What changed in this filing

/stocks — the workspaceLOADING

Item 8. Financial Statements and Supplementary Data

2023-03-01 compared with 2022-03-01 · 478 added, 308 removed, 821 unchanged (49% of the section changed)

19 unchanged sentences

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.

Critical Audit Matters

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

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

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

Accounting for Revenue Recognition

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

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

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

Addressed the Matter in Our

Addressed the

Matter in Our

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

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

Acquisition of Aidence Holding B.V.

& Quantib B.V.:

Valuation of Developed Technology & IPR&D

Description of

As discussed in Note 4 to the consolidated financial statements, the Company completed its acquisitions of Aidence Holding B.V.

(“Aidence”) and Quantib B.V.

(“Quantib”) for net consideration of $45.2 million and $42.3 million, respectively, on January 20, 2022.

The transactions were accounted for as business combinations.

Auditing the Company’s accounting for its acquisitions of Aidence and Quantib was complex due to the significant estimation required by management in determining the fair value of developed technology and in-process research and development (“IPR&D”) intangible assets of $26.6 million for Aidence and $20.3 million for Quantib.

The significant estimation uncertainty was primarily due to the complexity of the valuation models used and the sensitivity of the fair value estimates to the significant underlying assumptions.

The Company used an income approach to measure the fair value of the developed technology and IPR&D intangible assets.

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

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

Addressed the

Matter in Our

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

We tested controls over the recognition and measurement of developed technology and IPR&D intangible assets, including management’s review of the valuation model and underlying assumptions used to develop such estimates.

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

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

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

/s/ Ernst & Young LLP

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Deferred revenue 4,021 10,701

Current portion of finance lease liability — 2,578

Current portion of operating lease liability 57,607 65,452

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LONG-TERM LIABILITIES

Long-term finance lease liability — 743

Long-term operating lease liability 604,117 577,675

Notes payable, net of current portion 839,344 743,498

Deferred tax liability, net 9,256 —

Other non-current liabilities 23,015 16,360

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Equity in earnings of joint ventures ( 10,390 ) ( 10,967 ) ( 7,945 )

Non-cash change in fair value of interest rate hedge ( 21,670 ) 2,528 —

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

Non-cash change in fair value of interest rate swaps ( 39,621 ) ( 21,670 ) 2,528

Loss (gain) on extinguishment of debt and related expenses 731 6,044 ( 4,047 )

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NET INCOME (LOSS) $ 33,608 $ 44,319 $ ( 1,749 )

Foreign currency translation adjustments ( 65 ) ( 101 ) ( 32 )

Currency translation adjustments ( 3,943 ) ( 65 ) ( 101 )

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

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

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 — — — — — — —

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

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

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

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

Issuance of common stock for acquisitions 823,615 — 33,011 — — 33,011 — 33,011

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

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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

Issuance of common stock 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

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BALANCE - DECEMBER 31, 2021 53,548,227 $ 5 $ 342,592 $ ( 20,421 ) $ ( 93,272 ) $ 228,904 $ 117,253 $ 346,157

Issuance of stock upon exercise of options 25,000 1 294 — — 295 — 295

Shares issued under the equity compensation plan 725,577 — — — — — — —

Issuance of common stock to settle DeepHealth contingent consideration 781,577 — — — — — — —

Issuance of common stock under the DeepHealth equity compensation plan 204,160 — — — — — — —

Stock-based compensation expense — — 23,543 — — 23,543 — 23,543

Issuance of common stock for acquisitions 2,465,294 — 63,311 — — 63,311 — 63,311

Forfeiture of restricted stock and share cancellation ( 26,710 ) — ( 75 ) — — ( 75 ) — ( 75 )

Contribution from noncontrolling partner — — — — — — 19,139 19,139

Sale of economic interests in majority owned subsidiary, net of taxes — — 6,623 — — 6,623 — 6,623

Distributions paid to noncontrolling interests — — — — — — ( 893 ) ( 893 )

Change in cumulative foreign currency translation adjustment — — — ( 3,943 ) — ( 3,943 ) — ( 3,943 )

Change in fair value of cash flow hedge from prior periods reclassified to earnings — — — 3,687 — 3,687 — 3,687

Net income — — — — 10,650 10,650 22,958 33,608

BALANCE - DECEMBER 31, 2022 57,723,125 $ 6 $ 436,288 $ ( 20,677 ) $ ( 82,622 ) $ 332,995 $ 158,457 $ 491,452

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

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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 3,687 3,695 3,448

Non-cash change in fair value of interest rate hedge ( 21,670 ) 2,528 —

Non-cash change in fair value of interest rate swap ( 39,621 ) ( 21,670 ) 2,528

Stock-based compensation 23,770 25,203 12,405

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

Non cash item in other expenses — — 242

Change in value of contingent consideration ( 325 ) — —

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CASH FLOWS FROM INVESTING ACTIVITIES

Purchase of imaging facilities ( 77,691 ) ( 31,265 ) ( 27,150 )

Equity investments at fair value — — ( 143 )

Purchase of imaging centers and other operations ( 129,961 ) ( 77,691 ) ( 31,265 )

Purchase of property and equipment ( 119,451 ) ( 137,874 ) ( 94,172 )

1 unchanged sentence

Proceeds from sale of equipment 3,904 625 828

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 ) ( 1,441 ) ( 1,635 )

1 unchanged sentence

CASH FLOWS FROM FINANCING ACTIVITIES

Principal payments on notes and leases payable ( 3,302 ) ( 3,562 ) ( 6,494 )

Payments on term loan debt ( 53,750 ) ( 619,529 ) ( 43,296 )

Principal payments on notes and leases payable other than term loan debt — ( 3,302 ) ( 3,562 )

Additional deferred finance costs on revolving loan amendment — ( 938 ) ( 741 )

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Proceeds from sale of economic interest in majority owned subsidiary — 13,073 —

Contributions from noncontrolling partners — — 750

Proceeds from revolving credit facility — 128,300 250,900

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EFFECT OF EXCHANGE RATE CHANGES ON CASH 113 ( 65 ) ( 101 )

NET INCREASE IN CASH AND CASH EQUIVALENTS 32,588 61,853 29,776

NET (DECREASE) INCREASE IN CASH AND CASH EQUIVALENTS ( 6,772 ) 32,588 61,853

CASH AND CASH EQUIVALENTS, beginning of period 134,606 102,018 40,165

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

We executed inclusive of all acquisitions, finance lease liability/capital lease debt of approximately $ 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.

On November 1, 2022, we issued 359,002 shares of our common stock to complete our purchase of Heart and Lung Imaging Limited.

The shares were ascribed a value of $ 6.8 million.

On November 1, 2022 we made a contribution to our joint venture Arizona Diagnostic Radiology Group of $ 12.7 million in equipment and other assets.

We recorded an offset to due to affiliates of $ 4.5 million to reduce our overall investment to $ 8.3 million.

On April 1, 2022 we received $ 8.4 million in fixed assets and equipment from our partner in Frederick County Radiology, LLC.

