UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
 
FORM 10-Q
 
(Mark One)
☒ Quarterly report under Section 13 or 15(d) of the Securities Exchange Act of 1934
For the Quarter Ended September 30, 2017.
☐ 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 INJURY SOLUTIONS, 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   ☒     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   ☒     No   ☐
 
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. Large accelerated filer ☐ Accelerated filer ☐ Non-accelerated filer ☐ Smaller reporting company ☒ Emerging growth company ☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

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

As of November 13, 2017, there were 20,175,882 shares of the registrant’s common stock outstanding (the only class of voting common stock).
FORM 10-Q

TABLE OF CONTENTS

   
       
PART I
FINANCIAL INFORMATION
   
       
Item 1.
Condensed Consolidated Financial Statements
   
       
   
5
       
   
6
       
   
7
       
   
8
       
Item 2.
 
16
       
Item 3.
 
18
       
Item 4.
 
18
       
PART II
OTHER INFORMATION
   
       
Item 1A.
 
19
       
Item 2.
 
19
       
Item 6.
 
19
       
   
21
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, 2016, 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 Injury Solutions, Inc. and its subsidiaries and predecessors, unless the context indicates otherwise.

SPINE INJURY SOLUTIONS, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS

   
SEPTEMBER 30,
   
DECEMBER 31,
 
   
2017
   
2016
 
ASSETS
 
(Unaudited)
       
             
Current assets:
           
    Cash
 
$
140,658
   
$
256,263
 
Accounts receivable, net
   
1,269,780
     
1,395,200
 
Prepaid expenses
   
18,500
     
9,250
 
Inventories
   
176,911
     
183,898
 
                 
Total current assets
   
1,605,849
     
1,844,611
 
               
               
Accounts receivable, net of allowance for doubtful accounts
    of $551,359 and $958,185 at September 30, 2017 and
    December 31, 2016, respectively
   
2,329,124
     
2,297,283
 
Property and equipment, net
   
48,072
     
58,641
 
Intangible assets and goodwill
   
170,200
     
170,200
 
                 
Total assets
 
$
4,153,245
   
$
4,370,735
 
                 
LIABILITIES AND STOCKHOLDERS’ EQUITY
               
                 
Current liabilities:
               
Line of Credit
 
$
1,300,000
   
$
1,275,000
 
Notes Payable
   
250,000
     
300,000
 
Accounts payable and accrued liabilities
   
66,066
     
82,523
 
Due to related parties
   
10,396
     
-
 
                 
Total current liabilities
   
1,626,462
     
1,657,523
 
                 
                 
Commitments and contingencies
               
                 
Stockholders’ equity:
               
Common stock: $0.001 par value, 50,000,000 shares authorized, 
20,175,882 and 20,135,882 shares issued and outstanding at
September 30, 2017 and December 31, 2016, respectively
   
20,176
     
20,136
 
Additional paid-in capital
   
19,854,576
     
19,843,716
 
Accumulated deficit
   
(17,347,969
)
   
(17,150,640
)
                 
         Total  stockholders’ equity
   
2,526,783
     
2,713,212
 
                 
       Total liabilities and stockholders’ equity
 
$
4,153,245
   
$
4,370,735
 

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

   
FOR THE THREE MONTHS ENDED
SEPTEMBER 30,
   
FOR THE NINE MONTHS ENDED
SEPTEMBER 30,
 
   
2017
   
2016
   
2017
   
2016
 
Net revenue
 
$
565,202
   
$
458,958
   
$
1,492,429
   
$
1,661,006
 
                                 
Cost of providing services
                               
Third party providers
   
22,605
     
15,556
     
41,477
     
129,793
 
Related party providers
   
142,745
     
130,758
     
421,260
     
429,620
 
                                 
Total cost of providing services
   
165,350
     
146,314
     
462,737
     
559,413
 
                                 
Gross profit
   
399,852
     
312,644
     
1,029,692
     
1,101,593
 
                                 
Research and development expenses
   
-
     
18,862
     
12,203
     
38,709
 
Operating, general and administrative expenses
   
378,063
     
459,126
     
1,177,558
     
1,240,058
 
                                 
Income (loss) from operations
   
21,789
     
(165,344
)
   
(160,069
)
   
(177,174
)
                                 
Other income and (expense):
                               
Other income
   
666
     
1,484
     
4,237
     
5,113
 
Interest expense
   
(14,866
)
   
(14,541
)
   
(41,497
)
   
(45,168
)
                                 
Total other income and (expense)
   
(14,200
)
   
(13,057
)
   
(37,260
)
   
(40,055
)
                                 
Net income (loss)
 
$
7,589
   
$
(178,401
)
 
$
(197,329
)
 
$
(217,229
)
                                 
Net loss per common share:
                               
Basic and diluted
 
$
0.00
   
$
(0.01
)
 
$
(0.01
)
 
$
(0.01
)
                                 
Weighted average number of common shares outstanding:
                               
Basic and diluted
   
20,161,317
     
20,120,882
     
20,151,230
     
19,900,048
 

The accompanying notes are an integral part of the unaudited condensed consolidated financial statements .
SPINE INJURY SOLUTIONS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
UNAUDITED

 
 
FOR THE NINE MONTHS ENDED
SEPTEMBER 30,
 
 
 
2017
   
2016
 
Cash flows from operating activities:
           
Net loss
 
$
(197,329
)
 
$
(217,229
)
Adjustments to reconcile net loss to net cash
 (used) provided in operating activities:
               
Provision for bad debt
   
170,000
     
183,338
 
Stock based compensation
   
10,900
     
85,500
 
Depreciation and amortization expense
   
14,183
     
15,969
 
Changes in operating assets and liabilities:
               
Accounts receivable, net
   
(76,421
)
   
61,093
 
Inventories
   
6,987
     
(88,053
)
Prepaid expenses and other assets
   
(9,250
)
   
(9,250
)
Due to related party
   
10,396
     
13,427
 
Accounts payable and accrued liabilities
   
(16,457
)
   
(18,303
)
 
               
Net cash (used) provided in operating activities
   
(86,991
)
   
26,492
 
                 
Cash flows from investing activities:
               
Purchase of equipment
   
(3,614
)
   
-
 
                 
Net cash used in investing activities
   
(3,614
)
   
-
 
                 
Cash flows from financing activities:
               
Payment of notes payable and long-term debt
   
(50,000
)
   
(250,000
)
Proceeds from line of credit, net
   
25,000
     
180,000
 
 
               
Net cash used in financing activities
   
(25,000
)
   
(70,000
)
 
               
Net decrease in cash and cash equivalents
   
(115,605
)
   
(43,508
)
 
               
Cash and cash equivalents at beginning of period
   
256,263
     
173,647
 
Cash and cash equivalents at end of period
 
$
140,658
   
$
130,139
 
                 
Non-Cash financing activities:
               
Transfer of inventory to property and equipment
 
$
-
   
$
15,093
 
                 
Supplementary cash flow information:
               
Interest paid
 
$
41,497
   
$
44,499
 
Taxes paid
 
$
-
   
$
-
 

The accompanying notes are an integral part of the unaudited condensed consolidated financial statements.
SPINE INJURY SOLUTIONS, INC.
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

NOTE 1.  DESCRIPTION OF BUSINESS

Spine Injury Solutions Inc. was incorporated under the laws of Delaware on March 4, 1998.  We changed our name from Spine Pain Management Inc. to Spine Injury Solutions, Inc. on October 1, 2015.

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 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 Tyler, Texas. An affiliation with a center in Lubbock, Texas was added in 2017, but the Lubbock center is presently referring all its patients to the Odessa affiliate for treatment.  We are seeking additional funding for expansion by way of reasonable debt financing to accelerate 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 patented device and process by which a video recording system is attached to a fluoroscopic x-ray machine, the “four camera technology,” which we have refined through research and development, resulting in a fully commercialized Quad Video Halo System 3.0.  Using this technology, diagnostic and treatment 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 Quad Video Halo (“QVH”) can attract additional physicians and patients and provide us with additional revenue streams using our new programs designed to assist in treatment documentation.   Additionally, we anticipate independent medical representatives will sell QVH units to new 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 in connection with the QVH units.  
 
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 $2,343,271 to $17,347,969 as of September 30, 2017. 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.
SPINE INJURY SOLUTIONS, 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 (“U.S. GAAP”) 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 2016 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 condensed consolidated financial statements and the results of its operations for the interim period ended September 30, 2017, 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 Injury Solutions, 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 U.S. GAAP.

Use of Estimates
 
The preparation of consolidated financial statements in conformity with 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 condensed 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 condensed 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).
SPINE INJURY SOLUTIONS, 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 condensed 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.

Inventories

Inventories are stated at the lower of cost or market. Cost is determined by the first-in, first-out method, whereas market is based on the net realizable value. All inventories at September 30, 2017 and December 31, 2016 are classified as finished-goods and consist of our Quad Video Halo units.

Property and Equipment

Property and equipment are carried at cost.  When retired or otherwise disposed of, the related carrying cost and accumulated depreciation are removed from the respective accounts, and the net difference, less any amount realized from the disposition, is recorded in operations.  Maintenance and repairs are charged to operating expenses as incurred. Costs of significant improvements and renewals are capitalized.

Property and equipment consists of computers and equipment and are depreciated over their estimated useful lives of three to five years, using the straight-line method.

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. The goodwill amount is tested for impairment when events or circumstances indicate the asset might be impaired, but at least annually.  Impairment occurs when the original amount of goodwill exceeds the value of the expected future net cash flows from the business acquired.  As of September 30, 2017 and December 31, 2016, 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 September 30, 2017 and December 31, 2016, no impairment of the long-lived assets was determined to have occurred.
SPINE INJURY SOLUTIONS, INC.
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

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 $551,359 and $958,185, at September 30, 2017 and December 31, 2016, 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 nine months ended September 30, 2017 and 2016, we recognized compensation expense for issuances of our common stock in exchange for services of $10,900 and $85,500, respectively.

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 nine months ended September 30, 2017 and 2016, we recognized no estimated interest or penalties as income tax expense.
SPINE INJURY SOLUTIONS, INC.
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

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.

Earnings (Loss) per Share

Basic and diluted earnings (loss) per common share is presented in accordance with ASC Topic 260, “Earnings per Share,” for all periods presented. During the nine months ended September 30, 2017 and 2016, common stock equivalents from outstanding stock options, warrants and convertible debt have been excluded from the calculation of the diluted earnings (loss) per share in the statements of operations, because all such securities were anti-dilutive.  The earnings (loss) per share is calculated by dividing the net income (loss) by the weighted average number of shares outstanding during the periods.

Recent Accounting Pronouncements

In May 2014, the 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.  In July 2015, the FASB issued ASU No. 2015-14 which delayed the effective date of ASU No. 2014-09 by one year (effective for annual periods beginning after December 15, 2017).  Early adoption is not permitted.  We are currently reviewing the effect of ASU No. 2014-09 on our revenue recognition and have not yet determined the method with which we will adopt the standard in 2018.

In February 2016, the FASB issued ASU No. 2016-02, Leases, which requires lessees to recognize the following for all leases (with the exception of short-term leases) at the commencement date: (1) a lease liability, which is a lessee’s obligation to make lease payments arising from a lease, measured on a discounted basis; and (2) a right-of-use asset, which is an asset that represents the lessee’s right to use, or control the use of, a specified asset for the lease term. Under ASU No. 2016-02, lessor accounting is largely unchanged. ASU No. 2016-02 is effective for fiscal years beginning after December 15, 2018 with early application permitted. Lessees and lessors must apply a modified retrospective transition approach for leases existing at, or entered into after, the beginning of the earliest comparative period presented in the financial statements. The modified retrospective approach would not require any transition accounted for leases expired before the earliest comparative period presented. Lessees and lessors may not apply a full retrospective transition approach. Management has determined that based on current accounting and lease contract information the adoption of ASU No. 2016-02 is not expected to have a significant impact on the Company’s consolidated financial position, results of operations and disclosures.  However, management is continually evaluating the future impact of ASU No. 2016-02 based on changes in the Company’s consolidated financial statements through the period of adoption.

In May 2016, the FASB issued ASU No. 2016-12, Revenue from Contracts with Customers (Topic 606): Narrow-Scope Improvements and Practical Expedients. ASU No. 2016-12 provides narrow-scope improvements to the guidance on collectability, noncash consideration, and completed contracts at transition. The amendment also provides a practical expedient for contract modifications at transition and an accounting policy election related to the presentation of sales taxes and other similar taxes collected from customers and are expected to reduce the judgment necessary to comply with Topic 606. The effective date and transition requirements for ASU No. 2016-12 are the same as the effective date and transition requirements for ASU No. 2014-09. We have initiated the accumulation of our customer contracts in order to gather data for the purpose of assisting management to determine the effect of ASU No. 2016-12 on our revenue recognition and have not yet determined the effect of ASU No. 2016-12 on the Company’s consolidated financial position, results of operations and disclosures.
SPINE INJURY SOLUTIONS, INC.
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

In June 2016, the FASB issued ASU No. 2016-13, Financial Instruments – Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments. ASU No. 2016-13 eliminates the probable initial recognition threshold in current generally accepted accounting principles (“GAAP”) and, instead, requires the measurement of all expected credit losses for financial assets held at the reporting date based on historical experience, current conditions, and reasonable and supportable forecasts. In addition, ASU No. 2016-13 amends the accounting for credit losses on available-for-sale debt securities and purchased financial assets with credit deterioration. ASU No. 2016-13 is effective for annual periods beginning after December 15, 2020, with early application permitted in annual periods beginning after December 15, 2018. The amendments of ASU No. 2016-13 should be applied through a cumulative-effect adjustment to retained earnings as of the beginning of the first reporting period in which the guidance is effective. Management is currently evaluating the future impact of ASU No. 2016-13 on the Company’s consolidated financial position, results of operations and disclosures.

