THE MERGER

The following discussion contains certain information about the merger. The discussion is subject, and qualified in its entirety by reference, to the Merger Agreement attached as Annex A to this joint proxy and consent solicitation statement/prospectus. We urge you to read carefully this entire joint proxy and consent solicitation statement/prospectus, including the Merger Agreement attached as Annex A, for a more complete understanding of the merger.

General

Each of Alliqua and Celleration’s respective boards of directors has unanimously approved the Merger Agreement and the transactions contemplated therein, including the merger. Pursuant to the Merger Agreement, Celleration will merge with and into Merger Sub, with Merger Sub emerging as the surviving corporation.

Background of the Merger

The Alliqua board of directors, together with Alliqua’s senior management, has regularly evaluated and periodically reviewed opportunities to achieve long-term operational and financial goals and to enhance stockholder value through potential strategic transactions. Generally, these reviews have centered on strategies to access new sources of financing to support growth initiatives and to improve Alliqua’s existing operations, portfolio of wound care technologies and distribution infrastructure. From time to time, these assessments have included discussions and analyses of potential merger transactions as a means to enhance or improve stockholder value.

The Celleration board of directors, together with its senior management, has, from time to time in the ordinary course, reviewed the strategic direction for Celleration in light of its financial performance and market, economic, competitive and other conditions and developments. During 2013 and 2014, Celleration received considerable unsolicited interest in a potential strategic acquisition of Celleration triggered by important milestones achieved during the period. The Celleration board of directors, which includes representatives of three significant investors in Celleration, asked Celleration’s senior management to respond to interested parties while reaching out to other participants in the wound care sector. These discussions included the evaluations of a variety of strategic alternatives with numerous parties, including potential business combinations and strategic alliances. Considerable time was invested in such discussions, which ranged from informal expressions of interest from other parties to formal meetings regarding the terms of a possible transaction.

Since the beginning of 2013, Alliqua has raised approximately $37 million through the issuance of new equity. In light of its access to new sources of capital, the Alliqua board of directors and senior management determined that Alliqua had sufficient financial flexibility to begin exploring opportunities for the execution of its growth plan. In the second quarter of 2013, Alliqua initiated exploratory discussions with four companies in the wound care industry regarding potential acquisitions and other strategic transactions.

David Johnson, chief executive officer of Alliqua, was familiar with Celleration based on his previous employment with a company that had considered an acquisition of Celleration in 2006, but which was never consummated. In May 2013, Mr. Johnson connected with Mark Wagner, president and chief executive officer of Celleration, at a wound care conference in Denver, Colorado, during which Mr. Johnson contacted Mr. Wagner to set up an introductory breakfast meeting with him and Lori Toner, chief marketing officer of Alliqua. At the meeting, they had a preliminary, high-level discussion on the current business of each company and what each sought to accomplish in the wound care industry.

In September 2013, Alliqua commenced preliminary discussions with Choice Therapeutics, Inc. (“Choice”), a privately held wound care company regarding the possible acquisition of Choice by Alliqua.

In January 2014, Alliqua commenced preliminary discussions with a company in the wound care and orthopedics industry (referred to as “Party A”) regarding the possible acquisition of Party A by Alliqua.

On February 19, 2014, the Celleration board of directors held a quarterly meeting at which, among other matters, the board discussed the contacts made with participants in the wound care sector.

In March 2014, Celleration engaged in discussions with a strategic buyer (referred to as “Party B”) with whom Celleration had discussed a potential transaction previously. In addition, Celleration began discussing a potential business combination or distribution alliance with another participant in the wound care sector (referred to as “Party C”).

In March 2014, in addition to gauging the interest from Party B and Party C, Mr. Wagner initiated preliminary, high-level communications with Mr. Johnson regarding a potential business combination between Alliqua and Celleration and provided certain introductory information on Celleration.

On March 20, 2014, the Alliqua board of directors held a meeting at which Mr. Johnson provided an update on Alliqua’s mergers and acquisitions initiatives, including the status of discussions with Choice and Party A. In the following weeks, the Alliqua board of directors, together with senior management, decided to pursue and ultimately completed the acquisition of Choice on May 5, 2014. 

On March 26, 2014, the Celleration board of directors held an update call at which, among other matters, members of senior management updated the Celleration board of directors on the status of discussions with Alliqua, Party B and Party C and other potentially interested parties.

On March 31, 2014, Celleration received an offer and preliminary term sheet from Party B. The term sheet provided for the acquisition of Celleration by Party B in a cash transaction containing an upfront payment and subsequent payments based on the achievement of defined revenue and gross margin milestones.

On April 2, 2014, Celleration and Alliqua entered into a mutual non-disclosure agreement relating to a potential transaction.

On April 8, 2014, Mr. Johnson invited Mr. Wagner to attend a meeting with certain other members of Alliqua’s senior management, consisting of Ms. Toner and Janice Smeill, M.D., chief medical officer of Alliqua. The meeting was held by teleconference on April 9, 2014, during which Mr. Wagner presented an overview of Celleration’s history, technology and current position in the market.

On April 23, 2014, the Celleration board of directors held an update call at which Mr. Wagner and Christopher Geyen, chief financial officer of Celleration, summarized the progress of discussions with Party B, Party C and Alliqua, including a summary of the presentation made by Mr. Wagner at his meeting with Alliqua’s senior management on April 9, 2014.

On May 7, 2014, Celleration received a revised term sheet from Party B, in which Party B increased the amount of consideration payable under its proposal.

On May 8, 2014, Mr. Wagner and Mr. Johnson had a follow-up conversation during which they further discussed Celleration’s revenue numbers and value proposition as well as Alliqua’s continued interest in Celleration as a potential acquisition candidate. At that time, Mr. Johnson informed Mr. Wagner that although Alliqua was interested in continuing discussions, Alliqua would not be able to act immediately as it had just completed its acquisition of Choice and was devoting its resources to the integration of operations of the parties.

On May 9, 2014, the Alliqua board of directors held a meeting at which Mr. Johnson discussed Alliqua’s business development efforts and mergers and acquisitions strategy. During this discussion, Mr. Johnson reviewed Alliqua’s process of locating and evaluating potential targets and discussed the targets that senior management was analyzing at that time, including Celleration and Party A.

On May 27, 2014, Celleration received an offer and preliminary term sheet from Party C. The term sheet provided for the acquisition of Celleration by Party C in a cash transaction containing an upfront payment and subsequent payments based on the achievement of defined regulatory and revenue milestones.

On June 5, 2014, the Celleration board of directors held an update call at which Mr. Wagner and Mr. Geyen discussed the status of discussions with Alliqua, Party B and Party C, including the terms of the offer and preliminary term sheet from Party C and a comparison of the terms of the term sheets received from Party B and Party C.

During the first half of 2014, representatives of Alliqua and Celleration continued to meet with other potential merger candidates, all of whom were in the wound care or medical technology industry. On June 12, 2014, Mr. Wagner contacted Mr. Johnson to inform him that Celleration had received offers and preliminary term sheets from two strategic buyers. Mr. Johnson indicated that although Alliqua remained interested in Celleration as an acquisition candidate, it was not in a position to make Celleration an offer at that time.

On July 23, 2014, the Celleration board of directors held an update call and discussed, among other matters, the terms of the offers being negotiated with Party B and Party C and the ongoing discussions with Alliqua.

On August 6, 2014, the Celleration board of directors held a quarterly meeting and discussed, among other matters, the terms of the offers being negotiated with Party B and Party C and the ongoing discussions with Alliqua. In addition, the board determined to terminate negotiations with Party C, by mutual agreement with Party C, based on Party C’s current inability to focus adequate effort and attention on Celleration’s products. 

On September 24, 2014, the Celleration board of directors held an update call and discussed, among other matters, the terms of the offer being negotiated with Party B and the ongoing discussions with Alliqua. In addition, the board determined to terminate negotiations with Party B because Celleration was unable to reach agreement with Party B on the structure and definition of objectives for subsequent payments.

