UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington D.C. 20549

FORM 10-Q

(Mark One)

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

For the quarterly period ended ~~September 30, 2021~~March 31, 2022

☐ 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 its 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) 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 every Interactive Data File required to be submitted 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.

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 ☒

The number of shares of the registrant’s common stock outstanding on ~~November 4, 2021~~May 5, 2022 was ~~53,436,698~~56,219,473 shares.

Table of Contents

RADNET, INC.

TABLE OF CONTENTS


			Page

PART I – FINANCIAL INFORMATION			1

ITEM 1. Financial Statements			1

Condensed Consolidated Balance Sheets at ~~September~~ ~~30, 2021~~March 31, 2022 and December 31, ~~2020~~2021			1

Condensed Consolidated Statements of Operations for the Three ~~and~~ ~~Nine~~Months Ended ~~September~~ ~~30,~~March 31, 2022 and 2021 ~~and 2020~~			21

Condensed Consolidated Statements of Comprehensive Income ~~(Loss)~~ for the Three Months Ended March 31, 2022 and ~~Nine~~ ~~Months~~ ~~September~~ ~~30,~~ 2021 ~~and 2020~~			3

Condensed Consolidated Statement of Stockholders' Equity for the Three Months Ended ~~September~~ ~~30,~~March 31, 2022 and 2021 ~~and 2020~~			4

~~Condensed Consolidated Statement of Stockholders’ Equity for the~~ ~~Nine~~ ~~Months Ended~~ ~~September~~ ~~30, 2021 and 2020~~			6

Condensed Consolidated Statements of Cash Flows for the ~~Nine~~Three Months Ended ~~September~~ ~~30,~~March 31, 2022 and 2021 ~~and 2020~~			85

Notes to Condensed Consolidated Financial Statements			107

ITEM 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations			2624

ITEM 3. Quantitative and Qualitative Disclosures About Market Risk			4338

ITEM 4. Controls and Procedures			4339

PART II – OTHER INFORMATION			4540

ITEM 1. Legal Proceedings			4540

ITEM 1A. Risk Factors			4540

ITEM 2. Unregistered Sales of Equity Securities and Use of Proceeds			4540

ITEM 3. Defaults Upon Senior Securities			4540

ITEM 4. Mine Safety Disclosures			4540

ITEM 5. Other Information			4540

ITEM 6. Exhibits			4641

SIGNATURES			4742

Table of Contents

PART I - FINANCIAL INFORMATION

Item 1 – Financial Statements

RADNET, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS

(IN THOUSANDS EXCEPT SHARE AND PER SHARE DATA)


		September 30, 2021		December 31, 2020			March 31, 2022		December 31, 2021
		(unaudited)					(unaudited)
ASSETS	ASSETS					ASSETS
CURRENT ASSETS	CURRENT ASSETS					CURRENT ASSETS
Cash and cash equivalents	Cash and cash equivalents	$	151,253	$	102,018	Cash and cash equivalents	$	70,713	$	134,606
Accounts receivable	Accounts receivable	152,409		129,585		Accounts receivable	159,725		135,062
Due from affiliates	Due from affiliates	6,280		5,836		Due from affiliates	5,783		5,384
Prepaid expenses and other current assets	Prepaid expenses and other current assets	30,054		32,985		Prepaid expenses and other current assets	52,475		49,212

Total current assets	Total current assets	339,996		270,424		Total current assets	288,696		324,264
PROPERTY, EQUIPMENT AND RIGHT-OF-USE ASSETS	PROPERTY, EQUIPMENT AND RIGHT-OF-USE ASSETS					PROPERTY, EQUIPMENT AND RIGHT-OF-USE ASSETS
Property and equipment, net	Property and equipment, net	452,145		399,335		Property and equipment, net	488,958		484,247
Operating lease right-of-use assets	Operating lease right-of-use assets	577,712		483,661		Operating lease right-of-use assets	595,792		584,291
Total property, equipment and right-of-use assets	Total property, equipment and right-of-use assets	1,029,857		882,996		Total property, equipment and right-of-use assets	1,084,750		1,068,538
OTHER ASSETS	OTHER ASSETS					OTHER ASSETS
Goodwill	Goodwill	502,710		472,879		Goodwill	570,188		513,820
Other intangible assets	Other intangible assets	57,499		52,393		Other intangible assets	99,339		56,603
Deferred financing costs	Deferred financing costs	2,260		1,767		Deferred financing costs	2,009		2,135
Investment in joint ventures	Investment in joint ventures	44,228		34,528		Investment in joint ventures	44,746		42,229
Deferred tax assets	Deferred tax assets	24,563		34,687		Deferred tax assets	12,800		14,853
Deposits and other	Deposits and other	41,250		36,983		Deposits and other	38,993		36,032
Total assets	Total assets	$	2,042,363	$	1,786,657	Total assets	$	2,141,521	$	2,058,474
LIABILITIES AND EQUITY	LIABILITIES AND EQUITY					LIABILITIES AND EQUITY
CURRENT LIABILITIES	CURRENT LIABILITIES					CURRENT LIABILITIES
Accounts payable, accrued expenses and other	Accounts payable, accrued expenses and other	$	240,837	$	236,684	Accounts payable, accrued expenses and other	$	276,313	$	263,937
Due to affiliates	Due to affiliates	29,261		14,010		Due to affiliates	21,985		23,530
Deferred revenue	Deferred revenue	19,619		39,257		Deferred revenue	6,930		10,701
Current finance lease liability		—		2,578

Current operating lease liability	Current operating lease liability	70,613		65,794		Current operating lease liability	64,906		65,452
Current portion of notes payable	Current portion of notes payable	11,165		39,791		Current portion of notes payable	11,164		11,164
Total current liabilities	Total current liabilities	371,495		398,114		Total current liabilities	381,298		374,784
LONG-TERM LIABILITIES	LONG-TERM LIABILITIES					LONG-TERM LIABILITIES
Long-term finance lease liability		—		743

Long-term operating lease liability	Long-term operating lease liability	553,173		463,096		Long-term operating lease liability	590,665		577,675
Notes payable, net of current portion	Notes payable, net of current portion	746,288		612,913		Notes payable, net of current portion	740,707		743,498
Other non-current liabilities	Other non-current liabilities	32,028		53,488		Other non-current liabilities	7,401		16,360
Total liabilities	Total liabilities	1,702,984		1,528,354		Total liabilities	1,720,071		1,712,317
EQUITY	EQUITY					EQUITY
Common stock - $0.0001 par value, 200,000,000 shares authorized; 53,301,816 and 51,640,537 shares issued and outstanding at September 30, 2021 and December 31, 2020, respectively		5		5
Common stock - $0.0001 par value, 200,000,000 shares authorized; 56,197,826 and 53,548,227 shares issued and outstanding at March 31, 2022 and December 31, 2021, respectively						Common stock - $0.0001 par value, 200,000,000 shares authorized; 56,197,826 and 53,548,227 shares issued and outstanding at March 31, 2022 and December 31, 2021, respectively	5		5
Additional paid-in-capital	Additional paid-in-capital	335,599		307,788		Additional paid-in-capital	409,863		342,592
Accumulated other comprehensive loss	Accumulated other comprehensive loss	(21,317)		(24,051)		Accumulated other comprehensive loss	(20,761)		(20,421)
Accumulated deficit	Accumulated deficit	(89,450)		(117,999)		Accumulated deficit	(90,260)		(93,272)
Total RadNet, Inc.'s stockholders' equity	Total RadNet, Inc.'s stockholders' equity	224,837		165,743		Total RadNet, Inc.'s stockholders' equity	298,847		228,904
Noncontrolling interests	Noncontrolling interests	114,542		92,560		Noncontrolling interests	122,603		117,253
Total equity	Total equity	339,379		258,303		Total equity	421,450		346,157
Total liabilities and equity	Total liabilities and equity	$	2,042,363	$	1,786,657	Total liabilities and equity	$	2,141,521	$	2,058,474

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 September 30,				Nine Months Ended September 30,					Three Months Ended March 31,
		2021		2020		2021		2020			2022		2021
REVENUE	REVENUE									REVENUE
Service fee revenue	Service fee revenue	$	295,407	$	256,730	$	870,479	$	660,760	Service fee revenue	$	303,276	$	279,577
Revenue under capitation arrangements	Revenue under capitation arrangements	37,283		35,046		111,449		103,145		Revenue under capitation arrangements	38,491		35,742
Total service revenue	Total service revenue	332,690		291,776		981,928		763,905		Total service revenue	341,767		315,319
Provider relief funding	Provider relief funding	—		221		6,291		25,696		Provider relief funding	—		6,248
OPERATING EXPENSES	OPERATING EXPENSES									OPERATING EXPENSES
Cost of operations, excluding depreciation and amortization	Cost of operations, excluding depreciation and amortization	272,756		246,462		838,609		708,095		Cost of operations, excluding depreciation and amortization	315,039		282,280
Depreciation and amortization	Depreciation and amortization	24,606		21,247		71,272		64,536		Depreciation and amortization	27,118		22,656
Loss (gain) on sale and disposal of equipment and other	Loss (gain) on sale and disposal of equipment and other	2,595		342		(279)		543		Loss (gain) on sale and disposal of equipment and other	1,128		(1,307)
Severance costs	Severance costs	163		571		715		1,647		Severance costs	201		285
Total operating expenses	Total operating expenses	300,120		268,622		910,317		774,821		Total operating expenses	343,486		303,914
INCOME FROM OPERATIONS		32,570		23,375		77,902		14,780
(LOSS) INCOME FROM OPERATIONS										(LOSS) INCOME FROM OPERATIONS	(1,719)		17,653

OTHER INCOME AND EXPENSES	OTHER INCOME AND EXPENSES									OTHER INCOME AND EXPENSES
Interest expense	Interest expense	12,032		11,061		37,028		33,443		Interest expense	11,593		12,826
Equity in earnings of joint ventures	Equity in earnings of joint ventures	(2,853)		(2,276)		(8,259)		(5,176)		Equity in earnings of joint ventures	(2,517)		(2,285)
Non-cash change in fair value of interest rate hedge	Non-cash change in fair value of interest rate hedge	(2,870)		679		(14,149)		4,523		Non-cash change in fair value of interest rate hedge	(20,819)		(11,245)
Debt restructuring and extinguishment expenses		—		—		6,044		—
Other (income) expenses		(167)		(139)		1,699		(247)
Total other expenses		6,142		9,325		22,363		32,543
INCOME (LOSS) BEFORE INCOME TAXES		26,428		14,050		55,539		(17,763)
(Provision for) benefit from income taxes		(5,284)		(3,825)		(12,534)		5,029
NET INCOME (LOSS)		21,144		10,225		43,005		(12,734)

Other expenses										Other expenses	165		206
Total other income										Total other income	(11,578)		(498)
INCOME BEFORE INCOME TAXES										INCOME BEFORE INCOME TAXES	9,859		18,151
Provision for income taxes										Provision for income taxes	(1,496)		(4,376)
NET INCOME										NET INCOME	8,363		13,775
Net income attributable to noncontrolling interests	Net income attributable to noncontrolling interests	4,924		4,069		14,455		8,063		Net income attributable to noncontrolling interests	5,350		4,317
NET INCOME (LOSS) ATTRIBUTABLE TO RADNET, INC. COMMON STOCKHOLDERS		$	16,220	$	6,156	$	28,550	$	(20,797)
NET INCOME ATTRIBUTABLE TO RADNET, INC. COMMON STOCKHOLDERS										NET INCOME ATTRIBUTABLE TO RADNET, INC. COMMON STOCKHOLDERS	$	3,013	$	9,458

BASIC NET INCOME (LOSS) PER SHARE ATTRIBUTABLE TO RADNET, INC. COMMON STOCKHOLDERS		$	0.31	$	0.12	$	0.55	$	(0.41)
BASIC NET INCOME PER SHARE ATTRIBUTABLE TO RADNET, INC. COMMON STOCKHOLDERS										BASIC NET INCOME PER SHARE ATTRIBUTABLE TO RADNET, INC. COMMON STOCKHOLDERS	$	0.05	$	0.18

DILUTED NET INCOME (LOSS) PER SHARE ATTRIBUTABLE TO RADNET, INC. COMMON STOCKHOLDERS		$	0.30	$	0.12	$	0.54	$	(0.41)
DILUTED NET INCOME PER SHARE ATTRIBUTABLE TO RADNET, INC. COMMON STOCKHOLDERS										DILUTED NET INCOME PER SHARE ATTRIBUTABLE TO RADNET, INC. COMMON STOCKHOLDERS	$	0.05	$	0.18
WEIGHTED AVERAGE SHARES OUTSTANDING	WEIGHTED AVERAGE SHARES OUTSTANDING									WEIGHTED AVERAGE SHARES OUTSTANDING
Basic	Basic	52,810,644		51,358,603		52,323,360		50,746,380		Basic	55,303,007		51,951,506
Diluted	Diluted	53,817,840		51,955,815		53,249,698		50,746,380		Diluted	56,362,193		52,828,941

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

Table of Contents

RADNET, INC. AND SUBSIDIARIES

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

(IN THOUSANDS)

(unaudited)

Three Months Ended September 30, Nine Months Ended September 30,
2021 2020 2021 2020
NET INCOME (LOSS) $ 21,144 $ 10,225 $ 43,005 $ (12,734)
     Foreign currency translation adjustments (11) 11 (32) 6
     Change in fair value of cash flow hedge, net of taxes 2,870 195 14,149 (18,764)
     Change in fair value of cash flow hedge from prior periods reclassified to earnings, net of taxes 920 969 2,765 1,861
COMPREHENSIVE INCOME (LOSS) 24,923 11,400 59,887 (29,631)
     Less comprehensive income attributable to noncontrolling interests 4,924 4,069 14,455 8,063
COMPREHENSIVE INCOME (LOSS) ATTRIBUTABLE TO
RADNET, INC. COMMON STOCKHOLDERS $ 19,999 $ 7,331 $ 45,432 $ (37,694)


	Three Months Ended March 31,
	2022		2021
NET INCOME	$	8,363	$	13,775
Foreign currency translation adjustments	(1,264)		(12)

Change in fair value of cash flow hedge from prior periods reclassified to earnings, net of taxes	923		925
COMPREHENSIVE INCOME	8,022		14,688
Less comprehensive income attributable to noncontrolling interests	5,350		4,317
COMPREHENSIVE INCOME ATTRIBUTABLE TO
RADNET, INC. COMMON STOCKHOLDERS	$	2,672	$	10,371

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

Table of Contents

RADNET, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY

(IN THOUSANDS EXCEPT SHARE DATA)

(unaudited)

The following table summarizes changes in the Company’s consolidated stockholders' equity, including noncontrolling interest, during the three months ended ~~September 30, 2021~~March 31, 2022 and ~~September 30, 2020.~~March 31, 2021.

~~Table of Contents~~


		Common Stock			Additional Paid-In Capital		Accumulated Other Comprehensive Loss		Accumulated Deficit		Total Radnet, Inc.'s Equity		Noncontrolling Interests		Total Equity			Common Stock			Additional Paid-In Capital		Accumulated Other Comprehensive Loss		Accumulated Deficit		Total Radnet, Inc.'s Equity		Noncontrolling Interests		Total Equity
		Shares	Amount															Shares	Amount
BALANCE - JUNE 30, 2021		52,678,030	$	5	$	324,954	$	(22,227)	$	(105,668)	$	197,064	$	102,215	$	299,279
BALANCE - JANUARY 1, 2022																	BALANCE - JANUARY 1, 2022	53,548,227	$	5	$	342,592	$	(20,421)	$	(93,272)	$	228,904	$	117,253	$	346,157

Issuance of common stock under the equity compensation plan	Issuance of common stock under the equity compensation plan	94,638	—		—		—		—		—		—		—		Issuance of common stock under the equity compensation plan	530,188	—		—		—		—		—		—		—
Issuance of common stock under the DeepHealth equity compensation plan	Issuance of common stock under the DeepHealth equity compensation plan	464,855	—		—		—		—		—		—		—		Issuance of common stock under the DeepHealth equity compensation plan	13,119	—		—		—		—		—		—		—
Stock-based compensation expense	Stock-based compensation expense	—	—		4,463		—		—		4,463		—		4,463		Stock-based compensation expense	—	—		10,801		—		—		10,801		—		10,801

Issuance of common stock for sale of unregistered securities for acquisition		67,658	—		2,025		—		—		2,025		—		2,025
Forfeiture of restricted stock		(3,365)	—		(42)		—		—		(42)		—		(42)
Sale of economic interests in majority owned subsidiary, net of taxes		—	—		4,198		—		—		4,198		7,404		11,602
Issuance of common stock in connection with acquisitions																	Issuance of common stock in connection with acquisitions	2,106,292	—		56,470		—		—		56,470		—		56,470

Change in cumulative foreign currency translation adjustment	Change in cumulative foreign currency translation adjustment	—	—		—		(11)		—		(11)		—		(11)		Change in cumulative foreign currency translation adjustment	—	—		—		(1,264)		—		(1,264)		—		(1,264)

Change in fair value of cash flow hedge from prior periods reclassified to earnings, net of taxes	Change in fair value of cash flow hedge from prior periods reclassified to earnings, net of taxes	—	—		—		920		—		920		—		920		Change in fair value of cash flow hedge from prior periods reclassified to earnings, net of taxes	—	—		—		923		—		923		—		923
Other	Other	—	—		1		1		(2)		—		(1)		(1)		Other	—	—		—		1		(1)		—		—		—
Net income	Net income	—	—		—		—		16,220		16,220		4,924		21,144		Net income	—	—		—		—		3,013		3,013		5,350		8,363
BALANCE-SEPTEMBER 30, 2021		53,301,816	$	5	$	335,599	$	(21,317)	$	(89,450)	$	224,837	$	114,542	$	339,379
BALANCE-MARCH 31, 2022																	BALANCE-MARCH 31, 2022	56,197,826	$	5	$	409,863	$	(20,761)	$	(90,260)	$	298,847	$	122,603	$	421,450

BALANCE - JUNE 30, 2020		51,554,760	$	5	$	304,012	$	(26,098)	$	(130,111)	$	147,808	$	85,448	$	233,256
BALANCE - JANUARY 1, 2021																	BALANCE - JANUARY 1, 2021	51,640,537	$	5	$	307,788	$	(24,051)	$	(117,999)	$	165,743	$	92,560	$	258,303
Issuance of common stock upon exercise of options	Issuance of common stock upon exercise of options	—	—		—		—		—		—		—		—		Issuance of common stock upon exercise of options	—	—		—		—		—		—		—		—
Issuance of common stock under the equity compensation plan	Issuance of common stock under the equity compensation plan	37,000	—		—		—		—		—		—		—		Issuance of common stock under the equity compensation plan	699,825	—		—		—		—		—		—		—
Issuance of common stock under the DeepHealth equity compensation plan	Issuance of common stock under the DeepHealth equity compensation plan	4,338	—		—		—		—		—		—		—		Issuance of common stock under the DeepHealth equity compensation plan	494	—		—		—		—		—		—		—
Stock-based compensation expense	Stock-based compensation expense	—	—		2,067		—		—		2,067		—		2,067		Stock-based compensation expense	—	—		8,248		—		—		8,248		—		8,248
Purchase of noncontorlling interests																	Purchase of noncontorlling interests	—	—		(4)		—		—		(4)		—		(4)

Contributions from noncontrolling partner																	Contributions from noncontrolling partner	—	—		—		—		—		—		123		123
Change in cumulative foreign currency translation adjustment																	Change in cumulative foreign currency translation adjustment	—	—		—		(12)		—		(12)		—		(12)

Change in fair value of cash flow hedge from prior periods reclassified to earnings																	Change in fair value of cash flow hedge from prior periods reclassified to earnings	—	—		—		925		—		925		—		925

Purchase of noncontrolling interests		—	—		—		—		—		—		(601)		(601)
Change in cumulative foreign currency translation adjustment		—	—		—		11		—		11		—		11
Change in fair value cash flow hedge, net of taxes		—	—		—		195		—		195		—		195
Change in fair value of cash flow hedge from prior periods reclassified to earnings		—	—		—		969		—		969				969
Other		—	—		—		—		(1)		(1)		—		(1)
Net income	Net income	—	—		—		—		6,156		6,156		4,069		10,225		Net income	—	—		—		—		9,458		9,458		4,317		13,775
BALANCE-SEPTEMBER 30, 2020		51,596,098	$	5	$	306,079	$	(24,923)	$	(123,956)	$	157,205	$	88,916	$	246,121
BALANCE-MARCH 31, 2021																	BALANCE-MARCH 31, 2021	52,340,856	$	5	$	316,032	$	(23,138)	$	(108,541)	$	184,358	$	97,000	$	281,358

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

~~Table of Contents~~

~~RADNET, INC. AND SUBSIDIARIES~~

~~CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY~~

~~(IN THOUSANDS EXCEPT SHARE DATA)~~

~~(unaudited)~~

The following table summarizes changes in the Company’s consolidated stockholders' equity, including noncontrolling interest, during the nine months ended September 30, 2021 and September 30, 2020.

