twelve months ended December 31, 2019 of $6.2 million or 21.0% of income before income taxes, compared to a tax provision for the twelve months ended December 31, 2018 of $394,000 or 1.0% of income before income taxes.

Income tax provision increased in 2019 primarily due to non-recognition of gain on re-measurement of pre-existing interest in the prior year.

The income tax rates for the twelve months ended December 31, 2019 diverge from the federal statutory rate due to noncontrolling interests of the controlled partnerships and the prior year adjustments partially offset by effects of state income taxes.

We had a provision for income tax for the twelve months ended December 31, 2020 of $0.9 million or 104.8% of income before income taxes, compared to a tax provision for the twelve months ended December 31, 2019 of $6.2 million or 21.0% of income before income taxes.

Income tax decreased in 2020 primarily due to the economic effects of the COVID-19 pandemic on our operations.

The income tax rates for the twelve months ended December 31, 2020 diverge from the federal statutory rate due to adjustments for leasehold improvements, equity method investments, and other liabilities.

Year Ended December 31, 2019 Compared to the Year Ended December 31, 2018

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We use both GAAP and non-GAAP metrics to measure our financial results.

We believe that, in addition to GAAP metrics, non-GAAP metrics such as Adjusted EBITDA and Free Cash Flow assist us in measuring our cash generated from operations and ability to service our debt obligations.

We believe that, in addition to GAAP metrics, non-GAAP metrics such as Adjusted EBITDA and Free Cash Flow assist us in measuring our core operations from period to period as well as our cash generated from operations and ability to service our debt obligations.

Adjusted EBITDA

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Adjusted EBITDA should not be considered a measure of financial performance under GAAP, and Adjusted EBITDA should not be considered in isolation or as alternatives to net income, cash flows generated by operating, investing or financing activities or other financial statement data presented in the consolidated financial statements as an indicator of financial performance or liquidity.

Adjusted EBITDA is not a measurement determined in accordance with GAAP and is therefore susceptible to varying methods of calculation, this metric, as presented, may not be comparable to other similarly titled measures of other companies.

Adjusted EBITDA is not a measurement determined in accordance with GAAP and is therefore susceptible to varying methods of calculation and this metric, as presented, may not be comparable to other similarly titled measures of other companies.

The following is a reconciliation of the nearest comparable GAAP financial measure, net income, to Adjusted EBITDA for the years ended December 31, 2020, 2019, and 2018, respectively (in thousands):

Years Ended December 31,

Net income attributable to RadNet, Inc.

2020 2019 2018

Net (loss) income attributable to RadNet, Inc.

common stockholders $ (14,840) $ 14,756 $ 32,243

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Plus other expenses 120 1,283 —

Plus non-cash change in swap valuation 2,528 — —

Plus legal settlement and related expenses — 1,248 —

Plus refinancing fees

Plus expenses of divested/closed operations

Plus gain on sale of equipment attributable to noncontroling interest — — 440

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Plus loss on impairment 4,170 — 3,937

Less gain on sale of imaging center and medical practice

Less gain on extinguishment of debt (4,047) — —

Less gain on sale and disposal of equipment — — (2,054)

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Therefore, we believe it is important to view Free Cash Flow as a complement to our entire consolidated statements of cash flows.

The following table provides a reconciliation of free cash flow to “net cash flows from operations” the most directly comparable amounts reported in accordance with GAAP for the years ended December 31, 2019 , 2018 and 2017 :

Years Ended December 31,

2020 2019 2018

Adjusted EBITDA $ 139,461 $ 164,131 $ 141,756

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Less cash capital purchases (1)

Less new finance/capital lease debt

(86,758) (71,540) (72,180)

Less new finance debt (20) (51) —

Plus proceeds from sale of equipment 828 1,160 2,575

Plus proceeds from sale of imaging and medical practice assets

Free cash flow $ 13,990 $ 47,446 $ 35,135

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Total revenue $ 1,071,840 $ 1,154,179 $ 975,146

Net income attributable to RadNet common stockholders

Net (loss) income attributable to RadNet common stockholders (14,840) 14,756 32,243

We operate in a capital intensive, high fixed-cost industry that requires significant amounts of capital to fund operations.

