6-K

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 6-K

Report of Foreign Private Issuer

Pursuant to Rule 13a-16 or 15d-16

Under the Securities Exchange Act of 1934

For the Month of July 2021

001-39479 (Commission File Number)

Akumin Inc.

(Exact name of Registrant as specified in its charter)

8300 W. Sunrise Boulevard

Plantation, Florida 33322

(Address of principal executive offices)

Indicate by check mark whether the registrant files or will file annual reports under cover Form 20-F or Form 40-F.

Form 20-F  ☐            Form 40-F  ☒

Indicate by check mark if the registrant is submitting the Form 6-K in paper as permitted by Regulation S-T Rule 101(b)(1):  ☐

Indicate by check mark if the registrant is submitting the Form 6-K in paper as permitted by Regulation S-T Rule 101(b)(7):  ☐

DOCUMENTS INCLUDED AS PART OF THIS REPORT

Exhibit Index

Exhibit No.	Description
99.1	Press release entitled “Akumin Provides Updates Related to Alliance HealthCare Services Acquisition” , dated July 26, 2021.
99.2	Consolidated Financial Statements of Alliance HealthCare Services, Inc. for the years ended December 31, 2020 and 2019.
99.3	Condensed Consolidated Financial Statements of Alliance HealthCare Services, Inc. as of March 31, 2021.
99.4	Unaudited Pro Forma Condensed Combined Financial Information.
99.5	Management’s Discussion and Analysis of Financial Condition and Results of Operations - Alliance HealthCare Services, Inc.

SIGNATURES

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.
Date: July 26, 2021	By:	/s/ Matt Cameron
		Matt Cameron
		Senior Vice President and General Counsel

EX-99.1

Exhibit 99.1

AKUMIN PROVIDES UPDATES RELATED TO

ALLIANCE HEALTHCARE SERVICES ACQUISITION

Plantation, FL — July 26, 2021 — Akumin Inc. (NASDAQ/TSX: AKU) (“Akumin”) is pleased to provide an update with respect to its previously announced proposed acquisition of Alliance HealthCare Services, Inc. (“Alliance”) and to announce the filing today in Akumin’s public disclosure at www.sedar.com and www.sec.gov of (i) consolidated financial statements of Alliance for the years ended December 31, 2020 and 2019, (ii) condensed consolidated financial statements of Alliance as of March 31, 2021, (iii) unaudited pro forma combined financial information as at March 31, 2021 (after giving effect to the acquisition and related financing arrangements), and (iv) management discussion and analysis relating to items (i) and (ii) above.

The acquisition continues to be expected to close in the third quarter of 2021 subject to clearance under the Hart-Scott-Rodino Antitrust Improvements Act and other customary closing conditions, including final approval of the Toronto Stock Exchange.

Management Composition Post-Closing of Acquisition

Upon closing of the acquisition, Riadh Zine, Akumin’s existing President and Chief Executive Officer, will be named Chairman and Co-Chief Executive Officer of Akumin and Rhonda Longmore-Grund, Alliance’s existing President and Chief Executive Officer, will be named President and Co-Chief Executive Officer of Akumin. In addition, William Larkin, Alliance’s existing Chief Financial Officer, will be named Chief Financial Officer of Akumin and Mohammad Saleem, Akumin’s existing Chief Financial Officer, will be named Senior Vice President of Financial Reporting. Other senior officer positions will be announced as determined in connection with the acquisition.

Director Appointments Post-Closing of Acquisition

Further, as previously announced, on closing of the acquisition, the Akumin board of directors will exercise its right in accordance with applicable corporate laws to increase the size of the board and appoint a nominee of Thaihot Investment Co., LTD (the “Seller”), the seller of Alliance, to fill the vacancy at closing.

In addition, as previously announced, Akumin will hold a special meeting of shareholders within 90 days after closing the acquisition for the appointment of three additional nominees to its board of directors. Subject to clearance of customary exchange conditions, those nominees will consist of (i) James Wyper, (ii) Rhonda Longmore-Grund and (iii) Paul Viviano.

Mr. Wyper will serve as a nominee of Stonepeak, a leading alternative investment firm providing debt and equity financing to Akumin in connection with the acquisition of Alliance. Mr. Wyper is a Senior Managing Director with Stonepeak Infrastructure Partners where he is responsible for leading investments across the healthcare, transportation and logistics sectors. Ms. Longmore-Grund joined Alliance in 2016 as Executive Vice President and Chief Financial Officer before being named Chief Executive Officer in 2018. Mr. Viviano has been President and Chief Executive Officer of Children’s Hospital Los Angeles since 2015 and has served as an independent director on Alliance’s board of directors. Akumin has obtained voting support agreements in respect of the election of the three additional nominees from certain shareholders and persons who will become shareholders after giving effect to the issuance of shares to be issued in connection with the acquisition and related financing arrangements.

Each of the existing directors of Akumin are expected to continue to serve on the board, with Riadh Zine becoming Chairman, Stan Dunford becoming Chairman Emeritus and Murray Lee remaining the lead independent director upon closing of the acquisition.

Financial Information

We previously announced, based on the last twelve months ended March 31, 2021, the combined company is expected to have pro forma revenue⁽¹⁾ in excess of $730 million and pro forma adjusted EBITDA⁽¹⁾ in excess of $210 million. Based on the financial information filed in our public disclosure today and Akumin’s previously filed financial information, for the last twelve months ended March 31, 2021, such pro forma revenue would be $730 million and pro forma adjusted EBITDA would be approximately $213 million. Akumin’s revenue was $247 million with adjusted EBITDA⁽²⁾ of $52 million, and Alliance’s revenue was $483 million with adjusted EBITDA of $117 million. On a combined basis, adjusted EBITDA is comprised of each of Akumin’s and Alliance’s adjusted EBITDA, expected cost synergies of $24 million, EBITDA⁽¹⁾ of $8 million from Akumin’s previously announced acquisition in Florida which closed May 1, 2021, and other management adjustments of approximately $12 million, including adjustments for Alliance’s discontinued operations and Alliance’s 2020 management incentive compensation. See “Non-GAAP Measures” below.

⁽¹⁾  Non-GAAP financial measure. See “Non-GAAP Measures” below, including a quantitative reconciliation to the most directly comparable financial measure.

⁽²⁾  Non-GAAP financial measure. See “Non-GAAP Measures” below. Additional information about this measure, including a quantitative reconciliation to the most directly comparable financial measure, can be found under the heading titled “How We Assess the Performance of Our Business – Non-GAAP Measures” in Akumin’s Q1 2021 MD&A.

About Akumin Inc.

Akumin Inc. is a leading provider of freestanding, fixed-site outpatient diagnostic imaging services in the United States with a network of 137 owned and/or operated imaging centers located in Florida, Texas, Pennsylvania, Delaware, Illinois, Kansas, Georgia, and Massachusetts. By combining our clinical expertise with the latest advances in technology and information systems, our centers provide physicians with imaging capabilities to facilitate the diagnosis and treatment of diseases and disorders and may reduce unnecessary invasive procedures, minimizing the cost and amount of care for patients. Our imaging procedures include MRI, CT, positron emission tomography (PET), ultrasound, diagnostic radiology (X-ray), mammography, and other interventional procedures, performed with the help of over 1,500 team members. For more information, visit www.akumin.com.

About Alliance HealthCare Services, Inc.

Alliance HealthCare Services is a leading national provider of outsourced advanced radiology and radiation therapy services across 45 states in the U.S. Alliance partners with more than 1,000 hospitals, health systems and physician practices to provide a full continuum of solutions, including onsite outpatient services and comprehensive service line management. Alliance’s ~2,100 Team Members deliver exceptional customer and patient care via more than 500 diagnostic radiology and radiation therapy systems. For more information, visit www.alliancehealthcareservices-us.com.

Forward-Looking Information

Certain information in this press release constitutes forward-looking information. In some cases, but not necessarily in all cases, forward-looking information can be identified by the use of forward-looking terminology such as “plans”, “targets”, “expects” or “does not expect”, “is expected”, “is positioned”, “estimates”, “intends”, “assumes”, “anticipates” or “does not anticipate” or “believes”, or variations of such words and phrases or state that certain actions, events or results “may”, “could”, “would”, “might”, “will” or “will be taken”, “occur” or “be achieved”. In addition, any statements that refer to expectations, projections or other characterizations of future events or circumstances contain forward-looking information. Statements containing forward-looking information are not historical facts but instead represent management’s expectations, estimates and projections regarding future events.

-2-

Forward-looking information is necessarily based on a number of opinions, assumptions and estimates that, while considered reasonable by Akumin as of the date of this press release, are subject to known and unknown risks, uncertainties, assumptions and other factors that may cause the actual results, level of activity, performance or achievements to be materially different from those expressed or implied by such forward-looking information, including, but not limited to, the factors described in greater detail in the “Risk Factors” section of Akumin’s Annual Information Form dated March 31, 2021, which is available at www.sedar.com and www.sec.gov. These factors are not intended to represent a complete list of the factors that could affect Akumin; however, these factors should be considered carefully. There can be no assurance that such estimates and assumptions will prove to be correct. The forward-looking statements contained in this press release are made as of the date of this press release, and Akumin expressly disclaims any obligation to update or alter statements containing any forward-looking information, or the factors or assumptions underlying them, whether as a result of new information, future events or otherwise, except as required by law.

Non-GAAP Measures

This press release refers to certain non-GAAP measures. These non-GAAP measures are not recognized measures under United States generally accepted accounting principles (“GAAP”) and do not have a standardized meaning prescribed by GAAP. There is unlikely to be comparable or similar measures presented by other companies. Rather, these non-GAAP measures are provided as additional information to complement those GAAP measures by providing further understanding of our results of operations from management’s perspective. Accordingly, these non-GAAP measures should not be considered in isolation nor as a substitute for analysis of our financial information reported under GAAP. These non-GAAP measures are used to provide investors with supplemental measures of our operating performance and thus highlight trends in our core business that may not otherwise be apparent when relying solely on GAAP measures. We believe the use of these non-GAAP measures, along with GAAP financial measures, enhances the reader’s understanding of our operating results and is useful to us and to investors in comparing performance with competitors, estimating enterprise value, and making investment decisions. We also believe that securities analysts, investors, and other interested parties frequently use non-GAAP measures in the evaluation of issuers. Our management uses non-GAAP measures to facilitate operating performance comparisons from period to period, to prepare annual operating budgets and forecasts and to determine components of management compensation.

Non-GAAP financial measures presented in this press release are as follows:

“EBITDA” means net income (loss) attributable to shareholders of Akumin before interest expense (net), income tax expense (benefit) and depreciation and amortization.

“Adjusted EBITDA” means EBITDA, as further adjusted for stock-based compensation, impairment of property and equipment, provisions for certain credit losses, settlement costs, provisions, acquisition-related and public offering costs, gains (losses) in the period, deferred rent expense (credit) and one-time adjustments.

The following table reconciles pro forma revenue and pro forma adjusted EBITDA to the most directly comparable GAAP financial performance measure:

-3-

Akumin:

	Year ended Dec. 31,						Three months ended Mar. 31,						Twelve Month period ended March 31,
	2020			2019			2021			2020			2021
Revenue		251,283			247,436			66,889			71,262			246,910
Net income (loss) attributable to shareholders of Akumin		(20,398	)		9,428			681			2,235			(21,952	)
Income tax provision (benefit)		(5,750	)		3,736			281			445			(5,914	)
Depreciation and amortization		20,460			15,587			5,576			4,987			21,049
Interest expense		32,781			20,783			8,368			7,462			33,687
EBITDA		27,093			49,534			14,906			15,129			26,870
Adjustments:
Stock-based compensation		2,084			3,555			427			593			1,918
Settlement costs (recoveries)		2,324			(1,881	)		(24	)		356			1,944
Acquisition-related costs		1,079			3,403			1,279			219			2,139
Operational financial instrument revaluation and other (gains) losses		(3,908	)		1,017			90			(6,267	)		2,449
Other financial instruments revaluation and other (gains) losses		22,079			1,806			(3,365	)		4,263			14,451
Deferred rent expense (credit)(1)		2,953			2,380			445			675			2,723
Adjusted EBITDA		53,704			59,814			13,758			14,968			52,494

Alliance:

	Year ended December						Three-month period ended March 31						Twelve Month period ended March 31,
	2020			2019			2021			2020			2021
Revenue		496,208			569,388			119,513			132,405			483,316
Net loss attributable to Alliance HealthCare Services, Inc.		(63,409	)		(43,135	)		(9,907	)		(11,566	)		(61,750	)
Income tax expense (benefit)		264			(6,090	)		—			38			226
Net income attributable to non-controlling interest		12,132			18,657			3,895			4,727			11,300
Interest expense, net		56,481			56,187			15,963			13,199			59,245
Depreciation expense		54,870			59,113			12,721			13,860			53,731
Amortization expense		12,240			12,650			2,490			3,134			11,596
Transaction Costs		1,358			12,944			704			514			1,548
Restructuring charges		1,124			6,216			609			136			1,597
Impairment charges		29,580			5,365			—			—			29,580
Severance and related costs		1,870			2,917			129			537			1,462
Loss on extinguishment or modification of debt		14,614			—			—			—			14,614
Legal matters and other expenses (included in “Selling, general and administrative expenses”)		6,465			3,320			2,233			1,447			7,251
Share-based compensation (included in “Selling, general and administrative expenses”)		475			507			110			112			473
Other charges (benefits), net (included in “Other income, net”)		(2,275	)		463			97			45			(2,223	)
Adjusted EBITDA		125,789			129,114			29,044			26,183			128,650
Less: net income attributable to non-controlling interest		(12,132	)		(18,657	)		(3,895	)		(4,727	)		(11,300	)
Adjusted EBITDA, net of non-controlling interest		113,657			110,457			25,149			21,456			117,350

-4-

	Pro forma Twelve Month period ended March 31,
	2021
Akumin revenue (per above)		246,910
Alliance revenue (per above)		483,316
Pro forma revenue		730,226
Akumin Adjusted EBITDA (per above)		52,494
Alliance Adjusted EBITDA, net of non-controlling interest (per above)		117,350
Sub-total		169,844
Synergies		23,603
EBITDA from acquisition of six imaging clinics in Florida (2)		7,573
Other management adjustments		12,262
Pro forma Adjusted EBITDA		213,282

(1) Based on note 7 of the Company’s Q1 2021 Financial Statements; Deferred rent expense (credit) is defined as operating lease cost less operating cash flows from operating leases.

(2) See Akumin’s press release issued May 3, 2021.

Key Contacts

For Akumin:

R. Jeffrey White

Investor Relations

1-866-640-5222

jeffrey.white@akumin.com

# # #

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EX-99.2

Exhibit 99.2

Alliance HealthCare Services, Inc.

Consolidated Financial Statements

December 31, 2020 and 2019

Report of Independent Auditors

To the Board of Directors of Alliance HealthCare Services, Inc.

We have audited the accompanying consolidated financial statements of Alliance HealthCare Services, Inc. and its subsidiaries, which comprise the consolidated balance sheets as of December 31, 2020 and 2019, and the related consolidated statements of operations and comprehensive loss, of equity and of cash flows for the years then ended.

Management’s Responsibility for the Consolidated Financial Statements

Management is responsible for the preparation and fair presentation of the consolidated financial statements in accordance with accounting principles generally accepted in the United States of America; this includes the design, implementation, and maintenance of internal control relevant to the preparation and fair presentation of consolidated financial statements that are free from material misstatement, whether due to fraud or error.

Auditors’ Responsibility

Our responsibility is to express an opinion on the consolidated financial statements based on our audits. We conducted our audits in accordance with auditing standards generally accepted in the United States of America. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free from material misstatement.

An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the consolidated financial statements. The procedures selected depend on our judgment, including the assessment of the risks of material misstatement of the consolidated financial statements, whether due to fraud or error. In making those risk assessments, we consider internal control relevant to the Company’s preparation and fair presentation of the consolidated financial statements in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control. Accordingly, we express no such opinion. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of significant accounting estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion.

Opinion

In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of Alliance HealthCare Services, Inc. and its subsidiaries as of December 31, 2020 and 2019, and the results of their operations and their cash flows for the years then ended in accordance with accounting principles generally accepted in the United States of America.

/s/ PricewaterhouseCoopers LLP

PricewaterhouseCoopers LLP

March 15, 2021

Irvine, California

1

ALLIANCE HEALTHCARE SERVICES, INC.

CONSOLIDATED BALANCE SHEETS

(in thousands, except per share and share amounts)

	December 31,
	2020			2019
ASSETS
Current assets:
Cash and cash equivalents	$	25,782		$	15,145
Accounts receivable, net of allowance for doubtful accounts of $1,659 in 2020 and $1,093 in 2019		68,786			84,592
Prepaid expenses		10,567			11,715
Other current assets		9,526			3,859
Total current assets		114,661			115,311
Property and equipment, net		165,558			189,123
Goodwill		93,996			120,292
Other intangible assets, net		139,631			173,802
Other assets		24,453			17,753
Total assets	$	538,299		$	616,281
LIABILITIES AND EQUITY
Current liabilities:
Accounts payable	$	25,365		$	25,400
Accrued compensation and related expenses		23,174			24,736
Current portion of long-term debt		36,810			36,040
Current portion of obligations under capital leases		5,623			10,251
Other accrued liabilities		43,171			39,864
Total current liabilities		134,143			136,291
Long-term debt, net of current portion		550,614			546,431
Obligations under capital leases, net of current portion		2,386			6,970
Other liabilities		25,889			28,468
Total liabilities		713,032			718,160
Commitments and contingencies
Stockholders’ deficit:
Common stock, $0.01 par value; 50,000,000 shares authorized; 19,251,869 issued and outstanding		193			193
Additional paid-in capital		78,090			60,196
Accumulated other comprehensive loss		(12,865	)		(12,353	)
Accumulated deficit		(320,517	)		(257,108	)
Total stockholders’ deficit		(255,099	)		(209,072	)
Noncontrolling interest		80,366			107,193
Total equity		(174,733	)		(101,879	)
Total liabilities and equity	$	538,299		$	616,281

See accompanying notes to the consolidated financial statements.

2

ALLIANCE HEALTHCARE SERVICES, INC.

CONSOLIDATED STATEMENTS OF OPERATIONS

AND COMPREHENSIVE LOSS

(in thousands)

	Year Ended December 31,
	2020			2019
Revenues	$	496,208		$	569,388
Costs and expenses:
Cost of revenues, excluding depreciation and amortization		307,028			355,724
Selling, general and administrative expenses		80,482			93,331
Transaction costs		1,358			12,944
Restructuring charges		1,124			6,216
Impairment charges		29,580			5,365
Severance and related costs		1,870			2,917
Loss on extinguishment or modification of debt		14,614			—
Depreciation expense		54,870			59,113
Amortization expense		12,240			12,650
Interest expense, net		56,481			56,187
Other income, net		(11,150	)		(3,174	)
Total costs and expenses		548,497			601,273
Loss before income taxes, earnings from unconsolidated investee, and noncontrolling interest		(52,289	)		(31,885	)
Income tax benefit (expense)		(264	)		6,090
Earnings from unconsolidated investee		1,276			1,317
Net loss		(51,277	)		(24,478	)
Less: Net income attributable to noncontrolling interest		12,132			18,657
Net loss attributable to Alliance HealthCare Services, Inc.	$	(63,409	)	$	(43,135	)
Comprehensive loss, net of taxes:
Net loss	$	(51,277	)	$	(24,478	)
Unrealized loss on hedging transactions, net of taxes		(6,325	)		(9,439	)
Reclassification adjustment for losses included in net loss, net of taxes		5,812			1,389
Foreign currency translation adjustment		1			(34	)
Comprehensive loss, net of taxes		(51,789	)		(32,562	)
Less: Comprehensive income attributable to noncontrolling interest		12,132			18,657
Comprehensive loss attributable to Alliance HealthCare Services, Inc.	$	(63,921	)	$	(51,219	)

See accompanying notes to the consolidated financial statements.

3

ALLIANCE HEALTHCARE SERVICES, INC.

CONSOLIDATED STATEMENTS OF EQUITY

(in thousands, except share amounts)

	Common Stock				Additional Paid-In Capital			Accumulated Other Comprehensive Loss			Accumulated Deficit			Total Stockholders’ Deficit			Noncontrolling Interest			Total Equity
	Shares		Amount
Balance at December 31, 2018, as previously reported		19,250,000	$	193	$	48,798		$	(4,269	)	$	(217,420	)	$	(172,698	)	$	117,050		$	(55,648	)
Prior period adjustment (see Note 1)		—		—		—			—			2,415			2,415			—			2,415
Balance at December 31, 2018, restated		19,250,000		193		48,798			(4,269	)		(215,005	)		(170,283	)		117,050			(53,233	)
Issuance of common stock		1,869		—		—			—			—			—			—			—
Capital contribution		—		—		8,500			—			—			8,500			—			8,500
Reclassification upon liability derecognition		—		—		2,391			—			—			2,391			—			2,391
Share-based compensation		—		—		507			—			—			507			—			507
Other comprehensive loss		—		—		—			(8,084	)					(8,084	)					(8,084	)
Cumulative effect of accounting change		—		—		—			—			1,032			1,032			—			1,032
Sale of joint venture		—		—		—			—			—			—			(1,811	)		(1,811	)
Contributions from noncontrolling interest in subsidiaries		—		—		—			—			—			—			547			547
Distributions to noncontrolling interest in subsidiaries		—		—		—			—			—			—			(27,250	)		(27,250	)
Net income (loss)		—		—		—			—			(43,135	)		(43,135	)		18,657			(24,478	)
Balance at December 31, 2019		19,251,869		193		60,196			(12,353	)		(257,108	)		(209,072	)		107,193			(101,879	)
Capital contribution		—		—		19,700			—			—			19,700			—			19,700
Share-based compensation		—		—		474			—			—			474			—			474
Other comprehensive loss		—		—		—			(512	)		—			(512	)		—			(512	)
Sale of joint ventures		—		—		—			—			—			—			(15,375	)		(15,375	)
Contributions from noncontrolling interest in subsidiaries		—		—		—			—						—			247			247
Distributions to noncontrolling interest in subsidiaries		—		—		—			—			—			—			(26,401	)		(26,401	)
Assignment of noncontrolling interest		—		—		(2,229	)		—			—			(2,229	)		2,229			—
Other equity transactions		—		—		(51	)		—			—			(51	)		341			290
Net income (loss)		—		—		—			—			(63,409	)		(63,409	)		12,132			(51,277	)
Balance at December 31, 2020		19,251,869	$	193	$	78,090		$	(12,865	)	$	(320,517	)	$	(255,099	)	$	80,366		$	(174,733	)

See accompanying notes to the consolidated financial statements.

4

ALLIANCE HEALTHCARE SERVICES, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS

(in thousands)

	Year Ended December 31,
	2020			2019
Operating activities:
Net loss	$	(51,277	)	$	(24,478	)
Adjustments to reconcile net loss to net cash provided by operating activities:
Depreciation and amortization		67,110			71,763
Amortization of deferred financing costs and accretion of discount on long-term debt		6,117			4,227
Deferred income taxes		279			(5,789	)
Provision for doubtful accounts		2,853			(284	)
Distributions from unconsolidated investee		1,412			881
Earnings from unconsolidated investee		(1,276	)		(1,317	)
Impairment charges		29,580			5,365
Loss on extinguishment or modification of debt		14,614			—
Other non-cash items, net		(351	)		(609	)
Changes in operating assets and liabilities, net of acquisition:
Accounts receivable		8,668			4,840
Prepaid expenses		417			(802	)
Other assets		(2,959	)		3,249
Accounts payable		1,056			4,125
Accrued compensation and related expenses		(1,259	)		4,394
Other liabilities		5,483			(2,387	)
Net cash provided by operating activities		80,467			63,178
Investing activities:
Purchases of property and equipment		(27,151	)		(26,754	)
Increase in deposits on equipment		(4,875	)		(7,668	)
Acquisition, net of cash received		(7,350	)		—
Net proceeds from sale of assets		3,593			2,450
Other investing activities		132			368
Net cash used in investing activities	$	(35,651	)	$	(31,604	)

See accompanying notes to the consolidated financial statements.

5

ALLIANCE HEALTHCARE SERVICES, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS (CONTINUED)

(in thousands)

	Year Ended December 31,
	2020			2019
Financing activities:
Proceeds from revolving loan	$	89,000		$	40,000
Principal payments on revolving loan		(46,000	)		(50,000	)
Principal payments on term loan		(22,209	)		(10,125	)
Proceeds from equipment debt		16,391			21,979
Principal payments on equipment debt and capital lease obligations		(24,849	)		(21,672	)
Payments of deferred financing costs		(20,004	)		—
Contributions from noncontrolling interest in subsidiaries		247			547
Distributions to noncontrolling interest in subsidiaries		(26,401	)		(26,828	)
Capital contribution		—			8,500
Other financing activities		(354	)		—
Net cash used in financing activities		(34,179	)		(37,599	)
Net increase (decrease) in cash and cash equivalents		10,637			(6,025	)
Cash and cash equivalents, beginning of period		15,145			21,170
Cash and cash equivalents, end of period	$	25,782		$	15,145
Supplemental disclosure of cash flow information:
Interest paid	$	47,593		$	54,776
Income taxes paid (refunded), net of (refunds) payments		(2,287	)		148
Supplemental disclosure of non-cash investing and financing activities:
Capital contribution in the form of warrants		19,700			—
Note receivable received in connection with sale of joint venture		13,750			—
Interest payable-in-kind on term loans		2,884			—
Capital lease obligations related to the purchase of equipment		—			1,329
Equipment purchases in accounts payable and other accrued liabilities		6,147			7,148

See accompanying notes to the consolidated financial statements.

6

ALLIANCE HEALTHCARE SERVICES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

December 31, 2020 and 2019

1. Description of the Company and Basis of Financial Statement Presentation

Description of the Company

Alliance HealthCare Services, Inc. and its subsidiaries (the “Company” or “Alliance”) is a leading national provider of outsourced and joint venture healthcare services to hospitals and healthcare providers. The Company also operates freestanding outpatient radiology, oncology and interventional healthcare clinics and ambulatory surgical centers that are not owned by hospitals or providers. Diagnostic imaging services are delivered through the Radiology Division (Alliance Radiology), radiation oncology services are delivered through the Oncology Division (Alliance Oncology), and interventional and pain management services are delivered through the Interventional Division (Alliance Interventional). The Company is the nation’s largest provider of advanced diagnostic mobile imaging services, an industry-leading operator of fixed-site radiology centers, and a leading provider of stereotactic radiosurgery (“SRS”) nationwide. As of December 31, 2020, the Company operated 559 diagnostic imaging and radiation therapy systems, including 68 fixed-site imaging centers across the country, and 35 radiation therapy centers and SRS facilities. With a strategy of partnering with hospitals, health systems and physician practices, the Company provides quality healthcare services for approximately 1,000 hospitals and healthcare partners in 45 states, where approximately 2,300 Alliance team members are committed to providing exceptional patient care and exceeding customer expectations. The Company was incorporated in the state of Delaware on May 27, 1987.

Principles of Consolidation and Basis of Financial Statement Presentation

The audited consolidated financial statements of the Company include the assets, liabilities, revenues and expenses of all subsidiaries over which the Company exercises control. Intercompany transactions have been eliminated. The Company evaluates participating rights in its assessment of control in determining consolidation of joint venture partnerships. The Company records noncontrolling interest related to its consolidated subsidiaries that are not wholly-owned. Investments in non-consolidated investees over which it exercises significant influence but does not control are accounted for under the equity method and are included in other assets in the consolidated balance sheets. The consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the U.S. (“generally accepted accounting principles” or “GAAP”).

The Company has evaluated events subsequent to December 31, 2020 through March 15, 2021, the date the consolidated financial statements were available to be issued.

Since 2017, the Company has been controlled by Tahoe Investment Group Co., Ltd., an entity organized under the laws of the People’s Republic of China (“Tahoe”). Tahoe, through certain wholly-owned subsidiaries, owns 19,250,000 of the Company’s common stock. During 2020, Tahoe transferred its ownership interest in the Company to Tahoe Healthcare Management Limited, an entity under common control.

