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 ~~June 30, 2020~~March 31, 2021

ORor

☐ 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 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)

Not Applicable

(Former name, former address and former fiscal year, if changed since last report)

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

Class Title

Trading Symbol

Registered Exchange

Common Stock

RDNT

NASDAQ

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 (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). 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 ~~August 7, 2020~~May 6, 2021 was ~~51,574,760~~52,700,039 shares.

Table of Contents

RADNET, INC.

TABLE OF CONTENTS


		Page

		~~Page~~

PART I – FINANCIAL INFORMATION	31

ITEM 1. ~~Condensed Consolidated~~ Financial Statements ~~(unaudited)~~		31

Condensed Consolidated Balance Sheets at ~~June 30, 2020~~March 31, 2021 and December 31, ~~2019~~2020		31

Condensed Consolidated Statements of Operations for the Three ~~and Six~~ Months Ended ~~June 30,~~March 31, 2021 and 2020 ~~and 2019~~		42

Condensed Consolidated Statements of Comprehensive ~~Loss~~Income (Loss) for the Three ~~and Six~~ Months Ended ~~June 30,~~March 31, 2021 and 2020 ~~and 2019~~		53

Condensed Consolidated Statement of Stockholders' Equity for the Three Months Ended ~~June 30,~~March 31, 2021 and 2020 ~~and 2019~~		64



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

Condensed Consolidated Statements of Cash Flows for the ~~Six~~Three Months Ended ~~June 30,~~March 31, 2021 and 2020 ~~and 2019~~	95

Notes to Condensed Consolidated Financial Statements		117

ITEM 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations		2822

ITEM 3. Quantitative and Qualitative Disclosures About Market Risk		4636

ITEM 4. Controls and Procedures		4736

PART II – OTHER INFORMATION		4838

ITEM 1. Legal Proceedings		4838

ITEM 1A. Risk Factors		4838

ITEM 2. Unregistered Sales of Equity Securities and Use of Proceeds		4938

ITEM 3. Defaults Upon Senior Securities		4938

ITEM 4. Mine Safety Disclosures		4938

ITEM 5. Other Information		4938

ITEM 6. Exhibits		39

~~ITEM 6. Exhibits~~SIGNATURES		5040

~~SIGNATURES~~	51

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)


	March 31, 2021		December 31, 2020
	(unaudited)
ASSETS
CURRENT ASSETS
Cash and cash equivalents	$	31,091	$	102,018
Accounts receivable	146,665		129,585
Due from affiliates	7,521		5,836
Prepaid expenses and other current assets	37,720		32,985

Total current assets	222,997		270,424
PROPERTY, EQUIPMENT AND RIGHT-OF-USE ASSETS
Property and equipment, net	412,711		399,335
Operating lease right-of-use assets	529,563		483,661
Total property, equipment and right-of-use assets	942,274		882,996
OTHER ASSETS
Goodwill	502,566		472,879
Other intangible assets	52,198		52,393
Deferred financing costs	1,590		1,767
Investment in joint ventures	36,813		34,528
Deferred tax assets, net of current portion	31,554		34,687
Deposits and other	38,794		36,983
Total assets	$	1,828,786	$	1,786,657
LIABILITIES AND EQUITY
CURRENT LIABILITIES
Accounts payable, accrued expenses and other	$	231,700	$	236,684
Due to affiliates	18,133		14,010
Deferred revenue	40,648		39,257
Current finance lease liability	2,080		2,578
Current operating lease liability	69,890		65,794
Current portion of notes payable	40,166		39,791
Total current liabilities	402,617		398,114
LONG-TERM LIABILITIES
Long-term finance lease liability	414		743
Long-term operating lease liability	504,474		463,096
Notes payable, net of current portion	602,684		612,913
Other non-current liabilities	37,239		53,488
Total liabilities	1,547,428		1,528,354
EQUITY
Common stock - $0.0001 par value, 200,000,000 shares authorized; 52,340,856 and 51,640,537 shares issued and outstanding at March 31, 2021 and December 31, 2020, respectively	5		5
Additional paid-in-capital	316,032		307,788
Accumulated other comprehensive loss	(23,138)		(24,051)
Accumulated deficit	(108,541)		(117,999)
Total RadNet, Inc.'s stockholders' equity	184,358		165,743
Noncontrolling interests	97,000		92,560
Total equity	281,358		258,303
Total liabilities and equity	$	1,828,786	$	1,786,657

June 30,
2020 December 31,
2019
(unaudited)
ASSETS

CURRENT ASSETS

   Cash and cash equivalents $ 84,583
$ 40,165
   Accounts receivable 125,745
154,763
   Due from affiliates 1,472
1,242
   Prepaid expenses and other current assets 35,720
45,004
      Total current assets 247,520
241,174
PROPERTY, EQUIPMENT AND RIGHT-OF-USE ASSETS
   Property and equipment, net 370,188
367,795
   Operating lease right-of-use assets 448,855
445,477
      Total property, equipment and right-of-use assets 819,043
813,272
OTHER ASSETS
   Goodwill 467,803
441,973
   Other intangible assets 57,601
42,994
   Deferred financing costs 1,336
1,559
   Investment in joint ventures 37,370
34,470
   Deferred tax assets, net of current portion 46,226
34,548
   Deposits and other 40,104
36,996
       Total assets $ 1,717,003
$ 1,646,986
LIABILITIES AND EQUITY
CURRENT LIABILITIES
    Accounts payable, accrued expenses and other $ 206,272
$ 207,585
    Due to affiliates 20,042
14,347
    Deferred revenue 45,700
1,316
    Current finance lease liability 3,264
3,283
    Current operating lease liability 65,400
61,206
    Current portion of notes payable 41,715
39,691
        Total current liabilities 382,393
327,428
LONG-TERM LIABILITIES
    Long-term finance lease liability 1,682
3,264
    Long-term operating lease liability 424,018
420,922
    Notes payable, net of current portion 634,840
652,704
    Other non-current liabilities 40,814
9,529
        Total liabilities 1,483,747
1,413,847
EQUITY
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 304,012
262,865
    Accumulated other comprehensive loss (26,098 ) (8,026 )
    Accumulated deficit (130,111 ) (103,159 )
        Total RadNet, Inc.'s stockholders' equity 147,808
151,685
Noncontrolling interests 85,448
81,454
Total equity 233,256
233,139
Total liabilities and equity $ 1,717,003
$ 1,646,986

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

Table of Contents

RADNET, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(IN THOUSANDS EXCEPT SHARE AND PER SHARE DATA)

(unaudited)


	Three Months Ended June 30,						Six Months Ended June 30,							Three Months Ended March 31,
	2020			2019			2020			2019				2021		2020
REVENUE													REVENUE
Service fee revenue	$	155,698		$	258,171		$	404,031		$	500,844		Service fee revenue	$	279,577	$	248,333
Revenue under capitation arrangements	34,868			30,926			68,099			59,803			Revenue under capitation arrangements	35,742		33,231
Total revenue	190,566			289,097			472,130			560,647
Total service revenue													Total service revenue	315,319		281,564
Provider relief funding	25,475			—			25,475			—			Provider relief funding	6,248		0
OPERATING EXPENSES													OPERATING EXPENSES
Cost of operations, excluding depreciation and amortization	194,217			246,558			461,635			489,615			Cost of operations, excluding depreciation and amortization	282,280		267,417
Depreciation and amortization	21,355			20,083			43,289			39,703			Depreciation and amortization	22,656		21,934
(Gain) loss on sale and disposal of equipment and other	(569		)	101			202			1,073			(Gain) loss on sale and disposal of equipment and other	(1,307)		771
Severance costs	859			371			1,076			1,002			Severance costs	285		218
Total operating expenses	215,862			267,113			506,202			531,393			Total operating expenses	303,914		290,340
INCOME (LOSS) FROM OPERATIONS	179			21,984			(8,597		)	29,254			INCOME (LOSS) FROM OPERATIONS	17,653		(8,776)

OTHER INCOME AND EXPENSES													OTHER INCOME AND EXPENSES
Interest expense	10,831			12,399			22,382			24,694			Interest expense	12,826		11,552
Equity in earnings of joint ventures	(945		)	(2,244		)	(2,900		)	(4,117		)	Equity in earnings of joint ventures	(2,285)		(1,955)
Non-cash change in fair value of interest rate hedge	3,843			—			3,843			—			Non-cash change in fair value of interest rate hedge	(11,245)		0
Other (income) expenses	(115		)	1,269			(108		)	1,269
Total other expenses	13,614			11,424			23,217			21,846
(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
Other expenses													Other expenses	206		6
Total other (income) expenses													Total other (income) expenses	(498)		9,603
INCOME (LOSS) BEFORE INCOME TAXES													INCOME (LOSS) BEFORE INCOME TAXES	18,151		(18,379)
(Provision for) benefit from income taxes													(Provision for) benefit from income taxes	(4,376)		4,381
NET INCOME (LOSS)													NET INCOME (LOSS)	13,775		(13,998)
Net income attributable to noncontrolling interests	1,634			2,692			3,994			4,503			Net income attributable to noncontrolling interests	4,317		2,360
NET (LOSS) INCOME ATTRIBUTABLE TO RADNET, INC. COMMON STOCKHOLDERS	$	(10,594	)	$	4,899		$	(26,952	)	$	1,165
NET INCOME (LOSS) ATTRIBUTABLE TO RADNET, INC. COMMON STOCKHOLDERS													NET INCOME (LOSS) ATTRIBUTABLE TO RADNET, INC. COMMON STOCKHOLDERS	$	9,458	$	(16,358)

BASIC NET (LOSS) INCOME PER SHARE ATTRIBUTABLE TO RADNET, INC. COMMON STOCKHOLDERS	$	(0.21	)	$	0.10		$	(0.53	)	$	0.02
BASIC NET INCOME (LOSS) PER SHARE ATTRIBUTABLE TO RADNET, INC. COMMON STOCKHOLDERS													BASIC NET INCOME (LOSS) PER SHARE ATTRIBUTABLE TO RADNET, INC. COMMON STOCKHOLDERS	$	0.18	$	(0.33)

DILUTED NET (LOSS) INCOME PER SHARE ATTRIBUTABLE TO RADNET, INC. COMMON STOCKHOLDERS	$	(0.21	)	$	0.10		$	(0.53	)	$	0.02
DILUTED NET INCOME (LOSS) PER SHARE ATTRIBUTABLE TO RADNET, INC. COMMON STOCKHOLDERS													DILUTED NET INCOME (LOSS) PER SHARE ATTRIBUTABLE TO RADNET, INC. COMMON STOCKHOLDERS	$	0.18	$	(0.33)
WEIGHTED AVERAGE SHARES OUTSTANDING													WEIGHTED AVERAGE SHARES OUTSTANDING
Basic	50,672,219			49,702,869			50,483,274			49,490,234			Basic	51,951,506		50,294,329
Diluted	50,672,219			50,144,540			50,483,274			49,988,036			Diluted	52,828,941		50,294,329

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

RADNET, INC. AND SUBSIDIARIES

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

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)

The following table summarizes changes in the Company’s consolidated stockholders' equity, including noncontrolling interest, during the three months ended ~~June 30, 2020~~March 31, 2021 and ~~June 30, 2019.~~March 31, 2020.

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 six months ended June 30, 2020 and June 30, 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 - 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~~

Table of ~~these financial statements.~~Contents

RADNET, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(IN THOUSANDS)

(unaudited)


	Three Months Ended March 31,
	2021		2020
CASH FLOWS FROM OPERATING ACTIVITIES
Net income (loss)	$	13,775	$	(13,998)
Adjustments to reconcile net income (loss) to net cash provided by operating activities:
Depreciation and amortization	22,656		21,934
Amortization of operating lease right-of-use assets	17,863		17,259
Equity in earnings of joint ventures, net of dividends	(2,285)		(1,955)

Amortization of deferred financing costs and loan discount	1,147		1,081
(Gain) loss on sale and disposal of equipment and other	(1,307)		771
Amortization of cash flow hedge	925		0
Non-cash change in fair value of interest rate hedge	(11,245)		0
Stock-based compensation	8,248		6,622

Change in fair value of contingent consideration	200		0
Changes in operating assets and liabilities, net of assets acquired and liabilities assumed in purchase transactions:
Accounts receivable	(17,493)		10,504
Other current assets	(4,308)		5,164
Other assets	(3,507)		677
Deferred taxes	3,133		(11,413)
Operating lease liability	(18,291)		(17,345)
Deferred revenue	1,416		28
Accounts payable, accrued expenses and other	17,157		21,584
Net cash provided by operating activities	28,084		40,913
CASH FLOWS FROM INVESTING ACTIVITIES
Purchase of imaging facilities and other acquisitions	(57,075)		(4,300)

Purchase of property and equipment	(30,424)		(51,538)
Proceeds from sale of equipment	151		779



Net cash used in investing activities	(87,348)		(55,059)
CASH FLOWS FROM FINANCING ACTIVITIES
Principal payments on notes and leases payable	(827)		(914)
Payments on term loan debt	(10,824)		(10,824)






Proceeds from revolving credit facility	87,100		215,900
Payments on revolving credit facility	(87,100)		(135,900)

Net cash (used in) provided by financing activities	(11,651)		68,262
EFFECT OF EXCHANGE RATE CHANGES ON CASH	(12)		1
NET INCREASE IN CASH AND CASH EQUIVALENTS	(70,927)		54,117
CASH AND CASH EQUIVALENTS, beginning of period	102,018		40,165
CASH AND CASH EQUIVALENTS, end of period	$	31,091	$	94,282

SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION
Cash paid during the period for interest	$	8,267	$	9,934

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.

