RadNet, Inc. 10-K

Item 8. Financial Statements and Supplementary Data 51 Report of Independent Registered Public Accounting Firm To the Stockholders and the Board of Directors of RadNet, Inc. Opinion on the Financial Statements We have audited the accompanying consolidated balance sheets of RadNet, Inc. and subsidiaries (the Company) as of December 31, 2021 and 2020, 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, 2021, 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, 2021 and 2020, and the results of its operations and its cash flows for each of the three years in the period ended December 31, 2021, in conformity with U.S. generally accepted accounting principles. We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the Company's internal control over financial reporting as of December 31, 2021, based on criteria established in Internal Control-Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (2013 framework), and our report dated March 1, 2022 expressed an unqualified opinion thereon. Basis for Opinion These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on the Company’s financial statements based on our audits. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB. We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion. Critical Audit Matter The critical audit matter communicated below is a matter arising from the current period audit of the financial statements that was communicated or required to be communicated to the audit committee and that: (1) relates to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective or complex judgments. The communication of the critical audit matter 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 matter below, providing a separate opinion on the critical audit matter or on the accounts or disclosures to which it relates. 52 Accounting for Revenue Recognition Description of the Matter For the year ended December 31, 2021, the Company’s service fee revenue was $1,166.7 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. How We Addressed the Matter in Our Audit 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. /s/ Ernst & Young LLP We have served as the Company’s auditor since 2007. Los Angeles, California March 1, 2022 53 RADNET, INC. AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS (IN THOUSANDS EXCEPT SHARE AND PER SHARE DATA) As of December 31, 2021 2020 ASSETS CURRENT ASSETS Cash and cash equivalents $ 134,606 $ 102,018 Accounts receivable 135,062 129,585 Due from affiliates 5,384 5,836 Prepaid expenses and other current assets 49,212 32,985 Total current assets 324,264 270,424 PROPERTY, EQUIPMENT AND RIGHT-OF-USE ASSETS Property and equipment, net 484,247 399,335 Operating lease right-of-use-assets 584,291 483,661 Total property, equipment and right-of-use-assets 1,068,538 882,996 OTHER ASSETS Goodwill 513,820 472,879 Other intangible assets 56,603 52,393 Deferred financing costs 2,135 1,767 Investment in joint ventures 42,229 34,528 Deferred tax assets, net 14,853 34,687 Deposits and other 36,032 36,983 Total assets $ 2,058,474 $ 1,786,657 LIABILITIES AND EQUITY CURRENT LIABILITIES Accounts payable, accrued expenses and other $ 263,937 $ 236,684 Due to affiliates 23,530 14,010 Deferred revenue 10,701 39,257 Current portion of finance lease liability — 2,578 Current portion of operating lease liability 65,452 65,794 Current portion of notes payable 11,164 39,791 Total current liabilities 374,784 398,114 LONG-TERM LIABILITIES Long-term finance lease liability — 743 Long-term operating lease liability 577,675 463,096 Notes payable, net of current portion 743,498 612,913 Other non-current liabilities 16,360 53,488 Total liabilities 1,712,317 1,528,354 EQUITY RadNet, Inc. stockholders' equity: Common stock - $ .0001 par value, 200,000,000 shares authorized; 53,548,227 and 51,640,537 shares issued and outstanding at December 31, 2021 and 2020 respectively 5 5 Additional paid-in-capital 342,592 307,788 Accumulated other comprehensive loss ( 20,421 ) ( 24,051 ) Accumulated deficit ( 93,272 ) ( 117,999 ) Total RadNet, Inc.'s stockholders' equity 228,904 165,743 Noncontrolling interests 117,253 92,560 Total equity 346,157 258,303 Total liabilities and equity $ 2,058,474 $ 1,786,657 The accompanying notes are an integral part of these financial statements. 54 RADNET, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF OPERATIONS (IN THOUSANDS EXCEPT SHARE AND PER SHARE DATA) Years Ended December 31, 2021 2020 2019 REVENUE Service fee revenue $ 1,166,743 $ 931,722 1,028,236 Revenue under capitation arrangements 148,334 140,118 125,943 Total revenue 1,315,077 1,071,840 1,154,179 Provider relief funding 9,110 26,264 — OPERATING EXPENSES Cost of operations, excluding depreciation and amortization 1,123,274 965,902 999,692 Lease abandonment charges 19,675 — — Depreciation and amortization 96,694 86,795 80,607 Loss on sale and disposal of equipment and other 1,246 1,200 2,383 Loss on impairment — 4,170 — Severance costs 744 4,353 1,619 Total operating expenses 1,241,633 1,062,420 1,084,301 INCOME FROM OPERATIONS 82,554 35,684 69,878 OTHER INCOME AND EXPENSES Interest expense 48,830 45,882 48,044 Equity in earnings of joint ventures ( 10,967 ) ( 7,945 ) ( 8,350 ) Non-cash change in fair value of interest rate hedge ( 21,670 ) 2,528 — Gain on re-measurement of pre-existing interest — — ( 768 ) Loss (gain) on extinguishment of debt and related expenses 6,044 ( 4,047 ) — Other expenses 1,438 120 1,283 Total other expenses 23,675 36,538 40,209 INCOME (LOSS) BEFORE INCOME TAXES 58,879 ( 854 ) 29,669 Provision for income taxes ( 14,560 ) ( 895 ) ( 6,229 ) NET INCOME (LOSS) 44,319 ( 1,749 ) 23,440 Net income attributable to noncontrolling interests 19,592 13,091 8,684 NET INCOME (LOSS) ATTRIBUTABLE TO RADNET, INC. COMMON STOCKHOLDERS $ 24,727 $ ( 14,840 ) $ 14,756 BASIC NET INCOME (LOSS) PER SHARE ATTRIBUTABLE TO RADNET, INC. COMMON STOCKHOLDERS $ 0.47 $ ( 0.29 ) $ 0.30 DILUTED NET INCOME (LOSS) PER SHARE ATTRIBUTABLE TO RADNET, INC. COMMON STOCKHOLDERS $ 0.46 $ ( 0.29 ) $ 0.29 WEIGHTED AVERAGE SHARES OUTSTANDING Basic 52,496,679 50,891,791 49,674,858 Diluted 53,421,033 50,891,791 50,244,006 The accompanying notes are an integral part of these financial statements. 55 RADNET, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS) (IN THOUSANDS) Years Ended December 31, 2021 2020 2019 NET INCOME (LOSS) $ 44,319 $ ( 1,749 ) $ 23,440 Foreign currency translation adjustments ( 65 ) ( 101 ) ( 32 ) Change in fair value of cash flow hedge, net of taxes — ( 19,372 ) ( 10,253 ) Change in fair value of cash flow hedge from prior periods reclassified to earnings 3,695 3,448 — COMPREHENSIVE INCOME (LOSS) 47,949 ( 17,774 ) 13,155 Less comprehensive income attributable to noncontrolling interests 19,592 13,091 8,684 COMPREHENSIVE INCOME (LOSS) ATTRIBUTABLE TO RADNET, INC. COMMON STOCKHOLDERS $ 28,357 $ ( 30,865 ) $ 4,471 The accompanying notes are an integral part of these financial statements. 56 RADNET, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENT OF EQUITY (IN THOUSANDS EXCEPT SHARE DATA) 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, 2019 48,977,485 $ 5 $ 242,835 $ 2,259 $ ( 117,915 ) $ 127,184 $ 73,069 $ 200,253 Issuance of stock upon exercise of options 12,500 — 75 — — 75 — 75 Stock-based compensation 771,042 — 8,735 — — 8,735 — 8,735 Forfeiture of restricted stock ( 1,500 ) — ( 5 ) — — ( 5 ) — ( 5 ) Non-cash severance 12,692 — 188 — — 188 — 188 Issuance of stock for acquisitions 542,109 — 7,500 — — 7,500 — 7,500 Sale to noncontrolling interests, net of taxes — — 3,537 — — 3,537 2,008 5,545 Special distribution from noncontrolling interest — — — — — — — — Purchase of noncontrolling interests — — — — — — — — Contributions from noncontrolling interests — — — — — — 750 750 Distributions paid to noncontrolling interests — — — — — — ( 3,057 ) ( 3,057 ) Re-measurement of noncontrolling interest upon change in control — — — — — — — — Change in cumulative foreign currency translation adjustment — — — ( 32 ) — ( 32 ) — ( 32 ) 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 Issuance of stock upon exercise of options — — — — — — — — Stock-based compensation 491,674 — — — — — — — Issuance of common stock under the DeepHealth equipty 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) income — — — — ( 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 Issuance of stock upon exercise of options 53,960 — 488 — — 488 — 488 Shares issued under the equity compensation plan 1,212,758 — — — — — — — Issuance of common stock under the DeepHealth equity compensation plan 471,162 — — — — — — — Stock-based compensation expense — — 25,284 — — 25,284 — 25,284 Issuance of common stock for sale of unregistered securities for acquisitions and asset purchases 82,658 — 2,498 — — 2,498 — 2,498 Release of holdback shares from the purchase of DeepHealth 91,517 — 2,413 — — 2,413 — 2,413 57 Forfeiture of restricted stock ( 4,365 ) — ( 81 ) — — ( 81 ) — ( 81 ) Gain on contribution of assets to majority owned subsidiary — — ( 4 ) — — ( 4 ) — ( 4 ) Contribution from noncontrolling partner — — — — — — 123 123 Sale of economic interests in majority owned subsidiary, net of taxes — — 4,206 — — 4,206 7,404 11,610 Distributions paid to noncontrolling interests — — — — — — ( 2,426 ) ( 2,426 ) Change in cumulative foreign currency translation adjustment — — — ( 65 ) — ( 65 ) — ( 65 ) Change in fair value of cash flow hedge from prior periods reclassified to earnings — — — 3,695 — 3,695 — 3,695 Net income — — — — 24,727 24,727 19,592 44,319 BALANCE - DECEMBER 31, 2021 53,548,227 $ 5 $ 342,592 $ ( 20,421 ) $ ( 93,272 ) $ 228,904 $ 117,253 $ 346,157 The accompanying notes are an integral part of these financial statements. 58 RADNET, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS (IN THOUSANDS) Years Ended December 31, 2021 2020 2019 CASH FLOWS FROM OPERATING ACTIVITIES Net income (loss) $ 44,319 $ ( 1,749 ) $ 23,440 Adjustments to reconcile net income (loss) to net cash provided by operating activities: Depreciation and amortization 96,694 86,795 80,607 Amortization of operating lease right-of-use assets 73,967 67,915 66,842 Lease abandonment charges 19,675 — — Equity in earnings of joint ventures, net of dividends ( 6,260 ) 1,577 248 Amortization and write off of deferred financing costs and loan discount 3,254 4,413 4,184 Loss on sale and disposal of equipment and other 1,246 1,200 2,383 Loss (gain) on extinguishment of debt 1,496 ( 4,047 ) — Gain on re-measurement of pre-existing interest — — ( 768 ) Loss on impairment — 4,170 — Amortization of cash flow hedge 3,695 3,448 — Non-cash change in fair value of interest rate hedge ( 21,670 ) 2,528 — Stock-based compensation 25,203 12,405 8,730 Other non cash item in other expenses — 242 ( 371 ) Change in value of contingent consideration — — ( 3,123 ) Changes in operating assets and liabilities, net of assets acquired and liabilities assumed in purchase transactions: Accounts receivable ( 5,890 ) 25,206 ( 17,482 ) Other current assets ( 15,777 ) 6,588 ( 3,557 ) Other assets 662 ( 5,425 ) ( 2,326 ) Deferred taxes 19,834 ( 611 ) ( 3,888 ) Operating lease liability ( 72,553 ) ( 53,906 ) ( 66,831 ) Deferred revenue ( 28,319 ) 37,941 ( 1,082 ) Accounts payable, accrued expenses and other liabilities 9,915 45,069 17,316 Net cash provided by operating activities 149,491 233,759 104,322 CASH FLOWS FROM INVESTING ACTIVITIES Purchase of imaging facilities ( 77,691 ) ( 31,265 ) ( 27,150 ) Equity investments at fair value — — ( 143 ) Purchase of property and equipment ( 137,874 ) ( 94,172 ) ( 74,153 ) Purchase of intangible assets ( 5,130 ) — — Proceeds from sale of equipment 625 828 1,160 Proceeds from the sale of equity interests in a joint venture — — 132 Nulogix return of capital — — 792 Equity contributions in existing and purchase of interest in joint ventures ( 1,441 ) ( 1,635 ) ( 103 ) Net cash used in investing activities ( 221,511 ) ( 126,244 ) ( 99,465 ) CASH FLOWS FROM FINANCING ACTIVITIES Principal payments on notes and leases payable ( 3,302 ) ( 3,562 ) ( 6,494 ) Payments on term loan debt ( 619,529 ) ( 43,296 ) ( 40,742 ) Additional deferred finance costs on revolving loan amendment ( 938 ) ( 741 ) — Proceeds from debt issuance, net of issuance costs 717,307 — 97,144 Proceeds from paycheck protection program loans — 4,023 — Distributions paid to noncontrolling interests ( 2,426 ) ( 1,985 ) ( 3,057 ) Proceeds from sale of economic interest in majority owned subsidiary 13,073 — 5,275 Contributions from noncontrolling partners — — 750 Proceeds from revolving credit facility 128,300 250,900 261,200 Payments on revolving credit facility ( 128,300 ) ( 250,900 ) ( 289,200 ) Proceeds from issuance of common stock upon exercise of options 488 — 75 Net cash provided by (used in) financing activities 104,673 ( 45,561 ) 24,951 EFFECT OF EXCHANGE RATE CHANGES ON CASH ( 65 ) ( 101 ) ( 32 ) NET INCREASE IN CASH AND CASH EQUIVALENTS 32,588 61,853 29,776 CASH AND CASH EQUIVALENTS, beginning of period 102,018 40,165 10,389 CASH AND CASH EQUIVALENTS, end of period $ 134,606 $ 102,018 $ 40,165 SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION Cash paid during the period for interest $ 29,042 $ 39,521 $ 46,254 Cash paid during the period for income taxes $ 1,950 $ 5,069 $ 5,884 The accompanying notes are an integral part of these financial statements. RADNET, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS (CONTINUED) Supplemental Schedule of Non-Cash Investing and Financing Activities We acquired equipment and certain leasehold improvements for approximately $ 63.9 million, $ 52.0 million, and $ 51.7 million during the years ended December 31, 2021, 2020 and 2019, respectively, that we had not paid for as of December 31, 2021, 2020 and 2019, respectively. 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 $ 20.0 thousand, and $ 0.1 million during the twelve months ended December 31, 2020 and 2019. On October 22, 2021 we completed our purchase of specific technology assets of DRT LLC by in part by issuing 15,000 shares of our common stock to complete the transaction. The shares were ascribed a value of $ 0.4 million. On August 24, 2021, we completed our stock purchase of Tangent Associates LLC by issuing 67,658 shares of our common stock to complete the transaction. The shares were ascribed a value of $ 2.0 million. On January 1, 2021 we entered into the Simi Valley Imaging Group, LLC, partnership agreement with Simi Valley Hospital and Health Services ("Simi Adventist"). Of the total combined assets of $ 0.4 million, RadNet transferred $ 0.3 million and Simi Adventist contributed the remaining $ 0.1 million. 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. LLC in March 2019. See Note 4, Facility Acquisitions and Dispositions, for further information. On February 27, 2019, we issued 440,207 shares of our common stock to the sellers of Hudson Valley Radiology Associates, P.L.L.C. ("HVRA") which permitted our variable interest entity, Lenox Hill Radiology and Medical Imaging Associates, P.C., to complete its purchase of the membership interest of HVRA. The shares were ascribed a value of $ 6.0 million. 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. 59 RADNET, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS NOTE 1 – NATURE OF BUSINESS We are a national provider of freestanding, fixed-site outpatient diagnostic imaging services in the United States. At December 31, 2021, we operated directly or indirectly through joint ventures with hospitals, 347 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. Our services include magnetic resonance imaging (MRI), computed tomography (CT), positron emission tomography (PET), nuclear medicine, mammography, ultrasound, diagnostic radiology (X-ray), fluoroscopy and other related procedures. The vast majority of our centers offer multi-modality imaging services. 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 ("AI") suites to enhance interpretation of radiographic images. Our operations comprise a single segment for financial reporting purposes for this reporting period. The consolidated financial statements include the accounts of RadNet, Inc as well as its subsidiaries in which RadNet has a controlling financial interest. The consolidated financial statements also include certain variable interest entities in which we are the primary beneficiary (as described in more detail below). All material intercompany transactions and balances have been eliminated upon consolidation. All of these affiliated entities are referred to collectively as “RadNet”, “we”, “us”, “our” or the “Company” in this report Accounting regulations stipulate that generally any entity with a) insufficient equity to finance its activities without additional subordinated financial support provided by any parties, or b) equity holders that, as a group, lack the characteristics which evidence a controlling financial interest, is considered a Variable Interest Entity (“VIE”). We consolidate all VIEs in which we are the primary beneficiary. We determine whether we are the primary beneficiary of a VIE through a qualitative analysis that identifies which variable interest holder has the controlling financial interest in the VIE. The variable interest holder who has both of the following has the controlling financial interest and is the primary beneficiary: (1) the power to direct the activities of the VIE that most significantly impact the VIE’s economic performance and (2) the obligation to absorb losses of, or the right to receive benefits from, the VIE that could potentially be significant to the VIE. In performing our analysis, we consider all relevant facts and circumstances, including: the design and activities of the VIE, the terms of the contracts the VIE has entered into, the nature of the VIE’s variable interests issued and how they were negotiated with or marketed to potential investors, and which parties participated significantly in the design or redesign of the entity. VIEs that we consolidate as the primary beneficiary consist of professional corporations which are owned or controlled by individuals within our senior management and provide professional medical services for centers in Arizona, California, Delaware, Maryland, New Jersey and New York. These VIEs are collectively referred to as the consolidated medical group ("the Group"). RadNet provides non-medical, technical and administrative services to the Group for which it receives a management fee, pursuant to the related management agreements. Through the management agreements we have exclusive authority over all non-medical decision making related to the ongoing business operations and we determine the annual budget. The Group has insignificant operating assets and liabilities, and de minimis equity. Substantially all cash flows of the Group after expenses, including professional salaries, are transferred to us. We consolidate the revenue and expenses, assets and liabilities of the Group. The creditors of the Group do not have recourse to our general credit and there are no other arrangements that could expose us to losses on behalf of the Group. However, RadNet may be required to provide financial support to cover any operating expenses in excess of operating revenues. The Group on a combined basis recognized $ 179.6 million, $ 147.6 million, and $ 157.4 million of revenue, net of management services fees to RadNet, for the years ended December 31, 2021, 2020, and 2019, respectively and $ 179.6 million, $ 147.6 million, and $ 157.4 million of operating expenses for the years ended December 31, 2021, 2020, and 2019, respectively. RadNet, Inc. recognized $ 749.2 million, $ 600.7 million, and $ 618.9 million of total billed net service fee revenue for the years ended December 31, 2021, 2020, and 2019, respectively, for management services provided to them relating primarily to the technical portion of billed revenue. The cash flows of the Group are included in the accompanying consolidated statements of cash flows. All intercompany balances and transactions have been eliminated in consolidation. In our consolidated balance sheets at December 31, 2021 and December 31, 2020, we have included approximately $ 89.2 million and $ 82.3 million, respectively, of accounts receivable and approximately $ 14.4 million and $ 15.2 million of accounts payable and accrued liabilities related to the Group, respectively. 