| SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES | PRINCIPLES
OF CONSOLIDATION – The operating activities of subsidiaries are included in the accompanying consolidated financial statements
(“financial statements”) from the date of acquisition. Investments in companies in which we have the ability to exercise
significant influence, but not control, are accounted for by the equity method. All intercompany transactions and balances, with
our consolidated entities and the unsettled amount of intercompany transactions with our equity method investees, have been eliminated
in consolidation. As stated in Note 1 above, the BRMG and NY Groups are variable interest entities and we consolidate the operating
activities and balance sheets of each. Additionally, we determined that our unconsolidated joint venture, ScriptSender, LLC, is
also a VIE as it is dependent on our operational funding but we are not a primary beneficiary since RadNet does not have the power
to direct the activities of the entity that most significantly impact the entity’s economic performance. See Investment
in Joint Ventures section of Note 2 for further explanation. USE OF ESTIMATES
- The financial statements were prepared in accordance with U.S. generally accepted accounting principles (GAAP), which requires
management to make estimates and assumptions that affect the amounts reported in the financial statements and accompanying notes.
These estimates and assumptions affect various matters, including our reported amounts of assets and liabilities in our consolidated
balance sheets at the dates of the financial statements; our disclosure of contingent assets and liabilities at the dates of the
financial statements; and our reported amounts of revenues and expenses in our consolidated statements of operations during the
reporting periods. These estimates involve judgments with respect to numerous factors that are difficult to predict and are beyond
management’s control. As a result, actual amounts could materially differ from these estimates. RECLASSIFICATION
– We have reclassified certain amounts within accrued expenses for 2016 to conform to our 2017 presentation. REVENUES –
Service fee revenue, net of contractual allowances and discounts, consists of net patient fees received from various payors
and patients themselves based mainly upon established contractual billing rates, less allowances for contractual adjustments and
discounts. As it relates to BRMG and the NY Groups centers, this service fee revenue includes payments for both the professional
medical interpretation revenue recognized by BRMG and the NY Groups as well as the payment for all other aspects related to our
providing the imaging services, for which we earn management fees from BRMG and the NY Groups. As it relates to non-BRMG and NY
Groups centers, namely the affiliated physician groups, 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. Service fee
revenues are recorded during the period the services are provided based upon the estimated amounts due from the patients and third-party
payors. Third-party payors include federal and state agencies (under the Medicare and Medicaid programs), managed care health
plans, commercial insurance companies and employers. Estimates of contractual allowances are based on historical collection rates
of payor reimbursement contract agreements. We also record a provision for doubtful accounts based primarily on historical collection
rates related to patient copayments and deductible amounts for patients who have health care coverage under one of our third-party
payors. 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 service
fee revenue, net of contractual allowances and discounts, the provision for bad debts, and revenue under capitation arrangements
for the years ended December 31, are summarized in the following table (in thousands) :
Years Ended December 31,
2017 2016 2015
Commercial insurance $ 571,369 $ 539,793 $ 486,489
Medicare 193,166 187,941 168,545
Medicaid 25,821 28,170 23,948
Workers' compensation/personal injury 35,195 36,548 32,728
Other (1) 31,627 29,135 35,046
Service fee revenue, net of contractual allowances and discounts 857,178 821,587 746,756
Provision for bad debts (46,555 ) (45,387 ) (36,033 )
Net service fee revenue 810,623 776,200 710,723
Revenue under capitation arrangements 111,563 108,335 98,905
Total net revenue $ 922,186 $ 884,535 $ 809,628 (1) PROVISION
FOR BAD DEBTS – We provide for an allowance against accounts receivable that could become uncollectible to reduce the carrying
value of such receivables to their estimated net realizable value. We estimate this allowance based on the aging of our accounts
receivable by the historical payment patterns of each type of payor, write-off trends, and other relevant factors. A significant
portion of our provision for bad debt relates to co-payments and deductibles owed to us from patients with insurance. Although
we attempt to collect deductibles and co-payments due from patients with insurance at the time of service, this attempt to collect
at the time of service is not an assessment of the patient’s ability to pay nor are revenues recognized based on an assessment
of the patient’s ability to pay. There are various factors that can impact collection trends, such as changes in the economy,
which in turn have an impact on the increased burden of co-payments and deductibles to be made by patients with insurance. These
factors continuously change and can have an impact on collection trends and our estimation process. Our allowance for bad debts
at December 31, 2017 and 2016 was $34.6 million and $20.7 million, respectively. 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. 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. MEANINGFUL
USE INCENTIVE – Under the American Recovery and Reinvestment Act of 2009, a program was enacted that provides financial
incentives for providers that successfully implement and utilize electronic health record technology to improve patient care.
