9. Debt

Opus Bank — On September 2, 2015, the Company entered into a credit agreement with Opus. Opus committed to extend a credit facility totaling $10 million to the Company, inclusive of the following: (1) a $4 million term loan; (2) a $2 million revolving line of credit: and (3) an additional term loan, totaling $4 million that would be issued upon meeting certain conditions. The $4 million term loan and $2 million revolving line of credit were granted at closing. During November 2015, $2 million of the additional $4 million term loan was granted. During March 2016, the additional $2 million term loan was granted.

The Company’s obligations to Opus are secured by substantially all of the Company’s domestic assets and 65% of the shares in its Pakistan subsidiary.

The interest rate on all Opus loans is currently equal to the higher of (a) the prime rate plus 1.75% and (b) 5.0%. The commitment fee on the unused revolving line of credit is 0.5% per annum. The term loans mature on September 1, 2019 and the revolving line of credit will terminate on September 1, 2018, unless extended. Beginning October 1, 2016 the term loans require total monthly principal payments of approximately $222,000 per month through the end of the loan period. As of December 31, 2016, the $8 million term loans and the $2 million line of credit have been fully utilized and the required principal payments were made.

In connection with the Opus debt, the Company paid $100,000 of fees and issued warrants for Opus to purchase 100,000 shares of its common stock. The warrants have a strike price equal to $5.00 per share, a seven year exercise window, piggyback registration and net exercise rights. The fees paid and warrants issued to Opus were recorded as a debt discount. The warrants were classified as equity instruments and are included in additional paid-in capital in the consolidated balance sheets as of December 31, 2016 and 2015. The Company used a Black Scholes option pricing model to determine the fair value of the warrants and allocated the warrants to the $4 million of the initial term loan proceeds based on the relative fair values. Of this amount, $104,000 was allocated to the warrants.

The Opus credit agreement contains various covenants and conditions governing the long term debt and the revolving line of credit. During July 2016, the Opus credit agreement was modified to amend covenants regarding certain financial ratios to be maintained during the remaining term of the loan, providing the Company with additional flexibility. In exchange for the modification, the Company paid a fee of $25,000 to Opus and issued additional warrants for Opus to purchase an additional 100,000 shares of its common stock at a strike price equal to $5.00 per share, with similar terms to the previous warrants issued. The additional warrants were valued at approximately $52,000 and have been accounted for similarly to the previous warrants.

As of December 31, 2016, the Company was in compliance with all the covenants contained in the Opus credit agreement. See Note 18, Subsequent Events, for amendment to the Opus agreement in March, 2017.

Total debt issuance costs were $117,000 and $510,000 for the years ended December 31, 2016 and 2015, respectively, and recorded as an offset to the face amount of the loan. Discounts from the face amount of the loan are amortized over 4 years using the effective interest rate method. As a result of the loan discounts, the effective interest rate on the borrowings from Opus as of December 31, 2016 is approximately 7.6%.

The long term debt at December 31, 2016 is recorded at its accredited value and consists of the following:

TD Bank Revolving Line of Credit — As of December 31, 2014, the Company had an agreement with TD Bank for a revolving line of credit for up to $1,215,000. During March 2015, this line was increased to $3 million under the same lending terms. The line of credit had a variable rate of interest per annum at the Wall Street Journal prime rate plus 1%. The line of credit was collateralized by all of the Company’s assets and was guaranteed by the CEO of the Company. The Company fully repaid the TD Bank line of credit, from the Opus loan proceeds which had a balance of $3 million on September 2, 2015. The TD Bank line has been closed.

Prudential Notes Payable — As a result of the MediGain transaction, the Company has an unsecured obligation to Prudential for the remainder of the purchase price of $5 million, which is due during 2017. See Note 18, Subsequent Events, for recent communication with Prudential.

Vehicle Financing Notes — The Company financed certain vehicle purchases both in the United States and in Pakistan. The vehicle financing notes have 3 to 6 year terms and were issued at current market rates.

Insurance Financing — The Company financed certain insurance purchases over the one-year term of the policy life. The interest rate charged is 6.5%.

Obligation for customer relationships — During November 2015, the Company purchased customer relationships from a medical billing company for $435,000 and recorded the obligation as a note payable as of the acquisition date. During 2015, $60,000 was paid and the balance was satisfied during 2016.

Maturities of the outstanding notes payable, the term loans and other obligations as of December 31, 2016 are as follows: