What changed in this filing

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Item 2. Management’s Discussion and Analysis

2021-11-09 compared with 2021-08-09 · 160 added, 157 removed, 377 unchanged (46% of the section changed)

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(v) the impact of government and administrative regulation, guidance and appropriations;

(vi) changes in our revenues due to declining patient procedure

volumes, changes in payor mix;

(vi) changes in our revenues due to declining patient procedure volumes, changes in payor mix;

(vii) potential increased expenses or workforce disruptions related to our employees that could lead to unavailability of key personnel;

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We are a leading national provider of freestanding, fixed-site outpatient diagnostic imaging services in the United States based on number of locations and annual imaging revenue.

At June 30, 2021, we operated, directly or indirectly through joint ventures with hospitals, 353 centers located in Arizona, California, Delaware, Florida, Maryland, New Jersey, and New York.

At September 30, 2021, we operated, directly or indirectly through joint ventures with hospitals, 350 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 and may reduce unnecessary invasive procedures, often reducing the cost and amount of care for patients.

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We derive substantially all of our revenue, directly or indirectly, from fees charged for the diagnostic imaging services performed at our facilities.

The following table shows our facilities in operation and revenues for the six months ended June 30, 2021 and June 30, 2020:

Six Months Ended June 30,

The following table shows our facilities in operation and revenues for the nine months ended September 30, 2021 and September 30, 2020:

Nine Months Ended September 30,

Facilities in operation 350 334

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

Our total service revenue during the six months ended June 30, 2021 and 2020 are presented in the table below based on an allocation of the estimated transaction price with the patient between the primary patient classification of insurance coverage (in thousands):

Three Months Ended June 30, Six Months Ended June 30,

Our total service revenue during the nine months ended September 30, 2021 and 2020 are presented in the table below based on an allocation of the estimated transaction price with the patient between the primary patient classification of insurance coverage (in thousands):

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

2021 2020 2021 2020

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Recent Developments

The discussion of our results below centers on our performance through the second quarter ended June 30, 2021.

The discussion of our results below centers on our performance through the third quarter ended September 30, 2021.

During the same period in 2020, with the onset of the novel strain of the coronavirus ("COVID-19"), we began experiencing reduced procedure volumes at the end of the first quarter which intensified through mid year.

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

As we enter mid year 2021, our procedure volume has returned to pre-COVID-19 levels and our business has resumed normal operations.

We expect that the cost saving measures implemented in 2020 will continue to be beneficial to our financial position in 2021, while we continued to invest and position for future growth.

Year to date, we have acquired 19 new centers in California, New Jersey and New York.

As 2021 comes to a close, our procedure volume has returned to pre-COVID-19 levels and our business has resumed normal operations.

We expect that the cost saving measures implemented in 2020 will continue to be beneficial to our financial position in 2021.

In addition, we have continued to invest and position for future growth.

Year to date, we have acquired 19 new radiology centers in California, New Jersey and New York.

Equity Investments, Acquisitions and Dispositions, and Joint Venture Activity

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Equity Investments

As of June 30, 2021, we have three equity investments for which a fair value is not readily determinable and therefore the total amounts invested are recognized at cost as follows:

As of September 30, 2021, we have three equity investments for which a fair value is not readily determinable and therefore the total amounts invested are recognized at cost as follows:

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

Our investment of $1.2 million represents a 14.21% equity interest in the company.

No observable price changes or impairment in our investment was identified as of June 30, 2021.

No observable price changes or impairment in our investment was identified as of September 30, 2021.

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.

On February 1, 2018, we purchased 2.1 million preferred shares in Turner Imaging Systems for $2.0 million.

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

No observable price changes or impairment in our investment was identified as of June 30, 2021.

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

No observable price changes or impairment in our investment was identified as of September 30, 2021.

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 it operations.

No observable price changes, impairment in our investment or impairment of the loan receivable was identified as of June 30, 2021.

No observable price changes, impairment in our investment or impairment of the loan receivable was identified as of September 30, 2021.

Facility acquisitions

During the first and second quarters of 2021, we completed the acquisition of certain assets of the following entities.

During 2021, we completed the acquisition of certain assets of the following entities, which either engage directly in the practice of radiology or associated businesses.

The primary reason for these acquisitions was to strengthen our presence in the New York City, New Jersey and California markets.

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

Entity Date Acquired Total Cash Consideration Property & Equipment Right of Use Assets Goodwill Intangible Assets Other Assets Right of Use Liabilities

Entity Date Acquired Total Consideration Property & Equipment Right of Use Assets Goodwill Intangible Assets Other Assets Right of Use Liabilities

Personal Health Imaging PLLC* 2/1/2021 2,995 576 608 2,355 50 14 (608)

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ZP Eastern LLC 6/1/2021 2,868 2,801 1,951 17 50 — (1,951)

Tangent Associates LLC** 8/24/2021 2,025 10 — 379 1,636 — —

Total 66,943 34,559 12,670 29,754 2,421 209 (12,670)

*Fair Value Determination is Final

** All stock purchase through issuing 67,658 shares of our common stock

Formation of majority owned subsidiary

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RadNet contributed $0.3 million in assets for a 60% economic interest and Simi Adventist contributed assets totaling $0.1 million for a 40% economic interest.

Sale of ownership interest in a majority owned subsidiary

Effective September 1, 2021 we completed the sale of a 24.9% ownership interest in our majority owned subsidiary West Valley Imaging Group, LLC for $13.1 million to Tarzana Medical Center, LLC.

After the sale, our ownership interest in the subsidiary has reduced from 75.0% to 50.1% and we retain a controlling financial interest in the subsidiary.

We recognized in additional paid in capital on our condensed consolidated balance sheets, $4.2 million excess in consideration over the carrying value of the sold economic interest.

Post the sale of our ownership interest we acquired from Tarzana Medical Center, LLC, certain intangible business assets for purchase consideration of approximately $5.2 million.