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Because our cash flows from operations have been insufficient to fund all of these capital requirements, we have depended on the availability of financing under credit arrangements with third parties.

Based on our current level of operations, we believe that cash flow from operations and over the next twelve months available cash, together with available borrowings from our senior secured credit facilities, will be adequate to meet our short-term liquidity needs.

Our future liquidity requirements will be for working capital, capital expenditures, debt service and general corporate purposes.

Our ability to meet our working capital and debt service requirements, however, is subject to future economic conditions and to financial, business and other factors, many of which are beyond our control.

If we are not able to meet such requirements, we may be required to seek additional financing.

There can be no assurance that we will be able to obtain financing from other sources on the terms acceptable to us, if at all.

On a continuing basis, we also consider various transactions to increase stockholder value and enhance our business results, including acquisitions, divestitures and joint ventures.

The COVID 19 pandemic has resulted in a reduction of procedure volumes and corresponding operating revenues for the year ended December 31, 2020.

We are uncertain of the duration and ultimate severity of its effects.

Although we took measures to reduce operating expenses and have received government stimulus funding, we may continue to experience decreased procedure volumes during the duration of the pandemic.

We have credit available from our current credit facilities and borrowing under those facilities is subject to continued compliance with lending covenants.

We currently meet those requirements, but substantial and sustained operating losses could impact our ability to borrow under those facilities.

If we are not able to meet such requirements, we may be required to seek additional financing and there can be no assurance that we will be able to obtain financing from other sources on terms acceptable to us, if at all.

On a continuing basis, we also consider various transactions to increase shareholder value and enhance our business results, including acquisitions, divestitures and joint ventures.

These types of transactions may result in future cash proceeds or payments but the general timing, size or success of any acquisition, divestiture or joint venture effort and the related potential capital commitments cannot be predicted.

We expect to fund any future acquisitions primarily with cash flow from operations and borrowings, including borrowing from amounts available under our senior secured credit facilities or through new equity or debt issuances.

We and our subsidiaries or affiliates may from time to time, in our or their sole discretion, continue to purchase, repay, redeem or retire any of our outstanding debt or equity securities in privately negotiated or open market transactions, by tender offer or otherwise.

However, we have no formal plan of doing so at this time.

We have invested over $100 million in each of the past two years in expanding our operations through the acquisition of new facilities and equipment.

We expect to continue to make similar investments for the foreseeable future.

While we don't anticipate one at this time, a significant decrease in our liquidity would limit our ability to make these investments and consequently limit our growth.

We and our subsidiaries or affiliates may from time to time, in our sole discretion, purchase, repay, redeem or retire any of our outstanding debt or equity securities in privately negotiated or open market transactions, by tender offer or otherwise.

Sources and Uses of Cash

The following table summarizes key components of our sources and uses of cash for the twelve months ended December 31, 2020 and 2019:

Cash Flow Data

December 31, 2019

December 31, 2018

Cash Flow Data December 31, 2020 December 31, 2019

Cash provided by operating activities $ 233,759 $ 104,322

Cash used in investing activities (126,244) (99,465)

Cash provided by (used in) financing activities

For cash used in investing activities for the twelve months ended December 31, 2019 , we purchased property and equipment for approximately $ 74.2 million , acquired imaging facilities for $ 27.2 million , made equity investments at fair value of $ 143,000 and an equity contribution to an existing joint venture of $ 103,000 .

We received proceeds from the sale of equipment of $ 1,160,000 .

The cash provided by financing activities for the twelve months ended December 31, 2019 was mainly due to our additional term loan debt issuance of April 18, 2019, offset by payments on our term loans and revolving credit facility borrowings.

We have entered into factoring agreements with various institutions and sold certain accounts receivable under non-recourse agreements.

Cash (used in) provided by financing activities (45,561) 24,951

For cash used in investing activities for the twelve months ended December 31, 2020, we purchased property and equipment for approximately $94.2 million, acquired imaging facilities for $31.3 million, made an equity contributions to joint venture of $1.6 million.

We received proceeds from the sale of equipment of $0.8 million.

The cash used in financing activities for the twelve months ended December 31, 2020 was mainly due to principal payments on our term loans.