Prior Period Adjustment

The consolidated financial statements as of and for the year ended December 31, 2018, not presented herein, were audited by other independent auditors, whose report dated March 29, 2019 expressed an unqualified opinion on those financial statements. The Company has revised the December 31, 2018 consolidated financial statements to reflect the correction of an error related to the accounting for the tax effects of an outside basis difference in two joint ventures that resulted in an understatement of deferred tax assets that should have been recognized as a deferred tax benefit through the consolidated statement of operations in periods prior to 2018 to conform with generally accepted accounting principles. As a result of this correction, accumulated deficit has been reduced and deferred tax assets increased by $2.4 million to the previously reported December 31, 2018 balances. The Company determined that the error was not material to any previously issued consolidated financial statements.

COVID-19

On March 11, 2020, the World Health Organization declared a novel strain of coronavirus (“COVID-19”) a pandemic and recommended containment and mitigation measures worldwide. The COVID-19 pandemic has caused significant volatility and uncertainty, which has resulted in a prolonged economic downturn that has disrupted and is expected to continue to disrupt the Company’s business. As of December 31, 2020, the virus continues to spread and many countries are experiencing a resurgence in infection rates. Although vaccines have recently been approved for use, the availability and distribution of the vaccines continue to provide challenges to the control of the virus.

7

ALLIANCE HEALTHCARE SERVICES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

December 31, 2020 and 2019

During 2020, many of the Company-owned and customer operating sites were impacted by temporary closures or reduced operating hours. As a result, the Company experienced a reduction in procedure volumes and corresponding revenues. The Company cannot reasonably estimate the ultimate length or severity of this pandemic, nor the impact on its future procedure volumes and revenues. The extent to which the COVID-19 pandemic ultimately impacts the Company’s business, financial condition, results of operations, cash flows, and liquidity may differ from management’s current estimates due to inherent uncertainties regarding the duration and further spread of the outbreak, its severity, actions taken to contain the virus or treat its impact, and how quickly and to what extent normal economic and operating conditions can resume.

In response to this market condition, the Company took a number of actions in 2020 to mitigate the impact to the Company’s future results of operations and cash flows, as well as to protect its financial position. These actions included, but are not limited to, the following:

• Furloughed, reduced the hours for or eliminated the positions of a substantial number of employees;

• Reduced compensation for executive and management employees;

• Implemented certain other cost reductions;

• Deferred spending on capital expenditures; and

• Borrowed on its revolving loan facility as a precautionary measure to increase the Company’s cash position and help maintain financial flexibility.

In addition, the Company entered into amendments to its Credit Agreements (see Note 7) during 2020. The amendments provided for, among other things, the amendment to certain financial covenants. As a result of the actions taken by the Company and its projected operating results, management expects that the Company will be in compliance with the debt covenants under the Credit Agreements for at least the next twelve months.

On March 27, 2020, the Coronavirus Aid, Relief, and Economic Security Act (“CARES Act”) was signed into law. The CARES Act includes, among other things, a number of benefits that are applicable to the Company and other healthcare providers, provisions relating to the deferment of the employer portion of social security tax payments, as well as changes to federal income tax law including increases to the limit on the deduction for net interest expense and acceleration of the timing for refunds of alternative minimum tax credits. In addition, the Company received payments in connection with certain provisions of the CARES Act including: (i) advanced Medicare payments and (ii) government grants to compensate for healthcare related expenses or lost revenues attributable to the COVID-19 pandemic (see Note 6). On December 27, 2020, the Consolidated Appropriations Act, 2021 was signed into law, which provided additional stimulus relief and renewed some CARES Act programs that had expired.

2. Summary of Significant Accounting Policies

Cash and Cash Equivalents

The Company classifies short-term investments with original maturities of three months or less as cash equivalents.

Accounts Receivable

The Company provides shared and single-user diagnostic imaging and oncology equipment and technical support services to the healthcare industry and directly to patients on an outpatient basis. Substantially all of the Company’s accounts receivable are due from hospitals, other healthcare providers and health insurance providers, including Medicare, located throughout the U.S. A substantial portion of the Company’s services are provided pursuant to long-term contracts with hospitals and other healthcare providers or directly to patients. Estimated credit losses are provided for in the consolidated financial statements.

8

ALLIANCE HEALTHCARE SERVICES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

December 31, 2020 and 2019

Accounts receivable are reported at realizable value, net of allowances for doubtful accounts, which are estimated and recorded in the period the related revenue is recorded. The Company has a standardized approach to estimate and review the collectability of its receivables based on a number of factors, including the age of the receivable balances. Changes to the allowance for doubtful accounts estimates are recorded as an adjustment to bad debt expense within selling, general and administrative expenses in the consolidated statement of operations and comprehensive loss. Receivables deemed to be uncollectible are charged against the allowance for doubtful accounts at the time such receivables are written-off.

Concentration of Credit Risk

Financial instruments that potentially subject the Company to a concentration of credit risk principally consist of cash, cash equivalents and accounts receivable. The Company maintains its cash in high-credit-quality financial institutions. Cash and cash equivalents in excess of federally insured limits were $20.0 million and $15.7 million at December 31, 2020 and 2019, respectively.

The Company’s accounts receivable are primarily from clients in the healthcare industry and third-party payers. No individual customer represented more than 10% of the Company’s accounts receivable at December 31, 2020 and 2019. To reduce credit risk, the Company performs periodic credit evaluations of its customers but does not generally require advance payments or collateral. Credit losses from customers in the healthcare industry have not been material.

Property and Equipment

The majority of the Company’s property and equipment is stated at cost and is depreciated using the straight-line method over the following estimated useful lives:

	Estimated Useful Life
Major equipment	2 to 10 years
Transportation and service equipment	3 to 10 years
Office equipment	2 to 7 years
Furniture and fixtures	5 to 10 years
Tenant improvements	Shorter of the lease term or estimated useful life
Buildings	7 years

Routine maintenance and repairs are charged to expense as incurred. Major repairs and purchased software and hardware upgrades, which extend the life of or add value to the equipment, are capitalized and depreciated over the remaining useful life.

Assets Held Under Capital Leases

Assets held under capital leases are recorded at the lower of the net present value of the minimum lease payments or the fair value of the leased asset at the inception of the lease. Amortization expense is recognized using the straight-line method generally over the estimated useful life of the asset and is included in depreciation expense in the consolidated statement of operations and comprehensive loss.

Goodwill and Intangible Assets

Accounting Standards Codification (“ASC”) 350, “Intangibles – Goodwill and Other,” requires that goodwill and indefinite-lived intangible assets are not amortized but instead tested for impairment at least annually at the reporting unit level. In addition, ASC 350 defines a reporting unit as an operating segment or one level below an operating segment (also known as a component). A component of an operating segment is a reporting unit under ASC 350 if the component constitutes a business for which discrete financial information is available and reviewed by management. The Company has evaluated ASC 350 and concluded there are three operating segments: Radiology, Oncology and Interventional. The Company has assessed that each component listed above meets the definition of a reporting unit based on the conclusions that each component constitutes a business, discrete financial information is available for each component, and management regularly reviews the results of such financial information.

9

ALLIANCE HEALTHCARE SERVICES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

December 31, 2020 and 2019

In accordance with ASC 350, the Company performs an annual impairment test in the fourth quarter for goodwill and indefinite-lived intangible assets or more frequently if an event occurs or circumstances change that would more-likely-than-not reduce the fair value of a reporting unit below its carrying amount. Such indicators include a significant decline in expected future cash flows due to changes in company-specific factors or the broader business climate.

In evaluating goodwill for impairment, the Company first assesses qualitative factors to determine whether it is more-likely-than-not that the fair value of a reporting unit is less than its carrying amount. If the Company concludes that it is more-likely-than-not that the fair value of a reporting unit is less than its carrying amount, the Company conducts a quantitative goodwill impairment test. First, for each reporting unit, the Company compares its estimated fair value with its net book value. If the estimated fair value exceeds its net book value, goodwill is deemed not to be impaired, and no further testing is necessary. If the estimated fair value does not exceed its net book value, goodwill is deemed to be impaired. The Company records an impairment charge for the amount by which the carrying amount of the reporting unit exceeds its fair value.

The quantitative impairment analysis utilizes two primary approaches to calculate the fair value of the reporting unit: the discounted cash flow (“DCF”) method and the Guideline Public Company (“GPC”) method.

Under the DCF method, fair value is measured as the present worth of anticipated future net cash flows generated by a business. In a multi-period model, net cash flows attributable to a business are forecast for an appropriate period and then discounted to present value using an appropriate discount rate. In a single-period model, net cash flow or earnings for a normalized period are capitalized to reach a determination of present value. The methods, key assumptions, degree of uncertainty associated with the key assumptions and the potential events or changes in circumstances that could reasonably be expected to negatively affect the key assumptions with respect to the reporting unit are the estimated future net cash flows generated and the discount rate applied to capture the associated risks. The ability to achieve anticipated future net cash flows is subject to numerous assumptions and risks, including company-specific risks such as the ability to maintain and grow revenues, maintain or improve operating margins, control costs and anticipate working capital requirements. The anticipated future net cash flows are also dependent on industry-level factors, such as the impact of legislature, on patient volumes and cost-reimbursement levels and continued availability of qualified doctors and other medical professionals who are necessary to staff the Company’s operations, among other potential impacts.

Under the GPC method, value is estimated by comparing the subject company to similar companies with publicly-traded ownership interests. Guideline companies are selected based on comparability to the subject company, and valuation multiples are calculated and applied to subject company operating data. The key assumption used in connection with the GPC method focuses on identifying guideline companies that operate in the same (or similar) line of business as the reporting units with the same (or similar) operating characteristics. Eligible companies are selected based on Global Industry Classification Standard codes, Standard Industrial Classification codes, company descriptions, and industry affiliations. Considered factors include relative risk, profitability, and growth considerations of the reporting unit relative to the guideline companies. Value estimates for the reporting unit involve using multiples of market value of invested capital excluding cash to revenue and earnings before interest, income taxes, depreciation and amortization (“EBITDA”). Valuations derived using the GPC method rely on information primarily obtained from available industry market data and publicly available filings with the Securities and Exchange Commission (“SEC”).

In testing indefinite-lived intangible assets for impairment, the Company first assesses qualitative factors to determine whether it is more-likely-than-not that the fair value of an indefinite-lived intangible asset is less than its carrying amount. If the Company concludes that it is more-likely-than-not that the fair value of an indefinite-lived intangible asset is less than its carrying amount, the Company conducts a quantitative impairment test, which consist of a comparison of the fair value to its carrying amount. If the carrying amount exceeds its fair value, an impairment loss is recognized in an amount equal to that excess.

Finite-lived intangible assets are amortized over their respective estimated useful lives on a straight-line basis and are reviewed for impairment in accordance with ASC 360, “Property, Plant, and Equipment.”

Impairment of Long-Lived Assets

The Company accounts for long-lived assets in accordance with the provisions of ASC 360, which requires that long-lived assets be reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. Recoverability of assets to be held and used is measured by a comparison of the carrying amount of an asset to undiscounted future net cash flows expected to be generated by the asset. If the carrying amount of an asset exceeds its estimated undiscounted future cash flows, an impairment charge is recognized for the amount by which the carrying amount of the asset exceeds the fair value of the asset. Assets to be disposed of are reported at the lower of the carrying amount or fair value less costs to sell.

10

ALLIANCE HEALTHCARE SERVICES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

December 31, 2020 and 2019

Purchase Accounting

In accordance with GAAP, the assets acquired and liabilities assumed in an acquired business are recorded at their estimated fair values on the date of acquisition. The difference between the purchase price amount and the net fair value of assets acquired and liabilities assumed is recognized as goodwill if it exceeds the estimated fair value and as a bargain purchase gain if it is below the estimated fair value. Determining the fair value of assets acquired and liabilities assumed requires management’s judgment, often utilizes independent valuation experts and involves the use of significant estimates and assumptions with respect to the timing and amounts of future cash inflows and outflows, discount rates, market prices and asset lives, among other items. The judgments made in the determination of the estimated fair value assigned to the assets acquired and liabilities assumed, as well as the estimated useful life of each asset and the duration of each liability, can materially impact the financial statements in periods after acquisition, such as through depreciation and amortization expense.

Acquisitions of entities over which the Company exercises control have been recorded using the acquisition method of accounting and, accordingly, results of their operations have been included in the Company’s consolidated financial statements as of the effective date of each respective acquisition.

Revenue Recognition

On January 1, 2019, the Company adopted the new revenue recognition standard issued by the Financial Accounting Standards Board (“FASB”) and codified in the ASC as topic 606 (“ASC 606”). The revenue recognition standard in ASC 606 outlines a single comprehensive model for recognizing revenue when (or as) performance obligations, defined in a contract with a customer as goods or services transferred to the customer in exchange for consideration, are satisfied. In addition, ASC 606 provides implementation guidance on several other important topics, including the accounting for certain revenue-related costs. The standard also requires expanded disclosures regarding the Company’s revenue recognition policies and significant judgments employed in the determination of revenue.

The majority of the Company’s revenues are derived directly from hospitals and healthcare providers and are primarily for radiology and oncology services (“Wholesale”). To a lesser extent, revenues are generated from direct billings to third-party payers or patients, which are recorded net of contractual discounts, estimated uncollectible amounts associated with patients, and other arrangements for providing services at less than established patient billing rates (“Retail”). The following table summarizes the components of the Company’s revenues:

	Year Ended December 31,
	2020			2019
Wholesale:
Radiology		53	%		54	%
Oncology		17	%		14	%
		70	%		68	%
Retail:
Radiology		9	%		9	%
Oncology		11	%		11	%
Interventional		9	%		10	%
		29	%		30	%
Other		1	%		2	%
Total		100	%		100	%

11

ALLIANCE HEALTHCARE SERVICES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

December 31, 2020 and 2019

Pursuant to ASC 606, the Company recognizes revenue in the period in which performance obligations are satisfied by transferring goods or services to customers. The Company records the amount of revenue that reflects the consideration that it expects to receive in exchange for those goods or services. The Company applies the following five-step model in order to determine this amount: (i) identification of the contract with a customer; (ii) identification of the promised goods or services in the contract and determination of whether they represent performance obligations, including whether they are distinct in the context of the contract; (iii) measurement of the transaction price, including the constraint on variable consideration; (iv) allocation of the transaction price to the performance obligations; and (v) recognition of revenue when (or as) the Company satisfies each performance obligation.

The Company applied the modified retrospective approach when adopting ASC 606 and applied the practical expedient permitted under ASC 606 to those contracts that were not completed as of the date of initial adoption. Under the modified retrospective approach, the Company recognized the cumulative effect of initially applying the standard as an adjustment to opening retained earnings at the date of initial application. The Company was required to capitalize costs to acquire new contracts, whereas previously, the Company expensed those costs as incurred. As a result, as of January 1, 2019, the Company capitalized $1.3 million ($1.0 million net of tax) of deferred sales commissions related to open contracts, which are included in other assets in the consolidated balance sheet, and are amortized over the remaining weighted average contract term of three years. Sales commissions for contracts obtained after December 31, 2018 are capitalized and amortized over the service period of the respective contract. For the year ended December 31, 2019, the impact of recording sales commission expense under ASC 606 was not materially different from what would have been recorded under legacy GAAP. In addition, as a result of adopting ASC 606, uncollectible balances associated with patient responsibility from the Company’s Retail operations are now reflected as implicit price concessions (as defined in ASC 606) and therefore included as a reduction to net revenues whereas historically these amounts were classified as bad debt expense and included in selling, general and administrative expenses in the consolidated statement of operations and comprehensive loss. For the year ended December 31, 2019, the Company recorded $1.6 million of implicit price concessions as a direct reduction of net revenues that would have been recorded as bad debt expense prior to the adoption of ASC 606. Other than these changes in presentation on the consolidated balance sheet and consolidated statement of operations and comprehensive loss, the adoption of ASC 606 did not have a material impact on the consolidated financial statements as of and for the year ended December 31, 2019.

Wholesale

Wholesale revenues are derived from services provided under an outsourced contract arrangement with hospitals, physician groups and other healthcare providers. Under outsourced service contracts with wholesale customers, the Company provides medical services to patients at a fixed site facility or mobile unit. The Company typically bundles its services in providing diagnostic imaging or radiation therapy services, staffing, supplies and other patient related administrative tasks depending on the customers’ needs. The majority of the Company’s contracts have a single performance obligation, as a series of distinct services that are substantially the same are provided and are transferred with the same pattern to the customer. The Company bills customers either on a fee per procedure, percentage of collections, or fixed-payment methodology. Service fees based on fee per procedure and fixed-payment methodology are negotiated and agreed upon by both parties. The Company does not have a business practice of accepting less than contractual amounts. Any amounts not collected do not represent implicit price concessions and instead are due to general credit risk and therefore, Company treats the allowance for doubtful accounts related to these arrangements as bad debt expense, which is recorded in selling, general and administrative expenses in the consolidated statement of operations and comprehensive loss. For service fees based on a percentage of collections, the Company receives payment after the hospital and other healthcare provider customers are paid by third-party payers and patients. Revenue is recognized over time as medical services are provided and the measurement of the transaction price is generally consistent with the methodology used with Retail customers (see Retail below).

For the majority of its wholesale contracts, the Company has the right to invoice the customer in an amount that directly corresponds with the value to the customer of the Company’s performance to date. The Company uses the practical expedient under ASC 606 to recognize revenue corresponding with amounts it has the right to invoice for services performed.

Retail

Retail revenues are generated from freestanding facilities managed and operated by the Company, who submit billings and collect fees directly from the patients and third-party payers that are managed by the center. The Company’s performance obligations are to provide outpatient medical services to patients, such as diagnostic services, radiation therapy, pain management treatment, or the provision of goods and services during a patient visit. Revenues are recorded during the period the obligations to provide medical

12

ALLIANCE HEALTHCARE SERVICES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

December 31, 2020 and 2019

services are satisfied. Performance obligations for medical services are generally satisfied over a period of less than one day. The contractual relationships with patients, in most cases, also involve a third-party payer (Medicare, Medicaid, managed care health plans and commercial insurance companies, including plans offered through the health insurance exchanges) and the transaction prices for the services provided are dependent upon the terms provided by (Medicare and Medicaid) or negotiated with (managed care health plans and commercial insurance companies) the third-party payers. The payment arrangements with third-party payers for the services the Company provides to the related patients typically specify payments at amounts less than standard charges and generally provide for payments based upon predetermined rates per diagnostic services or discounted fee-for-service rates. Uninsured patients are billed based on established patient fee schedule or fees negotiated. Management continually reviews the contractual estimation process to consider and incorporate updates to laws and regulations and the frequent changes in contractual terms resulting from contract renegotiations and renewals.

Revenue recorded is based upon the estimated amounts the Company expects to be entitled to receive from patients and third-party payers. Estimates of contractual adjustments under managed care and commercial insurance plans are based upon the payment terms specified in the related contractual agreements. Revenues related to uninsured patients, uninsured copayment, and deductible amounts for patients who have healthcare coverage may have discounts applied (uninsured discounts and contractual discounts). The Company also records estimated implicit price concessions (based primarily on historical collection experience) related to uninsured accounts to record self-pay revenues at the estimated amounts ultimately expected to be collected. The Company considers all readily available information when preparing its estimates.

As part of its adoption of ASC 606, the Company elected the available practical expedient to recognize revenue using the portfolio approach as the Company does not expect the financial statement effects of this approach to materially differ from an individual contract approach.

Other

For certain contracts, the Company generates revenue from the rental of equipment and accounts for such contracts as operating leases. The revenue for these arrangements is recognized over the term of the related contract based on the use of the asset and at the amounts expected to be collected. In addition, the Company also records revenue from management services that it performs based upon management service contracts with predetermined pricing and records such revenues in the period in which the service is performed and at the amounts expected to be collected.

No single customer accounted for more than 10% of consolidated revenues during the years ended December 31, 2020 and 2019.

Share-based Compensation

Share-based compensation expense is based on the grant date fair value estimated in accordance with ASC 718, “Compensation—Stock Compensation.” The Company uses the Black-Scholes pricing model to value the compensation expense associated with share-based awards. Share-based compensation is recognized for the portion of the award that is ultimately expected to vest and is recognized on a straight-line basis over the requisite service period.

Derivatives

The Company accounts for derivative instruments and hedging activities in accordance with the provisions of ASC 815, “Derivatives and Hedging.” On the date the Company enters into a derivative contract, management may designate the derivative as a hedge of the identified exposure. The Company formally documents all relationships between hedging instruments and hedged items, as well as the risk-management objective and strategy for undertaking various hedge transactions. In this documentation, the Company specifically identifies the firm commitment or forecasted transaction that has been designated as a hedged item and states how the hedging instrument is expected to hedge the risks related to the hedged item. The Company formally measures effectiveness of its hedging relationships at hedge inception in accordance with its risk management policy. The Company’s derivatives are recorded on the balance sheet at fair value.

13

ALLIANCE HEALTHCARE SERVICES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

December 31, 2020 and 2019

Effective January 1, 2020, the Company adopted Accounting Standards Update 2017-12, “Targeted Improvements to Accounting for Hedging Activities” (ASU 2017-12). As a result of the adoption of ASU 2017-12, the Company updated its Derivatives and Hedging accounting policies. See below for additional details related to the adoption of ASU 2017-12. Prior to the adoption of ASU 2017-12, for derivatives accounted for as cash flow hedges, the Company was required to separately measure and reflect the amount by which the hedging instrument did not offset the changes in the cash flows of hedged items, which was referred to as the ineffective amount. The Company assessed hedge effectiveness at each reporting period and recorded the gain or loss related to the ineffective portion of derivative instruments, if any, in interest expense, net, in the consolidated statements of operations and comprehensive loss. Pursuant to the provisions of ASU 2017-12, the Company is no longer required to separately measure and recognize hedge ineffectiveness. Upon adoption of ASU 2017-12, the Company no longer recognizes hedge ineffectiveness in its consolidated statements of operations and comprehensive loss, but instead recognizes the entire change in the fair value of cash flow hedges in other comprehensive loss. The amounts recorded in other comprehensive loss are subsequently reclassified to earnings in the same line item in the consolidated statements of operations and comprehensive loss as impacted by the hedged item when the hedged item affects earnings. In addition, the Company has elected to assess the effectiveness of its hedging relationships qualitatively in subsequent reporting periods after the initial quantitative assessment as permitted by the new standard.

Income Taxes

The provision for income taxes is determined in accordance with ASC 740, “Income Taxes.” Deferred tax assets and liabilities are determined based on the temporary differences between the financial reporting and tax bases of assets and liabilities, applying enacted statutory tax rates in effect for the year in which the differences are expected to reverse. Future income tax benefits are recognized only to the extent that the realization of such benefits is considered to be more likely than not. The Company regularly reviews its deferred tax assets for recoverability and establishes a valuation allowance, when it is more likely than not that such deferred tax assets will not be recoverable, based on historical taxable income, projected future taxable income, and the expected timing of the reversals of existing temporary differences.

Fair Values of Financial Instruments

The Company uses the following methods and assumptions in estimating fair value disclosure for financial instruments:

• Cash and cash equivalents: The carrying amounts of cash and cash equivalents approximate fair value due to the short-term maturity or variable rates of these instruments.

• Debt: The carrying amounts of debt are recorded at historical cost. The carrying amounts of variable-rate borrowings approximate fair value estimates based on current market rates and credit spreads for similar debt instruments.

• Derivative instruments: Fair value is determined based on the income approach and standard valuation techniques to convert future amounts to a single present amount and approximates the net gains and losses that would have been realized if the contracts had been settled at each period-end.

ASC 820, “Fair Value Measurement,” applies to all assets and liabilities that are being measured and reported at fair value on a recurring basis. ASC 820 requires disclosure that establishes a framework for measuring fair value by establishing a hierarchy for ranking the quality and reliability of the information used to determine fair values. ASC 820 requires that assets and liabilities carried at fair value be classified and disclosed in one of the following three categories:

Level 1 Quoted market prices in active markets for identical assets or liabilities;

Level 2 Observable market-based inputs or unobservable inputs, including identical securities in inactive markets or similar securities in active markets that are corroborated by market data; or

Level 3 Unobservable inputs that are not corroborated by market data.

Self-Insurance

The Company has purchased large deductible insurance policies for its workers’ compensation, auto liability, general liability, and professional liability exposures. The Company currently retains the first $0.5 million of loss for workers’ compensation, $0.3 million for auto liability and $0.1 million for general and professional liability.

14

ALLIANCE HEALTHCARE SERVICES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

December 31, 2020 and 2019

The Company’s policy is to accrue amounts equal to the actuarially estimated costs to settle open claims of insureds, as well as an estimate of the cost of insured claims that have been incurred but not reported. The Company develops information about the size of the ultimate claims based on historical experience, current industry information and actuarial analysis, and evaluates the estimates for claim loss exposure on an annual basis.

The Company believes that adequate provision has been made in the consolidated financial statements for these liabilities. The most significant assumptions used in the estimation process include determining the trend in costs, the expected cost of claims incurred but not reported and the expected costs to settle or pay damage awards with respect to unpaid claims. Recorded liabilities are based upon estimates, and while management believes the estimates of loss are reasonable, the ultimate liability may be in excess of or less than the recorded amounts.

Advertising Costs

The Company expenses all advertising costs as incurred. Advertising costs were $1.1 million and $2.2 million for the years ended December 31, 2020 and 2019, respectively.

Use of Estimates

The preparation of consolidated financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the amounts reported in the consolidated financial statements and accompanying notes. Actual results could differ from those estimates. The COVID-19 pandemic has introduced significant additional uncertainty with respect to estimates, judgments and assumptions, which may materially impact our estimates.

Comprehensive Income

The Company reports comprehensive income in accordance with ASC 220, “Comprehensive Income.” The Company has multiple interest rate swap agreements to hedge the future cash interest payments on portions of its variable-rate debt. Any unrealized gains and losses related to the swaps that qualify for cash flow hedge accounting are classified as a component of comprehensive income, net of taxes.

Segment Reporting

Operating segments are defined as components of an enterprise about which separate financial information is available that is evaluated regularly by the chief operating decision maker (“CODM”) in deciding how to allocate resources and in assessing performance. In accordance with ASC 280, “Segment Reporting,” and based on the nature of the financial information that is received by the CODM, the Company operates in three reportable segments: Radiology, Oncology and Interventional. Each of these segments, on a stand-alone basis, provides and makes available its respective medical services in similar settings and operates within a singular regulatory environment. Further, management assesses the Company’s segment operations and each segment’s degree of efficiency and performance based on this structure of financial reporting and primarily makes operating decisions from these reportable segment results. 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 EBITDA. There is no aggregation of operating segments in the Company’s determination of reportable segments.

Accounting Pronouncements Recently Adopted

Derivatives and Hedging

In August 2017, the FASB issued ASU 2017-12, “Derivatives and Hedging (Topic 815): Targeted Improvements to Accounting for Hedging Activities,” which was designed to refine and expand hedge accounting for both financial (e.g., interest rate) and commodity risks. Its provisions create more transparency around how economic results are presented, both on the face of the financial statements and in the notes thereto. It also makes certain targeted improvements to simplify the application of hedge accounting guidance. The Company adopted ASU 2017-12 during the year ended December 31, 2020. In accordance with the transition provisions of ASU 2017-12, the Company is required to eliminate the separate measurement of ineffectiveness for its cash flow hedging instruments existing as of the adoption date through a cumulative effect adjustment to retained earnings as of the Application Date (as defined in ASU 2017-12). The Company did not record a cumulative effect adjustment to eliminate ineffectiveness amounts as all such amounts were not material. The adoption did not have a material impact on the Company’s consolidated financial statements.

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December 31, 2020 and 2019

In October 2018, the FASB issued ASU 2018-16, “Derivatives and Hedging (Topic 815): Inclusion of the Secured Overnight Financial Rate (SOFR) Overnight Index Swap (OIS) Rate as a Benchmark Interest Rate for Hedge Accounting Purposes,” which expands the list of U.S. benchmark interest rates permitted in the application of hedge accounting to include the Overnight Index Swap (“OIS”) rate based on the Secured Overnight Financing Rate (“SOFR”). SOFR is a new index calculated by reference to short-term repurchase agreements backed by Treasury securities. It was selected as a preferred replacement for U.S. dollar London Interbank Offered Rate (LIBOR), which will be phased out by June of 2023. The amendments in this ASU are required to be adopted concurrently with the amendments in ASU 2017-12. The Company adopted this ASU concurrently with ASU 2017-12 during the year ended December 31, 2020, but will continue to use LIBOR while available. The adoption did not have a material impact on the Company’s consolidated financial statements.