See Note 4, Facility Acquisitions contained herein.

On January 20, 2022, we issued 1,141,234 shares of our common stock to complete our purchase of Aidence Holding B.V.

The shares were ascribed a value of $ 30.6 million.

On January 20, 2022, we issued 965,058 shares to complete our purchase of Quantib B.V.

The shares were ascribed a value of $ 25.9 million.

On October 22, 2021 we completed our purchase of specific technology assets of DRT LLC 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.

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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.

We entered into finance lease debt of approximately $ 20.0 thousand during the twelve months ended December 31, 2020.

AND SUBSIDIARIES

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

In addition to our imaging services, we have certain other software subsidiaries which design and sell computerized systems for the imaging industry and internally develop Artificial Intelligence ("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.

In addition to our center operations, we have certain other subsidiaries that develop Artificial Intelligence ("AI") products and solutions that are designed to enhance interpretation of radiographic images.

Our operations comprise two segments for financial reporting purposes for this reporting period, Imaging Centers and Artificial Intelligence.

For further financial information about these segments, see Note 5, Segment Reporting.

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).

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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").

These VIEs are collectively referred to as 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.

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The Group on a combined basis recognized $ 189.1 million, $ 179.6 million, and $ 147.6 million of revenue, net of management services fees to RadNet, for the years ended December 31, 2022, 2021, and 2020, respectively and $ 189.1 million, $ 179.6 million, and $ 147.6 million of operating expenses for the years ended December 31, 2022, 2021, and 2020, respectively.

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.

recognized $ 786.5 million, $ 749.2 million, and $ 600.7 million of total billed net service fee revenue for the years ended December 31, 2022, 2021, and 2020, respectively, for management services provided to the Group relating primarily to the technical portion of billed revenue.

The cash flows of the Group are included in the accompanying 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.

In our consolidated balance sheets at December 31, 2022 and December 31, 2021, we have included approximately $ 110.3 million and $ 89.2 million, respectively, of accounts

receivable and approximately $ 16.2 million and $ 14.4 million of accounts payable and accrued liabilities related to the Group, respectively.

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.

The medical groups maintain full control over the physicians they employ.

Through our management agreements, we make available to the medical groups the imaging centers, including all furniture, fixtures and medical equipment therein.

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

The contractual relationships with patients, in most cases, also involve a third-party 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 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 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.

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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

As it relates to other centers, this service fee revenue is earned through providing the use of our

diagnostic imaging equipment and the provision of technical services as well as providing administration services such as clerical and administrative personnel, bookkeeping and accounting services, billing and collection, provision of medical and office supplies, secretarial, reception and transcription services, maintenance of medical records, and advertising, marketing and promotional activities.

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

Estimates of contractual allowances under managed care and commercial insurance plans are based upon the payment terms specified in the related contractual agreements.

Revenues related to uninsured patients and copayment and deductible amounts for patients who have health care coverage may have discounts applied (uninsured discounts and contractual discounts).

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.

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

Our total net revenues for the years ended December 31, 2021, 2020, and 2019 are presented in the table below (in thousands):

2021 2020 2019

Our total service fee revenues for the years ended December 31, 2022, 2021, and 2020 are presented in the table below.

Our imaging center revenue is displayed as the estimated service fee, broken down by classification of insurance coverage type.

Additional revenues are earned from our management services provided to joint ventures and our software and AI subsidiaries.

In Thousands 2022 2021 2020

Commercial insurance $ 785,128 $ 743,462 $ 584,035

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Management fee revenue 22,235 19,630 11,253

Imaging on call and software 10,525 10,798 17,317

Software and teleradiology 14,238 10,525 10,798

Other 19,428 12,436 23,297

Service fee revenue 1,166,743 931,722 1,028,236

Revenue under capitation arrangements 152,045 148,334 140,118

Imaging center segment revenue 1,425,665 1,313,662 1,071,840

AI segment revenue 4,396 1,415 —

Total revenue $ 1,430,061 $ 1,315,077 $ 1,071,840

GOVERNMENT ASSISTANCE:

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

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• $ 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.

• $ 4.0 million from the Paycheck Protection Program during 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

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 accelerated Medicare payments were recorded to deferred revenue in our consolidated balance sheet and are being applied to revenue as services are performed beginning in 2021.

Based on terms released on October 1, 2020, through the Continuing Appropriations Act, 2021 and Other Extensions Act, such accelerated payments are interest free for inpatient acute care hospitals for 29 months (seven months for medical groups), and the program currently requires CMS to recoup the payments

beginning one year after receipt by the provider, by withholding future Medicare fee-for-service payments for claims at a rate of 25% for the first 11 months, and 50% for the 6 months afterward, until the full accelerated payment has been recouped.

The program currently requires any outstanding balance remaining after 29 months to be repaid by the provider or be subject to an interest rate currently set at 4%.

We applied the accelerated Medicare payments to revenue in the amount of $ 8.4 million for the twelve months ended December 31, 2022 and $ 30.2 million for the twelve months ended December 31, 2021.

As of December 31, 2022, approximately $ 1.0 million of Medicare payments received remain in d eferred revenue .

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.

The Provider Relief Funding is displayed as such on our consolidated statements of operations in the year received.

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 by December 31,2022.

We elected to defer $ 16.3 million of this tax through December 31, 2020 which has been paid as of December 31, 2022.

The CARES Act also provided a refundable employer tax credit ("ERC") equal to 50 % of qualified wages, including certain health insurance costs, that can be used to offset payroll tax liabilities.

In the year ending December 31, 2021, we recognized an employee retention credit as a reduction to cost of operations totaling of $ 7.7 million.

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.

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

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

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

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

Proceeds 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.

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

Amounts remaining to be collected on these agreements were $ 15.4 million and $ 17.7 million at December 31, 2022 and December 31, 2021, 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.

ACCOUNTS PAYABLE AND ACCRUED EXPENSES - Accounts payable and accrued expenses were comprised of the following (in thousands):

Accounts payable $ 102,678 $ 86,461

Accrued expenses 181,574 93,420

Accrued salary and benefits 62,072 62,425

Accrued professional fees 23,271 21,631

Total $ 369,595 $ 263,937

SOFTWARE REVENUE RECOGNITION – We have developed and sell 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.

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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.

Deferred financing costs are related to our revolving credit facilities.

Deferred financing costs, net of accumulated amortization, were $ 2.3 million and $ 2.1 million for the twelve months ended at December 31, 2022 and 2021, respectively.

See Note 8, Credit Facilities and Notes Payable for more information on our revolving lines of credit.

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

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GOODWILL AND INDEFINITE LIVED INTANGIBLES – Goodwill totaled $ 677.7 million and $ 513.8 million at December 31, 2022 and December 31, 2021, 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.

Indefinite lived intangible assets at were $ 24.1 million at December 31, 2022 and $ 20.6 million at December 31, 2021 and are associated with the value of certain trade name intangibles and in process research and development (IPR&D).

