AKUMIN INC. – 10-K – Management's Discussion and Analysis of Financial Condition and Results of Operations

The following discussion and analysis of our financial condition and results of
operations should be read in conjunction with our consolidated financial
statements and related notes that appear in Item 8 of this Annual Report on Form
10-K. In addition to historical information, the following discussion contains
forward-looking statements that are subject to risks and uncertainties. Actual
results may differ substantially and adversely from those referred to herein due
to a number of factors, including, but not limited to, those described below and
in Item 1A "Risk Factors" and elsewhere in this Annual Report on Form 10-K.

Overview

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

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

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

                  Year Ended December 31,
                      2022               2021
Radiology                      83  %      89  %
Oncology                       17  %      11  %
                              100  %     100  %


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

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

                                            Year Ended December 31,
(in thousands)                                2022               2021
Patient fee payors:
Commercial                            $     272,399           $ 226,843
Medicare                                     82,326              51,238
Medicaid                                     12,781               8,002
Other patient revenue                        12,880              11,499
                                            380,386             297,582
Hospitals and healthcare providers          360,537             118,491
Other revenue                                 8,708               5,006
                                      $     749,631           $ 421,079

Summary of Factors Affecting Our Performance

Pricing

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

Competition

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

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

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

Seasonality

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

Industry Trends

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

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Inflation

Inflationary pressures impact us primarily in the area of labor costs and
medical supplies. The healthcare industry is labor intensive. Wages and other
expenses increase during periods of inflation and when labor shortages occur in
the marketplace. Suppliers and third-party service providers pass along rising
costs to us in the form of higher prices. Managing these costs remains a
significant challenge and priority for us.

Labor Shortages

Labor shortages among healthcare providers resulting from the COVID-19 pandemic
and new variants, including burnout and attrition, has led to increased
difficulty in hiring and retaining staff as well as increased labor costs and
wage inflation. The shortage of clinical labor has also impacted our ability to
generate same-store revenue growth.

Acquisitions and New/Closed Facilities

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

                        December 31,
                    2022             2021
Radiology sites    181               188
Oncology sites      30                34
                   211               222


Recent Developments

Alliance Acquisition

On September 1, 2021, we acquired Alliance for a total purchase price of $785.6
million. The acquisition was financed with (i) cash on hand, (ii) $340.0 million
of proceeds from the issuance of unsecured notes, (iii) $10.4 million of
proceeds from the issuance of 3,500,000 shares of our common stock, (iv) $375.0
million of proceeds from a private offering of 7.5% senior secured notes, and
(v) the issuance of 14,223,570 shares of our common stock to the seller.

Financing Transactions

On February 11, 2021, we completed a private offering of $75.0 million aggregate
principal amount of additional 7.0% senior secured notes due November 2025.
These notes were offered as additional notes under the same indenture as the
previously issued 2025 Senior Notes and will be treated as a single series with
the 2025 Senior Notes. The proceeds were used to partially fund acquisitions
with any unused proceeds to be used for working capital and other general
corporate purposes.

On August 9, 2021, we completed an offering of $375.0 million of aggregate
principal amount of 7.5% senior secured notes due August 1, 2028 (the "2028
Senior Notes"). The proceeds of the offering were used to fund the Alliance
Acquisition.

On September 1, 2021, Stonepeak purchased $340.0 million principal amount of
unsecured notes of Akumin Corp., our wholly owned indirect subsidiary (the
"Stonepeak Notes"), together with warrants to purchase 17,114,093 shares of our
common stock (the "Stonepeak Warrants") and 3,500,000 shares of our common stock
for total cash consideration of $10.4 million. No additional cash consideration
was paid for the Stonepeak Warrants. The proceeds of this offering were used to
fund the Alliance Acquisition.

Additional 2021 Acquisitions

On May 1, 2021, we acquired six outpatient diagnostic imaging centers in Florida
for aggregate cash consideration of $34.1 million and share consideration of
$3.0 million through issuance of 974,999 shares of our common stock.

On May 1, 2021, we acquired one outpatient diagnostic imaging center in South
Florida for cash consideration of $0.8 million.

