UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
 
 
FORM 10-Q
 
 
(Mark One)
 
x Quarterly report under Section 13 or 15(d) of the Securities Exchange Act of 1934
 
For the Quarter Ended March 31, 2015.
 
o Transition report under Section 13 or 15(d) of the Securities Exchange Act of 1934 (No fee required)
 
For the transition period from _______ to _______.
 
Commission file number : 000-27407
 
SPINE PAIN MANAGEMENT, INC.
(Name of Registrant in Its Charter)
 
Delaware
98-0187705
(State or Other Jurisdiction of Incorporation or
(I.R.S. Employer Identification No.)
Organization)
 

5225 Katy Freeway
Suite 600
Houston, Texas   77007
(Address of Principal Executive Offices)

(713) 521-4220
(Issuer's Telephone Number, Including Area Code)
 
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   x     No   ¨

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).  Yes   x     No   ¨

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer or a smaller reporting company. See definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. (Check one):

Large accelerated filer   ¨     Accelerated filer   ¨
Non-accelerated filer   ¨     Smaller reporting company   x

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).    Yes   ¨     No   x

As of May 13, 2015, there were 19,465,882 shares of the registrant’s common stock outstanding (the only class of voting common stock).
 
 
 
 
FORM 10-Q
 
TABLE OF CONTENTS

  3
       
PART I
FINANCIAL INFORMATION
   
       
Item 1.
  4
       
   
4
       
   
5
       
   
6
       
   
7
       
Item 2.
 
15
       
Item 3.
 
16
       
Item 4.
 
17
       
PART II
OTHER INFORMATION
   
       
Item 1A.
 
18
       
Item 6.
 
18
       
   
19

 
 
 
NOTE ABOUT FORWARD-LOOKING STATEMENTS
 
This Quarterly Report on Form 10-Q contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. These statements include, among other things, statements regarding plans, objectives, goals, strategies, future events or performance and underlying assumptions and other statements, which are other than statements of historical facts. Forward-looking statements may appear throughout this report, including without limitation, Item 2 “Management’s Discussion and Analysis of Financial Condition and Results of Operations.” Forward-looking statements generally can be identified by words such as “anticipates,” “believes,” “estimates,” “expects,” “intends,” “plans,” “predicts,” “projects,” “will be,” “will continue,” “will likely result,” and similar expressions. These forward-looking statements are based on current expectations and assumptions that are subject to risks and uncertainties, which could cause our actual results to differ materially from those reflected in the forward-looking statements. Factors that could cause or contribute to such differences include, but are not limited to, those discussed in this report and in our Annual Report on Form 10-K for the year ended December 31, 2014, and in particular, the risks discussed in our Form 10-K under the caption “Risk Factors” in Item 1A therein, and those discussed in other documents we file with the Securities and Exchange Commission (“SEC”). Important factors that in our view could cause material adverse effects on our financial condition and results of operations include, but are not limited to, risks associated with service demands and acceptance, our ability to expand, changes in healthcare practices, changes in technology, economic conditions, the impact of competition and pricing, government regulation and approvals and other factors that may cause actual results to be materially different from those described herein as anticipated, believed, estimated or expected. We undertake no obligation to revise or publicly release the results of any revision to any forward-looking statements, except as required by law. Given these risks and uncertainties, readers are cautioned not to place undue reliance on such forward-looking statements.
 
As used herein, the “Company,” “we,” “our,” and similar terms include Spine Pain Management, Inc. and its subsidiaries and predecessors, unless the context indicates otherwise.
 
 

 
3
 
PART I   FINANCIAL INFORMATION
 
ITEM  1.   FINANCIAL STATEMENTS
 
SPINE PAIN MANAGEMENT, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS

   
MARCH 31,
   
DECEMBER 31,
 
   
2015
   
2014
 
 
 
(Unaudited)
       
ASSETS            
             
Current assets:
           
Cash
  $ 341,448     $ 358,052  
Accounts receivable, net
    1,370,086       1,288,315  
Prepaid expenses
    299,616       336,996  
Other assets
    28,294       15,393  
                 
Total current assets
    2,039,444       1,998,756  
                 
Accounts receivable, net of allowance for doubtful accounts
    of $382,260 and $342,084 at March 31, 2015  and
    December 31, 2014, respectively
    3,727,997       3,864,944  
Intangible assets and goodwill, net
    174,700       179,200  
Other assets
    51,902       43,944  
                 
Total assets
  $ 5,994,043     $ 6,086,844  
                 
                 
LIABILITIES AND STOCKHOLDERS' EQUITY
               
                 
Current liabilities:
               
Accounts payable and accrued liabilities
  $ 121,845     $ 129,995  
Due to related parties
    36,215       -  
Current portion of  long-term debt, net
    50,000       350,000  
                 
Total current liabilities
    208,060       479,995  
                 
Line of credit
    1,025,000       500,000  
Notes payable and long-term debt, net of discount
    550,000       550,000  
                 
Total liabilities
    1,783,060       1,529,995  
                 
Commitments and contingencies
               
Stockholders' equity:
               
Common stock: $0.001 par value, 50,000,000 shares authorized, 
19,465,882 and 19,340,882 shares issued and outstanding at
March 31, 2015 and December 31, 2014, respectively
    19,466       19,341  
Additional paid-in capital
    19,874,474       19,874,599  
Accumulated deficit
    (15,682,957 )     (15,337,091 )
                 
Total  stockholders' equity
    4,210,983       4,556,849  
                 
Total liabilities and stockholders’ equity
  $ 5,994,043     $ 6,086,844  

The accompanying notes are an integral part of the unaudited condensed consolidated financial statements.
 
 
4
 
SPINE PAIN MANAGEMENT, INC.
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

   
FOR THE THREE MONTHS ENDED
 
   
MARCH 31,
 
   
2015
   
2014
 
             
Net revenue
  $ 416,298     $ 334,688  
Cost of providing services, including amounts billed by a related party of  $125,778
and  $100,889 during the three months ended March 31, 2015 and 2014, respectively
    180,966       145,152  
                 
Gross profit
    235,332       189,536  
                 
Operating, general and administrative expenses
    482,013       573,162  
Research and development
    82,468       5,911  
                 
Loss from operations
    (329,149 )     (389,537 )
                 
Other income and (expense):
               
Other income
    4,596       6,748  
Interest expense
    (21,313 )     (97,498 )
                 
Total other income and (expense)
    (16,717 )     (90,750 )
                 
Net loss
  $ (345,866 )   $ (480,287 )
                 
Basic and diluted  loss per common share
    (0.02 )     (0.03 )
                 
Shares used in loss per common share:
               
Basic and diluted
    19,465,882       18,715,882  

The accompanying notes are an integral part of the unaudited condensed consolidated financial statements .
 
 
5
 
SPINE PAIN MANAGEMENT , INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
 
   
FOR THE THREE MONTHS ENDED
MARCH 31,
 
   
2015
   
2014
 
Cash flows from operating activities:
           
Net loss
  $ (345,866 )   $ (480,287 )
Adjustments to reconcile net loss to net cash
used in operating activities:
               
Bad debt expense
    75,000       60,000  
Interest expense related to warrant amortization
    -       15,820  
Stock based compensation
    50,833       127,444  
Accretion of debt discount on long term debt
    -       20,985  
Depreciation and amortization expense
    7,389       5,900  
Changes in operating assets and liabilities:
               
Accounts receivable, net
    (19,824 )     283,695  
Prepaid expenses and other assets
    (26,354 )     (17,919 )
Due to related party
    36,215       (22,862 )
Accounts payable and accrued liabilities
    (8,150 )     (11,981 )
                 
Net cash used in operating activities
    (230,757 )     (19,205 )
                 
Cash flows from investing activities:
               
Purchase of equipment
    (10,847 )     (4,793 )
                 
Net cash used in investing activities
    (10,847 )     (4,793 )
                 
Cash flows from financing activities:
               
Payment of notes payable and long-term debt
    (300,000 )     -  
Net proceeds from line of credit
    525,000       -  
Repayments on related party notes  payable
    -       (45,000 )
                 
Net cash provided by (used in) financing activities
    225,000       (45,000 )
                 
Net decrease in cash and cash equivalents
    (16,604 )     (68,998 )
                 
Cash and cash equivalents at beginning of period
    358,052       687,549  
                 
Cash and cash equivalents at end of period
  $ 341,448     $ 618,551  
                 
Supplementary disclosure of cash flow information:
               
     Interest paid
  $ 21,213     $ 47,500  
     Taxes paid
    -       -  
 
The accompanying notes are an integral part of the unaudited condensed consolidated financial statements.
 
 
6
 
SPINE PAIN MANAGEMENT , INC.
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
 
NOTE 1.  DESCRIPTION OF BUSINESS

Spine Pain Management Inc. was incorporated under the laws of Delaware on March 4, 1998.

We are a technology, marketing, management, billing, and collection company facilitating diagnostic services for patients who have sustained spine injuries resulting from traumatic accidents.  We deliver turnkey solutions to spine surgeons, orthopedic surgeons and other healthcare providers for necessary and appropriate treatment of musculo-skeletal spine injuries resulting from automobile and work-related accidents.  Our goal is to become a leader in providing management services to spine and orthopedic surgeons and other healthcare providers to facilitate proper treatment of their injured clients.  By pre-funding the providers accounts receivable, which includes diagnostic testing and non-invasive and surgical care, patients are not unnecessarily delayed or prevented from obtaining needed treatment.  By facilitating early treatment through affiliated doctors, we believe that health conditions can be prevented from escalating and injured victims can be quickly placed on the road to recovery.  Through our affiliate system, we facilitate spine surgeons, orthopedic surgeons and other healthcare providers to provide reasonable, necessary, and appropriate treatments to patients with musculo-skeletal spine injuries. We assist the centers that provide the spine diagnostic injections and treatment and pay the doctors a fee for the medical procedures they performed. After a patient is billed for the procedures performed by the affiliated doctor, we take control of the patients’ unpaid bill and oversee collection. In most instances, the patient is a plaintiff in an accident case, where the patient is represented by an attorney. Typically, the defendant (and/or the insurance company of the defendant) in the accident case pays the patient’s bill upon settlement or final judgment of the accident case. The payment to us is made through the attorney of the patient. In most cases, we must agree to the settlement price and the patient must sign off on the settlement. Once we are paid, the patient’s attorney can receive payment for his or her legal fee.

We currently are affiliated with three spine injury diagnostic centers in the United States, which are located in Houston, Texas; Odessa, Texas; and San Antonio, Texas. In January 2014 we made the decision to discontinue doing business in Florida and McAllen, Texas (see Item 2, “Management’s Discussion and Analysis of Financial Condition and Results of Operations” below).  We are seeking additional funding for expansion by way of reasonable debt financing to accelerate this future development.  In connection with this strategy, we plan to open additional diagnostic centers in new market areas that are attractive under our business model, assuming adequate funds are available.

We own a device and process by which a video recording system is attached to a fluoroscopic x-ray machine, the “four camera technology,” that we believe can attract additional physicians and patients, expedite settlements and provide us with additional revenue streams.  During 2014 and continuing in 2015, we have refined the technology, through further research and development resulting in a fully commercialized Quad Video Halo System 3.0.  Using this technology, diagnostic procedures are recorded from four separate video feeds that capture views from both inside and outside the body, and a video is made which is given to the patient’s representative to verify the treatment received.  We believe the video will expedite the settlement process.  Additionally, with regulatory approval (if necessary) we anticipate independent medical representatives will sell Quad Video Halo units to outside hospitals and clinics.

In September 2014, we created a wholly owned subsidiary Quad Video Halo, Inc.  The purpose of this entity is to hold certain company assets affiliated with the Quad Video Halo units.  As of March 31, 2015 the subsidiary held no assets or liabilities.

NOTE 2.  GOING CONCERN CONSIDERATIONS

Since our inception in 1998, until commencement of our spine injury diagnostic operations in August, 2009, our expenses substantially exceeded our revenue, resulting in continuing losses and an accumulated deficit from operations of $15,004,698 as of December 31, 2009.  Since that time, our accumulated deficit has increased $678,259 to $15,682,957 as of March 31, 2015. We plan to increase our operating expenses as we increase our service development, marketing efforts and brand building activities. We also plan to increase our general and administrative functions to support our growing operations. We will need to generate significant revenues to achieve our business plan. Our continued existence is dependent upon our ability to successfully execute our business plan, as well as our ability to increase revenue from services and obtain additional capital from borrowing and selling securities, as needed, to fund our operations. There is no assurance that additional capital can be obtained or that it can be obtained on terms that are favorable to us and our existing stockholders.  Any expectation of future profitability is dependent upon our ability to expand and develop our healthcare services business, of which there can be no assurances.
 