Fair Value Measurements

In August 2018, the FASB issued ASU 2018-13, “Fair Value Measurement (Topic 820): Disclosure Framework Changes to the Disclosure Requirements for Fair Value Measurement.” This standard modifies certain disclosure requirements on fair value measurements. ASU 2018-13 is effective for the Company for fiscal years beginning after December 15, 2019, including interim periods within those years. The Company adopted ASU 2018-13 during the year ended December 31, 2020. The adoption did not have a material impact on the Company’s consolidated financial statements.

Income Taxes

In December 2019, the FASB issued ASU 2019-12, “Income Taxes (Topic 740): Simplifying the Accounting for Income Taxes,” which is intended to simplify various aspects related to accounting for income taxes. ASU 2019-12 removes certain exceptions to the general principles in Topic 740 and also clarifies and amends existing guidance to improve consistent application. ASU 2019-12 is effective for the Company for fiscal years beginning after December 15, 2021, and interim periods within fiscal year beginning after December 15, 2022. Early adoption is permitted. The Company early adopted the standard effective January 1, 2020. The adoption did not have a material impact on the Company’s consolidated financial statements.

3. Transactions

e+CancerCare

In January 2018, the Company entered into a definitive acquisition agreement to acquire e+CancerCare, a leading provider of cancer care services in the U.S., from Kohlberg & Company, L.L.C. and various other equity holders. Completion of the transaction was subject to satisfaction or waiver of various financial, regulatory and other conditions. The Company had expected to fund a large portion of the acquisition with an equity investment from Tahoe. In addition, in connection with the proposed acquisition, the Company entered into an agreement outlining its intent to establish an incremental term facility of $100 million (“Incremental Term Facility”), under the Company’s existing credit agreements, to finance a portion of the acquisition. Under the terms of the agreement related to the Incremental Term Facility, the Company agreed to pay certain ticking fees to the administrative agent for the account of the lenders in the syndicate until the debt was funded.

In March 2019, the agreement to acquire e+CancerCare was terminated due to challenges in executing upon the anticipated equity funding from Tahoe. Pursuant to the terms in the agreement, the Company paid a termination fee of $11.0 million to the equity holders of e+CancerCare in March 2019, which was recorded in transaction costs in the consolidated statement of operations and comprehensive loss for the year ended December 31, 2019. In addition, the Company terminated the Incremental Term Facility and paid all ticking fees incurred through the termination date, which totaled $4.2 million, in March 2019.

Acquisition of Molecular Imaging Technologies, LLC

On September 15, 2020, the Company through its Radiology Division, completed the purchase of 100% membership interest in three radiology centers and a 51% membership interest in a fourth radiology center from Molecular Imaging Technologies, LLC (“MIT”). The purchase price for this acquisition was $7.4 million and was funded with proceeds from the Company’s existing cash

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December 31, 2020 and 2019

balance. The estimated fair value of the identifiable assets acquired at the acquisition date was $6.5 million, including identifiable intangible assets of $5.4 million. The excess purchase price over the net identifiable assets acquired was $1.4 million and was recorded in goodwill. The amounts recorded for goodwill and intangible assets are being amortized over 15 years for tax purposes. Acquired intangible assets are amortized on a straight-line basis over their estimated useful lives. The fair values of the identifiable intangible assets were estimated using a valuation methodology representing Level 3 fair value measurements.

The values assigned to the identifiable intangible assets acquired are preliminary and may be subject to adjustment upon the final determination of their respective fair values.

During the year ended December 31, 2020, the post-acquisition results associated with the MIT acquisition include net revenues and income before income taxes of $1.4 million and $0.3 million, respectively.

Disposition of Alliance Interventional, LLC

On December 31, 2020, the Company sold its 77.28% membership interest in Alliance Interventional, LLC (“AI”) to its joint venture partners (“AI Sale”) who owned the remaining 22.72% membership interest. AI is the sole owner of The Pain Center of Arizona (“TPC”). Prior to the AI Sale, AI owned 60% of the membership interests in Alliance Interventional-Florida, LLC (“AHIP-FL”). Prior to the AI Sale, the joint venture partners of AI assigned their indirect membership interest in AHIP-FL to the Company so that AI no longer had a membership interest in AHIP-FL. In connection with the joint venture partners’ assignment of their indirect ownership in AHIP-FL, the Company reclassified $2.2 million from noncontrolling interest to additional paid-in capital, which primarily represents the accumulated deficit allocated to the assigned noncontrolling interest.

The total consideration received for the AI Sale was $15.0 million, consisting of $1.25 million in cash paid at closing and a $13.75 million promissory note due from the joint venture partners. The promissory note requires various principal payments during its term and is due on December 31, 2023. The promissory note bears interest at an annual interest rate of 9% through December 31, 2022 and 10% from January 1, 2023 through December 31, 2023. The promissory note is collateralized by a first priority security interest in all assets of AI and subsidiaries and secured by a pledge from the joint venture partners of a first priority security interest in their equity interests in AI.

As a result of the sale, the Company wrote-off $15.2 million related to the carrying value of the noncontrolling interest, $17.3 million of intangible assets, and $8.4 million related to goodwill allocated to the disposed business. The Company recognized a gain on sale of $0.3 million, which was recorded in other income, net in the consolidated statement of operations and comprehensive loss for the year ended December 31, 2020.

Other

In July 2019, the Company sold its interest in a consolidated joint venture for $1.2 million. As a result of the disposition, the Company wrote-off $1.8 million related to the carrying value of the noncontrolling interest. The net impact to earnings in connection with the sale was immaterial.

In August 2020, the Company sold substantially all of the assets of a radiology center for $0.5 million. As a result of the disposition, the Company recognized a gain on sale of $0.4 million, which was recorded in other income, net in the consolidated statement of operations and comprehensive loss for the year ended December 31, 2020.

In November 2020, the Company sold its 50% membership interest in a consolidated joint venture for $2.2 million. As a result of the disposition, the Company wrote-off $0.2 million related to the carrying value of the noncontrolling interest and $0.2 million related to goodwill allocated to the disposed business. In addition, the Company recognized a gain on sale of $1.8 million, which was recorded in other income, net in the consolidated statement of operations and comprehensive loss for the year ended December 31, 2020.

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December 31, 2020 and 2019

4. Fair Value of Financial Instruments

Instruments 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 December 31, 2020								Fair Value as of December 31, 2019
(in thousands)	Total		Level 1		Level 2		Level 3		Total		Level 1		Level 2		Level 3
Financial liabilities:
Interest rate contracts (included in other accrued liabilities)	$	6,196	$	—	$	6,196	$	—	$	4,218	$	—	$	4,218	$	—
Interest rate contracts (included in other liabilities)		8,156		—		8,156		—		9,620		—		9,620		—
Total financial liabilities	$	14,352	$	—	$	14,352	$	—	$	13,838	$	—	$	13,838	$	—

The Company’s derivative instruments are primarily pay-fixed, receive-variable interest rate swaps based on the London interbank offered rate (“LIBOR”) swap rate (see Note 8). The Company has elected to use the income approach to value these derivatives, using observable Level 2 market expectations at measurement date and standard valuation techniques to convert future amounts to a single present amount assuming that participants are motivated but not compelled to transact. Level 2 inputs for interest rate swap valuations are limited to quoted prices for similar assets or liabilities in active markets (specifically futures contracts on LIBOR for the first two years) and inputs other than quoted prices that are observable for the asset or liability (specifically LIBOR cash and swap rates at commonly quoted intervals and implied volatilities for options). According to ASC 820, the fair value measurement of an asset or liability must reflect the nonperformance risk of the entity and the counterparty. Therefore, the impact of the counterparty’s creditworthiness and the Company’s creditworthiness has also been factored into the fair value measurement of the derivative instruments.

None of the Company’s instruments has transferred from one level to another.

Assets and Liabilities Recorded at Fair Value on a Non-Recurring Basis

The Company measures the fair value of certain assets on a non-recurring basis (utilizing Level 3 inputs), generally on an annual basis, in connection with acquisitions, or when events or changes in circumstances indicate that the carrying amount of the assets may not be recoverable. These assets include goodwill, intangible assets and long-lived assets (see Notes 5 and 11).

During the year ended December 31, 2020, the Company also measured the fair value of the term loans and warrants (utilizing Level 3 inputs) in connection with the tax treatment of the debt modification resulting from the amendment to the Credit Agreements (see Note 7).

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December 31, 2020 and 2019

5. Goodwill and Intangible Assets

Goodwill

Changes in the carrying amount of goodwill are as follows:

(in thousands)	Radiology			Oncology			Interventional			Total
Balance at December 31, 2018	$	48,221		$	44,913		$	31,342		$	124,476
Disposition		—			(243	)		—			(243	)
Impairment		—			—			(3,941	)		(3,941	)
Balance at December 31, 2019		48,221			44,670			27,401			120,292
Acquisition		1,366			—			—			1,366
Disposition		(261	)		—			(8,401	)		(8,662	)
Impairment		—			—			(19,000	)		(19,000	)
Balance at December 31, 2020	$	49,326		$	44,670		$	—		$	93,996

The Company tests its goodwill and indefinite-lived intangible assets annually or more frequently depending on certain impairment indicators. There were no interim impairment tests performed. Goodwill was tested for impairment at the reporting unit level as of October 1, 2020 and October 1, 2019, the dates of the Company’s annual impairment review for the years ended December 31, 2020 and 2019, respectively. The Company performed a quantitative test as part of its annual impairment review. In estimating fair values, the Company used a combination of the income approach (the DCF method) and the market approach (the GPC method).

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

	October 1, 2020	October 1, 2019
Discount rate	10.5% to 12.5%	8.5% to 10.5%
Perpetual growth rate	2.00%	2.00%
Tax rate	25.00%	25.00%
Risk-free rate	1.20%	3.50%
EBITDA multiple	6.5x to 7.0x	6.0x to 7.5x

In both 2020 and 2019, the respective annual impairment tests yielded individual fair values for the Radiology and Oncology reporting units that exceeded their respective carrying values; therefore, these reporting units were not considered at risk of impairment. The estimated fair values at October 1, 2020 exceeded their carrying values by 99% and 87% for the Radiology and Oncology reporting units, respectively. In connection with its 2020 annual impairment test, the Company concluded that the carrying value of the Interventional reporting unit 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 $19.0 million related to goodwill in the Interventional reporting unit. In connection with the AI sale (see Note 3), the remaining Interventional goodwill balance of $8.4 million was written off as of December 31, 2020.

In connection with its 2019 annual impairment test, the Company concluded that the carrying value of the Interventional reporting unit 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 $3.9 million related to goodwill in the Interventional reporting unit.

Changes in estimates or assumptions could materially affect the determination of fair value and the conclusions of the Company’s impairment test. In addition to its annual review, the Company performs a test of impairment when indicators of impairment are present. As of December 31, 2020 and 2019, there were no indications of impairment of the Company’s goodwill balances.

As of December 31, 2020 and 2019, the Company’s total accumulated goodwill impairment was $197.2 million and $178.2 million, respectively.

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December 31, 2020 and 2019

Intangible Assets

Intangible assets consist of the following:

			December 31, 2020							December 31, 2019
(dollars in thousands)	Weighted Average Useful Life (in years)		Gross Carrying Amount		Accumulated Amortization			Intangible Assets, net		Gross Carrying Amount		Accumulated Amortization			Intangible Assets, net
Finite-lived intangible assets:
Customer contracts		15	$	202,047	$	(134,065	)	$	67,982	$	224,117	$	(132,810	)	$	91,307
Other		19		42,384		(24,970	)		17,414		55,221		(26,961	)		28,260
Total		16	$	244,431	$	(159,035	)		85,396	$	279,338	$	(159,771	)		119,567
Indefinite-lived intangible assets									54,235							54,235
Total other intangible assets								$	139,631						$	173,802

Indefinite-lived intangible assets, which consist of Certificates of Need and regulatory authority rights, were tested for impairment as of October 1, 2020 and October 1, 2019, the dates of the Company’s annual impairment review for the years ended December 31, 2020 and 2019, respectively. The Company elected to perform a qualitative assessment of factors to determine whether further impairment testing was required. Based on its testing, the Company concluded there was no impairment of indefinite-lived intangible assets as of October 1, 2020 and October 1, 2019.

In addition to its annual review, the Company performs an impairment test when indicators of impairment are present. During December 2020, the Company re-evaluated its finite-lived intangible assets associated with the Interventional division due to the projected outlook and long-term business plans for the division, as well as in connection with the divestiture of a portion of this division through the AI Sale (see Note 3). Consequently, the Company recorded an impairment charge of $10.0 million for the remaining carrying value of its intangible assets associated with the Interventional Division during the year ended December 31, 2020.

As of December 31, 2020 and 2019, there were no indications of impairment of the Company’s intangible assets balances.

Estimated annual amortization expense related to finite-lived intangible assets is presented below:

(in thousands)
Year ending December 31:
2021	$	9,881
2022		9,436
2023		8,894
2024		8,706
2025		8,694
Thereafter		39,785
	$	85,396

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

December 31, 2020 and 2019

6. Supplemental Balance Sheet Information

The components of property and equipment, net are as follows:

(in thousands)	December 31,
	2020			2019
Major equipment	$	716,849		$	769,467
Transportation and service equipment		18,075			18,087
Office equipment		102,445			97,399
Furniture and fixtures		3,470			3,833
Tenant improvements		50,087			50,771
Buildings and land		340			340
		891,266			939,897
Accumulated depreciation		(725,708	)		(750,774	)
	$	165,558		$	189,123

Included in major equipment and transportation and service equipment as of December 31, 2020 are assets held under capital leases with a cost of $42.6 million and $2.8 million, respectively, and accumulated depreciation of $24.9 million and $1.3 million, respectively.

Included in major equipment and transportation and service equipment as of December 31, 2019 are assets held under capital leases with a cost of $42.6 million and $2.8 million, respectively, and accumulated depreciation of $21.7 million and $1.0 million, respectively.

Other accrued liabilities consist of the following:

	December 31,
(in thousands)	2020		2019
MAAPP funds and Relief Funds	$	6,504	$	—
Interest rate contracts		6,196		4,218
Property and sales taxes		5,518		7,709
Accrued equipment purchases		4,274		5,050
Systems rental and maintenance costs		2,791		3,991
Other		17,888		18,896
Total	$	43,171	$	39,864

The CARES Act provided for qualified healthcare providers to receive advanced payments under the existing Medicare Accelerated and Advance Payments Program (“MAAPP”) during the COVID-19 pandemic. Under this program, healthcare providers could choose to receive advanced payments for future Medicare services provided. During 2020, the Company applied for and received approval to receive MAAPP funds from Centers for Medicare & Medicaid Services. The Company recorded these payments as a liability until all performance obligations have been met, as the payments were made on behalf of patients before services were provided. MAAPP funds received are required to be applied to future Medicare billings commencing in April 2021, with all such remaining amounts required to be repaid by September 2022. Included in other accrued liabilities at December 31, 2020 is $6.1 million of MAAPP funds.

In addition, the CARES Act provided waivers, reimbursement, grants and other funds to assist healthcare providers during the COVID-19 pandemic, including $100 billion in appropriations for the Public Health and Social Services Emergency Fund, also referred to as the Provider Relief Fund, to be used for preventing, preparing, and responding to the coronavirus, and for reimbursing eligible healthcare providers for lost revenues and healthcare related expenses that are attributable to COVID-19. During 2020, the Company received $6.6 million of payments (“Relief Funds”) under the CARES Act, of which $6.2 million were recorded in other income, net in the consolidated statement of operations and comprehensive loss for the year ended December 31, 2020, and $0.4 million were recorded in other accrued liabilities in the 2020 consolidated balance sheet pending the achievement of certain requirements. The Relief Funds do not have to be repaid.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

December 31, 2020 and 2019

The CARES Act provided for the deferred payment of the employer portion of Social Security taxes between March 27, 2020 and December 31, 2020, with 50% of the deferred amount due December 31, 2021 and the remaining 50% due December 31, 2022. The Company elected to defer depositing the employer’s share of Social Security taxes beginning in April 2020. As of December 31, 2020, $5.7 million related to these deferred payments are included in accrued compensation and related expenses in the consolidated balance sheet.

The components of accumulated other comprehensive loss are as follows:

(in thousands)	Unrealized Loss on Hedging Transactions			Foreign Currency Translation Adjustments			Total
Balance at December 31, 2018	$	(4,259	)	$	(10	)	$	(4,269	)
Other comprehensive loss before reclassifications		(9,439	)		(34	)		(9,473	)
Amounts reclassified into earnings		1,389			—			1,389
Balance at December 31, 2019		(12,309	)		(44	)		(12,353	)
Other comprehensive loss before reclassifications		(6,325	)		1			(6,324	)
Amounts reclassified into earnings		5,812			—			5,812
Balance at December 31, 2020	$	(12,822	)	$	(43	)	$	(12,865	)

The income tax effects on derivative losses included in other comprehensive loss during the years ended December 31, 2020 and 2019 were immaterial.

7. Long-Term Debt

Long-term debt consists of the following:

	December 31,
(in thousands)	2020			2019
Term loan facilities	$	485,425		$	504,750
Revolving loan facility		80,000			37,000
Equipment debt		59,452			59,201
Obligations under capital leases		8,009			17,221
Debt discount and deferred financing costs, net		(37,453	)		(18,480	)
		595,433			599,692
Less current portion		42,433			46,291
Long-term debt	$	553,000		$	553,401

Credit Agreements

On October 24, 2017, the Company established two credit facilities. The Company entered into a first lien credit agreement with JPMorgan Chase Bank, NA (“JPM”), as administrative agent, Bank of America, NA and Barclays Bank PLC, as syndication agents, and other lenders party thereto (the “First Lien Credit Agreement”). The Company also entered into a second lien credit agreement with Wilmington Trust, National Association, as administrative agent, JPM, as syndication agent, and other lenders party thereto (the “Second Lien Credit Agreement”). Collectively, the two agreements are referred to as the “Credit Agreements” herein. Under the Credit Agreements, the lenders provided the Company with: (i) a senior first lien credit facility in an aggregate principal amount of $530.0 million, consisting of a $405.0 million, six-year term loan facility and a $125.0 million, five-year revolving loan facility, including a $10.0 million sublimit for letters of credit; (ii) a $120.0 million, six-and one-half year second lien term loan facility; and (iii) uncommitted incremental loan facilities of $100.0 million, which are shared between the First Lien Credit Agreement and Second Lien Credit Agreement.

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December 31, 2020 and 2019

Borrowings under the First Lien Credit Agreement bear interest through maturity at a variable rate based upon, at the Company’s option, either the LIBOR or the base rate (which is the highest of (a) the administrative agent’s prime rate, (b) the rate which is one-half of 1.00% in excess of the New York Federal Reserve Bank Rate (“NYFRB Rate”) (as defined in the First Lien Credit Agreement), or (c) the rate which is 1.00% in excess of the one-month LIBOR rate), plus, in each case, an applicable margin. With respect to the first lien term loan facility, the applicable margin for LIBOR loans is 4.50% per annum, with a LIBOR floor of 1.00%, and with respect to the first lien revolving loan facility, the applicable margin for LIBOR loans ranges from 3.00% to 4.25% per annum, based on the applicable leverage ratio. The applicable margin for base rate loans under the first lien term loan facility is 3.50% per annum and under the first lien revolving loan facility ranges from 2.00% to 3.25% per annum, based on the applicable leverage ratio. The Company is required to pay a commitment fee which ranges from 0.40% to 0.50% per annum, based on the applicable leverage ratio, on the undrawn portion available under the first lien revolving loan facility and variable per annum fees with respect to outstanding letters of credit.

Borrowings under the Second Lien Credit Agreement bear interest through maturity at a variable rate based upon, at the Company’s option, either the LIBOR or the base rate (which is the highest of (a) the administrative agent’s prime rate, (b) the rate which is one-half of 1.00% in excess of the Federal Funds Effective Rate (as defined in the Second Lien Credit Agreement), or (c) the rate which is 1.00% in excess of the one-month LIBOR rate), plus, in each case, an applicable margin. With respect to the second lien term loan facility, the applicable margin is 10.00% per annum for LIBOR loans, with a LIBOR floor of 1.00%, and 9.00% for base rate loans.

Obligations under the Credit Agreements are guaranteed by substantially all the Company’s direct and indirect domestic and foreign subsidiaries. The obligations under the Credit Agreements and the guarantees are secured by a lien on substantially all tangible and intangible property and by a pledge of all of the shares of stock and limited liability company interests of the Company’s direct and indirect subsidiaries, subject to limited exceptions. In the case of subsidiaries that are either (i) a direct Material Foreign Subsidiary or (ii) a direct CFC Holdco (as defined in the First Lien Credit Agreement), up to but not exceeding 65% of the total shares will be pledged as security.

In addition to other covenants, the Credit Agreements place limits on the ability of the Company and its subsidiaries to declare dividends or redeem or repurchase capital stock, prepay, redeem or purchase debt, incur liens and engage in sale-leaseback transactions, make loans and investments, incur additional indebtedness, amend or otherwise alter debt and other material agreements, engage in mergers, acquisitions and asset sales, transact with affiliates and alter the business conducted by the Company and its subsidiaries.

Prior to the amendment discussed below, the Credit Agreements contained financial covenants, including a maximum leverage ratio and minimum fixed charge coverage ratio, and other customary affirmative and negative covenants and events of default. Under the First Lien Credit Agreement, the leverage ratio covenant required the Company to maintain a maximum Consolidated Leverage Ratio (as defined in the agreement) that ranged from 5.00 to 1.00 to 4.50 to 1.00. Under the Second Lien Credit Agreement, the Consolidated Leverage Ratio covenant ranged from 5.50 to 1.00 to 5.00 to 1.00. Under the First Lien Credit Agreement, the minimum Consolidated Fixed Charge Coverage Ratio (as defined in the First Lien Credit Agreement) was 1.50. Failure to comply with the covenants in the Credit Agreements could permit the lenders under the Credit Agreements to declare all amounts borrowed under the Credit Agreements, together with accrued interest and fees, to be immediately due and payable and to terminate all commitments under the Credit Agreements. The Company was in compliance with all such covenants as of December 31, 2019.

The outstanding principal balance of the term loans under the First Lien Credit Agreement is subject to repayment in quarterly installments. No amortization payment is required with respect to the first lien revolving loan facility or the second lien term loan facility. The Company is required to make mandatory prepayments of term loans under the Credit Agreements, subject to specified exceptions, from Excess Cash Flow (as defined in the Credit Agreements) and with the proceeds of asset sales, debt issuances and specified other events.

2020 Amendment to Credit Agreements

The Company has historically relied on cash flows from operations as well as borrowings under its credit facilities as the primary sources of liquidity. The Credit Agreements contain certain financial covenants, including a Consolidated Leverage Ratio and a Consolidated Fixed Charge Coverage Ratio. Due to the unfavorable impact of COVID-19 on the Company’s business operations, the Company was not in compliance with the Consolidated Leverage Ratio for the fiscal quarters ended March 31, 2020

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

December 31, 2020 and 2019

and June 30, 2020. On July 10, 2020 and August 10, 2020, the Company obtained waivers for the Specified Defaults and Related Event of Default (as defined in the waivers) that occurred pursuant to the Credit Agreements. The waived covenants included, among others, the Consolidated Leverage Ratio for the fiscal quarters ended March 31, 2020 and June 30, 2020 and the timely delivery of audited financial statements and other information.

On October 13, 2020, the Company entered into amendments to the Credit Agreements that provided for, among other things, an amendment to the Consolidated Leverage Ratio and the Consolidated Fixed Charge Coverage Ratio commencing for the fiscal quarter ended September 30, 2020. In addition, a new monthly financial covenant was established to provide for a Minimum Liquidity (as defined in the amendments). The required Minimum Liquidity is $40 million and $32 million for the First Lien Credit Agreement and the Second Lien Credit Agreement, respectively. Commencing on November 30, 2021, the required Minimum Liquidity is reduced to $32 million and $25 million for the First Lien Credit Agreement and the Second Lien Credit Agreement, respectively.

Covenants under the amended First Lien Credit Agreement require the Company to maintain a maximum Consolidated Leverage Ratio that ranges from 7.00 to 1.00 to 6.00 to 1.00, as well as a minimum Consolidated Fixed Charge Coverage Ratio that ranges from 1.25 to 1.00 to 1.50 to 1.00. Under the amended Second Lien Credit Agreement, the maximum Consolidated Leverage Ratio covenant ranges from 7.50 to 1.00 to 6.50 to 1.00. The Company was in compliance with all such covenants as of December 31, 2020.

Principal payments due under the amended first lien term loan are subject to deferral of 40% of the principal payment, under certain conditions, at the option of the Company for payments due through December 31, 2020; thereafter, principal payments are dependent upon the Company’s Liquidity (as defined in the amendment). Borrowings under the amended first lien term loan bear additional interest ranging from 1% to 4% per annum and may be payable-in-kind (subject to certain conditions), and added to the outstanding principal balance at the option of the Company. During 2020, interest payable-in-kind of $0.8 million was added to the principal balance of the first lien term loan. The amended first lien revolving loan facility bears interest at a rate of 0.25% per annum higher than the terms in the original agreement and added a LIBOR floor of 1%.

Borrowings under the amended Second Lien Credit Agreement bear additional interest of 1% per annum. Interest aggregating 10% per annum for LIBOR loans and 9% for base rate loans is payable-in-kind (subject to certain conditions) and added to the outstanding principal balance at the option of the Company. During 2020, interest payable-in-kind of $2.1 million was added to the principal balance of the second lien term loan.

The amendments to the Credit Agreements provide for a Capital Event (as defined in the amendments), which requires the Company to (i) repay at least $75 million of the outstanding first lien term loan principal balance (from sources specified in the amendment) on or prior to November 15, 2021, or (ii) have achieved a Consolidated Leverage Ratio of 4.50 to 1.00 or less as of any single fiscal quarter ending prior to November 1, 2021. In connection with the amendments, the Company paid a 1% consent fee to the consenting lenders under the Credit Agreements.

In connection with the amendments to the Credit Agreements, the Company’s immediate parent company, THAIHOT Investment Company US Limited (“THAIHOT”) issued warrants to purchase shares of THAIHOT common stock for the benefit of the lenders of the first lien term loan facility and the second lien term loan facility. The warrants granted represent 25% of the shares of THAIHOT’s common stock (“Initial Warrant Grant”) at a purchase price per share of $0.01. The warrants may be repurchased by THAIHOT on or prior to a Capital Event (as defined in the amendments to the Credit Agreements) for $25 million. If the repurchase occurs after a Capital Event, the price will be the then-current fair market value as determined by an independent third-party appraisal firm. In the event the Company does not complete a Capital Event by November 15, 2021 (“Triggering Event”), THAIHOT will be required to issue warrants to purchase additional shares of THAIHOT common stock at a price per share of $0.01. The aggregate amount of warrants to be granted from the Initial Warrant Grant and the Triggering Event represents 95% of the shares of THAIHOT’s common stock. All warrants expire seven years from the original issue date.

Based on a third-party valuation of the fair value of the warrants, the Company recorded $19.7 million in additional paid-in capital as a contribution from THAIHOT during 2020. The fair value of the warrants was determined with a Monte Carlo Simulation model utilizing the following estimates and key assumptions:

24

ALLIANCE HEALTHCARE SERVICES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

December 31, 2020 and 2019

Discount rate		10.5	%
Common equity value	$	144 million
Expected daily return		0.02	%
EBITDA multiple		7.1x
Volatility		2.6	%

As a result of the amendment, during the year ended December 31, 2020, the Company recorded a $14.6 million loss on extinguishment or modification of debt, based on an analysis of the underlying lender parties. The Company incurred fees totaling $39.7 million (including $19.7 million fair value of the warrants), of which $27.1 million were capitalized and are being amortized using the effective interest method as interest expense over the term of the Credit Agreements.

As of December 31, 2020, the Company had $39.5 million of available borrowings under its revolving loan facility, net of $80.0 million outstanding on the revolving loan facility and $5.5 million outstanding in letters of credit.

