Table of Contents


UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-K

☒ ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the fiscal year ended December 31, 2017

2023


☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF
1934
 For the transition period from to

Commission File Numberfile number 001-33307

RadNet, Inc.

(Exact name of registrant as specified in its charter)

Delaware13-3326724

(State or other jurisdiction of


incorporation or organization)

(I.R.S. Employer


Identification No.)

1510 Cotner Avenue
Los Angeles, CaliforniaCalifornia90025
(Address of principal executive offices)(Zip Code)

Registrant’s telephone number, including area code: (310) 478-7808

Securities registered pursuant to Section 12(b) of the Act:

Title of Each Classeach classTrading Symbol(s)Name of each exchange on which registered
Common Stock, $.0001 par valueRDNTNASDAQ Global Market

Securities registered pursuant to Section 12(g) of the Act: None

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes    ¨☒ Nox

☐

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. Yes¨☐ Nox

☒

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.  Yesx☒  No¨

☐

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Website, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yesx☒No¨

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K (§229.405 of this chapter) is not contained herein, and will not be contained, to the best of registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K.x

☐


Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer”, “smaller reporting company”, and “emerging growth company” in Rule 12b-2 of the Exchange Act. (Check one):

Large accelerated filero☒Accelerated filerþ☐
Non-accelerated filero(Do not check if a smaller reporting company)☐Smaller reporting companyo☐
Emerging growth companyo☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.¨

☐

Indicate by check mark whether the registrant has filed a report on and attestation to its management's assessment of the effectiveness of its internal control over financial reporting under Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C. 7262(b)) by the registered public accounting firm that prepared or issued its audit report. ☒
If securities are registered pursuant to Section 12(b) of the Act, indicate by check mark whether the financial statements of the registrant included in the filing reflect the correction of an error to previously issued financial statements. ☐

Indicate by check mark whether any of those error corrections are restatements that required a recovery analysis of incentive-based compensation received by any of the registrant’s executive officers during the relevant recovery period pursuant to §240.10D-1(b). ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act). Yes¨☐ Nox

☒

The aggregate market value of the registrant’s common stock held by non-affiliates of the registrant was approximately $335,616,695$2.1 billion on June 30, 20172023 (the last business day of the registrant’s most recently completed second fiscal quarter) based on the closing price for the common stock on the NASDAQ Global Market on June 30, 2017.

2023.

The number of shares of the registrant’s common stock outstanding on March 5, 2018,February 27, 2024, was 48,232,117.

68,475,443.

DOCUMENTS INCORPORATED BY REFERENCE

Portions of the registrant’s definitive proxy statement for the 20182024 Annual Meeting of Stockholders are incorporated herein by reference in Part III of this annual report on Form 10-K to the extent stated herein. Such proxy statement will be filed with the Securities and Exchange Commission pursuant to Regulation 14A not later than 120 days after the close of the registrant’s fiscal year.


1

RADNET, INC.

TABLE OF CONTENTS

FORM 10-K ITEMPAGE
Item 1.
1
Item 1A.20
15
Item 1B.32
26
Item 2.IC.32
26
Item 2.
27
Item 3.32
28
Item 4.32
28
Item 5.33
29
Item 6.Selected Consolidated Financial Data[Reserved]34
31
Item 7.36
32
Item 7A.55
49
Item 8.56
50
Item 9.87
92
Item 9A.87
92
Item 9B.90
94
Item 9C.97 
Item 10.90
94
Item 11.90
94
Item 12.90
94
Item 13.90
94
Item 14.90
94
Item 15.91
96

Item 16.i
100


i

Cautionary Note Regarding Forward-Looking Statements

This annual report contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended and Section 21E of the Securities Exchange Act of 1934, as amended. Forward-looking statements reflect current views about future events and are based on our currently available financial, economic and competitive data and on current business plans. Actual events or results may differ materially depending on risks and uncertainties that may affect our operations, markets, services, prices and other factors.

Statements in this annual report concerning our ability to successfully acquire and integrate new operations, to grow our contract management business, our financial guidance, our future cost saving efforts, our increased business from new equipment or operations and our ability to finance our operations are forward-looking statements. In some cases, youForward-looking statements can identify forward-looking statementsgenerally be identified by terminology such as “may,” “will,” “should,” “expect,” “intend,” “plan,” “anticipate,” “believe,” “estimate,” “predict,” “potential,” “continue,” “assumption” or the negative of these terms or other comparable terminology.

Forward looking statements in this annual report include statements or inferences we make about:


•expectations concerning domestic and global economic conditions, rates of inflation, or changes in interest rates;
•anticipated trends in our revenues, operating expenses or capital expenditures, and our financial guidance;
•expected future market acceptance for our products or services, and our competitive strengths in the markets we serve;
•expected timing and potential impact of regulatory changes affecting our business;
•our ability to successfully acquire and integrate new businesses, and achieve expected benefits, synergies or operating results from those acquisitions; and
•economic and costs savings anticipated to be derived from our investment in artificial intelligence and machine learning products and solutions.

Forward-looking statements involveare neither historical facts nor assurances of future performance.Because forward-looking statements relate to the future, they are inherently subject to known and unknown risks, uncertainties and other factors that may causeare difficult to predict and out of our control.Our actual results, levels of activity, performance or achievements tomay be materially different from any future results, levels of activity, performance or achievements expressed or implied by these forward-looking statements. These risksImportant factors that could cause our actual results to differ materially from those indicated or implied in our forward-looking statements include those factors listed in Item 1 — “Business,” Item 1A— “Risk Factors,” Item 3— “Legal Proceedings,” Item 7 — “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and elsewhere in this annual report and in other reports that we file with the Securities and Exchange Commission.


Any forward-looking statement in this annual report is based on information currently available to us and speaks only as of the date of this report.We do not undertake any responsibility to release publicly any revisions to these forward-looking statements to take into account events or circumstances that occur after the date of this annual report or any unanticipated events which may cause actual results to differ from those expressed or implied by the forward-looking statements contained in this annual report, except to the extent required by law.



ii

PART I
Item 1.iiBusiness

PART I

Item 1.Business

Business Overview

We are a leading national provider of freestanding, fixed-site outpatient diagnostic imaging services in the United States based on number of locations and annual imaging revenue. We have been in business since 1985. Our principal business segment is the provision of diagnostic imaging services. At December 31, 2017,2023, we operated, directly or indirectly through joint ventures with hospitals, 297366 imaging centers located in Arizona, California, Delaware, Florida, Maryland, New Jersey, and New York. 

Our imaging centers provide physicians with imaging capabilities to facilitate the diagnosis and treatment of diseases and disorders and may reduce unnecessary invasive procedures, often reducing the cost and amount of care for patients. Our services include magnetic resonance imaging (MRI), computed tomography (CT), positron emission tomography (PET), nuclear medicine, mammography, ultrasound, diagnostic radiology (X-ray), fluoroscopy and other related procedures. The vast majority of our centers offer multi-modality imaging services, a key point of differentiation from our competitors. 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.

Integral to the imaging center business is our software arm headed by our eRad, Inc. subsidiary, which sells computerized systems that distribute, display, store and retrieve digital images.


We seek to develop leading positions in regional markets in order to leverage operational efficiencies. We develop our imaging business through a combination of organic growth and acquisitions. Our scale and density within selected geographies provideprovides close, long-term relationships with key payors, radiology groups and referring physicians. Each of our center-level and regional operations teams is responsible for managing relationships with local physicians and payors, meeting our standards of patient service, and maintaining profitability. We provide training programs, standardized policies and procedures, and sharing of best practices among the physicians in our regional networks.

In addition to


Internationally, our imaging services, one of our subsidiaries, eRAD, Inc., develops and sells computerized systems for the imaging industry, including Picture Archiving Communications Systems (“PACS”). Another one of our subsidiaries,majority-owned subsidiary Heart & Lung Imaging On Call LLC,Limited, provides teleradiology services for remote interpretation of images on behalf of radiology groups, hospitals and imaging center customers. Teleradiology isproviders within the process of transmitting radiological patient images, such as X-rays, CTs, and MRIs, from one location to another for the purposes of interpretation and/or consultation. Teleradiology allows radiologists to provide services without actually having to be at the locationframework of the patient and allows trained specialists to be available 24/7. In addition to providing alternative revenue sources for us, the capabilities of both eRAD and Imaging On Call are designed to make the RadNet imaging center operations more efficient and cost effective.

Since December 2015 we have been engaged in a multi-year strategic relationship with Imaging Advantage LLC (“IA”) through which we collaborate in developing business models for radiology services. As part of our arrangement, we contract with IA for 85 radiologist physicians to provide services at our facilities.  In addition, our relationship with the State of Qatar to help direct Screen for Life, a public-private partnership with the Qatari government to provide screening services, is on-going.

We derive substantially all of our revenue from fees charged for the diagnostic imaging services performed at our facilities. For the years ended December 31, 2017, 2016 and 2015, we performed 6,196,398, 6,109,622, and 5,638,979, diagnostic imaging procedures and generated net revenue of $922.2 million, $884.5 million, and $809.6 million, respectively. Additional information concerning RadNet, Inc., including our consolidated subsidiaries, for each of the years ended December 31, 2017, 2016 and 2015 is included in the consolidated financial statements and notes thereto in this annual report.

History of our Business

We became incorporated in Delaware in 2008 and have been in business since 1985.

We develop our medical imaging business through a combination of organic growth and acquisitions. For a discussion of acquisitions, see Item 7 - “Management’s Discussion and Analysis and Results of Operations—Recent Developments and Facility Acquisitions” below.

In addition to our imaging business, our eRAD, Inc. subsidiary is a provider of PACS and related workflow solutions to the radiology industry.  Over 250 hospitals, teleradiology businesses, imaging centers and specialty physician groups use eRAD’s technology to distribute, display, store and retrieve digital images taken from all diagnostic imaging modalities.  eRAD has approximately 76 employees, including a research and development team of 21 software engineers in Budapest, Hungary.

United Kingdom's National Health Service.


We have also assembledestablished an industry leading teamArtificial Intelligence (AI) division, that develops and deploys AI suites to enhance radiologist interpretations of software developers,breast, lung and prostate images. The division is led by our DeepHealth, Inc. subsidiary and includes our acquisitions of Aidence Holding B.V. and Quantib B.V., both based out of Prince Edward Island, Canada, to create a workflow solution known as Radiology Information Systems (“RIS”) focused exclusively on RadNet’s internal use. All 25 members of this Canadian based team have significant software development expertise in radiology, and together with eRAD and its PACS technology, are creating fully integrated solutions to manage all aspects of RadNet’s internal information needs.

1
the Netherlands.


Through our teleradiology business, Imaging On Call, LLC, located in Fishkill, New York, we provide interpretation services to approximately 51 hospitals and hospital-based radiology groups.

References to “RadNet,” “we,” “us,” “our” or the “Company” in this report refer to RadNet, Inc., its subsidiaries and affiliated entities. See “Management’s Discussion and Analysis and Results of Operations—Overview.”

Available Information

All reports we file with the Securities and Exchange Commission are available free of charge via EDGAR through the SEC website at www.sec.gov. In addition you may read and copy any materials that we file with the SEC at the SEC’s Public Reference Room at 100 F Street, NE., Washington, DC 20549, and may obtain information on the operation of the Public Reference Room by calling the SEC at 1-800-SEC-0330. www.sec.gov. We also maintain a website atwww.radnet.com. where we make available, free of charge, our annual report on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K and all amendments to those reports as soon as is reasonably practicable after the material is electronically filed with, or furnished to, the Securities and Exchange Commission. References to our website in this report are provided as a convenience and the information contained on, or otherwise accessible through, the website is not incorporated by reference into, nor does it form a part of this annual report on Form 10-K or any other document that we file with the Securities and Exchange Commission.

Industry Overview

Diagnostic imaging involves the use of non-invasive procedures to generate representations of internal anatomy and function that can be recorded on film or digitized for display on a video monitor. Diagnostic imaging procedures facilitate the early diagnosis and treatment of diseases and disorders and may reduce unnecessary invasive procedures, often minimizing the cost and amount of care for patients. Diagnostic imaging procedures include MRI, CT, PET, nuclear medicine, ultrasound, mammography, X-ray and fluoroscopy.

While X-ray remains the most commonly performed diagnostic imaging procedure, the fastest growing and higher margin procedures are MRI, CT and PET. The rapid growth in PET scans is attributable to the increasing recognition of the efficacy of PET scans in the diagnosis and monitoring of cancer. The number of MRI and CT scans performed annually in the United States continues to grow due to their wider acceptance by physicians and payors, an increasing number of applications for their use and a general increase in demand due to the aging population.



1

In recent years, there has been rapid development of AI tools for the radiology field. In October 2023, the United States Food & Drug Administration reported it had granted marketing clearance to 405 radiology software products since January 2020. Modern AI is built by training on large databases to recognize patterns with much higher performance than previously. AI methods are now being employed throughout the imaging industry in a wide variety of ways, such as speeding image acquisition, providing diagnostic assistance, or prioritizing workflows. In addition, AI methods can speed up administrative tasks, such as keeping track of individuals needing procedures on a regular basis (i.e., mammograms, follow-up exams, etc.) and alerting our staff to contact the patient and schedule appointments.
Diagnostic Imaging Settings

Diagnostic imaging services are typically provided in one of the following settings:

Fixed-site, freestanding outpatient diagnostic facilities

centers. These facilitiescenters range from single-modality to multi-modality facilitiescenters and are generally not owned by hospitals or clinics. These facilitiescenters depend upon physician referrals for their patients and generally do not maintain dedicated, contractual relationships with hospitals or clinics. In fact, these facilitiescenters may compete with hospitals or clinics that have their own imaging systems to provide services to these patients. These facilitiescenters bill third-party payors, such as managed care organizations, insurance companies, Medicare or Medicaid. All of our facilitieswholly-owned centers are in this category.

Hospitals

Hospitals. Many hospitals provide both inpatient and outpatient diagnostic imaging services, typically on site.site or at a dedicated center located on or nearby the hospital campus. These inpatient and outpatient centers arecan be owned and operated by the hospital and provide imaging services to inpatients as ordered or clinic, or jointly by both, and are primarily used by patients of the hospital or clinic.outpatients through physician referrals. The hospital or clinicnormally bills third-party payors such as managed care organizations, insurance companies, Medicare or Medicaid. We have entered into joint ventures with certain hospitals to both provide and manage their diagnostic imaging services, at those hospitals.

allowing them to leverage our industry expertise.

Mobile Imaging

Imaging. While many hospitals own or lease their own equipment, certain hospitals provide diagnostic imaging services by contracting with providers of mobile imaging services. Using specially designed trailers, mobile imaging service providers transport imaging equipment and provide services to hospitals and clinics on a part-time or full-time basis, thus allowing small to mid-size hospitals and clinics that do not have the patient demand to justify fixed on-site access to advanced diagnostic imaging technology. Diagnostic imaging providers contract directly with the hospital or clinic and are typically reimbursed directly by them. We do not provide mobile imaging services.

2


Diagnostic Imaging Modalities

The principal diagnostic imaging modalities we use at our facilitiescenters are:

MRI


MRI. MRI has become widely accepted as the standard diagnostic tool for a wide and fast-growing variety of clinical applications for soft tissue anatomy, such as those found in the brain, spinal cord, abdomen, heart and interior ligaments of body joints such as the knee. MRI uses a strong magnetic field in conjunction with low energy electromagnetic waves that are processed by a computer to produce high-resolution, three-dimensional, cross-sectional images of body tissue. A typical MRI examination takes from 20 to 45 minutes. MRI systems are designed as either open or closed and have magnetic field strength of 0.2 Tesla to 3.0 Tesla and are priced in the range of $0.6 million to $2.5 million. As of December 31, 2017, we had 257 MRI systems in operation.

CT

Tesla.

CT. CT provides higher resolution images than conventional X-rays, but generally not as well defined as those produced by MRI. CT uses a computer to direct the movement of an X-ray tube to produce multiple cross-sectional images of a particular organ or area of the body. CT is used to detect tumors and other conditions affecting bones and internal organs. It is also used to detect the occurrence of strokes, hemorrhages and infections. A typical CT examination takes from 15 to 45 minutes. CT systems are priced in the range of $0.3 million to $1.2 million. As of December 31, 2017, we had 152 CT systems in operation.

PET

PET. PET scanning involves the administration of a radiopharmaceutical agent with a positron-emitting isotope and the measurement of the distribution of that isotope to create images for diagnostic purposes. PET scans provide the capability to determine how metabolic activity impacts other aspects of physiology in the disease process by correlating the reading for the PET with other tools such as CT or MRI. PET technology has been found highly effective and appropriate in certain clinical circumstances for the detection and assessment of tumors throughout the body, the evaluation of some cardiac conditions and the assessment of epilepsy seizure sites. The information provided by PET technology often obviates the need to perform further highly invasive or diagnostic surgical procedures. PET systems are priced in the range of $0.8 million to $2.5 million. In addition, we employ combined PET/CT systems that blend the PET and CT imaging modalities into one scanner. These combined systems are priced in the range of $1.1 million to $2.8 million. As of December 31, 2017, we had 49 PET or combination PET/CT systems in operation.


2

Nuclear Medicine

Medicine. Nuclear medicine uses short-lived radioactive isotopes that release small amounts of radiation that can be recorded by a gamma camera and processed by a computer to produce an image of various anatomical structures or to assess the function of various organs such as the heart, kidneys, thyroid and bones. Nuclear medicine is used primarily to study anatomic and metabolic functions. Nuclear medicine systems are priced in the range of $300,000 to $400,000. As of December 31, 2017, we had 52 nuclear medicine systems in operation.

X-ray

X-ray. X-rays use roentgen rays to penetrate the body and record images of organs and structures on film. Digital X-ray systems add computer image processing capability to traditional X-ray images, which provides faster transmission of images with a higher resolution and the capability to store images more cost-effectively. X-ray systems are priced in the range of $95,000 to $440,000. As of December 31, 2017, we had 285 X-ray systems in operation. 

Ultrasound

Ultrasound. Ultrasound imaging uses sound waves and their echoes to visualize and locate internal organs. It is particularly useful in viewing soft tissues that do not X-ray well. Ultrasound is used in pregnancy to avoid X-ray exposure as well as in gynecological, urologic, vascular, cardiac and breast applications. Ultrasound systems are priced in the range of $90,000 to $250,000. As of December 31, 2017, we had 614 ultrasound systems in operation.

3

Mammography

Mammography. Mammography is a specialized form of radiology using low dosage X-rays to visualize breast tissue and is the primary screening tool for breast cancer. Mammography procedures and related services assist in the diagnosis of and treatment planning for breast cancer. Analog mammography systems are priced in the range of $70,000 to $100,000, and digital mammography systems are priced in the range of $250,000 to $400,000. As of December 31, 2017, we had 261 mammography systems in operation.

Fluoroscopy

Fluoroscopy. Fluoroscopy uses ionizing radiation combined with a video viewing system for real time monitoring of organs. Fluoroscopy systems are priced in the range of $100,000 to $400,000. As of December 31, 2017, we had 102 fluoroscopy systems in operation.

Industry Trends

We believe the diagnostic imaging services industry will continue to grow as a result of a number of factors, including the following:

Escalating Demand for Healthcare Services from an Aging Population

Population. The U.S. population is expected to trend older over the coming decades. According to the United States Census Bureau estimates released in June 2017,a Pew Research Center report issued January 9, 2024, the number of US residents age over 65 or over increased from 35.0stands at approximately 62 million, in 2000 to 49.2 million in 2016,representing 18% of the population, and the median age for the United States is expected to continue to increase.reach 84 million, or 23% of the total population by 2054. Because diagnostic imaging use tends to increase as a person ages, we believe the aging population will generate more demand for diagnostic imaging procedures.


Greater Consumer Awareness of and Demand for Preventive Diagnostic Screening. Diagnostic imaging, such as elective full-body scans, is increasingly being used as a screening tool for preventive care procedures. Consumer awareness of diagnostic imaging as a less invasive and preventive screening method has added to the growth in diagnostic imaging procedures. We believe that further technological advancements allowing for early diagnosis of diseases and disorders using less invasive procedures will create additional demand for diagnostic imaging.
New Effective Applications for Diagnostic Imaging Technology

Technology. New technological developments are expected to extend the clinical uses of diagnostic imaging technology and increase the number of scans performed. Recent technological advancements include:

·MRI spectroscopy, which can differentiate malignant from benign lesions;

·MRI angiography, which can produce three-dimensional images of body parts and assess the status of blood vessels;

·enhancements in teleradiology systems, which permit the digital transmission of radiological images from one location to another for interpretation by radiologists at remote locations; and

·the development of combined PET/CT scanners, which combine the technology from PET and CT to create a powerful diagnostic imaging system.

•MRI spectroscopy, which can differentiate malignant from benign lesions;
•MRI angiography, which can produce three-dimensional images of body parts and assess the status of blood vessels;
•enhancements in teleradiology systems, which permit the digital transmission of radiological images from one location to another for interpretation by radiologists at remote locations;
•the development of combined PET/CT and PET/MRI scanners, which combine technologies to create a powerful diagnostic imaging system; and
•use of augmented reality technologies make it possible to create three dimensional images that physicians can examine through virtual reality headsets or print using a three dimensional printer.

Additional improvements in imaging technologies, contrast agents and scan capabilities are leading to new non-invasive diagnostic imaging application,applications, including methods of diagnosing blockages in the heart’s vital coronary arteries, liver metastases, pelvic diseases and vascular abnormalities without exploratory surgery. We believe that the use of the diagnostic capabilities of MRI and other imaging services will continue to increase because they are cost-effective, time-efficient and non-invasive, as compared to alternative procedures, including surgery, and that newer technologies and future technological advancements will further increase the use of imaging services. At the same time, the industry has increasingly used upgrades to existing equipment to expand applications, extend the useful life of existing equipment, improve image quality, reduce image acquisition time and increase the volume of scans that can be performed. We believe the use of equipment upgrades rather than

3

equipment replacements will continue, as we do not foresee new imaging technologies on the near-term horizon that will displace MRI, CT or PET as the principal advanced diagnostic imaging modalities.

4


Wider Physician and Payor Acceptance

Impact of Artificial Intelligence. AI has the Use of Imaging

During the last 30 years, there has been a major effort undertaken bypotential to significantly change the medical imaging industry. Current AI applications are aiding in image creation (for example, reducing the time required to perform an MRI scan, or the dose of a CT or PET scan) as well as aiding physicians performing image interpretation. AI appears to be particularly valuable in aiding radiologists reviewing cancer screening exams, where volumes can be high and scientific communitieslesions can be difficult to develop higher quality, cost-effectivefind, such as in screening mammography. AI can also improve business processes to better effectively serve customers and improve reimbursement and collections accuracy.

Competition
Our competitors include independent imaging operators and smaller regional operators, as well as hospitals and hospital groups that operate their own imaging services. In addition, some physician practices have established their own diagnostic imaging technologiescenters within their group practices. Some of our competitors may now or in the future have access to greater financial resources than we do, which could allow them to establish more centers and provide access to minimizenewer, more advanced equipment.
We compete principally on the risks associated withbasis of our reputation, our ability to provide multiple modalities at many of our centers, the applicationlocation of these technologies. The thrustour centers, the quality of product development during this period has largely been to reduce the hazards associated with conventional X-ray and nuclear medicine techniques and to develop new, less harmful imaging technologies. As a result, the use of advancedour diagnostic imaging modalities, such as MRI, CTservices and PET, which provide superior image quality comparedtechnologists and our ability to other diagnostic imaging technologies, has increased rapidly in recent years. These advanced modalities allow physicians to diagnose a wide variety of diseasesestablish and injuries quicklymaintain relationships with healthcare providers and accurately without exploratory surgery or other surgical or invasive procedures, which are usually more expensive, involve greater risk to patients and result in longer rehabilitation time. Because advanced imaging systems are increasingly seen as a tool for reducing long-term healthcare costs, they are gaining wider acceptance among payors.

Greater Consumer Awareness of and Demand for Preventive Diagnostic Screening

Diagnostic imaging, such as elective full-body scans, is increasingly being used as a screening tool for preventive care procedures. Consumer awareness of diagnostic imaging as a less invasive and preventive screening method has added to the growth in diagnostic imaging procedures.referring physicians. We believe that further technological advancements allowing for early diagnosis of diseases and disorders using less invasive procedures will create additional demand for diagnostic imaging.

Expansion of Teleradiology Services

As hiring radiologists has become more difficult, the use of teleradiology is expected to continue to expand to provide patients better, more specialized care and 24/7 services.

Our Competitive Strengths

following competitive strengths differentiate us from our competition.


Our Scale and Position as the Largest Provider of Freestanding, Fixed-site Outpatient Diagnostic Imaging Services in the United States, Based on Number of Centers and Revenue

Reputation. As of December 31, 2017,2023, we operated, 297directly or indirectly through joint ventures with hospitals, 366 centers in Arizona, California, Delaware, Florida, Maryland, New Jersey, and New York. Our sizeWe are the largest operator of freestanding, fixed-site outpatient diagnostic imaging service centers in the United States, based on number of centers and scale allow us to achieve operating, sourcing and administrative efficiencies, including equipment and medical supply sourcing savings and favorable maintenance contracts from equipment manufacturers and other suppliers.revenue. Our specific knowledge of our geographic markets drives strong relationships with key payors, radiology groups and referring physicians within our markets.


Our Comprehensive "Multi-Modality" Diagnostic Imaging Offering

Offering. The vast majority of our centers offer multiple types of imaging procedures, driving strong relationships with referring physicians and payors in our markets and a diversified revenue base. At each of our multi-modality facilities,centers, we offer patients and referring physicians one location to serve their needs for multiple procedures. This prevents multiple patient visits or unnecessary travel between facilities, therebylocations, increasing patient throughput and decreasing costs and time delays. Our revenue is generated by a broad mix of modalities. We believe our multi-modality strategy lessens our exposure to reimbursement changes in any specific modality.

Our Competitive Pricing

WePricing. Our business focus, scale, resources and access to technology afford us with certain operating efficiencies. Our size and scale allow us to achieve operating, sourcing and administrative efficiencies, including equipment and medical supply sourcing savings and favorable maintenance contracts from equipment manufacturers and other suppliers. As such, we believe our fees are generally lower than hospital fees for the same services we provide.

Our Facility Density in Many Highly Populated Areas of the United States

The strategic organization of ourStates. Our diagnostic imaging facilitiescenters are strategically organized into regional networks concentrated in major population centers in sixseven states, providing a density that offers unique benefits to our patients, our referring physicians, our payors and us. We are able to increase the convenience of our services to patients by implementing scheduling systems within geographic regions, where practical. For example, many of our diagnostic imaging facilitiescenters within a particular region can access the patient appointment calendars of other facilitiescenters within the same regional network to efficiently allocate time available and to meet a patient's appointment, date, time, or location preferences. The grouping of our facilitiescenters within regional networks enables us to easily move technologists and other personnel, as well as equipment, from over-utilized to under-utilized to over-utilized facilitiescenters on an as-needed basis, and drive referrals. Our organization of referral networks results in increased patient throughput, greater operating efficiencies, better equipment utilization rates and improved response time for our patients. We believe our networks of facilitiescenters and tailored service offerings for geographic areas drivesdrive local physician referrals, makesmake us an attractive candidate for selection as a preferred provider by third-party payors createsand create economies of scale and provides barriers to entry by competitors in our markets.

5
scale.


Our Strong Relationships with Payors and Diversified Payor Mix

Mix. Our revenue is derived from a diverse mix of payors, including privatecommercial insurance payors, managed care capitated payors and government payors which should mitigatesuch as Medicare and Medicaid, mitigating our exposure to possible unfavorable reimbursement trends within any one payor class. In addition, our experience with capitation arrangements has provided us with the expertise to manage utilization and pricing effectively, resulting in a predictable and recurring stream of revenue. We believe that third-party payors representing large groups of patients often


4

prefer to enter into managed care contracts with providers that offer a broad array of diagnostic imaging services at convenient locations throughout a geographic area. In 2017, we received approximately 59% of our net service revenue before provision for bad debt from commercial insurance payors, 12% from managed care capitated payors, 20% from Medicare and 3% from Medicaid. No single payor accounted for more than 5% of our net revenue for the twelve months ended December 31, 2017.

Our Strong Relationships with Experienced and Highly Regarded Radiologists

Radiologists. Our contracted radiologists have outstanding credentials, strong relationships with referring physicians, and a broad mix of sub-specialties. The collective experience and expertise of these radiologists translates into more accurate and efficient service to patients. Our close relationship with Howard G. Berger, M.D., our President and Chief Executive Officer, and Beverly Radiology Medical Group (“BRMG”) in California and our long-term arrangements with radiologists outside of California enable us to better ensure that medical service provided at our facilities is consistent with the needs and expectations of our referring physicians, patients and payors.

Our Experienced and Committed Management Team

Team. Our senior management group has more than 100 years of combined healthcare management experience. Ourand executive management team hasteams have created our differentiated approach based on their comprehensive understanding of the diagnostic imaging industry and the dynamics of our regional markets. We have a track record of successful acquisitions and integration of acquired businesses into RadNet, and have managed the business through a variety of economic and reimbursement cycles.

Our Technologically Advanced Imaging Systems

OurOperations. In 2019, we created an AI division that now hosts the combined efforts of our acquisitions of DeepHealth, Inc., Aidence Holding B.V., and Quantib B.V..The division is currently focused on developing improved medical interpretation of scans within the fields of mammography, lung and prostate imaging. Given the importance of training data in building modern AI applications as well as getting feedback on performance, our combination of vertical integration and scale provide advantages over other AI creators. Alongside our established subsidiary eRad, subsidiaryInc., which develops and sells computerized imaging systems for the industrydata storage and Imaging On Call provides teleradiology services for interpretation of images for radiology groups, hospitals and other medical groups. In addition,retrieval systems, we have assembled an industry leading team of software developers to create radiology workflow solutions for our internal use.

that improve patient care.


Business Strategy

Maximize Performance at Our Existing Facilities

Centers. We intendseek to enhance our operations and increase scan volume and revenue at our existing facilitiescenters by expanding physician relationships and increasing the procedure offerings.

Expansion Into Related Businesses

With our acquisition of eRad we entered the business of the development and sale of software systems essential to the imaging industry. Similarly, with our acquisition of Imaging On Call, we entered the teleradiology business. We intend to regularly evaluate potential acquisitions of other businesses to the extent they complement our imaging business.

Focus on Profitable Contracting

Contracting. We regularly evaluate our contracts with third-party payors, industry vendors and radiology groups, as well as our equipment and real property leases, to determine how we may improve the terms to increase our revenues and reduce our expenses. Because many of our contracts with third party payors are short-term in nature, we can regularly renegotiate these contracts, if necessary. We believe our position as a leading provider of diagnostic imaging services and our long-term relationships with physician groups in our markets enable us to obtain more favorable contract terms than would be available to smaller or less experienced imaging services providers.

6


Optimize Operating Efficiencies

Efficiencies. We tryseek to maximize our equipment utilization by adding, upgrading and re-deploying equipment where we experience excess demand. We will continue to trim excess operating and general and administrative costs where it is feasible to do so. We may also continue to use, where appropriate, highly trained radiology physician assistants to perform, under appropriate supervision of radiologists, basic services traditionally performed by radiologists. We will continue to upgrade our advanced information technology system to create cost reductions for our facilitiescenters in areas such as image storage, support personnel and financial management.

Expand Our Networks

Networks. We intend to continue to expand the number of our facilitiescenters both organically and through targeted acquisitions, using a disciplined approach for evaluating and entering new areas, including consideration of whether we have adequate financial resources to expand. Our current plans are to strengthen our market presence in geographic areas where we currently have existing operations and to expand into neighboring and other areas where we believe we can compete effectively. We perform extensive due diligence before developing a new facility or acquiring an existing facility or entering into a joint venture with a hospital to manage a facility, including surveying local referral sources and radiologists, as well as examining the demographics, reimbursement environment, competitive landscape and intrinsic demand of the geographic market. We generally will only enter new markets where:

·there is sufficient patient demand for outpatient diagnostic imaging services;

·we believe we can gain significant market share;

·we can build key referral relationships or we have already established such relationships; and

·payors are receptive to our entry into the market.

•there is sufficient patient demand for outpatient diagnostic imaging services;
•we believe we can gain significant market share;
•we can build key referral relationships or we have already established such relationships; and
•payors are receptive to our entry into the market.

Expand Our Joint Ventures

Ventures. As part of our growth strategy we have entered into joint ventures with hospitals, health systems or radiology practices that were formed for the purpose of owning and operating diagnostic imaging centers. We have created a number of joint ventures in California, Maryland, and New Jerseykey markets with well-established hospital systems to manage additional facilities.centers. We intend to continue to expand in established markets through additional joint ventures, particularly with hospital systems. We believe that suchthese joint ventures strengthendeepen and expand our strength in markets where we are already strong.

established.


5


Leverage our investment in AI and technology to improve services and operating efficiency. We have developed a portfolio of proprietary technologies that stretch from patient-scheduling, to image storage and retrieval, to AI applications that aid in the interpretation of scans in certain fields. We intend to use our substantial investment in technology and AI to create differentiated service offerings in each phase of our business. We are currently developing solutions to improve the quality and consistency of our core imaging services, expand our service offerings, and improve our operating efficiency, ranging from patient intake through billing and collection.
Our Services

We offer a comprehensive set of imaging services including MRI, CT, PET, nuclear medicine, X-ray, ultrasound, mammography, fluoroscopy and other related procedures. We focus on providing standardized high quality imaging services, regardless of location, to ensure patients, physicians and payors consistency in service and quality. To ensure the high quality of our services, we monitor patient satisfaction, timeliness of services to patients, and delivery of reports to physicians.

The key features of our services include:

·patient-friendly, non-clinical environments;

·a 24-hour turnaround on routine examinations;

·interpretations within one to two hours, if needed;

·flexible patient scheduling, including same-day appointments;

·extended operating hours, including weekends;

·reports delivered by courier, facsimile or email;

·availability of second opinions and consultations;

·availability of sub-specialty interpretations at no additional charge; and

·standardized fee schedules by region.

7

•patient-friendly, non-clinical environments;
•a 24-hour turnaround on routine examinations;
•interpretations within one to two hours, if needed;
•flexible patient scheduling, including same-day appointments;
•extended operating hours, including weekends;
•reports delivered by courier, facsimile or email;
•availability of second opinions and consultations;
•availability of sub-specialty interpretations at no additional charge; and
•standardized fee schedules by region.

Radiology Professionals

In the states in which we provide services (except Florida)Florida and Arizona), a lay person or any entity other than a professional corporation or similar professional organization is not allowed to practice medicine, including by employing professional persons or by having any ownership interest or profit participation in or control over any medical professional practice. This doctrine is commonly referred to as the prohibition on the “corporate practice” of medicine. In order to comply with this prohibition, we contract with radiologistsmedical groups to provide professional medical services in our facilities,centers, including the supervision and interpretation of diagnostic imaging procedures. The

We contract with a consolidated medical group (the "Group") which consists of professional corporations owned or controlled by individuals within our senior management that provide professional medical services in Arizona, California, Delaware, Maryland, New Jersey and New York. At locations where the Group does not provide professional medical services, we have entered into long-term contracts with third-party radiology groups in the area to provide physician services at those centers. These third-party radiology practice groups maintain full control over the provision of professional services, including supervision and interpretation of diagnostic imaging procedures, in our diagnostic imaging centers. Each medical group maintains full control over the physicians it employs. Pursuant to each management contract, we make available the imaging facilityemploys, and all of the furniture and medical equipment at the facility for use by the radiology practice, and the practice is responsible for staffing the facility with qualified professional medical personnel. In addition,

Under management agreements with the Group or other third-party radiology practices, we provide the use of our diagnostic imaging equipment, technical and management services, and administration of the non-medical functions relating toof the professional medical practicepractices at the facility,our centers, including among other functions,the provision of clerical and administrative personnel, bookkeeping andnon-medical staff, 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.marketing. As compensation for the services furnished under management contracts with radiologists,our medical groups, we generally receive technical fees for the use of our diagnostic imaging equipment and technical services and an agreed percentage of the medical practice billings for, or collections from, services provided at the facility, typically 75% of global net service fee revenue or collections after deduction of the professional component of the medical practice billings.

At all but 5 of our California facilities, we contract for the provision of professional medical services directly with BRMG, or indirectly through BRMG with other radiology groups.

Many states have also enacted laws prohibiting a licensed professional from splitting fees derived from the practice of medicine with an unlicensed person or business entity. We do not believe that the management, administrative, technical and other non-medical services we provide to each of our contracted radiology groups violate the corporate practice of medicine prohibition or that the fees we charge for such services violate the fee splitting prohibition. However, the enforcement and interpretation of these laws by regulatory authorities and state courts vary from state to state. If our arrangements with our independent contractor radiology groups are found to violate state laws prohibiting the practice of medicine by general business corporations or fee splitting, our business, financial condition and ability to operate in those states could be adversely affected.

BRMG and New York Groups

Howard G. Berger, M.D., is our President and Chief Executive Officer, a member of our Board of Directors, and also owns, indirectly, 99% of the equity interests in BRMG. BRMG is responsible for all of the professional medical services at nearly all of our facilities located in California under a management agreement with us, and employs physicians or contracts with various other independent physicians and physician groups to provide the professional medical services at most of our California facilities. We generally obtain professional medical services from BRMG in California, rather than provide such services directly or through subsidiaries, in order to comply with California’s prohibition against the corporate practice of medicine. However, as a result of our close relationship with Dr. Berger and BRMG, we believe that we are able to better ensure that medical service is provided at our California facilities in a manner consistent with our needs and expectations and those of our referring physicians, patients and payors than if we obtained these services from unaffiliated physician groups.

We believe that physicians are drawn to BRMG and the other radiologist groups with whom we contract by the opportunity to work with the state-of-the-art equipment we make available to them, as well as the opportunity to receive specialized training through our fellowship programs, and engage in clinical research programs, which generally are available only in university settings and major hospitals.

8

As of December 31, 2017, BRMG and the NY Groups (defined below) employed or contracted for 145 full-time and 34 part-time radiologists. In addition to our BRMG staff, we contract 85 full-time physicians through our strategic relationship with Imaging Advantage LLC. Under our management agreement with BRMG, we are paid a percentage of the amounts collected for the professional services BRMG physicians render as compensation for our services and for the use of our facilities and equipment. For the year ended December 31, 2017, this percentage was 79%. The percentage may be adjusted, if necessary, to ensure that the parties receive the fair value for the services they render. The following are the other principal terms of our management agreement with BRMG:

·The agreement expires on January 1, 2024. The agreement automatically renews for consecutive 10-year periods, unless either party delivers a notice of non-renewal to the other party no later than six months prior to the scheduled expiration date. Either party may terminate the agreement if the other party defaults under its obligations, after notice and an opportunity to cure. We may terminate the agreement if Dr. Berger no longer owns at least 60% of the equity of BRMG; as of December 31, 2017, he owned indirectly 99% of the equity interests of BRMG.

·At its expense, BRMG employs or contracts with an adequate number of physicians necessary to provide all professional medical services at all of our California facilities, except for 5 facilities for which we contract with separate medical groups.

·At our expense, we provide all furniture, furnishings and medical equipment located at the facilities and we manage and administer all non-medical functions at, and provide all nurses and other non-physician personnel required for the operation of, the facilities.

·If BRMG wants to open a new facility, we have the right of first refusal to provide the space and services for the facility under the same terms and conditions set forth in the management agreement.

·If we want to open a new facility in California, BRMG must use its best efforts to provide medical personnel under the same terms and conditions set forth in the management agreement. If BRMG cannot provide such personnel, we have the right to contract with other physicians to provide services at the facility.

·BRMG must maintain medical malpractice insurance for each of its physicians with coverage limits not less than $1 million per incident and $3 million in the aggregate per year. BRMG also has agreed to indemnify us for any losses we suffer that arise out of the acts or omissions of BRMG and its employees, contractors and agents.

We contract with nine medical groups which provide professional medical services at all of our facilities in Manhattan and Brooklyn, New York. These contracts are similar to our contract with BRMG. Seven of these groups are owned by John V. Crues, III, M.D., RadNet’s Medical Director, a member of our Board of Directors, and a 1% owner of BRMG. Dr. Berger owns a controlling interest in two of these medical groups which provide professional medical services at one of our Manhattan facilities.

Non-BRMG and NY Groups entity locations

At the 5 centers in California where BRMG does not provide professional medical services, and at all of the centers which are located outside of California, with the exception of centers located in the New York, New York area, we have entered into long-term contracts with prominent third-party radiology groups in the area to provide physician services at those facilities. These arrangements also allow us to comply with the prohibition against the “corporate practice” of medicine in other states in which we operate (except in Florida which does not have an equivalent statute prohibiting the corporate practice of medicine).

These third-party radiology practice groups provide professional services, including supervision and interpretation of diagnostic imaging procedures, in our diagnostic imaging centers. The radiology practices maintain full control over the provision of professional services. The contracted radiology practices have outstanding physician and practice credentials and reputations; strong competitive market positions; a broad sub-specialty mix of physicians; a history of growth and potential for continued growth. In these facilities we have entered into long-term agreements (typically 10-40 years in length) under which, in addition to obtaining technical fees for the use of our diagnostic imaging equipment and the provision of technical services, we provide management services and receive a fee based on the practice group’s professional revenue. We typically receive 100% of the technical reimbursements associated with imaging procedures plus certain fees paid to us for providing additional management services. The radiology practicemedical groups retain the professional reimbursements associated with imaging procedures after deducting management service fees paid to us.

9


Additionally, we perform certain management services for a portion of the professional groups with whom we contract who provide professional radiology services at local hospitals. For performing these management services, which include billing, collecting, transcription and medical coding, we receive management fees.

fees, that depending on the agreement are calculated at a fixed or variable rate.


6

Payors


The fees charged for diagnostic imaging services performed at our facilitiescenters are paid by a diverse mix of payors, as illustrated for the following periods presented in the table below:

  % of Net Revenue Before Bad Debt Provision 
  Year Ended
December 31,
2017		  Year Ended
December 31,
2016		  Year Ended
December 31,
2015		 
Commercial Insurance(1)  59%   58%   57% 
Managed Care Capitated Payors  12%   12%   12% 
Medicare& Medicaid  23%   23%   23% 

(1) Includes co-payments, direct patient payments and payments through contracts with physician groups and other non-insurance company payors.

We have described below the types of reimbursement arrangements we have with third-party payors.

payors:

Commercial Insurance

Insurance. Generally, insurance companies reimburse us, directly or indirectly, including through BRMG in Californiathe Group or through the contracted radiology groups, elsewhere, on the basis of agreed upon rates. These rates are negotiated and may differ materially with rates set forth in the Medicare Physician Fee Schedule for the particular service. The patients may be responsible for certain co-payments or deductibles.

Managed Care Capitation Agreements

Agreements. Under these agreements whichthat are generally between BRMG in California and outside of California between the contracted radiology group (typically an independent physician group or other medical group)groups and the payor (which in most cases are large medical groups or Independent Practice Associations), the payor pays a pre-determined amount per-member per-month in exchange for the radiology group providing all necessary covered services to the managed care members included in the agreement. These contracts pass much of the financial risk of providing outpatient diagnostic imaging services, including the risk of over-use, from the payor to the radiology practice group and, as a result of our management agreement with the radiology practice group, to us.

We believe that through our comprehensive utilization management, or UM, program we have become highly skilled at assessing and moderating the risks associated with the capitation agreements, so that these agreements are profitable for us. Our UM program is managed by our UM department, which consists of administrative and nursing staff as well as BRMG medical staff who are actively involved with the referring physicians and payor management in both prospective and retrospective review programs. Our UM program includes the following features all ofsuch as physician education combined with peer review procedures which are designed to manage our costs while ensuring that patients receive appropriate care:

·Physician Education

At the inception of a new capitation agreement, we provide the new referring physicians with binders of educational material comprised of proprietary information that we have prepared and third-party information we have compiled, which are designed to address diagnostic strategies for common diseases. We distribute additional material according to the referral practices of the group as determined in the retrospective analysis described below.

·Prospective Review

Referring physicians are required to submit authorization requests for non-emergency high-intensity services: MRI, CT, special procedures and nuclear medicine studies. The UM medical staff, according to accepted practice guidelines, considers the necessity and appropriateness of each request. Notification is then sent to the imaging facility, referring physician and medical group. Appeals for cases not approved are directed to us. The capitated payor has the final authority to uphold or deny our recommendation.

10
care.

·Retrospective Review

We collect and sort encounter activity by payor, place of service, referring physician, exam type and date of service. The data is then presented in quantitative and analytical form to facilitate understanding of utilization activity and to provide a comparison between fee-for-service and Medicare equivalents. Our Medical Director prepares a quarterly report for each payor and referring physician. When we find that a referring physician is over utilizing services, we work with the physician to modify referral patterns.

Medicare/Medicaid

Medicaid. Medicare is the federal health insurance program for people age 65 or older and people under age 65 with certain disabilities. Medicaid, funded by both the federal government and states, is a state-administered health insurance program for qualifying low-income and medically needy persons. For services for which we bill Medicare directly or indirectly, including through contracted radiologists, we are paid under the Medicare Physician Fee Schedule. Under the Protecting Access to Medicare Act of 2014, Congress introduced a new quality incentive program that, effective January 1, 2016, reduces Medicare payments for certain CT services reimbursed through the Medicare Physician Fee Schedule that are furnished using equipment that does not meet certain dose optimization and management standards. Medicare patients usually pay a 20% co-payment unless they have secondary insurance. Medicaid rates are set by the individual states for each state program and Medicaid patients may be responsible for a modest co-payment.

Contracts with Physician Groups and Other Non-Insurance Company Payors

Payors. For some of our contracts with physician groups and other providers, we do not bill payors, but instead accept agreed upon rates for our radiology services. These rates are typically at or below the rates set forth in the current Medicare Fee Schedule for the particular service. However, we often agree to a specified rate for MRI and CT procedures that is not tied to the Medicare Fee Schedule.

Facilities

We operate 132 fixed-site, freestanding outpatient diagnostic imaging facilities in California, 13 in Delaware, 3 in Florida, 60 in Maryland, 20 in New Jersey, 19 in the Rochester and Hudson Valley areas of New York and 50 in New York City. We lease the premises at which these facilities are located.

Imaging Centers
Our facilitiescenters are primarily located in geographic networks that we refer to as regions. The majority of our facilitiescenters are multi-modality sites, offering various combinations of MRI, CT, PET, nuclear medicine, ultrasound, X-ray, fluoroscopy services and other related procedures. A portion of our facilitiescenters are single-modality sites, offering either X-ray or MRI services. Consistent with our regional network strategy, we locate our single-modality facilitiescenters near multi-modality facilities,centers, to help accommodate overflow in targeted demographic areas.

The following table sets forth the number of our facilitiescenters operated directly or managed through joint ventures for each year during the five-yearthree-year period ended December 31, 2017:

  Years Ended 
  December 31, 
  2013  2014  2015  2016  2017 
                
Total facilities owned or managed (at beginning of the year)  246   250   259   300   305 
Facilities added by:                    
Acquisition  12   22   43   10   8 
Internal development  –   –   1   8   4 
Facilities closed or sold  -8   -13   -3    -13   -20 
Total facilities owned (at year end)  250   259   300   305   297 

11
2023:


7

Years Ended
December 31,
 202320222021
Total centers owned or managed (at beginning of the year)357 347 331 
Centers added by:
Acquisition10 8 27 
Internal development11 14 1 
Centers closed or sold(12)(12)(12)
Total centers owned or managed (at year end)366 357 347 

Diagnostic Imaging Equipment

The following table indicates, as of December 31, 2017,2023, the quantity of principal diagnostic equipment available at our facilitiesimaging centers operated directly or through joint ventures, by state:

Equipment Count                           
                               
  MRI  Open/MRI  CT  PET/CT  Mammo  Ultrasound  X-ray  NucMed  Fluoroscopy  Total 
California  81   23   58   22   106   294   136   22   58   800 
Florida  3   0   2   1   3   5   2   2   1   19 
Delaware  8   –   7   0   10   19   15   2   4   65 
New Jersey  18   5   15   3   18   30   16   2   6   113 
New York  49   9   33   9   63   141   51   9   12   376 
Maryland  56   5   37   14   61   125   65   15   21   399 
   Total  215   42   152   49   261   614   285   52   102   1,772 

venture investments:

Equipment CountYears Ended December 31,
 202320222021
MRI353 340 323 
CT208 208 192 
PET/CT63 67 68 
Mammography405 387 358 
Ultrasound861 818 760 
X-ray363 440 415 
Nuclear Medicine55 57 55 
Fluoroscopy121 116 105 
Total equipment2,429 2,433 2,276 

The average age of our MRI and CT units is less than five years, and the average age of our PET units is less than four years. The useful life of our MRI, CT and PET units is typically ten years.

Facility Acquisitions

Information regarding our facility acquisitions can be found within Item 7 - “Management’s Discussion and Analysis of Financial Condition and Results of Operations”, as well as Note 4 to our consolidated financial statements included in this annual report on Form 10-K.

Information Technology

Our corporate headquarters and many of our facilitiescenters are interconnected through a state-of-the-art information technology system. This system, which is compliant with the Health Insurance Portability and Accountability Act of 1996 ("HIPAA"), is comprised of a number of integrated applications and provides a single operating platform for billing and collections, electronic medical records, practice management and image management.

This technology has created cost reductions for our facilitiescenters in areas such as image storage, support personnel and financial management and has further allowed us to optimize the productivity of all aspects of our business by enabling us to:

·
•capture patient demographic, history and billing information at point-of-service;

·automatically generate bills and electronically file claims with third-party payors;

·record and store diagnostic report images in digital format;

·digitally transmit in real-time diagnostic images from one location to another, thus enabling networked radiologists to cover larger geographic markets by using the specialized training of other networked radiologists;

·perform claims, rejection and collection analysis; and

·perform sophisticated financial analysis, such as analyzing cost and profitability, volume, charges, current activity and patient case mix, with respect to each of our managed care contracts.

Diagnostic reports and billing information at point-of-service;

•automatically generate bills and electronically file claims with third-party payors;
•record and store diagnostic report images are currently accessible viain digital format;
•digitally transmit in real-time diagnostic images from one location to another, thus enabling networked radiologists to cover larger geographic markets by using the Internet byspecialized training of other networked radiologists;
•perform claims, rejection and collection analysis; and

8

•perform sophisticated financial analysis, such as analyzing cost and profitability, volume, charges, current activity and patient case mix, with respect to each of our California referring providers. We have worked with some of the larger medical groups in California with whom we have contracts to provide access to this content through their web portals. We are in the process of making such services available outside of California.

We have historically utilized third-party software for our front desk patient tracking system, which we refer to as a Radiology Information System, or RIS. managed care contracts.

We have developed our own RISRadiology Information System through our team of software development engineers, which is used as our front desk patient tracking system. Our eRad, Inc., subsidiary develops and began runningsells computerized imaging data storage and retrieval systems.
Human Capital Management Strategy
The primary goal of our talent management strategy is to attract and retain engaged, talented, and diverse team members to establish RadNet as the employer of choice. We seek to drive performance by enabling effective leadership that results in a positive patient experience delivered by talented and engaged team members. To achieve this, internally developed systemleaders across the enterprise partner to develop and deliver talent and culture programs, create total rewards strategies, and provide efficient and effective people operations.

We believe the strength of our workforce is critical to the success of our mission to provide comprehensive radiology solutions and change the future of healthcare. We invest in the first quarter of 2015.

Personnel

our employees to ensure their confidence and competence in their roles, as well as to provide a path for professional career development. We value an ethical culture where diversity is embraced, good health and safety are promoted, and employees are empowered to share their ideas and opinions. We strive to care for our team members and are concerned about their total well-being.


Headcount and Labor Representation. At December 31, 2017,2023, we had a total of 5,3567,872 full-time, 631569 part-time and 1,4531,847 per diem employees, including those employed by BRMG and NY Groups.the Group. These numbers include 145220 full-time and 3489 part-time physicians and 1,7352,429 full-time, 425397 part-time and 9931,190 per-diem technologists. In addition

Diversity, Equity, Inclusion, & Belonging. We are committed to our company personnel, we contract 85 full-time physicians through our strategiccreating an inclusive work environment where team members can be their best and authentic selves. With diversity comes a plethora of different perspectives and these different perspectives breed innovative ideas that enable us to lead radiology forward. Our relationship with Imaging Advantage LLC.

12

We employ site managers who are responsible for overseeing day-to-day and routine operations at eachJobs.Vision.Success SoCal, a nonprofit, non-sectarian social service agency, is one example of our facilities, including staffing, modalitysupport and schedule coordination, referring physiciansponsorship of community outreach and patient relationsenrichment programs for underserved populations. As a foundational practice, all employees are required to complete cultural competence training annually.


Employee Listening. We believe in ensuring every team member feels valued, seen, and purchasing of materials. These site managers reportheard; therefore, we have various avenues for all to regional managersshare ideas and directors, who are responsible for oversightprovide feedback. Piloting initiatives such as the Connections Roadshow and new employee listening platforms enable senior leaders to hear from team members at all levels of the operations of all facilities within their region,organization to gain insights on various topics including sales, marketingquality, engagement, innovation, customer service, patient focus, diversity, equity, inclusion, and contracting. The regional managers and directors, along with our directors of contracting, marketing, facilities, management/purchasing and human resources all reportbelonging.

Total Well-being. We subscribe to our chief operating officers. These officers, our chief financial officer, our director of information services and our medical director report to our chief executive officer.

Nonethe belief that if we take care of our employeespeople, they will in turn, take care of our patients. Prioritizing and promoting wellness allows our team members to be their best selves at work and at home. Concerning ourselves with the physical, mental, emotional, and social well-being of each team member enables us to attract and retain top talent. Beyond fair and equitable pay, we offer a wide range of benefit plan options that include, but are not limited to, medical insurance, health savings accounts, family support services, nutrition and exercise programs, and financial education. We evaluate our total well-being packages regularly to remain competitive, align with legislative changes, and respond to the needs of our team members. Based on survey feedback, we recently replaced our wellness platform and introduced Navigate Wellness to better address what our team members care about most.


Talent Development. Equipping our people to perform excellently is subjectone of our top priorities. With companies across the country facing unprecedented, post-pandemic labor shortages, attrition, and turnover, we are doubling down on our People and Culture initiatives. We have established a Talent & Culture Center of Expertise to focus on the employee experience from beginning to end. With a collective bargaining agreement nor haveheightened focus on upskilling our existing workforce, our investment in new training and development platforms and piloting a coaching capabilities builder program for our leaders, we experienced any work stoppages. We believeare promoting timely and effective feedback that fosters trust, respect, teamwork, growth, and excellence. Furthermore, our relationship with our employees is good.

tuition reimbursement program encourages team members at all levels of the enterprise to seek additional skills.

Sales and Marketing

At December 31, 2017, our California sales and marketing team consisted of three directors of marketing and 42 customer service representatives, while our eastern marketing team consisted of seven directors of marketing and 114 customer service representatives.

Our sales and marketing team employs a multi-pronged approach to marketing, including physician, payor and sports marketing programs, each of which are described below:


9

Physician Marketing

Marketing. Each customer service representative on our physician marketing team is responsible for marketing activity on behalf of one or more facilities.centers. The representatives act as a liaison between the facility and referring physicians, holding meetings periodically and on an as-needed basis with them and their staff to present educational programs on new applications and uses of our systems and to address particular patient service issues that have arisen. In our experience, consistent hands-on contact with a referring physician and his or her staff generates goodwill and increases referrals to our facilities.centers. The representatives also continually seek to establish referral relationships with new physicians and physician groups. In addition to a base salary, each representative receives a bonus based upon success.

Payor Marketing

Marketing. Our marketing team regularly meets with managed care organizations and insurance companies to solicit contracts and meet with existing contracting payors to solidify those relationships. The comprehensiveness of our services, the geographic location of our facilitiescenters and the reputation of the physicians with whom we contract all serve as tools for obtaining new or repeat business from payors.

Sports Marketing Program

RadNet Inc. has a sports marketing division. Via ourProgram. Our west coast operations we provide diagnosticrenders in stadium digital X-ray services for the following organizations: Los Angeles Lakers, Clippers, Dodgers, Kings and SparksLakers. In exchange, we receive season tickets and parking. Contract lengths vary from yearly up to five years. We also provide radiology services at select imaging centers for the Staples Center. X-ray is performed at the Coliseum forAnaheim Ducks, Los Angeles Angels, Los Angeles Rams, Oakland Athletics, San Francisco 49ers and student athletes of the University of Southern California and the Los Angeles Rams football teams. In exchange for these services, each team provides RadNet with season tickets, parking and advertising space in the program book. RadNet also provides radiology services at many of our imaging centers for the Los Angeles Angels, Anaheim Ducks, and the Oakland Athletics organizations.

