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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
___________________________
FORM 10-Q
___________________________
xQUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 2022
OR
oTRANSITION 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)
___________________________
Delaware88-4139425
(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 classTrading SymbolName of each exchange on which registered
Common Stock, $0.01 par value per shareAKUThe Nasdaq Stock Market
Common Stock, $0.01 par value per shareAKUThe 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 fileroAccelerated filerx
Non-accelerated fileroSmaller reporting companyx
Emerging growth companyx
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 November 7, 2022, there were 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;
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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.
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PART I - FINANCIAL INFORMATION
Item 1. Financial Statements
AKUMIN INC.
INDEX TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
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AKUMIN INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(Unaudited; in thousands, except share amounts)
September 30,
2022
December 31,
2021
ASSETS
Current assets:
Cash and cash equivalents$59,356 $48,419 
Accounts receivable112,376 121,525 
Prepaid expenses8,443 8,196 
Other current assets9,151 7,025 
Total current assets189,326 185,165 
Property and equipment, net229,722 259,122 
Operating lease right-of-use assets173,325 194,565 
Goodwill795,610 840,353 
Other intangible assets, net397,185 414,146 
Other assets24,070 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 debt18,714 14,789 
Current portion of obligations under finance leases5,963 6,460 
Current portion of obligations under operating leases17,864 20,794 
Accrued liabilities97,062 87,813 
Total current liabilities167,299 164,182 
Long-term debt, net of current portion1,242,181 1,197,596 
Obligations under finance leases, net of current portion15,037 15,951 
Obligations under operating leases, net of current portion165,882 184,375 
Other liabilities21,890 35,574 
Total liabilities1,612,289 1,597,678 
Redeemable noncontrolling interests34,200 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 capital230,073 227,705 
Accumulated other comprehensive income87 18 
Accumulated deficit(238,575)(123,424)
Total stockholders’ equity(7,518)105,189 
Noncontrolling interests170,267 178,490 
Total equity162,749 283,679 
Total liabilities, redeemable noncontrolling interests and equity$1,809,238 $1,918,826 
See accompanying notes to the condensed consolidated financial statements.
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AKUMIN INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS
(Unaudited; in thousands, except per share amounts)
Three Months Ended September 30,Nine Months Ended September 30,
2022202120222021
Revenues$186,605 $108,177 $564,996 $241,636 
Operating expenses:  
Cost of operations, excluding depreciation and amortization150,674 90,964 460,409 203,874 
Depreciation and amortization25,079 11,286 75,010 20,359 
Impairment charges20,369 — 20,702 — 
Restructuring charges4,042 479 11,366 479 
Severance and related costs2,485 53 10,282 53 
Settlements, recoveries and related costs(576)(52)101 (394)
Stock-based compensation556 785 2,375 1,997 
Other operating expense (income), net(7,574)(68)(7,328)278 
Total operating expenses195,055 103,447 572,917 226,646 
Income (loss) from operations(8,450)4,730 (7,921)14,990 
Other expense (income):
Interest expense29,679 16,932 87,650 34,221 
Acquisition-related costs99 8,784 567 14,412 
Other non-operating income, net(521)(96)(3,000)(3,462)
Total other expense, net29,257 25,620 85,217 45,171 
Loss before income taxes(37,707)(20,890)(93,138)(30,181)
Income tax expense (benefit)12,038 (22,070)9,118 (21,999)
Net income (loss)(49,745)1,180 (102,256)(8,182)
Less: Net income attributable to noncontrolling interests4,126 2,517 12,895 3,388 
Net loss attributable to common stockholders$(53,871)$(1,337)$(115,151)$(11,570)
Comprehensive income (loss), net of taxes:
Net income (loss)$(49,745)$1,180 $(102,256)$(8,182)
Other comprehensive income (loss):
Unrealized gain (loss) on hedging transactions, net of taxes11 (8)47 (8)
Reclassification adjustment for losses included in net loss, net of taxes(4)22 
Other comprehensive income (loss)(1)69 (1)
Comprehensive income (loss), net of taxes(49,738)1,179 (102,187)(8,183)
Less: Comprehensive income attributable to noncontrolling interests4,126 2,517 12,895 3,388 
Comprehensive loss attributable to common stockholders$(53,864)$(1,338)$(115,082)$(11,571)
Net loss per share attributable to common stockholders:
Basic and diluted$(0.60)$(0.02)$(1.29)$(0.16)
See accompanying notes to the condensed consolidated financial statements.
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AKUMIN INC.
CONDENSED CONSOLIDATED STATEMENTS OF EQUITY
(Unaudited; in thousands, except share amounts)
Common StockAdditional Paid-In CapitalAccumulated
 Other
 Comprehensive
Income (Loss)
Accumulated
Deficit
Total
 Stockholders’
Equity
Noncontrolling
Interests
Total
Equity
SharesAmount
Balance, June 30, 202171,303,427 $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 consideration14,223,570 142 30,723 — — 30,865 — 30,865 
Issuance of common stock - other3,500,000 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, 202189,026,997 $890 $239,536 $(1)$(91,703)$148,722 $215,769 $364,491 
Common StockAdditional Paid-In CapitalAccumulated
 Other
 Comprehensive
Income (Loss)
Accumulated
Deficit
Total
 Stockholders’
Equity
Noncontrolling
Interests
Total
Equity
SharesAmount
Balance, June 30, 202289,516,513 $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 units145,000 (2)— — — — — 
Stock-based compensation— — 556 — — 556 — 556 
Other comprehensive income— — — — — 
Distributions paid to noncontrolling interests— — — — — — (5,739)(5,739)
Purchase accounting adjustments— — — — — — (2,454)(2,454)
Balance, September 30, 202289,661,513 $897 $230,073 $87 $(238,575)$(7,518)$170,267 $162,749 
See accompanying notes to the condensed consolidated financial statements.



