Alliqua, Inc. (Form: 10-K, Received: 03/24/2014 13:13:15)

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON D.C. 20549

FORM 10-K

ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the fiscal year ended: December 31, 2013

TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

COMMISSION FILE NUMBER: 001-36278

Alliqua, Inc.

(Exact name of Registrant as specified in its charter)

Florida		58-2349413
(State or other jurisdiction of incorporation)		(I.R.S. Employer Identification Number)

2150 Cabot Blvd. West
Langhorne , PA		19047
(Address of principal executive office)		(Zip Code)

Registrant’s telephone number, including area code: (215) 702-8550

Securities registered pursuant to Section 12(b) of the Exchange Act:

Title of each class		Name of each exchange on which registered
Common Stock, $0.001 par value		The NASDAQ Stock Market LLC

Securities registered pursuant to Section 12(g) of the Exchange Act: None

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes ¨ No þ

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. Yes ¨ No þ

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the Registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes þ No ¨

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Website, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files) . Yes þ No ¨

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K (§229.405 of this chapter) is not contained herein, and will not be contained, to the best of registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. ¨

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, non-accelerated filer or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer,” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer	¨	Accelerated filer	¨
Non-accelerated filer	¨	Smaller reporting company	þ
(Do not check if a smaller reporting company)

Indicate by check mark whether the registrant is a shell company (as defined by Rule 12b-2 of the Exchange Act). Yes ¨ No þ

The aggregate market value of the voting and non-voting common equity of the registrant held by non-affiliates, computed by reference to the closing sales price of such stock, as of June 28, 2013 was $18,146,801. (For purposes of determination of the aggregate market value, only directors, executive officers and 10% or greater shareholders have been deemed affiliates.)

The number of shares outstanding of the registrant’s common stock, par value $0.001 per share, as of March 20, 2014 was 12,501,525 shares.

DOCUMENTS INCORPORATED BY REFERENCE

Portions of the registrant’s Proxy Statement for the 2014 Annual Meeting of Shareholders, which is to be filed with the Securities and Exchange Commission no later than April 30, 2014 are incorporated by reference into Part III of this report.

ALLIQUA, INC.

TABLE OF CONTENTS

		Page

PART I

ITEM 1.	BUSINESS	3

ITEM 1A.	RISK FACTORS	14

ITEM 1B.	UNRESOLVED STAFF COMMENTS	24

ITEM 2.	PROPERTIES	24

ITEM 3.	LEGAL PROCEEDINGS	24

ITEM 4.	MINE SAFETY DISCLOSURES	24

PART II

ITEM 5.	MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES	24

ITEM 6.	SELECTED FINANCIAL DATA	25

ITEM 7.	MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS	26

ITEM 7A.	QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK	30

ITEM 8.	FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA	30

ITEM 9.	CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLSOURE	30

ITEM 9A.	CONTROL S AND PROCEDURES	30

ITEM 9B.	OTHER INFORMATION	31

PART III

ITEM 10.	DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE	31

ITEM 11.	EXECUTIVE COMPENSATION	31

ITEM 12.	SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS	31

ITEM 13.	CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE	31

ITEM 14.	PRINCIPAL ACCOUNTING FEES AND SERVICES	31

PART IV

ITEM 15.	EXHIBITS AND FINANCIAL STATEMENT SCHEDULES	31

	2

PART I

ITEM 1. BUSINESS

Forward-Looking Statements

This Report on Form 10-K contains “forward-looking statements,” which include information relating to future events, future financial performance, strategies, expectations, competitive environment and regulation. Words such as “may,” “should,” “could,” “would,” “predict,” “potential,” “continue,” “expect,” “anticipate,” “future,” “intend,” “plan,” “believe,” “estimate,” and similar expressions, as well as statements in future tense, identify forward-looking statements. Forward-looking statements should not be read as a guarantee of future performance or results and may not be accurate indications of when such performance or results will actually be achieved. Forward-looking statements are based on information we have when those statements are made or our management’s good faith belief as of that time with respect to future events, and are subject to risks and uncertainties that could cause actual performance or results to differ materially from those expressed in or suggested by the forward-looking statements. Important factors that could cause such differences include, but are not limited to:

the uncertainty regarding the adequacy of our liquidity to pursue our complete business objectives;

	·	inadequate capital;

	·	our plans to make significant additional outlays of working capital before we expect to generate significant revenues and the uncertainty regarding when we will begin to generate significant revenues, if we are able to do so;

loss or retirement of key executives;

adverse economic conditions and/or intense competition;

loss of a key customer or supplier;

entry of new competitors and products;

adverse federal, state and local government regulation;

technological obsolescence of our products;

technical problems with our research and products;

price increases for supplies and components; and

the inability to carry out research, development and commercialization plans.

For a discussion of these and other risks that relate to our business and investing in shares of our common stock, you should carefully review the risks and uncertainties described under the heading “Part I – Item 1A. Risk Factors” in this Report. The forward-looking statements contained in this Annual Report on Form 10-K are expressly qualified in their entirety by this cautionary statement. We do not undertake any obligation to publicly update any forward-looking statement to reflect events or circumstances after the date on which any such statement is made or to reflect the occurrence of unanticipated events.

Our Company

We are a Florida corporation that was originally formed in 1997 under the name Zeta Corporation. On April 17, 2003, we changed our name to Hepalife Technologies, Inc. and, on December 20, 2010, we changed our name to Alliqua, Inc. We operate through the following wholly-owned subsidiaries: AquaMed Technologies, Inc. (“AquaMed Technologies”), Alliqua Biomedical, Inc. (“Alliqua Biomedical”) and HepaLife Biosystems, Inc. (“HepaLife”).

Our principal executive offices are located at 2150 Cabot Boulevard West, Langhorne, Pennsylvania 19047. Our telephone number is 215-702-8550 and our website is located at http://www.alliqua.com .

	3

Description of Business

Products and Services

We are a provider of advanced wound care solutions. Through our hydrogel technology platform and licensed and proprietary products, we seek to create superior outcomes for patients, providers, and partners. Our core businesses include advanced wound care and contract manufacturing. We leverage our proprietary hydrogel and licensed technology to add value to our own products and those of our partners.

We have historically served as a contract manufacturer, supplying our gels to third parties who incorporate them into their own products. In July 2012, we began to market two proprietary products, SilverSeal® (“SilverSeal”), a hydrogel wound dressing with silver coated fibers, and Hydress® (“Hydress”), an over-the-counter hydrogel wound dressing. We supply these gels primarily to the wound care segment of the healthcare industry.

Our SilverSeal and Hydress dressings are each currently available in two sizes. They are used to provide and maintain a moist wound environment. The benefits of these products include reduced scarring and pain, greater speed of healing and increased absorption of exudate (fluid that filters from the circulatory system into lesions or areas of inflammation). SilverSeal dressings also provide an antimicrobial barrier. Silver based wound dressings are becoming increasingly prevalent in wound care due to the recent increase of antibiotic-resistant bacteria such as methicillin-resistant Staphylococcus aureus, commonly known as MRSA.

In July 2013, we announced the results from a post-marketing study to assess surgical wound outcomes in patients who have undergone foot and ankle surgery. In this study, our SilverSeal dressing was shown to have a lower incidence of incision complications, including infection, and a greater reduction in scar length compared to standard petroleum-based dressing. In this study, patients who had undergone ankle and foot (including forefoot, midfoot or hindfoot) surgery were randomized to receive either SilverSeal or a standard petroleum-based dressing. Patients were monitored for three months following surgery to assess the degree of scarring and the incidence of incision complications such as superficial or deep infections or wound rupture, along the surgical suture. Of the nine incision complications observed, eight occurred in patients using the petroleum-based dressing and only one in those using SilverSeal (p=0.03). The p-value is the percentage chance that the results of a statistical nature are due to random error. Length of post-surgical scarring was also reduced to a greater extent in patients using SilverSeal compared to those with a standard petroleum-based dressing. Additional studies may be necessary to further investigate those potentially favorable results.

In September 2013, we entered into a long-term agreement with Sorbion GmbH & Co. KG (“Sorbion”) to distribute the sorbion sachet S, sorbion sana and new products with hydrokinetic fibers as primary dressings. We have the exclusive rights to sell these products throughout all of the Americas. In September 2013, we also entered into an agreement with Carolon Company (“Carolon”) pursuant to which we purchased the distribution rights to the sorbion sachet and sana products from Carolon.

Intended for wound bed preparation, sorbion sachet S (a comprehensive approach to removing barriers to healing and stimulating the healing process), is indicated as a primary dressing for moderately to highly exudating wounds such as surgical wounds, venous leg ulcers and diabetic ulcers. It assists in the removal of slough (dead skin tissue) and toxins, locks in bacteria and reduces odor. Sorbion sachet S’s hydration response technology combines mechanically modified cellulose fibers with gelling agents; the close interaction of the two components allows for active regulation of the wound climate.

Sorbion sana is indicated as a primary wound dressing and provides another form of wound treatment. It maintains a wound climate which supports healing and granulation (the formation of new connective tissue and tiny blood vessels on the surface of a wound) by protecting tissue and offers a reduction in pain during dressing changes. Sorbion sana consists of an absorbent core with hydration response technology and a three-dimensional outer cover made of polyethylene. Selected materials and an optimized manufacturing process allow the avoidance of glues and adhesives, making the sorbion sana dressings less likely to cause an allergic reaction.

In connection with our contract manufacturing business we develop, manufacture and market high water content, electron beam cross-linked, aqueous polymer hydrogels, or gels, used for wound care, medical diagnostics, transdermal drug delivery and cosmetics. We believe that we are one of only two known manufacturers of high performance gels in the world. We specialize in custom gels by capitalizing on proprietary manufacturing technologies. Our products are manufactured using proprietary and non-proprietary mixing, coating and cross-linking technologies. Together, these technologies enable us to produce gels that can satisfy rigid tolerance specifications with respect to a wide range of physical characteristics (e.g., thickness, water content, adherence, absorption, moisture vapor transmission rate (a measure of the passage of water vapor through a substance) and release rate) while maintaining product integrity. Additionally, we have the manufacturing ability to offer broad choices in selection of liners onto which the gels are coated. Consequently, our customers are able to determine tolerances in moisture vapor transmission rate and active ingredient release rates while personalizing color and texture.

	4

Planned Products and Services

On November 14, 2013 we entered into a license, marketing and development agreement with Anthrogenesis Corporation, d/b/a Celgene Cellular Therapeutics (“CCT”), an affiliate of Celgene Corporation, pursuant to which CCT granted us an exclusive, royalty-bearing license in its intellectual property related to certain placental based products, including the wound care products Extracellular Matrix (“ECM”), a suite of advanced wound management products made from extracellular matrix derived from the human placenta and Biovance®, a collagen-based decellularized and dehydrated topical wound covering produced from human amniotic membrane for the management of non-infected partial- and full-thickness wounds. The license agreement permits us to develop and commercialize ECM and Biovance in the United States . The development and application of the intellectual property covered under the license agreement will be managed by a joint steering committee, composed ofmembers of us and CCT. Following the commencement of commercial sales of the licensed products, we will pay CCT annual license fees, designated amounts when certain milestone events occur and royalties on all sales of licensed products, with such amounts being variable and contingent on various factors.

On November 14, 2013, we also entered into a supply agreement with CCT, pursuant to which CCT will supply us with the entire requirement of Biovance for distribution and sale in the United States. We expect to commence selling the Biovance product in April 2014. The Supply Agreement also provides that we and CCT will enter into a supply agreement for ECMs, on substantially the same terms as the Supply Agreement, prior to the anticipated date on which all regulatory approvals or clearances are acquired for the commercial sale of ECMs.

Biovance is a wound healing product made from decellularized and dehydrated human amniotic membrane. It is commercially available under Section 361 of the Public Health Service Act, which allows “minimally manipulated” human cells, tissues, and cellular and tissue-based products (HCT/Ps) to be marketed in the United States (U.S.) without pre-market FDA approval (also called a ‘361 product). Biovance is derived from the placenta of a normal, full-term pregnancy, therefore it is natural human tissue that contains collagen, fibronectin, and other proteins and nutrients that are essential to promote wound healing. Additionally, no cells are contained in the finished product (Biovance is decellurized), which is different from other placenta-based wound care products, and these features can reduce irritation and inflammation that can hamper more rapid and complete wound closure. The extracelluar matrix composition of Biovance forms a collagen scaffold within the wound bed, which serves as a platform to attract the body’s own cells and growth factors required for proper wound closure. Biovance is intended for use as a biological tissue graft for the repair of non-infected damaged tissue. It is intended for application to open traumatic wounds, complex wounds such as burns, open surgical wounds, Moh’s procedure (microscopically controlled surgery for skin cancer), and chronic wounds such diabetic ulcers, venous and arterial ulcers, pressure, and other ulcers. Biovance may also be used for wounds with exposed tendon, muscle, bone or other vital structures.

	5

While Biovance is made from amniotic membrane, products that will come from CCT’s ECM platform are derived from whole placenta, which we believe will enable greater supply, greater ease of manufacture, a lower cost of goods, and most importantly, the ability to manufacture various product “forms”, which can be more versatile versus tissue-based (or ‘361) products. We expect to obtain approval of the ECM product line using the 510(k) medical device regulatory route in 2014, with the first of such wound care solutions entering the market in 2015. Under the 510(k) process, CCT will file with the FDA data demonstrating safety and efficacy of ECM, as well its similarity to devices already on the market. CCT’s proprietary manufacturing process for its ECM-based products results in a paste-like raw material that can be finished into sheets with various shapes, sizes, and thicknesses, a powder, or a flowable matrix configuration. These product forms can be clinically useful given the different types of wounds and different wound conditions (larger, deeper, and/or tunneling wounds). This next-generation line of placenta-based products is intended to address a broad range of wound types and topical wound conditions such as partial and full-thickness wounds, pressure ulcers, venous ulcers, diabetic ulcers, chronic vascular ulcers, tunneled wounds, surgical wounds, trauma and draining wounds.

ECM products are rich in collagen and elastin, and while they do not contain all of the components of amniotic membrane (little to no fibronectin or laminin), they still provide the scaffold and key nutrients to attract the body’s growth factors for proper wound healing.

Key attributes anticipated for the ECM products include:

• they can be used off the shelf, with little to no preparation;

• no special storage is required;

• there is potential for large sheets (coverage of large wounds);

• no specific product orientation is required for graft placement;

• no removal required, integrates into the wound; and

• they facilitate high quality healing, appropriate pigmentation and hair growth and limit burn injury progression and scarring.

We intend to continue to expand our existing product offerings largely through licensing of products and acquisitions. We believe that our management team will be able to successfully integrate and leverage acquired products, that it will be easier to sell a more comprehensive suite of wound care products, and that acquiring a product with established sales channels would help us market our existing products. In evaluating potential acquisition targets, we are looking for technology platforms which enhance our current products; have revenue associated with the technology where possible and have a strong value proposition in today’s health care climate. In addition to expanding our product offerings through licenses and acquisitions, we also intend to modify of our existing products through both improvements and the expansion of customer options (e.g. improvements to our liner and additional offerings in different sizes and shapes). Because our products are already approved by the U.S. Food and Drug Administration, we believe that these types of modifications can be made with minor regulatory delay. We believe that these improvements and additional options will enhance our reputation and potentially attract new customers.

Drug Delivery and HepaMate™

Our strategy is to primarily focus on building a portfolio of wound care products. We are, therefore, evaluating strategic alternatives for our drug delivery and HepaMate technologies.

We believe our hydrogels can be utilized as delivery mechanisms for both prescription and over-the-counter medications to be delivered through the skin into the blood stream, known as transdermal delivery, or to be delivered between the layers of the skin, known as intradermal delivery. Active ingredients can also be added to our gels for use in wound and burn dressings and to provide for the topical application of non-prescription drugs.

We have begun to develop a transdermal lidocaine patch to treat pain associated with past herpetic neuralgia, or PHN, a complication of shingles in which pain lasts after the shingles rash and blisters have disappeared. In 2013 we commissioned a preclinical study that concluded that our investigational lidocaine transdermal patch compares favorably to the Lidoderm® (Lidocaine patch 5%) patch that is currently on the market. The overall results indicate that our patch is able to deliver in the pig a slightly higher amount of lidocaine than Lidoderm and to reach maximum delivery within a comparable period. No skin irritation occurred with either the Alliqua transdermal patch or Lidoderm patch. The study concludes that further development could result in the creation of a commercial lidocaine patch that could be a generic version of the Lidoderm patch or provide better drug delivery resulting in a 505 (b)(2) approval by the U.S. Food and Drug Administration .

The primary objective of the study was to conduct a comparative pharmacokinetic (PK) analysis of lidocaine in our transdermal patch compared to Lidoderm in the pig. The non-GLP (good laboratory practices, a system of quality management controls) in vivo crossover study was designed to evaluate the delivery of lidocaine over 24 hours in our patch and Lidoderm with regard to feasible length of application.

The study found that our patch offers a higher peak plasma concentration (Cmax) of lidocaine than Lidoderm (4.96±1.16 ng/mL versus 3.03±1.92 ng/mL) and higher mean total area under the curve (AUCtotal) than the competing product 66.5 ng/mL-h versus 48.9 ng/mL-h)). The mean period of peak concentration (Tmax) was 8.7 hours for our patch versus 10.7 hours for Lidoderm.

	6

In addition, our patch was easier and cleaner to remove from the skin after application, with minimal or no patch impression (outline) remaining. The presence of adhesive in Lidoderm seemed to have a "peel-off effect" on the skin (similar to an adhesive bandage); in contrast, our hydrogel patch has self-adhering characteristics and is easily removed from the skin at the end of a patch application without residual skin markings.

Our HepaMate™ technology focuses on the development of a cell-based bioartificial liver system. Our strategy has evolved to become a provider of advanced wound care products. We do not intend to further develop this technology nor do we intend to allocate any new capital to this technology. In 2013 we engaged an investment bank to find a strategic partner for the technology; however this process has been unsuccessful.

Industry and Markets

According to a study by the medical market research firm Kalorama Information (“Wound Care Markets 2012”) the global market for wound care management products, which had revenues of approximately $16 billion in 2011, is expected to grow to $23 billion by 2016, which is a compound annual growth rate of 9.5% for 2011 to 2016. Growth in the worldwide wound care market will likely come from new therapies that result in decreasing healing times and subsequent cost savings and a growing focus on special populations such as diabetics and the obese. New emerging markets in countries such as China, Brazil, and India are also a major driving force behind the expected growth in the global wound care market.

We intend to target five specific markets within the wound care industry:

Diabetic Ulcers . According to the National Diabetes Clearinghouse (“National Diabetes Fact Sheet, 2011” available at www.cdc.gov ) there are over 25.8 million diabetics in the U.S., or more than 8.3% of the U.S. population. Almost 11 million people over the age of 65 are diabetic, which equates to almost 27% of all people in this age group. Furthermore, more than 60% of nontraumatic lower-limb amputations occur in people with diabetes. A study published by Wild, et. al. ( Diabetes Care , May 2004) estimates that the worldwide number of diabetics is projected to be 366 million people by the year 2030. Boulton, et. al. (“Neuropathic Diabetic Foot Ulcers,” New England Journal of Medicine , July 2004) reported that diabetic foot ulcers (DFUs) develop in approximately 15% of patients with diabetes and precede 84% of all diabetes-related lower leg amputations. We believe that our wound care products can aid in the healing of these diabetic foot ulcers, thereby lessening the need for amputation.

Pressure Ulcers . Dorner, et. al. (“The Role of Nutrition in Pressure Ulcer Prevention and Treatment,” The National Pressure Ulcer Advisory Panel , 2009) stated that according to The Joint Commission, more than 2.5 million patients in U.S. acute-care facilities suffer from pressure ulcers. Dorner, et. al. also stated that the prevalence of pressure ulcers in the U.S. is widespread in all settings, with estimates of 10% to 18% in acute care and 2.3% to 28% in long-term care. The study further noted that these pressure ulcers can reduce overall quality of life and may also contribute to premature mortality in some patients, therefore any intervention that may help to prevent or treat them once they occur is important to reduce the cost of pressure ulcer care and improve the quality of life for affected individuals. Park-Lee, et. al. (“Pressure Ulcers Among Nursing Home Residents: United States, 2004,” The National Center for Health Statistics Data Brief , No. 14, February 2009) reported that 35% of nursing home residents with stage 2 or higher pressure ulcers received special wound care by specially trained professionals. We believe that our wound care products can aid in the treatment of pressure sores and ulcers, thereby increasing quality of life and decreasing the amount of time spent in wound care facilities.

Venous Stasis Ulcers . These wounds are believed to occur due to improper functioning of venous valves, usually of the legs. According to the University of Washington Medical Center (available at www.uwmedicine.org/health-library/Pages/venous-stasis-ulcers.aspx ), the main risk of venous stasis ulcers is the spread of infection from a persistent wound. Failure to address the condition appropriately could ultimately result in limb loss. As these ulcers are typically small, they are often undertreated, which leads to larger ulcers which require more complex treatments. Brem, et. al. (“Protocol for the Successful Treatment of Venous Ulcers,” American Journal of Surgery , July 2004) reported in one study that up to 48% of venous ulcers had recurred by the fifth year after healing. These often chronic ulcers affect up to 2.5 million U.S. citizens annually. We believe that our wound care products can aid in the treatment of venous stasis ulcers and increase the quality of life for those affected.

	7

Post-Surgical Dressings . The study entitled “Number, Rate, and Standard Error of All Listed Surgical and Non-surgical Procedures for Discharges from Short-stay Hospitals, by Selected Procedure Categories: United States, 2009” (Centers for Disease Control and Prevention) reported that in 2009, an estimated 29 million surgical procedures were performed in the U.S. The New York Times (Sack, “Hospital Infection Problem Persists,” The New York Times , April 13, 2010) cited a report from the Agency for Healthcare Research and Quality in 2010 that the problem of hospital-acquired infections (“HAIs”) contributes to an estimated 100,000 deaths annually and concluded that the problem merited “urgent attention”. We believe that our wound care products can aid in the prevention of HAIs. In July 2013, we announced the results from a post-marketing study to assess surgical wound outcomes in patients who have undergone foot and ankle surgery. In this study, our SilverSeal dressing was shown to have a lower level of incision complications, including infection, and a greater reduction in scare length compared to standard petroleum-based dressings.

Burns . According to the American Burn Association (“Burn Incidence and Treatment in the United States: 2013 Fact Sheet,” available at www.ameriburn.org/resources_factsheet.php ), an estimated 450,000 people with burn injuries receive medical treatment on an annual basis. If the burn is second degree or worse, medical attention may be required to reduce the risk of infection, dehydration and other potentially serious consequences. If the burn does result in hospitalization, we believe that our wound care products will benefit the healing process for the patient.

Sales and Marketing

We continue to focus on sales and marketing efforts in the U.S. In 2013, we restructured our senior management team with the goal of maximizing the potential for success in achieving our sales and marketing goals. In addition to appointing a new chief executive officer and chief financial officer, we have also hired a number of senior sales and marketing executives. We believe these individuals have significant experience in our industry, selling products similar to ours. In addition, we have hired several other professionals with industry marketing experience. We expect to continue to attend trade shows and seek other avenues to market our products.

During 2013, we also established an independent network of agents to sell our wound care products as well as an extensive network of distributors to supply our products. To enhance our sales efforts, we intend to hire approximately 20 direct sales agents in 2014, who have a background in the wound care industry.

We have also retained certain consultants and an outside sales organization to educate medical professionals about the benefits of these dressings. These individuals will visit physician offices, hospitals, home health care facilities, nursing homes and medical facilities to perform in-service presentations in order to educate medical personnel about the attributes of our products. We have also assembled a Medical Advisory Board to help us target improvements and new applications for our products and assist in our marketing efforts.

Below is a discussion of our anticipated marketing efforts:

Advanced Wound Care Dressings . We have begun to market our own branded line of advanced wound care hydrogel products, and more recently the product portfolio of our partner, Sorbion. In 2014, we intend to start the marketing of the biologics portfolio licensed from CCT. These marketing efforts include, but are not limited to: an independent selling organization; hiring of direct sales agents, conferences and educational events. We believe that the markets for our wound healing products will continue to expand due to the growing recognition by professionals and consumers of these technologies.

Contract Manufacturing . We sell our hydrogel technologies on a contract manufacturing basis for use in a variety of other applications, including medical devices and cosmetics. We have identified and targeted manufacturers of high quality medical devices (such as monitoring electrodes and devices and defibrillator pads) as a core segment of our future revenue streams. In addition, h ydrogel patches and hydrogel products have been used by some of the leading cosmetic companies in the U.S. These products include over-the-counter skin care preparation and other products for cosmetic use. On a regular basis, we receive product inquiries from cosmetic companies looking for hydrogel solutions. We believe that our products will be considered as replacements for existing adhesive and gels due to the quality and increased acceptance of our products in the marketplace.

	8

Customers

During 2013 and 2012 our sales were comprised primarily of contract manufacturing sales. We are dependent on a small number of customers that account for the vast majority of our contract manufacturing revenue. For the fiscal year ended December 31, 2013, two major customers accounted for approximately 67% of our revenue, with each customer individually accounting for 51% and 16%, respectively. These customers accounted for approximately 76% of our revenue for the fiscal year ended December 31, 2012, with each customer individually accounting for 60% and 16%, respectively. These customers are both medical device manufacturers. We expect that as revenues from the sales of our proprietary wound dressings increase, this customer concentration will continue to abate in 2014.

Hydrogel Technology and Manufacturing

Hydrogels are manufactured by introducing a hydrophilic polymer, which is a polymer that has a tendency to mix with or dissolve in water, into water to create a feed mix. The feed mix is then coated onto a liner and exposed to radiation. The polymers we use, when exposed to radiation, cross link faster than they degrade, creating a matrix that gives the gels a solid form. Active ingredients such as prescription or over-the-counter medication, skin care or wound-healing ingredients or other materials can be added before or after cross-linking. Materials that do not survive the irradiation process, or are modified by such process, are added after the cross-linking process is completed. Once the products have been mixed and cross-linked, they form sheets that can either be delivered directly to customers or first cut and shaped according to customer or our specifications, as appropriate. We believe that many of the processes described above are proprietary to us and provide us with competitive advantages, including our production of a high quality product and our increased ability to customize products for customers.

Proprietary Hydrogel Technologies

Proprietary Mixing. We believe that we are able to manufacture hydrogel feed mixes with far greater homogeneity than those of our competitors. This manufacturing advantage is critical, especially as it relates to dosages of active ingredients. In addition, our proprietary mixing technology allows for the incorporation of sensitive materials that may degrade if subjected to other types of mixing.

Proprietary Coating. Our proprietary coating technology enables us to properly coat the gels even though the gels are extremely thick and resistant to flow. We have achieved coating tolerances that have allowed us to coat materials as thin as 0.005 of an inch with a margin for error of typically less than 5%. Thickness controls are critical with respect to the performance of many of the end products utilizing our hydrogels, including medical electrodes, transdermal delivery patches and cosmetic patches. We have also developed a coating methodology that minimizes imperfections such as wrinkling in the end product by significantly reducing line tension. We believe that our proprietary know-how allows us to manufacture high quality, consistent products which meet the standards of our customers.

Proprietary Cross-Linking Technology. We cross-link our hydrogels using an electron beam accelerator. Such linking is achieved by introducing a high energy field, created by accelerated electrons, which causes the release of hydrogen atoms and causes carbon molecule covalent bonding. The creation of longer chains of the polymer in the gel increases its molecular integrity, giving the gel characteristics that make it useful in a variety of products.

Our electron-beam cross-linking process is one of three types of cross-linking, that we are aware of, used in the industry. The other types used are ultra-violent cross-linking and chemical cross-linking. We believe that the benefits of electron beam cross-linking include:

allowing for precise control of the amount of polymer cross-linking;

obviating the need for chemical cross-linking agents which may complicate or interfere with other additives or active ingredients; and

providing the ability to manufacture high quality hydrogels on a consistent basis.

The cross-linking of hydrogels can be further modified by varying the percent of polymer cross-linking and the way in which the high energy field is delivered. There are three variables in the use of an electron beam accelerator for cross-linking of hydrogels:

time of exposure of the target material to the electron stream;

voltage (electrical potential); and

	9

amperage (strength of the electrical current).

We believe that our proprietary methods of managing these three variables make it possible to produce high quality gels that can match a wide range of customer specifications.

We own and operate a Radiation Dynamics, Inc. Dynamitron IEA 1500-40 Industrial Electron Accelerator, or RDI Accelerator. The RDI Accelerator has been customized to handle the cross-linking of the type of materials we use, but can also be used for several other potential uses such as coloring gemstones and treating wire, cable and tubing. The replacement cost of the RDI Accelerator and processing equipment is estimated to be in excess of $7 million. The delivery and installation process is time-consuming, with replacement estimated to take 2.5 to 3 years. We estimate that our equipment has a useful life of approximately 20 years and provides annual production capacity in excess of 6,000 hours. We believe that its current utilization is significantly less than capacity.

Using our RDI Accelerator, we both cross-link materials for own products and perform contract irradiation services related to modifying certain materials for third parties. These third party contract activities account for less than 10% of our revenue. Products processed using these irradiation services include catheter tubing, sheet material and gemstones. These services are performed on an hourly basis, require minimal labor, and typically do not require us to supply any materials.

Competition

We believe that our proprietary competitive manufacturing advantages, along with the high barrier to entry, including the substantial cost of acquiring an electron beam as compared to other cross-linking devices, the cost and extended time required for installing this beam, and current minimal level of competition for high performance gels, affords us the opportunity to be a leader in the applications that require tight tolerances and/or incorporate active ingredients.

Our main competitor in the high performance gel industry is Covidien plc. We believe that we are able to compete effectively with Covidien plc, primarily due to our proprietary manufacturing methods. In addition, our smaller size, as compared to Covidien plc, allows us to provide greater individualized service to our customers and make decisions as a company more quickly and efficiently. However, we believe that, due to its size, Covidien plc may have significant advantages over us. Covidien plc has its own distribution networks for its products, including its hydrogel products, which, we believe, gives it an advantage over us in reaching potential customers. In addition, Covidien plc is vertically-integrated, which may allow it to maximize efficiencies that we cannot achieve with our third-party shippers and distributors. Finally, because of its significantly greater resources, Covidien plc may be able to focus on research and development of hydrogel technology more than we are able to. In general, we believe that Covidien plc has, and will continue to have, substantially greater financial, technological, research and development, regulatory and clinical, manufacturing, marketing and sales, distribution and personnel resources than we do.

In the general hydrogel market, there are other companies producing hydrogel products that are larger than us, with greater knowledge and resources than we have. We believe that we are competitive on the basis of our low cost and high quality, as well as the other factors described above. There are manufacturers in Asia who offer low-cost solutions like ours, however we believe that the quality of their product is inferior to ours. For new market entrants, we believe that the barrier to entry is both timely and costly, and it could take two years or more to successfully complete the build-out necessary to produce high performance hydrogel like ours.

In addition, while we believe that our hydrogel products have many applications, there are limitations on our hydrogel products. For example, our hydrogels are not designed to remain moist for extended periods of time once removed from their packaging; therefore, our hydrogels may not be appropriate for products that require a gel to remain moist. Furthermore, our hydrogels may not be cost-efficient replacements for adhesives that are not used as method of drug delivery because regular adhesives are less expensive than our hydrogels.

There are several established silver-based wound dressings and other products which are already in the marketplace that compete with SilverSeal. These include Acticoat (sold by Smith & Nephew), SeaSorb (sold by Coloplast), and Actisorb (sold by Systagenix). We believe that our low cost of sales will enable us to capture market share from our competitors. However, our ability to establish sales in a market with many larger manufacturers may be difficult. We continue to recruit proven veterans of the medical device industry to leverage our product offerings into the most beneficial distribution channels. Our competitors may still have greater resources to support their products and may not allow us to take any market share from them.

The sorbion products compete in the exudate management area of advanced wound care. The competitors in this space are the foam and alginate based products as well as the “superabsorbent” category of products. The market leaders in the foam and alginate categories are Smith and Nephew and Molnlycke. These companies have large market shares with their products making it difficult to compete. In the superabsorbent area, Medline and DermaSciences compete most directly with sorbion products. The proprietary sorbion (Hydration Response Technology), offers significantly better absorption and retention properties than the foam and traditional alginates providing differentiation against these competitors. With regard to the “superabsorbent” dressings, sorbion has demonstrated higher absorption capacity in studies, as well as retention of bacteria and harmful wound drainage components that the others have not matched. Medline with their large distribution capability and low price strategy makes them a challenging competitor. We will rely on product differentiation and data to compete.

Leading competitors in the tissue based wound care area that will compete with our Biovance and ECM products include companies such as Smith and Nephew, MiMedx Group,LLC, Organogenesis and Osiris. This market is estimated to be $600 million and growing at approximately 10% (“MedMarket Diligence, March 2013”). As the tissue based market expands, we believe that our partnership with Celgene Cellular Therapeutics for placenta derived treatments will help the market grow overall. We also believe that human derived tissue based products such as ours can compete favorably versus animal derived products. Additionally, many competitors in this space do not offer a range of wound care solutions to the clinician for when the tissue based products are not needed or to prepare the wound for the graft products. Smith and Nephew has this advantage and we intend to be able to do this as well with our suite of advanced wound care technologies.

	10

Sources and Availability of Raw Materials; Principal Suppliers

The Dow Chemical Company and the BASF Corporation are the principal manufacturers of the two polymers, polyethylene oxide and polyvinylpyrrolidone, respectively, that we primarily use in the manufacture of our hydrogels. We believe that, due to the size and scale of production of our suppliers, there should be adequate supply of these raw materials from our manufacturers. Although we have not experienced significant production delays attributable to supply changes, we believe that developing alternative sources of supply for the polymers used to make our current hydrogels would be difficult over a short period of time. Because we have no direct control over our third-party suppliers, interruptions or delays in the products and services provided by these third parties may be difficult to remedy in a timely fashion. In addition, if such suppliers are unable or unwilling to deliver the necessary raw materials or products, we may be unable to redesign or adapt our technology to work without such raw materials or products or find alternative suppliers or manufacturers. In such events, we could experience interruptions, delays, increased costs or quality control problems.

Patents, Proprietary Rights and Trademarks

Our policy is to file patent applications to protect technology, inventions and improvements that are important to the development of our business. We also rely on trade secret protection for our confidential and proprietary information.

Our subsidiary, Alliqua Biomedical, Inc., has an exclusive worldwide license to use Noble Fiber Technologies, LLC’s silver coated fibers marketed under the trademarks X-Static® and SilverSeal® in Alliqua Biomedical, Inc.’s manufacture, sale, use and distribution of Hydrogel Wound Dressing identified in 510(k) K040019 and Hydrocolloid Wound Dressing identified in 510(k) K033900. 510(k) is a premarket notification form that device manufacturers are required to file in order to notify the U.S. Food and Drug Administration of their intent to market a medical device at least 90 days in advance. We have an exclusive license until July 2021 with the ability to renew for another 10 years.

Our subsidiary, HepaLife Biosystems, Inc. has an exclusive license agreement with the U.S. Department of Agriculture, Agricultural Research Service for existing and future patents related to the PICM-19 hepatocyte cell lines. Under this license agreement, we are responsible for annual license maintenance fees commencing in 2010 for the term of the license, which is until the expiration of the last to expire licensed patents unless terminated earlier. The license agreement also requires certain milestone payments, if and when milestones are reached, as well as royalties on net sales of resulting licensed products, if any.

We are party to a long-term agreement with Sorbion GmbH & Co. KG (“Sorbion”) to distribute the Sorbion sachet S, Sorbion sana and new products with hydrokinetic fibers as primary wound dressings. We have the exclusive rights to sell these Sorbion products throughout all of the Americas.

The initial term of the Sorbion agreement ends on December 31, 2018, unless sooner terminated pursuant to the termination rights under the agreement, and will be extended for additional year terms until December 31, 2023, so long as we and Sorbion agree in September as to the minimum annual purchase amount for the calendar year that ends four years from the calendar year of such September, such that, for example, in September 2014, we and Sorbion must agree to the minimum annual purchase amount for the 2018 calendar year so that the Sorbion agreement is extended until December 31, 2019. We may terminate the agreement upon six months prior written notice to Sorbion. Sorbion may terminate the agreement for good cause, which shall include our application for insolvency proceedings, a change of control of us that may disrupt our relationship with Sorbion, our failure to cure a material breach of the agreement within 60 days or our challenge of Sorbion’s intellectual property.

In order to maintain our exclusivity, we must purchase the following minimum amounts, in Euros, under the Sorbion agreement for the indicated calendar year:

Calendar Year		Minimum Annual Purchase Amount
2014		500,000 Euros
2015		1,000,000 Euros
2016		2,500,000 Euros
2017		4,000,000 Euros

Since we must purchase the minimum amounts in Euros, the equivalent U.S dollar expenditure will be subject to fluctuations in foreign currency. The minimum annual purchase amounts in US. Dollars for each calendar year in the period from 2014-2017, based on the exchange rate as of December 31, 2013, are $689,000, $1,378,000, $3,444,000, and $5,510,000, respectively.

We may cure a failure to purchase products in amounts that meet or exceed the minimum annual purchase amount for a calendar year by paying Sorbion in cash an amount equal to the minimum annual purchase amount for such calendar year less the amount we paid to Sorbion for the products purchased for such calendar year. If we do not cure such failure for a calendar year, Sorbion may terminate our exclusivity and grant us non-exclusive rights. If we do not cure such failure for two calendar years, Sorbion may terminate the agreement. We will not be required to meet the minimal annual purchase amount if Sorbion fails to supply us with products in accordance with the Sorbion agreement. Sorbion may also terminate our exclusivity if we do not cure a material breach of the agreement within 30 days.

Pursuant to the Sorbion agreement, we have the right to use the trademarks related to the products for sale of the products in the applicable territory.

We are also party to a license, marketing and development agreement with CCT, pursuant to which we hold an exclusive, royalty-bearing license in CCT’s intellectual property related to certain placental based products, including ECM and Biovance, to develop and commercialize these products in the United States. The development and application of the intellectual property covered under the license agreement will be managed by a joint steering committee, composed of members of us and CCT. Following the commencement of commercial sales of the licensed products, we will pay CCT annual license fees, designated amounts when certain milestone events occur and royalties on all sales of licensed products, with such amounts being variable and contingent on various factors.

The initial term of the license agreement ends on November 14, 2023, unless sooner terminated pursuant to the termination rights under the license agreement, and will extend for additional two-year terms unless either party gives written notice within a specified period prior to the end of a term. The license agreement may be terminated (i) by CCT if we or any of our affiliates challenges the validity, enforceability or scope of certain enumerated CCT patents anywhere in the world; (ii) by either party if there is a final decree that a licensed product infringed on the intellectual property of a third party; (iii) by either party for breach and failure to cure such breach of the license agreement; or (iv) by either party if the other party is the subject of insolvency proceedings, either voluntary or involuntary. In addition, the license agreement is terminable on a product-by-product basis, and not with respect to the entire license agreement (i) by CCT in the second year of the license agreement, and by either CCT or us in the third year of the license agreement and beyond, if we fail to meet certain sales thresholds and (ii) by either party upon written notice if outside legal counsel recommends discontinuance of commercialization of a product because of significant safety, legal, or economic risk as a result of a claim, demand or action or as a result of a change in the interpretation of law by a governmental or regulatory authority.

Government Regulation

Product Regulation. Under the Federal Food, Drug and Cosmetic Act, medical devices are classified by the U.S. Food and Drug Administration into one of three classes—Class I, Class II or Class III—depending on the degree of risk associated with each medical device and the extent of control needed to ensure safety and effectiveness. While some applications of hydrogels fall under the jurisdiction of the U.S. Food and Drug Administration, hydrogels are generally classified as Class I exempt devices and the majority of the hydrogel products that we manufacture are thereby exempt from the U.S. Food and Drug Administration filing of any regulatory submissions and/or pre-market notification requirements. To the extent that any U.S. Food and Drug Administration regulatory submissions are required, we will be required to file these submissions and maintain all appropriate documentation. With respect to registering the manufacturing facility with the U.S. Food and Drug Administration under the Code of Federal Regulations, 21 CFR 820.1, Scope: Part A, it is stated that the regulation does not apply to manufacturers of component parts of finished devices. Currently, hydrogels are sold as component parts to various medical device/cosmetic manufacturers.

We believe that a number of products that we are developing will be classified as either Class I or Class II medical devices. Class I medical devices are subject to the U.S. Food and Drug Administration’s general controls, which include compliance with the applicable portions of the U.S. Food and Drug Administration’s Quality System Regulation, facility registration and product listing, reporting of adverse medical events, and appropriate, truthful and non-misleading labeling, advertising, and promotional materials. Class II devices are subject to the U.S. Food and Drug Administration’s general controls and may also be subject to other special controls as deemed necessary by the U.S. Food and Drug Administration to ensure the safety and effectiveness of the device. Most Class II devices require pre-market clearance by the U.S. Food and Drug Administration through the 510(k) pre-market notification process. When a 510(k) is required, the manufacturer must submit to the U.S. Food and Drug Administration a pre-market notification demonstrating that the device is “substantially equivalent” to either a device that was legally marketed prior to May 28, 1976, the date upon which the Medical Device Amendments of 1976 were enacted, or to another commercially available, similar device which was subsequently cleared through the 510(k) process. By regulation, the U.S. Food and Drug Administration is required to clear a 510(k) within 90 days of submission of the application. As a practical matter, clearance often takes longer.

	11

The U.S. Food and Drug Administration has broad post-market regulatory and enforcement powers with respect to medical devices, similar to those for pharmaceutical products. Failure to comply with the applicable U.S. medical device regulatory requirements could result in, among other things, warning letters, fines, injunctions, consent decrees, civil penalties, repairs, replacements, refunds, recalls or seizures of products, total or partial suspension of production, the U.S. Food and Drug Administration’s refusal to grant future pre-market clearances or approvals, withdrawals or suspensions of current product applications, and criminal prosecution.

If there are any modifications to an approved drug, such as our Hydrogel Wound Dressing identified in 510(k) K040019 and Hydrocolloid Wound Dressing identified in 510(k) K033900, including changes in indication, manufacturing process or labeling or a change in a manufacturing facility, an applicant must notify the U.S. Food and Drug Administration, and in many cases, approval for such changes must be submitted to the U.S. Food and Drug Administration. Additionally, the U.S. Food and Drug Administration regulates post-approval promotional labeling and advertising activities to assure that such activities are being conducted in conformity with statutory and regulatory requirements. These regulations include standards or restrictions for direct-to-consumer advertising, industry-sponsored scientific and educational activities, promotional activities and off-label promotion. While physicians may prescribe for off-label uses, manufacturers may only promote for the approved indications and in accordance with the provisions of the approved label. The U.S. Food and Drug Administration has very broad enforcement authority under the Federal Food, Drug and Cosmetic Act, and failure to abide by these regulations can result in enforcement action, including the issuance of warning letters directing entities to correct deviations from U.S. Food and Drug Administration regulations and civil and criminal investigations and prosecutions. These activities could have a material adverse effect on our business, results of operations, financial condition and cash flows.

Regulation of Human Cells, Tissues, and Cellular and Tissue-based Products. The U.S. Food and Drug Administration regulates the manufacture of human cells, tissues, and cellular and tissue-based products (“HCT/Ps”) under the authority of section 361 of the Public Health Service Act (“PHS Act”) and exercises this authority pursuant to the regulations set forth in Part 1271 in Title 21 of the Code of Federal Regulations. An HCT/P that meets the Part 1271 criteria for regulation solely under section 361 of the PHS Act and the regulations in Part 1271 is called a “361 HCT/P,” and may be marketed without the premarket approval or clearance of the U.S. Food and Drug Administration. To be a 361 HCT/P, the product must meet all four of the following criteria: (1) it is minimally manipulated, (2) it is intended for homologous use as determined by labeling, advertising, or other indications of the manufacturer’s objective intent, (3) its manufacture does not involve combination with another article, except for water, crystalloids, or a sterilizing, preserving, or storage agent, (4) it does not have a systemic effect and is not dependent upon the metabolic activity of living cells for its primary function, or if so, it is intended for autologous use, allogeneic use in close relatives, or for reproductive use. 21 C.F.R. § 1271.10(a). For structural tissue, the U.S. Food and Drug Administration defines “minimal manipulation” as “processing that does not alter the original relevant characteristics of the tissue relating to the tissue’s utility for reconstruction, repair, or replacement.” 21 C.F.R. § 1271.3(f)(1). The U.S. Food and Drug Administration permits manufacturers to proceed to market based upon a self-determination that a product qualifies as a 361 HCT/P. As a wound covering product made from decellularized and dehydrated human amniotic membrane, we believe that Biovance meets the regulatory requirements to be marketed in the United States as a 361 HCT/P without being subject to any premarket review requirements.

New Drug Application (“NDA”). We have no current plans to file an NDA, however, it should be noted that FDA approval is required before any “new drug” may be marketed, including new formulations, strengths, dosage forms, and generic versions, of previously approved drugs. Generally, the following two types of applications are used to obtain FDA approval of a “new drug.” For a drug product containing an active ingredient not previously approved by the FDA, a prospective manufacturer must submit a complete application containing the results of clinical studies supporting the drug product’s safety and efficacy. A shorter form of an NDA under the FDA’s 505(b)(2) regulatory pathway is also required for a drug with a previously approved active ingredient if the drug will be modified in some way, e.g. , used to treat an indication for which the drug was not previously approved or if the dosage form, strength or method of delivery is changed. The process required by the FDA before a pharmaceutical product may be approved for marketing in the U.S. generally involves the steps listed below, which could take from approximately three to more than ten years to complete.

Laboratory and clinical tests;

Submission of an Investigational New Drug (“IND”) application, which must become effective before clinical studies may begin;

Adequate and well-controlled human clinical studies to establish the safety and efficacy of the proposed product for its intended use;

Submission of an NDA containing the results of the preclinical tests and clinical studies establishing the safety and efficacy of the proposed product for its intended use, as well as extensive data addressing such matters such as manufacturing and quality assurance;

Scale-up to commercial manufacturing; and

FDA approval of an NDA.

As noted above, the submission of an NDA is no guarantee that the FDA will find it complete and accept it for filing. The FDA reviews all NDAs submitted before it accepts them for filing. It may refuse to file the application and instead request additional information, in which case, the application is delayed and must be resubmitted with the supplemental information. After the application is deemed filed by the FDA, FDA staff will review an NDA to determine, among other things, whether a product is safe and efficacious for its intended use.

If, after reviewing the NDA, the FDA determines that the application cannot be approved in its current form, the FDA sends the NDA applicant a Complete Response Letter identifying all outstanding deficiencies that preclude final approval. The FDA then halts its review until the applicant resubmits the NDA with new information designed to address the deficiencies. An applicant receiving a Complete Response Letter may resubmit the application with data and information addressing the FDA’s concerns or requirements, withdraw the application without prejudice to a subsequent submission of a related application or request a hearing on whether there are grounds for denying approval of the application. If a product receives regulatory approval, the approval may be significantly limited to specific diseases and dosages or the indications for use may otherwise be limited, among other limits, which could restrict the commercial value of the product. In addition, the FDA may require an applicant to conduct Phase 4 testing, which involves clinical trials designed to further assess a drug’s safety and effectiveness after NDA approval, and may require complex and costly surveillance programs to monitor the safety of approved products which have been commercialized. Once issued, the FDA may withdraw product approval if ongoing regulatory requirements are not met or if safety or efficacy questions are raised after the product reaches the market. The agency may also impose requirements that the NDA holder conduct new studies, make labeling changes, implement Risk Evaluation and Mitigation Strategies, and take other corrective measures.

	12

Quality Assurance Requirements . The U.S. Food and Drug Administration enforces regulations to ensure that the methods used in, and the facilities and controls used for, the manufacture, processing, packing and holding of drugs and medical devices conform with current good manufacturing practices. The current good manufacturing practices regulations the U.S. Food and Drug Administration enforces are comprehensive and cover all aspects of manufacturing operations, from receipt of raw materials to finished product distribution, insofar as they bear upon whether drugs meet all the identity, strength, quality and purity characteristics required of them. The current good manufacturing practices regulations for devices, called the Quality System Regulation, are also comprehensive and cover all aspects of device manufacture, from pre-production design validation to installation and servicing, insofar as they bear upon the safe and effective use of the device and whether the device otherwise meets the requirements of the Federal Food, Drug and Cosmetic Act. To assure compliance requires a continuous commitment of time, money and effort in all operational areas.

The U.S. Food and Drug Administration conducts pre-approval inspections of facilities engaged in the development, manufacture, processing, packing, testing and holding of the drugs subject to new drug applications or NDAs and abbreviated new drug applications, or ANDAs. If the U.S. Food and Drug Administration concludes that the facilities to be used do not or did not meet current good manufacturing practices, good laboratory practices or good clinical practices requirements, it will not approve the application. Corrective actions to remedy the deficiencies must be performed and are usually verified in a subsequent inspection. In addition, manufacturers of both pharmaceutical products and active pharmaceutical ingredients, or APIs, used to formulate the drug also ordinarily undergo a pre-approval inspection, although the inspection can be waived when the manufacturer has had a passing current good manufacturing practices inspection in the immediate past. Failure of any facility to pass a pre-approval inspection will result in delayed approval and would have a material adverse effect on our business, results of operations, financial condition and cash flows.

The U.S. Food and Drug Administration also conducts periodic inspections of drug and device facilities to assess their current good manufacturing practices status. If the U.S. Food and Drug Administration were to find serious current good manufacturing practices non-compliance during such an inspection, it could take regulatory actions that could adversely affect our business, results of operations, financial condition and cash flows. In respect to domestic establishments, the U.S. Food and Drug Administration could initiate product seizures or in some instances require product recalls and seek to enjoin a product’s manufacture and distribution. In certain circumstances, violations could support civil penalties and criminal prosecutions. In addition, if the U.S. Food and Drug Administration concludes that a company is not in compliance with current good manufacturing practices requirements, sanctions may be imposed that include preventing that company from receiving the necessary licenses to export its products and classifying that company as an “unacceptable supplier”, thereby disqualifying that company from selling products to federal agencies.

We believe that we and our suppliers and outside manufacturers are currently in compliance with current good manufacturing practices requirements. We are currently registered as a device manufacturer with the U.S. Food and Drug Administration and we intend to register as a drug facility with the U.S. Food and Drug Administration when we are required to do so.

Reimbursement Legislation . Reimbursement legislation, such as Medicaid, Medicare, and other programs, governs reimbursement levels. All pharmaceutical manufacturers rebate to individual states a percentage of their revenues arising from Medicaid-reimbursed drug sales. Generic drug manufacturers currently rebate an applicable percentage of the calculated average manufacturer price marketed under abbreviated new drug applications. We believe that the federal and state governments may continue to enact measures in the future aimed at reducing the cost of drugs and devices to the public. We cannot predict the nature of such measures or their impact on our profitability.

	13

In early 2012, we received from the Pricing, Data, Analysis, and Coding contractor for the Centers for Medicare and Medicaid Services, or CMS, the Healthcare Common Procedural Coding System, or HCPCS, codes, for use when billing for our silver based antimicrobial hydrogel dressings. HCPCS was established in 1978 to provide a standardized coding system for describing the specific items and services provided in the delivery of health care. HCPCS codes are used by Medicare and monitored by the CMS. They are based on the Current Procedural Technology codes developed by the American Medical Association. We believe that these codes will facilitate reimbursement for the use of our dressings in Medicare patients with applicable wounds.

We have applied to CMS for permanent outpatient reimbursement for our Biovance product that we intend to launch in 2014. This approval, if received, would be effective in 2015. We intend to apply for temporary outpatient reimbursement for Biovance, which approval, if received, would be effective in the second half of 2014.

Environmental Regulation. We are subject to various laws and governmental regulations concerning environmental matters and employee safety and health in the U.S. and other countries. We have made, and continue to make, significant investments to comply with these laws and regulations. We cannot predict the future capital expenditures or operating costs required to comply with environmental laws and regulations. We believe that we are currently compliant with applicable environmental, health and safety requirements in all material respects. However, we cannot assure you that current or future regulatory, governmental, or private action will not have a material adverse effect on our performance, results or financial condition.

In the future, if a loss contingency related to environmental matters, employee safety, health or conditional asset retirement obligations is recognized, we would record a liability for the obligation and it may result in a material impact on net income for the annual or interim period during which the liability is recorded. The investigation and remediation of environmental obligations generally occur over an extended period of time, and therefore we do not know if these events would have a material adverse effect on our financial condition, liquidity, or cash flow, nor can we assure you that such liabilities would not have a material adverse effect on our performance, results or financial condition.

Research and Development Costs

For the fiscal years ended December 31, 2013 and 2012, we incurred research and development costs totaling $63,204 and $233,819, respectively. We bear our own research and development costs and do not directly pass along our research and development costs to our customers; however, we build our research and development costs into the pricing structure of our products.

We intend to commit capital resources to research and development only as our cash resources allow. We have incurred all cost associated with the launch of our proprietary products and will only require research and development expenses for product enhancements and modifications, which we do not expect to be significant.

Employees

As of March 21, 2014, we had 39 full-time employees. Of these employees, 29 are involved with finance, sales, marketing, and administration and 10 are involved with manufacturing, research and development, clinical and regulatory matters. Our employees are not represented by a labor union or other collective bargaining groups, and we consider relations with our employees to be good. To the best of our knowledge, none of our employees, officers or directors is bound by restrictive covenants from prior employers that would preclude them from providing services to us , except as described under “Item 3. Legal Proceedings.” We currently plan to retain and utilize the services of outside consultants for additional research, testing, regulatory, accounting, legal compliance and other services on an as needed basis.

ITEM 1A. RISK FACTORS

There are numerous and varied risks, known and unknown, that may prevent us from achieving our goals. You should carefully consider the risks described below and the other information included in this Annual Report on Form 10-K, including the consolidated financial statements and related notes. If any of the following risks, or any other risks not described below, actually occur, it is likely that our business, financial condition, and/or operating results could be materially adversely affected. The risks and uncertainties described below include forward-looking statements and our actual results may differ from those discussed in these forward-looking statements.

	14

Risk Relating to Our Company

We have experienced significant losses and expect losses to continue for the foreseeable future.

We have yet to establish any history of profitable operations. We have incurred annual net losses of $21,976,882 and $4,905,335, respectively, during the fiscal years ended December 31, 2013 and 2012. As of December 31, 2013, we had an accumulated deficit of $44,597,279. We expect to incur additional operating losses for the foreseeable future. Although we expect sales and order backlogs to increase in 2014 from our existing product offerings, there can be no assurance that we will be able to achieve these revenues throughout the year or be profitable in the future.

We will require additional capital in order to execute the longer term aspects of our business plan.

The implementation of our growth strategy will continue to result in an increase in our fixed cost structure. Due to the time delay between outlays for working capital expenditures, such as costs to acquire rights to additional products, the hiring and training of sales agents and personnel, pre-launch marketing costs, the purchasing of inventory, and the billing and collection of revenue, we expect to record an increase in net operating cash outflows from operations for the first half of 2014 as compared to the last half of 2013. Future results of operations involve significant risks and uncertainties. Factors that could affect our future operating results and cause actual results to vary materially from expectations include, but are not limited to, potential demand for our products, risks from our competition, regulatory approval of our new products, technological change, and dependence on key personnel.

In order to complete our future growth strategy, additional equity and/or debt financing will be required. If we are unable to raise additional capital or if we encounter circumstances that place unforeseen constraints on capital resources, we will be required to take even stronger measures to conserve liquidity, which may include, but are not limited to, eliminating all non-essential positions and ceasing all marketing efforts. We would have to curtail business development activities and suspend the pursuit of our business plan. There can be no assurance that we will be successful in improving revenues, reducing expenses and/or securing additional capital in sufficient amounts and on favorable terms.

We depend on key personnel.

We believe that our success will depend, in part, upon our ability to retain the skilled personnel we have recently added and attract additional skilled personnel, which may require substantial additional funds. There can be no assurance that we will be able to find and attract additional qualified employees or retain any such personnel. Our inability to hire qualified personnel, the loss of services of our key personnel, or the loss of services of executive officers or key employees that may be hired in the future may have a material and adverse effect on our business.

Our strategic business plan may not produce the intended growth in revenue and operating income.

Our strategies include making significant investments in sales and marketing programs to achieve revenue growth and margin improvement targets. If we do not achieve the expected benefits from these investments or otherwise fail to execute on our strategic initiatives, we may not achieve the growth improvement we are targeting and our results of operations may be adversely affected.

Our acquisition strategy may not produce the intended growth in revenue and operating income.

As part of our strategy for growth, we may make acquisitions and enter into strategic alliances such as joint ventures and joint development agreements. However, we may not be able to identify suitable acquisition candidates, complete acquisitions or integrate acquisitions successfully, and our strategic alliances may not prove to be successful. Such acquisitions could reduce shareholders’ ownership, cause us to incur debt, expose us to liabilities and result in amortization expenses related to intangible assets with definite lives. In addition, acquisitions involve other risks, including diversion of management resources otherwise available for ongoing development of our business and risks associated with entering new markets with which we have limited experience or where distribution alliances with experienced distributors are not available. Our future profitability may depend in part upon our ability to develop further our resources to adapt to these new products or business areas and to identify and enter into satisfactory distribution networks. Moreover, we may fail to realize the anticipated benefits of any acquisition as rapidly as expected or at all, or the acquired business may not perform in accordance with our expectations. We may also incur significant expenditures in anticipation of an acquisition that is never realized. There can be no assurance that difficulties encountered in connection with acquisitions will not have a material adverse effect on our business, financial condition and results of operations.

	15

Our future success depends upon market acceptance of our existing and future products.

We believe that our success will depend in part upon the acceptance of our existing and future products by the medical community, hospitals and physicians and other health care providers, third-party payers, and end-users. Such acceptance may depend upon the extent to which the medical community and end-users perceive our products as safer, more effective or cost-competitive than other similar products. Ultimately, for our new products to gain general market acceptance, it may also be necessary for us to develop marketing partners for the distribution of our products. There can be no assurance that our new products will achieve significant market acceptance on a timely basis, or at all. Failure of some or all of our future products to achieve significant market acceptance could have a material adverse effect on our business, financial condition, and results of operations.

We are dependent on significant customers.

Our contract manufacturing business has generated most of our revenue and much of this revenue to date is generated from a limited number of clients, who account for a substantial percentage of our total revenues. For the year ended December 31, 2013, two major customers accounted for approximately 67% of revenue, with each customer individually accounting for 51% and 16%, respectively. For the year ended December 31, 2012, two major customers accounted for approximately 76% of our revenue, with each customer individually accounting for 60% and 16%, respectively. The loss of any of our significant customers would have a significant negative effect on our overall operations.

We may not be able to correctly estimate our future operating expenses, which could lead to cash shortfalls.

Our operating expenses may fluctuate significantly in the future as a result of a variety of factors, many of which are outside of our control. These factors include:

the time and resources required to develop and conduct clinical trials and obtain regulatory approvals for our products;

the costs to attract and retain personnel with the skills required for effective operations; and/or

the costs of preparing, filing, prosecuting, defending and enforcing patent claims and other patent related costs, including licensing fees and royalties and litigation costs and the results of such litigation.

We operate in a highly competitive industry and face competition from large, well-established medical device manufacturers as well as new market entrants.

Competition from other medical device companies and from research and academic institutions is intense, expected to increase, subject to rapid change and significantly affected by new product introductions and other market activities of industry participants. In addition to competing with universities and other research institutions in the development of products, technologies and processes, we compete with other companies in acquiring rights to products or technologies from those institutions. A number of factors may limit the market acceptance of our products, including the timing of regulatory approvals and market entry relative to competitive products, the availability of alternative products, the price of our products relative to alternative products, the availability of third party reimbursement and the extent of marketing efforts by third party distributors or agents that we retain. There can be no assurance that our products will receive market acceptance in a commercially viable period of time, if at all. Furthermore, there can be no assurance that we can develop products that are more effective or achieve greater market acceptance than competitive products, or that our competitors will not succeed in developing or acquiring products and technologies that are more effective than those being developed by us, that would render our products and technologies less competitive or obsolete.

Our competitors enjoy several competitive advantages over us, including some or all of the following:

large and established distribution networks in the U.S. and/or in international markets;

greater financial, managerial and other resources for products research and development, sales and marketing efforts and protecting and enforcing intellectual property rights;

significantly greater name recognition;

more expansive portfolios of intellectual property rights;

established relations with physicians, hospitals, other healthcare providers and third party payors;

products which have been approved by regulatory authorities for use in the U.S. and/or Europe and which are supported by long-term clinical data; and

	16

greater experience in obtaining and maintaining regulatory approvals and/or clearances from the U.S. Food and Drug Administration and other regulatory agencies.

Our competitors’ products will compete directly with our products. In addition, our competitors as well as new market entrants may develop or acquire new treatments, products or procedures that will compete directly or indirectly with our products. The presence of this competition in our market may lead to pricing pressure which would make it more difficult to sell our products at a price that will make us profitable or prevent us from selling our products at all. Our failure to compete effectively would have a material and adverse effect on our business, results of operations and financial condition.

We are dependent on our contract manufacturing business for all revenues.

At this point in time, we do not generate significant revenue from the sale of our products. As a result, our business, operating results and financial condition are largely dependent upon the business, operating results and financial condition of our contract manufacturing business. Any decline in revenue or business prospects of our contract manufacturing will have a significant negative affect on us and our business.

We are subject to governmental regulations.

Inherent in the development of new medical products is the potential for delay because product testing, including clinical evaluation, is required before most products can be approved for human use. As a manufacturer of medical products, we are generally subject to regulation by the U.S. Food and Drug Administration and the Federal Trade Commission, among other state and federal governmental authorities in the U.S., with respect to the manufacturing, marketing, labeling, record keeping, claims and advertising of our products. We are also subject to state regulation with respect to electron beam radiation services and facilities. The expansion of our business into the manufacturing and distribution of our products for consumer use will subject us to additional governmental regulation.

The submission of a new drug application, or NDA, or an abbreviated new drug application, or ANDA, to the U.S. Food and Drug Administration with supporting clinical safety and efficacy data, does not guarantee that the U.S. Food and Drug Administration will grant approval to market the product. Meeting the U.S. Food and Drug Administration’s regulatory requirements to obtain approval to market a product typically takes many years, varies substantially based upon the type, complexity and novelty of the pharmaceutical product, and the application process is subject to uncertainty. The NDA approval process for a new product varies in time, generally requiring a minimum of 10 months, but could also take several years from the date of application. The timing for the ANDA approval process for generic products is difficult to estimate and can vary significantly.

NDA approvals, if granted, may not include all uses (known as indications) for which a company may seek to market a product. The U.S. Food and Drug Administration also requires companies to undertake post-approval surveillance regarding their drug products and to report adverse events.

With respect to medical devices, such as those that we manufacture, before a new medical device, or a new use of, or claim for, an existing product can be marketed, it must first receive either premarket clearance under Section 510(k) of the Federal Food, Drug and Cosmetic Act or premarket approval from the U.S. Food and Drug Administration, unless an exemption applies. In the 510(k) clearance process, the U.S. Food and Drug Administration must determine that the proposed device is “substantially equivalent” to a device legally on the market, known as a “predicate” device, with respect to intended use, technology and safety and effectiveness to clear the proposed device for marketing. Clinical data is sometimes required to support substantial equivalence. The premarket approval pathway requires an applicant to demonstrate the safety and effectiveness of the device for its intended use based, in part, on extensive data including, but not limited to, technical, preclinical, clinical trial, manufacturing and labeling data. The premarket approval process is typically required for devices that are deemed to pose the greatest risk, such as life-sustaining, life-supporting or implantable devices. Both the 510(k) and premarket approval processes can be expensive and lengthy and entail significant user fees.

The U.S. Food and Drug Administration also regulates the manufacture of human cells, tissues, and cellular and tissue-based products (“HCT/Ps”) under the authority of section 361 of the Public Health Service Act (“PHS Act”) and exercises this authority pursuant to the regulations set forth in Part 1271 in Title 21 of the Code of Federal Regulations. 361 HCT/P products that meet the Part 1271 criteria may be marketed without the premarket approval or clearance of the U.S. Food and Drug Administration. The U.S. Food and Drug Administration permits manufacturers to proceed to market based upon a self-determination that a product qualifies as a 361 HCT/P. As a wound covering product made from decellularized and dehydrated human amniotic membrane, we believe that Biovance meets the regulatory requirements to be marketed in the United States as a 361 HCT/P without being subject to any premarket review requirements.

Failure to comply with applicable regulatory requirements can result in, among other things, suspensions or withdrawals of approvals or clearances, seizures or recalls of products, injunctions against the manufacture, holding, distribution, marketing and sale of a product, civil and criminal sanctions. Furthermore, changes in existing regulations or the adoption of new regulations could prevent us from obtaining, or affect the timing of, future regulatory approvals. Meeting regulatory requirements and evolving government standards may delay marketing of our new products for a considerable period of time, impose costly procedures upon our activities and result in a competitive advantage to larger companies that compete against us.

	17

We cannot assure you that the U.S. Food and Drug Administration or other regulatory agencies will approve any products developed by us, on a timely basis, if at all, or, if granted, that approval will not entail limiting the indicated uses for which we may market the product, which could limit the potential market for any of these products.

Based on scientific developments, post-market experience, or other legislative or regulatory changes, the current U.S. Food and Drug Administration standards of review for approving new pharmaceutical and medical device products are sometimes more stringent than those that were applied in the past. For example, the U.S. Food and Drug Administration is currently evaluating the 510(k) process for clearing medical devices and may make substantial changes to industry requirements, including which devices are eligible for 510(k) clearance, the ability to rescind previously granted 510(k) clearances and additional requirements that may significantly impact the process. Further, some new or evolving review standards or conditions for approval or clearance were not applied to many established products currently on the market, including certain opioid products. As a result, the U.S. Food and Drug Administration does not have as extensive safety databases on these products as on some products developed more recently. Accordingly, we believe the U.S. Food and Drug Administration has recently expressed an intention to develop such databases for certain of these products, including many opioids.

In addition, on September 27, 2007, through passage of the Food and Drug Administration Amendments Act of 2007, Congress passed legislation authorizing the U.S. Food and Drug Administration to require companies to undertake additional post-approval studies in order to assess known or signaled potential serious safety risks and to make any labeling changes necessary to address safety risks. Congress also empowered the U.S. Food and Drug Administration to require companies to formulate risk evaluation and mitigation strategies to ensure a drug’s benefits outweigh its risks.

The U.S. Food and Drug Administration regulates the facilities, processes and procedures used to manufacture and market pharmaceutical and medical products in the U.S. Manufacturing facilities must be registered with the U.S. Food and Drug Administration and all products made in such facilities must be manufactured in accordance with “current good manufacturing practices,” or cGMP, regulations enforced by the U.S. Food and Drug Administration. Compliance with cGMP regulations requires the dedication of substantial resources and requires significant expenditures. The U.S. Food and Drug Administration periodically inspects our manufacturing facilities and those of our subcontractors and procedures to assure compliance. The U.S. Food and Drug Administration may cause a suspension or withdrawal of product approvals if regulatory standards are not maintained. In the event an approved manufacturing facility for a particular drug or medical device is required by the U.S. Food and Drug Administration to curtail or cease operations, or otherwise becomes inoperable, or a third party contract manufacturing facility faces manufacturing problems, obtaining the required U.S. Food and Drug Administration authorization to manufacture at the same or a different manufacturing site could result in production delays, which could adversely affect our business, results of operations, financial condition and cash flow.

We cannot determine what effect changes in regulations or legal interpretations by the U.S. Food and Drug Administration or the courts, when and if promulgated or issued, may have on our business in the future. Changes could, among other things, require different labeling, monitoring of patients, interaction with physicians, education programs for patients or physicians, curtailment of necessary supplies, or limitations on product distribution. These changes, or others required by the U.S. Food and Drug Administration could have an adverse effect on the sales of these products. The U.S. Food and Drug Administration has authority to require a risk evaluation and mitigation strategy under the Food and Drug Administration Amendments Act of 2007 when necessary to address whether the benefits of these products continue to outweigh the risks. In addition, on September 27, 2007, Congress re-authorized requirements for testing drug products in children, which may increase the time and cost necessary for new drug development. The evolving and complex nature of regulatory science and regulatory requirements, the broad authority and discretion of the U.S. Food and Drug Administration and the generally high level of regulatory oversight results in a continuing possibility that from time to time, we will be adversely affected by regulatory actions despite ongoing efforts and commitment to achieve and maintain full compliance with all regulatory requirements.

If we fail to comply with continuing federal and state regulations, our business could be seriously harmed.

Following initial regulatory approval of any products that we may develop, we will be subject to continuing regulatory review, including review of adverse drug experiences and clinical results that are reported after our products become commercially available. This would include results from any post-marketing tests or continued actions required by a condition of approval. The manufacturing facilities we may use to make any of our products may become subject to periodic review and inspection by the U.S. Food and Drug Administration. If a previously unknown problem or problems with a product or a manufacturing and laboratory facility used by us is discovered, the U.S. Food and Drug Administration may impose restrictions on that product or on the manufacturing facility, including requiring us to withdraw the product from the market. Any changes to an approved product, including the way it is manufactured or promoted, often requires U.S. Food and Drug Administration approval before the product, as modified, can be marketed. In addition, for products we develop in the future, we and our contract manufacturers may be subject to ongoing U.S. Food and Drug Administration requirements for submission of safety and other post-market information. If we or any of our contract manufacturers fail to comply with applicable regulatory requirements, a regulatory agency may:

	18

issue warning letters;

impose civil or criminal penalties;

suspend or withdraw our regulatory approval;

suspend or terminate any of our ongoing clinical trials;

refuse to approve pending applications or supplements to approved applications filed by us;

impose restrictions on our operations;

close the facilities of our contract manufacturers; and/or

seize or detain products or require a product recall.