Equipment Debt

Equipment debt is composed of financing arrangements between the Company and various lenders. Equipment debt obligations are collateralized by equipment and have interest rates ranging from 1.55% to 8.75%. These debt obligations are generally payable in various monthly principal and interest payments through 2031. Certain of the Company’s financing arrangements consisted of interest-only equipment lines of credit. Upon completion of the related equipment projects, amounts advanced under these equipment line of credit arrangements were converted into fixed term loans. All interest-only equipment lines of credit expired during 2020 and the Company has no borrowings outstanding under these arrangements as of December 31, 2020.

Certain of the Company’s equipment debt obligations are subject to covenants with which it must comply on a quarterly or annual basis. The Company was in compliance with all such covenants as of December 31, 2020.

Obligations Under Capital Leases

Obligations under capital leases are collateralized by equipment and have interest rates ranging from 3.72% to 6.54%. These obligations are payable in various monthly principal and interest payments through 2024.

Principal Payments on Debt

The annual principal maturities of long-term debt and obligations under capital leases as of December 31, 2020 are as follows:

(in thousands)	Term Loan Facilities		Revolving Loan Facility		Equipment Debt		Obligations Under Capital Leases			Total
Year ending December 31:
2021	$	21,500	$	—	$	15,310	$	5,851		$	42,661
2022		20,250		80,000		13,599		1,691			115,540
2023		321,599		—		13,896		628			336,123
2024		122,076		—		9,497		164			131,737
2025		—		—		4,827		—			4,827
Thereafter		—		—		2,323		—			2,323
Total principal maturities, including imputed interest on obligations under capital leases	$	485,425	$	80,000	$	59,452		8,334			633,211
Less: imputed interest on obligations under capital leases								(325	)		(325	)
Total principal maturities, excluding imputed interest on obligations under capital leases							$	8,009		$	632,886

25

ALLIANCE HEALTHCARE SERVICES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

December 31, 2020 and 2019

8. Derivatives and Cash Flow Hedges

The Company has multiple interest rate swap agreements to hedge the future cash interest payments on portions of its variable-rate bank debt in order to avoid volatility in operating results due to fluctuations in interest rates.

The Company established five single-year interest rate swap agreements (“JPM Interest Rate Swaps”) with JPM, the administrative agent of the First Lien Credit Agreement. The JPM Interest Rate Swaps, which mature on June 30, 2019, June 30, 2020, June 30, 2021, June 30, 2022, and June 30, 2023, respectively, have notional amounts of $300.0 million each and were designated as cash flow hedges of future cash interest payments associated with a portion of the Company’s variable rate debt included in the Credit Agreements (see Note 7). Under the terms of these swap agreements, the Company receives one-month LIBOR and pays fixed rates ranging from 2.483% to 3.167% on the notional amounts. The net effect of the hedges is to record interest expense at these fixed rates plus the applicable margin of the underlying debt.

At December 31, 2020, the Company had interest rate swap agreements to hedge $307.9 million of its variable-rate bank debt or approximately 54% of total variable-rate debt. At December 31, 2019, the Company had interest rate swap agreements to hedge $309.3 million of its variable-rate bank debt or approximately 55% of total variable-rate debt. The amount that the Company expects to reclassify from accumulated other comprehensive loss to interest expense over the next twelve months is $6.2 million.

A summary of the Company’s derivative liabilities is as follows:

								Fair Value Liabilities
(dollars in thousands)	Notional Amount		Fixed Payment Rate			Maturity Date		December 31, 2020		December 31, 2019
Derivatives designated as cash flow hedging instruments:
JPM Interest Rate Swaps; one-month LIBOR interest rate swaps	$	300,000		3.101% –3.167	%		June 2021 –June 2023	$	14,191	$	13,756
Other one-month LIBOR interest rate swaps		7,894		0.860% –3.690	%		September 2021 – October 2024		161		82
Total derivative liabilities								$	14,352	$	13,838

The following table summarizes the effect of derivative instruments and the line items in the consolidated statements of operations and comprehensive loss for cash flow hedges:

	Amount of Loss Recognized in OCI on Derivatives					Amount of Loss Reclassified from Accumulated OCI into Income
	Year Ended December 31,				Location of Loss Reclassified from Accumulated OCI	Year Ended December 31,
(in thousands)	2020		2019		into Income	2020		2019
Interest rate contracts	$	6,325	$	9,439	Interest expense, net	$	5,812	$	1,389
Total	$	6,325	$	9,439		$	5,812	$	1,389

26

ALLIANCE HEALTHCARE SERVICES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

December 31, 2020 and 2019

The following table presents the effect of cash flow hedge accounting on the consolidated statements of operations and comprehensive loss:

	Year Ended December 31,
	2020		2019
(in thousands)	Interest Expense, net		Interest Expense, net
Total amounts of income and expense line items presented in the statement of operations and comprehensive loss in which the effects of cash flow hedges are recorded	$	56,481	$	56,187
The effects of fair value and cash flow hedging
Loss on cash flow hedging relationships:
Interest rate contracts:
Amount of loss reclassified from Accumulated OCI into Income	$	5,812	$	1,389

Non-designated derivative instruments were immaterial to the Company’s consolidated financial statements as of and for the years ended December 31, 2020 and 2019.

9. Equity and Related Transactions

Capital Contributions

During 2020, the Company recorded a capital contribution of $19.7 million related to the fair value of the warrants issued by THAIHOT in connection with the 2020 Amendment to Credit Agreements (see Note 7).

During 2019, the Company received a capital contribution of $8.5 million from its parent company.

Stock Appreciation Rights

During 2018, the Company adopted a long-term incentive program (“2018 LTIP”) pursuant to which certain key management personnel and non-employee consultants are eligible to receive Stock Appreciation Rights (“SARs”). SARs have 10-year terms and vest in three equal installments on each of the three anniversaries following the vesting commencement date. SARs are granted with a base price of not less than 100% of the fair value of the Company’s common stock at the date of grant. Once vested, SARs can be exercised to acquire shares of the Company’s common stock during the specified annual exercise period. The number of shares to be issued upon exercise of the SARs is based on the aggregate appreciation of the SARs value, calculated as the difference between the fair market value of the Company’s common stock as of the specified valuation date preceding the exercise date and the SARs base price. SARs are subject to accelerated vesting provisions upon certain change in control and other specified events. Upon termination of employment or service, unvested awards are generally cancelled and vested awards may be exercised for a limited period of time. Under the plan, up to 750,000 SARs may be granted and SARs that are exercised, forfeited or canceled or otherwise not paid will not again be available for grant under the plan.

27

ALLIANCE HEALTHCARE SERVICES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

December 31, 2020 and 2019

The following table summarizes the Company’s SARs activity:

	Number of SARs			Weighted Average Grant Date Base Price
Outstanding and unvested at December 31, 2018		490,104		$	9.75
Vested		(168,412	)	$	9.75
Forfeited		(70,435	)	$	9.75
Outstanding and unvested at December 31, 2019		251,257		$	9.75
Vested		(123,247	)	$	9.75
Forfeited		(6,353	)	$	9.75
Outstanding and unvested at December 31, 2020		121,657		$	9.75

In connection with the 2018 LTIP program, 29,935 SARs were exercised during the year ended December 31, 2019 and, as a result, the Company issued 1,869 shares of common stock in full satisfaction of the exercised SARs. No SARs were exercised during the year ended December 31, 2020.

The Company engaged a third-party valuation firm to estimate the fair value of its common stock as of the specified valuation date preceding the 2019 exercise date, which used a combination of the income and market approach. The valuation utilized the following Level 3 estimates and assumptions in its analyses:

Discount rate	12.0	%
Perpetual growth rate	2.0	%
Tax rate	25.0	%
Risk-free interest rate	3.5	%
Peer company beta	0.8
Revenue multiple	1.4x
EBITDA multiple	6.8x

As of December 31, 2020, the Company had total unrecognized compensation cost of $0.1million related to non-vested awards, which the Company expects to recognize over a weighted-average period of 0.25 years.

Share-based compensation expense related to the SARs was $0.5 million for each of the years ended December 31, 2020 and December 31, 2029, and was recorded in selling, general and administrative expenses in the consolidated statements of operations and comprehensive loss.    

Other Equity Transactions

During 2019, the Company entered into an agreement with one of its joint venture partners to forego a mandatory redemption provision allowing the noncontrolling interest holder to sell 10% of its noncontrolling interest to Alliance as part of the terms of the original joint venture acquisition. The fair value of the mandatory redemption provision was estimated by a third-party appraisal at $2.4 million and was recorded as a liability. Upon the mutual agreement to forego the redemption provision, the liability was determined to be extinguished and the Company reclassified $2.4 million from other liabilities to additional paid-in capital during the year ended December 31, 2019.

10. Commitments and Contingencies

Purchase Commitments

The Company has certain binding purchase commitments primarily for the purchase of equipment from various suppliers. As of December 31, 2020, the obligations for these future purchase commitments totaled $37.8 million, of which $29.5 million is expected to be paid in 2021 and $8.3 million is expected to be paid in 2022.

28

ALLIANCE HEALTHCARE SERVICES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

December 31, 2020 and 2019

Leases

The Company leases office and warehouse space and certain equipment under non-cancelable operating leases. The office and warehouse leases generally call for minimum monthly payments plus maintenance and inflationary increases. The future minimum payments under operating leases are as follows:

(in thousands)
Year ending December 31:
2021	$	16,198
2022		15,771
2023		15,395
2024		13,982
2025		9,683
Thereafter		42,727
	$113,756

Rent expense is recognized on a straight-line basis over the initial lease term and those renewal periods that are reasonably assured as determined at lease inception. The Company’s total rental expense, which includes short-term equipment rentals, for the years ended December 31, 2020 and 2019 was $20.0 million and $22.2 million, respectively.

Guarantees and Indemnities

The Company has applied the disclosure provisions of ASC 460, “Guarantees,” to its agreements that contain guarantee or indemnification clauses. These disclosure provisions expand those required by ASC 440, “Commitments,” and ASC 450, “Contingencies,” by requiring a guarantor to disclose certain types of guarantees, even if the likelihood of requiring the guarantor’s performance is remote. The following is a description of arrangements in which the Company is the guarantor or indemnifies a party.

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. At December 31, 2020, the Company has determined that no liability is necessary related to these guarantees and indemnities.

Other Matters

The Company from time to time is involved in routine litigation and regulatory matters incidental to the conduct of its business. The Company believes that resolution of such matters will not have a material adverse effect on its consolidated financial statements.

29

ALLIANCE HEALTHCARE SERVICES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

December 31, 2020 and 2019

11. Supplemental Statement of Operations Information

Restructuring charges of $1.1 million for the year ended December 31, 2020 consist of exit costs primarily associated with leased facilities that the Company ceased using and other costs. Restructuring charges of $6.2 million for the year ended December 31, 2019 consist of exit costs of $4.8 million and other costs associated with restructuring activities of $1.4 million. The exit costs are composed primarily of costs associated with leased facilities that the Company ceased using, sublease losses, lease termination costs, and other costs.

Activity and liability balances for exit costs are as follows:

(in thousands)	Facility			Contract Termination and Other			Total
Balance at December 31, 2018	$	3,859		$	—		$	3,859
Charged to costs and expenses		3,935			847			4,782
Non-cash adjustments		185			295			480
Payments		(1,916	)		(1,142	)		(3,058	)
Balance at December 31, 2019		6,063			—			6,063
Charged to costs and expenses		1,124			—			1,124
Non-cash adjustments		167			—			167
Payments		(1,800	)		—			(1,800	)
Balance at December 31, 2020	$	5,554		$	—		$	5,554

The unpaid exit costs are expected to be paid over the terms of the related agreements through 2025.

Impairment charges totaled $29.6 million for the year ended December 31, 2020 and are composed of a $19.0 million goodwill impairment charge and a $10.0 million intangible asset impairment charge related to the Company’s Interventional reporting unit (see Note 5), and a $0.6 million charge related to certain long-term assets that were deemed unrecoverable. Impairment charges totaled $5.4 million for the year ended December 31, 2019 and are composed of a $3.9 million goodwill impairment charge related to the Interventional reporting unit and $1.5 million of charges related to certain long-term assets that were deemed unrecoverable.

Severance and related costs of $1.9 million and $2.9 million for the years ended December 31, 2020 and 2019, respectively, represent costs associated with terminated employees and are generally paid in the year recorded. As of December 31, 2020, the unpaid balance totaled $0.4 million and is expected to be paid in 2021.

12. 401(k) Savings Plan

Under the Company’s 401(k) Savings Plan, eligible employees may contribute up to 50% of their annual compensation, subject to Internal Revenue Code limitations. During the years ended December 31, 2020 and 2019, the Company made matching contributions on behalf of its employees totaling $0.7 million and $1.7 million, respectively.

30

ALLIANCE HEALTHCARE SERVICES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

December 31, 2020 and 2019

13. Income Taxes

The income tax benefit shown in the consolidated statements of operations and comprehensive loss consists of the following:

	Year Ended December 31,
(in thousands)	2020			2019
Current:
Federal	$	5		$	6
State		(30	)		(70	)
Foreign		10			33
Total current		(15	)		(31	)
Deferred:
Federal		9			(5,729	)
State		270			(330	)
Total deferred		279			(6,059	)
Total income tax expense (benefit)	$	264		$	(6,090	)

Significant components of the Company’s net deferred tax assets (liabilities) are as follows:

	December 31,
(in thousands)	2020			2019
Net operating losses	$	39,806		$	32,248
Interest expense limitation		11,845			11,453
Accruals not currently deductible for income tax purposes		5,164			5,540
Derivative instruments		3,842			3,732
Deferred financing costs		2,177			(1,244)
Transaction costs		1,342			1,242
Basis differences in equipment		(25,659	)		(27,982	)
Basis differences associated with acquired investments		(9,644	)		(14,804	)
Basis differences in intangible assets		(5,252	)		(2,596	)
Other		1,067			868
Total deferred tax assets		24,688			8,457
Valuation allowance		(27,872	)		(11,362	)
Net deferred tax liabilities	$	(3,184	)	$	(2,905	)

A reconciliation of the total income tax benefit with the amount computed by applying the federal statutory tax rate to the loss before income taxes, earnings from unconsolidated investee, and noncontrolling interest is as follows:

	Year Ended December 31,
(in thousands)	2020			2019
U.S. federal tax benefit at statutory rates	$	(10,981	)	$	(6,696	)
State income taxes, net of federal benefit		(2,662	)		(2,240	)
Noncontrolling interest		(2,544	)		(3,918	)
Valuation allowance		15,643			6,488
Earnings from unconsolidated investee		268			276
Other		540			—
Income tax expense (benefit)	$	264		$	(6,090	)

As of December 31, 2020, the Company had net operating loss (“NOL”) carryforwards of $150.6 million and $134.7 million for federal and state income tax purposes, respectively. These loss carryforwards will expire at various dates from 2021 through 2039; however, $86.2 million of the federal NOL carryforward was generated after December 31, 2017 and has no expiration date.

31

ALLIANCE HEALTHCARE SERVICES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

December 31, 2020 and 2019

As of December 31, 2020, the Company recorded a valuation allowance of $27.9 million (an increase of $16.5 million in 2020) against its deferred tax assets, principally related to its net operating losses. Based on the Company’s earnings history and available objectively verifiable positive and negative evidence, the Company determined that it is more likely than not that a portion of its deferred tax assets will not be realized in the future.

As of December 31, 2020, the Company has provided a liability of $0.1 million for unrecognized tax benefits related to various federal and state income tax matters. The tax-effected amount that would reduce the Company’s effective income tax rate if recognized is $0.1 million.

A reconciliation of the beginning and ending amount of unrecognized tax benefits is as follows:

(in thousands)	2020			2019
Unrecognized tax benefits at January 1	$	112		$	140
Increases for positions taken in current year		23			25
Decreases for positions taken in a prior year		(2	)		—
Decreases for lapses in the applicable statute of limitations		(37	)		(53	)
Unrecognized tax benefits at December 31	$	96		$	112

The Company recognizes accrued interest and penalties related to unrecognized tax benefits in income tax benefit in the consolidated statements of operations and comprehensive loss. Accrued interest and penalties related to unrecognized tax benefits as of December 31, 2020 were not material.

The Company is subject to U.S. federal income tax as well as income tax of multiple state tax jurisdictions. The Company’s federal tax returns are currently open to audit under the statute of limitations by the Internal Revenue Service for the years ended December 31, 2017 through 2020. The Company’s state income tax returns are open to audit under the applicable statutes of limitations for the years ended December 31, 2016 through 2020. The Company does not anticipate a significant change to the total amount of unrecognized tax benefits within the next 12 months.

14. Investment in Unconsolidated Investee

The Company has direct ownership in one unconsolidated investee at December 31, 2020 and 2019. The Company owns 15% of this investee and provides management services under a management agreement with the investee. Revenues from the management agreement were $1.5 million for each of the years ended December 31, 2020 and 2019.

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 revenues and the reimbursement as revenue in the consolidated statements of operations and comprehensive loss. Reimbursed expenses related to the Company’s unconsolidated equity investee were $1.0 million for each of the years ended December 31, 2020 and 2019.

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

32

ALLIANCE HEALTHCARE SERVICES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

December 31, 2020 and 2019

15. Related Party Transactions

Through June 2020, the Company had arrangements with an affiliate of Tahoe to provide certain consulting services and for the licensing of the Company’s brand. During the year ended December 31, 2020 and 2019, the Company recognized revenues of $0.6 million and $1.5 million, respectively, in connection with these arrangements. As of December 31, 2019, the total amount due from Tahoe was $1.9 million and was included in accounts receivable in the consolidated balance sheet. During the year ended December 31, 2020, the Company wrote off the outstanding balance of $2.4 million due from Tahoe as it was deemed uncollectible.

16. Segment Information

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

	Year Ended December 31,
(in thousands)	2020		2019
Revenue:
MRI	$	165,808	$	197,586
PET/CT		120,387		135,549
Other radiology		22,595		32,158
Radiology		308,790		365,293
Oncology		141,754		143,127
Interventional		45,067		59,489
Corporate / Other		597		1,479
Total	$	496,208	$	569,388

Adjusted EBITDA represents net income before: income taxes; noncontrolling interest in subsidiaries; interest expense, net; depreciation expense; amortization expense; transaction costs; restructuring charges; impairment charges; severance and related costs; loss on extinguishment or modification of debt; legal matters and other expenses; share-based compensation; and other charges, net. 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:

	Year Ended December 31,
(in thousands)	2020			2019
Adjusted EBITDA(1):
Radiology	$	86,967		$	94,192
Oncology		52,198			44,076
Interventional		1,067			2,794
Corporate / Other		(14,443	)		(11,948	)
Total	$	125,789		$	129,114

(1) Adjusted EBITDA by segment includes inter-segment operating expense allocations from Corporate / Other to Radiology, Oncology and Interventional of $13.9 million, $5.7 million and $2.1 million, respectively, in 2020 and $18.2 million, $6.7 million and $2.6 million, respectively, in 2019.

33

ALLIANCE HEALTHCARE SERVICES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

December 31, 2020 and 2019

The reconciliation of loss before income taxes, earnings from unconsolidated investee, and noncontrolling interest to total Adjusted EBITDA is shown below:

	Year Ended December 31,
(in thousands)	2020			2019
Loss before income taxes, earnings from unconsolidated investee, and noncontrolling interest	$	(52,289	)	$	(31,885	)
Earnings from unconsolidated investee		1,276			1,317
Interest expense, net		56,481			56,187
Depreciation expense		54,870			59,113
Amortization expense		12,240			12,650
Transaction costs		1,358			12,944
Restructuring charges		1,124			6,216
Impairment charges		29,580			5,365
Severance and related costs		1,870			2,917
Loss on extinguishment or modification of debt		14,614			—
Legal matters and other expenses (included in “Selling, general and administrative expenses”)		6,465			3,320
Share-based compensation (included in “Selling, general and administrative expenses”)		475			507
Other charges (benefits), net (included in “Other income, net”)		(2,275	)		463
Total Adjusted EBITDA	$	125,789		$	129,114

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

	December 31,
(in thousands)	2020		2019
Identifiable assets:
Radiology	$	276,324	$	304,731
Oncology		225,196		227,768
Interventional		7,051		71,891
Corporate / Other		29,728		11,891
Total	$	538,299	$	616,281

34

EX-99.3

Exhibit 99.3

Alliance HealthCare Services, Inc.

Condensed Consolidated Financial Statements

March 31, 2021

ALLIANCE HEALTHCARE SERVICES, INC.

INDEX

	Page
Financial Statements (Unaudited):
Condensed Consolidated Balance Sheets as of March  31, 2021 and December 31, 2020		1
Condensed Consolidated Statements of Operations and Comprehensive Loss for the Three Months Ended March 31, 2021 and 2020		2
Condensed Consolidated Statements of Equity for the Three Months Ended March 31, 2021 and 2020		3
Condensed Consolidated Statements of Cash Flows for the Three Months Ended March 31, 2021 and 2020		4
Notes to Condensed Consolidated Financial Statements		6

ALLIANCE HEALTHCARE SERVICES, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

(Unaudited; in thousands, except share and per share amounts)

	March 31, 2021			December 31, 2020
ASSETS
Current assets:
Cash and cash equivalents	$	23,924		$	25,782
Accounts receivable, net of allowance for doubtful accounts of $1,679 in 2021 and $1,659 in 2020		70,292			68,786
Prepaid expenses		9,350			10,567
Other current assets		8,311			9,526
Total current assets		111,877			114,661
Property and equipment, net		159,859			165,558
Goodwill		93,996			93,996
Other intangible assets, net		137,141			139,631
Other assets		28,258			24,453
Total assets	$	531,131		$	538,299
LIABILITIES AND EQUITY
Current liabilities:
Accounts payable	$	21,924		$	25,365
Accrued compensation and related expenses		22,364			23,174
Current portion of long-term debt		37,490			36,810
Current portion of obligations under capital leases		4,398			5,623
Other accrued liabilities		42,924			43,171
Total current liabilities		129,100			134,143
Long-term debt, net of current portion		560,595			550,614
Obligations under capital leases, net of current portion		3,374			2,386
Other liabilities		24,491			25,889
Total liabilities		717,560			713,032
Commitments and contingencies
Stockholders’ deficit:
Common stock, $0.01 par value; 50,000,000 shares authorized; 19,251,869 issued and outstanding		193			193
Additional paid-in capital		78,200			78,090
Accumulated other comprehensive loss		(11,663	)		(12,865	)
Accumulated deficit		(330,424	)		(320,517	)
Total stockholders’ deficit		(263,694	)		(255,099	)
Noncontrolling interest		77,265			80,366
Total equity		(186,429	)		(174,733	)
Total liabilities and equity	$	531,131		$	538,299

See accompanying notes to the condensed consolidated financial statements.

1

ALLIANCE HEALTHCARE SERVICES, INC.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

AND COMPREHENSIVE LOSS

(Unaudited; in thousands)

	Three Months Ended March 31,
	2021			2020
Revenues	$	119,513		$	132,405
Costs and expenses:
Cost of revenues, excluding depreciation and amortization		73,033			85,517
Selling, general and administrative expenses		20,973			23,021
Transaction costs		704			514
Restructuring charges		609			136
Severance and related costs		129			537
Depreciation expense		12,721			13,860
Amortization expense		2,490			3,134
Interest expense, net		15,963			13,199
Other income, net		(780	)		(403	)
Total costs and expenses		125,842			139,515
Loss before income taxes, earnings from unconsolidated investee, and noncontrolling interest		(6,329	)		(7,110	)
Income tax expense		—			(38	)
Earnings from unconsolidated investee		317			309
Net loss		(6,012	)		(6,839	)
Less: Net income attributable to noncontrolling interest		3,895			4,727
Net loss attributable to Alliance HealthCare Services, Inc.	$	(9,907	)	$	(11,566	)
Comprehensive loss, net of taxes:
Net loss	$	(6,012	)	$	(6,839	)
Unrealized loss on hedging transactions, net of taxes		(404	)		(5,893	)
Reclassification adjustment for losses included in net loss, net of taxes		1,606			986
Foreign currency translation adjustment		—			(30	)
Comprehensive loss, net of taxes		(4,810	)		(11,776	)
Less: Comprehensive income attributable to noncontrolling interest		3,895			4,727
Comprehensive loss attributable to Alliance HealthCare Services, Inc.	$	(8,705	)	$	(16,503	)

See accompanying notes to the condensed consolidated financial statements.

2

ALLIANCE HEALTHCARE SERVICES, INC.

CONDENSED CONSOLIDATED STATEMENTS OF EQUITY

(Unaudited; in thousands, except share amounts)

	Common Stock				Additional Paid-In		Accumulated Other Comprehensive			Accumulated			Total Stockholders’			Noncontrolling			Total
	Shares		Amount		Capital		Income (Loss)			Deficit			Deficit			Interest			Equity
Balance at December 31, 2020		19,251,869	$	193	$	78,090	$	(12,865	)	$	(320,517	)	$	(255,099	)	$	80,366		$	(174,733	)
Share-based compensation		—		—		110		—			—			110			—			110
Other comprehensive income		—		—		—		1,202			—			1,202			—			1,202
Contributions from noncontrolling interest in subsidiaries		—		—		—		—			—			—			27			27
Distributions to noncontrolling interest in subsidiaries		—		—		—		—			—			—			(7,023	)		(7,023	)
Net income (loss)		—		—		—		—			(9,907	)		(9,907	)		3,895			(6,012	)
Balance at March 31, 2021		19,251,869	$	193	$	78,200	$	(11,663	)	$	(330,424	)	$	(263,694	)	$	77,265		$	(186,429	)

	Common Stock				Additional Paid-In		Accumulated Other Comprehensive			Accumulated			Total Stockholders’			Noncontrolling			Total
	Shares		Amount		Capital		Loss			Deficit			Deficit			Interest			Equity
Balance at December 31, 2019		19,251,869	$	193	$	60,196	$	(12,353	)	$	(257,108	)	$	(209,072	)	$	107,193		$	(101,879	)
Share-based compensation		—		—		111		—			—			111			—			111
Other comprehensive loss		—		—		—		(4,937	)		—			(4,937	)		—			(4,937	)
Distributions to noncontrolling interest in subsidiaries		—		—		—		—			—			—			(5,408	)		(5,408	)
Net income (loss)		—		—		—		—			(11,566	)		(11,566	)		4,727			(6,839	)
Balance at March 31, 2020		19,251,869	$	193	$	60,307	$	(17,290	)	$	(268,674	)	$	(225,464	)	$	106,512		$	(118,952	)

See accompanying notes to the condensed consolidated financial statements.

3

ALLIANCE HEALTHCARE SERVICES, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited; in thousands)

	Three Months Ended March 31,
	2021			2020
Operating activities:
Net loss	$	(6,012	)	$	(6,839	)
Adjustments to reconcile net loss to net cash provided by operating activities:
Depreciation and amortization		15,211			16,994
Amortization of deferred financing costs and accretion of discount on long-term debt		3,029			1,104
Provision for doubtful accounts		20			885
Distributions from unconsolidated investee		375			435
Earnings from unconsolidated investee		(317	)		(309	)
Non-cash interest expense		3,980			—
Other non-cash items, net		(400	)		(218	)
Changes in operating assets and liabilities:
Accounts receivable		(1,526	)		4,281
Prepaid expenses		1,217			1,776
Other assets		(410	)		(134	)
Accounts payable		(3,187	)		4,689
Accrued compensation and related expenses		(810	)		2,887
Other liabilities		534			1,209
Net cash provided by operating activities		11,704			26,760
Investing activities:
Purchases of property and equipment		(6,156	)		(3,803	)
Increase in deposits on equipment		(3,810	)		(4,405	)
Net proceeds from sale of assets		562			362
Other investing activities		1,341			32
Net cash used in investing activities	$	(8,063	)	$	(7,814	)

See accompanying notes to the condensed consolidated financial statements.

