UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington D.C. 20549

 

FORM 10-K/A

AMENDMENT NO. 1

 

(Mark One)

þ

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

 

For the fiscal year ended December 31, 2014

 

OR

 

¨

TRANSITION REPORT PURSUANT TO SECTION 13 or 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

 

 

Commission File Number 001-33307

 

RadNet, Inc.

(Exact name of registrant as specified in charter)

 

Delaware	13-3326724
(State or other jurisdiction of incorporation or organization)	(I.R.S. Employer Identification No.)
1510 Cotner Avenue
Los Angeles, California	90025
(Address of principal executive offices)	(Zip Code)

 

Registrant’s telephone number, including area code: (310) 478-7808

 

Securities registered pursuant to Section 12(b) of the Act:

 

Title of Each Class	Name of each exchange on which registered
Common Stock, $.0001 par value	NASDAQ Global Market

 

Securities registered pursuant to Section 12(g) of the Act:  None

 

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.  Yes    ¨   No x

 

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) or the act.  Yes   ¨  No   x

 

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 x      No ¨

 

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Website, if any, every Interactive Data File required to be submitted and posted 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  x     No  ¨

 

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K.   ¨

 

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company.  See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.

 

	Large Accelerated  Filer    ¨		Accelerated Filer   x
	Non-Accelerated Filer    ¨   (Do not check if a smaller reporting company)		Smaller Reporting Company    ¨

 

Indicate by check mark whether the registrant is a shell company (as defined in Exchange Act Rule 12b-2) Yes   ¨ No x

 

The aggregate market value of the registrant’s common stock held by non-affiliates of the registrant was approximately $217,067,155 on June 30, 2014 (the last business day of the registrant’s most recently completed second quarter) based on the closing price for the common stock on the NASDAQ Global Market on June 30, 2014.

 

The number of shares of the registrant’s common stock outstanding on March 27, 2015, was 43,642,119.

 

DOCUMENTS INCORPORATED BY REFERENCE

 

The information required by Part III of the Form 10-K, to the extent not set forth herein or in the Annual Report on Form 10-K filed on March 16, 2015, is incorporated herein by reference from the registrant’s definitive proxy statement for the Annual Meeting of Stockholders, to be filed with the Securities and Exchange Commission pursuant to Regulation 14A not later than 120 days after the close of the registrant’s fiscal year.

 

 

 

EXPLANATORY NOTE

 

We are filing this Form 10-K/A (Amendment No. 1) to our Annual Report on Form 10-K for the fiscal year ended December 31, 2014, originally filed with the U.S. Securities and Exchange Commission on March 16, 2015 (the "Original Filing"), solely for the purpose of including the financial statements of certain unconsolidated joint ventures in accordance with Rule 3-09 of Regulation S-X.  Rule 3-09 requires that we file financial statements of unconsolidated joint ventures in which we hold equity interests of 50% or less and account for them under the equity method, to the extent that the unconsolidated joint ventures are individually significant.  Under Rule 3-09 of Regulation S-X, we are permitted to file the financial statements for these unconsolidated joint ventures within 90 days of the end of our fiscal year.

 

We have determined that as of and for the year ended December 31, 2014, four of our unconsolidated joint venture interests, including Franklin Imaging Joint Venture, Carroll County Radiology, LLC, MRI at St. Joseph Medical Center, LLC, and Greater Baltimore Diagnostic Imaging Partnership (collectively, the “Group”), were significant unconsolidated joint ventures under Rule 3-09.  We are permitted to file combined financial statements for individually significant joint ventures which are in the same line of business. Accordingly, we are filing this Amendment No. 1 to include the combined financial statements of the Group under Item 15 - Exhibits and Financial Statement Schedules, and are amending the list of the financial statements and exhibits being filed herewith. We are also filing an updated Exhibit Index and updated Certificates of our Chief Executive Officer and Chief Financial Officer under Sections 302 and 906 of the Sarbanes Oxley Act of 2002.

 

Except as described above, this Form 10-K/A does not amend or change any other items or disclosures in the Original Filing.  The disclosure in this Form 10-K/A has not been updated to reflect events occurring after the Original Filing.  Accordingly, this Amendment should be read in conjunction with the Original Filing and our other filings with the SEC subsequent to the Original Filing.

 

 

 

 

 

 

 

 

 

PART IV 

 

Item 15.                Exhibits and Financial Statement Schedules  

 

(a)(1)  Financial Statements

 

The following financial statements of RadNet, Inc. and consolidated subsidiaries were filed with the Original Filing on March 16, 2015:  

 

Report of Independent Registered Public Accounting Firm	52
Consolidated Balance Sheets	53
Consolidated Statements of Operations	54
Consolidated Statements of Comprehensive Income	55
Consolidated Statements of Equity (Deficit)	56
Consolidated Statements of Cash Flows	57 to 58
Notes to Consolidated Financial Statements	59 to 82

 

(a)(2) Financial Statements Schedules  

 

Schedules – The following financial statement schedules of Radnet, Inc. and consolidated subsidiaries were filed with the Original Filing on March 16, 2015: 

  

Schedule II – Valuation and Qualifying Accounts 

 

(a)(3) Exhibit Index

 

See the Exhibit Index immediately preceding the signature page of this Annual Report on Form 10-K/A (Amendment No. 1).

 

(c) Financial Statement Schedules

 

The following combined financial statements of the Group are filed herewith pursuant to Rule 3-09 of Regulation S-X:

	Page No
Report of Independent Registered Public Accounting Firm	4
Combined Balance Sheets of Certain RadNet, Inc. Affiliates	5
Combined Statements of Income of Certain RadNet, Inc. Affiliates	6
Combined Statements of Partners’ Capital of Certain RadNet, Inc. Affiliates	7
Combined Statements of Cash Flows of Certain RadNet, Inc. Affiliates	8 to 9
Notes to Combined Financial Statements	10 to 14

 

 

 

Report of Independent Registered Public Accounting Firm

 

To the partners of:

 

Franklin Imaging Joint Venture;

Carroll County Radiology, LLC;

MRI at St. Joseph Medical Center, LLC; and

Greater Baltimore Diagnostic Imaging Partnership

 

 

We have audited the accompanying combined balance sheets of certain RadNet, Inc. affiliates including Franklin Imaging Joint Venture, Carroll County Radiology, LLC, MRI at St. Joseph Medical Center, LLC, and Greater Baltimore Diagnostic Imaging Partnership (collectively, the “Group”), as of December 31, 2014 and 2013, and the related combined statements of income, partners’ capital, and cash flows for each of the three years in the period ended December 31, 2014. These financial statements are the responsibility of the Group’s management. Our responsibility is to express an opinion on these financial statements based on our audits.

 

We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. We were not engaged to perform an audit of the Group’s internal control over financial reporting. Our audit included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Group’s internal control over financial reporting. Accordingly, we express no such opinion. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

 

In our opinion, the financial statements referred to above present fairly, in all material respects, the combined financial position of the Group at December 31, 2014 and 2013, and the combined results of their operations and their cash flows for each of the three years in the period ended December 31, 2014, in conformity with U.S. generally accepted accounting principles.

 

/s/ Ernst & Young, LLP

 

 

 

Los Angeles, California

March 31, 2015

 

 

CERTAIN RADNET, INC. AFFILIATES

COMBINED BALANCE SHEETS

(IN THOUSANDS)

 

		December 31,
		2014				2013
ASSETS
CURRENT ASSETS
Cash and cash equivalents		$	3			$	288
Accounts receivable, net			7,439				8,603
Due from affiliates			5,507				2,788
Prepaid expenses and other current assets			129				667
Total current assets			13,078				12,346
PROPERTY AND EQUIPMENT, NET			13,845				17,794
OTHER ASSETS
Goodwill			9,923				9,923
Other intangible assets			470				589
Total assets		$	37,316			$	40,652
LIABILITIES AND PARTNERS' CAPITAL
CURRENT LIABILITIES
Accounts payable and accrued expenses		$	1,483			$	1,942
Current portion of deferred rent			231				207
Current portion of equipment notes payable			692				668
Current portion of obligations under capital leases			–				167
Total current liabilities			2,406				2,984
LONG-TERM LIABILITIES
Deferred rent, net of current portion			1,169				1,399
Equipment notes payable, net of current portion			565				1,257
Total liabilities			4,140				5,640
PARTNERS' CAPITAL
RadNet, Inc.			15,339				16,833
Other partners			17,837				18,179
Total partners' capital			33,176				35,012
Total liabilities and partners' capital		$	37,316			$	40,652

 

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

 

 

CERTAIN RADNET, INC. AFFILIATES

COMBINED STATEMENTS OF INCOME

(IN THOUSANDS)

 

		Years Ended December 31,
		2014				2013				2012
NET SERVICE FEE REVENUE
Service fee revenue, net of contractual allowances and discounts		$	55,058			$	57,210			$	58,122
Provision for bad debts			(2,832	)			(2,777	)			(2,752	)
Net service fee revenue			52,226				54,433				55,370
OPERATING EXPENSES
Cost of operations			36,767				38,220				38,161
Depreciation and amortization			4,718				4,728				4,607
Net loss (gain) on sale of equipment			19				(143	)			(35	)
Total operating expenses			41,504				42,805				42,733
INCOME FROM OPERATIONS			10,722				11,628				12,637
Net interest expense			60				86				245
NET INCOME		$	10,662			$	11,542			$	12,392

 

 

 

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

 

 

 

 

 

 

 

CERTAIN RADNET, INC. AFFILIATES

COMBINED STATEMENTS OF PARTNERS' CAPITAL

(IN THOUSANDS)

 

		RadNet, Inc.				Other Partners				Total
BALANCE - January 1, 2012		$	16,458			$	16,641			$	33,099
Net income			5,757				6,635				12,392
Contributions			920				1,380				2,300
Distributions			(5,418	)			(6,403	)			(11,821	)
BALANCE - December 31, 2012			17,717				18,253				35,970
Net income			5,369				6,173				11,542
Distributions			(6,253	)			(6,247	)			(12,500	)
BALANCE - December 31, 2013			16,833				18,179				35,012
Net income			4,949				5,713				10,662
Distributions			(6,443	)			(6,055	)			(12,498	)
BALANCE - December 31, 2014		$	15,339			$	17,837			$	33,176

 

 

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

 

 

 

 

 

 

 

CERTAIN RADNET, INC. AFFILIATES

COMBINED STATEMENTS OF CASH FLOWS

(IN THOUSANDS)

 

		Years Ended December 31,
		2014				2013				2012
CASH FLOWS FROM OPERATING ACTIVITIES
Net income		$	10,662			$	11,542			$	12,392
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization			4,718				4,728				4,607
Provision for bad debts			2,832				2,777				2,752
Deferred rent amortization			(206	)			(155	)			(122	)
Net loss (gain) on sale of equipment			19				(143	)			(35	)
Changes in operating assets and liabilities
Accounts receivable			(1,669	)			(2,783	)			(3,022	)
Prepaid expenses and other current assets			537				(69	)			(264	)
Due from affiliates			(2,718	)			(1,668	)			1,293
Accounts payable and accrued expenses			(459	)			(84	)			(1,424	)
Net cash provided by operating activities			13,716				14,145				16,177
CASH FLOWS FROM INVESTING ACTIVITIES
Purchase of property and equipment			(669	)			(1,965	)			(1,091	)
Purchase of imaging facilities			–				–				(2,935	)
Proceeds from sale of equipment			1				30				35
Net cash used in investing activities			(668	)			(1,935	)			(3,991	)
CASH FLOWS FROM FINANCING ACTIVITIES
Principal payments on notes and leases payable			(835	)			(1,200	)			(2,976	)
Contributions from partners			–				–				2,300
Distributions to partners			(12,498	)			(12,500	)			(11,821	)
Net cash used in financing activities			(13,333	)			(13,700	)			(12,497	)
NET DECREASE IN CASH AND CASH EQUIVALENTS			(285	)			(1,490	)			(311	)
CASH AND CASH EQUIVALENTS, beginning of period			288				1,778				2,089
CASH AND CASH EQUIVALENTS, end of period		$	3			$	288			$	1,778
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION
Cash paid during the period for interest		$	60			$	86			$	245

 

 

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

 

 

 

CERTAIN RADNET, INC. AFFILIATES

 

COMBINED STATEMENTS OF CASH FLOWS (CONTINUED)

 

Supplemental Schedule of Non-Cash Investing and Financing Activities

 

Detail of investing activity related to acquisitions can be found in Note 3.

 

 

 

 

 

 

 

 

CERTAIN RADNET, INC. AFFILIATES
NOTES TO COMBINED FINANCIAL STATEMENTS

 

NOTE 1 – DESCRIPTION OF BUSINESS

 

Franklin Imaging Joint Venture, Carroll County Radiology, LLC, MRI at St. Joseph Medical Center, LLC, and Greater Baltimore Diagnostic Imaging Partnership (collectively, the “Group”), are joint ventures between RadNet, Inc. and, as applicable, hospitals, health systems or radiology practices operating within the state of Maryland 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. Each joint venture within the Group is an affiliate of RadNet, Inc. as follows:

 

		% owned by RadNet, Inc.
Franklin Imaging Joint Venture		49%
Carroll County Radiology, LLC		40%
MRI at St. Joseph Medical Center, LLC		49%
Greater Baltimore Diagnostic Imaging Partnership ("GBDIP")		50%

 

NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

 

PRINCIPLES OF COMBINATION – Under Rule 3-09 of Regulation S-X, RadNet, Inc. is permitted to file combined financial statements for individually significant unconsolidated joint ventures. The combined financial statements include the assets, liabilities, and operations of each member of the Group. The operating activities of each of these joint ventures are completely separate from one another. Accordingly there are no intercompany transactions and balances to be eliminated when combining each together.

 

USE OF ESTIMATES - The preparation of these financial statements in conformity with U.S. generally accepted accounting principles 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 the Group’s reported amounts of assets and liabilities in the combined balance sheets at the dates of the financial statements; disclosure of contingent assets and liabilities at the dates of the financial statements; and reported amounts of revenues and expenses in the combined statements of income 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.

 

REVENUES – Combined 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. This service fee revenue is earned through providing the use of diagnostic imaging equipment and the provision of technical services as well as providing administrative services such as clerical and administrative personnel, billing and collection, provision of medical and office supplies, secretarial, reception and transcription services, maintenance of medical records, and advertising, marketing and promotional activities.

 

The Group's combined 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 under managed care health plans are based upon the payment terms specified in the related contractual agreements. Contractual payment terms in managed care agreements are generally based upon predetermined rates per discounted fee-for-service rates. The Group also records a provision for doubtful accounts (based primarily on historical collection experience) related to patients and copayment and deductible amounts for patients who have health care coverage with third-party payors.

 

 

The Group’s service fee revenue, net of contractual allowances and discounts less the provision for bad debts for the years ended December 31, are summarized in the following table (in thousands):

 

		Years Ended December 31,
		2014				2013				2012
Commercial insurance		$	37,384			$	38,846			$	40,220
Medicare			12,003				12,472				12,089
Medicaid			1,872				1,945				1,976
Workers' compensation/personal injury			2,643				2,746				2,615
Other			1,156				1,201				1,222
Service fee revenue, net of contractual allowances and discounts			55,058				57,210				58,122
Provision for bad debts			(2,832	)			(2,777	)			(2,752	)
Net service fee revenue		$	52,226			$	54,433			$	55,370

 

ACCOUNTS RECEIVABLE - Substantially all of the Group’s 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. The Group continuously monitors collections from payors and maintains an allowance for bad debts based upon specific payor collection issues that have been identified as well as historical collection experience.

 

PROVISION FOR BAD DEBTS - Although outcomes vary, the Group’s policy is to attempt to collect amounts due from patients, including co-payments and deductibles due from patients with insurance, at the time of service. The Group provides for an allowance against accounts receivable that could become uncollectible by establishing an allowance to reduce the carrying value of such receivables to their estimated net realizable value. The Group estimates this allowance based on the aging of accounts receivable by each type of payor over a minimum 18-month look-back period, and other relevant factors. A significant portion of the provision for bad debt relates to co-payments and deductibles owed to the Group by patients with insurance. 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 the Group’s estimation process. The combined allowance for bad debts at December 31, 2014 and 2013 was $351,000 and $352,000, respectively.

 

CONCENTRATION OF CREDIT RISKS - Financial instruments that potentially subject the Group to credit risk are primarily cash equivalents and accounts receivable. Each joint venture places its cash and cash equivalents with a 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 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. The Group continuously monitors collections from its clients and maintains an allowance for bad debts based upon any specific payor collection issues that are identified and historical experience.

 

CASH AND CASH EQUIVALENTS – The Group considers 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.

 

PROPERTY AND EQUIPMENT – Property, furniture and equipment are stated at cost, less accumulated depreciation and amortization. Depreciation and amortization of property, furniture 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 shorter of the related lease term or their estimated useful lives which range from 3 to 30 years.