Goodwill, trade name intangibles and IPR&D 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.

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

We tested both goodwill and trade name intangibles for impairment on October 1, 2021.

We tested goodwill, trade name and IPR&D for impairment on October 1, 2022.

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.

Our annual impairment test as of October 1, 2022 noted no other impairment, and we have not identified any indicators of impairment through December 31, 2022.

LONG-LIVED ASSETS – We evaluate our long-lived assets (property and equipment) and intangibles, other than goodwill and indefinite lived intangible assets, 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.

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.

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

Income taxes are further explained in Note 10, Income Taxes.

See Note 10, Income Taxes, for more information.

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

liability in our consolidated balance sheets.

Operating leases are included in operating lease right-of-use (“ROU”) assets, current operating lease liabilities, 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 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.

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

We use the implicit rate when readily determinable.

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

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

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

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

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

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

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

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

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.

No events have occurred such as fire, flood, or other acts which have impaired the integrity of our ROU assets as of December 31, 2022.

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

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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.

After a management review of post pandemic patient traffic to centers during the fourth quarter of 2021, 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.

To complete the closure of these locations, we took a lease abandonment charge of approximately $ 12.6 million at December 31, 2021.

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 have recorded liabilities of $ 3.9 million and $ 3.5 million at December 31, 2022 and December 31, 2021, 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.

The policy has a deductible which is $ 10,000 per incidence for all years covered by this report.

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

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We have recorded liabilities as of December 31, 2022 and 2021 of $ 7.4 million and $ 6.3 million, respectively, for the estimated future cash obligations associated with the unpaid portion of the medical and dental claims incurred by our participants.

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

Additionally, we entered into an agreement with Blue

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

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

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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.

We contributed $ 3.0 million in matching for each of the twelve months ended December 31, 2022 and 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

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.

We have reserved 16,500,000 shares of common stock for issuance under the Restated Plan which can be issued in the form of incentive and/or nonstatutory stock options, restricted and/or unrestricted stock, stock units, and stock appreciation rights.

Terms and conditions of awards can be direct grants or based on achieving a performance metric and we also consider probability of achievement of performance conditions when determining expense recognition.

For the awards where vesting is probable, equity-based compensation is recognized over the related vesting period.

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.

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

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

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

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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.

2017 Equity 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.

See Note 11, Stock-Based Compensation, for more information.

FOREIGN CURRENCY TRANSLATION – For our operations in Canada, Europe and the United Kingdom, 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.

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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).

The following is a reconciliation of Foreign Currency Translation amounts for the years ended December 31, 2022, 2021 and 2020 is provided below (in thousands):

Currency Translation

Balance as of January 1, 2020 $ ( 276 )

Currency Translation Adjustments ( 101 )

Balance as of December 31, 2020 ( 377 )

Currency Translation Adjustments ( 65 )

Balance as of December 31, 2021 ( 442 )

Currency Translation Adjustments ( 3,943 )

Balance as of December 31, 2022 $ ( 4,385 )

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

Our foreign currency translation adjustments, changes in the fair value of cash flow hedges, and the amortization of balances associated with derivatives previously classified as cash flow hedges are included in other comprehensive income (loss).

The components of other comprehensive income (loss) for the twelve month periods ended December 31, 2022, December 31, 2021, and December 31, 2020 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.

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

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

We were liable for a

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

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

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

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December 31, 2022 $ —

December 31, 2021 $ —

December 31, 2020 $ 788 Other Comprehensive Loss

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

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

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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.

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

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

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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):

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 per month through October 2025.

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

Interest Rate Contracts - Effective Portion

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December 31, 2022 $ —

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

December 31, 2021 $ —

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

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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

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 other comprehensive income (loss) into income (prior period effective portion) Location of loss reclassified from accumulated other comprehensive income (loss) into income (prior period effective portion)

December 31, 2022 $ 39,621 Other Income (Expense) $( 3,687 ) Interest Expense

December 31, 2021 $ 21,670 Other Income (Expense) $( 3,695 ) Interest Expense

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

CONTINGENT CONSIDERATION -

Aidence Holding B.V.

On January 20, 2022, we completed our acquisition of all the equity interests of Aidence Holding B.V.

("Aidence") an artificial intelligence enterprise centered on lung cancer screening.

As part of the purchase agreement, we will pay up to $ 10.0 million consideration upon the completion of two identified milestones in RadNet common shares or cash at our election.

This contingency had a value of approximately $ 7.2 million on December 31, 2022.

The amount is reviewed quarterly and adjusted to fair value based on the yield rate of S&P B-rated corporate bonds and the probability of FDA approval, which has been currently determined by management to be 80 % for milestone one and 70 % for milestone two.

In addition, there is a remaining general holdback of $ 4.0 million to be issued in shares of our common stock subject to adjustment for any indemnification claims.

On January 20, 2022, we completed our acquisition of all the equity interests of Quantib B.V.

("Quantib") an artificial intelligence enterprise centered on prostate cancer screening.

As part of the purchase agreement, we will issue 18 months after acquisition, 113,303 shares of our common stock with an initial fair value at the date of close of $ 3.0 million subject to adjustment for any indemnification claims and will be adjusted to fair value in subsequent periods.

This contingency had a value of approximately $ 2.1 million as of December 31, 2022.

In addition, there is a general holdback of $ 1.6 million to be issued in cash subject to adjustment for any indemnification claims.

On October 1, 2022, we completed our acquisition of Montclair Radiological Associates.

As part of the purchase agreement, we recorded $ 1.2 million in contingent consideration to be determined by obtaining specific EBITDA targets within a defined time frame.

Heart and Lung Imaging Limited

On November 1, 2022, we completed our acquisition of 75 % of the equity interests of Heart and Lung Imaging Limited.

The purchase included $ 10.2 million in contingent milestone consideration and cash holdback of $ 0.6 million to be issued 24 months after acquisition subject to adjustment for any indemnification claims, which will be adjusted to fair value in

subsequent periods.

The milestone contingency had a value of approximately $ 11.1 million as of December 31, 2022.

The contingent consideration is determined by the achievement of a specific number of physician reads.

A tabular rollforward of contingent consideration is as follows (amounts in thousands):

For the twelve months ended December 31, 2022

Entity Account January 1, 2022 Balance Issuance of contingent consideration Amount of income (loss) recognized on contingent consideration Currency Translation December 31, 2022 Balance

Aidence Other Long Term Liabilities $ — $ 11,453 $ ( 362 ) $ 67 $ 11,158

Quantib Accrued Expenses & Other Long Term Liabilities $ — $ 4,581 $ ( 903 ) $ 31 $ 3,709

Montclair Accrued Expenses $ — $ 1,200 $ — $ — $ 1,200

Heart and Lung Limited Accrued Expenses & Other Long Term Liabilities $ — $ 10,814 $ 566 $ 276 $ 11,656

See Fair Value Measurements section below for the fair value of contingent consideration at December 31, 2022.

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

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Level 1 Level 2 Level 3 Total

Current and long term liabilities

Other Current Assets and Deposits and Other

2019 SWAPS - Interest Rate Contracts $ — $ 23,302 $ — $ 23,302

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Level 1 Level 2 Level 3 Total

Current and long term liabilities

Accrued expenses and other non-current liabilities

2019 SWAPS - Interest Rate Contracts $ — $ 16,319 $ — $ 16,319

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

Contingent Consideration:

The table below summarizes the estimated fair values of contingencies and holdback relating to our Aidence Holding B.V.

and Quantib B.V.

acquisitions on January 20, 2022, and the Heart and Lung Imaging Limited acquisition on November 1, 2022 that are subject to fair value measurements and the classification of these liabilities on our consolidated balance sheets, as follows (in thousands):

As of December 31, 2022

Level 1 Level 2 Level 3 Total

Accrued expenses and other non-current liabilities

Aidence Holding B.V.

milestone consideration $ — $ — $ 11,158 $ 11,158

holdback of 113,303 shares of RadNet common stock

$ — $ — $ 3,709 $ 3,709

Montclair Radiological Associates $ — $ — $ 1,200 $ 1,200

Heart and Lung Imaging Limited $ — $ — $ 11,656 $ 11,656

The estimated fair value of these liabilities was determined using Level 3 inputs.

For Aidence Holding B.V., the milestone contingent liability was adjusted to fair value based on the yield rate of S&P B-rated corporate bonds and the probability of FDA approval.

For the Quantib B.V holdback shares, the fair value was determined by calculating the value of estimated shares issuable as of the reporting date (which was $ 18.83 ) translated at the current exchange rate at December 31, 2022, the time period related to the contractual settlement term, and the probability of issuing the shares.

For Montclair Radiological Associates the contingent consideration is determined by obtaining specific EBITDA targets within a defined time frame.

For Heat Lung Imaging Limited the contingent consideration is determined by the achievement of a specific number of physician reads.

As significant inputs for the contingent consideration of Aidence B.V., Quantib B.V., Montclair Radiological Associates and Heart Lung Imaging Limited are not observable and cannot be corroborated by observable market data they are classified as Level 3.

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):

The table below summarizes the estimated fair value and carrying amount of our Truist (Term Loan Agreement) and Barclays (First Lien Term Loans) long-term debt as follows (in thousands):

As of December 31, 2022

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Our Barclays revolving credit facility had no aggregate principal amount outstanding as of December 31, 2022 and December 31, 2021, 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.

Our Truist revolving credit facility had no aggregate principal amount outstanding as of December 31, 2022 and December 31, 2021, 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 Truist term loans.

Level 2 inputs primarily related to comparable market prices.

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Weighted average number of common shares outstanding during the period 56,293,336 52,496,679 50,891,791

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

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

common stockholders $ 0.19 $ 0.47 $ ( 0.29 )

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Add nonvested restricted stock subject only to service vesting 172,139 259,539 —

Add additional shares issuable upon exercise of stock options and warrants 664,815 — 360,185

Add additional shares issuable upon exercise of stock options, warrants and holdback shares 855,395 664,815 —

Weighted average number of common shares used in calculating diluted net income per share 57,320,870 53,421,033 50,891,791

Changes in fair value associated with contingently issuable shares $ ( 724 ) $ — $ —

Net income (loss) attributable to RadNet, Inc's common stockholders for diluted share calculation $ 9,926 $ 24,727 $( 14,840 )

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

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Shares issuable upon the exercise of stock options 152,723 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.

INVESTMENTS IN EQUITY SECURITIES- As of December 31, 2022, 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.

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

No observable price changes or impairment in our investment was noted as of the year ended December 31, 2022.

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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.

On January 1, 2019 we funded a convertible promissory note in the amount of $ 0.1 million 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, 2022.

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No indicators of impairment existed as of December 31, 2022.

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

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

As we have the ability to exercise significant influence over our joint venture entities, we consider them related parties.

Amounts transacted between ourselves and the entities in the ordinary course of business are disclosed on our balance sheet in the due from/to affiliate accounts.

The following table is a summary of key unaudited financial data for these joint ventures as of December 31, 2022 and 2021, respectively, and for the years ended December 31, 2022, 2021 and 2020, respectively, (in thousands):

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Net income $ 21,169 $ 21,893 $ 16,850

During the years ended December 31, 2022 and 2021, we made an additional equity contributions of $ 1.4 million each year to Arizona Diagnostic Radiology Group ("ADRG", our joint venture with Dignity Health).

On November 1, 2022, we contributed eight of our imaging centers to ADRG of $ 12.7 million and recorded a loss of $ 0.5 million which was calculated as the difference between the sale price and carrying value of such imaging centers which included equipment and other assets and an allocation of goodwill to such imaging centers.

We recorded $ 4.5 million of the sale price as an offset to due to affiliates while the remaining $ 8.3 million was recorded as investment in joint venture on our balance sheet.

We accounted for the transaction as an adjustment to our equity investment for the value of the assets contributed.

To maintain our 49 % economic interest in ADRG, we received a distribution from the partnership of $ 4.5 million to reduce our overall investment to $ 8.3 million.

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.

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

Over the course of 2020 through 2022, the FASB issued different Accounting Standards Updates (ASUs) in regards to Reference Rate Reform (Topic 848).

ASU 2020-04 and ASU 2021-01 addressed optional expedients and exceptions for applying generally accepted accounting principals to certain contract modifications, hedging relationships, and derivatives that referenced London Inter-bank Offered Rate (LIBOR) or another reference rate expected to be discontinued.

The provisions originally were set to expire on December 31, 2022.

The date of LIBOR cessation was finalized as June 30, 2023, which is beyond the current sunset date of Topic 848 and hence the need to extend the time allotted for accounting relief.

ASU 2022-06 deferred the sunset date of the provision out to December 31, 2024.

The adoption of the provisions under these ASUs did not have a material effect on our consolidated financial statements.

In November 2021, the FASB issued ASU 2021-10 ("ASU 2021-10"), Government Assistance (Topic 832), Disclosures by Business Entities about Government Assistance.

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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.

The new standard was 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 did 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 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

Radiology Practice Acquisitions

The adoption did not have a material effect on our consolidated financial statements.

NOTE 4 – BUSINESS COMBINATIONS AND RELATED ACTIVITY

Imaging Center Segment

During 2022 and 2021, we completed the acquisition of certain assets of the following entities, which either engage directly in the practice of radiology or associated businesses.

