UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 | ||
For the Quarterly Period Ended | ||
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TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the transition period from to
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SECURITIES REGISTERED PURSUANT TO SECTION 12(b) OF THE ACT:
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SECURITIES REGISTERED PURSUANT TO SECTION 12(g) OF THE ACT: None
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ASSURE HOLDINGS CORP.
FORM 10Q
FOR THE QUARTER ENDED MARCH 31, 2024
TABLE OF CONTENTS
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
ASSURE HOLDINGS CORP.
CONDENSED CONSOLIDATED BALANCE SHEETS
(in thousands, except share and par amounts)
| March 31, |
| December 31, | |||
2024 | 2023 | |||||
(unaudited) | ||||||
ASSETS | ||||||
Current assets |
|
|
|
| ||
Cash | $ | | $ | | ||
Accounts receivable, net |
| |
| | ||
Other current assets |
| |
| | ||
Assets held for sale |
| — |
| | ||
Total current assets |
| |
| | ||
Equity method investments |
| |
| | ||
Operating lease right of use asset, net | | | ||||
Total assets | $ | | $ | | ||
LIABILITIES AND SHAREHOLDERS’ DEFICIT | ||||||
LIABILITIES | ||||||
Current liabilities | ||||||
Accounts payable and accrued liabilities | $ | | $ | | ||
Current portion of debt |
| |
| | ||
Current portion of lease liability |
| |
| | ||
Current portion of acquisition liability |
| |
| | ||
Short-term promissory notes (Note 6) | | — | ||||
Other current liabilities |
| |
| | ||
Total current liabilities |
| |
| | ||
Lease liability, net of current portion |
| |
| | ||
Acquisition liability, net of current portion | | | ||||
Total liabilities |
| |
| | ||
Commitments and contingencies (Note 9) | ||||||
SHAREHOLDERS’ DEFICIT | ||||||
Common stock: $ |
| |
| | ||
Additional paid-in capital |
| |
| | ||
Accumulated deficit |
| ( |
| ( | ||
Total shareholders’ deficit |
| ( |
| ( | ||
Total liabilities and shareholders’ deficit | $ | | $ | |
The accompanying notes are an integral part of these condensed consolidated financial statements.
2
ASSURE HOLDINGS CORP.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands, except share and per share amounts)
(unaudited)
Three Months Ended March 31, | |||||
2024 |
| 2023 | |||
Revenue | $ | | $ | | |
Cost of revenues |
| |
| | |
Gross margin |
| ( |
| ( | |
Operating expenses (income) | |||||
General and administrative |
| |
| | |
Depreciation and amortization |
| — |
| | |
Gain on settlement of accounts payable | ( | — | |||
Total operating expenses |
| |
| | |
Loss from operations |
| ( |
| ( | |
Other income (expenses) | |||||
Income from equity method investments |
| — | | ||
Interest expense |
| ( |
| ( | |
Other income (expense), net |
| |
| | |
Accretion expense (Note 6) | ( | ( | |||
Total other income (expense), net |
| ( |
| ( | |
Loss from continuing operations before income taxes |
| ( |
| ( | |
Income tax benefit on continuing operations |
| — |
| | |
Loss from continuing operations | ( | ( | |||
Income from discontinued operations, net of tax | | | |||
Net loss | $ | ( | $ | ( | |
Loss per share | |||||
Loss from continuing operations, basic and diluted | $ | ( | $ | ( | |
Income from discontinued operations, basic and diluted | $ | | $ | | |
Loss per share, basic and diluted | $ | ( | $ | ( | |
Weighted average number of shares used in per share calculation – basic |
| |
| | |
Weighted average number of shares used in per share calculation – diluted |
| |
| |
The accompanying notes are an integral part of these condensed consolidated financial statements.
3
ASSURE HOLDINGS CORP.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
(unaudited)
| Three Months Ended March 31, | |||||
2024 |
| 2023 | ||||
Cash flows from operating activities | ||||||
Net loss | $ | ( | $ | ( | ||
Adjustments to reconcile net loss to net cash used in operating activities | ||||||
Income from equity method investments |
| — |
| ( | ||
Stock-based compensation |
| |
| ( | ||
Depreciation and amortization |
| — |
| | ||
Amortization of debt issuance costs |
| |
| | ||
Accretion expense | | | ||||
Gain on sale of assets | ( | — | ||||
Gain on settlement of account payable | ( | — | ||||
Right of use assets | | | ||||
Deferred income taxes, net |
| — |
| ( | ||
Change in operating assets and liabilities | ||||||
Accounts receivable |
| |
| | ||
Accounts payable and accrued liabilities |
| |
| | ||
Due from MSAs |
| — |
| | ||
Lease liability | ( | — | ||||
Short-term promissory notes |
| |
| — | ||
Other assets and liabilities |
| |
| ( | ||
Operating cash flows from discontinued operations | — | | ||||
Net cash used in operating activities |
| ( |
| ( | ||
Cash flows from investing activities | ||||||
Proceeds from sale of assets | | — | ||||
Distributions received from equity method investments |
| — |
| | ||
Net cash provided by investing activities |
| |
| | ||
Cash flows from financing activities | ||||||
Proceeds from share issuance, net of share issuance costs | — | | ||||
Repayment of debt |
| ( |
| — | ||
Finance lease principal payments |
| ( |
| ( | ||
Payment of acquisition liability |
| ( |
| ( | ||
Net cash provided by financing activities |
| ( |
| | ||
Decrease in cash |
| |
| ( | ||
Cash at beginning of year |
| |
| | ||
Cash at end of year | $ | | $ | | ||
Supplemental cash flow information | ||||||
Interest paid | $ | | $ | | ||
Income taxes paid | $ | — | $ | — | ||
Supplemental non-cash flow information | ||||||
Convertible debt converted to common shares | $ | | $ | — |
The accompanying notes are an integral part of these condensed consolidated financial statements.
4
ASSURE HOLDINGS CORP.
CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS’ EQUITY (DEFICIT)
(in thousands, except share amounts)
(unaudited)
|
| Additional |
|
| Total | |||||||||
Common Stock | paid-in | Accumulated | shareholders' | |||||||||||
| Shares |
| Amount |
| Capital |
| deficit |
| equity (deficit) | |||||
Balances, December 31, 2022 |
| | $ | | $ | | $ | ( | $ | | ||||
Share issuance, net |
| | — | | — |
| | |||||||
Stock-based compensation |
| — |
| — |
| ( |
| — |
| ( | ||||
Net loss |
| — |
| — |
| — |
| ( |
| ( | ||||
Balances, March 31, 2023 | | $ | | $ | | $ | ( | $ | | |||||
Balances, December 31, 2023 |
| | $ | | $ | | $ | ( | $ | ( | ||||
Adoption of new accounting principle | — | — | — | ( | ( | |||||||||
Stock-based compensation |
| |
| — |
| |
| — |
| | ||||
Convertible debt converted into shares | | | | — | | |||||||||
Net loss |
| — |
| — |
| — |
| ( |
| ( | ||||
Balances, March 31, 2024 |
| | $ | | $ | | $ | ( | $ | ( |
The accompanying notes are an integral part of these condensed consolidated financial statements.
5
ASSURE HOLDINGS CORP.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(unaudited)
1.NATURE OF OPERATIONS
Assure Holdings Corp. (“Assure” or the “Company”), through its
The Company was originally incorporated in Colorado on November 7, 2016. In conjunction with a reverse merger, the Company was redomiciled in Nevada on May 16, 2017.
Neuromonitoring was formed on August 25, 2015, in Colorado and currently has multiple wholly-owned subsidiaries. The Company’s services are sold in the United States.
Networks was formed on November 7, 2016, in Colorado and holds varying ownerships interests in numerous Provider Network Entities (“PE”), which are professional IONM entities. These entities are accounted for under the equity method of accounting. Additionally, Networks manages other PEs that Networks does not have an ownership interest and charges those PEs a management fee. Throughout 2023, the Company exited the majority of business under Assure’s legacy Managed Service Agreement (“MSA”) model in order to keep all revenue generated from services provided by the Professional Component of IONM. The Company expects the remaining MSA relationships to be terminated during 2024.
Strategic Shift in Business Strategy
During September 2023, the Company’s Board of Directors initiated a process to explore strategic alternatives for the business. In consultation with financial and legal advisors, a comprehensive strategic review process began immediately and evaluated a broad range of options to maximize shareholder value. As part of this review process, Assure’s board agreed to conduct an auction process for the sale of its clinical operations and evaluate merger candidates. During February 2024, Assure entered a Definitive Agreement and Plan of Merger with Danam Health, Inc. (“Danam”). Danam delivers unique solutions for pharmacies, providers, pharmaceutical manufacturers, and payors focused on improving the lives of patients. During March 2024, Assure closed the disposal transaction resulting in the sale of most of the Company’s clinical operations, equipment, and contracts. As of the filing date of this Quarterly Report on Form 10Q, Assure is providing IONM services in limited markets, primarily Arizona and Montana.
Merger Agreement
On February 12, 2024, Assure entered into an Agreement and Plan of Merger (the “Merger Agreement”) with Danam Health, Inc. (“Danam”) and Assure Merger Corp., a newly formed wholly-owned subsidiary of Assure (“Assure Merger”). Upon the terms and subject to the satisfaction of the conditions described in the Merger Agreement, including approval of the transaction by the stockholders of Assure and Danam, Assure Merger will be merged with and into Danam (the “Merger”), with Danam surviving the Merger as a wholly-owned subsidiary of Assure. The Merger is intended to qualify as a tax-free reorganization for U.S. federal income tax purposes.
Subject to the terms and conditions of the Merger Agreement, at the effective time of the Merger (the “Effective Time”): (i) each share of Danam capital stock issued and outstanding immediately prior to the Effective Time shall automatically be converted into and become the right to receive the applicable per share portion of the “merger consideration” as set forth in the allocation statement to be delivered pursuant to the Merger Agreement (“merger consideration” is defined in the Merger Agreement to mean a number of shares of common
6
ASSURE HOLDINGS CORP.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(unaudited)
stock of Assure equal to (a) the quotient obtained by dividing (i) the number of shares of Assure capital stock on a fully diluted basis (the “Assure Fully Diluted Share Number”) by (ii) the quotient of (A) the adjusted value of Assure dividend by (B) the sum of the adjusted value of Assure and the adjusted value of Danam, minus (b) the Assure Fully Diluted Share Number minus (c) the number of shares of common stock of Assure the warrants of Danam will become exercisable for upon closing of the Merger); (ii) each outstanding warrant of Danam will be assumed by Assure and become a warrant to purchase an adjusted number of shares of common stock of Assure, at an adjusted exercise price per share but subject to the same terms and conditions as the warrant of Danam.