Joint Venture Activity

The following table is a summary of our investment in joint ventures during the six months ended June 30, 2021 (in thousands):

The following table is a summary of our investment in joint ventures during the nine months ended September 30, 2021 (in thousands):

Balance as of December 31, 2020 $ 34,528

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Equity contributions in existing joint ventures 1,441

Balance as of June 30, 2021 $ 41,375

We charged management service fees from the centers underlying these joint ventures of approximately $5.5 million and $3.3 million for the three months ended June 30, 2021 and 2020 and $10.8 million and $5.9 million for the six months ended June 30, 2021 and 2020, respectively.

Balance as of September 30, 2021 $ 44,228

We charged management service fees from the centers underlying these joint ventures of approximately $5.3 million and $2.7 million for the three months ended September 30, 2021 and 2020 and $16.0 million and $8.6 million for the nine months ended September 30, 2021 and 2020, respectively.

On June 23, 2021, we made an additional equity contribution to our joint venture in Arizona of $1.4 million.

Our equity ownership interest percentage in the venture did not change.

The following table is a summary of key balance sheet data for these joint ventures as of June 30, 2021 and December 31, 2020 and income statement data for the six months ended June 30, 2021 and 2020 (in thousands):

The following table is a summary of key balance sheet data for these joint ventures as of September 30, 2021 and December 31, 2020 and income statement data for the nine months ended September 30, 2021 and 2020 (in thousands):

Balance Sheet Data:

September 30,

2021 December 31,

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Total value of RadNet joint venture interests $ 44,228 $ 34,528

Income statement data for the six months ended June 30, 2021 2021 2020

Income statement data for the nine months ended September 30,

Net revenue $ 98,193 $ 78,988

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and our reported amounts of revenues and expenses in our consolidated statements of operations during the reporting periods.

These estimates involve judgments with respect to numerous factors that are difficult to predict and are beyond management’s control.

These estimates involve judgments with respect to numerous factors that

are difficult to predict and are beyond management’s control.

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

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

Management continually reviews the contractual estimation process to

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

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

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

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

Our estimates and assumptions related to revenue recognition did not change materially for the quarter ended June 30, 2021.

Our estimates and assumptions related to revenue recognition did not change materially for the quarter ended September 30, 2021.

Provider Relief Fund (COVID-19 Stimulus Funding)

The Provider Relief Fund offers government assistance to eligible providers throughout the healthcare system in support of certain expenses or lost revenue attributable to the coronavirus pandemic.

We have recorded provider relief funding in our condensed Consolidated Statements of Operations in the amount of $6.3 million for the six months ended June 30, 2021.

We have recorded provider relief funding in our condensed Consolidated Statements of Operations in the amount of $6.3 million for the nine months ended September 30, 2021.

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

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In recognizing revenue associated with provider relief funding our management is required to assess whether our operations have meet the applicable requirements for the funding received.

During the quarter ended June 30, 2021, we continued to evaluate our operating results in light of the most recent government guidance and based on our assessment, the amount of revenue recognized is appropriate.

During the quarter ended September 30, 2021, we continued to evaluate our operating results in light of the most recent government guidance and based on our assessment, the amount of revenue recognized is appropriate.

Accounts Receivable

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Services are generally provided pursuant to one-year contracts with healthcare providers.

Receivables generally are collected within industry norms for third-party payors.

Receivables generally are collected within industry norms for third-

party payors.

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

Our estimates and assumptions for allowances on our account receivable did not change materially during the quarter ended June 30, 2021.

Our estimates and assumptions for allowances on our account receivable did not change materially during the quarter ended September 30, 2021.

Business Combination

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While we use our best estimates and assumptions to accurately value assets acquired and liabilities assumed at the acquisition date, our estimates are inherently uncertain and subject to refinement.

As a result, during the measurement period, which may be up to one year from the acquisition date, we record adjustments to the assets acquired and liabilities assumed with the corresponding offset to

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

Goodwill and Indefinite Lived Intangibles

Goodwill at June 30, 2021 totaled $502.3 million.

Indefinite Lived Intangible Assets at June 30, 2021 were $7.1 million and are associated with the value of certain trade name intangibles.

Goodwill at September 30, 2021 totaled $502.7 million.

Indefinite Lived Intangible Assets at September 30, 2021 were $7.1 million and are associated with the value of certain trade name intangibles.

Our management reviews the fair value of our reporting units on an annual basis to determine if an event has occurred which suggest that the fair value of a reporting unit may be impaired.

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We tested goodwill for impairment on October 1, 2020.

We also continue at regular intervals to consider the current and expected future economic and market conditions surrounding the COVID-19 pandemic and to date have not had an indication of goodwill impairment being more likely than not through June 30, 2021.

Recent Accounting Standards

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Results of Operations

The following table sets forth, for the three and six months ended June 30, 2021 and 2020, the percentage that certain items in the statements of operations bears to total service revenue, inclusive of revenue under capitation contracts.

The following table sets forth, for the three and nine months ended September 30, 2021 and 2020, the percentage that certain items in the statements of operations bears to total service revenue, inclusive of revenue under capitation contracts.

AND SUBSIDIARIES

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Three Months Ended

June 30, Six Months Ended

September 30, Nine Months Ended

September 30,

2021 2020 2021 2020

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Depreciation and amortization 7.4 % 7.3 % 7.3 % 8.4 %

(Gain) loss on sale and disposal of equipment and other (0.5) % (0.3) % (0.4) % — %

Loss (gain) on sale and disposal of equipment and other 0.8 % 0.1 % — % 0.1 %

Severance costs — % 0.2 % 0.1 % 0.2 %

Total operating expenses 90.2 % 92.1 % 92.7 % 101.4 %

INCOME (LOSS) FROM OPERATIONS 8.3 % 0.1 % 7.0 % (1.8) %

INCOME FROM OPERATIONS 9.8 % 8.0 % 7.9 % 1.9 %

OTHER INCOME AND EXPENSES

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— % — % 0.6 % — %

Other expenses (income) 0.5 % (0.1) % 0.3 % — %

Total other (income) expenses 5.0 % 7.1 % 2.5 % 4.9 %

Other (income) expenses (0.1) % — % 0.2 % — %

Total other expenses 1.8 % 3.2 % 2.3 % 4.3 %

INCOME (LOSS) BEFORE INCOME TAXES 7.9 % 4.8 % 5.7 % (2.3) %

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We have segregated some of our information to demonstrate which is attributable to centers that were in operation through the entirety of the comparison period, and which is attributable to those that were acquired or disposed of during the period.

