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, 2019.

 

☐ 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)

 

Securities registered pursuant to Section 12(b) of the Act:  None

 

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.    Yes  ☒    No  ☐

 

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).  Yes  ☒    No  ☐

 

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. 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 11, 2019, there were 20,240,882 shares of the registrant’s common stock outstanding (the only class of voting common stock).

 

 

 

 

FORM 10-Q

 

TABLE OF CONTENTS

 

Note About Forward-Looking Statements

 

 

 

 

 

 

PART I

FINANCIAL INFORMATION

 

 

 

 

 

 

Item 1.

Condensed Consolidated Financial Statements

 

 

 

 

 

 

 

Condensed Consolidated Balance Sheets as of September 30, 2019 (Unaudited) and December 31, 2018

 

4

 

 

 

 

 

Condensed Consolidated Statements of Operations for the three and nine months ended September 30, 2019 and 2018 (Unaudited)

 

5

 

 

 

 

 

Condensed Consolidated Statements of Cash Flows for the nine months ended September 30, 2019 and 2018 (Unaudited)

 

6

 

 

 

 

 

Condensed Consolidated Statements of Shareholder Equity for the nine months ended September 30, 2019 and 2018 (Unaudited)

 

7

 

 

 

 

 

Notes to Condensed Consolidated Financial Statements (Unaudited)

 

8

 

 

 

 

Item 2.

Management’s Discussion and Analysis of Financial Condition and Results of Operations

 

16

 

 

 

 

Item 3.

Quantitative and Qualitative Disclosure About Market Risk

 

18

 

 

 

 

Item 4.

Controls and Procedures

 

18

 

 

 

 

PART II

OTHER INFORMATION

 

 

 

 

 

 

Item 1A.

Risk Factors

 

19

 

 

 

 

Item 2.

Unregistered Sales of Equity Securities and Use of Proceeds

 

19

 

 

 

 

Item 6.

Exhibits

 

19

 

 

 

 

 

Signatures

 

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, 2018, 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, unless the context indicates otherwise.

 

 

 

 

 

PART I   FINANCIAL INFORMATION

 

ITEM 1.   FINANCIAL STATEMENTS

 

SPINE INJURY SOLUTIONS, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

 

   

SEPTEMBER 30,

   

DECEMBER 31,

 
   

2019

   

2018

 

ASSETS

 

(Unaudited)

         
                 

Current assets:

               

Cash

  $ 189,377     $ 59,679  

Accounts receivable, net

    585,060       1,040,117  

Prepaid expenses

    12,000       10,650  

Inventories

    -       116,221  
                 

Total current assets

    786,437       1,226,667  
                 

Accounts receivable, net of allowance for doubtful accounts

of $466,862 and $395,873 at September 30, 2019 and

December 31, 2018, respectively

    894,174       1,923,421  

Property and equipment, net

    28,839       77,187  

Intangible assets and goodwill, net

    -       170,200  
                 

Total assets

  $ 1,709,450     $ 3,397,475  
                 

LIABILITIES AND STOCKHOLDERS’ EQUITY

               
                 

Current liabilities:

               

Line of Credit

  $ 1,306,000     $ 1,565,000  

Notes Payable

    -       90,000  

Accounts payable and accrued liabilities

    21,065       75,975  

Due to related parties

    -       4,967  
                 

Total current liabilities

    1,327,065       1,735,942  
                 

Commitments and contingencies

               
                 

Stockholders’ equity:

               

Common stock: $0.001 par value, 50,000,000 shares authorized,               

20,240,882 shares issued and outstanding at

September 30, 2019 and December 31, 2018, respectively

    20,241       20,241  

Additional paid-in capital

    19,869,511       19,869,511  

Accumulated deficit

    (19,507,367

)

    (18,228,219

)

                 

Total stockholders’ equity

    382,385       1,661,533  
                 

Total liabilities and stockholders’ equity

  $ 1,709,450     $ 3,397,475  

 

The accompanying notes are an integral part of the unaudited condensed consolidated financial statements.

 

 

SPINE INJURY SOLUTIONS, INC.

UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

 

   

FOR THE THREE MONTHS ENDED SEPTEMBER 30,

   

FOR THE NINE MONTHS

ENDED SEPTEMBER 30,

 
   

2019

   

2018

   

2019

   

2018

 
                                 

Net service revenue

  $ 57,999     $ 560,506     $ 101,640     $ 1,796,842  

Lease revenue

    24,973       1,200       49,032       4,000  

Total revenue

    82,972       561,706       150,672       1,800,842  
                                 

Cost of providing services, including amounts billed by

                               

Third party providers

    89,486       139,994       115,235       253,019  

Related party providers

    -       70,107       -       358,335  
                                 

Total cost of providing services

    89,486       210,101       115,235       611,354  
                                 

Gross (loss) profit

    (6,514 )     351,605       35,437       1,189,488  
                                 

Operating, general and administrative expenses

    495,477       394,539       1,092,678       1,090,357  

Impairment of goodwill

    170,200       -       170,200       -  
                                 

(Loss) income from operations

    (672,191

)

    (42,934

)

    (1,227,441

)

    99,131  
                                 

Other income and (expense):

                               

Other income

    594       5,608       1,737       7,448  

Interest expense

    (15,731

)

    (16,790

)

    (53,444

)

    (47,770

)

                                 

Total other income and (expense)

    (15,137

)

    (11,182

)

    (51,707

)

    (40,322

)

                                 

Net (loss) income

  $ (687,328

)

  $ (54,116

)

  $ (1,279,148

)

  $ 58,809  
                                 

Net loss per common share:

                               

Basic/ diluted

  $ (0.03

)

  $ 0.00     $ (0.07

)

  $ 0.00  
                                 

Weighted average shares used in loss per common share:

                               

Basic/ diluted

    20,240,882       20,222,775       20,240,882       20,236,211  

 

The accompanying notes are an integral part of the unaudited condensed consolidated financial statements.

 

 

SPINE INJURY SOLUTIONS, INC.

UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

 

   

FOR THE NINE MONTHS ENDED SEPTEMBER 30,

 
   

2019

   

2018

 

Cash flows from operating activities:

               

Net (loss) income

  $ (1,279,148

)

  $ 58,809  

Adjustments to reconcile net (loss) income to net cash

provided (used) in operating activities:

               

Bad debt expense

    360,000       215,000  

Factoring expense

    71,194       -  

Stock based compensation

    -       5,000  

Obsolete inventory

    116,221       -  

Impairment of goodwill

    170,200       -  

Depreciation and amortization expense

    48,348       14,725  

Changes in operating assets and liabilities:

               

Accounts receivable, net

    1,053,110       (359,716

)

Inventories

    -       (21,090

)

Prepaid expenses and other assets

    (1,350

)

    (11,296

)

Accounts payable and accrued liabilities

    (54,910

)

    21,981  

Deferred revenue

    -       22,935  

Due to related party

    (4,967

)

    (6,603

)

                 

Net cash provided (used) in operating activities

    478,698       (60,255

)

                 

Cash flows from financing activities:

               

 (Payments) proceeds of line of credit, net

    (259,000

)

    165,000  

Payments of note payable

    (90,000

)

    (135,000

)

                 

Net cash (used) provided in financing activities

    (349,000

)

    30,000  
                 

Net increase (decrease) in cash and cash equivalents

    129,698       (30,255

)

Cash and cash equivalents at beginning of period

    59,679       77,843  
                 

Cash and cash equivalents at end of period

  $ 189,377     $ 47,588  
                 

Supplementary disclosure of cash flow information:

               

     Interest paid

  $ 53,444     $ 47,700  

     Taxes paid

  $ -     $ -  

 

The accompanying notes are an integral part of the unaudited condensed consolidated financial statements.

 

 

SPINE INJURY SOLUTIONS, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY

For the Nine Months Ended s September 30, 2019 and 2018

 

   

Common Stock

   

Additional

   

Accumulated

   

Total

Stockholders’

 
   

Shares

   

Amount

   

Capital

   

Deficit

   

Equity

 

Balances, December 31, 2018

    20,240,882     $ 20,241     $ 19,869,511     $ (18,228,219

)

  $ 1,661,533  
                                         

Net loss

    -       -       -       (1,279,148

)

    (1,279,148

)

                                         

Balances, September 30, 2019 (Unaudited)

    20,240,882     $ 20,241     $ 19,869,511     $ (19,507,367

)

  $ 382,385  
                                         
                                         
                                         

Balances, December 31, 2017

    20,215,882     $ 20,216     $ 19,864,536     $ (17,556,564

)

  $ 2,328,188  
                                         

Issuance of stock

    25,000       25       4,975       -       5,000  
                                         

Net income

    -       -       -       58,809       58,809  
                                         

Balances, September 30, 2018 (Unaudited)

    20,240,882     $ 20,241     $ 19,869,511     $ (17,497,755

)

  $ 2,391,997  

 

No dividends were paid for the nine months ended September 30, 2019 and 2018.

 

 

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, 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 technology and monetizing services to spine and orthopedic surgeons and other healthcare providers to facilitate proper treatment of their injured clients.  By monetizing 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. During the fourth quarter of 2018, the decision was made to discontinue funding future medical procedures due to our cash position, and we have not funded any procedures in 2019 and will not do so unless we can access additional capital (see Note 2 below). However, we continue to actively pursue the collection of previously funded procedures.

 

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 believe can attract additional physicians and patients and provide us with additional revenue streams with our new programs designed to assist in treatment documentation.  We have refined the technology, 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.

 

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 $4,502,669 to $19,507,367 as of September 30, 2019. 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.

 

Additionally, during the fourth quarter of 2018, the decision was made to discontinue funding future medical procedures due to our cash position, which also hampered our ability to pay back existing debt to Wells Fargo and a current director and shareholder (see Note 7—Notes Payable). We did not fund any procedures in 2019 and will not do so unless we can access additional capital. The previous service revenue we have funded has resulted in longer settlement times, which has created a slowdown in cash collections. Additionally, our efforts to establish a market for the Quad Video Halo has not met our expectations and we have cut back its development and operations. If we are unable to access additional capital in the near future, these recent developments could have a material negative impact on our financial performance and could have a material adverse effect on our results of operations and financial condition.

 

 

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 2018 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, 2019, 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

 

The Company’s accounting for revenues is governed by two accounting standards. The Company’s service and product sale revenue are accounted for under ASC 606, Revenue from Contracts with Customers. Additionally, the Company’s QVH rental revenues are accounted for under ASC 842, Leases.

 

Service and Product Sale Revenue Recognition

 

Our net revenues include service revenues. Service revenues arise from the delivery of medical diagnostic services provided to the patient by medical professionals at the spine injury diagnostic centers, only after the patient completes and signs required medical and financial paperwork. Service revenues are recorded as net patient service revenues based on variable consideration elements further described below and in Note 4. Product sales arise from the sale and transfer of control of the Company’s QVH units to a consumer.

  

For service revenues, the patients are billed by the healthcare provider 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.

 

 

SPINE INJURY SOLUTIONS, INC.

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

 

Additionally, service 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 (“gross revenue”) less account discounts that are expected to result when individual cases are ultimately settled, which is the variable consideration associated with this revenue stream. 

 

While we do collect 100% of the accounts on some patients, our historical collection rate is used to estimate the variable consideration expected and is reflected in the carrying balance of the accounts receivable and service revenue to be recorded.   A discount rate of 48%, based on payment history, was used to reduce revenue to 52% of CPT code billings during the nine months ended September 30, 2019 and 2018.

 

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). As of September 30, 2019 and December 31, 2018, there were no material contract assets, contract liabilities, or deferred contract costs recorded on the condensed consolidated financial statements. 

 

Revenue expected to be recognized in any future year related to remaining performance obligations, excluding revenue pertaining to contracts that have an original expected duration of one year or less, contracts where revenue is recognized as invoiced and contracts with variable consideration related to undelivered performance obligations, is not material.

 

Lease Revenues

 

Rental revenues from operating leases are recognized on a straight-line basis over the term of the lease.  Rental billings for periods extending beyond period end are recorded as deferred income and are recognized in the period earned.   For the QVH Leases, rental related services revenues for support, maintenance and video processing, delivery, and installation are lease related because the payments are considered minimum lease payments that are an integral part of the negotiated lease agreement with the customer.  These revenues are recognized on a straight-line basis over the term of the lease. As of the quarter ended September 30, 2019 the Company’s leases consisted solely of operating leases.

 

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, 2019 and December 31, 2018 are classified as finished goods and consist of our Quad Video Halo. During the three and nine months ended September 30, 2019 the Company determined its inventory to be obsolete due to enhancements in technology that rendered the current inventories value to be $0. As such during the three and nine months ended September 30, 2019 the Company wrote off $89,487 and $116,221, respectively.

 

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.

 

 

SPINE INJURY SOLUTIONS, INC.

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

 

Goodwill recognized in a business combination is subjective and represents the value of the excess amount given to the acquired company above the estimated fair market value of the identifiable net assets on the acquisition date. Each year, during the fourth quarter, the goodwill amount is reviewed to determine if any impairment has occurred. Impairment occurs when the original amount of goodwill exceeds the value of the expected future net cash flows from the business acquired. We determined as of December 31, 2018 that there were indicators of impairment present and performed an analysis of future cash flows related to the QVH Halo which consisted of contracts entered into with customers during late 2018. The analysis concluded as of December 31, 2018 that the discounted cash flows from these contracts supported the value of goodwill as of December 31, 2018. During the three months ended September 30, 2019, the Company noted significant indicators of impairment, noting the discounted future cash flows did not fully support the goodwill balance along with the Company’s reduced emphasis on the marketing and development of the QVH, resulting in full impairment of goodwill as of September 30, 2019.

 

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 December 31, 2018, no impairment of the long-lived assets was determined to have occurred, however, the Company’s goodwill was determined to be fully impaired in the three months ended September 30, 2019.

 

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 $466,862 and $395,873, at September 30, 2019 and December 31, 2018, 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 condensed consolidated statements of operations.  We use the Black-Scholes Option Pricing Model to determine the fair-value of stock-based awards.  During the three and nine months ended September 30, 2019, we did not recognize compensation expense for issuances of our common stock in exchange for services. During the three and nine months ended September 30, 2018, we recognized compensation expense for issuance of our common stock in exchange for services of $5,000.

 

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.

 

 

SPINE INJURY SOLUTIONS, INC.

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

 

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, 2019 and 2018, we recognized no estimated interest or penalties as income tax expense.

 

Legal Costs and Contingencies

 

In the normal course of business, we incur costs to hire and retain external legal counsel to advise us on regulatory, litigation and other matters. We expense these costs as the related services are received.

 

If a loss is considered probable and the amount can be reasonably estimated, we recognize an expense for the estimated loss. If we have the potential to recover a portion of the estimated loss from a third party, we make a separate assessment of recoverability and reduce the estimated loss if recovery is also deemed probable.

 

Net Loss  per Share

 

Net 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, 2019 and 2018, common stock equivalents from outstanding stock options, warrants and convertible debt have been excluded from the calculation of the diluted loss per share in the statements of operations, because all such securities were anti-dilutive.  The loss  per share is calculated by dividing the net loss income by the weighted average number of shares outstanding during the periods.

 

Recent Accounting Pronouncements Not Yet Adopted

 

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 June 2018, the FASB issued ASU 2018-07, Compensation – Stock Compensation (Topic 718). The amendments expand the scope of Topic 718, which currently only includes share-based payments to employees, to include share-based payments issued to nonemployees for goods or services. Consequently, the accounting for share-based payments to nonemployees and employees will be substantially aligned. This ASU is effective for all organizations for fiscal years beginning after December 15, 2019 and interim periods within fiscal years beginning after December 15, 2020. Early adoption is permitted. The Company does not expect the adoption of this standard to have a material impact on its consolidated financial statements.

 

Recent Accounting Pronouncements Adopted

 

 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. ASU No. 2017-01 was adopted on January 1, 2019 and did not have a significant effect on the Company’s consolidated financial position, results of operations and disclosures.

 

 

SPINE INJURY SOLUTIONS, INC.

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

 

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 accounting for leases expired before the earliest comparative period presented. Lessees and lessors may not apply a full retrospective transition approach. Management has adopted the provisions of ASU No. 2016-02 noting it did not have any material leases falling under this guidance where the Company is considered the lessee. The Company has lease agreements with customers for the use of QVH units where the Company is considered the lessor. As part of the implementation of ASU No. 2016-02, the Company elected the package of practical expedients that allows for not reassessing: (1) whether any expired or existing contracts are or contain leases, (2) the lease classification for any expired or existing leases and (3) initial direct costs for any expired or existing leases.  

 

The Company’s QVH unit rentals are governed by agreements that detail the lease terms and conditions.  The determination of whether these contracts with customers contain a lease generally does not require significant judgement.  The Company accounts for these rentals as operating leases.  These leases do not include material amounts of variable payments and the Company has made the accounting policy election to exclude all taxes assessed by a governmental authority.  The Company provides an option for the lessee to purchase the rented equipment upon the termination of the lease for the as then fair market value; however, the Company has not generated material revenue from sales of equipment under such options.  Initial lease terms vary in length based upon customer needs and generally range from twelve to thirty-six months.  Customers have the option to keep equipment on rent beyond the initial lease term on a one year successive term that auto renews unless canceled by the customer.  All of the Company’s rental products have long useful lives relative to the typical rental term with the original investment typically recovered in approximately five years.  The rental products are typically rented for a majority of the time owned and a significant portion of the original investment is recovered when sold from inventory.  The Company’s lease agreements do not contain residual value guarantees or restrictive covenants.

 

As of September 30, 2019, maturities of operating lease payments to be received in 2019 and thereafter were as follows:

 

(in thousands)

       

2019

  $ 26  

2020

    103  

2021

    39  
    $ 168  

 

Included in property and equipment, net, as of September 30, 2019 and December 31, 2018 is equipment available for rent in the amount of $28,839 and $39,654, respectfully.

 

NOTE 4.  ACCOUNTS RECEIVABLE

 

The patients are billed by the healthcare provider based on 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.

 

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 (“gross revenue”) 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 during the nine months ended September 30, 2019.

 

The patients who receive medical services at the diagnostic centers are typically patients involved in auto accidents or work injuries. The patient completes and signs medical and financial paperwork, which includes an acknowledgement of the patient’s responsibility of payment for the services provided. Additionally, the paperwork should include an assignment of benefits.  The timing of collection of receivables varies depending on patient sources of payment. Historical experience, through 2018, 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 as of September 30, 2019 and December 31, 2018 that 30% of cases will be collected within one year of a medical procedure.

 

 

SPINE INJURY SOLUTIONS, INC.

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

 

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. As of September 30, 2019 and December 31, 2018, we determined an allowance for uncollectable accounts of $ 466,862 and $395,873, respectively was needed for those customer accounts whose collections appears doubtful. Due to the Company’s increased aging of the accounts receivable, we increased our allowance for bad debts $250,000 for the three months ended September 30, 2019. During the nine months ended September 30, 2019 and 2018 we recorded bad debt expense, net of recoveries of $337,535 and $151,855, respectively.

 

For the three and nine months ended September 30, 2019, we sold certain individual accounts receivable balances to a third party at a discounted rate without recourse resulting in the receipt of $136,665 which resulted in the recognition of $71,194 in factoring expense for the three and nine months ended September 30, 2019. This expense represents the discount provided to the purchaser and were recorded as an operating, general and administrative expense in the Company’s consolidated statement of operations for the three and nine months ended September 30, 2019.

 

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, 2019 and 2018, we expensed $0 and $358,335 related to services provided by NSO. For the three months ended September 30, 2019 and 2018 we recorded $0 and $139,944 related to services provided by NSO. As of September 30, 2019 and December 31, 2018, we had balances payable to NSO of $0 and $4,967, 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

 

We did not issue any shares of common stock for the three and nine months ended September 30, 2019 but did issue 25,000 shares for services provided for the three and nine months ended September 30, 2018.

 

NOTE 7.  NOTES PAYABLE

 

Convertible and secured notes payable

 

On August 29, 2012, we issued Peter Dalrymple, a director of the Company, a $1,000,000 three-year secured promissory note bearing interest at 12% per year, with thirty-five monthly payments of interest commencing on September 29, 2013, and continuing thereafter on the 29th day of each successive month throughout the term of the promissory note.  Under the terms of the secured promissory note, the holder received a detachable warrant to purchase 333,333 shares of our common stock at the price of $1.60 per share that were originally to expire on August 29, 2015; however, such warrants were extended as described below.  This promissory note is secured by $3,000,000 in gross accounts receivable.  On the maturity date, one balloon payment of the entire outstanding principal amount plus any accrued and unpaid interest is due.

 

On August 20, 2014, we entered into a Financing Agreement with Mr. Dalrymple, whereby he agreed to assist us in obtaining financing in the form of a $2,000,000 revolving line of credit (see Line of Credit below) from a commercial lender and provide a personal guaranty of the line of credit. Under the terms of the Financing Agreement, upon finalization of the line of credit with Wells Fargo Bank on September 8, 2014, we (i) extended the term of the $1,000,000 promissory note, described above, by one year to mature on August 29, 2016, (ii) reduced the interest rate on the promissory note to 6%, (iii) extended the expiration date on the warrants issued in connection with the promissory note by one year to an expiration date of August 29, 2016, (iv) granted Mr. Dalrymple 200,000 restricted shares of common stock, and (v) used $500,000 of advances under the line of credit as payment of principal and interest on the promissory note.

 

 

SPINE INJURY SOLUTIONS, INC.

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

 

In August 2016, the note and associated warrants were amended to extend the maturity date to August 29, 2017, then again in September 2017, we extended the maturity date of the promissory note to September 8, 2018. In connection with the extension of the Wells Fargo line of credit discussed below, on September 5, 2018 we entered into a Financing Agreement with Mr. Dalrymple and an Amendment to Amended and Restated Secured Promissory Note, 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, 2019. We paid off this note in September 2019. We will continue to provide collateral to Mr. Dalrymple in an amount of $3,000,000 in our gross accounts receivable to secure payment of his obligations in connection with the line of credit with Wells Fargo. As of September 30, 2019 and December 31, 2018, the note had a principal balance of $0 and $90,000, respectively.  During the nine months ended September 30, 2019 and 2018, the Company recorded $2,800 and $8,256 in interest expense related to this note. During the three months ended September 30, 2019 and 2018, the Company recorded $500 and $2,005 in interest expense related to this note.