Additionally, regulatory review covers a company’s activities in the promotion of its drugs, with significant potential penalties and restrictions for promotion of drugs for an unapproved use. Sales and marketing programs, such as illegal promotions to health care professionals, are under scrutiny for compliance with various mandated requirements. We are also required to submit information on open and completed clinical trials to public registries and databases. Failure to comply with these requirements could expose us to negative publicity, fines and penalties that could harm our business.

If we violate regulatory requirements at any stage, whether before or after marketing approval is obtained, we may be fined, be forced to remove a product from the market or experience other adverse consequences, including delay, which would materially harm our financial results. Additionally, we may not be able to obtain the labeling claims necessary or desirable for product promotion.

We are dependent on proprietary know-how.

Our competitors may develop or market technologies that are more effective or more commercially attractive than ours. Our manufacturing know-how as to mixing, coating and cross-linking may be able to be duplicated, even if it is difficult to do so. There is no assurance that, should we apply for intellectual property protection for our intellectual property, we would be able to obtain such protection.

We also rely on trade secret protection to protect our interests in proprietary know-how and for processes for which patents are difficult to obtain or enforce. We may not be able to protect our trade secrets adequately. In addition, we rely on non-disclosure and confidentiality agreements with employees, consultants and other parties to protect, in part, trade secrets and other proprietary technology. These agreements may be breached and we may not have adequate remedies for any breach. Moreover, others may independently develop equivalent proprietary information, and third parties may otherwise gain access to our trade secrets and proprietary knowledge. Any disclosure of confidential data into the public domain or to third parties could allow competitors to learn our trade secrets and use the information in competition against us.

Despite our efforts to protect our proprietary rights, there is no assurance that such protections will preclude our competitors from developing and/or marketing similar products. While we are not aware of any third party intellectual property that would materially affect our business, our failure or inability to obtain patents and protect our proprietary information could result in our business being adversely affected.

If we are not able to establish and maintain successful arrangements with third parties or successfully build our own sales and marketing infrastructure, we may not be able to commercialize our products which would adversely affect our business and financial condition.

We are currently expanding our sales and marketing capabilities. To commercialize our products, we must continue to develop our own sales, marketing and distribution capabilities, which will be expensive and time consuming, or make arrangements with third parties to perform these services for us. The third parties may not be capable of successfully selling any of our products. We will have to commit significant resources to developing a marketing and sales force and supporting distribution capabilities. If we decide to enter into arrangements with third parties for performance of these services, we may find that they are not available on terms acceptable to us, or at all.

	19

We may face intellectual property infringement claims that could be time-consuming, costly to defend and could result in our loss of significant rights and, in the case of patent infringement claims, the assessment of treble damages.

On occasion, we may receive notices of claims of our infringement, misappropriation or misuse of other parties’ proprietary rights. We may have disputes regarding intellectual property rights with the parties that have licensed those rights to us. We may also initiate claims to defend our intellectual property. Intellectual property litigation, regardless of its outcome, is expensive and time-consuming, could divert management’s attention from our business and have a material negative effect on our business, operating results or financial condition. In addition, the outcome of such litigation may be unpredictable. If there is a successful claim of infringement against us, we may be required to pay substantial damages—including treble damages if we were to be found to have willfully infringed a third party’s patent—to the party claiming infringement, and to develop non-infringing technology, stop selling our products or using technology that contains the allegedly infringing intellectual property or enter into royalty or license agreements that may not be available on acceptable or commercially practical terms, if at all. Our failure to develop non-infringing technologies or license the proprietary rights on a timely basis could harm our business. In addition, modifying our products to exclude infringing technologies could require us to seek re-approval or clearance from various regulatory bodies for our products, which would be costly and time consuming. Also, we may be unaware of pending patent applications that relate to our technology. Parties making infringement claims on future issued patents may be able to obtain an injunction that would prevent us from selling our products or using technology that contains the allegedly infringing intellectual property, which could harm our business.

Our products risk exposure to product liability claims

We are and, if successful in developing, testing and commercializing our products, will increasingly be, exposed to potential product liability risks, which are inherent in the testing, manufacturing and marketing of such products. It is likely we will be contractually obligated, under any distribution agreements that we enter into with respect to products we manufacture, to indemnify the individuals and/or entities that distribute our products against claims relating to the manufacture and sale of products distributed by such distribution partners. This indemnification liability, as well as direct liability to consumers for any defects in the products sold, could expose us to substantial risks and losses. While we have obtained product liability insurance, there can be no assurance that we will be able to maintain such insurance on acceptable terms or that such insurance will provide adequate coverage against potential liabilities. As we begin to sell and distribute our new line of proprietary products, we intend to increase the limits of our product liability insurance. A successful product liability claim or series of claims brought against us could result in judgments, fines, damages and liabilities that could have a material adverse effect on our business, financial condition and results of operations. We may incur significant expense investigating and defending these claims, even if they do not result in liability. Moreover, even if no judgments, fines, damages or liabilities are imposed on us, our reputation could suffer, which could have a material adverse effect on our business, financial condition and results of operations.

We and our sales personnel, whether employed by us or by others, must comply with various federal and state anti-kickback, self referral, false claims and similar laws, any breach of which could cause a material adverse effect on our business, financial condition and results of operations.

Our relationships with physicians, hospitals and the marketers of our products are subject to scrutiny under various federal anti-kickback, self-referral, false claims and similar laws, often referred to collectively as healthcare fraud and abuse laws. Healthcare fraud and abuse laws are complex, and even minor, inadvertent violations can give rise to claims that the relevant law has been violated. Possible sanctions for violation of these fraud and abuse laws include monetary fines, civil and criminal penalties, exclusion from federal and state healthcare programs, including Medicare, Medicaid, Veterans Administration health programs, workers’ compensation programs and TRICARE, the healthcare system administered by or on behalf of the U.S. Department of Defense for uniformed services beneficiaries, including active duty and their dependents, retirees and their dependents, and forfeiture of amounts collected in violation of such prohibitions. Certain states have similar fraud and abuse laws, imposing substantial penalties for violations. Any government investigation or a finding of a violation of these laws would likely result in a material adverse effect on the market price of our common stock, as well as our business, financial condition and results of operations.

Anti-kickback laws and regulations prohibit any knowing and willful offer, payment, solicitation or receipt of any form of remuneration in return for the referral of an individual or the ordering or recommending of the use of a product or service for which payment may be made by Medicare, Medicaid or other government-sponsored healthcare programs. We may engage additional physicians on a consulting basis. While these agreements with physicians will be structured with the intention of complying with all applicable laws, including the federal ban on physician self referrals, commonly known as the “Stark Law,” state anti-referral laws and other applicable anti-kickback laws, it is possible that regulatory or enforcement agencies or courts may in the future view these agreements as prohibited arrangements that must be restructured or for which we would be subject to other significant civil or criminal penalties, or prohibit us from accepting referrals from these physicians. Because our strategy includes the involvement of physicians who consult with us on the design of our products, we could be materially impacted if regulatory or enforcement agencies or courts interpret our financial relationships with our physician advisors who refer or order our products to be in violation of applicable laws and determine that we would be unable to achieve compliance with such applicable laws. This could harm our reputation and the reputations of our physician advisors. In addition, the cost of noncompliance with these laws could be substantial since we could be subject to monetary fines and civil or criminal penalties, and we could also be excluded from federally funded healthcare programs, including Medicare and Medicaid, for non-compliance.

	20

The scope and enforcement of all of these laws is uncertain and subject to rapid change, especially in light of the lack of applicable precedent and regulations. There can be no assurance that federal or state regulatory or enforcement authorities will not investigate or challenge our current or future activities under these laws. Any investigation or challenge could have a material adverse effect on our business, financial condition and results of operations. Any state or federal regulatory or enforcement review of us, regardless of the outcome, would be costly and time consuming. Additionally, we cannot predict the impact of any changes in these laws, whether these changes are retroactive or will have effect on a going-forward basis only.

We could receive claims and demands by former employers of our employees and personnel alleging actual or potential violations of restrictive covenants, such as non-competition agreements, which if material and successfully prosecuted against us, could materially and adversely affect our business, financial condition and results of operations.

From time to time, we may recruit and hire employees or other key personnel who are subject to restrictive covenants, such as non-competition agreements, with their former employers, of which we may not be aware at the time of hire, or which we may believe to be inapplicable. We are currently in the process of hiring several new management employees and sales personnel to expand our sales and marketing efforts for our wound care products, some of whose former employers sell products similar to ours or operate within the wound care industry. As a result, we have in the past and may in the future receive claims and demands from former employers related to alleged violations of restrictive covenants, such as non-competition agreements.

For example, a former employer recently filed suit against us, our subsidiary and three of our new employees, requesting injunctive relief for allegations involving breach of contract, tortious interference with employment agreements, unfair competition and common law conspiracy. The complaint is seeking, among other things, to enjoin us from continuing to employ the three individuals in positions related to sales of wound care products within certain geographic areas. We intend to vigorously defend these claims against us to the fullest extent permitted by the law and believe them to be wholly without merit. Although the ultimate outcome of these matters cannot be accurately predicted due to the inherent uncertainty of litigation, in the opinion of management, based upon current information, these matters are not expected to have a material adverse effect on our business, financial condition or results of operations. See “Item 3. Legal Proceedings.”

Even if we are successful on the merits, any pending or future lawsuits, claims or proceedings could be time-consuming and expensive to defend or settle and could result in the diversion of significant management time and operational resources, which could materially and adversely affect us. In addition, it is possible that an unfavorable resolution of one or more proceedings could in the future materially and adversely affect our financial position, results of operations or cash flows.

We are uncertain regarding the success of our clinical trials for our products in development.

Some of our products , including licensed products, in development may require clinical trials to determine their safety and efficacy for U.S. marketing approval by regulatory bodies, including the U.S. Food and Drug Administration. There can be no assurance that we or the partners to our agreements will be able to successfully complete the U.S. regulatory approval process for products in development. In addition, there can be no assurance that we or they will not encounter additional problems that will cause us or them to delay, suspend or terminate our clinical trials. In addition, we cannot make any assurance that clinical trials will be deemed sufficient in size and scope to satisfy regulatory approval requirements, or, if completed, will ultimately demonstrate these products to be safe and efficacious.

Healthcare policy changes, including recent laws to reform the U.S. healthcare system, may have a material adverse effect on us.

Healthcare costs have risen significantly over the past decade. There have been, and continue to be, proposals by legislators, regulators, and third-party payors to keep these costs down. Certain proposals, if passed, would impose limitations on the prices we will be able to charge for our products, or the amounts of reimbursement available for our products from governmental agencies or third-party payors. These limitations could have a material adverse effect on our financial position and results of operations.

Various healthcare reform proposals have emerged at the federal and state levels. We cannot predict the exact effect newly enacted laws or any future legislation or regulation will have on us. However, the implementation of new legislation and regulation may lower reimbursements for our products, reduce medical procedure volumes and adversely affect our business, possibly materially. In addition, the enacted excise tax may materially and adversely affect our operating expenses and results of operations.

Modifications to our current products may require new marketing clearances or approvals or require us to cease marketing or recall the modified products until such clearances or approvals are obtained.

Any modification to a U.S. Food and Drug Administration-cleared product that could significantly affect its safety or effectiveness, or that would constitute a major change or modification in its intended use, requires a new U.S. Food and Drug Administration 510(k) clearance or, possibly, a premarket approval. The U.S. Food and Drug Administration requires every manufacturer to make its own determination as to whether a modification requires a new 510(k) clearance or premarket approval, but the U.S. Food and Drug Administration may review and disagree with any decision reached by the manufacturer. In the future, we may make additional modifications to our products after they have received U.S. Food and Drug Administration clearance or approval and, in appropriate circumstances, determine that new clearance or approval is unnecessary. Regulations in other countries in which we market or sell, or propose to market or sell, our products may also require that we make judgments about changes to our products and whether or not those changes are such that regulatory approval or clearance should be obtained. In the U.S. and elsewhere, regulatory authorities may disagree with our past or future decisions not to seek new clearance or approval and may require us to obtain clearance or approval for modifications to our products. If that were to occur for a previously cleared or approved product, we may be required to cease marketing or recall the modified device until we obtain the necessary clearance or approval. Under these circumstances, we may also be subject to significant regulatory fines or other penalties. If any of the foregoing were to occur, our financial condition and results of operations could be negatively impacted.

	21

Changes in reimbursement levels by governmental or other third-party payors for procedures using our products may cause our revenues to decline

We believe that our products will be purchased principally by hospitals or physicians, which typically bill various third-party payors, such as governmental programs (e.g., Medicare and Medicaid), private insurance plans and managed care plans, for the healthcare services provided to their patients. The ability of our future customers to obtain appropriate reimbursement for products and services from third-party payors is critical to the success of medical product companies because it affects which products customers purchase and the prices they are willing to pay. Implementation of healthcare reforms in the U.S. may limit, reduce or eliminate reimbursement for our products and adversely affect both our pricing flexibility and the demand for our products. Even when we develop a promising new product, we may find limited demand for the product unless reimbursement approval is obtained from private and governmental third party payors.

Third-party payors have adopted, and are continuing to adopt, a number of healthcare policies intended to curb rising healthcare costs. These policies include:

controls on government-funded reimbursement for healthcare services and price controls on medical products and services providers;

challenges to the pricing of medical procedures or limits or prohibitions on reimbursement for specific devices and therapies through other means; and

the introduction of managed care systems in which healthcare providers contract to provide comprehensive healthcare for a fixed cost per person.

We are unable to predict whether federal, state or local healthcare reform legislation or regulation affecting our business may be proposed or enacted in the future, or what effect any such legislation or regulation would have on our business. Changes in healthcare systems in the U.S. in a manner that significantly reduces reimbursement for procedures using our products or denies coverage for these procedures, or adverse decisions relating to our products by administrators of these systems in coverage or reimbursement issues, would have an adverse impact on the acceptance of our products and the prices which our customers are willing to pay for them.

We are reliant upon two manufacturers for key ingredients of the manufacture of our hydrogels.

The Dow Chemical Company and the BASF Corporation are the principal manufacturers of the two polymers, polyethylene oxide and polyvinylpyrrolidone, respectively, that we primarily use in the manufacture of hydrogels. Although we have not experienced significant production delays attributable to supply changes, we believe that developing an alternative sources of supply for the polymers used to make our current hydrogels would be difficult over a short period of time. Because we have no direct control over our third-party suppliers, interruptions or delays in the products and services provided by these third parties may be difficult to remedy in a timely fashion. In addition, if such suppliers are unable or unwilling to deliver the necessary raw materials or products, we may be unable to redesign or adapt our technology to work without such raw materials or products or find alternative suppliers or manufacturers. In such events, we could experience interruptions, delays, increased costs or quality control problems, which would have a material and adverse effect on our business, results of operations and financial condition.

Risks Related to the Common Stock

Our stock price may be volatile, which could result in substantial losses for investors.

The market price of our common stock is likely to be highly volatile and could fluctuate widely in response to various factors, many of which are beyond our control, including the following:

technological innovations or new products and services by us or our competitors;

additions or departures of key personnel;

sales of our common stock, particularly under any registration statement for the purposes of selling any other securities, including management shares;

our ability to execute our business plan;

our plans to make significant additional outlays of working capital before we expect to generate significant revenues and the uncertainty regarding when we will begin to generate significant revenues, if we are able to do so;

operating results that fall below expectations;

loss of any strategic relationship;

	22

industry developments;

economic and other external factors; and

period-to-period fluctuations in our financial results.

In addition, the securities markets have from time to time experienced significant price and volume fluctuations that are unrelated to the operating performance of particular companies. These market fluctuations may also significantly affect the market price of our common stock.

If securities or industry analysts do not publish research or publish inaccurate or unfavorable research about our business, our stock price and trading volume could decline.

The trading market for our common stock will depend in part on the research and reports that securities or industry analysts publish about us or our business. We currently have very limited research coverage by securities and industry analysts and you should not invest in our common stock in anticipation that we will increase such coverage. If one or more of the analysts who covers us downgrades our stock or publishes inaccurate or unfavorable research about our business, our stock price would likely decline. If one or more of these analysts ceases coverage of us or fails to publish reports on us regularly, demand for our stock could decrease, which could cause our stock price and trading volume to decline.

Our board of directors can authorize the issuance of preferred stock, which could diminish the rights of holders of our common stock, and make a change of control of us more difficult even if it might benefit our shareholders.

Our board of directors is authorized to issue shares of preferred stock in one or more series and to fix the voting powers, preferences and other rights and limitations of the preferred stock. Accordingly, we may issue shares of preferred stock with a preference over our common stock with respect to dividends or distributions on liquidation or dissolution, or that may otherwise adversely affect the voting or other rights of the holders of common stock. Issuances of preferred stock, depending upon the rights, preferences and designations of the preferred stock, may have the effect of delaying, deterring or preventing a change of control, even if that change of control might benefit our shareholders.

Offers or availability for sale of a substantial number of shares of our common stock may cause the price of our common stock to decline.

Sales of a significant number of shares of our common stock in the public market could harm the market price of our common stock and make it more difficult for us to raise funds through future offerings of common stock. As additional shares of our common stock become available for resale in the public market, the supply of our common stock will increase, which could decrease the price of our common stock.

In addition, if our shareholders sell substantial amounts of our common stock in the public market, upon the expiration of any statutory holding period under Rule 144, upon the expiration of lock-up periods applicable to outstanding shares, or upon the exercise of outstanding options or warrants, it could create a circumstance commonly referred to as an “overhang,” in anticipation of which the market price of our common stock could fall. The existence of an overhang, whether or not sales have occurred or are occurring, could also make it more difficult for us to raise additional financing through the sale of equity or equity-related securities in the future at a time and price that we deem reasonable or appropriate.

There are inherent limitations in all control systems, and misstatements due to error or fraud may occur and not be detected.

The ongoing internal control provisions of Section 404 of the Sarbanes-Oxley Act of 2002 require us to identify material weaknesses in internal control over financial reporting, which is a process to provide reasonable assurance regarding the reliability of financial reporting for external purposes in accordance with accounting principles generally accepted in the U.S. Our management, including our chief executive officer and chief financial officer, does not expect that our internal controls and disclosure controls will prevent all errors and all fraud. A control system, no matter how well conceived and operated, can provide only reasonable, not absolute, assurance that the objectives of the control system are met. In addition, the design of a control system must reflect the fact that there are resource constraints and the benefit of controls must be relative to their costs. Because of the inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that all control issues and instances of fraud, if any, in our company have been detected. These inherent limitations include the realities that judgments in decision-making can be faulty and that breakdowns can occur because of simple errors or mistakes. Further, controls can be circumvented by individual acts of some persons, by collusion of two or more persons, or by management override of the controls. The design of any system of controls is also based in part upon certain assumptions about the likelihood of future events, and there can be no assurance that any design will succeed in achieving its stated goals under all potential future conditions. Over time, a control may be inadequate because of changes in conditions, such as growth of the company or increased transaction volume, or the degree of compliance with the policies or procedures may deteriorate. Because of inherent limitations in a cost-effective control system, misstatements due to error or fraud may occur and not be detected.

	23

In addition, discovery and disclosure of a material weakness, by definition, could have a material adverse impact on our financial statements. Such an occurrence could discourage certain customers or suppliers from doing business with us, cause downgrades in our future debt ratings leading to higher borrowing costs and affect how our stock trades. This could in turn negatively affect our ability to access public debt or equity markets for capital.

We do not expect to pay dividends in the future. As a result, any return on investment may be limited to the value of our common stock.

We do not anticipate paying cash dividends on our common stock in the foreseeable future. The payment of dividends on our common stock will depend on our earnings, financial condition and other business and economic factors as our board of directors may consider relevant. If we do not pay dividends, our common stock may be less valuable because a return on an investment in our common stock will only occur if our stock price appreciates.

ITEM 1B. UNRESOLVED STAFF COMMENTS

None.

ITEM 2. PROPERTIES

Our corporate headquarters are located at 2150 Cabot Boulevard West, Langhorne, Pennsylvania, where we lease approximately 16,500 square feet of office and manufacturing space. We believe that our facility is well maintained and is suitable and adequate for our current needs.

ITEM 3. LEGAL PROCEEDINGS

From time to time, we may become involved in lawsuits, investigations and claims that arise in the ordinary course of business. Except as set forth below, as of the date of this filing, we are not party to any material litigation nor are we aware of any such threatened or pending legal proceedings that we believe could have a material adverse effect on our business, financial condition or operating results.

On February 27, 2014, ConvaTec Inc. filed suit in the Court of Common Pleas of Philadelphia against us, our subsidiary, Alliqua Biomedical, Inc. and three individual defendants (each a former employee of ConvaTec Inc.), requesting injunctive relief for allegations involving breach of contract, tortious interference with employment agreements, unfair competition and common law conspiracy. The complaint alleges, among other things, that (i) the individual defendants breached certain restrictive covenants in their respective employment agreements with ConvaTec Inc. by engaging in employment with us within one year of their employment termination and using and disclosing confidential and proprietary business information in their employment with us, (ii) we tortuously interfered with such employment agreements by inducing the individual defendants to accept employment with us and to recruit other employees of ConvaTec Inc. to resign and accept employment us and (iii) we solicited, recruited and hired employees of ConvaTec Inc. for the purpose of utilizing their knowledge of confidential and proprietary information related to the wound care industry in order to unfairly compete with ConvaTec Inc. ConvaTec Inc. is seeking, among other things, to enjoin us from continuing to employ a sales manager who is one former employee of ConvaTec, Inc. in a position related to wound care products and two sales representatives who are former Convatec employees in positions related to sales of wound care products in certain geographic areas.

We intend to fully dispute the allegations of ConvaTec Inc. and the relief sought to the fullest extent permitted by the law and believe them to be wholly without merit.

There are no material proceedings in which any of our directors, officers or affiliates or any registered or beneficial shareholder of more than 5% of our common stock is an adverse party or has a material interest adverse to our interest.

ITEM 4. MINE SAFETY DISCLOSURES

Not applicable.

PART II

ITEM 5. MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES

Market for Common Stock

Our common stock has been listed on the Nasdaq Capital Market under the symbol “ALQA” since January 28, 2014. Prior to that date, it was quoted on the OTCQB over-the-counter marketplace.

	24

The following table sets forth, for the periods indicated, the high and low bid prices of our common stock as reported on the OTCQB. The quotations reflect inter-dealer prices, without retail markup, markdown, or commissions, and may not represent actual transactions. All quotations are adjusted for the 1-for-43.75 reverse stock split of our common stock that occurred November 18, 2013.

	High		Low
2013
Fourth Quarter	$	8.44	$	2.63
Third Quarter	$	3.94	$	3.06
Second Quarter	$	3.94	$	2.63
First Quarter	$	4.38	$	1.75
2012
Fourth Quarter	$	3.94	$	1.75
Third Quarter	$	2.19	$	1.31
Second Quarter	$	3.50	$	2.19
First Quarter	$	3.94	$	1.75

Holders of Record

As of March 20, 2014, there were approximately 170 holders of record of our common stock.

Dividends

We have never paid cash dividends on our common stock and do not anticipate paying any cash dividends in the foreseeable future, but intend to retain our capital resources for reinvestment in our business.

ITEM 6. SELECTED FINANCIAL DATA

Not applicable.

	25

ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

The following discussion and analysis of our financial condition and results of operations should be read in conjunction with our consolidated financial statements and related notes included in this report. This discussion and analysis contains forward-looking statements based on our current expectations, assumptions, estimates and projections. These forward-looking statements involve risks and uncertainties. Our actual results could differ materially from those indicated in these forward-looking statements as a result of certain factors, as more fully discussed in Item 1 of this report entitled “Business,” under “Forward-Looking Statements” and Item 1A of this report, entitled “Risk Factors.”

Overview

We effected a 1-for-43.75 reverse stock split of our outstanding common stock on November 18, 2013. The accompanying consolidated financial statements and accompanying notes to the consolidated financial statements give retroactive effect to the reverse stock split for all periods presented. The shares of common stock retained a par value of $0.001 per share. Accordingly, stockholders’ equity reflects the reverse stock split by reclassifying from common stock to additional paid-in capital an amount equal to the par value of the decreased shares resulting from the reverse stock split.

Results of Operations

Year Ended December 31, 2013 Compared to the Year Ended December 31, 2012

Overview . For the years ended December 31, 2013 and 2012, we had a net loss of $21,976,882 and $4,905,335, respectively, which was inclusive of non-cash items, including the impairment charge of $8,100,000 of our in-process research and development recognized in the year ended December 31, 2013. Additionally, we recognized approximately $5,513,861 and $1,975,115 of stock-based compensation in the years ended December 31, 2013 and 2012, respectively.

Revenues, net . For the year ended December 31, 2013 revenues increased by $569,071, or 46%, to $1,797,745 from $1,228,674 for the year ended December 31, 2012. The increase was primarily due to greater sales volume from our largest two customers during 2013 for the manufacturing of hydrogel products, as well as an increase in the sales of our proprietary products. The components of revenue are as follows:

	For the Years Ended December 31,
	2013		2012
Revenues
Contract manufacturing	$	1,618,670	$	1,221,145
Products		179,075		7,529
Total revenue, net	$	1,797,745	$	1,228,674

Gross loss . Our gross loss was $299,288 for the year ended December 31, 2013 compared to $608,495 for the year ended December 31, 2012. The improved results for the year ended December 31, 2013, as compared to 2012, was due to the higher volume of sales with sustained fixed overhead expenses. The components of cost of revenues are as follows:

	For the Years Ended December 31,
	2013		2012
Cost of revenues
Compensation and benefits	$	496,660	$	442,558
Depreciation and amortization		668,961		644,304
Materials		459,721		386,084
Equipment, production and other expenses		471,691		364,223
Total cost of revenues	$	2,097,033	$	1,837,169

	26

Selling, general and administrative expenses . The following table highlights selling, general and administrative expenses by type for the years ended December 31, 2013 versus 2012:

	For the Years Ended December 31,
	2013		2012
Selling, general and administrative expenses
Stock-based compensation	$	5,513,861	$	1,975,115
Compensation and benefits		3,069,209		842,433
Marketing		298,860		139,024
Royalty fees		200,000		50,000
Other expenses		2,588,068		1,047,801
Total selling, general and administrative expenses	$	11,669,998	$	4,054,373

Selling, general and administrative expense increased $7,615,625 to $11,669,998 for the year ended December 31, 2013, as compared to $4,054,373 for the year ended December 31, 2012.

Stock-based compensation increased by $3,538,746 to $5,513,861 for the year ended December 31, 2013, as compared to $1,975,115 for the year ended December 31, 2012. Compensation and benefits increased $2,226,776 to $3,069,209 for the year ended December 31, 2013, as compared to $842,433 for the year ended December 31, 2012. The increase in both stock-based compensation and compensation and benefits was due to the hiring of a new chief executive officer and chief financial officer, and various senior sales and marketing executives and professionals during the year ended December 31, 2013.

Marketing increased by $159,836 to $298,860 for the year ended December 31, 2013, as compared to $139,024 for the year ended December 31, 2012. The increase was primarily due to increased efforts to market our proprietary and licensed products.

Other selling, general and administrative expenses increased by $1,540,267 to $2,588,068 for the year ended December 31, 2013, as compared to $1,047,801 for the year ended December 31, 2012. Other general and administrative expense include legal, accounting, consulting, investor relation fees, and other costs administrative in nature. These increases were due to our increased business development, sales, and investor relation activities in the year ended December 31, 2013.

Research and Development . We recorded $63,204 in research and development expenses for the year ended December 31, 2013, as compared to $233,819 for the year ended December 31, 2012. The decrease in research and development expenses was due principally to a reduction in expenses associated with the development of our transdermal pain patch.

Impairment of In-Process Research and Development . We recorded an impairment charge of $8,100,000 for the year ended December 31, 2013 to the in-process research and development of our HepaMate technology. Our strategy has evolved to become a provider of advanced wound care products. We do not intend to further develop this technology nor do we intend to allocate any new capital to this technology. In 2013 we engaged an investment bank to find a strategic partner for the technology; however this process has been unsuccessful. See Note 7 – Intangible Assets for further discussion.

Change in Value of Warrant Liability. The change in value of our warrant liability for the year ended December 31, 2013 was $1,833,498 compared to $0 for the year ended December 31, 2012. The loss recorded resulted from an increase in the fair value of our warrant liability attributable to the increase in the fair value of our common stock during the year ended December 31, 2013.

Liquidity and Capital Resources

Year Ended December 31, 2013 Compared to the Year Ended December 31, 2012

At December 31, 2013, we had cash and cash equivalents totaling $12,100,544 compared to $260,357 at December 31, 2012. The increase was largely attributable to net financing proceeds of $16,727,293 offset by cash used in operating activities of $4,769,039 during the year ended December 31, 2013.

Net cash flow used in operating activities was $4,769,039 and $1,966,093 for the years ended December 31, 2013 and 2012, respectively. The increase was primarily attributable to an increase in net loss excluding impairment of in-process research and development, stock compensation and other non-cash items of $5,736,827 offset by an increase in accrued expenses and other liabilities compared to the prior year.

Cash flow generated from financing activities was $16,727,293 for the year ended December 31, 2013, compared to cash flow generated from financing activities of $2,052,525 for the year ended December 31, 2012.

At December 31, 2013, current assets totaled $12,847,234 and current liabilities totaled $3,353,464, as compared to current assets of $882,196 and current liabilities of $1,532,497 at December 31, 2012. As a result, we had working capital of $9,493,770 at December 31, 2013 compared to a working capital deficit of $650,301 at December 31, 2012.

	27

Our cash requirements have historically been for product development, clinical trials, marketing and sales activities, finance and administrative costs, capital expenditures and overall working capital. We have experienced negative operating cash flows since inception and have funded our operations primarily from sales of common stock and other securities.

Liquidity Outlook

We have revamped our strategy to focus on being a provider of wound care solutions as well as continuing to be a contract manufacturer. The use of proceeds from our 2013 financings will largely be used to support the sales and marketing of our wound care solutions.

In 2013, we restructured our senior management team with the goal of maximizing the potential for success in achieving our sales and marketing goals. In addition to appointing a new chief executive officer and chief financial officer, we have also hired a number of senior sales and marketing executives and professionals. We expect to continue to attend trade shows and seek other avenues to market our products. In January 2014, we hired a chief medical officer.

During 2013, we also established an independent network of agents to sell our wound care products as well as an extensive channel reach through a network of distributors. To enhance our sales efforts, we intend to hire approximately 20 direct sales agents in 2014. We expect to increase our number of employees from 21 at December 31, 2013 to approximately 45 by March 31, 2014.

We continue to focus our efforts on expanding our product offerings. We are seeking complementary products to our hydrogels in an effort to expand our offerings. In addition, we are seeking ways to modify products’ size, shape or thickness in order to appeal to a broader marketplace.

In September 2013, we entered into a distributor agreement with Sorbion, pursuant to which we became the exclusive distributor of sorbion sachet S, sorbion sana and new products with hydrokinetic fibers as primary dressings in the U.S., Canada and Latin America, subject to certain exceptions.

In September 2013, we entered into an agreement with Carolon pursuant to which, among other things, Carolon transferred certain assets related to sorbion sachet and sana products to us, including its saleable inventory, customer information, sales and training materials, customer orders and certain sales force members.

In November 2013, we entered into agreements with CCT, pursuant to which we received the right to develop and market the advanced wound care products Biovance and ECM. Under these agreements, CCT will also supply us with our entire requirements of Biovance for distribution and sale in the U.S.

We believe that our cash on hand and our cash generated from operations will be sufficient to fund our business for the next 12 months. However, our future results of operations involve significant risks and uncertainties. Factors that could affect the our future operating results and cause actual results to vary materially from expectations include, but are not limited to, potential demand for our products, risks from competition, regulatory approval of our new products, technological change, and dependence on key personnel.

In order to complete our future growth strategy, we will require additional equity and/or debt financing. If we are unable to raise additional capital or we encounter circumstances that place unforeseen constraints on our capital resources, we will be required to take even stronger measures to conserve liquidity, which may include, but are not limited to, eliminating all non-essential positions and ceasing all marketing efforts. We would have to curtail business development activities and suspend the pursuit of our business plan. There can be no assurance that we will be successful in improving revenues, reducing expenses and/or securing additional capital in sufficient amounts and on terms favorable to us.

Off Balance Sheet Arrangements

As of December 31, 2013, we had no off-balance sheet arrangements in the nature of guarantee contracts, retained or contingent interests in assets transferred to unconsolidated entities (or similar arrangements serving as credit, liquidity or market risk support to unconsolidated entities for any such assets), or obligations (including contingent obligations) arising out of variable interests in unconsolidated entities providing financing, liquidity, market risk or credit risk support to us, or that engage in leasing, hedging or research and development services with us.

	28

Critical Accounting Policies and Estimates

The preparation of financial statements in accordance with generally accepted accounting principles requires that we make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of our financial statements and the reported amounts of revenues and expenses during the reporting period. The accounting policies that we believe require more significant estimates and assumptions include: in-process research and development, long-lived assets and goodwill. We base our estimates and assumptions on historical experience, known or expected trends and various other assumptions that we believe to be reasonable. As future events and their effects cannot be determined with precision, actual results could differ significantly from these estimates, which may cause our future results to be significantly affected.

We believe that the following critical accounting policies comprise the more significant estimates and assumptions used in the preparation of our consolidated financial statements.

Acquired In-Process Research and Development

In-process research and development (“IPR&D”) represents the fair value assigned to incomplete research projects that we acquire through business combinations which, at the time of acquisition, have not reached technological feasibility. Amounts capitalized as IPR&D are accounted for as indefinite-lived intangible assets, subject to impairment testing until completion or abandonment of the projects. Once an IPR&D project has been completed, the useful life of the IPR&D asset is determined and amortized accordingly. If the IPR&D asset is abandoned, the remaining carrying value will be written off. Our in-process research and development technology represents HepaMate™ patented biotech technologies that currently have no commercial use. HepaMate™ is an extracorporeal (outside the body), temporary liver support system designed to provide ‘whole’ liver function to patients with acute or severe liver failure. During the fourth quarter of 2013, we believed there were impairment triggering events and circumstances which warranted an evaluation of certain indefinite-lived intangible assets. As a result of our assessment, we recognized impairment of our IPR&D of $8,100,000.

Impairment of Long-Lived Assets Subject to Amortization

We amortize intangible assets with finite lives over their estimated useful lives and review them for impairment at least annually or whenever an impairment indicator exists. We continually monitor events and changes in circumstances that could indicate carrying amounts of our long-lived assets, including our intangible assets, may not be recoverable. When such events or changes in circumstances occur, we assess recoverability by determining whether the carrying value of such assets will be recovered through the undiscounted expected future cash flows. If the future undiscounted cash flows are less than the carrying amount of these assets, we recognize an impairment loss based on the excess of the carrying amount over the fair value of the assets. There were no long-lived asset impairment charges recorded during the years ended December 31, 2013 and 2012.

Goodwill

Goodwill represents the excess purchase price of acquired businesses over the fair values attributed to underlying net tangible assets and identifiable intangible assets. We assess the recoverability of goodwill annually, at the beginning of the fourth quarter of each fiscal year, and between annual tests if an event occurs or circumstances change that would indicate the carrying amount may be impaired. Impairment testing for goodwill is done at a reporting unit level. Under Financial Accounting Standards Board guidance for goodwill and other intangible assets, a reporting unit is defined as an operating segment or one level below the operating segment, called a component. However, two or more components of an operating segment will be aggregated and deemed a single reporting unit if the components have similar economic characteristics. In 2013, we adopted authoritative accounting guidance that allows us to first assess qualitative factors to determine whether it is necessary to perform the more detailed two-step quantitative goodwill impairment test. We perform the quantitative test if its qualitative assessment determined it is more likely than not that a reporting unit’s fair value is less than its carrying amount. We may elect to bypass the qualitative assessment and proceed directly to the quantitative test for any reporting unit. When performing the quantitative test, an impairment loss is recognized if the carrying amount of the reporting unit’s net assets exceeds the estimated fair value of the reporting unit and the carrying amount of reporting unit goodwill is determined to exceed the implied fair value of that goodwill. The estimated fair value of a reporting unit is calculated using a discounted cash flow model.

	29

Recent Accounting Pronouncements

There are no accounting standards that have been issued but not yet adopted that we believe will have a material impact on our consolidated financial position or results of operations.

ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

Not applicable.

ITEM 8. FINANCIAL STATEMENTS AND SUPPLMENTARY DATA

Our Consolidated Financial Statements and the relevant notes to those statements are attached to this report beginning on page F-1.

ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE

None.

ITEM 9A. CONTROLS AND PROCEDURES.

Disclosure Controls and Procedures .

We conducted an evaluation of the effectiveness of our “disclosure controls and procedures” (“Disclosure Controls”), as defined by Rules 13a-15(e) and 15d-15(e) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), as of December 31, 2013, the end of the period covered by this Annual Report on Form 10-K. The Disclosure Controls evaluation was done under the supervision and with the participation of management, including our chief executive officer and chief financial officer. There are inherent limitations to the effectiveness of any system of disclosure controls and procedures. Accordingly, even effective disclosure controls and procedures can only provide reasonable assurance of achieving their control objectives. Based upon this evaluation, our chief executive officer and chief financial officer have concluded that our Disclosure Controls were effective at the reasonable assurance level as of December 31, 2013.

Management’s Report on Internal Control over Financial Reporting .

Management is responsible for establishing and maintaining adequate internal control over financial reporting, as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act. Our internal control over financial reporting is designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of the consolidated financial statements for external reporting purposes in accordance with generally accepted accounting principles.

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness of internal control over financial reporting to future periods are subject to the risk that controls may become inadequate because of changes in conditions or that the degree of compliance with the policies or procedures may deteriorate over time.

Management, including our chief executive officer and chief financial officer, assessed the effectiveness of our internal control over financial reporting as of December 31, 2013. In making this assessment, management used the criteria set forth by the Committee of Sponsoring Organizations of the Treadway Commission (“COSO”) in Internal Control—Integrated Framework (1992) . Based on its assessment and those criteria, management has concluded that we maintained effective internal control over financial reporting as of December 31, 2013.

Changes in Internal Control over Financial Reporting .

There have been no changes in our internal control over financial reporting during the quarter ended December 31, 2013 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

	30

ITEM 9B. OTHER INFORMATION

None.

PART III

ITEM 10. DIRECTORS, EXECUTIVE OFFIERS AND CORPORATE GOVERNANCE

Information with respect to this item will be set forth in our definitive Proxy Statement for the 2014 Annual Meeting of Shareholders, which is to be filed with the Securities and Exchange Commission no later than April 30, 2014, (our “Proxy Statement”), and which is incorporated herein by reference.

We have adopted a code of corporate governance and ethics that applies to all our directors and employees, including the principal executive officer, principal financial officer, principal accounting officer and controller. The full text of our Amended and Restated Code of Corporate Governance and Ethics is published on the Investors section of our website at www.alliqua.com. We intend to disclose any future amendments to certain provisions of the Amended and Restated Code of Corporate Governance and Ethics, or waivers of such provisions granted to executive officers and directors, on this website within four business days following the date of any such amendment or waiver.

ITEM 11. EXECUTIVE COMPENSATION

Information with respect to this item will be set forth in our Proxy Statement, and is incorporated herein by reference.

ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS

Information with respect to this item will be set forth in our Proxy Statement, and is incorporated herein by reference.

ITEM 13. CERTAIN RELATIONSHIP AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE

Information with respect to this item will be set forth in our Proxy Statement, and is incorporated herein by reference.

ITEM 14. PRINCIPAL ACCOUNTING FEES AND SERVICES

Information with respect to this item will be set forth in our Proxy Statement, and is incorporated herein by reference.

ITEM 15. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES

The following documents are filed as part of this report:

(1)

Financial Statement Schedules:

	Report of Independent Registered Public Accounting Firm	F-2
	Consolidated Balance Sheets as of December 31, 2013 and 2012	F-3
	Consolidated Statements of Operations for the years ended December 31, 2013 and 2012	F-4
	Consolidated Statements of Stockholders’ Equity for the years ended December 31, 2013 and 2012	F-5
	Consolidated Statements of Cash Flows for the years ended December 31, 2013 and 2012	F-6
	Notes to Consolidated Financial Statements	F-7

(2)

Financial Statement Schedules:

None

(3)

Exhibits:

See “Index to Exhibits” for a description of our exhibits.

	31

SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

	ALLIQUA, INC.
	By:	/s/ DAVID JOHNSON
	David Johnson
	President and Chief Executive Officer

Date: March 24, 2014

Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the Registrant and in the capacities and on the dates indicated.

Signature	Title	Date

/s/ DAVID JOHNSON	President, Chief Executive	March 24, 2014
David Johnson	Officer and Director
	(principal executive officer)

/s/ BRIAN M. POSNER	Chief Financial Officer, Treasurer and	March 24, 2014
Brian M. Posner	Secretary (principal financial and
	accounting officer)

/s/JEROME ZELDIS	Chairman of the Board of Directors	March 24, 2014
Jerome Zeldis, M.D., Ph.D.

/s/ JOSEPH LEONE	Director	March 24, 2014
Joseph Leone

/s/ PERRY KARSEN	Director	March 24, 2014
Perry Karsen

/s/ KENNETH PEARSEN	Director	March 24, 2014
Kenneth Pearsen

/s/ JEFFREY SKLAR	Director	March 24, 2014
Jeffrey Sklar

	32

Index to Exhibits

Exhibit No.		Description

3.1		Composite Articles of Incorporation of Alliqua, Inc., incorporated by reference to Exhibit 3.1 to the Form 10-K/A filed May 16, 2013.

3.2		Articles of Amendment to Articles of Incorporation of Alliqua, Inc., incorporated by reference to Exhibit 3.1 to the Form 8-K filed September 27, 2013.

3.3		Certificate of Designation of the Relative Rights and Preferences of the Series A Convertible Preferred Stock, incorporated by reference to Exhibit 3.1 to the Form 8-K filed October 28, 2013.

3.4		Articles of Amendment to the Articles of Incorporation, incorporated by reference to Exhibit 3.1 to the Form 8-K filed November 19, 2013.

3.5		Amended and Revised Bylaws, incorporated by reference to Exhibit 3.2 to the Form 8-K filed June 10, 2010.

4.1		Form of Series E Stock Purchase Warrant, incorporated by reference to Exhibit 4.1 to the Form 8-K filed May 17, 2010.

4.2		Form of Series F Stock Purchase Warrant, incorporated by reference to Exhibit 4.2 to the Form 8-K filed May 17, 2010.

4.3		Investor Warrant Issued March 2, 2011, incorporated by reference to Exhibit 10.2 to the Form 8-K filed March 3, 2011.

4.4		Placement Agent Warrant Issued March 2, 2011, incorporated by reference to Exhibit 10.3 to the Form 8-K filed March 3, 2011.

4.5		Form of Warrant used in connection with February 16, 2012 private placement, incorporated by reference to Exhibit 10.2 to the Form 8-K filed February 21, 2012.

4.6		Form of Warrant used in connection with August 14, 2012 private placement, incorporated by reference to Exhibit 10.2 to the Form 8-K filed August 16, 2012.

4.7		Form of Warrant used in connection with November 8, 2012 private placement, incorporated by reference to Exhibit 10.2 to the Form 8-K filed November 14, 2012.

4.8		Form of Warrant used in connection with February 22, 2013 private placement, incorporated by reference to Exhibit 10.2 to the Form 8-K filed February 25, 2013.

4.9		Form of Warrant used in connection with April and May 2013 private placement, incorporated by reference to Exhibit 10.2 to the Form 8-K filed April 26, 2013.

4.10		Form of Warrant used in connection with June 28, 2013 private placement, incorporated by reference to Exhibit 10.2 to the Form 8-K filed July 5, 2013.

4.11		Form of $0.10 Warrant used in connection with October 22, 2013 private placement, incorporated by reference to Exhibit 10.2 to the Form 8-K filed October 28, 2013.

	33

4.12*		Warrant issued to Celgene Corporation on November 18, 2013.

4.13*		Form of Warrant used in connection with November 18, 2013 private placement.

10.1+		2001 Incentive Stock Purchase Plan, incorporated by reference to Exhibit 10.2 to the Form S-8 filed on May 8, 2003.

10.2+		Form of Nonstatutory Stock Option Agreement under the 2001 Incentive Stock Purchase Plan, incorporated by reference to Exhibit 10.2 to the Form 10-K/A filed May 16, 2013.

10.3+		Form of Incentive Stock Option Agreement under the 2001 Incentive Stock Purchase Plan, incorporated by reference to Exhibit 10.3 to the Form 10-K/A filed May 16, 2013.

10.4		Form of Subscription Agreement, incorporated by reference to Exhibit 10.3 to the Form 8-K filed on May 17, 2010.

10.5+		Form of Offer Letter, incorporated by reference to Exhibit 10.1 to the Form 8-K filed January 5, 2011.

10.6+		Form of Indemnification Agreement, incorporated by reference to Exhibit 10.2 to the Form 8-K filed January 5, 2011.

10.7		Securities Purchase Agreement, dated as of March 2, 2011, by and between the Company and the purchasers identified therein, incorporated by reference to Exhibit 10.1 to the Form 8-K filed March 3, 2011.

10.8		Exclusive License Agreement, dated as of July 15, 2011, by and between Noble Fiber Technologies, LLC and Alliqua Biomedical, Inc., incorporated by reference to Exhibit 10.1 to the Form 8-K filed July 20, 2011.

10.9		Collateral Assignment of 510(k) Rights, dated as of July 15, 2011, by and between Noble Fiber Technologies, LLC and Alliqua Biomedical, Inc., incorporated by reference to Exhibit 10.1 to the Form 8-K filed July 20, 2011.

10.10+		Alliqua, Inc. 2011 Long-Term Incentive Plan, incorporated by reference to Exhibit 10.1 to the Form 8-K filed December 20, 2011.

10.11		Form of Securities Purchase Agreement, by and among Alliqua, Inc. and certain purchasers set forth therein, incorporated by reference to Exhibit 10.1 to the Form 8-K filed February 21, 2012.

10.12+		Executive Employment Agreement, dated as of May 16, 2012, by and between the Company and Richard Rosenblum, incorporated by reference to Exhibit 10.1 to the Form 8-K filed May 17, 2012.

10.13+		Executive Employment Agreement, dated as of May 31, 2012, by and between the Company and David Stefansky, incorporated by reference to Exhibit 10.1 to the Form 8-K filed June 5, 2012.

10.14		Securities Purchase Agreement, dated as of August 14, 2012, by and among Alliqua, Inc. and certain purchasers set forth therein, incorporated by reference to Exhibit 10.1 to the Form 8-K filed August 16, 2012.

10.15+		Executive Employment Agreement, dated September 28, 2012, by and between Alliqua, Inc. and James Sapirstein, incorporated by reference to Exhibit 10.1 to the Form 8-K filed October 3, 2012.

	34

10.16		Securities Purchase Agreement, dated as of November 8, 2012, by and among Alliqua, Inc. and certain purchasers set forth therein, incorporated by reference to Exhibit 10.1 to the Form 8-K filed November 14, 2012.

10.17+		Nonqualified Stock Option Agreement, dated as of November 8, 2012, by and between the Company and James Sapirstein, incorporated by reference to Exhibit 10.21 to the Form 10-K/A filed May 16, 2013.

10.18+		Restricted Stock Unit Award, dated as of November 8, 2012, by and between the Company and James Sapirstein, incorporated by reference to Exhibit 10.22 to the Form 10-K/A filed May 16, 2013.

10.19+		Nonqualified Stock Option Agreement, dated as of November 27, 2012, by and between the Company and Jerome Zeldis, incorporated by reference to Exhibit 10.23 to the Form 10-K/A filed May 16, 2013.

10.20+		Nonqualified Stock Option Agreement, dated as of November 27, 2012, by and between the Company and Joseph Leone, incorporated by reference to Exhibit 10.24 to the Form 10-K/A filed May 16, 2013.

10.21+		Nonqualified Stock Option Agreement, dated as of November 27, 2012, by and between the Company and Ken Londoner, incorporated by reference to Exhibit 10.25 to the Form 10-K/A filed May 16, 2013.

10.22+		Nonqualified Stock Option Agreement, dated as of November 27, 2012, by and between the Company and Jeffrey Sklar, incorporated by reference to Exhibit 10.26 to the Form 10-K/A filed May 16, 2013.

10.23+		Nonqualified Stock Option Agreement, dated as of November 27, 2012, by and between the Company and Steven Berger, incorporated by reference to Exhibit 10.27 to the Form 10-K/A filed May 16, 2013.

10.24+		Nonqualified Stock Option Agreement, dated as of November 27, 2012, by and between the Company and Jerome Zeldis, incorporated by reference to Exhibit 10.28 to the Form 10-K/A filed May 16, 2013.

10.25+		Nonqualified Stock Option Agreement, dated as of November 27, 2012, by and between the Company and Kenneth Pearsen, incorporated by reference to Exhibit 10.29 to the Form 10-K/A filed May 16, 2013.

10.26+		Nonqualified Stock Option Agreement, dated as of November 29, 2012, by and between the Company and David Johnson, incorporated by reference to Exhibit 10.30 to the Form 10-K/A filed May 16, 2013.

10.27+		First Amendment to the Alliqua, Inc. 2011 Long-Term Incentive Plan, incorporated by reference to Exhibit 10.1 to the Form 8-K filed December 20, 2012.

10.28+		Form of Nonstatutory Stock Option Agreement under the 2011 Long-Term Incentive Plan, incorporated by reference to Exhibit 10.32 to the Form 10-K/A filed May 16, 2013.

10.29+		Form of Incentive Stock Option Agreement under the 2011 Long-Term Incentive Plan, incorporated by reference to Exhibit 10.33 to the Form 10-K/A filed May 16, 2013.

10.30+		Executive Employment Agreement, dated as of February 4, 2013, between Alliqua, Inc. and David Johnson, incorporated by reference to Exhibit 10.1 to the Form 8-K filed February 7, 2013.

10.31+		First Amendment to Executive Employment Agreement, dated as of February 4, 2013, between Alliqua, Inc. and James Sapirstein, incorporated by reference to Exhibit 10.2 to the Form 8-K filed February 7, 2013.

	35

10.32+		Indemnification Agreement, dated as of February 4, 2013, in favor of David Johnson, incorporated by reference to Exhibit 10.3 to the Form 8-K filed February 7, 2013.

10.33		Securities Purchase Agreement, dated as of February 22, 2013, by and among Alliqua, Inc. and certain purchasers set forth therein, incorporated by reference to Exhibit 10.1 to the Form 8-K filed February 25, 2013.

10.34		Securities Purchase Agreement, dated as of April 11, 2013, by and among Alliqua, Inc. and certain purchasers set forth therein, incorporated by reference to Exhibit 10.1 to the Form 8-K filed April 26, 2013.

10.35+		Separation and General Release Agreement, dated as of June 28, 2013, by and between Alliqua, Inc. and Richard Rosenblum, incorporated by reference to Exhibit 10.1 to the Form 8-K filed July 5, 2013.

10.36+		Consulting Agreement, dated as of June 28, 2013, by and between Alliqua, Inc. and Richard Rosenblum, incorporated by reference to Exhibit 10.2 to the Form 8-K filed July 5, 2013.

10.37		Securities Purchase Agreement, dated as of June 28, 2013, by and among Alliqua, Inc. and certain purchasers set forth therein, incorporated by reference to Exhibit 10.3 to the Form 8-K filed July 5, 2013.

10.38+		Offer Letter to Brian Posner, dated July 19, 2013, incorporated by reference to Exhibit 10.1 to the Form 8-K filed September 9, 2013.

10.39+		Nonqualified Stock Option Agreement, dated September 3, 2013, between Brian Posner and Alliqua, Inc., incorporated by reference to Exhibit 10.2 to the Form 8-K filed September 9, 2013.

10.40+		Transition Agreement and Release, dated September 3, 2013, between Steven Berger and Alliqua, Inc., incorporated by reference to Exhibit 10.3 to the Form 8-K filed September 9, 2013.

10.41+		Nonqualified Stock Option Agreement, dated September 3, 2013, between Steven Berger and Alliqua, Inc., incorporated by reference to Exhibit 10.4 to the Form 8-K filed September 9, 2013.

10.42^		Distributor Agreement, dated September 23, 2013, by and between Sorbion GmbH & Co KG and Alliqua Biomedical, Inc., incorporated by reference to Exhibit 10.5 to the Form 10-Q filed November 12, 2013.

10.43		Agreement, dated September 23, 2013, by and between Carolon Company and Alliqua Biomedical, Inc., incorporated by reference to Exhibit 10.6 to the Form 10-Q filed November 12, 2013.

10.44		Securities Purchase Agreement, dated as of October 22, 2013, by and between Alliqua, Inc. and Crossover Healthcare Fund, LLC, incorporated by reference to Exhibit 10.2 to the Form 8-K filed October 28, 2013.

10.45		Amendment to Securities Purchase Agreement, dated as of November 6, 2013, by and between Alliqua, Inc. and Crossover Healthcare Fund, LLC, incorporated by reference to Exhibit 10.1 to the Form 8-K filed November 12, 2013.

10.46+		Separation and General Release Agreement, dated as of November 11, 2013, by and between Alliqua, Inc. and David Stefansky, incorporated by reference to Exhibit 10.7 to the Form 10-Q filed November 12, 2013.

10.47+		Consulting Agreement, dated as of November 11, 2013, by and between Alliqua, Inc. and David Stefansky, incorporated by reference to Exhibit 10.8 to the Form 10-Q filed November 12, 2013.

	36

10.48*^^		License, Marketing and Development Agreement, dated as of November 14, 2013, by and between Anthrogenesis Corporation, d/b/a CCT, and Alliqua, Inc.

10.49*^^		Supply Agreement, dated as of November 14, 2013, by and between Anthrogenesis Corporation and Alliqua, Inc.

10.50*		Stock Purchase Agreement, dated as of November 14, 2013, by and between Celgene Corporation and Alliqua, Inc.

10.51*		Securities Purchase Agreement, dated as of November 18, 2013, by and among Alliqua, Inc. and certain purchasers set forth therein.

10.52		First Amendment to Executive Employment Agreement dated December 20, 2013, by and between Alliqua, Inc. and David Johnson, incorporated by reference to Exhibit 10.1 to the Form 8-K filed December 27, 2013.

10.53		Nonqualified Stock Option Agreement dated December 20, 2013, by and between Alliqua, Inc. and David Johnson, incorporated by reference to Exhibit 10.2 to the Form 8-K filed December 27, 2013.

10.54+		Option Cancellation and Release Agreement, dated January 6, 2014, by and between Alliqua, Inc. and Richard Rosenblum, incorporated by reference to Exhibit 10.1 to the Form 8-K filed January 10, 2014.

10.55+		Option Cancellation and Release Agreement, dated January 6, 2014, by and between Alliqua, Inc. and David Stefansky, incorporated by reference to Exhibit 10.2 to the Form 8-K filed January 10, 2014.

10.62*+		Form of Restricted Stock Award Agreement under the 2011 Long-Term Incentive Plan.

10.63*+		Form of Restricted Stock Award Agreement for 2013 Executive Bonuses under the 2011 Long-Term Incentive Plan.

21.1		List of Subsidiaries, incorporated by reference to Exhibit 21.1 to the Form 10-K/A filed May 16, 2013.

23.1*		Consent of Independent Registered Public Accounting Firm to the Form 10-K.

31.1*		Certification of Chief Executive Officer Pursuant to Section 302 of Sarbanes-Oxley Act of 2002

31.2*		Certification of Chief Financial Officer Pursuant to Section 302 of Sarbanes-Oxley Act of 2002

32.1*		Certification of Chief Executive Officer Pursuant to Section 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

32.2*		Certification of Chief Financial Officer Pursuant to Section 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

101**		The following materials from the Company’s Annual Report on Form 10-K for the year ended December 31, 2013, formatted in XBRL (eXtensible Business Reporting Language), (i) Consolidated Balance Sheets, (ii) Consolidated Statements of Operations, (iii) Consolidated Statements of Stockholders’ Equity, (iv) Consolidated Statements of Cash Flows, and (v) Notes to the Consolidated Financial Statements

* Filed herewith.

** Pursuant to Rule 406T of Regulation S-T, the Interactive Data Files on Exhibit 101 hereto are deemed not filed or part of a registration statement or prospectus for purposes of Sections 11 or 12 of the Securities Act of 1933, as amended, are deemed not filed for purposes of Section 18 of the Securities and Exchange Act of 1934, as amended, and otherwise are not subject to liability under those sections.

^ Confidential treatment has been granted with respect to certain portions of this exhibit.

^^ Certain portions of this exhibit have been omitted and filed separately with the Securities and Exchange Commission under a confidential treatment request pursuant to Rule 24b-2 of the Securities Exchange Act of 1934, as amended.

+ Management contract or compensatory plan or arrangement.

	37

ALLIQUA INC. AND SUBSIDIARIES

INDEX TO CONSOLIDATED FINANCIAL STATEMENTS

Consolidated Financial Statements

Report of Independent Registered Public Accounting Firm	F-2
Consolidated Balance Sheets as of December 31, 2013 and 2012	F-3
Consolidated Statements of Operations for the years ended December 31, 2013 and 2012	F-4
Consolidated Statements of Stockholders’ Equity for the years ended December 31, 2013 and 2012	F-5
Consolidated Statements of Cash Flows for the years ended December 31, 2013 and 2012	F-6
Notes to Consolidated Financial Statements	F-7

	F-1

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Audit Committee of the

Board of Directors and Stockholders

of Alliqua, Inc. and Subsidiaries

We have audited the accompanying consolidated balance sheets of Alliqua, Inc. and Subsidiaries (the “Company”) as of December 31, 2013 and 2012, and the related consolidated statements of operations, stockholders’ equity and cash flows for the years then ended. These consolidated financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these financial statements based on our audits.

We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. Our audit included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion. An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of Alliqua, Inc. and Subsidiaries, as of December 31, 2013 and 2012, and the results of its consolidated operations and its cash flows for the years then ended in conformity with accounting principles generally accepted in the United States of America.

/s/ Marcum LLP

Marcum LLP
New York , NY
March 24, 2014

	F-2

ALLIQUA, INC. AND SUBSIDIARIES

Consolidated Balance Sheets

		December 31,		December 31,
		2013		2012
ASSETS:
Current Assets:
Cash and cash equivalents	$	12,100,544	$	260,357
Accounts receivable		156,831		108,866
Inventory		501,469		319,326
Prepaid expenses and other current assets		88,390		193,647
Total current assets		12,847,234		882,196
Improvements and equipment, net		1,745,248		1,915,179
Intangible assets, net		2,258,477		10,329,167
Goodwill		425,969		425,969
Other assets		174,640		174,640
Total assets	$	17,451,568	$	13,727,151

LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
Accounts payable	$	746,609	$	572,635
Accrued expenses		1,267,899		249,728
Payable for distribution rights		333,333		-
Deferred revenue		39,000		39,000
Warrant liability		933,465		605,737
Deferred lease incentive liability - current		8,337		-
Other current liabilities		24,821		65,397
Total current liabilities		3,353,464		1,532,497
Deferred lease incentive liability		92,408		-
Deferred tax obligation		53,000		44,000
Total liabilities		3,498,872		1,576,497

Commitments and Contingencies

Stockholders' Equity
Preferred Stock, par value $0.001 per share, 1,000,000 shares authorized, no shares issued and outstanding		-		-
Common Stock, par value $0.001 per share, 45,714,286 shares authorized; 11,484,191 and 5,924,627 shares issued and outstanding as of December 31, 2013 and December 31, 2012, respectively		11,484		5,925
Additional paid-in capital		58,538,491		34,785,126
Subscription receivable		-		(20,000)
Accumulated deficit		(44,597,279)		(22,620,397)
Total stockholders' equity		13,952,696		12,150,654
Total liabilities and stockholders' equity	$	17,451,568	$	13,727,151

The accompanying notes are an integral part of these consolidated financial statements.

	F-3

Alliqua, Inc. and Subsidiaries

Consolidated Statements of Operations

	Year Ended
	December 31,
	2013		2012

Revenue, net of returns, allowances and discounts	$	1,797,745	$	1,228,674

Cost of revenues		2,097,033		1,837,169

Gross loss		(299,288)		(608,495)

Operating expenses
Selling, general and administrative, (inclusive of stock-based compensation compensation of $5,513,861 and $1,975,115 for the years ended December 31, 2013 and 2012 - see Note 10)		11,669,998		4,054,373
Research and product development		63,204		233,819
Impairment of in-process research and development		8,100,000		-
Total operating expenses		19,833,202		4,288,192

Loss from operations		(20,132,490)		(4,896,687)

Other income (expense)
Interest expense		(4,807)		(3,353)
Other income		-		4,888
Interest income		2,913		817
Change in value of warrant liability		(1,833,498)		-
Total other (expense) income		(1,835,392)		2,352

Income tax provision		9,000		11,000

Net loss		(21,976,882)		(4,905,335)

Deemed dividend to preferred stockholders		(462,006)		-
Net loss attributable to common stockholders	$	(22,438,888)	$	(4,905,335)

Basic and diluted net loss per common share	$	(3.14)	$	(0.91)

Weighted average shares used in computing basic and diluted net loss per common share		7,140,613		5,383,995

The accompanying notes are an integral part of these consolidated financial statements.

	F-4

ALLIQUA, INC. AND SUBSIDIARIES

Consolidated Statements of Stockholders' Equity

	Redeemable Series A Convertible Preferred Stock			Common Stock			Additional Paid-in		Subscription		Accumulated		Total Stockholders'
	Shares	Amount		Shares	Amount		Capital		Receivable		Deficit		Equity
Balance, December 31, 2011	-	$	-	4,778,831	$	4,779	$	31,344,369	$	-	$	(17,715,062)	$	13,634,086

Issuance of common stock for cash, net of issuance costs of $87,475 and warrant liabilities of $605,737	-		-	987,429		988		1,465,800		(20,000)		-		1,446,788

Issuance of common stock for services	-		-	57,143		57		249,943		-		-		250,000

Issuance of common stock to related party for services	-		-	101,224		101		299,899		-		-		300,000

Stock-based compensation	-		-	-		-		1,425,115		-		-		1,425,115

Net loss	-		-	-		-		-		-		(4,905,335)		(4,905,335)

Balance, December 31, 2012	-	$	-	5,924,627	$	5,925	$	34,785,126	$	(20,000)	$	(22,620,397)	$	12,150,654

Issuance of common stock for cash, net of issuance costs of $680,132	-		-	4,599,334		4,599		15,772,694		-		-		15,777,293

Issuance of preferred stock for cash, net of cash issuance costs of $70,000, warrant issuance costs of $43,906 and $369,903 discount attributable to warrant and beneficial conversion feature	250,000		516,191	-		-		413,809		-		-		413,809

Preferred stock contingent beneficial conversion feature triggered due to price reset provision	-		(89,379)	-		-		89,379		-		-		89,379

Accretion of discount as deemed dividend on preferred stock	-		462,006	-		-		(462,006)		-		-		(462,006)

Conversion of preferred stock into common stock	(250,000)		(888,818)	279,505		280		888,538		-		-		888,818

Issuance of common stock for services	-		-	26,264		26		87,353		-		-		87,379

Issuance of common stock to related party for services	-		-	372,330		372		1,221,336		-		-		1,221,708

Exercise of warrants	-		-	261,030		261		(261)		-		-		-

Extinguishment of warrant liability	-		-	-		-		1,505,770		-		-		1,505,770

Receipt of subscription receivable	-		-	-		-		-		20,000		-		20,000

Stock-based compensation, net 14,299 of shares withheld for employee taxes	-		-	21,101		21		4,204,753		-		-		4,204,774

Fair value of rent provided by related party	-		-	-		-		32,000		-		-		32,000
														-
Net Loss	-		-	-		-		-		-		(21,976,882)		(21,976,882)

Balance, December 31, 2013	-	$	-	11,484,191	$	11,484	$	58,538,491	$	-	$	(44,597,279)	$	13,952,696

The accompanying notes are an integral part of these consolidated financial statements.

F-5

ALLIQUA, INC. AND SUBSIDIARIES

Consolidated Statements of Cash Flows

	Years Ended December 31,
	2013		2012
Cash Flows From Operating Activities
Net loss	$	(21,976,882)	$	(4,905,335)
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation and amortization		674,225		647,818
Amortization of deferred lease incentive		(695)		-
Deferred income taxes		9,000		11,000
Provision for inventory obsolescence		58,930		17,650
Loss on disposal of property and equipment		19,236		-
Stock-based compensation expense		4,204,774		1,425,115
Impairment of in process research and development		8,100,000		-
Stock issued for services rendered		87,379		250,000
Stock issued for services rendered by related parties		1,221,708		300,000
Change in value of warrant liability		1,833,498		-
Fair value of rent provided by related party		32,000		-
Changes in operating assets and liabilities:
Accounts receivable		(47,965)		(41,093)
Inventory		(241,073)		(106,686)
Prepaid expenses and other current assets		105,257		(133,311)
Accounts payable		173,974		320,883
Accrued expenses and other current liabilities		977,595		208,866
Deferred revenue		-		39,000
Net Cash Used in Operating Activities		(4,769,039)		(1,966,093)

Cash Flows From Investing Activities
Purchase of distribution rights		(66,667)		-
Purchase of property and equipment		(51,400)		(86,186)
Net Cash Used by Investing Activities		(118,067)		(86,186)

Cash Flows From Financing Activities
Net proceeds from issuance of common stock		15,797,293		2,002,525
Net proceeds from issuance of preferred stock		930,000		-
Net proceeds from issuance of notes payable		-		50,000
Net Cash Provided by Financing Activities		16,727,293		2,052,525

Net Increase in Cash and Cash Equivalents		11,840,187		246

Cash and Cash Equivalents - Beginning of year		260,357		260,111

Cash and Cash Equivalents - End of year	$	12,100,544	$	260,357

Supplemental Disclosure of Cash Flows Information
Cash paid during the period for:
Interest	$	4,808	$	3,353
Non-cash investing and financing activities
Cashless warrant exercise	$	1,505,770	$	-
Leasehold improvements provided by landlord	$	101,440	$	-
Conversion of note payable to equity	$	-	$	50,000
Warrant issued to placement agent in connection with preferred stock	$	43,906	$	-
Warrant and beneficial conversion feature issued to investor as discount in connection with preferred stock	$	369,903	$	-
Preferred stock contingent beneficial conversion feature triggered due to price reset provision	$	89,379	$	-
Deemed dividend on preferred stock	$	462,006	$	-
Conversion of preferred stock into common stock	$	888,818	$	-

The accompanying notes are an integral part of these consolidated financial statements.

F-6

ALLIQUA, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Description of Business and Basis of Presentation

Alliqua, Inc. (the “Company”) is a provider of advanced wound care solutions. The Company’s primary business strategy is to create superior outcomes for patients, providers, and partners through its hydrogel technology platform and licensed and proprietary products. Core businesses include advanced wound care and contract manufacturing. The Company seeks to leverage its proprietary hydrogel and licensed technology platform to add value to its own products and those of its partners.

Principles of Consolidation

The accompanying consolidated financial statements include the financial statements of the Company and its wholly-owned subsidiaries, AquaMed Technologies, Inc., HepaLife Biosystems, Inc. and Alliqua Biomedical, Inc. All significant inter-company transactions and accounts have been eliminated in consolidation.

Reclassifications

Certain amounts in prior periods have been reclassified to conform to the current year presentation. Such reclassifications did not have a material effect on the Company’s financial condition or results of operations as previously reported.

Reverse Stock Split

The Company effected a 1-for-43.75 reverse stock split of its outstanding common stock on November 18, 2013. The accompanying consolidated financial statements and accompanying notes to the consolidated financial statements give retroactive effect to the reverse stock split for all periods presented. The shares of common stock retained a par value of $ 0.001 per share. Accordingly, stockholders’ equity reflects the reverse stock split by reclassifying from common stock to additional paid-in capital an amount equal to the par value of the decreased shares resulting from the reverse stock split.

Liquidity

The Company has experienced negative operating cash flows since inception and has funded its operations primarily from sales of common stock and other securities. The Company’s cash requirements have historically been for product development, clinical trials, marketing and sales activities, finance and administrative costs, capital expenditures and overall working capital.

During the year ended December 31, 2013, the Company sold 4,599,334 shares of common stock for total net proceeds of $ 15,797,293 , and 250,000 shares of preferred stock for total net proceeds of $ 930,000 as detailed in Note 10 – Stockholders’ Equity. The Company has revamped strategies to focus on being a provider of wound care solutions as well as continue to be a contract manufacturer. The use of proceeds of the 2013 financings will largely be used to support the sales and marketing of wound care solutions.

In 2013, the Company restructured its senior management team with the goal of maximizing the potential for success in achieving sales and marketing goals. In addition to appointing a new chief executive officer and chief financial officer, the Company has also hired a number of senior sales and marketing executives and professionals. The Company expects to continue to attend trade shows and seek other avenues to market its products. During 2013, the Company also established an independent network of agents to sell wound care products as well as an extensive channel reach through a network of distributors.

The implementation of the growth strategy will continue to result in an increase in the Company’s fixed cost structure. Due to the time delay between outlays for working capital expenditures such as costs to acquire rights to additional products, the hiring and training of sales agents and personnel, pre-launch marketing costs, the purchasing of inventory, and the billing and collection of revenue, the Company expects to record an increase in net operating cash outflows from operations for the first half of 2014 as compared to the last half of 2013.

	F-7

Based on the factors above, the Company believes that cash on hand and cash generated from operations will be sufficient to fund the business for the next 12 months. However, future results of operations involve significant risks and uncertainties. Factors that could affect the Company’s future operating results and cause actual results to vary materially from expectations include, but are not limited to, potential demand for the Company’s products, risks from its competition, regulatory approval of new products, technological change, and dependence on key personnel.

In order to complete the Company’s future growth strategy additional equity and/or debt financing will be required. If unable to raise additional capital or if the Company encounters circumstances that place unforeseen constraints on capital resources, it will be required to take even stronger measures to conserve liquidity, which may include, but are not limited to, eliminating all non-essential positions and ceasing all marketing efforts. The Company would have to curtail business development activities and suspend the pursuit of the Company’s business plan. There can be no assurance that the Company will be successful in improving revenues, reducing expenses and/or securing additional capital in sufficient amounts and on favorable terms.