Table of Contents

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 ~~$31.8~~$28.8 million and ~~$14.0~~$30.8 million during the ~~six~~three months ended ~~June 30,~~March 31, 2021 and 2020, ~~and 2019,~~ respectively, which were not paid for as of ~~June 30,~~March 31, 2021 and 2020 ~~and 2019~~, respectively. The offsetting amounts due were recorded in our condensed consolidated balance sheet under accounts payable, accrued expenses and other.

On ~~June~~January 1, ~~2020,~~2021 we completed our stock purchase of DeepHealth, Inc. by issuing 823,615 shares of our common stock to purchase all of Deep Health's shares and share equivalents. The shares were ascribed a value of $13.9 million.

~~We 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 July 2019.~~

~~We transferred approximately $4.3 million in net assets to our new joint venture, Ventura County~~entered into the Simi Valley Imaging Group, LLC, ~~in March 2019.~~partnership agreement with Simi Valley Hospital and Health Services ("Simi Adventist"). Of the total combined assets of $0.4 million, RadNet transferred $0.3 million and Simi Adventist contributed the remaining $0.1 million.

~~On February 27, 2019, we issued~~

~~440,207~~

~~shares~~Table 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.Contents

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 ~~six~~7 U.S. states. At ~~June 30, 2020,~~March 31, 2021, we operated, directly or indirectly through joint ventures with hospitals, ~~332~~346 centers located in Arizona, California, Delaware, Florida, Maryland, New Jersey, and New York. Our centers provide physicians with imaging capabilities to facilitate the diagnosis and treatment of diseases and disorders. Our services include magnetic resonance imaging (MRI), computed tomography (CT), positron emission tomography (PET), nuclear medicine, mammography, ultrasound, diagnostic radiology (X-ray), fluoroscopy and other related procedures. The vast majority of our centers offer multi-modality imaging services. Our multi-modality strategy diversifies revenue streams, reduces exposure to reimbursement changes and provides patients and referring physicians 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~~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, Inc as well as its subsidiaries in which RadNet has a controlling financial interest. The consolidated financial statements also include certain variable interest entities in which we are the primary beneficiary (as described in more detail below). All material intercompany transactions and balances have been eliminated upon consolidation. All of these affiliated entities are referred to collectively as “RadNet”, “we”, “us”, “our” or the “Company” in this report.

Accounting regulations stipulate that generally any entity with a) insufficient equity to finance its activities without additional subordinated financial support provided by any parties, or b) equity holders that, as a group, lack the characteristics which evidence a controlling financial interest, is considered a ~~Variable Interest Entity~~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., our President and Chief Executive Officer, and John V. Crues, III, M.D., RadNet's Medical Director, both of whom are members of our Board of Directors. Dr. Berger owns, indirectly, 99% of the equity interests in Beverly Radiology Medical Group III (BRMG) and a controlling interest in two professional corporations in New York City. BRMG is responsible for the professional medical services at nearly all of our facilities located in California. Dr. Crues owns six professional corporations which provide medical services in Delaware, Maryland, New Jersey and New York. Additionally, Dr. Crues is a 1% owner of BRMG. These VIEs are collectively referred to as the consolidated medical group ("the Group").

RadNet provides non-medical, technical and administrative services to the Group for which it receives a management fee, pursuant to the related management agreements. Through the management agreements we have exclusive authority over all non-medical decision making related to the ongoing business operations and we determine the annual budget. The Group has insignificant operating assets and liabilities, and de minimis equity. Through management agreements with us, substantially all cash flows of the Group after expenses, including professional salaries, are transferred to us. We consolidate the revenue and expenses, assets and liabilities of the Group.

The Group on a combined basis recognized ~~$26.9~~$46.1 million and ~~$38.9~~$39.6 million of revenue, net of management services fees to RadNet, for the three months ended ~~June 30,~~March 31, 2021 and 2020, ~~and 2019,~~ respectively and ~~$26.9~~$46.1 million and ~~$38.9~~$39.6 million of operating expenses for the three months ended ~~June 30,~~March 31, 2021 and 2020, ~~and 2019,~~ respectively. RadNet recognized ~~$116.4~~$179.0 million and ~~$159.2~~$147.9 million of total billed net service fee revenue for the three months ended ~~June 30,~~March 31, 2021, and 2020, ~~and 2019,~~ respectively, for management services provided to the Group relating primarily to the technical portion of billed revenue.

The Group on a combined basis recognized $66.4 million and $76.3 million of revenue, net of management services fees to RadNet, for the six months ended June 30, 2020 and 2019, respectively and $66.4 million and $76.3 million of operating expenses for the six months ended June 30, 2020 and 2019, respectively. RadNet recognized $264.3 million and $301.6 million

of total billed net service fee revenue for the six months ended June 30, 2020, and 2019, respectively, for management services provided to the Group relating primarily to the technical portion of billed revenue.

The cash flows of the Group are included in the accompanying condensed consolidated statements of cash flows. All intercompany balances and transactions have been eliminated in consolidation. In our condensed consolidated balance sheets at ~~June 30, 2020~~March 31, 2021 and December 31, ~~2019,~~2020, we have included approximately ~~$76.6~~$89.9 million and ~~$100.3~~$82.3 million, respectively, of

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accounts receivable and approximately ~~$12.5~~$20.5 million and ~~$7.0~~$15.2 million of accounts payable and accrued liabilities related to the Group, respectively.

The creditors of the Group do not have recourse to our general credit and there are no other arrangements that could expose us to losses on their behalf. However, ~~RadNet~~we 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~~RadNet 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 up to 40 years) with independent radiology groups to provide physician services at those 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. 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. 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 economic controlling interest in these radiology practices as such, the 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 ~~June 30,~~March 31, 2021 and 2020 ~~and~~ ~~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, ~~2019~~.2020.

NOTE 2 - SIGNIFICANT ACCOUNTING POLICIES

During the period covered in this report, 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, ~~2019~~.2020. 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, ~~2019~~.2020.

REVENUES - Our revenues generally relate to net patient fees received from various payors and patients themselves under contracts in which our performance obligations are to provide diagnostic services to the patients. Revenues are recorded during the period when our obligations to provide diagnostic services are satisfied. Our performance obligations for diagnostic services are generally satisfied over a period of less than one day. The contractual relationships with patients, in most cases, also involve a third-party payor (Medicare, Medicaid, managed care health plans and commercial insurance companies, including plans offered through the health insurance exchanges) and the transaction prices for the services provided are dependent upon the terms provided by (Medicare and Medicaid) or negotiated with (managed care health plans and commercial insurance companies) the third-party payors. The payment arrangements with third-party payors for the services we provide to the related patients typically specify payments at amounts less than our standard charges and generally provide for payments based upon predetermined rates per diagnostic services or discounted fee-for-service rates. Management continually reviews the contractual estimation process to consider and incorporate updates to laws and regulations and the frequent changes in managed care contractual terms resulting from contract renegotiations and renewals.

As it relates to the ~~consolidated medical group,~~Group, this service fee revenue includes payments for both the professional medical interpretation revenue recognized by them as well as the payment for all other aspects related to our providing the imaging services, for which we earn management fees. As it relates to others centers, this service fee revenue is earned through providing the use of our 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

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

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

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 service revenues during the three ~~and six~~ months ended ~~June 30,~~March 31, 2021 and 2020~~and~~ ~~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 March 31,
	2021		2020
Commercial insurance	$	182,096	$	155,461
Medicare	63,589		57,749
Medicaid	8,451		6,628
Workers' compensation/personal injury	10,399		10,274
Other patient revenue	4,775		5,662
Management fee revenue	5,219		2,567
Teleradiology and Software revenue	2,426		3,770
Other	2,622		6,222
Service fee revenue	279,577		248,333
Revenue under capitation arrangements	35,742		33,231
Total service revenue	$	315,319	$	281,564

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

~~PROVIDER RELIEF~~COVID-19 PANDEMIC AND CARES ACT FUNDING - On March 11, 2020 the World Health Organization (WHO) designated COVID-19 as a global pandemic. To aid businesses and stimulate the national economy, Congress passed the The Coronavirus Aid, Relief, and Economic Security ("CARES") Act, which was signed in to law on March 27, 2020.

Through March 31, 2021, we have received since inception of the various programs established by the CARES Act, $39.5 million of accelerated Medicare payments, $32.5 million from general distribution and $4.0 million from the Paycheck Protection Program. In addition, we have received $5.0 million in advance payments from insurer Blue Shield.

The accelerated Medicare and Blue Shield payments are recorded to Deferred Revenue in our condensed consolidated balance sheet and will be applied to revenue as services are performed beginning in 2021. For the ~~second quarter~~three months ended March 31, 2021, $2.5 million of the accelerated Medicare and $2.5 million of the Blue Shield funds have been applied to revenue.

The amounts obtained from general distribution were accounted for as government grants and recognized as other revenue and displayed as Provider relief funding in our condensed consolidated statements of operations, of which $6.2 million of the total $32.5 million was received in the three months ended March 31, 2021.

The $4.0 million secured from the Paycheck Protection Program was accounted for as debt and in December 2020 we ~~received approximately $25.5~~met the eligibility requirements under the government guidelines for forgiveness and the loans were written off to gain on extinguishment of debt.

The CARES Act also provides for a payment deferral of the employer portion of Social Security tax incurred during the pandemic, allowing half of such payroll taxes to be deferred until December 2021 and the remaining half until December 2022. At March 31, 2021, the Company had in total $16.3 million of deferred Social Security taxes. These payment deferrals

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are recorded as payroll tax liability under the caption “Accounts payable, accrued expenses and other” 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.

~~RECLASSIFICATION –We have reclassified certain amounts previously classified as held for sale related to property and equipment and goodwill to conform to~~ our ~~2020 presentation.~~

condensed consolidated balance sheet.

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~~

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.~~agreements in exchange for notes receivables from the buyers. These transactions are accounted for as a reduction in accounts receivable as the agreements transfer effective control over and risk related to the receivables to the buyers. Proceeds on notes receivables are reflected as operating activities on our statement of cash flows and on our balance sheet as prepaid expenses and other current assets for the current portion and deposits and other for the long term portion. At ~~June 30, 2020~~March 31, 2021 we have ~~$22.5~~$20.5 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~~capital and assess the party's ability to pay upfront at the inception of the notes receivable and subsequently by reviewing their financial statements annually and reassessing any insolvency risk on a periodic basis. 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 ~~$1.3~~$1.6 million and ~~$1.6~~$1.8 million, as of ~~June 30, 2020~~March 31, 2021 and December 31, ~~2019~~,2020, respectively and related to our ~~line of credit. In conjunction with our Sixth and Seventh Amendments to our First Lien~~Barclays Revolving Credit ~~Agreement (as defined below), a net addition of approximately $0.7 million was added to deferred financing costs in the second quarter of 2019.~~Facility. See Note 5, Credit Facilities and Notes Payable for more information.

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 ~~June 30, 2020~~March 31, 2021 totaled ~~$467.8~~$502.6 million. Indefinite lived intangible assets at ~~June 30, 2020~~March 31, 2021 were ~~$11.3~~$7.1 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, ~~2019,~~2020, noting no impairment. In addition to the 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 coronavirus ("COVID-19")~~COVID-19 pandemic and did not identify an indication of goodwill impairment being more likely than not through ~~June 30, 2020~~.March 31, 2021. Activity in goodwill for the ~~six~~three months ended ~~June 30, 2020~~March 31, 2021 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, 2020	$	472,879
Goodwill acquired through acquisitions	29,609
Goodwill attributable to formation of Simi Valley Imaging Group LLC	105
Other Adjustments	(27)










Balance as of March 31, 2021	$	502,566

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

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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 ~~benefit~~expense of ~~$4.5~~$4.4 million, or an effective tax rate of ~~33.3%~~24.1%, for the three months ended ~~June 30, 2020~~March 31, 2021 compared to ana benefit from income ~~tax expense~~taxes of ~~$3.0~~$4.4 million, or an effective tax rate of ~~28.1%~~23.8% for the three months ended June 30, 2019. We recorded an income tax benefit of $8.9 million, or an effective tax rate of 27.8%, for the six months ended June 30, 2020 compared to an income tax expense of $1.7 million , or an effective tax rate of 23.5% for the six months ended June 30, 2019.TheMarch 31, 2020. The income tax rates for the three ~~and six~~ months ended ~~June 30, 2020~~March 31, 2021 diverge from the federal statutory rate due to (i) noncontrolling interests due to the controlled partnerships; (ii) effects of state income taxes; and (iii) excess tax benefits attributable to share-based compensation.