From July through September 2014, Mr. Wagner and Mr. Johnson exchanged communications with respect to various milestones achieved by their respective businesses. At the end of September, Mr. Wagner contacted Mr. Johnson to inform him that Celleration had decided to terminate negotiations with Party B and Party C.

In September 2014, Alliqua began working informally with Cowen to identify and pursue various strategic alternatives, including a potential acquisition of Party A.

On October 16, 2014, Mr. Wagner and Mr. Johnson met for lunch at a wound care conference in Las Vegas, Nevada, during which Mr. Wagner discussed reimbursement, clinical and product development milestones with respect to Celleration’s business.

On October 22, 2014, the Celleration board of directors held an update call at which Mr. Wagner and Mr. Geyen provided an update on the progress of discussions with Alliqua, including an overview of the conversation that Mr. Wagner had with Mr. Johnson on October 16, 2014.

On November 3, 2014, Mr. Wagner contacted Mr. Johnson to inform him that Celleration had received a favorable reimbursement decision for MIST Therapy. In light of the positive reimbursement news, Mr. Johnson indicated that Alliqua had an increased interested in pursuing Celleration as a potential acquisition candidate.

On November 12, 2014, Mr. Johnson and Mr. Wagner had a telephone conversation, during which they discussed, among other things, the merits of a business combination for both companies and their respective stockholders in light of the evolving market for advanced wound care treatments and the opportunities for creating long-term stockholder value by leveraging the respective strengths of each business and expanding the combined company’s product portfolio. That same day, Mr. Johnson followed up with an email to Mr. Wagner that summarized the key points discussed on their call and invited Mr. Wagner to make a presentation at an informal meeting with certain members of Alliqua’s board on December 2, 2014. In his email, Mr. Johnson also requested certain further information on Celleration and included a proposed structure with certain preliminary terms for a potential acquisition of Celleration, which provided for, among other things, consideration based on a multiple of 2.5 to 2.7 times Celleration’s 2014 audited gross revenue, consisting of equal amounts of cash and shares of Alliqua common stock, and other general provisions for a potential earn-out payment, financing contingency and agreements as to non-solicitation and confidentiality.

On November 17, 2014, Mr. Wagner sent the additional information on Celleration as requested by Mr. Johnson including with respect to an analysis and valuation of Celleration, financial statements and organizational information.

On December 2, 2014, Mr. Wagner, together with Mr. Geyen and Pamela Unger, vice president of medical affairs and clinical education of Celleration, attended a dinner meeting with certain Alliqua directors, during which Messrs. Wagner and Geyen and Ms. Unger presented an overview of Celleration’s business, products and value proposition, including its recent reimbursement approvals, clinical trials and 510(k) clearance from the FDA.

On December 3, 2014, at a meeting of the Alliqua board of directors, certain representatives of Cowen provided the directors with an overview of the businesses of and the potential acquisition opportunities with Celleration and Party A. Mr. Johnson also provided the board with an update on the status of current discussions and negotiations with each potential acquisition target. Brian Posner, chief financial officer of Alliqua, and a representative of Cowen further presented a preliminary analysis of the valuation of Alliqua after a combination with each of Celleration and Party A, respectively. After a thorough discussion with management and Cowen regarding each potential transaction, the Alliqua board of directors authorized management to negotiate a formal acquisition term sheet with each of Celleration and Party A.

On December 7, 2014, Alliqua submitted a preliminary offer together with a non-binding term sheet to Party A for a potential acquisition. Notwithstanding the status of negotiations with Party A, Alliqua senior management determined that, in the interest of maximizing stockholder value and obtaining the best possible acquisition candidate for Alliqua, it was advisable to also continue negotiations with Celleration.

On the evening of December 8, 2014, Mr. Johnson, together with Mr. Posner and Brad Barton, chief operating officer of Alliqua, made a presentation to Celleration’s board of directors at an informal meeting held in Minnesota. During the presentation, the representatives of Alliqua reviewed the company’s growth strategy and operating plan for 2015 and presented certain preliminary assumptions on the combined company, including forecasted pro forma information and valuation analysis of the combined company.

On December 9, 2014, the Celleration board of directors held its quarterly meeting. Among other matters, the Celleration board of directors reviewed and assessed the preliminary terms as proposed by Alliqua on November 12, 2014 and information presented by Alliqua on December 8, 2014. In addition, Celleration’s board provided guidance to Mr. Wagner regarding terms of a revised proposal and questions to be answered by Alliqua related to Alliqua’s business plans for the existing and combined business.

On December 10, 2014, Mr. Wagner sent an email to Mr. Johnson that summarized comments from Celleration’s board following the presentation by Alliqua that included questions about Alliqua’s business plans for the existing and combined business and certain revised terms for a proposed acquisition of Celleration by Alliqua. Among other matters, the Celleration counterproposal sought increases in the revenue multiple of the purchase price to 3.5 times Celleration’s 2014 audited gross revenue and in the amount of the earn-out consideration and also proposed the right to designate one director to serve on the Alliqua board of directors and a milestone payment based on NICE Approval.

On December 16, 2014, Alliqua determined to abandon discussions with Party A relating to a potential transaction because the parties were unable to agree on additional terms proposed by Party A.

During December 2014, following receipt of the email sent by Mr. Wagner on December 10, 2014, representatives of Alliqua, consisting principally of Mr. Johnson and certain Alliqua directors, and assisted by Cowen and Haynes and Boone LLP (“Haynes and Boone”), legal advisors to Alliqua, engaged in periodic discussions regarding Celleration’s proposed changes to the terms of the transaction, including the proposed increase in the revenue multiple of the purchase price. As part of these discussions, representatives of Alliqua considered various historical and projected financial and operating information, among other factors, that could affect the acquisition value of Celleration, as well as possible alternative transaction structures and the amount and forms of merger consideration that Alliqua would be willing to pursue. On December 18, 2014, Mr. Johnson sent Mr. Wagner an email that included two alternative transaction structures for Celleration’s board to consider. The first proposed structure contemplated upfront consideration based on a revenue multiple of 3.5, payable in equal amounts of cash and Alliqua common stock, with an incremental reduction to the amount of contingent consideration, also payable in equal amounts of cash and Alliqua common stock. The second proposed structure contemplated upfront consideration based on a revenue multiple of 3, payable in 60% cash and 40% Alliqua common stock., with an incremental increase in the amount of contingent consideration, payable in 87% cash and 13% Alliqua common stock. Mr. Johnson also indicated that Alliqua would continue to consider the proposed milestone payment based on NICE Approval.  

On December 19, 2014, Mr. Wagner discussed with the Celleration board of directors the status of discussions with Alliqua on the proposed transaction, including Alliqua’s revised proposals in response to the email sent by Mr. Wagner to Mr. Johnson on December 10, 2014. In connection with such discussions and over the course of the following week, Mr. Wagner, Mr. Johnson and their respective board of directors, legal and financial advisors continued to discuss and negotiate key terms with respect to the proposed transaction structure in light of certain tax considerations, amount and forms of the merger consideration, and treatment of milestone payments based on NICE Approval.

On December 24, 2014, Mr. Johnson sent a non-binding, indicative term sheet to Mr. Wagner for the proposed acquisition of Celleration by Alliqua. The term sheet provided for, among other things, (i) upfront consideration equal to 3.5 times Celleration’s 2014 audited gross revenue, payable in equal amounts of cash and shares of Alliqua common stock, (ii) certain contingent payments including earn-out consideration for each of 2015 and 2016 equal to 3.5 times the incremental increase in revenue generated from Celleration’s products payable in equal amounts of cash and shares of Alliqua common stock and a milestone payment for NICE Approval in an amount to be further negotiated by the parties and (iii) the appointment by Celleration of one member to Alliqua’s board of directors. Following receipt of the term sheet and through the execution of the Merger Agreement, Mr. Wagner and Mr. Geyen engaged in periodic discussions with members of Celleration’s board of directors and Dorsey & Whitney LLP (“Dorsey & Whitney”), legal counsel to Celleration, regarding the proposed terms from Alliqua. In connection with the increase in consideration offered in Alliqua’s original proposal, the Alliqua management and board of directors considered certain financial models for comparable companies in the industry and its desire to avoid a competitive bid process for the acquisition of Celleration.