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AKUMIN INC.
CONDENSED CONSOLIDATED STATEMENTS OF EQUITY
(Unaudited; in thousands, except share amounts)
Common StockAdditional Paid-In CapitalAccumulated
 Other
 Comprehensive
Income (Loss)
Accumulated
Deficit
Total
 Stockholders’
Equity
Noncontrolling
Interests
Total
Equity
SharesAmount
Balance, December 31, 202070,178,428 $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 consideration15,198,569 152 33,725 — — 33,877 — 33,877 
Issuance of common stock - other3,500,000 35 10,381 — — 10,416 — 10,416 
Warrants issued— — 33,096 — — 33,096 — 33,096 
Stock options exercised150,000 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, 202189,026,997 $890 $239,536 $(1)$(91,703)$148,722 $215,769 $364,491 
Common StockAdditional Paid-In CapitalAccumulated
 Other
 Comprehensive
Income (Loss)
Accumulated
Deficit
Total
 Stockholders’
Equity
Noncontrolling
Interests
Total
Equity
SharesAmount
Balance, December 31, 202189,026,997 $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 units634,516 (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, 202289,661,513 $897 $230,073 $87 $(238,575)$(7,518)$170,267 $162,749 
See accompanying notes to the condensed consolidated financial statements.

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AKUMIN INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited; in thousands)
Nine Months Ended September 30,
20222021
Operating activities:
Net loss$(102,256)$(8,182)
Adjustments to reconcile net loss to net cash provided by operating activities:
Depreciation and amortization75,010 20,359 
Impairment charges20,702 — 
Stock-based compensation2,375 1,997 
Non-cash interest expense37,509 — 
Amortization of deferred financing costs and accretion of discount/premium on long-term debt71 1,959 
Deferred income taxes9,012 (22,731)
Distributions from unconsolidated investees1,157 — 
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 receivable15,923 875 
Prepaid expenses and other assets(1,967)1,865 
Accounts payable and other liabilities7,388 16,924 
Operating lease liabilities and right-of-use assets(400)2,761 
Net cash provided by operating activities55,936 12,749 
Investing activities:  
Purchases of property and equipment(32,765)(5,203)
Business acquisitions, net of cash acquired— (758,114)
Other investing activities1,139 (4,563)
Net cash used in investing activities$(31,626)$(767,880)
See accompanying notes to the condensed consolidated financial statements.
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AKUMIN INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (CONTINUED)
(Unaudited; in thousands)

Nine Months Ended September 30,
20222021
Financing activities:
Proceeds from revolving loan$29,000 $— 
Principal payments on revolving loan(29,000)— 
Proceeds from long-term debt25,892 793,750 
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 equivalents10,937 11,480 
Cash and cash equivalents, beginning of period48,419 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, net506 238 
Supplemental disclosure of non-cash investing and financing activities:
Property and equipment purchases in accounts payable and accrued liabilities4,414 300 
Derecognition of operating lease right-of-use assets and lease liabilities associated with lease terminations6,561 1,058 
Equipment acquired in exchange for finance lease obligations4,197 1,299 
Operating lease right-of-use assets obtained in exchange for operating lease liabilities1,159 2,022 
See accompanying notes to the condensed consolidated financial statements.
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AKUMIN INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
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 nine months ended 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, 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
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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 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
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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.
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 nine months ended 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 intangible assets of $1.2 million due to a refinement in the valuation 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 a decrease in goodwill of $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 finalized as of August 31, 2022.
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AKUMIN INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)
September 30, 2022
(Unaudited)
The following table summarizes the 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 capital14,221 
Property and equipment205,940 
Operating lease right-of-use assets69,919 
Goodwill431,017 
Intangibles – Customer contracts264,401 
Intangibles – Trade names68,829 
Intangibles – Third party management agreements10,200 
Intangibles – Patent920 
Intangibles – Certificates of need69,558 
Other assets8,170 
1,169,300 
Liabilities assumed:
Equipment debt54,539 
Obligations under finance leases9,041 
Obligations under operating leases74,290 
Deferred tax liabilities30,082 
Other liabilities7,234 
175,186 
Net assets acquired994,114 
Less redeemable noncontrolling interests35,813 
Less noncontrolling interests172,685 
Purchase price$785,616 
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 September 30, 2022 and December 31, 2021, the Revenue Practices’ assets included in the Company’s condensed consolidated balance sheets were
13


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 $4.7 million and $0.6 million, respectively. The assets of the Revenue Practices can only be used to settle their obligations. During the nine months ended September 30, 2022 and 2021, the Revenue Practices’ revenues were $137.2 million and $128.6 million, respectively, and the net cash provided by operating activities was $161.0 million and $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.