4

ALLIANCE HEALTHCARE SERVICES, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (CONTINUED)

(Unaudited; in thousands)

	Three Months Ended March 31,
	2021			2020
Financing activities:
Proceeds from revolving loan	$	16,000		$	39,000
Principal payments on revolving loan		(16,000	)		(11,000	)
Principal payments on term loan		(7,666	)		(5,063	)
Proceeds from equipment debt		15,820			7,894
Principal payments on equipment debt and capital lease obligations		(6,552	)		(6,182	)
Payments of deferred financing costs		(105	)		—
Contributions from noncontrolling interest in subsidiaries		27			—
Distributions to noncontrolling interest in subsidiaries		(7,023	)		(5,297	)
Net cash provided by (used in) financing activities		(5,499	)		19,352
Net increase (decrease) in cash and cash equivalents		(1,858	)		38,298
Cash and cash equivalents, beginning of period		25,782			15,145
Cash and cash equivalents, end of period	$	23,924		$	53,443
Supplemental disclosure of cash flow information:
Interest paid	$	9,502		$	12,190
Income taxes paid (refunded), net of (refunds) payments		(2,304	)		9
Supplemental disclosure of non-cash investing and financing activities:
Interest payable-in-kind on term loans		3,980			—
Capital lease obligations related to the purchase of equipment		1,919			—
Equipment purchases in accounts payable and other accrued liabilities		4,943			5,331
Distributions to noncontrolling interest in subsidiaries		—			111

See accompanying notes to the condensed consolidated financial statements.

5

ALLIANCE HEALTHCARE SERVICES, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

March 31, 2021

(Unaudited)

1. Basis of Presentation

The accompanying unaudited condensed consolidated financial statements have been prepared by Alliance HealthCare Services, Inc. (the “Company” or “Alliance”) 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 months ended March 31, 2021 are not necessarily indicative of the results that may be expected for the year ending December 31, 2021. 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, 2020 (“2020 Annual Report”).

The preparation of financial statements in conformity with GAAP requires management to make estimates, judgments and assumptions that affect the amounts reported in the condensed consolidated financial statements and accompanying notes. On an ongoing basis, the Company evaluates its estimates, including those related to revenue recognition, provision for the collectibility of accounts receivable, goodwill and other intangible assets, and assets acquired and liabilities assumed in connection with acquisitions. Actual results could differ from these estimates and such differences could affect the results of operations reported in future periods.

Pending Acquisition by Akumin Corp.

On June 25, 2021, the Company entered into a share purchase agreement (the “Share Purchase Agreement”) with Akumin Corp., a wholly-owned indirect subsidiary of Akumin Inc. Pursuant to the Share Purchase Agreement, Akumin Corp. will acquire all of the issued and outstanding common stock of Thaihot Investment Company US Limited, which owns 100% of the common stock of Alliance, from Thaihot Investment Co., LTD (the “Seller”). The aggregate purchase price payable to the Seller at closing is $820 million (the “Purchase Price”).

The transaction is subject to the receipt of certain regulatory approvals, as well as the satisfaction or waiver of other customary closing conditions. The Share Purchase Agreement provides for the payment by Akumin Corp. of a reverse break fee to the Seller equal to: (a) 5.0% of the Purchase Price in connection with the termination of the Share Purchase Agreement under certain circumstances, including a material breach by Akumin Corp. of any covenant, representation or warranty contained in the Share Purchase Agreement; and (b) 2.5% of the Purchase Price in connection with the termination of the Share Purchase Agreement because of a failure to obtain certain regulatory approvals by an agreed upon date.

The Company expects the transaction to be completed in the third quarter of 2021.

2. Recent Accounting Pronouncements

Accounting Pronouncements Recently Adopted

Intangibles - Goodwill and Other-Internal-Use Software

In August 2018, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2018-15, “Intangibles - Goodwill and Other-Internal-Use Software.” ASU 2018-15 aligns the requirements for deferring implementation costs incurred in a cloud computing arrangement that is a service contract with the requirements for capitalizing implementation costs incurred to develop or obtain internal-use software. This ASU is effective for the Company for fiscal years beginning after December 15, 2020, and interim periods within fiscal years beginning after December 15, 2021. Early adoption is permitted and can be applied either retrospectively or prospectively to all implementation costs incurred after the date of adoption. The Company adopted ASU 2018-15 on January 1, 2021 on a prospective basis. The adoption of the standard did not have a material impact on the Company’s consolidated financial statements.

6

ALLIANCE HEALTHCARE SERVICES, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

March 31, 2021

(Unaudited)

Recently Issued Accounting Pronouncements Not Yet Adopted

Leases

In February 2016, the FASB issued ASU 2016-02, “Leases,” to increase transparency and comparability among organizations by recognizing lease assets and lease liabilities on the balance sheet and disclosing key information about leasing arrangements. ASU 2016-02 supersedes the current standard. The primary difference between current guidance and ASU 2016-02 is the recognition of lease assets and lease liabilities by lessees for those leases classified as operating leases under previous GAAP. ASU 2016-02 also requires an entity to separate the lease components from the non-lease components (for example, maintenance services or other activities that transfer a good or service to the customer) in a contract. Only the lease components must be accounted for in accordance with this guidance. In November 2019, the FASB issued ASU 2019-10, “Financial Instruments—Credit Losses (Topic 326), Derivatives and Hedging (Topic 815), and Leases (Topic 842): Effective Dates.” ASU 2019-10 deferred the effective date for ASU 2016-02 by one year for smaller reporting companies, non-SEC filers and all other companies. Subsequently, in June 2020, the FASB issued ASU 2020-05, “Revenue from Contracts with Customers (Topic 606) and Leases (Topic 842),” which grants a one-year effective date deferral. Therefore, ASU 2016-02 is effective for the Company for fiscal years beginning after December 15, 2021, and interim periods within fiscal years beginning after December 15, 2022. Early adoption continues to be allowed. The Company is assessing the impact that the adoption of ASU 2016-02 may have on its consolidated financial statements.

Financial Instruments – Credit Losses

In June 2016, the FASB issued ASU 2016-13, “Financial Instruments—Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments,” which requires the measurement and recognition of expected credit losses for financial assets held based on historical experience, current conditions, and reasonable and supportable forecasts that affect the collectibility of the reported amount. In May 2019, the FASB issued ASU 2019-05, “Financial Instruments—Credit Losses (Topic 326): Targeted Transition Relief,” which provides additional implementation guidance on the previously issued ASU 2016-13. These ASUs are effective for the Company for fiscal years beginning after December 15, 2022. Early adoption is permitted. The Company is assessing the impact that the adoption of these ASUs may have on its consolidated financial statements.

Derivatives and Hedging and Reference Rate Reform

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,” which provides optional expedients and exceptions for applying GAAP principles to contracts, hedging relationships, and other transactions that reference LIBOR or another reference rate expected to be discontinued due to reference rate reform. This guidance was effective beginning on March 12, 2020, and can be adopted on a prospective basis no later than December 31, 2022, with early adoption permitted. In January 2021, the FASB issued ASU 2021-01, “Reference Rate Reform (Topic 848).” The objective of the new reference rate reform standard is to clarify the scope of Topic 848 and provide explicit guidance to help companies applying optional expedients and exceptions. These ASUs are effective immediately for all entities that have applied optional expedients and exceptions. The Company is assessing the impact, if any, that the adoption of these ASUs may have on its consolidated financial statements.

7

ALLIANCE HEALTHCARE SERVICES, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

March 31, 2021

(Unaudited)

3. Fair Value of Financial Instruments

Instruments 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 March 31, 2021								Fair Value as of December 31, 2020
(in thousands)	Total		Level 1		Level 2		Level 3		Total		Level 1		Level 2		Level 3
Financial liabilities:
Interest rate contracts (included in other accrued liabilities)	$	6,261	$	—	$	6,261	$	—	$	6,196	$	—	$	6,196	$	—
Interest rate contracts (included in other liabilities)		6,888		—		6,888		—		8,156		—		8,156		—
Total financial liabilities	$	13,149	$	—	$	13,149	$	—	$	14,352	$	—	$	14,352	$	—

The Company’s derivative instruments are primarily pay-fixed, receive-variable interest rate swaps based on the London interbank offered rate (“LIBOR”) swap rate (see Note 5). The Company has elected to use the income approach to value these derivatives, using observable Level 2 market expectations at the measurement date and standard valuation techniques to convert future amounts to a single present amount assuming that participants are motivated but not compelled to transact. Level 2 inputs for interest rate swap valuations are limited to quoted prices for similar assets or liabilities in active markets (specifically futures contracts on LIBOR for the first two years) and inputs other than quoted prices that are observable for the asset or liability (specifically LIBOR cash and swap rates at commonly quoted intervals and implied volatilities for options). According to Accounting Standards Codification (“ASC”) 820, “Fair Value Measurement,” the fair value measurement of an asset or liability must reflect the nonperformance risk of the entity and the counterparty. Therefore, the impact of the counterparty’s creditworthiness and the Company’s creditworthiness has also been factored into the fair value measurement of the derivative instruments.

During the three months ended March 31, 2021, none of the Company’s instruments has transferred from one level to another.

Assets and Liabilities Recorded at Fair Value on a Non-Recurring Basis

The Company measures the fair value of certain assets on a non-recurring basis (utilizing Level 3 inputs), generally on an annual basis, in connection with acquisitions, or when events or changes in circumstances indicate that the carrying amount of the assets may not be recoverable. These assets include goodwill, intangible assets and long-lived assets (see Note 4). The Company did not make any such measurements during the three months ended March 31, 2021 or 2020.

4. Supplemental Balance Sheet Information

The components of property and equipment, net are as follows:

(in thousands)	March 31, 2021			December 31, 2020
Major equipment	$	701,629		$	716,849
Transportation and service equipment		18,065			18,075
Office equipment		102,586			102,445
Furniture and fixtures		3,488			3,470
Tenant improvements		49,871			50,087
Buildings and land		340			340
		875,979			891,266
Accumulated depreciation		(716,120	)		(725,708	)
	$	159,859		$	165,558

8

ALLIANCE HEALTHCARE SERVICES, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

March 31, 2021

(Unaudited)

Included in Major equipment and Transportation and service equipment as of March 31, 2021 are assets held under capital leases with a cost of $41.9 million and $2.8 million, respectively, and accumulated depreciation of $27.1 million and $1.4 million, respectively.

Included in Major equipment and Transportation and service equipment as of December 31, 2020 are assets held under capital leases with a cost of $42.6 million and $2.8 million, respectively, and accumulated depreciation of $24.9 million and $1.3 million, respectively.

Intangible assets consist of the following:

	Weighted Average Useful Life (in years)		March 31, 2021							December 31, 2020
(dollars in thousands)			Gross Carrying Amount		Accumulated Amortization			Intangible Assets, Net		Gross Carrying Amount		Accumulated Amortization			Intangible Assets, Net
Finite-lived intangible assets:
Customer contracts		15	$	202,047	$	(136,245	)	$	65,802	$	202,047	$	(134,065	)	$	67,982
Other		19		42,384		(25,280	)		17,104		42,384		(24,970	)		17,414
Total		16	$	244,431	$	(161,525	)		82,906	$	244,431	$	(159,035	)		85,396
Indefinite-lived intangible assets									54,235							54,235
Total other intangible assets								$	137,141						$	139,631

As of March 31, 2021, there were no indications of impairment of the Company’s intangible assets.

Other accrued liabilities consist of the following:

(in thousands)	March 31, 2021		December 31, 2020
MAAPP funds and Relief Funds	$	6,504	$	6,504
Interest rate contracts		6,261		6,196
Property and sales taxes		5,562		5,518
Accrued equipment purchases		3,323		4,274
Systems rental and maintenance costs		2,232		2,791
Other		19,042		17,888
Total	$	42,924	$	43,171

The Coronavirus Aid, Relief and Economic Security Act (“CARES Act”) provided for qualified healthcare providers to receive advanced payments under the existing Medicare Accelerated and Advance Payments Program (“MAAPP”) during the COVID-19 pandemic. Under this program, healthcare providers could choose to receive advanced payments for future Medicare services provided. During 2020, the Company applied for and received approval to receive MAAPP funds from Centers for Medicare & Medicaid Services. The Company recorded these payments as a liability until all performance obligations have been met, as the payments were made on behalf of patients before services were provided. MAAPP funds received are required to be applied to future Medicare billings commencing in April 2021, with all such remaining amounts required to be repaid by September 2022. Included in other accrued liabilities at March 31, 2021 and December 31, 2020 is $6.1 million of MAAPP funds.

In addition, the CARES Act provided waivers, reimbursement, grants and other funds to assist healthcare providers during the COVID-19 pandemic, including $100 billion in appropriations for the Public Health and Social Services Emergency Fund, also referred to as the Provider Relief Fund, to be used for preventing, preparing, and responding to the coronavirus, and for reimbursing eligible healthcare providers for lost revenues and healthcare related expenses that are attributable to COVID-19. During 2020, the Company received $6.6 million of payments (“Relief Funds”) under the CARES Act, of which $6.2 million were recorded in other income, net in the consolidated statement of operations and comprehensive loss for the year ended December 31, 2020, and $0.4 million were recorded in other accrued liabilities in the condensed consolidated balance sheets as of March 31, 2021 and December 31, 2020 pending the achievement of certain requirements. The Relief Funds do not have to be repaid.

9

ALLIANCE HEALTHCARE SERVICES, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

March 31, 2021

(Unaudited)

The CARES Act provided for the deferred payment of the employer portion of Social Security taxes between March 27, 2020 and December 31, 2020, with 50% of the deferred amount due December 31, 2021 and the remaining 50% due December 31, 2022. The Company elected to defer depositing the employer’s share of Social Security taxes beginning in April 2020. As of March 31, 2021 and December 31, 2020, $5.7 million related to these deferred payments are included in accrued compensation and related expenses in the consolidated balance sheet.

The components of accumulated other comprehensive loss are as follows:

(in thousands)	Unrealized Loss on Hedging Transactions			Foreign Currency Translation Adjustments			Total
Balance at December 31, 2020	$	(12,822	)	$	(43	)	$	(12,865	)
Other comprehensive loss before reclassifications		(404	)		—			(404	)
Amounts reclassified into earnings		1,606			—			1,606
Balance at March 31, 2021	$	(11,620	)	$	(43	)	$	(11,663	)

The income tax effects on derivative losses included in other comprehensive loss during the three months ended March 31, 2021 and 2020 were immaterial.

Long-term debt consists of the following:

(in thousands)	March 31, 2021			December 31, 2020
Term loan facilities	$	481,739		$	485,425
Revolving loan facility		80,000			80,000
Equipment debt		70,875			59,452
Obligations under capital leases		7,772			8,009
Debt discount and deferred financing costs, net		(34,529	)		(37,453	)
		605,857			595,433
Less current portion		41,888			42,433
Long-term debt	$	563,969		$	553,000

Certain of the Company’s debt obligations are subject to covenants with which it must comply on a quarterly or annual basis. The Company’s equipment debt is composed of financing arrangements with various lenders. The Company was in compliance with all such covenants as of March 31, 2021, except for one covenant in an agreement between an equipment lender and one of the Company’s controlled joint ventures. The equipment debt outstanding under this arrangement as of March 31, 2021 was $7.1 million. A waiver was obtained from the equipment lender for the violation of the minimum debt service coverage ratio for the trailing 12-month period as of March 31, 2021.

5. Derivatives and Cash Flow Hedges

The Company has multiple interest rate swap agreements to hedge the future cash interest payments on portions of its variable-rate bank debt in order to avoid volatility in operating results due to fluctuations in interest rates.

The Company established five single-year interest rate swap agreements (“JPM Interest Rate Swaps”) with JPMorgan Chase Bank, NA, the administrative agent of the First Lien Credit Agreement. The JPM Interest Rate Swaps, which mature on June 30, 2019, June 30, 2020, June 30, 2021, June 30, 2022, and June 30, 2023, respectively, have notional amounts of $300.0 million each and were designated as cash flow hedges of future cash interest payments associated with a portion of the Company’s variable rate debt included in the Credit Agreements. Under the terms of these swap agreements, the Company receives one-month LIBOR and pays fixed rates ranging from 2.483% to 3.167% on the notional amounts. The net effect of the hedges is to record interest expense at these fixed rates plus the applicable margin of the underlying debt.

10

ALLIANCE HEALTHCARE SERVICES, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

March 31, 2021

(Unaudited)

As of March 31, 2021, the Company had interest rate swap agreements to hedge a total of $306.9 million of its variable-rate bank debt or approximately 54% of total variable-rate debt. At December 31, 2020, the Company had interest rate swap agreements to hedge $307.9 million of its variable-rate bank debt or approximately 54% of total variable-rate debt. The amount that the Company expects to reclassify from accumulated other comprehensive loss to interest expense over the next twelve months is $6.3 million.

A summary of the Company’s derivative liabilities is as follows:

								Fair Value Liabilities
(dollars in thousands)	Notional Amount		Fixed Payment Rate			Maturity Date		March 31, 2021		December 31, 2020
Derivatives designated as cash flow hedging instruments:
JPM Interest Rate Swaps; one-month LIBOR interest rate swaps	$	300,000		3.101	% –3.167%		June 2021 –June 2023	$	13,021	$	14,191
Other one-month LIBOR interest rate swaps		6,908		0.860% – 3.690%			September 2021 – October 2024		128		161
Total derivative liabilities								$	13,149	$	14,352

The following table summarizes the effect of derivative instruments and the line items in the condensed consolidated statements of operations and comprehensive loss for cash flow hedges:

	Amount of Loss Recognized in OCI on Derivatives				Location of Loss		Amount of Loss Reclassified from Accumulated OCI into Income
	Three Months Ended March 31,				Reclassified from Accumulated OCI		Three Months Ended March 31,
(in thousands)	2021		2020		into Income		2021		2020
Interest rate contracts	$	404	$	5,893		Interest expense, net	$	1,606	$	986
Total	$	404	$	5,893			$	1,606	$	986

The following table presents the effect of cash flow hedge accounting on the condensed consolidated statements of operations and comprehensive loss:

	Three Months Ended March 31,
	2021		2020
(in thousands)	Interest Expense, net		Interest Expense, net
Total amounts of income and expense line items presented in the statement of operations and comprehensive loss in which the effects of cash flow hedges are recorded	$	15,963	$	13,199
The effects of fair value and cash flow hedging
Loss on cash flow hedging relationships:
Interest rate contracts:
Amount of loss reclassified from Accumulated OCI into Income	$	1,606	$	986

Non-designated derivative instruments were immaterial to the Company’s condensed consolidated financial statements as of and for the three months ended March 31, 2021 and 2020.

11

ALLIANCE HEALTHCARE SERVICES, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

March 31, 2021

(Unaudited)

6. Stock Appreciation Rights

During 2018, the Company adopted a long-term incentive program (“2018 LTIP”) pursuant to which certain key management personnel and non-employee consultants are eligible to receive Stock Appreciation Rights (“SARs”). SARs have 10-year terms and vest in three equal installments on each of the three anniversaries following the vesting commencement date. SARs are granted with a base price of not less than 100% of the fair value of the Company’s common stock at the date of grant. Once vested, SARs can be exercised to acquire shares of the Company’s common stock during the specified annual exercise period. The number of shares to be issued upon exercise of the SARs is based on the aggregate appreciation of the SARs value, calculated as the difference between the fair market value of the Company’s common stock as of the specified valuation date preceding the exercise date and the SARs base price. SARs are subject to accelerated vesting provisions upon certain change in control and other specified events. Upon termination of employment or service, unvested awards are generally cancelled and vested awards may be exercised for a limited period of time. Under the plan, up to 750,000 SARs may be granted and SARs that are exercised, forfeited or canceled or otherwise not paid will not again be available for grant under the plan.

During the three months ended March 31, 2021, 121,657 SARs vested. No SARs were exercised during the three months ended March 31, 2021. Compensation costs associated with the SARs were not material during the three months ended March 31, 2021 and 2020.

As of March 31, 2021, a total of 383,381 SARs vested and there were no unvested SARs.

7. Commitments and Contingencies

Purchase Commitments

The Company has certain binding purchase commitments primarily for the purchase of equipment from various suppliers. As of March 31, 2021, the obligations for these future purchase commitments totaled $30.4 million, of which $21.9 million is expected to be paid during the remaining nine months of 2021 and $8.5 million is expected to be paid in 2022.

Leases

The Company leases office and warehouse space and certain equipment under non-cancelable operating leases. The office and warehouse leases generally call for minimum monthly payments plus maintenance and inflationary increases. As of March 31, 2021, future minimum payments under operating leases are as follows:

(in thousands)
Year ending December 31:
2021 (remaining nine months)	$	13,868
2022		17,573
2023		16,059
2024		13,682
2025		9,360
Thereafter		42,196
	$112,738

Rent expense is recognized on a straight-line basis over the initial lease term and those renewal periods that are reasonably assured as determined at lease inception. The Company’s total rental expense, which includes short-term equipment rentals, for the three months ended March 31, 2021 and 2020 was $4.5 million and $5.2 million, respectively.

Guarantees and Indemnities

The Company has applied the disclosure provisions of ASC 460, “Guarantees,” to its agreements that contain guarantee or indemnification clauses. These disclosure provisions expand those required by ASC 440, “Commitments,” and ASC 450, “Contingencies,” by requiring a guarantor to disclose certain types of guarantees, even if the likelihood of requiring the guarantor’s performance is remote. The following is a description of arrangements in which the Company is the guarantor or indemnifies a party.

12

ALLIANCE HEALTHCARE SERVICES, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

March 31, 2021

(Unaudited)

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. At March 31, 2021, the Company has determined that no liability is necessary related to these guarantees and indemnities.

Other Matters

The Company from time to time is involved in routine litigation and regulatory matters incidental to the conduct of its business. The Company believes that resolution of such matters will not have a material adverse effect on its condensed consolidated financial statements.

8. Supplemental Statement of Operations Information

The majority of the Company’s revenues are derived directly from hospitals and healthcare providers and are primarily for radiology and oncology services (“Wholesale”). To a lesser extent, revenues are generated from direct billings to third-party payers or patients, which are recorded net of contractual discounts, estimated uncollectible amounts associated with patients, and other arrangements for providing services at less than established patient billing rates (“Retail”). The following table summarizes the components of the Company’s revenues:

	Three Months Ended March 31,
	2021			2020
Wholesale:
Radiology		57	%		53	%
Oncology		16	%		15	%
		73	%		68	%
Retail:
Radiology		10	%		9	%
Oncology		13	%		12	%
Interventional		3	%		10	%
		26	%		31	%
Other		1	%		1	%
Total		100	%		100	%

13

ALLIANCE HEALTHCARE SERVICES, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

March 31, 2021

(Unaudited)

Restructuring charges of $0.6 million and $0.1 million for the three months ended March 31, 2021 and 2020, respectively, consist of exit costs primarily associated with leased facilities that the Company ceased using.

Activity and liability balances for exit costs are as follows:

	Three Months Ended March 31,
(in thousands)	2021			2020
Beginning balance	$	5,554		$	6,063
Charged to costs and expenses		609			136
Non-cash adjustments		54			154
Payments		(481	)		(607	)
Ending balance	$	5,736		$	5,746

The unpaid exit costs are expected to be paid over the terms of the related agreements through 2030.

Severance and related costs of $0.1 million and $0.5 million for the three months ended March 31, 2021 and 2020, respectively, represent costs associated with terminated employees and are generally paid in the year recorded. As of March 31, 2021 and December 31, 2020, the unpaid balance totaled $0.1 million and $0.4 million, respectively, and is expected to be paid during the remainder of 2021.

9. Investment in Unconsolidated Investee

The Company has direct ownership in one unconsolidated investee at March 31, 2021 and 2020. The Company owns 15% of this investee and provides management services under a management agreement with the investee. Revenues from the management agreement were $0.4 million for each of the three months ended March 31, 2021 and 2020.

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 revenues and the reimbursement as revenue in the condensed consolidated statements of operations and comprehensive loss. Reimbursed expenses related to the Company’s unconsolidated equity investee were $0.2 million and $0.3 million for the three months ended March 31, 2021 and 2020, respectively.

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

14

ALLIANCE HEALTHCARE SERVICES, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

March 31, 2021

(Unaudited)

10. Segment Information

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

	Three Months Ended March 31,
(in thousands)	2021		2020
Revenue:
MRI	$	42,782	$	44,436
PET/CT		32,033		31,248
Other radiology		6,558		6,794
Radiology		81,373		82,478
Oncology		34,412		36,096
Interventional		3,728		13,484
Corporate / Other		—		347
Total	$	119,513	$	132,405

Adjusted earnings before interest, income taxes, depreciation and amortization (“Adjusted EBITDA”) represents net income before: income taxes; noncontrolling interest in subsidiaries; interest expense, net; depreciation expense; amortization expense; transaction costs; restructuring charges; severance and related costs; legal matters and other expenses; share-based compensation; and other charges, net. 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:

	Three Months Ended March 31,
(in thousands)	2021			2020
Adjusted EBITDA(1) :
Radiology	$	20,681		$	17,080
Oncology		10,700			11,154
Interventional		343			274
Corporate / Other		(2,680	)		(2,325	)
Total	$	29,044		$	26,183

⁽¹⁾ Adjusted EBITDA by segment includes inter-segment operating expense allocations from Corporate / Other to Radiology, Oncology and Interventional of $5.0 million, $1.8 million and $0.2 million, respectively, during the three months ended March 31, 2021, and $4.3 million, $1.8 million and $0.6 million, respectively, during the three months ended March 31, 2020.

15

ALLIANCE HEALTHCARE SERVICES, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

March 31, 2021

(Unaudited)

The reconciliation of loss before income taxes, earnings from unconsolidated investee, and noncontrolling interest to total Adjusted EBITDA is shown below:

	Three Months Ended March 31,
(in thousands)	2021			2020
Loss before income taxes, earnings from unconsolidated investee, and noncontrolling interest	$	(6,329	)	$	(7,110	)
Earnings from unconsolidated investee		317			309
Interest expense, net		15,963			13,199
Depreciation expense		12,721			13,860
Amortization expense		2,490			3,134
Transaction costs		704			514
Restructuring charges		609			136
Severance and related costs		129			537
Legal matters and other expenses (included in “Selling, general and administrative expenses”)		2,233			1,447
Share-based compensation (included in “Selling, general and administrative expenses”)		110			111
Other charges, net (included in “Other income, net”)		97			46
Adjusted EBITDA	$	29,044		$	26,183

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

	March 31,		December 31,
(in thousands)	2021		2020
Identifiable assets:
Radiology	$	277,243	$	276,324
Oncology		222,100		225,196
Interventional		6,622		7,051
Corporate / Other		25,166		29,728
Total	$	531,131	$	538,299

11. Subsequent Event

On May 31, 2021, the Company, through its consolidated joint venture Alliance Interventional-Florida, LLC (“AHIP-FL”), sold its 60% ownership interest in substantially all of the assets and certain specified liabilities of AHIP-FL to Specialty Surgery Partners Center of Florida, LLC. AHIP-FL was the sole remaining business in the Company’s Interventional Division. The total consideration received for the sale was $3.6 million, consisting of $3.2 million in cash paid at closing and a $0.4 million promissory note that is payable in various monthly principal and interest payments through May 2024.

16

EX-99.4

Exhibit 99.4

UNAUDITED PRO FORMA COMBINED FINANCIAL INFORMATION

On June 25, 2021, Akumin Inc. (“Akumin” or the “Company”) announced that it entered into a definitive purchase agreement through one of its wholly own subsidiary to acquire Alliance HealthCare Services Inc. (“Alliance”) by acquiring all of the issued and outstanding equity interests of Alliance’s parent company, Thaihot Investment Company US Limited, for a purchase price of $757.4 million plus the assumption of approximately $62.6 million of Alliance’s outstanding equipment financing liabilities (the “Acquisition”). The Acquisition is expected to close in the third quarter of 2021.

The unaudited pro forma combined financial information, which has been prepared in accordance with Article 11 of Regulation S-X, is based on the respective historical consolidated financial statements of Akumin and Alliance for the periods referenced herein, and has been prepared to reflect the Acquisition and the financing structure established to fund the Acquisition, more fully described in Note 2. The unaudited pro forma combined statement of financial position has been prepared to give effect to the Acquisition and related financings as if they were completed on March 31, 2021. The unaudited pro forma combined statements of comprehensive loss for the year ended December 31, 2020 and for the three months ended March 31, 2021 and March 31, 2020 assume that the Acquisition and related financing arrangements were completed on January 1, 2020. Pro forma adjustments reflected in the pro forma financial statements are based on available information and certain assumptions that Akumin believes are reasonable and supportable, and do not reflect the cost of any integration activities or benefits from the Acquisition, including potential synergies that may be derived in future periods. The pro forma financial statements are presented for illustrative purposes only and do not necessarily reflect the actual results of operations of Akumin had the Acquisition occurred at the dates indicated or project the results of operations of Akumin for any future date or period.

The pro forma financial statements should be read in conjunction with the following documents:

• Akumin’s audited consolidated financial statements as of December 31, 2020 and 2019 and for the years then ended, and management’s discussion and analysis of financial condition and results of operations for the same periods;

• Alliance’s audited consolidated financial statements as of December 31, 2020 and 2019 and for the years then ended, and management’s discussion and analysis of financial condition and results of operations for the same periods;

• Akumin’s unaudited consolidated financial statements as of March 31, 2021 and 2020 and for the three-month periods then ended, and management’s discussion and analysis of financial condition and results of operations for the same periods; and

• Alliance’s unaudited consolidated financial statements as of March 31, 2021 and 2020 and for the three-month periods then ended, and management’s discussion and analysis of financial condition and results of operations for the same periods.

AKUMIN INC.

UNAUDITED PRO FORMA COMBINED STATEMENT OF FINANCIAL POSITION

AS AT MARCH 31, 2021

	Historical Financial Statements (Note 7)						Pro Forma Adjustments						Pro forma combined
(In US$’000)	Akumin			Alliance (Note 6)			Transaction accounting adjustments			Note
Current assets
Cash and cash equivalents		122,725			23,924			(715,035	)		4	(a)		72,748
								(23,924	)		4	(a)
								492,500			4	(b)
								10,221			4	(d)
								196,000			4	(e)
								(23,872	)		4	(c)
								(9,791	)		4	(g)
Accounts receivable		95,886			70,292									166,178
Prepaid expenses and other current assets		2,550			17,661									20,211
Total current assets		221,161			111,877			(73,901	)					259,137
Non-current assets
Property and equipment		79,208			159,859			171,904			4	(a)		410,971
Operating lease right-of-use assets		124,605			88,230									212,835
Goodwill		360,604			93,996			(93,996	)		4	(a)		866,207
								505,603			4	(a)
Intangible assets		6,098			137,141			329,983			4	(a)		473,222
Security deposits and other assets		4,325			25,255									29,580
Other investments		8,411			3,003									11,414
Total assets		804,412			619,361			839,593						2,263,366
Current liabilities
Accounts payable and accrued liabilities		43,006			86,554			(6,912	)		4	(a)		122,648
Current portion of finance lease liabilities		3,432			4,398									7,830
Current portion of operating lease liabilities		9,417			19,887									29,304
Current portion of long-term debt		411			37,490			(20,250	)		4	(a)		17,651
Earn-out liability		4,689			—									4,689
Total current liabilities		60,955			148,329			(27,162	)					182,122
Non-current liabilities
Finance lease liabilities		12,065			3,374									15,439
Operating lease liabilities		120,863			74,238									195,101
Long-term debt		467,480			560,595			(506,960	)		4	(a)		1,192,982
								492,500			4	(b)
								179,367			4	(e)
Other long-term liabilities		1,346			16,070			(6,845	)		4	(a)		10,571
Deferred tax liabilities		860			3,184			133,000			4	(a)		137,044
Total liabilities		663,569			805,790			263,901						1,733,260
Shareholders’ equity
Common shares and additional paid-in capital		161,392			78,393			(78,393	)		4	(a)		230,632
								42,386			4	(a)
								9,354			4	(d)
								17,500			4	(f)
Accumulated other comprehensive loss		—			(11,663	)		11,663			4	(a)		—
Accumulated deficit		(26,079	)		(330,424	)		330,424			4	(a)		(59,742	)
								(23,872	)		4	(c)
								(9,791	)		4	(g)
Equity attributable to shareholders of the Company		135,313			(263,694	)		299,271						170,890
Non-controlling interests		5,530			77,265			276,422			4	(a)		359,217
Total shareholders’ equity		140,843			(186,429	)		575,693						530,107
Total liabilities and shareholders’ equity		804,412			619,361			839,593						2,263,366

2

AKUMIN INC.

UNAUDITED PRO FORMA COMBINED STATEMENT OF COMPREHENSIVE LOSS

FOR THE YEAR ENDED DECEMBER 31, 2020

	Historical Financial Statements (Note 7)						Pro Forma Adjustments						Pro forma combined
(In US$’000)	Akumin			Alliance			Transaction accounting adjustments			Note
Revenue		251,283			496,208									747,491
Cost of operations, excluding depreciation and amortization		199,887			387,510									587,397
Depreciation and amortization		20,460			67,110			121,415			5	(a)		208,985
Operational financial instruments revaluation and other ( gains) losses		(3,908	)		5,812			(5,812	)		5	(c)		(3,908	)
Impairment charges		—			29,580									29,580
Income from operations		34,844			6,196			(115,603	)					(74,563	)
Other income and expenses
Interest expense		32,781			50,669			31,875			5	(b)		101,719
								(47,273	)		5	(c)
								23,876			5	(e)
								9,791			5	(f)
Loss on extinguishment or modification of debt		—			14,614			(14,614	)		5	(c)		—
Other financial instruments revaluation and other ( gains) losses		22,079			—									22,079
Settlement costs and other ( recoveries)		2,324			(8,156	)								(5,832	)
Acquisition-related costs		1,079			1,358			23,872			5	(d)		26,309
Earnings from unconsolidated investee		—			(1,276	)								(1,276	)
Income ( loss) before income taxes		(23,419	)		(51,013	)		(143,130	)					(217,562	)
					—
Income tax provision (benefit)		(5,751	)		264			(37,432	)		5	(f)		(42,919	)
Net income ( loss) for the period		(17,668	)		(51,277	)		(105,697	)					(174,642	)
Less: Net income attributable to noncontrolling interest		2,729			12,132									14,861
Net income ( loss) attributable to common shareholders		(20,397	)		(63,409	)		(105,697	)					(189,503	)
Comprehensive loss, net of taxes:
Net income (loss) for the period		(17,668	)		(51,277	)		(105,697	)					(174,642	)
Unrealized loss on hedging transactions, net of taxes		—			(6,325	)		6,325			5	(c)		—
Reclassification adjustment for losses included in net loss, net of taxes		—			5,812			(5,812	)		5	(c)		—
Foreign currency translation adjustment		—			1									1
Comprehensive loss, net of taxes		(17,668	)		(51,789	)		(105,184	)					(174,641	)
Less: Comprehensive income attributable to noncontrolling interest		2,729			12,132									14,861
Comprehensive loss attributable to common shareholders		(20,397	)		(63,921	)		(105,184	)					(189,502	)
Net income (loss) per share - basic and diluted (in $)		(0.29	)								5	(h)		2.16

3

AKUMIN INC.

UNAUDITED PRO FORMA COMBINED STATEMENT OF COMPREHENSIVE LOSS

FOR THE THREE MONTHS ENDED MARCH 31, 2021

	Historical Financial Statements (Note 7)						Pro Forma Adjustments						Pro forma combined
(In US$’000)	Akumin			Alliance			Transaction accounting adjustments			Note
Revenue		66,889			119,513									186,402
Cost of operations, excluding depreciation and amortization		53,551			94,006									147,557
Depreciation and amortization		5,576			15,211			31,921			5	(a)		52,708
Operational financial instruments revaluation and other ( gains) losses		90			1,606			(1,606	)		5	(c)		90
Income from operations		7,672			8,690			(30,315	)					(13,953	)
Other income and expenses
Interest expense		8,368			14,357			7,969			5	(b)		22,928
								(13,735	)		5	(c)
								5,969			5	(e)
Other financial instruments revaluation and other ( gains) losses		(3,366	)		—									(3,366	)
Settlement costs and other ( recoveries)		(24	)		(42	)								(66	)
Acquisition-related costs		1,279			704									1,983
Earnings from unconsolidated investee		—			(317	)								(317	)
Income ( loss) before income taxes		1,415			(6,012	)		(30,518	)					(35,115	)
Income tax provision (benefit)		281			—			(8,087	)		5	(g)		(7,806	)
Net income ( loss) for the period		1,134			(6,012	)		(22,431	)					(27,309	)
Less: Net income attributable to noncontrolling interest		453			3,895									4,348
Net income ( loss) attributable to common shareholders		681			(9,907	)		(22,431	)					(31,657	)
Comprehensive loss, net of taxes:
Net income (loss) for the period		1,134			(6,012	)		(22,431	)					(27,309	)
Unrealized gain (loss) on hedging transactions, net of taxes		—			(404	)		404			5	(c)		—
Reclassification adjustment for losses included in net loss, net of taxes		—			1,606			(1,606	)		5	(c)		—
Foreign currency translation adjustment		—			—									—
Comprehensive loss, net of taxes		1,134			(4,810	)		(23,633	)					(27,309	)
Less: Comprehensive income attributable to noncontrolling interest		453			3,895									4,348
Comprehensive loss attributable to common shareholders		681			(8,705	)		(23,633	)					(31,657	)
Net income (loss) per share - basic and diluted (in $)		0.01									5	(h)		(0.35	)

4

AKUMIN INC.

UNAUDITED PRO FORMA COMBINED STATEMENT OF COMPREHENSIVE LOSS

FOR THE THREE MONTHS ENDED MARCH 31, 2020

	Historical Financial Statements (Note 7)						Pro Forma Adjustments						Pro forma combined
(In US$’000)	Akumin			Alliance			Transaction accounting adjustments			Note
Revenue		71,262			132,405									203,667
Cost of operations, excluding depreciation and amortization		56,945			108,538									165,483
Depreciation and amortization		4,987			16,994			30,138			5	(a)		52,119
Operational financial instruments revaluation and other ( gains) losses		(6,267	)		986			(986	)					(6,267	)
Income from operations		15,597			5,887			(29,152	)					(7,668	)
Other income and expenses
Interest expense		7,463			12,213			7,969			5	(b)		32,103
								(11,302	)		5	(c)
								5,969			5	(e)
								9,791			5	(f)
Other financial instruments revaluation and other ( gains) losses		4,263			—									4,263
Settlement costs and other ( recoveries)		356			270									626
Acquisition-related costs		219			514			23,872			5	(d)		24,605
Earnings from unconsolidated investee		—			(309	)								(309	)
Income ( loss) before income taxes		3,296			(6,801	)		(65,451	)					(68,956	)
Income tax provision (benefit)		445			38			(17,345	)		5	(g)		(16,862	)
Net income ( loss) for the period		2,851			(6,839	)		(48,106	)					(52,094	)
Less: Net income attributable to noncontrolling interest		615			4,727									5,342
Net income ( loss) attributable to common shareholders		2,236			(11,566	)		(48,106	)					(57,436	)
Comprehensive loss, net of taxes:
Net income (loss) for the period		2,851			(6,839	)		(48,106	)					(52,094	)
Unrealized gain (loss) on hedging transactions, net of taxes		—			(5,893	)		5,893			5	(c)		—
Reclassification adjustment for losses included in net loss, net of taxes		—			986			(986	)		5	(c)		—
Foreign currency translation adjustment		—			(30	)								(30	)
Comprehensive loss, net of taxes		2,851			(11,776	)		(43,199	)					(52,124	)
Less: Comprehensive income attributable to noncontrolling interest		615			4,727									5,342
Comprehensive loss attributable to common shareholders		2,236			(16,503	)		(43,199	)					(57,466	)
Net income (loss) per share - basic and diluted (in $)		0.03									5	(h)		(0.64	)

5

AKUMIN INC.

NOTES TO UNAUDITED PRO FORMA COMBINED FINANCIAL INFORMATION

Note 1. Basis of presentation

The pro forma combined financial statements are based on the respective historical consolidated financial statements of Akumin and Alliance, and has been prepared to reflect the Acquisition and the financing structure established to fund the Acquisition.

The unaudited pro forma combined statement of financial position has been prepared to give effect to the Acquisition and related financing arrangements as if it was completed on March 31, 2021. The unaudited pro forma combined statements of comprehensive loss for the year ended December 31, 2020 and for the three months ended March 31, 2021 and March 31, 2020 assume that the Acquisition and related financing arrangements were completed on January 1, 2020. Pro forma adjustments reflected in the pro forma financial statements are based on available information and certain assumptions that Akumin believes are reasonable and supportable, and do not reflect the cost of any integration activities or benefits from the Acquisition, including potential synergies that may be derived in future periods. The pro forma financial statements are presented for illustrative purposes only and do not necessarily reflect the actual results of operations of Akumin had the Acquisition occurred at the dates indicated or project the results of operations of Akumin for any future date or period. The pro forma combined financial statements have been prepared on the basis of the assumptions and adjustments described below and in subsequent notes.

The pro forma financial statements were prepared using the acquisition method of accounting in accordance with ASC 805 Business Combinations, with Akumin being the legal and accounting acquirer of Alliance. Under the acquisition method, the fair value of the purchase consideration, as well as the assets acquired and liabilities assumed is based on valuation which involves judgment. Accordingly, the transaction accounting pro forma adjustments have been recorded based on preliminary estimates of fair value, which have been made solely for the purpose of preparing these pro forma financial statements. Actual fair value may vary from these preliminary estimates and the differences could have a material impact on the accompanying pro forma financial statements and Akumin’s future results of operations and financial position. Accordingly, there can be no assurance that the final allocation of the purchase price will not differ from the preliminary allocation reflected in the pro forma financial statements. Additionally, since the Acquisition has not yet closed as of the date the pro forma financial statements were prepared, it was necessary for Akumin’s management to make assumptions and estimates with respect to certain elements of the source of financing. Actual composition and terms of the financing arrangements may differ from management’s assumptions and estimates, which may also have a material impact on the accompanying pro forma financial statements and Akumin’s future results of operations and financial position.

The pro forma adjustments are based upon the best available information and certain assumptions that Akumin believes to be reasonable. The accounting policies used to compute the pro forma adjustments include all adjustments necessary for the fair presentation of the Acquisition in accordance with the recognition and measurement principles of accounting principles generally accepted in the United States of America (“U.S. GAAP”) and incorporate the significant accounting policies expected to be used to prepare Akumin’s future consolidated financial statements.

There are no material transactions undertaken between Akumin and Alliance during the periods presented in the pro forma financial statements that would need to be eliminated.

Certain reclassifications have been made to Akumin’s and Alliance’s respective historical financial statements in preparation of the pro forma financial statements to conform to the financial statement presentation expected to be adopted post-closing of the Acquisition as described in the notes below.

6

Unless indicated otherwise in the notes to the pro forma financial statements, Akumin applied applicable enacted statutory tax rates in 2021, and has used a tax rate of 26.5 percent to calculate the tax impact of the pro forma adjustments. These rates may be subject to change and may not be reflective of Akumin´s effective tax rate for future periods after consummation of the Acquisition.

Note 2. Financing of the Acquisition

The total purchase price is expected to consist of:

1) $715.0 million – Cash;

2) $62.6 million – Assumption of Alliance’s existing capital leases and other debt-like obligations; and

3) $42.4 million – Issuance of Akumin common shares to the Seller, equal to 19.99% of Akumin’s issued and outstanding common shares immediately prior to the signing of the definitive purchase agreement at $2.98 per share, which was priced on the basis of the volume-weighted average trading price of the common shares on the NASDAQ for the five trading days ending on the trading day immediately prior to the signing of the definitive purchase agreement.

Akumin intends to finance the $715 million cash purchase price payable on closing of the Acquisition as follows:

1) $492.5 million –Proceeds from the issuance of $500 million of Notes offered hereby, net of issuance costs;

2) $186.2 million of proceeds from the issuance of $200 million Series A Unsecured Notes due 2032/2033 to Stonepeak, net of issuance costs, less $9.8 million cash commitment fees paid to Stonepeak for its $489.6 million additional capital commitment;

3) $10.2 million – Proceeds from the issuance of Akumin’s common shares to Stonepeak, net of issuance costs;

4) $26.1 million – Cash on hand.

As a part of the issuance of Series A Unsecured Notes and the issuance of common shares to Stonepeak, Akumin expects to issue to Stonepeak approximately 10,067,114 warrants to acquire Akumin’s common shares at the Issue Price, expiring 10 years from the date of issuance.

Note 3. Preliminary purchase price allocation

The Acquisition will be accounted for as a business combination using the acquisition method of accounting in conformity with U.S. GAAP. Under this method, the assets acquired, liabilities assumed and non-controlling interest of the acquiree have been recorded based on preliminary estimates of fair value. In the preliminary purchase price allocation, the difference between the purchase consideration and book value of assets acquired and liabilities assumed by Akumin was allocated based on management’s judgment and assumptions. Note that assets acquired and liabilities assumed in the Acquisition exclude certain significant items reflected in Alliance’s historical consolidated statement of financial position. The estimated fair value of the purchase consideration and the net identifiable assets acquired are as follows:

7

(in US$0 00’)	Fair value
Assets acquired:
Accounts receivable		70,292
Prepaid expenses and other current assets		17,661
Property and equipment		331,763
Operating lease right-of-use assets		88,230
Identifiable intangible assets		467,124
Security deposits and other assets		25,255
Other investments		3,003
Liabilities assumed:
Accounts payable and accrued liabilities		79,642
Current portion of finance lease liabilities		4,398
Current portion of operating lease liabilities		19,887
Current portion of long-term debt		17,240
Finance lease liabilities		3,374
Operating lease liabilities		74,238
Long-term debt		53,635
Other long-term liabilities		9,225
Deferred tax liabilities		3,184
Deferred tax liabilities arising from purchase accounting		133,000
Net identifiable assets		605,505
Fair value of purchase consideration
Cash		715,035
Akumin common shares		42,386
Fair value of purchase consideration for Alliance’s share of net identifiable assets		757,421
Fair value of NCI Alliance’s noncontrolling interest		353,687
Fair value of purchase price for the net identifiable assets		1,111,108
Goodwill		505,603

Note 4. Pro forma adjustments – unaudited pro forma combined statement of financial position

The pro forma adjustments are based on our preliminary estimates and assumptions that are subject to change. The following adjustments have been reflected in the unaudited pro forma combined statement of financial position:

(a) Purchase accounting using the acquisition method: Reflects the application of purchase accounting based on the preliminary purchase price allocation as shown in Note 3.

(b) Issuance of the Notes: Reflects the issuance of the additional $500 million of Notes offered hereby to finance the Acquisition, net of issuance costs.

(c) Transaction costs: As a result of the Acquisition, both Akumin and Alliance have incurred and will incur significant transaction costs. The adjustment reflects the accrual of expected total transaction costs that have not been recognized in the historical financial statements. These costs mainly relate to internal and external costs, including advisors’ fees, to prepare for and execute the Acquisition. Issuance costs of the Series A Unsecured Notes due 2023/2033, the Notes and the equity raise have been recorded as a reduction from the balances of long-term debt and common shares, respectively.

(d) Issuance of Akumin’s common shares: Reflects the issuance of approximately 3.5 million Akumin’s common shares to Stonepeak at the Issue Price, net of cash issuance costs and issuance costs satisfied by the issuance of warrants to purchase Akumin’s common shares (see Note 4(f) below).

(e) Issuance of Series A Unsecured Notes: Reflects the issuance of $200 million Series A Unsecured Notes due 2032/2033 to Stonepeak to finance the Acquisition, net of cash issuance costs and issuance costs satisfied by the issuance of warrants to purchase Akumin’s common shares (see Note 4(f) below).

8

(f) Issuance of warrants to purchase Akumin’s common shares: Reflects the issuance of approximately 10,067,114 warrants to purchase Akumin’s common shares to Stonepeak, in connection with the issuance of the Series A Unsecured Notes and common shares as described in Notes 4(d) and 4(e) above. The warrants are treated as issuance costs of the Series A Unsecured Notes and the common shares in proportion to their respective fair value on the issuance date.

(g) Commitment fees: In addition to the $200 million Series A Unsecured Notes issued to Stonepeak as described in note 4(e), Akumin has obtained an additional $489.6 million of capital commitment from Stonepeak as a form of back-up financing in the event that the offering of the Notes is not completed at the time the Acquisition closes. The adjustment reflects the 2% commitment fees paid to Stonepeak for providing the additional capital commitment.

Note 5. Pro forma adjustments – unaudited pro forma combined statement of comprehensive loss

The pro forma adjustments are based on our preliminary estimates and assumptions that are subject to change. The following adjustments have been reflected in the unaudited pro forma combined statement of comprehensive loss:

(a) Depreciation and amortization of fair value increment: Reflects the incremental amortization of property and equipment and definite-lived intangible assets as a result of the preliminary purchase price allocation as illustrated in Note 3. Definite-lived intangible assets arising from the Acquisition include trade name, customer relationships, and referral network. The depreciation of property and equipment is based on estimated useful lives range from 5 to 10 years, and the amortization of intangible assets is based on estimated useful lives of approximately 5 years.

(b) Interest expense on Notes offered hereby: Reflects the net interest expense including amortization of issuance costs on the Notes offered hereby issued to finance the Acquisition at an assumed interest rate. If the current interest rate on the additional Notes offered hereby increases or decreases by 0.125%, net interest expense will increase or decrease by $625,000 per annum.

(c) Reversal of interest expenses and related gains and losses on Alliance’s term loan and credit facilities: As Alliance’s term loan and credit facilities will not be assumed, related historical interest expenses have been reversed, together with gains and losses from the debt modification as well as the remeasurement of the related interest rate contracts.

(d) Transaction costs: Estimated transaction costs associated with the Acquisition (see Note 4(c)) that have not been recognized in the historical statement of comprehensive income/loss have been recognized as a pro forma adjustment for the year ended December 31, 2020, assuming the Acquisition consummated as of January 1, 2020. Transaction costs included in the historical statement of comprehensive income/loss for the three months ended March 31, 2021 have not been reversed.

(e) Interest expense on Series A Unsecured Notes: Reflects the net interest expense including amortization of issuance costs on the Series A Unsecured Notes issued to Stonepeak.

(f) Commitment fees: Commitment fees paid to Stonepeak for providing the $489.6 million additional capital commitment (see Note 4(g)) have been recognized as a pro forma adjustment for the year ended December 31, 2020, assuming the Acquisition consummated as of January 1, 2020.

(g) Effect of income taxes: Reflects tax impact of pro forma adjustments to the statement of comprehensive income/loss, computed at Akumin’s statutory tax rate of 26.5%.

9

(h) Pro forma earnings (loss) per share: please see tables below for the calculation of pro forma earnings (loss) per share for each period presented:

For the year ended December 31, 2020	Akumin			Alliance			Pro Forma Adjustments			Pro Forma Combined
Net (loss) income attributable to common shareholders (in $000’s)	$	(20,397	)	$	(63,409	)	$	(105,697	)	$	(189,503	)
Weighted average basic and diluted common shares outstanding		70, 101, 618						17, 723, 570			87,825,188
Basic and diluted loss per share (in $)	$	(0.29	)							$	(2.16	)

For the three months ended March 31, 2021	Akumin		Alliance			Pro Forma Adjustments			Pro Forma Combined
Net (loss) income attributable to common shareholders (in $000’s)	$	681	$	(9,907	)	$	(22,431	)	$	(31,657	)
Weighted average basic and diluted common shares outstanding		71,989,726					17,723,570			89, 713,296
Basic and diluted loss per share (in $)	$	0.01							$	(0.35	)

For the three months ended March 31, 2020	Akumin		Alliance			Pro Forma Adjustments			Pro Forma Combined
Net (loss) income attributable to common shareholders (in $000’s)	$	2,236	$	(11,566	)	$	(48,106	)	$	(57,436	)
Weighted average basic and diluted common shares outstanding		71,649,321					17,723,570			89,372,891
Basic and diluted loss per share (in $)	$	0.03							$	(0.64	)

Note 6: Accounting principles conformation

Akumin adopted ASC 842 Leases (“ASC 842”) as of January 1, 2019, while Alliance has not adopted the accounting standard due to its status as a non-public business entity as defined under U.S. GAAP. The adjustments reflect the impact of adopting ASC 842 as of January 1, 2019 on Alliance’s historical statement of financial position, which includes recognizing lease liabilities and right-of-use assets for all operating leases where Alliance is the lessee. No adjustments are required on the unaudited pro forma combined statement of comprehensive loss, as the requirements under ASC 842 are largely consistent with Alliance’s current accounting treatment with respect to rent expenses. Please see below for a reconciliation from Alliance’s historical statement of financial position after reclassifications made in Note 7 to Alliance’s historical statement of financial position as shown on the face of the unaudited pro forma combined statement of financial position.

10

(In US$’000)	As at March 31, 2021, after reclassification (Note 7)			Adjustments to align accounting principles			As shown on pro forma combined statement of financial position
Current assets
Cash and cash equivalents	$	23,924					$	23,924
Accounts receivable		70,292						70,292
Prepaid expenses and other current assets		17,661						17,661
Total current assets		111,877			—			111,877
Non-current assets
Property and equipment		159,859						159,859
Operating lease right-of-use assets		—			88,230			88,230
Goodwill		93,996						93,996
Intangible assets		137,141						137,141
Security deposits and other assets		25,255						25,255
Other investments		3,003						3,003
Total assets	$	531,131		$	88,230		$	619,361
Current liabilities
Accounts payable and accrued liabilities	$	87,212		$	(658	)	$	86,554
Current portion of finance lease liabilities		4,398						4,398
Current portion of operating lease liabilities		—			19,887			19,887
Current portion of long-term debt		37,490						37,490
Earn-out liability		—						—
Total current liabilities		129,100			19,229			148,329
Non-current liabilities
Finance lease liabilities		3,374						3,374
Operating lease liabilities		—			74,238			74,238
Long-term debt		560,595						560,595
Other long-term liabilities		21,307			(5,237	)		16,070
Deferred tax liabilities		3,184						3,184
								—
Total liabilities	$	717,560		$	88,230		$	805,790
Shareholders’ equity
Common shares and additional paid-in capital	$	78,393					$	78,393
Accumulated other comprehensive loss		(11,663	)					(11,663	)
Accumulated deficit		(330,424	)					(330,424	)
Equity attributable to shareholders of the Company		(263,694	)					(263,694	)
Non-controlling interests		77,265						77,265
Total shareholders’ equity	$	(186,429	)	$	—		$	(186,429	)
Total liabilities and shareholders’ equity	$	531,131		$	88,230		$	619,361

Note 7. Reclassifications of historical financial statements to conform presentation

The classification of certain items presented by Alliance has been modified in order to align with the presentation used by Akumin and the presentation expected to be adopted post-closing of the Acquisition. See below for reconciliations from Akumin and Alliance’s historical financial statements to the presentation of the pro forma financial statements.

11

Reconciliation from historical financial statements to historical information presented in unaudited pro forma combined statement of financial position

Akumin

Balance Sheet as at March 31, 2021
Historical classification	Amount ($’000)			Pro Forma classification
Finance lease liabilities		3,432		Current portion of finance lease liabilities
operating lease liabilities (right-of-use)		9,417		Current portion of operating lease liabilities
Senior loan payable		411		Current portion of long-term debt
Senior loan payable		467,480		Long-term debt
Accrued payroll taxes		1,346		Other long-term liabilities
Additional paid-in capital		161,392		Common shares and additional paid-in capital
Deficit		(26,079	)	Accumulated deficit

12

Alliance

Balance Sheet as at March 31, 2021
Historical classification	Amount ($’000)		Pro Forma classification
Prepaid expenses		9,350
Other current assets		8,311
		17,661	Prepaid expenses and other current assets
Other intangible assets, net		137,141	Intangible assets
		25,255	Security deposits and other assets
		3,003	Other investments
Other assets		28,258
Accounts payable		21,924
Accrued compensation and related expenses		22,364
Other accrued liabilities		42,924
		87,212	Accounts payable and accrued liabilities
Current portion of obligations under capital leases		4,398	Current portion of finance lease liabilities
Long-term debt, net of current portion		560,595	Long-term debt
Obligations under capital leases, net of current portion		3,374	Finance lease liabilities
		21,307	Other long-term liabilities
		3,184	Deferred tax liabilities
Other liabilities		24,491
Common stock		193
Additional paid-in capital		78,200
		78,393	Common shares and additional paid-in capital

13

Reconciliation from historical financial statements to historical information presented in unaudited pro forma combined statement of comprehensive income/loss

Akumin

Income Statement for the year ended December 31, 2020
Historical classification	Amount ($’000)		Pro Forma classification
Service fees - net of allowances and discounts		243,981
Other revenue		7,302
		251,283	Revenue
Cost of operations, excluding depreciation and amortization		197,803
Stock- based compensation		2,084
		199,887	Cost of operations, excluding depreciation and amortization

Income Statement for the 3 months ended March 31, 2021 and March 31, 2020
Historical classification	For the 3 months ended March 31, 2021 ($’000)		For the 3 months ended March 31, 2020 ($’000)		Pro Forma classification
Service fees - net of allowances and discounts		66,392		70,637
Other revenue		497		625
		66,889		71,262	Revenue
Cost of operations, excluding depreciation and		53,124		56,354
Stock- based compensation		427		593
		53,551		56,946	Cost of operations, excluding depreciation and amortization

14

Alliance

Income Statement for the year ended December 31, 2020
Historical classification	Amount ($’000)			Pro Forma classification
Cost of revenues, excluding depreciation and amortization		307,028
Selling, general and administrative expenses		80,482
		387,510		Cost of operations, excluding depreciation and amortization
Transaction costs		1,358		Acquisition- related costs
Depreciation expense		54,870
Amortization expense		12,240
		67,110		Depreciation and amortization
Restructuring charges		1,124
Severance and related costs		1,870
Other income, net		(11,150	)
		(8,156	)	Settlement costs and other ( recoveries)
		5,812		Operational financial instruments revaluation and other (gains) losses
		50,669		Interest expense, net
Interest expense, net		56,481

15

Income Statement for the 3 months ended March 31, 2021 and March 31, 2020
Historical classification	For the 3 months ended March 31, 2021 ($’000)			For the 3 months ended March 31, 2020 ($’000)			Pro Forma classification
Cost of revenues, excluding depreciation and a		73,033			85,517
Selling, general and administrative expenses		20,973			23,021
		94,006			108,538		Cost of operations, excluding depreciation and amortization
Transaction costs		704			514		Acquisition- related costs
Depreciation expense		12,721			13,860
Amortization expense		2,490			3,134
		15,211			16,994		Depreciation and amortization
Restructuring charges		609			136
Severance and related costs		129			537
Other income, net		(780	)		(403	)
		(42	)		270		Settlement costs and other ( recoveries)
		1,606			986		Operational financial instruments revaluation and other (gains) losses
		14,357			12,213		Interest expense, net
Interest expense, net		15,963			13,199

16

EX-99.5

Exhibit 99.5

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION

AND RESULTS OF OPERATIONS—ALLIANCE

You should read the following discussion of the results of operations and financial condition of Alliance together with the consolidated financial statements of Alliance for the years ended December 31, 2020 and 2019, and the condensed consolidated financial statements of Alliance for the period ended March 31, 2021, in each case together with the related Notes thereto. The information in this “Management’s Discussion and Analysis of Financial Condition and Results of Operations” is presented on a historical standalone basis without giving any pro forma effect to the Acquisition.

Overview

Alliance HealthCare is a leading national provider of outsourced advanced radiology and radiation therapy services across 45 states in the United States. Alliance partners with more than 1,000 hospitals, health systems and physician practices to provide a full continuum of solutions, including onsite outpatient services and comprehensive service line management.

Alliance’s diagnostic imaging services are delivered through its Radiology Division (Alliance Radiology) and oncology services through its Oncology Division (Alliance Oncology). Alliance is the nation’s largest provider of advanced diagnostic mobile imaging services, an industry-leading operator of fixed-site radiology centers, and a leading provider of radiation therapy solutions to hospitals and physician groups. As of March 31, 2021, it operated 547 diagnostic imaging and radiation therapy systems, including 68 fixed-site radiology centers across the country, and 35 radiation therapy centers. Approximately 2,100 Alliance team members are committed to providing exceptional patient care and exceeding customer expectations. Alliance was incorporated in the state of Delaware on May 27, 1987. The information herein is presented as of the dates or for the periods specified herein; however, subsequent to March 31, 2021 (the latest date as of which such financial information is presented), on May 31, 2021, Alliance sold its 60% ownership interest in substantially all of the assets and certain specified liabilities of AHIP-FL to Specialty Surgery Partners Center of Florida, LLC. AHIP-FL was the sole remaining business in Alliance’s Interventional Division. As a result, as of the date hereof, Alliance no longer has an Interventional segment.

Service Overview

• Radiology Division: Alliance provides a full continuum of essential diagnostic imaging capabilities and service line management to hospitals and provider groups in both fixed-site and mobile settings. In a mobile setting, Alliance focuses strategically on hospitals and health systems, providing essential, mostly outpatient yet on-campus advanced imaging services aimed at providing needed advanced capabilities, handling hospital imaging overflow/capacity issues, and capturing marketplace outpatient imaging volumes. These contracts begin most often in 3+-year contracts; however, approximately 60% of Alliance’s mobile radiology customers have been with them for more than five years and the division’s revenue retention rate has hovered at 90-94% annually. In a fixed-site setting, Alliance often operates in a single or multi-modality outpatient imaging environment which can be on or near a hospital, or freestanding in a community. Fixed sites are typically contracted at 5-10 years for single modalities, and 10-20 years for joint venture settings. In all cases, Alliance customers can contract for Alliance’s core services (most often including advanced imaging equipment, repairs/maintenance and certified clinical staffing) as well as overall operations management, scheduling/patient preparation, insurance/pre-authorization, billing, payor relations, marketing and sales.

• Oncology Division: Alliance partners directly with hospitals, physicians, and other healthcare providers to offer a full suite of radiation therapy and related services, including access to the latest radiation therapy technologies and full management of partners’ cancer care programs. The company offers clinical staffing, physics and dosimetry services, operations management, sales and marketing, quality and safety, equipment procurement and maintenance, billing and patient services and strategic consultation (market analysis, site or market planning, partnership facilitation and business development). Alliance specializes in two primary radiation therapy modalities: linear accelerators most often used conventional, IMRT and SBRT therapies (“Linac”), and targeted, robotic linear accelerators most often used for stereotactic radiosurgery (“SRS”).

• Interventional Division: Alliance provides comprehensive pain management services for a wide range of conditions and diseases through therapeutic, minimally invasive procedures to treat and ease pain, medication, laboratory testing, and other services. All of Alliance’s pain management services are performed either at an outpatient clinic setting or at an ambulatory surgery center (“ASC”), as determined by the treating physician. Its services also include clinical management, pharmaceutical referrals, functional restoration and other treatments that assist with chronic and acute pain care.

Alliance operates in three reportable business segments: Radiology, Oncology and Interventional. The following table summarizes its revenues by segment as a percentage of total revenue.

	Three Months Ended March 31,						Year Ended December 31,
	2021 (unaudited)			2020 (unaudited)			2020			2019
Segment revenue as a percentage of total revenue:
Radiology		68	%		63	%		62	%		64	%
Oncology		29	%		27	%		29	%		25	%
Interventional		3	%		10	%		9	%		11	%
Total		100	%		100	%		100	%		100	%

Clients and partners contract with Alliance to provide radiology and oncology services to:

• benefit from Alliance’s extensive radiology and oncology service line management experience;

• partner with a leader whose core competency is high quality, efficient and scalable services in the areas of advanced diagnostic imaging and radiation therapy;

• eliminate the need to recruit, train and manage qualified, certified clinical staff members, including technologists or radiation therapists;

• leverage Alliance’s extensive referring provider, consumer/patient and community outreach capabilities to grow market share;

• access Alliance’s full suite of ancillary services, such as scheduling, pre-authorization, patient prep, operations management, billing, payor relations, quality and safety and other programs to manage the service line;

• mitigate capital investment, financial risk and contracting for maintenance associated with the purchase of their own systems;

• leverage Alliance’s platform to gain access to radiology and oncology services for their patients when the demand for these services may not justify the purchase of dedicated, full-time systems and infrastructure; and

• gain access to services under Alliance’s regulatory and licensing approvals when they do not have these approvals.

Factors Affecting Alliance’s Results of Operations

Pricing

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

Cost of Revenues

The principal components of Alliance’s cost of revenues include: compensation paid to technologists, therapists, drivers and other clinical staff; equipment system maintenance costs; insurance; medical supplies; system transportation; team members’ travel costs; and professional costs related to the delivery of radiation therapy and professional radiology interpretation services. Because a majority of these expenses are fixed, increased revenues as a result of higher scan and treatment volumes per system significantly improves Alliance’s margins while lower scan and treatment volumes result in lower margins.

Selling, General and Administrative Expenses

The principal components of selling, general and administrative expenses are sales and marketing costs, corporate overhead costs, information technology and professional services.

Net income attributable to non-controlling interest and earnings from unconsolidated investee

Alliance records net income attributable to non-controlling interest and earnings from unconsolidated investee related to its consolidated and unconsolidated subsidiaries, respectively. These subsidiaries primarily provide shared-service and fixed-site diagnostic imaging, radiation therapy and interventional services.

Reimbursement

Alliance derives most of its revenues directly from healthcare providers, primarily from hospitals, with which it contracts to provide services to their patients (“wholesale”). Additionally, some of Alliance’s revenues come from patients and their third-party payors, including government healthcare programs such as Medicare and Medicaid that Alliance bills directly (“retail”). Services for which Alliance submits direct billings for Medicare and Medicaid patients are paid on a fee schedule basis, and patients are responsible for deductibles and coinsurance. The following table summarizes the percentage of wholesale and retail revenues as a percentage of total revenues.

	Three Months Ended March 31,						Year Ended December 31,
	2021 (unaudited)			2020 (unaudited)			2020			2019
Wholesale		73	%		68	%		70	%		68	%
Retail		26	%		31	%		29	%		30	%
Other		1	%		1	%		1	%		2	%
Total		100	%		100	%		100	%		100	%

Seasonality

Alliance experiences seasonality in the revenues and margins generated for its 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 holidays 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 Alliance’s costs. It also experiences fluctuations in revenues and margins due to acquisition activity and general economic conditions, including recession or economic slowdown.

COVID-19

On March 11, 2020, the World Health Organization declared COVID-19 a pandemic and recommended containment and mitigation measures worldwide. The COVID-19 pandemic has caused significant volatility and uncertainty, which has resulted in a prolonged economic downturn that has disrupted and is expected to continue to disrupt Alliance’s business. As of March 31, 2021, the virus continues to spread outside of the United States and many countries are experiencing a resurgence in infection rates. In the United States, vaccines are available and the majority of Americans 18+ have received their vaccinations; the country is continuing to see a downward trend of cases, hospitalizations and death from COVID-19, although the potential for variants to cause resurgences remains a significant concern.

During 2020, many of Alliance’s owned and customer operating sites were impacted by temporary closures or reduced operating hours. As a result, it experienced a reduction in procedure volumes and corresponding revenues. Although Alliance has continued to recover, the company cannot reasonably estimate the ultimate length or severity of this pandemic, nor the impact on its future procedure volumes and revenues. The extent to which the COVID-19 pandemic ultimately impacts the business, financial condition, results of operations, cash flows, and liquidity may differ from management’s current estimates due to inherent uncertainties regarding the duration and further spread of the pandemic overall, its severity, actions taken to contain the virus or treat its impact, and how quickly and to what extent normal economic and operating conditions can resume.

In response to this market condition, Alliance took a number of actions in 2020 to mitigate the impact to future results of operations and cash flows, as well as to protect its financial position. These actions included, but were not limited to, the following:

• Furloughed, reduced the hours for or eliminated the positions of a substantial number of employees;

• Reduced compensation for executive and management employees;

• Implemented certain other cost reductions;

• Deferred spending on capital expenditures; and

• Borrowed on its revolving loan facility as a precautionary measure to increase its cash position and help maintain financial flexibility.

In addition, Alliance entered into amendments to its Credit Agreements (as defined below) during 2020. The amendments provided for, among other things, the amendment to certain financial covenants.

On March 27, 2020, the CARES Act was signed into law. The CARES Act includes, among other things, a number of benefits that are applicable to Alliance and other healthcare providers, provisions relating to the deferment of the employer portion of social security tax payments, as well as changes to federal income tax law including increases to the limit on the deduction for net interest expense and acceleration of the timing for refunds of alternative minimum tax credits. In addition, Alliance received payments in connection with certain provisions of the CARES Act including: (i) advanced Medicare payments and (ii) government grants to compensate for healthcare related expenses or lost revenues attributable to the COVID-19 pandemic. On December 27, 2020, the Consolidated Appropriations Act, 2021 was signed into law, which provided additional stimulus relief and renewed some CARES Act programs that had expired.

Results of Operations

Year ended December 31, 2020 compared to year ended December 31, 2019

The following tables summarize our results of operations for the year ended December 31, 2020 compared to the year ended December 31, 2019.

	Year Ended December 31,
	2020					2019
(dollars in thousands)	Amount		% of Revenue			Amount		% of Revenue
Revenues	$	496,208		100.0	%	$	569,388		100.0	%
Costs and expenses:
Cost of revenues, excluding depreciation and amortization		307,028		61.9	%		355,724		62.5	%
Selling, general and administrative expenses		80,482		16.2	%		93,331		16.4	%
Transaction costs		1,358		0.3	%		12,944		2.3	%
Restructuring charges		1,124		0.2	%		6,216		1.1	%
Impairment charges		29,580		6.0	%		5,365		0.9	%
Severance and related costs		1,870		0.4	%		2,917		0.5	%
Loss on extinguishment or modification of debt		14,614		2.9	%		—		—	%

Depreciation expense		54,870		11.1	%		59,113		10.4	%
Amortization expense		12,240		2.5	%		12,650		2.2	%
Interest expense, net		56,481		11.4	%		56,187		9.9	%
Other income, net		(11,150	)	(2.2	)%		(3,174	)	(0.6	)%
Total costs and expenses		548,497		110.5	%		601,273		105.6	%
Loss before income taxes, earnings from unconsolidated investee, and non-controlling interest		(52,289	)	(10.5	)%		(31,885	)	(5.6	)%
Income tax benefit (expense)		(264	)	(0.1	)%		6,090		1.1	%
Earnings from unconsolidated investee		1,276		0.3	%		1,317		0.2	%
Net loss		(51,277	)	(10.3	)%		(24,478	)	(4.3	)%
Less: Net income attributable to non-controlling interest		12,132		2.4	%		18,657		3.3	%
Net loss attributable to Alliance HealthCare Services, Inc.	$	(63,409	)	(12.8	)%	$	(43,135	)	(7.6	)%
Adjusted EBITDA	$	125,789		25.4	%	$	129,114		22.7	%

(1) For a reconciliation of Net Loss to Adjusted EBITDA, see “Summary Historical Consolidated Financial Information and Other Data – Alliance.” The table below provides the components of revenue:

	Year Ended December 31,
(in thousands)	2020		2019
Revenue:
MRI	$	165,808	$	197,586
PET/CT		120,387		135,549
Other radiology		22,595		32,158
Radiology		308,790		365,293
Oncology		141,754		143,127
Interventional		45,067		59,489
Corporate / Other		597		1,479
Total	$	496,208	$	569,388

Revenue decreased by $73.2 million, or 12.9%, to $496.2 million in 2020 compared to $569.4 million in 2019 primarily due to decreases in Radiology, Oncology and Interventional revenues of $56.5 million, $1.4 million and $14.4 million, respectively.

Total Radiology revenue decreased by $56.5 million, or 15.5%, to $308.8 million in 2020, compared to $365.3 million in 2019, primarily due to the impact of COVID-19 and the resulting decrease in scans during the period.

MRI revenue decreased by $31.8 million, or 16.1%, to $165.8 million in 2020. The decrease is attributable to the following factors:

• Same-store-growth (“SSG”) for MRI, which is calculated by comparing the cumulative scan, treatment or case volume at all locations in the current year’s period to the same period in the prior year, decreased by 12.9%.

• Scan-based MRI revenue decreased by $27.4 million, or 16.5%, to $138.1 million in 2020 from $165.5 million in 2019. The decrease in scan-based MRI revenue was primarily due to year-over-year decreases in the total number of scan-based MRI scans, scans per system per day, and the average number of scan-based systems in service, partially offset by an increase in average revenue per scan. Total scan-based MRI scan volume decreased by 20.7% to 451,790 scans in 2020 from 569,385 scans in 2019. Scans per scan-based system per day decreased to 9.4 in 2020 from 10.3 in 2019. Revenue per scan increased by 5.2% from $290.61 in 2019 to $305.68 in 2020. The average number of scan-based systems in service decreased to 193.8 systems in 2020 from 202.9 systems for the same period in 2019.

• Non-scan-based MRI revenue decreased by $4.4 million to $27.7 million in 2020 compared to the same period in 2019.

PET/CT revenue decreased by $15.2 million, or 11.2%, to $120.4 million in 2020 compared to $135.5 million in 2019. The decrease is attributable to the following factors:

• SSG for PET/CT revenue decreased by 2.0% for the year ended December 31, 2020.

• Scan-based PET/CT revenue decreased by $15.0 million, or 11.7%, to $113.7 million in 2020 from $128.7 million during in 2019. The decrease in scan-based PET/CT revenue was primarily due to year-over-year decreases in the total number of scan-based PET/CT scans, scans per system per day, and the average number of scan-based systems in service, partially offset by an increase in average revenue per scan. Total volume of PET/CT scans decreased 17.3% to 117,056 scans in 2020 compared to 141,580 scans in 2019. Scans per system per day decreased to 5.5 in 2020 compared to 6.0 in 2019. The average revenue per PET/CT scan increased from $909.15 per scan in 2019 to $971.44 per scan in 2020. The average number of scan-based PET/CT systems in service decreased to 93.5 systems in 2020 compared to 102.9 systems in 2019.

• Non-scan based PET/CT revenue decreased by $0.2 million in 2020 compared to the same period in 2019.

Included in the Radiology revenue totals above are fixed-site imaging center revenues, which decreased by $14.8 million, or 15.4%, to $81.0 million in 2020 over the same period in 2019.

Oncology revenue decreased by $1.4 million, or 1.0%, to $141.8 million in 2020 compared to $143.1 million in 2019, primarily due to the impact of COVID-19 and the resulting decrease in treatment volumes, as well as the closure of certain underperforming sites during 2019. The number of Linac treatments performed decreased by 5.2%, and SSG for the year ended December 31, 2020 decreased by 4.4%. SSG for SRS decreased by 4.5% for the year ended December 31, 2020. The number of SRS patients treated in 2020 decreased by 4.1% when compared to the same period in 2019.

Interventional revenue decreased by $14.4 million, or 24.2%, to $45.1 million in 2020 compared to $59.5 million in 2019, primarily due to the impacts of COVID-19 and temporary state-mandated closures of ASCs in both Arizona and Florida in March 2020. Alliance’s ASCs in both Arizona and Florida started to reopen in April 2020.

At December 31, 2020, Alliance had 279 MRI systems and 112 PET/CT systems compared to 299 MRI systems and 118 PET/CT systems at December 31, 2019. Alliance operated 68 fixed-site radiology centers at December 31, 2020, compared to 70 fixed-site radiology centers at December 31, 2019. It operated 35 radiation therapy centers and SRS facilities (including one unconsolidated investee) at December 31, 2020 and December 31, 2019.

Cost of revenues, excluding depreciation and amortization, decreased by $48.7 million, or 13.7%, to $307.0 million in 2020 compared to $355.7 million in 2019. The decrease in cost of revenues consisted primarily of a $24.7 million decrease in compensation and related employee expenses, a $7.5 million decrease in maintenance and related costs, a $7.5 million decrease in medical supplies expense, a $2.7 million decrease in transportation and fuel expenses, a $1.9 million decrease in rent expenses, a $1.6 million decrease in marketing and business development expenses, a $1.5 million decrease in travel and entertainment expenses, and a $1.4 million decrease in outsourced services, as a result of lower treatment volumes due to COVID-19 and restructuring initiatives and other cost reductions implemented in 2020. Cost of revenues, excluding depreciation and amortization, as a percentage of revenue, decreased to 61.9% in 2020 compared to 62.5% in 2019.

Selling, general and administrative expenses decreased by $12.8 million, or 13.8%, to $80.5 million in 2020 compared to $93.3 million in 2019. The decrease in selling, general and administrative expenses consisted primarily of a decrease in compensation and related employee expenses of $12.3 million, a decrease of $1.9 million in travel and entertainment expenses, and a decrease of $1.7 million in professional and legal expenses, partially offset by a $3.1 million increase in bad debt expense. The overall decrease in selling, general and administrative expenses was primarily due to restructuring initiatives and other cost reductions implemented in 2020. Selling, general and administrative expenses as a percentage of revenue was 16.2% in 2020 compared to 16.4% in 2019.

Transaction costs decreased by $11.6 million to $1.4 million in 2020 compared to $12.9 million in 2019. Transaction costs represent due diligence and other expenses incurred in connection with business acquisitions and partnership investments pursuant to strategic planning by management. The decrease in transaction costs was related to an $11.0 million termination fee paid in connection with terminating a proposed transaction to acquire e+ Cancer Care in February 2019.

Restructuring charges decreased by $5.1 million to $1.1 million in 2020 compared to $6.2 million in 2019. Restructuring charges relate primarily to certain leased facilities in the Oncology Division.

Impairment charges increased by $24.2 million to $29.6 million in 2020 compared to $5.4 million in 2019. Impairment charges during 2020 are composed of a $19.0 million goodwill impairment charge and a $10.0 million intangible asset impairment charge related to the Interventional reporting unit, and a $0.6 million charge related to certain long-term assets that were deemed unrecoverable. Impairment charges in 2019 are composed of a $3.9 million goodwill impairment charge related to the Interventional reporting unit and $1.5 million of charges related to certain long-term assets that were deemed unrecoverable.

Severance and related costs were $1.9 million in 2020 compared to $2.9 million in 2019.

Loss on extinguishment or modification of debt was $14.6 million in 2020 and relates to lender fees and legal, professional and other expenses incurred in connection with the amendments to Alliance’s Credit Agreements during 2020. There was no loss on extinguishment or modification of debt in 2019.

Depreciation expense decreased by $4.2 million, or 7.2%, to $54.9 million in 2020 compared to $59.1 million in 2019. The decrease in depreciation expense is due to the year-over-year decrease in the number of units in the fleet along with reduced capital investments made during the last twelve months.

Amortization expense was $12.2 million in 2020 compared to $12.7 million in 2019.

Interest expense, net increased by $0.3 million, or 0.5%, to $56.5 million in 2020 compared to $56.2 million in 2019. The increase is primarily due to the increase in interest rates and deferred financing costs in connection with the amendments to Alliance’s Credit Agreements during 2020, partially offset by a decline in LIBOR interest rates in 2020 compared to 2019.

Other income, net increased by $8.0 million to $11.2 million in 2020 compared to $3.2 million in 2019. The increase is primarily due to $6.2 million of stimulus payments received from the Department of Health and Human Services (“HHS”) in connection with the CARES Act and $2.4 million of gain on sale of certain joint venture membership interests in the Radiology and Interventional Divisions.

Income tax expense was $0.3 million in 2020 compared to income tax benefit of $6.1 million in 2019. The increase of the income tax expense in 2020 compared to 2019 was driven primarily by a valuation allowance recorded against certain deferred tax assets, partially offset by an increase in the income tax benefit associated with an increase in pre-tax loss in 2020 compared to 2019. Based on its earnings history and available objectively verifiable positive and negative evidence, Alliance determined that it was more likely than not that a portion of its deferred tax assets would not be realized in the future.

Earnings from unconsolidated investee were $1.3 million in both 2020 and 2019.

Net income attributable to non-controlling interest decreased by $6.5 million, or 35.0%, to $12.1 million in 2020 compared to $18.7 million in 2019. The decrease was mostly attributable to decreases in year-over-year net income derived from Alliance’s joint venture partners.

Net loss attributable to Alliance HealthCare Services, Inc. was $63.4 million in 2020 compared to $43.1 million in 2019.

Adjusted EBITDA in 2020 decreased by $3.3 million or 2.6%, to $125.8 million from $129.1 million in 2019 primarily due to a decrease in volumes in each of our businesses due to the impact of COVID-19 on treatment volumes, partially offset by HHS stimulus funding, restructuring initiatives and other cost reductions implemented in the first half of 2020, and performance improvement in Oncology as a result of the closure of underperforming sites.

Three Months Ended March 31, 2021 Compared to Three Months Ended March 31, 2020

The following tables summarize our results of operations for the three-month period ended March 31, 2021 compared to the three-month period ended March 31, 2020.

	Three Months Ended March 31,
	2021 (unaudited)						2020 (unaudited)
(dollars in thousands)	Amount			% of Revenue			Amount			% of Revenue
Revenues	$	119,513			100.0	%	$	132,405			100.0	%
Costs and expenses:
Cost of revenues, excluding depreciation and amortization		73,033			61.1	%		85,517			64.6	%
Selling, general and administrative expenses		20,973			17.5	%		23,021			17.4	%
Transaction costs		704			0.6	%		514			0.4	%
Restructuring charges		609			0.5	%		136			0.1	%
Severance and related costs		129			0.1	%		537			0.4	%
Depreciation expense		12,721			10.6	%		13,860			10.5	%
Amortization expense		2,490			2.1	%		3,134			2.4	%
Interest expense, net		15,963			13.4	%		13,199			10.0	%
Other income, net		(780	)		(0.7	)%		(403	)		(0.3	)%
Total costs and expenses		125,842			105.3	%		139,515			105.4	%
Loss before income taxes, earnings from unconsolidated investee, and non-controlling interest		(6,329	)		(5.3	)%		(7,110	)		(5.4	)%
Income tax expense		—			—	%		(38	)		—	%
Earnings from unconsolidated investee		317			0.3	%		309			0.2	%
Net loss		(6,012	)		(5.0	)%		(6,839	)		(5.2	)%
Less: Net income attributable to non-controlling interest		3,895			3.3	%		4,727			3.6	%
Net loss attributable to Alliance HealthCare Services, Inc.	$	(9,907	)		(8.3	)%	$	(11,566	)		(8.7	)%
Adjusted EBITDA(1)	$	29,044			24.3	%	$	26,183			19.8	%

(1) For a reconciliation of Net Loss to Adjusted EBITDA, see “Summary Historical Consolidated Financial Information and Other Data – Alliance.”

Following are the components of revenue:

	Three Months Ended March 31,
(in thousands)	2021 (unaudited)		2020 (unaudited)
Revenue:
MRI	$	42,782	$	44,436
PET/CT		32,033		31,248
Other radiology		6,558		6,794
Radiology		81,373		82,478
Oncology		34,412		36,096
Interventional		3,728		13,484
Corporate / Other		—		347
Total	$	119,513	$	132,405

Revenue decreased by $12.9 million, or 9.7%, to $119.5 million during the three months ended March 31, 2021 compared to $132.4 million during the three months ended March 31, 2020 primarily due to decreases in Radiology, Oncology and Interventional revenues of $1.1 million, $1.7 million and $9.8 million, respectively.

Total Radiology revenue decreased by $1.1 million, or 1.3%, to $81.4 million during the three months ended March 31, 2021 compared to $82.5 million during the three months ended March 31, 2020, primarily due to the impact of COVID-19 and the resulting decrease in scans during the period and inclement weather in February 2021.

MRI revenue decreased by $1.7 million, or 3.7%, to $42.8 million during the three months ended March 31, 2021 compared to $44.4 million during the three months ended March 31, 2020.

• Same-store-growth (“SSG”) for MRI, which we calculate by comparing the cumulative scan, treatment or case volume at all locations in the current year’s period to the same period in the prior year, increased by 5.2%.

• Scan-based MRI revenue decreased by $0.3 million, or 0.8%, to $36.7 million during the three months ended March 31, 2021 from $37.0 million during the three months ended March 31, 2020. The decrease in scan-based MRI revenue was primarily due to year-over-year decreases in the total number of scan-based MRI scans and the average number of scan-based systems in service, partially offset by increases in scans per system per day and average revenue per scan. Total scan-based MRI scan volume decreased by 3.4% to 119,900 scans during the three months ended March 31, 2021 from 124,075 scans during the three months ended March 31, 2020. The average number of scan-based systems in service decreased to 184.5 systems during the three months ended March 31, 2021 from 203.3 systems for the same period in 2020. Scans per scan-based system per day increased to 10.0 million during the three months ended March 31, 2021 from 9.4 during the three months ended March 31, 2020. Revenue per scan increased by 2.7% from $298.42 during the three months ended March 31, 2020 to $306.35 during the three months ended March 31, 2021.

• Non-scan-based MRI revenue decreased by $1.4 million to $6.1 million during the three months ended March 31, 2021 compared to the same period in 2020.

PET/CT revenue increased by $0.8 million, or 2.5%, to $32.0 million during the three months ended March 31, 2021 compared to $31.2 million during the three months ended March 31, 2020.

• SSG for PET/CT revenue decreased by 1.5% for the three months ended March 31, 2021.

• Scan-based PET/CT revenue increased by $0.7 million, or 2.4%, to $30.1 million during the three months ended March 31, 2021 from $29.4 million during the three months ended March 31, 2020 primarily due to the increase in revenue attributable to Specialty Tracers. The scan-based PET/CT revenue reflects an increase in the average revenue per scan, partially offset by a year-over-year decrease in the total number of scan-based PET/CT scans. The average revenue per PET/CT scan increased from $956.45 per scan during the three months ended March 31, 2020 to $1,022.65 per scan during the three months ended March 31, 2021. Total volume of PET/CT scans decreased 4.2% to 29,477 scans during the three months ended March 31, 2021 compared to 30,781 scans during the three months ended March 31, 2020.

Included in the Radiology revenue totals above are fixed-site imaging center revenues, which increased by $0.6 million, or 2.8%, to $22.2 million during the three months ended March 31, 2021 over the same period in 2020.

Oncology revenue decreased by $1.7 million, or 4.7%, to $34.4 million during the three months ended March 31, 2021 compared to $36.1 million during the three months ended March 31, 2020, primarily due to the impact of COVID-19 and the resulting decrease in treatment volumes, inclement weather in February 2021 and the temporary closure of one Cyberknife site for equipment refresh. The number of Linac treatments performed decreased by 10.0% and SSG for the three months ended March 31, 2021 decreased by 10.7%. SSG for SRS decreased by 8.7% for the three months ended March 31, 2021. The number of SRS cases completed during the three months ended March 31, 2021 decreased by 8.7% from the same period in 2020.

Interventional revenue decreased by $9.8 million, or 72.4%, to $3.7 million during the three months ended March 31, 2021 compared to $13.5 million during the three months ended March 31, 2020, primarily due to the sale of its joint venture membership interest in Alliance Interventional (“AI Sale”) in December 2020. Alliance Interventional was the sole owner of The Pain Center of Arizona (“TPC”). TPC revenue was $8.8 million during the three months ended March 31, 2020.

At March 31, 2021, Alliance had 275 MRI systems and 106 PET/CT systems. Alliance had 293 MRI systems and 115 PET/CT systems at March 31, 2020. Alliance operated 68 fixed-site radiology centers at March 31, 2021, compared to 71 fixed-site radiology centers at March 31, 2020. Alliance operated 35 radiation therapy centers and SRS facilities (including one unconsolidated investee) at March 31, 2021 and 2020.

Cost of revenues, excluding depreciation and amortization, decreased by $12.5 million, or 14.6%, to $73.0 million during the three months ended March 31, 2021 compared to $85.5 million during the same period in 2020. Excluding the cost of revenues of TPC, which was $6.4 million during the three months ended March 31, 2020, cost of revenues decreased by $6.1 million. This decrease in cost of revenues consisted primarily of a $3.7 million decrease in compensation and related employee expenses, a $1.3 million decrease in maintenance and related costs, a $0.5 million decrease in travel and entertainment expenses, a $0.4 million decrease in outsourced service contracts and a $0.3 million decrease in marketing expenses. Cost of revenues, excluding depreciation and amortization, as a percentage of revenue, decreased to 61.1% during the three months ended March 31, 2021 compared to 64.6% during the three months ended March 31, 2020.

Selling, general and administrative expenses decreased by $2.0 million, or 8.9%, to $21.0 million during the three months ended March 31, 2021 compared to $23.0 million during the same period in 2020. Excluding the selling, general and administrative expenses of TPC, which was $1.9 million during the three months ended March 31, 2020, selling, general and administrative expenses decreased by $0.1 million. Selling, general and administrative expenses as a percentage of revenue was 17.5% during the three months ended March 31, 2021 compared to 17.4% during the three months ended March 31, 2020.

Transaction costs increased by $0.2 million to $0.7 million during the three months ended March 31, 2021 compared to $0.5 million during the three months ended March 31, 2020. Transaction costs represent due diligence and other expenses incurred in connection with business acquisitions and partnership investments pursuant to strategic planning by management.

Restructuring charges increased by $0.5 million to $0.6 million during the three months ended March 31, 2021 compared to $0.1 million during the three months ended March 31, 2020. Restructuring charges relate primarily to certain leased facilities in our Oncology Division.

Severance and related costs were $0.1 million during the three months ended March 31, 2021 compared to $0.5 million during the three months ended March 31, 2020.

Depreciation expense decreased by $1.1 million, or 8.2%, to $12.7 million during the three months ended March 31, 2021 compared to $13.9 million during the three months ended March 31, 2020. The decrease in depreciation expense is primarily due to the year-over-year decrease in the number of our diagnostic imaging systems.

Amortization expense was $2.5 million during the three months ended March 31, 2021 compared to $3.1 million during the three months ended March 31, 2020.

Interest expense, net increased by $2.8 million, or 20.9%, to $16.0 million during the three months ended March 31, 2021 compared to $13.2 million during the three months ended March 31, 2020. The increase is primarily due to the increase in Alliance’s interest rates and amortization of deferred financing costs in connection with the amendments to its Credit Agreements in October 2020.

Other income, net increased by $0.4 million to $0.8 million during the three months ended March 31, 2021 compared to $0.4 million during the three months ended March 31, 2020. The increase is primarily due to $0.2 million of management fees earned for transition services during the three months ended March 31, 2021 related to the AI Sale and an increase of $0.2 million in gain on the sale of assets.

Earnings from unconsolidated investee were $0.3 million during both the three months ended March 31, 2021 and 2020.

Net income attributable to non-controlling interest decreased by $0.8 million, or 17.6%, to $3.9 million during the three months ended March 31, 2021 compared to $4.7 million during the three months ended March 31, 2020. The decrease was primarily attributable to decreases in year-over-year earnings from our joint ventures.

Net loss attributable to Alliance HealthCare Services, Inc. was $9.9 million during the three months ended March 31, 2021 compared to $11.6 million during the three months ended March 31, 2020.

Adjusted EBITDA during the three months ended March 31, 2021 increased by $2.8 million or 10.9%, to $29.0 million from $26.2 million during the three months ended March 31, 2020 primarily due to restructuring initiatives and other cost reductions implemented in the year ended December 31, 2020.

Adjusted EBITDA

Adjusted EBITDA is not a measure of financial performance under generally accepted accounting principles in the U.S. (“GAAP”). Alliance believes, in addition to GAAP metrics, this non-GAAP metric is a useful measure for investors for a variety of reasons. Alliance’s management regularly communicates Adjusted EBITDA and their interpretation of such results to its board of directors. Alliance also compares actual periodic Adjusted EBITDA against internal targets as a key factor in determining cash incentive compensation for executives and other employees, largely because Alliance views Adjusted EBITDA results as indicative of how our Radiology, Oncology and Interventional businesses are performing and being managed.

Alliance defines Adjusted EBITDA as net loss attributable to Alliance HealthCare Services before: income taxes; non-controlling interest in subsidiaries; interest expense, net; depreciation expense; amortization expense; transaction costs; restructuring charges; impairment charges; severance and related costs; loss on extinguishment or modification of debt; legal matters and other expenses; share-based compensation; and other charges (benefits), net. For a reconciliation of net loss to Adjusted EBITDA, see “Summary Historical Consolidated Financial Information and Other Data – Alliance.”

The presentation of a non-GAAP metric does not imply that the reconciling items presented are non-recurring, infrequent or unusual. In general, non-GAAP metrics have certain limitations as analytical financial measures and are used in conjunction with GAAP results to evaluate our operating performance and by considering independently the economic effects of the items that are or are not reflected in non-GAAP metrics. Alliance compensates for such limitations by providing GAAP-based disclosures concerning the excluded items in its financial disclosures. As a result of these limitations, and because non-GAAP metrics may not be directly comparable to similarly titled measures reported by other companies, the non-GAAP metrics are not an alternative to the most directly comparable GAAP measure or any other GAAP measure of operating performance.

Liquidity and Capital Resources

Alliance’s primary source of liquidity is cash provided by operating activities and borrowings under its revolving loan facility. It generated $11.7 million and $26.8 million of cash flow from operating activities during the three months ended March 31, 2021 and 2020, respectively, and $80.5 million and $63.2 million of cash flow from operating activities during the twelve months ended December 31, 2020 and 2019, respectively. The year-over-year decrease in the first quarter was primarily related to changes in its operating assets and liabilities, partially offset by a decrease of $2.7 million of interest paid primarily resulting from the amendments to its Credit Agreements in October 2020. Alliance’s ability to generate cash flow is affected by numerous factors, including demand for MRI, PET/CT, other diagnostic imaging, radiation oncology, interventional services and other revenues. The year-over-year decrease during the fiscal year was primarily related to $6.6 million of stimulus payments received from HHS and $6.1 million of advanced payments for future Medicare services received from CMS in connection with the CARES ACT, decreased transaction costs in connection with the termination of a proposed transaction in 2019, change in deferred income taxes, and decreased restructuring charges related primarily to certain leased facilities in Alliance’s Oncology Division, partially offset by the unfavorable impact of COVID-19 on Alliance’s business operations. Its ability to generate cash flow from operating activities is also dependent upon the collections of its accounts receivable. Alliance’s number of days of revenue outstanding for its accounts receivable was 53 days at March 31, 2021 and 49 days as of December 31, 2020. As of March 31, 2021, it had $39.5 million of available borrowings under its revolving loan facility, net of $80.0 million outstanding on the revolving loan facility and $5.5 million outstanding in letters of credit. Management of alliance expects that it will be in compliance with the debt covenants under its credit agreements for at least the next twelve months.

Alliance used cash of $8.1 million and $7.8 million for investing activities during the three months ended March 31, 2021 and 2020, respectively. Investing activities during the three months ended March 31, 2021 included $6.2 million in cash used for purchases of property and equipment and $3.8 million in cash used for deposits on equipment, partially offset by $1.3 million in collections of notes receivable and $0.6 million of proceeds from sale of assets.

Investing activities during the three months ended March 31, 2020 included $3.8 million in cash used for purchases of property and equipment and $4.4 million in cash used for deposits on equipment, partially offset by $0.4 million of proceeds from sale of assets. Investing activities in the year ended December 31, 2020 included $27.2 million in cash used for purchases of property and equipment, an increase in deposits on equipment of $4.9 million and $7.4 million that was used for an acquisition, partially offset by $3.6 million of net proceeds from the sale of assets. Investing activities in the year ended December 31, 2019 included $26.8 million in cash used for purchases of property and equipment and $7.7 million in cash used for deposits on equipment, partially offset by $2.5 million of proceeds from the sale of assets and $0.4 million from other investing activities.

Alliance may continue to use cash for acquisitions in the future. Other than acquisitions, its primary use of capital resources is to fund capital expenditures. Alliance spends capital to:

• purchase new systems;

• replace less advanced systems with new systems;

• upgrade MRI, PET/CT and radiation oncology systems; and

• upgrade its corporate infrastructure, primarily in information technology.

Capital expenditures totaled $6.2 million and $3.8 million during the three months ended March 31, 2021 and 2020, respectively. Alliance purchased 1 radiation therapy system during the three months ended March 31, 2021. Capital expenditures totaled $27.2 million and $26.8 million in the years ended December 31, 2020 and 2019, respectively. Alliance purchased three MRI, four PETCT, one CT and five radiation therapy systems in 2020. Alliance expects to purchase additional systems in 2021 and finance substantially all of these purchases with its available cash, cash from operating activities and equipment debt.

Net cash used in financing activities during the three months ended March 31, 2021 was $5.5 million. Net cash provided by financing activities during the three months ended March 31, 2020 was $19.4 million. Financing activities during the three months ended March 31, 2021 included principal payments on its term loan facility of $7.7 million, principal payments on equipment debt and capital lease obligations of $6.6 million, and distributions to non-controlling interest in subsidiaries of $7.0 million, partially offset by proceeds from equipment debt of $15.8 million. Net cash used in financing activities were $34.2 million and $37.6 million in the years ended December 31, 2020 and 2019 respectively.

In the year ended December 31, 2020, financing activities included net proceeds of $43.0 million from Alliance’s revolving loan facility and proceeds from equipment debt of $16.4 million, partially offset by principal payments on Alliance’s term loan facility of $22.2 million, principal payments on equipment debt and capital lease obligations of $24.8 million, distributions to noncontrolling interest in subsidiaries of $26.4 million, and payments of deferred financing costs of $20.0 million. In the year ended December 31, 2019, financing activities included $22.0 million proceeds from equipment debt, $8.5 million capital contribution and $0.5 million of contributions from noncontrolling interest in subsidiaries, partially offset by principal payments on Alliance’s term loan facility of $10.1 million, net payments of $10.0 million on Alliance’s revolving loan facility, principal payments on equipment debt and capital lease obligations of $21.7 million, and distributions to noncontrolling interest in subsidiaries of $26.8 million.

Financing activities during the three months ended March 31, 2020 included net proceeds of $28.0 million from its revolving loan facility and proceeds of $7.9 million from equipment debt, partially offset by principal payments on equipment debt and capital lease obligations of $6.2 million, principal payments on its term loan facility of $5.1 million, and distributions to non-controlling interest in subsidiaries of $5.3 million.

Alliance had cash and cash equivalents of $23.9 million, $25.8 million and $15.1 million at March 31, 2021, December 31, 2020 and December 31, 2019, respectively.

Available cash and cash equivalents are maintained in high-credit-quality third-party financial institutions. To date, Alliance has experienced no loss or lack of access to its invested cash or cash equivalents; however, it cannot assure that access to its invested cash and cash equivalents will not be affected by adverse conditions in the financial markets.

At March 31, 2021, December 31, 2020 and December 31, 2019, Alliance had $17.5 million, $20.0 million and $15.7 million, respectively, in its accounts with third-party financial institutions that exceed the Federal Deposit Insurance Corporation (“FDIC”) insurance limits. While it monitors the cash balances in its operating accounts daily and adjust the cash balances as appropriate, these cash balances could be adversely affected if the underlying financial institutions fail or could be subject to other adverse conditions in the financial markets.

Acquisitions

On September 15, 2020, through its Radiology Division, Alliance completed the purchase of a 100% membership interest in three radiology centers and a 51% membership interest in a fourth radiology center from Molecular Imaging Technologies, LLC (“MIT”). The purchase price for this acquisition was $7.4 million in the aggregate and was funded with proceeds from Alliance’s existing cash balance. The estimated fair value of the identifiable assets

acquired at the acquisition date was $6.5 million, including identifiable intangible assets of $5.4 million. The excess purchase price over the net identifiable assets acquired was $1.4 million and was recorded in goodwill. The amounts recorded for goodwill and intangible assets are being amortized over 15 years for tax purposes. Acquired intangible assets are amortized on a straight-line basis over their estimated useful lives. The fair values of the identifiable intangible assets were estimated using a valuation methodology representing Level 3 fair value measurements.

The values assigned to the identifiable intangible assets acquired are preliminary and may be subject to adjustment upon the final determination of their respective fair values.

Disposition of Alliance Interventional, LLC

On December 31, 2020, Alliance sold its 77.28% membership interest in Alliance Interventional (“AI”) to Alliance’s joint venture partners (the “AI Sale”) who owned the remaining 22.72% membership interest. AI is the sole owner of The Pain Center of Arizona (“TPC”).

Prior to the AI Sale, AI owned 60% of the membership interests in Alliance Interventional-Florida, LLC (“AHIP-FL”) and the joint venture partners of AI assigned their indirect membership interest in AHIP-FL to Alliance. Following that transaction, AI no longer had a membership interest in AHIP-FL. In connection with the joint venture partners’ assignment of their indirect ownership in AHIP-FL to Alliance, Alliance reclassified $2.2 million from non-controlling interest to additional paid-in capital, which primarily represents the accumulated deficit allocated to the assigned non-controlling interest.

The total consideration received for the AI Sale was $15.0 million, consisting of $1.25 million in cash paid at closing and a $13.75 million promissory note due from the joint venture partners. The promissory note requires various principal payments during its term and is due on December 31, 2023. The promissory note bears interest at an annual interest rate of 9% through December 31, 2022 and 10% from January 1, 2023 through December 31, 2023. The promissory note is collateralized by a first priority security interest in all assets of AI and subsidiaries and secured by a pledge from the joint venture partners of a first priority security interest in their equity interests in AI.

As a result of the sale, Alliance wrote-off $15.2 million related to the carrying value of the non-controlling interest, $17.3 million of intangible assets, and $8.4 million related to goodwill allocated to the disposed business. Alliance recognized a gain on sale of $0.3 million, which was recorded in other income, net in the consolidated statement of operations and comprehensive loss for the year ended December 31, 2020.

Other

In July 2019, Alliance sold its interest in a consolidated joint venture for $1.2 million. As a result of the disposition, Alliance wrote-off $1.8 million related to the carrying value of the non-controlling interest. The net impact to earnings in connection with the sale was immaterial.

In August 2020, Alliance sold substantially all of the assets of a radiology center for $0.5 million. As a result of the disposition, Alliance recognized a gain on sale of $0.4 million, which was recorded in other income, net in the consolidated statement of operations and comprehensive loss for the year ended December 31, 2020.

In November 2020, Alliance sold its 50% membership interest in a consolidated joint venture for $2.2 million. As a result of the disposition, Alliance wrote-off $0.2 million related to the carrying value of the non-controlling interest and $0.2 million related to goodwill allocated to the disposed business. In addition, Alliance recognized a gain on sale of $1.8 million, which was recorded in other income, net in the consolidated statement of operations and comprehensive loss for the year ended December 31, 2020.

Equipment Debt

Alliance’s equipment debt is composed of financing arrangements with various lenders. The Company was in compliance with all such covenants as of March 31, 2021, except for one covenant in an agreement between an equipment lender and one of the Company’s controlled joint ventures. The equipment debt outstanding under this arrangement as of March 31, 2021 was $7.1 million. A waiver was obtained from the equipment lender for the violation of the minimum debt service coverage ratio for the trailing 12-month period as of March 31, 2021.

Off-Balance Sheet Arrangements

In the normal course of business, Alliance 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. Alliance indemnifies other parties, including customers, lessors, and parties to other transactions with Alliance, with respect to certain matters. Alliance 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, Alliance has entered into indemnification agreements with its executive officers and directors and its bylaws contain similar indemnification obligations. Under these arrangements, Alliance 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 March 31, 2021, Alliance has determined that no liability is necessary related to these guarantees and indemnities.

Critical Accounting Policies

The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the amounts reported in the financial statements. Actual results could differ from those estimates. The significant accounting policies that Alliance believes are the most critical to aid in fully understanding and evaluating its reported financial results include the following:

Revenue Recognition

Alliance derives the majority of its revenue directly from healthcare providers, primarily for imaging and radiation oncology services. To a lesser extent, Alliance generates revenues from direct billings to patients or their medical payors, and it records these revenues net of contractual discounts, estimated uncollectible amounts associated with patients, and other arrangements for providing services at less than established patient billing rates.

Alliance recognizes revenue in the period in which it satisfies its performance obligations by transferring goods or services to its customers. Alliance records the amount of revenue that reflects the consideration that it expects to receive in exchange for those goods or services. Alliance applies the following five-step model in order to determine this amount: (i) identification of the contract with a customer; (ii) identification of the promised goods or services in the contract and determination of whether they represent obligations, including whether they are distinct in the context of the contract; (iii) measurement of the transaction price, including the constraint on variable consideration; (iv) allocation of the transaction price to the performance obligations; and (v) recognition of revenue when (or as) Alliance satisfies each performance obligation.

Alliance continuously monitors collections from direct patient billings and compares these collections to revenue, net of contractual adjustments and estimated implicit price concessions related to uninsured amounts, recorded at the time of service. While these contractual adjustments and implicit price concessions have historically been within Alliance’s expectations and the provisions established, an inability to accurately estimate contractual adjustments and implicit price concessions in the future could have a material adverse effect on Alliance’s operating results. For certain contracts, Alliance generates revenue from the rental of equipment and it accounts for such contracts as operating leases. The revenue for these arrangements is recognized over the term of the related contract.

Valuation of Accounts Receivable

Alliance provides shared and single-user diagnostic imaging and oncology equipment and technical support services to the healthcare industry and directly to patients on an outpatient basis. Substantially all of Alliance’s accounts receivable are due from hospitals, other healthcare providers and health insurance providers, including Medicare, located throughout the U.S. Services are generally provided under long-term contracts with hospitals and other healthcare providers or directly to patients, and generally collateral is not required. Alliance generally collects receivables within industry norms for third-party payors. Alliance continuously monitors collections from its clients and maintains an allowance for estimated credit losses based upon any specific client collection issues that it has identified and its historical experience. Although credit losses have historically been within Alliance’s expectations and the provisions established, an inability to accurately estimate credit losses in the future could have a material adverse effect on its operating results.

Goodwill and Long-Lived Assets

ASC 350 requires that goodwill and indefinite-lived intangible assets are not amortized but instead tested for impairment at least annually at the reporting unit level. In addition, ASC 350 defines a reporting unit as an operating segment or one level below an operating segment (also known as a component). A component of an operating segment is a reporting unit under ASC 350 if the component constitutes a business for which discrete financial information is available and used by management. Alliance has evaluated ASC 350 and concluded there are three operating segments: Radiology, Oncology and Interventional. Alliance has assessed that each component listed above meets the definition of a reporting unit based on the conclusions that each component constitutes a business, discrete financial information is available for each component, and management regularly reviews the results of such financial information.

In accordance with ASC 350, Alliance performs an annual impairment test in the fourth quarter for goodwill and indefinite-lived intangible assets or more frequently if an event occurs or circumstances change that would more-likely-than-not reduce the fair value of a reporting unit below its carrying amount. Such indicators include a sustained significant decline in expected future cash flows due to changes in company-specific factors or the broader business climate.

In evaluating goodwill for impairment, Alliance first assesses qualitative factors to determine whether it is more-likely-than-not that the fair value of a reporting unit is less than its carrying amount. If Alliance concludes that it is more-likely-than-not that the fair value of a reporting unit is less than its carrying amount, Alliance conducts a quantitative goodwill impairment test. First, for each reporting unit, Alliance compares its estimated fair value with its net book value. If the estimated fair value exceeds its net book value, goodwill is deemed not to be impaired, and no further testing is necessary. If the estimated fair value does not exceed its net book value, goodwill is deemed to be impaired. Alliance records an impairment charge for the amount by which the carrying amount of the reporting unit exceeds its fair value.

The quantitative impairment analysis utilizes two primary approaches to calculate the fair value of the reporting unit: the discounted cash flow method (“DCF”) and the Guideline Public Company (“GPC”) method.

Under the DCF method, value is measured as the present worth of anticipated future net cash flows generated by a business. In a multi-period model, net cash flows attributable to a business are forecasted for an appropriate period and then discounted to present value using an appropriate discount rate. In a single-period model, net cash flow or earnings for a normalized period are capitalized to reach a determination of present value. The methods, key assumptions, degree of uncertainty associated with the key assumptions and the potential events or changes in circumstances that could reasonably be expected to negatively affect the key assumptions with respect to the reporting unit are the estimated future net cash flows generated and the discount rate applied to capture the associated risks. The ability to achieve anticipated future net cash flows is subject to numerous assumptions and risks, including company-specific risks such as the ability to maintain and grow revenues, maintain or improve operating margins, control costs and anticipate working capital requirements. The anticipated future net cash flows are also dependent on industry-level factors, such as the impact of legislation, patient volumes and cost reimbursement levels, and the continued availability of qualified doctors and other medical professionals who are necessary to staff Alliance’s operations, among other potential impacts.

Under the GPC method, value is estimated by comparing the subject company to similar companies with publicly-traded ownership interests. Guideline companies are selected based on comparability to the subject company, and valuation multiples are calculated and applied to subject company operating data. The key assumption used in connection with the GPC method focuses on identifying guideline companies that operate in the same (or similar) line of business as the reporting units with the same (or similar) operating characteristics. Eligible companies were selected based on Global Industry Classification Standard codes, Standard Industrial Classification codes, company descriptions, and industry affiliations. Considered factors include relative risk, profitability, and growth considerations of the reporting unit relative to the guideline companies. Value estimates for the reporting unit involve using multiples of market value of invested capital excluding cash to revenue and EBITDA. Valuations derived using the GPC method rely on information primarily obtained from available industry market data and publicly available filings with the Securities and Exchange Commission.

In testing indefinite-lived intangible assets for impairment, Alliance first assesses qualitative factors to determine whether it is more-likely-than-not that the fair value of an indefinite-lived intangible asset is less than its carrying amount. If Alliance concludes that it is more-likely-than-not that the fair value of an indefinite-lived intangible asset is less than its carrying amount, Alliance conducts a quantitative impairment test, which consists of a comparison of the fair value to its carrying amount. If the carrying amount exceeds its fair value, an impairment loss is recognized in an amount equal to that excess.

Finite-lived intangible assets are amortized over their respective estimated useful lives on a straight-line basis and are reviewed for impairment in accordance with ASC 360, “Property, Plant, and Equipment.”

Goodwill was tested for impairment at the reporting unit level as of October 1, 2020 and October 1, 2019, the dates of Alliance’s annual impairment review for the years ended December 31, 2020 and 2019, respectively. Alliance performed a quantitative test as part of its annual impairment review. In estimating fair values, Alliance used a combination of the income approach (the DCF method) and the market approach (the GPC method).

In both 2020 and 2019, Alliance’s respective annual impairment tests yielded individual fair values for its Radiology and Oncology reporting units that exceeded their respective carrying values; therefore, these reporting units were not considered at risk of impairment. The estimated fair values at October 1, 2020 exceeded their carrying values by 99% and 87% for the Radiology and Oncology reporting units, respectively. In connection with 2020 and 2019 annual impairment tests, Alliance concluded that the carrying value of the Interventional reporting unit exceeded its estimated fair value based on management’s assessment of the outlook and long-term business plans for this division. Consequently, Alliance recorded an impairment charge of $19.0 million and $3.9 million related to goodwill in the Interventional reporting unit in 2020 and 2019, respectively. In connection with the AI Sale, the remaining Interventional goodwill balance of $8.4 million was written off as of December 31, 2020.

During December 2020, Alliance re-evaluated its finite-lived intangible assets associated with its Interventional Division due to the projected outlook and long-term business plans for the division, as well as in connection with the divestiture of a portion of this division through the AI Sale. Consequently, Alliance recorded an impairment charge of $10.0 million for the remaining carrying value of the intangible assets associated with its Interventional Division during the year ended December 31, 2020.

Changes in estimates or assumptions could materially affect the determination of fair value and the conclusions of Alliance’s impairment tests. In addition to its annual review, Alliance performs a test of impairment when indicators of impairment are present. As of December 31, 2020 and 2019, there were no indications of impairment of Alliance’s goodwill balances.

The determination of fair value of Alliance’s reporting units requires significant estimates and assumptions. These estimates and assumptions primarily include earnings and required capital projections, discount rates, terminal growth rates, and operating income for each reporting unit and the weighting assigned to the results of each of the valuation methods described above. Changes in certain assumptions could have a significant impact on the goodwill impairment assessment. Alliance evaluated the significant assumptions used to determine the estimated fair values of each reporting unit, both individually and in the aggregate, and concluded they are reasonable. However, if weak market conditions continue for an extended period or the operating results of any of Alliance’s reporting units decline substantially compared to projected results, Alliance could determine that it needs to record additional impairment charges.

Purchase Accounting

In accordance with GAAP, the assets acquired and liabilities assumed in an acquired business are recorded at their estimated fair values on the date of acquisition. The difference between the purchase price amount and the net fair value of assets acquired and liabilities assumed is recognized as goodwill on the balance sheet if it exceeds the estimated fair value and as a bargain purchase gain on the income statement if it is below the estimated fair value. Determining the fair value of assets acquired and liabilities assumed requires management’s judgment, often utilizes independent valuation experts and involves the use of significant estimates and assumptions with respect to the timing and amounts of future cash inflows and outflows, discount rates, market prices and asset lives, among other items. The judgments made in the determination of the estimated fair value assigned to the assets acquired and liabilities assumed, as well as the estimated useful life of each asset and the duration of each liability, can materially impact the financial statements in periods after acquisition, such as through depreciation and amortization expense.