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~~CARES Act, ~~("CARES Act"). The CARES Act,~~which 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~~ROU asset is recognized on a straight-line basis over the shorter of the estimated useful life of the asset or the lease term. ROU assets are tested for impairment if circumstances suggest that the carrying amount may not be recoverable. Our ROU assets consist of facility and equipment assets on operating leases. No events have occurred such as fire, flood, or other acts which have impaired the integrity of our ROU assets ~~in 2020.~~as of March 31, 2021. 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~~which can be issued in the form 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.~~awards. Stock options ~~and warrants~~ generally vest over three to five years and expire five to ten years from date of grant. We determine the compensation expense for each stock option award using the Black Scholes, or similar valuation model. Those models require that our management make certain estimates concerning risk free interest rates and volatility in the trading price of our common stock. The compensation expense recognized for all equity-based awards is recognized over the awards’ service periods. Equity-based compensation is classified in operating expenses within the same line item as the majority of the cash compensation paid to employees. In connection with our acquisition of DeepHealth Inc. on June 1, 2020, we assumed the DeepHealth, Inc. 2017 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.

COMPREHENSIVE ~~LOSS~~INCOME (LOSS) - ASC 220 establishes rules for reporting and displaying comprehensive ~~loss~~income or ~~income~~loss and its components. Our unrealized gains or losses on foreign currency translation adjustments, interest rate cap and swap agreements are included in comprehensive loss and are included in the consolidated statements of comprehensive ~~loss~~income (loss) for the three ~~and six~~ months ended ~~June 30, 2020~~March 31, 2021 and ~~2019.~~2020.

COMMITMENTS AND CONTINGENCIES - We are party to various legal proceedings, claims, and regulatory, tax or government inquiries and investigations that arise in the ordinary course of business. With respect to these matters, we evaluate the developments on a regular basis and accrue a liability when we believe a loss is probable and the amount can be reasonably estimated. Based on current information, we do not believe that reasonably possible or probable losses associated with pending legal proceedings would either individually or in the aggregate, have a material adverse effect on our business and consolidated financial statements. However, the outcome of these matters is inherently uncertain. Therefore, if one or more of

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these matters were resolved against us for amounts in excess of management's expectations, our results of operations and financial condition, including in a particular reporting period in which any such outcome becomes probable and estimable, could be materially adversely affected.

DERIVATIVE INSTRUMENTS

~~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. 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 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 since such hedge has been determined to be effective. See Fair Value Measurements section below for the fair value of the 2016 Caps at ~~June 30, 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 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

2019 SWAPS

In the second quarter of 2019, we entered into ~~four~~4 forward interest rate agreements ("2019 Swaps"). The 2019 Swaps have total notional amounts of $500,000,000, consisting of ~~two~~2 agreements of $50,000,000 each and ~~two~~2 agreements of $200,000,000 each. The 2019 Swaps will secure a constant interest rate associated with portions of our variable rate bank debt and have an effective date of October 13, 2020. They will mature in October 2023 for the smaller notional and October 2025 for the larger notional. Under these arrangements, we arranged the 2019 Swaps with locked in 1 month LIBOR rates at 1.96% for the ~~$100,000,000~~$100,000,000 notional and at 2.05% for the ~~$400,000,000~~$400,000,000 notional. As of the effective date, we will be liable for premium payments if interest rates decline below arranged rates, but will receive interest payments if rates remain above the arranged rates.

At inception, we designated our 2019 Swaps as cash flow hedges of floating-rate borrowings. In accordance with accounting guidance, derivatives that have been designated and qualify as cash flow hedging instruments are reported at fair value. The gain or loss on the effective portion of the hedge (i.e. change in fair value) is reported as a component of comprehensive loss in the consolidated statement of equity. The remaining gain or loss, if any, is recognized currently in earnings. ~~As a result of the economic impact of the coronavirus pandemic, which precipitated a reduction in interest rates , the~~The cash flows for both our ~~$400,000,000~~$400,000,000 notional interest rate swap contract locked in at 2.05% due October 2025 ~~does~~and our $100,000,000 notional interest rate swap contract locked in at 1.96% do not match the cash flows for our First Lien Term Loans and so we have determined that they are not currently effective as cash flow hedges. Accordingly, all changes in their fair value after April 1, 2020 for the $400,000,000 notional and after July 1, 2020 for the $100,000,000 notional will be recognized in earnings. As of ~~April~~July 1, 2020, the total change in fair value relating to ~~swap due October 2025~~swaps included in other comprehensive income was approximately ~~$21.4~~$24.4 million, net of taxes. This amount will be amortized to interest expense through October ~~2025~~2023 at approximately $0.4 million per month and continuing at approximately $0.3 million ~~per month.~~through October 2025.

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


For the three months ended March 31, 2021
Account	January 1, 2021 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), net of taxes		March 31, 2021 Balance		Location
Accumulated Other Comprehensive Loss, net of taxes	$	(22,581)	$	0	$	925	$	(21,656)	Equity

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 twelve months ended December 31, 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), net of taxes		December 31, 2020		Location
Accumulated Other Comprehensive Loss, net of taxes	$	(5,870)	$	(19,352)	$	2,641	$	(22,581)	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

Table of Contents

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

For the three months ended March 31, 2021

Ineffective interest rate swap

Amount of gain recognized in income on derivative (current period ineffective portion)

Location of gain recognized in Income on derivative (current period ineffective portion)

Amount of loss reclassified from accumulated OCI into income (prior period effective portion)

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

Interest rate contracts

11,245

Other income (expense)

(925)

Interest Expense

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)

See Fair Value Measurements section below for the fair value of the ~~2016 caps and~~ 2019 ~~swaps~~Swaps at ~~June 30, 2020.~~March 31, 2021.

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 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 March 31, 2021
	Level 1		Level 2		Level 3		Total
Current and long term liabilities

2019 Swaps - Interest Rate Contracts	$	0	$	26,744	$	0	$	26,744

As of June 30, 2020
Level 1 Level 2 Level 3 Total
Current and long term liabilities

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, 2020
	Level 1		Level 2		Level 3		Total
Current and long term liabilities

2019 Swaps - Interest Rate Contracts	$	0	$	37,989	$	0	$	37,989

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

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 March 31, 2021
	Level 1		Level 2		Level 3		Total Fair Value		Total Face Value
First Lien Term Loans and SunTrust Term Loan	$	0	$	652,331	$	0	$	652,331	$	651,580

Table of Contents

As of June 30, 2020
Level 1 Level 2 Level 3 Total Fair Value Total Face Value
First Lien Term Loans and SunTrust Term Loan $ —
$ 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 December 31, 2020
	Level 1		Level 2		Level 3		Total Fair Value		Total Face Value
First Lien Term Loans and SunTrust Term Loan	$	0	$	661,640	$	0	$	661,640	$	662,403

As of ~~June 30, 2020~~March 31, 2021 and at December 31, ~~2019~~2020 our Barclays revolving credit facility had 0 balance outstanding. Our SunTrust revolving credit facility relating to our consolidated subsidiary ~~NJIN,~~The New Jersey Imaging Network ("NJIN"), had 0 principal amount outstanding at ~~June 30, 2020~~March 31, 2021 and at December 31, ~~2019.~~2020.

The estimated fair value of our long-term debt, which is discussed in Note 5, Credit Facilities and Notes Payable, 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 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 March 31,
	2021		2020
Net income (loss) attributable to RadNet, Inc.'s common stockholders	$	9,458	$	(16,358)

BASIC NET INCOME (LOSS) PER SHARE ATTRIBUTABLE TO RADNET, INC.'S COMMON STOCKHOLDERS
Weighted average number of common shares outstanding during the period	51,951,506		50,294,329
Basic net income (loss) per share attributable to RadNet, Inc.'s common stockholders	$	0.18	$	(0.33)

DILUTED NET INCOME (LOSS) PER SHARE ATTRIBUTABLE TO RADNET, INC.'S COMMON STOCKHOLDERS
Weighted average number of common shares outstanding during the period	51,951,506		50,294,329
Add nonvested restricted stock subject only to service vesting	253,265		0
Add additional shares issuable upon exercise of stock options and warrants	624,170		0
Weighted average number of common shares used in calculating diluted net income per share	52,828,941		50,294,329
Diluted net income (loss) per share attributable to RadNet, Inc.'s common stockholders	$	0.18	$	(0.33)

Stock options and non vested restricted awards excluded from the computation of diluted per share amounts as their effect would be antidilutive:
Nonvested restricted stock subject to service vesting	0		314,962
Shares issuable upon the exercise of stock options:	82,595		527,899

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

~~For the three and six months ended June 30, 2020 we excluded all outstanding options and restricted stock awards in the calculation~~

Table of ~~diluted earnings per share because their effect would be antidilutive.~~Contents

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.~~adjusted for observable price changes and impairments, with changes recognized in net income.

As of ~~June 30, 2020~~,March 31, 2021, we have ~~three~~3 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%~~ Our investment of $1.2 million represents a 14.21% 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 $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.~~company. No observable price changes or impairment in our investment was identified as of ~~June 30, 2020.~~

~~Turner Imaging:~~March 31, 2021.

Turner Imaging Systems, based in Utah, develops and markets portable X-ray imaging systems that provide a user the ability to acquire X-ray images wherever and whenever they are needed. On February 1, 2018, we purchased 2.1 million preferred shares in Turner Imaging Systems for $2.0 million. On January 1, 2019 we funded a convertible promissory note in the amount of $0.1 million that converted to additional 80,000 shares December 21, 2019. No observable price changes or impairment in our investment was identified as of ~~June 30, 2020.~~March 31, 2021.

~~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~~in support 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.its operations. No observable price changes, impairment in our investment or impairment of the loan receivable was identified as of ~~June 30, 2020.~~March 31, 2021.

INVESTMENT IN JOINT VENTURES – We have 1213 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 ~~June 30, 2020~~.March 31, 2021.

Joint venture investment and financial information

The following table is a summary of our investment in joint ventures during the ~~six~~three months ended ~~June 30, 2020~~March 31, 2021 (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, 2020	$	34,528
Equity in earnings in these joint ventures	2,285





Balance as of March 31, 2021	$	36,813

We charged management service fees from the centers underlying these joint ventures of approximately ~~$3.3~~$5.2 million and ~~$1.8~~$2.6 million for the three months ended ~~June 30, 2020~~March 31, 2021 and ~~2019, respectively. and $5.9 million and $3.9 million for the six months ended June 30,~~ 2020, ~~and 2019,~~ respectively. ~~We eliminate any unrealized portion~~

Table of ~~our management service fees with our equity in earnings of joint ventures.~~Contents

The following table is a summary of key balance sheet data for these joint ventures as of ~~June 30, 2020~~March 31, 2021 and December 31, ~~2019~~2020 and income statement data for the ~~six~~three months ended ~~June 30,~~March 31, 2021 and 2020 ~~and~~ ~~2019~~ (in thousands):


Balance Sheet Data:	March 31, 2021		December 31, 2020
Current assets	$	33,265	$	27,085
Noncurrent assets	68,493		68,686
Current liabilities	(13,929)		(12,545)
Noncurrent liabilities	(21,371)		(21,582)
Total net assets	$	66,458	$	61,644

Book value of RadNet joint venture interests	$	30,351	$	28,079
Cost in excess of book value of acquired joint venture interests and other	6,462		6,449
Total value of RadNet joint venture interests	$	36,813	$	34,528


Income statement data for the three months ended March 31,	2021		2020
Net revenue	$	31,718	$	26,341
Net income	$	4,803	$	4,245

Balance Sheet Data: June 30, 2020 December 31, 2019
Current assets $ 32,318
$ 27,427
Noncurrent assets 67,307
61,037
Current liabilities (10,677 ) (9,217 )
Noncurrent liabilities (22,572 ) (18,872 )
Total net assets $ 66,376
$ 60,375

Book value of RadNet joint venture interests $ 30,894
$ 28,001
Cost in excess of book value of acquired joint venture interests and other 6,476
6,469
Total value of Radnet joint venture interests $ 37,370
$ 34,470

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

Income statement data for the six months ended June 30, 2020 2019
Net revenue $ 43,849
$ 55,624
Net income $ 6,001
$ 8,723

NOTE 3 – RECENT ACCOUNTING AND REPORTING ~~STANDARDS~~STANDARD

Accounting standards adopted

In ~~June 2016,~~January 2021, the FASB issued ASU ~~No. 2016-13~~2021-01 ("ASU ~~2016-13),~~ ~~Financial Instruments - Credit Losses.~~ ASU 2016-13 replaces the incurred loss methodology previously utilized for valuing financial instruments with an expected loss methodology that is referred to as the current expected credit loss (CECL) methodology. We prospectively adopted the standard on January 1, 2020 and the adoption did not have a material impact to the condensed consolidated financial statements, 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”~~2021-01"), ~~Intangibles-Goodwill~~Reference Rate Reform (Topic 848), Scope. ASU 2021-01 provides clarifies the scope of Topic 848 so that derivatives affected by the discounting transition are explicitly eligible for certain option expedients and ~~Other-Internal-Use Software.~~ ~~ASU 2018-15 aligns the requirements for deferring implementation costs incurred~~exceptions 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~~Topic 848. The guidance is effective ~~in the first quarter of 2020 with early adoption permitted~~upon issuance and generally can be applied ~~either retrospectively or prospectively to all implementation costs incurred after~~through December 31, 2022. We are currently evaluating the ~~date~~potential impact 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 impact2021-01 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 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 potential impact of ASU 2020-04 on our financial statements.

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

In December 2019, the FASB issued ASU 2019-12 ("ASU 2019-12"), Income Taxes (Topic 740). ASU 2019-12 removes certain exceptions related to the approach for intraperiod tax allocation, the methodology for calculating income taxes in an interim period, and the recognition of deferred tax liabilities for outside basis differences. It also clarifies and simplifies other areas of the standard. ASU 2019-12 is effective beginning in the first quarter of 2021. The adoption did not have a material impact on our financial statements.

NOTE 4 – FACILITY ACQUISITIONS ~~AND DISPOSITIONS~~

~~Acquisitions:~~

Acquisitions

~~On June 1, 2020,~~

Table of Contents

During the first quarter of 2021, 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 ~~MRI at Woodbridge, LLC consisting of a single multi-modality imaging center~~the following entities, all located in ~~Avenel,~~the New ~~Jersey for cash consideration of $2.6 million. NJIN~~York city area. We made a preliminary fair value determination of the acquired assets and assumed liabilities and ~~approximately $0.5 million~~the following were recorded (in thousands):


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

Personal Health Imaging PLLC	$	2,995	$	576	$	608	$	2,355	$	50	$	14	$	(608)
ZP Elmont LLC	2,194		1,112		1,695		1,005		50		27		(1,695)
ZP Freeport LLC	6,065		3,968		2,361		2,018		50		29		(2,361)
Broadway Medical Imaging LLC	1,155		1,076		1,791		6		50		23		(1,791)
3235 Hempstead LLC	9,386		4,304		10,115		5,032		50		0		(10,115)
SLZM Realty LLC	13,671		3,862		7,715		9,759		50		0		(7,715)
2012 Sunrise Merrick LLC	11,428		2,363		5,919		9,015		50		0		(5,919)
ZP Bayside LLC	3,545		3,385		9,393		40		50		70		(9,393)
ZP Laurelton LLC	2,658		2,530		5,157		32		50		46		(5,157)
ZP Smith LLC	3,978		3,581		10,558		347		50		0		(10,558)
Total	$	57,075	$	26,757	$	55,312	$	29,609	$	500	$	209	$	(55,312)

Formation of majority owned subsidiary

On January 1, 2021 we entered into the Simi Valley Imaging Group, LLC, a partnership with Simi Valley Hospital and Health Services ("Simi Adventist"). The operation will offer multi-modality imaging services out of two locations in ~~property and equipment, $1.1 million~~Ventura County, California. Total investment in ~~right-of-use assets,~~the venture is $0.4 million. RadNet contributed $0.3 million in ~~intangible~~ assets ~~$1.1 million in operating lease liabilities,~~for a 60% economic interest and Simi Adventist contributed assets totaling $0.1 million ~~in finance lease liabilities, and $1.8 million in goodwill were recorded.~~for a 40% economic interest.

On January 2, 2020 we completed our acquisition of certain assets of Olney Open MRI, LLC, consisting of a single multi-modality imaging center located in Columbia, Maryland for cash consideration of $1.8 million. We have made a fair value determination of the acquired assets and assumed liabilities and approximately $0.8 million in property and equipment, $1.3 million in right-of-use assets, $0.3 million in intangible assets, $1.3 million in operating lease liabilities and $0.6 million in goodwill were recorded.

~~Dispositions:~~

On June 1, 2020 we completed our sale of certain assets of our Imaging On Call subsidiary to RadVantage P.C. (an unrelated corporation) for approximately $1.0 thousand. With this transaction, we have exited the teleradiology business.

NOTE 5 – CREDIT FACILITIES AND NOTES PAYABLE

As of ~~June 30, 2020~~March 31, 2021 and December 31, ~~2019~~2020 our debt obligations consisted of the following (in thousands):



	March 31, 2021		December 31, 2020
First Lien Term Loans collateralized by RadNet's tangible and intangible assets	$	601,330	$	611,028
Discounts on First Lien Term Loans	(8,730)		(9,699)
SunTrust Term Loan Agreement collateralized by NJIN's tangible and intangible assets	50,250		51,375



Total debt obligations	642,850		652,704
Less: current portion	(40,166)		(39,791)
Long term portion debt obligations	$	602,684	$	612,913

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

Included in our condensed consolidated balance sheets at March 31, 2021 are $601.3 million of First Lien Term Loans and $50.3 million of SunTrust Term Loan debt for a combined total of $651.6 million of total term loan debt (exclusive of unamortized discounts of $8.7 million) in thousands:

We had 0 outstanding balance under our $195.0 million Barclays Revolving Credit Facility at March 31, 2021 and have reserved $7.9 million for certain letters of credit. The remaining $187.1 million of our Barclays Revolving Credit Facility was available to draw upon as of March 31, 2021. We had 0 outstanding balance under our $30.0 million SunTrust Revolving Credit Facility at March 31, 2021. As of March 31, 2021, we were in compliance with all covenants under our credit facilities.

Senior Secured Credit Facilities

Barclays Credit Facilities:

At ~~June 30, 2020,~~March 31, 2021, our Barclays credit facilities were comprised of one tranche of term loans (“First Lien Term Loans”) in the principal amount described in the table above and a revolving credit facility of ~~$137.5~~$195.0 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, among RadNet, Barclays Bank plc, as administrative agent, and the lenders identified therein (as amended, the ~~“First~~"First Lien Credit ~~Agreement”~~Agreement").

At June 30, 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 June 30, 2020, we were in compliance with all covenants under our credit facilities.~~ Deferred financing costs at ~~June 30, 2020,~~March 31, 2021, net of accumulated amortization, was ~~$1.3~~$1.6 million and is specifically related to our Barclays Revolving Credit Facility.

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

We had 0 balance under our $137.5 million Barclays Revolving Credit Facility at June 30, 2020 and have reserved an additional $6.3 million for certain letters of credit. The remaining $131.2 million of our Barclays Revolving Credit Facility was available to draw upon as of June 30, 2020. We had 0 balance under our $30.0 million SunTrust Revolving Credit Facility related to our consolidated subsidiary NJIN at June 30, 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 relates to our Barclays 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. 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. Total issue costs added in relation to the amendments in 2019 amounted to approximately $4.4 million. Of this amount, $2.1 million was identified and capitalized as discount on debt, $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.

~~Terms of Barclays Credit Facilities:~~

~~First Lien Term Loans:~~

~~Interest:~~ Our First Lien Term Loans bear interest at either an Adjusted Eurodollar Rate or a Base Rate, plus an applicable ~~margin. Rates of the applicable~~ margin ~~for borrowing under the First Lien Credit 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%

At ~~June 30, 2020~~March 31, 2021 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%~~3.50% and ~~2.75%~~2.50%, 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~~will mature on ~~the earliest to occur of (i)~~ July 1, 2023 ~~and (ii)~~unless otherwise accelerated under the ~~date on which all First Lien Term Loans shall become due and payable in full under~~terms of the First Lien Credit ~~Agreement, whether by acceleration or otherwise.~~Agreement.

SunTrust Credit Facilities:

~~Additional Borrowing.~~ ~~Under~~At March 31, 2021, our SunTrust credit facilities, which relate to our consolidated subsidiary NJIN, were comprised of one term loan in the ~~First Lien~~principal amount described in the table above (the "SunTrust Term Loan") and a revolving credit facility of $30.0 million (the "SunTrust Revolving Credit ~~Agreement, we can elect to request (i) an increase~~Facility") both of which are provided pursuant to the ~~existing Barclays~~Amended and Restated Revolving Credit ~~Facility and/~~and Term Loan Agreement dated August 31, 2018, among NJIN, as borrower, with SunTrust Bank, as administrative agent, and the lenders identified therein (as amended, the "SunTrust Credit Agreement"). Our SunTrust Term Loan bears interest at either an Adjusted LIBOR or ~~(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)~~a Base Rate (each as ~~long as the First Lien Leverage Ratio (as~~ defined in the ~~First Lien~~SunTrust Credit Agreement) ~~would not exceed 4.00:1.00 after giving effect~~, plus an applicable margin according to ~~such incremental facilities,~~the following schedule:

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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

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

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

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

Less than 1.50:1.00

1.50%

per annum

0.50%

per annum

1.50%

per annum

0.30%

per annum

The loans and other obligations outstanding under the SunTrust Credit Agreement currently bear interest at a three month LIBOR election at 0.25% plus an ~~uncapped~~applicable margin and fees based on Pricing Level III described above.

The scheduled amortization of the SunTrust Term Loan began December 31, 2018 with quarterly payments of $0.8 million, representing annual amortization equal to 5.0% of the original principal amount of ~~incremental facilities, in each case subject~~the SunTrust Term Loan. At scheduled intervals, the quarterly amortization increases by $0.4 million, with the remaining balance to be paid at maturity. The SunTrust Term Loan will mature on August 31, 2023 unless otherwise accelerated under the ~~conditions and limitations set forth in~~terms of the ~~First Lien~~SunTrust 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.~~Facility.

Revolving Credit Facilities

Barclays Revolving Credit ~~Facility:~~

Facility

~~Interest:~~

Revolving loans borrowed under the Barclays Revolving Credit Facility bear interest at either an Adjusted Eurodollar Rate or a Base Rate (in each case, as more fully defined in the First Lien Credit Agreement) plus an applicable margin. ~~Rates of the~~The applicable margin for borrowing under the Barclays Revolving Credit Facility ~~also change depending~~varies based on our leverage ratio ~~and are~~in accordance with the same ~~rates as noted in the~~ schedule set forth above for First Lien Term Loans. As of ~~June 30, 2020,~~March 31, 2021, the effective interest rate payable on revolving loans under the Barclays Revolving Credit Facility was ~~6.00%~~5.75%.

~~Letters of Credit:~~ For letters of credit issued under the Barclays Revolving Credit Facility, letter of credit fees accrue at the applicable margin offor Adjusted Eurodollar Rate, currently ~~3.75%~~3.50% , 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 0.50% per annum accrues on the unused revolver commitments under the Barclays Revolving Credit Facility.

~~Maturity Date:~~ The Barclays Revolving Credit Facility will terminate on the ~~earliest to occur~~earlier of ~~(i)~~ July 1, 2023 (ii) the date we voluntarily agree to permanently reduce the Revolving Credit Facility to zero pursuant to section 2.13(b) of the First Lien Credit Agreement, and (iii) the date the Revolving Credit Facility is terminatedor termination due to specific events of default pursuant to ~~section 8.01~~the First Lien Credit Agreement.

Our Barclays Revolving Credit Facility was amended in August 2020 to add $57.5 million of revolving commitments, which additional commitments increased the maximum borrowing capacity to $195.0 million. Total issue costs added in relation to the eighth amendment amounted to approximately $0.7 million and was capitalized as deferred financing costs and will be amortized over the remaining term of the First Lien Credit Agreement.

~~The following relates to our SunTrust financing activities:~~

~~Amended and Restated Revolving Credit and Term Loan Agreement~~

On August 31, 2018, our subsidiary, 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 provide NJIN aggregate credit facilities of $90.0 million as categorized below:

~~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. The SunTrust Term Loan is repayable in scheduled quarterly amounts (as described below) and has a maturity date of 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:~~ Facility

The SunTrust ~~Restated~~ Credit Agreement ~~establishes~~established a $30.0 million revolving credit facility available to NJIN for funding requirements. The SunTrust Revolving Credit Facility terminates on the earliest of (i) August 31, 2023, (ii) the voluntary termination thereof by NJIN pursuant to Section 2.8 of the SunTrust ~~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

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by acceleration or otherwise). As of March 31, 2021, NJIN ~~has not borrowed against~~had no borrowings under the SunTrust Revolving Credit Facility.

Recent Amendments to credit facilities:

Barclays Credit Facilities:

On April 23, 2021, after the period covered by this report, we entered into the Second Amended and Restated First Lien Credit and Guaranty Agreement which provides for $725.0 million of senior secured first lien term loans and a $195.0 million senior secured revolving credit facility. See Note 7, Subsequent Events, for more information.

On August 28, 2020, RadNet Management, Inc. and RadNet, Inc. entered into Amendment No. 8, Consent and Incremental Joinder Agreement to Credit and Guaranty Agreement (the "Eighth Amendment"). The Eighth Amendment amends the First Lien Credit Agreement to add $57.5 million of revolving commitments to the Barclays Revolving Credit Facility increasing the maximum borrowing capacity under the revolving credit ~~line.~~

~~Interest:~~ ~~Interest rates~~facility to $195.0 million while leaving the maturity date of July 1, 2023 unchanged. Total issue costs added in relation to the Eighth Amendment amounted to approximately $0.7 million and ~~fees~~was capitalized as deferred financing costs and will be amortized over the remaining term of the ~~applicable margin for borrowing under~~First Lien Credit Agreement.

