<PAGE>

                                  UNITED STATES
                       SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D.C. 20549

                                    FORM 10-K

(Mark One)

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

        FOR THE FISCAL YEAR ENDED SEPTEMBER 30, 2001

                                       or

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

        For the transition period from ___________to _________

                        Commission file number 000-14242

                               CELSION CORPORATION
             ------------------------------------------------------
             (Exact Name of Registrant as Specified in Its Charter)


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<S>                                                                                     <C>
                              DELAWARE                                                      52-1256615
                  --------------------------------                                      -------------------
                    State or Other Jurisdiction                                         (I.R.S.  Employer
                  of Incorporation or Organization                                      Identification No.)

                  10220-I OLD COLUMBIA ROAD
                     COLUMBIA, MARYLAND                                                      21046-1705
                  --------------------------------                                      -------------------
                  (Address of Principal Executive Offices)                                   (Zip Code)
</TABLE>



<TABLE>
<S>                                                            <C>
Registrant's telephone number, including area code:            (410) 290-5390
                                                               --------------

Securities registered pursuant to Section 12(b) of the Act:    NONE
                                                               ----
Securities registered pursuant to Section 12(g) of the Act:    COMMON STOCK, PAR VALUE $.01 PER SHARE
                                                               --------------------------------------
                                                                           (Title of Class)
</TABLE>


        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  X  No
                                              ---

        Indicate by check mark if disclosure of delinquent filers pursuant to
Item 405 of Regulation S-K (Section 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. [X]

        As of December 20, 2001, 85,292,249 shares of the Registrant's Common
Stock were issued and outstanding. As of December 20, 2001, the aggregate market
value of voting stock held by non-affiliates of the Registrant was approximately
$45,901,693, based on the closing price for the Registrant's Common Stock on
that date as quoted on the American Stock Exchange.

                       DOCUMENTS INCORPORATED BY REFERENCE

        Portions of the Registrant's Definitive Proxy Statement to be filed in
connection with the Annual Meeting of Stockholders to be held on February 15,
2002, are incorporated by this reference into Part III hereof, as indicated
herein.


<PAGE>


                                     PART I


ITEM 1.         BUSINESS

                                     GENERAL

        We develop medical treatment systems primarily to treat breast cancer
and a chronic prostate enlargement condition, common in older males, known as
benign prostatic hyperplasia, or BPH, using minimally invasive focused heat
technology. Also, we are working with Duke University in the development of
heat-sensitive liposome compounds for use in the delivery of chemotherapy drugs
to tumor sites, and with Sloan-Kettering on the development of heat-activated
gene therapy compounds.

BPH TREATMENT SYSTEM

        Benign Prostatic Hyperplasia

        Millions of aging men experience symptoms resulting from benign
prostatic hyperplasia, or BPH, a non-cancerous urological disease in which the
prostate enlarges and constricts the urethra. The prostate is a walnut-sized
gland surrounding the male urethra that produces seminal fluid and plays a key
role in sperm preservation and transportation. The prostate frequently enlarges
with age. As the prostate expands, it compresses or constricts the urethra,
thereby restricting the normal passage of urine. This restriction of the urethra
may require a patient to exert excessive bladder pressure to urinate. Because
the urination process is one of the body's primary means of cleansing
impurities, the inability to urinate adequately increases the possibility of
infection and bladder and kidney damage.

        Prevalence of BPH

        As BPH is an age-related disorder, its incidence increases with
maturation of the population. Industry estimates suggest that more than 9
million men in the United States experience BPH symptoms and that more than 26
million men are affected by BPH worldwide. As the United States population
continues to age the prevalence of BPH can be expected to continue to increase.
It is generally estimated that approximately 50% of all men over 55 and 90% of
all men over 75 will have BPH symptoms at various times. Also, industry studies
estimate the overall costs of BPH therapy at approximately $2.5 to $3.0 billion
annually in the United States and $8.0 to $10.0 billion worldwide for patients
currently seeking treatment.

        Current Treatment Alternatives for BPH

        Like cancerous tumors, BPH historically has been treated by surgical
intervention or by drug therapy. The primary treatment for BPH currently is
transurethral resection of the prostate, or TURP, a surgical procedure in which
the prostatic urethra and surrounding diseased tissue in the prostate are
trimmed with a telescopic knife, thereby widening the urethral channel for urine
flow. While the TURP procedure typically has been considered the most effective
treatment available for the relief of BPH symptoms, the procedure has
shortcomings. In the first instance, TURP generally requires from one to three
days of post-operative hospitalization. In addition, a significant percentage of
patients who undergo TURP encounter significant complications, which can include
painful urination, infection, retrograde ejaculation, impotence, incontinence
and excessive bleeding. Furthermore, the cost of the TURP procedure and the
related hospitalization is high, ranging from $8,000 to $12,000. This cost does
not take into account the costs of lost work time, which could amount to several
weeks, or the costs related to adverse effects on patients' quality of life.

        Other, less radical, surgical procedures, generally categorized as
"minimally invasive" ("MI") therapies, are available as alternatives to the TURP
procedure. The primary MI treatments use

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<PAGE>

microwave heating ("TUMT") to treat BPH by incinerating the obstructing portion
of the prostate. TUMT involves sedation, catheterization and high levels of heat
to incinerate a portion of the prostate. Two other MI therapies--interstitial RF
therapy and laser therapy--employ, respectively, concentrated radio frequency
(RF) waves or laser radiation to reduce prostate swelling by cauterizing tissue
instead of removing it with a surgical knife. However, these procedures require
puncture incisions to be made in order to insert cauterizing RF or laser probes
into the affected tissue and, therefore, also involve the use of a full
operating facility and anesthesia, as well as the burning of prostate tissue by
the probes. Although these procedures result in less internal bleeding and
damage to the urethra than the TURP procedure and may decrease the adverse
effects and costs associated with surgery, anesthesia and post-operative tissue
recovery, they do not entirely eliminate these adverse consequences.

        Finally, drug therapy has emerged as an alternative to surgery in the
last several years. There are several drugs available for BPH treatment, the two
most widely prescribed being Hytrin and Proscar. Hytrin works by relaxing
certain involuntary muscles surrounding the urethra, thereby easing urinary
flow, and Proscar is intended actually to shrink the enlarged gland. However,
industry studies have asserted that drug therapy costs $500 to $800 per year or
more, must be maintained for life and does not offer consistent relief to a
large number of BPH patients. In fact, studies have shown that 45% of patients
who begin drug therapy for BPH drop out within the first year, primarily due to
the ineffectiveness of currently available drug therapies. Also, all of the BPH
drugs have appreciable side effects.

        Accordingly, neither the medicinal treatments nor the surgical
alternatives available for BPH appear to provide fully satisfactory,
cost-effective treatment solutions for BPH sufferers.

        Celsion BPH Treatment System

        We have developed a BPH treatment system -- "Microwave Uretheroplasty"
-- that combines our microwave thermotherapy capability with a proprietary
balloon compression technology licensed from MMTC, Inc. The system consists of a
microwave generator and conductors and a computer and computer software programs
that control the focusing and application of heat, plus a specially designed
balloon catheter and consists of two fundamental elements:

    -   Celsion's proprietary catheter, incorporating a balloon enlargement
        device, delivers computer-controlled transurethral microwave heating
        directly to the prostate at temperatures greater than 44(degrees) C
        (111(degrees) F).

    -   Simultaneously, the balloon inflates the device and expands to press the
        walls of the urethra from the inside outward as the surrounding prostate
        tissue is heated.

The combined effect of this "heat plus compression" therapy is twofold: first,
the heat denatures the proteins in the wall of the urethra, causing a stiffening
of the opening created by the inflated balloon. Second, the heat serves
effectively to kill off prostate cells outside the wall of the urethra, thereby
creating sufficient space for the enlarged natural opening.

        The following schematic illustrates the Celsion technology:

                                   [GRAPHIC]

                                       3

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    -----------------    -----------      -----------      ----------------
    1 - PROSTATE WITH    2 - CELSION      3 - BALLOON      4 - URETHRA RE-
           BLOCKAGE       CATHETER          EXPANDED            OPENED
    -----------------    -----------      -----------      ----------------

        Pre-clinical animal studies have demonstrated that a natural "stent," or
reinforced opening, in the urethra of the animals tested forms after the
combined heat plus compression treatment. Also, the BPH system's relatively low
temperature (43(degrees) C to 45(degrees) C) appears to be sufficient to kill
prostatic cells surrounding the urethra wall, thereby creating space for the
enlargement of the urethra opening. However, the temperature is not high enough
to cause swelling in the urethra.

        Celsion's investigational minimally invasive Microwave Uretheroplasty
treatment system is designed to overcome the limitations of all three of the
current treatment systems. It is designed to be a relatively painless, rapid
procedure that delivers the efficacy of surgical treatments without significant
risks and the potential for life-altering side effects. The potential benefits
of the Microwave Uretheroplasty system include walk-in, outpatient treatment
that can be completed in less than an hour; no required sedation; generally no
post-operative catheterization; and rapid symptomatic relief from BPH.

        Ultimate FDA approval for a device such as our equipment typically
requires two phases of clinical testing. The purpose of Phase I testing is to
show feasibility and safety and involves a small group of patients. Phase II
testing may involve as many as 160 patients and is designed to show safety and
efficacy. The FDA approved an Investigational Device Exemption, or IDE, to allow
clinical testing of our BPH system in June 1998 and we completed initial Phase I
clinical feasibility human trials of the BPH system at Montefiore Medical Center
in May 1999. In the Phase I trials, the combination of computer-controlled
microwave heat and balloon catheter expansion was able to increase peak flow
rates and to provide immediate relief of symptoms caused by BPH. In addition, we
undertook an expanded Phase I study to test an accelerated treatment protocol,
which was completed in May 2000, at Montefiore Medical Center. In July 2000, the
FDA approved the commencement of multiple-site Phase II studies to collect the
safety and efficacy data necessary for FDA premarketing approval (PMA) for
commercialization. All 160 patients required to be treated under the Phase II
trial were treated as of November 29, 2001 and, as of that date, we submitted
the first two of three required modules to the FDA in support of the PMA. We
expect to submit the last module, consisting of clinical data, during the second
quarter of 2002. If Phase II testing produces anticipated results and if our BPH
system meets all other requirements for FDA approval and receives such approval,
we intend to begin marketing the BPH system during the summer of 2002.

        Based on the information we have collected to date, we believe that our
BPH system has the potential to deliver a treatment that is performed in one
hour or less on an outpatient basis, would not require post-treatment
catheterization and that would deliver symptomatic relief and an increase in
urinary flow rates promptly after the procedure is completed.

                                       4

<PAGE>

BREAST CANCER TREATMENT SYSTEM

        Prevalence of Breast Cancer

        Breast cancer is one of the leading causes of death among women in the
United States. According to statistics published in the American Cancer
Society's A Cancer Journal for Clinicians, there were an average of 183,000
newly diagnosed breast cancer cases in the United States in each of the years
from 1995 through 1999.

        Current Treatment for Breast Cancer

        Breast cancer is presently treated by mastectomy, the surgical removal
of the entire breast, or by lumpectomy, the surgical removal of the tumor and
surrounding tissue. Both procedures are often followed by radiation therapy or
chemotherapy. The more severe forms of surgical intervention can result in
disfigurement and a need for extended prosthetic and rehabilitation therapy.

        In addition, heat therapy (also known as hyperthermia or thermotherapy)
is a historically recognized method of treatment of various medical conditions,
and heat therapy has been used in the past to treat malignant tumors in
conjunction with radiation and chemotherapy. As summarized in the Fourth Edition
of Radiobiology for the Radiologist, published in 1994 by J.B. Lippincott
Company, in 24 independent studies on an aggregate of 2,234 tumors, treatment
consisting of heat plus radiation resulted in an average doubling of the
complete response rate of tumors, compared to the use of radiation alone. The
complete response rate for this purpose means the total absence of a treated
tumor for a minimum of two years. Comparable increases in the complete response
rate were reported with the use of heat combined with chemotherapy. In addition,
it has been demonstrated on numerous occasions that properly applied heat, alone
and without the concurrent use of radiation, can also kill cancer cells.

        Heat Therapy in Conjunction with Radiation; First Generation Celsion
        Equipment

        In 1989, we obtained FDA premarketing approval for our microwave-based
Microfocus 1000 heat therapy equipment for use on surface and subsurface tumors
in conjunction with radiation therapy. Until 1995, we marketed our Microfocus
equipment for this use in 23 countries, but microwave heat therapy was not
widely accepted in the United States medical community as an effective cancer
treatment. Moreover, due to the limitations of microwave technology available at
that time, it was difficult to deliver a controlled amount of heat to subsurface
tumors without overheating surrounding healthy tissue.

        New Microwave Technology from MIT

        In 1993, we began working with researchers at the Massachusetts
Institute of Technology, or MIT, who had developed, originally for the United
States Defense Department, the microwave control technology known as "Adaptive
Phased Array", or APA. This technology permits properly designed microwave
equipment to focus and concentrate energy targeted at diseased tissue areas deep
within the body and to heat them selectively, without adverse impact on
surrounding healthy tissue. In 1996, MIT granted us an exclusive worldwide
license to use this technology for medical applications and thereafter we have
concentrated on developing a second generation of Microfocus equipment capable
of focusing microwave energy on specific tissue areas. We have now incorporated
the APA technology in our second-generation microwave therapy equipment.

                                       5

<PAGE>

        Second Generation Celsion Breast Cancer Treatment System

        Using the APA technology, we have developed a prototype breast cancer
treatment system intended to destroy localized breast tumors through the
application of heat alone. The system consists of a microwave generator and
conductors, a computer and computer software programs that control the focusing,
application and duration of the thermotherapy and a specially designed patient
treatment table.

        In 1998, we completed pre-clinical animal testing of our prototype
system at the Massachusetts General Hospital, a teaching hospital for Harvard
Medical School in Boston, Massachusetts. Using breast tissue-equivalent phantoms
and tumors in live animals, these studies demonstrated that our system is
capable of selectively heating tumors at temperatures up to 46(degrees) C
(115(degrees) F) without damage to surrounding healthy tissues. High
temperatures maintained for eight to ten minutes can cause complete tumor
necrosis (death), leading to the death of viable cancer cells within the tumor
and in its immediate vicinity. A second prototype clinical breast cancer
treatment system at Oxford University in England was used to demonstrate
successfully the ability of our equipment to focus heat deep into animal tissue
at precise locations and in small target areas. In our view, these animal tests
demonstrate that it is possible to eliminate tumors by heat alone and without
the use of radiation. Using the pre-clinical data from Massachusetts General,
the FDA granted Celsion a supplemental premarketing approval to incorporate the
APA technology with Celsion's already approved Microfocus 1000 system. The APA
technology enhances the ability of the Microfocus 1000 system to focus energy.

        In January 1999, we received an IDE approval from the FDA to permit
clinical testing of our breast cancer treatment system, and also received FDA
approval to proceed with Phase I human clinical studies. In August 2000, we
completed the treatment of ten patients in the Phase I study using our breast
cancer equipment at Columbia Hospital in West Palm Beach, Florida, and at Harbor
UCLA Medical Center in Torrance, California. In the study, our equipment was
clinically tested on female breast tumors on a minimally invasive basis through
a single application of precisely controlled and targeted heat. In December
2000, we received approval from the FDA to commence Phase II trials for our
breast cancer system.

        The Phase II trials consist of two protocols--the first is designed to
ablate (kill) small breast tumors using heat alone and the second is designed to
downsize large breast cancer tumors using a combination of heat and
chemotherapy, thus allowing a surgeon to perform a lumpectomy rather than a
mastectomy, thereby preserving the affected breast. These trials are currently
under way at Columbia Hospital, in Florida, Harbor UCLA in California and Halle
Martin Luther Breast Center in Halle, Germany. We expect to add additional
sites, both within the United States and in Europe, during the first quarter of
2002 and currently anticipate that we will complete the Phase II trials by the
end of calendar year 2002. If the Phase II trials are successful, we expect to
apply for the addition of a new indication of use to the existing FDA
premarketing approval for our Microfocus equipment, denoting that the system can
be used to destroy cancerous tumors and viable cancer cells within the human
breast through the application of focused microwave heat energy alone. If
testing and approvals proceed as anticipated, we expect to begin marketing this
breast cancer system before the end of 2003.

THERMO-LIPOSOMES; DUKE UNIVERSITY TECHNOLOGY

        Background

        Liposomes are man-made microscopic spheres with a liquid membrane,
developed in the 1980's to encapsulate drugs for targeted delivery. Commercial
liposomes can now encapsulate chemotherapeutic drugs, enabling them to avoid
destruction by the body's immune system, and allowing them to accumulate in
tumors. However, with presently available technology, it often takes two to four
hours for

                                       6

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commercial liposomes to release their drug contents to the tumors, severely
limiting the clinical efficacy of liposome chemotherapy treatments.

        Development of Thermo-Sensitive Liposomes

        A team of Duke University scientists has developed heat-sensitive
liposomes comprised of materials that rapidly change porosity when heated to a
specific point. As the heat-sensitive liposomes circulate within the small
arteries, arterioles, and capillaries, the drug contents of the liposomes are
released in significantly higher levels in those tissue areas which have been
heated for 30 to 60 minutes than in areas that do not receive heat. In animal
trials it has been determined that 50 times the amount of drugs carried by
heat-sensitive liposomes was deposited at a specific heated tissue site, when
compared to conventional liposomes. We have been a sponsor of this research,
which is part of a larger Duke University project to develop new
temperature-sensitive liposomes, temperature-sensitive gene promoters and
related compounds, and we are the exclusive licensee of Duke University's
heat-activated liposome technology.

        Celsion's focused microwave equipment is used to provide minimally
invasive heating of cancerous tumors to trigger heat-activated liposomes within
the tumors. The heat-activated liposomes, which encapsulate chemotherapeutic
agents, are injected into the bloodstream where they remain encapsulated until
they release their drug payload inside the heated tumor. In preliminary tumor
growth delay studies conducted at Duke University, tumor-bearing mice received a
single intravenous injection of the liposome with a 5mg per kilogram Doxorubicin
concentration. This was immediately followed by heating of the tumor to
42(degrees) C (108(degrees) F) for one hour. The result of the study was a
complete disappearance of the tumors in 11 out of 11 mice. These animals
remained disease free through 60 days of the study.

        In November 2001, we completed large animal toxicity studies involving
our Doxorubicin-laden thermo-liposome at the Roswell Park Cancer Institute, a
cancer research organization in Buffalo, New York. We expect to apply to the
Food and Drug Administration for an IND for the use of this liposome in the
treatment of prostate cancer using our Microfocus equipment as the means of heat
activation during the first quarter of calendar year 2002, and to move forward
with Phase I clinical trials thereafter.

        In addition, in January 2001, we entered into a Material Transfer
Agreement, or MTA, with the National Cancer Institute, or NCI, under which we
will supply heat-activated liposomes to enable the NCI to conduct clinical
trials on liver cancer. NCI will use an RF heating device to isolate the tumors
and to heat the liver, activating Celsion's heat-activated liposomes to kill
peripheral cancer cells. Liver cancer has yet to be successfully treated with
existing treatment modalities.

