UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington D.C. 20549

FORM 10-Q

(Mark One)

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

For the quarterly period ended ~~September~~June 30, ~~2019~~2020

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

For the transition period from to

Commission File Number 001-33307

RadNet, Inc.

(Exact name of registrant as specified in charter)



Delaware		13-3326724
(State or other jurisdiction of ~~Incorporation~~incorporation or organization)		(I.R.S. Employer Identification No.)

1510 Cotner Avenue
Los Angeles,	California	90025
(Address of principal executive offices)		(Zip Code)

~~(310)~~ (310) 478-7808

(Registrant’s telephone number, including area code)

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 and 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. Yes ☒ No ☐

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

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, 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 filer	☐	Accelerated filer	☒
Non-accelerated filer	☐	Smaller reporting company	☐
Emerging growth company	☐

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 is a shell company (as defined in Rule 12b-2 of the Exchange Act) Yes ☐ No ☒

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



Class Title	Trading Symbol	Registered Exchange
Common Stock	RDNT	NASDAQ

The number of shares of the registrant’s common stock outstanding on ~~November 6, 2019~~August 7, 2020 was ~~50,271,829~~51,574,760 shares.

RADNET, INC.

TABLE OF CONTENTS



	Page

PART I – FINANCIAL INFORMATION	3

ITEM 1. Condensed Consolidated Financial Statements (unaudited)	3

Condensed Consolidated Balance Sheets at ~~September~~June 30, ~~2019~~2020 and December 31, ~~2018~~2019	3

Condensed Consolidated Statements of Operations for the Three and ~~Nine~~Six Months Ended ~~September~~June 30, ~~2019~~2020 and ~~2018~~2019	54

Condensed Consolidated Statements of Comprehensive ~~(Loss) Income~~Loss for the Three and ~~Nine~~Six Months Ended ~~September~~June 30, ~~2019~~2020 and ~~2018~~2019	65

Condensed Consolidated Statement of Stockholders' Equity for the Three Months Ended ~~September~~June 30, ~~2019~~2020 and ~~2018~~2019	6

Condensed Consolidated Statement of Stockholders’ Equity for the Six Months Ended June 30, 2020 and 2019	7

Condensed Consolidated ~~Statement~~Statements of ~~Stockholders’ Equity~~Cash Flows for the ~~Nine~~Six Months Ended ~~September~~June 30, ~~2019~~2020 and ~~2018~~2019	89

Notes to Condensed Consolidated Financial Statements ~~of Cash Flows for the Nine Months Ended September 30, 2019 and 2018~~	1011

~~Notes to Condensed Consolidated Financial Statements~~	12

ITEM 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations	3428

ITEM 3. Quantitative and Qualitative Disclosures About Market Risk	5146

ITEM 4. Controls and Procedures	5247

PART II – OTHER INFORMATION	5348

ITEM 1. Legal Proceedings	5348

ITEM 1A. Risk Factors	5348

ITEM 2. Unregistered Sales of Equity Securities and Use of Proceeds	5349

ITEM 3. Defaults Upon Senior Securities	5349

ITEM 4. Mine Safety Disclosures	5349

ITEM 5. Other Information	5349

ITEM 6. Exhibits	5450

SIGNATURES	5551

Table of Contents

PART I - FINANCIAL INFORMATION

Item 1 – Financial Statements

RADNET, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS

(IN THOUSANDS EXCEPT SHARE AND PER SHARE DATA)


	September 30, 2019			December 31, 2018			June 30, 2020			December 31, 2019
	(unaudited)						(unaudited)
ASSETS
CURRENT ASSETS
Cash and cash equivalents	$	37,688		$	10,389		$	84,583		$	40,165
Accounts receivable	150,748			148,919			125,745			154,763
Due from affiliates	1,385			595			1,472			1,242
Prepaid expenses and other current assets	47,857			46,288			35,720			45,004
Assets held for sale	2,041			2,499
Total current assets	239,719			208,690			247,520			241,174
PROPERTY, EQUIPMENT AND RIGHT-OF-USE ASSETS
Property and equipment, net	352,310			345,729			370,188			367,795
Operating lease right-of-use assets	438,558			—			448,855			445,477
Total property, equipment and right-of-use assets	790,868			345,729			819,043			813,272
OTHER ASSETS
Goodwill	439,867			418,093			467,803			441,973
Other intangible assets	43,613			40,593			57,601			42,994
Deferred financing costs	1,670			1,354			1,336			1,559
Investment in joint ventures	36,868			37,973			37,370			34,470
Deferred tax assets, net of current portion	34,423			31,506			46,226			34,548
Deposits and other	30,872			25,392			40,104			36,996
Total assets	$	1,617,900		$	1,109,330		$	1,717,003		$	1,646,986
LIABILITIES AND EQUITY
CURRENT LIABILITIES
Accounts payable, accrued expenses and other	$	175,894		$	181,028		$	206,272		$	207,585
Due to affiliates	18,592			13,089			20,042			14,347
Deferred revenue	1,908			2,398			45,700			1,316
Current portion of deferred rent	—			3,735
Current finance lease liability	4,095			—			3,264			3,283
Current operating lease liability	69,308			—			65,400			61,206
Current portion of notes payable	39,719			33,653			41,715			39,691
Current portion of obligations under capital leases	—			5,614
Total current liabilities	309,516			239,517			382,393			327,428
LONG-TERM LIABILITIES
Deferred rent, net of current portion	—			31,542
Long-term finance lease liability	4,042			—			1,682			3,264
Long-term operating lease liability	410,958			—			424,018			420,922
Notes payable, net of current portion	662,605			626,507			634,840			652,704
Obligations under capital lease, net of current portion	—			6,505
Other non-current liabilities	15,707			5,006			40,814			9,529
Total liabilities	1,402,828			909,077			1,483,747			1,413,847
EQUITY
RadNet, Inc. stockholders' equity:
Common stock - $.0001 par value, 200,000,000 shares authorized; 50,254,136 and 48,977,485 shares issued and outstanding at September 30, 2019 and December 31, 2018, respectively	5			5
Common stock - $.0001 par value, 200,000,000 shares authorized; 51,554,760 and 50,314,328 shares issued and outstanding at June 30, 2020 and December 31, 2019, respectively							5			5
Additional paid-in-capital	260,463			242,835			304,012			262,865
Accumulated other comprehensive (loss) income	(12,250		)	2,259
Accumulated other comprehensive loss							(26,098		)	(8,026		)
Accumulated deficit	(113,555		)	(117,915		)	(130,111		)	(103,159		)
Total RadNet, Inc.'s stockholders' equity	134,663			127,184			147,808			151,685
Noncontrolling interests	80,409			73,069			85,448			81,454
Total equity	215,072			200,253			233,256			233,139
Total liabilities and equity	$	1,617,900		$	1,109,330		$	1,717,003		$	1,646,986

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

RADNET, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(IN THOUSANDS EXCEPT SHARE AND PER SHARE DATA)

(unaudited)


	Three Months Ended September 30,						Nine Months Ended September 30,						Three Months Ended June 30,						Six Months Ended June 30,
	2019			2018			2019			2018			2020			2019			2020			2019
REVENUE
Service fee revenue	$	261,908		217,552			$	762,751		641,136			$	155,698		$	258,171		$	404,031		$	500,844
Revenue under capitation arrangements	30,784			24,596			90,587			76,799			34,868			30,926			68,099			59,803
Total revenue	292,692			242,148			853,338			717,935			190,566			289,097			472,130			560,647
Provider relief funding													25,475			—			25,475			—
OPERATING EXPENSES
Cost of operations, excluding depreciation and amortization	254,383			208,511			743,997			634,200			194,217			246,558			461,635			489,615
Depreciation and amortization	20,490			17,480			60,193			53,422			21,355			20,083			43,289			39,703
Loss (gain) on sale and disposal of equipment and other	917			(373		)	1,990			(2,204		)
(Gain) loss on sale and disposal of equipment and other													(569		)	101			202			1,073
Severance costs	52			82			1,054			1,087			859			371			1,076			1,002
Total operating expenses	275,842			225,700			807,234			686,505			215,862			267,113			506,202			531,393
INCOME FROM OPERATIONS	16,850			16,448			46,104			31,430
INCOME (LOSS) FROM OPERATIONS													179			21,984			(8,597		)	29,254

OTHER INCOME AND EXPENSES
Interest expense	11,895			10,663			36,589			31,343			10,831			12,399			22,382			24,694
Equity in earnings of joint ventures	(1,955		)	(2,822		)	(6,072		)	(9,547		)	(945		)	(2,244		)	(2,900		)	(4,117		)
Other expenses	2			7			1,271			13
Non-cash change in fair value of interest rate hedge													3,843			—			3,843			—
Other (income) expenses													(115		)	1,269			(108		)	1,269
Total other expenses	9,942			7,848			31,788			21,809			13,614			11,424			23,217			21,846
INCOME BEFORE INCOME TAXES	6,908			8,600			14,316			9,621
Provision for income taxes	(1,816		)	(2,827		)	(3,556		)	(2,835		)
NET INCOME	5,092			5,773			10,760			6,786
(LOSS) INCOME BEFORE INCOME TAXES													(13,435		)	10,560			(31,814		)	7,408
Benefit from (provision for) income taxes													4,475			(2,969		)	8,856			(1,740		)
NET (LOSS) INCOME													(8,960		)	7,591			(22,958		)	5,668
Net income attributable to noncontrolling interests	1,897			734			6,400			3,679			1,634			2,692			3,994			4,503
NET INCOME ATTRIBUTABLE TO RADNET, INC. COMMON STOCKHOLDERS	$	3,195		$	5,039		$	4,360		$	3,107
NET (LOSS) INCOME ATTRIBUTABLE TO RADNET, INC. COMMON STOCKHOLDERS													$	(10,594	)	$	4,899		$	(26,952	)	$	1,165

BASIC NET INCOME PER SHARE ATTRIBUTABLE TO RADNET, INC. COMMON STOCKHOLDERS	$	0.06		$	0.10		$	0.09		$	0.06
BASIC NET (LOSS) INCOME PER SHARE ATTRIBUTABLE TO RADNET, INC. COMMON STOCKHOLDERS													$	(0.21	)	$	0.10		$	(0.53	)	$	0.02

DILUTED NET INCOME PER SHARE ATTRIBUTABLE TO RADNET, INC. COMMON STOCKHOLDERS	$	0.06		$	0.10		$	0.09		$	0.06
DILUTED NET (LOSS) INCOME PER SHARE ATTRIBUTABLE TO RADNET, INC. COMMON STOCKHOLDERS													$	(0.21	)	$	0.10		$	(0.53	)	$	0.02
WEIGHTED AVERAGE SHARES OUTSTANDING
Basic	49,807,460			48,010,726			49,597,138			47,937,215			50,672,219			49,702,869			50,483,274			49,490,234
Diluted	50,360,360			48,615,392			50,113,306			48,481,305			50,672,219			50,144,540			50,483,274			49,988,036

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

RADNET, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE ~~(LOSS) INCOME~~LOSS

(IN THOUSANDS)

(unaudited)


	Three Months Ended September 30,						Nine Months Ended September 30,						Three Months Ended June 30,						Six Months Ended June 30,
	2019			2018			2019			2018			2020			2019			2020			2019
NET INCOME	$	5,092		$	5,773		$	10,760		$	6,786
NET (LOSS) INCOME													$	(8,960	)	$	7,591		$	(22,958	)	$	5,668
Foreign currency translation adjustments	(23		)	(91		)	(28		)	(65		)	(7		)	3			(6		)	(5		)
Change in fair value of cash flow hedge, net of taxes	(5,283		)	595			(14,481		)	4,889			(409		)	(8,002		)	(18,958		)	(9,198		)
COMPREHENSIVE (LOSS) INCOME	(214		)	6,277			(3,749		)	11,610
Change in fair value of cash flow hedge from prior periods reclassified to earnings													892			—			892			—
COMPREHENSIVE LOSS													(8,484		)	(408		)	(41,030		)	(3,535		)
Less comprehensive income attributable to noncontrolling interests	1,897			734			6,400			3,679			1,634			2,692			3,994			4,503
COMPREHENSIVE (LOSS) INCOME ATTRIBUTABLE TO
COMPREHENSIVE LOSS ATTRIBUTABLE TO
RADNET, INC. COMMON STOCKHOLDERS	$	(2,111	)	$	5,543		$	(10,149	)	$	7,931		$	(10,118	)	$	(3,100	)	$	(45,024	)	$	(8,038	)

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

RADNET, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY

(IN THOUSANDS EXCEPT SHARE DATA)

(unaudited)

The following table summarizes changes in the Company’s consolidated stockholders' equity, including noncontrolling interest, during the three months ended ~~September~~June 30, ~~2019~~2020 and ~~September~~June 30, ~~2018.~~2019.

Common Stock
Additional Paid-In
Capital

Accumulated Other
Comprehensive
Income (Loss)

Accumulated
Deficit

Total
Radnet, Inc.'s
Equity

Noncontrolling
Interests

Total
Equity
Shares Amount
BALANCE - JUNE 30, 2019 50,127,234
$ 5
$ 257,607
$ (6,942 ) $ (116,752 ) $ 133,918
$ 78,512
$ 212,430
Issuance of common stock under the equity compensation plan 25,000
—
—
—
—
—
—
—
Stock-based compensation expense —
—
1,356
—
—
1,356
—
1,356
Issuance of common stock for purchase of Nulogix 101,902
—
1,500
—
—
1,500
—
1,500
Change in cumulative foreign currency translation adjustment —
—
—
(23 ) —
(23 ) —
(23 )
Change in fair value cash flow hedge, net of taxes —
—
—
(5,283 ) —
(5,283 ) —
(5,283 )
Other —
—
—
(2 ) 2
—
—
—
Net loss —
—
—
—
3,195
3,195
1,897
5,092
BALANCE-SEPTEMBER 30, 2019 50,254,136
$ 5
$ 260,463
$ (12,250 ) $ (113,555 ) $ 134,663
$ 80,409
$ 215,072

BALANCE - JUNE 30, 2018 48,284,925
$ 5
$ 235,713
$ 3,677
$ (152,090 ) $ 87,305
$ 37,629
$ 124,934

Issuance of common stock upon exercise of options 5,000
—
10
—
—
10
—
10
Issuance of common stock under the equity compensation plan 45,000
—
—
—
—
—
—
—
Stock-based compensation expense —
—
1,568
—
—
1,568
—
1,568
Sale of noncontrolling interests, net of taxes —
—
(3,070 ) —
—
(3,070 ) (2,046 ) (5,116 )
Special distribution from noncontrolling interest —
—
2,894
—
—
2,894
(9,175 ) (6,281 )
Distributions paid to noncontrolling interests —
—
—
—
—
—
—
—
Purchase of noncontrolling interests —
—
(43 ) —
—
(43 ) (157 ) (200 )
Change in cumulative foreign currency translation adjustment —
—
—
4
—
4
—
4
Change in fair value cash flow hedge, net of taxes —
—
—
595
—
595
—
595
Net loss —
—
—
—
5,039
5,039
734
5,773
BALANCE-SEPTEMBER 30, 2018 48,334,925
$ 5
$ 237,072
$ 4,276
$ (147,051 ) $ 94,302
$ 26,985
$ 121,287

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

~~RADNET, INC. AND SUBSIDIARIES~~

~~CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY~~

~~(IN THOUSANDS EXCEPT SHARE DATA)~~

~~(unaudited)~~

The following table summarizes changes in the Company’s consolidated stockholders' equity, including noncontrolling interest, during the nine months ended September 30, 2019 and September 30, 2018.


	Common Stock				Additional Paid-In Capital			Accumulated Other Comprehensive Income (Loss)			Accumulated Deficit			Total Radnet, Inc.'s Equity			Noncontrolling Interests			Total Equity			Common Stock				Additional Paid-In Capital			Accumulated Other Comprehensive Income (Loss)			Accumulated Deficit			Total Radnet, Inc.'s Equity			Noncontrolling Interests			Total Equity
	Shares		Amount		Additional Paid-In Capital			Accumulated Other Comprehensive Income (Loss)			Accumulated Deficit			Total Radnet, Inc.'s Equity			Noncontrolling Interests			Total Equity			Shares		Amount		Additional Paid-In Capital			Accumulated Other Comprehensive Income (Loss)			Accumulated Deficit			Total Radnet, Inc.'s Equity			Noncontrolling Interests			Total Equity
BALANCE - JANUARY 1, 2019	48,977,485		$	5	$	242,835		$	2,259		$	(117,915	)	$	127,184		$	73,069		$	200,253
Issuance of common stock upon exercise of options	10,000		—		50			—			—			50			—			50
BALANCE - April 1, 2020																							50,694,375		$	5	$	269,461		$	(26,574	)	$	(119,517	)	$	123,375		$	83,814		$	207,189
Issuance of common stock under the equity compensation plan	726,042		—		—			—			—			—			—			—			36,770		—		—			—			—			—			—			—
Stock-based compensation expense	—		—		6,993			—			—			6,993			—			6,993			—		—		1,540			—			—			1,540			—			1,540
Issuance of common stock for purchase of membership interest in HVRA	440,207		—		6,000			—			—			6,000			—			6,000
Forfeiture of restricted stock	(1,500	)	—		(5		)	—			—			(5		)	—			(5		)
Sale of noncontrolling interests, net of taxes	—		—		3,090			—			—			3,090			2,008			5,098
Distributions paid to noncontrolling interests	—		—		—			—			—			—			(1,818		)	(1,818		)
Contribution from noncontrolling partner	—		—		—			—			—			—			750			750
Issuance of common stock for purchase of Nulogix	101,902		—		1,500			—			—			1,500			—			1,500
Issuance of common stock for sale of unregistered securities for the DeepHealth acquisition																							823,615		—		33,011			—			—			33,011			—			33,011
Change in cumulative foreign currency translation adjustment	—		—		—			(28		)	—			(28		)	—			(28		)	—		—		—			(7		)	—			(7		)	—			(7		)
Change in fair value cash flow hedge, net of taxes	—		—		—			(14,481		)	—			(14,481		)	—			(14,481		)	—		—		—			(409		)	—			(409		)	—			(409		)
Net income	—		—		—			—			4,360			4,360			6,400			10,760
BALANCE-SEPTEMBER 30, 2019	50,254,136		$	5	$	260,463		$	(12,250	)	$	(113,555	)	$	134,663		$	80,409		$	215,072
Change in fair value of cash flow hedge from prior periods reclassified to earnings																							—		—		—			892			—			892			—			892
Net loss																							—		—		—			—			(10,594		)	(10,594		)	1,634			(8,960		)
BALANCE-JUNE 30, 2020																							51,554,760		$	5	$	304,012		$	(26,098	)	$	(130,111	)	$	147,808		$	85,448		$	233,256

BALANCE - JANUARY 1, 2018	47,723,915		$	5	$	212,261		$	(548	)	$	(150,158	)	$	61,560		$	8,365		$	69,925
BALANCE - April 1, 2019																							50,081,478		$	5	$	256,488		$	1,055		$	(121,648	)	$	135,900		$	77,638		$	213,538
Issuance of common stock upon exercise of options	5,000		—		10			—			—			10			—			10			—		—		—			—			—			—			—			—
Issuance of common stock under the equity compensation plan	607,160		—		—			—			—			—			—			—			47,256		—		—			—			—			—			—			—
Stock-based compensation expense	—		—		6,364			—			—			6,364			—			6,364			—		—		1,124			—			—			1,124			—			1,124
Forfeiture of restricted stock	(1,150	)	—		(7		)	—			—			(7		)	—			(7		)	(1,500	)	—		(5		)	—			—			(5		)	—			(5		)
Sale of noncontrolling interests, net of taxes	—		—		15,593			—			—			15,593			25,186			40,779
Special distribution from noncontrolling interest	—		—		2,894			—			—			2,894			(9,175		)	(6,281		)
Purchase of noncontrolling interests	—		—		(43		)	—			—			(43		)	(157		)	(200		)	—		—		—			—			—			—			(1,818		)	(1,818		)
Distributions paid to noncontrolling interests	—		—		—			—			—			—			(913		)	(913		)
Change in cumulative foreign currency translation adjustment	—		—		—			(65		)	—			(65		)	—			(65		)	—		—		—			3			—			3			—			3
Change in fair value cash flow hedge, net of taxes	—		—		—			4,889			—			4,889			—			4,889			—		—		—			(8,002		)	—			(8,002		)	—			(8,002		)
Other																							—		—		—			—			(1		)	(1		)	—			(1		)
Net loss	—		—		—			—			3,107			3,107			3,679			6,786			—		—		—			—			4,899			4,899			2,692			7,591
BALANCE-SEPTEMBER 30, 2018	48,334,925		$	5	$	237,072		$	4,276		$	(147,051	)	$	94,302		$	26,985		$	121,287
BALANCE-JUNE 30, 2019																							50,127,234		$	5	$	257,607		$	(6,944	)	$	(116,750	)	$	133,918		$	78,512		$	212,430

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

RADNET, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF ~~CASH FLOWS~~STOCKHOLDERS' EQUITY

(IN ~~THOUSANDS)~~THOUSANDS EXCEPT SHARE DATA)

(unaudited)

The following table summarizes changes in the Company’s consolidated stockholders' equity, including noncontrolling interest, during the six months ended June 30, 2020 and June 30, 2019.

Nine Months Ended September 30,
2019 2018
CASH FLOWS FROM OPERATING ACTIVITIES

Net income $ 10,760
$ 6,786
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization 60,193
53,422
Amortization of operating lease right-of-use assets 49,948
—
Equity in earnings of joint ventures (6,072 ) (9,547 )
Distributions from joint ventures 3,924
21,783
Amortization of deferred financing costs and loan discount 3,103
2,924
Loss (gain) on sale and disposal of equipment and other 1,990
(2,204 )
Stock-based compensation 6,963
6,557
Other noncash items included in cost of operations (559 ) —
Change in fair value of contingent consideration (1,749 ) —
Changes in operating assets and liabilities, net of assets acquired and liabilities assumed in purchase transactions:
Accounts receivable (3,467 ) (9,641 )
Other current assets (1,569 ) (5,680 )
Other assets (5,770 ) (1,209 )
Deferred taxes (4,230 ) 1,531
Operating lease liability (49,721 ) —
Deferred rent —
2,397
Deferred revenue (490 ) 353
Accounts payable, accrued expenses and other 19,349
20,386
Net cash provided by operating activities 82,603
87,858
CASH FLOWS FROM INVESTING ACTIVITIES
Purchase of imaging facilities (27,150 ) (17,393 )
Equity investments at fair value (143 ) (2,200 )
Purchase of property and equipment (68,269 ) (62,595 )
Proceeds from sale of equipment 760
2,587
Proceeds from the sale of equity interests in a joint venture 132
—
Nulogix return of capital 792
—
Equity contributions in existing and purchase of interest in joint ventures (103 ) (2,000 )
Net cash used in investing activities (93,981 ) (81,601 )
CASH FLOWS FROM FINANCING ACTIVITIES
Principal payments on notes and leases payable (4,778 ) (4,374 )
Payments on term loan debt (29,918 ) (24,810 )
Proceeds from debt issuance 97,144
—
Distributions paid to noncontrolling interests (1,818 ) (913 )
Proceeds from sale of noncontrolling interest 5,275
—
Contribution from noncontrolling partner 750
—
Proceeds from revolving credit facility 251,200
44,000
Purchase of noncontrolling interests —
(200 )
Payments on revolving credit facility (279,200 ) (44,000 )
Proceeds from issuance of common stock upon exercise of options 50
10
Net cash provided by (used in) financing activities 38,705
(30,287 )
EFFECT OF EXCHANGE RATE CHANGES ON CASH (28 ) (65 )
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS 27,299
(24,095 )
CASH AND CASH EQUIVALENTS, beginning of period 10,389
51,322
CASH AND CASH EQUIVALENTS, end of period $ 37,688
$ 27,227

SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION
Cash paid during the period for interest $ 36,058
$ 27,136



	Common Stock				Additional Paid-In Capital			Accumulated Other Comprehensive Income (Loss)			Accumulated Deficit			Total Radnet, Inc.'s Equity			Noncontrolling Interests			Total Equity
	Shares		Amount		Additional Paid-In Capital			Accumulated Other Comprehensive Income (Loss)			Accumulated Deficit			Total Radnet, Inc.'s Equity			Noncontrolling Interests			Total Equity
BALANCE - January 1, 2020	50,314,328		$	5	$	262,865		$	(8,026	)	$	(103,159	)	$	151,685		$	81,454		$	233,139
Issuance of common stock under the equity compensation plan	416,817		—		—			—			—			—			—			—
Stock-based compensation expense	—		—		8,136			—			—			8,136			—			8,136
Issuance of common stock for sale of unregistered securities for the DeepHealth acquisition	823,615		—		33,011			—			—			33,011			—			33,011
Change in cumulative foreign currency translation adjustment	—		—		—			(6		)	—			(6		)	—			(6		)
Change in fair value cash flow hedge, net of taxes	—		—		—			(18,958		)	—			(18,958		)	—			(18,958		)
Change in fair value of cash flow hedge from prior periods reclassified to earnings	—		—		—			892			—			892			—			892
Net loss	—		—		—			—			(26,952		)	(26,952		)	3,994			(22,958		)
BALANCE-JUNE 30, 2020	51,554,760		$	5	$	304,012		$	(26,098	)	$	(130,111	)	$	147,808		$	85,448		$	233,256