 
7
 
SPINE PAIN MANAGEMENT, INC.
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
 
NOTE 3.  CRITICAL ACCOUNTING POLICIES
 
The following are summarized accounting policies considered to be critical by our management:
 
Basis of Presentation

The accompanying unaudited condensed consolidated financial statements have been prepared pursuant to the rules and regulations of the Securities and Exchange Commission (the "SEC”). Certain information and footnote disclosures, normally included in consolidated financial statements prepared in accordance with accounting principles generally accepted in the United States of America have been condensed or omitted pursuant to such SEC rules and regulations. Nevertheless, we believe that the disclosures are adequate to make the information presented not misleading. These interim condensed consolidated financial statements should be read in conjunction with the audited consolidated financial statements and notes thereto included in our 2014 Annual Report as filed on Form 10-K. In the opinion of management, all adjustments, including normal recurring adjustments necessary to present fairly our financial position with respect to the interim consolidated financial statements and the results of its operations for the interim period ended March 31, 2015, have been included. The results of operations for interim periods are not necessarily indicative of the results for a full year.

Basis of Consolidation

The accompanying unaudited condensed consolidated financial statements include the accounts of Spine Pain Management, Inc. and its wholly owned subsidiary, Quad Video Halo, Inc. All material intercompany balances of transactions have been eliminated upon consolidation.

Accounting Method
 
Our financial statements are prepared using the accrual basis of accounting in accordance with accounting principles generally accepted in the United States of America.

Use of Estimates
 
The preparation of consolidated financial statements in conformity with accounting principles generally accepted in the United States of America (“U.S. GAAP”) requires the use of estimates and assumptions that affect the reported amounts of assets and liabilities, disclosure of contingent assets and liabilities known to exist as of the date of the consolidated financial statements and the reported amounts of revenues and expenses during the reporting period. Uncertainties with respect to such estimates and assumptions are inherent in the preparation of our consolidated financial statements; accordingly, it is possible that the actual results could differ from these estimates and assumptions and could have a material effect on the reported amounts of our financial position and results of operations.

Revenue Recognition
 
Revenues are recognized in accordance with SEC staff accounting bulletin, Topic 13, Revenue Recognition, which specifies that only when persuasive evidence for an arrangement exists; the fee is fixed or determinable; and collection is reasonably assured can revenue be recognized.
 
Persuasive evidence of an arrangement is obtained prior to services being rendered when the patient completes and signs the medical and financial paperwork.  Delivery of services is considered to have occurred when medical diagnostic services are provided to the patient.  The price and terms for the services are considered fixed and determinable at the time that the medical services are provided and are based upon the type and extent of the services rendered.  Our credit policy has been established based upon extensive experience by management in the industry and has been determined to ensure that collectability is reasonably assured.  Payment for services are primarily made to us by a third party and the credit policy includes terms of net 240 days for collections; however, collections occur upon settlement or judgment of cases (see Note 4).
 
 
8
 
SPINE PAIN MANAGEMENT, INC.
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

Fair Value of Financial Instruments
 
Cash, accounts receivable, accounts payable and accrued liabilities, and notes payable as reflected in the consolidated financial statements, approximates fair value.  Fair value estimates are made at a specific point in time, based on relevant market information and information about the financial instrument. These estimates are subjective in nature and involve uncertainties and matters of significant judgment and therefore cannot be determined with precision. Changes in assumptions could significantly affect these estimates.
 
Cash and Cash Equivalents

Cash and cash equivalents consist of liquid investments with original maturities of three months or less.  Cash equivalents are stated at cost, which approximates fair value.  We maintain cash and cash equivalents in banks which at times may exceed federally insured limits. We have not experienced any losses on these deposits.

Intangible Assets and Goodwill

Intangible assets acquired are initially recognized at cost. Intangible assets acquired in a business combination are recognized at their estimated fair value at the date of acquisition. Intangibles with a finite life are amortized, ratably, based on the contractual terms of the associated agreements.

Goodwill recognized in a business combination is subjective and represents the value of the excess amount given to the acquired company above the estimated fair market value of the identifiable net assets on the acquisition date. Each year, during the fourth quarter, the goodwill amount is reviewed to determine if any impairment has occurred. Impairment occurs when the original amount of goodwill exceeds the value of the expected future net cash flows from the business acquired.  As of March 31, 2015 and December 31, 2014, no impairment to the asset was determined to have occurred.
 
Long-Lived Assets
 
We periodically review and evaluate long-lived assets such as intangible assets, when events and circumstances indicate that the carrying amount of these assets may not be recoverable. In performing our review for recoverability, we estimate the future cash flows expected to result from the use of such assets and its eventual disposition. If the sum of the expected undiscounted future operating cash flows is less than the carrying amount of the related assets, an impairment loss is recognized in the consolidated statements of operations. Measurement of the impairment loss is based on the excess of the carrying amount of such assets over the fair value calculated using discounted expected future cash flows. At March 31, 2015 and December 31, 2014, no impairment of the long-lived assets was determined to have occurred.
 
Concentrations of Credit Risk

Assets that expose us to credit risk consist primarily of cash and accounts receivable. Our accounts receivable are from a diversified customer base and, therefore, we believe the concentration of credit risk is minimal. We evaluate the creditworthiness of customers before any services are provided.  We record a discount based on the nature of our business, collection trends, and an assessment of our ability to fully realize amounts billed for services.  Additionally, we have established an allowance for doubtful accounts in the amount of $382,260 and $342,084, at March 31, 2015 and December 31, 2014, respectively.
  
Stock Based Compensation
 
We account for the measurement and recognition of compensation expense for all share-based payment awards made to employees and directors, including employee stock options, based on estimated fair values.  Under authoritative guidance issued by the Financial Accounting Standards Board (“FASB”), companies are required to estimate the fair value or calculated value of share-based payment awards on the date of grant using an option-pricing model.  The value of awards that are ultimately expected to vest is recognized as expense over the requisite service periods in our consolidated statements of operations.  We use the Black-Scholes Option Pricing Model to determine the fair-value of stock-based awards.  During the quarters ended March 31, 2015 and 2014, we recognized compensation expense related to our stock options of $0 and $72,000, respectively. We also recognized compensation expense for issuances of our common stock in exchange for services of $50,833 and $42,250 during the quarters ended March 31, 2015 and 2014, respectively.
 
 
9
 
SPINE PAIN MANAGEMENT, INC.
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

Income Taxes
 
We account for income taxes in accordance with the liability method. Under the liability method, deferred assets and liabilities are recognized based upon anticipated future tax consequences attributable to differences between financial statement carrying amounts of assets and liabilities and their respective tax basis. We establish a valuation allowance to the extent that it is more likely than not that deferred tax assets will not be utilized against future taxable income.

Uncertain Tax Positions
 
Accounting Standards Codification “ASC” Topic 740-10-25 defines the minimum threshold a tax position is required to meet before being recognized in the financial statements as “more likely than not” (i.e., a likelihood of occurrence greater than fifty percent). Under ASC Topic 740-10-25, the recognition threshold is met when an entity concludes that a tax position, based solely on its technical merits, is more likely than not to be sustained upon examination by the relevant taxing authority. Those tax positions failing to qualify for initial recognition are recognized in the first interim period in which they meet the more likely than not standard, or are resolved through negotiation or litigation with the taxing authority, or upon expiration of the statute of limitations. De-recognition of a tax position that was previously recognized occurs when an entity subsequently determines that a tax position no longer meets the more likely than not threshold of being sustained.
 
We are subject to ongoing tax exposures, examinations and assessments in various jurisdictions. Accordingly, we may incur additional tax expense based upon the outcomes of such matters. In addition, when applicable, we will adjust tax expense to reflect our ongoing assessments of such matters which require judgment and can materially increase or decrease our effective rate as well as impact operating results.

Under ASC Topic 740-10-25, only the portion of the liability that is expected to be paid within one year is classified as a current liability. As a result, liabilities expected to be resolved without the payment of cash (e.g. resolution due to the expiration of the statute of limitations) or are not expected to be paid within one year are not classified as current. We have recently adopted a policy of recording estimated interest and penalties as income tax expense and tax credits as a reduction in income tax expense. For the three months ended March 31, 2015 and 2014, we recognized no estimated interest or penalties as income tax expense.

Legal Costs and Contingencies
 
In the normal course of business, we incur costs to hire and retain external legal counsel to advise us on regulatory, litigation and other matters. We expense these costs as the related services are received.
 
If a loss is considered probable and the amount can be reasonably estimated, we recognize an expense for the estimated loss. If we have the potential to recover a portion of the estimated loss from a third party, we make a separate assessment of recoverability and reduce the estimated loss if recovery is also deemed probable.
 
Net Loss per Share

Basic and diluted net loss per common share is presented in accordance with ASC Topic 260, “Earnings per Share,” for all periods presented. During the three months ended March 31, 2015 and 2014, common stock equivalents from outstanding stock options, warrants and convertible debt have been excluded from the calculation of the diluted loss per share in the statements of operations, because all such securities were anti-dilutive.  The net loss per share is calculated by dividing the net loss by the weighted average number of shares outstanding during the periods.

Recent Accounting Pronouncements

In May 2014, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) No. 2014-09, Revenue from Contracts with Customers (Topic 606).   This ASU is designed to create greater comparability for financial statement users across industries and jurisdictions.  The provisions of ASU No. 2014-09 include a five-step process by which entities will recognize revenue to depict the transfer of good or services to customers in amounts that reflect the payment to which an entity expects to be entitled in exchange for those goods or services.  The standard also will require enhanced disclosures, provide more comprehensive guidance for transactions such as service revenue and contract modifications, and enhance guidance for multiple-element arrangements.  ASU No. 2014-09 will be effective for U.S. public companies for annual reporting periods beginning after December 15, 2016, including interim reporting periods (January 1, 2017 for us).  Early adoption is not permitted.  We are currently reviewing the effect of ASU No. 2014-09 on our revenue recognition.
 
 
10
 
SPINE PAIN MANAGEMENT, INC.
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
 
In June 2014, the FASB issued ASU 2014-12, Accounting for Share-Based Payments When the Terms of an Award Provide That a Performance Target Could be Achieved after the Requisite Service Period. This new accounting guidance under ASC 718, Compensation – Stock Compensation, provides explicit guidance on whether to treat a performance target that could be achieved after the requisite service period as a performance condition that affects vesting or as a non-vesting condition that affects the grant-date fair value of an award. The guidance will become effective prospectively for fiscal years and interim reporting periods beginning after December 15, 2015. Early adoption is permitted. The adoption of ASU 2014-12 is not expected to have a significant impact on the consolidated financial statements.

In August 2014, the FASB issued ASU 2014-15, Presentation of Financial Statements – Going Concern (Subtopic 205-40): Disclosure of Uncertainties about an Entities Ability to Continue as a Going Concern. The amendments in ASU 2014-15 are intended to define management’s responsibility to evaluate whether there is substantial doubt about an entity’s ability to continue as a going concern and to provide related footnote disclosure. Under U.S. GAAP, financial statements are prepared under the presumption that the reporting entity will continue to operate as a going concern, except in limited circumstances. The going concern basis of accounting is critical to financial reporting because it establishes the fundamental basis for measuring and classifying assets and liabilities. Currently, U.S. GAAP lacks guidance about management’s responsibility to evaluate whether there is substantial doubt about the entity’s ability to continue as a going concern or to provide related footnote disclosures. This ASU provides guidance to an entity’s management with principles and definitions that are intended to reduce diversity in the timing and content of disclosures that are commonly provided by entities today in the financial statement footnotes. ASU 2014-15 is effective for annual periods ending after December 15, 2016, and interim periods within annual periods beginning after December 15, 2016. Early application is permitted. The adoption of ASU 2014-15 is not expected to have a significant impact on the consolidated financial statements.

In January 2015, the FASB issued ASU No. 2015-01, Income Statement – Extraordinary and Unusual Items (Subtopic 225-20): Simplified Income Statement Presentation by Eliminating the Concept of Extraordinary Items. This ASU eliminates from U.S. GAAP the concept of extraordinary items. Subtopic 225-20, Income statement – Extraordinary and Unusual Items, requires that an entity separately classify, present and disclose extraordinary events and transactions. Presently, an event or transaction is presumed to be ordinary and usual activity of the reporting entity unless evidence clearly supports its classification as an extraordinary item. If an event or transaction meets the criteria for extraordinary classification, an entity is required to segregate the extraordinary item from the results of ordinary operations and show the item separately in the income statement, net of tax, after income from continuing operations. The entity also is required to disclose applicable income taxes and either present or disclose earnings-per-share data applicable to the extraordinary item. ASU No. 2015-01 is effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2015. The amendments of ASU No. 2015-01 can be applied prospectively or retrospectively to all prior periods presented in the financial statements. Early adoption is permitted. The adoption of ASU No. 2015-01 is not expected to have a significant impact on the Company’s consolidated financial position, results of operations or disclosures.

