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Item 8. Financial Statements and Supplementary Data

2021-03-26 compared with 2020-03-30 · 145 added, 205 removed, 266 unchanged (57% of the section changed)

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Consolidated Statements of Operations for the years ended December 31, 2020 and 2019

Consolidated Statements of Changes in Stockholders’ Equity for the years ended December 31, 2019 and 2018

Consolidated Statements of Changes in Stockholders’ Equity (Deficit) for the years ended December 31, 2020 and 2019

Consolidated Statements of Cash Flows for the years ended December 31, 2020 and 2019

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REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Stockholders and Board of Directors of Spine Injury Solutions, Inc.:

To the Stockholders and Board of Directors

Spine Injury Solutions, Inc.

Houston, Texas

Opinion on the Consolidated Financial Statements

We have audited the accompanying consolidated balance sheets of Spine Injury Solutions, Inc.

(the “Company”) as of December 31, 2019 and 2018, and the related consolidated statements of operations, changes in stockholders’ equity and cash flows for the years then ended and the related notes (collectively referred to as the “financial statements”).

(the “Company”) as of December 31, 2020 and 2019, and the related consolidated statements of operations, changes in stockholders’ equity (deficit) and cash flows for the years then ended and the related notes (collectively referred to as the “financial statements”).

In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2020 and 2019, and the results of its operations and cash flows for the years then ended, in conformity with accounting principles generally accepted in the United States of America.

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Accordingly, we express no such opinion.

Our audit includes performing procedures to assess the risks of material misstatement of the consolidated financial statements, whether due to error or fraud, and performing procedures that respond to those risks.

Our audits included performing procedures to assess the risks of material misstatement of the consolidated financial statements, whether due to error or fraud, and performing procedures that respond to those risks.

Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the consolidated financial statements.

Our audit also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements.

We believe that our audit provides a reasonable basis for our opinion.

Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements.

We believe that our audits provide a reasonable basis for our opinion.

The accompanying consolidated financial statements referred to above have been prepared assuming that the Company will continue as a going concern.

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The consolidated financial statements do not include any adjustments that might result from the outcome of this uncertainty.

Critical Audit Matters

Critical audit matters are matter arisings from the current-period audit of the consolidated financial statements that were communicated or required to be communicated to the audit committee and that (1) relate to accounts or disclosures that are material to the consolidated financial statements and (2) represented especially challenging, subjective, or complex judgments.

We determined that there are no critical audit matters.

/s/ Ham, Langston & Brezina, LLP

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Property and equipment, net

Intangible assets and goodwill

LIABILITIES AND STOCKHOLDERS’ EQUITY

LIABILITIES AND STOCKHOLDERS ’ EQUITY (DEFICIT)

Current liabilities:

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Accounts payable and accrued liabilities

Due to related parties

Total current liabilities

Commitments and contingencies

Stockholders’ equity:

Commitments and contingencies (Note 10)

Stockholders’ equity (deficit):

Common stock:

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Accumulated deficit

Total stockholders’ equity

Total liabilities and stockholders’ equity

Total stockholders’ equity (deficit)

Total liabilities and stockholders’ equity (deficit)

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

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Total revenue

Cost of providing services, including amounts billed by

Third party providers

Related party providers

Inventory impairment

Total cost of providing services

Cost of providing services – provision for inventory obsolescence

Operating, general and administrative expenses

Loss from operations

Other income and (expense):

Other income (expense):

Gain from forgiveness of debt

Interest expense

Total other income and (expense)

Total other income (expense), net

Net loss per common share:

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SPINE INJURY SOLUTIONS, INC.

CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY

CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS ’ EQUITY (DEFICIT)

For the Years Ended December 31, 2020 and 2019

Stockholders ’

Equity (Deficit)

Balances, December 31, 2018

Issuance of common stock options for compensation of officers

Balances, December 31, 2019

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Adjustments to reconcile net (loss) to net cash

provided (used) in operating activities:

Bad debt expense

provided by operating activities:

Provision for uncollectible accounts

Provision for inventory obsolescence

Factoring expense

Issuance of common stocks for services

Obsolete inventory

Impairment of goodwill

Provision for impairment of goodwill

Depreciation expense

Gain from forgiveness of debt

Changes in operating assets and liabilities:

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Due to related party

Net cash provided (used) in by operating activities

Net cash provided by operating activities

Cash flows from financing activities:

Repayments on notes payable

(Payments) proceeds from line of credit, net

Net cash (used) provided in financing activities

Net increase (decrease) in cash and cash equivalents

Cash and cash equivalents at beginning of period

Cash and cash equivalents at end of period

Proceeds from Paycheck Protection Program loan

Payments on line of credit

Net cash used in financing activities

Net (decrease) increase in cash and cash equivalents

Cash and cash equivalents at beginning of year

Cash and cash equivalents at end of year

Supplementary disclosure of cash flow information:

Interest paid

Supplementary disclosure of non-cash investing and financing activities:

Reclassification of inventory to equipment

Non-cash investing and financing activities:

Exchange of note payable to a bank for note payable to shareholder

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

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Since that time, our accumulated deficit has increased $5,133,484 to $20,138,182 as of December 31, 2020.

We plan to increase our operating expenses as we increase our service development, marketing efforts and brand building activities, while no specific plans are in place.

We also plan to pursue a merger with another company.

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.

Presently, we are trying to limit all operating expenses as much as possible.

If in the future we decide to increase our service development, marketing efforts and/or brand building activities, we will need to increase our operating expenses and our general and administrative functions to support such growth in operations.

No such growth in operations is presently planned.

We are also actively seeking a private company with which to enter into a strategic business transaction, including without limitation a merger;

however, we cannot predict the ultimate outcome of our efforts.

Our continued existence is dependent upon our ability to successfully merge with a financially viable company, or 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 6—Notes Payable).

Any expectation of future profitability is dependent upon our ability to expand and develop our business, of which there can be no assurances.

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 Bank, N.A.

and a current director and shareholder (see Note 6—Notes Payable).

We did not fund any procedures in 2020 and will not do so unless we can access additional capital.

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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.

As an alternative, we are also investigating possible strategic business transactions with third party companies.

We are actively pursuing a merger with a private company where they become the controlling company.

We find this the best course of actions for our shareholders.

We are also actively seeking a private company with which to enter into a strategic business transaction, including without limitation a merger.

Presently, we believe this to be the best course of actions for our shareholders.

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

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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.

Service Revenue Recognition

Historically, our net revenues included service revenues that arose from the delivery of medical diagnostic services provided to patients by medical professionals at spine injury diagnostic centers, only after the patients completed and signed required medical and financial paperwork.

Service revenues were recorded as net patient service revenues based on variable consideration elements further described below and in Note 4.

While we did collect 100% of the accounts on certain patients, our historical collection rate was used to estimate the variable consideration expected and is reflected in the carrying balance of accounts receivable and service revenue recorded.

A discount rate of 48%, based on payment history, was used to reduce revenue to 52% of Current Procedural Terminology code rates (“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.

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 year ended December 31, 2018.

We recorded no revenue related to service revenue during the year ended December 31, 2019.

Patients were billed at the normal billing amount, based on national averages, for a particular CPT code procedure during the year ended December 31, 2018 and prior years.

We recorded no revenue related to medical diagnostic services provided during the years ended December 31, 2020 and 2019 and revenue presented represents adjustments of variable consideration received for procedures performed in years prior to 2019.

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.

Lease Revenues

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Fair Value of Financial Instruments

Cash, accounts receivable, accounts payable, accrued liabilities, and notes payable as reflected in the consolidated financial statements, approximates fair value.

Cash, accounts receivable, accounts payable, accrued liabilities, line of credit and notes payable as reflected in the consolidated financial statements, approximates fair value.

Fair value estimates are made at a specific point in time, based on relevant market information and information about the financial instrument.

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We have not experienced any losses on these deposits.

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 December 31, 2018 are classified as finished-goods and consist of our Quad Video Halo.

During the year ended December 31, 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 year ended December 31, 2019 and 2018, respectively the company wrote off $116,221 and $50,000.

