RadNet, Inc 10-Q for FY2021 Q3
RadNet, Inc. (RDNT)
10-Q
2021-11-09
For: 2021-09-30
View Original
Added on
April 09, 2026
About this 10-Q
RadNet, Inc filed this 10-Q on November 9, 2021, covering the quarter ended September 30, 2021 (FY2021 Q3).
Headline figures
Quarter ended September 30, 2021, as reported in this filing, compared with the same period a year earlier where the filing states it.
- Revenue
- $332.69M
- up 14.0% from $291.78M a year earlier
- Net income
- $16.22M
- up 163.5% from net income of $6.16M a year earlier
- Diluted EPS
- $0.30
- up 150.0% from $0.12 a year earlier
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington D.C. 20549
FORM 10-Q
(Mark One)
For the quarterly period ended September 30, 2021
or
For the transition period from to
Commission File Number 001-33307
(Exact name of registrant as specified in charter)
| (State or other jurisdiction of incorporation or organization) | (I.R.S. Employer Identification No.) | |||||||
| (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 | ||||||||||||
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 | ☐ | ☒ | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 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 was 53,436,698 shares.
RADNET, INC.
TABLE OF CONTENTS
| Page | |||||
ITEM 6. Exhibits | |||||
i
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 | ||||||||||
| (unaudited) | |||||||||||
| ASSETS | |||||||||||
| CURRENT ASSETS | |||||||||||
| Cash and cash equivalents | $ | $ | |||||||||
| Accounts receivable | |||||||||||
| Due from affiliates | |||||||||||
| Prepaid expenses and other current assets | |||||||||||
| Total current assets | |||||||||||
| PROPERTY, EQUIPMENT AND RIGHT-OF-USE ASSETS | |||||||||||
| Property and equipment, net | |||||||||||
| Operating lease right-of-use assets | |||||||||||
| Total property, equipment and right-of-use assets | |||||||||||
| OTHER ASSETS | |||||||||||
| Goodwill | |||||||||||
| Other intangible assets | |||||||||||
| Deferred financing costs | |||||||||||
| Investment in joint ventures | |||||||||||
| Deferred tax assets | |||||||||||
| Deposits and other | |||||||||||
| Total assets | $ | $ | |||||||||
| LIABILITIES AND EQUITY | |||||||||||
| CURRENT LIABILITIES | |||||||||||
| Accounts payable, accrued expenses and other | $ | $ | |||||||||
| Due to affiliates | |||||||||||
| Deferred revenue | |||||||||||
| Current finance lease liability | |||||||||||
| Current operating lease liability | |||||||||||
| Current portion of notes payable | |||||||||||
| Total current liabilities | |||||||||||
| LONG-TERM LIABILITIES | |||||||||||
| Long-term finance lease liability | |||||||||||
| Long-term operating lease liability | |||||||||||
| Notes payable, net of current portion | |||||||||||
| Other non-current liabilities | |||||||||||
| Total liabilities | |||||||||||
| EQUITY | |||||||||||
Common stock - $ | |||||||||||
| Additional paid-in-capital | |||||||||||
| Accumulated other comprehensive loss | ( | ( | |||||||||
| Accumulated deficit | ( | ( | |||||||||
| Total RadNet, Inc.'s stockholders' equity | |||||||||||
| Noncontrolling interests | |||||||||||
| Total equity | |||||||||||
| Total liabilities and equity | $ | $ | |||||||||
The accompanying notes are an integral part of these financial statements.
1
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, | ||||||||||||||||||||||
| 2021 | 2020 | 2021 | 2020 | ||||||||||||||||||||
| REVENUE | |||||||||||||||||||||||
| Service fee revenue | $ | $ | $ | $ | |||||||||||||||||||
| Revenue under capitation arrangements | |||||||||||||||||||||||
| Total service revenue | |||||||||||||||||||||||
| Provider relief funding | |||||||||||||||||||||||
| OPERATING EXPENSES | |||||||||||||||||||||||
| Cost of operations, excluding depreciation and amortization | |||||||||||||||||||||||
| Depreciation and amortization | |||||||||||||||||||||||
| Loss (gain) on sale and disposal of equipment and other | ( | ||||||||||||||||||||||
| Severance costs | |||||||||||||||||||||||
| Total operating expenses | |||||||||||||||||||||||
| INCOME FROM OPERATIONS | |||||||||||||||||||||||
| OTHER INCOME AND EXPENSES | |||||||||||||||||||||||
| Interest expense | |||||||||||||||||||||||
| Equity in earnings of joint ventures | ( | ( | ( | ( | |||||||||||||||||||
| Non-cash change in fair value of interest rate hedge | ( | ( | |||||||||||||||||||||
| Debt restructuring and extinguishment expenses | |||||||||||||||||||||||
| Other (income) expenses | ( | ( | ( | ||||||||||||||||||||
| Total other expenses | |||||||||||||||||||||||
| INCOME (LOSS) BEFORE INCOME TAXES | ( | ||||||||||||||||||||||
| (Provision for) benefit from income taxes | ( | ( | ( | ||||||||||||||||||||
| NET INCOME (LOSS) | ( | ||||||||||||||||||||||
| Net income attributable to noncontrolling interests | |||||||||||||||||||||||
| NET INCOME (LOSS) ATTRIBUTABLE TO RADNET, INC. COMMON STOCKHOLDERS | $ | $ | $ | $ | ( | ||||||||||||||||||
| BASIC NET INCOME (LOSS) PER SHARE ATTRIBUTABLE TO RADNET, INC. COMMON STOCKHOLDERS | $ | $ | $ | $ | ( | ||||||||||||||||||
| DILUTED NET INCOME (LOSS) PER SHARE ATTRIBUTABLE TO RADNET, INC. COMMON STOCKHOLDERS | $ | $ | $ | $ | ( | ||||||||||||||||||
| WEIGHTED AVERAGE SHARES OUTSTANDING | |||||||||||||||||||||||
| Basic | |||||||||||||||||||||||
| Diluted | |||||||||||||||||||||||
The accompanying notes are an integral part of these financial statements.
2
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) | $ | $ | $ | $ | ( | ||||||||||||||||||
| Foreign currency translation adjustments | ( | ( | |||||||||||||||||||||
| Change in fair value of cash flow hedge, net of taxes | ( | ||||||||||||||||||||||
| Change in fair value of cash flow hedge from prior periods reclassified to earnings, net of taxes | |||||||||||||||||||||||
| COMPREHENSIVE INCOME (LOSS) | ( | ||||||||||||||||||||||
| Less comprehensive income attributable to noncontrolling interests | |||||||||||||||||||||||
| COMPREHENSIVE INCOME (LOSS) ATTRIBUTABLE TO | |||||||||||||||||||||||
| RADNET, INC. COMMON STOCKHOLDERS | $ | $ | $ | $ | ( | ||||||||||||||||||
The accompanying notes are an integral part of these financial statements.
3
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 and September 30, 2020.
4
| Common Stock | Additional Paid-In Capital | Accumulated Other Comprehensive Loss | Accumulated Deficit | Total Radnet, Inc.'s Equity | Noncontrolling Interests | Total Equity | |||||||||||||||||||||||||||||||||||||||||
| Shares | Amount | ||||||||||||||||||||||||||||||||||||||||||||||
| BALANCE - JUNE 30, 2021 | $ | $ | $ | ( | $ | ( | $ | $ | $ | ||||||||||||||||||||||||||||||||||||||
| Issuance of common stock under the equity compensation plan | — | — | — | — | — | — | — | ||||||||||||||||||||||||||||||||||||||||
| Issuance of common stock under the DeepHealth equity compensation plan | — | — | — | — | — | — | — | ||||||||||||||||||||||||||||||||||||||||
| Stock-based compensation expense | — | — | — | — | — | ||||||||||||||||||||||||||||||||||||||||||
| Issuance of common stock for sale of unregistered securities for acquisition | — | — | — | — | |||||||||||||||||||||||||||||||||||||||||||
| Forfeiture of restricted stock | ( | — | ( | — | — | ( | — | ( | |||||||||||||||||||||||||||||||||||||||
| Sale of economic interests in majority owned subsidiary, net of taxes | — | — | — | — | |||||||||||||||||||||||||||||||||||||||||||
| Change in cumulative foreign currency translation adjustment | — | — | — | ( | — | ( | — | ( | |||||||||||||||||||||||||||||||||||||||
| Change in fair value of cash flow hedge from prior periods reclassified to earnings, net of taxes | — | — | — | — | — | ||||||||||||||||||||||||||||||||||||||||||
| Other | — | — | ( | — | ( | ( | |||||||||||||||||||||||||||||||||||||||||
| Net income | — | — | — | — | |||||||||||||||||||||||||||||||||||||||||||
| BALANCE-SEPTEMBER 30, 2021 | $ | $ | $ | ( | $ | ( | $ | $ | $ | ||||||||||||||||||||||||||||||||||||||
| BALANCE - JUNE 30, 2020 | $ | $ | $ | ( | $ | ( | $ | $ | $ | ||||||||||||||||||||||||||||||||||||||
| Issuance of common stock upon exercise of options | — | — | — | — | — | — | — | ||||||||||||||||||||||||||||||||||||||||
| Issuance of common stock under the equity compensation plan | — | — | — | — | — | — | — | ||||||||||||||||||||||||||||||||||||||||
| Issuance of common stock under the DeepHealth equity compensation plan | — | — | — | — | — | — | — | ||||||||||||||||||||||||||||||||||||||||
| Stock-based compensation expense | — | — | — | — | — | ||||||||||||||||||||||||||||||||||||||||||
| Purchase of noncontrolling interests | — | — | — | — | — | — | ( | ( | |||||||||||||||||||||||||||||||||||||||
| Change in cumulative foreign currency translation adjustment | — | — | — | — | — | ||||||||||||||||||||||||||||||||||||||||||
| Change in fair value cash flow hedge, net of taxes | — | — | — | — | — | ||||||||||||||||||||||||||||||||||||||||||
| Change in fair value of cash flow hedge from prior periods reclassified to earnings | — | — | — | — | |||||||||||||||||||||||||||||||||||||||||||
| Other | — | — | — | — | ( | ( | — | ( | |||||||||||||||||||||||||||||||||||||||
| Net income | — | — | — | — | |||||||||||||||||||||||||||||||||||||||||||
| BALANCE-SEPTEMBER 30, 2020 | $ | $ | $ | ( | $ | ( | $ | $ | $ | ||||||||||||||||||||||||||||||||||||||
The accompanying notes are an integral part of these financial statements.
5
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.
6
| 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 | $ | $ | $ | ( | $ | ( | $ | $ | $ | ||||||||||||||||||||||||||||||||||||||
| Issuance of common stock upon exercise of options | — | — | — | — | |||||||||||||||||||||||||||||||||||||||||||
| Issuance of common stock under the equity compensation plan | — | — | — | — | — | — | — | ||||||||||||||||||||||||||||||||||||||||
| Issuance of common stock under the DeepHealth equity compensation plan | — | — | — | — | — | — | — | ||||||||||||||||||||||||||||||||||||||||
| Stock-based compensation expense | — | — | — | — | — | ||||||||||||||||||||||||||||||||||||||||||
| Issuance of common stock for sale of unregistered securities for acquisition | — | — | — | — | |||||||||||||||||||||||||||||||||||||||||||
| Forfeiture of restricted stock | ( | — | ( | — | — | ( | — | ( | |||||||||||||||||||||||||||||||||||||||
| Purchase of noncontrolling interests by third party | — | — | ( | — | — | ( | ( | ||||||||||||||||||||||||||||||||||||||||
| Contribution from noncontrolling partner | — | — | — | — | — | — | |||||||||||||||||||||||||||||||||||||||||
| Sale of economic interests in majority owned subsidiary, net of taxes | — | — | — | — | |||||||||||||||||||||||||||||||||||||||||||
| Change in cumulative foreign currency translation adjustment | — | — | — | ( | — | ( | — | ( | |||||||||||||||||||||||||||||||||||||||
| Change in fair value of cash flow hedge from prior periods reclassified to earnings, net of taxes | — | — | — | — | — | ||||||||||||||||||||||||||||||||||||||||||
| Other | — | — | — | ( | — | — | |||||||||||||||||||||||||||||||||||||||||
| Net income | — | — | — | — | |||||||||||||||||||||||||||||||||||||||||||
| BALANCE-SEPTEMBER 30, 2021 | $ | $ | $ | ( | $ | ( | $ | $ | $ | ||||||||||||||||||||||||||||||||||||||
| BALANCE - DECEMBER 31, 2019 | $ | $ | $ | ( | $ | ( | $ | $ | $ | ||||||||||||||||||||||||||||||||||||||
| Issuance of common stock under the equity compensation plan | — | — | — | — | — | — | — | ||||||||||||||||||||||||||||||||||||||||
| Issuance of common stock under the DeepHealth equity compensation plan | — | — | — | — | — | — | — | ||||||||||||||||||||||||||||||||||||||||
| Stock-based compensation expense | — | — | — | — | — | ||||||||||||||||||||||||||||||||||||||||||
| Issuance of common stock for sale of unregistered securities for the DeepHealth acquisition | — | — | — | — | |||||||||||||||||||||||||||||||||||||||||||
| Distributions paid to noncontrolling interests | — | — | — | — | — | — | ( | ( | |||||||||||||||||||||||||||||||||||||||
| Change in cumulative foreign currency translation adjustment | — | — | — | — | — | ||||||||||||||||||||||||||||||||||||||||||
| Change in fair value cash flow hedge, net of taxes | — | — | — | ( | — | ( | — | ( | |||||||||||||||||||||||||||||||||||||||
| Change in fair value of cash flow hedge from prior periods reclassified to earnings, net of taxes | — | ||||||||||||||||||||||||||||||||||||||||||||||
| Net (loss) income | — | — | — | — | ( | ( | ( | ||||||||||||||||||||||||||||||||||||||||
| BALANCE-SEPTEMBER 30, 2020 | $ | $ | $ | ( | $ | ( | $ | $ | $ | ||||||||||||||||||||||||||||||||||||||
The accompanying notes are an integral part of these financial statements.
7
RADNET, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(IN THOUSANDS)
(unaudited)
| Nine Months Ended September 30, | |||||||||||
| 2021 | 2020 | ||||||||||
| CASH FLOWS FROM OPERATING ACTIVITIES | |||||||||||
| Net income (loss) | $ | $ | ( | ||||||||
| Adjustments to reconcile net income (loss) to net cash provided by operating activities: | |||||||||||
| Depreciation and amortization | |||||||||||
| Amortization of operating lease right-of-use assets | |||||||||||
| Equity in earnings of joint ventures, net of dividends | ( | ||||||||||
| Amortization of deferred financing costs and loan discount | |||||||||||
| (Gain) loss on sale and disposal of equipment and other | ( | ||||||||||
| Loss on extinguishment of debt | |||||||||||
| Amortization of cash flow hedge, net of taxes | |||||||||||
| Non-cash change in fair value of interest rate hedge | ( | ||||||||||
| Stock-based compensation | |||||||||||
Change in fair value of contingent consideration | ( | ||||||||||
Changes in operating assets and liabilities, net of assets acquired and liabilities assumed in purchase transactions: | |||||||||||
| Accounts receivable | ( | ||||||||||
| Other current assets | |||||||||||
| Other assets | ( | ( | |||||||||
| Deferred taxes | ( | ||||||||||
| Operating lease liability | ( | ( | |||||||||
| Deferred revenue | ( | ||||||||||
| Accounts payable, accrued expenses and other | |||||||||||
| Net cash provided by operating activities | |||||||||||
| CASH FLOWS FROM INVESTING ACTIVITIES | |||||||||||
| Purchase of imaging facilities and other acquisitions | ( | ( | |||||||||
| Purchase of property and equipment | ( | ( | |||||||||
| Proceeds from sale of equipment | |||||||||||
| Equity contributions in existing and purchase of interest in joint ventures | ( | ( | |||||||||
| Net cash used in investing activities | ( | ( | |||||||||
| CASH FLOWS FROM FINANCING ACTIVITIES | |||||||||||
| Principal payments on notes and leases payable | ( | ( | |||||||||
| Payments on term loan debt | ( | ( | |||||||||
| Additional deferred finance costs on revolving loan amendment | ( | ||||||||||
| Proceeds from debt refinancing, net of issuing costs | |||||||||||
| Proceeds from sale of economic interest in majority owned subsidiary, net of taxes | |||||||||||
| Distributions paid to noncontrolling interests | ( | ||||||||||
| Proceeds from paycheck protection program loans | |||||||||||
| Proceeds from revolving credit facility | |||||||||||
| Payments on revolving credit facility | ( | ( | |||||||||
| Proceeds from issuance of common stock upon exercise of options | |||||||||||
| Net cash provided by (used in) financing activities | ( | ||||||||||
| EFFECT OF EXCHANGE RATE CHANGES ON CASH | ( | ||||||||||
| NET INCREASE IN CASH AND CASH EQUIVALENTS | |||||||||||
| CASH AND CASH EQUIVALENTS, beginning of period | |||||||||||
| CASH AND CASH EQUIVALENTS, end of period | $ | $ | |||||||||
| SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION | |||||||||||
| Cash paid during the period for interest | $ | $ | |||||||||
| Cash paid during the period for income taxes | $ | $ | |||||||||
The accompanying notes are an integral part of these financial statements.
8
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 million and $28.1 million during the nine months ended September 30, 2021 and 2020, respectively, which were not paid for as of September 30, 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, we completed our stock purchase of Tangent Associates LLC by issuing 67,658 shares of our common stock to complete the transaction. The shares were ascribed a value of $2.0 million.
On January 1, 2021 we entered into the Simi Valley Imaging 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.
9
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 seven U.S. states. At September 30, 2021, we operated, directly or indirectly through joint ventures with hospitals, 350 centers located in Arizona, California, Delaware, Florida, Maryland, New Jersey, and New York. Our centers provide physicians with imaging capabilities to facilitate the diagnosis and treatment of diseases and disorders. Our services include magnetic resonance imaging (MRI), computed tomography (CT), positron emission tomography (PET), nuclear medicine, mammography, ultrasound, diagnostic radiology (X-ray), fluoroscopy and other related procedures. The vast majority of our centers offer multi-modality imaging services. Our multi-modality strategy diversifies revenue streams, reduces exposure to reimbursement changes and provides patients and referring physicians the convenience of a single location to serve the needs of multiple procedures. In addition to our imaging services, we design and develop software applications, artificial intelligence tools and other computerized systems for the diagnostic imaging industry. Our operations comprise a single segment for financial reporting purposes.
The consolidated financial statements include the accounts of RadNet, Inc as well as its subsidiaries in which RadNet has a controlling financial interest. The consolidated financial statements also include certain variable interest entities in which we are the primary beneficiary (as described in more detail below). All material intercompany transactions and balances have been eliminated upon consolidation. All of these affiliated entities are referred to collectively as “RadNet”, “we”, “us”, “our” or the “Company” in this report.
Accounting regulations stipulate that generally any entity with a) insufficient equity to finance its activities without additional subordinated financial support provided by any parties, or b) equity holders that, as a group, lack the characteristics which evidence a controlling financial interest, is considered a variable interest entity (“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 two professional corporations in New York City. BRMG is responsible for the professional medical services at nearly all of our facilities located in California. Dr. Crues owns six professional corporations which provide medical services in Delaware, Maryland, New Jersey and New York. Additionally, Dr. Crues is a 1 % owner of BRMG. These VIEs are collectively referred to as the Group.
RadNet provides non-medical, technical and administrative services to the Group for which it receives a management fee, pursuant to the related management agreements. Through the management agreements we have exclusive authority over all non-medical decision making related to the ongoing business operations and we determine the annual budget. The Group has insignificant operating assets and liabilities, and de minimis equity. Through management agreements with us, substantially all cash flows of the Group after expenses, including professional salaries, are transferred to us. We consolidate the revenue and expenses, assets and liabilities of the Group.
The Group on a combined basis recognized $43.8 million and $38.3 million of revenue, net of management services fees to RadNet, for the three months ended September 30, 2021 and 2020, respectively and $43.8 million and $38.3 million of operating expenses for the three months ended September 30, 2021 and 2020, respectively. RadNet recognized $186.8 million and $169.0 million of total billed net service fee revenue for the three 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 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 and December 31, 2020, we have included approximately $102.7 million and $82.3 million, respectively, of accounts receivable and approximately $19.2 million and $15.2 million of accounts payable and accrued liabilities related to the Group, respectively.
The creditors of the Group do not have recourse to our general credit and there are no other arrangements that could expose us to losses on their behalf. However, we may be required to provide financial support to cover any operating expenses in excess of operating revenues.