Following closing of the Merger, the former Assure equityholders immediately before the Merger are expected to own approximately
Upon closing of the Merger, Assure will be renamed Danam Health Holdings Corp. Suren Ajjarapu will serve as Chairman of the Board of Directors and Tim Canning will serve as the Chief Executive Officer of the combined company. The Merger Agreement provides that the Board of Directors of the combined company will be comprised of
The Merger Agreement contains customary representations, warranties and covenants of Assure and Danam, including covenants relating to the conduct of the business of both Assure and Danam from the date of signing the Merger Agreement through closing of the Merger, obtaining the requisite approval of the stockholders of Assure and Danam and maintain the listing of the common stock of Assure on the NASDAQ Capital Market and applying for the continued listing of Danam after the closing of the Merger on the NASDAQ Capital Market. Under the terms of the Merger Agreement, Assure has also agreed not to solicit from any person an acquisition proposal (as defined in the Merger Agreement) for Assure.
The Board has agreed to recommend the approval of the Assure Stockholder Proposals to the stockholders and to solicit proxies in support of the approval of the Assure Stockholder Proposals at a meeting of the stockholders to be held for that purpose.
The Merger Agreement contains a limited contractual ability for the Board, in accordance with its fiduciary duties to the stockholders, to change its recommendation to the stockholders upon receipt of a superior proposal subject to certain terms and conditions therein, including providing Danam notice of the superior proposal and time to make a counter-proposal to amend the terms of the Merger Agreement.
Under the Merger Agreement, Assure has agreed to maintain certain indemnity rights (including advancing expenses) of the current officers and directors of Assure as they exist in the governing documents of Assure and maintain director and officers insurance for a period of
The closing of the Merger is subject to customary closing conditions, including, among other things, (i) the required approval of the stockholders of Assure and Danam, (ii) the accuracy of the representations and warranties of the parties made in the Merger Agreement, subject to materiality qualifiers, (iii) compliance by the parties with their respective covenants under the Merger Agreement, and (iv) the approval of NASDAQ of the continued listing of Danam after the closing of the Merger. Further, closing of the Merger is conditioned on the simultaneous closing of a sale transaction of Assure’s assets. The obligation of Assure is conditioned upon Danam completing acquisition transactions as set forth in the Merger Agreement, including completing the acquisitions of (a) all of the membership interests in Wood Sage, LLC, a Florida limited liability company and (b) all of the membership interests in Wellgistics, LLC, a Florida limited liability company set forth in the applicable acquisition transactions agreements, both such acquisition transactions to close prior to or concurrent with the Merger. The obligation of Danam to close the Merger is also subject to satisfaction of certain additional conditions, including, among other things, (i) no Assure material adverse effect, (ii) Assure having performed its obligations under the agreement governing the sale transaction, (iii) Assure completing a wind down of its business, (iv) the reverse split having been consummated, and (v) Assure having a maximum amount of $
7
ASSURE HOLDINGS CORP.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(unaudited)
The parties may terminate the Merger Agreement upon mutual consent. Either party may terminate the Merger Agreement (i) if any of the representations or warranties of the other party set forth in the Merger Agreement shall not be true and correct or if the other party has failed to perform any covenant or agreement on the part of such party set forth in the Merger Agreement, (ii) the Merger is not consummated by the outside date (May 15, 2024), (iii) there is a governmental order prohibiting the Merger, and (iv) failure to obtain the stockholder vote. Danam may terminate the Merger Agreement if (i) the Board changes its recommendation to stockholders with respect to the Merger, (ii) the Board fails to reaffirm its recommendation to stockholders with respect to the Merger following a tender offer for Assure, (iii) the Board fails to reaffirm its recommendation to stockholders with respect to the merger following a publicly announced acquisition proposal for Assure, (iv) Assure breaches its non-solicitation provisions, or (v) the Board resolves to do any of the above. Assure may terminate the Merger Agreement for acceptance of a superior proposal.
In the event that Danam or Assure terminates the Merger Agreement pursuant to certain of the sections set forth above, Assure will be required to pay Danam a termination fee of $
On April 8, 2024, the Company entered into a partial waiver and amendment agreement (the Waiver Agreement”) with Assure Acquisition Corp. (the “Merger Sub”) and Danam which waives and amends certain provisions of that certain agreement and plan of merger (the “Merger Agreement”) dated February 12, 2024 by and between the Corporation, Merger Sub and Danam.
Pursuant to the terms and conditions of the Waiver Agreement, Danam has partially waived its right to terminate the Merger Agreement pursuant to breaches of Section 6.8(a) and 6.20 of the Merger Agreement provided that the Corporation meets the following conditions:
a. | Assure obtains the Preliminary Shareholder Vote required by Section 6.20 of the Merger Agreement no later than April 30, 2024; |
b. | Assure files the proxy statement and registration statement on Form S-4 required by the Section 6.8(a) Covenant no later than April 26th, 2024; |
c. | Assure issues Danam a $ |
d. | Assure receives shareholder approval for the Merger five (5) Business Days prior to the Termination Date and effects the Reverse Split prior to the Termination Date; |
e. | Assure is not in default under the Convertible Note; and |
f. | Assure is not in breach of any other covenants set forth in the Merger Agreement, subject to any necessary notice requirements and cure period set forth therein. |
Further the Waiver Agreement amends the Merger Agreement to change the definition of “Termination Date” to mean July 22, 2024.
In connection with the Waiver Agreement, on April 8, 2024, the Corporation issued a convertible note to Danam in principal amount of $
Financial Reporting and Classification
As a result of the corporate actions described above, the Company’s technical and professional services meet the criteria to be considered “held for sale” as that term is defined in accounting principles generally accepted in the United States (“GAAP”). Accordingly. the assets associated with these services are classified and reflected on our consolidated balance sheets as “held for sale” as of December 31, 2023, and their results of operations are classified as “discontinued operations” in the consolidated statements of operations for the three months ended March 31, 2024 and 2023. Certain financial disclosures including major components of the assets and results of operations
8
ASSURE HOLDINGS CORP.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(unaudited)
related to discontinued operations are provided in Note 3. Our continuing operations consists of our billing and collections services and costs to maintain our public company listing and are presented as such for all periods presented herein and until such time a strategic transaction is completed.
2.BASIS OF PRESENTATION
Basis of Presentation and Principles of Consolidation
The accompanying condensed consolidated financial statements have been prepared in accordance with generally accepted accounting principles in the United States of America (“GAAP”). The Company’s financial statements were prepared on a consolidated basis and include the accounts of the Company and its wholly owned subsidiaries, as well as an entity in which the Company has a controlling financial interest. All intercompany accounts and transactions have been eliminated in consolidation.
Unaudited Interim Financial Statements
The accompanying unaudited interim condensed consolidated financial statements are presented in accordance with the applicable rules and regulations of the U.S. Securities and Exchange Commission (“SEC”) for interim financial information. The amounts as of December 31, 2023, have been derived from the Company’s annual audited consolidated financial statements included in its Annual Report on Form 10-K for the year ended December 31, 2023, filed on April 26, 2024 (the “Form 10-K”). Certain information and footnote disclosures normally included in financial statements prepared in accordance with GAAP have been condensed or omitted in accordance with such rules and regulations. In the opinion of management, the accompanying unaudited interim condensed consolidated financial statements reflect all adjustments, which consist of normal recurring adjustments, necessary to state fairly the financial position of the Company and its results of operations and cash flows as of and for the periods presented. These unaudited interim condensed consolidated financial statements should be read in conjunction with the Form 10-K. The results of operations for the three months ended March 31, 2024, are not necessarily indicative of the results that may be expected for the full year ending December 31, 2024 or any future period and the Company makes no representations related thereto.
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. The accounting estimates and assumptions that require management’s most significant, difficult, and subjective judgment include the recognition and measurement of patient service fees, net, hospital, management and other revenue, the collectability of accounts receivable, the fair value measurements of goodwill and intangible assets, the assessment of the recoverability of goodwill, the assessment of useful lives and recoverability of intangible assets and long-lived assets, recognition and measurement of current and deferred income tax assets and liabilities, the assessment of unrecognized tax benefits, the valuation and recognition of stock-based compensation expense, among others. Actual results experienced by the Company may differ from management’s estimates. Revisions to accounting estimates are recognized in the period in which the estimate is revised and also in future periods when the revision affects both current and future periods. Significant assumptions, judgments, and estimates that management has made at the end of the reporting period that could result in a material adjustment to the carrying amounts of assets and liabilities in the event that actual results differ from assumptions made, relate to, but are not limited to, the following: patient service fees, net; hospital, management, and other revenue; accounts receivable; and due to/from related parties.
Liquidity and Going Concern
The Company’s current cash balance and estimated cash from operations for the next 12 months is not sufficient to meet the Company’s working capital needs for the next 12 months, which raised substantial doubt as to the Company’s ability to continue as a going concern. The Company intends to seek equity or debt financing and have implemented significant cost cutting measures to mitigate its going concern. Such financings may include the issuance of shares of common stock, warrants to purchase common stock, convertible
9
ASSURE HOLDINGS CORP.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(unaudited)
debt or other instruments that may dilute current stockholders. Financing may not be available on acceptable terms depending on market conditions at the time the Company seeks financing. The accompanying consolidated financial statements do not include any adjustments that might become necessary should the Company be unable to continue as a going concern.
Common Stock Reverse Split
Accounting Policies
There have been no changes, except as noted below, to the Company’s significant accounting policies or recent accounting pronouncements during the three months ended March 31, 2024, as compared to the significant accounting policies disclosed in the 10-K for the year ended December 31, 2023, as filed on April 26, 2024.
Accounting Policies Recently Adopted
In August 2020, the Financial Accounting Standard Board (the “FASB”) issued Accounting Standards Update (“ASU”) No. 2020-06, Accounting for Convertible Instruments and Contracts in an Entity’s Own Equity, which simplifies the accounting for convertible instruments by removing certain separation models such that the embedded conversion features are no longer separated from the host contract. The convertible debt instrument will be accounted for as a single liability measured at amortized cost. This guidance is effective for fiscal years beginning after December 15, 2023, including interim periods within the year. The adoption of this standard on January 1, 2024, utilizing the modified retrospective method, resulted in a $
Recent Accounting Pronouncements Accounting Standards Not Yet Adopted
In November 2023, the FASB issued ASU No. 2023-07, Segment Reporting (Topic 280): Improvements to Reportable Segment Disclosures, which requires significant segment expenses and other segment related items to be disclosed on an interim and annual basis. The new disclosure requirements are also applicable to companies with a single reportable segment. This guidance is effective on a retrospective basis for fiscal years beginning after December 15, 2023 and interim periods within fiscal years beginning after December 15, 2024, with early adoption permitted. The Company is currently evaluating the impact of this guidance on the disclosures within its consolidated financial statements.