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

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

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

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

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

IFRC LLC*^ 1/1/2022 8,200 2,910 1,703 5,271 — 19 ( 1,703 )

IFRC LLC*^ 1/1/2022 4,800 2,103 857 2,697 — — ( 857 )

Montclair Radiological Associates, P.A.*# 10/1/2022 94,877 16,414 4,665 79,690 400 ( 2,168 ) ( 4,124 )

Heart and Lung Imaging Limited+ 11/1/2022 32,000 — — 16,200 15,800 — —

Chelsea Diagnostic Radiology, P.C.* 12/1/2022 2,800 568 — 2,132 100 — —

North Jersey Imaging Center, LLC* 12/9/2022 104 20 — 55 25 4 —

$ 142,781 $ 22,015 $ 7,225 $ 106,045 $ 16,325 $( 2,145 ) $( 6,684 )

*Fair Value Determination is Final

^ IFRC LLC acquisitions consisted of three subsidiaries of IFRC, one of which was purchased separately by a joint venture with Calvert Medical Imaging Centers, LLC.

# Montclair Radiological Associates includes a liability for $ 1.2 million in contingent consideration.

+See detailed description of the Heart and Lung Imaging Limited acquisition below.

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

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

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Kelly MD acquisitions consisted of various subsidiaries purchased separately.

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.

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.

Heart and Lung Imaging Limited

On November 1, 2022, we acquired a 75 % controlling interest in Heart and Lung Imaging Limited (“HLI”).

HLI is a teleradiology concern which operates in the United Kingdom with the National Healthcare Service to screen high risk populations for cardiac and lung conditions.

HLI’s operations are included in our imaging center segment for reporting purposes.

The transaction was accounted for as the acquisition of a business with a total purchase consideration of approximately $ 31.9 million, including:

i) shares with a fair value of $ 6.8 million ( 359,002 shares issued at $ 19.06 per share), ii) cash of $ 6.3 million and iii) contingent consideration of $ 10.8 million ($ 10.2 million in contingent milestone consideration and cash holdback of $ 0.6 million to be issued 24 months after acquisition subject to adjustment for any indemnification claims) and iv) noncontrolling interest of $ 8.0 million.

We recorded $ 0.6 million in current assets, $ 15.8 million in intangible assets, $ 0.6 million current liabilities and $ 16.2 million in goodwill in connection with this transaction.

As part of the purchase price allocation, we determined the identifiable intangible assets are customer relationships and trade names.

The fair value of the intangible assets was estimated using the income approach, and the cash flow projections were discounted using a rate of 19.0 %.

The cash flows were based on estimated earnings from existing customers, and the discount rate applied was benchmarked with reference to the implied rate of return from the transaction model and the weighted average cost of capital.

Artificial Intelligence Segment

Aidence Holding B.V.

On January 20, 2022, we completed our acquisition of all the equity interests of Aidence Holding B.V.

("Aidence") an artificial intelligence enterprise focused on lung cancer screening.

Aidence is reported as part of our artificial intelligence segment and was acquired to enhance our AI capabilities.

The transaction was accounted for as an acquisition of a business and total purchase consideration was determined to be approximately $ 45.2 million including i) 1,117,872 shares issued at $ 26.80 per share with a fair value of $ 30.0 million ii) cash of $ 1.8 million and iii) contingent consideration of $ 11.9 million ($ 7.4 million in milestones to be settled in shares or cash at our election and a share holdback of $ 4.5 million) and iv) a settlement of a loan from RadNet of $ 1.5 million.

In addition we paid certain seller closing costs through the issuance of 23,362 shares at a fair value of $ 0.6 million.

As a result of this transaction, we recorded $ 1.0 million in current assets, $ 0.2 million in property and equipment, $ 27.7 million in intangible assets (including developed technology of $ 21.1 million and IPR&D of $ 5.5 million), $ 3.2 million in current liabilities, a deferred tax liability of $ 3.5 million, and $ 22.9 million in goodwill.

In performing the purchase price allocation, we considered, among other factors, the intended future use of acquired assets, analysis of historical financial performance and estimates of future performance of the Aidence business.

As part of the purchase price allocation, we determined the identifiable intangible assets are developed technology, IPR&D, trade names, and customer relationships.

The fair value of the intangible assets was estimated using the income approach, and the cash flow projections were discounted using rates ranging from 15 % to 17 %.

The cash flows were based on estimates used to price the transaction, and the discount rates applied were benchmarked with reference to the implied rate of return from the transaction model and the weighted average cost of capital.

The developed technology consists of artificial intelligence powered applications for lung nodule management and early lung cancer diagnosis and reporting.

The IPR&D asset relates primarily to an in-process project for a customer relationship management offering to manage patients that are found with Incidental Pulmonary Nodules and has not reached technological feasibility as of the acquisition date.

The asset recorded relates to one project, and the Company expects to complete the project in the next twelve months.

The useful lives for the developed technology asset was set at 7 years, for customer relationships 5.4 years, and trade names was 7 years.

The calculation of the excess of the purchase price over the estimated fair value of the tangible net assets and intangible assets acquired was recorded to goodwill.

Factors contributing to the recognition of the amount of goodwill were primarily based on anticipated strategic and synergistic benefits that are expected to be realized from the acquisition.

These benefits include expanding the Company's AI capabilities to drive revenue growth.

On January 20, 2022, we completed our acquisition of all the equity interests of Quantib B.V.

("Quantib") an artificial intelligence enterprise focused on prostate cancer screening.

Quantib is reported as part of our artificial intelligence segment, and was acquired to enhance our AI capabilities.

The transaction was accounted for as an acquisition of a business and total purchase consideration was determined to be approximately $ 42.3 million including i) 965,058 shares issued at $ 26.80 per share with a fair value of $ 25.9 million ii) cash of $ 11.8 million and iii) contingent consideration consisting of 113,303 shares with a fair value at the date of close of $ 3.0 million and cash of $ 1.6 million both to be released 18 months after acquisition subject to adjustment for any indemnification claims.

As a result of this transaction, we recorded $ 2.4 million in current assets, $ 0.1 million in property and equipment, $ 21.3 million in intangible assets (including developed technology of $ 19.6 million and IPR&D of $ 0.7 million), $ 0.7 million in current liabilities, $ 6.7 million in long-term debt and deferred tax liabilities, and $ 26.4 million in goodwill.

As part of the purchase price allocation, we determined the identifiable intangible assets are developed technology, IPR&D, trade names, and customer relationships.

The fair value of the intangible assets was estimated using the income approach, and the cash flow projections were discounted using rates ranging from 50 % to 55 %.

The cash flows were based on

estimates used to price the transaction, and the discount rates applied were benchmarked with reference to the implied rate of return from the transaction model and the weighted average cost of capital.

The developed technology consists of artificial intelligence powered applications for neurological and prostate imaging scans and reporting.

The useful lives for the developed technology asset was set at seven years , customer relationships three years , and trade names seven years .

The calculation of the excess of the purchase price over the estimated fair value of the tangible net assets and intangible assets acquired was recorded to goodwill.

Factors contributing to the recognition of the amount of goodwill were primarily based on anticipated strategic and synergistic benefits that are expected to be realized from the acquisition.

These benefits include expanding the Company's AI capabilities to drive revenue growth.

As disclosed above, for the acquisitions of Aidence and Quantib, the Company uses the income approach to determine the fair value of developed technology and IPR&D acquired in business combinations.