~~Table of Contents~~

Common Stock Additional Paid-In
Capital Accumulated Other
Comprehensive
Loss Accumulated
Deficit Total
Radnet, Inc.'s
Equity Noncontrolling
Interests Total
Equity
Shares Amount
BALANCE - DECEMBER 31, 2020 51,640,537 $ 5 $ 307,788 $ (24,051) $ (117,999) $ 165,743 $ 92,560 $ 258,303
Issuance of common stock upon exercise of options 2,500 — 26 — — 26 — 26
Issuance of common stock under the equity compensation plan 1,127,996 — — — — — — —
Issuance of common stock under the DeepHealth equity compensation plan 466,490 — — — — — — —
Stock-based compensation expense — — 21,608 — — 21,608 — 21,608
Issuance of common stock for sale of unregistered securities for acquisition 67,658 — 2,025 — — 2,025 — 2,025
Forfeiture of restricted stock (3,365) — (42) — — (42) — (42)
Purchase of noncontrolling interests by third party — — (4) — — (4) — (4)
Contribution from noncontrolling partner — — — — — — 123 123
Sale of economic interests in majority owned subsidiary, net of taxes — — 4,198 — — 4,198 7,404 11,602
Change in cumulative foreign currency translation adjustment — — — (32) — (32) — (32)
Change in fair value of cash flow hedge from prior periods reclassified to earnings, net of taxes — — — 2,765 — 2,765 — 2,765
Other — — — 1 (1) — — —
Net income — — — — 28,550 28,550 14,455 43,005
BALANCE-SEPTEMBER 30, 2021 53,301,816 $ 5 $ 335,599 $ (21,317) $ (89,450) $ 224,837 $ 114,542 $ 339,379
BALANCE - DECEMBER 31, 2019 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 453,817 — — — — — — —
Issuance of common stock under the DeepHealth equity compensation plan 4,338 — — — — — — —
Stock-based compensation expense — — 10,203 — — 10,203 — 10,203
Issuance of common stock for sale of unregistered securities for the DeepHealth acquisition 823,615 — 33,011 — — 33,011 — 33,011
Distributions paid to noncontrolling interests — — — — — — (601) (601)
Change in cumulative foreign currency translation adjustment — — — 6 — 6 — 6
Change in fair value cash flow hedge, net of taxes — — — (18,764) — (18,764) — (18,764)
Change in fair value of cash flow hedge from prior periods reclassified to earnings, net of taxes 1,861 1,861 — 1,861
Net (loss) income — — — — (20,797) (20,797) 8,063 (12,734)
BALANCE-SEPTEMBER 30, 2020 51,596,098 $ 5 $ 306,079 $ (24,923) $ (123,956) $ 157,205 $ 88,916 $ 246,121
~~Sale of noncontrolling interests, net of taxes~~

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

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RADNET, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(IN THOUSANDS)

(unaudited)


		Nine Months Ended September 30,					Three Months Ended March 31,
		2021		2020			2022		2021
CASH FLOWS FROM OPERATING ACTIVITIES	CASH FLOWS FROM OPERATING ACTIVITIES					CASH FLOWS FROM OPERATING ACTIVITIES
Net income (loss)		$	43,005	$	(12,734)
Adjustments to reconcile net income (loss) to net cash provided by operating activities:
Net income						Net income	$	8,363	$	13,775
Adjustments to reconcile net income to net cash provided by operating activities:						Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization	Depreciation and amortization	71,272		64,536		Depreciation and amortization	27,118		22,656
Amortization of operating lease right-of-use assets	Amortization of operating lease right-of-use assets	55,880		50,769		Amortization of operating lease right-of-use assets	16,802		17,863
Equity in earnings of joint ventures, net of dividends	Equity in earnings of joint ventures, net of dividends	(8,259)		530		Equity in earnings of joint ventures, net of dividends	(2,517)		(2,285)

Amortization of deferred financing costs and loan discount	Amortization of deferred financing costs and loan discount	2,608		3,266		Amortization of deferred financing costs and loan discount	648		1,147
(Gain) loss on sale and disposal of equipment and other		(279)		543
Loss on extinguishment of debt		1,496		—
Loss (gain) on sale and disposal of equipment and other						Loss (gain) on sale and disposal of equipment and other	1,128		(1,307)

Amortization of cash flow hedge, net of taxes	Amortization of cash flow hedge, net of taxes	2,765		2,204		Amortization of cash flow hedge, net of taxes	923		925
Non-cash change in fair value of interest rate hedge	Non-cash change in fair value of interest rate hedge	(14,149)		4,523		Non-cash change in fair value of interest rate hedge	(20,819)		(11,245)
Stock-based compensation	Stock-based compensation	21,566		10,144		Stock-based compensation	11,102		8,248

Change in fair value of contingent consideration	Change in fair value of contingent consideration	891		(145)		Change in fair value of contingent consideration	(501)		200
Changes in operating assets and liabilities, net of assets acquired and liabilities assumed in purchase transactions:	Changes in operating assets and liabilities, net of assets acquired and liabilities assumed in purchase transactions:					Changes in operating assets and liabilities, net of assets acquired and liabilities assumed in purchase transactions:
Accounts receivable	Accounts receivable	(23,237)		17,380		Accounts receivable	(23,904)		(17,493)
Other current assets	Other current assets	3,358		13,522		Other current assets	(4,065)		(4,308)
Other assets	Other assets	(4,998)		(700)		Other assets	(1,417)		(3,507)
Deferred taxes	Deferred taxes	10,124		(7,640)		Deferred taxes	1,387		3,133
Operating lease liability	Operating lease liability	(55,035)		(43,351)		Operating lease liability	(15,859)		(18,291)
Deferred revenue	Deferred revenue	(19,438)		44,530		Deferred revenue	(4,519)		1,416
Accounts payable, accrued expenses and other	Accounts payable, accrued expenses and other	12,725		22,966		Accounts payable, accrued expenses and other	7,031		17,157
Net cash provided by operating activities		100,295		170,343
Net cash (used in) provided by operating activities						Net cash (used in) provided by operating activities	901		28,084
CASH FLOWS FROM INVESTING ACTIVITIES	CASH FLOWS FROM INVESTING ACTIVITIES					CASH FLOWS FROM INVESTING ACTIVITIES
Purchase of imaging facilities and other acquisitions		(70,108)		(10,125)
Purchase of imaging centers and other acquisitions						Purchase of imaging centers and other acquisitions	(25,123)		(57,075)

Purchase of property and equipment	Purchase of property and equipment	(88,478)		(77,303)		Purchase of property and equipment	(36,558)		(30,424)
Proceeds from sale of equipment	Proceeds from sale of equipment	521		779		Proceeds from sale of equipment	117		151

Equity contributions in existing and purchase of interest in joint ventures		(1,441)		(1,631)

Net cash used in investing activities	Net cash used in investing activities	(159,506)		(88,280)		Net cash used in investing activities	(61,564)		(87,348)
CASH FLOWS FROM FINANCING ACTIVITIES	CASH FLOWS FROM FINANCING ACTIVITIES					CASH FLOWS FROM FINANCING ACTIVITIES
Principal payments on notes and leases payable	Principal payments on notes and leases payable	(3,302)		(2,704)		Principal payments on notes and leases payable	—		(827)
Payments on term loan debt	Payments on term loan debt	(616,217)		(33,472)		Payments on term loan debt	(3,313)		(10,824)
Additional deferred finance costs on revolving loan amendment		—		(741)
Proceeds from debt refinancing, net of issuing costs		716,369		—
Proceeds from sale of economic interest in majority owned subsidiary, net of taxes		11,602		—

Distributions paid to noncontrolling interests		—		(601)

Proceeds from paycheck protection program loans		—		4,023

Proceeds from revolving credit facility	Proceeds from revolving credit facility	128,300		250,900		Proceeds from revolving credit facility	—		87,100
Payments on revolving credit facility	Payments on revolving credit facility	(128,300)		(250,900)		Payments on revolving credit facility	—		(87,100)
Proceeds from issuance of common stock upon exercise of options		26		—
Net cash provided by (used in) financing activities		108,478		(33,495)

Net cash used in financing activities						Net cash used in financing activities	(3,313)		(11,651)
EFFECT OF EXCHANGE RATE CHANGES ON CASH	EFFECT OF EXCHANGE RATE CHANGES ON CASH	(32)		6		EFFECT OF EXCHANGE RATE CHANGES ON CASH	83		(12)
NET INCREASE IN CASH AND CASH EQUIVALENTS		49,235		48,574
NET DECREASE IN CASH AND CASH EQUIVALENTS						NET DECREASE IN CASH AND CASH EQUIVALENTS	(63,893)		(70,927)
CASH AND CASH EQUIVALENTS, beginning of period	CASH AND CASH EQUIVALENTS, beginning of period	102,018		40,165		CASH AND CASH EQUIVALENTS, beginning of period	134,606		102,018
CASH AND CASH EQUIVALENTS, end of period	CASH AND CASH EQUIVALENTS, end of period	$	151,253	$	88,739	CASH AND CASH EQUIVALENTS, end of period	$	70,713	$	31,091

SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION	SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION					SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION
Cash paid during the period for interest	Cash paid during the period for interest	$	21,408	$	31,210	Cash paid during the period for interest	$	7,448	$	8,267
Cash paid during the period for income taxes	Cash paid during the period for income taxes	$	1,913	$	5,036	Cash paid during the period for income taxes	$	34	$	24

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

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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 ~~$50.5~~$42.2 million and ~~$28.1~~$28.8 million during the ~~nine~~three months ended ~~September 30,~~March 31, 2022 and 2021, ~~and 2020,~~ respectively, which were not paid for as of ~~September 30,~~March 31, 2022 and 2021 ~~and 2020~~, respectively. The offsetting amounts due were recorded in our condensed consolidated balance sheet under accounts payable, accrued expenses and other.

On ~~August 24, 2021,~~January 20, 2022, we ~~completed our stock purchase of Tangent Associates LLC by issuing 67,658~~issued 1,141,234 shares of our common stock to complete ~~the transaction.~~our purchase of Aidence Holding B.V..The shares were ascribed a value of $30.6 million.

On January 20, 2022, we issued 965,058 shares to complete our purchase of Quantib B.V.. The shares were ascribed a value of ~~$2.0~~$25.9 million.

On January 1, 2021 we entered into the Simi Valley Imaging Group, LLC, partnership agreement with Simi Valley Hospital and Health Services ("Simi Adventist"). Of the total combined assets of $0.4 million, RadNet transferred $0.3 million and Simi Adventist contributed the remaining $0.1 million.

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

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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 ~~7 U.S. states.~~the United States. At ~~September 30, 2021,~~March 31, 2022, we operated directly or indirectly through joint ventures with hospitals, ~~350~~351 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~~one location to serve the needs of multiple procedures. In addition to our ~~imaging services,~~center operations, we ~~design~~have certain other subsidiaries that develop Artificial Intelligence ("AI") products and ~~develop software applications, artificial intelligence tools and other computerized systems for the diagnostic imaging industry.~~solutions that are designed to enhance interpretation of radiographic images. Our operations comprise ~~a single segment~~2 segments for financial reporting ~~purposes.~~purposes for this reporting period, Imaging Centers and Artificial Intelligence. For further financial information about these segments, see Note 5, Segment Reporting.

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.~~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 a member of our Board of Directors, and John V. Crues, III, M.D., RadNet's Medical Director. Dr. Berger owns, indirectly, 99% of the equity interests in Beverly Radiology Medical Group III (BRMG) and a controlling interest in 2 professional corporations in New York City. BRMG is responsible for theprovide professional medical services ~~at nearly all of our facilities located~~for centers in ~~California. Dr. Crues owns 6 professional corporations which provide medical services in~~Arizona, California, Delaware, Maryland, New Jersey and New York. ~~Additionally, Dr. Crues is a 1% owner of BRMG.~~ These VIEs are collectively referred to as the ~~Group.~~

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~~Substantially all cash flows of the Group after expenses, including professional salaries, are transferred to us. We consolidate the revenue and expenses, assets and liabilities of the Group. The creditors of the Group do not have recourse to our general credit and there are no other arrangements that could expose us to losses on behalf of the Group. However, RadNet may be required to provide financial support to cover any operating expenses in excess of operating revenues.

The Group on a combined basis recognized ~~$43.8~~$45.7 million and ~~$38.3~~$46.1 million of revenue, net of management services fees to RadNet, for the three months ended ~~September 30,~~March 31, 2022 and 2021, ~~and 2020,~~ respectively and ~~$43.8~~$45.7 million and ~~$38.3~~$46.1 million of operating expenses for the three months ended ~~September 30,~~March 31, 2022 and 2021, ~~and 2020,~~ respectively. RadNet recognized ~~$186.8~~$191.0 million and ~~$169.0~~$179.0 million of total billed net service fee revenue for the three months ended ~~September 30,~~March 31, 2022, and 2021, ~~and 2020, respectively, for management services provided to the Group relating primarily to the technical portion of billed revenue.~~

The Group on a combined basis recognized $135.0 million and $104.8 million of revenue, net of management services fees to RadNet, for the nine months ended September 30, 2021 and 2020, respectively and $135.0 million and $104.8 million of operating expenses for the nine months ended September 30, 2021 and 2020, respectively. RadNet recognized $556.4 million

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~~and $433.3 million of total billed net service fee revenue for the nine months ended September 30, 2021, and 2020,~~ respectively, for management services provided to the Group relating primarily to the technical portion of billed revenue.

The cash flows of the Group are included in the accompanying condensed consolidated statements of cash flows. All intercompany balances and transactions have been eliminated in consolidation. In our condensed consolidated balance sheets at ~~September 30, 2021~~March 31, 2022 and December 31, ~~2020,~~2021, we have included approximately ~~$102.7~~$100.4 million and ~~$82.3~~$89.2 million, respectively, of accounts receivable and approximately ~~$19.2~~$16.9 million and ~~$15.2~~$14.4 million of accounts payable and accrued liabilities related to the Group, respectively.

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At all of our centers not serviced by the Group we have entered into long-term contracts with medical groups to provide professional services at those centers, including supervision and interpretation of diagnostic imaging procedures. The ~~creditors~~medical groups maintain full control over the physicians they employ. Through our management agreements, we make available to the medical groups the imaging centers, including all furniture, fixtures and medical equipment therein. The medical groups are compensated for their services from the professional component of the ~~Group do~~global net service fee revenue and after deducting management service fees paid to us, we have no economic controlling interest in these medical groups. As such, the financial results of these groups are not ~~have recourse to~~consolidated in our ~~general credit and there are no other arrangements that could expose us to losses on their behalf. However, we may be required to provide~~ financial ~~support to cover any operating expenses in excess of operating revenues.~~statements.

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 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 We have continued to finance ScriptSender during it's development phase and our maximum exposure to loss is $3.9 million, which represents our receivable balance from the entity. Maximum exposure to loss is the loss that we would absorb in the event that all of ~~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 interpretationassets 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 feesScriptSender are deemed worthless. We paid operating expenses for the ~~use~~venture of ~~our diagnostic imaging equipment~~$0.4 million and $0.6 million for the ~~provision of technical services, we provide management services~~three months ended March 31, 2022, 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.March 31, 2021, respectively.

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 management, all adjustments consisting of normal recurring adjustments necessary for a fair presentation of the financial position, results of operations and cash flows for the interim periods ended ~~September 30,~~March 31, 2022 and 2021 ~~and 2020~~ 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, ~~2020.~~2021.

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, ~~2020.~~2021. 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, ~~2020.~~2021.

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~~Medicare and ~~Medicaid)~~Medicaid, or negotiated with ~~(managed~~managed care health plans and commercial insurance ~~companies) the third-party payors.~~companies. The payment arrangements with third-party payors for the services we provide to the related patients typically specify payments at amounts less than our standard charges and generally provide for payments based upon predetermined rates per diagnostic services or discounted fee-for-service rates. 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.

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As it relates to the Group, this service fee revenue includes payments for both the professional medical interpretation revenue recognized by them as well as the payment for all other aspects related to our providing the imaging services, for which we earn management fees. As it relates to others centers, this service fee revenue is earned through providing the use of our diagnostic imaging equipment and the provision of technical services as well as providing administration services such as clerical and administrative personnel, bookkeeping and accounting services, billing and collection, provision of medical and office supplies, secretarial, reception and transcription services, maintenance of medical records, and advertising, marketing and promotional activities.

Our revenues are based upon the estimated amounts we expect to be entitled to receive from patients and third-party payors. Estimates of contractual allowances under 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

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discounts). We also record estimated implicit price concessions (based primarily on historical collection experience) related to uninsured accounts to record self-pay revenues at the estimated amounts we expect to collect.

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

Our total service revenues during the three ~~and nine~~ months ended ~~September 30,~~March 31, 2022 and 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 September 30,				Nine Months Ended September 30,					Three Months Ended March 31,
		2021		2020		2021		2020			2022		2021
Commercial insurance	Commercial insurance	$	185,723	$	160,524	$	555,355	$	412,415	Commercial insurance	$	188,465	$	182,096
Medicare	Medicare	73,163		62,704		207,977		154,847		Medicare	70,999		63,589
Medicaid	Medicaid	8,707		7,098		26,198		18,072		Medicaid	9,087		8,451
Workers' compensation/personal injury	Workers' compensation/personal injury	11,554		7,183		32,507		25,705		Workers' compensation/personal injury	12,449		10,399
Other patient revenue	Other patient revenue	4,800		8,328		14,766		17,211		Other patient revenue	7,123		4,775
Management fee revenue	Management fee revenue	5,255		2,675		16,007		8,574		Management fee revenue	5,508		5,219
Teleradiology and Software revenue		2,564		2,349		7,611		8,319
Software revenue										Software revenue	3,399		2,426
AI revenue										AI revenue	599		—
Other	Other	3,641		5,869		10,058		15,617		Other	5,647		2,622
Service fee revenue	Service fee revenue	295,407		256,730		870,479		660,760		Service fee revenue	303,276		279,577
Revenue under capitation arrangements	Revenue under capitation arrangements	37,283		35,046		111,449		103,145		Revenue under capitation arrangements	38,491		35,742
Total service revenue	Total service revenue	$	332,690	$	291,776	$	981,928	$	763,905	Total service revenue	$	341,767	$	315,319

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

Beginning in the second quarter of 2020 and through the ~~nine~~three months ended ~~September 30, 2021,~~March 31, 2022, we received funding from the various programs established by the CARES Act as follows:

•$~~39.5~~39.6 million total of accelerated Medicare payments ~~through~~received, $39.5 million for the twelve months ended December 31, 2020 and $0.1 million for the twelve months ended December 31, 2021.

•$4.0 million from the Paycheck Protection Program through the twelve months ended December 31, ~~2020~~2020.

•$~~32.6~~35.4 million total Provider Relief Funding, $26.3 million received for the twelve months ended December 31, 2020 and ~~$6.3~~$9.1 million ~~for the nine months ended September 30, 2021~~

~~In addition, we have~~ received for the 12twelve months ended December 31, ~~2020, $5.0~~2021, with $6.2 million ~~in advance payments from insurer Blue Shield.~~of it received during the three months ended March 31, 2021. No Provider Relief Funding was received for the three months ended March 31, 2022.

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The accelerated Medicare and Blue Shield payments ~~are~~were recorded to Deferred Revenue in our ~~condensed~~ consolidated balance sheet and are being applied to revenue as services are performed beginning in 2021. ~~For~~Through the ~~nine~~three months ended ~~September 30, 2021, $21.2~~March 31, 2022, $36.0 million of the accelerated Medicare payments ~~and the total advance of $5.0 million from Blue Shield have~~has been applied to revenue.

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

The Provider Relief Funding from 2021 is displayed as such on our condensed consolidated statements of operations.

The CARES Act also provides for ~~a payment~~the deferral of the ~~employer~~employer-paid portion of ~~Social Security~~the social security payroll tax ~~incurred during the pandemic, allowing half of such payroll taxes to be deferred until~~with 50% due by December 31, 2021 and ~~the remaining half until December 2022. At~~50% due December 31, ~~2020, we had in total~~2022. We elected to defer $16.3 million of ~~deferred Social Security taxes and at September 30,~~this tax through December 31, 2020. Additionally, The CARES Act provided a refundable employer tax credit equal to 50% of qualified wages, including

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certain health insurance costs, that can be used to offset payroll tax liabilities. In 2021 we ~~had $8.6 million. The reduction was related to~~qualified for a ~~one time~~portion of the credit and recorded a benefit of $7.7 million ~~in federal~~through a reduction of payroll tax ~~forgiveness. The current portion of payment deferrals are recorded as payroll~~expense. Our remaining deferred tax liability ~~under the caption “Accounts payable, accrued expenses and other”, while the long term portion is recorded to Other Long Term Liabilities in our condensed consolidated~~ balance ~~sheet.~~of approximately $8.1 million at March 31, 2022, will be paid by December 31, 2022.

ACCOUNTS RECEIVABLE - Substantially all of our accounts receivable are due under fee-for-service contracts from third party payors, such as insurance companies and government-sponsored healthcare programs, or directly from patients. Services are generally provided pursuant to one-year contracts with healthcare providers. We continuously monitor collections from our payors and maintain an allowance for bad debts based upon specific payor collection issues that we have identified and our historical experience.

We have entered into factoring agreements with various institutions and sold certain accounts receivable under non-recourse agreements in exchange for notes receivables from the buyers. These transactions are accounted for as a reduction in accounts receivable as the agreements transfer effective control over and risk related to the receivables to the buyers. Proceeds on notes receivables are reflected as operating activities on our statement of cash flows and on our balance sheet as prepaid expenses and other current assets for the current portion and deposits and other for the long term portion. Amounts remaining to be collected on these agreement were ~~$18.3~~$17.0 million and ~~$20.5~~$17.7 million at ~~September 30, 2021~~March 31, 2022 and December 31, ~~2020,~~2021, respectively. We do not utilize factoring arrangements as an integral part of our financing for working capital and assess the party's ability to pay upfront at the inception of the notes receivable and subsequently by reviewing their financial statements annually and reassessing any insolvency risk on a periodic basis.

DEFERRED FINANCING COSTS - Costs of financing are deferred and amortized using the effective interest rate method. Deferred financing costs, net of accumulated amortization, were ~~$2.3~~$2.0 million and ~~$1.8~~$2.1 million, as of ~~September 30, 2021~~March 31, 2022 and December 31, ~~2020,~~2021, respectively and related to our Barclays Revolving Credit 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 ~~September 30, 2021~~March 31, 2022 totaled ~~$502.7~~$570.2 million. Indefinite lived intangible assets at ~~September 30, 2021~~March 31, 2022 were ~~$7.1~~$13.2 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, ~~2020,~~2021, noting no impairment. ~~However, during 2020 we ceased employing certain indefinite lived trade names with a total value of $4.2 million and they were written~~

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~~off in full. 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 COVID-19 pandemic and did not identify an indication of goodwill impairment being more likely than not through ~~September 30, 2021.~~March 31, 2022. Activity in goodwill for the ~~nine~~three months ended ~~September 30, 2021~~March 31, 2022 is provided below (in thousands):


Balance as of December 31, ~~2020~~2021	$	~~472,879~~513,820
Goodwill ~~acquired through~~from acquisitions	~~29,754~~57,215
~~Goodwill attributable to formation of Simi Valley Imaging Group LLC~~Valuation adjustment	~~105~~ (296)
~~Other Adjustments~~Currency translation	~~(28)~~(551)










Balance as of ~~September 30, 2021~~March 31, 2022	$	~~502,710~~570,188

Goodwill balances at March 31, 2022 reflect additional goodwill arising from deferred tax liabilities recorded on our acquisitions of Aidence Holding B.V. and Quantib B.V. of $7.3 million. See Note 4, Business Combinations and Related Activity for more information.

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

We recorded income tax expense of ~~$5.3~~$1.5 million, or an effective tax rate of ~~20.0%~~15.2%, for the three months ended ~~September 30, 2021~~March 31, 2022 compared to income tax expense of ~~$3.8~~$4.4 million, or an effective tax rate of ~~27.2%~~24.1% for the three months ended September 30, 2020. We recorded income tax expense of $12.5 million, or an effective tax rate of 22.6%, for the nine months ended September 30, 2021 compared to a benefit from income taxes of $5.0 million, or an effective tax rate of 28.3% for the nine months ended September 30, 2020.March 31, 2021. The income tax rates for the three ~~and nine~~ months ended ~~September 30, 2021~~March 31, 2022 diverge from the federal statutory rate due to (i) noncontrolling interests due to the controlled partnerships; (ii) effects of state income taxes (iii) effects of foreign income taxes; and ~~(iii)~~(iv) 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 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 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 as of ~~September 30, 2021.~~March 31, 2022. 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.

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EQUITY BASED COMPENSATION – We have 1 long-term incentive plan that we adopted in 2006 and which we have amended and restated at various points in time: first on April 20, 2015, second on March 9, 2017, and currently as of April 15, 2021 (the “Restated Plan”). The Restated Plan was approved by our stockholders at our annual stockholders meeting on June 10, 2021. We have reserved 16,500,000 shares of common stock for issuance under the Restated Plan which can be issued in the form of incentive and/or nonstatutory stock options, restricted and/or unrestricted stock, stock units, and stock appreciation rights. Terms and conditions of awards can be direct grants or based on achieving a performance metric. We evaluate performance-based awards to determine if it is probable that the vesting conditions will be met. We also consider probability of achievement of performance conditions when determining expense recognition. For the awards where vesting is probable, equity-based compensation is recognized over the related vesting period. Stock options generally vest over three years to five years and expire five years to ten years from date of grant. We determine the compensation expense for each stock option award using the Black Scholes, or similar valuation model. Those models require that our management make certain estimates concerning risk free interest rates and volatility in the trading price of our common stock. The compensation expense recognized for all equity-based awards is recognized over the awards’ service periods. Equity-based compensation is classified in operating expenses within the same line item as the majority of the cash compensation paid to employees. In connection with our acquisition of DeepHealth Inc. on June 1, 2020, we assumed the DeepHealth, Inc. 2017 Equity Incentive Plan, including outstanding options awards that can be exercised for our common stock. No additional awards will be granted under the DeepHealth, Inc. 2017 Equity Incentive Plan. See Note 6,7, Stock-Based Compensation, for more information.

COMPREHENSIVE INCOME (LOSS) - Accounting guidance establishes rules for reporting and displaying comprehensive income or 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 income (loss) for the three ~~and nine~~ months ended ~~September 30, 2021~~March 31, 2022 and ~~2020.~~2021.

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

DERIVATIVE INSTRUMENTS - In the second quarter of 2019, we entered into 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 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 are above the arranged rates.

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

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


For the three months ended March 31, 2022
Account	December 31, 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, 2022 Balance		Location
Accumulated Other Comprehensive Loss, net of taxes	$	(18,886)	$	—	$	923	$	(17,963)	Equity


For the twelve months ended December 31, 2021
Account	December 31, 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, 2021 Balance		Location
Accumulated Other Comprehensive Loss, net of taxes	$	(22,581)	$	—	$	3,695	$	(18,886)	Equity

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For the three months ended September 30, 2021
Account June 30, 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 September 30, 2021 Balance Location
Accumulated Other Comprehensive Loss, net of taxes $ (20,736) $ — $ 920 $ (19,816) Equity

For the nine months ended September 30, 2021
Account December 31, 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 September 30, 2021 Balance Location
Accumulated Other Comprehensive Loss, net of taxes $ (22,581) $ — $ 2,765 $ (19,816) Equity

A tabular presentation of the effect of derivative instruments on our statement of operations of the 2019 Swaps which remain ineffective is as follows (amounts in thousands):

For the three months ended September 30, 2021

For the three months ended March 31, 2022

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)

Gross 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)

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)

Gross 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

2,870

Other income (expense)

(1,245)

Interest Expense

Interest rate contracts

20,819

Other income (expense)

(923)

Interest Expense

For the nine months ended September 30, 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) Gross 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 $ 14,149 Other income (expense) $ (3,735) Interest Expense

See Fair Value Measurements section below for the fair value of the 2019 Swaps at ~~September 30, 2021.~~March 31, 2022.

CONTINGENT CONSIDERATION - On January 20, 2022, we completed our acquisition of all the equity interests of Quantib B.V. ("Quantib") an artificial intelligence enterprise centered on prostate cancer screening, in a combination stock and cash purchase. As part of the purchase agreement, we will issue 18 months after acquisition, 113,303 shares with an initial fair value at the date of close of $3.0 million subject to adjustment for any indemnification claims and will be marked to market in subsequent periods. See Note 4, Business Combinations and Related Activity for more information on the Quantib acquisition.

A tabular presentation of the effect of contingent consideration on our condensed consolidated balance sheet is as follows (amounts in thousands):


For the three months ended March 31, 2022
Account	January 20, 2022 Balance		Amount of other non operating income recognized on contingent consideration		March 31, 2022 Balance		Location
Accrued Expenses	$	—	$	(501)	$	501	Liabilities and Non Operating Income

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

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

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

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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 September 30, 2021
Level 1 Level 2 Level 3 Total
Current and long term liabilities
2019 Swaps - Interest Rate Contracts $ — $ 23,839 $ — $ 23,839

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		As of December 31, 2020									As of March 31, 2022
		Level 1		Level 2		Level 3		Total			Level 1		Level 2		Level 3		Total
Current and long term liabilities
Current and long term assets										Current and long term assets

2019 Swaps - Interest Rate Contracts	2019 Swaps - Interest Rate Contracts	$	—	$	37,989	$	—	$	37,989	2019 Swaps - Interest Rate Contracts	$	—	$	4,500	$	—	$	4,500


	As of December 31, 2021
	Level 1		Level 2		Level 3		Total
Current and long term liabilities

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

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.

Contingent Consideration:

The table below summarize the estimated fair values of certain of our shares of common stock issued in our Quantib B.V. acquisition on January 20, 2022, and held back for indemnification purposes that are subject to fair value measurements and the classification of these liabilities on our condensed consolidated balance sheets, as follows (in thousands):


	As of March 31, 2022
	Level 1		Level 2		Level 3		Total
Long term liabilities

113,303 shares of RadNet common stock	$	—	$	—	$	2,535	$	2,535

The estimated fair value of these contracts was determined using Level 3 inputs. More specifically, the fair value was determined by calculating the value estimated shares issuable as of the reporting date (which was $22.37), the time period related to the contractual settlement term, and the probability of issuing the shares. As all the inputs are not observable (excluding our closing share price) and cannot be corroborated by observable market data, we employ a Level 3 category.

Long Term Debt:

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


		As of September 30, 2021											As of March 31, 2022
		Level 1		Level 2		Level 3		Total Fair Value		Total Face Value			Level 1		Level 2		Level 3		Total Fair Value		Total Face Value
First Lien Term Loans and SunTrust Term Loan	First Lien Term Loans and SunTrust Term Loan	$	—	$	769,380	$	—	$	769,380	$	771,188	First Lien Term Loans and SunTrust Term Loan	$	—	$	753,769	$	—	$	753,769	$	764,563


		As of December 31, 2020											As of December 31, 2021
		Level 1		Level 2		Level 3		Total Fair Value		Total Face Value			Level 1		Level 2		Level 3		Total Fair Value		Total Face Value
First Lien Term Loans and SunTrust Term Loan	First Lien Term Loans and SunTrust Term Loan	$	—	$	661,640	$	—	$	661,640	$	662,403	First Lien Term Loans and SunTrust Term Loan	$	—	$	766,973	$	—	$	766,973	$	767,875

At ~~September 30, 2021~~March 31, 2022 and at December 31, ~~2020~~2021 our Barclays revolving credit facility had no balance outstanding. Our SunTrust revolving credit facility relating to our consolidated subsidiary The New Jersey Imaging Network ("NJIN"), had no principal amount outstanding at ~~September 30, 2021~~March 31, 2022 and at December 31, ~~2020.~~2021.

The estimated fair value of our long-term debt, which is discussed in Note 5,6, 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.

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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):

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Three Months Ended September 30, Nine Months Ended September 30,
2021 2020 2021 2020
Net income (loss) attributable to RadNet, Inc.'s common stockholders $ 16,220 $ 6,156 $ 28,550 $ (20,797)
BASIC NET INCOME (LOSS) PER SHARE ATTRIBUTABLE TO RADNET, INC.'S COMMON STOCKHOLDERS
Weighted average number of common shares outstanding during the period 52,810,644 51,358,603 52,323,360 50,746,380
Basic net income (loss) per share attributable to RadNet, Inc.'s common stockholders $ 0.31 $ 0.12 $ 0.55 $ (0.41)
DILUTED NET INCOME (LOSS) PER SHARE ATTRIBUTABLE TO RADNET, INC.'S COMMON STOCKHOLDERS
Weighted average number of common shares outstanding during the period 52,810,644 51,358,603 52,323,360 50,746,380
Add nonvested restricted stock subject only to service vesting 271,964 120,605 242,523 —
Add additional shares issuable upon exercise of stock options and warrants 735,232 476,607 683,815 —
Weighted average number of common shares used in calculating diluted net income per share 53,817,840 51,955,815 53,249,698 50,746,380
Diluted net income (loss) per share attributable to RadNet, Inc.'s common stockholders $ 0.30 $ 0.12 $ 0.54 $ (0.41)
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 — — — 331,659
Shares issuable upon the exercise of stock options: — 48,948 — 933,370


	Three Months Ended March 31,
	2022		2021
Net income attributable to RadNet, Inc.'s common stockholders	$	3,013	$	9,458

BASIC NET INCOME PER SHARE ATTRIBUTABLE TO RADNET, INC.'S COMMON STOCKHOLDERS
Weighted average number of common shares outstanding during the period	55,303,007		51,951,506
Basic net income per share attributable to RadNet, Inc.'s common stockholders	$	0.05	$	0.18

DILUTED NET INCOME PER SHARE ATTRIBUTABLE TO RADNET, INC.'S COMMON STOCKHOLDERS
Weighted average number of common shares outstanding during the period	55,303,007		51,951,506
Add nonvested restricted stock subject only to service vesting	197,911		253,265
Add additional shares issuable upon exercise of stock options and contingently issuable shares	861,275		624,170
Weighted average number of common shares used in calculating diluted net income per share	56,362,193		52,828,941
Diluted net income per share attributable to RadNet, Inc.'s common stockholders	$	0.05	$	0.18

Stock options and non vested restricted awards excluded from the computation of diluted per share amounts as their effect would be antidilutive:

Shares issuable upon the exercise of stock options:	46,912		82,595

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

As of ~~September 30, 2021,~~March 31, 2022, 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 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. Our investment of $1.2 million represents a 14.21% equity interest in the company. No observable price changes or impairment in our investment was identified as of ~~September 30, 2021.~~March 31, 2022.

