UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

___________________________

FORM 10-Q

___________________________


x			QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended ~~June~~September 30, 2022


o			TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from______________to______________

Commission file number: 333-261815

___________________________

AKUMIN INC.

(Exact name of registrant as specified in its charter)

___________________________


~~Ontario~~Delaware			~~Not Applicable~~88-4139425
(State or other jurisdiction of incorporation or organization)			(I.R.S. Employer Identification No.)


8300 W. Sunrise Boulevard
Plantation, Florida 33322
(844) 730-0050
(Address, Including Zip Code, and Telephone Number, Including Area Code, of Registrant’s Principal Executive Offices)

Not Applicable

(Former Name, Former Address and Former Fiscal Year,

if Changed Since Last Report)

Securities registered pursuant to Section 12(b) of the Act:


Title of each class	Trading Symbol	Name of each exchange on which registered
Common ~~Shares, no~~Stock, $0.01 par value per share	AKU	The Nasdaq Stock Market
Common ~~Shares, no~~Stock, $0.01 par value per share	AKU	The Toronto Stock Exchange

___________________________

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes x No o

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes x No o

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer

Accelerated filer

Non-accelerated filer

Smaller reporting company

Emerging growth company

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. o

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act). Yes o No x

As of ~~August 9,~~November 7, 2022, there were ~~89,516,513~~89,661,513 common shares outstanding.

TABLE OF CONTENTS

SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS

This Quarterly Report on Form 10-Q and the information incorporated by reference in this Quarterly Report on Form 10-Q contain or incorporate by reference “forward-looking information” or “forward-looking statements” as defined in the Private Securities Litigation Reform Act of 1995, that involve substantial risks and uncertainties. Forward-looking statements describe Akumin Inc.’s (together with its subsidiaries, the “Company”) future plans, strategies, expectations and objectives, and are generally identifiable by use of the words “may”, “will”, “should”, “continue”, “expect”, “anticipate”, “estimate”, “believe”, “intend”, “plan” or “project” or the negative of these words or other variations on these words or comparable terminology. Forward-looking statements include, but are not limited to, statements about:

•expected performance and cash flows;

•changes in laws and regulations affecting the Company;

•expenses incurred by the Company as a public company;

•future growth of the outpatient diagnostic imaging and radiation oncology markets;

•changes in reimbursement rates by payors;

•remediation and effectiveness of the design and effectiveness of our disclosure controls and procedures and internal control over financial reporting;

•the outcome of litigation and payment obligations in respect of prior settlements;

•competition;

•acquisitions and divestitures of businesses;

•potential synergies from acquisitions;

•non-wholly owned and other business arrangements;

•access to capital and the terms relating thereto;

•technological changes in our industry;

•successful execution of internal plans;

•compliance with our debt covenants;

•anticipated costs of capital investments; and

•future compensation of our directors and executive officers.

Such statements may not prove to be accurate and actual results and future events could differ materially from those anticipated in such statements. The following are some of the risks and other important factors that could cause actual results or outcomes to differ materially from those discussed in the forward-looking statements:

•our ability to successfully grow the market and sell our services;

•general market conditions in our industry;

•our ability to service existing debt;

•our ability to acquire new centers and, upon acquisition, to successfully integrate markets and sell new services that we acquire;

•our ability to achieve the financing necessary to complete our acquisitions;

•our ability to enforce any claims relating to breaches of indemnities or representations and warranties in connection with any acquisition;

•market conditions in the capital markets and our industry that make raising capital or consummating acquisitions difficult, expensive or both, or which may disrupt our annual operating budget and forecasts;

•unanticipated cash requirements to support current operations, to expand our business or for capital expenditures;

•delays or setbacks with respect to governmental approvals or manufacturing or commercial activities;

•changes in laws and regulations;

•the loss of key management or personnel;

•the risk the Company is not able to arrange sufficient cost-effective financing to repay maturing debt and to fund expenditures, future operational activities and acquisitions, and other obligations;

•the risks related to the additional costs and expenses associated with being a U.S. domestic issuer as opposed to a foreign private issuer;

•the risks associated with legislative and regulatory developments that may affect costs, revenues, the speed and degree of competition entering the market, global capital markets activity and general economic conditions in geographic areas where we operate (including the adverse impact of the coronavirus (“COVID-19”) pandemic on the Company); and

•the risks associated with macroeconomic conditions, including inflation and the threat of recession.

The existence of the COVID-19 pandemic creates a unique environment in which to consider the likelihood of forward-looking statements being accurate, and given the evolving circumstances surrounding the COVID-19 pandemic, it is difficult to predict how significant the adverse impact of the pandemic will be on the global and domestic economy and the business, operations and financial position of the Company.

Various assumptions or factors are typically applied in drawing conclusions or making the forecasts or projections set out in forward-looking information. Those assumptions and factors are based on information currently available to us, including information obtained from third-party industry analysts and other third-party sources. In some instances, material assumptions and factors are presented or discussed elsewhere in this Quarterly Report on Form 10-Q in connection with the statements or disclosure containing the forward-looking information. The reader is cautioned that the following list of material factors and assumptions is not exhaustive. The factors and assumptions include, but are not limited to:

•no unforeseen changes in the legislative and operating framework for our business;

•no unforeseen changes in the prices for our services in markets where prices are regulated;

•no unforeseen changes in the regulatory environment for our services;

•a stable competitive environment; and

•no significant event occurring outside the ordinary course of business such as a natural disaster, public health epidemic or other calamity.

Although we have attempted to identify important factors that could cause our actual results to differ materially from our plans, strategies, expectations and objectives, there may be other factors that could cause our results to differ from what we currently anticipate, estimate or intend. Forward-looking statements are provided to assist external stakeholders in understanding management’s expectations and plans relating to the future as of the date of the original document and may not be appropriate for other purposes. Readers are cautioned not to place undue reliance on forward-looking statements. Except as required under applicable securities laws, we undertake no obligation to publicly update or revise forward-looking statements, whether as a result of new information, future events or otherwise.

We qualify all the forward-looking statements contained in this Quarterly Report on Form 10-Q and the information incorporated by reference in this Quarterly Report on Form 10-Q by the foregoing cautionary statements.

PART I - FINANCIAL INFORMATION

Item 1. Financial Statements

AKUMIN INC.

INDEX TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS


Condensed Consolidated Balance Sheets			4

Condensed Consolidated Statements of Operations and Comprehensive Loss			5

Condensed Consolidated Statements of Equity			6

Condensed Consolidated Statements of Cash Flows			8

Notes to Condensed Consolidated Financial Statements			910

AKUMIN INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

(Unaudited; in thousands, except share amounts)

June 30,
2022 December 31,
2021
ASSETS
Current assets:
Cash and cash equivalents $ 38,447 $ 48,419
Accounts receivable 126,145 121,525
Prepaid expenses 9,385 8,196
Other current assets 6,826 7,025
Total current assets 180,803 185,165
Property and equipment, net 231,297 259,122
Operating lease right-of-use assets 179,954 194,565
Goodwill 840,788 840,353
Other intangible assets, net 403,980 414,146
Other assets 24,671 25,475
Total assets $ 1,861,493 $ 1,918,826
LIABILITIES, REDEEMABLE NONCONTROLLING INTERESTS AND EQUITY
Current liabilities:
Accounts payable $ 33,787 $ 34,326
Current portion of long-term debt 16,299 14,789
Current portion of obligations under finance leases 5,972 6,460
Current portion of obligations under operating leases 20,122 20,794
Accrued liabilities 90,916 87,813
Total current liabilities 167,096 164,182
Long-term debt, net of current portion 1,220,823 1,197,596
Obligations under finance leases, net of current portion 13,872 15,951
Obligations under operating leases, net of current portion 171,044 184,375
Other liabilities 32,124 35,574
Total liabilities 1,604,959 1,597,678
Redeemable noncontrolling interests 36,042 37,469
Shareholders’ equity:
Common stock, no par value; unlimited number of shares authorized; 89,516,513 and 89,026,997 shares issued and outstanding as of June 30, 2022 and December 31, 2021, respectively 230,414 228,595
Accumulated other comprehensive income 80 18
Accumulated deficit (184,704) (123,424)
Total shareholders’ equity 45,790 105,189
Noncontrolling interests 174,702 178,490
Total equity 220,492 283,679
Total liabilities, redeemable noncontrolling interests and equity $ 1,861,493 $ 1,918,826


	September 30, 2022		December 31, 2021
ASSETS
Current assets:
Cash and cash equivalents	$	59,356	$	48,419
Accounts receivable	112,376		121,525
Prepaid expenses	8,443		8,196
Other current assets	9,151		7,025
Total current assets	189,326		185,165
Property and equipment, net	229,722		259,122
Operating lease right-of-use assets	173,325		194,565
Goodwill	795,610		840,353
Other intangible assets, net	397,185		414,146
Other assets	24,070		25,475
Total assets	$	1,809,238	$	1,918,826
LIABILITIES, REDEEMABLE NONCONTROLLING INTERESTS AND EQUITY
Current liabilities:
Accounts payable	$	27,696	$	34,326
Current portion of long-term debt	18,714		14,789
Current portion of obligations under finance leases	5,963		6,460
Current portion of obligations under operating leases	17,864		20,794
Accrued liabilities	97,062		87,813
Total current liabilities	167,299		164,182
Long-term debt, net of current portion	1,242,181		1,197,596
Obligations under finance leases, net of current portion	15,037		15,951
Obligations under operating leases, net of current portion	165,882		184,375
Other liabilities	21,890		35,574
Total liabilities	1,612,289		1,597,678
Redeemable noncontrolling interests	34,200		37,469
Stockholders’ equity:
Preferred stock, $0.01 par value; 50,000,000 shares authorized; no shares issued and outstanding at September 30, 2022 and December 31, 2021	—		—
Common stock, $0.01 par value; 300,000,000 shares authorized; 89,661,513 shares issued and outstanding at September 30, 2022; 89,026,997 shares issued and outstanding at December 31, 2021	897		890
Additional paid-in capital	230,073		227,705
Accumulated other comprehensive income	87		18
Accumulated deficit	(238,575)		(123,424)
Total stockholders’ equity	(7,518)		105,189
Noncontrolling interests	170,267		178,490
Total equity	162,749		283,679
Total liabilities, redeemable noncontrolling interests and equity	$	1,809,238	$	1,918,826

See accompanying notes to the condensed consolidated financial statements.

AKUMIN INC.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS

(Unaudited; in thousands, except per share amounts)


		Three Months Ended June 30,				Six Months Ended June 30,					Three Months Ended September 30,				Nine Months Ended September 30,
		2022		2021		2022		2021			2022		2021		2022		2021
Revenues	Revenues	$	192,128	$	69,496	$	378,391	$	133,459	Revenues	$	186,605	$	108,177	$	564,996	$	241,636
Operating expenses:	Operating expenses:									Operating expenses:
Cost of operations, excluding depreciation and amortization	Cost of operations, excluding depreciation and amortization	154,574		57,768		309,735		112,910		Cost of operations, excluding depreciation and amortization	150,674		90,964		460,409		203,874
Depreciation and amortization	Depreciation and amortization	25,200		4,584		49,931		9,073		Depreciation and amortization	25,079		11,286		75,010		20,359
Impairment charges										Impairment charges	20,369		—		20,702		—
Restructuring charges	Restructuring charges	7,244		—		7,324		—		Restructuring charges	4,042		479		11,366		479
Severance and related costs	Severance and related costs	5,559		—		7,797		—		Severance and related costs	2,485		53		10,282		53
Settlements, recoveries and related costs	Settlements, recoveries and related costs	814		(318)		677		(341)		Settlements, recoveries and related costs	(576)		(52)		101		(394)
Stock-based compensation	Stock-based compensation	758		785		1,819		1,212		Stock-based compensation	556		785		2,375		1,997
Other operating expense, net		586		255		579		346
Other operating expense (income), net										Other operating expense (income), net	(7,574)		(68)		(7,328)		278
Total operating expenses	Total operating expenses	194,735		63,074		377,862		123,200		Total operating expenses	195,055		103,447		572,917		226,646
Income (loss) from operations	Income (loss) from operations	(2,607)		6,422		529		10,259		Income (loss) from operations	(8,450)		4,730		(7,921)		14,990
Other expense (income):	Other expense (income):									Other expense (income):
Interest expense	Interest expense	29,290		8,920		57,971		17,288		Interest expense	29,679		16,932		87,650		34,221
Acquisition-related costs	Acquisition-related costs	86		4,350		468		5,628		Acquisition-related costs	99		8,784		567		14,412
Other non-operating income, net	Other non-operating income, net	(2,421)		—		(2,479)		(3,366)		Other non-operating income, net	(521)		(96)		(3,000)		(3,462)
Total other expense, net	Total other expense, net	26,955		13,270		55,960		19,550		Total other expense, net	29,257		25,620		85,217		45,171
Loss before income taxes	Loss before income taxes	(29,562)		(6,848)		(55,431)		(9,291)		Loss before income taxes	(37,707)		(20,890)		(93,138)		(30,181)
Income tax expense (benefit)	Income tax expense (benefit)	(3,483)		6		(2,920)		71		Income tax expense (benefit)	12,038		(22,070)		9,118		(21,999)
Net loss		(26,079)		(6,854)		(52,511)		(9,362)
Net income (loss)										Net income (loss)	(49,745)		1,180		(102,256)		(8,182)
Less: Net income attributable to noncontrolling interests	Less: Net income attributable to noncontrolling interests	4,390		502		8,769		871		Less: Net income attributable to noncontrolling interests	4,126		2,517		12,895		3,388
Net loss attributable to common shareholders		$	(30,469)	$	(7,356)	$	(61,280)	$	(10,233)
Comprehensive loss, net of taxes:
Net loss		$	(26,079)	$	(6,854)	$	(52,511)	$	(9,362)
Other comprehensive income:
Unrealized gain on hedging transactions, net of taxes		7		—		36		—
Net loss attributable to common stockholders										Net loss attributable to common stockholders	$	(53,871)	$	(1,337)	$	(115,151)	$	(11,570)
Comprehensive income (loss), net of taxes:										Comprehensive income (loss), net of taxes:
Net income (loss)										Net income (loss)	$	(49,745)	$	1,180	$	(102,256)	$	(8,182)
Other comprehensive income (loss):										Other comprehensive income (loss):
Unrealized gain (loss) on hedging transactions, net of taxes										Unrealized gain (loss) on hedging transactions, net of taxes	11		(8)		47		(8)
Reclassification adjustment for losses included in net loss, net of taxes	Reclassification adjustment for losses included in net loss, net of taxes	9		—		26		—		Reclassification adjustment for losses included in net loss, net of taxes	(4)		7		22		7
Other comprehensive income		16		—		62		—
Comprehensive loss, net of taxes		(26,063)		(6,854)		(52,449)		(9,362)
Other comprehensive income (loss)										Other comprehensive income (loss)	7		(1)		69		(1)
Comprehensive income (loss), net of taxes										Comprehensive income (loss), net of taxes	(49,738)		1,179		(102,187)		(8,183)
Less: Comprehensive income attributable to noncontrolling interests	Less: Comprehensive income attributable to noncontrolling interests	4,390		502		8,769		871		Less: Comprehensive income attributable to noncontrolling interests	4,126		2,517		12,895		3,388
Comprehensive loss attributable to common shareholders		$	(30,453)	$	(7,356)	$	(61,218)	$	(10,233)
Net loss per share attributable to common shareholders:
Comprehensive loss attributable to common stockholders										Comprehensive loss attributable to common stockholders	$	(53,864)	$	(1,338)	$	(115,082)	$	(11,571)
Net loss per share attributable to common stockholders:										Net loss per share attributable to common stockholders:
Basic and diluted	Basic and diluted	$	(0.34)	$	(0.10)	$	(0.69)	$	(0.15)	Basic and diluted	$	(0.60)	$	(0.02)	$	(1.29)	$	(0.16)

See accompanying notes to the condensed consolidated financial statements.

AKUMIN INC.

CONDENSED CONSOLIDATED STATEMENTS OF EQUITY

(Unaudited; in thousands, except share amounts)

Common Stock Accumulated
Other
Comprehensive
Income Accumulated
Deficit Total
Shareholders’
Equity Noncontrolling
Interests Total
Equity
Shares Amount
Balance, December 31, 2020 70,178,428 $ 160,965 $ — $ (80,133) $ 80,832 $ 4,338 $ 85,170
Net income (loss) — — — (10,233) (10,233) 871 (9,362)
Issuance of common stock for acquisition consideration 974,999 3,012 — — 3,012 — 3,012
Stock options exercised 150,000 75 — — 75 — 75
Stock-based compensation — 1,212 — — 1,212 — 1,212
Distributions paid to noncontrolling interests — — — — — (1,006) (1,006)
Balance, June 30, 2021 71,303,427 $ 165,264 $ — $ (90,366) $ 74,898 $ 4,203 $ 79,101
Common Stock Accumulated
Other
Comprehensive
Income Accumulated
Deficit Total
Shareholders’
Equity Noncontrolling
Interests Total
Equity
Shares Amount
Balance, December 31, 2021 89,026,997 $ 228,595 $ 18 $ (123,424) $ 105,189 $ 178,490 $ 283,679
Net income (loss), net of the net income attributable to redeemable noncontrolling interests — — — (61,280) (61,280) 7,655 (53,625)
Issuance of common stock under stock-based awards 489,516 — — — — — —
Stock-based compensation — 1,819 — — 1,819 — 1,819
Other comprehensive income — — 62 — 62 — 62
Distributions paid to noncontrolling interests — — — — — (11,604) (11,604)
Other equity transactions — — — — — 161 161
Balance, June 30, 2022 89,516,513 $ 230,414 $ 80 $ (184,704) $ 45,790 $ 174,702 $ 220,492


	Common Stock			Additional Paid-In Capital		Accumulated Other Comprehensive Income (Loss)		Accumulated Deficit		Total Stockholders’ Equity		Noncontrolling Interests		Total Equity
	Shares	Amount
Balance, June 30, 2021	71,303,427	$	713	$	164,551	$	—	$	(90,366)	$	74,898	$	4,202	$	79,100
Net income (loss)	—	—		—		—		(1,337)		(1,337)		2,517		1,180
Issuance of common stock for acquisition consideration	14,223,570	142		30,723		—		—		30,865		—		30,865
Issuance of common stock - other	3,500,000	35		10,381		—		—		10,416		—		10,416
Warrants issued	—	—		33,096		—		—		33,096		—		33,096

Stock-based compensation	—	—		785		—		—		785		—		785
Other comprehensive loss	—	—		—		(1)		—		(1)		—		(1)
Acquisition of noncontrolling interests	—	—		—		—		—		—		212,210		212,210
Distributions paid to noncontrolling interests	—	—		—		—		—		—		(3,160)		(3,160)
Balance, September 30, 2021	89,026,997	$	890	$	239,536	$	(1)	$	(91,703)	$	148,722	$	215,769	$	364,491


	Common Stock			Additional Paid-In Capital		Accumulated Other Comprehensive Income (Loss)		Accumulated Deficit		Total Stockholders’ Equity		Noncontrolling Interests		Total Equity
	Shares	Amount
Balance, June 30, 2022	89,516,513	$	895	$	229,519	$	80	$	(184,704)	$	45,790	$	174,702	$	220,492
Net income (loss), net of the net income attributable to redeemable noncontrolling interests	—	—		—		—		(53,871)		(53,871)		3,758		(50,113)
Settlement of restricted share units	145,000	2		(2)		—		—		—		—		—
Stock-based compensation	—	—		556		—		—		556		—		556
Other comprehensive income	—	—		—		7		—		7		—		7
Distributions paid to noncontrolling interests	—	—		—		—		—		—		(5,739)		(5,739)
Purchase accounting adjustments	—	—		—		—		—		—		(2,454)		(2,454)
Balance, September 30, 2022	89,661,513	$	897	$	230,073	$	87	$	(238,575)	$	(7,518)	$	170,267	$	162,749

See accompanying notes to the condensed consolidated financial statements.

AKUMIN INC.