This approach determines fair value by estimating the after-tax cash flows attributable to the respective assets over their useful lives and then discounting these after-tax cash flows back to a present value.

The Company bases its revenue assumptions on estimates of relevant market sizes, expected market growth rates, expected trends in technology and expected product introductions by competitors.

The value of the in-process projects is based on the project's stage of completion, the complexity of the work completed as of the acquisition date, the projected costs to complete, the expected introduction date, the estimated cash flows to be generated upon commercial release and the estimated useful life of the technology.

The Company believes that the estimated developed technology and IPR&D amounts represent the fair value at the date of acquisition and do not exceed the amount a third-party would pay for the assets.

The significant assumptions used to estimate the fair value of intangible assets include discount rates and certain assumptions that form the basis of the forecasted results, specifically, revenue growth rates, EBITDA margins and obsolescence factors.

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

Subsidiary activity

Formation of majority owned subsidiary

Formation of majority owned subsidiaries

Frederick County Radiology, LLC

On April 1, 2022 we formed Frederick County Radiology, LLC ("FCR"), a partnership with Frederick Health Hospital, Inc.

("Hospital").

The operation offers multi-modality services out of six locations in Frederick, Maryland.

We contributed the operations of four centers to the enterprise and Hospital contributed $ 5.4 million in fixed assets, $ 3.0 million in equipment, and $ 11.0 million in goodwill.

As a result of the transaction, we recognized a gain of $ 6.6 million to additional paid in capital and retained a 65 % controlling economic interest in FCR and Hospital retains an $ 11.1 million or 35 % noncontrolling economic interest in FCR.

Advanced Radiology at Capital Region, LLC

On June 15, 2022 we entered into Advanced Radiology at Capital Region, LLC, a partnership with Dimension Health Corporation.

("Dimension"), an affiliate of the University of Maryland.

The operation will provide multi-modality services out of two yet to be determined locations in the Largo, Maryland area.

The venture was initially capitalized with nominal amounts of $ 5.1 thousand for a 51 % economic interest from us and $ 4.9 thousand from Dimension for a 49 % economic interest.

Simi Valley Imaging Group, LLC

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

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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 – SEGMENT REPORTING

Our reportable segments are described below:

Imaging Center

Our Imaging Center segment provides physicians with imaging capabilities to facilitate the diagnosis and treatment of diseases and disorders.

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

We also provide teleradiolgy services in the United Kingdom though our Heart&Lung Health subsidiary.

Included in the segment is our eRad subsidiary, which designs the underlying critical scheduling, data storage and retrieval systems necessary for imaging center operation.

Artificial Intelligence ("AI")

Our AI segment develops and deploys clinical applications to enhance interpretation of medical images and improve patient outcomes with an emphasis on brain, breast, prostate, and pulmonary diagnostics.

Our chief operating decision maker ("CODM"), who is also our CEO, evaluates the financial performance of our segments based upon their respective revenue and segmented internal profit and loss statements prepared on a basis not consistent with GAAP.

We do not report balance sheet information by segment since it is not reviewed by our CODM.

The table below present segment information reconciled to our financial results, with segment operating income or loss including revenue less cost of operations, depreciation and amortization, and other operating expenses to the extent specifically identified by segment (in thousands):

Twelve Months Ended December 31,

2022 2021 2020

Imaging Centers $ 1,425,665 $ 1,313,662 $ 1,071,840

AI 4,396 1,415 —

Total revenue $ 1,430,061 $ 1,315,077 $ 1,071,840

Cost of Operations

Imaging Centers $ 1,240,593 $ 1,130,543 $ 967,250

AI 23,753 5,333 2,822

Total cost of operations $ 1,264,346 $ 1,135,876 $ 970,072

Depreciation and Amortization

Imaging Centers $ 109,524 $ 96,174 $ 86,396

AI 6,353 520 399

Total depreciation and amortization $ 115,877 $ 96,694 $ 86,795

Loss on Disposal of Equipment

Imaging Centers $ 2,506 $ 8,319 $ 1,200

Total loss (gain) $ 2,529 $ 8,319 $ 1,200

Imaging Centers $ 926 $ 744 $ 4,353

Total severance $ 946 $ 744 $ 4,353

Income from Operations

Imaging Centers $ 72,116 $ 77,882 $ 12,641

AI ( 25,753 ) ( 4,438 ) ( 3,221 )

Total income from operations $ 46,363 $ 73,444 $ 9,420

For proper comparative purposes, Imaging Center segment revenue for the years 2021 and 2020 exclude Provider Relief Funding of $ 9.1 million and $ 26.3 million for the twelve months ended December 31, 2021 and 2020, respectively as it represents a form of direct Government stimulus.

No such funds were received for the twelve months ended December 31, 2022.

NOTE 6 – 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):

The following is a reconciliation of Goodwill by business segment for the years ended December 31, 2021 and December 31, 2022 is provided below (in thousands):

Imaging Center Artificial Intelligence Total

Balance as of December 31, 2020 $ 448,269 $ 24,610 $ 472,879

Goodwill from acquisitions 30,906

Additions 40,864 — 40,864

Measurement period and other adjustments 77 — 77

Balance as of December 31, 2021 $ 489,210 $ 24,610 $ 513,820

Goodwill from acquisitions 40,864

Other Adjustments 77

Additions 120,551 48,697 169,248

Disposals ( 4,200 ) — ( 4,200 )

Measurement period and other adjustments ( 106 ) 147 41

Currency translation 1,028 ( 2,272 ) ( 1,244 )

Balance as of December 31, 2022 $ 606,483 $ 71,182 $ 677,665

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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):

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

2023 2024 2025 2026 2027 Thereafter Total Weighted average amortization period remaining in years

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Covenant not to compete and other contracts 1,319 891 642 356 72 40 3,320 3.1

Developed Technology 461 318 318 318 318 1,432 3,165 9.1

Customer Relationships 1,244 1,244 1,112 991 816 12,396 17,803 18.6

Patent and Trademarks 298 298 298 298 298 322 1,812 6.4

Developed Technology & Software 6,297 6,297 6,297 6,257 5,722 7,196 38,066 6.7

Trade Names amortized 305 77 77 77 77 89 702 4.5

Trade Names indefinite life — — — — — 7,100 7,100 —

Software in development — — — — — 13,465 13,465 —

IPR&D — — — — — 17,032 17,032 —

Total Annual Amortization $ 11,750 $ 11,094 $ 10,713 $ 10,266 $ 9,272 $ 53,133 $ 106,228

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Computer and office equipment, furniture and fixtures 119,467 144,766

Software development costs 36,015 —

Leasehold improvements 501,963 441,921

Equipment under financing/capital lease 13,984 13,984

Equipment originally acquired under finance/capital lease 13,971 13,984

Total property and equipment cost 1,320,700 1,161,222

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Total property and equipment $ 565,961 $ 484,247

Included in our property and equipment at December 31, 2022 is approximately $ 73.4 million total of construction in process amounts consisting of $ 26.6 million in medical equipment, $ 5.3 million in computer and office equipment, $ 0.4 million in software development and $ 41.1 million in leasehold improvements.

