##### Table of Contents





UNITED STATES SECURITIES AND
    EXCHANGE COMMISSIONWashington, D.C.
    20549
     Form 10-K
      (Mark One)þ

ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
    SECURITIES EXCHANGE ACT OF 1934For the fiscal year ended
    December 31,
    2009ORo

TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
    SECURITIES EXCHANGE ACT OF 1934For the transition period
    from          to   Commission File Number
    001-33815
     Virtual Radiologic
    Corporation
 (Exact name of registrant as
    specified in its charter)
      Delaware(State or other jurisdiction
    of
    incorporation or organization)

27-0074530(IRS Employer
    Identification No.)11995 Singletree Lane, Suite 500
    Eden Prairie, Minnesota(Address of principal
    executive offices)

55344(Zip
    code)   (952) 595-1100
 (Registrants telephone
    number, including area code)
      Securities
    registered pursuant to Section 12(b) of the Act:
  Title of Each Class:

Name of Each Exchange on Which Registered:Common Stock, par value $0.001 per share


NASDAQ Global Market   Securities registered pursuant to Section 12(g) of the
    Act:
 None
      o þ
  o þ
  þ o
  Regulation S-T o o
  Regulation S-K Form 10-K Form 10-K. o
  12b-2
  Large
    accelerated
    filer o
    Accelerated
    filer o
    Non-accelerated
    filer o
    Smaller reporting
    company þ (Do not check if a smaller
    reporting company)
  Rule 12b-2 o þ
      DOCUMENTS
    INCORPORATED BY REFERENCE
  Form 10-K
  Form 10-K.




---



##### 





TABLE OF
    CONTENTS
   
 Part ISpecial Note Regarding Forward-Looking
    Statements


3Item 1


Business


4Item 1A.


Risk Factors


13Item 1B.


Unresolved Staff Comments


23Item 2.


Properties


23Item 3.


Legal Proceedings


23Item 4.


Submission of Matters to a Vote of Security
    Holders


24Part IIItem 5.


Market for Registrants Common Stock,
    Related Stockholder Matters and Issuer Purchases of Equity
    Securities


24Item 6.


Selected Consolidated Financial Data


26Item 7.


Managements Discussion and Analysis of
    Financial Condition and Results of Operations


27Item 7A.


Quantitative and Qualitative Disclosures About
    Market Risk


42Item 8.


Consolidated Financial Statements and
    Supplementary Data


43Item 9.


Changes in and Disagreements with Accountants on
    Accounting and Financial Disclosure


75Item 9A.


Controls and Procedures


75Item 9B.


Other Information


76Part IIIItem 10.


Directors, Executive Officers and Corporate
    Governance


77Item 11.


Executive Compensation


77Item 12.


Security Ownership of Certain Beneficial Owners
    and Management and Related Stockholder Matters


77Item 13.


Certain Relationships and Related Transactions,
    and Director Independence


78Item 14.


Principal Accounting Fees and Services


78Part IVItem 15.


Exhibits, Financial Statement Schedules


78Signatures


84EX-10.9EX-10.10EX-10.11EX-10.12EX-10.13EX-10.14EX-10.15EX-21.1EX-23.1EX-23.2EX-31.1EX-31.2EX-32.1EX-32.2   2




---



##### Table of Contents



PART I Special
    Note Regarding Forward-Looking Statements  Form 10-K
 3




---



##### Table of Contents



ITEM 1.
    Business  Overview
    (952) 595-1100.
  Our
    Corporate Structure
          Our
    Services
   4




---



##### Table of Contents



on-site
  Scope of Coverage. off-hours on-site
  Preliminary and Final Reads.
  Turn Around Time.
  Quality Assurance Process.
  Our
    Operations
  Our
    Medical Practice
  Our Independent Contractor Physicians.
   5




---



##### Table of Contents



Licensing and Credentialing.
    Our
    Workflow Technologies and Operations Center
  Technical Infrastructure.
  Network and Workflow Overview.
  
    Site Implementation  In conjunction with each
    new customer implementation, our site-implementation engineers
    establish firewall permissions for customer access to our
    web-based RIS and configure a VPN circuit to transfer digital
    imaging and communications. Upon successful testing of the image
    transfers and order entry functions, the customer may begin to
    use our services.
    Requisition of Reads  When a radiological
    procedure is performed, the radiology technologist at the
    hospital transmits the patient images to us. A corresponding
    order is created within our web-based RIS that is accessible on
    the technologists computer screen at the hospital.
    Image Transmission and Assignment 
    Radiological images and related data are encrypted and
    transmitted securely at high speed over the Internet to
    vRads PACS and are assigned to an independent contractor
    physician that is appropriately licensed and privileged.
    Reports and Delivery  Our independent
    contractor physicians are presented with orders on their work
    list based on aging, examine the images using vRad PACS, and
    report their findings utilizing a voice recognition dictation
    system integrated with our RIS to dictate a detailed report.
    When the report has been completed, the radiologist
    electronically signs the report, and the report is immediately
    posted in our RIS and is accessible at the facility for viewing.
    The report is also simultaneously faxed to the hospital, or, in
    cases in which we have established an integration into the
    hospitals health information system, the report is
    transmitted via that integration.  Software Development.
 6




---



##### Table of Contents



HIPAA Security Compliance/Disaster
    Recovery.
  Operations Center.
  Sales
    and Marketing
      Our
    Customers and Customer Service
  fee-for-service
    Our
    Competition
      
    Customers  We compete to attract and retain
    customers primarily through the quality of our services, the
    reliability of our coverage, the ability to perform preliminary
    and final interpretations, our ability to provide a billing
    solution for final reads that complies with applicable Medicare,
    Medicaid and third party payer requirements, the number and
    quality and subspecialty expertise of our independent contractor
    physicians and on price. 7




---



##### Table of Contents




    Radiologists  We compete to attract and retain
    radiologists primarily through the flexibility in lifestyle we
    offer, cash and equity compensation, the administrative support
    services we offer, our radiologist technology applications and
    systems, and our reputation.  Governmental
    Regulation and Oversight
    Physician Licensure Laws.
  Corporate Practice of Medicine.
   8




---



##### Table of Contents



Fee Splitting.
  Medicare and Medicaid Reimbursement
    Programs.
  fee-for-service
  Federal False Claims Act.
     9




---



##### Table of Contents



Federal and State Anti-kickback
    Prohibitions. and/or
  Physician Self-Referral Prohibitions.
  Medicare Anti-Markup Rule.
  Health Insurance Portability and Accountability Act of
    1996.
 10




---



##### Table of Contents



Federal Deficit Reduction Act of 2005.
 11




---



##### Table of Contents



Medical Device Regulation.
        Intellectual
    Property
        Employees
    and Independent Contractor Physicians
   12




---



##### Table of Contents



Website
  Form 10-K, Form 10-Q, Form 8-K, 1-800-SEC-0330, http://www.sec.gov.
  ITEM 1A.
    Risk
    Factors  Our business, financial condition or results of operations
    could be materially adversely affected by any of the risks and
    uncertainties described below. Additional risks not presently
    known to us, or that we currently deem immaterial, may also
    impair our business, financial condition or results of
    operations.
  The
    number of reads we perform may be affected by a continued
    general decline in economic conditions.
    Current
    health care reform initiatives targeting diagnostic imaging
    could adversely impact our customers or the overall imaging
    market, resulting in an adverse impact on our
    business.
    The
    industry in which we operate is highly competitive and has
    experienced pricing pressure, which may result in reduced
    revenue and reduced market share.
   13




---



##### Table of Contents



Our
    inability to effectively manage our growth could adversely
    affect our business and our operating results.
      We may
    in the future become involved in intellectual property rights
    claims, which could harm our business and operating
    results.
    If we
    are unable to recruit and retain a sufficient number of
    qualified independent contractor physicians, our future growth
    would be limited and our business and operating results would be
    negatively impacted.
    If we
    are unable to obtain proper physician licenses or hospital
    privileges on behalf of our independent contractor physicians,
    or if our independent contractor physicians lose those licenses
    or privileges, our business, financial condition and results of
    operations may be negatively impacted.
   14




---



##### Table of Contents



The
    forthcoming potential loss of our ability to leverage our Joint
    Commission accreditation for privileging purposes, or any future
    loss of Joint Commission accreditation could negatively impact
    our business and operating results.
            We are
    dependent upon our engagement with a physician who is properly
    licensed to oversee our medical practice.
  day-to-day
  We are
    also dependent on our management team, and the loss of any key
    member of this team may prevent us from implementing our
    business plan in a timely manner.
    day-to-day
 15




---



##### Table of Contents



As a
    result of our corporate structure, we are highly dependent upon
    our Affiliated Medical Practices, which we do not
    own.
    Interruptions
    or delays in our or our customers information systems or
    in network or related services provided by third party suppliers
    could impair the delivery of our services and harm our
    business.
    If our
    security measures are breached and unauthorized access is
    obtained to patient or customer data, we may face liabilities
    and our system may be perceived as not being secure, causing
    customers to curtail or stop using our services, which could
    lead to a decline in revenues.
    Any
    failure to protect our intellectual property rights could impair
    its value and our competitive advantage.
   16




---



##### Table of Contents



If our
    arrangements with our independent contractor physicians or our
    customers are found to violate state laws prohibiting the
    practice of medicine by general business corporations or fee
    splitting, our business, financial condition and ability to
    operate in those states could be adversely
    affected.
    Non-compliance
    with federal and state anti-kickback laws could affect our
    business, operations or financial condition.
  and/or
  Federal
    or state self-referral regulations could impact our arrangements
    with our independent contractor physicians.
   17