We also own a 49 % economic interest in ScriptSender, LLC, which provides secure data transmission services of medical information. Through a management agreement, RadNet provides management and accounting services and receives an agreed upon fee. ScriptSender, LLC is dependent on RadNet to finance its own activities, and as such we determined that it is a VIE but we are not a primary beneficiary since we do not have the power to direct the activities of the entity that most significantly impact the entity’s economic performance.
At all of our centers not serviced by the Group we have entered into long-term contracts (typically up to 40 years) with independent radiology groups to provide physician services at those centers. These radiology practices provide professional services, including supervision and interpretation of diagnostic imaging procedures, in our diagnostic imaging centers. The radiology practices maintain full control over the provision of professional services. Under these arrangements, in addition to obtaining technical fees for the use of our diagnostic imaging equipment and the provision of technical services, we provide management services and receive a fee based on the value of the services we provide. We own the diagnostic imaging equipment and, therefore, receive 100% of the technical reimbursements associated with imaging procedures. The radiology practice groups retain the professional reimbursements associated with imaging procedures after deducting management service fees paid to us and we have no economic controlling interest in these radiology practices as such, the financial results of these practices are not consolidated in our financial statements.
The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with the instructions to Form 10-Q and Rule 10-01 of Regulation S-X and, therefore, do not include all information and footnotes necessary for conformity with U.S. generally accepted accounting principles for complete financial statements; however, in the opinion of 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, 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.
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. 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.
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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 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, 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, | ||||||||||||||||||||||
| 2021 | 2020 | 2021 | 2020 | ||||||||||||||||||||
| Commercial insurance | $ | $ | $ | $ | |||||||||||||||||||
| Medicare | |||||||||||||||||||||||
| Medicaid | |||||||||||||||||||||||
| Workers' compensation/personal injury | |||||||||||||||||||||||
| Other patient revenue | |||||||||||||||||||||||
| Management fee revenue | |||||||||||||||||||||||
| Teleradiology and Software revenue | |||||||||||||||||||||||
| Other | |||||||||||||||||||||||
| Service fee revenue | |||||||||||||||||||||||
| Revenue under capitation arrangements | |||||||||||||||||||||||
| Total service revenue | $ | $ | $ | $ | |||||||||||||||||||
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 months ended September 30, 2021, we received funding from the various programs established by the CARES Act as follows:
•$39.5 million of accelerated Medicare payments through the twelve months ended December 31, 2020
•$4.0 million from the Paycheck Protection Program through the twelve months ended December 31, 2020
•$32.6 million total Provider Relief Funding, $26.3 million received for the twelve months ended December 31, 2020 and $6.3 million for the nine months ended September 30, 2021
In addition, we have received for the 12 months ended December 31, 2020, $5.0 million in advance payments from insurer Blue Shield.
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The accelerated Medicare and Blue Shield payments are recorded to Deferred Revenue in our condensed consolidated balance sheet and are being applied to revenue as services are performed beginning in 2021. For the nine months ended September 30, 2021, $21.2 million of the accelerated Medicare payments and the total advance of $5.0 million from Blue Shield have 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 is displayed as such on our condensed consolidated statements of operations.
The CARES Act also provides for a payment deferral of the employer portion of Social Security tax incurred during the pandemic, allowing half of such payroll taxes to be deferred until December 2021 and the remaining half until December 2022. At December 31, 2020, we had in total $16.3 million of deferred Social Security taxes and at September 30, 2021, we had $8.6 million. The reduction was related to a one time benefit of $7.7 million in federal payroll tax forgiveness. The current portion of payment deferrals are recorded as payroll 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.
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| Balance as of December 31, 2020 | $ | ||||
| Goodwill acquired through acquisitions | |||||
| Goodwill attributable to formation of Simi Valley Imaging Group LLC | |||||
| Other Adjustments | ( | ||||
| Balance as of September 30, 2021 | $ | ||||
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. 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. 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.
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.
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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 | $ | ( | $ | $ | $ | ( | 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 | $ | ( | $ | $ | $ | ( | 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 | ||||||||||||||||||||||||||
| 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 | $ | Other income (expense) | $ | ( | 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 | $ | Other income (expense) | $ | ( | Interest Expense | |||||||||||||||||||||
See Fair Value Measurements section below for the fair value of the 2019 Swaps at September 30, 2021.
FAIR VALUE MEASUREMENTS – Assets and liabilities subject to fair value measurements are required to be disclosed within a fair value hierarchy. The fair value hierarchy ranks the quality and reliability of inputs used to determine fair value. Accordingly, assets and liabilities carried at, or permitted to be carried at, fair value are classified within the fair value hierarchy in one of the following categories based on the lowest level input that is significant to a fair value measurement:
Level 1—Fair value is determined by using unadjusted quoted prices that are available in active markets for identical assets and liabilities.
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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 | $ | $ | $ | $ | |||||||||||||||||||
| As of December 31, 2020 | |||||||||||||||||||||||
| Level 1 | Level 2 | Level 3 | Total | ||||||||||||||||||||
| Current and long term liabilities | |||||||||||||||||||||||
| 2019 Swaps - Interest Rate Contracts | $ | $ | $ | $ | |||||||||||||||||||
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 | |||||||||||||||||||||||||||||
| Level 1 | Level 2 | Level 3 | Total Fair Value | Total Face Value | |||||||||||||||||||||||||
| First Lien Term Loans and SunTrust Term Loan | $ | $ | $ | $ | $ | ||||||||||||||||||||||||
| As of December 31, 2020 | |||||||||||||||||||||||||||||
| Level 1 | Level 2 | Level 3 | Total Fair Value | Total Face Value | |||||||||||||||||||||||||
| First Lien Term Loans and SunTrust Term Loan | $ | $ | $ | $ | $ | ||||||||||||||||||||||||
At September 30, 2021 and at December 31, 2020 our Barclays revolving credit facility had no no
The estimated fair value of our long-term debt, which is discussed in Note 5, Credit Facilities and Notes Payable, was determined using Level 2 inputs primarily related to comparable market prices.
We consider the carrying amounts of cash and cash equivalents, receivables, other current assets, current liabilities and other notes payables to approximate their fair value because of the relatively short period of time between the origination of these instruments and their expected realization or payment. Additionally, we consider the carrying amount of our finance lease obligations to approximate their fair value because the weighted average interest rate used to formulate the carrying amounts approximates current market rates.
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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 | $ | $ | $ | $ | ( | ||||||||||||||||||
| BASIC NET INCOME (LOSS) PER SHARE ATTRIBUTABLE TO RADNET, INC.'S COMMON STOCKHOLDERS | |||||||||||||||||||||||
| Weighted average number of common shares outstanding during the period | |||||||||||||||||||||||
| Basic net income (loss) per share attributable to RadNet, Inc.'s common stockholders | $ | $ | $ | $ | ( | ||||||||||||||||||
| DILUTED NET INCOME (LOSS) PER SHARE ATTRIBUTABLE TO RADNET, INC.'S COMMON STOCKHOLDERS | |||||||||||||||||||||||
| Weighted average number of common shares outstanding during the period | |||||||||||||||||||||||
| Add nonvested restricted stock subject only to service vesting | |||||||||||||||||||||||
| Add additional shares issuable upon exercise of stock options and warrants | |||||||||||||||||||||||
| Weighted average number of common shares used in calculating diluted net income per share | |||||||||||||||||||||||
| Diluted net income (loss) per share attributable to RadNet, Inc.'s common stockholders | $ | $ | $ | $ | ( | ||||||||||||||||||
| 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 | |||||||||||||||||||||||
| Shares issuable upon the exercise of stock options: | |||||||||||||||||||||||
As of September 30, 2021, we have three equity investments for which a fair value is not readily determinable and therefore the total amounts invested are recognized at cost as follows:
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.
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.
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.
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Joint venture investment and financial information
The following table is a summary of our investment in joint ventures during the nine months ended September 30, 2021 (in thousands):
| Balance as of December 31, 2020 | $ | ||||
| Equity in earnings in these joint ventures | |||||
| Equity contributions in existing joint ventures | |||||
| Balance as of September 30, 2021 | $ | ||||
We charged management service fees from the centers underlying these joint ventures of approximately $5.3 million and $2.7 million for the three months ended September 30, 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 and December 31, 2020 and income statement data for the nine months ended September 30, 2021 and 2020 (in thousands):
| Balance Sheet Data: | September 30, 2021 | December 31, 2020 | |||||||||
| Current assets | $ | $ | |||||||||
| Noncurrent assets | |||||||||||
| Current liabilities | ( | ( | |||||||||
| Noncurrent liabilities | ( | ( | |||||||||
| Total net assets | $ | $ | |||||||||
| Book value of RadNet joint venture interests | $ | $ | |||||||||
| Cost in excess of book value of acquired joint venture interests and other | |||||||||||
| Total value of RadNet joint venture interests | $ | $ | |||||||||
Income statement data for the nine months ended September 30, | 2021 | 2020 | |||||||||
| Net revenue | $ | $ | |||||||||
| Net income | $ | $ | |||||||||
NOTE 3 – RECENT ACCOUNTING AND REPORTING STANDARD
Accounting standards adopted
In January 2021, the FASB issued ASU 2021-01 ("ASU 2021-01"), Reference Rate Reform (Topic 848), Scope. ASU 2021-01 clarifies the scope of Topic 848 so that derivatives affected by the discounting transition are explicitly eligible for certain option expedients and exceptions in Topic 848. The guidance is effective upon issuance and generally can be applied through December 31, 2022. We are currently evaluating the potential impact of ASU 2021-01 on our financial statements.
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In March 2020, the FASB issued ASU 2020-04 ("ASU 2020-04"), Reference Rate Reform (Topic 848), Facilitation of the Effects of Reference Rate Reform on Financial Reporting. ASU 2020-04 provides optional expedients and exceptions for applying generally accepted accounting principles to certain contract modifications and hedging relationships that reference London Inter-bank Offered Rate (LIBOR) or another reference rate expected to be discontinued. The guidance is effective upon issuance and generally can be applied through December 31, 2022. We are currently evaluating the potential impact of ASU 2020-04 on our financial statements.
In January 2020, the FASB issued ASU 2020-01 ("ASU 2020-01"), Investments—Equity Securities (Topic 321), Investments—Equity Method and Joint Ventures (Topic 323), and Derivatives and Hedging (Topic 815), clarifying the interaction between accounting standards related to equity securities, equity method investments, and certain derivatives. ASU 2020-01 is effective for fiscal years beginning after December 15, 2020. The adoption did not have a material impact on our financial statements.