BALANCE - January 1, 2019	48,977,485		$	5	$	242,835		$	2,259		$	(117,915	)	$	127,184		$	73,069		$	200,253
Issuance of common stock upon exercise of options	10,000		—		50			—			—			50			—			50
Issuance of common stock under the equity compensation plan	701,042		—		—			—			—			—			—			—
Stock-based compensation expense	—		—		5,638			—			—			5,638			—			5,638
Issuance of common stock for purchase of membership interest in HVRA	440,207		—		6,000			—			—			6,000			—			6,000
Forfeiture of restricted stock	(1,500	)	—		(5		)	—			—			(5		)	—			(5		)
Sale of noncontrolling interests, net of taxes	—		—		3,089			—			—			3,089			2,008			5,097
Purchase of noncontrolling interests	—		—		—			—			—			—			(1,818		)	(1,818		)
Contribution from noncontrolling partner	—		—		—			—			—			—			750			750
Change in cumulative foreign currency translation adjustment	—		—		—			(5		)	—			(5		)	—			(5		)
Change in fair value cash flow hedge, net of taxes	—		—		—			(9,198		)	—			(9,198		)	—			(9,198		)
Net loss	—		—		—			—			1,165			1,165			4,503			5,668
BALANCE-JUNE 30, 2019	50,127,234		$	5	$	257,607		$	(6,944	)	$	(116,750	)	$	133,918		$	78,512		$	212,430

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

RADNET, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(IN THOUSANDS)

(unaudited)



	Six Months Ended June 30,
	2020			2019
CASH FLOWS FROM OPERATING ACTIVITIES
Net (loss) income	$	(22,958	)	$	5,668
Adjustments to reconcile net loss to net cash provided by operating activities:
Depreciation and amortization	43,289			39,703
Amortization of operating lease right-of-use assets	34,094			32,937
Equity in earnings of joint ventures	(2,900		)	(4,117		)
Distributions from joint ventures	—			3,438
Amortization of deferred financing costs and loan discount	2,163			2,021
Loss on sale and disposal of equipment and other	202			1,073
Amortization of cash flow hedge	892			—
Non-cash change in fair value of interest rate hedge	3,843			—
Stock-based compensation	8,078			5,582
Other non-cash items included in cost of operations	—			(559		)
Change in fair value of contingent consideration	(97		)	(1,953		)
Changes in operating assets and liabilities, net of assets acquired and liabilities assumed in purchase transactions:
Accounts receivable	29,018			(12,042		)
Other current assets	9,884			4,331
Other assets	(4,257		)	2,069
Deferred taxes	(11,678		)	(3,542		)
Operating lease liability	(30,182		)	(32,268		)
Deferred revenue	44,384			(666		)
Accounts payable, accrued expenses and other	27,690			2,860
Net cash provided by operating activities	131,465			44,535
CASH FLOWS FROM INVESTING ACTIVITIES
Purchase of imaging facilities and other acquisitions	(4,188		)	(27,149		)
Equity investments at fair value	—			(143		)
Purchase of property and equipment	(64,193		)	(50,342		)
Proceeds from sale of equipment	779			760
Proceeds from the sale of equity interests in a joint venture	—			132
Equity contributions in existing and purchase of interest in joint ventures	—			(103		)
Net cash used in investing activities	(67,602		)	(76,845		)
CASH FLOWS FROM FINANCING ACTIVITIES
Principal payments on notes and leases payable	(1,814		)	(3,320		)
Payments on term loan debt	(21,648		)	(19,469		)
Proceeds from debt issuance, net of issuing costs	—			97,144
Proceeds from Payment Protection Program	4,023			—
Proceeds from sale of noncontrolling interest	—			5,275
Contribution from noncontrolling partner	—			750
Proceeds from revolving credit facility	250,900			236,200
Payments on revolving credit facility	(250,900		)	(264,200		)
Proceeds from issuance of common stock upon exercise of options	—			50
Net cash (used in) provided by financing activities	(19,439		)	52,430
EFFECT OF EXCHANGE RATE CHANGES ON CASH	(6		)	(5		)
NET INCREASE IN CASH AND CASH EQUIVALENTS	44,418			20,115
CASH AND CASH EQUIVALENTS, beginning of period	40,165			10,389
CASH AND CASH EQUIVALENTS, end of period	$	84,583		$	30,504

SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION
Cash paid during the period for interest	$	22,826		$	23,292

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

RADNET, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (CONTINUED)

(unaudited)

Supplemental Schedule of Non-Cash Investing and Financing Activities

We acquired equipment and certain leasehold improvements for approximately ~~$14.1~~$31.8 million and ~~$14.2~~$14.0 million during the ~~nine~~six months ended ~~September~~June 30, ~~2019~~2020 and ~~2018,~~2019, respectively, which were not paid for as of ~~September~~June 30, ~~2019~~2020 and ~~2018~~2019, respectively. The offsetting amounts due were recorded in our condensed consolidated balance sheet under accounts payable, accrued expenses and other.

~~During the nine months ended September 30, 2018~~On June 1, 2020, we ~~incurred, exclusive~~completed our stock purchase of ~~commitments assumed through acquisitions, capital lease debt~~DeepHealth, Inc. by issuing 823,615 shares of ~~approximately $4.0 million from~~ our ~~partner in the formation~~common stock to purchase all of ~~Beach Imaging LLC. No such action was taken for the nine months ended September 30, 2019.~~Deep Health's shares and share equivalents. The shares were ascribed a value of $13.9 million.

We ~~received $15.0~~recorded under accrued expenses an accrual of equity interest distribution to noncontrolling interests of $1.8 million at June 30, 2019, which was paid in ~~fixed assets in January 2018 from our partner in Beach Imaging LLC.~~July 2019.

We transferred approximately $4.3 million in net assets to our new joint venture, Ventura County Imaging ~~Group.~~Group, LLC in March 2019. ~~See Note 4, Facility Acquisitions and Dispositions, for further information.~~

On February 27, 2019, we issued 440,207 shares of our common stock to the sellers of Hudson Valley Radiology Associates, P.L.L.C. ("HVRA") which permitted our variable interest entity, Lenox Hill Radiology and Medical Imaging Associates, P.C., to complete its purchase of the membership interest of HVRA. The shares were ascribed a value of $6.0 million.

On August 1, 2019 we issued RadNet common stock in the amount of $1.5 million to acquire 75% controlling interest in our formerly 25% owned joint venture Nulogix. See Note 2, Significant Accounting Policies, for further information.

RADNET, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(unaudited)

NOTE 1 – NATURE OF BUSINESS AND BASIS OF PRESENTATION

We are a national provider of freestanding, fixed-site outpatient diagnostic imaging services with operations in ~~the United States based on number of locations and annual imaging revenue.~~six U.S. states. At ~~September~~June 30, ~~2019,~~2020, we operated directly or indirectly through joint ventures with hospitals, ~~340~~332 centers located in 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~~the convenience of a single location to serve the needs of multiple procedures. In addition to our imaging services, we design and develop software applications, Artificial Intelligence tools and other computerized systems for the diagnostic imaging industry. Our operations comprise a single segment for financial reporting purposes.

The consolidated financial statements include the accounts of ~~Radnet Management, Inc. (or “Radnet Management”) and Beverly Radiology Medical Group III,~~RadNet, Inc as well as its subsidiaries in which RadNet has a professional partnership (“BRMG”). BRMG is a partnership of ProNet Imaging Medical Group, Inc., Beverly Radiology Medical Group, Inc. and Breastlink Medical Group, Inc. (formerly known as Westchester 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., 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.

~~The Financial~~ Accounting ~~Standards Board (FASB) Accounting Standards Codification (“ASC”) 810-10-15-14, Consolidation, stipulates~~regulations stipulate that generally any entity with a) insufficient equity to finance its activities without additional subordinated financial support provided by any parties, or b) equity holders that, as a group, lack the characteristics ~~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.

VIEs that we consolidate as the primary beneficiary consist of professional corporations which are owned or controlled by individuals within our senior management, namely Howard G. Berger, M.D., is our President and Chief Executive Officer, ~~a member~~and John V. Crues, III, M.D., RadNet's Medical Director, both of whom are members of our Board of ~~Directors, and also~~Directors. Dr. Berger owns, indirectly, 99% of the equity interests in ~~BRMG.~~Beverly Radiology Medical Group III (BRMG) and a controlling interest in two professional corporations in New York City. 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~~California. Dr. Crues owns six professional corporations which 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 withDelaware, Maryland, New Jersey and New York. Additionally, Dr. ~~Berger and BRMG, we believe that we are able to better ensure that medical service~~Crues 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 contract with seven medical groups which provide professional medical services at all of our facilities in Manhattan and Brooklyn, New York (“the NY Groups”). These contracts are similar to our contract with BRMG. Five of the NY Groups are owned or controlled 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 VIEs are collectively referred to as the ~~NY Groups which provide professional~~consolidated medical ~~services at one of our Manhattan facilities.~~group ("the Group").

RadNet provides non-medical, technical and administrative services to ~~BRMG and~~ the ~~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 have~~budget. The Group has insignificant operating assets and liabilities, and de minimis equity. Through management agreements with us, substantially all cash flows of ~~BRMG and~~ the ~~NY Groups~~Group after expenses, including professional salaries, are transferred to us.

We ~~have determined that BRMG and the NY Groups are VIEs, that we are the primary beneficiary, and consequently, we~~ consolidate the revenue and expenses, assets and liabilities of ~~each. BRMG and~~ the ~~NY Groups~~Group.

The Group on a combined basis recognized

~~$40.6~~ $26.9 million and ~~$33.2~~$38.9 million of revenue, net of management ~~service~~services fees to RadNet, for the three months ended ~~September~~June 30, ~~2019~~2020 and ~~2018~~,2019, respectively and ~~$40.6~~$26.9 million and ~~$33.2~~$38.9 million of operating expenses for the three months ended ~~September~~June 30, ~~2019~~2020 and ~~2018~~,2019, respectively. RadNet recognized ~~in its condensed consolidated statement of operations $154.5~~$116.4 million and ~~$126.8~~$159.2 million of total billed net ~~revenues~~service fee revenue for the three months ended ~~September~~June 30, ~~2019~~,2020, and ~~2018~~2019, respectively, for management services provided to ~~BRMG and~~ the ~~NY Groups~~Group relating primarily to the technical portion of ~~total~~ billed revenue.

~~BRMG and the NY Groups~~

The Group on a combined basis recognized ~~$116.9~~$66.4 million and ~~$100.7~~$76.3 million of revenue, net of management ~~service~~services fees to RadNet, for the ~~nine~~six months ended ~~September~~June 30, ~~2019~~2020 and ~~2018~~,2019, respectively and ~~$116.9~~$66.4 million and ~~$100.7~~$76.3 million of operating expenses for the ~~nine~~six months ended ~~September~~June 30, ~~2019~~2020 and ~~2018~~,2019, respectively. RadNet recognized ~~in its condensed consolidated statement of operations $456.1~~$264.3 million and ~~$378.7~~$301.6 million

of total billed net ~~revenues~~service fee revenue for the ~~nine~~six months ended ~~September~~June 30, ~~2019~~,2020, and ~~2018~~2019, respectively, for management services provided to ~~BRMG and~~ the ~~NY Groups~~Group relating primarily to the technical portion of ~~total~~ billed revenue.

The cash flows of ~~BRMG and~~ the ~~NY Groups~~Group are included in the accompanying condensed consolidated statements of cash flows. All intercompany balances and transactions have been eliminated in consolidation. In our condensed consolidated balance sheets at ~~September~~June 30, ~~2019~~2020 and December 31, ~~2018~~,2019, we have included approximately ~~$95.0~~$76.6 million and ~~$88.9~~$100.3 million, respectively, of accounts receivable and approximately ~~$6.9~~$12.5 million and ~~$5.6~~$7.0 million ~~respectively,~~ of accounts payable and accrued liabilities related to ~~BRMG and~~ the ~~NY Groups. Also in our consolidated balance sheets at September 30, 2019 we have included $3.9 million in intangible assets related to the purchase of membership interest of a New York~~ Group, ~~VIE.~~respectively.

The creditors of ~~BRMG and~~ the ~~NY Groups~~Group 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.~~their behalf. However, RadNet may be required to provide financial support to cover any operating expenses in excess of operating revenues.

We also own a 49% economic interest in ScriptSender, LLC, 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. ScriptSender, LLC is dependent on the Company to finance its own activities, and as such we determined that it is a VIE but we are not a primary beneficiary since we do not have the power to direct the activities of the entity that most significantly impact the entity’s economic performance.

At all of our centers not serviced by the Group we have entered into long-term contracts (typically 40 years) with independent radiology groups ~~in the area~~ to provide physician services at those ~~facilities.~~centers. These radiology practices 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. ~~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 value of the services we provide. Except in New York City, the 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 ~~financial~~economic controlling interest in these radiology practices as such, the ~~radiology practices.~~financial results of these practices are not consolidated in our financial statements.

The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with the instructions to Form 10-Q and Rule 10-01 of Regulation S-X and, therefore, do not include all information and footnotes necessary for conformity with U.S. generally accepted accounting principles for complete financial statements; however, in the opinion of our management, all adjustments consisting of normal recurring adjustments necessary for a fair presentation of the financial position, results of operations and cash flows for the interim periods ended ~~September~~June 30, ~~2019~~2020 and ~~2018~~2019 have been made. The results of operations for any interim period are not necessarily indicative of the results for a full year. These interim condensed consolidated financial statements should be read in conjunction with the consolidated financial statements and related notes thereto contained in our annual report on Form 10-K for the year ended December 31, ~~2018~~2019.

NOTE 2 - SIGNIFICANT ACCOUNTING POLICIES

During the period covered in this report, ~~we adopted a new significant accounting policy on Leases as described in Note 5 below. Except for the policy on Leases,~~ there have been no material changes to the significant accounting policies we use and have explained, in our annual report on Form 10-K for the fiscal year ended December 31, ~~2018~~2019. The information below is intended only to supplement the disclosure in our annual report on Form 10-K for the fiscal year ended December 31, ~~2018~~2019.

REVENUES - Our revenues generally relate to net patient fees received from various ~~payers~~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 ~~payer~~payor (Medicare, Medicaid, managed care health plans and commercial insurance companies, including plans offered through the health insurance exchanges) and the transaction prices for the services provided are dependent upon the terms provided by (Medicare and Medicaid) or negotiated with (managed care health plans and commercial insurance companies) the third-party ~~payers.~~payors. The payment arrangements with third-party ~~payers~~payors for the services we provide to the related patients typically specify payments at amounts less than our standard charges and generally provide for payments based upon predetermined rates per diagnostic services or discounted fee-for-service rates. Management continually reviews the contractual estimation process to consider and incorporate updates to laws and regulations and the frequent changes in managed care contractual terms resulting from contract renegotiations and renewals.

As it relates to ~~BRMG and NY Group centers,~~the consolidated medical group, this service fee revenue includes payments for both the professional medical interpretation revenue recognized by ~~BRMG and the NY Groups~~them 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~~others centers, this service fee revenue is earned through providing the use of our diagnostic imaging equipment and the provision of technical services as well as providing administration services such as clerical and administrative personnel, bookkeeping and accounting services, billing and collection, provision of medical and office supplies, secretarial, reception and transcription services, maintenance of medical records, and advertising, marketing and promotional activities.

Our revenues are based upon the estimated amounts we expect to be entitled to receive from patients and third-party ~~payers.~~payors. Estimates of contractual allowances under managed care and commercial insurance plans are based upon the payment terms specified in the related contractual agreements. Revenues related to uninsured patients and ~~uninsured~~ copayment and deductible amounts for patients who have health care coverage may have discounts applied (uninsured discounts and contractual discounts). We also record estimated implicit price concessions (based primarily on historical collection experience) related to uninsured accounts to record self-pay revenues at the estimated amounts we expect to collect.

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.

We typically experience some seasonality to our revenue stream. 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. It is common for 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.

Our total revenues during the three and ~~nine~~six months ended ~~September~~June 30, ~~2019~~ 2020 and ~~2018~~2019 are presented in the table below based on an allocation of the estimated transaction price with the patient between the primary patient classification of insurance coverage (in thousands):



	Three Months Ended June 30,				Six Months Ended June 30,
	2020		2019		2020		2019
Commercial insurance	$	96,349	$	160,185	$	251,711	$	311,899
Medicare	35,082		60,151		92,587		114,280
Medicaid	4,300		7,295		10,980		14,423
Workers' compensation/personal injury	7,359		11,014		17,916		22,062
Other patient revenue	3,549		6,017		9,217		11,858
Management fee revenue	3,332		1,753		5,899		3,870
Teleradiology and Software revenue	2,200		4,063		5,971		8,449
Other	3,527		7,693		9,750		14,003
Service fee revenue	155,698		258,171		404,031		500,844
Revenue under capitation arrangements	34,868		30,926		68,099		59,803
Total revenue	$	190,566	$	289,097	$	472,130	$	560,647

Three Months Ended
September 30, Nine Months Ended
September 30,
2019 2018 2019 2018
Commercial insurance $ 163,152
$ 135,445
$ 475,064
$ 397,193
Medicare 61,599
48,243
175,825
141,348
Medicaid 7,128
6,323
21,564
19,129
Workers' compensation/personal injury 10,865
8,810
32,950
25,714
Other patient revenue 6,085
6,205
17,947
18,318
Management fee revenue 1,792
3,615
5,662
11,237
Teleradiology and Software revenue 4,412
4,063
12,861
11,879
Other 6,875
4,848
20,878
16,318
Service fee revenue 261,908
217,552
762,751
641,136
Revenue under capitation arrangements 30,784
24,596
90,587
76,799
Total revenue $ 292,692
$ 242,148
$ 853,338
$ 717,935

PROVIDER RELIEF FUNDING - In the second quarter of 2020, we received approximately $25.5 million in funding from The Provider Relief Fundthat offered government assistance to eligible providers throughout the healthcare system in support of certain expenses or lost revenue attributable to the coronavirus pandemic. Generally, the department of Health and Human Services ("HHS") does not intend to recoup funds as long as a provider's lost revenue and increased expenses exceed the amount of provider relief funding one has received. HHS reserves the right to audit Relief Fund recipients in the future to ensure that this requirement is met and collect any Relief Fund amounts that were made in error or exceed lost revenue or increased expenses due to the pandemic. Failure to comply with the terms and conditions may be grounds for recoupment.

RECLASSIFICATION ~~– We~~–We have reclassified certain amounts ~~within our table of total revenue~~previously classified as held for ~~2018~~sale related to property and equipment and goodwill to conform to our ~~2019~~2020 presentation. In addition, we have reclassified certain amounts within our condensed consolidated statements of equity for the three and nine months ended September 30, 2018 in common shares issued and additional paid in capital to conform to our 2019 presentation.

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. In regards to the credit loss standard, we have concluded that the historical credit loss experienced across our receivable portfolio is materially similar to any current expected credit losses estimated under the Current Expected Credit Loss ("CECL") model.

In 2018 and 2019 we entered into factoring agreements with various institutions and sold certain accounts receivable under non-recourse agreements. These transactions are accounted for as a reduction in accounts receivable as the agreements transfer effective control over and risk related to the receivables to the buyers. As of the nine months ended September 30, 2019, the amount factored under these facilities was $9.0 million, inclusive of discount recorded to reflect the difference between market interest rates and the stated interest rate of the receivable. PaymentsProceeds on notes ~~receivable will be~~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. At ~~September~~June 30, ~~2019~~2020 we have ~~$24.3~~$22.5 million, net of discount, remaining to be collected on these agreements. We do not utilize factoring arrangements as an integral part of our financing for working capital. To employ the CECL model for the notes receivable, we 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. In the event of a significant past due balance, as the sold receivables were already revalued and recorded at net realizable value, we can mitigate the expected credit loss by offsetting any collections from the underlying factored receivables and not remitting that to the counter party.

DEFERRED REVENUE - Deferred revenue represents liability for payments received for performance obligations which have yet to be satisfied and is offen associated with sales of our eRad subsidiary. In April of 2020, we received approximately $39.4 million in advanced Medicare payments from the Centers for Medicare and Medicaid Services ("CMS") as part of the expanded Accelerated and Advance Payment Program under the Coronavirus Aid, Relief, and Economic Security (CARES) Act. As these payments are required to be repaid to CMS beginning 120 days after their receipt through offsets from new Medicare claims over a three month period, we have recorded amounts received to deferred revenue which will be amortized as Medicare reimbursements are earned. In addition, in May of 2020 we received $5.0 million in advance payments from an insurance carrier with similar repayment terms as the CMS.

DEFERRED FINANCING COSTS - Costs of financing are deferred and amortized using the effective interest rate method. Deferred financing costs, net of accumulated amortization, were ~~$1.7~~$1.3 million and ~~$1.4~~$1.6 million, as of ~~September~~June 30, ~~2019~~2020 and December 31, ~~2018~~2019, respectively and related to our line of credit. In conjunction with our Sixth ~~Amendment~~ and Seventh ~~Amendment~~Amendments to our First Lien Credit Agreement (as defined below), a net addition of approximately ~~$683,000~~$0.7 million was added to deferred financing ~~costs.~~costs in the second quarter of 2019. See Note 6,5, Credit ~~Facility,~~Facilities and Notes Payable ~~and Capital Lease Obligations,~~ for more information.

~~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 of property and equipment is performed using the straight-line method over the estimated useful lives of the assets acquired, which range from 3 to 15 years. Leasehold improvements are amortized at the lesser of lease term or their estimated useful lives, which range from 3 to 15 years. Maintenance and repairs are charged to expense as incurred.

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

GOODWILL AND INDEFINITE LIVED INTANGIBLES - Goodwill at ~~September~~June 30, ~~2019~~2020 totaled ~~$439.9~~$467.8 million. Indefinite lived intangible assets at ~~September~~June 30, ~~2019~~2020 were ~~$11.9~~$11.3 million. Goodwill and Indefinite Lived Intangibles are recorded as a result of business combinations. When we determine the carrying value of reporting unit exceeds its fair value an impairment charge would be recognized and should not exceed the total amount of goodwill allocated to that reporting unit. We tested goodwill and indefinite lived intangibles for impairment on October 1, 2018. During the review we noted our Teleradiology unit, Imaging On Call, (IOC), experienced a reduction of professional medical group clients and a contract with a major local health provider during 2018. This affected its estimated fair value and resulted in impairment charges2019, noting no impairment. In addition to the ~~reporting unit~~annual impairment test, we regularly assess if an event has occurred which would require interim impairment testing. We considered the current and expected future economic and market conditions surrounding the novel strain of ~~$3.9 million for the twelve months ended December 31, 2018, with~~coronavirus ("COVID-19") pandemic and did not identify an indication of goodwill ~~representing $3.8 million of the total and the remainder~~impairment being ~~its trade name of approximately $100,000. We have~~more likely than not ~~identified any indicators of impairment~~ through ~~September~~June 30, ~~2019~~2020. Activity in goodwill for the ~~nine~~six months ended ~~September~~June 30, ~~2019~~2020 is provided below (in thousands):



Balance as of December 31, 2019	$	441,973
Goodwill acquired through the acquisition of Olney Open MRI, LLC	601
Goodwill acquired through the acquisition of MRI at Woodbridge, LLC	1,833
Goodwill acquired through the acquisition of DeepHealth, Inc.	23,396
Balance as of June 30, 2020	$	467,803

Balance as of December 31, 2018 $ 418,093
Adjustments to our preliminary allocation of the purchase price of Medical Arts Radiological Group, P.C. 722
Goodwill acquired through the acquisition of certain assets of Dignity Health 1
Goodwill acquired through the acquisition of certain assets of West Valley Imaging Center, LLC 2,490
Goodwill disposed through sale of assets (123 )
     Goodwill acquired by Lenox Hill Radiology through the membership purchase of HVRA 3,125
Goodwill acquired through the acquisition of certain assets of Kern Radiology, Inc. 10,507
     Goodwill acquired through the acquisition of certain assets of Zilkha Radiology, Inc. 2,577
     Goodwill acquired through the acquisition of certain assets of Ramic Mahwah, LLC 231
     Goodwill acquired through the acquisition of GSRN 887
     Goodwill acquired through the acquisition of Nulogix 1,357
Balance as of September 30, 2019 $ 439,867

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.

We recorded an income tax ~~expense~~benefit of ~~$1.8~~$4.5 million, or an effective tax rate of ~~26.3%~~33.3%, for the three months ended ~~September~~June 30, ~~2019~~2020 compared to an income tax expense ~~for the three months ended September 30, 2018~~ of ~~$2.8~~$3.0 million, or an effective tax rate of ~~32.9%.~~28.1% for the three months ended June 30, 2019. We recorded an income tax ~~expense~~benefit of ~~$3.6~~$8.9 million, or an effective tax rate of ~~24.8%~~27.8%, for the ~~nine~~six months ended ~~September~~June 30, ~~2019~~2020 compared to an income tax expense ~~for the nine months ended September 30, 2018~~ of ~~$2.8~~$1.7 million , or an effective tax rate of ~~29.5%. The~~23.5% for the six months ended June 30, 2019.The income tax rates for the three and ~~nine~~six months ended ~~September~~June 30, ~~2019~~2020 diverge from the federal statutory rate due to (i) noncontrolling interests due to the controlled partnerships; (ii) effects of state income taxes; and (iii) excess tax benefits attributable to share-based ~~compensation; and adjustment associated with uncertain tax positions.~~compensation.

