Exhibit 99.4
Unaudited Pro Forma Condensed Consolidated Financial Statements
On October 15, 2015, MID Rockland Imaging Partners, Inc., a Delaware corporation (“Buyer”) and a subsidiary of RadNet, Inc. (“RadNet”) entered into an asset purchase agreement (“Purchase Agreement”) effective October 1, 2015, with Diagnostic Imaging Group, LLC, a Delaware limited liability company, Diagnostic Imaging Group Holdings, LLC, a Delaware limited liability company, New Primecare, LLC, a Delaware limited liability company and Flushing Medical Arts Building, Inc. (collectively the “Sellers”) and an individual serving as a majority member of the Sellers (all collectively “Diagnostic Imaging Group Holdings, LLC and Affiliates”). Pursuant to the terms of the Purchase Agreement, RadNet through its subsidiary purchased on October 16, 2015 substantially all of the assets of 17 imaging centers located in the New York City area from Diagnostic Imaging Group Holdings, LLC and Affiliates (“DIGH”). The following unaudited pro forma condensed consolidated financial statements have been prepared to give effect to the completed acquisition, which was accounted for as an acquisition.
The unaudited pro forma condensed consolidated balance sheet as of September 30, 2015, and the unaudited pro forma condensed consolidated statements of operations for the nine months ended September 30, 2015 and the year ended December 31, 2014, are presented herein. The unaudited pro forma condensed consolidated balance sheet was prepared using the historical balance sheets of RadNet and DIGH as of September 30, 2015. The unaudited pro forma condensed consolidated statements of operations were prepared using the historical statements of operations of RadNet and DIGH for the nine months ended September 30, 2015 and for the year ended December 31, 2014.
The unaudited pro forma condensed consolidated balance sheet gives effect to the acquisition as if it had been completed on September 30, 2015, and assumes the hypothetical consolidation of the unaudited condensed balance sheets of RadNet and DIGH. The unaudited pro forma condensed consolidated statements of operations for the nine months ended September 30, 2015 and for the year ended December 31, 2014 give effect to the acquisition as if it had occurred on January 1, 2014.
The unaudited pro forma condensed consolidated financial statements presented are based on the assumptions and adjustments described in the accompanying notes. The unaudited pro forma condensed consolidated financial statements are presented for illustrative purposes and do not purport to represent what the financial position or results of operations actually would have been if the events described above occurred as of the dates indicated or what such financial position or results would be for any future periods. The unaudited pro forma condensed consolidated financial statements, and the accompanying notes, are based upon the respective historical consolidated financial statements of RadNet and DIGH, and should be read in conjunction with RadNet’s historical financial statements and related notes, RadNet’s "Management's Discussion and Analysis of Financial Condition and Results of Operations" contained in RadNet’s Annual Report on Form 10-K for the year ended December 31, 2014, filed with the SEC on March 16, 2015 (as amended by the Form 10-K/A filed with the SEC on March 31, 2015), RadNet’s Quarterly Report on Form 10-Q for the quarterly period ended September 30, 2015, filed with the SEC on November 9, 2015, and DIGH’s historical financial statements presented herein.
RADNET, INC.