On January 2, 2015, the Celleration board of directors held a telephonic meeting at which Mr. Wagner reported on the negotiations with Alliqua and the board of directors discussed the indicative term sheet, including how Alliqua’s common stock would be valued in the transaction, the proposed milestone payments based on NICE Approval and the timing and extent of due diligence to be performed.

On January 4, 2015, Mr. Wagner, on behalf of Celleration, sent a revised draft of the indicative term sheet to Mr. Johnson. Among the changes proposed by Celleration were a change in the volume-weighted average stock price to be used to determine the number of Alliqua shares issuable to Celleration stockholders. Also, Celleration indicated that it would require that the term sheet contain a specific milestone payment related to NICE approval. Throughout the day, Mr. Wagner and Mr. Johnson continued to discuss and negotiate the key terms of the transaction, which resulted in the final draft of the term sheet that Mr. Johnson sent to Mr. Wagner later that evening. In addition to the previously agreed upon consideration terms, the final term sheet included a one-time $500,000 payment upon receipt of NICE approval, payable in shares of Alliqua common stock and royalty payments equal to 20% of the net sales recognized from the MIST products for the three fiscal years ending December 31, 2016, 2017 and 2018, payable in cash.

On January 5, 2015, following discussions between each member of the Celleration board of directors and Mr. Wagner, the Celleration board of directors approved by written consent the term sheet and authorized its execution by Mr. Wagner.

On January 5, 2015, Alliqua and Celleration entered into the non-binding term sheet which contained an exclusivity agreement with respect to the potential merger.

Following the execution of the term sheet, each party engaged in due diligence investigations of the business and financial condition of the other party, including through exchanges of documents and information based on specific requests from the other party.

On January 7, 2015, acting pursuant to a duly executed unanimous written consent, the Alliqua board of directors approved the terms of the engagement letter with Cowen to act as Alliqua’s financial adviser in connection with the proposed merger with Celleration. Alliqua subsequently entered into the engagement letter with Cowen on January 9, 2015.

On January 7 and January 9, 2015, Haynes and Boone and Dorsey & Whitney discussed preliminary matters related to the structure of the proposed merger.

On January 9 and January 16, 2015, the Celleration board of directors held telephonic meetings at which the structure of the proposed merger was discussed at length. During the meetings, Mr. Wagner and Mr. Geyen provided summary schedules and financial models that described to the Celleration board of directors the terms of the proposed Merger Agreement with Alliqua, including, among other things, the financial terms, contingent payments and a sensitivity model related to continent payments, the “no shop” covenants as related to other potential strategic interest, and escrow amounts. Mr. Wagner, Mr. Geyen and representatives from Dorsey & Whitney answered numerous questions from the members of the Celleration board of directors.

On January 12, 2015, Haynes and Boone sent an initial draft of the Merger Agreement to Dorsey & Whitney based upon the provisions set forth in the term sheet.

On January 15, 2015, Dorsey & Whitney provided Haynes and Boone with a revised draft of the Merger Agreement, which provided, among other things, for a revised transaction structure in light of certain tax considerations, a reduction in the amount of the merger consideration to be held in escrow to cover potential indemnification claims, a reduced fee in connection with certain termination rights of Celleration and certain revisions with respect to Celleration’s termination right in connection with a superior proposal.

On January 20, 2015, representatives of Haynes and Boone and Dorsey & Whitney held an in-person meeting at the offices of Haynes and Boone in New York City to discuss open legal comments to certain representations and warranties, covenants, indemnification and termination provisions in the proposed draft of the Merger Agreement.

On January 21, 2015, representatives of Haynes and Boone and Dorsey & Whitney, together with Mr. Johnson, Mr. Posner, Mr. Wagner and Mr. Geyen met at the offices of Haynes and Boone in New York City to conduct in-person discussions and negotiations regarding the open business issues in the Merger Agreement, including certain procedural terms related to payment of the merger consideration and contingent payments, revisions to the type of consideration to address certain tax considerations, required closing conditions, the definition of and process for addressing a superior proposal by Celleration, indemnification setoff and escrow amounts and procedures and the termination events and amounts for the termination and reverse termination fees.

On January 22, 2015, Haynes and Boone provided Dorsey & Whitney with a revised draft of the Merger Agreement based on the terms agreed upon by the parties at the January 21 meeting. The parties continued to negotiate and exchanged comments on the draft Merger Agreement over the next week.

On January 22, 2015, Haynes and Boone also sent drafts of certain ancillary agreements to Dorsey & Whitney. Subsequently, the parties continued to discuss and exchange revised drafts of such agreements.

On January 23, 2015, the Celleration board of directors held a telephonic meeting to discuss the results of the in-person discussions and negotiations that were conducted on January 21, 2015. Mr. Wagner and Mr. Geyen provided a summary of the negotiations and a revised outline of the proposed Merger Agreement, including the allocation of consideration between stock and cash, the structure of the transaction for tax purposes, escrow and indemnification requirements and estimated timing of the transactions. Mr. Wagner, Mr. Geyen and representatives from Dorsey & Whitney answered numerous questions from the Celleration board of directors.

On January 30, 2015, Alliqua’s board of directors met to review and discuss the proposed merger and the Merger Agreement. At the meeting, representatives of Haynes and Boone reviewed with the Alliqua board of directors its fiduciary duties and then described to the Alliqua board of directors the terms of the proposed Merger Agreement with Celleration, including, among other things, the financial terms, contingent payments, the “no shop” covenants, closing conditions, reverse termination fee and other remedies provisions and other terms and conditions. Representatives of Haynes and Boone also reviewed with the Alliqua board of directors the terms of the proposed voting agreement with Celleration equity holders.  Cowen then reviewed with the Alliqua board its financial analysis of the transactions contemplated by the Merger Agreement and rendered its oral opinion (which was subsequently confirmed in writing and such written opinion is attached as Annex C to this joint proxy and consent solicitation statement/prospectus) to the Alliqua board that, as of the date of the opinion and based upon and subject to the various assumptions made, procedures followed, matters considered, limitations of the review undertaken, qualifications contained and other matters set forth therein, the consideration to be paid by Alliqua in the merger pursuant to the terms of the Merger Agreement was fair, from a financial point of view, to Alliqua. Representatives of Cowen and Haynes and Boone answered questions from the members of the Alliqua board of directors. The Alliqua board of directors then considered and discussed the factors set forth under “Recommendation of the Alliqua Board of Directors and Alliqua’s Reasons for the Merger” set forth on page [    •    ]. After further discussions and deliberations regarding, among other things, the results of the Celleration due diligence, the proposed terms of the Merger Agreement with Celleration, the views of Alliqua’s management and the presentations made by Alliqua’s legal and financial advisors, and taking into consideration the factors described below under “—Alliqua’s Reasons for the Merger,” the Alliqua board of directors unanimously determined that the Merger Agreement and the transactions contemplated thereby were advisable and fair to, and in the best interests of Alliqua and its stockholders and adopted and approved the Merger Agreement.