 

Line of Credit 

 

On September 3, 2014, we entered into a $2,000,000 revolving line of credit agreement with Wells Fargo Bank, N.A. Outstanding principal on the line of credit bears interest at the 30-day London Interbank Offered Rate (“LIBOR”) plus 2%, resulting in an effective rate of 4.02% at September 30, 2019.

 

In September 2017, the line of credit agreement was amended, whereby the outstanding principle was due and payable in full on August 31, 2018 and the maximum amount we can borrow under the line of credit is $1,750,000. On September 7, 2018 we entered into an Amended and Restated Revolving Line of Credit Note to extend our revolving line of credit facility, whereby the outstanding principal was due and payable in full on August 31, 2019. On September 30, 2019 the credit line was amended into a one year term loan precluding any additional draws on the note, but all other terms of the loan remain the same. The term loan also 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. As of September 30, 2019 and December 31, 2018, the outstanding borrowings under the line of credit totaled $1,306,000 and $1,565,000 respectively.  During the nine months ended September 30, 2019 and 2018 the Company recorded $50,180 and $39,515 in interest expense related to this note. During the three months ended September 30, 2019 and 2018, the Company recorded $14,999 and $14,785 in interest expense related to this note.

 

NOTE 8.  INCOME TAXES

 

We have not made a provision for income taxes for the nine months ended September 30, 2019 or 2018, 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

 

During the fourth quarter of 2018, the decision was made to discontinue funding future medical procedures due to our cash position, which also hampered our ability to pay back existing debt to Wells Fargo and a current director and shareholder. We did not fund any procedures in 2019 and will not do so unless we can access additional capital. The service revenue we have funded has resulted in longer settlement times, which has created a slowdown in cash collections. Additionally, our efforts to establish a market for the Quad Video Halo has not met our expectations and we have cut back its development and operations; however, in late 2018 we were able to sell certain contracts to customers for the rental of our QVH units, along with image processing services.

 

Moving forward, our main focus will be collecting accounts receivable, paying down debt and leveraging our position as a fully reporting public company for other investing opportunities.

 

There can be no guarantee of us continuing as a going concern if we cannot obtain additional funds.

 

Results of Operations

 

The unaudited financial statements for the three and nine months ended September 30, 2019 and 2018 have been prepared in accordance with accounting principles generally accepted in the United States of America for interim financial information and with instructions to Form 10-Q. In the opinion of management, the unaudited condensed 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, 2019 and the results of operations and cash flows for the three and nine months ended September 30, 2019 and 2018. The results for the nine months ended September 30, 2019 are not necessarily indicative of the results to be expected for any subsequent quarter or of the entire year ending December 31, 2019.

 

Certain information and footnote disclosures normally included in financial statements prepared in accordance with accounting principles generally accepted in the United States of America have been condensed or omitted pursuant to the Securities and Exchange Commission’s rules and regulations. These unaudited financial statements should be read in conjunction with our audited financial statements and notes thereto for the year ended December 31, 2018 as included in our previously filed report on Form 10-K.

 

Comparison of the three-month period ended September 30, 2019 with the three month-period ended September 30, 2018.

 

We recorded $24,973 in QVH lease revenue for the three months ended September 30, 2019 coupled with $57,999 relating to excess collections for previously funded procedures. We recorded $1,228,754 in gross revenue (based on gross amounts billed for service revenue) for the three months ended September 30, 2018, offset by $667,048 of the expected variable consideration discount resulting in net revenue of $561,706.  For the three months ended September 30, 2019, we funded no new procedures with spine injury diagnostic centers. For the three months ended September 30, 2018 we worked with four spine injury diagnostic centers: Houston, Texas; Tyler, Texas; Odessa, Texas and Las Cruces New Mexico, and service cost was $210,101.

 

During the three months ended September 30, 2019, we incurred $665,677 of operating, general and administrative expenses including impairment of goodwill, compared to $394,539 for the same period in 2018.  Operating, general and administrative expenses were higher for the 2019 quarter compared to 2018 due to the write off of goodwill of $170,200, the increase in bad debt expense by $135,000, an increase in factoring expense of $71,194 offset by decreases in employee payroll expense of $37,162, consulting fees of $55,438 and rent $11,850. The aforementioned factoring expense is the discount provided to the purchaser of the accounts receivable.

 

As a result of the foregoing, we had net loss of $687,328 for the three months ended September 30, 2019, compared to a net loss of $54,116 for the three months ended September 30, 2018.

 

 

Comparison of the nine-month period ended September 30, 2019 with the nine month-period ended September 30, 2018.

 

We recorded $49,032 in QVH lease revenue for the nine months ended September 30, 2019 coupled with $101,640 relating to excess collections for previously funded procedures, resulting in revenue of $150,672. For the same period in 2018, gross revenue (based on gross amounts billed for service revenue) was $3,340,943, offset by $1,540,101 of the settlement discount, resulting in net revenue of $1,800,842.

 

Service cost for the nine months ended September 30, 2019 was $115,235 which consisted of inventory obsolescence write downs for the period, compared to service cost of $611,354 for the nine months ended September 30, 2018, which consisted of costs associated with funding procedures for the period. No funding of procedures occurred in 2019.

 

During the nine months ended September 30, 2019, we incurred $1,262,878 of operating, general and administrative expenses, including impairment of goodwill compared with the $1,090,357 for the same period in 2018. The increase is attributable to the write off of goodwill of $170,200, the increase in bad debt expense by $155,000, an increase in factoring expense of $71,194 offset by decreases in employee payroll expense of $78,787, consulting fees of $45,415, audit costs of $25,000, travel expense of $46,156, rent expense of $23,485 and consulting non-cash of $5,000.

 

As a result of the foregoing, we had net loss of $1,279,148 for the nine months ended September 30, 2019, compared to a net income of $58,809 for the nine months ended September 30, 2018.

 

Liquidity and Capital Resources

 

For the nine months ended September 30, 2019, cash provided in operations was $478,698 which primarily included decreases in accounts receivable of $1,053,110, decrease of related party payables of $4,967, increases in prepaid expenses of $1,350, and decreases in accounts payable and accrued liabilities of $54,909, along with non-cash operating expenses totaling $765,963.  For the nine months ended September 30, 2018, cash used in operations was $60,257 which primarily included uses of cash from operating sources due to a decrease in related party payables of $6,603, increases in accounts receivable of $359,716, prepaid expenses of $11,296, inventory of $21,090, and increases in cash from operating sources including an increase of accounts payable of $21,981 and deferred revenue of $22,935, along with non-cash operating expenses totaling $234,725. We used no cash in investing activities for the nine months ended September 30, 2019 and 2018.

 

Cash used in financing activities for the nine months ended September 30, 2019 and 2018 consisted of repayments on our notes payable in the amount of $90,000 and $135,000, respectively, and net (payments) draws on our line of credit of ($259,000) and $165,000, 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 $4,502,669 to $19,507,367 as of September 30, 2019. During the nine months ended September 30, 2019, we realized net losses of $1,279,148. 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, 2020. There can be no assurances that there will be adequate financing available to us.

 

Additionally, during the fourth quarter of 2018, the decision was made to discontinue funding future medical procedures due to our cash position, which also hampered our ability to pay back existing debt to Wells Fargo and a current director and shareholder (see Note 7—Notes Payable). We did not fund any procedures in 2019 and will not do so unless we can access additional capital. The service revenue we have funded has resulted in longer settlement times, which has created a slowdown in cash collections. Additionally, our efforts to establish a market for the Quad Video Halo has not met our expectations and we have cut back its development and operations. If we are unable to access additional capital in the near future, these recent developments could have a material negative impact on our financial performance and could have a material adverse effect on our results of operations and financial condition. 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 2018 Annual Report on Form 10-K.  We believe the risk factors presented in this filing and those presented on our 2018 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

 

Not applicable.

 

ITEM 6. EXHIBITS

 

Exhibit No.

 

Description

3.1

 

Articles of Incorporation dated March 4, 1998. (Incorporated by reference from Form 10-SB filed with the SEC on January 5, 2000.) *

 

 

 

3.2

 

Amended Articles of Incorporation dated April 23, 1998. (Incorporated by reference from Form 10-SB filed with the SEC on January 5, 2000.) *

 

 

 

3.3

 

Amended Articles of Incorporation dated January 4, 2002. (Incorporated by reference from Form 10KSB filed with the SEC on May 21, 2003.) *

 

 

 

3.4

 

Amended Articles of Incorporation dated December 19, 2003. (Incorporated by reference from Form 10-KSB filed with the SEC on May 20, 2004.) *

 

 

 

3.5

 

Amended Articles of Incorporation dated November 4, 2004. (Incorporated by reference from Form 10-KSB filed with the SEC on April 15, 2005) *

 

 

 

3.6

 

Amended Articles of Incorporation dated September 7, 2005. (Incorporated by reference from Form 10-QSB filed with the SEC on November 16, 2005) *

 

 

 

3.7

 

Certificate of Amendment to Certificate of Incorporation (Incorporated by reference from Form 8-K filed with the SEC on October 7, 2015.) *

 

 

 

3.8

 

By-Laws dated April 23, 1998. (Incorporated by reference from Form 10-SB filed with the SEC on January 5, 2000.) *

 

 

 

10.1

 

Financing Agreement with Peter Dalrymple (Incorporated by reference from Form 8-K filed with the SEC on August 26, 2014) *

 

 

 

10.2

 

Wells Fargo Loan Documentation (Incorporated by reference from Form 10-Q filed with the SEC on May 13, 2015) *

 

 

 

10.3

 

Letter agreement between Spine Injury Solutions, Inc. and Jeffrey Cronk (Incorporated by reference from Form 8-K filed with the SEC on September 7, 2017) *

 

 

 

10.4

 

Amended and Restated Revolving Line of Credit Note and Amended and Restated Credit Agreement with Wells Fargo Bank dated August 17, 2017 (Incorporated by reference from Form 10-Q filed with the SEC on November 13, 2017) *

 

 

 

10.5

 

Financing Agreement, Amended and Restated Secured Promissory Note and Amended Security Agreement with Peter Dalrymple dated September 8, 2017 (Incorporated by reference from Form 10-Q filed with the SEC on November 13, 2017) *

 

 

 

10.6

 

Amended and Restated Revolving Line of Credit Note dated September 7, 2018 (Incorporated by reference from Form 10-Q filed with the SEC on November 13, 2018) *

 

 

10.7

 

Amended and Restated Continuing Guaranty from Peter Dalrymple dated September 7, 2018 (Incorporated by reference from Form 10-Q filed with the SEC on November 13, 2018) *

 

 

 

10.8

 

Financing Agreement and Amended and Restated Secured Promissory Note with Peter Dalrymple dated September 5, 2018 (Incorporated by reference from Form 10-Q filed with the SEC on November 13, 2018) *

 

 

 

10.9

 

Amended and Restated Promissory Note with Wells Fargo Bank dated September 30, 2019

 

 

 

10.10

 

Amended and Restated Security Agreement from Peter Dalrymple dated September 30, 2019

 

 

 

10.11

 

Amended and Restated Continuing Guaranty from Peter Dalrymple dated September 30, 2019

 

 

 

31.1

 

Certification of principal executive officer required by Rule 13a – 14(1) or Rule 15d – 14(a) of the Securities Exchange Act of 1934, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

 

 

 

31.2

 

Certification of principal financial officer required by Rule 13a – 14(1) or Rule 15d – 14(a) of the Securities Exchange Act of 1934, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

 

 

 

32.1

 

Certification of principal executive officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 and Section 1350 of 18 U.S.C. 63.

