What changed in this filing

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Item 8. Financial Statements and Supplementary Data

2021-03-16 compared with 2020-03-16 · 470 added, 447 removed, 738 unchanged (55% of the section changed)

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We have audited the accompanying consolidated balance sheets of RadNet, Inc.

and subsidiaries (the Company) as of December 31, 2019 and 2018, the related consolidated statements of operations, comprehensive income (loss), equity and cash flows for each of the three years in the period ended December 31, 2019, and the related notes and the financial statement schedule listed in the Index at Item 15(a)(2) (collectively referred to as the "consolidated financial statements").

and subsidiaries (the Company) as of December 31, 2020 and 2019, the related consolidated statements of operations, comprehensive (loss) income, equity and cash flows for each of the three years in the period ended December 31, 2020, and the related notes (collectively referred to as the “consolidated financial statements”).

In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company at December 31, 2020 and 2019, and the results of its operations and its cash flows for each of the three years in the period ended December 31, 2020, in conformity with U.S.

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We believe that our audits provide a reasonable basis for our opinion.

Critical Audit Matters

The critical audit matters communicated below are matters arising from the current period audit of the financial statements that were communicated or required to be communicated to the audit committee and that:

(1) relate to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective, or complex judgments.

The communication of critical audit matters does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matters below, providing separate opinions on the critical audit matters or on the accounts or disclosures to which they relate.

Accounting for Revenue Recognition

Description of

For the year ended December 31, 2020, the Company’s service fee revenue was $931.7 million.

As discussed in Note 2 to the consolidated financial statements, service fee revenue is based upon the estimated amounts the Company expects to be entitled to receive from patients and third-party payors (Medicare, Medicaid, managed care health plans and commercial insurance companies).

Estimates of contractual allowances and implicit price concessions associated with third-party payors and any amounts due directly from patients, are based upon historical collection experience from such payors.

The contractual estimation process is periodically reviewed to consider and incorporate updates to the laws and regulations, changes in business and economic conditions and contractual terms resulting from contract negotiations and renewals.

The Company also records estimated implicit price concessions (based primarily on historical collection experience) related to amounts due directly from patients to record these revenues and accounts receivable at the estimated amounts the Company expects to collect.

Auditing management’s estimates of contractual allowances and implicit price concessions was complex and judgmental due to the significant data inputs and subjective assumptions utilized in determining related amounts.

Addressed the Matter in Our

We obtained an understanding, evaluated the design, and tested the operating effectiveness of controls that address the risks of material misstatement relating to the measurement of service fee revenue.

This included testing controls related to management’s review of the significant assumptions and inputs used in the determination of the estimated amount that would be collected for services rendered during the period.

We also tested controls over the current and historical data used by management in determining this estimate, including the completeness and accuracy of the data.

To test the estimated contractual allowances and implicit price concessions, we performed audit procedures that included, among others, assessing methodologies and evaluating the significant assumptions discussed above and testing the completeness and accuracy of the underlying data used by the Company in its estimates.

We compared the significant assumptions used by management to current industry and economic trends and considered changes, if any, to the Company’s business and other relevant factors.

We also assessed the historical accuracy of management’s estimates as a source of potential corroborative or contrary evidence.

Acquisition of DeepHealth, Inc.

Description of

As discussed in Note 4 to the consolidated financial statements, the Company completed its acquisition of DeepHealth, Inc.

for net consideration of $34.6 million on June 1, 2020.

The transaction was accounted for as a business combination.

Auditing the Company’s accounting for its acquisition of DeepHealth, Inc.

was complex due to the significant estimation required by management in determining the fair value of in-process research and development (“IPR&D”) intangible assets of $14.5 million.

The significant estimation was primarily due to the complexity of the valuation models used by management to measure the fair value of the IPR&D intangible assets and the sensitivity of the fair value estimates to the significant underlying assumptions.

The Company used an income approach to measure the fair value of the IPR&D.

The significant assumptions used to estimate the value of the IPR&D intangible assets included discount rates and certain assumptions that form the basis of the forecasted results (e.g., revenue growth rates, EBITDA margin and obsolescence factors).

These significant assumptions are forward looking and could be affected by future economic and market conditions.

Acquisition of DeepHealth, Inc.

Addressed the Matter in Our

We obtained an understanding, evaluated the design, and tested the operating effectiveness of controls over the Company’s accounting for the acquisition.

We tested controls over the recognition and measurement of consideration transferred and IPR&D intangible assets, including the valuation model and underlying assumptions used to develop such estimates.

To test the estimated fair value of the IPR&D intangible assets, we performed audit procedures that included, among others, evaluating the completeness and accuracy of the underlying data and reasonableness of significant assumptions such as revenue growth rates, EBITDA margin and obsolescence factors.

For example, we compared the forecasted results, derived based on the significant assumptions discussed above, to current industry, market and economic trends, to the assumptions used in other acquisitions and to other guidelines used by companies within the same industry.

We involved our valuation specialists to assist in our evaluation of the methodology used and reasonableness of the significant assumptions.

/s/ Ernst & Young LLP

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Prepaid expenses and other current assets 32,985 45,004

Assets held for sale

Total current assets 270,424 241,174

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Total property, equipment and right-of-use-assets 882,996 813,272

Goodwill 472,879 441,973

Other intangible assets 52,393 42,994

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Deposits and other 36,983 36,996

Total assets $ 1,786,657 $ 1,646,986

LIABILITIES AND EQUITY

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Due to affiliates 14,010 14,347

Deferred revenue related to software sales

Current portion of deferred rent

Deferred revenue 39,257 1,316

Current portion of finance lease liability 2,578 3,283

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Current portion of notes payable 39,791 39,691

Current portion of obligations under capital leases

Total current liabilities 398,114 327,428

LONG-TERM LIABILITIES

Deferred rent, net of current portion

Long-term finance lease liability 743 3,264

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Notes payable, net of current portion 612,913 652,704

Obligations under capital lease, net of current portion

Other non-current liabilities 53,488 9,529

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Additional paid-in-capital 307,788 262,865

Accumulated other comprehensive (loss) income

Accumulated other comprehensive loss ( 24,051 ) ( 8,026 )

Accumulated deficit ( 117,999 ) ( 103,159 )

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Noncontrolling interests 92,560 81,454

Total equity 258,303 233,139

Total liabilities and equity $ 1,786,657 $ 1,646,986

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Years Ended December 31,

Service fee revenue, net of contractual allowances and discounts

Provision for bad debts

2020 2019 2018

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

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

Provider relief funding 26,264 — —

OPERATING EXPENSES

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Equity in earnings of joint ventures ( 7,945 ) ( 8,350 ) ( 11,377 )

Non-cash change in fair value of interest rate hedge 2,528 — —

Gain on re-measurement of pre-existing interest — ( 768 ) ( 39,539 )

Gain on sale of imaging centers and medical practice

Gain on extinguishment of debt ( 4,047 ) — —

Other expenses (income) 120 1,283 ( 181 )

Total other expenses (income) 36,538 40,209 ( 7,641 )

INCOME BEFORE INCOME TAXES

(LOSS) INCOME BEFORE INCOME TAXES ( 854 ) 29,669 38,527

Provision for income taxes ( 895 ) ( 6,229 ) ( 394 )

NET (LOSS) INCOME ( 1,749 ) 23,440 38,133

Net income attributable to noncontrolling interests 13,091 8,684 5,890

NET INCOME ATTRIBUTABLE TO RADNET, INC.

NET (LOSS) INCOME ATTRIBUTABLE TO RADNET, INC.

COMMON STOCKHOLDERS $ ( 14,840 ) $ 14,756 $ 32,243

BASIC NET INCOME PER SHARE ATTRIBUTABLE TO RADNET, INC.

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

COMMON STOCKHOLDERS $ ( 0.29 ) $ 0.30 $ 0.67

DILUTED NET INCOME PER SHARE ATTRIBUTABLE TO RADNET, INC.

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

COMMON STOCKHOLDERS $ ( 0.29 ) $ 0.29 $ 0.66

WEIGHTED AVERAGE SHARES OUTSTANDING

Basic 50,891,791 49,674,858 48,114,275

Diluted 50,891,791 50,244,006 48,678,999

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

AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)

CONSOLIDATED STATEMENTS OF COMPREHENSIVE (LOSS) INCOME

(IN THOUSANDS)

Years Ended December 31,

2020 2019 2018

NET (LOSS) INCOME $ ( 1,749 ) $ 23,440 $ 38,133

Foreign currency translation adjustments ( 101 ) ( 32 ) ( 69 )

Change in fair value of cash flow hedge, net of taxes ( 19,372 ) ( 10,253 ) 2,876

COMPREHENSIVE INCOME

Change in fair value of cash flow hedge from prior periods reclassified to earnings 3,448 — —

COMPREHENSIVE (LOSS) INCOME ( 17,774 ) 13,155 40,940

Less comprehensive income attributable to noncontrolling interests 13,091 8,684 5,890

COMPREHENSIVE INCOME (LOSS) ATTRIBUTABLE TO RADNET, INC.

COMPREHENSIVE (LOSS) INCOME ATTRIBUTABLE TO RADNET, INC.

COMMON STOCKHOLDERS $ ( 30,865 ) $ 4,471 $ 35,050

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(IN THOUSANDS EXCEPT SHARE DATA)

Accumulated Other

Comprehensive

Stockholders'

Noncontrolling

(Loss) Income

Additional Accumulated Other Radnet, Inc.

Common Stock Paid-in Comprehensive Accumulated Stockholders' Noncontrolling Total

Shares Amount Capital (Loss) Income Deficit Equity Interests Equity

BALANCE - JANUARY 1, 2018 47,723,915 $ 5 $ 212,261 $ ( 548 ) $ ( 150,158 ) $ 61,560 $ 8,365 $ 69,925

Stock-based compensation

Issuance of stock for acquisitions

Sale to noncontrolling interests, net of taxes

Contributions from noncontrolling interests

Distributions paid to noncontrolling interests

Change in cumulative foreign currency translation adjustment

Change in fair value cash flow hedge, net of taxes

BALANCE - DECEMBER 31, 2017

Issuance of stock upon exercise of options 10,000 — 20 — — 20 — 20

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Change in fair value cash flow hedge, net of taxes — — — 2,876 — 2,876 — 2,876

Net income — — — — 32,243 32,243 5,890 38,133

BALANCE - DECEMBER 31, 2018 48,977,485 $ 5 $ 242,835 $ 2,259 $ ( 117,915 ) $ 127,184 $ 73,069 $ 200,253

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Change in fair value cash flow hedge, net of taxes — — — ( 10,253 ) — ( 10,253 ) — ( 10,253 )

Net income — — — — 14,756 14,756 8,684 23,440

BALANCE - DECEMBER 31, 2019 50,314,328 $ 5 $ 262,865 $ ( 8,026 ) $ ( 103,159 ) $ 151,685 $ 81,454 $ 233,139

Shares issued under the equity compensation plan 491,674 — — — — — — —

Issuance of common stock under the DeepHealth equity compensation plan 10,920 — — — — — — —

Stock-based compensation expense — — 12,463 — — 12,463 — 12,463

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

Tax effect on gain on sale of noncontrolling interest — — ( 551 ) — — ( 551 ) — ( 551 )

Distributions paid to noncontrolling interests — — — — — — ( 1,985 ) ( 1,985 )

Change in cumulative foreign currency translation adjustment — — — ( 101 ) — ( 101 ) — ( 101 )

Change in fair value cash flow hedge, net of taxes — — — ( 19,372 ) — ( 19,372 ) — ( 19,372 )

Change in fair value of cash flow hedge from prior periods reclassified to earnings — — — 3,448 — 3,448 — 3,448

Net loss — — — — ( 14,840 ) ( 14,840 ) 13,091 ( 1,749 )

BALANCE - DECEMBER 31, 2020 51,640,537 $ 5 $ 307,788 $ ( 24,051 ) $ ( 117,999 ) $ 165,743 $ 92,560 $ 258,303

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

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Years Ended December 31,

2020 2019 2018

CASH FLOWS FROM OPERATING ACTIVITIES

Net (loss) income $ ( 1,749 ) $ 23,440 $ 38,133

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

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Amortization of operating lease right-of-use assets 67,915 66,842 —

Provision for bad debts

Equity in earnings of joint ventures, net of dividends 1,577 248 13,469

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Loss (gain) on sale and disposal of equipment and other 1,200 2,383 ( 2,054 )

Gain on sale of imaging centers

Gain on extinguishment of debt ( 4,047 ) — —

Gain on re-measurement of pre-existing interest — ( 768 ) ( 39,539 )

Loss on impairment 4,170 — 3,937

Amortization of cash flow hedge 3,448 — —

Non-cash change in fair value of interest rate hedge 2,528 — —

Stock-based compensation 12,405 8,730 7,662

Other non cash item in other expenses 242 ( 371 ) —

Non cash severance

Change in value of contingent consideration — ( 3,123 ) 1,749

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Other current assets 6,588 ( 3,557 ) ( 9,248 )

Other assets ( 5,425 ) ( 2,326 ) ( 1,687 )

Deferred taxes ( 611 ) ( 3,888 ) ( 6,935 )

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Deferred revenue 37,941 ( 1,082 ) ( 208 )

Accounts payable, accrued expenses and other

Accounts payable, accrued expenses and other liabilities 45,069 17,316 26,221

Net cash provided by operating activities 233,759 104,322 116,754

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Purchase of imaging facilities ( 31,265 ) ( 27,150 ) ( 73,192 )

Investment at cost

Equity investments at fair value — ( 143 ) ( 2,200 )

Purchase of property and equipment ( 94,172 ) ( 74,153 ) ( 72,180 )

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

Proceeds from sale of imaging and medical practice assets

Proceeds from sale of internal use software — — 248

Nulogix return of capital — 792 —

Cash contribution from partner in JV formation

Equity contributions in existing and purchase of interest in joint ventures ( 1,635 ) ( 103 ) ( 2,000 )

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Payments on term loan debt ( 43,296 ) ( 40,742 ) ( 33,830 )

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

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

Proceeds from paycheck protection program loans 4,023 — —

Distributions paid to noncontrolling interests ( 1,985 ) ( 3,057 ) ( 1,427 )

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Proceeds from issuance of common stock upon exercise of options — 75 20

Net cash provided by (used in) financing activities

Net cash (used in) provided by financing activities ( 45,561 ) 24,951 ( 10,869 )

EFFECT OF EXCHANGE RATE CHANGES ON CASH ( 101 ) ( 32 ) ( 69 )

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The offsetting amount due was recorded in our consolidated balance sheets under “accounts payable, accrued expenses and other.”

We executed inclusive of all acquisitions, finance lease liability/capital lease debt of approximately $ 51,000 , $ 6.7 million , and $ 5.5 million during the twelve months ended December 31, 2019 , 2018 , and 2017 .

We executed inclusive of all acquisitions, finance lease liability/capital lease debt of approximately $ 20.0 thousand, $ 0.1 million, and $ 6.7 million during the twelve months ended December 31, 2020, 2019, and 2018.

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

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

The shares were assigned a value of $ 13.9 million.

See Note 4, Facility Acquisitions and Dispositions, to the consolidated financial statements contain herein for further information.

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

See Note 4, Facility Acquisitions and Dispositions, to the consolidated financial statements contain herein for further information.

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").

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

See Note 4, Facility Acquisitions and Dispositions, for further information.

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

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The shares were ascribed a value of $ 6.0 million.

We also recorded contingent consideration valued at $ 680,000 to guarantee the share value issued for a period of six months post acquisition date, which was taken to income upon the completion of the time period.

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").

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

See Note 4, Facility Acquisitions and Dispositions, for further information.

On August 1, 2019 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.

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.

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

We also recorded contingent consideration valued at $ 0.7 million to guarantee the share value issued for a period of six months post acquisition date, which was taken to income upon the completion of the time period.

See Note 4, Facility Acquisitions and Dispositions, to the consolidated financial statements contain herein for further information.

On October 1, 2018, we obtained control over the operations of New Jersey Imaging Network (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 and recognized fair value of non controlling interest of $ 44.3 million on the date of the transaction.

We remeasured NJIN's pre-existing 49 % equity interest in NJIN upon consolidation and recognized a non cash gain of $ 39.5 million .

As such, we consolidated the financial statements of NJIN effective as of that date and recognized fair value of non controlling interest of $ 44.3 million on the date of the transaction.

We remeasured our pre-existing 49 % equity interest in NJIN upon consolidation and recognized a non cash gain of $ 39.5 million.

We also obtained control of $ 5.4 million cash in NJIN as a result of such consolidation.

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On October 1, 2018 we acquired Medical Arts Radiology for cash consideration of $ 50.9 million, the assumption of $ 2.7 million in equipment debt, and $ 8.0 million in RadNet common stock.

As part of the transaction, we recorded a contingent liability of approximately $ 700,000 to guarantee the sellers stock price stability for a period of one year from the date of acquisition.

As part of the transaction, we recorded a contingent liability of approximately $ 0.7 million to guarantee the sellers stock price stability for a period of one year from the date of acquisition.

For the year ended December 31, 2018 we recorded a $ 1.7 million charge to record the contingent liability at fair market value.

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The Company received $ 15.0 million in fixed assets and assumed $ 4.0 million in capital lease debt in January 2018 from the Company’s partner in Beach Imaging LLC.

See Note 4, Facility Acquisitions and Assets Held for Sale contained herein for further information.

We transferred approximately $ 2.5 million in net assets in April 2017 to our new joint venture, Santa Monica Imaging Group LLC.

We transferred approximately $ 4.6 million in net assets in July 2017 to a new majority owned subsidiary, Advanced Imaging at Timonium Crossing, LLC.

On August 7, 2017 we acquired Diagnostic Imaging Associates for $ 13.0 million in cash and $ 1.5 million in RadNet common stock.

On October 5, 2017 we completed our acquisition of all of the outstanding equity interests in RadSite, LLC, for $ 1.0 million in common stock and $ 856,000 in cash.

See Note 4, Facility Acquisitions and Dispositions contained herein for further information.

AND SUBSIDIARIES

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We are a national provider of freestanding, fixed-site outpatient diagnostic imaging services in the United States.

At December 31, 2019 , we operated directly or indirectly through joint ventures with hospitals, 335 centers located in California, Delaware, Florida, Maryland, New Jersey, and New York.

At December 31, 2020, we operated directly or indirectly through joint ventures with hospitals, 331 centers located in Arizona, California, Delaware, Florida, Maryland, New Jersey, and New York.

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

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Our multi-modality strategy diversifies revenue streams, reduces exposure to reimbursement changes and provides patients and referring physicians one location to serve the needs of multiple procedures.

In addition to our imaging services, we have certain other software subsidiaries which design and sell computerized systems for the imaging industry and internally develop Artificial Intelligence, and Imaging On Call LLC, which provides teleradiology services.

In addition to our imaging services, we have certain other software subsidiaries which design and sell computerized systems for the imaging industry and internally develop Artificial Intelligence suites to enhance interpretation of radiographic images.

Our operations comprise a single segment for financial reporting purposes.

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

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

At all of our centers not serviced by the Group we have entered into long-term contracts (typically 10 to 40 years in length) with independent radiology groups to provide physician services at those centers.

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

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We own the diagnostic imaging equipment and, therefore, receive 100% of the technical reimbursements associated with imaging procedures.

The radiology practice groups retain the professional reimbursements associated with imaging procedures after deducting management service fees paid to us and we have no economic controlling interest in these radiology practices as such, the financial results of these practices are not consolidated in our financial statements.

As such, the financial results of these practices are not consolidated in our financial statements.

NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

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As a result, actual amounts could materially differ from these estimates.

RECLASSIFICATION – For the year 2017, we have reclassified certain amounts within other income and expenses on the consolidated statement of operations and proceeds from issuance of debt on the consolidated statement of cash flows to conform to our 2018 and 2019 presentation.

For the year 2018, we have reclassified certain amounts within other expenses on the consolidated statement of cash flows to conform to our 2019 presentation.

For the years 2018 and 2017, we have reclassified certain amounts within our reconciliation of the statutory U.S.

federal rate and effective rates to conform to our 2019 presentation.

RECLASSIFICATION - For the year 2019, we have reclassified certain amounts previously classified as held for sale related to property and equipment and goodwill to conform to our 2020 presentation.

REVENUES – Our revenues generally relate to net patient fees received from various payors and patients themselves under contracts in which our performance obligations are to provide diagnostic services to the patients.

Revenues are recorded during the period our obligations to provide diagnostic services are satisfied.

Revenues are recorded during the period when our obligations to provide diagnostic services are satisfied.

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.

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 and the frequent changes in managed care contractual terms resulting from contract renegotiations and renewals.

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

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

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

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

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

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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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.

Our total net revenues for the years ended December 31, 2020, 2019, and 2018 are presented in the table below (in thousands):

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

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

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

Many of these restrictions

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

During the twelve months ended December 31, 2020, we received $ 43.2 million of accelerated Medicare payments, $ 5.0 million from Blue Shield, $ 26.3 million from the general distribution and $ 4.0 million from the Paycheck Protection Program established through the Coronavirus Aid, Relief and Economic Security (“CARES”) Act.

The accelerated Medicare payments are recorded under the caption “ Deferred Revenue“ in our consolidated balance sheet and will be withheld from reimbursements for services in 2021 and 2022.

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

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

At December 31, 2020, the Company had deferred $ 16.3 million of Social Security taxes.

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

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

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

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

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

During the fourth quarter of 2020, procedure volumes continued to increase and have had a positive impact on our patient revenue.

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

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.

We continuously monitor collections from our payors and record an estimated price concession based upon specific payor collection issues that we have identified and our historical experience.

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

We have 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 amounts factored under these facilities, net of discounts recorded to reflect market interest rates, was $ 9.0 million during the year ended December 31, 2019 and $ 20.5 million during the year ended December 31, 2018 .

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

The aggregate amounts factored under these facilities, net of discounts recorded to reflect market interest rates is $ 29.5 million.

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

At December 31, 2020 we have $ 20.5 million remaining to be collected on these agreements.

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

MEANINGFUL USE INCENTIVE – Under the American Recovery and Reinvestment Act of 2009, a program was enacted that provides financial incentives for providers that successfully implement and utilize electronic health record technology to improve patient care.

Our software development team in Canada developed a Radiology Information System (RIS) software platform that has been awarded meaningful use certification.

We recorded the meaningful use incentive within non-operating income.

The program ended in 2017 and we recorded approximately $ 250,000 to other income during the twelve months ended December 31, 2017 relating to this incentive.

SOFTWARE REVENUE RECOGNITION – Our subsidiary, eRAD, Inc., sells Picture Archiving Communications Systems (“PACS”) and related services, primarily in the United States.

The PACS systems sold by eRAD are primarily composed of certain elements:

hardware, software, installation and training, and support.

Sales are made primarily through eRAD’s sales force and generally include hardware, software, installation, training and first-year warranty support.

Hardware, which is not unique or special purpose, is purchased from a third-party and resold to eRAD’s customers with a small mark-up.

SOFTWARE REVENUE RECOGNITION – Our software division has developed and sells Picture Archiving Communications Systems (“PACS”) and related services.

The PACS sales are made primarily through our sales force and generally include hardware, software, installation, training and first-year warranty support.

Hardware which is not unique or special purpose, is purchased from a third-party and resold to customers with a small mark-up.

We have determined that our core software products, such as PACS, are essential to most of our arrangements as hardware, software and related services are sold as an integrated package.

Revenue is recognized when a performance obligation is satisfied by transferring a promised good or service to a customer.

For the years ended December 31, 2019 , 2018 and 2017 , we recorded approximately $ 10.1 million , $ 6.8 million, and $ 6.1 million , respectively, in revenue related to our eRAD business which is included in net service fee revenue in our consolidated statement of operations.

At December 31, 2019 we had a deferred revenue liability of approximately $ 1.3 million associated with eRAD sales which we expect to recognize into revenue over the next 12 months.

SOFTWARE DEVELOPMENT COSTS – When we develop our own software solutions through our eRad subsidiary, we capitalize and amortize those costs over their useful life.

Costs related to the research and development of new software products

and enhancements to existing software products all for resale to our customers are expensed as incurred.

If we enter into agreements where we license our software to outside customers, we have recorded the receipt of these funds against the capitalized software costs.

Our most major software development to date was the Radiology Information System, a front desk patient tracking software, which had total capitalized costs of approximately $ 6.4 million and was fully amortized as of December 31, 2018 .

For the years ended December 31, 2020, 2019 and 2018, we recorded approximately $ 8.6 million, $ 10.1 million, and $ 6.8 million, respectively, in revenue related to our software business which is included in net service fee revenue in our consolidated statement of operations.

At December 31, 2020 we had deferred revenue of approximately $ 1.2 million associated with these sales which we expect to recognize into revenue over the next 12 months.

SOFTWARE DEVELOPMENT COSTS – When we develop our own software and artificial intelligence solutions we capitalize and amortize those costs over their useful life.

Costs related to the research and development of new software products and enhancements to existing software intended for resale to our customers are expensed as incurred.

CONCENTRATION OF CREDIT RISKS – Financial instruments that potentially subject us to credit risk are primarily cash equivalents and accounts receivable.

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See Note 8, Revolving Credit Facility, Notes Payable, and Capital Leases for more information on our revolving lines of credit.

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.

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

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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.

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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.

We tested both goodwill and trade name intangibles for impairment on October 1, 2020.

However, 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.

During the testing of goodwill and trade name intangibles at October 1, 2018, our Teleradiology reporting unit, Imaging On Call, (IOC), experienced a reduction of professional medical group clients and a loss of a contract with a major local health provider during 2018.

This affected its estimated fair value and resulted in impairment charges to our 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 its

trade name of approximately $ 100,000 .

This affected its estimated fair value and resulted in impairment charges to our 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 its trade name of approximately $ 0.1 million.

The estimated fair value of IOC reporting unit was determined by using the discounted cash flow method.

LONG-LIVED ASSETS – We evaluate our long-lived assets (property and equipment) and intangibles, other than goodwill, for impairment when events or changes indicate the carrying amount of an asset may not be recoverable.

Accounting standards requires that if the sum of the undiscounted expected future cash flows from a long-lived asset or definite-lived intangible is less than the carrying value of that asset, an asset impairment charge must be recognized.

Accounting standards requires that if the sum of the undiscounted expected future cash flows from a long-lived asset or definite-lived

intangible is less than the carrying value of that asset, an asset impairment charge must be recognized.

The amount of the impairment charge is calculated as the excess of the asset’s carrying value over its fair value, which generally represents the discounted future cash flows from that asset or in the case of assets we expect to sell, at fair value less costs to sell.

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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.

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

Our IBR used to discount the stream of lease payments is closely related to the interest rates charged on our collateralized debt obligations and is adjusted when those rates experience a substantial change.

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

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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.

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 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.

See Note 9, Leases, for more information.

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We and our affiliated physicians carry an annual medical malpractice insurance policy that protects us for claims that are filed during the policy year and that fall within policy limits.

The policy has a deductible for which is $ 10,000 per incidence for the years ending December 31, 2019 and December 31, 2018 , respectively.

The policy has a deductible which is $ 10,000 per incidence for the years ended December 31, 2020 and December 31, 2019, respectively.

In December 2008, in order to eliminate the exposure for claims not reported during the regular malpractice policy period, we purchased a medical malpractice claims made tail policy, which provides coverage for any claims reported in the event that our medical malpractice policy expires.

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We have recorded liabilities as of December 31, 2020 and 2019 of $ 6.6 million and $ 4.9 million, respectively, for the estimated future cash obligations associated with the unpaid portion of the medical and dental claims incurred by our participants.

Additionally, we entered into an agreement with Blue Shield for a stop loss policy that provides coverage for any claims that exceed $ 250,000 up to a maximum of $ 1.0 million in order for us to limit our exposure for unusual or catastrophic claims.

Additionally, we entered into an agreement with Blue

Shield for a stop loss policy that provides coverage for any claims that exceed $ 250,000 up to a maximum of $ 1.0 million in order for us to limit our exposure for unusual or catastrophic claims.

EMPLOYEE BENEFIT PLAN – We adopted a profit-sharing/savings plan pursuant to Section 401(k) of the Internal Revenue Code that covers substantially all non-professional employees.

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Employee contributions vest immediately.

January 1, 2017, RadNet provides a matching contribution in the amount to a maximum of 1.0 % per 4.0 % of employee contribution.

RadNet contributed $ 2.6 million for the year ended December 31, 2018 and is expected to contribute approximately $ 3.0 million for the plan year ended December 31, 2019 .

We can elect to provide a matching contribution in the amount to a maximum of 1.0 % per 4.0 % of employee contribution, and have done so since 2017.

We contributed $ 2.9 million in matching for the year ended December 31, 2019 and have elected no t to fund a matching contribution for the plan year ended December 31, 2020.

LOSS AND OTHER UNFAVORABLE CONTRACTS – We assess the profitability of our contracts to provide management services to our contracted physician groups and identify those contracts where current operating results or forecasts indicate probable future losses.

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and the remaining balance of approximately $ 558,000 was written off upon ending a contract with a physician group.

See Note 4, Facility Acquisitions, Assets Held for Sale and Dispositions for further information on the purchase of HVRA.

Related to acquisition activity, we entered into certain operating lease commitments for facilities where the fair market rent differs from the lease contract rate.

We recorded an unfavorable contract liability representing the difference between the total value of the fair market rent and the contract rent over the current term of the lease applicable from the date of acquisition.

As of December 31, 2018, the unfavorable contract liability on these leases was $ 2.2 million.

This balance was transferred to operating lease right-of-use assets in conjunction with adoption of Accounting Standard Update No.

2016-02, Leases, which amended the accounting standards for leases.

See Note 9, Leases, for further information.

See Note 4, Facility Acquisitions and Dispositions for further information on the purchase of HVRA.

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.

See Note 11 Stock-Based Compensation for more information.

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.

FOREIGN CURRENCY TRANSLATION – The functional currency of our foreign subsidiaries is the local currency.

In accordance with ASC 830, Foreign Currency Matters , assets and liabilities denominated in foreign currencies are translated using the exchange rate at the balance sheet dates.

Assets and liabilities denominated in foreign currencies are translated using the exchange rate at the balance sheet dates.

Revenues and expenses are translated using average exchange rates prevailing during the reporting period.

Any translation adjustments resulting from this process are shown separately as a component of accumulated other comprehensive income (loss).

Foreign currency transaction gains and losses are included in the determination of net income.

COMPREHENSIVE INCOME (LOSS) – Accounting guidance establishes rules for reporting and displaying comprehensive income (loss) and its components.

Gains and losses related to the foreign currency portion of international transactions are included in the determination of net income.

COMPREHENSIVE (LOSS) INCOME – Accounting guidance establishes rules for reporting and displaying comprehensive income (loss) and its components.

Our unrealized gains or losses on foreign currency translation adjustments and our interest rate cap and swap agreements are included in comprehensive income (loss).

The components of comprehensive income (loss) for the three years in the period ended December 31, 2020 are included in the consolidated statements of comprehensive income (loss).

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.

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.

We believe that the amount or any estimable range of reasonably possible or probable loss will not, either individually or in the aggregate, have a material adverse effect on our business and consolidated financial statements.

Based on current information, we do not believe that reasonably possible or probable losses associated with pending legal proceedings would either individually or in the aggregate, have a material adverse effect on our business and consolidated financial statements.

However, the outcome of these matters is inherently uncertain.

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In the fourth quarter of 2016, we entered into two forward interest rate cap agreements ("2016 Caps").

The 2016 Caps will mature in September and October 2020.

The 2016 Caps matured in September and October 2020.

The 2016 Caps had notional amounts of $ 150,000,000 and $ 350,000,000 , respectively, which were designated at inception as cash flow hedges of future cash interest payments associated with portions of our variable rate bank debt.

Under these arrangements, we purchased a cap on 3 month LIBOR at 2.0 %.

We are liable for a $ 5.3 million premium to enter into the caps which is being accrued to current liabilities on our balance sheet and paid over the life of the 2016 Caps.

At inception, we designated our 2016 Caps as cash flow hedges of floating-rate borrowings.

In accordance with ASC Topic 815, derivatives that have been designated and qualify as cash flow hedging instruments are reported at fair value.

We were liable for a $ 5.3 million premium to enter into the caps which accrued to current liabilities on our balance sheet and paid over the life of the 2016 Caps.

The gain or loss of the hedge (i.e.

change in fair value) is reported as a component of accumulated other comprehensive income in the consolidated statement of equity.

See Fair Value Measurements section below for the fair value of the 2016 Caps at December 31, 2019 .

A tabular presentation of the effect of derivative instruments on our consolidated statement of comprehensive income (loss), net of taxes is as follows (amounts in thousands):

change in fair value) was reported as a component of accumulated other comprehensive income (loss) in the consolidated statement of equity.

A tabular presentation of the effect of derivative instruments on our consolidated statement of comprehensive (loss) income, net of taxes is as follows (amounts in thousands):

Interest Rate Contracts

For the twelve months ended

Amount of (Loss) Gain Recognized on Derivative, net of taxes

Location of Loss Recognized

For the twelve months ended Amount of Gain (Loss) Recognized on Derivative, net of taxes Location of Gain (Loss) Recognized

in Income on Derivative

December 31, 2019

Other Comprehensive Loss

December 31, 2018

Other Comprehensive Income

December 31, 2017

Other Comprehensive Loss

December 31, 2020 $ 788 Other Comprehensive Income

December 31, 2019 ( 4,383 ) Other Comprehensive Loss

December 31, 2018 2,876 Other Comprehensive Income

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

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They will mature in October 2023 for the two smaller notional and October 2025 for the two larger notional.

Under these arrangements, we arranged the 2019 swaps with locked in 1 month LIBOR rates at 1.96 % for the two $ 50,000,000 notional and at 2.05 % for the two $ 200,000,000 notional.

Under these arrangements, we arranged the 2019 swaps with locked in 1 month LIBOR rates at 1.96 % for the $ 100,000,000 notional and at 2.05 % for the $ 400,000,000 notional.

As of the effective date, we will be liable for premium payments if interest rates decline below arranged rates, but will receive interest payments if rates remain above the arranged rates.

At inception, we designated our 2019 Swaps as cash flow hedges of floating-rate borrowings.

In accordance with ASC Topic 815, derivatives that have been designated and qualify as cash flow hedging instruments are reported at fair value.

The gain or loss of the hedge (i.e.

In accordance with accounting guidance, derivatives that have been designated and qualify as cash flow hedging instruments are reported at fair value.

The gain or loss on the effective portion of the hedge (i.e.

change in fair value) is reported as a component of comprehensive loss in the consolidated statement of equity.

See Fair Value Measurements section below for the fair value of the 2019 swaps at December 31, 2019 .

For the twelve months ended December 31, 2019

Effective Interest Rate Swap

Amount of Loss Recognized on Derivative, net of taxes

Location of Loss Recognized

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

The cash flows for both our $ 400,000,000 notional interest rate swap contract locked in at 2.05 % due October 2025 and our $ 100,000,000 notional interest rate swap contract locked in at 1.96 % do not match the cash flows for our First Lien Term Loans and so we have determined that they are not currently effective as cash flow hedges.

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

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

This amount will be amortized to interest expense through October 2023 at approximately $ 0.4 million per month and continuing at approximately $ 0.3 million through October 2025.

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

Interest Rate Contracts - Effective Portion

For the twelve months ended Amount of Loss Recognized on Derivative, net of taxes Location of Loss Recognized

in Income on Derivative

Interest rate contracts

Other Comprehensive Loss

December 31, 2020 $( 20,160 ) Other Comprehensive Loss

December 31, 2019 $( 5,870 ) Other Comprehensive Loss

A tabular presentation of the effect of derivative instruments on our statement of operations of the 2019 Swaps for the Swaps that became ineffective in 2020 is as follows (amounts in thousands):

Interest Rate Contracts - Ineffective Portion

For the twelve months ended Amount of loss recognized in income on derivative (current period ineffective portion) Location of loss recognized in Income on derivative (current period ineffective portion) Amount of loss reclassified from accumulated OCI into income (prior period effective portion) Location of loss reclassified from accumulated OCI into income (prior period effective portion)

December 31, 2020 $( 2,528 ) Other Income (Expense) $( 3,448 ) Equity and Interest Expense

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

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As of December 31, 2020

Level 1 Level 2 Level 3 Total

Current and long term liabilities

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As of December 31, 2019

Current assets

Level 1 Level 2 Level 3 Total

Current and long term liabilities

2016 CAPS - Interest Rate Contracts $ — $ 1,081 $ — $ 1,081

2019 SWAPS - Interest Rate Contracts $ — $ 9,477 $ — $ 9,477

The estimated fair value of these contracts was determined using Level 2 inputs.

More specifically, the fair value was determined by calculating the value of the difference between the fixed interest rate of the interest rate swaps and the counterparty’s forward LIBOR curve.

More specifically, the fair value was determined by calculating the value of the difference between the fixed interest rate of the interest rate swaps and the

counterparty’s forward LIBOR curve.

The forward LIBOR curve is readily available in the public markets or can be derived from information available in the public markets.

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As of December 31, 2020

Total Fair Value

Total Face Value

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

Term Loan Agreement and First Lien Term Loans $ — $ 661,640 $ — $ 661,640 $ 662,403

As of December 31, 2019

Total Face Value

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

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

Our Barclays revolving credit facility had no aggregate principal amount outstanding as of December 31, 2019 and a $ 28.0 million principal amount outstanding as of December 31, 2018 .

Our SunTrust revolving credit facility had no aggregate principal amount outstanding for the periods ending December 31, 2019 and December 31, 2018 , respectively.

Our Barclays revolving credit facility had no aggregate principal amount outstanding as of December 31, 2020 and December 31, 2019, respectively.

Our SunTrust revolving credit facility had no aggregate principal amount outstanding as of December 31, 2020 and December 31, 2019, respectively.

The estimated fair values of our long-term debt, which is discussed in Note 8, was determined using Level 2 inputs for the Barclays and SunTrust term loans.

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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

BASIC NET INCOME PER SHARE ATTRIBUTABLE TO RADNET, INC.

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

COMMON STOCKHOLDERS

Weighted average number of common shares outstanding during the period 50,891,791 49,674,858 48,114,275

Basic net income per share attributable to RadNet, Inc.

Basic net (loss) income per share attributable to RadNet, Inc.

common stockholders $ ( 0.29 ) $ 0.30 $ 0.67

DILUTED NET INCOME PER SHARE ATTRIBUTABLE TO RADNET, INC.

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

COMMON STOCKHOLDERS

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Weighted average number of common shares used in calculating diluted net income per share 50,891,791 50,244,006 48,678,999

Diluted net income per share attributable to RadNet, Inc.

Diluted net (loss) income per share attributable to RadNet, Inc.

common stockholders $ ( 0.29 ) $ 0.29 $ 0.66

Stock options excluded from the computation of diluted per share amounts:

Weighted average shares for which the exercise price exceeds average market price of common stock

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

Nonvested restricted stock subject to service vesting 329,159 — —

Shares issuable upon the exercise of stock options 554,444 — —

EQUITY INVESTMENTS AT FAIR VALUE- As of December 31, 2020, we have three equity investments for which a fair value is not readily determinable and we do not have significant influence and therefore the total amounts invested are recognized at cost.

In accordance with accounting guidance , if there is no readily determinable fair value, the guidance allows entities the ability to measure investments at cost less impairment, whereby impairment is based on a qualitative assessment.

Medic Vision:

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

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

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

Turner Imaging:

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 .

WhiteRabbit.ai Inc:

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.

INVESTMENT IN JOINT VENTURES – We have 13 unconsolidated joint ventures with ownership interests ranging from 35 % to 55 %.

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No indicators of impairment existed as of December 31, 2020.

Joint venture formations

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 control of our Arizona centers.

We hold a 49 % economic interest and CHI holds the majority 51 % economic interest, respectively in ADRG and 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.

Joint venture investment contribution

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

We maintain our 35 % economic interest in the partnership.

Sale of joint venture interest:

On April 1, 2017, we formed in conjuncture with Cedars Sinai Medical Center (“CSMC”) the Santa Monica Imaging Group, LLC (“SMIG”), consisting of two multi-modality imaging centers located in Santa Monica, CA with RadNet holding a 40 % economic interest and CSMC holding a 60 % economic interest.

On April 1, 2017, we formed in conjunction with Cedars Sinai Medical Center (“CSMC”) the Santa Monica Imaging Group, LLC (“SMIG”), consisting of two multi-modality imaging centers located in Santa Monica, CA with RadNet holding a 40 % economic interest and CSMC holding a 60 % economic interest.

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

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

On January 1, 2019, CSMC purchased from the us an additional 5 % economic interest in SMIG valued at $ 134,000 .

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

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

See Note 4, Facility Acquisitions and Dispositions, to the consolidated financial statements contain herein for further information.

Joint venture investment and financial information

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Equity in earnings in these joint ventures 8,350

Disposition of equity method interest upon acquisition of control in NJIN

Distribution of earnings

Balance as of December 31, 2018

Equity contributions in existing and purchase of interest in joint ventures

Equity in earnings in these joint ventures

Sale of ownership interest ( 134 )

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Balance as of December 31, 2019 $ 34,470

Equity contributions in existing and purchase of interest in joint ventures 1,635

Equity in earnings in these joint ventures 7,945

Distribution of earnings ( 9,522 )

Balance as of December 31, 2020 $ 34,528

We charged management service fees from the centers underlying these joint ventures of approximately $ 11.3 million, $ 11.4 million and $ 13.8 million for the years ended December 31, 2020, 2019 and 2018, respectively .

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Balance Sheet Data:

December 31, 2020 2019

Current assets $ 27,085 $ 27,427

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Total value of RadNet joint venture interests $ 34,528 $ 34,470

Total book value of other joint venture partner interests

2020 2019 2018

Net revenue $ 101,921 $ 108,051 $ 155,820

Net income $ 16,850 $ 18,624 $ 24,596

NOTE 3 - RECENT ACCOUNTING STANDARDS

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, 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

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).

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It also clarifies and simplifies other areas of the standard.

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

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 as well as the timing 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 its consolidated financial statements.

NOTE 4 – FACILITY ACQUISITIONS, ASSETS HELD FOR SALE AND DISPOSITIONS

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.

NOTE 4 – FACILITY ACQUISITIONS AND DISPOSITIONS

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 regulatory approval is obtained, but will be assessed for impairment annually, or more frequently if indicators of impairment become present

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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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 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 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 VIE entities, 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.

Joint venture formations

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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.

Assets held for sale

Effective January 1, 2018 we agreed to sell certain assets of four women’s imaging centers to MemorialCare Medical Foundation.

The sale was initially anticipated within 12 months of the effective date.

We are currently in discussions with the buyer and expect to complete the sale in 2020.

The following table summarizes the major categories of assets which remain classified as held for sale in the accompanying consolidated balance sheets at December 31, 2019 (in thousands):

Property and equipment, net

Total assets held for sale

Upon formation, RadNet held a 40 % economic interest and CSMC held a 60 % economic interest.

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 .

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.

On September 1, 2017 we completed the equity sale of a wholly owned breast oncology practice, Breastlink Medical Group, Inc., to Verity Medical Foundation for approximately $ 2.8 million .

We recorded a gain of approximately $ 845,000 and incurred severance expense of approximately $ 1.2 million on this transaction.

On July 1, 2017 we formed a majority owned subsidiary, Advanced Imaging at Timonium Crossing, LLC, in conjunction with the University of Maryland St.

Joseph Medical Center.

As part of that transaction, we sold a 25 % noncontrolling interest in an imaging center of our wholly owned subsidiary, Advanced Imaging Partners, Inc., to the University of Maryland St.

Joseph Medical Center for $ 3.9 million .

On the date of sale, the net book value of the 25 % interest was $ 1.1 million and the proceeds in excess of net book value amounting to $ 2.8 million were recorded to equity.

On April 28, 2017 we completed the sale of five imaging centers operating in Rhode Island to Rhode Island Medical Imaging, Inc.

for approximately $ 4.5 million .

We recorded a gain of approximately $ 1.9 million in the second quarter with regard to this transaction and have no remaining imaging centers in the state.

On April 1, 2017 we received from Cedars Sinai Medical Center $ 5.9 million in exchange for a 25 % noncontrolling interest in the West Valley Imaging Group, LLC (“WVI”).

The determined net book value of the 25 % interest was approximately $ 3.0 million .

The proceeds in excess of the net book value, amounting to $ 1.8 million net of taxes, were recorded to equity.

On April 1, 2017 we completed the sale of 2 wholly owned oncology practices to Cedars Sinai Medical Center in connection with the sale of non-controlling interest of the WVI subsidiary described above for approximately $ 1.2 million .

We recorded a gain of approximately $ 361,000 on this transaction.

On June 1, 2020 we completed our sale of certain assets of our Imaging On Call subsidiary to RadVantage P.C.

(an unrelated corporation) for approximately $ 1.0 thousand.

With this transaction, we have exited the teleradiology business.

NOTE 5 – GOODWILL AND OTHER INTANGIBLE ASSETS

Goodwill is recorded as a result of business combinations.

Activity in goodwill for the years ended December 31, 2018 and 2019 is provided below (in thousands):

Balance as of December 31, 2017

Goodwill acquired through the acquisition of Imaging Services Company of New York, LLC

Goodwill acquired through the acquisition of certain assets of MemorialCare Medical Foundation

Goodwill transferred to assets held for sale

Goodwill acquired through the acquisition of Women's Imaging Specialists in Healthcare

Goodwill acquired through the acquisition of Valley Metabolic Imaging

Goodwill acquired through the acquisition of Sierra Imaging Associates

Goodwill disposed through the sale of plastic surgery unit

Goodwill acquired through the acquisition of Washington Heights Medical Management

Goodwill acquired through the acquisition of Medical Arts Radiological Group, P.C.

Goodwill acquired through the acquisition of Arcadia Radiology Imaging Services, LLC

Goodwill acquired through the acquisition of Southern California Diagnostic Imaging, Inc.

Goodwill acquired through the acquisition of Orange County Diagnostics Imaging Center, Inc.

Goodwill acquired through assuming operational control of New Jersey Imaging Network, LLC

Goodwill impaired in the Imaging On Call reporting unit

Activity in goodwill for the years ended December 31, 2019 and December 31, 2020 is provided below (in thousands):

Balance as of December 31, 2018 $ 418,093

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Goodwill acquired through the acquisition of Nulogix 1,337

Goodwill transferred from assets held for sale 992

Balance as of December 31, 2019 $ 441,973

Goodwill acquired through the acquisition of Olney Open MRI, LLC 601

Goodwill acquired through the acquisition of MRI at Woodbridge, LLC 1,833

Goodwill acquired through the acquisition of DeepHealth, Inc.

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

Goodwill acquired through the acquisition of ZP Ozone Park, LLC 828

Goodwill acquired through the acquisition of ZP Elmhurst LLC 1,463

Balance as of December 31, 2020 $ 472,879

The amount of goodwill from these acquisitions that is deductible for tax purposes as of December 31, 2020 is $ 148.3 million.

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The following table shows annual amortization expense, by asset classes that will be recorded over the next five years (in thousands):

Weighted average amortization period remaining in years

2021 2022 2023 2024 2025 Thereafter Total Weighted average amortization period remaining in years

Management Service Contracts $ 2,287 $ 2,287 $ 2,287 $ 2,287 $ 2,287 $ 13,533 $ 24,968 10.9

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Property and equipment and accumulated depreciation and amortization are as follows (in thousands):

Land $ 250 $ 250

Medical equipment 480,631 426,682

Computer and office equipment, furniture and fixtures 132,446 120,490

Software development costs

Leasehold improvements 399,253 377,676

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Accounts payable and accrued expenses were comprised of the following (in thousands):

December 31, 2020 2019

Accounts payable $ 70,071 $ 64,300

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Accrued professional fees 24,250 17,429

NOTE 8 - NOTES PAYABLE, REVOLVING CREDIT FACILITY AND CAPITAL LEASES

Revolving credit facility, notes payable, and capital lease obligations :

December 31, 2019

December 31, 2018

Total $ 236,684 $ 207,585

NOTE 8 - CREDIT FACILITIES AND NOTES PAYABLE

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

December 31, 2020 December 31, 2019

First Lien Term Loans collateralized by RadNet's tangible and intangible assets $ 611,028 $ 649,824

Discount on First Lien Term Loans ( 9,699 ) ( 13,579 )

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

Revolving Credit Facility

Promissory note payable to the former owner of a practice acquired at an interest rate of 1.5% due through 2019

SunTrust Term Loan Agreement collateralized by NJIN's tangible and intangible assets 51,375 55,875

Equipment notes payable at interest rates ranging from 4.4 % to 5.6 %, due through 2020, collateralized by medical equipment

Obligations under capital leases at interest rates ranging from 3.7% to 9.3%, due through 2022, collateralized by medical and office equipment (1)

Total debt obligations 652,704 692,395

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Long-term portion debt obligations $ 612,913 $ 652,704

(1) Obligations under capital leases were transferred to Finance Lease Liability at January 1, 2019 in accordance with the adoption of Accounting Standards Update No 2016-02, Leases (Topic 842) .

See Note 9, Leases, for more information.

The following is a listing of annual principal maturities of notes payable exclusive of all related discounts and repayments on our revolving credit facilities for years ending December 31 (in thousands):

2021 $ 43,670

Total notes payable obligations $ 662,403

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.

As of December 31, 2019 , we were in compliance with all covenants under our credit facilities.

Deferred financing costs at December 31, 2019 , net of accumulated amortization, was $ 1.6 million and is specifically related to our Barclays Revolving Credit Facility.

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 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

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

Term Loan Agreement

SunTrust Term Loan Agreement 51,375 — 51,375

Total Term Loans $ 662,403 $ ( 9,699 ) $ 652,704

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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 related to our consolidated subsidiary NJIN 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

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.

Senior Credit Facilities:

Barclays Credit Facilities

At December 31, 2020, our Barclays credit facilities were comprised of one tranche of term loans (“First Lien Term Loans”) and a revolving credit facility of $ 195.0 million (the “Barclays Revolving Credit Facility”), both of which are provided pursuant to the Amended and Restated First Lien Credit and Guaranty Agreement dated July 1, 2016, among RadNet, Barclays Bank plc, as administrative agent, and the lenders identified therein (as amended, the "First Lien Credit Agreement").

Deferred financing costs at December 31, 2020, net of accumulated amortization, was $ 1.8 million and is specifically related to our Barclays Revolving Credit Facility.

