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Earn-out Milestone Liability

9 Months Ended

Sep. 30, 2018

Note 13. Earn-out Milestone Liability

The total aggregate purchase price for the EGEN Acquisition included potential future Earn-out Payments contingent upon achievement of certain milestones. The difference between the aggregate $30.4 million in future Earn-out Payments and the $13.9 million included in the fair value of the acquisition consideration at June 20, 2014 was based on the Company’s risk-adjusted assessment of each milestone (10% to 67%) and utilizing a discount rate based on the estimated time to achieve the milestone (1.5 to 2.5 years). The earn-out milestone liability will be fair valued at the end of each quarter and any change in their value will be recognized in the financial statements.

As of September 30, 2018, June 30, 2018 and December 31, 2017, the Company fair valued these milestones at $9.0 million, $13.1 million and $12.5 million, respectively, and recognized a non-cash gain of $4,114,995 and $3,567,671 during the three and nine months ended September 30, 2018 as a result of the change in the fair value of these milestones from the beginning of each period, respectively.

As of September 30, 2017, June 30, 2017 and December 31, 2016, the Company fair valued these milestones at $12.5 million, $13.8 million and $13.2 million, respectively, and recognized a non-cash gain of $1,246,151 and $670,172 during the three and nine months ended September 30, 2017 as a result of the change in the fair value of these milestones from the beginning of each period, respectively

The following is a summary of the changes in the earn-out milestone liability for 2018:

Balance at January 1, 2018	$	12,538,525
Non-cash gain from the adjustment for the change in fair value		(3,567,671	)
Balance at September 30, 2018	$	8,970,854

The following is a schedule of the Company’s risk-adjustment assessment of each milestone:

Date	Risk-adjustment Assessment of each Milestone		Discount Rate		Estimated Time to Achieve

September 30, 2018		0% to 80%		9%	0.00 to 1.17 year
June 30, 2018		35% to 80%		9%	0.83 to 1.00 years
December 31, 2017		35% to 80%		9%	1.33 to 1.50 years

September 30, 2017		35% to 80%		9%	1.25 to 1.75 years
June 30, 2017		50% to 80%		9%	1.50 to 2.00 years
December 31, 2016		50% to 80%		9%	2.00 to 2.50 years