UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
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☒ | |
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For the Quarterly Period Ended | ||
OR | ||
☐ | | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the transition period from to
Commission file number: 333-251829001-40785
ASSURE HOLDINGS CORP.
(Exact Name of Registrant as Specified in its Charter)
| | |
Nevada | | 82-2726719 |
(State or other jurisdiction of incorporation or organization) | | (I.R.S. Employer Identification No.) |
| | |
4600 South Ulster Street, Suite 1225 Denver, Colorado | | 80237 |
(Address of Principal Executive Offices) | | (Zip Code) |
(720) 287-3093
(Registrant’s Telephone Number, including Area Code)
SECURITIES REGISTERED PURSUANT TO SECTION 12(b) OF THE ACT: None
Title of each class | Trading Symbol(s) | Name of each exchange on which registered | ||
Common Stock, $0.001 par value per share | IONM | Nasdaq Stock Market LLC (Nasdaq Capital Market) |
SECURITIES REGISTERED PURSUANT TO SECTION 12(g) OF THE ACT: None
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Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ⌧☒ No ◻☐
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§ 229.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ◻☒No ⌧☐
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company or an emerging growth company. See definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
Large Accelerated Filer ◻☐ Accelerated Filer ◻☐Non-Accelerated Filer ◻☒ Smaller Reporting Company ☒ Emerging Growth Company ☒
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act). Yes ☐ No ⌧☒
The number of the registrant’s shares of common sharesstock outstanding as of May 12,November 8, 2021 was 56,606,634.11,839,304.
ASSURE HOLDINGS CORP.
FORM 10Q
FOR THE QUARTER ENDED SEPTEMBER 30, 2021
TABLE OF CONTENTS
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PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
ASSURE HOLDINGS CORP.
CONDENSED CONSOLIDATED BALANCE SHEETS
(in thousands, except share and per sharepar amounts)
(unaudited)
| | | | | | |
|
| March 31, |
| December 31, | ||
| | 2021 (unaudited) | | 2020 | ||
ASSETS | | | | | | |
Current assets |
| |
|
| |
|
Cash | | $ | 4,080 | | $ | 4,386 |
Accounts receivable, net | |
| 15,710 | |
| 14,965 |
Income tax receivable | | | 150 | | | 150 |
Other current assets | |
| 807 | |
| 618 |
Due from PEs | | | 5,031 | | | 4,856 |
Total current assets | |
| 25,778 | |
| 24,975 |
Equity method investments | |
| 416 | |
| 608 |
Property, plant and equipment, net | |
| 305 | |
| 356 |
Operating lease right of use asset | | | 67 | | | 124 |
Finance lease right of use asset | | | 764 | | | 608 |
Intangibles, net | |
| 3,998 | |
| 4,115 |
Goodwill | |
| 2,857 | |
| 2,857 |
Total assets | | $ | 34,185 | | $ | 33,643 |
LIABILITIES AND SHAREHOLDERS’ EQUITY | | | | | | |
LIABILITIES | | | | | | |
Current liabilities | | | | | | |
Accounts payable and accrued liabilities | | $ | 2,934 | | $ | 2,871 |
Current portion of debt | |
| 4,100 | |
| 4,100 |
Current portion of lease liability | |
| 623 | |
| 521 |
Other current liabilities | |
| 72 | |
| 96 |
Total current liabilities | |
| 7,729 | |
| 7,588 |
Lease liability, net of current portion | |
| 789 | |
| 772 |
Debt, net of current portion | |
| 4,011 | |
| 2,251 |
Acquisition share issuance liability | |
| 540 | |
| 540 |
Fair value of stock option liability | |
| 19 | |
| 16 |
Performance share issuance liability | |
| 2,081 | |
| 2,668 |
Deferred tax liability, net | |
| 172 | |
| 599 |
Total liabilities | |
| 15,341 | |
| 14,434 |
Commitments and contingencies (Note 7) | | | | | | |
SHAREHOLDERS’ EQUITY | | | | | | |
Common stock: $0.001 par value; 900,000,000 shares authorized; 56,598,777 and 56,378,939 shares issued and outstanding, as of March 31, 2021 and December 31, 2020, respectively | |
| 56 | |
| 56 |
Additional paid-in capital | |
| 31,707 | |
| 30,841 |
Accumulated deficit | |
| (12,919) | |
| (11,688) |
Total shareholders’ equity | |
| 18,844 | |
| 19,209 |
Total liabilities and shareholders’ equity | | $ | 34,185 | | $ | 33,643 |
| | | | | | |
|
| September 30, |
| December 31, | ||
| | 2021 | | 2020 | ||
ASSETS | | | | | | |
Current assets |
| |
|
| |
|
Cash | | $ | 918 | | $ | 4,386 |
Accounts receivable, net | |
| 22,683 | |
| 14,965 |
Income tax receivable | | | 150 | | | 150 |
Other current assets | |
| 104 | |
| 618 |
Due from PEs | | | 5,734 | | | 4,856 |
Total current assets | |
| 29,589 | |
| 24,975 |
Equity method investments | |
| 638 | |
| 608 |
Fixed assets | |
| 109 | |
| 356 |
Operating lease right of use asset | | | — | | | 124 |
Finance lease right of use asset | | | 877 | | | 608 |
Deferred tax asset, net | | | 144 | | | — |
Intangibles, net | |
| 3,763 | |
| 4,115 |
Goodwill | |
| 4,448 | |
| 2,857 |
Total assets | | $ | 39,568 | | $ | 33,643 |
LIABILITIES AND SHAREHOLDERS’ EQUITY | | | | | | |
LIABILITIES | | | | | | |
Current liabilities | | | | | | |
Accounts payable and accrued liabilities | | $ | 2,069 | | $ | 2,871 |
Current portion of debt | |
| — | |
| 4,100 |
Current portion of lease liability | |
| 579 | |
| 521 |
Current portion of acquisition liability | |
| 306 | |
| — |
Other current liabilities | |
| 10 | |
| 96 |
Total current liabilities | |
| 2,964 | |
| 7,588 |
Lease liability, net of current portion | |
| 750 | |
| 772 |
Debt, net of current portion | |
| 10,451 | |
| 2,251 |
Acquisition liability | | | 561 | | | — |
Acquisition share issuance liability | |
| 540 | |
| 540 |
Fair value of stock option liability | |
| 40 | |
| 16 |
Performance share issuance liability | |
| — | |
| 2,668 |
Deferred tax liability, net | |
| — | |
| 599 |
Total liabilities | |
| 15,306 | |
| 14,434 |
Commitments and contingencies (Note 8) | | | | | | |
SHAREHOLDERS’ EQUITY | | | | | | |
Common stock: $0.001 par value; 180,000,000 shares authorized; 11,839,304 and 11,275,788 shares issued and outstanding, as of September 30, 2021 and December 31, 2020, respectively | |
| 12 | |
| 11 |
Additional paid-in capital | |
| 38,385 | |
| 30,886 |
Accumulated deficit | |
| (14,135) | |
| (11,688) |
Total shareholders’ equity | |
| 24,262 | |
| 19,209 |
Total liabilities and shareholders’ equity | | $ | 39,568 | | $ | 33,643 |
See accompanying notes to 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, | ||||
|
| 2021 |
| 2020 | ||
Revenue |
| |
|
| |
|
Patient service fees, net | | $ | 2,950 | | $ | 2,346 |
Hospital, management and other | |
| 1,815 | |
| 1,987 |
Total revenue | |
| 4,765 | |
| 4,333 |
Cost of revenues | |
| 2,532 | |
| 1,798 |
Gross margin | |
| 2,233 | |
| 2,535 |
Operating expenses | | | | | | |
General and administrative | |
| 3,132 | |
| 2,246 |
Sales and marketing | |
| 335 | |
| 221 |
Depreciation and amortization | |
| 285 | |
| 259 |
Total operating expenses | |
| 3,752 | |
| 2,726 |
Loss from operations | |
| (1,519) | |
| (191) |
Other income/(expenses) | | | | | | |
Loss from equity method investments | |
| (23) | |
| (107) |
Other income (expense), net | |
| (3) | |
| 57 |
Accretion expense | | | (95) | | | (185) |
Interest expense, net | |
| (18) | |
| (53) |
Total other expense | |
| (139) | |
| (288) |
Loss before income taxes | |
| (1,658) | |
| (479) |
Income tax benefit | |
| 427 | |
| 65 |
Net loss | | $ | (1,231) | | $ | (414) |
Loss per common share | | | | | | |
Basic | | $ | (0.02) | | $ | (0.01) |
Diluted | | $ | (0.02) | | $ | (0.01) |
Weighted average number of common shares used in per share calculation – basic | |
| 56,537,711 | |
| 34,795,313 |
Weighted average number of common shares used in per share calculation – diluted | |
| 56,537,711 | |
| 34,795,313 |
| | | | | | | | | | | |
| Three Months Ended September 30, | | Nine Months Ended September 30, | ||||||||
| 2021 |
| 2020 | | 2021 |
| 2020 | ||||
Revenue | |
|
| |
| | |
|
| |
|
Patient service fees, net | $ | 6,443 | | $ | 2,965 | | $ | 13,087 | | $ | (6,342) |
Hospital, management and other |
| 2,103 | |
| 998 | |
| 6,446 | |
| 3,902 |
Total revenue |
| 8,546 | |
| 3,963 | |
| 19,533 | |
| (2,440) |
Cost of revenues |
| 4,254 | |
| 2,232 | |
| 9,956 | |
| 5,062 |
Gross margin |
| 4,292 | |
| 1,731 | |
| 9,577 | |
| (7,502) |
Operating expenses | | | | | | | | | | | |
General and administrative |
| 3,180 | |
| 1,957 | |
| 10,275 | |
| 5,853 |
Sales and marketing |
| 247 | |
| 349 | |
| 748 | |
| 801 |
Depreciation and amortization |
| 293 | |
| 249 | |
| 965 | |
| 769 |
Total operating expenses |
| 3,720 | |
| 2,555 | |
| 11,988 | |
| 7,423 |
Income (loss) from operations |
| 572 | |
| (824) | |
| (2,411) | |
| (14,925) |
Other income (expenses) | | | | | | | | | | | |
Income (loss) from equity method investments |
| 139 | |
| (232) | |
| 136 | |
| (1,449) |
Other income (expense), net |
| (27) | |
| (3) | |
| (29) | |
| 50 |
Accretion expense | | (171) | | | (227) | | | (386) | | | (619) |
Interest expense, net |
| (264) | |
| (58) | |
| (500) | |
| (164) |
Total other expense |
| (323) | |
| (520) | |
| (779) | |
| (2,182) |
Income (loss) before income taxes |
| 249 | |
| (1,344) | |
| (3,190) | |
| (17,107) |
Income tax benefit (expense) |
| (158) | |
| 367 | |
| 743 | |
| 2,396 |
Net income (loss) | $ | 91 | | $ | (977) | | $ | (2,447) | | $ | (14,711) |
Income (loss) per share | | | | | | | | | | | |
Basic | $ | 0.01 | | $ | (0.14) | | $ | (0.21) | | $ | (2.11) |
Diluted | $ | 0.01 | | $ | (0.14) | | $ | (0.21) | | $ | (2.11) |
Weighted average number of shares used in per share calculation – basic |
| 11,838,032 | |
| 6,988,058 | |
| 11,528,371 | |
| 6,968,728 |
Weighted average number of shares used in per share calculation – diluted |
| 15,724,103 | |
| 6,988,058 | |
| 11,528,371 | |
| 6,968,728 |
See accompanying notes to condensed consolidated financial statements.
3
ASSURE HOLDINGS CORP.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
(unaudited)
| | | | | | |
|
| Three Months Ended March 31, | ||||
| | 2021 |
| 2020 | ||
Cash flows from operating activities | | | | | | |
Net loss | | $ | (1,231) | | $ | (414) |
Adjustments to reconcile net loss to net cash used in operating activities | | | | | | |
Cash receipts from operations | | | 3,067 | | | 2,960 |
Losses from equity method investments | |
| 23 | |
| 107 |
Stock-based compensation | |
| 279 | |
| 205 |
Depreciation and amortization | |
| 285 | |
| 259 |
Provision for stock option fair value | |
| 3 | |
| (57) |
Accretion expense | | | 95 | | | 185 |
Tax impact of equity component of convertible debt issuance | | | — | | | (173) |
Change in operating assets and liabilities | | | | | | |
Accounts receivable, net | |
| (3,812) | |
| (2,751) |
Prepaid expenses | | | (151) | | | — |
Right of use assets | | | (216) | | | 22 |
Accounts payable and accrued liabilities | |
| 62 | |
| 156 |
Due from related parties | |
| (213) | |
| (1,072) |
Lease liability | | | 120 | | | (128) |
Income taxes | |
| (427) | |
| 110 |
Other assets and liabilities | |
| (24) | |
| 18 |
Net cash used in operating activities | |
| (2,140) | |
| (573) |
Cash flows from investing activities | | | | | | |
Purchase of equipment and furniture | |
| — | |
| (35) |
Acquisition debt | |
| — | |
| (530) |
Distributions received from equity method investments | |
| 169 | |
| 185 |
Net cash provided by (used in) investing activities | |
| 169 | |
| (380) |
Cash flows from financing activities | | | | | | |
Repayment of promissory note | |
| — | |
| (130) |
Proceeds from Payroll Protection Program loan | |
| 1,665 | |
| — |
Proceeds from convertible debenture | | | — | | | 1,605 |
Net cash provided by financing activities | |
| 1,665 | |
| 1,475 |
Increase (decrease) in cash | |
| (306) | |
| 522 |
Cash at beginning of period | |
| 4,386 | |
| 59 |
Cash at end of period | | $ | 4,080 | | $ | 581 |
Supplemental cash flow information | | | | | | |
Interest paid | | $ | 196 | | $ | 51 |
Income taxes paid | | $ | — | | $ | — |
Supplemental non-cash flow information | | | | | | |
Purchase of equipment with finance leases | | $ | 273 | | $ | 90 |
| | | | | | |
|
| Nine Months Ended September 30, | ||||
| | 2021 |
| 2020 | ||
Cash flows from operating activities | | | | | | |
Net loss | | $ | (2,447) | | $ | (14,711) |
Adjustments to reconcile net loss to net cash used in operating activities | | | | | | |
(Income) loss from equity method investments | |
| (136) | |
| 1,449 |
Stock-based compensation | |
| 818 | |
| 456 |
Depreciation and amortization | |
| 599 | |
| 769 |
Amortization of debt issuance costs | |
| 53 | |
| — |
Provision for stock option fair value | |
| 24 | |
| (50) |
Accretion expense | | | 386 | | | 619 |
Tax impact of equity component of convertible debt issuance | | | — | | | (288) |
Change in operating assets and liabilities | | | | | | |
Accounts receivable, net | |
| (5,723) | |
| 16,243 |
Prepaid expenses | | | 177 | | | — |
Right of use assets | | | 291 | | | — |
Accounts payable and accrued liabilities | |
| (1,045) | |
| (3,126) |
Due from related parties | |
| (1,121) | |
| (1,113) |
Lease liability | | | (399) | | | (172) |
Income taxes | |
| (743) | |
| (1,715) |
Other assets and liabilities | |
| (86) | |
| (209) |
Net cash used in operating activities | |
| (9,352) | |
| (1,848) |
Cash flows from investing activities | | | | | | |
Purchase of fixed assets | |
| — | |
| (33) |
Net cash paid for acquisitions | |
| (204) | |
| (3,934) |
Distributions received from equity method investments | |
| 312 | |
| 424 |
Net cash provided by (used in) investing activities | |
| 108 | |
| (3,543) |
Cash flows from financing activities | | | | | | |
Proceeds from exercise of stock options | |
| 19 | |
| — |
Proceeds from share issuance, net | | | 832 | | | 102 |
Proceeds from promissory note | |
| — | |
| 1,978 |
Repayment of promissory note | |
| — | |
| (1,418) |
Proceeds from Paycheck Protection Program loan | |
| 1,665 | |
| 1,211 |
Proceeds from line of credit | | | — | | | 2,122 |
Repayment of line of credit | |
| — | |
| (1,000) |
Proceeds from debenture | | | 7,360 | | | — |
Repayment of short term debt | | | (4,100) | | | — |
Proceeds from convertible debenture | | | — | | | 2,485 |
Net cash provided by financing activities | |
| 5,776 | |
| 5,480 |
Increase (decrease) in cash | |
| (3,468) | |
| 89 |
Cash at beginning of period | |
| 4,386 | |
| 59 |
Cash at end of period | | $ | 918 | | $ | 148 |
Supplemental cash flow information | | | | | | |
Interest paid | | $ | 301 | | $ | 145 |
Income taxes paid | | $ | — | | $ | 62 |
Supplemental non-cash flow information | | | | | | |
Purchase of equipment with finance leases | | $ | 431 | | $ | 269 |
See accompanying notes to condensed consolidated financial statements.
4
ASSURE HOLDINGS CORP.
CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS’ EQUITY
(in thousands, except share amounts)
(unaudited)
| | | | | | | | | | | | | | |
|
| | | | |
| Additional |
| Retained |
| Total | |||
| | Common Stock | | paid-in | | earnings | | shareholders' | ||||||
|
| Shares |
| Amount |
| Capital |
| (deficit) |
| equity | ||||
Balances, December 31, 2019 |
| 34,795,313 | | $ | 35 | | $ | 6,682 | | $ | 3,348 | | $ | 10,065 |
Stock-based compensation |
| — | |
| — | |
| 205 | |
| — | |
| 205 |
Expected tax loss of future stock compensation option exercises |
| — | |
| — | |
| (173) | |
| — | |
| (173) |
Equity component of convertible debt issuance |
| — | |
| — | |
| 754 | |
| — | |
| 754 |
Fair value of finders’ warrants |
| — | |
| — | |
| 32 | |
| — | |
| 32 |
Net loss |
| — | |
| — | |
| — | |
| (414) | |
| (414) |
Balances, March 31, 2020 | | 34,795,313 | | $ | 35 | | $ | 7,500 | | $ | 2,934 | | $ | 10,469 |
| | | | | | | | | | | | | | |
Balances, December 31, 2020 |
| 56,378,939 | | $ | 56 | | $ | 30,841 | | $ | (11,688) | | $ | 19,209 |
Stock-based compensation |
| — | |
| — | |
| 279 | |
| — | |
| 279 |
Settlement of performance share liability | | 219,838 | | | — | | | 587 | | | — | | | 587 |
Net loss |
| — | |
| — | |
| — | |
| (1,231) | |
| (1,231) |
Balances, March 31, 2021 |
| 56,598,777 | | $ | 56 | | $ | 31,707 | | $ | (12,919) | | $ | 18,844 |
| | | | | | | | | | | | | | |
|
| | | | |
| Additional |
| Retained |
| Total | |||
| | Common Stock | | paid-in | | earnings | | shareholders' | ||||||
|
| Shares |
| Amount |
| Capital |
| (deficit) |
| equity | ||||
Balances, June 30, 2020 |
| 6,959,063 | | $ | 7 | | $ | 8,056 | | $ | (10,386) | | $ | (2,323) |
Share issuance, net |
| 25,184 | |
| — | |
| 102 | |
| — | |
| 102 |
Stock-based compensation |
| — | |
| — | |
| 88 | |
| — | |
| 88 |
Settlement of payables |
| 10,000 | |
| — | |
| 40 | |
| — | |
| 40 |
Net loss |
| — | |
| — | |
| — | |
| (977) | |
| (977) |
Balances, September 30, 2020 |
| 6,994,247 | | $ | 7 | | $ | 8,286 | | $ | (11,363) | | $ | (3,070) |
| | | | | | | | | | | | | | |
Balances, June 30, 2021 | | 11,833,431 | | $ | 12 | | $ | 38,136 | | $ | (14,226) | | $ | 23,922 |
Exercise of stock options |
| 3,000 | |
| — | |
| 19 | |
| — | |
| 19 |
Share issuance, net | | — | | | — | | | — | | | — | | | — |
Stock-based compensation |
| — | | | — | | | 210 | | | — | |
| 210 |
Convertible debt converted into shares |
| 2,858 | | | — | | | 20 | | | — | |
| 20 |
Other |
| 15 | | | — | | | — | | | — | |
| — |
Net income |
| — | |
| — | |
| — | |
| 91 | |
| 91 |
Balances, September 30, 2021 |
| 11,839,304 | | $ | 12 | | $ | 38,385 | | $ | (14,135) | | $ | 24,262 |
| | | | | | | | | | | | | | |
|
| | | | |
| Additional |
| Retained |
| Total | |||
| | Common Stock | | paid-in | | earnings | | shareholders' | ||||||
|
| Shares |
| Amount |
| Capital |
| (deficit) |
| equity | ||||
Balances, December 31, 2019 |
| 6,959,063 | | $ | 7 | | $ | 6,710 | | $ | 3,348 | | $ | 10,065 |
Share issuance, net |
| 25,184 | |
| — | |
| 102 | |
| — | |
| 102 |
Stock-based compensation |
| — | |
| — | |
| 456 | |
| — | |
| 456 |
Expected tax loss of future stock compensation option exercises |
| — | |
| — | |
| (288) | |
| — | |
| (288) |
Equity component of convertible debt issuance |
| — | |
| — | |
| 1,220 | |
| — | |
| 1,220 |
Fair value of finders’ warrants |
| — | |
| — | |
| 46 | |
| — | |
| 46 |
Settlement of payables |
| 10,000 | |
| — | |
| 40 | |
| — | |
| 40 |
Net loss |
| — | |
| — | |
| — | |
| (14,711) | |
| (14,711) |
Balances, September 30, 2020 | | 6,994,247 | | $ | 7 | | $ | 8,286 | | $ | (11,363) | | $ | (3,070) |
| | | | | | | | | | | | | | |
Balances, December 31, 2020 |
| 11,275,788 | | $ | 11 | | $ | 30,886 | | $ | (11,688) | | $ | 19,209 |
Exercise of stock options |
| 3,000 | |
| — | |
| 19 | |
| — | |
| 19 |
Share issuance, net | | 171,032 | | | — | | | 832 | | | — | | | 832 |
Share issuance, acquisition related |
| 332,117 | |
| 1 | |
| 2,274 | |
| — | |
| 2,275 |
Stock-based compensation |
| — | |
| — | |
| 818 | |
| — | |
| 818 |
Convertible debt converted into shares | | 13,384 | | | | | | 60 | | | | | | 60 |
Equity component of debenture issuance |
| — | |
| — | |
| 1,203 | |
| — | |
| 1,203 |
Settlement of performance share liability | | 43,968 | | | — | | | 2,293 | | | — | | | 2,293 |
Other |
| 15 | |
| — | |
| — | |
| — | |
| — |
Net loss |
| — | |
| — | |
| — | |
| (2,447) | |
| (2,447) |
Balances, September 30, 2021 |
| 11,839,304 | | $ | 12 | | $ | 38,385 | | $ | (14,135) | | $ | 24,262 |
See accompanying notes to condensed consolidated financial statements.
5
ASSURE HOLDINGS CORP.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(unaudited)
1.NATURE OF OPERATIONS
Assure Holdings Corp. (the “Company” or “Assure”), through its 2 indirect wholly-owned subsidiaries, Assure Neuromonitoring, LLC (“Neuromonitoring”) and Assure Networks, LLC (“Networks”), provides technical and professionaloutsourced intraoperative neuromonitoringneurophysiological monitoring (“IONM”) and is an emerging provider of remote neurology services. The Company delivers a turnkey suite of clinical and operational services to support surgeons and medical facilities during invasive procedures including spine, neurosurgery, ear, nose, and throat, cardiovascular and orthopedic. Accredited by The Joint Commission, Assure’s mission is to provide exceptional surgical support services primarily associated with spinecare and head surgeries. These services have been recognizeda positive patient experience.
IONM identifies real-time changes in spinal cord, brain, and peripheral nerve functions during high-risk surgeries to prevent injuries or accidental damage to patients that could lead to strokes, heart attacks, paralysis or other serious medical issues. IONM is well established and is regarded as the standard of care by hospitals and surgeons for risk mitigation. in U.S healthcare.
Assure Holdings, Inc., a wholly-owned subsidiary, employs most of the corporate employees and performs various corporate services on behalf of the consolidated Company.
Neuromonitoring employshighly trained IONM technologists, who utilize technical equipment and their technical training to monitor EEG (electroencephalogram) and EMG (electromyography) signals during surgical procedures and to pre-emptively notify the underlying surgeonprovide a direct point of any nerve related issues that are identified. The technologists perform their servicescontact in the operating room duringto relay critical information to the surgeries.surgical team while Company physicians deliver remote neurology services in support of the surgical team. In addition, Assure offers surgeons and medical facilities a value-added platform that manages patient scheduling, billing and collections, physician relationship management and patient advocacy services. The technologists are certified by a third party credentialing agency.high quality IONM support that Assure provides results in decreased hospital and surgeon liability, abbreviated patient stays, fewer readmissions, reduced hospital costs, enhanced overall patient satisfaction and the efficient achievement of better clinical outcomes.
Networks performs similar supportThe Company maintains operations in twelve U.S. states. Assure believes that continued geographic expansion initiatives, facility-wide outsourcing agreements with medical facilities, the acceleration of its remote neurology services as Neuromonitoring except that these services are provided by third party contracted neurologists or certified readers. The support services provided by Networks occurs at the same timeplatform, and for the same surgeries as the support services provided by the Neuromonitoring technologist, except that they typically occur at an offsite location.selective acquisitions will combine to generate substantial growth opportunities going forward.
The Company was originally incorporated in Colorado on November 7, 2016. In conjunction with a reverse merger with Montreux Capital Corp., a British Columbia corporation, the Company was redomiciled inredomesticated from British Columbia to Nevada on May 16, 2017.
Neuromonitoring was formed on August 25, 2015 in Colorado and it currently has multiple wholly-owned subsidiaries. The Company’s services are sold in the United States, directly through the Company.
Networks was formed on November 7, 2016 in Colorado and holds varying ownerships interests in numerous Provider Network Entities (“PEs”), which are professional IONM entities. These entities are accounted for under the equity method of accounting. Additionally,
Networks also manages other PEs that Networks does not have an ownership interest and charges those PEs a management fee.fee which is accounted for as service revenue.
The Company operates in the United States in 1 segment.
COVID-19
In December 2019, a novel strainOur business and results of coronavirus,operations have been, and continues to be, adversely affected by the global COVID-19 was reported to have surfaced in Wuhan, China. Since then, the COVID-19 coronavirus has spread to over 150 countries and every state in the United States. On January 30, 2020, the World Health Organization declared the outbreak of coronavirus a “Public Health Emergency of International Concern.” On March 11, 2020, the World Health Organization declared the outbreak a pandemic and on March 13, 2020, the United States declared a national emergency.related events and we expect its impact to continue. The spreadimpact to date has included periods of the virus in many countries continues to adversely impact global economic activity and has contributed to significant volatility and negative pressure in financialvarious markets and supply chains.industries, including the healthcare industry. The pandemicvolatility has had, and couldwe anticipate it will continue to have, a significantly greater, materialan adverse effect on our customers and on our business, financial condition and results of operations, and may result in an impairment of our long-lived assets, including goodwill, increased credit losses and impairments of investments in other companies. In particular, the U.S. economy where we conduct our business. The pandemic has resulted,healthcare industry, hospitals and providers of elective procedures have been and may continue to result for an extended period, in significant disruption of global financial markets, which may reduce our ability to access capital in the future, which could negatively affect our liquidity.
Operations related to the support of surgical procedures may experience a delay in implementation due tobe impacted by the pandemic including delaysand/or other events beyond our control, and cancellations of elective procedures.
Thefurther volatility could have an additional negative impact on these industries, customers, and our business. In addition, the COVID-19 pandemic may alsoand, to a lesser extent, the impact our workforce, supply chains or distribution networks or otherwise impact our ability to restock our medical deviceon other industries, including automotive, electronics and supply inventories and depending upon the severity of the COVID-19 coronavirus’ continued spread in the United States and other countries, we may experience disruptions that could severely impact our business, including:real estate,
6
ASSURE HOLDINGS CORP.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(unaudited)
The global outbreakincreased fuel costs, U.S. restrictions on trade, and transitory inflation have impacted and may continue to impact the financial conditions of our customers and the patients they serve.
In addition, actions by United States federal, state and foreign governments to address the COVID-19 pandemic, including travel bans, stay-at-home orders and school, business and entertainment venue closures, also had and may continue to have a significant adverse effect on the markets in which we conduct our businesses. COVID-19 poses the risk that our workforce, suppliers, and other partners may be prevented from conducting normal business activities for an extended period of time, including due to shutdowns or stay-at-home orders that may be requested or mandated by governmental authorities. We have implemented policies to allow our employees to work remotely as a result of the COVID-19 coronavirus continuespandemic as we reviewed processes related to rapidly evolve. In early December 2020, authorities inworkplace safety, including social distancing and sanitation practices recommended by the United Kingdom reported mutations of the severe acute respiratory syndrome coronavirus 2 (SARS-CoV-2), which may indicate that the virus is replacing older versions of the virus and may increase the ability to infect cells. Subsequently, other mutations have been reported.
Since December 11, 2020, the U.S. Food and Drug Administration (“FDA”) issued emergency use authorization (“EUA”) for vaccines developed by Pfizer-BioNTech, Moderna, Inc. and Johnson and Johnson for the prevention of COVID-19 caused SARS-CoV-2. As of May 11, 2021, the CenterCenters for Disease Control and Prevention has reported 263 million doses of(CDC). The COVID-19 vaccines have been administeredpandemic could also cause delays in the United States with 153.4 million people receiving at lease one doseacquiring new customers and 116.5 million fully vaccinated. Other vaccine manufacturers are anticipated to receive FDA approval for additional vaccines. The emergency use authorizations allow the vaccines to be distributed in the U.S. While clinical trials of the vaccines demonstrated a high degree of effectiveness, there remains uncertaintyexecuting renewals and could also impact our business as to the effectiveness of the vaccines outside clinical trials, the timing of the rollout of the vaccines, the immunization and acceptance rate, potential side effects of the vaccines, potential mutation of COVID-19consumer behavior changes in response to the pandemic.