14


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)September 30,
2022
December 31,
2021
Medical equipment$245,105 $227,796 
Leasehold improvements42,779 39,763 
Equipment under finance leases37,243 34,597 
Office and computer equipment20,484 16,701 
Transportation and service equipment11,672 8,996 
Furniture and fixtures3,372 3,130 
Construction in progress 5,094 6,423 
365,749 337,406 
Less accumulated depreciation136,027 78,284 
$229,722 $259,122 
Depreciation expense was $19.5 million and $9.4 million for the three months ended September 30, 2022 and 2021, respectively, and $59.4 million and $17.1 million for the nine months ended September 30, 2022 and 2021, respectively.
As of September 30, 2022 and December 31, 2021, the equipment under finance leases had a net book value of $21.0 million and $22.2 million, respectively.
7. Goodwill
Changes in the carrying amount of goodwill are as follows:
(in thousands)RadiologyOncologyTotal
Balance, December 31, 2021$681,993 $158,360 $840,353 
Purchase accounting adjustments732 (25,475)(24,743)
Impairment— (20,000)(20,000)
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. During the three months ended September 30, 2022, 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 rate2.5%
Tax rate26.0%
Risk-free interest rate3.5%
Revenue multiple
1.9 to 2.3
EBITDA multiple
8.0 to 12.0

15


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 outlook and long-term business plans for this division. Consequently, the Company recorded an impairment charge of $20.0 million related to goodwill 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.
8. Other Intangible Assets
Other intangible assets consist of the following:
(dollars in thousands)Weighted
Average
Useful
Life
(in years)
September 30, 2022December 31, 2021
Gross
Carrying
Amount
Accumulated
Amortization
Other
Intangible
Assets, Net
Gross
Carrying
Amount
Accumulated
Amortization
Other
Intangible
Assets, Net
Finite-lived intangible assets:
Customer contracts20$264,236 $(15,046)$249,190 $266,224 $(4,437)$261,787 
Trade names1877,189 (9,928)67,261 77,466 (6,054)71,412 
Management agreements1710,200 (650)9,550 10,200 (200)10,000 
Other55,734 (4,108)1,626 4,814 (3,425)1,389 
Total $357,359 $(29,732)327,627 $358,704 $(14,116)344,588 
Certificates of Need69,558 69,558 
Total other intangible assets$397,185 $414,146 
The Company performs an impairment test when indicators of impairment are present. During the three months ended September 30, 2022, 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 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.
The aggregate amortization expense for the Company’s finite-lived intangible assets was $5.6 million and $1.9 million for the three months ended September 30, 2022 and 2021, respectively, and $15.6 million and $3.3 million for the nine months ended September 30, 2022 and 2021, respectively.

16


AKUMIN INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)
September 30, 2022
(Unaudited)
9. Long-Term Debt
Long-term debt consists of the following:
(in thousands)September 30,
2022
December 31,
2021
2028 Senior Notes$375,000 $375,000 
2025 Senior Notes475,000 475,000 
Subordinated Notes409,979 372,470 
Equipment Debt71,715 58,827 
1,331,694 1,281,297 
Debt discount and deferred issuance costs(70,799)(68,912)
1,260,895 1,212,385 
Less current portion18,714 14,789 
Long-term debt, net of current portion$1,242,181 $1,197,596 
During the nine months ended September 30, 2022, the Company elected to pay interest in-kind on the Subordinated Notes pursuant to the original agreement and, accordingly, $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 September 30, 2022.
10. Accrued Liabilities
Accrued liabilities consist of the following:
(in thousands)September 30,
2022
December 31,
2021
Accrued compensation and related expenses$32,687 $26,486 
Accrued interest expense19,252 16,840 
Other45,123 44,487 
$97,062 $87,813 
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 September 30, 2022, the Company holds redeemable noncontrolling interests of $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.
17


AKUMIN INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)
September 30, 2022
(Unaudited)
The following is a rollforward of the activity in the redeemable noncontrolling interests for the nine months ended September 30, 2022:
(in thousands)
Balance, December 31, 2021$37,469 
Net income attributable to redeemable noncontrolling interests1,482 
Distributions paid to redeemable noncontrolling interests(3,525)
Purchase accounting adjustments(1,226)
Balance, September 30, 2022$34,200 
12. Financial Instruments
Assets and Liabilities that are Measured at Fair Value on a Recurring Basis
The following table summarizes the valuation of the Company’s financial instruments that are reported at fair value on a recurring basis:
Fair Value as of September 30, 2022Fair Value as of December 31, 2021
(in thousands)Level 1Level 2Level 3TotalLevel 1Level 2Level 3Total
Current and long-term assets:
Interest rate contracts$— $58 $— $58 $— $$— $
Current and long-term liabilities:
Derivative in subordinated notes$— $— $6,412 $6,412 $— $— $7,522 $7,522 
Interest rate contracts$— $— $— $— $— $53 $— $53 
The derivative in subordinated notes relates to the Change of Control Redemption Election included in the Subordinated Notes (see Note 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 September 30, 2022 and December 31, 2021 use unobservable inputs for probability weighted time until an exit event of 3.7 years and 4.2 years, respectively, and an exit event probability weighting of 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 nine months ended September 30, 2022:
(in thousands)
Balance, December 31, 2021$7,522 
Change in fair value(1,110)
Balance, September 30, 2022$6,412 
The $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 statements of operations and comprehensive loss for the nine months ended September 30, 2022.
18