---



##### Table of Contents



Any
    lawsuit against us or our customers under the Federal False
    Claims Act, and the outcome of any such lawsuit could have a
    material adverse effect on our business, financial condition and
    results of operations.
    and/or
       18




---



##### Table of Contents



Medicare
    and Medicaid rules governing reassignment of payments could
    affect our customers ability to collect fees for final
    interpretation services provided by our independent contractor
    physicians and our ability to market these services to our
    customers.
  fee-for-service and/or
  We are
    subject to medical device regulations applicable to vRad PACS
    and our failure to maintain regulatory clearance for this
    software or to maintain regulatory compliance as a medical
    device establishment could adversely impact our
    business.
        Future
    changes in healthcare regulation are difficult to predict and
    may constrain or require us to restructure our operations, which
    could negatively impact our business and operating
    results.
   19




---



##### Table of Contents



fee-for-service
    Non-compliance
    with state and federal regulations concerning the privacy and
    security of patient information may adversely affect our
    business, financial condition or operations.
   20




---



##### Table of Contents



Changes
    in the rules and regulations governing Medicare and
    Medicaids payment for medical services could affect our
    revenues, particularly with respect to final
    reads.
  fee-for-
  Our
    business could be materially affected if a HHS-OIG study results
    in adverse modifications to Medicare payments for emergency room
    imaging.
    Although
    we maintain medical liability insurance covering all of our
    independent contractor physicians, our Affiliated Medical
    Practices and our company, we are subject to medical malpractice
    claims and other lawsuits that may require us to pay significant
    damages if not covered by insurance.
    If we
    are unable to retain our customers because they terminate their
    contracts with us or allow those contracts to lapse, our
    operating results and financial condition may be adversely
    affected.
    Because
    our contracts with our customers contain fixed prices, we are
    unable to pass along any increase in our expenses to our
    customers during their contract term.
   21




---



##### Table of Contents



We may
    be subject to less favorable levels of payment based upon third
    party payer fee schedules.
    If we
    acquire any companies or technologies in the future, they could
    prove difficult to integrate, disrupt our business, dilute
    stockholder value and adversely affect our operating
    results.
    
    difficulties in integrating operations, technologies, services
    and personnel;
    diversion of financial and management resources from existing
    operations;
    risk of entering new markets;
    potential write-offs of acquired assets;
    potential loss of key employees; and
    inability to generate sufficient revenue to offset acquisition
    costs.      Our
    operating results are subject to seasonal fluctuations, which
    make our results difficult to predict and could cause our
    performance to fall short of quarterly
    expectations.
   22




---



##### Table of Contents



If we
    are unable to maintain an effective system of internal controls,
    our ability to report our financial results in a timely and
    accurate manner, and to comply with Sections 302 and 404 of
    the Sarbanes-Oxley Act of 2002, may be adversely
    affected.
      ITEM 1B.
    Unresolved
    Staff Comments    ITEM 2.
    Properties    ITEM 3.
    Legal
    Proceedings       23




---



##### Table of Contents



ITEM 4.
    Submission
    of Matters to a Vote of Security Holders   PART II  ITEM 5.
    Market
    for Registrants Common Stock, Related Stockholder Matters
    and Issuer Purchases of Equity Securities  Market
    for Our Common Stock
    Common Stock PriceHigh

LowFiscal Year Ended December 31, 2008First Quarter

$
21.10


$
13.88Second Quarter


18.44



9.52Third Quarter


16.17



6.74Fourth Quarter


9.50



5.97Fiscal Year Ended December 31, 2009First Quarter

$
9.25


$
4.50Second Quarter


9.90



6.14Third Quarter


13.17



9.02Fourth Quarter


13.70



10.25   Holders
    of Record
    Dividends
    Issuer
    Purchases of Equity Securities
   24




---



##### Table of Contents



Performance
    Graph
    
  Recent
    Sales of Unregistered Securities
    Securities
    Authorized for Issuance Under Equity Compensation
    Plans
   25




---



##### Table of Contents



ITEM 6.
    Selected
    Consolidated Financial Data  The following selected consolidated financial data should be
    read in conjunction with Managements Discussion and
    Analysis of Financial Condition and Results of Operations
    and our consolidated financial statements included elsewhere in
    this report. The Consolidated Statements of Operations data for
    the fiscal years ended December 31, 2009, 2008 and 2007,
    and the Consolidated Balance Sheets data as of December 31,
    2009 and 2008 was derived from our audited consolidated
    financial statements included elsewhere in this report. The
    Consolidated Statements of Operations for the fiscal years ended
    December 31, 2006 and 2005 and the Consolidated Balance
    Sheets data as of December 31, 2007, 2006 and 2005 was
    derived from our audited consolidated financial statements not
    included in this report. The financial data presented below as
    of and for the years ended December 31, 2009, 2008, 2007
    and 2006 reflects the consolidated operations of vRad and our
    Affiliated Medical Practices. The financial data presented below
    as of and for the year ended December 31, 2005 reflects the
    consolidated operations of Virtual Radiologic Consultants, Inc.,
    our predecessor corporation, and VRP. The historical results
    presented below are not necessarily indicative of financial
    results to be achieved in future periods.
  Year Ended December 31,2009

2008

2007

2006

2005(in thousands, except per share data)Consolidated Statements of Operation Data:Revenue

$
120,736


$
106,567


$
86,243


$
54,099


$
26,991Operating costs and expenses(1)


107,915



92,780



77,013



53,594



29,816Operating income (loss)


12,821



13,787



9,230



505



(2,825
)Net income (loss) attributable to Virtual Radiologic Corporation


7,915



8,454



3,451



(529
)


(1,465
)Net income (loss) available to common stockholders


7,915



8,454



(20,272
)


(11,966
)


(29,646
)Earnings (loss) per common share:Basic

$
0.50


$
0.51


$
(2.31
)

$
(1.80
)

$
(4.74
)Diluted

$
0.48


$
0.50


$
(2.31
)

$
(1.80
)

$
(4.74
)Cash flow data:Net cash provided by (used in) operating activities

$
25,975


$
14,496


$
6,861


$
3,977


$
(1,794
)Net cash provided by (used in) investing activities


3,322



(25,135
)


(5,093
)


1,208



(7,754
)Net cash provided by (used in) financing activities


1,686



(3,668
)


25,761



(2,315
)


12,151Consolidated Balance Sheet Data:Cash, cash equivalents and short-term investments

$
50,163


$
29,316


$
33,487


$
5,958


$
8,180Total assets


94,462



71,001



59,436



25,649



17,555Total stockholders equity (deficit)


69,334



56,517



50,338



(34,410
)


(26,385
)Stock Data:Weighted average common shares outstanding  diluted(2)


16,283



16,976



8,762



6,640



6,254Dividends declared per share










3.00







Series A Cumulative Redeemable Convertible Preferred Stock
    outstanding














3,627



3,627Dividends declared per share










3.00







     (1)
    
    Includes the non-cash stock-based compensation, medical
    malpractice loss reserves, and depreciation and amortization
    charges set forth in the following table:  26




---



##### Table of Contents



Year Ended December 31,2009


2008


2007


2006


2005(in thousands)Professional services:Non-cash stock-based compensation

$
787


$
(479
)

$
3,687


$
3,416


$
1,995Medical malpractice loss reserves


4,669



997











Sales, general and administrative:Non-cash stock-based compensation


2,420



1,544



686



115



Depreciation and amortization


6,863



4,700



2,488



1,351



586Total

$
14,739


$
6,762


$
6,861


$
4,882


$
2,581    (2)
    
    The calculation of weighted average common shares outstanding
    for the years ended December 31, 2005, 2006 and 2007
    excludes the assumed conversion of the shares of Series A
    Cumulative Redeemable Convertible Preferred Stock into shares of
    common stock, because they are anti-dilutive. The calculation of
    weighted average common shares for the years ended
    December 31, 2005, 2006 and 2007 also excludes any other
    potential common stock equivalents that were outstanding during
    the relevant periods, calculated using the treasury stock
    method, because they are anti-dilutive.  ITEM 7.
    Managements
    Discussion and Analysis of Financial Condition and Results of
    Operations  The following discussion and analysis should be read in
    conjunction with our audited consolidated financial statements
    and notes thereto that appear elsewhere in this report. This
    discussion contains forward-looking statements reflecting our
    current expectations that involve risks and uncertainties.
    Actual results may differ materially from those discussed in
    these forward-looking statements due to a number of factors,
    including those set forth in the section entitled Risk
    Factors and elsewhere in this report.
  Overview
      Trends in
    our Business
     27




---



##### Table of Contents



28




---



##### Table of Contents



Results
    of Operations
    Year Ended December 31,2009


2008


2007Revenue


100.0
%


100.0
%


100.0
%Operating costs and expenses:Physician cash compensation expense


43.4



44.4



44.5Physician stock-based compensation expense (income)


0.7



(0.4
)


4.3Medical malpractice liability expense


4.6



2.3



1.8Total professional services


48.7



46.3



50.6Sales, general and administrative


35.0



36.4



35.8Depreciation and amortization


5.7



4.4



2.9Total operating costs and expenses


89.4



87.1



89.3Operating income


10.6



12.9



10.7Total other income (expense)


0.2



0.6



(2.2
)Income before income tax expense


10.8



13.5



8.5Income tax expense


4.3



5.6



4.5Net income


6.5



7.9



4.0Non-controlling interest (income) expense(1)










Net income attributable to Virtual Radiologic Corporation


6.5



7.9



4.0Series A cumulative redeemable convertible preferred stock
    accretion










(11.7
)Series A preferred stock dividend










(15.8
)Net income (loss) available to common stockholders


6.5
%


7.9
%


(23.5
)%     (1)
    
    Non-controlling interest (income) expense represents less than
    0.1% as a percentage of revenue.  Comparison
    of the Years Ended December 31, 2009, 2008 and
    2007
  Revenue
    and/or and/or
 29




---



##### Table of Contents



Key
    Revenue Metrics
  Year Ended December 31,2009

% Change

2008

% Change

2007(in thousands)Revenue

$
120,736



13
%

$
106,567



24
%

$
86,243Reads


2,668,043



21
%


2,200,365



30
%


1,691,859Year-over-year
    change in price per read


(7
)%






(5
)%






(3
)%Same site volume growth(1)


5
%






6
%






18
%Percentage of read revenue from:Final reads


28
%






24
%






24
%Preliminary reads


72
%






76
%






76
%Customers


655



5
%


621



32
%


469Facilities


1,173



14
%


1,026



28
%


804Percentage of U.S. hospitals served


19
%






17
%






13
%     (1)
    
    Same site volume growth measures the percentage increase in the
    number of reads over the comparable prior period generated by a
    facility that has been under contract for at least three months
    at the beginning of the measurement period and remains a
    customer throughout that period.      Operating
    Costs and Expenses
    Professional
    Services
     30




---



##### Table of Contents



Key
    Professional Service Metrics
  Year Ended December 31,2009


% Change


2008


% Change


2007(dollars in thousands)Physician cash compensation expense

$
52,378



10.6
%

$
47,343



23.3
%

$
38,388Physician stock-based compensation expense (income)


787



(264.3
)


(479
)


(113.0
)


3,687Medical malpractice liability expense


5,570



122.9



2,499



63.1



1,532Total professional services

$
58,735



19.0


$
49,363



13.2


$
43,607Radiologists providing services


143



6.7



134



19.6



112Average diagnostic cash compensation per read

$
19.52






$
21.22






$
22.37       Sales,
    General and Administrative
    Year Ended December 31,2009


% Change


2008


% Change


2007(dollars in thousands)Sales, general and administrative expenses

$
42,317



9.3
%

$
38,717



25.2
%

$
30,918      31




---



##### Table of Contents



Depreciation
    and Amortization
    Income
    Tax Expense
       32




---



##### Table of Contents



Quarterly
    Results of Operations (unaudited)
    Three Months EndedDec 31,


Sept 30,


Jun 30,


Mar 31,


Dec 31,


Sept 30,


Jun 30,


Mar 31,2009


2009


2009


2009


2008


2008


2008


2008(in thousands, except per share data)Consolidated Statement of Operations Data:Revenue

$
29,945


$
31,638


$
30,585


$
28,568


$
28,301


$
29,025


$
25,921


$
23,320Total operating costs and expenses(1)


28,197



26,791



26,645



26,282



26,580



23,785



22,458



19,957Operating income


1,748



4,847



3,940



2,286



1,721



5,240



3,463



3,363Other income


63



53



43



56



149



185



89



176Income before income tax expense


1,811



4,900



3,983



2,342



1,870



5,425



3,552



3,539Income tax expense


726



1,874



1,593



950



976



1,859



1,548



1,535Net income


1,085



3,026



2,390



1,392



894



3,566



2,004



2,004Non-controlling interest (income) expense


(22
)


(4
)


4







4



2



4



4Net income attributable to Virtual Radiologic Corporation

$
1,107


$
3,030


$
2,386


$
1,392


$
890


$
3,564


$
2,000


$
2,000Earnings per share:Basic

$
0.07


$
0.19


$
0.15


$
0.09


$
0.06


$
0.21


$
0.12


$
0.12Diluted

$
0.07


$
0.19


$
0.15


$
0.09


$
0.05


$
0.21


$
0.12


$
0.12     (1)
    
    Includes the non-cash stock-based compensation, medical
    malpractice loss reserves, and depreciation and amortization
    charges set forth in the following table:  Three Months EndedDec 31,


Sept 30,


Jun 30,


Mar 31,


Dec 31,


Sept 30,


Jun 30,


Mar 31,2009


2009


2009


2009


2008


2008


2008


2008(in thousands)Professional services:Non-cash stock-based compensation

$
134


$
369


$
427


$
(143
)

$
499


$
(419
)

$
(64
)

$
(495
)Medical malpractice loss reserves


1,461



1,070



836



1,300



997











Sales, general and administrative:Non-cash stock-based compensation


585



558



557



721



423



417



422



282Depreciation and amortization


1,871



1,819



1,723



1,450



1,343



1,286



1,216



855Total
    non-cash
    charges

$
4,051


$
3,816


$
3,543


$
3,328


$
3,262


$
1,284


$
1,574


$
642  33




---



##### Table of Contents



Liquidity
    and Capital Resources
  Cash,
    Cash Equivalents and Short-Term Investments
      Year Ended December 31,2009


2008


2007(in thousands)Net cash provided by operating activities

$
25,975


$
14,496


$
6,861Net cash provided by (used in) investing activities


3,322



(25,135
)


(5,093
)Net cash provided by (used in) financing activities


1,686



(3,668
)


25,761Net increase (decrease) in cash and cash equivalents

$
30,983


$
(14,307
)

$
27,529   Cash
    Flows from Operating Activities
         34




---



##### Table of Contents



Cash
    Flows from Investing Activities
    Cash
    Flows from Financing Activities
      Future
    Liquidity Requirements
    Contractual
    Obligations and Commitments
    Less than


1 - 3


3 - 5


More thanTotal


1 Year


Years


Years


5 Years(in thousands)Operating lease obligations(1)

$
16,745


$
1,816


$
3,292


$
3,371


$
8,266Capital lease obligations(2)


132



43



85



4



Total contractual obligations

$
16,877


$
1,859


$
3,377


$
3,375


$
8,266     (1)
    
    Operating lease commitments consist primarily of our principal
    office space leased in Eden Prairie, Minnesota.(2)
    
    Capital lease obligations include interest. 35




---



##### Table of Contents



Critical
    Accounting Policies and Estimates
    and/or
  Principles
    of Consolidation
     36




---



##### Table of Contents



Condensed
    Consolidating Balance Sheets
    (Unaudited)
  As of December 31, 2009AffiliatedMedicalvRad


Practices


Eliminations


Consolidated(in thousands)Cash and cash equivalents

$
49,159


$
1,004


$



$
50,163Accounts receivable, net


9,706



7,678







17,384Other current assets


34,701



38,629



(68,811
)


4,519Non-current assets


21,898



20



478



22,396Total assets

$
115,464


$
47,331


$
(68,333
)

$
94,462Current liabilities

$
29,673


$
54,212


$
(68,811
)

$
15,074Non-current liabilities


9,576







478



10,054Total liabilities


39,249



54,212



(68,333
)


25,128Stockholders equity (deficiency)


76,215



(6,881
)






69,334Total liabilities and stockholders equity

$
115,464


$
47,331


$
(68,333
)

$
94,462   As of December 31, 2008AffiliatedMedicalvRad


Practices


Eliminations


Consolidated(in thousands)Cash and cash equivalents

$
17,399


$
1,781


$



$
19,180Short-term investment


10,136











10,136Accounts receivable, net


8,842



8,541







17,383Other current assets


20,677



8,223



(24,074
)


4,826Non-current assets


19,292



16



168



19,476Total assets

$
76,346


$
18,561


$
(23,906
)

$
71,001Current liabilities

$
10,014


$
26,566


$
(24,074
)

$
12,506Non-current liabilities


1,810







168



1,978Total liabilities


11,824



26,566



(23,906
)


14,484Stockholders equity (deficiency)


64,522



(8,005
)






56,517Total liabilities and stockholders equity

$
76,346


$
18,561


$
(23,906
)

$
71,001  37




---



##### Table of Contents



Condensed
    Consolidating Statements of Operations
    (Unaudited)
  For the Year Ended December 31, 2009AffiliatedMedicalvRad


Practices


Eliminations


Consolidated(in thousands)Revenue

$
92,968


$
108,526


$
(80,758
)

$
120,736Operating costs and expenses


81,830



106,843



(80,758
)


107,915Operating income


11,138



1,683







12,821Other income


215











215Income before income tax expense


11,353



1,683







13,036Income tax expense


4,583



560







5,143Net income


6,770



1,123







7,893Non-controlling interest income










22



22Net income attributable to Virtual Radiologic Corporation

$
6,770


$
1,123


$
22


$
7,915   For the Year Ended December 31, 2008AffiliatedMedicalvRad


Practices


Eliminations


Consolidated(in thousands)Revenue

$
82,047


$
96,020


$
(71,500
)

$
106,567Operating costs and expenses


67,362



96,918



(71,500
)


92,780Operating income (loss)


14,685



(898
)






13,787Other income


599











599Income (loss) before income tax expense


15,284



(898
)






14,386Income tax expense


5,910



8







5,918Net income (loss)


9,374



(906
)






8,468Non-controlling interest expense










14



14Net income (loss) attributable to Virtual Radiologic Corporation

$
9,374


$
(906
)

$
14


$
8,454   For the Year Ended December 31, 2007AffiliatedMedicalvRad


Practices


Eliminations


Consolidated(In thousands)Revenue

$
65,711


$
82,294


$
(61,762
)

$
86,243Operating costs and expenses


54,292



84,483



(61,762
)


77,013Operating income (loss)


11,419



(2,189
)






9,230Other expense


(1,929
)










(1,929
)Income (loss) before income tax expense


9,490



(2,189
)






7,301Income tax expense (benefit)


3,877



(10
)






3,867Net income (loss)


5,613



(2,179
)






3,434Non-controlling interest income










17



17Net income (loss) attributable to Virtual Radiologic Corporation

$
5,613


$
(2,179
)

$
17


$
3,451  38




---



##### Table of Contents



Revenue
    Recognition and Accounts Receivable
  fee-for-service
  and/or and/or
        Stock-Based
    Compensation
  Employee Stock-Based Compensation.
  Physician Stock-Based Compensation.
 39




---



##### Table of Contents



Medical
    Malpractice Loss Reserves
    Intangible
    Assets and Goodwill
        Income
    Taxes
   40




---



##### Table of Contents



and/or
        Recent
    Accounting Pronouncements
         41




---



##### Table of Contents



ITEM 7A.
    Quantitative
    and Qualitative Disclosure about Market Risk  Foreign
    Currency Exchange Risk
    Interest
    Rate Market Risk
   42




---



##### Table of Contents



ITEM 8.
    Consolidated
    Financial Statements and Supplementary Data  Virtual
    Radiologic Corporation
  INDEX TO
    CONSOLIDATED FINANCIAL STATEMENTS
 Contents
  PageReports of Independent Registered Public
    Accounting Firms


44Consolidated Financial StatementsConsolidated Balance Sheets


47Consolidated Statements of Operations


48Consolidated Statements of Changes in
    Stockholders Equity (Deficiency)


49Consolidated Statements of Cash Flows


50Notes to Consolidated Financial Statements


51    43




---



##### Table of Contents



REPORT OF
    INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM    Internal Control  Integrated Framework
         44




---



##### Table of Contents



Internal Control 
    Integrated Framework
  DELOITTE & TOUCHE LLP
    45




---



##### Table of Contents



REPORT OF
    INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
        
   46




---



##### Table of Contents



VIRTUAL
    RADIOLOGIC CORPORATIONCONSOLIDATED BALANCE SHEETS
  As ofDecember 31,2009


2008(in thousands, except per share data)ASSETSCurrent assets:Cash and cash equivalents

$
50,163


$
19,180Restricted cash


1,751



700Short-term investments






10,136Accounts receivable, net


17,384



17,383Prepaid expenses and other current assets


2,768



4,126Total current assets


72,066



51,525Property, plant and equipment, net


13,489



11,692Intangible assets, net


3,952



5,073Goodwill


858



858Medical malpractice excess loss reserves receivable


1,008



1,288Deferred tax asset


3,084



184Other assets


5



381Total assets

$
94,462


$
71,001LIABILITIES AND STOCKHOLDERS EQUITYCurrent liabilities:Accrued professional services compensation expense

$
5,719


$
5,690Accrued sales, general and administrative compensation expense


4,087



1,383Current deferred tax liability


1,089



1,103Current taxes payable


1,635



Other accrued expenses


1,299



1,848Medical malpractice loss reserves, current


468



1,419Accounts payable and other current liabilities


777



1,063Total current liabilities


15,074



12,506Deferred tenant lease allowance


2,491



Medical malpractice loss reserves


5,101



Medical malpractice excess loss reserves


1,008



1,288Other liabilities


1,454



690Total liabilities


25,128



14,484Commitments and contingencies (Note 12)Virtual Radiologic Corporation stockholders equity:Common stock, $.001 par value; 100,000,000 shares
    authorized at December 31, 2009 and 2008; 15,928,661 and
    15,849,398 shares issued and outstanding at
    December 31, 2009 and 2008, respectively


17



17Additional paid-in capital


102,118



95,881Treasury stock at cost,1,095,490 and 944,760 shares at
    December 31, 2009 and 2008, respectively


(9,306
)


(8,000
)Accumulated deficit


(23,482
)


(31,397
)Accumulated other comprehensive loss


(13
)


(6
)Total Virtual Radiologic Corporation stockholders equity


69,334



56,495Non-controlling interest (See Note 2)






22Total stockholders equity


69,334



56,517Total liabilities and stockholders equity

$
94,462


$
71,001    47




---



##### Table of Contents



VIRTUAL
    RADIOLOGIC CORPORATIONCONSOLIDATED STATEMENTS OF OPERATIONS
  Year Ended December 31,2009


2008


2007(in thousands, except per share data)Revenue

$
120,736


$
106,567


$
86,243Operating costs and expenses:Professional services


58,735



49,363



43,607Sales, general and administrative


42,317



38,717



30,918Depreciation and amortization


6,863



4,700



2,488Total operating costs and expenses


107,915



92,780



77,013Operating income


12,821



13,787



9,230Other income (expense):Interest income


220



599



451Interest expense


(5
)






(2,380
)Total other income (expense)


215



599



(1,929
)Income before income tax expense


13,036



14,386



7,301Income tax expense


5,143



5,918



3,867Net income


7,893



8,468



3,434Non-controlling interest (income) expense


(22
)


14



(17
)Net income attributable to Virtual Radiologic Corporation


7,915



8,454



3,451Series A cumulative redeemable convertible preferred stock
    accretion










(10,127
)Cash dividends paid:Series A preferred stock










(13,596
)Net income (loss) available to common stockholders

$
7,915


$
8,454


$
(20,272
)Earnings (loss) per common share:Basic

$
0.50


$
0.51


$
(2.31
)Diluted

$
0.48


$
0.50


$
(2.31
)Weighted average common shares outstanding:Basic


15,872



16,500



8,762Diluted


16,283



16,976



8,762    48




---



##### Table of Contents



VIRTUAL
    RADIOLOGIC CORPORATIONCONSOLIDATED STATEMENTS OF CHANGES IN
    STOCKHOLDERS EQUITY (DEFICIENCY)
  Accumulated





TotalAdditional








Other





StockholdersCommon Stock


Paid-In


Treasury


Accumulated


Comprehensive


Non-controlling


EquityShares


Amount


Capital


Stock


Deficit


Loss


Interest


(Deficiency)(in thousands)Balance at December 31, 2006


6,719


$
7


$
(31,049
)

$



$
(3,393
)

$



$
25


$
(34,410
)Net income


















3,451











3,451Stock-based compensation for independent contractor physicians










3,687



















3,687Stock-based compensation for employees and directors










686



















686Stock option exercises


2,045



2



1,512



















1,514Excess tax benefits from exercises of stock options










4,780



















4,780Non-controlling interest


























(17
)


(17
)Stock issuance costs










(4,211
)


















(4,211
)Repurchase of common stock


(910
)


(1
)


(10,009
)


















(10,010
)Reissuance of common stock


910



1



10,009



















10,010Series A cumulative redeemable convertible preferred stock
    accretion










(10,127
)


















(10,127
)Warrant exercise


72







1



















1Payment of dividend


















(39,909
)










(39,909
)Common stock issued in initial public offering


4,000



4



63,236



















63,240Series A Preferred Stock conversion to common stock


3,627



3



61,650



















61,653Balance at December 31, 2007


16,463


$
16


$
90,165


$



$
(39,851
)

$



$
8


$
50,338Net income


















8,454











8,454Other comprehensive incomeForeign currency translation adjustments






















(6
)






(6
)Total comprehensive income





























$
8,448Stock-based compensation for independent contractor physicians










(479
)


















(479
)Stock-based compensation for employees and directors










1,544



















1,544Stock option exercises


331



1



313



















314Excess tax benefits from exercises of stock options










4,396



















4,396Non-controlling interest


























14



14Stock issuance costs










(58
)


















(58
)Repurchase of common stock


(945
)










(8,000
)














(8,000
)Balance at December 31, 2008


15,849


$
17


$
95,881


$
(8,000
)

$
(31,397
)

$
(6
)

$
22


$
56,517Net income


















7,915











7,915Other comprehensive incomeForeign currency translation adjustments






















(7
)






(7
)Total comprehensive income





























$
7,908Stock-based compensation for independent contractor physicians










787



















787Stock-based compensation for employees and directors










2,420



















2,420Stock option exercises


230







219



















219Excess tax benefits from exercises of stock options










2,811



















2,811Non-controlling interest


























(22
)


(22
)Repurchase of common stock


(150
)










(1,306
)














(1,306
)Balance at December 31, 2009


15,929


$
17


$
102,118


$
(9,306
)

$
(23,482
)

$
(13
)

$



$
69,334    49




---



##### Table of Contents



VIRTUAL
    RADIOLOGIC CORPORATIONCONSOLIDATED STATEMENTS OF CASH FLOWS
  Year Ended December 31,2009


2008


2007(in thousands)Cash flows from operating activities:Net income

$
7,893


$
8,468


$
3,434Adjustments to reconcile net income to net cash provided by
    operating activities:Provision for doubtful accounts and sales allowances


1,976



879



298Depreciation and amortization


6,863



4,700



2,488Lease abandonment liability


194







Medical malpractice loss reserves


4,647



1,394



(75
)Amortization of debt issuance costs










1,428Loss on disposal and impairment of property, plant and equipment


202



774



114Stock-based compensation for independent contractor physicians


787



(479
)


3,687Stock-based compensation for employees and directors


2,420



1,544



686Deferred income taxes


(2,914
)


659



197Changes in operating assets and liabilities:Accounts receivable


(1,953
)


(5,212
)


(3,748
)Prepaid and other assets


1,424



520



(2,523
)Accrued expenses


2,590



1,329



1,390Current taxes payable


1,635







(608
)Accounts payable and other liabilities


211



(80
)


93Net cash provided by operating activities


25,975



14,496



6,861Cash flows from investing activities:Purchases of property, plant and equipment


(5,775
)


(8,429
)


(5,051
)Cash paid for acquisition, net of cash acquired






(6,447
)


Purchase of short-term investment






(10,136
)


Proceeds from maturity of short-term investments


10,136







Restricted cash


(1,051
)






Other, net


12



(123
)


(42
)Net cash provided by (used in) investing activities


3,322



(25,135
)


(5,093
)Cash flows from financing activities:Payments on capital leases


(28
)






(21
)Payment of offering costs






(306
)


(2,139
)Proceeds from issuance of common stock










63,240Proceeds from stock option exercises


209



242



1,238Repurchases of common stock


(1,306
)


(8,000
)


(10,010
)Reissuance of common stock










10,010Excess tax benefits from exercises of stock options


2,811



4,396



4,780Proceeds from the issuance of debt










41,000Payment of debt










(41,000
)Payment of debt issuance costs










(1,428
)Cash dividends paid










(39,909
)Net cash provided by (used in) financing activities


1,686



(3,668
)


25,761Net increase (decrease) in cash and cash equivalents


30,983



(14,307
)


27,529Cash and cash equivalents:Beginning of period


19,180



33,487



5,958End of period

$
50,163


$
19,180


$
33,487Supplemental disclosure of cash flow information:Cash paid for interest

$
6


$



$
940Cash paid (received) for income taxes, net


2,656



(900
)


1,298Significant non-cash transactions:Medical malpractice excess receivable


1,008



1,288



Medical malpractice excess liability


1,008



1,288



Stock issuance costs reclassified to additional paid-in capital










4,211Series A preferred stock accretion










10,127Series A preferred stock conversion to common stock










61,653    50




---



##### Table of Contents



VIRTUAL
    RADIOLOGIC CORPORATION
  NOTES TO
    CONSOLIDATED FINANCIAL STATEMENTS
 FOR THE YEARS ENDED DECEMBER 31, 2009, 2008, AND 2007
  1.
    Business
    Overview          2.
    Summary
    of Significant Accounting Policies  Principles
    of Consolidation and Basis of Presentation
   51




---



##### Table of Contents



VIRTUAL
    RADIOLOGIC CORPORATION
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
          Use of
    Estimates
    Cash
    and Cash Equivalents
    Property,
    Plant and Equipment
    Software
    Development Costs
   52




---



##### Table of Contents



VIRTUAL
    RADIOLOGIC CORPORATION
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
    Intangible
    Assets and Other Long-Lived Assets
      Goodwill
    Medical
    Malpractice Loss Reserves
   53




---



##### Table of Contents



VIRTUAL
    RADIOLOGIC CORPORATION
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
    Medical
    Malpractice Excess Loss Receivables and
    Liabilities
  ,
  Revenue
    Recognition and Accounts Receivable
  fee-for-service
  and/or and/or
       54




---



##### Table of Contents



VIRTUAL
    RADIOLOGIC CORPORATION
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
  Income
    Taxes
    and/or
        Professional
    Services Expense
    Sales,
    General and Administrative Expenses
   55




---



##### Table of Contents



VIRTUAL
    RADIOLOGIC CORPORATION
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
    Stock-Based
    Compensation
    ,
  Year Ended December 31,2009


2008


2007(in thousands, except per share data)Net income attributable to Virtual Radiologic Corporation, as
    reported

$
7,915


$
8,454


$
3,451Less:Total employee stock-based compensation expense determined under
    the fair value-based method, net of related tax effects


14



26



33Pro forma net income

$
7,901


$
8,428


$
3,418Pro forma earnings (loss) per common share:BasicAs reported

$
0.50


$
0.51


$
(2.31
)Pro forma


0.50



0.51



(2.31
)DilutedAs reported

$
0.48


$
0.50


$
(2.31
)Pro forma


0.49



0.50



(2.31
)    56




---



##### Table of Contents



VIRTUAL
    RADIOLOGIC CORPORATION
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
  Accounting
    for Series A Preferred Stock
      Concentration
    of Credit Risk
      Fair
    Value of Financial Instruments
    Recent
    Accounting Pronouncements
     57




---



##### Table of Contents



VIRTUAL
    RADIOLOGIC CORPORATION
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
      non-authoritative.
    3.
    Selected
    Consolidated Financial Statement Information  Restricted
    Cash
    Short-term
    Investments
  held-to-maturity
 58




---



##### Table of Contents



VIRTUAL
    RADIOLOGIC CORPORATION
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
    Level 1
  Level 2
  Level 3
      Accounts
    Receivable, Net
  December 31,2009


2008(in thousands)Accounts receivable

$
18,231


$
17,762Less: Allowance for doubtful accounts


754



360Less: Allowance for sales credits


93



19Accounts receivable, net

$
17,384


$
17,383   Allowance for


Allowance forDoubful Accounts


Sales Credits(in thousands)Beginning balance, January 1, 2007

$
304


$
11Charged to costs and expenses


98



202Deductions/write-offs


(74
)


(198
)Ending balance, December 31, 2007

$
328


$
15Beginning balance, January 1, 2008

$
328


$
15Charged to costs and expenses


364



511Deductions/write-offs


(332
)


(507
)Ending balance, December 31, 2008

$
360


$
19Beginning balance, January 1, 2009

$
360


$
19Charged to costs and expenses


906



1,044Deductions/write-offs


(512
)


(970
)Ending balance, December 31, 2009

$
754


$
93  59




---



##### Table of Contents



VIRTUAL
    RADIOLOGIC CORPORATION
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
  Property,
    Plant and Equipment, Net
  December 31,2009


2008(in thousands)Equipment

$
11,812


$
10,332Software


8,157



6,110Furniture and fixtures


1,935



1,144Leasehold improvements


4,264



342Other


121



1,742Total property, plant and equipment


26,289



19,670Less: Accumulated depreciation and amortization


12,800



7,978Property, plant and equipment, net

$
13,489


$
11,692       Accounts
    Payable and Other Current Liabilities
  December 31,2009


2008(in thousands)Accounts payable

$
369


$
421Billing services payable


324



347Licensing fees






240Other


84



55Total accounts payable and other current liabilities

$
777


$
1,063   Other
    Liabilities
  December 31,2009


2008(in thousands)Non-current taxes payable

$
364


$
235Lease abandonment liability


152



Deferred rent


852



150Licensing fee obligation






305Other


86



Total other liabilities

$
1,454


$
690  60




---



##### Table of Contents



VIRTUAL
    RADIOLOGIC CORPORATION
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
   4.
    Goodwill
    and Other Intangible Assets, Net  Goodwill
    Intangible
    Assets, Net
  December 31, 2009


December 31, 2008Carrying


Accumulated





Carrying


AccumulatedAmount


Amortization


Net


Amount


Amortization


Net(in thousands)Patent application costs

$
347


$
(80
)

$
267


$
347


$
(56
)

$
291Non-compete agreements


298



(255
)


43



298



(105
)


193Customer relationships


4,968



(1,326
)


3,642



4,968



(379
)


4,589Intangible assets, net

$
5,613


$
(1,661
)

$
3,952


$
5,613


$
(540
)

$
5,073         Amount(in thousands)2010


8792011


6892012


5702013


4732014


393Thereafter


948$
3,952  61




---



##### Table of Contents



VIRTUAL
    RADIOLOGIC CORPORATION
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
    5.
    Acquisition  24-hour
  6.
    Financing
    Arrangements    7.
    Stockholders
    Equity   62




---



##### Table of Contents



VIRTUAL
    RADIOLOGIC CORPORATION
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
   8.
    Preferred
    Stock    Form S-1
  9.
    Stock-Based
    Compensation  vRad
    Equity Incentive Plan
    Stock-Based
    Compensation Costs
  Employee Stock-Based Compensation.
     63




---



##### Table of Contents



VIRTUAL
    RADIOLOGIC CORPORATION
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
  Physician Stock-Based Compensation.
    Black-Scholes
    Assumptions
    Year Ended December 31,Employee and Director Awards

2009


2008


2007(1)Fair value of options granted

$
4.54


$
6.77


$
5.14Risk-free interest rate


2.3
%


3.6
%


4.6
%Expected volatility


52.0
%


43.8
%


40.4
%Expected term of options (in years)


6.3



6.0



4.1Dividend yield


None



None



None     (1)
    
    Includes 140,000 options granted in May 2007 to members of the
    vRads Board of Directors that were not issued pursuant to
    the Plan.  Year Ended December 31,Physician Awards

2009(1)


2008


2007Risk-free interest rate






2.2
%


4.0
%Expected volatility






97.8
%


50.2
%Expected term of options (in years)






3.4



1.8Dividend yield






None



None     (1)
    
    No options were granted to independent contractor physicians in
    2009. 64




---



##### Table of Contents



VIRTUAL
    RADIOLOGIC CORPORATION
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
   Stock
    Option Activity
    Weighted


WeightedAverage


Average


AggregateExercise Price


Contractual Life


IntrinsicOutstanding


per Share


(in years)


Value(3)Balance at December 31, 2008(1)


2,183,995


$
10.82






$
Granted


377,000



8.72







1,524,060Exercised


(229,993
)


3.01







1,821,561Forfeited/Cancelled/Expired


(232,602
)


10.75







917,124Balance at December 31, 2009


2,098,400



11.31



6.01



5,709,381Options vested and expected to vest at December 31, 2009(2)


1,116,263



12.25



7.00



2,183,576Exercisable at December 31, 2009


948,425



10.17



4.87



3,457,219     (1)
    
    The number of options outstanding includes 120,000 options
    granted in May 2007 to members of vRads Board of Directors
    that were not issued pursuant to the Plan.(2)
    
