(7) LINE OF CREDIT

The Company has an asset-backed revolving credit facility under a Loan and Security Agreement as amended, (the “Triumph Agreement”) with Triumph Healthcare Finance, a division of TBK Bank, SSB, formerly known as Triumph Community Bank, (the “Lender”). The Triumph Agreement contains certain customary restrictive and financial covenants for asset-backed credit facilities. The Company has not been in compliance with the financial covenants under the Triumph Agreement since July 2014.

On July 14, 2014, the Company received notice from the Lender of an event of default under the Triumph Agreement. The notice relates to the Company’s default under the minimum debt service coverage ratio requirement for the quarter ended March 31, 2014 and certain other alleged defaults. The Lender notified the Company that it was exercising its default remedies under the Triumph Agreement, including, among others, accelerating the repayment of all outstanding obligations under the Triumph Agreement (outstanding principal and accrued interest) and collecting the Company’s bank deposits to apply towards the outstanding obligations. The Company and the Lender have been discussing the terms of an accelerated repayment of the amounts outstanding under the Triumph Agreement and the Lender has (pursuant to forbearance agreements which have been extended through June 30, 2017) continued to release cash collateral to the Company based on cash collections. As a result of the Company raising capital through a private placement as described in note 8 and increased revenues and cash flow, the Company was able to make a $600 payment to the Lender against the principal amount of the debt during the first three months of 2017 payment against principal.

Notwithstanding the Company’s improved performance in 2017 and expectations for the future, no assurance can be given that the Lender will continue to forbear exercising its default remedies or will continue to make such additional loans based on cash collections or in any other manner, or that the parties will agree on a repayment plan which the Company can meet. If the Lender were to insist upon immediate repayment, the Company may be forced to seek protection from creditors.

As of May 10, 2017, $1,978 was outstanding under the Triumph Agreement (as compared to $2,771 at December 31, 2016) and zero was available for borrowing based on the default status. Borrowings under the Triumph Agreement bear interest at the default interest rate. As of March 31, 2017, the effective interest rate under the Triumph Agreement was approximately 11.0% (6.75% interest rate plus 3% additional default interest rate and 1.25% fees). The Triumph Agreement requires monthly interest payments in arrears on the first day of each month. The Triumph Agreement matured on December 19, 2014. Triumph has agreed to forbear from the exercise of its rights and remedies under the terms of the Triumph Agreement through June 30, 2017, pursuant to the terms of the March 31, 2017 forbearance agreement. The Triumph Agreement requires a lockbox arrangement whereby all receipts are swept daily to reduce borrowings outstanding. The Company is obligated to reduce the loan balance by $100 each month. In connection with the agreement entered into on March 28, 2016, the Lender suspended this monthly payment requirement for February, March and April of 2016 up to an aggregate cap of $250, in exchange for the issuance of a warrant to purchase 50,000 shares of the Company’s common stock.

The Company used the Black Scholes option pricing model to determine the fair value of the stock warrant, using the following assumptions:

Contractual term	5.0 years
Volatility	122.44	%
Risk-free interest rate	1.00	%
Dividend yield	1.44	%

During the three months ended March 31, 2016, the Company recorded bank fee expense related to this stock warrant of $15.