CareCloud, Inc. Debt Disclosure

7. DEBT

 

SVB — During October 2017, the Company opened a revolving line of credit from SVB under a three-year agreement which replaced the previous credit facility. 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. During the third quarter of 2021, the credit line was further increased to $20 million and the term was extended for two years. During February 2023, the line of credit was increased to $25 million and the term was extended for two years through October 13, 2025. Effective August 31, 2023, the credit facility agreement was amended whereby the interest rate was increased from the prime rate plus 1.5% to the prime rate plus 2.0%. The requirement for the minimum liquidity ratio was slightly reduced. These amendments expired on March 31, 2024 and the credit facility reverted to its previous terms.

 

 

As of December 31, 2024, there were no borrowings under the credit facility, compared to $10 million in borrowings as of December 31, 2023. Interest on the revolving line of credit was charged at the prime rate plus 2.0% for the first quarter of 2024, but decreased to the prime rate plus 1.5% on April 1, 2024. 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. At December 31, 2024, the available borrowing base was approximately $10.0 million.

 

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 had a strike price equal to $3.92. They had a five-year exercise window and net exercise rights, and were valued at $3.12 per warrant. These warrants were exercised during 2022. 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 and expired unexercised in September 2023. The SVB credit agreement contains various covenants and conditions governing the revolving line of credit including a current annual fee of $44,000. These covenants include a minimum level of adjusted EBITDA or a minimum liquidity ratio, one of which must be satisfied when borrowings are outstanding. At December 31, 2024 and 2023, the Company was in compliance with all covenants.

 

During March 2023, SVB became a division of First Citizens Bank & Trust Company. The agreements that governed the former SVB relationship remain in place. As a result, there were no changes to the terms of the credit agreement.

 

During October, 2024, the Company entered into a Ninth Loan Modification agreement with SVB whereby the Company decreased the amount available on its revolving line of credit from $25 million to $10 million which proportionally reduced the anniversary fee and the fee on the unused portion of the credit line. As a result of the modification, one covenant was slightly modified.

 

The Company maintains cash balances at SVB in excess of the FDIC insurance coverage limits. The Company performs periodic evaluations of the relative credit standing of this financial institution to ensure its credit worthiness. As of December 31, 2024 and December 31, 2023, the Company held cash of approximately $119,000 and $255,000, respectively, in the name of its subsidiaries at banks in Pakistan and Sri Lanka. The banking systems in these countries do not provide deposit insurance coverage. The Company has not experienced any losses on its cash accounts.

 

Vehicle Financing Notes — The Company finances certain vehicle purchases both in the United States and in Pakistan. The vehicle financing notes typically have three to six year terms and are 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 7.49%.

 

Maturities of the outstanding notes payable and other obligations as of December 31, 2024 are as follows:

 SCHEDULE OF MATURITIES OF LONG-TERM DEBT

Year ending December 31,		Vehicle Financing Notes				Insurance Financing				Total
		($ in thousands)
2025		$	11			$	299			$	310
2026			11				-				11
2027			8				-				8
2028			7				-				7
Total		$	37			$	299			$	336