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

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.

The aggregate gross amount factored under these facilities for the year ended December 31, 2019 was approximately $9.0 million , inclusive of discount recorded to reflect the difference between market interest rates and the stated interest rate of the receivable.

Payments on the associated notes receivables will be 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 December 31, 2020 we have $20.5 million, net of discount, remaining to be collected on these agreements.

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Senior Credit Facilities:

At December 31, 2019 , 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 July 1, 2016 (as amended, the "First Lien Credit Agreement").

At December 31, 2019 , 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.

We maintain secured credit facilities with Barclays Bank PLC and with SunTrust.

The Barclays credit facilities are comprised of first lien term loans and a revolving credit facility.

On August 28, 2020 we amended the Barclays credit facilities to increase the amount available under the revolving line of credit to $195.0 million.

The SunTrust credit facilities are comprised of a term loan and a revolving credit facility of $30.0 million.

As of December 31, 2020, we were in compliance with all covenants under our credit facilities.

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Included in our consolidated balance sheets at December 31, 2020 are $601.3 million of First Lien Term Loans and $51.4 million of SunTrust Term Loan Agreement debt for a combined total of $652.7 million (net of unamortized discounts of $9.7 million) in thousands:

Total Carrying

Face Value Discount Total Carrying

Barclays First Lien Term Loans $ 611,028 $ (9,699) $ 601,329

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The remaining $187.7 million of our Barclays Revolving Credit Facility was available to draw upon as of December 31, 2020.

We also had no balance under our $30.0 million SunTrust Revolving Credit Facility at December 31, 2019 .

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 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 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, $683,000 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 Facilites:

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 December 31, 2019 the effective Adjusted Eurodollar Rate and the Base Rate for the First Lien Term Loans was 2.01% and 4.75% , respectively and the applicable margin for Adjusted Eurodollar Rate and Base Rate borrowings was 3.50% and 2.50% , 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.

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.

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 December 31, 2019 , the effective interest rate payable on revolving loans was 7.25% .

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 3.50% , 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, plus the applicable margin.

The scheduled amortization of the SunTrust Term Loan began December 31, 2018 with quarterly payments of $750,000 , representing annual amortization equal to 5.0% of the original principal amount of the SunTrust Term Loan.

At scheduled intervals, the quarterly amortization increases by $375,000 , with the remaining balance to be paid at maturity.

We also had no balance under our $30.0 million SunTrust Revolving Credit Facility related to our consolidated subsidiary NJIN at December 31, 2020, and with no letters of credit reserved against the facility, the full amount was available to draw upon.

At December 31, 2020 we were in compliance with all covenants under our credit facilities.

For more information on our secured credit facilities see Note 8 to our consolidated financial statements in this annual report.

Contractual Commitments

Our future obligations for notes payable, equipment under finance leases, lines of credit, equipment and building operating leases and other contractual obligations for the next five years and thereafter include (dollars in thousands):

2021 2022 2023 2024 2025 Thereafter Total

Notes payable (1) $ 43,670 $ 44,795 $ 573,938 $ — $ — $ — $ 662,403

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Operating leases (3) 97,307 91,479 83,648 69,686 59,469 316,112 717,701

Total $ 143,631 $ 136,993 $ 657,600 $ 69,699 $ 59,473 $ 316,114 $ 1,383,510

(1) Includes variable rate debt for which the contractual obligation was estimated using the applicable rate at December 31, 2020.

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The Securities and Exchange Commission defines critical accounting estimates as those that are both most important to the portrayal of a company’s financial condition and results of operations and require management’s most difficult, subjective or complex judgment, often as a result of the need to make estimates about the effect of matters that are inherently uncertain and may change in subsequent periods.

In Note 2 to our consolidated financial statements in this annual report on Form 10-K we

discuss our significant accounting policies, including those that do not require management to make difficult, subjective or complex judgments or estimates.

The most significant areas involving management’s judgments and estimates are described below.

In Note 2 to our consolidated financial statements in this annual report on Form 10-K we discuss our significant accounting policies, including those that do not require management to make difficult, subjective or complex judgments or estimates.

The critical areas involving management’s judgments and estimates are described below.

