XML 20 R10.htm IDEA: XBRL DOCUMENT v3.23.3
SIGNIFICANT ACCOUNTING POLICIES
 9 Months Ended
Sep. 30, 2023
Accounting Policies [Abstract]  
SIGNIFICANT ACCOUNTING POLICIES SIGNIFICANT ACCOUNTING POLICIES
During the period covered in this report, there have been no material changes to the significant accounting policies we use and have explained, in our annual report on Form 10-K for the fiscal year ended December 31, 2022. The information below is intended only to supplement the disclosure in our annual report on Form 10-K for the fiscal year ended December 31, 2022.
REVENUES - Our revenues generally relate to net patient fees received from various payors and patients themselves under contracts in which our performance obligations are to provide diagnostic services to the patients. Revenues are recorded during the period when our obligations to provide diagnostic services are satisfied. Our performance obligations for diagnostic services are generally satisfied over a period of less than one day. The contractual relationships with patients, in most cases, also involve a third-party payor (Medicare, Medicaid, managed care health plans and commercial insurance companies, including plans offered through the health insurance exchanges) and the fees for the services provided are dependent upon the terms provided by Medicare and Medicaid, or negotiated with managed care health plans and commercial insurance companies. The payment arrangements with third-party payors for the services we provide to the related patients typically specify payments at amounts less than our standard charges and generally provide for payments based upon predetermined rates per diagnostic services or discounted fee-for-service rates. Management continually reviews the contractual estimation process to consider and incorporate updates to laws and regulations and the frequent changes in managed care contractual terms resulting from contract renegotiations and renewals.
As it relates to the Group, this service fee revenue includes payments for both the professional medical interpretation revenue recognized by the Group as well as the payment for all other aspects related to our providing the imaging services, for which we earn management fees. As it relates to others centers, this service fee revenue is earned through providing the use of our diagnostic imaging equipment and the provision of technical services as well as providing administration services such as
clerical and administrative personnel, bookkeeping and accounting services, billing and collection, provision of medical and office supplies, secretarial, reception and transcription services, maintenance of medical records, and advertising, marketing and promotional activities.
Our revenues are based upon the estimated amounts we expect to be entitled to receive from patients and third-party payors. Estimates of contractual allowances under managed care and commercial insurance plans are based upon the payment terms specified in the related contractual agreements. Revenues related to uninsured patients and copayment and deductible amounts for patients who have health care coverage may have discounts applied (uninsured discounts and contractual discounts). We also record estimated implicit price concessions (based primarily on historical collection experience) related to uninsured accounts to record self-pay revenues at the estimated amounts we expect to collect.
Under capitation arrangements with various health plans, we earn a per-enrollee amount each month for making available diagnostic imaging services to all plan enrollees under the capitation arrangement. Revenue under capitation arrangements is recognized in the period in which we are obligated to provide services to plan enrollees under contracts with various health plans.
Our total service revenues during the three and nine months ended September 30, 2023 and 2022 are presented in the table below based on an allocation of the estimated transaction price with the patient between the primary patient classification of insurance coverage (in thousands):
 Three Months Ended
September 30,		Nine Months Ended
September 30,
2023202220232022
Commercial insurance$223,555 $189,634 $665,604 $573,259 
Medicare91,886 78,034 267,955 226,827 
Medicaid10,742 9,669 30,882 28,456 
Workers' compensation/personal injury9,952 13,200 35,478 38,785 
Other patient revenue10,664 7,646 30,793 22,334 
Management fee revenue3,957 6,099 12,203 17,199 
Teleradiology and Software revenue2,111 3,430 7,327 9,849 
Other6,173 3,431 20,625 12,054 
Revenue under capitation arrangements40,041 38,001 117,982 114,366 
Imaging Center Segment Revenue399,081 349,144 1,188,849 11888490001,043,129 
AI Segment Revenue2,887 900 7,398 3,056 
Total service revenue$401,968 $350,044 $1,196,247 $1,046,185 


GOVERNMENT ASSISTANCE: COVID-19 PANDEMIC AND CARES ACT FUNDING - On March 11, 2020 the World Health Organization (WHO) designated COVID-19 as a global pandemic. To aid businesses and stimulate the national economy, Congress passed The Coronavirus Aid, Relief, and Economic Security ("CARES") Act, which was signed in to law on March 27, 2020. As part of the CARES act, we received $39.6 million total of accelerated Medicare payments which were recorded to deferred revenue in our consolidated balance sheet and are being applied to revenue as services are performed. Through September 30, 2023, $38.6 million of the accelerated Medicare payments have been applied to revenue.
