NOTE 2 - SUPPLEMENTAL GUARANTOR INFORMATION

6 Months Ended

Jun. 30, 2011

Guarantor Obligations, Related Party Disclosure

NOTE 2 — SUPPLEMENTAL GUARANTOR INFORMATION

The following tables present condensed consolidating financial information for: (a) RadNet, Inc. (the “Parent”) on a stand-alone basis as a guarantor of the senior secured term loan due 2016 and the senior notes due 2018 ; (b) Radnet Management, Inc., the subsidiary issuer (the “Subsidiary Issuer”) of the senior secured term loan due 2016 and the senior notes due 2018; (c) on a combined basis, the guarantor subsidiaries (the “Guarantor Subsidiaries”) of the senior secured term loan due 2016 and the senior notes due 2018, which include all other 100% owned subsidiaries of the Subsidiary Issuer; (d) on a combined basis, the non-guarantor subsidiaries, which include joint venture partnerships of which the Subsidiary Issuer holds investments of 50% or greater, as well as BRMG, which we consolidate as a variable interest entity. Separate financial statements of the Subsidiary Issuer or the Guarantor Subsidiaries are not presented because the guarantee by the Parent and each Guarantor Subsidiary is full and unconditional, joint and several. In lieu thereof, the Parent includes the following:

RADNET, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
June 30, 2011
(in thousands)

(unaudited)

				Subsidiary			Guarantor		Non-Guarantor
	Parent			Issuer			Subsidiaries		Subsidiaries		Eliminations			Consolidated
ASSETS
CURRENT ASSETS
Cash and cash equivalents	$	-		$	-		$	-	$	178	$	-		$	178
Accounts receivable, net		-			-			68,670		48,232		-			116,902
Prepaid expenses and other current assets		-			8,595			6,382		366		-			15,343
Total current assets		-			8,595			75,052		48,776		-			132,423
PROPERTY AND EQUIPMENT, NET		-			45,838			149,979		1,952		-			197,769
OTHER ASSETS
Goodwill		-			41,768			107,943		-		-			149,711
Other intangible assets		-			94			56,016		-		-			56,110
Deferred financing costs, net		-			14,236			-		-		-			14,236
Investment in subsidiaries		(77,206	)		232,720			9,291		-		(164,805	)		-
Investment in joint ventures		-			-			17,935		-		-			17,935
Deposits and other		-			1,550			1,337		-		-			2,887
Total assets	$	(77,206	)	$	344,801		$	417,553	$	50,728	$	(164,805	)	$	571,071
LIABILITIES AND EQUITY DEFICIT
CURRENT LIABILITIES
Intercompany	$	-		$	(146,964	)	$	116,521	$	30,443	$	-		$	-
Accounts payable and accrued expenses		-			43,510			41,195		9,881		-			94,586
Due to affiliates		-			-			2,357		-		-			2,357
Deferred revenue		-			-			1,338		-		-			1,338
Current portion of notes payable		-			2,978			2,682		-		-			5,660
Current portion of deferred rent		-			432			486		-		-			918
Obligations under capital leases		-			4,071			2,642		359		-			7,072
Total current liabilities		-			(95,973	)		167,221		40,683		-			111,931
LONG-TERM LIABILITIES
Deferred rent, net of current portion		-			6,977			4,539		-		-			11,516
Deferred taxes		-			-			277		-		-			277
Line of credit		-			25,700			-		-		-			25,700
Notes payable, net of current portion		-			474,881			4,094		-		-			478,975
Obligations under capital leases, net of current portion		-			1,978			1,304		615		-			3,897
Other non-current liabilities		-			8,444			7,398		-		-			15,842
Total liabilities		-			422,007			184,833		41,298		-			648,138
EQUITY DEFICIT
Total Radnet, Inc.'s equity deficit		(77,206	)		(77,206	)		232,720		9,291		(164,805	)		(77,206	)
Noncontrolling interests		-			-			-		139		-			139
Total equity deficit		(77,206	)		(77,206	)		232,720		9,430		(164,805	)		(77,067	)
Total liabilities and equity deficit	$	(77,206	)	$	344,801		$	417,553	$	50,728	$	(164,805	)	$	571,071

RADNET, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
 December 31, 2010

(in thousands)