On April 18, 2019 we entered into the ~~SunTrust Restated~~following two amendments to the First Lien Credit Agreement: (i) Amendment No. 6, Consent and Incremental Joinder Agreement to Credit and Guaranty Agreement (the “Sixth Amendment”); and (ii) Amendment No. 7 to Credit and Guaranty Agreement (the “Seventh Amendment”). Among other things, The Sixth Amendment amended the First Lien Credit Agreement ~~adjust depending on our leverage ratio, according~~to issue $100.0 million in incremental First Lien Term Loans and to add an additional $20.0 million of revolving commitments to the ~~following table:~~Barclays Revolving Credit Facility. The Seventh Amendment amended 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. Total issue costs added in relation to the Sixth and Seventh Amendments in 2019 amounted to approximately $4.4 million. Of this amount, $2.1 million was identified and capitalized as discount on debt, $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 First Lien Credit Agreement.



~~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 applicable margin and fees based on Pricing Level III described above. The loans outstanding under the SunTrust Restated Credit Agreement currently bear interest based on a three month Eurodollar 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 $0.8 million, representing annual amortization equal to 5.00% of the original principal amount of the SunTrust Term Loan. At scheduled intervals, the quarterly amortization increases by $0.4 million, with the remaining balance to be paid at maturity.

NOTE 6 – 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 ~~June 30, 2020~~,March 31, 2021, we had outstanding options to acquire 527,899 shares of our common stock, of which options to acquire ~~298,863~~433,202 shares were exercisable. The following summarizes all of our option transactions for the ~~six~~three months ended ~~June 30, 2020~~:March 31, 2021:


Outstanding Options Under the 2006 Plan	Shares	Weighted Average Exercise price Per Common Share		Weighted Average Remaining Contractual Life (in years)	Aggregate Intrinsic Value
Balance, December 31, 2020	527,899	$	9.34
Granted	0	0


Balance, March 31, 2021	527,899	9.34		6.09	$	6,549,853
Exercisable at March 31, 2021	433,202	8.35		5.72	5,806,804

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

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Aggregate intrinsic value in the table above represents the total pretax intrinsic value (the difference between our closing stock price on ~~June 30, 2020~~March 31, 2021 and the exercise price, multiplied by the number of in-the-money options as applicable) that would have been received by the holder had all holders exercised their options on ~~June 30, 2020~~.March 31, 2021. NaN options were exercised during the ~~six~~three months ended ~~June 30, 2020~~.March 31, 2021. As of ~~June 30, 2020~~,March 31, 2021, total unrecognized stock-based compensation expense related to non-vested employee awards was ~~$0.9~~$0.5 million which is expected to be recognized over a weighted average period of approximately ~~1.85~~1.30 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,~~March 31, 2021, total unrecognized stock based compensation expense related to non-vested DeepHealth options was approximately ~~$5.0~~$3.4 million which is expected to be recognized over a weighted average period of approximately ~~2.82~~2.07 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


Outstanding Options Under the Deep Health Plan	Shares	Weighted Average Exercise price Per Common Share		Weighted Average Remaining Contractual Life (in years)	Aggregate Intrinsic Value
Balance December 31, 2020	400,539	$	—
Exercised	0	—
Balance, March 31, 2021	400,539	—		8.16	$	8,711,723
Exercisable at March 31, 2021	33,647	—		8.16	731,822

Restricted Stock Awards

The Restated Plan permits the award of restricted stock awards (“RSA’s”). As of ~~June 30, 2020~~,March 31, 2021, we have issued a total of ~~6,539,393~~7,152,934 RSA’s of which ~~319,659~~410,352 were unvested at ~~June 30, 2020~~.March 31, 2021. The following summarizes all unvested RSA’s activities during the ~~six~~three months ended ~~June 30, 2020~~:March 31, 2021:

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, 2020	329,159		$	16.69
Changes during the period
Granted	601,061		$	18.77
Vested	(519,868)		$	17.59

RSA's unvested at March 31, 2021	410,352	1.20	$	17.71

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 ~~six~~three months ended ~~June 30, 2020~~ ~~awards totaling 1,078~~March 31, 2021 0 such shares were granted.

Plan summary

In summary, of the 14,000,000 shares of common stock reserved for issuance under the Restated Plan, at ~~June 30, 2020~~,March 31, 2021, we had issued ~~15,359,316~~16,109,252 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 ~~1,983,427~~1,233,491 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.

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NOTE 7 – SUBSEQUENT EVENTS

~~Acquisitions:~~Refinancing of Barclays Credit Facilities:

The Second Amended and Restated First Lien Credit and Guaranty Agreement (the "Restated Credit Agreement"):

On ~~May 15,2020 ,~~April 23, 2021, we ~~agreed~~entered into the Restated Credit Agreement which provides for $725.0 million of senior secured first lien term loans and a $195.0 million senior secured revolving credit facility. The proceeds of the loans are being used to ~~acquire certain assets~~refinance the outstanding $611.0 million term and revolving loans, to pay fees and expenses associated with the refinancing transaction, to pay accrued interest on the previously existing facilities through the date of ~~AZ-Tech Radiology & Open MRI, LLC, consisting~~closing and to fund approximately $102.0 million to our balance sheet. The key terms of ~~8 multi-modality imaging centers located~~the Restated Credit Agreement are:

•Interest Rates: Borrowings under the Restated Credit Agreement bear interest at either the Eurodollar Rate or the Alternate Base Rate and the floor for the term loans bearing interest at the Eurodollar Rate was reduced from a minimum of 1.00% to a minimum of 0.75%.

•Maturity Dates: The maturity date for the term loans is April 23, 2028, and the maturity date for the revolving credit facility is April 23, 2026, in each case unless accelerated in accordance with the terms of the Restated Credit Agreement.

•Payments: We will be required to make quarterly payments of principal on the terms loans in the ~~Phoenix, Arizona area~~amount of approximately $1.8 million compared to approximately $9.7 million under the prior credit agreement.

Acquisitions:

In the months of April and May, 2021 we acquired certain business assets for purchase consideration of ~~$4.0~~approximately $5.0 million. ~~We expect the transaction to close August 31, 2020. The assets will be acquired from Whiterabbit.ai Inc., a company in which we hold an equity investment.~~

~~Collaborative Agreement:~~

On August 6, 2020, RadNet and Hologic, Inc. announced a comprehensive collaboration to improve breast cancer care, including the co-development of Artificial Intelligence tools, data-sharing and an upgrade of 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 and 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, ~~2019~~2020 included in our Annual Report on Form 10-K for the fiscal year ended December 31, ~~2019~~2020 filed with the U.S. Securities and Exchange Commission (SEC) on March ~~11, 2020.~~15, 2021.

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

• our ability to successfully integrate new operations, to our business and the anticipated benefits to be derived from our investments, acquisitions, and joint ventures;

•anticipated trends in our revenues, operating expenses and liquidity and cash flows, including our financial guidance and anticipated effects of cost-savings efforts;

•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

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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, 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 ~~June 30, 2020,~~March 31, 2021, we operated, directly or indirectly through joint ventures with hospitals, ~~332~~346 centers located in Arizona, California, Delaware, Florida, Maryland, New Jersey, and New York. Our centers provide physicians with imaging capabilities to facilitate the diagnosis and treatment of diseases and disorders and may reduce unnecessary invasive procedures, often reducing the cost and amount of care for patients. 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~~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 discussion below of our results centers 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 our operating results, cash flows and financial position. The magnitude of the impact will ultimately depend on the duration and extent of the COVID-19 pandemic and the impact of governmental actions and patient behavior in response to the pandemic, which remains ongoing.

As as result of 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 ramp-up, our procedure volumes have returned to approximately 90% of our 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 were successful in implementing such measures as concentration of patient traffic to larger imaging centers, negotiating payment terms with vendors and landlords, adjusting staff levels and 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 ~~six~~three months ended ~~June 30, 2020~~March 31, 2021 and ~~June 30, 2019:~~

March 31, 2020:


	Six Months Ended June 30,					Three Months Ended March 31,
	2020		2019			2021		2020
Facilities in operation	332		340		Facilities in operation	346		335
Net revenues (millions)	$	190.6	$	289.1	Net revenues (millions)	$	315	$	282

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.

Our total service revenue during the three months ended March 31, 2021 and 2020 are presented in the table below based on an allocation of the estimated transaction price with the patient between the primary patient classification of insurance coverage (in thousands):


	Three Months Ended March 31,
	2021		2020
Commercial insurance	$	182,096	$	155,461
Medicare	63,589		57,749
Medicaid	8,451		6,628
Workers' compensation/personal injury	10,399		10,274
Other patient revenue	4,775		5,662
Management fee revenue	5,219		2,567
Teleradiology and Software revenue	2,426		3,770
Other	2,622		6,222
Service fee revenue	279,577		248,333
Revenue under capitation arrangements	35,742		33,231
Total service revenue	$	315,319	$	281,564

We typically experience some seasonality to our revenue stream. ~~During~~Although we had a resurgence in procedure volumes for the first quarter ~~of each year~~ended March 31, 2021, it is in this time period that 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,~~Also, 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.

The ~~Company’s total net revenues~~discussion of our results below centers on our performance in the first quarter ending March 31, 2021. During 2020, with the onset of the novel strain of the coronavirus ("COVID-19") and related responses, we began experiencing reduced procedure volumes at the end of the first quarter which intensified through mid year. Procedure volumes returned to 90% of pre-COVID-19 pace in the third quarter and remained consistent at that level through the fourth quarter. During 2020, in response to the pandemic, we adjusted our business operations, inclusive of concentrating patient traffic to larger imaging centers, negotiating payment terms with vendors and landlords, initiating employee furloughs, compensation reductions, and telecommuting.

As we enter 2021, the arrival of the mRNA vaccine to protect against the virus is a welcome development. As inoculations ramp up across the country and other mitigation procedures continue, we can begin to look forward to a return of normal business operations. We expect that the cost saving measures implemented in 2020 will be beneficial to our financial position in 2021, provided that procedure volumes continue to ramp back up to historic levels. Despite the impact of COVID-19, we continued to invest and position for future growth. We acquired 10 new centers in the New York City area during the ~~three~~quarter ended March 31, 2021.

Equity Investments, Acquisitions and six months ended June 30, 2020 and 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):

~~Investment, Acquisition,~~Dispositions, 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, ~~2019.~~2020.

As of ~~June 30, 2020~~,March 31, 2021, we have three equity investments for which a fair value is not readily determinable and therefore the total amounts invested are recognized at cost as follows:

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~~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.

~~Turner Imaging:~~March 31, 2021.

~~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 in support of ~~its operations, 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.it operations. No observable price changes, impairment in our investment or impairment of the loan receivable was identified as of ~~June 30, 2020.~~

March 31, 2021.

Facility acquisitions

On June 1, 2020, we completed our acquisition of all the equity interests of DeepHealth Inc., ("DeepHealth") an artificial intelligence and machine learning company in an all stock purchase. As initial purchase consideration, we issued 915,132 shares at $16.93 per share (823,615 issued at execution, with up to 91,517 shares to be issued 18 months after acquisition subject to adjustment for any indemnification claims). The transaction was accounted for as an acquisition of a business and total purchase consideration determined to be approximately $34.6 million including i) 823,615 shares issued on the date of closing with fair value of $13.9 million, ii) a liability of 91,517 shares with a fair value of $1.5 million to be issued 18 months after acquisition subject to adjustment for any indemnification claims and will be marked to market in subsequent periods, iii) replacement awards attributable to pre-combination service issued to DeepHealth option holders with allocated fair value of $2.0 million, iv) acquisition date fair value of contingent consideration of $17.0 million and v) $0.1 million in closing costs reimbursed to the seller. The fair values of replacement awards attributable to pre-combination service and contingent consideration are recorded in additional paid in capital upon closing of the transaction. For the contingent consideration, there are three arrangements that will be settled in a fixed number of shares upon achievement of three individual specific milestones which are mutually exclusive of each other, with 390,789, 586,184, and 195,393 shares, respectively, issuable for each milestone arrangement. The fair value of the contingent consideration was estimated at the date of acquisition based on our share price and estimated probability of the achievement of the respective milestones. We 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")~~During the first quarter of 2021, we completed the acquisition of certain assets of ~~MRI at Woodbridge, LLC consisting of a single multi-modality imaging center~~the following entities, all located in ~~Avenel,~~the New ~~Jersey for consideration of $2.6 million. NJIN~~York city area. We made a preliminary fair value determination of the acquired assets and assumed liabilities and the following were recorded (in thousands):


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

Personal Health Imaging PLLC	$	2,995	$	576	$	608	$	2,355	$	50	$	14	$	(608)
ZP Elmont LLC	2,194		1,112		1,695		1,005		50		27		(1,695)
ZP Freeport LLC	6,065		3,968		2,361		2,018		50		29		(2,361)
Broadway Medical Imaging LLC	1,155		1,076		1,791		6		50		23		(1,791)
3235 Hempstead LLC	9,386		4,304		10,115		5,032		50		—		(10,115)
SLZM Realty LLC	13,671		3,862		7,715		9,759		50		—		(7,715)
2012 Sunrise Merrick LLC	11,428		2,363		5,919		9,015		50		—		(5,919)
ZP Bayside LLC	3,545		3,385		9,393		40		50		70		(9,393)
ZP Laurelton LLC	2,658		2,530		5,157		32		50		46		(5,157)
ZP Smith LLC	3,978		3,581		10,558		347		50		—		(10,558)
Total	$	57,075	$	26,757	$	55,312	$	29,609	$	500	$	209	$	(55,312)

~~approximately $0.5 million~~Formation of majority owned subsidiary

~~On January 2, 2020 we completed our acquisition of certain assets of Olney Open MRI, LLC, consisting of~~for a single multi-modality imaging center located in Columbia, Maryland for consideration of $1.8 million. We have made a fair value determination of the acquired assets and assumed liabilities and approximately $0.8 million in property and equipment, $1.3 million in right-of-use assets, $0.3 million in intangible assets, $1.3 million in operating lease liabilities and $0.6 million in goodwill were recorded.