Our software development team in Canada developed a Radiology Information System (RIS) software platform that has been awarded
meaningful use certification. As this certified RIS system is implemented throughout our imaging centers, the radiologists that
utilize this software can be eligible for the available financial incentives. In order to receive such incentive payments, providers
must attest that they have demonstrated meaningful use of the certified RIS in each stage of the program. We account for this
meaningful use incentive under the Gain Contingency Model outlined in ASC 450-30, and record the meaningful use incentive within
non-operating income only after Medicare accepts an attestation from the qualified eligible professional demonstrating meaningful
use. We recorded approximately $250,000, $2.8 million and $3.3 million during the twelve months ended December 31, 2017, 2016
and 2015, respectively, relating to this incentive. GAIN ON RETURN
OF COMMON STOCK – In the second quarter of 2016, we determined that certain pre-acquisition financial information of Diagnostic
Imaging Group (“DIG”) provided to us by the sellers contained errors. As a result of this, we negotiated and reached
a settlement with the sellers of DIG in June 2016 for the return of 958,536 shares of common stock which had a fair value of $5.0
million on the date of return. Such return has been recognized as a gain on return of common stock in our statement of operations. SOFTWARE REVENUE
RECOGNITION – Our subsidiary, eRAD, Inc., sells Picture Archiving Communications Systems (“PACS”) and related
services, primarily in the United States. The PACS systems sold by eRAD are primarily composed of certain elements: hardware,
software, installation and training, and support. Sales are made primarily through eRAD’s sales force. These sales are multiple-element
arrangements that generally include hardware, software, software installation, configuration, system installation, training and
first-year warranty support. Hardware, which is not unique or special purpose, is purchased from a third-party and resold to eRAD’s
customers with a small mark-up. We have determined
that our core software products, such as PACS, are essential to most of our arrangements as hardware, software and related services
are sold as an integrated package. Therefore, these transactions are accounted for under ASC 605-25, Multiple-Element Arrangements
Software. For the years
ended December 31, 2017, 2016 and 2015, we recorded approximately $6.1 million, $6.2 million and $6.1 million, respectively, in
revenue related to our eRAD business which is included in net service fee revenue in our consolidated statement of operations.
At December 31, 2017 we had a deferred revenue liability of approximately $2.5 million associated with eRAD sales which we expect
to recognize into revenue over the next 12 months. SOFTWARE DEVELOPMENT
COSTS – Costs related to the research and development of new software products and enhancements to existing software products
all for resale to our customers are expensed as incurred. We utilize
a variety of computerized information systems in the day to day operation of our diagnostic imaging facilities. One such system
is our front desk patient tracking system or Radiology Information System (“RIS”). We have historically utilized third
party RIS software solutions and pay monthly fees to outside third party software vendors for the use of this software. We have
developed our own RIS solution through our wholly owned subsidiary, Radnet Management Information Systems (“RMIS”)
and began utilizing this system beginning in the first quarter of 2015. In accordance
with ASC 350-40, Accounting for the Costs of Computer Software Developed for Internal Use, We have entered
into multiple agreements to license our RIS system to outside customers. For the twelve months December 31, 2017 and December
31, 2016, we received approximately $492,000 and $301,000 with respect to this licensing agreement, respectively. In accordance
with ASC 350-40, we recorded the receipt of these funds against the capitalized software costs explained above. As of December
31, 2017, the net carrying value of our capitalized software costs was approximately $1.3 million. CONCENTRATION
OF CREDIT RISKS – Financial instruments that potentially subject us to credit risk are primarily cash equivalents and accounts
receivable. We have placed our cash and cash equivalents with one major financial institution. At times, the cash in the financial
institution is temporarily in excess of the amount insured by the Federal Deposit Insurance Corporation, or FDIC. 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. We continuously monitor collections and maintain an allowance
for bad debts based upon our historical collection experience. CASH AND CASH
EQUIVALENTS – We consider all highly liquid investments that mature in three months or less when purchased to be cash equivalents.