USE OF ESTIMATES - The financial statements were prepared in accordance with U.S.

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Our performance obligations for diagnostic services are generally satisfied over a period of less than one day.

The contractual relationships with patients, in most cases, also involve a third-party payer (Medicare, Medicaid, managed care health plans and commercial insurance companies, including plans offered through the health insurance exchanges) and the transaction prices for the services provided are dependent upon the terms provided by (Medicare and Medicaid) or negotiated with (managed care health plans and commercial insurance companies) the third-party payers.

The payment arrangements with third-party payers for the services we provide to the related patients typically specify payments at amounts less than our standard charges and generally provide for payments based upon predetermined rates per diagnostic services or discounted fee-for-service rates.

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 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.

Our revenues are based upon the estimated amounts we expect to be entitled to receive from patients and third-party payers.

Estimates of conractrual allowances under managed care and commercial insurance plans are based upon historical collection experience of the payments received from such payors in accordance with the underlying contractual agreements.

The contractual relationships with patients, in most cases, also involve a third-party payor (Medicare, Medicaid, managed care health plans and commercial insurance companies, including plans offered through the health insurance exchanges) and the transaction prices for the services provided are dependent upon the terms provided by (Medicare and Medicaid) or negotiated with (managed care health plans and commercial insurance companies) the third-party payors.

The payment arrangements with third-party payors for the services we provide to the related patients typically specify payments at amounts less than our standard charges and generally provide for payments based upon predetermined rates per diagnostic services or discounted fee-for-service rates.

Management continually reviews the contractual estimation process to consider and incorporate updates to laws and regulations, changes in business and economic conditions, and the frequent changes in managed care contractual terms resulting from contract re-negotiations and renewals.

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.

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.

Our revenues are based upon the estimated amounts we expect to be entitled to receive from patients and third-party payors.

Estimates of contractual allowances under Medicare, Medicaid, managed care and commercial insurance plans are based upon historical collection experience of the payments received from such payors in accordance with the underlying contractual agreements.

Revenues related to uninsured patients and uninsured copayment and deductible amounts for patients who have health care coverage may have price concessions applied.

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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.

On January 1, 2018, we adopted the new revenue recognition accounting standard issued by the Financial Accounting Standards Board (“FASB”) and codified in the ASC as topic 606 (“ASC 606”).

The revenue recognition standard in ASC 606 outlines a single comprehensive model for recognizing revenue as performance obligations, defined in a contract with a customer as goods or services transferred to the customer in exchange for consideration, are satisfied.

The standard also requires expanded disclosures regarding our revenue recognition policies and significant judgments employed in the determination of revenue.

We applied the modified retrospective approach to all contracts when adopting ASC 606.

As a result, at the adoption of ASC 606 the majority of what was previously classified as the provision for bad debts in the statement of operations are now reflected as implicit price concessions and therefore included as a reduction to net operating revenues in 2018 and later.

For changes in credit issues not assessed at the date of service, we will prospectively recognize those amounts in other operating expenses on the statement of operations.

For periods prior to the adoption of ASC 606, the provision for bad debts has been presented consistent with the previous revenue recognition standards that required it to be presented separately as a component of net operating revenues.

As part of the adoption of ASC 606 allowance for doubtful accounts was reclassified to be a component of net patient accounts receivable.

Other than these changes in presentation on the consolidated statement of operations and consolidated balance sheet, the adoption of ASC 606 did not have a material impact on the consolidated financial statements.

As part of the adoption of ASC 606, we elected two of the available practical expedients provided for in the standard.

First, we did not adjust the transaction price

for any financing components as those were deemed to be insignificant.

Additionally, we expensed all incremental customer contract acquisition costs as incurred as such costs are not material and would be amortized over a period less than one year.

PROVIDER RELIEF FUND ( COVID-19 STIMULUS FUNDING ) - The Provider Relief Fund offers government assistance to eligible providers throughout the healthcare system in support of certain expenses or lost revenue attributable to the coronavirus pandemic.

In the fourth quarter of 2020, we received approximately $0.6 million in funding and for twelve months ended December 31, 2020 we have received funding of $26.3 million.

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.