~~We are not under examination in any jurisdiction and the years ended December 31, 2017, 2016, and 2015 remain subject to examination.~~ We believe no significant changes in the unrecognized tax benefits will occur within the next 12 months.

On March 27, 2020, the President of the United States signed into law the Coronavirus Aid, Relief, and Economic Security Act ("CARES Act"). The CARES Act, among other things, includes certain income tax provisions for individuals and corporations; however, these benefits do not impact the Company’s current tax provision.

LEASES - We determine if an arrangement is a lease at inception. Operating leases are included in operating lease right-of-use (“ROU”) assets, current operating lease 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 right-of-use asset is recognized on a straight-line basis over the shorter of the estimated useful life of the asset or the lease term. ~~See Note 5, Leases,~~ROU assets are tested for ~~more information.~~impairment if circumstances suggest that the carrying amount may not be recoverable. Our ROU assets consist of facility and equipment assets on operating leases. No events have occurred such as fire, flood, or other acts which have impaired the integrity of our ROU assets in 2020. Our facility leases require us to maintain insurance policies which would cover major damage to our facilities. We maintain business interruption insurance to cover loss of business due to a facility becoming non-operational under certain circumstances. Our equipment leases are covered by warranty and service contracts which cover repairs and provide regular maintenance to keep the equipment in functioning order.

EQUITY BASED COMPENSATION – We have one long-term incentive plan that we adopted in 2006 and which we first amended and restated as of April 20, 2015, and again on March 9, 2017 (the “Restated Plan”). The Restated Plan was approved by our stockholders at our annual stockholders meeting on June 8, 2017. We have reserved for issuance under the Restated Plan 14,000,000 shares of common stock. We can issue options, stock awards, stock appreciation rights, stock units and cash awards under the Restated Plan. Certain options granted under the Restated Plan to employees are intended to qualify as incentive stock options under existing tax regulations. Stock options and warrants generally vest over three to five years and expire five to ten years from date of grant. The compensation expense recognized for all equity-based awards is recognized over the awards’ service periods. Equity-based compensation is classified in operating expenses within the same line item as the majority of the cash compensation paid to employees. In connection with our acquisition of DeepHealth Inc. on June 1, 2020, we assumed the DeepHealth, Inc. 2017 Stock Incentive Plan, including outstanding options awards that can be exercised for our common stock. No additional awards will be granted under the DeepHealth, Inc. 2017 Equity Incentive Plan. See Note 7,4, Facility Acquisitions and Note 6, Stock-Based Compensation, for more information.

COMPREHENSIVE ~~(LOSS) INCOME~~LOSS - ASC 220 establishes rules for reporting and displaying comprehensive loss or income and its components. Our unrealized gains or losses on foreign currency translation adjustments, interest rate cap and ~~SWAP~~swap agreements are included in comprehensive ~~(loss) income~~loss and are included in the consolidated statements of comprehensive ~~(loss) income~~loss for the three and ~~nine~~six months ended ~~September~~June 30, ~~2019~~2020 and ~~2018.~~2019.

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. WeBased on current information, we do not believe that ~~the amount or any estimable range of~~ reasonably possible or probable ~~loss will not,~~losses associated with pending legal proceedings would either individually or in the aggregate, have a material adverse effect on our business and consolidated financial statements. However, the outcome of these matters is inherently uncertain. Therefore, if one or more of these matters were resolved against us for amounts in excess of management's expectations, our results of operations and financial condition, including in a particular reporting period in which any such outcome becomes probable and estimable, could be materially adversely affected.

In the second quarter of 2019, RadNet accrued a liability of $2.3 million related to allegations by the US Attorney's Office for the Western District of New York that RadNet submitted certain claims that incorrectly identified the physician who furnished the radiology services. The final settlement, which admits no wrong-doing on behalf of RadNet, was $2.2 million and paid in September 2019.

DERIVATIVE INSTRUMENTS

2016 CAPS

In the fourth quarter of 2016, we entered into two forward interest rate cap agreements ("2016 Caps"). The 2016 Caps will mature in September and October 2020. The 2016 Caps had notional amounts of $150,000,000 and $350,000,000, ~~respectively, which were designated at inception as cash flow hedges of future cash interest payments associated with portions of our variable rate bank debt.~~respectively. Under these arrangements, the Company purchased a cap on 3 month LIBOR at 2.0%. We incurred a $5.3 million premium to enter into the 2016 Caps which is being accrued over the life of the agreements.

At inception, we designated our 2016 Caps 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 of the hedge (i.e. change in fair value) is reported as a component of comprehensive loss in the consolidated statement of ~~equity.~~equity since such hedge has been determined to be effective. See Fair Value Measurements section below for the fair value of the 2016 Caps at ~~September~~June 30, ~~2019.~~

2020.

A tabular presentation of the effect of derivative instruments on our consolidated statement of comprehensive loss of the 2016 Caps is as follows (amounts in thousands):

For the three months ended September 30, 2019
Account July 1, 2019 Balance Amount of comprehensive loss recognized on derivative net of taxes September 30, 2019 Balance Location
Accumulated Other Comprehensive Loss (768 ) (251 ) (1,019 ) Liabilities and Equity



For the three months ended June 30, 2020
Account	April 1, 2020 Balance		Amount of comprehensive gain recognized on derivative net of taxes	June 30, 2020 Balance		Location
Accumulated Other Comprehensive Loss, net of taxes	(1,597	)	188	(1,409	)	Liabilities and Equity



For the six months ended June 30, 2020
Account	January 1, 2020 Balance		Amount of comprehensive gain recognized on derivative net of taxes	June 30, 2020 Balance		Location
Accumulated Other Comprehensive Loss, net of taxes	(1,877	)	468	(1,409	)	Liabilities and Equity

For the nine months ended September 30, 2019
Account January 1, 2019 Balance Amount of comprehensive loss recognized on derivative net of taxes September 30, 2019 Balance Location
Accumulated Other Comprehensive Income (Loss) 2,506
(3,525 ) (1,019 ) Liabilities and Equity

2019 SWAPS

In the second quarter of 2019, we entered into four forward interest rate agreements ("2019 ~~SWAPS"~~Swaps"). The 2019 ~~SWAPS~~Swaps have total notional amounts of $500,000,000, consisting of two agreements of $50,000,000 each and two agreements of $200,000,000 each. The 2019 ~~SWAPS~~Swaps will secure a constant interest rate associated with portions of our variable rate bank debt and have an effective date of October 13, 2020. They will mature in October 2023 for the smaller notional and October 2025 for the larger notional. Under these arrangements, we arranged the 2019 ~~SWAPS~~Swaps with locked in 1 month LIBOR rates at 1.96% for the $100,000,000 notional and at 2.05% for the $400,000,000 notional. As of the effective date, we will be liable for premium payments if interest rates decline below arranged rates, but will receive interest payments if rates remain above the arranged rates.

At inception, we designated our 2019 ~~SWAPS~~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 comprehensive loss in the consolidated statement of equity. ~~See Fair Value Measurements section below~~The remaining gain or loss, if any, is recognized currently in earnings. As a result of the economic impact of the coronavirus pandemic, which precipitated a reduction in interest rates , the cash flows for our $400,000,000 notional interest rate swap contract locked in at 2.05% due October 2025 does not match the cash flows for our First Lien Term Loans and so we have determined that they are not currently effective as cash flow hedges. Accordingly, all changes in their fair value after April 1, 2020 will be recognized in earnings. As of April 1, 2020, the ~~2019 SWAPS~~total change in fair value relating to swap due October 2025 included in other comprehensive income was approximately $21.4 million, net of taxes. This amount will be amortized to interest expense through October 2025 at ~~September 30, 2019.~~

$0.3 million per month.

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



For the three months ended June 30, 2020
Account	April 1, 2020 Balance			Amount of comprehensive loss recognized on derivative net of taxes			Amount of loss reclassified out of accumulated OCI into income (prior period effective portion)		June 30, 2020 Balance			Location
Accumulated Other Comprehensive Loss, net of taxes	$	(24,699	)	$	(599	)	$	892	$	(24,406	)	Liabilities and Equity



For the six months ended June 30, 2020
Account	January 1, 2020 Balance			Amount of comprehensive loss recognized on derivative net of taxes			Amount of loss reclassified out of accumulated OCI into income (prior period effective portion)		June 30, 2020 Balance			Location
Accumulated Other Comprehensive Loss, net of taxes	$	(5,870	)	$	(19,428	)	$	892	$	(24,406	)	Liabilities and Equity

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



For the three months ended June 30, 2020
Ineffective interest rate swap	Amount of loss recognized in income on derivative (current period ineffective portion)			Location of loss recognized in Income on derivative (current period ineffective portion)	Amount of loss reclassified from accumulated OCI into income (prior period effective portion)			Location of gain (Loss) reclassified from accumulated OCI into income (prior period effective portion)
Interest rate contracts	$	(3,843	)	Other income (expense)	$	(892	)	Interest income (expense)

For the nine months ended September 30, 2019
Account January 1, 2019 Balance Amount of comprehensive loss recognized on derivative net of taxes September 30, 2019 Balance Location
Accumulated Other Comprehensive Loss —
$ (10,956 ) $ (10,956 ) Liabilities and Equity

See Fair Value Measurements section below for the fair value of the 2016 caps and 2019 swaps at June 30, 2020.

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


	As of September 30, 2019								As of June 30, 2020
	Level 1		Level 2		Level 3		Total		Level 1		Level 2		Level 3		Total
Current and long term liabilities
2016 Caps - Interest Rate Contracts	$	—	$	906	$	—	$	906
2019 SWAPS - Interest Rate Contracts	$	—	$	15,473	$	—	$	15,473
2016 caps - Interest Rate Contracts									$	—	$	446	$	—	$	446
2019 swaps - Interest Rate Contracts									$	—	$	39,304	$	—	$	39,304



	As of December 31, 2019
	Level 1		Level 2		Level 3		Total
Current and long term liabilities
2016 caps - Interest Rate Contracts	$	—	$	1,081	$	—	$	1,081
2019 swaps - Interest Rate Contracts	$	—	$	9,477	$	—	$	9,477

As of December 31, 2018
Level 1 Level 2 Level 3 Total
Current assets

2016 Caps - Interest Rate Contracts $ —
$ 3,316
$ —
$ 3,316

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

Long Term Debt:

The table below summarizes the estimated fair value compared to our face value of our long-term debt as follows (in thousands):

As of September 30, 2019
Level 1 Level 2 Level 3 Total Fair Value Total Face Value
First Lien Term Loans and SunTrust Term Loan $ —
$ 718,172
$ —
$ 718,172
$ 716,522


	As of December 31, 2018										As of June 30, 2020
	Level 1		Level 2		Level 3		Total		Total Face Value		Level 1		Level 2		Level 3		Total Fair Value		Total Face Value
First Lien Term Loans and SunTrust Term Loan	$	—	$	633,229	$	—	$	633,229	$	646,441	$	—	$	650,954	$	—	$	650,954	$	684,051



	As of December 31, 2019
	Level 1		Level 2		Level 3		Total		Total Face Value
First Lien Term Loans and SunTrust Term Loan	$	—	$	708,948	$	—	$	708,948	$	705,699

As of ~~September~~June 30, 2020 and at December 31, 2019 our Barclays revolving credit facility had no0 balance ~~outstanding while at December 31, 2018, our Barclays revolving credit facility had a $28.0 million aggregate principal amount~~ outstanding. Our SunTrust revolving credit facility relating to our consolidated subsidiary NJIN, had no0 principal amount outstanding at ~~September~~June 30, ~~2019~~2020 and at December 31, ~~2018.~~2019.

The estimated fair value of our long-term debt, which is discussed in Note 6,5, was determined using Level 2 inputs primarily related to comparable market prices.

We consider the carrying amounts of cash and cash equivalents, receivables, other current assets, current liabilities and other notes payables to approximate their fair value because of the relatively short period of time between the origination of these instruments and their expected realization or payment. Additionally, we consider the carrying amount of our ~~capital~~finance lease obligations to approximate their fair value because the weighted average interest rate used to formulate the carrying amounts approximates current market rates.

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):



	Three Months Ended June 30,					Six Months Ended June 30,
	2020			2019		2020			2019
Net loss (income) attributable to RadNet, Inc.'s common stockholders	$	(10,594	)	$	4,899	$	(26,952	)	$	1,165

BASIC AND DILUTED NET (LOSS) INCOME PER SHARE ATTRIBUTABLE TO RADNET, INC.'S COMMON STOCKHOLDERS
Weighted average number of common shares outstanding during the period	50,672,219			49,702,869		50,483,274			49,490,234
Basic and diluted net (loss) income per share attributable to RadNet, Inc.'s common stockholders	$	(0.21	)	$	0.10	$	(0.53	)	$	0.02

DILUTED NET INCOME PER SHARE ATTRIBUTABLE TO RADNET, INC.'S COMMON STOCKHOLDERS
Weighted average number of common shares outstanding during the period	50,672,219			49,702,869		50,483,274			49,490,234
Add nonvested restricted stock subject only to service vesting	—			134,260		—			186,779
Add additional shares issuable upon exercise of stock options and warrants	—			307,411		—			311,023
Weighted average number of common shares used in calculating diluted net income per share	50,672,219			50,144,540		50,483,274			49,988,036
Diluted net income per share attributable to RadNet, Inc.'s common stockholders	$	(0.21	)	$	0.10	$	(0.53	)	$	0.02

Three Months Ended September 30, Nine Months Ended September 30,
2019 2018 2019 2018
Net income attributable to RadNet, Inc.'s common stockholders $ 3,195
$ 5,039
$ 4,360
$ 3,107

BASIC NET INCOME PER SHARE ATTRIBUTABLE TO RADNET, INC.'S COMMON STOCKHOLDERS
Weighted average number of common shares outstanding during the period 49,807,460
48,010,726
49,597,138
47,937,215
Basic net income per share attributable to RadNet, Inc.'s common stockholders $ 0.06
$ 0.10
$ 0.09
$ 0.06

DILUTED NET INCOME PER SHARE ATTRIBUTABLE TO RADNET, INC.'S COMMON STOCKHOLDERS
Weighted average number of common shares outstanding during the period 49,807,460
48,010,726
49,597,138
47,937,215
Add nonvested restricted stock subject only to service vesting 200,567
180,269
191,375
171,627
Add additional shares issuable upon exercise of stock options and warrants 352,333
424,397
324,793
372,463
Weighted average number of common shares used in calculating diluted net income per share 50,360,360
48,615,392
50,113,306
48,481,305
Diluted net income per share attributable to RadNet, Inc.'s common stockholders $ 0.06
$ 0.10
$ 0.09
$ 0.06

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 —
—
—
8,333
For the three and six months ended June 30, 2020 we excluded all outstanding options and restricted stock awards in the calculation of diluted earnings per share because their effect would be antidilutive.

EQUITY INVESTMENTS AT FAIR VALUE–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 less impairment.

As of ~~September~~June 30, ~~2019~~2020, we have ~~two~~three equity investments for which a fair value is not readily determinable and therefore the total amounts invested are recognized at cost as follows:

Medic Vision:

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

On March 24, 2017, we acquired an initial 12.5% equity interest in Medic Vision for $1.0 million. We also received an option to exercise warrants to acquire up to an additional 12.5% equity interest for $1.4 million within one year from the initial share purchase date, if exercised in full. On March 1, 2018 we exercised our warrant in part and acquired an additional 1.96% for ~~$200,000.~~$0.2 million. Our initial equity interest has been diluted to 12.25% and our total equity investment stands at 14.21%.

In accordance with accounting guidance, as we exercise no significant influence over Medic Vision’s operations, the investment is recorded at its cost of $1.2 million, given that the fair value is not readily determinable. No impairment in our investment was identified as of ~~September~~June 30, ~~2019.~~2020.

Turner Imaging:

Turner Imaging Systems, based in Utah, develops and markets portable X-ray imaging systems that provide a user the ability to acquire X-ray images wherever and whenever they are needed. On February 1, 2018, we purchased 2.1 million preferred shares in Turner Imaging Systems for $2.0 million. On January 1, 2019 we funded a convertible promissory note in the amount of ~~$143,000~~$0.1 million that ~~will convert~~converted to additional ~~preferred~~80,000 shares ~~no later than~~ December 21, 2019. No impairment in our investment was identified as of ~~September~~June 30, ~~2019.~~2020.

WhiteRabbit.ai Inc:

WhiteRabbit.ai Inc., based in California, is currently developing an artificial intelligence suite which aims to improve the speed and accuracy of cancer detection in radiology and improve patient care. On November 5, 2019 we acquired an equity interest in the company for $1.0 million and also loaned the company $2.5 million, the principal of which is due November 2022.

To leverage their artificial intelligence expertise, we entered into a software subscription service contract to assist our radiology work flow and advanced them $4.0 million for future software subscription fees that is recorded as a prepaid expense in Prepaid and Other Current assets in our consolidated balance sheets. No impairment in our investment or the loan receivable was identified as of June 30, 2020.

INVESTMENT IN JOINT VENTURES – We have 12 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 does 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 ~~September~~June 30, ~~2019~~2020.

~~Sale of joint venture interest:~~

On April 1, 2017, we formed in conjuncture with Cedars Sinai Medical Center (“CSMC”) the Santa Monica Imaging Group, LLC (“SMIG”), consisting of two multi-modality imaging centers located in Santa Monica, CA with RadNet holding a 40% economic interest and CSMC holding a 60% economic interest. RadNet accounts for our share of the venture under the equity method. On January 1, 2019, CSMC purchased from the us an additional five percent economic interest in SMIG valued at ~~$134,000. As a result of the transaction, our economic interest in SMIG has been reduced to 35%. We recorded a loss of~~ ~~$2,000~~ ~~on the transaction.~~

~~Change in control of existing joint ventures:~~

On October 6, 2014, we acquired a 49% equity interest in Garden State Radiology, LLC for cash consideration of $2.2 million. The venture consisted of two imaging centers located in New Jersey. On August 1, 2019, the entity was dissolved by transferring ownership of the assets of the centers to the partners for no consideration, with each partner receiving full ownership of one center. See Note 4, Facility Acquisitions and Dispositions, for further information.

On April 12, 2018 we acquired 25% share capital in Nulogix, Inc. for cash consideration of $2.0 million. On August 1, 2019 we completed via the issuance of RadNet common stock valued at $1.5 million, the acquisition of the remaining 75% economic interest and we now consolidate the financial statements of Nulogix. See Note 4, Facility Acquisitions and Dispositions, for further information.

Joint venture investment and financial information

The following table is a summary of our investment in joint ventures during the ~~nine~~six months ended ~~September~~June 30, ~~2019~~2020 (in thousands):



Balance as of December 31, 2019	$	34,470
Equity in earnings in these joint ventures	2,900
Balance as of June 30, 2020	$	37,370

Balance as of December 31, 2018 $ 37,973
Equity in earnings in these joint ventures 6,072
Distribution of earnings (3,924 )
Sale of ownership interest (134 )
Dissolution of GRSN (1,427 )
Nulogix change in control (1,795 )
Equity contributions in existing joint ventures 103
Balance as of September 30, 2019 $ 36,868

We charged management service fees from the centers underlying these joint ventures of approximately ~~$2.5~~$3.3 million and ~~$3.5~~$1.8 million for the ~~quarters~~three months ended ~~September~~June 30, ~~2019~~2020 and ~~2018~~2019, ~~respectively~~respectively. and ~~$7.8~~$5.9 million and ~~$10.6~~$3.9 million for the ~~nine~~six months ended ~~September~~June 30, ~~2019~~2020 and ~~2018,~~2019, respectively. We eliminate any unrealized portion of our management service fees with our equity in earnings of joint ventures.

The following table is a summary of key balance sheet data for these joint ventures as of ~~September~~June 30, ~~2019~~2020 and December 31, ~~2018~~2019 and income statement data for the ~~nine~~six months ended ~~September~~June 30, ~~2019~~2020 and ~~2018~~2019 (in thousands):


Balance Sheet Data:	September 30, 2019			December 31, 2018			June 30, 2020			December 31, 2019
Current assets	$	32,401		$	28,317		$	32,318		$	27,427
Noncurrent assets	62,564			45,912			67,307			61,037
Current liabilities	(9,383		)	(4,300		)	(10,677		)	(9,217		)
Noncurrent liabilities	(20,113		)	(4,898		)	(22,572		)	(18,872		)
Total net assets	$	65,469		$	65,031		$	66,376		$	60,375

Book value of RadNet joint venture interests	$	30,421		$	30,030		$	30,894		$	28,001
Cost in excess of book value of acquired joint venture interests	6,447			7,943
Cost in excess of book value of acquired joint venture interests and other							6,476			6,469
Total value of Radnet joint venture interests	$	36,868		$	37,973		$	37,370		$	34,470

Total book value of other joint venture partner interests	$	35,048		$	35,001		$	35,482		$	32,374


Income statement data for the nine months ended September 30,	2019		2018
Income statement data for the six months ended June 30,					2020		2019
Net revenue	$	80,115	$	136,413	$	43,849	$	55,624
Net income	$	13,718	$	20,271	$	6,001	$	8,723

NOTE 3 – RECENT ACCOUNTING AND REPORTING STANDARDS

Accounting standards adopted

~~In February 2016, the FASB issued Accounting Standard Update ("ASU") No. 2016-02,~~ ~~Leases (Topic 842)~~ (ASU 2016-02), which amends the existing accounting standards for leases. In September 2017, the FASB issued ASU No. 2017-13 which provides additional clarification and implementation guidance on the previously issued ASU No. 2016-02. Subsequently, in July 2018, the FASB issued ASU No 2018-10, Codification Improvements to Topic 842, Leases, and ASU No. 2018-11, Targeted Improvement, to clarify and amend the guidance in ASU No. 2016-02. The amendments in this update were effective for fiscal years (and interim reporting periods within fiscal years) beginning after December 15, 2018, with early adoption permitted for all entities. Under the new guidance, a lessee is required to recognize a lease liability and right-of-use asset for all leases with terms in excess of twelve months. The new guidance also requires additional disclosures to enable users of financial statements to understand the amount, timing, and potential uncertainty of cash flows arising from leases. Consistent with current guidance, a lessee’s recognition, measurement, and presentation of expenses and cash flows arising from a lease will continue to depend primarily on its classification. We have elected the optional transition method to apply the standard as of the effective date and therefore, we will not apply the standard to the comparative periods presented in the consolidated financial statements. We elected the transition package of three practical expedients permitted within the standard, which eliminates the requirements to reassess prior conclusions about lease identification, lease classification, and initial direct costs. For facility and equipment operating leases, the effect of the adoption amounted to a lease liability of approximately $455.5 million. Operating lease right-of-use assets were recorded in the amount of approximately $419.0 million. Inclusive in the adoption was the transfer of approximately $35.3 million in deferred rent liability and $792,000 in unfavorable rental contract liabilities to operating lease right of use assets. For finance leases, the effect of the adoption amounted to a finance lease liability of approximately $12.1 million, which was transfered from capital lease debt. Equipment leased under the finance arrangements, amounting to $14.1 million, remained in property, plant and equipment. The transition adjustment did not have a material impact on the statement of operations or cash flows. See Note 5, Leases, for more information.

~~In February 2018, the FASB issued ASU No. 2018-02 (“ASU 2018-02”),~~ ~~Reclassification of Certain Tax Effects from Accumulated Other Comprehensive Income~~. ASU 2018-02 allows for the reclassification of certain income tax effects related to the Tax Cuts and Jobs Act between “Accumulated other comprehensive income” and “Retained earnings.” This ASU relates to the requirement that adjustments to deferred tax liabilities and assets related to a change in tax laws or rates to be included in “Income from continuing operations”, even in situations where the related items were originally recognized in “Other comprehensive income” (rather than in “Income from continuing operations”). Subsequently, in March 2018, the FASB issued ASU No. 2018-05, ~~Income Taxes,~~ to clarify and amend guidance in ASU 2018-02. ASU 2018-02 and ASU 2018-05 are effective for all entities for fiscal years beginning after December 15, 2018, and interim periods within those fiscal years, with early adoption

permitted. Adoption of this ASU is to be applied either in the period of adoption or retrospectively to each period in which the effect of the change in the tax laws or rates were recognized. The adoption had no significant impact on the our results of operations, financial position and cash flows.

~~In April 2019, the FASB issued ASU 2019-04, ("ASU 2019-04"),~~ ~~Codification Improvements to Topic 326, Financial Instruments-Credit Losses, Topic 815, Derivatives and Hedging, and Topic 825, Financial Instruments, which, among other things, clarifies certain hedge accounting guidance. For the year ended 2017, we elected to early adopt ASU 2017-12,~~ ~~Targeted Improvements to Accounting for Hedging Activities~~, (Topic 815), for which this current ASU 2019-04 amends. For those entities that have already adopted ASU 2017-12, the hedging amendments in ASU 2019-04 are effective as of the beginning of the first annual reporting period beginning after 25 April 2019 and early adoption is permitted. We elected early adoption of ASU 2019-04 and the adoption had no effect on our financial statements.

~~Accounting standards not yet adopted~~

In June 2016, the FASB issued ASU No. 2016-13 ("ASU 2016-13), Financial Instruments - Credit Losses. ASU 2016-13 replaces the incurred loss ~~impairment~~ methodology ~~under current GAAP~~previously utilized for valuing financial instruments with aan expected loss methodology that ~~reflects~~is referred to as the current expected credit ~~losses and requires consideration of a broader range of reasonable and supportable information to inform credit~~ loss ~~estimates. The standard will be effective for us beginning after December 15, 2019, with early adoption permitted.~~(CECL) methodology. We ~~are currently evaluating~~prospectively adopted the ~~impact of this~~ standard on ~~our~~January 1, 2020 and the adoption did not have a material impact to the condensed consolidated financial statements, ~~including accounting policies, processes, and systems.~~resulting in no adjustments to our prior year earnings. See the Accounts Receivable section to Note 2 for further information on our allowances for credit losses.