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED BALANCE SHEET
(IN THOUSANDS EXCEPT SHARE AND PER SHARE DATA)
As of September 30, 2015
| | RadNet | | | DIGH | | | Pro forma
Adjustments | | | Pro forma
Adjustments | | | Pro forma
Combined | |
| ASSETS | | | | | | | | | | | | | | | | | | | | |
| CURRENT ASSETS | | | | | | | | | | | | | | | | | | | | |
| Cash and cash equivalents | | $ | 36,054 | | | | – | | | $ | 18,501 | | (a) | $ | (54,555 | ) | (b) | $ | – | |
| DIG Cash | | | – | | | $ | 2,181 | | | | – | | | | (2,181 | ) | (c) | | – | |
| Accounts receivable, net | | | 159,205 | | | | 20,375 | | | | – | | | | (8,028 | ) | (e) | | 171,552 | |
| Current portion of deferred tax assets | | | 17,246 | | | | 25 | | | | – | | | | (25 | ) | (c) | | 17,246 | |
| Due from affiliates | | | 2,604 | | | | – | | | | – | | | | – | | | | 2,604 | |
| Prepaid expenses and other current assets | | | 41,194 | | | | 4,892 | | | | – | | | | (4,782 | ) | (e) | | 41,304 | |
| Total current assets | | | 256,303 | | | | 27,473 | | | | 18,501 | | | | (69,571 | ) | | | 232,706 | |
| PROPERTY AND EQUIPMENT, NET | | | 232,477 | | | | 8,765 | | | | – | | | | 9,194 | | | | 250,436 | |
| OTHER ASSETS | | | | | | | | | | | | | | | | | | | | |
| Goodwill | | | 201,450 | | | | 49,839 | | | | – | | | | (10,631 | ) | (g) | | 240,658 | |
| Other intangible assets | | | 45,225 | | | | – | | | | – | | | | 50 | | (e) | | 45,275 | |
| Deferred financing costs, net of current portion | | | 4,294 | | | | – | | | | – | | | | – | | | | 4,294 | |
| Investment in joint ventures | | | 32,434 | | | | – | | | | – | | | | – | | | | 32,434 | |
| Deferred tax assets, net of current portion | | | 32,584 | | | | 204 | | | | – | | | | (204 | ) | (c) | | 32,584 | |
| Deposits and other | | | 4,108 | | | | 12,020 | | | | – | | | | (11,755 | ) | (e) | | 4,373 | |
| Total assets | | $ | 808,875 | | | $ | 98,301 | | | $ | 18,501 | | | $ | (82,917 | ) | | $ | 842,760 | |
| LIABILITIES AND EQUITY | | | | | | | | | | | | | | | | | | | | |
| CURRENT LIABILITIES | | | | | | | | | | | | | | | | | | | | |
| Accounts payable, accrued expenses and other | | $ | 95,058 | | | $ | 17,745 | | | | – | | | $ | (12,806 | ) | (f) | | 99,997 | |
| Due to affiliates | | | 5,664 | | | | – | | | | – | | | | – | | | | 5,664 | |
| Deferred revenue | | | 1,323 | | | | – | | | | – | | | | – | | | | 1,323 | |
| Current portion of notes payable | | | 23,391 | | | | 83 | | | | – | | | | – | | | | 23,474 | |
| Current portion of deferred rent | | | 2,299 | | | | – | | | | – | | | | – | | | | 2,299 | |
| Current portion of obligations under capital leases | | | 8,761 | | | | 1,309 | | | | – | | | | – | | | | 10,070 | |
| Total current liabilities | | | 136,496 | | | | 19,137 | | | | – | | | | (12,806 | ) | | | 142,827 | |
| LONG-TERM LIABILITIES | | | | | | | | | | | | | | | | | | | | |
| Deferred rent, net of current portion | | | 26,299 | | | | 143 | | | | – | | | | (143 | ) | (d) | | 26,299 | |
| Line of credit | | | – | | | | – | | | | 18,501 | | (a) | | – | | | | 18,501 | |
| Loan payable to member | | | – | | | | 33,379 | | | | – | | | | (33,379 | ) | (d) | | – | |
| Notes payable, net of current portion | | | 606,744 | | | | 46 | | | | – | | | | – | | | | 606,790 | |
| Obligations under capital lease, net of current portion | | | 7,422 | | | | 579 | | | | – | | | | 103 | | (f) | | 8,104 | |
| Other non-current liabilities | | | 5,577 | | | | 18,608 | | | | – | | | | (18,608 | ) | (d) | | 5,577 | |
| Total liabilities | | | 782,538 | | | | 71,892 | | | | 18,501 | | | | (64,833 | ) | | | 808,098 | |
| EQUITY | | | | | | | | | | | | | | | | | | | | |
| RadNet, Inc. stockholders' equity: | | | | | | | | | | | | | | | | | | | | |
| Common stock - $.0001 par value, 200,000,000 shares authorized; 44,995,235 shares issued and outstanding at September 30, 2015 | | | 4 | | | | – | | | | – | | | | – | | | | 4 | |
| Paid-in-capital | | | 188,310 | | | | – | | | | – | | | | 8,325 | | (h) | | 196,635 | |
| Member capital | | | | | | | 43,901 | | | | | | | | (43,901 | ) | (i) | | – | |
| Accumulated other comprehensive loss | | | (146 | ) | | | – | | | | – | | | | – | | | | (146 | ) |
| Accumulated deficit | | | (165,452 | ) | | | (17,492 | ) | | | – | | | | 17,492 | | (j) | | (165,452 | ) |
| Total RadNet, Inc.'s stockholders' equity | | | 22,716 | | | | 26,409 | | | | – | | | | (18,084 | ) | | | 31,041 | |
| Noncontrolling interests | | | 3,621 | | | | – | | | | – | | | | – | | | | 3,621 | |
| Total equity | | | 26,337 | | | | 26,409 | | | | – | | | | (18,084 | ) | | | 34,662 | |
| Total liabilities and equity | | $ | 808,875 | | | $ | 98,301 | | | $ | 18,501 | | | $ | (82,917 | ) | | $ | 842,760 | |
See accompanying notes to the unaudited pro forma condensed consolidated financial statements.