Since the start of the second quarter of 2021, there has been increased availability and administration of vaccines against COVID-19, as well as an easing of restrictions on social, business, travel, and government activities and functions, including healthcare and elective surgeries, and we have experienced a gradual resumption of economic activities in our industries. On the other riskshand, infection rates continue to fluctuate in various regions and uncertainties.new strains of the virus, including the Delta variant, remain a risk, which may give rise to implementation of restrictions in the geographic areas that we serve. In addition, there are ongoing global impacts resulting from the pandemic, including disruption of the supply chains, product shortages, increased delivery costs, increased governmental regulation, strains on healthcare systems, and delays in shipments, product development, technology launches and facility access.
The extent to whichWe have been closely monitoring the COVID-19 coronavirus may continue topandemic and its impact on our business, and our profitability and growth will depend on future developmentsincluding legislation to combatmitigate the impact of COVID-19 which are highly uncertain and cannot be predicted with confidence, such as the effectivenessCoronavirus Aid, Relief, and Economic Security (CARES) Act which was enacted in March 2020, and the American Rescue Plan Act of vaccines,2021 which was enacted in March 2021. Although a significant portion of our anticipated revenue for 2021 is derived from fixed-fee and minimum-guarantee arrangements, primarily from large, well-capitalized customers which we believe somewhat mitigates the ultimate geographic spreadrisks to our business, our per-unit and variable-fee based revenue will continue to be susceptible to the volatility, supply chain disruptions, microchip shortages and potential market downturns induced by the COVID-19 pandemic.
The full extent of the disease, the duration of the outbreak, travel restrictions and social distancing in the United States and other countries, business closures or business disruptions and the effectiveness of actions taken in the United States and other countries to contain and treat the disease.
Health & Safety Measures Assure has taken include:
Significant uncertainty remains as to the potentialfuture impact of the COVID-19 pandemic on our operations,the Company’s operational and financial performance is uncertain and will depend on many factors outside the Company’s control, including, without limitation, the timing, extent, trajectory and duration of the pandemic; the availability, distribution and effectiveness of vaccines; the spread of new variants of COVID-19; the continued and renewed imposition of protective public safety measures; the impact of COVID-19 on integration of acquisitions, expansion plans, implementation of telemedicine, restrictions on elective procedures, delays in payor remittance and increased regulations; and the impact of the pandemic on the global economy as a whole.
7
ASSURE HOLDINGS CORP.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(unaudited)the COVID-19 pandemic on our business, we are actively managing our financial expenditures in response to continued uncertainty. Further discussion of the potential impacts on our business from the COVID-19 pandemic is provided under Part I, Item 1A – Risk Factors of the Form 10-K.
2.BASIS OF PRESENTATION
Consolidation
The consolidated financial statements include the accounts of the Company and its wholly owned subsidiaries, and majority-owned entities. The accompanying consolidated financial statements have been prepared in accordance with U.S. generally accepted accounting principles (“GAAP”), which contemplates continuation of the Company as a going concern and the realization of assets and satisfaction of liabilities in the normal course of business. 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. All significant intercompany balances and transactions have been eliminated in consolidation.
7
ASSURE HOLDINGS CORP.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(unaudited)
For entities in which management has determined the Company does not have a controlling financial interest but has varying degrees of influence regarding operating policies of that entity, the Company’s investment is accounted for using the equity method of accounting.
Accounting Policies
There have been no changes to the Company’s significant accounting policies or recent accounting pronouncementpronouncements during the nine months ended September 30, 2021 as compared to the significant accounting policies disclosed in the Company’s Annual Report on Form 10-K for the year ended December 31, 2020 as filed on March 30, 2021.
Common Stock Reverse Split
During September 2021, the Company effectuated a five-for-one reverse stock split. All share, stock option and warrant information has been retroactively adjusted to reflect the stock split. See Note 5 for additional discussion.
3. 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.
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 nonleasenon-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 corporate office facilities under 2 operating sub-leases which expireexpired June 30, 2021. The Company is negotiating lease renewal terms and is currently under a month-to-month lease arrangement.
Finance leases
The Company leases medical equipment under various financing leases with stated interest rates ranging from 6.5% — 12.2% per annum which expire at various dates through 2026.
The condensed consolidated balance sheets include the following amounts for right of use (“ROU”) assets as of March 31,September 30, 2021 and December 31, 2020 (stated in thousands):
| | | | | | | | | | | | |
|
| March 31, | | December 31, |
| September 30, | | December 31, | ||||
| | 2021 |
| 2020 | | 2021 |
| 2020 | ||||
Operating |
| $ | 67 |
| $ | 124 |
| $ | — |
| $ | 124 |
Finance |
| | 764 |
| | 608 |
| | 877 |
| | 608 |
Total |
| $ | 831 |
| $ | 732 |
| $ | 877 |
| $ | 732 |
8
ASSURE HOLDINGS CORP.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(unaudited)
Finance lease assets are reported net of accumulated amortization of $1.4$1.8 million and $1.3 million as of March 31,September 30, 2021 and December 31, 2020, respectively.
The following are the components of lease cost for operating and finance leases (stated in thousands):
| | | | | | | | | | | | |
| | Three Months Ended March 31, | | Nine Months Ended September 30, | ||||||||
| | 2021 |
| 2020 | | 2021 |
| 2020 | ||||
Lease cost: | | | | | | | | | | | | |
Operating leases | | $ | 64 | | $ | 44 | | $ | 227 | | $ | 159 |
Finance leases: | | | | | | | | | | | | |
Amortization of ROU assets | | | 117 | | | 111 | | | 372 | | | 398 |
Interest on lease liabilities | | | 17 | | | 18 | | | 69 | | | 60 |
Total finance lease cost | | | 134 | | | 129 | | | 441 | | | 458 |
Total lease cost | | $ | 198 | | $ | 173 | | $ | 668 | | $ | 617 |
The following are the weighted average lease terms and discount rates for operating and finance leases:
|
|
|
|
|
|
|
|
|
|
| |
|
|
|
|
|
|
| |
|
|
| |
|
|
|
|
|
|
| |
|
|
|
| | | | | |
| | As of | | As of | |
|
| September 30, 2021 | | December 31, 2020 | |
Weighted average remaining lease term (years): | | | | | |
Operating leases |
| — | | 0.5 | |
Finance leases |
| 3.1 | | 3.3 | |
Weighted average discount rate: | | | | | |
Operating leases |
| — | | 6.9 | |
Finance leases |
| 8.1 | | 7.9 | |
The Company acquired ROU assets in exchange for lease liabilities of $273$431 thousand upon commencement of finance leases during the threenine months ended March 31,September 30, 2021.
Future minimum lease payments and related lease liabilities as of March 31,September 30, 2021 were as follows (stated in thousands):
| | | | | | | | | | | | | | | | | | |
|
| | |
| | |
| Total |
| | |
| | |
| Total | ||
| | Operating | | Finance | | Lease | | Operating | | Finance | | Lease | ||||||
| | Leases | | Leases | | Liabilities | | Leases | | Leases | | Liabilities | ||||||
Remainder 2021 | | $ | 64 | | $ | 420 | | $ | 484 | | $ | — | | $ | 167 | | $ | 167 |
2022 | |
| — | |
| 521 | |
| 521 | |
| — | |
| 620 | |
| 620 |
2023 | |
| — | |
| 246 | |
| 246 | |
| — | |
| 306 | |
| 306 |
2024 | | | — | | | 194 | | | 194 | | | — | | | 239 | | | 239 |
2025 | | | — | | | 147 | | | 147 | | | — | | | 148 | | | 148 |
Thereafter | |
| — | |
| 24 | |
| 24 | |
| — | |
| 23 | |
| 23 |
Total lease payments | |
| 64 | |
| 1,552 | |
| 1,616 | |
| — | |
| 1,503 | |
| 1,503 |
Less: imputed interest | |
| (1) | |
| (203) | |
| (204) | |
| — | |
| (174) | |
| (174) |
Present value of lease liabilities | | | 63 | | | 1,349 | | | 1,412 | | | — | | | 1,329 | | | 1,329 |
Less: current portion of lease liabilities | |
| 63 | |
| 560 | |
| 623 | |
| — | |
| 579 | |
| 579 |
Noncurrent lease liabilities | | $ | — | | $ | 789 | | $ | 789 | | $ | — | | $ | 750 | | $ | 750 |
| | | | | | | | | |
Note: Future minimum lease payments exclude short-term leases as well as payments to landlords for variable common area maintenance, insurance and real estate taxes.
9
ASSURE HOLDINGS CORP.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(unaudited)
4. DEBT
Paycheck Protection Program
During March 2021, the Company received an unsecured loan under the United States Small Business Administration Paycheck Protection Program (“PPP”) in the amount of $1.7 million. Assure executed a PPP promissory note, which matures on February 25, 2026. The PPP Loan carries an interest rate of 1.0% per annum, with principal and interest payments due on the first day of each month, with payments commencing on the earlier of: (i) the day the amount of loan forgiveness granted to Assure is remitted by the Small Business Administration to the Bank of Oklahoma; or (ii) 10 months after the end of the 24 week24-week period following the grant of the Loan. All or a portion of the Loan may be forgiven if the Company maintains its employment and compensation within certain parameters during the 24 week24-week period following the loan origination date and the proceeds of the Loan are spent on payroll costs, rent or lease agreements dated before February 15, 2020 and utility payments arising under service agreements dated before February 15, 2020. The Company intends to submit its application for forgiveness of the PPP promissory note during the fourth quarter of 2021.
Debenture
On June 10, 2021, the Company entered into definitive agreements to secure a credit facility under the terms of a commitment letter dated March 8, 2021 (the “Commitment Letter”) with Centurion Financial Trust, an investment trust formed by Centurion Asset Management Inc. (“Centurion”). Under the terms of the Commitment Letter, Assure issued a debenture to Centurion, dated June 9, 2021 (the “Debenture”), with a maturity date of June 9, 2025 (the “Maturity Date”), in the principal amount of $11 million related to a credit facility comprised of a $6 million senior term loan (the “Senior Term Loan”), a $2 million senior revolving loan (the “Senior Revolving Loan”) and a $3 million senior term acquisition line (the “Senior Term Acquisition Line” and together with the Senior Term Loan and the Senior Revolving Loan, the “Credit Facility”). The Senior Term Acquisition Line will be made available to the Company to fund future acquisitions, subject to certain conditions and approvals of Centurion. The Credit Facility matures in June 2025.
The principal amount of the Debenture drawn and outstanding from time to time shall bear interest both before and after maturity, default and judgment from the date hereof to the date of repayment in full at the rate of the greater of 9.50% or the Royal Bank of Canada Prime Rate plus 7.05% per annum calculated and compounded monthly in arrears and payable on the first business day of each month during which any obligations are outstanding, the first of such payments being due July 2, 2021 for the period from the Advance to the date of payment, and thereafter monthly. The difference between the commitment and the amount of the Loan outstanding from time to time shall bear a standby charge, for the period between June 2021 and the end of the availability period, in the amount of 1.50% per annum calculated and compounded monthly in arrears and payable on the first business day of each month during which any amount of the commitment remains available and undrawn, the first of such payments being due July 2, 2021. Interest on overdue interest shall be calculated and payable at the same rate plus 3% per annum.
With respect to the Senior Revolving Loan, Assure may prepay advances outstanding thereunder from time to time, with not less than 10 business days prior written notice of the prepayment date and the amount, in the minimum amount of $250 thousand. Any amount of the Senior Revolving Loan prepaid may be re-advanced. With respect to the Senior Term Loan and Senior Term Acquisition Line, Assure may prepay the advances outstanding thereunder, without penalty or bonus, in an amount not to exceed 25% of the aggregate of all Advances then outstanding under the Term Loans, on each anniversary date of the first advance made hereunder, provided in each case with not less than 30 days written notice of the Company's intention to prepay on such anniversary date and the proposed prepayment amount. Any prepayments to the Term Loans other than those permitted in the immediately preceding sentence may only be made on 30 days prior written notice of the prepayment date and the amount, and are subject to the Company paying on such prepayment date a prepayment charge equal to the lesser of (i) twelve (12) months interest and (ii) interest for the months remaining from the prepayment date to the Maturity Date, on the amount prepaid at the interest rate in effect on the applicable Term Loan as of the date of prepayment. Any amount of the Term Loan prepaid may not be re-advanced.
The Credit Facility is guaranteed by the subsidiaries under the terms of the guarantee and secured by a first ranking security interest in all of the present and future assets of Assure and the Subsidiaries under the terms of the security agreement.
10
ASSURE HOLDINGS CORP.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(unaudited)
Assure paid Centurion on first Advance of the Loan a commitment fee of 2.25%, being $248 thousand, made by withholding from the first advance.
A portion of the proceeds from the Debenture were utilized to repay the Central Bank line of credit and the Central Bank promissory note.
Warrant Fee
In addition, Assure issued Centurion an aggregate of 275,000 non-transferrable common stock purchase warrants. Each warrant entitles Centurion to acquire 1 share in the capital of Assure, at an exercise price equal to US$7.55 (representing the closing price of Assure’s shares of common stock as of the close of business on June 9, 2021 and multiplied by the Bank of Canada’s daily exchange rate on June 9, 2021) for a term of 48 months. The warrants and underlying shares of common stock are subject to applicable hold periods under U.S. securities laws.