        Celsion and Duke University are pursuing further development work and
pre-clinical studies aimed at using the new thermo-liposome technology in
conjunction with our APA focused heat technology for a variety of applications,
including cancer chemotherapy. We view the Duke thermo-liposome technology as a
highly promising improvement in the delivery of medicines used to combat serious
diseases. For example, the drugs used in chemotherapy regimens to fight cancer
are often toxic when administered in large quantities, and produce nausea,
vomiting, and exhaustion--all side effects of the body being poisoned. However,
if such a drug can be delivered directly to a tissue area where it is needed, as
opposed to being distributed through the entire circulatory system, the local
concentration of the drug could be increased without the side effects that
accompany large systemic dosing.

        In addition, in the July 1, 2000 issue of Cancer Research, a Duke
University research scientist reported on his initial use of heat to activate
gene therapy and to increase the production in animals of Interleukin-12, a
genetic protein, in order to delay tumor growth. On August 8, 2000, we entered
into an agreement with Duke University, subsequently renewed for six-month
periods, under which Celsion has the right, for a period of six months
thereafter,

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to negotiate an exclusive license for this technology.

        Production of Heat-Sensitive Liposomes

        We have established a relationship with Celator Corporation of
Vancouver, Canada to provide Quality System Regulation, or QSR (formerly Good
Manufacturing Practices, or GMP), production of our heat-activated liposome for
our recently-completed large animal toxicity studies and our planned Phase I
clinical study in humans. Celator is a leading drug formulation and discovery
company that specializes in liposome drug development. Celsion will require a
large-scale liposome manufacturer at such time as it reaches Phase II clinical
trials and beyond. Toward that end, it has initiated discussions with a major
Japanese liposome manufacturer for large-scale production of the
Doxorubicin-based heat-activated liposome.

SLOAN-KETTERING / CELSION HEAT-ACTIVATED GENE THERAPY COMPOUNDS

        Background

        Cancer cells have the ability to repair themselves after radiation or
chemotherapy. Thus, patients require repeated treatments to destroy
substantially all of the cancer cells. Celsion has licensed from Sloan-Kettering
Cancer Center, a biomedical innovation that promises significant improvements in
cancer therapy. Sloan-Kettering has developed biological modifiers that inhibit
cancer cells' ability to repair themselves. Activated by focused heat, this
Cancer Repair Inhibitor, or CRI, temporarily disables the repair mechanism of
cancer cells, making it possible to significantly reduce the number of
radiation/chemotherapy treatments and/or lower the treatment dosage.

        A standard approach to treating cancer is radiation therapy combined
with chemotherapy. High doses of radiation kill cancer cells or keep them from
dividing, but produce chronic or acute side effects, including fatigue,
neutropenia, anemia and leukopenia. Also, depending on the location of the
tumor, other acute side effects may occur, including diarrhea, allopecia and
various foreign ulcers. Chemotherapy presents comparable or more serious side
effects.

        Oncologists are seeking ways to mitigate these side effects. In
radiation therapy, these include hyperfractionated radiation, intra-operative
radiation, three-dimensional radiation, stereotactic radiosurgery and the use of
radio-labeled monoclonal antibodies and radio sensitizers. CRI falls into this
latter category because it "sensitizes" a cancer cell for treatment by making it
more susceptible to DNA damaging agents such as heat, chemicals or radiation. A
product of advances in our understanding of the biology of cancer, CRI is one of
a new class of "biologics" that are expected to become part of the cancer
treatment protocol.

        The Celsion Technology--CRI Plus Focused Heat

        CRI can be activated in tumors by minimally invasive focused heat in the
range of 41(degrees) C (106(degrees) F). This focused heat may be generated by
Celsion's Adaptive Phased Array microwave technology, which provides deep
heating without damage to surrounding healthy tissue. Having increased the
susceptibility of cancer cells to DNA-damaging agents, radiation and
chemotherapy treatment may then be administered with less frequency and/or at
lower doses than currently is possible. CRI would then deactivate and the
patient would resume normal post-treatment care.

        In September 2001, scientists at Sloan-Kettering successfully completed
pre-clinical laboratory feasibility demonstrations to assess safety and
biological activity of CRI. A small animal feasibility

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study, at Sloan-Kettering's Good Laboratory Practice (GLP) facility is expected
to yield additional data during December 2001 to assist in drug formulation.
Further studies with large animals to assess toxicity effects are expected to be
conducted during 2002 and 2003. Based on the current development timeline, we
expect to file an IND application with the Food and Drug Administration by the
end of calendar year 2003 and anticipate that we will be in a position to
commence Phase I clinical (human) trials before the end of calendar year 2004.
At such time as we determine safety and dosage in our preliminary studies, we
expect to form partnership(s) with one or more drug companies to scale-up
manufacturing and marketing for larger pivotal studies

        In May 2000, we entered into an exclusive worldwide agreement with
Sloan-Kettering for the commercial rights to the heat-activated gene therapy
technology developed by Sloan-Kettering.

                    DEVELOPMENT, MARKETING AND SALES STRATEGY

OVERVIEW AND GOALS

        We are not currently engaged in marketing and sales, and are focusing
our activities on the development and testing of our products. Our strategic
plan is based upon our expertise and experience in the medical application of
focused microwave heat and our relationships with and license rights from our
institutional research partners. Our goal has been to employ these resources to
develop minimally invasive or non-invasive, non-toxic treatment technologies
with efficacy significantly exceeding that available from other sources. Using
our management and staff, scientific advisory personnel and available financial
resources, we are focusing our efforts on the following goals:

        -       Short-Term Goals; 12 to 24 Months

                -       complete the clinical testing and commercialization of
                        our BPH treatment system;

                -       complete the development, testing, and commercialization
                        of our second generation technology for the eradication
                        of cancerous breast tumors; and

                -       pursue the development and testing of targeted drug
                        delivery via heat-sensitive liposomes for the purpose of
                        concentrating chemotherapeutic drugs at tumor sites.

        -       Longer-Term Goals; 18 Months and Beyond

                -       continue the development of gene therapy to
                        significantly improve the effectiveness of radiation and
                        chemotherapy on tumors; and

                -       initiate, either alone or with partners, the development
                        of cost-effective enhancements and variations of our
                        technology, including a version of our Microfocus
                        equipment for treating prostate and other cancers, and
                        additional potential applications for heat-sensitive
                        liposome therapy and heat-activated gene therapy in the
                        treatment of inflammatory, infectious and genetic
                        diseases.

        We anticipate that, in the near term (up to 24 months), the source of
our revenues will be our proprietary technology for BPH and for treatment of
breast cancer and deep-seated tumors through the use of focused microwave heat
therapy equipment, if the necessary testing and regulatory approval

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processes are completed. We intend to generate initial sales through a
combination of direct marketing and development of marketing alliances.

        In the longer term (from 18 months to 36 months and beyond), we will
seek to develop new revenue streams from our current work with Duke University
in targeted drug delivery systems and with Sloan-Kettering in gene therapy. We
anticipate that revenues will come from the licensing of this technology to
pharmaceutical manufacturers and major institutional health care providers who
would employ these technologies to deliver drug regimens or gene therapy
throughout the body. Also, because this technology is designed to be used in
conjunction with our APA-improved microwave equipment, we expect that the
acceptance of the technology will generate demand for our equipment which, in
turn, is expected to create equipment sales revenues. To prepare for future
marketing of our heat-sensitive drug delivery systems, we intend to explore the
possibilities of forming alliances with pharmaceutical companies, major
hospitals and health maintenance organizations.

BPH TREATMENT SYSTEM

           We intend to market our BPH treatment system by marketing to the
constituencies critical to its success. In particular, we intend to target the
approximately 2 million readily identified BPH sufferers currently employing
drug therapies, as well as the estimated 7 million United States men afflicted
with BPH who have not, as yet, sought treatment--the "watchful waiters"--with a
focused message designed to encourage these anxious BPH sufferers to take
advantage of a solution that will relieve their symptoms and help to restore
the quality of their lives. We expect that this marketing effort will include
the following elements:

        -       Reimbursement: We have established reimbursement under the TUMT
                reimbursement code for Medicare patients participating in our
                Phase II clinical trials. Based on this precedent, we expect
                that our BPH treatment will be covered in a like manner by
                private insurers.

        -       Key Constituencies:

                    -   Urology Practices. We expect first to target large
                        urology practices, starting with the large practices
                        participating in our Phase II trial. We intend to place
                        our Microwave Uretheroplasty equipment in urologists'
                        offices with no up-front capital cost to the physicians.
                        The urologists will pay Celsion for each procedure
                        performed using the equipment and, additionally, will
                        purchase a unique disposable catheter from Celsion for
                        each treatment. We believe that urology practices have
                        experienced a loss of revenue to primary care physicians
                        as a result of new drug therapies introduced to treat
                        BPH and other urological disorders and that urologists
                        will be favorably disposed toward its Microwave
                        Uretheroplasty system, which could offer them a
                        significant new revenue source.

                    -   Consumers. We also expect to target BPH sufferers
                        through aggressive use of promotional and advertising
                        media. Due to the specificity of our target patient
                        audience (males 50 years and older) and the geographic
                        concentration of retirees, we expect to employ specific
                        media in well defined and discrete markets to generate a
                        high level of awareness of the availability of, and
                        interest in, our treatment system. We also expect to
                        utilize the Internet and other electronic methods to
                        direct prospective patients to urology offices equipped
                        to perform our Microwave Uretheroplasty procedure.

                                       10

<PAGE>

        -       Primary Care Physicians. We have designed our marketing approach
                to enable us to bypass primary care physicians, whom we believe
                to be the most significant barrier to the success of our BPH
                treatment system. Generally, under current managed care
                protocols, a patient must first visit his primary care physician
                who, after reviewing the patient's symptoms, may either treat
                him or refer him to a specialist. With increasing availability
                of drug therapies to treat urological disorders, the number of
                referrals to urologists has been declining. We intend to ensure
                that BPH sufferers are aware of our Microwave Uretheroplasty
                treatment system so that they are in a position to insist that
                they be referred to a urologist to obtain treatment.

        We expect to establish a direct sales force to market our Microwave
Uretheroplasty treatment system in the United States. Consistent with our
marketing plan, this sales force will target leading urologists, hospitals and
HMOs on a nationwide basis. We are in discussions with medical device
organizations for distribution of our treatment system in Asian markets and
expect to enter into definitive Asian distribution arrangements during calendar
year 2002.

                    LICENSE AGREEMENTS AND PROPRIETARY RIGHTS

        We do not own any patents, although we do have three United States
patents pending, two of which have been filed internationally. Two of our
pending United States patent applications are directed to our BPH treatment
system, with the third directed to our breast cancer treatment. Through our
license agreements with MIT, MMTC, Duke and Sloan-Kettering, we have exclusive
rights, within defined fields of use of nine United States patents. Three of
these patents relate to the treatment of BPH, four relate to thermotherapy for
cancer, including the APA technology, one relates to heat-sensitive liposomes
and one relates to gene therapy.

        The MIT, MMTC, Duke University and Sloan-Kettering license agreements
each contains license fee, royalty and/or research support provisions, testing
and regulatory milestones, and other performance requirements that we must meet
by certain deadlines with respect to the use of the licensed technologies. In
conjunction with the patent holders, we intend to file international
applications for certain of the United States patents.

        In 1996, we entered into a patent license agreement with MIT, pursuant
to which we obtained exclusive rights to use of MIT's patented APA technology in
conjunction with application of heat to breast tumor conditions, the application
of heat to prostate conditions and all other medical uses. MIT has retained
certain rights in the licensed technology for non-commercial research purposes.
MIT's technology has been patented in the United States and MIT has patents
pending for its technology in China, Europe, Canada and Japan. The term of our
exclusive rights under the MIT license agreement expires on the earlier of ten
years after the first commercial sale of a product using the licensed technology
or October 24, 2009, but our rights continue on a non-exclusive basis for the
life of the MIT patents.

        We entered into a license agreement with MMTC in 1996, by which we
currently have exclusive worldwide rights to MMTC's patents related to its
balloon compression technology for the treatment of prostatic disease in humans.
Our exclusive rights under the MMTC license agreements extend for the life of
MMTC's patents. MMTC currently has patents in the United States and Canada. The
terms of these patents expire at various times from April 2008 to November 2014.
In addition, MMTC also has patent applications pending in Japan and Europe.

        On November 10, 1999, we entered into a license agreement with Duke
University under which we received exclusive rights (subject to certain
exceptions) to commercialize and use Duke's thermo-liposome technology. The
license agreement contains annual royalty and minimum payment provisions

                                       11

<PAGE>

and also requires us to make milestone-based royalty payments measured by
various events, including product development stages, FDA applications and
approvals, foreign marketing approvals and achievement of significant sales.
However, in lieu of such milestone-based cash payments, Duke has agreed to
accept shares of our common stock to be issued in installments at the time each
milestone payment is due, with each installment of shares to be calculated at
the average closing price of the common stock during the 20 trading days prior
to issuance. The total number of shares issuable to Duke under these provisions
is subject to adjustment in certain cases, and Duke has "piggyback" registration
rights for public offerings taking place more than one year after the effective
date of the license agreement. We are currently renegotiating certain terms of
our contractual arrangements with Duke.

        Our rights under our license agreement with Duke University extend for
the longer of 20 years or the end of any term for which any relevant patents are
issued by the United States Patent and Trademark Office. Currently, we have
rights to Duke's patent for its thermo-liposome technology in the United States,
which expires in 2018, and to future patents received by Duke in Canada, Europe,
Japan and Australia, where it has patent applications pending. The European
application can result in coverage in the United Kingdom, France and Germany.
For this technology, our license rights are worldwide, with various patent
rights covering the United States, Canada, the United Kingdom, France, Germany
and Japan.

        We entered into a license agreement with Sloan-Kettering in November
2000 by which we obtained exclusive rights to Sloan-Kettering's United States
patent and to patents that Sloan-Kettering may receive in the future for its
heat-sensitive gene therapy in Japan, Canada and Europe, where it has patent
applications pending. Our rights under the agreement with Sloan-Kettering will
terminate at the later of 20 years after the date of the agreement or the last
expiration date of any patent rights covered by the agreement.

        In addition to the rights available to us under completed or pending
license agreements, we rely on our own proprietary know-how and experience in
the development and use of microwave thermotherapy equipment, which we seek to
protect, in part, through proprietary information agreements with employees,
consultants and others. We cannot offer assurances that these information
agreements will not be breached, that we will have adequate remedies for any
breach or that these agreements, even if fully enforced, will be adequate to
prevent third-party use of our proprietary technology. Similarly, we cannot
guarantee that technology rights licensed to us by others will not be
successfully challenged or circumvented by third parties, or that the rights
granted will provide us with adequate protection. We are aware of published
patent applications filed after November 29, 2001 and issued patents belonging
to other companies, and it is uncertain whether any of those patent documents
found, or patent applications filed before November 29, 2001 of which we may not
have any knowledge, will require us to alter our potential products or
processes, pay licensing fees, or cease certain activities.

                                  MANUFACTURING

        Celsion presently manufactures its BPH equipment in-house and
anticipates that it will continue to do so for the immediate future. However, as
the market develops, we expect that we will outsource some or all of our BPH
equipment manufacturing.

        We believe we are best suited to conduct basic research and development
activities, to pursue a prototype product through clinical testing and
regulatory approval, to engage in initial manufacturing activities during
product launch and to market the final product. Accordingly, we do not intend to
engage in large-scale manufacturing with respect to our breast cancer treatment
system or any other possible future products, but instead intend generally to
outsource the manufacture of final commercial products,

                                       12

<PAGE>

components and disposables. Based on past experience, we do not anticipate any
significant obstacles in identifying and contracting with qualified suppliers
and manufacturers.

                            THIRD-PARTY REIMBURSEMENT

        Third-party reimbursement arrangements will likely be essential to
commercial acceptance of our new devices, and overall cost-effectiveness and
physician advocacy will be keys to obtaining such reimbursement. We believe that
our equipment can be used to deliver treatment at substantially lower total cost
than surgical treatments for BPH or cancer or than continuous drug therapy.
Consequently, we believe that third-party payors seeking procedures that provide
quality clinical outcomes at relatively lower cost will help drive acceptance of
our products.

        For BPH, our strategy is to use reimbursement codes currently approved
for TUMT in the United States and which have been approved for Medicare patients
in connection with BPH treatment in our Phase II clinical trials. For breast
cancer, we expect that our strategy for obtaining new reimbursement
authorizations in the United States will be to obtain appropriate reimbursement
codes and to perform studies in conjunction with clinical trials to establish
the efficacy and cost-effectiveness of the procedures as compared to surgical
and drug treatments for BPH and cancerous breast tumors. We plan to use this
information when approaching health care payors to obtain new reimbursement
authorizations.

        With the increasing use of managed care and capitation as means to
control health care costs in the United States, we believe that physicians may
view our products as a tool to treat BPH and breast cancer patients at a lower
total cost, thus providing them with a competitive advantage when negotiating
managed care contracts. This is especially important in the United States, where
a significant portion of the aging, Medicare-eligible population is moving into
a managed care system.

        Subject to regulatory approval for the use of our equipment to treat BPH
and breast cancer, we anticipate that physicians will submit insurance claims
for reimbursement for such procedures to third-party payors, such as Medicare
carriers, Medicaid carriers, health maintenance organizations and private
insurers. In the United States and in international markets, third-party
reimbursement is generally available for existing therapies used to treat cancer
and BPH. The availability and level of reimbursement from such payors for the
use of our new products will be a significant factor in our ability to
commercialize these systems.

        We expect that new regulations regarding third-party reimbursement for
certain investigational devices in the United States will allow us to pursue
early reimbursement from Medicare with individual clinical sites prior to
receiving FDA approval. However, FDA approval likely will be necessary to obtain
a national coverage determination from Medicare. The national coverage
determination for third-party reimbursement will depend on the determination of
the Centers for Medicare and Medicaid Service, or CMS (formerly known as the
United States Health Care Financing Administration, or HCFA), which establishes
national coverage policies for Medicare carriers, including the amount to be
reimbursed, for coverage of claims submitted for reimbursement related to
specific procedures. Private insurance companies and health maintenance
organizations make their own determinations regarding coverage and reimbursement
based upon "usual and customary" fees. Reimbursement experience with a
particular third-party payor does not reflect a formal reimbursement
determination by the third-party payor. New outpatient procedure codes were
instituted on August 1, 2000. Our ability to petition successfully for these new
reimbursement codes will ultimately determine the degree of success we achieve
in implementing our business model.

        Internationally, we expect to seek reimbursement approvals for
procedures utilizing our new products on an individual country basis. Some
countries currently have established reimbursement

                                       13

<PAGE>

authorizations for transurethral microwave therapy. We expect to use clinical
studies and physician advocacy to support reimbursement requests in countries in
which there is currently no reimbursement for such procedures.