In December 2019, the FASB issued ASU 2019-12 ("ASU 2019-12"), Income Taxes (Topic 740). ASU 2019-12 removes certain exceptions related to the approach for intraperiod tax allocation, the methodology for calculating income taxes in an interim period, and the recognition of deferred tax liabilities for outside basis differences. It also clarifies and simplifies other areas of the standard. ASU 2019-12 is effective beginning in the first quarter of 2021. The adoption did not have a material impact on our financial statements.
NOTE 4 – BUSINESS COMBINATIONS AND RELATED ACTIVITY
Acquisitions
During 2021, we completed the acquisition of certain assets of the following entities, which either engage directly in the practice of radiology or associated businesses. The primary reason for these acquisitions was to strengthen our presence in the New York City, New Jersey and California markets. We made a fair value determination of the acquired assets and assumed liabilities and the following were recorded (in thousands):
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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 | ( | ||||||||||||||||||||||||
| ZP Elmont LLC* | 2/1/2021 | |||||||||||||||||||||||||
| ZP Freeport LLC* | 2/1/2021 | |||||||||||||||||||||||||
| Broadway Medical Imaging LLC* | 2/1/2021 | ( | ||||||||||||||||||||||||
| 3235 Hempstead LLC* | 2/1/2021 | |||||||||||||||||||||||||
| SLZM Realty LLC* | 2/1/2021 | |||||||||||||||||||||||||
| 2012 Sunrise Merrick LLC* | 2/1/2021 | ( | ||||||||||||||||||||||||
| ZP Bayside LLC* | 3/1/2021 | ( | ||||||||||||||||||||||||
| ZP Laurelton LLC* | 3/1/2021 | ( | ||||||||||||||||||||||||
| ZP Smith LLC* | 3/1/2021 | ( | ||||||||||||||||||||||||
| ZP 907 Northern LLC | 4/1/2021 | ( | ||||||||||||||||||||||||
| William M. Kelly MD, Inc. | 5/1/2021 | ( | ||||||||||||||||||||||||
| 60th Street MRI, LLC | 5/1/2021 | |||||||||||||||||||||||||
| ZP Parkchester LLC | 5/1/2021 | ( | ||||||||||||||||||||||||
| ZP Eastern LLC | 6/1/2021 | ( | ||||||||||||||||||||||||
| Tangent Associates LLC** | 8/24/2021 | |||||||||||||||||||||||||
| Total | ( | |||||||||||||||||||||||||
*Fair Value Determination is Final
** All stock purchase through issuing 67,658 shares of our common stock.
Formation of majority owned subsidiary
On January 1, 2021 we entered into the Simi Valley Imaging Group, LLC, a partnership with Simi Valley Hospital and Health Services ("Simi Adventist"). The operation will offer multi-modality imaging services out of two locations in Ventura County, California. Total investment in the venture is $0.4 million. RadNet contributed $0.3 million in assets for a 60 % economic interest and Simi Adventist contributed assets totaling $0.1 million for a 40 % economic interest.
Sale 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.
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NOTE 5 – CREDIT FACILITIES AND NOTES PAYABLE
As of September 30, 2021 and December 31, 2020 our term loan debt obligations are as follows (in thousands):
| September 30, 2021 | December 31, 2020 | ||||||||||
| First Lien Term Loans collateralized by RadNet's tangible and intangible assets | $ | $ | |||||||||
| Discount on First Lien Term Loans | ( | ( | |||||||||
| SunTrust Term Loan collateralized by NJIN's tangible and intangible assets | |||||||||||
| Total debt obligations | |||||||||||
| Less: current portion | ( | ( | |||||||||
| Long term portion debt obligations | $ | $ | |||||||||
We had no 195.0 million Barclays Revolving Credit Facility at September 30, 2021 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. We had no outstanding balance under our $30.0 million SunTrust Revolving Credit Facility at September 30, 2021. As of September 30, 2021, 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 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 %, 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, 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 | ||||||||||||
| I | Greater than or equal to | per annum | per annum | per annum | per annum | ||||||||||||
| II | Less than | per annum | per annum | per annum | per annum | ||||||||||||
| III | Less than | per annum | per annum | per annum | per annum | ||||||||||||
| IV | Less than | per annum | per annum | per annum | per annum | ||||||||||||
| V | Less than | per annum | per annum | per annum | 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 % 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 million at September 30, 2021.
| First Lien Net Leverage Ratio | Eurodollar Rate Spread | Alternate Base Rate Spread | ||||||
> | ||||||||
> | ||||||||
≤ | ||||||||
As of September 30, 2021, the effective interest rate payable on revolving loans under the Barclays Revolving Credit Facility was 5.00 %.
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, 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 two 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 6 – STOCK-BASED COMPENSATION
Stock Incentive Plans
We have one 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), stock awards (restricted or unrestricted), 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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As of September 30, 2021, we had outstanding options to acquire 525,399 shares of our common stock, of which options to acquire 430,702 shares were exercisable. The following summarizes all of our option transactions for the nine months ended September 30, 2021:
| Outstanding Options Under the 2006 Plan | Shares | Weighted Average Exercise price Per Common Share | Weighted Average Remaining Contractual Life (in years) | Aggregate Intrinsic Value | ||||||||||||||||||||||
| Balance, December 31, 2020 | $ | |||||||||||||||||||||||||
| Exercised | ( | |||||||||||||||||||||||||
| Balance, September 30, 2021 | $ | |||||||||||||||||||||||||
| Exercisable at September 30, 2021 | ||||||||||||||||||||||||||
Aggregate intrinsic value in the table above represents the total pretax intrinsic value (the difference between our closing stock price on September 30, 2021 and the exercise price, multiplied by the number of in-the-money options as applicable) that would have been received by the holder had all holders exercised their options on September 30, 2021. Options for 2,500 shares of our common stock were exercised during the nine months ended September 30, 2021. As of September 30, 2021, total unrecognized stock-based compensation expense related to non-vested employee awards was $0.3 million, which is expected to be recognized over a weighted average period of approximately 0.98 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, total unrecognized stock based compensation expense related to non-vested DeepHealth options was approximately $2.5 million, which is expected to be recognized over a weighted average period of approximately 1.62 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 | $ | — | ||||||||||||||||||||||||
| Exercised | ( | — | ||||||||||||||||||||||||
| Balance, September 30, 2021 | — | $ | ||||||||||||||||||||||||
| Exercisable at September 30, 2021 | — | |||||||||||||||||||||||||
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, we have issued a total of 7,724,428 RSA’s of which 413,075 were unvested at September 30, 2021. The following summarizes all unvested RSA’s activities during the nine months ended September 30, 2021:
| RSA's | Weighted-Average Remaining Contractual Term (Years) | Weighted-Average Fair Value | |||||||||||||||
| RSA's unvested at December 31, 2020 | $ | ||||||||||||||||
| Changes during the period | |||||||||||||||||
| Granted | $ | ||||||||||||||||
| Vested | ( | $ | |||||||||||||||
| Forfeited or Canceled | ( | $ | |||||||||||||||
| RSA's unvested at September 30, 2021 | $ | ||||||||||||||||
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We determine the fair value of all RSA’s based on the closing price of our common stock on the award date.
Other stock bonus awards
The Restated Plan also permits 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 months ended September 30, 2021, awards amounting to 375,186 shares valued at approximately $8.9 million in compensation expense were issued in employee COVID-19 related bonuses.
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, there remain 3,320,665 shares available under the Restated Plan for future issuance.
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 included in our Annual Report on Form 10-K for the fiscal year ended December 31, 2020 filed with the U.S. Securities and Exchange Commission (SEC) on March 15, 2021.
.
Forward-Looking Statements
This quarterly report on Form 10-Q contains “forward-looking statements” within the meaning of Section 27A of the Securities Act of 1933, as amended (the “Securities Act”) and Section 21E of the Securities Exchange Act of 1934, as amended. Forward-looking statements reflect current views about future events and are based on our currently available financial, economic and competitive data and on current business plans. Actual events or results may differ materially depending on risks and uncertainties that may affect our operations, markets, services, prices and other factors.
In some cases, you can identify forward-looking statements by terminology such as “may,” “will,” “should,” “expect,” “intend,” “plan,” “anticipate,” “believe,” “estimate,” “predict,” “potential,” “continue,” “assumption” or the negative of these terms or other comparable terminology. Forward-looking statements in this current 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;
•anticipated trends in our revenues, operating expenses and liquidity and cash flows, including our financial guidance and anticipated effects of cost-savings efforts;
•the ongoing impact of the COVID-19 pandemic on our business, suppliers, payors, customers, referral sources, partners, patients and employees, including (i) government’s unprecedented action regarding existing and potential restrictions and/or obligations related to citizen and business activity to contain the virus; (ii) the consequences of an economic downturn resulting from the impacts of COVID-19 and the possibility of a global economic recession; (iii) the impact of the volume of canceled or rescheduled procedures, whether as a result of government action or patient choice; (iv) measures we are taking to respond to the COVID-19 pandemic, including changes to business practices; (v) the impact of government and administrative regulation, guidance and appropriations; (vi) changes in our revenues due to declining patient procedure volumes, changes in payor mix; (vii) potential increased expenses or workforce disruptions related to our employees that could lead to unavailability of key personnel; (viii) workforce disruptions related to our key partners, suppliers, vendors and others we do business with; (ix) the impact of return to work orders in certain states in which we operate; and (x) increased credit and collectability risks; and
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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 of future performance and our actual results may differ significantly from the results discussed in the forward-looking statements. Factors that might cause such differences include, but are not limited to, the factors included in “Risk Factors,” in our annual report on Form 10-K for the fiscal year ended December 31, 2020 or supplemented by the information in Part II– Item 1A below. You should consider the inherent limitations on, and risks associated with, forward-looking statements and not unduly rely on the accuracy of predictions contained in such forward-looking statements.
These forward-looking statements speak only as of the date when they are made. We assume no obligation to revise or update any forward-looking statements for any reason, except as required by law.
Overview
We are a leading national provider of freestanding, fixed-site outpatient diagnostic imaging services in the United States based on number of locations and annual imaging revenue. At September 30, 2021, we operated, directly or indirectly through joint ventures with hospitals, 350 centers located in Arizona, California, Delaware, Florida, Maryland, New Jersey, and New York. Our centers provide physicians with imaging capabilities to facilitate the diagnosis and treatment of diseases and disorders and may reduce unnecessary invasive procedures, often reducing the cost and amount of care for patients. Our services include magnetic resonance imaging (MRI), computed tomography (CT), positron emission tomography (PET), nuclear medicine, mammography, ultrasound, diagnostic radiology (X-ray), fluoroscopy and other related procedures.