The carrying amount of cash and cash equivalents approximates their fair market value. DEFERRED FINANCING
COSTS – Costs of financing are deferred and amortized on a straight-line basis over the life of the associated loan, which
approximates the effective interest rate method. Deferred financing costs, net of accumulated amortization, were $1.9 million
for the twelve month period ended December 31, 2017, and $2.0 million for the twelve month period ended December 31, 2016. Deferred
financing costs are solely related to our Revolving Credit Facility. In conjunction with our Fourth Amendment and Fifth Amendment
to our First Lien Credit Agreement, a net addition of approximately $371,000 was added to deferred financing costs for the twelve
months ended December 31, 2017. See Note 8, Revolving Credit Facility, Notes Payable, and Capital Leases for more information. INVENTORIES
– Inventories, consisting mainly of medical supplies, are stated at the lower of cost or net realizable value with cost
determined by the first-in, first-out method. PROPERTY AND
EQUIPMENT – Property and equipment are stated at cost, less accumulated depreciation and amortization. Depreciation and
amortization of property and equipment are provided using the straight-line method over the estimated useful lives, 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 30 years. Maintenance and repairs are charged to expense as incurred. BUSINESS COMBINATION
– Accounting for acquisitions 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 December 31, 2017 totaled $256.8 million and $239.6 million at December
31, 2016. Indefinite lived intangible assets at December 31, 2017 and 2016 totaled $7.9 million and are associated with the value
of certain trade name intangibles. Goodwill and trade name intangibles are recorded as a result of business combinations. Management
evaluates goodwill and trade name intangibles, at a minimum, on an annual basis and whenever events and changes in circumstances
suggest that the carrying amount may not be recoverable. Impairment of goodwill is tested at the reporting unit level by comparing
the reporting unit’s carrying amount, including goodwill, to the fair value of the reporting unit. The fair value of a reporting
unit is estimated using a combination of the income or discounted cash flows approach and the market approach, which uses comparable
market data. If the carrying amount of the reporting unit exceeds its fair value, goodwill is considered impaired and a second
step is performed to measure the amount of impairment loss, if any. Impairment of trade name intangibles is tested at the subsidiary
level by comparing the subsidiary’s trade name carrying amount to its respective fair value. We tested both goodwill and
trade name intangibles for impairment on October 1, 2017, noting no impairment, and have not identified any indicators of
impairment through December 31, 2017. LONG-LIVED
ASSETS – We evaluate our long-lived assets (property and equipment) and intangibles, other than goodwill, for impairment
when events or changes indicate the carrying amount of an asset may not be recoverable. U.S. GAAP requires that if the sum of
the undiscounted expected future cash flows from a long-lived asset or definite-lived intangible is less than the carrying value
of that asset, an asset impairment charge must be recognized. The amount of the impairment charge is calculated as the excess
of the asset’s carrying value over its fair value, which generally represents the discounted future cash flows from that
asset or in the case of assets we expect to sell, at fair value less costs to sell. We determined that there were no events or
changes in circumstances that indicated our long-lived assets were impaired during any periods presented. 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. Income taxes are further explained in Note 10. UNINSURED
RISKS – On November 1, 2008 we obtained a fully funded and insured workers’ compensation policy, thereby eliminating
any uninsured risks for employee injuries occurring on or after that date. This fully funded policy remained in effect through
November 1, 2013 and continues to cover any claims incurred through this date. On November
1, 2013 we entered into a high-deductible workers’ compensation insurance policy. We have recorded liabilities of $2.8 million
for the year ending December 31, 2017 and $2.9 million for the year ended December 31, 2016, respectively, for the estimated
future cash obligations associated with the unpaid portion of the workers compensation claims incurred. We
and our affiliated physicians carry an annual medical malpractice insurance policy that protects us for claims that are filed
during the policy year and that fall within policy limits. The policy has a deductible for which is $10,000 per incidence at for
the years ending December 31, 2017 and December 31, 2016, respectively. In
December 2008, in order to eliminate the exposure for claims not reported during the regular malpractice policy period, we purchased
a medical malpractice tail policy, which provides coverage for any claims reported in the event that our medical malpractice policy
expires. As of December 31, 2017, this policy remains in effect. We have entered
into an arrangement with Blue Shield to administer and process claims under a self-insured plan that provides health insurance
coverage for our employees and dependents. We have recorded liabilities as of December 31, 2017 and 2016 of $4.5 million
and $2.4 million, respectively, for the estimated future cash obligations associated with the unpaid portion of the medical and
dental claims incurred by our participants. Additionally, we entered into an agreement with Blue Shield for a stop loss policy
that provides coverage for any claims that exceed $250,000 up to a maximum of $1.0 million in order for us to limit our exposure
for unusual or catastrophic claims. LOSS AND OTHER
UNFAVORABLE CONTRACTS – We assess the profitability of our contracts to provide management services to our contracted physician
groups and identify those contracts where current operating results or forecasts indicate probable future losses. Anticipated
future revenue is compared to anticipated costs. If the anticipated future cost exceeds the revenue, a loss contract accrual is
recorded. In connection with the acquisition of Radiologix in November 2006, we acquired certain management service agreements
for which forecasted costs exceeds forecasted revenue. As such, an $8.9 million loss contract accrual was established in purchase
accounting, and is included in other non-current liabilities. The recorded loss contract accrual is being accreted into operations
over the remaining term of the acquired management service agreements, which ends in 2031. As of December 31, 2017 and 2016,
the remaining accrual balance is $5.0 million, and $5.6 million, respectively. In addition
and related to acquisition activity, we have certain operating lease commitments for facilities where the fair market rent differs
from the lease contract rate. We have recorded an unfavorable contract liability representing the difference between the total
value of the fair market rent and the contract rent over the current term of the lease applicable from the date of acquisition.