In August 2018, the FASB issued ASU No. 2018-15 (“ASU 2018-15”), Intangibles-Goodwill and Other-Internal-Use Software. ASU 2018-15 aligns the requirements for deferring implementation costs incurred in a cloud computing arrangement that is a service contract with the requirements for capitalizing implementation costs incurred to develop or obtain internal-use software. This ASU is effective in the first quarter of 2020 with early adoption permitted and can be applied either retrospectively or prospectively to all implementation costs incurred after the date of adoption. The adoption of this standard did not have a material impact on our condensed consolidated balance sheet.

In March 2020, the FASB issued ASU 2020-03 ("ASU 2020-03"), Codification Improvements to Financial Instruments. The amendments in this update represent changes to clarify or improve the codification and correct unintended application. ASU 2020-03 was effective immediately upon issuance and its adoption did not have a material impact on our financial statements.

In August 2018, the FASB issued ASU No. 2018-13 ("ASU 2018-13"), Disclosure Framework – Changes to the Disclosure Requirements for Fair Value Measurements. This standard removes, modifies and adds certain disclosures related to recurring and nonrecurring fair value measurements. We adopted ASC 2018-13 effective January 1, 2020 and it had no effect on our disclosures.

Accounting standards not yet adopted

In December 2019, the FASB issued ASU 2019-12 ("ASU 2019-12"), Income Taxes (Topic 740). ASU 2019-12 removes certain exceptions related to the approach for intraperiod tax allocation, the methodology for calculating income taxes in an interim period, and the recognition of deferred tax liabilities for outside basis differences. It also clarifies and simplifies other areas of the standard. ASU 2019-12 will be effective beginning in the first quarter of 2021. Early adoption is permitted. Certain amendments in this update must be applied on a prospective basis, certain amendments must be applied on a retrospective basis, and certain amendments must be applied on a modified retrospective basis through a cumulative-effect adjustment to retained earnings/(deficit) in the period of adoption. We are currently ~~assessing~~evaluating the impact this ASU will have on our financial statements and related disclosures as well as the timing of adoption.

In January 2020, the FASB issued ASU 2020-01 ("ASU 2020-01"), Investments—Equity Securities (Topic 321), Investments—Equity Method and Joint Ventures (Topic 323), and Derivatives and Hedging (Topic 815), clarifying the interaction between accounting standards related to equity securities, equity method investments, and certain derivatives. ASU 2020-01 is effective for fiscal years beginning after December 15, 2020. We do not expect the adoption of this guidance will have a material impact on our financial statements.

In March 2020, the FASB issued ASU 2020-04 ("ASU 2020-04"), Reference Rate Reform (Topic 848), Facilitation of the Effects of Reference Rate Reform on Financial Reporting. ASU 2020-04 provides optional expedients and exceptions for applying generally accepted accounting principles to certain contract modifications and hedging relationships that reference London Inter-bank Offered Rate (LIBOR) or another reference rate expected to be discontinued. The guidance is effective upon issuance and generally can be applied through December 31, 2022. We are currently evaluating the ~~Company’s results~~potential impact of ~~operations,~~ASU 2020-04 on our financial ~~position and cash flows.~~statements.

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

~~Acquisitions~~Acquisitions:

On ~~August~~June 1, 2019 we completed a step-up acquisition upon the dissolution of our former 49% owned joint venture, Garden State Radiology LLC ("GSRN"). GSRN consisted of two multi-modality centers operating in New Jersey. GSRN became our wholly owned subsidiary with the withdrawal of the 51% majority partner for the full ownership of one center with no other consideration. We made a preliminary fair value determination of our original 49% interest which resulted in a step-up gain of $114,000. We determined a preliminary fair value of the remaining acquired imaging center of $1.9 million in assets and $426,000 in liabilities were recognized. We recorded $1,000 in other assets, $599,000 in fixed assets, $426,000 in right-of-use assets, $426,000 in operating lease liabilities, and $888,000 in goodwill.

On August 1, 2019 we completed a step-up acquisition of our former 25% owned joint venture, Nulogix, via a stock issuance of RadNet common shares valued at $1.5 million to obtain the remaining 75% outstanding Nulogix shares. We made a preliminary fair value determination of the acquired assets and approximately $189,000 in fixed assets, $732,000 in intangible assets, $278,000 in deferred tax liability and goodwill of $1.4 million were recorded. We also made a fair value determination of our 25% pre existing interest in the business and recognized a loss of $504,000 which is included in operating expenses within the condensed consolidated statements of operations.

~~On April 1, 2019~~2020, we completed our acquisition of all the equity interests of DeepHealth Inc., ("DeepHealth") an artificial intelligence and machine learning company in an all stock purchase. As initial purchase consideration, we issued 915,132 shares at $16.93 per share (823,615 issued at execution, with up to 91,517 shares to be issued 18 months after acquisition subject to adjustment for any indemnification claims). The transaction was accounted for as an acquisition of a business and total purchase consideration determined to be approximately $34.6 million including i) 823,615 shares issued on the date of closing with fair value of $13.9 million, ii) a liability of 91,517 shares with a fair value of $1.5 million to be issued 18 months after acquisition subject to adjustment for any indemnification claims and will be marked to market in subsequent periods, iii) replacement awards attributable to pre-combination service issued to DeepHealth option holders with allocated fair value of $2.0 million, iv) acquisition date fair value of contingent consideration of $17.0 million and v) $0.1 million in closing costs reimbursed to the seller. The fair values of replacement awards attributable to pre-combination service and contingent consideration are recorded in additional paid in capital upon closing of the transaction. For the contingent consideration, there are three arrangements that will be settled in a fixed number of shares upon achievement of three individual specific milestones which are mutually exclusive of each other, with 390,789, 586,184, and 195,393 shares, respectively, issuable for each milestone arrangement. The fair value of the contingent consideration was estimated at the date of acquisition based on our share price and estimated probability of the achievement of the respective milestones. We preliminarily recorded $0.1 million in current assets, $3.5 million in deferred tax liabilities, $14.8 million in intangible assets, primarily in-process research and development ("IPR&D'), and $23.4 million in goodwill. The goodwill is primarily attributable to expected post-acquisition synergies from integrating Deep Health’s assembled workforce and IPR&D technologies. The fair values of the identifiable intangible assets related to IPR&D were determined by the income method and the assets will not be amortized until completion.

On March 2, 2020 our consolidated subsidiary New Jersey Imaging Networks ("NJIN") completed the acquisition of certain assets of ~~Kern Radiology Imaging Systems Inc.,~~MRI at Woodbridge, LLC consisting of ~~four~~a single multi-modality imaging ~~centers~~center located in ~~Bakersfield, California~~Avenel, New Jersey for ~~purchase~~cash consideration of ~~$19.3 million. We have~~$2.6 million. NJIN made a ~~preliminary~~ fair value determination of the acquired assets and assumed liabilities and approximately ~~$10.1~~$0.5 million in property and equipment, ~~$9.7~~$1.1 million in right-of-use assets, ~~$36,000 in other assets, $3.4~~$0.3 million in intangible assets, ~~$14.5~~$1.1 million in operating lease liabilities, $0.1 million in finance lease liabilities, and ~~$10.5~~$1.8 million in goodwill were recorded.

On ~~April 1, 2019~~January 2, 2020 we completed our acquisition of certain assets of ~~Zilkha Radiology Inc.~~Olney Open MRI, LLC, consisting of ~~two~~a single multi-modality ~~centers~~imaging center located in ~~Islip, New York~~Columbia, Maryland for ~~purchase~~cash consideration of ~~$4.5~~$1.8 million. We have made a fair value determination of the acquired assets and assumed liabilities and approximately ~~$2.2~~$0.8 million in property and equipment, ~~$5.1~~$1.3 million in right-of-use

assets, ~~$100,000~~$0.3 million in intangible assets, ~~$5.1~~$1.3 million in operating lease liabilities ~~retired $332,000 in equipment indebtedness,~~ and ~~recorded $2.6~~$0.6 million in ~~goodwill.~~goodwill were recorded.

Dispositions:

On ~~February 28, 2019, one of~~June 1, 2020 we completed our NY Group entities, Lenox Hill Radiology and Medical Imaging Associates, P.C. ("LHR"), purchased the membership interest of Hudson Valley Radiology Associates, P.L.L.C. ("HVRA") for $6.0 million of RadNet common stock and contingent consideration valued at $680,000 to guarantee the share value issued for a period of six months post acquisition date. LHR has performed a fair value purchase price allocation and recorded equipment of $10,000, a covenant not to compete of $50,000, trade name of $380,000, other intangible assets of $340,000 and goodwill of $3.1 million from the transaction. In connection with the acquisition, RadNet also settled against the purchase consideration, $2.8 million, net of taxes, of an unfavorable vendor contract with HVRA stemming from the previous acquisition of Radiologix, Inc. in November 2006.

~~On February 1, 2019 our majority owned subsidiary, West Valley Imaging Group, LLC ("WVIG") completed its acquisition~~sale of certain assets of ~~West Valley~~our Imaging ~~Center, LLC, consisting of a single multi-modality imaging center located in West Hills, CA~~On Call subsidiary to RadVantage P.C. (an unrelated corporation) for ~~purchase consideration of $3.0 million all of which was initially funded by the Company. We have made a preliminary fair value determination of the acquired assets and~~ approximately ~~$300,000~~ ~~in equipment and fixed assets,~~ ~~$7,000~~ ~~in other assets,~~ ~~$200,000~~ ~~in intangible assets and $2.5 million in goodwill were recorded. Subsequent to the~~$1.0 thousand. With this transaction, ~~our partner in WVIG, Cedars Sinai Medical Center, contributed $750,000 in cash to maintain its 25% economic interest in the venture.~~

~~Joint venture formations~~

On February 13, 2019 we formed a wholly owned subsidiary, Ventura County Imaging Group, LLC ("VCIG"). On March 1, 2019, Dignity Health joined as a venture partner. Total agreed contribution of both parties was $10.4 million of cash and assets with RadNet contributing net assets with a book value of $4.3 million for a 60% economic interest and Dignity Health contributing $6.1 million in cash and assets for a 40% economic interest. For its contribution, RadNet transferred net assets of three wholly owned multi-modality imaging centers. Dignity Health contributed approximately $800,000 in assets to acquire 5% economic interest and paid RadNet $5.3 million for an additional 35% economic interest. We maintain controlling economic interest in VCIG and fully consolidate the results into our financial statements.

~~Assets held for sale:~~

Effective January 1, 2018 we agreed to sell certain assets of four women’s imaging centers to MemorialCare Medical Foundation. The sale was initially anticipated within 12 months of the effective date, however we extended the date out to 24 months based on a change in business circumstances. The following table summarizes the major categories of assets which remain classified as held for sale in the accompanying condensed consolidated balance sheets at September 30, 2019:

Property and equipment, net $ 1,049
Goodwill 992
Total assets held for sale $ 2,041

~~NOTE 5 - LEASES~~

~~Adoption of Standard~~

In February 2016, the FASB issued a new standard related to leases to increase transparency and comparability among organizations by requiring the recognition of right-of-use (“ROU”) assets and lease liabilities on the balance sheet ~~for all leases with terms in excess of twelve months.~~ Sufficient disclosures are required to meet the objective of enabling users of financial statements to assess the amount, timing, and uncertainty of cash flows arising from leases. The standard was effective for us beginning January 1, 2019. We have elected the optional transition method to apply the standard as of the effective date and therefore, we will not apply the standard to the comparative periods presented in the consolidated financial statements. We also elected the transition package of three practical expedients permitted within the standard, which eliminates the requirements to reassess prior conclusions about lease identification, lease classification, and initial direct costs. ~~In preparation for adoption of the standard,~~ we have ~~implemented internal control procedures and key system functionality to enable~~exited the ~~preparation of financial information.~~teleradiology business.

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

of an operating lease liability of $455.5 million. Operating lease ROU assets were recorded in the amount of $419.0 million. Inclusive in the adoption was the transfer of $35.3 million in deferred rent liability and $792,000 in unfavorable rental contract liabilities to operating lease ROU assets. For finance leases, the effect of the adoption amounted to a finance lease liability of $12.1 million, which was transfered from capital lease debt and a finance right of use assets in the amount of $14.1 million which remained in property, plant and equipment.

~~Lease Liability~~

We have operating leases for medical facilities, administrative offices, warehouse space and major medical equipment. We lease the premises at which these facilities are located and do not have options to purchase the facilities we rent. Our most common initial term varies in length from 5 to 15 years. Including renewal options negotiated with the landlord, we can have a total span of 10 to 35 years at the facilities we lease. We also lease smaller satellite X-Ray locations on mutually renewable terms, usually lasting one year. Additionally, we have operating and finance leases for certain medical and office equipment, with lease terms generally lasting from 5 to 8 years. Our Incremental Borrowing Rate ("IBR") used to discount the stream of lease payments is closely related to the interest rates charged on our collateralized debt obligations and our IBR is adjusted when those rates experience a substantial change.

~~The components of lease expense were as follows:~~

Three months ended Nine months ended
(In thousands) September 30, 2019

Operating lease cost $ 24,497
$ 71,568

Finance lease cost:
Depreciation of leased equipment $ 724
$ 2,351
Interest on lease liabilities 91
319
Total finance lease cost $ 815
$ 2,670

~~Supplemental cash flow information related to leases was as follows:~~

Three months ended
Nine months ended
(In thousands) September 30, 2019

Cash paid for amounts included in the measurement of lease liabilities:
     Operating cash flows from operating leases $ 24,739
$ 71,926
     Operating cash flows from financing leases 91
319
     Financing cash flows from financing leases 1,363
4,299
Right-of-use & Equipment assets obtained in exchange for lease obligations:
     Operating leases⁽¹⁾
15,984
462,613
     Financing leases 32
14,088

⁽¹⁾~~Amounts for the nine months ended September 30, 2019 include the transition adjustment for the adoption of Topic 842 discussed in Note 2, Significant Accounting Policies for further information.~~

~~Supplemental balance sheet information related to leases was as follows:~~

(In thousands, except lease term and discount rates)
September 30, 2019

Operating Leases
Operating lease right-of-use assets $ 438,558
Current portion of operating lease liability $ 69,308
Operating lease liabilities 410,958
Total operating lease liabilities $ 480,266

Finance Leases
Property and Equipment, at cost $ 14,088
Accumulated depreciation (2,351 )
Equipment, net $ 11,737
Current portion of finance lease $ 4,095
Finance lease liabilities 4,042
Total finance lease liabilities $ 8,137

Weighted Average Remaining Lease Term
Operating leases - years 8.5
Finance leases - years 3.2

Weighted Average Discount Rate
Operating leases 6.4 %
Finance leases 4.2 %

~~Maturities of lease liabilities were as follows:~~

(In thousands)
Operating
Financing
Year Ending December 31, Leases
Leases
2019 (excluding the nine months ended September 30, 2019) $ 24,616
$ 1,716
2020 95,158
3,481
2021 88,085
2,614
2022 78,279
691
2023 67,021
—
Thereafter 282,379
—
Total Lease Payments 635,538
8,502
Less imputed interest (155,272 ) (365 )
Total $ 480,266
$ 8,137

As of September 30, 2019 , we have additional operating leases for facilities that have not yet commenced of approximately $2.1 million. These operating leases will commence in 2019 with lease terms of 4 to 5 years.

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

Facilities Equipment Total
2019 $ 75,588
$ 14,924
$ 90,512
2020 66,116
14,385
80,501
2021 57,826
12,966
70,792
2022 48,542
10,264
58,806
2023 38,800
7,095
45,895
Thereafter 160,327
5,144
165,471
$ 447,199
$ 64,778
$ 511,977

NOTE 65 – CREDIT ~~FACILITY,~~FACILITIES AND NOTES PAYABLE ~~AND CAPITAL LEASE OBLIGATIONS~~

As of ~~September~~June 30, ~~2019~~2020 and December 31, ~~2018~~2019 our debt obligations ~~consist~~consisted of the following (in thousands):




	June 30, 2020			December 31, 2019
First Lien Term Loans collateralized by RadNet's tangible and intangible assets	$	630,426		$	649,824
Discounts on First Lien Term Loans	(11,639		)	(13,579		)
Term Loan Agreement collateralized by NJIN's tangible and intangible assets	53,625			55,875
Paycheck Protection Program loans at 1% due April 2022	4,023			—
Equipment notes payable at interest rates ranging from 4.4% to 4.6%, due through 2020, collateralized by medical equipment	120			275
Total debt obligations	676,555			692,395
Less: current portion	(41,715		)	(39,691		)
Long term portion debt obligations	$	634,840		$	652,704

September 30,
2019 December 31,
2018
First Lien Term Loans collateralized by RadNet's tangible and intangible assets $ 659,522
$ 587,191

Discounts on First Lien Term Loans (14,549 ) (15,112 )

Term Loan Agreement collateralized by NJIN's tangible and intangible assets 57,000
59,250

Revolving Credit Facilities —
28,000

Promissory note payable to the former owner of a practice acquired at an interest rate of 1.5% due through 2019 —
199

Equipment notes payable at interest rates ranging from 3.3% to 5.6%, due through 2020, collateralized by medical equipment 351
632

Obligations under capital leases at interest rates ranging from 4.3% to 11.2%, due through 2022, collateralized by medical and office equipment ₍₁₎
—
12,119
Total debt obligations 702,324
672,279
Less: current portion (39,719 ) (39,267 )
Long term portion debt obligations $ 662,605
$ 633,012

⁽¹⁾~~Obligations under capital leases were transferred to Finance Lease Liability at January 1, 2019 in accordance with the adoption of Accounting Standards Update No 2016-02,~~ ~~Leases (Topic 842). See Note 5, Leases, for more information.~~

Senior Secured Credit Facilities

At ~~September~~June 30, ~~2019,~~2020, our Barclays credit facilities were comprised of one tranche of term loans (“First Lien Term Loans”) and a revolving credit facility of $137.5 million (the “Barclays Revolving Credit Facility”), both of which are provided pursuant to the Amended and Restated First Lien Credit and Guaranty Agreement dated as of July 1, 2016 (as amended, the “First Lien Credit Agreement”).

At ~~September~~June 30, ~~2019,~~2020, our SunTrust credit facilities, which relate to our consolidated subsidiary NJIN, were comprised of one term loan (the "SunTrust Term Loan") and a revolving credit facility of $30.0 million (the "SunTrust Revolving Credit Facility") both of which are provided pursuant to the SunTrust Restated Credit Agreement (as described below).

As of ~~September~~June 30, ~~2019,~~2020, we were in compliance with all covenants under our credit facilities. Deferred financing costs at ~~September~~June 30, ~~2019,~~2020, net of accumulated amortization, was ~~$1.7~~$1.3 million and is specifically related to our Barclays Revolving Credit Facility.

Included in our condensed consolidated balance sheets at ~~September~~June 30, ~~2019~~2020 are ~~$659.5~~$630.4 million of First Lien Term Loans and ~~$57.0~~$53.6 million of SunTrust Term Loan debt for a combined total of ~~$716.5~~$684.1 million of total term loan debt ~~(net~~(exclusive of unamortized discounts of ~~$14.5~~$11.6 million) in thousands:



	Face Value		Discount			Total Carrying Value
First Lien Term Loans	$	630,426	$	(11,639	)	$	618,787
SunTrust Term Loan	53,625		—			53,625
Total Term Loans	$	684,051	$	(11,639	)	$	672,412

Face Value Discount Total Carrying
Value
First Lien Term Loans $ 659,522
$ (14,549 ) $ 644,973
SunTrust Term Loan 57,000
—
57,000
Total Term Loans $ 716,522
$ (14,549 ) $ 701,973

We had no0 balance under our $137.5 million Barclays Revolving Credit Facility at ~~September~~June 30, ~~2019~~2020 and have reserved an additional ~~$5.9~~$6.3 million for certain letters of credit. The remaining ~~$131.7~~$131.2 million of our Barclays Revolving Credit Facility was available to draw upon as of ~~September~~June 30, ~~2019.~~2020. We ~~also~~ had no0 balance under our $30.0 million SunTrust Revolving Credit Facility related to our consolidated subsidiary NJIN at ~~September~~June 30, ~~2019.~~2020.

Paycheck Protection Program

The Paycheck Protection Program (PPP) includes funds available for loans to small business and Medicare providers to support operations during the COVID-19 pandemic. The funds are administered by the Small Business Administration (SBA), through approved lenders and do not require collateral or personal guarantees. We received our loans based on being a Medicare

provider. The terms and conditions for participation require entities to certify that economic uncertainty related to the COVID-19 pandemic makes the loan necessary to support their current operations, and that they will use the funds to retain workers (e.g., by paying salaries, providing paid sick/medical leave and health insurance benefits) and pay certain debts (mortgage obligations) and expenses (e.g. rent, utilities, telephone). The loans have a 1.0% fixed interest rate and are due in 2 years. Initial repayments have been deferred for six months. The loans are eligible for forgiveness subject to salary limitations and employee retention levels. Certain of our consolidated subsidiaries received 4 loans totaling $4.0 million. We have accounted for the funds received as debt and recognize a liability for the full amount of proceeds received. Interest will be accrued over the term of the loans. If we meet the eligibility requirements for forgiveness the amounts forgiven will be recognized in the income statement as a gain on loan extinguishment in accordance with accounting guidance.

The following ~~describes our financing activities related~~relates to our Barclays ~~credit facilities:~~financing activities:

2019 Amendments to the First Lien Credit Agreement:

On April 18, 2019 we entered into the following two new amendments to the First Lien Credit Agreement: (i) Amendment No. 6, Consent and Incremental Joinder Agreement to Credit and Guaranty Agreement dated as of April 18, 2019 (the “Sixth Amendment”); and (ii) Amendment No. 7 to Credit and Guaranty Agreement dated as of April 18, 2019 (the “Seventh Amendment”).

The Sixth Amendment amended the First Lien Credit Agreement to issue $100.0 million in incremental First Lien Term Loans and to add an additional $20.0 million of revolving commitments to the Barclay's Revolving Credit Facility. Under the First Lien Credit Agreement, we now have approximately $679.0 million in First Lien Term Loans outstanding and capacity to borrow up to $137.5 million under our Barclays Revolving Credit Facility. The proceeds of the incremental First Lien Term Loans have been used to repay revolving loans outstanding under the Revolving Credit Facility and the fees, costs and expenses associated with the Sixth Amendment and the Seventh Amendment. Rates of the applicable margin for borrowing under the First Lien Credit Agreement remain the same as Amendment No. 5 from August 22, 2017 and described below. At September 30, 2019 the effective Adjusted Eurodollar Rate and the Base Rate for the First Lien Term Loans was 2.33% and 5.00%, respectively and the applicable margin for Adjusted Eurodollar Rate and Base Rate borrowings was 3.50% and 2.50%, respectively.

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

The First Lien Credit Agreement, as amended by the Sixth Amendment, provides for quarterly payments of principal under the First Lien Term Loans in the amount of approximately $9.7 million, as compared to approximately $8.3 million under the First Lien Credit Agreement prior to the Sixth Amendment. Total issue costs ~~for~~added in relation to the ~~Sixth Amendment aggregated~~amendments in 2019 amounted to approximately ~~$4.4 million~~.$4.4 million. Of this amount, $2.1 million was identified and capitalized as discount on debt, ~~$683,000~~$0.7 million was capitalized as deferred financing costs, and $1.6 million was expensed. Amounts capitalized will be amortized over the remaining term of the agreement.

~~Amendment No. 5, Consent and Incremental Joinder Agreement to~~

Terms of Barclays Credit ~~and Guaranty Agreement~~Facilities:

~~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~~ Term Loans:

Interest: First Lien Term Loans ~~the proceeds of which were used to repay in full previously outstanding second lien term loans.~~

Pursuant to the Fifth Amendment and unchanged by the Sixth 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~~plus an applicable margin. Rates of the applicable margin for borrowing under the First Lien Credit ~~Agreement) or a combination of both, at the election of the Company, plus an applicable margin. Applicable margin for Adjusted Eurodollar Rate borrowings and Base Rate borrowings was changed to adjust~~Agreement will alter depending on our leverage ratio, according to the following schedule:



First Lien Leverage Ratio	Eurodollar Rate Spread	Base Rate Spread
> 5.50x	4.50%	3.50%
> 4.00x but ≤ 5.50x	3.75%	2.75%
>3.50x but ≤ 4.00x	3.50%	2.50%
≤ 3.50x	3.25%	2.25%

First Lien Leverage Ratio Eurodollar Rate Spread Base Rate Spread
> 5.50x 4.50% 3.50%
> 4.00x but ≤ 5.50x 3.75% 2.75%
>3.50x but ≤ 4.00x 3.50% 2.50%
≤ 3.50x 3.25% 2.25%

~~Pursuant~~At June 30, 2020 the effective Adjusted Eurodollar Rate and the Base Rate for the First Lien Term Loans was 1.00% and 3.25%, respectively and the applicable margin for Adjusted Eurodollar Rate and Base Rate borrowings was 3.75% and 2.75%, respectively.