In December 2023, the FASB issued ASU 2023-09, Income Taxes (Topic 740): Improvements to Income Tax Disclosures, which requires disclosure of specific categories in the effective tax rate reconciliation and additional information for reconciling items that meet a quantitative threshold and further disaggregation of income taxes paid for individually significant jurisdictions. This guidance is effective on a prospective or retrospective basis for annual periods beginning after December 15, 2024, with early adoption permitted. The Company is currently evaluating the impact of this guidance on the disclosures within its consolidated financial statements.
Reclassifications
Certain amounts for the three months ended March 31, 2023 have been reclassified to conform to the 2024 presentation as it relates to assets held for sale and discontinued operations. Total assets, liabilities, equity, and net loss did not change for the prior periods due to the reclassifications.
Credit Risk
Credit risk arises from cash and cash equivalents and trade and other receivables. The exposure to credit risk was as follows (in thousands):
10
ASSURE HOLDINGS CORP.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(unaudited)
| March 31, |
| December 31, | |||
2023 | 2023 | |||||
Cash | $ | | $ | | ||
Accounts receivable, net |
| |
| | ||
Total | $ | | $ | |
Cash
Cash is held in financial institutions with good standing, which, at times, may exceed the Federal Deposit Insurance Corporation coverage limit of $250,000. Any loss incurred or a lack of access to such funds could have a significant adverse impact on the Company’s financial condition, results of operations, and cash flows.
Accounts receivable
On January 1, 2023, the Company adopted Accounting Standards Update No, 2016-13, Measurement of Credit Losses on Financial Instruments, and its related amendments using the prospective method. The new standard requires the use of a current expected credit loss impairment model to develop and recognize credit losses for financial instruments at amortized cost when the asset is first originated or acquired, and each subsequent reporting period.
The cash collection cycles of the Company may be protracted due to the majority of its revenue being billed to third-party commercial insurance payors on an out-of-network basis. The collection cycle for IONM to out-of-network payors may require an extended period to maximize reimbursement on claims, which results in accounts receivable growth tied to the Company’s overall growth in technical and professional service revenues. The collection cycle may consist of multiple payments from out-of-network private insurance payors, as the collection process entails multiple rounds of denials, underpayments, appeals and negotiations as part of the process to maximize the reimbursement yield on claims. Based on the Company’s historical experience, claims generally become uncollectible once they are aged greater than
3. DISCONTINUED OPERATIONS
During September 2023, the Company’s Board of Directors initiated a process to explore strategic alternatives for the business. In consultation with financial and legal advisors, a comprehensive strategic review process began immediately and evaluated a broad range of options to maximize shareholder value. As part of this review process, Assure’s board agreed to conduct an auction process for the sale of its clinical operations. As of the filing date of this Quarterly Report on Form 10Q, Assure is providing IONM services in limited markets, primarily Arizona and Montana.
On March 26, 2024, the Company closed the sale with MPOWER Health of certain assets of its IONM business for up to $
11
ASSURE HOLDINGS CORP.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(unaudited)
As a result of the corporate actions described above, the Company’s technical and professional services meet the criteria to be considered “held for sale”. Accordingly. the assets associated with these services are classified and reflected on our consolidated balance sheets as “held for sale” as of December 31, 2023, and their results of operations are classified as “discontinued operations” in the consolidated statements of operations for the three months ended March 31, 2024 and 2023. Since the sale of clinical assets closed on March 26, 2024, the assets held for sale balance was
The following table presents the major classes of assets of the discontinued operations as of December 31, 2023 (stated in thousands):
| December 31, | ||
2023 | |||
Fixed assets | $ | | |
Finance lease right of use asset, net | | ||
Intangibles, net |
| | |
Goodwill |
| | |
Total assets | $ | |
The following table summarizes the results of operations of the discontinued operations (stated in thousands):
Three Months Ended March 31, | |||||
2024 |
| 2023 | |||
Revenue |
|
|
| ||
Technical services | $ | | $ | | |
Professional services | | | |||
Other |
| |
| | |
Revenue, net | | | |||
Cost of revenues, excluding depreciation and amortization |
| |
| | |
Gross margin |
| |
| | |
Operating expenses | |||||
Sales and marketing |
| |
| | |
Depreciation and amortization |
| — |
| | |
Total operating expenses |
| |
| | |
Income from discontinued operations |
| |
| | |
Other income (expense) | |||||
Gain on sale of assets | | — | |||
Interest expense |
| ( |
| ( | |
Total other income (expense) |
| |
| ( | |
Income from discontinued operations | | | |||
Income tax expense | — | — | |||
Net income from discontinued operations | $ | | $ | |
4. REVENUE
The Company disaggregates revenue between continuing operations and discontinued operations. Revenue streams from contracts with customers depicts the nature, amount, timing and uncertainty of its revenue and cash flows as affected by economic factors. Commercial insurance consists of neuromonitoring cases whereby a patient has healthcare insurance that we bill. Facility billing consists of neuromonitoring cases whereby the Company has an agreement to bill the medical facility for patients that do not have health care insurance.
12
ASSURE HOLDINGS CORP.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(unaudited)
The Company does not have any contract assets or contract liabilities as of or during the three months ended March 31, 2024 or 2023 or as of December 31, 2023.
The Company’s revenue is as follows (in thousands):
Three Months Ended March 31, | |||||
2024 |
| 2023 | |||
Managed service agreements and other | $ | | $ | |
Accounts Receivable
A summary of the accounts receivable, net, by revenue stream is as follows (in thousands):
March 31, | December 31, | |||||
| 2024 |
| 2023 | |||
Technical service | $ | |
| $ | | |
Professional service | | | ||||
Other |
| |
| — | ||
Total receivables, net | $ | | $ | |
The concentration of accounts receivable, net, by payor as a percentage of total accounts receivable is as follows:
As of March 31, | As of December 31, | |||||
2024 |
| 2023 | ||||
Commercial insurance | | % | | % | ||
Facility billing | | % | | % | ||
Other | | % | — | % | ||
Total |
| | % | | % |
5. LEASES
Under ASC 842, Leases, a contract is a lease, or contains a lease, if the contract conveys the right to control the use of identified property, plant, or equipment (an identified asset) for a period of time in exchange for consideration. To determine whether a contract conveys the right to control the use of an identified asset for a period of time, an entity shall assess whether, throughout the period of use, the entity has both of the following: (a) the right to obtain substantially all of the economic benefits from the use of the identified asset; and (b) the right to direct the use of the identified asset. The Company does not assume renewals in the determination of the lease term unless the renewals are deemed to be reasonably assured at lease commencement. Lease agreements generally do not contain material residual value guarantees or material restrictive covenants.
13
ASSURE HOLDINGS CORP.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(unaudited)
Leases with an initial term of 12 months or less are not recorded on the consolidated balance sheet; the Company recognizes lease expense for these leases on a straight-line basis over the lease term. As a practical expedient, the Company elected not to separate non-lease components for the corporate office facility (e.g., common-area maintenance costs) from lease components (e.g., fixed payments including rent) and instead to account for each separate lease component and its associated non-lease components as a single lease component.
Operating leases
The Company leases a corporate office facility under an operating lease which expires October 31, 2025. The Company entered into a sublease for this space during November 2023 for the remaining lease term. The incremental borrowing rate for this lease was
During April 2023, the Company entered into a lease for corporate offices space which expires May 2025. The incremental borrowing rate for this lease was
Finance leases
The Company historically leased medical equipment under various financing leases with stated interest rates ranging from
The condensed consolidated balance sheets include the following amounts for right-of-use (“ROU”) assets as of March 31, 2024, and December 31, 2023 (in thousands):
| March 31, | December 31, | ||||
2024 |
| 2023 | ||||
Operating |
| $ | |
| $ | |
The following are the components of lease cost for operating and finance leases (in thousands). Finance lease costs are included in loss from discontinued operations in the consolidated statements of operations for the periods presented.
Three Months Ended March 31, | ||||||
2024 |
| 2023 | ||||
Lease cost: | ||||||
Operating leases: | ||||||
Amortization of ROU assets | $ | | $ | | ||
Interest on lease liabilities | | | ||||
Total operating lease cost, included in general and administrative expenses | | | ||||
Finance leases: | ||||||
Amortization of ROU assets | — | | ||||
Interest on lease liabilities | | | ||||
Total finance lease cost, included in discontinued operations | | | ||||
Total lease cost | $ | | $ | |
During the three months ended March 31, 2024, the Company incurred operating and finance lease principal payments of $
14
ASSURE HOLDINGS CORP.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(unaudited)
The following are the weighted average lease terms and discount rates for operating and finance leases:
As of | As of | ||||
| March 31, 2024 | March 31, 2023 | |||
Weighted average remaining lease term (years): | |||||
Operating leases |
| ||||
Finance leases |
| — | |||
Weighted average discount rate (%): | |||||
Operating leases |
| | | ||
Finance leases |
| — | |
Future minimum lease payments and related lease liabilities as of March 31,2024, were as follows (in thousands):
|
|
| Total | ||||||
Operating | Lease | ||||||||
Leases | Liabilities | ||||||||
Remainder of 2024 | $ | | $ | — | $ | | |||
2025 |
| |
| — |
| | |||
| |
| — |
| | ||||
Less: imputed interest |
| |
| — |
| | |||
| — | | |||||||
| |
| — |
| | ||||
$ | | $ | — | $ | |
Future minimum lease payments exclude short-term leases as well as payments to landlords for variable common area maintenance, insurance and real estate taxes.
6. DEBT
The Company’s debt obligations are summarized as follows:
March 31, | December 31, | |||||
| 2024 |
| 2023 | |||
Face value of convertible debt | $ | | $ | | ||
Less: principal converted to common shares | ( | ( | ||||
Less: deemed fair value ascribed to conversion feature and warrants |
| ( |
| ( | ||
Plus: accretion of implied interest |
| | | |||
Total convertible debt |
| |
| | ||
Face value of Centurion debt | | | ||||
Less: deemed fair value ascribed to warrants | ( | ( | ||||
Plus: accretion of implied interest | | | ||||
Less: unamortized debt issuance costs | ( | ( | ||||
Total Centurion debt |
| |
| | ||
Total debt |
| |
| | ||
Less: current portion of debt |
| ( |
| ( | ||
Long-term debt | $ | — | $ | — |
15
ASSURE HOLDINGS CORP.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(unaudited)
As discussed in Note 2, the Company adopted ASU 2020-06 Accounting for Convertible Instruments and Contracts in an Entity’s Own Equity, which simplifies the accounting for convertible instruments by removing certain separation models such that the embedded conversion features are no longer separated from the host contract. The convertible debt instrument will be accounted for as a single liability measured at amortized cost. ASU 2020-06 only applies to the Company’s beneficial conversion feature associated with the convertible debt. As of January 1, 2024, the remaining value of the beneficial conversion feature was recorded to retained earnings and the Company no longer incurs accretion expense.
