10-Q 1 rdnt-20220331.htm 10-Q rdnt-20220331
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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington D.C. 20549

FORM 10-Q
(Mark One)
     QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 2022
or
     TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from                      to                     
Commission File Number 001-33307
RadNet, Inc.
(Exact name of registrant as specified in its charter)
Delaware13-3326724
(State or other jurisdiction of
incorporation or organization)
(I.R.S. Employer
Identification No.)
1510 Cotner Avenue 
Los Angeles,California90025
(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 TitleTrading SymbolRegistered Exchange
Common StockRDNTNASDAQ
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 filerAccelerated filer
Non-accelerated filerSmaller 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 May 5, 2022 was 56,219,473 shares.


RADNET, INC.
TABLE OF CONTENTS
Page

ITEM 6.  Exhibits

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PART I - FINANCIAL INFORMATION
Item 1 – Financial Statements
RADNET, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS EXCEPT SHARE AND PER SHARE DATA)
March 31,
2022
December 31,
2021
(unaudited) 
ASSETS  
CURRENT ASSETS  
   Cash and cash equivalents$70,713 $134,606 
   Accounts receivable159,725 135,062 
   Due from affiliates5,783 5,384 
   Prepaid expenses and other current assets52,475 49,212 
      Total current assets 288,696 324,264 
PROPERTY, EQUIPMENT AND RIGHT-OF-USE ASSETS
   Property and equipment, net488,958 484,247 
   Operating lease right-of-use assets595,792 584,291 
      Total property, equipment and right-of-use assets1,084,750 1,068,538 
OTHER ASSETS
   Goodwill570,188 513,820 
   Other intangible assets99,339 56,603 
   Deferred financing costs2,009 2,135 
   Investment in joint ventures44,746 42,229 
   Deferred tax assets12,800 14,853 
   Deposits and other38,993 36,032 
       Total assets$2,141,521 $2,058,474 
LIABILITIES AND EQUITY
CURRENT LIABILITIES
    Accounts payable, accrued expenses and other$276,313 $263,937 
    Due to affiliates21,985 23,530 
    Deferred revenue6,930 10,701 
    Current operating lease liability64,906 65,452 
    Current portion of notes payable11,164 11,164 
        Total current liabilities381,298 374,784 
LONG-TERM LIABILITIES
    Long-term operating lease liability590,665 577,675 
    Notes payable, net of current portion740,707 743,498 
    Other non-current liabilities7,401 16,360 
        Total liabilities1,720,071 1,712,317 
EQUITY
Common stock - $0.0001 par value, 200,000,000 shares authorized; 56,197,826 and 53,548,227 shares issued and outstanding at March 31, 2022 and December 31, 2021, respectively
5 5 
    Additional paid-in-capital409,863 342,592 
    Accumulated other comprehensive loss(20,761)(20,421)
    Accumulated deficit(90,260)(93,272)
        Total RadNet, Inc.'s stockholders' equity298,847 228,904 
Noncontrolling interests122,603 117,253 
       Total equity421,450 346,157 
       Total liabilities and equity$2,141,521 $2,058,474 

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



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RADNET, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(IN THOUSANDS EXCEPT SHARE AND PER SHARE DATA)
(unaudited)
 Three Months Ended
March 31,
20222021
REVENUE  
     Service fee revenue$303,276 $279,577 
     Revenue under capitation arrangements38,491 35,742 
Total service revenue341,767 315,319 
     Provider relief funding 6,248 
OPERATING EXPENSES
     Cost of operations, excluding depreciation and amortization315,039 282,280 
     Depreciation and amortization27,118 22,656 
     Loss (gain) on sale and disposal of equipment and other1,128 (1,307)
     Severance costs201 285 
Total operating expenses343,486 303,914 
(LOSS) INCOME FROM OPERATIONS(1,719)17,653 
OTHER INCOME AND EXPENSES
     Interest expense11,593 12,826 
     Equity in earnings of joint ventures(2,517)(2,285)
     Non-cash change in fair value of interest rate hedge(20,819)(11,245)
     Other expenses165 206 
Total other income(11,578)(498)
INCOME BEFORE INCOME TAXES9,859 18,151 
     Provision for income taxes(1,496)(4,376)
NET INCOME8,363 13,775 
     Net income attributable to noncontrolling interests5,350 4,317 
NET INCOME ATTRIBUTABLE TO RADNET, INC. COMMON STOCKHOLDERS$3,013 $9,458 
BASIC NET INCOME PER SHARE ATTRIBUTABLE TO RADNET, INC. COMMON STOCKHOLDERS$0.05 $0.18 
DILUTED NET INCOME PER SHARE ATTRIBUTABLE TO RADNET, INC. COMMON STOCKHOLDERS$0.05 $0.18 
WEIGHTED AVERAGE SHARES OUTSTANDING
Basic55,303,007 51,951,506 
Diluted56,362,193 52,828,941 
The accompanying notes are an integral part of these financial statements.
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RADNET, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(IN THOUSANDS)
(unaudited)
 Three Months Ended March 31,
20222021
NET INCOME$8,363 $13,775 
     Foreign currency translation adjustments(1,264)(12)
     Change in fair value of cash flow hedge from prior periods reclassified to earnings, net of taxes923 925 
COMPREHENSIVE INCOME8,022 14,688 
     Less comprehensive income attributable to noncontrolling interests5,350 4,317 
COMPREHENSIVE INCOME ATTRIBUTABLE TO
RADNET, INC. COMMON STOCKHOLDERS$2,672 $10,371 
The accompanying notes are an integral part of these financial statements.

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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 March 31, 2022 and March 31, 2021.
Common StockAdditional Paid-In
Capital
Accumulated Other
Comprehensive
 Loss
Accumulated
Deficit
Total
Radnet, Inc.'s
Equity
Noncontrolling
Interests
Total
Equity
SharesAmount
BALANCE - JANUARY 1, 202253,548,227 $5 $342,592 $(20,421)$(93,272)$228,904 $117,253 $346,157 
Issuance of common stock under the equity compensation plan530,188 — — — — — — — 
Issuance of common stock under the DeepHealth equity compensation plan13,119 — — — — — — — 
Stock-based compensation expense— — 10,801 — — 10,801 — 10,801 
Issuance of common stock in connection with acquisitions2,106,292 — 56,470 — — 56,470 — 56,470 
Change in cumulative foreign currency translation adjustment— — — (1,264)— (1,264)— (1,264)
Change in fair value of cash flow hedge from prior periods reclassified to earnings, net of taxes— — — 923 — 923 — 923 
Other— — — 1 (1)— —  
Net income— — — — 3,013 3,013 5,350 8,363 
BALANCE-MARCH 31, 202256,197,826 $5 $409,863 $(20,761)$(90,260)$298,847 $122,603 $421,450 
BALANCE - JANUARY 1, 202151,640,537 $5 $307,788 $(24,051)$(117,999)$165,743 $92,560 $258,303 
Issuance of common stock upon exercise of options— — — — — — — — 
Issuance of common stock under the equity compensation plan699,825 — — — — — — — 
Issuance of common stock under the DeepHealth equity compensation plan494 — — — — — — — 
Stock-based compensation expense— — 8,248 — — 8,248 — 8,248 
Purchase of noncontorlling interests— — (4)— — (4)— (4)
Contributions from noncontrolling partner— — — — — — 123 123 
Change in cumulative foreign currency translation adjustment— — — (12)— (12)— (12)
Change in fair value of cash flow hedge from prior periods reclassified to earnings— — — 925 — 925 — 925 
Net income— — — — 9,458 9,458 4,317 13,775 
BALANCE-MARCH 31, 202152,340,856 $5 $316,032 $(23,138)$(108,541)$184,358 $97,000 $281,358 
The accompanying notes are an integral part of these financial statements.
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RADNET, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(IN THOUSANDS)
(unaudited)
Three Months Ended March 31,
20222021
CASH FLOWS FROM OPERATING ACTIVITIES  
Net income$8,363 $13,775 
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization27,118 22,656 
Amortization of operating lease right-of-use assets16,802 17,863 
Equity in earnings of joint ventures, net of dividends(2,517)(2,285)
Amortization of deferred financing costs and loan discount648 1,147 
Loss (gain) on sale and disposal of equipment and other1,128 (1,307)
Amortization of cash flow hedge, net of taxes923 925 
Non-cash change in fair value of interest rate hedge(20,819)(11,245)
Stock-based compensation11,102 8,248 
Change in fair value of contingent consideration
(501)200 
Changes in operating assets and liabilities, net of assets acquired and liabilities assumed in purchase transactions:
Accounts receivable(23,904)(17,493)
Other current assets(4,065)(4,308)
Other assets(1,417)(3,507)
Deferred taxes1,387 3,133 
Operating lease liability(15,859)(18,291)
Deferred revenue(4,519)1,416 
Accounts payable, accrued expenses and other7,031 17,157 
Net cash (used in) provided by operating activities901 28,084 
CASH FLOWS FROM INVESTING ACTIVITIES
Purchase of imaging centers and other acquisitions(25,123)(57,075)
Purchase of property and equipment(36,558)(30,424)
Proceeds from sale of equipment117 151 
Net cash used in investing activities(61,564)(87,348)
CASH FLOWS FROM FINANCING ACTIVITIES
Principal payments on notes and leases payable (827)
Payments on term loan debt(3,313)(10,824)
Proceeds from revolving credit facility 87,100 
Payments on revolving credit facility (87,100)
Net cash used in financing activities(3,313)(11,651)
EFFECT OF EXCHANGE RATE CHANGES ON CASH83 (12)
NET DECREASE IN CASH AND CASH EQUIVALENTS(63,893)(70,927)
CASH AND CASH EQUIVALENTS, beginning of period134,606 102,018 
CASH AND CASH EQUIVALENTS, end of period$70,713 $31,091 
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION
Cash paid during the period for interest$7,448 $8,267 
Cash paid during the period for income taxes$34 $24 
The accompanying notes are an integral part of these financial statements.
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RADNET, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (CONTINUED)
(unaudited)
Supplemental Schedule of Non-Cash Investing and Financing Activities
We acquired equipment and certain leasehold improvements for approximately $42.2 million and $28.8 million during the three months ended March 31, 2022 and 2021, respectively, which were not paid for as of March 31, 2022 and 2021, respectively. The offsetting amounts due were recorded in our condensed consolidated balance sheet under accounts payable, accrued expenses and other.
On January 20, 2022, we issued 1,141,234 shares of our common stock to complete our purchase of Aidence Holding B.V..The shares were ascribed a value of $30.6 million.
On January 20, 2022, we issued 965,058 shares to complete our purchase of Quantib B.V.. The shares were ascribed a value of $25.9 million.
On January 1, 2021 we entered into the Simi Valley Imaging Group, LLC, partnership agreement with Simi Valley Hospital and Health Services ("Simi Adventist"). Of the total combined assets of $0.4 million, RadNet transferred $0.3 million and Simi Adventist contributed the remaining $0.1 million.
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RADNET, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(unaudited)
NOTE 1 – NATURE OF BUSINESS AND BASIS OF PRESENTATION
We are a national provider of freestanding, fixed-site outpatient diagnostic imaging services in the United States. At March 31, 2022, we operated directly or indirectly through joint ventures with hospitals, 351 centers located in Arizona, California, Delaware, Florida, Maryland, New Jersey, and New York. Our centers provide physicians with imaging capabilities to facilitate the diagnosis and treatment of diseases and disorders. Our services include magnetic resonance imaging (MRI), computed tomography (CT), positron emission tomography (PET), nuclear medicine, mammography, ultrasound, diagnostic radiology (X-ray), fluoroscopy and other related procedures. The vast majority of our centers offer multi-modality imaging services. Our multi-modality strategy diversifies revenue streams, reduces exposure to reimbursement changes and provides patients and referring physicians one location to serve the needs of multiple procedures. In addition to our center operations, we have certain other subsidiaries that develop Artificial Intelligence ("AI") products and solutions that are designed to enhance interpretation of radiographic images. Our operations comprise two segments for financial reporting purposes for this reporting period, Imaging Centers and Artificial Intelligence. For further financial information about these segments, see Note 5, Segment Reporting.
 
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 and provide professional medical services for centers in Arizona, California, Delaware, Maryland, New Jersey and New York. These VIEs are collectively referred to as the consolidated medical group ("the Group"). RadNet provides non-medical, technical and administrative services to the Group for which it receives a management fee, pursuant to the related management agreements. Through the management agreements we have exclusive authority over all non-medical decision making related to the ongoing business operations and we determine the annual budget. The Group has insignificant operating assets and liabilities, and de minimis equity. Substantially all cash flows of the Group after expenses, including professional salaries, are transferred to us. We consolidate the revenue and expenses, assets and liabilities of the Group. The creditors of the Group do not have recourse to our general credit and there are no other arrangements that could expose us to losses on behalf of the Group. However, RadNet may be required to provide financial support to cover any operating expenses in excess of operating revenues.

The Group on a combined basis recognized $45.7 million and $46.1 million of revenue, net of management services fees to RadNet, for the three months ended March 31, 2022 and 2021, respectively and $45.7 million and $46.1 million of operating expenses for the three months ended March 31, 2022 and 2021, respectively. RadNet recognized $191.0 million and $179.0 million of total billed net service fee revenue for the three months ended March 31, 2022, and 2021, 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 March 31, 2022 and December 31, 2021, we have included approximately $100.4 million and $89.2 million, respectively, of accounts receivable and approximately $16.9 million and $14.4 million of accounts payable and accrued liabilities related to the Group, respectively.
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At all of our centers not serviced by the Group we have entered into long-term contracts with medical groups to provide professional services at those centers, including supervision and interpretation of diagnostic imaging procedures. The medical groups maintain full control over the physicians they employ. Through our management agreements, we make available to the medical groups the imaging centers, including all furniture, fixtures and medical equipment therein. The medical groups are compensated for their services from the professional component of the global net service fee revenue and after deducting management service fees paid to us, we have no economic controlling interest in these medical groups. As such, the financial results of these groups are not consolidated in our financial statements.

We also own a 49% economic interest in ScriptSender, LLC, which provides secure data transmission services of medical information. Through a management agreement, RadNet provides management and accounting services and receives an agreed upon fee. ScriptSender, LLC is dependent on RadNet to finance its own activities, and as such we determined that it is a VIE but we are not a primary beneficiary since we do not have the power to direct the activities of the entity that most significantly impact the entity’s economic performance. We have continued to finance ScriptSender during it's development phase and our maximum exposure to loss is $3.9 million, which represents our receivable balance from the entity. Maximum exposure to loss is the loss that we would absorb in the event that all of the assets of ScriptSender are deemed worthless. We paid operating expenses for the venture of $0.4 million and $0.6 million for the three months ended March 31, 2022, and March 31, 2021, respectively.
The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with the instructions to Form 10-Q and Rule 10-01 of Regulation S-X and, therefore, do not include all information and footnotes necessary for conformity with U.S. generally accepted accounting principles for complete financial statements; however, in the opinion of management, all adjustments consisting of normal recurring adjustments necessary for a fair presentation of the financial position, results of operations and cash flows for the interim periods ended March 31, 2022 and 2021 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, 2021.
NOTE 2 - SIGNIFICANT ACCOUNTING POLICIES
During the period covered in this report, there have been no material changes to the significant accounting policies we use and have explained, in our annual report on Form 10-K for the fiscal year ended December 31, 2021. The information below is intended only to supplement the disclosure in our annual report on Form 10-K for the fiscal year ended December 31, 2021.
REVENUES - Our revenues generally relate to net patient fees received from various payors and patients themselves under contracts in which our performance obligations are to provide diagnostic services to the patients. Revenues are recorded during the period when our obligations to provide diagnostic services are satisfied. Our performance obligations for diagnostic services are generally satisfied over a period of less than one day. The contractual relationships with patients, in most cases, also involve a third-party payor (Medicare, Medicaid, managed care health plans and commercial insurance companies, including plans offered through the health insurance exchanges) and the transaction prices for the services provided are dependent upon the terms provided by Medicare and Medicaid, or negotiated with managed care health plans and commercial insurance companies. The payment arrangements with third-party payors for the services we provide to the related patients typically specify payments at amounts less than our standard charges and generally provide for payments based upon predetermined rates per diagnostic services or discounted fee-for-service rates. Management continually reviews the contractual estimation process to consider and incorporate updates to laws and regulations and the frequent changes in managed care contractual terms resulting from contract renegotiations and renewals.
As it relates to the 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
8

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 months ended March 31, 2022 and 2021 are presented in the table below based on an allocation of the estimated transaction price with the patient between the primary patient classification of insurance coverage (in thousands):
 Three Months Ended
March 31,
20222021
Commercial insurance$188,465 $182,096 
Medicare70,999 63,589 
Medicaid9,087 8,451 
Workers' compensation/personal injury12,449 10,399 
Other patient revenue7,123 4,775 
Management fee revenue5,508 5,219 
Software revenue3,399 2,426 
AI revenue599  
Other5,647 2,622 
Service fee revenue303,276 279,577 
Revenue under capitation arrangements38,491 35,742 
Total service revenue$341,767 $315,319 

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

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

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

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

$35.4 million total Provider Relief Funding, $26.3 million received for the twelve months ended December 31, 2020 and $9.1 million received for the twelve months ended December 31, 2021, with $6.2 million of it received during the three months ended March 31, 2021. No Provider Relief Funding was received for the three months ended March 31, 2022.

The accelerated Medicare and Blue Shield payments were recorded to Deferred Revenue in our consolidated balance sheet and are being applied to revenue as services are performed beginning in 2021. Through the three months ended March 31, 2022, $36.0 million of the accelerated Medicare payments has been applied to revenue.

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

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

The CARES Act also provides for the deferral of the employer-paid portion of the social security payroll tax with 50% due by December 31, 2021 and 50% due December 31, 2022. We elected to defer $16.3 million of this tax through December 31, 2020. Additionally, The CARES Act provided a refundable employer tax credit equal to 50% of qualified wages, including
9

certain health insurance costs, that can be used to offset payroll tax liabilities. In 2021 we qualified for a portion of the credit and recorded a benefit of $7.7 million through a reduction of payroll tax expense. Our remaining deferred tax liability balance of approximately $8.1 million at March 31, 2022, will be paid by December 31, 2022.
ACCOUNTS RECEIVABLE - Substantially all of our accounts receivable are due under fee-for-service contracts from third party payors, such as insurance companies and government-sponsored healthcare programs, or directly from patients. Services are generally provided pursuant to one-year contracts with healthcare providers. We continuously monitor collections from our payors and maintain an allowance for bad debts based upon specific payor collection issues that we have identified and our historical experience.