During the year ended December 31, 2019 the Company determined its inventory to be worthless based on advances in technology that rendered inventories obsolete.

Accordingly, during the years ended December 31, 2019, the company recognized a provision for inventory obsolescence of $116,221 to completely write-off inventory.

Property and Equipment

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Costs of significant improvements and renewals are capitalized.

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

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

Intangible Assets and Goodwill

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Impairment occurs when the original amount of goodwill exceeds the value of the expected future net cash flows from the business acquired.

During the year ended December 31, 2019, the Company noted significant indicators of impairment, and performed an impairment test on goodwill, 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 December 31, 2019.

During the year ended December 31, 2019, the Company noted significant indicators of impairment, and performed an impairment test on goodwill, noting the discounted future cash flows did not support the goodwill balance particularly because of the Company’s reduced emphasis on the marketing and development of the QVH.

The result of our analysis was a full impairment of goodwill of $170,200 as of December 31, 2019.

Long-Lived Assets

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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 year ended December 31, 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.

Our accounts receivable arise 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 $589,243 and $395,873, at December 31, 2019 and 2018, respectively.

Based on our analysis we established an allowance for doubtful accounts of $585,257 and $589,243, at December 31, 2020 and 2019, respectively.

Stock Based Compensation

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We use the Black-Scholes Option Pricing Model to determine the fair-value of stock-based awards.

During the year ended December 31, 2019, we did not recognize compensation expense for the issuance of our common stock in exchange for services.

During the year ended December 31, 2018 we recognized compensation expense for issuance of our common stock in exchange for services of $5,000.

During the years ended December 31, 2020 and 2019, we did not recognize compensation expense for the issuance of our common stock in exchange for services.

We account for income taxes in accordance with the liability method.

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2016-13 amends the accounting for credit losses on available-for-sale debt securities and purchased financial assets with credit deterioration.

2016-13 is effective for annual periods beginning after December 15, 2020, with early application permitted in annual periods beginning after December 15, 2018.

In November 2019, the FASB issued ASU No.

2019-10 to amend the effective date for entities that had not yet adopted ASU No.

Accordingly, the provisions of ASU No.

2016-13 are effective for annual periods beginning after December 15, 2022, with early application permitted in annual periods beginning after December 15, 2018.

The amendments of ASU No.

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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.

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.

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.

The adoption of ASU No.

2017-01 did not have material impact on the Company’s consolidated financial position, results of operations and disclosures.

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.

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 December 31, 2019, maturities of operating lease payments to be received are as follows:

(in thousands)

Included in property and equipment, net, as of December 31, 2019 and December 31, 2018 is equipment available for rent in the amount of $25,379 and $39,654, respectfully.

In March 2020, the FASB issued ASU No.

2020-04, Reference Rate Reform (Topic 848):

Facilitation of the Effects of Reference Rate Reform on Financial Reporting, which is optional guidance related to reference rate reform that provides practical expedients for contract modifications and certain hedging relationships associated with the transition from reference rates that are expected to be discontinued.

This guidance is applicable for our Term Loans and Revolving Credit Facility, which use LIBOR as a reference rate, and is effective immediately, but is only available through December 31, 2022 (see Note 6 for further details on our Term Loan).

The Company is currently evaluating the potential impact of this standard on our consolidated financial statements.

ACCOUNTS RECEIVABLE

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.

Revenue and corresponding accounts receivable are recognized by reference to “net revenue” and “accounts receivable, net” which is defined as gross amounts billed using CPT codes less account discounts that are expected to result when individual cases are ultimately settled.

While we do collect 100% of the accounts on some patients, our historical collection rate is used to calculate the carrying balance of the accounts receivable and the estimated revenue to be recorded.

A discount rate of 48%, based on payment history, was used to reduce revenue to 52% of CPT code billings (“gross revenue”) during the year ended December 31, 2018.

During the year ended December 31, 2019 no service revenue was recorded.

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.

Accounts receivable arise from patients billed by the healthcare providers based on CPT codes as described in Note 1.

Our customers, patients who receive medical services at diagnostic centers, are typically patients involved in auto accidents or work injuries.

Patients complete and sign medical and financial paperwork, which includes an acknowledgement of each patient’s responsibility for payment for the services provided.

Additionally, the paperwork should include an assignment of benefits.

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During the years ended December 31, 2020 and 2019, we recorded bad debt expense, net of recoveries of $-0- and $538,577, respectively.

For the year ended December 31, 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 year ended December 31, 2019.

This expense represents the discount provided to the purchaser and was recorded as an operating, general and administrative expense in the Company’s statement of operations for the year ended December 31, 2019.

During the year ended December 31, 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 and the recognition of $71,194 in factoring expense.

This factoring expense represents the discount provided to the purchaser and was recorded in an operating, general and administrative expense in the Company’s statement of operations for the year ended December 31, 2019.

For the year ended December 31, 2020, no accounts receivable balances were sold to a third party at a discount rate.

PROPERTY AND EQUIPMENT

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accumulated depreciation

Depreciation expense totaling $51,808 and $25,503, respectively, was charged to operating, general and administrative expenses during the years ended December 31, 2019 and 2018.

Depreciation expense totaling $14,420 and $51,808 was charged to operating, general and administrative expenses during the years ended December 31, 2020 and 2019, respectively.

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.

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 with Mr.

Dalrymple 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 December 31, 2019 and 2018, the note had a principal balance of $0 and $90,000, respectively.

During the year ended December 31, 2019 and 2018, the Company recorded $3,032 and $9,606, respectively, 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 3.76% at December 31, 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 is 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 remained 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 December 31, 2019 and 2018, the outstanding borrowings under the line of credit totaled $1,070,000 and $1,565,000 respectively.

During the years ended December 31, 2019 and 2018 the Company recorded $61,808 and $56,635 in interest expense related to this note.

Outstanding principal on the line of credit bore interest at the thirty-day London Interbank Offered Rate (“LIBOR”) plus 2%.

The line of credit agreement was amended at various dates until a final amendment on September 30, 2019 converted the line of credit into a one-year term loan precluding any additional draws but retaining all other terms.

The line of credit and term loan were guaranteed by Peter L.

Dalrymple, a member of our board of directors, and was secured by a first lien interest in certain of his assets.

On the August 31, 2020 maturity date of the term loan with Wells Fargo Bank, N.A., Mr.

Dalrymple paid off in full the entire $610,000 remaining principal balance.

During the twelve months ended December 31, 2020 and 2019, the Company recorded $15,090 and $61,808 respectively in interest expense related to the Wells Fargo term loan.

Notes payable

Upon Peter L.

Dalrymple paying off the principal balance of the Wells Fargo term loan on our behalf on August 31, 2020, we issued Mr.

Dalrymple a $610,000 one-year secured promissory note.

The secured promissory note bears interest of 6% per year with monthly payments of interest only due until maturity, when all unpaid interest and principal is due.

This note is collateralized by all our accounts receivable and a pledge of the stock of our wholly owned subsidiary, Quad Video Halo, Inc.

The secured promissory note balance was $490,000 at December 31, 2020.

During the year ended December 31, 2020, the Company recorded $11,058 in interest expense on the Dalrymple note, representing all interest due through that date.

Paycheck Protection Program – SBA Loan

On April 22, 2020 we received a $64,097 SBA loan under the federal Paycheck Protection Program, a program designed to help businesses keep their workforce employed during the COVID 19 pandemic.

The Paycheck Protection Program was established under the Coronavirus Aid, Relief, and Economic Security ("CARES") Act signed into law in March of 2020.

The Paycheck Protection Program provides a direct incentive for small businesses to keep their workers on the payroll and loans granted under the program are forgivable if employment levels maintained for specified periods and proceeds are used for payroll and other approved expenses (rent, mortgage interest, utilities, and certain other expenses) provided for under the program.

Loans provided under the program are uncollateralized, include no guarantees, bear interest of 1% per year and mature two years from the date of receipt.

The first payment of our loan was originally due in November 2020, seven months from issuance.

For the reasons discussed throughout this report, we believe current economic uncertainty related to the COVID 19 pandemic and our inability to obtain financing though other means made the loan necessary to support our ongoing operations.

We applied for forgiveness of our loan in 2020 and on December 31, 2020 the entire balance of the loan was forgiven and recognized in other income as gain on forgiveness of debt in our Statements of Operations.

STOCKHOLDERS ’ EQUITY

During the year ended December 31, 2019 we did not issue any common stock to compensate officers, employees, directors or outside professionals.

During the year ended December 31, 2018 we issued 25,000 shares for services provided.

The stock issuances were valued based on the quoted market price of our common stock on the respective measurement dates.

Following is an analysis of common stock issuances during the years ended December 31, 2019 and 2018:

During the year ended December 31, 2019 we did not issue any shares of common stock.

During the year ended December 31, 2018, we issued 25,000 shares of common stock, valued at $0.20 per share, in connection with consulting agreements.

During the year ended December 31, 2018, we expensed $5,000, in connection with this agreement which is included in operating, general and administrative expenses in the accompanying consolidated statements of operations.

During 2012, we issued 333,333 warrants in conjunction with the secured note payable.

The warrants have an exercise price of $1.60 per share and expired in August 2018.

There are no warrants outstanding as of December 31, 2019.

A summary of the warrant activity for the year ended December 31, 2018 follows:

Term (in years)

(In-the-Money)

Outstanding and exercisable at December 31, 2017

Warrants expired

Outstanding and exercisable at December 31, 2018

During the year ended December 31, 2020 and 2019 we did not issue any common stock.

Stock Options

We recognize compensation expense related to stock options in accordance with the FASB standard regarding share-based payments, and as such, have measured the share-based compensation expense for stock options granted during the years ended December 31, 2019 and 2018 based upon the estimated fair value of the award on the date of grant and recognizes the compensation expense over the award’s requisite service period.

The weighted average fair values were calculated using the Black Scholes option pricing model.

We recognize compensation expense related to stock options in accordance with the ASC 718, Compensation - Stock Compensation.

Under ASC 718 we measured stock-based compensation expense for stock options granted, based on weighted average fair values calculated using the Black Scholes option pricing model.

We issued no stock options and recognized no related expense during the years ended December 31, 2020 and 2019.

Details of stock option activity for the years ended December 31, 2020 and 2019 follows:

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Employee Options

For the year ended December 31, 2019 and 2018, no options were issued or expired.

As of December 31, 2019, all unrecognized compensation expense related to non-vested stock option awards has been recognized.

At December 31, 2020 and 2019 all options were fully vested and all compensation expense related to stock option awards has been recognized.

RELATED PARTY TRANSACTIONS

We have an agreement with Northshore Orthopedics, Assoc.

(“NSO”), which is 100% owned by our Chief Executive Officer, William Donovan, M.D., to provide medical services as our independent contractor at Houston and Odessa spine injury diagnostic centers.

As of December 31, 2019 and 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.

Donovan is the sole owner of NSO, and we pay NSO under the terms of our agreement.

We currently maintain our executive offices at 5151 Mitchelldale A2, Houston, Texas 77092.

This office space encompasses approximately 200 square feet and is provided to us at the rental rate of $1,875 per month on a monthly basis by Northshore Orthopedics, Assoc.

(“NSO”), a company owned by William Donovan, M.D., our director and Chief Executive Officer.

The rent includes the use of the telephone system, computer server, and copy machines.

As further described in Note 6, during 2020 we borrowed $610,000 from Peter Dalrymple, a director of the Company, under a secured promissory note.

The outstanding balance of the note was $0 and $90,000 at December 31, 2019 and 2018, respectively.

We have not made provision for income taxes for the years ended December 31, 2019 or 2018, since we have net operating loss carryforwards generated from recurring net losses offset by a full valuation allowance as described below.

On December 22, 2017, the Tax Reform Act was signed into law.

The legislation significantly changes U.S.

tax law by, among other things, lowering the U.S.

corporate income tax rate from a maximum of 35% to a flat 21% rate, effective January 1, 2018.

As a result of the decrease in the corporate income tax rate, we revalued our ending net deferred tax assets at December 31, 2019, but did not recognize any incremental income tax expense in 2018 due to the revaluation of the valuation allowance.

Deferred tax assets consist of the following at December 31:

Benefit from net operating loss carryforwards

The outstanding balance of the note was $490,000 at December 31, 2020.

We have no current or deferred provision for income taxes for the years ended December 31, 2020 or 2019, because we have net operating loss carryforwards generated from recurring net losses offset by a full valuation allowance as described below.

Deferred tax assets consist of the following at December 31, 2020 and 2019:

Net operating loss carryforwards

Allowance for doubtful accounts

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Following is a reconciliation of the (provision) benefit for federal income taxes as reported in the accompanying consolidated statements of operations, to the expected amount at the 21% federal statutory rate:

For the years ended December 31, 2019 and 2018, the reasons for the difference between the statutory federal rate of 21% and the effective tax rate were as follows:

Benefit for income tax

at federal statutory rate

Benefit for state

income tax, net of federal effect

Non-deductible expenses

Effect of change in enacted tax rate

Benefit for income tax at federal statutory rate

Change in available NOLs

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Lease Commitments

The Company leased office space under an operating lease that expired in January 2017 with minimum lease payments of $6,000.

Subsequent to the expiration the Company maintained the lease at $6,000 per month on a month-to-month basis.

In June 2019, the Company moved its offices and is currently maintaining a month-to-month lease at $3,750 for the new office space.

During 2018, we leased a 2,400 square foot warehouse/office in Clear Lake Shores, Texas where we assembled, developed, tested, and marketed the Quad Video Halo.

The lease was month-to-month with a monthly rent of $1,950.

We moved out of this location in February 2019.

We previously leased office space under a month-to-month lease, with monthly lease payments of $6,000, through May 2019.

We also previously leased a 2,400 square foot warehouse/office in Clear Lake Shores, Texas where we assembled, developed, tested, and marketed the Quad Video Halo.

This warehouse lease was on a month-to-month basis, with a monthly rent of $1,950, and ended in February 2019 when we vacated the space.

In June 2019, we moved into our current offices and now maintain a month-to-month lease, with monthly lease payments of $1,875, for office space.

LEASE REVENUES

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 of 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.

Customer 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.

All of the Company’s outstanding lease contracts as of December 31, 2020, are scheduled to mature in 2021 with expected operating lease payments to be received totaling approximately $66,000.

Included in property and equipment, net, as of December 31, 2020 and 2019 is equipment available for rent in the amount of $10,959 and $25,379, respectively.

SUBSEQUENT EVENTS

On January 19, 2021, we held an Annual Meeting of Stockholders of Spine Injury Solutions, Inc.

at our corporate offices.

In addition to electing our current directors, ratifying our independent registered accounting firm and approving a non-binding advisory resolution on executive compensation, stockholders approved the following proposals:

The filing of an amendment to our certificate of incorporation to increase the number of authorized shares of common stock from 50,000,000 to 250,000,000;

The filing of an amendment to our certificate of incorporation to increase the number of authorized shares of preferred stock from none to 10,000,000;

Authorizing our board of directors, without further stockholder approval, to effect a reverse stock split of all our outstanding common stock, by the filing of a certificate of amendment to our certificate of incorporation with the Secretary of State of Delaware, in a ratio of between one-for-two and one-for-1,000, with our board of directors having the discretion as to whether or not the reverse split is to be effected, and with the exact exchange ratio of any reverse split to be set at a whole number within the above range as determined by the board of directors in its sole discretion, at any time before the earlier of (a) January 19, 2022;

and (b) the date of our next annual meeting of stockholders;

A certificate of amendment was filed with the Secretary of State of Delaware on January 21, 2021 to effect the increase in the number of shares of common and preferred stock.

The board of directors has not yet effected a reverse stock split as of the date of this annual report, and has no present plans to do so.

CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE

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Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-K

Item 8. Financial Statements and Supplementary Data