                    REGULATION OF SALES IN THE UNITED STATES

FDA REGULATION--RESEARCH AND APPROVAL

        Our research and development activities, pre-clinical tests and clinical
trials and, ultimately, the manufacturing, marketing and labeling of our
products, are subject to extensive regulation by the FDA. The Federal Food,
Drug, and Cosmetic Act, or FDCA, the Public Health Service Act, or PHSA, and the
regulations promulgated by FDA govern, among other things, the testing,
manufacture, safety, efficacy, labeling, storage, record keeping, approval,
advertising, promotion, import and export of our products.

        Under these statutes, our Microwave Uretheroplasty treatment system is
regulated as a class III medical device, our heat-activated liposomes may be
regulated as a new drug and our Cancer Repair Inhibitor may be regulated as a
biological product. The steps ordinarily required before such products can be
marketed in the United States include (a) pre-clinical and clinical studies; (b)
the submission to the FDA of an Investigational Device Exemption, or IDE, or an
Investigational New Drug application, or IND, which must become effective before
human clinical trials may commence; (c) adequate and well-controlled human
clinical trials to establish the safety and efficacy of the product; (d) the
submission to the FDA of a Pre-Market Approval application, or PMA, a New Drug
Application, or NDA, or a Biological License Application, or BLA; and (e) FDA
approval of the application, including approval of all product labeling.

        Pre-clinical tests include laboratory evaluation of product chemistry,
formulation and stability, as well as animal studies to assess the potential
safety and efficacy of the product. Pre-clinical safety tests must be conducted
by laboratories that comply with FDA regulations regarding Good Laboratory
Practice. The results of pre-clinical tests are submitted to the FDA as part of
an IDE or IND and are reviewed by the FDA before the commencement of human
clinical trials. Submission of an IDE or IND will not necessarily result in FDA
authorization to commence clinical trials and the absence of FDA objection to
an IDE or IND does not necessarily mean that the FDA will ultimately approve a
PMA or that a product candidate otherwise will come to market.

        Clinical trials involve the administration of therapy to humans under
the supervision of a qualified principal investigator. Clinical trials must be
conducted in accordance with Good Clinical Practices, or GCP, under protocols
submitted to the FDA as part of the IDE or IND. Also, each clinical trial must
be approved and conducted under the auspices of an Institutional Review Board,
or IRB, and with patient informed consent. The IRB will consider, among other
things, ethical factors, the safety of human subjects and the possible liability
of the institution conducting the clinical trials.

        Clinical trials are typically conducted in two or three sequential
phases, but the phases may overlap. Phase I clinical trials involve the initial
introduction of the therapy to a small number of subjects. Phase II trials are
generally larger trials conducted in the target population. For devices such as
our Microwave Uretheroplasty treatment system, Phase II studies may serve as the
pivotal trials (demonstrating safety and effectiveness required for approval).
In the case of drugs and biological products, Phase II clinical trials generally
are conducted in a target patient population to gather evidence about the
pharmacokinetics, safety and biological or clinical efficacy of the drug for
specific indications, to determine dosage tolerance and optimal dosage and to
identify possible adverse effects and safety risks. When a drug or biological
compound has shown evidence of efficacy and an acceptable safety profile in
Phase II evaluations, Phase III clinical trials are undertaken to serve as the
pivotal trials to demonstrate clinical efficacy and safety in an expanded
patient population.

                                       14

<PAGE>

        There can be no assurance that any of our clinical trials will be
completed successfully, within any specified time period or at all. Either the
FDA or we may suspend clinical trials at any time, if either the FDA or we
conclude that clinical subjects are being exposed to an unacceptable health risk
or for other reasons. The FDA inspects and reviews clinical trial sites,
informed consent forms, data from the clinical trial sites, including case
report forms and record keeping procedures, and the performance of the protocols
by clinical trial personnel to determine compliance with Good Clinical
Practices. The FDA also examines whether there was bias in the conduct of
clinical trials. The conduct of clinical trials is complex and difficult,
especially in pivotal Phase II or Phase III trials. There can be no assurance
that the design or the performance of the pivotal clinical trial protocols or
any of our current or future product candidates will be successful.

        The results of pre-clinical studies and clinical trials, if successful,
are submitted in an application for FDA approval to market the device, drug or
biological product for a specified use. The testing and approval process
requires substantial time and effort, and there can be no assurance that any
approval will be granted for any product at any time, according to any schedule,
or at all. The FDA may refuse to approve an application if it believes that
applicable regulatory criteria are not satisfied. The FDA may also require
additional testing for safety and efficacy. Moreover, if regulatory approval is
granted, the approval will be limited to specific indications. There can be no
assurance that any of our product candidates will receive regulatory approvals
for marketing or, if approved, that approval will be for any or all of the
indications that we request.

        The FDA is authorized to require user fees for submission of NDAs and
BLAs. The current user fee for such applications is $267,606 and may increase
from year to year. The FDA is also authorized to require annual user fees for
approved products and for companies with establishments at which finished
products are manufactured, which fees may increase from year to year. The FDA
may waive or reduce such user fees under special circumstances. We intend to
seek waivers or reductions of user fees where possible, but we cannot be assured
that we will be eligible for any such waiver or reduction.

FDA REGULATION--POST-APPROVAL REQUIREMENTS

        Even if we receive necessary regulatory approvals for one or more of our
product candidates, our manufacturing facilities and products are subject to
ongoing review and periodic inspection. Each U.S. device, drug and biologic
manufacturing establishment must be registered with the FDA. Manufacturing
establishments in the U.S. and abroad are subject to inspections by the FDA and
must comply with the FDA's Good Manufacturing Practice, or GMP, regulations.
Medical devices must comply with the FDA's Quality System, or QSR, regulations.
In order to ensure full technical compliance with such regulations,
manufacturers must expend funds, time and effort in the areas of production and
quality control. The FDA stringently applies regulatory standards for
manufacturing.

        We are also subject to recordkeeping and reporting regulations,
including the FDA's mandatory Medical Device Reporting, or MDR, regulations.
These regulations require, among other things, the reporting to FDA of adverse
events alleged to have been associated with the use of a product or in
connection with certain product failures.

        Labeling and promotional activities also are regulated by the FDA and,
in certain instances, by the Federal Trade Commission, or FTC. We must also
comply with recordkeeping requirements as well as requirements to report certain
adverse events involving our products. The FDA can impose other post-marketing
controls on us as well as our products including, but not limited to,
restrictions on sale and use, through the approval process regulations and
otherwise.

        Failure to comply with applicable regulatory requirements can result in,
among other things, warning letters, fines, injunctions and other equity
remedies, civil penalties, recall or seizure of products,

                                       15

<PAGE>

total or partial suspension of production, refusal of the government to grant
approvals, pre-market clearance or pre-market approval, withdrawal of approvals
and criminal prosecution.

OUR COMPLIANCE WITH FDA REGULATION

        We believe that we are substantially in compliance with FDA regulations
governing the manufacturing and marketing of medical devices. We previously
received pre-marketing approval from the FDA for our original Microfocus 1000
cancer treatment equipment for surface and subsurface tumors in conjunction with
radiation. We have also received a supplemental pre-marketing approval to add
the APA technology from MIT to our Microfocus 1000 equipment. We are seeking a
new indication of use to permit the use of our improved Microfocus equipment
with APA for breast tumor ablation using heat alone.

        We also received approval to conduct an expanded Phase I study using our
BPH treatment system. The purpose of the expanded Phase I study was to test a
revised protocol, intended both to shorten significantly the BPH treatment time
for each patient application and to lower the manufacturing cost for a
disposable device used during the treatment. This expanded Phase I study was
completed in May 2000. In July 2000 the FDA approved the commencement of
multiple-site Phase II studies, and the first of such studies commenced
effective October 18, 2000. All 160 patients required to be treated under the
Phase II trial were treated as of November 29, 2001 and, as of that date,
Celsion submitted the first two of three required modules to the FDA in support
of the PMA. We expect to submit the last module, consisting of clinical data,
during the second quarter of 2002.

        In August 2000 we completed the treatment of ten patients in a Phase I
Study of our breast cancer treatment system and, in December 2000, we received
FDA approval to commence Phase II clinical trials. The Phase II trials consist
of two protocols--the first is designed to ablate (kill) small breast tumors
using heat alone and the second is designed to downsize large breast cancer
tumors using a combination of heat and chemotherapy, thus allowing a surgeon to
perform a lumpectomy rather than a mastectomy, thereby preserving the affected
breast. If the Phase II trials are successful, we expect to apply for the
addition of a new indication of use to the existing FDA pre-market approval for
its Microfocus equipment, denoting that the system can be used to destroy
cancerous tumors and viable cancer cells within the human breast through the
application of focused microwave heat energy alone. If testing and approvals
proceed as anticipated, we expect to begin marketing this breast cancer system
before the end of 2003.

OTHER FEDERAL REGULATION

        The Federal Communications Commission regulates the frequencies of
microwave and radio-frequency emissions from medical and other types of
equipment to prevent interference with commercial and governmental
communications networks. The FCC has approved the frequency of 915 MHZ for
medical applications, and machines utilizing that frequency do not require
shielding to prevent interference with communications. Our Microfocus and BPH
treatment products utilize the 915 MHZ frequency.

        In December 1984 the HCFA (now known as the Centers for Medicare and
Medicaid Service, or CMS) approved reimbursement under Medicare and Medicaid for
thermotherapy treatment when used in conjunction with radiation therapy for the
treatment of surface and subsurface tumors. At this time, most of the large
medical insurance carriers in the United States have approved reimbursement for
this type of thermotherapy treatment under their health policies. Thermotherapy
treatment administered using equipment that has received pre-marketing approval
is eligible for such reimbursement.

                                       16

<PAGE>

                           REGULATION OF FOREIGN SALES

        Sales of domestically produced drugs, biologics and medical devices
outside of the United States are subject to United States export requirements
and foreign regulatory controls. Drugs, biologics, and devices that are subject
to pre-marketing approval requirements and have not received FDA marketing
approval cannot be exported unless they are approved in the European Union, or
EU, in a country in the EU or the European Free Trade Association, or in certain
other countries specified in the FDCA.

        Products approved in these countries may be exported to other countries
in which they are legal for marketing. Such products must bear labeling that
complies with both the country of approval and the country to which the product
is exported. In the case of drugs and biologics, there must also be a valid
marketing authorization by a responsible authority and FDA must make detailed
determinations regarding the adequacy of the statutory or regulatory
requirements of the importing country.

        Exported products that are not approved in the United States are subject
to other FDA regulatory requirements as well, including substantial compliance
with good manufacturing practice requirements. FDA may prohibit export if there
is a determination that the exportation of the product presents an imminent
hazard to the public health of the importing country or to the United States if
reimported.

        Upon exportation, our products would be subject to regulation by
national governments and supranational agencies as well as by local agencies
affecting, among other things, product standards, packaging requirements,
labeling requirements, import restrictions, tariff regulations, duties and tax
requirements. There can be no assurance that one or more countries or agencies
will not impose regulations or requirements that could have a material adverse
effect on our ability to sell our products.

        In the EU, the harmonization of standards has caused a shift from a
country-by-country regulatory system towards an EU-wide single regulatory
system. However, many members of the EU have imposed additional country specific
regulations/requirements. The approval procedure varies from member state to
member state, and the time required may be longer or shorter than that required
for FDA approval. There can be no assurance that the changes in the regulatory
schemes imposed either by the EU, supranational agencies or individual countries
affecting our products will not have a material adverse effect on our ability
to sell our products in countries other than the United States.

        The rigorous and lengthy steps currently required before a medicinal
product may be marketed in the EU include: (a) adequate non-clinical tests and
clinical trials, (b) the submission to the EMEA or to the respective Member
States' Medicines Agencies of an application for a marketing authorization,
supported by all necessary documents and test results, and (c) approval of the
application, including approval of all product labeling and packaging. In all
cases, the safety, efficacy and quality of candidate products must be
demonstrated according to demanding criteria under EU and national rules. There
can be no assurance that our non-clinical tests and clinical trials performed in
the United States will be recognized and accepted by the various regulatory
authorities in the EU. Such authorities may require additional non-clinical
tests and clinical trials and other studies. Non-clinical tests on chemical
products in the EU must be conducted by laboratories that comply with harmonized
principles of Good Laboratory Practice, or GLP. Member States generally require
that clinical trials be conducted in accordance with specific national Good
Clinical Practices, or GCP. Moreover, many Member States require compliance with
principles of GMP in the manufacture of medicinal products intended for use in
clinical trials. The complex array of national requirements for clinical trials
conducted in the EU may delay the regulatory approvals necessary to commence
"multi-center" clinical trials.

                                       17

<PAGE>

        Failure to comply with foreign regulatory requirements can result in,
among other things, warning letters, fines, injunctions and other equitable
remedies, civil penalties, recall orders or seizure of products, total or
partial suspension of production, refusal of the health authorities to grant
desired approvals, the withdrawal of approvals and criminal prosecution.

        We have sold our original products in 23 countries in Asia, Europe and
South America. Meeting the registration requirements within these countries was
the responsibility of our distributors in each of these countries. Legal
restrictions on the sale of imported medical devices vary from country to
country. The time required to obtain approval by a foreign country may be longer
or shorter than that required for FDA approval and the requirements may differ.
We expect to receive approvals for marketing in a number of countries outside
the United States prior to the time that we will be able to market our products
in the United States. However, the timing for such approvals currently is not
known.

                                   COMPETITION

        Many companies and institutions are engaged in research and development
of thermotherapy technologies for both cancer and prostate disease products that
seek treatment outcomes similar to those we are pursuing. In addition, a number
of companies and institutions are pursuing alternative treatment strategies
through the use of radio frequency, laser and ultrasound energy sources, all of
which appear to be in the early stages of development and testing. We believe
that the level of interest by others in investigating the potential of
thermotherapy and alternative technologies will continue and may increase.
Potential competitors engaged in all areas of cancer and prostate treatment
research in the United States and other countries include, among others, major
pharmaceutical and chemical companies, specialized technology companies,
universities and other research institutions. Most of our competitors and
potential competitors have substantially greater financial, technical, human and
other resources, and may also have far greater experience than we have, both in
pre-clinical testing and human clinical trials of new products and in obtaining
FDA and other regulatory approvals. One or more of these companies or
institutions could succeed in developing products or other technologies that are
more effective than any which we have been or are developing, or which could
render our technology and products obsolete and non-competitive. Furthermore, if
we are permitted to commence commercial sales of products, we will also be
competing, with respect to manufacturing efficiency and marketing, with
companies having greater resources and experience in these areas.

        Several companies in the United States and overseas, including BSD
Medical Corporation and Labthermics Technology, Inc., have marketed equipment
that uses heat produced by microwaves or ultrasound to treat surface and
subsurface cancer, either with or without the concurrent use of radiation or
chemotherapy. To our knowledge, among these entities, BSD Medical Corporation
has the longest business history and has sold the largest number of microwave
thermotherapy units for the treatment of surface and subsurface cancer, but we
do not believe that BSD Medical Corporation has a dominant competitive position
or that its equipment has been widely accepted for use in the treatment of
cancer. We believe BSD Medical Corporation is attempting to develop more
advanced versions of its equipment for use in treating deep-seated tumors.

        In the treatment of BPH, EDAP TMS S.A., a French company, has marketed a
device named the "Prostatron," both in the United States and overseas, which
uses microwave-generated heat to destroy enlarged prostate tissue. Also,
Urologix, Inc., a domestic company, has introduced a BPH medical device similar
to the Prostatron. In October 2000, Urologix acquired the Prostatron product
line from EDAP. While we believe these devices have not been widely used or
accepted by providers of medical treatment for BPH, there is no guarantee that
EDAP TMS S.A. or Urologix, Inc. will not seek to introduce improved equipment
for the treatment of BPH. We are aware of other companies currently developing
or marketing devices using other forms of energy, including laser, radio
frequency, ultrasound and infrared

                                       18

<PAGE>

technologies, for the treatment of BPH. If any of these treatment technologies
become widely accepted by the medical community in the future, such acceptance
could pose a pose a significant competitive risk to us.

                         PRODUCT LIABILITY AND INSURANCE

        Our business exposes us to potential product liability risks that are
inherent in the testing, manufacturing and marketing of human therapeutic
products. We presently have product liability insurance limited to $5,000,000
per incident, and, if we were to be subject to a claim in excess of this
coverage or to a claim not covered by our insurance and the claim succeeded, we
would be required to pay the claim out of our own limited resources.

                                    EMPLOYEES

        We presently employ 17 full-time employees and also utilize the services
of some part-time consultants from time to time. In addition, our Scientific
Advisory Board actively assists our management with advice on various projects.
None of our employees are represented by a collective bargaining organization,
and we consider our relations with our employees to be good.


I
TEM 2.         PROPERTIES

        We lease premises consisting of approximately 22,300 square feet of
administrative office, laboratory and workshop space at 10220-I Old Columbia
Road, Columbia, Maryland 21046-1705 from an unaffiliated party under a five-year
lease that expires on June 30, 2005. Rent expense for the year ended September
30, 2001 was $227,961. Future minimum lease obligations are as follows:


<TABLE>
<S>                                             <C>
                       2002                     $294,071
                       2003                      302,779
                       2004                      311,789
                       2005                      239,018
</TABLE>


        In the year ended September 30, 2001 we began subleasing 13,385 square
feet of its office/warehouse space to an unrelated party, generating rental
income of $45,609. The sublease yields rent of $15,203 per month and ends
January 1, 2001. The tenant has indicated that it does not intend to renew the
lease and we currently are seeking a substitute tenant.


ITEM 3.         LEGAL PROCEEDINGS

        On April 27, 2000, we initiated an action in the United States District
Court for the District of Maryland against Warren C. Stearns, a former director
of Celsion, Mr. Stearn's management company, SMC, and a number of affiliates,
family members and colleagues of Mr. Stearns, who held warrants for the purchase
of approximately 4.1 million shares of our common stock. With the advice of
counsel, we concluded that the warrants should be rescinded because they
violated Section 15 of the Securities and Exchange Act of 1934. Our claims in
this action as originally filed are referred to as "Count I".

        On January 18, 2001, the Maryland District Court transferred the case to
the United States District Court for the Northern District of Illinois, in
Chicago, and on July 17, 2001, we filed a motion to amend our complaint to add a
second count, Count II, alleging that Mr. Stearns, on behalf of himself and

                                       19

<PAGE>

the other original defendants, had executed a Mutual Release which released any
right the original defendants had to exercise the warrants. This motion was
granted on July 19, 2001.

        On August 9, 2001, the original defendants filed a counterclaim against
Celsion, certain of its officers and directors and an attorney and law firm that
had represented Celsion. The counterclaim alleges (i) that Celsion's failure to
register the common stock was a breach of the warrants; (ii) that the filing of
the complaint by Celsion was a breach of the Mutual Release; (iii) that the
parties named in the counterclaim intentionally interfered with Celsion's
contractual relations pursuant to the warrants; (iv) conversion of the common
stock; (v) civil conspiracy among the parties named in the counterclaim in
failing to register the common stock; and (vi) fraudulent misrepresentation
against the parties named in the counterclaim stemming from alleged
representations that the common stock would be registered. The counterclaim does
not request a specific amount of damages.