California. Through our east coast operations, we have entered into sponsorship agreements with the Baltimore Ravens of the National Football League and the Baltimore Orioles of Major League Baseball which permitspermit us to state we are the exclusive imaging providerpartner to each organization. The sponsorship agreement with the Ravens lastsBoth of those agreements are being renewed through 2019 and the Orioles through 2020.

2025.


Suppliers

Historically, we have acquired

We acquire our major diagnostic imaging equipment directly from large suppliers such as Carestream, GE Medical Systems, Inc., Hologic, Hitachi, Phillips, Siemensoriginal equipment manufacturers or through third party financing companies and others, and we purchase medical supplies from various national vendors. Our diagnostic imaging equipment represents a cornerstone investment of the company as it provides our customers the latest in imaging technology. We believe that we have excellentemploy direct purchase or finance arrangements with such firms as GE, Hologic, Key Equipment, Philips, Siemens and Spectrum for our diagnostic equipment imaging needs. We seek to establish strong working relationships with allour providers, who are of our major vendors. There are several comparable vendors for our suppliesstature and offer similar products, to mitigate the risk that would be available to us ifany one of our current vendorssupplier becomes unavailable.

We primarily acquire our equipment with cash or through various financing arrangements with equipment vendors and third party equipment finance companies involving the use of capital leases with purchase options at minimal prices at the end of the lease term. At December 31, 2017, capital lease minimum payment obligations, excluding interest, totaled approximately $6.9 million through 2022, including current payment installments totaling approximately $4.1 million. If we open or acquire additional imaging facilities,centers, we may have to incur material capitalequipment lease obligations.

13
See Note 9, Leases, in the notes accompanying our consolidated financial statements included in this report for further information.


Timely and effective maintenance of our imaging equipment is essential for achieving high utilization ratesrates. In order to ensure operational efficiency, we have maintenance arrangements with the various service arms of the original equipment manufacturers that supply our imaging equipment. We have an arrangement with GE Medical Systems, Inc. under which it has agreed to be responsible for the maintenance
Insurance and repair of a majority of our equipment for a fee that is based upon a percentage of our revenue, subject to a minimum payment.

Competition

The market for outpatient diagnostic imaging services is highly competitive. We compete locally for patients with groups of radiologists, established hospitals, clinics and other independent organizations that own and operate imaging equipment. Our competitors include the formerly public, now privately held, Alliance Healthcare Services, Inc., to the extent it sells diagnostic services directly to outpatients, Diagnostic Imaging Group and several smaller regional competitors. In addition, some physician practices have established their own diagnostic imaging facilities within their group practices. We experience additional competition as a result of those activities.

We compete principally on the basis of our reputation, our ability to provide multiple modalities at many of our facilities, the location of our facilities, the quality of our diagnostic imaging services and technologists and our ability to establish and maintain relationships with healthcare providers and referring physicians. See “Competitive Strengths” above. Some of our competitors may now or in the future have access to greater financial resources than we do, which could allow them to establish more facilities and provide access to newer, more advanced equipment.

Each of the non-BRMG contracted radiology practices has entered into agreements with its physician shareholders and full-time employed radiologists that generally prohibit those shareholders and radiologists from competing for a period of two years within defined geographic regions after they cease to be owners or employees, as applicable. In certain states, like California, a covenant not to compete is enforced in limited circumstances involving the sale of a business. In other states, a covenant not to compete will be enforced only:

·to the extent it is necessary to protect a legitimate business interest of the party seeking enforcement;

·if it does not unreasonably restrain the party against whom enforcement is sought; and

·if it is not contrary to public interest.

Enforceability of a non-compete covenant is determined by a court based on all of the facts and circumstances of the specific case at the time enforcement is sought. For this reason, it is not possible to predict whether or to what extent a court will enforce the contracted radiology practices’ covenants. The inability of the contracted radiology practices or us to enforce radiologist’s non-compete covenants could result in increased competition from individuals who are knowledgeable about our business strategies and operations.

Liability Insurance

Mitigation

We maintain insurance policies with coverage we believe is appropriate in light of the risks attendant to our business and consistent with industry practice. We maintain general liability insurance and professional liability insurance in commercially reasonable amounts. Additionally, we maintain workers’ compensation insurance on all of our employees. Coverage
In our agreements with physician groups, including the Group, we require the physician group maintain medical malpractice insurance for each physician in the group, with coverage limits of not less than $1.0 million per incident and $3.0 million in the aggregate per year.
Our insurance coverage is placed on a statutory basis and corresponds to individual state’s requirements. However, adequate liability insurance may not be available to us in the future at acceptable costs or at all. In addition, insurers from which we purchase such insurance may experience financial hardship which would impact their ability to pay covered policyholder claims.

Pursuant to


In California our agreements with physician groups with whom we contract, including BRMG, each group must maintain medical malpractice insurance for each physician in the group, having coverage limits of not less than $1.0 million per incident and $3.0 million in the aggregate per year.

California’soperations benefit from a statutory medical malpractice cap furtherthat reduces our liability exposure. California places a $250,000 limit on non-economic damages for medical malpractice cases. Non-economic damages are defined as compensation for pain, suffering, inconvenience, physical impairment, disfigurement and other non-pecuniary injury. The cap applies whether the case is for injury or death, and it allows only one $250,000 recovery in a wrongful death case. Non-economic damages are defined as compensation for pain, suffering, inconvenience, physical impairment, disfigurement and other non-pecuniary injury. No cap applies to economic damages. Other states in which we now operate do not have similar limitations and in those states we believe our insurance coverage to be sufficient.

14


10

Regulation

General

The healthcare industry is highly regulated, and we can give no assurance thatchanges in the regulatory environment in which we operate will not changecould significantly affect our operations in the future. Our ability to operate profitably will depend in part upon us, and the contracted radiology practices and their affiliated physicians, obtaining and maintaining all necessary licenses and other approvals, and operating in compliance with applicable healthcare regulations. We believe that healthcare regulations will continue to change. Therefore, we monitor developments in healthcare law and modify our operations from time to time as the business and regulatory environment changes.

Facilities Licensing and Certification Laws

Laws. Ownership, construction, operation, expansion and acquisition of diagnostic imaging facilitiescenters are subject to various federal and state laws, regulations and approvals concerning licensing of facilitiescenters and personnel. In addition, free-standing diagnostic imaging facilitiescenters that provide services not performed as part of a physicianphysician's office must meet Medicare requirements to be certified as an independent diagnostic testing facility before it can be authorized to bill the Medicare program. We have experienced a slowdown in the credentialing of our physicians over the last several years which has lengthened our billing and collection cycle.

Corporate Practice of Medicine

Medicine. In the states in which we operate, other than Florida and Arizona, a lay person or any entity other than a professional corporation or other similar professional organization is not allowed to practice medicine, including by employing professional persons or by having any ownership interest or profit participation in or control over any medical professional practice. The laws of such states also prohibit a lay person or a non-professional entity from exercising control over the medical judgments or decisions of physicians and from engaging in certain financial arrangements, such as splitting professional fees with physicians. We structure our relationships with the radiology practices, including the purchase of diagnostic imaging facilities,centers, in a manner that we believe keeps us from engaging in the practice of medicine, exercising control over the medical judgments or decisions of the radiology practices or their physicians, or violating the prohibitions against fee-splitting.

Government Healthcare Programs. We derive a substantial portion of our revenue from direct billings to governmental healthcare programs, such as Medicare and Medicaid, Fraud and Abuse – Federal Anti-kickback Statute

private health insurance companies and/or health plans, including but not limited to those participating in the Medicare Advantage program. During the year ended December 31, 2017,2023, approximately 20%23% of our net service revenue before provision for bad debt generated at our diagnostic imaging centers was derived from federal government sponsored healthcare programs (Medicare) and 3% from state sponsored programs (Medicaid).

As a result, any negative changes in governmental capitation or fee-for-service rates or methods of reimbursement for the services we provide could have a significant adverse impact on our revenue and financial results. Because governmental healthcare programs generally reimburse on a fee schedule basis rather than on a charge-related basis, we generally cannot increase our revenues from these programs by increasing our fees for the specified services. Moreover, if our costs increase, we may not be able to recover our increased costs from these programs.


Government payors have taken and may continue to take steps to control the cost, eligibility for, use, and delivery of healthcare services as a result of budgetary constraints, cost containment pressures and other reasons. We believe that these trends in cost containment will continue. These cost containment measures, and other market changes in non-governmental insurance plans have generally restricted our ability to recover, or shift to non-governmental payors, any increased costs that we experience. Our integrated care business and financial operations may be materially affected by these developments.
Medicare and Medicaid Fraud and Abuse – Federal Anti-kickback Statute. Federal law known as the Anti-kickback Statute prohibits the knowing and willful offer, payment, solicitation or receipt of any form of remuneration in return for, or to induce, (i) the referral of a person, (ii) the furnishing or arranging for the furnishing of items or services reimbursable under the Medicare, Medicaid or other governmental programs or (iii) the purchase, lease or order or arranging or recommending purchasing, leasing or ordering of any item or service reimbursable under the Medicare, Medicaid or other governmental programs. Enforcement of this anti-kickback law is a high priority for the federal government, which has substantially increased enforcement resources and is scheduled to continue increasing such resources. Noncompliance with the federal Anti-kickback Statute can result in exclusion from the Medicare, Medicaid or other governmental programs and civil and criminal penalties.

The Anti-kickback Statute is broad, and it prohibits many arrangements and practices that are lawful in businesses outside of the healthcare industry. Recognizing that the Anti-kickback Statute is broad and may technically prohibit many innocuous or beneficial arrangements within the healthcare industry,To create better clarity, the Office of the Inspector General of the U.S. Department of Health and Human Services (OIG) has issued regulations in July of 1991, which the Department has referred to as “safe harbors.” These safe harbor regulations set forth certain provisions"safe harbor" guidelines which if met in form and substance, will assure healthcare providers and other parties that they will not be prosecuted for violation of the Anti–kickback Statute. The OIG issued a final rule on November 20, 2020, as part of the Regulatory Sprint to Coordinated Care initiative by the U.S. Department of Health and Human Services that, among other things, established new "safe harbors" under the federal Anti-kickback Statute. Additional safe harbor provisions providing similar protections have been published intermittently since 1991. Our arrangements with physicians, physician practice groups, hospitals and other persons or entities who are in a position to refer may not fully meet the stringent criteria specified in the various safe harbors.Statute for certain value-based compensation arrangements. Although full compliance with these provisions ensures against prosecution under the federal Anti-kickback Statute, the failure of a transaction or arrangement to fit within a specific safe harbor does not necessarily mean that the transaction or arrangement is illegal or that prosecution under the federal Anti-kickback Statute will be pursued.

15


11


Although some of our arrangements may not fall within a safe harbor, we believe that such business arrangements do not violate the Anti-kickback Statute because we are careful to structure them to reflect fair value and ensure that the reasons underlying our decision to enter into a business arrangement comport with reasonable interpretations of the Anti-kickback Statute. However, even though we continuously strive to comply with the requirements of the Anti-kickback Statute, liability under the Anti-kickback Statute may still arise because of the intentions or actions of the parties with whom we do business. While we are not aware of any such intentions or actions, we have only limited knowledge regarding the intentions or actions underlying those arrangements. Conduct and business arrangements that do not fully satisfy one of these safe harbor provisions may result in increased scrutiny by government enforcement authorities such as the Office of the Inspector General.

Medicare and Medicaid Fraud and Abuse – Stark Law

Congress has placed significant legal prohibitions against physician referrals including theLaw. The Ethics in Patient Referral Act of 1989, which is commonly known as the Stark Law. The Stark Law, prohibits a physician from referring Medicare patients to an entity providing designated health services, as defined under the Stark Law, including, without limitation, radiology services in which the physician (or immediate family member) has an ownership or investment interest or with which the physician (or immediate family member) has entered into a compensation arrangement. The Stark Law also prohibits the entity from billing for any such prohibited referral. The penalties for violating the Stark Law include a prohibition on payment by these governmental programs and civil penalties of as much as $15,000 for each violation referral and $100,000 for participation in a circumvention scheme. The regulations governing the Stark Law were also recently amended as part of the Regulatory Sprint to Coordinated Care initiative. These new regulations, which among other things establish new exceptions for value-based arrangements, were published by the Centers for Medicare & Medicaid Services (CMS) on November 20, 2020. We believe that, although we receive fees under our service agreements for management and administrative services, we are not in a position to make or influence referrals of patients.

Under the Stark Law, radiology and certain other imaging services and radiation therapy services and supplies are services included in the designated health services subject to the self-referral prohibition. Such services include the professional and technical components of any diagnostic test or procedure using X-rays, ultrasound or other imaging services, CT, MRI, radiation therapy and diagnostic mammography services (but not screening mammography services). PET and nuclear medicine procedures are also included as designated health services under the Stark Law. The Stark Law, however, excludes from designated health services: (i) X-ray, fluoroscopy or ultrasound procedures that require the insertion of a needle, catheter, tube or probe through the skin or into a body orifice; (ii) radiology procedures that are integral to the performance of, and performed during, non-radiological medical procedures; and (iii) invasive or interventional radiology, because the radiology services in these procedures are merely incidental or secondary to another procedure that the physician has ordered.

The Stark Law provides that a request by a radiologist for diagnostic radiology services or a request by a radiation oncologist for radiation therapy, if such services are furnished by or under the supervision of such radiologist or radiation oncologist pursuant to a consultation requested by another physician, does not constitute a referral by a referring physician. If such requirements are met, the Stark Law self-referral prohibition would not apply to such services. The effect of the Stark Law on the radiology practices, therefore, will depend on the precise scope of services furnished by each such practice’s radiologists and whether such services derive from consultations or are self-generated.

We believe that, other than self-referred patients, all of the services covered by the Stark Law provided by the contracted radiology practices derive from requests for consultation by non-affiliated physicians. Therefore, we believe that the Stark Law is not implicated by the financial relationships between our operations and the contracted radiology practices. In addition, we believe that we have structured our acquisitions of the assets of existing practices, and we intend to structure any future acquisitions, so as not to violate the Anti-kickback Statute, and Stark Law and regulations.the regulations related to these laws. Specifically, we believe the consideration paid by us to physicians to acquire the tangible and intangible assets associated with their practices is consistent with fair value in arms’ length transactions and is not intended to induce the referral of patients or other business generated by such physicians. Should any such practice be deemed to constitute an arrangement designed to induce the referral of Medicare or Medicaid patients, then our acquisitions could be viewed as possibly violating anti-kickback and anti-referral laws and regulations. A determination of liability under any such laws could have a material adverse effect on our business, financial condition and results of operations.

Medicare and Medicaid Fraud and Abuse – General

General. The federal government embarked on an initiative to audit all Medicare carriers, which are the companies that adjudicate and pay Medicare claims. These audits are expected to intensify governmental scrutiny of individual providers. An unsatisfactory audit of any of our diagnostic imaging facilitiescenters or contracted radiology practices could result in any or all of the following: significant repayment obligations, exclusion from the Medicare, Medicaid or other governmental programs, and civil and criminal penalties.

Federal regulatory and law enforcement authorities have increased enforcement activities with respect to Medicare and Medicaid fraud and abuse regulations and other reimbursement laws and rules, including laws and regulations that govern our

12

activities and the activities of the radiology practices. The federal government also has increased funding to fight healthcare fraud and is coordinating its enforcement efforts among various agencies, such as the U.S. Department of Justice, the U.S. Department of Health and Human Services Office of Inspector General, and state Medicaid fraud control units. The government may investigate our or the radiology practices’ activities, claims may be made against us or the radiology practices and these increased enforcement activities may directly or indirectly have an adverse effect on our business, financial condition and results of operations.

16

State Anti-kickback and Physician Self-referral Laws

Laws. Many states have adopted laws similar to the federal Anti-kickback Statute.Statute and the Stark Law. Some of these state prohibitions apply to services and the referral of patients for healthcare services reimbursed by any source, not only the Medicare and Medicaid programs. Although we believe that we comply with both federal and state Anti-kickbackanti-kickback laws and self-referral laws, any finding of a violation of these laws could subject us to criminal and civil penalties or possible exclusion from federal or state healthcare programs. Such penalties would adversely affect our financial performance and our ability to operate our business.

Federal False Claims Act

Act. The federal False Claims Act provides, in part, that the federal government may bring a lawsuit against any person who it believes has knowingly presented, or caused to be presented, a false or fraudulent request for payment from the federal government, or who has made a false statement or used a false record to get a claim approved. The federal False Claims Act further provides that a lawsuit thereunder may be initiated in the name of the United States by an individual, a “whistleblower,” who is an original source of the allegations. The government has taken the position that claims presented in violation of the federal anti-kickback lawAnti-kickback Statute or Stark Law may be considered a violation of the federal False Claims Act. Penalties include civil penalties of not less than $5,500 and not more than $11,000 for each false claim, plus three times the amount of damages that the federal government sustained because of the act of that person.

Further, on May 20, 2009, President Obama signed into law the Fraud Enforcement and Recovery Act of 2009 (FERA), which greatly expanded the types of entities and conduct subject to the False Claims Act. Also, various states are considering or have enacted laws modeled after the federal False Claims Act. Under the Deficit Reduction Act of 2005, or DRA, states are being encouraged to adopt false claims acts similar to the federal False Claims Act, which establish liability for submission of fraudulent claims to the State Medicaid program and contain whistleblower provisions. Even in instances when a whistleblower action is dismissed with no judgment or settlement, we may incur substantial legal fees and other costs relating to an investigation. Future actions under the False Claims Act may result in significant fines and legal fees, which would adversely affect our financial performance and our ability to operate our business.

We believe that we are in compliance with the rules and regulations that apply to the federal False Claims Act as well as its state counterparts.

Healthcare Reform Legislation

Patient Protection and Affordable Care Act. Healthcare reform legislation enacted in the first quarter of 2010 by the Patient Protection and Affordable Care Act or PPACA, specifically requires the U.S. Department of Health and Human Services, in computing physician practice expense relative value units, to increase the equipment utilization factor for advanced diagnostic imaging services (such as MRI, CT and PET) from a presumed utilization rate of 50% to 65% for 2010 through 2012, 70% in 2013, and 75% thereafter. Excluded from the adjustment is low-technology imaging modalities such as ultrasound, X-ray and fluoroscopy.over a three year period. The Health Care and Education Reconciliation Act of 2010 (H.R. 4872), or Reconciliation Act, which was passed byfully implemented the Senate and approved by the President on March 30, 2010, amends the provision for higher presumed utilization of advanced diagnostic imaging services to a presumed rate of 75%. The higher utilization rate was fully implemented in the beginning of 2011, and replacedeliminating the phase-in approach provided in the PPACA. This utilization rate was further increased to 90% by the American Taxpayer Relief Act of 2012, (“ATRA”), effective as of January 1, 2014.

The aim of increased utilization of diagnostic imaging services is to spread the cost of the equipment and services over a greater number of scans, resulting in a lower cost per scan. These changes have precipitated reductions in federal reimbursement for medical imaging, and resultresulting in decreased revenuerevenues per scan for the scans we perform for Medicare beneficiaries. Other changes in reimbursement for services rendered by Medicare Advantage plans may also reduce the revenues we receive for services rendered to Medicare Advantage enrollees.

On November 8, 2016, Donald Trump was elected President of the United States and members of the Republican Party retained majority control over both the United States House of Representatives and the United States Senate. President Trump has repeatedly signaled his intent to repeal and replace the

The PPACA and members of the Republican Party in Congress have also advocated the repeal or modification of the PPACA. On January 20, 2017, President Trump signed an “Executive Order Minimizing the Economic Burden of the Patient Protection and Affordable Care Act Pending Repeal.” (the “PPACA Executive Order”). Under the PPACA Executive Order it is the policy of the Trump Administration to seek prompt repeal of the PPACA.

17

On December 22, 2017, President Trump signed into law the Act to provide for reconciliation pursuant to titles II and V of the concurrent resolution on the budget for fiscal year 2018 (originally introduced as the Tax Cuts and Jobs Act (the “TCJA”)). Among numerous changes to the tax code, the TCJA repealed the individual mandate tax penalty (the “Individual Mandate”), a PPACA provision that required individuals to pay additional taxes if he or she was uninsured during the year.

year (the "Individual Mandate"). On December 22, 2017, the Tax Cuts and Jobs Act was enacted which, among numerous changes to the tax code, repealed the Individual Mandate tax penalty. Repeal of the Individual Mandate may lead to more people being uninsured, and could raise premium rates for insured persons. Such a development as well as other changes to (or the full repeal of) the PPACA, could affect reimbursement, coverage, and utilization of diagnostic imaging services in ways that are currently unpredictable.

Other changes to the PPACA (whether through legislation or judicial action), including further rollbacks of the PPACA being sought by congressional and state members of the Republican Party, or expansion of the PPACA (including, but not limited to, the development of a "public option" that would compete with private insurers to offer coverage to both individuals and those with employer sponsored insurance) being sought by the Biden Administration, could have similarly unpredictable effects.

Health Insurance Portability and Accountability Act of 1996

1996. Congress enacted the Health Insurance Portability and Accountability Act of 1996, or HIPAA, in part, to combat healthcare fraud and to protect the privacy and security of patients’ individually identifiable healthcare information.  HIPAA, among other things, amends existing crimes and criminal penalties for Medicare fraud and enacts new federal healthcare fraud crimes, including actions affecting non-government healthcare benefit programs. Under HIPAA, a healthcare benefit program includes any private plan or contract affecting interstate


13

commerce under which any medical benefit, item or service is provided. A person or entity that knowingly and willfully obtains the money or property of any healthcare benefit program by means of false or fraudulent representations in connection with the delivery of healthcare services is subject to a fine or imprisonment, or potentially both. In addition, HIPAA authorizes the imposition of civil money penalties against entities that employ or enter into contracts with excluded Medicare or Medicaid program participants if such entities provide services to federal health program beneficiaries. A finding of liability under HIPAA could have a material adverse effect on our business, financial condition and results of operations.

Further, HIPAA requires healthcare providers and their business associates to maintain the privacy and security of individually identifiable protected health information (“PHI”). HIPAA imposes federal standards for electronic transactions, for the security of electronic health information and for protecting the privacy of PHI. The Health Information Technology for Economic and Clinical Health Act of 2009 (“HITECH”), signed into law on February 17, 2009, dramatically expanded, among other things, (1) the scope of HIPAA to now apply directly to “business associates,” or independent contractors who receive or obtain PHI in connection with providing a service to a covered entity, (2) substantive security and privacy obligations, including new federal security breach notification requirements to affected individuals, DHHS and prominent media outlets, of certain breaches of unsecured PHI, (3) restrictions on marketing communications and a prohibition on covered entities or business associates from receiving remuneration in exchange for PHI, and (4) the civil and criminal penalties that may be imposed for HIPAA violations, increasing the annual cap in penalties from $25,000 to $1.5 million per year.

In addition, many states have enacted comparable privacy and security statutes or regulations that, in some cases, are more stringent than HIPAA requirements. In those cases it may be necessary to modify our operations and procedures to comply with the more stringent state laws, which may entail significant and costly changes for us. We believe that we are in compliance with such state laws and regulations. However, if we fail to comply with applicable state laws and regulations, we could be subject to additional sanctions.

We believe that we are in compliance with the current HIPAA requirements, as amended by HITECH, and comparable state laws, but we anticipate that we may encounter certain costs associated with future compliance. Moreover, we cannot guarantee that enforcement agencies or courts will not make interpretations of the HIPAA standards that are inconsistent with ours, or the interpretations of our contracted radiology practices or their affiliated physicians. A finding of liability under the HIPAA standards may result in significant criminal and civil penalties. Noncompliance also may result in exclusion from participation in government programs, including Medicare and Medicaid. These actions could have a material adverse effect on our business, financial condition, and results of operations.

U.S. Food and Drug Administration or FDA

FDA. The FDA has issued the requisite pre-market approval for all of the MRI and CT systems we use.

18


Our mammography systems are regulated by the FDA pursuant to the Mammography Quality Standards Act of 1992, as amended by the Mammography Quality Standards Reauthorization Acts of 1998 and 2004 (collectively, the “MQSA”). All mammography facilitiescenters are required to meet the applicable MQSA requirements, including quality standards, be accredited by an approved accreditation body or state agency and certified by the FDA or an FDA-approved certifying state agency. Pursuant to the accreditation process, each facility providing mammography services must comply with certain standards that include, among other things, annual inspection of the facility's equipment, personnel (interpreting physicians, technologists and medical physicists) and practices.

Compliance with these MQSA requirements and standards is required to obtain Medicare payment for services provided to beneficiaries and to avoid various sanctions, including monetary penalties, or suspension of certification. Although the Mammography Accreditation Program of the American College of Radiology is an approved accreditation body and currently accredits all of our facilitiescenters which provide mammography services, and although we anticipate continuing to meet the requirements for accreditation, if we lose such accreditation, the FDA could revoke our certification. Congress has extended Medicare benefits to include coverage of screening mammography but coverage is subject to the facility performing the mammography meeting prescribed quality standards described above. The Medicare requirements to meet the standards apply to diagnostic mammography and image quality examination as well as screening mammography.

We do not believe that any further FDA approval is required in connection with the majority of equipment currently in operation or proposed to be operated.

Radiologist Licensing

Licensing. The radiologists providing professional medical services at our facilitiescenters are subject to licensing and related regulations by the states in which they provide services. As a result, we require BRMG and the other radiology groups with which we contract to require those radiologists to have and maintain appropriate licensure. We do not believe that such laws and regulations will either prohibit or require licensure approval of our business operations, although no assurances can be made that such laws and regulations will not be interpreted to extend such prohibitions or requirements to our operations.


14

Insurance Laws and Regulation

Regulation. States in which we operate have adopted certain laws and regulations affecting risk assumption in the healthcare industry, including those that subject any physician or physician network engaged in risk-based managed care to comply with applicable insurance laws and regulations. These laws and regulations may require physicians and physician networks to meet minimum capital requirements and other safety and soundness requirements. Implementing additional regulations or compliance requirements could result in substantial costs to the contracted radiology practices, limiting their ability to enter into capitated or other risk-sharing managed care arrangements and indirectly affecting our revenue from the contracted practices.

U.S. Federal Budget

We derive a substantial portion of our revenue from direct billings to governmental healthcare programs, such as Medicare and Medicaid, and private health insurance companies and/or health plans, including but not limited to those participating in the Medicare Advantage program. As a result, any negative changes in governmental capitation or fee-for-service rates or methods of reimbursement for the services we provide could have a significant adverse impact on our revenue and financial results.

Because governmental healthcare programs generally reimburse on a fee schedule basis rather than on a charge-related basis, we generally cannot increase our revenues from these programs by increasing the amount of charges for services. Moreover, if our costs increase, we may not be able to recover our increased costs from these programs. Government and private payors have taken and may continue to take steps to control the cost, eligibility for, use, and delivery of healthcare services as a result of budgetary constraints, cost containment pressures and other reasons. We believe that these trends in cost containment will continue. These cost containment measures, and other market changes in non-governmental insurance plans have generally restricted our ability to recover, or shift to non-governmental payors, any increased costs that we experience. Our integrated care business and financial operations may be materially affected by these developments.

Environmental Matters

Matters. The facilities we operate or manage generate hazardous and medical waste subject to federal and state requirements regarding handling and disposal. We believe that the facilities that we operate and manage are currently in compliance in all material respects with applicable federal, state and local statutes and ordinances regulating the handling and disposal of such materials. We do not believe that we will be required to expend any material additional amounts in order to remain in compliance with these laws and regulations or that compliance will materially affect our capital expenditures, earnings or competitive position.

19

Compliance Program

Program. We maintain a program to monitor compliance with federal and state laws and regulations applicable to healthcare entities. We have a compliance officer who is charged with implementing and supervising our compliance program, which includes the adoption of (i) Standards of Conduct for our employees and affiliates and (ii) a process that specifies how employees, affiliates and others may report regulatory or ethical concerns to our compliance officer. We believe that our compliance program meets the relevant standards provided by the Office of Inspector General of the Department of Health and Human Services.

An important part of our compliance program consists of conducting periodic audits of various aspects of our operations and that of the contracted radiology practices. We also conduct mandatory educational programs designed to familiarize our employees with the regulatory requirements and specific elements of our compliance program.

Item 1A.Risk Factors

If BRMG

General Economic and Industry Risks

Adverse changes in general domestic and worldwide economic conditions could adversely affect our operating results, financial condition, and liquidity.

We are subject to risk arising from adverse changes in general domestic and global economic conditions, including recession or anyeconomic slowdown and disruption of credit markets. Concerns about the systemic impact of potential long-term and wide-spread recession, inflation, energy costs, geopolitical issues, the availability and cost of credit have contributed to increased market volatility and diminished expectations for near-term growth in the United States and many global economies.

Continued turbulence in domestic and international markets and economies may adversely affect our liquidity and financial condition.Patients may transition work, leaving insurance programs, or defer non-emergency procedures, which could reduce overall demand for our services.A decline in global economic conditions could also have a significant impact on the financial condition and operations of our third party payors, contracting radiology groups, equipment manufacturers and other suppliers.

A downturn in the economic environment can also lead to increased risk of collection on our accounts receivable, impairment of goodwill, and increased risk of failure of financial institutions including insurance companies and derivatives counterparties. These and other economic events could materially adversely affect our business, results of operations, financial condition and stock price.

Increasing interest rates or disruption of credit markets could adversely affect our financial condition and liquidity.

In response to recent macroeconomic concerns, the United States and other western countries have implemented monetary policies focused on suppressing inflation, including increasing interest rates.We operate in an industry that requires significant amounts of capital to fund operations, particularly in the development or acquisition of diagnostic imaging centers and the acquisition of diagnostic imaging equipment.To meet these capital requirements, we have incurred various indebtedness including senior secured credit facilities and equipment leases.


15

Most of our indebtedness is borrowed under terms with variable interest rates.We have purchased, and may in the future purchase, forward swaps or other derivative instruments designed to mitigate the risk of changes in interest rates.The use of such hedging activities may not be effective to offset any, or more than a portion, of the adverse financial effects of unfavorable movements in interest rates over the limited time the hedges are in place.If these market conditions continue, we may experience increased expenses associated with borrowing and resulting decreases in profitability.Moreover, continued disruption in credit markets could render it more difficult for us to timely replace maturing liabilities or to expand credit facilities, which would adversely affect our liquidity and financial condition.

Our labor costs have been, and we expect will continue to be, adversely affected by competition for staffing, the shortage of experienced healthcare professionals, and regulatory activity including changes in minimum wage laws.

Our operations are dependent on the availability, efforts, abilities and experience of management and medical support personnel. We compete with other healthcare providers in recruiting and retaining qualified employees; however, over the past several years, the healthcare industry has faced considerable workforce challenges, including shortages of skilled personnel and increased wage competition. In some of the regions in which we operate, state or municipalities increased the applicable minimum wage, which has created more competition and, in some cases, higher labor costs. If prevailing wages continue to be driven higher, we could suffer increased employee turnover and increased costs, adversely affecting our business.

We have a substantial number of employees who are paid on a part-time or per diem basis. In 2023, California mandated minimum wage increases for certain industries, including ours. As a result, we will experience increased compensation costs for certain of our employees and vendors beginning in 2024. As minimum wage rates increase, related laws and regulations change, and/or inflationary or other pressures increase wage rates, we and our partners may need to increase not only the wage rates of minimum wage employees, but also the wages paid to other hourly or salaried employees. If other states adopt similar minimum wage increases, the effect on our cost of operations would be compounded. In addition, we expect that inflationary pressures will continue to impact our salaries, wages, benefits and other costs.

Because the majority of our services are performed under multi-year contracted rates with commercial insurance companies or through government programs such as Medicare and Medicaid, we may be unable to offset these increased labor costs. Any such increase in costs, without an attendant increase in revenues or offsetting increase in operating efficiency, would reduce profitability and cash flows.

We face various risks related to health epidemics and other outbreaks, which may have a material adverse effect on our business, financial condition, results of operations and cash flows.

We face various risks related to health epidemics and other outbreaks, that have emerged and could emerge in the future, including:

•restrictions intended to slow the spread of outbreaks, including quarantines, government-mandated actions, stay-at-home orders and other restrictions, have led and may in the future lead to periods where our imaging procedure volumes drop significantly;
•disruptions in supply chains can affect the cost and availability of reagents and other materials needed for certain procedures;
•significant portions of our workforce may be unable to work due to illness, quarantines, facility closures, ineffective remote work arrangements or technology failures or limitations;
•general economic downturns as a result of outbreaks may affect demand or pricing for our services; and
•volatility in the global capital markets may result in a decrease in the price of our common stock, or an increase in our cost of capital.

Business interruptions due to natural disasters or other external events beyond our control can adversely affect our business, financial condition or results of operations.

Our operations can be impacted by external events beyond our control, such as the effects of earthquakes, fires, floods, severe weather, public health issues, power failures, telecommunication loss, and other natural and man-made events, some of which may be intensified by the effects of climate change and changing weather patterns. Our corporate headquarters and over 100 of our radiology centers are located in California, which is subject to wildfires, blackouts, and potentially damaging earthquakes. In addition, several of our imaging centers located in parts of the east coast have suffered from weather events that caused us to temporarily close centers.These or other similar events could cause disruption or interruption to our operations and significantly impact our employees.


16

Any disruption to our services may result in decreases in revenues or increased operating and capital expenses.Historically, when we have experienced a reduction in business due to inclement weather or external events for a period of time, our operations have returned to a normalized level, but we have not experienced a significant increase of procedures that would fully compensate for the revenues lost during the slower periods.

Changes in the method or rates of third-party reimbursement could have a negative impact on our results
A significant portion of our business is derived from federal and state reimbursement programs such as Medicare or Medicaid. From time to time those programs implement changes designed to contain healthcare costs, some of which have resulted in decreased reimbursement rates for diagnostic imaging services that impact our business. On November 16, 2023, Centers for Medicare and Medicaid Services (“CMS”) released the 2023 Medicare Physician Fee Schedule final rule, which contained significant payment reductions for radiology services, effective January 1, 2024, largely as a result of changes to relative value units, redistributive effects of the CMS proposed clinical labor pricing update and statutorily mandated budget neutrality rules. The January 18, 2024 continuing resolution passed by Congress and signed into law by President Biden did not contain provisions to stop or mitigate these reimbursement cuts. Furthermore, absent further and more permanent intervention from Congress, CMS could propose and impose similar or more significant reimbursement cuts in the months and years ahead.

One of the principal objectives of health maintenance organizations and preferred provider organizations is to control the cost of healthcare services. Managed care contracting has become very competitive, and reimbursement schedules are at or below Medicare reimbursement levels. The expansion of health maintenance organizations, preferred provider organizations and other managed care organizations within the geographic areas covered by our network could have a negative impact on the utilization and pricing of our services, because these organizations will exert greater control over patients’ access to diagnostic imaging services, the selections of the provider of such services and reimbursement rates for those services. Relatedly, reimbursement rate cuts may be pursued as a cost-saving measure by third party payors resulting from the implementation of the federal No Surprises Act (H.R. 133) and similar insurer-provider payment dispute laws, which also may negatively impact our revenue.

Any reduction in the rate that we can charge for our imaging services under these programs will reduce our net revenues and our operating margins per procedure under those reimbursement programs. Unless we can secure additional procedure volumes, increase utilization of our equipment, or change the overall mix of service procedures that we provide, a decline in reimbursement rates will reduce our net revenues and results of operations.

We experience competition from other diagnostic imaging companies and hospitals, and this competition could adversely affect our revenue and business.
The market for diagnostic imaging services is highly competitive. We compete for patients principally on the basis of our reputation, our ability to provide multiple modalities at many of our centers, the location of our centers and the quality of our diagnostic imaging services. Our competitors include independent imaging operators, such as Akumin, Inc., and smaller regional operators, as well as hospitals, clinics and radiology groups that operate their own imaging equipment. Some of our competitors may have, now or in the future, access to greater financial resources than we do and may have access to newer, more advanced equipment. If we are unable to successfully compete, our business and financial condition would be adversely affected.

Technological change in our industry could reduce the demand for our services and require us to incur significant costs to upgrade our equipment.
The development of new technologies or refinements of existing modalities may require us to upgrade and enhance our existing equipment before we may otherwise intend. Many companies currently manufacture diagnostic imaging equipment. Competition among manufacturers for a greater share of the diagnostic imaging equipment market may result in technological advances in the speed and imaging capacity of new equipment. In addition, advances in technology may enable physicians and others to perform diagnostic imaging procedures without us.

Our scale in both the number of our locations and the number and types of imaging equipment we offer is one of our competitive advantages. If the development of new technologies accelerates the obsolescence of our current equipment, we may lose some of our competitive advantage. We may also be required to accelerate the depreciation on existing equipment and incur significant capital expenditures to acquire the new technologies. We may not have the financial ability to acquire the new or improved equipment and may not be able to maintain a competitive equipment base.


17

Business Risks

If our contracted radiology practices terminate their agreements with us, our business could substantially diminish.

Our relationshipbusiness is substantially dependent on the radiology groups that we contract with BRMG is an integral part ofto provide medical services at our business. Through our management agreement, BRMG providesimaging centers. The radiology groups are party to substantially all of the professional medical services at 127managed care contracts from which we derive revenue. Under the terms of our 132 California facilities. Professional medical services are provided at our other facilities through management contracts with IA,agreements, the NY Groups, and other radiology groups. BRMG and these other radiology groups contract with various other independent physicians and physician groups to provide all of the professional medical services at most of our facilities, and they mustare required use their best efforts to provide the professional medical services at our centers as well as any new facilitiescenters that we open or acquire in their areas of operation. In addition, BRMG and the other radiology groups’ strong relationships with referring physicians are largely responsible for the revenue generated at the facilities they service. Although our management agreement with BRMG runs until 2024, with automatic renewals for 10-year periods, and our management agreements with other groups are also for multiple years, BRMG and the other radiology groups have the right to terminate the agreements if we default on our obligations and fail to cure the default. Also, the various radiology groups’ ability to continue performing under the management agreements may be curtailed or eliminated due to the radiology groups’ own financial difficulties, loss of physicians or other circumstances.

If theany of our contracted radiology groups cannot perform their obligations to us, we would need to contract with one or more other radiology groups to provide the professional medical services at the facilities serviced by the group.services. We may not be able to locate radiology groups willing to provide those services on terms acceptable to us, if at all. Even if we were able to do so, anyIn addition, the radiology group’s relationships with referring physicians are largely responsible for the revenue generated at the centers they service. Any replacement radiology group’s relationships with referring physicians may not be as extensive as those of the terminated group. The termination of a management agreement with a radiology group could result in both short and long-term loss of revenue and adversely affect our performance and competitive position in the markets served by the departing radiology group.

Each of the Group and our third party contracted radiology practices has entered into agreements with its physician shareholders and full-time employed radiologists that generally prohibit those shareholders and radiologists from competing for a period of two to five years within defined geographic regions after they cease to be owners or employees, as applicable. In any such event, ourcertain states, like California, a covenant not to compete is enforced in limited circumstances involving the sale of a business. In other states, a covenant not to compete will be enforced only:
•to the extent it is necessary to protect a legitimate business could be seriously harmed. In addition,interest of the radiology groups are party seeking enforcement;
•if it does not unreasonably restrain the party against whom enforcement is sought; and
•if it is not contrary to substantiallypublic interest.
Enforceability of a non-compete covenant is determined by a court based on all of the managed care contracts from which we derive revenue. If we were unable to readily replace these contracts, our revenue would be negatively affected.

We may experience risks associated with our strategic partnership with Imaging Advantage LLC

In December 2015, we entered into a multi-year strategic relationship with Imaging Advantage LLC. Under the terms of such agreement, we have agreed to collaborate to deploy innovative models of delivering radiology services. While we expect this strategic relationship to increase our profitabilityfacts and expand our operations, we may never realize the anticipated benefits of such relationship.

Our ability to generate revenue depends in large part on referrals from physicians.

We derive substantially all of our net revenue, directly or indirectly, from fees charged for the diagnostic imaging services performed at our facilities. We depend on referrals of patients from unaffiliated physicians and other third parties who have no contractual obligations to refer patients to us for a substantial portioncircumstances of the services we perform. Ifspecific case at the time enforcement is sought. For this reason, it is not possible to predict whether or to what extent a sufficiently large numbercourt will enforce the contracted radiology practices’ covenants. The inability of these physiciansthe contracted radiology practices or us to enforce a radiologist’s non-compete covenants could result in increased competition from individuals who are knowledgeable about our business strategies and other third parties were to discontinue referring patients to us, our scan volume could decrease, which would reduce our net revenue and operating margins. Further, commercial third-party payors have implemented programs that could limitoperations.

We are dependent on the ability of physicians to refer patients to us. For example, prepaid healthcare plans, such as health maintenance organizations, sometimes contract directly with providers and require their enrollees to obtain these services exclusively from those providers. Some insurance companies and self-insured employers also limit these services to contracted providers. These “closed panel” systems are now common in the managed care environment. Other systems create an economic disincentive for referrals to providers outside the system’s designated panel of providers. If we are unable to compete successfully for these managed care contracts, our results and prospects for growth could be adversely affected.

20

If our contracted radiology practices, including BRMGthe Group, to hire and the NY Groups, lose a significant number of their radiologists, our financial results could be adversely affected.

retain qualified radiologists.


At times, there has been a shortage of qualified radiologists in some of the regional markets we serve. In addition, competitionCompetition in recruiting radiologists may make it difficult for our contracted radiology practices to maintain adequate levels of radiologists. If a significant number of radiologists terminate their relationships with our contracted radiology practices and those radiology practices cannot recruit sufficient qualified radiologists to fulfill their obligations under our agreements with them, our ability to maximize the use of our diagnostic imaging facilitiescenters and our financial results could be adversely affected.

We are experiencing tighter labor conditions in some of the markets we serve. As a result our contracting radiological practices have experienced increased salary and professional services expenses. Increased expenses to BRMG andfor the NY Groups will impactcontracting radiological practices, including the Group, impacts our financial results because the management fee we receive from BRMG and the NY Groups,them, which is based on a percentage of their collections, is adjusted annually to take into account the expenses of BRMG or the NY Groups, as applicable.their expenses. Neither we, nor our contracted radiology practices, maintain insurance on the lives of any affiliated physicians.


Our ability to generate revenue depends in large part on referrals from physicians.
A significant portion of the services that we perform are derived from patient referrals from unaffiliated physicians and other third parties. Those physicians and other third parties do not have any contractual obligation to refer patients to us. If a sufficiently large number of these physicians and other third parties were to discontinue referring patients to us, our imaging procedure volume would decrease, which would reduce our net revenue and operating margins.

Further, commercial third-party payors have implemented managed care programs that could limit the ability of physicians to refer patients to us. For example, health maintenance organizations sometimes contract directly with providers

18

and require their enrollees to obtain these services exclusively from those contracted providers. Some insurance companies and self-insured employers also limit these services to contracted providers. These “closed panel” systems are now common in the managed care environment. Other systems such as preferred physician organizations create an economic disincentive for referrals to providers outside the system’s designated panel of providers. We seek to be the designated provider under these systems. If we are unable to compete successfully for these managed care contracts, our net revenues and our prospects for growth could be adversely affected.

We may become subject to professional malpractice liability, which could be costly and negatively impact our reputation and business.

The physicians employed by our contracted radiology practicesgroups are from time to time subject to malpractice claims. We structure our relationships withUnder the practices underterms of our management agreements with those radiology groups, we structure the relationship in a manner that we believe does not constitute theour practice of medicine, by us or subject us to professional malpractice claims for acts or omissions of physicians employed by the contracted radiology practices. Nevertheless, claims suits or complaints relating to services provided by the contracted radiology practices have been asserted against us in the past and may be asserted against us in the future. In addition, we may be subject to other professional liability claims, including without limitation, for improper use or malfunction of our diagnostic imaging equipment, or for accidental contamination, or injury from exposure to radiation.
We may not be ableseek to maintain adequate liability insurance to protect us against those claims at acceptable costs or at all.

Historically, we have sought to managemitigate this risk through the purchase of loss by, among other things, purchasing professional liability insurance. However, the insurer from which we purchased such insurance for the period ending July 15, 2017, Fairway Physicians Insurance Company, A Risk Retention Group (“Fairway”), recently experienced financial hardship.  As a result, on August 29, 2017, the District of Columbia Department of Insurance, Securities and Banking (“DISB”) found that Fairway was statutorily insolvent and that its continued operation would be hazardous to its policyholders, creditors and the general public.  On October 25, 2017, the Superior Court for the District of Columbia issued an order authorizing the DISB Commissioner to liquidate Fairway.  Fairway’s liquidation is currently pending, and it is presently unknown whether the Fairway liquidation estate will be able to pay covered policyholder claims, including claims asserted against us.

Any claim made against us that is not fully covered by insurance could be costly to defend, result in a substantial damage award against us and divert the attention of our management from our operations, all of which could have an adverse effect on our financial performance. In addition, successful claims against us may adversely affect our business or reputation. Although California places a $250,000 limit on non-economic damages for medical malpractice cases, no limit applies to economic damages and no such limits exist in the other states in which we provide services.

We may not receive payment from some of our healthcare provider customers because of their financial circumstances.

We contract with commercial insurance and managed care providers to provide diagnostic imaging services to their members. Some of our healthcare provider customers do not have significant financial resources, liquidity or access to capital. If these customers experience financial difficulties they may be unable to pay us for the equipment and services that we provide. A significant deterioration in general or local economic conditions could have a material adverse effect on the financial health of certain of our healthcare provider customers. As a result, we may haveIf our health care provider customers suffer financial hardship they could delay or default on their payment obligations to increase the amounts ofus, reducing our accounts receivables that we write-off, which would adversely affectreceivable and negatively impacting our financial condition and results of operations.


Capitation fee arrangements could reduce our operating margins.

For the year ended December 31, 2017,2023, we derived approximately 11.5%9% of our total net service fee revenue before provision for bad debt from capitation arrangements, and we intendexpect to increase thecontinue to derive a significant portion of our revenue we derive from capitation arrangements in the future. Under capitation arrangements, the payor pays us a pre-determined amount per-patient per-month, and in exchange for us providingwe are required to provide all necessary covered services to the patients covered under the arrangement. These contracts pass much of the financial risk of providing diagnostic imaging services, including the risk of over-use, from the payor to us as the provider. Our success depends in partability to generate profit from these arrangements is dependent on our ability to negotiate effectively, on behalf of the contracted radiology practices and our diagnostic imaging facilities, contracts with health maintenance organizations, employer groups and other third-party payorscorrectly forecast demand for services to be provided on a capitated basisfor the patient base, negotiate appropriate pre-determined amounts with the payor and to efficiently manage the utilization of those services. If we are not successful in managing the utilization of services under these capitation arrangements or ifforecasting demand patients or enrollees covered by these contracts require more frequent or extensive care than anticipated, or if we are not efficient in managing the utilization of services under these capitation arrangements, we would incur unanticipated costs not offset by additional revenue, which would reduce operating margins.

21


Changes

Cybersecurity threats and other disruption or malfunction in our information technology systems could adversely affect our business.
We rely on information technology systems to process, transmit and store electronic information including legally-protected personal information, such as diagnostic image results and other patient health information, credit card and other financial information, insurance information, and personally identifiable information. A significant portion of the communication between our personnel, patients, business partners, and suppliers depends on information technology. We rely on our information systems to perform functions critical to our ability to operate, including patient scheduling, billing, collections, image storage and image transmission. We also use information technology systems and networks in our operations and supporting departments such as research and development, marketing, accounting, finance, and human resources. The future success and growth of our business depends on streamlined processes made available through information systems, global communications, internet activity and other network processes.
Our information technology system is vulnerable to damage or interruption from:

19


•Cybersecurity attacks and breaches, ransomware and computer viruses, coordinated attacks by hackers, activist entities, organized criminal threat actors, and nation-state sponsored actors, seeking to disrupt operations or misappropriate information;
•technology service provider outages and technology supply chain cyber-security weaknesses;
•power losses, computer systems failures, internet and telecommunications or data network failures, operator negligence, improper operation by or supervision of employees, physical and electronic losses of data and similar events;
•earthquakes, fires, floods and other natural disasters; and
•acts of vandalism or theft, misplaced or lost data, programming or human errors and similar events.

Cybersecurity threats are constantly changing, increasing the difficulty of successfully defending against them or implementing adequate preventive measures. While we maintain multiple layers of security measures and are continuously enhancing our security technologies to address new threats, emerging and advanced cybersecurity threats, including coordinated attacks, require additional layers of security which may disrupt or impact efficiency of operations. We have in the methodpast experienced unauthorized access to our network and could again face attempts by others to gain unauthorized access to information or ratesto introduce malicious software to disrupt the operation of third-party reimbursementour information technology systems. While management is not aware of a cybersecurity incident that has had a material effect on our operations, there can be no assurances that a cybersecurity incident that could have a material impact on us will not occur in the future.

In particular, severe ransomware attacks are becoming increasingly prevalent and can lead to significant interruptions in our operations, loss of sensitive data and income, reputational harm, and diversion of funds. A successful ransomware or similar attack could disrupt or limit our ability to operate and generate revenue for an extended period of time including our ability to retrieve patient records, schedule imaging procedures, store and transmit diagnostic images, bill payors or patients, provide customer assistance services, conduct research and development activities, collect, process and prepare company financial information, and manage the administrative aspects of our business, any of which could materially adversely affect our business. Extortion payments may alleviate the negative impact on our results

From time to time, changes designed to contain healthcare costs have been implemented, some of which have resulted in decreased reimbursement rates for diagnostic imaging services that impact our business. For services for which we bill Medicare directly, we are paid undera ransomware attack, but there is the Medicare Physician Fee Schedule, which is updated on an annual basis. Under the Medicare statutory formula, payments under the Physician Fee Schedule would have decreased for the past several years if Congress failed to intervene.

Medicare program reimbursements for physician services as well as other services to Medicare beneficiaries who are not enrolled in Medicare Advantage plans are based upon the fee-for-service rates set forth in the Medicare Physician Fee Schedule, which relies, in part, on a target-setting formula system called the Sustainable Growth Rate or SGR. Each year, on January 1st, the Medicare program updates the Medicare Physician Fee Schedule reimbursement rates. Many private payors use the Medicare Physician Fee Schedule to determine their own reimbursement rates.

On April 16, 2015, President Obama signed into law the Medicare Access and CHIP Reauthorization Act (H.R. 2), which provides for sweeping changes to how Medicare pays physicians, as well as averts the 21% reduction to Medicare payments under the Medicare Physician Fee Schedule that was scheduled to take effect on April 1, 2016. H.R. 2, among other things, repealed the SGR formula. The SGR formula was enacted in 1997 and was linked to the growth in the U.S. gross domestic product, which led Congress to repeatedly intervene to mitigate the negative reimbursement impact associated with it. H.R. 2 provides that for services paid under the physician fee schedule and furnished during calendar years 2016 through 2019, Medicare’s payment rates will increase by 0.5% per year over calendar year 2015. Fees will remain at the 2019 level through 2025, but providers have the ability to participate in the Quality Payment Program (“QPP”) and have the opportunity for additional payments. Under one track, incentive payments will be based upon participating in an innovative payment model (e.g., participating in the Medicare Shared Savings Program), and under the other track, incentive payments will be based upon quality, resource use, clinical practice improvement activities and meaningful use of electronic health record technology. Givenrisk that the QPP remains under CMS’ continued development,threat actor may not destroy the stolen information and we cannot determine the impact ofmay be unwilling or unable to make such payments models on our business at this time. However,due to, for example, applicable laws or regulations prohibiting such payments.


Any such interruption in general, shifting to value-based care may decrease our revenueaccess, improper access, disclosure, modification, or other loss of information could result in legal claims or proceedings, liability or penalties under laws and require us to invest heavily in new IT infrastructure and analytic tools.

In 2013, Congress adjusted Medicare payment rates for physician imaging services in an attempt to better reflect actual usage, by revising upwardregulations that protect the assumed usage rate for diagnostic imaging equipment costing more than $1 million to 90% effective January, 1, 2014. Additionally, underprivacy of personal information, such as HIPAA, European data privacy regulations, such as the Protecting Access to Medicare Act of 2014 (“PAMA”), Congress introduced a new quality incentive program that, effective January 1, 2016, reduces Medicare payment for certain CT services reimbursed throughGeneral Data Protection Regulation, or GDPR, or state privacy regulations, such as the Medicare Physician Fee Schedule that are furnished using equipment that does not meet certain dose optimization and management standards. Other changes in reimbursement for services rendered by Medicare Advantage plans may reduce the revenues we receive for services rendered to Medicare Advantage enrollees.

Pressure to control healthcare costs could have a negative impact on our results.

One of the principal objectives of health maintenance organizations and preferred provider organizations is to control the cost of healthcare services. Healthcare providers participating in managed care plansCalifornia Consumer Privacy Act. We may be required to refer diagnostic imaging testscomply with state breach notification laws or become subject to certain providers depending on the plan in which a covered patient is enrolled. In addition, managed care contracting has become very competitive,mandatory corrective action.


Responding to such incidents could require us to incur significant costs related to rebuilding internal systems, defending against litigation, responding to regulatory inquiries or actions, paying damages, complying with consumer protection laws or taking other remedial steps with respect to third parties. If our data storage system was compromised, it could also give rise to unwanted media attention, materially damage our payor and reimbursement schedules are at or below Medicare reimbursement levels. The expansion of health maintenance organizations, preferred provider organizationsphysician relationships, and other managed care organizations within the geographic areas covered byharm our network could have a negative impact on the utilization and pricing ofbusiness reputation.While we maintain cyber liability insurance, our services, because these organizations will exert greater control over patients’ accessinsurance may not be sufficient to diagnostic imaging services, the selections of the provider of such services and reimbursement rates for those services.

We experience competition from other diagnostic imaging companies and hospitals, and this competition could adversely affect our revenue and business.

The market for diagnostic imaging services is highly competitive. We compete for patients principally on the basis of our reputation, our ability to provide multiple modalities at many of our facilities, the location of our facilities and the quality of our diagnostic imaging services. We compete locally with groups of radiologists, established hospitals, clinics and other independent organizations that own and operate imaging equipment. Our competitors include the privately held Alliance Healthcare Services, Inc., to the extent it sells diagnostic imaging services directly to outpatients, Diagnostic Imaging Group, and several smaller regional competitors. Some of our competitorsprotect against all losses we may now or in the future have access to greater financial resources than we do and may have access to newer, more advanced equipment. In addition, some physician practices have established their own diagnostic imaging facilities within their group practices and compete with us. We are experiencing increased competition as a result of such activities, andincur if we are unable to successfully compete, our business and financial condition would be adversely affected.

22
suffer significant or multiple attacks.


Our success depends in part on our key personnel and loss of key executives could adversely affect our operations. In addition, former employees and radiology practices we have previously contracted with could use the experience and relationships developed while employed or under contract with us to compete with us.

Our success depends in part on our ability to attract and retain qualified senior and executive management, and managerial and technical personnel. Competition in recruiting these personnel may make it difficult for us to continue our growth and success. The loss of their services or our inability in the future to attract and retain management and other key personnel could hinder the implementation of our business strategy. The loss of the services of Dr. Howard G. Berger, our President and Chief Executive Officer, and Norman R. Hames or Stephen M. Forthuber, our Presidents and Chief Operating Officers, West Coast and East Coast, respectively, could hinder our ability to execute our business strategy and have a significant negative impact on our operations. We believe that they could not easily be replaced with executives of equal experience and capabilities. We do not maintain key person insurance on the life of any of our executive officers. Additionally, if we lose the services of Dr. Berger, our relationship with BRMG could deteriorate,capabilities, which would materially adversely affect our business.

Many of the states in which we operate do not enforce agreements that prohibit a former employee from competing with a former employer. As a result, many


The future growth of our employees whose employmentimaging business is terminated are freepartially dependent on our ability to compete with us, subjectcontinue to prohibitions on the use of trade secret informationsuccessfully integrate acquired businesses.
Historically, we have experienced substantial growth through acquisitions that have increased our size, scope and depending on the terms of the employee’s employment agreement, on solicitation of existing employees and customers (if enforceable). A former executive, manager or other key employee who joins onegeographic distribution of our competitors could useimaging center business. During the relationships he or she established with third party payors, radiologists or referring physicians whilepast three fiscal years, we have completed acquisitions that have added 45 centers to our employee and the industry knowledge he or she acquired during that tenure to enhance the new employer’s ability to compete with us.