The following table depicts accretion expense and interest expense (excluding debt issuance cost amortization) related to the Company’s debt obligations for the three months ended March 31, 2024 and 2023 (in thousands):
Three Months Ended March 31, | ||||||
2024 |
| 2023 | ||||
Accretion expense |
|
|
| |||
Convertible debt | $ | | $ | | ||
Centurion debt |
| | | |||
$ | | $ | | |||
Debt issuance cost amortization |
|
|
| |||
Centurion debt | $ | | $ | | ||
Interest paid | ||||||
Convertible debt | $ | — | $ | | ||
Centurion debt |
| |
| | ||
$ | | $ | |
16
ASSURE HOLDINGS CORP.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(unaudited)
As of March 31, 2024, future minimum principal payments are summarized as follows (in thousands):
| Convertible |
| ||||
| Debt |
| Debenture | |||
Principal due in 2024 | $ | | $ | | ||
Less: fair value ascribed to conversion feature and warrants |
| ( |
| ( | ||
Plus: accretion and implied interest |
| |
| | ||
Less: debt issuance costs | — | ( | ||||
$ | | $ | |
The Centurion debt is contractually due during 2025 but has been classified as current liability for accounting purposes as the Company is not compliant with the Centurion debt covenants as of March 31, 2024.
Convertible Debt
The majority of the convertible debt matured during the period of December 2023 through March 2024. The Company has not paid the contractual amounts due per the terms of the convertible debt agreements. As such, the convertible debt is payable on demand. However, the Company anticipates offering Assure common shares as settlement of the remaining principal and accrued interest. There is no guarantee the Company will be able to settle the amounts outstanding under the Convertible Debenture with common shares of the Company.
During March 2024, the Company entered into exchange agreements with certain Convertible Debenture holders, whereby the Company issued
Centurion Debt
In June 2021, Assure issued a debenture to Centurion Financial Trust (“Centurion”) with a maturity date of June 9, 2025 (the “Maturity Date”), in the principal amount of $
The Credit Facility matures in June 2025 and bears interest at the rate of the greater of
During April 2024, the Company entered into an exchange agreement with Centurion whereby the Company issued
Short-Term Promissory Notes
During January 2024, the Company entered into short-term promissory notes to settle threatened legal action for a total of $
17
ASSURE HOLDINGS CORP.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(unaudited)
7. SHAREHOLDERS’ DEFICIT
Common stock
Common stock:
On May 14, 2024, the Company reconvened its previously adjourned special meeting of stockholders for which a total of
Nasdaq Notice
On July 25, 2023, the Company received a letter from the Listing Qualifications Staff (the “Staff”) of The Nasdaq Stock Market LLC (“Nasdaq”) indicating that, based upon the closing bid price of the Company’s common stock, par value $0.001 per share (“Common Stock”), for the last 30 consecutive business days, the Company is not currently in compliance with the requirement to maintain a minimum bid price of $1.00 per share for continued listing on The Nasdaq Capital Market, as set forth in Nasdaq Listing Rule 5550(a)(2) (the “Notice”).
The Notice had no immediate effect on the continued listing status of the Company's Common Stock on The Nasdaq Capital Market, and, therefore, the Company's listing remains fully effective.
The Company is provided a compliance period of 180 calendar days from the date of the Notice, or until January 22, 2024, to regain compliance with the minimum closing bid requirement, pursuant to Nasdaq Listing Rule 5810(c)(3)(A). If at any time before January 22, 2024, the closing bid price of the Company’s Common Stock closes at or above $1.00 per share for a minimum of 10 consecutive business days, subject to Nasdaq’s discretion to extend this period pursuant to Nasdaq Listing Rule 5810(c)(3)(G) to 20 consecutive business days, Nasdaq will provide written notification that the Company has achieved compliance with the minimum bid price requirement, and the matter would be resolved. If the Company does not regain compliance during the compliance period ending January 22, 2024, then Nasdaq may grant the Company a second 180 calendar day period to regain compliance, provided the Company meets the continued listing requirement for market value of publicly-held shares and all other initial listing standards for The Nasdaq Capital Market, other than the minimum closing bid price requirement, and notifies Nasdaq of its intent to cure the deficiency.
On August 16, 2023, the Company received notice from the Staff of the Nasdaq that the Company no longer satisfies the $2.5 million stockholders’ equity requirement for continued listing on The Nasdaq Capital Market, or the alternatives to that requirement - a $35 million market value of listed securities or $500,000 in net income in the most recent fiscal year or two or the last three fiscal years - as required by Nasdaq Listing Rule 5550(b) (the “Equity Requirement”). The notification is separate from, and in addition to, the previously deficiency letter that the Company received from the Staff on July 25, 2023, as discussed above.
As with the Bid Price Deficiency Letter (as defined above), the Staff’s notification had no immediate effect on the Company’s continued listing on The Nasdaq Capital Market. In accordance with the Nasdaq Listing Rules, the Company was provided
On October 2, 2023, the Company submitted its plan of compliance to the Staff. On November 1, 2023, the Staff provided notice to the Company that the Staff had granted an extension until January 22, 2024, to complete certain key steps of the Company’s compliance plan and, assuming those steps are complete on or before January 22, 2024 to complete certain key steps of the Company’s compliance plan.
On January 24, 2024, the Company received a determination letter (the “Determination Letter”) from the Staff stating that it had not regained compliance with Listing Rule 5550(a)(2) and is not eligible for a second 180-day period to regain compliance. The Company appealed the Staff’s determination, pursuant to the procedures set forth in the Nasdaq Listing Rule 5800 Series and had a hearing with
18
ASSURE HOLDINGS CORP.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(unaudited)
a Nasdaq Hearings Panel (the “Panel”) on April 9, 2024. The Company still awaiting the Panel’s decision on whether the Company’s plan as presented to the Panel has been accepted.
Based on the Company’s representations made in its compliance plan submitted to the Staff, on November 1, 2023, the Staff granted the Company an extension until January 22, 2024, to regain compliance with the Equity Requirement. However, the Staff indicated in the Determination Letter that, pursuant to Listing Rule 5810(d)(2), this deficiency serves as an additional and separate basis for delisting, and as such, the Company should address its non-compliance with the Equity Requirement before the Panel, if it appeals the Staff’s determination, which the Company has done.
On May 16, 2024, the Company received a written notice from the Panel that it has granted the Company an extension to regain compliance with the continued listing requirements for The Nasdaq Capital Market (the “Panel Decision”). The Hearings Panel granted the Company an extension until July 22, 2024, by which date the Company will be required to demonstrate compliance with all applicable initial listing requirements for the Nasdaq Capital Market in relation to its completion of its previously announced transaction with Danam.
There can be no assurance that the Company will be able to regain compliance with the applicable Nasdaq listing requirements, or that a Panel will not stay the suspension of the Company’s securities prior to July 22, 2024 for failure of the Company to comply with its plan as presented to the Panel or for other subsequent deficiencies in meeting the listing requirements of the Nasdaq Capital Market.
If Nasdaq delists the Company’s common stock from trading on its exchange and the Company is not able to list securities on another national securities exchange, management expect its securities could be quoted on an over-the-counter market. If this were to occur, the Company could face significant material adverse consequences, including:
● | a limited availability of market quotations for our securities; |
● | reduced liquidity for our securities; |
● | a determination that the common stock is a “penny stock” which will require brokers trading in our common stock to adhere to more stringent rules and possibly result in a reduced level of trading activity in the secondary trading market for our securities; |
● | a limited amount of news and analyst coverage; and |
● | a decreased ability to issue additional securities or obtain additional financing in the future. |
Reverse Share Split
During March 2023, the total number of shares of common stock authorized by the Company was reduced from
Additionally, all options, warrants and other convertible securities of the Company outstanding immediately prior to the reverse split were adjusted by dividing the number of shares of common stock into which the options, warrants and other convertible securities are exercisable or convertible by
(20) and multiplying the exercise or conversion price thereof by (20), all in accordance with the terms of the plans, agreements or arrangements governing such options, warrants and other convertible securities and subject to rounding to the nearest whole share.All shares of common stock, options, warrants and other convertible securities and the corresponding price per share amounts have been presented to reflect the reverse split in all periods presented within this Form 10-Q.
19
ASSURE HOLDINGS CORP.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(unaudited)
Share Issuance
During March 2024, the Company issued
During March 2024, the Company entered into exchange agreements with certain Convertible Debenture holders, whereby the Company agreed to issue
During March 2023, the Company completed a private placement for
Stock options
On December 10, 2020, shareholders approved amendments to the Company’s stock option plan, which amended the plan previously approved on November 20, 2019 (the “Amended Stock Option Plan”). On December 10, 2020, the Company’s shareholders approved the adoption of a new fixed equity incentive plan (the “Equity Incentive Plan”), which authorizes the Company to grant (a) stock options, (b) restricted awards, (c) performance share units, and other equity-based awards for compensation purposes (collectively, “Awards”).
In November 2021, the Company adopted and approved the 2021 Stock Incentive Plan and the 2021 Employee Stock Purchase Plan. The intent of the Company and the Board of Directors is that while the amended 2020 stock option plan and the 2020 equity incentive plan will continue in existence in relation to the options and awards previously granted, the Board will not grant future options or awards thereunder. Instead, only the 2021 Stock Incentive Plan will be used for the grant of options and awards to eligible participants.
As of March 31, 2024, there was
Options under the 2021 Stock Option Plan are granted from time to time at the discretion of the Board of Directors, with vesting periods and other terms as determined by the Board of Directors.
A summary of the stock option activity is presented below:
Options Outstanding | ||||||||||
|
| Weighted |
| Weighted |
| |||||
Average | Average | |||||||||
Number of | Exercise | Remaining | Aggregate | |||||||
Shares Subject | Price Per | Contractual | Intrinsic Value | |||||||
to Options | Share | Life (in years) | (in thousands) | |||||||
Balance at December 31, 2022 |
| $ | |
|
|
| ||||
Options granted |
| | $ | | ||||||
Options canceled |
| ( | $ | | ||||||
Balance at December 31, 2023 |
| | $ | | ||||||
Options expired | ( | $ | | |||||||
Options canceled |
| ( | $ | | ||||||
Balance at March 31, 2024 |
| | $ | |
|
| $ | — | ||
Vested and exercisable at March 31, 2024 |
| | $ | |
|
| $ | — |
20
ASSURE HOLDINGS CORP.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(unaudited)
The following table summarizes information about stock options outstanding and exercisable under the Company’s Stock Option Plan at March 31, 2024:
Options Outstanding | Options Exercisable | |||||||||
| Weighted |
|
|
| ||||||
Average | Weighted | Weighted | ||||||||
Remaining | Average | Average | ||||||||
Number of | Contractual | Exercise Price | Number | Exercise Price | ||||||
Outstanding | Life (in years) | Per Share | Exercisable | Per Share | ||||||
| $ | |
| | $ | | ||||
$ | | | $ | | ||||||
$ | | | $ | | ||||||
$ | | | $ | | ||||||
$ | | | $ | | ||||||
| $ | |
| | $ | |
The Company uses the Black-Scholes option pricing model to determine the estimated fair value of options. The fair value of each option grant is determined on the date of grant and the expense is recorded on a straight-line basis and is included as a component of general and administrative expense in the consolidated statements of operations. The assumptions used in the model include expected life, volatility, risk-free interest rate, dividend yield and forfeiture rate. The Company’s determination of these assumptions is outlined below.
