SPINE INJURY SOLUTIONS, INC.

UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONSBALANCE SHEETS

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 asand the related notes to the financial statements included in this Form 10-Q.

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

We recorded $1,562,124 in gross revenue for the six months ended June 30, 2017, offset by $634,897 of the expected settlement discount resulting in net revenue of $512,763.  We ceased providing collection services to$927,227.  For the same period in 2016, gross revenue was $2,055,547, offset by $853,499 of the settlement discount, resulting in net revenue of $1,202,048.  Revenue was affected negatively in 2017 by the reduced revenue of the Tyler, Texas affiliate, coupled with the loss of the San Antonio diagnostic center duringaffiliate in the first quarter of 2016, and accordingly had no revenue in San Antonio for the three months ended September 30, 2016 versus the same quarter in 2015.  This is the primary reason for the above decline in gross revenue between those two periods.  Net revenue as a percentage of gross revenue increased to 58.7% for the three months ended September 30, 2016 from 46.2% for the three months ended September 30, 2015 due to a higher collection percentage in the 2016 quarter. We are currently providing technology and funding services to five spine injury diagnostic centers in the United States, which are located in Houston, Texas; Odessa, Texas; Tyler, Texas; El Paso, Texas; and Dallas, Texas.2016.

Service cost was $146,314$297,387 for the threesix months ended SeptemberJune 30, 20162017 compared to $221,557$413,099 for the same period in 2015.  The decrease is due mainly to lower volume.

During the threesix months ended SeptemberJune 30, 2016,2017, we incurred $459,126$799,495 of operating, general and administrative expenses compared with the $409,532$780,932 for the same period in 2015.2016. The small increase is attributable to increases in (i) travel costs of approximately $19,000, (ii) marketing costs of approximately $29,000, (iii) depreciation and amortization expense of approximately $3,000, (iv) payroll and benefit costs of approximately $10,000, (v) legalconsulting expenses of approximately $3,000 and (vi) office and operating expenses of $9,000,$95,000 coupled with a decreases of (i)noncash consulting of approximately $18,000 in consulting costs,$64,000, and (ii)other expenses totaling approximately $5,000 in subscriptions costs.

As a result of the aforementioned,foregoing, we had a net loss of $217,229$204,918 for the ninesix months ended SeptemberJune 30, 2016,2017, compared to a net loss of $815,724$38,828 for the ninesix months ended SeptemberJune 30, 2015.

Cash used in financing activities was $70,000 which includedfor the six months ended June 30, 2017 and 2016 consisted of repayments on our notes payable in the amount of $50,000 and long-term debt of $250,000, partially offset by amounts borrowed from the$0, respectively, and net draws (repayments) on our line of credit totaling $180,000. Forof $75,000 and $20,000, respectively.

Since our inception in 1998, until commencement of our spine injury diagnostic operations in August, 2009, our expenses substantially exceeded our revenue, resulting in continuing losses and an accumulated deficit from operations of $15,004,698 as of December 31, 2009. Since that time, our accumulated deficit has increased $2,350,860 to $17,355,558 as of June 30, 2017. During the ninesix months ended SeptemberJune 30, 20152017, we realized net revenue of $927,227 and net loss of $204,918. Successful business operations and our transition to positive cash provided byflows from operations are dependent upon obtaining additional financing activities was $250,000, which includedand 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 June 30, 2018.  The company is seeking to increase revenue from services and obtain additional capital from borrowings and selling securities as needed to fund our operations. There can be no assurances that there will be adequate financing available to us. The accompanying consolidated financial statements have been prepared assuming that we will continue as a going concern. This basis of accounting contemplates the recovery of our assets and the satisfaction of liabilities in the normal course of business. The consolidated financial statements do not include any adjustments to reflect the possible future effects on the recoverability and classification of assets or the amounts borrowedand classification of liabilities that may result from the lineoutcome of credit totaling $600,000, partially offset by repayments on notes payable and long-term debt of $350,000.

ITEM 3.   QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

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.

ITEM 1A. RISK FACTORS

 

ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS

ITEM 6. EXHIBITS

 

* Incorporated by reference from our previous filings with the SEC