In December 2016, the FASB issued ASU No. 2016-20, Technical Corrections and Improvements to Topic 606, Revenue from Contracts with Customers. ASU No. 2016-20 allows entities not to make quantitative disclosures about remaining performance obligations in certain cases and require entities that use any of the new or previously existing optional exemptions to expand their qualitative disclosures. The amendment also clarifies narrow aspects of ASC 606, including contract modifications, contract costs, and the balance sheet classification of items as contract assets versus receivables, or corrects unintended application of the guidance. The effective date and transition requirements for ASU No. 2016-20 are the same as the effective date and transition requirements for ASU No. 2016-09. We have initiated the accumulation of our customer contracts in order to gather data for the purpose of assisting management to determine the effect of ASU No. 2016-20 on our revenue recognition and have not yet determined the effect of ASU No. 2016-20 on our consolidated financial position, results of operations and disclosures.

In January 2017, the FASB issued ASU No. 2017-01, Business Combinations (Topic 805): Clarifying the Definition of a Business. ASU No. 2017-01 clarifies the definition of a business with the objective of adding guidance to assist entities with evaluating whether transactions should be accounted for as acquisitions (or disposals) of a business or as acquisitions (or disposals) of assets. ASU No. 2017-01 is effective for annual periods beginning after December 15, 2018, with early adoption permitted under certain circumstances. The amendments of ASU No. 2017-01 should be applied prospectively as of the beginning of the period of adoption. Management is currently evaluating the future impact of ASU No. 2017-01 on the Company’s consolidated financial position, results of operations and disclosures.

In January 2017, the FASB issued ASU No. 2017-03, Accounting Changes and Error Corrections (Topic 250) and Investments – Equity Method and Joint Ventures (Topic 323): Amendments to SEC Paragraphs Pursuant to Staff Announcements at the September 22, 2016 and November 17, 2016 EITF Meetings. The amendments in this update relate to disclosures of the impact of recently issued accounting standards. The SEC staff’s view that a registrant should evaluate ASC updates that have not yet been adopted to determine the appropriate financial disclosures about the potential material effects of the updates on the financial statements when adopted. If a registrant does not know or cannot reasonably estimate the impact of an update, then in addition to making a statement to that effect, the registrant should consider additional qualitative financial statement disclosures to assist the reader in assessing the significance of the impact. The staff expects the additional qualitative disclosures to include a description of the effect of the accounting policies expected to be applied compared to current accounting policies. Also, the registrant should describe the status of its process to implement the new standards and the significant implementation matters yet to be addressed. The amendments specifically addressed recent ASC amendments to ASU No. 2016-13, Financial Instruments – Credit Losses, ASU No. 2016-02, Leases, and ASU No. 2014-09, Revenue from Contracts with Customers, although, the amendments apply to any subsequent amendments to guidance in the ASC. ASU No. 2017-03 is effective upon issuance and did not have a significant impact on the Company’s consolidated financial position, results of operations and disclosures.

SPINE INJURY SOLUTIONS, INC.
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

In January 2017, the FASB issued ASU No. 2017-04, Intangibles – Goodwill and Other (Topic 350): Simplifying the Test for Goodwill Impairment. The amendments in this update relate to the impairment test performed annually or interim.  The annual, or interim, goodwill impairment test is performed by comparing the fair value of a reporting unit with its carrying amount. An impairment charge should be recognized for the amount by which the carrying amount exceeds the reporting unit’s fair value; however, the loss recognized should not exceed the total amount of goodwill allocated to that reporting unit. In addition, income tax effects from any tax deductible goodwill on the carrying amount of the reporting unit should be considered when measuring the goodwill impairment loss, if applicable.  The amendments also eliminate the requirements for any reporting unit with a zero or negative carrying amount to perform a qualitative assessment and, if it fails that qualitative test, to perform Step 2 of the goodwill impairment test. An entity still has the option to perform the qualitative assessment for a reporting unit to determine if the quantitative impairment test is necessary. ASU No. 2017-04 is effective for annual periods beginning after December 15, 2019, with early adoption permitted for interim or annual goodwill impairment tests performed on testing dates after January 1, 2017. The amendments of ASU No. 2017-04 should be applied prospectively as of the beginning of the period of adoption. Management is currently evaluating the future impact of ASU No. 2017-04 on the Company’s consolidated financial position, results of operations and disclosures.

In May 2017, the FASB issued ASU No. 2017-09, Compensation – Stock Compensation (Topic 718): Scope of Modification Accounting. The amendments in this update provide guidance on determining which changes to the terms and conditions of share-based payment awards require an entity to apply modification accounting under Topic 718.  ASU No. 2017-09 is effective for annual periods, including interim periods, beginning after December 15, 2017, with early adoption permitted for interim periods of public business entities within reporting periods for which financial statements have not yet been issued.  The amendments of ASU No. 2017-09 should be applied prospectively as of the beginning of the period of adoption. Management is currently evaluating the future impact of ASU No. 2017-09 on the Company’s consolidated financial position, results of operations and disclosures.

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. While we do collect 100% of the accounts on some patients, our historical collection rate is used to calculate the carrying balance of the accounts receivable and the estimated revenue to be recorded.  A discount rate of 48%, based on payment history, was used to reduce revenue to 52%, of CPT code billings (“gross revenue”) during the nine months ended September 30, 2017 and 2016.

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 2016, 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 September 30, 2017 and December 31, 2016, 30% of cases will be subject to a settlement or judgment within one year of a medical procedure.

SPINE INJURY SOLUTIONS, INC.
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

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 nine months ended September 30, 2017 and 2016, we expensed $421,260 and $429,620 related to services provided by NSO. As of September 30, 2017 and December 31, 2016, we had balances payable to NSO of $10,396 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.  

NOTE 6. STOCKHOLDERS’ EQUITY

In January 2017, we issued 10,000 shares of common stock to a consultant for services, valued at $0.21 per share. In May 2017, we issued 10,000 shares of common stock to a consultant for services, valued at $0.30 per share. In September 2017 we issued 20,000 shares of common stock to our new Chief Operating Officer as part of his compensation, valued at $0.29 per share. A total of $5,800 and $10,900 was recognized as compensation expense during the three and nine months ended September 30, 2017, respectively.

During the nine months ended September 30, 2016, we issued an aggregate 300,000 shares of common stock, valued at $0.30 per share, in connection with a financing agreement with a director of the Company for his assistance in obtaining a line of credit. The 300,000 shares issued during the nine months ended September 30, 2016, includes 100,000 shares that vested during the fourth quarter of 2015. Accordingly, the associated expense of $30,000 was expensed during 2015. During the nine months ended September 30, 2016, we expensed the remaining $60,000 related to the financing agreement pursuant to the agreement’s vesting schedule, which is included in operating, general and administrative expenses in the accompanying condensed consolidated statements of operations. For the three months ended September 30, 2016, there were no issuances of stock related to this agreement. As of September 30, 2016, there was no unrecognized expense associated with the financing agreement.

During the three and nine months ended September 30, 2016, we issued 30,000 and 55,000 shares of common stock, respectively, valued at $0.33 and $0.35 per share, respectively, in connection with employment agreements and consulting agreements. During the three and nine months ended September 30, 2016, we expensed $9,800 and $19,300, respectively, in connection with these agreements which is included in operating, general and administrative expenses in the accompanying condensed consolidated statements of operations. As of September 30, 2016, there was no unrecognized expense associated with these agreements.

NOTE 7.  NOTES PAYABLE

Convertible and secured notes payable

In connection with the extension of the Wells Fargo loan (as described in Note 8), on September 8, 2017 we also entered into with Mr. Dalrymple a Financing Agreement, Amended and Restated Secured Promissory Note and Amended Security Agreement, under which we extended the maturity date of the promissory note originally entered into with Mr. Dalrymple in August 2012 to be due and payable on September 8, 2018 and have provided collateral to Mr. Dalrymple in an amount of $3,000,000 in our gross accounts receivable to secure payment of both his promissory note and his obligations in connection with the Amended and Restated Revolving Line of Credit Note and the Amended and Restated Credit Agreement with the Bank.  The promissory note with Mr. Dalrymple as of September 30, 2017 has a principal balance of $250,000.  For the three months ended September 30, 2017 and 2016, we recorded $3,750 and $6,250, respectively, in interest expense related to this note. For the nine months ended September 30, 2017 and 2016, we recorded $12,236 and $21,250, respectively, in interest expense related to this note.

SPINE INJURY SOLUTIONS, INC.
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

NOTE 8.  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 3.2% at September 30, 2017.  The line of credit was to mature on August 31, 2017 and is personally guaranteed by Mr. Dalrymple, a director of the Company. As of September 30, 2017 and December 31, 2016, outstanding borrowings under the line of credit totaled $1,300,000 and $1,275,000 respectively. For the three months ended September 30, 2017 and 2016, we recorded $11,117 and $7,041, respectively, in interest expense related to this note. For the nine months ended September 30, 2017 and 2016, we recorded $29,261 and $20,168, respectively, in interest expense related to this note.

On September 8, 2017 we entered into an Amended and Restated Revolving Line of Credit Note and an Amended and Restated Credit Agreement to extend our revolving line of credit facility with Wells Fargo Bank, whereby the outstanding principal is now due and payable in full on August 31, 2018 and the maximum amount we can borrow under the line of credit, as amended is $1,750,000.  The line of credit remains guaranteed by Peter L. Dalrymple, a member of our Board of Directors, and is secured by a first lien interest in certain of his assets.

NOTE 9.  INCOME TAXES

We have not made a provision for (benefit from) income taxes for the nine months ended September 30, 2017 or 2016, which reflects our valuation allowance established against our benefits from net operating loss carryforwards.
ITEM 2.  MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

The following discussion should be read in conjunction with our unaudited condensed consolidated 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 Consolidated Financial Statements, which note is incorporated herein by reference.

Management Overview

See the description of the business in Note 1 of the accompanying Notes to Unaudited Condensed Consolidated Financial Statements, which note is incorporated herein by reference.

We continue to further refine and market our Quad Video Halo. We recorded revenue from the  sale of one QVH during the third quarter of 2017.

We entered into a Letter Agreement with Jeffrey A. Cronk, D.C., to serve as our Chief Operating Officer, which became effective on September 5, 2017, under which we agreed to compensate Dr. Cronk $5,000 per month as well as grant him 20,000 restricted shares of common stock immediately and, for the next 12 quarters, grant him 40,000 restricted shares of common stock at the end of each quarter if he achieves certain objectives established by the Board of Directors.

Results of Operations

The unaudited financial statements for the three and nine months ended September 30, 2017 and 2016 have been prepared in accordance with U.S. GAAP for interim financial information and with instructions to Form 10-Q. In the opinion of management, the unaudited consolidated financial statements have been prepared on the same basis as the annual consolidated financial statements and reflect all adjustments, which include only normal recurring adjustments, necessary to present fairly the financial position as of September 30, 2017 and the results of operations for the three and nine months ended September 30, 2017 and 2016 and cash flows for the nine months ended September 30, 2017 and 2016. The results for the nine months ended September 30, 2017 are not necessarily indicative of the results to be expected for any subsequent quarter or of the entire year ending December 31, 2017.

Certain information and footnote disclosures normally included in financial statements prepared in accordance with U.S. GAAP 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, 2016 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 Unaudited Condensed Consolidated Financial Statements, we own a video recording system known as the Quad Video Halo System 3.0.  We have expended funds in this quarter for further development and marketing of this system.  We sold one QVH unit in the third quarter for $43,287 with a cost of $15,092 which is included in the third party cost of sales.

Comparison of the three month period ended September 30, 2017 with the three month period ended September 30, 2016.

We recorded $876,774 in gross revenue for the three months ended September 30, 2017, offset by $311,572 of the expected settlement discount resulting in net revenue of $565,202. We recorded $782,276 in gross revenue for the three months ended September 30, 2016, offset by $323,318 of the expected settlement discount resulting in net revenue of $458,958.     For the three months ended September 30, 2017, we worked with three spine injury diagnostic centers: Houston, Texas; Tyler, Texas and Odessa, Texas. The Lubbock affiliate has been referring patients to the Odessa affiliate for treatment. Service cost was $165,350  (which included $15,092 for the cost of the QVH sold) for the three months ended September 30, 2017 compared to $146,314 for the same period in 2016. The increase in service cost is attributable to the higher case volume in Houston and Odessa, reduced revenue of the Tyler affiliate, and the inclusion of the QVH.
During the three months ended September 30, 2017, we incurred $378,063 of operating, general and administrative expenses compared to $459,126 for the same period in 2016. The decrease is due mainly lower payroll costs of $35,000, marketing costs of $23,000, legal fees of $9,000, and travel expense of $14,000. There was research and development costs of $0 during the quarter ended September 30, 2017 as compared to $18,862 in 2016.

As a result of the foregoing, we had a net income of $7,589 for the three months ended September 30, 2017, compared to a net loss of $178,401 for the three months ended September 30, 2016.

Comparison of the nine month period ended September 30, 2017 with the nine month period ended September 30, 2016.

