NOTES PAYABLE |
6 Months Ended | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Jun. 30, 2024 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Debt Disclosure [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| NOTES PAYABLE |
9. NOTES PAYABLE
D&O Financing
In November 2023, the Company entered into a loan agreement with a financing company for $0.4 million to finance one of the Company’s insurance policies. The terms of the loan stipulate equal monthly payments of principal and interest payments of $39.0 thousand over a 10-month period. Interest accrues on this loan at an annual rate of 8.15%. Prepaid expenses as of June 30, 2024 and December 31, 2023, included approximately $0.1 million and $0.3 million, respectively, related to the underlying insurance policy being financed.
Loan and Security Agreement with K2 HealthVentures LLC
On July 28, 2020, the Company, with its subsidiary, Corbus Pharmaceuticals, Inc., as borrower, entered into a secured Loan and Security Agreement with K2 HealthVentures LLC (“K2HV”), an unrelated third party (the “Loan and Security Agreement”) and received $20.0 million upon signing. The Company entered into an Amendment to the Loan and Security Agreement (the "Amended Loan and Security Agreement") on October 25, 2022. Interest payments are made monthly and accrue at a variable annual rate equal to the greater of (i) 8.5% and (ii) the rate of interest noted in The Wall Street Journal, Money Rates section, as the “Prime Rate” plus 5.25%, in each case, subject to a step-down of 25 basis points upon the funding of the second tranche. The interest rate used at June 30, 2024 was 13.75%.
Pursuant to the Amended Loan and Security Agreement, K2HV may elect to convert up to $5.0 million of the outstanding loan balance into shares of the Company’s common stock at conversion prices as follows: $0.9 million of the loan at $4.50 per share, $1.1 million at $7.875 per share, and $3.0 million at $282.00 per share. On June 1, 2023, K2HV converted $0.9 million of the outstanding loan balance into 194,444 shares of the Company's stock at a conversion price of $4.50 per share. On March 6, 2024, K2HV converted $1.1 million of the outstanding loan balance into 142,857 shares of the Company's stock at a conversion price of $7.875 per share. As of June 30, 2024, $3.0 million of the outstanding loan balance remains available to convert into shares of the Company's common stock.
In connection with the Loan and Security Agreement, on July 28, 2020, the Company issued K2HV a warrant to purchase up to 2,873 common shares (the “K2 Warrant”) at an exercise price of $208.80 (the “Warrant Price”). The K2 Warrant may be exercised either for cash or on a cashless “net exercise” basis and expires on July 28, 2030.
The Company is required to make a final payment in excess of the stated principal equal to $1.6 million at the end of the loan. This payment has been amortized over the life of the loan through interest expense, net within the condensed consolidated statements of operations and comprehensive loss and is included in accrued expense on the condensed consolidated balance sheet as of June 30, 2024.
The Loan and Security Agreement includes both financial and non-financial covenants. The Company was in compliance with these covenants as of June 30, 2024. The obligations under the Loan and Security Agreement are secured on a senior basis by a lien on substantially all of the assets of the Company and its subsidiaries. The subsidiaries of the Company are guarantors of the obligations of the Company under the Loan and Security Agreement.
The total debt discount related to the Amended Loan and Security Agreement of approximately $3.0 million is being charged to interest expense using the effective interest method over the term of the debt. At June 30, 2024 and December 31, 2023, the fair value of our outstanding debt, which is considered level 3 in the fair value hierarchy, approximates carrying value. Interest expense for the three and six months ended June 30, 2024 was approximately $0.6 million and $1.5 million, respectively. Interest expense for the three and six months ended June 30, 2023 was $1.0 million and $1.9 million, respectively.
The net carrying amounts of the liability components consists of the following (in thousands):
As of June 30, 2024, the total principal amount of the loan under the Amended Loan and Security Agreement outstanding at June 30, 2024 is $12.4 million. This is comprised of $10.8 million principal amount outstanding at June 30, 2024 and the $1.6 million final payment discussed above. The Company made a monthly payment on the principal balance of $0.7 million on July 1, 2024. On August 1, 2024, the loan matured and the Company made a final payment in the amount of $11.8 million, which represents $10.1 million principal outstanding on the maturity date, $1.6 million final payment and accrued interest. |
|||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||