FACILITY ACQUISITIONS, ASSETS HELD FOR SALE AND DISPOSITIONS

12 Months Ended

Dec. 31, 2020

FACILITY ACQUISITIONS, ASSETS HELD FOR SALE AND DISPOSITIONS

FACILITY ACQUISITIONS AND DISPOSITIONS

Acquisitions

In October and November 2020, we completed our acquisition of certain assets of ZP Atlantic LLC, and ZP Elmhurst LLC. We made a fair value determination of the acquired assets and assumed liabilities and the following were recorded (in thousands):


	ZP Atlantic		ZP Elmhurst
Property and Equipment	$	7,931	$	10,681
Right of Use Assets	6,181		12,571
Other Assets	62		75
Intangible Assets	50		50
Right of Use Liabilities	(6,181)		(12,571)
Goodwill	828		1,463
TOTAL	$	8,871	$	12,269

On August 31, 2020 we completed our acquisition of certain assets of AZ-Tech Radiology & Open MRI, LLC, consisting of eight multi-modality imaging centers located in the Phoenix, Arizona area for purchase consideration of $5.5 million. We made a fair value determination of the acquired assets and assumed liabilities and approximately $2.5 million in property and equipment, $7.6 million in right-of-use assets, $0.1 million in other assets, $7.6 million in operating lease liabilities, and $2.9 million in goodwill were recorded.

On June 1, 2020, we completed our acquisition of all the equity interests of DeepHealth Inc., ("DeepHealth") an artificial intelligence and machine learning company in an all stock purchase. As initial purchase consideration, we issued 915,132 shares at $16.93 per share (823,615 issued at execution, with up to 91,517 shares to be issued 18 months after acquisition subject to adjustment for any indemnification claims). The transaction was accounted for as an acquisition of a business and total purchase consideration determined to be approximately $34.6 million including i) 823,615 shares issued on the date of closing with fair value of $13.9 million, ii) a liability of 91,517 shares with a fair value of $1.5 million to be issued 18 months after acquisition subject to adjustment for any indemnification claims and will be marked to market in subsequent periods, iii) replacement awards attributable to pre-combination service issued to DeepHealth option holders with allocated fair value of $2.0 million, iv) acquisition date fair value of contingent consideration of $17.0 million and v) $0.1 million in closing costs reimbursed to the seller. The fair values of replacement awards attributable to pre-combination service and contingent consideration are recorded in additional paid in capital upon closing of the transaction. For the contingent consideration, there are three arrangements that will be settled in a fixed number of shares upon achievement of three individual specific milestones which are mutually exclusive of each other, with 390,789, 586,184, and 195,393 shares, respectively, issuable for each milestone arrangement. The fair value of the contingent consideration was estimated at the date of acquisition based on our share price and estimated probability of the achievement of the respective milestones. We preliminarily recorded $0.1 million in current assets, $3.5 million in deferred tax liabilities, $14.8 million in intangible assets, primarily in-process research and development ("IPR&D'), and $23.3 million in goodwill. The goodwill is primarily attributable to expected post-acquisition synergies from integrating DeepHealth’s assembled workforce and IPR&D technologies. The fair values of the identifiable intangible assets related to IPR&D were determined by the income method and the assets will not be amortized until regulatory approval is obtained, but will be assessed for impairment annually, or more frequently if indicators of impairment become present

On March 2, 2020 our consolidated subsidiary New Jersey Imaging Networks ("NJIN") completed the acquisition of certain assets of MRI at Woodbridge, LLC consisting of a single multi-modality imaging center located in Avenel, New Jersey for cash consideration of $2.6 million. NJIN made a fair value determination of the acquired assets and assumed liabilities and approximately $0.5 million in property and equipment, $1.1 million in right-of-use assets, $0.3 million in intangible assets, $1.1 million in operating lease liabilities, $0.1 million in finance lease liabilities, and $1.8 million in goodwill were recorded.

On January 2, 2020 we completed our acquisition of certain assets of Olney Open MRI, LLC, consisting of a single multi-modality imaging center located in Columbia, Maryland for cash consideration of $1.8 million. We have made a fair value determination of the acquired assets and assumed liabilities and approximately $0.8 million in property and equipment, $1.3 million in right-of-use assets, $0.3 million in intangible assets, $1.3 million in operating lease liabilities and $0.6 million in goodwill were recorded.