In February 2015, the FASB issued ASU No. 2015-02, Consolidation (Topic 810): Amendments to the Consolidation Analysis, which is intended to improve targeted areas of consolidation guidance for legal entities such as limited partnerships, limited liability corporations, and securitization structures. ASU No. 2015-02 focuses on the consolidation evaluation for reporting organizations that are required to evaluate whether they should consolidate certain legal entities. In addition to reducing the number of consolidation models from four to two, the new standard simplifies the FASB Accounting Standards Codification TM and improves current GAAP by: (1) Placing more emphasis on risk of loss when determining a controlling financial interest. A reporting organization may no longer have to consolidate a legal entity in certain circumstances based solely on its fee arrangement, when certain criteria are met; (2) Reducing the frequency of the application of related-party guidance when determining a controlling financial interest in a variable interest entity; and (3) Changing consolidation conclusions for public and private companies in several industries that typically make use of limited partnerships or variable interest entities. ASU No. 2015-02 is effective for periods beginning after December 15, 2015. Management is currently evaluating the future impact of ASU No. 2015-02 on the Company’s consolidated financial position, results of operations and disclosures.

In April 2015, the FASB issued ASU No. 2015-03, Interest – Imputation of Interest (Subtopic 835-30): Simplifying the Presentation of Debt Issuance Costs. The amendments in ASU 2015-03 are intended to simplify the presentation of debt issuance costs. These amendments require that debt issuance costs related to a recognized debt liability be presented in the balance sheet as a direct deduction from the carrying amount of that debt liability, consistent with debt discounts. The recognition and measurement guidance for debt issuance costs are not affected by the amendments in this ASU. ASU No. 2015-03 is effective for annual periods beginning after December 15, 2015, and interim periods within those fiscal years. The adoption of ASU 2015-03 is not expected to have a significant impact on the Company’s consolidated financial position, results of operations or disclosures.
 
 
11
 
SPINE PAIN MANAGEMENT, INC.
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
 
NOTE 4.  ACCOUNTS RECEIVABLE

We recognize revenue and accounts receivable in accordance with SEC staff accounting bulletin, Topic 13, “Revenue Recognition”, which requires persuasive evidence that a sales arrangement exists; the fee is fixed or determinable; and collection is reasonably assured before revenue is recognized. We manage certain spine injury diagnostic centers where independent healthcare providers perform medical services for patients. We pay the healthcare providers a fixed rate for medical services performed. The patients are billed based on Current Procedural Terminology (“CPT”) codes for the medical procedure performed. CPT codes are numbers assigned to every task and service a medical practitioner may provide to a patient including medical, surgical and diagnostic services. CPT codes are developed, maintained and copyrighted by the American Medical Association. Patients are billed at the normal billing amount, based on national averages, for a particular CPT code procedure. We take control of the patients’ unpaid bills.

Revenue and corresponding accounts receivable are recognized by reference to “net revenue” and “accounts receivable, net” which is defined as gross amounts billed using CPT codes less account discounts that are expected to result when individual cases are ultimately settled. A discount rate of 52%, based on settled patient cases, was used to reduce revenue to 48% of CPT code billings (“gross revenue”) during the three months ended March 31, 2015 and 2014.

The patients who receive medical services at the diagnostic centers are typically plaintiffs in accident lawsuits. The timing of collection of receivables is dependent on the timing of a settlement or judgment of each individual case associated with these patients.  Historical experience, through 2014, demonstrated that the collection period for individual cases may extend for two years or more. Accordingly, we have classified receivables as current or long term based on our experience, which indicates that as of March 31, 2015 and 2014 that 25% and 40% of cases will be subject to a settlement or judgment within one year of a medical procedure.

We take the following steps to establish an arrangement between all parties and facilitate collection upon settlement or final judgment of cases:
 
 
·
The patient completed and signed medical and financial paperwork, which included an acknowledgement of the patient’s responsibility of payment for the services provided. Additionally, the paperwork should include an assignment of benefits derived from any settlement or judgment of the patient’s case.

 
·
The patient’s attorney issued the healthcare provider a Letter of Protection designed to guarantee payment for the medical services provided to the patient from proceeds of any settlement or judgment in the accident case. This Letter of Protection also should preclude any case settlement without providing for payment of the patient’s medical bill.

 
·
Most of the patients who received medical services at the diagnostic centers have typically been previously referred to a doctor from a plaintiff’s attorney, who performed the initial two to four months of conservative treatment. The doctor then typically refers the patient to one of our healthcare providers for an evaluation because of continuing symptoms. Patients are only accepted if the initial referral was from a reputable plaintiff’s attorney with adequate experience in personal injury lawsuits. Before referring a patient, the attorney is expected to have evaluated the patient’s accident case, including the conditions that gave rise to the patient’s injuries and the extent and quality of general liability insurance held by the defendant. The attorney is also responsible for determining that a settlement favorable to the patient/plaintiff is expected.

NOTE 5.  DUE TO RELATED PARTIES

We have an agreement with NSO, which is 100% owned by our Chief Executive Officer, William Donovan, M.D., to provide medical services as our independent contractor at the Houston and Odessa spine injury diagnostic centers. For the quarters ended March 31, 2015 and 2014, we expensed $125,778 and $100,889 related to services provided by NSO. As of March 31, 2015 and December 31, 2014, we had balances payable to NSO of $36,215 and $0, respectively. This outstanding payable is non-interest bearing, due on demand and does not follow any specific repayment schedule. We do not directly pay Dr. Donovan (in his individual capacity as a physician) any fees in connection with NSO. However, Dr. Donovan is the sole owner of NSO, and we pay NSO under the terms of our agreement.  
 
 
12
 
SPINE PAIN MANAGEMENT, INC.
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

NOTE 6. STOCKHOLDERS’ EQUITY

Stock Options

We recognized $0 and $72,000 in compensation expense in operating, general and administrative expenses in the Consolidated Statements of Operations for the three months ended March 31, 2015 and 2014, respectively.  All compensation expense related to stock options has been recognized as of December 31, 2014.

NOTE 7.  NOTES PAYABLE

On June 27, 2012, we issued a $500,000 convertible promissory note bearing interest at 12% per year with an initial maturity date of March 27, 2014, which was extended to March 27, 2015. In December 2014, we made a principal payment of $200,000 on this note and in March 2015 we paid the remaining $300,000. For the quarters ended March 31, 2015 and 2014, we recorded $8,600 and $15,000 in interest expense related to this note.

Line of Credit

On September 3, 2014, we entered into a $2,000,000 revolving line of credit agreement with Wells Fargo Bank, N.A. Outstanding principal on the line of credit bears interest at the 30 day London Interbank Offered Rate (“LIBOR”) plus 2%, resulting in an effective rate of 2.17% at March 31, 2015.  The line of credit matures on August 31, 2017 and is personally guaranteed by Peter Dalrymple, a director of the Company. As of March 31, 2015 and December 31, 2014, outstanding borrowings under the line of credit totaled $1,025,000 and $500,000, respectively. For the quarters ended March 31, 2015 and 2014, we recorded $2,714 and $0 in interest expense related to this note.

NOTE 8.  INCOME TAXES

We have not made a provision for income taxes for the three months ended March 31, 2015 or the year ended December 31, 2014, since we have net operating loss carryforwards to offset current taxable income.

Deferred tax assets consist of the following at March 31, 2015 and December 31, 2014:

   
March 31
   
December 31
 
   
2015
   
2014
 
             
Benefit from net operating loss carryforwards
  $ 2,644,087     $ 2,516,117  
                 
Allowance from doubtful accounts
    129,968       116,309  
                 
Less:  valuation allowance
    (2,774,055 )     (2,632,426 )
                 
    $ -     $ -  

Due to uncertainties surrounding our ability to generate future taxable income to realize these assets, a full valuation has been established to offset the net deferred income tax asset. Based on management’s assessment, utilizing an effective combined tax rate for federal and state taxes of approximately 37%, we have determined that it is not currently likely that a deferred income tax asset of approximately $2,774,055 and $2,632,426 attributable to the future utilization of the approximate $7,708,905 and $7,400,344 in eligible net operating loss carryforwards as of March 31, 2015 and December 31, 2014, respectively, will be realized. We will continue to review this valuation allowance and make adjustments as appropriate. The net operating loss carryforwards will begin to expire in varying amounts from year 2018 to 2035.

Current income tax laws limit the amount of loss available to be offset against future taxable income when a substantial change in ownership occurs. Therefore, amounts available to offset future taxable income may be limited under Section 382 of the Internal Revenue Code.
 
 
13
 
SPINE PAIN MANAGEMENT, INC.
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
 
Following is a reconciliation of the (provision) benefit for federal income taxes as reported in the accompanying Consolidated Statements of Operations to the expected amount at the 34% federal statutory rate:

   
Three Months Ended March 31,
 
   
2015
   
2014
 
             
Income tax benefit (provision) at the 34% statutory rate
  $ 117,594     $ 163,298  
Effect of state income taxes
    10,376       -  
Non-deductible interest expense
    -       (41,480 )
Other
    13,659       (2,436 )
Less change in valuation allowance
    (141,629 )     (119,382 )
                 
Income tax (provision) benefit
  $ -     $ -  

We are subject to taxation in the United States and certain state jurisdictions. Our tax years for 2003 and forward are subject to examination by the United States and applicable state tax authorities due to the carryforwards of unutilized net operating losses and the timing of tax filings.
 

 
 
14

ITEM 2.  MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

The following discussion should be read in conjunction with our condensed financial statements and the related notes to the financial statements included in this Form 10-Q.
 
Critical Accounting Policies
 
See Note 3 of the accompanying notes to unaudited condensed financial statements, which note is incorporated herein by reference.
 
Management Overview
 
At the end of 2008, we launched our new business concept of delivering turnkey solutions to spine surgeons, orthopedic surgeons and other healthcare providers for necessary, reasonable and appropriate treatment for musculo-skeletal spine injuries. Moving forward, our main focus will be on expansion through new affiliations with spine surgeons, orthopedic surgeons and other healthcare providers across the nation.
 
Results of Operations
 
The unaudited financial statements as of March 31, 2015 and for the three months ended March 31, 2015 and 2014 have been prepared in accordance with accounting principles generally accepted in the United States of America for interim financial information and with instructions to Form 10-Q. In the opinion of management, the unaudited financial statements have been prepared on the same basis as the annual financial statements and reflect all adjustments, which include only normal recurring adjustments, necessary to present fairly the financial position as of March 31, 2015 and the results of operations and cash flows for the three months ended March 31, 2015 and 2014. The results for the three months ended March 31, 2015 are not necessarily indicative of the results to be expected for any subsequent quarter or of the entire year ending December 31, 2015.
 
Certain information and footnote disclosures normally included in financial statements prepared in accordance with accounting principles generally accepted in the United States of America have been condensed or omitted pursuant to the Securities and Exchange Commission’s rules and regulations. These unaudited financial statements should be read in conjunction with our audited financial statements and notes thereto for the year ended December 31, 2014 as included in our previously filed report on Form 10-K.
 
As noted earlier in the description of the business in Note 1 of the Notes to Condensed Consolidated Financial Statements, we own a video recording system known as the Quad Video Halo System 2.0 (“QVH”).  We have expended funds in this quarter for further development and marketing of this system.  We anticipate that we will sell units of the system to outside hospitals and clinics once the product is ready for the market.  We will continue to develop this product in the upcoming quarters.
 
Comparison of the three month period ended March 31, 2015 with the three month period ended March 31, 2014.
 
We recorded $877,231, in gross revenue for the three months ended March 31, 2015, offset by $460,933 of the expected settlement discount resulting in net revenue of $416,298.  For the same period in 2014, gross revenue was $657,931, offset by $323,243 of standard allowance for discount, resulting in net revenue of $334,688.  Revenue was positively affected by higher case volume in 2015 due to the Odessa location not being open in the first quarter of 2014. For the three months ended March 31, 2015, we managed three spine injury diagnostic centers: Houston, Texas; San Antonio, Texas; and Odessa, Texas.  Service cost was $180,966 for the three months ended March 31, 2015 compared to $145,152 for the same period in 2014. The increase in service cost is attributable to the higher case volume.
 
 
During the three months ended March 31, 2015, we incurred $482,013 of operating, general and administrative expenses compared with the $573,162 for the same period in 2014.  Operating, general and administrative expenses were lower for the quarter compared to 2014 primarily because of legal expenses we incurred in Florida in connection with our affiliated Florida clinics coupled with lower officer and director expenses this quarter compared to the 2014 quarter which had stock options expensed.  In the quarter ended March 31, 2015, we spent approximately $122,372 on QVH marketing and development which is included in the operating general and administrative expenses.  These marketing expenses include consulting, travel, and tradeshow costs. Because we geared up our QVH plans in late 2014, there is no comparable amount to report for the first three months ended March 31, 2014.  We also spent $82,468 in research and development costs as compared to $5,911 in 2014.  Overall, we had $133,222 in non-cash operating charges in 2015 compared to $180,150 in non-cash operating expenses for the three months ended March 31, 2014.