CONDENSED CONSOLIDATED STATEMENTS OF EQUITY

(Unaudited; in thousands, except share amounts)

Common Stock Accumulated
Other
Comprehensive
Income Accumulated
Deficit Total
Shareholders’
Equity Noncontrolling
Interests Total
Equity
Shares Amount
Balance, March 31, 2021 70,178,428 $ 161,392 $ — $ (83,010) $ 78,382 $ 4,258 $ 82,640
Net income (loss) — — — (7,356) (7,356) 502 (6,854)
Issuance of common stock for acquisition consideration 974,999 3,012 — — 3,012 — 3,012
Stock options exercised 150,000 75 — — 75 — 75
Stock-based compensation — 785 — — 785 — 785
Distributions paid to noncontrolling interests — — — — — (557) (557)
Balance, June 30, 2021 71,303,427 $ 165,264 $ — $ (90,366) $ 74,898 $ 4,203 $ 79,101

Common Stock Accumulated
Other
Comprehensive
Income Accumulated
Deficit Total
Shareholders’
Equity Noncontrolling
Interests Total
Equity
Shares Amount
Balance, March 31, 2022 89,516,513 $ 229,656 $ 64 $ (154,235) $ 75,485 $ 176,724 $ 252,209
Net income (loss), net of the net income attributable to redeemable noncontrolling interests — — — (30,469) (30,469) 3,856 (26,613)
Stock-based compensation — 758 — — 758 — 758
Other comprehensive income — — 16 — 16 — 16
Distributions paid to noncontrolling interests — — — — — (5,878) (5,878)
Balance, June 30, 2022 89,516,513 $ 230,414 $ 80 $ (184,704) $ 45,790 $ 174,702 $ 220,492


	Common Stock			Additional Paid-In Capital		Accumulated Other Comprehensive Income (Loss)		Accumulated Deficit		Total Stockholders’ Equity		Noncontrolling Interests		Total Equity
	Shares	Amount
Balance, December 31, 2020	70,178,428	$	702	$	160,263	$	—	$	(80,133)	$	80,832	$	4,338	$	85,170
Net income (loss)	—	—		—		—		(11,570)		(11,570)		3,388		(8,182)
Issuance of common stock for acquisition consideration	15,198,569	152		33,725		—		—		33,877		—		33,877
Issuance of common stock - other	3,500,000	35		10,381		—		—		10,416		—		10,416
Warrants issued	—	—		33,096		—		—		33,096		—		33,096
Stock options exercised	150,000	1		74		—		—		75		—		75
Stock-based compensation	—	—		1,997		—		—		1,997		—		1,997
Other comprehensive loss	—	—		—		(1)		—		(1)		—		(1)
Acquisition of noncontrolling interests	—	—		—		—		—		—		212,210		212,210
Distributions paid to noncontrolling interests	—	—		—		—		—		—		(4,167)		(4,167)
Balance, September 30, 2021	89,026,997	$	890	$	239,536	$	(1)	$	(91,703)	$	148,722	$	215,769	$	364,491


	Common Stock			Additional Paid-In Capital		Accumulated Other Comprehensive Income (Loss)		Accumulated Deficit		Total Stockholders’ Equity		Noncontrolling Interests		Total Equity
	Shares	Amount
Balance, December 31, 2021	89,026,997	$	890	$	227,705	$	18	$	(123,424)	$	105,189	$	178,490	$	283,679
Net income (loss), net of the net income attributable to redeemable noncontrolling interests	—	—		—		—		(115,151)		(115,151)		11,413		(103,738)
Settlement of restricted share units	634,516	7		(7)		—		—		—		—		—
Stock-based compensation	—	—		2,375		—		—		2,375		—		2,375
Other comprehensive income	—	—		—		69		—		69		—		69
Distributions paid to noncontrolling interests	—	—		—		—		—		—		(17,343)		(17,343)
Purchase accounting adjustments	—	—		—		—		—		—		(2,293)		(2,293)
Balance, September 30, 2022	89,661,513	$	897	$	230,073	$	87	$	(238,575)	$	(7,518)	$	170,267	$	162,749

See accompanying notes to the condensed consolidated financial statements.

AKUMIN INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited; in thousands)
Six Months Ended June 30,
2022 2021
Operating activities:
Net loss $ (52,511) $ (9,362)
Adjustments to reconcile net loss to net cash provided by operating activities:
Depreciation and amortization 49,931 9,073
Stock-based compensation 1,819 1,212
Non-cash interest expense 24,604 —
Amortization of deferred financing costs and accretion of discount/premium on long-term debt 54 923
Deferred income taxes (3,368) —
Distributions from unconsolidated investees 915 —
Earnings from unconsolidated investees (488) —
Other non-cash items, net (498) (3,020)
Changes in operating assets and liabilities, net of acquisitions:
Accounts receivable (4,547) (1,688)
Prepaid expenses and other assets (1,919) 824
Accounts payable and other liabilities 6,502 3,895
Operating lease liabilities and right-of-use assets 585 904
Net cash provided by operating activities 21,079 2,761
Investing activities:
Purchases of property and equipment (15,466) (2,584)
Business acquisitions, net of cash acquired — (35,749)
Other investing activities 963 (4,588)
Net cash used in investing activities (14,503) (42,921)
Financing activities:
Proceeds from revolving loan 20,000 —
Principal payments on revolving loan (20,000) —
Proceeds from long-term debt 10,292 78,750
Principal payments on long-term debt (8,734) (200)
Principal payments on finance leases (3,961) (1,615)
Payment of debt issuance costs — (1,162)
Payment of earn-out liability — (4,689)
Proceeds from issuance of common stock — 75
Distributions paid to noncontrolling interests (14,145) (1,006)
Net cash provided by (used in) financing activities (16,548) 70,153
Net increase (decrease) in cash and cash equivalents (9,972) 29,993
Cash and cash equivalents, beginning of period 48,419 44,396
Cash and cash equivalents, end of period $ 38,447 $ 74,389
Supplemental disclosure of cash flow information:
Interest paid $ 32,439 $ 16,915
Income taxes paid, net 502 241
Supplemental disclosure of non-cash investing and financing activities:
Property and equipment purchases in accounts payable and other accrued liabilities 4,852 323
Derecognition of operating lease right-of-use assets and lease liabilities associated with lease terminations 3,635 929
Equipment acquired in exchange for finance lease obligations 1,433 686
Operating lease right-of-use assets obtained in exchange for operating lease liabilities 668 1,649


	Nine Months Ended September 30,
	2022		2021
Operating activities:
Net loss	$	(102,256)	$	(8,182)
Adjustments to reconcile net loss to net cash provided by operating activities:
Depreciation and amortization	75,010		20,359
Impairment charges	20,702		—
Stock-based compensation	2,375		1,997
Non-cash interest expense	37,509		—
Amortization of deferred financing costs and accretion of discount/premium on long-term debt	71		1,959
Deferred income taxes	9,012		(22,731)
Distributions from unconsolidated investees	1,157		—
Earnings from unconsolidated investees	(738)		(46)
Gain on sale of accounts receivable	(7,603)		—
Other non-cash items, net	(247)		(3,032)
Changes in operating assets and liabilities, net of acquisitions:
Accounts receivable	15,923		875
Prepaid expenses and other assets	(1,967)		1,865
Accounts payable and other liabilities	7,388		16,924
Operating lease liabilities and right-of-use assets	(400)		2,761
Net cash provided by operating activities	55,936		12,749
Investing activities:
Purchases of property and equipment	(32,765)		(5,203)
Business acquisitions, net of cash acquired	—		(758,114)
Other investing activities	1,139		(4,563)
Net cash used in investing activities	$	(31,626)	$	(767,880)

See accompanying notes to the condensed consolidated financial statements.

AKUMIN INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (CONTINUED)

(Unaudited; in thousands)


	Nine Months Ended September 30,
	2022		2021
Financing activities:
Proceeds from revolving loan	$	29,000	$	—
Principal payments on revolving loan	(29,000)		—
Proceeds from long-term debt	25,892		793,750
Principal payments on long-term debt	(12,829)		(2,697)
Principal payments on finance leases	(5,568)		(2,720)
Payment of debt issuance costs	—		(21,500)
Payment of earn-out liability	—		(4,689)
Proceeds from issuance of common stock	—		10,505
Payment of issuance costs for common stock and warrants	—		(1,871)
Distributions paid to noncontrolling interests	(20,868)		(4,167)
Net cash provided by (used in) financing activities	(13,373)		766,611
Net increase in cash and cash equivalents	10,937		11,480
Cash and cash equivalents, beginning of period	48,419		44,396
Cash and cash equivalents, end of period	$	59,356	$	55,876
Supplemental disclosure of cash flow information:
Interest paid	$	47,774	$	17,372
Income taxes paid, net	506		238
Supplemental disclosure of non-cash investing and financing activities:
Property and equipment purchases in accounts payable and accrued liabilities	4,414		300
Derecognition of operating lease right-of-use assets and lease liabilities associated with lease terminations	6,561		1,058
Equipment acquired in exchange for finance lease obligations	4,197		1,299
Operating lease right-of-use assets obtained in exchange for operating lease liabilities	1,159		2,022

See accompanying notes to the condensed consolidated financial statements.

AKUMIN INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

~~June~~September 30, 2022

(Unaudited)

1. Basis of Presentation

The accompanying unaudited condensed consolidated financial statements have been prepared by Akumin Inc. (the “Company” or “Akumin”) and do not include all of the information and disclosures required by accounting principles generally accepted in the U.S. (“GAAP”). In the opinion of management, all normal recurring accruals and adjustments considered necessary for a fair presentation have been included. The results for the three and ~~six~~nine months ended ~~June~~September 30, 2022 are not necessarily indicative of the results that may be expected for the year ending December 31, 2022. The accompanying condensed consolidated financial statements should be read in conjunction with the audited consolidated financial statements and notes to the consolidated financial statements for the year ended December 31, 2021.

On September 30, 2022, the Company changed its jurisdiction of incorporation from the province of Ontario, Canada, to the State of Delaware (the “Domestication”). The Company discontinued its existence as a corporation under Section 181 of the Ontario Business Corporations Act and, pursuant to Section 388 of the Delaware General Corporation Law (the “DGCL”), continued its existence under the DGCL as a corporation incorporated in the State of Delaware. In connection with the Domestication, the outstanding common shares of the Company were converted, on a one-for-one basis, into shares of common stock of the Company, respectively, as a corporation incorporated in the State of Delaware. Following the completion of the Domestication, the Company’s common stock will continue to be listed on the Nasdaq Stock Market and on the Toronto Stock Exchange under the symbol “AKU.” The business, assets and liabilities of the Company, as well as its principal place of business and fiscal year, were the same immediately after the Domestication as they were immediately prior to the Domestication.

The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the amounts reported in the condensed consolidated financial statements and accompanying notes. Actual results could differ from those estimates.

Certain reclassifications have been made to prior period condensed consolidated financial statements to conform to the current period presentation.

2. New Accounting Standards

Recently Adopted Accounting Standards

ASU 2021-04, Earnings Per Share (Topic 260), Debt—Modifications and Extinguishments (Subtopic 470-50), Compensation—Stock Compensation (Topic 718), and Derivatives and Hedging—Contracts in Entity’s Own Equity (Subtopic 815-40)

In April 2021, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2021-04, Earnings Per Share (Topic 260), Debt—Modifications and Extinguishments (Subtopic 470-50), Compensation—Stock Compensation (Topic 718), and Derivatives and Hedging—Contracts in Entity’s Own Equity (Subtopic 815-40). This guidance clarifies and reduces diversity in an issuer’s accounting for modifications or exchanges of freestanding equity-classified written call options due to a lack of explicit guidance in the FASB Codification. This ASU is effective for all entities for fiscal years beginning after December 15, 2021. The Company adopted this standard as of January 1, 2022 and it did not have a material impact on the Company’s condensed consolidated financial statements.

ASU 2021-10, Government Assistance (Topic 832): Disclosures by Business Entities about Government Assistance

In November 2021, the FASB issued ASU 2021-10, Government Assistance (Topic 832): Disclosures by Business Entities about Government Assistance, which aims to provide increased transparency by requiring business entities to disclose information about certain types of government assistance they receive in the notes to the financial statements. ASU 2021-10 also adds a new ~~Topic—ASC~~Topic, Accounting Standards Codification ("ASC") 832, Government Assistance,—to the FASB’s Codification. The disclosure requirements only apply to transactions with a government that are accounted for by

AKUMIN INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

September 30, 2022

(Unaudited)

analogizing to either a grant model or a contribution model. The guidance in ASU 2021-10 is effective for financial statements of all entities, including private companies, for annual periods beginning after December 15, 2021, with early adoption permitted. The Company adopted this standard as of January 1, 2022 and it did not have a material impact on the Company’s condensed consolidated financial statements.

Recently Issued Accounting Standards Not Yet Effective

ASU 2016-13, Financial Instruments – Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments

In June 2016, the FASB issued ASU 2016-13, Financial Instruments – Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments, and related clarifying standards, which replaces the incurred loss impairment

~~AKUMIN INC.~~

~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)~~

~~June 30, 2022~~

~~(Unaudited)~~

methodology in current GAAP with a methodology that reflects expected credit losses and requires consideration of a broader range of reasonable and supportable information to assess credit loss estimates. This ASU is effective for public entities for fiscal years beginning after December 15, 2019, with early adoption permitted. For all other entities, this ASU is effective for fiscal years beginning after December 15, 2022. The Company is considered an Emerging Growth Company as classified by the Securities and Exchange Commission (“SEC”), which gives the Company relief in the timing of implementation of this standard by allowing the private company timing for adoption. The Company is currently evaluating the impact of the standard on its consolidated financial statements.

ASU 2020-04, Reference Rate Reform (Topic 848): Facilitation of the Effects of Reference Rate Reform on Financial Reporting

In March 2020, the FASB issued ASU 2020-04, Reference Rate Reform (Topic 848): Facilitation of the Effects of Reference Rate Reform on Financial Reporting. This ASU provides optional expedients and exceptions for applying generally accepted accounting principles to certain contract modifications and hedging relationships that reference London Inter-bank Offered Rate (“LIBOR”) or another reference rate expected to be discontinued. For all entities, the guidance is effective upon issuance and generally can be applied through December 31, 2022. The Company is currently evaluating the impact of the standard on its consolidated financial statements.

ASU 2021-01, Reference Rate Reform (Topic 848): Scope

In January 2021, the FASB issued ASU 2021-01, Reference Rate Reform (Topic 848): Scope. This ASU clarifies the scope of Topic 848 so that derivatives affected by the discounting transition are explicitly eligible for certain option expedients and exceptions in Topic 848. The guidance is effective upon issuance and generally can be applied through December 31, 2022. The Company is currently evaluating the impact of the standard on its consolidated financial statements.

ASU 2021-08, Business Combinations (Topic 805): Accounting for Contract Assets and Contract Liabilities from Contracts with Customers (Topic 805)

In October 2021, the FASB issued ASU 2021-08, Business Combinations (Topic 805): Accounting for Contract Assets and Contract Liabilities from Contracts with Customers, creating an exception to the recognition and measurement principles in ASC 805, Business Combinations. The amendments require an acquirer to use the guidance in ASC 606, Revenue from Contracts with Customers, rather than using fair value, when recognizing and measuring contract assets and contract liabilities related to customer contracts assumed in a business combination. In addition, the amendments clarify that all contracts requiring the recognition of assets and liabilities in accordance with the guidance in ASC 606, such as contract liabilities derived from the sale of nonfinancial assets within the scope of ASC 610-20, Gains and Losses from the Derecognition of Nonfinancial Assets, fall within the scope of the amended guidance in ASC 805. The amendments do not affect the accounting for other assets or liabilities arising from revenue contracts with customers in a business combination, such as customer-related intangible assets and contract-based intangible assets, including off-market contract terms. This ASU is effective for public entities for fiscal years beginning after December 15, 2022, with early adoption permitted. For all other entities, this ASU is effective for fiscal years beginning after December 15, 2023. The Company is considered an Emerging Growth Company as classified by the SEC, which gives the Company relief in the timing of implementation of

AKUMIN INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

September 30, 2022

(Unaudited)

this standard by allowing the private company timing for adoption. The Company is currently evaluating the impact of the standard on its consolidated financial statements.

3. Alliance Acquisition

On September 1, 2021, the Company acquired all of the issued and outstanding common stock of Thaihot Investment Company US Limited, which owns 100% of the common stock of Alliance Healthcare Services, Inc. ("Alliance"), from Thaihot Investment Co., Ltd. for a total purchase price of $785.6 million (the “Alliance Acquisition”). The acquisition included Alliance’s ownership interests in its joint ~~ventures, which had a preliminary fair value of $212.0 million on the acquisition date.~~

~~AKUMIN INC.~~

~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)~~

~~June 30, 2022~~

~~(Unaudited)~~

ventures.

As of the acquisition date, the Company had preliminarily estimated the fair value of the assets acquired and liabilities assumed and allocated a portion of the total purchase price to tangible and identifiable intangible assets acquired and liabilities assumed based on their estimated fair values as of the date of the acquisition. Noncontrolling interests have also been recorded at estimated fair value as of the acquisition date. The fair value of the total enterprise applicable to joint ventures has been allocated to the individual joint ventures.

During the ~~six~~nine months ended ~~June~~September 30, 2022, the Company updated the preliminary assessment of the fair value of the tangible and identifiable intangible assets acquired and liabilities assumed, resulting in certain changes to the preliminary amounts previously recorded. These changes were composed primarily of (i) a decrease in property and equipment acquired of $0.5 million due to a refinement in the valuation analysis, (ii) a decrease in other ~~liabilities~~intangible assets of $0.1 million due to adjustments in estimated accrued liabilities, (iii) a decrease in equipment debt of $0.1 million due to an adjustment in the carrying value of the liability, and (iv) an increase in noncontrolling interest of $0.2$1.2 million due to a refinement in the valuation ~~analysis.~~analysis, partially offset by the valuation of a patent which had not previously been valued, (iii) a decrease in noncontrolling interests of $3.5 million due to a refinement in the valuation analysis, and (iv) a decrease in net deferred tax liabilities of $22.7 million due to further analysis of the difference between the book value and tax basis of the assets and liabilities reflected in the opening balance sheet of the acquired business, and the tax net operating loss carryforwards of both the acquired business and the acquiring business, as well as the valuation allowance required to reduce the carrying amount of deferred tax assets of the acquired business. The net effect of the changes to the preliminary fair value of the assets acquired and liabilities assumed resulted in ~~an increase~~a decrease in goodwill of ~~$0.4~~$24.7 million. The final determination of the fair value of certain assets acquired and liabilities assumed, including deferred tax liabilities and the assignment of goodwill to reporting units, was ~~not complete~~finalized as of ~~June~~August 31, 2022.

AKUMIN INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

September 30, 2022 ~~but will be finalized within the allowable one-year measurement period.~~

(Unaudited)

The following table summarizes the ~~revised preliminary~~final assessment of fair value of the assets acquired and liabilities assumed as of the date of the acquisition:


(in thousands)
Assets acquired:
Cash and cash equivalents	$	26,125
Net working capital	14,221
Property and equipment	205,940
Operating lease right-of-use assets	69,919
Goodwill	~~456,195~~431,017
Intangibles – Customer contracts	~~266,224~~264,401
Intangibles – Trade names	~~69,108~~68,829
Intangibles – Third party management agreements	10,200
Intangibles – Patent	920
Intangibles – Certificates of need	69,558
Other assets	8,170
	~~1,195,660~~1,169,300
Liabilities assumed:
Equipment debt	54,539
Obligations under finance leases	9,041
Obligations under operating leases	74,290
Deferred tax liabilities	~~52,760~~30,082
Other liabilities	7,234
	~~197,864~~175,186
Net assets acquired	~~997,796~~994,114
Less redeemable noncontrolling interests	~~37,040~~35,813
Less noncontrolling interests	~~175,140~~172,685
Purchase price	$	785,616

~~AKUMIN INC.~~

~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)~~

~~June 30, 2022~~

~~(Unaudited)~~

4. Variable Interest Entities

In accordance with consolidation guidance, a reporting entity with a variable interest in another entity is required to include the assets and liabilities and revenues and expenses of that separate entity (i.e., consolidate with the financial statements of the reporting entity) when the variable interest is determined to be a controlling financial interest. A reporting entity is considered to have a controlling financial interest in a variable interest entity (“VIE”) if (i) the reporting entity has the power to direct the activities of the VIE that most significantly impacts its economic performance and (ii) the reporting entity has the obligation to absorb losses of the VIE that could be potentially significant to the VIE.

