|3 Months Ended|
Mar. 31, 2021
|Derivative Instruments and Hedging Activities Disclosure [Abstract]|
On July 28, 2020, the Company, with its subsidiary, Corbus Pharmaceuticals, Inc., as borrower, entered into a $50,000,000 secured Loan and Security Agreement with K2HV, an unrelated third party (the “Loan Agreement”) and received the first $ tranche upon signing. The Company has determined that a prepayment feature and default feature needed to be separately valued and mark to market each reporting period after assessing the agreement under GAAP.
The value of these features are determined each reporting period by taking the present value of net cash flows with and without the prepayment features. The significant assumption used to determine the fair value of the debt without any features is the discount rate which has been estimated by using published market rates of triple CCC rated public companies. All other inputs are taken from the Loan Agreement. The additional significant assumptions used when valuing the prepayment feature is the probability of a change of control event. The Company has determined the probability from December 31, 2020 to March 31, 2021 has stayed consistent. The additional significant assumption used when valuing the default feature is the probability of defaulting on the repayment of loan. The Company has determined the probability decreased from December 31, 2020 to March 31, 2021 as a result of the additional cash the Company was able to raise in the first quarter of 2021. The value of these features was determined to be approximately $797,000 at December 21, 2020 and $803,000 at March 31, 2021 which resulted in $6,000 of other expense in the first quarter of 2021. The Company notes there was no impact of these features as of March 31, 2020. The Company considers the fair value of the derivative liability to be Level 3 under the three-tier fair value hierarchy.
A roll forward of the fair value of the derivative liabilities for the quarter ended March 31, 2021 is presented below.
SCHEDULE OF FAIR VALUE OF DERIVATIVE LIABILITY
The entire disclosure for derivative instruments and hedging activities including, but not limited to, risk management strategies, non-hedging derivative instruments, assets, liabilities, revenue and expenses, and methodologies and assumptions used in determining the amounts.
Reference 1: http://fasb.org/us-gaap/role/ref/legacyRef