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 into an additional 80,000 shares effective December 21, 2019. No observable price changes or impairment in our investment was identified as of ~~September 30, 2021.~~March 31, 2022.

WhiteRabbit.ai Inc., based in California, is currently developing an artificial intelligence suite which aims to improve the speed and accuracy of cancer detection in radiology and improve patient care. On November 5, 2019 we acquired an equity interest in the company for $1.0 million and also loaned the company $2.5 million in support of its operations. No observable price changes, impairment in our investment or impairment of the loan receivable was identified as of ~~September 30, 2021.~~March 31, 2022.

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INVESTMENT IN JOINT VENTURES – We have 13 unconsolidated joint ventures with ownership interests ranging from 35% to 55%. These joint ventures represent partnerships with hospitals, health systems or radiology practices and were formed for the purpose of owning and operating diagnostic imaging centers. Professional services at the joint venture diagnostic imaging centers are performed by contracted radiology practices or a radiology practice that participates in the joint venture. Our investment in these joint ventures is accounted for under the equity method, since RadNet does not have a controlling financial interest in such ventures. We evaluate our investment in joint ventures, including cost in excess of book value (equity method goodwill) for impairment whenever indicators of impairment exist. No indicators of impairment existed as of ~~September 30, 2021.~~March 31, 2022.

Acquisition by Equity Method Investments

During the first quarter of 2022, our joint venture with Calvert Medical Imaging Center, LLC, completed the acquisition of certain assets to strengthen our presence in the Maryland market. We made a fair value determination of the acquired assets and assumed liabilities and the following were recorded (in thousands):

Entity

Date Acquired

Total Consideration

Property & Equipment

Right of Use Assets

Goodwill

Right of Use Liabilities

IFRC LLC *^

1/1/2022

3,922

2,121

1,295

1,801

(1,295)

*Fair Value Determination is Final

^ IFRC LLC acquisitions consisted of 3 subsidiaries of IFRC, two of which were purchased separately by wholly owned RadNet subsidiaries.

Joint venture investment and financial information

The following table is a summary of our investment in joint ventures during the ~~nine~~three months ended ~~September 30, 2021~~March 31, 2022 (in thousands):


Balance as of December 31, ~~2020~~2021	$	~~34,528~~42,229
Equity in earnings in these joint ventures	~~8,259~~2,517




~~Equity contributions in existing joint ventures~~	~~1,441~~
Balance as of ~~September 30, 2021~~March 31, 2022	$	~~44,228~~44,746

We charged management service fees from the centers underlying these joint ventures of approximately ~~$5.3~~$5.5 million and ~~$2.7~~$5.2 million for the three months ended ~~September 30,~~March 31, 2022 and 2021, ~~and 2020 and $16.0 million and $8.6 million for the nine months ended September 30, 2021 and 2020,~~ respectively.

~~On June 23, 2021, we made an additional equity contribution to our joint venture in Arizona of $1.4 million. Our equity ownership interest percentage in the venture did not change.~~

The following table is a summary of key balance sheet data for these joint ventures as of ~~September 30, 2021~~March 31, 2022 and December 31, ~~2020~~2021 and income statement data for the ~~nine~~three months ended ~~September 30,~~March 31, 2022 and 2021 ~~and 2020~~ (in thousands):


Balance Sheet Data:	Balance Sheet Data:	September 30, 2021		December 31, 2020		Balance Sheet Data:	March 31, 2022		December 31, 2021
Current assets	Current assets	$	46,186	$	27,085	Current assets	$	37,119	$	37,186
Noncurrent assets	Noncurrent assets	67,514		68,686		Noncurrent assets	83,407		73,592
Current liabilities	Current liabilities	(12,182)		(12,545)		Current liabilities	(12,722)		(12,919)
Noncurrent liabilities	Noncurrent liabilities	(20,914)		(21,582)		Noncurrent liabilities	(27,298)		(22,370)
Total net assets	Total net assets	$	80,604	$	61,644	Total net assets	$	80,506	$	75,489

Book value of RadNet joint venture interests	Book value of RadNet joint venture interests	$	36,940	$	28,079	Book value of RadNet joint venture interests	$	37,214	$	34,930
Cost in excess of book value of acquired joint venture interests and other	Cost in excess of book value of acquired joint venture interests and other	7,288		6,449		Cost in excess of book value of acquired joint venture interests and other	7,532		7,299
Total value of RadNet joint venture interests	Total value of RadNet joint venture interests	$	44,228	$	34,528	Total value of RadNet joint venture interests	$	44,746	$	42,229


Income statement data for the nine months ended September 30,		2021		2020
Income statement data for the three months ended March 31,						Income statement data for the three months ended March 31,	2022		2021
Net revenue	Net revenue	$	98,193	$	78,988	Net revenue	$	34,411	$	31,718
Net income	Net income	$	16,007	$	13,651	Net income	$	5,035	$	4,803

NOTE 3 – RECENT ACCOUNTING AND REPORTING STANDARD

Table of Contents

Accounting standards adopted

In November 2021, the FASB issued ASU 2021-10 ("ASU 2021-10"), Government Assistance (Topic 832), Disclosures by Business Entities about Government Assistance. ASU 2021-10 requires entities to provide disclosures on material government assistance transactions for annual reporting periods. The disclosures include information around the nature of the assistance, the related accounting policies used to account for government assistance, the effect of government assistance on the entity’s financial statements, and any significant terms and conditions of the agreements, including commitments and contingencies. The new standard was effective for financial statements issued for annual reporting periods beginning after December 15, 2021. As ASU 2021-10 only impacts annual financial statement footnote disclosures, the adoption did not have a material effect on our consolidated financial statements.

In January 2021, the FASB issued ASU 2021-01 ("ASU 2021-01"), Reference Rate Reform (Topic 848), Scope. ASU 2021-01 clarifies the scope of Topic 848 so that derivatives affected by the discounting transition are explicitly eligible for certain option expedients and exceptions in Topic 848. The guidance is effective upon issuance and generally can be applied through December 31, 2022. ~~We are currently evaluating the potential impact of ASU 2021-01~~The adoption did not have a material effect on our consolidated financial statements.

~~Table of Contents~~

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

Accounting standards not yet adopted

In ~~January 2020,~~October 2021, the FASB issued ASU ~~2020-01~~2021-08 ("ASU ~~2020-01")~~2021-08), ~~Investments—Equity Securities~~Business Combinations (Topic ~~321)~~805), ~~Investments—Equity Method~~Accounting for Contract Assets and ~~Joint Ventures (Topic 323),~~Contract Liabilities from Contracts with Customers. ASU 2021-08 requires an acquirer in a business combination to recognize and ~~Derivatives~~measure contract assets and ~~Hedging (Topic 815),~~ ~~clarifying the interaction between accounting standards related to equity securities, equity method investments, and certain derivatives.~~contract liabilities in accordance with Accounting Standards Codification Topic 606. ASU ~~2020-01~~2021-08 is effective for fiscal years beginning after December 15, ~~2020. The~~2022 and early adoption ~~did~~is permitted. We do not expect ASU 2021-08 to have a material ~~impact~~effect, if any, on our consolidated 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 – BUSINESS COMBINATIONS AND RELATED ACTIVITY

Acquisitions

Imaging Center

During ~~2021,~~the first quarter of 2022, we completed the acquisition of certain assets of the following entities, which either engage directly in the practice of radiology or associated businesses. The primary reason for these acquisitions was to strengthen our presence in the ~~New York City, New Jersey and California markets.~~Maryland market. These acquisitions are reported as part of our Imaging Center segment. We made a fair value determination of the acquired assets and assumed liabilities and the following were recorded (in thousands):


Entity	Date Acquired	Total Consideration	Property & Equipment	Right of Use Assets	Goodwill	Other Assets	Right of Use Liabilities
IFRC LLC*^	1/1/2022	4,800	2,103	857	2,697	—	(857)
IFRC LLC*^	1/1/2022	8,200	2,910	1,703	5,271	19	(1,703)
Total		13,000	5,013	2,560	7,968	19	(2,560)

*Fair Value Determination is Final

^ IFRC LLC acquisitions consisted of 3 subsidiaries of IFRC, one of which was purchased separately by a joint venture with Calvert Medical Imaging Centers, LLC.

Artificial Intelligence

Aidence Holding B.V.

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Entity Date Acquired Total Consideration Property & Equipment Right of Use Assets Goodwill Intangible Assets Other Assets Right of Use Liabilities
Personal Health Imaging PLLC* 2/1/2021 2,995 576 608 2,355 50 14 (608)
ZP Elmont LLC* 2/1/2021 2,194 1,112 — 1,005 50 27 —
ZP Freeport LLC* 2/1/2021 6,065 4,668 — 1,328 40 29 —
Broadway Medical Imaging LLC* 2/1/2021 1,155 1,076 446 6 50 23 (446)
3235 Hempstead LLC* 2/1/2021 9,386 5,667 — 3,649 70 — —
SLZM Realty LLC* 2/1/2021 13,671 4,617 — 8,974 80 — —
2012 Sunrise Merrick LLC* 2/1/2021 11,428 2,741 335 8,617 70 — (335)
ZP Bayside LLC* 3/1/2021 3,545 3,385 2,191 40 50 70 (2,191)
ZP Laurelton LLC* 3/1/2021 2,658 2,530 1,418 32 50 46 (1,418)
ZP Smith LLC* 3/1/2021 3,978 3,581 2,214 347 50 — (2,214)
ZP 907 Northern LLC 4/1/2021 562 507 1,817 5 50 — (1,817)
William M. Kelly MD, Inc. 5/1/2021 3,750 990 1,379 2,710 50 — (1,379)
60th Street MRI, LLC 5/1/2021 400 85 — 290 25 — —
ZP Parkchester LLC 5/1/2021 263 213 311 — 50 — (311)
ZP Eastern LLC 6/1/2021 2,868 2,801 1,951 17 50 — (1,951)
Tangent Associates LLC** 8/24/2021 2,025 10 — 379 1,636 — —
Total 66,943 34,559 12,670 29,754 2,421 209 (12,670)

*Fair Value DeterminationOn January 20, 2022, we completed our acquisition of all the equity interests of Aidence Holding B.V. ("Aidence") an artificial intelligence enterprise centered on lung cancer screening, in an combination stock and cash purchase. Aidence is ~~Final~~

** All stock purchase through issuing 67,658 sharesreported as part of our ~~common stock.~~artificial intelligence segment and was acquired to enhance our AI capabilities. The transaction was accounted for as an acquisition of a business and total purchase consideration was determined to be approximately $45.2 million including i) 1,117,872 shares issued at $26.80 per share with a fair value of $30.0 million ii) cash of $1.8 million and iii) assuming liabilities of $11.9 million, $7.4 million in milestone contingent consideration and cash holdback of $4.5 million and iv) a settlement of a loan from RadNet of $1.5 million. In addition we paid certain seller closing costs through the issuance of 23,362 shares at a fair value of $0.6 million. We preliminarily recorded $1.0 million in current assets, $0.2 million in property plant and equipment, $27.5 million in intangible assets, $3.2 million in liabilities and $19.2 million in goodwill.

~~Formation of majority owned subsidiary~~

Quantib B.V.

On January ~~1, 2021~~20, 2022, we ~~entered into~~completed our acquisition of all the ~~Simi Valley Imaging Group, LLC,~~equity interests of Quantib B.V. ("Quantib") an artificial intelligence enterprise centered on prostate cancer screening, in a ~~partnership~~combination stock and cash purchase. Quantib is reported as part of our artificial intelligence segment, and was acquired to enhance our AI capabilities. The transaction was accounted for as an acquisition of a business and total purchase consideration was determined to be approximately $42.3 million including i) 965,058 shares issued at $26.80 per share with ~~Simi Valley Hospital~~a fair value of $25.9 million ii) cash of $11.8 million and ~~Health Services ("Simi Adventist")~~iii) 113,303 shares with a fair value at the date of close of $3.0 million and cash holdback of $1.6 million to be issued 18 months after acquisition subject to adjustment for any indemnification claims and will be marked to market in subsequent periods. We preliminarily recorded $2.4 million in current assets, $0.1 million in property plant and equipment, $21.3 million in intangible assets, $3.7 million in liabilities and $22.2 million in goodwill.

As noted above, our acquisitions of Aidence and Quantib are preliminary. As we finalize our estimation of the fair value of the assets acquired and liabilities assumed, additional adjustments may be recorded during the measurement period (a period not to exceed 12 months). The ~~operation will~~initial accounting is preliminary as of March 31, 2022 for the acquired assets and liabilities as we are currently in the process of completing the assessment of valuation inputs and assumptions as well as completing the assessment of the tax attributes of the business combination. The finalization of the acquisition accounting valuation assessment may result in a change in the valuation of the deferred tax assets and liabilities and intangible assets, along with the opening working capital accounts, which could have a material impact on our results of operations and financial position.

NOTE 5 – SEGMENT REPORTING

Our reportable segments are described below:

Imaging Center

Our Imaging Center segment provides physicians with imaging capabilities to facilitate the diagnosis and treatment of diseases and disorders. Services include magnetic resonance imaging (MRI), computed tomography (CT), positron emission tomography (PET), nuclear medicine, mammography, ultrasound, diagnostic radiology (X-ray), fluoroscopy and other related procedures. The vast majority of our centers offer multi-modality imaging services, ~~out~~a strategy that diversifies revenue streams, reduces exposure to reimbursement changes and provides patients and referring physicians one location to serve the needs of ~~two locations in Ventura County, California. Total investment~~multiple procedures. Included in the ~~venture~~segment is ~~$0.4 million. RadNet contributed $0.3~~our eRad subsidiary, which designs the underlying critical scheduling, data storage and retrieval systems necessary for imaging center operation.

Artificial Intelligence ("AI")

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

Our chief operating decision maker ("CODM"), who is also our CEO, evaluates the financial performance of our segments based upon their respective revenue and segmented internal profit and loss statements prepared on a basis not consistent with GAAP. We do not report balance sheet information by segment since it is not reviewed by our CODM.

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

Table of Contents


	Three Months Ended March 31,
	2022		2021
Revenue:
Imaging Centers	$	341,168	$	315,319
AI	599		—
Total revenue	$	341,767	$	315,319

Cost of Operations
Imaging Centers	$	310,110	$	281,013
AI	4,929		1,267
Total cost of operations	$	315,039	$	282,280

Depreciation and Amortization:
Imaging Centers	$	25,805	$	22,569
AI	1,313		87
Total depreciation and amortization	$	27,118	$	22,656

Loss (Gain) on Disposal of Equipment:
Imaging Centers	$	1,154	$	(1,307)
AI	(26)		—
Total loss (gain)	$	1,128	$	(1,307)

Severance
Imaging Centers	$	201	$	285
AI	—		—
Total severance	$	201	$	285

(Loss) Income from Operations
Imaging Centers	$	3,898	$	12,759
AI	(5,617)		(1,354)
Total (loss) income from operations	$	(1,719)	$	11,405

For proper comparative purposes, Imaging Center segment revenue in 2021 excludes $6.2 million in ~~assets for~~Provider Relief Funding, as it represents a ~~60% economic interest and Simi Adventist contributed assets totaling $0.1 million for a 40% economic interest.~~

~~Sale~~form of ~~ownership interest in a majority owned subsidiary~~

Effective September 1, 2021 we completed the sale of a 24.9% ownership interest in our majority owned subsidiary West Valley Imaging Group, LLC for $13.1 million to Tarzana Medical Center, LLC. After the sale, our ownership interest in the subsidiary has reduced from 75.0% to 50.1% and we retain a controlling financial interest in the subsidiary. We recognized in additional paid in capital on our condensed consolidated balance sheets, $4.2 million excess in consideration over the carrying value of the sold economic interest. Post the sale of our ownership interest we acquired from Tarzana Medical Center, LLC, certain intangible business assets for purchase consideration of approximately $5.2 million.direct Government stimulus.

2119

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NOTE 56 – CREDIT FACILITIES AND NOTES PAYABLE

As of ~~September 30, 2021~~March 31, 2022 and December 31, ~~2020~~2021 our term loan debt obligations are as follows (in thousands):


		September 30, 2021		December 31, 2020			March 31, 2022		December 31, 2021
First Lien Term Loans collateralized by RadNet's tangible and intangible assets	First Lien Term Loans collateralized by RadNet's tangible and intangible assets	$	723,188	$	611,028	First Lien Term Loans collateralized by RadNet's tangible and intangible assets	$	719,563	$	721,375
Discount on First Lien Term Loans	Discount on First Lien Term Loans	(13,735)		(9,699)		Discount on First Lien Term Loans	(12,692)		(13,213)
SunTrust Term Loan collateralized by NJIN's tangible and intangible assets	SunTrust Term Loan collateralized by NJIN's tangible and intangible assets	48,000		51,375		SunTrust Term Loan collateralized by NJIN's tangible and intangible assets	45,000		46,500

Total debt obligations	Total debt obligations	757,453		652,704		Total debt obligations	751,871		754,662
Less: current portion	Less: current portion	(11,165)		(39,791)		Less: current portion	(11,164)		(11,164)
Long term portion debt obligations	Long term portion debt obligations	$	746,288	$	612,913	Long term portion debt obligations	$	740,707	$	743,498

We had no outstanding balance under our $195.0 million Barclays Revolving Credit Facility at ~~September 30, 2021~~March 31, 2022 and have reserved $7.8 million for certain letters of credit. The remaining $187.2 million of our Barclays Revolving Credit Facility was available to draw upon as of ~~September 30, 2021.~~March 31, 2022. We had no outstanding balance under our $30.0 million SunTrust Revolving Credit Facility at ~~September 30, 2021.~~March 31, 2022. As of ~~September 30, 2021,~~March 31, 2022, we were in compliance with all covenants under our credit facilities.

Second Amended and Restated First Lien Credit and Guaranty Agreement

On April 23, 2021, we entered into the Second Amended and Restated First Lien Credit and Guaranty Agreement (the "Restated Credit Agreement") which provides for $725.0 million of senior secured first lien term loans (the "First Lien Term Loans") and a $195.0 million senior secured revolving credit facility (the "Barclays Revolving Credit Facility"). The proceeds of the First Lien Term Loans were used to refinance loans outstanding under our prior first lien credit agreement and provide funding for current and future operations. Total costs of the Restated Credit Agreement amounted to approximately $14.9 million segregated as follows: $8.8 million capitalized to discount and deferred finance cost, $4.5 million expensed to debt restructuring costs, $1.5 million charged to loss on early extinguishment of debt and $0.1 million written off to interest expense. Amounts capitalized will be amortized over the remaining terms of the respective credit facilities under the Restated Credit Agreement.

Senior Secured Credit Facilities

First Lien Term Loans:

The First Lien Term Loans under the Restated Credit Agreement bear interest at either a Eurodollar Rate or an Alternate Base Rate (in each case, as defined in the Restated Credit Agreement), plus an applicable margin. The applicable margin for Eurodollar Rate term loans under the Restated Credit Agreement is 3.25% per annum, with a reduction to 3.00% per annum upon delivery by us of financial statements for the period ending March 31, 2021 evidencing a first lien net leverage ratio of 3.50 to 1.00 or less. Such statements were delivered by us on May 27, 2021. At ~~September 30, 2021~~March 31, 2022 the effective Eurodollar Rate and the Alternate Base Rate for the First Lien Term Loans under the Restated Credit Agreement was 0.75% and ~~3.25%~~3.50%, respectively and the applicable margin for the Eurodollar Rate and Alternate Base Rate First Lien Term Loans under the Restated Credit Agreement was 3.00% and 2.00%, respectively.

The Restated Credit Agreement provides for quarterly payments of principal for the First Lien Term Loan in the amount of approximately $1.8 million. The First Lien Term Loan will mature on April 23, 2028 unless otherwise accelerated under the terms of the Restated Credit Agreement.

SunTrust Credit Facilities:

At ~~September 30, 2021,~~March 31, 2022, our SunTrust credit facilities, which relate to our consolidated subsidiary The New Jersey Imaging Network, L.L.C.("NJIN"), were comprised of one term loan in the principal amount described in the table above (the "SunTrust Term Loan") and a revolving credit facility of $30.0 million (the "SunTrust Revolving Credit Facility") both of which are provided pursuant to the Amended and Restated Revolving Credit and Term Loan Agreement dated August 31, 2018, among NJIN, as borrower, with SunTrust Bank, as administrative agent, and the lenders identified therein (as amended, the "SunTrust Credit Agreement"). Our SunTrust Term Loan bears interest at either an Adjusted LIBOR or a Base Rate (each as defined in the SunTrust Credit Agreement), plus an applicable margin according to the following schedule:

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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 ~~0.15%~~0.22% plus an applicable margin and fees based on Pricing Level V described above.

The scheduled amortization of the SunTrust Term Loan began December 31, 2018 with quarterly payments of $0.8 million, representing annual amortization equal to 5.0% of the original principal amount of the SunTrust Term Loan. At scheduled intervals, the quarterly amortization increases by $0.4 million, with the remaining balance to be paid at maturity. The SunTrust Term Loan will mature on August 31, 2023 unless otherwise accelerated under the terms of the SunTrust Credit Agreement.

Revolving Credit Facilities

Barclays Revolving Credit Facility

The Barclays Revolving Credit Facility under the Restated Credit Agreement is a $195.0 million senior secured revolving credit facility. Associated with the Barclays Revolving Credit Facility are deferred financing costs, net of accumulated amortization, of ~~$2.3~~$2.0 million at ~~September 30, 2021.~~March 31, 2022.

Revolving loans borrowed under the Barclays Revolving Credit Facility bear interest at either a Eurodollar Rate or an Alternate Base Rate (in each case, as defined in the Restated Credit Agreement) plus an applicable margin which adjusts depending on our first lien net leverage ratio, according to the following schedule:


First Lien Net Leverage Ratio	Eurodollar Rate Spread	Alternate Base Rate Spread
> 3.50x	3.25%	2.25%
> 3.00x but ≤ 3.50x	3.00%	2.00%
≤ 3.00x	2.75%	1.75%

As of ~~September 30, 2021,~~March 31, 2022, the effective interest rate payable on revolving loans under the Barclays Revolving Credit Facility was ~~5.00%~~5.25%.

For letters of credit issued under the Barclays Revolving Credit Facility, letter of credit fees accrue at the applicable margin for Eurodollar rate revolving loans which is currently 2.75% and fronting fees accrue at 0.125% per annum, in each case on the average aggregate daily maximum amount available to be drawn under all letters of credit issued under the Restated Credit Agreement. In addition, a commitment fee of 0.50% per annum accrues on the unused revolver commitments under the Barclays Revolving Credit Facility.

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

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SunTrust Revolving Credit Facility

The SunTrust Credit Agreement established a $30.0 million revolving credit facility available to NJIN for funding requirements. The SunTrust Revolving Credit Facility terminates on the earliest of (i) August 31, 2023, (ii) the voluntary termination thereof by NJIN pursuant to Section 2.8 of the SunTrust Credit Agreement, or (iii) the date on which all amounts outstanding under the SunTrust Credit Agreement have been declared or have automatically become due and payable (whether by acceleration or otherwise). As of ~~September 30, 2021,~~March 31, 2022, NJIN had no borrowings under the SunTrust Revolving Credit Facility.

Recent prior amendments to prior credit facilities:

Barclays Credit Facilities:

On August 28, 2020, RadNet Management, Inc. and RadNet, Inc. entered into Amendment No. 8, Consent and Incremental Joinder Agreement to Credit and Guaranty Agreement (the "Eighth Amendment"). The Eighth Amendment amended the prior first lien credit agreement to add $57.5 million of revolving commitments to the prior Barclays revolving credit facility increasing the maximum borrowing capacity under the prior Barclays revolving credit facility to $195.0 million while leaving the maturity date of July 1, 2023 unchanged.

On April 18, 2019 we entered into the following 2 amendments to the prior first lien credit agreement: (i) Amendment No. 6, Consent and Incremental Joinder Agreement to Credit and Guaranty Agreement (the “Sixth Amendment”); and (ii) Amendment No. 7 to Credit and Guaranty Agreement (the “Seventh Amendment”). Among other things, the Sixth Amendment amended the prior first lien credit agreement to issue $100.0 million in incremental first lien term loans and to add an additional $20.0 million of revolving commitments to the prior Barclays revolving credit facility. The Seventh Amendment amended the prior first lien credit agreement to extend the maturity date of the prior Barclays revolving credit facility by an additional two years to July 1, 2023, unless sooner terminated in accordance with the terms of the prior first lien credit agreement.

The prior first lien credit agreement was amended and restated by the Restated Credit Agreement described above, and the prior first lien term loans and prior Barclays revolving credit facility under the prior first lien credit agreement were refinanced and replaced by the First Lien Term Loans and the Barclays Revolving Credit Facility provided under the Restated Credit Agreement described above.

NOTE 67 – STOCK-BASED COMPENSATION

Stock Incentive Plans

We have ~~one~~1 long-term equity incentive plan, the RadNet, Inc. Equity Incentive Plan, which we first amended and restated April 20, 2015, again on March 9, 2017 and currently as of April 15, 2021 (the "Restated Plan”). The Restated Plan was most recently approved by our stockholders at our annual stockholders meeting on June 10, 2021. We have reserved for issuance under the Restated Plan 16,500,000 shares of common stock. We can issue options (incentive and nonstatutory), performance based options, stock awards (restricted or unrestricted), stock units, performance based stock units, and stock appreciation rights under the Restated Plan.

Options

Stock option grants, whether incentive or nonstatutory, generally vest over 3 to 5 years and expire 5 to 10 years from the date of grant. Under the Restated Plan, stock options may not be granted at a per share exercise price below the fair market value of a share of our common stock on the date of grant, may not be repriced or exchanged without stockholder approval, and the maximum exercisable term of the option may not exceed 10 years.

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Table of Contents

As of ~~September 30, 2021,~~March 31, 2022, we had outstanding options to acquire ~~525,399~~683,914 shares of our common stock, of which options to acquire ~~430,702~~508,969 shares were exercisable. The following summarizes all of our option transactions for the ~~nine~~three months ended ~~September 30, 2021:~~March 31, 2022:

Outstanding Options
Under the 2006 Plan Shares Weighted Average
Exercise price
Per Common Share Weighted Average
Remaining
Contractual Life
(in years) Aggregate
Intrinsic
Value
Balance, December 31, 2020 527,899 $ 9.34
Exercised (2,500) 10.10
Balance, September 30, 2021 525,399 9.34 5.61 $ 10,492,744
Exercisable at September 30, 2021 430,702 8.34 5.24 9,033,783


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, 2021	473,939	$	9.38
Granted	209,975	29.44


Balance, March 31, 2022	683,914	15.54		6.49	$	6,157,802
Exercisable at March 31, 2022	508,969	11.05		5.43	6,126,246

Aggregate intrinsic value in the table above represents the total pretax intrinsic value (the difference between our closing stock price on ~~September 30, 2021~~March 31, 2022 and the exercise price, multiplied by the number of in-the-money options as applicable) that would have been received by the holder had all holders exercised their options on ~~September 30, 2021. Options for 2,500 shares of our common stock were exercised during the nine months ended September 30, 2021.~~March 31, 2022. As of ~~September 30, 2021,~~March 31, 2022, total unrecognized stock-based compensation expense related to non-vested employee awards was ~~$0.3~~$2.6 million, which is expected to be recognized over a weighted average period of approximately ~~0.98~~2.24 years.

DeepHealth Options

During the second quarter of fiscal 2020, in connection with the completion of the DeepHealth acquisition, we granted options to acquire 412,434 shares 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 ~~September 30, 2021,~~March 31, 2022, total unrecognized stock based compensation expense related to non-vested DeepHealth options was approximately ~~$2.5~~$1.6 million, which is expected to be recognized over a weighted average period of approximately ~~1.62~~1.23 years

Outstanding Options
Under the Deep Health Plan Shares Weighted Average
Exercise price
Per Common Share Weighted Average
Remaining
Contractual Life
(in years) Aggregate
Intrinsic
Value
Balance December 31, 2020 400,539 $ —
Exercised (75,207) —
Balance, September 30, 2021 325,332 — 7.66 $ 9,535,481
Exercisable at September 30, 2021 40,708 — 7.66 1,193,150


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, 2021	320,660	$	—
Exercised	(12,637)	—
Balance, March 31, 2022	308,023	—		7.18	$	6,890,475
Exercisable at March 31, 2022	46,912	—		7.18	1,049,413

Options issued in replacement of original DeepHealth options as a result of our acquisition are not included in the share count under the Restated Plan.

Restricted Stock Awards

The Restated Plan permits the award of restricted stock awards (“RSA’s”). As of ~~September 30, 2021,~~March 31, 2022, we have issued a total of ~~7,724,428~~7,743,651 RSA’s of which ~~413,075~~438,786 were unvested at ~~September 30, 2021.~~March 31, 2022. The following summarizes all unvested RSA’s activities during the ~~nine~~three months ended ~~September 30, 2021:~~March 31, 2022:

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 642,046 $ 19.40
Vested (554,765) $ 18.00
Forfeited or Canceled (3,365) $ 18.60
RSA's unvested at September 30, 2021 413,075 0.90 $ 18.89

~~Table of Contents~~


	RSA's	Weighted-Average Remaining Contractual Term (Years)	Weighted-Average Fair Value
RSA's unvested at December 31, 2021	456,075		$	20.06
Changes during the period
Granted	500,622		$	28.72
Vested	(517,911)		$	21.63

RSA's unvested at March 31, 2022	438,786	1.16	$	25.96

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

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Other stock bonus awards

The Restated Plan also permits share awards not subject to any future service period. These are valued and expensed based on the closing price of our common stock on the date of award. During the ~~nine~~three months ended ~~September 30, 2021,~~March 31, 2022, no such awards ~~amounting~~were granted.

Performance based stock units ("PSUs")

In January 2022, the company granted certain employees PSUs with a target award of 25,683 shares of our common stock. The PSUs will vest in two equal parts, starting three years from the grant date based on continuous service, with the number of shares earned (0% to ~~375,186~~200% of the target award) depending upon the extent to which we achieve a performance condition as determined by the board of directors over the period from January 1, 2022 through December 31, 2022.

Performance based stock options ("PSOs")

In January 2022, the company granted certain employees PSOs with a potential to option a maximum of 111,925 shares ~~valued at approximately $8.9 million~~of our common stock. The PSOs will vest in ~~compensation expense were issued in employee COVID-19 related bonuses.~~three equal parts, starting three years from the grant date based on continuous service, with the number of shares earned (0 shares to 111,925 shares) depending upon the extent to which we achieve a performance condition as determined the board of directors over the period from January 1, 2022 through December 31, 2022.

Restated Plan summary

In summary, of the 16,500,000 shares of common stock reserved for issuance under the Restated Plan, at September 30, 2021, we had issued 16,525,443 total shares between options, RSA’s and other stock awards. With options canceled and RSA’s forfeited amounting to 3,281,040 and 65,068 shares, respectively,March 31, 2022, there remain ~~3,320,665~~2,380,364 shares available under the Restated Plan for future issuance.

NOTE 8 – SUBSEQUENT EVENTS

Formation of majority owned subsidiary

On April 1, 2022 we entered into Frederick County Radiology, LLC, a partnership with Frederick Health Hospital, Inc. ("Hospital"). The operation will offer multi-modality services out of 6 locations in Frederick, Maryland. RadNet will have a 65% economic interest and Hospital will have a 35% economic interest.

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, ~~2020~~2021 included in our Annual Report on Form 10-K for the fiscal year ended December 31, ~~2020~~2021 filed with the U.S. Securities and Exchange Commission (SEC) on March ~~15, 2021.~~1, 2022.

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

•anticipated trends in our revenues, operating expenses or capital expenditures, and ~~liquidity and cash flows, including~~ our financial ~~guidance~~guidance;

•expected future market acceptance for our products or services, and the anticipated ~~effects~~protection afforded by our competitive strengths in the markets we serve;

Table of ~~cost-savings efforts;~~Contents

•potential timing and impact of changes in regulations impacting our business;

•the ongoing impact ~~of the COVID-19 pandemic~~ on our business, suppliers, payors, customers, referral sources, partners, patients and employees including (i) government’s unprecedented action regarding existing and potential restrictions and/or obligations related to citizen and business activity to contain the virus; (ii) the consequences of an economic downturn resulting from the impacts of COVID-19 and the possibility of a global economic recession; (iii) the impact of the ~~volume~~COVID-19 pandemic;

•the anticipated effect of ~~canceled or rescheduled procedures, whether as a result of government action or patient choice; (iv)~~the measures we are taking to respond to the COVID-19 pandemic ~~including changes~~

•our ability to ~~business practices; (v) the impact of government~~successfully acquire and ~~administrative regulation, guidance~~integrate new imaging operations;

•cost savings, efficiencies and ~~appropriations; (vi) changes~~improvements anticipated from our investments 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, vendorsartificial intelligence and ~~others we do business with; (ix) the impact of return to work orders in certain states in which we operate;~~machine learning products and ~~(x) increased credit~~services; and ~~collectability risks; and~~

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•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~~neither historical facts nor assurances of future performance. Because forward-looking statements relate to the future, they are inherently subject to known and unknown risks, uncertainties and other factors that are difficult to predict and our of our control. Our actual results, level of activity, performance ~~and~~or achievements may be materially different from any future results, levels of activity, performance or achievements expressed or implied by these forwards-looking statements. Important factors that could cause our actual results ~~may~~to differ ~~significantly~~materially from ~~the results discussed~~those indicated or implied in ~~the~~our forward-looking ~~statements. Factors that might cause such differences~~statements 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, ~~2020~~2021 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~~Any forward-looking ~~statements speak~~statement in this quarterly report is based on information currently available to us and speaks only as of the date ~~when they are made.~~of this report. We ~~assume no obligation~~do not undertake any responsibility to ~~revise or update~~release publicly any revisions to these forward-looking statements ~~for~~to take into account events or circumstances that occur after the date of this quarterly report or any ~~reason,~~unanticipated events which may cause actual results to differ from those expressed or implied by the forward-looking statements contained in this quarterly report, except as required by law.

Overview

We are a leading national provider of freestanding, fixed-site outpatient diagnostic imaging services in the United States based on number of locations and annual imaging revenue. At ~~September 30, 2021,~~March 31, 2022, we operated, directly or indirectly through joint ventures with hospitals, ~~350~~351 centers located in Arizona, California, Delaware, Florida, Maryland, New Jersey, and New York. Our ~~centers provide~~operations comprise two segments for financial reporting purposes for this reporting period, Imaging Centers and Artificial Intelligence

Our Imaging Center segment provides 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~~disorders. Services include magnetic resonance imaging (MRI), computed tomography (CT), positron emission tomography (PET), nuclear medicine, mammography, ultrasound, diagnostic radiology (X-ray), fluoroscopy and other related procedures. The vast majority of our centers offer multi-modality imaging services, a strategy that diversifies revenue streams, reduces exposure to reimbursement changes and provides patients and referring physicians one location to serve the needs of multiple procedures. Included in the segment is our eRad subsidiary, which designs the underlying critical scheduling, data storage and retrieval systems necessary for imaging center operation.

~~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. We have made a number of investments in Artificial Intelligence ~~(AI) with~~("AI") segment that has been established through our ~~purchases~~acquisitions of DeepHealth, Nulogix Aidence Holding B.V. and ~~DeepHealth, combined with our investment in Whiterabbit.ai and our collaborative arrangement with Hologic.~~Quantib B.V.. Our current AI focus is to develop solutions inthat employ machine learning to assist radiologists and other clinicians in interpreting images and improving patient care, initially in the ~~field~~fields of ~~mammography.~~brain, breast, prostate, and pulmonary diagnostics..