Expected life — The expected life assumption is based on an analysis of the Company’s historical employee exercise patterns.
Volatility — Volatility is calculated using the historical volatility of the Company’s common stock for a term consistent with the expected life.
Risk-free interest rate — The risk-free interest rate assumption is based on the U.S. Treasury rate for issues with remaining terms similar to the expected life of the options.
Dividend yield — Expected dividend yield is calculated based on cash dividends declared by the Board for the previous four quarters and dividing that result by the average closing price of the Company’s common stock for the quarter. The Company has not declared a dividend to date.
Forfeiture rate — The Company does not estimate a forfeiture rate at the time of the grant due to the limited number of historical forfeitures. As a result, the forfeitures are recorded at the time the grant is forfeited, which can result in negative stock-based compensation expense in the period of forfeiture.
The Company did not grant any stock options during the three months ended March 31, 2024 or 2023.
Stock-based compensation (benefit) expense for the three months ended March 31, 2024 and 2023 was $
21
ASSURE HOLDINGS CORP.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(unaudited)
Warrants
As of March 31, 2024 and December 31, 2023, there were
The following table summarizes warrants outstanding by transaction type:
| Number of Warrants outstanding | |
Convertible debt, warrants issued |
| |
Debenture, warrants issued | | |
Other warrants issued | | |
December 2020 equity financing warrants issued | | |
Total warrant outstanding |
| |
8. LOSS PER SHARE
The following table sets forth the computation of basic and fully diluted loss per share for the three months ended March 31, 2024 and 2023 (in thousands, except per share amounts):
Three Months Ended March 31, | ||||||
2024 |
| 2023 | ||||
Net loss from continuing operations | $ | ( | $ | ( | ||
Income from discontinued operations |
| |
| | ||
Net loss | $ | ( | $ | ( | ||
Loss from continuing operations, basic and diluted | $ | ( | $ | ( | ||
Income from discontinued operations, basic and diluted |
| |
| | ||
Loss per share, basic and diluted | $ | ( | $ | ( | ||
Basic weighted average common stock outstanding |
| |
| | ||
Dilutive weighted average common stock outstanding |
| |
| |
Basic net loss per share is computed using the weighted average number of common shares outstanding during the period. Diluted net income loss per share is computed using the treasury stock method to calculate the weighted average number of common shares and, if dilutive, potential common shares outstanding during the period. Potential dilutive common shares include incremental common shares issuable upon the exercise of stock options, less shares from assumed proceeds. The assumed proceeds calculation includes actual proceeds to be received from the employee upon exercise and the average unrecognized stock compensation cost during the period.
Stock options to purchase
9. COMMITMENTS AND CONTINGENCIES
Indemnifications
The Company is a party to a variety of agreements in the ordinary course of business under which it may be obligated to indemnify third parties with respect to certain matters. These obligations include, but are not limited to, contracts entered into with physicians where the Company agrees, under certain circumstances, to indemnify a third party, against losses arising from matters including but not limited
22
ASSURE HOLDINGS CORP.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(unaudited)
to medical malpractice and other liability. The impact of any such future claims, if made, on future financial results is not subject to reasonable estimation because considerable uncertainty exists as to final outcome of these potential claims.
As permitted under Nevada law, the Company has agreements whereby it indemnifies its officers and directors for certain events or occurrences while the officer or director is, or was, serving at the Company’s request in such capacity. The maximum potential amount of future payments the Company could be required to make under these indemnification agreements is unlimited; however, the Company believes, given the absence of any such payments in the Company’s history, and the estimated low probability of such payments in the future, that the estimated fair value of these indemnification agreements is immaterial. In addition, the Company has directors’ and officers’ liability insurance coverage that is intended to reduce its financial exposure and may enable the Company to recover any payments, should they occur.
In April 2022, the U.S. Department of Justice (“DOJ)” issued Civil Investigative Demands which seek information with respect to a civil investigation under the Anti-kickback Statute and the False Claims Act. The Company voluntarily contacted the DOJ offering to provide any materials needed in the investigation and to answer any questions. While the Company’s policy during the relevant time was to not seek payments from federal health care programs, the third-party billing company utilized at that time submitted some claims to Medicare Advantage plans administered by commercial insurance companies. The Company has worked diligently to ensure that payments from Medicare Advantage plans have been returned to the commercial insurance companies and believes it has returned substantially all such payments that it has discovered, totaling approximately $
During February 2024, a Settlement Agreement (“Agreement”) was executed between Assure and the United States Department of Justice (“DOJ”).
In exchange for a payment of approximately $
10. SUBSEQUENT EVENT
Issuance of Common Shares In Lieu
During April 2024, the Company entered into an exchange agreement with Centurion whereby the Company agreed to issue
Subscription Agreement with Innovation
On April 8, 2024, the Corporation entered into a subscription agreement with Innovation pursuant to which Innovation agreed to the cancellation of $
Nasdaq
On May 16, 2024, the Company received a written notice from the Panel that it has granted the Company an extension to regain compliance with the continued listing requirements for The Nasdaq Capital Market (the “Panel Decision”). The Hearings Panel granted the Company an extension until July 22, 2024, by which date the Company will be required to demonstrate compliance with all applicable initial listing requirements for the Nasdaq Capital Market in relation to its completion of its previously announced transaction with Danam.
23
ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following discussion should be read in conjunction with the attached unaudited condensed consolidated financial statements and notes thereto, and with our audited financial statements and notes thereto for the year ended December 31, 2023, found in the annual report on Form 10-K filed by Assure Holdings Corp. on April 26, 2024 (the “Form 10-K”)
This Quarterly Report contains forward-looking statements, within the meaning of the Private Securities Litigation Reform Act of 1995, Section 27A of the Securities Act of 1933, and Section 21E of the Securities Exchange Act of 1934. All statements other than statements of historical fact included in this Annual Report, including statements regarding the Company’s future financial condition, results of operations, plans, objectives, expectations, future performance, business operations and business prospects, are forward-looking statements and may be identified by the use of words including, but not limited to the following; “may,” “believe,” “will,” “expect,” “project,” “estimate,” “anticipate,” “plan,” “continue,” or the negative thereof or other variations thereon or comparable terminology.
These forward-looking statements are based on our management’s current plans and expectations and are subject to uncertainty and changes in circumstances. We cannot assure you that future developments affecting us will be those that we have anticipated or occur in the manner we expected. Actual results may differ materially from these expectations due to changes in expected future political, legal, economic, business, competition, market and regulatory conditions and other factors and assumptions of management in making such statements, many of which are beyond our control.
Although forward-looking statements in this Quarterly Report reflect the good faith judgment of our management, such statements can only be based on facts and factors currently known by us. Consequently, forward-looking statements are inherently subject to risks, uncertainties, and changes in condition, significance, value, and effect, including those discussed under the heading “Risk Factors” in our annual report on Form 10-K and other documents we file from time to time with the Securities and Exchange Commission (“SEC”), such as our quarterly reports on Form 10-Q and our current reports on Form 8-K. Such risks, uncertainties and changes in condition, significance, value, and effect could cause our actual results to differ materially from those expressed herein and in ways not readily foreseeable. Readers are urged not to place undue reliance on these forward-looking statements, which speak only as of the date of this Quarterly Report and are based on information currently and reasonably known to us. We undertake no obligation to revise or update any forward-looking statements to reflect any event or circumstance that may arise after the date of this Quarterly Report, other than as required by law. Readers are urged to carefully review and consider the various disclosures made in this Quarterly Report, which attempt to advise interested parties of the risks and factors that may affect our business, financial condition, results of operations and prospects.
As used in this Quarterly Report, references to “Assure,” the “Company,” “we,” “our,” or “us” mean Assure Holdings Corp., and consolidated subsidiaries, or any one or more of them, as the context requires.
OVERVIEW
Assure is a provider of Intraoperative neuromonitoring (“IONM”). The Company delivers a turnkey suite of clinical and operational services to support surgeons and medical facilities during invasive surgical procedures. IONM has been well established as a standard of care and risk mitigation tool for various surgical verticals such as neurosurgery, spine, cardiovascular, orthopedic, ear, nose, and throat (“ENT”), and other surgical procures that place the nervous system at risk. Accredited by The Joint Commission, Assure’s mission is to provide exceptional surgical care and help make invasive surgeries safer. Our strategy focuses on utilizing best of class personnel and partners to deliver outcomes that are beneficial to all stakeholders including patients, surgeons, hospitals, insurers, and stockholders.
During each procedure, Assure provides two types of services, the Technical Component and Professional Component of IONM. Our in-house Interoperative Neurophysiologists (“INP”) provide the Technical Component IONM services from the operating room throughout the procedure, while telehealth-oriented supervising practitioners provide a level of redundancy and risk mitigation in support of the onsite INPs and the surgical team. In addition, Assure offers a comprehensive suite of IONM services, including scheduling the INP and supervising practitioner, real time monitoring, patient advocacy and subsequent billing and collecting for services provided.
24
Clinical leadership, surgeon support and patient care are Assure’s cornerstones. We make substantial ongoing investments in our training and development of clinical staff and have created a training program to rigorously train new INPs to cost-effectively join the Assure team. In addition, we have partnered with the internationally renowned Texas Back Institute on clinical research relating to IONM safety and efficacy.
Historically, the foundation of Assure’s business has been providing the Technical Component of IONM via our INP staff. We employ highly trained INPs, which provide a direct point of contact in the operating room during the surgeries to relay critical information to the surgical team. In this one-to-one business model, Assure pairs a team of INPs with third-party surgeons to promote a level of familiarity, comfort and efficiency between the surgeon and the INP. Each INP can support approximately 200 cases annually. Our INPs monitor the surgical procedure using state of the art, commercially available, diagnostic medical equipment. Assure INP’s are certified by a third-party accreditation board, ABRET Neurodiagnostic Credentialing and Accreditation (“ABRET”). The success of our service depends upon the timely recognition and successful interpretation of the data signals by our INPs and remote supervisors to quickly determine if the patient is experiencing a deficiency and advise the surgeon to determine if surgical intervention is required to positively impact the patient and surgery.
The Professional Component of IONM is provided via tele-neurology services under a one-to-many business model, and as a result, has a different financial profile than the Technical Component. Supervising practitioners provide tele-neurology services from an off-site location and maintain the ability to monitor multiple surgical cases simultaneously. As a result, each supervising practitioner has the ability to monitor approximately 2,500 or more cases annually.