During the year ended December 31, 2020, we continued to evaluate our operating results and gave consideration to the updated reporting guidelines issued in January 2021 by the U.S.

Department of Health and Human Services that significantly changed the measurement of Provider Relief Fund distributions providers are able to retain.

Based on our assessment recognition of the revenue previously recognized remained appropriate.

ACCOUNTS RECEIVABLE - Substantially all of our accounts receivable are due under fee-for-service contracts from third party payors, such as insurance companies and government-sponsored healthcare programs, or directly from patients.

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We continuously monitor collections from our payors and maintain an allowance for bad debts based upon specific payor collection issues that we have identified and our historical experience.

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

Under this method, deferred income tax assets and liabilities result from temporary differences in the financial reporting bases and the income tax reporting bases of assets and liabilities.

The measurement of deferred tax assets is reduced, if necessary, by the amount of any tax benefit that, based on available evidence, is not expected to be realized.

When it appears more likely than not that deferred taxes will not be realized, a valuation allowance is recorded to reduce the deferred tax asset to its estimated realizable value.

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

INVENTORIES – Inventories, consisting mainly of medical supplies, are stated at the lower of cost or net realizable value with cost determined by the first-in, first-out method.

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

Deferred financing costs, net of accumulated amortization, were $1.6 million and $1.4 million , as of December 31, 2019 and December 31, 2018 , respectively and related to our line of credit.

PROPERTY AND EQUIPMENT – Property and equipment are stated at cost, less accumulated depreciation and amortization.

Depreciation and amortization of property and equipment are provided using the straight-line method over the estimated useful lives, which range from 3 to 15 years .

Leasehold improvements are amortized at the lesser of lease term or their estimated useful lives, which range from 3 to 15 years .

Maintenance and repairs are charged to expense as incurred.

BUSINESS COMBINATION – In January 2017, the FASB issued ASU No.

BUSINESS COMBINATION – We evaluate all purchases under the framework in ASU No.

2017-01 (“ASU 2017-01”), Clarifying the Definition of a Business.

The update provides a framework for evaluating whether a transaction should be accounted for as an acquisition and/or disposal of a business versus assets.

In order for a purchase to be considered an acquisition of a business, and receive business combination accounting treatment, the set of transferred assets and activities must include, at a minimum, an input and a substantive process that together significantly contribute to the ability to create outputs.

If substantially all of the fair value of the gross assets acquired is concentrated in a single identifiable asset or a group of similar identifiable assets, then the set of transferred assets and activities is not a business.

We first evaluate all purchases under this framework.

Once the purchase has been determined to be the acquisition of a business, we are required to recognize separately from goodwill the assets acquired and the liabilities assumed at their acquisition date fair values.

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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 totaled $441.0 million and $418.1 million at December 31, 2019 and December 31, 2018 , respectively.

GOODWILL AND INDEFINITE LIVED INTANGIBLES – Goodwill totaled $472.9 million and $442.0 million million at December 31, 2020 and December 31, 2019, respectively.

Indefinite lived intangible assets at December 31, 2020 were $7.1 million and $11.3 million at December 31, 2019 and are associated with the value of certain trade name intangibles.

Goodwill and trade name intangibles are recorded as a result of business combinations.

When we determine the carrying value of goodwill exceeds its fair value, an impairment charge would be recognized which should not exceed the total amount of goodwill allocated to that reporting unit.

We determined fair values for each of the reporting units using the market approach, when available and appropriate, or the income approach, or a combination of both.

We assess the valuation methodology based upon the relevance and availability of the data at the time we perform the valuation.

If multiple valuation methodologies are used, the results are weighted appropriately.

We tested both goodwill and trade name intangibles for impairment on October 1, 2019, noting no impairment, and have not identified any indicators of impairment through December 31, 2019.

When we determine the carrying value of a reporting unit exceeds its fair value an impairment charge would be recognized and should not exceed the total amount of goodwill allocated to that reporting unit.

We test for impairment annually and in addition to that 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 during the year did not identify an indication of goodwill or trade name impairment due that event.

During the year we ceased employing certain indefinite lived trade names with a total value of $4.2 million and they were written off in full.

Separate from this, our annual impairment

test as of October 1, 2020 noted no other impairment, and we have not identified any indicators of impairment through December 31, 2020.