As a result of the financial relationship established between the Company and certain entities (the “Revenue Practices”) through respective management service agreements, the Revenue Practices individually qualify as VIEs as the Company, which provides them non-medical, technical and administrative services, has the power to direct their respective activities and the obligation to absorb their gains and losses. As a result, the Company is considered the primary beneficiary of the Revenue Practices, and accordingly, the assets and liabilities and revenues and expenses of the Revenue Practices are included in the condensed consolidated financial statements. The following information excludes any intercompany transactions and costs allocated by the Company to the Revenue Practices. As of ~~June~~September 30, 2022 and December 31, 2021, the Revenue Practices’ assets included in the Company’s condensed consolidated balance sheets were ~~$23.4~~

AKUMIN INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

September 30, 2022

(Unaudited)

$37.3 million and $20.4 million, respectively, and liabilities included in the Company’s condensed consolidated balance sheets were $0$4.7 million and $0.6 million, respectively. The assets of the Revenue Practices can only be used to settle their obligations. During the ~~six~~nine months ended ~~June~~September 30, 2022 and 2021, the Revenue Practices’ revenues were ~~$92.8~~$137.2 million and ~~$83.3~~$128.6 million, respectively, and the net cash provided by operating activities was ~~$93.2~~$161.0 million and ~~$90.2~~$135.1 million, respectively.

5. Sales of Accounts Receivable

The Company uses accounts receivable sales facilities as part of managing its cash flows and improving liquidity. The Company accounts for transfers of financial assets under ASC 860, “Transfers and Servicing,” as either sales or financings. Transfers of financial assets that result in sales accounting are those in which (1) the transfer legally isolates the transferred assets from the transferor, (2) the transferee has the right to pledge or exchange the transferred assets and no condition both constrains the transferee’s right to pledge or exchange the assets and provides more than a trivial benefit to the transferor, and (3) the transferor does not maintain effective control over the transferred assets. If the transfer does not meet these criteria, the transfer is accounted for as a financing. Financial assets that are treated as sales are removed from the Company’s accounts with any realized gain or loss reflected in earnings during the period of sale.

In August 2022, the Company entered into a One-Time Purchase Agreement (“OTPA”) with an independent third-party for the sale of certain existing accounts receivable that arose from healthcare services provided in the states of Georgia, Texas and Florida. Under the terms of the OTPA, the sale is on a non-recourse basis and the Company does not retain any interest in the receivables. In connection with the OTPA transaction, the Company sold accounts receivable with a carrying value of $20.3 million and received cash proceeds of $29.0 million. The transfer of accounts receivable under this agreement meets the criteria for a sale of financial assets. As a result, such receivables have been derecognized from the Company’s condensed consolidated balance sheet as of September 30, 2022 and the proceeds are included in cash flows from operating activities in the Company’s condensed consolidated statement of cash flows for the nine months ended September 30, 2022.

In addition, the Company entered into a Master Purchase Agreement (“MPA”) with the same third-party to sell, on an ongoing basis and without recourse, future accounts receivable that arise from healthcare services provided in the states of Georgia, Texas and Florida. Under the MPA, the purchaser will buy from the Company accounts receivable that are acceptable to the purchaser and that the purchaser agrees to acquire. Either party may terminate the agreement at any time upon thirty days’ prior written notice to the other party.

In connection with the OTPA and MPA, the Company entered into a servicing agreement to service the accounts receivable arising from the state of Florida. In accordance with ASC 860, the Company recognized a $1.1 million servicing liability related to the OTPA transaction for the cost of future servicing of the accounts receivable. This liability was initially measured at fair value and is being subsequently amortized on a straight-line basis over the estimated collection period of three years. The fair value of the servicing liability was determined using unobservable Level 3 inputs by obtaining an estimated rate that would be charged by an unrelated entity to service the accounts receivable and applying that rate to the estimated collections. The servicing liability is included in accrued liabilities (current portion) and other liabilities (non-current portion) in the Company's condensed consolidated balance sheet as of September 30, 2022.

In connection with the OTPA transaction, the Company recorded a gain on sale of accounts receivable of $7.6 million, which is included in other operating expense, net in the condensed consolidated statements of operations and comprehensive loss for the three and nine months ended September 30, 2022.

AKUMIN INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

September 30, 2022

(Unaudited)

6. Property and Equipment

Property and equipment consists of the following:


(in thousands)	(in thousands)	June 30, 2022		December 31, 2021		(in thousands)	September 30, 2022		December 31, 2021
Medical equipment	Medical equipment	$	236,007	$	227,796	Medical equipment	$	245,105	$	227,796
Leasehold improvements	Leasehold improvements	41,274		39,763		Leasehold improvements	42,779		39,763
Equipment under finance leases	Equipment under finance leases	35,574		34,597		Equipment under finance leases	37,243		34,597
Office and computer equipment	Office and computer equipment	19,246		16,701		Office and computer equipment	20,484		16,701
Transportation and service equipment	Transportation and service equipment	11,672		8,996		Transportation and service equipment	11,672		8,996
Furniture and fixtures	Furniture and fixtures	3,399		3,130		Furniture and fixtures	3,372		3,130
Construction in progress	Construction in progress	1,186		6,423		Construction in progress	5,094		6,423
		348,358		337,406			365,749		337,406
Less accumulated depreciation	Less accumulated depreciation	117,061		78,284		Less accumulated depreciation	136,027		78,284
		$	231,297	$	259,122		$	229,722	$	259,122

Depreciation expense was ~~$20.2~~$19.5 million and ~~$3.9~~$9.4 million for the three months ended ~~June~~September 30, 2022 and 2021, respectively, and ~~$39.9~~$59.4 million and ~~$7.7~~$17.1 million for the ~~six~~nine months ended ~~June~~September 30, 2022 and 2021, respectively.

As of ~~June~~September 30, 2022 and December 31, 2021, the equipment under finance leases had a net book value of ~~$20.7~~$21.0 million and $22.2 million, respectively.

~~AKUMIN INC.~~

~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)~~

~~June 30, 2022~~

~~(Unaudited)~~

6.7. Goodwill

Changes in the carrying amount of goodwill are as follows:


(in thousands)	(in thousands)	Radiology		Oncology		Total		(in thousands)	Radiology		Oncology		Total
Balance, December 31, 2021	Balance, December 31, 2021	$	681,993	$	158,360	$	840,353	Balance, December 31, 2021	$	681,993	$	158,360	$	840,353
Adjustments		360		75		435
Balance, June 30, 2022		$	682,353	$	158,435	$	840,788
Purchase accounting adjustments								Purchase accounting adjustments	732		(25,475)		(24,743)
Impairment								Impairment	—		(20,000)		(20,000)
Balance, September 30, 2022								Balance, September 30, 2022	$	682,725	$	112,885	$	795,610

The Company tests its goodwill and indefinite-lived intangible assets annually or more frequently depending on certain impairment indicators. Such indicators include a significant decline in expected future cash flows due to changes in company-specific factors or the broader business climate. ~~As of June~~During the three months ended September 30, 2022, ~~there were no indications~~the Company determined that potential indicators of impairment existed and thus performed a quantitative test for impairment at the reporting unit level as of August 31, 2022. In estimating fair values, the Company gave equal weight to an income approach (the DCF method) and a market approach (the GPC method).

Specifically, the Company utilized the following Level 3 estimates and assumptions in its analysis:


Discount rate			10.0% to 11.0%
Perpetual growth rate			2.5%
Tax rate			26.0%
Risk-free interest rate			3.5%
Revenue multiple			1.9 to 2.3
EBITDA multiple			8.0 to 12.0

AKUMIN INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

September 30, 2022

(Unaudited)

The impairment test yielded a fair value for the Radiology reporting unit that exceeded its carrying value; therefore this reporting unit was not considered at risk of impairment. In connection with the interim impairment test for the Oncology reporting unit, the Company concluded that the carrying value exceeded its estimated fair value based on management's assessment of the ~~Company’s~~outlook and long-term business plans for this division. Consequently, the Company recorded an impairment charge of $20.0 million related to goodwill ~~balances.~~for the Oncology reporting unit, which has been recorded in the condensed consolidated statements of operations and comprehensive loss for the three and nine months ended September 30, 2022.

Changes in these estimates or assumptions could materially affect the determination of fair value and the conclusions of the Company's impairment test.

7.8. Other Intangible Assets

Other intangible assets consist of the following:


(dollars in thousands)	(dollars in thousands)	Weighted Average Useful Life (in years)	June 30, 2022						December 31, 2021						(dollars in thousands)	Weighted Average Useful Life (in years)	September 30, 2022						December 31, 2021
			Gross Carrying Amount		Accumulated Amortization		Other Intangible Assets, Net		Gross Carrying Amount		Accumulated Amortization		Other Intangible Assets, Net				Gross Carrying Amount		Accumulated Amortization		Other Intangible Assets, Net		Gross Carrying Amount		Accumulated Amortization		Other Intangible Assets, Net
Finite-lived intangible assets:	Finite-lived intangible assets:														Finite-lived intangible assets:
Customer contracts	Customer contracts	20	$	266,059	$	(11,116)	$	254,943	$	266,224	$	(4,437)	$	261,787	Customer contracts	20	$	264,236	$	(15,046)	$	249,190	$	266,224	$	(4,437)	$	261,787
Trade names	Trade names	18	77,466		(8,618)		68,848		77,466		(6,054)		71,412		Trade names	18	77,189		(9,928)		67,261		77,466		(6,054)		71,412
Management agreements	Management agreements	17	10,200		(500)		9,700		10,200		(200)		10,000		Management agreements	17	10,200		(650)		9,550		10,200		(200)		10,000
Other	Other	4	4,814		(3,883)		931		4,814		(3,425)		1,389		Other	5	5,734		(4,108)		1,626		4,814		(3,425)		1,389
Total	Total		$	358,539	$	(24,117)	334,422		$	358,704	$	(14,116)	344,588		Total		$	357,359	$	(29,732)	327,627		$	358,704	$	(14,116)	344,588
Certificates of Need	Certificates of Need						69,558						69,558		Certificates of Need						69,558						69,558
Total other intangible assets	Total other intangible assets						$	403,980					$	414,146	Total other intangible assets						$	397,185					$	414,146

The Company performs an impairment test when indicators of impairment are present. ~~As of June~~During the three months ended September 30, 2022, ~~there were no indications~~the Company determined that potential indicators of impairment existed and thus performed a quantitative assessment for impairment by comparing the carrying amount of certain assets to the ~~Company’s~~undiscounted future net cash flows expected to be generated by the assets. Based on the assessment performed, the Company concluded that there was no impairment associated with its other intangible ~~assets balances.~~assets.

The aggregate amortization expense for the Company’s finite-lived intangible assets was ~~$5.0~~$5.6 million and ~~$0.7~~$1.9 million for the three months ended ~~June~~September 30, 2022 and 2021, respectively, and ~~$10.0~~$15.6 million and ~~$1.4~~$3.3 million for the ~~six~~nine months ended ~~June~~September 30, 2022 and 2021, respectively.

1316

AKUMIN INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

~~June~~September 30, 2022

(Unaudited)

8.9. Long-Term Debt

Long-term debt consists of the following:


(in thousands)	(in thousands)	June 30, 2022		December 31, 2021		(in thousands)	September 30, 2022		December 31, 2021
2028 Senior Notes	2028 Senior Notes	$	375,000	$	375,000	2028 Senior Notes	$	375,000	$	375,000
2025 Senior Notes	2025 Senior Notes	475,000		475,000		2025 Senior Notes	475,000		475,000
Subordinated Notes	Subordinated Notes	397,074		372,470		Subordinated Notes	409,979		372,470
Equipment Debt	Equipment Debt	60,212		58,827		Equipment Debt	71,715		58,827
		1,307,286		1,281,297			1,331,694		1,281,297
Debt discount and deferred issuance costs	Debt discount and deferred issuance costs	(70,164)		(68,912)		Debt discount and deferred issuance costs	(70,799)		(68,912)
		1,237,122		1,212,385			1,260,895		1,212,385
Less current portion	Less current portion	16,299		14,789		Less current portion	18,714		14,789
Long-term debt, net of current portion	Long-term debt, net of current portion	$	1,220,823	$	1,197,596	Long-term debt, net of current portion	$	1,242,181	$	1,197,596

During the ~~six~~nine months ended ~~June~~September 30, 2022, the Company elected to pay interest in-kind on the Subordinated Notes pursuant to the original agreement and, accordingly, ~~$24.6~~$37.5 million of accrued interest was added to the principal balance of the Subordinated Notes.

Certain of the debt obligations are subject to covenants with which the Company must comply on a quarterly or annual basis. The Company was in compliance with, or had received waivers for, all such covenants as of ~~June~~September 30, 2022.

9.10. Accrued Liabilities

Accrued liabilities consist of the following:


(in thousands)	(in thousands)	June 30, 2022		December 31, 2021		(in thousands)	September 30, 2022		December 31, 2021
Accrued compensation and related expenses	Accrued compensation and related expenses	$	35,525	$	26,486	Accrued compensation and related expenses	$	32,687	$	26,486
Accrued interest expense	Accrued interest expense	17,823		16,840		Accrued interest expense	19,252		16,840
Other	Other	37,568		44,487		Other	45,123		44,487
		$	90,916	$	87,813		$	97,062	$	87,813

~~10.~~11. Redeemable Noncontrolling Interests

The Company has noncontrolling interests with redemption features. These redemption features could require the Company to make an offer to purchase the noncontrolling interests in the case of certain events, including (i) the expiration or termination of certain operating agreements of the joint venture, or (ii) the noncontrolling interests’ tax-exempt status is jeopardized by the joint venture.

As of ~~June~~September 30, 2022, the Company holds redeemable noncontrolling interests of ~~$36.0~~$34.2 million, which are not currently redeemable or probable of becoming redeemable. The redemption of these noncontrolling interests is not solely within the Company’s control, therefore, they are presented in the temporary equity section of the Company’s condensed consolidated balance sheets. The Company does not believe it is probable the redemption features related to these noncontrolling interest securities will be triggered as the triggering events are generally not probable until they occur. As such, these noncontrolling interests have not been remeasured to redemption value.

1417

AKUMIN INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

~~June~~September 30, 2022

(Unaudited)

The following is a rollforward of the activity in the redeemable noncontrolling interests for the ~~six~~nine months ended ~~June~~September 30, 2022:


(in thousands)
Balance, December 31, 2021	$	37,469
Net income attributable to redeemable noncontrolling interests	~~1,114~~1,482
Distributions paid to redeemable noncontrolling interests	~~(2,541)~~(3,525)
Purchase accounting adjustments	(1,226)
Balance, ~~June~~September 30, 2022	$	~~36,042~~34,200

~~11.~~12. Financial Instruments

Assets and Liabilities that are Measured at Fair Value on a Recurring Basis

The following table summarizes the valuation of the Company’s financial instruments that are reported at fair value on a recurring basis:


		Fair Value as of June 30, 2022								Fair Value as of December 31, 2021									Fair Value as of September 30, 2022								Fair Value as of December 31, 2021
(in thousands)	(in thousands)	Level 1		Level 2		Level 3		Total		Level 1		Level 2		Level 3		Total		(in thousands)	Level 1		Level 2		Level 3		Total		Level 1		Level 2		Level 3		Total
Current and long-term assets:	Current and long-term assets:																	Current and long-term assets:
Interest rate contracts	Interest rate contracts	$	—	$	39	$	—	$	39	$	—	$	3	$	—	$	3	Interest rate contracts	$	—	$	58	$	—	$	58	$	—	$	3	$	—	$	3
Current and long-term liabilities:	Current and long-term liabilities:																	Current and long-term liabilities:
Derivative in subordinated notes	Derivative in subordinated notes	$	—	$	—	$	6,683	$	6,683	$	—	$	—	$	7,522	$	7,522	Derivative in subordinated notes	$	—	$	—	$	6,412	$	6,412	$	—	$	—	$	7,522	$	7,522
Interest rate contracts	Interest rate contracts	$	—	$	—	$	—	$	—	$	—	$	53	$	—	$	53	Interest rate contracts	$	—	$	—	$	—	$	—	$	—	$	53	$	—	$	53

The derivative in subordinated notes relates to the Change of Control Redemption Election included in the Subordinated Notes (see Note 8)9). The fair value of the Change of Control Redemption Election liability was determined using a probability weighted scenario analysis regarding a potential change of control during the term. The estimated fair values of the Change of Control Redemption Election as of ~~June~~September 30, 2022 and December 31, 2021 use unobservable inputs for probability weighted time until an exit event of ~~3.9~~3.7 years and 4.2 years, respectively, and an exit event probability weighting of ~~24.0%~~23.6% and 24.5%, respectively.

The following is a reconciliation of the opening and closing balances for the liability related to the embedded derivative included in the Subordinated Notes measured at fair value on a recurring basis using significant unobservable inputs (Level 3) during the ~~six~~nine months ended ~~June~~September 30, 2022:


(in thousands)
Balance, December 31, 2021	$	7,522
Change in fair value	~~(839)~~(1,110)
Balance, ~~June~~September 30, 2022	$	~~6,683~~6,412

The ~~$0.8~~$1.1 million change in the fair value of the derivative in subordinated notes was recorded as a gain and included in other non-operating income, net in the Company's condensed consolidated ~~statement~~statements of operations and comprehensive loss for the ~~six~~nine months ended ~~June~~September 30, 2022.

AKUMIN INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

September 30, 2022

(Unaudited)

The Company’s interest rate contracts are primarily pay-fixed, receive-variable interest rate swaps related to certain of the Company’s equipment debt. The amount that the Company expects to reclassify from accumulated other comprehensive income to interest expense over the next twelve months is immaterial.

~~AKUMIN INC.~~

~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)~~

~~June 30, 2022~~

~~(Unaudited)~~

Assets and Liabilities for which Fair Value is only Disclosed

The estimated fair values of other current and non-current liabilities are as follows:


(in thousands)	(in thousands)	June 30, 2022		December 31, 2021		(in thousands)	September 30, 2022		December 31, 2021
2028 Senior Notes	2028 Senior Notes	$	264,375	$	345,938	2028 Senior Notes	$	294,583	$	345,938
2025 Senior Notes	2025 Senior Notes	365,750		446,500		2025 Senior Notes	387,202		446,500
Subordinated Notes	Subordinated Notes	249,197		323,620		Subordinated Notes	241,622		323,620
Equipment Debt	Equipment Debt	51,862		56,879		Equipment Debt	63,944		56,879
		$	931,184	$	1,172,937		$	987,351	$	1,172,937

As of ~~June~~September 30, 2022 and December 31, 2021, the estimated fair values of the 2028 Senior Notes and 2025 Senior Notes were determined using Level 2 inputs and the estimated fair values of the Subordinated Notes and Equipment Debt were determined using Level 3 inputs.

The carrying value of cash and cash equivalents, accounts receivable, accounts payable, accrued liabilities, and the current portion of lease liabilities approximates their fair value given their short-term nature. The carrying value of the non-current portion of lease liabilities approximates their fair value given the difference between the discount rates used to recognize the liabilities in the condensed consolidated balance sheets and the normalized expected market rates of interest is insignificant.