As a result of the foregoing, we had a net loss of $345,866 for the three months ended March 31, 2015, compared to $480,287 of net loss for the three months ended March 31, 2014.
 
Liquidity and Capital Resources
 
For the three months ended March 31, 2015, cash used in operations was $230,757, which primarily included increases in accounts receivable of $19,824, prepaid expense of $13,453, and other assets of $12,901, and a decrease in accounts payable of $8,150, partially offset by the net loss of $345,866 and an increase of $36,215 in due to related party.  For the same period in 2014, cash used in operations was $19,205, which primarily included a decrease in accounts receivable of $283,695, a decrease in accounts payable of $11,981, prepaid expense of $17,919, and due to related party of $22,862, partially offset by the net loss of $480,287.  Cash used in investing activities for the three months ended March 31, 2015 and 2014 included a purchase of equipment of $10,847 and $4,793, respectively.
 
Cash used in financing activities for the three months ended March 31, 2015 consisted of a repayment on notes payables in the amount of $300,000, coupled with the draws on our line of credit of $525,000. Cash used in financing activities for the three months ended March 31, 2014 consisted of a repayment on related party payables in the amount of $45,000.

We collected $396,473 and $622,950 in settlements during the three months ended March 31, 2015 and 2014, respectively.

Going Concern Considerations

Since our inception in 1998, until commencement of our spine injury diagnostic operations in August, 2009, our expenses substantially exceeded our revenue, resulting in continuing losses and an accumulated deficit from operations of $15,004,698 as of December 31, 2009. Since that time, our accumulated deficit has increased $678,259 to $15,682,957 as of March 31, 2015. During the three months ended March 31, 2015, we realized net revenue of $416,298 and a net loss of $345,866. Successful business operations and our transition to positive cash flows from operations are dependent upon obtaining additional financing and achieving a level of collections adequate to support our cost structure. Considering the nature of our business, we are not generating immediate liquidity and sufficient working capital within a reasonable period of time to fund our planned operations and strategic business plan through March 31, 2016. There can be no assurances that there will be adequate financing available to us. The accompanying consolidated financial statements have been prepared assuming that we will continue as a going concern. This basis of accounting contemplates the recovery of our assets and the satisfaction of liabilities in the normal course of business. The consolidated financial statements do not include any adjustments to reflect the possible future effects on the recoverability and classification of assets or the amounts and classification of liabilities that may result from the outcome of this uncertainty.

ITEM 3.   QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

Not Applicable.
 

ITEM 4.   CONTROLS AND PROCEDURES

Our principal executive officer and principal financial officer are responsible for establishing and maintaining our disclosure controls and procedures. Such officers have concluded (based upon their evaluation of these controls and procedures as of the end of the period covered by this report) that our disclosure controls and procedures are effective to ensure that information required to be disclosed by us in this report is accumulated and communicated to management, including our principal executive and principal financial officer as appropriate, to allow timely decisions regarding required disclosure.

Our principal executive officer and principal financial officer have also indicated that, upon evaluation, there were no changes in our internal control over financial reporting or other factors during the period covered by this report that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
 
Our management, including our principal executive officer and principal financial officer, does not expect that our disclosure controls or our internal controls will prevent all error and all fraud. A control system, no matter how well conceived and operated, can provide only reasonable, not absolute, assurance that the objectives of the control system are met. In addition, the design of a control system must reflect the fact that there are resource constraints, and the benefits of controls must be considered relative to their costs. Because of the inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that all control issues and instances of fraud, if any, within a company have been detected. These inherent limitations include the realities that judgments in decision-making can be faulty, and that breakdowns can occur because of simple error or mistake. Additionally, controls can be circumvented by the individual acts of some persons, by collusion of two or more people or by management override of the control. The design of any system of controls also is based in part upon certain assumptions about the likelihood of future events, and there can be no assurance that any design will succeed in achieving its stated goals under all potential future conditions. Because of these inherent limitations in a cost-effective control system, misstatements due to error or fraud may occur and not be detected.
 
 
 
 
PART II   OTHER INFORMATION
 
ITEM 1A.   RISK FACTORS
 
In addition to the other information set forth in this report, one should carefully consider the discussion of various risks and uncertainties contained in Part I, Item 1A,  “Risk Factors” in our 2014 Annual Report on Form 10-K.  We believe the risk factors presented in this filing and those presented on our 2014 Form 10-K are the most relevant to our business and could cause our results to differ materially from any forward-looking statements made by us.  

ITEM 6.   EXHIBITS

Exhibit No.
 
Description
3.1
 
Articles of Incorporation dated March 4, 1998. (Incorporated by reference from Form 10-KSB filed with the SEC on January 5, 2000.) *
     
3.2
 
Amended Articles of Incorporation dated April 23, 1998. (Incorporated by reference from Form 10-KSB filed with the SEC on January 5, 2000.) *
     
3.3
 
Amended Articles of Incorporation dated January 4, 2002. (Incorporated by reference from Form 10KSB filed with the SEC on May 21, 2003.) *
     
3.4
 
Amended Articles of Incorporation dated December 19, 2003. (Incorporated by reference from Form 10-KSB filed with the SEC on May 20, 2004.) *
     
3.5
 
Amended Articles of Incorporation dated November 4, 2004. (Incorporated by reference from Form 10-KSB filed with the SEC on April 15, 2005) *
     
3.6
 
Amended Articles of Incorporation dated September 7, 2005. (Incorporated by reference from Form 10-QSB filed with the SEC on November 16, 2005) *
     
3.7
 
By-Laws dated April 23, 1998. (Incorporated by reference from Form 10K-SB filed with the SEC on January 5, 2000) *
     
10.1
 
Employment Agreement with William F. Donovan, M.D. dated September 18, 2014 (Incorporated by reference from Form 8-K filed with the SEC on September 22, 2014) *
     
10.2
 
Employment Agreement with John Bergeron dated November 30, 2013 (Incorporated by reference from Form 8-K filed with the SEC on December 13, 2013) *
     
10.3   Financing Agreement with Peter Dalrymple (Incorporated by reference from Form 8-K filed with the SEC on August 26, 2014) *
     
10.4   Wells Fargo Loan Documentation
     
31.1
 
     
31.2
 
     
32.1
 
     
32.2
 
 
101.INS
 
XBRL Instance Document
     
101.SCH
 
XBRL Taxonomy Extension Schema
     
101.CAL
 
XBRL Taxonomy Extension Calculation Linkbase
     
101.DEF
 
XBRL Taxonomy Extension Definitions Linkbase
     
101.LAB
 
XBRL Taxonomy Extension Label Linkbase
     
101.PRE
 
XBRL Taxonomy Extension Presentation Linkbase
 
* Incorporated by reference from our previous filings with the SEC
 
 
S IGNATURES

Pursuant to the requirements 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.
 
 
Spine Pain Management, Inc.
   
  Date: May 13, 2015
By: /s/ William F. Donovan, M.D.
 
William F. Donovan, M.D.
 
Chief Executive Officer (Principal Executive Officer)
   
   

  Date: May 13, 2015
By:  /s/ John Bergeron
 
John Bergeron
 
Chief Financial Officer (Principal Financial Officer)
   
   

 
 
19
 
Exhibit 10.4
 
WELLS FARGO REVOLVING LINE OF CREDIT NOTE
 
 
$2,000,000.00 Houston, Texas
 
September 3, 2014
 

                                                                                                                                             
FOR VALUE RECEIVED, the undersigned Spine Pain Management lnc. ("Borrower") promises to pay to the order of WELLS FARGO BANK, NATIONAL ASSOCIATION ("Bank") at its office at Private Banking - Houston, 1000 Louisiana St 2nd Floor, Houston, TX 77002 , or at such other place as the holder hereof may designate, in lawful money of the United States of America and in immediately available funds, the principal sum of Two Million and 00/100 Dollars ($2,000,000.00) , or so much thereof as may be advanced and be outstanding, with interest thereon, to be computed on each advance from the date of its disbursement as set forth herein.
   
1.    DEFINITIONS:
 
As used herein, the following terms shall have the meanings set forth after each, and any other term defined in this Note shall have the meaning set forth at the place defined:
 
1.1   "Daily One Month LlBOR" means, for any day, the rate of interest equal to LlBOR then in effect for delivery for a one (1) month period.
 
1.2   "LIBOR" means the rate of interest per annum determined by Bank based on the rate for United States dollar deposits for delivery of funds for one (1) month as reported on Reuters Screen LIBOR01 page (or any successor page) at approximately 11:00 a.m., London time, or, for any day not a London Business Day, the immediately preceding London Business Day (or if not so reported, then as determined by Bank from another recognized source or interbank quotation).
 
1.3   "London Business Day" means any day that is a day for trading by and between banks in dollar deposits in the London interbank market.
 
2.     INTEREST:
 
2.1   Interest .  The outstanding principal balance of this Note shall bear interest (computed on the basis of a 360-   day year, actual days elapsed, unless such calculation would result in a usurious rate, in which case interest shall be computed on the basis of a 365/366-day year, as the case may be, actual days elapsed) at the lesser of (a) a fluctuating rate per annum determined by Bank to be two percent (2.00000%)   above Daily One Month LIBOR in effect from time to time, or (b) the Maximum Rate. Bank is hereby authorized to note the date and interest rate applicable to this Note  and any payments made thereon on Bank's books and records (either manually or  by electronic entry) and/or on any schedule attached to this Note, which notations shall be prima facie evidence of the accuracy of the information noted.
 
2.2   Taxes   and   Regulatory   Costs .  Borrower shall pay to Bank immediately upon demand, in addition to any other amounts due or to become due hereunder, any and all (a) withholdings, interest equalization taxes, stamp taxes or other taxes (except income and franchise taxes) imposed by any domestic or foreign governmental authority and related in any manner to LIBOR, and (b) costs, expenses and liabilities arising from or in connection with reserve percentages prescribed by the Board of Governors of the Federal Reserve System (or any successor) for "Eurocurrency Liabilities" (as defined in Regulation D of the Federal Reserve Board, as amended), assessment rates imposed by the Federal Deposit Insurance Corporation, or similar requirements or costs imposed by any domestic or foreign governmental authority or resulting from compliance by Bank with any request or directive (whether or not having the force of law) from any central bank or other governmental authority and related in any manner to LIBOR. In determining which of the foregoing are· attributable to any LIBOR option available to Borrower hereunder, any reasonable allocation made by Bank among its operations shall be conclusive and binding upon Borrower.
 
 
PROMNOTE.TX (03/14)
1428960  /  Page 1
GRAPHIC  
Revolving Line of Credit Note
 
0007204, #7829235617
 
 
 
 
 
 
2.3   Payment of Interest .   Interest accrued on this  Note  shall  be  payable  on  the   3rd   day  of  each   month, commencing October   3,   2014.
 
2.4   Default   Interest .  From and after the maturity date of this Note, or such earlier  date as all principal owing hereunder becomes due and payable by acceleration or otherwise, or at Bank's option upon the occurrence, and during the continuance of an Event of Default, the outstanding principal balance of this Note shall bear interest at an increased rate per annum (computed on the basis of a 360-day year, actual days elapsed, unless such calculation would result in a usurious rate, in which case interest shall be computed on the basis of a 365/366-day year, as the case may be, actual days elapsed) equal to 4% above the rate of interest from time to time applicable to this Note, but in no event at a rate greater than the Maximum Rate.
 
3.     BORROWING AND REPAYMENT:
 
3.1   Borrowing   and   Repayment .  Borrower may from time to time during the term of this Note borrow, partially or wholly repay its outstanding borrowings, and reborrow, subject to all of the limitations, terms and conditions of this Note and of any document executed in connection with or governing this Note; provided  however, that the total outstanding borrowings under this Note shall not at any time exceed the principal amount stated above. The unpaid principal balance of this obligation at any time shall be the total amounts advanced hereunder by the holder hereof less the amount of principal payments made hereon by or for Borrower, which balance may be endorsed hereon from time to time by the holder. The outstanding principal balance of this Note shall be due and payable in full on August   31,   2017.
 