The agreements with most of our radiology practices contain non-compete provisions; however the enforceability of these provisions is determined by a court based on all the facts and circumstances of the specific case at the time enforcement is sought. Our inability to enforce radiologists’ non-compete provisions could result in increased competition from individuals who are knowledgeable about our business strategies and operations.

Our failure to successfully, and in a timely manner, integrate similar businesses and/or new lines of businesses we acquire could reduce our profitability.

fixed-site outpatient diagnostic imaging services.

We may never realize expected synergies business opportunities and growth prospects in connection with our acquisitions and joint ventures. We may not be able toor capitalize on expected business opportunities in connection with an acquisition. Moreover, assumptions underlying estimates of expected cost savings may be inaccurate, or general industry and business conditions may deteriorate. In addition, integratingIntegrating operations will requirerequires significant efforts and expensesexpense on our part. Personnel may leave or be terminated because of an acquisition. Our

20

management may have its attention diverted while trying to integrate an acquisition. Personnel may leave or be terminated because of an acquisition. If these factors limit our ability to integrate the operations of an acquisition successfully or on a timely basis, our expectations of future results of operations, including certain cost savings and synergies as a result of the acquisition, may not be met. In addition,
We may not generate the expected benefits from our investment in AI technologies or other new lines of business.

We believe that technology advancements including AI will significantly impact diagnostic imaging services in the future. As part of our growth and operating strategies for a target’s business may be different from the strategies that the target company pursued prior to our acquisition. If our strategies are not the proper strategies, they could have a material adverse effect on our business, financial condition and results of operations.

In the paststrategy we have acquired or invested in a number of AI companies and technologies, including DeepHealth, Inc., NuLogix Health, Inc., WhiteRabbit.ai, Aidence Holding B.V. and Quantib B.V. with the expectation that these AI technologies can be developed into solutions that enhance the quality of outcomes for patients via improved diagnostic imaging, reduce operating costs, and correspondingly improve our competitive position. However, the success of our AI investments will depend upon a number of factors, some of which are out of our control, such as:


•our ability to effectively integrate the operations of the acquired companies, including retaining key personnel;
•the timeline and related expenses associated with applying for regulatory approvals necessary for commercialization;
•whether any of our existing or future AI products will receive European CE or U.S. FDA 510(k) clearance or other clearances and or regulatory approvals necessary for commercialization;
•whether our AI solutions will prove effective for improving health care quality, patient services or business procedures;
•our ability to successfully commercialize and secure market acceptance of our AI solutions from patients and health care providers; and
•the development of competing technologies by other companies, and the relative efficacy, cost and ease of use of those technologies.

There is no guarantee that we will receive the anticipated benefits from the investments we have made and may againcontinue to make in the area of AI. Any failure would result in reduced operating profits and the potential impairment of goodwill related to those investments, which would further impact our profitability.

In the future we may acquire companies that create a new line of business. The process of integrating the acquired business, technology, service and research and development component into our business and operations and entry into a new line of business in which we are inexperienced may result in unforeseen operating difficulties and expenditures. In developing a new line of business, we may invest significant time and resources that take away the attention of management that would otherwise be available for ongoing development of our business which may affect our results of operations and we may not be able to take full advantage of the business opportunities available to us as we expand a new lines of business. In addition, there can be no assurance that our new lines of business will ultimately be successful. The failure to successfully manage these risks in the development and implementation of new lines of business could have a material, adverse effect on the Company’s business, financial condition, and results of operations.

23

We may not be able to successfully grow our business, which would adversely affect our financial condition and results of operations.

Historically, we have experienced substantial growth through acquisitions that have increased our size, scope and geographic distribution. During the past two fiscal years, we have completed 8 acquisitions. These acquisitions have added 13 centers to our fixed-site outpatient diagnostic imaging services. Our ability to successfully expand through acquiring facilities, developing new facilities, adding equipment at existing facilities, and directly or indirectly entering into contractual relationships with high-quality radiology practices depends upon many factors, including our ability to:

·identify attractive and willing candidates for acquisitions;

·identify locations in existing or new markets for development of new facilities;

·comply with legal requirements affecting our arrangements with contracted radiology practices, including state prohibitions on fee-splitting, corporate practice of medicine and self-referrals;

·obtain regulatory approvals where necessary and comply with licensing and certification requirements applicable to our diagnostic imaging facilities, the contracted radiology practices and the physicians associated with the contracted radiology practices;

·recruit a sufficient number of qualified radiology technologists and other non-medical personnel;

·expand our infrastructure and management; and

·compete for opportunities.

We may not be able to compete effectively for the acquisition of diagnostic imaging facilities. Our competitors may have more established operating histories and greater resources than we do. Competition may also make any acquisitions more expensive.

Managing our recent acquisitions, as well as any other future acquisitions, will entail numerous operational and financial risks, including:

·inability to obtain adequate financing;

·failure to achieve our targeted operating results;

·diversion of management’s attention and resources;

·failure to retain key personnel;

·difficulties in integrating new operations into our existing infrastructure; and

·amortization or write-offs of acquired intangible assets, including goodwill.

If we are unable to successfully grow our business through acquisitions it could have an adverse effect on our financial condition and results of operations. Further we cannot ensure we will be able to receive the required regulatory approvals for any future acquisitions, expansions or replacements, and the failure to obtain these approvals could limit the market for our services and have an adverse effect on our financial condition and results of operations.

We have experienced operating losses in the past. If we are unable to continue to generate sufficient income, we may be unable to pay our obligations.

We had income before taxes of $26.4 million, $12.4 million, and $14.6 million for the years ended December 31, 2017, 2016, and 2015 respectively. As of December 31, 2017, our equity was $69.9 million. As a whole, results have shown improvement over the past three years. However, if we cannot continue to generate income in sufficient amounts, we will not be able to pay our obligations as they become due, which could adversely impact our business, financial condition, and results of operations.

24


Our substantial debt

Healthcare and Regulatory Risks

The regulatory framework in which we operate is continually evolving.
Although we believe that we are operating in compliance with applicable federal and state laws, neither our current or anticipated business operations nor the operations of our contracted radiology practices have been the subject of judicial or regulatory interpretation. We cannot assure you that a review of our business by courts or regulatory authorities will not result in a determination that could adversely affect our financial conditionoperations. In addition, healthcare laws and prevent usregulations may change significantly in the future in a way that restricts our operations. We continuously monitor these developments and modify our operations from fulfillingtime to time as the regulatory environment changes. We cannot assure you, however, that we will be able to adapt our obligations under our outstanding indebtedness.

Our current substantial indebtedness and any future indebtedness we incur couldoperations to address new regulations or that new regulations will not adversely affect our financial condition. We are highly leveraged. As of December 31, 2017, our total combined indebtedness of term loans, capital leases and notes payable, excluding discount on term loan debt, was $627.6 million, $620.3 million of which constituted first lien term loan indebtedness. Our substantial indebtedness could also:

·make it difficult for us to satisfy our payment obligations with respect to our outstanding indebtedness;

·require us to dedicate a substantial portion of our cash flow from operations to payments on our debt, reducing the availability of our cash flow to fund working capital, capital expenditures, acquisitions and other general corporate purposes;

·expose us to the risk of interest rate increases on our variable rate borrowings, including borrowings under our new senior secured credit facilities;

·increase our vulnerability to adverse general economic and industry conditions;

·limit our flexibility in planning for, or reacting to, changes in our business and the industry in which we operate;

·place us at a competitive disadvantage compared to our competitors that have less debt; and

·limit our ability to borrow additional funds on terms that are satisfactory to us or at all.

We could be subject to tax audits, challenges to its tax positions,business.

Certain states have enacted statutes or adverse changes or interpretations of tax laws.

We are subject to federal and applicable state income tax laws and regulations. Income tax lawsadopted regulations affecting risk assumption in the healthcare industry, including statutes and regulations are often complex and require significant judgmentthat subject any physician or physician network engaged in determining our effective tax rate andrisk-based managed care contracting to comply with applicable insurance laws. These laws, if adopted in evaluating our tax positions. Our determination of our tax liability is subject to review by applicable tax authorities. Any audits or challenges of such determinations may adversely affect our effective tax rate, tax payments or financial condition. Recently enacted U.S. tax legislation made significant changes to federal tax law, including the taxation of corporations, by, among other things, reducing the corporate income tax rate, disallowing certain deductions that had previously been allowed, and altering the expensing of capital expenditures. The implementation and evaluation of these changesstates in which we operate, may require significant judgmentphysicians and substantial planning. These judgmentsphysician networks to meet minimum capital requirements and plans may require the US to take newother safety and different tax positions that if challenged could adversely affect our effective tax rate, tax paymentssoundness requirements. Implementing additional regulations or financial condition.

In addition, the new tax legislation remains subject to potential amendments, technical corrections, and further regulatory guidance and interpretation, any of which could lessen or increase certain adverse impacts on us. Furthermore, as the new tax legislation goes into effect, future changes may occur at the federal or state level thatcompliance requirements could result in unfavorable adjustmentssubstantial costs to our tax liability.

Increases in interest rates could increaseus and the amount of our debt paymentscontracted radiology practices and reduce out operating cash flows.

We have incurred significant indebtedness that accrues interest at variable rate borrowing and we may incur additional debt in the future. Increases in interest rates on our current outstanding debt or any other debt we may incur will reduce our operating cash flows and if we need to repay any of our variable rate borrowing during period of high interest rates, we could be required to forgo other opportunities in order to repay the debt which may not permit us to realize future earnings of those forgone opportunities. To mitigate this risk, we have entered into an interest rate cap contract on our term loan debt facilities. See note 8 in the notes to financial statements contained herein.

25

We may not be able to finance future needs or adapt our business plan to changes because of restrictions placed on us by our credit facilities and instruments governing our other indebtedness.

Our credit facilities contain affirmative and negative covenants which restrict, among other things, our ability to:

·pay dividends or make certain other restricted payments or investments;

·incur additional indebtedness and certain disqualified equity interests;

·create liens (other than permitted liens) securing indebtedness or trade payables;

·sell certain assets or merge with or into other companies or otherwise dispose of all or substantially all of our assets;

·enter into certain transactions with affiliates;

·create restrictions on dividends or other payments by our restricted subsidiaries; and

·create guarantees of indebtedness by restricted subsidiaries.

All of these restrictions could affect our ability to operate our business and may limit our ability to take advantage of potential business opportunities as they arise. A failure to comply with these covenants and restrictions would permit the relevant creditors to declare all amounts borrowed under the applicable agreement governing such indebtedness, together with accrued interest and fees, to be immediately due and payable. If the indebtedness under our credit facilities is accelerated, we may not have sufficient assets to repay amounts due under the credit facilitiesenter into capitation or on other indebtedness then outstanding.

A restriction in our ability to make capital expenditures would restrict our growth and could adversely affect our business.

We operate in a capital intensive, high fixed-cost industry that requires significant amounts of capital to fund operations, particularly the initial start-up and development expenses of new diagnostic imaging facilities and the acquisition of additional facilities and new diagnostic imaging equipment. We incur capital expenditures to, among other things, upgrade and replace equipment for existing facilities and expand within our existing markets and enter new markets. If we open or acquire additional imaging facilities, we may have to incur material capital lease obligations. To the extent we are unable to generate sufficient cash from our operations, funds are not available from our lenders or we are unable to structure or obtain financing through operating leases, long-term installment notes or capital leases, we may be unable to meet our capital expenditure requirements to support the maintenance and continued growth of our operations.

risk-sharing managed care arrangements.

We may be impacted by eligibility changes to government and private insurance programs.


21

Due to potential decreased availability of healthcare through private employers, the number of patients who are uninsured or participate in governmental programs may increase. Healthcare reform legislation will increase the participation of individuals in the Medicaid program in states that elect to participate in the expanded Medicaid coverage. A shift in payor mix from managed care and other private payors to government payors as well as an increase in the number of uninsured patients may result in a reduction in the rates of reimbursement or an increase in uncollectible receivables or uncompensated care, with a corresponding decrease in net revenue. Changes in the eligibility requirements for governmental programs such as the Medicaid program and state decisions on whether to participate in the expansion of such programs also could increase the number of patients who participate in such programs and the number of uninsured patients. Even for those patients who remain in private insurance plans, changes to those plans could increase patient financial responsibility, resulting in a greater risk of uncollectible receivables. Furthermore, additional changes to, or repealrollback of, the PPACA, under the Trump Administrationwhether through legislation or judicial action, may also affect reimbursement and coverage in ways that are currently unpredictable. These factors and events could have a material adverse effect on our business, financial condition, and results of operations.

Our business could be adversely impacted if there are deficiencies in our disclosure controls and procedures or internal control over financial reporting.

The design and effectiveness of our disclosure controls and procedures and internal control over financial reporting may not prevent all errors, misstatements or misrepresentations. While management will review the effectiveness of our disclosure controls and procedures and internal control over financial reporting, there can be no guarantee that our disclosure controls and procedures or our internal control over financial reporting will be effective in accomplishing all control objectives all of the time. Deficiencies, including any material weakness, in our internal control over financial reporting that may occur in the future could result in misstatements of our results of operations, restatements of our financial statements, or otherwise adversely impact our financial condition, results of operations, cash flows, and our ability to satisfy our debt service obligations. As of December 31, 2017, we have identified a material weakness in internal controls with respect to our processes surrounding the occurrence and measurement of revenue and valuation of accounts receivable. See Item 9 for further information.

26

The regulatory framework in which we operate is uncertain and evolving.

Although we believe that we are operating in compliance with applicable federal and state laws, neither our current or anticipated business operations nor the operations of the contracted radiology practices have been the subject of judicial or regulatory interpretation. We cannot assure you that a review of our business by courts or regulatory authorities will not result in a determination that could adversely affect our operations or that the healthcare regulatory environment will not change in a way that restricts our operations. In addition, healthcare laws and regulations may change significantly in the future. We continuously monitor these developments and modify our operations from time to time as the regulatory environment changes. We cannot assure you however, that we will be able to adapt our operations to address new regulations or that new regulations will not adversely affect our business.

Certain states have enacted statutes or adopted regulations affecting risk assumption in the healthcare industry, including statutes and regulations that subject any physician or physician network engaged in risk-based managed care contracting to applicable insurance laws and regulations. These laws and regulations, if adopted in the states in which we operate, may require physicians and physician networks to meet minimum capital requirements and other safety and soundness requirements. Implementing additional regulations or compliance requirements could result in substantial costs to us and the contracted radiology practices and limit our ability to enter into capitation or other risk-sharing managed care arrangements.

State and federal anti-kickback and anti-self-referral laws may adversely affect income.

Various federal and state laws govern financial arrangements among healthcare providers. The federal Anti-Kickback Law prohibits the knowing and willful offer, payment, solicitation or receipt of any form of remuneration in return for, or to induce, the referral of Medicare, Medicaid, or other federal healthcare program patients, or in return for, or to induce, the purchase, lease or order of items or services that are covered by Medicare, Medicaid, or other federal healthcare programs. Similarly, many state laws prohibit the solicitation, payment or receipt of remuneration in return for, or to induce the referral of patients in private as well as government programs. Violation of these Anti-Kickback Laws may result in substantial civil or criminal penalties for individuals or entities and/or exclusion from federal or state healthcare programs. We believe we are operating in compliance with applicable law and believe that our arrangements with providers would not be found to violate the Anti-Kickback Laws. However, these laws could be interpreted in a manner inconsistent with our operations.

Federal law prohibiting physician self-referrals, known as the Stark Law, prohibits a physician from referring Medicare or Medicaid patients to an entity for certain “designated health services” if the physician has a prohibited financial relationship with that entity, unless an exception applies. Certain radiology services are considered “designated health services” under the Stark Law. Although we believe our operations do not violate the Stark Law, our activities may be challenged. If a challenge to our activities is successful, it could have an adverse effect on our operations. In addition, legislation may be enacted in the future that further addresses Medicare and Medicaid fraud and abuse or that imposes additional requirements or burdens on us.

In addition, under the DRA, states enacting false claims statutes similar to the federal False Claims Act, which establish liability for submission of fraudulent claims to the State Medicaid program and contain qui tam or whistleblower provisions, receive an increased percentage of any recovery from a State Medicaid judgment or settlement. Adoption of new false claims statutes in states where we operate may impose additional requirements or burdens on us.

Federal and state privacy and information security laws are complex, and if we fail to comply with applicable laws, regulations and standards, or if we fail to properly maintain the integrity of our data, protect our proprietary rights to our systems, or defend against cybersecurity attacks, we may be subject to government or private actions due to privacy and security breaches, and our business, reputation, results of operations, financial position and cash flows could be materially and adversely affected.

We must comply with numerous federal and state laws and regulations governing the collection, dissemination, access, use, security and privacy of PHI, including HIPAA and its implementing privacy and security regulations, as amended by the federal HITECH Act and collectively referred to as HIPAA. If we fail to comply with applicable privacy and security laws, regulations and standards, properly maintain the integrity of our data, protect our proprietary rights to our systems, or defend against cybersecurity attacks, our business, reputation, results of operations, financial position and cash flows could be materially and adversely affected.

Information security risks have significantly increased in recent years in part because of the proliferation of new technologies, the use of the internet and telecommunications technologies to conduct our operations, and the increased sophistication and activities of organized crime, hackers, terrorists and other external parties, including foreign state agents. Our operations rely on the secure processing, transmission and storage of confidential, proprietary and other information in our computer systems and networks.

27

We are continuously implementing multiple layers of security measures through technology, processes, and our people; utilize current security technologies; and our defenses are monitored and routinely tested internally and by external parties. Despite these efforts, our facilities and systems may be vulnerable to privacy and security incidents; security attacks and breaches; acts of vandalism or theft; computer viruses; coordinated attacks by activist entities; emerging cybersecurity risks; misplaced or lost data; programming and/or human errors; or other similar events. Emerging and advanced security threats, including coordinated attacks, require additional layers of security which may disrupt or impact efficiency of operations.

Any security breach involving the misappropriation, loss or other unauthorized disclosure or use of confidential information, including protected health information, financial data, competitively sensitive information, or other proprietary data, whether by us or a third party, could have a material adverse effect on our business, reputation, financial condition, cash flows, or results of operations. The occurrence of any of these events could result in interruptions, delays, the loss or corruption of data, cessations in the availability of systems or liability under privacy and security laws, all of which could have a material adverse effect on our financial position and results of operations and harm our business reputation. If we are unable to protect the physical and electronic security and privacy of our databases and transactions, we could be subject to potential liability and regulatory action, our reputation and relationships with our patients and vendors would be harmed, and our business, operations, and financial results may be materially adversely affected. Failure to adequately protect and maintain the integrity of our information systems (including our networks) and data, or to defend against cybersecurity attacks, could subject us to monetary fines, civil suits, civil penalties or criminal sanctions and requirements to disclose the breach publicly, and may further result in a material adverse effect on our results of operations, financial position, and cash flows.

Complying with federal and state regulations is an expensive and time-consuming process, and any failure to comply could result in substantial penalties.

We are directly or indirectly, through the radiology practices with which we contract, subject to extensive regulation by both the federal government and the state governments in which we provide services, including:

·the federal False Claims Act;

·the federal Medicare and Medicaid Anti-Kickback Laws, and state anti-kickback prohibitions;

·federal and state billing and claims submission laws and regulations;

·the federal Health Insurance Portability and Accountability Act of 1996, as amended by the Health Information Technology for Economic and Clinical Health Act of 2009, and comparable state laws;

·the federal physician self-referral prohibition commonly known as the Stark Law and the state equivalent of the Stark Law;

·state laws that prohibit the practice of medicine by non-physicians and prohibit fee-splitting arrangements involving physicians;

·federal and state laws governing the diagnostic imaging and therapeutic equipment we use in our business concerning patient safety, equipment operating specifications and radiation exposure levels; and

·state laws governing reimbursement for diagnostic services related to services compensable under workers compensation rules.

•the federal False Claims Act;
•the federal Medicare and Medicaid Anti-Kickback Statute, and state anti-kickback prohibitions;
•federal and state billing and claims submission laws and regulations;
•HIPAA, as amended by HITECH, and comparable state laws;
•the federal physician self-referral prohibition commonly known as the Stark Law and state equivalents;
•state laws that prohibit the corporate practice of medicine and prohibit similar fee-splitting arrangements;
•state laws governing the approval of healthcare transactions and complying with cost targets, including the California Health Care Quality and Affordability Act and its implementing regulations.
•federal and state laws governing the diagnostic imaging and therapeutic equipment we use in our business concerning patient safety, equipment operating specifications and radiation exposure levels;
•state laws governing reimbursement for diagnostic services related to services compensable under workers' compensation rules; and
•federal and state environmental and health and safety laws.
If our operations are found to be in violation of any of the laws and regulations to which we or the radiology practices with which we contract are subject, we may be subject to the applicable penalty associated with the violation,penalties, including civil and criminal penalties, damages, fines and the curtailment of our operations. Any penalties, damages, fines or curtailment of our operations, individually or in the aggregate, could adversely affect our ability to operate our business and our financial results. The risks of our being found in violation of these laws and regulations is increased by the fact that many of them have not been fully interpreted by the regulatory authorities or the courts, and their provisions are open to a variety of interpretations. Any action brought against us for violation of these laws or regulations, even if we successfully defend against it, could cause us to incur significant legal expenses and divert our management’s attention from the operation of our business.

28


State and federal anti-kickback and anti-self-referral laws may adversely affect income.
Various federal and state laws govern financial arrangements among healthcare providers. The federal Anti-Kickback Statute prohibits the knowing and willful offer, payment, solicitation or receipt of any form of remuneration in return for, or to induce, the referral of Medicare, Medicaid, or other federal healthcare program patients, or in return for, or to induce, the purchase, lease or order of items or services that are covered by Medicare, Medicaid, or other federal healthcare programs. Similarly, many state laws prohibit the solicitation, payment or receipt of remuneration in return for, or to induce the referral of patients in private as well as government programs. Violation of these anti-kickback laws may result in substantial civil or criminal penalties for individuals or entities and/or exclusion from federal or state healthcare programs. We believe we are operating in compliance with applicable law and believe that our arrangements with providers would not be found to violate the anti-kickback laws. However, these laws could be interpreted in a manner inconsistent with our operations.
Federal law prohibiting certain physician self-referrals, known as the Stark Law, prohibits a physician from referring Medicare or Medicaid patients to an entity for certain “designated health services” if the physician has a prohibited financial relationship with that entity, unless an exception applies. Certain radiology services are considered “designated health services” under the Stark Law. Although we believe our operations do not violate the Stark Law, our activities may be challenged. If a

22

challenge is successful, it could have an adverse effect on our operations. In addition, legislation may be enacted in the future that further addresses Medicare and Medicaid fraud and abuse or imposes additional regulatory burdens on us.
In addition, under the Deficit Recovery Act, states enacting false claims statutes similar to the federal False Claims Act, which establish liability for submission of fraudulent claims to the State Medicaid program and contain qui tam or whistleblower provisions, receive an increased percentage of any recovery from a State Medicaid judgment or settlement. Adoption of new false claims statutes in states where we operate may impose additional burdens on us.
If we fail to comply with various licensure, certification and accreditation standards, we may be subject to loss of licensure, certification or accreditation, which would adversely affect our operations.

Ownership, construction, operation, expansion and acquisition of our diagnostic imaging facilitiescenters are subject to various federal and state laws, regulations and approvals concerning licensing of personnel, other required certificates for certain types of healthcare facilities and certain medical equipment. In addition, freestanding diagnostic imaging facilitiescenters that provide services independent of a physician’s office must be enrolled by Medicare as an independent diagnostic treatment facility, or IDTF, to bill the Medicare program. Medicare carriers have discretion in applying the IDTF requirements and therefore the application of these requirements may vary from jurisdiction to jurisdiction.

In addition, federal legislation requires all suppliers that provide the technical component of diagnostic MRI, PET/CT, CT, and nuclear medicine to be accredited by an accreditation organization designated by CMS (which currently include the American College of Radiology, (ACR), the Intersocietal Accreditation Commission (IAC) and the Joint Commission). Our MRI, CT, nuclear medicine, ultrasound and mammography facilitiescenters are currently accredited by the American College of Radiology. We may not be able to receive the required regulatory approvals or accreditation for any future acquisitions, expansions or replacements, and the failure to obtain these approvals could limit the opportunity to expand our services.


Our facilitiespayors required that the physicians providing imaging services are credentialed, before the payor will commence payment. We have experienced a slowdown in the credentialing of our physicians over the last several years which has lengthened our billing and collection cycle, and could negatively impact our ability to collect revenue from patients covered by Medicare.
Our centers are subject to periodic inspection by governmental and other authorities to assure continued compliance with the various standards necessary for licensure and certification. If any facility loses its certification under the Medicare program, then the facility will be ineligible to receive reimbursement from the Medicare and Medicaid programs. For the year ended December 31, 2017,2023, approximately 23% and 3% of our net service fee revenue before provision for bad debt came from the Medicare and various state Medicaid programs.programs, respectively. A change in the applicable certification status of one of our facilitiescenters could adversely affect our other facilitiescenters and, in turn, us as a whole. Credentialing of physicians is required by our payors prior to commencing payment. We have experienced a slowdown in the credentialing of our physicians over the last several years which has lengthened our billing and collection cycle, and could negatively impact our ability to collect revenue from patients covered by Medicare.

Our agreements with the contracted radiology practices must be structured to avoid the corporate practice of medicine and fee-splitting.

State law prohibits

The laws of certain states prohibit us from exercising control over the medical judgments or decisions of physicians and from engaging in certain financial arrangements, such as splitting professional fees with physicians. These laws are enforced by state courts and regulatory authorities, each with broad discretion. A component of our business has been to enter into management agreements with radiology practices. We provide management, administrative, technical and other non-medical services to the radiology practices in exchange for a service fee typically based on a percentage of the practice’s revenue. We structure our relationships with the radiology practices, including the purchase of diagnostic imaging facilities,centers, in a manner that we believe keeps us from engaging in the practice of medicine or exercising control over the medical judgments or decisions of the radiology practices or their physicians, or violating the prohibitions against fee-splitting. ThereState laws and enforcement efforts regarding corporate practice of medicine and fee-splitting are often subject to change. As a consequence, there can be no assurance that our present arrangements with BRMGthe Group or the physicians providing medical services and medical supervision at our imaging facilitiescenters will not be challenged, and, if challenged, that they will not be found to violate the corporate practice of medicine or fee splitting prohibitions, thus subjectingprohibitions. Any violation would subject us to potential damages, injunction and/or civil and criminal penalties or require us to restructure our arrangements in a way that would affect the control or quality of our services and/or change the amounts we receive under our management agreements. Any
If we fail to comply with federal and state privacy and information security laws mandating protection of thesecertain confidential data against disclosure, including cybersecurity attacks, we may be subject to government or private actions.


23

We must comply with numerous federal and state laws and regulations governing the collection, dissemination, access, use, security and privacy of PHI, including HIPAA and its implementing privacy and security regulations, as amended by the federal HITECH Act. Information security risks have significantly increased in recent years in part because of the proliferation of new technologies, and the increased sophistication and activities of organized crime, hackers, terrorists and other external parties, including foreign state agents.

Failure to adequately protect and maintain the integrity of our information systems (including our networks) and data, or to defend against cybersecurity attacks, could subject us to monetary fines, civil suits, civil penalties or criminal sanctions. We could also be required to disclose the breach publicly, which may damage our business reputation with our patients and vendors and cause a further material adverse effect on our results could jeopardize our business.

of operations, financial position, and cash flows.


Some of our imaging modalities use radioactive materials, which generate regulated waste and could subject us to liabilities for injuries or violations of environmental and health and safety laws.

Some of our imaging procedures use radioactive materials, which generate medical and other regulated wastes. For example, patients are injected with a radioactive substance before undergoing a PET scan. Storage, use and disposal of these materials and waste products present the risk of accidental environmental contamination and physical injury. We are subject to federal, state and local regulations governing storage, handling and disposal of these materials. We could incur significant costs and the diversion of our management’s attention in order to comply with current or future environmental and health and safety laws and regulations. Also, we cannot completely eliminate the risk of accidental contamination or injury from these hazardous materials. Although we maintain professional liability insurance coverage in amounts we believe is consistent with industry practice in the event of an accident, we could be held liable for any resulting damages, and any liability could exceed the limits of or fall outside the coverage of our professional liability insurance.

29

Technological change in our industry could reduce the demand for our services and require us to incur significant costs to upgrade our equipment.

The development of new technologies or refinements of existing modalities may require us to upgrade and enhance our existing equipment before we may otherwise intend. Many companies currently manufacture diagnostic imaging equipment. Competition among manufacturers for a greater share of the diagnostic imaging equipment market may result in technological advances in the speed and imaging capacity of new equipment. This may accelerate the obsolescence of our equipment, and we may not have the financial ability to acquire the new or improved equipment and may not be able to maintain a competitive equipment base. In addition, advances in technology may enable physicians and others to perform diagnostic imaging procedures without us. If we are unable to deliver our services in the efficient and effective manner that payors, physicians and patients expect our revenue could substantially decrease.

Financial Risks

Because we have high fixed costs, lower scan volumes per systemor other decreases revenues could adversely affect the profitability of our business.

The principal components of our expenses excluding depreciation, consist ofare debt service, capital lease payments,depreciation, compensation paid to technologists, salaries, real estate lease expenses and equipment maintenance costs. Because a majority of these expenses are fixed, a relatively small change in our revenue could have a disproportionate effect on our operating and financial results depending on the source of our revenue. Thus, decreased revenue as a result of lower scan volumes, per systemproduct mix, or reductions in reimbursement rates could result in lower margins, which couldwould materially adversely affect our business.

We may be unable to effectively maintain our equipment or generate revenue when our equipment is not operational.

Timely, effective service is essential to maintaining our reputation and high use rates on our imaging equipment. Although we have an agreement with GE Medical Systems pursuant to which it maintains and repairs the majorityprofitability of our imaging equipment, this agreement does not compensate us for loss of revenue when our systems are not fully operational and our business interruption insurance may not provide sufficient coverage for the loss of revenue. Also, GE Medical Systems may not be able to perform repairs or supply needed parts in a timely manner, whichbusiness.


Our substantial debt could result in a loss of revenue. Therefore, if we experience more equipment malfunctions than anticipated or if we are unable to promptly obtain the service necessary to keep our equipment functioning effectively, our ability to provide services would be adversely affected and our revenue could decline.

Disruption or malfunction in our information systems could adversely affect our business.

We rely on information technology systems to process, transmit and store electronic information. A significant portion of the communication between personnel, customers, business partners, and suppliers depends on information technology. We rely on our information systems to perform functions critical to our ability to operate, including patient scheduling, billing, collections, image storage and image transmission. We also use information technology systems and networks in our operations and supporting departments such as marketing, accounting, finance, and human resources. The future success and growth of our business depends on streamlined processes made available through information systems, global communications, internet activity and other network processes.

Despite our current security measures, our information technology systems, and those of our third-party service providers, may be vulnerable to information security breaches, acts of vandalism, computer viruses and interruption or loss of valuable business data. Our information technology system is vulnerable to damage or interruption from:

·earthquakes, fires, floods and other natural disasters;

·power losses, computer systems failures, internet and telecommunications or data network failures, operator negligence, improper operation by or supervision of employees, physical and electronic losses of data and similar events; and

·computer viruses, penetration by hackers seeking to disrupt operations or misappropriate information and other breaches of security.

We have technology security initiatives and disaster recovery plans in place to mitigate our risk to these vulnerabilities, but these measures may not be adequate or implemented properly to ensure that our operations are not disrupted or that data security breaches do not occur.

We could face attempts by others to gain unauthorized access through the Internet or to introduce malicious software to our information technology systems. If a malicious hacker gained unauthorized access to our systems and network, it could have a material adverse impact on our business or operations. Such incidents, whether or not successful, could result in our incurring significant costs related to, for example, rebuilding internal systems, defending against litigation, responding to regulatory inquiries or actions, paying damages, or taking other remedial steps with respect to third parties. In addition, these threats are constantly changing, thereby increasing the difficulty of successfully defending against them or implementing adequate preventive measures. Accordingly, an extended interruption in our information technology system’s function could significantly curtail, directly and indirectly, our ability to conduct our business and generate revenue.

30

If our network was compromised, it could give rise to unwanted media attention, materially damage our payor and physician relationships, harm our business, reputation, results of operations, cash flows and financial condition, result in fines or lawsuits, and may increase the costs we incur to protect against such information security breaches, such as increased investment in technology, the costs of compliance with consumer protection laws and costs resulting from consumer fraud. While we maintain cyber liability insurance, our insurance may not be sufficient to protect against all losses we may incur if we suffer significant or multiple attacks.

Adverse changes in general domestic and worldwide economic conditions and instability and disruption of credit markets could adversely affect our operating results, financial condition, or liquidity.

We are subject to risk arising from adverse changes in general domestic and global economic conditions, including recession or economic slowdown and disruption of credit markets. Continued concerns about the systemic impact of potential long-term and wide-spread recession, inflation, energy costs, geopolitical issues, the availability and cost of credit have contributed to increased market volatility and diminished expectations for the United States economy. The United States and other western countries have responded to this economic situation by exercising monetary policy to keep interest rates low. Any significant change in economic conditions or change in fiscal monetary policy could result in material changes in interest rates.

Continued turbulence in domestic and international markets and economies may adversely affect our liquidity and financial condition, and the liquidity and financial condition of our patients. If these market conditions continue, they may increase expenses associated with borrowing, limit our ability and the ability of our patients, to timely replace maturing liabilities, and access the capital markets to meet liquidity needs, resulting in adverse effects on our financial condition and results of operations.

Budget decisions by the California State Legislature could have an impact on our revenue.

132 of our 297 facilities are located in California and one to one-and-one-half percent (1% to 1.5%) of our revenues come from the California Medicaid program. To the extent California is unable to provide these payments on a timely basis, or at all, our revenues will be negatively impacted.

We are vulnerable to earthquakes, harsh weather and other natural disasters.

Our corporate headquarters and 132 of our facilities are located in California, an area prone to earthquakes and other natural disasters. Several of our facilities are located in areas of Florida and the east coast that have suffered from hurricanes and other harsh weather, including winter snow storms that have in the past caused us to close our facilities. An earthquake, harsh weather conditions or other natural disaster could decrease scan volume during affected periods and seriously impair our operations. Damage to our equipment or interruption of our business would adversely affect our financial condition and prevent us from fulfilling our obligations under our outstanding indebtedness.

Our current substantial indebtedness and any future indebtedness we incur could adversely affect our financial condition. We are highly leveraged. As of December 31, 2023 term loan indebtedness, excluding related discount, was $823.1 million, of which the Barclays credit facility term loans were $678.7 million and the Truist credit facility term loan was $144.4 million. Our substantial indebtedness could also:
•make it difficult for us to satisfy our payment obligations with respect to our outstanding indebtedness;
•require us to dedicate a substantial portion of our cash flow from operations to payments on our debt, reducing the availability of our cash flow to fund working capital, capital expenditures, acquisitions and other general corporate purposes;
•expose us to the risk of interest rate increases on our variable rate borrowings, including borrowings under our Barclays and Truist credit facilities;
•increase our vulnerability to adverse general economic and industry conditions;
•limit our flexibility in planning for, or reacting to, changes in our business and the industry in which we operate;
•place us at a competitive disadvantage compared to our competitors that have less debt; and
•limit our ability to borrow additional funds on terms that are satisfactory to us, or at all.

A restriction in our ability to make capital expenditures would restrict our growth and could adversely affect our business.
We operate in a capital intensive, high fixed-cost industry that requires significant amounts of capital to fund operations, particularly the initial start-up and development expenses of new diagnostic imaging centers and the acquisition of additional centers and new diagnostic imaging equipment. We incur capital expenditures to, among other things, upgrade and replace equipment for existing centers and expand within our existing markets and enter new markets. If we open or acquire

24

additional imaging centers, we may have to incur material capital lease obligations. To the extent we are unable to generate sufficient cash from our operations, funds are not available under our credit facilities or we are unable to structure or obtain financing through operating leases, finance leases or long-term installment notes, we may be unable to meet the capital expenditure requirements necessary to support the maintenance and continued growth of our operations.

We may be required to recognize an impairment of our goodwill, other intangible assets, or other long-lived assets, which could have an adverse effect on our financial position and results of operations.


When we acquire businesses we are generally required to allocate the purchase price to various assets including goodwill and other intangible assets. We are required to perform impairment tests for goodwill and other indefinite-lived intangible assets annually and whenever events or circumstances indicate that it is more likely than not that impairment exists. We are also required to perform an impairment test of definite lived intangible or other long-lived assets when indicators of impairment are present.

We have been required to recognize impairment charges in the past, and may again. In September 2023, we determined that an In-process Research and Development ("IPR&D") indefinite-lived intangible asset related to Aidence Holding B.V.'s Ai Veye Lung Nodule and Veye Clinic would not receive FDA approval for sale in the US without a new submission and additional expenditures for rework in the original projected timeline. The additional expenditures, delay and reduction of US sales affected the estimated fair value of the related IPR&D intangible asset and resulted in impairment charges of $3.9 million. A future decline in our operating results, future estimated cash flows and other assumptions could impact our estimated fair values, potentially leading to a material impairment of goodwill, other intangible assets, or other long-lived assets, which could adversely affect our financial position and results of operations.

Our credit facilities and instruments governing our other indebtedness restrict certain operations of our business.
Our credit facilities contain affirmative and negative covenants which restrict, among other things, our ability to:
•pay dividends or make certain other restricted payments or investments;
•incur additional indebtedness and certain disqualified equity interests;
•create liens (other than permitted liens) securing indebtedness or trade payables;
•sell certain assets or merge with or into other companies or otherwise dispose of all or substantially all of our assets;
•enter into certain transactions with affiliates;
•create restrictions on dividends or other payments by our restricted subsidiaries; and
•create guarantees of indebtedness by restricted subsidiaries.

All of these restrictions could affect our ability to operate our business and may limit our ability to take advantage of potential business opportunities as they arise. A failure to comply with these covenants and restrictions would permit the relevant creditors to declare all amounts borrowed under the applicable agreement governing such indebtedness, together with accrued interest and fees, to be immediately due and payable. If the indebtedness under our credit facilities is accelerated, we may not have sufficient assets to repay amounts due under the credit facilities or on other indebtedness then outstanding.

Capital Markets Risks

Possible volatility in our stock price could negatively affect us and our stockholders.

The trading price of our common stock on the NASDAQ Global Market has fluctuated significantly in the past. During the period from January 1, 20162021 through December 31, 2017,2023, the trading price of our common stock fluctuated from a high of $11.90$38.84 per share to a low of $4.66$12.03 per share. In the past, we have experienced a drop in stock price following an announcement of disappointing earnings or earnings guidance. Any such announcement in the future could lead to a similar drop in stock price. The price of our common stock could also be subject to wide fluctuations in the future as a result of a number of other factors, including the following:

·changes in expectations as to future financial performance or buy/sell recommendations of securities analysts;

·our, or a competitor’s, announcement of new services, or significant acquisitions, strategic partnerships, joint ventures or capital commitments; and

·the operating and stock price performance of other comparable companies.

31

•changes in expectations as to future financial performance or buy/sell recommendations of securities analysts;
•our, or a competitor’s, announcement of new services, or significant acquisitions, strategic partnerships, joint ventures or capital commitments; and
•the operating and stock price performance of other comparable companies.


25

In addition, the U.S. securities markets have experiencedperiodically experience significant price and volume fluctuations. These fluctuations often have been unrelated to the operating performance of companies in these markets. Broad market and industry factors may lead to volatility in the price of our common stock, regardless of our operating performance. Moreover, our stock has limited trading volume, and this illiquidity may increase the volatility of our stock price.

In the past, following periods of volatility in the market price of an individual company’s securities, securities class action litigation often has been instituted against that company. The institution of similar litigation against us could result in substantial costs and a diversion of management’s attention and resources, which could negatively affect our business, results of operations or financial condition.


Provisions of the Delaware General Corporation Law and our organizational documents may discourage an acquisition of us.

In the future, we could become the subject of an unsolicited attempted takeover of our company. Although an unsolicited takeover could be in the best interests of our stockholders, our organizational documents and the General Corporation Law of the State of Delaware both contain provisions that will impede the removal of directors and may discourage a third-party from making a proposal to acquire us. For example, provisions in our organizational documents:
•permit the provisions:

·permit the board of directors to increase its own size, within the maximum limitations set forth in the bylaws, and fill the resulting vacancies;

·authorize the issuance of shares of preferred stock in one or more series without a stockholder vote;

·establish an advance notice procedure for stockholder proposals to be brought before an annual meeting of our stockholders, including proposed nominations of persons for election to the board of directors; and

·prohibit transfers and/or acquisitions of stock (without consent of the Board of Directors ) that would result in any stockholder owning greater than 5% of the currently outstanding stock resulting in a limitation on net operating loss carryovers, capital loss carryovers, general business credit carryovers, alternative minimum tax credit carryovers and foreign tax credit carryovers, as well as any loss or deduction attributable to a “net unrealized built-in loss” within the meaning of Section 382 of the internal revenue code of 1986, as amended.

board of directors to increase its own size, within the maximum limitations set forth in the bylaws, and fill the resulting vacancies;

•authorize the issuance of shares of preferred stock in one or more series without a stockholder vote;
•establish an advance notice procedure for stockholder proposals to be brought before an annual meeting of our stockholders, including proposed nominations of persons for election to the board of directors; and
•prohibit transfers and/or acquisitions of stock (without consent of the Board of Directors ) that would result in any stockholder owning greater than 5% of the currently outstanding stock resulting in a limitation on net operating loss carryovers, capital loss carryovers, general business credit carryovers, alternative minimum tax credit carryovers and foreign tax credit carryovers, as well as any loss or deduction attributable to a “net unrealized built-in loss” within the meaning of Section 382 of the internal revenue code of 1986, as amended.

We are subject to Section 203 of the Delaware General Corporation Law, which could have the effect of delaying or preventing a change in control.

Item 1B.Unresolved Staff Comments

None.

Item 1C.Cybersecurity
Risk Management and Strategy

As a healthcare provider, cybersecurity, data protection, safeguarding patient information and the integrity of our information systems is of the utmost priority. We have developed and maintain a Cybersecurity and Data Protection Program which aligns with industry-standard frameworks and applicable regulatory requirements, integrates with our overall risk management process, and aims to ensure cybersecurity concerns are a requisite element for decision-making at all levels of our business.

RadNet’s Cybersecurity and Data Protection Program assesses, identifies and manages threats to our information systems and evaluates cybersecurity risks associated with our vendors and third-party partners. We are focused on detecting, preventing and responding to cyber threats, maintaining the privacy and protection of sensitive information, and maintaining the durability and resiliency of our information and data processing systems.

Our approach to designing, operating and measuring the effectiveness of our program leverages experienced internal resources, industry-recognized cybersecurity consultants, assessors, healthcare and industry-specific cybersecurity working groups and threat-intelligence platforms, federal law enforcement and CISA partnerships. We use these resources and partnerships, along with our internal expertise, to develop specialized insights pertinent to our business’s cyber-risk, and tailor our cybersecurity strategy to best safeguard our systems and data.

We staff an internal cybersecurity team and maintain a third-party managed security operations center which in-concert provide 24x7x365 real-time detection and response. These teams are always connected and routinely respond to

26

perceived threats within minutes. Time to detect and respond metrics are continuously evaluated for opportunities to enhance our program.

Cyber-awareness training and testing is a key component of RadNet’s Cybersecurity and Data Protection Program. Every employee is required to complete cyber-related training (including third-parties who access our systems) and successfully complete testing throughout the year in addition to monthly phishing tests. Furthermore, we require all system users to complete annual Patient Privacy and Patient Data Breach training and testing to meet RadNet compliance standards.

We benchmark and evaluate our Cybersecurity and Data Protection Program and data protection maturity against the NIST Cybersecurity Framework and the HIPAA Security Rule. Consistent with these frameworks, our program includes recurring third-party assessments and a vendor risk management program. Our vendor risk management program conducts security assessments to determine a risk profile of potential vendors and third-party partners and integrates ongoing monitoring and periodic re-assessments to ensure compliance with RadNet’s security standards. RadNet’s Vendor Risk Management Team works closely with RadNet Legal, Compliance and Operations teams to address data safety, compliance and legal requirements for each of our vendor/partner engagements.

We continuously evaluate the practical effectiveness of our cyber-defenses both internally and externally using a combination of technology-based assessments and recurring third-party audits. Our Critical Incident Response Team periodically conducts cyber-focused tabletop exercises using scenarios drawn from observations of risk indicators and from threat intelligence reports of real-world incidents affecting our industry. Outcomes and insights from tabletop exercises are used to enhance RadNet’s Incident Response Plan which is architected following NIST guidelines and reviewed annually and updated periodically as needed.

Our program's overall maturity and operational readiness are regularly evaluated internally by RadNet IT Governance and Compliance teams and by independent expert auditors using the NIST's Cybersecurity Framework. Our program, and the results of the evaluation and testing efforts, are regularly reviewed by our senior management and members of our Board of Directors.

Cybersecurity threats, including previous cybersecurity incidents, have not materially affected our business strategy, results of operations, or financial condition. However, cybersecurity threats have the potential to interrupt our operations or cause significant financial hardship. Our risks associated with cybersecurity threats are set forth under “Risk Factors” in Part I, Item 1A in this report.

Governance

RadNet is committed to appropriate cybersecurity governance and oversight. Our Cybersecurity and Data Protection Program is the principal responsibility of our Chief Information Officer and Chief Information Security Officer, each of whom have over 20 years of experience in information systems, including cybersecurity training and experience. Additionally, RadNet’s CIO and CISO work closely with our executive management, legal and compliance leaders, and meet regularly to discuss cybersecurity matters and risks.

Our Board of Directors oversees management's processes for identifying and mitigating risks, including cybersecurity and information security risks. Our Audit Committee of our Board of Directors regularly reviews our technology and cybersecurity program and effectiveness, and internal audits of our program. Our Audit Committee also receives regular cybersecurity updates and education on a broad range of topics, including:

•current cybersecurity landscape and emerging threats;
•status of ongoing cybersecurity initiatives and strategies;
•incident report and learnings from any cybersecurity events; and
•compliance with regulatory requirements and industry standards.

Item 2.Properties


Our corporate headquarters is located in adjoining premises at 1508, 1510 and 1516 Cotner Avenue, Los Angeles, California 90025, and approximately 21,500 square feet is occupied under these leases, which expire (withincluding options, to extend) onexpire June 30, 2027. We also have a regional office of approximately 39,000 square feet in Baltimore, Maryland under a lease, which including options, expires September 30, 2028. In addition, we lease approximately 62,00036,700 square feet of warehouse space under leases nationwide, which expire at various dates, including options, through August 2031. As of December 31, 2017, total square footage under lease, including medical office, administrative and storage locations was approximately 2.0 million square feet.

We operate 132 fixed-site, freestanding outpatient diagnostic imaging facilities2028.



27

At December 31, 2023, we operated directly or indirectly through joint ventures with hospitals, 366 centers located in Arizona, California, 13 in Delaware, 3 in Florida, 60 in Maryland, 20 in New Jersey, 19 in the Rochester and Hudson Valley areas of New York and 50 in New York City.York. We lease the premises at which these facilities are located.located and do not have options to purchase the facilities we rent. Our most common initial lease term varies in length from 5 to 15 years. IncludingFactoring in renewal options, negotiated with the landlord, we can have a total span of 10 to 2535 years at the facilities we lease. We also lease smaller satellite X-Ray locations, usually for one year terms, that are renewable on mutually renewable terms, usually lasting one year.mutual consent with the landlord. Rental increases can range from 1% to 7%10% on an annual basis, depending on the location and market conditions where we do business. We do not have options

As of December 31, 2023, total square footage operated directly or indirectly under lease, including medical office, administrative and warehouse locations, was approximately 2.7 million square feet. All leasing activity described relates solely to purchase the facilities we rent.

our Imaging Center segment, as our AI segment leasing activity is currently immaterial.
Item 3.Legal Proceedings

We are engaged from

From time to time we are engaged in the defense of lawsuits arising out of the ordinary course and conduct of our business. We do not believe that the outcome of our current litigation will not have a material adverse impact on our business, financial condition and results of operations. However, wethe outcome of litigation is inherently uncertain. If one or more legal matters were resolved against us in a reporting period for amounts above management’s expectations, our financial condition and operating results could be subsequently named as a defendant in other lawsuits that couldmaterially adversely affect us.

affected.
Item 4.Mine Safety Disclosures

Not applicable.

32

Not applicable.

28

PART II

Item 5.Market for the Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities

Principal Trading Market

Our common stock is quoted on the NASDAQ Global Market under the symbol “RDNT”. The following table indicates the high and low prices for our common stock for the periods indicated based upon information supplied by the NASDAQ Global Market.

   Low  High 
        
Quarter Ended       
 December 31, 2017  $9.50  $11.90 
 September 30, 2017   7.45   11.90 
 June 30, 2017   5.40   7.90 
 March 31, 2017   5.25   6.78 
           
 December 31, 2016  $5.35  $7.98 
 September 30, 2016   5.28   7.42 
 June 30, 2016   4.66   5.55 
 March 31, 2016   4.73   6.33 

The last low and high prices for our common stock on the NASDAQ Global Market for the period from January 1 to March 5, 2018 were $9.65 and $10.70, respectively.

Holders


As of March 5, 2018,February 27, 2024, the number of holders of record of our common stock was 1,083. However, Cede & Co., the nominee for The Depository Trust Company, the clearing agency for most broker-dealers, owned a substantial number of our outstanding shares of common stock of record on that date. Our management believes that the number of beneficial owners of our common stock is approximately 5,000.

1,001.


Dividends

We have never declared or paid cash dividends on our capital stock and we do not expect to pay any dividends in the foreseeable future. We currently intend to retain future earnings, if any, to finance the growth and development of our business. Our current credit facilities place restrictions on our ability to issue dividends. See discussion under “Liquidity and Capital Resources” regarding our current credit facilities. Payment of future dividends, if any, will be at the discretion of our board of directors and will depend on our financial condition, results of operations, capital requirements and such other factors as the board of directors deems relevant.

Equity Compensation Plans Information

The information required by this item will be contained in our definitive proxy statement, to be filed with the SEC in connection with our 2018 annual meeting of stockholders, which is expected to be filed not later than 120 days after the end of our fiscal year ended December 31, 2017, and is incorporated in this report by reference.


Stock Performance Graph

The following graph compares the yearly percentage change in cumulative total stockholder return of our common stock during the period from 20122018 to 20172023 with (i) the cumulative total return of the S&P 500 index and (ii) the cumulative total return of the S&P 500 – Healthcare Sector index. The comparison assumes $100 was invested on December 31, 20122018 in our common stock and in each of the foregoing indices and the reinvestment of dividends through December 31, 2017.29, 2023. The stock price performance on the following graph is not necessarily indicative of future stock price performance.

This graph shall not be deemed incorporated by reference by any general statement incorporating by reference this Form 10-K into any filing under the Securities Act or under the Exchange Act, except to the extent that RadNet specifically incorporates this information by reference, and shall not otherwise be deemed filed under the Securities Act or the Exchange Act.

33

  ANNUAL RETURN PERCENTAGE 
  Years Ending 
                
Company / Index  12/31/13   12/31/14   12/31/15   12/30/16   12/29/17 
RadNet, Inc.  -33.99   411.38   -27.63   4.37   56.59 
S&P 500 Index  32.39   13.69   1.38   11.96   21.83 
S&P Health Care Sector  41.46   25.34   6.89   -2.69   22.08 

     INDEXED RETURNS 
  Base  Years Ending 
  Period                
Company / Index  12/31/12   12/31/13   12/31/14   12/31/15   12/30/16   12/29/17 
RadNet, Inc.  100   66.01   337.55   244.27   254.94   399.21 
S&P 500 Index  100   132.39   150.51   152.59   170.84   208.14 
S&P Health Care Sector  100   141.46   177.30   189.52   184.42   225.13 


29

1833
ANNUAL RETURN PERCENTAGE
Years Ending
Company / Index12/31/1912/31/2012/31/2112/30/2212/29/23
RadNet, Inc.99.61 (3.60)53.86 (37.46)84.65 
S&P 500 Index31.49 18.40 28.71 (18.11)26.29 
S&P Health Care Sector20.82 13.45 26.13 (1.96)2.06 
BaseINDEXED RETURNS
Years Ending
 Period     
Company / Index12/31/1812/31/1912/31/2012/31/2112/30/2212/29/23
RadNet, Inc.100 199.61 192.43 296.07 185.15 341.89 
S&P 500 Index100 131.49 155.68 200.37 164.08 207.21 
S&P Health Care Sector100 120.82 137.07 172.89 169.51 173.00 
Recent Sales of Unregistered Securities

None.

Item 6.Selected Consolidated Financial Data

On December 12, 2023, we issued 64,569 shares of common stock to settle a milestone contingent liability as part of our purchase of Heart & Lung Imaging Limited. The following table sets forthshares were ascribed a value of $2.3 million.
On September 20, 2023, we issued 56,600 shares of common stock to settle a milestone contingent liability as part of our selected historical consolidated financial data.purchase of Heart & Lung Imaging Limited. The selected consolidated statementsshares were ascribed a value of operations data set forth below$1.6 million.
On July 7, 2023, we issued 113,303 shares of common stock to settle the stock portion of a holdback contingent liability as part of our purchase of Quantib B.V. The shares were ascribed a value of $3.5 million.

30


On April 30, 2023, we issued 114,227 shares of common stock to settle a holdback contingent liability as part of our purchase of Aidence Holding B.V. The shares were ascribed a value of $4.0 million.
In each of the foregoing transactions, the shares of common stock issued without registration on the basis of the exemption for private placement transactions provided by Section 4(a)(2) of the years ended December 31, 2017, 2016 and 2015, and the consolidated balance sheet data as of December 31, 2017 and 2016, are derived from our audited consolidated financial statements and notes thereto included elsewhere herein. The selected historical consolidated statements of operations data set forth below for the years ended December 31, 2014 and 2013, and the consolidated balance sheet data set forth below as of December 31, 2015, 2014 and 2013, are derived from our audited consolidated financial statements not included herein. This data should be read in conjunction with and is qualified in its entirety by reference to the audited consolidated financial statements and the related notes included elsewhere in this annual report and Item 7 - “Management’s Discussion and Analysis of Financial Condition and Results of Operations.”

Securities Act.
Item 6.34Reserved

The financial data set forth below and discussed in this annual report are derived from the consolidated financial statements of RadNet, its subsidiaries and certain affiliates. As a result of the contractual and operational relationship among BRMG, Dr. Berger, the NY Groups, Dr. Crues and the Company, we are considered to have a controlling financial interest in BRMG and the NY Groups (collectively, the “Professional Entities”) pursuant to applicable accounting guidance. Due to the deemed controlling financial interest, we are required to include the Professional Entities as consolidated entities in our consolidated financial statements. This means, for example, that revenue generated by the Professional Entities from the provision of professional medical services to our patients, as well as the Professional Entities costs of providing those services, are included as net revenue and cost of operations in our consolidated statement of operations, whereas the management fee that the Professional Entities’ pay to us under our management agreement with the Professional Entities is eliminated as a result of the consolidation of our results with those of the Professional Entities. Also, because the Professional Entities are consolidated in our financial statements, any borrowings or advances we have received from or made to the Professional Entities have been eliminated in our consolidated balance sheet. If the Professional Entities were not treated as consolidated entities in our consolidated financial statements, the presentation of certain items in our income statement, such as net service fee revenue and costs and expenses, would change but our net income would not, because in operation and historically, the annual revenue of the Professional Entities from all sources closely approximates its expenses, including Dr. Berger’s and Dr. Crues’ compensation, fees payable to us and amounts payable to third parties.