The discussion below shows a breakdown and analysis of revenue and expenses for the three and six months ended June 30, 2021 and 2020 for our operations at a total company and same center level.

Three Months Ended June 30, 2021 Compared to the Three Months Ended June 30, 2020

The discussion below shows a breakdown and analysis of revenue and expenses for the three and nine months ended September 30, 2021 and 2020 for our operations at a total company and same center level.

Three Months Ended September 30, 2021 Compared to the Three Months Ended September 30, 2020

Total Revenue inclusive of Provider Relief funding where applicable for 2021 and 2020

In Thousands Three Months Ended June 30,

In Thousands Three Months Ended September 30,

Revenue 2021 2020 $ Increase/(Decrease) % Change

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Same Center Revenue $308,243 $287,274 $20,969 7.3%

Increased revenue reflects an overall same center 80.5% growth in total procedure volumes over the same period in the prior year as business returned to pre-COVID-19 levels.

On a same center basis, Mammography procedures rose 106.3%, while advanced radiology procedures of MRI, PET and CT, expanded at a combined 154.4%, eventuating the significant revenue increase over the same period in the prior year.

This same center comparison excludes revenue contributions from centers that were acquired or divested subsequent to April 1, 2020.

For the three months ended June 30, 2021, net service fee revenue from centers that were acquired or divested subsequent to April 1, 2020 and excluded from the above comparison was $27.2 million.

For the three months ended June 30, 2020, net service fee revenue from centers that were acquired or divested subsequent to April 1, 2020 and excluded from the above comparison was $3.5 million.

Upswing in revenue reflects an overall same center 10.0% growth in total procedure volumes over the same period in the prior year as business continues to return to pre-COVID-19 levels.

On a same center basis, with Mammography procedures rising 6.4%, and advanced radiology procedures of MRI, PET and CT, expanding at a combined 23.6%, revenue increased over the same period in the prior year.

This same center comparison excludes revenue contributions from centers that were acquired or divested subsequent to July 1, 2020.

For the three months ended September 30, 2021, net service fee revenue from centers that were acquired or divested subsequent to July 1, 2020 and excluded from the above comparison was $24.4 million.

For the three months ended September 30, 2020, net service fee revenue from centers that were acquired or divested subsequent to July 1, 2020 and excluded from the above comparison was $4.7 million.

Operating Expenses

Total operating expenses for the three months ended June 30, 2021 increased approximately $90.4 million, or 41.9%, from $215.9 million for the three months ended June 30, 2020 to $306.3 million for the three months ended June 30, 2021.

The following table sets forth a breakdown of our cost of operations and total operating expenses for the three months ended June 30, 2021 and 2020 (in thousands):

Total operating expenses for the three months ended September 30, 2021 increased approximately $31.5 million, or 11.7%, from $268.6 million for the three months ended September 30, 2020 to $300.1 million for the three months ended September 30, 2021.

The following table sets forth a breakdown of our cost of operations and total operating expenses for the three months ended September 30, 2021 and 2020 (in thousands):

Three Months Ended

September 30,

Salaries and professional reading fees, excluding stock-based compensation $ 164,462 $ 149,970

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Depreciation and amortization 24,606 21,247

Gain on sale and disposal of equipment (1,567) (569)

Loss on sale and disposal of equipment 2,595 342

Severance costs 163 571

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* Includes billing fees, office supplies, repairs and maintenance, insurance, business tax and license, outside services, telecom, utilities, marketing, travel and other expenses.

The discussion below provides additional information and analysis on changes in our various operating expenses for the three months ended June 30, 2021 and 2020 (in thousands):

The discussion below provides additional information and analysis on changes in our various operating expenses for the three months ended September 30, 2021 and 2020 (in thousands):

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

In Thousands Three Months Ended June 30,

In Thousands Three Months Ended September 30,

Salaries and Professional Fees 2021 2020 $ Increase/(Decrease) % Change

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Same Center Salaries $151,321 $146,307 $5,014 3.4%

Same center salaries, which are substantially greater than the same period in the prior year, exemplifies the return to a state of normal business.

During the same period in the prior year, which was the height of the pandemic, our physician and non physician staff were subject to furloughs, pay reductions, and layoffs.

Our staff has now returned to a level to support the influx of patients seeking radiology procedures and combined with restored pay, has resulted in the higher salaries and professional fee expense.

This same center comparison excludes expenses from centers that were acquired or divested

subsequent to April 1, 2020.

For the three months ended June 30, 2021, salaries and professional reading fees from centers that were acquired or divested subsequent to April 1, 2020 and excluded from the above comparison was $12.8 million.

For the three months ended June 30, 2020, salaries and professional reading fees from centers that were acquired or divested subsequent to April 1, 2020 and excluded from the above comparison was approximately $2.0 million.

Stemming from the higher procedure volumes noted above, our staffing levels were adjusted to support the influx of patients seeking radiology procedures, resulting in a nominal increase in salaries and professional fee expense over the same period in the prior year.

This same center comparison excludes expenses from centers that were acquired or divested subsequent to July 1, 2020.

For the three months ended September 30, 2021, salaries and professional reading fees from centers that were acquired or divested subsequent to July 1, 2020 and excluded from the above comparison was $13.1 million.

three months ended September 30, 2020, salaries and professional reading fees from centers that were acquired or divested subsequent to July 1, 2020 and excluded from the above comparison was approximately $3.7 million.

