RadNet, Inc. - FORM 8-K/A - EX-99.2

Attached files

file	filename
8-K/A - RadNet, Inc.	v205858_8ka.htm
EX-23.1 - RadNet, Inc.	v205858_ex23-1.htm
EX-99.1 - RadNet, Inc.	v205858_ex99-1.htm

Exhibit 99.2

Unaudited Pro Forma Condensed Consolidated Financial Statements

On October 1, 2010, Radnet, Inc. ("RadNet") completed its acquisition of Image Medical Corporation, parent of eRAD Inc. (“eRAD”). The following unaudited pro forma condensed consolidated financial statements have been prepared to give effect to the completed acquisition, which was accounted for as an acquisition.

The unaudited pro forma condensed consolidated balance sheet as of September 30, 2010, and the unaudited pro forma condensed consolidated statements of operations for the nine months ended September, 2010 and the year ended December 31, 2009, are presented herein. The unaudited pro forma condensed consolidated balance sheet was prepared using the historical balance sheets of RadNet and eRAD as of September 30, 2010. The unaudited pro forma condensed consolidated statements of operations were prepared using the historical statements of operations of RadNet and eRAD for the nine months ended September 30, 2010 and for the year ended December 31, 2009.

The unaudited pro forma condensed consolidated balance sheet gives effect to the acquisition as if it had been completed on September 30, 2010, and consolidates the unaudited condensed balance sheet of RadNet and eRAD. The unaudited pro forma condensed consolidated statements of operations for the nine months ended September 30, 2010 and for the year ended December 31, 2009 give effect to the acquisition as if it had occurred on January 1, 2009.

The unaudited pro forma condensed consolidated financial statements presented are based on the assumptions and adjustments described in the accompanying notes. The unaudited pro forma condensed consolidated financial statements are presented for illustrative purposes and do not purport to represent what the financial position or results of operations actually would have been if the events described above occurred as of the dates indicated or what such financial position or results would be for any future periods. The unaudited pro forma condensed consolidated financial statements, and the accompanying notes, are based upon the respective historical consolidated financial statements of RadNet and eRAD, and should be read in conjunction with RadNet’s historical financial statements and related notes, RadNet’s "Management's Discussion and Analysis of Financial Condition and Results of Operation" contained in RadNet’s Annual Report on Form 10-K for the year ended December 31, 2009, and eRAD’s financial statements presented herein.

RADNET, INC.

UNAUDITED PRO FORMA CONDENSED CONSOLIDATED BALANCE SHEETS

(IN THOUSANDS)

As of September 30 ,2010

							Pro forma			Pro forma
	RadNet			eRAD			adjustments			combined

ASSETS
CURRENT ASSETS
Cash and cash equivalents	$	10,094		$	51		$	(9,391	)(a)	$	754
Accounts receivable, net		87,825			733			-			88,558
Prepaid expenses and other current assets		9,990			57			-			10,047
Total current assets		107,909			841			(9,391	)		99,359
PROPERTY AND EQUIPMENT, NET		182,571			291			(105	)		182,757
OTHER ASSETS
Goodwill		106,502			-			7,287	(b)		113,789
Other intangible assets		54,313			-			2,831	(b)		57,144
Deferred financing costs, net		8,229			-			-			8,229
Investment in joint ventures		18,741			-			-			18,741
Deposits and other		2,406			6			-			2,412
Total assets	$	480,671		$	1,138		$	622		$	482,432
LIABILITIES AND EQUITY DEFICIT
CURRENT LIABILITIES
Accounts payable and accrued expenses	$	69,641		$	628		$	-		$	70,269
Deferred compensation payable		-			2,031			(2,031	)(c)		-
Deferred revenue		-			1,361			-			1,361
Due to affiliates		7,456			-			-			7,456
Current portion of notes payable		6,927			6,118			(6,118	)(d)		6,927
Current portion of deferred rent		560			4			-			564
Obligations under capital leases, current portion		14,121			9			-			14,130
Total current liabilities		98,705			10,150			(8,148	)		100,706
LONG-TERM LIABILITIES
Deferred rent, net of current portion		8,920			10			-			8,930
Deferred taxes		277			-			-			277
Notes payable, net of current portion		416,699			-			-			416,699
Notes payable to eRAD shareholders		-			-			2,250	(e)		2,250
Obligations under capital leases, net of current portion		13,568			7			-			13,575
Other non-current liabilities		17,263			-			-			17,263
Total liabilities		555,432			10,167			(5,898	)		559,701
COMMITMENTS AND CONTINGENCIES
EQUITY DEFICIT
Common stock		4			-			-			4
Paid-in-capital		156,758			4,460			(4,460	)(f)		156,758
Accumulated other comprehensive loss		(1,588	)		-			-			(1,588	)
Accumulated deficit		(229,989	)		(13,489	)		10,981	(g)		(232,497	)
Total Radnet, Inc.'s equity deficit		(74,815	)		(9,029	)		6,521			(77,323	)
Noncontrolling interests		54			-			-			54
Total equity deficit		(74,761	)		(9,029	)		6,521			(77,269	)
Total liabilities and equity deficit	$	480,671		$	1,138		$	622		$	482,432

See accompanying notes to the unaudited pro forma condensed consolidated financial statements.

RADNET, INC.

UNAUDITED PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS

(IN THOUSANDS EXCEPT SHARE DATA)

For the nine months ended September 30, 2010

						Pro forma			Pro forma
	RadNet			eRAD		adjustments			combined

NET REVENUE	$	403,222		$	3,761	$	-		$	406,983

OPERATING EXPENSES
Cost of operations		311,478			3,576		-			315,054
Depreciation and amortization		40,153			57		693	(i)		40,903
Provision for bad debts		24,603			-		-			24,603
Loss on sale of equipment		606			-		-			606
Severance costs		731			-		-			731

Total operating expenses		377,571			3,633		693			381,897

INCOME FROM OPERATIONS		25,651			127		(693	)		25,085

OTHER EXPENSES
Interest expense		35,477			48		386	(h)		35,911
Loss on extinguishment of debt		9,871			-		-			9,871
Other expenses (income)		1,971			6		-			1,977

Total other expenses		47,319			55		386			47,760

LOSS BEFORE INCOME TAXES AND EQUITY
IN EARNINGS OF JOINT VENTURES		(21,668	)		73		(1,079	)		(22,674	)

Provision for income taxes		(523	)		2		-			(521	)
Equity in earnings of joint ventures		6,114					-			6,114
NET LOSS		(16,077	)		75		(1,079	)		(17,081	)
Net income attributable to noncontrolling interests		75			-		-			75
NET LOSS ATTRIBUTABLE TO RADNET, INC.
COMMON STOCKHOLDERS	$	(16,152	)	$	75	$	(1,079	)	$	(17,156	)

BASIC AND DILUTED NET LOSS PER SHARE
ATTRIBUTABLE TO RADNET, INC.
COMMON STOCKHOLDERS	$	(0.44	)						$	(0.47	)

WEIGHTED AVERAGE SHARES OUTSTANDING
Basic and diluted		36,755,781								36,755,781

See accompanying notes to the unaudited pro forma condensed consolidated financial statements.

RADNET, INC.

UNAUDITED PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS

(IN THOUSANDS EXCEPT SHARE DATA)

For the year ended December 31, 2009

							Pro forma			Pro forma
	RadNet			eRAD			adjustments			combined

NET REVENUE	$	524,368		$	4,771		$	-		$	529,139

OPERATING EXPENSES
Cost of operations		397,753			5,220			-			402,973
Depreciation and amortization		53,800			62			924	(i)		54,786
Provision for bad debts		32,704			-			-			32,704
Loss on sale of equipment		523			-			-			523
Severance costs		731			-			-			731

Total operating expenses		485,511			5,282			924			491,717

INCOME FROM OPERATIONS		38,857			(511	)		(924	)		37,422

OTHER EXPENSES
Interest expense		49,193			197			505	(h)		49,895
Gain on bargain purchase		(1,387	)		-			-			(1,387	)
Other expenses (income)		1,239			(4	)		-			1,235

Total other expenses		49,045			193			505			49,743

LOSS BEFORE INCOME TAXES AND EQUITY
IN EARNINGS OF JOINT VENTURES		(10,188	)		(704	)		(1,429	)		(12,321	)

Provision for income taxes		(443	)		(12	)		-			(455	)
Equity in earnings of joint ventures		8,456						-			8,456
NET LOSS		(2,175	)		(716	)		(1,429	)		(4,320	)
Net income attributable to noncontrolling interests		92						-			92
NET LOSS ATTRIBUTABLE TO RADNET, INC.
COMMON STOCKHOLDERS	$	(2,267	)	$	(716	)	$	(1,429	)	$	(4,412	)

BASIC AND DILUTED NET LOSS PER SHARE
ATTRIBUTABLE TO RADNET, INC.
COMMON STOCKHOLDERS	$	(0.06	)							$	(0.12	)

WEIGHTED AVERAGE SHARES OUTSTANDING
Basic and diluted		36,047,033									36,047,033

See accompanying notes to the unaudited pro forma condensed consolidated financial statements.