3.2   Advances .  Advances  hereunder, to the total amount of the principal sum available hereunder, may be made by the holder at the oral or written request of (a) William F. Donovan, any one acting alone, who are authorized to request advances and direct the disposition of any advances until written notice of the revocation of such authority is received by the holder at the office designated above, or (b) any person, with respect to advances deposited to the credit of any deposit account of Borrower, which advances, when so deposited, shall be conclusively presumed to have been made to or for the benefit of Borrower regardless of the fact that persons other than those authorized to request advances may have authority to draw against such account. The holder shall have no obligation to determine whether any person requesting an advance is or has been authorized by Borrower.
 
3.3   Application   of   Payments .  Each payment made on this Note shall be credited first, to any interest then due and second, to the outstanding principal balance hereof.
 
4.     LATE CHARGE:
 
If any payment required hereunder or under any contract, instrument and other document required hereby, or at any time hereafter delivered to Bank in connection herewith, is not paid within fifteen (15) days following the date it becomes due, Borrower shall pay a late charge equal to five percent (5%) of the amount of such unpaid payment.

5.     EVENTS OF DEFAULT:
 
This Note is made pursuant to and is subject to the terms and conditions of that certain Credit Agreement between Borrower and Bank dated as of September   3,   2014,   as amended from time to time (the "Credit Agreement"). Any default in the payment or performance of any obligation under this Note, or any defined event of default under the Credit Agreement, shall constitute an "Event of Default" under this Note.
 
6.     MISCELLANEOUS:
 
6.1    Remedies .  Upon the occurrence of any Event of Default, the holder of this Note, at the holder's option, may declare all sums of principal and accrued and unpaid interest outstanding hereunder to be immediately due and payable without presentment, demand, or any notices of any kind, including without limitation notice of nonperformance, notice of protest, protest, notice of dishonor, notice of intention to accelerate or notice of acceleration, all of which are expressly waived by Borrower, and the obligation, if any, of the holder to extend any further credit hereunder shall immediately cease and terminate. Borrower shall pay to the holder immediately upon demand the full amount of all payments, advances, charges, costs and expenses, including reasonable attorneys' fees (to include outside counsel fees and all allocated costs of the holder's in-house counsel to the extent permissible), expended or incurred by the holder in connection with the enforcement of the holder's rights and/or the

 
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collection of any amounts which become due to the holder under this Note, and the prosecution or defense of any action in any way related to this Note, including without limitation, any action for declaratory relief, whether incurred at the trial or appellate level, in an arbitration proceeding or otherwise, and including any of the foregoing incurred in connection with any bankruptcy proceeding (including without limitation, any adversary proceeding, contested matter or motion brought by Bank or any other person) relating to Borrower or any other person or entity.

6.2   Obligations   Joint   and   Several .  Should more than one person or entity sign this Note as a Borrower, the obligations of each such Borrower shall be joint and several.
 
6.3   Governing   Law .  This Note shall be governed by and construed in accordance with the laws of the State of Texas.
 
6.4   Savings   Clause .  It is the intention of the parties to comply strictly with applicable usury laws. Accordingly, notwithstanding any provision to the contrary in this Note, or in any contract, instrument or document evidencing or securing the payment hereof or otherwise relating hereto (each, a "Related Document"}, in no event shall this Note or any Related Document require the payment or permit the payment, taking, reserving, receiving, collection or charging of any sums constituting interest under applicable laws that exceed the maximum amount permitted by such laws, as the same may be amended or modified from time to time (the "Maximum Rate"). If any such excess interest is called for, contracted for, charged, taken, reserved or received in connection with this Note or any Related Document, or in any communication by Bank or any other person to Borrower or any other person, or in the event that all or part of the principal or interest hereof or thereof shall be prepaid or accelerated, so that under any of such circumstances or under any other circumstance whatsoever the amount of interest contracted for, charged, taken, reserved or received on the amount of principal actually outstanding from time to time under this Note shall exceed the Maximum Rate, then in such event it is agreed that: (a) the provisions of this paragraph shall govern and control; (b) neither Borrower nor any other person or entity now or hereafter liable for the payment of this Note or any Related Document shall be obligated to pay the amount of such interest to the extent it is in excess of the Maximum Rate; (c) any such excess interest which is or has been received by Bank, notwithstanding this paragraph, shall be credited against the then unpaid principal balance hereof or thereof, or if this Note or any Related Document has been or would be paid in full by such credit, refunded to Borrower; and (d) the provisions of this Note and each Related Document, and any other communication to Borrower, shall immediately be deemed reformed and such excess interest reduced, without the necessity of executing any other document, to the Maximum Rate. The right to accelerate the maturity of this Note or any Related Document does not include the right to accelerate, collect or charge unearned interest, but only such interest that has otherwise accrued as of the date of acceleration. Without limiting the foregoing, all calculations of the rate of interest contracted for, charged, taken, reserved or received in connection with this Note and any Related Document which are made for the purpose of determining whether such rate exceeds the Maximum Rate shall be made to the extent permitted by applicable laws by amortizing, prorating, allocating and spreading during the period of the full term of this Note or such Related Document, including all prior and subsequent renewals and extensions hereof or thereof, all interest at any time contracted for, charged, taken, reserved or received. The terms of this paragraph shall be deemed to be incorporated into each Related Document.
 
To the extent that either Chapter 303 or 306, or both, of the Texas Finance Code apply in determining the Maximum Rate, Bank hereby elects to determine the applicable rate ceiling by using the weekly ceiling from time to time in effect, subject to Bank's right subsequently to change such method in accordance with applicable law, as the same may be amended or modified from time to time.
 
6.5   Right   of   Setoff;   Deposit   Accounts .  Upon and after the occurrence of an Event of Default, (a) Borrower hereby authorizes Bank, at any time and from time to time, without notice, which is hereby expressly waived by Borrower, and whether or not Bank shall have declared this Note to be due and payable in accordance with the terms hereof, to set off against, and to appropriate and apply to the payment of, Borrower's obligations and liabilities under this Note (whether matured or unmatured, fixed or contingent, liquidated or unliquidated, any and all amounts owing by Bank to Borrower (whether payable in U.S. dollars or any other currency, whether matured or unmatured, and in the case of deposits, whether general or special (except trust and escrow accounts), time or demand and however evidenced), and (b) pending any such action, to the extent necessary, to hold such amounts as collateral to secure such obligations and liabilities and to return as unpaid for insufficient funds any and all checks and other items drawn against any deposits so held as Bank, in its sole discretion, may elect. Borrower hereby grants to Bank a security interest in all deposits and accounts maintained with Bank and with any other financial institution to secure the payment of all obligations and liabilities of Borrower to Bank under this Note.

 
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6.6   Business   Purpose .  Borrower represents and warrants that all loans evidenced by this Note are for a business, commercial, investment, agricultural or other similar purpose and not primarily for a personal, family or household use.
 
6.7   Certain   Tri-Party   Accounts .  Borrower and Bank agree that Chapter 346 of the Texas Finance Code (which regulates certain revolving credit loan accounts and revolving tri-party accounts) shall not apply to any revolving loan accounts created under this Note or maintained in connection herewith.
 
NOTICE: THIS NOTE AND ALL OTHER DOCUMENTS RELATING TO THE INDEBTEDNESS EVIDENCED HEREBY CONSTITUTE A WRITTEN LOAN AGREEMENT WHICH REPRESENTS THE FINAL AGREEMENT BETWEEN THE PARTIES AND MAY NOT BE CONTRADICTED BY EVIDENCE OF PRIOR, CONTEMPORANEOUS OR SUBSEQUENT ORAL AGREEMENTS OF THE PARTIES. THERE ARE NO UNWRITTEN ORAL AGREEMENTS BETWEEN THE PARTIES RELATING TO THIS NOTE AND THE INDEBTEDNESS EVIDENCED HEREBY.
 
IN WITNESS WHEREOF, the undersigned has executed this Note as of the date first written above.
 
Spine Pain Management Inc.   
              
By: /s/ William F. Donovan, President
William F. Donovan, President
 
 
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CREDIT AGREEMENT
 
THIS CREDIT AGREEMENT (this "Agreement") is entered into as of September 3, 2014, by and between SPINE PAIN MANAGEMENT, INC., a Delaware corporation ("Borrower"), and WELLS FARGO BANK, NATIONAL ASSOCIATION ("Bank").
 
RECITALS
 
Borrower has requested that Bank extend or continue credit to Borrower as described below, and Bank has agreed to provide such credit to Borrower on the terms and conditions contained herein.

NOW, THEREFORE, for valuable consideration, the receipt and sufficiency of which are hereby acknowledged, Bank and Borrower hereby agree as follows:
 
ARTICLE   I
CREDIT   TERMS
 

SECTION 1.1     LINE OF CREDIT.
 
(a)   Line   of   Credit .  Subject to the terms and conditions of this Agreement, Bank hereby agrees to make advances to Borrower from time to time up to and including August 31, 2017, not to exceed at any time the aggregate principal amount of Two Million and 00/100 Dollars ($2,000,000.00) ("Line of Credit"), the proceeds of which shall be used to provide the- company with short-term working capital.   Borrower's obligation to repay advances under the Line of Credit shall be evidenced by a Revolving Line of Credit Note dated as of September 3, 2014 ("Line of Credit Note"), all terms of which are incorporated herein by this reference.
 
(b)   Borrowing   and   Repayment .  Borrower may from time to time during the term of the Line of Credit borrow, partially or wholly repay its outstanding borrowings, and reborrow, subject to all of the limitations, terms and conditions contained herein or in the Line of Credit Note; provided however, that the total outstanding borrowings under the Line of Credit shall not at any time exceed the maximum principal amount available thereunder, as set forth above.
 
SECTION 1.2     INTEREST/FEES.
 
(a)   Interest .  The outstanding principal balance of the Line of Credit shall bear interest at the rate of interest set forth in the Line of Credit Note.
 
(b)   Computation   and   Payment .  Interest shall be computed on the basis of a 360-day year, actual days elapsed, unless such calculation would result in a usurious rate, in which case interest shall be computed on the basis of a 365/366-day year, as the case may be, actual days elapsed. Interest shall be payable at the times and place set forth in each promissory note or other instrument or document required hereby.
 
SECTION 1.3     COLLATERAL.
 
As security for all indebtedness and other obligations of Borrower to Bank subject hereto, Borrower shall cause Peter L. Dalrymple and Marlene C. Dalrymple to grant to Bank a first lien security interest in account no. (s): XXXXXXXX maintained at the Wells Fargo Advisors, LLC.
 
All of the foregoing shall be evidenced by and subject to the terms of such security agreements,  financing statements, deeds or mortgages, and other documents as Bank shall reasonably require, all in form and substance satisfactory to Bank. Borrower shall pay to Bank immediately upon demand the full amount of all charges, costs and expenses (to include fees paid to third parties and all allocated costs of Bank personnel), expended or incurred by
 
 
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GRAPHIC
   
 
 
 
 
 
Bank in connection with any of the foregoing security, including without limitation, filing and recording fees and costs of appraisals, audits and title insurance.
 
SECTION 1.4     GUARANTIES.  The payment and performance of all indebtedness  and  other  obligations  of Borrower to Bank subject hereto shall be guaranteed jointly and severally by Peter L.   Dalrymple, as evidenced by and subject to the terms of guaranties in form and substance satisfactory to Bank.

ARTICLE   II
REPRESENTATIONS   AND   WARRANTIES
 
Borrower makes the following representations and warranties to Bank, which representations and warranties shall survive the execution of this Agreement and shall continue in full force and effect until the full and final payment, and satisfaction and discharge, of all obligations of Borrower to Bank subject to this Agreement.
 
SECTION 2.1     LEGAL STATUS.  Spine Pain Management, Inc. is a corporation, duly organized and existing and in good standing under the laws of Delaware, and is qualified or licensed to do business (and is in good standing as a foreign corporation, if applicable) in all jurisdictions in which such qualification or licensing is required or in which the failure to so qualify or to be so licensed could have a material adverse effect on Borrower.
 
SECTION 2.2     AUTHORIZATION AND VALIDITY.  This Agreement and each  promissory  note,  contract, instrument and other document required hereby or at any time hereafter delivered to Bank in connection herewith (collectively, the "Loan Documents") have been duly authorized, and upon their execution and delivery in accordance with the provisions hereof will constitute legal, valid and binding agreements and obligations of Borrower or the party which executes the same, enforceable in accordance with their respective terms.
 
SECTION 2.3     NO VIOLATION.  The execution, delivery and performance by Borrower of each of the Loan Documents do not violate any provision of any law or regulation, or contravene any provision of the Articles of Incorporation or By-Laws of Borrower, or result in any breach of or default under any contract, obligation, indenture or other instrument to which Borrower is a party or by which Borrower may be bound.

SECTION 2.4     LITIGATION.  There are no pending, or to the best of Borrower's knowledge threatened, actions, claims, investigations, suits or proceedings  by or before any governmental authority, arbitrator,  court or administrative agency which could have a material adverse effect on the financial condition or operation of Borrower other than those disclosed by Borrower to Bank in writing prior to the date hereof.

SECTION 2.5     CORRECTNESS OF FINANCIAL STATEMENT.  All annual financial statements of Borrower, and all. interim financial statements prepared since the date of such annual financial statements, which have been delivered by Borrower to Bank prior to the date hereof, (a) are true, complete and correct and present fairly the financial condition of Borrower, and (b) disclose all liabilities of Borrower, whether liquidated or unliquidated, fixed or contingent. Since the dates of such financial statements there has been no material adverse change in the financial condition of Borrower, nor has Borrower mortgaged, pledged, granted a security interest in or otherwise encumbered any of its assets or properties except in favor of Bank or as otherwise permitted by Bank in writing.

SECTION 2.6     INCOME TAX RETURNS.  Borrower has no knowledge of any pending  assessments  or adjustments of its income tax payable with respect to any year.

SECTION 2.7     NO SUBORDINATION.  There is no agreement, indenture,  contract  or  instrument  to  which Borrower is a party or by which Borrower may be bound that requires the subordination in right of payment of any of Borrower's obligations subject to this Agreement to any other obligation of Borrower.
 
SECTION 2.8     PERMITS, FRANCHISES.  Borrower possesses, and will hereafter possess, all permits, consents, approvals, franchises and licenses required and rights to all trademarks, trade names, patents, and fictitious names, if any, necessary to enable it to conduct the business in which it is now engaged in compliance with applicable law.
 
SECTION 2.9     ERISA.  Borrower is in compliance in all material respects with all applicable provisions of the Employee Retirement Income Security Act of 1974, as amended or recodified from time to time ("ERISA"); Borrower has not violated any provision of any defined employee pension benefit plan (as defined in ERISA) maintained or


 
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contributed to by Borrower (each, a "Plan"); no Reportable Event as defined in ERISA has occurred and is continuing with respect to any Plan initiated by Borrower; Borrower has met its minimum funding requirements under ERISA with respect to each Plan; and each Plan will be able to fulfill its benefit obligations as they come due in accordance with the Plan documents and under generally accepted accounting principles.
 
SECTION 2.10   OTHER OBLIGATIONS.  Borrower is not in default on any obligation for borrowed money, any purchase money obligation or any other material lease, commitment, contract, instrument or obligation.
 
SECTION 2.11   ENVIRONMENTAL MATTERS.  Except as disclosed by Borrower to Bank in writing prior to the date hereof, Borrower is in compliance in all material respects with all applicable federal or state environmental, hazardous waste, health and safety statutes, and any rules or regulations adopted pursuant thereto, which govern or affect any of Borrower's operations and/or properties, including without limitation, the Comprehensive Environmental Response, Compensation and Liability Act of 1980, the Superfund Amendments and Reauthorization Act of 1986, the Federal Resource Conservation and Recovery Act of 1976, and the Federal Toxic Substances Control Act, as any of the same may be amended, modified or supplemented from time to time.  None of the operations of Borrower is the subject of any federal or state investigation evaluating whether any remedial  action involving a material expenditure is needed to respond to a release of any toxic or hazardous waste or substance into the environment. Borrower has no material contingent liability in connection with any release of any toxic or hazardous waste or substance into the environment.
 
ARTICLE   III
CONDITIONS
 
SECTION 3.1     CONDITIONS OF INITIAL EXTENSION OF CREDIT.  The obligation of Bank to extend any credit contemplated by this Agreement is subject to the fulfillment to Bank's satisfaction of all of the following conditions:
 
(a)   Approval   of   Bank   Counsel .  All legal matters incidental to the extension of credit by Bank shall be satisfactory to Bank's counsel.
 
(b)   Documentation .  Bank shall have received, in form and substance satisfactory to Bank, each of the following, duly executed:
 
(1)  
This Agreement.
(2)  
Each promissory note or other instrument or document required hereby.
(3)  
Security Agreement.
(4)  
Securities Account Control Agreement.
(5)  
Continuing Guaranty.
(6)  
Reg. U Statement of Purpose ..
(7)  
Corporate Resolution.
(8)  
Certificate of Incumbency.
(9)  
Name Affidavit.
(10)  
Such other documents as Bank may require under any other Section of this Agreement.
 
(c)   Financial Condition .  There shall have been no material adverse change, as determined by  Bank, in the financial condition or business of Borrower or any guarantor hereunder, nor any material decline, as determined by Bank, in the market value of any collateral required hereunder or a substantial or material portion of the assets of Borrower or any such guarantor.
 
(d)   Insurance .  Borrower shall have delivered to Bank evidence of insurance coverage in form, substance, amounts, covering risks and issued by companies satisfactory to Bank, and where required by Bank, with lender loss payable endorsements in favor of Bank.
 
SECTION 3.2     CONDITIONS OF EACH EXTENSION OF CREDIT. The obligation  of  Bank  to  make  each extension of credit requested by Borrower hereunder shall be subject to the fulfillment to Bank's satisfaction of each of the following conditions:
 
(a)   Compliance .  The representations and warranties contained herein and in each of the other Loan Documents shall be true on and as of the date of the signing of this Agreement and on the date of each extension of credit by
 
 
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Bank pursuant hereto, with the same effect as though such representations and warranties had been made on and as of each such date, and on each such date, no Event of Default as defined herein, and no condition, event or act which with the giving of notice or the passage of time or both would constitute such an Event of Default, shall have occurred and be continuing or shall exist.
 
(b)   Documentation .  Bank shall have received all additional documents which may be required in connection with such extension of credit.
 
ARTICLE   IV
 
AFFIRMATIVE   COVENANTS
 
Borrower covenants that so long as Bank remains committed to extend credit to Borrower pursuant hereto, or any liabilities (whether direct or contingent, liquidated or unliquidated) of Borrower to Bank under any of the Loan Documents remain outstanding, and until payment in full of all obligations of Borrower subject hereto, Borrower shall, unless Bank otherwise consents in writing:
 
SECTION 4.1      PUNCTUAL PAYMENTS.  Punctually pay all principal, interest, fees or other liabilities due under any of the Loan Documents at the times and place and in the manner specified therein, and immediately upon demand by Bank, the amount by which the outstanding principal balance of any credit subject hereto at any time exceeds any limitation on borrowings applicable thereto.
 
SECTION 4.2     ACCOUNTING RECORDS.  Maintain adequate books and records in accordance with Generally Accepted Accounting Principles, consistently applied, and permit any representative of Bank, at any reasonable time, to inspect, audit and examine such books and records, to make copies of the same, and to inspect the properties of Borrower.
 
SECTION 4.3     BUSINESS CONTINUITY.  Conduct its business in substantially the same manner and locations as such business is now and has previously been conducted.
 
SECTION 4.4     FINANCIAL STATEMENTS.  Provide to Bank, in form and detail satisfactory to Bank, due no later than each May 15th,   company prepared financial statements reflecting its operations during such period, including, without limitation, a balance sheet, profit and loss statement, statement of cash flows, and disclosure of contingent liabilities, with supporting schedules; and in reasonable detail, prepared  on a basis consistent with that of the preceding year.  Such statements shall be certified as to their correctness by a principal financial officer of Borrower.
 
SECTION 4.5     TAX RETURNS.  Provide to Bank, in form and detail satisfactory to Bank, within 30 days of filing or by November 15th   of each year, whichever is earlier, complete copies of Borrower's federal tax returns, together with all schedules thereto, including, without limitation all K-1 statements, each of which shall be signed and certified by Borrower to be true and complete copies of such returns.

SECTION 4.6     OTHER FINANCIAL INFORMATION.  Provide to Bank, in form and detail satisfactory to Bank, promptly such other information regarding the operation, business affairs, and financial condition of Borrower which Bank may reasonably request.
 
SECTION 4.7     NOTICE OF DEFAULT AND OTHER NOTICES.
 
(a)   Notice of Default.  Furnish to Bank immediately upon becoming aware of the existence of any condition or event which constitutes an Event of Default (as defined in the Loan Documents) or any event which, upon the giving of notice or lapse of time or both, may become an Event of Default, written notice specifying the nature and period of existence thereof and the action which Borrower is taking or proposes to take with respect thereto.
 
(b)   Other Notices.  Promptly notify Bank in writing of (i) any material adverse change in its financial condition or its business; (ii) any default under any agreement, contract or other instrument to which it is a party or by which any of its properties are bound, or any acceleration of the maturity of any indebtedness owing by Borrower; (iii) any material adverse claim against or affecting Borrower or any part of its properties; (iv) the commencement of, and any material determination  in, any litigation with any third party or any proceeding  before any  governmental  agency  or unit
 
 
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affecting Borrower; (v) at least 30 days prior thereto, any change in Borrower's name or address as shown herein, and/or any change in Borrower's structure; or (vi) any termination or cancellation of any insurance policy which Borrower is required to maintain, or any uninsured or partially uninsured loss through liability or property damage, or through fire, theft or any other cause affecting Borrower's property in excess of an aggregate of $25,000.00.
 
SECTION 4.8     COMPLIANCE.  Preserve and maintain all licenses, permits,  governmental  approvals,  rights, privileges and franchises necessary for the conduct of its business; and comply with the provisions of all documents pursuant to which Borrower is organized and/or which govern Borrower's continued existence and with the requirements of all laws, rules, regulations and orders of any governmental authority applicable to Borrower and/or its business.
 
SECTION 4.9     INSURANCE.  Maintain and keep in force, for each  business in which Borrower is engaged, insurance of the types and in amounts customarily carried in similar lines of business, including but not limited to fire, extended coverage, public liability, flood, and, if required, seismic property damage and workers' compensation, with all such insurance carried with companies and in amounts satisfactory to Bank, and deliver to Bank from time to time at Bank's request schedules setting forth all insurance then in effect, together with a lender's loss payee endorsement for all such insurance naming Bank as a lender loss payee.
 
SECTION 4.10   TAXES AND OTHER LIABILITIES.  Pay and discharge when due any and all indebtedness, obligations, assessments and taxes, both real or personal, including without limitation federal and state income taxes and state and local property taxes and assessments, except (a) such as Borrower may in good faith contest or as to which a bona fide dispute may arise, and (b) for which Borrower has made provision, to Bank's satisfaction, for eventual payment thereof in the event Borrower is obligated to make such payment.

SECTION 4.11   DEPOSIT RELATIONSHIP.  Maintain its primary depository account with Bank.
 
SECTION 4.12   ADDITIONAL THIRD PARTY FEES.  Pay any and all third party fees incurred by Bank  in connection with the credit facilities hereunder.
 
ARTICLE   V
 
NEGATIVE   COVENANTS
 
Borrower further covenants that so long as Bank remains committed to extend credit to Borrower pursuant hereto, or any liabilities (whether direct or contingent, liquidated or unliquidated) of Borrower to Bank under any of the Loan Documents remain outstanding, and until payment in full of all obligations of Borrower subject hereto, Borrower will not without Bank's prior written consent:
 
SECTION 5.1     USE OF FUNDS.  Use any of the proceeds of any credit extended hereunder except for the purposes stated in Article I hereof.
 
SECTION 5.2     OTHER INDEBTEDNESS.  Create, incur, assume or permit to exist any indebtedness or liabilities resulting from borrowings, loans or advances, whether secured or unsecured, matured or unmatured, liquidated or unliquidated, joint or several, direct or indirect, except (a) the  liabilities of Borrower to Bank, and (b) any other liabilities of Borrower existing as of, and disclosed to Bank prior to, the date hereof, (c) purchase money indebtedness (including capitalized leases) for the acquisition of fixed assets, provided that total purchase money indebtedness does not exceed $100,000.00 at any time outstanding; and (d) additional indebtedness or liabilities in an aggregate amount not to exceed $100,000.00 at any time.
 
SECTION 5.3     GUARANTIES.  Guarantee or become liable in any way as  surety,  endorser  (other  than  as endorser of negotiable instruments for deposit or collection in the ordinary course of business), accommodation endorser or otherwise for, nor  pledge or hypothecate any assets of Borrower as security for, any liabilities or obligations of any other person or entity, except any of the foregoing in favor of Bank.
 
SECTION 5.4     PLEDGE OF ASSETS.  Mortgage, pledge, grant or permit to exist a security interest in, or lien upon, all or any portion of Borrower's assets now owned or hereafter acquired, except (a) any of the foregoing in favor of Bank, (b) any of the foregoing which is existing as of, and disclosed to Bank in writing prior to, the date
 
 
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hereof, (c) security interests or liens which secure purchase money indebtedness otherwise allowed under this Agreement, and (d) any lien securing obligations incurred after the date hereof  in an amount not to exceed $100,000.00 in the aggregate at any time.
   
