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Earn-Out Milestone Liability

9 Months Ended

Sep. 30, 2021

Note 14. Earn-Out Milestone Liability

On March 28, 2019, the Company and EGWU, Inc. entered into an amendment to its purchase agreement (“Amended Asset Purchase Agreement”), whereby payment of the earnout milestone liability related to the Ovarian Cancer Indication of $12.4 million had 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.

As of September 30, 2021, June 30, 2021, and December 31, 2020, the Company calculated the fair value of the earn-out milestone liability at $7.3 million, $7.1 million and $7.0 million, respectively, and recognized a non-cash charge of $0.3 million and for each of the three-months and nine months ended September 30, 2021. In assessing the earnout milestone liability at September 30, 2021 and June 30, 2021, the Company determined the fair value of each of the two payment options per the Amended Asset Purchase Agreement and weighted them at 50% and 50% probability for the $7.0 million and the $12.4 million payments, respectively.

As of September 30, 2020, June 30, 2020 and December 31, 2019, the Company calculated the fair value of the earn-out milestone liability at $7.1 million, $6.0 million, and $5.7 million, respectively, and recognized a non-cash charge of $1.1 and $1.4 million for the three-month and nine-month periods ended September 30, 2020, respectively. In assessing the earnout milestone liability at September 30, 2020, the Company fair valued each of the two payment options per the Amended Asset Purchase Agreement and weighted them at 50% and 50% probability for the $7.0 million and the $12.4 million payments, respectively, and at June 30, 2020, the Company determined the fair value of 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.

The following is a summary of the changes in the earn-out milestone liability for the nine-month period ended September 30, 2021:

Balance at January 1, 2021	$	(7,018,000	)
Non-cash loss from the change in fair value		(327,000	)
Balance at September 30, 2021	$	(7,345,000	)

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

Schedule of Risk Adjustment Assessment

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

September 30, 2021		80	%		6.54% to 6.60	%	0.29 to 1.29 years
June 30, 2021		80	%		9	%	0.42 to 1.42 years
December 31, 2020		80	%		9	%	0.54 to 1.54 years

September 30, 2020		80	%		9	%	0.38 to 1.38 years
June 30, 2020		80	%		9	%	0.54 to 1.54 years
December 31, 2019		80	%		9	%	1.12 to 2.12 years