Stock-based compensation

Stock-based compensation increased $7.4 million, or 511.1% to approximately $8.9 million for the three months ended June 30, 2021 compared to $1.5 million for three months ended June 30, 2020.

This increase was driven by the higher fair value of RSA’s awarded and vested in the first quarter of 2021 as compared to RSA’s awarded and vested in the prior year’s first quarter.

In addition, we granted awards valued at $6.5 million in compensation expense in employee COVID-19 related bonuses.

Stock-based compensation increased $2.4 million, or 114.0% to approximately $4.4 million for the three months ended September 30, 2021 compared to $2.1 million for three months ended September 30, 2020.

This increase was a combination of awards valued at $8.9 million in stock compensation expense for employee COVID-19 related bonuses and higher fair value of RSA’s awarded and vested in the first quarter of 2021 as compared to RSA’s awarded and vested in the prior year’s first quarter.

Building and equipment rental

In Thousands Three Months Ended June 30,

In Thousands Three Months Ended September 30,

Building & Equipment Rental 2021 2020 $ Increase/(Decrease) % Change

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The overall increase in building and equipment rental expenses was related to centers acquired through our business combinations, as same center expense remained stable.

This same center comparison excludes expenses from centers that were acquired or divested subsequent to April 1, 2020.

For the three months ended June 30, 2021, building and equipment rental expenses from centers that were acquired or divested subsequent to April 1, 2020 and excluded from the above comparison was $5.5 million.

For the three months ended June 30, 2020, building and equipment rental expenses from centers that were acquired or divested subsequent to April 1, 2020 and excluded from the above comparison was approximately $1.4 million.

This same center comparison excludes expenses from centers that were acquired or divested subsequent to July 1, 2020.

For the three months ended September 30, 2021, building and equipment rental expenses from centers that were acquired or divested subsequent to July 1, 2020 and excluded from the above comparison was $6.3 million.

For the three months ended September 30, 2020, building and equipment rental expenses from centers that were acquired or divested subsequent to July 1, 2020 and excluded from the above comparison was approximately $1.5 million.

Medical supplies

In Thousands Three Months Ended June 30,

In Thousands Three Months Ended September 30,

Medical Supplies Expense 2021 2020 $ Increase/(Decrease) % Change

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Same Center $13,059 $12,275 $784 6.4%

Medical supplies expense increase stems from the overall procedural volumes noted above compared to the same period in the prior year and is consistent with the percentage increases in revenue and salaries expense.

This same center comparison excludes expenses from centers that were acquired or divested subsequent to April 1, 2020.

For the three months ended June 30, 2021, medical supplies expenses from centers that were acquired or divested subsequent to April 1, 2020 and excluded from the above comparison was $0.9 million.

For the three months ended June 30, 2020, medical supplies expense from centers that were acquired or divested subsequent to April 1, 2020 and excluded from the above comparison was $0.1 million.

Medical supplies expense increase relates to the growth in overall procedural volumes noted above compared to the same period in the prior year and is consistent with the percentage increase in revenue over the same period in the prior year.

This same center comparison excludes expenses from centers that were acquired or divested subsequent to July 1, 2020.

For the three months ended September 30, 2021, medical supplies expenses from centers that were acquired or divested subsequent to July 1, 2020 and excluded from the above comparison was $0.9 million.

For the three months ended September 30, 2020, medical supplies expense from centers that were acquired or divested subsequent to July 1, 2020 and excluded from the above comparison was $0.2 million.

Other operating expenses

In Thousands Three Months Ended June 30,

In Thousands Three Months Ended September 30,

Other Operating Expenses 2021 2020 $ Increase/(Decrease) % Change

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Same Center $53,337 $53,952 $(615) (1.1)%

Increases in same center other expenses is reflective of our improved business conditions, but the rise was less than proportionate with higher revenues due to the cumulative effect of successful contract re-negotiations in the prior year aimed to reduce charges across a range of vendors from repair and maintenance to professional services.

This same center comparison excludes expenses from centers that were acquired or divested subsequent to April 1, 2020.

For the three months ended June 30, 2021, other operating expense from centers that were acquired or divested subsequent April 1, 2020 and excluded from the above comparison was $5.0 million.

For the three months ended June 30, 2020, other operating expense from centers that were acquired or divested subsequent to April 1, 2020 was $1.4 million.

Other operating expenses remained flat due to the cumulative effect of successful contract re-negotiations in the prior year aimed to reduce charges across a range of vendors from repair and maintenance to professional services.

This same center comparison excludes expenses from centers that were acquired or divested subsequent to July 1, 2020.

For the three months ended September 30, 2021, other operating expense from centers that were acquired or divested subsequent July 1, 2020 and excluded from the above comparison was $5.1 million.

For the three months ended September 30, 2020, other operating expense from centers that were acquired or divested subsequent to July 1, 2020 was $1.3 million.

Depreciation and amortization

In Thousands Three Months Ended June 30,

In Thousands Three Months Ended September 30,

Depreciation & Amortization 2021 2020 $ Increase/(Decrease) % Change

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Same Center $21,749 $20,443 $1,306 6.4%

This same center comparison excludes expenses from centers that were acquired or divested subsequent to April 1, 2020.

For the three months ended June 30, 2021, depreciation expense from centers that were acquired or divested subsequent to April 1, 2020 and excluded from the above comparison was $2.5 million.

For the three months ended June 30, 2020, depreciation and amortization from centers that were acquired or divested subsequent to April 1, 2020 and excluded from the above comparison was $0.7 million.

This same center comparison excludes expenses from centers that were acquired or divested subsequent to July 1, 2020.

For the three months ended September 30, 2021, depreciation expense from centers that were acquired or divested subsequent to July 1, 2020 and excluded from the above comparison was $2.9 million.

For the three months ended September 30, 2020, depreciation and amortization from centers that were acquired or divested subsequent to July 1, 2020 and excluded from the above comparison was $0.8 million.

Gain on sale and disposal of equipment and other

We recorded gains on the disposal of equipment and other items of approximately $1.6 million for the three months ended June 30, 2021 and approximately $0.6 million for the three months ended June 30, 2020.

We recorded losses on the disposal of equipment and other items of approximately $2.6 million for the three months ended September 30, 2021 and approximately $0.3 million for the three months ended September 30, 2020.

Non-cash change in fair value of interest rate hedge

We recorded an immaterial gain of $35.0 thousand for the ineffective portion of our 2019 Swaps for the three months ended June 30, 2021 and a expense of $3.8 million for three months ended June 30, 2020.

Other (income) expenses

We recorded other expenses of approximately $7.7 million for the three months ended June 30, 2021 mainly related to our refinancing of our term loan debt and the change in fair value of contingent consideration.

Amounts for the corresponding period ending June 30, 2020 were other income of $0.1 million.

We recorded a gain of $2.9 million for the ineffective portion of our 2019 Swaps for the three months ended September 30, 2021 and a expense of $0.7 million for three months ended September 30, 2020.

We recorded other income of approximately $0.2 million for the three months ended September 30, 2021 and $0.1 million for the corresponding period ending September 30, 2020.

Severance costs

We incurred severance expenses of $0.3 million for the three months ended June 30, 2021 and $0.9 million for the three months ended June 30, 2020.

We incurred severance expenses of $0.2 million for the three months ended September 30, 2021 and $0.6 million for the three months ended September 30, 2020.

Interest expense

In Thousands Three Months Ended June 30,

In Thousands Three Months Ended September 30,

Interest Expense 2021 2020 $ Increase/(Decrease) % Change

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

Excluding the effect of interest expense related to derivatives and amortization for the three months ended June 30, 2021 compared to the three months ended June 30, 2020, interest expense decreased $1.0 million, or 11.8%.

Excluding the effect of interest expense related to derivatives and amortization for the three months ended September 30, 2021 compared to the three months ended September 30, 2020, interest expense decreased $0.7 million, or 8.0%.

The reduction in interest expense corresponds to lowered variable LIBOR and Prime interest rates paid on our term loan and revolving debt based on market conditions.

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Equity in earnings from unconsolidated joint ventures

For the three months ended June 30, 2021 we recognized equity in earnings from unconsolidated joint ventures in the amount of $3.1 million and for three months ended June 30, 2020 we recognized equity in earnings from unconsolidated joint ventures of $0.9 million, an increase of $2.2 million or 230.3%.

For the three months ended September 30, 2021 we recognized equity in earnings from unconsolidated joint ventures in the amount of $2.9 million and for three months ended September 30, 2020 we recognized equity in earnings from unconsolidated joint ventures of $2.3 million, an increase of $0.6 million or 25.4%.

The increase was mainly related to the equity in earnings received from our interest in the Arizona Diagnostic Radiology Group joint venture, which was formed in the fourth quarter of 2020.

Income tax provision

We recorded income tax expense of $2.9 million, or an effective tax rate of 26.2%, for the three months ended June 30, 2021 compared to a benefit from income taxes of $4.5 million, or an effective tax rate of 33.3% for the three months ended June 30, 2020.

The income tax rates for the three and six months ended June 30, 2021 diverge from the federal statutory rate due to (i) noncontrolling interests due to the controlled partnerships;

We recorded income tax expense of $5.3 million, or an effective tax rate of 20.0%, for the three months ended September 30, 2021 compared to income tax expense of $3.8 million, or an effective tax rate of 27.2% for the three months ended September 30, 2020.

The income tax rates for the three and nine months ended September 30, 2021 diverge from the federal statutory rate due to (i) noncontrolling interests due to the controlled partnerships;

(ii) effects of state income taxes;

and (iii) excess tax benefits attributable to share-based compensation.

Six Months Ended June 30, 2021 Compared to the Six Months Ended June 30, 2020

Nine Months Ended September 30, 2021 Compared to the Nine Months Ended September 30, 2020

Total Revenue inclusive of Provider Relief funding for 2020

In Thousands Six Months Ended June 30, 2021

In Thousands Nine Months Ended September 30,

Revenue 2021 2020 $ Increase/(Decrease) % Change

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Increased revenue reflects an overall same center 25.0% growth in total procedure volumes over the same period in the prior year as business returned to pre-COVID-19 levels.

Total Provider Relief funding used to offset lost revenue due to the pandemic and included in the above amounts was $6.2 million for the six months ended June 30, 2021 and $25.5 million for the six months ended June 30, 2020.

Total Provider Relief funding used to offset lost revenue due to the pandemic and included in the above amounts was $6.2 million for the nine months ended September 30, 2021 and $25.7 million for the nine months ended September 30, 2020.

This comparison excludes revenue contributions from centers that were acquired or divested subsequent to January 1, 2020.

For the six months ended June 30, 2021, net service fee revenue from centers that were acquired or divested subsequent to January 1, 2020 and excluded from the above comparison was $45.9 million.

For the six months ended June 30, 2020, net service fee revenue from centers that were acquired or divested subsequent to January 1, 2020 and excluded from the above comparison was $11.1 million.

For the nine months ended September 30, 2021, net service fee revenue from centers that were acquired or divested subsequent to January 1, 2020 and excluded from the above comparison was $74.7 million.

For the nine months ended September 30, 2020, net service fee revenue from centers that were acquired or divested subsequent to January 1, 2020 and excluded from the above comparison was $21.2 million.

Operating Expenses

Total operating expenses for the six months ended June 30, 2021 increased approximately $104.0 million, or 20.5%, from $506.2 million for the six months ended June 30, 2021 to $610.2 million for the six months ended June 30, 2020.

The following table sets forth a breakdown of our cost of operations and total operating expenses for the six months ended June 30, 2021 and 2020 (in thousands):

Six Months Ended June 30, 2021

Total operating expenses for the nine months ended September 30, 2021 increased approximately $135.5 million, or 17.5%, from $774.8 million for the nine months ended September 30, 2021 to $910.3 million for the nine months ended September 30, 2020.

The following table sets forth a breakdown of our cost of operations and total operating expenses for the nine months ended September 30, 2021 and 2020 (in thousands):

Nine Months Ended September 30,

Salaries and professional reading fees, excluding stock-based compensation $ 515,227 $ 429,292

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

In Thousands Six Months Ended June 30, 2021

In Thousands Nine Months Ended September 30,

Salaries and Professional Fees 2021 2020 $ Increase/(Decrease) % Change

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The increase in salaries expense was a result of a return to normal pre-Covid19 levels of business.

As noted in our quarterly explanation above, staffing levels have been adjusted to support higher patient volumes with the corresponding rise in salaries and professional fee expense.

Staffing levels have been adjusted to support higher patient volumes with the corresponding rise in salaries and professional fee expense.

This comparison excludes expenses from centers that were acquired or divested subsequent to January 1, 2020.

For the six months ended June 30, 2021, salaries and professional reading fees from centers that were acquired or divested subsequent to January 1, 2020 and excluded from the above comparison was $22.2 million.

For the six months ended June 30, 2020, salaries and professional reading fees from centers that were acquired or divested subsequent to January 1, 2020 and excluded from the above comparison was approximately $6.2 million.

For the nine months ended September 30, 2021, salaries and professional reading fees from centers that were acquired or divested subsequent to January 1, 2020 and excluded from the above comparison was $37.0 million.

For the nine months ended September 30, 2020, salaries and professional reading fees from centers that were acquired or divested subsequent to January 1, 2020 and excluded from the above comparison was approximately $12.0 million.

Stock-based compensation

Stock-based compensation increased $9.1 million, or 112.2% to approximately $17.1 million for the six months ended June 30, 2021 compared to $8.1 million for six months ended June 30, 2020.

This increase was driven by the higher fair value of RSA’s awarded and vested in the six months of 2021 as compared to RSA’s awarded and vested in the prior year’s same period.

In addition, we granted awards valued at $6.5 million in compensation expense in employee COVID-19 related bonuses during the first six months of 2021.

Stock-based compensation increased $11.4 million, or 112.6% to approximately $21.6 million for the nine months ended September 30, 2021 compared to $10.1 million for nine months ended September 30, 2020.

This increase was driven by the higher fair value of RSA’s awarded and vested in the nine months of 2021 as compared to RSA’s awarded and vested in the prior year’s same period.

In addition, we granted awards valued at $8.9 million in compensation expense in employee COVID-19 related bonuses during the first nine months of 2021.

Building and equipment rental

In Thousands Six Months Ended June 30, 2021

In Thousands Nine Months Ended September 30,

Building & Equipment Rental 2021 2020 $ Increase/(Decrease) % Change

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Same Center $75,434 $74,877 $557 0.7%

The increase in building and equipment rental expenses was related to centers acquired through our business combinations.

The increase in building and equipment rental expenses was related to centers acquired through our business combinations, as same center expense remained steady.

This comparison excludes expenses from centers that were acquired or divested subsequent to January 1, 2020.

For the six months ended June 30, 2021, building and equipment rental expenses from centers that were acquired or divested subsequent to January 1, 2020 and excluded from the above comparison was $8.7 million.

For the six months ended June 30, 2020, building and equipment rental expenses from centers that were acquired or divested subsequent to January 1, 2020 and excluded from the above comparison was approximately $3.0 million.

For the nine months ended September 30, 2021, building and equipment rental expenses from centers that were acquired or divested subsequent to January 1, 2020 and excluded from the above comparison was $15.8 million.

For the nine months ended September 30, 2020, building and equipment rental expenses from centers that

were acquired or divested subsequent to January 1, 2020 and excluded from the above comparison was approximately $5.3 million.

Medical supplies

In Thousands Six Months Ended June 30, 2021

In Thousands Nine Months Ended September 30,

Medical Supplies Expense 2021 2020 $ Increase/(Decrease) % Change

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This comparison excludes expenses from centers that were acquired or divested subsequent to January 1, 2020.

For the six months ended June 30, 2021, medical supplies expenses from centers that were acquired or divested subsequent to April 1, 2018 and excluded from the above comparison was $1.5 million.

For the six months ended June 30, 2020, medical supplies expense from centers that were acquired or divested subsequent to January 1, 2020 and excluded from the above comparison was $0.4 million.

For the nine months ended September 30, 2021, medical supplies expenses from centers that were acquired or divested subsequent to January 1, 2020 and excluded from the above comparison was $2.5 million.

For the nine months ended September 30, 2020, medical supplies expense from centers that were acquired or divested subsequent to January 1, 2020 and excluded from the above comparison was $0.8 million.

Other operating expenses

In Thousands Six Months Ended June 30, 2021

In Thousands Nine Months Ended September 30,

Other Operating Expenses 2021 2020 $ Increase/(Decrease) % Change

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Same Center $152,932 $148,840 $4,092 2.8%

As noted in our quarterly analysis above, increases in other operating expenses were mitigated by the cumulative effect of successful contract re-negotiations in the prior year aimed to reduce charges across a range of vendors.

The minimal increase in other operating expenses were mitigated by the cumulative effect of successful contract re-negotiations in the prior year aimed to reduce charges across a range of vendors.

This comparison excludes expenses from centers that were acquired or divested subsequent to January 1, 2020.

For the six months ended June 30, 2021, other operating expense from centers that were acquired or divested subsequent January 1, 2020 and excluded from the above comparison was $9.1 million.

For the six months ended June 30, 2020, other operating expense from centers that were acquired or divested subsequent to January 1, 2020 was $3.3 million.