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

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

Additional Borrowing. Under the First Lien Credit Agreement, we can elect to request 1)(i) an increase to the existing Barclays Revolving Credit Facility and/or 2)(ii) issue additional First Lien Term Loans, provided that the aggregate amount of such increases and additions does not exceed (a) $100.0 million and (b) as long as the First Lien Leverage Ratio (as defined in the First Lien Credit Agreement) would not exceed 4.00:1.00 after giving effect to such incremental facilities, an uncapped amount of incremental facilities, in each case subject to the conditions and limitations set forth in the First Lien Credit Agreement. 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~~

Barclays Revolving 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.Facility:

~~The First Lien Credit Agreement pursuant to the fifth amendment provided for a $117.5 million Barclays revolving credit facility and increased to $137.5 million in the Sixth Amendment.~~

Interest: Revolving loans borrowed under the ~~Barclays~~ Revolving Credit Facility ~~bore an~~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 and unchanged in the Sixth Amendment,~~Rates of the applicable margin ~~was amended to vary based~~for borrowing under the Revolving Credit Facility also change depending on our leverage ratio and are the same rates as noted in ~~accordance with~~ the ~~following schedule:~~schedule above for First Lien Term Loans. As of June 30, 2020, the effective interest rate payable on revolving loans was 6.00%.

First Lien Leverage Ratio Eurodollar Rate Spread Base Rate Spread
> 5.50x 4.50% 3.50%
> 4.00x but ≤ 5.50x 3.75% 2.75%
>3.50x but ≤ 4.00x 3.50% 2.50%
≤ 3.50x 3.25% 2.25%

Letters of Credit: For letters of credit issued under the ~~Barclays~~ Revolving Credit Facility, letter of credit fees accrue at the applicable margin ~~(see table above) for~~of Adjusted Eurodollar Rate, ~~revolving loans~~currently 3.75% , and fronting fees accrue at 0.25% per annum, in each case on the average aggregate daily maximum amount available to be drawn under all letters of credit issued under the First Lien Credit Agreement. In addition a commitment fee of ~~0.5%~~0.50% per annum accrues on the unused revolver commitments under the ~~Barclays~~ Revolving Credit Facility.

As of September 30, 2019, the interest rate payable on revolving loans was 7.50%. With no amounts outstanding and a reserve for letters of credit of $5.9 million as of September 30, 2019, the amount available to borrow under the Barclays

Maturity Date: The Revolving Credit Facility ~~at September 30, 2019 was $131.7 million.~~

~~The Barclays Revolving Credit Facility was originally scheduled to~~will terminate on the earliest to occur of (i) July 1, ~~2021,~~2023, (ii) the date we voluntarily agree to permanently reduce the ~~Barclays~~ Revolving Credit Facility to zero pursuant to section 2.13(b) of the First Lien Credit Agreement, and (iii) the date the ~~Barclays~~ Revolving Credit Facility is terminated due to specific events of default pursuant to section 8.01 of the First Lien Credit Agreement. ~~The termination date was updated with the Sixth Amendment.~~

The following ~~describes our financing activities with respect~~relates to our SunTrust ~~credit facilities:~~financing activities:

Amended and Restated Revolving Credit and Term Loan Agreement

On August 31, 2018, our subsidiary, ~~New Jersey Imaging Networks ("NJIN"),~~NJIN, entered into the Amended and Restated Revolving Credit and Term Loan Agreement (as amended, the "SunTrust Restated Credit Agreement") as borrower with SunTrust Bank and other financial institutions as lenders and to ~~restate~~provide NJIN aggregate credit facilities of $90.0 million as categorized below:

SunTrust Term Loan: Pursuant to the SunTrust ~~Original~~Restated Credit Agreement, the lenders thereunder made a term loan to NJIN in the amount of $60.0 million. The SunTrust Term Loan is repayable in scheduled quarterly amounts (as described below) and ~~to provide NJIN additional aggregate credit facilities~~has a maturity date of ~~$48.1 million as categorized below:~~the earlier of (i) August 31, 2023 and (ii) the date on which the principal amount of the SunTrust Term Loan has been declared or automatically has become due and payable (whether by acceleration or otherwise).

SunTrust Revolving Credit Facility: The SunTrust Restated Credit Agreement establishes a $30.0 million revolving credit facility available to NJIN for funding requirements. ~~This represents an increase of $20.0 million over the revolving facility of $10.0 million made available to NJIN under the SunTrust Original Credit Agreement.~~ The SunTrust Revolving Credit Facility terminates on the earliest of (i) August 31, 2023, (ii) the voluntary termination thereof by NJIN pursuant to Section 2.8 of the SunTrust Restated Credit Agreement, or (iii) the date on which all amounts outstanding under the SunTrust Restated Credit Agreement have been declared or have automatically become due and payable (whether by acceleration or otherwise). NJIN has not borrowed against the revolving credit line.

~~SunTrust Term Loan:~~ Pursuant to the SunTrust Restated Credit Agreement, the lenders thereunder made a term loan to NJIN in the amount of $60.0 million. This represents an increase of $28.1 million over the outstanding amount of the term loan under the SunTrust Original Credit Agreement and extends the term of the loan from September 30, 2020 to August 31, 2023. The SunTrust Term Loan is repayable in scheduled quarterly amounts (as described below) and has a maturity date of the earlier of (a) August 31, 2023 and (b) the date on which the principal amount of the SunTrust Term Loan has been declared or automatically has become due and payable (whether by acceleration or otherwise).

Interest: ~~For the period from August 31, 2018, through the date NJIN delivered its financial statements and compliance certificate for the fiscal quarter ending September 30, 2018, the interest~~Interest rates and fees applicable to the SunTrust Revolving Credit Facility and the SunTrust Term Loan were (i) for Eurodollar Loans (as defined in the SunTrust Restated Credit Agreement), the Adjusted LIBOR (as defined in the SunTrust Restated Credit Agreement) plus 2.75% per annum, (ii) for Base Rate Loans (as defined in the SunTrust Restated Credit Agreement), the Base Rate (as defined in the SunTrust Restated Credit Agreement) plus 1.75% per annum, (iii) for letters of credit, 2.75% per annum, and (iv) for the unused commitment fee on the SunTrust Revolving Credit Facility, 0.45% per annum. Thereafter, the rates of the applicable margin for borrowing under the SunTrust Restated Credit Agreement ~~will~~ adjust depending on our leverage ratio, according to the following table:



Pricing Level	Leverage Ratio	Applicable Margin for Eurodollar Loans	Applicable Margin for Base Rate Loans	Applicable Margin for Letter of Credit Fees	Applicable Percentage for Commitment Fee
I	Greater than or equal to 3.00:1.00	2.75% per annum	1.75% per annum	2.75% per annum	0.45% per annum
II	Less than 3.00:1.00 but greater than or equal to 2.50:1.00	2.25% per annum	1.25% per annum	2.25% per annum	0.40% per annum
III	Less than 2.50:1.00 but greater than or equal to 2.00:1.00	2.00% per annum	1.00% per annum	2.00% per annum	0.35% per annum
IV	Less than 2.00:1.00 but greater than or equal to 1.50:1.00	1.75% per annum	0.75% per annum	1.75% per annum	0.30% per annum
V	Less than 1.50:1.00	1.50% per annum	0.50% per annum	1.50% per annum	0.30% per annum

The loans and other obligations outstanding under the SunTrust Restated Credit Agreement currently bear ~~interest~~applicable margin and fees based on Pricing Level IIII described ~~above.The~~above. The loans outstanding under the SunTrust Restated Credit Agreement currently bear interest based on a ~~one~~three month Eurodollar ~~election.~~election of 1.45%, plus the applicable margin.

Payments: The scheduled amortization of the SunTrust Term Loan began December 31, 2018 with quarterly payments of ~~$750,000,~~$0.8 million, representing annual amortization equal to 5%5.00% of the original principal amount of the SunTrust Term Loan. At scheduled intervals, the quarterly amortization increases by ~~$375,000,~~$0.4 million, with the remaining balance to be paid at maturity.

~~Revolving Credit and Term Loan Agreement~~

On September 30, 2015, NJIN entered into the Revolving Credit and Term Loan Agreement (the "SunTrust Original Credit Agreement") as borrower with SunTrust Bank and other financial institutions as lenders, pursuant to which the lenders made available to NJIN credit facilities in an aggregate amount of $50.0 million as categorized below:

~~Original Revolving Credit Facility:~~ The SunTrust Original Credit Agreement established a $10.0 million revolving credit facility available to NJIN for needed funding requirements. The Original Revolving Credit Facility terminated on the earliest of (i) September 30, 2020, (ii) the voluntary termination thereof by NJIN pursuant to Section 2.8 of the SunTrust Original Credit Agreement, or (iii) the date on which all amounts outstanding under the SunTrust Original Credit Agreement have been declared or have automatically become due and payable (whether by acceleration or otherwise).

~~Original Term Loan:~~ Pursuant to the SunTrust Original Credit Agreement, the lenders thereunder made a term loan to NJIN in the amount of $40.0 million. The Original Term Loan was repayable in scheduled quarterly amounts (as described below) and had a maturity date of the earlier of (a) September 30, 2020 and (b) the date on which the principal amount of the Original Term Loan has been declared or automatically has become due and payable (whether by acceleration or otherwise).

~~Interest:~~ For the period from September 30, 2015, through the date NJIN delivered its financial statements and compliance certificate for the fiscal quarter ending December 31, 2015, the interest rates and fees applicable to the SunTrust Original Credit Agreement were (i) for Eurodollar Loans (as defined in the SunTrust Original Credit Agreement), the Adjusted LIBOR (as defined in the SunTrust Original Credit Agreement) plus 3.00% per annum, (ii) for Base Rate Loans (as defined in the SunTrust Original Credit Agreement), the Base Rate (as defined in the SunTrust Original Credit Agreement) plus 2.00% per annum, (iii) for letters of credit, 3.00% per annum, and (iv) for the unused commitment fee on the Original Revolving Credit Facility, 0.45% per annum. Thereafter, the rates of the applicable margin for borrowing under the SunTrust Original Credit Agreement adjusted depending on our leverage ratio, according to the following table:



~~Pricing Level~~	~~Leverage Ratio~~	~~Applicable Margin for Eurodollar Loans~~	~~Applicable Margin for Base Rate Loans~~	~~Applicable Margin for Letter of Credit Fees~~	~~Applicable Percentage for Commitment Fee~~
I	~~Greater than or equal to 3.00:1.00~~	~~3.00%~~ ~~per annum~~	~~2.00%~~ ~~per annum~~	~~3.00%~~ ~~per annum~~	~~0.45%~~ ~~per annum~~
II	~~Less than 3.00:1.00 but greater than or equal to 2.50:1.00~~	~~2.50%~~ ~~per annum~~	~~1.50%~~ ~~per annum~~	~~2.50%~~ ~~per annum~~	~~0.40%~~ ~~per annum~~
~~III~~	~~Less than 2.50:1.00 but greater than or equal to~~ ~~2.00:1.00~~	~~2.25%~~ ~~per annum~~	~~1.25%~~ ~~per annum~~	~~2.25%~~ ~~per annum~~	~~0.35%~~ ~~per annum~~
IV	~~Less than 2.00:1.00 but greater than or equal to 1.50:1.00~~	~~2.00%~~ ~~per annum~~	~~1.00%~~ ~~per annum~~	~~2.00%~~ ~~per annum~~	~~0.30%~~ ~~per annum~~
V	~~Less than 1.50:1.00~~	~~1.75%~~ ~~per annum~~	~~0.75%~~ ~~per annum~~	~~1.75%~~ ~~per annum~~	~~0.30%~~ ~~per annum~~

~~Payments:~~ The scheduled amortization of the term loans under the SunTrust Original Credit Agreement began December 31, 2015 with quarterly payments of $500,000, representing annual amortization equal to 5% of the original principal amount of the term loans under the SunTrust Original Credit Agreement. Each December 31, the scheduled quarterly amortization increased by a certain amount, with the remaining balance to be paid at maturity.

NOTE 76 – STOCK-BASED COMPENSATION

Stock Incentive Plans

We have one long-term equity incentive plan which we refer to as the 2006 Equity Incentive Plan, which we first amended and restated as of April 20, 2015 and again on March 9, 2017 (the "Restated Plan”). The Restated Plan was approved by our stockholders at our annual stockholders meeting on June 8, 2017. We have reserved for issuance under the Restated Plan 14,000,000 shares of common stock. We can issue options (incentive and non-qualified), stock awards, stock appreciation rights, stock units and cash awards under the Restated Plan.

Options

Certain options granted under the Restated Plan to employees are intended to qualify as incentive stock options under existing tax regulations. Stock options generally vest over 3 to 5 years and expire 5 to 10 years from the date of grant.

As of ~~September~~June 30, ~~2019~~2020, we had outstanding options to acquire ~~481,451~~527,899 shares of our common stock, of which options to acquire ~~137,623~~298,863 shares were exercisable. The following summarizes all of our option transactions for the ~~nine~~six months ended ~~September~~June 30, ~~2019~~2020:



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, 2019	478,951	$	8.21
Granted	48,948	20.43
Balance, June 30, 2020	527,899	9.34		6.75	$	3,669,010
Exercisable at June 30, 2020	298,863	7.48		5.99	2,508,847

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, 2018 513,282
$ 7.44

Granted 89,200
10.93

Exercised (10,000 ) 4.97

Canceled, forfeited or expired (111,031 ) 0.79

Balance, September 30, 2019 481,451
8.22
7.56 $ 2,956,444
Exercisable at September 30, 2019 137,623
6.97
6.65 1,017,406

Aggregate intrinsic value in the table above represents the total pretax intrinsic value (the difference between our closing stock price on ~~September~~June 30, ~~2019~~2020 and the exercise price, multiplied by the number of in-the-money options as applicable) that would have been received by the holder had all holders exercised their options on ~~September~~June 30, ~~2019~~2020. ~~Options~~NaN options were exercised ~~amounted to 10,000 shares~~ during the ~~nine~~six months ended ~~September~~June 30, ~~2019~~2020. As of ~~September~~June 30, ~~2019~~2020, total unrecognized stock-based compensation expense related to non-vested employee awards was ~~$846,700~~$0.9 million which is expected to be recognized over a weighted average period of approximately ~~1.96~~1.85 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 June 30, 2020, total unrecognized stock based compensation expense related to non-vested DeepHealth options was approximately $5.0 million which is expected to recognized over a weighted average period of approximately 2.82 years.



Outstanding Options Under the Deep Health Plan	Shares	Weighted Average Exercise price Per Common Share		Weighted Average Remaining Contractual Life (in years)	Aggregate Intrinsic Value
Balance, December 31, 2019	—
Granted, June 1, 2020	412,434	$	—
Balance, June 30, 2020	412,434	—		8.89	$	6,545,328
Exercisable at June 30, 2020	25,453	—		8.89	403,935

Restricted Stock Awards

The Restated Plan permits the award of restricted stock awards (“RSA’s”). As of ~~September~~June 30, ~~2019~~2020, we have issued a total of ~~6,089,276~~6,539,393 RSA’s of which ~~387,184~~319,659 were unvested at ~~September~~June 30, ~~2019~~2020. The following summarizes all unvested RSA’s activities during the ~~nine~~six months ended ~~September~~June 30, ~~2019~~2020:



	RSA's		Weighted-Average Remaining Contractual Term (Years)	Weighted-Average Fair Value
RSA's unvested at December 31, 2019	387,934			$	11.61
Changes during the period
Granted	426,117			$	21.11
Vested	(494,392	)		$	15.73
RSA's unvested at June 30, 2020	319,659		1.37	$	16.74

RSA's
Weighted-Average
Remaining
Contractual
Term (Years)

Weighted-Average
Fair Value
RSA's unvested at December 31, 2018 277,504
$ 9.77
Changes during the period
Granted 631,656
$ 11.76
Vested (520,476 ) $ 9.64
Forfeited or Cancelled (1,500 ) $ 12.76
RSA's unvested at September 30, 2019 387,184
1.38 $ 11.59

We determine the fair value of all RSA’s based on the closing price of our common stock on the 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 ~~nine~~six months ended ~~September~~June 30, ~~2019~~2020 awards totaling ~~26,600~~1,078 shares were granted.

Plan summary

In summary, of the 14,000,000 shares of common stock reserved for issuance under the Restated Plan, at ~~September~~June 30, ~~2019~~2020, we had issued ~~14,806,694~~15,359,316 total shares between options, RSA’s and other stock awards. With options canceled and RSA’s forfeited amounting to 3,281,040 and 61,703 shares, respectively, there remain ~~2,536,049~~1,983,427 shares available under the Restated Plan for future issuance.

The DeepHealth options were issued outside of the Restated Plan and are a direct result of our acquisition and not included in the share count of the Restated Plan.

NOTE 87 – SUBSEQUENT EVENTS

~~Equity Investments at Fair Value:~~Acquisitions:

~~WhiteRabbit.ai~~On May 15,2020 , we agreed to acquire certain assets of AZ-Tech Radiology & Open MRI, LLC, consisting of 8 multi-modality imaging centers located in the Phoenix, Arizona area for purchase consideration of $4.0 million. We expect the transaction to close August 31, 2020. The assets will be acquired from Whiterabbit.ai Inc., ~~based~~a company in ~~California, is currently developing~~which we hold an ~~artificial intelligence suite which aims~~equity investment.

Collaborative Agreement:

On August 6, 2020, RadNet and Hologic, Inc. announced a comprehensive collaboration to improve breast cancer care, including the ~~speed~~co-development of Artificial Intelligence tools, data-sharing and ~~accuracy~~an upgrade of ~~cancer~~RadNet’s fleet of Hologic mammography units to cutting-edge technology. Hologic, Inc. is a medical technology company primarily focused on improving women’s health and well-being through early detection ~~in radiology~~ and ~~improve patient care. On November 5, 2019 we acquired an equity interest in the company for $1.0 million and also loaned the company $2.5 million to in support of its operations.~~treatment.

ITEM 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

You should read the following discussion and analysis of our financial condition and results of operations in conjunction with our unaudited condensed consolidated financial statements and notes thereto included in Part I, Item 1 of this Quarterly Report on Form 10-Q and with our audited consolidated financial statements and notes thereto for the year ended December 31, ~~2018~~2019 included in our Annual Report on Form 10-K for the fiscal year ended December 31, ~~2018~~2019 filed with the U.S. Securities and Exchange Commission (SEC) on March ~~18, 2019.~~11, 2020.

Forward-Looking Statements

This quarterly report on Form 10-Q contains “forward-looking statements” within the meaning of Section 27A of the Securities Act of 1933, as amended (the “Securities Act”) 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.

In some cases, you can identify forward-looking statements 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. Statements in this quarterly 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 ability to increase business from new equipment or operations and our ability to finance our operations and repay our outstanding indebtedness, are forward-looking statements.

Forward–looking statements in this current report include, among others, statements we make regarding:

the ongoing impact of the COVID-19 pandemic on our business, suppliers, payors, customers, referral sources, partners, patients and employees, including (i) government’s unprecedented action regarding existing and potential restrictions and/or obligations related to citizen and business activity to contain the virus; (ii) the consequences of an economic downturn resulting from the impacts of COVID-19 and the possibility of a global economic recession; (iii) the impact of the volume of canceled or rescheduled procedures, whether as a result of government action or patient choice; (iv) measures we are taking to respond to the COVID-19 pandemic, including changes to business practices; (v) the impact of government and administrative regulation, guidance and appropriations; (vi) changes in our revenues due to declining patient procedure volumes, changes in payor mix; (vii) potential increased expenses or workforce disruptions related to our employees that could lead to unavailability of key personnel; (viii) workforce disruptions related to our key partners, suppliers, vendors and others we do business with; (ix) the impact of return to work orders in certain states in which we operate; and (x) increased credit and collectability risks; and

our future liquidity and our continuing ability to service and remain in compliance with applicable debt covenants or refinance our current indebtedness.

Forward-looking statements are not guarantees of future performance and our actual results may differ significantly from the results discussed in the forward-looking statements. Factors that might cause such differences include, but are not limited to, the factors included in “Risk Factors,” in our annual report on Form 10-K for the fiscal year ended December 31, ~~2018~~2019 and quarterly report on form 10Q for the quarter ended March 31, 2020, or supplemented by the information in Part II– Item 1A below. You should consider the inherent limitations on, and risks associated with, forward-looking statements and not unduly rely on the accuracy of predictions contained in such forward-looking statements.

These forward-looking statements speak only as of the date when they are made. We assume no obligation to revise or update any forward-looking statements for any reason, except as required by law.

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. At ~~September~~June 30, ~~2019,~~2020, we operated directly or indirectly through joint ventures with hospitals, ~~340~~332 centers located in California, Delaware, Florida, Maryland, New Jersey, and New York. Our centers provide physicians with imaging capabilities to facilitate the diagnosis and treatment of diseases and disorders and may reduce unnecessary invasive procedures, often reducing the cost and amount of care for patients.

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. In addition to our imaging services, we own and operate a number of technology businesses that are complementary to our imaging business. Our subsidiary eRAD, Inc., develops and sells computerized systems for the diagnostic imaging industry, which provide the technology to distribute, display, store and retrieve digital images. Over 2019 and 2020 we have made a number of investments in Artificial Intelligence (AI) with our purchases of Nulogix and DeepHealth, combined with our investment in Whiterabbit.ai and our collaborative arrangement with Hologic. Our current AI focus is to develop solutions in machine learning to assist radiologists and other clinicians in interpreting images and improving patient care, initially in the field of mammography.

The ~~vast majority~~discussion below of our results centers ~~offer multi-modality imaging services. Our multi-modality strategy diversifies revenue streams, reduces exposure~~on our performance in the second quarter ending June 30, 2020. As discussed in our Form 8-K filed on April 3, 2020, the overall impact of the coronavirus pandemic on RadNet’s business could be material to ~~reimbursement changes~~our operating results, cash flows and ~~provides patients~~financial position. The magnitude of the impact will ultimately depend on the duration and ~~referring physicians one location~~extent of the COVID-19 pandemic and the impact of governmental actions and patient behavior in response to ~~serve~~ the ~~needs~~pandemic, which remains ongoing.

As as result of ~~multiple procedures. Our operations compose a single segment for financial reporting purposes.~~

~~We seek~~the pandemic we began experiencing reduced procedure volumes in mid March which intensified through the early part of the second quarter. As economic activity has begun to ~~develop leading positions in regional markets in order~~ramp-up, our procedure volumes have returned to ~~leverage operational efficiencies. Our scale and density within selected geographies provides close, long-term relationships with key payors, radiology groups and referring physicians. Each~~approximately 90% of our ~~facility managers is responsible for managing relationships with local physicians~~pre-COVID-19 pace, from a low of 28% pre-COVID-19 volumes experienced in April 2020. Our experience has shown that lost imaging slots in one quarter are not made up within that period or in subsequent quarters. We continue to adapt our operations in response to the pandemic where needed and ~~payors, meeting our standards~~were successful in implementing such measures as concentration of patient ~~service~~traffic to larger imaging centers, negotiating payment terms with vendors and ~~maintaining profitability. We provide corporate training programs, standardized policies~~landlords, adjusting staff levels and ~~procedures and sharing of best practices among the physicians in our regional networks.~~telecommuting.

We derive substantially all of our revenue, directly or indirectly, from fees charged for the diagnostic imaging services performed at our facilities. The following table shows our facilities in operation and revenues for the ~~nine~~six months ended ~~September~~June 30, ~~2019~~2020 and ~~September~~June 30, ~~2018:~~2019:


	Nine Months Ended September 30,				Six Months Ended June 30,
	2019		2018		2020		2019
Facilities in operation	340		305		332		340
Net revenues (millions)	$	853.3	$	717.9	$	190.6	$	289.1

Our revenue is derived from a diverse mix of payors, including private payors, managed care capitated payors and government payors. 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. The Company’s total net revenues during the three and nine months ended September 30, 2019 and 2018 are presented in the table below based on an allocation of the estimated transaction price with the patient between the primary patient classification of insurance coverage (in thousands):

Three Months Ended September 30, Nine Months Ended September 30,
2019 2018 2019 2018
Commercial insurance $ 163,152
$ 135,445
$ 475,064
$ 397,193
Medicare 61,599
48,243
175,825
141,348
Medicaid 7,128
6,323
21,564
19,129
Workers' compensation/personal injury 10,865
8,810
32,950
25,714
Other patient revenue 6,085
6,205
17,947
18,318
Management fee revenue 1,792
3,615
5,662
11,237
Teleradiology and Software revenue 4,412
4,063
12,861
11,879
Other 6,875
4,848
20,878
16,318
Net service fee revenue 261,908
217,552
762,751
641,136
Revenue under capitation arrangements 30,784
24,596
90,587
76,799
Total net revenue $ 292,692
$ 242,148
$ 853,338
$ 717,935

We typically experience some seasonality to our ~~business.~~revenue stream. 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.