The Company’s debt obligations are summarized as follows:
| | | | | | | | | | | | |
| | March 31, | | December 31, | | September 30, | | December 31, | ||||
|
| 2021 |
| 2020 |
| 2021 |
| 2020 | ||||
Bank line of credit | | $ | 1,978 | | $ | 1,978 | ||||||
Bank promissory note | |
| 2,122 | |
| 2,122 | ||||||
Payroll protection program loan | |
| 1,665 | |
| — | ||||||
Central Bank line of credit | | $ | — | | $ | 1,978 | ||||||
Central Bank promissory note | |
| — | |
| 2,122 | ||||||
PPP promissory note | |
| 1,665 | |
| — | ||||||
Total | |
| 1,665 | |
| 4,100 | ||||||
| |
| 5,765 | |
| 4,100 | | | | | | |
Face value of convertible debenture | |
| 3,450 | |
| 3,450 | |
| 3,450 | |
| 3,450 |
Less: fair value ascribed to conversion feature and warrants | |
| (1,523) | |
| (1,523) | ||||||
Less: principal converted to common shares | | | (60) | | | — | ||||||
Less: deemed fair value ascribed to conversion feature and warrants | |
| (1,523) | |
| (1,523) | ||||||
Plus: accretion of implied interest | |
| 419 | | | 324 | |
| 610 | | | 324 |
Total convertible debt | |
| 2,477 | |
| 2,251 | ||||||
| |
| 2,346 | |
| 2,251 | | | | | | |
Face value of Centurion debenture | | | 8,000 | | | — | ||||||
Less: deemed fair value ascribed to warrants | | | (1,204) | | | — | ||||||
Plus: accretion of implied interest | | | 100 | | | — | ||||||
Less: net debt issuance costs | | | (587) | | | — | ||||||
Total Centurion debt | |
| 6,309 | |
| — | ||||||
Total debt | |
| 8,111 | |
| 6,351 | |
| 10,451 | |
| 6,351 |
Less: current portion of debt | |
| (4,100) | |
| (4,100) | |
| — | |
| (4,100) |
Long-term debt | | $ | 4,011 | | $ | 2,251 | | $ | 10,451 | | $ | 2,251 |
As of March 31, 2021, future minimum principal payments are summarized as follows (stated in thousands):
| | | | | | |
|
| Bank & PPP |
| Convertible | ||
|
| | Indebtedness |
| Debt | |
Remainder 2021 | | $ | 4,100 | | $ | — |
2022 | |
| — | |
| — |
2023 | |
| — | |
| 965 |
2024 | |
| — | |
| 2,485 |
2025 | |
| — | |
| — |
2026 | | | 1,665 | | | — |
Total | | | 5,765 | | | 3,450 |
Less: fair value ascribed to conversion feature and warrants | |
| — | |
| (1,523) |
Plus: accretion and implied interest | |
| — | |
| 419 |
| | $ | 5,765 | | $ | 2,346 |
1011
ASSURE HOLDINGS CORP.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(unaudited)
As of September 30, 2021, future minimum principal payments are summarized as follows (stated in thousands):
| | | | | | | | | | |
|
|
| PPP |
| Convertible |
| Bank | |||
|
|
| Loan |
| | Debt |
| Indebtedness | ||
Remainder 2021 | | | $ | — | | $ | — | | $ | — |
2022 | | |
| — | |
| — | |
| — |
2023 | | |
| — | |
| 965 | |
| — |
2024 | | |
| — | |
| 2,425 | |
| — |
2025 | | |
| — | |
| — | |
| 8,000 |
2026 | | | | 1,665 | | | — | | | — |
Total | | | | 1,665 | | | 3,390 | | | 8,000 |
Less: fair value ascribed to conversion feature and warrants | | |
| — | |
| (1,523) | |
| (1,204) |
Plus: accretion and implied interest | | |
| — | |
| 610 | |
| 100 |
Less: net debt issuance costs | | | | — | | | — | | | (587) |
| | | $ | 1,665 | | $ | 2,477 | | $ | 6,309 |
5. SHARE CAPITAL
Common stock
Common stock: 180,000,000 authorized; $0.001 par value. As of September 30, 2021 and December 31, 2020, there were 11,839,304 and 11,275,788 shares of common stock issued and outstanding, respectively.
Reverse Share Split
During September 2021, the total number of shares of common stock authorized by the Company was reduced from 900,000,000 shares of common stock, par $0.001, to 180,000,000 shares of common stock, par $0.001, and the number of shares of common stock held by each stockholder of the Company were consolidated automatically into the number of shares of common stock equal to the number of issued and outstanding shares of common stock held by each such stockholder immediately prior to the reverse split divided by five (5): effecting a five (5) old for one (1) new reverse stock split.
NaN fractional shares were issued in connection with the reverse split and all fractional shares were rounded up to the next whole share.
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 five (5) and multiplying the exercise or conversion price thereof by five (5), 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.
Acquisition shares
In connection with the acquisition of the Sentry Neuromonitoring, LLC (the “Seller”) assets, we issued to Seller or the Principals, as elected by Seller, shares of common stock of the Company with a value of $1,625,000, determined on the effective date, as quoted on the TSX Venture Exchange (237,226 shares of common stock). In addition, the Company placed into escrow 94,891 shares of the
12
ASSURE HOLDINGS CORP.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(unaudited)
5. SHARE CAPITAL
Common shares
Common shares: 900,000,000 authorized; $0.001 par value. AsCompany’s common stock with a value of March 31, 2021 and December 31, 2020, there were 56,598,777 and 56,378,939$650,000. The common sharesstock is subject to a issued12-month lock up beginning on the date of delivery. See Note 7 for additional discussion.
Share issuance
In June 2020, in connection with common stock purchase agreements, the Company issued 156,032 shares of common stock at a deemed value of $4.00 per share to certain employees, directors and third parties.
Convertible debt
During the nine months ended September 30, 2021, certain holders of the convertible debenture exercised their right to convert $60,000 of outstanding (“Common Shares”), respectively. principal into shares of common stock, resulting in the issuance of 13,384 common stock.
Stock options
On December 10, 2020, our 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”). As of March 31,September 30, 2021, an aggregate of 5,659,8781,183,930 shares of common stock (10% of the issued and outstanding shares of common stock) were available for issuance under the Amended Stock Option Plan. Of this amount, stock options in respect of 4,983,000 common1,014,100 shares have been issued.are outstanding as of September 30, 2021.
Options under the 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 | | Options Outstanding | ||||||||||||||||
|
| |
| Weighted |
| Weighted |
| | |
| |
| Weighted |
| Weighted |
| | | ||
| | | | Average | | Average | | | | | | | Average | | Average | | | | ||
| | Number of | | Exercise | | Remaining | | Aggregate | | Number of | | Exercise | | Remaining | | Aggregate | ||||
| | Shares Subject | | Price Per | | Contractual | | Intrinsic Value | | Shares Subject | | Price Per | | Contractual | | Intrinsic Value | ||||
| | to Options | | Share | | Life (in years) | | (in thousands) | | to Options | | Share | | Life (in years) | | (in thousands) | ||||
Balance at December 31, 2020 |
| 3,743,000 | | $ | 1.05 | | 4.00 | | | |
| 748,600 | | $ | 5.25 | | 4.00 | | | |
Options granted |
| 1,590,000 | | $ | 1.06 | | | | | |
| 348,000 | | | 5.33 | | | | | |
Options exercised |
| — | | $ | — | | | | | |
| (3,000) | | | 6.40 | | | | | |
Options canceled / expired |
| (350,000) | | $ | 1.20 | | | | | |
| (79,500) | | | 5.96 | | | | | |
Balance at March 31, 2021 |
| 4,983,000 | | $ | 1.03 |
| 4.10 |
| $ | 2,922 | ||||||||||
Vested and exercisable at March 31, 2021 |
| 2,638,467 | | $ | 0.94 |
| 3.85 |
| $ | 773 | ||||||||||
Balance at September 30, 2021 |
| 1,014,100 | | | 5.16 |
| 3.62 |
| $ | 2,670 | ||||||||||
Vested and exercisable at September 30, 2021 |
| 636,008 | | | 4.93 |
| 3.39 |
| $ | 1,894 |
The following table summarizes information about stock options outstanding and exercisable under the Company’s Stock Option Plan at March 31, 2021:
| | | | | | | | | | |
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 | ||
1,000,000 |
| 4.41 | | $ | 0.05 |
| 1,000,000 | | $ | 0.05 |
60,000 |
| 1.57 | | $ | 2.80 |
| 60,000 | | $ | 2.80 |
75,000 |
| 6.80 | | $ | 1.80 |
| 75,000 | | $ | 1.80 |
425,000 |
| 2.50 | | $ | 1.80 |
| 311,667 | | $ | 1.80 |
734,000 |
| 2.80 | | $ | 1.56 |
| 538,267 | | $ | 1.56 |
434,000 |
| 3.52 | | $ | 1.28 |
| 202,533 | | $ | 1.28 |
200,000 | | 4.41 | | $ | 0.90 | | 40,000 | | $ | 0.90 |
465,000 |
| 4.70 | | $ | 0.97 |
| 93,000 | | $ | 0.97 |
1,590,000 | | 4.84 | | $ | 1.06 | | 318,000 | | $ | 1.06 |
4,983,000 |
| 4.10 | | $ | 1.03 |
| 2,638,467 | | $ | 0.94 |
1113
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 September 30, 2021:
| | | | | | | | | | |
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 | ||
200,000 |
| 3.90 | | $ | 0.25 |
| 200,000 | | $ | 0.25 |
12,000 |
| 1.07 | | $ | 14.00 |
| 12,000 | | $ | 14.00 |
15,000 |
| 6.30 | | $ | 9.00 |
| 15,000 | | $ | 9.00 |
85,000 |
| 2.00 | | $ | 9.00 |
| 73,667 | | $ | 9.00 |
146,800 |
| 2.30 | | $ | 7.80 |
| 127,227 | | $ | 7.80 |
81,300 |
| 3.01 | | $ | 6.40 |
| 48,780 | | $ | 6.40 |
40,000 | | 3.91 | | $ | 4.50 | | 18,667 | | $ | 4.50 |
93,000 |
| 4.20 | | $ | 4.85 |
| 31,000 | | $ | 4.85 |
311,000 | | 4.34 | | $ | 5.30 | | 103,667 | | $ | 5.30 |
30,000 | | 4.54 | | $ | 5.60 | | 6,000 | | $ | 5.60 |
1,014,100 |
| 3.62 | | $ | 5.16 |
| 636,008 | | $ | 4.93 |
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 are 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.
There were 0 stock option grants during the three months ended March 31, 2020.The following assumptions were used to value the awards granted during the three months ended March 31, 2021:
|
|
|
|
|
| ||
|
|
| |
|
|
| |
|
|
|
Stock-based compensation expense recognized in our consolidated financial statements for the three months ended March 31, 2021 and 2020 was $279 thousand and $205 thousand, respectively. As of March 31, 2021, there was approximately $1.2 million of total unrecognized compensation cost related to 2,344,533 unvested stock options that is expected to be recognized over a weighted-average remaining vesting period of 2.6 years.
Derivative Liability
Stock options granted to consultants that have an exercise price this is stated in a different currency than the Company’s functional currency are treated as a liability and are revalued at the end of each reporting period for the term of the vesting period. Any change in the fair value of the stock option subsequent to the initial recognition is recorded as a component of other income, net in the consolidated statements of operations.
1214
ASSURE HOLDINGS CORP.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(unaudited)
Changes inThe following assumptions were used to value the Company’s stock option liabilityawards granted during the nine months ended September 30, 2021:
| | | | | |
|
| Nine Months Ended September 30, |
| ||
| | 2021 |
| 2020 | |
Expected life (in years) |
| 5.0 |
| 5.0 | |
Risk-free interest rate |
| 0.4 | % | 3.0 | % |
Dividend yield |
| — | % | — | % |
Expected volatility |
| 91 | % | 107 | % |
Stock-based compensation expense for the three months ended March 31,September 30, 2021 and 2020 was as follows (stated in thousands):$210 thousand and $88 thousand, respectively, and $818 thousand and $456 thousand for the nine months ended September 30, 2021 and 2020, respectively. As of September 30, 2021, there was approximately $925 thousand of total unrecognized compensation cost related to 378,092 unvested stock options that is expected to be recognized over a weighted-average remaining vesting period of 2.2 years.
| | | |
Balance at December 31, 2020 | | $ | 16 |
Loss on revaluation | |
| (3) |
Balance at March 31, 2021 | | $ | 19 |
Warrants
ThereAs of September 30, 2021 and December 31, 2020, there were 0 stock options granted during the three months ended March 31, 2021.
The assumptions used for the Black-Scholes Option Pricing Model to revalue the stock options granted to consultants as of March 31, 2021 were as follows:3,940,006 and 3,665,006 warrants outstanding, respectively.
| | |
|
|
|
| |
Balance at December 31, 2020 |
| ||
|
|
| |
|
|
| |
|
|
|
Warrants
As of March 31, 2021 and December 31, 2020, there were 18,325,028 warrants outstanding.
6. LOSS PER SHARE
The following table sets forth the computation of basic and fully diluted loss per common share for the three and months ended March 31,September 30, 2021 and 2020 (stated in thousands, except per share amounts):
| | | | | | |
|
| Three Months Ended March 31, | ||||
| | 2021 |
| 2020 | ||
Net loss | | $ | (1,231) | | $ | (414) |
Basic weighted average common shares outstanding | |
| 56,537,711 | |
| 34,795,313 |
Basic loss per common share | | $ | (0.02) | | $ | (0.01) |
Net loss | | $ | (1,231) | | $ | (414) |
Dilutive weighted average common shares outstanding | |
| 56,537,711 | |
| 34,795,313 |
Diluted loss per common share | | $ | (0.02) | | $ | (0.01) |
| | | | | | | | | | | | |
|
| Three Months Ended September 30, | | Nine Months Ended September 30, | ||||||||
| | 2021 |
| 2020 | | 2021 |
| 2020 | ||||
Net income (loss) | | $ | 91 | | $ | (977) | | $ | (2,447) | | $ | (14,711) |
Basic weighted average common stock outstanding | |
| 11,838,032 | |
| 6,988,058 | |
| 11,528,371 | |
| 6,968,728 |
Basic income (loss) per share | | $ | 0.01 | | $ | (0.14) | | $ | (0.21) | | $ | (2.11) |
Net income (loss) | | $ | 91 | | $ | (977) | | $ | (2,447) | | $ | (14,711) |
Basic weighted average common shares outstanding | |
| 11,838,032 | |
| 6,988,058 | |
| 11,528,371 | |
| 6,968,728 |
Dilutive effect of stock options and warrants | |
| 3,886,071 | |
| — | |
| — | |
| — |
Dilutive weighted average common stock outstanding | |
| 15,724,103 | |
| 6,988,058 | |
| 11,528,371 | |
| 6,968,728 |
Diluted income (loss) per share | | $ | 0.01 | | $ | (0.14) | | $ | (0.21) | | $ | (2.11) |
Basic net lossincome (loss) per share is computed using the weighted average number of shares of common sharesstock outstanding during the period. Diluted net lossincome (loss) per share is computed using the treasury stock method to calculate the weighted average number of shares of common sharesstock and, if dilutive, potential shares of common sharesstock outstanding during the period. Potential dilutive shares of common sharesstock include incremental shares of common sharesstock 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.
1315
ASSURE HOLDINGS CORP.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(unaudited)
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, exercisable, to purchase 2,638,467227,893 shares of common sharesstock and warrants to purchase 18,325,028462,068 shares of common sharesstock were outstanding at March 31,September 30, 2021 that were not included in the computation of diluted weighted average common sharesstock outstanding because their effect would have been anti-dilutive.
7. ACQUISITION
Effective on April 30, 2021 (the “Closing Date”), Assure Networks Texas Holdings II, LLC, a Colorado limited liability company and wholly-owned subsidiary of Assure Holdings (the “Purchaser”), entered into an Asset Purchase Agreement (the “Purchase Agreement”) with Sentry Neuromonitoring, LLC (the “Seller”), and certain owners (collectively “Principals”).