 

GOODWILL – Combined goodwill of the Group at December 31, 2014 totaled $9.9 million. Goodwill is recorded by each member of the Group as a result of business combinations. Management of each member of the Group evaluates goodwill, at a minimum, on an annual basis and whenever events and changes in circumstances suggest that the carrying amount may not be recoverable.  On January 1, 2012, each member of the Group adopted ASU 2011-08, “Intangibles—Goodwill and Other (Topic 350): Testing Goodwill for Impairment”, changing how a company may test goodwill for impairment. Companies now have the option to first assess qualitative factors to determine whether it is more likely than not that the fair value of a reporting unit is less than its carrying amount. If the company determines that it is not more likely than not that the fair value of a reporting unit is less than its carrying amount, then performing the two-step impairment test is unnecessary. Each member of the Group adopted the provisions of ASU 2011-08 effective January 1, 2012. Each member of the Group evaluated its respective share of the combined goodwill at October 1, 2014 for signs of impairment under the provisions of ASU 2011-08. By utilizing certain qualitative measures outlined in the guidance, each member determined that its respective share of the combined goodwill was not impaired.

 

 

INCOME TAXES - Each member of the Group is treated as a partnership for federal and state income tax purposes where all taxable income is allocated to the partners in accordance with the respective partnership agreement and so accordingly federal and state taxes on income are the responsibility of the joint venture partners individually.  Accordingly, no income tax provision is recorded by any joint ventures in the Group.

 

Open tax years are those that are open for examination by taxing authorities, and include all returns for tax years ending on or after December 31, 2011, for federal returns and December 31, 2011, for Maryland returns. The Group has no examinations in process and has not been notified of any future examinations at this time. Management of the Group has reviewed all open tax years and major jurisdictions, and has not recorded an unrecognized tax benefit relating to uncertain income tax positions taken or expected to be taken in future tax returns. The Group has recognized no interest or penalties related to uncertain tax positions taken or expected to be taken.

 

FAIR VALUE MEASUREMENTS –The combined balance sheets include the following financial instruments: cash and cash equivalents, receivables, trade accounts payable, capital leases, equipment notes payable and other liabilities. The Group considers the carrying amounts of cash and cash equivalents, receivables, other current assets and current liabilities 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, the Group considers the carrying amount of its equipment notes payable and capital lease obligations to approximate their fair value because the weighted average interest rate used to formulate the carrying amounts approximates current market rates.

 

NOTE 3 – FACILITY ACQUISITIONS

 

On February 22, 2012, Carroll County Radiology, LLC completed its acquisition of a multi-modality imaging center from RadNet, Inc. located in Westminster, Maryland for $2.3 million. The members made a fair value determination of the assets acquired and the liabilities assumed and approximately $200,000 of fixed assets and $2.1 million of goodwill was recorded with respect to this transaction.

 

On November 1, 2012, Franklin Imaging Joint Venture completed its acquisition of a multi-modality imaging center located in Baltimore, Maryland for $635,000. The partners made a fair value determination of the assets acquired and the liabilities assumed and $635,000 of fixed assets was recorded with respect to this transaction.

 

NOTE 4 – GOODWILL AND OTHER INTANGIBLE ASSETS

 

Combined goodwill of the Group totaled $9.9 million at December 31, 2014 and 2013. Goodwill is recorded as a result of business combinations.  

 

Other intangible assets are primarily related to the value of management service contracts on the books of MRI at St. Joseph Medical Center, LLC and covenant not to compete contracts acquired through GBDIP’s acquisition of a controlling interest of a previously held non-consolidated joint venture investment and totaled $896,000 on the date of acquisition. Accumulated amortization of the management service contract and covenant not to compete contract intangible assets through December 31, 2014 was $114,000 and $313,000, respectively. Amortization expense for the year ended December 31, 2014 was $120,000.  The value of these covenant not to compete contracts is amortized using the straight-line method over five years.  Management service contracts are amortized over 25 years.