In addition to our imaging services, we own and operate a number of technology businesses that are complementary to our imaging business. Our subsidiary eRAD, Inc., develops and sells computerized systems for the diagnostic imaging industry, which provide the technology to distribute, display, store and retrieve digital images. We have made a number of investments in Artificial Intelligence (AI) with our purchases of Nulogix and DeepHealth, combined with our investment in Whiterabbit.ai and our collaborative arrangement with Hologic. Our current AI focus is to develop solutions in machine learning to assist radiologists and other clinicians in interpreting images and improving patient care, initially in the field of mammography.
We derive substantially all of our revenue, directly or indirectly, from fees charged for the diagnostic imaging services performed at our facilities. The following table shows our facilities in operation and revenues for the nine months ended September 30, 2021 and September 30, 2020:
| Nine Months Ended September 30, | |||||||||||
| 2021 | 2020 | ||||||||||
| Facilities in operation | 350 | 334 | |||||||||
| Net revenues (millions) | $ | 982 | $ | 764 | |||||||
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 months ended September 30, 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, | ||||||||||||||||||||||
| 2021 | 2020 | 2021 | 2020 | ||||||||||||||||||||
| Commercial insurance | $ | 185,723 | $ | 160,524 | $ | 555,355 | $ | 412,415 | |||||||||||||||
| Medicare | 73,163 | 62,704 | 207,977 | 154,847 | |||||||||||||||||||
| Medicaid | 8,707 | 7,098 | 26,198 | 18,072 | |||||||||||||||||||
| Workers' compensation/personal injury | 11,554 | 7,183 | 32,507 | 25,705 | |||||||||||||||||||
| Other patient revenue | 4,800 | 8,328 | 14,766 | 17,211 | |||||||||||||||||||
| Management fee revenue | 5,255 | 2,675 | 16,007 | 8,574 | |||||||||||||||||||
| Teleradiology and Software revenue | 2,564 | 2,349 | 7,611 | 8,319 | |||||||||||||||||||
| Other | 3,641 | 5,869 | 10,058 | 15,617 | |||||||||||||||||||
| Service fee revenue | 295,407 | 256,730 | 870,479 | 660,760 | |||||||||||||||||||
| Revenue under capitation arrangements | 37,283 | 35,046 | 111,449 | 103,145 | |||||||||||||||||||
| Total service revenue | $ | 332,690 | $ | 291,776 | $ | 981,928 | $ | 763,905 | |||||||||||||||
Recent Developments
The discussion of 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 at the end 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 vendors 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.
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.
Equity Investments
As of September 30, 2021, we have three equity investments for which a fair value is not readily determinable and therefore the total amounts invested are recognized at cost as follows:
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.
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.
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.
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Facility acquisitions
During 2021, we completed the acquisition of certain assets of the following entities, which either engage directly in the practice of radiology or associated businesses. The primary reason for these acquisitions was to strengthen our presence in the New York City, New Jersey and California markets. We made a fair value determination of the acquired assets and assumed liabilities and the following were recorded (in thousands):
| Entity | Date Acquired | Total Consideration | Property & Equipment | Right of Use Assets | Goodwill | Intangible Assets | Other Assets | Right of Use Liabilities | ||||||||||||||||||
| 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 Determination is Final
** All stock purchase through issuing 67,658 shares of our common stock
Formation of majority owned subsidiary
On January 1, 2021 we entered into the Simi Valley Imaging Group, LLC, a partnership with Simi Valley Hospital and Health Services ("Simi Adventist"). The operation will offer multi-modality imaging services out of two locations in Ventura County, California. Total investment in the venture is $0.4 million. RadNet contributed $0.3 million in assets for a 60% economic interest and Simi Adventist contributed assets totaling $0.1 million for a 40% economic interest.
Sale 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.
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Joint Venture Activity
The following table is a summary of our investment in joint ventures during the nine months ended September 30, 2021 (in thousands):
| Balance as of December 31, 2020 | $ | 34,528 | |||
| Equity in earnings in these joint ventures | 8,259 | ||||
| Equity contributions in existing joint ventures | 1,441 | ||||
| Balance as of September 30, 2021 | $ | 44,228 | |||
We charged management service fees from the centers underlying these joint ventures of approximately $5.3 million and $2.7 million for the three months ended September 30, 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 and December 31, 2020 and income statement data for the nine months ended September 30, 2021 and 2020 (in thousands):
| 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 | |||||||||
| Net revenue | $ | 98,193 | $ | 78,988 | |||||||
| Net income | $ | 16,007 | $ | 13,651 | |||||||
Critical Accounting Policies
The Securities and Exchange Commission defines critical accounting estimates as those that are both most important to the portrayal of a company’s financial condition and results of operations and require management’s most difficult, subjective or complex judgment, often as a result of the need to make estimates about the effect of matters that are inherently uncertain and may change in subsequent periods. In Note 2 to our consolidated financial statements in this quarterly report and in our annual report on Form 10-K for the year ended December 31, 2020, we discuss our significant accounting policies, including those that do not require management to make difficult, subjective or complex judgments or estimates. The most significant areas involving management’s judgments and estimates are described below.
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.
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 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.
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 estimates and assumptions related to revenue recognition did not change materially for the quarter ended September 30, 2021.
Provider Relief Fund (COVID-19 Stimulus Funding)
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 million for the nine months ended September 30, 2021. Generally, the department of Health and Human Services ("HHS") does not intend to recoup funds as long as a provider's lost revenue and increased expenses exceed the amount of provider relief funding one has received. HHS reserves the right to audit Relief Fund recipients in the future to ensure that this requirement is met and collect any Relief Fund amounts that were made in error or exceed lost revenue or increased expenses due to the pandemic. Failure to comply with the terms and conditions may be grounds for recoupment. In recognizing revenue associated with provider relief funding our management is required to assess whether our operations have meet the applicable requirements for the funding received. During the quarter ended September 30, 2021, we continued to evaluate our operating results in light of the most recent government guidance and based on our assessment, the amount of revenue recognized is appropriate.
Accounts Receivable
Substantially all of our accounts receivable are due under fee-for-service contracts from third party payors, such as insurance companies and government-sponsored healthcare programs, or directly from patients. Services are generally provided pursuant to one-year contracts with healthcare providers. Receivables generally are collected within industry norms for third-
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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.
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 totaled $502.7 million. Indefinite Lived Intangible Assets at September 30, 2021 were $7.1 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. 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.
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, 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, | ||||||||||||||||||||||
| 2021 | 2020 | 2021 | 2020 | ||||||||||||||||||||
| REVENUE | |||||||||||||||||||||||
| Service fee revenue | 88.8 | % | 88.0 | % | 88.6 | % | 86.5 | % | |||||||||||||||
| Revenue under capitation arrangements | 11.2 | % | 12.0 | % | 11.4 | % | 13.5 | % | |||||||||||||||
| Total service revenue | 100.0 | % | 100.0 | % | 100.0 | % | 100.0 | % | |||||||||||||||
| Provider relief funding | — | % | 0.1 | % | 0.6 | % | 3.4 | % | |||||||||||||||
| OPERATING EXPENSES | |||||||||||||||||||||||
| Cost of operations, excluding depreciation and amortization | 82.0 | % | 84.5 | % | 85.4 | % | 92.7 | % | |||||||||||||||
| Depreciation and amortization | 7.4 | % | 7.3 | % | 7.3 | % | 8.4 | % | |||||||||||||||
| Loss (gain) on sale and disposal of equipment and other | 0.8 | % | 0.1 | % | — | % | 0.1 | % | |||||||||||||||
| Severance costs | — | % | 0.2 | % | 0.1 | % | 0.2 | % | |||||||||||||||
| Total operating expenses | 90.2 | % | 92.1 | % | 92.7 | % | 101.4 | % | |||||||||||||||
| INCOME FROM OPERATIONS | 9.8 | % | 8.0 | % | 7.9 | % | 1.9 | % | |||||||||||||||
| OTHER INCOME AND EXPENSES | |||||||||||||||||||||||
| Interest expense | 3.6 | % | 3.8 | % | 3.8 | % | 4.4 | % | |||||||||||||||
| Equity in earnings of joint ventures | (0.9) | % | (0.8) | % | (0.8) | % | (0.7) | % | |||||||||||||||
| Non-cash change in fair value of interest rate hedge | (0.9) | % | 0.2 | % | (1.4) | % | 0.6 | % | |||||||||||||||
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) | % | |||||||||||||||
| Net income attributable to noncontrolling interests | 1.5 | % | 1.4 | % | 1.5 | % | 1.1 | % | |||||||||||||||
| NET INCOME (LOSS) ATTRIBUTABLE TO RADNET, INC. COMMON STOCKHOLDERS | 4.9 | % | 2.1 | % | 2.9 | % | (2.6) | % | |||||||||||||||
We have developed our medical imaging business through a combination of organic growth, equity investments, acquisitions and joint venture formations. We have segregated some of our information to demonstrate which is attributable to centers that were in operation through the entirety of the comparison period, and which is attributable to those that were acquired or disposed of during the period. The discussion below shows a breakdown and analysis of revenue and expenses for the three and nine months ended September 30, 2021 and 2020 for our operations at a total company and same center level.
Three Months Ended September 30, 2021 Compared to the Three Months Ended September 30, 2020
Total Revenue inclusive of Provider Relief funding where applicable for 2021 and 2020
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| In Thousands | Three Months Ended September 30, | |||||||||||||
| Revenue | 2021 | 2020 | $ Increase/(Decrease) | % Change | ||||||||||
| Total Revenue | $332,691 | $291,997 | $40,694 | 13.9% | ||||||||||
| Same Center Revenue | $308,243 | $287,274 | $20,969 | 7.3% | ||||||||||
Upswing in revenue reflects an overall same center 10.0% 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 procedures rising 6.4%, and advanced radiology procedures of MRI, PET and CT, expanding at a combined 23.6%, revenue increased over the same period in the prior year. This same center comparison excludes revenue contributions from centers that were acquired or divested subsequent to July 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.