  Years Ended December 31, 
  2017  2016  2015  2014  2013 
                
  (in thousands, except per share data) 
Statement of Operations Data:               
                
Net revenue $922,186  $884,535  $809,628  $717,569  $702,986 
Operating expenses:                    
Cost of operations, excluding depreciation and amortization  802,377   775,801   708,289   602,652   598,655 
Depreciation and amortization  66,796   66,610   60,611   59,258   58,890 
Loss on sale and disposal of equipment, net  1,142   767   866   1,113   1,032 
Gain on sale of imaging center and medical practice  (3,146)  –   (5,434)  –   (2,108)
Gain on return of common stock  –   (5,032)  –   –   – 
Meaningful use incentive  (250)  (2,808)  (3,270)  (2,034)  – 
Loss on extinguishment of debt  –   –   –   15,927   – 
Net income attributable to RadNet common stockholders  53   7,230   7,709   1,376   2,120 
                     
Basic income per share attributable to RadNet common stockholders  0.00   0.16   0.18   0.03   0.05 
                     
Diluted income per share attributable to RadNet common stockholders  0.00   0.15   0.17   0.03   0.05 
                     
Balance Sheet Data:                    
                     
Cash and cash equivalents $51,322  $20,638  $446  $307  $8,412 
Total assets  868,979   849,476   836,427   740,680   722,576 
Total long-term liabilities  607,448   642,082   643,007   599,708   601,977 
Total liabilities  799,054   797,423   799,966   732,982   720,366 
Working capital  43,745   62,573   72,410   58,746   57,955 
Equity  69,925   52,053   36,461   7,698   2,210 

Not Required.

31

35

Item 7.
Management’s Discussion and Analysis of Financial Condition and Results of Operations


The following Management’s Discussion and Analysis of Financial Condition and Results of Operations (“MD&A”) is intended to help the reader understand the results of operations and financial condition of RadNet, Inc. MD&A is provided as a supplement to, and should be read in conjunction with, our consolidated financial statements and the accompanying notes included in this annual report on Form 10-K.
Overview


We are a leading national provider of freestanding, fixed-site outpatient diagnostic imaging services in the United States based on number of locations and annual imaging revenue.States. At December 31, 2017,2023, we operated directly or indirectly through joint ventures 297with hospitals, 366 centers located in Arizona, California, Delaware, Florida, Maryland, New Jersey, and New York. Internationally, our subsidiary Heart & Lung Imaging Limited, provides teleradiology services for remote interpretation of images on behalf of providers within the framework of the United Kingdom's National Health Service. 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, in the notes accompanying our consolidated financial statements included in this report.

Our imaging centers centers provide physicians with imaging capabilities to facilitate the diagnosis and treatment of diseases and disorders and may reduce unnecessary invasive procedures, often reducing the cost and amount of care for patients.

Our services include magnetic resonance Integral to the imaging (MRI)center business is our software arm headed by eRad, Inc., computed tomography (CT), positron emission tomography (PET), nuclear medicine, mammography, ultrasound, diagnostic radiology (X-ray), fluoroscopy and other related procedures. The following table shows the number ofwhich sells computerized systems that we haddistribute, display, store and retrieve digital images.


We have also established an Artificial Intelligence (AI) business, that develops and deploys AI suites to enhance radiologist interpretations of breast, lung and prostate images. The division is led by our DeepHealth, Inc. subsidiary and includes our acquisitions of Aidence Holding B.V. and Quantib B.V., both based in operation as of the years ended December 31, 2017, 2016 and 2015:

  Years Ended December 31, 
  2017  2016  2015 
MRI  257   257   231 
CT  152   157   144 
PET/CT  49   47   46 
Mammography  261   279   260 
Ultrasound  614   551   498 
X-ray  285   272   393 
Nuclear Medicine  52   48   49 
Fluoroscopy  102   104   105 
Total equipment  1,772   1,715   1,726 

We derive substantially all of our revenue from fees charged for the diagnostic imaging services performed at our facilities. Netherlands.


The following table shows our facilitiesimaging centers in operation at year end diagnostic volumes and revenues for the years ended December 31, 2017, 20162023, 2022 and 2015:

  Years Ended December 31, 
  2017  2016  2015 
Facilities in operation  297   305   300 
Diagnostic imaging procedures  6,196,398   6,109,622   5,638,979 
Net revenues (millions) $922.2  $884.5  $809.6 

During 2017 we continued to focus on our most established markets, growing there through joint ventures and acquisitions. In conjunction with Cedars Sinai Medical Center, we entered into two new joint ventures in the city of Los Angeles. We acquired our main competitor in the state of Delaware, picking up an additional 5 multi-modality centers to consolidate our leadership position in that market. We sold our wholly-owned breast oncology practice, Breastlink Medical Group, completely divesting that practice along with 3 facilities. We also divested all of our holdings in the state of Rhode Island through the sale of 5 centers, concentrating our geographic focus on the Maryland to New York corridor with our Delaware acquisition. We also agreed to create a new joint venture with another hospital system consisting of 34 outpatient centers spread across southern Los Angeles and Orange counties in California.

36
2021:

 Years Ended December 31,
 202320222021
Centers in operation366 357 347 
Total revenue (millions)$1,617 $1,430 $1,315 

Our revenue is derived from a diverse mix of payors, including private payors and commercial insurance companies, managed care capitated payors, and government payors.payors such as Medicare and Medicaid. We believe our payor diversity mitigates our exposure to possible unfavorable reimbursement trends within any one payor class. In addition, our experience with capitation arrangements over the last several years has provided us with the expertise to manage utilization and pricing effectively, resulting in a predictable stream of revenue. Our service fee revenue, net of contractual allowances and discounts, the provision for bad debts,implicit price concessions, and revenue under capitation arrangements for the years ended December 31, 2023, 2022 and 2021 are summarized in the following table (in thousands):

  Years Ended December 31, 
  2017  2016  2015 
          
Commercial insurance $571,369  $539,793  $486,489 
Medicare  193,166   187,941   168,545 
Medicaid  25,821   28,170   23,948 
Workers' compensation/personal injury  35,195   36,548   32,728 
Other (1)  31,627   29,135   35,046 
Service fee revenue, net of contractual allowances and discounts  857,178   821,587   746,756 
Provision for bad debts  (46,555)  (45,387)  (36,033)
Net service fee revenue  810,623   776,200   710,723 
Revenue under capitation arrangements  111,563   108,335   98,905 
Total net revenue $922,186  $884,535  $809,628 

(1) Other consist of revenue from teleradiology services, consulting fees and software revenue.

We have developed our medical imaging business through a combination of organic growth, acquisitions and joint venture formations. For further information, see “Recent Developments and Facility Acquisitions and Dispositions” below.



32

In Thousands202320222021
Commercial insurance$897,948 $785,128 $743,462 
Medicare363,863 311,124 280,911 
Medicaid43,175 38,279 34,731 
Workers' compensation/personal injury47,364 51,339 44,235 
Other patient revenue42,249 31,849 19,398 
Management fee revenue17,936 22,235 19,630 
Software and teleradiology18,082 14,238 10,525 
Other20,111 19,428 12,436 
Revenue under capitation arrangements153,433 152,045 148,334 
Imaging center segment revenue1,604,161 1,425,665 1,313,662 
AI segment revenue12,469 4,396 1,415 
Total revenue$1,616,630 $1,430,061 $1,315,077 
We typically experience some seasonality to our business. During the first quarter of each year we generally experience the lowest volumes of procedures and the lowest level of revenue for any quarter during the year. This is primarily the result of two factors. First, our volumes and revenue are typically impacted by winter weather conditions in our northeastern operations. It is common for snowstorms and other inclement weather to result in patient appointment cancellations and, in some cases, imaging center closures. Second, in recent years, we have observed greater participation in high deductible health plans by patients. As these high deductibles reset in January for most of these patients, we have observed that patients utilize medical services less during the first quarter, when securing medical care will result in significant out-of-pocket expenditures.

Acquisitions, Equity Investments and Joint Venture Activity
The following discussion summarizes certain details concerning our acquisition or disposition of centers, our equity investments and our joint venture transactions. See Note 4, Business Combinations and Related Activity and Note 2, Summary of Significant Accounting Policies, in the notes accompanying our consolidated financial statements included in this annual report includefor further information.

Acquisitions

Imaging Center Segment
Radiology Imaging Center Asset Acquisitions:

During the accountsyears ended 2023, 2022 and 2021, we completed the acquisition of Radnet Management, BRMG and the NY Groups. The consolidated financial statements also include Radnet Management I, Inc., Radnet Management II, Inc., Radiologix, Inc., Radnet Management Imaging Services, Inc., Delaware Imaging Partners, Inc., New Jersey Imaging Partners, Inc. and Diagnostic Imaging Services, Inc. (DIS), all wholly owned subsidiaries of Radnet Management.

Accounting Standards Codification (ASC) 810-10-15-14,Consolidation, stipulates that generally any entity with a) insufficient equity to finance its activities without additional subordinated financial support provided by any parties, or b) equity holders that, as a group, lack the characteristics specified in the Codification which evidence a controlling financial interest, is considered a Variable Interest Entity (“VIE”). We consolidate all VIEs in which we own a majority voting interest and all VIEs for which we are the primary beneficiary. We determine whether we are the primary beneficiary of a VIE through a qualitative analysis that identifies which variable interest holder has the controlling financial interest in the VIE. The variable interest holder that has bothcertain assets of the following has the controlling financial interest and is the primary beneficiary: (1) the power to direct the activities of the VIE that most significantly impact the VIE’s economic performance and (2) the obligation to absorb losses of, or the right to receive benefits from, the VIE that could potentially be significant to the VIE. In performing our analysis, we consider all relevant facts and circumstances, including: the design and activities of the VIE, the terms of the contracts the VIE has entered into, the nature of the VIE’s variable interests issued and how they were negotiated with or marketed to potential investors, andentities, which parties participated significantlyeither engage directly in the designpractice of radiology or redesignassociated businesses. The primary reason for these acquisitions was to strengthen our presence in many of the entity.

Facility Acquisitions, Formationour markets. These acquisitions are reported as part of Joint Ventures and Dispositions

Facility acquisitions

On October 5, 2017 we completed our acquisition of all of the outstanding equity interests in RadSite, LLC, for $1.0 million in common stock and $856,000 in cash. RadSite provides both quality certification and accreditation programs for imaging providers in accordance with standards of private insurance payors and federal regulations under Medicare.Imaging Center segment. We have made a fair value determination of the acquired assets and assumed liabilities and the following were recorded (in thousands):



33

2023:
EntityDate AcquiredTotal ConsiderationProperty & EquipmentRight of Use AssetsGoodwillIntangible AssetsOtherRight of Use Liabilities
C.C.D.G.L.R. & S Services Inc.*1/1/20233,5004351,6893,01550—(1,689)
Southern California Diagnostic Imaging, Inc.*1/1/20231,8154661,1841,2725027(1,184)
Inglewood Imaging Center, LLC*2/1/20232,6008771,1881,6585015(1,188)
Ramapo Radiology Associates, P.C.*2/1/20232,0001,6633,7752291008(3,775)
Madison Radiology Medical Group, Inc.*4/1/2023250100—150———
Delaware Diagnostic Imaging, P.A.*8/1/202360040133714950—(337)
Total$10,765$3,942$8,173$6,473$300$50$(8,173)

*Fair Value Determination is Final

2022:
EntityDate AcquiredTotal ConsiderationProperty & EquipmentRight of Use AssetsGoodwillIntangible AssetsOtherRight of Use Liabilities
IFRC LLC*^1/1/20228,2002,9101,7035,271—19(1,703)
IFRC LLC*^1/1/20224,8002,1038572,697——(857)
Heart & Lung Imaging Limited+11/1/202232,000——16,20015,800——
Montclair Radiological Associates, P.A.*#10/1/202294,87716,4144,66579,690400(2,168)(4,124)
Chelsea Dignostic Radiology, P.C.*12/1/20222,800568—2,132100——
North Jersey Imaging Center, LLC*12/9/202210420—55254—
Total$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 & Lung Imaging Limited acquisition below.

Heart & Lung Imaging Limited. On November 1, 2022, we acquired a 75% controlling interest in Heart & 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 $91,000$31.9 million, including: (a) shares of our common stock with a fair value of $6.8 million

34

(359,002 shares issued at $19.06 per share), (b) cash of $6.3 million, (c) 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 (d) noncontrolling interest of $8.0 million. We recorded $0.6 million in current assets, $25,000$15.8 million in fixedintangible assets, a $150,000 covenant not to compete, $75,000 in$0.6 million current liabilities and $1.7$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 recorded.

37
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 October 1, 2017January 20, 2022, we acquired all the equity interests of Aidence Holding B.V. ("Aidence") an artificial intelligence enterprise focused on developing artificial intelligence powered applications for lung nodule management and early lung cancer diagnosis and reporting. The transaction was accounted for as an acquisition of a business and total purchase consideration was determined to be approximately $45.2 million including (a) 1,117,872 shares of our common stock issued at $26.80 per share with a fair value of $30.0 million (b) cash of $1.8 million, (c) 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 (d) 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 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 originally expected to complete the project following twelve months of acquisition. Subsequently, in September 2023, we determined that the IPR&D related to Aidence's Ai Veye Lung Nodule and Veye Clinic would not achieve FDA approval for sale in the US without a new submission and additional expenditures for rework. The additional expenditures, delay and reduction of US sales affected the estimated fair value of the associated IPR&D intangible asset and resulted in an impairment charge of $3.9 million within Cost of operations in our Consolidated Statements of Operations in the consolidated financial statements included with this report.

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 our AI capabilities to drive revenue growth.

Quantib B.V. On January 20, 2022, we completed our acquisition of certain assetsall the equity interests of Remote Diagnostic Imaging P.L.L.C., consistingQuantib B.V. ("Quantib") an artificial intelligence enterprise focused on developing artificial intelligence powered applications for neurological and prostate imaging scans and reporting. The transaction was accounted for as an acquisition of a single multi-modality center located in New York, New York, forbusiness and total purchase consideration was determined to be approximately $42.3 million including (a) 965,058 shares of $3.9 million. We have madeour common stock issued at $26.80 per share with a fair value determinationof $25.9 million (b) cash of $11.8 million and (c) 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.

35


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 acquiredQuantib 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 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 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 approximately $2.6intangible 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 our AI capabilities to drive revenue growth.
Subsidiary activity
Formation of majority owned subsidiaries
Los Angeles Imaging Group, LLC. On September 1, 2023, we formed a wholly-owned subsidiary, Los Angeles Imaging Group, LLC ("LAIG"). The operation offers multi-modality imaging services out of three locations in Los Angeles, California. We contributed the operations of 3 centers to the subsidiary. Cedars-Sinai Medical Center purchased from us a 35% noncontrolling economic interest in LAIG for a cash payment of $5.9 million. As a result of the transaction, we retain a 65% controlling economic interest in LAIG.
Frederick County Radiology, LLC. On April 1, 2022 we formed Frederick County Radiology, LLC ("FCR"), a partnership with Frederick Health Hospital, Inc. The operation offers multi-modality services out of six locations in Frederick, Maryland. We contributed the operations of four centers to the enterprise and Frederick Health Hospital, Inc. contributed $5.4 million in fixed assets, a $50,000 covenant not to compete, and $1.2$3.0 million in goodwill were recorded.

On August 7, 2017 we acquired Diagnostic Imaging Associates (“DIA”) for $13.0equipment, and $11.0 million in cashgoodwill. As a result of the transaction, we recognized a gain of $6.6 million to additional paid in capital and $1.5retained a 65% controlling economic interest in FCR and Frederick Health Hospital, Inc. retains an $11.1 million or 35% noncontrolling economic interest in FCR.

Advanced Radiology at Capital Region, LLC. On June 15, 2022 we formed Advanced Radiology at Capital Region, LLC, a partnership with Dimension Health Corporation, 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 Health Corporation for a 49% economic interest.
Simi Valley Imaging Group, LLC. On January 1, 2021 we formed the Simi Valley Imaging Group, LLC, a partnership with Simi Valley Hospital and Health Services. The operation will offer multi-modality imaging services out of two locations in Ventura County, California. Total investment in the venture is $0.4 million. We contributed $0.3 million in RadNet common stock. Located in the state of Delaware, DIA operates five multi-modality imaging locations which provide MRI, CT, Ultrasound, Mammographyassets for a 60.0% economic interest and X-Ray services. We have madeSimi Valley Hospital and Health Services contributed assets totaling $0.1 million for a fair value determination of the acquired assets and approximately $3.1 million of fixed assets and equipment, $1.2 million in current assets, and $10.2 million in goodwill were recorded.

On June 1, 2017 we completed our acquisition of certain assets of Stockton MRI and Molecular40.0% economic interest.

Joint venture investment contribution
Santa Monica Imaging Medical Center Inc., consisting of a multi-modality center located in Stockton, CA, for consideration of $4.4 million. The facility provides MRI, CT, Ultrasound, X-Ray and Nuclear Medicine services. We have made a fair value determination of the acquired assets and approximately $1.2 million of fixed assets and equipment, a $50,000 covenant not to compete, and $3.1 million of goodwill were recorded.

On May 3, 2017 we completed our acquisition of certain assets of D&D Diagnostics Inc., consisting of a single multi-modality imaging center located in Silver Spring, Maryland, for total purchase consideration of $2.4 million. We have made a fair value determination of the acquired assets and approximately $820,000 of fixed assets, $16,000 of other assets, and $1.5 million of goodwill were recorded. The facility provides MRI, CT, X-Ray and related services.

On February 1, 2017, we completed our acquisition of certain assets of MRI Centers, Inc., consisting of one single-modality imaging center located in Torrance, CA providing MRI and sports medicine services, for cash consideration of $800,000 and the payoff of $81,000 in debt. We have made a fair value determination of the acquired assets and approximately $289,000 of fixed assets, $9,800 of other assets, $100,000 covenant not to compete and $401,000 of goodwill were recorded.

On January 13, 2017, we completed our acquisition of certain assets of Resolution Medical Imaging Corporation for consideration of $4.0 million. The purchase of Resolution was enacted to contribute its assets to a joint venture with Cedars Sinai Medical Corporation which was effective April 1, 2017. See the formation of new joint ventures section in Note 2 in the financial statements contained herein for further information.

Formation of new joint ventures

Group, LLC

On April 1, 2017, we formed in conjunctureconjunction with Cedars SinaiCedars-Sinai Medical Center (“CSMC”) the Santa Monica Imaging Group, LLC (“SMIG”("SMIG"), consisting of two multi-modality imaging centers located in Santa Monica, CA. Total agreed contribution was $2.7 million of cash and assetsCalifornia with RadNet contributing $1.1 million forholding a 40% economic interest and CSMC contributing $1.6 million forCedars-Sinai Medical Center holding a 60% economic interest. For its contribution, RadNet transferred $80,000 in cash andWe account for our share of the net assets acquired inventure under the acquisition of Resolution Imaging of $2.5 million. CSMC contributed $120,000 in cash and paid RadNet $1.5 million for the Resolution Imaging assets transferred to the venture. RadNet does not have controllingequity method. On January 1, 2019, Cedars-Sinai Medical Center purchased an additional 5% economic interest in SMIG from us and, the investment is accounted for under the equity method.

On January 6, 2017, Image Medical Inc. (“Image Medical”),as a wholly owned subsidiary of RadNet, acquired a 49%result, our economic interest ScriptSender, LLC, a partnership held by two individuals which provides secure data transmission services of medical information. Through a management agreement, RadNet provides management and accounting services and receives an agreed upon fee. Image Medical will contribute $3.0 millionin SMIG was reduced to the partnership for its 49% ownership stake over a three year period representing the maximum risk in the venture. ScriptSender LLC is dependent on this contribution to finance its own activities, and as such we determined that it is a VIE, but we are not a primary beneficiary since we do not have the power to direct the activities of the entity that most significantly impact the entity’s economic performance. As of December 31, 2017, the carrying amount of the investment is $2.5 million.

38
35%.

Dispositions and Sales of Noncontrolling Interest

On September 1, 20172023, we completedcontributed an additional multi-modality imaging center and a newly constructed imaging center located in Beverly Hills, California valued at $27.2 million and purchased an additional economic interest in SMIG for cash payment of $11.3 million. Simultaneously, Cedars-Sinai Medical Center contributed five additional multi-modality imaging centers located in Santa Monica, California. As a result of the equity sale of a wholly owned breast oncology practice, Breastlink Medical Group, Inc.,transaction, our economic interest in SMIG has been increased to Verity Medical Foundation for approximately $2.8 million.49%. We recorded a gain of approximately $845,000$16.8 million, within (gain) on contribution of imaging centers into joint venturein our consolidated statement of operations representing the difference between the fair value and incurred severance expensecarrying value of approximately $1.2 million from this transaction.

On July 1, 2017 we formedthe business contributed.


36

Sale of ownership interest in a majority owned subsidiary Advanced Imaging at Timonium Crossing, LLC, in conjunction with the University of Maryland St. Joseph Medical Center. As part of that transaction, we sold a 25% noncontrolling interest in an imaging center of our wholly owned subsidiary, Advanced Imaging Partners, Inc., to the University of Maryland St. Joseph Medical Center for $3.9 million. On the date of sale, the net book value of the 25% interest was $1.1 million and the proceeds in excess of net book value amounting to $2.8 million were recorded to equity.

On April 28, 2017

Effective September 1, 2021 we completed the sale of five imaging centers operating in Rhode Island to Rhode Island Medical Imaging, Inc. for approximately $4.5 million. We recorded a gain of approximately $1.9 million in the second quarter with regard to this transaction and have no remaining imaging centers in the state.

On April 1, 2017 we received from Cedars Sinai Medical Center $5.9 million in exchange for a 25% noncontrolling24.9% ownership interest in theour majority owned subsidiary West Valley Imaging Group, LLC (“WVI”). The determined net bookfor $13.1 million to Tarzana Medical Center, LLC. After the sale, our ownership interest in the subsidiary has reduced from 75.0% to 50.1% and we retain a controlling financial interest in the subsidiary. We recognized in additional paid in capital on our consolidated balance sheets, $4.2 million excess in consideration over the carrying value of the 25% interest was approximately $3.0 million. The proceeds in excess of the net book value, amounting to $1.8 million net of taxes, were recorded to equity.

On April 1, 2017 we completedsold economic interest. Following the sale of 2 wholly owned oncology practices to Cedars Sinaiour ownership interest we acquired from Tarzana Medical Center, in connectionLLC, certain tangible and intangible business assets for purchase consideration of approximately $5.2 million.


Joint venture investment contributions to Arizona Diagnostic Radiology Group
During the years ended December 31, 2023 and 2022, we made additional equity contributions of $2.4 million and $1.4 million, respectively, 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 saledifference between the transaction price and carrying value of non-controlling interestsuch imaging centers which included equipment and other assets and an allocation of goodwill to such imaging centers. We recorded $4.5 million of the WVI subsidiary described abovetransaction 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 approximately $1.2the 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. We recorded a gain of approximately $361,000 on this transaction on the statement of operations.

39


Results of Operations

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

  Years Ended December 31, 
  2017  2016  2015 
NET REVENUE            
Service fee revenue, net of contractual allowances and discounts  88.5%   88.4%   88.3% 
Provision for bad debts  -4.8%   -4.9%   -4.3% 
Net service fee revenue  83.7%   83.5%   84.0% 
Revenue under capitation arrangements  11.5%   11.6%   11.7% 
Total net revenue  95.2%   95.1%   95.7% 
OPERATING EXPENSES            
Cost of operations, excluding depreciation and amortization  82.8%   83.4%   83.8% 
Depreciation and amortization  6.9%   7.2%   7.2% 
Loss on sale and disposal of equipment  0.1%   0.1%   0.1% 
Severance costs  0.2%   0.3%   0.1% 
Total operating expenses  90.0%   91.0%   91.1% 
INCOME FROM OPERATIONS  5.2%   4.1%   4.6% 
             
OTHER INCOME AND EXPENSES            
Interest expense  4.2%   4.7%   4.9% 
Meaningful use incentive  0.0%   -0.3%   -0.4% 
Equity in earnings of joint ventures  -1.4%   -1.1%   -1.1% 
Gain on sale of imaging centers and medical practice  -0.3%   0.0%   -0.6% 
Gain on return of common stock  0.0%   -0.5%   0.0% 
Loss on early extinguishment of senior notes  0.0%   0.0%   0.0% 
Other expenses  0.0%   0.0%   0.0% 
Total other expenses  2.4%   2.8%   2.8% 
INCOME BEFORE INCOME TAXES  2.7%   1.4%   1.8% 
Provision for income taxes  -2.5%   -0.5%   -0.7% 
NET INCOME  0.2%   0.9%   1.1% 
Net income attributable to noncontrolling interests  0.2%   0.1%   0.1% 
NET INCOME ATTRIBUTABLE TO RADNET, INC.            
COMMON STOCKHOLDERS  0.0%   0.8%   1.0% 

the years 2023, 2022 and 2021.


37

 Years Ended December 31,
 202320222021
REVENUE   
Service fee revenue90.5 %89.4 %88.7 %
Revenue under capitation arrangements9.5 %10.6 %11.3 %
Total Revenue100.0 %100.0 %100.0 %
   Provider relief funding— %— %0.7 %
OPERATING EXPENSES   
Cost of operations, excluding depreciation and amortization86.3 %88.4 %85.4 %
Gain on contribution of imaging centers into joint venture(1.0)%— %— %
Lease abandonment charges0.3 %— %1.5 %
Depreciation and amortization7.9 %8.1 %7.4 %
Loss on sale and disposal of equipment and other0.1 %0.2 %0.1 %
Severance costs0.2 %0.1 %0.1 %
Total operating expenses93.9 %96.8 %94.4 %
INCOME FROM OPERATIONS6.1 %3.2 %6.3 %
OTHER INCOME AND EXPENSES   
Interest expense4.0 %3.6 %3.7 %
Equity in earnings of joint ventures(0.4)%(0.7)%(0.8)%
Non-cash change in fair value of interest rate swaps0.5 %(2.8)%(1.6)%
Loss on extinguishment of debt and related expenses— %0.1 %0.5 %
Other (income) expenses(0.4)%0.1 %0.1 %
Total other expenses3.7 %0.2 %1.9 %
INCOME BEFORE INCOME TAXES2.4 %3.0 %4.5 %
Provision for income taxes(0.5)%(0.7)%(1.1)%
NET INCOME1.9 %2.3 %3.3 %
Net income attributable to noncontrolling interests1.7 %1.6 %1.5 %
NET INCOME ATTRIBUTABLE TO RADNET, INC.   
COMMON STOCKHOLDERS0.2 %0.7 %1.8 %

Imaging Center Segment

Year Ended December 31, 20172023 Compared to the Year Ended December 31, 2016

Service Fee Revenue, net2022

We grow our imaging center business through a combination of contractual allowancesorganic growth as well as acquisitions and discounts

Service fee revenue, net of contractual allowances and discounts forjoint ventures. In the year ended December 31, 2017 was $857.2 million compared to $821.6 million for the year ended December 31, 2016, an increase of $35.6 million, or 4.3%.

Service fee revenue, net of contractual allowances and discounts, for only those centers in operation throughout the full fiscal years of both 2017 and 2016, increased $40.4 million, or 5.3%. The overall 5.3% increase was precipitated by a 4% hike in volumes of advanced imaging modalities at the higher 2017 fee schedule reimbursement rates plus a 1.4% revenue increase on digital tomography procedures. This comparison excludes revenue contributions from centers that were acquired subsequent to January 1, 2016. For the year ended December 31, 2017, service fee revenue, net of contractual allowances and discounts, from centers that were acquired subsequent to January 1, 2016 and excluded from the above comparison was $47.1 million. For the year ended December 31, 2016, net revenue from centers that were acquired subsequent to January 1, 2016 and excluded from the above comparison was $51.9 million.

40

Provision for bad debts

Provision for bad debts increased $1.2 million, or 2.6%, to $46.6 million, or 4.8% of net revenue, for the year ended December 31, 2017 compared to $45.4 million, or 4.9% of net revenue, for the year ended December 31, 2016. We review our provision by the application of judgmentdiscussion below same center metrics are based on factors such as contractual reimbursement rates, payor mix, the age of receivables, historical cash collection experience and other relevant information.

Revenue under capitation arrangements

Revenue under capitation arrangements for the year ended December 31, 2017 was $111.5 million compared to $108.3 million for the year ended December 31, 2016, an increase of $3.2 million, or 3.0%%.

Revenue under capitation arrangements, including only thoseimaging centers whichthat were in operation throughout the full fiscal yearsperiod of both 2017 and 2016, increased $3.6 million, or 3.3%. This comparison excludes revenue contributions fromJanuary 1, 2022 through December 31, 2023. Excluded amounts relate to imaging centers that were acquired subsequent toor divested between January 1, 2016. For2022 through December 31, 2023.


Total Revenue                                                            
In ThousandsYear Ended December 31,
Revenue20232022$ Increase/(Decrease)% Change
Total Revenue$1,604,161$1,425,665$178,49612.5%
Same Center Revenue$1,465,076$1,372,134$92,9426.8%
Excluded$139,085$53,531——


38

Overall revenue change was driven by procedure volume growth of 5.7% compared to the yearsame period in the prior year. On a same center basis, the increase in revenue was largely attributable to product mix as advanced radiology procedures of MRI, PET, and CT expanded at combined 7.2% to provide the major portion of the revenue growth.

Operating Expenses
Total operating expenses for the twelve months ended December 31, 2017, revenue under capitation arrangements2023 increased approximately $130.8 million, or 9.7%, from centers that were acquired subsequent to January 1, 2016 and excluded from$1.35 billion for the above comparison was $129,000. For the yeartwelve months ended December 31, 2016, net revenue from centers that were acquired subsequent2022 to January 1, 2016 and excluded from the above comparison was $484,000.

Operating expenses

Cost of operations$1.48 billion for the yeartwelve months ended December 31, 2017 increased approximately $26.6 million, or 3.4%, from $775.8 million for the year ended December 31, 2016 to $802.4 million for the year ended December 31, 2017.2023. The following table sets forth our cost of operations and total operating expenses for the yearstwelve months ended December 31, 20172023 and 20162022 (in thousands):

  Years Ended December 31, 
  2017  2016 
       
Salaries and professional reading fees, excluding stock-based compensation $470,382  $445,690 
Stock-based compensation  6,787   5,826 
Building and equipment rental  78,627   74,214 
Medical supplies  42,625   51,735 
Other operating expenses *  203,956   198,336 
Cost of operations  802,377   775,801 
         
Depreciation and amortization  66,796   66,610 
Loss on sale and disposal of equipment  1,142   767 
Severance costs  1,821   2,877 
Total operating expenses $872,136  $846,055 

 Years Ended December 31,
 20232022
Salaries and professional reading fees, excluding stock-based compensation$860,464 $778,586 
Stock-based compensation24,575 20,988 
Building and equipment rental117,660 123,150 
Medical supplies86,213 68,712 
Other operating expenses*
282,124 249,157 
Cost of operations1,371,036 1,240,593 
Depreciation and amortization120,776 109,524 
Gain on contribution of imaging centers into joint venture(16,808)— 
Lease abandonment charges5,147 — 
Loss on sale and disposal of equipment2,191 2,506 
Severance costs1,972 926 
Total operating expenses$1,484,314 $1,353,549 
*Includes billing fees, office supplies, repairs and maintenance, insurance, business tax and license, outside services, telecommunications, utilities, marketing, travel and other expenses.

41

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

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

In ThousandsYear Ended December 31,
Salaries and Professional Fees20232022$ Increase/(Decrease)% Change
Total$860,464$778,586$81,87810.5%
Same Center$805,096$757,989$47,1076.2%
Excluded$55,368$20,597——

Similar to the prior year, growth in procedure volumes precipitated increases in salary expenses to meet additional professional staffing needs and we increased $24.7salaries as we seek to retain our skilled work force in the current tight labor market.
    Stock-based compensation

Stock-based compensation decreased $3.6 million, or 5.5%17.1%, to $470.4approximately $24.6 million for the twelve months ended December 31, 2023 compared to $21.0 million for the twelve months ended December 31, 2022.

39

    Building and equipment rental
In ThousandsYear Ended December 31,
Building & Equipment Rental20232022$ Increase/(Decrease)% Change
Total$117,660$123,150($5,490)(4.5)%
Same Center$104,257$113,277($9,020)(8.0)%
Excluded$13,403$9,873——
The decrease in building and equipment rental was the result of our contribution of Phoenix, AZ imaging centers in connection with the formation of the Arizona Diagnostic Radiology Group joint venture in November 2022 and from the buyout of radiology equipment lease contracts during the year.
    Medical supplies
In ThousandsYear Ended December 31,
Medical Supplies Expense20232022$ Increase/(Decrease)% Change
Total$86,213$68,712$17,50125.5%
Same Center$79,550$64,872$14,67822.6%
Excluded$6,663$3,840——

Increased medical supplies expense was related to the 7.2% growth in advanced radiology volumes noted above, combined with price increases for contrast agents and higher utilization of isotopes employed in PET and CT procedures.
    Other operating expenses
In ThousandsYear Ended December 31,
Other Operating Expenses20232022$ Increase/(Decrease)% Change
Total$282,124$249,157$32,96713.2%
Same Center$259,164$240,084$19,0787.9%
Excluded$22,960$9,073— —

The rise in other operating expenses is attributable to additional professional fees associated with our acquisition activity, contractor services, equipment and maintenance and software upgrades all in support of our expansion and increase in procedure volumes.
Additional segment operating and non operating expenses:
In ThousandsYear Ended December 31,
20232022$ Increase/(Decrease)% Change
Depreciation and Amortization$120,776$109,524$11,25210.3%
Loss on disposal of equipment and other$2,191$2,506($315)(12.6)%
(Gain) Loss on contribution of imaging centers into joint venture($16,808)— ($16,808)nm
Non-cash change in fair value of interest rate swaps$8,185($39,621)$47,806(120.7)%
Other (income) expenses($7,756)$3,467($11,223)(323.7)%
Severance$1,972$926$1,046113.0%
nm=not meaningful

The increase in depreciation expense was the result of our higher depreciable asset base. For the year ended December 31, 2023, we recognized a gain on the contribution of assets into our Santa Monica Imaging Group LLC joint venture. The non-cash expense associated with the change in fair value of our interest rate swaps for the year ended December

40

31, 2023 related to the expiration of our notional $100 million in 2019 swaps and the shorter term on our remaining $400 million notional 2019 swaps. The gain associated with the non-cash change in fair value of interest rate swaps during the year ended December 31, 2022 was driven by the significant increase in interest rates experienced during the period. Other income for the year ended December 31, 2017, compared2023 included money market interest income of $10.9 million, offset by an eRad loss on investments of $3.1 million. Other expenses in 2022 included approximately $0.7 million of debt restructuring charges related to $445.7the refinancing of our credit facilities with Truist in 2022 and an eRad loss on investments of $2.9 million. See Note 8, Credit Facilities and Notes Payable, in the notes accompanying our consolidated financial statements included in this report.

Lease abandonment charges

We closely monitor patient levels at our imaging centers and occasionally divest or shut down centers to maximize utilization rates. During the end of 2023, we experienced lower utilization at two imaging centers. As a result, we abandoned the leases related to these locations at the end of 2023 and diverted the patients to our other sites in the area. We recorded a charge of approximately $5.1 million in December 2023 related to lease facilities abandonment. The lease abandonment charges include the impairment of associated right-of-use assets of $2.7 million and write off of related leasehold improvements of approximately $2.5 million.


In ThousandsYear Ended December 31,
Lease abandonment charges20232022$ Increase/(Decrease)% Change
Total$5,147— $5,147— 
Same Center$5,147— $5,147— 
Excluded— — — — 

Impairment Charges

In September 2023, we determined that an IPR&D indefinite-lived intangible asset related to Aidence's Ai Veye Lung Nodule and Veye Clinic would not receive FDA approval for sale in the year ended December 31, 2016.

SalariesUS without a new submission and professional reading fees, limited to centers which wereadditional expenditures for rework in operation throughout the full fiscal yearsoriginal projected timeline. The additional expenditures, delay and reduction of both 2017 and 2016, increased $25.4 million, or 6.1%. 2% ofUS sales affected the 6.1% increase was due to physician staffing in correlation with the increase in net revenue. The other 4% increase was attributable to non-physician staffing cost due to increased volumes at centers along with ramping up our staffing in Reimbursement Operations and Self Pay team in an effort to increase collection and improve our collection rates. This comparison excludes contributions from centers that were acquired subsequent to January 1, 2016. For the year ended December 31, 2017, salaries and professional reading fees from centers that were acquired subsequent to January 1, 2016 and excluded from the above comparison was $24.9 million. For the year ended December 31, 2016, salaries and professional reading fees from centers that were acquired subsequent to January 1, 2016, and excluded from the above comparison was $25.6 million.

·Stock-based compensation

Stock-based compensation increased $960,000, or 16.5%, to $6.8 million for the year ended December 31, 2017 compared to $5.8 million for the year ended December 31, 2016. This increase was driven by the higherestimated fair value of stock based compensation awardedthe related IPR&D intangible asset and vestedresulted in the year 2017 as compared to 2016.

·Building and equipment rental

Building and equipment rental expenses increased $4.4 million, or 6.0 %, to $78.6 million for the year ended December 31, 2017, compared to $74.2 million for the year ended December 31, 2016.

Building and equipment rental expenses, including only those centers which were in operation throughout the full fiscal yearsimpairment charges of both 2017 and 2016, increased $4.7 million, or 6.7%, mainly related to new facility and radiology equipment leases in support of imaging operations. This comparison excludes contributions$3.9 million.

Interest expense
In ThousandsYear Ended December 31,
Interest Expense20232022$ Increase/(Decrease)% Change
Total Interest Expense$64,483$50,841$13,64226.8%
Interest related to derivatives*$(9,752)$7,806
Interest related to amortization**$2,987$2,693
Adjusted Interest Expense***$71,248$40,342$30,90676.6%
*Includes payments from centers that were acquired subsequent to January 1, 2017. For the year ended December 31, 2017, building and equipment rental expenses from centers that were acquired subsequent to January 1, 2016, and excluded from the above comparison, was $3.7 million. For the year ended December 31, 2016, building and equipment rental expenses from centers that were acquired subsequent to January 1, 2016, and excluded from the above comparison, was $4.0 million.

·Medical supplies

Medical supplies expense decreased $9.1 million, or 17.6%, to $42.6 million for the year ended December 31, 2017, compared to $51.7 million for the year ended December 31, 2016.

Medical supplies expense, including only those centers which were in operation throughout the full fiscal years of both 2017 and 2016, increased $508,000, or 1.7%. This comparison excludes contributions from centers that were acquired or divested subsequent to January 1, 2017. For the year ended December 31, 2017, medical supplies expense from centers that were acquired subsequent to January 1, 2016, and excluded from the above comparison was $11.4 million. For the year ended December 31, 2016, medical supplies expense from centers that were acquired subsequent to January 1, 2016, and excluded from the above comparison was $21.0 million.

·Other operating expenses

Other operating expenses increased $5.6 million, or 2.8%, to $204.0 million for the year ended December 31, 2017 compared to $198.3 million for the year ended December 31, 2016.

Other operating expenses, limited to only those centers which were in operation throughout the full fiscal years of both 2017 and 2016, increased $7.7 million or 4.1%. The increase was primarily related to insurance reserve charges, higher utility usage rates in the fourth quarter of the year, and billing services. This comparison excludes contributions from centers that were acquired or divested subsequent to January 1, 2016. For the year ended December 31, 2017, other operating expenses from centers that were acquired subsequent to January 1, 2016, and excluded from the above comparison were $8.8 million. For the year ended December 31, 2016, other operating expenses from centers that were acquired subsequent to January 1, 2016, and excluded from the above comparison were $10.9 million.

42
2019 swaps

·Depreciation and amortization expense

Depreciation and amortization expense increased $186,000, or 0.3%, to $66.8 million for the year ended December 31, 2017 when compared $66.6 million for the year ended December 31, 2016.

Depreciation and amortization expense at those centers which were in operation throughout the full fiscal years of both 2017 and 2016, decreased $32,000 or 0.1%.  This comparison excludes contributions from centers that were acquired or divested subsequent to January 1, 2016.  For the year ended December 31, 2017, depreciation and amortization from centers that were acquired or divested subsequent to January 1, 2016 and excluded from the above comparison was $2.8 million.  For the year ended December 31, 2016, depreciation and amortization from centers that were acquired subsequent to January 1, 2016, and excluded from the above comparison was $2.6 million.

·Loss on sale and disposal of equipment

Loss on sale of equipment was $1.1 million and $767,000 for the years ended December 31, 2017 and 2016, respectively, and primarily related to the difference between the net book value of certain equipment sold and proceeds we received from the sale.

·Severance costs

During the year ended December 31, 2017, we had severance costs of $1.8 million compared to $2.9 recorded during the year ended December 31, 2016. In the third quarter of 2017, we incurred severance expenses of $1.2 million specifically related to the disposition of Breastlink Medical Group.

Interest expense

Interest expense decreased approximately $2.8 million, or 6.5%, to $40.6 million for the year ended December 31, 2017 compared to $43.5 million for the year ended December 31, 2016. Interest expense for the year ended December 31, 2016 included $3.5 million of**Includes noncash amortization of deferred financing and discount on issuance of debt, and $24,000 of other non cash interest. Interest expense for the year ended December 31, 2016 included $4.3 million of amortization of deferred financingloan costs and discount on issuance of debt as well as $709,000 of deferred financing costs

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

The rise in relationadjusted interest expense is attributable to higher overall loan balances in combination with increased variable interest rates paid on those balances in comparison to the Restatement Amendment and $93,000same period in other non cash interest.

The cash portion ofthe prior year. During 2022 we refinanced our Truist term loan which added an additional $108.0 million in obligations to our balance sheet in the fourth quarter. Based on recent Federal Reserve interest expense decreased approximately $1.2 million forrate decisions, we expect the year ended December 31, 2017 compared to the year ended December 31, 2016. The decrease was primarily due to lowereffective interest rates on our term loan debt stemming fromsenior credit facilities, and the Fifth Amendment (defined below).related interest expense, to stabilize in the near term. See “Liquidity and Capital Resources” below for more details on our financing activity during 2017.

Meaningful use incentive

Forcredit facilities.


To mitigate our future floating rate interest expense exposure we entered into the years2019 swaps with locked in interest rates for one-month Term SOFR of 1.89% for $100 million of notional value and 1.98% for $400 million of notional value. We are liable for premium payments to the 2019 swap counterparties if interests rates are below the arranged rates, and receive payments from the 2019 swap counterparties if interest rates exceed the arranged rates. If interest rates were to theoretically

41

reduce to 0%, our maximum premium payment would be the difference between the two swapped rates and 0% then multiplied by the notional value of the swaps, or $1.89 million per year for the $100 million swap and $8.0 million per year for the $400 million swap. Payments under the 2019 swaps are settled in cash on a monthly basis. During the year ended December 31, 20172023, interest rates were above the arranged rates for most of the year and we received payment of $14.5 million in cash payments from our 2019 swap counterparties, which was reported a component of interest expense. See the Derivative Instruments section of Note 2, Summary of Significant Accounting Policies, in the notes accompanying the consolidated financial statements included in this report and Item 7A — "Quantitative and Qualitative Disclosure About Market Risk" below for more details on our derivative transactions.

Non-cash change in fair value of interest rate hedge

In 2020, we determined that the cash flows from the 2019 swaps did not match the cash flows of our Barclays term loan and were therefore ineffective as cash flow hedges. Since that time, in accordance with accounting guidelines, all changes in fair value are being recognized in other income and expense.

The fair value of the 2019 swaps at December 31, 2016, we recognized other income from meaningful use incentive2023 was a net asset of $15.1 million compared to a net asset of $23.3 million December 31, 2022, resulting in a loss of $8.2 million during the amountyear ended December 31, 2023, which decreased the Company’s tax provision by $2.1 million. The significant change in fair value was caused by the expiration of $250,000the $100 million swap in October 2023 and $2.8the shorter remaining term on the $400 million respectively. This amountswap, which offset the increase in market interest rates and the steepening of the yield curve. The one-month Term SOFR rate at December 31, 2023 was earned under a Medicare program to promoteapproximately 5.47%, higher than the use4.33% one-month Term SOFR rate at December 31, 2022 and significantly above the 1.98% arranged rate for the $400 million portion of electronic health record technology.

the 2019 swaps.


Equity in earnings from unconsolidated joint ventures

Equity

For the twelve months ended December 31, 2023 we recognized equity in earnings from our unconsolidated joint ventures increased $3.8of $6.4 million or 38.8% to $13.6versus $10.4 million for the yeartwelve months ended December 31, 2017 compared2022, a decrease of $4.0 million or 38.1%. The decrease in equity in earnings from unconsolidated joint ventures was due to $9.8the formation of Arizona Diagnostic Radiology Group in November 2022, which operated at a net loss in 2023.

Net income attributable to noncontrolling interests

At December 31, 2023, our consolidated subsidiaries operated 321 imaging centers of which 85 were not wholly-owned and thus a portion of their operating results were attributable to noncontrolling interests. At December 31, 2022, our consolidated subsidiaries included 318 centers of which 81 were not wholly-owned. As noncontrolling interests only represent a portion of our imaging center business, and excludes our AI segment which generated losses of $21.2 million in 2023, we do not expect changes in net income attributable to noncontrolling interests to correlate with changes in consolidated operating income or pretax income.

For the twelve months ended December 31, 2023, we recognized net income attributable to noncontrolling interests of $27.3 million versus $23.0 million for the yeartwelve months ended December 31, 2016.2022, an increase of $4.3 million. The increase relates mainlyin net income attributable to equitynoncontrolling interests was primarily due to the formation of a new majority owned subsidiary, Los Angeles Imaging Group, LLC in earnings stemming fromSeptember 2023 as described in Note 4 to the consolidated financial statements. We contributed the operations of three centers to Los Angeles Imaging Group, LLC, and Cedars-Sinai Medical Center contributed cash. Net income attributable to noncontrolling interests was also improved as a result of our acquisition of various interests in 2022, which were able to operate for full twelve months in 2023. In October 2022, our consolidated joint venture New Jersey Imaging Networks,Network, LLC, acquired the assets of Montclair Radiological associates, P.A. In November 2022 we acquired a joint venture where75% controlling interest in Heart & Lung Imaging Limited. Additionally in April 2022 we holdformed a 49% non-controlling interest,new majority owned subsidiary, Frederick County Radiology, LLC. See Note 4, Business Combinations and strong performances in other joint ventures basedRelated Activity, in the state of Maryland.

Gain on Sale of Imaging Center

In separate sale transactions over 2017, we recognized a combined gain on the sale of 5 wholly owned imaging centers in Rhode Island and 3 oncology practices, including the sale of Breastlink Medical Group, in the amount of $3.1 million.

43

Gain on return of common stock

In the second quarter of 2016, we recorded a gain on return of common stock of $5.0 million.

Other expenses / income

For the year ended December 31, 2017 we recorded approximately $8,000 of other income. For the year ended December 31, 2016, we recorded $196,000 of other expenses.

Provision for income tax expense

We had a tax provision for the year ended December 31, 2017 of $24.3 million or 92.1% of income before income taxes, compared to a tax provision for year ended December 31, 2016 of $4.4 million or 35.6% of income before income taxes. The increase in provision for income tax expense was significantly impacted by the recent changes in federal tax law. The Tax Cuts and Jobs Act or Tax Act was enacted on December 22, 2017 and reduces the US federal corporate tax rate to 21%, requires companies to pay a one-time transition tax on earnings of certain foreign subsidiaries that were previously tax deferred, and creates new taxes on certain foreign secured earnings. We have not completed our accounting for the tax effects of the Tax Act, however in certain cases we have made a reasonable estimate of the effects on our existing deferred tax balances and one-time transition tax. For the items for which we were able to determine a reasonable estimate, we remeasured certain deferred tax assets and liabilities based on the rates at which they are expected to reverse in the future, which is generally 21%. The changes effected by the Tax Act resulted in an increase in tax expense of $13.6 million. Of this provision amount,  $13.5 million is related to the revaluation of certain deferred tax balances and $0.1 million is related to one-time transition tax on deemed repatriation of foreign earnings. See Note 10 tonotes accompanying our consolidated financial statement contained hereinstatements included in this report, for a more details.

detailed discussion of these acquisitions.

AI Segment
Year Ended December 31, 20162023 Compared to the Year Ended December 31, 2015

Service Fee Revenue, net2022

Our AI segment develops and deploys clinical applications to enhance interpretation of contractual allowancesmedical images and discounts

Service feeimprove patient outcomes with a current emphasis on breast, prostate, and lung cancer diagnostics. The breakdown of revenue netand expenses of contractual allowances and discountsthe segment for the yeartwelve months ended December 31, 2016 was $821.6 million compared to $746.8 million2023 and 2022 are as follows:


42

In ThousandsTwelve Months Ended December 31,
20232022$ Increase/(Decrease)
Statement of Operations
Revenue$12,469$4,396$8,073
     Salaries and Wages$18,168$15,799$2,369
     Stock compensation2,2112,782(571)
     Other operating3,8245,171(1,347)
     Depreciation & Amort.7,6156,3541,261
     Other operating loss(4)23(27)
     Severance1,805201,785
Total operating expenses33,61930,1483,470
Loss from Operations(21,150)(25,752)4,602
Other (income) expense1,402(903)2,305
Loss before taxes(22,552)(24,851)2,299
Income taxes(1,955)(3,395)1,440
Segment net loss($20,597)($21,456)$859
The increase in revenues for the year endedAI segment was driven by the launch of new imaging products, including our Enhanced Breast Cancer Detection product which was initially released in 2022 and is being rolled out in certain of our imaging centers. The increase in operating expenses for the AI segment was primarily related to salary expense as we increased headcount in connection with the commercialization of our initial AI products. Our net loss for the segment was consistent with the prior year. We expect that our AI segment will continue to generate net losses over the next several years.

Year Ended December 31, 2015, an increase of $74.8 million, or 10.0%.

Service fee revenue, net of contractual allowances and discounts, for only those centers in operation throughout2022 Compared to the full fiscal years of both 2016 and 2015, increased $17.6 million, or 2.6%. This comparison excludes revenue contributions from centers that were acquired subsequent to January 1, 2015. Year Ended December 31, 2021


For the year ended December 31, 2016, service fee revenue, netcomparison of contractual allowances and discounts, from centers that were acquired subsequent to January 1, 2015 and excluded from the above comparison was $122.1 million. For the year ended December 31, 2015, net revenue from centers that were acquired subsequent to January 1, 2015 and excluded from the above comparison was $64.9 million.

Provision for bad debts

Provision for bad debts increased $9.4 million, or 26.0%, to $45.4 million, or 4.9% of net revenue, for the year ended December 31, 2016 compared to $36.0 million, or 4.3% of net revenue, for the year ended December 31, 2015. The 26% increase was related to service fee revenue growth from our 2015 acquisition activity combined with additional reserves based on management determination that collection efforts for certain accounts appear to have been exhausted. We review our provision by the application of judgment based on factors such as contractual reimbursement rates, payor mix, the age of receivables, historical cash collection experience and other relevant information.

Revenue under capitation arrangements

Revenue under capitation arrangements for the year ended December 31, 2016 was $108.3 million compared to $98.9 million for the year ended December 31, 2015, an increase of $9.4 million, or 9.5%.

44

Revenue under capitation arrangements, including only those centers which were in operation throughout the full fiscal years of both 2016 and 2015, increased $1.7 million, or 1.7%. This comparison excludes revenue contributions from centers that were acquired subsequent to January 1, 2015. For the year ended December 31, 2016, revenue under capitation arrangements from centers that were acquired subsequent to January 1, 2015 and excluded from the above comparison was $9.0 million. For the year ended December 31, 2015, net revenue from centers that were acquired subsequent to January 1, 2015 and excluded from the above comparison was $1.3 million.

Operating expenses

Costresults of operations for the year ended December 31, 2016 increased approximately $67.5 million, or 9.5%, from $708.3 million2022 to the year ended December 31, 2021, for both out Imaging Center and AI segments, please see Item 7 — "Management's Discussion and Analysis of Financial Condition and Operations" in our Form 10-K for the year ended December 31, 2015 to $775.8 million for2022, filed with the year ended December 31, 2016. The following table sets forth our operating expenses for the years ended December 31, 2016 and 2015 (in thousands):

  Years Ended December 31, 
  2016  2015 
       
Salaries and professional reading fees, excluding stock-based compensation $445,690  $402,528 
Stock-based compensation  5,826   7,647 
Building and equipment rental  74,214   71,666 
Medical supplies  51,735   49,417 
Other operating expenses *  198,336   177,031 
Cost of operations  775,801   708,289 
         
Depreciation and amortization  66,610   60,611 
Loss on sale and disposal of equipment  767   866 
Severance costs  2,877   745 
Total operating expenses $846,055  $770,511 

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

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

Salaries and professional reading fees increased $43.2 million, or 10.7%, to $445.7 million for the year ended December 31, 2016, compared to $402.5 million for the year ended December 31, 2015.

Salaries and professional reading fees for only those centers in operation throughout the full fiscal years of both 2016 and 2015, increased $16.2 million, or 4.2%. This comparison excludes contributions from centers that were acquired subsequent to JanuarySEC on March 1, 2015. For the year ended December 31, 2016, salaries and professional reading fees from centers that were acquired subsequent to January 1, 2015 and excluded from the above comparison was $48.0 million. For the year ended December 31, 2015, salaries and professional reading fees from centers that were acquired subsequent to January 1, 2015, and excluded from the above comparison was $21.0 million.

·Stock-based compensation

Stock-based compensation decreased $1.8 million, or 23.8%, to $5.8 million for the year ended December 31, 2016 compared to $7.6 million for the year ended December 31, 2015. This decrease was driven by the lower fair value of stock based compensation awarded and vested in the year 2016 as compared to 2015.

·Building and equipment rental

Building and equipment rental expenses increased $2.5 million, or 3.6%, to $74.2 million for the year ended December 31, 2016, compared to $71.7 million for the year ended December 31, 2015.

Building and equipment rental expenses, including only those centers which were in operation throughout the full fiscal years of both 2016 and 2015, decreased $3.3 million, or 5.2%, mainly due to favorable lease negotiations at existing facilities. This comparison excludes contributions from centers that were acquired subsequent to January 1, 2016. For the year ended December 31, 2016, building and equipment rental expenses from centers that were acquired subsequent to January 1, 2015, and excluded from the above comparison, was $12.9 million. For the year ended December 31, 2015, building and equipment rental expenses from centers that were acquired subsequent to January 1, 2015, and excluded from the above comparison, was $7.1 million.

45
2023.

·Medical supplies

Medical supplies expense increased $2.3 million, or 4.7%, to $51.7 million for the year ended December 31, 2016, compared to $49.4 million for the year ended December 31, 2015.

Medical supplies expense, including only those centers which were in operation throughout the full fiscal years of both 2016 and 2015, decreased $2.2 million, or 4.6%. This 4.6% decrease is primarily due to renegotiation of our medical supplier contracts. This comparison excludes contributions from centers that were acquired or divested subsequent to January 1, 2016. For the year ended December 31, 2016, medical supplies expense from centers that were acquired subsequent to January 1, 2015, and excluded from the above comparison was $7.1 million. For the year ended December 31, 2015, medical supplies expense from centers that were acquired subsequent to January 1, 2015, and excluded from the above comparison was $2.6 million.

·Other operating expenses

Other operating expenses increased $21.3 million, or 12.0%, to $198.3 million for the year ended December 31, 2016 compared to $177.0 million for the year ended December 31, 2015.

Other operating expenses, including only those centers which were in operation throughout the full fiscal years of both 2016 and 2015, decreased $2.5 million or 1.6%. This comparison excludes contributions from centers that were acquired or divested subsequent to January 1, 2015. For the year ended December 31, 2016, other operating expenses from centers that were acquired subsequent to January 1, 2015, and excluded from the above comparison were $43.5 million. For the year ended December 31, 2015, other operating expenses from centers that were acquired subsequent to January 1, 2015, and excluded from the above comparison were $19.7 million.

·Depreciation and amortization expense

Depreciation and amortization expense increased $6.0 million, or 9.9%, to $66.6 million for the year ended December 31, 2016 when compared $60.6 million for the year ended December 31, 2015.

Depreciation and amortization expense at those centers which were in operation throughout the full fiscal years of both 2016 and 2015, increased $793,000 or 1.4%.  This comparison excludes contributions from centers that were acquired or divested subsequent to January 1, 2015.  For the year ended December 31, 2016, depreciation and amortization from centers that were acquired or divested subsequent to January 1, 2015 and excluded from the above comparison was $10.0 million.  For the year ended December 31, 2015, depreciation and amortization from centers that were acquired subsequent to January 1, 2015 and excluded from the above comparison was $4.8 million.