 

The following table shows annual amortization expense, by asset classes that will be recorded over the next five years (in thousands):

 

		2015				2016				2017				2018				2019				Thereafter				Total				Weighted average amortization period remaining in years
Management service contracts		$	16			$	16			$	16			$	16			$	16			$	181			$	261				17.0
Covenant not to compete contracts			104				105				–				–				–				–				209				2.0
Total annual amortization		$	120			$	121			$	16			$	16			$	16			$	181			$	470

 

 

NOTE 5 - PROPERTY AND EQUIPMENT

 

Property and equipment and accumulated depreciation and amortization are as follows (in thousands):

 

		December 31,
		2014				2013
Medical equipment		$	36,618			$	34,190
Office equipment, furniture and fixtures			3,238				3,206
Leasehold improvements			14,335				14,589
Equipment under capital leases			–				1,982
			54,191				53,967
Accumulated depreciation and amortization			(40,346	)			(36,173	)
		$	13,845			$	17,794

 

Depreciation and amortization expense on property and equipment, including amortization of equipment under capital leases, for the years ended December 31, 2014, 2013 and 2012 totaled $4.7 million, $4.6 million and $4.5 million, respectively.

 

NOTE 6 – ACCOUNTS PAYABLE AND ACCRUED EXPENSES

 

Accounts payable and accrued expenses are as follows (in thousands):

 

		December 31,
		2014				2013
Accounts payable		$	98			$	658
Accrued expenses			230				226
Accrued payroll and vacation			1,155				1,058
Total		$	1,483			$	1,942

 

NOTE 7 – EQUIPMENT NOTES PAYABLE

 

One member of the Group, GBDIP holds four promissory notes issued by two financing companies for the purpose of acquiring imaging equipment. These notes have interest rates between 3.5% and 4.5%, mature on or before October 2018 and are collateralized by the acquired equipment.

 

The following is a listing of annual principal maturities of the equipment notes discussed above for years ending December 31 (in thousands):

 

2015		$	692
2016			208
2017			201
2018			156
		$	1,257

 

 

NOTE 8 – COMMITMENTS AND CONTINGENCIES

 

Leases – The Group leases various operating facilities and certain medical equipment under operating leases with renewal options expiring through 2018. Certain leases contain renewal options from two to ten years and escalation clauses based either on the consumer price index or fixed rent escalators. Leases with fixed rent escalators are recorded on a straight-line basis. The Group records deferred rent for tenant leasehold improvement allowances received from a lessor and amortizes the deferred rent expense over the term of the lease agreement. Minimum annual payments under operating leases for future years ending December 31 follow (in thousands):

 

		Facilities				Equipment				Total
2015		$	2,043			$	675			$	2,718
2016			1,868				278				2,146
2017			1,401				35				1,436
2018			1,132				31				1,163
2019			879				16				895
Thereafter			710				–				710
		$	8,033			$	1,035			$	9,068

 

Total rent expense, including equipment rentals, for the years ended December 31, 2014, 2013 and 2012 was $3.5 million, $3.9 million and $4.3 million, respectively.

 

NOTE 9 – RELATED PARTY TRANSACTIONS

 

See Note 3 with respect to a related party acquisition.

 

RadNet, Inc. contracts with each joint venture within the Group to provide certain administrative services including assistance with accounting, payroll and employee benefits processing, and billing and collection functions on behalf of these joint ventures. RadNet Inc. remits to the joint ventures all amounts collected through its administration of the billing and collection functions.

 

RadNet, Inc., as administrator over payroll and employee benefits, pays salary and benefit obligations on behalf of these joint ventures and then bills each joint venture for its respective portion.

 

RadNet, Inc. contracts with certain members of its contracted radiologist groups to perform professional services for the joint ventures. RadNet, Inc. assures that these radiologists are adequately covered under medical malpractice insurance policies. RadNet, Inc., on behalf of its contracted radiologist groups, bills each joint venture for its respective share of the professional fees incurred through its utilization of these contracted radiologists. RadNet, Inc. remits to its contracted radiologist groups all amounts collected from the joint ventures for the billed professional fees.

 

Amounts receivable from and payable to RadNet Inc. for the activities listed above are summarized in due from affiliates on the Group’s combined balance sheets and were $5.5 million and $2.8 million at December 31, 2014 and 2013, respectively. 

 

NOTE 10 – SUBSEQUENT EVENTS

 

The members of the Group evaluated subsequent events through March 31, 2015 and concluded that no additional disclosures were required.

 

 

 

 

 

Exhibit Index

 

The following exhibits are filed, or incorporated by reference into this Annual Report on Form 10-K/A (Amendment No. 1):

 

Exhibit No.		Description of Exhibit
3.1		Certificate of Incorporation of RadNet, Inc., a Delaware corporation (incorporated by reference to exhibit filed with Form 8-K on September 4, 2008).
3.2		Certificate of Amendment to Certificate of Incorporation of RadNet, Inc., a Delaware corporation, dated September 2, 2008 (incorporated by reference to exhibit filed with Form 8-K on September 4, 2008).
3.3		Bylaws of RadNet, Inc., a Delaware corporation (incorporated by reference to exhibit filed with Form 8-K on September 4, 2008).
10.1		Credit and Guaranty Agreement, dated October 10, 2012, by and among Radnet Management, Inc., RadNet, Inc., the guarantors thereunder, General Electric Capital Corporation, Deutsche Bank Securities, Inc., RBC Capital Markets and Barclays Bank PLC (incorporated by reference to exhibit filed with Form 8-K on October 12, 2012).
10.2		Pledge and Security Agreement, dated October 10, 2012, by and among Radnet Management, Inc., RadNet, Inc., the guarantors thereunder, and Barclays Bank PLC (incorporated by reference to exhibit filed with Form 8-K on October 12, 2012).
10.3		Form of Trademark Security Agreement by and among the guarantors thereunder and Barclays Bank PLC (filed as an exhibit to the Pledge and Security Agreement, dated October 10, 2012, by among the guarantors thereunder and Barclays Bank PLC, included as Exhibit 10.2).
10.4		First Amendment Agreement dated as of April 3, 2013 to the Credit and Guaranty Agreement dated as of October 10, 2012, by and among Radnet Management, Inc., RadNet, Inc., the guarantors thereunder, Barclays Bank PLC, General Electric Capital Corporation and deutsche Bank Securities Inc. and RBC Capital Markets (incorporated by reference to Exhibit 99.1 filed with Form 8-K on April 4, 2013).
10.5		Second Amendment Agreement dated March 25, 2014 to the Credit and Guaranty Agreement, dated as of October 10, 2012 (as amended, by the First Amendment Agreement, dated as of April 3, 2013), by and among RadNet, Inc., Radnet Management, Inc., certain subsidiaries and affiliates of Radnet Management, Inc., certain lenders identified therein, and Barclays Bank PLC, as administrative agent and collateral agent (incorporated by reference to Exhibit 99.1 filed with Form 8-K on March 31, 2014).
10.6		Second Lien Credit and Guaranty Agreement, dated as of March 25, 2014, by and among Radnet Management, Inc., RadNet, Inc., certain subsidiaries and affiliates of Radnet Management, Inc., the lenders party thereto from time to time, certain other financial institutions and Barclays Bank PLC, as administrative agent and collateral agent (incorporated by reference to Exhibit 99.2 filed with Form 8-K on March 31, 2014).
10.7		Second Lien Pledge and Security Agreement, dated as of March 25, 2014, by and among Radnet Management, Inc., the Grantors identified therein, and Barclays Bank PLC (incorporated by reference to Exhibit 99.3 filed with Form 8-K on March 31, 2014).
10.8		2006 Equity Incentive Plan, amended and restated as of April 19, 2011 (incorporated by reference to exhibit filed with Form S-8 registration statement on August 15, 2011).*

 

 

10.9		Form of Stock Option Agreement for the 2006 Equity Incentive Plan (incorporated by reference to exhibit filed with Form S-8 registration statement on August 15, 2011).*
10.10		Form of Restricted Stock Award for the 2006 Equity Incentive Plan (incorporated by reference to exhibit filed with Form 10-Q for the quarter ended March 31, 2012).*
10.11		Form of Warrant recharacterized as under the 2006 Equity Incentive Plan –  Form A (incorporated by reference to exhibit filed with Form 10-Q for the quarter ended June 30, 2008).*
10.12		Form of Warrant recharacterized as under the 2006 Equity Incentive Plan –   Form B (incorporated by reference to exhibit filed with Form 10-Q for the quarter ended June 30, 2008).*
10.13		Form of Indemnification Agreement between the registrant and each of its officers and directors (incorporated by reference to exhibit filed with Form 10-Q for the quarter ended March 31, 2008).*
10.14		Employment Agreement dated as of June 12, 1992 with Howard G. Berger, M.D. (incorporated by reference to exhibit filed with an amendment to Form 8-K report for June 12, 1992).*
10.15		Amendment to Employment Agreement dated January 30, 2004 with Howard G. Berger, M.D. (incorporated by reference to exhibit filed with Form 10-Q for the quarter ended January 31, 2004).*
10.16		Employment Agreement dated as of April 16, 2001 with Jeffrey L. Linden (incorporated by reference to exhibit filed with Form 10-K for the year ended October 31, 2001).*
10.17		Amendment to Employment Agreement dated January 30, 2004 with Jeffrey L. Linden (incorporated by reference to exhibit filed with Form 10-Q for the quarter ended January 31, 2004).*
10.18		Employment Agreement dated as of May 1, 2001 with Norman R. Hames (incorporated by reference to exhibit filed with Form 10-K for the year ended October 31, 2001).*
10.19		Amendment to Employment Agreement dated January 30, 2004 with Norman R. Hames (incorporated by reference to exhibit filed with Form 10-Q for the quarter ended January 31, 2004).*
10.20		Employment Agreement with Mark Stolper effective January 1, 2009 (incorporated by reference to exhibit filed with Form 10-K for the year ended December 31, 2009).*
10.21		Retention Agreement with Stephen Forthuber dated November 15, 2006 (incorporated by reference to exhibit filed with Form 10-K/T for the year ended December 31, 2006).*
10.22		Amended and Restated Management and Service Agreement between Radnet Management, Inc. and Beverly Radiology Medical Group III dated January 1, 2004 (incorporated by reference to exhibit filed with Form 10-K for the year ended October 31, 2003).
12.1		Computation of Ratio of Earnings to Fixed Charges (incorporated by reference to exhibit filed with Form 10-K for the year ended December 31, 2014).
14.1		Code of Financial Ethics (incorporated by reference to exhibit filed with Form 10-K for the year ended October 31, 2003).

 

 

21.1		List of Subsidiaries (incorporated by reference to exhibit filed with Form 10-K for the year ended December 31, 2014.
23.1		Consent of Registered Independent Public Accounting Firm (incorporated by reference to exhibit filed with Form 10-K for the year ended December 31, 2014).
23.2		Consent of Registered Independent Public Accounting Firm.
24.1		Power of Attorney (included on signature page to the Form 10-K for the year ended December 31, 2014).
31.1		CEO Certification pursuant to Section 302.
31.2		CFO Certification pursuant to Section 302.
32.1		CEO Certification pursuant to Section 906.
32.2		CFO Certification pursuant to Section 906.
101.INS		XBRL Instance Document
101.SCH		XBRL Schema Document
101.CAL		XBRL Calculation Linkbase Document
101.LAB		XBRL Label Linkbase Document
101.PRE		XBRL Presentation Linkbase Document
101.DEF		XBRL Definition Linkbase Document

 

* Indicates management contract or compensatory plan.

 

 

 

 

 

 

 

SIGNATURES

 

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

 

	RADNET, INC.
Date:  March 31, 2015		/ s/    HOWARD G . BERGER, M.D.
		Howard G. Berger, M.D., President,
		Chief Executive Officer and Director

 

 

Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of registrant in the capacities and on the dates indicated.

 

By	/ s/   HOWARD  G . BERGER, M.D.	Date:  March 31, 2015
Howard G. Berger, M.D., Director, Chief Executive Officer and President
By	/s/ MARVIN S. CADWELL *	Date:  March 31, 2015
Marvin S. Cadwell, Director
By	/s/ JOHN V. CRUES, III, M.D. *	Date:  March 31, 2015
John V. Crues, III, M.D., Director
By	/s/ N ORMAN R. HAMES *	Date:  March 31, 2015
Norman R. Hames, Director
By	/s/ DAVID L. SWARTZ *	Date:  March 31, 2015
David L. Swartz, Director

 

By	/s/ LAWRENCE L. LEVITT *	Date:  March 31, 2015
Lawrence L. Levitt, Director
By	/s/ MICHAEL L. SHERMAN, M.D. *	Date:  March 31, 2015
Michael L. Sherman, M.D., Director
By	/s/ MARK D. STOLPER	Date:  March 31, 2015
Mark D. Stolper, Chief Financial Officer (Principal Accounting Officer)

 

 * By Mark D. Stolper, as attorney- in-fact