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On June 1, 2021, we acquired three outpatient diagnostic imaging centers in
Massachusetts for cash consideration of $0.5 million.

COVID-19

We believe the extent of COVID-19's impact on our operating results and
financial condition has been and could continue to be driven by many factors,
most of which are beyond our control and ability to forecast. Because of these
uncertainties, we cannot estimate how long or to what extent COVID-19 will
impact our operations. See "Risks Relating to the COVID-19 Pandemic" in Item 1A
of this Annual Report on Form 10-K.

Results of Operations

The following table presents our consolidated statements of operations for the
years ended December 31, 2022 and 2021. The results for the year ended
December 31, 2021 include the results of Alliance for four months since the date
of acquisition.

                                                                               Year Ended December 31,
(in thousands)                                                                 2022                   2021
Revenues                                                               $     749,631              $  421,079
Operating expenses:
Cost of operations, excluding depreciation and amortization                  608,377                 356,367
Depreciation and amortization                                                 98,205                  44,895
Impairment charges                                                            47,202                       -
Restructuring charges                                                         16,625                   1,992
Severance and related costs                                                   10,890                   1,376
Settlements, recoveries and related costs                                        679                    (539)
Stock-based compensation                                                       3,242                   2,792
Other operating expense (income), net                                         (7,512)                    583
Total operating expenses                                                     777,708                 407,466
Income (loss) from operations                                                (28,077)                 13,613
Other expense (income):
Interest expense                                                             118,012                  62,575
Acquisition-related costs                                                        708                  20,233
Other non-operating income, net                                               (3,620)                 (3,990)
Total other expense, net                                                     115,100                  78,818
Loss before income taxes                                                    (143,177)                (65,205)
Income tax expense (benefit)                                                   8,410                 (30,391)
Net loss                                                                    (151,587)                (34,814)
Less: Net income attributable to noncontrolling interests                      5,174                   8,477
Net loss attributable to common stockholders                                (156,761)                (43,291)

Net loss per share attributable to common stockholders:
Basic and diluted                                                      $       (1.75)             $    (0.56)


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Revenues

The following table summarizes our revenues by segment:

                                           Year Ended December 31,
                   (in thousands)            2022               2021
                   Radiology         $     624,845           $ 374,402
                   Oncology                124,786              46,677
                                     $     749,631           $ 421,079


Revenues for the year ended December 31, 2022 were $749.6 million and increased
by $328.6 million, or 78%, from the year ended December 31, 2021. This increase
includes $310.8 million of incremental revenues contributed by Alliance during
the year ended December 31, 2022, primarily due to timing of the Alliance
Acquisition, and therefore only included four months' results in the comparative
period. The remaining increase in revenues during 2022 was driven by an increase
in scan volumes, lower implicit price concessions, and a $3.3 million
incremental revenue contribution from other acquisitions completed in 2021.

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

                                                     Year Ended December 31,
      (in thousands)                       2022                2021        Change       % Change
      MRI scans                                     876         539         337             63  %
      PET/CT scans                                  133          46          87            189  %

      Oncology patient starts                    10.347       3.401       6.946            204  %

Cost of Operations, excluding Depreciation and Amortization

Cost of operations, excluding depreciation and amortization, for the year ended
December 31, 2022 was $608.4 million and increased by $252.0 million, or 71%,
from the year ended December 31, 2021. This increase includes $231.1 million of
incremental costs incurred by Alliance during the year ended December 31, 2022,
primarily due to timing of the Alliance Acquisition, and therefore only included
four months' results in the comparative period. The remaining increase was
primarily driven by higher employee compensation and third-party services and
professional fees, and other acquisitions completed in the second quarter of
2021.

The following table summarizes the components of our cost of operations,
excluding depreciation and amortization, for the years ended December 31, 2022
and 2021:

                                                        Year Ended December 31,
     (in thousands)                                       2022               2021
     Employee compensation                        $     279,906           $ 160,840

     Third-party services and professional fees         120,441            

 60,108
     Rent and utilities                                  50,715              37,158
     Reading fees                                        46,164              42,842
     Administrative                                      45,706              27,853

     Medical supplies and other                          65,445            

 27,566
                                                  $     608,377           $ 356,367


Employee Compensation

Employee compensation for the year ended December 31, 2022 was $279.9 million
and increased by $119.1 million, or 74%, from the year ended December 31, 2021.
This increase includes $110.5 million of incremental costs incurred by Alliance
during the year ended December 31, 2022, primarily due to timing of the Alliance
Acquisition, and therefore only included four months' results in the comparative
period. The remaining increase was primarily driven by wage inflation and higher
compensation to attract and retain clinical staff due to labor shortages in
certain markets, merit increases, and other acquisitions completed during 2021.

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Third-Party Services and Professional Fees

Third-party services and professional fees for the year ended December 31, 2022
were $120.4 million and increased by $60.3 million, or 100%, from the year ended
December 31, 2021. This increase includes $53.8 million of incremental costs
incurred by Alliance during the year ended December 31, 2022, primarily due to
timing of the Alliance Acquisition, and therefore only included four months'
results in the comparative period. The remaining increase was primarily due to
higher professional fees and information technology related services, and other
acquisitions completed during 2021.

Rent and Utilities

Rent and utilities for the year ended December 31, 2022 were $50.7 million and
increased by $13.6 million, or 36%, from the year ended December 31, 2021. This
increase includes $11.4 million of incremental costs incurred by Alliance during
the year ended December 31, 2022, primarily due to timing of the Alliance
Acquisition, and therefore only included four months' results in the comparative
period. The remaining increase in these costs was primarily due to other
acquisitions completed during 2021. Rent and utilities are largely a fixed cost.

Reading Fees

Reading fees for the year ended December 31, 2022 were $46.2 million and
increased by $3.3 million, or 8%, from the year ended December 31, 2021. Our
reading fees are primarily based on the volume of procedures performed. This
increase includes $1.8 million of incremental costs incurred by Alliance during
the year ended December 31, 2022, primarily due to timing of the Alliance
Acquisition, and therefore only included four months' results in the comparative
period. The remaining increase included the impact of other acquisitions
completed during 2021.

Administrative Expenses

Administrative expenses for the year ended December 31, 2022 were $45.7 million
and increased by $17.9 million, or 64%, from the year ended December 31, 2021.
This increase includes $15.6 million of incremental costs incurred by Alliance
during the year ended December 31, 2022, primarily due to timing of the Alliance
Acquisition, and therefore only included four months' results in the comparative
period. The remaining increase was driven primarily by higher insurance costs.

Medical Supplies and Other Expenses

Medical supplies and other expenses for the year ended December 31, 2022 were
$65.4 million and increased by $37.9 million, or 137%, from the year ended
December 31, 2021. This increase includes $37.9 million of incremental costs
incurred by Alliance during the year ended December 31, 2022, primarily due to
timing of the Alliance Acquisition, and therefore only included four months'
results in the comparative period.

Depreciation and Amortization

Depreciation and amortization for the year ended December 31, 2022 were $98.2
million and increased by $53.3 million, or 119%, from the year ended
December 31, 2021. This increase includes $53.2 million of incremental costs
incurred by Alliance during the year ended December 31, 2022, primarily due to
timing of the Alliance Acquisition, and therefore only included four months'
results in the comparative period.

Impairment Charges

Impairment charges for the year ended December 31, 2022 were $47.2 million
compared to $0.0 million for the year ended December 31, 2021. These charges
consist primarily of a $46.5 million goodwill impairment charge in our Oncology
reporting unit. See further discussion in Note 7 to the consolidated financial
statements that appear in Item 8 of this Annual Report on Form 10-K.

Restructuring Charges

Restructuring charges for the year ended December 31, 2022 were $16.6 million
compared to $2.0 million for the year ended December 31, 2021. This increase is
primarily due to $11.0 million of incremental transformation costs, lease
termination costs of $1.8 million, and domestication and related costs of
$1.4 million. See further discussion in Note 18 to the consolidated financial
statements that appear in Item 8 of this Annual Report on Form 10-K.