    Options expected to vest reflect an estimated forfeiture rate.(3)
    
    The aggregate intrinsic value in the table above represents the
    difference between the closing market price of vRads
    common stock at December 31, 2009, and the exercise price,
    multiplied by the number of
    in-the-money
    options that would have been received by the option holders had
    all option holders exercised their options on December 31,
    2009.    Options Outstanding


Options ExercisableWeightedAverageRemaining


Weighted





WeightedContractual


Average





AverageLife


Exercise


Number


ExerciseRange of Exercise Prices

Outstanding


(in Years)


Price


Exercisable


Price$2.00  $2.00


177,438



4.87


$
2.00



177,438


$
2.003.75  5.50


193,350



2.30



4.92



143,780



4.836.00  9.00


425,625



8.79



8.49



24,625



7.3410.20  14.52


673,447



5.98



12.09



374,817



12.0316.46  19.23


621,040



5.70



16.91



220,265



16.9523.00  23.00


7,500



0.01



23.00



7,500



23.002,098,400



6.01



11.31



948,425



10.17    65




---



##### Table of Contents



VIRTUAL
    RADIOLOGIC CORPORATION
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
  Restricted
    Stock Award Activity
    Weighted


WeightedAverage


Average


AggregateFair Value


Contractual Life


IntrinsicOutstanding


per Share


(in years)


Value(1)Balance at December 31, 2008





$







$
Granted


130,568



9.53







1,666,048Vested














Forfeited/Cancelled/Expired


(4,400
)


9.32







56,144Balance at December 31, 2009


126,168



9.53



8.25



1,609,904Awards expected to vest at December 31, 2009


123,098



9.52



8.25



1,570,730     (1)
    
    The aggregate intrinsic value in the table above represents the
    closing market price of vRads common stock at
    December 31, 2009, multiplied by the number of awards.    10.
    Income
    Taxes   66




---



##### Table of Contents



VIRTUAL
    RADIOLOGIC CORPORATION
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
    December 31,2009


2008(in thousands)Deferred tax assetNet operating losses

$
1,190


$
3,037Stock-based compensation deductions


2,220



211Accruals and reserves


2,091



854Tenant improvements


907



Credits


119



793Other


343



95Total deferred tax asset before valuation allowance


6,870



4,990Less: Valuation allowance


(1,212
)


(3,098
)Total deferred tax asset


5,658



1,892Deferred tax liabilityAccelerated depreciation and amortization


1,848



1,397Prepaid expenses


1,815



1,431Total deferred tax liability


3,663



2,828Net deferred tax asset (liability)

$
1,995


$
(936
)      67




---



##### Table of Contents



VIRTUAL
    RADIOLOGIC CORPORATION
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
    Year Ended December 31,2009


2008


2007(in thousands)CurrentFederal

$
5,880


$
4,369


$
2,946State


691



862



724Total current


6,571



5,231



3,670DeferredFederal


(1,177
)


806



156State


(251
)


(119
)


41Total deferred


(1,428
)


687



197Total tax expense

$
5,143


$
5,918


$
3,867     Year Ended December 31,2009


2008


2007Statutory federal income tax rate


34.0
%


34.0
%


34.0
%State income taxes, net of federal benefit


2.7



3.4



6.9Valuation allowance


0.4



2.8



10.2Other


2.4



1.0



1.7Effective income tax rate


39.5
%


41.2
%


52.8
%      68




---



##### Table of Contents



VIRTUAL
    RADIOLOGIC CORPORATION
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
    (in thousands)Balance at December 31, 2008

$
135Additions based on tax positions related to the current year


49Balance at December 31, 2009

$
184           11.
    Stock
    Repurchase Program  Rule 10b5-1
  Rule 10b5-1
  12.  Commitments
    and Contingencies
   69




---



##### Table of Contents



VIRTUAL
    RADIOLOGIC CORPORATION
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
    2010


2011


2012


2013


2014


Thereafter


Total(in thousands)Future minimum lease commitments

$
1,816


$
1,635


$
1,657


$
1,673


$
1,698


$
8,266


$
16,745         Amount(in thousands)2010

$
432011


432012


432013


3132Less: Amount representing interest


8Present value of minimum lease payments


124Less: Current portion


39Capital lease obligations, less current portion

$
85   Professional
    Liability Coverage
   70




---



##### Table of Contents



VIRTUAL
    RADIOLOGIC CORPORATION
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
        and/or
  Litigation
       71




---



##### Table of Contents



VIRTUAL
    RADIOLOGIC CORPORATION
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
   13.
    Employee
    Benefit Plan    14.
    Related
    Party Transactions      Year Ended December 31,2009

2008

2007(in thousands)VRP professional services revenue from vRad

$
26,356


$
23,243


$
20,633vRad professional services expense to VRP


26,356



23,243



20,633VRP professional services revenue from the Professional
    Corporations


27,338



24,250



21,873Professional Corporations professional services expense to VRP


27,338



24,250



21,873vRad management fee revenue from the Professional Corporations


27,064



24,007



19,256Professional Corporations management fee expense to vRad


27,064



24,007



19,256Cash paid for professional services by vRad to VRP


26,356



23,243



20,633Cash paid for professional services by the Professional
    Corporations to VRP


27,338



24,250



21,873Cash paid for management fees by the Professional Corporations
    to vRad


27,064



24,007



19,256     15.
    Earnings
    Per Share   72




---



##### Table of Contents



VIRTUAL
    RADIOLOGIC CORPORATION
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
        Year Ended December 31,2009


2008


2007(in thousands)Basic and Diluted Earnings per Share
    (Two-class Method)Net income attributable to Virtual Radiologic Corporation

$
7,915


$
8,454


$
3,451Less:Series A Cumulative Redeemable Convertible Preferred Stock
    accretion










(10,127
)Cash dividends paid:Series A Preferred Stock










(13,596
)Undistributed income (loss) available to common stockholders

$
7,915


$
8,454


$
(20,272
)Distributed Earnings per ShareBasic and DilutedCash dividends paid to Series A Preferred stockholders

$



$



$
13,596Weighted average preferred shares outstanding










3,150Distributed earnings per share  Preferred

$



$



$
4.32Cash dividends paid to common stockholders

$



$



$
26,312Weighted average common shares outstanding


15,872



16,500



8,762Distributed earnings per share  Common

$



$



$
3.00Undistributed Earnings per ShareBasicUndistributed income (loss) available to common stockholders

$
7,915


$
8,454


$
(20,272
)Participating securities ownership(1)


0.8
%


0.0
%(2)


0.0
%Participating securities interest in undistributed income

$
63


$



$

(3)Weighted average restricted shares outstanding  basic


99







Basic earnings per share  participating securities

$
0.63


$



$
Undistributed income (loss) available to common stockholders

$
7,915


$
8,454


$
(20,272
)Common ownership


99.2
%


100.0
%(2)


100.0
%Common stockholders interest in undistributed income (loss)

$
7,852


$
8,454


$
(20,272
)(3)Weighted average common shares outstanding  basic


15,872



16,500



8,762Basic earnings per share  common

$
0.50


$
0.51


$
(2.31
)Diluted Earnings per Share(If-converted Method)Common stockholders interest in undistributed earnings (losses)

$
7,852


$
8,454


$
(20,272
)Undistributed earnings  participating securities


63







Net income (loss) used in diluted earnings per share

$
7,915


$
8,454


$
(20,272
)Weighted average common shares outstanding  basic


15,872



16,500



8,762Weighted average restricted shares outstanding


99







Common share equivalents


312
(4)


476
(4)



(4)Shares used to compute income (loss) per common
    share  diluted


16,283



16,976



8,762Diluted earnings (loss) per share  common

$
0.48


$
0.50


$
(2.31
)     (1)
    
    Participating securities include Series A preferred stock
    for 2007 and restricted stock for 2009. 73




---



##### Table of Contents



VIRTUAL
    RADIOLOGIC CORPORATION
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
   (2)
    
    There was no restricted stock or Series A preferred stock
    outstanding during the year ended December 31, 2008.(3)
    
    Preferred stockholders do not participate in any undistributed
    losses with Common stockholders.(4)
    
    Common share equivalents are not included in the diluted
    earnings per common share calculation for these periods as they
    are anti-dilutive. Potential common shares totaled approximately
    1.8 million, 1.3 million and 0.8 million for the
    years ended December 31, 2009, 2008 and 2007, respectively.  16.
    Subsequent
    Events   74




---



##### Table of Contents



ITEM 9.
    Changes
    in and Disagreements with Accountants on Accounting and
    Financial Disclosure    ITEM 9A.
    Controls
    and Procedures  Evaluation
    of Disclosure Controls and Procedures
  Rule 13a-15(e)
  Managements
    Report on Internal Control Over Financial
    Reporting
  Rule 13a-15(f)
        Changes
    in Internal Controls
  Rule 13a-15(f)
 75




---



##### Table of Contents



ITEM 9B.
    Other
    Information  Payment
    of 2009 Bonuses
      Approval
    of 2010 Bonus Plan
   76




---



##### Table of Contents



PART III  ITEM 10.
    Directors,
    Executive Officers and Corporate Governance  Directors
    Executive
    Officers
    Section 16(a)
    Beneficial Ownership Reporting Compliance
    Code
    of Conduct and Ethics
    Changes
    to Nomination Procedures
    Audit
    Committee Matters
    ITEM 11.
    Executive
    Compensation    ITEM 12.
    Security
    Ownership of Certain Beneficial Owners and Management and
    Related Stockholder Matters   77




---



##### Table of Contents



Securities
    Authorized for Issuance Under Equity Compensation
    Plans
    Number of SecuritiesRemaining Availablefor Future IssuanceNumber of Securities