On August 1, 2019 we completed a step-up acquisition upon the dissolution of our former 49% owned joint venture, Garden State Radiology LLC ("GSRN"). GSRN consisted of two multi-modality centers operating in New Jersey. GSRN became our wholly owned subsidiary with the withdrawal of the 51% majority partner for the full ownership of one center with no other consideration. We made a fair value determination of our original 49% interest which resulted in a step-up gain of approximately $1.3 million. We determined a fair value of the remaining acquired imaging center of $3.1 million in assets and $0.4 million in liabilities were recognized. We recorded $1.0 thousand in other assets, $0.7 million in fixed assets, $0.4 million in right-of-use assets, $0.4 million in operating lease liabilities, and $2.0 million in goodwill.

On August 1, 2019 we completed a step-up acquisition of our former 25% owned joint venture, Nulogix, via a stock issuance of RadNet common shares valued at $1.5 million to obtain the remaining 75% outstanding Nulogix shares. We made a fair value determination of the acquired assets and approximately $0.2 million in fixed assets, $0.7 million in intangible assets, $0.3 million in deferred tax liability and goodwill of $1.3 million were recorded. We also made a fair value determination of our 25% pre-existing interest in the business and recognized a loss of $0.5 million which is included in operating expenses within the consolidated statements of operations.

On April 1, 2019 we completed our acquisition of certain assets of Kern Radiology Imaging Systems Inc., consisting of four multi-modality imaging centers located in Bakersfield, California for purchase consideration of $19.3 million. We made a fair value determination of the acquired assets and assumed liabilities and approximately $10.1 million in property and equipment, $9.7 million in right-of-use assets, $36.0 thousand in other assets, $3.4 million in intangible assets, $14.5 million in operating lease liabilities, and $10.5 million in goodwill were recorded.

On April 1, 2019 we completed our acquisition of certain assets of Zilkha Radiology Inc. consisting of two multi-modality centers located in Islip, New York for purchase consideration of $4.5 million. We made a fair value determination of the acquired assets and assumed liabilities and approximately $2.2 million in property and equipment, $5.1 million in right-of-use assets, $0.1 million in intangible assets, $5.1 million in operating lease liabilities, $0.3 million in finance lease liabilities and $2.6 million in goodwill were recorded.

On February 28, 2019, one of VIE entities, Lenox Hill Radiology and Medical Imaging Associates, P.C. ("LHR"), purchased the membership interest of Hudson Valley Radiology Associates, P.L.L.C. ("HVRA") for $6.0 million of RadNet common stock and contingent consideration valued at $0.7 million to guarantee the share value issued for a period of six months post acquisition date. LHR has performed a fair value purchase price allocation and recorded equipment of $10.0 thousand, a covenant not to compete of $50.0 thousand, trade name of $0.4 million, other intangible assets of $0.3 million and goodwill of $3.1 million from the transaction. In connection with the acquisition, RadNet also settled against the purchase consideration, $2.8 million, net of taxes, of an unfavorable vendor contract with HVRA stemming from the previous acquisition of Radiologix, Inc. in November 2006.

On February 1, 2019 our majority owned subsidiary, West Valley Imaging Group, LLC ("WVIG") completed its acquisition of certain assets of West Valley Imaging Center, LLC ("West Valley"), consisting of a single multi-modality imaging center located in West Hills, CA for purchase consideration of $3.0 million all of which was initially funded by the Company. We have made a fair value determination of the acquired assets and approximately $0.3 million in equipment and fixed assets, $7.0 thousand in other assets, $0.2 million in intangible assets and $2.5 million in goodwill were recorded. Subsequent to the transaction, our partner in WVIG, Cedars Sinai Medical Center, contributed $0.8 million in cash to maintain its 25% economic interest in the venture.

Joint venture formations

On February 13, 2019 we formed a wholly owned subsidiary, Ventura County Imaging Group, LLC ("VCIG"). On March 1, 2019, Dignity Health joined as a venture partner. Total agreed contribution of both parties was $10.4 million of cash and assets with RadNet contributing net assets with a book value of $4.3 million for a 60% economic interest and Dignity Health contributing $6.1 million in cash and assets for a 40% economic interest. For its contribution, RadNet transferred net assets of three wholly owned multi-modality imaging centers. Dignity Health contributed approximately $0.8 million in assets to acquire 5% economic interest and paid RadNet $5.3 million for an additional 35% economic interest. We maintain controlling economic interest in VCIG and fully consolidate the results into our financial statements.

Dispositions

On June 1, 2020 we completed our sale of certain assets of our Imaging On Call subsidiary to RadVantage P.C. (an unrelated corporation) for approximately $1.0 thousand. With this transaction, we have exited the teleradiology business.