Summary of Significant Accounting Policies

Use of Estimates in the Financial Statements

The preparation of the consolidated financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the amounts reported in the consolidated financial statements and accompanying notes. These estimates and assumptions include valuing equity securities and derivative financial instruments issued in financing transactions, account receivable reserves, inventory reserves, deferred taxes and related valuation allowances, and the fair values of long lived assets, intangibles and goodwill. Actual results could differ from the estimates.

Cash and Cash Equivalents

The Company considers all highly liquid investments with maturities of three months or less when purchased to be cash equivalents. The Company’s balance of cash and cash equivalents at December 31, 2013 and 2012 consisted principally of bank deposits. From time to time, the Company’s cash account balances may be uninsured or in deposit accounts that exceed Federal Deposit Insurance Corporation guarantee limit. The Company reduces its exposure to credit risk by maintaining its cash deposits with major financial institutions and monitoring their credit ratings.

Accounts Receivable

Trade accounts receivable are stated at the amount the Company expects to collect and do not bear interest. The Company considers the following factors when determining the collectability of specific customer accounts: customer credit-worthiness, past transaction history with the customer, current economic industry trends, and changes in customer payment terms. The Company’s accounts receivable balance is a result of product sales and contract manufacturing. These receivables have historically been paid timely. Due to the nature of the accounts receivable balance, the Company believes there is no significant risk of collection. If the financial condition of the Company’s customers were to deteriorate, adversely affecting their ability to make payments, allowances for doubtful accounts would be required.

Inventory

Inventory is valued at the lower of cost or market on a first-in, first-out basis. Reserves for inventory obsolescence are based on expiration date and are utilized to account for slow-moving inventory. At December 31, 2013 and 2012, the Company had reserves for obsolete inventory of $ 76,580 and $ 17,650 , respectively.

Improvements and Equipment

Improvements and equipment are recorded at cost. Depreciation of equipment is computed utilizing the straight-line method over the estimated useful lives of the assets. Amortization of leasehold improvements is computed utilizing the straight-line method over the shorter of the remaining lease term or estimated useful life. Repairs and maintenance costs are expensed as incurred. Additions and betterments are capitalized.

Acquired In-Process Research and Development

In-process research and development (“IPR&D”) represents the fair value assigned to incomplete research projects that the Company acquires through business combinations which, at the time of acquisition, have not reached technological feasibility. Amounts capitalized as IPR&D are accounted for as indefinite-lived intangible assets, subject to impairment testing until completion or abandonment of the projects. The Company tests IPR&D for impairment at least annually or more frequently if impairment indicators exist.

	F-8

Goodwill and Other Intangible Assets

The Company accounts for goodwill and intangible assets in accordance with the accounting guidance which requires that goodwill and other intangibles with indefinite lives be tested for impairment annually or on an interim basis if events or circumstances indicate that the fair value of an asset has decreased below its carrying value. Goodwill of $ 425,969 was assigned during the acquisition of Hydrogel Design Systems by AquaMed Technologies, Inc. in 2009. The Accounting Standards Codification (“Codification”) requires that goodwill be tested for impairment at the reporting unit level (operating segment or one level below an operating segment). Application of the goodwill impairment test requires judgment, including the identification of reporting units, assigning assets and liabilities to reporting units, assigning goodwill to reporting units, and determining the fair value. Significant judgment is required to estimate the fair value of reporting units which includes estimating future cash flows, determining appropriate discount rates and other assumptions. Changes in these estimates and assumptions could materially affect the determination of fair value and/or goodwill impairment.

When testing goodwill for impairment, the Company may assess qualitative factors for some or all of its reporting units to determine whether it is more likely than not (that is, a likelihood of more than 50 percent) that the fair value of a reporting unit is less than its carrying amount, including goodwill. Alternatively, the Company may bypass this qualitative assessment for some or all of our reporting units and perform a detailed quantitative test of impairment (step 1). If the Company performs the detailed quantitative impairment test and the carrying amount of the reporting unit exceeds its fair value, the Company would perform an analysis (step 2) to measure such impairment. In 2013, the Company first performed a qualitative assessment to identify and evaluate events and circumstances to conclude whether it is more likely than not that the fair value of the Company’s reporting unit is less than its carrying amount. Based on the Company’s qualitative assessments, the Company concluded that a positive assertion can be made from the qualitative assessment that it is not more likely than not that the fair value of the reporting unit is less than its carrying amount. In accordance with the Codification, the Company reviews the carrying value of its intangibles and other long-lived assets for impairment at least annually or whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. Recoverability of long-lived assets is measured by comparing the carrying amount of the asset or asset group to the undiscounted cash flows that the asset or asset group is expected to generate. If the undiscounted cash flows of such assets are less than the carrying amount, the impairment to be recognized is measured by the amount by which the carrying amount of the asset or asset group, if any, exceeds its fair market value. No impairment was deemed to exist as of December 31, 2013.

Impairment of Long-Lived Assets Subject to Amortization

The Company amortizes intangible assets with finite lives over their estimated useful lives and reviews them for impairment annually or whenever an impairment exists. The Company continually evaluates whether events or changes in circumstances might indicate that the remaining estimated useful life of long-lived assets may warrant revision, or that the remaining balance may not be recoverable. When factors indicate that long-lived assets should be evaluated for possible impairment, the Company uses an estimate of the related undiscounted cash flows in measuring whether the long-lived asset should be written down to fair value. Measurement of the amount of impairment would be based on generally accepted valuation methodologies, as deemed appropriate. As of December 31, 2013, Company management believed that no revision to the remaining useful lives or write-down of the Company’s long-lived assets was required, and similarly, no such revisions were required for the year ended December 31, 2012.

Fair Value of Financial Instruments

The carrying amounts reported in the consolidated balance sheets for cash and cash equivalents, accounts receivable and accounts payable and accrued expenses approximate fair value based on the short-term maturity of these instruments.

Fair value is defined as the price that would be received upon selling an asset or the price paid to transfer a liability on the measurement date. It focuses on the exit price in the principal or most advantageous market for the asset or liability in an orderly transaction between willing market participants. A three-tier fair value hierarchy is established as a basis for considering such assumptions and for inputs used in the valuation methodologies in measuring fair value. This hierarchy requires entities to maximize the use of observable inputs and minimize the use of unobservable inputs. The three levels of inputs used to measure fair values are as follows:

Level 1: Observable prices in active markets for identical assets and liabilities.

Level 2: Observable inputs other than quoted prices in active markets for identical assets and liabilities.

Level 3: Unobservable inputs that are supported by little or no market activity and that are significant to the fair value of the assets and liabilities.

	F-9

Revenue Recognition

Revenue is recognized when persuasive evidence of an arrangement exists, delivery has occurred; title and risk of loss have passed to the customer, there is a fixed or determinable sales price, and collectability of that sales price is reasonably assured. Deposits received on product orders are recorded as deferred revenue until revenues are earned when the products are shipped to customers. For irradiation services, the Company records revenue based upon an hourly service charge as services are provided.

Research and Development

Research and development expenses represent costs incurred to develop technology. Research and development expenses are charged to operations as they are incurred, including internal costs, costs paid to sponsoring organizations, and contract services for any third party laboratory work. Research and development expenses are tracked by project. As of December 31, 2013 and 2012 research and development costs totaled $ 63,204 and $ 233,819 , respectively.

Cost of Goods Sold and Selling, General and Administrative Expenses

Costs associated with the production and procurement of product are included in cost of goods sold, including shipping and handling costs such as inbound freight costs, purchasing and receiving costs, inspection costs and other product procurement related charges. All other expenses, excluding interest and income taxes, are included in selling, general and administrative expenses, as the predominant expenses associated therewith are general and administrative in nature.

Advertising Expenses

Advertising and marketing costs are expensed as incurred. Advertising expenses for the years ended December 31, 2013 and 2012 were $ 298,859 and $ 139,024 , respectively.

Shipping and Handling

Shipping and handling costs are paid for by the Company. Shipping and handling costs amounted to approximately $ 23,523 and $ 14,635 as of December 31, 2013 and 2012, respectively, and are included in selling, general and administrative expenses.

Income Taxes

The Company accounts for income taxes pursuant to the asset and liability method which requires deferred tax assets and liabilities to be recognized for the expected future tax consequences attributable to temporary differences between the financial statement carrying amounts and their respective tax bases of assets and liabilities. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in operations in the period enacted. A valuation allowance is provided when it is more likely than not that a portion or all of a deferred tax asset will not be realized. The ultimate realization of deferred tax assets is dependent upon the generation of future taxable income and the reversal of deferred tax liabilities during the period in which related temporary differences become deductible.

The Company adopted the provisions of Accounting Standards Codification Topic 740 (“ASC 740”) related to the accounting for uncertainty in income taxes recognized in an enterprise's consolidated financial statements. ASC 740 prescribes a comprehensive model for the financial statement recognition, measurement, presentation and disclosure of uncertain tax positions taken or expected to be taken in income tax returns.

The benefit of tax positions taken or expected to be taken in the Company's income tax returns are recognized in the financial statements if such positions are more likely than not of being sustained upon examination by taxing authorities. Differences between tax positions taken or expected to be taken in a tax return and the benefit recognized and measured pursuant to the interpretation are referred to as “unrecognized benefits”. A liability is recognized (or amount of net operating loss carryover or amount of tax refundable is reduced) for an unrecognized tax benefit because it represents an enterprise’s potential future obligation to the taxing authority for a tax position that was not recognized as a result of applying the provisions of ASC 740. Interest costs and related penalties related to unrecognized tax benefits are required to be calculated, if applicable. The Company’s policy is to classify assessments, if any, for tax related interest as interest expense and penalties as selling, general and administrative expenses. No interest or penalties were recorded during the years ended December 31, 2013 and 2012. As of December 31, 2013 and December 31, 2012, no liability for unrecognized tax benefits was required to be reported. The Company files tax returns in U.S. federal, state and local jurisdictions, including Pennsylvania, and has tax returns subject to examination by tax authorities beginning in the year ended December 31, 2010. The Company does not expect any significant changes in its unrecognized tax benefits in the next year.

	F-10

Common Stock Purchase Warrants

The Company assesses classification of common stock purchase warrants at each reporting date to determine whether a change in classification between assets and liabilities or equity is required. The Company’s free standing derivatives consist of warrants to purchase common stock that were issued pursuant to a Securities Purchase Agreement on November 8, 2012. The Company evaluated the common stock purchase warrants to assess their proper classification in the consolidated balance sheet and determined that the common stock purchase warrants contain exercise reset provisions. Accordingly, these instruments have been classified as warrant liabilities in the accompanying consolidated balance sheets as of December 31, 2013 and 2012. The Company re-measures warrant liabilities at each reporting and exercise date, with changes in fair value recognized in earnings for each reporting period.

Stock-Based Compensation

The Company measures the cost of services received in exchange for an award of equity instruments based on the fair value of the award. For employees and directors, the fair value of the award is measured on the grant date and for non-employees, the fair value of the award is generally re-measured on interim financial reporting dates and vesting dates until the service period is complete. The fair value amount is then recognized over the period services are required to be provided in exchange for the award, usually the vesting period. The Company recognizes stock-based compensation expense on a graded-vesting basis over the requisite service period for each separately vesting tranche of each award. Stock-based compensation expense is reflected within operating expenses in the consolidated statements of operations. The Company recognizes stock-based compensation expense for awards with performance conditions if and when the Company concludes that it is probable that the performance condition will be achieved. The Company reassesses the probability of vesting at each reporting period for awards with performance conditions and adjusts stock-based compensation expense based on its probability assessment.

Net Loss Per Common Share

Basic net loss per common share is computed based on the weighted average number of shares of common stock outstanding during the periods presented. Common stock equivalents, consisting of warrants, stock options and non-vested restricted stock units (“RSUs”), were not included in the calculation of the diluted loss per share because their inclusion would have been anti-dilutive.

The total common shares issuable upon the exercise of stock options, warrants and non-vested restricted stock units are as follows:

	December 31,
	2013	2012

Stock Options	4,985,586	2,333,822
Warrants	3,822,557	1,004,208
Non-Vested Restricted Stock Units	35,376	70,753
Total	8,843,519	3,408,783

Inventory

Inventory consists of the following:

	December 31,
	2013		2012

Raw materials	$	174,176	$	209,820
Work in process		57,030		25,119
Finished goods		346,843		102,037
Less: Inventory reserve		(76,580)		(17,650)
Total	$	501,469	$	319,326

	F-11

Improvements and Equipment, net

Improvements and equipment consist of the following:

		December 31,
	Useful Life	2013		2012
	(Years)
Machinery and equipment	10	$	2,869,453	$	2,869,453
Office furniture and equipment	10		44,844		40,124
Leasehold improvements	(A)		228,021		108,139
			3,142,318		3,017,716
Less: Accumulated depreciation and amortization			(1,397,070)		(1,102,537)
Improvements and equipment, net		$	1,745,248	$	1,915,179

(A) Leasehold improvements are amortized over the shorter of the remaining lease term or estimated useful life.

Depreciation and amortization expense was $ 303,535 and $ 297,818 for the years ended December 31, 2013 and 2012, respectively.

Accrued Expenses

Accrued expenses consist of the following:

	December 31,
	2013		2012

Salaries, benefits and incentive compensation	$	1,036,771	$	230,281
Professional fees		83,317		11,736
Inventory		127,786		-
Other		20,025		7,711
Total accrued expenses	$	1,267,899	$	249,728

Intangible Assets

Intangible Assets

During the fourth quarter of 2013 the Company tested the in-process research and development, also referred to as the Company’s HepaMate artificial liver technology acquired as part of the 2010 merger with AquaMed, for impairment. Prior to the impairment analysis, the value of the IPR&D remained at the fair value assigned at acquisition of $8,100,000. At acquisition, the project had not reached technological feasibility. The Company has not allocated any resources to the HepaMate technology since the merger other than the fees associated with the maintenance of patents and intellectual property related to the technology. No plans have been made to renew the clinical trials. The Company currently estimates a significant expense over a 5 year period is needed to complete the remainder of the clinical trial process.

The strategy of the Company has evolved to become a provider of advanced wound care products through the sale of its proprietary products and technologies acquired through in-licensing and acquisition. The Company does not intend to further develop the HepaMate technology. In 2013 the Company engaged an investment bank to find a strategic partner for the HepaMate technology however this process has been unsuccessful. Given the change in management as discussed and the refocus of efforts, management does not intend to allocate any new capital towards the development activities of this technology. Management has also considered the marketability and valuation considerations of the technology and has concluded the fair value of the technology to have limited commercial recoverability. As a result of these evaluations, the Company recognized an impairment of IPR&D of $8,100,000 during the year ended December 31, 2013.The evaluation of amounts recoverable in connection with intangible assets is a process that requires considerable exercise of judgment. Had different estimates and assumptions been used in this process, the measured impairments may have been different. The Company will continue to pursue strategies to optimize the value of the HepaMate technology.

The Company reviewed its other intangible definite-lived assets and did not identify any other impairment as of December 31, 2013.

	F-12

The gross carrying amount and accumulated amortization of intangible assets as of December 31, 2013 and 2012 are as follows:

		December 31,
		2013
								Net
	Useful Life	Gross		Accumulated				Carrying
	(Years)	Amount		Amortization		Impairment		Amount

In process research and development		$	8,100,000	$	-	$	(8,100,000)	$	-
Technology	10		3,000,000		(1,475,000)		-		1,525,000
Customer relationships	12		600,000		(245,834)		-		354,166
Distribution rights	5.27		400,000		(20,689)		-		379,311
		$	12,100,000	$	(1,741,523)	$	(8,100,000)	$	2,258,477

		December 31,
		2012
								Net
	Useful Life	Gross		Accumulated				Carrying
	(Years)	Amount		Amortization		Impairment		Amount

In process research and development		$	8,100,000	$	-	$	-	$	8,100,000
Technology	10		3,000,000		(1,175,000)		-		1,825,000
Customer relationships	12		600,000		(195,833)		-		404,167
		$	11,700,000	$	(1,370,833)	$	-	$	10,329,167

Amortization expense attributable to intangible assets for the years ended December 31, 2013 and 2012 was $ 370,690 and $ 350,000 , respectively.

Amortization expense in each of the five years and thereafter subsequent to December 31, 2013 related to the Company’s intangible assets is expected to be as follows:

	Expected
	Amortization
	Expense

2014	$	426,190
2015		426,190
2016		426,190
2017		426,190
2018		424,548
Thereafter		129,169

Total	$	2,258,477

Operating Leases

The Company has an obligation for its corporate offices and commercial manufacturing facility located at 2150 Cabot Boulevard West, Langhorne, Pennsylvania. On July 24, 2013 the Company extended its lease for it operating facilities in Langhorne, PA for an additional period of 10 years commencing on February 1, 2016 and continuing through and including January 31, 2026 . Under the extended lease, the landlord agreed to make certain improvements to the facility. For tenant improvements funded by the landlord, the Company recorded a deferred lease incentive liability in accrued and other long-term liabilities on the consolidated balance sheet and amortizes the deferred liability as a reduction to rent expense on the consolidated statement of operations over the term of the lease. At December 31, 2013, the deferred lease incentive liability was $ 100,745 .

Total rent expense was $ 204,930 and $ 191,597 for the years ended December 31, 2013 and 2012, respectively.

	F-13

Future minimum lease payments, excluding expense reimbursements, under noncancelable operating leases in each of the five years and thereafter subsequent to December 31, 2013 are as follows:

2014	$	204,689
2015		206,250
2016		207,309
2017		207,405
2018		207,405
Thereafter		1,469,119
Total	$	2,502,177

The Company previously had an agreement for shared corporate office space located at 850 3rd Avenue, New York, NY. This agreement was modified in January 2012, such that, the Company issued a related party 45,714 shares of common stock as consideration for an extension of the lease agreement until December 31, 2012 and, effective as of December 31, 2011, the elimination of the requirement to make any further cash payments. At the date of issuance, the common stock was valued at $ 100,000 and the associated expense was amortized over the term of the lease. The Company did not have any right to extend the terms of the lease agreement past December 31, 2012. As the Company was in the process of moving its corporate headquarters to its Langhorne, PA facility, it was authorized to occupy this space through June 30, 2013 at no additional cost. As such, the Company recognized the fair value of the rent of $ 32,000 in the year ended December 31, 2013. Total rent expense for this space amounted to $ 86,000 for the year ended December 31, 2012.

Commitments and Contingencies

Employment Agreements for Former Employees

On May 16, 2012, the Company entered into a three year executive employee agreement with its former president and former Board member retroactive to January 1, 2012. The agreement provided for an annual salary of $ 200,000 in 2012, $ 225,000 in 2013 and $ 250,000 in 2014, payable in a combination of cash and shares of common stock. An option to purchase 125,714 shares of common stock, at an exercise price of $ 8.75 per share, was granted and was scheduled to vest one third each year on the first, second and third anniversary of the date of grant and had a term of ten years. In addition, stock options to purchase 68,571 shares of common stock previously awarded were accelerated to vest and became exercisable on the date of execution of the employment agreement. On November 27, 2012, the executive resigned from his position as president, but remained a member of the Board. On June 28, 2013, the Company entered into a separation and general release agreement with this executive, pursuant to which the employment agreement was terminated effective as of December 31, 2012; non-competition and non-solicitation obligations under the employment agreement remain. All unvested options were immediately vested in full. The Company also entered into a consulting agreement on June 28, 2013, retroactively effective to January 1, 2013, pursuant to which, this former executive will provide consulting services in exchange for (i) a one-time grant of 186,165 shares of common stock, and (ii) monthly payments of $ 2,500 from June 2013 through June 2014. The value of the shares issued were $ 570,130 and are included in stock-based compensation. See Note 10 – Stockholders’ Equity.

On May 31, 2012, the Company entered into a three year executive employee agreement with its former executive chairman and a current Board member retroactive to January 1, 2012. The agreement provided for an annual salary of $ 200,000 in 2012, $ 225,000 in 2013 and $ 250,000 in 2014, payable in a combination of cash and shares of common stock. An option to purchase 125,714 shares of common stock, at an exercise price of $ 8.75 per share, was granted and scheduled to vest one third each year on the first, second and third anniversary of the date of grant and had a term of ten years. In addition, stock options to purchase 68,571 shares of common stock previously awarded were accelerated to vest and became exercisable on the date of execution of the employment agreement. On November 27, 2012, the executive resigned from his position as executive chairman, but remained a member of the Board. On November 11, 2013, the Company entered into a separation and general release agreement with this executive, pursuant to which the employment agreement was terminated effective as of December 31, 2012; non-competition and non-solicitation obligations under the employment agreement remain. All unvested options were immediately vested in full. The Company also entered into a consulting agreement on November 11, 2013, retroactively effective to January 1, 2013 pursuant to which, this former executive will provide consulting services in exchange for (i) a one-time grant of 186,165 shares of common stock, and (ii) monthly payments of $ 2,500 from June 2013 through March 2014. The value of the shares issued were $ 651,578 and are included in stock-based compensation. See Note 10 – Stockholders’ Equity.

Concurrently with the appointment of a new chief financial officer, the former chief financial officer, who also served as secretary and treasurer of the Company, resigned. He remained with the Company through the end of 2013 as vice president of operations to assist with the transition, in accordance with a Transition Agreement and Release dated September 3, 2013. The Company granted an award of nonqualified stock options to purchase 114,286 shares of common stock at an exercise price of $ 4.38 , which vested immediately upon the execution of a release on such date. The options have a term of three years . In addition, options held under the following grants shall remain outstanding and exercisable: (i) incentive stock option granted December 9, 2010 with respect to 22,857 shares of the Company’s common stock granted pursuant to the HepaLife Technologies, Inc. 2001 Incentive Stock Option Plan; (ii) nonqualified stock option agreement dated May 22, 2012 with respect to 22,857 shares of the Company’s common stock granted pursuant to the Alliqua, Inc. 2011 Long-Term Incentive Plan (the “2011 Plan”); and (iii) nonqualified stock option granted November 27, 2012 with respect to 11,429 shares of the Company’s common stock granted pursuant to the 2011 Plan. The Company has also agreed to pay him a monthly stipend of $ 600 per month during 2014.

	F-14

Consulting Agreements

The Company currently has various consulting agreements for management consulting, marketing, public relations, investor relations and research and development. Some agreements are based on fixed fee arrangements and others on specified hourly rates. The total fees included in operating expenses were $ 1,963,114 and $ 292,305 for years ended December 31, 2013 and 2012, respectively. Included in this expense is stock-based compensation of $ 1,309,087 and $550,000 for the years ended December 31, 2013 and 2012, respectively.

Cooperative and License Agreements

On November 20, 2007, the Company exercised its license right under the CRADA by entering into an exclusive license agreement with the USDA, ARS for existing and future patents related to the PICM-19 hepatocyte cell lines. Under this license agreement, the Company is responsible for annual license maintenance fees commencing in 2010 for the term of the license, which is until the expiration of the last to expire licensed patents unless terminated earlier. The license agreement also requires certain milestone payments, if and when milestones are reached, as well as royalties on net sales of resulting licensed products, if any.

On July 15, 2011, the Company, through its Alliqua Biomedical subsidiary, entered into a license agreement with Noble Fiber Technologies, LLC, whereby Alliqua has the exclusive right and license to manufacture and distribute “Silverseal Hydrogel Wound Dressings” and “Silverseal Hydrocolloid Wound Dressings”. The license is granted for ten years with an option to be extended for consecutive renewal periods of two years . An upfront license fee of $ 100,000 was expensed in 2011 as a selling, general and administrative expense. Royalties are to be paid equal to 9.75 % of net sales of licensed products. The agreement calls for minimum royalties to be paid each calendar year as follows: 2013 - $ 200,000 , 2014 - $ 400,000 ; 2015 - $ 500,000 ; and 2016 - $ 600,000 . Total royalties charged to selling, general and administrative expense for the years ended December 31, 2013 and 2012 were $ 200,000 and 50,000 , respectively. The remaining $ 192,987 royalty due for the year ended December 31, 2013, is included in accounts payable.

Sorbion Distributor Agreement

On September 23, 2013, Alliqua Biomedical entered into a distributor agreement (the “Sorbion Agreement”) with Sorbion GmbH & Co KG pursuant to which the Company became the exclusive distributor of sorbion sachet S, sorbion sana and new products with hydrokinetic fibers as primary dressings in the U.S. of America, Canada and Latin America, subject to certain exceptions.

The initial term of the agreement ends on December 31, 2018 and will be extended for additional year terms until December 31, 2023, so long as the Company and Sorbion agree in September as to the minimum annual purchase amount for the calendar year that ends four years from the calendar year of such September.

In order to maintain its exclusivity, the Company must purchase the following minimum amounts, in Euros, of the products for the indicated calendar year:

Calendar Year		Minimum Annual Purchase Amount
2014		500,000 Euros
2015		1,000,000 Euros
2016		2,500,000 Euros
2017		4,000,000 Euros

Since the Company must purchase the minimum amounts in Euros, the equivalent U.S. dollar expenditure will be subject to fluctuations in foreign currency exchange rates.

The minimum annual purchase amounts in US. Dollars for each calendar year in the period from 2014-2017, based on the exchange rate as of December 31, 2013, are $ 689,000 , $ 1,378,000 , $ 3,444,000 , and $ 5,510,000 , respectively.

If the Company fails to purchase products in amounts that meet or exceed the minimum annual purchase amount for a calendar year, it may cure such minimum purchase failure by paying Sorbion in cash an amount equal to the minimum annual purchase amount for such calendar year less the amount the Company paid to Sorbion for the products purchased for such calendar year. If the Company does not cure a minimum purchase failure with a makeup payment for a calendar year, Sorbion may terminate the Company’s exclusivity with respect to the products and grant the Company non-exclusive rights with respect to the products. If the Company does not cure a minimum purchase failure for two subsequent calendar years, Sorbion may terminate the agreement. The Company will not be required to meet the minimal annual purchase amount if Sorbion fails to supply the Company with the products in accordance with the agreement. Sorbion may also terminate the Company’s exclusivity with respect to the products if the Company does not cure a material breach of the agreement within 30 days.

	F-15

The Company has the right to use the trademarks related to the products. The Company will sell the products under their respective trademarked names and at prices determined by the Company. Sorbion may determine in its sole discretion the prices of the products sold to the Company, which are subject to change beginning January 1, 2015. The Company will be eligible for certain discounts with respect to the purchase and shipping of the products if its orders of the products are above certain amounts.

Carolon Distribution Rights Agreement

In September 2013, the Company entered into an agreement with Carolon Company (“Carolon”) pursuant to which, the Company purchased the distribution rights to the sorbion sachet and sana products from Carolon. The Company is committed to pay Carolon (i) an aggregate payment of $ 400,000 in 12 equal monthly payments beginning November 2013, and (ii) if the Company sells at least $ 600,000 of Sorbion sachet products in the 2014 calendar year, $ 50,000 in January 2015. This transaction was recorded as the purchase of distribution rights and was recorded as an intangible asset, subject to amortization over the remaining useful life of sixty-three months, and a corresponding liability of $400,000. In consideration of this agreement, an upfront fee of $ 50,000 for sales and training materials, was expensed in the year ended December 31, 2013 as a selling, general and administrative expense. As of December 31, 2013, the balance of distribution rights payable was $ 333,333 .

Celgene License, Marketing and Development and Supply Agreement

In November 2013, the Company entered into a License, Marketing and Development Agreement (the “License Agreement”) with Anthrogenesis Corporation, d/b/a Celgene Cellular Therapeutics (“CCT”), an affiliate of Celgene, pursuant to which CCT granted the Company an exclusive, royalty-bearing license in its intellectual property of certain placental based products, including ECMs, an extracellularmatrix derived from the human placenta, and Biovance, CCT’s proprietary wound coverings produced from decellularized, dehydrated humanamniotic membrane, to develop and commercialize ECMs and Biovance in the United States. Following the commencement of commercial sales of the licensed products, the Company will pay CCT annual license fees, designated amounts when certain milestone events occur and royalties on all sales of licensed products, with such amounts being variable and contingent on various factors. The initial term of the License Agreement ends on November 14, 2023, unless sooner terminated pursuant to the termination rights under the License Agreement, and will extend for additional two-year terms unless either party gives written notice within a specified period prior to the end of a term. The License Agreement may be terminated (i) by CCT if the Company or any of its affiliates challenges the validity, enforceability or scope of certain enumerated CCT patents anywhere in the world; (ii) by either party if there is a final decree that a licensed product infringed on the intellectual property of a third party; (iii) by either party for breach of the License Agreement, if the breach is not cured within a specified period after receiving written notice of the breach; or (iv) by either party if the other party is the subject of insolvency proceedings, either voluntary or involuntary. In addition, the License Agreement is terminable on a product-by-product basis, and not with respect to the entire License Agreement (i) by CCT in the second year of the License Agreement, and by either CCT or the Company in the third year of the License Agreement and beyond, if the Company fails to meet certain sales thresholds and (ii) by either party upon written notice if outside legal counsel recommends discontinuance of commercialization of a product because of significant safety, legal, or economic risk as a result of a claim, demand or action or as a result of a change in the interpretation of law by a governmental or regulatory authority. The License Agreement also contains mutual confidentiality and indemnification obligations for the Company and CCT.

In November 2013, the Company also entered into a Supply Agreement (the “Supply Agreement”) with CCT, pursuant to which CCT shall supply the Company with the Company’s entire requirements of Biovance for distribution and sale in the United States. The Supply Agreement also provides that the Company and CCT will enter into a supply agreement for ECMs, on substantially the same terms as the Supply Agreement, prior to the anticipated date on which all regulatory approvals or clearances are acquired for the commercial sale of ECMs. The Supply Agreement will be terminated automatically upon the termination of the License Agreement and may otherwise be terminated (i) by CCT upon six months’ prior written notice, (ii) by the Company upon six months’ prior written notice if CCT fails to deliver at least a specified portion of a firm purchase order by the required delivery date specified in the order on at least a specified number of occasions in a specified period; (iii) by either party for breach of the Supply Agreement, if the breach is not cured within a specified period after receiving written notice of the breach; or (iv) by either party if the other party is the subject of insolvency proceedings, either voluntary or involuntary.

In connection with the License and Supply Agreements, the Company entered into a Stock Purchase Agreement with Celgene Corporation in which the Company sold an aggregate of 1,672,474 shares of the Company’s common stock, and a five year warrant to purchase 836,237 shares of common stock at an exercise price of $ 5.69 per share, in exchange for aggregate consideration of $ 6,000,000 . See Note 10 – Stockholders’ Equity.

	F-16

Litigation, Claims and Assessments

The Company is subject to periodic lawsuits, investigations and claims that arise in the ordinary course of business.

On February 27, 2014, ConvaTec Inc. filed suit against the Company and three of its current employees (each a former employee of ConvaTec Inc.), requesting injunctive relief for allegations involving breach of contract, tortious interference with employment agreements, unfair competition and common law conspiracy. ConvaTec Inc. is seeking, among other things, to enjoin the Company from continuing to employ a sales manager who is a former employee of ConvaTec, Inc. in a position related to wound care products and two sales representatives in positions related to wound care products in certain geographic areas .

The Company intends to fully dispute the allegations of ConvaTec Inc. and the relief sought to the fullest extent permitted by the law and believes them to be wholly without merit. The Company does not believe that the results of this suit will have a material adverse impact on its financial position, results of operations or cash flows .

10.

Stockholders’ Equity

Preferred Stock

The Company has authorized 1,000,000 shares of preferred stock, $0.001 par value per share, which may be divided into series and with preferences, limitations and relative rights determined by the Board of Directors.

On October 22, 2013, as amended on November 6, 2013, the Company issued 250,000 shares of Series A Convertible Preferred Stock (the “Preferred Stock”) and a five-year warrant to purchase 126,984 shares of common stock at an exercise price of $ 4.38 per share (the “Investor Warrant”) to an accredited investor in exchange for $ 1,000,000 . The stated value of the Preferred Stock was $ 4.00 per share and it accrued dividends at the rate of 6 % per annum. Each share of Preferred Stock was convertible by the investor at any time into common stock at an initial conversion price of $ 3.94 per share. In connection with the closing of the sale of the Preferred Stock and Investor Warrant, the Company paid $ 70,000 in cash fees to the Company’s placement agent (the “Placement Agent”) and issued a five-year warrant to purchase 8,889 shares of common stock at an exercise price of $ 4.38 per share and a five-year warrant to purchase 8,889 shares of common stock at an exercise price of $ 4.81 per share to the Placement Agent.

On November 18, 2013, the Company closed on a private placement of equity securities (see below for additional details) which, pursuant to the terms of the Preferred Stock, triggered (i) an adjustment of the Preferred Stock conversion price to $ 3.59 per share of Common Stock; and (ii) mandatory conversion of the Preferred Stock into 279,505 shares of common stock (the “Conversion Shares”), which represents the $ 1,000,000 principal amount, plus a 6 % dividend of $ 2,724 , divided by the $3.59 adjusted conversion price.

The Preferred Stock was initially classified as mezzanine (or temporary) equity on the balance sheet, because the Company was obligated to redeem the Preferred Stock on October 21, 2015 if the holders did not elect to convert the Preferred Stock into common stock prior to that date. The Preferred Stock was eventually recorded net of a $ 573,188 discount, which was comprised of a $ 113,906 issuance cost discount and a $459,282 discount associated with the issuance of related equity instruments. The $113,906 issuance cost discount represented $ 70,000 of cash and the $ 43,906 value of the warrants issued to the Placement Agent. The $ 459,282 equity instrument discount was comprised of the $ 240,507 relative fair value of the Investor Warrant, the $ 129,396 value of the initial beneficial conversion feature and the $ 89,379 value of the contingent beneficial conversion feature. The aggregate beneficial conversion feature represented the difference between the $ 978,268 commitment date value of the Conversion Shares (279,505 shares times the $3.50 closing price of the Company’s common stock on October 22, 2013) and the $ 759,493 accounting conversion price of the Conversion Shares ($ 1,000,000 proceeds less the $240,507 relative fair value of the Investor Warrant). The Warrants were valued using the Black-Scholes option pricing model using the following assumptions: October 22, 2013 closing common stock price of $ 3.50 per share, an expected term equal to the five-year contractual term; volatility of 99.44 %; a 0 % annual rate of quarterly dividends and a 1.3 % risk-free interest rate. On the conversion date, the full $459,282 equity instrument discount was recognized as a deemed dividend and the remaining carrying value of the Preferred Stock was reclassified to permanent equity.

The Investor Warrant will be automatically exercised on the date that the closing price of the common stock equals or exceeds 2.5 times the then-applicable exercise price for a period of sixty consecutive trading days; provided, that, at such time, the Company has an effective registration statement for the resale of the shares of common stock issuable upon exercise of the Investor Warrant (the “Warrant Shares”) or the Warrant Shares may be offered for sale to the public without any volume restrictions. The Investor Warrant is exercisable at any time on a cashless basis.

Authorized Common Stock

Effective September 25, 2013, the authorized shares of the Company’s common stock was increased from 11,428,571 shares to 45,714,286 shares, with a $0.001 par value per share.

	F-17

Common Stock and Warrant Offerings

The following table summarizes the common stock and warrant offerings during the years ended December 31, 2013 and 2012:

								Five-Year Warrants
							Common	Investor		Placement Agent
Issuance		Gross			Issuance		Stock	Warrants		Warrants		Exercise
Date		Proceeds			Costs		(Shares)	(Shares)		(Shares)		Price

02/16/12		$	1,050,000		$	62,975	480,000	240,000		25,360		$	3.02
08/14/12	[1]		265,000			-	121,143	60,571		-		$	2.19
09/28/12	[2]		25,000			-	11,429	5,714		-		$	2.19
10/11/12	[2]		5,000			-	2,286	1,143		-		$	2.19
11/08/12	[3]		815,000	[4]		24,500	372,572	372,572	[5]	8,000	[5]	$	2.19
2012 Total			2,160,000			87,475	987,430	680,000		33,360

02/22/13			380,500			-	107,372	107,372		-		$	4.24
04/11/13			236,000			37,100	66,596	66,596		6,660		$	4.24
04/22/13			576,000			55,100	162,540	162,540		13,150		$	4.24
05/31/13			288,000			31,300	81,270	81,270		8,127		$	4.24
06/28/13			1,976,925			62,632	557,862	557,862		17,674		$	4.24
11/14/13			6,000,000	[6]		-	1,672,474	836,237		-		$	5.69
11/18/13			7,000,000			494,000	1,951,220	975,610		136,490		$	5.69
2013 Total			16,457,425			680,132	4,599,334	2,787,487		182,101

Total		$	18,617,425		$	767,607	5,586,764	3,467,487		215,461

[1]

Includes 86,857 shares of common stock and five-year warrants to purchase 43,429 shares of common stock at an exercise price of $ 2.19 per share issued to certain officers and members of the Board of Directors in exchange for gross proceeds of $ 190,000 .

[2]

Issued to a member of the Board of Directors.

[3]

Includes 89,143 shares of common stock and five-year warrants to purchase 89,143 shares of common stock at an exercise price of $ 2.19 per share issued to certain members of the Board of Directors for gross proceeds of $ 195,000 .

[4]

Includes $ 50,000 represented by the conversion of debt.

[5]

See Note 15 – Fair Value Measurement for details regarding the fair value of the warrant liability recorded in connection with these issued warrants.

[6]

See Note 9 – Commitment and Contingencies for details regarding the Celgene License, Marketing, and Development Agreement and Supply Agreement.

The securities purchase agreements the Company entered into in 2012 contain a variety of contractual provisions, which include certain affirmative and negative covenants made by the Company. The Company’s covenants principally consist of a requirement to reserve sufficient authorized shares to issue upon the exercise of the related warrants, and, subject to certain exceptions, in the event the Company subsequently issues or sells common shares at a price lower than the purchase price per share which was offered to the investors, each investor will be entitled to additional shares such that the total purchase price paid by such investor, when divided by the number of shares held by such investor (including additional shares) equals the lower price.

In connection with the securities purchase agreements entered into on February 16, 2012 and November 8, 2012, pursuant to which Palladium Capital Advisors, LLC served as the placement agent, the Company is required to (i) upon its failure to provide for the timely delivery of shares upon the exercise of the warrants, pay liquidated damages consisting of a cash payment of $10 per trading day (increasing to $20 per trading day on the fifth trading day) for each $1,000 of warrant shares until such certificates are delivered , (ii) upon its failure to maintain timely required filings with the SEC, pay liquidated damages consisting of a cash payment of one percent (1.0%) of the aggregate subscription amount of such purchasers’ securities on the day of the failure to maintain timely filings with the SEC and on every thirtieth (30th) day thereafter, until the required documents are filed with the SEC or such filing is no longer required for the purchaser to transfer the underlying shares pursuant to Rule 144, and (iii) upon its failure to provide for the timely delivery of unlegended shares, upon the satisfaction of certain conditions, pay in cash to the investor (in addition to any other remedies available to or elected by the investor) the amount, if any, by which (A) such investor’s total purchase price (including any brokerage commissions) for the common stock the investor was required to purchase to cover a sale order exceeds (B) the aggregate purchase price of the common shares or warrant shares delivered to the Company for reissuance as unlegended shares.

	F-18

The securities purchase agreement for each of the above 2013 financings contain customary representations, warranties and covenants. In addition, the securities purchase agreement for 2013 transactions prior to November 2013 contain a “full ratchet” anti-dilution adjustment provision, pursuant to which, in the event that the Company sells or issues shares of common stock or common stock equivalents at a price (the “Base Price”) lower than $3.54 per share, the Company will be required to issue to each investor, for no additional consideration, a certain number of shares of common stock such that the purchase price paid by such investor under the securities purchase agreement for the number of shares originally held, when divided by the aggregate number of shares originally held and any additional shares issued to such investor, will equal the Base Price. This investor right will terminate for an investor at any time following the nine month anniversary of the final closing under such investor’s securities purchase agreement, if (i) the closing sales price of the common stock for thirty (30) consecutive trading days is at least 200% of the per share purchase price , (ii) the product of (A) the volume weighted average price of the common stock on its principal market and (B) its corresponding daily trading volume, each as reported by Bloomberg L.P., equals or exceeds $50,000 for such thirty (30) consecutive trading days and (iii) the investor shares that were acquired by investors who are not our affiliates were eligible for unrestricted sale pursuant to Rule 144 under the Securities Act of 1933, as amended on the Company’s principal market from the six month anniversary of the final closing under the securities purchase agreement through at least the nine month anniversary of such final closing. Each warrant is exercisable immediately for cash. In addition, in the event that there is no effective registration statement registering, or no current prospectus available for, the resale of the shares of common stock issuable upon exercise of a warrant at any time following the one year anniversary of the issuance date of such warrant, such warrant may also be exercised by way of a cashless exercise. The warrants also contain customary provisions that protect their holders against dilution by adjustment of the purchase price in certain events such as stock dividends, stock splits and other similar events.

Stock-Based Compensation

The following table summarizes stock-based compensation expense, which is reflected as selling, general and administrative expenses in the consolidated statements of operations:

	For The Years Ended
	December 31,
	2013		2012
Options	$	3,948,025	$	1,421,338
Warrants		172,913		3,777
Restricted Stock Units		83,836		-
Restricted Stock		1,309,087		550,000
Total Stock-Based Compensation	$	5,513,861	$	1,975,115

	F-19

Restricted Stock

The following table summarizes the restricted stock issued as compensation during the years ended December 31, 2013 and 2012:

Issuance	Grantee	Shares	Vesting		Grant Date
Date	Type	Issued	Term		Value

01/11/12	Vendor	45,714	Immediate	$	100,000	[1]
06/30/12	Officer	22,857	Immediate		100,000
06/30/12	Officer	32,653	Immediate		100,000
08/15/12	Consultant	2,286	Immediate		10,000
09/20/12	Consultant	2,286	Immediate		10,000
11/14/12	Consultant	4,571	Immediate		20,000
11/14/12	Consultant	45,714	Immediate		200,000
11/30/12	Consultant	2,286	Immediate		10,000
	Restricted Stock - Total	158,367			550,000

11/08/12	Officer	70,753	[2]		154,773
	Restricted Stock Units - Total	70,753			154,773

	2012 - Total	229,120			704,773

05/24/13	Consultant	2,286	Immediate		7,000
06/28/13	Fmr. Officer	186,165	Immediate		570,130
07/01/13	Consultant	16,429	Immediate		50,312
10/15/13	Consultant	3,265	Immediate		10,000
11/11/13	Fmr. Officer	186,165	Immediate		651,578
11/14/13	Consultant	2,875	Immediate		10,063
12/12/13	Employee	21,614	One year		150,001	[3]
12/24/13	Consultant	1,409	Immediate		10,004
	Restricted Stock - Total	420,208			1,459,088

	2013 - Total	420,208		$	1,459,088

[1]

See Note 13 –Related Party Transactions for additional details.

[2]

Vests over three years and is subject to the Company’s achievement of certain market capitalization targets. During the fourth quarter of 2013, 35,377 shares vested as a performance condition was met.

[3]

Shares forfeited during 2013. The Company did not record any stock-based compensation expense during 2013 related to the issuance.

As of December 31, 2013, there was $ 23,646 of unrecognized stock-based compensation expense related to RSUs which will be amortized over a weighted average period of 1.8 years, provided the performance condition remains probable of being achieved. Separately, as of December 31, 2013, there was $ 38,693 of unrecognized stock-based compensation expense related to RSUs with performance conditions that are currently improbable of being achieved.

Warrants

See Note 10 – Stockholders’ Equity - Preferred Stock, Common Stock and Warrant Offerings for details of warrants issued to investors and placement agents in connection with equity offerings.

On April 10, 2012, the Company entered into an agreement for investment banking services. The agreement had a term of twelve months. As compensation for services, the Company agreed to pay a cash fee of $ 6,500 per month and a five-year warrant to purchase 1,143 shares of common stock at an exercise price $ 3.50 per share was to be issued monthly. During 2012, the Company issued warrants to purchase an aggregate of 2,286 shares of common stock with an aggregate grant date value of $ 3,777 . The grant date value was recognized immediately. A warrant to purchase an additional 1,143 shares of common stock was waived by the receiving party due to non-performance. The agreement was terminated in July of 2012.

On July 11, 2013, the Company issued to a consultant a five-year warrant to purchase 6,857 shares of common stock at an exercise price of $ 4.38 per share, which will vest and become exercisable in 12 equal monthly installments over the first year from the date of issuance. The aggregate grant date value was $ 14,640 .

	F-20

Between October 28 and November 12, 2013, the Company issued to various consultants five-year warrants to purchase an aggregate of 68,571 shares of common stock at exercise prices ranging from $ 4.38 to $ 5.69 per share. The warrants vest in twelve equal monthly installments from the date of issuance. The aggregate grant date value was $ 168,255 .

In applying the Black-Scholes option pricing model to compensatory warrants issued, the Company used the following weighted average assumptions:

	For The Year Ended
	December 31,
	2013		2012
Risk free interest rate	1.27	%	0.74	%
Expected term (years)	5.00		5.00
Expected volatility	99.59	%	98.49	%
Expected dividends	0.00	%	0.00	%

The risk-free interest rate is based on rates of treasury securities with the same expected term as the warrants. The expected term used for warrants is the contractual life. The Company is utilizing an expected volatility figure based on a review of the Company’s historical volatility, over a period of time, equivalent to the expected life of the instrument being valued. The expected dividend yield is based upon the fact that the Company has not historically paid dividends, and does not expect to pay dividends in the near future.

The weighted average estimated fair value per share of the compensatory warrants issued during the year ended December 31, 2013 and 2012 was $ 2.42 and $ 1.65 , respectively.

During the year ended December 31, 2013, the Company issued an aggregate of 261,030 shares of common stock to several holders of warrants who elected to exercise warrants to purchase an aggregate of 371,429 shares of common stock on a "cashless" basis under the terms of the warrants. The warrants had exercise prices of $ 3.02 per share ( 125,714 gross shares) and $ 2.19 per share ( 245,715 gross shares). The aggregate intrinsic value of the warrants exercised was $ 2,167,657 for the year ended December 31, 2013.

As of December 31, 2013, there was $ 255,537 of unrecognized stock-based compensation expense related to compensatory warrants that are subject to non-employee mark-to-market adjustments and will be amortized over a weighted average period of 0.9 years.

A summary of the warrant activity, including common stock purchase warrants, during the years ended December 31, 2013 and 2012 is presented below:

				Weighted
		Weighted		Average
		Average		Remaining
	Number of	Exercise		Life	Intrinsic
	Warrants	Price		In Years	Value
Outstanding, December 31, 2011	310,107	$	10.94
Issued	715,647		2.63
Anti-Dilutive Adjustment	539		51.19
Exercised	-		-
Forfeited	(22,085)		51.19
Outstanding, December 31, 2012	1,004,208	$	3.94
Issued	3,189,778		5.15
Exercised	(371,429)		1.01
Forfeited	-		-
Outstanding, December 31, 2013	3,822,557	$	5.12	4.4	$	8,369,579

Exercisable, December 31, 2013	3,756,558	$	5.12	4.4	$	8,207,235

	F-21

The following table presents information related to warrants at December 31, 2013:

Warrants Outstanding			Warrants Exercisable
			Weighted
		Outstanding	Average	Exercisable
Exercise		Number of	Remaining Life	Number of
Price		Warrants	In Years	Warrants

$	2.19	202,286	3.8	202,286
	3.02	139,648	3.1	139,648
	3.50	2,286	3.3	2,286
	4.24	1,021,251	4.4	1,021,251
	4.38	188,444	4.8	143,112
	4.81	8,889	4.8	8,889
	5.69	1,971,194	4.9	1,950,527
	7.00	140,708	1.4	140,708
	8.75	147,851	1.4	147,851
		3,822,557	4.4	3,756,558

As of December 31, 2013, five-year warrants to purchase an aggregate of 152,000 shares of common stock at an exercise price of $ 2.19 per share were deemed to be a derivative liability. See Note 15 – Fair Value Measurement.

11.

Stock Options

Options - 2011 Plan

The Company maintains an active stock option plan (the “2011 Plan”) that provides for option grants to employees, directors and others. A total of 1,828,571 shares of common stock have been authorized for issuance under the 2011 Plan, of which, as of December 31, 2013, 681,053 shares were reserved for outstanding options and 1,147,518 shares were available for future option issuances. As of December 31, 2013, an inactive stock option plan had 352,191 shares reserved for outstanding options (no shares were available for future option issuances), while there were 3,952,342 shares reserved for non-plan outstanding options.

Options - 2012 Grants

During 2012, options to purchase an aggregate of 1,979,576 shares of common stock at exercise prices ranging from $ 4.38 to $ 8.75 with an aggregate grant date value of $ 3,056,383 were granted to directors, employees and consultants. Most of the 2012 grants had five or ten year terms and vested between immediately or within three years . In general, the grant date value is being amortized over the vesting term.

Details of the grants with the more significant grant date values are as follows:

(1)

On May 17, 2012, a ten -year option to purchase 530,286 shares of common stock with an aggregate grant date value of $ 914,080 was granted to a director. The options were scheduled to vest and become exercisable as follows: (i) options to purchase 79,543 shares of common stock at $ 4.38 per share vested immediately on the date of grant; and (ii) the remainder were to vest and become exercisable at $ 4.38 or $ 6.56 per share based on various performance measures that were never met or were cancelled based on mutual agreement.

(2)

On November 27, 2012, a ten -year option to purchase 457,143 shares of common stock with an aggregate grant date value of $ 695,000 was granted to a director. The options were scheduled to vest and become exercisable as follows: (i) options to purchase 57,143 shares of common stock at $ 8.75 per share vested immediately on the date of grant; (ii) options to purchase 57,143 shares of common stock at $ 8.75 per share vest on each of the one-, two-, and three-year anniversaries of the date of grant; (iii) options to purchase 57,143 shares of common stock at $ 8.75 per share vested on November 14, 2013 upon meeting a performance condition and (iv) the remainder were to vest based on various performance measures that were never met or were cancelled based on mutual agreement.

(3)

On November 5, 2012, a ten -year option to purchase 212,261 shares of common stock with an aggregate grant date value of $ 318,833 was granted to an officer of the Company. The options are scheduled to vest and become exercisable at $ 4.38 per share on each of the one- ( 70,754 shares), two- ( 70,754 shares), and three-year ( 70,753 shares) anniversaries of the date of grant.

	F-22

(4)

On November 29, 2012, a ten -year option to purchase 177,600 shares of common stock with an aggregate grant date value of $ 292,670 was granted to a director of the Company. The options are scheduled to vest and become exercisable as follows: (i) options to purchase 59,200 shares at $ 4.38 per share vested immediately; and (ii) options to purchase 59,200 shares of common stock vest on each of the one- (at $ 6.56 per share) and two- (at $ 8.75 per share) year anniversaries of the date of grant.

Options - 2013 Grants

During 2013, options to purchase an aggregate of 3,319,421 shares of common stock at exercise prices ranging from $ 3.28 to $ 10.94 (most between $ 4.38 and $ 8.75 ) with an aggregate grant date value of $ 9,375,010 were granted to directors, employees and consultants. Most of the 2013 grants had five or ten year terms and vested between immediately or within three years. In general, the grant date value is being amortized over the vesting term.

Details of the grants with the more significant grant date values are as follows:

(1)

On December 20, 2013, a ten -year option to purchase 730,535 shares of common stock with an aggregate grant date value of $ 3,826,039 was granted to an officer of the Company. The options are scheduled to vest and become exercisable at $ 6.82 per share as follows: (i) 81,171 shares on January 1, 2014 and (ii) 81,170 or 81,171 shares on each of the next eight succeeding quarterly anniversaries of the first vesting date.

(2)

On July 22, 2013, a 9.5 -year option to purchase 622,170 shares of common stock with an aggregate grant date value of $ 1,556,984 was granted to a director. The options were scheduled to vest and become exercisable as follows: (i) options to purchase 207,290 shares of common stock at $ 6.56 per share are currently deemed probable of vesting upon the meeting of certain performance criteria; (ii) options to purchase 207,290 shares of common stock at $ 8.75 per share are currently deemed probable of vesting upon the meeting of certain performance criteria; (iii) options to purchase 207,290 shares of common stock at $ 10.94 per share are also currently deemed probable of vesting upon the meeting of certain performance criteria. In conjunction with this grant, certain outstanding options with as yet unmet 2013 performance conditions held by this director were cancelled, as follows: (a) options to purchase 106,057 shares of common stock at $ 6.56 per share; (b) options to purchase 114,286 shares of common stock at $ 8.75 per share; and (c) options to purchase 57,142 shares of common stock at $ 8.75 per share.

(3)

On February 4, 2013, a ten -year immediately vested option to purchase 279,227 shares of common stock at an exercise price of $ 3.18 per share with an aggregate grant date value of $ 684,107 was granted to an officer of the Company.

(4)

On May 10, 2013, a ten -year option to purchase 274,275 shares of common stock with an aggregate grant date value of $ 476,794 was granted to an officer of the Company. The options were scheduled to vest and become exercisable (the exercise price for one-fifth of each tranche is $ 4.38 , $ 5.47 , $ 6.56 , $ 8.75 and $ 10.94 per share) as follows: (i) options to purchase 54,855 shares of common stock vested immediately on the date of grant; (ii) options to purchase 54,855 shares of common stock vest on each of the one-, two-, three-, and four-year anniversaries of the date of grant.

(5)

On September 3, 2013, a ten -year option to purchase 185,142 shares of common stock with an aggregate grant date value of $ 384,210 was granted to an officer of the Company. The options are scheduled to vest and become exercisable as follows: (i) options to purchase 61,714 shares at $ 4.38 per share vested immediately; and (ii) options to purchase 61,714 shares of common stock vest on each of the one- (at $ 6.56 per share) and two- (at $ 8.75 per share) year anniversaries of the date of grant.

(6)

On November 14, 2013, a five -year option to purchase 160,000 shares of common stock with an aggregate grant date value of $ 371,992 was granted to a consultant of the Company. The options are scheduled to vest and become exercisable as follows: (i) options to purchase 80,000 shares at $ 5.69 per share vested immediately; and (ii) options to purchase 80,000 shares at $ 6.56 per share vest on the six month anniversary of the date of grant.

(7)

On November 14, 2013, a ten -year option to purchase 117,125 shares of common stock with an aggregate grant date value of $ 310,482 was granted to an officer of the Company. The options are scheduled to vest and become exercisable at $ 3.50 per share as follows: (i) options to purchase 32,549 shares on March 28, 2014 (ii) options to purchase 41,116 shares on June 28, 2014; and (iii) options to purchase 43,460 shares on September 30, 2014.

(8)

On May 10, 2013, a ten -year option to purchase 171,432 shares of common stock with an aggregate grant date value of $ 292,406 was granted to an employee of the Company. The options were scheduled to vest and become exercisable (the exercise price for one-fourth of each tranche is $ 4.38 , $ 5.47 , $ 6.56 and $ 8.75 per share) as follows: (i) options to purchase 57,144 shares of common stock vested immediately on the date of grant and (ii) options to purchase 57,144 shares of common stock vest on each of the one- and two-year anniversaries of the date of grant.

	F-23

Options - Summary Data

In applying the Black-Scholes option pricing model to stock options granted, the Company used the following weighted average assumptions:

	For The Years Ended
	December 31,
	2013		2012
Risk free interest rate	1.40	%	0.75	%
Expected term (years)	5.55		5.49
Expected volatility	99.78	%	97.87	%
Expected dividends	0.00	%	0.00	%

The risk-free interest rate is based on rates of treasury securities with the same expected term as the options. The Company uses the "simplified method" to calculate the expected term of employee and director stock-based options. The expected term used for consultants is the contractual life. The Company is utilizing an expected volatility figure based on a review of the Company’s historical volatility, over a period of time, equivalent to the expected life of the instrument being valued. The expected dividend yield is based upon the fact that the Company has not historically paid dividends, and does not expect to pay dividends in the near future.

The weighted average estimated fair value per share of the options granted during the year ended December 31, 2013 and 2012 was $ 2.80 and $ 1.54 , respectively.

During the year ended December 31, 2013, the Company recognized a credit of $ 411,614 relating to options containing performance conditions, of which, $ 386,119 related to previously recognized expense for options where the performance was not rendered by the required date and have been forfeited, and $ 25,495 related to the expense previously recognized for options which were originally deemed probable of being achieved that are now deemed improbable of being achieved. As of December 31, 2013, there was $ 6,609,208 of unrecognized stock-based compensation expense related to stock options which will be amortized over a weighted average period of 1.6 years, of which $ 536,764 is subject to non-employee mark-to-market adjustments. Separately, as of December 31, 2013, there was $ 137,332 of unrecognized stock-based compensation expense related to stock options with performance conditions that are currently improbable of being achieved.

A summary of the stock option activity during the years ended December 31, 2013 and 2012 is presented below:

				Weighted
		Weighted		Average
		Average		Remaining
	Number of	Exercise		Life	Intrinsic
	Options	Price		In Years	Value
Outstanding, December 31, 2011	431,314	$	7.00
Granted	1,979,576		6.13
Exercised	-		-
Forfeited	(77,068)		4.81
Outstanding, December 31, 2012	2,333,822	$	6.56
Granted	3,319,421		6.37
Exercised	-		-
Forfeited	(667,657)		6.96
Outstanding, December 31, 2013	4,985,586	$	6.47	8.2	$	6,574,508

Exercisable, December 31, 2013	2,381,469	$	5.87	6.9	$	4,241,527

	F-24

The following table presents information related to stock options at December 31, 2013:

Options Outstanding			Options Exercisable
			Weighted
		Outstanding	Average	Exercisable
	Exercise	Number of	Remaining Life	Number of
Price		Options	In Years	Options

$	3.28	279,227	9.1	279,227
	3.50	117,125	-	-
	3.94	7,619	9.9	7,619
	4.38	1,233,854	6.4	853,325
	5.47	120,569	9.4	30,971
	5.69	114,286	4.9	114,286
	5.91	17,142	7.0	17,142
	6.34	280,342	5.9	280,342
	6.56	657,634	5.0	205,599
	6.82	780,535	10.0	12,500
	8.75	999,349	8.7	453,828
	9.19	114,285	4.9	114,285
	10.94	262,245	9.4	10,971
	11.38	1,145	4.7	1,145
	26.69	229	4.4	229
		4,985,586	6.9	2,381,469

12.

Income Taxes

The income tax provision (benefit) consists of the following:

	For The Years Ended
	December 31,
	2013		2012
Federal:
Current	$	-	$	-
Deferred		(6,528,000)		(1,648,000)

State and local:
Current		-		-
Deferred		(1,140,000)		(139,000)
		(7,668,000)		(1,787,000)
Change in valuation allowance		7,677,000		1,798,000
Income tax provision (benefit)	$	9,000	$	11,000

The expected tax expense (benefit) based on the statutory rate reconciled with the actual expense (benefit) is as follows:

	For The Years Ended
	December 31,
	2013		2012
US federal statutory rate	(34.0)	%	(34.0)	%
State tax rate, net of federal benefit	(5.9)	%	(5.9)	%
Permanent differences
- Exercised warrant liability	3.3	%	0.0	%
- Other	1.7	%	3.4	%
Change in valuation allowance	34.9	%	36.7	%

Income tax provision (benefit)	0.0	%	0.2	%

	F-25

Deferred tax assets consisted of the effects of temporary differences attributable to the following:

	As of December 31,
	2013		2012
Deferred tax assets:
Net operating loss carryforwards	$	10,703,000	$	7,940,000
Stock-based compensation		2,825,000		1,469,000
Intangible assets		4,059,000		870,000
Accruals		326,000		-
Other		230,000		196,000
Total deferred tax assets		18,143,000		10,475,000
Valuation allowance		(17,607,000)		(9,930,000)
Deferred tax assets, net of valuation allowance		536,000		545,000

Deferred tax liabilities:
Property and equipment		(536,000)		(545,000)
Goodwill		(53,000)		(44,000)
Total deferred tax liabilities		(589,000)		(589,000)

Net deferred tax liabilities	$	(53,000)	$	(44,000)

For the years ended December 31, 2013 and 2012, the Company had approximately $ 27,408,000 and $ 20,468,000 of federal and state net operating loss carryovers (“NOLs”), respectively, which begin to expire in 2018 . The net operating loss carryovers may be subject to annual limitations under Internal Revenue Code Section 382 should there be a greater than 50% ownership change as determined under the regulations. The Company conducted a preliminary Section 382 analysis and has determined that no ownership changes have occurred wherein the annual limitations will inhibit the Company from ultimately realizing the benefit of NOL's if the Company generates sufficient taxable income.

In assessing the realization of deferred tax assets, management considers whether it is more likely than not that some portion or all of the deferred tax assets will be realized. The ultimate realization of the deferred tax assets is dependent upon the future generation of taxable income during the periods in which those temporary differences become deductible. Management considers the scheduled reversal of deferred tax liabilities, projected future taxable income and taxing strategies in making this assessment. The deferred tax liability related to goodwill cannot be used in this determination since goodwill is considered to be an asset with an indefinite life for financial reporting purposes. Therefore, the deferred tax liability related to goodwill cannot be considered when determining the ultimate realization of deferred tax assets. Based upon this assessment, management has established a full valuation allowance for the amount of the deferred tax assets which cannot be supported through the production of future taxable income generated through the reversal of the deferred tax liability related to the depreciation of the property and equipment, since it is more likely than not that these deferred tax assets will not be realized.

13.

Related Party

On January 11, 2012, the Company issued 45,714 shares of common stock to a related party in satisfaction of its obligation for office space and services.

On February 15, 2013, a subscription receivable of $ 20,000 was received from a director in connection with a private placement.

On February 22, 2013, the Company issued to four directors and an affiliate of a director, in the aggregate, (i) 76,190 shares of common stock and (ii) five year warrants to purchase, in the aggregate, up to 76,190 shares of common stock at an exercise price of $ 4.24 per share, in exchange for aggregate consideration of $ 270,000 .

On June 28, 2013, the Company issued to five directors, in the aggregate, (i) 231,393 shares of common stock and (ii) five year warrants to purchase, in the aggregate, up to 231,393 shares of common stock at an exercise price of $ 4.24 per share, in exchange for aggregate consideration of $ 820,000 .

	F-26

14.

Concentration of Risk

Revenues and accounts receivable from our largest customers for the years ended December 31 were as follows:

	2013				2012
Customer	% of Total Revenue		Accounts Receivable		% of Total Revenue		Accounts Receivable

A	51	%	51	%	60	%	38	%
B	16	%	0	%	16	%	39	%

Principal components used in manufacturing are purchased from the following sources: Berry Plastics, Dow Chemical and BASF. The total material purchases from these sources were $ 203,239 and $ 124,552 for the years ended December 31, 2013 and 2012, respectively.

15.

Fair Value Measurement

On December 31, 2012, the Company recomputed the fair value of its warrant liability as $605,737 using the Binomial option pricing model (Level 3 inputs) using the following assumptions: expected volatility of 97.26 %, risk-free rate of 0.65 %, expected term of 5.00 years, and expected dividends of 0.00 %. The change in fair value of these warrant liabilities for the year ended December 31, 2012 was de minimis.

On December 2, 2013, warrants to purchase an aggregate of 228,572 shares of common stock were exercised. These warrant liabilities had an aggregate exercise date fair value of $1,505,770 which was credited to equity. The Company recorded a loss on the change in fair value of these warrant liabilities of $ 1,141,964 during the year ended December 31, 2013. The Company recomputed the fair value of these warrant liabilities using the Binomial option pricing model (Level 3 inputs) using the following assumptions: expected volatility of 99.44 %, risk-free rate of 1.01 %, expected term of 3.94 years, and expected dividends of 0.00 %.

On December 31, 2013, the Company recomputed the fair value of its warrant liability as $933,465 using the Binomial option pricing model (Level 3 inputs) using the following assumptions: expected volatility of 102.63 %, risk-free rate of 1.27 %, expected term of 3.86 years, and expected dividends of 0.00 %. The Company recorded a loss on the change in fair value of these warrant liabilities of $691,534 during the year ended December 31, 2013.

The following table sets forth a summary of the changes in the fair value of Level 3 warrant liabilities that are measured at fair value on a recurring basis:

	December 31,
	2013		2012

Beginning balance as of January 1,	$	605,737	$	-
Aggregate value of warrants issued		-		605,737
Change in fair value of warrant liability		1,833,498		-
Value of warrants exercised		(1,505,770)		-
Ending balance as of December 31,	$	933,465	$	605,737

Assets and liabilities measured at fair value on a recurring or nonrecurring basis are as follows:

	Level	Level	Level
	1	2	3
December 31, 2012
Recurring:
Warrant liabilities	N/A	N/A	$	605,737

December 31, 2013
Recurring:
Warrant liabilities	N/A	N/A	$	933,465

	F-27

Warrants that contain exercise reset provisions are Level 3 derivative liabilities measured at fair value on a recurring basis using pricing models for which at least one significant assumption is unobservable. The development and determination of the unobservable inputs for Level 3 fair value measurements and the fair value calculations are the responsibility of the Company’s Chief Financial Officer and are approved by the Chief Executive Officer.

16.

Defined Contribution Plan

The Company maintains the AquaMed Technologies, Inc. 401(k) Profit Sharing Plan and Trust (“Plan”) in accordance with the provisions of Section 401(k) of the Internal Revenue Code (“Code”). The Plan covers substantially all full-time employees of the Company. Participants may contribute up to 100% of their total compensation to the Plan, not to exceed the limit as defined in the Code. The Company does not currently provide any Company match, therefore no expenses were recorded in 2013 and 2012.

17.

Subsequent Events

On January 6, 2014 the Company entered into an option cancellation and release agreement with two directors, pursuant to which each of the parties agreed to cancel options previously granted to purchase 278,096 shares of common stock of the Company at exercise prices ranging from $ 6.34 to $ 9.19 . In exchange for the cancellation of the options, the Company granted each director 194,667 shares of common stock of the Company pursuant to 2011 Plan.

On January 6, 2014, the Company granted a restricted stock award of 369,395 shares of common stock to the Company’s president and chief executive officer, pursuant to the Company’s 2011 Long-Term Incentive Plan. The restricted stock vests, subject to certain terms and conditions included in the restricted stock agreement, in eight quarterly installments, with one-eighth vesting on January 6, 2014 and the first day of each calendar quarter, thereafter.

On March 14, 2014 the chief executive officer of a wholly-owned subsidiary of the Company resigned. In connection with his resignation, the executive entered into a General Release and Severance Agreement with the Company, pursuant to which, the Company will provide the executive with the following: (a) a lump sum payment in the amount of $ 210,000 ; (b) severance payments, in an amount equal to his base salary for a period of six months from the date of resignation; (c) continued health insurance coverage for a period of six months; and (d) the full and immediate vesting of all outstanding stock options and restricted stock unit awards granted to the executive with such stock options remaining exercisable for a period of two years following the date of resignation.

	F-28

Exhibit 4.12

NEITHER THESE SECURITIES NOR THE SECURITIES FOR WHICH THESE SECURITIES ARE EXERCISABLE HAVE BEEN REGISTERED WITH THE SECURITIES AND EXCHANGE COMMISSION OR THE SECURITIES COMMISSION OF ANY STATE IN RELIANCE UPON AN EXEMPTION FROM REGISTRATION UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE “SECURITIES ACT”), AND, ACCORDINGLY, MAY NOT BE OFFERED OR SOLD EXCEPT PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT OR PURSUANT TO AN AVAILABLE EXEMPTION FROM, OR IN A TRANSACTION NOT SUBJECT TO, THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT AND IN ACCORDANCE WITH APPLICABLE STATE SECURITIES LAWS.

ALLIQUA, INC.

WARRANT

Warrant No. C-1

Dated: November 18, 2013

Alliqua, Inc., a Florida corporation (the “ Company ”), hereby certifies that, for value received, Celgene Corporation, a Delaware corporation or its registered assigns (the “ Holder ”), is entitled to purchase from the Company up to a total of 36,585,366 shares of common stock, $0.001 par value per share (the “ Common Stock ”) of the Company (each such share, a “ Warrant Share ” and all such shares, the “ Warrant Shares ”) at an exercise price equal to $0.13 per share (as adjusted from time to time as provided in Section 8 , the “ Exercise Price ”), at any time and on or after November 18, 2013 (the “ Initial Exercise Date ”) and through and including the date that is five (5) years from the Initial Exercise Date, or if such day is not a Business Day (as defined in the Purchase Agreement, as defined below), on the next preceding Business Day (the “ Expiration Date ”), and subject to the following terms and conditions. This Warrant (this “ Warrant ”) is issued pursuant to that certain Stock Purchase Agreement, dated as of November 14, 2013, by and among the Company and the Holder (the “ Purchase Agreement ”).

1. Registration of Warrant . The Company shall register this Warrant, upon records to be maintained by the Company for that purpose (the “ Warrant Register ”), in the name of the record Holder hereof from time to time. The Company may deem and treat the registered Holder of record of this Warrant as the absolute owner hereof for the purpose of any exercise hereof or any distribution to the Holder, and for all other purposes, absent actual notice to the contrary.

2. Registration of Transfers . The Company shall register the transfer of any portion of this Warrant in the Warrant Register, upon surrender of this Warrant, with the Form of Assignment attached hereto duly completed and signed, to the Company at its address specified herein. Upon any such registration of transfer, a new warrant to purchase Common Stock, in substantially the Form of this Warrant (any such new warrant, a “ New Warrant ”), evidencing the portion of this Warrant so transferred shall be issued to the transferee and a New Warrant evidencing the remaining portion of this Warrant not so transferred, if any, shall be issued to the transferring Holder. The acceptance of the New Warrant by the transferee thereof shall be deemed the acceptance by such transferee of all of the rights and obligations of a holder of a Warrant.

3. Exercise and Duration of Warrant .

(a) This Warrant shall be exercisable by the registered Holder at any time and from time to time on or after the Initial Exercise Date and prior to 5:30 p.m., New York City time on the Expiration Date at which time the portion of this Warrant not exercised prior thereto shall be and become void and of no value.

(b) The Holder may exercise this Warrant by delivering to the Company (i) an exercise notice, in the Form attached hereto (the “ Exercise Notice ”), appropriately completed and duly signed, and (ii) payment of the Exercise Price for the number of Warrant Shares as to which this Warrant is being exercised, and the date such items are delivered to the Company (as determined in accordance with the notice provisions hereof) is an “ Exercise Date .” The Holder shall not be required to deliver the original Warrant in order to effect an exercise hereunder; provided , however , that in the event that this Warrant is exercised in full or for the remaining unexercised portion hereof, the Holder shall deliver this Warrant to the Company for cancellation within a reasonable time after such exercise. In the event of a partial exercise of this Warrant, execution and delivery of the Exercise Notice shall have the same effect as cancellation of the original Warrant and issuance of a New Warrant evidencing the right to purchase the remaining number of Warrant Shares.

4. Delivery of Warrant Shares .

(a) Upon exercise of this Warrant, the Company shall promptly following the Exercise Date (but in no event later than three Trading Days after the Exercise Date) credit such aggregate number of Warrant Shares to which the Holder is entitled to receive pursuant to such exercise of this Warrant to the Holder’s or its designee’s balance account with The Depository Trust Company (“ DTC ”) through its Deposit Withdrawal Agent Commission system, or if the Company’s transfer agent for the Common Stock (the “ Transfer Agent ”) is not participating in the Fast Automated Securities Transfer Program or if the certificates are required to bear a legend regarding restriction on transferability, issue and dispatch by overnight courier to the address as specified in the Exercise Notice, a certificate, registered in the Company’s share register in the name of the Holder or its designee, for the number of Warrant Shares to which the Holder is entitled to receive pursuant to such exercise of this Warrant. The Holder, or any Person so designated by the Holder to receive Warrant Shares, shall be deemed to have become the holder of record of such Warrant Shares as of the Exercise Date, irrespective of the date such Warrant Shares are credited to the Holder’s DTC account or the date of delivery of the certificates evidencing such Warrant Shares, as the case may be. For purposes of this Warrant, “ Person ” shall mean an individual or corporation, partnership, trust, incorporated or unincorporated association, joint venture, limited liability company, joint stock company, government (or an agency or subdivision thereof) or other entity of any kind and “ Trading Day ” means a day on which the Common Stock is traded on the principal securities exchange or securities market on which the Common Stock is then traded.

(b) This Warrant is exercisable, either in its entirety or, from time to time, for a portion of the number of Warrant Shares. Upon surrender of this Warrant following one or more partial exercises, the Company shall issue or cause to be issued, at its expense, a New Warrant evidencing the right to purchase the remaining number of Warrant Shares.

5. Charges, Taxes and Expenses . Issuance and delivery of certificates for shares of Common Stock upon exercise of this Warrant shall be made without charge to the Holder for any issue or transfer tax, withholding tax, transfer agent fee or other incidental tax or expense in respect of the issuance of such certificates, all of which taxes and expenses shall be paid by the Company; provided , however , that the Company shall not be required to pay any tax which may be payable in respect of any transfer involved in the registration of any certificates for Warrant Shares or Warrants in a name other than that of the Holder. The Holder shall be responsible for all other tax liability that may arise as a result of holding or transferring this Warrant or receiving Warrant Shares upon exercise hereof.

6. Replacement of Warrant . If this Warrant is mutilated, lost, stolen or destroyed, the Company shall issue or cause to be issued in exchange and substitution for and upon cancellation hereof, or in lieu of and substitution for this Warrant, a New Warrant, but only upon receipt of evidence reasonably satisfactory to the Company of such loss, theft or destruction and customary and reasonable bond or indemnity, if requested. Applicants for a New Warrant under such circumstances shall also comply with such other reasonable regulations and procedures and pay such other reasonable third-party costs as the Company may prescribe.

7. Reservation of Warrant Shares . The Company covenants that it will at all times reserve and keep available out of the aggregate of its authorized but unissued and otherwise unreserved Common Stock, solely for the purpose of enabling it to issue Warrant Shares upon exercise of this Warrant as herein provided, the number of Warrant Shares which are then issuable and deliverable upon the exercise of this entire Warrant, free from preemptive rights or any other contingent purchase rights of persons other than the Holder (after giving effect to the adjustments of Section 8 , if any). The Company covenants that all Warrant Shares so issuable and deliverable shall, upon issuance and the payment of the applicable Exercise Price in accordance with the terms hereof, be duly and validly authorized, issued and fully paid and nonassessable. The Company will take all such action as may be necessary to assure that such shares of Common Stock may be issued as provided herein without violation of any applicable law or regulation, or of any requirements of any securities exchange or automated quotation system upon which the Common Stock may be listed.

8. Certain Adjustments . The Exercise Price and number of Warrant Shares issuable upon exercise of this Warrant are subject to adjustment from time to time as set forth in this Section 8 .

(a) Stock Dividends, Subdivisions or Combinations . If the Company, at any time while this Warrant is outstanding, (i) pays a stock dividend on its Common Stock or otherwise makes a distribution on any class of capital stock that is payable in shares of Common Stock, (ii) subdivides outstanding shares of Common Stock into a larger number of shares, or (iii) combines outstanding shares of Common Stock into a smaller number of shares, then in each such case the Exercise Price shall be adjusted by multiplying the Exercise Price by a fraction of which the numerator shall be the number of shares of Common Stock outstanding immediately before such event and of which the denominator shall be the number of shares of Common Stock outstanding immediately after such event. Simultaneously with any adjustment to the Exercise Price pursuant to this subsection (a), the number of Warrant Shares that may be purchased upon exercise of this Warrant shall be adjusted proportionately, so that after such adjustment the aggregate Exercise Price payable hereunder for the increased or decreased number of Warrant Shares, as the case may be, shall be the same as the aggregate Exercise Price in effect immediately prior to such adjustment to the Exercise Price and the number of Warrant Shares.

(b) Adjustments Upon Reorganization, Reclassification, Consolidation or Merger . In the event of any (i) capital reorganization of the Company, (ii) reclassification of the Common Stock of the Company (other than as a result of a stock dividend or subdivision, split-up or combination of shares), (iii) consolidation or merger of the Company with or into another Person, (iv) sale of all or substantially all of the Company’s assets to another Person or (v) other similar transaction (other than a transaction covered by Section 8(a)), in each case which entitles the holders of Common Stock to receive (either directly or upon subsequent liquidation) stock, securities or assets with respect to or in exchange for Common Stock, this Warrant shall, immediately after such reorganization, reclassification, consolidation, merger, sale or similar transaction, remain outstanding and shall thereafter be exercisable for the kind and number of shares of stock or other securities or assets of the Company or of the successor Person resulting from such transaction to which the Holder would have been entitled upon such reorganization, reclassification, consolidation, merger, sale or similar transaction if the Holder had exercised this Warrant in full immediately prior to the time of such transaction and acquired the applicable number of Warrant Shares then issuable hereunder as a result of such exercise; and, in such case, appropriate adjustments (in form and substance reasonably satisfactory to the Holder) shall be made with respect to the Holder’s rights hereunder to insure that the provisions of this Section 8 shall thereafter be applicable, as nearly as possible, to this Warrant in relation to any shares of stock, securities or assets thereafter acquirable upon exercise of this Warrant. The provisions of this Section 8(c) shall similarly apply to all successive reorganizations, reclassifications, consolidations, mergers, sales or similar transactions. The Company shall not effect any such reorganization, reclassification, consolidation, merger, sale or similar transaction unless, prior to the consummation thereof, the successor Person (if other than Company) resulting therefrom, shall assume, by written instrument substantially similar in Form and substance to this Warrant and satisfactory to the Holder, the obligation to deliver to the Holder such shares of stock, securities or assets which, in accordance with the foregoing provisions, the Holder shall be entitled to receive upon exercise of this Warrant. Notwithstanding anything to the contrary contained herein, with respect to any corporate event or transaction contemplated by this Section 8(b), the Holder shall have the right to elect prior to the consummation of such event or transaction, to exercise this Warrant in accordance with Section 3(b) instead of giving effect to the provisions of this Section 8(c) with respect to this Warrant.

(d) Calculations . All calculations under this Section 8 shall be made to the nearest cent or the nearest 1/100th of a share, as applicable.

(e) Certificate as to Adjustment . As promptly as reasonably practicable following any adjustment of the Exercise Price, but in no event later than five (5) Business Days thereafter, the Company shall furnish to the Holder a certificate of an executive officer of the Company setting forth in reasonable detail such adjustment and the facts upon which it is based and certifying the calculation thereof. No later than five (5) Business Days following the receipt by Company of a written request by the Holder, the Company shall furnish the Holder a certificate of an executive officer certifying the Exercise Price then in effect and the number of Warrant Shares or the amount, if any, of other shares of stock, securities or assets then issuable upon exercise of the Warrant.

(f) Notice of Corporate Events . If (i) the Company shall declare a dividend (or any other distribution in whatever form) on the Common Stock, (ii) the Company shall declare a special nonrecurring cash dividend on or a redemption of the Common Stock applicable to all holders thereof, (iii) the Company shall authorize the granting to all holders of the Common Stock rights or warrants to subscribe for or purchase any shares of capital stock of any class or of any rights, (iv) the approval of any stockholders of the Company shall be required in connection with any reclassification of the Common Stock, any consolidation or merger to which the Company is a party, any sale or transfer of all or substantially all of the assets of the Company, or any compulsory share exchange whereby the Common Stock is converted into other securities, cash or property, or (v) the Company shall authorize the voluntary or involuntary dissolution, liquidation or winding up of the affairs of the Company, then, in each case, the Company shall cause to be mailed to the Holder at its last address as it shall appear upon the Warrant Register of the Company, at least 20 calendar days prior to the applicable record or effective date hereinafter specified, a notice stating (x) the date on which a record is to be taken for the purpose of such dividend, distribution, redemption, rights or warrants, or if a record is not to be taken, the date as of which the holders of the Common Stock of record to be entitled to such dividend, distributions, redemption, rights or warrants are to be determined or (y) the date on which such reclassification, consolidation, merger, sale, transfer or share exchange is expected to become effective or close, and the date as of which it is expected that holders of the Common Stock of record shall be entitled to exchange their shares of the Common Stock for securities, cash or other property deliverable upon such reclassification, consolidation, merger, sale, transfer or share exchange; provided that the failure to mail such notice or any defect therein or in the mailing thereof shall not affect the validity of the corporate action required to be specified in such notice. The Holder shall remain entitled to exercise this Warrant during the period commencing on the date of such notice to the effective date of the event triggering such notice except as may otherwise be expressly set forth herein.

9. Purchase Rights . In addition to any adjustments pursuant to Section 8 above, if at any time prior to the Expiration Date the Company grants, issues or sells (y) any securities directly or indirectly exchangeable for or convertible into Common Stock or (z) any rights to purchase stock, warrants, securities or other property, in the case of clauses (y) and (z), pro rata to all of the record holders of any class of shares of Common Stock (the “ Purchase Rights ”), then the Holder will be entitled to acquire, upon the terms applicable to such Purchase Rights, the aggregate Purchase Rights which the Holder could have acquired if the Holder had held the number of shares of Common Stock acquirable upon complete exercise of this Warrant immediately before the date on which a record is taken for the grant, issuance or sale of such Purchase Rights, or, if no such record is taken, the date as of which the record holders of shares of Common Stock are to be determined for the grant, issue or sale of such Purchase Rights.

10. Fractional Shares . The Company shall not be required to issue or cause to be issued fractional Warrant Shares on the exercise of this Warrant. If any fraction of a Warrant Share would, except for the provisions of this Section, be issuable upon exercise of this Warrant, the number of Warrant Shares to be issued will be rounded up to the nearest whole share.

11. Notices . Any and all notices or other communications or deliveries hereunder (including without limitation any Exercise Notice) shall be in writing and shall be deemed given and effective on the earliest of (a) the date of transmission, if such notice or communication is delivered via facsimile at the facsimile number specified in the Purchase Agreement prior to 6:30 p.m. (New York City time) on a Trading Day, (b) the next Trading Day after the date of transmission, if such notice or communication is delivered via facsimile at the facsimile number specified in the Purchase Agreement on a day that is not a Trading Day or later than 6:30 p.m. (New York City time) on any Trading Day, (c) the Trading Day following the date of mailing, if sent by nationally recognized overnight courier service, or (d) upon actual receipt by the party to whom such notice is required to be given. The address for such notices or communications shall be as set forth in the Purchase Agreement.

12. Warrant Agent . The Company shall serve as warrant agent under this Warrant. Upon 30 days’ notice to the Holder, the Company may appoint a new warrant agent. Any corporation into which the Company or any new warrant agent may be merged or any corporation resulting from any consolidation to which the Company or any new warrant agent shall be a party or any corporation to which the Company or any new warrant agent transfers substantially all of its corporate trust or stockholder services business shall be a successor warrant agent under this Warrant without any further act. Any such successor warrant agent shall promptly cause notice of its succession as warrant agent to be mailed (by first class mail, postage prepaid) to the Holder at the Holder’s last address as shown on the Warrant Register.

13. Miscellaneous

(a) Subject to compliance with applicable securities laws and Section 4.6 of the Purchase Agreement, this Warrant may be assigned by the Holder. This Warrant shall be binding on and inure to the benefit of the parties hereto and their respective successors and assigns. Subject to the preceding sentence, nothing in this Warrant shall be construed to give to any Person other than the Company and the Holder any legal or equitable right, remedy or cause of action under this Warrant. This Warrant may be amended only in writing signed by the Company and the Holder and their successors and assigns.

(b) The Company will not, by amendment of its governing documents or through any reorganization, transfer of assets, consolidation, merger, dissolution, issue or sale of securities or any other voluntary action, avoid or seek to avoid the observance or performance of any of the terms of this Warrant, but will at all times in good faith assist in the carrying out of all such terms and in the taking of all such action as may be necessary or appropriate in order to protect the rights of the Holder against impairment. Without limiting the generality of the foregoing, the Company (i) will not increase the par value of any Warrant Shares above the amount payable therefor on such exercise, (ii) will take all such action as may be reasonably necessary or appropriate in order that the Company may validly and legally issue fully paid and nonassessable Warrant Shares on the exercise of this Warrant, and (iii) will not close its stockholder books or records in any manner which interferes with the timely exercise of this Warrant.

(c) ALL QUESTIONS CONCERNING THE CONSTRUCTION, VALIDITY, ENFORCEMENT AND INTERPRETATION OF THIS WARRANT SHALL BE GOVERNED BY AND CONSTRUED AND ENFORCED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK. EACH OF THE COMPANY AND, BY ACCEPTING THIS WARRANT, THE HOLDER HEREBY IRREVOCABLY SUBMITS TO THE EXCLUSIVE JURISDICTION OF THE STATE AND FEDERAL COURTS SITTING IN THE CITY OF NEW YORK, BOROUGH OF MANHATTAN, FOR THE ADJUDICATION OF ANY DISPUTE HEREUNDER OR IN CONNECTION HEREWITH OR WITH ANY TRANSACTION CONTEMPLATED HEREBY OR DISCUSSED HEREIN (INCLUDING WITH RESPECT TO THE ENFORCEMENT OF THIS WARRANT), AND HEREBY IRREVOCABLY WAIVES, AND AGREES NOT TO ASSERT IN ANY SUIT, ACTION OR PROCEEDING, ANY CLAIM THAT IT IS NOT PERSONALLY SUBJECT TO THE JURISDICTION OF ANY SUCH COURT, THAT SUCH SUIT, ACTION OR PROCEEDING IS IMPROPER. EACH OF THE COMPANY AND, BY ACCEPTING THIS WARRANT, THE HOLDER HEREBY IRREVOCABLY WAIVES PERSONAL SERVICE OF PROCESS AND CONSENTS TO PROCESS BEING SERVED IN ANY SUCH SUIT, ACTION OR PROCEEDING BY MAILING A COPY THEREOF VIA REGISTERED OR CERTIFIED MAIL OR OVERNIGHT DELIVERY (WITH EVIDENCE OF DELIVERY) TO SUCH PARTY AT THE ADDRESS IN EFFECT FOR NOTICES TO IT UNDER THIS AGREEMENT AND AGREES THAT SUCH SERVICE SHALL CONSTITUTE GOOD AND SUFFICIENT SERVICE OF PROCESS AND NOTICE THEREOF. NOTHING CONTAINED HEREIN SHALL BE DEEMED TO LIMIT IN ANY WAY ANY RIGHT TO SERVE PROCESS IN ANY MANNER PERMITTED BY LAW. THE COMPANY HEREBY WAIVES ALL RIGHTS TO A TRIAL BY JURY.

(d) The headings herein are for convenience only, do not constitute a part of this Warrant and shall not be deemed to limit or affect any of the provisions hereof.

(e) In case any one or more of the provisions of this Warrant shall be invalid or unenforceable in any respect, the validity and enforceability of the remaining terms and provisions of this Warrant shall not in any way be affected or impaired thereby and the parties will attempt in good faith to agree upon a valid and enforceable provision which shall be a commercially reasonable substitute therefor, and upon so agreeing, shall incorporate such substitute provision in this Warrant.

(f) The remedies provided in this Warrant shall be cumulative and in addition to all other remedies available under this Warrant, at law or in equity (including a decree of specific performance and/or other injunctive relief), and nothing herein shall limit the right of the Holder to pursue actual damages for any failure by the Company to comply with the terms of this Warrant. The Company acknowledges that a breach by it of its obligations hereunder may cause irreparable harm to the Holder and that the remedy at law for any such breach may be inadequate. The Company therefore agrees that, in the event of any such breach or threatened breach, the holder of this Warrant shall be entitled, in addition to all other available remedies, to seek an injunction restraining any breach.

(g) No provision hereof, in the absence of any affirmative action by the Holder to exercise this Warrant to purchase Warrant Shares, and no enumeration herein of the rights or privileges of the Holder, shall give rise to any liability of the Holder for the purchase price of any Warrant Shares or as a stockholder of the Company, whether such liability is asserted by the Company or by creditors of the Company. Prior to the exercise of this Warrant, the Holder shall not have or exercise any rights as a stockholder of the Company by virtue of its ownership of this Warrant.

SIGNATURE PAGE FOLLOWS

IN WITNESS WHEREOF, the Company has caused this Warrant to be duly executed by its authorized officer as of the date first indicated above.

ALLIQUA, INC.

	By:	/s/ David Johnson
		Name: David Johnson
		Title: Chief Executive Officer

FORM OF EXERCISE NOTICE

(To be executed by the Holder to exercise the right to purchase shares of Common Stock under the foregoing Warrant)

To Alliqua, Inc.:

The undersigned is the Holder of Warrant No. _______ (the “ Warrant ”) issued by Alliqua, Inc., a Florida corporation (the “ Company ”). Capitalized terms used herein and not otherwise defined have the respective meanings set forth in the Warrant.

The Warrant is currently exercisable to purchase a total of ______________ Warrant Shares.

The undersigned Holder hereby exercises its right to purchase _________________ Warrant Shares pursuant to the Warrant.

The holder shall pay the sum of $____________ to the Company in accordance with the terms of the Warrant.

Pursuant to this exercise, the Company shall deliver to the holder _______________ Warrant Shares in accordance with the terms of the Warrant.

Following this exercise, the Warrant shall be exercisable to purchase a total of ______________ Warrant Shares.

Dated:

Name of Holder:

(Print)

	By:
	Name:
	Title:

ACKNOWLEDGED AND AGREED TO this ___ day of
___________, 20__

ALLIQUA, INC.

By:
	Name:
	Title:

FORM OF ASSIGNMENT

[To be completed and signed only upon transfer of Warrant]

FOR VALUE RECEIVED, the undersigned hereby sells, assigns and transfers unto ________________________________ the right represented by the within Warrant to purchase ____________ shares of Common Stock of Alliqua, Inc. to which the within Warrant relates and appoints ________________ attorney to transfer said right on the books of Alliqua, Inc. with full power of substitution in the premises.

Dated:

_____________,_____________




	Address of Transferee

In the presence of:

Exhibit 4.13

FORM OF WARRANT

ALLIQUA, INC.

WARRANT

Warrant No. [__]

Dated: November 18, 2013

Alliqua, Inc., a Florida corporation (the “ Company ”), hereby certifies that, for value received, [_____________] or its registered assigns (the “ Holder ”), is entitled to purchase from the Company up to a total of [_________] shares of common stock, $0.001 par value per share (the “ Common Stock ”) of the Company (each such share, a “ Warrant Share ” and all such shares, the “ Warrant Shares ”) at an exercise price equal to $5.6875 per share (as adjusted from time to time as provided in Section 8 , the “ Exercise Price ”), at any time and on or after November 18, 2013 (the “ Initial Exercise Date ”) and through and including the date that is five (5) years from the Initial Exercise Date, or if such day is not a Business Day (as defined in the Purchase Agreement, as defined below), on the next preceding Business Day (the “ Expiration Date ”), and subject to the following terms and conditions. This Warrant (this “ Warrant ”) is issued pursuant to that certain Securities Purchase Agreement, dated as of November 18, 2013, by and among the Company and the investors signatory thereto (the “ Purchase Agreement ”).

3. Exercise and Duration of Warrant .

4. Delivery of Warrant Shares .

8. Certain Adjustments . The Exercise Price and number of Warrant Shares issuable upon exercise of this Warrant are subject to adjustment from time to time as set forth in this Section 8 .

(b) Adjustments Upon Reorganization, Reclassification, Consolidation or Merger . In the event of any (i) capital reorganization of the Company, (ii) reclassification of the Common Stock of the Company (other than as a result of a stock dividend or subdivision, split-up or combination of shares), (iii) consolidation or merger of the Company with or into another Person, (iv) sale of all or substantially all of the Company’s assets to another Person or (v) other similar transaction (other than a transaction covered by Section 8(a)), in each case which entitles the holders of Common Stock to receive (either directly or upon subsequent liquidation) stock, securities or assets with respect to or in exchange for Common Stock, this Warrant shall, immediately after such reorganization, reclassification, consolidation, merger, sale or similar transaction, remain outstanding and shall thereafter be exercisable for the kind and number of shares of stock or other securities or assets of the Company or of the successor Person resulting from such transaction to which the Holder would have been entitled upon such reorganization, reclassification, consolidation, merger, sale or similar transaction if the Holder had exercised this Warrant in full immediately prior to the time of such transaction and acquired the applicable number of Warrant Shares then issuable hereunder as a result of such exercise; and, in such case, appropriate adjustments (in form and substance reasonably satisfactory to the Holder) shall be made with respect to the Holder’s rights hereunder to insure that the provisions of this Section 8 shall thereafter be applicable, as nearly as possible, to this Warrant in relation to any shares of stock, securities or assets thereafter acquirable upon exercise of this Warrant. The provisions of this Section 8(b) shall similarly apply to all successive reorganizations, reclassifications, consolidations, mergers, sales or similar transactions. The Company shall not effect any such reorganization, reclassification, consolidation, merger, sale or similar transaction unless, prior to the consummation thereof, the successor Person (if other than Company) resulting therefrom, shall assume, by written instrument substantially similar in Form and substance to this Warrant and satisfactory to the Holder, the obligation to deliver to the Holder such shares of stock, securities or assets which, in accordance with the foregoing provisions, the Holder shall be entitled to receive upon exercise of this Warrant. Notwithstanding anything to the contrary contained herein, with respect to any corporate event or transaction contemplated by this Section 8(b), the Holder shall have the right to elect prior to the consummation of such event or transaction, to exercise this Warrant in accordance with Section 3(b) instead of giving effect to the provisions of this Section 8(b) with respect to this Warrant.

(d) Calculations . All calculations under this Section 8 shall be made to the nearest cent or the nearest 1/100th of a share, as applicable.

(e) Certificate as to Adjustment . As promptly as reasonably practicable following any adjustment of the Exercise Price, but in no event later than five (5) Business Days thereafter, the Company shall furnish to the Holder a certificate of an executive officer of the Company setting forth in reasonable detail such adjustment and the facts upon which it is based and certifying the calculation thereof. No later than five (5) Business Days following the receipt by the Company of a written request by the Holder, the Company shall furnish the Holder a certificate of an executive officer certifying the Exercise Price then in effect and the number of Warrant Shares or the amount, if any, of other shares of stock, securities or assets then issuable upon exercise of the Warrant.

9. Fractional Shares . The Company shall not be required to issue or cause to be issued fractional Warrant Shares on the exercise of this Warrant. If any fraction of a Warrant Share would, except for the provisions of this Section, be issuable upon exercise of this Warrant, the number of Warrant Shares to be issued will be rounded up to the nearest whole share.

10. Notices . Any and all notices or other communications or deliveries hereunder (including without limitation any Exercise Notice) shall be in writing and shall be deemed given and effective on the earliest of (a) the date of transmission, if such notice or communication is delivered via facsimile at the facsimile number specified in the Purchase Agreement prior to 6:30 p.m. (New York City time) on a Trading Day, (b) the next Trading Day after the date of transmission, if such notice or communication is delivered via facsimile at the facsimile number specified in the Purchase Agreement on a day that is not a Trading Day or later than 6:30 p.m. (New York City time) on any Trading Day, (c) the Trading Day following the date of mailing, if sent by nationally recognized overnight courier service, or (d) upon actual receipt by the party to whom such notice is required to be given. The address for such notices or communications shall be as set forth in the Purchase Agreement.

11. Warrant Agent . The Company shall serve as warrant agent under this Warrant. Upon 30 days’ notice to the Holder, the Company may appoint a new warrant agent. Any corporation into which the Company or any new warrant agent may be merged or any corporation resulting from any consolidation to which the Company or any new warrant agent shall be a party or any corporation to which the Company or any new warrant agent transfers substantially all of its corporate trust or stockholder services business shall be a successor warrant agent under this Warrant without any further act. Any such successor warrant agent shall promptly cause notice of its succession as warrant agent to be mailed (by first class mail, postage prepaid) to the Holder at the Holder’s last address as shown on the Warrant Register.

12. Miscellaneous

(a) Subject to compliance with applicable securities laws and Section 4.4 of the Purchase Agreement, this Warrant may be assigned by the Holder. This Warrant shall be binding on and inure to the benefit of the parties hereto and their respective successors and assigns. Subject to the preceding sentence, nothing in this Warrant shall be construed to give to any Person other than the Company and the Holder any legal or equitable right, remedy or cause of action under this Warrant. This Warrant may be amended only in writing signed by the Company and the Holder and their successors and assigns.

(d) The headings herein are for convenience only, do not constitute a part of this Warrant and shall not be deemed to limit or affect any of the provisions hereof.

SIGNATURE PAGE FOLLOWS

IN WITNESS WHEREOF, the Company has caused this Warrant to be duly executed by its authorized officer as of the date first indicated above.

	ALLIQUA, INC.

	By:
		Name: Brian Posner
		Title: Chief Financial Officer

FORM OF EXERCISE NOTICE

(To be executed by the Holder to exercise the right to purchase shares of Common Stock under the foregoing Warrant)

To Alliqua, Inc.:

The Warrant is currently exercisable to purchase a total of ______________ Warrant Shares.

The undersigned Holder hereby exercises its right to purchase _________________ Warrant Shares pursuant to the Warrant.

The holder shall pay the sum of $____________ to the Company in accordance with the terms of the Warrant.

Pursuant to this exercise, the Company shall deliver to the holder _______________ Warrant Shares in accordance with the terms of the Warrant.

Following this exercise, the Warrant shall be exercisable to purchase a total of ______________ Warrant Shares.

Dated: ___________________	Name of Holder:

	(Print)______________

	By:________________
	Name:
	Title:

ACKNOWLEDGED AND AGREED TO this ___ day of
___________, 20__

ALLIQUA, INC.

By:
	Name:
	Title:

FORM OF ASSIGNMENT

[To be completed and signed only upon transfer of Warrant]

Dated: ,





	Address of Transferee

In the presence of:

Exhibit 10.48

THE COMPANY HAS REQUESTED AN ORDER FROM THE SECURITIES AND EXCHANGE COMMISSION (THE “COMMISSION”) PURSUANT TO RULE 24b-2 OF THE SECURITIES EXCHANGE ACT OF 1934, AS AMENDED, GRANTING CONFIDENTIAL TREATMENT TO SELECTED PORTIONS. ACCORDINGLY, THE CONFIDENTIAL PORTIONS HAVE BEEN OMITTED FROM THIS EXHIBIT, AND HAVE BEEN FILED SEPARATELY WITH THE COMMISSION. OMITTED PORTIONS ARE INDICATED IN THIS EXHIBIT WITH “*****”.

LICENSE, MARKETING AND DEVELOPMENT AGREEMENT

BY AND BETWEEN

ANTHROGENESIS CORPORATION, D/B/A CCT

AND

ALLIQUA, INC.

NOVEMBER 14, 2013

TABLE OF CONTENTS

Article 1 DEFINITIONS		1

Article 2 LICENSES		10

2.1	License to Alliqua.	10

2.2	Exclusivity.	10

2.3	Alliqua Sublicense Rights.	11

2.4	Third Party Licenses.	11

2.5	CCT Retained Rights	12

2.6	Right of First Offer.	12

Article 3 GOVERNANCE		13

3.1	Joint Steering Committee.	13

3.2	Alliance Managers.	15

3.3	Commercial Launch Team	15

3.4	Promotional Materials.	15

Article 4 DEVELOPMENT		15

4.1	Joint Development Plan; Alliqua Activities.	15

4.2	Records and Reports.	16

4.3	Subcontracts	16

Article 5 REGULATORY MATTERS		18

5.1	Regulatory Activities.	18

5.2	Regulatory Reports; Meetings with Regulatory Authorities.	18

5.3	Regulatory Costs.	18

5.4	Notification of Threatened Action.	19

5.5	Adverse Event Reporting and Safety Data Exchange.	19

5.6	Remedial Actions.	19

5.7	Rebate Processing and Government Price Reporting.	20

Article 6 COMMERCIALIZATION		20

6.1	Commercialization Responsibilities.	20

6.2	Commercialization Plan.	20

6.3	Commercial Diligence.	21

6.4	Records and Reports.	21

6.5	Commercialization Outside the Territory.	21

Article 7 COMPENSATION		21

7.1	Annual License Fee.	22

7.2	Milestone Payments.	22

7.3	Royalties.	22

7.4	Market Condition Change.	23

7.5	Payment Method; Late Payments.	23

7.6	Records	23

7.7	Audits.	23

7.8	Taxes.	24

7.9	Annual Fee on Medical Device Manufacturers and Importers.	24

Article 8 INTELLECTUAL PROPERTY MATTERS		24

8.1	Prosecution of Patents.	24

8.2	Inventions Generally.	25

8.3	Enforcement of CCT Patents.	25

8.4	Infringement of Third Party Rights in the Territory.	26

8.5	Patent Marking.	27

8.6	Trademarks.	27

Article 9 REPRESENTATIONS AND WARRANTIES; COVENANTS		28

9.1	Mutual Representations and Warranties	28

9.2	Additional Representations and Warranties of CCT	29

9.3	Mutual Covenants.	30

9.4	Disclaimer.	30

Article 10 INDEMNIFICATION		31

10.1	Indemnification by CCT	31

10.2	Indemnification by Alliqua	31

10.3	Indemnification Procedures.	31

10.4	Limitation of Liability	32

10.5	Insurance	32

Article 11 CONFIDENTIALITY		33

11.1	Confidentiality.	33

11.2	Authorized Disclosure	33

11.3	Return of Confidential Information	33

11.4	Publicity; Terms of the Agreement; Confidential Treatment.	34

11.5	Technical Publication.	35

11.6	Equitable Relief.	35

Article 12 TERM AND TERMINATION		35

12.1	Term.	35

12.2	Termination by CCT.	35

12.3	Termination for Breach.	36

12.4	Termination for Bankruptcy Code.	37

12.5	Termination for Safety, Legal or Economic Risks.	37

12.6	Effect of Termination.	38

12.7	Survival	40

Article 13 DISPUTE RESOLUTION		40

13.1	Disputes.	40

13.2	Internal Resolution.	40

13.3	Patent and Trademark Disputes.	40

13.4	Equitable Relief	40

Article 14 MISCELLANEOUS		40

14.1	Entire Agreement; Amendment.	40

14.2	Force Majeure.	41

14.3	Notices.	41

14.4	No Strict Construction; Headings	42

14.5	Assignment	42

14.6	Performance by Affiliates.	43

14.7	Further Actions.	43

14.8	Severability.	43

14.9	No Waiver.	43

14.10	Independent Contractors.	43

14.11	Governing Law.	43

14.12	Counterparts.	44

LICENSE, MARKETING AND DEVELOPMENT AGREEMENT

This License , MARKETING AND DEVELOPMENT Agreement (the “ Agreement ”) is entered into as of November 14, 2013 (the “ Effective Date ”) by and between Anthrogenesis Corporation , d/b/a CELGENE CELLULAR THERAPEUTICS ( “ CCT ” ) , a New Jersey corporation having a principal place of business at 33 Technology Drive, 2 ^nd Floor, Warren, NJ 07059 (“ CCT ”), and Alliqua, INC. , a Florida corporation having a principal place of business at 2150 Cabot Boulevard West, Langhorne, Pennsylvania (“ Alliqua ”). Alliqua and CCT may each be referred to as a “ Party ” or collectively be referred to as the “ Parties ”.

RECITALS

Whereas , CCT owns or has rights to placental based products, including intellectual property relating thereto, and is willing to license such intellectual property to Alliqua, and Alliqua desires to accept such license;

Whereas , CCT and Alliqua desire to establish a collaboration for the development and commercialization of Licensed Products in the Field in the Territory (each, as defined below), in accordance with the terms and conditions set forth herein; and

Whereas , concurrently with the signing of this Agreement, Celgene Corporation (“ Investor ”) and Alliqua are entering into a Stock Purchase Agreement (the “ Stock Purchase Agreement ”) pursuant to which Investor intends to purchase certain securities of Alliqua.

Now, Therefore , in consideration of the foregoing premises and the mutual promises, covenants and conditions contained in this Agreement, the Parties agree as follows:

Article 1
DEFINITIONS

The terms in this Agreement with initial letters capitalized, whether used in the singular or the plural, shall have the meaning set forth below or, if not listed below, the meaning designated elsewhere in this Agreement (and derivative forms of them shall be interpreted accordingly). The terms “include,” “includes,” “including” and derivative forms of them shall be deemed followed by the phrase “without limitation” regardless of whether such phrase appears there (and with no implication being drawn from its inconsistent inclusion or non-inclusion).

“ 510(k) ” means a marketing authorization issued by the FDA pursuant to Section 510(k) of the Act, whereby the FDA clears a medical device for sale in the United States, determining that the medical device is substantially equivalent to legally marketed predicate devices.

“ Accounting Standards ” has the meaning set forth in the definition of Net Sales.

“ Acquired Entity ” has the meaning set forth in Section 2.2(d).

“ Acquiring Entity ” has the meaning set forth in Section 2.2(c).

“ Act ” means the Federal Food, Drug, and Cosmetic Act, as amended, and the rules, regulations, guidelines and requirements of the FDA as may be in effect from time to time.

“ Additional Territory Transaction ” has the meaning set forth in Section 6.5.

“ Affiliate ” means, with respect to a Person, any Person that controls, is controlled by or is under common control with such first Person. For purposes of this definition only, “ control ” means (a) to possess, directly or indirectly, the power to direct the management or policies of a Person, whether through ownership of voting securities, by contract relating to voting rights or corporate governance or otherwise, or (b) to own, directly or indirectly, fifty percent (50%) or more of the outstanding securities or other ownership interest of such Person. For the purposes of this Agreement, neither Party shall be considered an Affiliate of the other, and the Affiliates of each Party shall not be considered Affiliates of the other Party or of any of such other Party’s Affiliates.

“ Agreement ” has the meaning set forth in the Preamble.

“ Alliance Manager ” has the meaning set forth in Section 3.2.

“ Alliqua ” has the meaning set forth in the Preamble.

“ Alliqua Indemnitees ” has the meaning set forth in Section 10.1.

“ Alliqua Permitted Subcontractor ” has the meaning set forth in Section 4.3(e).

“ Alliqua Sublicense Agreement ” has the meaning set forth in Section 2.3(a).

“ Annual License Fee(s) ” has the meaning set forth in Section 7.1.

“ Audited Party ” has the meaning set forth in Section 7.7.

“ Auditing Party ” has the meaning set forth in Section 7.7.

“ Bankrupt Party ” has the meaning set forth in Section 12.4.

“ Bankruptcy Code ” has the meaning set forth in Section 12.4.

“ Base Purchase Price ” means, with respect to a Licensed Product, (i) the purchase price of such Licensed Product on a per unit basis, as defined in the Supply Agreement, or (ii) if the Licensed Product is manufactured on Alliqua’s behalf by a Third Party in accordance with the Supply Agreement, the amount paid to such Third Party on a per unit basis for such Licensed Product, or (iii) if the Licensed Product is manufactured by Alliqua in accordance with the Supply Agreement, [****].

- 2 -

“ Biovance ” means decellularized, dehydrated human amniotic membrane, as produced according to the CCT Technology as of the Effective Date or thereafter, which are marketed under the Biovance name.

“ Business Day ” means any day (other than a Saturday, Sunday or a legal holiday) on which banks are open for general business in New York, New York.

“ CCT ” has the meaning set forth in the Preamble.

“ CCT Indemnitees ” has the meaning set forth in Section 10.2.

“ CCT Know-How ” means all Know-How Controlled by CCT as of the Effective Date or during the Term that is necessary or useful for the Development or Commercialization of the Licensed Products.

“ CCT Mark(s) ” has the meaning set forth in Section 8.6(b).

“ CCT Patents ” means (i) the Patents listed in Exhibit A and (ii) any other Patents in the Territory that issue from, or that claim the priority of, any of the Patents listed in Exhibit A in the Field in the Territory.

“ CCT Technology ” means the CCT Know-How and the CCT Patents.

“ Claims ” has the meaning set forth in Section 10.1.

“ Cost of Goods Sold ” or “ COGS ” means, with respect to Licensed Products, the cost of goods sold as determined in accordance with GAAP and as reflected on the published financial statements of Alliqua.

“ Commercialization Plan ” has the meaning set forth in Section 6.2.

“ Commercialize ” or “ Commercialization ” means to package (from bulk to finished form), label, market, promote, sell, offer for sale and/or distribute (but not to manufacture or have manufactured, except to the extent packaging and labeling hereunder is considered to be manufacturing).

“ Commercially Reasonable Best Efforts ” means, with respect to Alliqua’s activities under this Agreement, the carrying out of such activities with a level of effort and resources consistent with the commercially best reasonable practices of a similarly situated company in the pharmaceutical device industry that would be applied to the research, development, packaging, labeling or commercialization of a pharmaceutical product comparable to the Licensed Product at a similar stage of development or commercialization (but explicitly ignoring the royalty, milestone and other payments due CCT under this Agreement), provided that Alliqua’s effort with regard to the Development and Commercialization of each Licensed Product shall be no less strenuous than the effort exerted by [****] in the development and commercialization of any other present or future product or compound.

- 3 -

“ Competing Product ” means any advanced biologic wound care biological skin substitute product [****] in the Field, other than a Licensed Product.

“ Confidential Information ” of a Party means any and all information of a confidential or proprietary nature disclosed by such Party to the other Party under this Agreement or under the Prior CDA, whether in oral, written, graphic or electronic form.

“ Control ” means, with respect to any particular Know-How or Patent, that a Party (a) owns or (b) has a license (other than a license granted to such Party under this Agreement) to such Know-How or Patent and, in each case, has the ability to grant to the other Party access, a license, or a sublicense (as applicable) to such Know-How or Patent on the terms and conditions set forth in this Agreement without violating the terms of any then-existing agreement or other arrangement with any Third Party.

“ Cover ” means, with respect to a particular item and a particular Patent, that such Patent claims or covers, in any of the countries of manufacture, use, and/or sale, (a) the composition of such item, any of its ingredients or formulations or any product containing or that is made using such item (by virtue of such product containing or being made using such item); (b) a method of making or using any of the foregoing things referred to in (a); (c) an item used or present in the manufacture of any of the foregoing things referred to in (a); and/or (d) the method by which such item was discovered or identified, or another item present during or used in such method.

“ Covered Opportunity ” has the meaning set forth in Section 2.6.

“ Develop ” or “ Development ” means activities that relate to developing a Licensed Product or a Competing Product, including clinical trials. Development (with respect to Licensed Products, but not Competing Products) shall exclude manufacturing, Commercialization, and obtaining and supporting Regulatory Clearances and/or Approvals.

“ Development Costs ” means the out-of-pocket and internal costs and expenses associated with particular Development activities for which Alliqua is responsible under each Joint Development Plan.

“ Development Records ” has the meaning set forth in Section 4.2.

“ Dollar ” or “ $ ” means a USA dollar.

“ ECMs ” means extracellular matrix derived from the human placenta, as produced according to the CCT Technology as of the Effective Date or thereafter, which may be (but is not necessarily) formulated into [****],[****], or [****].

“ Event of Bankruptcy ” has the meaning set forth in Section 12.4.

“ Executive Officer ” means, with respect to CCT, its Chief Executive Officer or such Chief Executive Officer’s designee, or such other person holding a similar position designated by CCT from time to time, and with respect to Alliqua, its Chief Executive Officer or such Chief Executive Officer’s designee, or such other person holding a similar position designated by Alliqua from time to time.

- 4 -

“ FD&C Act ” means the USA Federal Food, Drug and Cosmetic Act, as amended.

“ FDA ” means the USA Food and Drug Administration or any successor entity.

“ Field ” means acute and chronic non-healing wounds: pressure ulcers, venous ulcers, diabetic ulcers, chronic vascular ulcers, tunnel/undermined wounds, surgical wounds (donor sites/grafts, dehiscence), trauma wounds (abrasions, lacerations, second degree burns, and skin tears), and draining wounds.

“ First Commercial Sale ” means, with respect to a Licensed Product, the first sale, transfer or disposition for value or for end use to a Third Party of such Licensed Product in a given regulatory jurisdiction after Regulatory Clearance and/or Approval has been obtained in such jurisdiction.

“ GAAP ” means generally accepted accounting principles in the United States, consistently applied.

“ Governmental Authority ” means any multi-national, federal, state, local, municipal, provincial or other governmental authority of any nature (including any governmental division, prefecture, subdivision, department, agency, bureau, branch, office, commission, council, court or other tribunal).

“ Government Price Reporting ” has the meaning set forth in Section 5.7.

“ Gross Margin ” means Net Sales of a Licensed Product minus the Purchase Price, as determined in accordance with GAAP.

“ Improvements ” means an invention, idea, concept, formula, design, technique or improvement (whether or not patentable or subject to any other form of intellectual property right registration) to a Licensed Product developed, conceived or reduced to practice subsequent to the date hereof in the Field.

“ Indemnified Party ” has the meaning set forth in Section 10.3.

“ Indemnifying Party ” has the meaning set forth in Section 10.3.

“ Infringement ” has the meaning set forth in Section 8.3(a).

“ Infringement Dispute ” has the meaning set forth in Section 8.4(b).

“ Initial Term ” has the meaning set forth in Section 12.1.

“ Investor ” has the meaning set forth in the Recitals.

- 5 -

“ Joint Development Plan ” means a plan established by the Parties as described in Section 4.1 setting forth the activities to be conducted by or on behalf of Alliqua to Develop the Licensed Products in accordance with the terms of Article 4.

“ Joint Steering Committee ” or “ JSC ” means the committee formed by the Parties as described in Section 3.1.

“ JSC Dispute ” has the meaning set forth in Section 3.1(c)(i).

“ JSC Selected Subcontractor ” has the meaning set forth in Section 4.3(b).

“ JSC Selected Subcontractor Agreement ” has the meaning set forth in Section 4.3(b).

“ Know-How ” means all technical information, data and know-how, including inventions, discoveries, trade secrets, specifications, instructions, processes, formulae, expertise, materials, methods, protocols and other technology applicable to formulations, compositions or products or to their manufacture, development, registration, use or marketing or processes for their manufacture, formulations containing them or compositions incorporating or comprising them, and including all biological, chemical, pharmacological, biochemical, toxicological, pharmaceutical, physical and analytical, safety, quality control, manufacturing, preclinical and clinical data, instructions, processes, formula, and expertise.

“ Launch Year ” means, for each of Biovance and ECMs, (i) with respect to the first Launch Year, the 12-month period beginning on the first day of the calendar month immediately preceding the first anniversary of the First Commercial Sale of a Licensed Product and (ii) with respect to any subsequent Launch Year, the 12-month period beginning on the first day of the relevant anniversary of the first Launch Year. Solely by way of example, if the First Commercial Sale occurs on April 15, 2014, the first Launch Year shall commence on April 1, 2014 and each subsequent Launch Year shall commence on April 1 of each subsequent year.

“ Launch Year Quarter ” means the first three (3) calendar month period, second three (3) calendar month period, third three (3) calendar month period and fourth three (3) calendar month period, in each case, commencing with the first day of each Launch Year. Solely by way of example, if the Launch Year commences on April 1, 2014, the first Launch Year Quarter shall mean the period commencing on April 1 and ending on June 30, the second Launch Year Quarter shall mean the period commencing on July 1 and ending on September 30, the third Launch Year Quarter shall mean the period commencing on October 1 and ending on December 31 and the fourth Launch Year Quarter shall mean the period commencing January 1 and ending on March 31.

“ Laws ” means all laws, statutes, rules, regulations, ordinances and other pronouncements having the effect of law of any federal, national, multinational, state, provincial, county, city or other political subdivision, domestic or foreign.

“ Liabilities ” has the meaning set forth in Section 10.1.

- 6 -

“ Licensed Product” means each of Biovance and ECMs and any and all Improvements thereof; “ Licensed Products ” shall mean Biovance and ECMs, collectively.

“ Management Change Transaction ” has the meaning set forth in Section 2.2(c).

“ Market Condition Change ” means, for Biovance, at any time during the [****] of this Agreement, and for ECMs, at any time during the [****] after the First Commercial Sale thereof, factors outside the reasonable control of Alliqua, including supply shortages or outages, changes in any Governmental Authority or Regulatory Authority regulation or reimbursement rate, and/or any Regulatory Authority action which would adversely affect the Commercialization of such Licensed Product in any material respect.

“ Market Condition Financial Terms ” has the meaning set forth in Section 7.4.

“ Milestone Event ” has the meaning set forth in Section 7.2.

“ Milestone Payment ” has the meaning set forth in Section 7.2.

“ Minimum Sales Threshold ” has the meaning set forth in Section 12.2(b)(i).

“ Negotiation Period ” has the meaning set forth in Section 2.6.

“ Net Sales ” means, with respect to any Licensed Product, gross amounts invoiced by Alliqua or its Affiliates to Third Parties for the sale or other commercial disposition of such Licensed Product anywhere within the Territory, including sales to wholesale distributors, less deductions from such amounts calculated in accordance with the Accounting Standards so as to arrive at “net sales” under the Accounting Standards, and further reduced by write-offs of accounts receivables or increased for collection of accounts that were previously written off.

(a) Net Sales, and any and all set-offs against gross amounts invoiced, shall be determined from books and records maintained in accordance with the Accounting Standards, consistently applied throughout the organization and across all products of the entity whose sales of any Licensed Product are giving rise to Net Sales. Sales or other commercial dispositions of Licensed Products between Alliqua and its Affiliates, and Licensed Products provided to Third Parties without charge, in connection with research and development, clinical trials, compassionate use, humanitarian and charitable donations, or indigent programs or for use as samples shall be excluded from the computation of Net Sales, and no payments will be payable on such sales or such other commercial dispositions, except where such an Affiliate is an end user of the Licensed Product.

(b) If a Licensed Product is sold or otherwise commercially disposed of for consideration other than cash or in a transaction that is not at arm’s length between the buyer and the seller, then the gross amount to be included in the calculation of Net Sales shall be the amount that would have been invoiced had the transaction been conducted at arm’s length and for cash. Such amount that would have been invoiced shall be determined, wherever possible, by reference to the average selling price of the relevant Licensed Product in arm’s length transactions in the relevant country.

- 7 -

(c) Notwithstanding the foregoing, in the event a Licensed Product is sold as a Combination Product, Net Sales shall be calculated by multiplying the Net Sales of the Combination Product by the fraction A/(A+B), where A is the gross invoice price of the royalty- bearing product if sold separately in a country and B is the gross invoice price of the other product(s) included in the Combination Product if sold separately in such country. If no such separate sales are made by Alliqua or its Affiliates in a country, Net Sales of the Combination Product shall be calculated in a manner to be negotiated and agreed upon by the Parties, reasonably and in good faith, prior to any sale of such Combination Product, which shall be based upon the relative value of the active components of such Combination Product.

As used in this definition: (i) “ Accounting Standards ” means GAAP (United States Generally Accepted Accounting Principles), and (ii) “Combination Product” means any product that comprises a Licensed Product sold in conjunction with another active component so as to be a combination product (whether packaged together or in the same therapeutic formulation).

“ Non-Bankrupt Party ” has the meaning set forth in Section 12.4.

“ Notice of Interest ” has the meaning set forth in Section 2.6.

“ Party ” or “ Parties ” has the meaning set forth in the Preamble.

“ Patents ” means, collectively, (a) pending patent applications (and patents issuing therefrom), issued patents, regional patents, utility models and designs; and (b) reissues, divisions, substitutions, confirmations, renewals, extensions, provisionals, registrations, validations, re-examinations, additions, continuations, continued prosecution applications, continuations-in-part, divisionals, or any Supplementary Protection Certificates or restoration of patent terms of or to any patents, patent applications, utility models or designs, in each case being enforceable within the applicable territory.

“ Person ” means an individual, sole proprietorship, partnership, limited partnership, limited liability partnership, corporation, limited liability company, business trust, joint stock company, trust, unincorporated association, joint venture or other similar entity or organization, including a government or political subdivision, department or agency of a government.

“ Prior CDA ” means that certain Mutual Confidentiality Agreement between the Parties dated March 19, 2013.

“ Product Marks ” has the meaning set forth in Section 8.6(a).

“ Promotional Materials ” has the meaning set forth in Section 3.4.

“ Purchase Price ” means, with respect to a Licensed Product: (a) the Base Purchase Price; plus (b) to the extent not included in amounts paid under the Supply Agreement or a Third Party manufacturer and incurred by Alliqua in connection with the manufacture of such Licensed Product, any [****] and [****] incurred in connection with the procurement of such Licensed Product; plus (c) any and all reasonable and documented costs actually incurred by Alliqua to [****]; plus (d) all amounts paid by Alliqua in respect of [****] applied to the sale of such Licensed Product; in each case, as determined in accordance with GAAP.

- 8 -

“ Regulatory Clearances and/or Approvals ” means all approvals necessary for the commercial sale of a Licensed Product for any indication in a given country or regulatory jurisdiction in the Territory, which shall include satisfaction of all applicable regulatory and notification requirements, and shall be deemed to include any stockpiling by any Governmental Authority for civilian or military use, but which shall exclude any pricing and reimbursement approvals.

“ Regulatory Authority ” means the FDA or any corollary agency or Governmental Authority involved in granting Regulatory Clearances and/or Approvals in any other country or jurisdiction in the Territory.

“ Regulatory Materials ” means regulatory applications, submissions, notifications, communications, correspondence, registrations, Regulatory Clearances and/or Approvals and/or other filings made to, received from or otherwise conducted with a Regulatory Authority in order to Develop, manufacture, market, sell or otherwise Commercialize a Licensed Product in a particular country or jurisdiction.

“ Remedial Action ” has the meaning set forth in Section 5.6.

“ Renewal Term ” has the meaning set forth in Section 12.1.

“ Revenue ” has the meaning set forth in Section 8.3(e).

“ Royalty Term ” has the meaning set forth in Section 7.3(b).

“ Safety Data and Exchange Agreement ” has the meaning set forth in Section 5.5.

“ Sales Threshold Default ” has the meaning set forth in Section 12.2(b)(i).

“ Sales Threshold Default Notice ” has the meaning set forth in Section 12.2(b)(i).

“ Secretary Designee ” has the meaning set forth in Section 3.1(d).

“ Selected Subcontractor ” has the meaning set forth in Section 4.3(a).

“ Selected Subcontractor Agreement ” has the meaning set forth in Section 4.3(a).

“ Sell-Off Period ” has the meaning set forth in Section 12.6(d).

“ Stock Purchase Agreement ” has the meaning set forth in the Recitals.

“ Subject Transaction ” has the meaning set forth in Section 2.2(d).

“ Supply Agreement ” means that certain Supply Agreement entered into by the Parties, dated November 14, 2013.

- 9 -

“ Term ” has the meaning set forth in Section 12.1.

“ Territory ” means USA.

“ Third Party ” means any Person not including the Parties or the Parties’ respective Affiliates.

“ USA ” or “ United States ” means the United States of America, including all possessions and territories thereof.

Article 2
LICENSES

2.1 License to Alliqua .

(a) Subject to the terms and conditions of this Agreement, CCT hereby grants to Alliqua during the Term an exclusive, royalty-bearing license, with the right to sublicense solely as provided in Section 2.3, under the CCT Technology, to Develop and Commercialize, including to use, offer for sale and sell Licensed Products in the Field in the Territory. Alliqua shall not, and shall not permit any of its Affiliates to, use or practice any CCT Technology outside the scope of the license granted to it under this Section 2.1(a). CCT hereby expressly retains for itself and others exclusive rights under the CCT Technology to manufacture Licensed Products for Alliqua (it being understood and agreed that the Parties have entered into a Supply Agreement as of the Effective Date to address the supply of Licensed Products). For the avoidance of doubt, as of the Effective Date, the license grant set forth in this Section 2.1(a) is solely in connection with Alliqua’s right to Develop and Commercialize Licensed Products and is subject to CCT’s right to Develop ECMs pursuant to Section 4.1 below.

(b) Alliqua may not enhance, decompile, disassemble, improve, modify, change, reverse assemble or reverse engineer Licensed Products or any part thereof, except as: (i) set forth in the Supply Agreement; (ii) expressly set forth in the applicable Joint Development Plan; or (iii) otherwise agreed to by the JSC.

2.2 Exclusivity .

(a) As partial consideration for the grant of rights set forth in Section 2.1(a), Alliqua agrees that during the Term of this Agreement, it and its Affiliates shall not, directly or indirectly, Develop or Commercialize any Competing Product in the Territory.

(b) Subject to Section 2.2(c) and 2.2(d), as partial consideration for the services to be performed by Alliqua hereunder, CCT agrees that during the Term of this Agreement, it shall not, directly or indirectly, Commercialize any Competing Product in the Territory.

(c) Nothing in this Section 2.2 shall prohibit any Acquiring Entity of CCT or any of its respective Affiliates or sublicensees from continuing, furthering or performing (i) any activities in which it was engaged prior to the effective date of a Management Change Transaction or (ii) any activities relating to products developed by an Acquiring Entity or CCT (or any other Third Party) without accessing or practicing technology or information made available to Alliqua under this Agreement. For purposes of this Section 2.2(c), (x) “ Management Change Transaction ” shall mean a transfer to a Third Party of all or substantially all of CCT’s assets to which this Agreement relates, or the merger or consolidation with, or acquisition of CCT by a Third Party and (y) “ Acquiring Entity ” shall mean such Third Party described in clause (x).

- 10 -

(d) Nothing in this Section 2.2 shall prohibit CCT, Alliqua or any of their respective Acquired Entities from continuing, furthering or performing (i) any activities in which an Acquired Entity was engaged prior to the effective date of a Subject Transaction or (ii) any activities relating to products developed by an Acquired Entity, CCT or Alliqua (or any other Third Party) without accessing or practicing technology or information made available to Alliqua under this Agreement. For purposes of this Section 2.2(d), (x) “ Subject Transaction ” shall mean a transfer to CCT or Alliqua, as the case may be, by a Third Party of all or substantially all of such Third Party’s assets, or the merger or consolidation with, or acquisition of, a Third Party by CCT or Alliqua, as the case may be, and (y) “ Acquired Entity ” shall mean such Third Party described in clause (x).

2.3 Alliqua Sublicense Rights .

(a) Alliqua shall have the right to grant sublicenses of the licenses granted in Section 2.1(a) to (i) its Affiliates without the consent of CCT and (ii) any Third Party for the sole purpose of providing services directly to Alliqua, so that Alliqua may perform its rights and/or obligations of Alliqua hereunder (but which, for the avoidance of doubt, shall not include a wholesale sublicense of the licenses granted in Section 2.1(a) for purposes of transferring Alliqua’s rights and obligations hereunder in their entirety), upon the prior written consent of CCT as determined by CCT in good faith, in each case, solely as set forth in this Section 2.3 (each such sublicense, a “ Alliqua Sublicense Agreement ”). Alliqua shall remain primarily responsible for all of its Affiliates’ activities and any and all failures by its Affiliates to comply with the applicable terms of this Agreement.

(b) Alliqua shall, within thirty (30) days after granting any Alliqua Sublicense Agreement, notify CCT of the grant of such sublicense and provide CCT with a true and complete copy of the Alliqua Sublicense Agreement. Each Alliqua Sublicense Agreement shall be consistent with the terms and conditions of this Agreement and the Affiliate shall be bound by and subject to all applicable terms and conditions of this Agreement in the same manner and to the same extent as Alliqua is bound thereby.

2.4 Third Party Licenses .

(a) For the avoidance of doubt, CCT shall be responsible for payment obligations to Third Parties for Patents and Know-How within the CCT Technology that are licensed to CCT by a Third Party prior to the Effective Date, if any. Alliqua hereby acknowledges and agrees that its sublicense under such in-licensed CCT Technology (if any) is subject to the terms and conditions of the applicable license agreement governing CCT’s license of such in-licensed CCT Technology.

- 11 -

(b) The responsibility, necessity and handling of any Third Party license required as a result of Improvements to a Licensed Product after the Effective Date shall be agreed upon by the JSC, provided that Alliqua shall have the right to negotiate any third party license agreement that is required as a result of any Improvement to the CCT Technology, subject to (i) information sharing with CCT, including apprising CCT of any offers made by Third Parties, the substance of such offer, the status of any negotiations with Third Parties and any other information regarding such Third Party license as reasonably requested by CCT and (ii) CCT’s prior written consent of such Third Party license agreement. The costs associated with any Third Party license agreement shall be allocated as follows: (x) if such Third Party license is required in order to Develop or Commercialize the CCT Technology existing on or after the Effective Date, the costs of such Third Party license shall be [****], and (y) if such Third Party license is required in order to Develop or Commercialize the CCT Technology made on or after the Effective Date, the costs of such Third Party license shall be [****]. Alliqua may deduct up to [****] of the amount of royalties paid by Alliqua to a Third Party for such license against amounts payable to CCT hereunder, but in no event shall Alliqua deduct an amount greater than [****] of any payment of the royalties due and payable to CCT for the Licensed Products in accordance with Article 7 below. For the avoidance of doubt, Alliqua may not carry over any amounts from any prior payment period.

2.5 CCT Retained Rights. The licenses granted by CCT under this Agreement are limited to those grants specifically set forth in Section 2.1(a) and Section 8.6(b). Nothing in this Agreement will be construed to grant any rights or licenses to any other intellectual property rights of CCT. All rights, licenses, benefits and privileges not expressly granted to Alliqua hereunder are reserved by CCT. For the avoidance of doubt, CCT shall retain all rights in all CCT intellectual property (including the CCT Technology) (i) outside the Field in the Territory and (ii) in any field (including the Field) outside the Territory. Further, CCT shall have the right to research, Develop, manufacture and Commercialize any products other than Licensed Products in the Field in the Territory.

2.6 Right of First Offer . CCT grants to Alliqua a right of first offer (on the terms and conditions set forth in this Section 2.6) with respect to the Commercialization of any Competing Product in the Field in the Territory Developed by CCT (a “ Covered Opportunity ”). CCT will promptly notify Alliqua in writing of each Covered Opportunity. If, within fifteen (15) Business Days of receiving such notice from CCT, CCT receives a notice in writing from Alliqua that Alliqua wishes to enter into negotiations regarding the Covered Opportunity (the “ Notice of Interest ”), then CCT shall negotiate exclusively with Alliqua in good faith for a period of sixty (60) days from the date of CCT’s notice to Alliqua of the Covered Opportunity (or such longer period of time as may be agreed to by the Parties in writing) (the “ Negotiation Period ”) with respect to a definitive agreement for the Commercialization of the Covered Opportunity by Alliqua. If (a) Alliqua indicates in writing that it does not wish to enter into negotiations regarding such Covered Opportunity, (b) CCT fails to receive a Notice of Interest within the fifteen (15) Business Day period described above, or (c) the Parties have not entered into such a definitive agreement by the end of the Negotiation Period, then (i) CCT shall be free to Commercialize the Covered Opportunity itself and/or enter into one or more agreements regarding the Covered Opportunity with any Third Party and (ii) the restrictions set forth in Section 2.2(b) shall automatically terminate solely with respect to CCT’s Commercialization of such Covered Opportunity.

- 12 -

Article 3
GOVERNANCE

3.1 Joint Steering Committee .

(a) Within 30 days after the Effective Date, the Parties shall establish a joint steering committee (the “ Joint Steering Committee ” or “ JSC ”). The JSC shall oversee the performance of the Parties’ activities under this Agreement and under each Joint Development Plan, as set forth herein, and provide a forum for sharing advice, progress, and results relating to such activities and shall attempt to facilitate the resolution of any disputes between the Parties. The JSC shall appoint and oversee subcommittees as it deems appropriate for carrying out activities under this Agreement, and shall review the overall progress of the Parties’ collaborative efforts under this Agreement.

(b) Membership; Meetings . The JSC shall be composed of three (3) members from each of CCT and Alliqua or such equal number of members as the Parties may agree, and shall meet, in person, by teleconference, or by video-teleconference, at least one time per calendar quarter, or more or less often as unanimously agreed by both Parties’ JSC members (provided that in any event, the Parties meet at least one time per year in person). Either Party may reasonably call a meeting upon no less than fifteen (15) Business Days’ notice. In-person meetings shall alternate between CCT and Alliqua locations, or as mutually agreed upon by the Parties. Each Party shall be responsible for all of its own personnel and travel costs and expenses relating to participation in JSC meetings. The first such meeting shall be within sixty (60) days after the Effective Date. Any member of the JSC may designate a substitute to attend with prior written notice to the other Party. Ad hoc guests who are subject to written confidentiality obligations commensurate in scope to the provisions in Article 11 may be invited, upon prior joint consent of Alliqua and CCT, to the JSC meetings. Each Party may replace its JSC members with other of its employees, at any time, upon written notice to the other Party.

(c) Decision-Making; Limitations on JSC; JSC Disputes . Decisions of the JSC shall be made by unanimous vote or written consent, with each Party having collectively one vote in all decisions. The presence of at least one (1) JSC member representing each Party shall constitute a quorum in order for decisions to be made. The JSC shall have only such powers as are specifically delegated to it in this Agreement, and such powers shall be subject to the terms and conditions set forth herein. Amendments or changes to this Agreement shall be valid and binding only upon mutual written agreement of the Parties in accordance with Section 14.1 and the JSC shall have no authority to amend, change or modify the terms and conditions of this Agreement. The JSC shall use reasonable best efforts to resolve the matters within its roles and functions or otherwise referred to it.

(i) If, with respect to a matter that is subject to the JSC’s decision-making authority: (i) the JSC cannot reach consensus within five (5) Business Days after it has met and attempted to reach such consensus or (ii) the Parties cannot reach consensus on whether the JSC has decision-making authority regarding a matter within three (3) Business Days after such matter was first raised by either Party (each of the foregoing cases, a “ JSC Dispute ”); then in each such instance, the JSC Dispute in question shall be referred to the Executive Officer of CCT and the Executive Officer of Alliqua for resolution. The Executive Officers shall use reasonable efforts to resolve the JSC Dispute referred to them.

- 13 -

(ii) If the Executive Officers are unable to resolve the JSC Dispute within five (5) Business Days, the provisions of this Section 3.1(c)(ii) shall control:

(1) if the JSC Dispute solely relates to the [****] of Licensed Products (in each case excluding any dispute to the extent relating to [****] (including for the avoidance of doubt, [****]), any [****] in connection with any Licensed Product or any [****]), and the Executive Officers cannot resolve the matter within five (5) Business Days, then the matter shall be decided by the Executive Officer of Alliqua in good faith, giving appropriate consideration to the reasonable business and scientific concerns of CCT; and

(2) if the JSC Dispute solely relates to [****] (in each case excluding any dispute to the extent relating to any matters which are the subject of [****]) and the Executive Officers cannot resolve the matters within five (5) Business Days, then the matter shall be decided by the Executive Officer of CCT in good faith, giving appropriate consideration to the reasonable business and scientific concerns of Alliqua.

(3) Notwithstanding Sections 3.1(c)(ii)(1) and 3.1(c)(ii)(2) above, any dispute relating to Article 7 or any financial term of this Agreement (including, for the avoidance of doubt, any increase or purported increase in the Base Purchase Price for any Licensed Product as contemplated by the Supply Agreement), shall be excluded from the provisions of this Section 3.1(c)(ii) and shall be conclusively settled in accordance with Article 13 below.

(iii) Any JSC Dispute that is not covered by 3.1(c)(ii) or resolved pursuant to Section 3.1(c)(i) or Section 3.1(c)(ii) shall be conclusively settled in accordance with Article 13 below. For all purposes under this Agreement, any decision made pursuant to this Section 3.1(c) shall be deemed to be the decision of the JSC.

(d) Secretary; Agenda; Minutes . The Chairperson shall be designated by CCT. The Chairperson (who shall be a CCT designee) shall designate a secretary of the JSC (the “ Secretary Designee ”) who also will be a CCT designee and who will be responsible for calling meetings and preparing and circulating an agenda in advance of each meeting. The Secretary Designee shall solicit agenda items from JSC members and provide an agenda along with appropriate information for such agenda reasonably in advance of any meeting. It is understood that such agenda will include all items reasonably requested by any JSC member for inclusion therein. Additionally, the Secretary Designee shall be responsible for preparing and circulating minutes within 15 days after each meeting of the JSC setting forth, among other things, a description, in reasonable detail, of the discussions at the meeting and a list of any actions, decisions, or determinations approved by the JSC. Such minutes shall be effective only after being approved by both Parties. Definitive minutes of all JSC meetings shall be finalized no later than 30 days after the meeting to which the minutes pertain.

- 14 -

3.2 Alliance Managers . Promptly after the Effective Date, each Party shall appoint an individual to act as the alliance manager for such Party (each, an “ Alliance Manager ”) (who may be a member of the JSC). Each Alliance Manager shall thereafter be permitted to attend meetings of the JSC as a nonvoting observer (if not a member), subject to the confidentiality provisions of Article 11. The Alliance Managers shall be the primary point of contact for the Parties regarding the activities contemplated by this Agreement and shall facilitate communication regarding all activities hereunder. The Alliance Managers shall lead the communications between the Parties and shall be responsible for following-up on decisions made by the JSC. The name and contact information for such Alliance Manager, as well as any replacement(s) chosen by CCT or Alliqua, in their sole discretion, from time to time, shall be promptly provided to the other Party in accordance with Section 14.3.

3.3 Commercial Launch Team . Within thirty (30) days of the Effective Date Alliqua shall establish a commercial launch team with respect to the Commercialization of Licensed Products, and shall invite at least two (2) employees of CCT, or such number as the Parties may agree, to participate in such commercial launch team and Alliqua shall consider in good faith, any advice, comments or recommendations given by the CCT participants. The commercial launch team shall, among other things, provide the Parties with technical and other related support with respect to Commercialization, as well as recommendations in connection therewith.

3.4 Promotional Materials . Alliqua will not use any Promotional Materials in connection with the marketing, sale or distribution of the Licensed Products until after such Promotional Materials have been reviewed by the JSC and by CCT, as needed, and Alliqua has considered in good faith any comments of the JSC and CCT, except that Alliqua may use, without such review, in its introduction announcements to the trade, bill sheets and product catalog Promotional Materials that incorporate only the Licensed Product’s name, launch date, available packaging configurations, and the pricing and delivery terms. For purposes of clarity, CCT shall have final discretion to approve the content of all Promotional Materials and will be solely responsible for all Promotional Materials. For purposes of this Agreement, “ Promotional Materials ” means all labeling and advertising materials as defined in the Act and the regulations of the FDA thereunder. For the purposes of clarity, Alliqua will be responsible for the filing of Promotional Materials with the FDA as directed by CCT or as otherwise required by applicable Law.

Article 4
DEVELOPMENT

4.1 Joint Development Plan; Alliqua Activities. A Joint Development Plan for Biovance, consistent with the material terms mutually agreed upon by the Parties, attached hereto as Exhibit B , shall be prepared by Alliqua and presented to the JSC within ninety (90) days of the Effective Date or such other time agreed to by the JSC. In addition, Alliqua shall submit a Joint Development Plan for ECMs (similar in nature to the Joint Development Plan submitted for Biovance) to the JSC no later than ninety (90) days prior to anticipated 510(k) or other Regulatory Clearance and/or Approval in each relevant jurisdiction within the Territory, such Joint Development Plan to be discussed in good faith between the Parties prior to JSC submission, it being understood and agreed that following the Effective Date, CCT shall have the right to continue to Develop ECMs. The Parties shall, and shall cause their respective members of the JSC to, cooperate with each other in good faith to promptly finalize a mutually acceptable Joint Development Plan for each Licensed Product. The Parties agree to cooperate with each other in carrying out each Joint Development Plan consistent with the activities set forth therein. Alliqua shall use Commercially Reasonable Best Efforts to undertake the Development activities for the Licensed Products (and conduct such related clinical studies and perform all such related activities) set forth in, and in accordance with, each Joint Development Plan, subject to CCT’s right to continue to Develop ECMs. Alliqua shall be responsible for, and shall bear all Development Costs, including any additional activities required by health authorities or following unexpected events.

- 15 -

4.2 Records and Reports. Alliqua shall maintain complete, current and accurate records of (a) all work conducted by it or its Affiliates under each Joint Development Plan; (b) all data, Know-How and Patents resulting from such work; and (c) all Development Costs incurred in connection therewith (collectively, the “ Development Records ”). At each quarterly JSC meeting, to the extent applicable, (i) CCT shall provide to Alliqua all written updates that CCT has provided to its management team during the previous calendar quarter with respect to any pre-clinical development of ECMs and all other information reasonably requested by Alliqua, including but not limited to, written updates on all work conducted by it or its Affiliates with respect to such development during the previous calendar quarter and (ii) Alliqua shall provide to CCT all written updates that Alliqua has provided to its management team during the previous calendar quarter with respect to Development and all other information reasonably requested by CCT, including but not limited to, written updates on (1) all work conducted by it or its Affiliates under each Joint Development Plan during the previous calendar quarter; (2) all data, Know-How and Patents resulting from such work during the previous calendar quarter; and (3) all Development Costs incurred in connection therewith during the previous calendar quarter. CCT shall have the right to audit the financial records relating to the Development Costs in accordance with Section 7.7, and shall have the right to review Alliqua’s Development Records during regular business hours and not more often than once each calendar year.

4.3 Subcontracts. Alliqua may perform any of its Development or Commercialization activities under this Agreement through its Affiliates and through one or more subcontractors or consultants pursuant to a written subcontractor agreement without the prior written consent of CCT, provided that with respect to each subcontractor agreement entered into on or after the Effective Date:

(a) Alliqua obtains CCT’s prior written consent to the selection of each such subcontractor (i) that will perform contract research services or (ii) that will perform contract manufacturing services, in each case, such consent shall not be unreasonably withheld, conditioned or delayed, and, if requested by CCT with respect to such a specific subcontractor (each, a “ Selected Subcontractor ”), Alliqua shall provide to CCT such subcontractor’s subcontractor agreement for CCT’s review and comment (each, a “ Selected Subcontractor Agreement ”), solely for the purpose of approving such Selected Subcontractor to perform Development and/or Commercialization activities on behalf of Alliqua pursuant to this Agreement. CCT shall have a period of five (5) Business Days (or such other period of time as mutually agreed to by the Parties in good faith) following receipt of a Selected Subcontractor Agreement to review and comment upon such Selected Subcontractor Agreement, which comments Alliqua shall consider in good faith; provided, however, that in the event CCT fails to provide or affirmatively deny consent to use such Selected Subcontractor within such five (5) Business Day period, then Alliqua shall be free to enter into such Selected Subcontractor Agreement. For the avoidance of doubt, CCT’s review and comment shall be solely limited to approval of such Selected Subcontractor as a subcontractor who may perform Development and/or Commercialization activities on behalf of Alliqua under this Agreement. Any comments by CCT to a Selected Subcontractor Agreement shall not be construed by Alliqua that CCT consents to any term or condition in such Selected Subcontractor Agreement. Alliqua shall be solely responsible for the terms and substance of each Selected Subcontractor Agreement, including without limitation, that each Selected Subcontractor Agreement conforms to the terms of this Agreement as required by this Section 4.3.

- 16 -

(b) Alliqua obtains the JSC’s prior written consent to the selection of each such subcontractor if the aggregate payments to such subcontractor for services rendered with respect to work performed by such subcontractor in connection with, or related to, any Licensed Product exceed, or are expected to exceed, $[****] (each, a “ JSC Selected Subcontractor ”). If the JSC approves the selection of a JSC Selected Subcontractor, Alliqua shall provide, at CCT’s request, such subcontractor’s subcontractor agreement to CCT for CCT’s review and comment (each, a “ JSC Selected Subcontractor Agreement ”). CCT shall have a period of five (5) Business Days (or such other period of time as mutually agreed to by the Parties in good faith) following receipt of a JSC Selected Subcontractor Agreement to review and comment upon such JSC Selected Subcontractor Agreement, which comments Alliqua shall consider in good faith. For the avoidance of doubt, any comments by CCT to a JSC Selected Subcontractor Agreement shall not be construed by Alliqua that CCT consents to any term or condition in such JSC Selected Subcontractor Agreement. Alliqua shall be solely responsible for the terms and substance of each JSC Selected Subcontractor Agreement, including without limitation, that each JSC Selected Subcontractor Agreement conforms to the terms of this Agreement as required by this Section 4.3. If the JSC does not agree on a selection of a subcontractor under Section 4.3(b), the Parties shall resolve the dispute under Section 3.1(c)(ii)(1).

(c) Alliqua remains responsible for the work allocated to such Affiliates, subcontractors and consultants to the same extent it would if it had done such work itself.

(d) The Affiliate or subcontractor (as the case may be) undertakes in writing obligations of confidentiality and non-use regarding Confidential Information, that are substantially the same as those undertaken by the Parties pursuant to Article 11 hereof.

(e) If such Affiliate or subcontractor will develop intellectual property related to any Licensed Product in the course of performing any such work, the Affiliate or subcontractor (as the case may be) agrees in writing to assign to Alliqua all data, inventions, other Know-How, Patents and other intellectual property developed in the course of performing any such work, in each case to the extent related to such Licensed Product. Each subcontractor who performs any Development and/or Commercialization activities on behalf of Alliqua under this Agreement is referred to herein as an “ Alliqua Permitted Subcontractor. ”

- 17 -

Without limiting the foregoing, each Alliqua Permitted Subcontractor shall be subject to the applicable terms and conditions of this Agreement and no agreement with any Alliqua Permitted Subcontractor shall release Alliqua from any of its activities under this Agreement. For purposes of determining Alliqua’s liability under this Agreement, any time the term “Alliqua” is used in this Agreement it includes all subcontractors performing any part of this Agreement on behalf of Alliqua unless otherwise agreed to by CCT in writing. Upon CCT’s reasonable written request, Alliqua shall remove or replace any Alliqua Permitted Subcontractor (subject to compliance with the terms of any applicable agreement entered into by Alliqua with such Alliqua Permitted Subcontractor), if CCT determines, in its reasonable and good faith judgment, that the continued use of such Alliqua Permitted Subcontractor is not in the best interests of CCT.

Article 5
REGULATORY MATTERS

5.1 Regulatory Activities. CCT shall be responsible for Regulatory Clearances and/or Approvals and shall use commercially reasonable efforts to obtain and support Regulatory Clearances and/or Approvals in at least the United States for Licensed Products. CCT shall file and own all right, title and interest in all Regulatory Materials designed to obtain or support such Regulatory Clearances and/or Approvals. Upon CCT’s reasonable request and expense, Alliqua shall cooperate fully with, and provide assistance to, CCT in connection with the activities set forth in this Article 5.

5.2 Regulatory Reports; Meetings with Regulatory Authorities. Each Party shall keep the other Party informed of material regulatory developments relating to Licensed Products in the Territory through regular reports at the JSC meetings. Each Party shall provide the other Party, for review and comment, significant draft material regulatory filings at least twenty (20) Business Days in advance of their intended date of submission to the extent possible and on a rolling basis as needed to any Regulatory Authority in any country or jurisdiction and shall consider any comments thereto provided by such other Party. Each Party shall notify the other Party as soon as practical of any Regulatory Materials (other than routine correspondence) submitted to or received from any Regulatory Authority in any jurisdiction and shall provide such other Party with copies thereof within twenty (20) Business Days after submission or receipt. Each Party shall provide the other Party with reasonable advance notice of all meetings scheduled with any Regulatory Authority in any country or jurisdiction concerning a Licensed Product to the extent such meeting effects this Agreement and/or such other Party’s obligations hereunder, and shall consider any input from such other Party in preparing for such meetings, and in the Party's sole discretion and if permitted by the relevant Regulatory Authority, appropriate personnel from such other Party may have the right to attend such meetings at its own expense.

5.3 Regulatory Costs. [****] shall be solely responsible for all costs and expenses incurred by either Party in the maintenance of all Regulatory Materials for Regulatory Clearances and/or Approvals for Licensed Products in the Territory. For the avoidance of doubt, except as provided in the Development Plan, [****] shall be solely responsible for all costs and expenses incurred by either Party in connection with all actions relating to insurance or federal or state health care program reimbursement, including but not limited to clinical or other studies in furtherance of the foregoing.

- 18 -

5.4 Notification of Threatened Action. Each Party shall immediately notify the other Party of any information it receives regarding any threatened or pending action, inspection or communication by or from any Third Party, including a Regulatory Authority, which may materially affect the Development, Commercialization or regulatory status of a Licensed Product. Upon receipt of such information, the Parties shall consult with each other in an effort to arrive at a mutually acceptable procedure for taking appropriate action.

5.5 Adverse Event Reporting and Safety Data Exchange . As soon as practical, the Parties shall enter into a commercially reasonable pharmacovigilance agreement (the “ Safety Data and Exchange Agreement ”). The Safety Data and Exchange Agreement shall include customary guidelines and procedures for the receipt, investigation, recordation, communication, and exchange (as between the Parties) of adverse event reports, pregnancy reports, and any other information concerning the safety of any Licensed Product. Such guidelines and procedures shall be in accordance with, and enable the Parties to fulfill, local and national regulatory reporting activities under applicable Laws. Furthermore, such agreed procedure shall be consistent with relevant guidelines of the International Conference on Harmonisation, except where such guidelines may conflict with existing local regulatory reporting or safety reporting requirements, in which case the local reporting requirements shall prevail. The Safety Data and Exchange Agreement shall provide for an adverse event database for Licensed Products in the Territory to be maintained by CCT at [****] expense. CCT shall be responsible for reporting quality complaints, adverse events and safety data related to Licensed Products to applicable Regulatory Authorities in the Territory, as well as responding to safety issues and to all requests of Regulatory Authorities relating to Licensed Products in the Territory. Each Party hereby agrees to comply with its respective activities under such Safety Data and Exchange Agreement and to cause its Affiliates to comply with such activities.

5.6 Remedial Actions . Each Party shall notify the other Party immediately, and promptly confirm such notice in writing, if it obtains information indicating that any Licensed Product may be subject to any recall, corrective action or other regulatory action with respect to a Licensed Product taken by virtue of applicable Laws (a “ Remedial Action ”). The Parties shall assist each other in gathering and evaluating such information as is necessary to determine the necessity of conducting a Remedial Action. CCT shall, and shall ensure that its Affiliates will, maintain adequate records to permit the Parties to trace the distribution and use of the Licensed Products. CCT shall have the right to decide whether any Remedial Action with respect to any Licensed Product should be commenced and CCT shall, at its expense, control and coordinate all efforts necessary to conduct such Remedial Action. Upon CCT’s reasonable request, Alliqua shall reasonably cooperate with, and provide reasonable assistance to, CCT in connection with any activities undertaken by CCT pursuant to the immediately preceding sentence, at [****] sole cost and expense.

- 19 -

5.7 Rebate Processing and Government Price Reporting. Alliqua will be solely responsible for all federal, state and local government and private purchasing, pricing or reimbursement programs with respect to the Licensed Products, including taking all necessary and proper steps to execute agreements and file other appropriate reports and other documents with Governmental Authorities and private Persons and CCT shall provide reasonable assistance to Alliqua to effectuate the same. Alliqua shall be solely responsible for payment and processing of all discounts, rebates, and fees, whether required by contract or Laws, for the Licensed Products. For the avoidance of doubt, with respect to Licensed Products, Alliqua shall report all applicable data, including price, rebate and discount data to the Centers for Medicare and Medicaid Services, data to the Department of Veterans Affairs and any other pricing or reimbursement related data required by Governmental Authorities under applicable Laws (“ Government Price Reporting ”). Alliqua’s Government Price Reporting shall comply with all applicable Laws and contracts. Alliqua shall pay the rebates, chargebacks, discounts, and fees for the Licensed Products as required by applicable Laws and contracts. If CCT notifies Alliqua that it is required to refer to Licensed Products sales made by Alliqua, or other reimbursement or Commercialization-related data maintained by Alliqua under this Agreement, in CCT’s reports to Governmental Authorities, Alliqua shall provide CCT with required sales figures or other data for Licensed Products sales made by Alliqua, and CCT shall be entitled to use such data or information that Alliqua provides under this Section 5.7 or otherwise for complying with CCT’s required reports to Governmental Authorities.

Article 6
COMMERCIALIZATION

6.1 Commercialization Responsibilities. During the Term, Alliqua shall use Commercially Reasonable Best Efforts to, and shall be responsible for, all aspects of, the Commercialization of Licensed Products for all indications throughout the Territory. Such Commercialization responsibilities for each Licensed Product shall include: (a) developing and executing a Commercialization Plan for each Licensed Product; (b) negotiating with applicable Governmental Authorities and private Third Party payers regarding the price and reimbursement status of each Licensed Product; (c) marketing and promotion; (d) booking sales and distribution and performance of related services; (e) handling all aspects of order processing, invoicing and collection, inventory and receivables; (f) providing customer support, including handling medical queries, and performing other related functions; and (g) conforming its practices and procedures to applicable Laws relating to the marketing, detailing and promotion of each Licensed Product in the Territory, in each case, unless otherwise expressly provided in this Agreement, as determined by Alliqua in its sole discretion; provided, however, that Alliqua shall promptly inform and provide CCT with any material developments, updates and documentation related to Alliqua’s obligations set forth in this Section 6.1(a)-(g). Alliqua shall bear all of the costs and expenses incurred in connection with such Commercialization activities.

6.2 Commercialization Plan. The strategy for the Commercialization of each Licensed Product shall be described in a comprehensive plan that describes the pre-launch, launch and subsequent Commercialization activities for such Licensed Product in the Territory, which shall include, without limitation, (i) the annual anticipated number of details to be conducted in each country within the Territory, (ii) the annual anticipated marketing expenses to be incurred in each of the countries within the Territory, (iii) the annual anticipated number of FTEs to be assigned to Commercialize in each of the countries within the Territory, and (iv) a report on pricing, advertising, education, planning, marketing, and sales force training (the “ Commercialization Plan ”). An initial Commercialization Plan for Biovance shall be prepared by Alliqua and presented to the JSC as soon as practicable, but in any event, within ninety (90) days of the Effective Date or such other time agreed to by the JSC. In addition, Alliqua shall submit an initial Commercialization Plan for ECMs to the JSC no later than ninety (90) days prior to anticipated 510(k) or other Regulatory Clearance and/or Approval in each relevant jurisdiction within the Territory. The Parties shall, and shall cause their respective members of the JSC to, cooperate with each other in good faith to promptly finalize a mutually acceptable Commercialization Plan for each Licensed Product. Alliqua shall deliver an updated Commercialization Plan for each Licensed Product, as applicable, at each meeting of the JSC or at such times as agreed to by the JSC.

- 20 -

6.3 Commercial Diligence . During the Term, Alliqua shall use Commercially Reasonable Best Efforts to Commercialize each Licensed Product in the Field throughout the Territory, in each case as contemplated by the applicable Commercialization Plan or as otherwise mutually agreed upon by the Parties in writing.

6.4 Records and Reports. Alliqua shall maintain complete, current and accurate records of all work conducted by it or its Affiliates under each Commercialization Plan. At each quarterly JSC meeting, Alliqua shall provide all written updates that Alliqua has provided to its management team during the previous calendar quarter with respect to the Commercialization of the Licensed Products and all other information reasonably requested by CCT, including but not limited to, an update of all work conducted by it or its Affiliates under each Commercialization Plan during the previous calendar quarter.

6.5 Commercialization Outside the Territory. CCT hereby grants to Alliqua and Alliqua hereby accepts, the right of first negotiation, under mutually acceptable terms between the Parties, to enter into an agreement to market and/or sell the Licensed Products (whether on an exclusive or non-exclusive basis) in the Field in any jurisdictions outside the Territory, in the event that CCT intends to grant rights to a Third Party to market and/or sell the Licensed Products in the Field in any such jurisdictions outside the Territory (an “Additional Territory Transaction ”). In the event that CCT desires to enter into an Additional Territory Transaction, CCT shall notify Alliqua in writing of CCT’s desire to enter into discussions regarding such a transaction. Alliqua shall, within fifteen (15) Business Days after receipt of such notice, indicate to CCT in writing whether it wishes to enter into discussions regarding an Additional Territory Transaction and, if Alliqua indicates that it wishes to enter into such discussions, the Parties shall in good faith negotiate a definitive agreement for such Additional Territory Transaction. If either (a) Alliqua indicates it does not wish to enter into such discussions regarding an Additional Territory Transaction, (b) Alliqua fails to indicate its interest within such fifteen (15) Business Day period or (c) Alliqua indicates it wishes to enter into such discussions but the Parties fail to execute a definitive agreement with respect to such Additional Territory Transaction within sixty (60) calendar days after Alliqua’s indication of interest, then CCT shall have no further obligation to Alliqua under this Agreement with respect to an Additional Territory Transaction and CCT may, itself, or through an Affiliate or Third Party, market and/or sell the Licensed Products, as the case may be, in the Field outside the Territory.

- 21 -

Article 7
COMPENSATION

7.1 Annual License Fee .

(a) As partial consideration for the rights granted to Alliqua herein, subject to Section 7.1(b), Alliqua shall pay to CCT the annual license fees set forth on Schedule 7.1(a) hereto following the First Commercial Sale of each Licensed Product (each, an “ Annual License Fee ,” and, collectively, the “ Annual License Fees ”), provided that on a Licensed Product-by-Licensed Product basis, if a Market Condition Change occurs in a Launch Year that an Annual License Fee is due and payable, the Parties shall negotiate and mutually agree upon an alternative Annual License Fee with respect to such Licensed Product in accordance with Section 7.4 below. Alliqua shall pay to CCT each Annual License Fee for each Launch Year in arrears with each such amount due and payable forty-five (45) days following the end of such Launch Year.

(b) Notwithstanding Section 7.1(a), on a Licensed Product-by-Licensed Product basis, in the event that for any Launch Year: (i) the product of the number of units of the Licensed Product acquired by Alliqua multiplied by the Base Purchase Price of such Licensed Product is less than the Annual License Fee due and payable to CCT for such Launch Year pursuant to Section 7.1(a), then Alliqua shall, in accordance with Section 7.1(a), pay to CCT the Annual License Fee; or (ii) if the product of the number of units of the Licensed Product acquired by Alliqua multiplied by the Base Purchase Price of such Licensed Product is equal to or greater than the Annual License Fee due and payable for such Launch Year pursuant to Section 7.1(a), then Alliqua shall not be obligated to pay any Annual License Fee to CCT for such Launch Year. Schedule 7.1(b) sets forth by way of example the terms of this Section 7.1(b).

7.2 Milestone Payments. Alliqua shall make non-refundable, non-creditable milestone payments (each, a “ Milestone Payment ”) to CCT upon the achievement of certain milestone events (each a “ Milestone Event ”) in connection with the sale of a Licensed Product as set forth on Schedule 7.2 hereto, with the caveat that each individual Milestone Payment set forth in rows numbered (1) through (9) of the table set forth on Schedule 7.2 shall be paid only once. Alliqua shall pay to CCT each such amount within forty-five (45) days following the end of such Launch Year in which achievement of the applicable Milestone Event occurred. If any Milestone Event is achieved and Alliqua has not yet made the prior Milestone Payment(s), all previous unpaid Milestone Payments shall be due and payable together with the payment of the Milestone Payment for the first such subsequent Milestone Event achieved.

7.3 Royalties .

(a) Royalty Rates. Alliqua shall pay to CCT royalties on aggregate annual Net Sales of all Licensed Products during the Royalty Term as set forth on Schedule 7.3(a) hereto, such royalties to be calculated by multiplying the applicable royalty rate in the applicable table for each Licensed Product on Schedule 7.3(a) by the corresponding Gross Margin of such Licensed Product in the Territory in each Launch Year, provided that if a Market Condition Change occurs in a Launch Year that royalties are due and payable, the Parties shall negotiate and mutually agree upon an alternative royalty rate in accordance with Section 7.4 below.

(b) Royalty Term. Royalties shall be due under this Section 7.3 during the period of time beginning, on a country-by-country basis, from the First Commercial Sale of a Licensed Product in such country until the termination or expiration of this Agreement in accordance with Article 12, below, including through any Sell-Off Period in accordance with Section 12.6(d) (the “ Royalty Term ”).

- 22 -

(c) Royalty Reports and Payments . Within sixty (60) days following the end of each Launch Year Quarter, commencing with the Launch Year Quarter in which the First Commercial Sale of any Licensed Product is made anywhere in the Territory, Alliqua shall provide CCT with a report containing the following information for the applicable Launch Year Quarter, on a country-by-country and Licensed Product-by-Licensed Product basis: (i) the amount of gross sales of such Licensed Product in the Territory, (ii) an itemized calculation of Net Sales in the Territory showing deductions provided for in the definition of Net Sales, (iii) a calculation of the royalty payment due on such sales, and (iv) the exchange rate for such country. Contemporaneously with the delivery of the applicable quarterly report, Alliqua shall pay in Dollars all amounts due to CCT pursuant to Section 7.3(a) with respect to Net Sales by Alliqua and its Affiliates for such Launch Year Quarter.

7.4 Market Condition Change. In the event of a Market Condition Change, the Parties shall negotiate in good faith and mutually agree upon an alternative (i) Annual License Fee for a Launch Year and (ii) Minimum Sales Threshold (as defined below) to account for such Market Condition Change (the “ Market Condition Financial Terms ”), provided that such Market Condition Financial Terms shall not be reduced by more than [****] of the then-current financial terms set forth in this Article 7 and provided further that, once such Market Condition Change is cured, the Market Condition Financial Terms shall automatically expire as of the end of the calendar year in which the Market Condition Change occurred, and the terms and conditions set forth in this Article 7 shall control.

7.5 Payment Method; Late Payments. All payments due hereunder shall be made in Dollars by wire transfer of immediately available funds into an account in the USA designated by the payee Party. If a Party does not receive payment of any sum due to it on or before the due date, simple interest shall thereafter accrue on the sum due until the date of payment at the per annum rate of [****] over the then-current prime rate reported in The Wall Street Journal or the maximum rate allowable by applicable Laws, whichever is lower.

7.6 Records. Alliqua and its Affiliates shall maintain complete and accurate records in reasonably sufficient detail to permit CCT to confirm the accuracy of the calculation of royalty payments. CCT shall have the right to audit such records in accordance with Section 7.7.

7.7 Audits. For a period of two (2) years from the end of the Launch Year in which a payment was due hereunder, upon thirty (30) days’ prior notice, Alliqua (the “ Audited Party ”) shall (and shall require that its Affiliates) make such records relating to such payment available, during regular business hours and not more often than once each Launch Year, for examination by an independent certified public accountant selected by CCT (the “ Auditing Party ”), for the purposes of verifying compliance with this Agreement and the accuracy of the financial reports and/or invoices furnished pursuant to this Agreement. The results of any such audit shall be shared by the auditor with both Parties and shall be considered Confidential Information of both Parties. Any amounts shown to be owed to the other shall be paid within thirty (30) days from the auditor’s report, plus interest (as set forth in Section 7.5) from the original due date. The Auditing Party shall bear the full cost of such audit unless such audit discloses a deficiency in the Audited Party’s payments of greater than [****] (i.e., an under-payment by Alliqua pursuant to Section 7.3, or an over-charge by CCT pursuant to Section 5.3), in which case the Audited Party shall bear the full cost of such audit.

- 23 -

7.8 Taxes .

(a) Taxes on Income. Each Party shall be solely responsible for the payment of all taxes imposed on its share of income arising directly or indirectly from the efforts of the Parties under this Agreement.

(b) Tax Cooperation. The Parties agree to cooperate with one another and use reasonable efforts to reduce or eliminate tax withholding or similar obligations in respect of royalties, Milestone Payments, and other payments made by Alliqua to CCT under this Agreement. To the extent Alliqua is required to deduct and withhold taxes on any payment to CCT, Alliqua shall pay the amounts of such taxes to the proper Governmental Authority in a timely manner and promptly transmit to CCT an official tax certificate or other evidence of such withholding sufficient to enable CCT to claim such payment of taxes. CCT shall provide Alliqua any tax forms that may be reasonably necessary in order for Alliqua not to withhold tax or to withhold tax at a reduced rate under an applicable bilateral income tax treaty. Each Party shall provide the other with reasonable assistance to enable the recovery, as permitted by applicable Laws, of withholding taxes, value added taxes, or similar obligations resulting from payments made under this Agreement, such recovery to be for the benefit of the Party bearing such withholding tax or value added tax. Alliqua shall require its Affiliates in the Territory to cooperate with CCT in a manner consistent with this Section 7.8(b).

7.9 Annual Fee on Medical Device Manufacturers and Importers. The Parties acknowledge that the “Annual Fee on Medical Device Manufacturers and Importers” was signed into United States law with the Patient Protection and Affordable Care Act (PPACA) in 2010. For the avoidance of doubt, in the event the Annual Fee on Medical Device Manufacturers and Importers or any similar fee for a drug or biological product is applied to the sale of any Licensed Product by Alliqua, the Parties hereby acknowledge and agree that (a) Alliqua shall be solely responsible for full payment of such fee; and (b) Alliqua shall supply CCT with reasonable documentation supporting the imposition of such fee, including, but not limited to, as applicable, the annual invoice for such fee received from the United States Internal Revenue Service.

Article 8
INTELLECTUAL PROPERTY MATTERS

8.1 Prosecution of Patents .

(a) CCT Prosecuted Patents .

(i) Subject to Section 8.1(a)(ii) below, as between the Parties, CCT shall have the first right to (and shall use reasonably diligent efforts to) prepare, file, prosecute and maintain the CCT Patents in the Territory. The costs of preparation, filing, prosecution and maintenance of CCT Patents shall be borne by [****].

- 24 -

(ii) If CCT decides to cease the prosecution or maintenance of any CCT Patent after the Effective Date, it shall notify Alliqua in writing sufficiently in advance (but in no event less than twenty (20) Business Days prior to the date on which the CCT Patent would become abandoned) so that Alliqua may, at its discretion, assume the responsibility for the prosecution or maintenance of such Patent, at [****] cost and expense.

(b) Cooperation. Each Party shall provide the other Party all reasonable assistance and cooperation, at the other Party’s request and expense, in the patent prosecution efforts provide above in this Section 8.1, including providing any necessary powers of attorney and executing any other required documents or instruments for such prosecution.

8.2 Inventions Generally . Inventions conceived or reduced to practice in the course of activities performed under or contemplated by this Agreement (including those which are Improvements to CCT Know-How, CCT Patents or otherwise to CCT’s biomaterials-related intellectual property, or which relate to a Licensed Product), by either CCT or Alliqua (or both, jointly) shall be owned by CCT. Alliqua hereby makes all assignments to CCT in order to effect the foregoing, and agrees, at Alliqua’s cost and expense, to take all further actions requested by CCT in order to perfect the foregoing assignment. All rights assigned to CCT by Alliqua shall be deemed to be CCT Know-How or CCT Patents, as applicable.

8.3 Enforcement of CCT Patents .

(a) Notification. If either Party becomes aware of any existing or threatened infringement of the CCT Patents (an “ Infringement ”), which infringing activity involves the using, making, importing, offering for sale or selling of any Licensed Product or a competitive product or otherwise adversely affects or is reasonably expected to adversely affect the Commercialization of any Licensed Product, it shall promptly notify the other Party in writing to that effect and the Parties shall consult with each other regarding any actions to be taken with respect to such Infringement.

(b) Actions Controlled by CCT; Alliqua’s Back-Up Enforcement Right. CCT shall have the first right to bring an appropriate suit or take other action against any Third Party engaged in any Infringement, at CCT’s cost and expense. If, after its receipt or delivery of notice thereof under Section 8.3(a), CCT (i) notifies Alliqua that it will not bring any claim, suit or action to prevent or abate such Infringement or (ii) fails to commence a suit to prevent or abate such Infringement within one hundred and eighty (180) days, Alliqua shall have the right, but not the obligation, to commence a suit or take action to prevent or abate such Infringement under the CCT Patents at its own cost and expense. Expenses of, and recoveries on, suits under this Section 8.3(b) shall be handled as provided in Section 8.3(e).

- 25 -

(c) Collaboration. Each Party shall provide to the enforcing Party reasonable assistance in such enforcement, at such enforcing Party’s request and expense, including joining such action as a party plaintiff if required by applicable Laws to pursue such action. The enforcing Party shall keep the other Party regularly informed of the status and progress of such enforcement efforts and shall reasonably consider the other Party’s comments on any such efforts. The enforcing Party shall consult with the other Party as to any important aspects of such enforcement, including determination of litigation strategy and filing of material papers to the competent court. The non-enforcing Party shall be entitled to separate representation in such matter by counsel of its own choice and at its own expense, but such Party shall at all times cooperate fully with the enforcing Party.

(d) Settlement. Neither Party shall settle any claim, suit or action that it brings under Section 8.3(b) in a manner that would negatively impact the applicable CCT Patents (e.g., shorten the life of such Patents or narrow their scope) without the prior written consent of the other Party.

(e) Expenses and Recoveries. The term “ Revenue ” includes all fees, minimum royalties, payments, compensation, or consideration of any kind (including without limitation in-kind payments, forbearance in connection with settlement, equity amounts taken in lieu of cash, or discounts below fair market value of equity) received by either Party or its Affiliates, without regard to which entity pays, transfers or otherwise provides the Revenue, or how the Revenue is structured, denominated, or paid transferred or provided. The enforcing Party bringing a claim, suit or action under Section 8.3(b) shall be solely responsible for any expenses incurred by such Party as a result of such claim, suit or action. If such Party receives Revenue in such claim, suit or action, such Revenue shall be allocated first to the reimbursement of any expenses incurred by the Parties in such litigation (including, for this purpose, a reasonable allocation of expenses of internal counsel), and any remaining amounts shall be allocated as follows: (i) if CCT is the Party bringing the suit, [****]; and (ii) if instead Alliqua exercised its back-up right to enforce, then the [****].

8.4 Infringement of Third Party Rights in the Territory .

(a) If any Licensed Product Commercialized by or on behalf of Alliqua becomes the subject of a Third Party claim or assertion of infringement of such Third Party’s intellectual property, including any Patent, issued in the Territory, Alliqua shall promptly notify CCT and the Parties shall negotiate in good faith and agree on and enter into a “common interest agreement” wherein the Parties agree to their shared, mutual interest in the outcome of such potential dispute, and thereafter, the Parties shall promptly meet to consider the claim or assertion and the appropriate course of action. Subject to Sections 2.4 and 12.5, CCT shall have the right, but not the obligation, to defend any such infringement claim, [****] all costs and expenses relating to, and arising from, the defense of any such infringement claim shall be [****]. Alliqua shall provide all reasonable assistance to CCT and reasonably cooperate in the defense of any such action. At each quarterly JSC meeting, CCT shall provide to Alliqua an update on the status and defense of such infringement claim during the previous calendar quarter and any other information with respect thereto as reasonably requested by Alliqua.

- 26 -

(b) CCT shall not settle or consent to judgment of any infringement claim without the prior written consent of Alliqua, such consent not to be unreasonably delayed, conditioned, or withheld; provided, however, that if such settlement or consent to judgment does not impose any liability on, or materially affect the rights or obligations of, Alliqua, CCT shall have the right to settle such claim or consent to judgment (e.g., a monetary liability that is fully satisfied by CCT on behalf of Alliqua). In the event the Parties cannot reach consensus within five (5) Business Days after they have met and attempted to reach consensus regarding settlement of any such infringement claim (an “ Infringement Dispute ”), the settlement of such Infringement Dispute shall be referred to the JSC for resolution; provided, however, that the provisions of Section 3.1(c)(ii) shall not apply with respect to that particular matter and the Parties’ resolution thereof.

8.5 Patent Marking. Alliqua and its Affiliates shall mark each Licensed Product marketed and sold by Alliqua or its Affiliates hereunder with appropriate patent numbers or indicia.

8.6 Trademarks .

(a) Product Marks. Alliqua shall have the right to brand the Licensed Products and create all Licensed Product labels using Alliqua-related trademarks and any other trademarks and trade names it determines appropriate (including the CCT Marks as set forth in Section 8.6(b) below) for the Licensed Products, which may vary by country or within a country (collectively, the “ Product Marks ”). The Parties acknowledge and agree that the Licensed Products shall be co-branded as mutually agreed upon in writing by the Parties and that Alliqua shall give the proper attribution on each Licensed Product to CCT as provider of the CCT Technology or as otherwise mutually agreed upon by the Parties. The Parties shall mutually agree upon the form and substance of such attribution rights. In the event that Alliqua desires to brand a Licensed Product using an alternative name, Alliqua shall first propose such alternative name to CCT, which name may be approved by CCT in its sole discretion. For the avoidance of doubt, in no event may Alliqua brand a Licensed Product under an alternative name without the prior written consent of CCT.

- 27 -

(b) CCT Marks. Subject to the terms and conditions of this Agreement, CCT hereby grants to Alliqua an exclusive license to use and display (with the right to grant sublicenses to any (i) sublicensees permitted under Section 2.3 and (ii) contract research organizations, distributors and other Third Parties who perform activities directly on behalf of Alliqua, provided that such sublicense is incidental to the activities performed by such Third Party), during the Term and in the Field in the Territory, to the Biovance and/or ECM trademark, as applicable, as set forth in Exhibit C, to identify the Licensed Products (each, a “ CCT Mark ” and collectively, the “ CCT Marks ”), (i) on the Licensed Product itself, (ii) as part of the Product Marks and (iii) on any other labels, promotional materials or Regulatory Materials used in connection with any Licensed Product, provided that if Alliqua, upon the consent of CCT, brings an enforcement action with respect to any CCT Mark, Alliqua shall reimburse CCT fully for the expenses CCT incurs in connection therewith (including, without limitation, costs associated with hiring consultants, attorneys’ fees and preparation and filing of any applications, renewals or other documentation with the United States Patent and Trademark Office, foreign counterparts, or other relevant agency). Alliqua shall give reasonable prior advance notice to CCT regarding any use or display of the CCT Marks and shall provide CCT with a sample embodying such use or display, for CCT’s prior review and approval to ensure such use or display complies with CCT’s reasonable trademark guidelines, such approval not to be unreasonably withheld, conditioned or delayed. Alliqua shall follow CCT’s reasonable trademark guidelines at all times as to the use of the CCT Marks. If CCT changes such trademark guidelines: (x) CCT shall, if practical, provide Alliqua with at least thirty (30) days prior written notice of such changes, (y) such changes shall not apply to any materials that are in inventory or on order as of the effective date of such notice and (z) Alliqua shall be solely responsible for any expense of implementing such changes, including on packaging, promotional materials and other items if such changes are required by Law, and if such changes are not required by Law, each Party shall bear equal responsibility for any expense of implementing such changes. Other than as expressly set forth herein, use of the CCT Marks shall not confer on Alliqua any right to or interest in such trademark, and Alliqua acknowledges and agrees that all use of the CCT Marks and the goodwill generated thereby shall inure solely to the benefit of CCT. Alliqua shall not use, adopt, file, register, seek to register or take any other action to use or establish rights in any mark anywhere in the world which is comprised of, derivative of, a combination with, or otherwise confusingly similar to, any CCT Mark or file any application to register any trademark or trade name that is confusingly similar to the CCT Marks.

(c) Ownership; No Challenge. Subject to Section 8.6(b), above, Alliqua shall own all right, title and interest in and to the Product Marks (excluding the CCT Marks). All use of the Product Marks (excluding the CCT Marks) and the goodwill generated thereby shall inure solely to the benefit of Alliqua. Other than in connection with the CCT Marks, CCT shall not use, adopt, file, register, seek to register, or take any other action to use or establish rights in any mark anywhere in the world which is comprised of, derivative of, a combination with, or otherwise confusingly similar to, any Product Mark. For the avoidance of doubt, this Section 8.6(c) does not grant Alliqua any right to or interest in the CCT Marks, and Alliqua acknowledges and agrees that all use of the CCT Marks and the goodwill generated thereby shall inure solely to the benefit of CCT.

Article 9
REPRESENTATIONS AND WARRANTIES; COVENANTS

9.1 Mutual Representations and Warranties. Each Party hereby represents and warrants to the other Party as follows:

(a) Organization. As of the Effective Date, such Party is an entity duly organized, validly existing and in good standing under the laws of the state of its incorporation or organization, with the requisite legal authority to own and use its properties and assets and to carry on its business as currently conducted. Such Party not in violation of any of the provisions of its respective certificate or articles of incorporation, formation, bylaws or other organizational or charter documents.

- 28 -

(b) Authorization; Enforcement. Such Party has the requisite corporate authority to enter into and to consummate the transactions contemplated by this Agreement and each of and otherwise to carry out its obligations hereunder. The execution and delivery by it of this Agreement and the consummation by it of the transactions contemplated hereby have been duly authorized by all necessary corporate action and no further consent or action is required by it, its Board of Directors or its stockholders. This Agreement has been duly executed by such Party and is the valid and binding obligation of such Party enforceable against such Party in accordance with its terms, except (i) as limited by general equitable principles and applicable bankruptcy, insolvency, reorganization, moratorium and other laws of general application affecting enforcement of creditors’ rights generally, and (ii) as limited by laws relating to the availability of specific performance, injunctive relief or other equitable remedies.

(c) No Conflicts. The execution, delivery and performance by such Party of this Agreement and the consummation by such Party of the transactions contemplated hereby does not, and will not, (i) conflict with or violate any provision of such Party’s certificate or articles of incorporation, bylaws or other organizational or charter documents, (ii) in any material respect, conflict with, or constitute a default (or an event that with notice or lapse of time or both would become a default) under, or give to others any rights of termination, amendment, acceleration or cancellation (with or without notice, lapse of time or both) of, any agreement, credit facility, debt or other instrument or other understanding to which such Party is a party or by which any property or asset of such Party is bound, or affected, or (iii) in any material respect, result in a violation of any law, rule, regulation, order, judgment, injunction, decree or other restriction of any court or governmental authority to which such Party is subject, or by which any property or asset of such Party is bound or affected.

9.2 Additional Representations and Warranties of CCT. CCT represents and warrants to Alliqua as follows, as of the Effective Date:

(a) It has sufficient legal and/or beneficial title, ownership or license to the CCT Technology to grant the licenses to Alliqua as purported to be granted pursuant to this Agreement;

(b) CCT has not licensed from any Third Party any intellectual property rights included in the CCT Technology, and, to CCT’s knowledge, no such license is required.

(c) CCT has not received any written claim or notice from any Third Party asserting or alleging that the CCT Technology infringes any intellectual property rights of such Third Party, and, to CCT’s knowledge, the CCT Technology does not infringe any intellectual property rights of any Third Party;

(d) It has not received any written notice from any Third Party asserting or alleging that any research or development of any Licensed Product by CCT prior to the Effective Date infringed or misappropriated the intellectual property rights of such Third Party;

(e) There are no pending, and to CCT’s knowledge, no threatened, adverse actions, suits or proceedings against CCT involving CCT Technology, or any Licensed Product;

(f) The CCT Patents include all Patents that Cover the Licensed Products which are Controlled by CCT and/or its Affiliates on the Effective Date;

(g) Except as set forth on Schedule 9.2(e) , to CCT’s knowledge (i) the CCT Marks have been properly filed and registered with the U.S. Patent and Trademark Office and is valid and in full force and effect, and (ii) CCT has the right to use and license the CCT Marks, free and clear of any liens or encumbrances;

- 29 -

(h) To CCT’s knowledge, there are no pending legal suits or proceedings involving the CCT Technology or any Licensed Product; and to there are no threatened legal suits or proceedings in the Territory involving the CCT Technology or any Licensed Product; and

(i) There are no current pending, or to CCT’s knowledge, threatened in writing, product liability, warranty or other similar claims by any Third Party (whether based in contract or tort and whether relating to personal injury, including death, property damage or economic loss) arising from the marketing or sale of any Licensed Product.

9.3 Mutual Covenants .

(a) No Debarment. In the course of, and with respect, the Development and Commercialization of the Licensed Products, each Party shall not use any employee or consultant who has been debarred , excluded or disqualified under applicable Law by any Governmental Authority, or, to such Party’s knowledge, is the subject of debarment, exclusion or disqualification proceedings by any Governmental Authority. Each Party shall notify the other Party promptly upon becoming aware that any of its employees or consultants has been debarred, excluded or disqualified under applicable Law, or is the subject of debarment, exclusion or disqualification proceedings by any Governmental Authority.

(b) Compliance. Each Party and its Affiliates shall comply in all material respects with all applicable Laws in the Development and Commercialization of Licensed Products and performance of its obligations under this Agreement, including the statutes, regulations and written directives of the FDA and any Regulatory Authority having jurisdiction in the Territory, the FD&C Act, the Prescription Drug Marketing Act, the federal Anti-Kickback Law (42 U.S.C. 1320a-7b(b)), the statutes, regulations and written directives of Medicare, Medicaid and all other federal health care programs (as defined in 42 U.S.C. § 1320a-7b(f)), the civil False Claims Act (31 U.S.C. 3729 et. seq.), the administrative False Claims Act (42 U.S.C. 1320a-7b(a)), the United States Public Health Service Act, the Physician Payment Sunshine Act (42 U.S.C. 1320a-7h), the United States Health Insurance Portability and Accountability Act of 1996 and the Foreign Corrupt Practices Act of 1977, and all regulations promulgated thereunder, each as may be amended from time to time.

9.4 Disclaimer. Alliqua understands that the Licensed Products are the subject of ongoing clinical research and development and that CCT cannot assure the safety or efficacy of any Licensed Product. In addition, CCT makes no warranties except as set forth in this Article 9 concerning the CCT Technology. EXCEPT AS EXPRESSLY STATED IN THIS AGREEMENT, NO REPRESENTATIONS OR WARRANTIES WHATSOEVER, WHETHER EXPRESS OR IMPLIED, INCLUDING WARRANTIES OF MERCHANTABILITY, FITNESS FOR A PARTICULAR PURPOSE, NON-INFRINGEMENT, OR NON-MISAPPROPRIATION OF THIRD PARTY INTELLECTUAL PROPERTY RIGHTS ARE MADE OR GIVEN BY OR ON BEHALF OF A PARTY, AND ALL IMPLIED REPRESENTATIONS AND WARRANTIES, WHETHER ARISING BY OPERATION OF LAW OR OTHERWISE, ARE HEREBY EXPRESSLY DISCLAIMED.

- 30 -

Article 10
INDEMNIFICATION

10.1 Indemnification by CCT. CCT shall indemnify and hold harmless Alliqua, and its directors, officers, employees, agents, Affiliates and contractors (collectively, the “ Alliqua Indemnitees ”), from and against all losses, liabilities, damages and expenses, including reasonable attorneys’ fees and costs (collectively, “ Liabilities ”), resulting from any claims, demands, actions or other proceedings by any Third Party (including Claims based upon products liability) (“ Claims ”) to the extent resulting from or relating to (a) the breach or inaccuracy of any representation or warranty made by CCT in this Agreement; (b) the breach by CCT of any covenant or any of its obligations under this Agreement; (c) CCT’s failure to comply with any applicable federal, state or local Laws in connection with the performance of its obligations hereunder; (d) any design (latent, patent or inherent) defect of the Licensed Products, provided that the Licensed Products are Commercialized in accordance with this Agreement and are used in the Field in the Territory; or (e) any gross negligence or willful misconduct of CCT or any of its Affiliates. The foregoing indemnity obligation shall not apply to the extent that (i) the Alliqua Indemnitees fail to comply with the indemnification procedures set forth in Section 10.3 and CCT’s defense of the relevant Claims is prejudiced by such failure, or (ii) any Claim arises from, is based on, or results from any activity set forth in Sections 10.2(a), 10.2(b), 10.2(c), 10.2(d), 10.2(e) or 10(f) for which Alliqua is obligated to indemnify the CCT Indemnitees under Section 10.2.

10.2 Indemnification by Alliqua . Alliqua shall indemnify and hold harmless CCT, and its directors, officers, employees, agents, Affiliates and contractors (collectively, the “ CCT Indemnitees ”), from and against all Liabilities resulting from any Claims to the extent resulting from or relating to (a) the breach or inaccuracy of any representation or warranty made by Alliqua in this Agreement; (b) the breach by Alliqua of any covenant or any of its obligations under this Agreement; (c) Alliqua’s failure to comply with any applicable federal, state or local Laws in connection with the performance of its obligations hereunder; (d) improper Commercialization of the Licensed Products by or on behalf of Alliqua or any representations regarding the Licensed Products made by Alliqua in breach of this Agreement; (e) any gross negligence or willful misconduct of Alliqua or any of its Affiliates; or (f) any manufacturing defects of the Licensed Products manufactured by Alliqua or by a Third Party on behalf of Alliqua. The foregoing indemnity obligation shall not apply to the extent that (i) the CCT Indemnitees fail to comply with the indemnification procedures set forth in Section 10.3 and Alliqua’s defense of the relevant Claims is prejudiced by such failure, or (ii) any Claim arises from, is based on, or results from any activity set forth in Sections 10.1(a), 10.1(b), 10.1(c), 10.1(d) or 10.1(e) for which CCT is obligated to indemnify the Alliqua Indemnitees under Section 10.1.

10.3 Indemnification Procedures . The Party claiming indemnity under this Article 10 (the “ Indemnified Party ”) shall give written notice to the Party from whom indemnity is being sought (the “ Indemnifying Party ”) promptly after learning of such Claim. The Indemnifying Party shall have the right to assume and conduct the defense of the Claim with counsel of its choice, and the Indemnified Party may participate in and monitor such defense with counsel of its own choosing at its sole expense. The Indemnified Party shall provide the Indemnifying Party with reasonable assistance, at the Indemnifying Party’s expense, in connection with the defense of the Claim for which indemnity is being sought. Each Party shall not settle or compromise any Claim without the prior written consent of the other Party, which consent shall not be unreasonably withheld, delayed or conditioned. If the Parties cannot agree as to the application of the foregoing Sections 10.1 and 10.2, each may conduct separate defenses of the Claim, and each Party reserves the right to claim indemnity from the other in accordance with this Article 10 upon the resolution of the underlying Claim.

- 31 -

10.4 Limitation of Liability . NEITHER PARTY SHALL BE LIABLE FOR ANY SPECIAL, CONSEQUENTIAL, INCIDENTAL, PUNITIVE, OR INDIRECT DAMAGES, INCLUDING LOST PROFITS, ARISING FROM OR RELATING TO ANY BREACH OF THIS AGREEMENT except for fraud or willful misconduct, BREACH OF EITHER PARTY’S CONFIDENTIALITY OBLIGATIONS, A PARTY’S INDEMNIFICATION OBLIGATIONS, A BREACH OF EACH PARTY’S EXCLUSIVITY OBLIGATIONS OR A BREACH OF THE LICENSE GRANTS, REGARDLESS OF ANY NOTICE OF THE POSSIBILITY OF SUCH DAMAGES; provided, however, that any damages claimed by or paid to a Third Party in a Third Party action shall not be considered SPECIAL, CONSEQUENTIAL, INCIDENTAL, PUNITIVE, OR INDIRECT Damages for purposes of this Agreement .

10.5 Insurance. Each Party shall, at all times during the Term of this Agreement and for five (5) years thereafter, obtain and maintain at its own expense the following types of insurance, with limits of liability not less than those specified below:

(a) Commercial general liability insurance against claims for bodily injury and property damage which shall include contractual coverage and product liability coverage, with limits of not less than $[****] per occurrence and in the aggregate. The other Party, its officers, directors, representatives and agents shall be named as additional insureds.

(b) Workers compensation and employers’ liability with limits to comply with the statutory requirements of the state(s) in which the Agreement is to be performed. The policy shall include employers’ liability for not less than $[****] per accident.

All policies shall be issued by insurance companies with an A.M. Best’s rating of Class A-:V (or its equivalent) or higher status. Each Party shall deliver certificates of insurance evidencing coverage to the other Party promptly after the execution of this Agreement and annually thereafter. All policies provided for herein shall expressly provide that such policies shall not be cancelled, terminated or altered without at least thirty (30) days prior written notice to the insured Party, and each insuring Party shall immediately notify the insured Party in the event that a policy provided for herein is cancelled, terminated or altered.

- 32 -

Article 11
CONFIDENTIALITY

11.1 Confidentiality. During the Term and for a period of five (5) years thereafter, each Party shall maintain all Confidential Information of the other Party in trust and confidence and shall not, without the written consent of the other Party, disclose any Confidential Information of the other Party to any Third Party or use any Confidential Information of the other Party for any purpose other than as necessary in connection with the exercise of rights or discharge of obligations under this Agreement. The confidentiality obligations of this Section 11.1 shall not apply to Confidential Information to the extent that the receiving Party can establish by competent evidence that such Confidential Information: (a) is publicly known prior or subsequent to disclosure without breach of confidentiality obligations by such Party or its employees, consultants or agents; (b) was in such Party’s possession at the time of disclosure without any restrictions on further disclosure; (c) is received by such receiving Party, without any restrictions on further disclosure, from a Third Party who has the lawful right to disclose it; or (d) is independently developed by employees or agents of the receiving Party who had no access to the disclosing Party’s Confidential Information.

11.2 Authorized Disclosure. Nothing herein shall preclude a Party from disclosing the Confidential Information of the other Party to the extent:

(a) such disclosure is reasonably necessary (i) for the filing or prosecuting of Patents as contemplated by this Agreement; (ii) to comply with the requirement of Regulatory Authorities with respect to obtaining and maintaining Regulatory Clearance and/or Approval (or any pricing and reimbursement approvals) of any Licensed Product; or (iii) for prosecuting or defending litigations as contemplated by this Agreement;

(b) such disclosure is reasonably necessary to its employees, agents, consultants or contractors on a need-to-know basis for the sole purpose of performing its obligations or exercising its rights under this Agreement; provided that in each case, the disclosees are bound by written obligations of confidentiality and non-use consistent with those contained in this Agreement;

(c) such disclosure is reasonably necessary to any bona fide potential or actual investor, acquiror, merger partner, or other financial or commercial partner for the sole purpose of evaluating an actual or potential investment, acquisition or other business relationship; provided that in each case, the disclosees are bound by written obligations of confidentiality and non-use consistent with those contained in this Agreement;

(d) such disclosure is reasonably necessary to comply with applicable Laws, including regulations promulgated by applicable security exchanges, a valid order of a court of competent jurisdiction, administrative subpoena or order.

Notwithstanding the foregoing, in the event a Party is required to make a disclosure of the other Party’s Confidential Information pursuant to any of Sections 11.2(a) through 11.2(d), such Party shall promptly notify the other Party of such required disclosure and shall use reasonable efforts to obtain, or to assist the other Party in obtaining, a protective order preventing or limiting the required disclosure.

11.3 Return of Confidential Information . Promptly after the termination or expiration of this Agreement for any reason, each Party shall return to the other Party all tangible manifestations of such other Party’s Confidential Information at that time in the possession of the receiving Party.

- 33 -

11.4 Publicity; Terms of the Agreement; Confidential Treatment .

(a) The Parties agree that the terms of this Agreement (including without limitation any exhibits and schedules hereto) shall be considered Confidential Information of each Party, subject to the special authorized disclosure provisions set forth in Section 11.2 and this Section 11.4.

(b) If either Party desires to make a public announcement concerning the material terms of this Agreement, such Party shall give reasonable prior advance notice of the proposed text of such announcement to the other Party for its prior review and approval (except as otherwise provided herein), such approval not to be unreasonably withheld, conditioned or delayed. A Party commenting on such a proposed press release shall provide its comments, if any, within three (3) Business Days after receiving the press release for review. In addition, to the extent required by applicable Laws, including regulations promulgated by applicable security exchanges, each Party shall have the right to make a press release announcing the achievement of each milestone under this Agreement as it is achieved, and the achievements of Regulatory Clearances and/or Approvals in the Territory as they occur, subject to the other Party’s consent as to form and substance of such announcement, which shall not be unreasonably withheld, conditioned or delayed. In relation to the other Party’s review and approval of such an announcement, such other Party may make specific, reasonable comments on such proposed press release within the prescribed time for commentary, but shall not withhold its consent to disclosure of the information that the relevant milestone has been achieved and triggered a payment hereunder. Neither Party shall be required to seek the permission of the other Party to repeat any information regarding the terms of this Agreement that has already been publicly disclosed by such Party, or by the other Party, in accordance with this Section 11.4, provided such information remains accurate as of such time.

(c) In addition, the Parties acknowledge that either or both Parties may be obligated to file under applicable law and regulation a copy of this Agreement with the USA Securities and Exchange Commission or similar stock exchange authorities or other governmental authorities. Each Party shall be entitled to make such a required filing; provided , however , that it requests confidential treatment of the commercial terms and sensitive technical terms hereof and thereof to the extent such confidential treatment is reasonably available to such Party. In the event of any such filing, each Party shall provide the other Party with a copy of this Agreement marked to show provisions for which such Party intends to seek confidential treatment and shall reasonably consider and incorporate the other Party’s comments thereon to the extent consistent with the legal requirements, with respect to the filing Party, governing disclosure of material agreements and material information that must be publicly filed.

- 34 -

11.5 Technical Publication. Neither Party may publish peer reviewed manuscripts or give other forms of public disclosure such as abstracts and media presentations (such disclosure collectively, for purposes of this Section 11.5, “ publication ”), of results of studies carried out under this Agreement, without the opportunity for prior review by the other Party, except to the extent required by applicable Laws. A Party seeking publication shall provide the other Party the opportunity to review and comment on any proposed publication that relates to the Licensed Product at least thirty (30) days (or at least ten (10) days in the case of abstracts and media presentations) prior to its intended submission for publication. The other Party shall provide the Party seeking publication with its comments in writing, if any, within twenty (20) days (or within five (5) days in the case of abstracts and media presentations) after receipt of such proposed publication. The Party seeking publication shall consider in good faith any comments thereto provided by the other Party and shall comply with the other Party’s reasonable request to remove any and all of such other Party’s Confidential Information from the proposed publication. In addition, the Party seeking publication shall delay the submission for a period up to sixty (60) days in the event that the other Party can demonstrate reasonable need for such delay in order to accommodate the preparation and filing of a patent application. If the other Party fails to provide its comments to the Party seeking publication within such twenty (20) day period (or five (5) day period, as the case may be), such other Party shall be deemed not to have any comments, and the Party seeking publication shall be free to publish in accordance with this Section 11.5 after the thirty (30) day period (or ten (10) day period, as the case may be) has elapsed. The Party seeking publication shall provide the other Party a copy of the publication at the time of the submission. Each Party agrees to acknowledge the contributions of the other Party and its employees in all publications as scientifically appropriate.

11.6 Equitable Relief. Each Party acknowledges that its breach of Article 11 of this Agreement may cause irreparable injury to the other Party for which monetary damages may not be an adequate remedy. Therefore, each Party shall be entitled to seek injunctive and other appropriate equitable relief to prevent or curtail any actual or threatened breach of the obligations relating to Confidential Information set forth in this Article 11 by the other Party. The rights and remedies provided to each Party in this Article 11 are cumulative and in addition to any other rights and remedies available to such Party at law or in equity.

Article 12
TERM AND TERMINATION

12.1 Term. This Agreement shall commence on the Effective Date and, unless earlier terminated in accordance with the terms of this Article 12, shall continue for a period of ten (10) years (the “ Initial Term ”). Upon expiration of the Initial Term, this Agreement will automatically renew for additional two (2) year periods unless either Party gives written notice of termination at least ninety (90) days prior to the expiration of the then-current term, which shall cause this Agreement to terminate at the end of the then-current term (each period, a “ Renewal Term ” and together with the Initial Term, the “ Term ”).

12.2 Termination by CCT .

(a) For Patent Challenge. CCT may terminate this Agreement in its entirety immediately upon written notice to Alliqua if Alliqua or its Affiliates (directly or indirectly, individually or in association with any other person or entity) challenges the validity, enforceability or scope of any CCT Patent anywhere in the world.

- 35 -

(b) For Failure to Meet Thresholds .

(i) In the event that gross sales of a Licensed Product during the second Launch Year for such Licensed Product are less than (x) Five Million Dollars ($5,000,000) or alternatively, (y) the new gross sales volume agreed to by the Parties pursuant to Section 7.4, as the case may be (the “ Minimum Sales Threshold ”), CCT shall have the right to terminate solely with respect to such Licensed Product, on a Licensed Product-by-Licensed Product basis (but not with respect to the Agreement in its entirety), on sixty (60) days’ written notice to Alliqua (a “ Sales Threshold Default ”), which notice of such Sales Threshold Default must be delivered to Alliqua within thirty (30) calendar days following the delivery of the royalty report for the fourth Launch Year Quarter of the second Launch Year (a “ Sales Threshold Default Notice ”). Upon receipt of a Sales Threshold Default Notice, Alliqua may cure the Sales Threshold Default solely for the second Launch Year by (i) paying to CCT an amount equal to the difference between the Annual License Fee for the second Launch Year and the aggregate royalties which would be due to CCT if gross annual sales of such Licensed Product for the second Launch Year were Five Million Dollars ($5,000,000) (or the alternative Minimum Sales Threshold, as the case may be) or (ii) by demonstrating to the reasonable satisfaction of CCT that the gross annual sales of such Licensed Product will reach an annualized run rate of Five Million Dollars ($5,000,000) (or the alternative Minimum Sales Threshold) as of the second Launch Year Quarter of the third Launch Year.

(ii) In the event gross annual sales of any Licensed Product for the third Launch Year or any subsequent Launch Year thereafter are less than Five Million Dollars ($5,000,000) (or the alternative Minimum Sales Threshold, as the case may be) each of CCT and Alliqua shall have the right to terminate this Agreement solely with respect to such Licensed Product, on a Licensed Product-by-Licensed Product basis (but not with respect to the Agreement in its entirety) upon six months’ prior written notice to the other Party, which notice of such termination must be delivered to the other Party within sixty (60) calendar days following the delivery of the royalty report for the fourth Launch Year Quarter of the applicable Launch Year. Notwithstanding the foregoing, in the event that in the third Launch Year the gross annual sales of a Licensed Product are less than Five Million Dollars ($5,000,000) (or the alternative Minimum Sales Threshold, as the case may be), the Parties may discuss alternative options to the termination of this Agreement with respect to such Licensed Product, including, without limitation, the sale of all rights in and to such Licensed Product to Alliqua.

(c) Termination by Either Party. This Agreement may be terminated by either Party in its entirety upon the issuance of a final order or decree issued in a bona fide proceeding by or before a competent judicial authority that a Licensed Product infringed the intellectual property rights of a Third Party, if, after receiving such issuance of a final order or decree of infringement, CCT or Alliqua, as applicable, fails to or is unable to cure such infringement within sixty (60) days from the date of issuance.

12.3 Termination for Breach .

(a) Each Party shall have the right to terminate this Agreement in its entirety immediately upon written notice to the other Party if the other Party materially breaches its obligations under this Agreement (including, but not limited to, failure of Alliqua to exert Commercially Reasonable Best Efforts in accordance with the terms set forth in this Agreement) and, after receiving written notice identifying such material breach in reasonable detail, fails to cure such material breach within sixty (60) days from the date of such notice.

- 36 -

(b) If the alleged breaching Party disputes in good faith the existence or materiality of a breach specified in a notice provided by the other Party in accordance with Section 12.3(a), and such alleged breaching Party provides the other Party notice of such dispute within the applicable cure period, then the non-breaching Party shall not have the right to terminate this Agreement under Section 12.3(a) unless and until an arbitrator, in accordance with Article 13, has determined that the alleged breaching Party has materially breached the Agreement and such breaching Party fails to cure such breach within the applicable cure period (measured as commencing after the arbitrator’s decision). It is understood and agreed that during the pendency of such dispute, all of the terms and conditions of this Agreement shall remain in effect and the Parties shall continue to perform all of their respective obligations hereunder.

12.4 Termination for Bankruptcy. To the extent permitted under applicable Laws, if at any time during the Term of this Agreement, an Event of Bankruptcy (as defined below) relating to either Party (the “ Bankrupt Party ”) occurs, the other Party (the “ Non-Bankrupt Party ”) shall have, in addition to all other legal and equitable rights and remedies available hereunder, the option to terminate this Agreement upon sixty (60) days written notice to the Bankrupt Party. It is agreed and understood that if the Non-Bankrupt Party does not elect to terminate this Agreement upon the occurrence of an Event of Bankruptcy, except as may otherwise be agreed with the trustee or receiver appointed to manage the affairs of the Bankrupt Party, the Non-Bankrupt Party shall continue to make all payments required of it under this Agreement as if the Event of Bankruptcy had not occurred, and the Bankrupt Party shall not have the right to terminate any license granted herein. The term “ Event of Bankruptcy ” means: (a) filing, in any court or agency pursuant to any statute or regulation of any state or country, (i) a petition in bankruptcy or insolvency, (ii) for reorganization or (iii) for the appointment of (or for an arrangement for the appointment of) a receiver or trustee of the Bankrupt Party or of its assets; (b) with respect to the Bankrupt Party, being served with an involuntary petition filed in any insolvency proceeding, which such petition is not dismissed within sixty (60) days after the filing thereof; (c) proposing or being a party to any dissolution or liquidation when insolvent; or (d) making an assignment for the benefit of creditors. Without limitation, the Bankrupt Party’s rights under this Agreement shall include those rights afforded by 11 USAC. § 365(n) of the United States Bankruptcy Code (the “ Bankruptcy Code ”) and any successor thereto. If the bankruptcy trustee of a Bankrupt Party as a debtor or debtor-in-possession rejects this Agreement under 11 USAC. § 365(o) of the Bankruptcy Code, the Non-Bankrupt Party may elect to retain its rights licensed from the Bankrupt Party hereunder (and any other supplementary agreements hereto) for the duration of this Agreement and avail itself of all rights and remedies to the full extent contemplated by this Agreement and 11 USAC. § 365(n) of the Bankruptcy Code, and any other relevant Laws.

12.5 Termination for Safety, Legal or Economic Risks. Either Party may terminate this Agreement on a Licensed Product-by-Licensed Product basis, or in the entirety, immediately upon thirty (30) days prior written notice to the other Party if the terminating Party is advised in writing by its outside legal counsel that it is not advisable for Alliqua to continue the Commercialization of such Licensed Product in the Territory as a result of an actual, threatened or perceived significant safety, legal or economic risk regarding such Licensed Product as the result of any Law, decree, resolution, Liabilities resulting from any Claim, or any decision of a Governmental Authority or Regulatory Authority or change in the interpretation of any current Law, decree, resolution or decision by a Governmental Authority or Regulatory Authority, provided that a Party may only terminate this Agreement in the entirety if the actual, threatened or perceived significant safety, legal or economic risk relates to the Licensed Products as a whole. Notwithstanding the foregoing, in the event that CCT purports to terminate this Agreement with respect to a Licensed Product pursuant to this Section 12.5, the Parties may discuss alternative options to the termination of this Agreement with respect to such Licensed Product, including, without limitation, the sale of all rights in and to such Licensed Product to Alliqua.

- 37 -

12.6 Effect of Termination .

(a) General . Upon any termination (but not expiration) of this Agreement in whole or in part, (i) all licenses and rights granted to Alliqua under this Agreement or with respect to each Licensed Product, as applicable, shall terminate, (ii) Alliqua shall immediately transfer and assign to CCT or its designee all materials, Know-How, Regulatory Materials, licenses, Third Party agreements and other items as are reasonably necessary for CCT to continue the Development and Commercialization of the Licensed Product(s) and (iii) Alliqua shall immediately cease all sales, marketing and distribution of the Licensed Product(s), subject to Section 12.6(d), below.

(b) Additional Effects of Termination. Without limiting the generality of Section 12.6(a), the following rights and consequences shall apply upon any termination of this Agreement, it being understood that if this Agreement terminates on a Licensed Product-by-Licensed Product basis, that this Section 12.6(b) shall apply only with respect to the terminated Licensed Product, provided that if this Agreement is terminated with respect to all License Products hereunder, that this Agreement shall automatically terminate without any further action by the Parties:

(i) Regulatory Materials; Data. To the extent permitted by applicable Laws, Alliqua shall transfer and assign to CCT all Regulatory Materials to extent such Regulatory Materials are not owned by CCT, and related data and Know-How relating to the Licensed Product(s) and shall treat the foregoing as Confidential Information of CCT (and not of Alliqua) under Article 11; provided that Alliqua shall be allowed to retain any such materials that a Regulatory Authority requires Alliqua to retain under applicable Laws.

(ii) Alliqua Assignment. Alliqua hereby irrevocably assigns to CCT, effective upon such termination, a non-exclusive, fully paid, worldwide, fully transferrable, irrevocable license (with the right to grant sublicenses through multiple tiers) to all intellectual property, including all Patents and Know-How (i) Controlled by Alliqua (or its Affiliates) as of the effective date of such termination and (ii) related to or useful in connection with the Licensed Product(s).

(iii) Trademarks . Alliqua shall assign to CCT all right, title and interest in and to the Product Marks (excluding any such marks that include, in whole or part, any corporate name or logo of Alliqua) throughout the Territory.

- 38 -

(iv) Transition Assistance . Alliqua shall provide such assistance, at no cost to CCT, as may be reasonably necessary or useful for CCT to continue Developing and/or Commercializing the Licensed Product(s) throughout the Territory, including assigning or amending as appropriate, upon request of CCT, any agreements or arrangements with Third Party vendors and/or distributors to Develop and/or Commercialize the Licensed Product(s). To the extent that any such contract between Alliqua and a Third Party is not assignable to CCT, Alliqua shall reasonably cooperate with CCT to arrange to continue to provide such services for a reasonable time after termination. Alliqua shall not, during such applicable notice period, take any action that could reasonably be expected to have a material adverse impact on the further Development and Commercialization of any Licensed Product.

(c) Inventories. Subject to Section 12.6(d), below, in the event this Agreement terminates other than for CCT’s breach of the Agreement in accordance with Section 12.3(a), then CCT shall have the right to purchase from Alliqua any and all of the inventory of the Licensed Product(s) held by Alliqua as of the effective date of termination at a price equal to Alliqua’s actual cost to acquire or manufacture such inventory. CCT shall notify Alliqua within thirty (30) days after the effective date of termination whether CCT elects to exercise such right. Notwithstanding the foregoing, in the event this Agreement is terminated in accordance with Sections 12.3 and 12.4 due to an Event of Bankruptcy relating to Alliqua, Alliqua shall immediately transfer, at no cost to CCT, any and all inventory of the Licensed Product(s) held by Alliqua as of the effective date of termination.

(d) Alliqua’s Right to Sell Off. In the event this Agreement terminates other than for Alliqua’s breach of the Agreement in accordance with Section 12.3(a), then CCT, at its option, shall (i) have the right to purchase from Alliqua any and all of the inventory of Licensed Products held by Alliqua as of the effective date of termination in accordance with the terms of Section 12.6(c), above, or (ii) permit Alliqua, for a period of ninety days (90) from the effective date of termination, to market, distribute, offer to sell and sell off then-existing inventory of Licensed Products then on hand (the period referred to in this Section 12.6(d)(ii), the “ Sell-Off Period ”). If CCT elects to allow Alliqua to sell off its then-existing inventory of Licensed Products in accordance with Section 12.6(d)(ii), following the expiration of the Sell Off Period, Alliqua shall immediately cease all sales, marketing and distribution of the then-existing inventory Licensed Products on hand as of the end of such Sell-Off Period, and CCT, at its option, shall (x) have the right to purchase from Alliqua any and all of the inventory of Licensed Products held by Alliqua as of the last date of the Sell-Off Period at a price equal to Alliqua’s actual cost to acquire or manufacture such inventory, or (y) instruct Alliqua to destroy or donate (to a recognized not-for-profit charitable organization, provided however, that such inventory is not further re-sold or distributed for profit) such remaining inventory.

For clarity, Alliqua shall continue to perform all of its obligations under this Agreement with respect to the Development and Commercialization of Licensed Products until the effective date of termination and shall not modify in any material respects such activities from past practices during such period.

- 39 -

12.7 Survival . Termination or expiration of this Agreement shall not affect any rights or obligations of the Parties under this Agreement that have accrued prior to the date of termination or expiration. Notwithstanding anything to the contrary, the following provisions shall survive any expiration or termination of this Agreement: 1, 7.3, 8, 9.4, 10, 11, 12.6, 13, 14 and this Section 12.7.

Article 13
DISPUTE RESOLUTION

13.1 Disputes . The Parties recognize that disputes as to certain matters may from time to time arise that relate to either Party’s rights and/or obligations hereunder. It is the objective of the Parties to establish procedures to facilitate the resolution of disputes arising under this Agreement in an expedient manner by mutual cooperation and without resort to litigation. To accomplish this objective, the Parties agree to follow the procedures set forth in this Article 13 to resolve any controversy or claim arising out of, relating to or in connection with any provision of this Agreement, if and when a dispute arises under this Agreement.

13.2 Internal Resolution. With respect to all disputes arising between the Parties under this Agreement, including any alleged breach under this Agreement or any issue relating to the interpretation or application of this Agreement, if the Parties are unable to resolve such dispute within thirty (30) days after such dispute is first identified by either Party in writing to the other, the Parties shall refer such dispute to the Executive Officers of the Parties for attempted resolution by good faith negotiations within thirty (30) days after such notice is received, including at least one (1) in-person meeting of the Executive Officers within twenty (20) days after such notice is received. If the Executive Officers are not able to resolve such dispute referred to them within such thirty (30) day period, then Section 14.11 shall control.

13.3 Patent and Trademark Disputes. Any dispute, controversy or claim relating to the scope, validity, enforceability or infringement of any Patent Covering the manufacture, use, importation, offer for sale or sale of any Licensed Product or of any trademark rights relating to any Licensed Product shall be submitted to a court of competent jurisdiction in the country in which such Patent or trademark rights were granted or arose.

13.4 Equitable Relief. Nothing in this Article 13 shall prevent either Party from seeking equitable or other relief in a court of competent jurisdiction. All rights and remedies provided to each Party in this Agreement are cumulative and in addition to any other rights and remedies available to such Party at law or in equity.

Article 14
MISCELLANEOUS

14.1 Entire Agreement; Amendment. This Agreement, together with the exhibits and schedules attached hereto, which are hereby incorporated herein, represents the entire agreement and understanding between the Parties with respect to its subject matter and supersedes and terminates any prior and/or contemporaneous discussions, representations or agreements, whether written or oral, of the Parties regarding the subject matter hereto, and supersedes, as of the Effective Date, all prior and contemporaneous agreements and understandings between the Parties with respect to the subject matter hereof (including for the Prior CDA). There are no covenants, promises, agreements, warranties, representations, conditions or understandings, either oral or written, between the Parties other than as are set forth in this Agreement. Amendments or changes to this Agreement shall be valid and binding only if in writing and signed by duly authorized representatives of the Parties.

- 40 -

14.2 Force Majeure. Both Parties shall be excused from the performance of their obligations under this Agreement to the extent that such performance is prevented by force majeure and the nonperforming Party promptly provides notice of the prevention to the other Party. Such excuse shall be continued so long as the condition constituting force majeure continues and the nonperforming Party takes reasonable efforts to remove the condition. For purposes of this Agreement, force majeure shall mean conditions beyond the control of the Parties, including an act of God, war, civil commotion, terrorist act, labor strike or lock-out, epidemic, failure or default of public utilities or common carriers, destruction of production facilities or materials by fire, earthquake, storm or like catastrophe, and failure of plant or machinery (provided that such failure could not have been prevented by the exercise of skill, diligence, and prudence that would be reasonably and ordinarily expected from a skilled and experienced person engaged in the same type of undertaking under the same or similar circumstances). If a force majeure persists for more than ninety (90) days, then the Parties shall discuss in good faith the modification of the Parties’ obligations under this Agreement in order to mitigate the delays caused by such force majeure, and if the force majeure prevents CCT from performing its obligations under either Joint Development Plan for a period of more than one hundred and eighty (180) days, Alliqua shall have the right to terminate this Agreement pursuant to Section 12.3.

14.3 Notices. Any notice required or permitted to be given under this Agreement shall be in writing, shall specifically refer to this Agreement, and shall be addressed to the appropriate Party at the address specified below or such other address as may be specified by such Party in writing in accordance with this Section 14.3, and shall be deemed to have been given for all purposes (a) when received, if hand-delivered or sent by confirmed facsimile or a reputable courier service, or (b) five (5) Business Days after mailing, if mailed by first class certified or registered airmail, postage prepaid, return receipt requested.

If to CCT:

Anthrogenesis Corporation, d/b/a Celgene Cellular Therapeutics

Attn.: Chief Executive Officer

33 Technology Drive

Warren, NJ 07059-5148

Fax: [****]

With a copy to (which shall not constitute notice):

Proskauer Rose LLP

Eleven Times Square

New York, NY 10036

Attn: Robert A. Cantone, Esq.

Fax No.: (212) 969-2900

- 41 -

and

Celgene Corporation

86 Morris Avenue

Summit, NJ 07901

Attention: General Counsel

Fax: [****]

If to Alliqua:

Alliqua, Inc.

2150 Cabot Boulevard West

Langhorne, Pennsylvania 19047

Attention: Chief Executive Officer

Fax No.: [****]

With a copy to (which shall not constitute notice):

Lowenstein Sandler LLP

65 Livingston Avenue

Roseland, New Jersey 07068

Attention: Michael Lerner, Esq.

Fax No.: (973) 597-6395

14.4 No Strict Construction; Headings. This Agreement has been prepared jointly by the Parties and shall not be strictly construed against either Party. Ambiguities, if any, in this Agreement shall not be construed against any Party, irrespective of which Party may be deemed to have authored the ambiguous provision. The headings of each Article and Section in this Agreement have been inserted for convenience of reference only and are not intended to limit or expand on the meaning of the language contained in the particular Article or Section. Except where the context otherwise requires, the use of any gender shall be applicable to all genders, and the word “or” is used in the inclusive sense (and/or). The term “including” as used herein means including, without limiting the generality of any description preceding such term.

14.5 Assignment. Neither Party may assign this Agreement without the prior written consent of the other Party, such consent not to be unreasonably withheld, conditioned or delayed; provided, however, that either Party may assign this Agreement without the consent of the other Party, effective upon written notice to the other Party thereof, to (i) an Affiliate of such Party, provided that the Party hereunder who assigns this Agreement agrees in writing to continue to be bound by and subject to the terms and conditions of this Agreement and (ii) any Person who acquires all or substantially all of such Party’s assets or that is the surviving entity in a merger, recapitalization, combination or other similar transaction with such assigning Party and who agrees in writing to be bound by and subject to the terms and conditions of this Agreement. Further, CCT may assign without Alliqua’s consent its rights to payments received under this Agreement. Any permitted assignment shall be binding on the successors of the assigning Party. Any attempted or purported assignment in violation of this Section 14.5 shall be null and void.

- 42 -

14.6 Performance by Affiliates. Each Party may discharge any obligations and exercise any right hereunder through any of its Affiliates. Each Party hereby guarantees the performance by its Affiliates of such Party’s obligations under this Agreement, and shall cause its Affiliates to comply with the provisions of this Agreement in connection with such performance. Any breach by a Party’s Affiliate of any of such Party’s obligations under this Agreement shall be deemed a breach by such Party, and the other Party may proceed directly against such Party without any obligation to first proceed against such Party’s Affiliate.

14.7 Further Actions. Each Party agrees to execute, acknowledge and deliver such further instruments, and to do all such other acts, as may be necessary or appropriate in order to carry out the purposes and intent of this Agreement.

14.8 Severability. If any provision of this Agreement is found by a court of competent jurisdiction to be unenforceable, then such provision shall be construed, to the extent feasible, so as to render the provision enforceable, and if no feasible interpretation would save such provision, it shall be severed from the remainder of this Agreement. The remainder of this Agreement shall remain in full force and effect, unless the severed provision is essential and material to the rights or benefits received by either Party. In such event, the Parties shall negotiate, in good faith, and substitute a valid and enforceable provision or agreement that most nearly implements the Parties’ intent in entering into this Agreement.

14.9 No Waiver. No provision of this Agreement can be waived except by the express written consent of the Party waiving compliance. Except as specifically provided for herein, the waiver from time to time by either Party of any of its rights or its failure to exercise any remedy shall not operate or be construed as a continuing waiver of same or of any other of such Party’s rights or remedies provided in this Agreement.

14.10 Independent Contractors. For all purposes under this Agreement, Alliqua and CCT and their respective Affiliates are independent contractors with respect to each other, and shall not be deemed to be an employee, agent, partner or legal representative of the other Party. This Agreement does not grant any Party or its employees, consultants or agents any authority (express or implied) to do any of the following without the prior express written consent of the other Party: create or assume any obligation; enter into any agreement; make any representation or warranty; serve or accept legal process on behalf of the other Party; settle any claim by or against the other Party; or bind or otherwise render the other liable in any way.

14.11 Governing Law. This Agreement shall be governed by the laws of the state of New York, without regard to its choice of law provisions that would require the application of the laws of a different jurisdiction. The Parties hereby irrevocably submit to the jurisdiction of the state and federal courts sitting in the County and State of New York for the adjudication of disputes arising out of or relating to this Agreement.

- 43 -

14.12 Counterparts. This Agreement may be executed in two (2) or more counterparts, each of which shall be deemed an original but all of which together shall constitute the same legal instrument. Facsimile or PDF execution and delivery of this Agreement by any Party shall constitute a legal, valid and binding execution and delivery of this Agreement by such Party. The Parties to this document agree that a copy of the original signature (including an electronic copy) may be used for any and all purposes for which the original signature may have been used. The Parties agree they will have no rights to challenge the use or authenticity of this document based solely on the absence of an original signature.

[Signature page follows]

- 44 -

In Witness Whereof , the Parties have executed this Agreement by their duly authorized officers as of the Effective Date.

Alliqua, Inc.		Anthrogenesis Corporation (D/B/A CCT)

By:	/s/ David Johnson	By:	/s/ Perry Karsen
Name: David Johnson		Name: Perry Karsen
Title: Chief Executive Officer		Title: Chief Executive Officer

[Signature Page to License, Marketing and Development Agreement]

Exhibit A

Patents

Docket No.

Country

Case
Status

Application
No.

Application
Date

Registration
No.

Registration
Date

009516-0148-999

United States of America

Abandoned

10/397,867

Mar-26-2003

009516-0389-888

United States of America

Expired

60/699,441

Jul-13-2005

009516-0389-999

United States of America

Issued

11/485,840

Jul-12-2006

7,928,280

Apr-19-2011

012827-0102-999

United States of America

Abandoned

13/089,029

Apr-18-2011

012827-0372-999

United States of America

Pending

13/711,331

Dec-11-2012

Exhibit B

Joint Development Plan

[****] – [****] Study

Study Design:

[****]

Target Investigators:

[****]

Number of Patients:

[****]

Key Endpoints:

[****]

Timelines:

[****]

Contracts and Protocol :

[****]

Enrollment:

[****]

Clinical Study Report :

[****]

[****] Study

Study Design:

[****]

Target Investigators:

[****]

Number of Patients:

[****]

Key Endpoints:

[****]

Timelines:

[****]

Contracts and Protocol :

[****]

Enrollment:

[****]

Post Study Evaluations:

[****]

Ongoing Additional Clinical Plans:

[****]

Exhibit C

CCT Marks

BIOVANCE®

Schedule 7.1(a)

Annual License Fees

Annual License Fees for Biovance:

(a) for the first Launch Year, the greater of (i) [****] (subject to adjustment as provided in Section 7.4 of this Agreement); and

(b) for the second Launch Year and each Launch Year thereafter, the greater of (i) [****] or (ii) [****] (subject to adjustment as provided in Section 7.4 of this Agreement).

Annual License Fees for ECMs:

(a) for the first Launch Year, the greater of (i) [****] or (ii) [****] (subject to adjustment as provided in Section 7.4 of this Agreement); and

(b) for the second Launch Year and each Launch Year thereafter, the greater of (i) [****] or (ii) [****] (subject to adjustment as provided in Section 7.4 of this Agreement).

Schedule 7.1(b)

Annual License Fees and Base Purchase Price Examples

By way of example only for Biovance, assuming that the Base Purchase Price is equal to [****]:

If the Annual License Fee due for a Launch Year is [****] and the aggregate amount paid by Alliqua in that Launch Year for such Licensed Product is [****], Alliqua shall pay to CCT an Annual License Fee for that Launch Year of [****].

If the Annual License Fee due for a Launch Year is [****] and the aggregate amount paid by Alliqua in that Launch Year for such Licensed Product is [****], Alliqua shall not be required pay to CCT any Annual License Fee for that Launch Year.

Schedule 7.1(b) (cont’d)

Annual License Fees and Base Purchase Price Examples

By way of example only for ECMs, assuming that the Base Purchase Price is equal to [****]:

Schedule 7.2
Milestone Payments

	Milestone Event for Biovance	Milestone Payment
1	At such time as aggregate annual Net Sales for any rolling twelve month period equal or exceed [****]	[****]
2	At such time as aggregate annual Net Sales for any rolling twelve month period equal or exceed [****]	[****]
3	At such time as aggregate annual Net Sales for any rolling twelve month period equal or exceed [****]	[****]
4	At such time as aggregate annual Net Sales for any rolling twelve month period equal or exceed [****]	[****]

	Milestone Event for ECMs	Milestone Payment
5	510(k) or other Regulatory Clearance and/or Approval	[****]
6	At such time as aggregate annual Net Sales for any rolling twelve month period equal or exceed [****]	[****]
7	At such time as aggregate annual Net Sales for any rolling twelve month period equal or exceed [****]	[****]
8	At such time as aggregate annual Net Sales for any rolling twelve month period equal or exceed [****]	[****]
9	At such time as aggregate annual Net Sales for any rolling twelve month period equal or exceed [****]	[****]

Schedule 7.3(a)

Royalties

Annual Net Sales of Biovance in the Territory		Royalty Rate
[****]		[**] Percent ([**]%)
[****]		[**] Percent ([**]%)
[****]		[**] Percent ([**]%)
[****]		[**] Percent ([**]%)

Annual Net Sales of ECMs in the Territory		Royalty Rate
[****]		[**] Percent ([**]%)
[****]		[**] Percent ([**]%)
[****]		[**] Percent ([**]%)
[****]		[**] Percent ([**]%)

[****]

Exhibit 10.49

SUPPLY AGREEMENT

BY AND BETWEEN

ANTHROGENESIS CORPORATION

AND

ALLIQUA, INC.

NOVEMBER 14, 2013

TABLE OF CONTENTS

		PAGE

ARTICLE 1 DEFINITIONS		1

ARTICLE 2 SUPPLY OF MANUFACTURED PRODUCTS		2

2.1	Sale and Purchase of Manufactured Products	2
2.2	Forecasts; Firm Orders	3
2.3	Shipment and Delivery	3
2.4	Alliqua Right to Manufacture	4
2.5	Manufacture and Supply of ECMs	4

ARTICLE 3 REGULATORY AND QUALITY MATTERS		4

3.1	Regulatory Responsibility	4
3.2	Change Control	5
3.3	Records	5
3.4	Testing	5
3.5	Regulatory Inquiries	5
3.6	Notice of Regulatory Inspections	6
3.7	Quality Agreement	6
3.8	Quality Audits	6
3.9	Intentionally Omitted	7
3.10	Cooperation	7
3.11	Recalls	7
3.12	Complaints	8
3.13	Warning Letters	8
3.14	Inquiries from Health Care Professionals	8
3.15	Debarment	8
3.16	Additional Covenants of Alliqua	8

ARTICLE 4 PRICE AND PAYMENT TERMS		9

4.1	Purchase Price	9
4.2	Taxes	9
4.3	Freight and Insurance	9
4.4	Payments	9
4.5	Interest Charges	10
4.6	Pricing	10

ARTICLE 5 INSPECTION OF MANUFACTURED PRODUCTS		10

5.1	Inspection by Alliqua	10
5.2	Disputes Over Manufactured Products	10
5.3	Replacement of Manufactured Products That Are Not Acceptable Manufactured Products	10

- i -

5.4	Exclusive Remedy	11

ARTICLE 6 REPRESENTATIONS AND WARRANTIES; CERTAIN COVENANTS		11

6.1	Mutual Representations and Warranties	11
6.2	Additional CCT Representations and Warranties	11
6.3	Alliqua Compliance with Applicable Law	12

ARTICLE 7 INDEMNIFICATION AND INSURANCE		12

7.1	CCT Indemnification	12
7.2	Alliqua Indemnification	12
7.3	Indemnification Procedures	13
7.4	Limitation of Liability	13
7.5	Insurance	13

ARTICLE 8 CONFIDENTIAL INFORMATION		14

8.1	Confidentiality	14
8.2	Authorized Disclosure	14
8.3	Return of Confidential Information	15
8.4	Publicity; Terms of the Agreement; Confidential Treatment	15
8.5	Technical Publication	16
8.6	Equitable Relief	16

ARTICLE 9 TERM AND TERMINATION		16

9.1	Term	16
9.2	Termination	16
9.3	Effects of Termination	18

ARTICLE 10 GENERAL PROVISIONS		18

10.1	Entire Agreement; Amendment	18
10.2	Force Majeure	18
10.3	Notices	19
10.4	No Strict Construction; Headings	20
10.5	Assignment	20
10.6	Performance by Affiliates	20
10.7	Further Actions	20
10.8	Severability	20
10.9	No Waiver	21
10.10	Independent Contractors	21
10.11	Governing Law	21
10.12	Counterparts	21

- ii -

SUPPLY AGREEMENT

THIS SUPPLY AGREEMENT (this “ Agreement ”) dated as of November 14, 2013 (the “ Effective Date ”), by and between Anthrogenesis Corporation, a Delaware corporation doing business as Celgene Cellular Therapeutics (“ CCT ”), and Alliqua, Inc., a Florida corporation (“ Alliqua ”). Alliqua and CCT may each be referred to as a “ Party ” or collectively be referred to as the “ Parties ”.

PREAMBLE

A. CCT and Alliqua are entering into a License, Marketing and Development Agreement (the “ License Agreement ”) concurrently herewith, under which CCT will grant certain rights to Alliqua to market and sell the Licensed Products; and

B. In connection with the License Agreement, CCT wishes to supply to Alliqua, and Alliqua wishes to purchase from CCT, Alliqua’s entire requirements of Manufactured Product for distribution and sale in the Territory;

NOW, THEREFORE , in consideration of the mutual covenants and agreements contained in this Agreement, and for other good and valuable consideration, the receipt and adequacy of which are hereby acknowledged, CCT and Alliqua agree as follows:

ARTICLE 1
DEFINITIONS

All capitalized terms used but not defined herein shall have the meaning ascribed to such term in the License Agreement. In addition to the terms defined in the License Agreement and elsewhere in this Agreement, the following terms have the meanings indicated:

“ Acceptable Manufactured Products ” has the meaning set forth in Section 5.1.

“ Act ” means the Federal Food, Drug, and Cosmetic Act, as amended, and the rules, regulations, guidelines and requirements of the FDA as may be in effect from time to time.

“ Alliqua Indemnified Parties ” has the meaning set forth in Section 7.1.

“ Calendar Year ” means each successive period of twelve (12) calendar months commencing on January 1.

“ CCT Indemnified Parties ” has the meaning set forth in Section 7.2.

“ CCT Recall Event ” has the meaning set forth in Section 3.11.

“ CFR ” has the meaning set forth in Section 3.1.

“ cGTPs ” means current Good Tissue Practices as described in Part 1271 of Title 21 of the U.S. Code of Federal Regulations.

“ FDA ” means the United States Food and Drug Administration or any successor agency performing a similar function.

“ Firm Order ” means a written irrevocable firm purchase order for Manufactured Products, which order shall include a delivery schedule specifying the required delivery date and quantity for each Manufactured Product stock keeping unit ordered and the location to which shipment of Manufactured Products is to be delivered.

“ Forecast ” has the meaning set forth in Schedule 2.2, subsection (a)(ii).

“ Long Range Forecast ” has the meaning set forth in Schedule 2.2, subsection (a)(i).

“ Losses ” has the meaning set forth in Section 7.1.

“ Manufactured Product ” means Biovance.

“ Permitted Subcontractor ” has the meaning set forth in Section 2.1(d).

“ Product Samples ” has the meaning set forth in Section 3.4.

“ Purchase Price ” has the meaning set forth in Section 4.1.

“ Quality Agreement ” has the meaning set forth in Section 3.7.

“ Required Manufacturing Changes ” has the meaning set forth in Section 3.2.

“ Specifications ” means the applicable specifications for manufacturing, storage, testing, and bulk packaging of a Manufactured Product as set forth on Schedule A hereto, as it may be amended from time to time.

“ Term ” has the meaning set forth in Section 9.1.

“ Third Party Claims ” has the meaning set forth in Section 7.1.

ARTICLE 2
SUPPLY OF MANUFACTURED PRODUCTS

2.1 Sale and Purchase of Manufactured Products.

(a) Subject to the terms and on the conditions set forth in this Agreement, commencing no earlier than April 1, 2014, CCT shall supply and sell to Alliqua, and Alliqua shall purchase from CCT, Alliqua’s entire requirements of bulk Manufactured Products for exploitation in the Territory under the License Agreement. The bulk form and bulk packaging of Manufactured Products shall be in accordance with the Specifications.

- 2 -

(b) CCT shall manufacture, store at its facility, and test all bulk Manufactured Products or cause the same to be manufactured, stored at the manufacturing facility, and tested, in conformity with the applicable Specifications for such Manufactured Product and in compliance with all applicable Law, including cGTPs, and the terms and conditions of this Agreement and the Quality Agreement.

(c) Alliqua shall be solely responsible for all labels, labeling, tracking letters, and packaging of finished Manufactured Products, including package inserts and outserts for each Manufactured Product in the Territory.

(d) Subject to any legal requirements under applicable Law, CCT may, at its sole option, engage or use subcontractors and suppliers that it reasonably believes are qualified to perform some or all of CCT’s obligations under this Agreement (each, a “ Permitted Subcontractor ”).

(e) Without limiting the foregoing, all Permitted Subcontractors shall be subject to the applicable terms and conditions of this Agreement and the Quality Agreement and no agreement with any Permitted Subcontractor shall release CCT from any of its obligations under this Agreement or the Quality Agreement. CCT shall remain responsible for any services performed by such Permitted Subcontractor to the same extent as if it had performed the obligations itself.

(f) For the purposes of clarity, nothing in this Agreement shall provide a right of reference to support any filing by Alliqua or an Alliqua Affiliate with the FDA for any product other than the Manufactured Products or to support any similar filing with another Governmental Authority in or out of the Territory.

2.2 Forecasts; Firm Orders . The Parties shall comply with the provisions of Schedule 2.2 to this Agreement with respect to the matters set forth therein.

2.3 Shipment and Delivery .

(a) CCT shall deliver to Alliqua the Manufactured Products ordered pursuant to a Firm Order by the required delivery dates therefor EXW (Incoterms 2010) CCT’s designated facility in the United States. For purposes of clarity, Alliqua bears all risk and costs from the time Alliqua or its carrier picks up the Manufactured Products at CCT’s designated facility in the United States and CCT has no obligation to load the Manufactured Products or clear them for export.

(b) CCT shall package Manufactured Products in bulk for shipment in accordance with practices that are customary and reasonable in the industry with respect to similar products and comply with applicable Law, unless otherwise specified in writing by Alliqua at least ten (10) Business Days prior to such shipment, in which event CCT shall package Manufactured Products in bulk for shipment in accordance with such instructions and any commercially reasonable, documented actual external costs incurred by CCT (without markup) on account of the bulk packaging changes requested by Alliqua shall be promptly reimbursed by Alliqua.

- 3 -

(c) Prior to shipment, CCT shall perform release testing for the Manufactured Product pursuant to the Specifications, cGTPs and the Quality Agreement.

2.4 Alliqua Right to Manufacture.

(a) If CCT terminates this Agreement pursuant to Section 9.2(a), or Alliqua terminates this Agreement pursuant to Section 9.2(b), (c) or (d), then, for so long as Alliqua has the right to Commercialize the Manufactured Products in the Territory under the License Agreement, Alliqua or any person or entity designated by Alliqua (including an Affiliate of Alliqua) may, following notice to CCT, manufacture, store at is facility, and test Alliqua’s requirements of the Manufactured Products for Commercialization in the Field in the Territory in accordance with the License Agreement.

(b) If Alliqua elects to manufacture, store, and test Alliqua’s requirements of the Manufactured Products in accordance with Section 2.4(a), CCT shall cooperate with and assist Alliqua or any person or entity designated by Alliqua (including an Affiliate of Alliqua) in transferring the processes for manufacturing, storing and testing the Manufactured Product to Alliqua or any person or entity designated by Alliqua (including an Affiliate of Alliqua).

2.5 Manufacture and Supply of ECMs. Prior to the anticipated date of Regulatory Clearance and/or Approval of the first of CCT’s extracellular matrix derived from the human placenta (“ ECM ”) products, the Parties shall enter into a supply agreement with respect to such ECM product that is on substantially the same terms as this Agreement, except that the purchase price shall be as set forth in Schedule 2.5 to this Agreement.

ARTICLE 3
REGULATORY AND QUALITY MATTERS

3.1 Regulatory Responsibility. Subject to the terms of this Agreement and the License Agreement, all matters in the Territory regarding obtaining and supporting Regulatory Clearance and/or Approval of the Manufactured Products, and manufacturing and testing of the Manufactured Products in compliance with the applicable Specifications for the Manufactured Product and applicable Law (including cGTPs), shall be the responsibility of, and shall remain under the control of CCT. Except as set forth in Section 3.2 below, any costs or expenses required to comply with CCT’s obligations under this Section 3.1 shall be borne by [****]. Each Party shall be registered with the FDA’s Center for Biologics Evaluation and Research pursuant to 21 Code of Federal Regulations (“ CFR ”) Part 1271, as and when their activities with respect to Manufactured Products require such registration. Each Party shall promptly (within three (3) Business Days) provide the other Party with copies of all communications received from any Regulatory Authority concerning the Manufactured Products which directly or indirectly affect or relate to the manufacturing, storage, testing, packaging or labeling thereof, and any filings that directly or indirectly affect or relate to the manufacturing, storage, testing, packaging or labeling of the Manufactured Products to be made to any such agency for prior review and comment at least five (5) Business Days prior to such submission. Each Party shall provide notice to the other Party of meetings with any Regulatory Authority, whether via electronic means, in person, or otherwise, which affect or relate to the manufacturing, storing, testing, packaging or labeling of the Manufactured Products. CCT will require each Permitted Subcontractor to keep CCT and Alliqua fully and promptly advised of any inspections, inspectional observations and other communications and interactions between such Permitted Subcontractor and any Regulatory Authority which may directly or indirectly affect or relate to the manufacturing, storage, testing, packaging or labeling of any Manufactured Products. In the event of any inconsistency between the provisions of this Section 3.1 and the provisions of the License Agreement, the provisions of the License Agreement shall control.

- 4 -

3.2 Change Control. CCT and Alliqua shall cooperate in timely making any and all changes to the Specifications or manufacturing processes that are required by applicable Law (collectively, “ Required Manufacturing Changes ”). The commercially reasonable, documented costs attributable to the Required Manufacturing Change, including the cost of a reasonable quantity (in light of the Forecasts submitted by Alliqua) of raw materials, work-in-process, Manufactured Products and bulk packaging materials rendered obsolete as a result of any such Required Manufacturing Changes, shall be borne [****].

3.3 Records. CCT shall, and shall cause its Affiliates and each Permitted Subcontractor to, keep appropriate accounts, notes, data and records of the work performed under this Agreement in accordance with applicable Law, including cGTPs, and the terms and conditions of this Agreement and the Quality Agreement. CCT shall provide Alliqua with a copy of a certificate of analysis with each batch of Manufactured Products delivered to Alliqua, as set forth in the Quality Agreement.

3.4 Testing. CCT shall be solely responsible for (a) taking and maintaining quality control samples of all Manufactured Products delivered to Alliqua (collectively, the “ Product Samples ”), and (b) testing Product Samples, in each case, in accordance with the Quality Agreement. CCT shall promptly provide Alliqua data resulting from testing related to the Product Samples for distribution in the Territory as such information becomes available, including any discovery of any negative or adverse trending in testing data.

3.5 Regulatory Inquiries. Without limiting any provision of the License Agreement, upon being contacted (and, in the case of CCT, upon any Permitted Subcontractor being contacted) by any Regulatory Authority for any regulatory purpose pertaining to this Agreement or to the Manufactured Products, including notice of the initiation of any inquiries, notices or inspection activity by any such agency, a Party shall immediately notify the other Party and provide the other Party with (a) a reasonable description of any such inquiries and related documentation, (b) an opportunity to advise and comment with respect thereto and (c) if appropriate, an opportunity to participate with respect thereto to the extent such matters relate to the Manufactured Products in the Territory.

- 5 -

3.6 Notice of Regulatory Inspections. Each Party shall (a) advise the other Party of any requests by any Regulatory Authority (including, in the case of CCT, any such requests made to a Permitted Subcontractor) for any inspections with respect to the manufacturing, storing, testing, packaging and/or labeling of Manufactured Products, (b) provide the other Party with copies of any correspondence related thereto, and, to the extent it (or, in the case of CCT, by a Permitted Subcontractor) becomes aware of the results, observations or outcome of any inspections or audits of the facilities or operations involved in the manufacture, storage, testing, packaging and/or labeling of the Manufactured Products conducted by any Regulatory Authority, including providing the other Party an opportunity to advise and comment with respect to any correspondence to be provided by such Party (or, in the case of CCT, by a Permitted Subcontractor) to the applicable agency, and (c) notify the other Party of any such information as it relates to the Manufactured Products in the Territory within three (3) Business Days of obtaining the information.

3.7 Quality Agreement. Within sixty (60) Business Days after the Effective Date, CCT and Alliqua shall negotiate in good faith the terms of, and enter into, a reasonable and customary quality agreement (the “ Quality Agreement ”). The Quality Agreement shall include provisions with respect to, among other things, release testing, change control procedures with respect to the Specifications and the manufacturing processes for the Manufactured Products, stability testing, recalls of any Manufactured Products, and record retention requirements with respect to recalls. In the event of any conflict between the terms of the Quality Agreement and the terms of this Agreement, the terms of the Quality Agreement shall govern.

3.8 Quality Audits.

(a) Upon reasonable advance notice and during reasonable business hours, Alliqua shall have the right to inspect and audit those portions of CCT’s and its Affiliates’ and its Permitted Subcontractors’ facilities in which the Manufactured Products are manufactured, stored or tested, to ascertain compliance with cGTPs, applicable Law, and the terms and conditions of this Agreement and the Quality Agreement; provided, however, that (i) Alliqua’s representatives shall follow all security and facility access procedures as reasonably required by CCT or its Affiliate or Permitted Subcontractor, as applicable, and (ii) Alliqua may not exercise its right under this Section 3.8(a) more than once in any twelve (12)-month period (unless such inspection and audit reveals a material compliance issue, in which event Alliqua shall have the right to conduct a follow-up inspection and audit to verify that such issue has been remedied). CCT shall use commercially reasonable efforts to promptly resolve, and to cause its Affiliates and its Permitted Subcontractors to promptly resolve, any quality issues raised by any inspections and audits of their respective facilities.

(b) Upon reasonable advance notice and during reasonable business hours, CCT shall have the right to inspect and audit (i) those portions of Alliqua’s facilities in which the Manufactured Products are stored, handled or labeled and (ii) if Alliqua elects to manufacture, store, and test Alliqua’s requirements of the Manufactured Products or designate another person or entity to manufacture, store, and test Alliqua’s requirements of the Manufactured Products, in accordance with Section 2.4(a), those portions of Alliqua’s facilities or those of its designated Person, as the case may be, in which the Manufactured Products are manufactured, stored, handled or labeled, in each case, to ascertain compliance with cGTPs, applicable Law, and the terms and conditions of this Agreement and the Quality Agreement; provided, however, that (i) CCT’s representatives shall follow all security and facility access procedures as reasonably required by Alliqua, as applicable, and (ii) CCT may not exercise its right under this Section 3.8(a) more than once in any twelve (12)-month period (unless such inspection and audit reveals a material compliance issue, in which event CCT shall have the right to conduct a follow-up inspection and audit to verify that such issue has been remedied). Alliqua shall use commercially reasonable efforts to promptly resolve any quality issues raised by any inspections and audits of its facilities.

- 6 -

(c) Except as otherwise set forth in this Agreement, each Party shall, at its sole cost and expense, maintain in full force and effect all necessary licenses, approvals, permits and other authorizations required by applicable Law to carry out its duties and obligations under this Agreement and the Quality Agreement.

3.9 Intentionally Omitted .

3.10 Cooperation . The Parties will cooperate in good faith in responding to any Regulatory Authority inquiry or in making any report to the Regulatory Authority with respect to Manufactured Products. Notwithstanding anything to the contrary in this Agreement (and without limiting CCT’s obligation under the License Agreement to obtain, support and maintain Regulatory Clearances and/or Approvals), CCT will have final authority for regulatory decisions and responsibility for all communications with any Regulatory Authority with respect to obtaining or maintaining Regulatory Approval of the Manufactured Products.

3.11 Recalls . CCT and Alliqua will each notify the other Party promptly if it becomes aware that a Manufactured Product is the subject of a recall or market withdrawal that is mandated by a Regulatory Authority, and the Parties will reasonably cooperate in the handling and disposition of such recall or market withdrawal; provided, however, in the event of a disagreement as to any matters related to any such recall or market withdrawal, other than the determination of who will bear the costs as set forth in the immediately following sentences, CCT will have the final authority with respect to any product recall or withdrawal relating to Manufactured Products, including any recall or market withdrawal that is not mandated by a Regulatory Authority. [****] will bear the cost of all recalls or market withdrawals of Manufactured Products purchased by Alliqua pursuant to this Agreement where such recall or market withdrawal is the direct result of CCT’s or a Permitted Subcontractor’s [****] Recall Event ”). [****] will bear the cost of all recalls or market withdrawals of Manufactured Products purchased by Alliqua pursuant to this Agreement where such recall or market withdrawal is the direct result of Alliqua’s [****] Recall Event ”). If a recall or market withdrawal [****], then the costs of such recall or market withdrawal will be [****] will bear the cost of all recalls or market withdrawals of Manufactured Products purchased by Alliqua pursuant to this Agreement where the recall or market withdrawal is [****]. Alliqua will maintain records of all sales of Manufactured Product and all customers sufficient to adequately administer a recall or market withdrawal for the longer of one (1) year after termination or expiration of this Agreement or the period required by applicable Law. Alliqua will, in all events and regardless of who bears the cost, be responsible for administering the physical aspects of any recalls or market withdrawals with respect to the Manufactured Products, provided, however, that any reasonable external costs and expenses incurred by Alliqua relating to the recall or market withdrawal (including, but not limited to reasonable recall destruction costs) will be allocated between the Parties as set forth above in this Section. Any revenue attributable to Manufactured Products held or sold by Alliqua (or its designee) that is subject to a recall will be deducted from Net Sales for purposes of the License. In the event of any recall, if requested by Alliqua, CCT will provide Manufactured Products to Alliqua to replace the recalled Manufactured Products and, to the extent the recalled Manufactured Products were previously paid for by Alliqua, the cost of such replacement Manufactured Products shall be allocated between the Parties as set forth above in this Section.

- 7 -

3.12 Complaints . Alliqua will collect complaint files for the Manufactured Products in accordance with the provisions of the Quality Agreement. Manufactured Products complaint reports received by Alliqua will be sent to CCT at [****] within twenty-four (24) hours after receipt of the complaint by Alliqua. Alliqua and CCT will notify each other of any Manufactured Product complaints made by customers that will or could require a report of an “adverse reaction” to the FDA pursuant to 21 CFR 1271.350, and will thereafter reasonably cooperate with each other relative to any investigation or inquiry that may be initiated by FDA with respect thereto. The complaint handling obligations of the Parties will be detailed further within the Quality Agreement and/or the Safety Data and Exchange Agreement.

3.13 Warning Letters . In the event that either Party (or, in the case of CCT, any Permitted Subcontractor) receives a warning letter from the FDA or the equivalent from any other Governmental Authority in connection with the Manufactured Product, such Party will notify the other Party promptly, and in any event within twenty four (24) hours (to the extent legally permitted) after receiving such warning letter.

3.14 Inquiries from Health Care Professionals . CCT shall provide reasonable assistance to Alliqua in its preparation and filing with appropriate Regulatory Authorities related to reimbursement and health care insurance filings required for the marketing and distribution of Manufactured Products in the Territory by Alliqua.

3.15 Debarment . Neither Party shall use any employee or consultant (or, in the case of CCT, any Permitted Subcontractor or employees or consultants thereof) who has been debarred by any Regulatory Authority, or, to such Party's knowledge, is the subject of debarment proceedings by a Regulatory Authority. Each Party shall notify the other Party promptly upon becoming aware that any of its employees or consultants (or, in the case of CCT, any Permitted Subcontractor or employees or consultants thereof) has been debarred or is the subject of debarment proceedings by any Regulatory Authority.

3.16 Additional Covenants of Alliqua . Alliqua shall:

(a) discharge its obligations pursuant to this Agreement in accordance with all applicable Laws, including those enforced by the FDA (including compliance with cGTP);

(b) maintain the Manufactured Products pending sale to its customers in a facility that is properly equipped to store such Manufactured Products in accordance with the applicable Manufactured Product labeling; and

- 8 -

ARTICLE 4
PRICE AND PAYMENT TERMS

4.1 Purchase Price.

(a) For all Manufactured Products ordered pursuant to Firm Orders by Alliqua at any time, Alliqua shall pay CCT a purchase price (“ Purchase Price ”) for each conforming quantity of Manufactured Product delivered hereunder in accordance with the terms set forth in Schedule 4.1 to this Agreement.

(b) If at any time during the Term, CCT notifies Alliqua in writing that CCT has incurred an increase in the costs associated with manufacturing the Manufactured Products, the Parties shall promptly negotiate in good faith an increase in the Purchase Price to account for such increase in costs; provided, however, that if the Parties fail to reach agreement on any such price increase, the resolution of such disagreement shall be governed by the provisions of Section 13 of the License Agreement.

4.2 Taxes. The Purchase Price and other amounts payable by Alliqua to CCT pursuant to this Agreement shall not be reduced on account of any taxes unless required by applicable Law. CCT alone shall be responsible for paying any and all taxes (other than any withholding taxes required by applicable Law to be paid by Alliqua) levied on account of, or measured in whole or in part by reference to, any payments it receives from Alliqua.

4.3 Freight and Insurance. In addition to the Purchase Price, for the purposes of clarity, Alliqua shall pay all actual freight and insurance expenses incurred by Alliqua in connection with the sale and shipment of the Manufactured Products.

4.4 Payments.

(a) Upon each delivery of Manufactured Products, CCT shall promptly submit an invoice to Alliqua. All invoices and payments for Manufactured Products shall be in United States dollars. Alliqua shall pay each invoice (except for any amounts disputed by Alliqua in good faith) within thirty (30) days after receipt thereof.

(b) If an inconsistency between any invoice, purchase order, purchase order release, confirmation, acceptance or similar document and this Agreement exists, the terms of this Agreement shall control.

(c) Payment due to CCT shall be paid in United States dollars by wire transfer to an account designated in writing by CCT.

- 9 -

4.5 Interest Charges. If CCT does not receive payment of any sum due to it on or before the due date, simple interest shall thereafter accrue on the sum due until the date of payment at the rate of [****] per month or, if less, the maximum rate allowable by applicable Law.

4.6 Pricing. All resale prices of Manufactured Products shall be reviewed by the JSC and Alliqua shall consider in good faith any comments of the JSC. For purposes of clarity, Alliqua shall have final discretion with respect to resale prices of the Manufactured Products during the Term, including resale price increases and decreases and the timing thereof.

ARTICLE 5
INSPECTION OF MANUFACTURED PRODUCTS

5.1 Inspection by Alliqua. Alliqua may inspect and analyze the Manufactured Products delivered to Alliqua for purposes of determining whether the Manufactured Products meet the applicable Specifications at the time of delivery thereof (such Manufactured Product, “ Acceptable Manufactured Products ”). Alliqua shall notify CCT in writing within thirty (30) days after the date of delivery to Alliqua (or within thirty (30) days after discovery that any Manufactured Product is not Acceptable Manufactured Products for reasons that could not reasonably have been detected by Alliqua’s customary inspection on delivery) of any Manufactured Product or portion thereof which Alliqua is returning because it is not an Acceptable Manufactured Product, including documentation of the reasons therefor. If CCT does not receive such notice within such thirty (30)-day period, the shipped Manufactured Products will be deemed accepted as Acceptable Manufactured Products.

5.2 Disputes Over Manufactured Products. CCT shall have a reasonable opportunity not to exceed thirty (30) days from the date of receipt of the notice described in Section 5.1 to inspect and/or test such Manufactured Product that Alliqua claims is not an Acceptable Manufactured Product. If CCT, after good faith consultation with Alliqua, disputes any determination by Alliqua that a Manufactured Product is not an Acceptable Manufactured Product, then representative samples of such Manufactured Product shall be forwarded to an independent Third Party laboratory jointly selected by CCT and Alliqua, in their reasonable discretion, for analysis, which analysis shall be performed in compliance with industry standards and applicable Law. The findings of such Third Party laboratory regarding whether the Manufactured Product was an Acceptable Manufactured Product shall be binding upon the Parties. The cost of such analysis by such Third Party laboratory shall be borne by the Party whose analysis was not substantiated by the findings of such Third Party laboratory.

5.3 Replacement of Manufactured Products That Are Not Acceptable Manufactured Products. CCT shall, at Alliqua’s option, either replace any Manufactured Product order or portion thereof which is not an Acceptable Manufactured Product as soon as reasonably practicable at CCT’s cost and expense, including shipping costs, or promptly refund to Alliqua the payments made for such returned Manufactured Products (including Alliqua’s shipping costs). At the sole option of CCT, said Manufactured Products may be returned to CCT, at CCT’s expense including shipping costs, or destroyed in an environmentally acceptable manner, in accordance with applicable Law, at CCT’s expense. CCT will not, however, replace any Manufactured Product which fails or ceases to conform to the Specifications or which is unsalable, in each case, as a result of improper storage, transport or other mishandling or other event after the Manufactured Product has been delivered to Alliqua, Alliqua’s designated courier or other Alliqua designee.

- 10 -

5.4 Exclusive Remedy . The sole and exclusive remedy available to Alliqua in connection with Manufactured Products that are not Acceptable Manufactured Products shall be replacement of such Manufactured Product by CCT in accordance with Section 5.3 above. Notwithstanding the immediately preceding sentence, Manufactured Products that are not Acceptable Manufactured Products shall be deemed not to have been delivered for purposes of Section 9.2(b).

ARTICLE 6
REPRESENTATIONS AND WARRANTIES; CERTAIN COVENANTS

6.1 Mutual Representations and Warranties. Each Party represents and warrants to the other Party as of the Effective Date as follows:

(a) It is a corporation duly organized, validly existing and in good standing under the laws of the State of its incorporation, with the requisite legal authority to own and use its properties and assets and to carry on its business as currently conducted.

(b) It has the requisite corporate authority to enter into and to consummate the transactions contemplated by this Agreement and otherwise to carry out its obligations hereunder. The execution and delivery of this Agreement by it and the transactions contemplated hereby and thereby have been duly authorized by all necessary corporate action on its part and no further consent or action is required by it, by its Board of Directors or by its stockholders.

(c) This Agreement has been duly executed by it and is the valid and binding obligation of the Company enforceable against it in accordance with its terms, except (i) as limited by general equitable principles and applicable bankruptcy, insolvency, reorganization, moratorium and other laws of general application affecting enforcement of creditors’ rights generally, and (ii) as limited by laws relating to the availability of specific performance, injunctive relief or other equitable remedies.

6.2 Additional CCT Representations and Warranties. CCT represents and warrants to Alliqua that at the time each Manufactured Product is delivered to Alliqua such Manufactured Product: (a) will meet the Specifications therefor; (b) will have been manufactured, stored and handled at CCT’s facility, and tested in accordance with the applicable Law, Regulatory Clearances and/or Approvals, Specifications and cGTPs; (c) will have a remaining shelf life no less than [****] of the shelf life set forth in the Regulatory Clearances and/or Approvals therefor in the Territory; (d) will not be (i) adulterated, or (ii) manufactured, stored or handled at CCT’s facility, or tested in a manner that violates the Act, or any other applicable Law; and (e) will pass to Alliqua free and clear of any security interest, lien or other encumbrances.

- 11 -

6.3 Alliqua Compliance with Applicable Law. Alliqua shall at all times: (a) handle, warehouse, store, label, package, market, sell, distribute and otherwise dispose of the Manufactured Products in the Territory in compliance with all applicable Law, Regulatory Clearances and/or Approvals, Specifications and cGTPs; and (b) except for any Regulatory Clearances and/or Approvals that CCT is responsible for maintaining, maintain all applicable licenses, registrations and permits necessary to take control of, market, sell and distribute such Manufactured Products in the Territory. Alliqua will not market the Manufactured Product in any manner which is inconsistent with its labeling or with applicable Law, or otherwise make any false or misleading representations to customers or others regarding the Manufactured Product.

ARTICLE 7
INDEMNIFICATION AND INSURANCE

7.1 CCT Indemnification. Subject to the procedures set forth in Section 7.3, CCT shall indemnify Alliqua, its Affiliates and its and their respective directors, officers, employees and agents (the “ Alliqua Indemnified Parties ”), and defend and save each of them harmless, from and against any and all claims, lawsuits, losses, damages, liabilities, penalties, costs and expenses (including reasonable attorneys’ fees and disbursements) (collectively, “ Losses ”) incurred by any of them in connection with any and all suits, investigations, claims or demands of Third Parties (collectively, “ Third Party Claims ”) in connection with, arising from or occurring as a result of: (a) the breach or inaccuracy of any representation or warranty made by CCT in this Agreement or the Quality Agreement; (b) the breach by CCT of any of its obligations under this Agreement or the Quality Agreement; or (c) any manufacturing defect of the Manufactured Products manufactured by CCT or on its behalf; in each case except for those Losses for which Alliqua has an obligation to indemnify any CCT Indemnified Parties pursuant to Section 7.2 of the License Agreement.

7.2 Alliqua Indemnification. Subject to the procedures set forth in Section 7.3, Alliqua shall indemnify CCT, its Affiliates and its and their respective directors, officers, employees and agents (the “ CCT Indemnified Parties ”), and defend and save each of them harmless, from and against any and all Losses incurred by any of them in connection with any Third Party Claims in connection with, arising from or occurring as a result of: (a) the breach or inaccuracy of any representation or warranty made by Alliqua in this Agreement or the Quality Agreement; (b) the use of any and all Promotional Materials; (c) the breach by Alliqua of any of its obligations under this Agreement or the Quality Agreement; or (d) any Manufactured Products manufactured by Alliqua or on its behalf by any Person other than CCT, in each case except for those Losses for which CCT has an obligation to indemnify any Alliqua Indemnified Parties pursuant to Section 7.1 or the License Agreement.

- 12 -

7.3 Indemnification Procedures. The Party claiming indemnity under this Article 7 (the “ Indemnified Party ”) shall give written notice to the Party from whom indemnity is being sought (the “ Indemnifying Party ”) promptly after learning of such Claim. The Indemnifying Party shall have the right to assume and conduct the defense of the Claim with counsel of its choice, and the Indemnified Party may participate in and monitor such defense with counsel of its own choosing at its sole expense. The Indemnified Party shall provide the Indemnifying Party with reasonable assistance, at the Indemnifying Party's expense, in connection with the defense of the Claim for which indemnity is being sought. Each Party shall not settle or compromise any Claim without the prior written consent of the other Party, which consent shall not be unreasonably withheld, delayed or conditioned. If the Parties cannot agree as to the application of the foregoing Sections 7.1 and 7.2, each may conduct separate defenses of the Claim, and each Party reserves the right to claim indemnity from the other in accordance with this Article 7 upon the resolution of the underlying Claim.

7.4 Limitation of Liability. NEITHER PARTY SHALL BE LIABLE FOR ANY SPECIAL, CONSEQUENTIAL, INCIDENTAL, PUNITIVE, OR INDIRECT DAMAGES, INCLUDING LOST PROFITS, ARISING FROM OR RELATING TO ANY BREACH OF THIS AGREEMENT EXCEPT FOR FRAUD OR WILLFUL MISCONDUCT, BREACH OF EITHER PARTY'S CONFIDENTIALITY OBLIGATIONS, A PARTY'S INDEMNIFICATION OBLIGATIONS, A BREACH OF EACH PARTY'S EXCLUSIVITY OBLIGATIONS OR A BREACH OF THE LICENSE GRANTS, REGARDLESS OF ANY NOTICE OF THE POSSIBILITY OF SUCH DAMAGES; PROVIDED, HOWEVER, THAT ANY DAMAGES CLAIMED BY OR PAID TO A THIRD PARTY IN A THIRD PARTY ACTION SHALL NOT BE CONSIDERED SPECIAL, CONSEQUENTIAL, INCIDENTAL, PUNITIVE, OR INDIRECT DAMAGES FOR PURPOSES OF THIS AGREEMENT.

7.5 Insurance. Each Party shall, at all times during the Term of this Agreement and for five (5) years thereafter, obtain and maintain at its own expense the following types of insurance, with limits of liability not less than those specified below:

(a) Commercial general liability insurance against claims for bodily injury and property damage which shall include contractual coverage and product liability coverage, with limits of not less than $[****] per occurrence and in the aggregate. The other Party, its officers, directors, representatives and agents shall be named as additional insureds.

(b) Workers compensation and employers' liability with limits to comply with the statutory requirements of the state(s) in which the Agreement is to be performed. The policy shall include employers' liability for not less than $[****] per accident.

All policies shall be issued by insurance companies with an A.M. Best's rating of Class A-:V (or its equivalent) or higher status. Each Party shall deliver certificates of insurance evidencing coverage to the other Party promptly after the execution of this Agreement and annually thereafter. All policies provided for herein shall expressly provide that such policies shall not be cancelled, terminated or altered without at least thirty (30) days prior written notice to the insured Party, and each insuring Party shall immediately notify the insured Party in the event that a policy provided for herein is cancelled, terminated or altered.

- 13 -

ARTICLE 8
CONFIDENTIAL INFORMATION

8.1 Confidentiality . During the Term and for a period of five (5) years thereafter, each Party shall maintain all Confidential Information of the other Party in trust and confidence and shall not, without the written consent of the other Party, disclose any Confidential Information of the other Party to any Third Party or use any Confidential Information of the other Party for any purpose other than as necessary in connection with the exercise of rights or discharge of obligations under this Agreement. The confidentiality obligations of this Section 8.1 shall not apply to Confidential Information to the extent that the receiving Party can establish by competent evidence that such Confidential Information: (a) is publicly known prior or subsequent to disclosure without breach of confidentiality obligations by such Party or its employees, consultants or agents; (b) was in such Party’s possession at the time of disclosure without any restrictions on further disclosure; (c) is received by such receiving Party, without any restrictions on further disclosure, from a Third Party who has the lawful right to disclose it; or (d) is independently developed by employees or agents of the receiving Party who had no access to the disclosing Party’s Confidential Information.

8.2 Authorized Disclosure . Nothing herein shall preclude a Party from disclosing the Confidential Information of the other Party to the extent:

(a) such disclosure is reasonably necessary (i) for the filing or prosecuting of Patents as contemplated by the License Agreement; (ii) to comply with the requirement of Regulatory Authorities with respect to obtaining and maintaining Regulatory Clearance and/or Approval (or any pricing and reimbursement approvals) of any Manufactured Product; or (iii) for prosecuting or defending litigations as contemplated by the License Agreement;

(b) such disclosure is reasonably necessary to its employees, agents, consultants or contractors on a need-to-know basis for the sole purpose of performing its obligations or exercising its rights under this Agreement; provided that in each case, the disclosees are bound by written obligations of confidentiality and non-use consistent with those contained in this Agreement;

(c) such disclosure is reasonably necessary to any bona fide potential or actual investor, acquiror, merger partner, or other financial or commercial partner for the sole purpose of evaluating an actual or potential investment, acquisition or other business relationship; provided that in each case, the disclosees are bound by written obligations of confidentiality and non-use consistent with those contained in this Agreement;

(d) such disclosure is reasonably necessary to comply with applicable Laws, including regulations promulgated by applicable security exchanges, a valid order of a court of competent jurisdiction, administrative subpoena or order.

Notwithstanding the foregoing, in the event a Party is required to make a disclosure of the other Party’s Confidential Information pursuant to any of Sections 8.2(a) through 8.2(d), such Party shall promptly notify the other Party of such required disclosure and shall use reasonable efforts to obtain, or to assist the other Party in obtaining, a protective order preventing or limiting the required disclosure.

- 14 -

8.3 Return of Confidential Information . Promptly after the termination or expiration of this Agreement for any reason, each Party shall return to the other Party all tangible manifestations of such other Party’s Confidential Information at that time in the possession of the receiving Party.

8.4 Publicity; Terms of the Agreement; Confidential Treatment .

(a) The Parties agree that the terms of this Agreement (including without limitation any exhibits and schedules hereto) shall be considered Confidential Information of each Party, subject to the special authorized disclosure provisions set forth in Section 8.2 and this Section 8.4.

(b) If either Party desires to make a public announcement concerning the material terms of this Agreement, such Party shall give reasonable prior advance notice of the proposed text of such announcement to the other Party for its prior review and approval (except as otherwise provided herein), such approval not to be unreasonably withheld, conditioned or delayed. A Party commenting on such a proposed press release shall provide its comments, if any, within three (3) Business Days after receiving the press release for review. In addition, to the extent required by applicable Laws, including regulations promulgated by applicable security exchanges, each Party shall have the right to make a press release announcing the achievement of each milestone under this Agreement as it is achieved, and the achievements of Regulatory Clearances and/or Approvals in the Territory as they occur, subject to the other Party’s consent as to form and substance of such announcement, which shall not be unreasonably withheld, conditioned or delayed. In relation to the other Party’s review and approval of such an announcement, such other Party may make specific, reasonable comments on such proposed press release within the prescribed time for commentary, but shall not withhold its consent to disclosure of the information that the relevant milestone has been achieved and triggered a payment hereunder. Neither Party shall be required to seek the permission of the other Party to repeat any information regarding the terms of this Agreement that has already been publicly disclosed by such Party, or by the other Party, in accordance with this Section 8.4, provided such information remains accurate as of such time.

(c) In addition, the Parties acknowledge that either or both Parties may be obligated to file under applicable law and regulation a copy of this Agreement with the USA Securities and Exchange Commission or similar stock exchange authorities or other governmental authorities. Each Party shall be entitled to make such a required filing; provided, however, that it requests confidential treatment of the commercial terms and sensitive technical terms hereof and thereof to the extent such confidential treatment is reasonably available to such Party. In the event of any such filing, each Party shall provide the other Party with a copy of this Agreement marked to show provisions for which such Party intends to seek confidential treatment and shall reasonably consider and incorporate the other Party’s comments thereon to the extent consistent with the legal requirements, with respect to the filing Party, governing disclosure of material agreements and material information that must be publicly filed.

- 15 -

8.5 Technical Publication. Neither Party may publish peer reviewed manuscripts or give other forms of public disclosure such as abstracts and media presentations (such disclosure collectively, for purposes of this Section 8.5, “ publication ”), of results of studies carried out under this Agreement, without the opportunity for prior review by the other Party, except to the extent required by applicable Laws. A Party seeking publication shall provide the other Party the opportunity to review and comment on any proposed publication that relates to the Manufactured Product at least thirty (30) days (or at least ten (10) days in the case of abstracts and media presentations) prior to its intended submission for publication. The other Party shall provide the Party seeking publication with its comments in writing, if any, within twenty (20) days (or within five (5) days in the case of abstracts and media presentations) after receipt of such proposed publication. The Party seeking publication shall consider in good faith any comments thereto provided by the other Party and shall comply with the other Party’s reasonable request to remove any and all of such other Party’s Confidential Information from the proposed publication. In addition, the Party seeking publication shall delay the submission for a period up to sixty (60) days in the event that the other Party can demonstrate reasonable need for such delay in order to accommodate the preparation and filing of a patent application. If the other Party fails to provide its comments to the Party seeking publication within such twenty (20) day period (or five (5) day period, as the case may be), such other Party shall be deemed not to have any comments, and the Party seeking publication shall be free to publish in accordance with this Section 8.5 after the thirty (30) day period (or ten (10) day period, as the case may be) has elapsed. The Party seeking publication shall provide the other Party a copy of the publication at the time of the submission. Each Party agrees to acknowledge the contributions of the other Party and its employees in all publications as scientifically appropriate.

8.6 Equitable Relief . Each Party acknowledges that its breach of Article 8 of this Agreement may cause irreparable injury to the other Party for which monetary damages may not be an adequate remedy. Therefore, each Party shall be entitled to seek injunctive and other appropriate equitable relief to prevent or curtail any actual or threatened breach of the obligations relating to Confidential Information set forth in this Article 8 by the other Party. The rights and remedies provided to each Party in this Article 8 are cumulative and in addition to any other rights and remedies available to such Party at law or in equity.

ARTICLE 9
TERM AND TERMINATION

9.1 Term. The term of this Agreement shall commence on the Effective Date and shall continue until this Agreement is terminated pursuant to this ARTICLE 9 (the “ Term ”).

9.2 Termination. This Agreement may be terminated as follows:

(a) By CCT upon six months’ prior written notice to Alliqua.

(b) By Alliqua upon [****] prior written notice to CCT if, on at least [****] occasions within any twelve (12) month period, CCT fails to deliver at least [****]% of any Manufactured Products specified in a Firm Order conforming to the provisions of Schedule 2.2, subsection (c) by the required delivery date specified therein and in conformity with the applicable Specifications.

- 16 -

(c) By either Party immediately upon written notice to the other Party if the other Party materially breaches its obligations under this Agreement and, after receiving written notice identifying such material breach in reasonable detail, fails to cure such material breach within sixty (60) days from the date of such notice. If the alleged breaching Party disputes in good faith the existence or materiality of a breach specified in a notice provided by the other Party in accordance with this Section 9.2(c), and such alleged breaching Party provides the other Party notice of such dispute within the applicable cure period, then the non-breaching Party shall not have the right to terminate this Agreement under this Section 9.2(c) unless and until an arbitrator, in accordance with Article 13 of the License Agreement, has determined that the alleged breaching Party has materially breached the Agreement and such breaching Party fails to cure such breach within the applicable cure period (measured as commencing after the arbitrator’s decision). It is understood and agreed that during the pendency of such dispute, all of the terms and conditions of this Agreement shall remain in effect and the Parties shall continue to perform all of their respective obligations hereunder.

(d) To the extent permitted under applicable Laws, if at any time during the Term of this Agreement, an Event of Bankruptcy (as defined below) relating to either Party (the “ Bankrupt Party ”) occurs, the other Party (the “ Non-Bankrupt Party ”) shall have, in addition to all other legal and equitable rights and remedies available hereunder, the option to terminate this Agreement upon sixty (60) days written notice to the Bankrupt Party. It is agreed and understood that if the Non-Bankrupt Party does not elect to terminate this Agreement upon the occurrence of an Event of Bankruptcy, except as may otherwise be agreed with the trustee or receiver appointed to manage the affairs of the Bankrupt Party, the Non-Bankrupt Party shall continue to make all payments required of it under this Agreement as if the Event of Bankruptcy had not occurred, and the Bankrupt Party shall not have the right to terminate any license granted herein. The term “ Event of Bankruptcy ” means: (a) filing, in any court or agency pursuant to any statute or regulation of any state or country, (i) a petition in bankruptcy or insolvency, (ii) for reorganization or (iii) for the appointment of (or for an arrangement for the appointment of) a receiver or trustee of the Bankrupt Party or of its assets; (b) with respect to the Bankrupt Party, being served with an involuntary petition filed in any insolvency proceeding, which such petition is not dismissed within sixty (60) days after the filing thereof; (c) proposing or being a party to any dissolution or liquidation when insolvent; or (d) making an assignment for the benefit of creditors. Without limitation, the Bankrupt Party’s rights under this Agreement shall include those rights afforded by 11 USAC. § 365(n) of the United States Bankruptcy Code (the “ Bankruptcy Code ”) and any successor thereto. If the bankruptcy trustee of a Bankrupt Party as a debtor or debtor-in-possession rejects this Agreement under 11 USAC. § 365(o) of the Bankruptcy Code, the Non-Bankrupt Party may elect to retain its rights licensed from the Bankrupt Party hereunder (and any other supplementary agreements hereto) for the duration of this Agreement and avail itself of all rights and remedies to the full extent contemplated by this Agreement and 11 USAC. § 365(n) of the Bankruptcy Code, and any other relevant Laws..

- 17 -

(e) This Agreement shall automatically terminate upon expiration or termination of the License Agreement.

9.3 Effects of Termination.

(a) Upon termination of this Agreement for any reason, all submitted Firm Orders for Manufactured Products shall be delivered and paid for in accordance with Article 2.

(b) Termination or expiration of this Agreement for any reason shall be without prejudice to any rights that shall have accrued to the benefit of a Party prior to such termination or expiration.

(c) Section 3.11, this Section 9.3 and Articles 1, 4, 5, 6, 7, 8 and 10 shall survive expiration or termination of this Agreement for any reason; Schedule 2.2, subsection (h) and Section 2.4 shall survive a termination of this Agreement pursuant to Section 9.2(a) or (b); and, with respect to Firm Orders submitted and/or filled after termination of this Agreement pursuant to Schedule 2.2, subsection (h), the provisions of this Agreement otherwise applicable to the Manufactured Products that are the subject of such Firm Orders shall survive termination of this Agreement.

ARTICLE 10
GENERAL PROVISIONS

10.1 Entire Agreement; Amendment. This Agreement, together with the exhibits and schedules hereto, which are hereby incorporated herein, represents the entire agreement and understanding between the Parties with respect to its subject matter and supersedes and terminates any prior and/or contemporaneous discussions, representations or agreements, whether written or oral, of the Parties regarding the subject matter hereto, and supersedes, as of the Effective Date, all prior and contemporaneous agreements and understandings between the Parties with respect to the subject matter hereof (including for the Prior CDA). There are no covenants, promises, agreements, warranties, representations, conditions or understandings, either oral or written, between the Parties other than as are set forth in this Agreement. Amendments or changes to this Agreement shall be valid and binding only if in writing and signed by duly authorized representatives of the Parties.

10.2 Force Majeure. Both Parties shall be excused from the performance of their obligations under this Agreement to the extent that such performance is prevented by force majeure and the nonperforming Party promptly provides notice of the prevention to the other Party. Such excuse shall be continued so long as the condition constituting force majeure continues and the nonperforming Party takes reasonable efforts to remove the condition. For purposes of this Agreement, force majeure shall mean conditions beyond the control of the Parties, including an act of God, war, civil commotion, terrorist act, labor strike or lock-out, epidemic, failure or default of public utilities or common carriers, destruction of production facilities or materials by fire, earthquake, storm or like catastrophe, and failure of plant or machinery (provided that such failure could not have been prevented by the exercise of skill, diligence, and prudence that would be reasonably and ordinarily expected from a skilled and experienced person engaged in the same type of undertaking under the same or similar circumstances). If a force majeure persists for more than ninety (90) days, then the Parties shall discuss in good faith the modification of the Parties’ obligations under this Agreement in order to mitigate the delays caused by such force majeure.

- 18 -

10.3 Notices. Any notice required or permitted to be given under this Agreement shall be in writing, shall specifically refer to this Agreement, and shall be addressed to the appropriate Party at the address specified below or such other address as may be specified by such Party in writing in accordance with this Section 10.3, and shall be deemed to have been given for all purposes (a) when received, if hand-delivered or sent by confirmed facsimile or a reputable courier service, or (b) five (5) Business Days after mailing, if mailed by first class certified or registered airmail, postage prepaid, return receipt requested.

If to CCT:

Anthrogenesis Corporation, d/b/a Celgene Cellular Therapeutics

Attn.: Chief Executive Officer

33 Technology Drive Warren, NJ 07059-5148

Fax: [****]

With a copy to (which shall not constitute notice):

Proskauer Rose LLP

Eleven Times Square

New York, NY 10036

Attn: Robert A. Cantone, Esq.

Fax No.: (212) 969-2900

and

Celgene Corporation

86 Morris Avenue

Summit, NJ 07901

Attention: General Counsel

Fax: [****]

If to Alliqua:

Alliqua, Inc.

2150 Cabot Boulevard West

Langhorne, Pennsylvania 19047

Attention: Chief Executive Officer

Fax No.: [****]

With a copy to (which shall not constitute notice):

Lowenstein Sandler LLP

65 Livingston Avenue

Roseland, New Jersey 07068

Attention: Michael Lerner, Esq.

Fax No.: (973) 597-6395

- 19 -

10.4 No Strict Construction; Headings. This Agreement has been prepared jointly by the Parties and shall not be strictly construed against either Party. Ambiguities, if any, in this Agreement shall not be construed against any Party, irrespective of which Party may be deemed to have authored the ambiguous provision. The headings of each Article and Section in this Agreement have been inserted for convenience of reference only and are not intended to limit or expand on the meaning of the language contained in the particular Article or Section. Except where the context otherwise requires, the use of any gender shall be applicable to all genders, and the word “or” is used in the inclusive sense (and/or). The term “including” as used herein means including, without limiting the generality of any description preceding such term.

10.5 Assignment. Neither Party may assign this Agreement without the prior written consent of the other Party, such consent not to be unreasonably withheld, conditioned or delayed; provided, however, that either Party may assign this Agreement without the consent of the other Party, effective upon written notice to the other Party thereof, to (i) an Affiliate of such Party, provided that the Party hereunder who assigns this Agreement agrees in writing to continue to be bound by and subject to the terms and conditions of this Agreement and (ii) any Person who acquires all or substantially all of such Party’s assets or that is the surviving entity in a merger, recapitalization, combination or other similar transaction with such assigning Party and who agrees in writing to be bound by and subject to the terms and conditions of this Agreement. Further, CCT may assign without Alliqua’s consent its rights to payments received under this Agreement. Any permitted assignment shall be binding on the successors of the assigning Party. Any attempted or purported assignment in violation of this Section 10.5 shall be null and void.

10.6 Performance by Affiliates. Each Party may discharge any obligations and exercise any right hereunder through any of its Affiliates. Each Party hereby guarantees the performance by its Affiliates of such Party’s obligations under this Agreement, and shall cause its Affiliates to comply with the provisions of this Agreement in connection with such performance. Any breach by a Party’s Affiliate of any of such Party’s obligations under this Agreement shall be deemed a breach by such Party, and the other Party may proceed directly against such Party without any obligation to first proceed against such Party’s Affiliate.

10.7 Further Actions. Each Party shall execute, acknowledge and deliver such further instruments, and to do all such other acts, as may be necessary or appropriate in order to carry out the purposes and intent of this Agreement.

10.8 Severability. If any provision of this Agreement is found by a court of competent jurisdiction to be unenforceable, then such provision shall be construed, to the extent feasible, so as to render the provision enforceable, and if no feasible interpretation would save such provision, it shall be severed from the remainder of this Agreement. The remainder of this Agreement shall remain in full force and effect, unless the severed provision is essential and material to the rights or benefits received by either Party. In such event, the Parties shall negotiate, in good faith, and substitute a valid and enforceable provision or agreement that most nearly implements the Parties’ intent in entering into this Agreement.

- 20 -

10.9 No Waiver. No provision of this Agreement can be waived except by the express written consent of the Party waiving compliance. Except as specifically provided for herein, the waiver from time to time by either Party of any of its rights or its failure to exercise any remedy shall not operate or be construed as a continuing waiver of same or of any other of such Party’s rights or remedies provided in this Agreement.

10.10 Independent Contractors. For all purposes under this Agreement, Alliqua and CCT and their respective Affiliates are independent contractors with respect to each other, and shall not be deemed to be an employee, agent, partner or legal representative of the other Party. This Agreement does not grant any Party or its employees, consultants or agents any authority (express or implied) to do any of the following without the prior express written consent of the other Party: create or assume any obligation; enter into any agreement; make any representation or warranty; serve or accept legal process on behalf of the other Party; settle any claim by or against the other Party; or bind or otherwise render the other liable in any way.

10.11 Governing Law. This Agreement shall be governed by the laws of the state of New York, without regard to its choice of law provisions that would require the application of the laws of a different jurisdiction. The Parties hereby irrevocably submit to the jurisdiction of the state and federal courts sitting in the County and State of New York for the adjudication of disputes arising out of or relating to this Agreement.

10.12 Counterparts. This Agreement may be executed in two (2) or more counterparts, each of which shall be deemed an original but all of which together shall constitute the same legal instrument. Facsimile or PDF execution and delivery of this Agreement by any Party shall constitute a legal, valid and binding execution and delivery of this Agreement by such Party. The Parties to this document agree that a copy of the original signature (including an electronic copy) may be used for any and all purposes for which the original signature may have been used. The Parties agree they will have no rights to challenge the use or authenticity of this document based solely on the absence of an original signature.

[Signature page follows.]

- 21 -

IN WITNESS WHEREOF , each of the Parties has caused this Agreement to be executed in duplicate, as of the Effective Date, by its duly authorized officer or representative.

ANTHROGENESIS CORPORATION		ALLIQUA, INC.

By:	/s/ Perry Karsen	By:	/s/ David Johnson
Name: Perry Karsen		Name: David Johnson
Title: Chief Executive Officer		Title: Chief Executive Officer

[Signature Page to Supply Agreement]

SCHEDULE A

SPECIFICATIONS

[****]

SCHEDULE 2.2

(a) Alliqua shall submit to CCT as soon as practicable after the Effective Date, and in any event not later than the thirtieth (30 ^th ) day after the date of this Agreement, and thereafter no later than the fifth (5th) Business Day of every month during the Term:

(i) a three (3) year rolling forecast (“ Long Range Forecast ”) organized by Manufactured Product stock keeping unit and by quarterly periods, setting forth the quantities of each Manufactured Product that Alliqua expects to purchase from CCT during the three (3) years commencing with the beginning of said month, and

(ii) a twelve (12)-month rolling forecast (“ Forecast ”) organized by Manufactured Product stock keeping unit and by months, setting forth the quantities of each Manufactured Product that Alliqua expects to purchase from CCT during the twelve (12)-month period commencing with the beginning of said month.

(b) Alliqua shall make all Forecasts and Long Range Forecasts in good faith given market and other information available to Alliqua. Each Forecast shall constitute a binding commitment of Alliqua to purchase at least the percentages of Manufactured Products set forth below pursuant to Firm Orders issued in accordance with Subsection (c) below, notwithstanding any change in the quantity of a Manufactured Product specified in a subsequent Forecast. Except as provided in the preceding sentence, each Forecast shall be non-binding on Alliqua. Each Long Range Forecast shall be non-binding on Alliqua. Alliqua shall be required to submit Firm Orders to purchase at least that percentage of the quantity of each of the Manufactured Products specified in the Forecast as follows:

Period of the Forecast		Percentage of the aggregate amount of Manufactured Products that Alliqua is required to submit Firm Orders for during such period
[****]		[****]
[****]		[****]
[****]		[****]

(c) Alliqua shall purchase Manufactured Products solely by Firm Orders for such Manufactured Products. For a given month, CCT will accept Firm Orders for quantities of Manufactured Products, provided such Firm Orders in the aggregate do not exceed [****] of the quantity set forth in the binding portion of the Forecast most recently submitted for such month; provided, however, that if, with respect to any month, Alliqua orders any Manufactured Product in excess of [****] of the quantity set forth in the binding portion of the Forecast most recently submitted for such month, CCT shall make commercially reasonable efforts to supply such excess up to [****] of the quantity set forth in the binding portion of the Forecast most recently submitted for such month, but shall not be liable for its failure to do so. Alliqua shall specify a delivery date in each Firm Order that is at least sixty (60) days after the date on which the Firm Order is submitted to CCT. CCT shall, within five (5) Business Days after CCT receives each Firm Order submitted in accordance with the preceding two sentences, accept in writing such Firm Order. Subject to any other term or condition of this Agreement, Alliqua shall be obligated to purchase, and CCT shall be obligated to deliver by the required delivery date set forth therein, such quantities of each Manufactured Product as are set forth in each Firm Order. If Alliqua requests changes to any Firm Order previously submitted by Alliqua, including any increases or decreases in quantity of Manufactured Products, required delivery date or form of Manufactured Product, CCT shall provide Alliqua a good faith estimate of the anticipated costs of complying with such request. If Alliqua approves such estimated costs in writing, CCT shall use commercially reasonable efforts to comply with such changes but shall not be liable for its failure to do so. In the event that CCT complies with any such request, Alliqua shall reimburse CCT for its commercially reasonable, documented costs incurred in complying with such request. Notwithstanding anything to the contrary in this subsection (c), during the first six months of Manufactured Product deliveries under this Agreement, CCT shall have no obligation to deliver, nor to accept any portion of a Firm Order requiring it to deliver, more than the following maximum number of Units (by size) per month as follows:

	Maximum Deliveries of Units, by Unit Dimension
	[****]	[****]	[****]
Each of the first three months of Manufactured Product deliveries under this Agreement	[****]	[****]	[****]
Each of the fourth, fifth and sixth months of Manufactured Product deliveries under this Agreement	[****]	[****]	[****]

(d) CCT shall promptly notify Alliqua in writing if at any time CCT has reason to believe that CCT will not be able to (i) fill a Firm Order for any Manufactured Product in accordance with the delivery schedule specified therein by Alliqua and pursuant to the terms and conditions of this Agreement and the Quality Agreement, or (ii) supply Manufactured Products to Alliqua in satisfaction of the most recent Forecast, which notice in either case shall provide Alliqua with information on the extent of the expected shortfall of supply. Upon such notice of a supply shortfall, or in any event upon CCT's failure to satisfy, within the delivery time frame specified by Alliqua, a portion of the Manufactured Products ordered by Alliqua in compliance with this Agreement and the Quality Agreement, Alliqua and CCT will immediately meet and work together in good faith to identify an appropriate resolution to the supply shortfall. Any agreed resolution to the supply shortfall will be set forth in a writing executed by both Parties. Compliance by CCT with this subsection (d) shall not relieve CCT of any other obligation or liability under this Agreement, including any obligation or liability under subsections (e) or (f) below.

(e) If CCT fails to deliver at least [****] of any Manufactured Products specified in a Firm Order conforming to the provisions of Subsection (c) above by the required delivery date specified therein and in conformity with the applicable Specifications, Alliqua, at its option, may:

(i) cancel all or any portion of such Firm Order with respect to such Manufactured Products, in which event Alliqua shall have no liability with respect to the portion of such Firm Order so cancelled; or

(ii) accept late delivery of all or any portion of such Firm Order with respect to such Manufactured Product, in which event the Purchase Price otherwise payable by Alliqua with respect to all Manufactured Products delivered late and accepted by Alliqua under such Firm Order shall be reduced by [****].

(f) If CCT fails to deliver at least [****] of any Manufactured Products specified in a Firm Order conforming to the provisions of Subsection (c) above by the required delivery date specified therein and in conformity with the applicable Specifications, CCT shall pay to Alliqua any reasonable, documented external expenses incurred by Alliqua resulting from CCT’s breach of its obligation to deliver the full quantity of any Manufactured Product specified in such Firm Order by the required delivery date specified therein. Notwithstanding anything to the contrary in this Agreement, delivery by CCT of at least [****] of the quantity ordered will be accepted by Alliqua in full satisfaction of CCT’s obligation to supply a Firm Order. Should delivered quantities of Manufactured Product be below [****], CCT will use commercially reasonable efforts to accelerate the subsequent delivery of Manufactured Product, if so requested by Alliqua. Alliqua will be invoiced for the actual quantities shipped, adjusted as provided in Subsection (e)(ii) above. CCT will not be responsible for warehousing Manufactured Product for Alliqua. CCT will make available to Alliqua or Alliqua’s designee, as the case may be, all Manufactured Products upon release.

(g) The remedies provided for in Subsections (e) and (f) above shall be the sole remedies of Alliqua with respect to any single failure by CCT to deliver less than [****] of any Manufactured Product specified in a Firm Order conforming to the provisions of C 2.2(c) by the required delivery date specified therein and in conformity with the applicable Specifications; and the remedy provided for in Section 9.2(b) of the Agreement shall be the sole remedy of Alliqua with respect to the failure of CCT on at least [****] within any [****] period to deliver at least [****] of any Manufactured Products specified in a Firm Order conforming to the provisions of Schedule 2.2, subsection (c) by the required delivery date specified therein and in conformity with the applicable Specifications.

(h) Notwithstanding anything to the contrary in the Agreement, following termination of the Agreement pursuant to Sections 9.2(a) or (b), during the twelve (12) month period commencing on the date notice of termination is given pursuant to either of such Sections (the “ Termination Supply Period ”), Alliqua may submit Firm Orders for quantities of Manufactured Products in accordance with subsection (c) above, except that the Firm Orders for any month during the last nine (9) months of the Termination Supply Period may not exceed one hundred percent (100%) of the forecasted amount for such nine (9) months in the most recent Forecast provided by Alliqua to CCT prior to such notice of termination.

SCHEDULE 2.5

ECM PURCHASE PRICE

Purchase Price per unit of Manufactured Products, regardless of dimensions thereof: $[****]

Maximum dimension of Manufactured Products: [****]

SCHEDULE 4.1

BIOVANCE PURCHASE PRICE

Purchase Price per unit of Manufactured Products, regardless of dimensions thereof: $[****]

Maximum dimension of Manufactured Products: [****]

Exhibit 10.50

STOCK PURCHASE AGREEMENT

BY AND BETWEEN

Celgene CORPORATION

AND

ALLIQUA, INC.

NOVEMBER 14, 2013

TABLE OF CONTENTS

		PAGE

ARTICLE 1 DEFINITIONS		1

ARTICLE 2 PURCHASE AND SALE		5

2.1	Closing	5
2.2	Adjustments in Share Numbers and Prices	6
2.3	Reserve Shares	6
2.4	Concurrent Issuances	6
2.5	Closing Deliveries	6

ARTICLE 3 REPRESENTATIONS AND WARRANTIES		6

3.1	Representations and Warranties of the Company	6
3.2	Representations and Warranties of the Investor	13

ARTICLE 4 OTHER AGREEMENTS OF THE PARTIES		15

4.1	Filing of Reports	15
4.2	Board Representation and Observer Rights	15
4.3	Right Of First Offer	16
4.4	Listing of Shares	16
4.5	Use of Proceeds	16
4.6	Lock-Up	17
4.7	Public Statements	17
4.8	Additional Financing	17

ARTICLE 5 CONDITIONS		17

5.1	Conditions Precedent to the Obligations of the Investor	17
5.2	Conditions Precedent to the Obligations of the Company	18

ARTICLE 6 REGISTRATION RIGHTS		19

6.1	Piggy-Back Registration Rights	19
6.2	Registration Expenses	20

ARTICLE 7 INDEMNIFICATION		20

7.1	Indemnification by the Company	20
7.2	Indemnification by Investor	21
7.3	Conduct of Indemnification Proceedings	21

ARTICLE 8 GENERAL PROVISIONS		23

8.1	Termination	23
8.2	Fees and Expenses	23
8.3	Entire Agreement	23
8.4	Notices	24
8.5	Amendments; Waivers	24
8.6	Construction	24

- i -

8.7	Successors and Assigns	24
8.8	No Third-Party Beneficiaries	25
8.9	Governing Law; Venue; Waiver of Jury Trial	25
8.10	Survival	25
8.11	Execution	25
8.12	Severability	25
8.13	Replacement of Certificates	26
8.14	Remedies	26

Exhibit A :	Form of Warrants
Exhibit B :	Opinion of Company Counsel

- ii -

STOCK PURCHASE AGREEMENT

THIS STOCK PURCHASE AGREEMENT (this “ Agreement ”), dated as of November 14, 2013, by and between Alliqua, Inc., a Florida corporation (the “ Company ”), and Celgene Corporation, a Delaware corporation (“ Investor ”).

PREAMBLE

A. Contemporaneously with the execution and delivery of this Agreement, the Company and Anthrogenesis Corporation, a Delaware corporation doing business as Celgene Cellular Therapeutics (“ CCT ”), are entering into that certain License, Marketing and Development Agreement, dated as of the date hereof (the “ License Agreement ”), and that certain Supply Agreement, dated as of the date hereof, relating to, among other things, the development and commercialization by the Company of certain CCT products; and

B. The Investor wishes to purchase, and the Company wishes to sell, upon the terms and conditions stated in this Agreement, (a) that aggregate number of shares of the common stock, par value $0.001 per share, of the Company (the “ Common Stock ”), which is the nearest number of whole shares of Common Stock determined by dividing (x) $6,000,000 by (y) $0.082; which aggregate amount of shares shall collectively be referred to herein as the “ Common Shares ”, and (b) five year warrants to purchase 36,585,366 shares of Common Stock at an exercise price of $0.13 per share (the “ Initial Warrants ”) in the form attached hereto as Exhibit A .

NOW, THEREFORE, in consideration of the mutual covenants and agreements contained in this Agreement, and for other good and valuable consideration, the receipt and adequacy of which are hereby acknowledged, the Company and the Investor agree as follows:

ARTICLE 1
DEFINITIONS

In addition to the terms defined elsewhere in this Agreement, the following terms have the meanings indicated:

“ Agreement ” has the meaning set forth in the Preamble.

“ Business Day ” means any day (other than a Saturday, Sunday or a legal holiday) on which banks are open for general business in New York, New York.

“ Board ” has the meaning set forth in Section 4.2.

“ Additional Warrants ” has the meaning set forth in Section 4.8.

“ Agreement ” has the meaning set forth in the Preamble.

“ CCT ” has the meaning set forth in the Preamble.

“ Closing ” means the closing of the purchase and sale of the Common Shares pursuant to Section 2.1.

“ Closing Date ” means the date and time of the Closing which, subject to the satisfaction or waiver of the conditions set forth in Article 5, shall take place at 9:00 a.m. EST on the date that is five (5) Business Days following the date hereof, or on such other date and time as is mutually agreed to by the Company and the Investor .

“Company” has the meaning set forth in the Preamble.

“ Company Counsel ” means Lowenstein Sandler LLP, counsel to the Company.

“ Common Shares ” has the meaning set forth in the Preamble .

“ Common Stock ” has the meaning set forth in the Preamble .

“ Competitor ” means any Person that, during the Term of the License Agreement, Commercializes or Develops a Competing Product. For purposes of this definition, the terms “Commercializes”, “Competing Product”, Develops”, and “Term” shall have the meanings ascribed to such terms in the License Agreement.

“ Convertible Securities ” means any stock or securities (other than Options) convertible into or exercisable or exchangeable for Common Stock.

“ Disclosure Materials ” has the meaning set forth in Section 3.1(g).

“ Equity Securities ” means any all shares of Common Stock and any securities of the Company convertible into, or exchangeable or exercisable for, such shares, and options, warrants or other rights to acquire such shares.

“ Equity Financing ” has the meaning set forth in Section 4.8.

“ Exchange Act ” means the Securities Exchange Act of 1934, as amended.

“ Excluded Securities ” means Equity Securities issued in connection with: (a) a grant to any existing or prospective consultants, employees, officers or directors pursuant to any stock option, employee stock purchase or similar equity-based plans or other compensation agreements; (b) the conversion or exchange of any securities of the Company into shares of Common Stock, or the exercise of any options, warrants or other rights to acquire such shares; (c) any acquisition by the Company of the stock, assets, properties or business of any Person; (d) any merger, consolidation or other business combination involving the Company; (e) a bona fide firm commitment underwritten public offering; (f) any stock split, stock dividend or any similar recapitalization, or (g) up to an aggregate of $6,000,000 of Common Stock issued to Persons other than the Investor and its Affiliates within 30 days of the date hereof, on terms and conditions no less favorable to the Company than those offered to the Investor hereunder.

- 2 -

“ First Commercial Sale ” means the First Commercial Sale of ECMs. For purposes of this definition, the terms “First Commercial Sale”, and “ECMs”, shall have the meanings ascribed to such terms in the License Agreement.

“ GAAP ” has the meaning set forth in Section 3.1(g).

“ Indemnified Party ” has the meaning set forth in Section 7.3.

“ Indemnifying Party ” has the meaning set forth in Section 7.3.

“ Initial Warrants ” has the meaning set forth in the Preamble.

“ Intellectual Property Rights ” has the meaning set forth in Section 3.1(q).

“ Investor ” has the meaning set forth in the Preamble.

“ Investor Director ” has the meaning set forth in Section 4.2.

“ Investor Observer ” has the meaning set forth in Section 4.2.

“ knowledge” of the Company means with respect to any statement made to the knowledge of the Company, that the statement is based upon the actual knowledge, after reasonable due inquiry, of any executive officer of the Company as of the date of this Agreement.

“ License Agreement ” has the meaning set forth in the Preamble .

“ Lien ” means any lien, charge, claim, security interest, encumbrance, right of first refusal or other restriction.

“ Losses ” means any and all losses, claims, damages, liabilities, settlement costs and expenses, including, without limitation, reasonable attorneys’ fees.

“ Material Adverse Effect ” means (i) a material adverse effect on the results of operations, assets, business or financial condition of the Company and the Subsidiaries taken as a whole on a consolidated basis or (ii) material and adverse effect on the legality, validity or enforceability of this Agreement, provided, that none of the following alone shall be deemed, in and of itself, to constitute a Material Adverse Effect: (x) a change in the market price or trading volume of the Common Stock, (y) changes in general economic conditions or changes affecting the industry in which the Company operates generally (as opposed to Company-specific changes) so long as such changes do not have a disproportionate effect on the Company and the Subsidiaries taken as a whole or (z) effects resulting from or relating to the announcement or disclosure of the sale of the Common Shares or other transactions contemplated by, or being taken in connection with, this Agreement.

- 3 -

“ Material Permits ” has the meaning set forth in Section 3.1(r).

“ New Securities ” has the meaning set forth in Section 4.3.

“ Options ” means any outstanding rights, warrants or options to subscribe for or purchase Common Stock or Convertible Securities.

“ Person ” means an individual, a limited liability company, a partnership, a joint venture, a corporation, a trust, an unincorporated organization, a government or any department or agency thereof and any other legal entity.

“ Proceeding ” means an action, claim, suit, investigation or proceeding (including, without limitation, a partial proceeding, such as a deposition), whether commenced or threatened in writing.

“ Prospectus ” means the prospectus included in the Registration Statement (including, without limitation, a prospectus that includes any information previously omitted from a prospectus filed as part of an effective registration statement in reliance upon Rule 430A promulgated under the Securities Act), as amended or supplemented by any prospectus supplement, with respect to the terms of the offering of any portion of the Registrable Securities covered by the Registration Statement, and all other amendments and supplements to the Prospectus including post-effective amendments, and all material incorporated by reference or deemed to be incorporated by reference in such Prospectus.

“ Purchase Price ” means the aggregate purchase price to be paid by the Investor for the Common Shares determined by multiplying (i) the number of shares of Common Stock comprising the Common Shares by (ii) $0.082.

“ Registrable Securities ” means the Common Shares and the Warrant Shares (but with respect to the Warrant Shares issuable under the Additional Warrant, from and after the issuance of the Additional Warrant), together with any securities issued or issuable upon any stock split, dividend or other distribution, recapitalization or similar event with respect to the foregoing.

“ Registration Statement ” means any registration statement filed under Article VI, including (in each case) the Prospectus, amendments and supplements to such registration statement or Prospectus, including pre- and post-effective amendments, all exhibits thereto, and all material incorporated by reference or deemed to be incorporated by reference in such registration statement.

“ Rule 144 ,” “ Rule 415 ,” and “ Rule 424 ” means Rule 144, Rule 415 and Rule 424, respectively, promulgated by the SEC pursuant to the Securities Act, as such Rules may be amended from time to time, or any similar rule or regulation hereafter adopted by the SEC having substantially the same effect as such Rule.

“SEC” means the United States Securities and Exchange Commission.

“ SEC Reports ” has the meaning set forth in Section 3.1(g).

“ Securities Act ” means the Securities Act of 1933, as amended .

- 4 -

“ Shares ” means shares of the Company’s Common Stock.

“ Short Sales ” means all “short sales” as defined in Rule 200 promulgated under Regulation SHO under the Exchange Act and all types of direct and indirect stock pledges, forward sale contracts, options, puts, calls, swaps, derivatives and similar arrangements.

“ Subsidiary ” means any entity in which the Company, directly or indirectly, owns capital stock or holds an equity or similar interest .

“ Supply Agreement ” has the meaning set forth in the Preamble .

“ Trading Day ” means (i) a day on which the Common Stock is traded on a Trading Market (other than the OTC Bulletin Board), or (ii) if the Common Stock is not listed or quoted on a Trading Market (other than the OTC Bulletin Board), a day on which the Common Stock is traded in the over-the-counter market, as reported by the OTC Bulletin Board, or (iii) if the Common Stock is not listed or quoted on any Trading Market, a day on which the Common Stock is quoted in the over-the-counter market as reported by the Pink Sheets LLC (or any similar organization or agency succeeding to its functions of reporting prices); provided, that in the event that the Common Stock is not listed or quoted as set forth in (i), (ii) and (iii) hereof, then Trading Day shall mean a Business Day.

“ Trading Market ” means whichever of the New York Stock Exchange, the NYSE/Amex, the NASDAQ Global Select Market, the NASDAQ Global Market, the NASDAQ Capital Market or OTC Bulletin Board on which the Common Stock is listed or quoted for trading on the date in question.

“ Transaction ” has the meaning set forth in Section 3.2(h).

“ Transaction Documents ” means this Agreement, the License Agreement, the Supply Agreement, the Warrants and the schedules and exhibits referred to herein.

“ Transfer Agent ” means Action Stock Transfer Corporation, or any successor transfer agent for the Company.

“ Warrant Shares ” has the meaning set forth in Section 2.3.

“ Warrants ” has the meaning set forth in Section 4.8.

ARTICLE 2
PURCHASE AND SALE

2.1 Closing. Subject to the terms and conditions set forth in this Agreement, at the Closing the Company shall issue and sell to the Investor, and the Investor shall purchase from the Company, (a) the Common Shares at a purchase price of $0.082 per Common Share, and (b) the Initial Warrants. The date and time of the Closing shall be 11:00 a.m., New York City Time, on the Closing Date. The Closing shall take place at the offices of Company Counsel.

- 5 -

2.2 Adjustments in Share Numbers and Prices. In the event of any stock split, subdivision, dividend or distribution payable in shares of Common Stock (or other securities or rights convertible into, or entitling the holder thereof to receive directly or indirectly shares of Common Stock), combination or other similar recapitalization or event occurring after the date hereof, each reference in this Agreement to the number of Common Shares and the price per Common Share shall be amended to appropriately account for such event.

2.3 Reserve Shares . The Company has authorized and has reserved and covenants to continue to reserve, free of preemptive rights and other similar contractual rights of stockholders, a number of shares of Common Stock equal to the number of shares of Common Stock issuable upon the exercise of the Warrants (the “ Warrant Shares ”).

2.4 Concurrent Issuances . The Company shall not, within 30 calendar days of the execution of this Agreement, issue any New Securities to any person at a lower per share purchase price than the per share price to be paid by the Investor pursuant to this Agreement, or on other terms and conditions more favorable to such person than the terms and conditions applicable to the Investor pursuant to this Agreement.

2.5 Closing Deliveries .

(a) At the Closing, the Company shall deliver or cause to be delivered to the Investor the following:

(i) a copy of the Company’s irrevocable instructions to the Transfer Agent instructing the Transfer Agent to promptly deliver one or more stock certificates, free and clear of all restrictive and other legends (except for a customary legend to the effect that the Common Shares have not been registered under the Securities Act), evidencing the Common Shares, registered in the name of the Investor;

(ii) a legal opinion of Company Counsel, in the form of Exhibit B , executed by such counsel and delivered to the Investor.

(b) At the Closing, the Investor shall deliver or cause to be delivered to the Company the Purchase Price in United States dollars by wire transfer to an account designated in writing to the Investor by the Company for such purpose.

ARTICLE 3
REPRESENTATIONS AND WARRANTIES

3.1 Representations and Warranties of the Company. The Company hereby represents and warrants to the Investor that, except as set forth in the SEC Reports or in the Schedules delivered concurrently herewith:

- 6 -

(a) Organization and Qualification . The Company is an entity duly organized, validly existing and in good standing under the laws of the State of Florida, with the requisite legal authority to own and use its properties and assets and to carry on its business as currently conducted. Each Subsidiary is an entity duly organized, validly existing and in good standing under the laws of the jurisdiction of its incorporation or formation. Neither the Company nor any Subsidiary is in violation of any of the provisions of its respective certificate or articles of incorporation, formation, bylaws or other organizational or charter documents. The Company and each Subsidiary is duly qualified to do business and is in good standing as a foreign corporation or other entity in each jurisdiction in which the nature of the business conducted or property owned by it makes such qualification necessary, except where the failure to be so qualified or in good standing, as the case may be, would not, individually or in the aggregate, reasonably be expected to result in a Material Adverse Effect.

(b) Subsidiaries. The Company owns or controls, directly or indirectly, all of the capital stock or comparable equity interests of each Subsidiary free and clear of any Lien, and all issued and outstanding shares of capital stock or comparable equity interest of each Subsidiary are validly issued and are fully paid, non-assessable and free of preemptive and similar rights; and the Company has no Subsidiaries other than the following corporations, partnerships, limited liability partnerships, limited liability companies, associations or other entities: (i) AquaMed Technologies, Inc., a Delaware corporation, (ii) Alliqua Biomedical, Inc. a Delaware corporation, and (iii) Hepalife Biosystems, Inc. a Nevada corporation.

(c) Authorization; Enforcement. The Company has the requisite corporate authority to enter into and to consummate the transactions contemplated by this Agreement and each of the other Transaction Documents to which it is a party and otherwise to carry out its obligations hereunder and thereunder including the issuance and sale of the Common Shares and Warrants. The execution and delivery by the Company of this Agreement and each of the other Transaction Documents to which it is party and the consummation by it of the transactions contemplated hereby and thereby have been duly authorized by all necessary corporate action on the part of the Company and no further consent or action is required by the Company, its Board of Directors or its stockholders. Each of the Transaction Documents to which to Company is party to has been duly executed by the Company and is the valid and binding obligation of the Company enforceable against the Company in accordance with its terms, except (i) as limited by general equitable principles and applicable bankruptcy, insolvency, reorganization, moratorium and other laws of general application affecting enforcement of creditors’ rights generally, and (ii) as limited by laws relating to the availability of specific performance, injunctive relief or other equitable remedies.

- 7 -

(d) No Conflicts. The execution, delivery and performance by the Company of this Agreement and the other Transaction Documents it is party to and the consummation by the Company of the transactions contemplated hereby and thereby do not, and will not, (i) conflict with or violate any provision of the Company’s certificate or articles of incorporation, bylaws or other organizational or charter documents, (ii) in any material respect, conflict with, or constitute a default (or an event that with notice or lapse of time or both would become a default) under, or give to others any rights of termination, amendment, acceleration or cancellation (with or without notice, lapse of time or both) of, any agreement, credit facility, debt or other instrument (evidencing a Company debt or otherwise) or other understanding to which the Company is a party or by which any property or asset of the Company is bound, or affected, or (iii) in any material respect, result in a violation of any law, rule, regulation, order, judgment, injunction, decree or other restriction of any court or governmental authority to which the Company is subject (including, assuming the accuracy of the representations and warranties of the Investor set forth in Section 3.2 hereof, federal and state securities laws and regulations and the rules and regulations of any self-regulatory organization to which the Company or its securities are subject, including all applicable Trading Markets), or by which any property or asset of the Company is bound or affected, except in the case of clauses (ii) and (iii) such as would not, individually or in the aggregate, have a Material Adverse Effect. Neither the Company nor any Subsidiary is as of the date hereof, nor after giving effect to the transactions contemplated hereby to occur at the Closing, will be Insolvent (as defined below). For purposes of this Section 3.1(d), “Insolvent” means, with respect to the Company or any Subsidiary (i) the present fair saleable value of such Person’s assets is less than the amount required to pay such Person’s debts and liabilities, (ii) such Person is unable to pay its debts and liabilities, subordinated, contingent or otherwise, as such debts and liabilities become absolute and matured, (iii) such Person intends to incur or believes that it will incur debts that would be beyond its ability to pay as such debts mature or (iv) such Person has unreasonably small capital with which to conduct the business in which it is engaged, as such business is now conducted and is proposed to be conducted.

(e) The Common Shares. The Common Shares are duly authorized and, when issued and paid for in accordance with this Agreement, will be duly and validly issued, fully paid and nonassessable, free and clear of all Liens (other than restrictions on transfer set forth in this Agreement or imposed by applicable securities laws) and will not be subject to preemptive or similar rights of stockholders (other than those imposed by the Investor). When the Warrant Shares are issued in accordance with the terms of the Warrants, such shares will be duly authorized, validly issued, fully paid and nonassessable, free and clear of all Liens (other than restrictions on transfer set forth in this Agreement or imposed by applicable securities laws) and will not be subject to preemptive or similar rights of stockholders (other than those imposed by the Investor).

(f) Capitalization. The aggregate number of shares and type of all authorized, issued and outstanding classes of capital stock, Options and other securities of the Company (whether or not presently convertible into or exercisable or exchangeable for shares of capital stock of the Company) is set forth on Schedule 3.1(f)(i). Schedule 3.1(f)(ii) sets forth the aggregate number of shares and type of all authorized, issued and outstanding classes of capital stock, Options and other securities of the Company (whether or not presently convertible into or exercisable or exchangeable for shares of capital stock of the Company) after taking into account the consummation of the transactions contemplated to occur on the Closing. All outstanding shares of capital stock are duly authorized, validly issued, fully paid and nonassessable and have been issued in compliance in all material respects with all applicable securities laws. Except as set forth on Schedule 3.1(f), the Company does not have outstanding any Options, script rights to subscribe to, calls or commitments of any character whatsoever relating to, or securities, rights or obligations convertible into or exercisable or exchangeable for, nor has it entered into any agreement giving any Person any right to subscribe for or acquire, any shares of Common Stock, or securities or rights convertible or exchangeable into shares of Common Stock. Except for customary adjustments as a result of stock dividends, stock splits, combinations of shares, reorganizations, recapitalizations, reclassifications or other similar events, there are no anti-dilution or price adjustment provisions contained in any security issued by the Company (or in any agreement providing rights to security holders) and the issuance and sale of the Common Shares will not obligate the Company to issue shares of Common Stock or other securities to any Person (other than the Investor) and will not result in a right of any holder of securities to adjust the exercise, conversion, exchange or reset price under such securities.

- 8 -

(g) SEC Reports; Financial Statements. The Company (i) has filed all reports required to be filed by it under the Exchange Act, including pursuant to Section 13(a) or 15(d) thereof, for the 12 months preceding the date hereof on a timely basis or has received a valid extension of such time of filing and has filed any such SEC Reports prior to the expiration of any such extension, and (ii) has filed all reports required to be filed by it under the Exchange Act, including pursuant to Section 13(a) or 15(d) thereof, for the two years preceding the date hereof. Such reports required to be filed by the Company under the Exchange Act, including pursuant to Section 13(a) or 15(d) thereof, together with the exhibits thereto and the documents incorporated by reference therein, being collectively referred to herein as the “ SEC Reports ” and, together with this Agreement and the Schedules to this Agreement, the “ Disclosure Materials ”. As of their respective dates (or, if amended or superseded by a filing prior to the Closing Date, then on the date of such filing), the SEC Reports filed by the Company complied in all material respects with the requirements of the Securities Act and the Exchange Act and the rules and regulations of the SEC promulgated thereunder, and none of the SEC Reports, when filed (or, if amended or superseded by a filing prior to the date hereof, then on the date of such filing) by the Company, contained any untrue statement of a material fact or omitted to state a material fact required to be stated therein or necessary in order to make the statements therein, in the light of the circumstances under which they were made, not misleading. The financial statements of the Company included in the SEC Reports comply in all material respects with applicable accounting requirements and the rules and regulations of the SEC with respect thereto as in effect at the time of filing (or, if amended or superseded by a filing prior to the Closing Date, then on the date of such filing). Such financial statements have been prepared in accordance with United States generally accepted accounting principles applied on a consistent basis during the periods involved (“ GAAP ”), except as may be otherwise specified in such financial statements, the notes thereto and except that unaudited financial statements may not contain all footnotes required by GAAP or may be condensed or summary statements, and fairly present in all material respects the consolidated financial position of the Company and the Subsidiaries as of and for the dates thereof and the results of operations and cash flows for the periods then ended, subject, in the case of unaudited statements, to normal, year-end audit adjustments. All material agreements to which the Company or any Subsidiary is a party or to which the property or assets of the Company or any Subsidiary are subject are included as part of or identified in the SEC Reports, to the extent such agreements are required to be included or identified pursuant to the rules and regulations of the SEC.

- 9 -

(h) Material Changes; Undisclosed Events, Liabilities or Developments; Solvency. Since the date of the latest audited financial statements included within the SEC Reports, except as specifically disclosed in the SEC Reports or as set forth in Schedule 3.1(h), (i) there has been no event, occurrence or development that, individually or in the aggregate, has had or would reasonably be expected to result in a Material Adverse Effect, (ii) neither the Company nor any Subsidiary has incurred any material liabilities other than (A) trade payables and accrued expenses incurred in the ordinary course of business consistent with past practice and (B) liabilities not required to be reflected in the Company’s financial statements pursuant to GAAP or required to be disclosed in filings made with the SEC, (iii) the Company has not altered materially its method of accounting or changed its auditors, (iv) the Company has not declared or made any dividend or distribution of cash or other property to its stockholders, in their capacities as such, or purchased, redeemed or made any agreements to purchase or redeem any shares of its capital stock (other than in connection with repurchases of unvested stock issued to employees of the Company), and (v) the Company has not issued any equity securities to any officer, director or Affiliate, except pursuant to existing Company stock-based plans. Neither the Company nor any Subsidiary has taken any steps to seek protection pursuant to any bankruptcy law nor does the Company have any knowledge or reason to believe that its creditors intend to initiate involuntary bankruptcy proceedings or any actual knowledge of any fact which would reasonably lead a creditor to do so.

(i) Absence of Litigation. There is no action, suit, claim, or Proceeding, or, to the Company’s knowledge, inquiry or investigation, before or by any court, public board, government agency, self-regulatory organization or body pending or, to the knowledge of the Company, threatened against or affecting the Company or any Subsidiary that would, individually or in the aggregate, reasonably be expected to have a Material Adverse Effect.

(j) Compliance. Except as would not, individually or in the aggregate, reasonably be expected to result in a Material Adverse Effect, (i) neither the Company nor any Subsidiary is in default under or in violation of (and no event has occurred that has not been waived that, with notice or lapse of time or both, would result in a default by the Company or any Subsidiary under), nor has the Company or any Subsidiary received written notice of a claim that it is in default under or that it is in violation of, any indenture, loan or credit agreement or any other agreement or instrument to which it is a party or by which it or any of its properties is bound (whether or not such default or violation has been waived), (ii) neither the Company nor any Subsidiary is in violation of any order of any court, arbitrator or governmental body, and (iii) neither the Company nor any Subsidiary is or has been in violation of any statute, rule or regulation of any governmental authority. The Company has not taken, in violation of applicable Law, any action designed to or that would have reasonably expected to cause or result in stabilization or manipulation of the price of the Common Stock to facilitate the sale of the Common Shares.

- 10 -

(l) Private Placement; Investment Company; U.S. Real Property Holding Corporation. Neither the Company nor any of its Affiliates nor, any Person acting on the Company’s behalf has, directly or indirectly, at any time within the past six months, made any offer or sale of any security or solicitation of any offer to buy any security under circumstances that would (i) eliminate the availability of the exemption from registration under Regulation D under the Securities Act in connection with the offer and sale by the Company of the Common Shares as contemplated hereby or (ii) cause the offering of the Common Shares pursuant hereto to be integrated with prior offerings by the Company for purposes of any applicable law, regulation or stockholder approval provisions, including, without limitation, under the rules and regulations of any Trading Market. Assuming the accuracy of the representations and warranties of the Investor set forth in Section 3.2, no registration under the Securities Act is required for the offer and sale of the Common Shares by the Company to the Investor as contemplated hereby. The Company is not required to be registered as, and is not an Affiliate of, an “investment company” within the meaning of the Investment Company Act of 1940, as amended. The Company is not required to be registered as a United States real property holding corporation within the meaning of the Foreign Investment in Real Property Tax Act of 1980.

(m) Registration Rights. The Company has not granted or agreed to grant to any Person any rights (including “piggy-back” registration rights) to have any securities of the Company registered with the SEC or any other governmental authority that have not expired or been satisfied or waived.

(n) Application of Takeover Protections. The Company and its Board of Directors have taken all necessary action, if any, including under the Florida Business Corporation Act, to render inapplicable any control share acquisition, business combination, poison pill (including any distribution under a rights agreement) or other similar anti-takeover provision under the Company’s charter documents or the laws of its state of incorporation that is or could become applicable to the Investor or its Affiliates as a result of the Investor and the Company fulfilling their obligations or exercising their rights under the Transaction Documents, including, without limitation, as a result of the Company’s issuance of the Common Shares to the Investor and the Investor’s ownership thereof.

(o) Disclosure. All written disclosure provided by the Company to the Investor regarding the Company, its business and the transactions contemplated hereby are true and correct in all material respects and do not contain any untrue statement of a material fact or omit to state any material fact necessary in order to make the statements made therein, in the light of the circumstances under which they were made, not misleading. To the Company’s knowledge, no event or circumstance has occurred or information exists with respect to the Company or any Subsidiary or their respective business, properties, operations or financial condition, which, under applicable law, rule or regulation, requires public disclosure or announcement by the Company or their but which has not been so publicly announced or disclosed.

(p) Transactions With Affiliates and Employees. Except as set forth on Schedule 3.1(p), none of the officers, directors or employees of the Company is presently a party to any transaction with the Company that would be required to be reported on Form 10-K by Item 13 thereof pursuant to Regulation S-K Item 404(a) (other than for ordinary course services as employees, officers or directors), including any contract, agreement or other arrangement providing for the furnishing of services to or by, providing for rental of real or personal property to or from, or otherwise requiring payments to or from any such officer, director or employee or, to the Company’s knowledge, any corporation, partnership, trust or other entity in which any such officer, director, or employee has a substantial interest or is an officer, director, trustee or partner.

- 11 -

(q) Patents and Trademarks. The Company and each Subsidiary owns, or possesses adequate rights or licenses to use, all trademarks, trade names, service marks, service mark registrations, service names, patents, patent rights, copyrights, inventions, licenses, approvals, governmental authorizations, trade secrets and other intellectual property rights (“ Intellectual Property Rights ”) necessary to conduct their respective businesses as now conducted. The Company does not have any knowledge of any infringement by the Company or any Subsidiary of Intellectual Property Rights of others and there is no claim, action or proceeding being made or brought, or to the knowledge of the Company, being threatened, against the Company or any Subsidiary regarding its Intellectual Property Rights.

(r) Regulatory Permits. The Company and each Subsidiary possesses all certificates, authorizations and permits issued by the appropriate federal, state, local or foreign regulatory authorities necessary to conduct their respective businesses as presently conducted and described in the SEC Reports (“ Material Permits” ), except where the failure to possess such permits would not, individually or in the aggregate, reasonably be expected to result in a Material Adverse Effect, and neither the Company nor any Subsidiary has received any written notice of proceedings relating to the revocation or modification of any Material Permit.

(s) Employee Relations. Neither the Company nor any Subsidiary is a party to any collective bargaining agreement or employs any member of a union. The Company believes that its relations with its employees is as disclosed in the SEC Reports. During the period covered by the SEC Reports, no executive officer or key employee of the Company or any Subsidiary has notified the Company or any Subsidiary that such officer or key employee intends to leave the Company or a Subsidiary, as applicable, or otherwise terminate such officer’s or key employee’s employment with the Company or a Subsidiary, as applicable. To the knowledge of the Company, no executive officer or key employee of the Company or any Subsidiary is in violation of any material term of any employment contract, confidentiality, disclosure or proprietary information agreement, non-competition agreement, or any other contract or agreement or any restrictive covenant, and the continued employment of each such executive officer or key employee does not subject the Company or any Subsidiary to any liability with respect to any of the foregoing matters.

(t) Labor Matters. The Company and each Subsidiary is in compliance in all material respects with all federal, state, local and foreign laws and regulations respecting labor, employment and employment practices and benefits, terms and conditions of employment and wages and hours, except where failure to be in compliance would not, either individually or in the aggregate, reasonably be expected to result in a Material Adverse Effect.

- 12 -

(u) Listing and Maintenance Requirements . The Common Stock is registered pursuant to Section 12(b) or 12(g) of the Exchange Act, and the Company has taken no action designed to terminate the registration of the Common Stock under the Exchange Act nor has the Company received any notification that the SEC is contemplating terminating such registration. The Company is in compliance with applicable OTCQB trading qualification requirements. There are no proceedings pending or, to the Company’s knowledge, threatened against the Company relating to the Common Stock’s continued qualification for trading on the OTCQB market.

3.2 Representations and Warranties of the Investor. The Investor hereby represents and warrants to the Company as follows:

(a) Organization; Authority. The Investor is a corporation duly organized, validly existing and in good standing under the laws of the State of Delaware with the requisite corporate power and authority to enter into and to consummate the transactions contemplated by this Agreement and otherwise to carry out its obligations hereunder. The purchase by the Investor of the Common Shares and Warrants hereunder has been duly authorized by all necessary corporate action on the part of the Investor. This Agreement has been duly executed and delivered by the Investor and constitutes the valid and binding obligation of the Investor, enforceable against it in accordance with its terms, except (i) as limited by general equitable principles and applicable bankruptcy, insolvency, reorganization, moratorium and other laws of general application affecting enforcement of creditors’ rights generally, and (ii) as limited by laws relating to the availability of specific performance, injunctive relief or other equitable remedies.

(b) No Public Sale or Distribution. The Investor is acquiring the Common Shares and Warrants for its own account and not with a view towards, or for resale in connection with, the public sale or distribution thereof, except pursuant to sales registered under the Securities Act or under an exemption from such registration and in compliance with applicable federal and state securities laws, and the Investor does not have a present arrangement to effect any distribution of the Common Shares or Warrants to or through any person or entity; provided , however , that by making the representations herein, such Investor does not agree to hold any of the Common Shares or Warrant Shares for any minimum or other specific term and reserves the right to dispose of the Common Shares or Warrant Shares at any time in accordance with or pursuant to a registration statement or an exemption under the Securities Act.

(c) Investor Status. At the time the Investor was offered the Common Shares and Warrants, it was, and at the date hereof it is an “accredited investor” as defined in Rule 501(a) under the Securities Act or a “qualified institutional buyer” as defined in Rule 144A(a) under the Securities Act. Such Investor is not a registered broker dealer registered under Section 15(a) of the Exchange Act, or a member of the Financial Industry Regulatory Authority, Inc. or an entity engaged in the business of being a broker dealer.

(d) Experience of Such Investor. The Investor, either alone or together with its representatives, has such knowledge, sophistication and experience in business and financial matters so as to be capable of evaluating the merits and risks of the prospective investment in the Common Shares and Warrants, and has so evaluated the merits and risks of such investment. The Investor understands that it must bear the economic risk of this investment in the Common Shares indefinitely, and is able to bear such risk and is able to afford a complete loss of such investment.

- 13 -

(e) Access to Information. The Investor acknowledges that it has reviewed the Disclosure Materials and has been afforded: (i) the opportunity to ask such questions as it has deemed necessary of, and to receive answers from, representatives of the Company concerning the terms and conditions of the offering of the Common Shares and Warrants and the merits and risks of investing in the Common Shares and Warrants; (ii) access to information (other than material non-public information) about the Company and its financial condition, results of operations, business, properties, management and prospects sufficient to enable it to evaluate its investment; and (iii) the opportunity to obtain such additional information that the Company possesses or can acquire without unreasonable effort or expense that is necessary to make an informed investment decision with respect to the investment. Neither such inquiries nor any other investigation conducted by or on behalf of the Investor or its representatives or counsel shall modify, amend or affect the Investor’s right to rely on the truth, accuracy and completeness of the Disclosure Materials and the Company’s representations and warranties contained in the Transaction Documents.

(f) No Conflicts. The execution, delivery and performance by the Investor of this Agreement and the consummation by the Investor of the transactions contemplated hereby will not (i) result in a violation of the organizational documents of the Investor or (ii) conflict with, or constitute a default (or an event which with notice or lapse of time or both would become a default) under, or give to others any rights of termination, amendment, acceleration or cancellation of, any agreement, indenture or instrument to which the Investor is a party, or (iii) result in a violation of any law, rule, regulation, order, judgment or decree (including federal and state securities laws) applicable to the Investor, except in the case of clauses (ii) and (iii) above, for such that are not material and do not otherwise affect the ability of the Investor to consummate the transactions contemplated hereby.

(g) Restricted Securities. The Investor understands that the Common Shares are characterized as “restricted securities” under the U.S. federal securities laws inasmuch as they are being acquired from the Company in a transaction not involving a public offering and that under such laws and applicable regulations such securities may be resold without registration under the Securities Act only in certain limited circumstances. The Investor further understands that the certificates evidencing the Common Shares, Warrants and Warrant Shares purchased by it will contain the following legend:

THESE SECURITIES HAVE NOT BEEN REGISTERED WITH THE SECURITIES AND EXCHANGE COMMISSION OR THE SECURITIES COMMISSION OF ANY STATE IN RELIANCE UPON AN EXEMPTION FROM REGISTRATION UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE “ SECURITIES ACT ”), OR ANY APPLICABLE STATE SECURITIES LAWS AND, ACCORDINGLY, MAY NOT BE OFFERED OR SOLD EXCEPT PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT OR PURSUANT TO AN AVAILABLE EXEMPTION FROM, OR IN A TRANSACTION NOT SUBJECT TO, THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT AND IN COMPLIANCE WITH APPLICABLE STATE SECURITIES LAWS OR BLUE SKY LAWS.

- 14 -

(h) Prohibited Transactions . The Investor has not, directly or indirectly, and no Person acting on behalf of or pursuant to any understanding with the Investor has, engaged in any purchases or sales in the securities, including derivatives, of the Company (including, without limitation, any Short Sales (a “ Transaction ”) involving any of the Company’s securities) since the time that the Investor was first contacted by the Company or any other Person regarding an investment in the Company. The Investor covenants that neither it nor any Person acting on its behalf or pursuant to any understanding with the Investor will engage, directly or indirectly, in any Transactions in the securities of the Company (including Short Sales) prior to the time the transactions contemplated by this Agreement are publicly disclosed.

ARTICLE 4
OTHER AGREEMENTS OF THE PARTIES

4.1 Filing of Reports. Until the date that the Investor (or any transferee that is an Affiliate of the Investor) ceases to own any Common Shares or Warrant Shares, the Company covenants to use its commercially reasonable efforts to (a) timely file (or obtain extensions in respect thereof and file within the applicable grace period) all reports required to be filed by the Company after the date hereof pursuant to the Securities Act and the Exchange Act, (b) comply with the requirements of Rule 144(c) under the Securities Act with respect to current public information about the Company, and (c) furnish to the Investor promptly upon request therefor (i) a written statement by the Company as to its compliance with the requirements of Rule 144(c) under the Securities Act, and the reporting requirements under the Securities Act and the Exchange Act, and (ii) such reports and documents of the Company as the Investor may reasonably request to avail itself (or its Affiliates) of any similar rule or regulation of the SEC allowing it (or its Affiliates) to sell any such securities without registration.

4.2 Board Representation and Observer Rights.

(a) For so long as the Investor or any of its Affiliates holds at least fifty percent (50%) of the Common Shares purchased under this Agreement, upon the request of the Investor at any time, and from time to time, the Company shall use its reasonable best efforts to cause its board of directors (the “ Board ”) to (i) increase the current Board by one member and elect to such newly created vacancy an individual designated by the Investor (the “ Investor Director ”) that is not a Competitor of, or employed or Affiliated with a Competitor of the Company, and (ii) remove, upon direction from the Investor for any reason or no reason, any person who is an Investor Director, and appoint each successor to the Investor Director as the Investor designates; provided, that, such successor is not a Competitor of, or employed or Affiliated with a Competitor of the Company.

- 15 -

(b) For so long as the Investor or any of its Affiliates holds at least twenty-five percent (25%) of the Common Shares purchased under this Agreement, and during any and all periods in which no Investor Director shall be serving on the Board, upon the request of the Investor at any time, and from time to time, the Company shall use its reasonable best efforts to permit one individual designated by the Investor as a non-participating observer (the “ Investor Observer ”) to be present at all in-person and telephonic meetings of the Board and all committees thereof; provided, that, (y) the Investor Observer executes a confidentiality agreement acceptable to the Company agreeing to hold in confidence and trust all information that the Investor Observer receives or is provided access to; and (z) the Company reserves the right to exclude the Investor Observer from access to any material or meeting or portion thereof if the Board determines in good faith after consulting with legal counsel that such exclusion is reasonably necessary to preserve the attorney client privilege or the Board determines in good faith that such exclusion is necessary to avoid a conflict of interest between the Company and the Investor Observer. Except as provided in the proviso to the immediately preceding sentence, the Company shall provide the Investor Observer with the same notice with respect to meetings of the Board and all committees thereof as provided to the members of the Board and shall provide the Investor Observer any and all other information that is provided to the members of the Board, whether in connection with any meeting of the Board or committee thereof or otherwise.

(c) The Investor Director and Investor Observer shall have access to the Company’s books and records and to participate in discussions with the Company’s management upon reasonable advance notice and during normal business hours. The Company shall reimburse the Investor Director or Investor Observer, as the case may be, for his or her reasonable out-of-pocket expenses (including travel, lodging and meal expenses) incurred in connection with the attendance of meetings of the Board or any committee thereof. Notwithstanding anything to the contrary contained herein, for purposes of this Section 4.2, any individual who is an employee of the Investor or any direct or indirect subsidiary thereof, shall not be considered a Competitor of the Company or employed or Affiliated with a Competitor of the Company.

4.3 Right Of First Offer. For so long as the Investor or any of its Affiliates holds at least twenty-five percent (25%) of the Common Shares purchased under this Agreement, if the Company proposes to issue any new Equity Securities (other than Excluded Securities) (the “ New Securities ”) and the Company is required to first offer such New Securities for purchase by any other stockholder of the Company, the Company shall, subject to applicable securities laws, also be required to first offer such New Securities, to the extent applicable, to the Investor on no less favorable terms as such New Securities are required to be offered to such other stockholder of the Company.

4.4 Listing of Shares . Promptly following the date hereof, the Company shall take all necessary action to cause the Common Shares to be qualified for trading on the OTCQB. If the Company applies to have its Common Stock or other securities traded on any other principal stock exchange or market, it shall include in such application the Common Shares and will take such other action as is necessary to cause such Common Shares to be so listed.

4.5 Use of Proceeds. The Company will use the net proceeds from the sale of the Common Shares and Warrants to meet its obligations under the License Agreement and for other working capital and general corporate purposes.

- 16 -

4.6 Lock-Up. During the six (6) month period following the Closing, the Investor shall not, without the consent of the Company, issue, sell, offer or agree to sell, grant any option for the sale of, pledge, enter into any swap, derivative transaction or other arrangement that transfers to another, in whole or in part, any of the economic consequences of ownership of any of the Common Shares or Warrant Shares (whether any such transaction is to be settled by delivery of Common Shares or Warrant Shares, other securities, cash or other consideration) or otherwise dispose (or publicly announce the undersigned’s intention to do any of the foregoing) of, directly or indirectly, any Common Shares or Warrant Shares. Notwithstanding anything in this Agreement to the contrary, subject to the requirements of Section 8.7 (including the obligation to be bound by this Section 4.6), the Investor shall not be restricted from transferring any of the Warrants, Common Shares or Warrant Shares to any Affiliate of the Investor.

4.7 Public Statements. Except as required by applicable law or regulation, neither party hereto shall issue any press release or other public announcement concerning the existence of or terms of this Agreement or the Transaction Documents without the prior written consent of the other Party, which consent shall not be unreasonably withheld. Each Party agrees to provide to the other Party a copy of any proposed press release or other public announcement as soon as reasonably practicable under the circumstances prior to the proposed date of dissemination thereof. The party proposing such press release or other public announcement shall consider in good faith any changes to such proposed press release or public announcement that are requested by the other party.

4.8 Additional Financing. If at any time, and from time to time, following the date on which the First Commercial Sale occurs and on or prior to June 30, 2015, the Company proposes to issue and sell securities of the Company with the principal purpose of raising capital (“ Equity Financing ”), to the extent so requested by the Company, the Investor shall purchase up to $4,000,000 of shares of Common Stock, at a price per share equal to the volume weighted average price of the Common Stock for the five trading day period immediately preceding the date such Equity Financing is publicly announced; provided, that (a) purchasers other than the Investor and its Affiliates purchase an aggregate of no less than $4,000,000 of shares of Common Stock in the Equity Financing, at the same per share purchase price paid by, and on other terms and conditions no more favorable to such persons than the terms and conditions applicable to the Investor in such Equity Financing, and (b) concurrently with the consummation of the Equity Financing the Company issues and sells to the Investor five year warrants (the “ Additional Warrants ” and together with the Initial Warrants, the “ Warrants ”) to purchase the nearest number of whole shares of Common Stock equal to 50% of the shares of Common Stock purchased by the Investor in the Equity Financing at an exercise price per share equal to 135% of the price per share paid in the Equity Financing. The Additional Warrants shall be in the form attached hereto as Exhibit A . The Investor shall execute and deliver to the Company all transaction documents reasonably requested by the Company and entered into by other purchasers participating in such Equity Financing. The Company shall not grant to any other purchaser in connection with such Equity Financing any right not granted to the Investor.

ARTICLE 5
CONDITIONS

5.1 Conditions Precedent to the Obligations of the Investor. The obligation of the Investor to purchase the Common Shares and Warrants at the Closing is subject to the satisfaction or waiver by the Investor, at or before the Closing, of each of the following conditions:

(a) Representations and Warranties. The representations and warranties of the Company contained herein shall be true and correct in all material respects as of the date when made and as of the Closing as though made on and as of such date (except for representations and warranties that speak as of a specific date, which shall be true and correct as of such specific date);

- 17 -

(b) Performance. The Company shall have performed, satisfied and complied in all material respects with all covenants, agreements and conditions required by the Transaction Documents to be performed, satisfied or complied with by it at or prior to the Closing;

(c) Officer’s Certificate. The Investor shall have received a certificate of the Chief Executive Officer or Chief Financial Officer of the Company, dated as of the Closing Date, certifying to the fulfillment of the conditions specified in Section 5.1(a) and (b);

(d) No Suspensions of Trading in Common Stock. Trading in the Common Stock shall not have been suspended by the SEC or any other applicable authority at any time since the date of execution of this Agreement;

(e) Absence of Litigation. No action, suit or proceeding by or before any court or any governmental body or authority, against the Company or pertaining to the transactions contemplated by this Agreement or their consummation, shall have been instituted on or before the Closing Date, which action, suit or proceeding would, if determined adversely, have a Material Adverse Effect; and

(f) No Injunction. No preliminary or permanent injunction or other order issued by a court of competent jurisdiction which prevents the consummation of the transactions contemplated by any of the Transaction Documents shall have been issued and remain in effect, provided, however, that the parties shall use their respective commercially reasonable efforts to have any such order or injunction lifted.

5.2 Conditions Precedent to the Obligations of the Company. The obligation of the Company to sell the Common Shares and Warrants at the Closing is subject to the satisfaction or waiver by the Company, at or before the Closing, of each of the following conditions:

(a) Representations and Warranties. The representations and warranties of the Investor contained herein shall be true and correct in all material respects as of the date when made and as of the Closing Date as though made on and as of such date (except for representations and warranties that speak as of a specific date, which shall be true and correct as of such specific date);

(b) Performance. The Investor shall have performed, satisfied and complied in all material respects with all covenants, agreements and conditions required by the Transaction Documents to be performed, satisfied or complied with by the Investor at or prior to the Closing;

(c) Officer’s Certificate. The Company shall have received a certificate of an officer of the Investor, dated as of the Closing Date, certifying to the fulfillment of the conditions specified in Section 5.2(a), and (b); and

- 18 -

(d) No Injunction. No preliminary or permanent injunction or other order issued by a court of competent jurisdiction which prevents the consummation of the transactions contemplated hereby shall have been issued and remain in effect, provided, however, that the parties shall use their respective commercially reasonable efforts to have any such order or injunction lifted.

ARTICLE 6
REGISTRATION RIGHTS

6.1 Piggy-Back Registration Rights. If at any time the Company shall determine to prepare and file with the SEC a registration statement relating to an offering for its own account or the account of others under the Securities Act of any of its equity securities, other than on Form S-4 or Form S-8 (each as promulgated under the Securities Act) or their then equivalents relating to equity securities to be issued solely in connection with any acquisition of any entity or business or equity securities issuable in connection with stock option or other employee benefit plans, then the Company shall send to the Investor, provided it owns Registrable Securities and is not then eligible to sell all of its Registrable Securities under Rule 144 in a three-month period, written notice of such determination and if, within ten (10) days after receipt of such notice, the Investor shall so request in writing, the Company shall include in such registration statement all or any part of such Registrable Securities the Investor requests to be registered. The Investor shall comply with any request to furnish the Company a completed selling stockholder questionnaire in customary form and acknowledges that it shall not be entitled to the inclusion of its Registrable Securities unless it has returned such questionnaire to the Company. Notwithstanding the foregoing, in the event that, in connection with any underwritten public offering, the managing underwriter(s) thereof shall impose a limitation on the number of shares of Common Stock which may be included in the Registration Statement because, in such underwriter(s)’ judgment, marketing or other factors dictate such limitation is necessary to facilitate public distribution, then the Company shall be obligated to include in such Registration Statement only such limited portion of the Registrable Securities with respect to which the Investor has requested inclusion hereunder as the underwriter shall permit; provided , however , that (i) the Company shall not exclude any Registrable Securities unless the Company has first excluded all outstanding securities, the holders of which are not contractually entitled to inclusion of such securities in such Registration Statement or are not contractually entitled to pro rata inclusion with the Registrable Securities and (ii) after giving effect to the immediately preceding proviso, any such exclusion of Registrable Securities shall be made pro rata among the Investor and the holders of other securities having the contractual right to inclusion of their securities in such Registration Statement, in proportion to the number of Registrable Securities or other securities, as applicable, sought to be included by the Investor and such other holders. Notwithstanding the foregoing sentence, in the case of an underwritten offering by the Company for its own account, no securities proposed to be included by the Company in such underwritten offering shall be cutback and, after taking into account all of the securities proposed to be included by the Company in such underwritten offering, the remaining securities shall be allocated among the Registrable Securities and the other securities requested to be included therein in accordance with the proviso of the immediately preceding sentence. If an offering in connection with which the Investor is entitled to registration under this Section 6.1 is an underwritten offering, then the Investor shall, unless otherwise agreed by the Company, offer and sell such Registrable Securities in an underwritten offering using the same underwriter or underwriters and, subject to the provisions of this Agreement, on the same terms and conditions as other shares of Common Stock included in such underwritten offering and shall enter into an underwriting agreement in a form and substance reasonably satisfactory to the Company and the underwriter or underwriters.

- 19 -

6.2 Registration Expenses. The Company shall pay all fees and expenses incurred by the Company incident to the performance of or compliance with Article VI of this Agreement by the Company, including without limitation (a) all registration and filing fees and expenses related to filings with the SEC, any Trading Market and in connection with applicable state securities or Blue Sky laws, (b) printing expenses (including without limitation expenses of printing certificates for Registrable Securities), (c) messenger, telephone and delivery expenses, (d) fees and disbursements of counsel for the Company, (e) fees and expenses of all other Persons retained by the Company in connection with the consummation of the transactions contemplated by this Agreement and (f) all listing fees to be paid by the Company to the Trading Market. The Company shall also pay the reasonable legal fees of the Investor incurred in connection with its legal review of the Registration Statement in an amount not to exceed $10,000 in the aggregate.

ARTICLE 7
INDEMNIFICATION

7.1 Indemnification by the Company. The Company shall, notwithstanding any termination of this Agreement, indemnify and hold harmless the Investor, its officers, directors, partners, members, agents and employees, each Person who controls the Investor (within the meaning of Section 15 of the Securities Act or Section 20 of the Exchange Act) and the officers, directors, partners, members, agents and employees of each such controlling Person, to the fullest extent permitted by applicable law, from and against any and all Losses, as incurred, arising out of or relating to (i) any misrepresentation or breach of any representation or warranty made by the Company in this Agreement or any other agreement, certificate, instrument or document delivered in connection with the consummation of the transactions hereby (which, for the avoidance of doubt, shall not include the License Agreement or the Supply Agreement or any agreements, certificates, instruments or documents ancillary thereto), (ii) any breach of any covenant, agreement or obligation of the Company contained in this Agreement or any other agreement, certificate, instrument or document delivered in connection with the consummation of the transactions contemplated hereby (which, for the avoidance of doubt, shall not include the License Agreement or the Supply Agreement or any agreements, certificates, instruments or documents ancillary thereto), (iii) any cause of action, suit or claim brought or made against such Indemnified Party (as defined in Section 7.3(a) below) by a third party (including for these purposes a derivative action brought on behalf of the Company), arising out of or resulting from (x) the execution, delivery, performance or enforcement of this Agreement or any other agreement, certificate, instrument or document delivered in connection with the consummation of the transactions contemplated hereby (which, for the avoidance of doubt, shall not include the License Agreement or the Supply Agreement or any agreements, certificates, instruments or documents ancillary thereto), or (y) the status of Indemnified Party as a holder of Common Stock (unless, and only to the extent that, such action, suit or claim is based, including in part, upon a breach of the Investor’s representations, warranties or covenants in this Agreement or any other agreement, certificate, instrument or document delivered in connection with the consummation of the transactions contemplated hereby (which, for the avoidance of doubt, shall not include the License Agreement or the Supply Agreement or any agreements, certificates, instruments or documents ancillary thereto), or any conduct by the Investor that constitutes fraud, gross negligence or willful misconduct), or (iv) any untrue or alleged untrue statement of a material fact contained in the Registration Statement, any Prospectus or any form of Company prospectus or in any amendment or supplement thereto or in any Company preliminary prospectus, or arising out of or relating to any omission or alleged omission of a material fact required to be stated therein or necessary to make the statements therein (in the case of any Prospectus or form of prospectus or supplement thereto, in the light of the circumstances under which they were made) not misleading, except to the extent, but only to the extent, that (A) such untrue statements, alleged untrue statements, omissions or alleged omissions are based solely upon information regarding the Investor furnished in writing to the Company by the Investor for use therein, or to the extent that such information relates to the Investor or the Investor’s proposed method of distribution of Registrable Securities and was reviewed and expressly approved by the Investor in writing expressly for use in the Registration Statement, or (B) with respect to any prospectus, if the untrue statement or omission of material fact contained in such prospectus was corrected on a timely basis in the prospectus, as then amended or supplemented, if such corrected prospectus was timely made available by the Company to the Investor, and the Investor seeking indemnity hereunder was advised in writing not to use the incorrect prospectus prior to the use giving rise to Losses.

- 20 -

7.2 Indemnification by Investor. The Investor shall indemnify and hold harmless the Company and its directors, officers, agents and employees to the fullest extent permitted by applicable law, from and against all Losses (as determined by a court of competent jurisdiction in a final judgment not subject to appeal or review) arising solely out of any untrue statement of a material fact contained in the Registration Statement, any Prospectus, or any form of prospectus, or in any amendment or supplement thereto, or arising out of or relating to any omission of a material fact required to be stated therein or necessary to make the statements therein (in the case of any Prospectus or form of prospectus or supplement thereto, in the light of the circumstances under which they were made) not misleading, but only to the extent that such untrue statements or omissions are based solely upon information regarding the Investor furnished to the Company by the Investor in writing expressly for use therein, or to the extent that such information relates to the Investor or the Investor’s proposed method of distribution of Registrable Securities and was reviewed and expressly approved in writing by the Investor expressly for use in the Registration Statement, such Prospectus or such form of prospectus or in any amendment or supplement thereto. In no event shall the liability of the Investor hereunder be greater in amount than the dollar amount of the net proceeds received by the Investor upon the sale of the Registrable Securities giving rise to such indemnification obligation.

7.3 Conduct of Indemnification Proceedings .

(a) If any Proceeding shall be brought or asserted against any Person entitled to indemnity hereunder (an “ Indemnified Party ”), such Indemnified Party shall promptly notify the Person from whom indemnity is sought (the “ Indemnifying Party ”) in writing, and the Indemnifying Party shall assume the defense thereof, including the employment of counsel reasonably satisfactory to the Indemnified Party and the payment of all fees and expenses incurred in connection with defense thereof; provided, that the failure of any Indemnified Party to give such notice shall not relieve the Indemnifying Party of its obligations or liabilities pursuant to this Agreement, except (and only) to the extent that it shall be finally determined by a court of competent jurisdiction (which determination is not subject to appeal or further review) that such failure shall have proximately and materially adversely prejudiced the Indemnifying Party.

- 21 -

(b) An Indemnified Party shall have the right to employ separate counsel in any such Proceeding and to participate in the defense thereof, but the fees and expenses of such counsel shall be at the expense of such Indemnified Party or Parties unless: (i) the Indemnifying Party has agreed in writing to pay such fees and expenses; or (ii) the Indemnifying Party shall have failed promptly to assume the defense of such Proceeding and to employ counsel reasonably satisfactory to such Indemnified Party in any such Proceeding; or (iii) the named parties to any such Proceeding (including any impleaded parties) include both such Indemnified Party and the Indemnifying Party, and such Indemnified Party shall have been advised by counsel that a conflict of interest is likely to exist if the same counsel were to represent such Indemnified Party and the Indemnifying Party (in which case, if such Indemnified Party notifies the Indemnifying Party in writing that it elects to employ separate counsel at the expense of the Indemnifying Party, the Indemnifying Party shall not have the right to assume the defense thereof and the reasonable fees and expenses of separate counsel shall be at the expense of the Indemnifying Party). It shall be understood, however, that the Indemnifying Party shall not, in connection with any one such Proceeding (including separate Proceedings that have been or will be consolidated before a single judge) be liable for the fees and expenses of more than one separate firm of attorneys at any time for all Indemnified Parties, which firm shall be appointed by a majority of the Indemnified Parties. The Indemnifying Party shall not be liable for any settlement of any such Proceeding effected without its written consent, which consent shall not be unreasonably withheld. No Indemnifying Party shall, without the prior written consent of the Indemnified Party, effect any settlement of any pending Proceeding in respect of which any Indemnified Party is a party, unless such settlement includes an unconditional release of such Indemnified Party from all liability on claims that are the subject matter of such Proceeding.

(c) All reasonable fees and expenses of the Indemnified Party (including reasonable fees and expenses to the extent incurred in connection with investigating or preparing to defend such Proceeding in a manner not inconsistent with this Section) shall be paid to the Indemnified Party, as incurred, within 20 Trading Days of written notice thereof to the Indemnifying Party (regardless of whether it is ultimately determined that an Indemnified Party is not entitled to indemnification hereunder; provided, that the Indemnifying Party may require such Indemnified Party to undertake to reimburse all such fees and expenses to the extent it is finally judicially determined that such Indemnified Party is not entitled to indemnification hereunder).

- 22 -

(d) If a claim for indemnification under Section 7.1 or 7.2 is unavailable to an Indemnified Party (by reason of public policy or otherwise), then each Indemnifying Party, in lieu of indemnifying such Indemnified Party, shall contribute to the amount paid or payable by such Indemnified Party as a result of such Losses, in such proportion as is appropriate to reflect the relative fault of the Indemnifying Party and Indemnified Party in connection with the actions, statements or omissions that resulted in such Losses as well as any other relevant equitable considerations. The relative fault of such Indemnifying Party and Indemnified Party shall be determined by reference to, among other things, whether any action in question, including any untrue or alleged untrue statement of a material fact or omission or alleged omission of a material fact, has been taken or made by, or relates to information supplied by, such Indemnifying Party or Indemnified Party, and the parties’ relative intent, knowledge, access to information and opportunity to correct or prevent such action, statement or omission. The amount paid or payable by a party as a result of any Losses shall be deemed to include, subject to the limitations set forth in Article 7, any reasonable attorneys’ or other reasonable fees or expenses incurred by such party in connection with any Proceeding to the extent such party would have been indemnified for such fees or expenses if the indemnification provided for in this Section was available to such party in accordance with its terms.

The parties hereto agree that it would not be just and equitable if contribution pursuant to this Section 7.3(d) were determined by pro rata allocation or by any other method of allocation that does not take into account the equitable considerations referred to in the immediately preceding paragraph. Notwithstanding the provisions of this Section 7.3(d), the Investor shall not be required to contribute, in the aggregate, any amount in excess of the amount by which the net proceeds actually received by such Investor from the sale of the Registrable Securities subject to the Proceeding exceed the amount of any damages that the Investor has otherwise been required to pay by reason of such untrue or alleged untrue statement or omission or alleged omission. No Person guilty of fraudulent misrepresentation (within the meaning of Section 11(f) of the Securities Act) shall be entitled to contribution from any Person who was not guilty of such fraudulent misrepresentation.

The indemnity and contribution agreements contained in this Article 7 are in addition to any liability that the Indemnifying Parties may have to the Indemnified Parties.

ARTICLE 8
GENERAL PROVISIONS

8.1 Termination. This Agreement may be terminated by the Company or the Investor, by written notice to the other party, if the Closing has not been consummated by November 29, 2013; provided that no such termination will affect the right of any party to sue for any breach by the other party (or parties) occurring prior to such termination.

8.2 Fees and Expenses. Except as expressly set forth in the Transaction Documents to the contrary, each party shall pay the fees and expenses of its advisers, counsel, accountants and other experts, if any, and all other expenses incurred by such party incident to the negotiation, preparation, execution, delivery and performance of this Agreement. The Company shall pay all Transfer Agent fees, stamp taxes and other taxes and duties levied in connection with the sale and issuance of the Common Shares.

8.3 Entire Agreement. This Agreement, together with the Exhibits and Schedules hereto, contains the entire understanding of the parties with respect to the subject matter hereof and supersedes all prior agreements and understandings, oral or written, with respect to such matters, which the parties acknowledge have been merged into such documents, exhibits and schedules. At or after the Closing, and without further consideration, the Company will execute and deliver to the Investor such further documents as may be reasonably requested in order to give practical effect to the intention of the parties under this Agreement.

- 23 -

8.4 Notices. Any and all notices or other communications or deliveries required or permitted to be provided hereunder shall be in writing and shall be deemed given and effective on the earliest of (a) the date of transmission, if such notice or communication is delivered via facsimile or email at the facsimile number or email address specified in this Section prior to 6:30 p.m. (New York City time) on a Trading Day, (b) the next Trading Day after the date of transmission, if such notice or communication is delivered via facsimile or email at the facsimile number or email address specified in this Section on a day that is not a Trading Day or later than 6:30 p.m. (New York City time) on any Trading Day, (c) the Trading Day following the date of deposit with a nationally recognized overnight courier service, or (d) upon actual receipt by the party to whom such notice is required to be given. The addresses, facsimile numbers and email addresses for such notices and communications are those set forth on the signature pages hereof, or such other address or facsimile number as may be designated in writing hereafter, in the same manner, by any such Person.

8.5 Amendments; Waivers. No provision of this Agreement may be waived or amended except in a written instrument signed, in the case of an amendment, by the Company and the Investor or, in the case of a waiver, by the party against whom enforcement of any such waiver is sought. No waiver of any default with respect to any provision, condition or requirement of this Agreement shall be deemed to be a continuing waiver in the future or a waiver of any subsequent default or a waiver of any other provision, condition or requirement hereof, nor shall any delay or omission of any party to exercise any right hereunder in any manner impair the exercise of any such right.

8.6 Construction. The headings herein are for convenience only, do not constitute a part of this Agreement and shall not be deemed to limit or affect any of the provisions hereof. The language used in this Agreement will be deemed to be the language chosen by the parties to express their mutual intent, and no rules of strict construction will be applied against any party.

8.7 Successors and Assigns. This Agreement shall be binding upon and inure to the benefit of the parties and their successors and permitted assigns. The Company may not assign this Agreement or any rights or obligations hereunder without the prior written consent of the Investor, which consent may be withheld by the Investor in its sole discretion. The Investor may assign its rights under this Agreement to any Person to whom the Investor assigns or transfers any Common Shares, provided (i) the Investor agrees in writing with the transferee or assignee to assign such rights, and a copy of such agreement is furnished to the Company after such assignment, (ii) the Company is furnished with written notice of (x) the name and address of such transferee or assignee and (y) the Registrable Securities with respect to which such registration rights are being transferred or assigned, (iii) following such transfer or assignment, the further disposition of such securities by the transferee or assignee is restricted under the Securities Act and applicable state securities laws, (iv) such transferee agrees in writing to be bound, with respect to the transferred Common Shares, by the provisions hereof that apply to the “Investor” and such transferee is not a Competitor of, or Affiliated with a Competitor of, the Company and (v) such transfer shall have been made in accordance with the applicable requirements of this Agreement and with all laws applicable thereto.

- 24 -

8.8 No Third-Party Beneficiaries. This Agreement is intended for the benefit of the parties hereto and their respective successors and permitted assigns and is not for the benefit of, nor may any provision hereof be enforced by, any other Person, except that each Indemnified Party is an intended third party beneficiary of Section 7.1 or Section 7.2, as applicable, and (in each case) may enforce the provisions of such Section directly against the parties with obligations thereunder.