~~During~~The Company’s total net revenues during the ~~first quarter of 2018, unusually severe winter weather conditions in our northeastern~~three and ~~mid-Atlantic operations, which represent slightly over 50% of our total revenue, impacted significantly our operating results, and consequently~~

~~our results for the nine~~six months ended ~~September~~June 30, ~~2018. Based on our experience we do not believe that lost imaging slots in one quarter~~2020 and 2019 are ~~made up later~~presented in the ~~quarter or in subsequent quarters.~~table below based on an allocation of the estimated transaction price with the patient between the primary patient classification of insurance coverage (in thousands):



	Three Months Ended June 30,				Six Months Ended June 30,
	2020		2019		2020		2019
Commercial insurance	$	96,349	$	160,185	$	251,711	$	311,899
Medicare	35,082		60,151		92,587		114,280
Medicaid	4,300		7,295		10,980		14,423
Workers' compensation/personal injury	7,359		11,014		17,916		22,062
Other patient revenue	3,549		6,017		9,217		11,858
Management fee revenue	3,332		1,753		5,899		3,870
Teleradiology and Software revenue	2,200		4,063		5,971		8,449
Other	3,527		7,693		9,750		14,003
Net service fee revenue	155,698		258,171		404,031		500,844
Revenue under capitation arrangements	34,868		30,926		68,099		59,803
Total net revenue	$	190,566	$	289,097	$	472,130	$	560,647

Investment, Acquisition, and Joint Venture Activity

We have developed our medical imaging business through a combination of organic growth, equity investments, acquisitions and joint venture formations. The information below updates our activity of such matters contained in our annual report on Form 10-K for the year ended December 31, ~~2018.~~2019.

Equity Investments

As of June 30, 2020, we have three equity investments for which a fair value is not readily determinable and therefore the total amounts invested are recognized at cost as follows:

Medic Vision:

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

On March 24, 2017, we acquired an initial 12.5% equity interest in Medic Vision ~~Imaging Solutions Ltd~~ for $1.0 million. We also received an option to exercise warrants to acquire up to an additional 12.5% equity interest for $1.4 million within one year from the initial share purchase date, if exercised in full. On March 1, 2018 we exercised our warrant in part and acquired an additional 1.96% for ~~$200,000.~~$0.2 million. Our initial equity interest has been diluted to 12.25% and our total equity investment stands at 14.21%.

Turner Imaging:

WhiteRabbit.ai Inc:

WhiteRabbit.ai Inc., based in California, is currently developing an artificial intelligence suite which aims to improve the ~~nine months ended~~ ~~September~~speed and accuracy of cancer detection in radiology and improve patient care. On November 5, 2019 we acquired an equity interest in the company for $1.0 million and also loaned the company $2.5 million in support of its operations, the principal of which is due November 2022.

Facility acquisitions

On ~~August~~June 1, 2019 we completed a step-up acquisition upon the dissolution of our former 49% owned joint venture, Garden State Radiology LLC ("GSRN"). GSRN consisted of two multi-modality centers operating in New Jersey. GSRN became our wholly owned subsidiary with the withdrawal of the 51% majority partner for the full ownership of one center with no other consideration. We made a preliminary fair value determination of our original 49% interest which resulted in a step-up gain of $114,000. We determined a preliminary fair value of the remaining acquired imaging center of $1.9 million in assets and recorded $1,000 in other assets, $599,000 in fixed assets, $426,000 in right-of-use assets, $426,000 in operating lease liabilities, and $888,000 in goodwill.

approximately ~~$10.1~~$0.5 million in property and equipment, ~~$9.7~~$1.1 million in right-of-use assets, ~~$36,000 in other assets, $3,373,000~~$0.3 million in intangible assets, ~~$14.5~~$1.1 million in operating lease liabilities, $0.1 million in finance lease liabilities, and ~~$10.5~~$1.8 million in goodwill were recorded.

On ~~April 1, 2019~~January 2, 2020 we completed our acquisition of certain assets of ~~Zilkha Radiology Inc.~~Olney Open MRI, LLC, consisting of ~~two~~a single multi-modality ~~centers~~imaging center located in ~~Islip, New York~~Columbia, Maryland for ~~purchase~~ consideration of ~~$4.5~~$1.8 million. We have made a fair value determination of the acquired assets and assumed liabilities and approximately ~~$2.2~~$0.8 million in property and equipment, ~~$5.1~~$1.3 million in right-of-use assets, ~~$100,000~~$0.3 million in intangible assets, ~~$5.1~~$1.3 million in operating lease liabilities and ~~$2.6~~$0.6 million in goodwill were recorded.

Dispositions:

from the transaction. In connection with the acquisition, RadNet also settled against the purchase consideration, $2.8 million, net of taxes, of an unfavorable vendor contract with HVRA stemming from the previous acquisition of Radiologix, Inc. in November 2006.

~~On February 1, 2019 our majority owned subsidiary, West Valley Imaging Group, LLC ("WVIG") completed its acquisition~~sale of certain assets of ~~West Valley~~our Imaging ~~Center, LLC, consisting of a single multi-modality imaging center located in West Hills, CA~~On Call subsidiary to RadVantage P.C. (an unrelated corporation) for ~~purchase consideration of $3.0 million which was initially funded by~~approximately $1.0 thousand. With this transaction, we have exited the ~~Company. We have made a fair value determination of the acquired assets and approximately~~ ~~$300,000~~ ~~in equipment and fixed assets,~~ ~~$7,000~~ ~~in other assets,~~ ~~$200,000~~ in intangible assets and $2.5 million in goodwill were recorded. Subsequent to the transaction, our partner in WVIG, Cedars Sinai Medical Center, contributed $750,000 in cash to maintain its 25% economic interest in the venture.

~~Joint venture formations~~

On February 13, 2019 we formed a wholly owned subsidiary, Ventura County Imaging Group, LLC ("VCIG"). On March 1, 2019, Dignity Health joined as a venture partner. Total agreed contribution of both parties was $10.4 million of cash and assets with RadNet contributing $4.3 million in assets for a 60% economic interest and Dignity Health contributing $6.1 million in cash and assets for a 40% economic interest. For its contribution, RadNet transferred net assets of three wholly owned multi-modality imaging centers. Dignity Health contributed approximately $800,000 in assets to acquire 5% economic interest and paid RadNet $5.3 million for an additional 35% economic interest. We maintain controlling economic interest in VCIG and fully consolidates the results into our financial statements.

~~Sale of joint venture interest~~

On April 1, 2017, we formed in conjuncture with Cedars Sinai Medical Center (“CSMC”) the Santa Monica Imaging Group, LLC (“SMIG”), consisting of two multi-modality imaging centers located in Santa Monica, CA with RadNet holding a 40% economic interest and CSMC holding a 60% economic interest. RadNet accounts for our share of the venture under the equity method. On January 1, 2019, CSMC purchased from us an additional five percent economic interest in SMIG valued at ~~$134,000. As a result of the transaction, our economic interest in SMIG has been reduced to 35%. We recorded a loss of~~ ~~$2,000~~ ~~on the transaction.~~

~~Change in control of existing joint ventures:~~

Joint venture investment and financial information

The following table is a summary of our investment in joint ventures during the ~~nine~~six months ended ~~September~~June 30, ~~2019~~2020 (in thousands):

Balance as of December 31, 2018 $ 37,973
Equity in earnings in these joint ventures 6,072
Distribution of earnings (3,924 )
Sale of ownership interest (134 )
Dissolution of GSRN (1,427 )
Nulogix change in control (1,795 )
Equity contributions in existing joint ventures 103
Balance as of September 30, 2019 $ 36,868



Balance as of December 31, 2019	$	34,470
Equity in earnings in these joint ventures	2,900
Balance as of June 30, 2020	$	37,370

ended ~~September~~June 30, ~~2019~~2020 and ~~2018,~~2019, respectively. We eliminate any unrealized portion of our management service fees with our equity in earnings of joint ventures.


Balance Sheet Data:	September 30, 2019			December 31, 2018			June 30, 2020			December 31, 2019
Current assets	$	32,401		$	28,317		$	32,318		$	27,427
Noncurrent assets	62,564			45,912			67,307			61,037
Current liabilities	(9,383		)	(4,300		)	(10,677		)	(9,217		)
Noncurrent liabilities	(20,113		)	(4,898		)	(22,572		)	(18,872		)
Total net assets	$	65,469		$	65,031		$	66,376		$	60,375

Book value of RadNet joint venture interests	$	30,421		$	30,030		$	30,894		$	28,001
Cost in excess of book value of acquired joint venture interests	6,447			7,943			6,476			6,469
Total value of Radnet joint venture interests	$	36,868		$	37,973		$	37,370		$	34,470

Total book value of other joint venture partner interests	$	35,048		$	35,001		$	35,482		$	32,374


Income statement data for the nine months ended September 30,	2019		2018
Income statement data for the six months ended June 30, 2020					2020		2019
Net revenue	$	80,115	$	136,413	$	43,849	$	55,624
Net income	$	13,718	$	20,271	$	6,001	$	8,723

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 quarterly report and in our annual report on Form 10-K for the year ended December 31, ~~2018,~~2019, we discuss our significant accounting policies, including those that

do not require management to make difficult, subjective or complex judgments or estimates. The most significant areas involving management’s judgments and estimates are described below.

Revenues

Our revenues generally relate to net patient fees received from various ~~payers~~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 ~~payer~~payor (Medicare, Medicaid, managed care health plans and commercial insurance companies, including plans offered through the health insurance exchanges) and the transaction prices for the services provided are dependent upon the terms provided by (Medicare and Medicaid) or negotiated with (managed care health plans and commercial insurance companies) the third-party ~~payers.~~payors. The payment arrangements with third-party ~~payers~~payors for the services we provide to the related patients typically specify payments at amounts less than our standard charges and generally provide for payments based upon predetermined rates per diagnostic services or discounted fee-for-service rates. Management continually reviews the contractual estimation process to consider and incorporate updates to laws and regulations and the frequent changes in managed care contractual terms resulting from contract renegotiations and renewals.

As it relates to ~~BRMG and NY~~the Group, ~~centers,~~ this service fee revenue includes payments for both the professional medical interpretation revenue recognized by ~~BRMG and the NY Groups~~them 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~~other centers, this service fee revenue is earned through providing the use of our diagnostic imaging equipment and the provision of technical services as well as providing administration services such as clerical and administrative personnel, bookkeeping and accounting

services, billing and collection, provision of medical and office supplies, secretarial, reception and transcription services, maintenance of medical records, and advertising, marketing and promotional activities.

Our revenues are based upon the estimated amounts we expect to be entitled to receive from patients and third-party ~~payers.~~payors. Estimates of contractual allowances under managed care and commercial insurance plans are based upon historical collection experience of the ~~payment terms specified~~payments received from such payors in accordance with the ~~related~~underlying contractual agreements. Revenues related to uninsured patients and ~~uninsured~~ copayment and deductible amounts for patients who have health care coverage may have ~~discounts applied (uninsured discounts and contractual discounts).~~price concessions applied. We also record estimated implicit price concessions (based primarily on historical collection experience) related to uninsured accounts to record self-pay revenues at the estimated amounts we expect to collect.

Provider Relief Fund

In the second quarter of 2020, we received approximately $25.5 million in funding from The Provider Relief Fund, that offered government assistance to eligible providers throughout the healthcare system in support of certain expenses or lost revenue attributable to the coronavirus pandemic. Generally, the department of Health and Human Services ("HHS") does not intend to recoup funds as long as a provider's lost revenue and increased expenses exceed the amount of provider relief funding one has received. HHS reserves the right to audit Relief Fund recipients in the future to ensure that this requirement is met and collect any Relief Fund amounts that were made in error or exceed lost revenue or increased expenses due to the pandemic. Failure to comply with the terms and conditions may be grounds for recoupment.

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. Receivables generally are collected within industry norms for third-party payors. We continuously monitor collections from our payors and maintain an allowance for bad debts based upon specific payor collection issues that we have identified and our historical experience. In regards to the credit loss standard, our expectation is that the historical credit loss experienced across our receivable portfolio is materially similar to any current expected credit losses that would be estimated under the CECL model.

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, including tax planning strategies, in determining whether our net deferred tax assets are more likely than not to be realized.

Deferred ~~Financing Costs~~Revenue

~~Costs~~DEFERRED REVENUE - Deferred revenue represents liability for payments received for performance obligations which have yet to be satisfied and is offen associated with sales of ~~financing~~our eRad subsidiary. In April of 2020, we received approximately $39.4 million in advanced Medicare payments from the Centers for Medicare and Medicaid Services ("CMS") as part of the expanded Accelerated and Advance Payment Program under the Coronavirus Aid, Relief, and Economic Security (CARES) Act. As these payments are required to be repaid to CMS beginning 120 days after their receipt through offsets from new Medicare claims over a three month period, we have recorded amounts received to deferred ~~and~~revenue which will be amortized ~~using~~as Medicare reimbursements are earned. In addition, in May of 2020 we received $5.0 million in advance payments from an insurance carrier with similar repayment terms as the ~~effective interest rate method. Deferred financing costs, net of accumulated amortization, were $1.7 million and $1.4 million, as of~~ ~~September 30, 2019~~ ~~and~~ ~~December 31, 2018, respectively and related to our line of credit. See Note 6, Revolving Credit Facility, Notes Payable and Capital Lease Obligations for more information.~~CMS.

Property and Equipment

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

Business Combination

~~When~~

In January 2017, the ~~qualifications~~FASB issued ASU No. 2017-01 (“ASU 2017-01”), Clarifying the Definition of a Business. The update provides a framework for evaluating whether a transaction should be accounted for as an acquisition and/or disposal of a business versus assets. In order for a purchase to be considered an acquisition of a business, and receive business combination accounting treatment, the set of transferred assets and activities must include, at a minimum, an input and a substantive process that together significantly contribute to the ability to create outputs. If substantially all of the fair value of the gross assets acquired is concentrated in a single identifiable asset or a group of similar identifiable assets, then the set of transferred assets and activities is not a business. We first evaluate all purchases under this framework.

Once the purchase has been determined to be the acquisition of a business, we are ~~met, it requires us~~required 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.

~~Accounts Receivable~~

~~Depreciation and Amortization of Long-Lived Assets~~

We depreciate our long-lived assets over their estimated economic useful lives with the exception of leasehold improvements where we use the shorter of the assets useful lives or the lease term of the facility for which these assets are associated. We estimate the economic useful lives of assets, other than leasehold improvements, to be between 3 and 15 years depending on the type of asset.

~~Income Taxes~~

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, including tax planning strategies, in determining whether our net deferred tax assets are more likely than not to be realized.

Goodwill and Indefinite Lived Intangibles

Goodwill at ~~September~~June 30, ~~2019~~2020 totaled ~~$439.9~~$467.8 million. Indefinite Lived Intangible Assets at ~~September~~June 30, ~~2019~~2020 were ~~$11.9~~$11.3 million and are associated with the value of certain trade name intangibles. Goodwill and trade name intangibles are recorded as a result of business combinations. When we determine the carrying value of a reporting unit exceeds its fair value an impairment charge would be recognized and should not exceed the total amount of goodwill allocated to that reporting unit. We tested goodwill for impairment on October 1, ~~2018. During~~2019. In addition to the ~~review~~annual impairment test, we ~~noted our Teleradiology unit, Imaging On Call, (IOC), experienced a reduction~~regularly assess if an event has occurred which would require interim impairment testing. We considered the current and expected future economic and market conditions surrounding the novel strain of ~~professional medical group clients~~coronavirus ("COVID-19") pandemic and ~~a contract with a major local health provider during 2018. This affected its estimated fair value and resulted in~~did not identify an indication of goodwill impairment ~~charges to our the reporting unit of $3.9 million for the twelve months ended December 31, 2018, with goodwill representing $3.8 million of the total and the remainder~~ being ~~its trade name of approximately $100,000. We have~~more likely than not ~~identified any indicators of impairment~~ through ~~September~~June 30, ~~2019~~.2020.

Long-Lived Assets

We evaluate our long-lived assets (property and equipment) and intangibles, other than goodwill, for impairment whenever indicators of impairment exist. To evaluate the long-lived assets our management estimates the undiscounted future cash flows expected to be derived from the asset. The accounting standards require 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. No indicators of impairment were identified with respect to our long-lived assets as of ~~September~~June 30, ~~2019~~2020.

Depreciation and Amortization of Long-Lived Assets

Leases

We determine if an arrangement is a lease at inception. Operating leases are included in operating lease right-of-use (“ROU”) assets, current operating lease 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 right-of-use asset is recognized on a straight-line basis over the shorter of the estimated useful life of the asset or the lease term.ROU assets are tested for impairment if circumstances suggest that the carrying amount may not be recoverable. Our ROU assets consist of facility and equipment assets on operating leases. No events have occurred such as fire, flood, or other acts which have impaired the integrity of our ROU assets in 2020. Our facility leases require us to maintain insurance policies which would cover major damage to our facilities. We maintain business interruption insurance to cover loss of business due to a facility becoming non-operational under certain circumstances. Our equipment leases are covered by warranty and service contracts which cover repairs and provide regular maintenance to keep the equipment in functioning order.

Equity Based Compensation

We have one long-term incentive plan that we adopted in 2006 and which we first amended and restated as of April 20, 2015, and again on March 9, 2017 (the “Restated Plan”). The Restated Plan was approved by our stockholders at our annual stockholders meeting on June 8, 2017. We have reserved 14,000,000 shares of common stock for issuance under the Restated Plan ~~14,000,000 shares of common stock.~~. We can issue options, stock awards, stock appreciation rights, stock units and cash awards under the Restated Plan. Certain options granted under the Restated Plan to employees are intended to qualify as incentive stock options under existing tax regulations. Stock options and warrants generally vest over three to five years and expire five to ten years from date of grant. The compensation expense recognized for all equity-based awards is recognized over the awards’ service periods. Equity-based compensation is classified in operating expenses within the same line item as the majority of the cash compensation paid to employees. In connection with our acquisition of DeepHealth Inc. on June 1, 2020, we assumed the DeepHealth, Inc. 2017 Stock Incentive Plan, including outstanding options awards that can be exercised for our common stock. No additional awards will be granted under the DeepHealth, Inc. 2017 Equity Incentive Plan. See Note 4, Facility Acquisitions and Note 6, Stock-Based Compensation, for more information.

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. WeBased on current information, we do not believe that ~~the amount or any estimable range of~~ reasonably possible or probable ~~loss will not,~~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.

Recent Accounting Standards

See Note 3, Recent Accounting and Reporting Standards ~~for~~to the financial statements included in this report or further information.

~~thResults~~Results of Operations

The following table sets forth, for the three and ~~nine~~six months ended ~~September~~June 30, ~~2019~~2020 and ~~2018~~2019, the percentage that certain items in the statements of operations bears to total revenue, inclusive of revenue under capitation contracts.

RADNET, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(IN THOUSANDS EXCEPT SHARE DATA)

(unaudited)


	Three Months Ended September 30,				Nine Months Ended September 30,				Three Months Ended June 30,				Six Months Ended June 30,
	2019		2018		2019		2018		2020		2019		2020		2019
REVENUE
Service fee revenue	89.5	%	89.8	%	89.4	%	89.3	%	81.7	%	89.3	%	85.6	%	89.3	%
Revenue under capitation arrangements	10.5	%	10.2	%	10.6	%	10.7	%	18.3	%	10.7	%	14.4	%	10.7	%
Total revenue	100.0	%	100.0	%	100.0	%	100.0	%	100.0	%	100.0	%	100.0	%	100.0	%
Provider relief funding									13.4	%	—	%	5.4	%	—	%
OPERATING EXPENSES
Cost of operations, excluding depreciation and amortization	86.9	%	86.1	%	87.2	%	88.3	%	101.9	%	85.3	%	97.8	%	87.3	%
Depreciation and amortization	7.0	%	7.2	%	7.1	%	7.4	%	11.2	%	6.9	%	9.2	%	7.1	%
Loss (gain) on sale and disposal of equipment and other	0.3	%	(0.2	)%	0.2	%	(0.3	)%
(Gain) loss on sale and disposal of equipment and other									(0.3	)%	—	%	—	%	0.2	%
Severance costs	—	%	—	%	0.1	%	0.2	%	0.5	%	0.1	%	0.2	%	0.2	%
Total operating expenses	94.2	%	93.2	%	94.6	%	95.6	%	113.3	%	92.4	%	107.2	%	94.8	%

INCOME FROM OPERATIONS	5.8	%	6.8	%	5.4	%	4.4	%
INCOME (LOSS) FROM OPERATIONS									0.1	%	7.6	%	(1.8	)%	5.2	%

OTHER INCOME AND EXPENSES
Interest expense	4.1	%	4.4	%	4.3	%	4.4	%	5.7	%	4.3	%	4.7	%	4.4	%
Equity in earnings of joint ventures	(0.7	)%	(1.2	)%	(0.7	)%	(1.3	)%	(0.5	)%	(0.8	)%	(0.6	)%	(0.7	)%
Other expenses	—	%	—	%	0.1	%	—	%
Non-cash change in fair value of interest rate hedge									2.0	%	—	%	0.8	%	—	%
Other (income) expenses									(0.1	)%	0.4	%	—	%	0.2	%
Total other expenses	3.4	%	3.2	%	3.7	%	3.0	%	7.1	%	4.0	%	4.9	%	3.9	%
INCOME BEFORE INCOME TAXES	2.4	%	3.6	%	1.7	%	1.3	%
Provision for income taxes	(0.6	)%	(1.2	)%	(0.4	)%	(0.4	)%
NET INCOME	1.7	%	2.4	%	1.3	%	0.9	%
(LOSS) INCOME BEFORE INCOME TAXES									(7.1	)%	3.7	%	-6.7	%	1.3	%
Benefit from (provision for) income taxes									2.3	%	(1.0	)%	1.9	%	(0.3	)%
NET (LOSS) INCOME									(4.7	)%	2.6	%	-4.9	%	1.0	%
Net income attributable to noncontrolling interests	0.6	%	0.3	%	0.7	%	0.5	%	0.9	%	0.9	%	0.8	%	0.8	%
NET INCOME ATTRIBUTABLE TO RADNET, INC. COMMON STOCKHOLDERS	1.1	%	2.1	%	0.6	%	0.4	%
NET (LOSS) INCOME ATTRIBUTABLE TO RADNET, INC. COMMON STOCKHOLDERS									(5.6	)%	1.7	%	-5.6	%	0.2	%

We ~~grow~~have developed our medical imaging business through a combination of organic growth, ~~as well as~~equity investments, acquisitions and joint ~~ventures.~~venture formations. We have segregated some of our information to demonstrate which is attributable to

centers that were in operation through the entirety of the comparison

period, and which is attributable to those that were acquired or disposed of during the period. The discussion below shows a breakdown and analysis of revenue and expenses for the three and six months ended ~~September~~June 30, ~~2019~~2020 and ~~2018~~2019 for our operations at a total company and same center level. ~~For the discussion below, same centers are those centers that have been in continuous operation since July 1, 2018.~~

Three Months Ended ~~September~~June 30, ~~2019~~2020 Compared to the Three Months Ended ~~September~~June 30, ~~2018~~2019

Total Revenue inclusive of Provider Relief funding for 2020


In Thousands	Three Months Ended September 30,				Three Months Ended June 30,
Revenue	2019	2018	$ Increase/(Decrease)	% Change	2020	2019	$ Increase/(Decrease)	% Change
Total Revenue	$292,692	$242,148	$50,544	20.9%	$216,041	$289,097	$(73,056)	(25.3)%
Same Center Revenue	$251,079	$239,217	$11,862	5.0%	$214,082	$284,338	$(70,257)	(24.7)%

~~The rise~~Our nationwide operations were affected by the COVID-19 pandemic starting mid March 2020 which continued into the second quarter and resulted in an approximate 43% decrease in same center procedural volumes compared to the same period last year. Inclusive in the reported 2020 revenue ~~mainly resulted from increased procedure volumes~~is $25.5 million received in ~~advanced modalities~~Provider Relief funding, which, ~~have higher reimbursement rates.~~per the official designation of the program, was used to offset lost revenues. This comparison excludes revenue contributions from centers that were acquired or divested subsequent to ~~July~~April 1, ~~2018.~~2019. For the three months ended ~~September~~June 30, 2020, net service fee revenue from centers that were acquired or divested subsequent to April 1, 2019 and excluded from the above comparison was $2.0 million. For the three months ended June 30, 2019, net service fee revenue from centers that were acquired or divested subsequent to ~~July~~April 1, ~~2018~~2019 and excluded from the above comparison was $41.6 million. For the three months ended September 30, 2018, net service fee revenue from centers that were acquired or divested subsequent to July 1, 2018 and excluded from the above comparison was $2.9$4.8 million.