We have entered into factoring agreements with various institutions and sold certain accounts receivable under non-recourse agreements in exchange for notes receivables from the buyers. These transactions are accounted for as a reduction in accounts receivable as the agreements transfer effective control over and risk related to the receivables to the buyers. Proceeds on notes receivables are reflected as operating activities on our statement of cash flows and on our balance sheet as prepaid expenses and other current assets for the current portion and deposits and other for the long term portion. Amounts remaining to be collected on these agreement were $17.0 million and $17.7 million at March 31, 2022 and December 31, 2021, respectively. We do not utilize factoring arrangements as an integral part of our financing for working capital and assess the party's ability to pay upfront at the inception of the notes receivable and subsequently by reviewing their financial statements annually and reassessing any insolvency risk on a periodic basis.
DEFERRED FINANCING COSTS - Costs of financing are deferred and amortized using the effective interest rate method. Deferred financing costs, net of accumulated amortization, were $2.0 million and $2.1 million, as of March 31, 2022 and December 31, 2021, respectively and related to our Barclays Revolving Credit Facility. See Note 5, Credit Facilities and Notes Payable for more information.
PROPERTY AND EQUIPMENT - Property and equipment are stated at cost, less accumulated depreciation and amortization. Depreciation of property and equipment is performed using the straight-line method over the estimated useful lives of the assets acquired, which range from 3 to 15 years. Leasehold improvements are amortized at the lesser of lease term or their estimated useful lives, which range from 3 to 15 years. Maintenance and repairs are charged to expense as incurred.
BUSINESS COMBINATION - When the qualifications for business combination accounting treatment are met, it requires us to recognize separately from goodwill the assets acquired and the liabilities assumed at their acquisition date fair values. Goodwill as of the acquisition date is measured as the excess of consideration transferred over the net of the acquisition date fair values of the assets acquired and the liabilities assumed. While we use our best estimates and assumptions to accurately value assets acquired and liabilities assumed at the acquisition date, our estimates are inherently uncertain and subject to refinement. As a result, during the measurement period, which may be up to one year from the acquisition date, we record adjustments to the assets acquired and liabilities assumed with the corresponding offset to goodwill. Upon the conclusion of the measurement period or final determination of the values of assets acquired or liabilities assumed, whichever comes first, any subsequent adjustments are recorded to our consolidated statements of operations.
GOODWILL AND INDEFINITE LIVED INTANGIBLES - Goodwill at March 31, 2022 totaled $570.2 million. Indefinite lived intangible assets at March 31, 2022 were $13.2 million. Goodwill and Indefinite Lived Intangibles are recorded as a result of business combinations. When we determine the carrying value of reporting unit exceeds its fair value an impairment charge would be recognized and should not exceed the total amount of goodwill allocated to that reporting unit. We tested goodwill and indefinite lived intangibles for impairment on October 1, 2021, noting no impairment. We considered the current and expected future economic and market conditions surrounding COVID-19 pandemic and did not identify an indication of goodwill impairment being more likely than not through March 31, 2022. Activity in goodwill for the three months ended March 31, 2022 is provided below (in thousands):
Balance as of December 31, 2021$513,820 
Goodwill from acquisitions57,215 
Valuation adjustment(296)
Currency translation(551)
Balance as of March 31, 2022$570,188 
Goodwill balances at March 31, 2022 reflect additional goodwill arising from deferred tax liabilities recorded on our acquisitions of Aidence Holding B.V. and Quantib B.V. of $7.3 million. See Note 4, Business Combinations and Related Activity for more information.
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INCOME TAXES - Income tax expense is computed using an asset and liability method and using expected annual effective tax rates. Under this method, deferred income tax assets and liabilities result from temporary differences in the financial reporting bases and the income tax reporting bases of assets and liabilities. The measurement of deferred tax assets is reduced, if necessary, by the amount of any tax benefit that, based on available evidence, is not expected to be realized. When it appears more likely than not that deferred taxes will not be realized, a valuation allowance is recorded to reduce the deferred tax asset to its estimated realizable value. For net deferred tax assets we consider estimates of future taxable income in determining whether our net deferred tax assets are more likely than not to be realized.
We recorded income tax expense of $1.5 million, or an effective tax rate of 15.2%, for the three months ended March 31, 2022 compared to income tax expense of $4.4 million, or an effective tax rate of 24.1% for the three months ended March 31, 2021. The income tax rates for the three months ended March 31, 2022 diverge from the federal statutory rate due to (i) noncontrolling interests due to the controlled partnerships; (ii) effects of state income taxes (iii) effects of foreign income taxes; and (iv) excess tax benefits attributable to share-based compensation. We believe no significant changes in the unrecognized tax benefits will occur within the next 12 months.
LEASES - We determine if an arrangement is a lease at inception. Operating leases are included in operating lease right-of-use (“ROU”) assets, current operating lease liabilities, and long term operating lease liability in our consolidated balance sheets. Finance leases are included in property and equipment, current finance lease liability, and long-term finance lease liability in our consolidated balance sheets.  ROU assets represent our right to use an underlying asset for the lease term and lease liabilities represent our obligation to make lease payments arising from the lease. Operating lease ROU assets and liabilities are recognized at commencement date based on the present value of lease payments over the lease term. As most of our leases do not provide an implicit rate, we use our incremental borrowing rate based on the information available at commencement date in determining the present value of lease payments. We use the implicit rate when readily determinable. We include options to extend a lease when it is reasonably certain that we will exercise that option. Lease expense for lease payments is recognized on a straight-line basis over the lease term. For a contract in which we are a lessee that contains fixed payments for both lease and non-lease components, we have elected to account for the components as a single lease component, as permitted. For finance leases, interest expense on the lease liability is recognized using the effective interest method and amortization of the ROU asset is recognized on a straight-line basis over the shorter of the estimated useful life of the asset or the lease term. ROU assets are tested for impairment if circumstances suggest that the carrying amount may not be recoverable. Our ROU assets consist of facility and equipment assets on operating leases. No events have occurred such as fire, flood, or other acts which have impaired the integrity of our ROU assets as of March 31, 2022. Our facility leases require us to maintain insurance policies which would cover major damage to our facilities. We maintain business interruption insurance to cover loss of business due to a facility becoming non-operational under certain circumstances. Our equipment leases are covered by warranty and service contracts which cover repairs and provide regular maintenance to keep the equipment in functioning order.
EQUITY BASED COMPENSATION – We have one long-term incentive plan that we adopted in 2006 and which we have amended and restated at various points in time: first on April 20, 2015, second on March 9, 2017, and currently as of April 15, 2021 (the “Restated Plan”). The Restated Plan was approved by our stockholders at our annual stockholders meeting on June 10, 2021. We have reserved 16,500,000 shares of common stock for issuance under the Restated Plan which can be issued in the form of incentive and/or nonstatutory stock options, restricted and/or unrestricted stock, stock units, and stock appreciation rights. Terms and conditions of awards can be direct grants or based on achieving a performance metric. We evaluate performance-based awards to determine if it is probable that the vesting conditions will be met. We also consider probability of achievement of performance conditions when determining expense recognition. For the awards where vesting is probable, equity-based compensation is recognized over the related vesting period. Stock options generally vest over three years to five years and expire five years to ten years from date of grant. We determine the compensation expense for each stock option award using the Black Scholes, or similar valuation model. Those models require that our management make certain estimates concerning risk free interest rates and volatility in the trading price of our common stock. The compensation expense recognized for all equity-based awards is recognized over the awards’ service periods. Equity-based compensation is classified in operating expenses within the same line item as the majority of the cash compensation paid to employees. In connection with our acquisition of DeepHealth Inc. on June 1, 2020, we assumed the DeepHealth, Inc. 2017 Equity Incentive Plan, including outstanding options awards that can be exercised for our common stock. No additional awards will be granted under the DeepHealth, Inc. 2017 Equity Incentive Plan. See Note 7, Stock-Based Compensation, for more information.
COMPREHENSIVE INCOME (LOSS) - Accounting guidance establishes rules for reporting and displaying comprehensive income or loss and its components. Our unrealized gains or losses on foreign currency translation adjustments, interest rate cap and swap agreements are included in comprehensive loss and are included in the consolidated statements of comprehensive income (loss) for the three months ended March 31, 2022 and 2021.
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COMMITMENTS AND CONTINGENCIES - We are party to various legal proceedings, claims, and regulatory, tax or government inquiries and investigations that arise in the ordinary course of business. With respect to these matters, we evaluate the developments on a regular basis and accrue a liability when we believe a loss is probable and the amount can be reasonably estimated. Based on current information, we do not believe that reasonably possible or probable losses associated with pending legal proceedings would either individually or in the aggregate, have a material adverse effect on our business and consolidated financial statements. However, the outcome of these matters is inherently uncertain. Therefore, if one or more of these matters were resolved against us for amounts in excess of management's expectations, our results of operations and financial condition, including in a particular reporting period in which any such outcome becomes probable and estimable, could be materially adversely affected.
DERIVATIVE INSTRUMENTS - In the second quarter of 2019, we entered into 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 interest payments if rates are above the arranged rates.
At inception, we designated our 2019 Swaps as cash flow hedges of floating-rate borrowings. In accordance with accounting guidance, derivatives that have been designated and qualify as cash flow hedging instruments are reported at fair value. The gain or loss on the effective portion of the hedge (i.e. change in fair value) is reported as a component of comprehensive loss in the consolidated statement of equity. The remaining gain or loss, if any, is recognized currently in earnings. The cash flows for both our $400,000,000 notional interest rate swap contract locked in at 2.05% due October 2025 and our $100,000,000 notional interest rate swap contract locked in at 1.96% do not match the cash flows for our First Lien Term Loans and so we have determined that they are not currently effective as cash flow hedges. Accordingly, all changes in their fair value after April 1, 2020 for the $400,000,000 notional and after July 1, 2020 for the $100,000,000 notional are being recognized in earnings. As of July 1, 2020, the total change in fair value relating to swaps included in other comprehensive income was approximately $24.4 million, net of taxes. This amount will be amortized to interest expense through October 2023 at approximately $0.4 million per month and continuing at approximately $0.3 million through October 2025.
A tabular presentation of the effect of derivative instruments on our consolidated statement of comprehensive loss of the 2019 Swaps which remain ineffective is as follows (amounts in thousands):
For the three months ended March 31, 2022
AccountDecember 31, 2021 BalanceAmount of comprehensive loss recognized on derivative net of taxesAmount of loss reclassified out of accumulated OCI into income (prior period effective portion), net of taxesMarch 31, 2022 BalanceLocation
Accumulated Other Comprehensive Loss, net of taxes$(18,886)$ $923 $(17,963)Equity

For the twelve months ended December 31, 2021
AccountDecember 31, 2020 BalanceAmount of comprehensive loss recognized on derivative net of taxesAmount of loss reclassified out of accumulated OCI into income (prior period effective portion), net of taxesDecember 31, 2021 BalanceLocation
Accumulated Other Comprehensive Loss, net of taxes$(22,581)$ $3,695 $(18,886)Equity
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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 March 31, 2022
Ineffective interest rate swapAmount 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$20,819 Other income (expense)$(923)Interest Expense

See Fair Value Measurements section below for the fair value of the 2019 Swaps at March 31, 2022.
CONTINGENT CONSIDERATION - On January 20, 2022, we completed our acquisition of all the equity interests of Quantib B.V. ("Quantib") an artificial intelligence enterprise centered on prostate cancer screening, in a combination stock and cash purchase. As part of the purchase agreement, we will issue 18 months after acquisition, 113,303 shares with an initial fair value at the date of close of $3.0 million subject to adjustment for any indemnification claims and will be marked to market in subsequent periods. See Note 4, Business Combinations and Related Activity for more information on the Quantib acquisition.
A tabular presentation of the effect of contingent consideration on our condensed consolidated balance sheet is as follows (amounts in thousands):
For the three months ended March 31, 2022
AccountJanuary 20, 2022 BalanceAmount of other non operating income recognized on contingent considerationMarch 31, 2022 BalanceLocation
Accrued Expenses$ $(501)$501 Liabilities and Non Operating Income

See Fair Value Measurements section below for the fair value of contingent consideration at March 31, 2022.
FAIR VALUE MEASUREMENTS – Assets and liabilities subject to fair value measurements are required to be disclosed within a fair value hierarchy. The fair value hierarchy ranks the quality and reliability of inputs used to determine fair value. Accordingly, assets and liabilities carried at, or permitted to be carried at, fair value are classified within the fair value hierarchy in one of the following categories based on the lowest level input that is significant to a fair value measurement:
Level 1—Fair value is determined by using unadjusted quoted prices that are available in active markets for identical assets and liabilities.
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):
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 As of March 31, 2022
Level 1Level 2Level 3Total
Current and long term assets    
2019 Swaps - Interest Rate Contracts$ $4,500 $ $4,500 
 As of December 31, 2021
Level 1Level 2Level 3Total
Current and long term liabilities    
2019 Swaps - Interest Rate Contracts$ $16,319 $ $16,319 
The estimated fair value of these contracts was determined using Level 2 inputs. More specifically, the fair value was determined by calculating the value of the difference between the fixed interest rate of the interest rate swaps and the counterparty’s forward LIBOR curve. The forward LIBOR curve is readily available in the public markets or can be derived from information available in the public markets.
Contingent Consideration:
The table below summarize the estimated fair values of certain of our shares of common stock issued in our Quantib B.V. acquisition on January 20, 2022, and held back for indemnification purposes that are subject to fair value measurements and the classification of these liabilities on our condensed consolidated balance sheets, as follows (in thousands):
 As of March 31, 2022
Level 1Level 2Level 3Total
Long term liabilities    
113,303 shares of RadNet common stock
$ $ $2,535 $2,535 

The estimated fair value of these contracts was determined using Level 3 inputs. More specifically, the fair value was determined by calculating the value estimated shares issuable as of the reporting date (which was $22.37), the time period related to the contractual settlement term, and the probability of issuing the shares. As all the inputs are not observable (excluding our closing share price) and cannot be corroborated by observable market data, we employ a Level 3 category.
Long Term Debt:
The table below summarizes the estimated fair value compared to our face value of our long-term debt as follows (in thousands):
 As of March 31, 2022
Level 1Level 2Level 3Total Fair ValueTotal Face Value
First Lien Term Loans and SunTrust Term Loan$ $753,769 $ $753,769 $764,563 
 As of December 31, 2021
Level 1Level 2Level 3Total Fair ValueTotal Face Value
First Lien Term Loans and SunTrust Term Loan$ $766,973 $ $766,973 $767,875 
At March 31, 2022 and at December 31, 2021 our Barclays revolving credit facility had no balance outstanding. Our SunTrust revolving credit facility relating to our consolidated subsidiary The New Jersey Imaging Network ("NJIN"), had no principal amount outstanding at March 31, 2022 and at December 31, 2021.
The estimated fair value of our long-term debt, which is discussed in Note 6, Credit Facilities and Notes Payable, was determined using Level 2 inputs primarily related to comparable market prices.
We consider the carrying amounts of cash and cash equivalents, receivables, other current assets, current liabilities and other notes payables to approximate their fair value because of the relatively short period of time between the origination of these instruments and their expected realization or payment. Additionally, we consider the carrying amount of our finance lease obligations to approximate their fair value because the weighted average interest rate used to formulate the carrying amounts approximates current market rates.
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EARNINGS PER SHARE - Earnings per share is based upon the weighted average number of shares of common stock and common stock equivalents outstanding, net of common stock held in treasury, as follows (in thousands except share and per share data):
 Three Months Ended March 31,
20222021
Net income attributable to RadNet, Inc.'s common stockholders$3,013 $9,458 
BASIC NET INCOME PER SHARE ATTRIBUTABLE TO RADNET, INC.'S COMMON STOCKHOLDERS
Weighted average number of common shares outstanding during the period55,303,007 51,951,506 
Basic net income per share attributable to RadNet, Inc.'s common stockholders$0.05 $0.18 
DILUTED NET INCOME PER SHARE ATTRIBUTABLE TO RADNET, INC.'S COMMON STOCKHOLDERS
Weighted average number of common shares outstanding during the period55,303,007 51,951,506 
Add nonvested restricted stock subject only to service vesting197,911 253,265 
Add additional shares issuable upon exercise of stock options and contingently issuable shares861,275 624,170 
Weighted average number of common shares used in calculating diluted net income per share56,362,193 52,828,941 
Diluted net income per share attributable to RadNet, Inc.'s common stockholders$0.05 $0.18 
Stock options and non vested restricted awards excluded from the computation of diluted per share amounts as their effect would be antidilutive:
Shares issuable upon the exercise of stock options:46,912 82,595 

EQUITY INVESTMENTS AT FAIR VALUE–Accounting guidance requires entities to measure equity investments at fair value, with any changes in fair value recognized in net income. If there is no readily determinable fair value, the guidance allows entities the ability to measure investments at cost, adjusted for observable price changes and impairments, with changes recognized in net income.
As of March 31, 2022, we have three equity investments for which a fair value is not readily determinable and therefore the total amounts invested are recognized at cost as follows:
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 March 31, 2022.
Turner Imaging Systems, based in Utah, develops and markets portable X-ray imaging systems that provide a user the ability to acquire X-ray images wherever and whenever they are needed. No observable price changes or impairment in our investment was identified as of March 31, 2022.

WhiteRabbit.ai Inc., based in California, is currently developing an artificial intelligence suite which aims to improve the speed and accuracy of cancer detection in radiology and improve patient care. On November 5, 2019 we acquired an equity interest in the company for $1.0 million and also loaned the company $2.5 million in support of its operations. No observable price changes, impairment in our investment or impairment of the loan receivable was identified as of March 31, 2022.
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INVESTMENT IN JOINT VENTURES – We have 13 unconsolidated joint ventures with ownership interests ranging from 35% to 55%. These joint ventures represent partnerships with hospitals, health systems or radiology practices and were formed for the purpose of owning and operating diagnostic imaging centers. Professional services at the joint venture diagnostic imaging centers are performed by contracted radiology practices or a radiology practice that participates in the joint venture. Our investment in these joint ventures is accounted for under the equity method, since RadNet does not have a controlling financial interest in such ventures. We evaluate our investment in joint ventures, including cost in excess of book value (equity method goodwill) for impairment whenever indicators of impairment exist. No indicators of impairment existed as of March 31, 2022.
Acquisition by Equity Method Investments