				Subsidiary			Guarantor		Non-Guarantor
	Parent			Issuer			Subsidiaries		Subsidiaries		Eliminations			Consolidated
ASSETS
CURRENT ASSETS
Cash and cash equivalents	$	-		$	205		$	-	$	422	$	-		$	627
Accounts receivable, net		-			-			52,493		43,601		-			96,094
Prepaid expenses and other current assets		-			8,481			5,543		280		-			14,304
Total current assets		-			8,686			58,036		44,303		-			111,025
PROPERTY AND EQUIPMENT, NET		-			46,893			145,770		1,567		-			194,230
OTHER ASSETS
Goodwill		-			41,768			101,585		-		-			143,353
Other intangible assets		-			137			57,211		-		-			57,348
Deferred financing costs, net		-			15,486			-		-		-			15,486
Investment in subsidiaries		(82,530	)		218,393			9,223		-		(145,086	)		-
Investment in joint ventures		-			-			15,444		-		-			15,444
Deposits and other		-			1,320			1,308		-		-			2,628
Total assets	$	(82,530	)	$	332,683		$	388,577	$	45,870	$	(145,086	)	$	539,514
LIABILITIES AND EQUITY DEFICIT
CURRENT LIABILITIES
Intercompany	$	-		$	(133,637	)	$	107,258	$	26,379	$	-		$	-
Accounts payable and accrued expenses		-			44,450			30,997		7,172		-			82,619
Due to affiliates		-			-			1,082		1,893		-			2,975
Deferred revenue		-			-			1,568		-		-			1,568
Current portion of notes payable		-			3,082			5,136		-		-			8,218
Current portion of deferred rent		-			321			424		-		-			745
Obligations under capital leases		-			5,640			3,150		349		-			9,139
Total current liabilities		-			(80,144	)		149,615		35,793		-			105,264
LONG-TERM LIABILITIES
Deferred rent, net of current portion		-			6,086			4,293		-		-			10,379
Deferred taxes		-			-			277		-		-			277
Notes payable, net of current portion		-			475,231			6,347		-		-			481,578
Obligations under capital leases, net of current portion		-			3,535			1,307		797		-			5,639
Other non-current liabilities		-			10,505			8,345		-		-			18,850
Total liabilities		-			415,213			170,184		36,590		-			621,987
EQUITY DEFICIT
Total Radnet, Inc.'s equity deficit		(82,530	)		(82,530	)		218,393		9,223		(145,086	)		(82,530	)
Noncontrolling interests		-			-			-		57		-			57
Total equity deficit		(82,530	)		(82,530	)		218,393		9,280		(145,086	)		(82,473	)
Total liabilities and equity deficit	$	(82,530	)	$	332,683		$	388,577	$	45,870	$	(145,086	)	$	539,514

RADNET, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
For The Three Months Ended  June 30, 2011
(in thousands)

(unaudited)

			Subsidiary			Guarantor			Non-Guarantor
	Parent		Issuer			Subsidiaries			Subsidiaries			Eliminations			Consolidated
NET REVENUE	$	-	$	31,298		$	107,935		$	16,398		$	-		$	155,631
OPERATING EXPENSES
Operating expenses		-		27,166			76,877			15,070			-			119,113
Depreciation and amortization		-		3,513			10,672			111			-			14,296
Provision for bad debts		-		1,154			6,894			700			-			8,748
Loss (gain) on sale and disposal of equipment		-		(2,150	)		294			-			-			(1,856	)
Severance costs		-		120			389			-			-			509
Total operating expenses		-		29,803			95,126			15,881			-			140,810
INCOME FROM OPERATIONS		-		1,495			12,809			517			-			14,821
OTHER EXPENSES
Interest expense		-		7,601			5,532			17			-			13,150
Other income		-		(189	)		-			-			-			(189	)
Total other expenses		-		7,412			5,532			17			-			12,961
INCOME (LOSS) BEFORE INCOME TAXES AND EQUITY IN EARNINGS OF JOINT VENTURES		-		(5,917	)		7,277			500			-			1,860
Provision for income taxes		-		(18	)		(315	)		(4	)		-			(337	)
Equity in earnings (losses) of consolidated subsidiaries		3,521		9,456			411			-			(13,388	)		-
Equity in earnings of joint ventures		-		-			2,083			-			-			2,083
NET INCOME		3,521		3,521			9,456			496			(13,388	)		3,606
Net income attributable to noncontrolling interests		-		-			-			85			-			85
NET INCOME ATTRIBUTABLE TO RADNET, INC.COMMON STOCKHOLDERS	$	3,521	$	3,521		$	9,456		$	411		$	(13,388	)	$	3,521