Significant Accounting Policies

DEFERRED REVENUE - 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.

In addition, in May of 2020 we received $5.0 million in advance payments from an insurance carrier with similar repayment terms as the CMS.

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

Under this method, deferred income tax assets and liabilities result from temporary differences in the financial reporting bases and the income tax reporting bases of assets and liabilities.

The measurement of deferred tax assets is reduced, if necessary, by the amount of any tax benefit that, based on available evidence, is not expected to be realized.

When it appears more likely than not that deferred taxes will not be realized, a valuation allowance is recorded to reduce the deferred tax asset to its estimated realizable value.

LONG-LIVED ASSETS - We evaluate our long-lived assets (property and equipment) and intangibles, other than goodwill and indefinite lived intangibles, for impairment whenever indicators of impairment exist.

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No indicators of impairment were identified with respect to our long-lived assets as of December 31, 2020.

DEPRECIATION AND AMORTIZATION OF LONG-LIVED ASSETS - We depreciate our long-lived assets over their estimated economic useful lives with the exception of leasehold improvements where we use the shorter of the assets useful lives or the lease term of the facility for which these assets are associated.

We estimate the economic useful lives of assets, other than leasehold improvements, to be between 3 and 15 years depending on the type of asset.

PROPERTY AND EQUIPMENT – Property and equipment are stated at cost, less accumulated depreciation and amortization.

Depreciation and amortization of property and equipment are provided using the straight-line method over the estimated useful lives, which range from 3 to 15 years.

Leasehold improvements are amortized at the lesser of lease term or their estimated useful lives, which range from 3 to 15 years.

Maintenance and repairs are charged to expense as incurred.

LEASES - We determine if an arrangement is a lease at inception.

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Operating lease ROU assets and liabilities are recognized at commencement date based on the present value of lease payments over the lease term.

We use the implicit rate when readily determinable.

As most of our leases do not provide an implicit rate, we use our incremental borrowing rate based on the information available at commencement date in determining the present value of lease payments.

We use the implicit rate when readily determinable.

We include options to extend a lease when it is reasonably certain that we will exercise that option.

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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 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.

Our ROU assets consist of facility and equipment assets on operating leases.

No events have occurred such as fire, flood, or other acts which have impaired the integrity of our ROU assets in 2020.

Our facility leases require us to maintain insurance policies which would cover major damage to our facilities.

We maintain business interruption insurance to cover loss of business due to a facility becoming non-operational under certain circumstances.

Our equipment leases are covered by warranty and service contracts which cover repairs and provide regular maintenance to keep the equipment in functioning order.

EQUITY BASED COMPENSATION – We have one long-term incentive plan that we adopted in 2006 and which we first amended and restated as of April 20, 2015, and again on March 9, 2017 (the “Restated Plan”).

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Equity-based compensation is classified in operating expenses within the same line item as the majority of the cash compensation paid to employees.

COMMITTMENTS 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.

In connection with our acquisition of DeepHealth Inc.

on June 1, 2020, we assumed the DeepHealth, Inc.

2017 Stock Incentive Plan, including outstanding options awards that can be exercised for our common stock.

No additional awards will be granted under the DeepHealth, Inc.

2017 Equity Incentive Plan.

See Note 4, Facility Acquisitions and Note 11, Stock-Based Compensation, for more information.

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.

With respect to these matters, we evaluate the developments on a regular basis and accrue a liability when we believe a loss is probable and the amount can be reasonably estimated.

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Accounting standards adopted

In February 2016, the FASB issued Accounting Standard Update ("ASU") No.

2016-02, Leases (Topic 842) (ASU 2016-02), which amends the existing accounting standards for leases.

In September 2017, the FASB issued ASU No.

2017-13 which provides additional clarification and implementation guidance on the previously issued ASU No.

Subsequently, in July 2018, the FASB issued ASU No 2018-10, Codification Improvements to Topic 842, Leases, and ASU No.

2018-11, Targeted Improvement, to clarify and amend the guidance in ASU No.

The amendments in this update were effective for fiscal years (and interim reporting periods within fiscal years) beginning after December 15, 2018, with early adoption permitted for all entities.