8.9 Governing Law; Venue; Waiver of Jury Trial. ALL QUESTIONS CONCERNING THE CONSTRUCTION, VALIDITY, ENFORCEMENT AND INTERPRETATION OF THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK. THE COMPANY AND THE INVESTOR HEREBY IRREVOCABLY SUBMIT TO THE EXCLUSIVE JURISDICTION OF THE STATE AND FEDERAL COURTS SITTING IN THE CITY OF NEW YORK, BOROUGH OF MANHATTAN FOR THE ADJUDICATION OF ANY DISPUTE BROUGHT BY THE COMPANY OR THE INVESTOR HEREUNDER, IN CONNECTION HEREWITH OR WITH ANY TRANSACTION CONTEMPLATED HEREBY OR DISCUSSED HEREIN, AND HEREBY IRREVOCABLY WAIVE, AND AGREE NOT TO ASSERT IN ANY SUIT, ACTION OR PROCEEDING BROUGHT BY THE COMPANY OR THE INVESTOR, ANY CLAIM THAT IT IS NOT PERSONALLY SUBJECT TO THE JURISDICTION OF ANY SUCH COURT, OR THAT SUCH SUIT, ACTION OR PROCEEDING IS IMPROPER. EACH PARTY HEREBY IRREVOCABLY WAIVES PERSONAL SERVICE OF PROCESS AND CONSENTS TO PROCESS BEING SERVED IN ANY SUCH SUIT, ACTION OR PROCEEDING BY MAILING A COPY THEREOF VIA REGISTERED OR CERTIFIED MAIL OR OVERNIGHT DELIVERY (WITH EVIDENCE OF DELIVERY) TO SUCH PARTY AT THE ADDRESS IN EFFECT FOR NOTICES TO IT UNDER THIS AGREEMENT AND AGREES THAT SUCH SERVICE SHALL CONSTITUTE GOOD AND SUFFICIENT SERVICE OF PROCESS AND NOTICE THEREOF. NOTHING CONTAINED HEREIN SHALL BE DEEMED TO LIMIT IN ANY WAY ANY RIGHT TO SERVE PROCESS IN ANY MANNER PERMITTED BY LAW. THE COMPANY AND THE INVESTOR HEREBY WAIVE ALL RIGHTS TO A TRIAL BY JURY.

8.10 Survival. The representations and warranties, agreements and covenants contained herein shall survive the Closing.

8.11 Execution. This Agreement may be executed in two or more counterparts, all of which when taken together shall be considered one and the same agreement and shall become effective when counterparts have been signed by each party and delivered to the other party, it being understood that both parties need not sign the same counterpart. In the event that any signature is delivered by facsimile transmission or email attachment, such signature shall create a valid and binding obligation of the party executing (or on whose behalf such signature is executed) with the same force and effect as if such facsimile or email-attached signature page were an original thereof.

8.12 Severability. If any provision of this Agreement is held to be invalid or unenforceable in any respect, the validity and enforceability of the remaining terms and provisions of this Agreement shall not in any way be affected or impaired thereby and the parties will attempt to agree upon a valid and enforceable provision that is a reasonable substitute therefor, and upon so agreeing, shall incorporate such substitute provision in this Agreement.

- 25 -

8.13 Replacement of Certificates. If any certificate or instrument evidencing any Common Shares is mutilated, lost, stolen or destroyed, the Company shall issue or cause to be issued in exchange and substitution for and upon cancellation thereof, or in lieu of and substitution therefor, a new certificate or instrument, but only upon receipt of evidence reasonably satisfactory to the Company of such loss, theft or destruction and the execution by the holder thereof of a customary lost certificate affidavit of that fact and an agreement to indemnify and hold harmless the Company for any losses in connection therewith.

8.14 Remedies. In addition to being entitled to exercise all rights provided herein or granted by law, including recovery of damages, each of the Investor and the Company will be entitled to seek specific performance under this Agreement. The parties agree that monetary damages may not be adequate compensation for any loss incurred by reason of any breach of obligations described in the foregoing sentence and hereby agree to waive in any action for specific performance of any such obligation (other than in connection with any action for a temporary restraining order) the defense that a remedy at law would be adequate.

[SIGNATURE PAGES TO FOLLOW]

- 26 -

IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly executed by their respective authorized signatories as of the date first indicated above.

	Alliqua, INC.

	By:	/s/ David Johnson
		Name: David Johnson
		Title: Chief Executive Officer

	Address for Notice:

	2150 Cabot Boulevard West
	Langhorne, PA 19047
	Attn: Chief Executive Officer
	Facsimile No.: (215) 702-8535
	Telephone No.: (215) 702-8535

	With a copy (which shall not constitute notice) to:

	Lowenstein Sandler LLP
	65 Livingston Avenue
	Roseland, NJ 07068
	Attn: Michael Lerner, Esq.
	Facsimile No.: (973) 597-6395
	Telephone No.: (973) 597-6394

	Celgene CORPORATION

	By:	/s/ Perry Karsen
	Name: Perry Karsen
	Title: Executive Vice President

	Address for Notice:

	86 Morris Avenue
	Summit, New Jersey 07901
	Attention: General Counsel
	Facsimile: (908) 673-2771
	Telephone: (908) 673-9757

	with copies (which shall not constitute notice) to:

	Proskauer Rose LLP
	Eleven Times Square
	New York, New York 10036
	Attention: Robert A. Cantone, Esq.
	Facsimile: (212) 969-2900
	Telephone: (212) 969-3235

Exhibit A

FORM OF WARRANT

ALLIQUA, INC.

WARRANT

Warrant No. [ ]

Dated: [ ]

Alliqua, Inc., a Florida corporation (the “ Company ”), hereby certifies that, for value received, Celgene Corporation, a Delaware corporation or its registered assigns (the “ Holder ”), is entitled to purchase from the Company up to a total of [ ] ¹ shares of common stock, $0.001 par value per share (the “ Common Stock ”) of the Company (each such share, a “ Warrant Share ” and all such shares, the “ Warrant Shares ”) at an exercise price equal to $[ ] ² per share (as adjusted from time to time as provided in Section 8 , the “ Exercise Price ”), at any time and on or after [ ] (the “ Initial Exercise Date ”) and through and including the date that is five (5) years from the Initial Exercise Date, or if such day is not a Business Day (as defined in the Purchase Agreement, as defined below), on the next preceding Business Day (the “ Expiration Date ”), and subject to the following terms and conditions. This Warrant (this “ Warrant ”) is issued pursuant to that certain [ ], dated as of [ ], by and among the Company and the Holder (the “ Purchase Agreement ”).

¹ For the Initial Warrants, 50% of the Common Shares issued to the Investor at the Closing. For the Additional Warrants, 50% of the shares issued to Investor and its Affiliates in the Equity Financing.

² For the Initial Warrants, $0.13 per share. For the Additional Warrants, 135% of the price per share paid by Investor and its Affiliates in the Equity Financing.

3. Exercise and Duration of Warrant .

4. Delivery of Warrant Shares .

8. Certain Adjustments . The Exercise Price and number of Warrant Shares issuable upon exercise of this Warrant are subject to adjustment from time to time as set forth in this Section 8 .

(d) Calculations . All calculations under this Section 8 shall be made to the nearest cent or the nearest 1/100th of a share, as applicable.

13. Miscellaneous

(d) The headings herein are for convenience only, do not constitute a part of this Warrant and shall not be deemed to limit or affect any of the provisions hereof.

SIGNATURE PAGE FOLLOWS

IN WITNESS WHEREOF, the Company has caused this Warrant to be duly executed by its authorized officer as of the date first indicated above.

ALLIQUA, INC.

By:
		Name:
		Title:

FORM OF EXERCISE NOTICE

(To be executed by the Holder to exercise the right to purchase shares of Common Stock under the foregoing Warrant)

To Alliqua, Inc.:

The undersigned is the Holder of Warrant No. (the “ Warrant ”) issued by Alliqua, Inc., a Florida corporation (the “ Company ”). Capitalized terms used herein and not otherwise defined have the respective meanings set forth in the Warrant.

1.	The Warrant is currently exercisable to purchase a total of Warrant Shares.

2.	The undersigned Holder hereby exercises its right to purchase Warrant Shares pursuant to the Warrant.

3.	The holder shall pay the sum of $ to the Company in accordance with the terms of the Warrant.

4.	Pursuant to this exercise, the Company shall deliver to the holder Warrant Shares in accordance with the terms of the Warrant.

5.	Following this exercise, the Warrant shall be exercisable to purchase a total of Warrant Shares.


Dated:						Name of Holder:

						(Print)

						By:
						Name:
						Title:


ACKNOWLEDGED AND AGREED TO this day of , 20
ACKNOWLEDGED AND AGREED TO this day of , 20

ALLIQUA, INC.

By:
		Name:
		Title:

FORM OF ASSIGNMENT

[To be completed and signed only upon transfer of Warrant]

FOR VALUE RECEIVED, the undersigned hereby sells, assigns and transfers unto the right represented by the within Warrant to purchase shares of Common Stock of Alliqua, Inc. to which the within Warrant relates and appoints attorney to transfer said right on the books of Alliqua, Inc. with full power of substitution in the premises.


Dated:		,

Address of Transferee

In the presence of:

Exhibit B

OPINION OF COMPANY COUNSEL

1. The Company is a corporation duly incorporated, validly existing and in good standing under the laws of the State of Florida.

2. The authorized capital stock of the Company consists of [_______] shares of Common Stock, $.001 par value, and [_________] shares of Preferred Stock, par value $.[__] per share.

3. The Company has all necessary corporate power and authority to execute and deliver the Agreement, to perform its obligations thereunder and to consummate the transactions contemplated thereby.

4. The Company has all necessary power and authority to issue and deliver the Common Shares; the Common Shares have been duly authorized, and, when duly issued and delivered to the Investor, will be duly and validly issued, fully paid and nonassessable and will be issued in compliance with federal and state securities laws.

5. Assuming the accuracy of the representations and warranties of the Investor contained in the Agreement and the compliance of such parties with the agreements set forth herein and therein, it is not necessary, in connection with the issuance and sale of the Common Shares, in the manner contemplated by the Agreement, to register the Securities under the Securities Act.

Exhibit 10.51

ALLIQUA, INC.

Securities Purchase Agreement

NOVEMBER 18, 2013

TABLE OF CONTENTS

		PAGE

ARTICLE	1 DEFINITIONS	1

ARTICLE	2 PURCHASE AND SALE	3

2.1	Purchase and Sale of Stock and Warrants; Closing	3
2.2	Adjustments in Share Numbers and Prices	4
2.3	Reserve Shares	4
2.4	Closing Deliveries	4

ARTICLE	3 REPRESENTATIONS AND WARRANTIES	4

3.1	Representations and Warranties of the Company	4
3.2	Representations and Warranties of the Investors	11

ARTICLE	4 OTHER AGREEMENTS OF THE PARTIES	13

4.1	Filing of Reports	13
4.2	Listing of Shares	13
4.3	Use of Proceeds	14
4.4	Lock-Up	14

ARTICLE	5 CONDITIONS	14

5.1	Conditions Precedent to the Obligations of the Investors	14
5.2	Conditions Precedent to the Obligations of the Company	15

ARTICLE	6 GENERAL PROVISIONS	15

6.1	Termination	15
6.2	Fees and Expenses	15
6.3	Entire Agreement	15
6.4	Notices	16
6.5	Amendments; Waivers	16
6.6	Construction	16
6.7	Successors and Assigns	16
6.8	No Third-Party Beneficiaries	16
6.9	Governing Law; Venue; Waiver of Jury Trial	17
6.10	Survival	17
6.11	Execution	17
6.12	Severability	17
6.13	Replacement of Certificates	17
6.14	Remedies	18

Exhibit A :

Form of Warrants

SECURITIES PURCHASE AGREEMENT

THIS SECURITIES PURCHASE AGREEMENT (this “ Agreement ”), dated as of November 18, 2013, by and among Alliqua, Inc., a Florida corporation (the “ Company ”), and each of the investors identified on the signature pages hereto (each, an “ Investor ” and together, the “ Investors ”).

The parties hereto agree as follows:

ARTICLE 1
DEFINITIONS

In addition to the terms defined elsewhere in this Agreement, the following terms have the meanings indicated:

“ Agreement ” has the meaning set forth in the Preamble.

“ Business Day ” means any day (other than a Saturday, Sunday or a legal holiday) on which banks are open for general business in New York, New York.

“ Celgene Transaction Documents ” means that certain (a) Stock Purchase Agreement, dated as of November 14, 2103, by and between the Company and Celgene Corporation (the “ Celgene SPA ”), (b) License, Marketing and Development Agreement, dated as of November 14, 2013, by and between the Company and Anthrogenesis Corporation d/b/a CCT, and (c) Supply Agreement, dated as of November 14, 2013, by and between the Company and Anthrogenesis Corporation d/b/a CCT.

“ Closing ” means the closing of the purchase and sale of the Common Shares and Warrants pursuant to Section 2.1.

“ Closing Date ” means the date and time of the Closing and shall take place at 4:00 p.m. EST on November 18, 2013, or on such other date and time as is mutually agreed to by the Company and the Majority-in-Interest .

“Company” has the meaning set forth in the Preamble.

“ Common Shares ” has the meaning set forth in Section 2.1(a) .

“ Common Stock ” has the meaning set forth in Section 2.1(a) .

“ Convertible Securities ” means any stock or securities (other than Options) convertible into or exercisable or exchangeable for Common Stock.

“ Disclosure Materials ” has the meaning set forth in Section 3.1(g).

“ Exchange Act ” means the Securities Exchange Act of 1934, as amended.

“ GAAP ” has the meaning set forth in Section 3.1(g).

“ Intellectual Property Rights ” has the meaning set forth in Section 3.1(q).

“ Investor ” or “ Investors ” has the meaning set forth in the Preamble.

“ Lien ” means any lien, charge, claim, security interest, encumbrance, right of first refusal or other restriction.

“ Majority-in-Interest ” means Investors holding at least a majority of the Common Shares then outstanding.

“ Material Adverse Effect ” means (a) a material adverse effect on the results of operations, assets, business or financial condition of the Company and the Subsidiaries taken as a whole on a consolidated basis or (b) a material and adverse effect on the legality, validity or enforceability of this Agreement, provided, that none of the following alone shall be deemed, in and of itself, to constitute a Material Adverse Effect: (x) a change in the market price or trading volume of the Common Stock, (y) changes in general economic conditions or changes affecting the industry in which the Company operates generally (as opposed to Company-specific changes) so long as such changes do not have a disproportionate effect on the Company and the Subsidiaries taken as a whole, or (z) effects resulting from or relating to the announcement or disclosure of the sale of the Common Shares or other transactions contemplated by, or being taken in connection with, this Agreement or the Celgene Transaction Documents.

“ Material Permits ” has the meaning set forth in Section 3.1(r).

“ Options ” means any outstanding rights, warrants or options to subscribe for or purchase Common Stock or Convertible Securities.

“ Per Share Purchase Price ” has the meaning set forth in Section 2.1(a).

“ Purchase Price ” has the meaning set forth in Section 2.1(a).

“SEC” means the United States Securities and Exchange Commission.

“ SEC Reports ” has the meaning set forth in Section 3.1(g).

“ Securities Act ” means the Securities Act of 1933, as amended .

“ Subsidiary ” means any entity in which the Company, directly or indirectly, owns capital stock or holds an equity or similar interest.

“ Trading Day ” means a day on which the Common Stock is traded on a Trading Market; provided, that in the event that the Common Stock is not listed or quoted on a Trading Market, then Trading Day shall mean a Business Day.

“ Trading Market ” means whichever of the New York Stock Exchange, the NYSE MKT, the NASDAQ Global Select Market, the NASDAQ Global Market, the NASDAQ Capital Market, the OTC Bulletin Board or any over the counter market operated by OTC Markets Group Inc. (or any similar organization or agency succeeding to its functions of reporting prices) on which the Common Stock is listed or quoted for trading on the date in question.

“ Transaction ” has the meaning set forth in Section 3.2(h).

“ Transaction Documents ” means this Agreement, the Warrants and the schedules and exhibits referred to herein.

“ Transfer Agent ” means Action Stock Transfer Corp., or any successor transfer agent for the Company.

“ Warrant Shares ” has the meaning set forth in Section 2.3.

“ Warrants ” has the meaning set forth in Section 2.1(b).

ARTICLE 2
PURCHASE AND SALE

2.1 Purchase and Sale of Stock and Warrants; Closing.

(a) Upon the following terms and conditions, on the Closing Date the Company shall issue and sell to each Investor, and each Investor shall, severally and not jointly, purchase from the Company, that number of shares of the Company’s common stock, par value $0.001 per share (the “ Common Stock ”), as is set forth on each such Investor’s signature page hereto (collectively, the “ Common Shares ”), at a price per share equal to $0.082 (the “ Per Share Purchase Price ,” and such amounts in the aggregate, the “ Purchase Price ”).

(b) The Company further agrees to issue to each Investor on the Closing Date, in consideration for the Purchase Price, a Warrant in substantially the form attached hereto as Exhibit A (each a “ Warrant ” and collectively, the “ Warrants ”), to purchase that number of shares of Common Stock as is equal to fifty percent (50%) of the number of Common Shares purchased by each such Investor hereunder. The Warrants shall have an initial term of five (5) years from their issuance date and shall have an initial exercise price per share equal to $0.13.

(c) The Closing shall take place by the electronic exchange of executed Transaction Documents.

2.2 Adjustments in Share Numbers and Prices. In the event of any stock split, subdivision, dividend or distribution payable in shares of Common Stock (or other securities or rights convertible into, or entitling the holder thereof to receive directly or indirectly shares of Common Stock), combination or other similar recapitalization or event occurring after the date hereof, each reference in this Agreement to the number of Common Shares and the Per Share Purchase Price shall be amended to appropriately account for such event.

2.3 Reserve Shares . The Company has authorized and has reserved and covenants to continue to reserve, free of preemptive rights and other similar contractual rights of shareholders, a number of shares of Common Stock equal to the number of shares of Common Stock issuable upon the exercise of the Warrants (the “ Warrant Shares ”).

2.4 Closing Deliveries .

(a) At the Closing, the Company shall deliver or cause to be delivered to each Investor (i) a copy of the Company’s irrevocable instructions to the Transfer Agent instructing the Transfer Agent to promptly deliver one or more stock certificates, free and clear of all restrictive and other legends (except for a customary legend to the effect that the Common Shares have not been registered under the Securities Act), evidencing the Common Shares purchased by such Investor hereunder, registered in the name of such Investor and (ii) a Warrant to purchase that number of Warrant Shares equal to fifty percent (50%) of the number of Common Shares purchased by such Investor hereunder.

(b) At the Closing, each Investor shall deliver or cause to be delivered to the Company the Purchase Price for such Investor’s Common Shares and Warrants in United States dollars by wire transfer to an account designated in writing to such Investor by the Company for such purpose.

ARTICLE 3
REPRESENTATIONS AND WARRANTIES

3.1 Representations and Warranties of the Company. The Company hereby represents and warrants to the Investors that, except as set forth in the SEC Reports or in the Schedules delivered concurrently herewith:

(b) Subsidiaries. The Company owns or controls, directly or indirectly, all of the capital stock or comparable equity interests of each Subsidiary free and clear of any Lien, and all issued and outstanding shares of capital stock or comparable equity interest of each Subsidiary are validly issued and are fully paid, non-assessable and free of preemptive and similar rights; and the Company has no Subsidiaries other than the following corporations: (i) AquaMed Technologies, Inc., a Delaware corporation, (ii) Alliqua Biomedical, Inc. a Delaware corporation, and (iii) Hepalife Biosystems, Inc. a Nevada corporation.

(c) Authorization; Enforcement. The Company has the requisite corporate authority to enter into and to consummate the transactions contemplated by this Agreement and each of the other Transaction Documents to which it is a party and otherwise to carry out its obligations hereunder and thereunder including the issuance and sale of the Common Shares and Warrants. The execution and delivery by the Company of this Agreement and each of the other Transaction Documents to which it is party and the consummation by it of the transactions contemplated hereby and thereby have been duly authorized by all necessary corporate action on the part of the Company and no further consent or action is required by the Company, its Board of Directors or its shareholders. Each of the Transaction Documents to which to Company is party to has been duly executed by the Company and is the valid and binding obligation of the Company enforceable against the Company in accordance with its terms, except (i) as limited by general equitable principles and applicable bankruptcy, insolvency, reorganization, moratorium and other laws of general application affecting enforcement of creditors’ rights generally, and (ii) as limited by laws relating to the availability of specific performance, injunctive relief or other equitable remedies.

(d) No Conflicts. The execution, delivery and performance by the Company of this Agreement and the other Transaction Documents it is party to and the consummation by the Company of the transactions contemplated hereby and thereby do not, and will not, (i) conflict with or violate any provision of the Company’s articles of incorporation, bylaws or other organizational or charter documents, (ii) in any material respect, conflict with, or constitute a default (or an event that with notice or lapse of time or both would become a default) under, or give to others any rights of termination, amendment, acceleration or cancellation (with or without notice, lapse of time or both) of, any agreement, credit facility, debt or other instrument (evidencing a Company debt or otherwise) or other understanding to which the Company is a party or by which any property or asset of the Company is bound, or affected, or (iii) in any material respect, result in a violation of any law, rule, regulation, order, judgment, injunction, decree or other restriction of any court or governmental authority to which the Company is subject (including, assuming the accuracy of the representations and warranties of the Investors set forth in Section 3.2 hereof, federal and state securities laws and regulations and the rules and regulations of any self-regulatory organization to which the Company or its securities are subject, including all applicable Trading Markets), or by which any property or asset of the Company is bound or affected, except in the case of clauses (ii) and (iii) such as would not, individually or in the aggregate, have a Material Adverse Effect. Neither the Company nor any Subsidiary is as of the date hereof, nor after giving effect to the transactions contemplated hereby to occur at the Closing, will be Insolvent (as defined below). For purposes of this Section 3.1(d), “Insolvent” means, with respect to the Company or any Subsidiary (i) the present fair saleable value of such Person’s assets is less than the amount required to pay such Person’s debts and liabilities, (ii) such Person is unable to pay its debts and liabilities, subordinated, contingent or otherwise, as such debts and liabilities become absolute and matured, (iii) such Person intends to incur or believes that it will incur debts that would be beyond its ability to pay as such debts mature or (iv) such Person has unreasonably small capital with which to conduct the business in which it is engaged, as such business is now conducted and is proposed to be conducted.

(e) The Common Shares and Warrant Shares. The Common Shares are duly authorized and, when issued and paid for in accordance with this Agreement, will be duly and validly issued, fully paid and nonassessable, free and clear of all Liens (other than restrictions on transfer set forth in this Agreement or imposed by applicable securities laws) and will not be subject to preemptive or similar rights of shareholders. When the Warrant Shares are issued in accordance with the terms of the Warrants, such shares will be duly authorized, validly issued, fully paid and nonassessable, free and clear of all Liens (other than restrictions on transfer set forth in this Agreement or imposed by applicable securities laws) and will not be subject to preemptive or similar rights of shareholders.

(f) Capitalization. The aggregate number of shares and type of all authorized, issued and outstanding classes of capital stock, Options and other securities of the Company (whether or not presently convertible into or exercisable or exchangeable for shares of capital stock of the Company) as of the date hereof is set forth on Schedule 3.1(f). All outstanding shares of capital stock are duly authorized, validly issued, fully paid and nonassessable and have been issued in compliance in all material respects with all applicable securities laws. Except as set forth on Schedule 3.1(f), the Company does not have outstanding any Options, script rights to subscribe to, calls or commitments of any character whatsoever relating to, or securities, rights or obligations convertible into or exercisable or exchangeable for, nor has it entered into any agreement giving any Person any right to subscribe for or acquire, any shares of Common Stock, or securities or rights convertible or exchangeable into shares of Common Stock. Except for customary adjustments as a result of stock dividends, stock splits, combinations of shares, reorganizations, recapitalizations, reclassifications or other similar events, there are no anti-dilution or price adjustment provisions contained in any security issued by the Company (or in any agreement providing rights to security holders) and the issuance and sale of the Common Shares will not obligate the Company to issue shares of Common Stock or other securities to any Person (other than the Investor) and will not result in a right of any holder of securities to adjust the exercise, conversion, exchange or reset price under such securities.

(h) Material Changes; Undisclosed Events, Liabilities or Developments; Solvency. Since the date of the latest audited financial statements included within the SEC Reports, except as specifically disclosed in the SEC Reports or as set forth in Schedule 3.1(h), (i) there has been no event, occurrence or development that, individually or in the aggregate, has had or would reasonably be expected to result in a Material Adverse Effect, (ii) neither the Company nor any Subsidiary has incurred any material liabilities other than (A) trade payables and accrued expenses incurred in the ordinary course of business consistent with past practice and (B) liabilities not required to be reflected in the Company’s financial statements pursuant to GAAP or required to be disclosed in filings made with the SEC, (iii) the Company has not altered materially its method of accounting or changed its auditors, (iv) the Company has not declared or made any dividend or distribution of cash or other property to its shareholders, in their capacities as such, or purchased, redeemed or made any agreements to purchase or redeem any shares of its capital stock (other than in connection with repurchases of unvested stock issued to employees of the Company), and (v) the Company has not issued any equity securities to any officer, director or Affiliate, except pursuant to existing Company stock-based plans. Neither the Company nor any Subsidiary has taken any steps to seek protection pursuant to any bankruptcy law nor does the Company have any knowledge or reason to believe that its creditors intend to initiate involuntary bankruptcy proceedings or any actual knowledge of any fact which would reasonably lead a creditor to do so.

(j) Compliance. Except as would not, individually or in the aggregate, reasonably be expected to result in a Material Adverse Effect, (i) neither the Company nor any Subsidiary is in default under or in violation of (and no event has occurred that has not been waived that, with notice or lapse of time or both, would result in a default by the Company or any Subsidiary under), nor has the Company or any Subsidiary received written notice of a claim that it is in default under or that it is in violation of, any indenture, loan or credit agreement or any other agreement or instrument to which it is a party or by which it or any of its properties is bound (whether or not such default or violation has been waived), (ii) neither the Company nor any Subsidiary is in violation of any order of any court, arbitrator or governmental body, and (iii) neither the Company nor any Subsidiary is or has been in violation of any statute, rule or regulation of any governmental authority. The Company has not taken, in violation of applicable law, any action designed to or that would have reasonably expected to cause or result in stabilization or manipulation of the price of the Common Stock to facilitate the sale of the Common Shares and Warrants.

(k) Placement Agent’s Fees. The Company shall be responsible for the payment of any placement agent’s fees, financial advisory fees, or brokers’ commission (other than for persons engaged by the Investor or its Affiliates) relating to or arising out of the issuance of the Common Shares and Warrants to the Investors pursuant to this Agreement. The Company shall pay, and hold the Investors harmless against, any liability, loss or expense (including, without limitation, reasonable attorney’s fees and out-of-pocket expenses) arising in connection with any such claim for fees arising out of the issuance of the Common Shares and Warrants pursuant to this Agreement. Except for Summer Street Research Partners (“ Summer Street ”), as placement agent in connection with the offer and sale of Common Shares and Warrants pursuant this Agreement, which the Company has agreed to pay a cash fee of 7% of the Purchase Price and issue a warrant, in the form of the Warrant, to purchase such number of shares of Common Stock equal to 7% of the number of Common Shares sold pursuant to this Agreement, the Company does not intend to pay any placement agent’s fees, financial advisory fees, or brokers’ commissions in connection with the sale of the Common Shares and Warrants.

(l) Private Placement; Investment Company; U.S. Real Property Holding Corporation. Neither the Company nor any of its Affiliates nor, any Person acting on the Company’s behalf has, directly or indirectly, at any time within the past six months, made any offer or sale of any security or solicitation of any offer to buy any security under circumstances that would (i) eliminate the availability of the exemption from registration under Regulation D under the Securities Act in connection with the offer and sale by the Company of the Common Shares and Warrants as contemplated hereby or (ii) cause the offering of the Common Shares and Warrants pursuant hereto to be integrated with prior offerings by the Company for purposes of any applicable law, regulation or shareholder approval provisions, including, without limitation, under the rules and regulations of any Trading Market. Assuming the accuracy of the representations and warranties of the Investors set forth in Section 3.2, no registration under the Securities Act is required for the offer and sale of the Common Shares and Warrants by the Company to the Investor as contemplated hereby. The Company is not required to be registered as, and is not an Affiliate of, an “investment company” within the meaning of the Investment Company Act of 1940, as amended. The Company is not required to be registered as a United States real property holding corporation within the meaning of the Foreign Investment in Real Property Tax Act of 1980.

(n) Application of Takeover Protections. The Company and its Board of Directors have taken all necessary action, if any, including under the Florida Business Corporation Act, to render inapplicable any control share acquisition, business combination, poison pill (including any distribution under a rights agreement) or other similar anti-takeover provision under the Company’s charter documents or the laws of its state of incorporation that is or could become applicable to the Investors or their Affiliates as a result of the Investors and the Company fulfilling their obligations or exercising their rights under the Transaction Documents, including, without limitation, as a result of the Company’s issuance of the Common Shares and Warrants to the Investors and the Investors’ ownership thereof.

(o) Disclosure. All written disclosure provided by the Company to the Investors regarding the Company, its business and the transactions contemplated hereby are true and correct in all material respects and do not contain any untrue statement of a material fact or omit to state any material fact necessary in order to make the statements made therein, in the light of the circumstances under which they were made, not misleading. To the Company’s knowledge, no event or circumstance has occurred or information exists with respect to the Company or any Subsidiary or their respective business, properties, operations or financial condition, which, under applicable law, rule or regulation, requires public disclosure or announcement by the Company but which has not been so publicly announced or disclosed.

3.2 Representations and Warranties of the Investors. Each Investor, severally and not jointly, hereby represents and warrants to the Company as follows:

(a) Organization; Authority. Such Investor has full power and authority to enter into and to consummate the transactions contemplated by this Agreement and otherwise to carry out its obligations hereunder. The purchase by such Investor of the Common Shares and Warrants hereunder has been duly authorized by all necessary corporate action on the part of such Investor. This Agreement has been duly executed and delivered by such Investor and constitutes the valid and binding obligation of such Investor, enforceable against it in accordance with its terms, except (i) as limited by general equitable principles and applicable bankruptcy, insolvency, reorganization, moratorium and other laws of general application affecting enforcement of creditors’ rights generally, and (ii) as limited by laws relating to the availability of specific performance, injunctive relief or other equitable remedies.

(b) No Public Sale or Distribution. Such Investor is acquiring the Common Shares and Warrants for its own account and not with a view towards, or for resale in connection with, the public sale or distribution thereof, except pursuant to sales registered under the Securities Act or under an exemption from such registration and in compliance with applicable federal and state securities laws, and such Investor does not have a present arrangement to effect any distribution of the Common Shares or Warrants to or through any person or entity; provided , however , that by making the representations herein, such Investor does not agree to hold any of the Common Shares or Warrant Shares for any minimum or other specific term and reserves the right to dispose of the Common Shares or Warrant Shares at any time in accordance with or pursuant to a registration statement or an exemption under the Securities Act.

(c) Investor Status. At the time such Investor was offered the Common Shares and Warrants, it was, and at the date hereof it is an “accredited investor” as defined in Rule 501(a) under the Securities Act and as indicated by such Investor’s response to the investor questionnaire attached hereto as Schedule A. Such Investor is not a registered broker dealer registered under Section 15(a) of the Exchange Act, or a member of the Financial Industry Regulatory Authority, Inc. or an entity engaged in the business of being a broker dealer.

(d) Experience of Such Investor. Such Investor, either alone or together with its representatives, has such knowledge, sophistication and experience in business and financial matters so as to be capable of evaluating the merits and risks of the prospective investment in the Common Shares and Warrants, and has so evaluated the merits and risks of such investment. Such Investor understands that it must bear the economic risk of this investment in the Common Shares and Warrants indefinitely, and is able to bear such risk and is able to afford a complete loss of such investment.

(e) Access to Information. Such Investor acknowledges that it has reviewed the Disclosure Materials and has been afforded: (i) the opportunity to ask such questions as it has deemed necessary of, and to receive answers from, representatives of the Company concerning the terms and conditions of the offering of the Common Shares and Warrants and the merits and risks of investing in the Common Shares and Warrants; (ii) access to information (other than material non-public information) about the Company and its financial condition, results of operations, business, properties, management and prospects sufficient to enable it to evaluate its investment; and (iii) the opportunity to obtain such additional information that the Company possesses or can acquire without unreasonable effort or expense that is necessary to make an informed investment decision with respect to the investment. Neither such inquiries nor any other investigation conducted by or on behalf of such Investor or its representatives or counsel shall modify, amend or affect such Investor’s right to rely on the truth, accuracy and completeness of the Disclosure Materials and the Company’s representations and warranties contained in the Transaction Documents.

(f) No Conflicts. The execution, delivery and performance by such Investor of this Agreement and the consummation by such Investor of the transactions contemplated hereby will not (i) to the extent such Investor is not a natural person, result in a violation of the organizational documents of such Investor or (ii) conflict with, or constitute a default (or an event which with notice or lapse of time or both would become a default) under, or give to others any rights of termination, amendment, acceleration or cancellation of, any agreement, indenture or instrument to which such Investor is a party, or (iii) result in a violation of any law, rule, regulation, order, judgment or decree (including federal and state securities laws) applicable to such Investor, except in the case of clauses (ii) and (iii) above, for such that are not material and do not otherwise affect the ability of such Investor to consummate the transactions contemplated hereby.

(g) Restricted Securities. Such Investor understands that the Common Shares, Warrants and Warrant Shares (upon issuance) are characterized as “restricted securities” under the U.S. federal securities laws inasmuch as they are being acquired from the Company in a transaction not involving a public offering and that under such laws and applicable regulations such securities may be resold without registration under the Securities Act only in certain limited circumstances. Such Investor further understands that the certificates evidencing the Common Shares, Warrants and Warrant Shares purchased by it will contain the following legend:

(h) Prohibited Transactions . Such Investor has not, directly or indirectly, and no Person acting on behalf of or pursuant to any understanding with such Investor has, engaged in any purchases or sales in the securities, including derivatives, of the Company (including, without limitation, any Short Sales (a “ Transaction ”) involving any of the Company’s securities) since the time that such Investor was first contacted by the Company or any other Person regarding an investment in the Company. Such Investor covenants that neither it nor any Person acting on its behalf or pursuant to any understanding with such Investor will engage, directly or indirectly, in any Transactions in the securities of the Company (including Short Sales) prior to the time the transactions contemplated by this Agreement are publicly disclosed.

ARTICLE 4
OTHER AGREEMENTS OF THE PARTIES

4.1 Filing of Reports. Until the date that all Investors (or any transferee that is an Affiliate of such Investor) cease to own any Common Shares or Warrant Shares, the Company covenants to use its commercially reasonable efforts to (a) timely file (or obtain extensions in respect thereof and file within the applicable grace period) all reports required to be filed by the Company after the date hereof pursuant to the Securities Act and the Exchange Act, (b) comply with the requirements of Rule 144(c) under the Securities Act with respect to current public information about the Company, and (c) furnish to each Investor promptly upon request therefor (i) a written statement by the Company as to its compliance with the requirements of Rule 144(c) under the Securities Act, and the reporting requirements under the Securities Act and the Exchange Act, and (ii) such reports and documents of the Company as such Investor may reasonably request to avail itself (or its Affiliates) of any similar rule or regulation of the SEC allowing it (or its Affiliates) to sell any such securities without registration.

4.2 Listing of Shares . Promptly following the date hereof, the Company shall take all necessary action to cause the Common Shares and Warrant Shares to be qualified for trading on the OTCQB. If the Company applies to have its Common Stock or other securities traded on any other principal stock exchange or market, it shall include in such application the Common Shares and Warrant Shares and will take such other action as is necessary to cause such Common Shares and Warrant Shares to be so listed.

4.3 Use of Proceeds. The Company will use the net proceeds from the sale of the Common Shares and Warrants for working capital and general corporate purposes.

4.4 Lock-Up. During the six (6) month period following the Closing, each Investor shall not, without the consent of the Company, issue, sell, offer or agree to sell, grant any option for the sale of, pledge, enter into any swap, derivative transaction or other arrangement that transfers to another, in whole or in part, any of the economic consequences of ownership of any of the Common Shares or Warrant Shares (whether any such transaction is to be settled by delivery of Common Shares or Warrant Shares, other securities, cash or other consideration) or otherwise dispose (or publicly announce the undersigned’s intention to do any of the foregoing) of, directly or indirectly, any Common Shares or Warrant Shares. Notwithstanding anything in this Agreement to the contrary, subject to the requirements of Section 6.7, no Investor shall be restricted from transferring any of the Common Shares or Warrant Shares to any Affiliate of such Investor.

ARTICLE 5
CONDITIONS

5.1 Conditions Precedent to the Obligations of the Investors. The obligation of the Investors to purchase the Common Shares and Warrants at the Closing is subject to the satisfaction or waiver by the Majority-in-Interest, at or before the Closing, of each of the following conditions:

(c) No Suspensions of Trading in Common Stock. Trading in the Common Stock shall not have been suspended by the SEC or any other applicable authority at any time since the date of execution of this Agreement;

(d) Absence of Litigation. No action, suit or proceeding by or before any court or any governmental body or authority, against the Company or pertaining to the transactions contemplated by this Agreement or their consummation, shall have been instituted on or before the Closing Date, which action, suit or proceeding would, if determined adversely, have a Material Adverse Effect; and

(e) No Injunction. No preliminary or permanent injunction or other order issued by a court of competent jurisdiction which prevents the consummation of the transactions contemplated by any of the Transaction Documents shall have been issued and remain in effect, provided, however, that the parties shall use their respective commercially reasonable efforts to have any such order or injunction lifted.

5.2 Conditions Precedent to the Obligations of the Company. The obligation of the Company to sell the Common Shares and Warrants at the Closing is subject to the satisfaction or waiver by the Company, at or before the Closing, of each of the following conditions:

(a) Representations and Warranties. The representations and warranties of each Investor contained herein shall be true and correct in all material respects as of the date when made and as of the Closing Date as though made on and as of such date (except for representations and warranties that speak as of a specific date, which shall be true and correct as of such specific date);

(b) Performance. Each Investor shall have performed, satisfied and complied in all material respects with all covenants, agreements and conditions required by the Transaction Documents to be performed, satisfied or complied with by such Investor at or prior to the Closing; and

(c) No Injunction. No preliminary or permanent injunction or other order issued by a court of competent jurisdiction which prevents the consummation of the transactions contemplated hereby shall have been issued and remain in effect, provided, however, that the parties shall use their respective commercially reasonable efforts to have any such order or injunction lifted.

ARTICLE 6
GENERAL PROVISIONS

6.1 Termination. This Agreement may be terminated by the Company or the Majority-in-Interest, by written notice to the other parties, if the Closing has not been consummated by November 29, 2013; provided that no such termination will affect the right of any party to sue for any breach by the other party (or parties) occurring prior to such termination.

6.2 Fees and Expenses. Except as expressly set forth in the Transaction Documents to the contrary, each party shall pay the fees and expenses of its advisers, counsel, accountants and other experts, if any, and all other expenses incurred by such party incident to the negotiation, preparation, execution, delivery and performance of this Agreement. The Company shall pay all Transfer Agent fees, stamp taxes and other taxes and duties levied in connection with the sale and issuance of the Common Shares.

6.3 Entire Agreement. This Agreement, together with the Exhibits and Schedules hereto, contains the entire understanding of the parties with respect to the subject matter hereof and supersedes all prior agreements and understandings, oral or written, with respect to such matters, which the parties acknowledge have been merged into such documents, exhibits and schedules. At or after the Closing, and without further consideration, the Company will execute and deliver to each Investor such further documents as may be reasonably requested in order to give practical effect to the intention of the parties under this Agreement.

6.4 Notices. Any and all notices or other communications or deliveries required or permitted to be provided hereunder shall be in writing and shall be deemed given and effective on the earliest of (a) the date of transmission, if such notice or communication is delivered via facsimile or email at the facsimile number or email address specified in this Section prior to 6:30 p.m. (New York City time) on a Trading Day, (b) the next Trading Day after the date of transmission, if such notice or communication is delivered via facsimile or email at the facsimile number or email address specified in this Section on a day that is not a Trading Day or later than 6:30 p.m. (New York City time) on any Trading Day, (c) the Trading Day following the date of deposit with a nationally recognized overnight courier service, or (d) upon actual receipt by the party to whom such notice is required to be given. The addresses, facsimile numbers and email addresses for such notices and communications are those set forth on the signature pages hereof, or such other address or facsimile number as may be designated in writing hereafter, in the same manner, by any such Person.

6.5 Amendments; Waivers. No provision of this Agreement may be waived or amended except in a written instrument signed, in the case of an amendment, by the Company and the Majority-in-Interest or, in the case of a waiver, by the party against whom enforcement of any such waiver is sought. No waiver of any default with respect to any provision, condition or requirement of this Agreement shall be deemed to be a continuing waiver in the future or a waiver of any subsequent default or a waiver of any other provision, condition or requirement hereof, nor shall any delay or omission of any party to exercise any right hereunder in any manner impair the exercise of any such right.

6.6 Construction. The headings herein are for convenience only, do not constitute a part of this Agreement and shall not be deemed to limit or affect any of the provisions hereof. The language used in this Agreement will be deemed to be the language chosen by the parties to express their mutual intent, and no rules of strict construction will be applied against any party.

6.7 Successors and Assigns. This Agreement shall be binding upon and inure to the benefit of the parties and their successors and permitted assigns. The Company may not assign this Agreement or any rights or obligations hereunder without the prior written consent of the Majority-in-Interest. Each Investor may assign its rights under this Agreement to any Person to whom such Investor assigns or transfers any of such Investor’s Common Shares, provided (i) such Investor agrees in writing with the transferee or assignee to assign such rights, and a copy of such agreement is furnished to the Company after such assignment, (ii) the Company is furnished with written notice of the name and address of such transferee or assignee, (iii) following such transfer or assignment, the further disposition of such securities by the transferee or assignee is restricted under the Securities Act and applicable state securities laws, (iv) such transferee agrees in writing to be bound, with respect to the transferred Common Shares, by the provisions hereof that apply to the “Investor” and such transferee is not a competitor of, or Affiliated with a competitor of, the Company and (v) such transfer shall have been made in accordance with the applicable requirements of this Agreement and with all laws applicable thereto.

6.8 No Third-Party Beneficiaries. This Agreement is intended for the benefit of the parties hereto and their respective successors and permitted assigns and is not for the benefit of, nor may any provision hereof be enforced by, any other Person.

6.9 Governing Law; Venue; Waiver of Jury Trial. ALL QUESTIONS CONCERNING THE CONSTRUCTION, VALIDITY, ENFORCEMENT AND INTERPRETATION OF THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK. THE COMPANY AND THE INVESTORS HEREBY IRREVOCABLY SUBMIT TO THE EXCLUSIVE JURISDICTION OF THE STATE AND FEDERAL COURTS SITTING IN THE CITY OF NEW YORK, BOROUGH OF MANHATTAN FOR THE ADJUDICATION OF ANY DISPUTE BROUGHT BY THE COMPANY OR THE INVESTOR HEREUNDER, IN CONNECTION HEREWITH OR WITH ANY TRANSACTION CONTEMPLATED HEREBY OR DISCUSSED HEREIN, AND HEREBY IRREVOCABLY WAIVE, AND AGREE NOT TO ASSERT IN ANY SUIT, ACTION OR PROCEEDING BROUGHT BY THE COMPANY OR ANY INVESTOR, ANY CLAIM THAT IT IS NOT PERSONALLY SUBJECT TO THE JURISDICTION OF ANY SUCH COURT, OR THAT SUCH SUIT, ACTION OR PROCEEDING IS IMPROPER. EACH PARTY HEREBY IRREVOCABLY WAIVES PERSONAL SERVICE OF PROCESS AND CONSENTS TO PROCESS BEING SERVED IN ANY SUCH SUIT, ACTION OR PROCEEDING BY MAILING A COPY THEREOF VIA REGISTERED OR CERTIFIED MAIL OR OVERNIGHT DELIVERY (WITH EVIDENCE OF DELIVERY) TO SUCH PARTY AT THE ADDRESS IN EFFECT FOR NOTICES TO IT UNDER THIS AGREEMENT AND AGREES THAT SUCH SERVICE SHALL CONSTITUTE GOOD AND SUFFICIENT SERVICE OF PROCESS AND NOTICE THEREOF. NOTHING CONTAINED HEREIN SHALL BE DEEMED TO LIMIT IN ANY WAY ANY RIGHT TO SERVE PROCESS IN ANY MANNER PERMITTED BY LAW. THE COMPANY AND THE INVESTORS HEREBY WAIVE ALL RIGHTS TO A TRIAL BY JURY.

6.10 Survival. The representations and warranties, agreements and covenants contained herein shall survive the Closing.

6.11 Execution. This Agreement may be executed in two or more counterparts, all of which when taken together shall be considered one and the same agreement and shall become effective when counterparts have been signed by each party and delivered to the other party, it being understood that both parties need not sign the same counterpart. In the event that any signature is delivered by facsimile transmission or email attachment, such signature shall create a valid and binding obligation of the party executing (or on whose behalf such signature is executed) with the same force and effect as if such facsimile or email-attached signature page were an original thereof.

6.12 Severability. If any provision of this Agreement is held to be invalid or unenforceable in any respect, the validity and enforceability of the remaining terms and provisions of this Agreement shall not in any way be affected or impaired thereby and the parties will attempt to agree upon a valid and enforceable provision that is a reasonable substitute therefor, and upon so agreeing, shall incorporate such substitute provision in this Agreement.

6.13 Replacement of Certificates. If any certificate or instrument evidencing any Common Shares is mutilated, lost, stolen or destroyed, the Company shall issue or cause to be issued in exchange and substitution for and upon cancellation thereof, or in lieu of and substitution therefor, a new certificate or instrument, but only upon receipt of evidence reasonably satisfactory to the Company of such loss, theft or destruction and the execution by the holder thereof of a customary lost certificate affidavit of that fact and an agreement to indemnify and hold harmless the Company for any losses in connection therewith.

6.14 Remedies. In addition to being entitled to exercise all rights provided herein or granted by law, including recovery of damages, each of the Investors and the Company will be entitled to seek specific performance under this Agreement. The parties agree that monetary damages may not be adequate compensation for any loss incurred by reason of any breach of obligations described in the foregoing sentence and hereby agree to waive in any action for specific performance of any such obligation (other than in connection with any action for a temporary restraining order) the defense that a remedy at law would be adequate.

[SIGNATURE PAGES TO FOLLOW]

IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly executed by their respective authorized signatories as of the date first indicated above.

	Alliqua, INC.

	By:	/s/ Brian Posner
		Name: Brian Posner
		Title: Chief Financial Officer

	Address for Notice:

	2150 Cabot Boulevard West
	Langhorne, PA 19047
	Attn: Chief Executive Officer
	Facsimile No.: (215) 702-8535
	Telephone No.: _____________

	With a copy (which shall not constitute notice) to:

	Haynes and Boone, LLP
	30 Rockefeller Plaza
	26 ^th Floor
	New York, New York 10112
	Attn: Rick Werner, Esq.
	Facsimile No.: (212) 884-8234
	Telephone No.: (212) 659-4974

Signature Page to Securities Purchase Agreement

	Investors:

	[_____________________]

	By:
	Name:
	Title:

	Address for Notice:
	___________________________________
	___________________________________
	___________________________________
	Attention: ___________________________
	Facsimile: (___)______________________
	Telephone: (___)______________________

	Number of Common Shares:	_________________________

	Number of Warrant Shares:	_________________________

	Purchase Price:	$________________________

	Tax ID Number:	_________________________

Delivery Instructions (if different from above):

___________________________________

Attention: ___________________________

Facsimile: (___)______________________

Telephone: (___)______________________

Other Special Instructions: ___________________________________________

Signature Page to Securities Purchase Agreement

Exhibit A

FORM OF WARRANT

Schedule A

ACCREDITED INVESTOR QUESTIONNAIRE

For Individual Investors Only

(All individual investors must INITIAL where appropriate. Where there are joint investors both parties must INITIAL):

Initial _______ I certify that I have a “net worth” of at least $1 million either individually or through aggregating my individual holdings and those in which I have a joint, community property or other similar shared ownership interest with my spouse. For purposes of calculating net worth under this paragraph, (i) the primary residence shall not be included as an asset, (ii) to the extent that the indebtedness that is secured by the primary residence is in excess of the fair market value of the primary residence, the excess amount shall be included as a liability, and (iii) if the amount of outstanding indebtedness that is secured by the primary residence exceeds the amount outstanding 60 days prior to investing in this Offering, other than as a result of the acquisition of the primary residence, the amount of such excess shall be included as a liability.

Initial _______ I certify that I have had an annual gross income for the past two years of at least $200,000 (or $300,000 jointly with my spouse) and expect my income (or joint income, as appropriate) to reach the same level in the current year.

For Non-Individual Investors

(all Non-Individual Investors must INITIAL where appropriate):

Initial _______ The undersigned certifies that it is a partnership, corporation, limited liability company or business trust that is 100% owned by persons who meet either of the criteria for Individual Investors, above.

Initial _______ The undersigned certifies that it is a partnership, corporation, limited liability company or business trust that has total assets of at least $5 million and was not formed for the purpose of investing in the Company.

Initial _______ The undersigned certifies that it is an employee benefit plan whose investment decision is made by a plan fiduciary (as defined in ERISA §3(21)) that is a bank, savings and loan association, insurance company or registered investment adviser.

Initial _______ The undersigned certifies that it is an employee benefit plan whose total assets exceed $5,000,000 as of the date of the Purchase Agreement.

Initial _______ The undersigned certifies that it is a self-directed employee benefit plan whose investment decisions are made solely by persons who meet either of the criteria for Individual Investors, above.

Initial _______ The undersigned certifies that it is a U.S. bank, U.S. savings and loan association or other similar U.S. institution acting in its individual or fiduciary capacity.

Initial _______ The undersigned certifies that it is a broker-dealer registered pursuant to §15 of the Securities Exchange Act of 1934, as amended.

Initial _______ The undersigned certifies that it is an organization described in §501(c)(3) of the Internal Revenue Code with total assets exceeding $5,000,000 and not formed for the specific purpose of investing in the Company.

Initial _______ The undersigned certifies that it is a trust with total assets of at least $5,000,000, not formed for the specific purpose of investing in the Company, and whose purchase is directed by a person with such knowledge and experience in financial and business matters that he is capable of evaluating the merits and risks of the prospective investment.

Initial _______ The undersigned certifies that it is a plan established and maintained by a state or its political subdivisions, or any agency or instrumentality thereof, for the benefit of its employees, and which has total assets in excess of $5,000,000.

Initial _______ The undersigned certifies that it is an insurance company as defined in §2(a)(13) of the Securities Act of 1933, as amended, or a registered investment company.

Exhibit 10.62

RESTRICTED STOCK AWARD AGREEMENT

ALLIQUA, INC.

2011 LONG-TERM INCENTIVE PLAN

1. Grant of Award . Pursuant to the Alliqua, Inc. 2011 Long-Term Incentive Plan (the “ Plan ”) for key Employees, key Contractors, and Outside Directors of Alliqua, Inc., a Florida corporation (the “ Company ”),

______________________ _____

(the “ Participant ”)

has been granted a Restricted Stock Award in accordance with Section 6.4 of the Plan. The number of shares of Common Stock awarded under this Restricted Stock Award Agreement (this “ Agreement ”) is ______________________________ (____________________) shares (the “ Awarded Shares ”). The “ Date of Grant ” of this Award is ____________, 20____.

2. Subject to Plan . This Agreement is subject to the terms and conditions of the Plan, and the terms of the Plan shall control to the extent not otherwise inconsistent with the provisions of this Agreement. To the extent the terms of the Plan are inconsistent with the provisions of this Agreement, this Agreement shall control. The capitalized terms used herein that are defined in the Plan shall have the same meanings assigned to them in the Plan unless such terms are otherwise defined herein. This Agreement is subject to any rules promulgated pursuant to the Plan by the Board or the Committee and communicated to the Participant in writing.

3. Vesting . Except as specifically provided in this Agreement and subject to certain restrictions and conditions set forth in the Plan, the Awarded Shares shall vest as follows:

[INSERT VESTING TERMS]

Notwithstanding the foregoing, upon the occurrence of a Change in Control, any unvested Awarded Shares immediately shall vest on the effective date of such Change in Control.

4. Forfeiture of Awarded Shares . Awarded Shares that are not vested in accordance with Section 3 shall be forfeited on the date of the Participant’s Termination of Service. Upon forfeiture, all of the Participant’s rights with respect to the forfeited Awarded Shares shall cease and terminate, without any further obligations on the part of the Company.

5. Restrictions on Awarded Shares . Subject to the provisions of the Plan and the terms of this Agreement, from the Date of Grant until the date the Awarded Shares are vested in accordance with Section 3 and are no longer subject to forfeiture in accordance with Section 4 (the “ Restriction Period ”), the Participant shall not be permitted to sell, transfer, pledge, or assign any of the Awarded Shares. Except for these limitations, the Committee may in its sole discretion, remove any or all of the restrictions on such Awarded Shares whenever it may determine that, by reason of changes in Applicable Laws or other changes in circumstances arising after the date of this Agreement, such action is appropriate.

6. Legend . Awarded Shares electronically registered in the Participant’s name shall note that such shares are Restricted Stock. If certificates for Awarded Shares are issued, the following legend shall be placed on all such certificates:

On the face of the certificate:

“Transfer of this stock is restricted in accordance with conditions printed on the reverse of this certificate.”

On the reverse:

“The shares of stock evidenced by this certificate are subject to and transferable only in accordance with that certain Alliqua, Inc. 2011 Long-Term Incentive Plan, a copy of which is on file at the principal office of the Company in Langhorne, PA. No transfer or pledge of the shares evidenced hereby may be made except in accordance with and subject to the provisions of said Plan. By acceptance of this certificate, any holder, transferee or pledgee hereof agrees to be bound by all of the provisions of said Plan.”

The following legend shall be inserted on a certificate, if issued, evidencing Common Stock issued under the Plan if the shares were not issued in a transaction registered under the applicable federal and state securities laws:

“Shares of stock represented by this certificate have been acquired by the holder for investment and not for resale, transfer or distribution, have been issued pursuant to exemptions from the registration requirements of applicable state and federal securities laws, and may not be offered for sale, sold or transferred other than pursuant to effective registration under such laws, or in transactions otherwise in compliance with such laws, and upon evidence satisfactory to the Company of compliance with such laws, as to which the Company may rely upon an opinion of counsel satisfactory to the Company.”

All Awarded Shares owned by the Participant shall be subject to the terms of this Agreement and shall be represented by a certificate or certificates bearing the foregoing legend.

7. Delivery of Certificates . If requested by the Participant in accordance with Section 6.4(a) of the Plan, the Company shall deliver certificates for the Awarded Shares free of restriction under this Agreement promptly after, and only after, the Restriction Period has expired without forfeiture pursuant to Section 4 . In connection with the issuance of a certificate for Restricted Stock, the Participant shall endorse such certificate in blank or execute a stock power in a form satisfactory to the Company in blank and deliver such certificate and executed stock power to the Company.

8. Rights of a Shareholder . Except as provided in Section 4 and Section 5 above, the Participant shall have, with respect to his or her Awarded Shares, all of the rights of a shareholder of the Company, including the right to vote the shares, and the right to receive any dividends thereon.

9. Voting . The Participant, as record holder of the Awarded Shares, has the exclusive right to vote, or consent with respect to, such Awarded Shares until such time as the Awarded Shares are transferred in accordance with this Agreement; provided , however , that this Section 9 shall not create any voting right where the holders of such Awarded Shares otherwise have no such right.

- 2 -

10. Adjustment to Number of Awarded Shares . The number of Awarded Shares shall be subject to adjustment in accordance with Articles 11-13 of the Plan.

11. Specific Performance . The parties acknowledge that remedies at law will be inadequate remedies for breach of this Agreement and consequently agree that this Agreement shall be enforceable by specific performance. The remedy of specific performance shall be cumulative of all of the rights and remedies at law or in equity of the parties under this Agreement.

12. Participant’s Representations . Notwithstanding any of the provisions hereof, the Participant hereby agrees that he or she will not acquire any Awarded Shares, and that the Company will not be obligated to issue any Awarded Shares to the Participant hereunder, if the issuance of such shares shall constitute a violation by the Participant or the Company of any provision of any law or regulation of any governmental authority. Any determination in this connection by the Company shall be final, binding, and conclusive. The rights and obligations of the Company and the rights and obligations of the Participant are subject to all Applicable Laws, rules, and regulations.

13. Participant’s Acknowledgments . The Participant acknowledges that a copy of the Plan has been made available for his or her review by the Company, and represents that he or she is familiar with the terms and provisions thereof, and hereby accepts this Award subject to all the terms and provisions thereof. The Participant hereby agrees to accept as binding, conclusive, and final all decisions or interpretations of the Committee or the Board, as appropriate, upon any questions arising under the Plan or this Agreement.

14. Law Governing . This Agreement shall be governed by, construed, and enforced in accordance with the laws of the State of Florida (excluding any conflict of laws rule or principle of Delaware law that might refer the governance, construction, or interpretation of this Agreement to the laws of another state).

15. No Right to Continue Service or Employment . Nothing herein shall be construed to confer upon the Participant the right to continue in the employ or to provide services to the Company or any Subsidiary, whether as an Employee, Contractor, or Outside Director, or interfere with or restrict in any way the right of the Company or any Subsidiary to discharge the Participant as an Employee, Contractor, or Outside Director at any time.

16. Legal Construction . In the event that any one or more of the terms, provisions, or agreements that are contained in this Agreement shall be held by a court of competent jurisdiction to be invalid, illegal, or unenforceable in any respect for any reason, the invalid, illegal, or unenforceable term, provision, or agreement shall not affect any other term, provision, or agreement that is contained in this Agreement and this Agreement shall be construed in all respects as if the invalid, illegal, or unenforceable term, provision, or agreement had never been contained herein.

17. Covenants and Agreements as Independent Agreements . Each of the covenants and agreements that is set forth in this Agreement shall be construed as a covenant and agreement independent of any other provision of this Agreement. The existence of any claim or cause of action of the Participant against the Company, whether predicated on this Agreement or otherwise, shall not constitute a defense to the enforcement by the Company of the covenants and agreements that are set forth in this Agreement.

18. Entire Agreement . This Agreement together with the Plan supersede any and all other prior understandings and agreements, either oral or in writing, between the parties with respect to the subject matter hereof and constitute the sole and only agreements between the parties with respect to the said subject matter. All prior negotiations and agreements between the parties with respect to the subject matter hereof are merged into this Agreement. Each party to this Agreement acknowledges that no representations, inducements, promises, or agreements, orally or otherwise, have been made by any party or by anyone acting on behalf of any party, which are not embodied in this Agreement or the Plan and that any agreement, statement or promise that is not contained in this Agreement or the Plan shall not be valid or binding or of any force or effect.

- 3 -

19. Parties Bound . The terms, provisions, and agreements that are contained in this Agreement shall apply to, be binding upon, and inure to the benefit of the parties and their respective heirs, executors, administrators, legal representatives, and permitted successors and assigns, subject to the limitation on assignment expressly set forth herein. No person shall be permitted to acquire any Awarded Shares without first executing and delivering an agreement in the form satisfactory to the Company making such person or entity subject to the restrictions on transfer contained herein.

20. Modification . No change or modification of this Agreement shall be valid or binding upon the parties unless the change or modification is in writing and signed by the parties. Notwithstanding the preceding sentence, the Company may amend the Plan to the extent permitted by the Plan.

21. Headings . The headings that are used in this Agreement are used for reference and convenience purposes only and do not constitute substantive matters to be considered in construing the terms and provisions of this Agreement.

22. Gender and Number . Words of any gender used in this Agreement shall be held and construed to include any other gender, and words in the singular number shall be held to include the plural, and vice versa, unless the context requires otherwise.

23. Notice . Any notice required or permitted to be delivered hereunder shall be deemed to be delivered only when actually received by the Company or by the Participant, as the case may be, at the addresses set forth below, or at such other addresses as they have theretofore specified by written notice delivered in accordance herewith:

Notice to the Company shall be addressed and delivered as follows:

Alliqua, Inc.

2150 Cabot Boulevard West

Langhorne, PA 19047

Attn: Chairman of the Board of Directors

Facsimile: (646) 218-1401

Notice to the Participant shall be addressed and delivered as set forth on the signature page.

- 4 -

24. Tax Requirements . The Participant is hereby advised to consult immediately with his or her own tax advisor regarding the tax consequences of this Agreement, the method and timing for filing an election to include this Agreement in income under Section 83(b) of the Code, and the tax consequences of such election. By execution of this Agreement, the Participant agrees that if the Participant makes such an election, the Participant shall provide the Company with written notice of such election in accordance with the regulations promulgated under Section 83(b) of the Code. The Company or, if applicable, any Subsidiary (for purposes of this Section 24 , the term “ Company ” shall be deemed to include any applicable Subsidiary), shall have the right to deduct from all amounts paid in cash or other form in connection with the Plan, any federal, state, local, or other taxes required by law to be withheld in connection with this Award. The Company may, in its sole discretion, also require the Participant receiving shares of Common Stock issued under the Plan to pay the Company the amount of any taxes that the Company is required to withhold in connection with the Participant’s income arising with respect to this Award. Such payments shall be required to be made when requested by Company and may be required to be made prior to the delivery of any certificate representing shares of Common Stock, if such certificate is requested by the Participant in accordance with Section 6.4(a) of the Plan. Such payment may be made by (i) the delivery of cash to the Company in an amount that equals or exceeds (to avoid the issuance of fractional shares under (iii) below) the required tax withholding obligations of the Company; (ii) if the Company, in its sole discretion, so consents in writing, the actual delivery by the Participant to the Company of shares of Common Stock that the Participant has not acquired from the Company within six (6) months prior thereto, which shares so delivered have an aggregate Fair Market Value that equals or exceeds (to avoid the issuance of fractional shares under (iii) below) the required tax withholding payment; (iii) if the Company, in its sole discretion, so consents in writing, the Company’s withholding of a number of shares to be delivered upon the vesting of this Award, which shares so withheld have an aggregate Fair Market Value that equals (but does not exceed) the required tax withholding payment; or (iv) any combination of (i), (ii), or (iii). The Company may, in its sole discretion, withhold any such taxes from any other cash remuneration otherwise paid by the Company to the Participant.

* * * * * * * * * *

[ Remainder of Page Intentionally Left Blank.

Signature Page Follows ]

- 5 -

IN WITNESS WHEREOF, the Company has caused this Agreement to be executed by its duly authorized officer, and the Participant, to evidence his or her consent and approval of all the terms hereof, has duly executed this Agreement, as of the date specified in Section 1 hereof.

	COMPANY:

	ALLIQUA, INC.

	By:
	Name:
	Title:

	PARTICIPANT:


	Signature

	Name:
	Address:

- 6 -

Exhibit 10.63

RESTRICTED STOCK AWARD AGREEMENT

ALLIQUA, INC.

2011 LONG-TERM INCENTIVE PLAN

_____ _ ________________ _____

(the “ Participant ”)

3. Vesting . Except as specifically provided in this Agreement and subject to certain restrictions and conditions set forth in the Plan, the Awarded Shares shall vest on the earlier of (a) the first anniversary of the Date of Grant, and (b) the Participant’s Termination of Service by the Company without Cause (as defined below). Notwithstanding the foregoing, upon the occurrence of a Change in Control, any unvested Awarded Shares immediately shall vest on the effective date of such Change in Control.

4. Forfeiture of Awarded Shares .

a. Awarded Shares that are not vested in accordance with Section 3 shall be forfeited on the date of the Participant’s Termination of Service (i) by the Company for Cause, or (ii) due to the Participant’s voluntary resignation for any reason. Upon forfeiture, all of the Participant’s rights with respect to the forfeited Awarded Shares shall cease and terminate, without any further obligations on the part of the Company.

b. For purposes of this Agreement, the term “ Cause ” shall have the meaning ascribed to such term in any employment agreement or consulting agreement in effect by and between the Company and the Participant; provided , however , at any time there is no such agreement in effect, or if such agreement does not define such term, the term “Cause” shall mean (i) the Participant’s commission of a dishonest or fraudulent act in connection with the Participant’s employment or service with the Company, or the misappropriation of Company property; (ii) the Participant’s conviction of, or plea of nolo contendere to, a felony or crime involving dishonesty; (iii) the Participant’s inattention to duties, unsatisfactory performance, or failure to perform the Participant’s duties hereunder, provided in each case the Company gives the Participant written notice and thirty (30) days to correct the Participant’s performance to the Company’s satisfaction; (iv) a substantial failure to comply with the Company’s policies; (v) a material and willful breach of the Participant’s fiduciary duties in any material respect, provided in each case the Company gives the Participant written notice and thirty (30) days to correct the breach to the Company’s satisfaction; (vi) the Participant’s failure to comply in any material respect with any legal written directive of the Board; or (vii) any act or omission of the Participant which is of substantial detriment to the Company because of the Participant’s intentional failure to comply with any statute, rule, or regulation, except any act or omission believed by the Participant in good faith to have been in or not opposed to the best interests of the Company (without intent of the Participant to gain, directly or indirectly, a profit to which the Participant was not legally entitled). Any determination of whether the Participant should be terminated for Cause pursuant to this Agreement shall be made in the sole, good faith discretion of the Board, and shall be binding upon all parties affected thereby.

On the face of the certificate:

“Transfer of this stock is restricted in accordance with conditions printed on the reverse of this certificate.”

On the reverse:

All Awarded Shares owned by the Participant shall be subject to the terms of this Agreement and shall be represented by a certificate or certificates bearing the foregoing legend.

10. Adjustment to Number of Awarded Shares . The number of Awarded Shares shall be subject to adjustment in accordance with Articles 11-13 of the Plan.

Notice to the Company shall be addressed and delivered as follows:

Alliqua, Inc.

2150 Cabot Boulevard West

Langhorne, PA 19047

Attn: Chairman of the Board of Directors

Facsimile: (646) 218-1401

Notice to the Participant shall be addressed and delivered as set forth on the signature page.

* * * * * * * * * *

[ Remainder of Page Intentionally Left Blank.

Signature Page Follows ]

	COMPANY:

	ALLIQUA, INC.

	By:
	Name:
	Title:

	PARTICIPANT:


	Signature

	Name:
	Address:

Exhibit 23.1

Independent Registered Public Accounting Firm’s Consent

We consent to the incorporation by reference in the Registration Statement of Alliqua, Inc. and Subsidiaries on Form S-8 (File No. 333-193513) of our report dated March 24, 2014, with respect to our audits of the consolidated financial statements of Alliqua, Inc. and Subsidiaries as of December 31, 2013 and 2012 and for the years then ended, which report is included in this Annual Report on Form 10-K of Alliqua, Inc. and Subsidiaries for the year ended December 31, 2013.

/s/ Marcum llp

Marcum llp

New York, NY

March 24, 2014

EXHIBIT 31.1

CERTIFICATION OF CHIEF EXECUTIVE OFFICER PURSUANT TO RULE 13a-14(a)

I, David Johnson, certify that:

I have reviewed this Annual Report on Form 10-K of Alliqua, Inc. (the “registrant”);

Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: March 24, 2014
	By:	/s/ David Johnson
	Name:	David Johnson

EXHIBIT 31.2

CERTIFICATION OF CHIEF FINANCIAL OFFICER PURSUANT TO RULE 13a-14(a)

I, Brian M. Posner, certify that:

I have reviewed this Annual Report on Form 10-K of Alliqua, Inc. (the “registrant”);

Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: March 24, 2014	By:	/s/ Brian M. Posner
	Name:	Brian M. Posner
	Title:	Chief Financial Officer, Treasurer and Secretary (Principal Financial Officer)

EXHIBIT 32.1

CERTIFICATION FURNISHED PURSUANT TO 18 U.S.C. SECTION 1350,

AS ADOPTED PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

This certification is furnished solely pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (18 U.S.C. 1350) and accompanies the Annual Report on Form 10-K (the “Form 10-K ”) for the year ended December 31, 2013 of Alliqua, Inc. (the “Company”). I, David Johnson, the President and Chief Executive Officer of the Company, certify that, based on my knowledge:

(1)

The Form 10-K fully complies with the requirements of Section 13(a) or Section 15(d) of the Securities Exchange Act of 1934; and

(2)

The information contained in the Form 10-K fairly presents, in all material respects, the financial condition and results of operations of the Company as of and for the periods covered in this report.

Date: March 24, 2014	By:	/s/ David Johnson
	Nam e:	David Johnson
	Title:	President and Chief Executive Officer (Principal Executive Officer)

The foregoing certification is being furnished as an exhibit to the Form 10-K pursuant to Item 601(b)(32) of Regulation S-K and Section 906 of the Sarbanes-Oxley Act of 2002 (subsections (a) and (b) of Section 1350, Chapter 63 of Title 18, United States Code) and, accordingly, is not being filed as part of the Form 10-K for purposes of Section 18 of the Securities Exchange Act of 1934, as amended, and is not incorporated by reference into any filing of the Company, whether made before or after the date hereof, regardless of any general incorporation language in such filing.

EXHIBIT 32.2

CERTIFICATION FURNISHED PURSUANT TO 18 U.S.C. SECTION 1350,

AS ADOPTED PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

This certification is furnished solely pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (18 U.S.C. 1350) and accompanies the Annual Report on Form 10-K (the “Form 10-K ”) for the year ended December 31, 2013 of Alliqua, Inc. (the “Company”). I, Brian M. Posner, the Chief Financial Officer of the Company, certify that, based on my knowledge:

(1)

The Form 10-K fully complies with the requirements of Section 13(a) or Section 15(d) of the Securities Exchange Act of 1934; and

(2)

Date: March 24, 2014	By:	/s/ Brian M. Posner
	Name:	Brian M. Posner
	Title:	Chief Financial Officer, Treasurer and Secretary (Principal Financial Officer)