Our First Lien Term Loans bear interest at either an Adjusted Eurodollar Rate or a Base Rate (each as defined in the First Lien Credit Agreement) plus an applicable margin according to the following schedule:

First Lien Leverage Ratio Eurodollar Rate Spread Base Rate Spread

> 5.50x 4.50 % 3.50 %

> 4.00x but ≤ 5.50x 3.75 % 2.75 %

>3.50x but ≤ 4.00x 3.50 % 2.50 %

≤ 3.50x 3.25 % 2.25 %

At December 31, 2020 the effective Adjusted Eurodollar Rate and the Base Rate for the First Lien Term Loans was 1.00 % and 3.25 %, respectively and the applicable margin for Adjusted Eurodollar Rate and Base Rate borrowings was 3.75 % and 2.75 %, respectively.

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

Maturity Date.

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

Additional Borrowing.

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

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 First Lien Term Loans will mature on July 1, 2023 unless otherwise accelerated under the terms of the First Lien Credit Agreement.

SunTrust Credit Facilities:

At December 31, 2020, our SunTrust credit facilities, which relate to our consolidated subsidiary The New Jersey Imaging Network, L.L.C.("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 Amended and Restated revolving Credit and Term Loan Agreement dated August 31, 2018, among NJIN, as borrower, with SunTrust Bank, as

administrative agent, and the lenders identified therein (as amended, the "SunTrust Credit Agreement").

Our SunTrust Term Loan bears interest at either an Adjusted LIBOR Rate or a Base Rate (each as defined in the SunTrust Credit Agreement), plus an applicable margin according to the following schedule:

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

I Greater than or equal to 3.00 :1.00

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

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

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

V Less than 1.50 :1.00

The loans and other obligations outstanding under the SunTrust Credit Agreement currently bear interest at a three month LIBOR election at 0.22 % plus an applicable margin and fees based on Pricing Level III described above.

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.

Revolving Credit Facilities:

Barclays Revolving Credit Facility:

Revolving loans borrowed under the Barclays Revolving Credit Facility bear interest at either an Adjusted Eurodollar Rate or a Base Rate (in each case, as more fully defined in the First Lien Credit Agreement) plus an applicable margin.

The applicable margin for borrowing under the Barclays Revolving Credit Facility varies based on our leverage ratio in accordance with the same schedule set forth above for First Lien Term Loans.

As of December 31, 2020, the effective interest rate payable on revolving loans under the Barclays Revolving Credit Facility was 6.00 %.

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

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

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

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

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

SunTrust Revolving Credit Facility:

The SunTrust Credit Agreement established 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 Credit Agreement, or (iii) the date on which all amounts outstanding under the SunTrust Credit Agreement have been declared or have automatically become due and payable (whether by acceleration or otherwise).

As of December 31, 2020, NJIN had no borrowings under the SunTrust Revolving Credit Facility.

Recent Amendments to Credit Facilities

Barclays Credit Facilities:

On August 28, 2020, RadNet Management, Inc.

and RadNet, Inc.

entered into Amendment No.

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

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

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

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

(i) Amendment No.

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

and (ii) Amendment No.

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

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

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

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

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

Amounts capitalized will be amortized over the remaining term of the First Lien Credit Agreement.

Paycheck Protection Program

The Paycheck Protection Program (PPP) includes funds available for loans to small business and Medicare providers to support operations during the COVID-19 pandemic.

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

We received our loans based on being a Medicare provider.

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

rent, utilities, telephone).

The loans have a 1.0 % fixed interest rate and are due in 2 years.

The loans are eligible for forgiveness subject to salary limitations and employee retention levels.

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

We accounted for the funds received as debt and recorded a liability for the full amount of proceeds received and accrued interest over the term of the loans.

In December 2020 we met the eligibility requirements for forgiveness and the loans were written off to gain on debt extinguishment.

NOTE 9 – LEASES

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We also 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.

The adoption of the standard had a material impact on our condensed consolidated balance sheets, but did not have material impact on our condensed consolidated income statements or cash flows.

Adoption of the standard resulted in the recognition of an operating lease liability of $ 455.5 million .

Operating lease ROU assets were recorded in the amount of $ 419.0 million .

Inclusive in the adoption was the transfer of $ 35.3 million in deferred rent liability and $ 792,000 in unfavorable rental contract liabilities to operating lease ROU assets.

For finance leases, the effect of the adoption amounted to a finance lease liability of $ 12.1 million , which was transfered from capital lease debt and a finance right of use assets in the amount of $ 14.1 million which remained in property, plant and equipment.

The adoption of the standard had a material impact on our consolidated balance sheets, but did not have material impact on our consolidated income statements or cash flows.

Lease Liability

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Additionally, we have operating and finance leases for certain medical and office equipment, with lease terms generally lasting from 5 to 8 years.

Our Incremental Borrowing Rate ("IBR") used to discount the stream of lease payments

is closely related to the interest rates charged on our collateralized debt obligations and our IBR is adjusted when those rates experience a substantial change.

Our Incremental Borrowing Rate ("IBR") used to discount the stream of lease payments is closely related to the interest rates charged on our collateralized debt obligations and our IBR is adjusted when those rates experience a substantial change.

The components of lease expense were as follows:

Twelve months ended

Years ended December 31,

(In thousands) 2020 2019

December 31, 2019

Operating lease cost $ 99,323 $ 95,348

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Supplemental cash flow information related to leases was as follows:

Twelve months ended

Years ended December 31,

(In thousands) 2020 2019

December 31, 2019

Cash paid for amounts included in the measurement of lease liabilities:

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Operating leases (1)

106,099 482,399

Financing leases 24 14,105

(1) Amounts for the twelve months ended December 31, 2019 include the transition adjustment for the adoption of Topic 842 discussed in Note 3, Recent Account Standards, for further information.

(1) Amounts for the twelve months ended December 31, 2019 include the transition adjustment for the adoption of Topic 842.

As previously disclosed in our 2018 Annual Report on Form 10-K and under the previous lease accounting, rental expense for the year ended December 31, 2018 was $ 83.0 million.

Supplemental balance sheet information related to leases was as follows:

(In thousands, except lease term and discount rates)

December 31, 2019

(In thousands, except lease term and discount rates) December 31,

Operating Leases

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(In thousands)

Year Ending December 31,

Operating Financing

Year Ending December 31, Leases Leases

2021 $ 97,307 $ 2,654

2022 91,479 719

2023 83,648 14

2024 69,686 13

2025 59,469 4

Thereafter 316,112 2

Total Lease Payments 717,701 3,406

Less imputed interest ( 188,811 ) ( 85 )

Total $ 528,890 $ 3,321

As of December 31, 2020, we have additional operating leases for facilities and medical equipment that have not yet commenced of approximately $ 8.8 million.

These operating leases will commence in 2021 with lease terms of 3 to 15 years.

As previously disclosed in our 2018 Annual Report on Form 10-K and under the previous lease accounting, maturities of operating lease liabilities were as follows as of December 31, 2018 (in thousands):

NOTE 10 – INCOME TAXES

For the years ended December 31, 2020, 2019 and 2018, we recognized income tax expense comprised of the following (in thousands):

2020 2019 2018

Federal current tax $ ( 256 ) $ ( 161 ) $ ( 765 )

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Years Ended December 31,

2020 2019 2018

Federal tax $ ( 179 ) $ 6,231 $ 8,256

State franchise tax, net of federal benefit 779 3,891 1,332

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Changes in valuation allowance ( 33 ) ( 462 ) 1,760

Tax Cuts and Jobs Act

Return to provision ( 2,252 ) ( 1,324 ) 1,494

PPP Loan ( 850 ) — —

Gain on change in control — — ( 8,303 )

Deferred true-ups and other 4,839 ( 761 ) ( 4,254 )

Uncertain tax provisions 1,036 ( 217 ) 1,046

Other reconciling items 2 21 ( 171 )

Income tax expense $ 895 $ 6,229 $ 394

Pursuant to the federal tax legislation that was enacted on December 22, 2017 ("Tax Act"), the Company re-measured its existing deferred tax assets and liabilities based on 21% , the current rate at which they are expected to reverse in the future.

In 2017, the Company recorded provisional amounts for certain enactment-date efforts of the Act by applying the guidance in SAB 118 because it had not yet completed our enactment-date effects of the Act.

The Company has completed analysis of Tax Act's income tax effects.

In total, the Company recorded a non-cash charge of 13.6 million , which is included as a component of income tax expense from continuing operations in 2017.

Upon further analysis of certain aspects of the Tax Act and refinement of the calculations during the 12 months ended December 31, 2018 , the Company found an immaterial adjustment was necessary.

Deferred income taxes reflect the net tax effects of temporary differences between carrying amounts of assets and liabilities for financial and income tax reporting purposes and operating loss carryforwards.

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Operating lease liability 124,139 126,546

Straight-Line rent adjustment

Unfavorable contract liability

Equity compensation 1,903 1,374

Allowance for doubtful accounts 21,284 27,220

Other 11,512 4,616

Valuation allowance ( 5,315 ) ( 5,348 )

2 unchanged sentences

Property and equipment ( 24,298 ) ( 6,450 )

Goodwill ( 28,457 ) ( 24,637 )

Intangibles ( 9,608 ) ( 6,669 )

Operating lease right-of-use asset ( 112,956 ) ( 115,364 )

Non accrual experience method reserve

Other ( 6,619 ) ( 5,510 )

Total Deferred Tax Liabilities $ ( 181,938 ) $ ( 158,630 )

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As of December 31, 2020, the Company had federal net operating loss carryforwards of approximately $ 251.6 million, which comprise of definite and indefinite net operating losses.

We had federal net operating loss carryforwards of approximately $ 124.7 million , which expire at various intervals from the years 2023 to 2037, and had carryforwards of $ 11.5 million of net operating losses generated in 2018, which do not expire.

We had federal net operating loss carryforwards of approximately $ 186.2 million, which expire at various intervals from the years 2023 to 2037, and had carryforwards of $ 65.4 million of net operating losses which do not expire.

Federal net operating losses generated following December 31, 2017 carryover indefinitely and may generally be used to offset up to 80% of future taxable net income.

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income tax examinations by tax authorities for years before 2015.

We do not anticipate the results of any open examinations would result in a material change to its financial position.

We are currently under audit in the state of California for the tax years of 2016 and 2017.

It is too early to assess the impact such audits may have on the financial position of the Company, however we do not anticipate the results of any open examinations would result in a material change to our financial position.

At December 31, 2020, the Company has unrecognized tax benefits of $ 5.5 million of which $ 4.4 million will affect the effective tax rate if recognized.

A reconciliation of the total gross amounts of unrecognized tax benefits for the years ended are as follows (in thousands):

2020 2019 2018

Balance at beginning of year $ 4,320 $ 4,629 $ 3,615

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Balance at end of year $ 5,484 $ 4,320 $ 4,629

We believe it is reasonably possible it will not materially reduce its unrecognized tax benefits within the next twelve months.

The Company recognizes accrued interest and penalties related to unrecognized tax benefits in income tax expense.

During the year ended December 31, 2019 the Company accrued approximately $ 30,000 of interest and penalties.

As of December 31, 2019 , accrued interest and penalties amounted to approximately $ 300,000 .

During the year ended December 31, 2020 the Company accrued approximately $ 0.1 million of interest and penalties.

As of December 31, 2020, accrued interest and penalties amounted to approximately $ 0.4 million.

On March 27, 2020, the United States enacted the Coronavirus Aid, Relief and Economic Security Act (CARES Act).

The Cares Act is an emergency economic stimulus package that includes spending and tax breaks to strengthen the United States economy and fund a nationwide effort to curtail the effect of COVID-19.

The CARES Act provides sweeping tax changes in response to the COVID-19 pandemic, some of the more significant provisions are removal of certain limitations on utilization of net operating losses, increasing the loss carryback period for certain losses to five years, and increasing the ability to deduct interest expense, as well as amending certain provisions of the previously enacted Tax Cuts and Jobs Act.

At December 31, 2020, the Company has taken advantage of the accelerated tax depreciation related to qualified improvement property and the Paycheck Protection Program loan allowed under the CARES Act.

On December 27, 2020, the United States enacted the Consolidated Appropriations Act of 2021 (“CAA”).

The CAA includes provisions extending certain CARES Act provisions and adds coronavirus relief, tax and health extenders.

The Company will continue to evaluate the impact of the CAA and its impact on our financial statements in 2021 and beyond.

In June 29, 2020, the state of California passed Assembly Bill 85 which suspends the California net operating loss deduction for the 2020-2022 tax years and the R&D credit usage for the same period (for credit usages in excess of $5M).

These suspensions were considered in preparation of the 2020 financial statements.

NOTE 11 – STOCK-BASED COMPENSATION

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We have reserved for issuance under the 2017 Restated Plan 14,000,000 shares of common stock.

We can issue options, stock awards, stock appreciation rights, stock units and cash awards under the 2017 Restated Plan.

We can issue options (incentive and non-qualified), stock awards, stock appreciation rights, stock units and cash awards under the Restated Plan.

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

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Outstanding Options

Under the 2006 Plan

Weighted Average

Under the 2006 Plan Shares Weighted Average

Exercise price

Per Common Share

Weighted Average

Life(in years)

Per Common Share Weighted Average

Life(in years) Aggregate

Balance, December 31, 2019 478,951 $ 8.21

Canceled, forfeited or expired

Granted 48,948 20.43

Balance, December 31, 2020 527,899 9.34 6.34 $ 5,441,129

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Aggregate intrinsic value in the table above represents the total pretax intrinsic value (the difference between our closing stock price on December 31, 2020 and the exercise price, multiplied by the number of in-the-money options as applicable) that would have been received by the holder had all holders exercised their options on December 31, 2020.

As of December 31, 2019 , total unrecognized stock-based compensation expense related to non-vested employee awards was $ 710,861 which is expected to be recognized over a weighted average period of approximately 1.8 years .

As of December 31, 2020, total unrecognized stock-based compensation expense related to non-vested employee awards was $ 0.6 million which is expected to be recognized over a weighted average period of approximately 1.50 years.

DeepHealth Options

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

As of December 31, 2020, total unrecognized stock based compensation expense related to non-vested DeepHealth options was approximately $ 3.9 million which is expected to be recognized over a weighted average period of approximately 2.29 years.

Outstanding Options

Under the Deep Health Plan Shares Weighted Average

Exercise price

Per Common Share Weighted Average

Contractual Life

(in years) Aggregate

Balance, December 31, 2019 —

Granted, June 1, 2020 412,434 $ —

Exercised ( 11,895 ) —

Balance, December 31, 2020 400,539 — 8.40 $ 7,710,376

Exercisable at December 31, 2020 26,545 — 8.40 510,994

Restricted Stock Awards (“RSA’s”)

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The following summarizes all unvested RSA’s activities during the twelve months ended December 31, 2020:

Weighted-Average

RSA's Weighted-Average

Term (Years) Weighted-Average

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

Changes during the period

Granted 457,596 $ 19.66

Vested ( 516,371 ) $ 16.37

RSA's unvested at December 31, 2020 329,159 0.87 $ 16.69

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

During the twelve months ended December 31, 2019 we issued 66,600 shares relating to these awards, amounting to $ 1.0 million of compensation expense.

During the twelve months ended December 31, 2020 we issued 66,078 shares relating to these awards, approximately amounting to $ 1.0 million of compensation expense.

In summary, of the 14,000,000 shares of common stock reserved for issuance under the Restated Plan, at December 31, 2020, we had issued 15,424,316 total shares between options, RSA’s and other stock awards.

With options cancelled and RSA’s forfeited amounting to 3,281,040 and 61,703 shares, respectively, there remain 1,918,427 shares available under the Restated Plan for future issuance.

NOTE 12 – QUARTERLY RESULTS OF OPERATIONS (unaudited)

The following table sets forth a summary of our unaudited quarterly operating results for each of the last eight quarters in the years ended December 31, 2019 and 2018 .

This quarterly data has been derived from our unaudited consolidated interim financial statements which, in our opinion, have been prepared on substantially the same basis as the audited financial statements contained elsewhere in this report and include all normal recurring adjustments necessary for a fair presentation of the financial information for the periods presented.

These unaudited quarterly results should be read in conjunction with our financial statements and notes thereto, included elsewhere in this report.

The operating results in any quarter are not necessarily indicative of the results that may be expected for any future period (in thousands except per share data).

2019 Quarter Ended

2018 Quarter Ended

Statement of Operations Data:

Total operating expenses

Total other expenses

Equity in earnings of joint ventures

Benefit from (provision for) income taxes

Net (loss) income

Net income (loss) attributable to noncontrolling interests

Net (loss) income attributable to Radnet, Inc.

common stockholders

Basic net (loss) income attributable to Radnet, Inc.

common stockholders (loss) earnings per share:

Diluted net (loss) income attributable to Radnet, Inc.

common stockholders (loss) earnings per share:

Weighted average shares outstanding

NOTE 13 – RELATED PARTY TRANSACTIONS

As stated in Note 2, Summary of Significant Accounting Policies, we have an equity investment in WhiteRabbit.ai Inc..

In addition to our equity investment, we have a loan of $ 2.5 million to the company outstanding at December 31, 2019 .

NOTE 12 – 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.

Changes In and Disagreements with Accountants on Accounting and Financial Disclosure

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 8. Financial Statements and Supplementary Data