 

 

 

32.2

 

Certification of principal financial officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 and Section 1350 of 18 U.S.C. 63.

     
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 14, 2019

By: /s/ William F. Donovan, M.D.

 

William F. Donovan, M.D.

 

Chief Executive Officer (Principal Executive Officer)

 

 

 

 

 

  Date: November 14, 2019

By: /s/ John Bergeron

 

John Bergeron

 

Chief Financial Officer (Principal Financial Officer)

 

 

 

 

 

 

21
 

 

 

 

Exhibit 10.9

 

WELLS FARGO AMENDED AND RESTATED PROMISSORY NOTE

 

$1,306,000.00  

Houston, Texas

September 30, 2019

 

   

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 Note dated as of August 31, 2018, 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 St 7th 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 Three Hundred Six Thousand and 00/100 Dollars ($1,306,000.00), with interest thereon 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 be, actual days elapsed) at the lesser of (a) a fluctuating rate per annum determined by Bank to be two percent (2.00000%) above Daily One Month LIBOR in effect from time to time, or (b) the Maximum Rate. Bank is hereby authorized to note the date and interest rate applicable to this Note and any payments made thereon on Bank's books and records (either manually or by electronic entry) and/or on any schedule attached to this Note, which notations shall be prima facie evidence of the accuracy of the information noted.

 

2.2     Taxes and Regulatory Costs. Borrower shall pay to Bank immediately upon demand, in addition to any other amounts due or to become due hereunder, any and all (a) withholdings, interest equalization taxes, stamp taxes or other taxes (except income and franchise taxes) imposed by any domestic or foreign governmental authority and related in any manner to LIBOR, and (b) costs, expenses and liabilities arising from or in connection with reserve percentages prescribed by the Board of Governors of the Federal Reserve System (or any successor) for "Eurocurrency Liabilities" (as defined in Regulation D of the Federal Reserve Board, as amended), assessment rates imposed by the Federal Deposit Insurance Corporation, or similar requirements or costs imposed by any domestic or foreign governmental authority or resulting from compliance by Bank with any request or directive (whether or not having the force of law) from any central bank or other governmental authority and related in any manner to LIBOR.

 

 

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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 November 3, 2019.

 

2.4     Default Interest. The Bank shall have the option in its sole and absolute discretion to have the outstanding principal balance of this Note 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 365/3_66-day year, as the case may be, actual days elapsed) equal to the lesser of (i) a rate per annum equal to four percent (4%) above the rate of interest from time to time applicable to this Note, or (ii) the Maximum Rate, (a) from and after the maturity date of this Note; (b) from and after the date prior to the maturity date of this Note when all principal owing hereunder becomes due and payable by acceleration or otherwise; and/or (c) upon the occurrence and during the continuance of any Event of Default.

 

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 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.

REPAYMENT AND PREPAYMENT:

 

3.1     Repayment. The outstanding principal balance of this Note shall be due and payable in full on September 30, 2020.

 

3.2     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.

FINANCIAL AND BUSINESS INFORMATION:

 

Borrower shall promptly provide to Bank, in form and detail satisfactory to Bank as Bank may request from time to time, (a) copies of financial statements, tax returns, brokerage, investment management and similar securities account statements, and other financial and business information regarding the financial condition of Borrower and any Third Party Obligor, and (b) such other information for the purpose of enabling Bank to fulfill its regulatory and compliance requirements, standards and processes.

 

6.

DEPOSIT RELATIONSHIP:

 

Borrower shall maintain Borrower's primary deposit relationship with Bank.

 

7.

EVENTS OF DEFAULT:

 

7.1     The occurrence of any of the following shall constitute an "Event of Default" under this Note:

 

(a)     Borrower shall fail to pay when due any principal, interest, fees or other amounts payable under any of the Loan Documents.

 

 

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(b)     Any financial statement or certificate furnished to Bank in connection with, or any representation or warranty made by Borrower or any other party under this Note or any other Loan Document shall prove to be incorrect, false or misleading in any material respect when furnished or made.

 

(c)     Any default in the performance of or compliance with (1) any collateral requirement set forth herein or in any other Loan Document; or (2) any obligation, agreement or other provision contained herein or in any other Loan Document (other than those specifically described as an "Event of Default" in this Note), and with respect to any such default under this subdivision (2) that by its nature can be cured, such default shall continue for a period of twenty (20) days from its occurrence; provided that the foregoing cure period shall only be available once during each 12 month period for each such obligation, agreement or provision.

 

(d)     Any default in the payment or performance or any obligation, or any defined event of default, under the terms of any contract, instrument or document (other than any of the Loan Documents) pursuant to which Borrower, any guarantor hereunder or any general partner or joint venturer in Borrower if a partnership or joint venture (with each such guarantor, general partner, and/or joint venturer referred to herein as a "Third Party Obligor") has incurred any debt or other liability to any person or entity, including Bank.

 

(e)     Borrower or any Third Party Obligor shall b come insolvent, or shall suffer or consent to or apply for the appointment of a receiver, trustee, custodian or liquidator of itself or any of its property, or shall generally fail to pay its debts as they become due, or shall make a general assignment for the benefit of creditors; Borrower or any Third Party Obligor shall file a voluntary petition in bankruptcy, or seeking reorganization, in order to effect a plan or other arrangement with creditors or any other relief under the Bankruptcy Reform Act, Title 11 of the United States Code, as amended or recodified from time to time ("Bankruptcy Code"), or under any state or federal law granting relief to debtors, whether now or hereafter in effect; or Borrower or any Third Party Obligor shall file an answer admitting the jurisdiction of the court and the material allegations of any involuntary petition: or Borrower or any Third Party Obligor shall be adjudicated a bankrupt, or an order for relief shall be entered against Borrower or any Third Party Obligor by any court of competent jurisdiction under the Bankruptcy Code or any other applicable state or federal law relating to bankruptcy, reorganization or other relief for debtors.

 

(f)     The filing of a notice of judgment lien against Borrower or any Third Party Obligor; or the recording of any abstract of judgment against Borrower or any Third Party Obligor in any county in which Borrower or such Third Party Obligor has an interest in real property; or the service of a notice of levy and/or of a writ of attachment or execution, or other like process, against the assets of Borrower or any Third Party Obligor; or the entry of a judgment against Borrower or any Third Party Obligor; or any involuntary petition or proceeding pursuant to the Bankruptcy Code or any other applicable state or federal law relating to bankruptcy, reorganization or other relief for debtors is filed or commenced against Borrower or any Third Party Obligor.

 

(g)     (i) Borrower shall directly or indirectly use any of the proceeds extended hereunder for the purposes of (a) providing financing or otherwise funding any targets of Sanctions, or (b) providing financing or otherwise funding any transaction which would be prohibited by Sanctions or would otherwise cause Bank or any of Bank's affiliates to be in breach of any Sanctions; (ii) any Borrower or guarantor shall fail to comply with the requirements of all applicable laws , rules, regulations and orders of any foreign, federal, state or local authority materially affecting Borrower, guarantor, or the operations or property of either; (iii) any party with a material interest in any collateral given to secure any indebtedness under this Note shall fail to comply with the requirements of the laws, rules, regulations and orders of any governmental authority applicable to and materially affecting such collateral; or (iv) any Borrower, Third Party Obligor, or other owner of an equity interest in Borrower or any Third Party Obligor, or any subsidiary owned directly or indirectly by Borrower or any Third Party Obligor, is the target of any Sanctions, or performs or engages in any act or series of acts that Bank reasonably believes could constitute a violation of Sanctions, money laundering or a predicate crime to money laundering under applicable laws, rules, regulations and orders of any governmental authority, or a violation of the U.S. Foreign Corrupt Practices Act of 1977, as amended, or any other applicable anti-bribery or anti-corruption laws and regulations.

 

(h)     The death or incapacity of Borrower or any Third Party Obligor if an individual, provided, however, that in the case of death, and so long as no other Event Of Default shall then exist or thereafter occur, Bank shall refrain from asserting its rights and remedies (except as may be necessary or desirable to preserve and protect its interests in estate, probate or like proceedings) for a period of time not greater than sixty (60) days from date of such death. The withdrawal, resignation or expulsion of any one or more of the general partners in Borrower or any Third Party

 

 

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Obligor if a partnership. The dissolution, division or liquidation of Borrower or any Third Party Obligor if a corporation, partnership, joint venture or other type of entity; or Borrower or any such Third Party Obligor, or any of its directors, stockholders or members, shall take action seeking to effect the dissolution, division or liquidation of Borrower or such Third Party Obligor. If Borrower or such Third Party Obligor is a trustee of a trust, the termination or revocation of any such trust; or any person or entity shall take action seeking to effect the termination or revocation of any such trust; or there shall be no trustee of any such trust for forty-five (45) consecutive days.

 

(i)     Any change in control of Borrower or any entity or combination of entities that directly or indirectly control Borrower, with "control" defined as ownership of an aggregate of twenty five percent (25%) or more of the common stock, members' equity or other ownership interest (other than a limited partnership interest).

 

(j)     Any transfer (including, without limitation, transfers to a trust or other entity for estate planning purposes) or other disposition, except in the ordinary course of its business, of all or a substantial or material portion of the assets of Borrower or any Third Party Obligor.

 

8.

MISCELLANEOUS:

 

8.1     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 amount of all payments, advances, charges, costs and expenses, including reasonable attorneys' fees (to include outside counsel fees and all allocated costs of the holder's in-house counsel to the extent permissible), expended or incurred by the holder in connection with the enforcement of the holder's rights and/or the 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.

 

8.2     Representations and Warranties. Borrower agrees that (a) any financial information furnished to Bank in connection with the transaction evidenced by this Note is materially true and correct as of the date of execution; (b) all provided from time to time by Borrower or any Third Party Obligor to Bank for the purpose of enabling Bank to fulfill its regulatory and compliance requirements, standards and processes was complete and correct at the time such information was provided and, except as specifically identified to Bank in a subsequent writing, remains complete and correct today; (c) that this Note and any and all agreements, contracts, instruments and other documents required hereby or at any time hereafter delivered to Bank in connection herewith (collectively, the "Loan Documents") have been duly authorized, and upon execution and delivery will constitute legal, valid and binding agreements and obligations, enforceable in accordance with their terms; (d) the execution, delivery and performance of the Loan Documents does not violate any applicable law, or the terms of any organizational documents that govern Borrower, or result in any breach of or default under any contract, obligation, indenture or other instrument to which Borrower is a party or by which Borrower may be bound; (e) Borrower is not in default on any obligation for borrowed money, any purchase money obligation or any other material lease, commitment, contract, instrument or obligation, and (f) Borrower is not the target of any trade or economic sanctions promulgated by the United Nations or the governments of the United States, the United Kingdom, the European Union, or any other jurisdiction in which the Borrower is located or operates (collectively, "Sanctions"). Borrower further agrees that the representations and warranties contained herein and in each of the other Loan Documents shall be true as of the date of execution and on the date of each extension of credit evidenced by this Note, with the same effect as though such representations and warranties had been made on and as of each such date, and on each such date, no Event of Default as defined

 

 

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herein, and no condition, event or act which with the giving of notice or the passage of time or both would constitute such an Event of Default, shall have occurred and be continuing.