~~Dispositions:~~

Joint ~~venture investment and financial information~~Venture Activity

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The following table is a summary of our investment in joint ventures during the ~~six~~three months ended ~~June 30, 2020~~March 31, 2021 (in thousands):


Balance as of December 31, 2020	$	34,528
Equity in earnings in these joint ventures	2,285





Balance as of March 31, 2021	$	36,813

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 Sheet Data:	March 31, 2021		December 31, 2020
Current assets	$	33,265	$	27,085
Noncurrent assets	68,493		68,686
Current liabilities	(13,929)		(12,545)
Noncurrent liabilities	(21,371)		(21,582)
Total net assets	$	66,458	$	61,644

Book value of RadNet joint venture interests	$	30,351	$	28,079
Cost in excess of book value of acquired joint venture interests	6,462		6,449
Total value of RadNet joint venture interests	$	36,813	$	34,528

Balance Sheet Data: June 30,
2020 December 31,
2019
Current assets $ 32,318
$ 27,427
Noncurrent assets 67,307
61,037
Current liabilities (10,677 ) (9,217 )
Noncurrent liabilities (22,572 ) (18,872 )
Total net assets $ 66,376
$ 60,375

Book value of RadNet joint venture interests $ 30,894
$ 28,001
Cost in excess of book value of acquired joint venture interests 6,476
6,469
Total value of Radnet joint venture interests $ 37,370
$ 34,470

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


Income statement data for the three months ended March 31, 2021	2021		2020
Net revenue	$	31,718	$	26,341
Net income	$	4,803	$	4,245

Income statement data for the six months ended June 30, 2020 2020 2019
Net revenue $ 43,849
$ 55,624
Net income $ 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, ~~2019,~~2020, 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~~Use of Estimates

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

Revenues

Our revenues generally relate to net patient fees received from various payors and patients themselves under contracts in which our performance obligations are to provide diagnostic services to the patients. Revenues are recorded during the period ~~when~~

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our obligations to provide diagnostic services are satisfied. Our performance obligations for diagnostic services are generally satisfied over a period of less than one day. The contractual relationships with patients, in most cases, also involve a third-party payor (Medicare, Medicaid, managed care health plans and commercial insurance companies, including plans offered through the health insurance exchanges) and the transaction prices for the services provided are dependent upon the terms provided by (Medicare and Medicaid) or negotiated with (managed care health plans and commercial insurance companies) the third-party payors. The payment arrangements with third-party payors for the services we provide to the related patients typically specify payments at amounts less than our standard charges and generally provide for payments based upon predetermined rates per diagnostic services or discounted fee-for-service rates. Management continually reviews the contractual estimation process to consider and incorporate updates to laws and regulations, changes in business and economic conditions, and the frequent changes in managed care contractual terms resulting from contract ~~renegotiations~~re-negotiations and renewals.

As it relates to the Group, this service fee revenue includes payments for both the professional medical interpretation revenue recognized by them as well as the payment for all other aspects related to our providing the imaging services, for which we earn management fees. As it relates to ~~other~~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~~our management's estimate of amounts we expect to be entitled to receive from patients and third-party payors. Estimates of contractual allowances under Medicare, Medicaid, managed care and commercial insurance plans are based upon historical collection experience of the payments received from such payors in accordance with the underlying contractual agreements. Revenues related to uninsured patients and uninsured copayment and deductible amounts for patients who have health care coverage may have price concessions applied. We also record estimated implicit price concessions (based primarily on historical collection experience) related to uninsured accounts to record self-pay revenues at the estimated amounts we expect to collect.

Provider Relief Fund (COVID-19 Stimulus Funding)

~~In the second quarter of 2020, we received approximately $25.5 million in funding from~~ The Provider Relief Fund, ~~that offered~~ offers government assistance to eligible providers throughout the healthcare system in support of certain expenses or lost revenue attributable to the coronavirus pandemic. We have recorded provider relief funding in our condensed Consolidated Statements of Operations in the amount of $6.2 million for three months ended March 31, 2021. Generally, the department of Health and Human Services ("HHS") does not intend to recoup funds as long as a provider's lost revenue and increased expenses exceed the amount of provider relief funding one has received. 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.

In recognizing revenue associated with provider relief funding our management is required to assess whether our operations have meet the applicable requirements for the funding received. During the quarter ended March 31, 2021, we continued to evaluate our operating results in light of the most recent government guidance and based on our assessment, the amount of revenue recognized is appropriate.

Accounts Receivable

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~~Our estimates and assumptions for allowances on our account receivable did not change materially during 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 Revenue~~

~~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.quarter ended March 31, 2021.

Business Combination

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~~In January 2017,~~We evaluate all acquisitions under the ~~FASB issued ASU No. 2017-01 (“ASU 2017-01”),~~framework Clarifying the Definition of a ~~Business. The update provides~~Business in the accounting guidance.. Once 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 required to recognize ~~separately from goodwill~~ the assets acquired and the liabilities assumed at their acquisition date fair values. ~~Goodwill as~~Any portion of the ~~acquisition date is measured as the~~purchase consideration transferred in excess of ~~consideration transferred over~~ the net of the acquisition date fair values of the assets acquired and the liabilities assumed, is allocated to goodwill. The allocation requires our management to make estimates of the value of various assets acquired and 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 ~~June 30, 2020~~March 31, 2021 totaled ~~$467.8~~$502.6 million. Indefinite Lived Intangible Assets at ~~June 30, 2020~~March 31, 2021 were ~~$11.3~~$7.1 million and are associated with the value of certain trade name intangibles. ~~Goodwill and trade name intangibles are recorded as~~Our management reviews the fair value of our reporting units on an annual basis to determine if an event has occurred which suggest that the fair value of a ~~result of business combinations.~~reporting unit may be impaired. 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. The review of fair value requires our management to make assessments of the business and financial prospects for a particular reporting unit. We tested goodwill for impairment on October 1, ~~2019. In addition~~2020. We also continue at regular intervals to ~~the annual impairment test, we regularly assess if an event has occurred which would require interim impairment testing. We considered~~consider the current and expected future economic and market conditions surrounding the ~~novel strain of coronavirus ("COVID-19")~~COVID-19 pandemic and ~~did~~to date have not ~~identify~~had an indication of goodwill impairment being more likely than not through ~~June 30, 2020.~~March 31, 2021.

~~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 ~~June 30, 2020~~.

~~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.

~~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 . 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. Based on current information, we do not believe that reasonably possible or probable losses associated with pending legal proceedings would either individually or in the aggregate, have a material adverse effect on our business and consolidated financial statements. However, the outcome of these matters is inherently uncertain. Therefore, if one or more of these matters were resolved against us for amounts in excess of

management's expectations, our results of operations and financial condition, including in a particular reporting period in which any such outcome becomes probable and estimable, could be materially adversely affected.

Recent Accounting Standards

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

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Results of Operations

The following table sets forth, for the three ~~and six~~ months ended ~~June 30,~~March 31, 2021 and 2020, ~~and~~ ~~2019~~, the percentage that certain items in the statements of operations bears to total service 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 March 31,
	2021		2020
REVENUE
Service fee revenue	88.7	%	88.2	%
Revenue under capitation arrangements	11.3	%	11.8	%
Total service revenue	100.0	%	100.0	%
Provider relief funding	2.0	%	—	%
OPERATING EXPENSES
Cost of operations, excluding depreciation and amortization	89.5	%	95.0	%
Depreciation and amortization	7.2	%	7.8	%
(Gain) loss on sale and disposal of equipment and other	(0.4)	%	0.3	%
Severance costs	0.1	%	0.1	%
Total operating expenses	96.4	%	103.1	%

INCOME (LOSS) FROM OPERATIONS	5.6	%	(3.1)	%

OTHER INCOME AND EXPENSES
Interest expense	4.1	%	4.1	%
Equity in earnings of joint ventures	(0.7)	%	(0.7)	%
Non-cash change in fair value of interest rate hedge	(3.6)	%	—	%
Other expenses	0.1	%	—	%
Total other (income) expenses	(0.2)	%	3.4	%
INCOME (LOSS) BEFORE INCOME TAXES	5.8	%	(6.5)	%
(Provision for) benefit from income taxes	(1.4)	%	1.6	%
NET INCOME (LOSS)	4.4	%	(5.0)	%
Net income attributable to noncontrolling interests	1.4	%	0.8	%
NET INCOME (LOSS) ATTRIBUTABLE TO RADNET, INC. COMMON STOCKHOLDERS	3.0	%	(5.8)	%

Three Months Ended
June 30, Six Months Ended
June 30,
2020 2019 2020 2019
REVENUE

     Service fee revenue 81.7 % 89.3 % 85.6 % 89.3 %
     Revenue under capitation arrangements 18.3 % 10.7 % 14.4 % 10.7 %
Total revenue 100.0 % 100.0 % 100.0 % 100.0 %
     Provider relief funding 13.4 % — % 5.4 % — %
OPERATING EXPENSES

     Cost of operations, excluding depreciation and amortization 101.9 % 85.3 % 97.8 % 87.3 %
     Depreciation and amortization 11.2 % 6.9 % 9.2 % 7.1 %
     (Gain) loss on sale and disposal of equipment and other (0.3 )% — % — % 0.2 %
     Severance costs 0.5 % 0.1 % 0.2 % 0.2 %
Total operating expenses 113.3 % 92.4 % 107.2 % 94.8 %

INCOME (LOSS) FROM OPERATIONS 0.1 % 7.6 % (1.8 )% 5.2 %

OTHER INCOME AND EXPENSES

     Interest expense 5.7 % 4.3 % 4.7 % 4.4 %
     Equity in earnings of joint ventures (0.5 )% (0.8 )% (0.6 )% (0.7 )%
     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 7.1 % 4.0 % 4.9 % 3.9 %
(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 0.9 % 0.9 % 0.8 % 0.8 %
NET (LOSS) INCOME ATTRIBUTABLE TO RADNET, INC. COMMON STOCKHOLDERS (5.6 )% 1.7 % -5.6 % 0.2 %

We have developed our medical imaging business through a combination of organic growth, equity investments, acquisitions and joint 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 ~~June 30,~~March 31, 2021 and 2020 ~~and~~ ~~2019~~ for our operations at a total company and same center level.

Three Months Ended ~~June 30, 2020~~March 31, 2021 Compared to the Three Months Ended ~~June 30, 2019~~March 31, 2020

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

Table of Contents


In Thousands	Three Months Ended June 30,				In Thousands	Three Months Ended March 31,
Revenue	2020	2019	$ Increase/(Decrease)	% Change	Revenue	2021	2020	$ Increase/(Decrease)	% Change
Total Revenue	$216,041	$289,097	$(73,056)	(25.3)%	Total Revenue	$321,567	$281,564	$40,003	14.2%
Same Center Revenue	$214,082	$284,338	$(70,257)	(24.7)%	Same Center Revenue	$304,696	$277,990	$26,706	9.6%

~~Our nationwide operations were affected~~Increased revenue was spurred by ~~the COVID-19 pandemic starting mid March 2020 which continued into the second quarter and resulted in~~ an ~~approximate 43% decrease in~~overall same center ~~procedural~~5.1% growth in procedure volumes ~~compared to~~over the same period ~~last year. Inclusive~~ in the ~~reported 2020~~prior year. On a same center basis, Mammography procedures rose 15.1%, followed by advanced radiology procedures of PET and CT, which expanded at a combined 8.7%. The growth in Mammography procedures was precipitated by our investment in the use of artificial intelligence, which is employed to keep track of patient data, catalog findings, and drive patient notification so a regular exam schedule is maintained. Assisting in the revenue ~~is $25.5~~increase was $6.2 million received in Provider Relief funding ~~which, per the official designation of the program, was used to offset lost revenues.~~and annual contractual rate increases in capitation and fee for service plans. This same center comparison excludes revenue contributions from centers that were acquired or divested subsequent to ~~April~~January 1, ~~2019.~~2020. For the three months ended ~~June 30,~~March 31, 2021, net service fee revenue from centers that were acquired or divested subsequent to January 1, 2020 and excluded from the above comparison was $16.9 million. For the three months ended March 31, 2020, net service fee revenue from centers that were acquired or divested subsequent to ~~April~~January 1, ~~2019~~2020 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 April 1, 2019 and excluded from the above comparison was $4.8~~$3.6 million.