SECTION 5.5     GOVERNMENT INTERVENTION.  Permit the assertion or making of any seizure, vesting or intervention by or under authority of any governmental entity, as a result of which the management of Borrower or any guarantor is displaced of its authority in the conduct of its respective business or such business is curtailed or materially impaired.
 
ARTICLE   VI
 
EVENTS   OF   DEFAULT
 
SECTION 6.1     The occurrence of any of the following shall constitute an "Event of Default" under this Agreement:
 
(a)   Borrower shall fail to pay when due any principal, interest, fees or other amounts payable under any of the Loan Documents.
 
(b)   Any financial statement or certificate furnished to Bank in connection with, or any representation or warranty made by Borrower or any other party under this Note or any other Loan Document shall prove to be incorrect, false or misleading in any material respect when furnished or made.
 
(c)   Any default in the performance of or compliance with any obligation, agreement or other provision contained herein or in any other Loan Document (other than those specifically described as an "Event of Default" in this Note or in collateral value requirements under any Loan Document), and with respect to any such default that by its nature can be cured, such default shall continue for a period of twenty (20) days from its occurrence; provided that the foregoing cure period shall only be available once during each 12 month period for each such obligation, agreement or provision.
 
(d)   Any default in the payment or performance of any obligation, or any defined event of default, under the terms of any contract, instrument or document (other than any of the Loan Documents) pursuant to which Borrower, any guarantor hereunder or any general partner or joint venturer in Borrower if a partnership or joint venture (with each such guarantor, general partner, and/or joint venturer referred to herein as a "Third Party Obligor") has incurred any debt or other liability to any person or entity, including Bank.
 
(e)   Borrower or any Third Party Obligor shall become insolvent, or shall suffer or consent to or apply for the appointment of a receiver, trustee, custodian or liquidator of itself or any of its property, or shall generally fail to pay its debts as they become due, or shall make a general assignment for the benefit of creditors; Borrower or any Third Party Obligor shall file a voluntary petition in bankruptcy, or seeking reorganization, in order to effect a plan or other arrangement with creditors or any other relief under the Bankruptcy Reform Act, Title 11 of the United States Code, as amended or recodified from time to time ("Bankruptcy Code"), or under any state or federal law granting relief to debtors, whether now or hereafter in effect; or Borrower or any Third Party Obligor shall file an answer admitting the jurisdiction of the court and the material allegations of any involuntary petition; or Borrower or any Third Party Obligor shall be adjudicated a bankrupt, or an order for relief shall be entered against Borrower or any Third Party Obligor by any court of competent jurisdiction under the Bankruptcy Code or any other applicable state or federal law relating to bankruptcy, reorganization or other relief for debtors.
 
(f)   The filing of a notice of judgment lien against Borrower or any Third Party Obligor; or the recording of any abstract of judgment against Borrower or any Third Party Obligor in any county in which Borrower or such Third Party Obligor has an interest in real property; or the service of a notice of levy and/or of a writ of attachment or execution, or other like process, against the assets of Borrower or any Third Party Obligor; or the entry of a judgment against Borrower or any Third Party Obligor; or any involuntary petition or proceeding pursuant to the Bankruptcy Code or any other applicable state or federal law relating to bankruptcy, reorganization or other relief for debtors is filed or commenced against Borrower or any Third Party Obligor.
 
(g)   There shall exist or occur any event or condition that Bank in good faith believes impairs, or is substantially likely to impair, the prospect of payment or performance by Borrower, any Third Party Obligor, or the general partner of either if such entity is a partnership, of its obligations under any of the Loan Documents.
 
 
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(h)   The death or incapacity of Borrower or any Third Party Obligor if an individual. The dissolution or liquidation of Borrower or any Third Party Obligor if a corporation, partnership, joint venture or other type of entity; or Borrower or any such Third Party Obligor, or any of its directors, stockholders or members, shall take action seeking to effect the dissolution or liquidation of Borrower or such Third Party Obligor.
 
(i)   Any change in control of Borrower or any entity or combination of entities that directly or indirectly control Borrower, with "control" defined as ownership of an aggregate of twenty five percent (25%) or more of the common stock, members' equity or other ownership interest (other than a limited partnership interest).
 
(j)   Any sale, lease, transfer or other disposition (including, without limitation, transfers to a trust or other entity for estate planning purposes), except in the ordinary course of its business, of all or a substantial or material portion of the assets of Borrower or any Third Party Obligor.
 
SECTION 6.2     REMEDIES.  Upon the occurrence  of any  Event of Default:  (a) all principal and accrued  and unpaid interest outstanding under each of the Loan Documents, any term thereof to the contrary notwithstanding, shall at Bank's option and without notice become immediately due and payable without presentment, demand, or any notices of any kind, including without limitation notice of nonperformance, notice of protest, protest, notice  of dishonor, notice of intention to accelerate or notice of acceleration, all of which are hereby expressly waived by Borrower; (b) the obligation, if any, of Bank to extend any further credit under any of the Loan Documents shall immediately cease and terminate; and (c) Bank shall have all rights, powers and remedies available under each of the Loan Documents, or accorded by law, including without limitation the right to resort to any or all security for any credit subject hereto and to exercise any or all of the rights of a beneficiary or secured party pursuant to applicable law. All rights, powers and remedies of Bank may be exercised at any time by Bank and from time to time after the occurrence of an Event of Default, are cumulative and not exclusive, and shall be in addition to any other rights, powers or remedies provided by law or equity.
 
ARTICLE   VII
MISCELLANEOUS
 
SECTION 7.1     NO WAIVER. No delay, failure or discontinuance of Bank in exercising any right, power or remedy under any of the Loan Documents shall affect or operate as a waiver of such right, power or remedy; nor shall any single or partial exercise of any such right, power or remedy preclude, waive or otherwise affect any other or further exercise thereof or the exercise of any other right, power or remedy. Any waiver, permit, consent or approval of any kind by Bank of any breach of or default under any of the Loan Documents must be in writing and shall be effective only to the extent set forth in such writing.

SECTION 7.2     NOTICES.  All notices, requests and demands which any party is required or may desire to give to any other party under any provision of this Agreement must be in writing delivered to each party at the following address:
 
BORROWER: Spine Pain Management, Inc.
 
5225 Katy Fwy. Suite 600
 
Houston, TX 77007
 
BANK: Wells Fargo Bank, National Association
 
Private Banking - Houston
 
1 000 Louisiana St. 2nd Floor
Houston, TX 77002
 
or to such other address as any party may designate by written notice to all other parties. Each such notice, request and demand shall be deemed given or made as follows: (a) if sent by hand delivery, upon delivery; (b) if sent by mail, upon the earlier of the date of receipt or three (3) days after deposit in the U.S. mail, first class and postage prepaid; and (c) if sent by telecopy, upon receipt.
 
SECTION 7.3     COSTS, EXPENSES AND ATTORNEYS' FEES.  Borrower shall pay to Bank immediately upon demand the full amount of all payments, advances, charges, costs and expenses, including reasonable attorneys' fees (to include outside counsel fees and all allocated costs of Bank's in-house counsel to the extent permissible),
 
 
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Loan Documents, Bank's continued administration hereof and thereof, and the preparation of any amendments and waivers hereto and thereto, (b) the enforcement of Bank's rights and/or the collection of any amounts which become due to   Bank under any of the Loan Documents, and (c) the prosecution or defense of any action in any way related to   any of the Loan Documents, including without limitation, any action for declaratory relief, whether incurred at the trial or appellate level, in an arbitration proceeding or otherwise, and including any of the foregoing incurred in connection with any bankruptcy proceeding (including without limitation, any adversary proceeding, contested matter or motion brought by Bank or any other person) relating to Borrower or any other person or entity.
 
SECTION 7.4     SUCCESSORS, ASSIGNMENT.  This Agreement shall be binding upon and inure to the benefit of the heirs, executors, administrators, legal representatives, successors and assigns of the parties; provided however, that Borrower may not assign or transfer its interests or rights hereunder without Bank's prior written consent. Bank reserves the right to sell, assign, transfer, negotiate or grant participations in all or any part of, or any interest in, Bank's rights and benefits under each of the Loan Documents. In connection therewith, Bank may disclose all documents and  information which Bank now has or may hereafter acquire relating to any credit subject hereto, Borrower or its business, any guarantor hereunder or the business of such guarantor, or any collateral required hereunder.
 
SECTION 7.5      AMENDMENT.  This Agreement may be amended or modified only in writing signed by each party hereto.
 
SECTION 7.6     NO THIRD PARTY BENEFICIARIES.  This Agreement is made and entered into for the sole protection and benefit of the parties hereto and their respective permitted successors and assigns, and no other person or entity shall be a third party beneficiary of, or have any direct or indirect cause of action or claim in connection with, this Agreement or any other of the Loan Documents to   which it is not a party.
 
SECTION 7.7     TIME.  Time is of the essence of each and every provision of this Agreement and each other of the Loan Documents.
 
SECTION 7.8     SEVERABILITY OF PROVISIONS.  If any provision of this Agreement shall be prohibited by or invalid und.er applicable  law, such provision shall be ineffective only to   the extent of such prohibition or invalidity without invalidating the remainder of such provision or any remaining provisions of this Agreement.
 
SECTION 7.9     OBLIGATION JOINT AND SEVERAL.  The obligations of Borrower under this Agreement and the other Loan Documents to which borrower is a party shall be joint and several with all other obligors hereof and thereof.
 
SECTION 7.10   COUNTERPARTS.  This Agreement may be executed in any  number of counterparts,  each of which when executed and delivered shall be deemed to be an original, and all of which when taken together shall constitute one and the same Agreement.
 
SECTION 7.11   GOVERNING LAW.  This Agreement shall be governed by and construed in accordance with the laws of the State of Texas.
 
SECTION 7.12   SAVINGS CLAUSE.   It is the intention of the parties to   comply strictly with applicable usury laws. Accordingly, notwithstanding any provision to   the contrary in the Loan Documents, ·in no event shall any of the Loan Documents require the payment or permit the payment, taking, reserving, receiving, collection or charging of any sums constituting interest under applicable laws that exceed the maximum amount permitted by such laws, as the same may be amended or modified from time to   time (the "Maximum Rate").  If any such excess interest is called for, contracted for,  charged,  taken,  reserved or  received  in connection with  any of the  Loan Documents,  or in any communication by Bank or any other person to Borrower or any other person, or in the event that all or part of the principal or interest hereof or thereof shall be prepaid or accelerated, so that under any of such circumstances or under any other circumstance whatsoever the amount of interest contracted for, charged, taken, reserved or received on the amount of  principal actually  outstanding  from  time to   time  under the Loan Documents shall exceed the Maximum Rate, then in such event it is agreed that: (a) the provisions of this paragraph shall govern and control; (b) neither Borrower nor any other person or entity now or hereafter liable for the payment of any of the Loan Documents shall be obligated to   pay the amount of such interest to the extent it is in excess of the Maximum Rate; (c) any such excess interest which is or has been received by Bank, notwithstanding this paragraph, shall be credited against the then unpaid principal balance hereof or thereof, or if any of the Loan Documents has been or would be paid in full by
 
 
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such credit, refunded to Borrower; and (d) the prov1s1ons of each of the Loan Documents, and any other communication to Borrower, shall immediately be deemed reformed and such excess interest reduced, without the necessity of executing any other document, to the Maximum Rate. The right to accelerate the maturity of the Loan Documents does not include the right to accelerate, collect or charge unearned interest, but only such interest that has otherwise accrued as of the date of acceleration. Without limiting the foregoing, all calculations of the rate of interest contracted for, charged, taken, reserved or received in connection with any of the Loan Documents which are made for the purpose of determining whether such rate exceeds the Maximum Rate shall be made to the extent permitted by applicable laws by amortizing, prorating, allocating and spreading during the period of the full term of such Loan Documents, including all prior and subsequent renewals and extensions hereof or thereof, all interest at any time contracted for, charged, taken, reserved or received by Bank. The terms of this paragraph shall be deemed to be incorporated into each of the other Loan Documents.
 
To the extent that' either Chapter 303 or 306, or both, of the Texas Finance Code apply in determining the Maximum Rate, Bank hereby elects to determine the applicable rate ceiling by using the weekly ceiling from time to time in effect, subject to Bank's right subsequently to change such method in accordance with applicable law, as the same may be amended or modified from time to time.
 