        On September 10, 2001, the Illinois District Court dismissed, with
prejudice, Count I of the complaint, finding that it was barred by a three-year
statute of repose. Count II was not, however, dismissed. On November 23, 2001,
Celsion and certain of its officers and directors filed a motion to dismiss the
counterclaim for failure to state a claim upon which relief can be granted and
that motion remains pending. It is impossible to determine at this point in the
litigation the amount of damages, if any, that may be awarded against Celsion if
it is liable for the claims alleged in the counterclaim. In addition, our
insurance carrier has denied liability as to the claims asserted in the
counterclaim. However, we intend to prosecute this litigation vigorously.


ITEM 4.         SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

        Not applicable.


                                     PART II


ITEM 5.         MARKET FOR REGISTRANT'S COMMON
                EQUITY AND RELATED STOCKHOLDER MATTERS

MARKET PRICE FOR OUR COMMON STOCK

        Since May 31, 2000, our common stock has traded on The American Stock
Exchange. Prior to that time, the common stock traded on the over-the-counter
market. The following table sets forth the high and low sales prices for our
common stock reported by The American Stock Exchange since May 31, 2000 and,
prior to that date, the high and low bid prices for our shares as quoted in the
Electronic Bulletin Board operated by The Nasdaq Stock Market, Inc. The
quotations set forth below do not include retail markups, markdowns or
commissions, and, with respect to periods before May 31, 2000, may not
necessarily represent actual transactions.


<TABLE>
<CAPTION>
                                                                                                    High          Low
                                                                                                    ------------  --------------
<S>                                                                                                 <C>           <C>
FISCAL YEAR ENDED SEPTEMBER 30, 2000
      First Quarter (October 1 - December 31, 1999)............................................     $ 4.13        $0.71
      Second Quarter (January 1 - March 31, 2000)..............................................     $10.25        $1.68
      Third Quarter (April 1 - June 30, 2000)..................................................     $ 6.00        $2.84
      Fourth Quarter (July 1 - September 30, 2000).............................................     $ 3.56        $1.88

FISCAL YEAR ENDED SEPTEMBER 30, 2001
      First Quarter (October 1 - December 31, 2000)............................................     $2.19         $0.75
      Second Quarter (January 1 - March 31, 2001)..............................................     $3.75         $0.94
      Third Quarter (April 1 - June 30, 2001)..................................................     $1.25         $0.60
      Fourth Quarter (July 1 - September 30, 2001).............................................     $0.85         $0.40
</TABLE>


                                       20

<PAGE>

        On December 20, 2001, the last reported sale price for our common stock
on The American Stock Exchange was $0.57. As of December 20, 2001, there were
approximately 1,300 holders of record of our common stock.

DIVIDEND POLICY

        We have never declared or paid any cash dividends on our common stock or
other securities and do not currently anticipate paying cash dividends in the
foreseeable future.

ISSUANCE OF SHARES WITHOUT REGISTRATION

        During the fiscal quarter ended September 30, 2001, we issued the
following securities without registration under the Securities Act of 1933, as
amended (the "Securities Act"):

        -       On September 5, 2001, we issued 1,545 shares of our common stock
                to the holder of a warrant to purchase our Series A 10%
                Convertible Preferred in a cashless exercise transaction.

        -       On September 30, 2001, we issued a total of 128,608 shares of
                our common stock, valued at $65,589, to four non-employee
                directors in lieu of cash fees for their services as directors
                during the fiscal year ended September 30, 2001.

        The certificates representing all of the shares issued as described
above were endorsed with Celsion's standard restricted stock legend, and a stop
transfer instruction was recorded by our transfer agent. Accordingly, we view
such issuances as exempt from registration under Sections 4(2) and/or 4(6) of
the Securities Act as transactions by an issuer not involving any public
offering.

                                       21

<PAGE>


ITEM 6.         SELECTED FINANCIAL DATA

        The following table contains certain financial data for Celsion for the
five fiscal years ended September 30, 2001 is qualified in its entirety by, and
should be read in conjunction with, the "Item 8. Financial Statements and
Supplementary Data and Financial Disclosure" and "Item 7. Management's
Discussion and Analysis of Financial Condition and Results of Operations."


<TABLE>
<CAPTION>
                                                                       YEAR ENDED SEPTEMBER 30,
                                                 ----------------------------------------------------------------------
                                                     1997          1998          1999            2000          2001
                                                     ----          ----          ----            ----          ----
<S>                                              <C>           <C>           <C>             <C>           <C>
STATEMENT OF OPERATIONS DATA:

Revenues:

     Product Sales (Net) .....................       $121,257      $174,182  $          -          $3,420  $          -

     Research  and development contracts .....              -             -                             -              
                                                 ------------  ------------  ------------    ------------  ------------

Total revenues ...............................        121,257       174,182                         3,420              

Cost of sales ................................         46,734       136,500                           246              
                                                 ------------  ------------  ------------    ------------  ------------

Gross profit on product sales ................         74,523        37,682                         3,174              
                                                 ------------  ------------  ------------    ------------  ------------

Other costs and expenses:

     Selling, general and  administrative ....      2,283,245     2,515,822     1,371,161       2,661,333     3,211,625

     Research and development ................        185,974     1,534,872     1,019,941       2,238,292     4,075,249
                                                 ------------  ------------  ------------    ------------  ------------


Total operating expenses .....................      2,469,219     4,050,694     2,391,102       4,899,625     7,286,874
                                                 ------------  ------------  ------------    ------------  ------------

(Loss) from operations .......................    (2,394,696)   (4,013,012)   (2,391,102)     (4,896,451)
                                                 ------------  ------------  ------------    ------------              

Other income (expense) .......................      (471,631)        11,870        15,744               -        45,609

 Interest income (expense) ...................      (185,562)     (199,346)      (60,834)         349,236       318,038
                                                 ------------  ------------  ------------    ------------  ------------

Net (loss) ...................................   $(3,051,889)  $(4,200,488)  $(2,436,192)    $(4,547,215)  $(6,923,227)
                                                 ============  ============  ============    ============  ============

Net loss per share ...........................        $(0.11)       $(0.12)       $(0.05)     $(0.08)        $(0.10)
                                                 ============  ============  ============    ============    =======

Weighted average shares outstanding ..........     28,386,145    34,867,001    45,900,424      59,406,921    72,249,920
</TABLE>



<TABLE>
<CAPTION>
                                                                             AS OF SEPTEMBER 30,
                                              ---------------------------------------------------------------------------------
                                                    1997           1998           1999               2000             2001
                                                    ----           ----           ----               ----             ----
<S>                                            <C>             <C>            <C>                <C>              <C>
BALANCE SHEET DATA:

Cash and cash equivalents ..................       $267,353         $54,920     $1,357,464         $8,820,196       $2,510,136
Working Capital ............................    (2,645,908)     (2,000,351)        906,926          8,509,173        2,388,900

Total Assets ...............................        823,209         330,738      1,558,684          9,117,821        2,956,861

Long-term debt, less current maturities ....              -               -              -                  -           15,203

Accumulated deficit ........................   (15,263,522)    (19,464,010)   (21,900,202)       (26,447,417)     (33,605,157)

Total stockholders' equity (deficit) .......      2,460,646     (1,851,067)      1,037,125          8,726,429        2,956,861
</TABLE>


                                       22

<PAGE>


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

FORWARD-LOOKING STATEMENTS

        Certain of the statements contained in this Annual Report on Form 10-K,
including certain in this section, are forward-looking. In addition, from time
to time, we may publish forward-looking statements relating to such matters as
anticipated financial performance, business prospects, technological
developments, new products, research and development activities and similar
matters. These statements involve known and unknown risks, uncertainties, and
other factors that may cause our or our industry's actual results, levels of
activity, performance, or achievements to be materially different from any
future results, levels of activity, performance, or achievements expressed or
implied by such forward-looking statements. Such factors include, among other
things, those listed under "Risk Factors" below and elsewhere in this Annual
Report on Form 10-K. In some cases, you can identify forward-looking statements
by terminology such as "may," "will," "should," "expect," "plan," "anticipate,"
"believe," "estimate," "predict," "potential" or "continue" or the negative of
such terms or other comparable terminology. Forward-looking statements are only
predictions. Actual events or results may differ materially. In evaluating these
statements, you should specifically consider various factors, including the
risks outlined under "Risk Factors." Although we believe that the expectations
reflected in the forward-looking statements are reasonable, we cannot guarantee
future results, levels of activity, performance or achievements. Moreover,
neither we nor any other person assumes responsibility for the accuracy and
completeness of such statements. We are under no duty to update any of the
forward-looking statements after the date of this prospectus to conform such
statements to actual results.

GENERAL

        Since inception, we have incurred substantial operating losses. We
expect operating losses to continue and possibly increase in the near term and
for the foreseeable future as we continue our product development efforts,
conduct clinical trials and undertake marketing and sales activities for new
products. Our ability to achieve profitability is dependent upon our ability
successfully to integrate new technology into our thermotherapy systems, conduct
clinical trials, obtain governmental approvals, and manufacture, market and sell
our new products. We have faced a number of major obstacles over the last
several years, including inadequate funding, a negative net worth, and the slow
development of the thermotherapy market due to technical shortcomings of the
thermotherapy equipment previously available commercially. We have not continued
to market our older thermotherapy system, principally because of the system's
inability to provide precise and consistent heat treatment for other than
surface and subsurface tumors. Instead, we have concentrated on a new generation
of thermotherapy products.

        Our operating results have fluctuated significantly in the past on an
annual and a quarterly basis. We expect that operating results will continue to
fluctuate significantly from quarter to quarter for the foreseeable future and
will depend on a number of factors, many of which are outside of our control.

RESULTS OF OPERATIONS

        Comparison of Fiscal Year Ended September 30, 2001 and Fiscal Year Ended
        September 30, 2000

        We generated no revenues during the fiscal year ended September 30,
2001, compared to revenues on the sale of parts and equipment in the amount of
$3.240 during the fiscal year ended September 30, 2000.

                                       23

<PAGE>

        Research and development expenditures in the year ended September 30,
2001 were $4,075,249, an increase of $1,836,957, or 82% compared to the fiscal
year ended September 30, 2000. The increase was attributable to costs incurred
in undertaking pivotal Phase II clinical trials for both our BPH and breast
cancer treatment systems. These costs included increased personnel costs as well
as costs related to the acquisition of equipment and materials necessary to
complete the trials. Additionally, during the year we also initiated development
of our heat-activated liposomes by formulating the drug and undertaking large
animal toxicity studies.

        Selling, general and administrative expense increased by 21%, to
$3,211,625 for the fiscal year ended September 30, 2001 compared to $2,661,333
for the fiscal year ended September 30, 2000. The increase was due primarily to
increased staffing, principally our newly retained Chief Financial Officer, and
legal costs associated with the conversion of the Series A 10% Convertible
Preferred Stock, various SEC filings and settlement of a long-standing trade
dispute with a former distributor in Hong Kong.

        The increase in research and development, selling, general and
administrative expenses described above resulted in a loss from operations of
$(7,286,874) for the year ending September 30, 2001 compared to a loss
$(4,896,451) for the year ended September 30, 2000, representing an increase of
$2,387,249.

        Interest income net of interest expense decreased by $31,198, to
$318,038 for the fiscal year ended September 30, 2001 compared to $349,236 for
the fiscal year ended September 30, 2000. This decrease reflects the fact that,
as Celsion has no revenues, all expenditures are met from cash reserves. As cash
reserves declined, interest income is likewise reduced.

        Comparison of Fiscal Year Ended September 30, 2000 and Fiscal Year Ended
        September 30, 1999

        Product sales for the year ended September 30, 2000 were $3,420, as
compared to none for the prior fiscal year. The limited revenue in the more
recent period resulted from a parts reorder for older, previously sold
equipment. Additional significant product revenues are not expected unless and
until development of our second generation, of equipment incorporating APA
technology, is completed and such equipment is clinically tested and receives
necessary approvals from governmental regulatory agencies.

        Research and development expense increased by 120%, to $2,238,292 for
the fiscal year ended September 30, 2000 from $1,019,941 for the fiscal year
ended September 30, 1999. The increase of $1,218,351 in the fiscal year ended
September 30, 2000 was attributable to payments, through the issuance of shares
of common stock, to Duke University under a license agreement for
thermo-liposome technology, research on thermo-liposome technology, expenditures
in connection with our Phase I breast cancer treatment system trials,
expenditures for our Phase II BPH and breast cancer treatment trials and
payments made to Sloan-Kettering for licensing of its gene therapy technology
during the fiscal year ended September 30, 2000.

        Selling, general and administrative expense increased by 94%, to
$2,661,333 for the fiscal year ended September 30, 2000 from $1,371,161 for the
fiscal year ended September 30, 1999. The increase of $1,290,172 was due
primarily to expenses associated with increased legal and financial services in
connection with our various securities offerings and technology licensing,
increased office staffing, costs associated with our annual meeting and
increased public relations activities.

        Due mainly to the increase in the expenditures listed above for the
fiscal year ending September 30, 2000, the loss from operations rose by
$2,505,349 to $(4,896,451) from $(2,391,102) in the prior fiscal year.

                                       24

<PAGE>

        Interest income net of interest expense increased to $349,236 for the
fiscal year ended September 30, 2000 from $(60,834) for the fiscal year ended
September 30, 1999. The $410,070 increase was due to increased cash balances
representing the proceeds from our private placement in January 2000 which were
invested in money market instruments and time deposits.

LIQUIDITY AND CAPITAL RESOURCES

        Since inception, our expenses have significantly exceeded our revenues,
resulting in an accumulated deficit of $33,605,157 at September 30, 2001. We
have incurred negative cash flows from operations since our inception and have
funded our operations primarily through the sale of equity securities. As of
September 30, 2001, we had cash and cash equivalents of $2,510,136 and total
current assets of $2,661,341, compared with current liabilities of $272,441,
resulting in a working capital surplus of $2,388,900. As of September 30, 2000,
we had $8,820,196 in cash and cash equivalents and total current assets of
$8,900,565, compared with current liabilities of $391,392, which resulted in a
working capital surplus of $8,509,173 at fiscal year end. The decrease in
working capital at September 30, 2001 as compared to September 30, 2000 was due
to the fact that, during the past fiscal year, we drew on our cash reserves to
pay for our ongoing operations. In addition, we applied approximately $500,000,
in settlement costs and legal expenses, in settling a long-standing trade
dispute with a former distributor in Hong Kong.

        We do not have any bank financing arrangements and have funded our
operations in recent years primarily through private placement offerings of
equity securities. On December 13, 2001, we conducted a first closing on a
private placement of equity securities consisting of units, each comprised of
one share of our common stock and one common stock purchase warrant exercisable
for a period of five years at $0.60 per share. The offering is being conducted
on a "best efforts, minimum/maximum basis" with a minimum of $3,000,000 and a
maximum of $5,000,000 (subject to a $1,250,000 oversubscription allowance). At
the first closing, we realized gross proceeds of $3,360,000 from the sale of
6,720,000 units, representing net proceeds to Celsion of $3,004,986 after
deduction of commissions and offering expenses. As of December 20, 2001, we had
realized gross proceeds of $4,135,826 from the sale of 8,271,652 units,
representing net proceeds to Celsion of $3,707,110. By its terms, the private
placement will terminate on January 31, 2002, unless earlier terminated at the
election of Celsion.

        For all of fiscal year 2002, we expect to expend a total of
approximately $7,000,000 for clinical testing of our breast cancer and BPH
treatment systems, as well as corporate overhead, which we expect to fund from
our current resources. The foregoing amounts are estimates based upon
assumptions as to the availability of funding, the scheduling of institutional
clinical research and testing personnel, the timing of clinical trials and other
factors, not all of which are fully predictable. Accordingly, estimates and
timing concerning projected expenditures and programs are subject to change. We
expect that the proceeds from the first closing of our private placement,
together with any additional proceeds from subsequent closings and our current
cash resources, will be sufficient to fund our operations through the 2002
fiscal year.

        Our dependence on raising additional capital will continue at least
until we are able to begin marketing our new technologies. Our future capital
requirements and the adequacy of our financing depend upon numerous factors,
including the successful commercialization of our Microwave Urethroplasty and
breast cancer treatment systems, progress in product development efforts,
progress with pre-clinical studies and clinical trials, the cost and timing of
production arrangements, the development of effective sales and marketing
activities, the cost of filing, prosecuting, defending and enforcing
intellectual property rights, competing technological and market developments
and the development of

                                       25

<PAGE>

strategic alliances for the marketing of our products. We will be required to
obtain such funding through equity or debt financing, strategic alliances with
corporate partners and others, or through other sources not yet identified. We
do not have any committed sources of financing, and cannot guarantee that
additional funding will be available in a timely manner, on acceptable terms, or
at all. If adequate funds are not available, we may be required to delay, scale
back or eliminate certain aspects of our operations or attempt to obtain funds
through unfavorable arrangements with partners or others that may require us to
relinquish rights to certain of our technologies, product candidates, products
or potential markets or which otherwise may be materially unfavorable to us.
Furthermore, if we cannot fund our ongoing development and other operating
requirements, particularly those associated with our obligation to conduct
clinical trials under our licensing agreements, we will be in breach of our
commitments under these licensing agreements and could therefore lose our
license rights, which could have material adverse effects on our business.

RISK FACTORS

        Among numerous risk factors that may affect our future performance and
our ability to achieve profitable operations are the following:

WE HAVE A HISTORY OF SIGNIFICANT LOSSES AND EXPECT TO CONTINUE SUCH LOSSES FOR
THE FORESEEABLE FUTURE.

        Since Celsion's inception in 1982, its expenses have substantially
exceeded its revenues, resulting in continuing losses and an accumulated deficit
of $(33,605,157) at September 30, 2001, including losses of $(4,547,215) for the
year ended September 30, 2000 and $(6,923,227) for the year ended September 30,
2001. Because we presently have no revenues and are committed to continuing our
product research, development and commercialization programs, we will continue
to experience significant operating losses unless and until we completes the
development of new products and these products have been clinically tested,
approved by the FDA and successfully marketed. In addition, we have funded our
operations for many years primarily through the sale of the Company's securities
and have limited working capital for our product research, development,
commercialization and other activities.

WE DO NOT EXPECT TO GENERATE SIGNIFICANT REVENUE FOR THE FORESEEABLE FUTURE.

        We marketed and sold our original microwave thermotherapy products,
which produced modest revenues from 1990 to 1994, but ceased marketing these
products in 1995. We have devoted our resources in ensuing years to developing a
new generation of thermotherapy and other products, but cannot market these
products unless and until we have completed clinical testing and obtained all
necessary governmental approvals. Accordingly, we have no current source of
revenues, much less profits, to sustain our present operations, and no revenues
will be available unless and until our new products are clinically tested,
approved by the FDA and successfully marketed. We cannot guarantee that any or
all of our products will be successfully tested, approved by the FDA or marketed
at any time in the foreseeable future or at all.