RADNET, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
For The Three Months Ended  June 30, 2010
(in thousands)

(unaudited)

				Subsidiary			Guarantor		Non-Guarantor
	Parent			Issuer			Subsidiaries		Subsidiaries		Eliminations		Consolidated
NET REVENUE	$	-		$	30,528		$	93,988	$	14,435	$	-	$	138,951
OPERATING EXPENSES
Operating expenses		-			26,643			65,962		13,600		-		106,205
Depreciation and amortization		-			3,465			10,377		34		-		13,876
Provision for bad debts		-			1,310			6,526		632		-		8,468
Loss on sale of equipment		-			-			51		-		-		51
Severance costs		-			283			152		-		-		435
Total operating expenses		-			31,701			83,068		14,266		-		129,035
INCOME (LOSS) FROM OPERATIONS		-			(1,173	)		10,920		169		-		9,916
OTHER EXPENSES
Interest expense		-			6,966			5,760		3		-		12,729
Loss on extinguishment of debt					9,871			-		-		-		9,871
Other expenses		-			1,150			-		-		-		1,150
Total other expenses		-			17,987			5,760		3		-		23,750
INCOME (LOSS) BEFORE INCOME TAXES AND EQUITY IN EARNINGS OF JOINT VENTURES		-			(19,160	)		5,160		166		-		(13,834	)
Benefit from income taxes		-			-			128		-		-		128
Equity in earnings (losses) of consolidated subsidiaries		(11,756	)		7,404			145				4,207		-
Equity in earnings of joint ventures		-			-			1,971		-		-		1,971
NET INCOME (LOSS)		(11,756	)		(11,756	)		7,404		166		4,207		(11,735	)
Net income attributable to noncontrolling interests		-			-			-		21		-		21
NET INCOME (LOSS) ATTRIBUTABLE TO RADNET, INC.COMMON STOCKHOLDERS	$	(11,756	)	$	(11,756	)	$	7,404	$	145	$	4,207	$	(11,756	)

RADNET, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
For The Six Months Ended June 30, 2011
(in thousands)

(unaudited)

			Subsidiary			Guarantor			Non-Guarantor
	Parent		Issuer			Subsidiaries			Subsidiaries			Eliminations			Consolidated
NET REVENUE	$	-	$	62,414		$	207,896		$	31,538		$	-		$	301,848
OPERATING EXPENSES
Operating expenses		-		53,894			151,989			29,058			-			234,941
Depreciation and amortization		-		7,009			20,987			221			-			28,217
Provision for bad debts		-		2,145			13,244			1,264			-			16,653
Loss (gain) on sale and disposal of equipment		-		(2,063	)		466			-			-			(1,597	)
Severance costs		-		189			465			-			-			654
Total operating expenses		-		61,174			187,151			30,543			-			278,868
INCOME FROM OPERATIONS		-		1,240			20,745			995			-			22,980
OTHER EXPENSES
Interest expense		-		14,920			11,110			35			-			26,065
Other income		-		(2,060	)		-			-			-			(2,060	)
Total other expenses		-		12,860			11,110			35			-			24,005
INCOME (LOSS) BEFORE INCOME TAXES AND EQUITY IN EARNINGS OF JOINT VENTURES		-		(11,620	)		9,635			960			-			(1,025	)
Provision for income taxes		-		(31	)		(447	)		(6	)		-			(484	)
Equity in earnings (losses) of consolidated subsidiaries		2,645		14,296			801						(17,742	)		-
Equity in earnings of joint ventures		-		-			4,307			-			-			4,307
NET INCOME		2,645		2,645			14,296			954			(17,742	)		2,798
Net income attributable to noncontrolling interests		-		-			-			153			-			153
NET INCOME ATTRIBUTABLE TO RADNET, INC.COMMON STOCKHOLDERS	$	2,645	$	2,645		$	14,296		$	801		$	(17,742	)	$	2,645

RADNET, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
For The Six Months Ended  June 30, 2010
(in thousands)

(unaudited)