RADNET, INC.
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
(IN THOUSANDS EXCEPT SHARE DATA)
For the nine months ended September 30, 2015
| | RadNet | | | DIGH | | | Pro forma
Adjustments | | | Pro forma
combined | |
| NET REVENUE | | | | | | | | | | | | | | | | |
| Service fee revenue, net of contractual allowances and discounts | | $ | 546,337 | | | $ | 52,626 | | | $ | – | | | $ | 598,963 | |
| Provision for bad debts | | | (25,295 | ) | | | (1,373 | ) | | | – | | | | (26,668 | ) |
| Net service fee revenue | | | 521,042 | | | | 51,253 | | | | – | | | | 572,295 | |
| Revenue under capitation arrangements | | | 72,880 | | | | 4,099 | | | | 76,979 | | | | | |
| Total net revenue | | | 593,922 | | | | 55,352 | | | | – | | | | 649,274 | |
| OPERATING EXPENSES | | | | | | | | | | | | | | | | |
| Cost of operations, excluding depreciation and amortization | | | 520,348 | | | | 52,927 | | | | – | | | | 573,275 | |
| Depreciation and amortization | | | 43,836 | | | | 8,381 | | | | – | | | | 52,217 | |
| Loss on sale and disposal of equipment | | | 774 | | | | (423 | ) | | | – | | | | 351 | |
| Severance costs | | | 297 | | | | – | | | | – | | | | 297 | |
| Total operating expenses | | | 565,255 | | | | 60,885 | | | | – | | | | 626,140 | |
| INCOME FROM OPERATIONS | | | 28,667 | | | | (5,533 | ) | | | – | | | | 23,134 | |
| | | | | | | | | | | | | | | | | |
| OTHER INCOME AND EXPENSES | | | | | | | | | | | | | | | | |
| Interest expense | | | 30,965 | | | | 1,492 | | | | 902 | | (k) | | 33,359 | |
| Meaningful use incentive | | | (3,270 | ) | | | – | | | | – | | | | (3,270 | ) |
| Equity in earnings of joint ventures | | | (6,301 | ) | | | – | | | | – | | | | (6,301 | ) |
| Gain on sale of imaging centers | | | (4,823 | ) | | | – | | | | – | | | | (4,823 | ) |
| Loss on early extinguishment of Senior Notes | | | – | | | | – | | | | – | | | | – | |
| Other expenses | | | 418 | | | | – | | | | – | | | | 418 | |
| Total other expenses | | | 16,989 | | | | 1,492 | | | | 902 | | | | 19,383 | |
| INCOME (LOSS) BEFORE INCOME TAXES | | | 11,678 | | | | (7,025 | ) | | | (902 | ) | | | 3,751 | |
| (Provision for) benefit from income taxes | | | (4,300 | ) | | | (17 | ) | | | – | | | | (4,317 | ) |
| NET INCOME (LOSS) | | | 7,378 | | | | (7,042 | ) | | | (902 | ) | | | (566 | ) |
| Net income attributable to noncontrolling interests | | | 550 | | | | – | | | | – | | | | 550 | |
| | | | | | | | | | | | | | | | |
| NET INCOME (LOSS) ATTRIBUTABLE TO RADNET, INC. COMMON STOCKHOLDERS | | $ | 6,828 | | | $ | (7,042 | ) | | $ | (902 | ) | | $ | (1,116 | ) |
| BASIC NET INCOME (LOSS) PER SHARE | | | | | | | | | | | | | | | | |
| ATTRIBUTABLE TO RADNET, INC. COMMON STOCKHOLDERS | | $ | 0.16 | | | | | | | | | | | $ | (0.03 | ) |
| DILUTED NET INCOME (LOSS) PER SHARE | | | | | | | | | | | | | | | | |
| ATTRIBUTABLE TO RADNET, INC. COMMON STOCKHOLDERS | | $ | 0.15 | | | | | | | | | | | $ | (0.02 | ) |
| WEIGHTED AVERAGE SHARES OUTSTANDING | | | | | | | | | | | | | | | | |
| Basic | | | 43,247,002 | | | | | | | | | | | | 43,247,002 | |
| Diluted | | | 44,704,323 | | | | | | | | | | | | 44,704,323 | |
See accompanying notes to the unaudited pro forma condensed consolidated financial statements.