OUR MICROWAVE HEAT THERAPY TECHNOLOGY IS STILL UNDERGOING HUMAN TESTING AND MAY
NOT ACHIEVE SUFFICIENT ACCEPTANCE BY THE MEDICAL COMMUNITY TO SUSTAIN OUR
BUSINESS.

        To date, microwave heat therapy has not been widely accepted in the
United States medical community as an effective treatment for BPH or for cancer
treatment, with or without the concurrent use of radiation. We believe that this
is primarily due to the inability of earlier technology adequately to focus and
control heat directed at specific tissue locations and to conclusions that were
drawn from a

                                       26

<PAGE>

widely publicized study by the Radiation Oncology Therapy Group that purported
to show that thermotherapy in conjunction with radiation was only marginally
effective. Subsequent to the publication of this study, the HCFA (now known as
the CMS) established a low medical reimbursement rate for all thermotherapy
equipment designed to be used in conjunction with radiation. While management
believes that our new technology is capable of overcoming the limitations of the
earlier technology, the medical community may not embrace the perceived
advantages of our "adaptive phased array," or APA, focused heat therapy without
more extensive testing and clinical experience than we will be able to provide.
To date, we have completed and submitted to the FDA only Phase I clinical trials
of our Microwave Uretheroplasty treatment system, although we have completed
patient treatments in our Phase II trials. Similarly, our new cancer treatment
technology is currently in Phase II trials. Accordingly, our technology may not
prove as effective in practice as we anticipate based on testing to date. If
further testing and clinical practice do not confirm the safety and efficacy of
our technology or, even if further testing and practice produce positive results
but the medical community does not view this new form of heat therapy as
effective and desirable, our efforts to market our new products may fail, with
material adverse consequences to our business. We intend to petition CMS to
include our Microwave Uretheroplasty treatment system under the existing
reimbursement code for TUMT, the present minimally invasive BPH treatment that
employs microwave heating, and for a new reimbursement code for our breast
cancer treatment. The success of our business model depends significantly upon
our ability to petition successfully for these reimbursement codes. However, we
cannot offer any assurances as to when, if ever, CMS may act on our request to
include its Microwave Uretheroplasty treatment within the TUMT reimbursement
code or establish a reimbursement code for our breast cancer treatment system.
In addition, there can be no assurance that the reimbursement level established
for our breast cancer treatment system (and for our Microwave Uretheroplasty
treatment system, if not included in the TUMT code), if established, will be at
a level sufficient for us to carry out our business plan effectively.

IF WE ARE NOT ABLE TO OBTAIN NECESSARY FUNDING, WE WILL NOT BE ABLE TO COMPLETE
THE DEVELOPMENT, TESTING AND COMMERCIALIZATION OF OUR TREATMENTS AND PRODUCTS.

        We will need substantial additional funding in order to complete the
development, testing and commercialization of our breast cancer treatment system
and heat-activated liposome and cancer repair inhibitor products, as well as
other potential new products. We expended approximately $6.8 million in the
fiscal year ending September 30, 2001. As of that date, we had available a total
of approximately $2.5 million to fund additional expenditures. In addition, as
of December 13, 2001, we had received approximately $3,100,000 in net proceeds
from a private placement of our equity securities. As of December 20, 2001, we
had realized gross proceeds of $4,135,826 from the sale of 8,271,652 units,
representing net proceeds to Celsion of $3,707,110. It is our current intention
both to increase the pace of development work on our present products and to
make a significant commitment to our heat-activated liposome and cancer repair
inhibitor research and development projects. The increase in the scope of
present development work and the commitment to these new projects will require
additional external funding, at least until we are able to begin marketing our
products and to generate sufficient cash flow from sale of those products to
support our continued operations. We do not have any committed sources of
financing and cannot offer any assurances that additional funding will be
available in a timely manner, on acceptable terms or at all.

        If adequate funding is not available, we may be required to delay, scale
back or eliminate certain aspects of our operations or attempt to obtain funds
through unfavorable arrangements with partners or others that may force us to
relinquish rights to certain of our technologies, products or potential markets
or that could impose onerous financial or other terms. Furthermore, if we cannot
fund our ongoing development and other operating requirements, particularly
those associated with our obligations to

                                       27

<PAGE>

conduct clinical trials under our licensing agreements, we will be in breach of
these licensing agreements and could therefore lose our license rights, which
could have material adverse effects on our business.

OUR BUSINESS IS SUBJECT TO NUMEROUS AND EVOLVING STATE, FEDERAL AND FOREIGN
REGULATIONS AND WE MAY NOT BE ABLE TO SECURE THE GOVERNMENT APPROVALS NEEDED TO
DEVELOP AND MARKET OUR PRODUCTS.

        Our research and development activities, pre-clinical tests and clinical
trials, and ultimately the manufacturing, marketing and labeling of our
products, all are subject to extensive regulation by the FDA and foreign
regulatory agencies. Pre-clinical testing and clinical trial requirements and
the regulatory approval process typically take years and require the expenditure
of substantial resources. Additional government regulation may be established
that could prevent or delay regulatory approval of our product candidates.
Delays or rejections in obtaining regulatory approvals would adversely affect
our ability to commercialize any product candidates and our ability to generate
product revenues or royalties.

        The FDA and foreign regulatory agencies require that the safety and
efficacy of product candidates be supported through adequate and well-controlled
clinical trials. If the results of pivotal clinical trials do not establish the
safety and efficacy of our product candidates to the satisfaction of the FDA and
other foreign regulatory agencies, we will not receive the approvals necessary
to market such product candidates.

        Even if regulatory approval of a product candidate is granted, the
approval may include significant limitations on the indicated uses for which the
product may be marketed. Also, manufacturing establishments in the United States
and abroad are subject to inspections and regulations by the FDA. Medical
devices must also continue to comply with the FDA's Quality System Regulation,
or QSR. Compliance with such regulations requires significant expenditures of
time and effort to ensure full technical compliance. The FDA stringently applies
regulatory standards for manufacturing.

        We are also subject to recordkeeping and reporting regulations,
including FDA's mandatory Medical Device Reporting, or MDR regulation. Labeling
and promotional activities are regulated by the FDA and, in certain instances,
by the Federal Trade Commission.

        Many states in which we do or in the future may do business or in which
our products may be sold impose licensing, labeling or certification
requirements that are in addition to those imposed by the FDA. There can be no
assurance that one or more states will not impose regulations or requirements
that have a material adverse effect on our ability to sell our products.

        In many of the foreign countries in which we may do business or in which
our products may be sold, we will be subject to regulation by national
governments and supranational agencies as well as by local agencies affecting,
among other things, product standards, packaging requirements, labeling
requirements, import restrictions, tariff regulations, duties and tax
requirements. There can be no assurance that one or more countries or agencies
will not impose regulations or requirements that could have a material adverse
effect on our ability to sell our products.

        The EU has a registration process that includes registration of
manufacturing facilities (known as "ISO certification") and product
certification (known as a "CE Mark"). We have obtained ISO certification for our
existing facilities. However, there is no guarantee that we will be successful
in obtaining European certifications for new facilities or for our products, or
that we will be able to maintain its existing certifications in the future.

        Foreign government regulation may delay marketing of our new products
for a considerable period of time, impose costly procedures upon its activities
and provide an advantage to larger companies that compete with it. There can be
no assurance that we will be able to obtain necessary regulatory approvals, on a
timely basis or at

                                       28

<PAGE>

all, for any products that it develops. Any delay in obtaining, or failure to
obtain, necessary approvals would materially and adversely affect the marketing
of our contemplated products subject to such approvals and, therefore, our
ability to generate revenue from such products.

        Even if regulatory authorities approve our product candidates, such
products and our facilities, including facilities located outside the EU, may be
subject to ongoing testing, review and inspections by the European health
regulatory authorities. After receiving pre-marketing approval, in order to
manufacture and market any of its products, we will have to comply with
regulations and requirements governing manufacture, labeling and advertising on
an ongoing basis.

        Failure to comply with applicable domestic and foreign regulatory
requirements, can result in, among other things, warning letters, fines,
injunctions and other equitable remedies, civil penalties, recall or seizure of
products, total or partial suspension of production, refusal of the government
to grant approvals, pre-market clearance or pre-market approval, withdrawal of
approvals and criminal prosecution of the Company and its employees, all of
which would have a material adverse effect on our business.

OUR BUSINESS DEPENDS ON LICENSE AGREEMENTS WITH THIRD PARTIES TO PERMIT US TO
USE PATENTED TECHNOLOGIES. THE LOSS OF ANY OF OUR RIGHTS UNDER THESE AGREEMENTS
COULD IMPAIR OUR ABILITY TO DEVELOP AND MARKET OUR PRODUCTS.

        Currently, we have three utility patents pending in the United States
Patent & Trademark Office. Two are directed to our Microwave Uretheroplasty
treatment for BPH and the other is directed to our breast cancer treatment
system. However, even when our pending applications mature into United States
patents, our business will still depend on license agreements that it has
entered into with third parties until the third parties' patents expire.

        Our success will depend, in substantial part, on our ability to maintain
our rights under license agreements granting us rights to use patented
technologies. We have entered into exclusive license agreements with MIT, for
APA technology and with MMTC, a privately owned developer of medical devices,
for microwave balloon catheter technology. We have also entered into a license
agreement with Duke University, under which we have exclusive rights to
commercialize medical treatment products and procedures based on Duke
University's thermo-liposome technology and a license agreement with Memorial
Sloan-Kettering Cancer Center under which we have rights to commercialize
certain cancer repair inhibitor products. The MIT, MMTC, Duke University and
Sloan-Kettering agreements each contain license fee, royalty and/or research
support provisions, testing and regulatory milestones, and other performance
requirements that we must meet by certain deadlines. If we were to breach these
or other provisions of the license and research agreements, we could lose our
ability to use the subject technology, as well as compensation for our efforts
in developing or exploiting the technology. Also, loss of our rights under the
MIT license agreement would prevent us from proceeding with most our current
product development efforts, which are dependent on licensed APA technology.
Any such loss of rights and access to technology would have a material adverse
effect on our business.

        Further, we cannot guarantee that any patent or other technology rights
licensed to us by others will not be challenged or circumvented successfully by
third parties, or that the rights granted will provide adequate protection to
it. We are aware of published patent applications and issued patents belonging
to others, and it is not clear whether any of these patents or applications, or
other patent applications of which it may not have any knowledge, will require
us to alter any of our potential products or processes, pay licensing fees to
others or cease certain activities. Litigation, which could result in
substantial costs, may also be necessary to enforce any patents issued to or
licensed by us or to determine the scope and

                                       29

<PAGE>

validity of others' claimed proprietary rights. We also rely on trade secrets
and confidential information that we seek to protect, in part, by
confidentiality agreements with our corporate partners, collaborators, employees
and consultants. We cannot guarantee that these agreements will not be breached,
that, even if not breached, that they are adequate to protect our trade secrets,
that we will have adequate remedies for any breach or that our trade secrets
will not otherwise become known to, or will not be discovered independently by,
competitors.

TECHNOLOGIES FOR THE TREATMENT OF CANCER ARE SUBJECT TO RAPID CHANGE AND THE
DEVELOPMENT OF TREATMENT STRATEGIES THAT ARE MORE EFFECTIVE THAN OUR
THERMOTHERAPY TECHNOLOGY COULD RENDER OUR TECHNOLOGY OBSOLETE.

        Various methods for treating cancer currently are, and in the future may
be expected to be, the subject of extensive research and development. Many
possible treatments that are being researched, if successfully developed, may
not require, or may supplant, the use of our thermotherapy technology. These
alternate treatment strategies include the use of radio frequency (RF), laser
and ultrasound energy sources. The successful development and acceptance of any
one or more of these alternative forms of treatment could render our technology
obsolete as a cancer treatment method.

WE MAY NOT BE ABLE TO HIRE OR RETAIN KEY OFFICERS OR EMPLOYEES THAT WE NEED TO
IMPLEMENT ITS BUSINESS STRATEGY AND DEVELOP ITS PRODUCTS AND BUSINESSES.

        Our success depends significantly on the continued contributions of its
executive officers, scientific and technical personnel and consultants, and on
our ability to attract additional personnel as we seek to implement our business
strategy and develop our products and businesses. During our operating history,
we have assigned many essential responsibilities to a relatively small number of
individuals. However, as our business and the demand on our key employees
expand, we have been, and will continue to be, required to recruit additional
qualified employees. The competition for such qualified personnel is intense,
and the loss of services of certain key personnel or our inability to attract
additional personnel to fill critical positions as we implement our business
strategy could adversely affect our business.

        Effective October 4, 2001, Spencer J. Volk, formerly the President,
Chief Executive Officer and a director of Celsion, resigned from all of these
positions. Our Board has appointed Dr. Augustine Y. Cheung, the Chairman and
Chief Scientific Officer, to serve as Celsion's President and Chief Executive
Officer and Dr. Max Link, a director since 1997, has assumed the position of
Chairman of the Board.

OUR SUCCESS WILL DEPEND IN PART ON OUR ABILITY TO GROW AND DIVERSIFY, WHICH IN
TURN WILL REQUIRE THAT WE MANAGE AND CONTROL OUR GROWTH EFFECTIVELY.

        Our business strategy contemplates growth and diversification. As
manufacturing, marketing, sales, and other personnel are added, and
manufacturing and research and development capabilities are expanded, our
operating expenses and capital requirements will increase. Our ability to manage
growth effectively will require that we continue to expend funds to improve our
operational, financial and management controls, reporting systems and
procedures. In addition, we must effectively expand, train and manage our
employees. We will be unable to effectively manage our businesses if we are
unable to alleviate the strain on resources caused by growth in a timely and
successful manner. There can be no assurance that we will be able to manage our
growth and a failure to do so could have a material adverse effect on our
business.

                                       30

<PAGE>

THE SUCCESS OF OUR PRODUCTS MAY BE HARMED IF THE GOVERNMENT, PRIVATE HEALTH
INSURERS AND OTHER THIRD- PARTY PAYORS DO NOT PROVIDE SUFFICIENT COVERAGE OR
REIMBURSEMENT.

        Our ability to commercialize our thermotherapy technology successfully
will depend in part on the extent to which reimbursement for the costs of such
products and related treatments will be available from government health
administration authorities, private health insurers and other third-party
payors. The reimbursement status of newly approved medical products is subject
to significant uncertainty. We cannot guarantee that adequate third-party
insurance coverage will be available for us to establish and maintain price
levels sufficient for realization of an appropriate return on our investment in
developing new therapies. Government, private health insurers and other
third-party payors are increasingly attempting to contain health care costs by
limiting both coverage and the level of reimbursement for new therapeutic
products approved for marketing by the FDA. Accordingly, even if coverage and
reimbursement are provided by government, private health insurers and
third-party payors for uses of our products, market acceptance of these products
would be adversely affected if the reimbursement available proves to be
unprofitable for health care providers.

WE FACE INTENSE COMPETITION AND THE FAILURE TO COMPETE EFFECTIVELY COULD
ADVERSELY AFFECT OUR ABILITY TO DEVELOP AND MARKET OUR PRODUCTS.

        There are many companies and other institutions engaged in research and
development of thermotherapy technologies, both for prostate disease and cancer
treatment products, that seek treatment outcomes similar to those that we are
pursuing. In addition, a number of companies and other institutions are pursuing
alternative treatment strategies through the use of microwave, infrared, radio
frequency, laser and ultrasound energy sources, all of which appear to be in the
early stages of development and testing. We believe that the level of interest
by others in investigating the potential of thermotherapy and alternative
technologies will continue and may increase. Potential competitors engaged in
all areas of prostate and cancer treatment research in the United States and
other countries include, among others, major pharmaceutical and chemical
companies, specialized technology companies, and universities and other research
institutions. Most of our competitors and potential competitors have
substantially greater financial, technical, human and other resources, and may
also have far greater experience, than do we, both in pre-clinical testing and
human clinical trials of new products and in obtaining FDA and other regulatory
approvals. One or more of these companies or institutions could succeed in
developing products or other technologies that are more effective than the
products and technologies that we have been or are developing, or which would
render our technology and products obsolete and non-competitive. Furthermore, if
we are permitted to commence commercial sales of any of our products, we will
also be competing, with respect to manufacturing efficiency and marketing, with
companies having substantially greater resources and experience in these areas.

LEGISLATIVE AND REGULATORY CHANGES AFFECTING THE HEALTH CARE INDUSTRY COULD
ADVERSELY AFFECT OUR BUSINESS.

        There have been a number of federal and state proposals during the last
few years to subject the pricing of health care goods and services to government
control and to make other changes to the United States health care system. It is
uncertain which legislative proposals, if any, will be adopted (or when) or what
actions federal, state, or private payors for health care treatment and services
may take in response to any health care reform proposals or legislation. We
cannot predict the effect health care reforms may have on our business and we
can offer no assurances that any of these reforms will not have a material
adverse effect on that business.

WE MAY BE SUBJECT TO SIGNIFICANT PRODUCT LIABILITY CLAIMS AND LITIGATION.

                                       31

<PAGE>

        Our business exposes us to potential product liability risks inherent in
the testing, manufacturing and marketing of human therapeutic products. We
presently have product liability insurance limited to $5,000,000 per incident.
If we were to be subject to a claim in excess of this coverage or to a claim not
covered by our insurance and the claim succeeded, we would be required to pay
the claim with our own limited resources, which could have a material adverse
effect on our business. In addition, liability or alleged liability could harm
the business by diverting the attention and resources of our management and by
damaging our reputation.

WE PRESENTLY HAVE LIMITED MARKETING AND SALES CAPABILITY AND WILL BE REQUIRED TO
DEVELOP SUCH CAPABILITIES AND TO ENTER INTO ALLIANCES WITH OTHERS POSSESSING
SUCH CAPABILITIES IN ORDER TO COMMERCIALIZE OUR PRODUCTS SUCCESSFULLY.

        We intend to market our Microwave Uretheroplasty treatment system
directly, at such time, if any, as it is approved for commercialization by the
FDA, and to market our breast cancer treatment system, if and when so approved,
through strategic alliances and distribution arrangements with third parties.
There can be no assurance that we will be able to establish such sales and
marketing capability successfully or successfully enter into third-party
marketing or distribution arrangements. We have limited experience and
capabilities in marketing, distribution and direct sales, although we expect to
attempt to recruit experienced marketing and sales personnel as we pursue
commercialization. In attracting, establishing and maintaining a marketing and
sales force or entering into third-party marketing or distribution arrangements
with other companies, we expect to incur significant additional expense. There
can be no assurance that, to the extent we enter into any commercialization
arrangements with third parties, such third parties will establish adequate
sales and distribution capabilities or be successful in gaining market
acceptance for our products and services. There also can be no assurance that
our direct sales, marketing, licensing and distribution efforts would be
successful or that revenue from such efforts would exceed expenses.