On January 30, 2015, the Celleration board of directors held a telephonic meeting. The directors acknowledged that they had met and discussed on several occasions, both formerly and informally, the potential merits and risks to Celleration and its stockholders of the merger, the chronology of events leading to the proposals to approve the merger, the negotiations with Alliqua with respect to the merger and the terms and conditions of the merger. Mr. Wagner reviewed the key provisions of the Merger Agreement, including the structure and timing considerations, the closing conditions, the “go shop” provision, the termination provisions, the termination fees to be paid by either Celleration or Alliqua and the consideration to be received by the Celleration stockholders; the funding of Alliqua’s debt financing; the terms of the bridge loan to be made by Alliqua to Celleration in the event that Alliqua requests an extension to the closing date; the voting agreements from certain Celleration stockholders to vote in favor of the merger; and the interests of certain Celleration directors and executive officers in the merger. After further discussions and deliberations regarding, among other things, the results of the due diligence of Alliqua, the proposed terms of the Merger Agreement with Celleration, the views of Celleration’s senior management and the fiduciary duties of the directors to the stockholders of Celleration, and taking into consideration the factors described below under “— Celleration’s Reasons for the Merger,” the Celleration board of directors, by unanimous written consent on January 30, 2015, determined that the Merger Agreement and the transactions contemplated thereby, including the merger, are advisable and in the best interests of Celleration and its stockholders; approved the Merger Agreement and related agreements; resolved to recommend that the Celleration stockholders approve and adopt the Merger Agreement; approved one-time special cash bonuses contingent on the successful completion of the merger to certain directors and executive officers; and approved certain other related matters.

On February 2, 2015, the Merger Agreement was executed by Alliqua, Merger Sub, Celleration and certain other representatives of the stockholders of Celleration, as identified therein. Simultaneously with the execution of the Merger Agreement, Alliqua and certain equity holders of Celleration entered into the voting agreements. For a discussion of the Merger Agreement and voting agreement, see the sections titled “The Merger Agreement” beginning on page [    •    ] and “Ancillary Agreements—Voting Agreement” beginning on page [    •    ] of this joint proxy and consent solicitation statement/prospectus.

Alliqua’s Reasons for the Merger

In reaching its decision to approve and adopt the Merger Agreement, the merger and the other transactions contemplated by the Merger Agreement, including the issuance of shares of Alliqua common stock in the merger, and to recommend that its stockholders approve the Alliqua Share Issuance Proposal and the Alliqua Adjournment Proposal, the Alliqua board of directors consulted with Alliqua management, as well as its outside financial and legal advisors, and considered a number of factors, including the following material factors:

Alliqua’s board of directors also considered potential risks relating to the merger and other transactions contemplated by the Merger Agreement, including the following:

The foregoing discussion of the factors considered by the Alliqua board of directors is not intended to be exhaustive, but, rather, includes the material factors considered by the Alliqua board of directors. In reaching its decision to approve and adopt the Merger Agreement, the merger and the other transactions contemplated by the Merger Agreement, including the issuance of shares of Alliqua common stock in the merger, the Alliqua board of directors did not quantify or assign any relative weights to the factors considered, and individual directors may have given different weights to different factors. The Alliqua board of directors considered all these factors as a whole, including discussions with, and questioning of, Alliqua's management and Alliqua's outside financial and legal advisors, and overall considered the factors to be favorable to, and to support, its determination.

Celleration’s Reasons for the Merger

The Celleration board of directors considered many factors in making its decision to recommend the approval of the Celleration Merger Agreement proposal. In arriving at its decision, the Celleration board of directors consulted with Celleration’s senior management, legal advisors, reviewed a significant amount of information, considered a number of factors and concluded in its business judgment that the proposed merger is likely to result in significant strategic and financial benefits to Celleration and its stockholders, including a number of positive factors (not in any relative order of importance):

In the course of its deliberations, the Celleration board of directors also considered a variety of uncertainties, risks and other potentially negative factors relevant to the merger, including the following:

In addition to considering the factors described above, the Celleration board of directors considered that some members of the Celleration board of directors and certain Celleration executive officers have interests in the proposed merger as individuals that are in addition to, and that may be different from, the interest of the Celleration stockholders generally, as described in “The Merger — Interests of Celleration’s Directors and Executive Officers in the Merger” beginning on page [•].

After considering the foregoing potentially negative and potentially positive factors, the Celleration board of directors unanimously concluded, in its business judgment, that the potentially positive factors relating to the Merger Agreement and the transactions contemplated thereby, including the merger, outweighed the potentially negative factors.

The previous discussion of the information and factors considered by the Celleration board of directors is not exhaustive but is intended to reflect the material factors considered by the Celleration board of directors in its consideration of the merger. In view of the complexity, and the large number, of the factors considered, the Celleration board of directors, both individually and collectively, did not find it practicable to and did not attempt to quantify or assign any relative or specific weight to the various factors. Rather, the Celleration board of directors based its recommendation on the totality of the information presented to and considered by it. In addition, individual members of the Celleration board of directors may have given different weight to different factors.

The previous discussion of the information and factors considered by the Celleration board of directors is forward-looking in nature. This information should be read in light of the factors described under “Cautionary Statement Concerning Forward-Looking Statements” beginning on page [•].

Opinion of Alliqua’s Financial Advisor

Pursuant to an engagement letter with Alliqua (the “Engagement Letter”), dated as of January 9, 2015, Alliqua retained Cowen, as investment bankers, to render an opinion to the Alliqua board of directors as to the fairness, from a financial point of view, to Alliqua of the consideration to be paid by Alliqua in the merger.

On January 30, 2015, Cowen delivered to the Alliqua board of directors its oral opinion subsequently confirmed in writing (the “Opinion”) that, as of the date of the Opinion, and subject to the various assumptions made, procedures followed, matters considered, limitations of the review undertaken, qualifications contained and other matters set forth therein, the consideration to be paid by Alliqua in the merger pursuant to the terms of the Merger Agreement was fair, from a financial point of view, to Alliqua. The full text of the Opinion is attached as Annex C hereto and is incorporated herein by reference. Holders of shares of Alliqua common stock are urged to read the Opinion in its entirety for the assumptions made, procedures followed, other matters considered and limits of the review undertaken by Cowen. The summary of the Opinion set forth herein is qualified in its entirety by reference to the full text of the Opinion. The Opinion was prepared for and addressed to the Alliqua board of directors and was directed only to the fairness, from a financial point of view, of the consideration to be paid by Alliqua in the merger, and does not constitute an opinion as to the merits of the merger or a recommendation to any stockholder as to how to vote on the proposed merger. The consideration to be paid in the merger was determined through negotiations between Alliqua and Celleration and not pursuant to recommendations of Cowen.

In connection with the Opinion, Cowen reviewed and considered such financial and other matters as it deemed relevant, including, among other things:

In conducting its review and arriving at the Opinion, Cowen, with Alliqua’s consent, assumed and relied, without independent investigation, upon the accuracy and completeness of all financial and other information provided to it by Celleration and Alliqua, respectively, or which was publicly available or was otherwise reviewed by Cowen. Cowen did not undertake any responsibility for the accuracy, completeness or reasonableness of, or independent verification of, such information. Cowen relied upon, without independent verification, the assessment of the managements of Celleration and Alliqua as to the existing products and services of Celleration and the viability of, and risks associated with, the future products and services of Celleration. In addition, Cowen did not conduct, nor assume any obligation to conduct, any physical inspection of the properties or facilities of Celleration or Alliqua. Cowen further relied upon Alliqua’s and Celleration’s representations that all information provided to Cowen by Alliqua or Celleration, as applicable, was accurate and complete in all material respects. Cowen, with Alliqua’s consent, assumed that the financial forecasts and description of Expected Synergies which Cowen examined were reasonably prepared by the respective managements of Celleration and Alliqua on bases reflecting the best currently available estimates and good faith judgments of such managements as to the future performance of Celleration and Alliqua, as applicable, and such projections and synergies, and the Wall Street Projections utilized in Cowen analyses, provided a reasonable basis for the Opinion. The Opinion states that all such projected financial information is based upon numerous variables and assumptions and that actual results could vary significantly from those set forth in such projected financial information. Cowen expressed no opinion as to Celleration Forecasts, the Alliqua Forecasts, the Wall Street Projections, the Expected Synergies or the assumptions on which they were made and did not in any respect assume any responsibility for the accuracy thereof.

