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Earn-out Milestone Liability | 9 Months Ended
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Sep. 30, 2019
Hercules Warrant [Member] |
Earn-out Milestone Liability | Note 13. Earn-out Milestone Liability The total aggregate purchase price for the EGEN asset 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. On March 28, 2019, the Company and EGWU, Inc, entered into the Amended Asset Purchase Agreement. Pursuant to the Amended Asset Purchase Agreement, payment of the earnout milestone liability related to the Ovarian Cancer Indication of $12.4 million has been modified. The Company has the option to make the payment as follows:
a) | $7.0 million in cash within 10 business days of achieving the milestone; or
b) | $12.4 million in cash, common stock of the Company, or a combination of either, within one year of achieving the milestone.
The Company provided EGWU, Inc. 200,000 warrants to purchase common stock at a strike price of $0.01 per warrant share as consideration for entering into this amended agreement. The warrant shares have no expiration and were fair valued at $2.00 using the closing price of a share of Celsion stock on the date of issuance offset by the exercise price and recorded as a non-cash expense in the income statement and were classified as equity on the balance sheet. As of September 30, 2019, June 30, 2019, and December 31, 2018, the Company fair valued the earn-out milestone liability at $5.8 million, $5.9 million and $8.9 million, respectively and recognized a non-cash benefit of $0.1 million and $3.1 million for the three and nine-month periods ended September 30, 2019, respectively. In assessing the earnout milestone liability at September 30, 2019 and June 30, 2019, the Company fair valued each of the two payment options per the Amended Asset Purchase Agreement and weighted them at 80% and 20% probability for the $7.0 million and the $12.4 million payments, respectively. 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 benefit of $4.1 million and 3.6 million during the three and nine-month periods ended September 30, 2018, respectively. The following is a summary of the changes in the earn-out milestone liability for 2019:
Balance at January 1, 2019 |  | $ | (8,907,664 | )
Non-cash gain from the adjustment for the change in fair value |  |  | 3,088,821 |
Balance at September 30, 2019 |  | $ | (5,818,843 | )
The following is a schedule of the Company’s risk-adjustment assessment of each milestone:
Date |  | Risk-adjustment Assessment of achieving each Milestone |  |  | Discount Rate |  |  | Estimated Time to Achieve
September 30, 2019 |  |  | 80% |  |  |  | 9% |  |  | 0.92 to 1.92 years
June 30, 2019 |  |  | 80% |  |  |  | 9% |  |  | 0.75 to 1.75 years
December 31, 2018 |  |  | 80% |  |  |  | 9% |  |  | 1.25 years
September 30, 2018 |  |  | 0% to 80% |  |  |  | 9% |  |  | 0.00 to 1.17 years
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

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