Annual report pursuant to Section 13 and 15(d)

DEBT

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DEBT
 12 Months Ended
Dec. 31, 2021
Debt Disclosure [Abstract]  
DEBT

8. DEBT

 

SVB — During October 2017, the Company opened a revolving line of credit from Silicon Valley Bank (“SVB”) under a three-year agreement which replaced the previous credit facility from Opus. The SVB credit facility is a secured revolving line of credit where borrowings are based on a formula of 200% of repeatable revenue adjusted by an annualized attrition rate as defined in the credit agreement. During the third quarter of 2018, the credit line was increased from $5 million to $10 million and the term was extended for an additional year and during the third quarter of 2021, the credit line was further increased to $20 million and the term was extended for another year. As of December 31, 2021, there was $8 million outstanding on the line of credit. Subsequent to the year-end, the credit line was repaid. At December 31, 2020, there were no borrowings under the credit facility. Interest on the SVB revolving line of credit is currently charged at the prime rate plus 1.50%. There is also a fee of one-half of 1% annually for the unused portion of the credit line. The debt is secured by all of the Company’s domestic assets and 65% of the shares in its offshore subsidiaries. Future acquisitions are subject to approval by SVB.

 

In connection with the original SVB debt agreement, the Company paid SVB approximately $50,000 of fees upfront and issued warrants for SVB to purchase 125,000 shares of its common stock, and committed to pay an annual anniversary fee of $50,000 a year. Based on the terms in the original SVB credit agreement, these warrants have a strike price equal to $3.92. They have a five-year exercise window and net exercise rights, and were valued at $3.12 per warrant. As a result of the revision in the SVB credit line, which increased the credit line from $5 million to $10 million and reduced the interest rate by 25 basis points, the Company paid approximately $50,000 of fees upfront and issued an additional 28,489 warrants, with a strike price equal to $5.26, a five-year exercise window and net exercise rights. The additional warrants were valued at $3.58 per warrant. The SVB credit agreement contains various covenants and conditions governing the revolving line of credit. These covenants include a minimum level of adjusted EBITDA and a minimum liquidity ratio. At December 31, 2021 and 2020, the Company was in compliance with all covenants.

 

 

During November 2019, the Company modified its loan agreement with SVB, which adjusted the required monthly EBITDA amounts and does not require the Company to comply with financial covenants as long as there have been no borrowings on the revolving credit line for the prior six months.

 

During September 2020, the agreement with SVB was modified to include CareCloud and Meridian as borrowers. During September 2021, the agreement with SVB was modified to include CAC and medSR as borrowers.

 

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

 

Insurance Financing — The Company finances certain insurance purchases over the term of the policy life. The interest rate charged is 4.15%.

 

Maturities of the outstanding notes payable and other obligations as of December 31, 2021 are as follows:

 

Years ending
December 31		   Line of Credit*     Vehicle Financing Notes     Insurance Financing     Total  
    ($ in thousands)  
2022   $ -     $      16     $ 328     $ 344  
2023     8,000       7       -       8,007  
2024     -       5       -       5  
2025     -       5       -       5  
2026     -       3       -       3  
Total   $ 8,000     $ 36     $ 328     $ 8,364  

 

* The line of credit was repaid after year-end.