Under the terms of the Purchase Agreement, Assure Texas Holdings agreed to purchase certain assets (“Acquired Assets”) related to the Seller’s interoperative neuromonitoring business (the “Business”) and assumed certain liabilities of the Seller. The Acquired Assets included, among other items, all assets used in the Business, certain tangible personal property, inventory, Seller’s records related to the Business, deposits and prepaid expenses, certain contracts related to the Business, licenses, intellectual property, goodwill and accounts receivables. The purchase qualified as a business combination for accounting purposes.
The purchase price for the assets consisted of cash and stock, payable as follows:
Cash Payment
Cash consideration of $1,125,000 in installment payments, payable (a) $153,125 at closing, (b) $153,125 within 30 days of Closing Date and (c) $818,750, together with interest at the applicable federal rate, shall be paid in cash in NaN equal monthly installments, with the first installment being due on or before the first business day of the first month following the sixtieth day from the Closing Date and the remaining installments being due on the first business day of each month thereafter.
Stock Payment
The Company issued 237,226 shares of common stock issued to the Seller or the Principals, as elected by Seller, with a value of $1,625,000, determined on the Closing Date, as quoted on the TSX Venture Exchange, on or about the Closing Date and 94,891 shares of common stock were placed in escrow with a value of $650,000 and are being held by the Escrow Agent pursuant to terms set forth in an escrow agreement to be mutually agreed to by Purchaser and Seller. The common stock is subject to regulatory restrictions and requirements and a 12 month lock up from the date of delivery, in addition to any additional lock up period imposed on the common stock under applicable law and/or regulation,
Reimbursements
Reimbursement to Seller for operational capital injected by Seller or its Principals since December 31, 2020, for verifiable and reasonable expenses, consistent with past business practices up to a cap of $50 thousand.
Receivable Bonus
Purchaser agreed to pay Seller or the Principals, as elected by Seller, a bonus in an amount equal to $250,000 (“Receivable Bonus”) upon collecting $3,000,001 in accounts receivable acquired by Purchaser for accounts receivable that was generated by Seller prior to the Closing. The Receivable Bonus, if earned, will be paid to Seller or the Principals, as elected by Seller, in 3 payments: (i) the first payment being in the amount of $100 thousand, payable on the thirtieth (30th) day following the date the Receivable Bonus is earned, (ii) the second payment being in the amount of $100 thousand, payable on the sixtieth (60th) day following the date the
16
ASSURE HOLDINGS CORP.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(unaudited)
Receivable Bonus is earned, and (iii) the third payment in the amount of $50 thousand, payable on the ninetieth (90th) day following the date the Receivable Bonus is earned.
Founders’ Bonus
The Registrant agreed to pay a $50 thousand bonus (“Founders’ Bonus”) payment to certain owners in installments: (i) $25 thousand at Closing and (ii) $25 thousand within twelve (12) months of Closing. The Founders’ Bonus is additional consideration, which is independent, separate and apart from other consideration to be paid by Purchaser.
Under the Purchase Agreement, Purchaser agreed to enter into employment agreements with certain key personnel of Seller, as determined by Purchaser. The employment agreements, in standard form of employment agreement of Purchaser, include: (i) a minimum annual base salary of $175 thousand with full benefits and (ii) up to $50 thousand in annual variable compensation bonus to be memorialized in a mutually agreeable form of agreement that details the scope of services and compensation.
The initial accounting for the acquisition of Sentry is incomplete as we, with the support of our valuation specialist, are in the process of finalizing the fair market value calculations of the acquired net assets. In addition, the Company is in the process of reviewing the applicable future cash flows used in determining the purchase accounting. As a result, the amounts recorded in the consolidated financial statements related to the Sentry acquisition are preliminary and the measurement period remains open. The following table summarizes the preliminary allocation of the total consideration to the assets acquired and liabilities assumed as of the date of the acquisition (in thousands):
| | | |
Purchase price consideration: |
| | |
Cash |
| $ | 1,125 |
Common stock, at fair value |
| | 2,275 |
Total consideration |
| $ | 3,400 |
| | | |
Assets acquired: | | | |
Cash |
| $ | 51 |
Accounts receivable | | | 2,000 |
Right of use assets |
| | 131 |
Total assets acquired |
| | 2,182 |
| | | |
Liabilities assumed: | | | |
Accounts payable and accrued liabilities | | | 242 |
Lease liability | | | 131 |
Total liabilities assumed | | | 373 |
| | | |
Preliminary Goodwill |
| $ | 1,591 |
8. 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
17
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.
Performance share compensation
As part of a reverse takeover transaction (“RTO”) during 2016, the Company entered into a one-time stock grant agreement with 2 executives (Messrs. Preston Parsons and Matthew Willer (former Chief Financial Officer) which defines a bonus share threshold as follows: should the Company meet or exceed a 2017 fiscal year EBITDA threshold of Cdn$7,500, the Company would issue 6,000,0001,200,000 shares of common sharesstock of the surviving issuer at the trailing 30-day average closing price. The performance share grant was structured as part ofSee the RTO transaction to provide additional equity to management conditioned upon performance achievements. As the Company achieved the EBITDA thresholdCompany’s annual report for the year ended December 31, 2017, the Company has recorded a liability of approximately $16 million2020 filed on March 30, 2021 for the value of the shares to be issued while the agreements are modified and the cash collected threshold is achieved, which the Company deems probable.additional discussion. During the year ended December 31, 2020, the Company settled 5,000,0001,000,000 performance shares resulting from the issuance of 5,000,0001,000,000 shares of common shares.stock. During the first quarterhalf of 2021, the Company settled an additional 219,838the remaining 200,000 performance shares. As of March 31, 2021, 780,162 performance shares have not been settled.
8.9. SUBSEQUENT EVENTS
Acquisition
On April 30,October 1, 2021, the Company completed its acquisition of Sentry Neuromonitoring, LLC (“Sentry”), one of the largest IONM service providers in Texas, for an aggregate purchase price of $3.5 million. The purchase pricegranted 197,000 stock options to be paid is $1.225 million in cash, payable in installments,certain officers and $2.3 million in Assure common stock, payable $1.625 million at closing and $650 thousand into escrow, subject to escrow release. The common stock is subject to 12-month lockup and applicable securities laws and regulations.
Board Appointment
employees.
On AprilNovember 15, 2021, the Company appointedannounced that it has closed a brokered private placement of approximately 900,000 shares of the Company at an issue price of $5.25 per share, for gross proceeds of $4.75 million (the “Offering”). The proceeds of the Offering are expected to be used for expanding the Company’s remote neurology services offering for intraoperative neuromonitoring (“IONM”), extending the Company’s operational footprint into new member to its Board of Directors. Instates, supporting expected growth generated by the agreement with Premier, Inc. and general working capital purposes. Kestrel Merchant Partners LLC (the “Sponsor”) acted as the exclusive sponsor and The Benchmark Company, LLC (the “Agent”) acted as sole placement agent in connection with the appointment,Offering. Additionally, certain directors, officers and employees are expected to participated in a subsequent offering to settle approximately $700 thousand of compensation at a market price to be determined in accordance with Nasdaq listing requirements following the Company
granted 150,000 stock options exercisable to acquire common stock at $1.12 per share for a periodend of five years.the Company’s trading blackout in accordance with the Company’s insider trading policy.
14
ASSURE HOLDINGS CORP.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(unaudited)
Nasdaq listing
On May 12, 2021, we filed an application to be listed on the Nasdaq.
1518
ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
You should read theThe following discussion should be read in conjunction with the attached unaudited condensed consolidated financial statements and analysisnotes thereto, and with our audited financial statements and notes thereto for the year ended December 31, 2020 found in the Form 10-K filed by Assure Holdings Corporation on March 30, 2021 (the “Form 10-K”).
This Quarterly Report contains forward-looking statements, which are subject to the safe harbor provisions created by the Private Securities Litigation Reform Act of 1995. Words such as “expects,” “anticipates,” “plans,” “believes,” “seeks,” “estimates,” “could,” “would,” “may,” “intends,” “targets” and similar expressions or variations of such words are intended to identify forward-looking statements, but are not the exclusive means of identifying forward-looking statements in this Quarterly Report. The identification of certain statements as “forward-looking” is not intended to mean that other statements not specifically identified are not forward-looking. All statements other than statements about historical facts are statements that could be deemed forward-looking statements, including, but not limited to, statements that relate to our future revenue, growth rate, competitiveness, gross margins, expenditures, tax expenses, cash flows, our management's plans and objectives for our current and future operations, general economic conditions, the impact of the COVID-19 pandemic and related events, the impact of acquisitions on our financial condition and results of operations, together with ourand the sufficiency of financial statementsresources to support future operations and related notes appearing elsewherecapital expenditures.
Although forward-looking statements in this Quarterly Report. This discussionReport reflect the good faith judgment of our management, such statements can only be based on facts and analysis containsfactors currently known by us. Consequently, forward-looking statements that involveare inherently subject to risks, uncertainties, and assumptions. See “Cautionary Note Regarding Forward-Looking Statements.” Our actual results may differ materially fromchanges in condition, significance, value and effect, including those anticipated in these forward-looking statements as a result of many factors, including, but not limited to, those set forth in “Item 1A. Riskdiscussed under the heading “Risk Factors” in our Annual Report for the year ended December 31, 2020annual report on Form 10-K filedand other documents we file from time to time with the Securities and Exchange Commission (the “SEC”), such as our quarterly reports on March 30, 2021.
The following discussionForm 10-Q and analysis of our financial condition and results of operations should be read in conjunction with our Condensed Consolidated Financial Statements and accompanying notes included in Item 1 of this Quarterly Report. This Management’s Discussion and Analysis (this “MD&A”) has been prepared basedcurrent reports on information known to management as of May 14, 2021. This MD&A is intended to help the reader understand the condensed consolidated unaudited financial statements of the Company.
CAUTION REGARDING FORWARD-LOOKING STATEMENTS
This Quarterly Report contains forward-looking statements within the meaning of Canadian and United States securities laws. Forward- looking statements include all statements that do not relate solely to historical or current facts 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, or by discussions of strategy. These forward-looking statements are based on the Company’s current plans and expectations and are subject to a number ofForm 8-K. Such risks, uncertainties and other factors which could significantly affect current planschanges in condition, significance, value and expectations and our future financial condition and results. These factors, whicheffect could cause actual results, performance and achievements to differ materially from those anticipated.
Some of the important risks and uncertainties that could affect forward-looking statements are described further under the section headings “Item 1. Business,” “Item 1A. Risk Factors” of the Annual Report for the year ended December 31, 2020 on Form 10-K filed with the Securities and Exchange Commission on March 30, 2021. Although we have attempted to identify important factors that could causeour actual results to differ materially from those describedexpressed herein and in forward-looking statements, there may be other factors that cause resultsways not to be as anticipated, estimated or intended. Should one or more of these risks or uncertainties materialize, or should underlying assumptions prove incorrect, actual results may vary, possibly materially, from those anticipated, believed, estimated or expected. We caution readersreadily foreseeable. Readers are urged not to place undue reliance on any suchthese forward-looking statements, which speak only as of the date made. Except as required by law, we disclaim anyof 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 in order to reflect eventsany event or circumstancescircumstance that may arise after the date of such statements orthis Quarterly Report, other than as required by law. Readers are urged to reflectcarefully review and consider the occurrence of anticipated or unanticipated events. We qualify all of the forward-looking statements containedvarious disclosures made in this Quarterly Report, by the foregoing cautionary statements.
We have not undertaken any obligationwhich attempt to publicly update or revise any forward-looking statements. All of our forward-looking statements speak only asadvise interested parties of the daterisks and factors that may affect our business, financial condition, results of the document in which they are made or, if a date is specified, as of such date. Subject to mandatory requirements of applicable law, we disclaim any obligation or undertaking to provide any updates or revisions to any forward-looking statement to reflect any change in expectations or any changes in events, conditions, circumstances or information on which the forward-looking statement is based. All subsequent writtenoperations and oral forward-looking statements attributable to us or persons acting on our behalf are expressly qualified in their entirety by the risk factors set forth in the section “Item 1. Business,” “Item 1A. Risk Factors” of the Annual Report for the year ended December 31, 2020 on Form 10-K filed with the Securities and Exchange Commission on March 30, 2021.prospects.
OVERVIEW
Assure is focused on providing physicians with a comprehensivebest-in-class provider of outsourced intraoperative neurophysiological monitoring (“IONM”) and an emerging provider of remote neurology services. The Company delivers a turnkey suite of clinical and operational services for Intraoperative Neuromonitoring (“IONM”). IONM is a service that has been well established as a standard of care for over 20 years as a risk mitigation toolto support surgeons and medical facilities during invasive surgeries such asprocedures including spine, neurosurgery, ear, nose, and throat, cardiovascular and orthopedic. Accredited by The Joint Commission, Assure’s mission is to provide exceptional surgical care and a positive patient experience.
IONM identifies real-time changes in spinal cord, brain, and peripheral nerve functions during high-risk surgeries to prevent injuries or accidental damage to patients that could lead to strokes, heart attacks, paralysis or other partsserious medical issues. IONM is well established and regarded as the standard of the human body. The Company’s operations consistcare in U.S healthcare.
Assure employs highly trained IONM technologists, which provide a direct point of a single reportable segment. Assure Neuromonitoring employs a technical staff that is on sitecontact in the operating room during each procedureto relay critical information to the surgical team while Company physicians deliver remote neurology services in support of the surgical team. In addition, Assure offers surgeons and coversmedical facilities a value-added platform including: patient scheduling, billing and collections, physician relationship management and patient advocacy services. High quality Assure IONM support results in decreased hospital and surgeon liability, abbreviated patient stays, fewer readmissions, reduced hospital costs, enhanced overall patient satisfaction and the efficient achievement of better clinical outcomes.
Assure’s integrated IONM offering, encompassing both the technologist in the operating room as well as off-site remote neurology services, help the Company create an even higher standard of service for surgeons and patients alike. In addition, it broadens Assure’s platform and greatly expands the Company’s margin potential by significantly reducing cost of delivery. This allows Assure to improve profitability on every case using industry standard, diagnostic machinery. The technical staff are certified by a third-party credentialing agency. Since 2015, Assure has addressed the Professional IONM component of its business via a series of investments in and managementperformed. Expanded scale associated with physician-driven remote neurology services’ one-to-many model,
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service agreements with Provider Network Entities (“PEs”). These PEs are contracted with offsite neurologists/readers to provide IONM coverage from a remote location as a level of redundancy and risk mitigation in additioncontrast to the onsite technicalCompany’s legacy on-site technologist-driven one-to-one model, is the most important catalyst for margin improvement. The top-line also benefits from Assure’s integrated offering, given that most remote neurology cases Assure performs itself establish a new revenue stream. Assure technologists have created substantial managed case volume for the business that the Company’s physicians performing remote neurology services are simply consuming. Currently, driving growth in remote neurology services is a matter of the technical company. Collectively, the technicalscheduling and professionaldelivering Assure’s existing managed case volume. Further, providing remote neurology services for IONM offers Assure new opportunities in adjacent markets such as electroencephalographic (EEG), epilepsy, sleep studies and stroke care, where similar services offered and rendered provide a turnkey platform to help make surgeries safer. The Company’s goal is to establish Assure as the premier provider of IONM services by offering a value-added platform that handles every component from scheduling to coverage, to billing and collections. The Company’s strategy focuses on utilizing best of breed staff and partners to deliver outcomes thatexpertise are beneficial to all stakeholders including patients, physicians, and shareholders.utilized.