ACCOUNTS RECEIVABLE - Substantially all of our accounts receivable are due under fee-for-service contracts from third party payors, such as insurance companies and government-sponsored healthcare programs, or directly from patients. Services are generally provided pursuant to one-year contracts with healthcare providers. We continuously monitor collections from our payors and maintain an allowance for bad debts based upon specific payor collection issues that we have identified and our historical experience.

We have entered into factoring agreements with various institutions and sold certain accounts receivable under non-recourse agreements in exchange for notes receivables from the buyers. These transactions are accounted for as a reduction in accounts receivable as the agreements transfer effective control over and risk related to the receivables to the buyers. Proceeds on notes receivables are reflected as operating activities on our statement of cash flows and on our balance sheet as prepaid expenses and other current assets for the current portion and deposits and other for the long term portion. Amounts remaining to be collected on these agreements were $14.7 million and $15.4 million at September 30, 2023 and December 31, 2022, respectively. We do not utilize factoring arrangements as an integral part of our financing for working capital and assess the
party's ability to pay upfront at the inception of the notes receivable and subsequently by reviewing their financial statements annually and reassessing any insolvency risk on a periodic basis.
DEFERRED FINANCING COSTS - Costs of financing are deferred and amortized using the effective interest rate method and are related to our revolving credit facilities. Deferred financing costs, net of accumulated amortization, were $1.8 million and $2.3 million, as of September 30, 2023 and December 31, 2022, respectively. See Note 6, Credit Facilities and Notes Payable for more information.
PROPERTY AND EQUIPMENT - Property and equipment are stated at cost, less accumulated depreciation and amortization. Depreciation of property and equipment is performed using the straight-line method over the estimated useful lives of the assets acquired, which range from 3 to 15 years. Leasehold improvements are amortized at the lesser of lease term or their estimated useful lives, which range from 3 to 15 years. Maintenance and repairs are charged to expense as incurred.
BUSINESS COMBINATION - When the qualifications for business combination accounting treatment are met, it requires us to recognize separately from goodwill the assets acquired and the liabilities assumed at their acquisition date fair values. Goodwill as of the acquisition date is measured as the excess of consideration transferred over the net of the acquisition date fair values of the assets acquired and the liabilities assumed. While we use our best estimates and assumptions to accurately value assets acquired and liabilities assumed at the acquisition date, our estimates are inherently uncertain and subject to refinement. As a result, during the measurement period, which may be up to one year from the acquisition date, we record adjustments to the assets acquired and liabilities assumed with the corresponding offset to goodwill. Upon the conclusion of the measurement period or final determination of the values of assets acquired or liabilities assumed, whichever comes first, any subsequent adjustments are recorded to our consolidated statements of operations.
GOODWILL - Goodwill at September 30, 2023 totaled $676.4 million. Goodwill is recorded as a result of business combinations. If we determine the carrying value of a reporting unit exceeds its fair value an impairment charge would be recognized and should not exceed the total amount of goodwill allocated to that reporting unit. We tested goodwill and indefinite lived intangibles for impairment on October 1, 2022, noting no impairment. Activity in goodwill for the nine months ended September 30, 2023 is provided below (in thousands):
Imaging CenterArtificial IntelligenceTotal
Balance as of December 31, 2022606,483 $71,182 $677,665 
Goodwill from acquisitions6,473 — 6,473 
Valuation adjustment1,603 — 1,603 
Currency translation223 (353)(130)
Contribution of imaging centers(9,235)— (9,235)
Balance as of September 30, 2023$605,547 $70,829 $676,376 
INTANGIBLE ASSETS - The components of intangible assets, both finite and indefinite, along with annual amortization expense that will be recorded over the next five years at September 30, 2023 and December 31, 2022 are as follows (in thousands):
As of September 30, 2023:

2023*
2024202520262027ThereafterTotalWeighted average amortization period remaining in years
Management Service Contracts$572 $2,287 $2,287 $2,287 $2,287 $8,958 $18,678 8.2
Covenant not to compete and other contracts339 941 692 406 122 42 2,542 3.4
Customer Relationships181 1,202 1,070 949 749 10,966 15,117 17.8
Patent and Trademarks77 316 315 316 316 398 1,738 5.6
Developed Technology & Software1,714 6,657 6,657 6,617 6,083 5,392 33,120 5.8
Trade Names amortized19 77 77 77 77 89 416 5.5
Trade Names indefinite life— — — — — 7,100 7,100 — 
IPR&D— — — — — 13,122 13,122 — 
Total Annual Amortization$2,902 $11,480 $11,098 $10,652 $9,634 $46,067 $91,833 
*Excluding the nine months ended September 30, 2023



As of December 31, 2022:
20232024202520262027ThereafterTotalWeighted average amortization period remaining in years
Management Service Contracts$2,287 $2,287 $2,287 $2,287 $2,287 $8,958 $20,393 8.9
Covenant not to compete and other contracts1,319 891 642 356 72 40 3,320 3.1
Customer Relationships1,244 1,244 1,112 991 816 12,396 17,803 18.6
Patent and Trademarks298 298 298 298 298 322 1,812 6.4
Developed Technology & Software6,297 6,297 6,297 6,257 5,722 7,196 38,066 6.7
Trade Names amortized305 77 77 77 77 89 702 4.5
Trade Names indefinite life— — — — — 7,100 7,100 — 
IPR&D— — — — — 17,032 17,032 — 
Total Annual Amortization$11,750 $11,094 $10,713 $10,266 $9,272 $53,133 $106,228 
Total intangible asset amortization expense was $8.9 million and $7.5 million for the nine months ended September 30, 2023 and September 30, 2022, respectively. Intangible assets are amortized using the straight-line method over their useful life determined at acquisition. Management service agreements are amortized over 25 years using the straight line method. Software development is capitalized and amortized over the useful life of the software when placed into service. Trade names are reviewed annually for impairment.
On September 30, 2023, we determined that an In-process Research and Development ("IPR&D") nonamortized intangible asset related to Aidence's Ai Veye Lung Nodule and Veye Clinic would not receive FDA approval for sale in the US without a new submission and additional expenditures for rework in the original projected timeline. The additional expenditures, delay and reduction of US sales affected the estimated fair value of the related IPR&D intangible asset and resulted in impairment charges of $3.9 million within Cost of operations in our Consolidated Statements of Operations. The estimated fair value of the IPR&D intangible asset was determined using the multi-period excess earnings method under the income approach, which estimates the present value of the free cash flows associated with the asset and tax amortization benefit to arrive at the fair value of the asset. We have not identified any other indicators of impairment through September 30, 2023.
INCOME TAXES - Income tax expense is computed using an asset and liability method and using expected annual effective tax rates. Under this method, deferred income tax assets and liabilities result from temporary differences in the financial reporting bases and the income tax reporting bases of assets and liabilities. The measurement of deferred tax assets is reduced, if necessary, by the amount of any tax benefit that, based on available evidence, is not expected to be realized. When it appears more likely than not that deferred taxes will not be realized, a valuation allowance is recorded to reduce the deferred tax asset to its estimated realizable value. For net deferred tax assets we consider estimates of future taxable income in determining whether our net deferred tax assets are more likely than not to be realized.
We recorded an income tax expense (benefit) of $7.2 million, or an effective tax rate of 23.1%, for the three months ended September 30, 2023 and $2.2 million, or an effective tax rate of 25.3% for the three months ended September 30, 2022. We recorded income tax expense of $7.7 million, or an effective tax rate of 24.1%, for the nine months ended September 30, 2023 and $7.1 million, or an effective tax rate of 19.8% for the nine months ended September 30, 2022.
The income tax rates for the three and nine months ended September 30, 2023 diverge from the federal statutory rate due to benefits related to (i) noncontrolling interests from controlled partnerships, (ii) foreign tax rate differentials, (iii) reversal of uncertain tax positions due to statute of limitation expiration, and (iv) release of state valuation allowances, offset by (i) effects of state income taxes and related prior year adjustments, (ii) share-based compensation, (iii) officer's compensation limitations, and (v) partial valuation allowance on losses in foreign jurisdictions.
LEASES - We determine if an arrangement is a lease at inception. Operating leases are included in operating lease right-of-use (“ROU”) assets, current operating lease liabilities, and long term operating lease liability in our consolidated balance sheets. Finance leases are included in property and equipment, current finance lease liability, and long-term finance lease liability in our consolidated balance sheets.  ROU assets represent our right to use an underlying asset for the lease term
and lease liabilities represent our obligation to make lease payments arising from the lease. Operating lease ROU assets and liabilities are recognized at commencement date based on the present value of lease payments over the lease term. As most of our leases do not provide an implicit rate, we use our incremental borrowing rate based on the information available at commencement date in determining the present value of lease payments. We use the implicit rate when readily determinable. We include options to extend a lease when it is reasonably certain that we will exercise that option. Lease expense for lease payments is recognized on a straight-line basis over the lease term. For a contract in which we are a lessee that contains fixed payments for both lease and non-lease components, we have elected to account for the components as a single lease component. For finance leases, interest expense on the lease liability is recognized using the effective interest method and amortization of the ROU asset is recognized on a straight-line basis over the shorter of the estimated useful life of the asset or the lease term. ROU assets are tested for impairment if circumstances suggest that the carrying amount may not be recoverable. Our ROU assets consist of facility and equipment assets on operating leases. No events have occurred such as fire, flood, or other acts which have impaired the integrity of our ROU assets as of September 30, 2023. Our facility leases require us to maintain insurance policies which would cover major damage to our facilities. We maintain business interruption insurance to cover loss of business due to a facility becoming non-operational under certain circumstances. Our equipment leases are covered by warranty and service contracts which cover repairs and provide regular maintenance to keep the equipment in functioning order.