WE DEPEND ON THIRD-PARTY SUPPLIERS TO PROVIDE US WITH COMPONENTS REQUIRED FOR
OUR PRODUCTS AND MAY NOT BE ABLE TO OBTAIN THESE COMPONENTS ON FAVORABLE TERMS
OR AT ALL.

        We are not currently manufacturing any products, but are using our
facilities to assemble prototypes of the equipment for research and development
purposes. We currently purchase certain specialized microwave and thermometry
components and applicator materials and the catheter unit used for our Microwave
Uretheroplasty equipment from single or limited source suppliers because of the
small quantities involved. While we have not experienced any significant
difficulties in obtaining these components, the loss of an important current
supplier could require that we obtain a replacement supplier, which might result
in delays and additional expense in being able to make prototype equipment
available for clinical trials and other research purposes. In addition, inasmuch
as we expect to manufacture our Microwave Uretheroscopy equipment at least for
some period subsequent to FDA approval and the commencement of
commercialization, such manufacturing and commercialization also could be
delayed. In addition, in the event that we succeed in marketing our products, we
intend to use outside contractors to supply components and the Microwave
Uretheroplasty catheter, and may use such contractors to assemble finished
equipment in the future, which could cause us to become increasingly dependent
on key vendors.

WE HAVE NOT PAID DIVIDENDS IN THE PAST AND DO NOT INTEND TO DO SO FOR THE
FORESEEABLE FUTURE.

        We have never paid cash dividends and do not anticipate paying cash
dividends on our common stock or Preferred Stock in the foreseeable future.
Therefore, our stockholders cannot achieve any degree

                                       32

<PAGE>

of liquidity with respect to their shares of common stock except by selling such
shares.

THE EXERCISE OR CONVERSION OF OUR OUTSTANDING OPTIONS, WARRANTS AND CONVERTIBLE
PREFERRED STOCK COULD RESULT IN SIGNIFICANT DILUTION OF OWNERSHIP INTERESTS IN
OUR COMMON STOCK OR OTHER CONVERTIBLE SECURITIES.

        Options and Warrants. As of September 30, 2001, we had outstanding and
exercisable warrants and options to purchase a total of 9,767,884 shares of our
common stock at exercise prices ranging from $0.13 to $5.00 per share (and a
weighted average exercise price of approximately $0.67 per share). In addition,
we had outstanding but unexercisable and unvested warrants and options to
purchase a total of 5,337,333 shares of our common stock at exercise prices
ranging from $0.70 to $5.00 per share. Some of the prices are below the current
market price of our common stock, which has ranged from a low of $0.45 to a high
of $0.60 over the 20 trading days ending December 20, 2001. If holders choose to
exercise such warrants and options at prices below the prevailing market price
for the common stock, the resulting purchase of a substantial number of shares
of our Common would have a dilutive effect on our stockholders and could
adversely affect the market price of our issued and outstanding common stock and
convertible securities. In addition, holders of these options and warrants who
have the right to require registration of the common stock under certain
circumstances and who elect to require such registration, or who exercise their
options or warrants and then satisfy the one-year holding period and other
requirements of Rule 144 of the Securities Act of 1933, will be able to sell in
the public market shares of common stock purchased upon such exercise.

        Preferred Stock. As of September 30, 2001, we had outstanding a total of
942.5 shares of Series A 10% Convertible Preferred Stock (plus 157 shares
representing accrued dividends). The shares of Series A Preferred Stock are
subject to exchange and conversion privileges upon the occurrence of major
events, including a public offering of our securities or our merger with a
public company. In addition, the holders of the Series A Preferred Stock are
entitled to convert their preferred shares into shares of common stock at a
conversion price of $0.41 per share of common stock, subject to certain
adjustments. The conversion of the Series A Preferred Stock could have a
dilutive effect on our stockholders and could adversely affect the market price
of our issued and outstanding common stock and convertible securities. The
holders of the Series A Preferred Stock also have registration rights at such
time, if any, as we undertake a registered public offering of securities. Even
without such registration, holders of the Series A Preferred Stock who satisfy
the requirements of Rule 144 of the Securities Act of 1933 will be able to sell
in the public market shares of common stock acquired upon the conversion of
Series A Preferred Stock. There also were outstanding warrants to purchase 36
shares of Series A Preferred Stock (convertible into an additional 87,805 shares
of common stock) as of September 30, 2001.

                                       33

<PAGE>

IF THE PRICE OF OUR SHARES REMAINS LOW, WE MAY BE DELISTED BY THE AMERICAN STOCK
EXCHANGE AND BECOME SUBJECT TO SPECIAL RULES APPLICABLE TO LOW PRICED STOCKS.

        Our common stock currently trades on The American Stock Exchange (the
"Amex"). The Amex, as a matter of policy, will consider the suspension of
trading in, or removal from listing of, any stock when, in the opinion of the
Amex, (i) the financial condition and/or operating results of an issuer appear
to be unsatisfactory; (ii) it appears that the extent of public distribution or
the aggregate market value of the stock has become so reduced as to make further
dealings on the Amex inadvisable; (iii) the issuer has sold or otherwise
disposed of its principal operating assets; or (iv) the issuer has sustained
losses which are so substantial in relation to its overall operations or its
existing financial condition has become so impaired that it appears
questionable, in the opinion of the Amex, whether the issuer will be able to
continue operations and/or meet its obligations as they mature. For example, the
Amex will consider suspending dealings in or delisting the stock of an issuer if
the issuer has sustained losses from continuing operations and/or net losses in
its five most recent fiscal years. Another instance where the Amex would
consider suspension or delisting of a stock is if the stock has been selling for
a substantial period of time at a low price per share and the issuer fails to
effect a reverse split of such stock within a reasonable time after being
notified that the Amex deems such action to be appropriate. We have sustained
net losses for our last five fiscal years (and beyond) and our common stock has
been trading at relatively low prices. Therefore, our common stock may be at
risk for delisting by the Amex.

        Upon any such delisting, the common stock would become subject to the
penny stock rules of the SEC, which generally are applicable to equity
securities with a price of less than $5.00 per share (other than securities
registered on certain national securities exchanges or quoted on the Nasdaq
system, provided that current price and volume information with respect to
transactions in such securities is provided by the exchange or system). The
penny stock rules require a broker-dealer, prior to a transaction in a penny
stock not otherwise exempt from the rules, to deliver a standardized risk
disclosure document prepared by the SEC that provides information about penny
stocks and the nature and level of risks in the penny stock market. The
broker-dealer also must provide the customer with bid and ask quotations for the
penny stock, the compensation of the broker-dealer and its salesperson in the
transaction and monthly account statements showing the market value of each
penny stock held in the customer's account. In addition, the penny stock rules
require that, prior to a transaction in a penny stock that is not otherwise
exempt from such rules, the broker-dealer must make a special written
determination that the penny stock is a suitable investment for the purchaser
and receive the purchaser's written agreement to the transaction. These
disclosure requirements are likely to have a material and adverse effect on
price and the level of trading activity in the secondary market for a stock that
becomes subject to the penny stock rules. If our common stock were to become
subject to the penny stock rules it is likely that the price of the common stock
would decline and that our stockholders would be likely to find it more
difficult to sell their shares.

OUR STOCK PRICE COULD BE VOLATILE.

        Market prices for our common stock and the securities of other medical
and high technology companies have been volatile. Factors such as announcements
of technological innovations or new products by us or by our competitors,
government regulatory action, litigation, patent or proprietary rights
developments and market conditions for medical and high technology stocks in
general can have a significant impact on the market for our common stock.

                                       34

<PAGE>

ANTI-TAKEOVER PROVISIONS IN OUR CHARTER DOCUMENTS AND DELAWARE LAW COULD PREVENT
OR DELAY A CHANGE IN CONTROL.

        Our Certificate of Incorporation and Bylaws may discourage, delay or
prevent a merger or acquisition that a stockholder may consider favorable by
authorizing the issuance of "blank check" preferred stock. In addition, our
classified Board of Directors may discourage such transactions by increasing the
amount of time necessary to obtain majority representation on the Board. Certain
other provisions of our Bylaws and of Delaware law may also discourage, delay or
prevent a third party from acquiring or merging with us, even if such action
were beneficial to some, or even a majority, of our stockholders.


I
TEM 7A.        QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

           We do not currently hold any derivative instruments and do not engage
in hedging activities and currently do not enter into any transactions
denominated in a foreign currency. Thus, our exposure to interest rate and
foreign exchange fluctuations is minimal.


ITEM 8.         FINANCIAL STATEMENTS AND
                SUPPLEMENTARY DATA AND FINANCIAL DISCLOSURE

        The financial statements, supplementary data and report of independent
public accountants are filed as part of this report on pages F-1 through F-14.


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

        Not applicable.


                                    PART III


ITEM 10.        DIRECTORS AND EXECUTIVE OFFICERS

        The information required by this item is incorporated herein by
reference to the information set forth under the captions "Directors and
Executive Officers" and "Compliance with Section 16(a) of the Securities
Exchange At of 1934, as Amended" in Celsion's Definitive Proxy Statement in
connection with the Annual Meeting of Stockholders to be held on February 15,
2002, which has been, or will be, filed with the Securities and Exchange
Commission within 120 days after the end of our fiscal year ended September 30,
2001.


ITEM 11.        EXECUTIVE COMPENSATION

        The information required by this item is incorporated herein by
reference to the information set forth under the caption "Executive
Compensation" in Celsion's Definitive Proxy Statement in connection with the
Annual Meeting of Stockholders to be held on February 15, 2002, which has been,
or will be,

                                       35

<PAGE>

filed with the Securities and Exchange Commission within 120 days after the end
of our fiscal year ended September 30, 2001.


ITEM 12.        SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS

        The information required by this item is incorporated herein by
reference to the information set forth under the caption "Security Ownership of
Certain Beneficial Owners and Management" in Celsion's Definitive Proxy
Statement in connection with the Annual Meeting of Stockholders to be held on
February 15, 2002, which has been, or will be, filed with the Securities and
Exchange Commission within 120 days after the end of the our fiscal year ended
September 30, 2001.


ITEM 13.        CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

        The information required by this item is incorporated herein by
reference to the information set forth under the caption "Certain Transactions"
in Celsion's Definitive Proxy Statement in connection with the Annual Meeting of
Stockholders to be held on February 15, 2002, which has been, or will be, filed
with the Securities and Exchange Commission within 120 days after the end of our
fiscal year ended September 30, 2001.


                                     PART IV


ITEM 14.        EXHIBITS, FINANCIAL STATEMENTS,
                SCHEDULES AND REPORTS ON FORM 8-K

(a)

        1. FINANCIAL STATEMENTS.

        The following is a list of the financial statements of Celsion
Corporation, together with the report of its independent public accountants.


<TABLE>
<CAPTION>
TITLE OF DOCUMENTS                                                                                     PAGE NO.
------------------                                                                                     --------
<S>                                                                                                    <C>
           Independent Auditors' Report                                                                F-1

           Balance Sheet                                                                               F-2

           Statements of Operations                                                                    F-4

           Statements of Changes in Stockholders' Equity                                               F-5

           Statements of Cash Flows                                                                    F-6

           Notes to Financial Statements                                                               F-7
</TABLE>


        2. FINANCIAL STATEMENT SCHEDULES.

        No schedules are provided because of the absence of conditions under
which they are required.

                                       36

<PAGE>

        3. EXHIBITS.

        The following documents are included as exhibits to this report:


<TABLE>
<CAPTION>
          EXHIBIT NO.                                      DESCRIPTION
          -----------                                      -----------
<S>                               <C>
             3.1.1                Certificate of Incorporation of Celsion (the "Company"), as
                                  amended, incorporated herein by reference to Exhibit 3.1 to the
                                  Quarterly Report on Form 10-Q of the Company for the Quarter Ended
                                  June 30, 2001.

             3.1.2                Certificate of Designations regarding the Series A 10% Preferred
                                  Stock of the Company, incorporated herein by reference to Exhibit
                                  3.1.2 to the Annual Report on Form 10-K of the Company for the
                                  Year Ended September 30, 2001.

             3.1.3                Certificate of Ownership and Merger of Celsion Corporation (a
                                  Maryland Corporation) into Celsion (Delaware) Corporation (inter
                                  alia, changing the Company's name to "Celsion Corporation" from
                                  "Celsion (Delaware) Corporation), incorporated herein by reference
                                  to Exhibit 3.1.3 to the Annual Report on Form 10-K of the Company
                                  for the Year Ended September 30, 2000.

              3.2                 By-laws of the Company, as amended, incorporated herein by
                                  reference to Exhibit 3.2 to the Quarterly Report on Form 10-Q of
                                  the Company for the Quarter Ended June 30, 2001.

              4.1                 Form of Common Stock Certificate, par value $0.01 per share,
                                  incorporated herein by reference to Exhibit 4.1 to the Annual
                                  Report on Form 10-K of the Company for the Year Ended September
                                  30, 2001.

             10.1                 Patent License Agreement between the Company and Massachusetts
                                  Institute of technology dated June 1 1996, incorporated herein by
                                  reference to Exhibit 10.1 to the Annual Report on Form 10-K of the
                                  Company for the year ended September 30, 1996 (Confidential
                                  Treatment Requested).

             10.2                 License Agreement between the Company and MMTC, Inc. dated August
                                  23, 1996, incorporated herein by reference to Exhibit 10.2 to the
                                  Annual Report on Form 10-K of the Company for the year ended
                                  September 30, 1996 (Confidential Treatment Requested).

             10.3                 Patent License Agreement between the Company and Massachusetts
                                  Institute of Technology dated October 17, 1997, incorporated
                                  herein by reference to Exhibit 10.7 to the Annual Report on Form
                                  10-K (amended) of the Company for the year ended September 30,
                                  1998. (Confidential Treatment Requested).

             10.4                 Amendment dated November 25, 1997 to the License Agreement between
                                  the Company and MMTC, Inc. dated August 23, 1996, incorporated
                                  herein by reference to Exhibit 10.8 to the Annual Report on Form
                                  10-K (amended) of the Company for the year ended September 30,
                                  1998. (Confidential Treatment Requested).

             10.5                 Patent License Agreement between the Company and Duke University
                                  dated November 10, 1999, incorporated herein by reference to
                                  Exhibit 10.9 to the Annual Report on Form 10-K of the Company for
                                  the year ended September 30, 1999 (Confidential Treatment
                                  Requested).
</TABLE>


                                       37

<PAGE>


<TABLE>
<S>                               <C>
             10.6                 Amendment dated March 23, 1999 to the License Agreement between
                                  the Company and MMTC, Inc. dated August 23, 1996, incorporated
                                  herein by reference to Exhibit 10.10 to the Annual Report on Form
                                  10-K of the Company for the year ended September 30, 1999.
                                  (Confidential Treatment Requested).

             10.7+                Celsion Corporation 2001 Stock Option Plan.

             10.8                 Form of Series 200 Warrant issued to certain employees, directors
                                  and consultants to Purchase Common Stock of the Company,
                                  incorporated herein by reference to Exhibit 10.11 to the Annual
                                  Report on Form 10-K of the Company for the year ended September
                                  30, 1998.

             10.9                 Form of Series 250 Warrant issued to DunnHughes Holding, Inc. to
                                  Purchase Common Stock of the Company, incorporated herein by
                                  reference to Exhibit 10.12 to the Annual Report on Form 10-K of
                                  the Company for the year ended September 30,1998

             10.10                Form of Series 300 Warrant issued to Nace Resources, Inc. to
                                  purchase Common Stock of the Company, incorporated herein by
                                  reference to Exhibit 10.13 to the Annual Report on Form 10-K of
                                  the Company for the year ended September 30, 1998.

             10.11                Form of Series 400 Warrant issued to Stearns Management Company
                                  Assignees to Purchase Common Stock of the Company, incorporated
                                  herein by reference to Exhibit 10.14 to the Annual Report on Form
                                  10-K of the Company for the year ended September 30, 1998.

             10.12                Form of Series 500 Warrant to Purchase Common Stock of the Company
                                  pursuant to the Private Placement Memorandum of the Company dated
                                  January 6, 1997, as amended, incorporated herein by reference to
                                  Exhibit 10.15 to the Annual Report on Form 10-K of the Company for
                                  the year ended September 30, 1998.

             10.13                Intentionally omitted.

             10.14                Form of Series 600 Warrant issued to Certain Employees and
                                  Directors on May 16, 1996 to Purchase Common Stock of the Company,
                                  incorporated herein by reference to Exhibit 10.17 to the Annual
                                  Report on Form 10-K of the Company for the year ended September
                                  30, 1998.

             10.15                License Agreement between the Company and Sloan-Kettering
                                  Institute for Cancer Research dated May 19, 2000, incorporated
                                  herein by reference to Exhibit 10.18 to the Annual Report on Form
                                  10-K of the Company for the year ended September 30, 2000-.

             10.16                Employment Agreement between the Company and Anthony P. Deasey
                                  dated November 27, 2000, incorporated herein by reference to
                                  Exhibit 10.1 to the Quarterly Report on Form 10-K of the Company
                                  for the quarter ended June 30, 2001.

             10.17                Employment Agreement between the Company and Augustine Y. Cheung
                                  dated January 1, 2000, incorporated herein by reference to Exhibit
                                  10.2 to the Quarterly Report on Form 10-Q (amended) of the Company
                                  for the quarter ended December 31, 1999.
</TABLE>


                                       38

<PAGE>


<TABLE>
<S>                               <C>
             10.18                Employment Agreement between the Company and John Mon dated June
                                  8, 2000, incorporated herein by reference to Exhibit 10.21 to the
                                  Annual Report on Form 10-K of the Company for the year ended
                                  September 30, 2000.

             10.19                Employment Agreement between the Company and Dennis Smith dated
                                  May 19, 2000, incorporated herein by reference to Exhibit 10.22 to
                                  the Annual Report on Form 10-K of the Company for the year ended
                                  September 30, 2000.

             10.20                Option Agreement between the Company and Duke University dated
                                  August 8, 2000, incorporated herein by reference to Exhibit 10.23
                                  to the Annual Report on Form 10-K of the Company for the year
                                  ended September 30, 2000.

             10.21+               Employment Agreement between the Company and Daniel S. Reale dated
                                  April 9, 2001.

             10.22                Service Agreement between the British Columbia Cancer Agency,
                                  Division of Medical Oncology, Investigational Drug Section,
                                  Propharma Pharmaceutical Clean Room and the Company dated
                                  September 20, 2000, incorporated herein by reference to Exhibit
                                  10.24 to the Annual Report on Form 10-K of the Company for the
                                  year ended September 30, 2000 (Confidential Treatment Requested).

             10.23+               Form of Warrant to Purchase Common Stock of the Company pursuant 
                                  to the Private Placement Memorandum of the Company dated 
                                  October 11, 2001.

             10.24+               Advisory Agreement between the Company and Dr. Kris Venkat dated
                                  August 1, 2001.