·Loss on sale and disposal of equipment

Loss on sale of equipment was $767,000 and $866,000 for the years ended December 31, 2016 and 2015, respectively, and primarily related to the difference between the net book value of certain equipment sold and proceeds we received from the sale.

·Severance costs

During the year ended December 31, 2016, we had severance costs of $2.9 million compared to $745,000 recorded during the year ended December 31, 2015. In the third quarter of 2016, we incurred severance expenses of $2.2 million specifically related to the integration of acquisitions in the state of New York.

Interest expense

Interest expense increased approximately $1.8 million, or 4.3%, to $43.5 million for the year ended December 31, 2016 compared to $41.7 million for the year ended December 31, 2015. Interest expense for the year ended December 31, 2016 included $4.3 million of amortization of deferred financing and discount on issuance of debt, as well as a write off of $709,000 of deferred financing costs in relation to the Restatement Amendment and $93,000 of other non cash interest. Interest expense for the year ended December 31, 2015 included $5.4 million of amortization of deferred financing costs and discount on issuance of debt as well as $61,000 in other non cash interest.

46

The cash portion of interest expense increased approximately $2.1 million for the year ended December 31, 2016 compared to the year ended December 31, 2015. The increase was primarily due to higher interest rates on our term loan debt stemming from the Restatement Amendment and First Lien Credit Agreement. See “Liquidity and Capital Resources” below for more details on our financing activity during 2016.

Meaningful use incentive

For the years ended December 31, 2016 and December 31, 2015, we recognized other income from meaningful use incentive in the amount of $2.8 million and $3.3 million, respectively. This amount was earned under a Medicare program to promote the use of electronic health record technology.

Equity in earnings from unconsolidated joint ventures

Equity in earnings from our unconsolidated joint ventures increased $840,000 or 9.4% to $9.8 million for the year ended December 31, 2016 compared to $8.9 million for the year ended December 31, 2015. The increase relates mainly to equity in earnings stemming from the September 30, 2015 sale of 10 wholly owned centers from our subsidiary New Jersey Imaging Partners to New Jersey Imaging Networks, a joint venture where we hold a 49% non-controlling interest.

Gain on Sale of Imaging Center 

On September 30, 2015, we recognized a gain on the sale of 10 wholly owned imaging centers to the New Jersey Imaging Networks in the amount of $5.4 million.

Gain on return of common stock

In the second quarter of 2016, we recorded a gain on return of common stock of $5.0 million.

Other expenses / income

For the year ended December 31, 2016 we recorded approximately $196,000 of other expenses. For the year ended December 31, 2015, we recorded $419,000 of other expenses mainly related to acquisition activity.

Provision for income tax expense

For the years ended December 31, 2016 and December 31, 2015, we recorded income tax expense of $4.4 million and $6.0 million, respectively.

Non-GAAP Financial Measures

We use both GAAP and non-GAAP metrics to measure our financial results. We believe that, in addition to GAAP metrics, non-GAAP metrics such as Adjusted EBITDA and Free Cash Flow assist us in measuring our cash generatedcore operations from operations and abilityperiod to service our debt obligations.

period.

Adjusted EBITDA

Our Adjusted EBITDA metric removes non-cash and non-recurring charges that occur in the affected period and provides a basis for measuring the Company’s core financial performance against other periods.

We define Adjusted EBITDA as earnings before interest, taxes, depreciation and amortization, as adjusted to exclude losses or gains on the disposal of equipment, other income or loss, loss on debt extinguishments,extinguishment, bargain purchase gains, loss on de-consolidation of joint ventures, gain on contribution of imaging centers into joint ventures, and non-cash equity compensation.  Adjusted EBITDA includes equity earnings in unconsolidated operations and subtracts allocations of earnings to non-controlling interests in subsidiaries, and is adjusted for non-cash or one-time events that take place during the period.

47

Adjusted EBITDA is a non-GAAP financial measure used as an analytical indicator by us and the healthcare industry to assess business performance, and is a measure of leverage capacity and ability to service debt.performance. Adjusted EBITDA should not be considered a measure of financial performance under GAAP, and the items excluded from Adjusted EBITDA should not be considered in isolation or as alternatives to net income, cash flows generated by operating, investing or financing activities or other financial statement data presented in the consolidated financial statements as an indicator of financial performance or liquidity. Asperformance. Adjusted EBITDA is not a measurement determined in accordance with GAAP and is therefore susceptible to varying methods of calculation and this metric, as presented, may not be comparable to other similarly titled measures of other companies.


43

The following is a reconciliation of the nearest comparable GAAP financial measure, net income, to Adjusted EBITDA for the years ended December 31, 2017, 2016,2023, 2022, and 2015,2021, respectively (in thousands):

  Years Ended December 31, 
  2017  2016  2015 
          
          
Net income attributable to RadNet, Inc. common stockholders $53  $7,230  $7,709 
Plus provision for income taxes  24,310   4,432   6,007 
Plus other expenses  –   196   419 
Plus interest expense  40,623   43,455   41,684 
Plus severance costs  1,821   2,877   745 
Plus loss on sale and disposal of equipment  1,142   767   866 
Plus acquisition related working capital adjustment  –   6,072   – 
Plus legal settlements  –   –   1,425 
Plus reimbursable legal expenses  723   –   – 
Plus refinancing fees  235   606   – 
Plus expenses of divested/closed operations  3,186   –   – 
Less gain on sale of imaging center and medical practice  (3,146)  –   (5,434)
Less gain on return of common stock  –   (5,032)    
Less other income  (8)  –   – 
Plus depreciation and amortization  66,796   66,610   60,611 
Plus non-cash employee stock-based compensation  6,787   5,826   7,647 
Adjusted EBITDA $142,522  $133,039  $121,679 

Free Cash Flow

Another non-GAAP measure that we use is “Free Cash Flow”. We use free cash flow as an additional way of viewing our liquidity that, when viewed with our GAAP results, provides a more complete understanding of factors and trends affecting our cash flows, and consequently our ability to service debt and make capital expenditures. Free cash flow is used in addition to and in conjunction with results presented in accordance with GAAP and free cash flow should not be relied upon to the exclusion of GAAP financial measures.

We define free cash flow as Adjusted EBITDA, less capital expenditures, and less the cash portion of our interest expense. We reconcile free cash flow to “net cash flows provided by operating activities”. We use free cash flow to conduct and evaluate our business because, although it is similar to cash flow from operations, we believe it is a more conservative measure of cash flows since purchases of fixed assets and the cash portion of our interest expense are a necessary component of our ongoing operations. In limited circumstances in which proceeds from sales of fixed assets exceed purchases, free cash flow could exceed cash flow from operations. This occurred in the year ended December 31, 2015 and was related to the sale of our wholly-owned imaging centers in the state of New Jersey to the New Jersey Imaging Networks. However, since we do not anticipate being a net seller of fixed assets, we expect free cash flow to be less than operating cash flows.

Free cash flow has limitations due to the fact that it does not represent the residual cash flow available for discretionary expenditures. For example, free cash flow does not incorporate payments made on capital lease obligations or cash payments for business acquisitions. Therefore, we believe it is important to view Free Cash Flow as a complement to our entire consolidated statements of cash flows.

48

 Years Ended December 31,
 202320222021
Net income attributable to RadNet, Inc. common stockholders$3,044 $10,650 $24,727 
Income Taxes8,473 9,361 14,560 
Interest Expense64,483 50,841 48,830 
Severance costs3,778 946 744 
Depreciation and amortization128,391 115,877 96,694 
Non-cash employee stock-based compensation26,785 23,770 25,203 
Loss on sale and disposal of equipment2,187 2,529 1,246 
Loss on impairment3,950 — — 
Loss on extinguishment of debt and related expenses— 731 6,044 
Other (income) expenses(6,354)1,833 1,438 
Non-cash change in fair value of interest rate hedge8,185 (39,621)(21,670)
(Gain) loss on contribution of imaging centers into joint venture(16,808)— (565)
Legal settlement and related expenses— 2,197 831 
Lease abandonment charges5,146 — 19,675 
Non operational rent expenses3,628 4,297 — 
Non-Capitalized R&D - DeepHealth Cloud OS & Generative AI1,308 
Transaction costs HLH, Aidence Holding B.V., Quantib B.V, and WhiteRabbit222 927 1,171 
Valuation adjustment for contingent consideration(4,075)47 — 
Change in estimate related to refund liability— 8,089 — 
Adjusted EBITDA Including Losses from AI Segment and Provider Relief Funding$232,343$192,474$218,928
Provider relief funding— — (9,110)
Adjusted EBITDA including losses from AI Segment and excluding benefit from Provider Relief Funding$232,343$192,474$209,818 
Adjusted EBITDA Losses from AI segment12,765 16,575 2,122 
Adjusted EBITDA excluding Losses from AI Segment and Provider Relief Funding$245,108$209,049$211,940


The following table providesis a reconciliation of free cash flowGAAP net income for our AI Segment to “net cash flows from operations” the most directly comparable amounts reported in accordance with GAAPAdjusted EBITDA for the years ended December 31, 2017, 20162023, 2022 and 2015:

 Years Ended December 31, 
  2017  2016  2015 
Adjusted EBITDA $142,522  $133,039  $121,679 
Less cash paid for interest  (34,197)   (37,487)   (36,028)
Less cash capital purchases  (61,336)   (59,251)   (42,964)
Less new capital lease debt  (5,504)   (1,268)   (7,753)
Plus proceeds from sale of equipment  852   481   1,282 
Plus proceeds from sale of imaging and medical practice assets  8,429   –   35,500 
Free cash flow $50,766  $35,514  $71,716 
Free cash flow as a percent of            
cash flow from operations  35.7%  38.8%  107.0%

2021 respectively.


44

 Twelve Months Ended December 31,
 202320222021
Segment net loss$(20,597)$(21,456)$(5,060)
Stock Compensation2,211 2,782 1,796 
Depreciation & Amortization7,615 6,354 520 
Other operating loss(4)23 — 
Other expense (income)1,402 (903)622 
Severance1,805 20 — 
Income taxes(1,955)(3,395)— 
Non-cash change to contingent consideration(7,191)— — 
Impairment of IPR&D intangible asset3,950 — — 
Adjusted EBITDA AI Segment$(12,765)$(16,575)$(2,122)

Liquidity and Capital Resources

The cash we generate from our core operations enables us to fund ongoing operations, our research and development for new products and technologies including our investment in AI, and acquisition or expansion of imaging centers. We had net income attributableexpect to RadNet, Inc.’s common stockholders of $53,000, $7.2 million and $7.7 millioncontinue to generate positive cash flows from operations for the yearsforeseeable future. In June 2023, we closed on a public offering of our common stock raising net proceeds, after deducting underwriting discounts, commissions, and expenses, of $245.8 million. Accordingly, we believe that our current sources of funds will provide us with adequate liquidity during the 12-month period following December 31, 2023, as well as in the long-term.

The following table summarizes key balance sheet data as of December 31, 2023 and December 31, 2022 and income statement data for the twelve months ended December 31, 2017, 20162023, 2022 and 2015, respectively. We had cash and cash equivalents of $51.3 million and accounts receivable of $155.5 million at December 31, 2017, compared to cash of $20.6 and accounts receivable of $164.2 million at December 31, 2016. We had a working capital balance of $43.7 million and $62.6 million at December 31, 2017 and 2016, respectively. We also had total equity of $69.9 million and $52.1 million at December 31, 2017 and 2016, respectively.

2021 (in thousands):

Balance Sheet Data for the period ended December 31,202320222021
Cash and cash equivalents$342,570 $127,834 
Accounts receivable163,707 166,357 
Working capital (exclusive of current operating lease liability)197,805 (41,932)
Stockholders' equity813,359 491,452 
Income Statement data for the twelve months ended December 31,
Total revenue$1,616,630 $1,430,061 $1,315,077 
Net income attributable to RadNet common stockholders3,044 10,650 24,727 

We operate in a capital intensive, high fixed-cost industry that requires significant amounts of capital to fund operations. In addition to ongoing operations, we require a significant amountinvest in the purchase of capital for the initial start-up and development of new diagnostic imaging facilities, the acquisition of additional facilitiesequipment, and new diagnostic imaging equipment. Because our cash flows from operations have been insufficientthe acquisition of technology to fund all of these capital requirements,our growth. If economic or global business conditions slowed, we have depended on the availability of financing under credit arrangements with third parties.

Based on our current level of operations, we believe that cash flow from operations and over the next twelve months available cash, together with available borrowings from our senior secured credit facilities, will be adequate to meet our short-term liquidity needs. Our future liquidity requirements will be for working capital, capital expenditures, debt service and general corporate purposes. Our ability to meet our working capital and debt service requirements, however, is subject to future economic conditions and to financial, business and other factors, many of which are beyond our control. If we are not able to meet such requirements, we may be required to seek additional financing. There can be no assuranceexpect that we will be able to obtainadjust the pace of our investment activities.

We continually evaluate our cash needs and may decide it is best to raise additional capital or seek alternative financing from other sources onto fund the terms acceptable to us, if at all.

On a continuing basis, we also consider various transactions to increase stockholder value and enhancerapid growth of our business, results, including acquisitions, divestitures and joint ventures. These types of transactions may result in future cash proceedsthrough draw-downs on existing or payments but the general timing, sizenew debt facilities or success of any acquisition, divestiture or joint venture effort and the related potential capital commitments cannot be predicted.financing funds. We expect to fund any future acquisitionscapital requirements primarily with cash flow from operations and borrowings, including borrowing from amounts available under our senior secured credit facilities or through new equity or debt issuances.

We and our subsidiaries or affiliates may from time to time, in our or their sole discretion, continue to purchase, repay, redeem or retire any of our outstanding debt or equity securities in privately negotiated or open market transactions, by tender offer or otherwise. However, we have no formal plan of doing so at this time.

Sources and Uses of Cash

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

45

Cash Flow Data202320222021
     Cash provided by operating activities$220,863 $146,417 $149,491 
     Cash used in investing activities(201,470)(246,949)(221,511)
     Cash provided by financing activities195,635 93,647 104,673 
Cash provided by operating activities was $142.2 million, $91.6 million, and $67.0 million, for the yearsperiod ended December 31, 2017, 20162023 included $261.1 million in net income reconciling adjustments and 2015, respectively.

Cash used$40.3 million change in investing activities was $79.3 million, $65.5 million, and $96.8 million, for the years ended December 31, 2017, 2016 and 2015, respectively. For the year ended December 31, 2017, we purchased property and equipment for approximately $61.3 million, acquired the assets and businesses of additional imaging facilities for approximately $27.6 million. Offsetting ourliabilities. The $68.3 million increase in cash used in investingprovided by operating activities we received $8.4 million in proceeds from the sale of imaging and medical practice assets and $1.5 million received from joint venture partners.

49

Cash used in financing activities was $32.2 million for the year ended December 31, 2017,2023 compared to cashDecember 31, 2022 was primarily driven by an increase in income from operations and timing of payment.


Cash used in financinginvesting activities for the twelve months ended December 31, 2023 decreased from December 31, 2022 by $45.5 million. The changes included a $119.0 million reduction in purchases of $5.9imaging centers and other AI operations compared to 2022 which included our acquisition of Aidence Holding B.V. and Quantib B.V. for net consideration of $45.2 million and cash$42.3 million, respectively. This decrease was offset by an increase in the level of capital expenditures for property and equipment of $57.1 million.
Cash provided by financing activities of $29.9 million for the yearstwelve months ended December 31, 20162023 related primarily to a secondary public offering of our common stock, offset by payments including prepayments on our term loan, and payments of contingent consideration on recent acquisition transactions. In June 2023, we closed on a public offering of 8,711,250 shares of our common stock at a price to the public of $29.75 per share, resulting in net proceeds, after deducting underwriting discounts, commissions, and expenses, of $245.8 million. Payments on term loan debt for the twelve months ended December 31, 2023 were $41.1million. In addition, we made a prepayment of $30.0 million on our term loan to mitigate our exposure on variable interest debt as $100 million of notional value of our 2019 swaps matured in October 2023. On July 7, 2023, September 20, 2023 and December 12, 2023, we settled contingent liabilities associated with the acquisition related holdbacks and milestones for Quantib B.V. and Heart & Lung Imaging Limited with cash payments totaling $5.5 million.
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 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 $14.3 million and $15.4 million at December 31, 2023 and December 31, 2015,2022, respectively. The cash used byWe do not utilize factoring arrangements as an integral part of our financing for the year ended December 31, 2017 consisted of $170.0 million in new borrowings from the Fifth Amendment and Incremental Joinder Agreement with respect to our First Lienworking capital.

Senior Credit Agreement. See financing activity in 2017 below for a further description on this event. Payments onFacilities:
We maintain secured debt and revolver loans amounted to $196.7 million, which included a full payoff of the balance of our Second Lien Credit and Guaranty Agreement and contractual payments of equipment notes and capital leases totaled $6.8 million.

Senior Secured Credit Facilities

At December 31, 2017, our credit facilities werewith Barclays Bank PLC and with Truist Bank. The Barclays credit facilities are comprised of one tranche of senior secured first lien term loans (the “First Lien Term Loans”) and a revolving credit facility (the “Revolving Credit Facility”), both of which$195.0 million. The Truist credit facilities relate to our subsidiary New Jersey Imaging Network LLC, and are provided pursuant to the Amendedcomprised of a term loan and Restated First Lien Credit and Guaranty Agreement dated asa revolving credit facility of July 1, 2016 (as amended, the “First Lien Credit Agreement”). At December 31, 2017, we had $620.3 million aggregate principal amount of First Lien Term Loans outstanding and no principal borrowed under our Revolving Credit Facility. The Revolving Credit Facility provides for a maximum borrowing limit of $117.5 million and fully available to us at December 31, 2017, subject to customary drawing conditions.

$50.0 million. As of December 31, 2017,2023, we were in compliance with all covenants under outour credit facilities.

The following describes our 2017 Deferred financing activities:

Amendment No. 5, Consent and Incremental Joinder Agreement to Credit and Guaranty Agreement

On August 22, 2017, we entered into Amendment No. 5, Consent and Incremental Joinder Agreement to Credit and Guaranty Agreement (the “Fifth Amendment”) with respect to our First Lien Credit Agreement. Pursuant to the Fifth Amendment, we issued $170.0 million in incremental First Lien Term Loans, the proceeds of which were used to repay in full all outstanding Second Lien Term Loans and all other obligations under the Second Lien Credit Agreement.

Pursuant to the Fifth Amendment, we also changed the interest rate margin applicable to borrowings under the First Lien Credit Agreement. While borrowings under the First Lien Credit Agreement continue to bear interest at either an Adjusted Eurodollar Rate or a Base Rate (in each case, as more fully defined in the First Lien Credit Agreement) or a combination of both, at the election of the Company, plus an applicable margin. The applicable margin for Adjusted Eurodollar Rate borrowings and Base Rate borrowings was changed from 3.25% and 2.25%, respectively, to 3.75% and 2.75%, respectively, through an initial period which ends when financial reporting is delivered for the period ending September 30, 2017. Thereafter, the rates of the applicable margin for borrowing under the First Lien Credit Agreement will adjust dependingcosts on our leverage ratio, according to the following schedule:

First Lien Leverage RatioEurodollar Rate SpreadBase Rate Spread
> 5.50x4.50%3.50%
> 4.00x but ≤ 5.50x3.75%2.75%
>3.50x but ≤ 4.00x3.50%2.50%
≤ 3.50x3.25%2.25%

Atrevolving credit lines at December 31, 2017 the effective Adjusted Eurodollar Rate and the Base Rate for the First Lien Term Loans was 1.36% and 4.50%, respectively, and the applicable margin for Adjusted Eurodollar Rate and Base Rate borrowings remained at 3.75% and 2.75%, respectively.

Pursuant to the Fifth Amendment, the First Lien Credit Agreement was amended so that we can elect to request 1) an increase to the existing Revolving Credit Facility and/or 2) additional First Lien Term Loans, provided that the aggregate amount2023, net of such increases and additions does not exceed (a) $100.0accumulated amortization, totaled $1.6 million, and (b) as long as the First Lien Leverage Ratio (as defined in the First Lien Credit Agreement) would not exceed 4.00:1.00 after giving effect to such incremental facilities, an uncapped amount of incremental facilities, in each case subject to the conditions and limitations set forth in the First Lien Credit Agreement. Each lender approached to provide all or a portion of any incremental facility may elect or decline, in its sole discretion, to provide an incremental commitment or loan.

Pursuant to the Fifth Amendment, the First Lien Credit Agreement was also amended to (i) provide for quarterly payments of principal of the First Lien Term Loans in the amount of approximately $8.3with $1.1 million as compared to approximately $6.1 million prior to the Fifth Amendment, (ii) extend the call protection provided to the holders of the First Lien Term Loans for a period of twelve months following the date of the Fifth Amendment and (iii) provide us with additional operating flexibility, including the ability to incur certain additional debt and to make certain additional restricted payments, investments and dispositions, in each case as more fully set forth in the Fifth Amendment. Total issue costs for the Fifth Amendment aggregated to approximately $4.7 million. Of this amount, $4.1 million was identified and capitalized as discount on debt, $350,000 was capitalized as deferred financing costs and the remaining $235,000 was expensed. Amounts capitalized will be amortized over the remaining term of the agreement.

50

Fourth Amendment to First Lien Credit Agreement

On February 2, 2017, we entered into Amendment No. 4 to Credit and Guaranty Agreement (the “Fourth Amendment”) with respect to our First Lien Credit Agreement. Pursuant to the Fourth Amendment, the interest rate margin per annum on the First Lien Term Loans and the Revolving Credit Facility was reduced by 50 basis points, from 3.75% to 3.25%. Except for such reduction in the interest rate on credit extensions, the Fourth Amendment did not result in any other material modifications to the First Lien Credit Agreement. RadNet incurred expenses for the transaction in the amount of $543,000, which was recorded to discount on debt and will be amortized over the remaining term of the agreement.

The following describes our applicable financing prior to giving effect to the Fourth Amendment and Fifth Amendment discussed above.

First Lien Credit Agreement

On July 1, 2016, we entered into the First Lien Credit Agreement pursuant to which we amended and restated our then existing first lien credit facilities. Pursuant to the First Lien Credit Agreement, we originally issued $485 million of First Lien Term Loans and established the $117.5 million Revolving Credit Facility. Proceeds from the First Lien Credit Agreement were used to repay the previously outstanding first lien loans under the First Lien Credit Agreement, make a $12.0 million principal payment of the Second Lien Term Loans, pay costs and expenses related to the First Lien Credit AgreementBarclays revolving credit facility and provide approximately$0.5 million related to the Truist revolving credit facility.

Included in our consolidated balance sheets at December 31, 2023 are $813.0 million of total term loan debt (net of unamortized discounts of $10.0 million) displayed below in thousands:
 Face ValueDiscountTotal Carrying
Value
Barclays Term Loans$678,687 $(9,041)$669,646 
Truist Term Loan144,375 (990)143,385 
Total Term Loans$823,062 $(10,031)$813,031 

We had no outstanding balance under our $195.0 million Barclays revolving credit facility at December 31, 2023 and had reserved $7.6 million for general corporate purposes.

Interest.certain letters of credit. The interest rates payable on the First Lien Term Loans were (a) the Adjusted Eurodollar Rate (as defined in the First Lien Credit Agreement) plus 3.75% per annum or (b) the Base Rate (as defined in the First Lien Credit Agreement) plus 2.75% per annum. As appliedremaining $187.4 million of our Barclays revolving credit facility


46

was available to the First Lien Term Loans, the Adjusted Eurodollar Rate has a minimum floordraw upon as of 1.0%.

Payments.The scheduled quarterly principal payments of the First Lien Term Loans was approximately $6.1December 31, 2023. We also had no balance under our $50.0 million Truist revolving credit facility at December 31, 2023, and with the balance due at maturity.

Maturity Date. The maturity date for the First Lien Term Loans shall be on the earliest to occur of (i) July 1, 2023, (ii) the date on which all First Lien Term Loans shall become due and payable in full under the First Lien Credit Agreement, whether by acceleration or otherwise, and (iii) September 25, 2020 if our indebtedness under the Second Lien Credit Agreement had not been repaid, refinanced or extended prior to such date.

Revolving Credit Facility:The First Lien Credit Agreement provides for a $117.5 million Revolving Credit Facility. Revolving loans borrowed under the Revolving Credit Facility bear interest at either an Adjusted Eurodollar Rate or a Base Rate (in each case, as more fully defined in the First Lien Credit Agreement), plus an applicable margin. Pursuant to the Fifth Amendment, the applicable margin was amended to vary based on our leverage ratio in accordance with the following schedule:

First Lien Leverage RatioEurodollar Rate SpreadBase Rate Spread
> 5.50x4.50%3.50%
> 4.00x but ≤ 5.50x3.75%2.75%
>3.50x but ≤ 4.00x3.50%2.50%
≤ 3.50x3.25%2.25%

Forno letters of credit issued underreserved against the Revolving Credit Facility, letter of credit fees accrue atfacility, the applicable margin (see table above) for Adjusted Eurodollar Rate revolving loans and fronting fees accrue at 0.25% per annum, in each case on the average aggregate daily maximumfull amount was available to be drawn under all letters ofdraw upon. For more information on our secured credit issued underfacilities see Note 8, Credit Facilities and Notes Payable, in the First Lien Credit Agreement. In addition a commitment fee of 0.5% per annum accrues on the unused revolver commitments under the Revolving Credit Facility. As of December 31, 2017, the interest rate payable on revolving loans was 7.0%.

The Revolving Credit Facility will terminate on the earliest to occur of (i) July 1, 2021, (ii) the date we voluntarily agree to permanently reduce the Revolving Credit Facility to zero pursuant to section 2.13(b) of the First Lien Credit Agreement, and (iii) the date the Revolving Credit Facility is terminated due to specific events of default pursuant to section 8.01 of the First Lien Credit Agreement.

51
notes accompanying our consolidated financial statements in this report.


Second Lien Credit Agreement:

On March 25, 2014, we entered into the Second Lien Credit and Guaranty Agreement (the “Second Lien Credit Agreement”) pursuant to which we issued $180 million of second lien term loans (the “Second Lien Term Loans”). The proceeds from the Second Lien Term Loans were used to redeem our 10 3/8% senior unsecured notes, due 2018, to pay the expenses related to the transaction and for general corporate purposes. On July 1, 2016, in conjunction with the restated First Lien Credit Agreement, a $12.0 million principal payment was made on the Second Lien Term Loans. On August 22, 2017 the Second Lien Credit Agreement was repaid in full with the proceeds of First Lien Term Loans issued under the Fifth Amendment, as described above.

Contractual Commitments

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

  2018  2019  2020  2021  2022  Thereafter  Total 
Notes payable (1) $67,285  $65,215  $63,196  $61,266  $59,432  $467,450  $783,844 
Capital leases (2)  4,080   2,276   282   162   59   –   6,859 
Operating leases (3)  68,458   60,128   51,073   42,076   31,954   105,954   359,643 
Total $139,823  $127,619  $114,551  $103,504  $91,445  $573,404  $1,150,346 

(1)Includes variable rate debt for which the contractual obligation was estimated using the applicable rate at December 31, 2017.

(2)Includes interest component of capital lease obligations.

(3)Includes all operating leases through the end of their main lease term, excluding options on facility leases.

 20242025202620272028ThereafterTotal
Notes payable$20,324 $22,431 $22,676 $124,188 $650,454 $— $840,073 
Interest and fees on notes payable71,506 69,818 68,147 65,146 19,274 — 293,891 
Operating leases (1)97,603 92,092 91,400 88,977 85,633 482,594 938,299 
Total$189,433 $184,341 $182,223 $278,311 $755,361 $482,594 $2,072,263 

(1)Includes interest component of operating lease obligations.

We have an arrangementservice agreements with GE Medical Systemsvarious vendors under which it hasthey have agreed to be responsible for the maintenance and repair of a majority of our equipment for a fee that is based on the type and age of the equipment. Under this agreement,these agreements, we are committed to minimum payments of approximately $27.0$30.5 million per year through 2019.

in 2024.

Critical Accounting Policies

The Securities and Exchange Commission defines critical accounting estimates as those that are both most important to the portrayal of a company’s financial condition and results of operations and require management’s most difficult, subjective or complex judgment, often as a result of the need to make estimates about the effect of matters that are inherently uncertain and may change in subsequent periods. In Note 2 to our consolidated financial statements in this annual report on Form 10-K we discuss our significant accounting policies, including those that do not require management to make difficult, subjective or complex judgments or estimates. The critical areas involving management’s judgments and estimates are described below.

USE OF ESTIMATES - The financial statements werehave been prepared in accordance with U.S. generally accepted accounting principles (GAAP), which requires management to make estimates and assumptions that affect the amounts reported in the financial statements and accompanying notes. These estimates and assumptions affect various matters, including our reported amounts of assets and liabilities in our consolidated balance sheets at the dates of the financial statements; our disclosure of contingent assets and liabilities at the dates of the financial statements; and our reported amounts of revenues and expenses in our consolidated statements of operations during the reporting periods. These estimates involve judgments with respect to numerous factors that are difficult to predict and are beyond management’s control. As a result, actual amounts could materially differ from these estimates.

REVENUES - Service fee revenue, net of contractual allowances and discounts, consists of– Our revenues generally relate to net patient fees receivedthat we receive from various payors and patients themselves under contracts in which our performance obligations are to provide diagnostic services to the patients. Revenues are recorded during the period when our obligations to provide diagnostic services are satisfied. Our performance obligations for diagnostic services are generally satisfied over a period of less than one day. The contractual relationships with patients, in most cases, also involve a third-party payor (Medicare, Medicaid, managed care health plans and commercial insurance companies, including plans offered through the health insurance exchanges) and the transaction prices for the services provided are dependent upon the terms provided by Medicare and Medicaid, or negotiated with managed care health plans and commercial insurance companies. The 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 mainly upon establishedpredetermined rates per diagnostic services or discounted fee-for-service rates. Management continually reviews the contractual billing rates, less allowances forestimation process to consider and incorporate updates to laws and regulations and the frequent changes in managed care contractual adjustmentsterms resulting from contract renegotiations and discounts. renewals.
As it relates to BRMG and the NY Groups centers,Group (as defined in Note 1 Nature of Business included in the notes to our consolidated financial statements), this service fee revenue includes payments for both the professional medical interpretation revenue recognized by BRMG and the NY Groupsthem as well as the payment for all other aspects related to our providing the imaging services, for which we earn management fees from BRMG and the NY Groups.fees. As it relates to non-BRMG and NY Groupsother centers, namely the affiliated physician groups, this service fee revenue is earned through providing the use of our diagnostic imaging

47

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.

52

Service feeOur revenues are recorded during the period the services are provided based upon the estimated amounts duewe expect to be entitled to receive from the patients and third-party payors. Third-party payors include federal and state agencies (under the Medicare and Medicaid programs), managed care health plans, commercial insurance companies and employers. Estimates of contractual allowances under managed care and commercial insurance plans are based on historical collection rates of payor reimbursement contractupon the payment terms specified in the related contractual agreements. We also record a provision for doubtful accounts based primarily on historical collection ratesRevenues related to patient copaymentsuninsured patients and copayment and deductible amounts for patients who have health care coverage under one of our third-party payors.

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.

Under capitation arrangements with various health plans, we earn a per-enrollee amount each month for making available diagnostic imaging services to all plan enrollees under the capitation arrangement. Revenue under capitation arrangements is recognized in the period in which we are obligated to provide services to plan enrollees under contracts with various health plans.

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

  Years Ended December 31, 
  2017  2016  2015 
          
Commercial insurance $571,369  $539,793  $486,489 
Medicare  193,166   187,941   168,545 
Medicaid  25,821   28,170   23,948 
Workers' compensation/personal injury  35,195   36,548   32,728 
Other (1)  31,627   29,135   35,046 
Service fee revenue, net of contractual allowances and discounts  857,178   821,587   746,756 
Provision for bad debts  (46,555)  (45,387)  (36,033)
Net service fee revenue  810,623   776,200   710,723 
Revenue under capitation arrangements  111,563   108,335   98,905 
Total net revenue $922,186  $884,535  $809,628 

(1) Other consists of revenue from teleradiology services, consulting fees and software revenue.

PROVISION FOR BAD DEBTS - We provide for an allowance against accounts receivable that could become uncollectible to reduce the carrying value of such receivables to their estimated net realizable value. We estimate this allowance based on the aging

ACCOUNTS RECEIVABLE – Substantially all of our accounts receivable by the historical payment patterns of each type of payor, write-off trends, and other relevant factors. A significant portion of our provision for bad debt relates to co-payments and deductibles owed to usare due under fee-for-service contracts from patients with insurance. Although we attempt to collect deductibles and co-payments due from patients with insurance at the time of service, this attempt to collect at the time of service is not an assessment of the patient’s ability to pay nor are revenues recognized based on an assessment of the patient’s ability to pay. There are various factors that can impact collection trends,third party payors, such as changes in the economy, which in turn haveinsurance companies and government-sponsored healthcare programs, or directly from patients. Services are generally provided pursuant to one-year contracts with healthcare providers. We continuously monitor collections from our payors and maintain an impact on the increased burden of co-payments and deductibles to be made by patients with insurance. These factors continuously change and can have an impact on collection trends and our estimation process. Our allowance for bad debts based upon specific payor collection issues that we have identified and our historical experience.
BUSINESS COMBINATIONS – When the qualifications for business combination accounting treatment are met, it requires us to recognize separately from goodwill the assets acquired and the liabilities assumed at December 31, 2017their acquisition date fair values. Goodwill as of the acquisition date is measured as the excess of consideration transferred over the net of the acquisition date fair values of the assets acquired and 2016 was $34.6 millionthe liabilities assumed. While we use our best estimates and $20.7 million, respectively.

assumptions to accurately value assets acquired and liabilities assumed at the acquisition date, our estimates are inherently uncertain and subject to refinement. As a result, during the measurement period, which may be up to one year from the acquisition date, we record adjustments to the assets acquired and liabilities assumed with the corresponding offset to goodwill. Upon the conclusion of the measurement period or final determination of the values of assets acquired or liabilities assumed, whichever comes first, any subsequent adjustments are recorded to our consolidated statements of operations.


GOODWILL AND INDEFINITE LIVED INTANGIBLES -– Goodwill at December 31, 2017 totaled $256.8$679.5 million and $239.6$677.7 million at December 31, 2016.2023 and December 31, 2022, respectively. Indefinite lived intangible assets were $9.0 million at December 31, 20172023 and 2016 totaled $7.9$24.1 million at December 31, 2022 and are associated with the value of certain trade name intangibles.intangibles and IPR&D. Goodwill, and trade name intangibles and IPR&D are recorded as a result of business combinations. Management evaluates goodwill and trade name intangibles, at a minimum, on an annual basis and whenever events and changes in circumstances suggest thatWhen we determine the carrying amount may not be recoverable. Impairmentvalue of goodwill is tested at the reporting unit level by comparing the reporting unit’s carrying amount, including goodwill, to the fair value of the reporting unit. The fair value of a reporting unit is estimated using a combination of the income or discounted cash flows approach and the market approach, which uses comparable market data. If the carrying amount of the reporting unit exceeds its fair value, goodwill is considered impaired and a second step is performed to measurean impairment charge would be recognized which should not exceed the total amount of impairment loss, if any. Impairmentgoodwill allocated to that reporting unit. We determined fair values for each of the reporting units using the market approach, when available and appropriate, or the income approach, or a combination of both. We assess the valuation methodology based upon the relevance and availability of the data at the time we perform the valuation. If multiple valuation methodologies are used, the results are weighted appropriately.

We tested goodwill, trade name intangibles is tested at the subsidiary level by comparing the subsidiary’s trade name carrying amount to its respective fair value. We tested both goodwill and trade name intangiblesIPR&D for impairment on October 1, 2017, noting2023. On September 2023, we determined that an IPR&D indefinite-lived intangible asset related to Aidence's Ai Veye Lung Nodule and Veye Clinic would not receive FDA approval for sale in the US without a new submission and additional expenditures for rework in the original projected timeline. The additional expenditures, delay and reduction of US sales affected the estimated fair value of the related IPR&D intangible asset and resulted in impairment charges of $3.9 million within Cost of operations in our Consolidated Statements of Operations. Our annual impairment test as of October 1, 2023 noted no other impairment, and we have not identified any indicators of impairment through December 31, 2017.

53
2023.

Recent Accounting Standards

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

In May 2014, the FASB issued ASU No. 2014-09, Revenue from Contracts with Customers, (Topic 606). ASU 2014-09 requires an entity to recognize as revenue the amount that reflects the consideration to which it expects to be entitled in exchange for goods or services as it transfers control to its customers. It also requires more detailed disclosures to enable users of the financial statements to understand the nature, amount, timing and uncertainty of revenue and cash flows arising from contracts with customers. The Company’s current revenue recognition policies for our most significant revenue streams, materially comply with the amended guidance. The primary change for healthcare providers under the new guidance is the requirement to report the allowance for uncollectible accounts associated with patient responsibility amounts as a reduction in net revenue as opposed to bad debt expense as a component of operating expenses. The new standard supersedes most current revenue guidance, including industry-specific guidance, and may be applied retrospectively with cumulative effect recognized in retained earnings as of the date of adoption (modified retrospective method). The guidance became effective for the Company on January 1, 2018 and the Company adopted the new standard using the modified retrospective approach. As part of adopting the standard, the Company identified revenue streams of like contracts to allow for ease of implementation. The Company used primarily a portfolio approach to apply the new model to classes of customers with similar characteristics. The impact of adopting the new standard on our total revenue; and income from operations is not material. The immaterial impact of adopting Topic 606 primarily relates to recognizing certain credit and collection issues not known at the date of service, including bankruptcy,

See Note 3, Recent Accounting Standards, in the provision for uncollectible accounts included in expenses onnotes accompanying the consolidated statement of operations, which previously were netted against service revenue.  The impact to income from current activities is not material because the analysis of our contracts under the new revenue recognition standard supports the recognition of revenue consistent with our current revenue recognition model.  In addition, the number of our performance obligations under the new standard is not materially different from our contract segments under the existing standard. Lastly, the accounting for the estimate of variable consideration is not materially different compared to our current practice. As such, the adoption of this guidance is not expected to have a material impact on our Consolidated Financial Statements.

In February 2016, the FASB issued ASU No. 2016-02,Leases, (Topic 842): Amendments to the FASB Accounting Standards Codification. ASU 2016-02 amends the existing accounting standards for lease accounting, including requiring lessees to recognize most leases on their balance sheets and making targeted changes to lessor accounting. The new standard requires a modified retrospective transition approach for all leases existing at, or entered into after, the date of initial application, with an option to use certain transition relief. The amendments in this update are effective for fiscal years (and interim reporting periods within fiscal years) beginning after December 15, 2018. Early adoption of the amendments is permitted for all entities. We are currently evaluating the impact this guidance will have on our consolidated financial statements but expect this adoption will result in a significant increase in the assets and liabilities related to our leased properties and equipment.

In February 2018, the FASB issued ASU No. 2018-02 (“ASU 2018-02”),Reclassification of Certain Tax Effects from Accumulated Other Comprehensive Income. ASU 2018-02 allows for the reclassification of certain income tax effects related to the Tax Cuts and Jobs Act between “Accumulated other comprehensive income” and “Retained earnings.” This ASU relates to the requirement that adjustments to deferred tax liabilities and assets related to a change in tax laws or rates be included in “Income from continuing operations”, even in situations where the related items were originally recognized in “Other comprehensive income” (rather than in “Income from continuing operations”). ASU 2018-02 is effectivethis report for all entities for fiscal years beginning after December 15, 2018, and interim periods within those fiscal years, with early adoption permitted. Adoption of this ASU is to be applied either in the period of adoption or retrospectively to each period in which the effect of the change in the tax laws or rates were recognized. We are evaluating the effect of this guidance.

In January 2017, the FASB issued ASU No. 2017-04 (“ASU 2017-04”),Simplifying the Test for Goodwill Impairment. ASU 2017-04 eliminates the requirement to calculate the implied fair value of goodwill (i.e., Step 2 of the current goodwill impairment test) to measure a goodwill impairment charge. Instead, entities will record an impairment charge based on the excess of a reporting unit’s carrying amount over its fair value (i.e., measure the charge based on the current Step 1). ASU 2017-04 is effective for annual and any interim impairment tests for periods beginning after December 15, 2019, with early adoption permitted. We are evaluating the effect of this guidance.

In January 2017, the FASB issued ASU No. 2017-01 (“ASU 2017-01”),Clarifying the Definition of a Business. ASU 2017-01 changes the definition of a business to assist entities with evaluating when a set of transferred assets and activities is considered a business. ASU 2017-01 is effective for annual periods beginning after December 31, 2017 including interim periods within those periods. We do not anticipate any material impact on our financial position.

54
further information.


Subsequent Events

On January 1, 2018 we completed our acquisition of certain assets of Imaging Services Company of New York, LLC, consisting of a single multi-modality center located in New York, New York, for purchase consideration of $5.8 million.

On January 1, 2018, we formed Beach Imaging Group, LLC (“Beach Imaging”) and contributed the operations of 24 imaging facilities spread across southern Los Angeles and Orange Counties in exchange for a 60% economic interest. MemorialCare Medical Foundation (MCMF), a hospital system in southern California, contributed $22.9 million in cash along with the operations of 10 of its imaging facilities in southern California to receive a 40% economic interest in Beach Imaging. In connection with the same transaction, Beach Imaging agreed to sell one of its newly acquired imaging center from RadNet to MCMF for $1.7 million.

Additional Information


48

Additional information concerning RadNet, Inc., including our consolidated subsidiaries, for each of the years ended December 31, 2017, 20162023, 2022 and 20152021 is included in the consolidated financial statements and notes thereto in this annual report.

Item 7A.Quantitative and Qualitative Disclosures About Market Risk

Foreign Currency Exchange Risk. We receive payment forgenerate substantially all of our services exclusivelyrevenues and incur substantially all of our expenses in United States dollars. As a result, our financial results are unlikely to be materially affected by factors such as changes in foreign currency exchange rates or weak economic conditions in foreign markets.

We are exposed to foreign exchange risk with respect to revenues and expenses denominated in the Euro, Canadian Dollar, Hungarian Forint and Pound Sterling. We have AI operations in the Netherlands, radiology services in the United Kingdom, and maintain research and development facilitiescenters in Prince Edward Island, Canada and Budapest, Hungary for which expenses are paid in the local currency. Accordingly, we do have currency risk resulting from fluctuations between such local currency and the United States Dollar.Hungary. At the present time, we do not have any foreign currency exchange contracts to mitigate this risk. At December 31, 2017,2023, a hypothetical 1% decline in the currency exchange rates between the U.S. dollar against the Canadian dollar and the Hungarian Forintthese currencies, would have resulted in an annual increase of approximately $33,000$0.3 million in operating expenses.

Interest Rate SensitivitySensitivity. We pay interest on various types of debt instruments to our suppliers and lending institutions. The agreements entail either fixed or variable interest rates.  Instruments which have fixed rates are mainly leases on radiology equipment. Variable rate interest obligations relate primarily to amounts borrowed under our outstanding credit facilities. Accordingly, our interest expense and consequently, our earnings, are affected by changes in short term interest rates. However dueWe purchased the 2019 swaps to our purchase of caps, described below, the effects ofmitigate interest rate changes are limited.

At December 31, 2017, we had $620.3 millionrisk on a portion of our outstanding subject to an adjusted Eurodollar election on First Lien Term Loans. term loan debt, as described below.

We can elect EurodollarSOFR or Alternative Base Rate (Prime) interest rate options on amounts outstanding under the First Lien Term Loans.

To mitigate interest rate risk sensitivity, in the fourth quarter of 2016 we entered into two forward interest rate cap agreements (the “2016 Caps”) which were designated at inception as cash flow hedges of future cash interest payments. The 2016 Caps are designed to provide a hedge against interest rate increases. Under these arrangements, we purchased a cap on 3 month LIBOR at 2.0%.Barclay's term loan. At December 31, 2017, our effective 3 month LIBOR was 1.36%. The 2016 Caps have a2023, after giving effect to the $400 million notional amount of $150,000,000 and $350,000,000 and will mature in September and October 2020. We are liable forour 2019 swaps, we had $279.0 million outstanding subject to a $5.3 million premium to enter into the caps which is being accrued over the lifeSOFR election on our Barclay's term loan, at an effective rate plus applicable margin of the 2016 Caps. See Note 2 to the consolidated financial statements contained herein.

5.38%. A hypothetical 1% increase in the adjusted EurodollarSOFR rates under the First Lien Credit Agreement over the rates experienced in 2016Barclay's credit facility would after considering the effects of the 2016 Caps, result in an increase of $4.0$2.8 million in annual interest expense and a corresponding decrease in income before taxes.


We can elect SOFR or Base Rate interest rate options on amounts outstanding under the Truist credit facility. At December 31, 2017,2023, we had $144.4 million outstanding subject to an additional $8.1 million in debt instruments is tied to the prime rate.adjusted SOFR election on our Trust term loan. At December 31, 2023, our effective SOFR rate plus applicable margin was 7.24%. A hypothetical 1% increase in the prime rateadjusted SOFR rates under the Truist credit facility would result in an annual increase of approximately $1.4 million in annual interest expense of approximately $81,000 and a corresponding decrease in income before taxes. These amounts are determined by considering the impact of the hypothetical interest rates on the borrowing costs and cap agreements. These analyses do not consider the effects of the reduced level of overall economic activity that could exist in such an environment. Further, in the event of a change of such magnitude, our management would likely take actions to further mitigate its exposure to the change. However, due to the uncertainty of the specific actions that would be taken and their possible effects, the sensitivity analysis assumes no changes in our financial structure.




49

55

Item 8.Financial Statements and Supplementary Data

The Financial Statements are attached hereto and begin on page 57.

56



50


Report of Independent Registered Public Accounting Firm


To the Stockholders and the Board of Directors of RadNet, Inc.


Opinion on the Financial Statements

We have audited the accompanying consolidated balance sheets of RadNet, Inc. and subsidiaries (the(the Company) as of December 31, 20172023 and 2016,2022, the related consolidated statements of operations, comprehensive (loss) income, equity and cash flows for each of the three years in the period ended December 31, 2017,2023, and the related notes and the financial statement schedule listed in the Index at Item 15(a)(2) (collectively(collectively referred to as the “consolidated financial statements”). In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company at December 31, 20172023 and 2016,2022, and the results of its operations and its cash flows for each of the three years in the period ended December 31, 2017,2023, in conformity with U.S. generally accepted accounting principles.


We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the Company's internal control over financial reporting as of December 31, 2017,2023, based on criteria established in Internal Control-Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (2013 framework), and our report dated March 16, 2018February 29, 2024 expressed an adverseunqualified opinion thereon.


Basis for Opinion

These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on the Company’s financial statements based on our audits. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.


We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion.


Critical Audit Matter
The critical audit matter communicated below is a matter arising from the current period audit of the financial statements that was communicated or required to be communicated to the audit committee and that: (1) relates to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective, or complex judgments. The communication of the critical audit matter does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing a separate opinion on the critical audit matter or on the accounts or disclosures to which it relates.


51

Accounting for Revenue Recognition
Description of
the Matter
For the year ended December 31, 2023, the Company’s service fee revenue was $1,463 million. As discussed in Note 2 to the consolidated financial statements, service fee revenue is based upon the estimated amounts the Company expects to be entitled to receive from patients and third-party payors (Medicare, Medicaid, managed care health plans and commercial insurance companies). Estimates of contractual allowances and implicit price concessions associated with third-party payors and any amounts due directly from patients are based upon historical collection experience from such payors. The contractual allowance estimation process is periodically reviewed to consider and incorporate updates to the laws and regulations, changes in business and economic conditions and contractual terms resulting from contract negotiations and renewals. The Company also records estimated implicit price concessions (based primarily on historical collection experience) related to amounts due directly from patients to record these revenues and accounts receivable at the estimated amounts the Company expects to collect.

Auditing management’s estimates of contractual allowances and implicit price concessions was complex and judgmental due to the significant data inputs and subjective assumptions utilized in determining related amounts.
How We
Addressed the
Matter in Our
Audit
We obtained an understanding, evaluated the design, and tested the operating effectiveness of controls that address the risks of material misstatement relating to the measurement of service fee revenue. This included testing controls related to management’s review of the significant assumptions and inputs used in the determination of the estimated amount that would be collected for services rendered during the period. We also tested controls over the current and historical data used by management in determining this estimate, including the completeness and accuracy of the data.

To test the estimated contractual allowances and implicit price concessions, we performed audit procedures that included, among others, assessing methodologies and evaluating the significant assumptions discussed above and testing the completeness and accuracy of the underlying data used by the Company in its estimates. We also assessed the historical accuracy of management’s estimates as a source of potential corroborative or contrary evidence.


/s/ Ernst & Young LLP


We have served as the Company’s auditor since 2007.

Los Angeles, California

March 16, 2018

57

February 29, 2024


52

RADNET, INC. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

(IN THOUSANDS EXCEPT SHARE AND PER SHARE DATA)

 As of December 31, 
  2017  2016 
ASSETS      
CURRENT ASSETS        
Cash and cash equivalents $51,322  $20,638 
Accounts receivable, net  155,518   164,210 
Due from affiliates  2,343   2,428 
Prepaid expenses and other current assets  26,168   28,435 
Assets held for sale  –   2,203 
Total current assets  235,351   217,914 
PROPERTY AND EQUIPMENT, NET  244,301   247,725 
OTHER ASSETS        
Goodwill  256,776   239,553 
Other intangible assets  40,422   42,682 
Deferred financing costs, net of current portion  1,895   2,004 
Investment in joint ventures  52,435   43,509 
Deferred tax assets, net of current portion  30,852   50,356 
Deposits and other  6,947   5,733 
Total assets $868,979  $849,476 
LIABILITIES AND EQUITY        
CURRENT LIABILITIES        
Accounts payable, accrued expenses and other $135,809  $111,166 
Due to affiliates  16,387   13,141 
Deferred revenue related to software sales  2,606   1,516 
Current portion of deferred rent  2,714   2,961 
Current portion of notes payable  30,224   22,031 
Current portion of obligations under capital leases  3,866   4,526 
Total current liabilities  191,606   155,341 
         
LONG-TERM LIABILITIES        
Deferred rent, net of current portion  26,251   24,799 
Notes payable, net of current portion  572,365   609,445 
Obligations under capital lease, net of current portion  2,672   2,730 
Other non-current liabilities  6,160   5,108 
Total liabilities  799,054   797,423 
         
EQUITY        
RadNet, Inc. stockholders' equity:        
Common stock - $.0001 par value, 200,000,000 shares authorized; 47,723,915 and 46,574,904 shares issued and outstanding at December 31, 2017 and 2016, respectively  5   4 
Additional paid-in-capital  212,261   198,387 
Accumulated other comprehensive (loss) gain  (548)  306 
Accumulated deficit  (150,158)  (150,211)
Total RadNet, Inc.'s stockholders' equity  61,560   48,486 
Non-controlling interests  8,365   3,567 
Total equity  69,925   52,053 
Total liabilities and equity $868,979  $849,476 

As of December 31,
 20232022
ASSETS  
CURRENT ASSETS  
Cash and cash equivalents$342,570 $127,834 
Accounts receivable163,707 166,357 
Due from affiliates25,342 18,971 
Prepaid expenses and other current assets47,657 54,022 
Total current assets579,276 367,184 
PROPERTY, EQUIPMENT AND RIGHT-OF-USE ASSETS
Property and equipment, net604,401 565,961 
Operating lease right-of-use-assets596,032 603,524 
Total property, equipment and right-of-use-assets1,200,433 1,169,485 
OTHER ASSETS
Goodwill679,463 677,665 
Other intangible assets90,615 106,228 
Deferred financing costs1,643 2,280 
Investment in joint ventures92,710 57,893 
Deposits and other46,333 53,172 
Total assets$2,690,473 $2,433,907 
LIABILITIES AND EQUITY
CURRENT LIABILITIES
Accounts payable, accrued expenses and other$342,940 $369,595 
Due to affiliates15,910 23,100 
Deferred revenue4,647 4,021 
Current portion of operating lease liability55,981 57,607 
Current portion of notes payable17,974 12,400 
Total current liabilities437,452 466,723 
LONG-TERM LIABILITIES
Long-term operating lease liability605,097 604,117 
Notes payable, net of current portion812,068 839,344 
Deferred tax liability, net15,776 9,256 
Other non-current liabilities6,721 23,015 
Total liabilities1,877,114 1,942,455 
EQUITY
RadNet, Inc. stockholders' equity:
Common stock - $.0001 par value, 200,000,000 shares authorized; 67,956,318 and 57,723,125 shares issued and outstanding at December 31, 2023 and 2022 respectively7 6 
Additional paid-in-capital722,750 436,288 
Accumulated other comprehensive loss(12,484)(20,677)
Accumulated deficit(79,578)(82,622)
Total RadNet, Inc.'s stockholders' equity630,695 332,995 
Noncontrolling interests182,664 158,457 
Total equity813,359 491,452 
Total liabilities and equity$2,690,473 $2,433,907 

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

58


53


RADNET, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF OPERATIONS

(IN THOUSANDS EXCEPT SHARE AND PER SHARE DATA)

  Years Ended December 31, 
  2017  2016  2015 
          
NET REVENUE            
Service fee revenue, net of contractual allowances and discounts $857,178  $821,587  $746,756 
Provision for bad debts  (46,555)  (45,387)  (36,033)
Net service fee revenue  810,623   776,200   710,723 
Revenue under capitation arrangements  111,563   108,335   98,905 
Total net revenue  922,186   884,535   809,628 
OPERATING EXPENSES            
Cost of operations, excluding depreciation and amortization  802,377   775,801   708,289 
Depreciation and amortization  66,796   66,610   60,611 
Loss on sale and disposal of equipment  1,142   767   866 
Severance costs  1,821   2,877   745 
Total operating expenses  872,136   846,055   770,511 
INCOME FROM OPERATIONS  50,050   38,480   39,117 
             
OTHER INCOME AND EXPENSES            
Interest expense  40,623   43,455   41,684 
Meaningful use incentive  (250)  (2,808)  (3,270)
Equity in earnings of joint ventures  (13,554)  (9,767)  (8,927)
Gain on sale of imaging centers and medical practice  (3,146)  –   (5,434)
Gain on return of common stock  –   (5,032)  – 
Other (income) expenses  (8)  196   419 
Total other expenses  23,665   26,044   24,472 
INCOME BEFORE INCOME TAXES  26,385   12,436   14,645 
Provision for income taxes  (24,310)  (4,432)  (6,007)
NET INCOME  2,075   8,004   8,638 
Net income attributable to noncontrolling interests  2,022   774   929 
             
NET INCOME ATTRIBUTABLE TO RADNET, INC. COMMON STOCKHOLDERS $53  $7,230  $7,709 
             
BASIC NET INCOME PER SHARE ATTRIBUTABLE TO RADNET, INC. COMMON STOCKHOLDERS $0.00  $0.16  $0.18 
             
DILUTED NET INCOME PER SHARE ATTRIBUTABLE TO RADNET, INC. COMMON STOCKHOLDERS $0.00  $0.15  $0.17 
             
WEIGHTED AVERAGE SHARES OUTSTANDING            
Basic  46,880,775   46,244,188   43,805,794 
Diluted  47,401,921   46,655,032   45,171,372 

 Years Ended December 31,
 202320222021
REVENUE   
Service fee revenue$1,463,197 $1,278,016 1,166,743 
Revenue under capitation arrangements153,433 152,045 148,334 
Total revenue1,616,630 1,430,061 1,315,077 
Provider relief funding— — 9,110 
OPERATING EXPENSES
Cost of operations, excluding depreciation and amortization1,395,239 1,264,346 1,123,274 
Gain on contribution of imaging centers into joint venture(16,808)— — 
Lease abandonment charges5,146 — 19,675 
Depreciation and amortization128,391 115,877 96,694 
Loss on sale and disposal of equipment and other2,187 2,529 1,246 
Severance costs3,778 946 744 
Total operating expenses1,517,933 1,383,698 1,241,633 
INCOME FROM OPERATIONS98,697 46,363 82,554 
OTHER INCOME AND EXPENSES
Interest expense64,483 50,841 48,830 
Equity in earnings of joint ventures(6,427)(10,390)(10,967)
Non-cash change in fair value of interest rate swaps8,185 (39,621)(21,670)
Loss on extinguishment of debt and related expenses— 731 6,044 
Other (income) expenses(6,354)1,833 1,438 
Total other expenses59,887 3,394 23,675 
INCOME BEFORE INCOME TAXES38,810 42,969 58,879 
Provision for income taxes(8,473)(9,361)(14,560)
NET INCOME30,337 33,608 44,319 
Net income attributable to noncontrolling interests27,293 22,958 19,592 
NET INCOME ATTRIBUTABLE TO RADNET, INC. COMMON STOCKHOLDERS$3,044 $10,650 $24,727 
BASIC NET INCOME PER SHARE ATTRIBUTABLE TO RADNET, INC. COMMON STOCKHOLDERS$0.05 $0.19 $0.47 
DILUTED NET INCOME PER SHARE ATTRIBUTABLE TO RADNET, INC. COMMON STOCKHOLDERS$0.05 $0.17 $0.46 
WEIGHTED AVERAGE SHARES OUTSTANDING
Basic63,580,059 56,293,336 52,496,679 
Diluted64,658,299 57,320,870 53,421,033 
The accompanying notes are an integral part of these financial statements.