We derive substantially all of our revenue, directly or indirectly, from fees charged for the diagnostic imaging services performed at our ~~facilities.~~centers. The following table shows our ~~facilities~~centers in operation and revenues for the ~~nine~~three months ended ~~September 30, 2021~~March 31, 2022 and ~~September 30, 2020:~~March 31, 2021:

Nine Months Ended September 30,
2021 2020
Facilities in operation 350 334
Net revenues (millions) $ 982 $ 764

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	Three Months Ended March 31,
	2022		2021
Centers in operation	351		346
Net revenues (millions)	$	342	$	315

Our revenue is derived from a diverse mix of payors, including private, managed care capitated 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 ~~nine~~three months ended ~~September 30,~~March 31, 2022 and 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):

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		Three Months Ended September 30,				Nine Months Ended September 30,					Three Months Ended March 31,
		2021		2020		2021		2020			2022		2021
Commercial insurance	Commercial insurance	$	185,723	$	160,524	$	555,355	$	412,415	Commercial insurance	$	188,465	$	182,096
Medicare	Medicare	73,163		62,704		207,977		154,847		Medicare	70,999		63,589
Medicaid	Medicaid	8,707		7,098		26,198		18,072		Medicaid	9,087		8,451
Workers' compensation/personal injury	Workers' compensation/personal injury	11,554		7,183		32,507		25,705		Workers' compensation/personal injury	12,449		10,399
Other patient revenue	Other patient revenue	4,800		8,328		14,766		17,211		Other patient revenue	7,123		4,775
Management fee revenue	Management fee revenue	5,255		2,675		16,007		8,574		Management fee revenue	5,508		5,219
Teleradiology and Software revenue		2,564		2,349		7,611		8,319
Software revenue										Software revenue	3,399		2,426
AI revenue										AI revenue	599		—
Other	Other	3,641		5,869		10,058		15,617		Other	5,647		2,622
Service fee revenue	Service fee revenue	295,407		256,730		870,479		660,760		Service fee revenue	303,276		279,577
Revenue under capitation arrangements	Revenue under capitation arrangements	37,283		35,046		111,449		103,145		Revenue under capitation arrangements	38,491		35,742
Total service revenue	Total service revenue	$	332,690	$	291,776	$	981,928	$	763,905	Total service revenue	$	341,767	$	315,319

Recent Developments

~~The discussion of~~As 2022 begins, our results below centers on our performance through the third quarter ended September 30, 2021. During the same period in 2020, with the onset of the novel strain of the coronavirus ("COVID-19"), we began experiencing reduced procedure volumes atremain strong. Our acquisitions of Aidence Holding B.V. and Quantib B.V. have expanded our AI initiatives to encompass imaging diagnostics solutions for the ~~end~~most prevalent cancers. We have also opened five centers through a combination of the first quarter which intensified through mid year. In response to the pandemic, we adjusted our business operations, inclusive of concentrating patient traffic to larger imaging centers, negotiating payment terms with vendorsacquisition and ~~landlords, initiating employee furloughs, compensation reductions, and telecommuting.~~

As 2021 comes to a close, our procedure volume has returned to pre-COVID-19 levels and our business has resumed normal operations. We expect that the cost saving measures implemented in 2020 will continue to be beneficial to our financial position in 2021. In addition, we have continued to invest and position for future growth. Year to date, we have acquired 19 new radiology centers in California, New Jersey and New York.internal development.

Equity Investments, Acquisitions and 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, ~~2020.~~2021.

Equity Investments

As of ~~September 30, 2021,~~March 31, 2022, 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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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 it operations. No observable price changes, impairment in our investment or impairment of the loan receivable was identified as of ~~September 30, 2021.~~March 31, 2022.

28Acquisitions

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~~Facility acquisitions~~Imaging Center

During ~~2021,~~the first quarter of 2022, we completed the acquisition of certain assets of the following entities, which either engage directly in the practice of radiology or associated businesses. The primary reason for these acquisitions was to strengthen our presence in the ~~New York City, New Jersey and California markets.~~Maryland market. These acquisitions are reported as part of our Imaging Center segment.. We made a fair value determination of the acquired assets and assumed liabilities and the following were recorded (in thousands):


Entity	Date Acquired	Total Consideration	Property & Equipment	Right of Use Assets	Goodwill	Right of Use Liabilities
IFRC LLC*^	1/1/2022	4,800	2,103	857	2,697	(857)
IFRC LLC*^	1/1/2022	8,200	2,910	1,703	5,271	(1,703)
Total		13,000	5,013	2,560	7,968	(2,560)

*Fair Value Determination is Final

** All stock purchase through issuing 67,658 shares^ IFRC LLC acquisitions consisted of ~~our common stock~~three subsidiaries of IFRC, one of which was purchased separately by a joint venture with Calvert Medical Imaging Centers, LLC.

~~Formation of majority owned subsidiary~~

Artificial Intelligence

Aidence Holding B.V.

On January ~~1, 2021~~20, 2022, we ~~entered into~~completed our acquisition of all the ~~Simi Valley Imaging Group, LLC,~~equity interests of Aidence Holding B.V. ("Aidence") an artificial intelligence enterprise centered on lung cancer screening, in an combination stock and cash purchase. Aidence is reported as part of our artificial intelligence segment and was acquired to enhance our AI capabilities. The transaction was accounted for as an acquisition of a ~~partnership~~business and total purchase consideration was determined to be approximately $45.2 million including i) 1,117,872 shares issued at $26.80 per share with ~~Simi Valley Hospital~~a fair value of $30.0 million ii) cash of $1.8 million and ~~Health Services ("Simi Adventist"). The operation will offer multi-modality imaging services out~~iii) assuming liabilities of ~~two locations in Ventura County, California. Total investment in the venture is $0.4 million. RadNet contributed $0.3~~$11.9 million, $7.4 million in milestone contingent consideration and cash holdback of $4.5 million and iv) a settlement of a loan from RadNet of $1.5 million. In addition we paid certain seller closing costs through the issuance of 23,362 shares at a fair value of $0.6 million. We preliminarily recorded $1.0 million in current assets, $0.2 million in property plant and equipment, $27.5 million in intangible assets, $3.2 million in liabilities and $19.2 million in goodwill.

Quantib B.V.

On January 20, 2022, we completed our acquisition of all the equity interests of Quantib B.V. ("Quantib") an artificial intelligence enterprise centered on prostate cancer screening, in a combination stock and cash purchase. Quantib is reported as part of our artificial intelligence segment, and was acquired to enhance our AI capabilities. The transaction was accounted for as an acquisition of a ~~60% economic interest~~business and ~~Simi Adventist contributed~~total purchase consideration was determined to be approximately $42.3 million including i) 965,058 shares issued at $26.80 per share with a fair value of $25.9 million ii) cash of $11.8 million and iii) 113,303 shares with a fair value at the date of close of $3.0 million and cash holdback of $1.6 million to be issued 18 months after acquisition subject to adjustment for any indemnification claims. We preliminarily recorded $2.4 million million in current assets, ~~totaling~~ $0.1 million ~~for a 40% economic interest.~~in property plant and equipment, $21.3 million in intangible assets, $3.7 million in liabilities and $22.2 million in goodwill.

~~Sale of ownership interest in a majority owned subsidiary~~

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As we finalize our estimation of the fair value of the assets acquired and liabilities assumed, additional adjustments may be recorded during the measurement period (a period not to exceed 12 months). The initial accounting is incomplete as of March 31, 2022 for the acquired assets and liabilities as we are currently in the process of completing the assessment of valuation inputs and assumptions as well as completing the assessment of the tax attributes of the business combination. The finalization of the acquisition accounting valuation assessment may result in a change in the valuation of the deferred tax assets and liabilities and intangible assets, along with the opening working capital accounts, which could have a material impact on our results of operations and financial position.

Joint Venture Activity

Acquisition

Entity

Date Acquired

Total Consideration

Property & Equipment

Right of Use Assets

Goodwill

Right of Use Liabilities

IFRC LLC *^

1/1/2022

3,922

2,121

1,295

1,801

(1,295)

*Fair Value Determination is Final

^ IFRC LLC acquisitions consisted of three subsidiaries of IFRC, two of which were purchased separately by wholly owned RadNet subsidiaries.

The following table is a summary of our investment in joint ventures during the ~~nine~~three months ended ~~September 30, 2021~~March 31, 2022 (in thousands):


Balance as of December 31, ~~2020~~2021	$	~~34,528~~42,229
Equity in earnings in these joint ventures	~~8,259~~2,517




~~Equity contributions in existing joint ventures~~	~~1,441~~
Balance as of ~~September 30, 2021~~March 31, 2022	$	~~44,228~~44,746

~~On June 23, 2021, we made an additional equity contribution to our joint venture in Arizona of $1.4 million. Our equity ownership interest percentage in the venture did not change.~~


Balance Sheet Data:	March 31, 2022		December 31, 2021
Current assets	$	37,119	$	37,186
Noncurrent assets	83,407		73,592
Current liabilities	(12,722)		(12,919)
Noncurrent liabilities	(27,298)		(22,370)
Total net assets	$	80,506	$	75,489

Book value of RadNet joint venture interests	$	37,214	$	34,930
Cost in excess of book value of acquired joint venture interests	7,532		7,299
Total value of RadNet joint venture interests	$	44,746	$	42,229

Balance Sheet Data: September 30,
2021 December 31,
2020
Current assets $ 46,186 $ 27,085
Noncurrent assets 67,514 68,686
Current liabilities (12,182) (12,545)
Noncurrent liabilities (20,914) (21,582)
Total net assets $ 80,604 $ 61,644
Book value of RadNet joint venture interests $ 36,940 $ 28,079
Cost in excess of book value of acquired joint venture interests 7,288 6,449
Total value of RadNet joint venture interests $ 44,228 $ 34,528


Income statement data for the nine months ended September 30,		2021		2020
Income statement data for the three months ended March 31,						Income statement data for the three months ended March 31,	2022		2021
Net revenue	Net revenue	$	98,193	$	78,988	Net revenue	$	34,411	$	31,718
Net income	Net income	$	16,007	$	13,651	Net income	$	5,035	$	4,803

Critical Accounting Policies

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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, ~~2020,~~2021, 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.

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

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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 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 re-negotiations and renewals.

Our revenues are based upon 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)

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The Provider Relief Fund 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 ~~$6.3~~$6.2 million for the ~~nine~~three months ended ~~September 30,~~March 31, 2021. No provider relief funding was received for the three months ended March 31, 2022. 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 ~~September 30, 2021,~~March 31, 2022, 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-~~

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~~party~~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. Our estimates and assumptions for allowances on our account receivable did not change materially during the quarter ended ~~September 30, 2021.~~March 31, 2022.

Business Combination

We evaluate all acquisitions under the framework Clarifying the Definition of a Business in the accounting guidance. Once a purchase has been determined to be the acquisition of a business, we are required to recognize the assets acquired and the liabilities assumed at their acquisition date fair values. Any portion of the purchase consideration transferred in excess of 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 ~~September 30, 2021~~March 31, 2022 totaled ~~$502.7~~$570.2 million. Indefinite Lived Intangible Assets at ~~September 30, 2021~~March 31, 2022 were ~~$7.1~~$13.2 million and are associated with the value of certain trade name intangibles. 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 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, ~~2020.~~2021. We also continue at regular intervals to consider the current and expected future economic and market conditions surrounding the COVID-19 pandemic and to date have not had an indication of goodwill impairment being more likely than not through ~~September 30, 2021.~~March 31, 2022.

Recent Accounting Standards

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

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Results of Operations

The following table sets forth, for the three ~~and nine~~ months ended ~~September 30,~~March 31, 2022 and 2021, ~~and 2020,~~ 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 September 30,				Nine Months Ended September 30,					Three Months Ended March 31,
		2021		2020		2021		2020			2022		2021
REVENUE	REVENUE									REVENUE
Service fee revenue	Service fee revenue	88.8	%	88.0	%	88.6	%	86.5	%	Service fee revenue	88.7	%	88.7	%
Revenue under capitation arrangements	Revenue under capitation arrangements	11.2	%	12.0	%	11.4	%	13.5	%	Revenue under capitation arrangements	11.3	%	11.3	%
Total service revenue	Total service revenue	100.0	%	100.0	%	100.0	%	100.0	%	Total service revenue	100.0	%	100.0	%
Provider relief funding	Provider relief funding	—	%	0.1	%	0.6	%	3.4	%	Provider relief funding	—	%	2.0	%
OPERATING EXPENSES	OPERATING EXPENSES									OPERATING EXPENSES
Cost of operations, excluding depreciation and amortization	Cost of operations, excluding depreciation and amortization	82.0	%	84.5	%	85.4	%	92.7	%	Cost of operations, excluding depreciation and amortization	92.2	%	89.5	%
Depreciation and amortization	Depreciation and amortization	7.4	%	7.3	%	7.3	%	8.4	%	Depreciation and amortization	7.9	%	7.2	%
Loss (gain) on sale and disposal of equipment and other	Loss (gain) on sale and disposal of equipment and other	0.8	%	0.1	%	—	%	0.1	%	Loss (gain) on sale and disposal of equipment and other	0.3	%	(0.4)	%
Severance costs	Severance costs	—	%	0.2	%	0.1	%	0.2	%	Severance costs	0.1	%	0.1	%
Total operating expenses	Total operating expenses	90.2	%	92.1	%	92.7	%	101.4	%	Total operating expenses	100.5	%	96.4	%

INCOME FROM OPERATIONS		9.8	%	8.0	%	7.9	%	1.9	%
(LOSS) INCOME FROM OPERATIONS										(LOSS) INCOME FROM OPERATIONS	(0.5)	%	5.6	%

OTHER INCOME AND EXPENSES	OTHER INCOME AND EXPENSES									OTHER INCOME AND EXPENSES
Interest expense	Interest expense	3.6	%	3.8	%	3.8	%	4.4	%	Interest expense	3.4	%	4.1	%
Equity in earnings of joint ventures	Equity in earnings of joint ventures	(0.9)	%	(0.8)	%	(0.8)	%	(0.7)	%	Equity in earnings of joint ventures	(0.7)	%	(0.7)	%
Non-cash change in fair value of interest rate hedge	Non-cash change in fair value of interest rate hedge	(0.9)	%	0.2	%	(1.4)	%	0.6	%	Non-cash change in fair value of interest rate hedge	(6.1)	%	(3.6)	%
Debt restructuring and extinguishment expenses		—	%	—	%	0.6	%	—	%
Other (income) expenses		(0.1)	%	—	%	0.2	%	—	%
Total other expenses		1.8	%	3.2	%	2.3	%	4.3	%
INCOME (LOSS) BEFORE INCOME TAXES		7.9	%	4.8	%	5.7	%	(2.3)	%
(Provision for) benefit from income taxes		(1.6)	%	(1.3)	%	(1.3)	%	0.7	%
NET INCOME (LOSS)		6.4	%	3.5	%	4.4	%	(1.7)	%

Other expenses										Other expenses	—	%	0.1	%
Total other income										Total other income	(3.4)	%	(0.2)	%
INCOME BEFORE INCOME TAXES										INCOME BEFORE INCOME TAXES	2.9	%	5.8	%
Provision for income taxes										Provision for income taxes	(0.4)	%	(1.4)	%
NET INCOME										NET INCOME	2.4	%	4.4	%
Net income attributable to noncontrolling interests	Net income attributable to noncontrolling interests	1.5	%	1.4	%	1.5	%	1.1	%	Net income attributable to noncontrolling interests	1.6	%	1.4	%
NET INCOME (LOSS) ATTRIBUTABLE TO RADNET, INC. COMMON STOCKHOLDERS		4.9	%	2.1	%	2.9	%	(2.6)	%
NET INCOME ATTRIBUTABLE TO RADNET, INC. COMMON STOCKHOLDERS										NET INCOME ATTRIBUTABLE TO RADNET, INC. COMMON STOCKHOLDERS	0.9	%	3.0	%

Results of Operations

Imaging Center Segment

We have developed our medical imaging ~~business~~centers segment 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 nine~~ months ended ~~September 30, 2021~~March 31, 2022 and ~~2020 for our operations at a total company and same center level.~~2021.

Three Months Ended ~~September 30, 2021~~March 31, 2022 Compared to the Three Months Ended ~~September 30, 2020~~March 31, 2021

Total Revenue inclusive of Provider Relief funding where applicable for ~~2021~~2022 and ~~2020~~2021

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In Thousands	In Thousands	Three Months Ended September 30,				In Thousands	Three Months Ended March 31,
Revenue	Revenue	2021	2020	$ Increase/(Decrease)	% Change	Revenue	2022	2021	$ Increase/(Decrease)	% Change
Total Revenue	Total Revenue	$332,691	$291,997	$40,694	13.9%	Total Revenue	$341,167	$321,567	$19,600	6.1%
Same Center Revenue	Same Center Revenue	$308,243	$287,274	$20,969	7.3%	Same Center Revenue	$314,705	$305,892	$8,813	2.9%
Excluded						Excluded	$26,462	$15,675	—	—

Upswing in revenue reflects an overall same center ~~10.0%~~6.2% growth in total procedure volumes over the same period in the prior year as business continues to return to pre-COVID-19 levels.On a same center basis, with ~~Mammography~~routine imaging procedures rising ~~6.4%~~5.6%, and advanced radiology procedures of MRI, PET and CT, expanding at a combined ~~23.6%~~7.9%, revenue increased over the same period in the prior year. ~~This same center comparison excludes~~Total Provider Relief funding used to offset lost revenue due to the pandemic and included in the above amounts was $6.2 million for the three months ended March 31, 2021. Excluded amounts refer to revenue contributions for the three month periods ending March 31, 2022 and March 31, 2021, respectively, from centers that were acquired or divested ~~subsequent to July~~between January 1, ~~2020. For the three months ended September 30,~~ 2021 net service fee revenue from centers that were acquired or divested subsequent to July 1, 2020 and excluded from the above comparison was $24.4 million. For the three months ended September 30, 2020, net service fee revenue from centers that were acquired or divested subsequent to July 1, 2020 and excluded from the above comparison was $4.7 million.through March 31, 2022.