Assure has made substantial investments to make its revenue cycle management function more data-driven, analytical, and automated. This modernization facilitated successful state-level arbitrations in 2022 and federal arbitrations in 2023. Many IONM competitors, particularly smaller peers that remain reliant on third-party billing companies lack the analytics and transparency to similarly leverage opportunities presented by the arbitration process. The Company intends to continue to seek arbitration opportunities related to uncollected accounts receivable.
During the fourth quarter of 2022 and throughout 2023, the Company exited the majority of business under Assure’s legacy Managed Service Agreement (“MSA”) model in order to keep all revenue generated from services provided by the Professional Component of IONM. The Company expects the remaining MSA relationships to be terminated during 2024.
During September 2023, the Company’s Board of Directors initiated a process to explore strategic alternatives for the business. In consultation with financial and legal advisors, a comprehensive strategic review process began immediately and evaluated a broad range of options to maximize shareholder value. As part of this review process, Assure’s board agreed to conduct an auction process for the sale of its clinical operations. On March 26, 2024, Assure closed the sale transaction resulting in the sale of most of the Company’s clinical operations, equipment, and contracts. As of the filing date of this Quarterly Report on Form 10-Q, Assure is providing IONM services in limited markets, primarily Arizona and Montana. During February 2024, Assure entered an Agreement and Plan of Merger (the “Merger Agreement”) with Danam Health, Inc. (“Danam”). Danam delivers unique solutions for pharmacies, providers, pharmaceutical manufacturers, and payors focused on improving the lives of patients.
Subject to the terms and conditions of the Merger Agreement, at the effective time of the Merger (the “Effective Time”): (i) each share of Danam capital stock issued and outstanding immediately prior to the Effective Time shall automatically be converted into and become the right to receive the applicable per share portion of the “merger consideration” as set forth in the allocation statement to be delivered pursuant to the Merger Agreement (“merger consideration” is defined in the Merger Agreement to mean a number of shares of common stock of the Company equal to (a) the quotient obtained by dividing (i) the number of shares of capital stock of the Company on a fully diluted basis (the “Assure Fully Diluted Share Number”) by (ii) the quotient of (A) the adjusted value of the Company dividend by (B) the sum of the adjusted value of the Company and the adjusted value of Danam, minus (b) the Assure Fully Diluted Share Number minus (c) the number of shares of common stock of the Company the warrants of Danam will become exercisable for upon closing of the Merger); (ii) each outstanding warrant of Danam will be assumed by the Company and become a warrant to purchase an adjusted number of shares of common stock of the Company, at an adjusted exercise price per share but subject to the same terms and conditions as the warrant of Danam.
Following the closing of the Merger, the former equity holders of the Company immediately before the Merger are expected to own approximately 10% of the outstanding capital stock of the combined company on a fully diluted basis and the equity holders of Danam
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immediately before the Merger are expected to own approximately 90% of the outstanding capital stock of the combined company on a fully diluted basis.
Upon closing of the Merger, the Company will be renamed Danam Health Holdings Corp. Suren Ajjarapu will serve as Chairman of the Board of Directors and Tim Canning will serve as the Chief Executive Officer of the combined company. The Merger Agreement provides that the Board of Directors of the combined company will be comprised of four members which will be filled upon completion of the Merger to be designated by Danam.
The Merger Agreement contains customary representations, warranties and covenants of the Company and Danam, including covenants relating to the conduct of the business of both the Company and Danam from the date of signing the Merger Agreement through closing of the Merger, obtaining the requisite approval of the stockholders of the Company and Danam and maintain the listing of the common stock of the Company on the NASDAQ Capital Market and applying for the continued listing of Danam after the closing of the Merger on the NASDAQ Capital Market. Under the terms of the Merger Agreement, the Company has also agreed not to solicit from any person an acquisition proposal (as defined in the Merger Agreement) for the Company.
In connection with the Merger, the Company will prepare and file with the U.S. Securities and Exchange Commission (the “SEC”) a registration statement on Form S-4 that will contain a prospectus and a proxy statement, and will seek the approval of the Company’s stockholders with respect to certain actions, including approval of the Merger.
Additional Information and Where to Find It
This section of the Quarterly Report may be deemed to be solicitation material with respect to the proposed transactions between Assure and Danam Health Inc. In connection with the proposed transaction, Assure has filed relevant materials with the SEC, including a registration statement on Form S-4, filed with the SEC on May 3, 2024, that contains a prospectus and a proxy statement. Assure will mail the proxy statement/prospectus to the Assure and Danam stockholders, and the securities may not be sold or exchanged until the registration statement becomes effective.
Investors and securityholders of Assure and Danam are urged to read these materials when they become available because they will contain important information about Assure, Danam and the proposed transactions. This section of the Quarterly Report is not a substitute for the registration statement, definitive proxy statement/prospectus or any other documents that Assure may file with the SEC or send to securityholders in connection with the proposed transactions. Investors and securityholders may obtain free copies of the documents filed with the SEC, once available, on Assure’s website at www.assureneuromonitoring.com, on the SEC’s website at www.sec.gov or by directing a request to Assure at 7887 E. Belleview Ave., Suite 240, Denver, Colorado, USA 80111, Attention: John Farlinger, Chief Executive Officer; or by email at ir@assureiom.com.
Participants in the Solicitation
Each of Assure and Danam and their respective directors and executive officers may be deemed to be participants in the solicitation of proxies from the stockholders of Assure in connection with the proposed transaction. Information about the executive officers and directors of Assure are set forth in Assure’s Definitive Proxy Statement on Schedule 14A relating to the 2023 Annual Meeting of Stockholders of Assure, filed with the SEC on December 5, 2023 and in Assure’s Annual Report on Form 10-K for the fiscal year ended December 31, 2023, filed with the SEC on April 26, 2024. Other information regarding the interests of such individuals, who may be deemed to be participants in the solicitation of proxies for the stockholders of Assure are set forth in the proxy statement/prospectus, which is included in Assure’s registration statement on Form S-4 filed with the SEC on May 3, 2024. You may obtain free copies of these documents as described above.
The Company has financed its cash requirements primarily from revenues generated from its services, by utilizing debt facilities and from the sale of common stock.
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RESULTS OF OPERATIONS
Three Months Ended March 31, 2024, Compared to the Three Months Ended March 31, 2023
| Three Months Ended March 31, | Change | Change |
| ||||||||
2024 |
| 2023 |
| $ |
| % |
| |||||
Revenue | $ | 9 | $ | 115 | $ | (106) | (92) | % | ||||
Cost of revenues |
| 475 |
| 679 |
| (204) | (30) | % | ||||
Gross margin |
| (466) |
| (564) |
| 98 | (17) | % | ||||
Operating expenses (income) | ||||||||||||
General and administrative |
| 3,911 |
| 3,211 |
| 700 | 22 | % | ||||
Depreciation and amortization |
| — |
| 2 |
| (2) | (100) | % | ||||
Gain on settlement of accounts payable | (181) |
| — |
| (181) | 100 | % | |||||
Total operating expenses |
| 3,730 |
| 3,213 |
| 517 | 16 | % | ||||
Loss from operations |
| (4,196) |
| (3,777) |
| (419) | (11) | % | ||||
Other income (expenses) | ||||||||||||
Income from equity method investments |
| — |
| 25 |
| (25) | 100 | % | ||||
Interest expense |
| (527) |
| (501) |
| (26) | 5 | % | ||||
Other income, net |
| 156 |
| 58 |
| 98 | 169 | % | ||||
Accretion expense | (102) | (170) | 68 | 40 | % | |||||||
Total other income (expense), net |
| (473) |
| (588) |
| 115 | (20) | % | ||||
Loss from continuing operations before taxes |
| (4,669) |
| (4,365) |
| (304) | (7) | % | ||||
Income tax benefit on continuing operations |
| — |
| 796 |
| (796) | (100) | % | ||||
Loss from continuing operations | (4,669) | (3,569) | (1,100) | 31 | % | |||||||
Income from discontinued operations, net of tax | 908 | 425 | 483 | 114 | % | |||||||
Net loss | $ | (3,761) | $ | (3,144) | $ | (617) | (20) | % | ||||
Loss per share | ||||||||||||
Loss from continuing operations, basic and diluted | $ | (0.67) | $ | (3.38) | $ | 2.71 | 80 | % | ||||
Income from discontinued operations, basic and diluted | 0.13 | 0.40 | (0.27) | 68 | % | |||||||
Loss per share, basic and diluted | $ | (0.54) | $ | (2.98) | $ | 2.44 | 82 | % | ||||
Weighted average number shares – basic |
| 6,999,879 |
| 1,054,933 |
| 5,944,946 | 564 | % | ||||
Weighted average number shares – diluted |
| 6,999,879 |
| 1,054,933 |
| 5,944,946 | 564 | % |
Revenue
Total revenue for the three months ended March 31, 2024 and 2023, were $9 thousand and $115 thousand, respectively. Revenue is generated by our revenue cycle management team under legacy managed service agreements for billing and collecting for professional services provided by our business partners. The decrease in revenue is attributable to the Company’s efforts to exit the managed service arrangements during 2023.
Cost of revenues
Cost of revenues for the three months ended March 31, 2024 and 2023, were $475 thousand and $679 thousand, respectively. Cost of revenues consist primarily of the cost of our internal billing and collection department and decreased slightly related to the decrease in headcount.
General and administrative
General and administrative expenses for the three months ended March 31, 2024 and 2023, were $3.9 million and $3.2 million, respectively. The overall increase is primarily related to an increase in legal fees associated with the sale of clinical assets, the proposed merger and settlement, partially offset by a decrease in employee compensation and benefits.
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Gain on settlement of accounts payable
During the three months ended March 31 2024, the Company settled certain amounts of accounts payable for less than the original amounts owed which resulted in a gain of $181 thousand. There were no such transactions during the three months ended March 31, 2023.
Interest expense
Interest expense was $527 thousand for the three months ended March 31, 2024, compared to $501 thousand for the three months ended March 31, 2023. The increase year-over-year is primarily due to higher outstanding debt balances. Specifically, interest expense was $76 thousand and $76 thousand for the three months ended March 31, 2024 and 2023 related to the convertible debt, respectively, and $409 thousand and $376 thousand for the three months ended March 31, 2024 and 2023, respectively, for the Centurion debt. The remaining amount of interest expense is associated with implied interest on the Company’s lease obligations.
Accretion expense
The Company recorded non-cash accretion expense of $102 thousand and $170 thousand for the three months ended March 31, 2024 and 2023, respectively. The Company accretes the difference between the fair value of the convertible debt and the debenture and the face value of the convertible debt and the debenture over the term of the convertible debt and the debenture. Specifically, accretion expense was $27 thousand and $95 thousand for three months ended March 31, 2024 and 2023, respectively related to the convertible debt and $75 thousand for each period related to the Centurion debt.
