Exhibit 99.1

FORM 51-102F4

BUSINESS ACQUISITION REPORT

Akumin Inc. (including its affiliates and subsidiaries, the “Company”) 151 Bloor Street West, Suite 603 Toronto, ON M5S 1S4

Riadh Zine, Chairman and Co-Chief Executive Officer – 954-320-6910

The Company consummated the acquisition of all of the issued and outstanding common stock of Thaihot Investment Company US Limited, the sole shareholder of Alliance HealthCare Services Inc. (“Alliance”), pursuant to a share purchase agreement dated June 25, 2021 (the “Acquisition”). Alliance is a leading national provider of radiology and oncology solutions providing outsourced advanced radiology and radiation therapy services across 45 states in the U.S. and partnering with more than 1,000 hospitals, health systems and physician practices. Additional disclosure regarding the Acquisition and Alliance can be found in the Company’s material change report dated September 10, 2021, a copy of which is available on the Company’s SEDAR profile at www.sedar.com and under its public disclosure at www.sec.gov.

September 1, 2021

The total purchase price for the Acquisition was approximately US$820 million of which an aggregate of approximately US$42.4 million was satisfied by the issuance of 14,223,570 common shares of the Company (“Common Shares”) at a price of US$2.98 per Common Share with the balance paid in cash or by the assumption of debt. The cash portion of the purchase price was partly financed with (i) US$375 million of proceeds raised from the Company’s private offering of 7.500% senior secured notes due 2028 that closed on August 9, 2021, which proceeds were released from escrow contemporaneously with the closing of the Acquisition when the Company assumed the obligations of the issuer of the notes, Akumin Escrow Inc., and (ii) the proceeds from the issuance of US$340 million of unsecured notes of Akumin Corp. and approximately US$10.4 million of proceeds from the issuance of 3,500,000 Common Shares at a price of US$2.98 per Common Share, in each case issued to Stonepeak Magnet Holdings LP (“Stonepeak”) contemporaneously with the closing of the Acquisition. In connection with the debt and equity financing provided by Stonepeak, Stonepeak also received warrants to purchase 17,114,093 Common Shares at an exercise price of US$2.98 per Common Share.

The Company does not have any current plans or proposals for material changes in the Company’s business affairs or the affairs of the businesses of Alliance that it acquired which would have significant effects on the results of operations and financial position of the Company other than what has been discussed above.

To the knowledge of the Company, there has been no valuation opinion obtained within the last 12 months by Alliance or the Company required by securities legislation or a Canadian exchange or market to support the consideration paid by the Company in connection with the acquisition of Alliance.

The acquisition was not with any informed person, associate or affiliate of the Company.

November 15, 2021.

The following financial statements, which are appended hereto as Exhibits A through C of this report, respectively, are hereby incorporated by reference and form part of this report:

Cautionary Statement Regarding Forward-Looking Statements

Certain information included in this Business Acquisition Report, including the unaudited pro forma combined financial statements of the Company attached as Exhibit C, and statements that express management’s expectations or estimates of future performance including the effect of the acquisition of Alliance on the Company’s results of operations or financial position, may constitute “forward-looking statements” within the meaning of applicable Canadian securities legislation. These statements relate to analysis and other information that are based on forecasts of future results, estimates of amounts not yet determinable and assumptions by management. Readers are cautioned not to place undue reliance on such forward-looking statements. Forward-looking statements are based on current expectations, estimates and assumptions that involve a number of risks, which could cause actual results to vary and in some instances to differ materially from those anticipated by the Company and described in the forward-looking statements contained in this Business Acquisition Report. The various factors that could cause results to vary materially from those indicated in the forward-looking statements include a failure to realize anticipated synergies and the ability of the Company to integrate Alliance’s business into the Company’s operations. No assurance can be given that any of the events anticipated by the forward-looking statements will transpire or occur or, if any of them do so, what benefits the Company will derive there from.

EXHIBIT A

AUDITED CONSOLIDATED FINANCIAL STATEMENTS

OF ALLIANCE HEALTHCARE SERVICES, INC.

FOR THE YEARS ENDED DECEMBER 31, 2020 AND 2019

See attached.

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

Irvine, California

March 15, 2021

1

See accompanying notes to the consolidated financial statements.

2

See accompanying notes to the consolidated financial statements.

3

See accompanying notes to the consolidated financial statements.

4

See accompanying notes to the consolidated financial statements.

5

See accompanying notes to the consolidated financial statements.

6

ALLIANCE HEALTHCARE SERVICES, INC.

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:

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.

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:

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 services are satisfied.

12

ALLIANCE HEALTHCARE SERVICES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

December 31, 2020 and 2019

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:

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:

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.

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.

14

ALLIANCE HEALTHCARE SERVICES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

December 31, 2020 and 2019

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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ALLIANCE HEALTHCARE SERVICES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

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”).

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ALLIANCE HEALTHCARE SERVICES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

December 31, 2020 and 2019

The purchase price for this acquisition was $7.4 million and was funded with proceeds from the Company’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.

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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ALLIANCE HEALTHCARE SERVICES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

December 31, 2020 and 2019

4. Fair Value of Financial Instruments

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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ALLIANCE HEALTHCARE SERVICES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

December 31, 2020 and 2019

5. Goodwill and Intangible Assets

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:

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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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:

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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:

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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ALLIANCE HEALTHCARE SERVICES, INC.

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:

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:

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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ALLIANCE HEALTHCARE SERVICES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

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 and June 30, 2020.

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ALLIANCE HEALTHCARE SERVICES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

December 31, 2020 and 2019

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.

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ALLIANCE HEALTHCARE SERVICES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

December 31, 2020 and 2019

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:

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.

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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:

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:

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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.

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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:

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.

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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:

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.

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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: