NOTES PAYABLE

Hercules Credit Agreement

November

2013,

the Company entered into a loan agreement with Hercules Technology Growth Capital, Inc. (Hercules) which permits up to

$20

million in capital to be distributed in multiple tranches (the Hercules Credit Agreement). The Company drew the

first

tranche of

million upon closing of the Hercules Credit Agreement in

November

2013

and used approximately

million of the proceeds to repay the outstanding obligations under its loan agreement with Oxford Finance LLC and Horizon Technology Finance Corporation as discussed further below. On

June

10,

2014,

the Company closed the

second

million tranche under the Hercules Credit Agreement. The proceeds were used to fund the

$3.0

million upfront cash payment associated with Celsion's acquisition of EGEN, as well as the Company’s transaction costs associated with the EGEN acquisition. Upon the closing of this

second

tranche, the Company has drawn down a total of

$10

million under the Hercules Credit Agreement.

The obligations under the Hercules Credit Agreement are in the form of secured indebtedness bearing interest at a calculated prime-based variable rate

(11.25%

per annum since inception through

December

17,

2015,

11.50%

from

December

18,

2015

through

December

15,

2016

and

11.75%

since). Payments under the loan agreement were interest only for the

first

twelve

months after loan closing, followed by a

-month amortization period of principal and interest through the scheduled maturity date of

June

2017.

In connection with the Hercules Credit Agreement, the Company incurred cash expenses of

$122,378

which were recorded as deferred financing fees. These deferred financing fees are being amortized as interest expense using the effective interest method over the life of the loan. Also in connection with the Hercules Credit Facility, the Company paid loan origination fees of

$230,000

which has been classified as debt discount. This amount is being amortized as interest expense using the effective interest method over the life of the loan.

As a fee in connection with the Hercules Credit Agreement, the Company issued Hercules a warrant for a total of

97,493

shares of the Company’s common stock (the Hercules Warrant) at a per share exercise price of

$3.59,

exercisable for cash or by net exercise from

November

25,

2013.

Upon the closing of the

second

tranche on

June

10,

2014,

this warrant became exercisable for an additional

97,493

shares of the Company’s common stock. The Hercules Warrant will expire

November

25,

2018.

Hercules has certain rights to register the common stock underlying the Hercules Warrant pursuant to a Registration Rights Agreement with the Company dated

November

25,

2013.

The registration rights expire on the date when such stock

may

be sold under Rule

144

without restriction or upon the

first

year anniversary of the registration statement for such stock, whichever is earlier. The common stock issuable pursuant to the Hercules Warrant was filed pursuant to Rule

415

under the Securities Act of

1933

on the Prospectus for Registration Statement No.

333

193936

and was declared effective on

September

30,

2014.

The Company valued the Hercules Warrant issued at the inception of the loan using the Black-Scholes option pricing model and recorded

$521,763

2013

as deferred financing fees. In calculating the value of the warrants, the Company assumed a volatility rate of

102%,

risk free interest rate of

1.37%,

an expected life of

years, a stock price of

$3.55

(closing price on date of the Hercules Warrant) and no expected forfeitures nor dividends. In the

second

quarter of

2014,

the Company reassessed the classification of the warrants and concluded the original amount should be reclassified from deferred financing fees and equity. Therefore, other assets and additional paid in capital were both reduced by the

$521,763.

The Company then valued the warrant for the initial

97,493

shares of the Company’s common stock as of the inception of the loan and recorded

$260,928

as a debt discount to be amortized as interest expense using the effective interest method over the life of the loan and recognized a warrant liability for this amount. In connection with the closing of the

second

million tranche on

June

2014,

the Company then valued the warrant for the additional

97,493

shares of the Company’s common stock which became available and exercisable as of the date and recorded

$215,333

as a debt discount to be amortized as interest expense using the effective interest method over the life of the loan and recognized a warrant liability for this amount. In calculating the value of the warrant for the additional shares of the Company’s common stock on

June

10,

2014,

the Company assumed a volatility rate of

104%,

risk free interest rate of

1.69%,

an expected remaining life of

4.5

years, a stock price of

$3.07

(closing price

June

2014)

and no expected forfeitures nor dividends. In

2014,

the warrant liability was fair valued at the end of each quarter and the resulting change in fair value will be recognized in net income.

In the

second

quarter of

2015,

the Company concluded the warrant provision which provided for the exercise price to be adjusted downward as described above had expired. Therefore, the Company valued the warrant at

$336,254

immediately prior to this event and recorded non-cash charges to net income of

$18,018

and

$61,246

in the

second

quarter and year to date periods of

2015,

respectively. The Company also reduced the liability to

zero

and increased equity by

$336,254

at this time.

Also in connection with each of the

$5.0

million tranches, the Company will be required to pay an end of term charge equal to

3.5%

of each original loan amount at time of maturity. Therefore, these amounts totaling

$350,000

are being amortized as interest expense using the effective interest method over the life of the loan.

For the year ended

December

31,

2016,

the Company incurred

$486,327

in interest expense and amortized

$236,666

as interest expense for deferred fees, debt discount and end of term charges in connection with the Hercules Credit Agreement. For the year ended

December

31,

2015,

the Company incurred

$918,465

in interest expense and amortized

$438,717

as interest expense for deferred fees, debt discount and end of term charges in connection with the Hercules Credit Agreement.

The Hercules Credit Agreement contains customary covenants, including covenants that limit or restrict the Company’s ability to grant liens, incur indebtedness, make certain restricted payments, merge or consolidate and make dispositions of assets. Upon the occurrence of an event of default under the Hercules Credit Agreement, the lenders

may

cease making loans, terminate the Hercules Credit Agreement, declare all amounts outstanding to be immediately due and payable and foreclose on or liquidate the Company’s assets that comprise the lenders’ collateral. The Hercules Credit Agreement specifies a number of events of default (some of which are subject to applicable grace or cure periods), including, among other things, non-payment defaults, covenant defaults, a material adverse effect on the Company or its assets, cross-defaults to other material indebtedness, bankruptcy and insolvency defaults and material judgment defaults. The Company has maintained compliance with these covenants.

Following is a schedule of future principle payments and end of term fee net of debt discount due on the Hercules Credit Agreement:

	As of December 31,
2017	$	2,560,553
2018 and thereafter		–
Total	$	2,560,553