The Company has primarily been engaged in the neuromonitoring of spine and neurosurgeries. The expansion into additional surgical verticals is part of Assure’s growth strategy. By applying its neuromonitoring platform to additional surgical verticals such as vascular, ear nose and throat, and several others, the addressable market for Assure’s service is greatly expanded. The Company hasmaintains operations in Louisiana, Michigan, Pennsylvania, Texas, Colorado, South Carolina, and Arizona. In October 2019, the Company acquired Neuro-Pro Monitoring (“Neuro-Pro”). Neuro-Pro has historically operated in Texas. The Companytwelve U.S. states. Assure believes that continued geographic expansion initiatives, coupledfacility-wide outsourcing agreements with medical facilities, the surgical vertical expansion effortsacceleration of its remote neurology services platform, and selective acquisitions will combine to generate substantial growth opportunities going forward.
The Company has financed its cash requirements primarily from revenues generated from its services, by utilizing a bank promissory note and line of credit, from the issuances of convertible debentures, other debentures, from government loan programs, and from the sale of common stock. The Company’s ability to maintain the carrying value of its assets is dependent on successfully marketing its services and maintaining future profitable operations, the outcome of which cannot be predicted at this time. The Company has also stated its intention to grow its operations by developing additional PE relationships and directly contracting with hospitals and surgery centers for services. In the future, it may be necessary for the Company to raise additional funds for the continuing development of its business plan. For further information about Assure, please visit www.assureneuromonitoring.com, www.sedar.com and www.otcmarkets.com.www.sec.gov.
COVID-19
In December 2019, a novel strainOur business and results of coronavirus,operations have been, and continues to be, adversely affected by the global COVID-19 was reported to have surfaced in Wuhan, China. Since then, the COVID-19 coronavirus has spread to over 150 countries and every state in the United States. On January 30, 2020, the World Health Organization declared the outbreak of coronavirus a “Public Health Emergency of International Concern.” On March 11, 2020, the World Health Organization declared the outbreak a pandemic and on March 13, 2020, the United States declared a national emergency.related events and we expect its impact to continue. The spreadimpact to date has included periods of the virus in many countries continues to adversely impact global economic activity and has contributed to significant volatility and negative pressure in financialvarious markets and supply chains.industries, including the healthcare industry. The pandemicvolatility has had, and we anticipate it will continue to have, an adverse effect on our customers and on our business, financial condition and results of operations, and may result in an impairment of our long-lived assets, including goodwill, increased credit losses and impairments of investments in other companies. In particular, the healthcare industry, hospitals and providers of elective procedures have been and may continue to be impacted by the pandemic and/or other events beyond our control, and further volatility could have an additional negative impact on these industries, customers, and our business. In addition, the COVID-19 pandemic and, to a significantly greater, materiallesser extent, the impact on other industries, including automotive, electronics and real estate, increased fuel costs, U.S. restrictions on trade, and transitory inflation have impacted and may continue to impact the financial conditions of our customers and the patients they serve. In addition, actions by United States federal, state and foreign governments to address the COVID-19 pandemic, including travel bans, stay-at-home orders and school, business and entertainment venue closures, also had a significant adverse effect on the U.S. economy wheremarkets in which we conduct our business. The pandemic has resulted,businesses. COVID-19 poses the risk that our workforce, suppliers, and other partners may continue to resultbe prevented from conducting normal business activities for an extended period in significant disruption of global financial markets, whichtime, including due to shutdowns or stay-at-home orders that may reducebe requested or mandated by governmental authorities. We have implemented policies to allow our abilityemployees to access capital inwork remotely as a result of the future, which could negatively affect our liquidity.
Operationspandemic as we reviewed processes related to workplace safety, including social distancing and sanitation practices recommended by the support of surgical procedures may experience a delay in implementation due to the pandemic, including delays and cancellations of elective procedures.
The COVID-19 pandemic may also impact our workforce, supply chains or distribution networks or otherwise impact our ability to restock our medical device and supply inventories and depending upon the severity of the COVID-19 coronavirus’ continued spread in the United States and other countries, we may experience disruptions that could severely impact our business, including:
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The global outbreak of the COVID-19 coronavirus continues to rapidly evolve. In early December 2020, authorities in the United Kingdom reported mutations of the severe acute respiratory syndrome coronavirus 2 (SARS-CoV-2), which may indicate that the virus is replacing older versions of the virus and may increase the ability to infect cells. Subsequently, other mutations have been reported.
Since December 11, 2020, the U.S. Food and Drug Administration (“FDA”) issued emergency use authorization (“EUA”) for vaccines developed by Pfizer-BioNTech, Moderna, Inc. and Johnson and Johnson for the prevention of COVID-19 caused SARS-CoV-2. As of May 11, 2021, the CenterCenters for Disease Control and Prevention has reported 263 million doses ofPrevention. The COVID-19 vaccines have been administeredpandemic could also cause delays in the United States with 153.4 million people receiving at lease one doseacquiring new customers and 116.5 million fully vaccinated. Other vaccine manufacturers are anticipated to receive FDA approval for additional vaccines. The emergency use authorizations allow the vaccines to be distributed in the U.S. While clinical trials of the vaccines demonstrated a high degree of effectiveness, there remains uncertaintyexecuting renewals and could also impact our business as to the effectiveness of the vaccines outside clinical trials, the timing of the rollout of the vaccines, the immunization and acceptance rate, potential side effects of the vaccines, potential mutation of COVID-19consumer behavior changes in response to the pandemic.
Since the start of the second quarter of 2021, there has been increased availability and administration of vaccines against COVID-19, as well as an easing of restrictions on social, business, travel, and government activities and functions, and we have experienced a gradual resumption of economic activities in our industries. On the other riskshand, infection rates continue to fluctuate in various regions and uncertainties.new strains of the virus, including the Delta variant, remain a risk, which may give rise to implementation of restrictions in the geographic areas that we serve. In addition, there are ongoing global impacts resulting from the pandemic, including disruption of the supply chains, product shortages, increased delivery costs, increased governmental regulation, strains on healthcare systems, and delays in shipments, product development, technology launches and facility access.
The extent to whichWe have been closely monitoring the COVID-19 coronavirus may continue topandemic and its impact on our business, and our profitability and growth will depend on future developmentsincluding legislation to combatmitigate the impact of COVID-19 which are highly uncertain and cannot be predicted with confidence, such as the effectiveness of vaccines, the ultimate geographic spread of the disease, the duration of the outbreak, travel restrictionsCoronavirus Aid, Relief, and social distancingEconomic Security (CARES) Act which was enacted in the United States and other countries, business closures or business disruptionsMarch 2020, and the effectivenessAmerican Rescue Plan Act of actions taken2021 which was enacted in the United StatesMarch 2021. Although a significant portion of our anticipated revenue for 2021 is derived from fixed-fee and other countries to contain and treat the disease.
Health & Safety Measures Assure has taken include:
Significant uncertainty remains as to the potential impact of the COVID-19 pandemic on our operations, and on the global economy as a whole.minimum-guarantee arrangements, primarily from large, well-capitalized customers which we
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believe somewhat mitigates the risks to our business, our per-unit and variable-fee based revenue will continue to be susceptible to the volatility, supply chain disruptions, microchip shortages and potential market downturns induced by the COVID-19 pandemic.
The full extent of the future impact of the COVID-19 pandemic on the Company’s operational and financial performance is uncertain and will depend on many factors outside the Company’s control, including, without limitation, the timing, extent, trajectory and duration of the pandemic; the availability, distribution and effectiveness of vaccines; the spread of new variants of COVID-19; the continued and renewed imposition of protective public safety measures; the impact of COVID-19 on integration of acquisitions, expansion plans, implementation of telemedicine, restrictions on elective procedures, delays in payor remittance and increased regulations; and the impact of the pandemic on the global economy and demand for consumer products. Although we are unable to predict the full impact and duration of the COVID-19 pandemic on our business, we are actively managing our financial expenditures in response to continued uncertainty. Further discussion of the potential impacts on our business from the COVID-19 pandemic is provided under Part I, Item 1A – Risk Factors of the Form 10-K.
RESULTS OF OPERATIONS
Three Months Ended March 31, 2020September 30, 2021 Compared to the Three Months Ended March 31,September 30, 2020
The following table provides selected financial information from the condensed consolidated financial statements of income for the three months ended March 31,September 30, 2021 and 2020. All dollar amounts set forth in the table below are expressed thousands of dollars, except share and per share amounts.
| | | | | | | | | | | | | | | | | | | | | | | | |
|
| Three Months Ended March 31, | | Change | | Change |
|
| Three Months Ended September 30, | | Change | | Change |
| ||||||||||
| | 2021 |
| 2020 |
| $ |
| % |
| | 2021 |
| 2020 |
| $ |
| % |
| ||||||
Revenue | | | | | | | | | | | | | | | | | | | | | | | | |
Patient service fees, net | | $ | 2,950 | | $ | 2,346 | | $ | 604 | | 25.7 | % | | $ | 6,443 | | $ | 2,965 | | $ | 3,478 | | 117.3 | % |
Hospital, management and other | |
| 1,815 | |
| 1,987 | |
| (172) | | (8.7) | % | |
| 2,103 | |
| 998 | |
| 1,105 | | 110.7 | % |
Total revenue | |
| 4,765 | |
| 4,333 | |
| 432 | | 10.0 | % | |
| 8,546 | |
| 3,963 | |
| 4,583 | | 115.6 | % |
Cost of revenues | |
| 2,532 | |
| 1,798 | |
| 734 | | 40.8 | % | |
| 4,254 | |
| 2,232 | |
| 2,022 | | 90.6 | % |
Gross margin | |
| 2,233 | |
| 2,535 | |
| (302) | | (11.9) | % | |
| 4,292 | |
| 1,731 | |
| 2,561 | | 147.9 | % |
Operating expenses | | | | | | | | | | | | | | | | | | | | | | | | |
General and administrative | |
| 3,132 | |
| 2,246 | |
| 886 | | 39.4 | % | |
| 3,180 | |
| 1,957 | |
| 1,223 | | 62.5 | % |
Sales and marketing | |
| 335 | |
| 221 | |
| 114 | | 51.6 | % | |
| 247 | |
| 349 | |
| (102) | | (29.2) | % |
Depreciation and amortization | |
| 285 | |
| 259 | |
| 26 | | 10.0 | % | |
| 293 | |
| 249 | |
| 44 | | 17.7 | % |
Total operating expenses | |
| 3,752 | |
| 2,726 | |
| 1,026 | | 37.6 | % | |
| 3,720 | |
| 2,555 | |
| 1,165 | | 45.6 | % |
Loss from operations | |
| (1,519) | |
| (191) | |
| (1,328) | | 695.3 | % | ||||||||||||
Other income/(expenses) | | | | | | | | | | | | | ||||||||||||
Loss from equity method investments | |
| (23) | |
| (107) | |
| 84 | | (78.5) | % | ||||||||||||
Other income (loss), net | |
| (3) | |
| 57 | |
| (60) | | (105.3) | % | ||||||||||||
Income (loss) from operations | |
| 572 | |
| (824) | |
| 1,396 | | (169.4) | % | ||||||||||||
Other income (expenses) | | | | | | | | | | | | | ||||||||||||
Income (loss) from equity method investments | |
| 139 | |
| (232) | |
| 371 | | (159.9) | % | ||||||||||||
Other income (expense), net | |
| (27) | |
| (3) | |
| (24) | | 800.0 | % | ||||||||||||
Accretion expense | | | (95) | | | (185) | | | 90 | | (48.6) | % | | | (171) | | | (227) | | | 56 | | (24.7) | % |
Interest expense, net | |
| (18) | |
| (53) | |
| 35 | | (66.0) | % | |
| (264) | |
| (58) | |
| (206) | | 355.2 | % |
Total other expense | |
| (139) | |
| (288) | |
| 149 | | (51.7) | % | |
| (323) | |
| (520) | |
| 197 | | (37.9) | % |
Loss before income taxes | |
| (1,658) | |
| (479) | |
| (1,179) | | 246.1 | % | ||||||||||||
Income tax benefit | |
| 427 | |
| 65 | |
| 362 | | 556.9 | % | ||||||||||||
Net loss | | $ | (1,231) | | $ | (414) | | $ | (817) | | 197.3 | % | ||||||||||||
Loss per common share | | | | | | | | | | | | | ||||||||||||
Income (loss) before income taxes | |
| 249 | |
| (1,344) | |
| 1,593 | | (118.5) | % | ||||||||||||
Income tax benefit (expense) | |
| (158) | |
| 367 | |
| (525) | | (143.1) | % | ||||||||||||
Net income (loss) | | $ | 91 | | $ | (977) | | $ | 1,068 | | (109.3) | % | ||||||||||||
Income (loss) per share | | | | | | | | | | | | | ||||||||||||
Basic | | $ | (0.02) | | $ | (0.01) | | $ | (0.01) | | 83.0 | % | | $ | 0.01 | | $ | (0.14) | | $ | 0.15 | | (105.5) | % |
Diluted | | $ | (0.02) | | $ | (0.01) | | $ | 0.00 | | (1.1) | % | | $ | 0.01 | | $ | (0.14) | | $ | 0.16 | | (112.7) | % |
Weighted average number common shares – basic | |
| 56,537,711 | |
| 34,795,313 | |
| 21,742,398 | | 62.5 | % | ||||||||||||
Weighted average number common shares – diluted | |
| 56,537,711 | |
| 34,795,313 | |
| 21,742,398 | | 62.5 | % | ||||||||||||
Weighted average number shares – basic | |
| 11,838,032 | |
| 6,988,058 | |
| 4,849,974 | | 69.4 | % | ||||||||||||
Weighted average number shares – diluted | |
| 11,838,032 | |
| 6,988,058 | |
| 4,849,974 | | 69.4 | % |
21
Revenue
Total revenues for the three months ended March 31,September 30, 2021 and 2020 were $4.8$8.5 million and $4.3$4.0 million, respectively, net of implicit price concessions. As at March 31,For the three months ended September 30, 2021 and 2020, we recorded an allowance for of implicit price concessions of $118 thousandnil and $4.4$4.6 million, respectively.
Patient service fee 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 record out-of-network technical and professional revenue (included in-Patient service fees, net) per case based upon our historical collection rates from private insurance carriers. Our revenue estimation process for out-of-network revenue is based on the collection experience from insurance cases that are up to two years old and management the collection experience of these receivables is more indicative of future per case collection rates. The Company recognizes revenue from hospital and surgery center customers and certain PEs, for which the Company does not have an ownership interest in, on a contractual basis. Revenue from services rendered is recorded after services are rendered.