We recorded $2,438,988 in gross revenue for the nine months ended September 30, 2017, offset by $946,559 of the expected settlement discount resulting in net revenue of $1,492,429.  For the same period in 2016, gross revenue was $2,837,823, offset by $1,176,817 of the settlement discount, resulting in net revenue of $1,661,006.  Revenue was affected negatively in 2017 by the reduced revenue of the Tyler, Texas affiliate due to case volume, coupled with the loss of the San Antonio affiliate in the first quarter of 2016.

Service cost was $462,737 for the nine months ended September 30, 2017 compared to $559,413 for the same period in 2016.  The decrease in service cost is attributable to lower case volume in Houston and Tyler coupled with the loss of the San Antonio affiliate.

During the nine months ended September 30, 2017, we incurred $1,177,558 of operating, general and administrative expenses compared with the $1,240,058 for the same period in 2016. The decrease is due mainly to lower bad debt expense of $13,000, payroll costs of $24,000, marketing costs of $24,000, legal fees of $31,000, travel expense of $23,000, coupled with an increase of consulting costs of $56,000 and other expense decreases netting out to $3,000.  During the nine months ended September 30, 2017, we incurred $12,203 of research and development expenses compared with the $38,709 for the same period in 2016.  

As a result of the foregoing, we had net loss of $197,329 for the nine months ended September 30, 2017, compared to a net loss of $217,229 for the nine months ended September 30, 2016.

Liquidity and Capital Resources

For the nine months ended September 30, 2017, cash used in operations was $86,991 which primarily included increases in accounts receivable of $76,421 and increases in prepaid expenses of $9,250, related party payables of $10,395 and accounts payable of $16,456.  For the same period in 2016, cash provided in operations was $26,492, which primarily included a net loss of $217,229, a decrease in accounts receivable of $61,093, an increase in inventories of $88,053, an increase in prepaid expenses of $9,250, a decrease in accounts payable of $18,303, and a decrease in due to related party of $13,427.

We have cash used in investing activities of $3,614 and $0 for the nine months ended September 31, 2017 and 2016, respectively, resulting from the purchase of certain equipment for the QVH units.

Cash used in financing activities for the nine months ended September 30, 2017 and 2016 consisted of repayments on our notes payable in the amount of $50,000 and $250,000, respectively, and net draws on our line of credit of $25,000 and $180,000, 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 $2,343,271 to $17,347,969 as of September 30, 2017. During the nine months ended September 30, 2017, we realized net revenue of $1,492,429 and net loss of $197,329. 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 September 30, 2018.  The company is seeking to increase revenue from services and obtain additional capital from borrowings and selling securities as needed to fund our operations. 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 2016 Annual Report on Form 10-K.  We believe the risk factors presented in this filing and those presented on our 2016 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 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS

In September 2017, we issued 20,000 shares of common stock to our new Chief Operating Officer.  The securities were issued under the exemption from registration provided by Section 4(a)(2) of the Securities Act of 1933 and the rules and regulations promulgated thereunder.  The issuance of securities did not involve a “public offering” based upon the following factors: (i) the issuance of securities was an isolated private transaction; (ii) a limited number of securities were issued to a single purchaser; (iii) there were no public solicitations; (iv) the investment intent of the purchaser; and (v) the restriction on transferability of the securities issued.

ITEM 6. EXHIBITS

Exhibit No.
 
Description
3.1
 
 
 
 
3.2
 
 
 
 
3.3
 
 
 
 
3.4
 
 
 
 
3.5
 
 
 
 
3.6
 
 
 
 
3.7
 
 
 
 
3.8
 
 
 
 
10.1
 
 
 
 
10.2
 
 
 
 
10.3
 


10.4
 
     
10.5
 
     
10.6
 
 
 
 
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


SIGNATURES

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 Injury Solutions, Inc.
 
 
  Date: November 13, 2017
By: /s/ William F. Donovan, M.D.
 
William F. Donovan, M.D.
 
Chief Executive Officer (Principal Executive Officer)
 
 
 
 

  Date: November 13, 2017
By:  /s/ John Bergeron
 
John Bergeron
 
Chief Financial Officer (Principal Financial Officer)
 
 
 
 

 
 
21
 
EXHIBIT 10.5

WELLS FARGO   AMENDED AND RESTATED REVOLVING LINE OF CREDIT NOTE


$1,750,000.00
Houston,  Texas
 
August 17, 2017


This Note amends, modifies, restates and replaces, but does not satisfy nor act as a novation of the obligations under. relating to. or in connection with, that certain Amended and Restated Revolving Line of Credit dated as of March 16, 2015, executed and delivered by some or all Borrower hereunder in favor of Bank.

FOR VALUE RECEIVED, the undersigned SPINE INJURY SOLUTIONS, INC . (“Borrower”) promises to pay to the order of WELLS FARGO BANK, NATIONAL ASSOCIATION (“Bank”) at its office at Private Banking - Houston, 1000 Louisiana Street, 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 One Million Seven Hundred Fifty Thousand and 00/100 Dollars ($1,750,000.00) , 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 LIBOR” means, for any day, the rate of interest equal to LIBOR 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 published by the ICE Benchmark Administration Limited, a United Kingdom company, 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); provided, however, that if LIBOR determined as provided above would be less than zero percent (0.0%), then LIBOR shall be deemed to be zero percent (0.0%).

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 6e, actual days elapsed) at the lesser of (a) a fluctuating rate per annum determined by Bank to be two percent (2.00%) above Daily One Month LlBOR 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
1483256/Page 1

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.

2.3   Payment of Interest. Interest accrued on this Note shall be payable on the 3rd day of each month, commencing September 3, 2017 .

24   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 four percent (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.

2. 5   Collection of Payments . Borrower authorizes Bank to collect all principal, interest, fees and other sums due hereunder  by charging Borrower’s deposit account number XXXXXXX    with Bank, or any other deposit account maintained by Borrower with Bank, for the full amount thereof. Should there be insufficient funds in any such deposit account to pay all such sums when due, the full amount of such deficiency shall be immediately due and payable by Borrower.

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, 2018.

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 August 17, 2017 , 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.

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6.   MISCELLANEOUS :

6.1   Remedies . Upon the sale, transfer, hypothecation, assignment, or other encumbrance, whether voluntary, involuntary or by operation of law, of all or any interest in any real property securing this Note, if applicable, or 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 am6unt 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 collection of any amounts which become due to the holder under this Note, whether or not suit is brought, 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 ln 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.

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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.

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 INJURY SOLUTIONS, INC.

By:     /s/ William F. Donovan                                       
William F. Donovan, Chief Executive Officer
 
 
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AMENDED AND RESTATED CREDIT AGREEMENT

THIS CREDIT AGREEMENT (this “Agreement”) is entered into as of August 17, 2017, by and between SPINE INJURY SOLUTIONS, 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. This Agreement amends, modifies, restates and replaces. but does not satisfy nor act as a novation of the obligations under, relating to, or in connection with, that certain Amended and Restated Credit Agreement, dated as of March 16, 2015, executed and delivered by some or all Borrower hereunder in favor of Bank.

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, 2018, not to exceed at any time the aggregate principal amount of One Million Seven Hundred Fifty Thousand and 00/100 Dollars ($1,750,000.00) (“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 an Amended and Restated Revolving Line of Credit Note dated as of August 17, 2017 (“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 P ayment. 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 COLLECTION OF PAYMENTS. Borrower authorizes Bank to collect all principal, interest and fees due under each credit subject hereto by charging Borrower’s deposit account number 1787956356 with Bank. or any other deposit account maintained by Borrower with Bank, for the full amount thereof. Should. there be insufficient funds in any such deposit account to pay all such sums when due, the full amount of such deficiency shall be immediately due and payable by Borrower.
 

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4.1   Value Requirements . The Margin Value of the Collateral shall at all times exceed the outstanding balance of Indebtedness. Whenever applicable, the credit limits of Regulation U of the Federal Reserve Board (12 U.S.C. § 221 et seq) shall also be satisfied as prescribed therein. Collateral satisfying value requirements in this Agreement cannot also satisfy other value requirements in favor of Bank, if any.

4.2   Maintenance of Value . Whenever value requirements in this Agreement are not met Debtor shall, within three (3) business days, take all remedial action necessary to restore the required value. Remedial action may include the following in any combination or amount (a) delivery of additional Collateral acceptable to Bank; (b) substitution of assets providing little or no support to value requirements for assets providing greater support; (c) payoff of the Indebtedness (or if applicable, reduction thereof); or (d) conversion of assets to cash. Bank has no duty to act to: (a) prevent any decline in market value of Collateral or Proceeds; (b) preserve any Debtor rights against prior parties relating to Collateral or Proceeds; or (c) assure that Proceeds of any Collateral are deposited into interest bearing account(s).

4.3   Breach of Value Requirements . Bank is not obligated to permit an advance when value requirements are not met or if permitted would not then be met. Failure to timely meet value requirements is an Event of Default, and allows Bank, in its sole option, to accelerate the Indebtedness and exercise its rights and remedies under this Agreement.

4.4   Excess Collateral . Unless an Event of Default occurs, Collateral in excess of the value requirements is available for withdrawal at Debtor’s request to Bank, free and clear of its lien. Debtor will provide reasonable time, information and cooperation for Debtor withdrawal requests. No Intermediary is authorized to release Collateral, or allow excess Collateral withdrawals, without written consent of an authorized employee of Bank’s applicable credit department.

4.5   Trading of Collateral Permitted . Unless an Event of Default occurs, and provided all value requirements would continue to be met, Debtor, or any party authorized by Debtor to act with respect to the Collateral, may receive payments of interest and/or cash dividends earned on the Collateral in the Securities Account, and may trade Collateral in the Securities Account. Except as provided in this Agreement, Bank is not obligated to permit any withdrawal or distribution of Collateral or Proceeds.

4.6   Rule 144/145 Collateral . For so long as any of the Collateral may be subject to Securities Exchange Commission (“SEC”) Rule 144 or Rule 145, Debtor will not sell or otherwise transfer shares of securities of the issuer of such Collateral (whether or not such shares are Collateral) without Bank’s prior written consent, which consent shall be given in Bank’s sole discretion.

4.7   Hedge Fund Collateral . Hedge fund interests credited, maintained or recorded in the Securities Account (each and collectively a “Hedge Fund”) are Collateral under this Agreement even if the issuer’s books and records may not reflect Bank’s lien and even if Bank has not agreed the Hedge Fund contributes to value requirements in this Agreement.

4.8   Determination of Value; Collateral Eligibility; Definitions . Collateral subject to assignment, pledge or similar consent requirements of a third party is not eligible to satisfy value requirements in this Agreement until the required consent is furnished to Bank in writing. In addition, the following definitions apply for all purposes in determining Debtor’s satisfaction of the value requirements:

“Brokered Certificates of Deposit ” or “ Brokered CD’s ” means an FDIC-insured certificate of deposit of any financial institution other than Wells Fargo Bank, NA obtained from or through the mediation or assistance of Wells Fargo Advisors, LLC, Wells Fargo Securities, LLC, or the Investment & Financial Services Group of Wells Fargo Bank and held in the Securities Account.

“ Commercial Paper ” means fixed rate debt instruments of domestic corporations rated A2 or higher by Standard & Poor’s and Prime 2 or higher by Moody’s. Floating rate commercial paper and commercial paper of non- US corporations are not included in this definition.

“ Corporate Bonds ” means bonds of domestic corporations which are not convertible to equity and which are rated BBB- or higher by Standard & Poor’s and Baa3 or higher by Moody’s. Bonds of non-US corporations are not
 
1483256/Page 2
included in this definition. “Short Term” Corporate Bonds are those with 5 years or less remaining until date of maturity; all others are “Longer Term”. “Convertible Corporate Bonds” are Corporate Bonds convertible to equity securities of the issuer and which are rated A or higher by Standard & Poor’s.

“ Equities ” means: (a) common stock of domestic corporations and, except in the case of Small and Micro Cap Equities, American depository receipts (“ADR’s”), which, as to all of the foregoing, have a value greater than or equal to $10.00 per share, trade on an NSE, and have done so for at least one year after initial settlement of the public offering of the securities; and (b) preferred stock of domestic corporations (or their affiliated trusts or entities) so long as the common stock of the issuers qualify as “Equities” (and despite that the preferred stock would not qualify as “Equities” due to market capitalization or initial public offering date). Equity securities of value less than $10.00 per share, newly issued, trading on OTC, Pink Sheets or regional exchanges only, unregistered, unlisted or de-listed, or not publicly traded entities, and put or call options, rights or warrants, managed futures, auction rate preferred stock, and exchange funds, hedge funds, and other private equity or investment groups are not included in this definition. Qualifying restricted and control securities are included in this definition, but only to the extent such securities can be converted to cash by Bank in three days or less in accordance with SEC Rules 144 or 145 should an Event of Default occur. “Large Cap” Equities are those of an issuer having a market capitalization greater than $10 billion; “Mid Cap” are those with a market capitalization greater than $2 billion but no more than $10 billion; “Small Cap” are those with a market capitalization greater than $1 billion but no more than $2 billion; and “Micro Cap” are those with a market capitalization greater than $250 million but no more than $1 billion.

“ Exchange Traded Fund ” or “ ETF ” means a security of an investment company formed under the Investment Company Act of 1940 (the “40 Act”) which trades on an NSE, whose investments track  an index, commodity or basket of assets, having greater than $100,000,000.00 in total assets under management and a minimum FMV greater than or equal to $4.00 per share except in the case of Money Market ETF’s which shall have a minimum FMV greater than or equal to $1.00, and except that leveraged ETF’s and inverse or “bear market” ETF’s are not included in this definition. ETF investment objective distinctions, as well as the factors that will exclude ETF’s from eligibility in this definition, are identical to those applied for Mutual Funds.

