1.NATURE OF OPERATIONS

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Overview

Assure has been a provider of Intraoperative neuromonitoring (“IONM”). The Company delivered 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. Assure’s mission was to provide exceptional surgical care and help make invasive surgeries safer. Our strategy focused 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 provided 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 offered 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.

Historically, the foundation of Assure’s business has been providing the Technical Component of IONM via our INP staff. We employed highly trained INPs, which provided 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 paired a team of INPs with third-party surgeons to promote a level of familiarity, comfort, and efficiency between the surgeon and the INP.  Our INPs monitored the surgical procedure using state of the art, commercially available, diagnostic medical equipment.  The success of our service depended upon the timely recognition and successful interpretation of the data signals by our INPs and remote supervisors to quickly determine if the patient was experiencing a deficiency and advised the surgeon to determine if surgical intervention is required to positively impact the patient and surgery.

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 11, 2024, the Company, and its subsidiaries, Assure Neuromonitoring, LLC, Assure Networks, LLC, Assure Networks Texas Holdings, LLC and Assure Networks Texas Holdings II, LLC (collectively, the “Sellers’) entered into an asset purchase agreement (the “APA”) with National Neuromonitoring Services, LLC (“Purchaser”). Upon the terms and subject to the satisfaction of the conditions described in the APA, the Company and the Sellers sold to Purchaser certain assets of the Sellers and Purchaser assumed certain liabilities and obligations of the Sellers (the “Sale Transaction”). See Note 3 for a complete disclosure of the sale of assets and discontinued operations.  On March 26, 2024, Assure closed the sale transaction resulting in the disposal 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.

Corporate Structure

Assure Holdings Corp.

Assure Holdings Corp., formerly Montreux Capital Corp, a Canadian Capital Pool Company (“Montreux”), was formed under the British Columbia Business Corporations Act in British Columbia, Canada on September 24, 2007, is a Nevada corporation, existing under the laws of the State of Nevada pursuant to its Articles of Domestication filed with the Nevada Secretary of State on May 15, 2017.

Assure Holdings, Inc.

Assure Holdings, Inc. is a direct subsidiary is Assure Holdings, Corp., is a Colorado corporation, formed under the laws of the State of Colorado on November 7, 2016. Assure Holdings, Inc. became a wholly owned subsidiary of Assure Holdings Corp. on May 15, 2017 when Assure Holdings Inc. and its stockholders and Montreux and its stockholders entered into a Share Exchange Agreement pursuant to which the stockholders of Assure Holdings, Inc. received shares of Montreux as consideration for their assignment of their shares in Assure Holdings, Inc. to Montreux in the “Qualifying Transaction” under the rules of the TSX Venture Exchange (“TSX-V”). One of the primary objectives of the Qualifying Transactions was to facilitate our going public and listing on the TSX-V.

Assure Holdings, Inc. is the sole member of Assure Neuromonitoring, LLC (“Assure Neuromonitoring”), a Colorado limited liability company formed under the laws of the state of Colorado on August 25, 2015. Assure Neuromonitoring became a wholly owned subsidiary of Assure Holdings, Inc. on November 7, 2016, when its members assigned their interest in Assure Neuromonitoring to Assure Holdings, Inc. for shares of Assure Holdings, Inc.

Assure Holdings, Inc. is the sole member of Assure Networks, LLC (“Assure Networks”), a Colorado limited liability company formed under the laws of the state of Colorado on November 2, 2016. Assure Networks became a wholly owned subsidiary of Assure Holdings, Inc. on November 7, 2016, when its members assigned their interest in Assure Networks to Assure Holdings, Inc. for shares of Assure Holdings, Inc.

Assure Holdings, Inc. is the sole member of Assure Equipment Leasing, LLC (“Assure Equipment Leasing”), a Colorado limited liability company formed under the laws of the state of Colorado on April 20, 2020.

Assure Neuromonitoring, LLC.

Assure Neuromonitoring, LLC exists for the purpose of facilitating the performance of the Technical Component of IONM support to surgeons and patients. This includes a Technical Component via our INP staff who utilize technical equipment and technical training to monitor EEG, EMG, and a number of complex modalities during surgical procedures to pre-emptively notify the underlying surgeon of any nerve related issues that are identified.

Assure Networks, LLC.

Assure Networks, LLC exists for the purpose of facilitating the performance of the Professional Component of IONM support to surgeons and patients. Assure Networks provides off-site tele-neurology services for IONM.  These services are provided by and through the Assure Networks, LLC’s subsidiaries, which own interest in entities that either (i) directly perform the Professional Component through third-party contracted neurologists or oversight reading physicians, or (ii) provide management services for entities owned by licensed physicians. These oversight services support the INP and strengthen our capacity to pre-emptively notify the underlying surgeon of any nerve related issues that are identified during a surgical procedure.