RadNet, Inc.

Notes to Unaudited Pro Forma Condensed Consolidated Financial Statements

Note 1. Basis of Presentation

The unaudited pro forma condensed consolidated statements of operations of RadNet, Inc. (“RadNet”) for the nine months ended September 30, 2010 and the year ended December 31, 2009 give effect to the acquisition of Image Medical Corporation, parant of eRAD, Inc. (“eRAD”) as if it had been completed on January 1, 2009. The unaudited pro forma condensed consolidated balance sheet as of September 30, 2010 gives effect to the acquisition of eRAD as if it had occurred on September 30, 2010.

The unaudited pro forma condensed consolidated statements of operations and unaudited pro forma condensed consolidated balance sheet were derived by adjusting RadNet’s historical financial statements for the acquisition of eRAD. The unaudited pro forma condensed consolidated balance sheet and unaudited pro forma condensed consolidated statement of operations are provided for informational purposes only and should not be construed to be indicative of RadNet’s financial position or results of operations had the transaction been consummated on the dates indicated and do not project RadNet’s financial position or results of operations for any future period or date.

The unaudited pro forma condensed consolidated balance sheet and unaudited condensed consolidated statements of operations and accompanying notes should be read in conjunction with RadNet’s historical financial statements and related notes, RadNet’s “Management’s Discussion and Analysis of Financial Condition and Results of Operation” contained in RadNet’s Annual Report on Form 10-K for the year ended December 31, 2009, and eRAD’s financial statements presented herein.

Note 2. Preliminary Purchase Price

The unaudited pro forma condensed consolidated financial statements reflect a purchase price of $10,750,000. RadNet paid $8,500,000 of the purchase price in cash, and paid the remainder of the purchase price through the issuance of promissory notes to the shareholders of eRAD totaling $2,250,000.

The preliminary purchase price allocation as of September 30, 2010, subject to change pending completion of the final valuation and analysis, is as follows (in thousands):

Tangible assets	$	1,138
Goodwill		7,287
Developed technology and in-process R&D		2,688
Trade name and customer relationships		1,655

Total assets acquired		12,768
Liabilities assumed		(2,018	)
Net assets acquired	$	10,750

Goodwill represents the excess of the purchase price over the fair value of the net assets acquired. Developed technology is being amortized on a straight-line basis over five years.

Note 3. Pro Forma Adjustments

The following pro forma adjustments are based upon management’s preliminary estimates of the value of the tangible and intangible assets acquired. These estimates are subject to finalization.

(a)

Represents the funds used by RadNet to fund its purchase of eRAD.

(b)

Represents $7,287,000 of goodwill and $2,831,000 of other intangible assets, net of accumulated amortization, resulting from the transaction, as if the acquisition had been completed on October 1, 2010. The final valuation of the purchase price allocation between goodwill and identifiable intangible assets has not yet been completed. These amounts represent RadNet’s best estimates and are subject to change pending completion of the final valuation and analysis.

(c)

Represents obligations under a deferred compensation policy that were settled using part of the $10,750,000 purchase price.

(d)

Represents loans payable to certain shareholders of eRAD that were settled using part of the $10,750,000 purchase price.

(e)

Represents promissory notes issued to the shareholders of eRAD as explained in Note 2 above.

(f)

Represents the elimination of the capital stock of eRAD upon RadNet’s purchase of eRAD.

(g)

Represents the elimination of eRAD’s accumulated deficit upon RadNet’s purchase of eRAD, as well as the interest expense incurred by RadNet to fund its purchase of eRAD, and depreciation and amortization expense on tangible and intangible assets purchased from eRAD.

(h)

Represents the interest expense incurred by RadNet to fund its purchase of eRAD.

(i)

Represents depreciation and amortization expense on tangible and intangible assets purchased from eRAD.

RadNet, Inc. - FORM 8-K/A - EX-99.2 - December 17, 2010

Attached files

RadNet, Inc. Reports