“ Fair Market Value ” or “ FMV ” means, as to any Collateral that is uncertificated, the per share or per unit closing sale price quoted  or reported at the close of the immediately preceding business day  in the Securities Account, and, as to any Collateral that is certificated, the per share or per unit closing sale price quoted or reported at the close of the immediately preceding business day were such share or unit held in uncertificated form in a securities account at Wells Fargo Advisors, LLC (or, in either case if not available, such other customary publication of securities closing sale prices as Bank may reasonably elect to reference) multiplied by the number of shares or units of like Collateral. The aggregate FMV of the Collateral is the total of all such FMVs so determined plus the amount of cash Collateral. If FMV cannot be determined by the foregoing procedure, then FMV shall be determined by the Bank, in its sole discretion, by reference to the notional amount of such assets or to public information and procedures that may otherwise then be available. All cash and other value references are to currency denominated in dollars of the United States of America.

“ Margin Value ” means the FMV of the Collateral multiplied by the applicable percentage set forth in the following table:
 
Collateral Type
% of FMV
 
Cash and cash equivalents (in the Securities Account)
95%
 
Wells Fargo Deposits (in the Securities Account or otherwise directly pledged)
100%
 
Brokered Certificates of Deposit
85%
 
Commercial Paper
80%
 
US Government Obligations - Short Term
90%
 
US Government Obligations - Longer Term
80%
 
Corporate & Municipal Bonds - Short Term
80%
 
Corporate & Municipal Bonds - Longer Term
70%
 
Corporate Bonds – Convertible
50%
 *
Equities - Common and ADRs - Large Cap
75%
 *
Equities - Common and ADRs - Mid Cap
65%
 *
Equities - Common - Small & Micro Cap
55%
 *
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Equities - Preferred - Large, Mid, Small & Micro Cap
70%
 *
Mutual Funds - Money Market
95%
 
Mutual Funds/ETFs - Bond - US Government (Short Term)
90%
 *
Mutual Funds/ETFs - Bond - US Government (General and Longer Term)
80%
 *
Mutual Funds/ETFs - Bond - Corporate & Municipal (Short Term)
80%
 *
Mutual Funds/ETFs - Bond - Corporate & Municipal (Longer Term)
70%
 *
Mutual Funds/ETFs - Bond - High Yield
60%
 *
Mutual Funds/ETFs - Bond - Global & International
55%
 *
Mutual Funds/ETFs - Equity - Large Cap, S&P Index, Equity Income, Balanced
75%
 *
Mutual Funds/ETFs - Equity - Multi & Mid Cap
65%
 *
Mutual Funds/ETFs - Equity - Small Cap, Specialty, Sector, Global & International
55%
 *
Master Limited Partnerships
55%
 *
Real Estate Investments Trusts
55%
 *
Unit Investment Trusts
55%
 *
Wells Fargo Market Linked Certificates of Deposit
70%
 *†
Wells Fargo Market Linked Notes
70%
 *†
All Other Types of Collateral
0%
 

•  However, if Regulation U of the Federal Reserve Board applies then the lesser of the percentage stated or 50% shall be the percentage applied for these assets.

†  In the case of these asset types, the stated percentage is applied to FMV and the resulting amount may not exceed the notional amount.
 
“ Master Limited Partnerships ” or “ MLP ” means limited partner equity interests in limited partnerships with a market capitalization greater than $250 million and which trade on an NSE, and have done so for at least one year after initial settlement of the public offering of such securities, if the unit value (or per share price) therein is greater than or equal to $10.00. Limited partner interests of value less than $10.00 per unit, newly issued, trading on OTC, Pink Sheets or regional exchanges only, unregistered, unlisted or de-listed, or not publicly traded, and general partner interests of any kind are not included in this definition.

“ Municipal Bonds ” means bonds of state, city, county, municipality and other public entities rated BBB- or higher by Standard & Poor’s and Baa3 or higher by Moody’s. “Short Term” Municipal Bonds are those with 5 years or less remaining until date of maturity; all others are “Longer Term”.

“ Mutual Funds ” means investment companies regulated under the 40 Act, except those regulated under Sections’ 4 and 26, that invest primarily in money markets securities (“Money Market”), short or longer term US government taxable or tax exempt bonds (“US Government”), short or longer term taxable corporate bonds (“Corporate”), short or longer term, insured and single state municipal bonds (“Municipal”), bonds that seek higher returns to compense increased risk of investing in lower rated issuers (“High Yield”), equities of US issuers in particular market capitalization segments (Large Cap, Mid Cap, “Multi Cap” and Small Cap), bonds and/or equities of non-US issuers (“International”) or worldwide including the US issuers (“Global”), or invest by designs to track the performance of the S&P 500 index (“S&P Index”), to provide both current income and growth potential (“Equity Income”), for balanced or allocated portfolios of . securities (“Balanced”), for particular sectors of the economy (“Sector”) or for particular specialized traits associated with their investments made (“Specialty”), and which have greater than $100,000,000.00 in total assets under management and a minimum FMV greater than or equal to $4.00 per share except in the case of Money Market Mutual Funds which shall have a minimum FMV greater than or equal to $1.00. Leveraged mutual funds and inverse or “bear market” mutual funds, non-networked funds, funds organized under the laws of, and/or operated from within, countries other than the United States of America, and face-amount certificate and management companies are not included in this definition.

“ National Securities Exchange ” or “ NSE ” means securities exchanges registered with the SEC as national securities exchanges in accordance with Section 6 (a) of the Securities Exchange Act of 1934.
 
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“ Real Estate Investment Trusts ” or “ REIT ” means real estate investment trust equity interests with a market capitalization greater than $250 million and which trade on an NSE, and have done so for at least one year after initial settlement of the public offering of the securities, if the unit value (or per share price) therein is greater than or equal to $10.00. Real estate investment trust interests of value less than $10.00 per unit, newly issued, trading on OTC, Pink Sheets or regional exchanges only, unregistered, unlisted or de-listed, or not publicly traded, and general partner interests of any kind are not included in this definition. “Large Cap” REITs are those of an issuer having a market capitalization greater than $10 billion; “Mid Cap” are those with a market capitalization greater than $2 billion but no more than $10 billion; “Small Cap” are those with a market capitalization greater than $1 billion but no more than $2 billion; and “Micro Cap” are those with a market capitalization greater than $250 million but no more than $1 billion.

“ Unit Investment Trusts ” or “ UIT ” means investment companies regulated primarily under Sections 4 and 26 of the 40 Act that are invested primarily in municipal securities or securities of domestic corporations and which have greater than $100,000,000.00 in total assets under management and a FMV greater than or equal to $4.00 per share. Leveraged and inverse or “bear market” funds, non-networked funds, funds invested primarily in private equity, private placements, limited partnership interests, or venture capital enterprise, funds organized under the laws of, and/or operated from within, countries other than the United States of America, and face-amount certificate and management companies are not included in this definition.

“ U.S. Government Obligations ” means U.S. Treasury Bills, U.S. Treasury Bonds and Notes, U.S. Government Zero Coupon Bonds, Government National Mortgage Association fixed income securities and U.S. Government sponsored enterprise (Federal Home Loan Banks, Federal National Mortgage Association,  Federal Home Loan Mortgage Corporation, Government National Mortgage Association, Federal Farm Credit  Banks, and Federal Agricultural Mortgage Corporation) fixed income securities. “Short Term” U.S. Government Obligations are those with 5 years or less remaining until date of maturity; all others are “Longer Term”.

“ Wells Fargo Deposits ” means acceptable certificates of deposit and savings accounts of Wells Fargo Bank, National Association, in the Securities Account or otherwise directly pledged as collateral for the Indebtedness. Wells Fargo Command accounts, 7-day CD’s, callable CD’s, demand deposit, money market and uninsured deposit accounts of any kind, brokered and market linked certificates  of deposit, and deposits or accounts of any other financial institution are not included in this definition.

“ Wells Fargo Market Linked Certificates of Deposit ” or “ WFMLCD ” means a FDIC insured and CUSIP numbered certificates of deposit issued by Wells Fargo Bank, NA which provide at maturity the return of the entire original deposit amount and an interest payment based on performance of a specified market measure during the term thereof, which may be liquidated at any time without penalty or fee, which are not subject to any lock up periods, and which have no more than 96 months remaining until maturity. Market linked certificates of deposit not FDIC insured, lacking a CUSIP number, of issuers other than Wells Fargo Bank, N.A., returning only a portion of the original deposit amount, or subject to liquidation fees or penalties or lock up periods of any kind, are not included in this definition.

“ Wells Fargo Market Linked Notes ” or “ WFMLN ” means CUSIP  numbered notes issued by Wells Fargo & Company which provide at maturity the return of the entire original principal amount and an interest payment based on performance of a specified market measure during the term thereof, which may be liquidated at any time without penalty or fee, which are not subject to any lock up periods, and which have no more than 96 months remaining until maturity. Market linked notes lacking a CUSIP number, of issuers other than Wells Fargo & Company, returning only a portion of the original principal amount, or subject to liquidation fees or penalties or lock up periods of any kind, are not included in this definition.

5.   CONTINUING AGREEMENT; REVOCATION; OBLIGATION UNDER OTHER AGREEMENTS . This is a continuing agreement and all rights, powers and remedies under this Agreement shall apply to all past, present and future Indebtedness of each of the Obligors to Bank, including that arising under successive transactions which shall either continue the Indebtedness, increase or decrease it, or from time to time create new Indebtedness after all or any prior Indebtedness has been satisfied, and notwithstanding the death, incapacity, dissolution, liquidation or bankruptcy of any of the Obligors or Debtor or any other event or proceeding affecting any of the Obligors or Debtor. For any Debtor that is not also an Obligor, this Agreement shall not apply to any new Indebtedness created after actual receipt by Bank of written notice of its revocation as to such new Indebtedness; provided however, that loans or advances  made by Bank to any of the Obligors after revocation under commitments existing prior to receipt by
 
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Bank of such revocation, and extensions, renewals or modifications, of any kind, of Indebtedness incurred by any of the Obligors or committed by Bank prior  to receipt by Bank of such revocation, shall not be considered new Indebtedness. Any such notice must be sent to Bank by registered U.S. mail, postage prepaid, addressed to its office at 1000 Louisiana St 2nd Floor Houston, TX 77002, or at such other address as Bank shall from time to time designate. The obligations of Debtor under this Agreement shall be in addition to any obligations of Debtor under any other grants or pledges of security for any liabilities or obligations of any of the Obligors or any other person heretofore or hereafter given to Bank unless said other grants or pledges of security are expressly modified or revoked in writing; and this Agreement shall not, unless expressly provided in this Agreement, affect or invalidate any such other grants or pledges of security.

6.   OBLIGATIONS JOINT AND SEVERAL; SEPARATE ACTIONS; REINSTATEMENT OF LIABILITY. The obligations under this Agreement are joint and several and independent of the obligations of Obligors, and a separate action or  actions may be brought and prosecuted against Debtor whether action  is brought against any of the Obligors or any other person, or whether any of the Obligors or any other person is joined in any such action or actions. Debtor acknowledges no conditions precedent to the effectiveness of this Agreement remain unfulfilled, and this Agreement is binding on Debtor regardless of whether Bank obtains collateral or any guaranties from others or takes any other action contemplated by Debtor. The Debtor’s obligations and the Bank’s right. under this Agreement will be reinstated to the extent amounts paid on account of any Indebtedness secured by this Agreement must be restored by Bank. The determination as to whether any amount paid must be restored will be made by Bank in its sole discretion; provided however, that if Bank contests any such matter at Debtor’s request, Debtor agrees to indemnify and hold Bank harmless from and against all costs and expenses, including reasonable attorneys’ fees.

7.   REPRESENTATIONS AND WARRANTIES.

7.1   Debtor represents and warrants to Bank that: (a) Debtor owns and has the exclusive right to pledge and grant a security interest in the Collateral and Proceeds which are free from liens and adverse claims of any kind, except the lien created by this Agreement or any other agreement with Bank, or as otherwise disclosed by Debtor to Bank in writing prior to the effective date of this Agreement; (b) no financing statement or control agreement purporting to cover any of the Collateral or Proceeds, and naming any secured party other than Bank, exists or is on file in any public office or remains in effect; and (c) no person or entity, other than Debtor, Bank and Intermediary, has any interest in or control over the Collateral.·

7.2   Each Debtor who is not an Obligor further represents and warrants to Bank that: (a) the Collateral is pledged at Obligors’ request; (b) Bank has made no representation to Debtor as to the creditworthiness of any Obligor and (c) Debtor has established adequate means of obtaining directly from each Obligor on a continuing basis information pertaining to Obligor’s financial condition, and Bank shall have no obligation to disclose to Debtor any information about any Obligor which is acquired by Bank in any manner.