Operating Expenses

Total operating expenses for the three months ended ~~September~~June 30, ~~2019 increased~~2020 decreased approximately ~~$50.1~~$51.3 million, or ~~22.2%~~19.2%, from ~~$225.7~~$267.1 million for the three months ended ~~September~~June 30, ~~2018~~2019 to ~~$275.8~~$215.9 million for the three months ended ~~September~~June 30, ~~2019.~~2020. The following table sets forth our cost of operations and total operating expenses for the three months ended ~~September~~June 30, ~~2019~~2020 and ~~2018~~2019 (in thousands):


	Three Months Ended September 30,					Three Months Ended June 30,
	2019		2018			2020			2019
Salaries and professional reading fees, excluding stock-based compensation	$	160,757	$	133,303		$	111,794		$	156,441
Stock-based compensation	1,381		1,667			1,456			1,044
Building and equipment rental	26,850		22,162			26,549			26,938
Medical supplies	12,313		11,410			8,566			11,562
Other operating expenses *	53,082		39,969			45,852			50,573
Cost of operations	254,383		208,511			194,217			246,558

Depreciation and amortization	20,489		17,480			21,355			20,083
Loss (gain) on sale and disposal of equipment	917		(373		)
(Gain) loss on sale and disposal of equipment						(569		)	101
Severance costs	52		82			859			371
Total operating expenses	$	275,841	$	225,700		$	215,862		$	267,113

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

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


In Thousands	Three Months Ended September 30,				Three Months Ended June 30,
Salaries and Professional Fees	2019	2018	$ Increase/(Decrease)	% Change	2020	2019	$ Increase/(Decrease)	% Change
Total Salaries	$160,757	$133,303	$27,454	20.6%	$111,794	$156,441	$(44,647)	(28.5)%
Same Center Salaries	$141,781	$131,052	$10,729	8.2%	$110,376	$153,496	$(43,120)	(28.1)%

The ~~rise~~decrease in ~~same center~~ salaries expense was a result of staff furloughs and ~~professional fees was precipitated by higher physician cost due~~salary reductions initiated in response to ~~greater procedure volume~~the COVID-19 crisis. To support our current operations, certain of our subsidiaries have accepted approximately $4.0 million in loans from the Paycheck Protection Program (PPP). We have used the funds to pay program approved payroll expenses to both maintain and ~~added personnel and existing employee wage and benefit increases in support of operations.~~rehire furloughed employees. This comparison excludes expenses from centers that were acquired or divested subsequent to ~~July~~April 1, ~~2018.~~2019. For the three months ended ~~September~~June 30, 2020, salaries and professional reading fees from centers that were acquired or divested subsequent to April 1, 2019 and excluded from the above comparison was $1.4 million. For the three months ended June 30, 2019, salaries and professional reading fees from centers that were acquired or divested subsequent to ~~July~~April 1, 2018 and excluded from the above comparison was $19.0 million. For the three months ended September 30, 2018, salaries and professional reading fees from centers that were acquired or divested subsequent to July 1, 20182019 and excluded from the above comparison was approximately ~~$2.3~~$2.9 million.

Stock-based compensation

Stock-based compensation ~~decreased $286,700,~~increased $0.4 million, or ~~17.2%~~39.4% to approximately ~~$1.4~~$1.5 million for the three months ended ~~September~~June 30, ~~2019~~2020 compared to ~~$1.7~~$1.0 million for three months ended ~~September~~June 30, ~~2018.~~2019. This ~~decrease~~increase was driven by the ~~lower~~higher fair value of RSA’s awarded and vested in the ~~third~~first quarter of ~~2019~~2020 as compared to RSA’s awarded and vested in the prior year’s ~~third~~first quarter.

Building and equipment rental


In Thousands	Three Months Ended September 30,				Three Months Ended June 30,
Building & Equipment Rental	2019	2018	$ Increase/(Decrease)	% Change	2020	2019	$ Increase/(Decrease)	% Change
Total	$26,850	$22,162	$4,688	21.2%	$26,549	$26,938	$(390)	(1.5)%
Same Center	$23,153	$21,506	$1,646	7.7%	$25,639	$26,123	$(484)	(1.9)%

~~The increase in same center building and equipment rental expenses was related to a combination of new imaging center and radiology equipment leases to meet market demand and improve patient care.~~ This comparison excludes expenses from centers that were acquired or divested subsequent to ~~July~~April 1, ~~2018.~~2019. For the three months ended ~~September~~June 30, 2020, building and equipment rental expenses from centers that were acquired or divested subsequent to April 1, 2019 and excluded from the above comparison was $0.9 million. For the three months ended June 30, 2019, building and equipment rental expenses from centers that were acquired or divested subsequent to ~~July~~April 1, ~~2018~~2019 and excluded from the above comparison was ~~$3.7~~approximately $0.8 million.

Medical supplies



In Thousands	Three Months Ended June 30,
Medical Supplies Expense	2020	2019	$ Increase/(Decrease)	% Change
Total	$8,566	$11,562	$(2,996)	(25.9)%
Same Center	$8,513	$11,393	$(2,880)	(25.3)%

The reduced medical supplies expense correlated to lower procedure volumes and enabled medical supplies obtained in anticipation of pre-COVID-19 levels in the first quarter to be used throughout the second quarter. This comparison excludes expenses from centers that were acquired or divested subsequent to April 1, 2019. For the three months ended June 30, 2020, medical supplies expenses from centers that were acquired or divested subsequent to April 1, 2019 and excluded from the above comparison was $0.1 million. For the three months ended ~~September~~June 30, ~~2018,~~2019, medical supplies expense from centers that were acquired or divested subsequent to April 1, 2019 and excluded from the above comparison was $0.2 million.

Other operating expenses



In Thousands	Three Months Ended June 30,
Other Operating Expenses	2020	2019	$ Increase/(Decrease)	% Change
Total	$45,852	$50,573	$(4,721)	(9.3)%
Same Center	$45,332	$49,633	$(4,301)	(8.7)%

Other operating expenses decrease was related in part to contract re-negotiations offering improved rates from vendors across a range of services such as equipment repairs and maintenance, janitorial and billing. This comparison excludes expenses from centers that were acquired or divested subsequent to April 1, 2019. For the three months ended June 30, 2020, other operating expense from centers that were acquired or divested subsequent April 1, 2019 and excluded from the above comparison was $0.5 million. For the three months ended June 30, 2019, other operating expense from centers that were acquired or divested subsequent to April 1, 2019 was $0.9 million.

Depreciation and amortization



In Thousands	Three Months Ended June 30,
Depreciation & Amortization	2020	2019	$ Increase/(Decrease)	% Change
Total	$21,355	$20,083	$1,271	6.3%
Same Center	$20,784	$19,622	$1,162	5.9%

The increase in same center depreciation and amortization is primarily due to additional equipment and leasehold improvements placed in service in the second quarter in 2020 over the second quarter in 2019. This comparison excludes expenses from centers that were acquired or divested subsequent to April 1, 2019. For the three months ended June 30, 2020, depreciation expense from centers that were acquired or divested subsequent to April 1, 2019 and excluded from the above comparison was $0.6 million. For the three months ended June 30, 2019, depreciation and amortization from centers that were acquired or divested subsequent to April 1, 2019 and excluded from the above comparison was $0.5 million.

(Gain) loss on sale and disposal of equipment and other

We recorded a gain on the disposal of equipment and other items of approximately $0.6 million for the three months ended June 30, 2020 and a loss of approximately $0.1 million for the three months ended June 30, 2019.

Non-cash change in fair value of interest rate hedge

We recorded expense of $3.8 million for the ineffective portion of our 2019 Swaps for the three months ended June 30, 2020.

Other (income) expenses

We recorded other income of approximately $0.1 million for the three months ended June 30, 2020 and other expenses of approximately $1.3 million for the three months ended June 30, 2019 related to refinancing of our term loan debt and legal contingency charges.

Severance Costs

We incurred severance expenses of $0.9 million for the three months ended June 30, 2020 and $0.4 million for the three months ended June 30, 2019.

Interest expense



In Thousands	Three Months Ended June 30,
Interest Expense	2020	2019	$ Increase/(Decrease)	% Change
Total Interest Expense	$10,831	$12,399	$(1,568)	(12.6)%
Interest related to amortization*	$1,973	$1,109	$864	77.9%
Adjusted Interest Expense	$8,858	$11,290	$(2,432)	(21.5)%

*Includes combined non cash amortization of deferred loan costs, discount on issuance of debt and accumulated other comprehensive loss.

Excluding the non cash interest amounts for the three months ended June 30, 2020 compared to the three months ended June 30, 2019, interest expense decreased $2.4 million, or 21.5%. The reduction in interest expense corresponds to lowered variable LIBOR and Prime interest rates paid on our term loan and revolving debt in reaction to market conditions surrounding COVID-19. See “Liquidity and Capital Resources” below for more details on our credit facilities.

Equity in earnings from unconsolidated joint ventures

For the three months ended June 30, 2020 we recognized equity in earnings from unconsolidated joint ventures in the amount of $0.9 million and for three months ended June 30, 2019 we recognized equity in earnings from unconsolidated joint ventures of $2.2 million, an decrease of $1.3 million or (57.9)% related to the market conditions stemming from the COVID-19 pandemic.

Income tax benefit

We recorded an income tax benefit of $4.5 million, or an effective tax rate of 33.3%, for the three months ended June 30, 2020 compared to an income tax provision of $3.0 million , or an effective tax rate of 28.1% for the three months ended June 30, 2019. The income tax rates for the three and six months ended June 30, 2020 diverge from the federal statutory rate due to (i) noncontrolling interests due to the controlled partnerships; (ii) effects of state income taxes; and (iii) excess tax benefits attributable to share-based compensation.

Six Months Ended June 30, 2020 Compared to the Six Months Ended June 30, 2019

Total Revenue inclusive of Provider Relief funding for 2020



In Thousands	Six Months Ended June 30, 2020
Revenue	2020	2019	$ Increase/(Decrease)	% Change
Total Revenue	$497,605	$560,646	$(63,042)	(11.2)%
Same Center Revenue	$470,374	$536,203	$(65,829)	(12.3)%

Our procedure volumes were affected by the COVID-19 pandemic, a downward effect that continued into the second quarter and resulted in an approximate 23% decrease in same center procedural volumes year over year. Inclusive in the reported 2020 revenue is $25.5 million received in Provider Relief funding, which, per the official designation of the program, was used to offset lost revenues. This comparison excludes revenue contributions from centers that were acquired or divested subsequent to January 1, 2019. For the six months ended June 30, 2020, net service fee revenue from centers that were acquired or divested subsequent to January 1, 2019 and excluded from the above comparison was $27.2 million. For the six months ended June 30, 2019, net service fee revenue from centers that were acquired or divested subsequent to January 1, 2019 and excluded from the above comparison was $24.4 million.

Operating Expenses

Total operating expenses for the six months ended June 30, 2020 decreased approximately $25.2 million, or 4.7%, from $531.4 million for the six months ended June 30, 2020 to $506.2 million for the three months ended June 30, 2020. The following table sets forth our cost of operations and total operating expenses for the three months ended June 30, 2020 and 2019 (in thousands):



	Six Months Ended June 30, 2020
	2020		2019
Salaries and professional reading fees, excluding stock-based compensation	$	279,322	$	311,036
Stock-based compensation	8,078		5,583
Building and equipment rental	53,445		52,167
Medical supplies	21,314		21,400
Other operating expenses *	99,476		99,429
Cost of operations	461,635		489,615

Depreciation and amortization	43,289		39,704
Loss on sale and disposal of equipment	202		1,072
Severance costs	1,076		1,002
Total operating expenses	$	506,202	$	531,393

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

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



In Thousands	Six Months Ended June 30, 2020
Salaries and Professional Fees	2020	2019	$ Increase/(Decrease)	% Change
Total Salaries	$279,322	$311,036	$(31,714)	(10.2)%
Same Center Salaries	$265,517	$297,343	$(31,826)	(10.7)%

The decrease in salaries expense was a result of staff furloughs and salary reductions initiated in response to the COVID-19 crisis. To support our current operations, certain of our subsidiaries have accepted approximately $4.0 million in loans from the Paycheck Protection Program (PPP). We have used the funds to pay program approved payroll expenses to both maintain and rehire furloughed employees. This comparison excludes expenses from centers that were acquired or divested subsequent to January 1, 2019. For the six months ended June 30, 2020, salaries and professional reading fees from centers that were acquired or divested subsequent to January 1, 2019 and excluded from the above comparison was $13.8 million. For the six months ended June 30, 2019, salaries and professional reading fees from centers that were acquired or divested subsequent to January 1, 2019 and excluded from the above comparison was approximately $13.7 million.

Stock-based compensation

Stock-based compensation increased $2.5 million, or 44.7% to approximately $8.1 million for the six months ended June 30, 2020 compared to $5.6 million for six months ended June 30, 2019. This increase was driven by the higher fair value of RSA’s awarded and vested in the first half of 2020 as compared to RSA’s awarded and vested in the prior year’s first half.

Building and equipment rental



In Thousands	Six Months Ended June 30, 2020
Building & Equipment Rental	2020	2019	$ Increase/(Decrease)	% Change
Total	$53,445	$52,167	$1,278	2.5%
Same Center	$52,167	$48,642	$515	1.1%

This comparison excludes expenses from centers that were acquired or divested subsequent to January 1, 2019. For the six months ended June 30, 2020, building and equipment rental expenses from centers that were acquired or divested subsequent to ~~July~~January 1, ~~2018~~2019 and excluded from the above comparison was $4.3 million. For the six months ended June 30, 2019, building and equipment rental expenses from centers that were acquired or divested subsequent to January 1, 2019 and excluded from the above comparison was approximately ~~$0.7~~$3.5 million.

Medical supplies


In Thousands	Three Months Ended September 30,				Six Months Ended June 30, 2020
Medical Supplies Expense	2019	2018	$ Increase/(Decrease)	% Change	2020	2019	$ Increase/(Decrease)	% Change
Total	$12,313	$11,410	$903	7.9%	$21,314	$21,400	$(86)	(0.4)%
Same Center	$9,984	$11,132	$(1,148)	(10.3)%	$19,201	$19,744	$(543)	(2.8)%

~~Same center~~Year over year medical supplies expense ~~decreased as~~remained relatively flat due to varying factors. In the first quarter, we noted a ~~result~~21% same store increase stemming from securing personal protective equipment and procurement of ~~renegotiation~~specialized imaging agents. While in the second quarter, a 25% same store expense reduction was correlated to lower procedural volumes. The cumulative effect of these factors has resulted in the year over year stability of medical ~~supply contracts along with improved inventory management procedures.~~supplies expense. This comparison excludes expenses from centers that were acquired or divested subsequent to ~~July~~January 1, ~~2018.~~2019. For the ~~three~~six months ended ~~September~~June 30, ~~2019,~~2020, medical supplies expenses from centers that were acquired or divested subsequent to April 1, 2018 and excluded from the above comparison was ~~$2.3~~$2.1 million. For the ~~three~~six months ended ~~September~~June 30, ~~2018,~~2019, medical supplies expense from centers that were acquired or divested subsequent to ~~July~~January 1, ~~2018~~2019 and excluded from the above comparison was ~~$278,100.~~$1.7 million.

Other operating expenses


In Thousands	Three Months Ended September 30,				Six Months Ended June 30, 2020
Other Operating Expenses	2019	2018	$ Increase/(Decrease)	% Change	2020	2019	$ Increase/(Decrease)	% Change
Total	$53,082	$39,969	$13,114	32.8%	$99,476	$99,429	$46	0.1%
Same Center	$44,576	$39,173	$5,403	13.8%	$95,384	$95,112	$272	0.3%

~~Other operating expenses on a same center basis rose in part due to expense timing and additional utilities and outside services charges stemming from increased procedural volumes.~~ This comparison excludes expenses from centers that were acquired

or divested subsequent to ~~July~~January 1, ~~2018.~~2019. For the ~~three~~six months ended ~~September~~June 30, 2020, other operating expense from centers that were acquired or divested subsequent January 1, 2019 and excluded from the above comparison was $4.1 million. For the six months ended June 30, 2019, other operating expense from centers that were acquired or divested subsequent ~~July~~to January 1, ~~2018 and excluded from the above comparison~~2019 was ~~$8.5 million. For the three months ended September 30, 2018, other operating expense from centers that were acquired or divested subsequent to July 1, 2018 was $0.8~~$4.3 million.

Depreciation and amortization


In Thousands	Three Months Ended September 30,				Six Months Ended June 30, 2020
Depreciation & Amortization	2019	2018	$ Increase/(Decrease)	% Change	2020	2019	$ Increase/(Decrease)	% Change
Total	$20,489	$17,480	$3,011	17.2%	$43,289	$39,704	$3,585	9.0%
Same Center	$16,346	$17,215	$(869)	(5.0)%	$40,593	$37,721	$2,872	7.6%

The ~~decrease~~increase in same center depreciation and amortization is primarily due to ~~several of our assets completing their depreciation schedules subsequent to the end of~~additional equipment and leasehold improvements placed in service in the first ~~quarter~~half of 2020 over the first half 2019. This comparison excludes expenses from centers that were acquired or divested subsequent to ~~July~~January 1, ~~2018.~~2019. For the ~~three~~six months ended ~~September~~June 30, ~~2019,~~2020, depreciation expense from centers that were acquired or divested subsequent to ~~July~~January 1, ~~2018~~2019 and excluded from the above comparison was ~~$4.1~~$2.7 million. For the ~~three~~six months ended ~~September~~June 30, ~~2018,~~2019, depreciation and amortization from centers that were acquired or divested subsequent to ~~July~~January 1, ~~2018~~2019 and excluded from the above comparison was ~~$264,200.~~$2.0 million.

~~Gain~~(Gain) loss on sale and disposal of equipment and other

We recorded ~~a loss~~losses on the disposal of equipment and other items of approximately ~~$917,200~~$0.2 million for the ~~three~~six months ended ~~September~~June 30, ~~2018~~2020 and approximately ~~$373,300~~$1.1 million for the ~~three~~six months ended ~~September~~June 30, ~~2018.~~2019.

Non-cash change in fair value of interest rate hedge

We recorded expense of $3.8 million for the ineffective portion of our 2019 Swaps for the six months ended June 30, 2020.

Other (income) expenses

We recorded other income of approximately $0.1 million for the six months ended June 30, 2020 and other expenses of approximately $1.3 million for the six months ended June 30, 2019 related to refinancing of our term loan debt and legal contingency charges.

Severance Costs

We incurred severance expenses of ~~$52,400~~$1.1 million for the ~~three~~six months ended ~~September~~June 30, ~~2019~~2020 and ~~$82,300~~$1.0 million for the ~~three~~six months ended ~~September~~June 30, ~~2018.~~2019.

Interest expense


In Thousands	Three Months Ended September 30,				Six Months Ended June 30, 2020
Interest Expense	2019	2018	$ Increase/(Decrease)	% Change	2020	2019	$ Increase/(Decrease)	% Change
Total Interest Expense	$11,895	$10,663	$1,232	11.6%	$22,382	$24,694	$(2,312)	(9.4)%
Non Cash Interest*	$1,109	$977	$132	13.5%
Interest related to amortization*					$3,055	$2,021	$1,034	51.2%
Adjusted Interest Expense	$10,786	$9,686	$1,100	11.4%	$19,327	$22,673	$(3,346)	(14.8)%

*Includes combined non cash amortization of deferred loan costs, discount on issuance of debt and ~~incidental financing charges.~~accumulated other comprehensive loss.

Excluding the non cash interest amounts for the ~~three~~six months ended ~~September~~June 30, ~~2019~~2020 compared to the ~~three~~six months ended ~~September~~June 30, ~~2018,~~2019, interest expense ~~increased $1.1~~decreased $3.3 million, or ~~11.4%~~14.8%. The ~~main drivers behind the increase were the~~reduction in interest ~~payments~~expense corresponds to lowered variable LIBOR and Prime interest rates paid on ~~assumed debt of the New Jersey Imaging Network and the additional~~our term loan and revolving debt ~~stemming from the Sixth Amendment~~in reaction to ~~the First Lien Term Loan.~~market conditions surrounding COVID-19. See “Liquidity and Capital Resources” below for more details on our credit facilities.

Equity in earnings from unconsolidated joint ventures

For the ~~three~~six months ended ~~September~~June 30, ~~2019~~2020 we recognized equity in earnings from unconsolidated joint ventures in the amount of ~~$2.0~~$2.9 million and for ~~three~~six months ended ~~September~~June 30, ~~2018~~2019 we recognized equity in earnings from unconsolidated joint ventures of ~~$2.8~~$4.1 million, aan decrease of ~~$867,400~~$1.2 million or ~~30.7%. The decrease was a result of~~29.6%, related to the ~~New Jersey Imaging Networks becoming a fully consolidated entity in October of 2018.~~market conditions stemming from COVID-19.

~~Provision for income taxes~~

Income tax benefit

We recorded an income tax ~~expense~~benefit of ~~$1.8~~$8.9 million, or an effective tax rate of ~~26.3%~~27.8%, for ~~three~~the six months ended ~~September~~June 30, ~~2019~~2020 compared to an income tax ~~expense for the three months ended September 30, 2018~~provision of ~~$2.8~~$1.7 million , or an effective tax rate of ~~32.9%.~~23.5% for the six months ended June 30, 2019. The income tax rates for the three and six months ended ~~September~~June 30, ~~2019~~2020 diverge from the federal statutory rate due to (i) noncontrolling interests due to the controlled partnerships; (ii) effects of state income taxes; and (iii) excess tax benefits attributable to share-based ~~compensation; and adjustment associated with uncertain tax positions.~~

The discussion below shows a breakdown and analysis of revenue and expenses for the nine months ended September 30, 2019 and 2018 for our operations at a total company and same center level. For the purposes of this discussion, same centers are those centers that have been in continuous operation since January 1, 2018.

~~Nine Months Ended September 30, 2019 Compared to the Nine Months Ended September 30, 2018~~

~~Total Net Revenue~~

In Thousands Nine Months Ended September 30,
2019 2018 $ Increase/(Decrease) % Change
Total Revenue $853,278 $717,935 $135,343 18.9%
Same Center Revenue $719,692 $697,273 $22,419 3.2%

Higher same center revenue experienced for the period resulted from increased procedure volume of advanced radiology modalities, improvement of equipment utilization and increased capitation revenue over the same period last year. We benefited from better weather in the first quarter of 2019, compared to 2018 where inclement weather impacted our procedure volumes. This comparison excludes revenue contributions from centers that were acquired or divested subsequent to January 1, 2018. For the nine months ended September 30, 2019, total net revenue from centers that were acquired or divested subsequent to January 1, 2018 and excluded from the above comparison was $133.6 million. For the nine months ended September 30, 2018, revenue under capitation arrangements from centers that were acquired or divested subsequent to January 1, 2018 and excluded from the above comparison was $20.7 million.

~~Operating Expenses~~

Cost of operations for the nine months ended September 30, 2019 increased approximately $120.7 million, or 17.6%, from $686.5 million for the nine months ended September 30, 2018 to $807.2 million for the nine months ended September 30, 2019. The following table sets forth our cost of operations and total operating expenses for the nine months ended September 30, 2019 and 2018 (in thousands):

Nine Months Ended
September 30,
2019 2018
Salaries and professional reading fees, excluding stock-based compensation $ 471,792
$ 403,569
Stock-based compensation 6,964
6,558
Building and equipment rental 78,957
65,393
Medical supplies 33,713
29,193
Other operating expenses *
152,512
129,487
Cost of operations 743,938
634,200

Depreciation and amortization 60,193
53,422
Loss (gain) on sale and disposal of equipment 1,990
(2,204 )
Severance costs 1,054
1,087
Total operating expenses $ 807,175
$ 686,505

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

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

In Thousands Nine Months Ended September 30,
Salaries and Professional Fees 2019 2018 $ Increase/(Decrease) % Change
Total Salaries $471,792 $403,569 $68,223 16.9%
Same Center Salaries $410,504 $391,723 $18,781 4.8%

Of the rise in same center salaries and professional fees of 4.8%, 1.2% was precipitated by increased physician cost due to greater procedure volume and the remainder related to added personnel and existing employee wage and benefit increases in support of operations. This comparison excludes expenses from centers that were acquired or divested subsequent to January 1, 2018. For the nine months ended September 30, 2019, salaries and professional reading fees from centers that were acquired or divested subsequent to January 1, 2018 and excluded from the above comparison was $61.3 million. For the nine months ended September 30, 2018, salaries and professional reading fees from centers that were acquired or divested subsequent to January 1, 2018 and excluded from the above comparison was approximately $11.8 million.

~~Stock-based compensation~~

Stock-based compensation increased $406,000, or 13.4%, to approximately $7.0 million for the nine months ended September 30, 2019 compared to $6.6 million for the nine months ended September 30, 2018. This increase was driven by the higher fair value of RSA’s awarded and vested in the first nine months of 2019 as compared to RSA’s awarded and vested in the same period in 2018.

~~Building and equipment rental~~

In Thousands Nine Months Ended September 30,
Building & Equipment Rental 2019 2018 $ Increase/(Decrease) % Change
Total $78,957 $65,393 $13,564 20.7%
Same Center $66,120 $61,809 $4,311 7.0%

The increase in same center building and equipment rental expenses relates to additional new imaging center and radiology equipment leases to support expanding operations. This comparison excludes expenses from centers that were acquired or divested subsequent to January 1, 2018. For the nine months ended September 30, 2019, building and equipment rental expenses from centers that were acquired or divested subsequent to January 1, 2018 and excluded from the above comparison was $12.8 million. For the nine months ended September 30, 2018, building and equipment rental expenses from centers that were acquired or divested subsequent to January 1, 2018 and excluded from the above comparison was approximately $3.6 million.

~~Medical supplies~~

In Thousands Nine Months Ended September 30,
Medical Supplies Expense 2019 2018 $ Increase/(Decrease) % Change
Total $33,713 $29,193 $4,520 15.5%
Same Center $27,313 $27,736 $(423) (1.5)%

Same center medical supplies decrease was attributable to renegotiation of medical supply contracts with more favorable pricing. This comparison excludes expenses from centers that were acquired or divested subsequent to January 1, 2018. For the nine months ended September 30, 2019, medical supplies expenses from centers that were acquired or divested subsequent to January 1, 2018 and excluded from the above comparison was $6.4 million. For the nine months ended September 30, 2018,

~~medical supplies expense from centers that were acquired or divested subsequent to January 1, 2018 and excluded from the above comparison was $1.5 million.~~

~~Other operating expenses~~

In Thousands Nine Months Ended September 30,
Other Operating Expenses 2019 2018 $ Increase/(Decrease) % Change
Total $152,512 $129,487 $23,025 17.8%
Same Center $125,974 $125,578 $396 0.3%

This comparison excludes expenses from centers that were acquired or divested subsequent to January 1, 2018. For the nine months ended September 30, 2019, other operating expense from centers that were acquired or divested subsequent to January 1, 2018 and excluded from the above comparison was $26.5 million. For the nine months ended September 30, 2018, other operating expense from centers that were acquired or divested subsequent to January 1, 2018 was $3.9 million.