EQUITY BASED COMPENSATION – We have one long-term incentive plan that we adopted in 2006 and which we have amended and restated at various points in time: first on April 20, 2015, second on March 9, 2017, third on April 15, 2021 and currently as of April 27, 2023 (the “Restated Plan”). The Restated Plan was approved by our stockholders at our annual stockholders meeting on June 7, 2023. We have reserved 20,100,000 shares of common stock for issuance under the Restated Plan which can be issued in the form of incentive and/or nonstatutory stock options, restricted and/or unrestricted stock, stock units, and stock appreciation rights. Terms and conditions of awards can be direct grants or based on achieving a performance metric. We evaluate performance-based awards to determine if it is probable that the vesting conditions will be met. We also consider probability of achievement of performance conditions when determining expense recognition. For the awards where vesting is probable, equity-based compensation is recognized over the related vesting period. Stock options generally vest over three years to five years and expire five years to ten years from date of grant. We determine the compensation expense for each stock option award using the Black Scholes, or similar valuation model. Those models require that our management make certain estimates concerning risk free interest rates and volatility in the trading price of our common stock. The compensation expense recognized for all equity-based awards is recognized over the awards’ service periods. Equity-based compensation is classified in operating expenses within the same line item as the majority of the cash compensation paid to employees. In connection with our acquisition of DeepHealth Inc. on June 1, 2020, we assumed the DeepHealth, Inc. 2017 Equity Incentive Plan, including outstanding options awards that can be exercised for our common stock. No additional awards will be granted under the DeepHealth, Inc. 2017 Equity Incentive Plan. See Note 7, Stock-Based Compensation, for more information.
COMPREHENSIVE INCOME (LOSS) - Accounting guidance establishes rules for reporting and displaying other comprehensive income (loss) and its components. Our foreign currency translation adjustments and the amortization of balances associated with derivatives previously classified as cash flow hedges are included in other comprehensive income (loss). The components of other comprehensive income (loss) for the three and nine months ended September 30, 2023 and September 30, 2022 are included in the consolidated statements of comprehensive income (loss).
COMMITMENTS AND CONTINGENCIES - We are party to various legal proceedings, claims, and regulatory, tax or government inquiries and investigations that arise in the ordinary course of business. With respect to these matters, we evaluate the developments on a regular basis and accrue a liability when we believe a loss is probable and the amount can be reasonably estimated. Based on current information, we do not believe that reasonably possible or probable losses associated with pending legal proceedings would either individually or in the aggregate, have a material adverse effect on our business and consolidated financial statements. However, the outcome of these matters is inherently uncertain. Therefore, if one or more of these matters were resolved against us for amounts in excess of management's expectations, our results of operations and financial condition, including in a particular reporting period in which any such outcome becomes probable and estimable, could be materially adversely affected.
DERIVATIVE INSTRUMENTS - In the second quarter of 2019, we entered into four forward interest rate agreements ("2019 Swaps"). The 2019 Swaps have total notional amounts of $500,000,000, consisting of two agreements of $50,000,000 each and two agreements of $200,000,000 each. The 2019 Swaps will secure a constant interest rate associated with portions of our variable rate bank debt and have an effective date of October 13, 2020. They will mature in October 2023 for the smaller notional and October 2025 for the larger notional. Under these arrangements, we arranged the 2019 Swaps with locked in 1 month Term SOFR rates at 1.89% for the $100,000,000 notional and at 1.98% for the $400,000,000 notional. As of the effective date, we are liable for premium payments if interest rates decline below arranged rates, but will receive interest payments if rates are above the arranged rates.