59


54

RADNET, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF COMPREHENSIVE (LOSS) INCOME

(IN THOUSANDS)

  Years Ended December 31, 
  2017  2016  2015 
          
NET INCOME $2,075  $8,004  $8,638 
Foreign currency translation adjustments  26   (49)  (41)
Change in fair value of cash flow hedge, net of taxes  (880)  508   – 
COMPREHENSIVE INCOME  1,221   8,463   8,597 
Less comprehensive income attributable to non-controlling interests  2,022   774   929 
             
COMPREHENSIVE (LOSS) INCOME ATTRIBUTABLE TO RADNET, INC. COMMON STOCKHOLDERS $(801) $7,689  $7,668 

 Years Ended December 31,
 202320222021
NET INCOME$30,337 $33,608 $44,319 
Currency translation adjustments4,617 (3,943)(65)
Change in fair value of cash flow hedge from prior periods reclassified to earnings3,576 3,687 3,695 
COMPREHENSIVE INCOME38,530 33,352 47,949 
Less comprehensive income attributable to noncontrolling interests27,293 22,958 19,592 
COMPREHENSIVE INCOME ATTRIBUTABLE TO RADNET, INC. COMMON STOCKHOLDERS$11,237 $10,394 $28,357 

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

60


55

RADNET, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENT OF EQUITY

(IN THOUSANDS EXCEPT SHARE DATA)

      Additional  Accumulated Other     Radnet, Inc.       
 Common Stock  Paid-in  Comprehensive  Accumulated  Stockholders'  Noncontrolling  Total 
 Shares  Amount  Capital  (Loss) Income  Deficit  Equity  Interests  Equity 
BALANCE - JANUARY 1, 2015  42,825,676  $4  $177,750  $(112) $(172,280) $5,362  $2,336  $7,698 
Issuance of common stock upon exercise of options/warrants  835,098   –   594    –       –       594       –       594  
Stock-based compensation  –   –   7,635   –   –   7,635   –   7,635 
Issuance of restricted stock and other awards  1,014,423   –   –   –   –   –   –   – 
Forfeiture of restricted stock  (59,053)  –   –   –   –   –   –   – 
Issuance of stock for acquisitions  1,665,045   –   9,241   –   –   9,241   –   9,241 
Sale to noncontrolling interests, net of taxes  –   –   2,077   –   –   2,077   1,348   3,425 
Distributions paid to noncontrolling interests  –   –   –   –   –    –     (729)    (729)
Change in cumulative foreign currency translation adjustment  –   –   –   (41)  –   (41)  –   (41)
Net income  –   –   –   –   7,709   7,709   929   8,638 
BALANCE - DECEMBER 31, 2015  46,281,189  $4  $197,297  $(153) $(164,571) $32,577  $3,884  $36,461 
Cumulative effect of accounting change due to adoption of ASU 2016-09  –   –   –   –   7,130   7,130   –   7,130 
Issuance of common stock upon exercise of options/warrants  314,448   –   150   –   –   150   –   150 
Stock-based compensation  –   –   5,767   –   –   5,767   –   5,767 
Issuance of restricted stock and other awards  937,803   –   –   –   –   –   –   – 
Return of common stock  (958,536)  –   (5,032)  –   –   (5,032)  –   (5,032)
Purchase of noncontrolling interests  –   –   (495)  –   –   (495)  (599)  (1,094)
Sale to noncontrolling interests, net of taxes  –   –   700   –   –   700   –   700 
Distributions paid to noncontrolling interests  –   –   –   –   –   –   (492)  (492)
Change in cumulative foreign currency translation adjustment  –   –   –   (49)  –   (49)  –   (49)
Change in fair value cash flow hedge, net of taxes  –   –   –   508   –   508   –   508 
Net income  –   –   –   –   7,230   7,230   774   8,004 
 BALANCE - DECEMBER 31, 2016  46,574,904  $4  $198,387  $306  $(150,211) $48,486  $3,567  $52,053 
Stock-based compensation  867,248   1   7,833   –   –   7,834   –   7,834 
Issuance of stock for acquisitions  281,763   –   2,500   –   –   2,500   –   2,500 
Sale to noncontrolling interests, net of taxes  –   –   3,541   –   –   3,541   –   3,541 
Contributions from noncontrolling interests  –   –   –   –   –   –   4,304   4,304 
Distributions paid to noncontrolling interests  –   –   –   –   –   –   (1,528)  (1,528)
Change in cumulative foreign currency translation adjustment  –   –   –   26   –   26   –   26 
Change in fair value cash flow hedge, net of taxes  –   –   –   (880)  –   (880)  –   (880)
Net income  –   –   –   –   53   53   2,022   2,075 
 BALANCE - DECEMBER 31, 2017  47,723,915  $5  $212,261  $(548) $(150,158) $61,560  $8,365  $69,925 

 AdditionalAccumulated Other Radnet, Inc.  
Common StockPaid-inComprehensiveAccumulatedStockholders'NoncontrollingTotal
SharesAmountCapital(Loss) IncomeDeficitEquityInterestsEquity
BALANCE - DECEMBER 31, 202051,640,537 $5 $307,788 $(24,051)$(117,999)$165,743 $92,560 $258,303 
Issuance of stock upon exercise of options53,960 — 488 — — 488 — 488 
Shares issued under the equity compensation plan1,212,758 — — — — — — — 
Issuance of common stock under the DeepHealth equity compensation plan471,162 — — — — — — — 
Stock-based compensation expense— — 25,284 — — 25,284 — 25,284 
Issuance of common stock for acquisitions and asset purchases82,658 — 2,498 — — 2,498 — 2,498 
Release of holdback shares from the purchase of DeepHealth91,517 — 2,413 — — 2,413 — 2,413 
Forfeiture of restricted stock(4,365)— (81)— — (81)— (81)
Gain on contribution of assets to majority owned subsidiary— — (4)— — (4)— (4)
Contribution from noncontrolling partner— — — — — — 123 123 
Sale of economic interests in majority owned subsidiary, net of taxes— — 4,206 — — 4,206 7,404 11,610 
Distributions paid to noncontrolling interests— — — — — — (2,426)(2,426)
Change in cumulative foreign currency translation adjustment— — — (65)— (65)— (65)
Change in fair value of cash flow hedge from prior periods reclassified to earnings— — — 3,695 — 3,695 — 3,695 
Net income (loss)— — — — 24,727 24,727 19,592 44,319 
BALANCE - DECEMBER 31, 202153,548,227 $5 $342,592 $(20,421)$(93,272)$228,904 $117,253 $346,157 
Issuance of stock upon exercise of options25,000 1 294 — — 295 — 295 
Shares issued under the equity compensation plan725,577 — — — — — — — 
Issuance of common stock to settle DeepHealth contingent consideration781,577 — — — — — — — 
Issuance of common stock under the DeepHealth equity compensation plan204,160 — — — — — — — 
Stock-based compensation expense— — 23,543 — — 23,543 — 23,543 
Issuance of common stock for acquisitions2,465,294 — 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 (loss)— — — — 10,650 10,650 22,958 33,608 

56

BALANCE - DECEMBER 31, 202257,723,125 $6 $436,288 $(20,677)$(82,622)$332,995 $158,457 $491,452 
Issuance of stock upon exercise of options12,424 — 142 — — 142 — 142 
Shares issued under the equity compensation plan1,128,453 — — — — — — — 
Issuance of common stock under the DeepHealth equity compensation plan37,909 — — — — — — — 
Stock-based compensation expense— — 26,785 — — 26,785 — 26,785 
Issuance of common stock, net of issuance costs8,711,250 1 245,831 — — 245,832 — 245,832 
Issuance of common stock in connection with acquisitions378,699 — 11,470 — — 11,470 — 11,470 
Forfeiture of restricted stock(35,542)— — — — — — — 
Sale of economic interests in majority owned subsidiary, net of taxes— — 2,236 — — 2,236 — 2,236 
Contribution from noncontrolling partner— — — — — — 2,885 2,885 
Distributions paid to noncontrolling interests— — — — — — (5,972)(5,972)
Change in cumulative foreign currency translation adjustment— — — 4,617 — 4,617 — 4,617 
Change in fair value of cash flow hedge from prior periods reclassified to earnings— — — 3,576 — 3,576 — 3,576 
Other— — (2)— — (2)1 (1)
Net income (loss)— — — — 3,044 3,044 27,293 30,337 
BALANCE - DECEMBER 31, 202367,956,318 $7 $722,750 $(12,484)$(79,578)$630,695 $182,664 $813,359 
The accompanying notes are an integral part of these financial statements.

61


57

RADNET, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

(IN THOUSANDS)

 Years Ended December 31, 
  2017  2016  2015 
CASH FLOWS FROM OPERATING ACTIVITIES            
Net income $2,075  $8,004  $8,638 
Adjustments to reconcile net income to net cash provided by operating activities:                  
Depreciation and amortization  66,796   66,610   60,611 
Provision for bad debts  46,555   45,387   36,033 
Gain on return from common stock  –   (5,032)  – 
Equity in earnings of joint ventures  (13,554)  (9,767)  (8,927)
Distributions from joint ventures  8,690   2,926   7,731 
Amortization and write off of deferred financing costs and loan discount  3,483   5,045   5,369 
Loss on sale and disposal of equipment  1,142  767   866 
Gain on sale of imaging centers  (3,146)  –   (5,434)
Stock-based compensation  6,787   5,826   7,647 
Non cash severance  1,047   –   – 
Changes in operating assets and liabilities, net of assets acquired and liabilities assumed in purchase transactions:             
Accounts receivable  (37,164)  (47,055)  (34,514)
Other current assets  1,461   11,038   (14,198)
Other assets  (801)  1,267   (3,813)
Deferred taxes  19,504   3,446   4,036 
Deferred rent  2,135   (1,668)  7,011 
Deferred revenue  1,034   (82)  (366)
Accounts payable, accrued expenses and other  36,181   4,929   (3,653)
Net cash provided by operating activities  142,225   91,641   67,037 
CASH FLOWS FROM INVESTING ACTIVITIES            
Purchase of imaging facilities  (27,612)  (6,641)  (90,792)
Investment at cost  (500)        
Purchase of property and equipment  (61,336)  (59,251)  (42,964)
Proceeds from sale of equipment  852   481   1,282 
Proceeds from sale of imaging and medical practice assets  8,429   –   35,500 
Proceeds from sale of internal use software  492   301   443 
Cash contribution from partner in JV formation  1,473   994   – 
Equity contributions in existing and purchase of interest in joint ventures  (1,118)  (1,374)  (265)
Net cash used in investing activities  (79,320)  (65,490)  (96,796)
CASH FLOWS FROM FINANCING ACTIVITIES            
Principal payments on notes and leases payable  (6,836)  (11,880)  (9,773)
Proceeds from borrowings  170,000   476,504   73,869 
Payments on senior notes  (196,666)  (469,086)  (23,727)
Payments on deferred financing costs and debt discount  (5,062)  (945)  – 
Distributions paid to noncontrolling interests  (1,528)  (492)  (729)
Proceeds from sale of noncontrolling interest, net of taxes  7,720   992   5,005 
Contributions from noncontrolling partners  125   –   – 
Proceeds from revolving credit facility  200,800   435,900   248,400 
Payments on revolving credit facility  (200,800)  (435,900)  (263,700)
Purchase of non-controlling interests  –   (1,153)  – 
Proceeds from issuance of common stock upon exercise of options  –   150   594 
Net cash (used in) provided by financing activities  (32,247)  (5,910)  29,939 
EFFECT OF EXCHANGE RATE CHANGES ON CASH  26   (49)  (41)
NET INCREASE IN CASH AND CASH EQUIVALENTS  30,684   20,192   139 
CASH AND CASH EQUIVALENTS, beginning of period  20,638   446   307 
CASH AND CASH EQUIVALENTS, end of period $51,322  $20,638  $446 
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION            
Cash paid during the period for interest $34,197  $37,487  $36,028 
Cash paid during the period for income taxes $4,939  $2,798  $1,781 

Years Ended December 31,
 202320222021
CASH FLOWS FROM OPERATING ACTIVITIES   
Net income$30,337 $33,608 $44,319 
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization128,391 115,877 96,694 
Amortization of operating lease right-of-use assets61,102 68,847 73,967 
Lease abandonment charges5,146 — 19,675 
Equity in earnings of joint ventures, net of dividends9,176 (5,952)(6,260)
Amortization and write off of deferred financing costs and loan discount2,987 2,693 3,254 
Gain on contribution of imaging centers into joint venture(16,808)— — 
Loss on sale and disposal of equipment and other2,187 2,529 1,246 
Loss on extinguishment of debt— — 1,496 
Loss on impairment3,949 — — 
Amortization of cash flow hedge3,576 3,687 3,695 
Non-cash change in fair value of interest rate swap8,185 (39,621)(21,670)
Stock-based compensation26,785 23,770 25,203 
Change in value of contingent consideration(3,880)(325)— 
Changes in operating assets and liabilities, net of assets acquired and liabilities assumed in purchase transactions:
Accounts receivable2,650 (30,078)(5,890)
Other current assets(8,441)(3,327)(15,777)
Other assets(1,484)(12,166)662 
Deferred taxes6,056 13,356 19,834 
Operating lease liability(54,763)(68,943)(72,553)
Deferred revenue626 (7,316)(28,319)
Accounts payable, accrued expenses and other liabilities15,086 49,778 9,915 
Net cash provided by operating activities220,863 146,417 149,491 
CASH FLOWS FROM INVESTING ACTIVITIES
Purchase of imaging centers and other operations(10,918)(129,961)(77,691)
Purchase of property and equipment(176,600)(119,451)(137,874)
Purchase of intangible assets— — (5,130)
Proceeds from sale of equipment83 3,904 625 
Equity contributions in existing and purchase of interest in joint ventures(14,035)(1,441)(1,441)
Net cash used in investing activities(201,470)(246,949)(221,511)
CASH FLOWS FROM FINANCING ACTIVITIES
Payments on term loan debt(41,063)(53,750)(619,529)
Principal payments on notes and leases payable other than term loan debt(2,930)— (3,302)
Additional deferred finance costs on revolving loan amendment— — (938)
Proceeds from debt issuance, net of issuance costs— 147,996 717,307 
Distributions paid to noncontrolling interests(5,972)(893)(2,426)
Proceeds from sale of economic interest in majority owned subsidiary— — 13,073 
Proceeds from revolving credit facility— — 128,300 
Payments on revolving credit facility— — (128,300)
Sale of noncontrolling interests5,121 — — 
Payments on contingent consideration(5,495)— — 
Proceeds from issuance of common stock, net of issuance costs245,832 — — 
Proceeds from issuance of common stock upon exercise of options142 294 488 
Net cash provided by financing activities195,635 93,647 104,673 
EFFECT OF EXCHANGE RATE CHANGES ON CASH(292)113 (65)
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS214,736 (6,772)32,588 
CASH AND CASH EQUIVALENTS, beginning of period127,834 134,606 102,018 
CASH AND CASH EQUIVALENTS, end of period$342,570 $127,834 $134,606 
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION
Cash paid during the period for interest$64,695$39,151$29,042
Cash paid during the period for income taxes$1,587 $587 $1,950 
The accompanying notes are an integral part of these financial statements.

62

RADNET, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS (CONTINUED)

Supplemental Schedule of Non-Cash Investing and Financing Activities

We acquired equipment and certain leasehold improvements for approximately $18.5$67.7 million, $28.8$111.8 million, and $32.4$63.9 million during the years ended December 31, 2017, 20162023, 2022 and 2015,2021, respectively, that we had not paid for as of December 31, 2017, 20162023, 2022 and 2015,2021, respectively. The offsetting amount due was recorded in our consolidated balance sheets under “accountsaccounts payable, accrued expenses and other.”

We added capital lease debt

On December 12, 2023, we issued 64,569 shares of approximately $5.5 million, $1.3 million, and $7.8 million forcommon stock to settle the years ended December 31, 2017, 2016 and 2015 respectively, relatingstock contingent liabilities as part of our purchase of Heart & Lung Imaging Limited. The shares were ascribed a value of $2.3 million.
On September 20, 2023, we issued 56,600 shares of common stock to radiology equipment.

We recorded an investment in joint venturesettle the stock contingent liabilities as part of $3.0our purchase of Heart & Lung Imaging Limited. The shares were ascribed a value of $1.6 million.

On September 1, 2023, we made a contribution of a business with a fair value of $27.2 million to ScriptSender, LLC representing our capital contribution to the venture. The offsetting amount was recorded on the due to affiliates account of ScriptSender, LLC. As of December 31, 2017, the balance remaining to be contributed is approximately $2.0 million. See Note 2, Investment in Joint Ventures section to the consolidated financial statements contain herein for further information.

We transferred approximately $2.5 million in net assets in April 2017 to our new joint venture, Santa Monica Imaging Group, LLC. See Note 4, Facility Acquisitions and Dispositions, to the consolidated financial statements contain herein for further information.

We transferred approximately $4.6 million in net assets inLLC joint venture.

On July 2017 to a new majority owned subsidiary, Advanced Imaging at Timonium Crossing, LLC. See Note 4, Facility Acquisitions and Dispositions, to the consolidated financial statements contain herein for further information.

On August 7, 20172023, we acquired Diagnostic Imaging Associates for $13.0 million in cash and $1.5 million in RadNet common stock. See Note 4, Facility Acquisitions and Dispositions, to the consolidated financial statements contain herein for further information.

On October 5, 2017 we completed our acquisition of all of the outstanding equity interests in RadSite, LLC, for $1.0 million in common stock and $856,000 in cash. See Note 4, Facility Acquisitions and Dispositions, to the consolidated financial statements contain herein for further information.

We recognized a non-cash gain on returnissued 113,303 shares of common stock to settle the stock holdback contingent liabilities as part of $5.0our purchase of Quantib B.V.. The shares were ascribed a value of $3.5 million.

On April 13, 2023, we issued 144,227 shares of common stock to settle the general holdback contingent liabilities as part of our purchase of Aidence Holding B.V.. The shares were ascribed a value of $4.0 million.
On February 1, 2023, we issued a promissory note in the amount of $19.8 million to acquire radiology equipment previously leased under operating leases.
On November 1, 2022, we issued 359,002 shares of common stock to complete our purchase of Heart & 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 June 2016. See Note 2, Gain 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 Return of Common Stock section.

We transferred $2.7April 1, 2022 we received $8.4 million in fixed assets and equipment from our partner in June 2016Frederick County Radiology, LLC.

On January 20, 2022, we issued 1,141,234 shares of common stock to complete our new joint venture, Glendale Advancedpurchase of Aidence Holding B.V. The shares were ascribed a value of $30.6 million.
On January 20, 2022, we issued 965,058 shares of common stock 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. The shares were ascribed a value of $2.0 million.
On January 1, 2021 we entered into the Simi Valley Imaging LLC; see Note 2, Investment in Joint Ventures section.

63
Group, LLC, partnership agreement with Simi Valley Hospital and Health Services. Of the total combined assets of $0.4 million, we transferred $0.3 million and Simi Valley Hospital and Health Services contributed the remaining $0.1 million.


58

RADNET, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 1 – NATURE OF BUSINESS

We are a leading national provider of freestanding, fixed-site outpatient diagnostic imaging services in the United States based on number of locations and annual imaging revenue.States. At December 31, 2017,2023, we operated directly or indirectly through joint ventures with hospitals, 297366 centers located in Arizona, California, Delaware, Florida, Maryland, New Jersey, and New York. Our centers provide physicians with imaging capabilities to facilitate the diagnosis and treatment of diseases and disorders. Our services include magnetic resonance imaging (MRI), computed tomography (CT), positron emission tomography (PET), nuclear medicine, mammography, ultrasound, diagnostic radiology (X-ray), fluoroscopy and other related procedures. The vast majority of our centers offer multi-modality imaging services. Our multi-modality strategy diversifies revenue streams, reduces exposure to reimbursement changes and provides patients and referring physicians one location to serve the needs of multiple procedures. In addition to our imaging services,center operations, we have twocertain other subsidiaries eRAD, Incthat develop Artificial Intelligence ("AI") products and Imaging On Call LLC. eRAD, Inc., develops and sells computerized systems for the imaging industry. Imaging On Call LLC, provides teleradiology services for remote interpretation of images. The capabilities of both eRAD and Imaging On Callsolutions that are designed to make the RadNet imaging center operations more efficient and cost effective. As such, ourenhance interpretation of radiographic images. Our operations comprise a single segmenttwo segments for financial reporting purposes.

purposes for this reporting period, Imaging Centers and Artificial Intelligence. For further financial information about these segments, see Note 5, Segment Reporting. In June 2023, we completed a public offering of 8,711,250 shares of our common stock at a price to the public of $29.75 per share. The gross proceeds as a result of this public offering was $259.2 million before underwriting discounts, commissions, and expenses totaling $13.4 million.

The consolidated financial statements include the accounts of Radnet Management,RadNet, Inc. (or “Radnet Management”) and Beverly Radiology Medical Group III,as well as its subsidiaries in which RadNet has a professional partnership (“BRMG”). BRMG is a partnership of ProNet Imaging Medical Group, Inc. and Beverly Radiology Medical Group, Inc.controlling financial interest. The consolidated financial statements also include Radnet Management I, Inc., Radnet Management II, Inc., Radiologix, Inc., Radnet Managed Imaging Services, Inc., Delaware Imaging Partners, Inc., New Jersey Imaging Partners, Inc.certain variable interest entities in which we are the primary beneficiary (as described in more detail below). All material intercompany transactions and Diagnostic Imaging Services, Inc. (“DIS”), all wholly owned subsidiaries of Radnet Management.balances have been eliminated upon consolidation. All of these affiliated entities are referred to collectively as “RadNet”, “we”, “us”, “our” or the “Company” in this report.

Accounting Standards Codification (“ASC”) 810-10-15-14,Consolidation, stipulatesregulations stipulate that generally any entity with a) insufficient equity to finance its activities without additional subordinated financial support provided by any parties, or b) equity holders that, as a group, lack the characteristics specified in the ASC which evidence a controlling financial interest, is considered a Variable Interest Entity (“VIE”). We consolidate all VIEs in which we are the primary beneficiary. We determine whether we are the primary beneficiary of a VIE through a qualitative analysis that identifies which variable interest holder has the controlling financial interest in the VIE. The variable interest holder who has both of the following has the controlling financial interest and is the primary beneficiary: (1) the power to direct the activities of the VIE that most significantly impact the VIE’s economic performance and (2) the obligation to absorb losses of, or the right to receive benefits from, the VIE that could potentially be significant to the VIE. In performing our analysis, we consider all relevant facts and circumstances, including: the design and activities of the VIE, the terms of the contracts the VIE has entered into, the nature of the VIE’s variable interests issued and how they were negotiated with or marketed to potential investors, and which parties participated significantly in the design or redesign of the entity.

Howard G. Berger, M.D., is our President and Chief Executive Officer, a member of our Board of Directors, and also owns, indirectly, 99% of the equity interests in BRMG. BRMG is responsible for all of the professional medical services at nearly all of our facilities located in California under a management agreement with us, and employs physicians or contracts with various other independent physicians and physician groups to provide the professional medical services at most of our California facilities. We generally obtain professional medical services from BRMG in California, rather than provide such services directly or through subsidiaries, in order to comply with California’s prohibition against the corporate practice of medicine. However, as a result of our close relationship with Dr. Berger and BRMG, we believe


VIEs that we consolidate as the primary beneficiary consist of professional corporations which are able to better ensure that medical service is provided atowned or controlled by individuals within our California facilities in a manner consistent with our needssenior management and expectations and those of our referring physicians, patients and payors than if we obtained these services from unaffiliated physician groups.

We contract with nine medical groups which provide professional medical services at all of our facilitiesfor centers in ManhattanArizona, California, Delaware, Maryland, New Jersey and Brooklyn, New York. These contractsVIEs are similarcollectively referred to our contract with BRMG. Seven of these groups are owned by John V. Crues, III, M.D., RadNet’s Medical Director, a member of our Board of Directors, and a 1% owner of BRMG. Dr. Berger owns a controlling interest in two of theseas the consolidated medical groups which provide professional medical services at one of our Manhattan facilities.

group (the "Group"). RadNet provides non-medical, technical and administrative services to BRMG and the nine medical groups mentioned above (“NY Groups”)Group for which it receives a management fee, pursuant to the related management agreements. Through the management agreements we have exclusive authority over all non-medical decision making related to the ongoing business operations of BRMG and the NY Groups and we determine the annual budget of BRMG and the NY Groups. BRMG and the NY Groups both havebudget. The Group has insignificant operating assets and liabilities, and de minimis equity. Through management agreements with us, substantiallySubstantially all cash flows of BRMG and the NY GroupsGroup after expenses, including professional salaries, are transferred to us.

64

We have determined that BRMG and the NY Groups are variable interest entities, that we are the primary beneficiary, and consequently, we consolidate the revenue and expenses, assets and liabilities of each. BRMGthe Group. The creditors of the Group do not have recourse to our general credit and there are no other arrangements that could expose us to losses on behalf of the NY GroupsGroup. However, RadNet may be required to provide financial support to cover any operating expenses in excess of operating revenues.


The Group on a combined basis recognized $134.6$205.6 million, $135.7$189.1 million, and $113.1$179.6 million of revenue, net of management services fees to RadNet, for the years ended December 31, 2017, 2016,2023, 2022, and 2015,2021, respectively and $134.6$205.6 million, $135.7$189.1 million, and $113.1$179.6 million of operating expenses for the years ended December 31, 2017, 2016,2023, 2022, and 2015,2021, respectively. RadNet, Inc. recognized $435.5$849.4 million, $430.4$786.5 million, and $343.9$749.2 million of total billed net service fee revenue for the years ended December 31, 2017, 20162023, 2022, and 2015,2021, respectively, for management services provided to BRMG and the NY GroupsGroup relating primarily to the technical portion of billed revenue.

The cash flows of BRMG and the NY GroupsGroup 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

59

31, 20172023 and December 31, 2016,2022, we have included approximately $96.3$94.1 million and $100.0$110.3 million, respectively, of accounts receivable and approximately $7.4$16.7 million and $9.0$16.2 million of accounts payable and accrued liabilities related to BRMG and the NY Groups,Group, respectively.

The creditors of BRMG and the NY Groups do not have recourse to our general credit and there are no other arrangements that could expose us to losses on behalf of BRMG and the NY Groups. However, RadNet may be required to provide financial support to cover any operating expenses in excess of operating revenues. 


At all of our centers not serviced by the Group we have entered into long-term contracts with radiologymedical groups in the area to provide physicianprofessional services at those facilities. These radiology practices provide professional services,centers, including supervision and interpretation of diagnostic imaging procedures, in our diagnostic imaging centers.procedures. The radiology practicesmedical groups maintain full control over the provision ofphysicians they employ. Through our management agreements, we make available to the medical groups the imaging centers, including all furniture, fixtures and medical equipment therein. The medical groups are compensated for their services from the professional services. In these facilities we enter into long-term agreements with radiology practice groups (typically 40 years). Under these arrangements, in addition to obtaining technical fees for the use of our diagnostic imaging equipment and the provision of technical services, we provide management services and receive a fee based on the valuecomponent of the services we provide. Except in New York City, theglobal net service fee is based on the practice group’s professional revenue including revenue derived outside of our diagnostic imaging centers. In New York City we are paid a fixed fee set in advance for our services.  We own the diagnostic imaging equipment and therefore, receive 100% of the technical reimbursements associated with imaging procedures. The radiology practice groups retain the professional reimbursements associated with imaging procedures after deducting management service fees paid to us, and we have no financialeconomic controlling interest in these medical groups. As such, the radiology practices.

financial results of these groups are not consolidated in our financial statements.


NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

PRINCIPLES OF CONSOLIDATION – The operating activities of subsidiaries are included in the accompanying consolidated financial statements (“financial statements”) from the date of acquisition. Investments in companies in which we have the ability to exercise significant influence, but not control, are accounted for by the equity method. All intercompany transactions and balances, with our consolidated entities and the unsettled amount of intercompany transactions with our equity method investees, have been eliminated in consolidation. As stated in Note 1 above, the BRMG and NY Groups are variable interest entitiesGroup consists of VIEs and we consolidate the operating activities and balance sheets of each. Additionally, we determined that our unconsolidated joint venture, ScriptSender, LLC, is also a VIE as it is dependent on our operational funding but we are not a primary beneficiary since RadNet does not have the power to direct the activities of the entity that most significantly impact the entity’s economic performance. See Investment in Joint Ventures section of Note 2 for further explanation.


USE OF ESTIMATES - The financial statements werehave been prepared in accordance with U.S. generally accepted accounting principles (GAAP), which requires management to make estimates and assumptions that affect the amounts reported in the financial statements and accompanying notes. These estimates and assumptions affect various matters, including our reported amounts of assets and liabilities in our consolidated balance sheets at the dates of the financial statements; our disclosure of contingent assets and liabilities at the dates of the financial statements; and our reported amounts of revenues and expenses in our consolidated statements of operations during the reporting periods. These estimates involve judgments with respect to numerous factors that are difficult to predict and are beyond management’s control. As a result, actual amounts could materially differ from these estimates.

RECLASSIFICATION – We have reclassified certain amounts within accrued expenses for 2016 to conform to our 2017 presentation.

REVENUES – Service fee revenue, net of contractual allowances and discounts, consists ofOur revenues generally relate to net patient fees received from various payors and patients themselves under contracts in which our performance obligations are to provide diagnostic services to the patients. Revenues are recorded during the period when our obligations to provide diagnostic services are satisfied. Our performance obligations for diagnostic services are generally satisfied over a period of less than one day. The contractual relationships with patients, in most cases, also involve a third-party payor (Medicare, Medicaid, managed care health plans and commercial insurance companies, including plans offered through the health insurance exchanges) and the fees 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 mainly upon establishedpredetermined rates per diagnostic services or discounted fee-for-service rates. Management continually reviews the contractual billing rates, less allowances forestimation process to consider and incorporate updates to laws and regulations and the frequent changes in managed care contractual adjustmentsterms resulting from contract renegotiations and discounts. renewals.
As it relates to BRMG and the NY Groups centers,Group, this service fee revenue includes payments for both the professional medical interpretation revenue recognized by BRMG and the NY GroupsGroup as well as the payment for all other aspects related to our providing the imaging services, for which we earn management fees from BRMG and the NY Groups.fees. As it relates to non-BRMG and NY Groupsother centers, namely the affiliated physician groups, 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.

65

Service feeOur revenues are recorded during the period the services are provided based upon the estimated amounts duewe expect to be entitled to receive from the patients and third-party payors. Third-party payors include federal and state agencies (under the Medicare and Medicaid programs), managed care health plans, commercial insurance companies and employers. Estimates of contractual allowances under managed care and commercial insurance plans are based on historical collection rates of payor reimbursement contractupon the payment terms specified in the related contractual agreements. We also record a provision for doubtful accounts based primarily on historical collection ratesRevenues related to patient copaymentsuninsured patients and co-payment and deductible amounts for patients who have health care coverage under one of our third-party payors.

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.


60

Under capitation arrangements with various health plans, we earn a per-enrollee amount each month for making available diagnostic imaging services to all plan enrollees under the capitation arrangement. Revenue under capitation arrangements is recognized in the period in which we are obligated to provide services to plan enrollees under contracts with various health plans.


Our total service fee revenue, net of contractual allowances and discounts, the provision for bad debts, and revenue under capitation arrangementsrevenues for the years ended December 31, 2023, 2022, and 2021 are summarizedpresented in the following table (in thousands) :

  Years Ended December 31, 
  2017  2016  2015 
          
Commercial insurance $571,369  $539,793  $486,489 
Medicare  193,166   187,941   168,545 
Medicaid  25,821   28,170   23,948 
Workers' compensation/personal injury  35,195   36,548   32,728 
Other (1)  31,627   29,135   35,046 
Service fee revenue, net of contractual allowances and discounts  857,178   821,587   746,756 
Provision for bad debts  (46,555)  (45,387)  (36,033)
Net service fee revenue  810,623   776,200   710,723 
Revenue under capitation arrangements  111,563   108,335   98,905 
Total net revenue $922,186  $884,535  $809,628 

(1) Other consistsbelow. Our imaging center revenue is displayed as the estimated service fee, broken down by classification of revenueinsurance coverage type. Additional revenues are earned from teleradiologyour management services consulting feesprovided to joint ventures and our software revenue

PROVISION FOR BAD DEBTS – We provide for an allowance against accounts receivable that could become uncollectibleand AI subsidiaries.

In Thousands202320222021
Commercial insurance$897,948 $785,128 $743,462 
Medicare363,863 311,124 280,911 
Medicaid43,175 38,279 34,731 
Workers' compensation/personal injury47,364 51,339 44,235 
Other patient revenue42,249 31,849 19,398 
Management fee revenue17,936 22,235 19,630 
Software and teleradiology18,082 14,238 10,525 
Other20,111 19,428 12,436 
Revenue under capitation arrangements153,433 152,045 148,334 
Imaging center segment revenue1,604,161 1,425,665 1,313,662 
AI segment revenue12,469 4,396 1,415 
Total revenue$1,616,630 $1,430,061 $1,315,077 
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. To aid businesses and stimulate the national economy, Congress passed The Coronavirus Aid, Relief, and Economic Security ("CARES") Act, which was signed in to reduce the carrying value of such receivables to their estimated net realizable value. We estimate this allowance basedlaw on the aging of our accounts receivable by the historical payment patterns of each type of payor, write-off trends, and other relevant factors. A significant portion of our provision for bad debt relates to co-payments and deductibles owed to us from patients with insurance. Although we attempt to collect deductibles and co-payments due from patients with insurance at the time of service, this attempt to collect at the time of service is not an assessmentMarch 27, 2020. As part of the patient’s abilityCARES act, we received $39.6 million total of accelerated Medicare payments which were recorded to pay nordeferred revenue in our consolidated balance sheet and are revenues recognized based on an assessmentbeing applied to revenue as services are performed. Through December 31, 2023, all of the patient’s abilityaccelerated Medicare payments have been applied to pay. There are various factors that can impact collection trends, such as changes in the economy, which in turn have an impact on the increased burden of co-payments and deductibles to be made by patients with insurance. These factors continuously change and can have an impact on collection trends and our estimation process. Our allowance for bad debts at December 31, 2017 and 2016 was $34.6 million and $20.7 million, respectively.

revenue.


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. 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.

MEANINGFUL USE INCENTIVE – Under the American Recovery


We have entered into factoring agreements with various institutions and Reinvestment Act of 2009, a program was enacted that provides financial incentivessold certain accounts receivable under non-recourse agreements in exchange for providers that successfully implement and utilize electronic health record technology to improve patient care. Our software development team in Canada developed a Radiology Information System (RIS) software platform that has been awarded meaningful use certification. As this certified RIS system is implemented throughout our imaging centers, the radiologists that utilize this software can be eligible for the available financial incentives. In order to receive such incentive payments, providers must attest that they have demonstrated meaningful use of the certified RIS in each stage of the program. We account for this meaningful use incentive under the Gain Contingency Model outlined in ASC 450-30, and record the meaningful use incentive within non-operating income only after Medicare accepts an attestationnotes receivables from the qualified eligible professional demonstrating meaningful use. We recorded approximately $250,000, $2.8 million and $3.3 million during the twelve months ended December 31, 2017, 2016 and 2015, respectively, relating to this incentive.

66

GAIN ON RETURN OF COMMON STOCK – In the second quarter of 2016, we determined that certain pre-acquisition financial information of Diagnostic Imaging Group (“DIG”) provided to us by the sellers contained errors. As a result of this, we negotiated and reached a settlement with the sellers of DIG in June 2016buyers. These transactions are accounted for the return of 958,536 shares of common stock which had a fair value of $5.0 million on the date of return. Such return has been recognized as a gainreduction in accounts receivable as the agreements transfer effective control over and risk related to the receivables to the buyers. Proceeds on return of common stock innotes receivables are reflected as operating activities on our statement of operations.  

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 $14.3 million and $15.4 million at December 31, 2023 and December 31, 2022, respectively. We do not utilize factoring arrangements as an integral part of our financing for working capital and assess the party's ability to pay upfront at the inception of the notes receivable and subsequently by reviewing their financial statements annually and reassessing any insolvency risk on a periodic basis.


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

61

 December 31,
 20232022
Accounts payable$122,888 $102,678 
Accrued expenses124,059 181,574 
Accrued salary and benefits71,297 62,072 
Accrued professional fees24,696 23,271 
Total$342,940 $369,595 
SOFTWARE REVENUE RECOGNITION – Our subsidiary, eRAD, Inc., sellsWe have developed and sell Picture Archiving Communications Systems (“PACS”) and related services, primarily in the United States.services. The PACS systems sold by eRAD are primarily composed of certain elements: hardware, software, installation and training, and support. Salessales are made primarily through eRAD’sour sales force. These sales are multiple-element arrangements thatforce and generally include hardware, software, software installation, configuration, system installation, training and first-year warranty support. Hardware which is not unique or special purpose, is purchased from a third-party and resold to eRAD’s customers with a small mark-up.

We have determined that our core software products, such as PACS, are essential to most of our arrangements as hardware, software and related services are sold as an integrated package. Therefore, these transactions are accounted for under ASC 605-25,Multiple-Element Arrangements (as modifiedRevenue is recognized when a performance obligation is satisfied by ASU 2009-13).  Non-essential software and related services, and essential software sold ontransferring a stand-alone basis without hardware, would continuepromised good or service to be accounted for under ASC 985-605,Software.

a customer.

For the years ended December 31, 2017, 20162023, 2022 and 2015,2021, we recorded approximately $6.1$20.2 million, $6.2$13.2 million, and $6.1$10.5 million, respectively, in revenue related to our eRADsoftware business which is included in net service fee revenue in our consolidated statementstatements of operations. At December 31, 20172023 we had a deferred revenue liability of approximately $2.5$1.3 million associated with eRADthese sales which we expect to recognize into revenue over the next 12 months.

SOFTWARE DEVELOPMENT COSTS – When we develop our own software and artificial intelligence solutions we capitalize and amortize those costs over their useful life. Costs related to the research and development of new software products and enhancements to existing software products allintended for resale to our customers are expensed as incurred.

We utilize a variety of computerized information systems in the day to day operation of our diagnostic imaging facilities. One such system is our front desk patient tracking system or Radiology Information System (“RIS”). We have historically utilized third party RIS software solutions and pay monthly fees to outside third party software vendors for the use of this software. We have developed our own RIS solution through our wholly owned subsidiary, Radnet Management Information Systems (“RMIS”) and began utilizing this system beginning in the first quarter of 2015.

In accordance with ASC 350-40,Accounting for the Costs of Computer Software Developed for Internal Use,the costs incurred by RMIS toward the development of our RIS system, which began in August, 2010 and continued until December 2014, were capitalized and are being amortized over its useful life which we determined to be 5 years. Total costs capitalized were approximately $6.4 million. We began recording amortization of $107,000 per month for our use of this software in January 2015.

We have entered into multiple agreements to license our RIS system to outside customers. For the twelve months December 31, 2017 and December 31, 2016, we received approximately $492,000 and $301,000 with respect to this licensing agreement, respectively. In accordance with ASC 350-40, we recorded the receipt of these funds against the capitalized software costs explained above. As of December 31, 2017, the net carrying value of our capitalized software costs was approximately $1.3 million.


CONCENTRATION OF CREDIT RISKS – Financial instruments that potentially subject us to credit risk are primarily cash equivalents and accounts receivable. We have placed our cash and cash equivalents with one major financial institution. At times, theThe cash in the financial institution is temporarily in excess of the amount insured by the Federal Deposit Insurance Corporation, or FDIC. Substantially all of our accounts receivable are due under fee-for-service contracts from third party payors, such as insurance companies and government-sponsored healthcare programs, or directly from patients. We continuously monitor collections and maintain an allowance for bad debts based upon our historical collection experience.

In addition, we have notes receivable stemming from our factoring of accounts receivable as stated above. Companies with which we factor our receivables are well known established buyers of such instruments, have agreed to assume the full risk of their collection.

CASH AND CASH EQUIVALENTS – We consider all highly liquid investments that mature in three months or less when purchased to be cash equivalents. The carrying amount of cash and cash equivalents approximates theirthe fair market value.

DEFERRED FINANCING COSTS – Costs of financing are deferred and amortized on a straight-line basis over the life of the associated loan, which approximatesusing the effective interest rate method. Deferred financing costs are related to our revolving credit facilities. Deferred financing costs, net of accumulated amortization, were $1.9$1.6 million for the twelve month period ended December 31, 2017, and $2.0$2.3 million for the twelve month period ended December 31, 2016. Deferred financing costs are solely related to our Revolving Credit Facility. In conjunction with our Fourth Amendment and Fifth Amendment to our First Lien Credit Agreement, a net addition of approximately $371,000 was added to deferred financing costs for the twelve months ended at December 31, 2017.2023 and 2022, respectively. See Note 8, Revolving Credit Facility,Facilities and Notes Payable and Capital Leases for more information.

67
information on our revolving lines of credit.

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

PROPERTY AND EQUIPMENT – Property and equipment are stated at cost, less accumulated depreciation and amortization. Depreciation and amortization of property and equipment are provided using the straight-line method over the estimated useful lives, which range from 3 to 15 years. Leasehold improvements are amortized at the lesser of lease term or their estimated useful lives, which range from 3 to 3015 years. Maintenance and repairs are charged to expense as incurred.

BUSINESS COMBINATIONCOMBINATIONS –Accounting When the qualifications for acquisitionsbusiness combination accounting treatment are met, it requires us to recognize separately from goodwill the assets acquired and the liabilities assumed at their acquisition date fair values. Goodwill as of the acquisition date is measured as the excess of consideration transferred over the net of the acquisition date fair values of the assets acquired and the liabilities assumed. While we use our best estimates and assumptions to accurately value assets acquired and liabilities assumed at the acquisition date, our estimates are inherently uncertain and subject to refinement. As a result, during the measurement period, which may be up to one year from the acquisition date, we record adjustments to the assets acquired and liabilities assumed with the corresponding offset to goodwill. Upon the conclusion of the measurement period or final determination of the values of assets acquired or liabilities assumed, whichever comes first, any subsequent adjustments are recorded to our consolidated statements of operations.


62

GOODWILL AND INDEFINITE LIVED INTANGIBLES – Goodwill at December 31, 2017 totaled $256.8$679.5 million and $239.6$677.7 million at December 31, 2016.2023 and December 31, 2022, respectively. Indefinite lived intangible assets were $9.0 million at December 31, 20172023 and 2016 totaled $7.9$24.1 million at December 31, 2022 and are associated with the value of certain trade name intangibles.intangibles and in process research and development ("IPR&D"). Goodwill, and trade name intangibles and IPR&D are recorded as a result of business combinations. Management evaluatesWhen we determine the carrying value of goodwill exceeds its fair value, an impairment charge would be recognized which should not exceed the total amount of goodwill allocated to that reporting unit. We determined fair values for each of the reporting units using the market approach, when available and appropriate, or the income approach, or a combination of both. We assess the valuation methodology based upon the relevance and availability of the data at the time we perform the valuation. If multiple valuation methodologies are used, the results are weighted appropriately.

We tested goodwill, trade name intangibles,and IPR&D for impairment on October 1, 2023. In September 2023, we determined that an IPR&D indefinite-lived intangible asset related to Aidence's Ai Veye Lung Nodule and Veye Clinic would not receive FDA approval for sale in the US without a new submission and additional expenditures for rework in the original projected timeline. The additional expenditures, delay and reduction of US sales affected the estimated fair value of the related IPR&D intangible asset and resulted in impairment charges of $3.9 million within Cost of operations in our Consolidated Statements of Operations. The estimated fair value of the IPR&D intangible asset was determined using the multi-period excess earnings method under the income approach, which estimates the present value of the free cash flows associated with the asset and tax amortization benefit to arrive at a minimum, on an annual basis and whenever events and changes in circumstances suggest that the carrying amount may not be recoverable. Impairment of goodwill is tested at the reporting unit level by comparing the reporting unit’s carrying amount, including goodwill, to the fair value of the reporting unit. The fair valueasset. Our annual impairment test as of a reporting unit is estimated using a combination of the income or discounted cash flows approach and the market approach, which uses comparable market data. If the carrying amount of the reporting unit exceeds its fair value, goodwill is considered impaired and a second step is performed to measure the amount of impairment loss, if any. Impairment of trade name intangibles is tested at the subsidiary level by comparing the subsidiary’s trade name carrying amount to its respective fair value. We tested both goodwill and trade name intangibles for impairment on October 1, 2017, noting2023 noted no other impairment, and we have not identified any indicators of impairment through December 31, 2017.

2023.


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. U.S. GAAPAccounting 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. WeAt December 31, 2023 and December 31, 2021 we recorded lease abandonment of $2.5 million and $7.1 million, respectively in leasehold improvements for facilities that we abandoned. See the Leases discussion below for more information. Other than this, we determined that there were no events or changes in circumstances that indicated our long-lived assets were impaired during any periods presented.

INCOME TAXES – Income tax expense is computed using an asset and liability method and using expected annual effective tax rates. Under this method, deferred income tax assets and liabilities result from temporary differences in the financial reporting bases and the income tax reporting bases of assets and liabilities. The measurement of deferred tax assets is reduced, if necessary, by the amount of any tax benefit that, based on available evidence, is not expected to be realized. When it appears more likely than not that deferred taxes will not be realized, a valuation allowance is recorded to reduce the deferred tax asset to its estimated realizable value. For net deferred tax assets we consider estimates of future taxable income in determining whether our net deferred tax assets are more likely than not to be realized. See Note 10, Income taxesTaxes, for more information.
LEASES - We determine if an arrangement is a lease at inception. Operating leases are further explainedincluded in Note 10.

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. We include options to extend a lease when it is reasonably certain that we will exercise that option. Lease expense for lease payments is recognized on a straight-line basis over the lease term. For a contract in which we are a lessee that contains fixed payments for both lease and non-lease components, we have elected to account for the components as a single lease component, as permitted. For finance leases, interest expense on the lease liability is recognized using the effective interest method and amortization of the 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. No events have occurred such as fire, flood, or other acts which have impaired the integrity of our ROU assets as of December 31, 2023. Our facility leases require us to maintain insurance policies which would cover major damage to our facilities. We maintain business interruption insurance to cover loss of business due to a facility becoming non-operational under certain

63

circumstances. Our equipment leases are covered by warranty and service contracts which cover repairs and provide regular maintenance to keep the equipment in functioning order.
We closely monitor patient levels at our imaging centers and occasionally divest or shut down centers to maximize utilization rates. We may abandon low utilization leases and divert the patients to nearby centers. During 2023, we experienced lower utilization at two imaging centers. To complete the closure of these locations, we took a lease abandonment charge of approximately $5.1 million and $19.7 million at December 31, 2023 and December 31, 2021, respectively. Of these amounts, $2.7 million and $12.6 million were related to right-of-use assets impairment and $2.5 million and $7.1 million were related to the write-off of leasehold improvements for the years ending December 31, 2023 and December 31, 2021.

UNINSURED RISKS – On November 1, 2008 we obtained a fully funded and insured workers’ compensation policy, thereby eliminating any uninsured risks for employee injuries occurring on or after that date. This fully funded policy remained in effect through November 1, 2013 and continues to cover any claims incurred through this date.

On November 1, 2013 we entered intoWe maintain a high-deductible workers’ compensation insurance policy. We have recorded liabilities of $2.8$3.4 million for the year endingand $3.9 million at December 31, 20172023 and $2.9 million for the year ended December 31, 2016,2022, respectively, for the estimated future cash obligations associated with the unpaid portion of the workers compensation claims incurred.

68

We and our affiliated physicians carry an annual medical malpractice insurance policy that protects us for claims that are filed during the policy year and that fall within policy limits. The policy has a deductible for which is $10,000 per incidence at for theall years ending December 31, 2017 and December 31, 2016, respectively.

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. As of December 31, 2017,2023, this policy remains in effect.

We have entered into an arrangement with Blue Shield to administer and process claims under a self-insured plan that provides health insurance coverage for our employees and dependents. We have recorded liabilities as of December 31, 20172023 and 20162022 of $4.5$7.2 million and $2.4$7.4 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. 

LOSS AND OTHER UNFAVORABLE CONTRACTS


EMPLOYEE BENEFIT PLAN – We assessadopted a profit-sharing/savings plan pursuant to Section 401(k) of the profitabilityInternal Revenue Code that covers substantially all non-professional employees. Eligible employees may contribute on a tax-deferred basis a percentage of our contractscompensation, up to the maximum allowable under tax law. Employee contributions vest immediately. We can elect to provide management servicesa matching contribution in the amount to our contracted physician groupsa maximum of 1.0% per 4.0% of employee contributions. We contributed $0.0 million and identify those contracts where current operating results or forecasts indicate probable future losses. Anticipated future revenue is compared to anticipated costs. If the anticipated future cost exceeds the revenue, a loss contract accrual is recorded. In connection with the acquisition of Radiologix$3.0 million in November 2006, we acquired certain management service agreementsmatching for which forecasted costs exceeds forecasted revenue. As such, an $8.9 million loss contract accrual was established in purchase accounting, and is included in other non-current liabilities. The recorded loss contract accrual is being accreted into operations over the remaining termeach of the acquired management service agreements, which ends in 2031. As oftwelve months ended December 31, 20172023 and 2016, the remaining accrual balance is $5.0 million, and $5.6 million, respectively.

In addition and related to acquisition activity, we have certain operating lease commitments for facilities where the fair market rent differs from the lease contract rate. We have recorded an unfavorable contract liability representing the difference between the total value of the fair market rent and the contract rent over the current term of the lease applicable from the date of acquisition. As of December 31, 2017 and 2016, the unfavorable contract liability on these leases is $1.4 million and $1.6 million, respectively.

2022.

EQUITY BASED COMPENSATION – We have one long-term incentive plan that we adopted in 2006 and which we first amended and restated as ofat various points in time: first on April 20, 2015, and againsecond on March 9, 2017, third on April 15, 2021 and currently as of April 27, 2023 (the “Restated Plan”). The Restated Plan was most recently approved by our stockholders at our annual stockholders meeting on June 8, 2017.7, 2023. We have reserved 20,100,000 shares of common stock for issuance under the Restated Plan 14,000,000 shareswhich can be issued in the form of common stock. We can issueincentive and/or nonstatutory stock options, restricted and/or unrestricted stock, awards, stock appreciation rights, stock units, and cashstock appreciation rights. Terms and conditions of awards undercan be direct grants or based on achieving a performance metric. We evaluate performance-based awards to determine if it is probable that the Restated Plan. Certain options granted undervesting conditions will be met. We also consider probability of achievement of performance conditions when determining expense recognition. For the Restated Plan to employees are intended to qualify as incentive stock options under existing tax regulations.awards where vesting is probable, equity-based compensation is recognized over the related vesting period. Stock options and warrants generally vest over three years to five years and expire five years to ten years from date of grant. 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. Equity-based compensation is classified in operating expenses within the same line item as the majority of the cash compensation paid to employees. In connection with our acquisition of DeepHealth Inc. on June 1, 2020, we assumed the DeepHealth, Inc. 2017 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 11, Stock-Based Compensation, for more information.

FOREIGN CURRENCY TRANSLATION – TheFor our operations in Canada, Europe and the United Kingdom, the functional currency of our foreign subsidiaries is the local currency. In accordance with ASC 830,Foreign Currency Matters, assetsAssets and liabilities denominated in foreign currencies are translated using the exchange rate at the balance sheet dates. Revenues and expenses are translated using average exchange rates prevailing during the reporting period. Any translation adjustments resulting from this process are shown separately as a

64

component of accumulated other comprehensive income (loss) income. Foreign. Gains and losses related to the foreign currency transaction gains and lossesportion of international transactions are included in the determination of net income.

The following is a reconciliation of Foreign Currency Translation amounts for the years ended December 31, 2023, 2022 and 2021 is provided below (in thousands):


Currency Translation
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)
Currency Translation Adjustments4,617 
Balance as of December 31, 2023232 
OTHER COMPREHENSIVE INCOME (LOSS) INCOME – ASC 220,Comprehensive Income,Accounting guidanceestablishes rules for reporting and displaying other comprehensive income (loss) income and its components. Our unrealized gains or losses on foreign currency translation adjustments and the amortization of balances associated with derivatives previously classified as cash flow hedges are included in other comprehensive income (loss) income. In December, 2016, we entered into an interest rate cap agreement, as discussed in Note 2, Derivative Instruments. Assuming perfect effectiveness, any unrealized gains or losses related to the cap agreement that qualify for cash flow hedge accounting are classified as a component of income. Any ineffectiveness is recognized in earnings.. The components of other comprehensive income (loss) income for the three years in the periodtwelve month periods ended December 31, 20172023, December 31, 2022, and December 31, 2021 are included in the consolidated statements of comprehensive (loss) income.

COMMITMENTS AND CONTINGENCIES - We are party to various legal proceedings, claims, and regulatory, tax or government inquiries and investigations that arise in the ordinary course of business. With respect to these matters, we evaluate the developments on a regular basis and accrue a liability when we believe a loss is probable and the amount can be reasonably estimated. Based on current information, we do not believe that reasonably possible or probable losses associated with pending legal proceedings would either individually or in the aggregate, have a material adverse effect on our business and consolidated financial statements. However, the outcome of these matters is inherently uncertain. Therefore, if one or more of these matters were resolved against us for amounts in excess of management's expectations, our results of operations and financial condition, including in a particular reporting period in which any such outcome becomes probable and estimable, could be materially adversely affected.

DERIVATIVE INSTRUMENTS –
2019 swaps:
In the fourthsecond quarter of 2016,2019, we entered into twofour forward interest rate cap agreements ("2016 Caps"2019 swaps"). The 2016 Caps will mature in September and October 2020. The 2016 Caps had2019 swaps have total notional amounts of $150,000,000$500,000,000, consisting of two agreements of $50,000,000 each and $350,000,000, respectively, which were designated at inception as cash flow hedgestwo agreements of future cash$200,000,000 each. The 2019 swaps will secure a constant interest paymentsrate associated with portions of our variable rate bank debt.debt and have an effective date of October 13, 2020. They matured in October 2023 for the two smaller notional and will mature in October 2025 for the two larger notional. Under these arrangements, we purchasedarranged the 2019 swaps with locked in 1 month Term SOFR rates at 1.89% for the $100,000,000 notional and at 1.98% for the $400,000,000 notional. In October of 2023, the two agreements of $50,000,000 each matured and the remaining 2019 swaps have a cap on 3 month LIBOR at 2.0%. We aretotal notional amount of $400,000,000 as of December 31, 2023. As of the effective date, we will be liable for a $5.3 million premium to enter intopayments if interest rates decline below arranged rates, but will receive interest payments if rates remain above the caps which is being accrued over the life of the 2016 Caps.

ADOPTION of ASU 2017-12 – Targeted Improvements to Accounting for Hedging Activities - In August 2017, the FASB issued ASU 2017-12,Targeted Improvements to Accounting for Hedging Activities, (Topic 815). ASU 2017-12 is intended to improve the financial reporting of hedging relationships to better portray the economic results of an entity's risk management activities in its financial statements. These amendments also make targeted improvements to simplify the application of the hedge accounting guidance in current GAAP. The amendments are effective beginning on January 1, 2019, although early adoption is permitted. Upon adoption, entities are required to apply the amendments in this update to hedging relationships existing on the date of adoption, reflected as of the beginning of the fiscal year. We elected to early adopt the new guidance and the adoption had no effect on our financial statements, as our 2016 Caps were continuously effective since their inception in the fourth quarter of 2016.