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.
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)September 30,
2022
December 31,
2021
2028 Senior Notes$294,583 $345,938 
2025 Senior Notes387,202 446,500 
Subordinated Notes241,622 323,620 
Equipment Debt63,944 56,879 
$987,351 $1,172,937 
As of 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.
19


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)September 30,
2022
December 31,
2021
Financial assets measured at amortized cost:
Cash and cash equivalents$59,356 $48,419 
Accounts receivable112,376 121,525 
$171,732 $169,944 
Financial liabilities measured at amortized cost:  
Accounts payable$27,696 $34,326 
Current portion of long-term debt18,714 14,789 
Current portion of leases23,827 27,254 
Non-current portion of long-term debt1,242,181 1,197,596 
Non-current portion of leases180,919 200,326 
Accrued liabilities97,062 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 $
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 September 30, 2022 and December 31, 2021, the Company had $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 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.


20


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 September 30, 2022 and December 31, 2021, common shares reserved for issuance under the 2017 Stock Plans were 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
Fair Value
(in thousands)
Outstanding and unvested at December 31, 20212,029,032$2.41 
Granted799,0851.10 $875 
Vested(634,516)2.98 $1,891 
Cancelled(50,000)1.69 $(85)
Outstanding and unvested at September 30, 20222,143,601$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, 20215,680,120$2.54 4.4$2,344 
Outstanding at September 30, 20225,498,120$2.50 3.6$2,269 
Exercisable at September 30, 20224,925,619$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 September 30, 2022 and the exercise price multiplied by the number of in-the-money options.
No stock options were granted during the nine months ended September 30, 2022.
21


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 September 30, 2022, the obligations for these future purchase commitments totaled $50.7 million, of which $17.0 million is expected to be paid during the remaining three months of 2022 and $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 September 30, 2022, the Company has determined that no liability is necessary related to these guarantees and indemnities.
Legal Matters
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.
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.
22


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 September 30,Nine Months Ended September 30,
(in thousands)2022202120222021
Patient fee payors:
Commercial$66,760 $60,010 $207,470 $165,612 
Medicare20,304 13,158 62,478 30,149 
Medicaid3,111 980 9,560 4,837 
Other patient revenue3,053 2,933 9,540 8,193 
93,228 77,081 289,048 208,791 
Hospitals and healthcare providers91,092 30,081 269,202 30,081 
Other revenue2,285 1,015 6,746 2,764 
$186,605 $108,177 $564,996 $241,636 
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 September 30,Nine Months Ended September 30,
(in thousands)2022202120222021
Employee compensation$67,278 $41,247 $214,426 $88,156 
Third-party services and professional fees30,233 15,154 89,271 29,771 
Rent and utilities12,894 9,507 38,114 24,853 
Reading fees11,379 10,797 34,665 31,642 
Administrative12,473 7,156 35,621 16,341 
Medical supplies and other16,417 7,103 48,312 13,111 
$150,674 $90,964 $460,409 $203,874 




23


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)2022202120222021
Goodwill (Note 7)$20,000 $— $20,000 $— 
Property and equipment369 — 702 — 
$20,369 $— $20,702 $— 
Restructuring Charges
Restructuring charges consists of the following:
Three Months Ended September 30,Nine Months Ended September 30,
(in thousands)2022202120222021
Transformation costs$3,363 $— $7,388 $— 
Lease termination costs— — 1,840 — 
Domestication and related costs350 — 1,413 — 
Other329 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 September 30, 2022, the accrued liability for unpaid transformation consulting costs was $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).
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 nine months ended 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.


24


AKUMIN INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)
September 30, 2022
(Unaudited)


Other Operating and Non-Operating Expense (Income)
Other operating expense (income), net consists of the following:
Three Months Ended September 30,Nine Months Ended September 30,
(in thousands)2022202120222021
Gain on sale of accounts receivable (Note 5)$(7,603)$— $(7,603)$— 
Loss (gain) on disposal of property and equipment, net26 (25)398 321 
Other, net(43)(123)(43)
$(7,574)$(68)$(7,328)$278 
Other non-operating income, net consists of the following:
Three Months Ended September 30,Nine Months Ended September 30,
(in thousands)2022202120222021
Fair value adjustment on derivative in subordinated notes$(271)$(50)$(1,110)$(50)
Earnings from unconsolidated investees(250)(46)(738)(46)
Gain on conversion of debt to equity investment (Note 18)— — — (3,360)
Other, net— — (1,152)(6)
$(521)$(96)$(3,000)$(3,462)
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 $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 nine months ended 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 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.
25