             23.1+                Consent of Stegman & Company, independent public accountants of
                                  the Company.
</TABLE>


+ Filed herewith.

(b)     REPORTS ON FORM 8-K.

        The Company filed a report on Form 8-K on August 9, 2001 and a report on
Form 8-K on August 20, 2001.

                                       39

<PAGE>


                                   SIGNATURES

        Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the Registrant has duly caused its annual report on Form
10-K to be signed on its behalf by the undersigned, thereunto duly authorized.

                                          CELSION CORPORATION

December 20, 2001                         By: /s/ Augustine Y. Cheung
                                          ---------------------------
                                          Augustine Y. Cheung
                                          President and Chief Executive Officer
                                          (Principal Executive Officer)

                                          By: /s/ Anthony P. Deasey
                                              ---------------------

                                               Anthony P. Deasey
                                               Chief  Financial Officer
                                               (Principal Financial and
                                               Accounting Officer)

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


<TABLE>
<CAPTION>
SIGNATURE                                                  TITLE                                             DATE
---------                                                  -----                                             ----
<S>                                                        <C>                                               <C>
/s/ Augustine Y. Cheung                                    Director, President and Chief                     December 20, 2001
-----------------------                                    Executive Officer
 Augustine Y. Cheung                                       (Principal Executive Officer)

/s/ Anthony P. Deasey                                      Senior Vice President and Chief                   December 20, 2001
---------------------                                      Financial Officer
Anthony P. Deasey                                          (Principal Financial and
                                                           Accounting Officer)

/s/ John Mon                                               Vice President, Secretary,                        December 20, 2001
------------                                               Treasurer and Director
John Mon

/s/ Max E. Link                                            Chairman of the Board                             December 20, 2001
---------------
Max E. Link

/s/ LaSalle D. Leffall, Jr.                                Director                                          December 20, 2001
---------------------------
LaSalle D. Leffall, Jr.

/s/ Claude Tihon                                           Director                                          December 20, 2001
----------------
Claude Tihon
</TABLE>


                                       40

<PAGE>
                               CELSION CORPORATION

                               REPORT ON AUDITS OF
                              FINANCIAL STATEMENTS

                               FOR THE YEARS ENDED
                        SEPTEMBER 30, 2001, 2000 AND 1999




<PAGE>

                                    CONTENTS


<TABLE>
<CAPTION>
                                                                              Page
                                                                              ----

<S>                                                                           <C>
INDEPENDENT AUDITORS' REPORT                                                   F-1



FINANCIAL STATEMENTS


        Balance Sheets                                                         F-2


        Statements of Operations                                               F-4


        Statements of Changes in Stockholders' Equity                          F-5


        Statements of Cash Flows                                               F-6


NOTES TO FINANCIAL STATEMENTS                                                  F-7
</TABLE>




<PAGE>


                          INDEPENDENT AUDITORS' REPORT





The Board of Directors and Stockholders
Celsion Corporation
Columbia, Maryland


                We have audited the accompanying balance sheets of Celsion
Corporation as of September 30, 2001 and 2000, and the related statements of
operations, changes in stockholders' equity, and cash flows for each of the
three years in the period ended September 30, 2001. These 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 auditing standards
generally accepted in the 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. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. An audit also includes 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 financial statements referred to above
present fairly, in all material respects, the financial position of Celsion
Corporation as of September 30, 2001 and 2000, and the results of its operations
and its cash flows for each of the three years in the period ended September 30,
2001 in conformity with accounting principles generally accepted in the United
States.


/s/Stegman & Company


Baltimore, Maryland
November 6, 2001




                                      F-1

<PAGE>

                               CELSION CORPORATION

                                 BALANCE SHEETS
                           SEPTEMBER 30, 2001 AND 2000

                                     ASSETS



<TABLE>
<CAPTION>
                                                         2001            2000
                                                       ----------     ----------

<S>                                                    <C>            <C>       
CURRENT ASSETS:
  Cash and cash equivalents                            $2,510,136     $8,820,196
  Accounts receivable - trade                               1,205          2,307
  Accrued interest receivable                                 -            7,751
  Inventories                                                 -           13,538
  Prepaid expenses                                            -           22,417
  Other current assets                                    150,000         34,356
                                                       ----------     ----------

         Total current assets                           2,661,341      8,900,565
                                                       ----------     ----------

PROPERTY AND EQUIPMENT - at cost:
  Furniture and office equipment                          229,643        146,287
  Laboratory and shop equipment                            87,193         52,978
                                                       ----------     ----------
                                                          316,836        199,265
      Less accumulated depreciation                       127,556         74,540
                                                       ----------     ----------

         Net value of property and equipment              189,280        124,725
                                                       ----------     ----------

OTHER ASSETS:
  Deposits                                                 29,537            -
  Patent licenses (net of accumulated amortization
    of $113,247 and $97,419 in 2001 and 2000,
    respectively)                                          76,703         92,531
                                                       ----------     ----------

         Total other assets                               106,240         92,531
                                                       ----------     ----------


         TOTAL ASSETS                                  $2,956,861     $9,117,821
                                                       ==========     ==========
</TABLE>





See accompanying notes.




                                      F-2

<PAGE>

                      LIABILITIES AND STOCKHOLDERS' EQUITY



<TABLE>
<CAPTION>
                                                              2001              2000
                                                          ------------      ------------
<S>                                                       <C>               <C>         
CURRENT LIABILITIES:
  Accounts payable - trade                                $    145,520      $     60,472
  Notes payable - other                                            -             114,778

  Accrued interest payable - other                                 -             155,373
  Other accrued liabilities                                    126,921            60,769
                                                          ------------      ------------

         Total current liabilities                             272,441           391,392


LONG-TERM LIABILITIES:
  Security deposit                                              15,203               - 
                                                          ------------      ------------

         Total liabilities                                     287,644           391,392
                                                          ------------      ------------


STOCKHOLDERS' EQUITY:
  Common stock - $.01 par value; 150,000,000 shares
      authorized, 76,876,761 and 64,372,067 issued
      and outstanding for 2001 and 2000, respectively          768,768           643,721
  Series A 10% Convertible Preferred Stock, $1,000
      par value, 7,000 shares authorized, 1,099 and
      5,176 shares issued and outstanding                    1,099,584         5,176,000
  Additional paid-in capital                                34,406,022        29,354,125
  Accumulated deficit                                      (33,605,157)      (26,447,417)
                                                          ------------      ------------

         Total stockholders' equity                          2,669,217         8,726,429
                                                          ------------      ------------


         TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY       $  2,956,861      $  9,117,821
                                                          ============      ============
</TABLE>



See accompanying notes.



                                      F-3

<PAGE>

                               CELSION CORPORATION

                            STATEMENTS OF OPERATIONS
              FOR THE YEARS ENDED SEPTEMBER 30, 2001, 2000 AND 1999






<TABLE>
<CAPTION>
                                               2001              2000              1999
                                           ------------      ------------      ------------
<S>                                        <C>               <C>               <C>       
REVENUES:
   Equipment sales and parts               $        -        $      3,420      $        -
   Returns and allowances                           -                 -                 - 
                                           ------------      ------------      ------------

        Total revenues                              -               3,420               -

COST OF SALES                                       -                 246               - 
                                           ------------      ------------      ------------

GROSS PROFIT                                        -               3,174               -
                                           ------------      ------------      ------------

OPERATING EXPENSES:
   Selling, general and administrative        3,211,625         2,661,333         1,371,161
   Research and development                   4,075,249         2,238,292         1,019,941
                                           ------------      ------------      ------------

        Total operating expenses              7,286,874         4,899,625         2,391,102
                                           ------------      ------------      ------------

LOSS FROM OPERATIONS                         (7,286,874)       (4,896,451)       (2,391,102)

INTEREST INCOME                                 318,038           350,526            15,744

RENTAL INCOME                                    45,609               -                 -

INTEREST EXPENSE                                    -              (1,290)          (60,834)
                                           ------------      ------------      ------------

LOSS BEFORE INCOME TAXES                     (6,923,227)       (4,547,215)       (2,436,192

INCOME TAXES                                        -                 -                 - 
                                           ------------      ------------      ------------

NET LOSS                                   $ (6,923,227)     $ (4,547,215)     $ (2,436,192)
                                           ============      ============      ============

BASIC AND DILUTED NET LOSS PER
   COMMON SHARE                            $      (0.10)     $       (.08)     $       (.05)
                                           ============      ============      ============

BASIC AND DILUTED WEIGHTED
   AVERAGE NUMBER OF COMMON
   SHARES OUTSTANDING                        72,249,920        59,406,921        45,900,424
                                           ============      ============      ============
</TABLE>





See accompanying notes.



                                      F-4

<PAGE>

                               CELSION CORPORATION

                  STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
              FOR THE YEARS ENDED SEPTEMBER 30, 2001, 2000 AND 1999





<TABLE>
<CAPTION>
                                                                      Series A
                                                                   10% Convertible
                                                 Common Stock      Preferred Stock        Additional
                                             ------------------   ------------------       Paid-in       Accumulated
                                             Shares     Amount    Shares     Amount        Capital         Deficit         Total
                                             ------     ------    ------     ------        -------         -------         -----

<S>                                         <C>         <C>       <C>      <C>           <C>            <C>            <C>
Balances at October 1, 1998                 39,945,826  $399,458     -     $       -     $ 17,213,485   $(19,464,010)  $(1,851,067)

   Sale of common stock                      9,545,500    95,455     -             -        3,517,420            -       3,612,875

   Issuance of shares of common stock as
      payment of indebtedness and expenses   3,879,172    38,792     -             -        1,672,717            -       1,711,509

   Net loss                                        -         -       -             -              -       (2,436,192)   (2,436,192)
                                            ----------  --------  ------   -----------   ------------   ------------   -----------

Balances at September 30, 1999              53,370,498   533,705     -             -       22,403,622    (21,900,202)    1,037,125

   Sale of common stock                     10,248,544   102,485     -             -        7,122,893            -       7,225,378

   Issuance of  shares of common stock as
      payment of indebtedness and expenses     753,025     7,531     -             -          771,965            -         779,496

   Issuance of  shares of Series A 10%
      convertible preferred stock (net of
      issuance costs)                              -         -     4,853     4,852,500       (620,855)           -       4,231,645

   Preferred stock dividend                        -         -       323       323,500       (323,500)           -             -

   Net loss                                        -         -       -             -              -       (4,547,215)   (4,547,215)
                                            ----------  --------  ------   -----------   ------------   ------------   -----------

Balances at September 30, 2000              64,372,067   643,721   5,176     5,176,000     29,354,125    (26,447,417)    8,726,429

   Sale of common stock                        510,000     5,100     -             -          147,400            -         152,500

   Issuance of shares of common stock as
      payment for operating expenses           319,174     3,192     -             -          337,566            -         340,758

   Conversion of shares of Series A 10%
      convertible, preferred stock plus
      accrued dividend                      10,514,763   105,148  (4,311)   (4,311,053)     4,205,905            -             -

   Exercise of preferred stock warrants      1,160,757    11,607     -             -          (11,607)           -             -

   Preferred stock dividend                        -         -       234       234,637            -         (234,513)          124

   Stock option compensation                       -         -       -             -          372,633            -         372,633

   Net loss                                        -         -       -             -              -       (6,923,227)   (6,923,277)
                                            ----------  --------  ------   -----------   ------------   ------------   -----------

Balances at September 30, 2001              76,876,761  $768,768   1,099   $ 1,099,584   $ 34,406,022   $(33,605,157)  $ 2,669,217
                                            ==========  ========  ======   ===========   ============   ============   ===========
</TABLE>



See accompanying notes.



                                      F-5

<PAGE>



                               CELSION CORPORATION

                            STATEMENTS OF CASH FLOWS
              FOR THE YEARS ENDED SEPTEMBER 30, 2001, 2000 AND 1999


<TABLE>
<CAPTION>
                                                                  2001             2000              1999
                                                              ------------     -------------     ------------
<S>                                                           <C>              <C>               <C>         
CASH FLOWS FROM OPERATING ACTIVITIES:
  Net loss                                                    $(6,923,227)     $ (4,547,215)     $(2,436,192)
  Noncash items included in net loss:
    Depreciation and amortization                                  68,845            39,478           28,674
    Inventory valuation                                            13,538            17,000           20,000
    Stock option compensation                                     372,633               -                -
    Common stock issued for operating expenses                    340,758           542,745          200,304
  Net changes in:
    Accounts receivable                                             1,102              (495)             -
    Inventories                                                       -              (8,479)             -
    Accrued interest receivable - related parties                   7,751            (7,751)             -
    Prepaid expenses                                               14,832           197,103           73,424
    Other current assets                                         (115,644)            4,847          (21,594)
    Accounts payable and accrued interest payable                 (70,324)          (73,370)        (223,255)
    Accrued compensation                                              -             (91,009)         189,239
    Accrued professional fees                                         -                 -           (100,000)
    Other accrued liabilities                                      66,275            60,681          (13,551)
                                                              -----------      ------------      -----------

         Net cash used in operating activities                 (6,223,461)       (3,866,465)      (2,282,951)
                                                              -----------      ------------      -----------

CASH FLOWS FROM INVESTING ACTIVITIES:
  Increase in deposits                                             (6,749)              -                -
  Purchase of property and equipment                             (117,572)         (122,108)          (8,297)
                                                              -----------      ------------      -----------

         Net cash used in investing activities                   (124,321)         (122,108)          (8,297)
                                                              -----------      ------------      -----------

CASH FLOWS FROM FINANCING ACTIVITIES:
  Payment on notes payable - other                               (114,778)              -            (18,000)
  Payment on capital lease obligation                                 -              (5,719)          (1,083)
  Proceeds of stock issuances                                     152,500        11,457,024        3,612,875
                                                              -----------      ------------      -----------

         Net cash provided by financing activities                 37,722        11,451,305        3,593,792
                                                              -----------      ------------      -----------

NET (DECREASE) INCREASE  IN CASH                               (6,310,060)        7,462,732        1,302,544

CASH AT BEGINNING OF YEAR                                       8,820,196         1,357,464           54,920
                                                              -----------      ------------      -----------

CASH AT END OF YEAR                                           $ 2,510,136      $  8,820,196      $ 1,357,464
                                                              ===========      ============      ===========

Conversion of accounts payable, debt and accrued interest
   payable through issuance of common stock                   $       -        $     20,750      $ 1,511,205
                                                              ===========      ============      ===========

Prepaid expenses funded through issuance of
   common stock                                               $       -        $    216,000      $       - 
                                                              ===========      ============      ===========

Cash paid during the year for interest                        $       -        $      1,290      $    21,356
                                                              ===========      ============      ===========
</TABLE>




See accompanying notes 


                                      F-6

<PAGE>


                               CELSION CORPORATION

                          NOTES TO FINANCIAL STATEMENTS
              FOR THE YEARS ENDED SEPTEMBER 30, 2001, 2000 AND 1999


1.      DESCRIPTION OF BUSINESS AND SUMMARY OF 
        SIGNIFICANT ACCOUNTING POLICIES

            Description of Business

Celsion Corporation ("Celsion" or the "Company"), a Delaware corporation, is a
research and development company dedicated to developing and commercializing
medical devices and biotechnologies for the treatment of Benign Prostatic
Hyperplasia ("BPH"), cancer and other diseases using focused heat technology
delivered by patented microwave technology. The Company is in pivotal Phase II
clinical trials of its treatment systems that use focused heat for the treatment
of both BPH and breast cancer. The Company is also in the pre-clinical stages of
development of a system that would use its focused heat technology in
combination with heat-activated liposomes for the thermodynamic treatment of
cancer. In addition, the Company has licensed a Cancer Repair Inhibitor ("CRI")
from Memorial Sloan-Kettering Cancer Center, which is in pre-clinical
development.

            Cash and Cash Equivalents

                The Company classifies highly liquid investments with original
maturities of 90 days or less to be cash equivalents. Cash equivalents are
stated at cost, which approximates market value.

            Inventories

                Inventories are stated at the lower of cost or market. Cost is
determined using the average cost method.

            Property and Equipment

                Property and equipment is stated at cost. Depreciation is
provided over the estimated useful lives of the related assets of three to seven
years using the straight-line method. Major renewals and betterments are
capitalized at cost and ordinary repairs and maintenance are charged against
operations as incurred. Depreciation expense was $53,016, $23,648 and $12,845
for the years ended September 30, 2001, 2000 and 1999, respectively.

            Patent Licenses

                The Company has purchased several licenses to use the rights
to patented technologies. Patent license costs are amortized straight-line over
the remaining patent life.

            Revenue Recognition

                Revenue is recognized when systems, products or components are
shipped and when consulting services are rendered. Deferred revenue is recorded
for customer deposits received on contingent sale agreements.


                                      F-7

<PAGE>


            Research and Development

                Research and development costs are expensed as incurred.
Equipment and facilities acquired for research and development activities which
have alternative future uses are capitalized and charged to expense over their
estimated useful lives.

            Net Loss Per Common Share

                Basic and diluted net loss per common share was computed by
dividing net loss by the weighted average number of shares of common stock
outstanding during each period. The impact of common stock equivalents has been
excluded from the computation of weighted average common shares outstanding, as
the effect would be antidilutive.

            Nonmonetary Transactions

                Nonmonetary transactions are accounted for in accordance with
Accounting Principles Board Opinion No. 29 "Accounting for Nonmonetary
Transactions" which requires that the transfer or distribution of a nonmonetary
asset or liability generally is based on the fair value of the asset or
liability that is received or surrendered whichever is more clearly evident.

            Use of Estimates

                The preparation of financial statements in conformity with
accounting principles generally accepted in the United States requires
management to make estimates and assumptions that affect the reported amounts of
assets and liabilities and disclosure of contingent assets and liabilities at
the date of the financial statements and the reported amounts of revenues and
expenses during the reporting period. Actual results could differ from those
estimates.

            Financial Instruments

                For most financial instruments, including cash, accounts
payable and accruals, management believes that the carrying amount approximates
fair value, as the majority of these instruments are short-term in nature.

2.      FINANCIAL CONDITION

                Since inception, the Company has incurred substantial operating
losses, principally from expenses associated with the Company's research and
development programs, the clinical trials conducted in connection with the
Company's thermotherapy systems and applications for submission to the Food and
Drug Administration. The Company believes these expenditures are essential for
the commercialization of its technologies. As a result of these expenditures, as
well as related general and administrative expenses the Company had an
accumulated deficit of $34 million as of September 30, 2001. The Company expects
such operating losses to continue in the near term and for the foreseeable
future as it continues its product development efforts, and undertakes marketing
and sales activities. The Company's ability to achieve profitability is 
dependent upon its ability to


                                      F-8

<PAGE>


successfully obtain governmental approvals, produce, market and sell its new
technology and integrate such technology into its thermotherapy systems. There
can be no assurance that the Company will be able to commercialize its
technology successfully or that profitability will ever be achieved. The
operating results of the Company have fluctuated significantly in the past. The
Company expects that its operating results will fluctuate significantly from
quarter to quarter in the future and will depend on a number of factors, many
of which are outside the Company's control.

