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EARN-OUT MILESTONE LIABILITY | 12 Months Ended
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Dec. 31, 2021
Earn-out Milestone Liability |
EARN-OUT MILESTONE LIABILITY | 12. 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. 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. 13,333 warrants to purchase common stock at a strike price of $0.15 per warrant share as consideration for entering into this amended agreement. The warrant shares have no expiration and were fair valued at $30.00 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. In October of 2020, EGWU, Inc. elected to receive 13,151 shares through a non-cash conversion and exercised all 13,333 warrant shares. At December 31, 2021, the Company fair valued the earn-out milestone liability at $5.4 million and recognized a non-cash gain of $1.6 million during 2021 as a result of the change in the fair value of the earn-out milestone liability of $7.0 million at December 31, 2020. In assessing the fair value of the earnout milestone liability at December 31, 2021, the Company considered each of the settlement provisions per the Amended Asset Purchase Agreement and equally weighted the probability of a cash or cash and common stock payment. At December 31, 2020, the Company fair valued the earn-out milestone liability at $7.0 million and recognized a non-cash charge of $1.3 million during 2020 as a result of the change in the fair value of earn-out milestone liability of $5.7 million at December 31, 2019. In assessing the fair value of the earnout milestone liability at December 31, 2020, the Company considered each of the settlement provisions per the Amended Asset Purchase Agreement and equally weighted the probability of a cash or cash and common stock payment. The following is a summary of the changes in the earn-out milestone liability for 2020 and 2021: SCHEDULE OF CHANGES IN EARN-OUT MILESTONE LIABILITY
Balance at January 1, 2020 |  | $ | 5,717,709 |
Non-cash loss from the adjustment for the change in fair value included in 2020 net loss |  |  | 1,300,291 |
Balance at December 31, 2020 |  |  | 7,018,000 |
Non-cash gain from the adjustment for the change in fair value included in 2021 net loss |  |  | (1,622,000 | )
Balance at December 31, 2021 |  | $ | 5,396,000 |

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