Operating Expenses
Total operating expenses for the three months ended September 30, 2021 increased approximately $31.5 million, or 11.7%, from $268.6 million for the three months ended September 30, 2020 to $300.1 million for the three months ended September 30, 2021. The following table sets forth a breakdown of our cost of operations and total operating expenses for the three months ended September 30, 2021 and 2020 (in thousands):
| Three Months Ended September 30, | |||||||||||
| 2021 | 2020 | ||||||||||
| Salaries and professional reading fees, excluding stock-based compensation | $ | 164,462 | $ | 149,970 | |||||||
| Stock-based compensation | 4,422 | 2,067 | |||||||||
| Building and equipment rental | 31,403 | 26,703 | |||||||||
| Medical supplies | 14,008 | 12,498 | |||||||||
Other operating expenses * | 58,461 | 55,225 | |||||||||
| Cost of operations | 272,756 | 246,463 | |||||||||
| Depreciation and amortization | 24,606 | 21,247 | |||||||||
| Loss on sale and disposal of equipment | 2,595 | 342 | |||||||||
| Severance costs | 163 | 571 | |||||||||
| Total operating expenses | $ | 300,120 | $ | 268,623 | |||||||
*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, 2021 and 2020 (in thousands):
Salaries and professional reading fees, excluding stock-based compensation and severance
| In Thousands | Three Months Ended September 30, | |||||||||||||
| Salaries and Professional Fees | 2021 | 2020 | $ Increase/(Decrease) | % Change | ||||||||||
| Total Salaries | $164,462 | $149,970 | $14,492 | 9.7% | ||||||||||
| Same Center Salaries | $151,321 | $146,307 | $5,014 | 3.4% | ||||||||||
Stemming from the higher procedure volumes noted above, our staffing levels were adjusted to support the influx of patients seeking radiology procedures, resulting in a nominal increase in salaries and professional fee expense 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, salaries and professional reading fees from centers that were acquired or divested subsequent to July 1, 2020 and excluded from the above comparison was $13.1 million. For the
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three months ended September 30, 2020, salaries and professional reading fees from centers that were acquired or divested subsequent to July 1, 2020 and excluded from the above comparison was approximately $3.7 million.
Stock-based compensation
Stock-based compensation increased $2.4 million, or 114.0% to approximately $4.4 million for the three months ended September 30, 2021 compared to $2.1 million for three months ended September 30, 2020. This increase was a combination of awards valued at $8.9 million in stock compensation expense for employee COVID-19 related bonuses and higher fair value of RSA’s awarded and vested in the first quarter of 2021 as compared to RSA’s awarded and vested in the prior year’s first quarter.
Building and equipment rental
| In Thousands | Three Months Ended September 30, | |||||||||||||
| Building & Equipment Rental | 2021 | 2020 | $ Increase/(Decrease) | % Change | ||||||||||
| Total | $31,403 | $26,703 | $4,700 | 17.6% | ||||||||||
| Same Center | $25,056 | $25,235 | $(179) | (0.7)% | ||||||||||
The overall increase in 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 from centers that were acquired or divested subsequent to July 1, 2020. For the three months ended September 30, 2021, building and equipment rental expenses from centers that were acquired or divested subsequent to July 1, 2020 and excluded from the above comparison was $6.3 million. For the three months ended September 30, 2020, building and equipment rental expenses from centers that were acquired or divested subsequent to July 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
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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% | ||||||||||
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.
Interest expense
| In Thousands | Three Months Ended September 30, | |||||||||||||
| Interest Expense | 2021 | 2020 | $ Increase/(Decrease) | % Change | ||||||||||
| Total Interest Expense | $12,032 | $11,061 | $971 | 8.8 | % | |||||||||
| Interest related to derivatives* | $3,700 | $1,603 | ||||||||||||
| Interest related to amortization** | $647 | $1,103 | ||||||||||||
| Adjusted Interest Expense*** | $7,685 | $8,355 | $(670) | (8.0) | % | |||||||||
* 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 compared to the three months ended September 30, 2020, interest expense decreased $0.7 million, or 8.0%. The reduction in interest expense corresponds to lowered variable LIBOR and Prime interest rates paid on our term loan and revolving debt based on market conditions. See “Liquidity and Capital Resources” below for more details on our credit facilities.
To mitigate our future interest expense exposure we have entered into certain interest rate swap agreements. See the Derivative Instruments section of Note 2, Significant Accounting Policies, to the condensed consolidated financial statements included in this report for more details on our derivative transactions.
Equity in earnings from unconsolidated joint ventures
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For the three months ended September 30, 2021 we recognized equity in earnings from unconsolidated joint ventures in the amount of $2.9 million and for three months ended September 30, 2020 we recognized equity in earnings from unconsolidated joint ventures of $2.3 million, an increase of $0.6 million or 25.4%. 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 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):
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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 | |||||||
*Includes billing fees, office supplies, repairs and maintenance, insurance, business tax and license, outside services, telecom, utilities, marketing, travel and other expenses.
Salaries and professional reading fees, excluding stock-based compensation and severance
| In Thousands | Nine Months Ended September 30, | |||||||||||||
| Salaries and Professional Fees | 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% | ||||||||||
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
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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
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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 months ended September 30, 2021 and 2020, respectively.
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.
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, 2021 and 2020, respectively.
| Three Months Ended September 30, | Nine Months Ended September 30, | ||||||||||||||||||||||
| 2021 | 2020 | 2021 | 2020 | ||||||||||||||||||||
| 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) | |||||||||||||||||||
| Interest expense | 12,032 | 11,061 | 37,028 | 33,443 | |||||||||||||||||||
| Severance costs | 163 | 571 | 715 | 1,647 | |||||||||||||||||||
| Depreciation and amortization | 24,606 | 21,247 | 71,272 | 64,536 | |||||||||||||||||||
| Non-cash employee stock-based compensation | 4,422 | 2,067 | 21,566 | 10,144 | |||||||||||||||||||
| Loss (gain) on sale and disposal of equipment and other | 2,595 | 342 | (279) | 543 | |||||||||||||||||||
| Debt restructuring and loss on extinguishment expenses | — | — | 6,044 | — | |||||||||||||||||||
| Non-cash change in fair value of interest rate hedge | (2,870) | 679 | (14,149) | 4,523 | |||||||||||||||||||
| Other adjustment to joint venture investment | — | — | (565) | — | |||||||||||||||||||
| Other expenses | (167) | (139) | 1,699 | (247) | |||||||||||||||||||
| 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 and December 31, 2020 and income statement data for the nine months ended September 30, 2021 and 2020 (in thousands):
| Balance Sheet Data: | September 30, 2021 | December 31, 2020 | |||||||||
| Cash and cash equivalents | $ | 151,253 | $ | 102,018 | |||||||
| Accounts receivable | 152,409 | 129,585 | |||||||||
| Working capital (exclusive of current operating lease liabilities) | 39,114 | (61,896) | |||||||||
| Stockholders' equity | 339,379 | 258,303 | |||||||||
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) | |||||||||
We operate in a capital intensive, high fixed-cost industry that requires significant amounts of capital to fund operations. In addition to operations, we require a significant amount of capital for the initial start-up and development of new diagnostic imaging facilities, the acquisition of additional facilities and new diagnostic imaging equipment. Because our cash flows from operations have been insufficient to fund all of these capital requirements, we have depended on the availability of financing under credit arrangements with third parties.
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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 months ended September 30, 2021 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 provided by operating activities for the nine months ended September 30, 2021 was $100.3 million and $170.3 million for the nine months ended September 30, 2020. Our cash provided by operating activities for the period ended September 30, 2020 was benefited by the receipt of $39.5 million in CMS advances recorded as deferred revenue.
Cash used in investing activities for the nine months ended September 30, 2021, included purchases of property and equipment for approximately $88.5 million and the acquisition of imaging business and other assets for $70.1 million. As part of our business operations we continually evaluate investment opportunities.
Cash provided by financing activities of $108.5 million for the nine months ended September 30, 2021, was due to refinancing of our term loan obligations with the Second Amended and Restated First Lien Credit and Guaranty Agreement on April 23, 2021. Please see Note 5, 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 we have $18.3 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, we were in compliance with all covenants under our credit facilities. Deferred financing costs at September 30, 2021, net of accumulated amortization, was $2.3 million and is specifically related to our Barclays revolving credit facility.
Included in our condensed consolidated balance sheets at September 30, 2021 are $771.2 million of total term loan debt (exclusive of unamortized discounts of $14.3 million) in thousands:
| Face Value | Discount | Total Carrying Value | |||||||||||||||
| First Lien Term Loans | $ | 723,188 | $ | (13,735) | $ | 709,453 | |||||||||||
| SunTrust Term Loan | 48,000 | — | 48,000 | ||||||||||||||
| Total Term Loans | $ | 771,188 | $ | (13,735) | $ | 757,453 | |||||||||||
At September 30, 2021, 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, 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
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, we had $723.2 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, 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%. 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, we had $48.0 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, our effective LIBOR rate plus applicable margin was 1.65%. 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 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 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 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. 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 we issued 67,658 shares of our common stock to complete our purchase of Tangent Associates Group LLC. The shares were ascribed a value of $2.0 million and and were issued pursuant to the private placement exemption contained in Section 4(a)(2) of the Securities Act.
ITEM 3. Defaults Upon Senior Securities
None.
ITEM 4. Mine Safety Disclosures
Not applicable.
ITEM 5. Other Information
None.
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INDEX TO EXHIBITS
| Exhibit Number | Description | |||||||
| 10.1 | ||||||||
| 10.2 | ||||||||
| 31.1 | ||||||||
| 31.2 | ||||||||
| 32.1 | ||||||||
| 32.2 | ||||||||
| 101 | The following financial information from RadNet, Inc.'s Quarterly Report on Form 10-Q for the quarter ended September 30, 2021 formatted in Inline XBRL (Extensible Business Reporting Language) includes: (i) the Condensed Consolidated Balance Sheets, (ii) the Condensed Consolidated Statements of Operations, (iii) the Condensed Consolidated Statements of Comprehensive Loss, (iv) the Condensed Consolidated Statements of Changes in Stockholders Equity, (v) the Condensed Consolidated Statements of Cash Flows, and (vi) Notes to the Condensed Consolidated Financial Statements. | |||||||
| 104 | Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101) | |||||||
* This certification is being furnished solely to accompany this report pursuant to 18 U.S.C. 1350, and is not being filed for purposes of Section 18 of the Exchange Act and is not to be incorporated by reference into any filing of the registrant, whether made before or after the date hereof, regardless of any general incorporation language in such filing.
** 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 | By: | /s/ Howard G. Berger, M.D. | ||||||
| Howard G. Berger, M.D., President and Chief Executive Officer (Principal Executive Officer) | ||||||||
| Date: November 9, 2021 | By: | /s/ Mark D. Stolper | ||||||
| Mark D. Stolper, Chief Financial Officer (Principal Financial and Accounting Officer) | ||||||||
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SEVERANCE AGREEMENT This Severance Agreement ("Agreement") is entered into by and between RadNet Management, Inc. ("EMPLOYER"), on the one hand, and Ruth Villiger-Wilson ("EMPLOYEE"), on the other hand. RECITALS This Agreement is executed and given with reference to the following facts: A. EMPLOYEE has been an employee of EMPLOYER since October 10, t994 C. The parties have agreed that for EMPLOYEE to continue as an employee of EMPLOYER, she should be compensated in the event of the termination of her employment. Now, THEREFORE, in consideration of the promises and covenants herein, and for other valuable consideration, the receipt and sufficiency of which is hereby expressly acknowledged, it is hereby mutually agreed by and between the parties hereto, and each of them, as follows: TERMS l. Payment Upon Termination. Upon any termination of EMPLOYEE's employment with EMPLOYER for any reason other than by reason of EMPLOYEE's death or disability, EMPLOYER shall pay to EMPLOYEE as severance compensation, One Million Dollars ($1,000,000.00) less mandated deductions (the "Severance Payment"). The Severance Payment shall be paid through stock valuel and/or cash, to be determined by EMPLOYER at the time of termination. The Severance Payment constitutes all monies EMPLOYER would be obligated to pay EMPLOYEE after termination of employment. 2. Continuation Coveraqe for Health Insurance Benefits. EMPLOYEE, and any spouse or dependent children covered under EMPLOYER's health benefit plan, shall be entitled to "continuation coverage" ("COBRA") for health insurance benefits pursuant to the terms of EMPLOYER's policy regarding such continuation coverage and subject to the termination provisions of COBRA benefits prior to the end of maximum coverage. Notwithstanding the foregoing, EMPLOYER shall pay the cost of COBRA coverage on behalf of EMPLOYEE for the eighteen (18) months following Employee's termination of employment or until the date EMPLOYEE secures alternative health insurance benefits, whichever is earlier. I Stock value shall be that of RadNet, lnc., a Delaware corporation ("RDNT"), Common Stock, $.0001 par value as of the time of closing on the date of EMPLOYEE's termination of employment. 1 B. EMPLOYER wishes to retain EMPLOYEE as its employee for the foreseeable future.
3. Releases. Except as contained herein, EMPLOYEE hereby releases, acquits and forever discharges EMPLOYER and its parents, subsidiaries, predecessors and affiliated entities, directors, officers, employees, agents and representatives, from any and all claims, debts, liabilities, demands, damages, obligations, actions and causes of actions, of any nature whatsoever, whether known or unknown, or suspected or unsuspected, arising out of or in connection with her employment by EMPLOYER and the termination of her employment. This includes, without limitation, any claim for (l) violation of any federal, state or local statute, ordinance or regulation relating to employment benefits or discrimination in employment, specihcally including, without limitation, the California Fair Employment and Housing Act, the California Family Rights Act, Title VII of the Civil Rights Act of 1964, and the Age Discrimination in Employment Act of 7967, the Americans with Disabilities Act, the Employees' Retirement Income and Security Act, the Family and Medical Leave Act, and further including any regulation of any administrative agency or governmental authority relating to employment benefits or discrimination and/or harassment in employment; (2) breach of oral, implied or written contract; (3) estoppel or reliance; (4) wrongful termination of employment; (5) breach of the implied covenant of good faith and fair dealing; (6) negligent or intentional infliction of mental or emotional distress; (7) defamation; (8) any non-statutory tort or contractual claim; (9) wages and/or benefits and/or penalties; and (10) attorneys'fees. 4. Section 1542 of the California Civil Code. EMPLOYEE waives and relinquishes all rights and benefits afforded by section 1542 of the Civil Code of California, which provides as follows: A GENERAL RELEASE DOES NOT EXTEND TO CLAIMS WHICH THE CREDITOR DOES NOT KNOW OR SUSPECT TO EXIST IN HER FAVOR AT THE TIME OF EXECUTING THE RELEASE, WHICH IF KNOWN BY HIM MUST HAVE MATERIALLY AFFECTED HER SETTLEMENT WITH THE DEBTOR. EMPLOYEE hereby waives the provision of Section1542 of the California Civil Code and acknowledges that this wavier is an essential and material term of this Agreement. 5. Confidentiality. EMPLOYEE agrees that the existence, facts, terms, or provisions of or information conceming this Agreement shall remain absolutely confidential and shall not be disclosed to any person, firm, corporation, or other entity with the sole and exclusive exceptions of (a) any govemmental agency or court as required by law; or (b) EMPLOYEE's accountant or attorney as required only for the rendition ofsuch professional services, so long as any such attorney or accountant is informed of this confidentiality agreement and agrees to abide by its terms. EMPLOYEE acknowledges and agrees that this paragraph is a material inducement to EMPLOYER entering into this Agreement, and further acknowledges and agrees that any breach of this paragraph is subject to a claim by EMPLOYER for damages or equitable relief (or both), including, but not limited to, injunctive relief. 6. No Disparagement. EMPLOYEE agrees that she will not in any way (directly or indirectly) do or say anything at any time which disparages or derogates EMPLOYER, its business interests or reputation, or any of its directors, officers, investors, partners, shareholders, vendors, lenders, creditors, employees, or agents. 2
7. Futurcloopetattqa. If required, EMPLOYEE will assist and cooperate with the defense or prosecution of any claims filed against or by EMPLOYER and EMPLOYEE will furnish testimony if required or when deemed necessary by counsel and give other such assistance as EMPLOYER may reasonably request, such as furnishing recollection of meetings and business-related conversations, locations of files and correspondence, etc. EMPLOYER will pay all reasonable out-of-pocket expenses incurred in giving such assistance. 8. Successors and Assigns. This Agreement shall inure to the benefit of, and shall be binding upon, the successors and assigns of EMPLOYER. 9. Severability. The parties agree that if any term, provision, covenant or condition of this Agreement is held by a court of competent jurisdiction to be invalid, void or unenforceable, the remaining terms and provisions of this Agreement shall remain in full force and effect and shall in no way be affected, impaired or invalidated. 10. Knowins and Voluntary Agreement. EMPLOYEE, by signing this Agreement, represents and warrants that she has carefully read and fully understands this Agreement and its final and binding effect, that he has been afforded sufficient opportunity to review this Agreement with advisors of her choice, that she is fully competent to manage her own business affairs and to enter into this Agreement, and that she has signed this Agreement knowingly, freely and voluntarily. 1 1. Later Discovery of Facts. Each of the parties acknowledges that she or it may hereafter discover facts different from, or in addition to, those which it now knows or believes to be true with respect to the releases herein made and agrees that every such release made by it is now and will remain effective notwithstanding the existence or the discovery of such additional facts. 12. Execution in Counterparts. This Agreement may be executed in one or more counterparts, each of which will be deemed an original, and said counterparts shall constitute but one of the same instrument which may be sufficiently evidenced by one counterpart signed by the party who is to be charged with it. 13. Singular/Plural Forms. As used herein, the singular shall constitute the plural and the plural shall constitute the singular where appropriate. 14. Attorne)rs' Fees. In the event suit is brought by any party arising out of or in connection with this Agreement, the prevailing party shall be entitled to recover reasonable attorneys' fees and expenses incurred in connection therewith. 15. Choice of Law. The parties agree that California law shall govern the construction, interpretation and enforcement of this Agreement. 16. Integration. The parties agree that this Agreement contains their entire agreement and supersedes all other agreements and understandings, whether written or oral, covering the subject matter hereof. The parties warrant that there were no representations, agreements, 1J
arrangements or understandings, whether written or oral, between them relating to the subject matter contained in this Agreement which are not fully expressed herein. 17. Modifications. No modification, amendment or waiver of any of the provisions contained in this Agreement, or any future representations, promise, or condition in connection with the subject matter of this Agreement, shall be binding upon any party to this Agreement unless made in writing and signed by such party or by a duly authorized officer, partner, or agent of such party. DATE: tr- /l ,2021 Wilson DATE: lt 2ozl 2021 Norman Hames President and COO, Western Division RadNet Management, Inc. 4 .rff[E
Execution Copy SEVERANCE AGREEMENT This Severance Agreement ("Agreement") dated 2"3 day of _tlt)")j 20 11 is entered into by and between RadNet Management, Inc. ("EMPLOYER"), on the one hand, and Christine Gordon ("EMPLOYEE"), on the other hand. RECITALS A. EMPLOYEE has been an employee of EMPLOYER since October 1,1990. B. EMPLOYER wishes to retain EMPLOYEE as its employee for the foreseeable future. (As used herein, "foreseeable future" references an undefined period oftime which is left to the sole discretion of EMPLOYEE. This Agreement does not impose any obligation upon EMPLOYEE to continue to work for EMPLOYER for any amount of time beyond the date of the signing of the Agreement. It is acknowledged and agreed by EMPLOYER that EMPLOYEE has the right to terminate her employment with EMPLOYER with or without cause, at any time after the signing of the Agreement, without waiving any of the benefits set forth herein. C. The parties have agreed that for EMPLOYEE to continue as an employee of EMPLOYER, she should be compensated in the event of the termination of her employment. NOW, THEREFORE, in consideration of the promises and covenants herein, and for other valuable consideration, the receipt and sufficiency of which is hereby expressly acknowledged, it is hereby expressly acknowledged and mutually agreed by and between the parties hereto, and each of them, as follows: TERMS 1. Payment Upon Termination. Upon any termination of EMPLOYEE's employment with EMPLOYER, for any reason other than by reason of EMPLOYEE'S death, EMPLOYER shall pay to EMPLOYEE as severance compensation, the equivalent of twenty-four (24) months of EMPLOYEE's regular salary at the time of termination (the "Severance Payment"). The Severance Payment shall be paid through cash and/or up to fifty percent (50%) stock value. Stock value shall be that of RadNet, Inc., a Delaware corporation ("RNDT"), Common Stock, $.0001 par value as of the time of closing on the date of EMPLOYEE's termination of employment. EMPLOYER may determine the form of payment at the time of termination, so long as the cash payment is at least fifty percent (50%) of the Severance Payment. The Severance Payment of all cash andlor stock shall be paid to EMPLOYEE within sixty days (60) of EMPLOYEE'S termination. The Severance Payment constitutes all monies EMPLOYER shall be obligated to pay EMPLOYEE on termination of employment, with the exception of any portion of EMPLOYEE's regular salary that has been earned but not paid, accrued vacation time and/or any stock value owed to EMPLOYEE prior to the EMPLOYEE's termination. 2. Continued Pavment of Medical Insurance. In addition to the Severance Payment, EMPLOYER agrees to continue to pay for EMPLOYEE's medical insurance, inclusive of medical, dental and vision benefits ("Medical Insurance"), for the term of twenty-four (24) months after the C:\Userslnhames\AppData\Local\Microsoft\ Windows\INetCache\Content.Outlook\ WDW0319T\Severance Agt, Chris Gordon_102219 Final (3).docx -------- - - - - -
Execution COP\ termination of EMPLOYEE'S employment with EMPLOYER. The Medical Insurance provided to EMPLOYEE by EMPLOYER after termination shall be identical in coverage in that said Medical Insurance will not exclude pre-existing conditions and shall include the same coverage and benefits as contained in the medical, dental and vision insurance plans provided to EMPLOYEE by EMPLOYER immediately prior to termination and shall be maintained at the same degree as that offered to similarly situated employees. 3. Releases. Except as to the Severance Payment, Medical Benefits and matters contained herein, EMPLOYEE hereby releases, acquits and forever discharges EMPLOYER and its parents, subsidiaries predecessors and affiliated entities, directors, officers, employees, agents and representatives, from any and all claims, debts, liabilities, demands, damages, obligations, actions and causes of actions, of any nature whatsoever, whether known or unknown, or suspected or unsuspected, arising out of or in connection with her employment by EMPLOYER and her termination of her employment. This includes, without limitations, any claim for (1) violation of any federal, state of local statute, ordinance or regulation relating to employment benefits or discrimination of employment, specifically including, without limitation, the California Fair Employment and Housing Act, the California Family Rights Act, Title VII of the Civil Rights Act of 1964, and the Age Discrimination in Employment Act of 1967, the Americans with Disabilities Act, the Employees' Retirement Income and Security Act, the Family and Medical Leave Act, and further including any regulation of any administrative agency or governmental authority relating to employment benefits or discrimination and/or harassment in employment; (2) breach of oral, implied or written contract; (3) estoppel or reliance; (4) wrongful termination of employment; (5) breach of implied covenant of good faith and fair dealing; (6) negligent or intentional infliction of mental or emotional distress; (7) defamation; (8) any non-statutory tort or contractual claim; (9) wages and/or benefits and/or penalties; and (10) attorneys' fees. 4. Section 1542 of the California Civil Code. EMPLOYEE waives and relinquishes all rights and benefits afforded by section 1542 of the Civil Code of California, which provides as follows: A GENERAL RELEASE DOES NOT EXTEND TO CLAIMS WHICH THE CREDITOR DOES NOT KNOW OR SUSPECT TO EXIST IN HIS FAVOR AT THE TIME OF EXECUTING THE RELEASE, WHICH IF KNOWN BY HIMIHER MUST HAVE MATERIALLY AFFECTED HIS/HER SETTLEMENT WITH THE DEBTOR. EMPLOYEE hereby waives the provision of Section 1542 of California Civil Code and Acknowledges that this waiver is an essential and material term of this Agreement. 5. Confidentialitv. EMPLOYEE agrees that the existence, facts, terms, or provisions of or information concerning this Agreement shall remain absolutely confidential and shall not be disclosed to any person, firm, corporation or any entity with the sole and exclusive exceptions of (a) any governmental agency or court as required by law, or (b) EMPLOYEE's accountant or attorney as required only for the rendition of such professional services, so long as any such attorney or accountant is informed of this confidentiality agreement and agrees to abide by its terms. EMPLOYEE acknowledges and agrees that this paragraph is a material inducement to EMPLOYER entering into this Agreement, and further acknowledges and agrees that any breach of this paragraphs is subject to a claim by EMPLOYER for damages and/or equitable relief, including but not limited toiniunctive relief. 2 Severance Agt_Chris Gordon_I022 19 Final (3)
Execution Cop> 6. No Disparagement. EMPLOYEE agrees that she will not in any way (directly or indirectly) do or say anything at any time which disparages or derogates EMPLOYER, its business interests or reputation, or any of its directors, officers, investors, partners, shareholders, vendors, lenders, creditors, employees, or agents. 7. Future Cooperation. Ifrequired, EMPLOYEE will assist and cooperate with the defense or prosecution of any claims filed against or by EMPLOYER. EMPLOYEE will furnish testimony if required or when deemed necessary by counsel and give other such assistance as EMPLOYER may reasonably request, such as furnishing recollection of meetings and business-related conversations, location of files and correspondence, etc. EMPLOYER will pay all reasonable out-of-pocket expenses in addition to EMPLOYEE's reasonable consulting fee of Two Hundred and Fifty-Dollars ($250.00) per hour. 8. Successors and Assigns. This Agreement shall inure to the benefit of, and shall be binding upon, the successors and assigns of EMPLOYER. 9. Severability. The parties agree that if any term, provision, covenant or condition of this Agreement is held by a court of competent jurisdiction to be invalid, void or unenforceable, the remaining terms and provisions of this Agreement shall remain in full force and effect and shall in no way be affected, impaired or invalidated. 10. Knowing and Voluntary Agreement. EMPLOYEE, by signing this Agreement, represents and warrants that she has carefully read and fully understands this Agreement and its final and binding effect, that she has been afforded sufficient opportunity to review this Agreement with advisors or her choice, that she is fully competent to manage her own business affairs and to enter into this Agreement, and that she has signed this Agreement knowingly and voluntarily. 11. Later Discovery of Facts. Each of the parties acknowledge that she or it may hereafter discover facts different from, or in addition to, those which it now knows or believes to be true with respect to the releases herein made and agree that every such release made by it is now and will remain effective notwithstanding the existence or discovery of such additional facts. 12. Execution in Counterparts. This agreement may be executed in one or more counterparts, each of which will be deemed an original, and said counterparts shall constitute but one of the same instrument which may be sufficiently evidenced by one counterpart signed by the party who is to be charged with it. 13. Singular/Plural Forms. As used herein, the singular shall constitute the plural and the plural shall constitute the singular where appropriate. 14. Attornevs' Fees. In the event suit is brought by any party arising out of or in connection with this Agreement, the prevailing party shall be entitled to recover reasonable attorneys' fees and expenses incurred in connection therewith. 15. Choice of Law. The parties agree that California law shall govern the construction, Interpretation and enforcement of this Agreement. 3 Severance Agt_Chris Gordon_I022 19 Final (3)
Execution Copv 16. Integration. The parties agree that this Agreement contains their entire agreement and supersedes all other agreements and understanding, whether written or oral, between them relating to the subject matter hereof. The parties warrant that there were no representations, agreements, arrangement or understandings, whether written or oral, between them relating to the subject matter contained in this Agreement which are not fully expressed herein. 17. Modification. No modifications, amendment or waiver of any of the provisions contained in this Agreement, or any future representations, promise, or condition in connection with the subject matter of this Agreement shall be binding upon any party to this Agreement unless made in writing and signed by such party or by a duly authorized officer, partner or agent of such party. DATE: ..N""-o\)-"---=2'-'-b , 2019 "EMPLOYEE" Christine Gordon , 2019 "EMP,""OYER" J !i) \ ~Jc'.{r+- Norman Hames President & COO, Western Operations RadNet Management, Inc. 4 Severance Agt_Chris Gordon_102219 Final (3)
EXHIBIT 31.1
CERTIFICATION PURSUANT TO
18 U.S.C. SECTION 1350
AS ADOPTED PURSUANT TO
SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002
I, Howard G. Berger, M.D., certify that:
1. I have reviewed this report on Form 10-Q of RadNet, Inc.;
2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
4. The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
| a. | designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; | |||||||
| b. | designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; | |||||||
| c. | evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and | |||||||
| d. | disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and | |||||||
5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):
| a. | all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and | |||||||
| b. | any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting. | |||||||
Dated: November 9, 2021
| /s/ Howard G. Berger, M.D. | |||||
| Howard G. Berger, M.D. | |||||
| President, Chief Executive Officer and Chairman of the Board of Directors | |||||
EXHIBIT 31.2
CERTIFICATION PURSUANT TO
18 U.S.C. SECTION 1350
AS ADOPTED PURSUANT TO
SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002
I, Mark D. Stolper, certify that:
1. I have reviewed this report on Form 10-Q of RadNet, Inc.;
2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
4. The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and
have:
| a. | designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; | |||||||
| b. | designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; | |||||||
| c. | evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and | |||||||
| d. | disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and | |||||||
5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):
| a. | all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and | |||||||
| b. | any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting. | |||||||
Dated: November 9, 2021
| /s/ Mark D. Stolper | |||||
| Mark D. Stolper | |||||
| Executive Vice President | |||||
| and Chief Financial Officer | |||||
EXHIBIT 32.1
CERTIFICATION PURSUANT TO
18 U.S.C. SECTION 1350
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
In connection with the Quarterly Report of RadNet, Inc. (the “Company”) on Form 10-Q for the quarterly period ended September 30, 2021, as filed with the Securities and Exchange Commission on November 9, 2021 (the “Report”), I, Howard G. Berger, M.D., Chairman of the Board of Directors and Chief Executive Officer of the Company, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that:
1. The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended; and
2. The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company as of, and for the periods presented in the Report.
| /s/ Howard G. Berger, M.D. | |||||
| Howard G. Berger, M.D. | |||||
| Chairman, President and Chief Executive Officer | |||||
| (Principal Executive Officer) | |||||
| November 9, 2021 | |||||
A signed original of this written statement required by Section 906 has been provided to the Company and will be furnished to the Securities and Exchange Commission or its staff upon request.
EXHIBIT 32.2
CERTIFICATION PURSUANT TO
18 U.S.C. SECTION 1350
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
In connection with the Quarterly Report of RadNet, Inc. (the “Company”) on Form 10-Q for the quarterly period ended September 30, 2021, as filed with the Securities and Exchange Commission on November 9, 2021 (the “Report”), I, Mark D. Stolper, Chief Financial Officer of the Company, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that:
1. The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended; and
2. The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company as of, and for the periods presented in the Report.
| /s/ Mark D. Stolper | |||||
| Mark D. Stolper | |||||
| Chief Financial Officer | |||||
| (Principal Financial Officer) | |||||
| November 9, 2021 | |||||
A signed original of this written statement required by Section 906 has been provided to the Company and will be furnished to the Securities and Exchange Commission or its staff upon request.