At inception, we designated our 2019 Swaps as cash flow hedges of floating-rate borrowings. In accordance with accounting guidance, derivatives that have been designated and qualify as cash flow hedging instruments are reported at fair value. The gain or loss on the effective portion of the hedge (i.e. change in fair value) is reported as a component of comprehensive gain or loss in the consolidated statement of equity. The remaining gain or loss, if any, is recognized currently in earnings. The cash flows for both our $400,000,000 notional interest rate swap contract locked in at 1.98% due October 2025 and our $100,000,000 notional interest rate swap contract locked in at 1.89% do not match the cash flows for our First Lien Term Loans and so we have determined that they are not currently effective as cash flow hedges. Accordingly, all changes in their fair value after April 1, 2020 for the $400,000,000 notional and after July 1, 2020 for the $100,000,000 notional are being recognized in earnings. As of July 1, 2020, the total change in fair value relating to swaps included in other comprehensive income was approximately $24.4 million, net of taxes. This amount will be amortized to interest expense through October 2023 at approximately $0.4 million per month and continuing at approximately $0.3 million through October 2025.
A tabular presentation of the effect of derivative instruments on our consolidated statement of comprehensive income (loss) of the 2019 Swaps which remain ineffective is as follows (amounts in thousands):
For the three months ended September 30, 2023
AccountJune 30, 2023 BalanceAmount of comprehensive loss recognized on derivative net of taxesAmount of loss reclassified out of accumulated OCI into income (prior period effective portion), net of taxesSeptember 30, 2023 BalanceLocation
Accumulated Other Comprehensive Loss, net of taxes$(13,357)$—$921$(12,436)Equity

For the nine months ended September 30, 2023
AccountDecember 31, 2022 BalanceAmount of comprehensive loss recognized on derivative net of taxesAmount of loss reclassified out of accumulated OCI into income (prior period effective portion), net of taxesSeptember 30, 2023 BalanceLocation
Accumulated Other Comprehensive Loss, net of taxes$(15,201)$—$2,765$(12,436)Equity

A tabular presentation of the effect of derivative instruments on our statement of operations of the 2019 Swaps which remain ineffective is as follows (amounts in thousands):
For the three months ended September 30, 2023
Ineffective interest rate swapAmount of loss recognized in income on derivative (current period ineffective portion)Location of loss recognized in Income on derivative (current period ineffective portion)Amount of loss reclassified from accumulated OCI into income (prior period effective portion)Location of loss reclassified from accumulated OCI into income (prior period effective portion)
Interest rate contracts$(1,015)Other income (expense)$(921)Interest Expense
For the nine months ended September 30, 2023
Ineffective interest rate swapAmount of gain recognized in income on derivative (current period ineffective portion)Location of gain recognized in Income on derivative (current period ineffective portion)Amount of loss reclassified from accumulated OCI into income (prior period effective portion)Location of loss reclassified from accumulated OCI into income (prior period effective portion)
Interest rate contracts$(949)Other income (expense)$(2,765)Interest Expense

See Fair Value Measurements section below for the fair value of the 2019 Swaps at September 30, 2023.
CONTINGENT CONSIDERATION -
Aidence Holding B.V.
On January 20, 2022, we completed our acquisition of all the equity interests of Aidence Holding B.V. ("Aidence") an artificial intelligence enterprise centered on lung cancer screening. As part of the purchase agreement, we agreed to pay up to $10.0 million consideration upon the completion of two identified milestones in RadNet common shares or cash at our election. This contingency had a value of approximately $7.2 million at June 30, 2023. The amount was reviewed quarterly and adjusted to fair value based on the yield rate of S&P B-rated corporate bonds and the probability of meeting the milestones which were tied to FDA approval of artificial intelligence screening solutions. On September 30, 2023, we determined that the milestones could not be achieved under the contractual terms of the stock purchase agreement because the original submissions of artificial intelligence screening solutions did not receive regulatory clearance. A new submission would required; and therefore, the probability of the milestones became zero. Accordingly, management recorded a contingency gain of $7.2 million against Cost of operations in our Consolidated Statements of Operations. In addition, there was a general holdback of $4.0 million for any indemnification claims, which was settled on April 30, 2023 by the issuance of 144,227 shares of our common stock.
Quantib B.V.
On January 20, 2022, we completed our acquisition of all the equity interests of Quantib B.V. ("Quantib") an artificial intelligence enterprise centered on prostate cancer screening. As part of the purchase agreement, we agreed to issue 18 months after acquisition, 113,303 shares of our common stock with an initial fair value at the date of close of $3.0 million subject to adjustment for any indemnification claims and will be adjusted to fair value in subsequent periods. In addition, there is a general holdback of $1.6 million to be issued in cash subject to adjustment for any indemnification claims. On July 7, 2023, we settled the stock holdback contingent liabilities by issuing 113,303 shares of our common stock at an ascribed value of $3.5 million and also settled the general holdback for $1.6 million in cash.
Montclair
On October 1, 2022, we completed our acquisition of Montclair Radiological Associates. As part of the purchase agreement, we recorded $1.2 million in contingent consideration to be determined by obtaining specific EBITDA targets within a defined time frame. On June 30, 2023 we settled the contingent consideration liability and recognized a gain of $1.2 million.
Heart and Lung Imaging Limited
On November 1, 2022, we completed our acquisition of 75% of the equity interests of Heart and Lung Imaging Limited. The purchase included $10.2 million in contingent milestone consideration and cash holdback of $0.6 million to be issued 24 months after acquisition subject to adjustment for any indemnification claims, which will be adjusted to fair value in subsequent periods. The milestone contingency had a value of approximately $11.1 million as of September 30, 2023. The contingent consideration is determined by the achievement of a specific number of physician reads. On September 20, 2023, we settled a milestone contingent liability by issuing 56,600 shares of our common stock at an ascribed value of $1.6 million and cash of $1.8 million.
A tabular rollforward of contingent consideration is as follows (amounts in thousands):
For the three months ended September 30, 2023
EntityAccountJune 30, 2023 BalanceSettlement of contingent considerationChange in valuation of Contingent ConsiderationCurrency TranslationSeptember 30, 2023 Balance
AidenceOther Long Term Liabilities$7,191 $— $(7,191)$— $— 
QuantibAccrued Expenses & Other Long Term Liabilities$5,271 $(5,110)$(161)$— $— 
Heart and Lung LimitedAccrued Expenses & Other Long Term Liabilities$14,358 $(3,402)$915 $(772)$11,099 
For the nine months ended September 30, 2023
EntityAccountJanuary 1, 2023 BalanceSettlement of contingent considerationChange in valuation of Contingent ConsiderationCurrency TranslationSeptember 30, 2023 Balance
AidenceOther Long Term Liabilities11,158 (4,000)$(7,158)$— $— 
QuantibAccrued Expenses & Other Long Term Liabilities3,709 (5,110)$1,401 $— $— 
MontclairAccrued Expenses1,200 — $(1,200)$— $— 
Heart and Lung LimitedAccrued Expenses & Other Long Term Liabilities11,656 (3,402)$2,906 $(61)$11,099 

See Fair Value Measurements section below for the fair value of contingent consideration at September 30, 2023.
FAIR VALUE MEASUREMENTS – Assets and liabilities subject to fair value measurements are required to be disclosed within a fair value hierarchy. The fair value hierarchy ranks the quality and reliability of inputs used to determine fair value. Accordingly, assets and liabilities carried at, or permitted to be carried at, fair value are classified within the fair value hierarchy in one of the following categories based on the lowest level input that is significant to a fair value measurement:
Level 1—Fair value is determined by using unadjusted quoted prices that are available in active markets for identical assets and liabilities.
Level 2—Fair value is determined by using inputs other than Level 1 quoted prices that are directly or indirectly observable. Inputs can include quoted prices for similar assets and liabilities in active markets or quoted prices for identical assets and liabilities in inactive markets. Related inputs can also include those used in valuation or other pricing models such as interest rates and yield curves that can be corroborated by observable market data.
Level 3—Fair value is determined by using inputs that are unobservable and not corroborated by market data. Use of these inputs involves significant and subjective judgment.
Derivatives:
The tables below summarize the estimated fair values of certain of our financial assets that are subject to fair value measurements, and the classification of these assets on our condensed consolidated balance sheets, as follows (in thousands):
 As of September 30, 2023
Level 1Level 2Level 3Total
Current and long term assets    
2019 Swaps - Interest Rate Contracts$— $22,354 $— $22,354 
 As of December 31, 2022
Level 1Level 2Level 3Total
Current and long term assets    
2019 Swaps - Interest Rate Contracts$— $23,302 $— $23,302 
The estimated fair value of these contracts was determined using Level 2 inputs. More specifically, the fair value was determined by calculating the value of the difference between the fixed interest rate of the interest rate swaps and the counterparty’s forward SOFR curve. The forward SOFR curve is readily available in the public markets or can be derived from information available in the public markets.
Contingent Consideration:
The table below summarizes the estimated fair values of contingencies and holdback relating to our Heart and Lung Imaging Limited acquisition on November 1, 2022 that are subject to fair value measurements and the classification of these liabilities on our consolidated balance sheets, as follows (in thousands):
 As of September 30, 2023
Level 1Level 2Level 3Total
Accrued expenses and other non-current liabilities    
Heart and Lung Imaging Limited$— $— $11,099 $11,099 

The estimated fair value of these liabilities was determined using Level 3 inputs. For Heart Lung Imaging Limited the contingent consideration is determined by the achievement of a specific number of physician reads. As significant inputs for the contingent consideration of Heart Lung Imaging Limited are not observable and cannot be corroborated by observable market data they are classified as Level 3.