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

Entity Date AcquiredTotal ConsiderationProperty & EquipmentRight of Use AssetsGoodwillRight of Use Liabilities
IFRC LLC *^1/1/20223,9222,1211,2951,801(1,295)
*Fair Value Determination is Final
^ IFRC LLC acquisitions consisted of three subsidiaries of IFRC, two of which were purchased separately by wholly owned RadNet subsidiaries.
Joint venture investment and financial information
The following table is a summary of our investment in joint ventures during the three months ended March 31, 2022 (in thousands):
Balance as of December 31, 2021$42,229 
Equity in earnings in these joint ventures2,517 
Balance as of March 31, 2022$44,746 
We charged management service fees from the centers underlying these joint ventures of approximately $5.5 million and $5.2 million for the three months ended March 31, 2022 and 2021, respectively.
The following table is a summary of key balance sheet data for these joint ventures as of March 31, 2022 and December 31, 2021 and income statement data for the three months ended March 31, 2022 and 2021 (in thousands):
Balance Sheet Data:March 31, 2022December 31, 2021
Current assets$37,119 $37,186 
Noncurrent assets83,407 73,592 
Current liabilities(12,722)(12,919)
Noncurrent liabilities(27,298)(22,370)
Total net assets$80,506 $75,489 
Book value of RadNet joint venture interests$37,214 $34,930 
Cost in excess of book value of acquired joint venture interests and other7,532 7,299 
Total value of RadNet joint venture interests$44,746 $42,229 
Income statement data for the three months ended March 31,
20222021
Net revenue$34,411 $31,718 
Net income$5,035 $4,803 
 
NOTE 3 – RECENT ACCOUNTING AND REPORTING STANDARD
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Accounting standards adopted

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

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

In March 2020, the FASB issued ASU 2020-04 ("ASU 2020-04"), Reference Rate Reform (Topic 848), Facilitation of the Effects of Reference Rate Reform on Financial Reporting. ASU 2020-04 provides optional expedients and exceptions for applying generally accepted accounting principles to certain contract modifications and hedging relationships that reference London Inter-bank Offered Rate (LIBOR) or another reference rate expected to be discontinued. The guidance is effective upon issuance and generally can be applied through December 31, 2022. The adoption did not have a material effect on our consolidated financial statements.

Accounting standards not yet adopted

In October 2021, the FASB issued ASU 2021-08 ("ASU 2021-08), Business Combinations (Topic 805), Accounting for Contract Assets and Contract Liabilities from Contracts with Customers. ASU 2021-08 requires an acquirer in a business combination to recognize and measure contract assets and contract liabilities in accordance with Accounting Standards Codification Topic 606. ASU 2021-08 is effective for fiscal years beginning after December 15, 2022 and early adoption is permitted. We do not expect ASU 2021-08 to have a material effect, if any, on our consolidated financial statements.
NOTE 4 – BUSINESS COMBINATIONS AND RELATED ACTIVITY

Acquisitions

Imaging Center

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

Entity Date AcquiredTotal ConsiderationProperty & EquipmentRight of Use AssetsGoodwillOther AssetsRight of Use Liabilities
IFRC LLC*^1/1/20224,8002,1038572,697(857)
IFRC LLC*^1/1/20228,2002,9101,7035,27119(1,703)
Total13,0005,0132,5607,96819(2,560)
*Fair Value Determination is Final
^ IFRC LLC acquisitions consisted of three subsidiaries of IFRC, one of which was purchased separately by a joint venture with Calvert Medical Imaging Centers, LLC.

Artificial Intelligence

Aidence Holding B.V.

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On January 20, 2022, we completed our acquisition of all the equity interests of Aidence Holding B.V. ("Aidence") an artificial intelligence enterprise centered on lung cancer screening, in an combination stock and cash purchase. Aidence is reported as part of our artificial intelligence segment and was acquired to enhance our AI capabilities. The transaction was accounted for as an acquisition of a business and total purchase consideration was determined to be approximately $45.2 million including i) 1,117,872 shares issued at $26.80 per share with a fair value of $30.0 million ii) cash of $1.8 million and iii) assuming liabilities of $11.9 million, $7.4 million in milestone contingent consideration and cash holdback of $4.5 million and iv) a settlement of a loan from RadNet of $1.5 million. In addition we paid certain seller closing costs through the issuance of 23,362 shares at a fair value of $0.6 million. We preliminarily recorded $1.0 million in current assets, $0.2 million in property plant and equipment, $27.5 million in intangible assets, $3.2 million in liabilities and $19.2 million in goodwill.


Quantib B.V.

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

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

NOTE 5 – SEGMENT REPORTING

Our reportable segments are described below:

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

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

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

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

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Three Months Ended March 31,
20222021
Revenue:
Imaging Centers$341,168 $315,319 
AI599  
Total revenue$341,767 $315,319 
Cost of Operations
Imaging Centers$310,110 $281,013 
AI4,929 1,267 
Total cost of operations$315,039 $282,280 
Depreciation and Amortization:
Imaging Centers$25,805 $22,569 
AI1,313 87 
Total depreciation and amortization$27,118 $22,656 
Loss (Gain) on Disposal of Equipment:
Imaging Centers$1,154 $(1,307)
AI(26) 
Total loss (gain)$1,128 $(1,307)
Severance
Imaging Centers$201 $285 
AI