Total operating expenses for the three months ended ~~June 30, 2020 decreased~~March 31, 2021 increased approximately ~~$51.3~~$13.6 million, or ~~19.2%~~4.7%, from ~~$267.1~~$290.3 million for the three months ended ~~June 30, 2019~~March 31, 2020 to ~~$215.9~~$303.9 million for the three months ended ~~June 30, 2020.~~March 31, 2021. The following table sets forth a breakdown of our cost of operations and total operating expenses for the three months ended ~~June 30,~~March 31, 2021 and 2020 ~~and 2019~~ (in thousands):

Other operating expenses *

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


In Thousands	Three Months Ended March 31,
Salaries and Professional Fees	2021	2020	$ Increase/(Decrease)	% Change
Total Salaries	$177,861	$167,528	$10,334	6.2%
Same Center Salaries	$168,803	$164,287	$4,516	2.8%

The ~~decrease~~moderate rise in same center salaries expense ~~was a result of staff furloughs and salary reductions initiated in response~~corresponded to the ~~COVID-19 crisis. To support our current operations, certain of our subsidiaries have accepted approximately $4.0 million in loans~~added professional staff requisite for radiology study interpretation that stemmed from ~~the Paycheck Protection Program (PPP). We have used the funds to pay program approved payroll expenses to both maintain and rehire furloughed employees.~~higher procedure volumes. This same center comparison excludes expenses from

centers that were acquired or divested subsequent to January 1, 2020. For the three months ended March 31, 2021, salaries and professional reading fees from centers that were acquired or divested subsequent to ~~April~~January 1, ~~2019.~~2020 and excluded from the above comparison was $9.1 million. For the three months ended ~~June 30,~~March 31, 2020, salaries and professional reading fees from centers that were acquired or divested subsequent to ~~April~~January 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 April 1, 20192020 and excluded from the above comparison was approximately ~~$2.9~~$3.2 million.

Stock-based compensation

Stock-based compensation increased ~~$0.4~~$1.6 million, or ~~39.4%~~24.6% to approximately ~~$1.5~~$8.2 million for the three months ended ~~June 30, 2020~~March 31, 2021 compared to ~~$1.0~~$6.6 million for three months ended ~~June 30, 2019.~~March 31, 2020. This increase was driven by the higher fair value of RSA’s awarded and vested in the first quarter of ~~2020~~2021 as compared to RSA’s awarded and vested in the prior year’s first quarter.

Building and equipment rental


In Thousands	Three Months Ended March 31,
Building & Equipment Rental	2021	2020	$ Increase/(Decrease)	% Change
Total	$28,711	$26,896	$1,815	6.8%
Same Center	$25,685	$25,671	$14	0.1%

In Thousands Three Months Ended June 30,
Building & Equipment Rental 2020 2019 $ Increase/(Decrease) % Change
Total $26,549 $26,938 $(390) (1.5)%
Same Center $25,639 $26,123 $(484) (1.9)%

This same center comparison excludes expenses from centers that were acquired or divested subsequent to ~~April~~January 1, ~~2019.~~2020. For the three months ended ~~June 30,~~March 31, 2021, building and equipment rental expenses from centers that were acquired or divested subsequent to January 1, 2020 and excluded from the above comparison was $3.0 million. For the three months ended March 31, 2020, building and equipment rental expenses from centers that were acquired or divested subsequent to ~~April~~January 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 April 1, 20192020 and excluded from the above comparison was approximately ~~$0.8~~$1.2 million.


In Thousands	Three Months Ended March 31,
Medical Supplies Expense	2021	2020	$ Increase/(Decrease)	% Change
Total	$13,970	$12,748	$1,222	9.6%
Same Center	$13,370	$12,596	$774	6.2%

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~~Higher same center medical supplies expense ~~correlated~~related to ~~lower procedure volumes~~additional consumption of contrast agents in our advanced imaging modalities driven by volume increases of CT and ~~enabled medical supplies obtained~~PET procedures and cost of personal protective equipment in ~~anticipation~~support of ~~pre-COVID-19 levels in the first quarter to be used throughout the second quarter.~~staff and patient safety. This same center comparison excludes expenses from centers that were acquired or divested subsequent to ~~April~~January 1, ~~2019.~~2020. For the three months ended ~~June 30, 2020,~~March 31, 2021, medical supplies expenses from centers that were acquired or divested subsequent to ~~April~~January 1, 2019 and excluded from the above comparison was $0.1 million. For the three months ended June 30, 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~~

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~~

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,~~March 31, 2020, medical supplies expense from centers that were acquired or divested subsequent to January 1, 2020 and excluded from the above comparison was $0.2 million.

Other operating expenses


In Thousands	Three Months Ended March 31,
Other Operating Expenses	2021	2020	$ Increase/(Decrease)	% Change
Total	$53,491	$53,623	$(133)	(0.3)%
Same Center	$49,900	$52,594	$(2,694)	(5.1)%

Savings in same center other operating expenses reflects the cumulative effect of successful contract re-negotiations aimed to reduce charges across a range of vendors from repair and maintenance to professional services. This same center comparison excludes expenses from centers that were acquired or divested subsequent to January 1, 2020. For the three months ended March 31, 2021, other operating expense from centers that were acquired or divested subsequent January 1, 2020 and excluded from the above comparison was $3.6 million. For the three months ended March 31, 2020, other operating expense from centers that were acquired or divested subsequent to January 1, 2020 was $1.0 million.

Depreciation and amortization


In Thousands	Three Months Ended March 31,
Depreciation & Amortization	2021	2020	$ Increase/(Decrease)	% Change
Total	$22,656	$21,934	$723	3.3%
Same Center	$20,952	$21,470	$(518)	(2.4)%

This same center comparison excludes expenses from centers that were acquired or divested subsequent to January 1, 2020. For the three months ended March 31, 2021, depreciation expense from centers that were acquired or divested subsequent to January 1, 2020 and excluded from the above comparison was $1.7 million. For the three months ended March 31, 2020, depreciation and amortization from centers that were acquired or divested subsequent to ~~April~~January 1, ~~2019~~2020 and excluded from the above comparison was $0.5 million.

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

We recorded ~~a gain~~gains on the disposal of equipment and other items of approximately ~~$0.6~~$1.3 million for the three months ended ~~June 30, 2020~~March 31, 2021 and a loss on sale and disposal of equipment of approximately ~~$0.1~~$0.8 million for the three months ended ~~June 30, 2019.~~March 31, 2020.

Non-cash change in fair value of interest rate hedge

We recorded ~~expense~~a gain of ~~$3.8~~$11.2 million for the ineffective portion of our 2019 Swaps for the three months ended ~~June 30, 2020.~~March 31, 2021.

Other (income) expenses

We recorded other ~~income~~expenses of approximately ~~$0.1~~$0.2 million for the three months ended ~~June 30,~~March 31, 2021. Amounts for the corresponding period ending March 31, 2020 ~~and other~~were immaterial.

We incurred severance expenses of ~~approximately $1.3~~$0.3 million for the three months ended ~~June 30, 2019 related to refinancing of our term loan debt~~March 31, 2021 and ~~legal contingency charges.~~

~~We incurred severance expenses of $0.9~~$0.2 million for the three months ended ~~June 30, 2020~~March 31, 2020.


In Thousands	Three Months Ended March 31,
Interest Expense	2021	2020	$ Increase/(Decrease)	% Change
Total Interest Expense	$12,826	$11,552	$1,274	11.0	%
Interest related to derivatives*	$3,650	$362

Interest related to amortization**	$1,147	$1,081
Adjusted Interest Expense***	$8,029	$10,109	$(2,080)	(20.6)	%

Excluding the effect of interest expense related to derivatives and amortization for the three months ended ~~June 30, 2019.~~

~~Interest expense~~

*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~~March 31, 2021 compared to the three months ended ~~June 30, 2019,~~March 31, 2020, interest expense decreased ~~$2.4~~$2.1 million, or ~~21.5%~~20.6%. 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~~based on market ~~conditions surrounding COVID-19.~~conditions. See “Liquidity and Capital Resources” below for more details on our credit facilities.

To mitigate our future interest expense exposure we have entered into certain interest rate swap agreements. See the Derivative Instruments section of Note 2, Significant Accounting Policies, to the condensed consolidated financial statements included in this report for more details on our derivative transactions.

Equity in earnings from unconsolidated joint ventures

Income tax ~~benefit~~provision

We recorded an income tax ~~benefit~~expense of ~~$4.5~~$4.4 million, or an effective tax rate of ~~33.3%~~24.1%, for the three months ended ~~June 30, 2020~~March 31, 2021 compared to ana benefit from income ~~tax provision~~taxes of ~~$3.0~~$4.4 million, , or an effective tax rate of ~~28.1%~~23.8% for the three months ended ~~June 30, 2019.~~March 31, 2020. 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~~

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):

Other operating expenses *

*~~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~~

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~~

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 January 1, 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 $3.5 million.

~~Medical supplies~~

Year over year medical supplies expense remained relatively flat due to varying factors. In the first quarter, we noted a 21% same store increase stemming from securing personal protective equipment and procurement of 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 supplies expense. This comparison excludes expenses from centers that were acquired or divested subsequent to January 1, 2019. For the six months ended June 30, 2020, medical supplies expenses from centers that were acquired or divested subsequent to April 1, 2018 and excluded from the above comparison was $2.1 million. For the six months ended June 30, 2019, medical supplies expense from centers that were acquired or divested subsequent to January 1, 2019 and excluded from the above comparison was $1.7 million.

~~Other operating expenses~~

This comparison excludes expenses from centers that were acquired or divested subsequent to January 1, 2019. For the six months ended 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 to January 1, 2019 was $4.3 million.

~~Depreciation and amortization~~

The increase in same center depreciation and amortization is primarily due to additional equipment and leasehold improvements placed in service in the first half of 2020 over the first half 2019. This comparison excludes expenses from centers that were acquired or divested subsequent to January 1, 2019. For the six months ended June 30, 2020, depreciation expense from centers that were acquired or divested subsequent to January 1, 2019 and excluded from the above comparison was $2.7 million. For the six months ended June 30, 2019, depreciation and amortization from centers that were acquired or divested subsequent to January 1, 2019 and excluded from the above comparison was $2.0 million.

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

We recorded losses on the disposal of equipment and other items of approximately $0.2 million for the six months ended June 30, 2020 and approximately $1.1 million for the six 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 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.

~~We incurred severance expenses of $1.1 million for the six months ended June 30, 2020 and $1.0 million for the six months ended June 30, 2019.~~

~~Interest expense~~

*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 six months ended June 30, 2020 compared to the six months ended June 30, 2019, interest expense decreased $3.3 million, or 14.8%. 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 six months ended June 30, 2020 we recognized equity in earnings from unconsolidated joint ventures in the amount of $2.9 million and for six months ended June 30, 2019 we recognized equity in earnings from unconsolidated joint ventures of $4.1 million, an decrease of $1.2 million or 29.6%, related to the market conditions stemming from COVID-19.

~~Income tax benefit~~

We recorded an income tax benefit of $8.9 million, or an effective tax rate of 27.8%, for the six months ended June 30, 2020 compared to an income tax provision of $1.7 million , or an effective tax rate of 23.5% for the six months ended June 30, 2019. The income tax rates for the three and six months ended June 30, 2020March 31, 2021 diverge from the federal statutory rate due to (i) noncontrolling interests due to the controlled partnerships; (ii) effects of state income taxes; and (iii) excess tax benefits attributable to share-based compensation.

We use both GAAP and non-GAAP metrics to measure our financial results. We believe that, in addition to GAAP metrics, ~~these~~certain non-GAAP metrics, such as Adjusted EBITDA assist us in measuring our business performance, cash generated from operations, leverage capacity 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~~$6.2 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 six~~ months ended ~~June 30,~~March 31, 2021 and 2020, ~~and 2019,~~ respectively.


	Three Months Ended March 31,
	2021		2020
Net income (loss) attributable to RadNet, Inc. common stockholders	$	9,458	$	(16,358)
Provision for (benefit from) income taxes	4,376		(4,381)
Interest expense	12,826		11,552
Severance costs	285		218
Depreciation and amortization	22,656		21,934
Non-cash employee stock-based compensation	8,248		6,622
(Gain) loss on sale and disposal of equipment and other	(1,307)		771
Non-cash change in fair value of interest rate hedge	(11,245)		—
Other expenses	206		6
Legal settlements	—		—


Adjusted EBITDA	$	45,503	$	20,364

Liquidity and Capital Resources

The following table ~~is a summary~~summarizes of key balance sheet data related to our liquidity as of ~~June 30, 2020~~March 31, 2021 and December 31, ~~2019~~2020 and income statement data for the ~~six~~three months ended ~~June 30,~~March 31, 2021 and 2020 ~~and 2019~~ (in thousands):


Income statement data for the three months ended March 31	2021		2020
Total net revenue	$	315,319	$	281,564
Net income (loss) attributable to RadNet common stockholders	9,458		(16,358)

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.

