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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, DC 20549

FORM 8-K/A

(Amendment No. 1)

CURRENT REPORT

Pursuant to Section 13 or 15(d) of The Securities Exchange Act of 1934

Date of Report (Date of earliest event reported): June 20, 2014

CELSION CORPORATION

(Exact name of registrant as specified in its Charter)

Delaware

001-15911

52-1256615

(State or other jurisdiction

of incorporation)

(Commission

File Number)

(IRS Employer

Identification No.)

997 Lenox Drive, Suite 100, Lawrenceville, NJ 08648-2311

(Address of principal executive offices) (Zip Code)

(609) 896-9100

(Registrant’s telephone number, including area code)

N/A

(Former name or former address, if changed since last report)

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions (see General Instruction A.2. below):

☐	Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

☐	Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

☐	Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

☐	Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

Explanatory Note

As reported in the Current Report on Form 8-K filed on June 20, 2014 (the “Original 8-K”), Celsion Corporation, a Delaware corporation (“Celsion”), completed the acquisition of substantially all of the assets of Egen, Inc., an Alabama corporation (“EGEN”), on June 20, 2014, pursuant to the Asset Purchase Agreement dated as of June 6, 2014, by and between Celsion and EGEN (the “Purchase Agreement”). CLSN Laboratories, Inc., a Delaware corporation and a wholly-owned subsidiary of Celsion (“CLSN Laboratories”), acquired all of EGEN’s right, title and interest in and to substantially all of the assets of EGEN, including cash and cash equivalents, patents, trademarks and other intellectual property rights, clinical data, certain contracts, licenses and permits, equipment, furniture, office equipment, furnishings, supplies and other tangible personal property. In addition, CLSN Laboratories assumed certain specified liabilities of EGEN, including the liabilities arising out of the acquired contracts and other assets relating to periods after the closing date.

The total purchase price for the asset acquisition is up to $44.4 million, including potential future payments of up to $30.4 million contingent upon achievement of certain earnout milestones set forth in the Purchase Agreement (“Earnout Payments”). At the closing, Celsion paid approximately $3.0 million in cash after the expense adjustment and issued 2,712,188 shares of its common stock to EGEN. The shares of Common Stock were issued in a private transaction exempt from registration under the Securities Act of 1933, as amended, pursuant to Section 4(2) thereof. In addition, 670,070 shares of Common Stock were held back by Celsion at the closing and are issuable to EGEN on or after August 2, 2016 pending certain potential adjustments for expenses or in relation to EGEN’s indemnification obligations under the Purchase Agreement.

The Earnout Payments of up to $30.4 million will become payable, in cash, shares of Common Stock or a combination thereof, at Celsion’s option, as follows:

•

$12.4 million will become payable upon achieving certain specified development milestones relating to an EGEN-001 ovarian cancer study to be conducted by Celsion or its subsidiary;

•

$12.0 million will become payable upon achieving certain specified development milestones relating to an EGEN-001 glioblastoma multiforme brain cancer study to be conducted by Celsion or its subsidiary; and

•

up to $6.0 million will become payable upon achieving certain specified development milestones relating to the TheraSilence® technology acquired from EGEN in the acquisition.

Celsion's obligations to make the Earnout Payments will terminate on the seventh anniversary of the closing date.

The foregoing description of the Purchase Agreement does not purport to be complete and is qualified in its entirety by reference to the Purchase Agreement, a copy of which was filed as Exhibit 2.1 to Celsion’s Quarterly Report on Form 10-Q for the quarter ended June 30, 2014 and is incorporated herein by reference.

This Amendment No. 1 on Form 8-K/A (“Amendment No. 1”) amends Items 9.01 (a) and (b) of the Original 8-K in its entirety to provide the information required by Item 9.01 of Form 8-K. Amendment No. 1 is being filed solely to provide, as Exhibits 99.1 through 99.4 hereto, (i) the financial statements of EGEN as of and for the year ended June 30, 2013 and for the period from March 2, 2002 (date of inception) to June 30, 2013, together with the independent auditors’ report, (ii) the financial statements of EGEN as of and for the year ended June 30, 2012, together with the independent auditors’ report, (iii) the unaudited financial statements of EGEN as of March 31, 2014 and for the three and nine months ended March 31, 2014 and 2013, and (iii) the unaudited pro forma condensed combined financial statements as of and for the three months ended March 31, 2014 and for Celsion’s fiscal year ended December 31, 2013. No other modification to the Original 8-K is being made by Amendment No. 1.

Item 9.01 Financial Statements and Exhibits

(a) Financial Statements of Businesses Acquired

Item 9.01(a) of the Original 8-K is hereby amended in its entirety as follows:

The financial statements of EGEN as of and for the year ended June 30, 2013 and for the period from March 2, 2002 (date of inception) to June 30, 2013, together with the independent auditors’ report, are attached hereto as Exhibit 99.1 and are incorporated herein by reference.

The financial statements of EGEN as of and for the year ended June 30, 2012, together with the independent auditors’ report, are attached hereto as Exhibit 99.2 and are incorporated herein by reference.

The unaudited condensed financial statements of EGEN as of March 31, 2014 and 2013 and for the three and nine month periods ended March 31, 2014 and 2013 are attached hereto as Exhibit 99.3 and are incorporated herein by reference.

(b)

Pro Forma Financial Information.

Item 9.01(b) of the Original 8-K is hereby amended in its entirety as follows:

The unaudited pro forma condensed combined financial statements as of and for the three months ended March 31, 2014, and for Celsion’s fiscal year ended December 31, 2013 are attached hereto as Exhibit 99.4 and are incorporated herein by reference.

(d)

Exhibits.

Exhibit

Description

23.1	Consent of Anglin, Reichmann, Snellgrove & Armstrong P.C.

99.1	Financial statements of Egen, Inc. as of and for the year ended June 30, 2013 and for the period from March 2, 2002 (date of inception) to June 30, 2013, together with the independent auditors’ report

99.2	Financial statements of Egen, Inc. as of and for the year ended June 30, 2012, together with the independent auditors’ report

99.3	Unaudited condensed financial statements of Egen, Inc. as of March 31, 2014 and 2013 and for the three and nine month periods ended March 31, 2014 and 2013

99.4	Unaudited Pro Forma Condensed Combined Financial Statements

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.