 

8.3     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.

 

8.4     Notices. All notices, requests and demands required under this Note must be in writing, addressed to Bank at the address specified above and to Borrower 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 Borrower, upon the sender's receipt of a facsimile confirmation or 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.

 

8.5     Costs. Expenses and Attorneys' Fees. Borrower shall pay upon demand the Bank's expenses, including, to the extent permitted by applicable law, reasonable attorneys' fees, incurred by Bank in connection with the enforcement and exercise of any right or remedy conferred by this Note. All of the foregoing shall be paid by Borrower with interest from the date of demand until paid in full at the rate of interest in effect from time to time under this Note.

 

8.6     Successors; Assignment. This Note is binding upon the heirs, executors, administrators, legal representatives, successors and assigns of the parties; provided however, that Borrower may not assign or transfer any of its interests or rights under this Note 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 Borrower to Bank and any obligations under this Note, and for such purposes, Bank may disclose all documents and information which Bank now has or may hereafter acquire relating to any credit subject hereto, Borrower or its business, any guarantor hereunder or the business of such guarantor, or any collateral required hereunder.

 

8.7     Entire Agreement; Amendment. This Note 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 Note shall be effective unless memorialized in writing that states it is intended to amend or modify this Note.

 

8.8     Severability; Counterparts; Governing Law. If any provision of this Note 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 Note. This Note 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 Note shall be governed by and construed in accordance with the laws of the State of Texas.

 

8.9     Cross-Collateral Exclusion. Borrower acknowledges and agrees no deed of trust, mortgage, security deed, or similar real estate collateral agreement, nor any security interest in goods or other tangible personal property granted in a personal property security agreement provided to Bank by Borrower or any other party, shall now or hereafter secure the indebtedness and other obligations of Borrower to Bank subject to this Note, unless such documentation specifically describes the indebtedness subject to this Note as part of the indebtedness secured thereby.

 

8.10     Election for Electronic Communication and Signatures. To facilitate execution of this Note, this Note and each contract, instrument and other document required by this Note or at any time delivered to Bank in connection with any credit facility memorialized in this Note, or as a condition to the execution of this Note, may be executed by one or more of the Borrower 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 Borrower. 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 Note, that writing may be provided by electronic means and in an electronic format.

 

 

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This election for electronic communications and signatures is subject to the following conditions: (i) the prior consent of Borrower, and if Borrower is a "Consumer" (as defined by ESIGN Act) such consent must be obtained in accordance with the ESIGN Act, (ii) the prior consent of Bank and (iii) 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 Borrower or require from Borrower information in writing in a paper format.

 

Any writing (whether on paper or in electronic format) prepared by Borrower and delivered to Bank will be deemed materially true, correct and complete by Borrower and each officer or employee of Borrower 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.

 

8.11     Savings Clause. It is the intention of the parties to comply strictly with applicable usury laws. Accordingly, notwithstanding any provision to the contrary in this Note, or in any contract, instrument or document evidencing or securing the payment hereof or otherwise relating hereto (each, a "Related Document"), in no event shall this Note or any Related Document require the payment or permit the payment, taking, reserving, receiving, collection or charging of any sums constituting interest under applicable laws that exceed the maximum amount permitted by such laws, as the same may be amended or modified from time to, time (the "Maximum Rate"). If any such excess interest is called for, contracted for, charged, taken, reserved or received in connection with this Note or any Related Document, or in any communication by Bank or any other person to Borrower or any other person, or in the event that all or part of the principal or interest hereof or thereof shall be prepaid or accelerated, so that under any of such circumstances or under any other circumstance whatsoever the amount of interest contracted for, charged, taken, reserved or received on the amount of principal actually outstanding from time to time under this Note shall exceed the Maximum Rate, then in such event it is agreed that: (a) the provisions of this paragraph shall govern and control; (b) neither Borrower nor any other person or entity now or hereafter liable for the payment of this Note or any Related Document shall be obligated to pay the amount of such interest to the extent it is in excess of the Maximum Rate; (c) any such excess interest which is or has been received by Bank, notwithstanding this paragraph, shall be credited against the then unpaid principal balance hereof or thereof, or if this Note or any Related Document has been or would be paid in full by such credit, refunded to Borrower; and (d) the provisions of this Note and each Related Document, and any other communication to Borrower, shall immediately be deemed reformed and such excess interest reduced, without the necessity of executing any other document, to the Maximum Rate. The right to accelerate the maturity of this Note or any Related Document does not include the right to accelerate, collect or charge unearned interest, but only such interest that has otherwise accrued as of the date of acceleration. Without limiting the foregoing, all calculations of the rate of interest contracted for, charged, taken, reserved or received in connection with this Note and any Related Document which are made for the purpose of determining whether such rate exceeds the Maximum Rate shall be made to the extent permitted by applicable laws by amortizing, prorating, allocating and spreading during the period of the full term of this Note or such Related Document, including all prior and subsequent renewals and extensions hereof or thereof, all interest at any time contracted for, charged, taken, reserved or received. The terms of this paragraph shall be deemed to be incorporated into each Related Document.

 

To the extent that either Chapter 303 or 306, or both, of the Texas Finance Code apply in determining the Maximum Rate, Bank hereby elects to determine the applicable rate ceiling by using the weekly ceiling from time to time in effect, subject to Bank's right subsequently to change such method in accordance with applicable law, as the same may be amended or modified from time to time.

 

8.12     Right of Setoff; Deposit Accounts. Upon and after the occurrence of an Event of Default, (a) Borrower hereby authorizes Bank, at any time and from time to time, without notice, which is hereby expressly waived by Borrower, and whether or not Bank shall have declared this Note to be due and payable in accordance with the terms hereof, to set off against, and to appropriate and apply to the payment of, Borrower's obligations and liabilities under this Note (whether matured or unmatured, fixed or contingent, liquidated or unliquidated), any and all amounts owing by Bank to Borrower (whether payable in U.S. dollars or any other currency, whether matured or unmatured, and in the case of deposits, whether general or special (except trust and escrow accounts), time or demand and however evidenced), and (b) pending any such action, to the extent necessary, to hold such amounts as collateral to secure such obligations and liabilities and to return as unpaid for insufficient funds any and all checks and other items drawn against any deposits so held as Bank, in its sole discretion, may elect. Borrower hereby grants to Bank a security interest in all deposits and accounts maintained with Bank and with any other financial institution to secure the payment of all obligations and liabilities of Borrower to Bank under this Note.

 

 

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8.13     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.

 

9.

ARBITRATION:

 

9.1     Arbitration. The parties hereto agree, upon demand by any party, to submit to binding arbitration all claims, disputes and controversies between or among them (and their respective employees, officers, directors, attorneys, and other agents), whether in tort, contract or otherwise in any way arising out of or relating to (a) any credit subject hereto, or this Note or any contract, instrument or document relating to this Note, and their negotiation, execution, collateralization, administration, repayment, modification, extension, substitution, formation, inducement, enforcement, default or termination; or (b) requests for additional credit. In the event of a court ordered arbitration, the party requesting arbitration shall be responsible for timely filing the demand for arbitration and paying the appropriate filing fee within 30 days of the abatement order or the time specified by the court. Failure to timely file the demand for arbitration as ordered by the court will result in that party's right to demand arbitration being automatically terminated.

 

9.2     Governing Rules. Any arbitration proceeding will (a) proceed in a location in Texas selected by the American Arbitration Association ("AAA"); (b) be governed by the Federal Arbitration Act (Title 9 of the United States Code), notwithstanding any conflicting choice of law provision in any of the documents between the parties; and (c) be conducted by the AAA, or such other administrator ,as the parties shall mutually agree upon, in accordance with the AAA's commercial dispute resolution procedures, unless the claim or counterclaim is at least $1,000,000.00 exclusive of claimed interest, arbitration fees and costs in which case the arbitration shall be conducted in accordance with the AAA's optional procedures for large, complex commercial disputes (the commercial dispute resolution procedures or the optional procedures for large, complex commercial disputes to be referred to herein, as applicable, as the "Rules"). If there is any inconsistency between the terms hereof and the Rules, the terms and procedures set forth herein shall control. Any party who fails or refuses to submit to arbitration following a demand by any other party shall bear all costs and expenses incurred by such other party in compelling arbitration of any dispute. Nothing contained herein shall be deemed to be a waiver by any party that is a bank of the protections afforded to it under 12 U.S.C. §91 or any similar applicable state law.

 

9.3     No Waiver of Provisional Remedies, Self-Help and Foreclosure. The arbitration requirement does not limit the right of any party to (a) foreclose against real or personal property collateral; (b) exercise self-help remedies relating to collateral or proceeds of collateral such as setoff or repossession; or (c) obtain provisional or ancillary remedies such as replevin, injunctive relief, attachment or the appointment of a receiver, before during or after the pendency of any arbitration proceeding. This exclusion does not constitute a waiver of the right or obligation of any party to submit any dispute to arbitration or reference hereunder, including those arising from the exercise of the actions detailed in sections (a), (b) and (c) of this paragraph.

 

9.4     Arbitrator Qualifications and Powers.  Any arbitration proceeding in which the amount in controversy is $5,000,000.00 or less will be decided by a single arbitrator selected according to the Rules, and who shall not render an award of greater than $5,000,000.00. Any dispute in which the amount in controversy exceeds $5,000,000.00 shall be decided by majority vote of a panel of three arbitrators; provided however, that all three arbitrators must actively participate in all hearings and deliberations. The arbitrator will be a neutral attorney licensed in the State of Texas with a minimum of ten years experience in the substantive law applicable to the subject matter of the dispute to be arbitrated. The arbitrator will determine whether or not an issue is arbitratable and will give effect to the statutes of limitation in determining any claim. In any arbitration proceeding the arbitrator will decide (by documents only or with a hearing at the arbitrator's discretion) any pre-hearing motions which are similar to motions to dismiss for failure to state a claim or motions for summary adjudication. The arbitrator shall resolve all disputes in accordance with the substantive law of Texas and may grant any remedy or relief that a court of such state could order or grant within the scope hereof and such ancillary relief as is necessary to make effective any award. The arbitrator shall also have the power to award recovery of all costs and fees, to impose sanctions and to take such other action as the arbitrator deems necessary to the same extent a judge could pursuant to the Federal Rules of Civil Procedure, the Texas Rules of Civil Procedure or other applicable law. Judgment upon the award rendered by the arbitrator may be entered in any court having jurisdiction. The institution and maintenance of an action for judicial relief or pursuit of a provisional or ancillary remedy shall not constitute a waiver of the right of any party, including the plaintiff, to submit the controversy or claim to arbitration if any other party contests such action for judicial relief

 

 

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9.5     Discovery. In any arbitration proceeding, discovery will be permitted in accordance with the Rules. All discovery shall be expressly limited to matters directly relevant to the dispute being arbitrated and must be completed no later than 20 days before the hearing date. Any requests for an extension of the discovery periods, or any discovery disputes, will be subject to final determination by the arbitrator upon a showing that the request for discovery is essential for the party's presentation and that no alternative means for obtaining information is available.

