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Fair Value Measurements

3 Months Ended

Mar. 31, 2022

Note 8. Fair Value Measurements

FASB ASC Section 820, Fair Value Measurements and Disclosures establishes a three-level hierarchy for fair value measurements which requires an entity to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value. The three levels of inputs that may be used to measure fair value are as follows:

Level 1: Quoted prices (unadjusted) or identical assets or liabilities in active markets that the entity has the ability to access as of the measurement date;

Level 2: Significant other observable inputs other than Level 1 prices such as quoted prices for similar assets or liabilities; quoted prices in markets that are not active; or other inputs that are observable or can be corroborated by observable market data; and

Level 3: Significant unobservable inputs that reflect a reporting entity’s own assumptions that market participants would use in pricing an asset or liability.

Cash and cash equivalents, other current assets, accounts payable and other accrued liabilities are reflected in the condensed consolidated balance sheet at their approximate estimated fair values primarily due to their short-term nature. The fair values of securities available for sale is determined by relying on the securities’ relationship to other benchmark quoted securities and classified its investments as Level 2 items in both 2022 and 2021. There were no transfers of assets or liabilities between Level 1 and Level 2 and no transfers in or out of Level 3 during the three-months ended March 31, 2021 or during the year ended December 31, 2021. The changes in Level 3 liabilities were the result of changes in the fair value of the earn-out milestone liability included in earnings and in-process R&D. The earnout milestone liability is valued using a risk-adjusted assessment of the probability of payment of each milestone, discounted to present value using an estimated time to achieve the milestone (see Note 14).

Assets and liabilities measured at fair value are summarized below:

	Total Fair Value		Quoted Prices in Active Markets for Identical Assets/Liabilities (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
Assets:

Recurring items as of March 31, 2022
Corporate debt securities, available for sale	$	12,943,814	$	–	$	–	$	12,943,814

Non-recurring items as of March 31, 2022
In-process R&D (Note 9)	$	13,366,234	$	–	$	–	$	13,366,234

Recurring items as of December 31, 2021
Corporate debt securities, available for sale	$	29,803,095	$	–	$	–	$	29,803,095

Non-recurring items as of December 31, 2021
In-process R&D (Note 9)	$	13,366,234	$	–	$	–	$	13,366,234

Liabilities:

Recurring items as of March 31, 2022
Earn-out milestone liability (Note 14)	$	5,396,000	$	–	$	–	$	5,396,000

Recurring items as of December 31, 2021
Earn-out milestone liability (Note 14)	$	5,396,000	$	–	$	–	$	5,396,000