For the nine months ended September 30, 2021, other operating expense from centers that were acquired or divested subsequent January 1, 2020 and excluded from the above comparison was $15.4 million.

For the nine months ended September 30, 2020, other operating expense from centers that were acquired or divested subsequent to January 1, 2020 was $5.9 million.

Depreciation and amortization

In Thousands Six Months Ended June 30, 2021

In Thousands Nine Months Ended September 30,

Depreciation & Amortization 2021 2020 $ Increase/(Decrease) % Change

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This comparison excludes expenses from centers that were acquired or divested subsequent to January 1, 2020.

For the six months ended June 30, 2021, depreciation expense from centers that were acquired or divested subsequent to January 1, 2020 and excluded from the above comparison was $4.2 million.

For the six months ended June 30, 2020, depreciation and amortization from centers that were acquired or divested subsequent to January 1, 2020 and excluded from the above comparison was $1.6 million.

For the nine months ended September 30, 2021, depreciation expense from centers that were acquired or divested subsequent to January 1, 2020 and excluded from the above comparison was $7.3 million.

For the nine months ended September 30, 2020, depreciation and amortization from centers that were acquired or divested subsequent to January 1, 2020 and excluded from the above comparison was $2.3 million.

Loss on sale and disposal of equipment and other

We recorded a gain on the disposal of equipment and other items of approximately $2.9 million for the six months ended June 30, 2021 and a loss on the disposal of equipment of approximately $0.2 million for the six months ended June 30, 2020.

We recorded a gain on the disposal of equipment and other items of approximately $0.3 million for the nine months ended September 30, 2021 and a loss on the disposal of equipment of approximately $0.5 million for the nine months ended September 30, 2020.

Non-cash change in fair value of interest rate hedge

We recorded expense of $11.3 million for the ineffective portion of our 2019 Swaps for the six months ended June 30, 2021.

We recorded a gain of $14.1 million for the ineffective portion of our 2019 Swaps for the nine months ended September 30, 2021 and an expense of $4.5 million for the nine months ended September 30, 2020.

Other (income) expenses

We recorded other expense of approximately $7.9 million for the six months ended June 30, 2021 mainly related to our refinancing of our term loan debt and the change in fair value of contingent consideration.

We recorded other income of approximately $0.1 million for the six months ended June 30, 2020

We recorded other expense of approximately $7.7 million for the nine months ended September 30, 2021 mainly related to our refinancing of our term loan debt and the change in fair value of contingent consideration.

We recorded other income of approximately $0.2 million for the nine months ended September 30, 2020

Severance Costs

We incurred severance expenses of $0.6 million for the six months ended June 30, 2021 and $1.1 million for the six months ended June 30, 2020.

We incurred severance expenses of $0.7 million for the nine months ended September 30, 2021 and $1.6 million for the nine months ended September 30, 2020.

Interest expense

In Thousands Six Months Ended June 30, 2021

In Thousands Nine Months Ended September 30,

Interest Expense 2021 2020 $ Increase/(Decrease) % Change

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Interest related to derivatives* $11,034 $3,152

Interest payable on debt obligations** $17,663 $20,833 $(3,170) (15.2) %

Interest related to amortization*** $2,725 $3,266

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

Excluding interest expense for derivatives and amortization for the six months ended June 30, 2021 compared to the six months ended June 30, 2020, interest expense decreased $3.1 million, or 16.5%.

The reduction in interest expense corresponds to lowered variable LIBOR and Prime interest rates paid on our term loan and revolving debt.

Excluding interest expense for derivatives and amortization for the nine months ended September 30, 2021 compared to the nine months ended September 30, 2020, interest expense decreased $3.8 million, or 13.9% and relates to lowered variable LIBOR and Prime interest rates paid on our term loan and revolving debt.

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

Equity in earnings from unconsolidated joint ventures

For the six months ended June 30, 2021 we recognized equity in earnings from unconsolidated joint ventures in the amount of $5.4 million and for six months ended June 30, 2020 we recognized equity in earnings from unconsolidated joint ventures of $2.9 million, an increase of $2.5 million or 86.4%.

For the nine months ended September 30, 2021 we recognized equity in earnings from unconsolidated joint ventures in the amount of $8.3 million and for the nine months ended September 30, 2020 we recognized equity in earnings from unconsolidated joint ventures of $5.2 million, an increase of $3.1 million or 59.6%.

The increase was mainly related to the equity in earnings received from our interest in the Arizona Diagnostic Radiology Group joint venture, which was formed in the fourth quarter of 2020.

Income tax expense

We recorded a provision for income tax of $7.2 million, or an effective tax rate of 24.9%, for the six months ended June 30, 2021 compared to a benefit for income tax of $8.9 million , or an effective tax rate of 27.8% for the six months ended June 30, 2020.

The income tax rates for the three and six months ended June 30, 2021 diverge from the federal statutory rate due to (i) noncontrolling interests due to the controlled partnerships;

We recorded a provision for income tax of $12.5 million, or an effective tax rate of 22.6%, for the nine months ended September 30, 2021 compared to a benefit for income tax of $5.0 million , or an effective tax rate of 28.3% for the nine months ended September 30, 2020.

The income tax rates for the three and nine months ended September 30, 2021 diverge from the federal statutory rate due to (i) noncontrolling interests due to the controlled partnerships;

(ii) effects of state income taxes;

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We have not made specific adjustments to our calculation of Adjusted EBITDA in response to COVID 19.

Our net income (loss) reflected below includes the effect of revenue received under the Provider Relief Fund of $6.2 million and $25.5 million for the six months ended June 30, 2021 and 2020, respectively.

Our net income (loss) reflected below includes the effect of revenue received under the Provider Relief Fund of $6.2 million and $25.7 million for the nine months ended September 30, 2021 and 2020, respectively.

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

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The following is a reconciliation of GAAP net income (loss) attributable to RadNet, Inc.

common stockholders to Adjusted EBITDA for the three and six months ended June 30, 2021 and 2020, respectively.

Three Months Ended June 30, Six Months Ended June 30,

common stockholders to Adjusted EBITDA for the three and nine months ended September 30, 2021 and 2020, respectively.

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

2021 2020 2021 2020

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Non-cash employee stock-based compensation 4,422 2,067 21,566 10,144

(Gain) loss on sale and disposal of equipment and other (1,567) (569) (2,874) 202

Loss (gain) on sale and disposal of equipment and other 2,595 342 (279) 543

Debt restructuring and loss on extinguishment expenses — — 6,044 —

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Liquidity and Capital Resources

The following table summarizes key balance sheet data related to our liquidity as of June 30, 2021 and December 31, 2020 and income statement data for the six months ended June 30, 2021 and 2020 (in thousands):

The following table summarizes key balance sheet data related to our liquidity as of September 30, 2021 and December 31, 2020 and income statement data for the nine months ended September 30, 2021 and 2020 (in thousands):

Balance Sheet Data:

June 30, 2021 December 31, 2020

September 30, 2021 December 31, 2020

Cash and cash equivalents $ 151,253 $ 102,018

2 unchanged sentences

Stockholders' equity 339,379 258,303

Income statement data for the six months ended June 30,

Income statement data for the nine months ended September 30,

Total net revenue $ 981,928 $ 763,905

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

During the six months ended June 30, 2021 we had a substantial acceleration of procedure volumes compared to the prior year.

During the nine months ended September 30, 2021 we had a substantial acceleration of procedure volumes compared to the prior year.

Net income from the period, together with proceeds from the refinance of our credit facility has resulted in substantial improvement of our working capital position compared to December 31, 2020.

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Sources and Uses of Cash

The following table summarizes key components of our sources and uses of cash for the six months ended June 30, 2021 and 2020:

Cash Flow Data June 30, 2021 June 30, 2020

The following table summarizes key components of our sources and uses of cash for the nine months ended September 30, 2021 and 2020:

Cash Flow Data September 30, 2021 September 30, 2020

Cash provided by operating activities $ 100,295 $ 170,343

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Cash provided by (used in) financing activities 108,478 (33,495)

Cash provided by operating activities for the six months ended June 30, 2021 was $58.7 million and $131.5 million for the six months ended June 30, 2020.

Our cash provided by operating activities for the period ended June 30, 2020 was benefited by the receipt of $39.5 million in CMS advances recorded as deferred revenue.

Cash used in investing activities for the six months ended June 30, 2021, included purchases of property and equipment for approximately $53.8 million and the acquisition of imaging business assets for $64.9 million.

Cash provided by operating activities for the nine months ended September 30, 2021 was $100.3 million and $170.3 million for the nine months ended September 30, 2020.

Our cash provided by operating activities for the period ended September 30, 2020 was benefited by the receipt of $39.5 million in CMS advances recorded as deferred revenue.

Cash used in investing activities for the nine months ended September 30, 2021, included purchases of property and equipment for approximately $88.5 million and the acquisition of imaging business and other assets for $70.1 million.

As part of our business operations we continually evaluate investment opportunities.

Cash provided by financing activities of $99.8 million for the six months ended June 30, 2021, was due to refinancing of our term loan obligations with the Second Amended and Restated First Lien Credit Agreement on April 23, 2021.

Cash provided by financing activities of $108.5 million for the nine months ended September 30, 2021, was due to refinancing of our term loan obligations with the Second Amended and Restated First Lien Credit and Guaranty Agreement on April 23, 2021.

Please see Note 5, Credit Facilities and Notes Payable in the notes to consolidated financials statements for more information.

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

At June 30, 2021 we have $19.8 million, net of discount, remaining to be collected on these agreements.

At September 30, 2021 we have $18.3 million, net of discount, remaining to be collected on these agreements.

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

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The Barclays credit facilities are comprised of first lien term loans and a revolving credit facility of $195.0 million.

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

As of June 30, 2021, we were in compliance with all

covenants under our credit facilities.

Deferred financing costs at June 30, 2021, net of accumulated amortization, was $2.4 million and is specifically related to our Barclays revolving credit facility.

Included in our condensed consolidated balance sheets at June 30, 2021 are $774.1 million of total term loan debt (exclusive of unamortized discounts of $14.3 million) in thousands:

The SunTrust credit facilities are

comprised of a term loan and a revolving credit facility of $30.0 million.

As of September 30, 2021, we were in compliance with all covenants under our credit facilities.

Deferred financing costs at September 30, 2021, net of accumulated amortization, was $2.3 million and is specifically related to our Barclays revolving credit facility.

Included in our condensed consolidated balance sheets at September 30, 2021 are $771.2 million of total term loan debt (exclusive of unamortized discounts of $14.3 million) in thousands:

Face Value Discount Total Carrying

2 unchanged sentences

Total Term Loans $ 771,188 $ (13,735) $ 757,453

At June 30, 2021, we had no borrowings under our Barclays or SunTrust revolving credit facilities.

At September 30, 2021, we had no borrowings under our Barclays or SunTrust revolving credit facilities.

After reserves for outstanding letters of credit of $7.8 million on our Barclays Revolving Credit Facility, we have $187.2 million available for borrowing and $30.0 million available under our SunTrust Revolving Credit Facility.

For more information on our secured credit facilities see Note 5 to our condensed consolidated financial statements in this quarterly report.

We expect our existing capital resources, anticipated cash from operations and our borrowing capacity under our credit facilities will be sufficient to sustain our operations for the next twelve months and the foreseeable future.

Please see Note 5, Credit Facilities and Notes Payable in the notes to consolidated financials statements for more information on our refinancing activity of April 23, 2021.

Please see Note 5, Credit Facilities and Notes Payable in the notes to consolidated financials statements for more information on our secured credit facilities and refinancing activity of April 23, 2021.

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

What changed 10-Q

Item 2. Management’s Discussion and Analysis