CareCloud, Inc. Quarterly report pursuant to Section 13 or 15(d)

Quarterly report pursuant to Section 13 or 15(d)

DEBT

DEBT

3 Months Ended

Mar. 31, 2016

Debt

Opus Bank On September 2, 2015, the Company entered into a credit agreement with Opus Bank (“Opus”). Opus extended three credit facilities 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 $4 million of term loans that was subsequently issued.

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 will equal 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. As of March 31, 2016, all of the term loans and the line of credit have been fully utilized. Beginning October 1, 2016 the term loans require total monthly principal payments of $222,222 per month through the end of the loan period.

The Opus credit agreement contains various covenants and conditions governing the long term debt and line of credit. As of March 31, 2016, the Company was in compliance with all the covenants contained in the Opus credit agreement.

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.

Total debt issuance costs were $602,000 and recorded as an offset to the face amount of the loans. During the quarter ended March 31, 2016, approximately $92,000 of debt issuance costs were capitalized in connection with the final portion of the additional $4 million term loan received in the quarter. Discounts from the face amount of the loans 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 March 31, 2016 is approximately 7.33%.

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

Face amount of the loans	$	8,000,000
Unamortized debt issuance costs		536,995
Unamortized discount on loan fees		86,631
Unamortized discount of amount allocated to warrants		90,096
Balance at March 31, 2016	$	7,286,278

Vehicle Financing Notes The Company financed certain vehicle purchases both in the United States and in Pakistan. The vehicle financing notes have 3 to 5 year terms and were issued at current market rates.

Bank Direct Capital Finance The Company financed certain insurance purchases over the term of the policy life. The interest rate charged is 6.6%.

Obligation for customer relationships During November 2015, the Company purchased customer relationship from a medical billing company for $435,000. Through March 31, 2016, $185,000 was paid and the balance will be paid without interest in two additional equal installments during 2016.

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

Years ending December 31	Vehicle Financing Notes		Opus Bank Term Loan		Bank Direct Capital Finance		Obligation for Customer Relationships		Total
2016 (nine months)	$	36,195	$	666,666	$	89,136	$	250,000	$	1,041,997
2017		51,244		2,666,667		-		-		2,717,911
2018		42,031		2,666,667		-		-		2,708,698
2019		20,127		2,000,000		-		-		2,020,127
Thereafter		13,552		-		-		-		13,552
Total	$	163,149	$	8,000,000	$	89,136	$	250,000	$	8,502,285