60 At all of our centers not serviced by the Group we have entered into long-term contracts with medical groups to provide professional services at those centers, including supervision and interpretation of diagnostic imaging procedures. The medical groups maintain full control over the physicians they employs. Through our management agreements, we make available to the medical groups the imaging centers, including all furniture, fixtures and medical equipment therein. The medical groups are compensated for their services from the professional component of the global net service fee revenue and after deducting management service fees paid to us, we have no economic controlling interest in these medical groups. As such, the financial results of these groups are not consolidated in our financial statements. We also own a 49 % economic interest in ScriptSender, LLC, which provides services for secure data transmission of medical information. Through a management agreement, RadNet provides management and accounting services and receives an agreed upon fee. ScriptSender LLC is dependent on us 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. We have continued to finance ScriptSender during it's development phase and our maximum exposure to loss is $ 4.0 million, which represents our receivable balance from the entity. Maximum exposure to loss is the loss that we would absorb in the event that all of the assets of ScriptSender are deemed worthless. We paid operating expenses for the venture of $ 1.6 million and $ 1.8 million for the years ended December 31, 2021, and December 31, 2020, respectively. NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES PRINCIPLES OF CONSOLIDATION – The operating activities of subsidiaries are included in the accompanying consolidated financial statements (“financial statements”) from the date of acquisition. Investments in companies in which we have the ability to exercise significant influence, but not control, are accounted for by the equity method. All intercompany transactions and balances, with our consolidated entities and the unsettled amount of intercompany transactions with our equity method investees, have been eliminated in consolidation. As stated in Note 1 above, the Group consists of VIEs and we consolidate the operating activities and balance sheets of each. Additionally, we determined that our unconsolidated joint venture, ScriptSender, LLC, is also a VIE as it is dependent on our operational funding but we are not a primary beneficiary since RadNet does not have the power to direct the activities of the entity that most significantly impact the entity’s economic performance. USE OF ESTIMATES - The financial statements have been prepared in accordance with U.S. generally accepted accounting principles (GAAP), which requires management to make estimates and assumptions that affect the amounts reported in the financial statements and accompanying notes. These estimates and assumptions affect various matters, including our reported amounts of assets and liabilities in our consolidated balance sheets at the dates of the financial statements; our disclosure of contingent assets and liabilities at the dates of the financial statements; 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. As a result, actual amounts could materially differ from these estimates. 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 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 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 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 61 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 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. We also record estimated implicit price concessions (based primarily on historical collection experience) related to uninsured accounts to record self-pay revenues at the estimated amounts we expect to collect. Under capitation arrangements with various health plans, we earn a per-enrollee amount each month for making available diagnostic imaging services to all plan enrollees under the capitation arrangement. 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 total net revenues for the years ended December 31, 2021, 2020, and 2019 are presented in the table below (in thousands): 2021 2020 2019 Commercial insurance $ 743,462 $ 584,035 $ 642,341 Medicare 280,911 217,928 237,427 Medicaid 34,731 25,619 28,283 Workers' compensation/personal injury 44,235 33,478 42,792 Other patient revenue 19,398 25,314 23,862 Management fee revenue 19,630 11,253 11,659 Imaging on call and software 10,525 10,798 17,317 Other 13,851 23,297 24,555 Service fee revenue 1,166,743 931,722 1,028,236 Revenue under capitation arrangements 148,334 140,118 125,943 Total revenue $ 1,315,077 $ 1,071,840 $ 1,154,179 COVID-19 PANDEMIC AND CARES ACT FUNDING - On March 11, 2020 the World Health Organization (WHO) designated COVID-19 as a global pandemic. To aid businesses and stimulate the national economy, Congress passed The Coronavirus Aid, Relief, and Economic Security ("CARES") Act, which was signed in to law on March 27, 2020. Beginning in the second quarter of 2020 and through the twelve months ended December 31, 2021, we received funding from the various programs established by the CARES Act as follows: • $ 39.6 million total of accelerated Medicare payments received, $ 39.5 million for the twelve months ended December 31, 2020 and $ 0.1 million for the twelve months ended December 31, 2021. • $ 4.0 million from the Paycheck Protection Program through the twelve months ended December 31, 2020. • $ 35.4 million total Provider Relief Funding, $ 26.3 million received for the twelve months ended December 31, 2020 and $ 9.1 million received for the twelve months ended December 31, 2021. In addition to CARES Act funding, we received $ 5.0 million in advance payments from insurer Blue Shield for the 12 months ended December 31, 2020. The accelerated Medicare and Blue Shield payments were recorded to Deferred Revenue in our consolidated balance sheet and are being applied to revenue as services are performed beginning in 2021. For the twelve months ended December 31, 2021, $ 30.2 million of the accelerated Medicare payments has been applied to revenue. The total advance of $ 5.0 million from 62 Blue Shield has been repaid, with $ 1.3 million for the twelve months ended December 31, 2020 and $ 3.7 million for the twelve months ended December 31, 2021. The $ 4.0 million secured from the Paycheck Protection Program was accounted for as debt and in December 2020 we met the eligibility requirements under the government guidelines for forgiveness and the loans were written off to gain on extinguishment of debt. The Provider Relief Funding is displayed as such on our consolidated statements of operations. The CARES Act also provides for the deferral of the employer-paid portion of the social security payroll tax with 50% due by December 31, 2021 and 50% due December 31,2022. We elected to defer $ 16.3 million of this tax through December 31, 2020. Additionally, The CARES Act provided a refundable employer tax credit equal to 50 % of qualified wages, including certain health insurance costs, that can be used to offset payroll tax liabilities. In the third quarter of 2021 we qualified for a portion of the credit and recorded a benefit of $ 7.7 million through a reduction of payroll tax expense. Our remaining deferred tax liability balance of approximately $ 8.1 million at December 31, 2021, will be paid by December 31, 2022. 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. 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. 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. Amounts remaining to be collected on these agreements were $ 17.7 million and $ 20.5 million at December 31, 2021 and December 31, 2020, respectively. We do not utilize factoring arrangements as an integral part of our financing for working capital. 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, 2021, 2020 and 2019, we recorded approximately $ 10.5 million, $ 8.6 million, and $ 10.1 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, 2021 we had deferred revenue of approximately $ 1.0 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. We have placed our cash and cash equivalents with one major financial institution. At times, the cash in the financial institution is temporarily in excess of the amount insured by the Federal Deposit Insurance Corporation, or FDIC. 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 and maintain an allowance for bad debts based upon our historical collection experience. In addition, we have notes receivable stemming from our factoring of accounts receivable as stated above. Companies with which we factor our receivables are well known established buyers of such instruments, have agreed to assume the full risk of their collection. CASH AND CASH EQUIVALENTS – We consider all highly liquid investments that mature in three months or less when purchased to be cash equivalents. The carrying amount of cash and cash equivalents approximates the fair market value. 63 DEFERRED FINANCING COSTS – Costs of financing are deferred and amortized using the effective interest rate method. Deferred financing costs are solely related to our Barclays Revolving Credit Facilities. Deferred financing costs, net of accumulated amortization, were $ 2.1 million and $ 1.8 million for the twelve months ended December 31, 2021 and 2020, respectively. See Note 8, Revolving Credit Facility, Notes Payable, and Capital Leases for more information on our revolving lines of credit. PROPERTY AND EQUIPMENT – Property and equipment are stated at cost, less accumulated depreciation and amortization. Depreciation and amortization of property and equipment are provided using the straight-line method over the estimated useful lives, which range from 3 to 15 years. Leasehold improvements are amortized at the lesser of lease term or their estimated useful lives, which range from 3 to 15 years. Maintenance and repairs are charged to expense as incurred. BUSINESS COMBINATION – When the qualifications for business combination accounting treatment are met, it requires us to recognize separately from goodwill the assets acquired and the liabilities assumed at their acquisition date fair values. Goodwill as of the acquisition date is measured as the excess of consideration transferred over the net of the acquisition date fair values of the assets acquired and the liabilities assumed. 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 goodwill. 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 $ 513.8 million and $ 472.9 million at December 31, 2021 and December 31, 2020, respectively. Indefinite lived intangible assets at were $ 7.1 million at December 31, 2021 and December 31, 2020 and are associated with the value of certain trade name intangibles. Goodwill and trade name intangibles are recorded as a result of business combinations. When we determine the carrying value of goodwill exceeds its fair value, an impairment charge would be recognized which should not exceed the total amount of goodwill allocated to that reporting unit. We determined fair values for each of the reporting units using the market approach, when available and appropriate, or the income approach, or a combination of both. We assess the valuation methodology based upon the relevance and availability of the data at the time we perform the valuation. If multiple valuation methodologies are used, the results are weighted appropriately. We tested both goodwill and trade name intangibles for impairment on October 1, 2021. In 2020 we ceased employing certain indefinite lived trade names with a total value of $ 4.2 million and they were written off in full as of December 31, 2020 . Separate from this, our annual impairment test as of October 1, 2021 noted no other impairment, and we have not identified any indicators of impairment through December 31, 2021. 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. 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. At December 31, 2021 we recorded a write off charge of $ 7.1 million in leasehold improvements for facilities that we abandoned. See the Leases discussion below for more information. Other than this, we determined that there were no events or changes in circumstances that indicated our long-lived assets were impaired during any periods presented. INCOME TAXES – Income tax expense is computed using an asset and liability method and using expected annual effective tax rates. Under this method, deferred income tax assets and liabilities result from temporary differences in the financial reporting bases and the income tax reporting bases of assets and liabilities. The measurement of deferred tax assets is reduced, if necessary, by the amount of any tax benefit that, based on available evidence, is not expected to be realized. When it appears more likely than not that deferred taxes will not be realized, a valuation allowance is recorded to reduce the deferred tax asset to its estimated realizable value. For net deferred tax assets we consider estimates of future taxable income in determining whether our net deferred tax assets are more likely than not to be realized. Income taxes are further explained in Note 10, Income Taxes. LEASES - We determine if an arrangement is a lease at inception. Operating leases are included in operating lease right-of-use (“ROU”) assets, current operating lease liability, and long term operating lease liability in our consolidated balance sheets. Finance leases are included in property and equipment, current finance lease liability, and long-term finance lease 64 liability in our consolidated balance sheets. ROU assets represent our right to use an underlying asset for the lease term and lease liabilities represent our obligation to make lease payments arising from the lease. Operating lease ROU assets and liabilities are recognized at commencement date based on the present value of lease payments over the lease term. We use the implicit rate when readily determinable. As most of our leases do not provide an implicit rate, we use our incremental borrowing rate ("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. Lease expense for lease payments is recognized on a straight-line basis over the lease term. For a contract in which we are a lessee that contains fixed payments for both lease and non-lease components, we have elected to account for the components as a single lease component, as permitted. For finance leases, interest expense on the lease liability is recognized using the effective interest method and amortization of the right-of-use asset is recognized on a straight-line basis over the shorter of the estimated useful life of the asset or the lease term. 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. After a management review of post pandemic patient traffic to centers, it was noted that although overall volumes had returned to pre-pandemic levels, certain imaging locations did not experience the same levels of activity as beforehand. This was due in part to lower utilization rates of commercial space from telecommuting, accompanied by the migration of those workers out of congested urban centers to residential areas. Based on this analysis, management decided to consolidate volumes into fewer centers and reduce administrative office space in response to the demographic changes experienced. We took a lease abandonment charge of approximately $ 12.6 million at December 31, 2021 to complete the closure of these locations. Other than stated above, 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. UNINSURED RISKS – On November 1, 2013 we entered into a high-deductible workers’ compensation insurance policy. We have recorded liabilities of $ 3.5 million and $ 4.1 million for each of the years ending December 31, 2021 and December 31, 2020, respectively, for the estimated future cash obligations associated with the unpaid portion of the workers compensation claims incurred. 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 which is $ 10,000 per incidence for the years ended December 31, 2021 and December 31, 2020, 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. As of December 31, 2021, this policy remains in effect. We have entered into an arrangement with Blue Shield to administer and process claims under a self-insured plan that provides health insurance coverage for our employees and dependents. We have recorded liabilities as of December 31, 2021 and 2020 of $ 6.3 million and $ 6.6 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. 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. Eligible employees may contribute on a tax-deferred basis a percentage of compensation, up to the maximum allowable under tax law. Employee contributions vest immediately. 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 $ 3.0 million in matching for the year ended December 31, 2021. For the year ended December 31, 2020, we elected not to provide a matching contribution. 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. Anticipated future revenue is compared to anticipated costs and if the anticipated 65 future cost exceeds the revenue, a loss contract accrual is recorded. In connection with the acquisition of Radiologix in November 2006, we acquired certain management service agreements which met this criterion and recorded to other non-current liabilities an $ 8.9 million loss contract accrual. Of the $ 4.6 million ending balance at December 31, 2019, approximately $ 4.0 million, ($ 2.8 million net of taxes), was settled against the purchase consideration of Hudson Valley Radiology Associates, P.L.L.C. (HVRA) by our VIE entity Lenox Hill Radiology and Medical Associates, P.C. and the remaining balance of approximately $ 558,000 was written off upon ending a contract with a physician group. 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, and currently as of April 15, 2021 (the “Restated Plan”). The Restated Plan was approved by our stockholders at our annual stockholders meeting on June 10, 2021. We have reserved for issuance under the Restated Plan 16,500,000 shares of common stock. We can issue options, stock awards, stock appreciation rights, stock units and cash awards under the Restated Plan. Certain options granted under the Restated Plan to employees are intended to qualify as incentive stock options under existing tax regulations. Stock options and warrants generally vest over three to five years and expire five to ten years from date of grant. The compensation expense associated with option grants is calculated based on a valuation model, typically the Black–Scholes model, which requires certain management assumptions with respect to volatility. The compensation expense recognized for all equity-based awards is recognized over the awards’ service periods. Equity-based compensation is classified in operating expenses within the same line item as the majority of the cash compensation paid to employees. 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 – For our operations in Canada and Hungary, the functional currency of our foreign subsidiaries is the local currency. 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). Gains and losses related to the foreign currency portion of international transactions 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. 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, 2021 are included in the consolidated statements of comprehensive income (loss). 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. 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. Therefore, if one or more of these matters were resolved against us for amounts in excess of management's expectations, our results of operations and financial condition, including in a particular reporting period in which any such outcome becomes probable and estimable, could be materially adversely affected. In the second quarter of 2019, we accrued a liability of $ 2.3 million related to allegations by the US Attorney's Office for the Western District of New York that RadNet submitted certain claims which incorrectly identified the physician who furnished the radiology services. The final settlement, which admits no wrong-doing on behalf of RadNet, was $ 2.2 million and paid in September 2019. DERIVATIVE INSTRUMENTS 2016 CAPS In the fourth quarter of 2016, we entered into two forward interest rate cap agreements ("2016 Caps"). 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 were liable for a 66 $ 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) 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 Gain (Loss) Recognized on Derivative, net of taxes Location of Gain (Loss) Recognized in Income on Derivative December 31, 2021 $ — December 31, 2020 788 Other Comprehensive Loss December 31, 2019 ( 4,383 ) Other Comprehensive Income 2019 SWAPS In the second quarter of 2019, we entered into four forward interest rate agreements ("2019 swaps"). The 2019 swaps have total notional amounts of $ 500,000,000 , consisting of two agreements of $ 50,000,000 each and two agreements of $ 200,000,000 each. The 2019 swaps will secure a constant interest rate associated with portions of our variable rate bank debt and have an effective date of October 13, 2020. 