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Severance and Related Costs

Severance and related costs for the year ended December 31, 2022 were
$10.9 million compared to $1.4 million for the year ended December 31, 2021.
These costs include severance and benefits costs paid to terminated employees.
See further discussion in Note 18 to the consolidated financial statements that
appear in Item 8 of this Annual Report on Form 10-K.

Other Expense (Income)

Other operating income, net for the year ended December 31, 2022 was
$7.5 million compared to operating expense, net of $0.6 million for the year
ended December 31, 2021. The other operating income, net in 2022 includes a $7.4
million gain on sale of accounts receivable. See further discussion in Note 5 to
the consolidated financial statements that appear in Item 8 of this Annual
Report on Form 10-K.

Interest expense for the year ended December 31, 2022 was $118.0 million and
increased by $55.4 million, or 89%, from the year ended December 31, 2021. This
increase is primarily due to the interest associated with the 2028 Senior Notes
and Subordinated Notes that were issued during September 2021 in connection with
the Alliance Acquisition.

Acquisition-related costs for the year ended December 31, 2022 were $0.7 million
compared to $20.2 million for the year ended December 31, 2021. This decrease is
primarily due to reduced acquisition-related activities.

Other non-operating income for the year ended December 31, 2022 was $3.6 million
compared to $4.0 million for the year ended December 31, 2021. The other
non-operating income in 2022 includes a $1.4 million fair value adjustment of
the derivative associated with the Subordinated Notes and $1.0 million of
earnings from unconsolidated investees. The other non-operating income in 2021
consists primarily of a $3.4 million gain on the conversion of a debt investment
to an equity investment.

Income Tax Expense (Benefit)

Income tax expense for the year ended December 31, 2022 was $8.4 million
compared to income tax benefit of $30.4 million for the year ended December 31,
2021. The effective tax rate for the year ended December 31, 2022 differs from
the U.S. federal statutory rate of 21% primarily due to the impact of valuation
allowances applied against losses in jurisdictions for which no tax benefit or
expense is recognized, partially offset by state income taxes. The effective tax
rate for the year ended December 31, 2021 differs from the Canadian statutory
rate of 26.5% primarily due to the impact of releasing the valuation allowance
for deferred tax assets expected to be realized as a result of the Alliance
Acquisition, partially offset by the impact of non-deductible expenses. Akumin,
Inc. re-domesticated from Ontario, Canada to Delaware, USA on September 30,
2022.

Net Income Attributable to Noncontrolling Interests

Net income attributable to noncontrolling interests for the year ended
December 31, 2022 was $5.2 million and decreased by $3.3 million from the year
ended December 31, 2021. This decrease is primarily due to the Oncology
reporting unit goodwill impairment charge in non-wholly owned entities, offset
by the timing of the Alliance Acquisition, and therefore only included four
months' results in the comparative period.

Non-GAAP Financial Measures

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

We define Adjusted EBITDA as net income before interest expense, income tax
expense (benefit), depreciation and amortization, impairment charges,
restructuring charges, severance and related costs, settlements and related
costs (recoveries), stock-based compensation, gain on sale of accounts
receivable, losses (gains) on disposal of property and equipment,
acquisition-related costs, financial instrument revaluation adjustments, gain on
conversion of debt to equity investment, deferred rent expense, other losses
(gains), and one-time adjustments. Adjusted EBITDA is a non-GAAP

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financial measure used as an analytical indicator by us and the healthcare
industry to assess business performance and is a measure of leverage capacity
and ability to service debt. Adjusted EBITDA should not be considered in
isolation or as an alternative to net income, cash flows generated by operating,
investing or financing activities or other financial statement data presented in
the consolidated financial statements as indicators of financial performance or
liquidity. Adjusted EBITDA is not a financial measure determined in accordance
with GAAP and is therefore susceptible to varying methods of calculation and may
not be comparable to other similarly titled measures of other companies.