Cowen assumed that there were no material changes in the assets, liabilities, financial condition, results of operations, business or prospects of Celleration or Alliqua since the date of the last financial statements made available to Cowen. Cowen did not make or obtain any independent evaluations, valuations or appraisals of the assets or liabilities of Celleration or Alliqua, nor was Cowen furnished with such materials. In addition, Cowen did not evaluate the solvency or fair value of Celleration, Alliqua or Merger Sub under any state or federal laws relating to bankruptcy, insolvency or similar matters. The Opinion does not address any legal, tax or accounting matters related to the Merger Agreement or the merger, as to which Cowen assumed that Alliqua and the Alliqua board of directors received such advice from legal, tax and accounting advisors as each determined appropriate. Cowen assumed, at Alliqua’s direction and with Alliqua’s consent, that (i) Celleration will achieve its Revenue Targets (as defined in the Merger Agreement) for the fiscal years ending December 31, 2015 and December 31, 2016, and (ii) NICE Approval (as defined in the Merger Agreement) will not be obtained, and consequently certain additional contingent consideration payments based on MIST Net Sales (as defined in the Merger Agreement) over an enumerated benchmark will not be made. The Opinion addresses only the fairness to Alliqua, from a financial point of view, of the consideration to be paid by Alliqua in the merger pursuant to the terms of the Merger Agreement. Cowen did not express any view as to any other aspect or implication of the merger or any other agreement, arrangement or understanding entered into in connection with the merger or otherwise, including, without limitation, the form or structure of the merger or any consequences of the merger on Alliqua, Merger Sub or Alliqua’s stockholders, creditors, employees or other constituencies. The Opinion is necessarily based upon economic and market conditions and other circumstances as they existed and could be evaluated by Cowen on the date of the Opinion. The Opinion states that it should be understood that, although subsequent developments may affect the Opinion, Cowen does not have any obligation to update, revise or reaffirm the Opinion and Cowen expressly disclaims any responsibility to do so.

Cowen did not consider any potential legislative or regulatory changes being considered at the time of or recently enacted before the issuance of the Opinion by the United States or any foreign government, or any domestic or foreign regulatory body, or any changes in accounting methods or generally accepted accounting principles that may be adopted by the SEC, the Financial Accounting Standards Board or any similar foreign regulatory body or board.

For purposes of rendering the Opinion, Cowen assumed in all respects material to its analysis, that the representations and warranties of each party contained in the Merger Agreement are true and correct, that each party will perform all of the covenants and agreements required to be performed by it under the Merger Agreement and that all conditions to the consummation of the merger will be satisfied without waiver thereof, and without any adjustment to the consideration. Cowen assumed that the final form of the Merger Agreement will be substantially similar to the last draft reviewed by Cowen. Cowen also assumed that all governmental, regulatory and other consents and approvals contemplated by the Merger Agreement will be obtained and that in the course of obtaining any of those consents no restrictions will be imposed or waivers made that would have an adverse effect on the contemplated benefits of the merger. Cowen assumed that the merger will be consummated in a manner that complies with the applicable provisions of the Securities Act of 1933, as amended, the Securities Exchange Act of 1934, as amended, and all other applicable federal and state statutes, rules and regulations. The Opinion states that Alliqua informed Cowen, and Cowen assumed, that the merger will be treated as a tax-free reorganization.

The Opinion states that it is intended for the benefit and use of the Alliqua board of directors for its information and assistance in connection with its consideration of the financial terms of the merger and may not be used for any other purpose or reproduced, disseminated, quoted or referred to at any time, in any manner or for any purpose without Cowen’s prior written consent. The Opinion does not constitute a recommendation to the Alliqua board of directors or stockholders of Alliqua on whether or not to approve or to vote in favor of the merger or to take any other action in connection with the merger or otherwise. Cowen was not requested to opine as to, and the Opinion does not in any manner address, Alliqua’s underlying business decision to effect the merger or the relative merits of the merger as compared to other business strategies or transactions that might have been available to Alliqua. Additionally, Cowen was not engaged to be involved in any determinations of the Alliqua board of directors or Alliqua’s management to pursue strategic alternatives and Cowen was not authorized or requested to, and did not, investigate any other alternative transactions that may have been available to Alliqua. In addition, Cowen was not requested to opine as to, and the Opinion does not in any manner address, (i) the fairness of the amount or nature of the compensation to any officers, directors or employees of any party to the merger, or class of such persons, relative to the consideration to be paid by Alliqua in the merger, (ii) the fairness of the merger or the consideration to the holders of any class of securities, creditors or other constituencies of Celleration or Alliqua, or (iii) whether Alliqua had sufficient cash, available lines of credit or other sources of funds to enable it to pay the consideration at the closing of the merger. Furthermore, Cowen expressed no view as to the price or trading range for shares of Alliqua common stock following the consummation of the merger.

The following is a brief summary of the principal financial analyses performed by Cowen to arrive at the Opinion. Some of the summaries of financial analyses include information presented in tabular format. In order to fully understand the financial analyses, the tables must be read together with the text of each summary. The tables alone do not constitute a complete description of the financial analyses. Considering the data set forth in the tables without considering the full narrative description of the financial analyses, including the methodologies and assumptions underlying the analyses, could create a misleading or incomplete view of the financial analyses. Cowen reviewed with the management of Alliqua the assumptions on which such analyses were based and other factors, including the historical and projected financial results of Alliqua and Celleration. No limitations were imposed by the Alliqua board of directors with respect to the investigations made or procedures followed by Cowen in rendering the Opinion.

Analysis of Selected Transactions. Cowen reviewed the financial terms, to the extent publicly available, of 12 transactions (the “MedTech Industry Transactions”) involving the acquisition of companies in the medical technology industry, which were announced or completed since March 12, 2008. These transactions were (listed as target/buyer):

Cowen reviewed the market capitalization of common stock plus total debt less cash and cash equivalents (“Enterprise Value”) paid in the MedTech Industry Transactions as a multiple of last 12 month (“LTM”) and next 12 month (“NTM”) revenues. The following table presents the multiples implied by the ratios of Enterprise Values to LTM and NTM revenues.

Based upon the information presented in the table above, Cowen’s experience in the medical technology industry and its professional judgment, Cowen selected implied reference range multiples. The following table presents the implied Enterprise Value of Celleration based on a range of 4.6x - 5.5x Enterprise Value/LTM revenue multiples and 3.6x - 4.9x Enterprise Value/NTM revenue multiples, in each case, compared to the implied Enterprise Value to be paid in the merger by Alliqua of $49.0 million.

Although the MedTech Industry Transactions were used for comparison purposes, none of those transactions is directly comparable to the merger, and none of the companies in those transactions is directly comparable to Alliqua or Celleration. Accordingly, an analysis of the results of such a comparison is not purely mathematical, but instead involves complex considerations and judgments concerning differences in historical and projected financial and operating characteristics of the companies involved and other factors that could affect the acquisition value of such companies or Celleration.

Analysis of Selected Publicly Traded Companies. To provide contextual data and comparative market information, Cowen compared selected historical operating and financial data and ratios for Celleration to the corresponding financial data and ratios of certain other companies (the “Selected Companies”) whose securities are publicly traded and which Cowen believes have operating, market valuation and trading valuations similar to what might be expected of Celleration. These companies were:

The data and ratios included the Enterprise Values of the Selected Companies as multiples of LTM and NTM revenues. The following table presents the multiples implied by the ratios of Enterprise Values to LTM and NTM revenues.