	CELSION CORPORATION



Dated: August 25, 2014	By:	/s/ Jeffrey W. Church
		Jeffrey W. Church
		Senior Vice President and Chief Financial Officer

EXHIBIT INDEX

Exhibit

Description

23.1	Consent of Anglin, Reichmann, Snellgrove & Armstrong P.C.

99.1	Financial statements of Egen, Inc. as of and for the year ended June 30, 2013 and for the period from March 2, 2002 (date of inception) to June 30, 2013, together with the independent auditors’ report

99.2	Financial statements of Egen, Inc. as of and for the year ended June 30, 2012, together with the independent auditors’ report

99.3	Unaudited condensed financial statements of Egen, Inc. as of March 31, 2014 and 2013 and for the three and nine month periods ended March 31, 2014 and 2013

99.4	Unaudited Pro Forma Condensed Combined Financial Statements

clsn20140819_8ka.htm

Exhibit 23.1

CONSENT OF INDEPENDENT PUBLIC ACCOUNTING FIRM

The Board of Directors

Celsion Corporation

Lawrenceville, New Jersey

We consent to the incorporation by reference in the Registration Statement on Form S-3 (No. 333-183286) and the Registration Statements on Form S-8 (Nos. 333-183288, 333-145680, 333-139784, 333-116435 and 333-67508) of Celsion Corporation of (i) our report dated January 30, 2014 (except for Note 13, as to which the date is June 6, 2014), with respect to the financial statements of Egen, Inc. as of and for the year ended June 30, 2013 and for the period from March 2, 2002 (date of inception) to June 30, 2013, and (ii) our report dated June 16, 2014, with respect to the financial statements of Egen, Inc. as of and for the year ended June 30, 2012, each included in Amendment No. 1 to the Current Report of Celsion Corporation on Form 8-K/A filed with the Securities and Exchange Commission on August 25, 2014.

/s/ Anglin, Reichmann, Snellgrove & Armstrong P.C.

Huntsville, Alabama

August 25, 2014

Exhibit 99.1

Exhibit 99.2

clsn20140819_8ka.htm

Exhibit 99.3

EGEN, INC.

(A DEVELOPMENT STAGE COMPANY)

UNAUDITED FINANCIAL STATEMENTS

FOR THE THREE AND NINE MONTH PERIODS ENDED MARCH 31, 2014 AND 2013

EGEN, INC.

TABLE OF CONTENTS

PART I: FINANCIAL INFORMATION
		Page(s)
Item 1.	Financial Statements (Unaudited)	1
	Balance Sheets	2
	Statements of Operations and Comprehensive Loss	3
	Statements of Cash Flows	4
	Notes to Financial Statements	5

EGEN, INC.

BALANCE SHEETS

	March 31, 2014			June 30, 2013
	(Unaudited)
ASSETS
Current Assets
Cash and cash equivalents	$	462,281		$	379,454
Accounts receivable		28,409			34,674
Investments		686,107			2,715,648
Prepaid expenses		63,463			374
Total Current Assets		1,240,260			3,130,150

Property and Equipment
Computer equipment		145,857			145,857
Equipment		668,869			667,263
Automobiles		21,778			21,778
Facilities		3,000			3,000
Intellectual property		913,484			779,335
		1,752,988			1,617,233
Less: accumulated depreciation and amortization		1,220,551			1,108,983
Total Property and Equipment, net		532,437			508,250

Other Assets
Patents not in service		568,344			631,651
Deposits		3,570			3,570
Total Other Assets		571,914			635,221

Total Assets	$	2,344,611		$	4,273,621

LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities
Accounts payable	$	54,045		$	87,132
Accrued leave		105,080			102,824
Payroll liabilities		7,750			-
Total Current Liabilities		166,875			189,956

Stockholders' Equity
Series A preferred stock		12,750			12,750
Series B preferred stock		20,000			20,000
Common stock		140,842			140,842
Additional paid in capital		39,282,302			39,278,352
Accumulated other comprehensive loss, net		(9,233	)		(61,109	)
Accumulated deficit		(37,268,925	)		(35,307,170	)
Total Stockholders' Equity		2,177,736			4,083,665

Total Liabilities and Stockholders' Equity	$	2,344,611		$	4,273,621

See accompanying notes to the financial statements.

EGEN, INC.

STATEMENTS OF INCOME AND COMPREHENSIVE LOSS

	Three Months Ended						Nine Months Ended
	March 31, 2014			March 31, 2013			March 31, 2014			March 31, 2013
Revenue
Grant revenue	$	-		$	-		$	95,721		$	100,000
Total Revenue		-			-			95,721			100,000
Operating Expenses
Research and development expenses		375,240			420,994			1,204,681			995,923
General and administrative expenses		370,443			388,074			1,221,868			1,273,021
Total Operating Expenses		745,683			809,068			2,330,828			2,268,944
Operating Income (Loss)		(745,683	)		(809,068	)		(2,330,828	)		(2,168,944	)
Other Income (Expenses)
Gain (loss) on trading securities		(6,570	)		499			(29,164	)		11,699
Gain (loss) on asset disposal		-			-			-			1,935
Royalty income		2,665			16,698			4,611			23,486
Contract research income		118,142			6,917			375,805			6,917
Dividend and interest income		1,726			5,770			17,746			25,285
Other income (expenses), net		-			(4,861	)		76			(4,861	)
Total Other Income (Expenses)		115,963			25,023			369,074			64,461
Income (Loss) Before Income Taxes		(629,720	)		(784,045	)		(1,961,754	)		(2,104,483	)
Income Tax Provision (Benefit), net		-			-			-			-
Net Income (Loss)		(629,720	)		(784,045	)		(1,961,754	)		(2,104,483	)
Other Comprehensive Income (Loss), Net of Tax
Unrealized holding gain (loss) on investments arising during the period		1,870			6,301			22,712			19,439
Plus: reclassification adjustment for (gain) loss realized		6,570			(499	)		29,164			(11,699	)
Total Other Comprehensive Income (Loss)		8,440			5,802			51,876			7,740
Total Comprehensive Income (Loss)	$	(621,280	)	$	(778,243	)	$	(1,909,878	)	$	(2,096,743	)

See accompanying notes to the financial statements.

EGEN, INC.

STATEMENTS OF CASH FLOWS

	Nine Months Ended
	March 31, 2014			March 31, 2013

Cash Flows from Operating Activities
Net income (loss)	$	(1,961,754	)	$	(2,104,483	)
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation and amortization		111,567			69,958
Realized investment (gain) loss		29,164			(11,699	)
(Gain) loss on disposal of assets		-			(1,935	)
Compensation expense related to stock options		3,950			87,693
Changes in asset and liability accounts:		-			-
Accounts receivable		6,264			(6,917	)
Prepaid expenses		(63,089	)		(374	)
Deposits		-			-
Accounts payable		(33,087	)		(31,998	)
Accrued vacation		5,411			103,018
Payroll liabilities		4,595			963
Net Cash (Used in) Provided by Operating Activities		(1,896,979	)		(1,895,774	)
Cash Flows from Investing Activities
Purchase of property and equipment		(59,947	)		(91,853	)
Purchase of patents not in service		-			(23,996	)
Proceeds from sale of equipment		-			7,500
Purchases of investments		2,022,007			(3,725,285	)
Proceeds from sale of investments		17,746			1,571,130
Net Cash (Used in) Provided by Investing Activities		1,979,806			(2,262,504	)
Cash Flows from Financing Activities
Proceeds from common stock issued		-			3,917,335
Net Cash (Used in) Provided by Financing Activities		-			3,917,335
Net Increase (Decrease) in Cash and Cash Equivalents		82,827			(240,943	)
Cash and Cash Equivalents, Beginning of Year		379,454			526,475
Cash and Cash Equivalents, End of Year	$	462,281		$	285,532

See accompanying notes to the financial statements.

EGEN, INC.

NOTES TO FINANCIAL STATEMENTS (UNAUDITED)

FOR THE THREE AND NINE MONTH PERIODS ENDED MARCH 31, 2014 AND 2013

Note 1 - Business Description

EGEN, Inc. (the Company), founded in 2002, is a clinical stage biopharmaceutical company focused on developing nucleic acid-based therapeutics for cancer and other difficult to treat diseases using proprietary nanoparticle delivery systems. The Company’s technology platform is very broad, including polymer, cationic lipid, and molecular biology-based approaches to delivery of nucleic acid and anti-cancer drugs. The primary activities of the Company are the application of the TheraPlas™ and TheraSilence™ platforms to the treatment of human disease.

Note 2 - Basis of Presentation

The accompanying unaudited financial statements of EGEN, Inc. have been prepared in accordance with generally accepted accounting principles in the United States (GAAP) for interim financial information and with the instructions to Form 10-Q and Article 10 of Regulation S-X. Certain information and footnote disclosures normally included in financial statements prepared in accordance with GAAP have been condensed or omitted pursuant to such rules and regulations.

In the opinion of management, all adjustments, consisting only of normal recurring accruals considered necessary for a fair presentation, have been included in the accompanying unaudited financial statements. Operating results for the three and nine month periods ended March 31, 2014 and 2013 are not necessarily indicative of the results that may be expected for any other interim period(s) or for any full year. For further information, refer to the financial statements and notes thereto included in the Company’s audited financial statements for the fiscal year ended June 30, 2013 issued on January 30, 2014 and as restated on June 6, 2014, and for the fiscal year ended June 30, 2012 issued on June 16, 2014.

The preparation of financial statements in conformity with GAAP requires management to make judgments, estimates, and assumptions that affect the amount reported in the Company’s financial statements and accompanying notes. Actual results could differ materially from those estimates.

Events and conditions arising subsequent to the most recent balance sheet date have been evaluated for their possible impact on the financial statements and accompanying notes. In July 2013, the Company amended its operating lease agreement for office space, which is scheduled to expire in January 2018, to reflect lower monthly rental payments of $23,139. In June 2014, the Company signed an asset purchase agreement for the sale of substantially all Company assets. No other events and conditions would give rise to any information that required accounting recognition or disclosure in the financial statements other than those arising in the ordinary course of business.

Note 3 - New Accounting Pronouncements

From time to time, new accounting pronouncements are issued by the Financial Accounting Standards Board (FASB) and are adopted by the Company as of the specified effective date. Unless otherwise discussed, Company management believes that the impact of recently issued accounting pronouncements will not have a material impact on the Company’s financial position, results of operations, and cash flows, or do not apply to the Company’s operations.

The Company adopted Accounting Standards Update (ASU) No. 2014-10 - Development Stage Entities (Topic 915): Elimination of Certain Financial Reporting Requirements, Including an Amendment to Variable Interest Entities Guidance in Topic 810, Consolidation - an amendment to FASB Accounting Standards Codification (ASC) Topic 915, Development Stage Entities, in June 2014 for any annual reporting period or interim period for which the Company’s financial statements have not yet been made available for issuance, the objective of which is to improve financial reporting by reducing the cost and complexity associated with the incremental reporting requirements for development stage entities by eliminating the requirements for development stage entities to (1) present inception-to-date information in the statements of operations, cash flows, and changes in stockholders’ equity, (2) label the financial statements as those of a development stage entity, (3) disclose a description of the development stage activities in which the entity is engaged, and (4) disclose in the first year in which the entity is no longer a development stage entity that in prior years it had been in the development stage.

Note 4 - Investments

The Company classifies investments as available for sale. As of March 31, 2014, the Company held the following securities, recorded at fair value:

	Cost		Unrealized Loss			Fair Value
Available for sale securities
Mutual Funds	$	695,340	$	(9,233	)	$	686,107

Total available for sale securities	$	695,340	$	(9,233	)	$	686,107

As of June 30, 2013, the Company held the following securities, recorded at fair value:

	Cost		Unrealized Loss			Fair Value
Available for sale securities
Mutual Funds	$	2,776,757	$	(61,109	)	$	2,715,648

Total available for sale securities	$	2,776,757	$	(61,109	)	$	2,715,648

Investment securities available for sale are evaluated periodically to determine whether a decline in their value is other than temporary. The term “other than temporary” is not intended to indicate a permanent decline in value. Rather, it means that the prospects for near-term recovery of value are not necessarily favorable, or that there is a lack of evidence to support fair values equal to, or greater than, the carrying value of the security. Management reviews criteria such as the magnitude and duration of the decline, as well as the reasons for the decline, to predict whether the loss in value is other than temporary. Once a decline in value is determined to be other than temporary, the value of the security is reduced and a corresponding charge to earnings is recognized.

Note 5 - Fair Value Measurements

FASB ASC 820, Fair Value Measurements and Disclosures, establishes a framework for measuring fair value. That framework provides a fair value hierarchy that prioritizes the inputs to valuation techniques used to measure fair value. The hierarchy gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (level 1 measurement) and the lowest priority to unobservable inputs (level 3 measurements).

The three levels of the fair value hierarchy under FASB ASC 820 are described below:

Level 1 - Quoted prices (unadjusted) for 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 balance sheet at their estimated fair values primarily due to their short-term nature.

The following table summarizes the Company's investments reported at fair value based on the inputs used to value them:

	Level 1		Level 2		Level 3		Total
As of March 31, 2014
Mutual Funds	$	686,107	$	-	$	-	$	686,107

As of June 30, 2013
Mutual Funds	$	2,715,648	$	-	$	-	$	2,715,648

Note 6 - Common Stock

The holders of the Common Stock are entitled to one vote for each share of Common Stock on all matters that may be submitted to the holders of Common Stock of the Company. The holders of Common Stock shall vote together with the holders of Series A Preferred Stock and Series B Preferred Stock as a single class. The Company shall not plan a merger or conversion, sale or dispose of property, or dissolve the Company without the written consent or affirmative vote of the entire single class. As of March 31, 2014, the Company had Common Stock, $0.01 par value, 32,000,000 shares authorized and 14,084,223 shares issued and outstanding.

Note 7 - Preferred Stock

The Company has authority to issue 8,000,000 shares of Preferred Stock with a par value of $0.01 per share. The Company has designated 1,500,000 shares of authorized preferred stock as Series A Preferred Stock with an issue price of $5.00 per share. The Company has designated 2,000,000 shares of authorized preferred stock as Series B Preferred Stock with an issue price of $6.00 per share. Series A Preferred Stock and Series B Preferred Stock have the same rights, preferences, powers, privileges, restrictions, qualifications, and limitations. As of March 31, 2014, the Company had Series A Preferred Stock, $0.01 par value, 1,500,000 shares designated, 1,275,000 shares issued and outstanding, and liquidation preference of $6,375,000. As of March 31, 2014, the Company had Series B Preferred Stock, $0.01 par value, 2,000,000 shares designated, issued and outstanding, and liquidation preference of $12,000,000.

Dividends

From and after the date of the issuance of any shares of Series A Preferred Stock, dividends shall accrue at the annual rate of 8% of the original issue price. The dividends shall accrue from day to day, whether or not declared, shall compound annually, shall be calculated on the basis of a 365 day year, and shall be cumulative. The holders of the Series A Preferred Stock are entitled to receive dividends when and if declared by the Board of Directors. Dividends on Preferred Stock are in preference to and prior to any payment of any dividend on Common Stock. As of March 31, 2014, $4,602,548 in Preferred Stock dividends was in arrears.

Convertibility

Each share of Series A Preferred Stock and Series B Preferred Stock shall be convertible, at the option of the holder at any time and from time to time, and without the payment of additional consideration by the holder into Common Stock. The number of shares will be determined by dividing the original issue price by the fair market value price of the Preferred Stock at the time of conversion.

Liquidation Preference

In the event of any liquidation, dissolution or winding up of the Company, the holders of the Series A Preferred Stock are entitled to receive prior to, and in preference to, any distribution to the holders of Common Stock or any other class or series of stock ranking on liquidation junior to the Series A Preferred Stock, an amount equal to the original issue price plus any accrued dividends that have not yet been paid. The holders of the Series B Preferred Stock are entitled to receive prior to, and in preference to, any distribution to the holders of Common Stock or any other class or series of stock ranking on liquidation junior to the Series B Preferred Stock, an amount equal to the original issue price plus any accrued dividends that have not yet been paid.

The Series A Preferred Stock Liquidation Preference and the Series B Preferred Stock Liquidation Preference shall be on parity with one another. In the event that upon liquidation or dissolution, the assets and funds of the Company are insufficient to permit the payment to holders of shares of Series A Preferred Stock and Series B Preferred Stock the full amount to which they shall be entitled, the holders of shares of Series A Preferred Stock and Series B Preferred Stock then outstanding and any class or series of stock ranking on liquidation on a parity with the Series A Preferred Stock and Series B Preferred

Stock shall share in any distribution of the remaining assets available for distribution in proportion to the respective amounts which would otherwise be payable in respect of the shares held by them upon such distribution if all amounts payable on or with respect to such shares were paid in full.

After the distributions described above have been paid in full, the remaining assets of the Company available for distribution shall be distributed pro-rata to the holders of the shares of Common Stock.

Note 8 - Intangible Assets

Intangible assets with finite lives are amortized on a straight-line basis over their estimated useful lives. Costs associated with awarded patents are amortized over the life of the patent. Intangible assets consist of the following at March 31, 2014:

Amortized Intangibles
Intellectual property	$	913,484
Accumulated amortization		(402,177	)

Intangible assets, net		511,307
Unamortized intangibles
Patents not in service		568,345

Total intangible assets, net	$	1,079,652

Note 9 - Stock Option Plan

Stock Option Plan Description

In 2003, the Company’s Board of Directors adopted the EGEN, Inc. 2003 Stock Option Plan (the Plan) that provides for the granting of stock options to employees, the Plan was amended in 2004 and 2009 to increase the number of reserved shares of common stock. The Plan reserved 3,000,000 shares of common stock. Options are granted at the discretion of the Board of Directors. Options granted under the Plan are nonqualified stock options (NSO’s), as designated by the Board. The options will be granted at an exercise price set by the Board at the time of grant but in no event shall the exercise price be less than the greater of (i) the par value of the stock on the date the option is granted or any time during which the option is exercisable and (ii) 25% of the fair market value of the stock as of the date of grant.

The term of the grants are generally for 10 years and vest over a period of time as determined on the date of the grant.

Stock-Based Compensation

The Company follows the provisions of FASB ASC 718, Compensation-Stock Compensation. FASB ASC 718 requires all share-based payments to employees, including grants of employee stock options, to be recognized as compensation expense in the financial statements based on their fair value at the grant date.

Stock-based compensation expense is included in general and administrative expenses for the three and nine months ended March 31, 2014.

Valuation and Expense Information

The Company recognizes compensation expense related to stock options on a straight-line basis over the vesting period of the awards, which is generally one to three years. The Company estimates the fair value of options on the date of grant using the Black-Scholes-Merton option pricing model with the following assumptions:

	Three and Nine Months Ended
	March 31, 2014			March 31, 2013
Expected volatility		15.92% - 18.18	%		15.92% - 18.18	%
Expected term (in years)		4.00 - 9.00			4.00 - 9.00
Risk-free interest rate		0.72% - 5.11	%		0.72% - 5.11	%
Expected dividend yield		0.00	%		0.00	%
Weighted average calculated value of options granted	$	1.93		$	1.93

Expected volatility was estimated using the historical volatility of an industry sector index. The Company estimates the expected term using historical option exercise data to determine the expected employee exercise behavior. The risk-free interest rate is the yield on a U.S. Treasury zero-coupon issue with a remaining term equal to the expected term of the option at the grant date.

The application of FASB ASC 718 resulted in a reduction of net earnings from total stock-based compensation expense, net of tax, of $0 and $3,949 for the three and nine months ended March 31, 2014, respectively and $3,164 and $87,693 for the three and nine months ended March 31, 2013, respectively. Stock-based compensation expense is included in general and administrative expense for the three and nine month periods ended March 31, 2014 and 2013. As of March 31, 2014, the Company had $539 of unrecognized compensation cost related to stock options, which is expected to be recognized over a weighted average period of two years.

Details of stock option activity for the nine months ended March 31, 2014 are as follows:

			Weighted
	Number of		Average
	Shares		Exercise Price
Outstanding at June 30, 2013		2,499,143	$	1.87
Granted		-		-
Exercised		-		-
Forfeited/cancelled		-		-
Outstanding at March 31, 2014		2,499,143	$	1.87

The following table summarizes information about stock options exercisable at March 31, 2014:

Weighted

Average

Range of

Number

Remaining

Weighted

Exercise

of Shares

Contractual

Average

Prices

Exercisable

Life in Years

Exercise Price

$0.50 - 5.00

2,490,559

5.19

1.87

Details of nonvested stock option activity for the three and nine months ended March 31, 2014 are as follows:

				Weighted
				Average
	Nonvested			Grant Date
	Options			Fair Value
Nonvested options at June 30, 2013		8,584		$	0.52
Granted		-			-
Vested		(7,251	)		0.54
Forfeited/cancelled		-			-
Nonvested options at December 31, 2013		1,333			0.40
Granted		-			-
Vested		-			-
Forfeited/cancelled		-			-
Nonvested options at March 31, 2014		1,333		$	0.40

Note 10 - Concentration of Licensing Rights

The Company is engaged primarily in developing nucleic acid-based therapeutics for cancer and other difficult to treat diseases using proprietary nanoparticle delivery systems. A significant portion of the Company’s development activity utilizes a third party license agreement. The agreement can be terminated by either party subject to certain restrictions in the agreement. The agreement contains future stipulations for certain royalty fees, maintenance fees, milestone payments, minimum royalties, and product liability insurance.

Note 11 - Restatement of Previously Issued Financial Statements

Subsequent to the original issuance of the Company’s annual financial statements as of and for the year ended June 30, 2013, the Company determined that certain legal expenses were previously expensed in the Company’s financial statements that met the requirements for capitalization. These transactions relate to expenses incurred in the defense of intellectual property and additional expenses on patents under development that have not yet been granted. The restatement of the Company’s financial statements as of and for the year ended June 30, 2013 reflects a correction to the treatment of these expenses.

The correction resulted in an increase in intellectual property of $12,795, an increase in patents not in service of $78,213, an increase in retained earnings of $91,008, and a decrease in legal expense and net loss of $155,628 as of and for the year ending June 30, 2013. The correction decreased beginning retained earnings by $77,415 as of June 30, 2012. There is no tax effect due to the net loss in each year as well as the valuation allowance for deferred taxes.

Note 12 - Subsequent Events

On June 20, 2014, Celsion Corporation, a Delaware corporation (“Celsion”), completed the acquisition of substantially all of the assets of the Company pursuant to the Asset Purchase Agreement dated as of June 6, 2014, by and between Celsion and the Company (the “Purchase Agreement”). CLSN Laboratories, Inc., a Delaware corporation and a wholly-owned subsidiary of Celsion (“CLSN Laboratories”), acquired all of the Company’s right, title and interest in and to substantially all of the assets of the Company, including cash and cash equivalents, patents, trademarks and other intellectual property rights, clinical data, certain contracts, licenses and permits, equipment, furniture, office equipment, furnishings, supplies and other tangible personal property. In addition, CLSN Laboratories assumed certain specified liabilities of the Company, including the liabilities arising out of the acquired contracts and other assets relating to periods after the closing date.

clsn20140819_8ka.htm

Exhibit 99.4

Unaudited Pro Forma Condensed Combined Financial Statements

Introduction to Unaudited Pro Forma Condensed Combined Financial Statements

On June 20, 2014, Celsion Corporation, a Delaware corporation (“Celsion”), completed the acquisition of substantially all of the assets of Egen, Inc., an Alabama corporation (“EGEN”), pursuant to the terms of the Asset Purchase Agreement dated as of June 6, 2014, by and between Celsion and EGEN (the “Asset Purchase Agreement”). The unaudited pro forma condensed combined financial statements presented herein are based on, and should be read in conjunction with:

•

Celsion’s historical financial statements and related notes thereto contained in its Annual Report on Form 10-K for the year ended December 31, 2013 filed with the SEC on March 13, 2014;

•

Celsion’s historical financial statements and related notes thereto contained in its Quarterly Report on Form 10-Q for the three months ended March 31, 2014 filed with the SEC on May 8, 2014; and

•

EGEN’s historical financial statements and related notes thereto for the year ended June 30, 2013 and the three and nine months ended March 31, 2014 and 2013 attached to this Form 8-K/A as Exhibits 99.1 and 99.3.

The following unaudited pro forma condensed combined financial statements for the year ended December 31, 2013 and for the three months ended March 31, 2014 have been prepared as if the acquisition occurred on January 1, 2013. The unaudited pro forma condensed combined balance sheet as of March 31, 2014 has been prepared as if the acquisition occurred on March 31, 2014. The historical financial information is adjusted in the unaudited pro forma condensed combined financial statements to give effect only to pro forma events that are (1) directly attributable to the acquisition; (2) factually supportable; and (3) with respect to the statement of operations, expected to have a continuing impact on the combined results of Celsion and EGEN. The unaudited pro forma condensed combined financial statements should be read in conjunction with the accompanying notes to the unaudited pro forma condensed combined financial statements presented below and with the separate historical financial statements of Celsion and EGEN.

The unaudited pro forma condensed combined financial statements are based on estimates and assumptions and are presented for illustrative purposes only and are not necessarily indicative of what the combined company’s results of operations actually would have been had the acquisition been completed as of the dates indicated. Additionally, the unaudited pro forma condensed combined financial statements are not necessarily indicative of the condensed combined financial position or results of operations in future periods or the results that actually would have been realized if the acquisition had been completed as of the dates indicated.

The unaudited pro forma adjustments related to the acquisition have been prepared using the acquisition method of accounting under existing U.S. generally accepted accounting principles with Celsion as the acquirer, which are subject to change and interpretation and are based on a preliminary purchase price allocation. The allocation of purchase price for acquisitions requires extensive use of accounting estimates, assumptions and judgments to allocate the purchase price to identifiable tangible and intangible assets acquired and liabilities assumed, based on their respective estimated fair values. The purchase price for EGEN was allocated to tangible and intangible assets acquired and liabilities assumed based on their estimated fair values at the acquisition date. Such valuations require significant estimates and assumptions including but not limited to: determining the timing and estimated costs to complete the in-process projects, projecting regulatory approvals, estimating future cash flows, and developing appropriate discount rates. Celsion believes the preliminarily estimated fair values assigned to the assets acquired and liabilities assumed are based on reasonable assumptions. The final purchase price allocation will be performed using estimated fair values as of the acquisition. The fair value estimates for the purchase price allocation may change if additional information becomes available. Differences between these purchase price allocations and any changes thereto could have a material impact on the unaudited pro forma condensed combined financial statements and Celsion’s future results of operations and financial position.

Pro forma adjustments are necessary to reflect the estimated purchase price and to adjust EGEN’s net tangible and intangible assets and liabilities to estimated fair values. The pro forma adjustments to EGEN’s assets and liabilities and allocation of purchase price are based on Celsion management’s preliminary estimates of the fair value of the assets to be acquired and liabilities to be assumed. Celsion made estimates of fair value of the EGEN assets acquired and liabilities assumed using reasonable assumptions based on historical experience, data from industry peers and information obtained from EGEN’s management.

CELSION CORPORATION

UNAUDITED PRO FORMA CONDENSED COMBINED BALANCE SHEETS

As of March 31, 2014

	Historical						Pro Forma Adjustments				Pro Forma
	Celsion			EGEN			(Note 6)				Combined

ASSETS
Current assets:
Cash and cash equivalents	$	4,606,267		$	462,281		$	1,961,950		(a), (b)	$	7,030,498
Investment securities available for sale, at fair value		47,255,487			686,107			-				47,941,594
Accounts receivable - cost reimbursable grants		-			28,409			(28,409	)	(c)		0
Accrued interest receivable on investment securities		339,791			-			-				339,791
Advances, deposits and other current assets		620,979			63,463			(63,463	)	(c)		620,979
Total current assets		52,822,524			1,240,260			1,870,078				55,932,862

Property and equipment, net		747,386			532,437			(497,755	)	(d)		782,068

Other assets:
Deposits, deferred fees and other assets		1,120,931			3,570			(3,570	)	(c)		1,120,931
Identifiable intangible assets, net		18,750			568,344			25,233,384		(e)		25,820,478
Goodwill		-			-			977,674		(f)		977,674
Total other assets		1,139,681			571,914			26,207,488				27,919,083

Total assets	$	54,709,591		$	2,344,611		$	27,579,811			$	84,634,013

LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Accounts payable	$	2,102,013		$	54,045		$	-			$	2,156,058
Accrued liabilities		2,205,838			112,830			-				2,318,668
Notes payable - current portion		439,218			-			-				439,218
Deferred revenue - current portion		500,000			-			-				500,000
Earnout milestones		-			-			13,877,659		(g)		13,877,659
Total current liabilities		5,247,069			166,875			13,877,659				19,291,603

Notes payable non-current portion		4,560,782			-			5,000,000		(b)		9,560,782
Deferred revenue - non-current portion		3,875,000			-			-				3,875,000
Other non-current liabilities		467,545			-			-				467,545
Total liabilities		14,150,396			166,875			18,877,659				33,194,930

Stockholders’ equity:
Series A preferred stock		-			12,750			(12,750	)	(h)		-
Series B preferred stock		-			20,000			(20,000	)	(h)		-
Common stock		173,477			140,842			(113,720	)	(h), (i)		200,599
Additional paid-in capital		217,535,506			39,282,302			(28,429,536	)	(h), (i), (j)		228,388,272
Accumulated other comprehensive loss		(27,897	)		(9,233	)		9,233		(h)		(27,897	)
Accumulated deficit		(174,744,150	)		(37,268,925	)		37,268,925		(h)		(174,744,150	)
Subtotal		42,936,936			2,177,736			8,702,152				53,816,824
Treasury stock, at cost		(2,377,741	)		-			-				(2,377,741	)
Total stockholders’ equity		40,559,195			2,177,736			8,702,152				51,439,083

Total liabilities and stockholders’ equity	$	54,709,591		$	2,344,611		$	27,579,811			$	84,634,013

CELSION CORPORATION

UNAUDITED PRO FORMA CONDENSED COMBINED STATEMENT OF OPERATIONS

For the three months ended March 31, 2014

	Historical						Pro Forma Adjustments				Pro Forma
	Celsion			EGEN			(Note 6)				Combined

Licensing revenue	$	125,000		$	-		$	-			$	125,000

Operating expenses:
Research and development		2,893,168			375,240			(18,394	)	(k)		3,250,014
General and administrative		2,433,857			370,443			(81,037	)	(l), (m)		2,723,263
Total operating expenses		5,327,025			745,683			(99,431	)			5,973,277

Loss from operations		(5,202,025	)		(745,683	)		99,431				(5,848,277	)

Other income (expense):
Gain from change in valuation of common stock warrant liability		3,026			-			-				3,026
Investment income, net		7,019			(6,570	)		-				449
Royalty income		-			2,665			-				2,665
Contract research income		-			118,142			-				118,142
Dividend and interest income		-			1,726			-				1,726
Interest expense		(230,713	)		-			(141,563	)	(n)		(372,276	)
Total other (expense) income, net		(220,668	)		115,963			(141,563	)			(246,268	)

Net loss	$	(5,422,693	)	$	(629,720	)	$	(42,132	)		$	(6,094,545	)

Net loss (income) per common share basic and diluted	$	(0.33	)				$	(0.02	)		$	(0.32	)

Weighted average shares outstanding basic and diluted		16,371,097						2,712,188		(o)		19,083,285

CELSION CORPORATION

UNAUDITED PRO FORMA CONDENSED COMBINED STATEMENT OF OPERATIONS

For the year ended December 31, 2013

	Historical						Pro Forma Adjustments				Pro Forma
	Celsion			EGEN			(Note 6)				Combined
Licensing and grant revenue
Licensing revenue	$	500,000		$	-		$	-			$	500,000
Grant revenue		-			127,628			-				127,628
Total licensing and grant revenue		500,000			127,628			-				627,628

Operating expenses:
Research and development		9,364,228			1,610,461			(73,874	)	(k)		10,900,815
General and administrative		6,547,257			1,615,367			(188,472	)	(l),(m)		7,974,152
Total operating expenses		15,911,485			3,225,828			(262,346	)			18,874,967

Loss from operations		(15,411,485	)		(3,098,200	)		262,346				(18,247,339	)

Other income (expense):
Gain (loss) from valuation of common stock warrant liability		8,090,636			-			-				8,090,636
Investment (loss) income, net		(12,744	)		(27,750	)		-				(40,494	)
Royalty income		-			19,695			-				19,695
Contract research income		-			270,113			-				270,113
Dividend and interest income		-			39,908			-				39,908
Interest expense		(915,235	)		-			(566,252	)	(n)		(1,481,487	)
Other (expense) income		(2,530	)		76			-				(2,454	)
Total other income (expense)		7,160,127			302,042			(566,252	)			6,895,917

Net loss		(8,251,358	)		(2,796,158	)		(303,906	)			(11,351,422	)

Non-cash deemed dividend from beneficial conversion feature on convertible preferred stock		(4,601,410	)		-			-				(4,601,410	)

Net loss attributable to common shareholders	$	(12,852,768	)	$	(2,796,158	)	$	(303,906	)		$	(15,952,832	)

Net loss per common share basic and diluted	$	(0.95	)				$	(0.11	)		$	(0.98	)

Weighted average common shares outstanding basic and diluted		13,540,566						2,712,188		(o)		16,252,754

CELSION CORPORATION

NOTES TO UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL STATEMENTS

NOTE 1 – DESCRIPTION OF TRANSACTION

On June 20, 2014, Celsion completed the previously announced acquisition of substantially all of the assets of EGEN pursuant to the Asset Purchase Agreement. CLSN Laboratories, Inc., a Delaware corporation and a wholly-owned subsidiary of Celsion (“CLSN Laboratories”), acquired all of EGEN’s right, title and interest in and to substantially all of the assets of EGEN, including cash and cash equivalents, patents, trademarks and other intellectual property rights, clinical data, inventory and raw materials, certain contracts, licenses and permits, machinery, mobile and immobile equipment, furniture, office equipment, furnishings, transportation equipment, supplies and other tangible personal property. In addition, CLSN Laboratories assumed certain specified liabilities of EGEN, including the liabilities arising out of the acquired contracts and other assets relating to periods after the closing date.

NOTE 2 – BASIS OF PRESENTATION

The unaudited pro forma condensed combined financial information was prepared using historical financial statements of Celsion and EGEN, which were prepared under United States Generally Accepted Accounting Principles (“GAAP”). The acquisition is accounted for under the purchase method of accounting in accordance with the Financial Accounting Standards Board Accounting Standards Codification (“ASC”) Topic 805, Business Combinations. Under the purchase method of accounting, the total purchase price, calculated as described in Note 5 to these unaudited pro forma condensed combined financial statements, is allocated to the net tangible and intangible assets acquired and liabilities assumed of EGEN based on their preliminarily estimated fair values. The allocation of purchase price for acquisitions requires extensive use of accounting estimates, assumptions and judgments to allocate the purchase price to the identifiable tangible and intangible assets acquired and liabilities assumed based on their respective estimated fair values. Celsion believes the preliminarily estimated fair values assigned to the assets acquired and liabilities assumed are based on reasonable assumptions. The fair value estimates for the purchase price allocation may change if additional information becomes available.

The unaudited pro forma condensed combined statement of operations is presented after giving effect to the acquisition of EGEN as if it occurred on January 1, 2013 for the year ended December 31, 2013 and three months ended March 31, 2014. The unaudited pro forma condensed combined balance sheet as of March 31, 2014 has been prepared as if the acquisition occurred on March 31, 2014. Certain reclassifications have been made to the historical financial statements of EGEN to conform to Celsion’s presentation.

NOTE 3 – HISTORICAL FINANCIAL INFORMATION

EGEN has a June 30 fiscal year end. The historical statement of operations of EGEN for the year ended December 31, 2013 was derived from EGEN’s financial statements for the year ended June 30, 2013 minus the unaudited results of operations for the six months ended December 31, 2012 plus the unaudited results of operations for the six months ended December 31, 2013, as shown in the schedule below. The historical statement of operations of EGEN for the six months ended December 31, 2012 was derived from EGEN’s unaudited financial statements for the nine months ended March 31, 2013, minus the unaudited results of operations for the three months ended March 31, 2013. The historical statement of operations of EGEN for the six months ended December 31, 2013 was derived from EGEN’s unaudited financial statements for the nine months ended March 31, 2014, minus the unaudited results of operations for the three months ended March 31, 2014.

	Statements of Income - Unaudited
	Year Ended June 30, 2013			Six Months Ended December 31, 2013			Six Months Ended December 31, 2012			Year Ended December 31, 2013
Revenue
Grant revenue	$	131,907		$	95,721		$	100,000		$	127,628
Total Revenue		131,907			95,721			100,000			127,628

Operating Expenses
Research and development expenses		1,355,949			829,441			574,929			1,610,461
General and administrative expenses		1,648,889			851,425			884,947			1,615,367
Total Operating Expenses		3,004,838			1,680,866			1,459,876			3,225,828

Operating Loss		(2,872,931	)		(1,585,145	)		(1,359,876	)		(3,098,200	)

Other Income (Expenses)
Gain (loss) on trading securities		6,044			(22,594	)		11,200			(27,750	)
Gain (loss) on asset disposal		1,935			-			1,935			-
Royalty income		24,537			1,946			6,788			19,695
Contract research income		12,450			257,663			-			270,113
Dividend and interest income		43,403			16,020			19,515			39,908
Other income (expenses), net		-			76			-			76
Total Other Income (Expenses)		88,369			253,111			39,438			302,042

Loss Before Income Taxes		(2,784,562	)		(1,332,034	)		(1,320,438	)		(2,796,158	)

Income Tax Provision (Benefit), net		-			-			-			-

Net Loss	$	(2,784,562	)	$	(1,332,034	)	$	(1,320,438	)	$	(2,796,158	)

NOTE 4 – ACCOUNTING POLICIES

As a result of the continuing review of EGEN’s accounting policies, Celsion may identify differences between the accounting policies of the two companies that, when conformed, could have a material impact on the combined financial statements. At this time, Celsion is not aware of any differences that would have a material impact on the combined financial statements. The unaudited pro forma condensed combined financial statements do not assume any differences in accounting policies.

NOTE 5 – PURCHASE PRICE

The total aggregate purchase price for the acquisition is up to $44.4 million, which includes potential future payments of up to $30.4 million contingent upon achievement of certain milestones set forth in the Purchase Agreement (the “Earnout Payments”). At the closing, Celsion paid approximately $3.0 million in cash after expense adjustment and issued 2,712,188 shares of its common stock to EGEN. The shares of Celsion’s common stock were issued in a private transaction exempt from registration under the Securities Act of 1933, as amended (the “Securities Act”), pursuant to Section 4(2) thereof. In addition, 670,070 shares of Celsion common stock were held back by Celsion at the closing and are issuable to EGEN on or after August 2, 2016 pending certain potential adjustments for expenses or in relation to EGEN’s indemnification obligations under the Purchase Agreement (Holdback Shares).

The Earnout Payments of up to $30.4 million will become payable, in cash, shares of Celsion common stock or a combination thereof, at Celsion’s option, as follows:

●

$12.4 million will become payable upon achieving certain specified development milestones relating to an EGEN-001 ovarian cancer study to be conducted by Celsion or its subsidiary;

●

up to $6.0 million will become payable upon achieving certain specified development milestones relating to the TheraSilence technology acquired from EGEN in the acquisition.

Celsion's obligations to make the Earnout Payments will terminate on the seventh anniversary of the closing date.

On June 9, 2014, Celsion borrowed an additional $5 million pursuant to a certain Loan and Security Agreement dated as of November 25, 2013, by and between Celsion and Hercules Technology Growth Capital, Inc. Celsion used the loan proceeds to pay the upfront cash payment at closing and certain transaction costs incurred by Celsion in connection with the acquisition.