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

                                                        Year Ended December 31,
(in thousands)                                            2022               2021
Net loss                                           $    (151,587)         $ (34,814)
Interest expense                                         118,012             62,575
Income tax expense (benefit)                               8,410            (30,391)
Depreciation and amortization                             98,205             44,895

Impairment charges                                        47,202                  -
Restructuring charges                                     16,625              1,992
Severance and related costs                               10,890              1,376
Settlements, recoveries and related costs                    679            

(539)

Stock-based compensation                                   3,242            

2,792

Gain on sale of accounts receivable                       (7,384)           

-

Loss on disposal of property and equipment, net              173            

748

Acquisition-related costs                                    708            

20,233

Fair value adjustment on derivative                       (1,390)           

(100)

Gain on conversion of debt to equity investment                -             (3,360)
Deferred rent expense                                      1,205              1,802
Other, net                                                  (888)              (306)
Adjusted EBITDA                                    $     144,102          $  66,903

We operate in two reportable segments: radiology and oncology. The following
table summarizes our Adjusted EBITDA by segment:

                         Year Ended December 31,
(in thousands)             2022                2021
Adjusted EBITDA:
Radiology          $     126,156            $ 64,992
Oncology                  43,430              15,466
Corporate                (25,484)            (13,555)
                   $     144,102            $ 66,903


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Liquidity and Capital Resources

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

                                                                        Year Ended December 31,
(in thousands)                                                         2022                  2021
Cash and cash equivalents, beginning of period                   $      48,419          $    44,396
Net cash provided by operating activities                               65,367               17,050
Net cash used in investing activities                                  (38,703)            (779,171)
Net cash provided by (used in) financing activities                    (15,659)             766,144
Cash and cash equivalents, end of period                         $      

59,424 $ 48,419

Cash Flows from Operating Activities

Cash provided by operating activities was $65.4 million for the year ended
December 31, 2022 and consisted of a net loss of $151.6 million adjusted for
certain non-cash items and changes in certain operating assets and liabilities.
The primary non-cash charges included in the net loss are $98.2 million of
depreciation and amortization, $50.8 million of non-cash interest expense,
$47.2 million of impairment charges, and $7.5 million of deferred income taxes.
Changes in operating assets and liabilities, net of acquisitions, provided
$18.1 million of operating cash driven primarily by a $14.3 million decrease in
accounts receivable and a $7.0 million increase in accounts payable and other
liabilities, partially offset by a $3.4 million increase in prepaid expenses and
other assets.

Cash Flows from Investing Activities

During the year ended December 31, 2022, cash used in investing activities was
$38.7 million, a decrease of $740.5 million from the prior year. Cash used for
business acquisitions during the year ended December 31, 2021 was $758.1
million, driven primarily by cash used to acquire Alliance of $722.4 million
(net of the cash acquired). There were no business acquisitions during the year
ended December 31, 2022. Purchases of property and equipment for the year ended
December 31, 2022 were $44.8 million, an increase of $26.9 million from the
prior year primarily due to timing of the Alliance Acquisition, and therefore
only included four months' purchases of property and equipment in the
comparative period.

Cash Flows from Financing Activities

During the year ended December 31, 2022, cash used in financing activities was
$15.7 million compared to cash provided by financing activities of
$766.1 million for the prior year. Financing activities during the year ended
December 31, 2022 included $36.5 million of proceeds from long-term debt and
$29.0 million of proceeds from our revolving facility, offset by payments on our
revolving facility of $29.0 million, distributions paid to noncontrolling
interests of $28.1 million, principal payments on long-term debt of
$16.1 million, and principal payments on finance leases of $8.0 million.

Liquidity Outlook

Cash and cash equivalents were $59.4 million as of December 31, 2022. In
addition, we have a revolving credit facility under which we may borrow up to
$55.0 million for working capital and other general corporate purposes. As of
December 31, 2022, there were no borrowings outstanding under the revolving
credit facility. We believe that our existing cash, cash equivalents and
expected future cash flow from operations will provide sufficient funds to
finance our operations for at least the next twelve months. However, it is
possible that we may need to supplement our existing sources of liquidity to
finance our activities beyond the next twelve months and there can be no
assurance that sources of liquidity will be available to us at that time or if
available will be on commercially reasonable terms. In addition, we may be
limited to obtain additional financing under the terms of the financing from
Stonepeak.

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

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For additional information regarding our revolving credit facility and the
additional borrowing available for future acquisitions, see Note 9 to Item 8 of
this Annual Report on Form 10-K.

For a description of contractual obligations, such as debt, finance leases and
operating leases, see Note 9, Note 10 and Note 11 to Item 8 of this Annual
Report on Form 10-K, respectively.

Critical Accounting Policies and Estimates

The preparation of the financial statements in accordance with GAAP requires us
to make estimates and judgments that affect the amounts reported in the
consolidated financial statements and accompanying notes. We base our estimates
on historical experience and various other factors that we believe to be
reasonable under the circumstances, including the current economic environment,
in making judgments about the carrying values of assets and liabilities. We
believe the accounting policies described below to be our most critical
accounting policies. These accounting policies are affected significantly by
judgments, assumptions and estimates used in the preparation of the financial
statements and actual results could differ materially from the amounts reported
based on these policies.

We have other significant accounting policies that do not generally require
subjective estimates or judgments or would not have a material impact on our
results of operations. Our significant accounting policies are described in Note
2 to Item 8 of this Annual Report on Form 10-K.

Revenue Recognition

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

We recognize revenue in the period in which performance obligations are
satisfied by providing services to customers. We record the amount of revenue
that reflects the consideration that we expect to receive in exchange for those
services. We apply the following five-step model in order to determine this
amount: (i) identification of the contract with a customer; (ii) identification
of the promised 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) we satisfy each performance obligation.

Patient Fee Payors

Our patient fee revenues are generated from freestanding facilities that we
manage and operate. We submit billings and collect fees directly from the
patients and third-party payors. Our performance obligations are to provide
outpatient medical services to patients, such as diagnostic services, radiation
therapy, or the provision of goods and services during a patient visit. Revenues
are recorded during the period the obligations to provide medical 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 payor (Medicare, Medicaid, managed
care health plans, attorneys, employers 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 payors. The payment
arrangements with third-party payors for the services we provide 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 we expect to be entitled to
receive from patients and third-party payors. Estimates of contractual
adjustments under managed care and commercial insurance plans are based upon the
payment terms specified in the related contractual agreements, negotiated rates
and historical and expected payment patterns. 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). We also record estimated implicit price concessions
(based primarily on historical collection experience) related to uninsured
accounts to record self-

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pay revenues at the estimated amounts ultimately expected to be collected. We
consider readily available information when preparing estimates.

Hospital and Healthcare Providers

Our hospital and healthcare provider revenues are derived from services provided
under an outsourced contract arrangement with hospitals, physician groups and
other healthcare providers. Under these outsourced service contracts, we provide
medical services to patients at a fixed site facility or mobile unit. We
typically bundle our 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 our 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. We bill customers 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. We do 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; therefore, we treat the allowance
for doubtful accounts related to these arrangements as bad debt expense, which
is recorded in operating expenses in our consolidated statements of operations
and comprehensive loss. For service fees based on a percentage of collections,
we receive payment after the hospital and other healthcare provider customers
are paid by third-party payors 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 patient fee payors.

Accounts Receivable

Substantially all of our accounts receivable are due from health insurance
providers (including Medicare and Medicaid), hospitals, other healthcare
providers and patients, located throughout the U.S. A significant portion of our
services are provided directly to patients or pursuant to long-term contracts
with hospitals and other healthcare providers. Estimated credit losses are
provided for in our consolidated financial statements.

Accounts receivable are reported at realizable value, net of allowances for
price concessions and doubtful accounts, which are estimated and recorded in the
period the related revenue is recorded. Implicit price concessions are recorded
as a reduction in revenue with an offsetting amount reducing the carrying value
of the receivable. We have a standardized approach to estimate and review the
collectability of our 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 operating
expenses in our consolidated statements 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.

Business Combinations

Acquisitions of entities over which we exercise control are accounted for using
the acquisition method of accounting. The assets acquired and liabilities
assumed in a business combination 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. Non-controlling interests in the
acquired company are measured at their 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.