Based upon the information presented in the table above, Cowen’s experience in the medical technology industry and its professional judgment, Cowen selected implied reference range multiples. The following table presents the implied Enterprise Value of Celleration based on a range of 6.3x – 8.1x Enterprise Value/LTM revenue multiples and 4.3x – 5.2x Enterprise Value/NTM revenue multiples, in each case, compared to the implied Enterprise Value to be paid in the merger by Alliqua of $49.0 million.

Although the Selected Companies were used for comparison purposes, none of those companies is directly comparable to Celleration. Accordingly, an analysis of the results of such a comparison is not purely mathematical, but instead involves complex considerations and judgments concerning differences in historical and projected financial and operating characteristics of the Selected Companies and other factors that could affect the acquisition value of the Selected Companies or Celleration.

Discounted Cash Flow Analysis. Cowen estimated a range of values for Celleration based upon the discounted present value of the projected after-tax cash flows of Celleration described in the financial forecasts provided by management of Celleration for Celleration’s fiscal quarters ended September 30, 2015 and December 31, 2015 and Celleration’s fiscal years ending 2016 through 2019, and of the terminal value of Celleration at the fiscal year ending 2019, based upon multiples of revenue, in each case discounted back to June 30, 2015, the assumed closing date of the merger. Unlevered free cash flow was calculated by taking operating earnings and subtracting from this amount projected taxes, capital expenditures, and decreases in net working capital, and adding back projected depreciation and amortization, stock-based compensation, and increases in net working capital. This analysis was based upon certain assumptions described by and projections supplied by the management of Celleration. In performing this analysis, Cowen utilized discount rates ranging from 10% to 14%, which were selected based on the average of the weighted average cost of capital of the Selected Companies. Cowen utilized terminal multiples of revenue ranging from 4.0x to 5.0x, which range was selected by Cowen in its professional judgment and based on multiples implied by the ratios of Enterprise Values to LTM revenues for the MedTech Industry Transactions.

Utilizing this methodology, the implied Enterprise Value of Celleration ranged from $83.7 million to $120.7 million, compared to the implied Enterprise Value to be paid in the merger by Alliqua of $49.0 million.

Relative Contribution/Pro Forma Ownership Analysis. Cowen analyzed the respective contributions of 2015 through 2017 calendar year estimated total revenues, gross profit and operating income (or loss) of Alliqua and Celleration to the combined company, based upon the projected financial results of Alliqua and Celleration (based upon the respective financial forecasts prepared by managements of Alliqua and Celleration and excluding synergies expected to result from the merger) and compared the results to the pro forma ownership of the combined company following the merger. The table below indicates the results of this analysis.

Cowen analyzed the pro forma ownership in the combined company by the holders of Alliqua common stock and noted that current holders of Alliqua common stock would own approximately 76.9% of the combined company and shareholders of Celleration would own 23.1% of the combined company. In performing this analysis, Cowen assumed that Celleration will achieve its Revenue Targets for fiscal years ending December 31, 2015 and December 31, 2016 and that the related earn-out payments will paid at such level. Cowen noted that this percentage exceeded the percentage of Alliqua’s contributions to revenues, gross profit and operating income (loss) in each of the calendar years 2015 through 2017.

In analyzing the consideration to be paid by Alliqua in connection with the merger, Cowen reviewed certain publicly available data regarding the market value of shares of Alliqua common stock relative to that of the Selected Companies. In particular, Cowen analyzed the reported price and trading history of shares of Alliqua common stock as compared to the reported price and trading histories of shares of the Selected Companies. Cowen noted that Alliqua common stock, as of January 29, 2015, was trading at 54% of its 52 week high and 135% of its 52 week low, in line with trading of the shares of the Selected Companies. Furthermore, Cowen compared the multiples implied by the ratios of the Enterprise Values of the Selected Companies to their respective LTM and NTM revenues to the corresponding multiples for Alliqua (in each case utilizing Wall Street Projections). Cowen noted that Alliqua common stock, as of January 29, 2015, was trading at Enterprise Value to revenue multiples at or above the range of the Selected Companies’ 2014 and 2015 Enterprise Value to revenue multiples.

The summary set forth above does not purport to be a complete description of all the analyses performed by Cowen. The preparation of a fairness opinion involves various determinations as to the most appropriate and relevant methods of financial analysis and the application of these methods to the particular circumstances and, therefore, such an opinion is not readily susceptible to partial analysis or summary description. Cowen did not attribute any particular weight to any analysis or factor considered by it, but rather made qualitative judgments as to the significance and relevance of each analysis and factor. Accordingly, notwithstanding the separate factors summarized above, Cowen believes, and has advised the Alliqua board of directors, that its analyses must be considered as a whole and that selecting portions of its analyses and the factors considered by it, without considering all analyses and factors, could create an incomplete view of the process underlying the Opinion. Additionally, no company or transaction used in any analysis as a comparison is identical to Celleration or the merger, and they all differ in material ways. Accordingly, an analysis of the results described above is not mathematical; rather it involves complex considerations and judgments concerning differences in financial and operating characteristics of the companies and other factors that could affect the acquisition value of the selected companies or transactions to which they are being compared. Cowen used these analyses to determine the impact of various operating metrics on the implied enterprise value of Celleration. Each of these analyses yielded a range of implied enterprise values, and therefore, such implied enterprise value ranges developed from these analyses were viewed by Cowen collectively and not individually.

In performing its analyses, Cowen made numerous assumptions with respect to industry performance, business and economic conditions and other matters, many of which are beyond the control of Alliqua and Celleration. Except as otherwise noted, the information utilized by Cowen in its analyses, to the extent that it was based on market data, is based on market data as it existed on or before January 29, 2015 and is not necessarily indicative of current market conditions. These analyses performed by Cowen are not necessarily indicative of actual values or future results, which may be significantly more or less favorable than suggested by such analyses. In addition, analyses relating to the value of businesses do not purport to be appraisals or to reflect the prices at which businesses or securities may actually be sold. Accordingly, such analyses and estimates are inherently subject to uncertainty, being based upon numerous factors or events beyond the control of the parties or their respective advisors. None of Alliqua, Celleration, Cowen or any other person assumes responsibility if future results are materially different from those projected. The analyses supplied by Cowen and the Opinion were among several factors taken into consideration by the Alliqua board of directors in making its decision to enter into the Merger Agreement and should not be considered as determinative of such decision.

Cowen was selected by the Alliqua board of directors to render the Opinion to the Alliqua board of directors because Cowen is a nationally recognized investment banking firm and because, Cowen as part of its investment banking business, is continually engaged in the valuation of businesses and their securities in connection with mergers and acquisitions, negotiated underwritings, secondary distributions of listed and unlisted securities, private placements and valuations for corporate and other purposes. In addition, in the ordinary course of its business, Cowen and its affiliates may actively trade the equity securities of Alliqua for their own account and for the accounts of their customers, and, accordingly, may at any time hold a long or short position in such securities. The issuance of the Opinion was approved by Cowen’s fairness opinion review committee.

Cowen is acting as exclusive financial advisor to the Alliqua board of directors in connection with the merger and will receive a fee of $1,500,000 (the “Transaction Fee”) from Alliqua for Cowen’s services pursuant to the terms of the Engagement Letter, all of which is contingent upon the consummation of the merger. Cowen received a fee of $750,000 for providing the Opinion without regard to whether the merger is ultimately consummated, but which is creditable against any Transaction Fee. In addition, Alliqua agreed to reimburse certain of Cowen’s expenses and to indemnify Cowen for certain liabilities that may arise out of Cowen’s engagement. The Opinion states that, in the two years preceding the date of the Opinion, Cowen has not had a material relationship with Alliqua or any other party to the merger and there were no material relationships mutually understood to be contemplated in which any compensation was received or was intended to be received as a result of the relationship between Cowen and any party to the merger. Pursuant to the terms of the Engagement Letter, Alliqua agreed that Cowen shall have the right to participate as one of Alliqua’s underwriters or placement agents in any equity financing by Alliqua to finance the merger after the execution of the Merger Agreement and during the term of the Engagement Letter, and Cowen would receive fees for the rendering of such services. Cowen and its affiliates may in the future provide commercial and investment banking services to Alliqua   and Merger Sub and may receive fees for the rendering of such services.

The terms of the fee arrangement with Cowen, which are customary in transactions of this nature, were negotiated at arm’s length between Alliqua and Cowen, and the Alliqua board of directors was aware of the arrangement, including the fact that a significant portion of Cowen’s fees are contingent upon the completion of the merger.

Board Composition and Management of Alliqua after the Merger

The directors and officers of Alliqua immediately prior to the effective time of the merger will continue to be directors and officers of Alliqua immediately following the merger. Pursuant to the terms of the Merger Agreement, Alliqua has agreed to appoint Celleration’s president and chief executive officer, Mark Wagner, to the Alliqua board of directors upon the effective time of the merger.

Information about current directors and executive officers of Alliqua, including biographical information, executive compensation and stock ownership, can be found in Alliqua’s Annual Report on Form 10-K for the fiscal year ended December 31, 2014, which is filed with the SEC and incorporated by reference into this joint proxy and consent solicitation statement/prospectus. See the section titled “Where You Can Find More Information” beginning on page [    •    ] of this joint proxy and consent solicitation statement/prospectus.

Information about Mark Wagner, including his biographical information, executive compensation and stock ownership as the president and chief executive officer and a director of Celleration, can be found in the section titled “Information About the Celleration Director” beginning on page [    •    ] and the section titled “Principal Stockholders of Celleration” beginning on page [   •    ] of this joint proxy and consent solicitation statement/prospectus.

Interests of Celleration’s Directors and Executive Officers in the Merger

In considering the recommendation of the Celleration board of directors to approve and adopt the Celleration Merger Agreement proposal, Celleration stockholders should be aware that certain of Celleration’s directors and executive officers have interests in the merger that may be different from, or in addition to, the interests of Celleration stockholders generally. The Celleration board of directors was aware of these interests and considered them, among other matters, in approving and declaring advisable the Merger Agreement and the transactions contemplated by the Merger Agreement. These interests are described below.

Position with the Combined Company

Mark Wagner, currently a director and the president and chief executive officer of Celleration, will be appointed to the Alliqua board of directors upon the effective time of the merger pursuant to the terms of the Merger Agreement. Certain executive officers of Celleration may be hired as employees by Alliqua. No agreements with Alliqua have been finalized as of the date of this joint proxy and consent solicitation statement/prospectus. These matters are subject to negotiations and discussions and there can be no assurance that the parties will reach agreement. Such executive officers of Celleration do, however, have existing employment agreements or offer letters with Celleration.

Ownership Interests of Celleration’s Directors and Executive Officers

As of April 1, 2015, Celleration’s directors and executive officers as a group held eligible options to purchase a total of 14,177,200 shares of Celleration common stock. As described under “Treatment of Celleration Stock Options and Warrants,” beginning on page [ • ] of this joint proxy and consent solicitation statement/prospectus, at the effective time of the merger, each outstanding and unexercised Celleration stock option will be cancelled. Only certain holders of in-the-money options will be entitled to receive a pro rata share of the merger consideration and the contingent consideration, as determined by taking the product of (i) the number of shares underlying such in-the-money option and (ii) the excess of the closing per share merger consideration over the per share exercise price of such option. The board of directors of Celleration anticipates that the options to purchase shares of Celleration common stock held by Celleration’s executive officers will be deemed in-the-money. Based on the exercise price of $0.05 per share for each option and an estimated closing per share merger consideration of $0.169, the value of the merger consideration Celleration’s directors and executive officers will receive for options to purchase shares of Celleration common stock expected to be deemed in-the-money is set forth in the table below.

For additional information on directors’ and executive officers’ beneficial ownership of Celleration common stock and options held by Celleration’s directors and executive officers, please refer to “Principal Stockholders of Celleration” beginning on page [ • ] of this joint proxy and consent solicitation statement/prospectus.

Liquidation Preference Payable to Directors and Executive Officers

In addition, certain of the Celleration officers and directors will be entitled to a pro rata portion of the Series AA preferred stock liquidation preference upon the closing of the merger. For a discussion of the liquidation preference payable to directors and executive officers of Celleration, please refer to “—Liquidation Preference Payable to Certain Stockholders, Directors and Executive Officers of Celleration in the Merger” beginning on page [ • ] of this joint proxy and consent solicitation statement/prospectus.

Bonus Upon Completion of the Merger

The Celleration board of directors approved a one-time special cash bonus for certain officers and directors of Celleration contingent on the successful completion of the merger and the closing of the transactions contemplated by the Merger Agreement. Sven Wehrwein and Bruce Elegant, each a current director of Celleration, are entitled to receive $13,432.80 and $11,122.40, respectively. In addition, Messrs. Wagner and Geyen are entitled to receive $145,212.13 and $13,737.37, respectively.

Indemnification and Liability Insurance

Pursuant to the Merger Agreement, upon the completion of the merger, Celleration and Alliqua agreed that for six years after the effective time of the merger, to the fullest extent permitted under applicable law, Alliqua and the surviving corporation shall indemnify, defend and hold harmless each current and former director and officer of Celleration against all losses, claims, damages, liabilities, fees, expenses, judgments and fines arising in whole or in part out of actions or omissions in their capacity as such occurring at or prior to the effective time of the merger, including in connection with the transactions contemplated by the Merger Agreement, and shall reimburse each such director and officer of Celleration for any legal or other expenses reasonably incurred in connection with investigating or defending any such losses, claims, damages, liabilities, fees, expenses, judgments and fines as such expenses are incurred, subject to certain limitations.

Celleration will purchase a “tail” policy with respect to directors’ and officers’ liability insurance policy with a claims period of at least six-years after the effective time of the merger. During the term of the tail policy, Alliqua and the surviving company have agreed in the Merger Agreement not take any action to cause the tail policy to be cancelled or any provision therein to be amended or waived.

Voting Agreements

Certain of the Celleration 5% stockholders who have entered into voting agreements with Alliqua to, among other things, execute and deliver a written consent with respect to all shares of Celleration common stock and Series AA preferred stock owned by them as of the applicable record date in favor of the adoption and approval of the Merger Agreement and merger, are affiliated with directors of Celleration. Each of Celleration’s executive officers has also entered into a voting agreement with Alliqua. See the section titled “Ancillary Agreements—Voting Agreement” beginning on page [ • ] of this joint proxy and consent solicitation statement/prospectus.

Golden Parachute Compensation

This section sets forth the information required by Item 402(t) of Regulation S-K regarding the compensation for each of Celleration’s named executive officers that is based on or otherwise relates to the merger. This compensation is referred to as “golden parachute” compensation by the applicable SEC disclosure rules, and in this section Celleration uses such term to describe the merger-related compensation payable to Celleration’s named executive officers. For 2014, the named executive officers of Celleration were Mark Wagner, president and chief executive officer; Chris Geyen, chief financial officer; and Pamela Unger, vice president of medical affairs and clinical education.

Mark Wagner —Mr. Wagner is employed as the president and chief executive officer of Celleration pursuant to an employment agreement. Under his employment agreement, if Celleration terminates Mr. Wagner’s employment without cause, or Mr. Wagner terminates his employment for good reason, both as defined in the agreement, Mr. Wagner is entitled to receive an amount equal to 12 months of his base salary, paid in equal installments over 12 months, and will be permitted to continue to participate in Celleration’s medical and dental benefit plans for a period of 12 months following the date of termination, at Celleration’s expense. Upon a change in control of Celleration, if Celleration terminates Mr. Wagner’s employment without cause, or Mr. Wagner terminates his employment for good reason, within one year of the change in control, Mr. Wagner is entitled to a lump sum payment equal to the sum of (i) 15 months of his base salary; (ii) 50% of his base salary; and (iii) an amount equal to the award that would have been payable under any incentive bonus plan if Celleration’s performance results remained the same for the rest of the year, pro-rated for the number of days elapsed during the year; and also to continued participation in the medical and dental benefit plans for a period of 15 months following the date of termination, at Celleration’s expense. Receipt of any benefits by Mr. Wagner upon termination will be conditioned upon Mr. Wagner executing a general release of all claims in a form provided by Celleration and his being compliant with the employment agreement and any other written agreements with the company.

