Long-Term Debt

The Company maintains the 2013 Loan and Security Agreement for working capital purposes and capital expenditures. The Company also entered into the Credit Agreement with SWK Funding LLC in connection with the Acquisition. The following table summarizes the Company's outstanding borrowings:



(in thousands)	December 31, 2015

2013 Loan and Security Agreement	3,278
Term Loan	5,000
Discount on Term Loan	(2,785		)
Total debt	5,493
Short term portion	(5,493		)
Total long-term debt, net of discount	$	—

2013 Loan and Security Agreement

The Company maintains the 2013 Loan and Security Agreement, as amended on March 28, 2013, July 9, 2014, April 17, 2015, August 10, 2015, and November 10, 2015, with the Senior Lender. Borrowings under the 2013 Loan and Security Agreement are to be used for working capital purposes and capital expenditures. The amount available for borrowing may be less than the $7 million under this facility at any given time due to the manner in which the maximum available amount is calculated. The Company has an available borrowing base subject to reserves established at the lender's discretion of 85% of Eligible Receivables up to $7 million under this facility. Eligible Receivables do not include certain receivables deemed ineligible by the Senior Lender pursuant to the Second Amendment to the Loan and Security Agreement ("the Second Amendment"). On August 10, 2015, the Company entered into and consummated a Fourth Amendment to the Loan and Security Agreement (the "Fourth Amendment") which added the AHS receivables to the borrowing base. As of December 31, 2015, there were $3.3 million borrowings outstanding under the 2013 Loan and Security Agreement with available borrowing capacity of $0.4 million. Average available borrowing capacity for the month of March 2016 was $0.4 million, and we had $2.4 million of cash and cash equivalents as of March 28, 2016.

The 2013 Loan and Security Agreement and the Third Amendment contain various covenants, including financial covenants which require the Company to achieve a minimum EBITDA amount. The Third Amendment contained minimum EBITDA covenants of positive $0.8 million for the twelve month period ended December 31, 2015, which the Company did not comply with. On March 28, 2016, the Company obtained a Waiver and Sixth Amendment to the Loan and Security Agreement (the "Sixth Amendment") in which the lender modified the covenants to waive the minimum EBITDA covenant for the twelve months ended December 31, 2015, and replaced the covenants going forward. Refer to Note 2 for the modified covenant requirements. If the Company is unable to comply with financial covenants in 2016 and in the event that the Company was unable to modify the covenants, find new or additional lenders, or raise additional equity, it would be considered in default, which would then enable the lenders to accelerate the repayment of all amounts outstanding and exercise remedies with respect to collateral, which would have a material adverse impact on the Company's business. Additionally, the Company continues to have limitations on the maximum amount of capital expenditures for each fiscal year.

Interest on revolving credit loans is calculated based on the greatest of (i) the annualized prime rate plus 2.75%, (ii) the 90 day LIBOR rate plus 5.25%, and (iii) 6% per annum. The interest rate on the 2013 Loan and Security Agreement was 6.00% as of December 31, 2015. The Company is obligated to pay, on a monthly basis in arrears, an annual facility fee equal to 1% of the revolving credit limit. In connection with the 2013 Loan and Security Agreement, the Company incurred a commitment fee of $0.1 million and other debt issue costs totaling $0.9 million during the year ended December 31, 2013. During the years ended December 31, 2015 and 2014, in connection with the 2013 Loan and Security Agreement, the Company incurred $0.1 million and $0.2 million, respectively, in facility fees. As of December 31, 2015, the remaining balance in deferred financing costs recorded on the consolidated balance sheet was $0.3 million.

The revolving credit loans are payable in full, together with all accrued interest and fees, on February 28, 2019. The 2013 Loan and Security Agreement provides for the prepayment of the entire outstanding balance of the revolving credit loans. The Company would be required to pay an early termination fee equal to 3% if the termination occurs prior to February 28, 2017; 2% if the termination occurs prior to February 28, 2018; and 1% if the termination occurs after February 28, 2018, but prior to February 28, 2019.

The failure of the Company or any subsidiary guarantor to comply with any of the covenants or the breach of any of its or their representations and warranties, contained in the 2013 Loan and Security Agreement, constitutes an event of default under the agreement. In addition, the 2013 Loan and Security Agreement provides that "Events of Default" include the occurrence or failure of any event or condition that, in the Senior Lender's sole judgment, could have a material adverse effect (i) on the business, operations, assets, management, liabilities or condition of the Company, (ii) in the value, collectability or salability of the collateral, or (iii) on the ability of the Company and its subsidiary guarantors to perform under the 2013 Loan and Security Agreement.