Goodwill and Long-Lived Assets

Goodwill and Indefinite-Lived Intangible Assets

Goodwill and indefinite-lived intangible assets are not amortized but instead
tested for impairment at least annually at the reporting unit level. We perform
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

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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, we first assess qualitative factors to
determine whether it is more-likely-than-not the fair value of a reporting unit
is less than its carrying amount. If we conclude it is more-likely-than-not the
fair value of a reporting unit is less than its carrying amount, we conduct a
quantitative goodwill impairment test. First, for each reporting unit, we
compare 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. We record 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 legislation, patient volumes, cost-reimbursement
levels, and continued availability of qualified doctors and other medical
professionals who are necessary to staff our 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. 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 evaluating indefinite-lived intangible assets for impairment, we first assess
qualitative factors to determine whether it is more-likely-than-not the fair
value of an indefinite-lived intangible asset is less than its carrying amount.
If we conclude it is more-likely-than-not the fair value of an indefinite-lived
intangible asset is less than its carrying amount, we conduct 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.

Long-Lived Assets with Finite Lives

Long-lived assets, including property and equipment and purchased intangible
assets subject to amortization (i.e., customer contracts and trade names), are
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.

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Income Taxes

Income tax expense is computed using the asset and liability method. 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. We regularly review our deferred tax assets for
recoverability and establish 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.

Derivatives

The valuation of derivatives is complex and requires significant estimates and
judgments that affect the amounts reported in the consolidated financial
statements and accompanying notes. The following summarizes the critical
accounting policies related to our significant derivatives.

Warrants

We review the terms of warrants to purchase our common stock to determine
whether the warrants should be classified as liabilities or stockholders' equity
in our consolidated balance sheets. In order for a warrant to be classified in
stockholders' equity, the warrant must be (i) indexed to the company's equity
and (ii) meet the conditions for equity classification.

If a warrant does not meet the conditions for stockholders' equity
classification, it is carried on the consolidated balance sheets as a warrant
liability measured at fair value, with subsequent changes in the fair value of
the warrant recorded in other non-operating losses (gains) in the consolidated
statements of operations and comprehensive loss. If a warrant meets both
conditions for equity classification, the warrant is initially recorded, at its
relative fair value on the date of issuance, in stockholders' equity in the
consolidated balance sheets, and the amount initially recorded is not
subsequently remeasured at fair value.

The fair value of the Stonepeak Warrants at the date of issuance was determined
using the Black-Scholes option pricing model based on management estimates and
assumptions. We determined the Stonepeak Warrants should be classified in
stockholders' equity and not subsequently remeasured as long as they continue to
meet the conditions for equity classification. The relative fair value of the
Stonepeak Warrants on the issuance date, net of allocated transaction costs, was
$21.0 million, and is included in additional paid-in capital in the consolidated
balance sheet as of December 31, 2022.

Embedded Derivatives

We review the terms of debt and equity financing transactions to identify
whether there are any embedded derivatives that require separation from the
related host financial instrument. Any such embedded derivatives are presented
at fair value in the consolidated balance sheets, with changes in fair value
recorded in other non-operating losses (gains) in the consolidated statements of
operations and comprehensive loss. Determination of whether a contract provision
constitutes an embedded derivative requires significant management judgment. We
separate an embedded provision in a debt or equity contract in which management
determines that (i) the economic characteristics and risks of the embedded
derivative provision are not clearly and closely related to the economic
characteristics and risks of the host instrument, (ii) the host instrument
itself is not carried at fair value in the consolidated balance sheets, and
(iii) the embedded provision would meet the definition of a derivative financial
instrument if it were issued on a standalone basis.

We identified an embedded derivative related to a change of control redemption
election provision included in the Stonepeak Notes and determined that it should
be separated from the Stonepeak Notes and initially and subsequently be reported
as a liability and measured at fair value. Determining the fair value of the
change of control redemption election embedded derivative requires significant
management estimates and judgment. The fair value of the change of control
redemption election liability was determined using a probability weighted
scenario analysis regarding a potential change of control during the seven years
from initiation date. The fair value of the change of control redemption
election of $6.1 million and $7.5 million as of December 31, 2022 and 2021,
respectively, is recorded as an embedded derivative liability and included in
other liabilities in the consolidated balance sheets. See further discussion
regarding the change of control redemption election embedded derivative in Note
9 to Item 8 of this Annual Report on Form 10-K.

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