 

9.6     Class Proceedings and Consolidations. No party hereto shall be entitled to join or consolidate disputes by or against others in any arbitration, except parties who have executed this Note or any contract, instrument or document relating to this Note, or to include in any arbitration any dispute as a representative or member of a class, or to act in any arbitration in the interest of the general public or in a private attorney general capacity.

 

9.7     Payment Of Arbitration Costs And Fees. The arbitrator shall award all costs and expenses of the arbitration proceeding.

 

9.8     Miscellaneous. To the maximum extent practicable, the AAA, the arbitrators and the parties shall take all action required to conclude any arbitration proceeding within 180 days of the filing of the dispute with the AAA. No arbitrator or other party to an arbitration proceeding may disclose the existence, content or results thereof, except for disclosures of information by a party required in the ordinary course of its business or by applicable law or regulation. If more than one agreement for arbitration by or between the parties potentially applies to a dispute, the arbitration provision most directly related to the documents between the parties or the subject matter of the dispute shall control. This Note may be amended or modified only in writing signed.by each party hereto. If any provision of this Note shall be held to be prohibited by or invalid under applicable law such provision shall be ineffective only to the extent of such prohibition or invalidity, without invalidating the remainder of such provision or any remaining provisions of this Note. This arbitration provision shall survive termination, amendment or expiration of any of the documents or any relationship between the parties.

 

9.9     Small Claims Court. Notwithstanding anything herein to the contrary, each party retains the right to pursue in Small Claims Court any dispute within that court's jurisdiction. Further, this arbitration provision shall apply only to disputes in which either party seeks to recover an amount of money (excluding attorneys' fees and costs) that exceeds the jurisdictional limit of the Small Claims Court.

 

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

 

Address:

5225 Katy Fwy Ste 600

Houston, TX 77007-2211

 

 

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Exhibit 10.10

 

AMENDED AND RESTATED SECURITY AGREEMENT

(Financial Assets)

 

This Security Agreement ("Agreement") to be effective as of September 30, 2019.

 

This Agreement amends, modifies and restates, but does not satisfy nor act as a novation of the obligations under, relating to, or in connection with, that certain Amended and Restated Security Agreement, dated as of August 31, 2018, executed and delivered by some or all Debtor hereunder.

 

1.     GRANT OF SECURITY INTEREST. For valuable consideration, Peter L. Dalrymple and Marlene C. Dalrymple, (each and collectively being the "Debtor"), hereby grants and transfers to WELLS FARGO BANK, NATIONAL ASSOCIATION, a national banking association having offices at 1000 Louisiana St 7th Floor, Houston, TX 77002 (the "Bank"), a security interest in: (a) Debtor's account no.(s) XXXXXXXXXXX maintained at Wells Fargo Clearing Services, LLC (whether held in Debtor's name or as a Bank collateral account for the benefit of Debtor), any sub-account thereunder or consolidated therewith, and all replacements or substitutions therefor, including any account resulting from a renumbering or other administrative re-identification thereof (each and collectively being the "Securities Account", and the parties maintaining the Securities Account each and collectively being the "Intermediary"), (b) all financial assets credited to the Securities Account (including, without limitation, any interests or shares in hedge funds and any pending subscription or redemption amounts relating thereto (each, a "Hedge Fund")), (c) all security entitlements with respect to the financial assets credited to the Securities Account, (d) any and all other investment property or assets maintained or recorded in the Securities Account and (e) all of Debtor's right, title and interest in and to: Deposit account number XXXXXX maintained with Bank, In the initial amount of $400,000.00 including interest now or hereafter earned thereon and all funds added thereto, and all renewals and replacements thereof, whether or not any such renewal or replacement is evidenced by a certificate of deposit, assigned a different number or in a greater or lesser amount (each and collectively being the "Collateral"), together with whatever is receivable or received when any of the Collateral or proceeds thereof are sold, collected, exchanged or otherwise disposed of, whether such disposition is voluntary or involuntary (each and collectively the "Proceeds"), but excluding from such Collateral and Proceeds all common trust funds of Bank governed by 12 CFR 9.18 now or hereafter maintained in the Securities Account. In this Agreement, the terms "security entitlement," "financial asset" and "investment property" have the meanings used in the Texas Business and Commerce Code.

 

2.     OBLIGATIONS SECURED. The obligations secured by this Agreement are the payment and performance of: (a) all present and future Indebtedness under, relating to, or in connection with, that certain Amended and Restated Promissory Note in the amount of $1,306,000.00 dated September 30, 2019 of SPINE INJURY SOLUTIONS, INC., a Delaware corporation (each and collectively being the "Obligor") to Bank and all extensions, renewals or modifications thereof, and restatements or substitutions therefor; and (b) all obligations of Debtor to Bank under this Agreement. The word "Indebtedness" is used in its most comprehensive sense and includes any and all advances, debts, obligations and liabilities heretofore, now or hereafter made, incurred or created, whether voluntary or involuntary and however arising, whether due or not due, absolute or contingent, liquidated or unliquidated, determined or undetermined, including under any swap, derivative, foreign exchange, hedge, deposit, treasury management or other similar transaction or arrangement, and whether liable individually or jointly with others, or whether recovery upon such Indebtedness may be or hereafter becomes unenforceable.

 

3.     EXCLUSIONS FROM COLLATERAL. Bank may, at its sole discretion and at any time upon written notice to Debtor, release Bank's security interest in any WF Securities in the Collateral or Proceeds and exclude WF Securities from the determination of value requirements to which the Collateral is subject under this Agreement. Such release, if any, shall not relieve Debtor from the obligation to satisfy any value requirement set forth in this Agreement. As used in this Agreement, "WF Securities" means stock, securities or obligations of Wells Fargo & Company or of any affiliate thereof (as the term affiliate is defined in Section 23A of the Federal Reserve Act (12 U.S.C. 371(c)), as amended from time to time).

 

4.     COLLATERAL VALUE PROVISIONS.

 

4.1     Value Requirements. The Margin Value of the Collateral shall at all times exceed the outstanding balance of Indebtedness. Collateral subject to the provisions of Section 11(d) (1) of the Securities Exchange Act of 1934 may

 

 

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not be used to satisfy value requirements unless and until they have been owned by Debtor for a period greater than thirty (30) days. 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 j:)n 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 CDs" means an FDIC-insured certificate of deposit of any financial institution other than Wells Fargo Bank, N.A. obtained from or through the mediation or assistance of Wells Fargo Clearing Services, 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

 

 

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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 Clearing Services, 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, N.A. 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 7th 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 Ban 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

 

 

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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

 

 

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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 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; (d) any impairment of any rights of Bank in any Collateral or Proceeds, or any attachment or likely levy on any property of Debtor; and (e) the termination or revocation of any trust the assets of which are subject of this Agreement, or any person or entity shall take action seeking to effect the termination or revocation of such trust, or there $hall be no person or entity serving as trustee of such trust for a period exceeding forty-five (45) consecutive days.

 

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

 

 

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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 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. 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,

 

 

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Bank may always in its sole discretion provide to Debtor or require from Debtor information in writing in a paper format.

 

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

 

 

/s/ Marlene C. Dalrymple                

Marlene C. Dalrymple

 

Address:

 

 

 

STATE OF TEXAS      §

                                      §

COUNTY OF               §

 

 

This instrument was ACKNOWLEDGED before me on               ,20    , by                                  .

 

[SEAL]

 

My commission expires:

 

                                                  

                                                                                                             

Notary Public, State of                                       

 

 

Printed Name of Notary Public                                                  

Notary ID No.                                                    

 

 

 

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Exhibit 10.11

 

WELLS FARGO AMENDED AND RESTATED CONTINUING GUARANTY

 

TO: WELLS FARGO BANK, NATIONAL ASSOCIATION

 

This Guaranty 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 Continuing Guaranty dated as of August 31, 2018 executed and delivered by Guarantor hereunder in favor of Bank.

 

1.     GUARANTY; DEFINITIONS. In consideration of any credit or other financial accommodation heretofore, now or hereafter extended or made to SPINE INJURY SOLUTIONS, INC. ("Borrowers"), or any of them, by WELLS FARGO BANK, NATIONAL ASSOCIATION ("Bank"), and for other valuable consideration, the undersigned PETER L. DALRYMPLE ("Guarantor"), jointly and severally unconditionally guarantees and promises to pay to Bank or order, on demand in lawful money of the United States of America and in immediately available funds, any and all Indebtedness of any of the Borrowers to Bank. The term "Indebtedness" is used herein in its most comprehensive sense and includes any and all advances, debts, obligations and liabilities of Borrowers, or any of them, heretofore, now or hereafter made, incurred or created, whether voluntary or involuntary and however arising, whether due or not due, absolute or contingent, liquidated or unliquidated, determined or undetermined, including under any swap, derivative, foreign exchange, hedge, deposit, treasury management or other similar transaction or arrangement, and whether Borrowers may be liable individually or jointly with others, or whether recovery upon such Indebtedness may be or hereafter becomes unenforceable. This Guaranty is a guaranty of payment and not collection.

 

2.     MAXIMUM LIABILITY; SUCCESSIVE TRANSACTIONS; REVOCATION; OBLIGATION UNDER OTHER GUARANTIES. This is a continuing guaranty and all rights, powers and remedies hereunder shall apply to all past, present and future Indebtedness of each of the Borrowers 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 Borrowers or Guarantor or any other event or proceeding affecting any of the Borrowers or Guarantor. This Guaranty 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 Borrowers after revocation under commitments existing prior to receipt by Bank of such revocation, and extensions, renewals or modifications, of any kind, of Indebtedness incurred by any of the Borrowers 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 Private Banking - Houston, 1000 Louisiana St 7th Floor, Houston, TX 77002, or at such other address as Bank shall from time to time designate. Any payment by Guarantor with respect to the Indebtedness shall not reduce Guarantor's maximum obligation hereunder unless written notice to that effect is actually received by Bank at or prior to the time of such payment. The obligations of Guarantor hereunder shall be in addition to any obligations of Guarantor under any other guaranties of any liabilities or obligations of any of the Borrowers or any other persons heretofore or hereafter given to Bank unless said other guaranties are expressly modified or revoked in writing; and this Guaranty shall not, unless expressly herein provided, affect or invalidate any such other guaranties.

 

3.     OBLIGATIONS JOINT AND SEVERAL; SEPARATE ACTIONS; WAIVER OF STATUTE OF LIMITATIONS; REINSTATEMENT OF LIABILITY. The obligations hereunder are joint and several and independent of the obligations of Borrowers, and a separate action or actions may be brought and prosecuted against Guarantor whether action is brought against any of the Borrowers or any other person, or whether any of the Borrowers or any other person is joined in any such action or actions. Guarantor acknowledges that this Guaranty is absolute and unconditional there are no conditions precedent to the effectiveness of this Guaranty, and this Guaranty is in full force and effect and is binding on Guarantor as of the date written below, regardless of whether Bank obtains collateral or any guaranties from others or takes any other action contemplated by Guarantor. Guarantor waives the benefit of any statute of limitations affecting Guarantor's liability hereunder or the enforcement thereof, and Guarantor agrees that any payment of any Indebtedness or other act which shall toll any statute of limitations applicable thereto shall similarly operate to toll such statute of limitations applicable to Guarantor's liability hereunder. The liability of Guarantor hereunder shall be reinstated and revived and the rights of Bank shall continue if and to the extent that for any reason any amount at any time paid on account of any Indebtedness guaranteed hereby is rescinded or must otherwise be restored by Bank, whether as a result of any proceedings in bankruptcy or reorganization or otherwise,

 

 

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all as though such amount had not been paid. The determination as to whether any amount so paid must be rescinded or restored shall be made by Bank in its sole discretion; provided however, that if Bank chooses to contest any such matter at the request of Guarantor, Guarantor agrees to indemnify and hold Bank harmless from and against all costs and expenses, including reasonable attorneys' fees, expended or incurred by Bank in connection therewith, including without limitation, in any litigation with respect thereto.

 

4.     AUTHORIZATIONS TO BANK. Guarantor authorizes Bank either before or after revocation hereof], without notice to or demand on, or consent of Guarantor, and without affecting Guarantor's liability hereunder, from time to time to: (a) alter, compromise, renew, extend, accelerate or otherwise change the time for 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) do any and all of the following with respect to any document or instrument now or hereafter entered into with respect to the Indebtedness or otherwise evidencing any portion of the Indebtedness (collectively, the "Loan Documents"): (i) amend, amend and restate, supplement, replace, or otherwise modify any Loan document; (ii) waive compliance with any provision of any Loan Document on any number of occasions; (iii) consent to departure from any provision of any Loan Document on any number of occasions; and/or (iv) forbear from exercising any rights of remedies of Bank in connection with a breach of any provision of any Loan Document for any duration of time and on any number of occasions; (c) take and hold security for the payment of this Guaranty or the Indebtedness or any portion thereof, and exchange, enforce, waive, subordinate or release any such security; (d) apply such 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; (e) release or substitute any one or more of the endorsers or any other guarantors of the Indebtedness, or any portion thereof, or any other party thereto; and (f) apply payments received by Bank from any of the Borrowers to any Indebtedness of any of the Borrowers to Bank, in such order as Bank shall determine in its sole discretion, whether or not such Indebtedness is covered by this Guaranty, and Guarantor hereby waives any provision of law regarding application of payments which specifies otherwise. Bank may without notice assign this Guaranty in whole or in part. Upon Bank's request, Guarantor agrees to provide to Bank copies of Guarantor's financial statements.

 

5.     REPRESENTATIONS AND WARRANTIES. Guarantor represents and warrants to Bank that: (a) this Guaranty is executed at Borrowers' request; (b) Guarantor shall not, without Bank's prior written consent, sell, lease, assign, encumber, hypothecate, transfer or otherwise dispose of all or a substantial or material part of Guarantor's assets other than in the ordinary course of Guarantor's business, nor accomplish any of the above by virtue of a division or similar transaction; (c) Bank has made no representation to Guarantor as to the creditworthiness of any of the Borrowers; and (d) Guarantor has established adequate means of obtaining from each of the Borrowers on a continuing basis financial and other information pertaining to Borrowers' financial condition. Guarantor agrees to keep adequately informed from such means of any facts, events or circumstances which might in any way affect Guarantor's risks hereunder, and Guarantor further agrees that Bank shall have no obligation to disclose to Guarantor any information or material about any of the Borrowers which is acquired by Bank in any manner.

 

6.     GUARANTOR'S WAIVERS.

 

6.1     Guarantor waives any right to require Bank to: (a) proceed against any of the Borrowers or any other person; (b) marshal assets or proceed against or exhaust any security held from any of the Borrowers 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 Borrowers or any other person; (d) take any action or pursue any other remedy in Bank's power; or (e) make any presentment or demand for performance, or give any notice of nonperformance, protest, notice of protest or notice of dishonor hereunder 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 hereunder, or in connection with the creation of new or additional Indebtedness.

 

6.2     Guarantor waives any defense to its obligations hereunder based upon or arising by reason of: (a) any disability or other defense of any of the Borrowers 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 Borrowers or any other person; (c) any lack of authority of any officer, director, partner, agent or other person acting or purporting to act on behalf of any of the Borrowers which is a corporation, partnership or other type of entity, or any defect in the formation of any such

 

 

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Borrower; (d) the application by any of the Borrowers of the proceeds of any Indebtedness for purposes other than the purposes represented by Borrowers to, or intended or understood by, Bank or Guarantor; (e) any act or omission by Bank which directly or indirectly results in or aids the discharge of any of the Borrowers 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 Borrowers; (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 Guaranty. Until all Indebtedness shall have been paid in full, Guarantor shall have no right of subrogation, and Guarantor waives any right to enforce any remedy which Bank now has or may hereafter have against any of the Borrowers or any other person, and waives any benefit of, or any right to participate in, any security now or hereafter held by Bank. Guarantor further waives all rights and defenses Guarantor 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 Guarantor's rights of subrogation or Guarantor's rights to proceed against any of the Borrowers for reimbursement, or (ii) any loss of rights Guarantor may suffer by reason of any rights, powers or remedies of any of the Borrowers in connection with any anti-deficiency laws or any other laws limiting, qualifying or discharging Borrowers' Indebtedness, whether by operation of law or otherwise, including any rights Guarantor may have to a fair market value 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.

 

7.     BANK'S RIGHTS WITH RESPECT TO GUARANTOR'S PROPERTY IN BANK'S POSSESSION. In addition to all liens upon and rights of setoff against the monies, securities or other property of Guarantor given to Bank by law, Bank shall have a lien upon and a right of setoff against all monies, securities and other property of Guarantor now or hereafter in the possession of or on deposit with Bank, whether held in a general or special account or deposit or for safekeeping or otherwise, and every such lien and right of setoff may be exercised without demand upon or notice to Guarantor. No lien or right of setoff shall be deemed to have been waived by any act or conduct on the part of Bank, or by any neglect to exercise such right of setoff or to enforce such lien, or by any delay in so doing, and every right of setoff and lien shall continue in full force and effect until such right of setoff or lien is specifically waived or released by Bank in writing.

 

8.     SUBORDINATION. Any Indebtedness of any of the Borrowers now or hereafter held by Guarantor is hereby subordinated to the Indebtedness of Borrowers to Bank. Such Indebtedness of Borrowers to Guarantor is assigned to Bank as security for this Guaranty and the Indebtedness and, if Bank requests, shall be collected and received by Guarantor as trustee for Bank and paid over to Bank on account of the Indebtedness of Borrowers to Bank but without reducing or affecting in any manner the liability of Guarantor under the other provisions of this Guaranty. Any notes or other instruments now or hereafter evidencing such Indebtedness of any of the Borrowers to Guarantor shall be marked with a legend that the same are subject to this Guaranty and, if Bank so requests, shall be delivered to Bank. Bank is hereby authorized in the name of Guarantor from time to time to file financing statements and continuation statements and execute such other documents and take such other action as Bank deems necessary or appropriate to perfect, preserve and enforce its rights hereunder.

 

9.     REMEDIES; NO WAIVER. All rights, powers and remedies of Bank hereunder are cumulative. No delay, failure or discontinuance of Bank in exercising any right, power or remedy hereunder shall affect or operate as a waiver of such right, power or remedy; nor shall any single or partial exercise of any such right, power or remedy preclude, waive or otherwise affect any other or further exercise thereof or the exercise of any other right, power or remedy. Any waiver, permit, consent or approval of any kind by bank of any breach of this Guaranty, or any such waiver of any provisions or conditions hereof, must be in writing and shall be effective only to the extent set forth in writing.

 

10.     COSTS, EXPENSES AND ATTORNEYS' FEES. Guarantor shall pay to Bank immediately upon demand the full amount of all payments, advances, charges, costs and expenses, including reasonable attorneys' fees (to include outside counsel fees and all allocated costs of Bank's in-house counsel), expended or incurred by Bank in connection with the enforcement of any of Bank's rights, powers or remedies and/or the collection of any amounts which become

 

 

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due to Bank under this Guaranty, and the prosecution or defense of any action in any way related to this Guaranty, 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 Guarantor or any other person or entity. Notwithstanding anything in this Guaranty to the contrary, reasonable attorneys' fees shall not exceed the amount permitted by law, including, but not limited to, the provisions of Del. Code Ann. tit. 10, §3912 (2009). All of the foregoing shall be paid by Guarantor with interest from the date of demand until paid in full at a rate per annum equal to the greater of ten percent (10%) or Bank's Prime Rate in effect from time to time.

 

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

 

12.     AMENDMENT. This Guaranty may be amended or modified only in writing signed by Bank and Guarantor that states it is intended to amend or modify this Guaranty.

 

13.     APPLICATION OF SINGULAR AND PLURAL. In all cases where there is but a single Borrower, then all words used herein 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 Borrower named herein, or when this Guaranty is executed by more than one Guarantor, the word "Borrowers'' and the word "Guarantor" respectively shall mean all or any one or more of them as the context requires.

 

14.     UNDERSTANDING WITH RESPECT TO WAIVERS; SEVERABILITY OF PROVISIONS. Guarantor warrants and agrees that each of the waivers set forth herein is made with Guarantor's full knowledge of its significance and consequences, and that under the circumstances, the waivers are reasonable and not contrary to public policy or law. If any waiver or other provision of this Agreement shall be held to be prohibited by or invalid under applicable public policy or law, such waiver or other provision shall be ineffective only to the extent of such prohibition or invalidity, without invalidating the remainder of such waiver or other provision or any remaining provisions of this Agreement.

 

15.     COUNTERPARTS; GOVERNING LAW. This Guaranty 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 Guaranty shall be governed by and construed in accordance with the laws of the State of Delaware.

 

16.     ARBITRATION.

 

16.1     Arbitration. The parties hereto agree, upon demand by any party, to submit to binding arbitration all claims, disputes and controversies between or among them (and their respective employees, officers, directors, attorneys, and other agents), whether in tort, contract or otherwise, in any way arising out of or relating to this Guaranty and its negotiation, execution, collateralization, administration, repayment, modification, extension, substitution, formation, inducement, enforcement, default or termination; provided, however, that nothing herein shall preclude or limit the Bank's right to confess judgment pursuant to a warrant of attorney provision set forth in any document related to the Indebtedness; and provided, further, that no party shall have the right to demand binding arbitration of any claim, dispute or controversy seeking to (a) strike-off or open a judgment obtained by confession pursuant to a warrant of attorney contained in any document related to the Indebtedness, including, without limitation, this Agreement, or (b) challenge the waiver of a right to prior notice and a hearing before judgment is entered, or after judgment is entered, but before execution upon the judgment. In the event of a court ordered arbitration, the party requesting arbitration shall be responsible for timely filing the demand for arbitration and paying the appropriate filing fee within 30 days of the abatement order or the time specified by the court. Failure to timely file the demand for arbitration as ordered by the court will result in that party's right to demand arbitration being automatically terminated.