Long Term Debt:
The table below summarizes the estimated fair value compared to our face value of our long-term debt as follows (in thousands):
 As of September 30, 2023
Level 1Level 2Level 3Total Fair ValueTotal Face Value
First Lien Term Loans and Truist Term Loan$— $850,405 $— $850,405 $853,063 
 As of December 31, 2022
Level 1Level 2Level 3Total Fair ValueTotal Face Value
First Lien Term Loans and Truist Term Loan$— $843,594 $— $843,594 $864,125 
The estimated fair value of our long-term debt, which is discussed in Note 6, Credit Facilities and Notes Payable, was determined using Level 2 inputs primarily related to comparable market prices.
We consider the carrying amounts of cash and cash equivalents, receivables, other current assets, current liabilities and other notes payables to approximate their fair value because of the relatively short period of time between the origination of these instruments and their expected realization or payment. Additionally, we consider the carrying amount of our finance lease obligations to approximate their fair value because the weighted average interest rate used to formulate the carrying amounts approximates current market rates.
EARNINGS PER SHARE - Earnings per share is based upon the weighted average number of shares of common stock and common stock equivalents outstanding, net of common stock held in treasury, as follows (in thousands except share and per share data):
 Three Months Ended September 30,Nine Months Ended September 30,
2023202220232022
Net income attributable to RadNet, Inc.'s common stockholders$17,540 $668 $4,904 $11,585 
BASIC NET INCOME PER SHARE ATTRIBUTABLE TO RADNET, INC.'S COMMON STOCKHOLDERS
Weighted average number of common shares outstanding during the period67,793,404 56,744,419 62,113,707 56,041,017 
Basic net income per share attributable to RadNet, Inc.'s common stockholders$0.26 $0.01 $0.08 $0.21 
DILUTED NET INCOME PER SHARE ATTRIBUTABLE TO RADNET, INC.'S COMMON STOCKHOLDERS
Weighted average number of common shares outstanding during the period67,793,404 56,744,419 62,113,707 56,041,017 
Add non-vested restricted stock subject only to service vesting217,238 179,268 202,082 141,492 
Add additional shares issuable upon exercise of stock options and contingently issuable shares799,176 728,074 905,462 853,908 
Weighted average number of common shares used in calculating diluted net income per share68,809,818 57,651,761 63,221,251 57,036,417 
Changes in FV associated with contingently issuable shares$— $— $— $(586)
Net income attributable to RadNet, Inc's common stockholders for diluted share calculation$17,540 $668 $4,904 $— $10,999 
Diluted net income per share attributable to RadNet, Inc.'s common stockholders$0.25 $0.01 $0.08 $0.19 
Earnings per share disclosures:
Fair value change for contingently issuable shares excluded from the computation of diluted per share amounts as its effect would be antidilutive$— $278 $— $— 
Stock options and non-vested restricted awards excluded from the computation of diluted per share amounts as their effect would be antidilutive:
Non-vested restricted stock subject to service vesting— — — — 
Shares issuable upon the exercise of stock options88,600 84,885 761,708 67,289 
Shares issuable subject to satisfaction of certain contingencies— 113,303 — — 
Weighted average shares for which the exercise price exceeds average market price of common stock— 83,972 94,346 73,094 
Contingently issuable shares— — 193,207 — 

INVESTMENTS IN EQUITY SECURITIES–Accounting guidance requires entities to measure equity investments at fair value, with any changes in fair value recognized in net income. If there is no readily determinable fair value, the guidance allows entities the ability to measure investments at cost, adjusted for observable price changes and impairments, with changes recognized in net income.
As of September 30, 2023, we have three equity investments for which a fair value is not readily determinable and therefore the total amounts invested are recognized at cost as follows:
Medic Vision, based in Israel, specializes in software packages that provide compliant radiation dose structured reporting and enhanced images from reduced dose CT scans. Our investment of $1.2 million represents a 14.21% equity interest in the company. No observable price changes or impairment in our investment was identified as of September 30, 2023.
Turner Imaging Systems, based in Utah, develops and markets portable X-ray imaging systems that provide a user the ability to acquire X-ray images wherever and whenever they are needed. On February 1, 2018, we purchased 2.1 million preferred shares in Turner Imaging Systems for $2.0 million. On January 1, 2019 we funded a convertible promissory note in the amount of $0.1 million that converted to an additional 80,000 preferred shares on October 11, 2019. No observable price changes or impairment in our investment was identified as of September 30, 2023.