AKUMIN INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)
September 30, 2022
(Unaudited)
19. Income Taxes
The effective tax rate for the three and nine months ended 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.
20. Basic and Diluted Loss per Share
The loss per share is calculated by dividing the net loss attributable to common stockholders by the weighted average common shares outstanding during the period.
Three Months Ended September 30,Nine Months Ended September 30,
(in thousands, except share and per share amounts)2022202120222021
Net loss attributable to common stockholders$(53,871)$(1,337)$(115,151)$(11,570)
Weighted average common shares outstanding:
Basic and diluted89,540,046 77,082,852 89,378,653 72,727,721 
Net loss per share attributable to common stockholders:
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 antidilutive2,571,041 1,967,411 2,548,000 2,023,697 
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 one reportable segment, which was outpatient diagnostic imaging services. As a result of the acquisition, the Company operates in two 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, taxes, depreciation and amortization ("Adjusted EBITDA").
The following table summarizes the Company’s revenues by segment:
Three Months Ended September 30,Nine Months Ended September 30,
(in thousands)2022202120222021
Radiology$155,062 $95,021 $471,269 $228,480 
Oncology31,543 13,156 93,727 13,156 
$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, 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
26


AKUMIN INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)
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 September 30,Nine Months Ended September 30,
(in thousands)2022202120222021
Adjusted EBITDA:
Radiology$31,218 $16,572 $95,832 $42,495 
Oncology11,048 4,899 31,383 4,899 
Corporate(5,745)(3,503)(20,494)(8,013)
$36,521 $17,968 $106,721 $39,381 
A reconciliation of the net income (loss) to total Adjusted EBITDA is shown below:
Three Months Ended September 30,Nine Months Ended September 30,
(in thousands)2022202120222021
Net income (loss)$(49,745)$1,180 $(102,256)$(8,182)
Interest expense29,679 16,932 87,650 34,221 
Income tax expense (benefit)12,038 (22,070)9,118 (21,999)
Depreciation and amortization25,079 11,286 75,010 20,359 
Impairment charges20,369 — 20,702 — 
Restructuring charges4,042 479 11,366 479 
Severance and related costs2,485 53 10,282 53 
Settlements, recoveries and related costs(576)(52)101 (394)
Stock-based compensation556 785 2,375 1,997 
Gain on sale of accounts receivable(7,603)— (7,603)— 
Loss (gain) on disposal of property and equipment, net26 (25)398 321 
Acquisition-related costs99 8,784 567 14,412 
Fair value adjustment on derivative(271)(50)(1,110)(50)
Gain on conversion of debt to equity investment— — — (3,360)
Deferred rent expense325 621 904 1,525 
Other, net18 45 (783)(1)
Adjusted EBITDA$36,521 $17,968 $106,721 $39,381 
27


AKUMIN INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)
September 30, 2022
(Unaudited)
The following table summarizes the Company’s total assets by segment:
(in thousands)September 30,
2022
December 31,
2021
Identifiable assets:
Radiology$1,411,032 $1,451,905 
Oncology375,937 440,416 
Corporate22,269 26,505 
$1,809,238 $1,918,826 
The following table summarizes the Company’s capital expenditures by segment:
Three Months Ended September 30,Nine Months Ended September 30,
(in thousands)2022202120222021
Capital expenditures:
Radiology$16,081 $2,619 $29,541 $5,203 
Oncology1,207 — 3,041 — 
Corporate11 — 183 — 
$17,299 $2,619 $32,765 $5,203 
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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 1,100 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 September 30,Nine Months Ended September 30,
2022202120222021
Radiology83 %88 %83 %95 %
Oncology17 %12 %17 %%
100 %100 %100 %100 %
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.
The following table summarizes the components of our revenues by payor category:
Three Months Ended September 30,Nine Months Ended September 30,
(in thousands)2022202120222021
Patient fee payors:
Commercial$66,760 $60,010 $207,470 $165,612 
Medicare20,304 13,158 62,478 30,149 
Medicaid3,111 980 9,560 4,837 
Other patient revenue3,053 2,933 9,540 8,193 
93,228 77,081 289,048 208,791 
Hospitals and healthcare providers91,092 30,081 269,202 30,081 
Other revenue2,285 1,015 6,746 2,764 
$186,605 $108,177 $564,996 $241,636 

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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 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:
September 30,
2022
December 31,
2021
Radiology sites183188
Oncology sites3234
215222

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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.
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Results of Operations
The following table presents our condensed consolidated statements of operations:
Three Months Ended September 30,Nine Months Ended September 30,
(in thousands)2022202120222021
Revenues$186,605 $108,177 $564,996 $241,636 
Operating expenses:  
Cost of operations, excluding depreciation and amortization150,674 90,964 460,409 203,874 
Depreciation and amortization25,079 11,286 75,010 20,359 
Impairment charges20,369 — 20,702 — 
Restructuring charges4,042 479 11,366 479 
Severance and related costs2,485 53 10,282 53 
Settlements, recoveries and related costs(576)(52)101 (394)
Stock-based compensation556 785 2,375 1,997 
Other operating expense (income), net(7,574)(68)(7,328)278 
Total operating expenses195,055 103,447 572,917 226,646 
Income (loss) from operations(8,450)4,730 (7,921)14,990 
Other expense (income):
Interest expense29,679 16,932 87,650 34,221 
Acquisition-related costs99 8,784 567 14,412 
Other non-operating income, net(521)(96)(3,000)(3,462)
Total other expense, net29,257 25,620 85,217 45,171 
Loss before income taxes(37,707)(20,890)(93,138)(30,181)
Income tax expense (benefit)12,038 (22,070)9,118 (21,999)
Net income (loss)(49,745)1,180 (102,256)(8,182)
Less: Net income attributable to noncontrolling interests4,126 2,517 12,895 3,388 
Net loss attributable to common stockholders$(53,871)$(1,337)$(115,151)$(11,570)
Net loss per share attributable to common stockholders:
Basic and diluted$(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 September 30,Nine Months Ended September 30,
(in thousands)20222021Change% Change20222021Change% Change
MRI scans220 138 82 59 %659 322 337 105 %
PET/CT scans34 11 23 209 %99 14 85 607 %
Other modalities291 290 — %891 801 90 11 %
Total545 439 106 24 %1,649 1,137 512 45 %
Total Oncology patient startsnmfnmf
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The following table summarizes our revenues by segment:
Three Months Ended September 30,Nine Months Ended September 30,
(in thousands)2022202120222021
Radiology$155,062 $95,021 $471,269 $228,480 
Oncology31,543 13,156 93,727 13,156 
$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 September 30,Nine Months Ended September 30,
(in thousands)2022202120222021
Employee compensation$67,278 $41,247 $214,426 $88,156 
Third-party services and professional fees30,233 15,154 89,271 29,771 
Rent and utilities12,894 9,507 38,114 24,853 
Reading fees11,379 10,797 34,665 31,642 
Administrative12,473 7,156 35,621 16,341 
Medical supplies and other16,417 7,103 48,312 13,111 
$150,674 $90,964 $460,409 $203,874 
Three Months Ended September 30, 2022 Compared to Three Months Ended September 30, 2021
Revenues
Revenues for the three months ended September 30, 2022 were $186.6 million and increased by $78.4 million, or 72%, from the three months ended September 30, 2021. This increase includes $77.2 million of incremental revenues contributed by Alliance during the three months ended September 30, 2022, primarily due to timing of the Alliance Acquisition, and therefore only included one month’s results in the comparative period.
Cost of Operations, excluding Depreciation and Amortization
Cost of operations, excluding depreciation and amortization, for the three months ended September 30, 2022 was $150.7 million and increased by $59.7 million, or 66%, from the three months ended September 30, 2021. This increase includes $55.0 million of incremental costs incurred by Alliance during the three months ended September 30, 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 higher employee compensation and third-party services and professional fees.
Employee Compensation
Employee compensation for the three months ended September 30, 2022 was $67.3 million and increased by $26.0 million, or 63%, from the three months ended September 30, 2021. This increase includes $24.0 million of incremental costs incurred by Alliance during the three months ended September 30, 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 higher employee compensation and merit increases.
Third-Party Services and Professional Fees
Third-party services and professional fees for the three months ended September 30, 2022 were $30.2 million and increased by $15.1 million, or 100%, from the three months ended September 30, 2021. This increase includes $14.0 million of incremental costs incurred by Alliance during the three months ended September 30, 2022, primarily due to timing of the Alliance Acquisition, and therefore only included one month’s results in the comparative period.
33


Rent and Utilities
Rent and utilities for the three months ended September 30, 2022 were $12.9 million and increased by $3.4 million, or 36%, from the three months ended September 30, 2021. The increase was driven primarily by incremental rent and utilities incurred by Alliance during the three months ended September 30, 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 September 30, 2022 were $11.4 million and increased by $0.6 million, or 5%, from the three months ended September 30, 2021. Our reading fees are primarily based on the volume of procedures performed. The increase includes $0.4 million of incremental costs incurred by Alliance during the three months ended September 30, 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 September 30, 2022 were $12.5 million and increased by $5.3 million, or 74%, from the three months ended September 30, 2021. This increase includes $5.0 million of incremental costs incurred by Alliance during the three months ended September 30, 2022, primarily 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 September 30, 2022 were $16.4 million and increased by $9.3 million, or 131%, from the three months ended September 30, 2021. The increase was driven primarily by incremental medical supplies and other expenses incurred by Alliance during the three months ended September 30, 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 September 30, 2022 was $25.1 million and increased by $13.8 million, or 122%, from the three months ended September 30, 2021. This increase is primarily due to $14.2 million of incremental depreciation and amortization for Alliance during the three months ended September 30, 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 September 30, 2022 were $4.0 million compared to $0.5 million for the three months ended September 30, 2021. Restructuring charges are composed primarily of transformation costs of $3.4 million and domestication and related costs of $0.4 million. See further discussion in Note 17 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 September 30, 2022 were $2.5 million compared to $0.1 million for the three months ended September 30, 2021. These costs include severance and benefits costs paid to terminated employees. See further discussion in Note 17 to the condensed consolidated financial statements that appear in Item 1 of this Quarterly Report on Form 10-Q.
34