Operating Expenses

Total operating expenses for the three months ended ~~September 30, 2021~~March 31, 2022 increased approximately ~~$31.5~~$34.7 million, or ~~11.7%~~11.5%, from ~~$268.6~~$302.6 million for the three months ended ~~September 30, 2020~~March 31, 2021 to ~~$300.1~~$337.3 million for the three months ended ~~September 30, 2021.~~March 31, 2022. The following table sets forth a breakdown of our cost of operations and total operating expenses for the three months ended ~~September 30,~~March 31, 2022 and 2021 ~~and 2020~~ (in thousands):


		Three Months Ended September 30,					Three Months Ended March 31,
		2021		2020			2022		2021
Salaries and professional reading fees, excluding stock-based compensation	Salaries and professional reading fees, excluding stock-based compensation	$	164,462	$	149,970	Salaries and professional reading fees, excluding stock-based compensation	$	196,962	$	177,204
Stock-based compensation	Stock-based compensation	4,422		2,067		Stock-based compensation	10,357		7,791
Building and equipment rental	Building and equipment rental	31,403		26,703		Building and equipment rental	29,623		28,711
Medical supplies	Medical supplies	14,008		12,498		Medical supplies	15,557		13,970
Other operating expenses *	Other operating expenses *	58,461		55,225		Other operating expenses *	57,611		53,337
Cost of operations	Cost of operations	272,756		246,463		Cost of operations	310,110		281,013

Depreciation and amortization	Depreciation and amortization	24,606		21,247		Depreciation and amortization	25,806		22,569
Loss on sale and disposal of equipment	Loss on sale and disposal of equipment	2,595		342		Loss on sale and disposal of equipment	1,154		(1,307)
Severance costs	Severance costs	163		571		Severance costs	201		285
Total operating expenses	Total operating expenses	$	300,120	$	268,623	Total operating expenses	$	337,271	$	302,560

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

The discussion below provides additional information and analysis on changes in our various operating expenses for the three months ended ~~September 30,~~March 31, 2022 and 2021 ~~and 2020~~ (in thousands):

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


In Thousands	In Thousands	Three Months Ended September 30,				In Thousands	Three Months Ended March 31,
Salaries and Professional Fees	Salaries and Professional Fees	2021	2020	$ Increase/(Decrease)	% Change	Salaries and Professional Fees	2022	2021	$ Increase/(Decrease)	% Change
Total Salaries	Total Salaries	$164,462	$149,970	$14,492	9.7%	Total Salaries	$196,962	$177,204	$19,758	11.2%
Same Center Salaries	Same Center Salaries	$151,321	$146,307	$5,014	3.4%	Same Center Salaries	$182,278	$168,535	$13,743	8.2%
Excluded						Excluded	$14,684	$8,669	—	—

Stemming from the higher procedure volumes noted above, our staffing levels were adjusted to support the influx of patients seeking radiology ~~procedures, resulting~~procedures.In addition, we face inflation in ~~a nominal increase in salaries and professional fee expense over~~employee cost similar to the ~~same period in the prior year. This same center comparison excludes expenses from centers that were acquired or divested subsequent~~general economy as demand returns to ~~July 1, 2020. For the three months ended September 30, 2021,~~pre-Covid levels. Excluded amounts refer to salaries and professional reading fees ~~from centers that were acquired or divested subsequent to July 1, 2020 and excluded from~~for the ~~above comparison was $13.1 million. For the~~three month

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~~three months ended September 30, 2020, salaries~~periods ending March 31, 2022 and ~~professional reading fees~~March 31, 2021, respectively, from centers that were acquired or divested ~~subsequent to July~~between January 1, ~~2020 and excluded from the above comparison was approximately $3.7 million.~~2021 through March 31, 2022.

Stock-based compensation

Stock-based compensation increased ~~$2.4~~$2.6 million, or ~~114.0%~~32.9% to approximately ~~$4.4~~$10.4 million for the three months ended ~~September 30, 2021~~March 31, 2022 compared to ~~$2.1~~$7.8 million for three months ended ~~September 30, 2020.~~March 31, 2021. This increase was ~~a combination of awards valued at $8.9 million in stock compensation expense for employee COVID-19 related bonuses and~~driven by the higher fair value of RSA’s awarded and vested in the first quarter of ~~2021~~2022 as compared to RSA’s awarded and vested in the prior year’s first quarter.

Building and equipment rental


In Thousands	In Thousands	Three Months Ended September 30,				In Thousands	Three Months Ended March 31,
Building & Equipment Rental	Building & Equipment Rental	2021	2020	$ Increase/(Decrease)	% Change	Building & Equipment Rental	2022	2021	$ Increase/(Decrease)	% Change
Total	Total	$31,403	$26,703	$4,700	17.6%	Total	$29,623	$28,711	$912	3.2%
Same Center	Same Center	$25,056	$25,235	$(179)	(0.7)%	Same Center	$24,425	$25,462	$(1,037)	(4.1)%
Excluded Sites						Excluded Sites	$5,198	$3,249	—	—

The ~~overall increase~~decrease in building and rental expense relates to reduced equipment rental expenses relating to operating lease contracts which ended or were bought out during 2021. Excluded amounts refer to building and equipment rental ~~expenses was related to centers acquired through our business combinations, as same center expense remained stable. This same center comparison excludes expenses~~for the three month periods ending March 31, 2022 and March 31, 2021, respectively, from centers that were acquired or divested ~~subsequent~~between January 1, 2021 through March 31, 2022.

Medical supplies


In Thousands	Three Months Ended March 31,
Medical Supplies Expense	2022	2021	$ Increase/(Decrease)	% Change
Total	$15,557	$13,970	$1,587	11.4%
Same Center	$14,505	$13,229	$1,276	9.7%
Excluded Sites	$1,052	$741	—	—

The rise in Medical supplies expense corresponds to ~~July 1, 2020. For~~higher patient volume combined with price increases for contrasting agents used in advanced radiology procedures. Excluded amounts refer to medical supplies expense for the three ~~months ended September 30,~~month periods ending March 31, 2022 and March 31, 2021, ~~building and equipment rental expenses~~respectively, from centers that were acquired or divested ~~subsequent~~between January 1, 2021 through March 31, 2022. .

Other operating expenses


In Thousands	Three Months Ended March 31,
Other Operating Expenses	2022	2021	$ Increase/(Decrease)	% Change
Total	$57,611	$53,337	$4,274	8.0%
Same Center	$52,326	$50,521	$1,805	3.6%
Excluded Sites	$5,285	$2,816	—	—

Other operating expenses increase relates to ~~July 1, 2020 and excluded from the above comparison was $6.3 million. For~~one time settlement charge for telecom contracts being phased out as part of a change in service provider. Excluded amounts refer to other operating expenses for the three ~~months ended September 30, 2020, building~~month periods ending March 31, 2022 and ~~equipment rental expenses~~March 31, 2021, respectively, from centers that were acquired or divested ~~subsequent to July~~between January 1, ~~2020 and excluded from the above comparison was approximately $1.5 million.~~

~~Medical supplies~~

In Thousands Three Months Ended September 30,
Medical Supplies Expense 2021 2020 $ Increase/(Decrease) % Change
Total $14,008 $12,498 $1,510 12.1%
Same Center $13,059 $12,275 $784 6.4%

Medical supplies expense increase relates to the growth in overall procedural volumes noted above compared to the same period in the prior year and is consistent with the percentage increase in revenue over the same period in the prior year. This same center comparison excludes expenses from centers that were acquired or divested subsequent to July 1, 2020. For the three months ended September 30, 2021 medical supplies expenses from centers that were acquired or divested subsequent to July 1, 2020 and excluded from the above comparison was $0.9 million. For the three months ended September 30, 2020, medical supplies expense from centers that were acquired or divested subsequent to July 1, 2020 and excluded from the above comparison was $0.2 million.

~~Other operating expenses~~

In Thousands Three Months Ended September 30,
Other Operating Expenses 2021 2020 $ Increase/(Decrease) % Change
Total $58,461 $55,225 $3,236 5.9%
Same Center $53,337 $53,952 $(615) (1.1)%

Other operating expenses remained flat due to the cumulative effect of successful contract re-negotiations in the prior year 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 July 1, 2020. For the three months ended September 30, 2021, other operating expense from centers that were acquired or divested subsequent July 1, 2020 and excluded from the above comparison was $5.1 million. For the three months ended September 30, 2020, other operating expense from centers that were acquired or divested subsequent to July 1, 2020 was $1.3 million.

~~Depreciation and amortization~~through March 31, 2022.

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In Thousands Three Months Ended September 30,
Depreciation & Amortization 2021 2020 $ Increase/(Decrease) % Change
Total $24,606 $21,247 $3,359 15.8%
Same Center $21,749 $20,443 $1,306 6.4%
Additional segment operating and non operating expenses:


In Thousands	Three Months Ended March 31,
	2022	2021	$ Increase/(Decrease)	% Change
Depreciation and amortization	$25,806	$22,569	$3,238	14.3%
Loss (gain) on disposal of equipment and other	$1,154	($1,307)	$2,461	nm
Non-cash change in fair value of interest rate hedge	($20,819)	($11,245)	(9,575)	nm
Other expenses	$661	$7	$654	nm
Severance	$201	$285	(84)	(34.6)%

This same center comparison excludes expenses from centers that were acquired or divested subsequent to July 1, 2020. For the three months ended September 30, 2021, depreciation expense from centers that were acquired or divested subsequent to July 1, 2020 and excluded from the above comparison was $2.9 million. For the three months ended September 30, 2020, depreciation and amortization from centers that were acquired or divested subsequent to July 1, 2020 and excluded from the above comparison was $0.8 million.

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

We recorded losses on the disposal of equipment and other items of approximately $2.6 million for the three months ended September 30, 2021 and approximately $0.3 million for the three months ended September 30, 2020.

~~Non-cash change in fair value of interest rate hedge~~

~~We recorded a gain of $2.9 million for the ineffective portion of our 2019 Swaps for the three months ended September 30, 2021 and a expense of $0.7 million for three months ended September 30, 2020.~~

~~Other income~~

~~We recorded other income of approximately $0.2 million for the three months ended September 30, 2021 and $0.1 million for the corresponding period ending September 30, 2020.~~

~~Severance costs~~

~~We incurred severance expenses of $0.2 million for the three months ended September 30, 2021 and $0.6 million for the three months ended September 30, 2020.~~nm= not meaningful

Interest expense


In Thousands	In Thousands	Three Months Ended September 30,					In Thousands	Three Months Ended March 31,
Interest Expense	Interest Expense	2021	2020	$ Increase/(Decrease)	% Change		Interest Expense	2022	2021	$ Increase/(Decrease)	% Change
Total Interest Expense	Total Interest Expense	$12,032	$11,061	$971	8.8	%	Total Interest Expense	$11,601	$12,826	$(1,224)	(9.5)	%
Interest related to derivatives*	Interest related to derivatives*	$3,700	$1,603				Interest related to derivatives*	$3,671	$3,650

Interest related to amortization**	Interest related to amortization**	$647	$1,103				Interest related to amortization**	$647	$1,147
Adjusted Interest Expense***	Adjusted Interest Expense***	$7,685	$8,355	$(670)	(8.0)	%	Adjusted Interest Expense***	$7,283	$8,029	$(745)	(9.3)	%

* Includes interest on current and prior derivative instruments not related to debt obligations.

** Includes combined noncash amortization of deferred loan costs and discount on issuance of debt.

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

Excluding the effect of interest expense related to derivatives and amortization for the three months ended ~~September 30, 2021~~March 31, 2022 compared to the three months ended ~~September 30, 2020,~~March 31, 2021, interest expense decreased $0.7 million, or ~~8.0%~~9.3%. The reduction in interest expense ~~corresponds~~is attributable to ~~lowered variable LIBOR and Prime~~a lower base rate that that was negotiated as part of an amendment to our senior credit facilities which reduced the effective interest rates ~~paid~~ on our term loan and revolving ~~debt based~~credit facilities as compared to the same period last year. Based on ~~market conditions.~~recent increases in global interests rates, we expect the effective interest rates on our senior credit facilities, and our related interest expense, to rise in the near term. 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

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For the three months ended ~~September 30, 2021~~March 31, 2022 we recognized equity in earnings from unconsolidated joint ventures in the amount of ~~$2.9~~$2.5 million and for three months ended ~~September 30, 2020~~March 31, 2021 we recognized equity in earnings from unconsolidated joint ventures of $2.3 million, an increase of ~~$0.6~~$0.2 million or ~~25.4%~~10.2%. The increase was mainly related to the equity in earnings received from our ~~interest~~venture operations in ~~the Arizona Diagnostic Radiology Group joint venture, which was formed in the fourth quarter of 2020.~~

~~Income tax provision~~

We recorded income tax expense of $5.3 million, or an effective tax rate of 20.0%, for the three months ended September 30, 2021 compared to income tax expense of $3.8 million, or an effective tax rate of 27.2% for the three months ended September 30, 2020. The income tax rates for the three and nine months ended September 30, 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.

~~Nine Months Ended September 30, 2021 Compared to the Nine Months Ended September 30, 2020~~

~~Total Revenue inclusive of Provider Relief funding for 2020~~

In Thousands Nine Months Ended September 30,
Revenue 2021 2020 $ Increase/(Decrease) % Change
Total Revenue $988,219 $789,601 $198,618 25.2%
Same Center Revenue $913,503 $768,383 $145,120 18.9%

Increased revenue reflects an overall same center 25.0% growth in total procedure volumes over the same period in the prior year as business returned to pre-COVID-19 levels. Total Provider Relief funding used to offset lost revenue due to the pandemic and included in the above amounts was $6.2 million for the nine months ended September 30, 2021 and $25.7 million for the nine months ended September 30, 2020. This comparison excludes revenue contributions from centers that were acquired or divested subsequent to January 1, 2020. For the nine months ended September 30, 2021, net service fee revenue from centers that were acquired or divested subsequent to January 1, 2020 and excluded from the above comparison was $74.7 million. For the nine months ended September 30, 2020, net service fee revenue from centers that were acquired or divested subsequent to January 1, 2020 and excluded from the above comparison was $21.2 million.

~~Operating Expenses~~

Total operating expenses for the nine months ended September 30, 2021 increased approximately $135.5 million, or 17.5%, from $774.8 million for the nine months ended September 30, 2021 to $910.3 million for the nine months ended September 30, 2020. The following table sets forth a breakdown of our cost of operations and total operating expenses for the nine months ended September 30, 2021 and 2020 (in thousands): Maryland.

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Nine Months Ended September 30,
2021 2020
Salaries and professional reading fees, excluding stock-based compensation $ 515,227 $ 429,292
Stock-based compensation 21,566 10,144
Building and equipment rental 91,253 80,148
Medical supplies 42,246 33,812
Other operating expenses *
168,316 154,700
Cost of operations 838,608 708,096
Depreciation and amortization 71,273 64,536
(Gain) loss on sale and disposal of equipment (279) 543
Severance costs 715 1,647
Total operating expenses $ 910,317 $ 774,822
AI Segment

*~~Includes billing fees, office supplies, repairs~~Our AI segment develops and ~~maintenance, insurance, business tax~~deploys clinical applications to enhance interpretation of medical images and ~~license, outside services, telecom, utilities, marketing, travel~~improve patient outcomes with an emphasis on brain, breast, prostate, and ~~other expenses.~~pulmonary diagnostics. We are developing our AI segment initially through acquisition activity. Our acquisitions of Nulogix and Deephealth comprise the results for 2021. Our 2022 results now include our recent additions of Aidence Holding B.V and Quantib B.V. The breakdown of revenue and expenses of the segment for the three months ended March 31, 2022 and 2021 are as follows:

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

In Thousands Nine Months Ended September 30,
Salaries and Professional Fees 2021 2020 $ Increase/(Decrease) % Change
Total Salaries $515,227 $429,292 $85,935 20.0%
Same Center Salaries $478,215 $417,280 $60,935 14.6%


In Thousands	Three Months Ended March 31,
	2022	2021	$ Increase/(Decrease)
Revenue	$599	$—	$599
Loss from Operations	($5,617)	($1,354)	($4,263)
Other	($504)	$200	(704)
Segment loss	($5,113)	($1,554)	($3,559)

The increase in salaries expense was a result of a return to normal pre-Covid19 levels of business. Staffing levels have been adjusted to support higher patient volumes with the corresponding rise in salaries and professional fee expense. This comparison excludes expenses from centers that were acquired or divested subsequent to January 1, 2020. For the nine months ended September 30, 2021, salaries and professional reading fees from centers that were acquired or divested subsequent to January 1, 2020 and excluded from the above comparison was $37.0 million. For the nine months ended September 30, 2020, salaries and professional reading fees from centers that were acquired or divested subsequent to January 1, 2020 and excluded from the above comparison was approximately $12.0 million.

~~Stock-based compensation~~

Stock-based compensation increased $11.4 million, or 112.6% to approximately $21.6 million for the nine months ended September 30, 2021 compared to $10.1 million for nine months ended September 30, 2020. This increase was driven by the higher fair value of RSA’s awarded and vested in the nine months of 2021 as compared to RSA’s awarded and vested in the prior year’s same period. In addition, we granted awards valued at $8.9 million in compensation expense in employee COVID-19 related bonuses during the first nine months of 2021.

~~Building and equipment rental~~

In Thousands Nine Months Ended September 30,
Building & Equipment Rental 2021 2020 $ Increase/(Decrease) % Change
Total $91,253 $80,148 $11,105 13.9%
Same Center $75,434 $74,877 $557 0.7%

The increase in building and equipment rental expenses was related to centers acquired through our business combinations, as same center expense remained steady. This comparison excludes expenses from centers that were acquired or divested subsequent to January 1, 2020. For the nine months ended September 30, 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 $15.8 million. For the nine months ended September 30, 2020, building and equipment rental expenses from centers that

~~Table of Contents~~

~~were acquired or divested subsequent to January 1, 2020 and excluded from the above comparison was approximately $5.3 million.~~

~~Medical supplies~~

In Thousands Nine Months Ended September 30,
Medical Supplies Expense 2021 2020 $ Increase/(Decrease) % Change
Total $42,246 $33,812 $8,434 24.9%
Same Center $39,752 $33,019 $6,733 20.4%

Medical supplies expense increase stems from the overall procedural volumes noted above compared to the same period in the prior year and is consistent with the percentage increase in revenue. This comparison excludes expenses from centers that were acquired or divested subsequent to January 1, 2020. For the nine months ended September 30, 2021, medical supplies expenses from centers that were acquired or divested subsequent to January 1, 2020 and excluded from the above comparison was $2.5 million. For the nine months ended September 30, 2020, medical supplies expense from centers that were acquired or divested subsequent to January 1, 2020 and excluded from the above comparison was $0.8 million.

~~Other operating expenses~~

In Thousands Nine Months Ended September 30,
Other Operating Expenses 2021 2020 $ Increase/(Decrease) % Change
Total $168,316 $154,700 $13,616 8.8%
Same Center $152,932 $148,840 $4,092 2.8%

The minimal increase in other operating expenses were mitigated by the cumulative effect of successful contract re-negotiations in the prior year aimed to reduce charges across a range of vendors. This comparison excludes expenses from centers that were acquired or divested subsequent to January 1, 2020. For the nine months ended September 30, 2021, other operating expense from centers that were acquired or divested subsequent January 1, 2020 and excluded from the above comparison was $15.4 million. For the nine months ended September 30, 2020, other operating expense from centers that were acquired or divested subsequent to January 1, 2020 was $5.9 million.