For the three months ended September 30, 2021, Assure managed 4,996 cases where it retained 100% of the professional revenue (from our wholly-owned subsidiaries) compared to 2,685 cases where it retained 100% of the professional revenue (from our wholly- owned subsidiaries) in the same period in the prior year, an 86% increase in case volume. The increase is primarily related to organic sales growth in new markets such as Nebraska and Nevada, the acquisition of Sentry on April 30, 2021, and the launch of tele neurologist services.
Cost of Revenues
Cost of revenues for the three months ended September 30, 2021 were $4.3 million compared to $2.2 million for the same period in 2020. Cost of revenues consist primarily of third-party billing fees, the cost of our internal billing and collection department, technologist and reader wages, third-party reader and collection fees and medical supplies. Technologist wages and medical supplies vary with the number of neuromonitoring cases. The cost of our internal billing and collection department increased as we have ramped up this department and as the number of cases they are responsible for invoicing increases. During the three months ended September 30, 2021, the number of neuromonitoring cases increased 86% compared to the three months ended September 30, 2020, which increased cost of revenues year over year.
General and administrative
General and administrative expenses were $3.2 million and $2.0 million for the three months ended September 30, 2021 and 2020, respectively. The increase period-to-period was primarily related to an increase in information technology consulting costs as we continue to focus on automation and infrastructure to scale our business and an increase in stock based compensation expense.
Sales and marketing
Sales and marketing expenses was $247 thousand and $349 thousand for the three months ended September 30, 2021 and 2020. The decrease period-to-period was related to cost savings measures.
Depreciation and amortization
Depreciation and amortization expense was $293 thousand and $249 thousand for the three months ended September 30, 2021 and 2020, respectively. The increase is primarily related to the increase in ROU lease assets compared to the prior year.
Income (loss) from equity method investments
Assure recognizes its pro-rata share of the net income (loss) generated by the non-wholly-owned PEs. During the three months ended September 30, 2021, the Company recognized $139 thousand of income from equity method investments compared to $232 thousand in losses for the three months ended September 30, 2020. The variance is primarily associated with recording of the previously mentioned implicit price concessions which were significantly larger in 2020 than 2021.
22
Accretion expense
The Company recorded accretion expense of $171 thousand and $227 thousand for the three months ended September 30, 2021 and 2020, respectively. The Company accretes the difference between the fair value of the warrants and conversion feature related to the Central Bank and Centurion debt, as applicable, and the face value of such debt over the term of the debt.
Interest expense, net
Interest expense, net was $264 thousand for the three months ended September 30, 2021 compared to $58 thousand for the three months ended September 30, 2020. The increase year-over-year is primarily due to higher outstanding debt balances and the amortization of debt issuance costs. The Company capitalizes debt issuance costs and then amortizes such costs over the term of the debt.
Income tax benefit (expense)
For the three months ended September 30, 2021 income tax expense was $158 thousand compared to an income tax benefit of $367 thousand for the three months ended September 30, 2020. 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.
23
Nine Months Ended September 30, 2021 Compared to the Nine Months Ended September 30, 2020
The following table provides selected financial information from the condensed consolidated financial statements of income for the nine months ended September 30, 2021 and 2020. All dollar amounts set forth in the table below are expressed thousands of dollars, except share and per share amounts.
| | | | | | | | | | | | |
|
| Nine Months Ended September 30, | | Change | | Change |
| |||||
| | 2021 |
| 2020 |
| $ |
| % |
| |||
Revenue | | | | | | | | | | | | |
Patient service fees, net | | $ | 13,087 | | $ | (6,342) | | $ | 19,429 | | (306.4) | % |
Hospital, management and other | |
| 6,446 | |
| 3,902 | |
| 2,544 | | 65.2 | % |
Total revenue | |
| 19,533 | |
| (2,440) | |
| 21,973 | | (900.5) | % |
Cost of revenues | |
| 9,956 | |
| 5,062 | |
| 4,894 | | 96.7 | % |
Gross margin | |
| 9,577 | |
| (7,502) | |
| 17,079 | | (227.7) | % |
Operating expenses | | | | | | | | | | | | |
General and administrative | |
| 10,275 | |
| 5,853 | |
| 4,422 | | 75.6 | % |
Sales and marketing | |
| 748 | |
| 801 | |
| (53) | | (6.6) | % |
Depreciation and amortization | |
| 965 | |
| 769 | |
| 196 | | 25.5 | % |
Total operating expenses | |
| 11,988 | |
| 7,423 | |
| 4,565 | | 61.5 | % |
Loss from operations | |
| (2,411) | |
| (14,925) | |
| 12,514 | | (83.8) | % |
Other income (expenses) | | | | | | | | | | | | |
Income (loss) from equity method investments | |
| 136 | |
| (1,449) | |
| 1,585 | | (109.4) | % |
Other income (expense), net | |
| (29) | |
| 50 | |
| (79) | | (158.0) | % |
Accretion expense | | | (386) | | | (619) | | | 233 | | (37.6) | % |
Interest expense, net | |
| (500) | |
| (164) | |
| (336) | | 204.9 | % |
Total other expense | |
| (779) | |
| (2,182) | |
| 1,403 | | (64.3) | % |
Loss before income taxes | |
| (3,190) | |
| (17,107) | |
| 13,917 | | (81.4) | % |
Income tax benefit | |
| 743 | |
| 2,396 | |
| (1,653) | | (69.0) | % |
Net loss | | $ | (2,447) | | $ | (14,711) | | $ | 12,264 | | (83.4) | % |
Loss per share | | | | | | | | | | | | |
Basic | | $ | (0.21) | | $ | (2.11) | | $ | 1.90 | | (89.9) | % |
Diluted | | $ | (0.21) | | $ | (2.11) | | $ | 1.91 | | (90.4) | % |
Weighted average number shares – basic | |
| 11,528,371 | |
| 6,968,728 | |
| 4,559,643 | | 65.4 | % |
Weighted average number shares – diluted | |
| 11,528,371 | |
| 6,968,728 | |
| 4,559,643 | | 65.4 | % |
Revenue
Total revenues for the nine months ended September 30, 2021 and 2020 were $19.5 million and $(2.4 million,) respectively, net of implicit price concessions. For the nine months ended September 30, 2021 and 2020, we recorded an allowance for implicit price concessions of $1.2 million and $24.0 million, respectively.
Patient service fee 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 record out-of-network technical and professional revenue (included in-Patient service fees, net) per case based upon our historical collection rates from private insurance carriers. Our revenue estimation process for out-of-network revenue is based on the collection experience from insurance cases that are between 1-2 years old and management believes the more recent collection experience is more indicative of future per case collection rates. The Company recognizes revenue from hospital and surgery center customers and certain PEs, for which the Company does not have an ownership interest in, on a contractual basis. Revenue from services rendered is recorded after services are rendered.
24
For the threenine months ended March 31,September 30, 2021, Assure managed 2,303 technical cases and 491 professional cases10,979 where it retained 100% of the professional revenue (from our wholly-owned subsidiaries) compared to 1,877 technical6,763 cases and 210 professional cases where
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it retained 100% of the professional revenue (from our wholly- owned subsidiaries) in the same period in the prior year, a 34%62% increase in case volume. The increase is primarily related to organic sales growth in new markets such as Nebraska and Nevada, the acquisition of Sentry on April 30, 2021, and the launch of tele neurologist services.
Cost of Revenues
Cost of revenues for the threenine months ended March 31,September 30, 2021 were $2.5$10.0 million compared to $1.8$5.1 million for the same period in 2020. Cost of revenues consist primarily of third-party billing fees, the cost of our internal billing and collection department, technologist and reader wages, third-party reader and collection fees and medical supplies. Third- party billing fees are recorded as a percentage of revenue recorded and therefore, also vary materially when we changed our allowance against accounts receivable. Technologist wages and medical supplies vary with the number of neuromonitoring cases. The cost of our internal billing and collection department has been increasingincreased as we have ramped up this department and as the number of cases that they are responsible for billinginvoicing increases. During the threenine months ended March 31,September 30, 2021, the number of neuromonitoring cases increased 34%62% compared to the threenine months ended March 31, 2020.September 30, 2020 which increased costs of revenues year over year.
General and administrative
General and administrative expenses were $3.1$10.3 million and $2.6$5.9 million for the threenine months ended March 31,September 30, 2021 and 2020, respectively. The increase period-to-period was primarily related to higher legal fees which vary based on corporate activitiesin relation to our Nasdaq listing, acquisition of Sentry and debt financing with Centurion, and increased head count as we continued to build an inhouse billing and collections function. During the threenine months ended March 31,September 30, 2021, we incurred legal and audit expenses related to the filing of our registration statement on Form S-1 and our initial Form 10-K with the Securities and Exchange Commission which are nonrecurring expenses.
Sales and marketing
Sales and marketing expenses were $335relatively consistent at $748 thousand and $221$801 thousand for the threenine months ended March 31,September 30, 2021 and 2020. The increase period-to-period was primarily related to investment in channel development.2020, respectively.
Depreciation and amortization
Depreciation and amortization expense was $285$965 thousand and $259$769 thousand for the threenine months ended March 31,September 30, 2021 and 2020, respectively. The increase is primarily related to the increase in ROU asset balanceslease assets compared to the prior year.
LossIncome (loss) from equity method investments
Assure recognizes its pro-rata share of the net income (loss)loss generated by the non-wholly-owned PEs. During the threenine months ended March 31,September 30, 2021, the Company recognized $23$136 thousand of lossesincome from equity method investments compared to $107 thousand$1.5 million of losses for the threenine months ended March 31,September 30, 2020. The variance is primarily associated with recording of the previously mentioned implicit price concessions which were significantly larger in 2020 than 2021.
Accretion expense
The Company recorded accretion expense of $95$386 thousand and $185$619 thousand for the threenine months ended March 31,September 30, 2021 and 2020, respectively. The Company accretes the difference between the fair value of the convertible noteswarrants and conversion feature related to the Central Bank and Centurion debt, as applicable, and the face value of the convertible debt over the term of the convertible note. Additionally, during 2020, the Company recorded accretion expense related to the difference in the fair value of debt related to an acquisition and the face value of thesuch debt over the term of the debt.
Interest expense, net
Interest expense, net was $18$500 thousand for the threenine months ended March 31,September 30, 2021 compared to $53$164 thousand for the threenine months ended March 31,September 30, 2020. The decreaseincrease year-over-year is primarily due to lowerhigher outstanding debt balances.
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Income tax benefit
For the threenine months ended March 31,September 30, 2021 income tax benefit was $427$743 thousand compared to $65 thousand$2.4 million for the threenine months ended March 31,September 30, 2020. The Company’s estimated annual tax rate is impacted primarily by the amount of taxable income earned in each
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jurisdiction the Company operates in and permanent differences between financial statement carrying amounts and the tax basis and to a valuation allowance that the Company recorded against certain deferred tax assets.basis.
FINANCIAL POSITION, LIQUIDITY AND CAPITAL RESOURCES
Our cash position as at March 31,of September 30, 2021 was $4.1 million$918 thousand compared to the December 31, 2020 cash balance of $4.4 million. Working capital was $18.0$26.6 million as of March 31,September 30, 2021 compared to $17.4 million at December 31, 2020. We rely on payments from multiple private insurers and hospital systems that have payment policies and payment cycles that vary widely. Because we are primarily an out-of-network biller to private insurance companies, the collection times for our claims can last in excess of 24 months. Accounts receivables outstanding greater than 24 months are fully reserved.
For the threenine months ended March 31,September 30, 2021, we collected approximately $3.1$10.1 million of cash from operations compared to collecting approximately $3.0$10.0 million in the same prior year period despite the carrying amount ofperiod. As at September 30, 2021, accounts receivable, decreasing.which are recorded net of implicit price concessions, was $22.7 million compared to $15.0 million at December 31, 2020. We had $169received $312 thousand ofin cash distributions from itsthe PE entities for the threenine months ended March 31,September 30, 2021 compared to $185$424 thousand received for the same prior year period.
We financed our operations primarily from revenues generated from services rendered and through equity and debt financings. We expect to meet our short-term obligations for the next 12 months, through cash earned through operating activities, debt financings, issuances of convertible debentures and stock sales.equity offerings. During November 2021, we completed an equity financing. See Subsequent Event below for additional discussion.
Cash used in operating activities for the threenine months ended March 31,September 30, 2021 was $2.1$9.4 million compared to $573 thousand$1.8 million for the same period in the preceding year. Cash was used to fund operations and to fund our growth strategy.
Cash provided by investing activities of $169$108 thousand for the threenine months ended March 31,September 30, 2021 was related the PE distributions received.advances, offset by payments related to the Sentry acquisition. Cash used in investing activities of $380 thousand$3.5 million for the threenine months ended March 31,September 30, 2020 was primarily related to payments against the Neuro-Pro acquisition partially offset by the distributions received from the PEs.
Cash provided by financing activities of $1.7$5.8 million for the threenine months ended March 31,September 30, 2021 was due to $7.4 million of net proceeds from the debenture, $1.7 million of proceeds from the Payroll Protection Program loan.loan, and $832 thousand in proceeds from common stock issuances, offset by $4.1 million payments of bank debt. Cash provided by financing activities of $1.5$5.5 million for the threenine months ended March 31,September 30, 2020 was primarily due to $1.6$2.5 million of proceeds from the issuance of convertible debentures, offset by $130$1.2 million of proceeds from the payroll protection program, net proceeds of $560 thousand of payments tofrom the bank promissory note.note, and net proceeds of $1.1 million from the bank line of credit.
Our near-term cash requirements relate primarily to payroll expenses, trade payables, debt payments, capital lease payments, and general corporate obligations. Approximately 50% - 55% of the trade and other payables at March 31,September 30, 2021 and December 31, 2020 consist of accrued billing fees. These fees will not be due and payable until the underlying accounts receivable is collected which may be in the longer term.
Debenture
On June 10, 2021, the Company entered into definitive agreements to secure a credit facility under the terms of a commitment letter dated March 8, 2021 (the “Commitment Letter”) with Centurion Financial Trust, an investment trust formed by Centurion Asset Management Inc. (“Centurion”). Under the terms of the Commitment Letter, Assure issued a debenture to Centurion, dated June 9, 2021 (the “Debenture”), with a maturity date of June 9, 2025 (the “Maturity Date”), in the principal amount of $11 million related to a credit facility comprised of a $6 million senior term loan (the “Senior Term Loan”), a $2 million senior revolving loan (the “Senior Revolving Loan”) and a $3 million senior term acquisition line (the “Senior Term Acquisition Line” and together with the Senior Term
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Loan and the Senior Revolving Loan, the “Credit Facility”). The Senior Term Acquisition Line will be made available to the Company to fund future acquisitions, subject to certain conditions and approvals of Centurion. The Credit Facility matures in June 2025.
The principal amount of the Debenture drawn and outstanding from time to time shall bear interest both before and after maturity, default and judgment from the date hereof to the date of repayment in full at the rate of the greater of 9.50% or the Royal Bank of Canada Prime Rate plus 7.05% per annum calculated and compounded monthly in arrears and payable on the first business day of each month during which any obligations are outstanding, the first of such payments being due July 2, 2021 for the period from the Advance to the date of payment, and thereafter monthly. The difference between the commitment and the amount of the Loan outstanding from time to time shall bear a standby charge, for the period between June 2021 and the end of the availability period, in the amount of 1.50% per annum calculated and compounded monthly in arrears and payable on the first business day of each month during which any amount of the commitment remains available and undrawn, the first of such payments being due July 2, 2021. Interest on overdue interest shall be calculated and payable at the same rate plus 3% per annum.
With respect to the Senior Revolving Loan, Assure may prepay advances outstanding thereunder from time to time, with not less than 10 business days prior written notice of the prepayment date and the amount, in the minimum amount of $250,000. Any amount of the Senior Revolving Loan prepaid may be re-advanced. With respect to the Senior Term Loan and Senior Term Acquisition Line, Assure may prepay the advances outstanding thereunder, without penalty or bonus, in an amount not to exceed 25% of the aggregate of all Advances then outstanding under the Term Loans, on each anniversary date of the first advance made hereunder, provided in each case with not less than 30 days written notice of the Company's intention to prepay on such anniversary date and the proposed prepayment amount. Any prepayments to the Term Loans other than those permitted in the immediately preceding sentence may only be made on 30 days prior written notice of the prepayment date and the amount, and are subject to the Company paying on such prepayment date a prepayment charge equal to the lesser of (i) twelve (12) months interest and (ii) interest for the months remaining from the prepayment date to the Maturity Date, on the amount prepaid at the interest rate in effect on the applicable Term Loan as of the date of prepayment. Any amount of the Term Loan prepaid may not be re-advanced.
The Credit Facility is guaranteed by the subsidiaries under the terms of the guarantee and secured by a first ranking security interest in all of the present and future assets of Assure and the Subsidiaries under the terms of the security agreement.
Assure paid Centurion on first Advance of the Loan a commitment fee of 2.25%, being $248 thousand, made by withholding from the first advance.
A portion of the proceeds from the Debenture were utilized to repay the Central Bank line of credit and the Central Bank promissory note.
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.
We have receivables from related parties and equity investments in PEs that are due and payable upon those entities collecting on their own accounts receivable. To the extent that these entities are unable to collect on their accounts receivable or there is an impairment in the valuation of those accounts receivable, the Company will need to reduce its related party receivables and/or its equity investments in the PEs.
Subsequent Event
On November 15, 2021, the Company announced that it has closed a brokered private placement of approximately 900,000 shares of the Company at an issue price of $5.25 per share, for gross proceeds of $4.75 million (the “Offering”). The proceeds of the Offering are expected to be used for expanding the Company’s remote neurology services offering for intraoperative neuromonitoring (“IONM”), extending the Company’s operational footprint into new states, supporting expected growth generated by the agreement with Premier, Inc. and general working capital purposes. Kestrel Merchant Partners LLC (the “Sponsor”) acted as the exclusive sponsor and The Benchmark Company, LLC (the “Agent”) acted as sole placement agent in connection with the Offering. Additionally, certain directors, officers and employees are expected to participate in a subsequent offering to settle approximately $700 thousand of compensation at a
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market price to be determined in accordance with Nasdaq listing requirements following the end of the Company’s trading blackout in accordance with the Company’s insider trading policy.
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 MD&A. 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
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the Notes to Consolidated Financial Statements included in the Annual Report on Form 10-K for the year ended December 31, 2020 as filed with the Securities and Exchange Commission on March 30, 2021.
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.
SUBSEQUENT EVENTS
Sentry Acquisition
Effective on April 30, 2021, Assure Networks Texas Holdings II, LLC, a Colorado limited liability company and wholly-owned subsidiary of Assure Holdings (the “Purchaser”), entered into an Asset Purchase Agreement (the “Purchase Agreement”) with Sentry Neuromonitoring, LLC (the “Seller”), and Kenneth Sly and on behalf of (SLY HOLDINGS, LLC, a Texas limited liability company (“KRS”), Wesley Varghese and (on behalf of Northern Lights Investments and consulting, LLC, a Texas limited liability company (“NLI”), Patricia Worley, Stephanie Hicks, on behalf of Texas Medsurge, LLC and Shelia Jumper (collectively “Principals”).
The acquisition closed on April 30, 2021 (the “Closing Date”).
Under the terms of the Purchase Agreement, Assure Texas Holdings agreed to purchase certain assets (“Acquired Assets”) related to the Seller’s interoperative neuromonitoring business (the “Business”) and assumed certain liabilities of the Seller. The Acquired Assets included, among other items, all assets used in the Business, certain tangible personal property, inventory, Seller’s records related to the Business, deposits and prepaid expenses, certain contracts related to the Business, licenses, intellectual property, goodwill and accounts receivables.
The purchase price for the assets consisted of cash and stock, payable as follows:
Cash Payment. Cash consideration of $1,225,000 in installment payments, payable (a) $153,125 at closing, (b) $153,125 within 30 days of Closing Date and (c) $918,750, [together with interest at the applicable federal rate], shall be paid in cash in thirty-six equal monthly installments, with the first installment being due on or before the first business day of the first month following the sixtieth day from the Closing Date and the remaining installments being due on the first business day of each month thereafter.
Stock Payment. Shares of common stock to be issued to Seller or the Principals, as elected by Seller, with a value of $1,625,000, determined on the Closing Date, as quoted on the TSX Venture Exchange (1,186,131 shares of common stock), issued on or about the Closing Date and shares of common stock to be escrowed, no event later than May 14, 2021, with an escrow agent, mutually selected by Purchaser and Seller (the “Escrow Agent”), common stock of the Registrant with a value of $650,000 (474,452 shares of common stock) and held by the Escrow Agent pursuant to terms set forth in an escrow agreement to be mutually agreed to by Purchaser and Seller. The common stock is subject to regulatory restrictions and requirements and a 12 month lock up from the date of issuance to the Seller or the Principals, as applicable, in addition to any additional lock up period imposed on the common stock under applicable law and/or regulation,
Reimbursements. Reimbursement to Seller for operational capital injected by Seller or its Principals since December 31, 2020, for verifiable and reasonable expenses, consistent with past business practices up to a cap of $50,000.
Receivable Bonus. Purchaser agreed to pay Seller or the Principals, as elected by Seller, a bonus in an amount equal to $250,000 (“Receivable Bonus”) upon collecting $3,000,001 in accounts receivable acquired by Purchaser for accounts receivable that was generated by Seller prior to the Closing. The Receivable Bonus, if earned, will be paid to Seller or the Principals, as elected by Seller, in three payments: (i) the first payment being in the amount of $100,000, payable on the thirtieth (30th) day following the date the Receivable Bonus is earned, (ii) the second payment being in the amount of $100,000, payable on the sixtieth (60th) day following the date the Receivable Bonus is earned, and (iii) the third payment in the amount of $50,000, payable on the ninetieth (90th) day following the date the Receivable Bonus is earned.
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Founders Bonus. The Registrant agreed to pay a $50,000.00 bonus (“Founders’ Bonus”) payment to each Kenneth Sly, Wesley Varghese, Patricia Worley and Shelia Jumper in installments: (i) $25,000.00 at Closing and (ii) $25,000.00 within twelve (12) months of Closing. The Founders’ Bonus is additional consideration, which is independent, separate and apart from other consideration to be paid by Purchaser.
Under the Purchase Agreement, Purchaser agreed to enter into employment agreements with certain key personnel of Seller, as determined by Purchaser, including Ken Sly, Wesley Varghese, Patricia Worley, Shelia Jumper (the “Key Personnel”). The employment agreements, in standard form of employment agreement of Purchaser, include: (i) a minimum Annual Base Salary of $175,000 with full benefits and (ii) up to $50,000 in annual variable compensation bonus to be memorialized in a mutually agreeable form of agreement that details the scope of services and compensation.
On May 6, 2021, we filed a Form 8-K with the Commission, which includes the Purchase Agreement as Exhibit 10.1.
Appointment of Director
On April 15, 2021, our Board of Directors appointed John Flood to the Board of Directors to serve until our next annual general meeting or until revocation or his resignation. Mr. Flood was appointed to serve on our Audit Committee, Governance, Nomination, and Compensation Committee. In connection with Mr. Flood’s appointment, we agreed to pay compensation consisting of (i) a stipend of $40,000 per annum as member of the Board of Directors of the Company; (ii) a stipend of $5,000 per annum for each committee Mr. Flood is a member of; and (iii) a grant of 150,000 stock option of the company on April 15, 2021 based on a 5 year term at a strike price of $1.12 (C$1.40).
Nasdaq listing
On May 12, 2021, we filed an application to be listed on the Nasdaq.
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, 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 that, as of the end of the period covered by this Quarterly Report on Form 10-Q, our disclosure controls and procedures were 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.
Changes in Internal ControlsControl Over Financial Reporting
Our management assessed the effectiveness ofThere have been changes in our internal control over financial reporting as of December 31, 2020 and March 31, 2021. In making this assessment, our management usedduring the criteria set forth in the Internal Control—Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). Based on our management assessment, we have concludedquarter ended September 30, 2021 that as of December 31, 2020,has materially affected, or is reasonably likely to materially affect, our internal controlscontrol over financial reporting. Changes in our internal control over financial reporting were ineffective. Managementduring the quarter ended September 30, 2021 are discussed below under “Remediation”.
Material Weaknesses
Previously, management noted that we had material weaknesses in our internal control over financial reporting related to inadequate controls over the review of the accounting for complex transactions and improper segregation of duties which management believes to be a material weakness.
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Remediation
In response to the identified material weakness, during the first quarter of 2021, management has
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implemented a rigorous review process regarding the accounting for complex transactions and plans to remediatetransactions. During the third quarter of 2021, the Company remediated the segregation of duties during 2021.
control weakness by restructuring certain employee functions.
PART II – OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
We are not aware of any material pending or threatened litigation or of any proceedings known to be contemplated by governmental authorities that are, or would be, likely to have a material adverse effect upon us or our operations, taken as a whole.
ITEM 1A. RISK FACTORS
During the three months ended March 31,September 30, 2021 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, 2020.
ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS
Sentry AcquisitionItem 2(b) and 2(c) are not applicable.
Item 2(a) – Stock Issuances
| | |
| | Total number of shares |
2021 | | common stock issued |
July (1) | | 2,858 |
August | | — |
September | | — |
Total | | 2,858 |
(1) | Convertible debenture |
In connection with the acquisitionterms of the Sentry Neuromonitoring, LLC (the “Seller”) assets, weconvertible debenture (See Note 5 to our Condensed Consolidated Financial Statements), the Registrant issued to Seller or the Principals, as elected by Seller,2,858 shares of common stock upon the conversion of the Registrant with a value$20 thousand principal amount of $1,625,000, determined on the Effective Date, as quoted on the TSX Venture Exchange (1,186,131 shares of common stock). In addition, the Registrant agreed to escrow, no event later than May 14, 2021, with an escrow agent, mutually selected by Purchaser and Seller, common stock of the Registrant with a value of $650,000 (474,452 shares of common stock). The common stock is subject to a 12-month lock up beginning on the date actually delivered to Seller or the Principals. The common stock was issuedconvertible debenture pursuant to Section 4(a)(2) of the Securities Act of 1933, as amended, and applicable state securities laws exemptions. The shares of common stock are “restricted securities” as defined in Rule 144 of the Securities Act.
Rule 701 Compensatory Grants and Issuances
We granted 150,000 options to purchase shares of common stock, based on a 5 year term at a strike price of US$1.12 (C$1.40), to a newly appointed director pursuant to Rule 701 of the Securities Act.
Debt Settlement
In connection with the settlement of debt with an arm’s length service provider, the Registrant issued 75,000 shares of common stock at a deemed value of $1.53 per share, pursuant to Section 4(a)(2)3(a)(9) of the Securities Act of 1933, as amended, and applicable state securities laws exemptions. The shares of common stock are “restricted securities” as defined in Rule 144 of the Securities Act and subject to hold periods under applicable Canadian securities laws.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
None.
ITEM 4. MINE SAFETY DISCLOSURES
Not applicable.
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ITEM 5. OTHER INFORMATION
ApprovalCredit Facility
As previously reported on Form 8-K filed on June 16, 2021, we entered into definitive agreements to secure a credit facility with Centurion Financial Trust, an investment trust formed by Centurion Asset Management Inc. (“Centurion”). Assure issued a Debenture to Centurion, dated June 9, 2021, with a maturity date of Executive Compensatory ArrangementsJune 9, 2025, in the principal amount of US$11,000,000 related to a credit facility comprised of a US$6,000,000 senior term loan, a US$2,000,000 senior revolving loan and a US$3,000,000 senior term acquisition line (the “Credit Facility”). The Credit Facility is guaranteed by certain Assure subsidiaries.
Adoption of Code of Business Conduct and Ethics
During the fiscal quarter ended March 31,On August 11, 2021, the Registrant’s Governance, Nomination & Compensation Committee (“GNC Committee”) met to consider executive compensation for the Registrant’s Chief Executive Officer, John Farlinger,Board of Directors adopted a Code of Business Conduct and the Registrant’s Founder, Preston Parsons.
CEO Compensation: The GNC Committee approved base salary compensationEthics, which replaces our prior Code of $388,000 for Mr. Farlinger, which is inclusive of travel, healthcare insurance and housing expenses. In prior years, the Registrant paid Mr. Farlinger a base salary and provided allowances for travel, healthcare insurance and housing expenses. The approved compensation in 2021 for Mr. Farlinger results in a net increase of 2% in base salary. Mr. Farlinger is personally responsible for travel, healthcare insurance and housing expenses. Mr. Farlinger is provided a car allowance. Mr. Farlinger is entitled to an annual performance bonus.
The GNC Committee approved a stock option grant to Mr. Farlinger of 450,000 stock options with an exercise price of $1.07 per share. The options have a five year term and vest 20% on the grant date of January 27, 2021, and the balance one-sixth every six months thereafter.
Founder Compensation: The GNC Committee approved base salary compensation of $285,000 for Mr. Parsons, which is inclusive of travel, healthcare insurance and housing expenses. Mr. Parsons is provided a car allowance and benefits under the Registrant’s 401k plan. Mr. Parsons is entitled to an annual performance bonus.
The Registrant expects to enter into new employment agreements with each of Mr. Farlinger and Mr. Parsons.Ethics.
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ITEM 6. EXHIBITS
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Exhibit Number | Description |
3.1 | |
3.2 | |
3.3 | |
3.4 | |
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3.9+ | |
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 |
+ | Filed herewith. |
++ | Furnished herewith. |
* | Indicates a management contract or compensatory plan, contract or arrangement. |
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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/ John Price |
| John Farlinger, Executive Chairman and Chief Executive Officer | |
| John Price, Chief Financial Officer (Principal Financial Officer) |
| (Principal Executive Officer) | |
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| Date: | |
| Date: |
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