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):

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

Depreciation and amortization expense of property and equipment, including amortization of equipment under finance leases, for the years ended December 31, 2022, 2021 and 2020 was $ 105.6 million, $ 92.3 million, and $ 83.1 million, respectively.

NOTE 8 - CREDIT FACILITIES AND NOTES PAYABLE

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Discount on First Lien Term Loans ( 11,127 ) ( 13,213 )

SunTrust Term Loan Agreement collateralized by NJIN's tangible and intangible assets 46,500 51,375

Term Loan Agreement collateralized by NJIN's tangible and intangible assets 150,000 46,500

Discount on NJIN Term Loan Agreement ( 1,254 ) —

Total debt obligations 851,744 754,662

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The remaining $ 187.4 million of our Barclays Revolving Credit Facility was available to draw upon as of December 31, 2022.

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.

We also had no balance under our $ 50.0 million Truist Revolving Credit Facility related to our consolidated subsidiary NJIN at December 31, 2022, and with no letters

of credit reserved against the facility, the full amount was available to draw upon.

At December 31, 2022 we were in compliance with all covenants under our credit facilities.

Amendments to Credit Facilities

Second Amended and Restated First Lien Credit and Guaranty Agreement

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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.

$ 8.8 million capitalized to discount and deferred finance cost, $ 6.0 million charged to loss on early extinguishment of debt and related expenses 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.

Second Amended and Restated Revolving Credit and Term Loan Agreement

On October 7, 2022, we entered into the Second Amended and Restated Revolving Credit and Term Loan Agreement (the "Restated Credit and Term Loan Agreement") which provides for a $ 150.0 million of a secured term loan (the "Truist Term Loan") and a $ 50.0 million secured revolving credit facility (the "Truist Revolving Credit Facility").

Both loans were secured by our simultaneous entry into the Second Amended and Restated Guaranty and Security Agreement on the same date.

The proceeds were were used to refinance the outstanding balance under our prior term loan agreement and provide funding for current and future operations.

Total costs of the Restated Credit and Term Loan Agreement amounted to approximately $ 2.7 million segregated as follows:

$ 2.0 million capitalized to discount and deferred finance cost and $ 0.7 million expensed to loss on extinguishment of debt and related expenses in other expense.

Amounts capitalized will be amortized over the remaining terms of the respective credit facilities under the Restated Credit and Term Loan Agreement.

All obligations under the Second Amended and Restated Credit and Term Loan Agreement bear interest at either a SOFR or a Base Rate (each as defined in the Restated Credit and Term Loan Agreement), plus an applicable margin according to the following schedule:

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

I Greater than or equal to 3.00 :1.00

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

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

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

V Less than 1.50 :1.00

Senior Credit Facilities:

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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.

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.

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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:

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

I Greater than or equal to 3.00 :1.00

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

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

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

V Less than 1.50 :1.00

The loans and other obligations outstanding under the SunTrust Credit Agreement currently bear interest at a three month LIBOR election at 0.13 % 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.

Truist Term Loan:

The Truist Term Loan currently bears interest at a three month SOFR election of 4.28 % plus an applicable margin and fees based on Pricing Level III described above.

The scheduled amortization of the Truist Term Loan begins March 31, 2023 with quarterly payments of $ 1.9 million, representing 1.00 % of the original principal balance.

At scheduled intervals, the quarterly amortization increases by $ 0.9 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.

The Truist Term Loan will mature on October 10, 2027 unless otherwise accelerated under the terms of the Credit Agreement.

Revolving Credit Facilities:

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> 3.00 x but ≤ 3.50 x

As of December 31, 2021, the effective interest rate payable on revolving loans under the Barclays Revolving Credit Facility was 5.0 %.

As of December 31, 2022, the effective interest rate for borrowings on revolving loans under the Barclays Revolving Credit Facility stood at 9.5 %.

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 3.00 % 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.

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The Barclays Revolving Credit Facility will terminate on April 23, 2026 unless otherwise accelerated in accordance with the terms of the Restated Credit Agreement.

SunTrust Revolving Credit Facility:

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

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

As of December 31, 2021, NJIN had no borrowings under the SunTrust Revolving Credit Facility.

Truist Revolving Credit Facility:

Associated with the Truist Revolving Credit Facility of $ 50.0 million are deferred financing costs, net of accumulated amortization, of $ 0.6 million at December 31, 2022.

As of December 31, 2022, NJIN had no borrowings under the Truist Revolving Credit Facility.

The Truist Revolving Credit Facility bears interest with different margins based on types of borrowings at a Pricing Level III as noted in the pricing grid above.

The Truist Revolving Credit Facility terminates on the earliest of (i)

October 7, 2027, (ii) the date on which the Revolving Commitments are terminated pursuant to Section 2.8 of the Truist Restated Credit Agreement, or (iii) the date on which all amounts outstanding under the Truist Restated Credit Agreement have been declared or have automatically become due and payable (whether by acceleration or otherwise).

Recent Amendments to prior Credit Facilities

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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.

Truist Credit Facilities:

On August 31, 2018, under the Amended and Restated Revolving Credit and Term Loan Agreement (A&R Agreement), NJIN secured a term loan commitment of $ 60.0 million and established revolving credit facility of $ 30.0 million.

The agreement had a maturity date of August 31, 2023 and was refinanced on October 10, 2022 by the Second Amended and Restated Revolving Credit and Term Loan Agreement.

Paycheck Protection Program

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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.

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.

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Total finance lease cost $ 2,896 $ 3,114

1) Operating lease cost above for the year ended December 31, 2021 includes $ 12.6 million in lease abandonment charges.

1) Operating lease cost above for the year ended December 31, 2021 included $ 12.6 million in lease abandonment charges.

Please see our discussion in the Leases section of Note 2, Summary of Significant Accounting Policies.

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Operating leases 88,080 186,695

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.