The Purchase Agreement contains customary representations and warranties regarding EGEN and Celsion, covenants regarding the conduct of EGEN’s business prior to the consummation of the acquisition, indemnification provisions, termination and other provisions customary for transactions of this nature.

The acquisition of EGEN was accounted for under the acquisition method of accounting which required Celsion to perform an allocation of the purchase price to the assets acquired and liabilities assumed. The fair value of the consideration transferred for the acquisition has been prepared as if the acquisition occurred on March 31, 2014 and is approximately $27.8 million determined as follows:

Consideration Paid at Closing
Cash, net of cash acquired	$	3,038,000
Celsion common stock (2,712,188 shares valued at $3.48 which was the last closing price of our common stock at the time of closing the transaction on June 20, 2014)		9,438,000

Future Consideration
Holdback Shares (670,070 shares of Celsion common stock which were discounted by 38% to reflect the cost of the restriction)		1,441,000
Earnout Payments (at fair value*)		13,878,000

Total fair value of consideration	$	27,795,000

*The difference between the aggregate $30.4 million in future Earnout Payments and the $13.9 million included in the fair value of the acquisition consideration was based on the Celsion’s risk-adjusted assessment of each milestone and utilizing a discount rate based on the estimated time to achieve the milestone.

Under the acquisition method of accounting, the total purchase price is allocated to EGEN’s net tangible and intangible assets and liabilities based on their estimated fair values as of the acquisition date. The table below summarizes the preliminary estimated fair values of EGEN’s net tangible and intangible assets and liabilities on the acquisition date and has been prepared as if the acquisition occurred on March 31, 2014. The purchase price allocations are preliminary and subject to change as more detailed analyses are completed and additional information with respect to the fair values of the assets and liabilities acquired becomes available.

Cash		462,000
Investment securities		686,000
Property and equipment, net		35,000
In-process research and development		25,801,000
Goodwill		978,000

Total assets:		27,962,000

Accounts payable and accrued liabilities		(167,000	)

Net assets acquired	$	27,795,000

The preliminary purchase price exceeds the estimated fair value of the net assets acquired by approximately $1.0 million which was recorded as goodwill. Transaction costs incurred by EGEN are $73,000 during the three months ended June 30, 2014, and $174,000 during the year ended December 31, 2013.

Acquired In-Process Research and Development (IPR&D)

Acquired IPR&D consists of EGEN's drug technology platforms: TheraPlas^® and TheraSilence^®. The fair value of the IPR&D drug technology platforms was estimated to be $25.8 million as of the acquisition date using the Multi-Period Excess Earnings Method (MPEEM) which is a form of the income approach. Under the MPEEM, the fair value of an intangible asset is equal to the present value of the asset’s incremental after-tax cash flows (excess earnings) remaining after deducting the market rates of return on the estimated value of contributory assets (contributory charge) over its remaining useful life.

To calculate fair value of the IPR&D programs under the MPEEM, we used projected cash flows discounted at a rate considered appropriate given the significant inherent risks associated with drug development by development-stage companies. Cash flows were calculated based on estimated projections of revenues and expenses related to the IPR&D programs and then reduced by a contributory charge on requisite assets employed. Contributory assets included debt-free working capital, net fixed assets and assembled workforce. Rates of return on the contributory assets were based on rates used for comparable market participants. Cash flows were assumed to extend through a seven-year market exclusivity period. The resultant cash flows were then discounted to present value using a weighted-average cost of equity capital for companies with profiles substantially similar to that of Celsion, which we believe represents the rate that market participants would use to value the assets. The projected cash flows were based on significant assumptions, including the indication in which we will pursue development of IPR&D programs, the time and resources needed to complete the development and regulatory approval of IPR&D programs, estimates of revenue and operating profit related to the program considering its stage of development, the life of the potential commercialized product, market penetration and competition, and risks associated with achieving commercialization, including delay or failure to obtain regulatory approvals to conduct clinical studies, failure of clinical studies, delay or failure to obtain required market clearances, and intellectual property litigation.

As of the closing of the acquisition, the IPR&D is considered indefinite lived intangible assets and will not be amortized. IPR&D will be reviewed for possible impairment on an annual basis or more frequently if events are indicative of impairment.

NOTE 6 – UNAUDITED PRO FORMA ADJUSTMENTS

The unaudited pro forma condensed combined financial statements should be read in conjunction with the accompanying notes to the unaudited pro forma condensed combined financial statements presented below and with the separate historical financial statements of Celsion and EGEN.

Adjustments included in the column under the heading “Pro Forma Adjustments” represent the following:

Reflects cash payment to EGEN of $3,038,050 at Closing Date.

Reflects cash received and the corresponding notes payable in relation to Celsion’s additional $5,000,000 borrowing on June 9, 2014 from its loan facility. This additional $5,000,000 borrowing proceeds were used to make the cash payment to EGEN and other transaction costs incurred by Celsion in the transaction closing.

Reflects assets that were not acquired in acquisition.

Reflects fair value adjustment.

Reflects the portion of the purchase price allocated to in process research and development (“IPR&D” ) assets acquired from EGEN. The balance reflects estimated fair value of indefinite-life intangible assets on the Closing Date.

Reflects the estimated portion of the purchase price allocated to goodwill based on the estimated fair value of the total purchase price adjusted for intangible and other assets acquired and liabilities assumed at their respective fair values as of the balance sheet date.

Reflects the estimated fair value of the contingent earn-out payments due to EGEN for achieving certain specified development milestones as of March 31, 2014.

Reflects the cancellation of EGEN's historical equity and convertible preferred stock as part of the transaction.

Reflects purchase consideration of the issuance of 2,712,188 shares of Celsion common stock, par value $.01 per share, to EGEN on June 20, 2014 with a fair value of $9,438,414.

Reflects purchase consideration of the issuance of 670,070 shares of Celsion common stock to EGEN payable on August 2, 2016 with a fair value of $1,441,471.

Reflects the elimination of depreciation for intellectual property for the three months ended March 31, 2014 and for the year ended December 31, 2013.

Reflects the elimination of acquisition costs which were expensed for the three months ended March 31, 2014 and for the year ended December 31, 2013.

Reflects adjustments to depreciation expense as a result of recording property and equipment at fair value as of the acquisition date.

Reflects interest expense associated with the notes payable of $5,000,000 for the loan proceeds from June 9, 2014 (as discussed in note “b” above) as if the loan proceeds had been borrowed as if the transaction occurred on January 1, 2013.

Reflects purchase consideration of the issuance of 2,712,188 shares of Celsion common stock to EGEN on June 20, 2014 with a stock value of $9,438,414.