AKUMIN INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

September 30, 2022

(Unaudited)

Financial instruments are classified into one of the following categories: amortized cost, fair value through earnings and fair value through other comprehensive income. The following table summarizes information regarding the carrying value of the Company’s financial instruments:

(in thousands) June 30,
2022 December 31,
2021
Financial assets measured at amortized cost:
Cash and cash equivalents $ 38,447 $ 48,419
Accounts receivable 126,145 121,525
$ 164,592 $ 169,944
Financial liabilities measured at amortized cost:
Accounts payable $ 33,787 $ 34,326
Current portion of long-term debt 16,299 14,789
Current portion of leases 26,094 27,254
Non-current portion of long-term debt 1,220,823 1,197,596
Non-current portion of leases 184,916 200,326
Accrued liabilities 90,916 87,813
$ 1,572,835 $ 1,562,104
Financial liabilities measured at fair value through earnings:
Derivative in subordinated notes $ 6,683 $ 7,522
Financial assets measured at fair value through other comprehensive income:
Interest rate contracts $ 39 $ 3
Financial liabilities measured at fair value through other comprehensive income:
Interest rate contracts $ — $ 53

~~AKUMIN INC.~~

~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)~~

~~June 30, 2022~~

~~(Unaudited)~~


(in thousands)	September 30, 2022		December 31, 2021
Financial assets measured at amortized cost:
Cash and cash equivalents	$	59,356	$	48,419
Accounts receivable	112,376		121,525
	$	171,732	$	169,944
Financial liabilities measured at amortized cost:
Accounts payable	$	27,696	$	34,326
Current portion of long-term debt	18,714		14,789
Current portion of leases	23,827		27,254
Non-current portion of long-term debt	1,242,181		1,197,596
Non-current portion of leases	180,919		200,326
Accrued liabilities	97,062		87,813
	$	1,590,399	$	1,562,104
Financial liabilities measured at fair value through earnings:
Derivative in subordinated notes	$	6,412	$	7,522
Financial assets measured at fair value through other comprehensive income:
Interest rate contracts	$	58	$	3
Financial liabilities measured at fair value through other comprehensive income:
Interest rate contracts	$	—	$	53

Assets and Liabilities that are Measured at Fair Value on a Nonrecurring Basis

The Company measures certain non-financial assets at fair value on a nonrecurring basis, primarily intangible assets, goodwill and long-lived assets in connection with acquisitions and periodic evaluations for potential impairment. The Company estimates the fair value of these assets using primarily unobservable inputs; therefore, these are considered Level 3 fair value measurements.

Interest Rate Risk

Interest rate risk is the risk the fair value or future cash flows of a financial instrument will fluctuate because of changes in market interest rates. Changes in lending rates can cause fluctuations in interest payments and cash flows. Certain of the Company’s equipment debt arrangements have interest rate swap agreements to hedge the future variable cash interest payments in order to avoid volatility in operating results due to fluctuations in interest rates. As of ~~June~~September 30, 2022 and December 31, 2021, the Company had ~~$1.4~~$5.1 million and $1.8 million, respectively, of variable interest rate equipment debt that is not hedged. In addition, the Company is exposed to variable interest rates related to the 2020 Revolving Facility, which had no outstanding balance as of ~~June~~September 30, 2022 or December 31, 2021. The Company’s exposure to interest rate risk from a 1% increase or decrease in the variable interest rates is not material.

~~12.~~

AKUMIN INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

September 30, 2022

(Unaudited)

13. Stockholders' Equity

In connection with the Domestication (Note 1), the Company amended its Certificate of Incorporation to provide for the issuance of up to 300,000,000 shares of common stock, par value $0.01 per share, and 50,000,000 shares of undesignated preferred stock, par value $0.01 per share. The effect of the change in the common stock from no par value to $0.01 par value per share has been reflected in the condensed consolidated financial statements on a retroactive basis for all periods presented.

Stock-Based Awards

The Company may grant stock-based awards to employees, directors and consultants under the Amended and Restated Restricted Share Unit Plan, adopted as of November 14, 2017 (the “RSU Plan”) and the Amended and Restated Stock Option Plan, adopted as of November 14, 2017 (the “Stock Option Plan” and together with the RSU Plan, the “2017 Stock Plans”). Under the 2017 Stock Plans, the collective maximum number of shares reserved for issuance is equal to 10% of the number of capital shares of the Company that are outstanding from time to time. As of ~~June~~September 30, 2022 and December 31, 2021, common shares reserved for issuance under the 2017 Stock Plans were ~~8,951,651~~8,966,151 and 8,902,699 respectively. The 2017 Stock Plans are administered by the Board of Directors, which has authority to select eligible persons to receive awards and to determine the terms and conditions of the awards.

Restricted Share Units

Restricted share units (“RSUs”) represent a right to receive a share of common stock at a future vesting date with no cash payment from the holder. RSUs granted generally vest over 2 years from the date of grant. A summary of RSU activity is as follows:

Number of
RSUs Weighted-
Average
Grant Date
Fair Value Aggregate Grant Date
Fair Value
(in thousands)
Outstanding and unvested at December 31, 2021 2,029,032 $ 2.41
Granted 799,085 1.10 $ 875
Vested (489,516) 3.19 $ 1,561
Outstanding and unvested at June 30, 2022 2,338,601 $ 1.80 $ 4,210

~~AKUMIN INC.~~

~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)~~

~~June 30, 2022~~

~~(Unaudited)~~


	Number of RSUs	Weighted- Average Grant Date Fair Value		Aggregate Fair Value (in thousands)
Outstanding and unvested at December 31, 2021	2,029,032	$	2.41
Granted	799,085	1.10		$	875
Vested	(634,516)	2.98		$	1,891
Cancelled	(50,000)	1.69		$	(85)
Outstanding and unvested at September 30, 2022	2,143,601	$	1.77	$	3,795

Stock Options

Stock options are awarded as consideration in exchange for services rendered to the Company. Stock options granted generally have terms of 7 to 10 years and vest over 3 years. A summary of the stock option activity is as follows:

Number of
Options Weighted-
Average
Exercise Price Weighted-
Average
Remaining
Contractual
Term (Years) Aggregate
Intrinsic
Value
(in thousands)
Outstanding at December 31, 2021 5,680,120 $ 2.54 4.4 $ 2,344
Outstanding at June 30, 2022 5,668,120 $ 2.53 3.8 $ 188
Exercisable at June 30, 2022 5,072,519 $ 2.44 3.7 $ 188


	Number of Options	Weighted- Average Exercise price		Weighted- Average Remaining Contractual Term (Years)	Aggregate Intrinsic Value (in thousands)
Outstanding at December 31, 2021	5,680,120	$	2.54	4.4	$	2,344
Outstanding at September 30, 2022	5,498,120	$	2.50	3.6	$	2,269
Exercisable at September 30, 2022	4,925,619	$	2.41	3.5	$	2,269

Aggregate intrinsic value for outstanding and exercisable stock options in the table above represents the difference between the closing stock price on ~~June~~September 30, 2022 and the exercise price multiplied by the number of in-the-money options.

No stock options were granted during the ~~six~~nine months ended ~~June~~September 30, 2022.

~~13.~~

AKUMIN INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

September 30, 2022

(Unaudited)

14. Commitments and Contingencies

Purchase Commitments

The Company has certain binding purchase commitments primarily for the purchase of equipment from various suppliers. As of ~~June~~September 30, 2022, the obligations for these future purchase commitments totaled ~~$46.6~~$50.7 million, of which ~~$36.0~~$17.0 million is expected to be paid during the remaining ~~six~~three months of 2022 and ~~$10.6~~$33.7 million is expected to be paid thereafter.

Guarantees and Indemnities

In the normal course of business, the Company has made certain guarantees and indemnities, under which it may be required to make payments to a guaranteed or indemnified party, in relation to certain transactions. The Company indemnifies other parties, including customers, lessors, and parties to other transactions with the Company, with respect to certain matters. The Company has agreed to hold the other party harmless against losses arising from certain events as defined within the particular contract, which may include, for example, litigation or claims arising from a breach of representations or covenants. In addition, the Company has entered into indemnification agreements with its executive officers and directors and the Company’s bylaws contain similar indemnification obligations. Under these arrangements, the Company is obligated to indemnify, to the fullest extent permitted under applicable law, its current or former officers and directors for various amounts incurred with respect to actions, suits or proceedings in which they were made, or threatened to be made, a party as a result of acting as an officer or director.

It is not possible to determine the maximum potential amount under these indemnification agreements due to the limited history of prior indemnification claims and the unique facts and circumstances involved in each particular agreement. Historically, payments made related to these indemnifications have been immaterial. As of ~~June~~September 30, 2022, the Company has determined that no liability is necessary related to these guarantees and indemnities.

Legal Matters

~~AKUMIN INC.~~

~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)~~

~~June 30, 2022~~

~~(Unaudited)~~

not yet responded to the claim. On December 20, 2021, a second statement of claim was filed by a new plaintiff making similar allegations. Because the two statements of claim involve similar subject matter and some of the same class members, the second Ontario plaintiff firm requested a motion for carriage under the Class Proceedings Act, 1992 (Ontario) so the court could determine which plaintiff firm will have carriage of the class action proceedings. That carriage motion was heard by the court on March 31, 2022 and, on April 27, 2022, the court rendered a decision in favor of the second plaintiff. As such, the second plaintiff has been awarded carriage of the class action claim and the action by the first plaintiff is stayed.

Other Matters

The Company is party to various legal proceedings, claims, and regulatory, tax or government inquiries and investigations that arise in the ordinary course of business. With respect to these matters, management evaluates the developments on a regular basis and accrues a liability when it believes a loss is probable and the amount can be reasonably estimated. Management believes that the amount or any estimable range of reasonably possible or probable loss will not, either individually or in the aggregate, have a material adverse effect on the Company’s business and condensed consolidated financial statements. However, the outcome of these matters is inherently uncertain. Therefore, if one or more of these matters were resolved against the Company for amounts in excess of management’s expectations, the Company’s results of operations and financial condition could be materially and adversely affected.

~~14.~~

AKUMIN INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

September 30, 2022

(Unaudited)

15. Supplemental Revenue Information

Revenues consist primarily of net patient fees received from various payors and patients based on established contractual billing rates, less allowances for contractual adjustments and implicit price concessions. Revenues are also derived directly from hospitals and healthcare providers.

Other revenue consists of miscellaneous fees under contractual arrangements, including service fee revenue under capitation arrangements with third-party payors, management fees, government grants and fees for other services provided to third parties.

The following table summarizes the components of the Company’s revenues by payor category:

Three Months Ended June 30, Six Months Ended June 30,
(in thousands) 2022 2021 2022 2021
Patient fee payors:
Commercial $ 71,609 $ 54,803 $ 140,710 $ 105,602
Medicare 21,002 8,806 42,174 16,990
Medicaid 3,347 2,026 6,449 3,857
Other patient revenue 3,213 2,608 6,487 5,260
99,171 68,243 195,820 131,709
Hospitals and healthcare providers 90,651 — 178,110 —
Other revenue 2,306 1,253 4,461 1,750
$ 192,128 $ 69,496 $ 378,391 $ 133,459


	Three Months Ended September 30,				Nine Months Ended September 30,
(in thousands)	2022		2021		2022		2021
Patient fee payors:
Commercial	$	66,760	$	60,010	$	207,470	$	165,612
Medicare	20,304		13,158		62,478		30,149
Medicaid	3,111		980		9,560		4,837
Other patient revenue	3,053		2,933		9,540		8,193
	93,228		77,081		289,048		208,791
Hospitals and healthcare providers	91,092		30,081		269,202		30,081
Other revenue	2,285		1,015		6,746		2,764
	$	186,605	$	108,177	$	564,996	$	241,636

~~AKUMIN INC.~~

~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)~~

~~June 30, 2022~~

~~(Unaudited)~~

~~15.~~16. Cost of Operations, excluding Depreciation and Amortization

The following table summarizes the components of the Company’s cost of operations, excluding depreciation and amortization:


		Three Months Ended June 30,				Six Months Ended June 30,					Three Months Ended September 30,				Nine Months Ended September 30,
(in thousands)	(in thousands)	2022		2021		2022		2021		(in thousands)	2022		2021		2022		2021
Employee compensation	Employee compensation	$	72,021	$	23,792	$	147,148	$	46,910	Employee compensation	$	67,278	$	41,247	$	214,426	$	88,156
Third-party services and professional fees	Third-party services and professional fees	29,919		7,758		59,096		14,617		Third-party services and professional fees	30,233		15,154		89,271		29,771
Rent and utilities	Rent and utilities	12,742		7,662		25,219		15,346		Rent and utilities	12,894		9,507		38,114		24,853
Reading fees	Reading fees	11,788		10,860		23,286		20,844		Reading fees	11,379		10,797		34,665		31,642
Administrative	Administrative	11,467		4,829		23,091		9,185		Administrative	12,473		7,156		35,621		16,341
Medical supplies and other	Medical supplies and other	16,637		2,867		31,895		6,008		Medical supplies and other	16,417		7,103		48,312		13,111
		$	154,574	$	57,768	$	309,735	$	112,910		$	150,674	$	90,964	$	460,409	$	203,874

~~16.~~

AKUMIN INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

September 30, 2022

(Unaudited)

17. Supplemental Statement of Operations Information

Impairment Charges

Impairment charges relate to the following assets:


	Three Months Ended September 30,				Nine Months Ended September 30,
(in thousands)	2022		2021		2022		2021
Goodwill (Note 7)	$	20,000	$	—	$	20,000	$	—
Property and equipment	369		—		702		—

	$	20,369	$	—	$	20,702	$	—

Restructuring Charges

Three Months Ended June 30, Six Months Ended June 30,
(in thousands) 2022 2021 2022 2021
Transformation costs $ 4,025 $ — $ 4,025 $ —
Lease termination costs 1,840 — 1,840 —
Domestication and related costs 1,063 — 1,063 —
Other 316 — 396 —
$ 7,244 $ — $ 7,324 $ —
Restructuring charges consists of the following:


	Three Months Ended September 30,				Nine Months Ended September 30,
(in thousands)	2022		2021		2022		2021
Transformation costs	$	3,363	$	—	$	7,388	$	—
Lease termination costs	—		—		1,840		—
Domestication and related costs	350		—		1,413		—
Other	329		479		725		479
	$	4,042	$	479	$	11,366	$	479

Transformation costs consist of third-party consulting fees associated with a significant project to identify, plan, and implement various business improvement initiatives designed to enhance growth opportunities and improve operations. The project is expected to continue into 2024. The consulting agreement provides for fixed fees totaling $12.5 million, milestone fees totaling up to $7.0 million that are earned upon the achievement of certain milestones, and performance fees totaling up to $15.0 million that are earned based on the achievement of certain performance results during the period of the contract. The Company recognizes the fixed fees over the contract period as the services are rendered. Milestone and performance fees that are probable of ultimately being paid are recognized based on a percentage of achievement of the related milestone or performance result. As of ~~June~~September 30, 2022, the accrued liability for unpaid transformation consulting costs was ~~$2.8~~$3.9 million.

Lease termination costs relate to a $1.8 million payment made in May 2022 pursuant to an agreement to early terminate the lease for one of the Company’s office facilities. In addition, the Company derecognized $3.2 million for the related operating lease right-of-use asset and the associated lease liability during the three months ended June 30, 2022.

Domestication and related costs consist of professional fees incurred related to the change in the Company’s jurisdiction of incorporation from the province of Ontario (Canada) to the State of Delaware (USA) (See Note 1). ~~This change in jurisdiction was approved by the shareholders in June 2022 and is expected to be completed by late 2022.~~

Severance and Related Costs

Severance and related costs represent costs associated with employees whose employment with the Company has been terminated and are generally paid in the year recorded. During the ~~six~~nine months ended ~~June~~September 30, 2022, the Company implemented a small workforce reduction and recorded severance and related costs. In connection with certain terminated employees, severance benefits are being paid over periods of 12 to 18 months. As of September 30, 2022, the unpaid balance of severance and related costs totaled $6.3 million, of which $5.9 million will be paid during the next twelve months and the remaining $0.4 million will be paid thereafter.

2024

AKUMIN INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

~~June~~September 30, 2022

(Unaudited)

employees, severance benefits are being paid over periods of 12 to 18 months. As of June 30, 2022, the unpaid balance of severance and related costs totaled $6.3 million, of which $5.6 million will be paid during the next twelve months and the remaining $0.7 million will be paid thereafter.

Other Operating and Non-Operating Expense (Income)

Other operating expense (income), net consists of the following:


		Three Months Ended June 30,				Six Months Ended June 30,					Three Months Ended September 30,				Nine Months Ended September 30,
(in thousands)	(in thousands)	2022		2021		2022		2021		(in thousands)	2022		2021		2022		2021
Loss on disposal of property and equipment, net		$	170	$	255	$	372	$	346
Gain on sale of accounts receivable (Note 5)										Gain on sale of accounts receivable (Note 5)	$	(7,603)	$	—	$	(7,603)	$	—
Loss (gain) on disposal of property and equipment, net										Loss (gain) on disposal of property and equipment, net	26		(25)		398		321
Other, net	Other, net	416		—		207		—		Other, net	3		(43)		(123)		(43)
		$	586	$	255	$	579	$	346		$	(7,574)	$	(68)	$	(7,328)	$	278

Other non-operating income, net consists of the following:


		Three Months Ended June 30,				Six Months Ended June 30,					Three Months Ended September 30,				Nine Months Ended September 30,
(in thousands)	(in thousands)	2022		2021		2022		2021		(in thousands)	2022		2021		2022		2021
Fair value adjustment on derivative in subordinated notes	Fair value adjustment on derivative in subordinated notes	$	(1,009)	$	—	$	(839)	$	—	Fair value adjustment on derivative in subordinated notes	$	(271)	$	(50)	$	(1,110)	$	(50)
Earnings from unconsolidated investees	Earnings from unconsolidated investees	(248)		—		(488)		—		Earnings from unconsolidated investees	(250)		(46)		(738)		(46)
Gain on conversion of debt to equity investment (Note 17)		—		—		—		(3,360)
Gain on conversion of debt to equity investment (Note 18)										Gain on conversion of debt to equity investment (Note 18)	—		—		—		(3,360)
Other, net	Other, net	(1,164)		—		(1,152)		(6)		Other, net	—		—		(1,152)		(6)
		$	(2,421)	$	—	$	(2,479)	$	(3,366)		$	(521)	$	(96)	$	(3,000)	$	(3,462)

~~17.~~18. Investments in Unconsolidated Investees

Effective March 1, 2021, the Company completed a common equity investment in an artificial intelligence business (“AI business”) as part of a private placement offering for $4.6 million. The AI business develops artificial intelligence aided software programs for use in medical businesses, including outpatient imaging services provided by the Company. As a result of the investment, a previous investment in a convertible note instrument issued by the AI business to the Company in May 2020 converted to common equity. Upon conversion, the Company’s total common equity investment was estimated to be valued at ~~$7.9~~$8.0 million and represented a 34.5% interest in the AI business on a non-diluted basis. In addition, the Company holds share purchase warrants which, subject to the occurrence of certain events and certain assumptions, and the payment of $0.4 million, would entitle the Company to acquire an additional 2.4% ownership interest in the AI business common equity. During the ~~six~~nine months ended ~~June~~September 30, 2021, the Company recognized a gain of $3.4 million on the conversion of the convertible note instrument to common equity and the share purchase warrants. This gain is included in other non-operating income, net in the condensed consolidated statements of operations and comprehensive loss.

The Company has a 15% direct ownership in an unconsolidated investee and provides management services under a management agreement with the investee. The Company provides services as part of its ongoing operations for and on behalf of the unconsolidated investee, which reimburses the Company for the actual amount of the expenses incurred. The Company records the expenses in cost of operations and the reimbursement as revenue in the condensed consolidated ~~statement~~statements of operations and comprehensive loss.

The financial position and results of operations of these unconsolidated investees are not material to the Company’s condensed consolidated financial statements.

2125

AKUMIN INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

~~June~~September 30, 2022

(Unaudited)

~~18.~~19. Income Taxes

The effective tax rate for the three and ~~six~~nine months ended ~~June~~September 30, 2022 and 2021 differs from the Canadian statutory rate of 26.5% primarily due to earnings in foreign jurisdictions that are subject to tax rates which differ from the Canadian statutory tax rate, as well as the impact of valuation allowances applied against losses in jurisdictions for which no tax benefit or expense is recognized.

~~19.~~20. Basic and Diluted Loss per Share

The loss per share is calculated by dividing the net loss attributable to common ~~shareholders~~stockholders by the weighted average common shares outstanding during the period.


		Three Months Ended June 30,				Six Months Ended June 30,					Three Months Ended September 30,				Nine Months Ended September 30,
(in thousands, except share and per share amounts)	(in thousands, except share and per share amounts)	2022		2021		2022		2021		(in thousands, except share and per share amounts)	2022		2021		2022		2021
Net loss attributable to common shareholders		$	(30,469)	$	(7,356)	$	(61,280)	$	(10,233)
Net loss attributable to common stockholders										Net loss attributable to common stockholders	$	(53,871)	$	(1,337)	$	(115,151)	$	(11,570)
Weighted average common shares outstanding:	Weighted average common shares outstanding:									Weighted average common shares outstanding:
Basic and diluted	Basic and diluted	89,516,513		70,846,010		89,296,619		70,514,063		Basic and diluted	89,540,046		77,082,852		89,378,653		72,727,721
Net loss per share attributable to common shareholders:
Net loss per share attributable to common stockholders:										Net loss per share attributable to common stockholders:
Basic and diluted	Basic and diluted	$	(0.34)	$	(0.10)	$	(0.69)	$	(0.15)	Basic and diluted	$	(0.60)	$	(0.02)	$	(1.29)	$	(0.16)
Employee stock options, warrants and restricted share units excluded from the computation of diluted per share amounts as their effect would be antidilutive	Employee stock options, warrants and restricted share units excluded from the computation of diluted per share amounts as their effect would be antidilutive	2,042,461		1,803,349		2,207,983		1,820,926		Employee stock options, warrants and restricted share units excluded from the computation of diluted per share amounts as their effect would be antidilutive	2,571,041		1,967,411		2,548,000		2,023,697

~~20.~~21. Segment Information

Operating segments are reported in a manner consistent with the internal reporting provided to the chief operating decision maker. The chief operating decision maker, who is responsible for allocating resources and assessing performance of the operating segments, has been identified as the Chief Executive Officer. Prior to the Alliance Acquisition, the Company had 1one reportable segment, which was outpatient diagnostic imaging services. As a result of the acquisition, the Company operates in 2two reportable segments: Radiology and Oncology. All intercompany revenues, expenses, payables and receivables are eliminated in consolidation and are not reviewed when evaluating segment performance. Each segment’s performance is evaluated based on revenue and adjusted earnings before interest, ~~income~~ taxes, depreciation and amortization ~~(“EBITDA”) and~~ ("Adjusted ~~EBITDA.~~EBITDA").

The following table summarizes the Company’s revenues by segment:


		Three Months Ended June 30,				Six Months Ended June 30,					Three Months Ended September 30,				Nine Months Ended September 30,
(in thousands)	(in thousands)	2022		2021		2022		2021		(in thousands)	2022		2021		2022		2021
Radiology	Radiology	$	160,867	$	69,496	$	316,207	$	133,459	Radiology	$	155,062	$	95,021	$	471,269	$	228,480
Oncology	Oncology	31,261		—		62,184		—		Oncology	31,543		13,156		93,727		13,156
		$	192,128	$	69,496	$	378,391	$	133,459		$	186,605	$	108,177	$	564,996	$	241,636

Adjusted EBITDA is defined as net income before interest expense, income tax expense (benefit), depreciation and amortization, impairment charges, restructuring charges, severance and related costs, settlements and related costs (recoveries), stock-based compensation, gain on sale of accounts receivable, losses (gains) on disposal of property and equipment, acquisition-related costs, financial instrument revaluation adjustments, gain on conversion of debt to equity investment, deferred rent expense, ~~impairment charges,~~ other losses (gains), and one-time adjustments. Adjusted EBITDA should not be considered a measure of financial performance under GAAP, and the items excluded from Adjusted EBITDA should not be considered in isolation or as alternatives to net income, cash flows generated by operating, investing or financing ~~activities, or other financial statement data presented in~~

2226

AKUMIN INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

~~June~~September 30, 2022

(Unaudited)

activities, or other financial statement data presented in the condensed consolidated financial statements as an indicator of financial performance or liquidity. Adjusted EBITDA is not a measurement determined in accordance with GAAP and is therefore susceptible to varying methods of calculation and may not be comparable to other similarly titled measures of other companies. Adjusted EBITDA is the most frequently used measure of each segment’s performance and is commonly used in setting performance goals.

The following table summarizes the Company’s Adjusted EBITDA by segment:


		Three Months Ended June 30,				Six Months Ended June 30,					Three Months Ended September 30,				Nine Months Ended September 30,
(in thousands)	(in thousands)	2022		2021		2022		2021		(in thousands)	2022		2021		2022		2021
Adjusted EBITDA:	Adjusted EBITDA:									Adjusted EBITDA:
Radiology	Radiology	$	35,692	$	14,346	$	64,281	$	25,189	Radiology	$	31,218	$	16,572	$	95,832	$	42,495
Oncology	Oncology	10,302		—		20,335		—		Oncology	11,048		4,899		31,383		4,899
Corporate	Corporate	(7,810)		(2,136)		(14,414)		(3,776)		Corporate	(5,745)		(3,503)		(20,494)		(8,013)
		$	38,184	$	12,210	$	70,202	$	21,413		$	36,521	$	17,968	$	106,721	$	39,381

A reconciliation of the net ~~loss~~income (loss) to total Adjusted EBITDA is shown below:


		Three Months Ended June 30,				Six Months Ended June 30,					Three Months Ended September 30,				Nine Months Ended September 30,
(in thousands)	(in thousands)	2022		2021		2022		2021		(in thousands)	2022		2021		2022		2021
Net loss		$	(26,079)	$	(6,854)	$	(52,511)	$	(9,362)
Net income (loss)										Net income (loss)	$	(49,745)	$	1,180	$	(102,256)	$	(8,182)
Interest expense	Interest expense	29,290		8,920		57,971		17,288		Interest expense	29,679		16,932		87,650		34,221
Income tax expense (benefit)	Income tax expense (benefit)	(3,483)		6		(2,920)		71		Income tax expense (benefit)	12,038		(22,070)		9,118		(21,999)
Depreciation and amortization	Depreciation and amortization	25,200		4,584		49,931		9,073		Depreciation and amortization	25,079		11,286		75,010		20,359
EBITDA		24,928		6,656		52,471		17,070
Adjustments:
Impairment charges										Impairment charges	20,369		—		20,702		—
Restructuring charges	Restructuring charges	7,244		—		7,324		—		Restructuring charges	4,042		479		11,366		479
Severance and related costs	Severance and related costs	5,559		—		7,797		—		Severance and related costs	2,485		53		10,282		53
Settlements, recoveries and related costs	Settlements, recoveries and related costs	814		(318)		677		(341)		Settlements, recoveries and related costs	(576)		(52)		101		(394)
Stock-based compensation	Stock-based compensation	758		785		1,819		1,212		Stock-based compensation	556		785		2,375		1,997
Loss on disposal of property and equipment, net		170		255		372		346
Gain on sale of accounts receivable										Gain on sale of accounts receivable	(7,603)		—		(7,603)		—
Loss (gain) on disposal of property and equipment, net										Loss (gain) on disposal of property and equipment, net	26		(25)		398		321
Acquisition-related costs	Acquisition-related costs	86		4,350		468		5,628		Acquisition-related costs	99		8,784		567		14,412
Fair value adjustment on derivative	Fair value adjustment on derivative	(1,009)		—		(839)		—		Fair value adjustment on derivative	(271)		(50)		(1,110)		(50)
Gain on conversion of debt to equity investment	Gain on conversion of debt to equity investment	—		—		—		(3,360)		Gain on conversion of debt to equity investment	—		—		—		(3,360)
Deferred rent expense	Deferred rent expense	247		459		579		904		Deferred rent expense	325		621		904		1,525
Other, net	Other, net	(613)		23		(466)		(46)		Other, net	18		45		(783)		(1)
Adjusted EBITDA	Adjusted EBITDA	$	38,184	$	12,210	$	70,202	$	21,413	Adjusted EBITDA	$	36,521	$	17,968	$	106,721	$	39,381

2327

AKUMIN INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

~~June~~September 30, 2022

(Unaudited)

The following table summarizes the Company’s total assets by segment:


(in thousands)	(in thousands)	June 30, 2022		December 31, 2021		(in thousands)	September 30, 2022		December 31, 2021
Identifiable assets:	Identifiable assets:					Identifiable assets:
Radiology	Radiology	$	1,417,348	$	1,451,905	Radiology	$	1,411,032	$	1,451,905
Oncology	Oncology	424,374		440,416		Oncology	375,937		440,416
Corporate	Corporate	19,771		26,505		Corporate	22,269		26,505
		$	1,861,493	$	1,918,826		$	1,809,238	$	1,918,826

The following table summarizes the Company’s capital expenditures by segment:


		Three Months Ended June 30,				Six Months Ended June 30,					Three Months Ended September 30,				Nine Months Ended September 30,
(in thousands)	(in thousands)	2022		2021		2022		2021		(in thousands)	2022		2021		2022		2021
Capital expenditures:	Capital expenditures:									Capital expenditures:
Radiology	Radiology	$	4,648	$	1,411	$	13,460	$	2,584	Radiology	$	16,081	$	2,619	$	29,541	$	5,203
Oncology	Oncology	858		—		1,834		—		Oncology	1,207		—		3,041		—
Corporate	Corporate	82		—		172		—		Corporate	11		—		183		—
		$	5,588	$	1,411	$	15,466	$	2,584		$	17,299	$	2,619	$	32,765	$	5,203

2428

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

The following discussion and analysis of our financial condition and results of operations should be read in conjunction with our unaudited condensed consolidated financial statements and related notes that appear in Item 1 of this Quarterly Report on Form 10-Q and our audited consolidated financial statements and related notes included in our Annual Report on Form 10-K for the year ended December 31, 2021. In addition to historical information, the following discussion contains forward-looking statements that are subject to risks and uncertainties. Actual results may differ substantially and adversely from those referred to herein due to a number of factors, including, but not limited to, those described below and in Item 1A “Risk Factors” and elsewhere in our Annual Report on Form 10-K for the year ended December 31, 2021.

Overview

On September 1, 2021, we acquired all of the issued and outstanding common stock of Thaihot Investment Company US Limited, which owns 100% of the common stock of Alliance HealthCare Services, Inc. (“Alliance”), through our wholly owned indirect subsidiary Akumin Corp. (the “Alliance Acquisition”). Alliance is a leading national provider of radiology and oncology solutions to hospitals, health systems and physician groups. With the acquisition of Alliance, we provide fixed-site outpatient diagnostic imaging services through a network of approximately 180 owned and/or operated imaging locations; and outpatient radiology and oncology services and solutions to approximately ~~1,000~~1,100 hospitals and health systems across 48 states. Our imaging procedures include magnetic resonance imaging (“MRI”), computed tomography (“CT”), positron emission tomography (“PET” and “PET/CT”), ultrasound, diagnostic radiology (X-ray), mammography and other related procedures. Our cancer care services include a full suite of radiation therapy and related offerings.

We are significantly diversified across business lines, geographies, modality offerings and reimbursement sources. The diversity of our business provides a number of advantages, including having no material revenue concentration with any health system or hospital customer and no material concentration with any commercial payor.

We currently operate in two reportable business segments: radiology and oncology. The following table summarizes our revenues by segment as a percentage of total revenue:


		Three Months Ended June 30,				Six Months Ended June 30,					Three Months Ended September 30,				Nine Months Ended September 30,
		2022		2021		2022		2021			2022		2021		2022		2021
Radiology	Radiology	84	%	100	%	84	%	100	%	Radiology	83	%	88	%	83	%	95	%
Oncology	Oncology	16	%	—		16	%	—		Oncology	17	%	12	%	17	%	5	%
		100	%	100	%	100	%	100	%		100	%	100	%	100	%	100	%

The following table summarizes the components of our revenues by payor category:


		Three Months Ended June 30,				Six Months Ended June 30,					Three Months Ended September 30,				Nine Months Ended September 30,
(in thousands)	(in thousands)	2022		2021		2022		2021		(in thousands)	2022		2021		2022		2021
Patient fee payors:	Patient fee payors:									Patient fee payors:
Commercial	Commercial	$	71,609	$	54,803	$	140,710	$	105,602	Commercial	$	66,760	$	60,010	$	207,470	$	165,612
Medicare	Medicare	21,002		8,806		42,174		16,990		Medicare	20,304		13,158		62,478		30,149
Medicaid	Medicaid	3,347		2,026		6,449		3,857		Medicaid	3,111		980		9,560		4,837
Other patient revenue	Other patient revenue	3,213		2,608		6,487		5,260		Other patient revenue	3,053		2,933		9,540		8,193
		99,171		68,243		195,820		131,709			93,228		77,081		289,048		208,791
Hospitals and healthcare providers	Hospitals and healthcare providers	90,651		—		178,110		—		Hospitals and healthcare providers	91,092		30,081		269,202		30,081
Other revenue	Other revenue	2,306		1,253		4,461		1,750		Other revenue	2,285		1,015		6,746		2,764
		$	192,128	$	69,496	$	378,391	$	133,459		$	186,605	$	108,177	$	564,996	$	241,636

2529

Summary of Factors Affecting Our Performance

Pricing

Continued expansion of health maintenance organizations, preferred provider organizations and other managed care organizations have influence over the pricing of our services because these organizations can exert great control over patients’ access to our services and reimbursement rates for accessing those services.

Competition

The market for outpatient diagnostic imaging and oncology services is highly competitive. We compete principally on the basis of our reputation, our ability to provide multiple modalities at many of our centers, the location of our centers and the quality of our outpatient diagnostic imaging and oncology services. We compete locally with groups of individual healthcare providers, established hospitals, clinics and other independent organizations that own and operate imaging and radiation therapy equipment.

We also face competition from other outpatient diagnostic imaging companies and oncology service providers in acquiring outpatient diagnostic imaging and oncology centers, which makes it more difficult to find attractive ~~products~~opportunities on acceptable terms. Accordingly, we may not be able to acquire rights to additional outpatient diagnostic imaging and oncology centers on acceptable terms.

Our multi-modality imaging offering provides a one-stop-shop for patients and referring physicians and diversifies our revenue sources. Our scalable and integrated operating platform is expected to create value from future acquisitions, cost efficiencies and organic growth.

Seasonality and Economic Conditions

We experience seasonality in the revenues and margins generated for our services. First and fourth quarter revenues are typically lower than those from the second and third quarters. First quarter revenue is affected primarily by fewer calendar days and inclement weather, typically resulting in fewer patients being scanned or treated during the period. Fourth quarter revenues are affected by holiday and client and patient vacation schedules, resulting in fewer scans or treatments during the period. The variability in margins is higher than the variability in revenues due to the fixed nature of our costs. We also experience fluctuations in our revenues and margins due to acquisition activity and general economic conditions, including recession or economic slowdown. In addition, we face inflation and the impact of increased labor and fuel costs similar to the general economy.

Industry Trends

Our revenue is impacted by changes to U.S. healthcare laws, our partners’ and contractors’ healthcare costs, and/or reimbursement rates by payors.

Acquisitions and New Facilities

The timing of acquisitions and the opening of new fixed-site facilities impacts our revenue and the comparability of our results from period to period. The following table shows the number of our radiology diagnostic imaging sites and oncology radiation therapy sites:


		June 30, 2022	December 31, 2021		September 30, 2022	December 31, 2021
Radiology sites	Radiology sites	184	188	Radiology sites	183	188
Oncology sites	Oncology sites	32	34	Oncology sites	32	34
		216	222		215	222

Recent Developments

COVID-19

Commencing during the first quarter of 2020 and continuing through the present, a pandemic relating to the novel coronavirus known as COVID-19 occurred causing significant financial market disruption and social dislocation. The

pandemic is dynamic, with various cities, counties, states and countries around the world responding or having responded in different ways to address and contain the outbreak, including the declaration of a global pandemic by the World Health Organization, a National State of Emergency in the United States, and state and local executive orders and ordinances forcing the closure of non-essential businesses and persons not employed in or using essential services to “stay at home” or “shelter in place.” At this stage, while there are signs of improvement, we are uncertain as to how long the pandemic, or a more limited epidemic, will last, what regions will be most affected, to what extent containment measures will be applied, or the nature and timing of possible vaccinations. Imaging and radiation therapy centers are healthcare facilities and are generally considered an essential service with the expectation that they continue to operate during the pandemic.

We instituted several realignment and cost containment measures to respond to the drop in volume that resulted from the COVID-19 pandemic and related government orders. Our cost containment measures included the temporary closure of certain of our imaging centers to consolidate volume to nearby centers and reduced operating hours at the remainder of our imaging centers, with the highest number of centers closed in mid-April 2020. At that same time, we furloughed or laid off a portion of our workforce, reduced work hours for our hourly personnel and reduced salaries of employees, as well as negotiated deferral of certain costs due to landlords and other vendors.

In light of the improving business environment, we gradually increased our workforce during 2021. Effective January 1, 2021, all reduced salaries had been returned to normal levels. Clinical operations have resumed to normal operating hours as patient volumes allow and substantially all of the clinics that had temporarily closed due to the COVID-19 pandemic have resumed normal operations. If the future economic or legislative environment related to the COVID-19 pandemic again leads to weakened business volume, we might re-institute cost containment measures similar to those described above in order to preserve our liquidity.

2731

Results of Operations

The following table presents our condensed consolidated statements of operations:


		Three Months Ended June 30,				Six Months Ended June 30,					Three Months Ended September 30,				Nine Months Ended September 30,
(in thousands)	(in thousands)	2022		2021		2022		2021		(in thousands)	2022		2021		2022		2021
Revenues	Revenues	$	192,128	$	69,496	$	378,391	$	133,459	Revenues	$	186,605	$	108,177	$	564,996	$	241,636
Operating expenses:	Operating expenses:									Operating expenses:
Cost of operations, excluding depreciation and amortization	Cost of operations, excluding depreciation and amortization	154,574		57,768		309,735		112,910		Cost of operations, excluding depreciation and amortization	150,674		90,964		460,409		203,874
Depreciation and amortization	Depreciation and amortization	25,200		4,584		49,931		9,073		Depreciation and amortization	25,079		11,286		75,010		20,359
Impairment charges										Impairment charges	20,369		—		20,702		—
Restructuring charges	Restructuring charges	7,244		—		7,324		—		Restructuring charges	4,042		479		11,366		479
Severance and related costs	Severance and related costs	5,559		—		7,797		—		Severance and related costs	2,485		53		10,282		53
Settlements, recoveries and related costs	Settlements, recoveries and related costs	814		(318)		677		(341)		Settlements, recoveries and related costs	(576)		(52)		101		(394)
Stock-based compensation	Stock-based compensation	758		785		1,819		1,212		Stock-based compensation	556		785		2,375		1,997
Other operating expense, net		586		255		579		346
Other operating expense (income), net										Other operating expense (income), net	(7,574)		(68)		(7,328)		278
Total operating expenses	Total operating expenses	194,735		63,074		377,862		123,200		Total operating expenses	195,055		103,447		572,917		226,646
Income (loss) from operations	Income (loss) from operations	(2,607)		6,422		529		10,259		Income (loss) from operations	(8,450)		4,730		(7,921)		14,990
Other expense (income):	Other expense (income):									Other expense (income):
Interest expense	Interest expense	29,290		8,920		57,971		17,288		Interest expense	29,679		16,932		87,650		34,221
Acquisition-related costs	Acquisition-related costs	86		4,350		468		5,628		Acquisition-related costs	99		8,784		567		14,412
Other non-operating income, net	Other non-operating income, net	(2,421)		—		(2,479)		(3,366)		Other non-operating income, net	(521)		(96)		(3,000)		(3,462)
Total other expense, net	Total other expense, net	26,955		13,270		55,960		19,550		Total other expense, net	29,257		25,620		85,217		45,171
Loss before income taxes	Loss before income taxes	(29,562)		(6,848)		(55,431)		(9,291)		Loss before income taxes	(37,707)		(20,890)		(93,138)		(30,181)
Income tax expense (benefit)	Income tax expense (benefit)	(3,483)		6		(2,920)		71		Income tax expense (benefit)	12,038		(22,070)		9,118		(21,999)
Net loss		(26,079)		(6,854)		(52,511)		(9,362)
Net income (loss)										Net income (loss)	(49,745)		1,180		(102,256)		(8,182)
Less: Net income attributable to noncontrolling interests	Less: Net income attributable to noncontrolling interests	4,390		502		8,769		871		Less: Net income attributable to noncontrolling interests	4,126		2,517		12,895		3,388
Net loss attributable to common shareholders		$	(30,469)	$	(7,356)	$	(61,280)	$	(10,233)
Net loss per share attributable to common shareholders:
Net loss attributable to common stockholders										Net loss attributable to common stockholders	$	(53,871)	$	(1,337)	$	(115,151)	$	(11,570)
Net loss per share attributable to common stockholders:										Net loss per share attributable to common stockholders:
Basic and diluted	Basic and diluted	$	(0.34)	$	(0.10)	$	(0.69)	$	(0.15)	Basic and diluted	$	(0.60)	$	(0.02)	$	(1.29)	$	(0.16)

The following table summarizes statistical information regarding our radiology scan volumes and oncology patient starts:


		Three Months Ended June 30,					Six Months Ended June 30,						Three Months Ended September 30,					Nine Months Ended September 30,
(in thousands)	(in thousands)	2022	2021	Change	% Change		2022	2021	Change	% Change		(in thousands)	2022	2021	Change	% Change		2022	2021	Change	% Change
MRI scans	MRI scans	225	96	129	134	%	439	184	255	139	%	MRI scans	220	138	82	59	%	659	322	337	105	%
PET/CT scans	PET/CT scans	33	1	32	3,200	%	65	3	62	2,067	%	PET/CT scans	34	11	23	209	%	99	14	85	607	%
Other modalities	Other modalities	306	253	53	21	%	600	511	89	17	%	Other modalities	291	290	1	—	%	891	801	90	11	%
Total	Total	564	350	214	61	%	1,104	698	406	58	%	Total	545	439	106	24	%	1,649	1,137	512	45	%
Total Oncology patient starts	Total Oncology patient starts	2	—	2	nmf		5	—	5	nmf		Total Oncology patient starts	3	1	2	nmf		8	1	7	nmf

2832

The following table summarizes our revenues by segment:


		Three Months Ended June 30,				Six Months Ended June 30,					Three Months Ended September 30,				Nine Months Ended September 30,
(in thousands)	(in thousands)	2022		2021		2022		2021		(in thousands)	2022		2021		2022		2021
Radiology	Radiology	$	160,867	$	69,496	$	316,207	$	133,459	Radiology	$	155,062	$	95,021	$	471,269	$	228,480
Oncology	Oncology	31,261		—		62,184		—		Oncology	31,543		13,156		93,727		13,156
		$	192,128	$	69,496	$	378,391	$	133,459		$	186,605	$	108,177	$	564,996	$	241,636

The following table summarizes the components of our cost of operations, excluding depreciation and amortization:


		Three Months Ended June 30,				Six Months Ended June 30,					Three Months Ended September 30,				Nine Months Ended September 30,
(in thousands)	(in thousands)	2022		2021		2022		2021		(in thousands)	2022		2021		2022		2021
Employee compensation	Employee compensation	$	72,021	$	23,792	$	147,148	$	46,910	Employee compensation	$	67,278	$	41,247	$	214,426	$	88,156
Third-party services and professional fees	Third-party services and professional fees	29,919		7,758		59,096		14,617		Third-party services and professional fees	30,233		15,154		89,271		29,771
Rent and utilities	Rent and utilities	12,742		7,662		25,219		15,346		Rent and utilities	12,894		9,507		38,114		24,853
Reading fees	Reading fees	11,788		10,860		23,286		20,844		Reading fees	11,379		10,797		34,665		31,642
Administrative	Administrative	11,467		4,829		23,091		9,185		Administrative	12,473		7,156		35,621		16,341
Medical supplies and other	Medical supplies and other	16,637		2,867		31,895		6,008		Medical supplies and other	16,417		7,103		48,312		13,111
		$	154,574	$	57,768	$	309,735	$	112,910		$	150,674	$	90,964	$	460,409	$	203,874

Three Months Ended ~~June~~September 30, 2022 Compared to Three Months Ended ~~June~~September 30, 2021

Revenues

Revenues for the three months ended ~~June~~September 30, 2022 were ~~$192.1~~$186.6 million and increased by ~~$122.6~~$78.4 million, or ~~176%~~72%, from the three months ended ~~June~~September 30, 2021. This increase includes ~~$117.5~~$77.2 million of incremental revenues contributed by Alliance during the three months ended ~~June 30, 2022. The remaining increase in revenues during the three months ended June~~September 30, 2022, ~~was driven by an increase in scan volumes~~primarily due to timing of the Alliance Acquisition, and ~~a $0.7 million incremental revenue contribution from other acquisitions completed~~therefore only included one month’s results in the ~~second quarter of 2021.~~comparative period.

Cost of Operations, excluding Depreciation and Amortization

Cost of operations, excluding depreciation and amortization, for the three months ended ~~June~~September 30, 2022 was ~~$154.6~~$150.7 million and increased by ~~$96.8~~$59.7 million, or ~~168%~~66%, from the three months ended ~~June~~September 30, 2021. This increase includes ~~$91.9~~$55.0 million of incremental costs incurred by Alliance during the three months ended ~~June~~September 30, ~~2022.~~2022, primarily due to timing of the Alliance Acquisition, and therefore only included one month’s results in the comparative period. The remaining increase was primarily driven by ~~other acquisitions completed in the second quarter of 2021,~~ higher employee compensation and third-party services and professional fees.

Employee Compensation

Employee compensation for the three months ended ~~June~~September 30, 2022 was ~~$72.0~~$67.3 million and increased by ~~$48.2~~$26.0 million, or ~~203%~~63%, from the three months ended ~~June~~September 30, 2021. This increase includes ~~$46.3~~$24.0 million of incremental costs incurred by Alliance during the three months ended ~~June~~September 30, ~~2022.~~2022, primarily due to timing of the Alliance Acquisition, and therefore only included one month’s results in the comparative period. The remaining increase was primarily driven by ~~other acquisitions completed during 2021~~higher employee compensation and ~~easing of the cost containment measures taken in 2020 in response to the COVID-19 pandemic. See “Recent Developments – COVID-19” above.~~merit increases.

Third-Party Services and Professional Fees

Third-party services and professional fees for the three months ended ~~June~~September 30, 2022 were ~~$29.9~~$30.2 million and increased by ~~$22.2~~$15.1 million, or ~~286%~~100%, from the three months ended ~~June~~September 30, 2021. This increase includes ~~$20.7~~$14.0 million of incremental costs incurred by Alliance during the three months ended ~~June~~September 30, ~~2022.~~2022, primarily due to timing of the Alliance Acquisition, and therefore only included one month’s results in the comparative period.

2933

Rent and Utilities

Rent and utilities for the three months ended ~~June~~September 30, 2022 were ~~$12.7~~$12.9 million and increased by ~~$5.1~~$3.4 million, or ~~66%~~36%, from the three months ended ~~June~~September 30, 2021. The increase was driven primarily by incremental rent and utilities incurred by Alliance during the three months ended ~~June~~September 30, ~~2022.~~2022, primarily due to timing of the Alliance Acquisition, and therefore only included one month’s results in the comparative period. Rent and utilities are largely a fixed cost.

Reading Fees

Reading fees for the three months ended ~~June~~September 30, 2022 were ~~$11.8~~$11.4 million and increased by ~~$0.9~~$0.6 million, or 9%5%, from the three months ended ~~June~~September 30, 2021. Our reading fees are primarily based on the volume of procedures performed. The increase includes ~~$0.7~~$0.4 million of incremental costs incurred by Alliance during the three months ended ~~June~~September 30, ~~2022.~~2022, primarily due to timing of the Alliance Acquisition, and therefore only included one month’s results in the comparative period.

Administrative Expenses

Administrative expenses for the three months ended ~~June~~September 30, 2022 were ~~$11.5~~$12.5 million and increased by ~~$6.6~~$5.3 million, or ~~137%~~74%, from the three months ended ~~June~~September 30, 2021. This increase includes ~~$6.1~~$5.0 million of incremental costs incurred by Alliance during the three months ended ~~June~~September 30, ~~2022. The remaining increase was driven~~2022, primarily ~~by higher insurance costs.~~due to timing of the Alliance Acquisition, and therefore only included one month’s results in the comparative period.

Medical Supplies and Other Expenses

Medical supplies and other expenses for the three months ended ~~June~~September 30, 2022 were ~~$16.6~~$16.4 million and increased by ~~$13.8~~$9.3 million, or ~~480%~~131%, from the three months ended ~~June~~September 30, 2021. The increase was driven primarily by incremental medical supplies and other expenses incurred by Alliance during the three months ended ~~June~~September 30, ~~2022.~~2022, primarily due to timing of the Alliance Acquisition, and therefore only included one month’s results in the comparative period.

Depreciation and Amortization

Depreciation and amortization for the three months ended ~~June~~September 30, 2022 was ~~$25.2~~$25.1 million and increased by ~~$20.6~~$13.8 million, or ~~450%~~122%, from the three months ended ~~June~~September 30, 2021. This increase is primarily due to ~~$20.4~~$14.2 million of incremental depreciation and amortization for Alliance during the three months ended ~~June~~September 30, ~~2022.~~2022, primarily due to timing of the Alliance Acquisition, and therefore only included one month’s results in the comparative period.

Impairment Charges

Impairment charges of $20.4 million for the three months ended September 30, 2022 consist primarily of a $20.0 million goodwill impairment in our Oncology reporting unit. See further discussion in Note 7 to the condensed consolidated financial statements that appear in Item 1 of this Quarterly Report on Form 10-Q.

Restructuring Charges

Restructuring charges for the three months ended ~~June~~September 30, 2022 ~~was $7.2~~were $4.0 million compared to ~~$0.0~~$0.5 million for the three months ended ~~June~~September 30, 2021. Restructuring charges are composed primarily of transformation costs of ~~$4.0 million, lease termination costs of $1.8~~$3.4 million and domestication and related costs of ~~$1.1~~$0.4 million. See further discussion in Note 1617 to the condensed consolidated financial statements that appear in Item 1 of this Quarterly Report on Form 10-Q.

Severance and Related Costs

Severance and related costs for the three months ended ~~June~~September 30, 2022 ~~was $5.6~~were $2.5 million compared to ~~$0.0~~$0.1 million for the three months ended ~~June~~September 30, 2021. These costs include severance and benefits costs paid to terminated employees. See further discussion in Note 1617 to the condensed consolidated financial statements that appear in Item 1 of this Quarterly Report on Form 10-Q.

Other Expense (Income)

Other operating income, net for the three months ended September 30, 2022 was $7.6 million compared to $0.1 million for the three months ended September 30, 2021. The other operating income, net in 2022 includes a $7.6 million gain on sale of accounts receivable. See further discussion in Note 5 to the condensed consolidated financial statements that appear in Item 1 of this Quarterly Report on Form 10-Q.

Interest expense for the three months ended ~~June~~September 30, 2022 was ~~$29.3~~$29.7 million and increased by ~~$20.4~~$12.7 million, or ~~228%~~75%, from the three months ended ~~June~~September 30, 2021. This increase is primarily due to the interest associated with the 2028 Senior Notes and Subordinated Notes that were issued during 2021 in connection with the ~~acquisition of Alliance.~~Alliance Acquisition.

Acquisition-related costs for the three months ended ~~June~~September 30, 2022 were $0.1 million compared to ~~$4.4~~$8.8 million for the three months ended ~~June~~September 30, 2021. This decrease is primarily due to reduced acquisition-related activities.

Other non-operating income for the three months ended ~~June~~September 30, 2022 was ~~$2.4~~$0.5 million compared to ~~$0.0~~$0.1 million for the three months ended ~~June~~September 30, 2021. The other non-operating income in 2022 includes a ~~$1.0~~$0.3 million fair value adjustment of the derivative associated with the Subordinated Notes and $0.2 million of earnings from unconsolidated investees.

Income Tax Expense

Income tax expense (benefit) for the three months ended ~~June~~September 30, 2022 and 2021 was ~~$(3.5)~~$12.0 million and ~~$0.0~~$(22.1) million, respectively. The effective tax rate for the periods differs from the Canadian statutory rate of 26.5% primarily due to earnings in foreign jurisdictions that are subject to tax rates which differ from the Canadian statutory tax rate, as well as the impact of valuation allowances applied against losses in jurisdictions for which no tax benefit or expense is recognized.

Net Income Attributable to Noncontrolling Interests

Net income attributable to noncontrolling interests for the three months ended ~~June~~September 30, 2022 was ~~$4.4~~$4.1 million and increased by ~~$3.9~~$1.6 million from the three months ended ~~June~~September 30, 2021. This increase is primarily due to amounts attributable to Alliance during the three months ended ~~June~~September 30, 2022.

~~Six~~Nine Months Ended ~~June~~September 30, 2022 Compared to ~~Six~~Nine Months Ended ~~June~~September 30, 2021

Revenues

Revenues for the ~~six~~nine months ended ~~June~~September 30, 2022 were ~~$378.4~~$565.0 million and increased by ~~$244.9~~$323.4 million, or ~~184%~~134%, from the ~~six~~nine months ended ~~June~~September 30, 2021. This increase includes ~~$231.4~~$308.5 million of incremental revenues contributed by Alliance during the ~~six~~nine months ended ~~June~~September 30, ~~2022.~~2022, primarily due to timing of the Alliance Acquisition, and therefore only included one month’s results in the comparative period. The remaining increase in revenues during the ~~six~~nine months ended ~~June~~September 30, 2022 was driven by an increase in scan volumes, lower implicit price concessions, and a ~~$4.2~~$3.9 million incremental revenue contribution from other acquisitions completed in 2021.

Cost of Operations, excluding Depreciation and Amortization

Cost of operations, excluding depreciation and amortization, for the ~~six~~nine months ended ~~June~~September 30, 2022 was ~~$309.7~~$460.4 million and increased by ~~$196.8~~$256.5 million, or ~~174%~~126%, from the ~~six~~nine months ended ~~June~~September 30, 2021. This increase includes ~~$181.1~~$236.1 million of incremental costs incurred by Alliance during the ~~six~~nine months ended ~~June~~September 30, ~~2022.~~2022, primarily due to timing of the Alliance Acquisition, and therefore only included one month’s results in the comparative period. The remaining increase was primarily driven by other acquisitions completed in the second quarter of 2021 and higher employee compensation and third-party services and professional fees.

Employee Compensation

Employee compensation for the ~~six~~nine months ended ~~June~~September 30, 2022 was ~~$147.1~~$214.4 million and increased by ~~$100.2~~$126.3 million, or ~~214%~~143%, from the ~~six~~nine months ended ~~June~~September 30, 2021. This increase includes ~~$93.0~~$117.0 million of incremental

costs incurred by Alliance during the ~~six~~nine months ended ~~June~~September 30, ~~2022.~~2022, primarily due to timing of the Alliance Acquisition, and therefore only included one month’s results in the comparative period. The remaining increase was primarily driven by other acquisitions completed during 2021 and ~~easing of the cost containment measures taken in 2020 in response to the COVID-19 pandemic. See “Recent Developments – COVID-19” above.~~higher employee compensation and merit increases.

Third-Party Services and Professional Fees

Third-party services and professional fees for the ~~six~~nine months ended ~~June~~September 30, 2022 were ~~$59.1~~$89.3 million and increased by ~~$44.5~~$59.5 million, or ~~304%~~200%, from the ~~six~~nine months ended ~~June~~September 30, 2021. This increase includes ~~$39.8~~$54.1 million of incremental costs incurred by Alliance during the ~~six~~nine months ended ~~June~~September 30, ~~2022.~~2022, primarily due to timing of the Alliance Acquisition, and therefore only included one month’s results in the comparative period. The remaining increase in these fees was primarily due to other acquisitions completed during 2021 and higher professional fees.

Rent and Utilities

Rent and utilities for the ~~six~~nine months ended ~~June~~September 30, 2022 were ~~$25.2~~$38.1 million and increased by ~~$9.9~~$13.3 million, or ~~64%~~53%, from the ~~six~~nine months ended ~~June~~September 30, 2021. The increase was driven primarily by incremental rent and utilities incurred by Alliance during the ~~six~~nine months ended ~~June~~September 30, ~~2022.~~2022, primarily due to timing of the Alliance Acquisition, and therefore only included one month’s results in the comparative period. Rent and utilities are largely a fixed cost.

Reading Fees

Reading fees for the ~~six~~nine months ended ~~June~~September 30, 2022 were ~~$23.3~~$34.7 million and increased by ~~$2.4~~$3.0 million, or ~~12%~~10%, from the ~~six~~nine months ended ~~June~~September 30, 2021. Our reading fees are primarily based on the volume of procedures performed. The increase includes ~~$1.4~~$1.8 million of incremental costs incurred by Alliance during the ~~six~~nine months ended ~~June~~September 30, ~~2022.~~2022, primarily due to timing of the Alliance Acquisition, and therefore only included one month’s results in the comparative period. The remaining increase was driven by other acquisitions completed during 2021.

Administrative Expenses

Administrative expenses for the ~~six~~nine months ended ~~June~~September 30, 2022 were ~~$23.1~~$35.6 million and increased by ~~$13.9~~$19.3 million, or ~~151%~~118%, from the ~~six~~nine months ended ~~June~~September 30, 2021. This increase includes ~~$12.1~~$17.1 million of incremental costs incurred by Alliance during the ~~six~~nine months ended ~~June~~September 30, ~~2022.~~2022, primarily due to timing of the Alliance Acquisition, and therefore only included one month’s results in the comparative period. The remaining increase was driven primarily by higher insurance costs.

Medical Supplies and Other Expenses

Medical supplies and other expenses for the ~~six~~nine months ended ~~June~~September 30, 2022 were ~~$31.9~~$48.3 million and increased by ~~$25.9~~$35.2 million, or ~~431%~~268%, from the ~~six~~nine months ended ~~June~~September 30, 2021. The increase was driven primarily by incremental medical supplies and other expenses incurred by Alliance during the ~~six~~nine months ended ~~June~~September 30, ~~2022.~~2022, primarily due to timing of the Alliance Acquisition, and therefore only included one month’s results in the comparative period.

Depreciation and Amortization

Depreciation and amortization for the ~~six~~nine months ended ~~June~~September 30, 2022 was ~~$49.9~~$75.0 million and increased by ~~$40.9~~$54.7 million, or ~~450%~~268%, from the ~~six~~nine months ended ~~June~~September 30, 2021. This increase is primarily due to ~~$40.3~~$54.4 million of incremental depreciation and amortization for Alliance during the ~~six~~nine months ended ~~June~~September 30, ~~2022.~~2022, primarily due to timing of the Alliance Acquisition, and therefore only included one month’s results in the comparative period.

Impairment Charges

Impairment charges of $20.7 million for the nine months ended September 30, 2022 consist primarily of a $20.0 million goodwill impairment in our Oncology reporting unit. See further discussion in Note 7 to the condensed consolidated financial statements that appear in Item 1 of this Quarterly Report on Form 10-Q.

Restructuring Charges

Restructuring charges for the ~~six~~nine months ended ~~June~~September 30, 2022 ~~was $7.3~~were $11.4 million compared to ~~$0.0~~$0.5 million for the ~~six~~nine months ended ~~June~~September 30, 2021. Restructuring charges are composed primarily of transformation costs of ~~$4.0~~$7.4 million, lease termination costs of $1.8 million, and domestication and related costs of ~~$1.1~~$1.4 million. See further discussion in Note 1617 to the condensed consolidated financial statements that appear in Item 1 of this Quarterly Report on Form 10-Q.

Severance and Related Costs

Severance and related costs for the ~~six~~nine months ended ~~June~~September 30, 2022 ~~was $7.8~~were $10.3 million compared to ~~$0.0~~$0.1 million for the ~~six~~nine months ended ~~June~~September 30, 2021. These costs include severance and benefits costs paid to terminated employees. See further discussion in Note 1617 to the condensed consolidated financial statements that appear in Item 1 of this Quarterly Report on Form 10-Q.

Other Expense (Income)

Other operating income, net for the nine months ended September 30, 2022 was $7.3 million compared to operating expense, net of $0.3 million for the nine months ended September 30, 2021. The other operating income, net in 2022 includes a $7.6 million gain on sale of accounts receivable. See further discussion in Note 5 to the condensed consolidated financial statements that appear in Item 1 of this Quarterly Report on Form 10-Q.

Interest expense for the ~~six~~nine months ended ~~June~~September 30, 2022 was ~~$58.0~~$87.7 million and increased by ~~$40.7~~$53.4 million, or ~~235%~~156%, from the ~~six~~nine months ended ~~June~~September 30, 2021. This increase is primarily due to the interest associated with the 2028 Senior Notes and Subordinated Notes that were issued during 2021 in connection with the ~~acquisition of Alliance.~~Alliance Acquisition.

Acquisition-related costs for the ~~six~~nine months ended ~~June~~September 30, 2022 were ~~$0.5~~$0.6 million compared to ~~$5.6~~$14.4 million for the ~~six~~nine months ended ~~June~~September 30, 2021. This decrease is primarily due to reduced acquisition-related activities.

Other non-operating income for the ~~six~~nine months ended ~~June~~September 30, 2022 was ~~$2.5~~$3.0 million compared to ~~$3.4~~$3.5 million for the ~~six~~nine months ended ~~June~~September 30, 2021. The other non-operating income in 2022 includes a ~~$0.8~~$1.1 million fair value adjustment of the derivative associated with the Subordinated Notes and ~~$0.5~~$0.7 million of earnings from unconsolidated investees. The other non-operating income in 2021 consists primarily of a $3.4 million gain on the conversion of a debt investment to an equity investment.

Income Tax Expense

Income tax expense (benefit) for the ~~six~~nine months ended ~~June~~September 30, 2022 and 2021 was ~~$(2.9)~~$9.1 million and ~~$0.1~~$(22.0) million, respectively. The effective tax rate for the periods differs from the Canadian statutory rate of 26.5% primarily due to earnings in foreign jurisdictions that are subject to tax rates which differ from the Canadian statutory tax rate, as well as the impact of valuation allowances applied against losses in jurisdictions for which no tax benefit or expense is recognized.

Net Income Attributable to Noncontrolling Interests

Net income attributable to noncontrolling interests for the ~~six~~nine months ended ~~June~~September 30, 2022 was ~~$8.8~~$12.9 million and increased by ~~$7.9~~$9.5 million from the ~~six~~nine months ended ~~June~~September 30, 2021. This increase is due to amounts attributable to Alliance during the ~~six~~nine months ended ~~June~~September 30, ~~2022.~~2022, primarily due to timing of the Alliance Acquisition, and therefore only included one month’s results in the comparative period.

3237

Non-GAAP Financial Measures

We use various measures of financial performance based on financial statements prepared in accordance with GAAP. We believe, in addition to GAAP measures, certain non-GAAP measures are useful for investors for a variety of reasons. We use this information in our analysis of the performance of our business, excluding items we do not consider relevant to the performance of our continuing operations. Such non-GAAP measures include adjusted earnings before interest, taxes, depreciation and amortization (“Adjusted EBITDA”) ~~and Adjusted EBITDA.~~. Our management regularly communicates ~~EBITDA and~~ Adjusted EBITDA and their interpretation of such results to our Board of Directors. We also compare actual periodic Adjusted EBITDA against internal targets as a key factor in determining cash incentive compensation for executives and other employees, largely because we view Adjusted EBITDA results as indicative of how our radiology and oncology businesses are performing and being managed.

We define Adjusted EBITDA as net income before interest expense, income tax expense (benefit), depreciation and amortization, impairment charges, restructuring charges, severance and related costs, settlements and related costs (recoveries), stock-based compensation, gain on sale of accounts receivable, losses (gains) on disposal of property and equipment, acquisition-related costs, financial instrument revaluation adjustments, gain on conversion of debt to equity investment, deferred rent expense, ~~impairment charges,~~ other losses (gains), and one-time adjustments. ~~EBITDA and~~ Adjusted EBITDA ~~are~~is a non-GAAP financial ~~measures~~measure used as an analytical ~~indicators~~indicator by us and the healthcare industry to assess business performance and ~~are measures~~is a measure of leverage capacity and ability to service debt. ~~EBITDA and~~ Adjusted EBITDA should not be considered in isolation or as ~~alternatives~~an alternative to net income, cash flows generated by operating, investing or financing activities or other financial statement data presented in the consolidated financial statements as indicators of financial performance or liquidity. ~~EBITDA and~~ Adjusted EBITDA ~~are~~is not a financial ~~measures~~measure determined in accordance with GAAP and ~~are~~is therefore susceptible to varying methods of calculation and may not be comparable to other similarly titled measures of other companies.

3338

The following table presents a reconciliation of our net ~~loss,~~income (loss), the most directly comparable GAAP financial measure, to total ~~EBITDA and~~ Adjusted EBITDA:


		Three Months Ended June 30,				Six Months Ended June 30,					Three Months Ended September 30,				Nine Months Ended September 30,
(in thousands)	(in thousands)	2022		2021		2022		2021		(in thousands)	2022		2021		2022		2021
Net loss		$	(26,079)	$	(6,854)	$	(52,511)	$	(9,362)
Net income (loss)										Net income (loss)	$	(49,745)	$	1,180	$	(102,256)	$	(8,182)
Interest expense	Interest expense	29,290		8,920		57,971		17,288		Interest expense	29,679		16,932		87,650		34,221
Income tax expense (benefit)	Income tax expense (benefit)	(3,483)		6		(2,920)		71		Income tax expense (benefit)	12,038		(22,070)		9,118		(21,999)
Depreciation and amortization	Depreciation and amortization	25,200		4,584		49,931		9,073		Depreciation and amortization	25,079		11,286		75,010		20,359
EBITDA		24,928		6,656		52,471		17,070
Adjustments:
Impairment charges										Impairment charges	20,369		—		20,702		—
Restructuring charges	Restructuring charges	7,244		—		7,324		—		Restructuring charges	4,042		479		11,366		479
Severance and related costs	Severance and related costs	5,559		—		7,797		—		Severance and related costs	2,485		53		10,282		53
Settlements, recoveries and related costs	Settlements, recoveries and related costs	814		(318)		677		(341)		Settlements, recoveries and related costs	(576)		(52)		101		(394)
Stock-based compensation	Stock-based compensation	758		785		1,819		1,212		Stock-based compensation	556		785		2,375		1,997
Loss on disposal of property and equipment, net		170		255		372		346
Gain on sale of accounts receivable										Gain on sale of accounts receivable	(7,603)		—		(7,603)		—
Loss (gain) on disposal of property and equipment, net										Loss (gain) on disposal of property and equipment, net	26		(25)		398		321
Acquisition-related costs	Acquisition-related costs	86		4,350		468		5,628		Acquisition-related costs	99		8,784		567		14,412
Fair value adjustment on derivative	Fair value adjustment on derivative	(1,009)		—		(839)		—		Fair value adjustment on derivative	(271)		(50)		(1,110)		(50)
Gain on conversion of debt to equity investment	Gain on conversion of debt to equity investment	—		—		—		(3,360)		Gain on conversion of debt to equity investment	—		—		—		(3,360)
Deferred rent expense	Deferred rent expense	247		459		579		904		Deferred rent expense	325		621		904		1,525
Other, net	Other, net	(613)		23		(466)		(46)		Other, net	18		45		(783)		(1)
Adjusted EBITDA	Adjusted EBITDA	$	38,184	$	12,210	$	70,202	$	21,413	Adjusted EBITDA	$	36,521	$	17,968	$	106,721	$	39,381

The following table summarizes our Adjusted EBITDA by segment:


		Three Months Ended June 30,				Six Months Ended June 30,					Three Months Ended September 30,				Nine Months Ended September 30,
(in thousands)	(in thousands)	2022		2021		2022		2021		(in thousands)	2022		2021		2022		2021
Adjusted EBITDA:	Adjusted EBITDA:									Adjusted EBITDA:
Radiology	Radiology	$	35,692	$	14,346	$	64,281	$	25,189	Radiology	$	31,218	$	16,572	$	95,832	$	42,495
Oncology	Oncology	10,302		—		20,335		—		Oncology	11,048		4,899		31,383		4,899
Corporate	Corporate	(7,810)		(2,136)		(14,414)		(3,776)		Corporate	(5,745)		(3,503)		(20,494)		(8,013)
		$	38,184	$	12,210	$	70,202	$	21,413		$	36,521	$	17,968	$	106,721	$	39,381

Liquidity and Capital Resources

To date, we have financed our operations primarily through cash generated from operations, ~~public and private~~ sales of debt and equity securities, subordinated notes, and bank borrowings. The following table presents a summary of our consolidated cash flows and the ending balance of our cash and cash equivalents:


		Six Months Ended June 30,					Nine Months Ended September 30,
(in thousands)	(in thousands)	2022		2021		(in thousands)	2022		2021
Cash and cash equivalents at beginning of period	Cash and cash equivalents at beginning of period	$	48,419	$	44,396	Cash and cash equivalents at beginning of period	$	48,419	$	44,396
Net cash provided by operating activities	Net cash provided by operating activities	21,079		2,761		Net cash provided by operating activities	55,936		12,749
Net cash used in investing activities	Net cash used in investing activities	(14,503)		(42,921)		Net cash used in investing activities	(31,626)		(767,880)
Net cash provided by (used in) financing activities	Net cash provided by (used in) financing activities	(16,548)		70,153		Net cash provided by (used in) financing activities	(13,373)		766,611
Cash and cash equivalents at end of period	Cash and cash equivalents at end of period	$	38,447	$	74,389	Cash and cash equivalents at end of period	$	59,356	$	55,876

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Cash Flows from Operating Activities

Cash provided by operating activities was ~~$21.1~~$55.9 million for the ~~six~~nine months ended ~~June~~September 30, 2022 and consisted of a net loss of ~~$52.5~~$102.3 million adjusted for certain non-cash items and changes in certain operating assets and liabilities. The primary non-cash charges included in the net loss are ~~$49.9~~$75.0 million of depreciation and amortization, ~~and $24.6~~$37.5 million of non-cash interest ~~expense.~~expense, $20.7 million of impairment charges, and $9.0 million of deferred income taxes. Changes in operating assets and liabilities, net of acquisitions, provided ~~$0.6~~$20.9 million of operating cash driven primarily by a ~~$6.5~~$15.9 million decrease in accounts receivable and a $7.4 million increase in accounts payable and other liabilities, partially offset by a ~~$4.5 million increase in accounts receivable and a $1.9~~$2.0 million increase in prepaid expenses and other assets.

Cash Flows from Investing Activities

During the ~~six~~nine months ended ~~June~~September 30, 2022, cash used in investing activities was ~~$14.5~~$31.6 million, a decrease of ~~$28.4~~$736.3 million from the comparable period in 2021. The ~~six~~nine months ended ~~June~~September 30, 2021 included ~~$35.7~~$758.1 million of cash used for acquisitions, net of cash acquired. Purchases of property and equipment during the ~~six~~nine months ended ~~June~~September 30, 2022 were ~~$15.5~~$32.8 million, an increase of ~~$12.9~~$27.6 million from the comparable period in 2021. Cash used in investing activities during the ~~six~~nine months ended ~~June~~September 30, 2021 also included a $4.6 million equity investment in an unconsolidated company.

Cash Flows from Financing Activities

During the ~~six~~nine months ended ~~June~~September 30, 2022, cash used in financing activities was ~~$16.5~~$13.4 million compared to cash provided by financing activities of ~~$70.2~~$766.6 million during the ~~six~~nine months ended ~~June~~September 30, 2021. Cash used in financing activities during the ~~six~~nine months ended ~~June~~September 30, 2022 included principal payments on the revolving loan of ~~$20.0~~$29.0 million, distributions paid to noncontrolling interests of ~~$14.1~~$20.9 million, and principal payments on long-term debt and finance leases of ~~$12.7~~$18.4 million, partially offset by proceeds from the revolving loan of ~~$20.0~~$29.0 million and proceeds from long-term debt of ~~$10.3~~$25.9 million. The cash provided by financing activities during the ~~six~~nine months ended ~~June~~September 30, 2021 was composed primarily of proceeds from long-term debt of ~~$78.8~~$793.8 million and proceeds from issuance of common stock of $10.5 million, partially offset by ~~the~~ payment of ~~an earn-out liability~~debt issuance costs of ~~$4.7~~$21.5 million, principal payments on long-term debt and finance leases of ~~$1.8~~$5.4 million, payment of an earn-out liability of $4.7 million, and ~~payment~~distributions paid to noncontrolling interests of ~~debt issuance costs of $1.2~~$4.2 million.

Liquidity Outlook

Cash and cash equivalents were ~~$38.4~~$59.4 million as of ~~June~~September 30, 2022. In addition, we have a revolving credit facility under which we may borrow up to $55.0 million for working capital and other general corporate purposes. As of ~~June~~September 30, 2022, there were no borrowings outstanding under the revolving credit facility. We believe that our existing cash, cash equivalents and expected future cash flow from operations will provide sufficient funds to finance our operations for at least the next twelve months. However it is possible that we may need to supplement our existing sources of liquidity to finance our activities beyond the next twelve months and there can be no assurance that sources of liquidity will be available to us at that time.

We also have access to an additional $349.6 million of debt financing through August 2024, provided certain conditions are met, to finance mutually agreed upon organic growth and future acquisition opportunities.

For additional information regarding our revolving credit facility and the additional borrowing available for future acquisitions, see Note 8 to the consolidated financial statements included in our Annual Report on Form 10-K for the year ended December 31, 2021.

For a description of contractual obligations, such as debt, finance leases and operating leases, see Note 8, Note 9 and Note 10 to the consolidated financial statements included in our Annual Report on Form 10-K for the year ended December 31, 2021.

Critical Accounting Policies and Estimates

There were no significant changes in our critical accounting policies and estimates during the ~~six-month~~nine-month period ended ~~June~~September 30, 2022 compared to those previously disclosed in “Critical Accounting Policies and Estimates” in “Management’s Discussion and Analysis of Financial Condition and Results of Operations” included in our Annual Report on Form 10-K for the year ended December 31, 2021.

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Item 3. Quantitative and Qualitative Disclosures About Market Risk

The Company is a smaller reporting company as defined by Rule 12b-2 of the Exchange Act and is not required to provide the information required under this item.

Item 4. Controls and Procedures

Evaluation of Disclosure Controls and Procedures

Under the supervision of our management, including our Chief Executive Officer and Interim Chief Financial Officer, we conducted an evaluation of the effectiveness of the design and operation of our disclosure controls and procedures under Rules 13a-15(e) and 15d-15(e) of the Exchange Act, as of ~~June~~September 30, 2022. Based on this evaluation, our Chief Executive Officer and Interim Chief Financial Officer concluded that our disclosure controls and procedures were not effective as of ~~June~~September 30, 2022.

Identification of Material Weakness for the Quarter Ended December 31, 2021

Accounting Estimates and the Use of Specialists

Management concluded a material weakness in internal control over financial reporting existed relating to the oversight and review of the work performed by third-party specialists, the application of certain accounting principles and the coordination between specialists. Specialists were used in the preparation of (i) our purchase price allocation pursuant to ASC 805, Business Combinations, (ii) the adoption of ASC 842, Leases, in connection with the Alliance Acquisition, and (iii) the valuation of warrants issued in connection with a debt financing arrangement. The control deficiency could have resulted in a misstatement of certain accounting estimates or disclosures that would have resulted in a material misstatement of our annual consolidated financial statements that would not have been prevented or detected on a timely basis.

Identification of Material Weakness for the Quarter Ended September 30, 2022

Income Tax Provision

Management concluded a material weakness in internal control over financial reporting existed related to our quarterly income tax provision process. Specifically, we did not provide adequate review of the impact on deferred tax assets and liabilities and the related deferred tax provision within the quarterly consolidated income tax provision as a result of the finalization of the purchase price allocation for a significant acquisition. While the control deficiency did not result in a misstatement of our previously issued consolidated financial statements, the control deficiency could have resulted in a misstatement of the income tax related accounts or disclosures that would have resulted in a material misstatement of our quarterly or annual consolidated financial statements that would not have been prevented or detected on a timely basis.

Remediation of Material Weaknesses in Internal Control Over Financial Reporting

Management is committed to the remediation efforts to address material weaknesses, as well as continuously enhancing our internal controls. As previously reported in our Annual Report on Form 10-K for the year ended December 31, 2021, the Company’s Chief Executive Officer and Chief Financial Officer concluded that we did not maintain effective internal control over the processes related to (i) estimates for implicit price concessions, (ii) identifying whether component parts replaced in its equipment should be classified as capital or as a repair and maintenance expense, and (iii) reviewing the quarterly tax provision.

~~We have implemented remedial actions to resolve these material weaknesses, specifically:~~

•Management enhanced its methodology that quantifies and considers the effects of implicit price concessions on the recognition of accounts receivable and collection history on a consolidated basis which will allow for timely recording of the impact to net revenue and accounts receivable due to changes to implicit price concessions if necessary.

•~~Management has put in place controls to ensure its procedures to evaluate the appropriate accounting for component parts that are replaced when equipment is repaired.~~

•~~Management has taken steps to enhance the review of the quarterly tax provision to include a process for reviewing information underlying discrete transactions in the quarterly income tax provision.~~

Management has completed its remediation efforts related to these material weaknesses as of the date of this filing. Accordingly, management deems these material weaknesses to be fully remediated as of the date of the filing of this Quarterly Report on Form 10-Q.

Management has made financial reporting control changes to address the material weakness relating to the process for evaluating the qualifications of third-party specialists, defining the scope of work to be performed, and reviewing all estimates prepared by specialists. Management has taken steps to enhance its evaluation of the qualifications of third-party specialists and defining the scope of work to be performed, as well as enhance the review process for all estimates prepared by specialists, including a detailed review of all work performed by specialists, by team members with the appropriate level of experience and knowledge and review the specialists work for compliance with accounting standards.

Management will enhance its process for reviewing the quarterly income tax provision with a focus on deferred tax assets and liabilities and the related deferred tax provision for significant transactions.

To further remediate the material ~~weakness~~weaknesses identified herein, the management team, including the Chief Executive Officer and Interim Chief Financial Officer, have reaffirmed and re-emphasized the importance of internal control, control consciousness and a strong control environment. We also expect to continue to review, optimize, and enhance our financial reporting controls and procedures. ~~This~~These material ~~weakness~~weaknesses will not be considered remediated until the applicable

remediated ~~control operates~~controls operate for a sufficient period of time and management has concluded that ~~this control is~~these controls are operating effectively.

No assurance can be provided at this time that the actions and remediation efforts we have taken or will implement will effectively remediate the material weaknesses described above or prevent the incidence of other significant deficiencies or material weaknesses in our internal controls over financial reporting in the future. The design of any system of controls is based in part upon certain assumptions about the likelihood of future events, and there can be no assurance that any design will succeed in achieving our stated goals under all potential future conditions.

If the remedial measures described above are insufficient to address the material weaknesses described above, or are not implemented timely, or additional deficiencies arise in the future, material misstatements in our interim or annual financial statements may occur in the future and could have the effects described in the “Risk Factors” section included in Item 1A of our Annual Report on Form 10-K for the year ended December 31, 2021.

Changes in Internal Control over Financial Reporting

There were no other changes in our internal control over financial reporting that occurred during the ~~six-month~~nine-month period ended ~~June~~September 30, 2022 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting, except for the remediation efforts described above.

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PART II - OTHER INFORMATION

Item 1. Legal Proceedings

On November 22, 2021, an alleged shareholder of the Company filed a putative class action claim with the Ontario Superior Court of Justice against the Company and certain of its directors and officers alleging violations of Securities Act (Ontario), negligent misrepresentation and other related claims. The claims generally allege that certain of the Company’s prior public financial statements misrepresented the Company’s revenue, accounts receivable and the value of its assets based upon the Company’s August 12, 2021, October 12, 2021 and November 8, 2021 disclosures relating to a review of certain procedures related to its financial statements and to the restatement of financial statements affecting accounts receivable and net book value of property and equipment. The claim does not quantify a damage request. Defendants have not yet responded to the claim. On December 20, 2021, a second statement of claim was filed by a new plaintiff making similar allegations. Because the two statements of claim involve similar subject matter and some of the same class members, the second Ontario plaintiff firm requested a motion for carriage under the Class Proceedings Act, 1992 (Ontario) so the court could determine which plaintiff firm will have carriage of the class action proceedings. That carriage motion was heard by the court on March 31, 2022 and, on April 27, 2022, the court rendered a decision in favor of the second plaintiff. As such, the second plaintiff has been awarded carriage of the class action claim and the action by the first plaintiff is stayed.

The Company has been, and continues to be, subject to claims and legal actions that arise in the ordinary course of business, including potential claims related to patient care and treatment, contract disputes, employment and other commercial or regulatory matters. The defense of these lawsuits may result in significant legal costs, regardless of the outcome, and can result in large settlement amounts or damage awards. We believe that the outcome of our current litigation will not have a material adverse impact on our business, financial condition and results of operations. However, we could be subsequently named as a defendant in other lawsuits that could adversely affect us.

Item 1A. Risk Factors

Except to the extent updated below or to the extent additional factual information disclosed elsewhere in this Quarterly Report on Form 10-Q relates to such risk factors (including, without limitation, the matters discussed in Part I, “Item 2—Management’s Discussion and Analysis of Financial Condition and Results of Operations”), there were Nono material changes to the risk factors discussed in our Annual Report on Form 10-K for the year ended December 31, 2021 dated March 16, 2022 and filed with the Securities and Exchange Commission pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934.

Business and Industry Risks

Macroeconomic trends including inflation and rising interest rates may adversely affect our financial condition and results of operations.

Macroeconomic trends, including increases in inflation and rising interest rates, may adversely impact our business, financial condition and results of operations. Inflation in the United States has recently accelerated and is currently expected to continue at an elevated level in the near-term. Rising inflation could have an adverse impact on our operating expenses and our credit facilities. There is no guarantee we will be able to mitigate the impact of rising inflation. The Federal Reserve has recently started raising interest rates to combat inflation and restore price stability and it is expected that rates will continue to rise throughout the remainder of 2022. While most of the Company’s existing borrowings are currently at fixed interest rates, there are risks that any additional borrowing or refinancing of the existing borrowings could be at increased interest rates which will result in higher debt service costs and which will also adversely affect our cash flows. We cannot assure you that our access to capital and other sources of funding will not become constrained, which could adversely affect the availability and terms of future borrowings. Such future constraints could increase our borrowing costs, which would make it more difficult or expensive to obtain additional financing or refinance existing obligations and commitments, which could slow or deter future growth.

Our ~~common shares may~~business, financial condition and results of operations could be ~~delisted~~adversely affected by disruptions in the global economy resulting from the ~~Nasdaq Stock Market or the Toronto Stock Exchange, which could negatively impact the price of our common shares, liquidity~~ongoing military conflict between Russia and ~~our ability to access the capital markets.~~Ukraine.

The ~~listing standards of~~global economy has been negatively impacted by increasing tension, uncertainty and tragedy resulting from ongoing military conflict between Russia and Ukraine. The adverse and uncertain economic conditions resulting therefrom have and may further negatively impact global demand, cause supply chain disruptions and increase costs for transportation, energy and other raw materials. Furthermore, governments in the Nasdaq Stock Market provide that a company, in order to qualify for continued listing, must maintain a minimum stock price of $1.00 and satisfy standards relative to minimum shareholders’ equity, minimum market value of publicly held shares and various additional requirements. On June 10, 2022,United States, the ~~Company received a written notification (the “Notice”) from~~European Union, the Nasdaq Stock Market that the closing bid price for its common shares had been below $1.00 for 30 consecutive business days and that the Company therefore is not in compliance with the minimum bid price requirement for continued inclusion on the Nasdaq Stock Market under Nasdaq Listing Rule 5550(a)(2) (the “Bid Price Requirement”).

Under the Nasdaq Listing Rules, the Company has a period of 180 calendar days from the date of the Notice, or December 7, 2022 (the “Compliance Date”), to regain compliance with the Bid Price Requirement. To regain compliance, the closing bid price of the Company’s common shares must be at least $1.00 for a minimum of ten consecutive business days prior to the Compliance Date. In the event the Company does not regain compliance by the Compliance Date, the Company may be eligible for an additional 180 calendar day compliance period. To qualify for this second compliance period, the Company will be required to meet the continued listing requirement for market value of publicly held shares and all other initial listing standards for the Nasdaq Stock Market, with the exception of the Bid Price Requirement, and will need to provide written notice of its intention to cure the deficiency during the second compliance period, by effecting a reverse stock split, if necessary.

~~There can be no assurance that the Company will be able to regain compliance with the Bid Price Requirement, or will otherwise be in compliance with other Nasdaq Listing Rules.If the Company fails to regain compliance with the Bid Price Requirement, or is otherwise not in compliance with other Nasdaq Listing Rules, our common shares may be delisted.~~United Kingdom, Canada

3843

~~The Toronto Stock Exchange may suspend from trading~~ and ~~delist an issuer’s securities if it determines that~~others have imposed financial and economic sanctions on certain industry segments and various parties in Russia and Belarus. We are monitoring the issuer has failed to comply with the provisions of its listing agreement or with any other requirement of the Toronto Stock Exchange or such action is necessary in the public interest. The Toronto Stock Exchange has adopted certain quantitative and qualitative criteria under which it will normally consider the suspension from trading and delisting of securitiesconflict including the potential impact of financial ~~condition and/~~and economic sanctions on the global economy. Increased trade barriers, sanctions and other restrictions on global or operating results of the issuer and the market value and public distribution of the issuer. Notwithstanding the foregoing, the Toronto Stock Exchange has authority to suspend from trading and delist securities whether or not such delisting criteria is applicable. If our common shares are delisted from the Toronto Stock Exchange, itregional trade could ~~reduce the price of our common shares and the levels of liquidity available to our shareholders.~~

~~In addition, the delisting of our common shares could materially~~ adversely affect our ~~access to~~business, financial condition and results of operations. The length and impact of the ongoing military conflict is highly unpredictable, and resulted in market disruptions, including significant volatility in commodity prices, credit and capital markets, ~~and any limitation on liquidity~~ an increase in cyber security incidents as well as supply chain disruptions. Further escalation of geopolitical tensions related to this military conflict and/or ~~reduction in the price of our common shares~~its expansion could materially adversely affect our ability to raise capital. Delisting from the Nasdaq Stock Market or the Toronto Stock Exchange could also result in other negative consequences, including the potential loss of confidence by suppliers, customers and employees, the loss of institutional investor interest and fewer business development opportunities.

If our common shares were no longer listed on the Nasdaq Stock Market or the Toronto Stock Exchange, investors might only be able to trade on one of the over-the-counter markets, including the OTC Bulletin Board ® or in the Pink Sheets ® (a quotation medium operated by Pink Sheets LLC). This would impair the liquidity of our common shares not only in the number of shares that could be bought and sold at a given price, which might be depressed by the relative illiquidity, but also through delays in the timing of transactions and reduction in media coverage. In addition, we could face significant material adverse consequences, including:

•~~a limited availability of market quotations for our securities;~~

•~~a limited amount of news and analyst coverage for us; and~~

•~~a decreased ability to issue additional securities or obtain additional financing in the future.~~

~~Risks relating to the Domestication~~

~~The rights of our shareholders under Ontario law will differ from their rights under Delaware law, which will, in some cases, provide less protection to shareholders following the Domestication.~~

At the Annual General and Special Meeting of our shareholders held on June 30, 2022 (the “Meeting”), our shareholders passed a special resolution authorizing the Board of Directors, in its sole discretion, to change our jurisdiction of incorporation from the province of Ontario to the State of Delaware in the United States of America (the “Domestication”).

Upon consummation of the Domestication, our shareholders will become stockholders of a Delaware corporation. There are material differences between the OBCA and the DGCL and our current articles and proposed charter and by-laws. For example, under Ontario law, many significant corporate actions such as amending a corporation’s articles of incorporation, certain amalgamations (other than with a direct or indirect wholly-owned subsidiary), continuances, and sales, leases or exchanges of all or substantially all the property of a corporation other than in the ordinary course of business, and other corporate actions such as liquidations, dissolutions and (if ordered by a court) arrangements and consummating a merger require the approval of at least two-thirds of the votes cast by shareholders, whereas under Delaware law, all that is required is a simple majority of the total voting power of all of those entitled to vote on the matter. Furthermore, shareholders under Ontario law are entitled to dissent with respect to a number of extraordinary corporate actions, including an amalgamation with another unrelated corporation, certain amendments to a corporation’s articles of incorporation or the sale of all or substantially all of a corporation’s assets, whereas under Delaware law, stockholders are only entitled to appraisal rights for certain mergers or consolidations. As shown by the examples above, if the Domestication is consummated, our shareholders, in certain circumstances, may be afforded less protection under the DGCL than they had under the OBCA.

~~The proposed Domestication will result in additional direct and indirect costs whether or not completed.~~

The Domestication will result in additional direct costs. We will incur attorneys’ fees, accountants’ fees, filing fees, mailing expenses, franchise taxes and financial printing expenses in connection with the Domestication. The Domestication may also result in certain indirect costs by diverting the attention of our management and employees from the day-to-day management of the business, which may result in increased ~~administrative costs~~volatility and ~~expenses.~~

~~The Domestication may result in adverse U.S. federal income tax consequences for shareholders.~~

A U.S. Holder of the Company’s common shares, who on the date of the Domestication beneficially own (directly, indirectly or constructively) 10% or more of the total combined voting power of all classes of common shares entitled to vote or 10% or more of the total value of shares of all classes of stock (a “U.S. Holder”), may be subject to U.S. federal income tax as a result of the Domestication.

A U.S. Holder who on the day of the Domestication beneficially owns (actually or constructively) common shares with a fair market value of $50,000 USD or more, but less than 10% of the total combined voting power of all classes of common shares entitled to vote or less than 10% of the total combined value of all classes of common shares, generally will recognize gain (but not loss) in respect of the Domestication as if such holder exchanged its common shares for Akumin Delaware common shares in a taxable transaction, unless such U.S. Holder elects in accordance with applicable Treasury Regulations to include in income, as a dividend, the “all earnings and profits amount” (as defined in the Treasury Regulations) attributabledisruption to the ~~common shares held directly by such holder.~~

A U.S. Holder who on the day of the Domestication beneficially owns (actually or constructively) 10% or more of the total combined voting power of all classes of common shares entitled to vote or 10% or more of the total value of shares of all classes of stock, will generally be required to include in income, as a dividend, the “all earnings and profits amount” attributable to the common shares held directly by such holder.

The Company has estimated its earnings and profits for the tax years 2015, when the Company was formed, through 2021. Based on these estimates, the Company believes it has cumulative negative earnings and profits through 2021. However, there can be no assurance the IRS would agree with our earnings and profits calculations. If the IRS does not agree with our earnings and profits calculations, a shareholder may owe additional U.S. federal income taxes as a result of the Domestication. The Company intends to provide on the investor relations section of its website (~~https://akumin.com/investor-relations/~~) information regarding the Company’s earnings and profits for the years 2015 through 2021, which will be updated to include 2022 (through the date of the Domestication) once the information is available. Currently, the Company anticipates that it will not generate a positive earnings and profits in 2022 through the date of the Domestication. However, there can be no assurance that once all of the Company’s activities through the date of the Domestication are considered, the Company’s 2022 earnings and profits will remain negative.

Additionally, proposed Treasury Regulations with a retroactive effective date have been promulgated under Section 1291(f) of the Code which generally require that, a U.S. person who disposes of stock of a passive foreign investment company (“PFIC”) must recognize gain equal to the excess of the fair market value of such PFIC stock over its adjusted tax basis, notwithstanding any other provision of the Code. The Company believes that it was not a PFIC before 2022 and it does not anticipate that it will be a PFIC in 2022, but there can be no assurance that the Company will not become a PFIC in 2023. Accordingly, the Domestication will likely not be a taxable event for any U.S. Holder under the PFIC rules if the Domestication occurs during 2022. The determination of whether a foreign corporation is a PFIC is primarily factual and there is little administrative or judicial authority on which to rely to make a determination. Therefore, the IRS might not agree that the Company is not and has never been a PFIC. If the Company is considered a PFIC for U.S. federal income tax purposes, the proposed Treasury Regulations, if finalized in their current form, would generally require U.S. Holders of common shares to recognize gain on the deemed exchange of common shares for Akumin Delaware common shares pursuant to the Domestication unless such U.S. Holder has made certain tax elections with respect to such holder’s common shares. The tax on any such gain would be imposed at the rate applicable to ordinary income and an interest charge would apply based on complex rules designed to offset the tax deferral to such holders on the undistributed earnings, if any, of the Company. It is not possible to determine at this time whether, in what form, and with what effective date, final Treasury Regulations under Section 1291(f) will be adopted.

~~Additionally, non-U.S. Holders of the Company’s common shares may become subject to withholding tax on any dividends paid on our stock subsequent to the Domestication.~~

~~All holders are strongly urged to consult a tax advisor for the tax consequences of the Domestication to their particular situation.~~

~~The Domestication may give rise to Canadian corporate tax.~~

~~For purposes of the~~ ~~Income Tax Act~~ (Canada) (the “Canadian Tax Act”), the Company’s taxation year will be deemed to have ended immediately prior to it ceasing to be a resident of Canada. Immediately prior to the time of this deemed year-end, the Company will be deemed to have disposed of each of its properties for proceeds of disposition equal to the fair market value of all such properties at that time and will be deemed to have reacquired such properties for a cost amount

equal to such proceeds of disposition. The Company will be subject to income tax under Part I of the Canadian Tax Act on any income and net taxable capital gains which arise as a result of this deemed disposition. The Company will also be subject to “emigration tax” under Part XIV of the Canadian Tax Act on the amount by which the fair market value, immediately before the Company’s deemed year end, of all of its properties exceeds the total of certain of its liabilitiesglobal economy and the ~~paid-up capital, determined for purposes~~markets in which we operate adversely impacting our business, financial condition or results of ~~that emigration tax, of all the issued and outstanding shares of the Company immediately before such deemed year end.~~

The quantum of tax payable, if any, by the Company upon the Domestication will depend upon a number of considerations including valuation of the Company’s assets, the amount of its liabilities, its shareholder composition, as well as certain Canadian tax amounts, accounts and balances of the Company, each as of the time of the Domestication. There can be no assurances that material adverse tax consequences will not result from the Domestication or the transactions completed in relation to the Domestication in Canada. In addition, it is possible that following the Domestication, the Canada Revenue Agency may disagree with the Company’s determination of the fair market value of its properties at the relevant time or the Company’s determination of any of its tax accounts or tax attributes. As a result, the quantum of Canadian tax payable by the Company may significantly exceed the Company’s estimates. Any such adverse tax consequences could adversely affect Akumin (as a Delaware corporation) and its share price.

~~It is possible that if our Board of Directors is not satisfied with the anticipated Canadian tax consequences of the Domestication, it may not proceed with the Domestication.~~

~~Risks Relating to the Consolidation~~

~~There are certain risks associated with the Consolidation.~~

At the Meeting, our shareholders passed a special resolution authorizing the Board of Directors, in its sole discretion, to consolidate all of the shares of the common stock on the basis of a consolidation ratio of one new common share for up to every four old common shares, to be determined at Board of Director’s discretion, and to amend the Company’s articles accordingly (the “Consolidation”).

There can be no assurance that the total market capitalization of the common shares of the Company (the aggregate value of all common shares at the then market price) immediately after the Consolidation will be equal to or greater than the total market capitalization immediately before the Consolidation. In addition, there can be no assurance that the per share market price of the common shares following the Consolidation will remain higher than the per share market price immediately before the Consolidation or equal or exceed the direct arithmetical result of the Consolidation. In addition, a decline in the market price of the common shares after the Consolidation may result in a greater percentage decline than would occur in the absence of a Consolidation, and the liquidity of the common shares could be adversely affected. Further, there can be no assurance that, if the Consolidation is implemented, the margin terms associated with the purchase of common shares will improve or that the Company will be successful in receiving increased attention from institutional investors.operations.

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds

None.

Item 3. Defaults Upon Senior Securities

None.

Item 4. Mine Safety Disclosures

Not applicable.

Item 5. Other Information

On August 9, 2022, the Company entered into amended and restated employment agreements with Riadh Zine (the Company's Chairman of the Board of Directors and Chief Executive Officer), Rohit Navani (the Company's Executive Vice President and Chief Transformation Officer), and Matthew Cameron (the Company's Chief Legal Officer and Corporate Secretary) (collectively, the "A&R Employment Agreements"). The A&R Employment Agreements amend and restate the employment agreements that Mr. Zine, Mr. Navani, and Mr. Cameron previously entered into with the

Company. The A&R Employment Agreements did not materially amend the terms of the respective employment agreements other than to reflect that each of these named executive officers are resident in the United States.

~~The A&R Employment Agreements are filed herewith as Exhibits 10.1, 10.2, and 10.3, respectively, and are incorporated by reference herein.~~None.

Item 6. Exhibits


Exhibit Number			Description of Exhibit

10.1			~~Amended~~Confidential Separation Agreement and ~~Restated Employment Agreement~~General Release by and between Akumin Inc., Alliance HealthCare Services, Inc. and ~~Riadh Zine~~,William Larkin, dated as of ~~August 9,~~September 1, 2022

10.2			~~Amended~~Confidential Separation and ~~Restated Employment Agreement by and between Akumin Inc. and Rohit Navani~~, ~~dated as of August 9, 2022~~

~~10.3~~			~~Amended and Restated Employment~~Release Agreement by and between Akumin Inc. and Matthew Cameron,, dated as of ~~August 9,~~September 1, 2022

31.1			Certification of the Chief Executive Officer required by Rule 13a-14(a) or Rule 15d-14(a)

31.2			Certification of the Interim Chief Financial Officer required by Rule 13a-14(a) or Rule 15d-14(a)

32.1			Certification of the Chief Executive Officer and the Interim Chief Financial Officer required by Rule 13a-14(b) or Rule 15d-14(b) and 18 U.S.C. 1350

101.INS			Inline XBRL Instance Document - the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document

101.SCH			Inline XBRL Taxonomy Extension Schema Document

101.CAL			Inline XBRL Taxonomy Extension Calculation Linkbase Document

101.DEF			Inline XBRL Taxonomy Extension Definition Linkbase Document

101.LAB			Inline XBRL Taxonomy Extension Label Linkbase Document

101.PRE			Inline XBRL Taxonomy Extension Presentation Linkbase Document

104			Cover Page Interactive Data File (formatted in iXBRL and contained in Exhibit 101)

4244

SIGNATURE

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.


			AKUMIN INC.

			By:			/s/ Riadh Zine
						Riadh Zine Chairman, Chief Executive Officer and Director

Date: ~~August~~November 9, 2022

4345


		Page
PART I	FINANCIAL INFORMATION

Item 1.	Financial Statements	3
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	2529
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	3641
Item 4.	Controls and Procedures	3641

PART II	OTHER INFORMATION

Item 1.	Legal Proceedings	3843
Item 1A.	Risk Factors	3843
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	4144
Item 3.	Defaults Upon Senior Securities	4144
Item 4.	Mine Safety Disclosures	4144
Item 5.	Other Information	4144
Item 6.	Exhibits	4244

SIGNATURE		4345


	Common Stock			Accumulated Other Comprehensive Income		Accumulated Deficit		Total Shareholders’ Equity		Noncontrolling Interests		Total Equity
	Shares	Amount
Balance, December 31, 2020	70,178,428	$	160,965	$	—	$	(80,133)	$	80,832	$	4,338	$	85,170
Net income (loss)	—	—		—		(10,233)		(10,233)		871		(9,362)
Issuance of common stock for acquisition consideration	974,999	3,012		—		—		3,012		—		3,012
Stock options exercised	150,000	75		—		—		75		—		75
Stock-based compensation	—	1,212		—		—		1,212		—		1,212
Distributions paid to noncontrolling interests	—	—		—		—		—		(1,006)		(1,006)
Balance, June 30, 2021	71,303,427	$	165,264	$	—	$	(90,366)	$	74,898	$	4,203	$	79,101


	Number of RSUs	Weighted- Average Grant Date Fair Value		Aggregate Grant Date Fair Value (in thousands)
Outstanding and unvested at December 31, 2021	2,029,032	$	2.41
Granted	799,085	1.10		$	875
Vested	(489,516)	3.19		$	1,561
Outstanding and unvested at June 30, 2022	2,338,601	$	1.80	$	4,210