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

undertaking measures to reduce operating expenses, ~~and have received government stimulus funding,~~ we may ~~continue to~~again experience operating ~~losses.~~losses as a result of the pandemic which can impact both the consumption and cost of our medical imaging services. We have credit available from our current credit facilities and borrowing under those facilities is subject to continued compliance with lending covenants. We currently meet those requirements, and expect that we will continue to do so for the foreseeable future, but substantial and sustained operating losses could impact our ability to borrow under those facilities. If we are not able to meet such requirements, we may be required to seek additional 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 ~~six~~three months ended ~~June 30, 2020~~March 31, 2021 and ~~2019:~~2020:


Cash Flow Data	March 31, 2021		March 31, 2020
Cash provided by operating activities	$	28,084	$	40,913
Cash used in investing activities	(87,348)		(55,059)
Cash (used in) provided by financing activities	(11,651)		68,262

Cash Flow Data June 30, 2020 June 30, 2019
Cash provided by operating activities $ 131,465
$ 44,535
Cash used in investing activities (67,602 ) (76,845 )
Cash (used in) provided by financing activities (19,439 ) 52,430

Cash provided by operating activities for the ~~six~~three months ended ~~June 30, 2020~~March 31, 2021 was ~~$131.5~~$28.1 million and ~~$44.5~~$40.9 million for the ~~six~~three months ended ~~June 30, 2019.~~March 31, 2020. Our cash provided by operating activities for the period ended March 31, 2020 was benefited by the receipt of $39.5 million in CMS advances recorded as deferred revenue.

Cash used in investing activities for the ~~six~~three months ended ~~June 30, 2020,~~March 31, 2021, included purchases of property and equipment for approximately ~~$64.2~~$30.4 million and the acquisition of imaging ~~facilities~~and software business assets for ~~$4.2~~$57.1 million. As part of our business operations we continually evaluate investment opportunities. As noted in Note 7, Subsequent Events, we have purchase commitments for acquisitions of $5.0 million.

Cash used in financing activities for the ~~six~~three months ended ~~June 30, 2020,~~March 31, 2021, was due to principal payments on our term ~~loan~~loans and equipment ~~debt.~~debt obligations.

~~In 2018 and 2019 we~~We have entered into factoring agreements with various institutions and sold certain accounts receivable under non-recourse agreements. These transactions are accounted for as a reduction in accounts receivable as the agreements transfer effective control over and risk related to the receivables to the buyers. Payments on the associated notes receivables will be reflected as operating activities on our statement of cash flows and on our balance sheet as prepaid expenses and other current assets for the current portion and deposits and other for the long term portion. At ~~June 30, 2020~~March 31, 2021 we have ~~$22.5~~$20.5 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.

Senior Secured Credit Facilities

~~At June 30, 2020, our~~We maintain secured credit facilities ~~were~~with Barclays Bank PLC and with SunTrust Bank. The Barclays credit facilities are comprised of ~~one tranche of~~first lien 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 (asfacility. On August 28, 2020 we amended the ~~“First Lien Credit Agreement”).~~

~~At June 30, 2020, our~~Barclays credit facilities which extended and increased the amount available under the revolving line of credit to $195.0 million. The SunTrust credit facilities ~~which relate to our consolidated subsidiary NJIN, were~~are comprised of ~~one~~a 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.~~

million. As of ~~June 30, 2020,~~March 31, 2021, we were in compliance with all covenants under our credit facilities. Deferred financing costs at ~~June 30, 2020,~~March 31, 2021, net of accumulated amortization, was ~~$1.3~~$1.6 million and is specifically related to our Barclays ~~Revolving Credit Facility.~~

revolving credit facility.

Included in our condensed consolidated balance sheets at ~~June 30, 2020~~March 31, 2021 are ~~$684.1~~$651.6 million of total term loan debt (exclusive of unamortized discounts of ~~$11.6~~$8.7 million) in thousands:

At March 31, 2021, we had no ~~balance~~borrowings under our ~~$137.5 million~~ Barclays ~~Revolving Credit Facility at June 30, 2020 and have reserved against the borrowing capacity $6.3 million~~or SunTrust revolving credit facilities. After reserves for ~~certain~~outstanding letters of ~~credit. The remaining $131.2~~credit of $7.9 million ofon our Barclays Revolving Credit Facility, ~~was~~we have $187.1 million available ~~to draw upon as of June 30, 2020. We had no balance~~for borrowing and $30.0 million available under our ~~$30.0 million Suntrust~~SunTrust Revolving Credit ~~Facility at June 30, 2020.~~

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

On April 23, 2021, after the period covered by this report, we entered into the Restated Credit Agreement which provides for $725.0 million of senior secured first lien term loans and a $195.0 million senior secured revolving credit facility. The proceeds of the loan were used to refinance the outstanding $611.0 million term and revolving loans, to pay fees and expenses associated with the refinancing transaction, to pay accrued interest on the previously existing facilities through the date of closing and to fund approximately $102.0 million to our balance sheet. In addition, the Restated Credit Agreement lowered our interest rates and reduced our principal payments from $9.7 million to $1.8 million per quarter. We expect our existing capital resources, anticipated cash from operations and our borrowing capacity under our credit facilities will be sufficient to sustain our operations for the next twelve months and the foreseeable future.

~~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 June 30, 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 $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 June 30, 2020, we had $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~~ At March 31, 2021, 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~~had $601.3 million outstanding subject to ~~provide a hedge against interest rate increases. Under these arrangements, we purchased a cap~~an adjusted Eurodollar election on ~~3 month LIBOR at 2.0%. At June 30, 2020,~~First Lien Term Loans and our effective 6 month LIBOR rate plus applicable was ~~1.00%~~4.75%. 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 current Eurodollar rate would result in an increase of ~~$6.3~~$6.0 million in annual interest expense and a corresponding decrease in income before taxes. At March 31, 2021, we had $6.0 million outstanding subject to an adjusted prime election on First Lien Term Loans and our effective prime rate was 5.75%. A hypothetical 1% increase in the adjusted Prime rates under the First Lien Credit Agreement over the current Prime rate would result in an increase of $0.1 million in annual interest expense and a corresponding decrease in income before taxes.

~~Interest Rate Sensitivity SunTrust Term Loan~~

At ~~June 30, 2020,~~March 31, 2021, we had ~~$54.8~~$50.3 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 ~~June 30, 2020,~~March 31, 2021, our effective LIBOR rate plus applicable margin was ~~3.45%~~2.25%. A hypothetical 1% increase in the adjusted Eurodollar rates under the SunTrust Restated Credit Agreement would result in an increase of approximately $0.5 million in annual interest expense and a corresponding decrease in income before taxes. No

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

ITEM 4. 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 three months ended ~~June 30, 2020~~March 31, 2021 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, 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 June 1, 2020, we completed our purchase of Deep Health, Inc. by issuing 823,615 shares of our common stock to purchase all of Deep Health's shares and share equivalents. The shares were ascribed a value of $13.9 million and were issued pursuant to the private placement exemption contained in Section 4(a)(2) of the Securities Act.None.

ITEM 3. Defaults Upon Senior Securities

ITEM 4. Mine Safety Disclosures

ITEM 5. Other Information

* 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.

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.

Howard G. Berger, M.D., President and Chief Executive Officer

(Principal Executive Officer)

Mark D. Stolper, Chief Financial Officer

(Principal Financial and Accounting Officer)



	June 30, 2020			December 31, 2019
	(unaudited)
ASSETS
CURRENT ASSETS
Cash and cash equivalents	$	84,583		$	40,165
Accounts receivable	125,745			154,763
Due from affiliates	1,472			1,242
Prepaid expenses and other current assets	35,720			45,004
Total current assets	247,520			241,174
PROPERTY, EQUIPMENT AND RIGHT-OF-USE ASSETS
Property and equipment, net	370,188			367,795
Operating lease right-of-use assets	448,855			445,477
Total property, equipment and right-of-use assets	819,043			813,272
OTHER ASSETS
Goodwill	467,803			441,973
Other intangible assets	57,601			42,994
Deferred financing costs	1,336			1,559
Investment in joint ventures	37,370			34,470
Deferred tax assets, net of current portion	46,226			34,548
Deposits and other	40,104			36,996
Total assets	$	1,717,003		$	1,646,986
LIABILITIES AND EQUITY
CURRENT LIABILITIES
Accounts payable, accrued expenses and other	$	206,272		$	207,585
Due to affiliates	20,042			14,347
Deferred revenue	45,700			1,316
Current finance lease liability	3,264			3,283
Current operating lease liability	65,400			61,206
Current portion of notes payable	41,715			39,691
Total current liabilities	382,393			327,428
LONG-TERM LIABILITIES
Long-term finance lease liability	1,682			3,264
Long-term operating lease liability	424,018			420,922
Notes payable, net of current portion	634,840			652,704
Other non-current liabilities	40,814			9,529
Total liabilities	1,483,747			1,413,847
EQUITY
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	304,012			262,865
Accumulated other comprehensive loss	(26,098		)	(8,026		)
Accumulated deficit	(130,111		)	(103,159		)
Total RadNet, Inc.'s stockholders' equity	147,808			151,685
Noncontrolling interests	85,448			81,454
Total equity	233,256			233,139
Total liabilities and equity	$	1,717,003		$	1,646,986



	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 - 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	36,770		—		—			—			—			—			—			—
Stock-based compensation expense	—		—		1,540			—			—			1,540			—			1,540
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	—		—		—			(7		)	—			(7		)	—			(7		)
Change in fair value cash flow hedge, net of taxes	—		—		—			(409		)	—			(409		)	—			(409		)
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 - 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	—		—		—			—			—			—			—			—
Issuance of common stock under the equity compensation plan	47,256		—		—			—			—			—			—			—
Stock-based compensation expense	—		—		1,124			—			—			1,124			—			1,124
Forfeiture of restricted stock	(1,500	)	—		(5		)	—			—			(5		)	—			(5		)
Purchase of noncontrolling interests	—		—		—			—			—			—			(1,818		)	(1,818		)
Change in cumulative foreign currency translation adjustment	—		—		—			3			—			3			—			3
Change in fair value cash flow hedge, net of taxes	—		—		—			(8,002		)	—			(8,002		)	—			(8,002		)
Other	—		—		—			—			(1		)	(1		)	—			(1		)
Net loss	—		—		—			—			4,899			4,899			2,692			7,591
BALANCE-JUNE 30, 2019	50,127,234		$	5	$	257,607		$	(6,944	)	$	(116,750	)	$	133,918		$	78,512		$	212,430



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



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 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)



	As of June 30, 2020
	Level 1		Level 2		Level 3		Total
Current and long term liabilities
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



Balance Sheet Data:	June 30, 2020			December 31, 2019
Current assets	$	32,318		$	27,427
Noncurrent assets	67,307			61,037
Current liabilities	(10,677		)	(9,217		)
Noncurrent liabilities	(22,572		)	(18,872		)
Total net assets	$	66,376		$	60,375

Book value of RadNet joint venture interests	$	30,894		$	28,001
Cost in excess of book value of acquired joint venture interests and other	6,476			6,469
Total value of Radnet joint venture interests	$	37,370		$	34,470

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


	Face Value		Discount		Total Carrying Value
First Lien Term Loans	$	601,330	$	(8,730)	$	592,600
SunTrust Term Loan	50,250		0		50,250
Total Term Loans	$	651,580	$	(8,730)	$	642,850



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)%



Cash Flow Data	June 30, 2020			June 30, 2019
Cash provided by operating activities	$	131,465		$	44,535
Cash used in investing activities	(67,602		)	(76,845		)
Cash (used in) provided by financing activities	(19,439		)	52,430


Exhibit Number		Description

~~Exhibit~~ ~~Number~~ 10.17		~~Description~~

~~10.17~~	~~Nonqualified Deferred Compensation Plan Compensation Plan, effective~~ Second Amended and Restated First Lien Credit and Guaranty Agreement, dated as of ~~May 5, 2016~~April 23, 2021, by and among RadNet Management, Inc., a California corporation, RadNet, Inc., a Delaware corporation, certain subsidiaries and affiliates of RadNet Management, Inc., as Guarantors, the Lenders and other financial institutions from time to time party thereto, and Barclays Bank PLC, as Administrative Agent and Collateral Agent (incorporated by reference to exhibit filed with ~~form~~Form 8-K on May 9, 2016)**April 26, 2021).

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		The following financial information from RadNet, Inc.'s Quarterly Report on Form 10-Q for the quarter ended ~~June~~March 30, ~~2020~~2021 formatted in Inline XBRL (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.

104		Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101)


*			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.



	RADNET, INC.
	(Registrant)

Date: ~~August~~May 10, ~~2020~~2021	By:	/s/ Howard G. Berger, M.D.
		Howard G. Berger, M.D., President and Chief Executive Officer (Principal Executive Officer)


Date: ~~August~~May 10, ~~2020~~2021	By:	/s/ Mark D. Stolper
		Mark D. Stolper, Chief Financial Officer (Principal Financial and Accounting Officer)