69
arranged rates.

At inception, we designated our 2016 Caps2019 Swaps as cash flow hedges of floating-rate borrowings. In accordance with ASC Topic 815,accounting guidance, derivatives that have been designated and qualify as cash flow hedging instruments are reported at fair value. The gain or loss on the effective portion of the hedge (i.e., change in fair value) is reported as a component of other accumulated other comprehensive income (loss) income in the consolidated statement of equity.

Below represents The remaining gain or loss, if any, is recognized currently in earnings. The cash flows for both our $400,000,000 notional interest rate swap contract locked in at 1.98% due October 2025 and our $100,000,000 notional interest rate swap contract locked in at 1.89% did not match the cash flows for our Barclays term loans and so we determined that they were not currently effective as cash flow hedges. Accordingly, all changes in their fair value after April 1, 2020 for the $400,000,000 notional and after July 1, 2020 for the $100,000,000 notional was recognized in earnings. As of our 2016 CapsJuly 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 loss (gain) recognized:

For the twelve months ended December 31, 2017
      
Derivatives Balance Sheet Location Fair Value – Liabilities 
Interest rate contracts Current and other non-current liabilities $(595)

For the twelve months ended December 31, 2016
      
Derivatives Balance Sheet Location  Fair Value – Asset Derivatives 
Interest rate contracts Current assets $818 

continuing at approximately $0.3 million per month through October 2025.



65


A tabular presentation of the effect of derivative instruments on our consolidated statement of comprehensive (loss) income, netoperations of taxesthe 2019 Swaps for the Swaps that became ineffective in 2020 is as follows (amounts in thousands):

For the twelve months ended December 31, 2017
Effective Interest Rate CapAmount of Loss Recognized on DerivativeLocation of Loss Recognized
in Income on Derivative
Interest rate contracts($880)Other Comprehensive Loss

For the twelve months ended December 31, 2016
Effective Interest Rate CapAmount of Gain Recognized on DerivativeLocation of Gain Recognized
in Income on Derivative
Interest rate contracts$508Other Comprehensive Income

Interest Rate Contracts - Ineffective Portion
For the twelve months endedAmount 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, 2023$(8,185)Other Income (Expense)$(3,576)Interest Expense
December 31, 2022$39,621Other Income (Expense)$(3,687) Interest Expense
December 31, 2021$21,670Other Income (Expense)$(3,695)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 agreed to pay up to $10.0 million consideration upon the completion of two identified milestones in RadNet common shares or cash at our election. The contingency had a fair value of approximately $7.2 million on December 31, 2022. The fair value is based on the yield rate of S&P B-rated corporate bonds and the probability of meeting the milestones which were tied to FDA approval of artificial intelligence screening solutions. In September 2023, we determined that the milestones could not be achieved under the contractual terms of the stock purchase agreement because the original submissions of artificial intelligence screening solutions did not receive regulatory clearance. A new submission would be required; and therefore, the probability of the milestones being achieved became zero. Accordingly, management recognized a gain of $7.2 million in 2023 representing the change in fair value of contingent consideration within Cost of operations in our Consolidated Statements of Operations. In addition, there was a general holdback of $4.0 million for any indemnification claims, which was settled on April 30, 2023 by the issuance of 144,227 shares of our common stock.
Quantib B.V. 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 agreed to 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. In addition, there is a general holdback of $1.6 million to be issued in cash subject to adjustment for any indemnification claims. On July 7, 2023, we settled the stock holdback contingent liabilities by issuing 113,303 shares of our common stock at an ascribed value of $3.5 million and also settled the general holdback for $1.6 million in cash.
Montclair. 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 which was based on the anticipated achievement of specific EBITDA targets within a defined time frame. In June 2023, we determined that the contingent consideration thresholds were not achieved and, as such, we recognized a gain of $1.2 million representing the change in fair value of the contingent consideration within Cost of operations in our Consolidated Statements of Operations.
Heart & Lung Imaging Limited. On November 1, 2022, we completed our acquisition of 75% of the equity interests of Heart & 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 contingencies had a value of approximately $6.2 million and $11.1 million as of December 31, 2023 and 2022, respectively. The contingent consideration is determined by the achievement of a specific number of physician reads. On September 20, 2023, we settled a milestone contingent liability by issuing 56,600 shares of our common stock at an ascribed value of $1.6 million and cash of $1.8 million. On December 12, 2023, we settled a milestone contingent liability by issuing 64,569 shares of our common stock at an ascribed value of $2.3 million and cash of $2.1 million.
A tabular roll-forward of contingent consideration is as follows (amounts in thousands):

66


67

For the twelve months ended December 31, 2023
EntityAccountJanuary 1, 2023 BalanceSettlement of Contingent ConsiderationChange in Valuation of Contingent ConsiderationCurrency TranslationDecember 31, 2023 Balance
AidenceOther Long Term Liabilities$11,158 $(4,000)$(7,158)$— $— 
QuantibAccrued Expenses & Other Long Term Liabilities$3,709 $(5,110)$1,401 $— $— 
MontclairAccrued Expenses$1,200 $(1,200)$— $— 
Heart & Lung LimitedAccrued Expenses & Other Long Term Liabilities$11,656 $(7,854)$2,477 $600 $6,879 
For the twelve months ended December 31, 2022
EntityAccountJanuary 1, 2022 BalanceSettlement of Contingent ConsiderationChange in Valuation of Contingent ConsiderationCurrency TranslationDecember 31, 2022 Balance
AidenceOther Long Term Liabilities$— $11,453 $(362)$67 $11,158 
QuantibAccrued Expenses & Other Long Term Liabilities$— $4,581 $(903)$31 $3,709 
MontclairAccrued Expenses$— $1,200 $— $— $1,200 
Heart & Lung LimitedAccrued Expenses & Other Long Term Liabilities$— $10,814 $566 $276 $11,656 
See Fair Value Measurements section below for the fair value of contingent consideration at December 31, 2023 and 2022.

FAIR VALUE MEASUREMENTS – Assets and liabilities subject to fair value measurements are required to be disclosed within a fair value hierarchy. The fair value hierarchy ranks the quality and reliability of inputs used to determine fair value. Accordingly, assets and liabilities carried at, or permitted to be carried at, fair value are classified within the fair value hierarchy in one of the following categories based on the lowest level input that is significant to a fair value measurement:

Level 1—Fair value is determined by using unadjusted quoted prices that are available in active markets for identical assets and liabilities.

Level 2—Fair value is determined by using inputs other than Level 1 quoted prices that are directly or indirectly observable. Inputs can include quoted prices for similar assets and liabilities in active markets or quoted prices for identical assets and liabilities in inactive markets. Related inputs can also include those used in valuation or other pricing models such as interest rates and yield curves that can be corroborated by observable market data.

Level 3—Fair value is determined by using inputs that are unobservable and not corroborated by market data. Use of these inputs involves significant and subjective judgment.


Derivatives:

The table below summarizes the estimated fair values of certain of our financial assets that are subject to fair value measurements, and the classification of these assets in our consolidated balance sheets, as follows (in thousands):

 As of December 31, 2017 
 Level 1  Level 2  Level 3  Total 
Current and other non-current liabilities                
Interest Rate Contracts $–  $(595) $–  $(595)

 As of December 31, 2016 
 Level 1  Level 2  Level 3  Total 
Current assets                
Interest Rate Contracts $–  $818  $–  $818 

70



68

As of December 31, 2023
Level 1Level 2Level 3Total
Other Current Assets and Deposits and Other    
2019 SWAPS - Interest Rate Contracts$— $15,118 $— $15,118 
As of December 31, 2022
Level 1Level 2Level 3Total
Other Current Assets and Deposits and Other    
2019 SWAPS - Interest Rate Contracts$— $23,302 $— $23,302 

The estimated fair value of these contracts was determined using Level 2 inputs. More specifically, the fair value was determined by calculating the value of the difference between the fixed interest rate of the interest rate swaps and the counterparty’s forward LIBOR curve. TheSOFR curve in 2023 and forward LIBOR curve isin 2022. respectively. The forward SOFR curve and forward LIBOR curve are readily available in the public markets or can be derived from information available in the public markets.

Contingent Consideration:
The tables below summarize the estimated fair values of contingencies and holdback relating to our acquisitions 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, 2023
Level 1Level 2Level 3Total
Accrued expenses and other non-current liabilities    
Heart & Lung Imaging Limited$— $— $6,879 $6,879 

The estimated fair value of these liabilities was determined using Level 3 inputs. For Heart & 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 Heart & Lung Imaging Limited are not observable and cannot be corroborated by observable market data they are classified as Level 3.

As of December 31, 2022
Level 1Level 2Level 3Total
Accrued expenses and other non-current liabilities
Aidence Holding B.V. milestone consideration$— $— $11,158 $11,158 
Quantib B.V. Holdback of 113,303 shares of RadNet common stock$— $— $3,709 $3,709 
Montclair Radiological Associates$— $— $1,200 $1,200 
Heart & Lung Imaging Limited$— $— $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 Heart & 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.

69

Long Term Debt

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

  As of December 31, 2017 
  Level 1  Level 2  Level 3  Total Fair Value  Total Face Value 
First Lien Term Loans $–  $628,801  $–  $628,801  $620,272 

  As of December 31, 2016 
  Level 1  Level 2  Level 3  Total  Total Face Value 
First Lien Term Loans $–  $483,129  $–  $483,129  $478,938 
Second Lien Term Loans $–  $167,580  $–  $167,580  $168,000 

 As of December 31, 2023
 Level 1Level 2Level 3Total Fair ValueTotal Face Value
Barclays Term Loans and Truist Term Loan$— $824,759 $— $824,759 $823,063 
 As of December 31, 2022
 Level 1Level 2Level 3Total Fair ValueTotal Face Value
Barclays Term Loans and Truist Term Loan$— $843,594 $— $843,594 $864,125 
Our Barclays revolving credit facility had no aggregate principal amount outstanding as of December 31, 2017.

2023 and December 31, 2022, respectively. Our Truist revolving credit facility had no aggregate principal amount outstanding as of December 31, 2023 and December 31, 2022, respectively.

The estimated fair valuevalues 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 relatedrelate to comparable market prices.

We consider the carrying amounts of cash and cash equivalents, receivables, other current assets, and current liabilities and other notes payables to approximate their fair value because of the relatively short period of time between the origination of these instruments and their expected realization or payment. Additionally, we consider the carrying amount of our capitalfinance lease obligations and other notes payable to approximate their fair value because the weighted average interest rate used to formulate the carrying amounts approximates current market rates.



70

EARNINGS PER SHARE - Earnings per share is based upon the weighted average number of shares of common stock and common stock equivalents outstanding, net of common stock held in treasury, as follows (in thousands except share and per share data):

  Years Ended December 31, 
  2017  2016  2015 
          
Net income attributable to RadNet, Inc. common stockholders $53  $7,230  $7,709 
             
BASIC NET INCOME PER SHARE ATTRIBUTABLE TO RADNET, INC. COMMON STOCKHOLDERS            
Weighted average number of common shares outstanding during the period  46,880,775   46,244,188   43,805,794 
Basic net income per share attributable to RadNet, Inc. common stockholders $0.00  $0.16  $0.18 
DILUTED NET INCOME PER SHARE ATTRIBUTABLE TO RADNET, INC. COMMON STOCKHOLDERS            
Weighted average number of common shares outstanding during the period  46,880,775   46,244,188   43,805,794 
Add nonvested restricted stock subject only to service vesting  274,940   220,416   865,326 
Add additional shares issuable upon exercise of stock options and warrants  246,206   190,428   500,252 
Weighted average number of common shares used in calculating diluted net income per share  47,401,921   46,655,032   45,171,372 
Diluted net income per share attributable to RadNet, Inc. common stockholders $0.00  $0.15  $0.17 
             
Stock options excluded from the computation of diluted per share amounts:            
Weighted average shares for which the exercise price exceeds average market price of common stock  175,037   245,313    260,000  

71

INVESTMENT AT COST – On March 24, 2017,

 Years Ended December 31,
 202320222021
Net income attributable to RadNet, Inc. common stockholders$3,044 $10,650 $24,727 
BASIC NET INCOME PER SHARE ATTRIBUTABLE TO RADNET, INC. COMMON STOCKHOLDERS
Weighted average number of common shares outstanding during the period63,580,059 56,293,336 52,496,679 
Basic net income per share attributable to RadNet, Inc. common stockholders$0.05 $0.19 $0.47 
DILUTED NET INCOME PER SHARE ATTRIBUTABLE TO RADNET, INC. COMMON STOCKHOLDERS
Weighted average number of common shares outstanding during the period63,580,059 56,293,336 52,496,679 
Add nonvested restricted stock subject only to service vesting202,995 172,139 259,539 
Add additional shares issuable upon exercise of stock options, warrants and holdback shares875,245 855,395 664,815 
Weighted average number of common shares used in calculating diluted net income per share64,658,299 57,320,870 53,421,033 
Changes in fair value associated with contingently issuable shares$— $(724)$— 
Net income attributable to RadNet, Inc's common stockholders for diluted share calculation$3,044$9,926$24,727
Diluted net income per share attributable to RadNet, Inc. common stockholders$0.05 $0.17 $0.46 
Stock options and non-vested restricted awards excluded from the computation of diluted per share amounts as their effect would be antidilutive:
Shares issuable upon the exercise of stock options754,131 152,723 47,792 
Weight average shares for which the exercise price exceeds the average market price of common stock70,760 — — 

INVESTMENTS IN EQUITY SECURITIES- Accounting guidance requires entities to measure equity investments at fair value, with any changes in fair value recognized in net income. If there is no readily determinable fair value, the guidance allows entities the ability to measure investments at cost, adjusted for observable price changes and impairments, with changes recognized in net income.

As of December 31, 2023, we acquiredhave three equity investments for which a 12.5% equity interest in Medic Vision – Imaging Solutions Ltd. for $1.0 million. We alsofair value is not readily determinable and we do not have an option to acquire an additional 12.5% equity interest for $1.4 million exercisable within one year fromsignificant influence and therefore the initial share purchase date. total amounts invested are recognized at cost as follows:
Medic Vision, based in Israel, specializes in software packages that provide compliant radiation dose structured reporting and enhanced images from reduced dose CT scans. In accordance with ASC 325-20,Cost Method Investments,Our investment of $1.2 million, represents a 14.21% equity interest in the investment is recorded at its cost of $1.0 million.company. No observable price changes or impairment in our investment was notedidentified as of the year ended December 31, 2017. As such,2023.
Turner Imaging Systems, based in Utah, develops and markets portable X-ray imaging systems that provide a user the ability to acquire X-ray images wherever and whenever they are needed. On February 1, 2018, we do not estimatepurchased 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 fair valueamount 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 identified as noof December 31, 2023.

71

WhiteRabbit.ai Inc., based in California, is currently developing an artificial intelligence suite which aims to improve the speed and accuracy of cancer detection in radiology and improve patient care. On November 5, 2019 we acquired 2,315,350 shares of Series A Preferred Stock interest at a cost of $1.0 million and also loaned the company $2.5 million in support of its operations. On October 6, 2023, WhiteRabbit.ai Inc. commenced another offering of preferred shares and the Company converted its note receivable outstanding principal and accrued interest in exchange for 20,325,203 shares of Series C-1 Preferred Stock at an exchange rate of $0.123 per share. No observable price changes or impairment in our investment was identified events or changes in circumstances occurred that would have a significant adverse effect on the valueas of the investment.

December 31, 2023.

INVESTMENT IN JOINT VENTURES – We have fourteen13 unconsolidated joint ventures with ownership interests ranging from 35% to 55%. These joint ventures represent partnerships with hospitals, health systems or radiology practices and were formed for the purpose of owning and operating diagnostic imaging centers.  Professional services at the joint venture diagnostic imaging centers are performed by contracted radiology practices or a radiology practice that participates in the joint venture.  Our investment in these joint ventures is accounted for under the equity method, since RadNet doesas we do not have a controlling financial interest in such ventures. We evaluate our investment in joint ventures, including cost in excess of book value (equity method goodwill) for impairment whenever indicators of impairment exist. No indicators of impairment existed as of December 31, 2017.

Acquisition of new facilities

On August 15, 2016 our joint venture, Franklin Imaging, LLC, acquired a single multi-modality imaging center located in Rosedale, Maryland for cash consideration of $1.0 million and the assumption of capital lease debt of $241,000. Franklin Imaging, LLC made a fair value determination of the acquired assets and approximately $600,000 of fixed assets, $30,000 of other assets and goodwill of $648,000 was recorded in respect to the transaction.

Formation of new joint ventures

On April 1, 2017, we formed in conjuncture with Cedars Sinai Medical Center (“CSMC”) the Santa Monica Imaging Group, LLC (“SMIG”), consisting of two multi-modality imaging centers located in Santa Monica, CA. Total agreed contribution was $2.7 million of cash and assets with RadNet contributing $1.1 million for a 40% economic interest and CSMC contributing $1.6 million for a 60% economic interest. For its contribution, RadNet transferred $80,000 in cash and the net assets acquired in the acquisition of Resolution Imaging of $2.5 million. CSMC contributed $120,000 in cash and paid RadNet $1.5 million for the Resolution Imaging assets transferred to the venture. RadNet does not have controlling economic interest in SMIG and the investment is accounted for under the equity method.

On January 6, 2017, Image Medical Inc. (“Image Medical”), a wholly owned subsidiary of RadNet, acquired a 49% economic interest ScriptSender, LLC, a partnership held by two individuals which provides secure data transmission services of medical information. Through a management agreement, RadNet provides management and accounting services and receives an agreed upon fee. Image Medical will contribute $3.0 million to the partnership for its 49% ownership stake over a three year period representing the maximum risk in the venture. ScriptSender LLC is dependent on this contribution to finance its own activities, and as such we determined that it is a VIE, but we are not a primary beneficiary since we do not have the power to direct the activities of the entity that most significantly impact the entity’s economic performance. As of December 31, 2017, the carrying amount of the investment is $2.5 million.

On April 1, 2016, Community Imaging Partners Inc., a wholly owned subsidiary of RadNet, entered into a joint venture with Mt. Airy Health Services, LLC, a partnership of Frederick Memorial Hospital and Carroll Hospital Center. On August 31, 2016, Community Imaging Partners Inc. contributed $200,000 for a 40% economic interest in the partnership and funded an additional $440,000 in relation to a capital call. Mt. Airy Health Services, LLC, contributed $300,000 for a 60% economic interest and an additional $660,000 in relation to the capital call.

On May 9, 2016, RadNet, through a newly formed subsidiary, Glendale Advanced Imaging LLC, entered into a joint venture with Dignity Health, a California nonprofit public benefit corporation.  On June 1, 2016, RadNet contributed net assets of $2.2 million for a 55% economic interest and Dignity Health contributed net assets of $1.8 million for a 45% economic interest.

2023.


Joint venture investment and financial information

The following table is a summary of our investment in joint ventures during the years ended December 31, 20172023 and December 31, 20162022 (in thousands):

Balance as of December 31, 2015 $33,584 
Equity contributions in existing and purchase of interest in joint ventures  3,084 
Equity in earnings in these joint ventures  9,767 
Distribution of earnings  (2,926)
Balance as of December 31, 2016 $43,509 
Equity contributions in existing and purchase of interest in joint ventures  4,062 
Equity in earnings in these joint ventures  13,554 
Distribution of earnings  (8,690)
Balance as of December 31, 2017 $52,435 

Balance as of December 31, 202172$42,229 
Equity contributions in existing and purchase of interest in joint ventures9,712 
Equity in earnings in these joint ventures10,390 
Distribution of earnings(4,438)
Balance as of December 31, 2022$57,893 
Equity in earnings in these joint ventures6,427 
Equity contributions in existing and purchase of interest in joint ventures43,993 
Distribution of earnings(15,603)
Balance as of December 31, 2023$92,710 

We receivedcharged management service fees from the imaging centers underlying these joint ventures of approximately $13.1$17.9 million , $22.2 million, and $19.6 million for the yearyears ended December 31, 2017, $11.9 million for the year ended December 31, 20162023, 2022 and $9.3 million per year for the year ended December 31, 2015.2021, respectively. 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, 20172023 and 2016,2022, respectively, and for the years ended December 31, 2017, 20162023, 2022 and 2015,2021, respectively, (in thousands):

 December 31, 
Balance Sheet Data: 2017  2016 
Current assets $47,813  $40,093 
Noncurrent assets  107,481   100,146 
Current liabilities  (16,655)  (14,077)
Noncurrent liabilities  (42,072)  (44,405)
Total net assets $96,567  $81,757 
Book value of RadNet joint venture interests $45,935  $38,539 
Cost in excess of book value of acquired joint venture interests accounted for as equity method goodwill  6,500   4,970  
Total value of RadNet joint venture interests $52,435  $43,509 
Total book value of other joint venture partner interests $50,632  $43,218 

  2017  2016  2015 
          
Net revenue $188,849  $160,134  $125,544 
Net income $28,644  $21,933  $19,485 

December 31,
Balance Sheet Data:20232022
Current assets$39,819 $39,304 
Noncurrent assets224,936 134,694 
Current liabilities(46,587)(29,588)
Noncurrent liabilities(70,834)(37,952)
Total net assets$147,334 $106,458 
 202320222021
Net revenue$184,194 $145,256 $129,023 
Net income$12,968 $21,169 $21,893 

72


During the years ended December 31, 2023 and 2022, we made additional equity contributions of $2.4 million and $1.4 million, respectively, 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.

Formation of majority owned subsidiary and sale of economic interest

Los Angeles Imaging Group, LLC. On September 1, 2023, we formed a wholly-owned subsidiary, Los Angeles Imaging Group, LLC ("LAIG"). The operation offers multi-modality imaging services out of three locations in Los Angeles, California. We contributed the operations of 3 centers to the subsidiary. Cedars-Sinai Medical Center ("CSMC") purchased from us a 35% noncontrolling interest in LAIG for a cash payment of $5.9 million. As a result of the transaction, we retain a 65% controlling economic interest in LAIG.

Joint venture investment contribution

Santa Monica Imaging Group, LLC. 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, California with RadNet holding a 40% economic interest and CSMC holding a 60% economic interest. RadNet accounted for its share of the venture under the equity method. On January 1, 2019, CSMC purchased an additional 5% economic interest in SMIG from us and, as a result, of our economic interest in SMIG was reduced to 35%.

On September 1, 2023, RadNet contributed an additional multi-modality imaging center and a newly constructed imaging center located in Beverly Hills, California valued at $27.2 million and purchased an additional economic interest in SMIG for cash payment of $11.3 million. Simultaneously, CSMC contributed five additional multi-modality imaging centers located in Santa Monica, California. As a result of the transaction, our economic interest in SMIG has been increased to 49%. We recorded a gain of $16.8 million, within (Gain) on contribution of imaging centers into joint venture in our Consolidated Statements of Operations, representing the difference between the fair value and carrying value of the business contributed. The related gain on disposal of business was calculated as the difference between the fair value and carrying value of such imaging centers which included equipment, other assets, accrued liabilities, and an allocation of goodwill to such imaging centers.

In determining the fair value of the imaging centers contributed to SMIG, we used an income approach which is considered a level 3 valuation technique. See Fair Value Measurements above for further detail on the valuation hierarchy. Key assumptions used in measuring the fair value are financial forecasts and a discount rate. We also utilized the cash paid for an additional interest in the joint venture to substantiate the fair value of the contributed assets.

NOTE 3 –- RECENT ACCOUNTING STANDARDS

Recently Issued Accounting standards adopted

Pronouncements


In March 2016,November 2023, the Financial Accounting Standards Board (“FASB”)FASB issued Accounting Standards Update (“ASU”) No. 2016-09 (“Updates (ASUs) 2023-07 ("ASU 2016-09”2023-07"),Compensation—Stock Compensation,Segment Reporting (Topic 718):280) Improvements to Employee Share-Based Payment Accounting. ASU 2016-09 requires excess tax benefits and tax deficiencies, which arise due to differences between the measure of compensation expense and the amount deductible for tax purposes, to be recorded directly through the statement of operations when awards vest or are settled. In addition, cash flows related to excess tax benefits will no longer be classified separately as a financing activity apart from other tax cash flows. We elected to early adopt the new guidance for the year ended December 31, 2016. Upon adoption using the modified retrospective transition method, we recorded a cumulative effect adjustment to recognize previously unrecognized excess tax benefits which increased deferred tax assets and reduced accumulated deficit by $7.1 million. The current net tax benefit for 2016 resulting from adoption of the new guidance is approximately $400,000 and is reflected in our tax provision.

Accounting standards not yet adopted

In May 2014, the FASB issued ASU No. 2014-09, Revenue from Contracts with Customers, (Topic 606). ASU 2014-09 requires an entity to recognize as revenue the amount that reflects the consideration to which it expects to be entitled in exchange for goods or services as it transfers control to its customers. It also requires more detailed disclosures to enable users of the financial statements to understand the nature, amount, timing and uncertainty of revenue and cash flows arising from contracts with customers. The Company’s current revenue recognition policies for our most significant revenue streams, materially comply with the amended guidance. The primary change for healthcare providers under the new guidance is the requirement to report the allowance for uncollectible accounts associated with patient responsibility amounts as a reduction in net revenue as opposed to bad debt expense as a component of operating expenses. The new standard supersedes most current revenue guidance, including industry-specific guidance, and may be applied retrospectively with cumulative effect recognized in retained earnings as of the date of adoption (modified retrospective method)Reportable Segment Disclosures. The guidance became effective for the Company on January 1, 2018 and the Companyrequires entities to provide enhanced disclosures about significant segment expenses. For entities that have adopted the new standard usingamendments in ASU 2023-07, the modified retrospective approach. As part of adopting the standard, the Company identified revenue streams of like contracts to allow for ease of implementation. The Company used primarily a portfolio approach to apply the new model to classes of customers with similar characteristics. The impact of adopting the new standard on our total revenue; and income from operations is not material. The immaterial impact of adopting Topic 606 primarily relates to recognizing certain credit and collection issues not known at the date of service, including bankruptcy, in the provision for uncollectible accounts included in expenses on the consolidated statement of operations, which previously were netted against service revenue. In addition, the number of our performance obligations under the new standard is not materially different from our contract segments under the existing standard. Lastly, the accounting for the estimate of variable consideration is not materially different compared to our current practice. As such, the adoption of thisupdated guidance is not expected to have a material impact on our Consolidated Financial Statements.

73

In February 2016, the FASB issued ASU No. 2016-02,Leases, (Topic 842): Amendments to the FASB Accounting Standards Codification. ASU 2016-02 amends the existing accounting standards for lease accounting, including requiring lessees to recognize most leases on their balance sheets and making targeted changes to lessor accounting. The new standard requires a modified retrospective transition approach for all leases existing at, or entered into after, the date of initial application, with an option to use certain transition relief. The amendments in this update are effective for fiscal years (and interim reporting periods within fiscal years) beginning after December 15, 2018. Early adoption of the amendments is permitted for all entities. We are currently evaluating the impact this guidance will have on our consolidated financial statements, but expect this adoption will result in a significant increase in the assets and liabilities related to our leased properties and equipment.

In February 2018, the FASB issued ASU No. 2018-02 (“ASU 2018-02”),Reclassification of Certain Tax Effects from Accumulated Other Comprehensive Income. ASU 2018-02 allows for the reclassification of certain income tax effects related to the Tax Cuts and Jobs Act between “Accumulated other comprehensive income” and “Retained earnings.” This ASU relates to the requirement that adjustments to deferred tax liabilities and assets related to a change in tax laws or rates to be included in “Income from continuing operations”, even in situations where the related items were originally recognized in “Other comprehensive income” (rather than in “Income from continuing operations”). ASU 2018-02 is effective for all entities for fiscal years beginning after December 15, 2018,2023, and interim periods within fiscal years beginning after December 15, 2024, and is applicable to the Company in fiscal 2025. Early adoption is permitted. The Company is currently evaluating the impact of the adoption of ASU 2023-07 on its consolidated financial position and results of operations.


In December 2023, the FASB issued Accounting Standards Updates (ASUs) 2023-09 ("ASU 2023-09"), Income Tax (Topic 740) Improvements to Income Tax Disclosures primarily related to the rate reconciliation and income taxes paid information. The amendments in this Update are effective for fiscal years, and interim periods within those fiscal years, with early adoption permitted. Adoption of this ASU is to be applied either in the period of adoption or retrospectively to each period in which the effect of the change in the tax laws or rates were recognized. We are evaluating the effect of this guidance.

In January 2017, the FASB issued ASU No. 2017-04 (“ASU 2017-04”),Simplifying the Test for Goodwill Impairment. ASU 2017-04 eliminates the requirement to calculate the implied fair value of goodwill (i.e., Step 2 of the current goodwill impairment test) to measure a goodwill impairment charge. Instead, entities will record an impairment charge based on the excess of a reporting unit’s carrying amount over its fair value (i.e., measure the charge based on the current Step 1). ASU 2017-04 is effective for annual and any interim impairment tests for periods beginning after December 15, 2019, with early2024, and is applicable to the Company in fiscal 2025. Early adoption is permitted. We areThe


73

Company is currently evaluating the effectimpact of this guidance.

In January 2017, the FASB issuedadoption of ASU No. 2017-01 (“ASU 2017-01”),Clarifying the Definition2023-09 on its consolidated financial position and results of a Business. ASU 2017-01 changes the definition of a business to assist entities with evaluating when a set of transferred assets and activities is considered a business. ASU 2017-01 is effective for annual periods beginning after December 31, 2017 including interim periods within those periods. There was no material impact on our financial statements.

operations.

NOTE 4 – FACILITY ACQUISITIONS, ASSETS HELD FOR SALEBUSINESS COMBINATIONS AND DISPOSITIONS

RELATED ACTIVITY

Acquisitions

On October 5, 2017

Imaging Center Segment

During the years ended 2023, 2022 and 2021, we completed ourthe acquisition of allcertain assets of the outstanding equity interestsfollowing entities, which either engage directly in RadSite, LLC,the practice of radiology or associated businesses. The primary reason for $1.0 millionthese acquisitions was to strengthen our presence in common stockthe California, Delaware, Maryland, New Jersey and $856,000 in cash. RadSite provides both quality certification and accreditation programs for imaging providers in accordance with standards of private insurance payors and federal regulations under Medicare.New York markets. We have made a fair value determination of the acquired assets and assumed liabilities and the following were recorded (in thousands):

2023:

EntityDate AcquiredTotal Purchase ConsiderationProperty & EquipmentRight of Use AssetsGoodwillIntangible AssetsOtherRight of Use Liabilities
C.C.D.G.L.R. & S Services Inc.*1/1/20233,5004351,6893,01550—(1,689)
Southern California Diagnostic Imaging, Inc.*1/1/20231,8154661,1841,2725027(1,184)
Inglewood Imaging Center, LLC*2/1/20232,6008771,1881,6585015(1,188)
Ramapo Radiology Associates, P.C.*2/1/20232,0001,6633,7752291008(3,775)
Madison Radiology Medical Group, Inc.*4/1/2023250100—150———
Delaware Diagnostic Imaging, P.A.*8/1/202360040133714950—(337)
Total$10,765$3,942$8,173$6,473$300$50$(8,173)

*Fair Value Determination is Final


74

2022:
EntityDate AcquiredTotal Purchase ConsiderationProperty & EquipmentRight of Use AssetsGoodwillIntangible AssetsOtherRight of Use Liabilities
IFRC LLC*^1/1/20228,2002,9101,7035,271—19(1,703)
IFRC LLC*^1/1/20224,8002,1038572,697——(857)
Montclair Radiological Associates, P.A.*#10/1/202294,87716,4144,66579,690400(2,168)(4,124)
Heart & Lung Imaging Limited+11/1/202232,000——16,20015,800——
Chelsea Diagnostic Radiology, P.C.*12/1/20222,800568—2,132100——
North Jersey Imaging Center, LLC*12/9/202210420—55254—
Total$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 & Lung Imaging Limited acquisition below.

Heart & Lung Imaging Limited. On November 1, 2022, we acquired a 75% controlling interest in Heart & 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 $91,000$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, 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, $25,000$15.8 million in fixedintangible assets, a $150,000 covenant not to compete, $75,000 in$0.6 million current liabilities and $1.7$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 recorded.

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 October 1, 2017January 20, 2022, we completed our acquisition of certain assetsall the equity interests of Remote Diagnostic Imaging P.L.L.C., consistingAidence 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 single multi-modality center located in New York, New York, forbusiness and total purchase consideration of $3.9 million. We have madewas determined to be approximately $45.2 million including i) 1,117,872 shares issued at $26.80 per share with a fair value determination of the acquired assets and approximately $2.6$30.0 million, ii) cash of $1.8 million, iii) contingent consideration of $11.9 million ($7.4 million in fixed assets,milestones to be settled in shares or cash at our election and a $50,000 covenant not to compete,share holdback of $4.5 million), and $1.2 million in goodwill were recorded.

On August 7, 2017iv) a settlement of a loan from RadNet of $1.5 million. In addition we acquired Diagnostic Imaging Associates (“DIA”) for $13.0 million in cash and $1.5 million in RadNet common stock. Located inpaid certain seller closing costs through the stateissuance of Delaware, DIA operates five multi-modality imaging locations which provide MRI, CT, Ultrasound, Mammography and X-Ray services. We have made23,362 shares at a fair value determination of the acquired assets and approximately $3.1 million$0.6 million. As a result of fixed assets and equipment, $1.2this transaction, we recorded $1.0 million in current assets, and $10.2$0.2 million in property and equipment, $27.7 million in intangible assets (including developed technology of


75

$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 originally expected to complete the project following twelve months of acquisition. Subsequently, in September 2023, we determined that the In-process Research and Development ("IPR&D") related to Aidence's Ai Veye Lung and Veye Clinic would not achieve FDA approval for sale in the US without a new submission and additional expenditures for rework. The additional expenditures, delay, and reduction of US sales affected the estimated fair value of the associated IPR&D intangible asset and resulted in impairment charges of $3.9 million within Cost of operations in our Consolidated Statements of Operations.
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 recorded.

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.


Quantib B.V. On June 1, 2017January 20, 2022, we completed our acquisition of certain assetsall the equity interests of Stockton MRIQuantib B.V. ("Quantib") an artificial intelligence enterprise focused on prostate cancer screening. Quantib is reported as part of our artificial intelligence segment, and Molecular Imaging Medical Center Inc., consistingwas acquired to enhance our AI capabilities. The transaction was accounted for as an acquisition of a multi-modality center located in Stockton, CA, forbusiness and total purchase consideration of $4.4 million. The facility provides MRI, CT, Ultrasound, X-Ray and Nuclear Medicine services. We have madewas determined to be approximately $42.3 million including i) 965,058 shares issued at $26.80 per share with a fair value determinationof $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.
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 acquiredQuantib 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 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 approximately $1.2 millionintangible assets acquired was recorded to goodwill. Factors contributing to the recognition of fixed assets and equipment, a $50,000 covenant not to compete, and $3.1 millionthe amount of goodwill were recorded.

74
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.


76

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 subsidiaries
Frederick County Radiology, LLC. On MayApril 1, 2022 we formed Frederick County Radiology, LLC ("FCR"), a partnership with Frederick Health Hospital, Inc. The operation offers multi-modality services out of six locations in Frederick, Maryland. We contributed the operations of four centers to the enterprise and Frederick Health Hospital, Inc. 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 Frederick Health Hospital, Inc. retains an $11.1 million or 35% noncontrolling economic interest in FCR.
Formation of majority owned subsidiary and sale of ownership interest
Los Angeles Imaging Group, LLC. On September 1, 2023 we formed a wholly-owned subsidiary, Los Angeles Imaging Group, LLC ("LAIG"). The operation offers multi-modality imaging services out of three locations in Los Angeles, California. We contributed the operations of 3 2017centers to the subsidiary. Cedars-Sinai Medical Center purchased from us a 35% noncontrolling economic interest in LAIG for a cash payment of $5.9 million. As a result of the transaction, we retain a 65% controlling economic interest in LAIG.
Sale of ownership interest in a majority owned subsidiary
Tarzana Medical Center, LLC. Effective September 1, 2021 we completed our acquisition of certain assets of D&D Diagnostics Inc., consistingthe sale of a single multi-modality imaging center located24.9% ownership interest in Silver Spring, Maryland,our majority owned subsidiary West Valley Imaging Group, LLC for total purchase consideration of $2.4$13.1 million including cash consideration of $1.2 million and settlement of liabilities of $1.2 million. We have made a fair value determination ofto Tarzana Medical Center, LLC. After the acquired assets and approximately $820,000 of fixed assets, $16,000 of other assets, and $1.5 million of goodwill were recorded. The facility provides MRI, CT, X-Ray and related services.

On February 1, 2017, we completedsale, our acquisition of certain assets of MRI Centers, Inc., consisting of one single-modality imaging center located in Torrance, CA providing MRI and sports medicine services, for cash consideration of $800,000 and the payoff of $81,000 in debt. We have made a fair value determination of the acquired assets and approximately $289,000 of fixed assets, $9,800 of other assets, $100,000 covenant not to compete and $401,000 of goodwill were recorded.

On January 13, 2017, we completed our acquisition of certain assets of Resolution Medical Imaging Corporation for consideration of $4.0 million. The purchase of Resolution was enacted to contribute its assets to a joint venture with Cedars Sinai Medical Corporation which was effective April 1, 2017. See the formation of new joint ventures section in Note 2 above for further information.

In separate purchases occurring on July 1 and October 1 2016, we acquired for approximately $1.2 million the remaining non-controllingownership interest of 47.6% in the Park West joint venture, thus increasingsubsidiary has reduced from 75.0% to 50.1% and we retain a controlling financial interest in the subsidiary. We recognized in additional paid in capital on our ownership percentage from 52.4% to 100%. The difference between theconsolidated balance sheets, $4.2 million excess in consideration paid andover the carrying value of the non-controlling interest purchased was recorded as additional paid-in capital.

On March 1, 2016 we completed our acquisition of certain assets of Advanced Radiological Imaging – Astoria P.C. consisting of two multi-modality imaging centers located in Astoria, NY for cash consideration of $5.0 million. The facility provides MRI, PET/CT, Ultrasound and X-ray services. We have made a fair value determination of the acquired assets and approximately $3.6 million of fixed assets, $47,000 of prepaid assets, $100,000 covenant not to compete, and $1.3 million of goodwill were recorded.

Dispositions and Sales of Noncontrolling Interest

On September 1, 2017 we completed the equity sale of a wholly owned breast oncology practice, Breastlink Medical Group, Inc., to Verity Medical Foundation for approximately $2.8 million. We recorded a gain of approximately $845,000 and incurred severance expense of approximately $1.2 million on this transaction.

On July 1, 2017 we formed a majority owned subsidiary, Advanced Imaging at Timonium Crossing, LLC, in conjunction with the University of Maryland St. Joseph Medical Center. As part of that transaction, we sold a 25% noncontrolling interest in an imaging center of our wholly owned subsidiary, Advanced Imaging Partners, Inc., to the University of Maryland St. Joseph Medical Center for $3.9 million. On the date of sale, the net book value of the 25% interest was $1.1 million and the proceeds in excess of net book value amounting to $2.8 million were recorded to equity.

On April 28, 2017 we completedeconomic interest. Post the sale of five imaging centers operating in Rhode Island to Rhode Islandour ownership interest we acquired from Tarzana Medical Imaging, Inc.Center, LLC, certain tangible and intangible business assets for approximately $4.5 million. We recorded a gainpurchase consideration of approximately $1.9 million$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 teleradiology services in the second quarter with regard to this transaction and have no remaining imaging centersUnited Kingdom though our majority-owned Heart & Lung Imaging Limited subsidiary. Included in the state.

On April 1, 2017 we received from Cedars Sinai Medical Center $5.9 million in exchangesegment is our eRad subsidiary, which designs the underlying critical scheduling, data storage and retrieval systems necessary for imaging center operation.





77

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 25% noncontrolling interest in the West Valley Imaging Group, LLC (“WVI”). The determined net book value of the 25% interest was approximately $3.0 million. The proceeds in excess of the net book value, amounting to $1.8 million net of taxes, were recorded to equity.

On April 1, 2017 we completed the sale of 2 wholly owned oncology practices to Cedars Sinai Medical Center in connectionbasis not consistent with the sale of non-controlling interest of the WVI subsidiary described above for approximately $1.2 million.GAAP. We recorded a gain of approximately $361,000 on this transaction.

75

On November 4, 2016, the Board of Directors resolved to sell the ownership interest in all five of its Rhode Island imaging centers operating under the name The Imaging Institute within the upcoming 12 months. The following table summarizes the major categories of assets classified as held for sale in the accompanying Consolidated Balance Sheets at December 31, 2016 (in thousands):

Property and equipment, net $1,056 
Other assets  21 
Goodwill  1,126 
Total assets held for sale $2,203 

As the sale of these assets doesdo not represent a strategic shift that will have a major effect on the Company’s operations and financial results,report balance sheet information by segment since it is not classified asreviewed by our CODM.


In the normal course of business, our reportable segments enter into transactions with each other. While intersegment transactions are treated like third-party transactions to determine segment performance, the revenues recognized by a discontinued operation. segment and expenses incurred by the counterparty are eliminated in consolidation and do not affect consolidated results.

Twelve Months Ended December 31, 2023
Imaging CentersAIIntersegment EliminationConsolidated Total
Revenue:
Third Party$1,610,707 $5,923 $— $1,616,630 
Intersegment— 6,546 (6,546)— 
Total revenue$1,610,707 $12,469 $(6,546)$1,616,630 


Twelve Months Ended December 31, 2022
Imaging CentersAIIntersegment EliminationConsolidated Total
Revenue:
Third Party$1,425,665 $4,396 $— $1,430,061 
Intersegment— — — — 
Total revenue$1,425,665 $4,396 $— $1,430,061 

The disposition occurredtable 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):

78

Twelve Months Ended December 31,
202320222021
Revenue:
Imaging Centers$1,604,161 $1,425,665 $1,313,662 
AI12,469 4,396 1,415 
Total revenue$1,616,630 $1,430,061 $1,315,077 
Cost of Operations
Imaging Centers$1,371,036 $1,240,593 $1,117,941 
AI24,203 23,753 5,333 
Total cost of operations$1,395,239 $1,264,346 $1,123,274 
Gain on contribution of imaging centers into joint venture
Imaging Centers$(16,808)$— $— 
AI— — — 
Total cost of operations$(16,808)$— $— 
Lease abandonment charges
Imaging Centers$5,146 $— $19,675 
AI— — — 
Total depreciation and amortization$5,146 $— $19,675 
Depreciation and Amortization
Imaging Centers$120,776 $109,524 $96,174 
AI7,615 6,353 520 
Total depreciation and amortization$128,391 $115,877 $96,694 
Loss on Disposal of Equipment
Imaging Centers$2,191 $2,506 $1,246 
AI(4)23 — 
Total loss (gain)$2,187 $2,529 $1,246 
Severance
Imaging Centers$1,973 $926 $744 
AI1,805 20 — 
Total severance$3,778 $946 $744 
Income from Operations
Imaging Centers$119,847 $72,116 $77,882 
AI(21,150)(25,753)(4,438)
Total income from operations$98,697 $46,363 $73,444 


79


In the first quarter of 2024, we revised our reportable segments to combine our eRad business, which was included in the Imaging Center segment, with our AI segment to form a new Digital Health reportable segment. As a result of the change, beginning with our Quarterly Report on April 28, 2017.

Form 10-Q for the quarter ending March 31, 2024, we will report our results in these two reportable segments. The change in reportable segments will be reflected retrospectively.


NOTE 56 – GOODWILL AND OTHER INTANGIBLE ASSETS

Goodwill is recorded as a result of business combinations. Activity in goodwillThe following is a reconciliation of Goodwill by business segment for the years ended December 31, 20162022 and 2017December 31, 2023 is provided below (in thousands):

Balance as of December 31, 2015 $239,408 
Goodwill acquired through the acquisition of Advanced Radiological Imaging  1,280 
Adjustments to our preliminary allocation of the purchase price of Diagnostic Imaging Group, LLC  (47)
Goodwill acquired through the acquisition of Landmark Imaging, LLC  38 
Goodwill held for sale  (1,126)
Balance as of December 31, 2016  239,553 
Goodwill acquired through the acquisition of Resolution Imaging Medical Corp  1,901 
Goodwill acquired through the acquisition of MRI Centers Inc.  401 
Goodwill disposed through the transfer to Santa Monica Imaging Group JV  (1,901)
Goodwill acquired through the acquisition of D&D Diagnostics, Inc.  1,519 
Goodwill acquired through the acquisition of Stockton MRI, Inc.  3,101 
Goodwill disposed through the sale of Hematology Oncology  (110)
Goodwill acquired through the acquisition of DIA, Inc.  9,185 
Goodwill disposed through the sale of Breastlink Medical Group, Inc.  (509)
Goodwill acquired through the acquisition of RDI, Inc.  1,202 
Adjustments to our preliminary allocation of the purchase price of DIA, Inc.  1,058 
Goodwill acquired through the acquisition of RadSite, LLC  1,665 
Goodwill transferred to other assets  (289)
Balance as of December 31, 2017 $256,776 


Imaging CenterArtificial IntelligenceTotal
Balance as of December 31, 2021$489,210 $24,610 $513,820 
Additions120,551 48,697 169,248 
Disposals(4,200)— (4,200)
Measurement period and other adjustments(106)147 41 
Currency translation1,028 (2,272)(1,244)
Balance as of December 31, 2022$606,483 $71,182 $677,665 
Additions6,473 — 6,473 
Disposals(9,235)— (9,235)
Measurement period and other adjustments1,603 — 1,603 
Currency translation1,233 1,724 2,957 
Balance as of December 31, 2023$606,557 $72,906 $679,463 
The amount of goodwill from these acquisitions that is deductible for tax purposes as of December 31, 20172023 is $110.1$142.7 million.

Other intangible assets are primarily related to our business combinations and software development. They include the valueestimated fair values of managementsuch items as service agreements, obtained through our acquisition of Radiologix, Inc. in 2006 and are recorded at a cost of $57.5 million less accumulated amortization of $25.7 million at December 31, 2017. Also included in other intangible assets is the value of covenantcustomer lists, covenants not to compete, contracts associated with our facility acquisitions totaling $6.4 million less accumulated amortization of $5.8 million, as well as the value ofacquired technologies, and trade names associated with acquired imaging facilities totaling $10.2 million less accumulated amortization of $1.5 million and dispositions of $750,000.

names.

Total amortization expense was $2.6$12.2 million, $10.1 million, and $4.4 million for each of the years ended December 31, 20172023, 2022 and 2016 and $3.0 million for the year ended December 31, 2015.2021, respectively. Intangible assets are amortized using the straight-line method.method over their useful life determined at acquisition. Management service agreements are amortized over 25 years using the straight line method.

76
Software development is capitalized and amortized over the useful life of the software when placed into service. Trade names are reviewed annually for impairment.


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

  2018  2019  2020  2021  2022  Thereafter  Total  Weighted average amortization period remaining in years 
                         
Management Service Contracts $2,287  $2,287  $2,287  $2,287  $2,287  $20,396  $31,831   13.9 
Covenant not to compete contracts  279   199   119   43   14   –   654   2.8 
Trade Names*  –   –   –   –   –   7,937   7,937   – 
Total Annual Amortization $2,566  $2,486  $2,406  $2,330  $2,301  $28,333  $40,422     

* These trade name intangibles have an indefinite life

20242025202620272028ThereafterTotalWeighted average amortization period remaining in years
Management Service Contracts$2,287 $2,287 $2,287 $2,287 $2,287 $6,671 $18,106 7.9
Covenant not to compete and other contracts946 714 427 132 45 6 2,270 3.4
Customer Relationships1,234 1,104 981 797 764 10,564 15,444 17.7
Patent and Trademarks316 316 316 315 300 164 1,727 5.8
Developed Technology & Software7,785 7,785 7,745 7,210 7,046 6,117 43,688 5.7
Trade Names amortized77 77 77 77 63 27 398 5.3
Trade Names indefinite life— — — — — 7,100 7,100 — 
IPR&D— — — — — 1,882 1,882 — 
Total Annual Amortization$12,645 $12,283 $11,833 $10,818 $10,505 $32,531 $90,615 

80


NOTE 67 - PROPERTY AND EQUIPMENT

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

  December 31, 
  2017  2016 
Land $250  $250 
Medical equipment  380,439   393,001 
Computer and office equipment, furniture and fixtures  96,382   99,434 
Software development costs  6,391   6,391 
Leasehold improvements  273,436   252,595 
Equipment under capital lease  17,180   26,758 
Total property and equipment cost  774,078   778,429 
Accumulated depreciation  (529,511)  (529,648)
Total net property and equipment  244,567   248,781 
Equipment transferred to other assets  (266)  (1,056)
Total property and equipment $244,301  $247,725 

 December 31,
 20232022
Land$250 $250 
Medical equipment714,400 649,034 
Computer and office equipment, furniture and fixtures127,540 119,467 
Software costs47,286 36,015 
Leasehold improvements537,853 501,963 
Equipment originally acquired under finance/capital lease13,971 13,971 
Total property and equipment cost1,441,300 1,320,700 
Accumulated depreciation(836,899)(754,739)
Total property and equipment$604,401 $565,961 
Included in our property and equipment at December 31, 2023 is approximately $42.7 million total of construction in process amounts consisting of $12.2 million in medical equipment, $1.9 million in computer and office equipment, $6.0 million in software costs and $22.6 million in leasehold improvements.

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 costs and $41.1 million in leasehold improvements.

Depreciation and amortization expense of property and equipment, including amortization of equipment under capitalfinance leases, for the years ended December 31, 2017, 20162023, 2022 and 20152021 was $64.2$116.2 million, $64.0$105.6 million, and $57.6$92.3 million, respectively.

NOTE 7 – ACCOUNTS8 - CREDIT FACILITIES AND NOTES PAYABLE AND ACCRUED EXPENSES

Accounts payable

As of December 31, 2023 and accrued expenses were comprisedDecember 31, 2022 our term loan debt and other obligations consisted of the following (in thousands):

  December 31, 
  2017  2016 
       
Accounts payable $28,538  $40,952 
Accrued expenses  67,298   36,993 
Accrued salary and benefits  30,670   25,009 
Accrued professional fees  9,303   8,212 
Total $135,809  $111,166 

77

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

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

  December 31,  December 31, 
  2017  2016 
       
First Lien Term Loans $620,272  $478,938 
         
Second Lien Term Loans  –   168,000 
         
Discounts on term loans  (18,470)  (16,783)
         
Promissory note payable to the former owner of a practice acquired at an interest rate of 1.5% due through 2019  592   980 
         
Equipment notes payable at interest rates ranging from 3.3% to 5.6%, due through 2020, collateralized by medical equipment  195   341 
         
Obligations under capital leases at interest rates ranging from 4.3% to 11.2%, due through 2022, collateralized by medical and office equipment  6,538   7,256 
Total debt obligations  609,127   638,732 
Less current portion  (34,090)  (26,557)
Long-term portion debt obligations $575,037  $612,175 

December 31, 2023December 31, 2022
Barclays Term Loans collateralized by RadNet's tangible and intangible assets$678,687 $714,125 
Discount on Barclays Term Loans(9,041)(11,127)
Truist Term Loan collateralized by NJIN's tangible and intangible assets144,375 150,000 
Discount on Truist Term Loan(990)(1,254)
Equipment notes payable at 6.0%, due 2028, collateralized by medical equipment17,011 — 
Total debt obligations830,042 851,744 
Less current portion(17,974)(12,400)
Long-term portion of debt obligations$812,068 $839,344 

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

2018 $33,582 
2019  33,357 
2020  33,092 
2021  33,081 
2022  33,081 
Thereafter  454,866 
Total notes payable obligations $621,059 


81

2024$20,324 
202522,431 
202622,676 
2027124,188 
2028650,454 
Total notes payable obligations$840,073 

We lease equipmenthad no outstanding balance under capital lease arrangements. Future minimum lease payments under capital leases for years ending December 31 (in thousands) is as follows:

2018 $4,080 
2019  2,276 
2020  282 
2021  162 
2022  60 
Thereafter  – 
Total minimum payments  6,860 
Amount representing interest  (322)
Present value of net minimum lease payments  6,538 
Less current portion  (3,866)
Long-term portion lease obligations $2,672 

78

Term Loans,our $195.0 million Barclays Revolving Credit Facility at December 31, 2023 and Financing Activity Information:

had reserved an additional $7.6 million for certain letters of credit. The remaining $187.4 million of our Barclays Revolving Credit Facility was available to draw upon as of December 31, 2023. We also had no balance under our $50.0 million Truist Revolving Credit Facility, related to our consolidated subsidiary NJIN, at December 31, 2023, and with no letters of credit reserved against the facility, the full amount was available to draw upon. At December 31, 2017, our credit facilities were comprised of one tranche of term loans (“First Lien Term Loans”) and a revolving credit facility of $117.5 million (the “Revolving Credit Facility”). As of December 31, 2017,2023 we were in compliance with all covenants under our credit facilities.

Included On February 1, 2023, we issued a promissory note in our consolidated balance sheets at December 31, 2017 are $601.8the amount of $19.8 million of senior secured term loan debt (net of unamortized discounts of $18.5 million) in thousands:

  Face Value  Discount  Total Carrying
Value		 
Total First Lien Term Loans $620,272  $(18,470) $601,802 

We had no balanceto acquire radiology equipment previously leased under our $117.5 million Revolvingoperating leases.


Amendments to Credit Facility at December 31, 2017.

The following describes our 2017 financing activities:

Facilities


Barclays: First Amendment No. 5, Consentto Second Amended and Incremental Joinder Agreement toRestated First Lien Credit and Guaranty Agreement

On August 22, 2017,March 27, 2023, we entered into the First Amendment No. 5, Consentto Second Amended and Incremental JoinderRestated First Lien Credit and Guaranty Agreement related to our Barclays credit facility (the "Barclays Amendment"), which replaces the interest rate benchmark, from the London Interbank Offered Rate ("LIBOR") to the Secured Overnight Financing Rate ("SOFR") and includes applicable credit spread adjustments of 0.11448%, 0.26161%, and 0.42826% for interest periods of one month, three months, and six months, respectively. The replacement of LIBOR with SOFR and the credit spread adjustments were effective as of March 31, 2023, which was the last day of the last-ending existing interest period of currently outstanding loan bearing interest at LIBOR. Other than the foregoing, the material terms of the Barclays credit facility remained unchanged.
Barclays: Second Amended and Restated First Lien Credit and Guaranty Agreement
On April 23, 2021, we entered into the Second Amended and Restated First Lien Credit and Guaranty Agreement (the “Fifth Amendment”"Barclays Restated Credit Agreement") with respect to our First Lienwhich provides for $725.0 million of senior secured first lien term loans (the "Barclays Term Loans") and a $195.0 million senior secured revolving credit facility (the "Barclays Revolving Credit Agreement. Pursuant toFacility"). The proceeds of the Fifth Amendment, we issued $170.0 million in incremental First LienBarclays Term Loans the proceeds of which were used to repayrefinance loans outstanding under our prior Barclays credit agreement and provide funding for current and future operations. Total costs of the Barclays Restated Credit Agreement amounted to approximately $14.9 million segregated as follows: $8.8 million capitalized to discount and deferred finance cost, $4.5 million expensed to debt restructuring costs, $1.5 million charged to loss on early extinguishment of debt and $0.1 million written off to interest expense. Amounts capitalized will be amortized over the remaining terms of the respective credit facilities under the Barclays Restated Credit Agreement.
Truist: 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 "Truist Restated Credit 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 Truist term loan agreement and provide funding for current and future operations. Total costs of the Truist Restated Credit 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 full all outstanding Second Lien Term Loans and all other expense. Amounts capitalized will be amortized over the remaining terms of the respective credit facilities under the Truist Restated Credit Agreement.
All obligations under the Second LienTruist Restated Credit Agreement.