Current Strategy

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As of June 30, 2024, the Company had sixteen active employees with operations limited to Montana and Arizona. The Company plans for the business to continue to operate in these markets while management continues to assess other strategic opportunities in the near term, which may include the acquisition of additional operational assets, acquiring new lines of business or engaging in other strategic transactions. As a result, the financial results of our past business operations may not be indicative of our financial results in the future.

Financial Reporting and Classification

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As a result of the corporate actions previously described, the Company’s technical and professional services met 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 in the condensed consolidated balance sheets as “held for sale” as of December 31, 2023, and their results of operations are classified as “discontinued operations” in the condensed consolidated statements of operations for the three and six months ended June 30, 2024, and 2023. Certain financial disclosures including major components of the assets and results of operations 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. 

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Merger Agreement

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On February 12, 2024, Assure entered into an Agreement and Plan of Merger (the “Merger Agreement”) with 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 would have merged with and into Danam (the “Merger”), with Danam surviving the Merger as a wholly-owned subsidiary of Assure. The Merger was intended to qualify as a tax-free reorganization for U.S. federal income tax purposes.

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The parties were able to terminate the Merger Agreement upon mutual consent. Either party may have terminated 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 failed to perform any covenant or agreement on the part of such party set forth in the Merger Agreement, (ii) the Merger was not consummated by the outside date (May 15, 2024), (iii) there was a governmental order prohibiting the Merger, and (iv) failure to obtain the stockholder vote. Danam was able to terminate the Merger Agreement if (i) the Board changes its recommendation to stockholders with respect to the Merger, (ii) the Board failed to reaffirm its recommendation to stockholders with respect to the Merger following a tender offer for Assure, (iii) the Board failed 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 resolved to do any of the above. Assure was able to terminate the Merger Agreement for acceptance of a superior proposal.

In the event Danam or Assure terminated the Merger Agreement pursuant to certain of the sections set forth above, Assure was required to pay Danam a termination fee of $1,000,000, less any reimbursed expenses. Upon termination in other contexts in which a termination fee is not due, the breaching party would have owed the non-breaching party reimbursement of expenses up to $250,000.

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On April 8, 2024, the Company entered into a partial waiver and amendment agreement (the “Waiver Agreement”) which waived and amended certain provisions of the Merger Agreement.

Pursuant to the terms and conditions of the Waiver Agreement, Danam partially waived its right to terminate the Merger Agreement pursuant to breaches of Section 6.8(a) and 6.20 of the Merger Agreement. The Waiver Agreement required the following:

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Further the Waiver Agreement amended the Merger Agreement to change the definition of “Termination Date” to mean July 22, 2024.

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In connection with the Waiver Agreement, on April 8, 2024, the Company issued a convertible note to Danam in principal amount of $1 million. The note accrues interest on the then outstanding principal balance at a rate equal to 10% per annum, computed on the basis of the actual number of days elapsed and a year of 365 days. The note has a maturity date of July 22, 2024. Upon the occurrence of certain events, the note is convertible into shares of common stock at the Nasdaq “Minimum Price” in accordance with Listing Rule 5635(d). The note will become immediately due and payable upon the occurrence of an event of default under the note, including but not limited to: a failure to pay, voluntary bankruptcy or insolvency of Assure, involuntary bankruptcy or insolvency proceedings of Assure, breach of the Merger Agreement or termination of the Merger Agreement.

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On June 11, 2024, Assure delivered a letter to Danam pursuant to which Assure terminated the Merger Agreement with Danam and Assure Merger, pursuant to Section 8.1(b) thereof. According to the terms of the Merger Agreement, Danam may be entitled to a $1 million termination fee. Assure accrued the termination fee as of June 30, 2024, which is included as a component of the Accounts payable and accrued expenses balance in the accompanying condensed consolidated balance sheet. Additionally, the $1 million convertible note matured on July 22, 2024, and as of the date of this filing, is currently in default.  The note is included as a component of the short-term promissory notes balance in the accompanying condensed consolidated balance sheet as of June 30, 2024.

Pursuant to Section 8.1(b) of the Merger Agreement, Assure terminated the Merger Agreement based on Assure’s assertion of certain misrepresentations by Danam regarding its representations and warranties set form in Article 4 of the Merger Agreement, including but not limited to, its representations regarding its financial condition and ability to complete the Acquisition Transactions, and the Company’s assertion that Danam was failing to perform its covenants under the Merger Agreement, including but not limited to its covenant to meet the closing condition to complete the Acquisition Transactions prior to or concurrent with the closing of the Merger and such breaches could not be cured within the time periods set forth in Section 8.1(b) thereof.

As a result of the termination of the Merger Agreement, in addition to reserving its right to seek other remedies, pursuant to Section 8.3(c) of the Merger Agreement, Assure is seeking reimbursement for all of its fees, costs and expenses (including all fees and expenses of counsel, accountants, investment bankers, experts and consultants) in relation to the Merger Agreement and its performance thereunder.

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As of June 30, 2024, the Company has recorded $1 million of termination fees in accrued expenses and $1 million convertible note in short-term promissory notes within the condensed consolidated balance sheet.