				Subsidiary			Guarantor			Non-Guarantor
	Parent			Issuer			Subsidiaries			Subsidiaries			Eliminations		Consolidated
NET REVENUE	$	-		$	59,207		$	175,864		$	28,058		$	-	$	263,129
OPERATING EXPENSES
Operating expenses		-			52,091			126,389			26,364			-		204,844
Depreciation and amortization		-			6,648			20,433			70			-		27,151
Provision for bad debts		-			2,607			12,307			1,231			-		16,145
Loss on sale of equipment		-			72			83			-			-		155
Severance costs		-			365			202			-			-		567
Total operating expenses		-			61,783			159,414			27,665			-		248,862
INCOME (LOSS) FROM OPERATIONS		-			(2,576	)		16,450			393			-		14,267
OTHER EXPENSES
Interest expense		-			11,084			11,606			6			-		22,696
Loss on extinguishment of debt					9,871			-			-			-		9,871
Other expenses		-			1,150			-			-			-		1,150
Total other expenses		-			22,105			11,606			6			-		33,717
INCOME (LOSS) BEFORE INCOME TAXES AND EQUITY IN EARNINGS OF JOINT VENTURES		-			(24,681	)		4,844			387			-		(19,450	)
Provision for income taxes		-			(19	)		(185	)		(2	)		-		(206	)
Equity in earnings (losses) of consolidated subsidiaries		(15,867	)		8,833			342						6,692		-
Equity in earnings of joint ventures		-			-			3,832			-			-		3,832
NET INCOME (LOSS)		(15,867	)		(15,867	)		8,833			385			6,692		(15,824	)
Net income attributable to noncontrolling interests		-			-			-			43			-		43
NET INCOME (LOSS) ATTRIBUTABLE TO
RADNET, INC.COMMON STOCKHOLDERS	$	(15,867	)	$	(15,867	)	$	8,833		$	342		$	6,692	$	(15,867	)

RADNET, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
For The Six Months Ended  June 30, 2011
(in thousands)

(unaudited)

				Subsidiary			Guarantor			Non-Guarantor
	Parent			Issuer			Subsidiaries			Subsidiaries			Eliminations			Consolidated
CASH FLOWS FROM OPERATING ACTIVITIES
Net income	$	2,645		$	2,645		$	14,296		$	954		$	(17,742	)	$	2,798
Adjustments to reconcile net income to net cash provided by (used in) operating activities:
Depreciation and amortization		-			7,009			20,987			221			-			28,217
Provision for bad debts		-			2,145			13,244			1,264			-			16,653
Equity in (earnings) loss of consolidated subsidiaries		(2,645	)		(14,296	)		(801	)		-			17,742			-
Distributions from consolidated subsidiaries		-			-			732			-			(732	)		-
Equity in earnings of joint ventures		-			-			(4,307	)		-			-			(4,307	)
Distributions from joint ventures		-			-			3,926			-			-			3,926
Deferred rent amortization		-			985			325			-			-			1,310
Amortization of deferred financing cost		-			1,467			-			-			-			1,467
Amortization of bond discount		-			119			-			-			-			119
Loss (gain) on sale and disposal of equipment		-			(2,063	)		466			-			-			(1,597	)
Amortization of cash flow hedge		-			612			-			-			-			612
Stock-based compensation		-			448			1,342			-			-			1,790
Changes in operating assets and liabilities, net of assets acquired and liabilities assumed in purchase transactions:
Accounts receivable		-			-			(27,150	)		(9,315	)		-			(36,465	)
Other current assets		-			(114	)		(1,163	)		(86	)		-			(1,363	)
Other assets		-			(230	)		3			-			-			(227	)
Deferred revenue		-			-			(230	)		-			-			(230	)
Accounts payable and accrued expenses		-			(14,574	)		16,435			8,303			-			10,164
Net cash provided by (used in) operating activities		-			(15,847	)		38,105			1,341			(732	)		22,867
CASH FLOWS FROM INVESTING ACTIVITIES
Purchase of imaging facilities		-			-			(11,529	)		-			-			(11,529	)
Purchase of property and equipment		-			(5,315	)		(18,989	)		(611	)		-			(24,915	)
Proceeds from insurance claims on damaged equipment		-			2,151			318			-			-			2,469
Proceeds from sale of equipment		-			-			291			-			-			291
Purchase of equity interest in joint ventures		-			-			(1,500	)		-			-			(1,500	)
Net cash used in investing activities		-			(3,164	)		(31,409	)		(611	)		-			(35,184	)
CASH FLOWS FROM FINANCING ACTIVITIES
Principal payments on notes and leases payable		-			(3,700	)		(6,731	)		(171	)		-			(10,602	)
Deferred financing costs		-			(217	)		-			-			-			(217	)
Distributions to noncontrolling interests		-			-			-			(803	)		732			(71	)
Proceeds from, net of payments, on line of credit		-			25,700			-			-			-			25,700
Payments to counterparties of interest rate swaps, net of amounts received		-			(3,219	)		-			-			-			(3,219	)
Proceeds from issuance of common stock		-			242			-			-			-			242
Net cash provided by (used in) financing activities		-			18,806			(6,731	)		(974	)		732			11,833
EFFECT OF EXCHANGE RATE CHANGES ON CASH		-			-			35			-			-			35
NET DECREASE IN CASH AND CASH EQUIVALENTS		-			(205	)		-			(244	)		-			(449	)
CASH AND CASH EQUIVALENTS, beginning of period		-			205			-			422			-			627
CASH AND CASH EQUIVALENTS, end of period	$	-		$	-		$	-		$	178		$	-		$	178

RADNET, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
For The Six Months Ended June 30, 2010
(in thousands)

(unaudited)

				Subsidiary			Guarantor			Non-Guarantor
	Parent			Issuer			Subsidiaries			Subsidiaries			Eliminations			Consolidated
CASH FLOWS FROM OPERATING ACTIVITIES
Net income (loss)	$	(15,867	)	$	(15,867	)	$	8,833		$	385		$	6,692		$	(15,824	)
Adjustments to reconcile net income (loss) to net cash provided by (used in) operating activities:
Depreciation and amortization		-			6,648			20,433			70			-			27,151
Provision for bad debts		-			2,607			12,307			1,231			-			16,145
Equity in (earnings) loss of consolidated subsidiaries		15,867			(8,833	)		(342	)		-			(6,692	)		-
Distributions from consolidated subsidiaries		-			-			394			-			(394	)		-
Equity in earnings of joint ventures		-			-			(3,832	)		-			-			(3,832	)
Distributions from joint ventures		-			-			5,758			-			-			5,758
Deferred rent amortization		-			892			645			-			-			1,537
Amortization of deferred financing cost		-			1,365			-			-			-			1,365
Amortization of bond discount		-			51			-			-			-			51
Loss on sale and disposal of equipment		-			72			83			-			-			155
Loss on extinguishment of debt		-			9,871			-			-			-			9,871
Stock-based compensation		-			507			1,520			-			-			2,027
Changes in operating assets and liabilities, net of assets acquired and liabilities assumed in purchase transactions:
Accounts receivable		-			-			(9,873	)		(9,094	)		-			(18,967	)
Other current assets		-			(2,334	)		(357	)		(299	)		-			(2,990	)
Other assets		-			968			(1,354	)		-			-			(386	)
Accounts payable and accrued expenses		-			(23,735	)		15,998			8,172			-			435
Net cash provided by (used in operating activities		-			(27,788	)		50,213			465			(394	)		22,496
CASH FLOWS FROM INVESTING ACTIVITIES
Purchase of imaging facilities		-			(1,260	)		(28,549	)		-			-			(29,809	)
Purchase of property and equipment		-			(5,853	)		(14,945	)		(20	)		-			(20,818	)
Net cash used in investing activities		-			(7,113	)		(43,494	)		(20	)		-			(50,627	)
CASH FLOWS FROM FINANCING ACTIVITIES
Principal payments on notes and leases payable		-			(4,615	)		(6,719	)		-			-			(11,334	)
Repayment of debt		-			(412,000	)		-			-			-			(412,000	)
Proceeds from borrowings		-			482,360			-			-			-			482,360
Deferred financing costs		-			(17,239	)		-			-			-			(17,239	)
Distributions to noncontrolling interests		-			-			-			(445	)		394			(51	)
Payments to counterparties of interest rate swaps, net of amounts received		-			(3,272	)		-			-			-			(3,272	)
Proceeds from issuance of common stock		-			49			-			-			-			49
Net cash provided by (used in) financing activities		-			45,283			(6,719	)		(445	)		394			38,513
NET INCREASE IN CASH AND CASH EQUIVALENTS		-			10,382			-			-			-			10,382
CASH AND CASH EQUIVALENTS, beginning of period		-			10,094			-			-			-			10,094
CASH AND CASH EQUIVALENTS, end of period	$	-		$	20,476		$	-		$	-		$	-		$	20,476