DEBT |
9 Months Ended | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Sep. 30, 2015 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Debt Disclosure [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Debt Disclosure [Text Block] |
The Company had an agreement with TD Bank for a revolving line of credit maturing on November 30, 2015 for up to $3 million. The balance outstanding at December 31, 2014 was $1,215,000. The line of credit had a variable rate of interest per annum at the Wall Street Journal prime rate plus 1% (4.25%). The Company fully repaid the TD bank line of credit, which had a balance of $3 million on September 2, 2015 from the Opus Bank loan proceeds. The TD bank line has been closed.
On September 2, 2015, the Company entered into a credit agreement with Opus Bank (“Opus”). Opus committed to extend three credit facilities totaling $10,000,000 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 $4 million term loan that would be issued upon meeting certain conditions. 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 three Opus loans will equal the higher of (a) the prime rate plus 1.75% and (b) 5.0%. The first term loan will mature on September 1, 2019, the second term loan will mature four years after it commences, and the revolving line of credit will terminate on September 1, 2018, unless extended. As of September 30, 2015, both the term loan and the line of credit have been fully utilized. Beginning October 1, 2016 the term loan requires monthly principal payments of $111,111 per month through the end of the loan period.
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 condensed consolidated balance sheet as of September 30, 2015. The Company used a Black Scholes option pricing model to determine the fair value of the warrants and allocated the $4.0 million of the term loan proceeds based on the relative fair values. Of this amount, $104,000 was allocated to the warrants. Additionally, in the third quarter of 2015 the Company elected to early adopt ASU 2015-03. This accounting standard requires that debt issuance costs related to a recognized debt liability be recorded in the balance sheet as a direct deduction from the debt liability rather than as an asset, which was the Company’s previous accounting policy. Since the Company had no prior debt issuance costs, it elected to early adopt of ASU 2015-03 so that a retrospective adjustment would not be required when ASU 2015-03 becomes effective. Total debt issuance costs were $415,000 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 Bank as of September 30, 2015 is approximately 7.50%. The long term debt at September 30, 2015 is recorded at its accredited value and consists of the following:
Maturities of notes payable and long term debt as of September 30, 2015 are as follows:
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