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 $ 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 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. 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 December 31, 2021 $ — 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): 67 Interest Rate Contracts - Ineffective Portion For the twelve months ended Amount of gain (loss) recognized in income on derivative (current period ineffective portion) Location of gain (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, 2021 $ 21,670 Other Income (Expense) $( 3,695 ) Equity and Interest Expense 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. The fair value hierarchy ranks the quality and reliability of inputs used to determine fair value. Accordingly, assets and liabilities carried at, or permitted to be carried at, fair value are classified within the fair value hierarchy in one of the following categories based on the lowest level input that is significant to a fair value measurement: Level 1—Fair value is determined by using unadjusted quoted prices that are available in active markets for identical assets and liabilities. Level 2—Fair value is determined by using inputs other than Level 1 quoted prices that are directly or indirectly observable. Inputs can include quoted prices for similar assets and liabilities in active markets or quoted prices for identical assets and liabilities in inactive markets. Related inputs can also include those used in valuation or other pricing models such as interest rates and yield curves that can be corroborated by observable market data. Level 3—Fair value is determined by using inputs that are unobservable and not corroborated by market data. Use of these inputs involves significant and subjective judgment. Derivatives: The table below summarizes the estimated fair values of certain of our financial assets that are subject to fair value measurements, and the classification of these assets in our consolidated balance sheets, as follows (in thousands): As of December 31, 2021 Level 1 Level 2 Level 3 Total Current and long term liabilities 2019 SWAPS - Interest Rate Contracts $ — $ 16,319 $ — $ 16,319 As of December 31, 2020 Level 1 Level 2 Level 3 Total Current and long term liabilities 2019 SWAPS - Interest Rate Contracts $ — $ 37,989 $ — $ 37,989 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. The forward LIBOR curve is readily available in the public markets or can be derived from information available in the public markets. 68 Long Term Debt The table below summarizes the estimated fair value and carrying amount of our SunTrust (Term Loan Agreement) and Barclays (First Lien Term Loans) long-term debt as follows (in thousands): As of December 31, 2021 Level 1 Level 2 Level 3 Total Fair Value Total Face Value Term Loan Agreement and First Lien Term Loans $ — $ 766,973 $ — $ 766,973 $ 767,875 As of December 31, 2020 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 Our Barclays revolving credit facility had no aggregate principal amount outstanding as of December 31, 2021 and December 31, 2020, respectively. Our SunTrust revolving credit facility had no aggregate principal amount outstanding as of December 31, 2021 and December 31, 2020, 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. Level 2 inputs primarily related to comparable market prices. We consider the carrying amounts of cash and cash equivalents, receivables, other current assets, current liabilities and other notes payables to approximate their fair value because of the relatively short period of time between the origination of these instruments and their expected realization or payment. Additionally, we consider the carrying amount of our capital lease obligations to approximate their fair value because the weighted average interest rate used to formulate the carrying amounts approximates current market rates. 69 EARNINGS PER SHARE - Earnings per share is based upon the weighted average number of shares of common stock and common stock equivalents outstanding, net of common stock held in treasury, as follows (in thousands except share and per share data): Years Ended December 31, 2021 2020 2019 Net income (loss) attributable to RadNet, Inc. common stockholders $ 24,727 $ ( 14,840 ) $ 14,756 BASIC NET INCOME (LOSS) PER SHARE ATTRIBUTABLE TO RADNET, INC. COMMON STOCKHOLDERS Weighted average number of common shares outstanding during the period 52,496,679 50,891,791 49,674,858 Basic net income (income) per share attributable to RadNet, Inc. common stockholders $ 0.47 $ ( 0.29 ) $ 0.30 DILUTED NET INCOME (LOSS) PER SHARE ATTRIBUTABLE TO RADNET, INC. COMMON STOCKHOLDERS Weighted average number of common shares outstanding during the period 52,496,679 50,891,791 49,674,858 Add nonvested restricted stock subject only to service vesting 259,539 — 208,963 Add additional shares issuable upon exercise of stock options and warrants 664,815 — 360,185 Weighted average number of common shares used in calculating diluted net income per share 53,421,033 50,891,791 50,244,006 Diluted net income (loss) per share attributable to RadNet, Inc. common stockholders $ 0.46 $ ( 0.29 ) $ 0.29 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 47,792 554,444 — EQUITY INVESTMENTS AT FAIR VALUE- As of December 31, 2021, 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, based in Israel, specializes in software packages that provide compliant radiation dose structured reporting and enhanced images from reduced dose CT scans. On March 24, 2017, we acquired an initial 12.50 % equity interest in Medic Vision - Imaging Solutions Ltd for $ 1.0 million. We also received an option to exercise warrants to acquire up to an additional 12.50 % equity interest for $ 1.4 million within one year from the initial share purchase date, if exercised in full. On March 1, 2018 we exercised our warrant in part and acquired an additional 1.96 % for $ 200,000 . Our initial equity interest has been diluted to 12.25 % and our total equity investment stands at 14.21 %. In accordance with accounting guidance , as we exercise no significant influence over Medic Vision’s operations, the investment is recorded at its cost of $ 1.2 million, given that the fair value is not readily determinable. No observable price changes or impairment in our investment was noted as of the year ended December 31, 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 $ 143,000 that converted to an additional 80,000 preferred shares on October 11, 2019. No observable price changes or impairment in our investment was noted for the year ended December 31, 2021. 70 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 observable price changes or impairment in our investment was noted for the year ended December 31, 2021. INVESTMENT IN JOINT VENTURES – We have 13 unconsolidated joint ventures with ownership interests ranging from 35 % to 55 %. These joint ventures represent partnerships with hospitals, health systems or radiology practices and were formed for the purpose of owning and operating diagnostic imaging centers. Professional services at the joint venture diagnostic imaging centers are performed by contracted radiology practices or a radiology practice that participates in the joint venture. Our investment in these joint ventures is accounted for under the equity method, as we do not have a controlling financial interest in such ventures. We evaluate our investment in joint ventures, including cost in excess of book value (equity method goodwill) for impairment whenever indicators of impairment exist. No indicators of impairment existed as of December 31, 2021. 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 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 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 %. We recorded a loss of $ 2,000 on the transaction. Change in control of existing joint ventures On October 6, 2014, we acquired a 49 % equity interest in Garden State Radiology Network, LLC ("GSRN") for cash consideration of $ 2.2 million. The venture consisted of two imaging centers located in New Jersey. On August 1, 2019, the entity was dissolved by transferring ownership of the assets of the centers with each partner receiving full ownership of one center. On April 12, 2018 we acquired 25 % share capital in Nulogix, Inc. for cash consideration of $ 2.0 million. On August 1, 2019 we completed via the issuance of RadNet common stock valued at $ 1.5 million, the acquisition of the remaining 75 % economic interest and we now consolidate the financial statements of Nulogix. Joint venture investment and financial information The following table is a summary of our investment in joint ventures during the years ended December 31, 2021 and December 31, 2020 (in thousands): 71 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 Equity contributions in existing and purchase of interest in joint ventures 1,441 Equity in earnings in these joint ventures 10,967 Distribution of earnings ( 4,707 ) Balance as of December 31, 2021 $ 42,229 We charged management service fees from the centers underlying these joint ventures of approximately $ 19.6 million, $ 11.3 million and $ 11.4 million for the years ended December 31, 2021, 2020 and 2019, respectively. We eliminate any unrealized portion of our management service fees with our equity in earnings of joint ventures. The following table is a summary of key unaudited financial data for these joint ventures as of December 31, 2021 and 2020, respectively, and for the years ended December 31, 2021, 2020 and 2019, respectively, (in thousands): December 31, Balance Sheet Data: 2021 2020 Current assets $ 37,186 $ 27,085 Noncurrent assets 73,592 68,686 Current liabilities ( 12,919 ) ( 12,545 ) Noncurrent liabilities ( 22,370 ) ( 21,582 ) Total net assets $ 75,489 $ 61,644 Book value of RadNet joint venture interests $ 34,930 $ 28,079 Cost in excess of book value of acquired joint venture interests accounted for as equity method goodwill 7,299 6,449 Total value of RadNet joint venture interests $ 42,229 $ 34,528 2021 2020 2019 Net revenue $ 129,023 $ 101,921 $ 108,051 Net income $ 21,893 $ 16,850 $ 18,624 NOTE 3 - RECENT ACCOUNTING STANDARDS Accounting standards adopted In January 2021, the FASB issued ASU 2021-01 ("ASU 2021-01"), Reference Rate Reform (Topic 848), Scope . ASU 2021-01 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 expect to elect the optional expedients for eligible contract modifications as they occur through that date. The application of these expedients is not expected to have a material impact on our consolidated financial statements. 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 expect to elect the optional expedients for eligible contract modifications as they occur through that date. The application of these expedients is not expected to have a material impact on our consolidated financial statements. 72 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. The adoption did not have a material impact on our financial statements. In December 2019, the FASB issued ASU 2019-12 ("ASU 2019-12"), Income Taxes (Topic 740). ASU 2019-12 removes certain exceptions related to the approach for intraperiod tax allocation, the methodology for calculating income taxes in an interim period, and the recognition of deferred tax liabilities for outside basis differences. It also clarifies and simplifies other areas of the standard. ASU 2019-12 is effective beginning in the first quarter of 2021. The adoption did not have a material impact on our financial statements. Accounting standards not yet adopted In November 2021, the FASB issued ASU 2021-10 ("ASU 2021-10"), Government Assistance (Topic 832), Disclosures by Business Entities about Government Assistance. ASU 2021-10 requires entities to provide disclosures on material government assistance transactions for annual reporting periods. The disclosures include information around the nature of the assistance, the related accounting policies used to account for government assistance, the effect of government assistance on the entity’s financial statements, and any significant terms and conditions of the agreements, including commitments and contingencies. The new standard is effective for financial statements issued for annual reporting periods beginning after December 15, 2021. As ASU 2021-10 only impacts annual financial statement footnote disclosures, the adoption will not have a material effect on our consolidated financial statements. In October 2021, the FASB issued ASU 2021-08 ("ASU 2021-08), Business Combinations (Topic 805), Accounting for Contract Assets and Contract Liabilities from Contracts with Customers. ASU 2021-08 requires an acquirer in a business combination to recognize and measure contract assets and contract liabilities in accordance with Accounting Standards Codification Topic 606. ASU 2021-08 is effective for fiscal years beginning after December 15, 2022 and early adoption is permitted. We do not expect ASU 2021-08 to have a material effect, if any, on our consolidated financial statements. NOTE 4 – ACQUISITIONS, DISPOSITIONS AND BUSINESS VENTURE ACTIVITY Acquisitions Radiology Practice Acquisitions During 2021 and 2020, 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 Arizona, California, New Jersey, and New York City markets. We made a fair value determination of the acquired assets and assumed liabilities and the following were recorded (in thousands): 73 2021: 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 ) ZP Elmont LLC* 2/1/2021 2,194 1,112 — 1,005 50 27 — ZP Freeport LLC* 2/1/2021 6,065 4,668 — 1,328 40 29 — Broadway Medical Imaging LLC* 2/1/2021 1,155 1,076 446 6 50 23 ( 446 ) 3235 Hempstead LLC* 2/1/2021 9,386 5,667 — 3,649 70 — — SLZM Realty LLC* 2/1/2021 13,671 4,617 — 8,974 80 — — 2012 Sunrise Merrick LLC* 2/1/2021 11,428 2,741 335 8,617 70 — ( 335 ) ZP Bayside LLC* 3/1/2021 3,545 3,385 2,191 40 50 70 ( 2,191 ) ZP Laurelton LLC* 3/1/2021 2,658 2,530 1,418 32 50 46 ( 1,418 ) ZP Smith LLC* 3/1/2021 3,978 3,581 2,214 347 50 — ( 2,214 ) ZP 907 Northern LLC* 4/1/2021 562 507 1,817 5 50 — ( 1,817 ) William M. Kelly MD, Inc.* ^ 5/1/2021 3,750 990 1,379 2,710 50 — ( 1,379 ) 60th Street MRI, LLC* 5/1/2021 400 85 — 290 25 — — ZP Parkchester LLC* 5/1/2021 263 213 311 — 50 — ( 311 ) 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 — — Mid Delaware Imaging P.A. 12/1/2021 6,023 590 — 5,260 150 23 — William M. Kelly MD, Inc.* ^ 12/6/2021 4,404 701 — 3,653 50 — — William M. Kelly MD, Inc.* ^ 12/31/2021 2,346 99 323 2,197 50 — ( 323 ) 79,716 35,949 12,993 40,864 2,671 232 ( 12,993 ) *Fair Value Determination is Final ** All stock purchase through issuing 67,658 shares of our common stock. ^ William M. Kelly MD acquisitions consisted of various subsidiaries purchased separately. 74 2020: Entity Date Acquired Total Consideration Property & Equipment Right of Use Assets Goodwill Intangible Assets Other Assets Right of Use Liabilities Olney Open MRI, LLC* 1/2/2020 1,751 849 1,300 602 300 — ( 1,300 ) MRI of Woodbridge LLC* 3/2/2020 2,608 464 1,081 1,833 300 11 ( 1,081 ) AZ-Tech Radiology and Open MRI, LLC* 8/31/2020 5,462 2,532 7,552 2,882 — 48 ( 7,552 ) ZP Atlantic LLC* 11/1/2020 8,871 7,931 6,181 828 50 62 ( 6,181 ) ZP Elmhurst LLC* 11/1/2020 12,269 10,681 12,571 1,463 50 75 ( 12,571 ) 30,961 22,457 28,685 7,608 700 196 ( 28,685 ) *Fair Value Determination is Final Software Company Acquisitions 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 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 July 2, 2021, management determined DeepHealth had achieved its first specific milestone per the purchase contract and we issued the related fixed shares. In addition, we released the shares retained for any indemnification adjustments in full on December 1, 2021. Dispositions 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. Subsidiary activity Formation of majority owned subsidiary 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 $ 0.4 million. RadNet contributed $ 0.3 million in assets for a 60.0 % economic interest and Simi Adventist contributed assets totaling $ 0.1 million for a 40.0 % economic interest. Sale of ownership interest in a majority owned subsidiary 75 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 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 tangible and intangible business assets for purchase consideration of approximately $ 5.2 million. 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, 2020 and December 31, 2021 is provided below (in thousands): Balance as of December 31, 2019 $ 441,973 Goodwill from acquisitions 30,906 Balance as of December 31, 2020 $ 472,879 Goodwill from acquisitions 40,864 Other Adjustments 77 Balance as of December 31, 2021 513,820 The amount of goodwill from these acquisitions that is deductible for tax purposes as of December 31, 2021 is $ 168.8 million. Other intangible assets are primarily related to our business combinations and software development. They include the estimated fair values of such items as service agreements, customer lists, covenants not to compete, acquired technologies, and trade names. Total amortization expense was $ 4.4 million, $ 3.7 million, and $ 3.1 million for the years ended December 31, 2021, 2020 and 2019, respectively. Intangible assets are amortized using the straight-line method over their useful life determined at acquisition. Management service agreements are amortized over 25 years using the straight line method. Software development is capitalized and amortized over the useful life of the software when placed into service. Trade names are reviewed annually for impairment. The following table shows annual amortization expense, by asset classes that will be recorded over the next five years (in thousands): 2022 2023 2024 2025 2026 Thereafter Total Weighted average amortization period remaining in years Management Service Contracts $ 2,287 $ 2,287 $ 2,287 $ 2,287 $ 2,287 $ 11,246 $ 22,681 9.8 Covenant not to compete and other contracts 2,500 2413 1997 1654 989 74 9,627 4.2 Developed Technology 461 318 318 318 318 1,432 3,165 9.1 Trade Names amortized 88 80 77 77 77 166 565 7.1 Trade Names indefinite life — — — — — 7,100 7,100 — Software in development — — — — — 13,465 13,465 — Total Annual Amortization $ 5,336 $ 5,098 $ 4,679 $ 4,336 $ 3,671 $ 33,483 $ 56,603 NOTE 6 - PROPERTY AND EQUIPMENT Property and equipment and accumulated depreciation and amortization are as follows (in thousands): 76 December 31, 2021 2020 Land $ 250 $ 250 Medical equipment 560,301 480,631 Computer and office equipment, furniture and fixtures 144,766 132,446 Leasehold improvements 441,921 399,253 Equipment under financing/capital lease 13,984 13,984 Total property and equipment cost 1,161,222 1,026,564 Accumulated depreciation ( 676,975 ) ( 627,229 ) Total property and equipment $ 484,247 $ 399,335 Included in our property and equipment at December 31, 2021 is approximately $ 18.1 million total of construction in process amounts consisting of $ 2.6 million in medical equipment, $ 6.1 million in computer and office equipment, and $ 9.3 million in leasehold improvements. Depreciation and amortization expense of property and equipment, including amortization of equipment under finance/capital leases, for the years ended December 31, 2021, 2020 and 2019 was $ 92.3 million, $ 83.1 million, and $ 77.5 million, respectively. NOTE 7 – ACCOUNTS PAYABLE AND ACCRUED EXPENSES Accounts payable and accrued expenses were comprised of the following (in thousands): December 31, 2021 2020 Accounts payable $ 86,461 $ 70,071 Accrued expenses 93,420 84,312 Accrued salary and benefits 62,425 58,051 Accrued professional fees 21,631 24,250 Total $ 263,937 $ 236,684 NOTE 8 - CREDIT FACILITIES AND NOTES PAYABLE As of December 31, 2021 and December 31, 2020 our debt obligations consisted of the following (in thousands): December 31, 2021 December 31, 2020 First Lien Term Loans collateralized by RadNet's tangible and intangible assets $ 721,375 $ 611,028 Discount on First Lien Term Loans ( 13,213 ) ( 9,699 ) SunTrust Term Loan Agreement collateralized by NJIN's tangible and intangible assets 46,500 51,375 Total debt obligations 754,662 652,704 Less current portion ( 11,164 ) ( 39,791 ) Long-term portion debt obligations $ 743,498 $ 612,913 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): 77 2022 $ 13,250 2023 47,750 2024 7,250 2025 7,250 2026 7,250 Thereafter 685,125 Total notes payable obligations $ 767,875 We had no outstanding balance under our $ 195.0 million Barclays Revolving Credit Facility at December 31, 2021 and had reserved an additional $ 7.8 million for certain letters of credit. The remaining $ 187.2 million of our Barclays Revolving Credit Facility was available to draw upon as of December 31, 2021. We also had no balance under our $ 30.0 million SunTrust Revolving Credit Facility related to our consolidated subsidiary NJIN at December 31, 2021, and with no letters of credit reserved against the facility, the full amount was available to draw upon. At December 31, 2021 we were in compliance with all covenants under our credit facilities. Second Amended and Restated First Lien Credit and Guaranty Agreement On April 23, 2021, we entered into the Second Amended and Restated First Lien Credit and Guaranty Agreement (the "Restated Credit Agreement") which provides for $ 725.0 million of senior secured first lien term loans (the "First Lien Term Loans") and a $ 195.0 million senior secured revolving credit facility (the "Barclays Revolving Credit Facility"). The proceeds of the First Lien Term Loans were used to refinance loans outstanding under our prior first lien credit agreement and provide funding for current and future operations. Total costs of the Restated Credit Agreement amounted to approximately $ 14.9 million segregated as follows: $ 8.8 million capitalized to discount and deferred finance cost, $ 4.5 million expensed to debt restructuring costs, $ 1.5 million charged to loss on early extinguishment of debt and $ 0.1 million written off to interest expense. Amounts capitalized will be amortized over the remaining terms of the respective credit facilities under the Restated Credit Agreement. Senior Credit Facilities: First Lien Term Loans: The First Lien Term Loans under the Restated Credit Agreement bear interest at either a Eurodollar Rate or an Alternate Base Rate (in each case, as defined in the Restated Credit Agreement), plus an applicable margin. The applicable margin for Eurodollar Rate term loans under the Restated Credit Agreement is 3.25 % per annum, with a reduction to 3.0 % per annum upon delivery by us of financial statements evidencing a first lien net leverage ratio of 3.50 to 1.00 or less. Such statements were delivered by us on May 27, 2021. At December 31, 2021 the effective Eurodollar Rate and the Alternate Base Rate for the First Lien Term Loans under the Restated Credit Agreement was 0.75 % and 3.25 %, respectively and the applicable margin for the Eurodollar Rate and Alternate Base Rate First Lien Term Loans under the Restated Credit Agreement was 3.00 % and 2.00 %, respectively. The Restated Credit Agreement provides for quarterly payments of principal for the First Lien Term Loan in the amount of approximately $ 1.8 million. The First Lien Term Loan will mature on April 23, 2028 unless otherwise accelerated under the terms of the Restated Credit Agreement. SunTrust Credit Facilities: At December 31, 2021, 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 in the principal amount described in the table above (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 or a Base Rate (each as defined in the SunTrust Credit Agreement), plus an applicable margin according to the following schedule: 78 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 2.75 % per annum 1.75 % per annum 2.75 % per annum 0.45 % per annum II Less than 3.00 :1.00 but greater than or equal to 2.50 :1.00 2.25 % per annum 1.25 % per annum 2.25 % per annum 0.40 % per annum III Less than 2.50 :1.00 but greater than or equal to 2.00 :1.00 2.00 % per annum 1.00 % per annum 2.00 % per annum 0.35 % per annum IV Less than 2.00 :1.00 but greater than or equal to 1.50 :1.00 1.75 % per annum 0.75 % per annum 1.75 % per annum 0.30 % per annum V Less than 1.50 :1.00 1.50 % per annum 0.50 % per annum 1.50 % per annum 0.30 % per annum The loans and other obligations outstanding under the SunTrust Credit Agreement currently bear interest at a three month LIBOR election at 0.13 % plus an applicable margin and fees based on Pricing Level V described above. The scheduled amortization of the SunTrust Term Loan began December 31, 2018 with quarterly payments of $ 0.8 million, representing annual amortization equal to 5.0 % of the original principal amount of the SunTrust Term Loan. At scheduled intervals, the quarterly amortization increases by $ 0.4 million, with the remaining balance to be paid at maturity. The SunTrust Term Loan will mature on August 31, 2023 unless otherwise accelerated under the terms of the SunTrust Credit Agreement. Revolving Credit Facilities: Barclays Revolving Credit Facility: The Barclays Revolving Credit Facility under the Restated Credit Agreement is a $ 195.0 million senior secured revolving credit facility. Associated with the Barclays Revolving Credit Facility are deferred financing costs, net of accumulated amortization, of $ 2.1 million at December 31, 2021. Revolving loans borrowed under the Barclays Revolving Credit Facility bear interest at either a Eurodollar Rate or an Alternate Base Rate (in each case, as defined in the Restated Credit Agreement) plus an applicable margin which adjusts depending on our first lien net leverage ratio, according to the following schedule: First Lien Leverage Ratio Eurodollar Rate Spread Base Rate Spread > 3.50 x 3.25 % 2.25 % > 3.00 x but ≤ 3.50 x 3.00 % 2.00 % ≤ 3.00 x 2.75 % 1.75 % As of December 31, 2021, the effective interest rate payable on revolving loans under the Barclays Revolving Credit Facility was 5.0 %. For letters of credit issued under the Barclays Revolving Credit Facility, letter of credit fees accrue at the applicable margin for Eurodollar rate revolving loans which is currently 2.75 % and fronting fees accrue at 0.125 % per annum, in each case on the average aggregate daily maximum amount available to be drawn under all letters of credit issued under the Restated Credit Agreement. In addition, a commitment fee of 0.50 % per annum accrues on the unused revolver commitments under the Barclays Revolving Credit Facility. The Barclays Revolving Credit Facility will terminate on April 23, 2026 unless otherwise accelerated in accordance with the terms of the Restated Credit Agreement. 79 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, 2021, NJIN had no borrowings under the SunTrust Revolving Credit Facility. Recent Amendments to prior 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 amended the prior first lien credit agreement to add $ 57.5 million of revolving commitments to the prior Barclays revolving credit facility increasing the maximum borrowing capacity under the prior Barclays revolving credit facility to $ 195.0 million while leaving the maturity date of July 1, 2023 unchanged. On April 18, 2019 we entered into the following two amendments to the prior 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 prior 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 prior Barclays revolving credit facility. The Seventh Amendment amended the prior first lien credit agreement to extend the maturity date of the prior Barclays revolving credit facility by an additional two years to July 1, 2023, unless sooner terminated in accordance with the terms of the prior first lien credit agreement. The prior first lien credit agreement was amended and restated by the Restated Credit Agreement described above, and the prior first lien term loans and prior Barclays revolving credit facility under the prior first lien credit agreement were refinanced and replaced by the First Lien Term Loans and the Barclays Revolving Credit Facility provided under the Restated Credit Agreement described above. 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 Our material lease contracts are for facilities and advanced radiology equipment. In regards to our imaging, administrative and warehouse facilities, the most common initial lease term varies in length from 5 to 15 years. Including renewal options negotiated with the landlord, we can have a total span of 10 to 35 years at these locations, and we do not enter into purchase options on the underlying property. We also lease smaller satellite X-Ray locations on mutually renewable terms, usually lasting one year. Leases for advanced radiology and office equipment have terms generally lasting from 5 to 8 years. All leases are classified as operating or finance for accounting purposes, depending on the terms of the agreement. 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. During 2021, we satisfied all liabilities classified as finance leases, and only operating leases remain. 80 The components of lease expense were as follows: Years ended December 31, (In thousands) 2021 2020 Operating lease cost (1) $ 121,578 $ 99,323 Finance lease cost: Depreciation of leased equipment $ 3,068 $ 3,122 Interest on lease liabilities 46 210 Total finance lease cost $ 3,114 $ 3,332 1) Operating lease cost above for the year ended December 31, 2021 includes $ 12.6 million in lease abandonment charges. Please see our discussion in the Leases section of Note 2, Summary of Significant Accounting Policies Supplemental cash flow information related to leases was as follows: Years ended December 31, (In thousands) 2021 2020 Cash paid for amounts included in the measurement of lease liabilities: Operating cash flows from operating leases (1) $ 110,288 $ 89,821 Operating cash flows from financing leases 46 210 Financing cash flows from financing leases 3,304 3,304 Right-of-use & Equipment assets obtained in exchange for lease obligations: Operating leases 186,695 106,099 Financing leases — 24 1) On December 31, 2021 we reduced our liability and eliminated the related right-of-use assets for future lease options at facilities that we elected to abandon. The amount of liability and right-of-use asset reduction amounted to approximately $ 3.3 million. Supplemental balance sheet information related to leases was as follows: 81 (In thousands, except lease term and discount rates) December 31, 2021 2020 Operating Leases Operating lease right-of-use assets $ 584,291 $ 483,661 Current portion of operating lease liability 65,452 65,794 Operating lease liabilities 577,675 463,096 Total operating lease liabilities $ 643,127 $ 528,890 Finance Leases Equipment at cost $ 13,984 $ 13,984 Accumulated depreciation ( 9,287 ) ( 6,220 ) Equipment, net $ 4,697 $ 7,764 Current portion of finance lease liability $ — $ 2,578 Finance lease liabilities — 743 Total finance lease liabilities $ — $ 3,321 Weighted Average Remaining Lease Term Operating leases - years 10.4 9.2 Finance leases - years 0.0 2.5 Weighted Average Discount Rate Operating leases 6.3 % 6.4 % Finance leases — % 4.4 % Maturities of lease liabilities were as follows: (In thousands) Operating Year Ending December 31, Leases 2022 $ 103,831 2023 96,894 2024 88,682 2025 79,409 2026 73,912 Thereafter 457,425 Total Lease Payments 900,153 Less imputed interest ( 257,026 ) Total $ 643,127 As of December 31, 2021, we have additional operating leases for facilities and medical equipment that have not yet commenced of approximately $ 19.0 million. These operating leases will commence in 2022 with lease terms of 1 to 15 years. 