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 September 30, 2022 was $29.7 million and increased by $12.7 million, or 75%, from the three months ended 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 Alliance Acquisition.
Acquisition-related costs for the three months ended September 30, 2022 were $0.1 million compared to $8.8 million for the three months ended September 30, 2021. This decrease is primarily due to reduced acquisition-related activities.
Other non-operating income for the three months ended September 30, 2022 was $0.5 million compared to $0.1 million for the three months ended September 30, 2021. The other non-operating income in 2022 includes a $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 September 30, 2022 and 2021 was $12.0 million and $(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 September 30, 2022 was $4.1 million and increased by $1.6 million from the three months ended September 30, 2021. This increase is primarily due to amounts attributable to Alliance during the three months ended September 30, 2022.
Nine Months Ended September 30, 2022 Compared to Nine Months Ended September 30, 2021
Revenues
Revenues for the nine months ended September 30, 2022 were $565.0 million and increased by $323.4 million, or 134%, from the nine months ended September 30, 2021. This increase includes $308.5 million of incremental revenues contributed by Alliance during the nine months ended September 30, 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 nine months ended September 30, 2022 was driven by an increase in scan volumes, lower implicit price concessions, and a $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 nine months ended September 30, 2022 was $460.4 million and increased by $256.5 million, or 126%, from the nine months ended September 30, 2021. This increase includes $236.1 million of incremental costs incurred by Alliance during the nine months ended September 30, 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 nine months ended September 30, 2022 was $214.4 million and increased by $126.3 million, or 143%, from the nine months ended September 30, 2021. This increase includes $117.0 million of incremental
35


costs incurred by Alliance during the nine months ended September 30, 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 higher employee compensation and merit increases.
Third-Party Services and Professional Fees
Third-party services and professional fees for the nine months ended September 30, 2022 were $89.3 million and increased by $59.5 million, or 200%, from the nine months ended September 30, 2021. This increase includes $54.1 million of incremental costs incurred by Alliance during the nine months ended September 30, 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 nine months ended September 30, 2022 were $38.1 million and increased by $13.3 million, or 53%, from the nine months ended September 30, 2021. The increase was driven primarily by incremental rent and utilities incurred by Alliance during the nine months ended September 30, 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 nine months ended September 30, 2022 were $34.7 million and increased by $3.0 million, or 10%, from the nine months ended September 30, 2021. Our reading fees are primarily based on the volume of procedures performed. The increase includes $1.8 million of incremental costs incurred by Alliance during the nine months ended September 30, 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 nine months ended September 30, 2022 were $35.6 million and increased by $19.3 million, or 118%, from the nine months ended September 30, 2021. This increase includes $17.1 million of incremental costs incurred by Alliance during the nine months ended September 30, 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 nine months ended September 30, 2022 were $48.3 million and increased by $35.2 million, or 268%, from the nine months ended September 30, 2021. The increase was driven primarily by incremental medical supplies and other expenses incurred by Alliance during the nine months ended September 30, 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 nine months ended September 30, 2022 was $75.0 million and increased by $54.7 million, or 268%, from the nine months ended September 30, 2021. This increase is primarily due to $54.4 million of incremental depreciation and amortization for Alliance during the nine months ended September 30, 2022, primarily due to timing of the Alliance Acquisition, and therefore only included one month’s results in the comparative period.

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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 nine months ended September 30, 2022 were $11.4 million compared to $0.5 million for the nine months ended September 30, 2021. Restructuring charges are composed primarily of transformation costs of $7.4 million, lease termination costs of $1.8 million, and domestication and related costs of $1.4 million. See further discussion in Note 17 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 nine months ended September 30, 2022 were $10.3 million compared to $0.1 million for the nine months ended September 30, 2021. These costs include severance and benefits costs paid to terminated employees. See further discussion in Note 17 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 nine months ended September 30, 2022 was $87.7 million and increased by $53.4 million, or 156%, from the nine months ended 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 Alliance Acquisition.
Acquisition-related costs for the nine months ended September 30, 2022 were $0.6 million compared to $14.4 million for the nine months ended September 30, 2021. This decrease is primarily due to reduced acquisition-related activities.
Other non-operating income for the nine months ended September 30, 2022 was $3.0 million compared to $3.5 million for the nine months ended September 30, 2021. The other non-operating income in 2022 includes a $1.1 million fair value adjustment of the derivative associated with the Subordinated Notes and $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 nine months ended September 30, 2022 and 2021 was $9.1 million and $(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 nine months ended September 30, 2022 was $12.9 million and increased by $9.5 million from the nine months ended September 30, 2021. This increase is due to amounts attributable to Alliance during the nine months ended September 30, 2022, primarily due to timing of the Alliance Acquisition, and therefore only included one month’s results in the comparative period.
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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”). Our management regularly communicates 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, other losses (gains), and one-time adjustments. Adjusted EBITDA is a non-GAAP financial measure used as an analytical indicator by us and the healthcare industry to assess business performance and is a measure of leverage capacity and ability to service debt. Adjusted EBITDA should not be considered in isolation or as 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. Adjusted EBITDA is not a financial measure 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.
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The following table presents a reconciliation of our net income (loss), the most directly comparable GAAP financial measure, to total Adjusted EBITDA:
Three Months Ended September 30,Nine Months Ended September 30,
(in thousands)2022202120222021
Net income (loss)$(49,745)$1,180 $(102,256)$(8,182)
Interest expense29,679 16,932 87,650 34,221 
Income tax expense (benefit)12,038 (22,070)9,118 (21,999)
Depreciation and amortization25,079 11,286 75,010 20,359 
Impairment charges20,369 — 20,702 — 
Restructuring charges4,042 479 11,366 479 
Severance and related costs2,485 53 10,282 53 
Settlements, recoveries and related costs(576)(52)101 (394)
Stock-based compensation556 785 2,375 1,997 
Gain on sale of accounts receivable(7,603)— (7,603)— 
Loss (gain) on disposal of property and equipment, net26 (25)398 321 
Acquisition-related costs99 8,784 567 14,412 
Fair value adjustment on derivative(271)(50)(1,110)(50)
Gain on conversion of debt to equity investment— — — (3,360)
Deferred rent expense325 621 904 1,525 
Other, net18 45 (783)(1)
Adjusted EBITDA$36,521 $17,968 $106,721 $39,381 
The following table summarizes our Adjusted EBITDA by segment:
Three Months Ended September 30,Nine Months Ended September 30,
(in thousands)2022202120222021
Adjusted EBITDA:
Radiology$31,218 $16,572 $95,832 $42,495 
Oncology11,048 4,899 31,383 4,899 
Corporate(5,745)(3,503)(20,494)(8,013)
$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, 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:
Nine Months Ended September 30,
(in thousands)20222021
Cash and cash equivalents at beginning of period$48,419 $44,396 
Net cash provided by operating activities55,936 12,749 
Net cash used in investing activities(31,626)(767,880)
Net cash provided by (used in) financing activities(13,373)766,611 
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 $55.9 million for the nine months ended September 30, 2022 and consisted of a net loss of $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 $75.0 million of depreciation and amortization, $37.5 million of non-cash interest 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 $20.9 million of operating cash driven primarily by a $15.9 million decrease in accounts receivable and a $7.4 million increase in accounts payable and other liabilities, partially offset by a $2.0 million increase in prepaid expenses and other assets.
Cash Flows from Investing Activities
During the nine months ended September 30, 2022, cash used in investing activities was $31.6 million, a decrease of $736.3 million from the comparable period in 2021. The nine months ended September 30, 2021 included $758.1 million of cash used for acquisitions, net of cash acquired. Purchases of property and equipment during the nine months ended September 30, 2022 were $32.8 million, an increase of $27.6 million from the comparable period in 2021. Cash used in investing activities during the nine months ended September 30, 2021 also included a $4.6 million equity investment in an unconsolidated company.
Cash Flows from Financing Activities
During the nine months ended September 30, 2022, cash used in financing activities was $13.4 million compared to cash provided by financing activities of $766.6 million during the nine months ended September 30, 2021. Cash used in financing activities during the nine months ended September 30, 2022 included principal payments on the revolving loan of $29.0 million, distributions paid to noncontrolling interests of $20.9 million, and principal payments on long-term debt and finance leases of $18.4 million, partially offset by proceeds from the revolving loan of $29.0 million and proceeds from long-term debt of $25.9 million. The cash provided by financing activities during the nine months ended September 30, 2021 was composed primarily of proceeds from long-term debt of $793.8 million and proceeds from issuance of common stock of $10.5 million, partially offset by payment of debt issuance costs of $21.5 million, principal payments on long-term debt and finance leases of $5.4 million, payment of an earn-out liability of $4.7 million, and distributions paid to noncontrolling interests of $4.2 million.
Liquidity Outlook
Cash and cash equivalents were $59.4 million as of 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 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 nine-month period ended 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 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 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.
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 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. These material weaknesses will not be considered remediated until the applicable
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remediated controls operate for a sufficient period of time and management has concluded that 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 nine-month period ended 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 no 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 business, financial condition and results of operations could be adversely affected by disruptions in the global economy resulting from the ongoing military conflict between Russia and Ukraine.

The 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 United States, the European Union, the United Kingdom, Canada
43


and others have imposed financial and economic sanctions on certain industry segments and various parties in Russia and Belarus. We are monitoring the conflict including the potential impact of financial and economic sanctions on the global economy. Increased trade barriers, sanctions and other restrictions on global or regional trade could adversely affect our 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, an increase in cyber security incidents as well as supply chain disruptions. Further escalation of geopolitical tensions related to this military conflict and/or its expansion could result in increased volatility and disruption to the global economy and the markets in which we operate adversely impacting our business, financial condition or results of 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
None.
Item 6. Exhibits
Exhibit
Number
Description of Exhibit
10.1
10.2
31.1
31.2
32.1
101.INSInline 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.SCHInline XBRL Taxonomy Extension Schema Document
101.CALInline XBRL Taxonomy Extension Calculation Linkbase Document
101.DEFInline XBRL Taxonomy Extension Definition Linkbase Document
101.LABInline XBRL Taxonomy Extension Label Linkbase Document
101.PREInline XBRL Taxonomy Extension Presentation Linkbase Document
104Cover Page Interactive Data File (formatted in iXBRL and contained in Exhibit 101)
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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: November 9, 2022
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