~~Depreciation and amortization~~

In Thousands Nine Months Ended September 30,
Depreciation & Amortization 2021 2020 $ Increase/(Decrease) % Change
Total $71,273 $64,536 $6,737 10.4%
Same Center $63,957 $62,267 $1,690 2.7%

This comparison excludes expenses from centers that were acquired or divested subsequent to January 1, 2020. For the nine months ended September 30, 2021, depreciation expense from centers that were acquired or divested subsequent to January 1, 2020 and excluded from the above comparison was $7.3 million. For the nine months ended September 30, 2020, depreciation and amortization from centers that were acquired or divested subsequent to January 1, 2020 and excluded from the above comparison was $2.3 million.

~~Loss on sale and disposal of equipment and other~~

We recorded a gain on the disposal of equipment and other items of approximately $0.3 million for the nine months ended September 30, 2021 and a loss on the disposal of equipment of approximately $0.5 million for the nine months ended September 30, 2020.

~~Non-cash change in fair value of interest rate hedge~~

We recorded a gain of $14.1 million for the ineffective portion of our 2019 Swaps for the nine months ended September 30, 2021 and an expense of $4.5 million for the nine months ended September 30, 2020.

~~Other (income) expenses~~

~~Table of Contents~~

We recorded other expense of approximately $7.7 million for the nine months ended September 30, 2021 mainly related to our refinancing of our term loan debt and the change in fair value of contingent consideration. We recorded other income of approximately $0.2 million for the nine months ended September 30, 2020

~~Severance Costs~~

~~We incurred severance expenses of $0.7 million for the nine months ended September 30, 2021 and $1.6 million for the nine months ended September 30, 2020.~~

~~Interest expense~~

In Thousands Nine Months Ended September 30,
Interest Expense 2021 2020 $ Increase/(Decrease) % Change
Total Interest Expense $37,028 $33,443 $3,585 10.7 %
Interest related to derivatives* $11,034 $3,152
Interest related to amortization*** $2,725 $3,266
Adjusted Interest Expense $23,269 $27,025 $(3,756) (13.9) %

* Includes interest on derivatives not related to debt obligations.

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

***Includes combined noncash amortization of deferred loan costs and discount on issuance of debt.

Excluding interest expense for derivatives and amortization for the nine months ended September 30, 2021 compared to the nine months ended September 30, 2020, interest expense decreased $3.8 million, or 13.9% and relates to lowered variable LIBOR and Prime interest rates paid on our term loan and revolving debt. See “Liquidity and Capital Resources” below for more details on our credit facilities.

~~Equity in earnings from unconsolidated joint ventures~~

For the nine months ended September 30, 2021 we recognized equity in earnings from unconsolidated joint ventures in the amount of $8.3 million and for the nine months ended September 30, 2020 we recognized equity in earnings from unconsolidated joint ventures of $5.2 million, an increase of $3.1 million or 59.6%. The increase was mainly related to the equity in earnings received from our interest in the Arizona Diagnostic Radiology Group joint venture, which was formed in the fourth quarter of 2020.

~~Income tax expense~~

We recorded a provision for income tax of $12.5 million, or an effective tax rate of 22.6%, for the nine months ended September 30, 2021 compared to a benefit for income tax of $5.0 million , or an effective tax rate of 28.3% for the nine months ended September 30, 2020. The income tax rates for the three and nine months ended September 30, 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.

Adjusted EBITDA

We use both GAAP and non-GAAP metrics to measure our financial results. We believe that, in addition to GAAP metrics, 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.

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

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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 ~~(loss)~~ reflected below includes the effect of revenue received under the Provider Relief Fund of $6.2 million ~~and $25.7 million~~ for the ~~nine~~three months ended ~~September 30, 2021 and 2020, respectively.~~March 31, 2021.

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. 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.

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Adjusted EBITDA is most comparable to the GAAP financial measure, net income ~~(loss)~~ attributable to RadNet, Inc. common stockholders. The following is a reconciliation of GAAP net income ~~(loss)~~ attributable to RadNet, Inc. common stockholders to Adjusted EBITDA for the three ~~and nine~~ months ended ~~September 30,~~March 31, 2022 and 2021, ~~and 2020,~~ respectively.


		Three Months Ended September 30,				Nine Months Ended September 30,					Three Months Ended March 31,
		2021		2020		2021		2020			2022		2021
Net income (loss) attributable to RadNet, Inc. common stockholders		$	16,220	$	6,156	$	28,550	$	(20,797)
Provision for (benefit from) income taxes		5,284		3,825		12,534		(5,029)
Net income attributable to RadNet, Inc. common stockholders										Net income attributable to RadNet, Inc. common stockholders	$	3,013	$	9,458
Provision for income taxes										Provision for income taxes	1,496		4,376
Interest expense	Interest expense	12,032		11,061		37,028		33,443		Interest expense	11,593		12,826
Severance costs	Severance costs	163		571		715		1,647		Severance costs	201		285
Depreciation and amortization	Depreciation and amortization	24,606		21,247		71,272		64,536		Depreciation and amortization	27,118		22,656
Non-cash employee stock-based compensation	Non-cash employee stock-based compensation	4,422		2,067		21,566		10,144		Non-cash employee stock-based compensation	11,102		8,248
Loss (gain) on sale and disposal of equipment and other	Loss (gain) on sale and disposal of equipment and other	2,595		342		(279)		543		Loss (gain) on sale and disposal of equipment and other	1,128		(1,307)
Debt restructuring and loss on extinguishment expenses		—		—		6,044		—

Non-cash change in fair value of interest rate hedge	Non-cash change in fair value of interest rate hedge	(2,870)		679		(14,149)		4,523		Non-cash change in fair value of interest rate hedge	(20,819)		(11,245)
Other adjustment to joint venture investment		—		—		(565)		—

Other expenses	Other expenses	(167)		(139)		1,699		(247)		Other expenses	165		206
Legal settlements										Legal settlements	2,197		—
Non operational rent expenses										Non operational rent expenses	938		—
Gain on sale of equipment attributable to noncontrolling interest										Gain on sale of equipment attributable to noncontrolling interest
Adjusted EBITDA including losses from AI Segment & Provider Relief Funding										Adjusted EBITDA including losses from AI Segment & Provider Relief Funding	$	38,132	$	45,503

Provider relief funding										Provider relief funding	—		(6,248)
Adjusted EBITDA including losses from AI Segment and excluding benefit from Provider Relief Funding										Adjusted EBITDA including losses from AI Segment and excluding benefit from Provider Relief Funding	$	38,132	$	39,255
Losses from AI Segment										Losses from AI Segment	3,585		811
Adjusted EBITDA excluding losses from AI Segment & Provider Relief Funding										Adjusted EBITDA excluding losses from AI Segment & Provider Relief Funding	$	41,717	$	40,066

Adjusted EBITDA		$	62,285	$	45,809	$	164,415	$	88,763

Liquidity and Capital Resources

The following table summarizes key balance sheet data related to our liquidity as of ~~September 30, 2021~~March 31, 2022 and December 31, ~~2020~~2021 and income statement data for the ~~nine~~three months ended ~~September 30,~~March 31, 2022 and 2021 ~~and 2020~~ (in thousands):


Balance Sheet Data:	Balance Sheet Data:	September 30, 2021		December 31, 2020		Balance Sheet Data:	March 31, 2022		December 31, 2021
Cash and cash equivalents	Cash and cash equivalents	$	151,253	$	102,018	Cash and cash equivalents	$	70,713	$	134,606
Accounts receivable	Accounts receivable	152,409		129,585		Accounts receivable	159,725		135,062
Working capital (exclusive of current operating lease liabilities)	Working capital (exclusive of current operating lease liabilities)	39,114		(61,896)		Working capital (exclusive of current operating lease liabilities)	(27,696)		14,932
Stockholders' equity	Stockholders' equity	339,379		258,303		Stockholders' equity	421,450		346,157

Income statement data for the nine months ended September 30, 2021 2020
Total net revenue $ 981,928 $ 763,905
Net income (loss) attributable to RadNet common stockholders 28,550 (20,797)


Income statement data for the three months ended March 31,	2022		2021
Total net revenue	$	341,767	$	315,319
Net income attributable to RadNet common stockholders	3,013		9,458

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,~~centers, the acquisition of additional ~~facilities~~centers and new diagnostic imaging equipment. Because our cash

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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.

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During the nine months ended September 30, 2021 we had a substantial acceleration of procedure volumes compared to the prior year. Net income from the period, together with proceeds from the refinance of our credit facility has resulted in substantial improvement of our working capital position compared to December 31, 2020. However, as noted in our forward looking statements, we are uncertain of the duration and ultimate severity of 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, we may again experience operating 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 ~~nine~~three months ended:


Cash Flow Data	March 31, 2022		March 31, 2021
Cash provided by operating activities	$	901	$	28,084
Cash used in investing activities	(61,564)		(87,348)
Cash used in financing activities	(3,313)		(11,651)

Cash used in operating activities for the three months ended ~~September 30, 2021~~March 31, 2022 was $0.9 million and ~~2020:~~

Cash Flow Data September 30, 2021 September 30, 2020
Cash provided by operating activities $ 100,295 $ 170,343
Cash used in investing activities (159,506) (88,280)
Cash provided by (used in) financing activities 108,478 (33,495)

~~Cash~~cash provided by operation activities was $28.1 million for the three months ended March 31, 2021. Our cash provided by operating activities for the ~~nine~~three months ended ~~September 30, 2021~~March 31, 2022 was ~~$100.3 million and $170.3 million for~~affected by the ~~nine months ended September 30, 2020.~~non-cash change in fair value of our interest rate hedge of $20.8 million. Our cash provided by operating activities for the period ended ~~September 30, 2020~~March 31, 2021 was benefited by the receipt of ~~$39.5~~$39.6 million in CMS advances recorded as deferred revenue.

Cash used in investing activities for the ~~nine~~three months ended ~~September 30, 2021,~~March 31, 2022, included purchases of property and equipment for approximately ~~$88.5~~$36.6 million and the acquisition of imaging business and other assets for ~~$70.1~~$25.1 million. As part of our business operations we continually evaluate investment opportunities.

Cash ~~provided by~~used in financing activities of ~~$108.5~~$3.3 million for the ~~nine~~three months ended ~~September 30, 2021,~~March 31, 2022, was due to ~~refinancing of~~payment on our term loan ~~obligations with the Second Amended and Restated First Lien Credit and Guaranty Agreement on April 23, 2021.~~obligations. Please see Note 5,6, Credit Facilities and Notes Payable in the notes to consolidated financials statements for more information.

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 ~~September 30, 2021~~March 31, 2022 we have ~~$18.3~~$17.0 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

We maintain secured credit facilities with Barclays Bank PLC and with SunTrust Bank. The Barclays credit facilities are comprised of first lien term loans and a revolving credit facility of $195.0 million. The SunTrust credit facilities are

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comprised of a term loan and a revolving credit facility of $30.0 million. As of ~~September 30, 2021,~~March 31, 2022, we were in compliance with all covenants under our credit facilities. Deferred financing costs at ~~September 30, 2021,~~March 31, 2022, net of accumulated amortization, was ~~$2.3~~$2.0 million and is specifically related to our Barclays revolving credit facility.

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Included in our condensed consolidated balance sheets at ~~September 30, 2021~~March 31, 2022 are ~~$771.2~~$764.6 million of total term loan debt (exclusive of unamortized discounts of ~~$14.3~~$12.7 million) in thousands:


		Face Value		Discount		Total Carrying Value			Face Value		Discount		Total Carrying Value
First Lien Term Loans	First Lien Term Loans	$	723,188	$	(13,735)	$	709,453	First Lien Term Loans	$	719,563	$	(12,692)	$	706,871
SunTrust Term Loan	SunTrust Term Loan	48,000		—		48,000		SunTrust Term Loan	45,000		—		45,000
Total Term Loans	Total Term Loans	$	771,188	$	(13,735)	$	757,453	Total Term Loans	$	764,563	$	(12,692)	$	751,871

At ~~September 30, 2021,~~March 31, 2022, we had no borrowings under our Barclays or SunTrust revolving credit facilities. After reserves for outstanding letters of credit of $7.8 million on our Barclays Revolving Credit Facility, we have $187.2 million available for borrowing and $30.0 million available under our SunTrust Revolving Credit Facility.

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. Please see Note 5,6, Credit Facilities and Notes Payable in the notes to consolidated financials statements for more information on our secured credit facilities and refinancing activity of April 23, 2021.

ITEM 3. Quantitative and Qualitative Disclosures about Market Risk

Foreign Currency Exchange Risk: We receive payment for our imaging 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 are exposed to foreign exchange risk with respect to revenues and expenses denominated in the Euro, Canadian Dollar and Hungarian Forint. We have Artificial Intelligence operations in the Netherlands and maintain research and development centers in Canada and Hungary. At the present time, we do not have any foreign currency exchange contracts to mitigate this risk. At March 31, 2022, a hypothetical 1% decline in the currency exchange rates between the U.S. dollar against these currencies, would have resulted in an annual increase of approximately $0.2 million 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.

We can elect Eurodollar or Base Rate (Prime) interest rate options on amounts outstanding under the First Lien Term Loans. At ~~September 30, 2021,~~March 31, 2022, we had ~~$723.2~~$719.6 million outstanding subject to a Eurodollar election on First Lien Term Loans and our effective 3 month LIBOR rate plus applicable margin was 3.75%. A hypothetical 1% increase in the adjusted Eurodollar rates under the Restated Credit Agreement over the current Eurodollar rate would result in an increase of $7.2 million in annual interest expense and a corresponding decrease in income before taxes. At ~~September 30, 2021,~~March 31, 2022, we had $1.8 million loan amount principal outstanding subject to an alternate base rate election on First Lien Term Loans with an effective rate of ~~5.25%~~5.50%. A hypothetical 1% increase in the alternative base rate under the First Lien Credit Agreement over the current alternative base rate would result in an increase of $18.1 thousand in annual interest expense and a corresponding decrease in income before taxes.

At ~~September 30, 2021,~~March 31, 2022, we had ~~$48.0~~$45.0 million outstanding subject to an adjusted Eurodollar election on the SunTrust Restated Credit Agreement. We can elect Eurodollar or Base Rate (Prime) interest rate options on amounts outstanding under the SunTrust Restated Credit Agreement. At ~~September 30, 2021,~~March 31, 2022, our effective LIBOR rate plus applicable margin was ~~1.65%~~2.51%. 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.

In the second quarter of 2019, we entered into four forward interest rate agreements ("2019 Swaps"). The 2019 Swaps have total notional amounts of $500,000,000, consisting of two agreements of $50,000,000 each and two agreements of $200,000,000 each. The 2019 Swaps will secure a constant interest rate associated with portions of our variable rate bank debt and have an effective date of October 13, 2020. They will mature in October 2023 for the 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 notional and at 2.05% for the $400,000,000 notional. As of the effective date, we will be liable for premium

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payments if interest rates decline below arranged rates, but will receive payments under the 2019 Swaps if interest rates rise above the arranged rates.

ITEM 4. Controls and Procedures

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Evaluation of Disclosure Controls and Procedures

We maintain controls and procedures designed to ensure that we are able to collect the information we are required to disclose in the reports we file with the SEC, and to process, summarize and disclose this information within the time periods specified in the rules of the SEC. Our management, with the participation of our Chief Executive Officer and our Chief Financial Officer, has conducted an evaluation of the design and operation of our “disclosure controls and procedures” as defined in Rule 13a-15(e) and 15d-15(e) under the Exchange Act. Based on this evaluation, our Chief Executive Officer and our Chief Financial Officer have concluded that our disclosure controls and procedures ~~are~~were 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 ~~September 30, 2021~~March 31, 2022 that has materially affected, or is reasonably likely to materially affect, our internal controls over financial reporting.

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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, ~~2020.~~2021. 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.

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

On ~~September 24, 2021~~January 20, 2022, we issued ~~67,658~~1,141,234 shares of our common stock to complete our purchase of ~~Tangent Associates Group LLC. The~~Aidence Holding B.V..The shares were ascribed a value of ~~$2.0 million and and~~$30.6 million.

Also on January 20, 2022, we issued 965,058 shares of our common stock to complete our purchase of Quantib B.V.. These shares were ascribed a value of $25.7 million.

All shares were issued pursuant to the private placement exemption contained in Section 4(a)(2) of the Securities Act.

ITEM 3. Defaults Upon Senior Securities

None.

ITEM 4. Mine Safety Disclosures

Not applicable.

ITEM 5. Other Information

None.

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~~INDEX TO EXHIBITS~~ITEM 6. Exhibits


Exhibit Number						Description

10.1						Amended and Restated Severance Agreement dated ~~August 11, 2021~~January 26, 2022 with Ruth WilsonWilson (incorporated by reference to Exhibit 10.20 to the registrant's Annual Report on Form 10-K filed with the SEC on March 1, 2022)*

10.2						Amended and Restated Severance Agreement dated ~~November 25, 2019~~February 24, 2022 with Christine GordonGordon (incorporated by reference to Exhibit 10.21 to the registrant's Annual Report on Form 10-K filed with the SEC on March 1, 2022)*

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 ~~September 30, 2021~~March 31, 2022 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.

** Indicates management contract or compensatory plan.

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SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.


	RADNET, INC.
	(Registrant)

Date: ~~November 9, 2021~~May 10, 2022	By:	/s/ Howard G. Berger, M.D.
		Howard G. Berger, M.D., President and Chief Executive Officer (Principal Executive Officer)


Date: ~~November 9, 2021~~May 10, 2022	By:	/s/ Mark D. Stolper
		Mark D. Stolper, Chief Financial Officer (Principal Financial and Accounting Officer)

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For the three months ended September 30, 2021
Account	June 30, 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		September 30, 2021 Balance		Location
Accumulated Other Comprehensive Loss, net of taxes	$	(20,736)	$	—	$	920	$	(19,816)	Equity


In Thousands	Three Months Ended September 30,
Depreciation & Amortization	2021	2020	$ Increase/(Decrease)	% Change
Total	$24,606	$21,247	$3,359	15.8%
Same Center	$21,749	$20,443	$1,306	6.4%


Cash Flow Data	September 30, 2021		September 30, 2020
Cash provided by operating activities	$	100,295	$	170,343
Cash used in investing activities	(159,506)		(88,280)
Cash provided by (used in) financing activities	108,478		(33,495)