Pursuant to the Fifth Amendment, we also changed the interest rate margin applicable to borrowings under the First Lien Credit Agreement. While borrowings under the First Lien Credit Agreement continue to bear interest at either an Adjusted Eurodollar Ratea SOFR or a Base Rate (in each case,(each as more fully defined in the First LienTruist Restated Credit Agreement), plus an applicable margin according to the following schedule:


82

Pricing LevelLeverage RatioApplicable Margin for SOFR LoansApplicable Margin for Base Rate LoansApplicable Margin for Letter of Credit FeesApplicable Percentage for Commitment Fee
IGreater than or equal to 3.00:1.00
2.50%
per annum
1.50%
per annum
2.50%
per annum
0.45%
per annum
IILess than 3.00:1.00 but greater than or equal to 2.50:1.00
2.25%
per annum
1.25%
per annum
2.25%
per annum
0.40%
per annum
III
Less than 2.50:1.00 but greater than or equal to
2.00:1.00
2.00%
per annum
1.00%
per annum
2.00%
per annum
0.35%
per annum
IVLess than 2.00:1.00 but greater than or equal to 1.50:1.00
1.75%
per annum
0.75%
per annum
1.75%
per annum
0.30%
per annum
VLess than 1.50:1.00
1.50%
per annum
0.50%
per annum
1.50%
per annum
0.30%
per annum


Senior Credit Facilities:
Barclays Term Loans:

Through March 31, 2023, the Barclays Term Loans bore interest at either a Eurodollar Rate or a combination of both, atan Alternative Base Rate (in each such case, as defined in the election of the Company,Barclays Restated Credit Agreement) plus an applicable margin. The applicable margin for Adjusted Eurodollar Rate borrowings and Alternative Base Rate borrowings was changed from 3.25%3% and 2.25%2%, respectively, to 3.75%with an effective Eurodollar Rate and 2.75%the Alternative Base Rate of 4.63% and 8.00%, respectively, throughrespectively.

Under the Barclays Amendment, effective March 31, 2023, the Barclays Term Loans bear interest either at a SOFR or Alternative Base Rate (in each such case, as defined in the Restated Barclays Credit Agreement) plus an initial period which ends when financial reporting is delivered for the period ending September 30, 2017. Thereafter, the rates of theapplicable margin. The applicable margin for borrowingEurodollar Rate and Alternative Base Rate was 3% and 2%, respectively. At December 31, 2023, we have an effective SOFR of 8.38%, with an applicable credit spread adjustment of 0.26161%, and an Alternative Base Rate of 10.5%, respectively.

The Barclays Restated Credit Agreement provides for quarterly payments of principal for the Barclays Term Loans in the amount of approximately $1.8 million. The Barclays Term Loans will mature on April 23, 2028 unless otherwise accelerated under the First Lienterms of the Barclays Restated Credit AgreementAgreement.

Truist Term Loan:

The Truist Term Loan currently bears interest at a three month SOFR election of 5.33% plus an applicable margin and fees based on Pricing Level V described above.

The scheduled amortization of the Truist Term Loan began 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 Truist Term Loan will adjustmature on October 10, 2027 unless otherwise accelerated under the terms of the Truist Restated Credit Agreement.

Revolving Credit Facilities:

Barclays Revolving Credit Facility:

The Barclays Revolving Credit Facility is a $195.0 million senior secured revolving credit facility. Associated with the Barclays Revolving Credit Facility are deferred financing costs, net of accumulated amortization, of $1.1 million at December 31, 2023.


83

Revolving loans borrowed under the Barclays Revolving Credit Facility bear interest at either a SOFR or an Alternate Base Rate (in each case, as defined in the Barclays Restated Credit Agreement) plus an applicable margin which adjusts depending on our net leverage ratio, according to the following schedule:

First Lien Leverage RatioEurodollar Rate SpreadBase Rate Spread
> 5.50x4.50%3.50%
> 4.00x but ≤ 5.50x3.75%2.75%
>3.50x but ≤ 4.00x3.50%2.50%
≤ 3.50x3.25%2.25%

At


Net Leverage RatioTerm SOFR LoansAlternative Base Rate Spread
> 3.50x3.25%2.25%
> 3.00x but ≤ 3.50x3.00%2.00%
≤ 3.00x2.75%1.75%

As of December 31, 20172023, the effective Adjusted Eurodollar Rate and the Base Rate for the First Lien Term Loans was 1.36% and 4.50%, respectively and the applicable margin for Adjusted Eurodollar Rate and Base Rate borrowings remained at 3.75% and 2.75%, respectively.

Pursuant to the Fifth Amendment, the First Lien Credit Agreement was amended so that we can elect to request 1) an increase to the existing Revolving Credit Facility and/or 2) additional First Lien Term Loans, provided that the aggregate amount of such increases and additions does not exceed (a) $100.0 million and (b) as long as the First Lien Leverage Ratio (as defined in the First Lien Credit Agreement) would not exceed 4.00:1.00 after giving effect to such incremental facilities, an uncapped amount of incremental facilities, in each case subject to the conditions and limitations set forth in the First Lien Credit Agreement. Each lender approached to provide all or a portion of any incremental facility may elect or decline, in its sole discretion, to provide an incremental commitment or loan.

Pursuant to the Fifth Amendment, the First Lien Credit Agreement was also amended to (i) provide for quarterly payments of principal of the First Lien Term Loans in the amount of approximately $8.3 million, as compared to approximately $6.1 million prior to the Fifth Amendment, (ii) extend the call protection provided to the holders of the First Lien Term Loans for a period of twelve months following the date of the Fifth Amendment and (iii) provide us with additional operating flexibility, including the ability to incur certain additional debt and to make certain additional restricted payments, investments and dispositions, in each case as more fully set forth in the Fifth Amendment. Total issue costs for the Fifth Amendment aggregated to approximately $4.7 million. Of this amount, $4.1 million was identified and capitalized as discount on debt, $350,000 was capitalized as deferred financing costs and the remaining $235,000 was expensed. Amounts capitalized will be amortized over the remaining term of the agreement.

79

Fourth Amendment to First Lien Credit Agreement

On February 2, 2017, we entered into Amendment No. 4 to Credit and Guaranty Agreement (the “Fourth Amendment”) with respect to our First Lien Credit Agreement. Pursuant to the Fourth Amendment, the interest rate margin per annumfor borrowings on revolving loans under the First Lien Term Loans and theBarclays Revolving Credit Facility was reduced by 50 basis points, from 3.75% to 3.25%10.3%. Except for such reduction in the interest rate on credit extensions, the Fourth Amendment did not result in any other material modifications to the First Lien Credit Agreement. RadNet incurred expenses for the transaction in the amount of $543,000, which was recorded to discount on debt and will be amortized over the remaining term of the agreement.

The following describes our applicable financing prior to giving effect to the Fourth Amendment and Fifth Amendment discussed above.

First Lien Credit Agreement

On July 1, 2016, we entered into the First Lien Credit Agreement pursuant to which we amended and restated our then existing first lien credit facilities. Pursuant to the First Lien Credit Agreement, we originally issued $485 million of First Lien Term Loans and established the $117.5 million Revolving Credit Facility. Proceeds from the First Lien Credit Agreement were used to repay the previously outstanding first lien loans under the First Lien Credit Agreement, make a $12.0 million principal payment of the Second Lien Term Loans, pay costs and expenses related to the First Lien Credit Agreement and provide approximately $10.0 million for general corporate purposes.

Interest.The interest rates payable on the First Lien Term Loans were (a) the Adjusted Eurodollar Rate (as defined in the First Lien Credit Agreement) plus 3.75% per annum or (b) the Base Rate (as defined in the First Lien Credit Agreement) plus 2.75% per annum. As applied to the First Lien Term Loans, the Adjusted Eurodollar Rate has a minimum floor of 1.0%.

Payments.The scheduled quarterly principal payment of the First Lien Term Loans was approximately $6.1 million, with the balance due at maturity.

Maturity Date. The maturity date for the First Lien Term Loans shall be on the earliest to occur of (i) July 1, 2023, (ii) the date on which all First Lien Term Loans shall become due and payable in full under the First Lien Credit Agreement, whether by acceleration or otherwise, and (iii) September 25, 2020 if our indebtedness under the Second Lien Credit Agreement had not been repaid, refinanced or extended prior to such date.

Revolving Credit Facility:The First Lien Credit Agreement provides for a $117.5 million Revolving Credit Facility. Revolving loans borrowed under the Revolving Credit Facility bear interest at either an Adjusted Eurodollar Rate or a Base Rate (in each case, as more fully defined in the First Lien Credit Agreement), plus an applicable margin. Pursuant to the Fifth Amendment, the applicable margin was amended to vary based on our leverage ratio in accordance with the following schedule:

First Lien Leverage RatioEurodollar Rate SpreadBase Rate Spread
> 5.50x4.50%3.50%
> 4.00x but ≤ 5.50x3.75%2.75%
>3.50x but ≤ 4.00x3.50%2.50%
≤ 3.50x3.25%2.25%


For letters of credit issued under the Barclays Revolving Credit Facility, letter of credit fees accrue at the applicable margin (see table above) for Adjusted Eurodollar RateSOFR revolving loans which is currently 3.00% and fronting fees accrue at 0.25%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 First LienBarclays Restated Credit Agreement. In addition, a commitment fee of 0.5%0.50% per annum accrues on the unused revolver commitments under the Barclays Revolving Credit Facility. As of December 31, 2017, the interest rate payable on revolving loans was 7.0% and the amount available to borrow under the Revolving Credit Facility was $117.5 million.

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

Truist Revolving Credit Facility:

Associated with the Truist Revolving Credit Facility of $50.0 million are deferred financing costs, net of accumulated amortization, of $0.5 million at December 31, 2023. As of December 31, 2023, 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 V as noted in the pricing grid above. The Truist Revolving Credit Facility terminates on the earliest to occur of (i) July 1, 2021,October 7, 2027, (ii) the date we voluntarily agree to permanently reduceon which the Revolving Credit Facility to zeroCommitments are terminated pursuant to section 2.13(b)Section 2.8 of the First LienTruist Restated Credit Agreement, andor (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

Truist Credit Facilities:

On August 31, 2018, under an Amended and Restated Revolving Credit Facility is terminated dueand Term Loan Agreement, our NJIN subsidiary 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 Truist Restated Credit Agreement.

NOTE 9 – LEASES

Our material lease contracts are for facilities and advanced radiology equipment. In regards to specific eventsour imaging, administrative and warehouse facilities, the most common initial lease term varies in length from 5 to 15 years. Including renewal options negotiated with the landlord, we can have a total span of default pursuant10 to section 8.0135 years at these locations, and we do not enter into purchase options on the underlying property. We also lease smaller satellite X-Ray locations on mutually renewable terms, usually lasting one year. Leases for advanced radiology and office equipment have terms generally lasting from 5 to 8 years. All leases are classified as operating or finance for accounting purposes, depending on the terms of the First Lien Credit Agreement.

80

Second Lien Credit Agreement:

On March 25, 2014, we entered into the Second Lien Credit and Guaranty Agreement (the “Second Lien Credit Agreement”) pursuant to which we issued $180 million of second lien term loans (the “Second Lien Term Loans”). The proceeds from the Second Lien Term Loans wereagreement. Our incremental borrowing rate used to redeem our 10 3/8% senior unsecured notes, due 2018, to paydiscount the expensesstream of lease payments is closely related to the transactioninterest rates charged on our collateralized debt obligations and for general corporate purposes. On July 1, 2016, in conjunction with the restated First Lien Credit Agreement,our incremental borrowing rate is adjusted when those rates experience a $12.0 million principal payment was made on the Second Lien Term Loans. On August 22, 2017 the Second Lien Credit Agreement was repaid in full with the proceeds of First Lien Term Loans issued under the Fifth Amendment,substantial change. During 2021, we satisfied all liabilities classified as described above.

NOTE 9 – COMMITMENTS AND CONTINGENCIES

Leases– We lease various operating facilitiesfinance leases, and certain medical equipment underonly operating leases with renewal options expiring through 2041. Certain leases contain renewal options from two to ten years and escalation based either on the consumer price index or fixed rent escalators. Leases with fixed rent escalators are recorded on a straight-line basis. We record deferred rentremain.



84

The components of lease expense were as follows:
Years ended December 31,
(In thousands)202320222021
Operating lease cost(1)
$106,954 $107,475 $121,578 
Finance lease cost:
     Depreciation of leased equipment$1,204 $2,896 $3,068 
     Interest on lease liabilities— — 46 
Total finance lease cost$1,204 $2,896 $3,114 

1) Operating lease cost above for tenant leasehold improvement allowances received from certain lessors and amortize the deferred rent expense over the term of the lease agreement. Minimum annual payments under operating leases for future years ending December 31 are as follows (in thousands):

  Facilities  Equipment  Total 
2018 $58,907  $9,551  $68,458 
2019  51,177   8,950   60,127 
2020  43,237   7,836   51,073 
2021  36,089   5,986   42,075 
2022  28,287   3,667   31,954 
Thereafter  102,837   3,118   105,955 
  $320,534  $39,108  $359,642 

Total rent expense, including equipment rentals, for the years ended December 31, 2017, 2016 and 2015 was $67.2 million, $74.2 million and $71.7 million, respectively.

Litigation– We are engaged from time to time in the defense of lawsuits arising out of the ordinary course and conduct of our business. We believe that the outcome of our current litigation will not have a material adverse impact on our business, financial condition and results of operations. However, we could be subsequently named as a defendant in other lawsuits that could adversely affect us.

NOTE 10 – INCOME TAXES

On December 22, 2017, the U.S. government enacted comprehensive tax legislation commonly referred to as the Tax Cuts and Jobs Act (“Tax Act”). Among other items, the Tax Act reduced the U.S. federal corporate tax rate to 21%, effective for tax years beginning after December 31, 2017, and established a one-time deemed repatriation transition tax on earnings of certain foreign subsidiaries that were previously tax deferred.

Due to the timing of the enactment and the complexity involved in applying the provisions of the Tax Act, the SEC issued guidance on December 22, 2017 to address the application of US GAAP in situations when a registrant does not have the necessary information available, prepared, or analyzed in reasonable detail to complete the accounting for certain income tax effects of the Tax Act. In accordance with this guidance, we have made reasonable estimates below of the effects of the Tax Act and recorded provisional amounts in our financial statements as of December 31, 2017. For the items for which we were able to determine a reasonable estimate, we recognized a provisional amount of $13.6 million, which is included as a component of income tax expense from continuing operations. As we collect and prepare necessary data, and interpret the Tax Act and any additional guidance issued by the U.S. Treasury Department, the IRS, and other standard-setting bodies, we may make adjustments to the provisional amounts. Those adjustments may materially impact our provision for income taxes and effective tax rate in the period in which the adjustments are made. The accounting for the tax effects of the Tax Act will be completed in 2018.

81

For the year ended December 31, 2017,2023 and 2021 included $2.7 million and $12.6 million, respectively in lease abandonment charges. Please see our discussion in the Company recorded a provisional net tax provisionLeases section of $13.5 millionNote 2, Summary of Significant Accounting Policies.


Supplemental cash flow information related to the remeasurementleases was as follows:
Years ended December 31,
(In thousands)202320222021
Cash paid for amounts included in the measurement of lease liabilities:
     Operating cash flows from operating leases$101,516 $108,004 $110,288 
     Operating cash flows from financing leases— — 46 
     Financing cash flows from financing leases— — 3,304 
Right-of-use & Equipment assets obtained in exchange for lease obligations:
     Operating leases55,852 88,080 186,695 


85

Supplemental balance sheet information related to leases was as follows:
(In thousands, except lease term and discount rates)December 31,
20232022
Operating Leases
Operating lease right-of-use assets$596,032 $603,524 
Current portion of operating lease liability55,981 57,607 
Long-term operating lease liability605,097 604,117 
     Total operating lease liabilities$661,078 $661,724 
Finance Leases
Equipment at cost$13,971 $13,971 
Accumulated depreciation(13,374)(12,171)
Equipment, net$597 $1,801 
Weighted Average Remaining Lease Term
Operating leases - years10.610.9
Weighted Average Discount Rate
Operating leases6.7 %6.4 %


Maturities of its net deferred tax assets using the new U.S. federal corporate tax rate of 21%, which is estimated to result in significantly lower federal cash taxes for the Company in 2018 and beyond. Although the tax rate reduction is known, we have not collected the necessary data to complete our analysis of the effect of the Tax Act on the underlying deferred taxes andlease liabilities were as such, the amounts recorded asfollows:
(In thousands)
Operating Leases
Year Ending December 31,
2024$97,603 
2025$92,092 
202691,400 
202788,977 
202885,633 
Thereafter482,594 
Total Lease Payments938,299 
Less imputed interest(277,221)
Total$661,078 

As of December 31, 2017 are provisional.

The Tax Act requires the Company to pay U.S. income taxes on accumulated foreign subsidiary earnings2023, we have additional operating leases for facilities and medical equipment that have not previously subject to U.S. income tax at a rate of 15.5% to the extent of foreign cash and certain other net current assets and 8% on the remaining earnings. Given that the transition tax analysis requires significant data from our foreign subsidiaries that is not regularly collected or analyzed, we recorded a provisional amount for the one-time transitional tax liability for our foreign subsidiariesyet commenced of approximately $0.1$4.6 million. Additional work is necessary for a more detailed analysisThese operating leases will commence in 2024 with lease terms of the Company’s deferred tax assets and liabilities and its historical foreign earnings as well as potential correlative adjustments. If the final tax outcome of these matters is different than the provisional amounts recorded by the Company, then adjustments1 to the provisional amounts will impact the tax provision and effective tax rate in the period recorded.

Tax Act includes new anti-deferral, anti-base erosion, and base broadening provisions. Given the complexity of these provisions, we are still evaluating the effects and impact of these provisions.

15 years.




NOTE 10 – INCOME TAXES

For the years ended December 31, 2017, 20162023, 2022 and 2015,2021, we have the following income (loss) before income taxes (in thousands):


86


 December 31,
 202320222021
US Domestic$60,374 $59,529 $58,806 
Foreign(21,564)(16,560)73 
Income (loss) before income taxes$38,810 $42,969 $58,879 

For the years ended December 31, 2023, 2022 and 2021, we recognized income tax expense comprised of the following (in thousands):

  December 31, 
  2017  2016  2015 
          
Federal current tax $871  $88  $237 
State current tax  4,906   914   1,705 
Other current tax  23   28   28 
Federal deferred tax  21,389   2,539   3,625 
State deferred tax  (2,879)  863   412 
             
Income tax expense (benefit) $24,310  $4,432  $6,007 

 December 31,
 202320222021
Federal current tax$— $— $— 
State current tax3,442 371 (2,191)
Foreign current tax638 87 18 
Other current tax— — — 
Federal deferred tax8,960 6,470 9,831 
State deferred tax(2,724)5,863 6,902 
Foreign deferred tax(1,843)(3,430)— 
Currency translation— — — 
Income tax expense8,473 9,361 14,560 
A reconciliation of the statutory U.S. federal rate and effective rates is as follows:

  Years Ended December 31, 
  2017  2016  2015 
                   
Federal tax $8,971   34.00% $4,229   34.00% $4,979   34.00%
State franchise tax, net of federal benefit  1,799   6.82%  224   1.80%  1,245   8.50%
Other Non deductible expenses  91   0.35%  (11)  -0.09%  (1)  -0.01%
Changes in valuation allowance  (1,045)  -3.96%  585   4.70%  (2,536)  -17.32%
Tax Cuts and Jobs Act  13,527   51.27%  –   0.00%  –   0.00%
Deferred true-ups and other  (194)  -0.74%  (3,142)  -25.25%  1,964   13.41%
Other reconciling items  1,161   4.39%  2,547   20.47%  356   2.43%
                         
Income tax expense (benefit) $24,310   92.13% $4,432   35.64% $6,007   41.02%

82

 Years Ended December 31,
 202320222021
Federal tax$8,150 $9,023 $12,365 
State franchise tax, net of federal benefit3,730 595 4,198 
Other Non deductible expenses196 305 (93)
Officer Compensation1,199 759 291 
Noncontrolling interests in partnerships(5,752)(4,821)(4,114)
Changes in valuation allowance(2,569)6,124 (249)
Return to provision5,987 234 (2,530)
Deferred true-ups and other483 (1,451)5,009 
Foreign rate differential(1,083)(737)4 
Uncertain tax provisions(884)(749)(321)
Tax rate adjustment(984)— — 
Other differences— 79 — 
Income tax expense$8,473 $9,361 $14,560 


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

Our deferred tax assets and liabilities comprise the following (in thousands):

  December 31, 
Deferred tax assets: 2017  2016 
Net operating losses $47,212  $84,509 
Accrued expenses  3,242   4,400 
Straight-Line rent adjustment  7,749   10,750 
Unfavorable contract liability  1,288   2,114 
Equity compensation  871   950 
Allowance for doubtful accounts  8,720   6,033 
Other  2,504   1,357 
Valuation allowance  (4,049)  (4,428)
Total Deferred Tax Assets $67,537  $105,685 
         
Deferred tax liabilities:        
Property and equipment  (373)  (6,994)
Goodwill  (17,568)  (23,350)
Intangibles  (7,839)  (12,066)
Non accrual experience method reserve  (2,778)  (8,483)
Other  (8,127)  (4,436)
Total Deferred Tax Liabilities $(36,685) $(55,329)
         
Net Deferred Tax Asset $30,852  $50,356 


87

 December 31,
Deferred tax assets:20232022
Net operating losses$43,247 $68,124 
Accrued expenses4,432 3,941 
Operating lease liability136,097 142,347 
Equity compensation4,179 4,387 
Allowance for doubtful accounts2,198 3,071 
Other15,755 6,541 
Valuation allowance(9,688)(12,095)
Total Deferred Tax Assets$196,220 $216,316 
Deferred tax liabilities:
Property and equipment(7,851)(9,214)
Goodwill(42,419)(38,820)
Intangibles(15,578)(18,640)
Operating lease right-of-use asset(122,840)(129,802)
Outside basis difference(18,547)(20,015)
Other(4,761)(9,081)
Total Deferred Tax Liabilities$(211,996)$(225,572)
Net Deferred Tax Liability$(15,776)$(9,256)

As of December 31, 2017, the Company2023, we had federal net operating loss carryforwards of approximately $191.6$128.9 million, which is comprised of definite and indefinite net operating losses. We had federal net operating loss carryforwards of approximately $63.9 million, which expire at various intervals from the years 20182026 to 2034 if2037, and had carryforwards of $65.0 million of net operating losses which do not utilized. The Companyexpire. 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 $132.3$145.3 million, which expire at various intervals from the years 20182024 through 2037.2042. As of December 31, 2017, $23.52023, $24.9 million of our federal net operating loss carryforwards acquired in connection with the 2011 acquisition of Raven Holdings U.S., Inc. and the 2019 acquisition of Nulogix Health, Inc. are subject to limitations related to their utilization under Section 382 of the Internal Revenue Code. Future ownership changes as determined under Section 382 of the Internal Revenue Code could further limit the utilization ofWe also had foreign net operating loss carryforwards.

83
carryforwards of approximately $45.8 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. The evaluation of this evidence requires significant judgment about the forecasts of future taxable income, based on the plans and estimates we are using to manage the underlying businesses. In evaluating the objective evidence that historical results provide, we consider three years of cumulative operating income. As of December 31, 2017,2023, we have determined that deferred tax assets of $67.5$196.2 million are more likely-than-not to be realized. We have also determined that deferred tax liabilities of $17.6$42.4 million are required related to book basis in goodwill that has an indefinite life.

We file consolidated income tax returns in the U.S. federal jurisdiction and various states and foreign jurisdictions. We continue to reinvest earnings of the non-US entities for the foreseeable future and therefore have not recognized any U.S. tax expense on these earnings. With limited exceptions, we are no longer subject to U.S. federal, state and local, or non-U.S. income tax examinations by tax authorities for years before 2013.2018. We do not anticipate the results of any open examinations would result in a material change to itsour financial position.

At December 31, 2017, the Company has unrecognized tax benefits of $3.6 million of which $2.9 million will affect the effective tax rate if recognized.

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

  December 31, 
  2017  2016  2015 
Balance at beginning of year $3,861  $94  $3,761 
Increases (Decreases) related to prior year tax positions  1   3,861   (3,667)
Expiration of the statute of limitations for the assessment of taxes  –   (94)  – 
Increase (Decreases) related to change in rate  (247)  –   – 
Balance at end of year $3,615  $3,861  $94 

The Company believes it is reasonably possible it will not materially reduce its


88

 December 31,
 202320222021
Balance at beginning of year$4,144 $5,088 $5,484 
Increases related to prior year tax positions54 55 317 
Increases related to current year tax positions62 — — 
Expiration of the statute of limitations for the assessment of taxes(1,180)(999)(713)
Increase related to change in rate2 — — 
Balance at end of year$3,082 $4,144 $5,088 

At December 31, 2023, we had unrecognized tax benefits withinof $3.1 million of which $2.5 million will affect the next twelve months.

The Company recognizeseffective 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, 20172023 the Company accrued an insignificant amountapproximately $47 thousand of interest expense.and penalties. As of December 31, 2017,2023, accrued interest and penalties were insignificant.

amounted to approximately $0.4 million. We do not anticipate the uncertain tax position to change materially within the next 12 months.


In 2021, the Organization for Economic Co-operation and Development ("OECD") announced an inclusive framework on base erosion and profit shifting including Pillar Two Model Rules defining the global minimum tax, which calls for taxation of large multinational corporations at a minimum rate of 15%. Subsequently multiple sets of administrative guidance have been issued. Many non-US tax jurisdictions have either recently enacted legislation to adopt certain components of Pillar Two Model Rules beginning in 2024 (including the European Union Member States) with the adoption of additional components in later years or announced their plans to enact legislation in future years. We are continuing to evaluate the impacts of enacted legislation and pending legislation to enact Pillar Two Model Rules in the jurisdictions that we operate in outside of the 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.
NOTE 11 – STOCK-BASED COMPENSATION

Stock Incentive Plans

Options


We have one long-term equity incentive plan, which we refer to as the 2006RadNet, Inc. Equity Incentive Plan, which we first amended and restated as of April 20, 2015, and againsecond on March 9, 2017, (“the Restatedthird on April 15, 2021, and currently as of April 27, 2023 (the "Restated Plan”). The Restated Plan was most recently approved by our stockholders at our annual stockholders meeting on June 8, 2017.7, 2023. We have reserved for issuance under the 2017 Restated Plan 14,000,00020,100,000 shares of common stock. We can issue options (incentive and nonstatutory), performance based options, stock awards (restricted or unrestricted), stock units, performance based stock units, and stock appreciation rights stock units and cash awards under the 2017 Restated Plan.
Options

Certain options granted under the Restated Plan to employees are intended to qualify as incentive stock options under existing tax regulations. Stock options generally vest over threeone to five years and expire five to ten years from the date of grant.

As of December 31, 2017, we had outstanding options to acquire 420,149 shares of our common stock, of which options to acquire 43,334 shares were exercisable.


89

The following summarizes all of our option transactions for the twelve months ended December 31, 2017:

Outstanding Options
Under the 2006 Plan		    Shares        Weighted Average
Exercise price
Per Common Share		        Weighted Average
Remaining
Contractual
Life(in years)		        Aggregate
Intrinsic
Value		    
             
Balance, December 31, 2016  375,626  $6.82         
Granted  209,523   6.95         
Exercised  –   –         
Canceled, forfeited or expired  (165,000)  8.83         
Balance, December 31, 2017  420,149   6.10   7.74  $1,722,210 
Exercisable at December 31, 2017  43,334   2.27   0.97   339,503 

84
2023:

Outstanding Options
Under the Restated Plan		SharesWeighted Average
Exercise price
Per Common Share		Weighted Average
Remaining
Contractual
Life(in years)		Aggregate
Intrinsic
Value
Balance, December 31, 2022678,914 $15.72 
Granted261,220 18.64 
Exercised(12,723)11.11 
Canceled, forfeited or expired(16,000)17.06 
Balance, December 31, 2023911,411 16.60 6.22$16,561,659 
Exercisable at December 31, 2023668,809 14.75 5.2413,387,921 

Aggregate intrinsic value in the table above represents the total pretax intrinsic value (the difference between our closing stock price on December 31, 20172023 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, 2017. No options were exercised during the twelve months ended December 31, 2017.2023. As of December 31, 2017,2023, total unrecognized stock-based compensation expense related to non-vested employee awards was $842,343$1.4 million which is expected to be recognized over a weighted average period of approximately 2.61.23 years.


DeepHealth Options
During the second quarter of fiscal 2020, in connection with the completion of the DeepHealth acquisition, we granted 412,434 options at a grant date fair value of $16.93 per share unit to DeepHealth employees in replacement of their stock options that were outstanding as of the closing date. As of December 31, 2023, total unrecognized stock based compensation expense related to non-vested DeepHealth options was insignificant.
Outstanding Options
Under the Deep Health Plan		SharesWeighted Average
Exercise price
Per Common Share		Weighted Average
Remaining
Contractual Life
(in years)		Aggregate
Intrinsic
Value
Balance, December 31, 2022116,982 
Exercised(37,909)— 
Balance, December 31, 202379,073 — 5.75$2,749,368 
Exercisable at December 31, 202376,612 — 5.752,663,803 

Options issued in replacement of original DeepHealth options as a result of our acquisition are not included in the share count under the Restated Plan.

Restricted Stock Awards (“RSA’s”)

The Restated Plan permits the award of restricted stock awards (“RSA’s”). As of December 31, 2017,2023, we have issued a total of 4,945,4608,718,185 RSA’s of which 447,351537,358 were unvested at December 31, 2017.2023. The following summarizes all unvested RSA’s activities during the twelve months ended December 31, 2017:

     Weighted-Average    
     Remaining    
     Contractual  Weighted-Average 
  RSA's  Term (Years)  Fair Value 
RSA's unvested at December 31, 2016  573,145      $6.18 
Changes during the period            
Granted  681,448      $5.98 
Vested  (807,242)     $6.02 
RSA's unvested at December 31, 2017  447,351   0.32  $6.17 

2023:


90

RSA'sWeighted-Average
Remaining
Contractual
Term (Years)		Weighted-Average
Fair Value
RSA's unvested at December 31, 2022536,767 $23.84 
Changes during the period
Granted825,255 $21.31 
Vested(785,656)$22.12 
Forfeited(39,008)$18.31 
RSA's unvested at December 31, 2023537,358 0.90$22.99 
We determine the fair value of all RSA’s based ofon the closing price of our common stock on award date.

Other stock bonus awards

The Restated Plan also permits the award of stock bonuses not subject to any future service period. These awards are valued and expensed based on the closing price of our common stock on the date of award. During the twelve months ended December 31, 20172023 we issued 35,80050,765 shares relating to these awards, amounting to $361,370approximately $1.3 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. In January of 2023, based on the performance condition achieved, the board of directors issued 12,843 units with a fair value of $29.44 per unit.
In January 2023, we granted certain employees PSUs with a target award of 60,685 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, 2023 through December 31, 2023. As of December 31, 2023, 121,370 shares are expected to vest.
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. In January of 2023, based on the performance condition achieved, the board of directors issued 27,981 options with a strike price of $29.44 per share.
In January 2023, we granted certain employees PSOs with a potential to purchase a maximum of 235,227 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 235,227 shares) depending upon the extent to which we achieve a performance condition as determined by the board of directors over the period January 1, 2023 through December 31, 2023. As of December 31, 2023, all 235,227 shares are expected to vest.
AI Long Term Incentive Plan shares ("AI 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 AI LTIPs based on the closing price of our common stock on the award date. The following summarizes all unvested AI LTIPs activities during the twelve months ended December 31, 2023:

91

LTIPsWeighted-Average
Remaining
Contractual
Term (Years)		Weighted-Average
Fair Value
LTIPs unvested at December 31, 2022169,471 $19.56 
Changes during the period
Granted216,460 $20.24 
Vested(66,309)$19.62 
Forfeited or Canceled(94,897)$19.82 
LTIPs unvested at December 31, 2023224,725 2.73$20.08 
Plan summary

In summary, of the 14,000,00020,100,000 shares of common stock reserved for issuance under the Restated Plan at December 31, 2017, we had issued 13,195,159 total shares between options, RSA’s and other stock awards. With options cancelled and RSA’s forfeited amounting to 3,140,009 and 59,053 shares, respectively,2023, there remain 4,003,9034,069,349 shares available under the Restated Plan for future issuance.

NOTE 12 – EMPLOYEE BENEFIT PLAN

We adopted a profit-sharing/savings plan pursuant to Section 401(k)SUBSEQUENT EVENTS


Proposed acquisitions of the Internal Revenue Code that covers substantially all non-professional employees. Eligible employees may contribute on a tax-deferred basis a percentage of compensation, up to the maximum allowable under tax law. Employee contributions vest immediately. As of January 1, 2017, RadNet provides a matching contribution in the amount to a maximum of 1.0% per 4.0% of employee contribution and is expected to contribute approximately $2.5 million for the year ended December 31, 2017.

85
imaging centers


NOTE 13 – QUARTERLY RESULTS OF OPERATIONS (unaudited)

The following table sets forth a summary of our unaudited quarterly operating results for each of the last eight quarters in the years ended December 31, 2017 and 2016. This quarterly data has been derived from our unaudited consolidated interim financial statements which, in our opinion, have been prepared on substantially the same basis as the audited financial statements contained elsewhere in this report and include all normal recurring adjustments necessary

On February 16, 2023, we acquired Houston Medical Imaging, LLC for a fair presentation of the financial information for the periods presented. These unaudited quarterly results should be read in conjunction with our financial statements and notes thereto, included elsewhere in this report. The operating results in any quarter are not necessarily indicative of the results that may be expected for any future period (in thousands except per share data).

  2017 Quarter Ended  2016 Quarter Ended 
  Mar 31  June 30  Sept 30  Dec 31  Mar 31  June 30  Sept 30  Dec 31 
                         
Statement of Operations Data:                                
Net  revenue $229,013  $230,014  $227,607  $235,552  $216,388  $218,565  $224,643  $224,939 
                                 
Total operating expenses  222,266   215,853   216,765   217,252   213,405   210,487   212,192   209,971 
                                 
Total other expenses  9,993   8,009   9,328   9,889   7,875   5,717   11,578   10,641 
                                 
Equity in earnings of joint ventures  (1,928)  (2,994)  (3,450)  (5,182)  (2,279)  (3,274)  (2,576)  (1,638)
                                 
Benefit from (provision for) income taxes  458   (3,523)  (1,112)  (20,133)  1,180   (2,253)  (1,458)  (1,901)
                                 
Net (loss) income  (860)  5,623   3,852   (6,540)  (1,433)  3,382   1,991   4,064 
                                 
Net income (loss) attributable to noncontrolling interests  350   313   623   736   290   (243)  344   383 
                                 
Net (loss) income attributable to Radnet, Inc. common stockholders $(1,210) $5,310  $3,229  $(7,276) $(1,723) $3,625  $1,647  $3,681 
                                 
                                 
Basic net (loss) income attributable to Radnet, Inc. common stockholders (loss) earnings per share: $(0.03) $0.11  $0.07  $(0.15) $(0.04) $0.08  $0.04  $0.08 
                                 
Diluted net (loss) income attributable to Radnet, Inc. common stockholders (loss) earnings per share: $(0.03) $0.11  $0.07  $(0.15) $(0.04) $0.08  $0.04  $0.08 
                                 
Weighted average shares outstanding                                
Basic  46,560   46,756   46,954   47,237   46,581   46,559   45,869   45,967 
Diluted  46,560   47,196   47,578   47,886   46,581   46,882   46,334   46,389 

NOTE 14 – RELATED PARTY TRANSACTIONS

We used World Wide Express, a package delivery company formerly owned by our western operations chief operating officer, to provide delivery services for us. For the years ended December 31, 2016 and 2015, we paid approximately $670,000 and $693,000 respectively, to World Wide Express for those services. At December 31, 2016, we had outstanding amounts due to World Wide Express of $273,000. World Wide Express is no longer affiliated with the Company as a related party for the year ended December 31, 2017.

NOTE 15 – SUBSEQUENT EVENTS

On January 1, 2018 we completed our acquisition of certain assets of Imaging Services Company of New York, LLC, consisting of a single multi-modality center located in New York, New York, for purchase consideration of $5.8approximately $29.0 million.

Houston Medical Imaging consists of seven multi modality imaging centers located in Houston, Texas.


On JanuaryFebruary 1, 2018,2024, we formed Beachacquired Antelope Valley Outpatient Imaging Group,Center, LLC (“Beach Imaging”) and contributed the operations of 24 imaging facilities spread across southern Los Angeles and Orange Counties in exchange for a 60% economic interest. MemorialCare Medical Foundation (MCMF), a hospital systempurchase consideration of approximately $3.5 million. Antelope Valley Outpatient Imaging consists of four multi modality imaging centers located in southern California, contributed $22.9 million in cash along with the operations of 10 of its imaging facilities in southern California to receive a 40% economic interest in Beach Imaging. In connection with the same transaction, Beach Imaging agreed to sell one of its newly acquired imaging center from RadNet to MCMF for $1.7 million.

Palmdale, California.

92

86

Item 9. Changes In and Disagreements with Accountants on Accounting and Financial Disclosure

None.


Item 9AControls and Procedures


Evaluation of Disclosure Controls and Procedures

Under the supervision of our management, including our Chief Executive Officer and Chief Financial Officer, we conducted an evaluation of the effectiveness of the design and operation of our disclosure controls and procedures under Rules 13a-15(e) and 15d-15(e) of the Securities Exchange Act of 1934, as amended, as of December 31, 2016.2023. Based on this evaluation, our ChiefPrincipal Executive Officer and ChiefPrincipal Financial Officer concluded that our disclosure controls and procedures were not effective as of December 31, 2017 because deficiencies2023 to provide reasonable assurance that information required to be disclosed by the Company in reports that it files or submits under the Exchange Act is (i) recorded, processed, summarized and reported within the time periods specified in the operating effectiveness of several information technology dependent manual controls relatedSEC rules and forms and (ii) accumulated and communicated to the revenueour management, including our principal executive officer and accounts receivable process caused a material weakness in our internal control overprincipal financial reportingofficer, as described in more detail below.

Limitations on Effectiveness of Controls and Procedures

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectivenessappropriate to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with existing policies or procedures may deteriorate.

allow timely decisions regarding required disclosure.

Management's Report on Internal Control over Financial Reporting

Our management is responsible for establishing and maintaining adequate internal control over financial reporting. Internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with U.S. generally accepted accounting principles (“GAAP”). Internal control over financial reporting includes policies and procedures that (i) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the Company; (ii) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with GAAP, and that receipts and expenditures of the Company are transacted in accordance with authorizations of management and directors of the Company; and (iii) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the Company’s assets that could have a material effect on the financial statements.

Our management, under the supervision of our ChiefPrincipal Executive Officer and ChiefPrincipal Financial Officer, conducted an assessment of the effectiveness of its internal control over financial reporting as of December 31, 20172023 based on the criteria established in Internal Control - Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission (“COSO”). Based on this assessment, management concluded that our internal control over financial reporting was not effective as of December 31, 2017 because of the material weakness described below.

A material weakness is defined as “a deficiency, or a combination of deficiencies, in internal control over financial reporting, such that there is a reasonable possibility that a material misstatement of the Company’s annual or interim financial statements will not be prevented or detected on a timely basis.”

Management concluded that, as of December 31, 2015 and 2016, certain user access, program change and operations control components of information technology general controls and information technology dependent manual control deficiencies related to the Company’s revenue and accounts receivable process were not designed and operating effectively, which aggregate to a material weakness in the Company’s internal control over financial reporting.

Management concluded that our internal controls over financial reporting were not effective as of December 31, 2017 because the following control deficiency related to the Company’s revenue and accounts receivable process identified in the years ended December 31, 2015 and 2016 has not been remediated and therefore a material weakness continues to be present in the Company’s internal control over financial reporting:

·Certain information technology dependent manual controls which are (i) designed to ensure the completeness of revenue transaction processing, and (ii) designed to ensure a reasonable valuation of the Company’s accounts receivable balance were not performed timely, accurately or reviewed with sufficient precision.

87
2023.

The ineffective operation of these information technology dependent manual controls impacts a material portion of our revenue transactions.

Ernst & Young LLP, the Company’s independent registered public accounting firm, has audited the Company’s internal control over financial reporting as of December 31, 2017,2023, as stated in their report, which is included below in this Annual Report on Form 10-K.

Remediation Plan for Material Weakness

Management, with oversight

Limitations on Effectiveness of our Audit Committee, has been actively engaged in developingControls and executing a remediation plan to addressProcedures
Our management does not expect that internal controls over financial reporting will prevent or detect all misstatements or incidences of fraud. A control system, no matter how well designed and operated, can provide only reasonable, not absolute, assurance that the material weakness originally identified in the year ended December 31, 2015. The remediation efforts, which are ongoing, are to continue to focus on executing certain information technology dependent manual controls which are designed to ensure the completeness of revenue transaction processing, and to ensure a reasonable valuationobjectives of the Company’s accounts receivable balance oncontrol system are met. The design and implementation of a timely basiscontrol system is limited by resource constraints, and the benefits of controls must be considered relative to their costs. Because of the inherent limitations in all control systems, no evaluation of internal controls can provide absolute assurance that all control issues and instances of fraud, if any, have been detected. Also, any evaluation of the effectiveness of controls in future periods are subject to the risk that those internal controls may become inadequate because of changes in business conditions, or that the degree of compliance with an adequate level of precision.

If the remedial measures described above are insufficient to address the material weakness described above,policies or are not implemented timely, or additional deficiencies arise in the future, material misstatements in our interim or annual financial statementsprocedures may occur in the future and could have the effects described in “Item 1A. Risk Factors” in Part I of this Form 10-K.

deteriorate.


Changes in Internal Control over Financial Reporting

Management identified the following


There were no changes in our internal control over financial reporting occurring(as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act) during the fourth quarter ended December 31, 2023, that have materially affected, or wasare reasonably likely to materially affect, the Company’sour internal control over financial reporting:

·Certain user access, program change and operations control components of information technology general controls pertaining to multiple systems which capture and bill revenue transactions and design components relating to certain information technology dependent manual controls related to the Company’s revenue and accounts receivable process were modified.

88
reporting.


93

Report of Independent Registered Public Accounting Firm

To the Stockholders and the Board of Directors and Stockholders of RadNet, Inc.


Opinion on Internal Control overOver Financial Reporting

We have audited RadNet, Inc. and subsidiaries’ internal control over financial reporting as of December 31, 2017,2023, based on criteria established in Internal Control—Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (2013 framework), (the COSO criteria). In our opinion, because of the effect of the material weakness described below on the achievement of the objectives of the control criteria, RadNet, Inc. and subsidiaries’subsidiaries (the Company) has not maintained, in all material respects, effective internal control over financial reporting as of December 31, 2017,2023, based on the COSO criteria.

A material weakness is a deficiency, or combination of deficiencies, in internal control over financial reporting, such that there is a reasonable possibility that a material misstatement of the company’s annual or interim financial statements will not be prevented or detected on a timely basis. The following material weakness has been identified and included in management’s assessment. Management has identified a material weakness in the operating effectiveness of certain information technology dependent manual controls related to the Company’s revenue and accounts receivables process.


We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the 2017 consolidated balance sheets of the Company as of December 31, 20172023 and 2016,2022, the related consolidated statements of operations, comprehensive (loss) income, equity and cash flows for each of the three years in the period ended December 31, 2017,2023, and the related notesand financial statement schedule listed in the Index at Item 15(a)(2). This material weakness was considered in determining the nature, timing and extent of audit tests applied in our audit of the 2017 consolidated financial statements, and this report does not affect our report dated March 16, 2018, whichFebruary 29, 2024 expressed an unqualified opinion thereon.


Basis for Opinion

The Company’s management is responsible for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control over financial reporting included in the accompanying Management’s Report on Internal Control over Financial Reporting. Our responsibility is to express an opinion on the Company’s internal control over financial reporting based on our audit. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.


We conducted our audit in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects.


Our audit included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, testing and evaluating the design and operating effectiveness of internal control based on the assessed risk, and performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion.


Definition and Limitations of Internal Control Over Financial Reporting

A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements.


Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.


/s/ Ernst & Young LLP


Los Angeles, California

March 16, 2018

February 29, 2024 


94

-
Item 9B. 89Other Information.

During the fiscal quarter ended December 31, 2023, none of our directors or executive officers adopted or terminated any contract, instruction or written plan for the purchase or sale of Company securities that was intended to satisfy the affirmative defense conditions of Rule 10b5-1(c) or any "non-Rule 10b5-1 trading arrangement."

Item 9B. 9C.Other Information.Disclosure Regarding Foreign Jurisdictions that Prevent Inspections.

None

None.
PART III

Item 10.Directors, Executive Officers and Corporate Governance

The information required by this Item 10 will be included under the captions “Election of Directors,“Directors,” “Executive Officers,” “Board of Directors and Corporate“Corporate Governance,” and “Section“Delinquent Section 16(a) Beneficial Ownership Reporting Compliance”Reports” in our definitive Proxy Statement for the 20182024 Annual Meeting of Stockholders to be filed with the SEC within 120 days after the end of our fiscal year (the “Proxy Statement”) and is incorporated herein by reference.

We have adopted a code of financial ethics applicable to our directors, officers and employees which is designed to deter wrongdoing and to promote:

·honest and ethical conduct;
·full, fair, accurate, timely and understandable disclosure in reports and documents that we file with the SEC and in our other public communications;
·compliance with applicable laws, rules and regulations, including insider trading compliance; and
·accountability for adherence to the code and prompt internal reporting of violations of the code, including illegal or unethical behavior regarding accounting or auditing practices.

•honest and ethical conduct;

•full, fair, accurate, timely and understandable disclosure in reports and documents that we file with the SEC and in our other public communications;

•compliance with applicable laws, rules and regulations, including insider trading compliance; and

•accountability for adherence to the code and prompt internal reporting of violations of the code, including illegal or unethical behavior regarding accounting or auditing practices.

You may obtain a copy of our Code of Financial Ethics on our website atwww.radnet.com under Investor Relations — Corporate Governance. The Audit Committee is responsible for reviewing the Code of Financial Ethics and amending as necessary. Any amendments will be disclosed on our website.

Item 11.Executive Compensation

The information required by this Item 11 will be included under the captions “Compensation of Directors,” “Compensation of Executive Officers,Committee Report,” “Compensation Discussion and Analysis,” “Compensation Committee Interlocks and Insider Participation,” and “Compensation Committee Report “in"Executive Compensation Tables" in the Proxy Statement and is incorporated herein by reference.

Item 12.Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters

The information required by this Item 12 will be included under the captions “Security Ownership of Certain Beneficial Owners and Management” and “Equity Compensation Plan Information” in the Proxy Statement and is incorporated herein by reference.

Item 13.Certain Relationships and Related Transactions, and Director Independence

The information required by this Item 13 will be included under the captions “Certain Relationships“Compensation of Directors," "Compensation Committee Report," "Compensation Discussion and Related Party Transactions”Analysis", and “Board of Directors and Corporate Governance”"Executive Compensation Tables" in the Proxy Statement and is incorporated herein by reference.

Item 14.Principal Accountant Fees and Services


95

The information required by this Item 14 will be included under the caption “Independent Registered Public Accounting Firm Fees”“Fees Paid to Auditors” in the Proxy Statement and is incorporated herein by reference.


96

PART IV

90

PART IV

Item 15.Exhibits and Financial Statements Schedule
(a) Documents filed as part of this annual report on Form 10-K
(a) Documents filed as part of this annual report on Form 10-K
(1) Financial Statements
Page No.

The following financial statements are included in this report

57
51
58
53
59
54
60
55
61
56
62
58
64to 86
(2) Financial Statement Schedules
The following financial statement schedules are filed herewith:

SCHEDULE II – VALUATION AND QUALIFYING ACCOUNTS

RADNET, INC. AND SUBSIDIARIES

  Balance at Beginning of Year  Additional Charges Against Income  Deductions from Reserve  Balance at End of Year 
             
Year Ended December 31, 2017                
Accounts Receivable-Allowance for Bad Debts $20,674  $46,555  $(32,585) $34,644 
                 
Year Ended December 31, 2016                
Accounts Receivable-Allowance for Bad Debts $20,794  $45,387  $(45,507) $20,674 
                 
Year Ended December 31, 2015                
Accounts Receivable-Allowance for Bad Debts $15,109  $36,033  $(30,348) $20,794 

All other schedules


(2) Financial Statement Schedules
Schedules are omitted because they are not applicable or the required information is shown in the consolidated financial statements or notes thereto.

91


97

(3) Exhibits

The following exhibits are filed herewith or incorporated by reference herein:

Exhibit No.Description of Exhibit
2.13.1Asset Purchase Agreement dated October 1, 2015 by and among Mid Rockland Imaging Partners, Inc., a Delaware corporation and a subsidiary of the registrant, Diagnostic Imaging Group LLC, a Delaware limited liability company, Diagnostic Imaging Group Holdings, LLC,, a Delaware limited liability company, New Primecare LLC, a Delaware limited liability company, and Flushing Medical Arts Building, Inc. (incorporated by reference to exhibit filed with Form 8-K on October 20, 2015).
3.1
3.2
3.3
10.14.1
Credit and Guaranty Agreement, dated October 10, 2012, by and among Radnet Management, Inc., RadNet, Inc., the guarantors thereunder, General Electric Capital Corporation, Deutsche BankDescription of Securities Inc., RBC Capital Markets and Barclays Bank PLC (incorporated by reference to exhibitthe Description of Common Stock contained in the registration statement on Form S-3ASR filed with Form 8-K on October 12, 2012)December 27, 2022).
10.210.1*
10.3Form of Trademark Security Agreement by and among the guarantors thereunder and Barclays Bank PLC3 (filed as an exhibit to the Pledge and Security Agreement, dated October 10, 2012, by among the guarantors thereunder and Barclays Bank PLC, included as Exhibit 10.2).
10.4First Amendment Agreement dated April 3, 2013 to the Credit and Guaranty Agreement dated October 10, 2012, by and among RadNet Management, Inc., RadNet, Inc., certain subsidiaries and affiliates of RadNet Management, Inc., certain lenders identified therein and Barclays Bank PLC, as administrative agent and collateral agent. (incorporated by reference to Exhibit 99.1 filed with Form 8-K S-8 registration statement on April 4, 2013)August 9, 2023).
10.510.2
10.610.3*
10.7Second Lien Pledge and Security Agreement, dated as of March 25, 2014, by and among Radnet Management, Inc., the Grantors identified therein, and Barclays Bank PLC, as collateral agent.Equity Incentive Plan (incorporated by reference to Exhibit 99.3 filed with Form 8-KS-8 registration statement on March 31, 2014)August 9, 2023).
10.810.4*
10.9Amendment No. 3 to Credit and Guaranty Agreement, dated as of July 1, 2016 by and among Radnet Management, Inc., Radnet, Inc. certain subsidiaries and affiliates of Radnet Management, Inc., the lenders party thereto from time to time, certain other financial institutions and Barclays Bank PLC, as administrative agent and collateral agent. (incorporated by reference to filed with Form 8-K/A on December 2, 2016).

92

10.10Amendment No. 4 to Credit and Guaranty Agreement, dated as of February 2, 2017 by and among Radnet Management, Inc., Radnet, Inc. certain subsidiaries and affiliates of Radnet Management, Inc., the lenders party thereto from time to time, certain other financial institutions and Barclays Bank PLC, as administrative agent and collateral agent. (incorporated by reference to filed with Form 8-K on February 2, 2017).
10.11RadNet, Inc. 2006 Equity Incentive Plan (Amended and Restated as of April 20, 2015) (incorporated by reference to exhibit filed with Proxy Statement on April 30, 2015).*
10.12Form of Stock Option Agreement for the 2006 Equity Incentive Plan (incorporated by reference to exhibitExhibit 99.4 filed with Form S-8 registration statement on August 15, 2011)August 9, 2023).*
10.1310.5*
Form of Restricted Stock AwardUnits Agreement (deferred settlement) for the 2006 Equity Incentive Plan (incorporated by reference to exhibitExhibit 99.5 filed with Form 10-Q for the quarter ended March 31, 2012)S-8 registration statement on August 9, 2023).*
10.6*
10.14
10.7*
10.8*
10.15
10.1610.9*
10.10*
10.1710.11*Second Amendment to Employment Agreement dated November 16, 2015 with Howard G. Berger, M.D. (incorporated by reference to exhibit filed with Form 10-K on March 15, 2016).
10.18Employment Agreement dated as of April 16, 2001 with Jeffrey L. Linden (incorporated by reference to exhibit filed with Form 10-K for the year ended October 31, 2001).*
10.19
10.12*

98

10.2010.13*Second Amendment to Employment Agreement dated November 16, 2015 with Jeffrey L. Linden (incorporated by reference to exhibit filed with Form 10-K on March 15, 2016).
10.21Employment Agreement dated as of May 1, 2001 with Norman R. Hames (incorporated by reference to exhibit filed with Form 10-K for the year ended October 31, 2001).*
10.22
10.14*
10.2310.15*
10.16*
10.2410.17*
Employment Agreement with Mark Stolper effective January 1, 2009 (incorporated by reference to exhibit filed with Form 10-K for the year ended December 31, 2009).*
10.25First Amendment to Employment Agreement dated November 16, 2015January 1, 2024 with Mark StolperMital Patel (filed herewith).
10.18*
10.19*
10.20*

93

10.26
10.21*
RetentionAmended and Restated Severance Agreement dated February 24, 2022 with Stephen Forthuber dated November 15, 2006Christine Gordon (incorporated by reference to exhibit filed with Form 10-K/T for the year ended December 31, 2006).*
10.2710.22First Amendment to Retention Agreement dated November 16, 2015 with Stephen Forthuber (incorporated by reference to exhibit filed with Form 10-K on March 15, 2016).*
10.28
10.23
12.1
10.24
21.1
23.1
24.1
Power of Attorney (included on signature page attached hereto).
31.1
31.2
32.132.1**
32.232.2**


99

97.1*
101.INSXBRL Instance Document
101.SCHXBRL Schema Document
101.CALXBRL Calculation Linkbase Document
101.LABXBRL Label Linkbase Document
101.PREXBRL Presentation Linkbase Document
101.DEFXBRL Definition Linkbase Document
104Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101)


*Indicates management contract or compensatory plan.

†Certain schedules to this exhibit have been omitted in accordance with Regulation S-K

**    Furnished herewith.


100

Item 601(b)(2). The company agrees to furnish supplementally a copy of all omitted schedules to the SEC upon its request.

94
16.  10-K Summary


None
SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

RADNET, INC.
Date: March 16, 2018February 29, 2024/s/ HOWARD  G. BERGER, M.D .
Howard G. Berger, M.D., President,
Chief Executive Officer and Director

POWER OF ATTORNEY

KNOW ALL PERSONS BY THESE PRESENTS, that each person whose signature appears below hereby severally constitutes and appoints Howard G. Berger, M.D. and Mark D. Stolper, and each of them, his or her true and lawful attorney-in-fact and agent, with full power of substitution and re-substitution for him or her and in his or her name, place and stead, in any and all capacities to sign any and all amendments to this report, and to file the same, with all exhibits thereto, and other documents in connection therewith, with the SEC, granting unto said attorney-in-fact and agents, and each of them, full power and authority to do and perform each and every act and thing requisite or necessary fully to all intents and purposes as he or she might or could do in person, hereby ratifying and confirming all that each said attorneys-in-fact and agents or any of them or their or his or her substitute or substitutes, may lawfully do or cause to be done by virtue hereof.

Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of registrant in the capacities and on the dates indicated.

By/s/ HOWARD G. BERGER, M.D.
Howard G. Berger, M.D., Director, Chief Executive Officer and President (Principal Executive Officer)
Date: March 16, 2018February 29, 2024
By/s/ MARVIN S. CADWELLGREGORY E. SPURLOCK
Marvin S. Cadwell,Gregory E. Spurlock, Director
Date: March 16, 2018February 29, 2024
By/s/ JOHN V. CRUES, III, M.D.ALMA GREGORY SORENSEN
John V. Crues, III, M.D.,Alma Gregory Sorensen, Director
Date: March 16, 2018February 29, 2024
By/s/ NORMAN R. HAMES
Norman R. Hames, Director
Date: March 16, 2018
By/s/ DAVID L. SWARTZ

David L. Swartz, Director


101
Date: March 16, 2018February 29, 2024
By/s/ LAWRENCE L. LEVITT
Lawrence L. Levitt, Director
Date: March 16, 2018February 29, 2024
By/s/ MICHAEL L. SHERMAN, M.D.LAURA P. JACOBS
Michael L. Sherman, M.D.,Laura P. Jacobs, Director
Date: March 16, 2018February 29, 2024
By/s/ CHRISTINE GORDON
Christine Gordon, Director
Date: February 29, 2024
By/s/ MARK D. STOLPER
Mark D. Stolper,Chief Financial Officer (Principal Accounting Officer)
Date: March 16, 2018

95February 29, 2024