Income tax benefit
For the three months ended March 31, 2024, income tax benefit was $nil compared to $796 thousand for the three months ended March 31, 2023. The Company’s estimated annual tax rate is impacted primarily by the amount of taxable income earned in each jurisdiction the Company operates in and permanent differences between financial statement carrying amounts and the tax basis.
Discontinued operations
Three Months Ended March 31, | |||||
2024 |
| 2023 | |||
Revenue |
|
|
| ||
Technical services | $ | 1,318 | $ | 1,234 | |
Professional services | 1,320 | 1,874 | |||
Other |
| 29 |
| 329 | |
Revenue, net | 2,667 | 3,437 | |||
Cost of revenues, excluding depreciation and amortization |
| 2,363 |
| 2,694 | |
Gross margin |
| 304 |
| 743 | |
Operating expenses | |||||
Sales and marketing |
| 54 |
| 128 | |
Depreciation and amortization |
| — |
| 182 | |
Total operating expenses |
| 54 |
| 310 | |
Income from discontinued operations |
| 250 |
| 433 | |
Other income (expense) | |||||
Gain on sale of assets | 666 | — | |||
Interest expense |
| (8) |
| (8) | |
Total other income (expense) |
| 658 |
| (8) | |
Income from discontinued operations | 908 | 425 | |||
Income tax expense | — | — | |||
Net income from discontinued operations | $ | 908 | $ | 425 |
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Income from discontinued operations was $908 thousand for the three months ended March 31, 2024, compared to $425 thousand for the three months ended March 31, 2023. The sale of assets resulted in a gain of $666 thousand for the three months ended March 31, 2024. Discontinued operations consist of the following activities:
Technical and professional service revenue is recognized in the period in which IONM services are rendered, at net realizable amounts due from third party payors when collections are reasonably assured and can be estimated. The majority of the Company’s services are rendered on an out-of-network basis and billed to third-party insurers. We estimate out-of-network technical and professional revenue per case based upon our historical cash collection rates from private health insurance carriers. Our revenue estimation process for out-of-network revenue is based on the collection experience from insurance cases that are between 1 and 24 months old as management believes the more recent collection experience is more indicative of future per case collection rates. The Company reserves accounts receivable beginning in the fifth quarter after date of service and continuing to increase the reserve percentage until the receivable is aged to 24 months and a day from the date of service at which point it is fully reserved.
Cost of revenues consist primarily of the cost of technologist and supervising practitioner wages, third-party supervising practitioner fees, and medical supplies. Technologist and supervising practitioner wages and medical supplies vary with the number of neuromonitoring cases. The decrease in costs of revenues is primarily related to the Company’s efforts focused on reducing the Company’s average cost of delivery in providing our services, both on the technologist and the remote neurology parts of the business.
Additionally, discontinued operations consist of sales and marketing expenses related to the generation of revenue and depreciation, amortization and implied interest expenses related to the medical equipment utilized in operations.
FINANCIAL POSITION, LIQUIDITY AND CAPITAL RESOURCES
Funding Requirements
Our cash position as of March 31, 2024, was $376 thousand compared to the December 31, 2022 cash balance of $123 thousand. Working capital was negative $19.0 million as of March 31, 2024, compared to negative $15.5 million at December 31, 2023. Our working capital balance and our estimated cash flows from operations during 2024 will not support our operating activities and our obligations for the next 12 months. We intend to seek equity or debt financing and have implemented significant cost cutting measures to mitigate our going concern. Such financings may include the issuance of shares of common stock, warrants to purchase common stock, convertible debt or other instruments that may dilute our current stockholders. Financing may not be available to us on acceptable terms depending on market conditions at the time we seek financing. We applied for a $3.2 million refund under the CARES Act Employee Retention Credit program, however there is no guarantee when, or if, these funds will be received during 2024. Furthermore, our independent registered public accountants have expressed that substantial doubt exists as to the Company’s ability to continue as a going concern.
On July 25, 2023, the Company received a letter from the Listing Qualifications Staff of The Nasdaq Stock Market LLC (“Nasdaq”) indicating that, based upon the closing bid price of the Company’s common stock for 30 consecutive business days, the Company is not currently in compliance with the requirement to maintain a minimum bid price of $1.00 per share for continued listing on The Nasdaq Capital Market, as set forth in Nasdaq Listing Rule 5550(a)(2) (the “Notice”).
On August 16, 2023, the Company received notice from the Staff of the Nasdaq that the Company no longer satisfies the $2.5 million stockholders’ equity requirement for continued listing on The Nasdaq Capital Market, or the alternatives to that requirement - a $35 million market value of listed securities or $500,000 in net income in the most recent fiscal year or two or the last three fiscal years - as required by Nasdaq Listing Rule 5550(b) (the “Equity Requirement”). The notification is separate from, and in addition to, the previously deficiency letter that the Company received from the Staff on July 25, 2023, as discussed above.
During November 2023, the Company received notice from the Staff of the Nasdaq that the Staff has determined to grant the Company an extension of time to regain compliance with Listing Rule 5550(b) (the “Rule”). The Rule requires a minimum $2,500,000 stockholders’ equity, $35,000,000 market value of listed securities, or $500,000 net income from continuing operations (the “Equity Requirement”).
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On October 2, 2023, the Company submitted its plan of compliance to the Staff. On November 1, 2023, the Staff provided notice to the Company that the Staff had granted an extension until January 22, 2024, to complete certain key steps of the Company’s compliance plan and, assuming those steps are complete on or before January 22, 2024 to complete certain key steps of the Company’s compliance plan.
Based on the Company’s representations made in its compliance plan submitted to the Staff, on November 1, 2023, the Staff granted the Company an extension until January 22, 2024, to regain compliance with the Equity Requirement. However, the Staff indicated in the Determination Letter that, pursuant to Listing Rule 5810(d)(2), this deficiency serves as an additional and separate basis for delisting, and as such, the Company should address its non-compliance with the Equity Requirement before the Panel, if it appeals the Staff’s determination, which the Company has done.
On January 24, 2024, the Company received a determination letter (the “Determination Letter”) from the Staff stating that it had not regained compliance with Listing Rule 5550(a)(2) and is not eligible for a second 180-day period to regain compliance. The Company appealed the Staff’s determination, pursuant to the procedures set forth in the Nasdaq Listing Rule 5800 Series and had a hearing with a Nasdaq Hearings Panel (the “Panel”) on April 9, 2024.
On May 16, 2024, the Company received a written notice from the Panel that it has granted the Company an extension to regain compliance with the continued listing requirements for The Nasdaq Capital Market (the “Panel Decision”). The Hearings Panel granted the Company an extension until July 22, 2024, by which date the Company will be required to demonstrate compliance with all applicable initial listing requirements for the Nasdaq Capital Market in relation to its completion of its previously announced transaction with Danam.
There can be no assurance that the Company will be able to regain compliance with the applicable Nasdaq listing requirements, or that a Panel will not stay the suspension of the Company’s securities prior to July 22, 2024 for failure of the Company to comply with its plan as presented to the Panel or for other subsequent deficiencies in meeting the listing requirements of the Nasdaq Capital Market.
If Nasdaq delists our common stock from trading on its exchange and we are not able to list our securities on another national securities exchange, we expect our securities could be quoted on an over-the-counter market. If this were to occur, we could face significant material adverse consequences, including:
● | a limited availability of market quotations for our securities; |
● | reduced liquidity for our securities; |
● | a determination that our common stock is a “penny stock” which will require brokers trading in our common stock to adhere to more stringent rules and possibly result in a reduced level of trading activity in the secondary trading market for our securities; |
● | a limited amount of news and analyst coverage; and |
● | a decreased ability to issue additional securities or obtain additional financing in the future |
We are also dependent on Centurion granting us certain add-backs and other one-time adjustments in the calculation of our financial covenants related to EBITDA related to the Centurion debt and if we are not granted such allowances we may not meet our financial covenants which could result in a default on our obligations and the lender could foreclose on our assets if we cannot otherwise payoff the debt. We currently owe approximately $11 million in face amount on the Centurion debt. As of December 31, 2023, the Company was not in compliance with the Debenture debt covenants. As a result, Centurion may demand full repayment of the outstanding principal and interest. Additionally, approximately $3.0 million in convertible debentures, the majority of which have matured but have not been repaid according to the terms and conditions of the underlying note agreements, and may be payable on demand.
Our near-term cash requirements relate primarily to payroll expenses, trade payables, debt payments, capital lease payments, and general corporate obligations.
Cash flows from operating activities
For the three months ended March 31, 2024, we collected approximately $3.9 million of receivables compared to collecting approximately $4.5 million in the same prior year period. As of March 31, 2024, accounts receivable, which are recorded net of implicit
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price concessions, was $2.1 million compared to $3.6 million at December 31, 2023. The decrease in our accounts receivable balance during 2024 is primarily related to the increased velocity of cash receipts and implicit price concession charges.
Cash used in operating activities for the three months ended March 31, 2024, and 2023 was $1.5 million and $497 thousand, respectively. Cash was used to fund operations and to fund operations.
Cash flows from investing activities
Cash provided by investing activities of $2.3 million for the three months ended March 31, 2024, was related the proceeds from the sales of clinical assets. Cash provided by investing activities of $37 thousand for the three months ended March 31, 2023 was related the PE distributions of $37 thousand.
Cash flows from financing activities
Cash used in financing activities of $603 thousand for the three months ended March 31, 2024, resulted from debt repayment of $82 thousand, finance lease principal payments of $408 thousand and acquisition liability payments of $113 thousand. Cash provided by financing activities of $60 thousand for the three months ended March 31, 2023 resulted from $300 thousand associated with a private placement of 50,000 common shares at a price of $6.00 per common share, partially offset by finance lease principal payments of $163 thousand and acquisition liability payments of $77 thousand.
Off-Balance Sheet Arrangements
We have no material undisclosed off-balance sheet arrangements that have or are reasonably likely to have, a current or future effect on our results of operations or financial condition.
CRITICAL ACCOUNTING POLICIES
We prepare our consolidated financial statements in conformity with GAAP. Application of GAAP requires management to make estimates and assumptions that affect the amounts reported in our consolidated financial statements and accompanying notes and within this Management’s Discussion and Analysis of Financial Condition and Results of Operations section. We consider our most important accounting policies that require significant estimates and management judgment to be those policies with respect to revenue, accounts receivable, stock-based compensation, acquired intangible assets, goodwill, and income taxes, which are discussed below. Our other significant accounting policies are summarized in Note 2, “Basis of Presentation” and Note 3, “Summary of Significant Accounting Policies,” of the Notes to Consolidated Financial Statements included in the Annual Report on Form 10-K for the year ended December 31, 2023 as filed with the Securities and Exchange Commission on April 26, 2024.