Christopher Geyen —Mr. Geyen is employed as the chief financial officer of Celleration pursuant to an employment agreement. Under his employment agreement, if Celleration terminates Mr. Geyen’s employment without cause, or Mr. Geyen terminates his employment for good reason, both as defined in the agreement, Mr. Geyen is entitled to receive an amount equal to 12 months of his base salary, paid in equal installments over 12 months, and will be permitted to continue to participate in Celleration’s medical and dental benefit plans for a period of 12 months following the date of termination, at Celleration’s expense. Upon a change in control of Celleration, if Celleration terminates Mr. Geyen’s employment without cause, or Mr. Geyen terminates his employment for good reason, within one year of the change in control, Mr. Geyen is entitled to a lump sum payment equal to the sum of (i) 12 months of his base salary; (ii) 35% of his base salary; and (iii) an amount equal to the award that would have been payable under any incentive bonus plan if Celleration’s performance results remained the same for the rest of the year, pro-rated for the number of days elapsed during the year; and also to continued participation in the medical and dental benefit plans for a period of 12 months following the date of termination, at Celleration’s expense. Receipt of any benefits by Mr. Geyen upon termination will be conditioned upon Mr. Geyen executing a general release of all claims in a form provided by Celleration and his being compliant with the employment agreement and any other written agreements with the company.

Pamela Unger —Ms. Unger is employed as the vice president of medical affairs and clinical education of Celleration pursuant to an employment agreement. Under her employment agreement, if Celleration terminates Ms. Unger’s employment without cause, or Ms. Unger terminates her employment for good reason, both as defined in the agreement, Ms. Unger is entitled to receive an amount equal to three months of her base salary, paid in equal installments over three months, and will be permitted to continue to participate in Celleration’s medical and dental benefit plans for a period of three months following the date of termination, at Celleration’s expense. Upon a change in control of Celleration, if Celleration terminates Ms. Unger’s employment without cause, or Ms. Unger terminates her employment for good reason, within one year of the change in control, Ms. Unger is entitled to a lump sum payment equal to the sum of (i) six months of her base salary; (ii) an amount equal to 50% of the award that would have been payable under Celleration’s annual incentive bonus plan; and (iii) an amount equal to the award that would have been payable under any incentive bonus plan if Celleration’s performance results remained the same for the rest of the year, pro-rated for the number of days elapsed during the year; and also to continued participation in the medical and dental benefit plans for a period of six months following the date of termination, at Celleration’s expense. Receipt of any benefits by Ms. Unger upon termination will be conditioned upon Ms. Unger executing a general release of all claims in a form provided by Celleration. Receipt of any benefits by Ms. Unger upon termination will be conditioned upon Ms. Unger executing a general release of all claims in a form provided by Celleration and her being compliant with the employment agreement and any other written agreements with the company.

For purposes of the employment and equity arrangements above, the consummation of the merger will constitute a “change of control” under each arrangement.

Aggregate Amounts of Potential Compensation

The table below summarizes potential golden parachute compensation that each named executive officer would be entitled to receive from Celleration if the merger is consummated and if the named executive officer thereafter incurs a termination of employment. Please note that the amounts indicated below are estimates based on multiple assumptions that may or may not actually occur, including assumptions described herein. Some of these assumptions are based on information not currently available and, as a result, the actual amounts, if any, to be received by named executive officer may differ in material respects from the amounts set forth below.

For purposes of calculating such potential golden parachute compensation, Celleration has assumed that the merger occurs on May 31, 2015, including with respect to calculating the portion of equity awards subject to accelerated vesting, and has further assumed that the named executive officers will incur a termination of employment on such date that would entitle them to the benefits set forth in the table below.

Liquidation Preference Payable to Certain Stockholders, Directors and Executive Officers of Celleration in the Merger

In addition to the right of the holders of Celleration Series AA preferred stock to participate in the merger consideration with the holders of Celleration common stock, the holders of the Celleration Series AA preferred stock will also receive $10,500,000 as a liquidation preference, payable in equal amounts of cash and shares of Alliqua common stock. The following table shows the aggregate liquidation preference payable to each of the beneficial holders of more than 5% of Celleration’s common stock and, for the William Cadogan trusts, 5% of Celleration’s oustanding Series AA preferred stock, as well as for Celleration’s directors and officers.

For information on Celleration’s principal stockholders’ beneficial ownership of Celleration common stock and Series AA preferred stock, please refer to “Principal Stockholders of Celleration” beginning on page [ • ] of this joint proxy and consent solicitation statement/prospectus.  

Regulatory Approvals Required for the Merger

Completion of the merger is subject to prior receipt of all approvals required to be obtained from applicable governmental and regulatory authorities. Subject to the terms and conditions of the Merger Agreement, Alliqua and Celleration have agreed to use their commercially reasonable efforts and cooperate to prepare and file, as promptly as possible, all necessary documentation and to obtain as promptly as practicable all regulatory approvals required or advisable to complete the transactions contemplated by the Merger Agreement.

Alliqua and Celleration believe that the merger does not raise substantial antitrust or other significant regulatory concerns and that both parties will be able to obtain all requisite regulatory approvals prior to the anticipated closing. However, at any time before or after the effective time of the merger, the FTC, the Antitrust Division or others (including foreign regulatory agencies, states and private parties) could challenge the merger and take action under antitrust laws. There can be no assurance that a challenge to the merger on antitrust grounds will not be made or, if such challenge is made, that it would not be successful.

Alliqua must also comply with the applicable federal and state securities laws and the rules and regulations of The NASDAQ Stock Market LLC for the approval of the listing application to be submitted in connection with the issuance of shares of Alliqua common stock in the merger and the filing of this joint proxy and consent solicitation statement/prospectus with the SEC.

The parties' obligation to complete the merger is conditioned upon the receipt of all required regulatory approvals. Alliqua and Celleration will use their respective commercially reasonable efforts to resolve any objections that may be asserted by any regulatory authority with respect to the Merger Agreement or the merger or the other transactions contemplated by the Merger Agreement. For further information, see the section titled “ The Merger Agreement—Conditions to Completion of the Merger” on page [ • ] of this joint proxy and consent solicitation statement/prospectus.

The foregoing is a summary of the material regulatory requirements for the merger, satisfaction or waiver of certain of which requirements is a condition to the completion of the merger. There can be no guarantee as to if and when any of the consents or approvals required for the merger will be obtained or as to the conditions that such consents and approvals may contain .

Accounting Treatment

Alliqua will account for the acquisition pursuant to the Merger Agreement using the acquisition method of accounting in accordance with U.S. GAAP. Alliqua will measure the assets acquired and liabilities assumed at their fair values including net tangible and identifiable intangible assets acquired and liabilities assumed as of the closing of the transaction. Any excess of the purchase price over those fair values will be recorded as goodwill. Definite lived intangible assets will be amortized over their estimated useful lives. Intangible assets with indefinite useful lives and goodwill will not be amortized but will be tested for impairment at least annually. All intangible assets and goodwill are also tested for impairment when certain indicators are present. The purchase price reflected in the unaudited pro forma condensed combined financial statements is based on preliminary estimates using assumptions Alliqua management believes are reasonable based on currently available information. The final purchase price and fair value assessment of assets and liabilities will be based in part on a detailed valuation which has not yet been completed.