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Equipment, net $ 1,801 $ 4,697

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 10.9 10.4

Finance leases - years 0.0 2.5

Weighted Average Discount Rate

Operating leases 6.4 % 6.3 %

Finance leases — % 4.4 %

Maturities of lease liabilities were as follows:

(In thousands)

Year Ending December 31, Leases

Operating Leases

Year Ending December 31,

2023 $ 92,371

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NOTE 10 – INCOME TAXES

For the years ended December 31, 2022, 2021 and 2020, we have the following income (loss) before income taxes (in thousands):

2022 2021 2020

US Domestic $ 59,529 $ 58,806 $ ( 986 )

Foreign ( 16,560 ) 73 132

Income (loss) before income taxes $ 42,969 $ 58,879 $ ( 854 )

For the years ended December 31, 2022, 2021 and 2020, we recognized income tax expense comprised of the following (in thousands):

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State current tax 371 ( 2,191 ) ( 1,608 )

Other current tax 18 27 22

Foreign current tax 87 18 27

Federal deferred tax 6,470 9,831 ( 303 )

State deferred tax 5,863 6,902 3,035

Foreign deferred tax ( 3,430 ) — —

Income tax expense $ 9,361 $ 14,560 $ 895

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State franchise tax, net of federal benefit 595 4,198 779

Non deductible expenses 198 301 674

Other Non deductible expenses 305 ( 93 ) 224

Officer Compensation 759 291 77

Noncontrolling interests in partnerships ( 4,821 ) ( 4,114 ) ( 2,748 )

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Deferred true-ups and other ( 1,451 ) 5,009 4,840

Foreign rate differential ( 737 ) 4 ( 1 )

Uncertain tax provisions ( 749 ) ( 321 ) 1,036

Other differences 79 — 2

Income tax expense $ 9,361 $ 14,560 $ 895

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Operating lease right-of-use asset ( 129,802 ) ( 128,868 )

Outside basis difference ( 20,015 ) —

Other ( 9,081 ) ( 11,587 )

Total Deferred Tax Liabilities $ ( 225,572 ) $ ( 195,695 )

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.

Net Deferred Tax (Liability) Asset $ ( 9,256 ) $ 14,853

As of December 31, 2022, we had federal net operating loss carryforwards of approximately $ 231.5 million, which is comprised of definite and indefinite net operating losses.

We had federal net operating loss carryforwards of approximately $ 165.2 million, which expire at various intervals from the years 2026 to 2037, and had carryforwards of $ 66.3 million of net operating losses which do not expire.

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

We also had state net operating loss carryforwards of approximately $ 271.7 million, which expire at various intervals from the years 2024 through 2042.

As of December 31, 2022, $ 24.9 million of our federal net operating loss carryforwards acquired in connection with the 2011 acquisition of Raven Holdings U.S., Inc.

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are subject to limitations related to their utilization under Section 382 of the Internal Revenue Code.

We also had foreign net operating loss carryforwards of approximately $ 19.8 million, which begin to expire from years 2023 to 2027, in addition to $ 11.0 million which do not expire and are carried over indefinitely.

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.

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As of December 31, 2022, we have determined that deferred tax assets of $ 216.3 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 have also determined deferred tax liabilities of $ 38.8 million are related to book basis in goodwill that has an indefinite life.

We file consolidated income tax returns in the U.S.

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income tax examinations by tax authorities for years before 2018.

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

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

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

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Balance at end of year $ 4,144 $ 5,088 $ 5,484

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.

At December 31, 2022, we had unrecognized tax benefits of $ 4.1 million of which $ 3.4 million will affect the effective tax rate if recognized.

We recognize accrued interest and penalties related to unrecognized tax benefits in income tax expense.

During the year ended December 31, 2022 the Company accrued approximately $ 2 thousand of interest and penalties.

As of December 31, 2022, accrued interest and penalties amounted to approximately $ 0.4 million.

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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.

At December 31, 2020, we have 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.

The Inflation Reduction Act 2022 which incorporates a Corporate Alternative Minimum Tax (CAMT) was signed on August 16, 2022.

The changes will affect for the tax years beginning after December 31, 2022.

The new tax will require companies to compute two separate calculations for federal income tax purposes and pay the greater of the new minimum tax or their regular tax liability.

We will be monitoring the impacts of the act to determine if this will have a impact on us for years beginning after December 31, 2022.

As of year-end it is not expected to have a material impact for us.

The Creating Helpful Incentives to Produce Semiconductors (CHIPS) Act of 2022 was signed into law on August 9, 2022 to boost domestic semiconductor manufacturing and encourage US research activities.

The act provided a 25% investment credit intended to promote domestic production of semiconductors.

This act is not expected to have a material impact for us.

The Tax Cuts and Jobs Act of 2017 subjects a U.S.

shareholder to tax on global intangible low-taxed income ("GILTI") earned by certain foreign subsidiaries.

An entity can make an accounting policy election to either recognize deferred taxes for temporary basis differences expected to reverse as GILTI in future years or to provide for the tax expense related to GILTI in the year the tax is incurred as a period expense only.

We have elected to account for GILTI in the year the tax is incurred.

NOTE 11 – STOCK-BASED COMPENSATION

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

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, 2022:

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Balance, December 31, 2021 473,939 $ 9.38

Granted 229,975 28.36

Exercised ( 25,000 ) 11.75

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Aggregate intrinsic value in the table above represents the total pretax intrinsic value (the difference between our closing stock price on December 31, 2022 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, 2022.

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.

As of December 31, 2022, total unrecognized stock-based compensation expense related to non-vested employee awards was $ 1.1 million which is expected to be recognized over a weighted average period of approximately 2.32 years.

DeepHealth Options

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

During the twelve months ended December 31, 2021 we issued 415,968 shares relating to these awards, approximately amounting to $ 10.1 million of compensation expense, mainly pandemic related employee bonuses.

During the twelve months ended December 31, 2022 we issued 41,000 shares relating to these awards, approximately amounting to $ 0.8 million of compensation expense.

Performance based stock units ("PSUs")

In January 2022, we granted certain employees PSUs with a target award of 25,683 shares of our common stock.

The PSUs will vest in two equal parts, starting three years from the grant date based on continuous service, with the number of shares earned ( 0 % to 200 % of the target award) depending upon the extent to which we achieve a performance condition as determined by the board of directors over the period from January 1, 2022 through December 31, 2022.

Performance based stock options ("PSOs")

In January 2022, we granted certain employees PSOs to purchase a maximum of 111,925 shares of our common stock.

The PSOs will vest in three equal parts, starting three years from the grant date based on continuous service, with the number of shares earned ( 0 shares to 111,925 shares) depending upon the extent to which we achieve a performance condition as determined by the board of directors over the period from January 1, 2022 through December 31, 2022.

Long Term Incentive Plan shares ("LTIPs")

In addition, we issue stock-based compensation to certain employees in our AI segment in the form of Stock Units and Restricted Stock Awards, subject to certain restrictions.

The awards represent a form of long term incentive and are reflective of a general practice within the software industry.

The units and shares vest ratably over a two to four year period, conditioned on continued employment through the vesting periods.

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

The following summarizes all unvested LTIPs activities during the twelve months ended December 31, 2022:

LTIPs Weighted-Average

Term (Years) Weighted-Average

LTIPs unvested at December 31, 2021 — $ —

Changes during the period

Granted 180,612 $ 19.56

Forfeited or Canceled ( 11,141 ) $ 19.50

LTIPs unvested at December 31, 2022 169,471 2.69 $ 19.56

In summary, of the 16,500,000 shares of common stock reserved for issuance under the Restated Plan at December 31, 2022, there remain 2,017,233 shares available for future awards.

NOTE 12 – SUBSEQUENT EVENTS

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 .

Changes In and Disagreements with Accountants on Accounting and Financial Disclosure

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

What changed 10-K

Item 8. Financial Statements and Supplementary Data