8.   COVENANTS OF DEBTOR. Debtor agrees to execute and deliver any documents Bank deems necessary to create, perfect and continue the security interests under this Agreement and to obtain such agreements from third parties as Bank deems necessary, proper or convenient in connection with the preservation, perfection or enforcement of its rights under this Agreement. Unless Bank agrees otherwise in writing, Debtor agrees: (a) that Bank is authorized to file financing statements in the name of Debtor to perfect Bank’s security interest in Collateral and Proceeds; (b) not to permit any security interest in or lien on the Collateral or Proceeds, except in favor of Bank and except liens in favor of Intermediary to the extent expressly permitted by Bank in writing; and (c) not to hypothecate or permit the transfer by operation of law of any of the Collateral or Proceeds or any interest therein, nor withdraw any funds from any deposit account pledged to Bank under this Agreement. Debtor further agrees that any party now or at any time hereafter authorized by Debtor to advise or otherwise act with respect to the Securities Account shall be subject to all terms and conditions contained in this Agreement and in any control, custodial or other similar agreement that at any time be in effect among Bank, Debtor and Intermediary relating to the Collateral.

9.   POWERS OF BANK. Debtor irrevocably appoints Bank its attorney-in-fact for the duration of this Agreement to perform any of the following powers, which are coupled with an interest, and which may be exercised from time to time by Bank whether or not any of the Obligors or Debtor is in default: (a) to perform any obligation of Debtor under this Agreement; (b) to notify any person obligated on any security, instrument or other document subject to this Agreement of Bank’s rights under this Agreement; (c) to collect by legal proceedings or otherwise  all dividends, interest, principal or other sums now or hereafter payable upon or on account of the Collateral or Proceeds; (d) to
 
1483256/Page 6

exercise all rights, powers and remedies which Debtor would have, but for this Agreement, with respect to all Collateral and Proceeds subject hereto; and (e) to do all acts and things and execute all documents in the name of Debtor or otherwise, deemed by Bank as necessary in preserving, protecting or enforcing of its rights under this Agreement. To fulfill the purposes of this Agreement, Bank may cause any Collateral and/or Proceeds to be transferred to Bank’s name or the name of Bank’s nominee.

10.   DEBTOR’S WAIVERS.

10.1   Each of Debtor who is not an Obligor waives any right to require Bank to: (a) proceed against any of the Obligors or any other person; (b) marshal assets or proceed against or exhaust any security held from any of the Obligors or any other person; (c) give notice of the terms, time and place of any public or private sale or other disposition of personal property security held from any of the Obligors or any other person; (d) take any other action or pursue any other remedy in Bank’s power; or (e) make any presentment or demand for performance, or give any notices of any kind, including without limitation, any notice of nonperformance, protest, notice of protest, notice of dishonor, notice of intention to accelerate or notice of acceleration under this Agreement or in connection with any obligations or evidences of indebtedness held by Bank as security for or which constitute in whole or in part the Indebtedness guaranteed or secured by this Agreement. or in connection  with the creation of new or additional Indebtedness.

10.2   Each of Debtor who is not an Obligor waives any defense to its obligations under this Agreement based upon or arising by reason of: (a) any disability or other defense of any of the Obligors or any other  person; (b) the cessation or limitation from any cause whatsoever,  other than payment in full, of the Indebtedness of any of the Obligors or any other person; (c) any lack of authority of any officer, director, partner, agent or any other person acting or purporting to act on behalf of any of the Obligors which is a corporation, partnership or other type of entity, or any defect in the formation of any of such Obligors; (d) the application by any of the Obligors of the proceeds of any Indebtedness for purposes other than the purposes represented by Obligors to, or intended or understood by, Bank or Debtor; (e) any act or omission by Bank which directly or indirectly results in or aids the discharge of any of the Obligors or any portion of the Indebtedness by operation of law or otherwise, or which in any way impairs or suspends any rights or remedies of Bank against any of the Obligors; (f) any impairment of the value of any interest in any security for the Indebtedness or any portion thereof, including without limitation, the failure to obtain or maintain perfection or recordation of any interest in any such security, the release of any such security without substitution, and/or the failure to preserve the value of, or to comply with applicable law in disposing of, any such security; (g) any modification of the Indebtedness, in any form whatsoever, including any modification made after revocation hereof to any Indebtedness incurred prior to such revocation, and including without limitation the renewal, extension, acceleration or other change in time for payment of, or other change in the terms of, the Indebtedness or any portion thereof, including increase or decrease of the rate of interest thereon; or (h) any requirement that Bank give any notice of acceptance of this Agreement. Until all Indebtedness shall have been paid in full, Debtor shall have no right of subrogation, and Debtor waives any right to enforce any remedy which Bank now has or may hereafter have against any of the Obligors or any other person, and waives any benefit of, or any right to participate in, any security now or hereafter held by Bank. Debtor further waives all rights and defenses Debtor may have arising out of (i) any election of remedies by Bank, even though that election of remedies, such as a non-judicial foreclosure with respect to any security for any portion of the Indebtedness, destroys Debtor’s rights of subrogation or Debtor’s rights to proceed against any of the Obligors for reimbursement, or (ii) any loss of rights Debtor may suffer by reason of any rights, powers or remedies of any of the Obligors in connection. with any anti-deficiency laws or any other laws limiting, qualifying or discharging Obligors’ Indebtedness, whether by operation of law or otherwise, including any rights Debtor may have to a FMV hearing to determine the size of a deficiency following any foreclosure sale or other disposition of any real property security for any portion of the Indebtedness.

10.3   By signing this Agreement, Debtor waives (a) each and every right to which it may be entitled by virtue of any suretyship law, including without limitation, any rights arising pursuant to Section 17.001 and Chapter 43 of the Texas Civil Practice and Remedies Code and Rule 31 of the Texas Rules of Civil Procedure, as the same may be amended from time to time, and (b) without limiting any of the waivers set forth herein, any other fact or event that, in the absence of this provision, would or might constitute or afford a legal or equitable discharge or release of or defense to Debtor.

11.   AUTHORIZATIONS TO BANK. Each of Debtor who is not an Obligor authorizes Bank either before or after revocation hereof, without notice to or demand on such Debtor, and without affecting such Debtor’s liability under this Agreement, from time to time to: (a) alter, compromise, renew, extend, accelerate or otherwise change the time for


1483256/Page 7

payment of, or otherwise change the terms of, the Indebtedness or any portion thereof, including increase or decrease of the rate of interest thereon; (b) take and hold security, other than the Collateral and Proceeds, for the payment of the Indebtedness or any portion thereof, and exchange, enforce, waive, subordinate or release the Collateral and Proceeds, or any part thereof, or any such other security; (c) apply the Collateral and Proceeds or such other security and direct the order or manner of sale thereof, including without limitation, a non-judicial sale permitted by the terms of the controlling security agreement, mortgage or deed of trust, as Bank in its discretion may determine; (d) release or substitute any one or more of the endorsers or guarantors of the Indebtedness, or any portion thereof, or any other party thereto; and (e) apply payments received by Bank from any of the Obligors to any Indebtedness of any of the Obligors to Bank, in such order as Bank shall determine in its sole discretion, whether or not such Indebtedness is covered by this Agreement, and Debtor hereby waives any provision of law regarding application of payments which specifies otherwise. Bank may without notice assign this Agreement in whole or in part.

12.   EVENTS OF DEFAULT. The occurrence of any of the following shall constitute an “Event of Default” under this Agreement: (a) any default in the payment or performance of any obligation, or any defined event of default, under (i) any contract or instrument evidencing any Indebtedness, or (ii) any control, custodial or other similar agreement in effect among Bank, Debtor and Intermediary relating to the Collateral; (b) any representation or warranty made by Debtor in this Agreement shall prove to be incorrect in any material respect when made; (c) Debtor shall fail to observe or perform any obligation or agreement contained in this Agreement; or (d) any impairment of the rights of Bank in any Collateral or Proceeds or any attachment or like levy on any property of Debtor.

13.   REMEDIES . Following an Event of Default, Bank may exercise without demand any and all rights and remedies granted to a secured party upon default under the Texas Business and Commerce Code or other applicable law, including without limitation, the right (a) to instruct any intermediary, issuer, custodian or other party maintaining the Collateral or Proceeds to deliver all Collateral and/or Proceeds directly to Bank, and (b) to engage in electronic self-help or otherwise sell or dispose of any Collateral. All rights and remedies of Bank are cumulative. No delay or failure of Bank to exercise any right or remedy affects or waives that right or remedy; nor does a single or partial exercise of any right or remedy preclude or waive any further exercise of that or any other right or remedy. Any waiver of any Event of Default or any of the terms of this Agreement must be in writing. It is agreed that public or private sales or other disposition, including auctions, to any purchaser, for cash or on credit, are commercially reasonable. While an Event of Default exists: (a) Debtor will not dispose of any Collateral or Proceeds except on terms approved by Bank; (b) Bank may appropriate the Collateral and apply all Proceeds to Indebtedness in such order as Bank may determine; and (c) Bank may take any action with respect to the Collateral contemplated by any control, custodial or other similar agreement then in effect among Bank, Debtor and Intermediary, and Bank may, at any time and at Bank’s sole discretion, liquidate any Collateral consisting of time deposits and apply the Proceeds to the Indebtedness, regardless of whether or not the time deposits have matured or that liquidation gives rise to penalties for early withdrawal. Bank may elect to not delay a disposition of securities for any period of time necessary to permit registration for public sale under applicable law, even if the issuer is agreeable  to registration. Debtor further agrees that Bank shall have no obligation to process or prepare any Collateral for sale or other disposition.

14.   DISPOSITION OF COLLATERAL AND PROCEEDS;  TRANSFER OF INDEBTEDNESS. Any proceeds of any disposition of any Collateral or Proceeds, may be deposited to a non-interest bearing deposit account or applied by Bank to the payment of its expenses, including reasonable attorneys’ fees, and the balance of such proceeds may be applied to the Indebtedness in such order of application as Bank may in its discretion elect. Bank may transfer all or any part of the Indebtedness, as well as any part of the Collateral or Proceeds and shall be fully  discharged’ thereafter from all liability and responsibility with respect to any of the foregoing so transferred, and the transferee shall be vested with all rights and powers of Bank hereunder with respect to any of the foregoing so transferred; but with respect to any Collateral or Proceeds not so transferred, Bank shall retain all rights and remedies under this Agreement.

15.   NOTICES. All notices, requests and demands required under this Agreement must be in writing, addressed to Bank at the address specified above and to Debtor at the address of its chief executive office (or principal residence, if applicable) specified below or to such other address as any party may designate by written notice to each other party, and shall be deemed to have been given or made as follows: (a) if personally delivered,  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 facsimile, by electronic  mail (“e-mail”) or by any proprietary electronic service offered by Bank, if separately agreed to by Bank and Debtor, upon the sender’s receipt of a facsimile confirmation or
 
1483256/Page 8
 
an acknowledgement from the intended recipient, such as the “return receipt requested” function, return e-mail, or other forms of acknowledgement as may be applicable.

16.   COSTS, EXPENSES AND ATTORNEYS’ FEES. Debtor shall pay to Bank immediately upon demand the Bank’s expenses, including reasonable attorneys’ fees, incurred by Bank in connection with (a} the perfection and preservation of the Collateral or Proceeds, and (b) the enforcement and exercise of any right or remedy conferred by this Agreement.

17.   SUCCESSORS; ASSIGNMENT. This Agreement shall be binding upon the heirs, executors, administrators, legal representatives, successors and assigns of the parties; provided however, that Debtor may not assign or transfer any of its interests or rights under this Agreement without Bank’s prior written consent. Bank may sell, assign, transfer, negotiate or grant participations in all or any part of, or any interest in, any Indebtedness of Obligors to Bank and any obligations with respect thereto, including this Agreement. In connection therewith, Bank may disclose all documents and information which Bank now has or hereafter acquires relating to Debtor and/or this Agreement, whether furnished by Obligors, Debtor or otherwise. Debtor further agrees that Bank may disclose such documents and information to Obligors.

18.   ENTIRE AGREEMENT; AMENDMENT. This Agreement constitutes the entire agreement between Debtor and Bank and supersedes all prior negotiations, communications, discussions and correspondence concerning the subject matter. No agreement to amend or modify this Agreement shall be effective unless memorialized in writing that states it is intended to amend or modify this Agreement.

19.   OBLIGATIONS OF MARRIED PERSONS. Any Debtor who is a married person agrees that recourse may be had against his or her separate property (as well as all marital property) for all his or her Indebtedness to Bank secured by the Collateral and Proceeds under this Agreement.

20.   APPLICATION OF SINGULAR AND PLURAL. If there is but a single Obligor, all words used in the plural shall be deemed to have been used in the singular where the context and construction so require; and when there is more than one Obligor, or when this Agreement is executed by more than one Debtor, “Obligors” and “Debtor” respectively shall mean all or any one or more of them as the context requires.

21.   SEVERABILITY; COUNTERPARTS; GOVERNING LAW . If any provision of this Agreement shall be determined to be invalid under applicable law, the provision shall be ineffective only to the extent of the invalidity, without invalidating any remaining provisions of this Agreement. This Agreement may be executed in as many counterparts as may be required to reflect all parties assent; all counterparts will collectively constitute a single agreement. This Agreement shall be governed by and construed in accordance with the laws of the State of Texas.

22.   ELECTION FOR ELECTRONIC COMMUNICATIONS AND SIGNATURES. To facilitate execution of this Agreement, this Agreement and each promissory note, contract, instrument and other document  required by this Agreement or at any time delivered to Bank in connection with the Collateral, any Proceeds, or the Indebtedness secured by this Agreement, or as a condition to the execution of this Agreement, may be executed by one or more of Debtor or Bank in the form of an “Electronic Record” (as such term is defined in the Electronic Signatures in Global and National Commerce Act at 15 U.S.C. §7001 et seq. (“ESIGN Act”)). An “Electronic Signature” (as defined in ESIGN) will constitute an original and binding signature of Bank and Debtor 1 The fact that a document is in the form of an Electronic Record and/or is signed using an Electronic Signature will not, in and of itself, be grounds  for invalidating such document. When information (such as a disclosure, notice, permission, waiver, demand or amendment) is to be provided in writing under this Agreement, that writing may be provided by electronic means and in an electronic format.