RADNET, INC.
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
(IN THOUSANDS EXCEPT SHARE DATA)
For the year ended December 31, 2014
| | | RadNet | | | DIGH | | | Pro forma
Adjustments | | | Pro forma
combined | |
| | | | | | | | | | | | | | | | | |
| NET REVENUE | | | | | | | | | | | | | | | | |
| Service fee revenue, net of contractual allowances and discounts | | $ | 670,136 | | | $ | 75,200 | | | $ | – | | | $ | 745,336 | |
| Provision for bad debts | | | (29,807 | ) | | | (2,875 | ) | | | – | | | | (32,682 | ) |
| Net service fee revenue | | | 640,329 | | | | 72,325 | | | | – | | | | 712,654 | |
| Revenue under capitation arrangements | | | 77,240 | | | | 5,726 | | | | – | | | | 82,966 | |
| Total net revenue | | | 717,569 | | | | 78,051 | | | | – | | | | 795,620 | |
| OPERATING EXPENSES | | | | | | | | | | | | | | | | |
| Cost of operations, excluding depreciation and amortization | | | 602,652 | | | | 68,741 | | | | – | | | | 671,393 | |
| Depreciation and amortization | | | 59,258 | | | | 12,552 | | | | – | | | | 71,810 | |
| Loss on sale and disposal of equipment | | | 1,113 | | | | (72 | ) | | | – | | | | 1,041 | |
| Severance costs | | | 1,241 | | | | – | | | | – | | | | 1,241 | |
| Total operating expenses | | | 664,264 | | | | 81,221 | | | | – | | | | 745,485 | |
| INCOME FROM OPERATIONS | | | 53,305 | | | | (3,170 | ) | | | – | | | | 50,135 | |
| | | | | | | | | | | | | | | | | |
| OTHER INCOME AND EXPENSES | | | | | | | | | | | | | | | | |
| Interest expense | | | 42,727 | | | | 2,215 | | | | 1,203 | | (k) | | 46,145 | |
| Meaningful use incentive | | | (2,034 | ) | | | – | | | | – | | | | (2,034 | ) |
| Equity in earnings of joint ventures | | | (6,970 | ) | | | – | | | | – | | | | (6,970 | ) |
| Gain on sale of imaging centers | | | – | | | | – | | | | – | | | | – | |
| Gain on de-consolidation of joint venture | | | – | | | | – | | | | – | | | | – | |
| Loss on extinguishment of debt | | | 15,927 | | | | (2,124 | ) | | | – | | | | 13,803 | |
| Other expenses (income) | | | 3 | | | | (877 | ) | | | – | | | | (874 | ) |
| Total other expenses | | | 49,653 | | | | (786 | ) | | | 1,203 | | | | 50,070 | |
| INCOME BEFORE INCOME TAXES | | | 3,652 | | | | (2,384 | ) | | | (1,203 | ) | | | 65 | |
| (Provision for) benefit from income taxes | | | (1,967 | ) | | | (596 | ) | | | – | | | | (2,563 | ) |
| NET INCOME | | | 1,685 | | | | (2,980 | ) | | | (1,203 | ) | | | (2,498 | ) |
| Net income (loss) attributable to noncontrolling interests | | | 309 | | | | – | | | | – | | | | 309 | |
| | | | | | | | | | | | | | | | |
| NET INCOME ATTRIBUTABLE TO RADNET, INC. COMMON STOCKHOLDERS | | $ | 1,376 | | | $ | (2,980 | ) | | $ | (1,203 | ) | | $ | (2,807 | ) |
| BASIC NET INCOME PER SHARE | | | | | | | | | | | | | | | | |
| ATTRIBUTABLE TO RADNET, INC. COMMON STOCKHOLDERS | | $ | 0.03 | | | | | | | | | | | $ | (0.07 | ) |
| DILUTED NET INCOME PER SHARE | | | | | | | | | | | | | | | | |
| ATTRIBUTABLE TO RADNET, INC. COMMON STOCKHOLDERS | | $ | 0.03 | | | | | | | | | | | $ | (0.07 | ) |
| WEIGHTED AVERAGE SHARES OUTSTANDING | | | | | | | | | | | | | | | | |
| Basic | | | 41,070,077 | | | | | | | | | | | | 41,070,077 | |
| Diluted | | | 43,149,196 | | | | | | | | | | | | 43,149,196 | |
See accompanying notes to the unaudited pro forma condensed consolidated financial statements.