2015 Credit Agreement

In order to fund the Acquisition, the Company entered into and consummated a Credit Agreement with SWK Funding LLC ("SWK") on April 17, 2015. The Credit Agreement provides the Company with a $5.0 million Term Loan. The proceeds of the Term Loan were used to pay certain fees and expenses related to the negotiation and consummation of the Purchase Agreement and the Acquisition described in Note 3 and general corporate purposes. The Company paid SWK an origination fee of $0.1 million. The Term Loan is due and payable on April 17, 2018. The Company is also required to make quarterly revenue-based payments in an amount equal to eight and one-half percent (8.5%) of yearly aggregate revenue up to and including $20 million, seven percent (7%) of yearly aggregate revenue greater than $20 million up to and including $30 million, and five percent (5%) of yearly aggregate revenue greater than $30 million. The revenue-based payment will be applied to fees and interest, and any excess to the principal of the Term Loan. Revenue-based payments commence in February 2016, and the maximum aggregate revenue-based principal payment is capped at $600,000 per quarter. The Company made its first principal payment of $0.5 million, on February 16, 2016, in addition to $0.2 million of interest expense, for a total payment of $0.7 million. As of December 31, 2015, the remaining balance in deferred financing costs recorded on the consolidated balance sheet was $0.2 million.

The outstanding principal balance under the Credit Agreement bears interest at an adjustable rate per annum equal to the LIBOR Rate (subject to a minimum amount of one percent (1.0%)) plus fourteen percent (14.0%) and is due and payable quarterly, in arrears, commencing on August 14, 2015. Upon the earlier of (a) the maturity date on April 17, 2018, or (b) full repayment of the Term Loan, whether by acceleration or otherwise, the Company is required to pay an exit fee equal to eight percent (8%) of the aggregate principal amount of all term loans advanced under the Credit Agreement. The Company is recognizing the exit fee over the term of the Term Loan through an accretion accrual to interest expense using the effective interest method.

There was no significant interest expense for the years ended 2014 and 2013. The following table summarizes the components of interest expense for the year ended December 31, 2015:



(in thousands)
	December 31, 2015
Interest expense on Term Loan (interest at LIBOR, plus 14%)	529
Interest expense on 2013 Loan and Security Agreement	94
Accretion of termination fees (over term of Term Loan at rate of 8%)	88
Amortization of deferred financing costs	385
Accretion of debt discount associated with Warrant	581
Accretion of discount associated with additional warrant feature	199
Mark to market of the additional warrant feature	(80	)
Total	1,796

On February 25, 2016, the Company entered into a First Amendment to Credit Agreement (“First Amendment”) with SWK. The First Amendment modifies the Credit Agreement dated April 17, 2015, to extend the date the Company has to issue the additional warrant to SWK to purchase common stock valued at $1.25 million from February 28, 2016, to April 30, 2016, if the 2013 Loan and Security Agreement is not repaid in full and terminated and all liens securing the 2013 Loan and Security Agreement are not released. The First Amendment also modifies the exercise price of the warrant from one cent over the closing price on February 28, 2016, and replaced it with the closing price of our stock on April 30, 2016. Refer to Note 3 for additional discussion regarding the warrants. The First Amendment also required the Company to issue 454,545 shares of its common stock, $0.04 par value, with a value of $50,000 to SWK effective February 29, 2016.

The Credit Agreement also contains certain financial covenants including minimum aggregate revenue, EBITDA, and consolidated unencumbered liquid assets requirements. The Credit Agreement contains a minimum aggregate revenue covenant of $34 million for the twelve month period ended December 31, 2015, which the Company did not comply with. On March 28, 2016, the Company obtained a Second Amendment to the Credit Agreement (the "Second Amendment") in which the lender removed the minimum aggregate revenue requirement for the twelve months ended December 31, 2015, and replaced the covenants going forward. Refer to Note 2 for the modified covenant requirements. The Second Amendment also required the Company to issue shares of its common stock, $0.04 par value, with a value of $100,000 to SWK within five business days of the transaction. If the Company is unable to comply with financial covenants in 2016 and in the event that the Company was unable to modify the covenants, find new or additional lenders, or raise additional equity, it would be considered in default, which would then enable the lenders to accelerate the repayment of all amounts outstanding and exercise remedies with respect to collateral, which would have a material adverse impact on the Company's business.

As security for payment and other obligations under the 2013 Loan and Security Agreement, the Senior Lender holds a security interest in all of the Company's, and its subsidiary guarantors', existing and after-acquired property, including receivables (which are subject to a lockbox account arrangement), inventory and equipment. Additionally, SWK Funding, LLC holds a security interest for final and indefeasible payment. The security interest held by SWK Funding, LLC is in substantially all of the Company's assets and the Company's subsidiaries. The aforementioned security interest is collectively referred to herein as the "collateral". Refer to Note 3 regarding additional discussion of the Warrant and additional warrant feature issued to SWK in connection with the Acquisition.