 

16.2     Governing Rules. Any arbitration proceeding will (a) proceed in a location in Delaware selected by the American Arbitration Association ("AAA"); (b) be governed by the Federal Arbitration Act (Title 9 of the United States

 

 

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Code), notwithstanding any conflicting choice of law provision in any of the documents between the parties; and (c) be conducted by the AAA, or such other administrator as the parties shall mutually agree upon, in accordance with the AAA's commercial dispute resolution procedures, unless the claim or counterclaim is at least $1,000,000.00 exclusive of claimed interest, arbitration fees and costs in which case the arbitration shall be conducted in accordance with the AAA's optional procedures for large, complex commercial disputes (the commercial dispute resolution procedures or the optional procedures for large, complex commercial disputes to be referred to herein, as applicable, as the "Rules"). If there is any inconsistency between the terms hereof and the Rules, the terms and procedures set forth herein shall control. Any party who fails or refuses to submit to arbitration following a demand by any other party shall bear all costs and expenses incurred by such other party in compelling arbitration of any dispute. Nothing contained herein shall be deemed to be a waiver by any party that is a bank of the protections afforded to it under 12 U.S.C. §91 or any similar applicable state law.

 

16.3     No Waiver of Provisional Remedies. Self-Help and Foreclosure. The arbitration requirement does not limit the right of any party to (a) foreclose against real or personal property collateral; (b) exercise self-help remedies relating to collateral or proceeds of collateral such as setoff or repossession; or (c) obtain provisional or ancillary remedies such as replevin, injunctive relief, attachment or the appointment of a receiver, before during or after the pendency of any arbitration proceeding . This exclusion does not constitute a waiver of the right or obligation of any party to submit any dispute to arbitration or reference hereunder, including those arising from the exercise of the actions detailed in sections (a), (b) and (c) of this paragraph.

 

16.4     Arbitrator Qualifications and Powers. Any arbitration proceeding in which the amount in controversy is $5,000,000.00 or less will be decided by a single arbitrator selected according to the Rules, and who shall not render an award of greater than $5,000,000.00. Any dispute in which the amount in controversy exceeds $5,000,000.00 shall be decided by majority vote of a panel of three arbitrators; provided however, that all three arbitrators must actively participate in all hearings and deliberations. The arbitrator will be a neutral attorney licensed in the State of Delaware or a neutral retired judge of the state or federal judiciary of Delaware, in either case with a minimum of ten years experience in the substantive law applicable to the subject matter of the dispute to be arbitrated. The arbitrator will determine whether or not an issue is arbitratable and will give effect to the statutes of limitation in determining any claim. In any arbitration proceeding the arbitrator will decide (by documents only or with a hearing at the arbitrator's discretion) any pre-hearing motions which are similar to motions to dismiss for failure to state a claim or motions for summary adjudication. The arbitrator shall resolve all disputes in accordance with the substantive law of Delaware and may grant any remedy or relief that a court of such state could order or grant within the scope hereof and such ancillary relief as is necessary to make effective any award. The arbitrator shall also have the power to award recovery of all costs and fees, to impose sanctions and to take such other action as the arbitrator deems necessary to the same extent a judge could pursuant to the Federal Rules of Civil Procedure, the Delaware Rules of Civil Procedure or other applicable law. Judgment upon the award rendered by the arbitrator may be entered in any court having jurisdiction . The institution and maintenance of an action for judicial relief or pursuit of a provisional or ancillary remedy shall not constitute a waiver of the right of any party, including the plaintiff, to submit the controversy or claim to arbitration if any other party contests such action for judicial relief.

 

16.5     Discovery. In any arbitration proceeding, discovery will be permitted in accordance with the Rules. All discovery shall be expressly limited to matters directly relevant to the dispute being arbitrated and must be completed no later than 20 days before the hearing date. Any requests for an extension of the discovery periods, or any discovery disputes, will be subject to final determination by the arbitrator upon a showing that the request for discovery is essential for the party's presentation and that no alternative means for obtaining information is available.

 

16.6     Class Proceedings and Consolidations. No party hereto shall be entitled to join or consolidate disputes by or against others in any arbitration, except parties who have executed this Guaranty or any other contract, instrument or document relating to any Indebtedness, or to include in any arbitration any dispute as a representative or member of a class, or to act in any arbitration in the interest of the general public or in a private attorney general capacity.

 

16.7     Payment Of Arbitration Costs And Fees. The arbitrator shall award all costs and expenses of the arbitration proceeding.

 

16.8     Miscellaneous. To the maximum extent practicable, the AAA, the arbitrators and the parties shall take all action required to conclude any arbitration proceeding within 180 days of the filing of the dispute with the AAA. No arbitrator or other party to an arbitration proceeding may disclose the existence, content or results thereof, except for disclosures of information by a party required in the ordinary course of its business, by applicable law or regulation,

 

 

 

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or to the extent necessary to exercise any judicial review rights set forth herein. If more than one agreement for arbitration by or between the parties potentially applies to a dispute, the arbitration provision most directly related to the documents between the parties or the subject matter of the dispute shall control. This arbitration provision shall survive termination, amendment or expiration of any of the documents or any relationship between the parties.

 

16.9     Small Claims Court. Notwithstanding anything herein to the contrary, each party retains the right to pursue in Small Claims Court any dispute within that court's jurisdiction. Further, this arbitration provision shall apply only to disputes in which either party seeks to recover an amount of money (excluding attorneys' fees and costs) that exceeds the jurisdictional limit of the Small Claims Court.

 

17.     WARRANT OF ATTORNEY TO CONFESS JUDGMENT. GUARANTOR HEREBY IRREVOCABLY AUTHORIZES AND EMPOWERS THE PROTHONOTARY, ANY ATTORNEY OR ANY CLERK OF ANY COURT OF RECORD, FOLLOWING THE OCCURRENCE OF AN EVENT OF DEFAULT, TO APPEAR FOR AND CONFESS JUDGMENT AGAINST GUARANTOR FOR SUCH SUMS AS ARE DUE AND/OR MAY BECOME DUE UNDER THIS GUARANTY, WITH OR WITHOUT DECLARATION, WITH COSTS OF SUIT, WITHOUT STAY OF EXECUTION AND WITH AN AMOUNT ADDED FOR ATTORNEYS' COLLECTION FEES. NOTWITHSTANDING ANYTHING IN THIS GUARANTY TO THE CONTRARY, REASONABLE ATTORNEYS FEES SHALL NOT EXCEED THE AMOUNT PERMITTED BY LAW, INCLUDING, BUT NOT LIMITED TO, THE PROVISIONS OF DEL. CODE ANN. TIT. 10, §3912 (2009). TO THE EXTENT PERMITTED BY LAW, OTHER THAN MANIFEST ERROR, GUARANTOR RELEASES ALL ERRORS IN SUCH PROCEEDINGS. IF A COPY OF THIS GUARANTY, VERIFIED BY AFFIDAVIT BY OR ON BEHALF OF THE HOLDER OF THIS GUARANTY SHALL HAVE BEEN FILED IN SUCH ACTION, IT SHALL NOT BE NECESSARY TO FILE THE ORIGINAL GUARANTY AS A WARRANT OF ATTORNEY. THE AUTHORITY AND POWER TO APPEAR FOR AND CONFESS JUDGMENT AGAINST GUARANTOR SHALL NOT BE EXHAUSTED BY THE INITIAL EXERCISE THEREOF AND MAY BE EXERCISED AS OFTEN AS THE HOLDER SHALL FIND IT NECESSARY AND DESIRABLE AND THIS GUARANTY OR A COPY THEREOF SHALL BE A SUFFICIENT WARRANT THEREFOR. THE HOLDER HEREOF MAY CONFESS ONE OR MORE JUDGMENTS IN THE SAME OR DIFFERENT JURISDICTIONS FOR ALL OR ANY PART OF THE AMOUNT OWING HEREUNDER, WITHOUT REGARD TO WHETHER JUDGMENT HAS THERETOFORE BEEN CONFESSED ON MORE THAN ONE OCCASION FOR THE SAME AMOUNT. IN THE EVENT ANY JUDGMENT CONFESSED AGAINST GUARANTOR HEREUNDER IS STRICKEN OR OPENED UPON APPLICATION BY OR ON GUARANTOR'S BEHALF FOR ANY REASON, THE HOLDER IS HEREBY AUTHORIZED AND EMPOWERED TO AGAIN APPEAR FOR AND CONFESS JUDGMENT AGAINST GUARANTOR FOR ANY PART OR ALL OF THE AMOUNTS OWING HEREUNDER, AS PROVIDED FOR HEREIN, IF DOING SO WILL CURE ANY ERRORS OR DEFECTS IN SUCH PRIOR PROCEEDINGS.

 

18.     ELECTION FOR ELECTRONIC COMMUNICATIONS AND SIGNATURES. To facilitate execution of this Guaranty, this Guaranty and each promissory note, contract, instrument and other document required by this Guaranty or at any time delivered to Bank in connection with the Indebtedness secured by this Guaranty, or as a condition to the execution of this Guaranty, may be executed by one or more of Guarantor 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 Guarantor. 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 other than a notice to terminate this Guaranty, permission, waiver, demand or amendment) is to be provided in writing under this Guaranty, 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: (i) the prior consent of Guarantor, and if Guarantor is a "Consumer" (as defined by ESIGN Act) such consent must be obtained in accordance with the ESIGN Act, (ii) the prior consent of Bank and (iii) 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 Guarantor or require from Guarantor information in writing in a paper format.

 

Any writing (whether on paper or in electronic format) prepared by Guarantor and delivered to Bank will be deemed materially true, correct and complete by Guarantor and each officer or employee of Guarantor 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.

 

 

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IN WITNESS WHEREOF, the undersigned Guarantor has executed this Guaranty as a sealed instrument as of September 30, 2019.

 

/s/ Peter L. Dalrymple                              

PETER L. DALRYMPLE

 

Address:

13451 BELHAVEN DR

HOUSTON, TX 77069

(SEAL)

 

STATE OF TEXAS      §

                                      §

COUNTY OF               §

 

This instrument was ACKNOWLEDGED before me on              , 20     , by                                               .

 

[SEAL]

 

My commission expires:

 

                                            

                                                                                 

Notary Public, State of                                

 

Printed Name of Notary Public                                              

Notary ID No..                                             

 

 

 

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EXHIBIT 31.1

 

CERTIFICATION PURSUANT TO SECTION 302 OF THE

SARBANES-OXLEY ACT OF 2002

 

I, William F. Donovan, M.D., Chief Executive Officer of Spine 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, 2019;

 

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 14, 2019

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, 2019;

 

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 14, 2019

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, 2019 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 14, 2019

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, 2019 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 14, 2019

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.