SECTION 7.13    RIGHT OF SETOFF; DEPOSIT ACCOUNTS.  Upon and after the occurrence  of an  Event of Default, (a) Borrower hereby authorizes Bank, at any time and from time to time, without notice, which is hereby expressly waived by Borrower, and whether or not Bank shall have declared any credit subject hereto to be due and payable in accordance with the terms  hereof, to set off against, and to appropriate and apply to the payment of, Borrower's obligations and liabilities under the Loan Documents (whether matured or unmatured, fixed or contingent, liquidated or unliquidated), any and all amounts owing by Bank to Borrower (whether payable in U.S. dollars or any other currency, whether matured or unmatured, and in the case of deposits, whether general or special (except trust and escrow accounts), time or demand and however evidenced), and (b) pending any such action, to the extent necessary, to hold such amounts as collateral to secure such obligations and liabilities and to return as unpaid for insufficient funds any and all checks and other items drawn against any deposits so held as Bank, in its sole discretion, may elect. Borrower hereby grants to Bank a security interest in all deposits and accounts maintained with Bank and with any other financial institution to secure the payment of all obligations and liabilities of Borrower to Bank under the Loan Documents.
 
SECTION 7.14    BUSINESS PURPOSE.  Borrower represents and warrants that each credit subject hereto is for a business, commercial, investment, agricultural, or other similar purpose and not primarily for a personal, family or household use.
 
SECTION 7.15   ARBITRATION.
 
(a)   Arbitration .  The parties hereto agree, upon demand by any party, to submit to binding arbitration all claims, disputes and controversies between or among them (and their respective employees, officers, directors, attorneys, and other agents), whether in tort, contract or otherwise in any way arising out of or relating to (i) any credit subject hereto, or any of the Loan Documents, and their negotiation, execution, collateralization, administration, repayment, modification, extension, substitution, formation, inducement, enforcement, default or termination; or (ii) requests for additional credit. In the event of a court ordered arbitration, the party requesting arbitration shall be responsible for timely filing the demand for arbitration and paying the appropriate filing fee within 30 days of the abatement order or the time specified by the court. Failure to timely file the demand for arbitration as ordered by the court will result in that party's right to demand arbitration being automatically terminated.

(b)   Governing   Rules .  Any arbitration proceeding will (i) proceed in a location in Texas selected by the American. Arbitration Association ("AAA"); (ii) be governed by the Federal Arbitration Act (Title 9 of the United States Code), notwithstanding  any conflicting  choice of law provision in any of the documents  between the parties; and (iii) be conducted by the AAA, or such other administrator as the parties shall mutually agree upon, in accordance with the AAA's  commercial  dispute  resolution  procedures,  unless  the  claim  or  counterclaim  is  at  least  $1,000,000.00 exclusive  of  claimed  interest,  arbitration  fees  and  costs  in  which  case  the  arbitration  shall  be  conducted  in accordance  with  the AAA's  optional  procedures for  large, complex  commercial  disputes  (the commercial  dispute resolution procedures or the optional procedures for large, complex commercial disputes to be referred to herein, as applicable, as the "Rules").   If there is any inconsistency  between the terms hereof and the Rules, the terms and procedures set forth herein shall control.  Any party who fails or refuses to submit to arbitration following a demand by any other party shall bear all costs and expenses incurred by such other party in compelling arbitration of any
 
 
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dispute. Nothing contained herein shall be deemed to be a waiver by any party that is a bank of the protections afforded to it under 12 U.S.C. §91 or any similar applicable state law.
 
(c)   No   Waiver   of   Provisional   Remedies.   Self-Help   and   Foreclosure .  The arbitration requirement does not limit the right of any party to (i) foreclose against real or personal property collateral; (ii) exercise self-help remedies relating to collateral or proceeds of collateral such as setoff or repossession; or (iii) obtain provisional or ancillary remedies such as replevin, injunctive relief, attachment or the appointment of a receiver, before during or after the pendency of any arbitration proceeding. This exclusion does not constitute a waiver of the right or obligation of any party to submit any dispute to arbitration or reference hereunder, including those arising from the exercise of the actions detailed in sections (i), (ii) and (iii) of this paragraph.
 
(d)   Arbitrator   Qualifications   and   Powers .   Any arbitration proceeding in which the amount  in controversy is $5,000,000.00 or less will be decided by a single arbitrator selected according to the Rules, and who shall not render an award of greater than $5,000,000.00. Any dispute in which the amount in controversy exceeds $5,000,000.00 shall be decided by majority vote of a panel of three arbitrators; provided however, that all three arbitrators must actively participate in all hearings and deliberations. The arbitrator will be a neutral attorney licensed in the State of Texas with a minimum of ten years experience in the substantive law applicable to the subject matter of the dispute to be arbitrated. The arbitrator will determine whether or not an issue is arbitratable and will give effect to the statutes of limitation in determining any claim. In any arbitration proceeding the arbitrator will decide (by documents only or with a hearing at the arbitrator's discretion) any pre-hearing motions which are similar to motions to dismiss for failure to state a claim or motions for summary adjudication. The arbitrator shall resolve all disputes  in accordance with the substantive law of Texas and may grant any remedy or relief that a court of such state could order or grant within the scope hereof and such ancillary relief as is necessary to make effective any award. The arbitrator shall also have the power to award recovery of all costs and fees, to impose sanctions and to take such other action as the arbitrator deems necessary to the same extent a judge could pursuant to the Federal Rules of Civil Procedure, the Texas Rules of Civil Procedure or other applicable law. Judgment upon the award rendered by the arbitrator may be entered in any court having jurisdiction. The institution and maintenance of an action for judicial relief or pursuit of a provisional or ancillary remedy shall not constitute a waiver of the right of any party, including the plaintiff, to submit the controversy or claim to arbitration if any other party contests such action for judicial relief.
 
(e)   Discovery .   In any arbitration proceeding, discovery will be permitted in accordance with the Rules. All discovery shall be expressly limited to matters directly relevant to the dispute being arbitrated and must be completed no later than 20 days before the hearing date. Any requests for an extension of the discovery periods, or any discovery disputes, will be subject  to final determination by the arbitrator upon a showing that the request for discovery is essential for the party's presentation and that no alternative means for obtaining information is available.
 
(f)   Class   Proceedings   and   Consolidations .  No party hereto shall be entitled to join or consolidate disputes by or against others in any arbitration, except parties who have executed any Loan Document, or to include in any arbitration any dispute as a representative or member of a class, or to act in any arbitration in the interest of the general public or in a private attorney general capacity.
 
(g)   Payment   Of   Arbitration   Costs   And   Fees .  The arbitrator shall award all costs and expenses of the arbitration proceeding.
 
(h)   Miscellaneous .  To the maximum extent practicable, the AAA, the arbitrators and the parties shall take all action required to conclude any arbitration proceeding within 180 days of the filing of the dispute with the AAA. No arbitrator or other party to an arbitration proceeding may disclose the existence, content or results thereof, except for disclosures of information by a party required in the ordinary course of its business or by applicable law or regulation. If more than one agreement for arbitration by or between the parties potentially applies to a dispute, the arbitration provision most directly related to the Loan Documents or the subject matter of the dispute shall control. This arbitration provision shall survive termination, amendment or expiration of any of the Loan Documents or any relationship between the parties.
 
(i)   Small   Claims   Court .  Notwithstanding anything herein to the contrary, each party retains the right to pursue in Small Claims Court any dispute within that court's jurisdiction. Further, this arbitration provision shall apply only to disputes in which either party seeks to  recover an amount of money (excluding attorneys' fees and costs) that exceeds the jurisdictional limit of the Small Claims Court.
 
 
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NOTICE: THIS DOCUMENT AND ALL OTHER DOCUMENTS RELATING TO THE INDEBTEDNESS CONSTITUTE A WRITTEN LOAN AGREEMENT WHICH REPRESENTS THE FINAL AGREEMENT BETWEEN THE PARTIES AND MAY NOT BE CONTRADICTED BY EVIDENCE OF PRIOR, CONTEMPORANEOUS OR SUBSEQUENT ORAL AGREEMENTS OF THE PARTIES. THERE ARE NO UNWRITTEN ORAL AGREEMENTS BETWEEN THE PARTIES RELATING TO THE INDEBTEDNESS.
 
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed as of the day and year first written above.
 
Spine Pain Management, Inc.
 
By:   /s/ William F. Donovan, President
William F. Donovan, President
 
Wells Fargo Bank, National Association
 
By:  /s/ Matt Milner
Matt Milner, Senior Private Banker
 
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EXHIBIT 31.1
 
CERTIFICATION PURSUANT TO SECTION 302 OF THE
SARBANES-OXLEY ACT OF 2002
 
 
I, William F. Donovan, M.D., Chief Executive Officer of Spine Pain Management, Inc., certify that:
 
1.
I have reviewed this quarterly report on Form 10-Q of Spine Pain Management, Inc. for the quarter ended March 31, 2015;

2.
Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3.
Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the issuer as of, and for, the periods presented in this report;

4.
The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15 (e) and 15d- 15 (e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

(a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under my supervision, to ensure that material information relating to the issuer, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

(b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under my supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

(c) Evaluated the effectiveness of the issuer's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

(d) Disclosed in this report any change in the issuer's internal control over financial reporting that occurred during the issuer's most recent fiscal year that has materially affected, or is reasonably likely to materially affect, the issuer's internal control over financial reporting; and

5.
I have disclosed, based on my most recent evaluation of internal control over financial reporting, to the issuer's independent registered public accounting firm and the audit committee of the issuer's board of directors (or persons performing the equivalent functions):

(a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the issuer's ability to record, process, summarize and report financial information; and

(b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the issuer's internal control over financial reporting.

Date: May 13, 2015
By:    /s/ William F. Donovan, M.D.
 
William F. Donovan, M.D.
 
Chief Executive Officer (Principal Executive Officer)
 

 
 
 
EXHIBIT 31.2
 
CERTIFICATION PURSUANT TO SECTION 302 OF THE
SARBANES-OXLEY ACT OF 2002
 
 
I, John Bergeron, the Chief Financial Officer of Spine Pain Management, Inc., certify that:
 
1.
I have reviewed this quarterly report on Form 10-Q of Spine Pain Management, Inc. for the quarter ended March 31, 2015;

2.
Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3.
Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the issuer as of, and for, the periods presented in this report;

4.
The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15 (e) and 15d- 15 (e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

(a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under my supervision, to ensure that material information relating to the issuer, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

(b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under my supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

(c) Evaluated the effectiveness of the issuer's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

(d) Disclosed in this report any change in the issuer's internal control over financial reporting that occurred during the issuer's most recent fiscal year that has materially affected, or is reasonably likely to materially affect, the issuer's internal control over financial reporting; and

5.
I have disclosed, based on my most recent evaluation of internal control over financial reporting, to the issuer's independent registered public accounting firm and the audit committee of the issuer's board of directors (or persons performing the equivalent functions):

(a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the issuer's ability to record, process, summarize and report financial information; and

(b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the issuer's internal control over financial reporting.
 
Date: May 13, 2015
By:    /s/ John Bergeron
 
John Bergeron
 
Chief Financial Officer (Principal Financial Officer)


 
EXHIBIT 32.1
 
CERTIFICATION PURSUANT TO RULE 13a-14(b) OR
RULE 15d-14(b) and 18 U.S.C. §1350,
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the quarterly report of Spine Pain Management, Inc. (the "Company") on Form 10-Q for the quarter ended March 31, 2015 as filed with the Securities and Exchange Commission on the date hereof (the "Report"), I, William F. Donovan, M.D., Chief Executive Officer of the Company, certify, pursuant to 18 U.S.C. §1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that:

(1)           The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

(2)           The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.


Date: May 13, 2015
By:    /s/ William F. Donovan, M.D.
 
William F. Donovan, M.D.
 
Chief Executive Officer (Principal Executive Officer)

 
The foregoing certification is not deemed filed with the Securities and Exchange Commission for purposes of Section 18 of the Securities Exchange Act of 1934, as amended (“Exchange Act”), and is not to be incorporated by reference into any filing of Spine Pain Management, Inc. under the Securities Act of 1933, as amended, or the Exchange Act, whether made before or after the date hereof, regardless of any general incorporation language in such filing.
 
 
 
 
 
EXHIBIT 32.2
 
CERTIFICATION PURSUANT TO RULE 13a-14(b) OR
RULE 15d-14(b) and 18 U.S.C. §1350,
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the quarterly report of Spine Pain Management, Inc. (the "Company") on Form 10-Q for the quarter ended March 31, 2015 as filed with the Securities and Exchange Commission on the date hereof (the "Report"), I, John Bergeron, the Chief Financial Officer of the Company, certify, pursuant to 18 U.S.C. §1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that:

(1)           The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

(2)           The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.


Date: May 13, 2015
By:    /s/ John Bergeron
 
John Bergeron
 
Chief Financial Officer (Principal Financial Officer)
 
 
The foregoing certification is not deemed filed with the Securities and Exchange Commission for purposes of Section 18 of the Securities Exchange Act of 1934, as amended (“Exchange Act”), and is not to be incorporated by reference into any filing of Spine Pain Management, Inc. under the Securities Act of 1933, as amended, or the Exchange Act, whether made before or after the date hereof, regardless of any general incorporation language in such filing.