Weighted-Average


under Equityto be Issued Upon


Exercise Price of


Compensation PlansExercise of Outstanding


Outstanding


(Excluding SecuritiesOptions, Warrants


Options, Warrants


Reflected inPlan Category

and Rights


and Rights


Column a)Equity compensation plans approved by security holders(1)


2,098,400


$
11.31



615,951Equity compensation plans not approved by security holders





$




Total


2,098,400


$
11.31



615,951     (1)
    
    The number of options to be issued excludes 120,000 options
    granted to members of our Board of Directors that were not
    issued pursuant to an equity compensation plan.  ITEM 13.
    Certain
    Relationships and Related Transactions, and Director
    Independence    ITEM 14.
    Principal
    Accounting Fees and Services   PART IV  ITEM 15.
    Exhibits,
    Financial Statement Schedules    1)
    Consolidated Financial Statements: See Index to Consolidated
    Financial Statements contained in Item 8 on page 43 of
    this annual report.2)
    Financial Statement Schedule: Schedule II 
    Consolidated Valuation and Qualifying Accounts    3)
    Exhibits are incorporated herein by reference or are filed with
    this annual report on Form
    10-K as set
    forth below: 78




---



##### Table of Contents



EXHIBIT INDEX
  Exhibit



Incorporated by Reference

FiledNumber

Exhibit Description

Form

Filing Date

Number

Herewith3
.1

Second Amended and Restated Certificate of Incorporation of
    Virtual Radiologic Corporation.

10-K

2/20/09


3
.13
.2

Amended and Restated Bylaws of Virtual Radiologic Corporation.

10-K

2/20/09


3
.23
.3

First Amendment to Amended and Restated Bylaws of Virtual
    Radiologic Corporation.

8-K

2/9/09


3
.14
.1

Form of Stock Certificate.

S-1/A

9/17/07


4
.210
.1

Lease Agreement, dated as of March 11, 2004, by and between
    Midwest Holding Corp. # 9, Inc. and Virtual Radiologic
    Consultants, LLC.

S-1/A

9/17/07


10
.3010
.2

First Amendment to Lease, dated August 12, 2004, by and
    between Midwest Holding Corp. # 9, Inc. and Virtual Radiologic
    Consultants, LLC.

S-1/A

9/17/07


10
.3110
.3

Second Amendment to Lease, dated as of December 1, 2006, by
    and between Wells REIT II  5995 Opus Parkway, LLC (as
    successor in interest to Midwest Holding Corp. # 9, Inc.) and
    Virtual Radiologic Corporation.

S-1/A

9/17/07


10
.6710
.4

Third Amendment to Lease, dated as of August 21, 2007, by
    and between Wells REIT II  5995 Opus Parkway, LLC and
    Virtual Radiologic Corporation.

S-1/A

9/17/07


10
.6810
.5

Office Lease, effective December 3, 2007, by and between
    Windsor Plaza, LLC and Virtual Radiologic Corporation.

8-K

12/7/07


10
.110
.6

First Amendment to Lease, effective March 31, 2009, between
    Windsor Plaza, LLC and Virtual Radiologic Corporation.

10-Q

5/1/09


10
.810
.7

Investor Rights Agreement, dated as of May 2, 2005, by and
    among Virtual Radiologic Consultants, Inc. and the parties
    listed on the signature page thereto.

S-1/A

9/26/06


10
.210
.8

Form of Indemnification Agreement, between Virtual Radiologic
    Corporation and individual members of the Board of Directors.

S-1/A

9/26/06


10
.410
.9

Amended and Restated Virtual Radiologic Corporation Equity
    Incentive Plan, as amended as of February 3, 2009.*









X10
.10

Form of Incentive Stock Option Agreement.*









X10
.11

Form of Non-Incentive Stock Option Agreement.*









X10
.12

Form of Restricted Stock Award Agreement (Non-Employee Director
    Grants).*









X10
.13

Form of Restricted Stock Award Agreement (Executive Grants).*









X10
.14

Form of Restricted Stock Award Agreement (Executive Grants
    Waiving Dividends).*









X10
.15

Summary of 2010 Employee Bonus Plan.*









X10
.16

Second Revised Licensing Agreement, dated as of April 1,
    2006, between Fujifilm Medical Systems U.S.A., Inc. and Virtual
    Radiologic Corporation.

S-1/A

9/17/07


10
.3310
.17

Membership Interest Purchase Agreement between the Company,
    Diagna Radiology, LLC, and the owners of Diagna Radiology, LLC
    dated April 14, 2008.

8-K

4/16/08


10
.1 79




---



##### Table of Contents



Exhibit



Incorporated by Reference

FiledNumber

Exhibit Description

Form

Filing Date

Number

Herewith10
.18

Employment Agreement, effective July 1, 2009, between
    Virtual Radiologic Corporation and Eduard
    Michel, M.D., Ph.D.*

10-Q

7/30/09


10
.110
.19

Independent Physician Agreement, effective July 1, 2009,
    between Virtual Radiologic Professionals, LLC and Eduard
    Michel, M.D., Ph.D.*

10-Q

7/30/09


10
.210
.20

Employment Agreement, effective as of October 1, 2007, by
    and between Virtual Radiologic Corporation and Sean Casey.*

S-1/A

9/17/07


10
.6910
.21

First Amendment to Employment Agreement, dated December 30,
    2008, between Virtual Radiologic Corporation and Sean
    Casey, M.D.*

8-K

1/2/09


10
.110
.22

Transition Agreement, effective as of January 26, 2009, by
    and among Virtual Radiologic Corporation, Sean O.
    Casey, M.D., and, for solely the purposes of
    Section 1(f) thereof, Virtual Radiologic Professionals,
    LLC.*

8-K

1/29/09


10
.110
.23

Employment Agreement, effective July 30, 2009, between
    Virtual Radiologic Corporation and Robert C. Kill.*

10-Q

7/30/09


10
.310
.24

Employment Agreement, effective July 30, 2009, between
    Virtual Radiologic Corporation and Leonard C. Purkis.*

10-Q

7/30/09


10
.410
.25

Employment Agreement, effective July 30, 2009, between
    Virtual Radiologic Corporation and Richard W. Jennings.*

10-Q

7/30/09


10
.510
.26

Employment Agreement, effective July 30, 2009, between
    Virtual Radiologic Corporation and Michael J. Kolar.*

10-Q

7/30/09


10
.610
.27

Professional and Management Services Agreement and License,
    dated as of January 1, 2006, by and between Virtual
    Radiologic Professionals, LLC and Virtual Radiologic
    Corporation.

S-1/A

2/9/07


10
.1710
.28

Amendment No. 1 to Professional and Management Services
    Agreement and License, dated as of February 1, 2007, by and
    between Virtual Radiologic Professionals, LLC and Virtual
    Radiologic Corporation.

S-1/A

2/9/07


10
.4810
.29

Amendment No. 2 to Professional and Management Services
    Agreement and License, dated as of January 30, 2008, by and
    between Virtual Radiologic Professionals, LLC and Virtual
    Radiologic Corporation.

8-K

2/1/08


10
.110
.30

Amendment to Amendment No. 2 to Professional and Management
    Services Agreement and License, dated as of April 22, 2008,
    by and between Virtual Radiologic Professionals, LLC and Virtual
    Radiologic Corporation.

8-K

4/25/08


10
.110
.31

Amendment No. 3 to Professional and Management Services
    Agreement and License, dated as of April 30, 2009, by and
    between Virtual Radiologic Professionals, LLC and Virtual
    Radiologic Corporation.

10-Q

5/1/09


10
.110
.32

Management Services Agreement, dated as of January 1, 2006,
    by and between Virtual Radiologic Corporation and Virtual
    Radiologic Professionals of California, P.A.

S-1/A

2/9/07


10
.2010
.33

Amendment No. 1 to Management Services Agreement, dated as
    of January 30, 2008, by and between Virtual Radiologic
    Professionals of California, P.A. and Virtual Radiologic
    Corporation.

8-K

2/1/08


10
.2 80




---



##### Table of Contents



Exhibit



Incorporated by Reference

FiledNumber

Exhibit Description

Form

Filing Date

Number

Herewith10
.34

Amendment No. 2 to Management Services Agreement, dated as
    of April 30, 2009, by and between Virtual Radiologic
    Professionals of California, P.A. and Virtual Radiologic
    Corporation.

10-Q

5/1/09


10
.210
.35

Management Services Agreement, dated as of January 1, 2006,
    by and between Virtual Radiologic Corporation and Virtual
    Radiologic Professionals of Illinois, P.A.

S-1/A

2/9/07


10
.2110
.36

Amendment No. 1 to Management Services Agreement, dated as
    of January 30, 2008, by and between Virtual Radiologic
    Professionals of Illinois, S.C. and Virtual Radiologic
    Corporation.

8-K

2/1/08


10
.310
.37

Amendment No. 2 to Management Services Agreement, dated as
    of April 30, 2009, by and between Virtual Radiologic
    Professionals of Illinois, S.C. and Virtual Radiologic
    Corporation.

10-Q

5/1/09


10
.310
.38

Management Services Agreement, dated as of January 1, 2006,
    by and between Virtual Radiologic Corporation and Virtual
    Radiologic Professionals of Michigan, P.A.

S-1/A

2/9/07


10
.2210
.39

Amendment No. 1 to Management Services Agreement, dated as
    of January 30, 2008, by and between Virtual Radiologic
    Professionals of Michigan, P.C. and Virtual Radiologic
    Corporation.

