NOTE 8 — BORROWING ARRANGEMENTS

Perceptive Credit Facility

On February 27, 2018, the Company entered into a term loan facility with Perceptive Credit Holdings II, LP (“Perceptive”) in the amount of $10.0 million (the “Perceptive Credit Facility”). The Perceptive Credit Facility consists of a $5.0 million term loan, which was drawn on the effective date of the Perceptive Credit Facility, and an additional $5.0 million term loan that can be drawn down at a future date. The principal on the facility accrues interest at an annual rate equal to a three-month LIBOR plus the Applicable Margin. The Applicable Margin is 11.00%. Upon the occurrence, and during the continuance, of an event of default, the Applicable Margin, defined above, will be increased by 4.00% per annum. The interest rate at March 31, 2020 was 12.91%. Payments for the first 24 months are interest only and are paid quarterly. After the second anniversary of the closing date of the Perceptive Credit Facility, principal payments of $0.2 million are due each calendar quarter, with a final payment of $3.4 million due on February 27, 2022. This term loan facility matures on February 27, 2022 and includes both financial and non-financial covenants, including a minimum cash balance requirement. The Company is required to pay an exit fee of $100,000 on a pro rata basis on the maturity date or the earlier date of repayment of the term loans in full. Additionally, the Company incurred $0.5 million in deferred finance costs and issued the debt net of a $1.5 million discount. The exit fee, deferred finance costs and discount are being accreted to interest expense over the term of the Perceptive Credit Facility using the effective interest method.

For the three months ended March 31, 2020 and March 31, 2019, the Company recorded $0.2 million and $0.2 million of interest expense, respectively. For the three months ended March 31, 2020 and March 31, 2019, the Company recorded $0.1 million and $0.1 million of amortization of debt discount related to the Perceptive Credit Facility for both periods.

In connection with the Perceptive Credit Facility, on February 27, 2018 the Company issued Perceptive a warrant to purchase 190,000 shares of the Company’s common stock. The warrant is exercisable for a period of seven years from the date of issuance at an exercise price per share of $9.5792, subject to certain adjustments as specified in the Warrant. For more information refer to Note 11, “Stockholders Equity” included in the Annual Report on Form 10-K for the year ended December 31, 2019 filed with the SEC on March 13, 2020. The fair value of the warrant of $1.5 million was recorded as a debt discount, which is being amortized to interest expense over the term of the Perceptive Credit Facility using the effective interest method.

As of March 31, 2020 and December 31, 2019 the Perceptive Credit Facility principal balance was $4.8 million and $5.0 million, respectively, with principal payment due one calendar year, or more, from the balance sheet being classified as non-current. As of March 31, 2020, the Company was in compliance with the non-financial covenants of the Perceptive Credit Facility.

As of March 31, 2020 and December 31, 2019 the carrying value of the long-term debt was $3.7 million and $3.7 million, respectively.

Future required principal and final payments on the Perceptive Credit Facility were as follows at March 31, 2020 (in thousands):