WhiteRabbit.ai Inc., based in California, is currently developing an artificial intelligence suite which aims to improve the speed and accuracy of cancer detection in radiology and improve patient care. On November 5, 2019 we acquired an equity interest in the company for $1.0 million and also loaned the company $2.5 million in support of its operations. No observable price changes, impairment in our investment or impairment of the loan receivable was identified as of September 30, 2023.
INVESTMENT IN JOINT VENTURES – We have 13 unconsolidated joint ventures with ownership interests ranging from 35% to 55%. These joint ventures represent partnerships with hospitals, health systems or radiology practices and were formed for the purpose of owning and operating diagnostic imaging centers. Professional services at the joint venture diagnostic imaging centers are performed by contracted radiology practices or a radiology practice that participates in the joint venture. Our investment in these joint ventures is accounted for under the equity method, since RadNet does not have a controlling financial interest in such ventures. We evaluate our investment in joint ventures, including cost in excess of book value (equity method goodwill) for impairment whenever indicators of impairment exist. No indicators of impairment existed as of September 30, 2023.
Joint venture investment and financial information
The following table is a summary of our investment in joint ventures during the nine months ended September 30, 2023 (in thousands):
Balance as of December 31, 2022$57,893 
Equity in earnings in these joint ventures3,935 
Distribution of earnings(8,540)
Equity contributions in existing joint ventures41,184 
Balance as of September 30, 2023$94,472 
We charged management service fees from the centers underlying these joint ventures of approximately $3.9 million and $6.1 million for the three months ended September 30, 2023 and 2022 and $12.2 million and $17.2 million for the nine months ended September 30, 2023 and 2022, respectively.
The following table is a summary of key balance sheet data for these joint ventures as of September 30, 2023 and December 31, 2022 and income statement data for the nine months ended September 30, 2023 and 2022 (in thousands):
Balance Sheet Data:September 30, 2023December 31, 2022
Current assets$44,605 $39,304 
Noncurrent assets176,527 134,694 
Current liabilities(42,486)(29,588)
Noncurrent liabilities(73,770)(37,952)
Total net assets$104,876 $106,458 
Income statement data for the nine months ended September 30,
20232022
Net revenue$129,020 $107,241 
Net income$7,906 $17,034 

 Formation of majority owned subsidiary and sale of economic interest

Los Angeles Imaging Group, LLC
On September 1, 2023 we formed a wholly-owned subsidiary, Los Angeles Imaging Group, LLC ("LAIG"). The operation offers multi-modality imaging services out of three locations in Los Angeles, California. We contributed the operations of 3 centers to the subsidiary. Cedars-Sinai Medical Center ("CSMC") purchased from us a 35% noncontrolling economic interest in LAIG for a cash payment of $5.9 million. As a result of the transaction, we retain a 65% controlling economic interest in LAIG.

Joint venture Investment Contribution
Santa Monica Imaging Group, LLC
On April 1, 2017, we formed in conjunction with CSMC, the Santa Monica Imaging Group, LLC ("SMIG"), consisting of two multi-modality imaging centers located in Santa Monica, CA with RadNet holding a 40% economic interest and CSMC holding a 60% economic interest. RadNet accounts for our share of the venture under the equity method. On January 1, 2019, CSMC purchased from us an additional 5% economic interest in SMIG and as a result our economic interest in SMIG was reduced to 35%. On September 1, 2023, RadNet contributed an additional multi-modality imaging center and a newly constructed imaging center located in Beverly Hills, CA valued at $27.2 million and purchased an additional 6% interest economic interest in SMIG for cash payment of $5.2 million. Simultaneously, CSMC contributed five additional multi-modality imaging centers located in Santa Monica, CA. As a result of the transaction, our economic interest in SMIG has been increased to 49%. We recorded a gain of $16.8 million, within (Gain) on contribution of imaging centers into joint venture in our Consolidated Statements of Operations. The related gain on disposal of business was calculated as the difference between the sales price and carrying value of such imaging centers which included equipment, other assets, accrued liabilities, and an allocation of goodwill to such imaging centers. Concurrently, we made additional capital contributions of $8.5 million to the joint venture in the form of construction-in-progress. We accounted for the transaction as an adjustment to our equity investment for the value of the assets contributed.
In determining the fair value of the imaging centers contributed to SMIG, we used an income approach which is considered a level 3 valuation technique. See Fair Value Measurements above for further detail on the valuation hierarchy. Key assumptions used in measuring the fair value are financial forecasts and a discount rate. We also utilized the cash paid for an additional interest in the joint venture to substantiate the fair value of the contributed assets.