RadNet, Inc.
Notes to Unaudited Pro Forma Condensed Consolidated Financial Statements
Note 1. Basis of Presentation
The unaudited pro forma condensed consolidated statements of operations of RadNet, Inc. (“RadNet”) for the nine months ended September 30, 2015 and the year ended December 31, 2014 give effect to the acquisition of Diagnostic Imaging Group Holdings, LLC and Affiliates (“DIGH”) as if it had been completed on January 1, 2014. The unaudited pro forma condensed consolidated balance sheet as of September 30, 2015 gives effect to the acquisition of DIGH as if it had occurred on September 30, 2015.
The unaudited pro forma condensed consolidated statements of operations and unaudited pro forma condensed consolidated balance sheet were derived by adjusting RadNet’s historical financial statements for the acquisition of DIGH. The unaudited pro forma condensed consolidated balance sheet and unaudited pro forma condensed consolidated statement of operations are provided for informational purposes only and should not be construed to be indicative of RadNet’s financial position or results of operations had the transaction been consummated on the dates indicated and do not project RadNet’s financial position or results of operations for any future period or date.
The unaudited pro forma condensed consolidated balance sheet and unaudited condensed consolidated statements of operations and accompanying notes should be read in conjunction with RadNet’s historical financial statements and related notes, and RadNet’s “Management’s Discussion and Analysis of Financial Condition and Results of Operations” contained in RadNet’s Annual Report on Form 10-K for the year ended December 31, 2014, filed with the SEC on March 16, 2015 (as amended by the Form 10-K/A filed with the SEC on March 31, 2015), RadNet’s Quarterly Report on Form 10-Q for the quarterly period ended September 30, 2015, filed with the SEC on November 9, 2015, as amended and DIGH historical financial statements presented herein.
Note 2. Preliminary Purchase Price
The unaudited pro forma condensed consolidated financial statements reflect a purchase price of $62,880,000. RadNet paid $54,555,000 of the purchase price in cash, and paid the remainder of the purchase price through the issuance of RadNet common stock valued at $8,325,000.
The preliminary purchase price allocation as of September 30, 2015, subject to change pending completion of the final valuation and analysis, is as follows (in thousands):
| Tangible assets | | $ | 30,681 | |
| Goodwill | | | 39,208 | |
| Intangible assets | | | 50 | |
| Total assets acquired | | | 69,939 | |
| Liabilities assumed | | | 7,059 | |
| Net assets acquired | | $ | 62,880.00 | |
Goodwill represents the excess of the purchase price over the fair value of the net assets acquired. Intangibles are being amortized on a straight-line basis over five to ten years.
Note 3. Pro Forma Adjustments
The following pro forma adjustments are based upon management’s preliminary estimates of the value of the tangible and intangible assets acquired. These estimates are subject to finalization.
(a) Represents the funds borrowed for the acquisition through our existing credit facility.
(b) Represents the funds used for the acquisition.
(c) Represents adjustments to remove certain assets not aquired in the acquisition.
(d) Represents adjustments to remove certain liabilities not assumed in the acquisition.
(e) Represents adjustments to aquired assets to their fair value.
(f) Represents adjustment to assumed liabilities to their fair value.
(g) Represents an adjustment to goodwill to its fair value.
(h) Represents the issuance of common stock as a component of the overall purchase consideration
(i) Represents the elimination of member capital of DIGH upon RadNet’s purchase of DIGH
(j) Represents the elimination of DIGH's accumulated deficit upon RadNet’s purchase of DIGH
(k) Represents interest on the funds borrowed for the acquisition through our existing credit facility.
