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Assure Holdings Corp.

ARHH / Other OTC / $1.60

March 1, 2021

 

Business Overview

 

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Assure Holdings Corp. (the Company) is a leading turnkey outsource provider of intraoperative neurophysiological monitoring (IONM) and professional neurologist oversight services. The use of electrophysiological methods (EEG, EMG) to observe the functional integrity of neural structures during surgery provides immediate feedback and warning to surgeons before they cause neurological deficits or permanent injuries.

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The Company has a turnkey suite of services.  It employs its own technologists and uses its own monitoring equipment (a 32-channel Cadwell Cascade Pro), handles scheduling and setup, and bills for the technical services it provides. Assure is JCAHO Joint Commission accredited.

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Procedures presently targeted by IONM include spinal and neurosurgeries, vascular, ENT, orthopedic and other invasive surgeries. Management is actively looking to identify new surgical specialties.

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The Company has exclusive partnerships with surgeons in Colorado, Louisiana, Texas, Pennsylvania, Utah, Michigan, and South Carolina, and it is aggressively increasing the number of physician and hospital partners in those markets.

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A major long-term goal is to boost the number of in-network provider agreements. The first such agreement, Aetna in the State of Michigan, was completed in third-quarter 2019.

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The number of procedures is increasing rapidly, rising in 2020 to more than 9,900 vs. 6,400+ in 2019. In January 2021, management announced that it expected its procedure count to increase at least 40% in 2021.

 

 

2021 Focus

 

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A key goal is to grow the number of surgeon partners by leveraging existing surgeon relationships, connections with surgical equipment distributors, and the relationships of its BoD members. Acquisitions might also play a role.

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The Company has a clear path to enter new geographic markets, having recently obtained approval to expand into Georgia, Nevada, Arizona, and Oklahoma.

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With its increasing scale, the Company plans to rapidly boost its in-network contracts with insurance providers.

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Days sales outstanding (DSO) runs high, particularly for out-of-network procedures, but the Company has brought its billing and collections in house to reduce DSO, cut collection expenses, and improved its relationship with insurers.

 

 

Management and BoD Members

 

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The backgrounds of the management and directors are outlined on the Assure website and the investor deck. John A. Farlinger, CPA CA, is Executive Chairman and CEO. He has 25+ years of experience in technology, operations, and finance. The overall management team backrounds include neurophysiology, management of fast-growing microcap companies, out-of-network billing, in-network contracting, and M&A.

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The four BoD members have a broad range of relevant experience, including healthcare, commercial banking, and investment banking.

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On February 10, 2021, executive officers and directors as a group (6 persons) beneficially owned 41.7% of the common shares, including 38.3% by Preston Parsons (founder and a director).

 

 

Financials

 

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Income Statements (9 months through 09/30/20 vs. 09/30/19)

 

Revenue: (2,440,000) vs. 22,384,000

Operating income (loss): (14,925,000) vs. 11,429,000

Net income (loss): (14,711,000) vs. 9,441,000

Earnings (loss) per diluted common share: (0.42) vs. 0.23

 

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Common Stock

 

Number of common shares outstanding (02/10/21): 56,598,777

Number of common shares outstanding (02/10/21) after issuance of common shares listed in the Prospectus dated 02/11/21 and exercise of the warrants held by selling stockholders: 72,956,480

 

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On February 24, 2021, the Company signed a term sheet to acquire Sentry Neuromonitoring, LLC, a provider of IONM services primarily in Texas, for $3.5 million, consisting of $1,225,000 in cash and $2,275,000 in common stock. In 2020, Sentry performed more than 5,500 IONM procedures, and about half of those had commercial insurance payors.

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On December 1, 2020, the Company entered into a securities purchase agreement with selling stockholders pursuant to which it sold an aggregate of 16,357,703 units at an issue price of $0.64 per unit, for gross proceeds of $10,468,930. Each unit consisted of one common share and one five-year common stock warrant exercisable at $0.78 per share.

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The Company completed the acquisition of Neuro-Pro Monitoring in February 2020. Consideration included $530,000 on February 14, $1,200,000 to be paid on March 31, monthly payments of $328,462 during each of the 13 months through April 2021, and a final cash payment of $1,700,000 on May 31, 2021. In 2019, Neuro-Pro generated approximately $6 million in cash from revenue and $3 million in net income, with approximately 80% of the Neuro-Pro procedures being paid for by commercial insurance companies. Approximately 23% of the Neuro-Pro procedures for 2019 will be included in the Assure financial statements for 2019, as these cases were performed after the acquisition agreement was announced on November 1, 2019.

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Two executives (Messrs. Parsons and Willer) received a performance share grant of 6,000,000 shares as a condition of the reverse takeover in 2016. The Company met the conditions for such grant in 2017 and has recorded a liability of approximately $16 million for the value of the shares to be issued while the agreements are modified, and the cash collected threshold achieved. Mr. Parsons has decided that once his 5,000,000 performance shares have been issued to distribute a meaningful portion of those shares to other members of the management team and key personnel.

 

 

Valuation Considerations

 

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The market for IONM is sizable and growing, and the Company is gaining market share. The overall IONM market is estimated to grow to $1.9B in 2022 (Allied Market Research, August 2018).

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Management expects the expanding scale of the Company to facilitate acceleration of in-network contracts with insurance companies.

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The February 2020 acquisition of Neuro-Pro brings important relationships with prestigious spine surgeons in the Dallas Ft. Worth area and could unlock additional business opportunities in Texas.

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The Assure cash collection cycles are protracted, primarily reflecting the out-of-network billing to private insurance payers. Claims that have aged to 24 months are reserved but not written off until they age to 36 months. An in-house billing department is focused on reducing DSO and collection costs and strengthening relationships with insurers.

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The ongoing impact from COVID-19 remains an uncertainty. In addition, the Company’s website and 2021 Prospectus detail various other risks and matters, and these are hereby incorporated by reference.

 

 

Contacts

 

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Website: https://www.assureneuromonitoring.com/

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Executive offices: 4600 South Ulster Street, Suite 1225, Denver, CO 80237; 720.287.3093

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Executive contact: John Farlinger, Executive Chairman & CEO; John.Farlinger@assureiom.com; 604.763.7565

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Investor contact: Scott Kozak, Director of Investor & Media Relations; Scott.Kozak@assureiom.com; 720.287.3093

 

 

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