Under the new guidance, a lessee is required to recognize a lease liability and right-of-use asset for all leases with terms in excess of twelve months.

The new guidance also requires additional disclosures to enable users of financial statements to understand the amount, timing, and potential uncertainty of cash flows arising from leases.

Consistent with current guidance, a lessee’s recognition, measurement, and presentation of expenses and cash flows arising from a lease will continue to depend primarily on its classification.

We have elected the optional transition method to apply the standard as of the effective date and

therefore, we will not apply the standard to the comparative periods presented in the consolidated financial statements.

We elected the transition package of three practical expedients permitted within the standard, which eliminates the requirements to reassess prior conclusions about lease identification, lease classification, and initial direct costs.

See Note 9, Leases, to the consolidated financial statement included in this annual report on Form 10-K for more information.

In February 2018, the FASB issued ASU No.

2018-02 (“ASU 2018-02”), Reclassification of Certain Tax Effects from Accumulated Other Comprehensive Income .

ASU 2018-02 allows for the reclassification of certain income tax effects related to the Tax Cuts and Jobs Act between “Accumulated other comprehensive income” and “Retained earnings.” This ASU relates to the requirement that adjustments to deferred tax liabilities and assets related to a change in tax laws or rates to be included in “Income from continuing operations”, even in situations where the related items were originally recognized in “Other comprehensive income” (rather than in “Income from continuing operations”).

Subsequently, in March 2018, the FASB issued ASU No.

2018-05, Income Taxes, to clarify and amend guidance in ASU 2018-02.

ASU 2018-02 and ASU 2018-05 are effective for all entities for fiscal years beginning after December 15, 2018, and interim periods within those fiscal years, with early adoption permitted.

Adoption of this ASU is to be applied either in the period of adoption or retrospectively to each period in which the effect of the change in the tax laws or rates were recognized.

The adoption had no significant impact on the our results of operations, financial position and cash flows.

In April 2019, the FASB issued ASU 2019-04, ("ASU 2019-04"), Codification Improvements to Topic 326, Financial Instruments-Credit Losses, Topic 815, Derivatives and Hedging, and Topic 825, Financial Instruments , which, among other things, clarifies certain hedge accounting guidance.

For the year ended 2017, we elected to early adopt ASU 2017-12, Targeted Improvements to Accounting for Hedging Activities , (Topic 815), for which this current ASU 2019-04 amends.

For those entities that have already adopted ASU 2017-12, the hedging amendments in ASU 2019-04 are effective as of the beginning of the first annual reporting period beginning after 25 April 2019 and early adoption is permitted.

We elected early adoption of ASU 2019-04 and the adoption had no effect on our financial statements.

Accounting standards not yet adopted

Stated below are accounting policies which are under evaluation for their potential impact on our statement of operations and cash flows.

In March 2020, the FASB issued ASU 2020-04 ("ASU 2020-04"), Reference Rate Reform (Topic 848), Facilitation of the Effects of Reference Rate Reform on Financial Reporting .

ASU 2020-04 provides optional expedients and exceptions for applying generally accepted accounting principles to certain contract modifications and hedging relationships that reference London Inter-bank Offered Rate (LIBOR) or another reference rate expected to be discontinued.

The guidance is effective upon issuance and generally can be applied through December 31, 2022.

We are currently evaluating the potential impact of ASU 2020-04 on our financial statements.

In June 2016, the FASB issued ASU No.

2016-13 ("ASU 2016-13), Financial Instruments - Credit Losses.

ASU 2016-13 replaces the incurred loss impairment methodology under current GAAP with a methodology that reflects expected credit losses and requires consideration of a broader range of reasonable and supportable information to inform credit loss estimates.

The standard will be effective for us beginning after December 15, 2019, with early adoption permitted.

We are currently evaluating the impact of this standard on our consolidated financial statements, including accounting policies, processes, and systems.

ASU 2016-13 replaces the incurred loss methodology previously utilized for valuing financial instruments with an expected loss methodology that is referred to as the current expected credit loss (CECL) methodology.

We adopted the standard on January 1, 2020 using the modified retrospective approach.

See the Accounts Receivable section to Note 2 for further information on our allowances for credit losses.

In August 2018, the FASB issued ASU No.

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ASU 2018-15 aligns the requirements for deferring implementation costs incurred in a cloud computing arrangement that is a service contract with the requirements for capitalizing implementation costs incurred to develop or obtain internal-use software.

This ASU is effective in the first quarter of 2020 with early adoption permitted and can be applied either retrospectively or prospectively to all implementation costs incurred after the date of adoption.

We are currently assessing the impact of the adoption of this ASU on our results of operations, financial position and cash flows.

This ASU was effective in the first quarter of 2020 with early adoption permitted and can be applied either retrospectively or prospectively to all implementation costs incurred after the date of adoption.

The adoption of this standard did not have a material impact on our consolidated balance sheet.

In March 2020, the FASB issued ASU 2020-03 ("ASU 2020-03"), Codification Improvements to Financial Instruments .

The amendments in this update represent changes to clarify or improve the codification and correct unintended application.

ASU 2020-03 was effective immediately upon issuance and its adoption did not have a material impact on our financial statements.

In August 2018, the FASB issued ASU No.

2018-13 ("ASU 2018-13"), Disclosure Framework – Changes to the Disclosure Requirements for Fair Value Measurements .

This standard removes, modifies and adds certain disclosures related to recurring and nonrecurring fair value measurements.

We adopted ASC 2018-13 effective January 1, 2020 and it had no effect on our disclosures.

Accounting standards not yet adopted

In December 2019, the FASB issued ASU 2019-12 ("ASU 2019-12"), Income Taxes (Topic 740).

ASU 2019-12 removes certain exceptions related to the approach for intraperiod tax allocation, the methodology for calculating income taxes in an interim period, and the recognition of deferred tax liabilities for outside basis differences.

It also clarifies and simplifies other areas of the standard.

ASU 2019-12 is effective beginning in the first quarter of 2021.

Early adoption is permitted.

Certain amendments in this update must be applied on a prospective basis, certain amendments must be applied on a retrospective basis, and certain amendments must be applied on a modified retrospective basis through a cumulative-effect adjustment to retained earnings/(deficit) in the period of adoption.

We are currently evaluating the impact this ASU will have on our financial statements and related disclosures.

In January 2020, the FASB issued ASU 2020-01 ("ASU 2020-01"), Investments—Equity Securities (Topic 321), Investments—Equity Method and Joint Ventures (Topic 323), and Derivatives and Hedging (Topic 815), clarifying the interaction between accounting standards related to equity securities, equity method investments, and certain derivatives.

ASU 2020-01 is effective for fiscal years beginning after December 15, 2020.

We do not expect the adoption of this guidance will have a material impact on our financial statements.

In January 2021, the FASB issued ASU 2021-01 ("ASU 2021-01"), Reference Rate Reform (Topic 848), Scope .

ASU 2021-01 provides clarifies the scope of Topic 848 so that derivatives affected by the discounting transition are explicitly eligible for certain option expedients and exceptions in Topic 848.

The guidance is effective upon issuance and generally can be applied through December 31, 2022.

We are currently evaluating the potential impact of ASU 2021-01 on our financial statements.

Subsequent Events

On March 11, 2020, we announced a definitive agreement to acquire DeepHealth, Inc.

("DeepHealth").

DeepHealth is developing solutions in machine learning and artificial intelligence to assist radiologists in interpreting images and improving patient care.

The close is planned for April 1, 2020 and we will issue approximately 1.0 million RadNet common stock shares to complete the acquisition.

On January 1, 2021 we entered into the Simi Valley Imaging Group, LLC, a partnership with Simi Valley Hospital and Health Services ("Simi Adventist").

The operation will offer multi-modality imaging services out of two locations in Ventura County, California.

Total investment in the venture is $0.5 million.

RadNet contributed $0.3 million in assets for a 60% economic interest and Simi Adventist contributed assets totaling $0.2 million for a 40% economic interest.

Over January and February 2021, we completed additional acquisitions of ZP companies in the New York City area for total purchase consideration of approximately $53.4 million.

In March 2021, we received $6.2 million in general distribution funds under the CARES Act.

Additional Information

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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-K

Item 7. Management’s Discussion and Analysis