As of December 31, 2017 and 2016, the unfavorable contract liability on these leases is $1.4 million and $1.6 million, respectively. EQUITY BASED
COMPENSATION – We have one long-term incentive plan that we adopted in 2006 and which we first amended and restated as of
April 20, 2015, and again on March 9, 2017 (the “Restated Plan”). The Restated Plan was approved by our stockholders
at our annual stockholders meeting on June 8, 2017. We have reserved for issuance under the Restated Plan 14,000,000 shares of
common stock. We can issue options, stock awards, stock appreciation rights, stock units and cash awards under the Restated Plan.
Certain options granted under the Restated Plan to employees are intended to qualify as incentive stock options under existing
tax regulations. Stock options and warrants generally vest over three to five years and expire five to ten years from date of
grant. The compensation expense recognized for all equity-based awards is recognized over the awards’ service periods. Equity-based
compensation is classified in operating expenses within the same line item as the majority of the cash compensation paid to employees.
See Note 11 Stock-Based Compensation for more information. FOREIGN CURRENCY
TRANSLATION – The functional currency of our foreign subsidiaries is the local currency. In accordance with ASC 830, Foreign
Currency Matters COMPREHENSIVE
(LOSS) INCOME – ASC 220, Comprehensive Income, DERIVATIVE
INSTRUMENTS – In the fourth quarter of 2016, we entered into two forward interest rate cap agreements ("2016 Caps").
The 2016 Caps will mature in September and October 2020. The 2016 Caps had notional amounts of $150,000,000 and $350,000,000,
respectively, which were designated at inception as cash flow hedges of future cash interest payments associated with portions
of our variable rate bank debt. Under these arrangements, we purchased a cap on 3 month LIBOR at 2.0%. We are liable for a $5.3
million premium to enter into the caps which is being accrued over the life of the 2016 Caps. ADOPTION of
ASU 2017-12 – Targeted Improvements to Accounting for Hedging Activities - In August 2017, the FASB issued ASU 2017-12,
Targeted Improvements to Accounting for Hedging Activities At inception,
we designated our 2016 Caps as cash flow hedges of floating-rate borrowings. In accordance with ASC Topic 815, derivatives that
have been designated and qualify as cash flow hedging instruments are reported at fair value. The gain or loss of the hedge (i.e.,
change in fair value) is reported as a component of accumulated other comprehensive (loss) income in the consolidated statement
of equity. Below represents
the fair value of our 2016 Caps and loss (gain) recognized:
For
the twelve months ended December 31, 2017
Derivatives Balance Sheet Location Fair
Value – Liabilities
Interest rate contracts Current and other non-current liabilities $ (595 )
For
the twelve months ended December 31, 2016
Derivatives Balance Sheet
Location Fair
Value – Asset Derivatives
Interest rate contracts Current assets $ 818 A tabular
presentation of the effect of derivative instruments on our consolidated statement of comprehensive (loss) income, net of taxes
is as follows (amounts in thousands):
For the twelve months ended December
31, 2017
Effective Interest Rate Cap Amount of Loss Recognized on
Derivative Location of Loss Recognized
in Income on Derivative
Interest rate contracts ($880) Other Comprehensive Loss
For the twelve months ended December
31, 2016
Effective Interest Rate Cap Amount of Gain Recognized on
Derivative Location of Gain Recognized in Income on Derivative
Interest rate contracts $508 Other Comprehensive Income 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. The table
below summarizes the estimated fair values of certain of our financial assets that are subject to fair value measurements, and
the classification of these assets in our consolidated balance sheets, as follows (in thousands):
As of December
31, 2017
Level
1 Level
2 Level
3 Total
Current and other non-current liabilities
Interest Rate Contracts $ – $ (595 ) $ – $ (595 )
As of December
31, 2016
Level
1 Level
2 Level
3 Total
Current assets
Interest Rate Contracts $ – $ 818 $ – $ 818 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. The table
below summarizes the estimated fair value and carrying amount of our long-term debt as follows (in thousands):
As
of December 31, 2017
Level
1 Level
2 Level
3 Total
Fair Value Total
Face Value
First Lien Term Loans $ – $ 628,801 $ – $ 628,801 $ 620,272
As
of December 31, 2016
Level
1 Level
2 Level
3 Total Total
Face Value
First Lien Term Loans $ – $ 483,129 $ – $ 483,129 $ 478,938
Second Lien Term Loans $ – $ 167,580 $ – $ 167,580 $ 168,000 Our revolving
credit facility had no aggregate principal amount outstanding as of December 31, 2017. The estimated
fair value of our long-term debt, which is discussed in Note 8, 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 capital lease obligations to approximate
their fair value because the weighted average interest rate used to formulate the carrying amounts approximates current market
rates. EARNINGS PER
SHARE - Earnings per share is based upon the weighted average number of shares of common stock and common stock equivalents outstanding,
net of common stock held in treasury, as follows (in thousands except share and per share data):
Years
Ended December 31,
2017 2016 2015
Net income
attributable to RadNet, Inc. common stockholders $ 53 $ 7,230 $ 7,709
BASIC NET INCOME PER SHARE
ATTRIBUTABLE TO RADNET, INC. COMMON STOCKHOLDERS
Weighted
average number of common shares outstanding during the period 46,880,775 46,244,188 43,805,794
Basic
net income per share attributable to RadNet, Inc. common stockholders $ 0.00 $ 0.16 $ 0.18
DILUTED NET INCOME PER SHARE
ATTRIBUTABLE TO RADNET, INC. COMMON STOCKHOLDERS
Weighted average number
of common shares outstanding during the period 46,880,775 46,244,188 43,805,794
Add nonvested restricted
stock subject only to service vesting 274,940 220,416 865,326
Add
additional shares issuable upon exercise of stock options and warrants 246,206 190,428 500,252
Weighted
average number of common shares used in calculating diluted net income per share 47,401,921 46,655,032 45,171,372
Diluted
net income per share attributable to RadNet, Inc. common stockholders $ 0.00 $ 0.15 $ 0.17
Stock options excluded
from the computation of diluted per share amounts:
Weighted average shares
for which the exercise price exceeds average market price of common stock 175,037 245,313 260,000 INVESTMENT
AT COST – On March 24, 2017, we acquired a 12.5% equity interest in Medic Vision – Imaging Solutions Ltd. for $1.0
million. We also have an option to acquire an additional 12.5% equity interest for $1.4 million exercisable within one year from
the initial share purchase date. Medic Vision, based in Israel, specializes in software packages that provide compliant radiation
dose structured reporting and enhanced images from reduced dose CT scans. In accordance with ASC 325-20, Cost Method Investments,
INVESTMENT
IN JOINT VENTURES – We have fourteen 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 December 31, 2017. Acquisition of new facilities On
August 15, 2016 our joint venture, Franklin Imaging, LLC, acquired a single multi-modality imaging center located in Rosedale,
Maryland for cash consideration of $1.0 million and the assumption of capital lease debt of $241,000. Franklin Imaging, LLC made
a fair value determination of the acquired assets and approximately $600,000 of fixed assets, $30,000 of other assets and goodwill
of $648,000 was recorded in respect to the transaction. Formation of new joint ventures On April 1,
2017, we formed in conjuncture with Cedars Sinai Medical Center (“CSMC”) the Santa Monica Imaging Group, LLC (“SMIG”),
consisting of two multi-modality imaging centers located in Santa Monica, CA. Total agreed contribution was $2.7 million of cash
and assets with RadNet contributing $1.1 million for a 40% economic interest and CSMC contributing $1.6 million for a 60% economic
interest. For its contribution, RadNet transferred $80,000 in cash and the net assets acquired in the acquisition of Resolution
Imaging of $2.5 million. CSMC contributed $120,000 in cash and paid RadNet $1.5 million for the Resolution Imaging assets transferred
to the venture. RadNet does not have controlling economic interest in SMIG and the investment is accounted for under the equity
method. On January
6, 2017, Image Medical Inc. (“Image Medical”), a wholly owned subsidiary of RadNet, acquired a 49% economic interest
ScriptSender, LLC, a partnership he |