~~Depreciation and amortization~~

In Thousands Nine Months Ended September 30,
Depreciation & Amortization 2019 2018 $ Increase/(Decrease) % Change
Total $60,193 $53,422 $6,772 12.7%
Same Center $48,043 $51,788 $(3,744) (7.2)%

The decrease in same center depreciation and amortization is primarily due to several of our assets completing their depreciation schedules subsequent to the end of our fourth quarter of 2018. This comparison excludes expenses from centers that were acquired or divested subsequent to January 1, 2018. For the nine months ended September 30, 2019, depreciation expense from centers that were acquired or divested subsequent to January 1, 2018 and excluded from the above comparison was $12.2 million. For the nine months ended September 30, 2018, depreciation and amortization from centers that were acquired or divested subsequent to January 1, 2018 and excluded from the above comparison was $1.6 million.

~~Gain and loss on sale and disposal of equipment and other items~~

We recorded a loss on sale and disposal of equipment and other items of approximately $2.0 million for the nine months ended September 30, 2019 and a gain on the sale of equipment and other items of approximately $2.2 million for the nine months ended September 30, 2018.

~~Severance Costs~~

~~We incurred severance expenses of $1.1 million for each of the nine months ended September 30, 2019 and September 30, 2018.~~

~~Interest expense~~

In Thousands Nine Months Ended September 30,
Interest Expense 2019 2018 $ Increase/(Decrease) % Change
Total Interest Expense $36,589 $31,343 $5,246 16.7%
Non Cash Interest* $3,103 $2,932 $171 5.8%
Adjusted Interest Expense $33,486 $28,411 $5,075 17.9%

*Includes combined non cash amortization of deferred loan costs, discount on issuance of debt and incidental financing charges.

Excluding the non cash interest amounts for the nine months ended September 30, 2019 compared to the nine months ended September 30, 2018, interest expense increased $5.1 million, or 17.9%. The main drivers behind the increase were the interest payments on assumed debt of the New Jersey Imaging Network and the additional term loan debt stemming from the Sixth Amendment to the First Lien Term Loan. See “Liquidity and Capital Resources” below for more details on our credit facilities.

To mitigate our future interest expense exposure the Company has entered into two forward interest rate cap agreements. See Derivative Instruments section of Note 2 to the consolidated condensed financial statements contained herein and ITEM 3. Quantitative and Qualitative Disclosure About Market Risk below for more details on our derivative transactions.

~~Equity in earnings from unconsolidated joint ventures~~

For the nine months ended September 30, 2019 we recognized equity in earnings from unconsolidated joint ventures of $6.1 million versus $9.5 million for the nine months ended September 30, 2018, a decrease of $3.5 million or 36.4%, as a result of the New Jersey Imaging Networks becoming a fully consolidated entity in October of 2018.

~~Other Income/Expenses~~

~~We incurred other expenses of $1.3 million for the nine months ended September 30, 2019 due to expenses in amending our term loan debt and legal contingency charges.~~

~~Provision for income taxes~~

We had a tax provision for the nine months ended September 30, 2019 of $3.6 million or 24.8% of income before income taxes, compared to a tax provision for the nine months ended September 30, 2018 of $2.8 million or 29.5% of income before income taxes. The income tax rates for the nine months ended September 30, 2019 diverge from the federal statutory rate due to (i) noncontrolling interests due to the controlled partnerships; (ii) effects of state income taxes; (iii) excess tax benefits attributable to share-based compensation; and adjustment associated with uncertain tax positions.compensation.

Adjusted EBITDA

We use both GAAP and non-GAAP metrics to measure our financial results. We believe that, in addition to GAAP metrics, these non-GAAP metrics assist us in measuring our cash generated from operations and ability to service our debt obligations. We believe this information is useful to investors and other interested parties because we are highly leveraged and our non-GAAP metrics remove non-cash and certain other charges that occur in the affected period and provide a basis for measuring the Company's financial condition against other quarters.

One non-GAAP measure we believe assists us is Adjusted EBITDA. We define Adjusted EBITDA as earnings before interest, taxes, depreciation and amortization, each from continuing operations and excluding losses or gains on the disposal of equipment, other income or loss, loss on debt extinguishment, bargain purchase gains and non-cash equity compensation. Adjusted EBITDA includes equity earnings in unconsolidated operations and subtracts allocations of earnings to noncontrolling interests in subsidiaries, and is adjusted for non-cash or extraordinary and one-time events taking place during the period. We have not made specific adjustments to our calculation of Adjusted EBITDA in response to COVID 19. Our net income reflected below includes the effect of the $25 million in other revenue received under the Provider Relief Fund. We have treated the PPP loans as

debt, and accordingly will be liable for an interest charge related to those loans which will be included in interest expense, although the loans may ultimately be forgiven.

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. 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. As Adjusted EBITDA is not a measurement determined in accordance with GAAP and is therefore susceptible to varying methods of calculation, this metric, as presented, may not be comparable to other similarly titled measures of other companies.

Adjusted EBITDA is most comparable to the GAAP financial measure, net income (loss) attributable to RadNet, Inc. common stockholders. The following is a reconciliation of GAAP net income (loss) attributable to RadNet, Inc. common stockholders to Adjusted EBITDA for the three and ~~nine~~six months ended ~~September~~June 30, ~~2019~~2020 and ~~2018,~~2019, respectively.


	Three Months Ended September 30,					Nine Months Ended September 30,					Three Months Ended June 30,					Six Months Ended June 30,
	2019		2018			2019		2018			2020			2019		2020			2019
Net income (loss) attributable to RadNet, Inc. common stockholders	$	3,195	$	5,039		$	4,360	$	3,107
Provision for income taxes	1,816		2,827			3,557		2,835
Net loss attributable to RadNet, Inc. common stockholders											$	(10,594	)	$	4,899	$	(26,952	)	$	1,165
Benefit from income taxes											(4,475		)	2,969		(8,856		)	1,740
Interest expense	11,895		10,663			36,589		31,343			10,831			12,399		22,382			24,694
Severance costs	52		82			1,054		1,087			859			371		1,076			1,002
Depreciation and amortization	20,490		17,480			60,193		53,422			21,355			20,083		43,289			39,703
Non-cash employee stock-based compensation	1,381		1,667			6,964		6,557			1,456			1,044		8,078			5,583
Loss (gain) on sale and disposal of equipment	917		(373		)	1,990		(2,204		)
Loss on sale and disposal of equipment and other											(569		)	101		202			1,072
Non-cash change in fair value of interest rate hedge											3,843			—		3,843			—
Other expenses	2		7			1,271		13			(115		)	1,269		(108		)	1,269
Legal settlements	1,248		—			1,248		—
Transaction costs EmblemHealth/ACP	—		681			—		681
Gain on sale of equipment attributable to noncontrolling interest								440
Adjusted EBITDA	$	40,996	$	38,073		$	117,225	$	97,281		$	22,591		$	43,135	$	42,954		$	76,228

Liquidity and Capital Resources

The following table is a summary of key balance sheet data as of ~~September~~June 30, ~~2019~~2020 and December 31, ~~2018~~2019 and income statement data for the ~~nine~~six months ended ~~September~~June 30, ~~2019~~2020 and ~~2018~~2019 (in thousands):


Balance Sheet Data:	September 30, 2019			December 31, 2018			June 30, 2020			December 31, 2019
Cash and cash equivalents	$	37,688		$	10,389		$	84,583		$	40,165
Accounts receivable	150,748			148,919			125,745			154,763
Working capital (exclusive of current operating lease liabilities)	(489		)	(30,827		)	(69,473		)	(25,048		)
Stockholders' equity	215,072			200,253			233,256			233,139

Income statement data for the nine months ended September 30, 2019 2018
Total net revenue $ 853,338
$ 717,935
Net income (loss) attributable to RadNet common stockholders 4,360
3,107



Income statement data for the six months ended June 30,	2020			2019
Total net revenue	$	472,130		$	560,647
Net (loss) income attributable to RadNet common stockholders	(26,952		)	1,165

We operate in a capital intensive, high fixed-cost industry that requires significant amounts of capital to fund operations. In addition to operations, we require a significant amount of capital for the initial start-up and development of new diagnostic imaging facilities, the acquisition of additional facilities and new diagnostic imaging equipment. Because our cash flows from operations have been insufficient to fund all of these capital requirements, we have depended on the availability of financing under credit arrangements with third parties.

~~Based on~~As noted in our forward looking statements, the COVID 19 pandemic has resulted in a reduction of procedure volumes and corresponding operating revenues. We are uncertain of the duration and ultimate severity of its effects. Although we are

undertaking measures to reduce operating expenses and have received government stimulus funding, we may continue to experience operating losses. We have credit available from our current ~~level of operations, we believe that cash flow from operations and available cash, together with available borrowings from our senior secured~~ credit facilities ~~will be adequate to meet our 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,~~borrowing under those facilities is subject to ~~future economic conditions~~continued compliance with lending covenants. We currently meet those requirements, but substantial and sustained operating losses could impact our ability to ~~financial, business and other factors, many of which are beyond our control.~~borrow under those facilities. If we are not able to meet such requirements, we may be required to seek additional ~~financing. There~~financing and there can be no assurance that we will be able to obtain financing from other sources on terms acceptable to us, if at all.

On a continuing basis, we also consider various transactions to increase shareholder value and enhance our business results, including acquisitions, divestitures and joint ventures. These types of transactions may result in future cash proceeds or payments but the general timing, size or success of any acquisition, divestiture or joint venture effort and the related potential capital commitments cannot be predicted. We expect to fund any future acquisitions 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 sole discretion, 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.

Sources and Uses of Cash

The following table summarizes key components of our sources and uses of cash for the ~~nine~~six months ended ~~September 2019~~June 30, 2020 and ~~2018:~~2019:


Cash Flow Data	September 30, 2019			September 30, 2018			June 30, 2020			June 30, 2019
Cash provided by operating activities	$	82,603		$	87,858		$	131,465		$	44,535
Cash used in investing activities	(93,981		)	(81,601		)	(67,602		)	(76,845		)
Cash provided by (used in) financing activities	38,705			(30,287		)
Cash (used in) provided by financing activities							(19,439		)	52,430

Cash provided by operating activities for the ~~nine~~six months ended ~~September~~June 30, ~~2019~~2020 was $~~82.6~~131.5 million and ~~$87.9~~$44.5 million for the ~~nine~~six months ended ~~September~~June 30, ~~2018 .~~2019.

Cash used in investing activities for the ~~nine~~six months ended ~~September~~June 30, ~~2019,~~2020, included purchases of property and equipment for approximately ~~$68.3~~$64.2 million and the acquisition of imaging facilities for ~~$27.2~~$4.2 million.

Cash ~~provided by~~used in financing activities for the ~~nine~~six months ended ~~September~~June 30, ~~2019,~~2020, was ~~mainly~~ due to ~~our additional term loan debt issuance of April 18, 2019, offset by~~principal payments on our term loan and ~~revolving credit facility borrowings.~~equipment debt.

Senior Secured Credit Facilities

At ~~September~~June 30, ~~2019,~~2020, our credit facilities were comprised of one tranche of term loans (“First Lien Term Loans”) and a revolving credit facility of $137.5 million (the “Barclays Revolving Credit Facility”), both of which are provided pursuant to the Amended and Restated First Lien Credit and Guaranty Agreement dated as of July 1, 2016 (as amended, the “First Lien Credit Agreement”).

Included in our condensed consolidated balance sheets at ~~September~~June 30, ~~2019~~2020 are ~~$716.5~~$684.1 million of total term loan debt ~~(net~~(exclusive of unamortized discounts of ~~$14.5~~$11.6 million) in thousands:


	Face Value		Discount			Total Carrying Value		Face Value		Discount			Total Carrying Value
First Lien Term Loans	$	659,522	$	(14,549	)	$	644,973	$	630,426	$	(11,639	)	$	618,787
SunTrust Term Loan	57,000		—			57,000		53,625		—			53,625
Total Term Loans	$	716,522	$	(14,549	)	$	701,973	$	684,051	$	(11,639	)	$	672,412

We had no balance under our $137.5 million Barclays Revolving Credit Facility at ~~September~~June 30, ~~2019~~2020 and have reserved against the borrowing capacity ~~$5.9~~$6.3 million for certain letters of credit. The remaining ~~$131.7~~$131.2 million of our Barclays Revolving Credit Facility was available to draw upon as of ~~September~~June 30, ~~2019.~~2020. We had no balance under our $30.0 million Suntrust Revolving Credit Facility at ~~September~~June 30, ~~2019.~~2020.

For more information on our secured credit facilities see Note ~~6 in~~5 to our condensed consolidated financial statements in this quarterly report.

ITEM 3. Quantitative and Qualitative Disclosures about Market Risk

Foreign Currency Exchange Risk: We receive payment for our services exclusively in United States dollars. As a result, our financial results are unlikely to be affected by factors such as changes in foreign currency, exchange rates or weak economic conditions in foreign markets.

We maintain research and development facilities 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. At the present time, we do not have any foreign currency exchange contracts to mitigate this risk. At ~~September~~June 30, ~~2019,~~2020, a hypothetical 1% decline in the currency exchange rates between the U.S. dollar against the Canadian dollar and the Hungarian Forint would have resulted in an annual increase of approximately ~~$30,500~~$28,000 in operating expenses.

Interest Rate Sensitivity: 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 due to our purchase of caps, described below, the effects of interest rate changes are limited.

Interest Rate Sensitivity Barclays First Lien Term Loans

At ~~September~~June 30, ~~2019,~~2020, we had ~~$659.5~~$630.4 million outstanding subject to an adjusted Eurodollar election on First Lien Term Loans. We can elect Eurodollar or 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%. At ~~September~~June 30, ~~2019,~~2020, our effective 36 month LIBOR was ~~2.33%~~1.00%. The 2016 Caps have a notional amount of $150,000,000 and $350,000,000 and will mature in September and October 2020. We are liable for a $5.3 million premium to enter into the 2016 Caps which is being accrued over the life of the instrument. See Note 2, Significant Accounting Policies, for further information.

A hypothetical 1% increase in the adjusted Eurodollar rates under the First Lien Credit Agreement over the ~~rates experienced in 2018~~current Eurodollar rate would ~~after considering the effects of the 2016 Caps,~~ result in an increase of ~~$1.6~~$6.3 million in annual interest expense and a corresponding decrease in income before taxes. ~~At September 30, 2019, an additional $9.7 million in debt instruments is tied to the prime rate. A hypothetical 1% increase in the prime rate would result in an annual increase in interest expense of~~

approximately $96,990 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.

Interest Rate Sensitivity SunTrust Term Loan

At ~~September~~June 30, ~~2019,~~2020, we had ~~$57.0~~$54.8 million outstanding subject to an adjusted Eurodollar election on the SunTrust Restated Credit Agreement. We can elect Eurodollar or Base Rate (Prime) interest rate options on amounts outstanding under the SunTrust Restated Credit Agreement.

At ~~September~~June 30, ~~2019,~~2020, our effective LIBOR rate plus applicable margin was ~~4.10%~~3.45%. A hypothetical 1% increase in the adjusted Eurodollar rates under the SunTrust Restated Credit Agreement would result in an increase of approximately ~~$570,000~~$0.5 million in annual interest expense and a corresponding decrease in income before taxes. No amounts are tied to the prime rate under the SunTrust Restated Agreement.

ITEM 4. Controls and Procedures

Evaluation of Disclosure Controls and Procedures

We maintain controls and procedures designed to ensure that we are able to collect the information we are required to disclose in the reports we file with the SEC, and to process, summarize and disclose this information within the time periods specified in the rules of the SEC. Our management, with the participation of our Chief Executive Officer and our Chief Financial Officer, has conducted an evaluation of the design and operation of our “disclosure controls and procedures” as defined in Rule 13a-15(e) and 15d-15(e) under the Exchange Act. Based on this evaluation, our Chief Executive Officer and our Chief Financial Officer have concluded that our disclosure controls and procedures are effective as of the end of the period covered by this report for the purposes set forth above.

Changes in Internal Control over Financial Reporting

There has been no change in our internal control over financial reporting during ~~the~~ three months ended ~~September~~June 30, ~~2019~~2020 that has materially affected, or is reasonably likely to materially affect, our internal controls over financial reporting.

PART II – OTHER INFORMATION

ITEM 1. Legal Proceedings

We are engaged from time to time in the defense of lawsuits arising out of the ordinary course and conduct of our business. We do not believe that the outcome of any of our current litigation will 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.

ITEM 1A. Risk Factors

For information about the risks and uncertainties related to our business, please see the risk factors described in our annual report on Form 10-K for the year ended December 31, ~~2018.~~2019 and our quarterly report on Form 10-Q for the quarter ended March 31, 2020. The risks described in our Form 10-K and Form 10-Q are not the only risks facing our Company. Additional risks and uncertainties not currently known to us or that we currently deem to be immaterial also may materially adversely affect our business, financial condition and/or operating results.

In light of recent developments relating to COVID-19, RadNet is supplementing Item 1A. Risk Factors in the Annual Report on Form 10-K filed with the Securities and Exchange Commission on March 16, 2020. The following risk factor should be read in conjunction with the risk factors described in the Annual Report on Form 10-K.

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

We face various risks related to health epidemics and other outbreaks, including the global outbreak of COVID-19. The COVID-19 pandemic, changes in patient behavior related to illness, pandemic fears and market downturns, and restrictions intended to slow the spread of COVID-19, including quarantines, government-mandated actions, stay-at-home orders and other restrictions, have led to disruption of our business and volatility in the global capital markets. The United States government has taken steps to attempt to mitigate some of the more severe anticipated economic effects of the COVID-19 pandemic, including the passage of the Coronavirus Aid, Relief, and Economic Security Act (“CARES Act”). Additionally, we have received some funding from the U.S. Department of Health & Human Services (“HHS”) under the CARES Act’s Public Health and Social Services Emergency Fund (“PHSSEF”), which is geared towards supporting healthcare-related expenses or lost revenue attributable to COVID-19. Nonetheless, no assurance that such types of measures and funding whether already enacted or to be enacted will be effective or achieve their desired results in a timely fashion, including as it relates to our business operations. Moreover, while we believe we are in compliance with the applicable terms and conditions of funding under PHSSEF, compliance-related guidance for the program remains in process with HHS, and we may face enforcement risk if we are found to have failed to comply with such terms and conditions.

If significant portions of our workforce are unable to work effectively as a result of the COVID-19 pandemic, including because of illness, quarantines, facility closures, ineffective remote work arrangements or technology failures or limitations, our operations would be adversely impacted.

We currently believe our results of operations will be negatively impacted by these developments in addition, changes to statutes, regulations, or regulatory policies or practices as a result of, or in response to COVID-19, could affect us in substantial and unpredictable ways. Given the many uncertainties and far reaching consequences of potential developments, we cannot assure that the COVID-19 outbreak and the many related impacts will not require extended or additional diagnostic center closures and other disruptions to our business or will not materially and adversely affect our business, results of operations and financial condition in fiscal 2020 and beyond.

ITEM 2. Unregistered Sales of Equity Securities and Use of Proceeds

On ~~August~~June 1, ~~2019,~~2020, we ~~issued 101,902~~completed our purchase of Deep Health, Inc. by issuing 823,615 shares of our common stock to ~~sellers~~purchase all of ~~Nulogix, Inc, to complete our acquisition of the company.~~Deep Health's shares and share equivalents. The shares were ascribed a value of ~~$1.5~~$13.9 million and were issued pursuant to the private placement exemption contained in Section 4(a)(2) of the Securities Act.

ITEM 3. Defaults Upon Senior Securities

None.

ITEM 4. Mine Safety Disclosures

Not applicable.

ITEM 5. Other Information

None.

INDEX TO EXHIBITS



Exhibit Number		Description

10.17		Nonqualified Deferred Compensation Plan Compensation Plan, effective as of May 5, 2016 (incorporated by reference to exhibit filed with form 8-K on May 9, 2016)**

31.1		Certification of Howard G. Berger, M.D. pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

31.2		Certification of Mark D. Stolper pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

32.1		Certification of Howard G. Berger, M.D. pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. *

32.2		Certification of Mark D. Stolper pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. *

~~101.INS~~101		The following financial information from RadNet, Inc.'s Quarterly Report on Form 10-Q for the quarter ended June 30, 2020 formatted in Inline XBRL ~~Instance Document~~(Extensible Business Reporting Language) includes: (i) the Condensed Consolidated Balance Sheets, (ii) the Condensed Consolidated Statements of Operations, (iii) the Condensed Consolidated Statements of Comprehensive Loss, (iv) the Condensed Consolidated Statements of Changes in Stockholders Equity, (v) the Condensed Consolidated Statements of Cash Flows, and (vi) Notes to the Condensed Consolidated Financial Statements.

~~101.SCH~~104		Cover Page Interactive Data File (formatted as Inline XBRL ~~Schema Document~~and contained in Exhibit 101)

~~101.CAL~~		~~XBRL Calculation Linkbase Document~~

~~101.LAB~~		~~XBRL Label Linkbase Document~~

~~101.PRE~~		~~XBRL Presentation Linkbase Document~~

~~101.DEF~~		~~XBRL Definition Linkbase Document~~


*	This certification is being furnished solely to accompany this report pursuant to 18 U.S.C. 1350, and is not being filed for purposes of Section 18 of the Exchange Act and is not to be incorporated by reference into any filing of the registrant, whether made before or after the date hereof, regardless of any general incorporation language in such filing.


**	Indicates management contract or compensatory plan.

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.
	(Registrant)

Date: ~~November 12, 2019~~August 10, 2020	By:	/s/ Howard G. Berger, M.D.
		Howard G. Berger, M.D., President and Chief Executive Officer (Principal Executive Officer)


Date: ~~November 12, 2019~~August 10, 2020	By:	/s/ Mark D. Stolper
		Mark D. Stolper, Chief Financial Officer (Principal Financial and Accounting Officer)

5551



Balance as of December 31, 2018	$	418,093
Adjustments to our preliminary allocation of the purchase price of Medical Arts Radiological Group, P.C.	722
Goodwill acquired through the acquisition of certain assets of Dignity Health	1
Goodwill acquired through the acquisition of certain assets of West Valley Imaging Center, LLC	2,490
Goodwill disposed through sale of assets	(123		)
Goodwill acquired by Lenox Hill Radiology through the membership purchase of HVRA	3,125
Goodwill acquired through the acquisition of certain assets of Kern Radiology, Inc.	10,507
Goodwill acquired through the acquisition of certain assets of Zilkha Radiology, Inc.	2,577
Goodwill acquired through the acquisition of certain assets of Ramic Mahwah, LLC	231
Goodwill acquired through the acquisition of GSRN	887
Goodwill acquired through the acquisition of Nulogix	1,357
Balance as of September 30, 2019	$	439,867



For the three months ended September 30, 2019
Account	July 1, 2019 Balance		Amount of comprehensive loss recognized on derivative net of taxes		September 30, 2019 Balance		Location
Accumulated Other Comprehensive Loss	(768	)	(251	)	(1,019	)	Liabilities and Equity



For the nine months ended September 30, 2019
Account	January 1, 2019 Balance	Amount of comprehensive loss recognized on derivative net of taxes		September 30, 2019 Balance		Location
Accumulated Other Comprehensive Income (Loss)	2,506	(3,525	)	(1,019	)	Liabilities and Equity



Property and equipment, net	$	1,049
Goodwill	992
Total assets held for sale	$	2,041




	Three months ended		Nine months ended
(In thousands)	September 30, 2019

Operating lease cost	$	24,497	$	71,568

Finance lease cost:
Depreciation of leased equipment	$	724	$	2,351
Interest on lease liabilities	91		319
Total finance lease cost	$	815	$	2,670



(In thousands, except lease term and discount rates)
	September 30, 2019

Operating Leases
Operating lease right-of-use assets	$	438,558
Current portion of operating lease liability	$	69,308
Operating lease liabilities	410,958
Total operating lease liabilities	$	480,266

Finance Leases
Property and Equipment, at cost	$	14,088
Accumulated depreciation	(2,351		)
Equipment, net	$	11,737
Current portion of finance lease	$	4,095
Finance lease liabilities	4,042
Total finance lease liabilities	$	8,137

Weighted Average Remaining Lease Term
Operating leases - years	8.5
Finance leases - years	3.2

Weighted Average Discount Rate
Operating leases	6.4		%
Finance leases	4.2		%



(In thousands)
	Operating			Financing
Year Ending December 31,	Leases			Leases
2019 (excluding the nine months ended September 30, 2019)	$	24,616		$	1,716
2020	95,158			3,481
2021	88,085			2,614
2022	78,279			691
2023	67,021			—
Thereafter	282,379			—
Total Lease Payments	635,538			8,502
Less imputed interest	(155,272		)	(365		)
Total	$	480,266		$	8,137



	Facilities		Equipment		Total
2019	$	75,588	$	14,924	$	90,512
2020	66,116		14,385		80,501
2021	57,826		12,966		70,792
2022	48,542		10,264		58,806
2023	38,800		7,095		45,895
Thereafter	160,327		5,144		165,471
	$	447,199	$	64,778	$	511,977