This election for electronic communications and signatures is subject to the following conditions; (a} the prior consent of Debtor, and if Debtor is a “Consumer” (as defined by ESIGN Act) such consent must be obtained in accordance with the ESIGN Act, (b) the prior consent of Bank and (c) utilization of an electronic transmission process with audit, security and authentication controls satisfactory to Bank. Notwithstanding any election for electronic communication, Bank may always in its sole discretion provide to Debtor or require from Debtor information in writing in a paper format.


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Any writing (whether on paper or in electronic format) prepared by Debtor and delivered to Bank will be deemed materially true, correct and complete by Debtor and each officer or employee of Debtor who prepared and authenticated same, and may be legally relied upon by Bank without regard to the medium in which the record is maintained or the method of delivery or transmission.

23.   ARBITRATION. Debtor and Bank agree any claim, dispute, or controversy arising between Debtor and Bank under or relating to this Agreement, the Collateral, any Proceeds, or the Indebtedness, upon the demand of either Debtor or Bank, will be resolved through the arbitration process established by the loan documents evidencing the Indebtedness, a true and correct copy of which Debtor acknowledges has been made available to Debtor.

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, this Agreement has been duly executed as of the day and year first above written.
 
 
  /s/ Peter L. Dalrymple                                   
Peter L. Dalrymple
13451 Belhaven Drive
Houston, TX 77069
 
 
 
  /s/ Marlene Dalrymple                                 
Marlene Dalrymple
13451 Belhaven Drive
Houston, TX 77069
1483256/Page 10
 
EXHIBIT 10.6
 
 
FINANCING AGREEMENT

This Financing Agreement (this “ Agreement ”) is dated as of September 8, 2017, by and among Spine Injury Solutions, Inc. , a Delaware corporation (the “ Company ”), and Peter Dalrymple , an individual whose address is 13451 Belhaven, Houston TX 77069 (“ Dalrymple ”).
Recitals
WHEREAS, the Company obtained a Revolving Line of Credit with Wells Fargo Bank, National Association (the “Bank” ), of $2,000,000 in August, 2014, which was due August 31, 2017; and
WHEREAS, the Bank has agreed to an Amended and Restated Revolving Line of Credit Note in the amount of $1,750,000 (the “Amended Line of Credit Note” ); and
WHEREAS, the Bank requires that Dalrymple pledge certain collateral pursuant to the Amended Line of Credit Note in order to enter into the Amended Line of Credit Note with the Company; and
WHEREAS, Dalrymple is willing to pledge certain collateral to the Amended Line of Credit Note, subject to the terms of this Agreement; and
WHEREAS, the Company entered into a 12% Secured Promissory Note dated August 29, 2012, in the original principal amount of $1,000,000 payable to Dalrymple (the “Promissory Note” ); and
WHEREAS, the Company provided Dalrymple with certain collateral pursuant to a Security Agreement dated August 29, 2012 (the “Security Agreement” ) in connection with the Promissory Note; and
WHEREAS, the Promissory Note has been subsequently amended and extended; and
WHEREAS, the Promissory Note currently has an outstanding balance of $250,000; and
WHEREAS, the Company and Dalrymple have agreed to enter into an Amended and Restated Secured Promissory Note in connection with the Promissory Note; and
WHEREAS, the Company and Dalrymple have agreed to enter into an Amended Security Agreement to amend the Security Agreement, which provided for collateral to Dalrymple in connection with the Promissory Note.
Now, Therefore, in consideration   of the mutual covenants contained in this Agreement, and for other good and valuable consideration, the receipt and adequacy of which are hereby acknowledged, the Company and Dalrymple hereby agree as follows:
1.   Dalrymple hereby agrees to enter into an Amended and Restated Security Agreement with the Bank to provide certain collateral required by the Bank in connection with the Amended Line of Credit Note.
2.   In consideration for Dalrymple entering into the Amended and Restated Security Agreement with the Bank, and the Amended and Restated Secured Promissory Note with the Company, the Company has agreed to enter into an Amended Security Agreement with Dalrymple (the “Amended Security Agreement” ) to provide certain collateral to Dalrymple as provided in the Amended Security Agreement, specifically the Company shall provide collateral to Dalrymple in an amount of $3,000,000 in
Gross Accounts Receivable of the Company as set forth in the Amended Security Agreement of even date herewith.  “Gross Accounts Receivable” means the gross amounts billed using Current Procedural Terminology Codes without applying an allowance for doubtful accounts (the “Collateral” ) as set forth in the Amended Security Agreement.
3.   This Agreement contains the entire understanding of the parties with respect to the subject matter thereof and supersedes all prior agreements, understandings, discussions and representations, oral or written, with respect to such matters.
4.   Any notices or other communications required or permitted hereunder shall be sufficiently given if in writing and delivered in person or sent by registered or certified mail (return receipt requested) or nationally recognized overnight delivery service, postage pre-paid, addressed as follows, or to such other address has such party may notify to the other parties in writing:

If to the Company:
Spine Injury Solutions, Inc.
5225 Katy Freeway #600
Houston, TX 77007
 
If to Dalrymple:
Peter Dalrymple
13451 Belhaven
Houston, TX 77069

A notice or communication will be effective (i) if delivered in person or by overnight courier, on the business day it is delivered and (ii) if sent by registered or certified mail, three (3) business days after dispatch .
5.   Neither this Agreement nor any provision hereof may be amended, modified or supplemented unless in writing, executed by all the parties hereto.  Except as otherwise expressly provided herein, no waiver with respect to this Agreement shall be enforceable unless in writing and signed by the party against whom enforcement is sought.  Except as otherwise expressly provided herein, no failure to exercise, delay in exercising, or single or partial exercise of any right, power or remedy by any party, and no course of dealing between or among any of the parties, shall constitute a waiver of, or shall preclude any other or further exercise of, any right, power or remedy.
6.   The provisions of this Agreement shall inure to the benefit of and be binding upon the parties and their successors and permitted assigns. This Agreement, or any rights or obligations hereunder, may not be assigned by the Company without the prior written consent of Dalrymple.
7.   This Agreement is intended for the benefit of the parties hereto and their respective successors and permitted assigns and is not for the benefit of, nor may any provision hereof be enforced by, any other person.
8.   All questions concerning the construction, validity, enforcement and interpretation of this Agreement shall be governed by and construed and enforced in accordance with the internal laws of the State of Texas, without regard to the principles of conflict of laws thereof.  Each party agrees that all legal proceedings concerning the interpretation, enforcement and defense of this Agreement (whether brought against a party hereto or its respective Affiliates, directors, officers, shareholders, employees or agents) shall be commenced in the state or federal courts sitting in Harris County, Texas (the “ Harris County Courts ”).  Each party hereto hereby irrevocably submits to the exclusive jurisdiction of the Harris County Courts for the adjudication of any dispute hereunder or in connection herewith or with any transaction contemplated hereby or discussed herein, and hereby irrevocably waives, and agrees not to assert in any
Page 2 – Financing Agreement
suit, action or proceeding, any claim that it is not personally subject to the jurisdiction of such Harris County Courts, or that such Harris County Courts are improper or inconvenient venue for such proceeding.
9.   This Agreement may be executed in two or more counterparts, all of which when taken together shall be considered one and the same agreement and shall become effective when counterparts have been signed by each party and delivered to the other party, it being understood that the parties need not sign the same counterpart. In the event that any signature is delivered by facsimile transmission, or by e-mail delivery of a “ .pdf ” format data file, such signature shall create a valid and binding obligation of the party executing (or on whose behalf such signature is executed) with the same force and effect as if such facsimile or “ .pdf ” signature page were an original thereof.
10.   If any provision of this Agreement is held to be invalid or unenforceable in any respect, the validity and enforceability of the remaining terms and provisions of this Agreement shall not in any way be affected or impaired thereby and the parties will attempt to agree upon a valid and enforceable provision that is a reasonable substitute therefor and achieves that same or substantially the same effect or result, and upon so agreeing, shall incorporate such substitute provision in this Agreement.
IN WITNESS WHEREOF , the parties hereto have caused this Agreement to be duly executed by their respective authorized signatories as of the date first indicated above.

SPINE INJURY SOLUTIONS, INC.

By:   /s/ William F. Donovan  
Name:  William F. Donovan
Title:  President

/s/ Peter Dalrymple __________________________
PETER DALRYMPLE
Page 3 – Financing Agreement
 
AMENDED AND RESTATED
SECURED PROMISSORY NOTE
OF
SPINE INJURY SOLUTIONS, INC.
(FORMERLY SPINE PAIN MANAGEMENT, INC.)

This Amended and Restated Secured Promissory Note of Spine Injury Solutions, Inc. (formerly Spine Pain Management, Inc.), a Delaware corporation (the “Company”) dated September 8, 2017, is entered into between the Company and Peter Dalrymple (the “Holder”).

WHEREAS, the Company entered into a Secured Promissory Note dated August 29, 2012, in the original principal amount of $1,000,000 made payable to the order of the Holder (the “Promissory Note”); and

WHEREAS , the Promissory Note was amended on September 8, 2014, whereby the interest rate was reduced from 12% to 6% and the maturity date was extended from August 29, 2015 to August 29, 2016.  The Promissory Note was further amended in August, 2016, to extend the maturity date to August 29, 2017; and

WHEREAS, the Company and the Holder desire to amend and restate the Promissory Note in its entirety to reflect as of the date of execution hereof the terms, conditions, principal amount and security of the Promissory Note.

THEREFORE, it is agreed by the Company and the Holder to amend and restate the Promissory Note in its entirety as follows:

“AMENDED AND RESTATED
SECURED PROMISSORY NOTE
OF
SPINE INJURY SOLUTIONS, INC.
(FORMERLY SPINE PAIN MANAGEMENT, INC.)


CERTIFICATE: SPIN-S.P.N NO.1-A          AMENDED ORIGINAL ISSUE DATE: SEPT. 8, 2017


SECURED PROMISSORY NOTE
OF
SPINE INJURY SOLUTIONS, INC.
(FORMERLY SPINE PAIN MANAGEMENT, INC.)


FOR VALUE RECEIVED, SPINE INJURY SOLUTIONS, INC., a Delaware corporation with its principal office located at 5225 Katy Freeway, Suite 600, Houston, Texas 77007 (the “Company” ), unconditionally promises to pay to PETER DALRYMPLE , whose address is  13451
Amended and Restated Secured Promissory Note – Page 1
Belhaven Dr., Houston, TX, 77069, or the registered assignee, upon presentation of this Amended and Restated Secured Promissory Note (the “Promissory Note” ) by the registered holder hereof (the “Holder” ) at the office of the Company, the principal sum of $250,000 (the “Principal Amount” ), together with any accrued and unpaid interest thereon, subject to the terms and conditions set forth below, on September 8, 2018 (the “Maturity Date” ), if not sooner paid.  The effective date of execution and issuance of this Promissory Note is September 8, 2017 (“Amended Original Issue Date ”).

The following terms shall apply to this Promissory Note:

1.   Schedule for Payment of Principal and Interest .  The Company shall pay to the Holder eleven (11) monthly payments of interest only on the Principal Amount outstanding hereunder, in cash, in arrears, at the rate of six percent (6%) per annum from the Amended Original Issuance Date, commencing on October 8, 2017, and continuing thereafter on the 8 th   day of each successive month throughout the term of this Promissory Note.  On the Maturity Date, the Company shall pay the Holder one balloon payment of the entire outstanding Principal Amount of this Promissory Note plus any accrued and unpaid interest thereon.

2.   Payment .  Payment of any sums due to the Holder under the terms of this Promissory Note shall be made in United States Dollars by check or wire transfer at the option of the Company.  Payment shall be made at the address last appearing on the records of the Company as designated in writing by the Holder hereof from time to time.  If any payment hereunder would otherwise become due and payable on a day on which banks are closed or permitted to be closed in Houston, Texas, such payment shall become due and payable on the next succeeding day on which banks are open and not permitted to be closed in Houston, Texas (“ Business Day ”).  The forwarding of such funds shall constitute a payment of outstanding principal and/or interest hereunder and shall satisfy and discharge the liability for principal and interest on this Promissory Note to the extent of the sum represented by such payment.

3.   Representations and Warranties of the Company .  The Company represents and warrants to the Holder that:

(a)   Organization .  The Company is validly existing and in good standing under the laws of the State of Delaware and has the requisite power to own, lease and operate its properties and to carry on its business as now being conducted.

(b)   Power and Authority .   The Company has the requisite power to execute, deliver and perform this Promissory Note, and to consummate the transactions contemplated hereby.  The execution and delivery of this Promissory Note by the Company and the consummation of the transactions contemplated hereby have been duly authorized by all necessary corporate action on the part of the Company.  This Promissory Note has been duly executed and delivered by the Company and constitutes a legal, valid and binding obligation of the Company and is enforceable against the Company in accordance with its terms except (i) that such enforcement may be subject to bankruptcy, insolvency, moratorium or similar laws affecting creditors’ rights and (ii) that the remedy of specific performance and injunctive and other forms of equitable relief are subject to certain
Amended and Restated Secured Promissory Note – Page 2
equitable defenses and to the discretion of the court before which any proceedings therefor may be brought.

4.   Events of Defaults and Remedies .  Each of the following is deemed to be an event of default (“ Event of Default ”) hereunder: (i) the failure by the Company to pay any installment of interest on the Promissory Note as and when due and payable and the continuance of any such failure for 15 days, (ii) the failure by the Company to pay all or any part of the principal on the Promissory Note when and as the same becomes due and payable, as set forth above, and the continuance of any such failure for 15 days, (iii) the failure by the Company to observe or perform any other covenant or agreement contained in the Promissory Note and the continuance of such failure for a period of 30 days after written notice is given to the Company by the Holder, (iv) the assignment by the Company for the benefit of creditors, or an application by the Company to any tribunal for the appointment of a trustee or receiver of a substantial part of the assets of the Company, or the commencement of any proceedings relating to the Company under any bankruptcy, reorganization, arrangement, insolvency, readjustment of debts, dissolution or other liquidation law of any jurisdiction; or the filing of such application, or the commencement of any such proceedings against the Company and an indication of consent by the Company to such proceedings, or the appointment of such trustee or receiver, or an adjudication of the Company bankrupt or insolvent, or approval of the petition in any such proceedings, and such order remains in effect for 60 days; or (v) a default in the payment of principal or interest when due which extends beyond any stated period of grace applicable thereto or an acceleration for any other reason of maturity of any indebtedness for borrowed money of the Company with an aggregate principal amount in excess of $2,000,000 and (vi) final unsatisfied judgments not covered by insurance aggregating in excess of $2,000,000, at any one time rendered against the Company and not stayed, bonded or discharged within 75 days.

If an Event of Default occurs and is continuing (other than an Event of Default specified in clause (v) above with respect to the Company), then in every such case, unless the Principal Amount of the Promissory Note shall have already become due and payable, the Holder of the Promissory Note then outstanding, by notice in writing to the Company (an “Acceleration Notice”), may declare all principal and accrued and unpaid interest thereon to be due and payable immediately.  If an Event of Default specified in clause (v) above occurs with respect to the Company, all principal and accrued and unpaid interest thereon will be immediately due and payable on the Promissory Note without any declaration or other act on the part of the Holder.  The Holder may rescind such acceleration if the existing Event of Default has been cured or waived.

5.   Default Interest .  The Company agrees that if the Company defaults in the payment of any payment required hereunder, whether payment of Principal Amount or interest, the Company promises to pay, on demand, interest on any such unpaid amounts, from the date the payment is due to the date of actual payment, at the rate (the “ Default Rate ”) of the lesser of (i) 12% per annum; and (ii) the maximum nonusurious rate permitted by applicable law.
6.   Limitation on Merger, Sale or Consolidation .  The Company may not, directly or indirectly, consolidate with or merge into another person or sell, lease, convey or transfer all or substantially all of its assets (computed on a consolidated basis), whether in a single transaction or a series of related transactions, to another person or group of affiliated persons, unless either (a) in the
Amended and Restated Secured Promissory Note – Page 3
case of a merger or consolidation, the Company is the surviving entity or (b) the resulting, surviving or transferee entity is a corporation or limited liability company organized under the laws of any state of the United States and expressly assumes by supplemental agreement all of the obligations of the Company in connection with the Promissory Note.

Upon any consolidation or merger or any transfer of all or substantially all of the assets of the Company in accordance with the foregoing, the successor corporation or limited liability company formed by such consolidation or into which the Company is merged or to which such transfer is made, shall succeed to, and be substituted for, and may exercise every right and power of the Company under the Promissory Note with the same effect as if such successor corporation or limited liability company had been named therein as the Company, and the Company will be released from its obligations under the Promissory Note, except as to any obligations that arise from or as a result of such transaction.

7.   No Personal Liability of Shareholders, Officers, Directors .  No recourse shall be had for the payment of the Principal Amount or the interest on this Promissory Note, or for any claim based thereon, or otherwise in respect thereof, or based on or in respect of any Promissory Note supplemental thereto, against any incorporator, stockholder, officer, or director (past, present, or future) of the Company, whether by virtue of any constitution, statute, or rule of law, or by the enforcement of any assessment or penalty or otherwise, all such liability being by the acceptance hereof, and as part of the consideration for the issue hereof, expressly waived and released.

8.   Listing of Registered Holder of Promissory Note .  This Promissory Note will be registered as to principal in the Holder’s name on the books of the Company at its principal office in Houston, Texas, after which no transfer hereof shall be valid unless made on the Company’s books at the office of the Company, by the Holder hereof, in person, or by attorney duly authorized in writing, and similarly noted hereon.

9.   Holder of Promissory Note Not Deemed a Stockholder .  No Holder, in his capacity as Holder of this Promissory Note shall be entitled to vote or receive dividends or be deemed the holder of shares of the Company for any purpose, nor shall anything contained in this Promissory Note be construed to confer upon the Holder hereof, in his capacity as Holder, any of the rights of a stockholder of the Company or any right to vote, give or withhold consent to any corporate action (whether any reorganization, issue of stock, reclassification of stock, consolidation, merger, conveyance or otherwise), receive notice of meetings, receive dividends or subscription rights, or otherwise.

10.   Waiver of Demand, Presentment, Etc .   The Company hereby expressly waives demand and presentment for payment, notice of nonpayment, protest, notice of protest, notice of dishonor, notice of acceleration or intent to accelerate, bringing of suit and diligence in taking any action to collect amounts called for hereunder and shall be directly and primarily liable for the payment of all sums owing and to be owing hereunder, regardless of and without any notice, diligence, act or omission as or with respect to the collection of any amount called for hereunder.

11.   Attorney’s Fees .   The Company agrees to pay all costs and expenses, including
Amended and Restated Secured Promissory Note – Page 4
without limitation reasonable attorney’s fees, which may be incurred by the Holder in collecting any amount due under this Promissory Note as described herein.

12.   Enforceability .   In case any provision of this Promissory Note is held by a court of competent jurisdiction to be excessive in scope or otherwise invalid or unenforceable, such provision shall be adjusted rather than voided, if possible, so that it is enforceable to the maximum extent possible, and the validity and enforceability of the remaining provisions of this Promissory Note will not in any way be affected or impaired thereby.

13.   Intent to Comply with Usury Laws .   In no event will the interest to be paid on this Promissory Note exceed the maximum rate provided by law.  It is the intent of the parties to comply fully with the usury laws of the State of Texas; accordingly, it is agreed that notwithstanding any provisions to the contrary in this Promissory Note, in no event shall such Promissory Note require the payment or permit the collection of interest (which term, for purposes hereof, shall include any amount which, under Texas law, is deemed to be interest, whether or not such amount is characterized by the parties as interest) in excess of the maximum amount permitted by the laws of the State of Texas.  If any excess of interest is unintentionally contracted for, charged or received under this Promissory Note, or in the event the maturity of the indebtedness evidenced by the Promissory Note is accelerated in whole or in part, or in the event that all of part of the Principal Amount or interest of this Promissory Note shall be prepaid, so that the amount of interest contracted for, charged or received under this Promissory Note, on the amount of the Principal Amount actually outstanding from time to time under this Promissory Note shall exceed the maximum amount of interest permitted by the applicable usury laws, then in any such event (i) the provisions of this paragraph shall govern and control, (ii) neither the Company nor any other person or entity now or hereafter liable for the payment thereof, shall be obligated to pay the amount of such interest to the extent that it is in excess of the maximum amount of interest permitted by such applicable usury laws, (iii) any such excess which may have been collected shall be either applied as a credit against the then unpaid principal amount thereof or refunded to the Company at the Holder’s option, and (iv) the effective rate of interest shall be automatically reduced to the maximum lawful rate of interest allowed under the applicable usury laws as now or hereafter construed by the courts having jurisdiction thereof.  It is further agreed that without limitation of the foregoing, all calculations of the rate of interest contracted for, charged or received under the Promissory Note which are made for the purpose of determining whether such rate exceeds the maximum lawful rate of interest, shall be made, to the extent permitted by applicable laws, by amortizing, prorating, allocating and spreading in equal parts during the period of the full stated term of the Promissory Note evidenced thereby, all interest at any time contracted for, charged or received from the Company or otherwise by the Holders in connection with this Promissory Note.

14.   Governing Law; Consent to Jurisdiction .  All questions concerning the construction, validity, enforcement and interpretation of this Promissory Note shall be governed by and construed and enforced in accordance with the internal laws of the State of Texas, without regard to the principles of conflict of laws thereof.  Each party agrees that all legal proceedings concerning the interpretation, enforcement and defense of the Promissory Note (whether brought against a party hereto or its respective Affiliates, directors, officers, shareholders, employees or agents) shall be commenced in the state or federal courts sitting in Harris County, Texas (the “ Harris County
Amended and Restated Secured Promissory Note – Page 5
Courts ”).  Each party hereto hereby irrevocably submits to the exclusive jurisdiction of the Harris County Courts for the adjudication of any dispute hereunder or in connection herewith or with any transaction contemplated hereby or discussed herein, and hereby irrevocably waives, and agrees not to assert in any suit, action or proceeding, any claim that it is not personally subject to the jurisdiction of such Harris County Courts, or that such Harris County Courts are improper or inconvenient venue for such proceeding.

15.   Amendment and Waiver .  Any waiver or amendment hereto shall be in writing signed by the Holder.  No failure on the part of the Holder to exercise, and no delay in exercising, any right hereunder shall operate as a waiver thereof, nor shall any single or partial exercise by the Holder of any right hereunder preclude any other or further exercise thereof or the exercise of any other rights.  The remedies herein provided are cumulative and not exclusive of any other remedies provided by law.

16.   Restrictions Against Transfer or Assignment .  This Promissory Note may not be sold, transferred, assigned, pledged, hypothecated or otherwise disposed of by the registered Holder hereof, in whole or in part, unless and until either (i) the Promissory Note (or the underlying shares herein) have been duly and effectively registered for resale under the Act and under any then applicable state securities laws; or (ii) the registered Holder delivers to the Company a written opinion acceptable to its counsel that an exemption from such registration requirements is then available with respect to any such proposed sale or disposition.  The Company has the absolute right, in its sole discretion, to approve or disapprove such transfer.  Any transfer otherwise permissible hereunder shall be made only at the principle office of the Company upon surrender of this Promissory Note for cancellation and upon the payment of any transfer tax or other government charge connected therewith, and upon any such transfer a new Promissory Note or Promissory Notes will be issued to the transferee in exchange therefor.  The transferee of this Promissory Note shall be bound by the provisions of this Promissory Note.  The register of the transfer of this Promissory Note shall occur upon the delivery of this Promissory Note, endorsed by the registered Holder or his duly authorized attorney, signature guaranteed, to the Company or its transfer agent.  Each Promissory Note instrument issued upon the transfer of this Promissory Note shall have the restrictive legend contained herein conspicuously imprinted on it.

17.   Lost or Mutilated Promissory Note .  If this Promissory Note shall be mutilated, lost, stolen or destroyed, the Company shall execute and deliver, in exchange and substitution for and upon cancellation of a mutilated Promissory Note, or in lieu of or in substitution for a lost, stolen or destroyed Promissory Note, a new Promissory Note for the principal amount of this Promissory Note so mutilated, lost, stolen or destroyed, but only upon receipt of evidence of such loss, theft or destruction of such Promissory Note, and of the ownership hereof, reasonably satisfactory to the Company and if requested by the Company, indemnity also reasonably satisfactory to the Company.

18.   Entire Agreement; Headings .  This Promissory Note constitutes the entire agreement between the Holder and the Company pertaining to the subject matter hereof and supersedes all prior and contemporaneous agreements, representations and understandings, written or oral, of such parties.  The headings are for reference purposes only and shall not be used in construing or interpreting this Promissory Note.
Amended and Restated Secured Promissory Note – Page 6

19.   Notices .  All notices and other communications provided for herein shall be in writing and shall be deemed to have been duly given if delivered personally, or sent by registered or certified mail, return receipt requested, postage prepaid, or overnight air courier guaranteeing next day delivery:
 
(a)   If to the Company, to it at the following address:

5225 Katy Freeway, Suite 600
Houston, Texas 77007
Attn: William F. Donovan

With a copy to:

Robert D. Axelrod
Axelrod, Smith & Kirshbaum
5300 Memorial Drive, Ste. 1000
Houston, Texas 77007

(b)   If to registered Holder, to it at the following address:

PETER DALRYMPLE
13451 Belhaven Dr.
Houston, TX 77069

A notice or communication will be effective (i) if delivered in person or by overnight courier, on the business day it is delivered and (ii) if sent by registered or certified mail, the date of actual receipt by the party to whom such notice is required to be given.

20.   Security for Payment .  This Promissory Note is secured by $3,000,000 in gross accounts receivable of the Company as set forth in the Security Agreement entered into between the parties of even date herewith.  “Gross accounts receivable” means the gross amounts billed using Current Procedural Terminology codes without applying an allowance for doubtful accounts (the “Collateral”).

IN WITNESS WHEREOF,   Spine Injury Solutions, Inc. has caused this Promissory Note to be duly executed in its corporate name by the manual signature of its President.

Dated:   September 8, 2017.

Spine Injury Solutions, Inc.

By: /s/ William F. Donovan __________________
William F. Donovan,
President and Chief Executive Officer
 
 
Amended and Restated Secured Promissory Note – Page 7
 
 
Amended Security Agreement

Date:   September 8, 2017

Debtor: Spine Injury Solutions, Inc. (formerly Spine Pain Management, Inc.), a Delaware corporation

Debtor’s Mailing Address:

5225 Katy Freeway, Suite 600
Houston, Texas 77007

Secured Party: Peter Dalrymple

Secured Party’s Mailing Address:

13451 Belhaven Dr.
Houston, TX, 77069

Amendment:
This Amended Security Agreement amends in its entirety the Security Agreement entered into on August 29, 2012, between the Debtor and Secured Party.

Collateral:

All of Debtor’s interest in $3,000,000 of Debtor’s Gross Accounts Receivables (meaning the gross amounts billed using Current Procedural Terminology codes without applying an allowance for doubtful accounts). “Gross Accounts Receivables” means all “accounts” , “instruments”, “documents”, (including “payment intangibles”) (as each such term is defined in the UCC) and other obligations owed to the Debtor of any kind, now or hereafter existing, whether or not arising out of or in connection with the sale or lease of goods or the rendering of services, and whether or not evidenced by a written agreement, and all rights now or hereafter existing in and to all other contracts including support agreements (as such term is defined in the Uniform Commercial Code of Texas) (all such written or unwritten agreements and other contracts, including all support agreements), securing or otherwise relating to any such accounts, instruments, documents or other obligations.

Obligation(s) (the Note):

(a)
Amended and Restated Secured Promissory Note

Date:   September 8, 2017

Original principal amount:   $250,000
Amended Security Agreement – Page 1

Borrower (Debtor):   Spine Injury Solutions, Inc.

Lender (Secured Party):   Peter Dalrymple

Maturity date:   September 8, 2018

(b)
To secure the obligations of the Secured Party’s pledge of collateral pursuant to that certain Amended and Restated Security Agreement granted in connection with the Amended and Restated Revolving Line of Credit Note between the Debtor and Wells Fargo Bank, National Association

Date:   September ___, 2017

Original principal amount:  $1,750,000, or so much thereof as may be advanced and be outstanding.

Borrower (Debtor):
Spine Injury Solutions, Inc.

Lender (Secured Party):
Wells Fargo Bank, National Association

Maturity Date:
  August 31, 2018

Debtor’s Representations Concerning Debtor and Locations:

Debtor’s state of organization is Delaware; Debtor’s name, as shown in its organizational documents, as amended, is exactly as set forth above.

Debtor’s records concerning the Collateral are located at 5225 Katy Freeway, Suite 600, Houston, Texas 77007.

Debtor grants to Secured Party a security interest in the Collateral and all its proceeds to secure the Obligation and all renewals, modifications, and extensions of the Obligation.  Upon payment of all Obligations by Debtor, then Secured Party shall take all steps necessary to release the Collateral.  Debtor authorizes Secured Party to file a financing statement describing the Collateral.

A.   Debtor represents and warrants the following:

1.   No financing statement covering the Collateral is filed in any public office (other than as may be on file for benefit of Secured Party).

2.   Debtor owns the Collateral and has the authority to grant this security interest, free from any setoff, claim, restriction, security interest, or encumbrance except liens for taxes not yet due.
Amended Security Agreement – Page 2

3.   All information about Debtor’s financial condition is or will be accurate when provided to Secured Party.

4.   Each account and chattel paper in the Collateral is and will be the valid, legally enforceable obligation of a third-party account debtor or obligor.

5.   If any Collateral or proceeds include obligations of third parties to Debtor, the transactions creating those obligations conform and will conform in all respects to applicable state and federal consumer credit law.

B.   Debtor agrees to-

1.   Defend the Collateral against all claims adverse to Secured Party’s interest; pay all taxes imposed on the Collateral; keep the Collateral free from liens, except for liens in favor of Secured Party or for taxes not yet due; and keep the Collateral in Debtor’s possession and ownership except as otherwise provided in this agreement.

2.   Pay all Secured Party’s expenses, including reasonable attorney’s fees and legal expenses, incurred to (a) obtain, preserve, perfect, defend, and enforce this agreement; (b) retake, hold, prepare for disposition, dispose, collect, or enforce the Collateral; and (c) collect or enforce the Obligation.

3.   Sign and deliver to Secured Party any documents or instruments that Secured Party considers necessary to obtain, maintain, and perfect this security interest in the Collateral.

4.   Notify Secured Party immediately of any event of default and of any material change (a) in the Collateral, (b) in Debtor’s mailing address, (c) in the location of any Collateral, (d) in any other representation or warranty in this agreement, and (e) that may affect this security interest, and of any change (f) in Debtor’s name and (g) of any location set forth above to another state.

5.   Use the Collateral primarily according to the stated classification.

6.   Maintain accurate records of the Collateral at the address set forth above, furnish Secured Party any requested information related to the Collateral; and permit Secured Party to inspect and copy all records relating to the Collateral.

7.   Preserve the liability of all obligors on the Collateral and preserve the priority of all security for the Collateral.

8.   Preserve the Collateral for the benefit of Secured Party and shall: (a) preserve all beneficial contract rights in connection therewith, to the extent commercially reasonable, and (b) in conjunction with and at the direction of Secured Party, take commercially reasonable steps to collect all accounts in connection with the Collateral.
Amended Security Agreement – Page 3

C.   Debtor agrees not to-

1.   Sell, transfer, or encumber any of the Collateral, except in the ordinary course of Debtor’s business.

2.   Change its name or jurisdiction of organization, merge or consolidate with any person, or convert to a different entity without notifying Secured Party in advance and taking action to continue the perfected status of the security interest in the Collateral.

3.   Change the state in which Debtor’s place of business (or chief executive office if Debtor has more than one place of business) is located, change its name, or convert to a different entity without notifying Secured Party in advance and taking action to continue the perfected status of the security interest in the Collateral.

D.   Default and Remedies

1.   A default exists if -

a.   Debtor fails to timely pay or perform any obligation or covenant in any written agreement between Secured Party and Debtor;

b.   any warranty, covenant, or representation in this agreement or in any other written agreement between Secured Party and Debtor is materially false when made;

c.   a receiver is appointed for Debtor or any Collateral;

d.   any Collateral is assigned for the benefit of creditors;

e.   a bankruptcy or insolvency proceeding is commenced by Debtor;

f.   a bankruptcy or insolvency proceeding is commenced against Debtor, and the proceeding continues without dismissal for 60 days, the party against whom the proceeding is commenced admits the material allegations of the petition against it, or an order for relief is entered;

g.   Debtor is dissolved, begins to wind up its affairs, is authorized to dissolve or wind up its affairs by its governing body or persons, or any event occurs or condition exists that permits the dissolution or winding up of the affairs of Debtor; or

h.   any Collateral is impaired by loss, theft, damage, levy and execution, issuance of an official writ or order of seizure, or destruction, unless it is promptly replaced with collateral of like kind and quality or restored to its former condition.

2.   If a default exists that is not cured, Secured Party may -
Amended Security Agreement – Page 4

a.   demand, collect, convert, redeem, settle, compromise, receipt for, realize on, sue for, and adjust the Collateral either in Secured Party’s or Debtor’s name, as Secured Party desires, or take control of any proceeds of the Collateral and apply the proceeds against the Obligation;

b.   take possession of any Collateral not already in Secured Party’s possession, without demand or legal process, and for that purpose Debtor grants Secured Party the right to enter any premises where the Collateral may be located;

c.   without taking possession, sell, lease, or otherwise dispose of the Collateral at any public or private sale in accordance with the law;

d.   exercise any rights and remedies granted by law or this agreement;

e.   notify obligors on the Collateral to pay Secured Party directly and enforce Debtor’s rights against such obligors; and

f.   as Debtor’s agent, make any endorsements in Debtor’s name and on Debtor’s behalf.

3.   Foreclosure of this security interest by suit does not limit Secured Party’s remedies, including the right to sell the Collateral under the terms of this agreement. Secured Party may exercise all remedies at the same or different times, and no remedy is a defense to any other. Secured Party’s rights and remedies include all those granted by law and those specified in this agreement.

4.   Secured Party’s delay in exercising, partial exercise of, or failure to exercise any of its remedies or rights does not waive Secured Party’s rights to subsequently exercise those remedies or rights. Secured Party’s waiver of any default does not waive any other default by Debtor. Secured Party’s waiver of any right in this agreement or of any default is binding only if it is in writing. Secured Party may remedy any default without waiving it.

5.   Secured Party has no obligation to prepare the Collateral for sale.

6.   Secured Party has no obligation to collect any of the Collateral and is not liable for failure to collect any of the Collateral, for failure to preserve any rights pertaining to the Collateral, or for any act or omission on the part of Secured Party or Secured Party’s officers, agents, or employees, except willful misconduct.

7.   Secured Party has no obligation to satisfy the Obligation by attempting to collect the Obligation from any other person liable for it.  Secured Party may release, modify, or waive any collateral provided by any other person to secure any of the Obligation.  If Secured Party attempts to collect the Obligation from any other person liable for it or releases, modifies, or waives any collateral provided by any other person, that will not affect Secured Party’s rights against Debtor. 
Amended Security Agreement – Page 5
Debtor waives any right Debtor may have to require Secured Party to pursue any third person for any of the Obligation.

8.   If Secured Party must comply with any applicable state or federal law requirements in connection with a disposition of the Collateral, such compliance will not be considered to adversely affect the commercial reasonableness of a sale of the Collateral.

9.   Secured Party may sell the Collateral without giving any warranties as to the Collateral.  Secured Party may specifically disclaim any warranties of title or the like.  This procedure will not be considered to adversely affect the commercial reasonableness of a sale of the Collateral.

10.   If Secured Party sells any of the Collateral on credit, Debtor will be credited only with payments actually made by the purchaser and received by Secured Party for application to the indebtedness of the purchaser.  If the purchaser fails to pay for the Collateral, Secured Party may resell the Collateral and Debtor will be credited with the proceeds of the sale.

11.   If Secured Party purchases any of the Collateral being sold, Secured Party may pay for the Collateral by crediting the purchase price against the Obligation.

12.   Secured Party has no obligation to marshal any assets in favor of Debtor or against or in payment of the Note, or any other obligation owed to Secured Party by Debtor or any other person.

13.   If the Collateral is sold after default, recitals in the bill of sale or transfer will be prima facie evidence of their truth and all prerequisites to the sale specified by this agreement and by law will be presumed satisfied.

E.   General

1.   Notice is reasonable if it is mailed, postage prepaid, to Debtor at Debtor’s Mailing Address at least ten days before any public sale or ten days before the time when the Collateral may be otherwise disposed of without further notice to Debtor.

2.   This security interest will neither affect nor be affected by any other security for any of the Obligation. Neither extensions of any of the Obligation nor releases of any of the Collateral will affect the priority or validity of this security interest.

3.   This agreement binds, benefits, and may be enforced by the successors in interest of Secured Party and will bind all persons who become bound as debtors to this agreement.  Assignment of any part of the Obligation and Secured Party’s delivery of any part of the Collateral will fully discharge Secured Party from responsibility for that part of the Collateral.  If such an assignment is made, Debtor will render performance under this agreement to the assignee.  Debtor waives and will not assert against any assignee any claims, defenses, or setoffs that Debtor could assert against Secured Party except defenses that cannot be waived.  All representations, warranties,
Amended Security Agreement – Page 6
and obligations are joint and several as to each Debtor.

4.   This agreement may be amended only by an instrument in writing signed by Secured Party and Debtor.

5.   The unenforceability of any provision of this agreement will not affect the enforceability or validity of any other provision.

6.   This agreement will be construed according to Texas law, without regard to choice-of-law rules in any jurisdiction. This agreement is to be performed in Harris County, the county of Debtor’s Mailing Address.

7.   Interest on the Obligation secured by this agreement will not exceed the maximum amount of nonusurious interest that may be contracted for, taken, reserved, charged, or received under law. Any interest in excess of that maximum amount will be credited on the principal of the Obligation or, if that has been paid, refunded. On any acceleration or required or permitted prepayment, any such excess will be canceled automatically as of the acceleration or prepayment or, if already paid, credited on the principal of the Obligation or, if the principal of the Obligation has been paid, refunded. This provision overrides any conflicting provisions in this and all other instruments concerning the Obligation.

8.   When the context requires, singular nouns and pronouns include the plural.

9.   Any term defined in sections 1.101 to 11.108 of the Texas Business and Commerce Code and not defined in this agreement has the meaning given to the term in the Code.


IN WITNESS WHEREOF, the parties hereto have executed this Security Agreement as of September 8, 2017.

DEBTOR:
Spine Injury Solutions, Inc.


By: __ /s/ William F. Donovan _________________
William F. Donovan,
President and Chief Executive Officer

SECURED PARTY:


/s/ Peter Dalrymple __________________________
Peter Dalrymple
 
 
Amended Security Agreement – Page 7

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 Injury Solutions, Inc., certify that:

1.
I have reviewed this quarterly report on Form 10-Q of Spine Injury Solutions, Inc. for the quarter ended September 30, 2017;

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: November 13, 2017
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 Injury Solutions, Inc., certify that:

1.
I have reviewed this quarterly report on Form 10-Q of Spine Injury Solutions, Inc. for the quarter ended September 30, 2017;

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: November 13, 2017
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 Injury Solutions, Inc. (the “Company”) on Form 10-Q for the quarter ended September 30, 2017 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: November 13, 2017
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 Injury Solutions, 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 Injury Solutions, Inc. (the “Company”) on Form 10-Q for the quarter ended September 30, 2017 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: November 13, 2017
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 Injury Solutions, 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.