8-K

2/1/08


10
.410
.40

Amendment No. 2 to Management Services Agreement, dated as
    of April 30, 2009, by and between Virtual Radiologic
    Professionals of Michigan, P.C. and Virtual Radiologic
    Corporation.

10-Q

5/1/09


10
.410
.41

Management Services Agreement, dated as of January 1, 2006,
    by and between Virtual Radiologic Corporation and Virtual
    Radiologic Professionals of Minnesota, P.A.

S-1/A

2/9/07


10
.1810
.42

Amendment No. 1 to Management Services Agreement, dated as
    of January 30, 2008, by and between Virtual Radiologic
    Professionals of Minnesota, P.A. and Virtual Radiologic
    Corporation.

8-K

2/1/08


10
.510
.43

Amendment No. 2 to Management Services Agreement, dated as
    of April 30, 2009, by and between Virtual Radiologic
    Professionals of Minnesota, P.A. and Virtual Radiologic
    Corporation.

10-Q

5/1/09


10
.510
.44

Management Services Agreement, dated as of January 1, 2006,
    by and between Virtual Radiologic Corporation and Virtual
    Radiologic Professionals of New York, P.A.

S-1/A

2/9/07


10
.1910
.45

Amendment No. 1 to Management Services Agreement, dated as
    of January 30, 2008, by and between Virtual Radiologic
    Professionals of New York, P.A. and Virtual Radiologic
    Corporation.

8-K

2/1/08


10
.610
.46

Amendment No. 2 to Management Services Agreement, dated as
    of April 30, 2009, by and between Virtual Radiologic
    Professionals of New York, P.A. and Virtual Radiologic
    Corporation.

10-Q

5/1/09


10
.610
.47

Management Services Agreement, dated as of January 1, 2006,
    by and between Virtual Radiologic Corporation and Virtual
    Radiologic Professionals of Texas, P.A.

S-1/A

2/9/07


10
.23 81




---



##### Table of Contents



Exhibit



Incorporated by Reference

FiledNumber

Exhibit Description

Form

Filing Date

Number

Herewith10
.48

Amendment No. 1 to Management Services Agreement, dated as
    of January 30, 2008, by and between Virtual Radiologic
    Professionals of Texas, P.A. and Virtual Radiologic
    Corporation.

8-K

2/1/08


10
.710
.49

Amendment No. 2 to Management Services Agreement, dated as
    of April 30, 2009, by and between Virtual Radiologic
    Professionals of Texas, P.A. and Virtual Radiologic Corporation.

10-Q

5/1/09


10
.710
.50

Professional Services Agreement, dated as of January 1,
    2006, by and between Virtual Radiologic Professionals, LLC, and
    Virtual Radiologic Professionals of California, P.A.

S-1/A

2/9/07


10
.2610
.51

Amendment No. 1 to Professional Services Agreement, dated
    as of February 1, 2007, by and between Virtual Radiologic
    Professionals, LLC, and Virtual Radiologic Professionals of
    California, P.A.

S-1/A

2/9/07


10
.5110
.52

Amendment No. 2 to Professional Services Agreement, dated
    as of January 30, 2008, by and between Virtual Radiologic
    Professionals, LLC and Virtual Radiologic Professionals of
    California, P.A.

8-K

2/1/08


10
.810
.53

Professional Services Agreement, dated as of January 1,
    2006, by and between Virtual Radiologic Professionals, LLC, and
    Virtual Radiologic Professionals of Illinois, P.A.

S-1/A

2/9/07


10
.2710
.54

Amendment No. 1 to Professional Services Agreement, dated
    as of February 1, 2007, by and between Virtual Radiologic
    Professionals, LLC and Virtual Radiologic Professionals of
    Illinois, S.C.

S-1/A

2/9/07


10
.5210
.55

Amendment No. 2 to Professional Services Agreement, dated
    as of January 30, 2008, by and between Virtual Radiologic
    Professionals, LLC and Virtual Radiologic Professionals of
    Illinois, S.C.

8-K

2/1/08


10
.910
.56

Professional Services Agreement, dated as of January 1,
    2006, by and between Virtual Radiologic Professionals, LLC, and
    Virtual Radiologic Professionals of Michigan, P.A.

S-1/A

2/9/07


10
.2810
.57

Amendment No. 1 to Professional Services Agreement, dated
    as of February 1, 2007, by and between Virtual Radiologic
    Professionals, LLC, and Virtual Radiologic Professionals of
    Michigan, P.A.

S-1/A

2/9/07


10
.5310
.58

Amendment No. 2 to Professional Services Agreement, dated
    as of January 30, 2008, by and between Virtual Radiologic
    Professionals, LLC and Virtual Radiologic Professionals of
    Michigan, P.C.

8-K

2/1/08


10
.1010
.59

Professional Services Agreement, dated as of January 1,
    2006, by and between Virtual Radiologic Professionals, LLC, and
    Virtual Radiologic Professionals of Minnesota, P.A.

S-1/A

2/9/07


10
.2410
.60

Amendment No. 1 to Professional Services Agreement, dated
    as of February 1, 2007, by and between Virtual Radiologic
    Professionals, LLC, and Virtual Radiologic Professionals of
    Minnesota, P.A.

S-1/A

2/9/07


10
.49 82




---



##### Table of Contents



Exhibit



Incorporated by Reference

FiledNumber

Exhibit Description

Form

Filing Date

Number

Herewith10
.61

Amendment No. 2 to Professional Services Agreement, dated
    as of January 30, 2008, by and between Virtual Radiologic
    Professionals, LLC, and Virtual Radiologic Professionals of
    Minnesota, P.A.

8-K

2/1/08


10
.1110
.62

Professional Services Agreement, dated as of January 1,
    2006, by and between Virtual Radiologic Professionals, LLC, and
    Virtual Radiologic Professionals of New York, P.A.

S-1/A

2/9/07


10
.2510
.63

Amendment No. 1 to Professional Services Agreement, dated
    as of February 1, 2007, by and between Virtual Radiologic
    Professionals, LLC, and Virtual Radiologic Professionals of New
    York, P.A.

S-1/A

2/9/07


10
.5010
.64

Amendment No. 2 to Professional Services Agreement, dated
    as of January 30, 2008, by and between Virtual Radiologic
    Professionals, LLC and Virtual Radiologic Professionals of New
    York, P.A.

8-K

2/1/08


10
.1210
.65

Professional Services Agreement, dated as of January 1,
    2006, by and between Virtual Radiologic Professionals, LLC, and
    Virtual Radiologic Professionals of Texas, P.A.

S-1/A

2/9/07


10
.2910
.66

Amendment No. 1 to Professional Services Agreement, dated
    as of February 1, 2007, by and between Virtual Radiologic
    Professionals, LLC, and Virtual Radiologic Professionals of
    Texas, P.A.

S-1/A

2/9/07


10
.5410
.67

Amendment No. 2 to Professional Services Agreement, dated
    as of January 30, 2008, by and between Virtual Radiologic
    Professionals, LLC and Virtual Radiologic Professionals of
    Texas, P.A.

8-K

2/1/08


10
.1321
.1

List of subsidiaries of Registrant.









X23
.1

Consent of Deloitte & Touche LLP.









X23
.2

Consent of PricewaterhouseCoopers LLP.









X31
.1

Certification by Principal Executive Officer pursuant to
    Rule 13a-14(a)
    or 15d-14(a) of the Securities Exchange Act of 1934, as amended,
    as adopted pursuant to Section 302 of the Sarbanes-Oxley
    Act of 2002.









X31
.2

Certification of Principal Financial Officer pursuant to
    Rule 13a-14(a)
    or 15d-14(a) of the Securities Exchange Act of 1934, as amended,
    as adopted pursuant to Section 302 of the Sarbanes-Oxley
    Act of 2002.









X32
.1

Certification by Chief Executive Officer pursuant to
    18 U.S.C. Section 1350, as adopted pursuant to
    Section 906 of the Sarbanes-Oxley Act of 2002.









X32
.2

Certification by Chief Financial Officer pursuant to
    18 U.S.C. Section 1350, as adopted pursuant to
    Section 906 of the Sarbanes-Oxley Act of 2002.









X     *
    
    Indicates management contract or compensatory plan contract or
    arrangement.
    
    Confidential treatment has been requested for certain portions
    of this exhibit, which portions have been omitted and filed
    separately with the Securities and Exchange Commission. 83




---



##### Table of Contents



SIGNATURES  th
    
  Title:
    President and Chief Executive Officer    Signature

Title

Date/s/  Robert
    C. KillRobert
    C. Kill

Chairman of the Board, President and Chief Executive Officer
    (Principal Executive Officer)

February 18, 2010/s/  Leonard
    C. PurkisLeonard
    C. Purkis

Chief Financial Officer (Principal Financial and Accounting
    Officer)

February 18, 2010/s/  Nabil
    N. El-HageNabil
    N. El-Hage

Director

February 18, 2010/s/  Andrew
    P. HertzmarkAndrew
    P. Hertzmark

Director

February 18, 2010/s/  Mark
    E. JenningsMark
    E. Jennings

Director

February 18, 2010/s/  Eduard
    Michel, M.D., Ph.D.Eduard
    Michel, M.D., Ph.D.

Director

February 18, 2010/s/  Richard
    J. NigonRichard
    J. Nigon

Director

February 18, 2010/s/  Kevin
    H. RocheKevin
    H. Roche

Director

February 18, 2010/s/  David
    L. SchlotterbeckDavid
    L. Schlotterbeck

Director

February 18, 2010/s/  Brian
    F. SullivanBrian
    F. Sullivan

Director

February 18, 2010  84