We continually evaluate the accounting policies and estimates used to prepare the consolidated financial statements. In general, our estimates are based on historical experience, evaluation of current trends, information from third-party professionals and various other assumptions that we believe to be reasonable under the known facts and circumstances. Estimates can require a significant amount of judgment and a different set of assumptions could result in material changes to our reported results.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Not applicable
ITEM 4. CONTROLS AND PROCEDURES
Disclosure Controls and Procedures
As of the end of the period covered by this Quarterly Report on Form 10-Q for the months ended March 31, 2024, an evaluation was carried out under the supervision of, and with the participation of the Chief Executive Officer (“CEO”) and Chief Financial Officer (“CFO”), of the effectiveness of the design and operations of our disclosure controls and procedures (as defined in Rule 13a-15(e) under the Securities Exchange Act of 1934, as amended (the “Exchange Act”). Based on that evaluation, the CEO and the CFO have concluded
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that, as of the end of the period covered by this Quarterly Report on Form 10-Q, our disclosure controls and procedures were not effective in ensuring that (i) information required to be disclosed by us in the reports that we file or submit under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms and (ii) information required to be disclosed by us in the reports that we file or submit under the Exchange Act is accumulated and communicated to our CEO and CFO, as appropriate, to allow timely decisions regarding required disclosure.
Material Weaknesses
Management noted inadequate controls over the review of the accounting for complex transactions and financial reporting which management believes to be a material weakness.
A material weakness (within the meaning of PCAOB Auditing Standard No. 5) is a deficiency, or a combination of deficiencies, in internal control over financial reporting, such that there is a reasonable possibility that a material misstatement of our annual or interim financial statements will not be prevented or detected on a timely basis. A significant deficiency is a deficiency, or a combination of deficiencies, in internal control over financial reporting that is less severe than a material weakness, yet important enough to merit attention by those responsible for oversight of the company’s financial reporting.
In response to the identified material weakness, during the fourth quarter of 2023 and through the first quarter of 2024, management has implemented a rigorous review process regarding the accounting for complex transactions and financial reporting.
Changes in Internal Control over Financial Reporting
There were no other changes in our internal control over financial reporting, except as noted above, during the quarter ended March 31, 2024, that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.
PART II – OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
We know of no material, existing or pending legal proceedings against our Company or any of our subsidiaries, nor are we involved as a plaintiff in any other material proceeding or pending litigation. There are no other proceedings in which any of our directors, executive officers or affiliates, or any registered or beneficial stockholder, is an adverse party or has a material interest adverse to our interest.
In April 2022, the U.S. Department of Justice (“DOJ”) issued Civil Investigative Demands which seek information with respect to a civil investigation under the Anti-kickback Statute and the False Claims Act. We voluntarily contacted the DOJ offering to provide any materials needed in the investigation and to answer any questions. While our policy during the relevant time was to not seek payments from federal health care programs, the third-party billing company we used at that time submitted some claims to Medicare Advantage plans administered by commercial insurance companies. We have worked diligently to ensure that payments from Medicare Advantage plans have been returned to the commercial insurance companies and we believe we have returned substantially all such payments that we have discovered to date, totaling approximately $450,000. The DOJ has not made any allegations in the investigation, and we are currently unable to predict the eventual scope, ultimate timing, or outcome of this investigation. During February 2024, a Settlement Agreement (“Agreement”) was executed between Assure and the United States Department of Justice (“DOJ”).
In exchange for a payment of approximately $1 million, the Agreement releases Assure from any civil or administrative monetary claim the United States has for the Covered Conduct under the False Claims Act, 31 U.S.C. §§ 3729-3733; the Civil Monetary Penalties Law, 42 U.S.C. § 1320a-7a; the Program Fraud Civil Remedies Act, 31 U.S.C. §§ 3801-3812; or the common law theories of payment by mistake, unjust enrichment, and fraud. Payments are in equal monthly installments over the next 12 months.
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ITEM 1A. RISK FACTORS
Other than as set forth below, during the three months ended March 31, 2024, there were no material changes to the risk factors disclosed in Item 1A of Part I of our Annual Report on Form 10-K for the year ended December 31, 2023.
We have not been in compliance with the requirements of the NASDAQ for continued listing and if NASDAQ does not concur that we have adequately remedied our non-compliance, our common stock may be delisted from trading on NASDAQ, which could have a material adverse effect on us and our stockholders.
On July 25, 2023, the Company received a written notice from Nasdaq that, because the closing bid price for the Company's common stock had fallen below $1.00 per share for 30 consecutive business days, the Company no longer complies with the minimum bid price requirement for continued listing on the Nasdaq.
The Bid Price Deficiency Letter has no immediate effect on the continued listing status of the Company's Common Stock on The Nasdaq Capital Market, and, therefore, the Company's listing remains fully effective.
The Company is provided a compliance period of 180 calendar days from the date of the Bid Price Deficiency Letter, or until January 22, 2024, to regain compliance with the minimum closing bid requirement, pursuant to Nasdaq Listing Rule 5810(c)(3)(A). If at any time before January 22, 2024, the closing bid price of the Company’s Common Stock closes at or above $1.00 per share for a minimum of 10 consecutive business days, subject to Nasdaq’s discretion to extend this period pursuant to Nasdaq Listing Rule 5810(c)(3)(G) to 20 consecutive business days, Nasdaq will provide written notification that the Company has achieved compliance with the minimum bid price requirement, and the matter would be resolved. If the Company does not regain compliance during the compliance period ending January 22, 2024, then Nasdaq may grant the Company a second 180 calendar day period to regain compliance, provided the Company meets the continued listing requirement for market value of publicly-held shares and all other initial listing standards for The Nasdaq Capital Market, other than the minimum closing bid price requirement, and notifies Nasdaq of its intent to cure the deficiency.
On August 16, 2023, the Company received notice from the Nasdaq that the Company no longer satisfies the $2.5 million stockholders’ equity requirement for continued listing on The Nasdaq Capital Market, or the alternatives to that requirement - a $35 million market value of listed securities or $500,000 in net income in the most recent fiscal year or two or the last three fiscal years - as required by Nasdaq Listing Rule 5550(b) (the “Equity Requirement”).
As with the Bid Price Deficiency Letter, the Staff’s notification has no immediate effect on the Company’s continued listing on The Nasdaq Capital Market.
In accordance with the Nasdaq Listing Rules, the Company was provided 45 calendar days, or until October 2, 2023, to submit a plan to regain compliance with the Equity Requirement (the “Compliance Plan”). The Company submitted its Compliance Plan on October 2, 2023. On November 1, 2023, the Staff provided notice to the Company that the Staff had granted an extension until January 22, 2024 to complete certain key steps of the Company’s compliance plan.
Based on the Company’s representations made in its compliance plan submitted to the Staff, on November 1, 2023, the Staff granted the Company an extension until January 22, 2024, to regain compliance with the Equity Requirement. However, the Staff indicated in the Determination Letter that, pursuant to Listing Rule 5810(d)(2), this deficiency serves as an additional and separate basis for delisting, and as such, the Company should address its non-compliance with the Equity Requirement before the Panel, if it appeals the Staff’s determination, which the Company has done.
On January 24, 2024, the Company received a determination letter (the “Determination Letter”) from the Staff stating that it had not regained compliance with Listing Rule 5550(a)(2) and is not eligible for a second 180-day period to regain compliance. The Company appealed the Staff’s determination, pursuant to the procedures set forth in the Nasdaq Listing Rule 5800 Series and had a hearing with a Nasdaq Hearings Panel (the “Panel”) on April 9, 2024.
On May 16, 2024, the Company received a written notice from the Panel that it has granted the Company an extension to regain compliance with the continued listing requirements for The Nasdaq Capital Market (the “Panel Decision”). The Hearings Panel granted the Company an extension until July 22, 2024, by which date the Company will be required to demonstrate compliance with all
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applicable initial listing requirements for the Nasdaq Capital Market in relation to its completion of its previously announced transaction with Danam.
There can be no assurance that the Company will be able to regain compliance with the applicable Nasdaq listing requirements, or that a Panel will not stay the suspension of the Company’s securities prior to July 22, 2024, for failure of the Company to comply with its plan as presented to the Panel or for other subsequent deficiencies in meeting the listing requirements of the Nasdaq Capital Market.
If Nasdaq delists our common stock from trading on its exchange and we are not able to list our securities on another national securities exchange, we expect our securities could be quoted on an over-the-counter market. If this were to occur, we could face significant material adverse consequences, including:
● | a limited availability of market quotations for our securities; |
● | reduced liquidity for our securities; |
● | a determination that our common stock is a “penny stock” which will require brokers trading in our common stock to adhere to more stringent rules and possibly result in a reduced level of trading activity in the secondary trading market for our securities; |
● | a limited amount of news and analyst coverage; and |
● | a decreased ability to issue additional securities or obtain additional financing in the future. |
.
ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS
Items 2(b) and 2(c) are not applicable.
Item 2(a) – Stock Issuances - All issuances of equity securities on an unregistered basis during the quarter ended March 31, 2024, were previously reported on a Current Report on Form 8-K.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
None.
ITEM 4. MINE SAFETY DISCLOSURES
Not applicable.
ITEM 5. OTHER INFORMATION
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ITEM 6. EXHIBITS
Exhibit Number | Description |
---|---|
2.1 | |
2.2 | |
3.1 | |
3.2 | |
4.1 | |
4.2 | |
10.1 | Payment Accommodation Agreement with Centurion Financial Trust dated December 29, 2023 |
10.2 | Settlement Agreement with the Department of Justice dated February 7, 2024 |
10.3 | |
10.4 | |
10.5 | |
10.6 | |
10.7 | |
31.1+ | Certification of the Principal Executive Officer pursuant to Rule 13a-14 of the Exchange Act |
31.2+ | Certification of the Principal Financial Officer pursuant to Rule 13a-14 of the Exchange Act |
32.1++ | |
32.2++ | |
101.INS+ | Inline XBRL Instance Document |
101.SCH+ | Inline XBRL Schema Document |
101.CAL+ | Inline XBRL Calculation Linkbase Document |
101.DEF+ | Inline XBRL Definition Linkbase Document |
101.LAB+ | Inline XBRL Label Linkbase Document |
101.PRE+ | Inline XBRL Presentation Linkbase Document |
104+ | The cover page of the Company’s Quarterly Report on Form 10-Q for the quarter ended March 31, 2024, formatted in Inline XBRL (contained in Exhibit 101) |
+ | Filed herewith. |
++ | Furnished herewith. |
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SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
ASSURE HOLDINGS CORP.
By: | /s/ John Farlinger | By | : /s/ Paul Webster | |
John Farlinger, Executive Chairman and Chief Executive Officer |
| Paul Webster, Chief Financial Officer | ||
(Principal Executive Officer) |
| (Principal Financial Officer) | ||
| ||||
Date: June 7, 2024 |
| Date: June 7, 2024 |
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