82 NOTE 10 – INCOME TAXES For the years ended December 31, 2021, 2020 and 2019, we recognized income tax expense comprised of the following (in thousands): December 31, 2021 2020 2019 Federal current tax $ — $ ( 256 ) $ ( 161 ) State current tax ( 2,191 ) ( 1,608 ) 7,715 Other current tax 18 27 22 Federal deferred tax 9,831 ( 303 ) 3,396 State deferred tax 6,902 3,035 ( 4,743 ) Income tax expense $ 14,560 $ 895 $ 6,229 A reconciliation of the statutory U.S. federal rate and effective rates is as follows: Years Ended December 31, 2021 2020 2019 Federal tax $ 12,365 $ ( 179 ) $ 6,231 State franchise tax, net of federal benefit 4,198 779 3,891 Non deductible expenses 198 301 674 Noncontrolling interests in partnerships ( 4,114 ) ( 2,748 ) ( 1,824 ) Changes in valuation allowance ( 249 ) ( 33 ) ( 462 ) Return to provision ( 2,530 ) ( 2,252 ) ( 1,324 ) PPP Loan — ( 850 ) — Deferred true-ups and other 5,013 4,839 ( 761 ) Uncertain tax provisions ( 321 ) 1,036 ( 217 ) Other — 2 21 Income tax expense $ 14,560 $ 895 $ 6,229 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. Our deferred tax assets and liabilities comprise the following (in thousands): 83 December 31, Deferred tax assets: 2021 2020 Net operating losses $ 57,663 $ 59,154 Accrued expenses 3,275 3,948 Operating lease liability 141,440 124,139 Equity compensation 2,993 1,903 Allowance for doubtful accounts 2,711 21,284 Other 7,532 11,512 Valuation allowance ( 5,066 ) ( 5,315 ) Total Deferred Tax Assets $ 210,548 $ 216,625 Deferred tax liabilities: Property and equipment ( 12,134 ) ( 24,298 ) Goodwill ( 33,973 ) ( 28,457 ) Intangibles ( 9,133 ) ( 9,608 ) Operating lease right-of-use asset ( 128,868 ) ( 112,956 ) Other ( 11,587 ) ( 6,619 ) Total Deferred Tax Liabilities $ ( 195,695 ) $ ( 181,938 ) Net Deferred Tax Asset $ 14,853 $ 34,687 As of December 31, 2021, the we had federal net operating loss carryforwards of approximately $ 224.0 million, of which $ 152.1 million, which expire at various intervals from the years 2022 to 2037, and $ 71.9 million of net operating losses which do not expire. Federal net operating losses generated following December 31, 2017 carryover indefinitely and may be used to offset up to 80% of future taxable net income. The Company also had state net operating loss carryforwards of approximately $ 194.3 million, which expire at various intervals from the years 2021 through 2039. As of December 31, 2021, $ 24.9 million of our federal net operating loss carryforwards acquired in connection with the 2011 acquisition of Raven Holdings U.S., Inc. and the 2019 acquisition of Nulogix Health, Inc. are subject to limitations related to their utilization under Section 382 of the Internal Revenue Code. We considered all evidence available when determining whether deferred tax assets are more likely-than-not to be realized, including projected future taxable income, scheduled reversals of deferred tax liabilities, prudent tax planning strategies, and recent financial operations. The evaluation of this evidence requires significant judgment about the forecasts of future taxable income, based on the plans and estimates we are using to manage the underlying businesses. In evaluating the objective evidence that historical results provide, we consider three years of cumulative operating income. As of December 31, 2021, we have determined that deferred tax assets of $ 210.5 million are more likely-than-not to be realized. We have also taken into consideration deferred tax liabilities of $ 34.0 million are related to book basis in goodwill that has an indefinite life. We file consolidated income tax returns in the U.S. federal jurisdiction and various states and foreign jurisdictions. We continue to reinvest earnings of the non-US entities for the foreseeable future and therefore have not recognized any U.S. tax expense on these earnings. With limited exceptions, we are no longer subject to U.S. federal, state and local, or non-U.S. income tax examinations by tax authorities for years before 2017. We are currently under audit in the state of California for the tax years of 2016 and 2017. A reconciliation of the total gross amounts of unrecognized tax benefits for the years ended are as follows (in thousands): 84 December 31, 2021 2020 2019 Balance at beginning of year $ 5,484 $ 4,320 $ 4,629 Increases related to prior year tax positions 317 1,382 ( 34 ) Increases related to current year tax positions — 3 119 Expiration of the statute of limitations for the assessment of taxes ( 713 ) ( 221 ) ( 393 ) Increase (decrease) related to change in rate — — ( 1 ) Balance at end of year $ 5,088 $ 5,484 $ 4,320 At December 31, 2021, the Company has unrecognized tax benefits of $ 5.1 million of which $ 4.1 million will affect the effective tax rate if recognized. The Company recognizes accrued interest and penalties related to unrecognized tax benefits in income tax expense. During the year ended December 31, 2021 the Company accrued approximately $ 0.04 million of interest and penalties. As of December 31, 2021, accrued interest and penalties amounted to approximately $ 0.4 million. We do not anticipate the uncertain tax position to change materially within the next 12 months. 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 2021 and 2020 financial statements. NOTE 11 – STOCK-BASED COMPENSATION Stock Incentive Plans We have one long-term equity incentive plan, the RadNet, Inc. Equity Incentive Plan, which we first amended and restated April 20, 2015, again on March 9, 2017 and currently as of April 15, 2021 (the "Restated Plan”). The Restated Plan was most recently approved by our stockholders at our annual stockholders meeting on June 10, 2021. We have reserved for issuance under the 2017 Restated Plan 16,500,000 shares of common stock. We can issue options (incentive and non-qualified), stock awards, stock appreciation rights, stock units and cash awards under the Restated Plan. Options Certain options granted under the Restated Plan to employees are intended to qualify as incentive stock options under existing tax regulations. Stock options generally vest over three to five years and expire five to ten years from the date of grant. 85 As of December 31, 2021, we had outstanding options to acquire 473,939 shares of our common stock, of which options to acquire 379,242 shares were exercisable. The following summarizes all of our option transactions for the twelve months ended December 31, 2021: Outstanding Options Under the 2006 Plan Shares Weighted Average Exercise price Per Common Share Weighted Average Remaining Contractual Life(in years) Aggregate Intrinsic Value Balance, December 31, 2020 527,899 $ 9.34 Exercised ( 53,960 ) 9.04 Balance, December 31, 2021 473,939 9.38 5.29 $ 9,826,090 Exercisable at December 31, 2021 379,242 8.25 4.86 8,291,371 Aggregate intrinsic value in the table above represents the total pretax intrinsic value (the difference between our closing stock price on December 31, 2021 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, 2021. As of December 31, 2021, total unrecognized stock-based compensation expense related to non-vested employee awards was $ 0.2 million which is expected to be recognized over a weighted average period of approximately 1 year. 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, 2021, total unrecognized stock based compensation expense related to non-vested DeepHealth options was approximately $ 2.1 million which is expected to be recognized over a weighted average period of approximately 1.41 years. Outstanding Options Under the Deep Health Plan Shares Weighted Average Exercise price Per Common Share Weighted Average Remaining Contractual Life (in years) Aggregate Intrinsic Value Balance, December 31, 2020 400,539 Exercised ( 79,879 ) — Balance, December 31, 2021 320,660 — 7.42 $ 9,655,073 Exercisable at December 31, 2021 47,792 — 7.42 1,439,026 Restricted Stock Awards (“RSA’s”) The Restated Plan permits the award of restricted stock awards (“RSA’s”). As of December 31, 2021, we have issued a total of 7,243,029 RSA’s of which 456,075 were unvested at December 31, 2021 . The following summarizes all unvested RSA’s activities during the twelve months ended December 31, 2021: 86 RSA's Weighted-Average Remaining Contractual Term (Years) Weighted-Average Fair Value RSA's unvested at December 31, 2020 329,159 $ 16.69 Changes during the period Granted 686,046 $ 20.15 Vested ( 554,765 ) $ 18.00 Forfeited ( 4,365 ) $ 18.60 RSA's unvested at December 31, 2021 456,075 0.87 $ 20.06 We determine the fair value of all RSA’s based of the closing price of our common stock on award date. Other stock bonus awards The Restated Plan also permits the award of stock bonuses not subject to any future service period. 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, 2021 we issued 415,968 shares relating to these awards, approximately amounting to $ 10.1 million of compensation expense, mainly pandemic related employee bonuses. Plan summary In summary, of the 16,500,000 shares of common stock reserved for issuance under the Restated Plan at December 31, 2021, there remain 3,236,903 shares available for future awards. NOTE 12 – SUBSEQUENT EVENTS Acquisitions On January 1, 2022 we acquired certain radiology practice business assets for purchase consideration of $ 13.0 million. On January 20, 2022, we completed our stock acquisitions of two unrelated technology companies located in the Netherlands. Aidence Holding B.V. and Quantib B.V. are AI companies with a focus on clinical solutions for lung and prostate cancer, respectively. Total combined investment is $ 95.0 million, with Aidence Holding B.V. at $ 50.0 million, and Quantib B.V. at $ 45.0 million . 87 Item 9. Changes In and Disagreements with Accountants on Accounting and Financial Disclosure None.