                The Company will need substantial additional funding in order
to complete the development, testing and commercialization of its cancer
treatment and BPH products and of potential new products. It is the Company's
current intention both to increase the pace of development work on its present
products and to make a significant commitment to thermosensitive liposome and
gene therapy research and development projects. The increase in the scope of
present development work and such new projects will require additional funding,
at least until the Company is able to begin marketing its products. Subsequent
to September 30, 2001 and through December 20, 2001, the Company had realized
net proceeds of 3,707,110 in a private placement of units consisting of its
common stock and common stock warrants. The Company believes that these
additional funds will be sufficient to fund operations through September 30,
2002.

                If adequate funding is not available in the future, the Company
may be required to delay, scale-back or eliminate certain aspects of its
operations or to attempt to obtain funds through onerous arrangements with
partners or others that may force the Company to relinquish rights to certain of
its technologies, products or potential markets. Furthermore, if the Company
cannot fund its ongoing development and other operating requirements, and
particularly those associated with its obligation to conduct clinical trials
under its licensing agreements, it will be in breach of its commitments under
such licensing agreements and could therefore lose its license rights, with
material adverse effects on the Company.

3.      INVENTORIES

            Inventories are comprised of the following:


<TABLE>
<CAPTION>
                                                                                       2001                 2000   
                                                                                   ------------          -----------
 
<S>                                                                                <C>                     <C>    
           Materials                                                               $   -                   $13,538
           Finished products                                                           -                       -    
                                                                                   ------------          -----------

                                                                                   $   -                   $13,538
                                                                                   ============          ===========
</TABLE>


4.      NOTES PAYABLE - OTHER

                Notes payable - other consists of a term note without interest
and payable on demand that was paid off during the year ended September 30,
2001.

5.      INCOME TAXES

                A reconciliation of the Company's statutory tax rate to the
effective rate for the years ended September 30 is as follows:


<TABLE>
<CAPTION>
                                                                        2001           2000            1999  
                                                                       ------         -------         -------

<S>                                                                    <C>            <C>             <C>
       Federal statutory rate                                           34.0%          34.0%            34.0%
       State taxes, net of federal tax benefit                           4.6            4.6              4.6
       Valuation allowance                                             (38.6)         (38.6)           (38.6)
                                                                       -----          -----            -----

                                                                        .0%            .0%              .0%
                                                                       =====          =====            =====
</TABLE>



                                      F-9

<PAGE>


                As of September 30, 2001, the Company had net operating loss
carryforwards of approximately $29 million for federal income tax purposes that
are available to offset future taxable income through the year 2021.

                The components of the Company's deferred tax asset for the years
ended September 30 is as follows:


<TABLE>
<CAPTION>
                                                                       2001                      2000 
                                                                   ------------             -------------

<S>                                                                <C>                         <C>       
       Net operating loss carryforwards                            $ 11,400,000             $   9,215,000
       Valuation allowance                                          (11,400,000)               (9,215,000)
                                                                   ------------             -------------

                                                                   $        -               $        - 
                                                                   ============             =============
</TABLE>


                The evaluation of the realizability of such deferred tax assets
in future periods is made based upon a variety of factors for generating future
taxable income, such as intent and ability to sell assets and historical and
projected operating performance. At this time, the Company has established a
valuation reserve for all of its deferred tax assets. Such tax assets are
available to be recognized and benefit future periods.

6.      RETIREMENT PLAN

                The Company provides a SAR-SEP savings plan to which eligible
employees may make pretax payroll contributions up to 15% of compensation. The
Company does not make contributions to the plan.

7.      PREFERRED STOCK

                During the year ended September 30, 2000 the Company issued
4,852.5 shares of Series A 10% convertible preferred stock. Holders of shares of
preferred stock are entitled to receive when, as and if declared by the
Company's Board of Directors, dividends at the annual rate of 10% per share
payable semi-annually on March 31 and September 30. Such dividends are payable
in shares and fractional shares of preferred stock, valued for this purpose at
the rate of $1,000 per share.

                The shares of Series A preferred stock are subject to exchange
and conversion privileges upon the occurrence of major events, including a
public offering of the Company's securities or the Company's merger into another
public company. In addition, the holders of the Series A preferred stock are
entitled to convert their preferred shares into shares of common stock at a
conversion price of $0.41 per share of common stock, subject to certain
adjustments.

                As of September 30, 2001, 4,283.55 (including accrued dividends)
shares of the Series A preferred stock had been converted into 10,447,690 shares
of the Company's common stock and 1,099 shares (including accrued dividends) of
the Series A preferred stock remained outstanding.

                There are outstanding warrants to purchase 36 shares of Series A
preferred stock (convertible into an additional 87,805 shares of common stock)
as of September 30, 2001.

8.      STOCK OPTIONS AND WARRANTS

                The Company has issued stock options and warrants to employees,
directors, vendors and debt holders. Options and warrants are generally granted
at market value at the date of the grant.


                                      F-10

<PAGE>


                A summary of the Company's stock option and warrant activity and
related information for the years ended September 30, 2001, 2000 and 1999 is as
follows:


<TABLE>
<CAPTION>
                                                          Weighted
                                       Options/           Average
                                       Warrants           Exercise
                                      Outstanding          Price
                                      -----------         --------

<S>                                   <C>                 <C> 
Outstanding at October 1, 1998         10,603,983          $.39
  Granted                               6,749,627           .81
  Exercised                              (587,500)          .25
  Expired/cancelled                      (112,340)          .52
                                      -----------

Outstanding at September 30, 1999      16,653,770           .59
  Granted                               1,125,214           .94
  Exercised                           (10,247,074)          .70
  Expired/cancelled                           -             -
                                      -----------

Outstanding at September 30, 2000       7,531,910           .44
  Granted                               8,158,308          1.36
  Exercised                              (585,000)          .35
  Expired/cancelled                           -             -
                                      -----------

Outstanding at September 30, 2001      15,105,218           .94
                                      ===========
</TABLE>


                Following is additional information with respect to options and
warrants outstanding at September 30, 2001:


<TABLE>
<CAPTION>
                                          Exercise       Exercise          Exercise        Exercise           Exercise
                                         Price from     Price from        Price from      Price from         Price from
                                        $.13 to $.51   $.60 to $.85      $.92 to $1.03   $1.19 to $1.60     $1.73 to $5.00
                                        ------------   ------------      -------------   --------------     --------------

<S>                                     <C>            <C>               <C>             <C>                <C>
Outstanding at September 30, 2001:
   Number of options/warrants            5,948,148      1,992,000          2,330,470       2,923,600          1,911,000
   Weighted average exercise price          $.18           $.73               $.98           $1.34              $3.01
   Weighted average remaining
     contractual life in years              4.41           5.63               5.12            6.10               4.55

Exercisable at September 30, 2001:
   Number of options/warrants            5,948,148        952,000          1,282,137        630,600            955,000
   Weighted average exercise price          $.18           $.72               $.98           $1.30              $2.81
</TABLE>


                Subsequent to September 30, 2001, the Company's Chief Executive
Officer retired from employment with the Company. In connection with his
retirement, unvested stock options to purchase 900,000 shares of the Company's
stock with a weighted average exercise price of $1.18 became immediately
exercisable.

                During the year ended September 30, 2001, the Company entered
into agreements with


                                      F-11

<PAGE>


consultants in which the consultants received stock options in exchange for
services. The fair value of these options was estimated at the date of the grant
using a Black-Scholes option pricing model with the following weighted average
assumptions: risk-free interest rate of 5.41%, expected volatility of 50%;
expected option life 5 years from vesting and an expected dividend yield of 0%.
As a result of these agreements, additional expense of $372,633 was recognized
in the year ended September 30, 2001.

                The Company has adopted the disclosure-only provisions of
Statement of Financial Accounting Standards No. 123, Accounting for Stock-Based
Compensation (SFAS No. 123), but applies Accounting Principles Board Opinion No.
25 and related interpretations. No compensation expense related to the granting
of stock options to employees or directors was recorded during the three years
ended September 30, 2001. The fair value of these equity awards was estimated at
the date of grant using a Black-Scholes option pricing model with the following
weighted average assumptions for 2001, 2000 and 1999: risk-free interest rate of
4.77%, 6.54% and 5.16% for 2001, 2000 and 1999, respectively; expected
volatility of 50%; expected option life of 3 to 5 years from vesting and an
expected dividend yield of 0.0%. If the Company had elected to recognize cost
based on the fair value at the grant dates consistent with the method prescribed
by SFAS No. 123, net loss and loss per share would have been changed to the pro
forma amounts as follows:


<TABLE>
<CAPTION>
                                                                                 Year Ended September 30,              
                                                                -------------------------------------------------------
                                                                       2001                  2000               1999
                                                                ----------------         ------------        ----------
<S>                                                                <C>                   <C>                 <C>         
                  Net loss                                         $(7,599,676)          $(5,032,715)        $(2,448,402)
                  Net loss per common share - basic                       (.11)                 (.08)               (.05)
</TABLE>


9.      LICENSE AGREEMENTS AND PROPRIETARY RISKS

                Through the Company's license agreements with Massachusetts 
Institute of Technology ("MIT") MMTC, Inc., Duke University ("Duke") and
Sloan-Kettering, the Company has exclusive rights, within defined fields of use
, of nine United States patents. Three of these patents relate to the treatment
of BPH, four relate to thermotherapy for cancer, one relates to heat-sensitive
liposomes and one relates to gene therapy.

                The MIT, MMTC, Duke and Sloan-Kettering license agreements each
contains license fee, royalty and/or research support provisions, testing and
regulatory milestones, and other performance requirements that the Company must
meet by certain deadlines with respect to the use of the licensed technologies.
In conjunction with the patent holders, the Company intends to file
international applications for certain of the United States patents.

                In 1996, the Company entered into a patent license agreement
with MIT, pursuant to which the Company obtained exclusive rights to use of
MIT's patented APA technology in conjunction with application of heat to breast
tumor conditions, the application of heat to prostate conditions and all other
medical uses. MIT has retained certain rights in the licensed technology for
non-commercial research purposes. MIT's technology has been patented in the
United States and MIT has patents pending for its technology in China, Europe,
Japan and Canada. The term of the Company's exclusive rights under the MIT
license agreement expires on the earlier of ten years after the first commercial
sale of a product using the licensed technology or October 24, 2009, but the
rights continue on a non-exclusive basis for the life of the MIT patents.


                                      F-12

<PAGE>


                The Company entered into a license agreement with MMTC in 1996,
for exclusive worldwide rights to MMTC's patents related to its balloon
compression technology for the treatment of prostatic disease in humans. The
exclusive rights under the MMTC license agreements extend for the life of MMTC's
patents. MMTC currently has patents in the United States and Canada. The terms
of these patents expire at various times from April 2008 to November 2014. In
addition, MMTC also has patent applications pending in Japan and Europe.

                On November 10, 1999, the Company entered into a license 
agreement with Duke under which the Company received exclusive rights (subject
to certain exceptions) to commercialize and use Duke's thermo-liposome
technology. The license agreement contains annual royalty and minimum payment
provisions and also requires milestone-based royalty payments measured by
various events, including product development stages, FDA applications and
approvals, foreign marketing approvals and achievement of significant sales.
However, in lieu of such milestone-based cash payments, Duke has agreed to
accept shares of the Company common stock to be issued in installments at the
time each milestone payment is due, with each installment of shares to be
calculated at the average closing price of the common stock during the 20
trading days prior to issuance. The total number of shares issuable to Duke
under these provisions is subject to adjustment in certain cases, and Duke has
"piggyback" registration rights for public offerings taking place more than one
year after the effective date of the license agreement. The Company is currently
renegotiating certain terms of our contractual arrangements with Duke.

                The rights under the license agreement with Duke extend for the
longer of 20 years or the end of any term for which any relevant patents are
issued by the United States Patent and Trademark Office. Currently, the Company
has rights to Duke's patent for its thermo-liposome technology in the United
States, which expires in 2018, and to future patents received by Duke in Canada,
Europe, Japan and Australia, where it has patent applications pending.

                The Company entered into a license agreement with
Sloan-Kettering in 2000 under which it obtained exclusive rights to
Sloan-Kettering's United States patent and to patents that Sloan-Kettering may
receive in the future for its heat-sensitive gene therapy in Japan, Canada and
Europe, where it has patent applications pending. Rights under the agreement
with Sloan-Kettering will terminate at the later of 20 years after the date of
the agreement or the last expiration date of any patent rights covered by the
agreement.

10.     COMMITMENTS AND CONTINGENCIES

            Lease Commitments

                The Company has entered into a lease for their facilities
located in Columbia, Maryland. Future minimum lease obligations are as follows:


<TABLE>
<S>                           <C>                                                 <C>     
                                2002                                                $294,071
                                2003                                                 302,779
                                2004                                                 311,789
                                2005                                                 239,018
                              Thereafter                                                -
</TABLE>


                Rent expense for the years ended September 30, 2001, 2000 and
1999 was $227,961, $70,848 and $67,796, respectively.

            Rental Income

                In the year ended September 30, 2001 the Company began
subleasing some of its office/warehouse space to an unrelated party, generating
rental income of $45,609. The sublease yields rent of $15,203 per month and ends
January 1, 2001. At the end of the lease term, the tenant has the option to
renewing its sublease for an additional three months.


                                      F-13

<PAGE>


            Product Liability Insurance

                The Company's business exposes it to potential product liability
risks which are inherent in the testing, manufacturing, and marketing of human
therapeutic products. The Company presently has product liability insurance
limited to $5,000,000 per incident, and, if the Company were to be subject to a
claim in excess of such coverage and such claim succeeded, the Company would be
required to pay such claim out of its own limited resources.

            Litigation

                The Company has initiated legal action against a former director
of the Company and the director's related entities who held warrants for the
purchase of 4.1 million shares of common stock. The Company has concluded that
the warrants should be rescinded because they violated Section 15 of the
Securities and Exchange Act of 1934. The original defendants have filed a
counterclaim against the Company, certain of its officers and directors and an
attorney and law firm that represented the Company alleging certain acts in
connection with the warrants. The counterclaim does not request a specific
amount of damages.

                It is impossible to determine at this point in the litigation
the amount of damages, if any that may be awarded against Celsion if it is
liable for the claims alleged in the counterclaim. In addition, the Company's
insurance carrier has denied liability as to the claims asserted in the
counterclaim. However, the Company intends to prosecute this litigation
vigorously.

11.     CONCENTRATIONS OF CREDIT RISK

                As of September 30, 2001, the Company has a concentration of
credit represented by cash balances in one large commercial bank in amounts
that exceed current federal deposit insurance limits. The financial stability
of this institution is continually reviewed by senior management.

12.     SELECTED QUARTERLY FINANCIAL INFORMATION (UNAUDITED)


<TABLE>
<CAPTION>
                                            First         Second          Third         Fourth
                                           Quarter        Quarter        Quarter        Quarter        
                                           -------        -------        -------        -------        

<S>                                      <C>            <C>            <C>            <C>         
Gross profit on sales                    $       -      $     1,858    $     1,462    $    (3,320)
General and administrative expenses         (930,600)      (982,792)    (1,127,585)      (170,648)
Research and development expenses           (556,375)      (669,820)      (552,934)    (2,296,120)
Other income/expense                         112,523         94,883         62,438         93,803
                                         -----------    -----------    -----------    -----------

Net loss                                 $(1,374,452)   $(1,555,871)   $(1,616,619)   $(2,376,285)
                                         ===========    ===========    ===========    ===========


Net loss per share - basic and diluted   $      (.02)   $      (.02)   $      (.02)   $      (.03)
                                         ===========    ===========    ===========    ===========
</TABLE>


13.     SUBSEQUENT EVENT

                On December 13, 2001, the Company conducted a first closing on a
private placement of equity securities consisting of units, each comprised of
one share of its common stock and one common stock purchase warrant exercisable
for a period of five years at $0.60 per share. The offering is being conducted
on a "best efforts, minimum/maximum basis" with a minimum of $3,000,000 and a
maximum of $5,000,000 (subject to a $1,250,000 oversubscription allowance). At
the first closing, the Company realized gross proceeds of $3,360,000 from the
sale of 6,720,000 units, representing net proceeds to the Company of $3,004,986
after deduction of commissions and offering expenses. As of December 20, 2001,
the Company had realized gross proceeds of $4,135,826 from the sale of 8,271,652
units, representing net proceeds to the Company of $3,707,110. By its terms, the
private placement will terminate on January 31, 2002, unless earlier terminated
at the election of the Company.



                                      F-14





<PAGE>
                                                                    EXHIBIT 10.7

                              CELSION CORPORATION
 
                             2001 STOCK OPTION PLAN
 
                         EFFECTIVE               , 2001
 

<PAGE>
 
                              CELSION CORPORATION
 
                             2001 STOCK OPTION PLAN
 
1.  ESTABLISHMENT, PURPOSE AND TYPES OF AWARDS
 
     Celsion Corporation hereby establishes the CELSION CORPORATION 2001 STOCK
OPTION PLAN (the "Plan"). The purpose of the Plan is to promote the long-term
growth and profitability of Celsion Corporation (the "Corporation") by (i)
providing key people with incentives to improve stockholder value and to
contribute to the growth and financial success of the Corporation, and (ii)
enabling the Corporation to attract, retain and reward the best available
persons for positions of substantial responsibility.
 
     The Plan permits the granting of stock options (including nonqualified
stock options and incentive stock options qualifying under Section 422 of the
Code) and stock appreciation rights (including free-standing, tandem and limited
stock appreciation rights) or any combination of the foregoing (collectively,
"Awards").
 
2.  DEFINITIONS
 
     Under this Plan, except where the context otherwise indicates, the
following definitions apply:
 
          (a) "Board" shall mean the Board of Directors of the Corporation.
 
          (b) "Change in Control" shall mean: (i) any sale, exchange
 or other
     disposition of substantially all of the Corporation's assets or over 50% of
     its Common Stock; or (ii) any merger, share exchange, consolidation or
     other reorganization or business combination in which the Corporation is
     not the surviving or continuing corporation, or in which the Corporation's
     stockholders become entitled to receive cash, securities of the Corporation
     other than voting common stock, or securities of another issuer.
 
          (c) "Code" shall mean the Internal Revenue Code of 1986, as amended,
     and any regulations issued thereunder.
 
          (d) "Committee" shall mean the Board or committee of Board members
     appointed pursuant to Section 3 of the Plan to administer the Plan.
 
          (e) "Common Stock" shall mean shares of the Corporation's common
     stock.
 
          (f) "Exchange Act" shall mean the Securities Exchange Act of 1934, as
     amended.
 
          (g) "Fair Market Value" of a share of the Corporation's Common Stock
     for any purpose on a particular date shall be determined in a manner such
     as the Committee shall in good faith determine to be appropriate.
 
          (h) "Grant Agreement" shall mean a written agreement between the
     Corporation and a grantee memorializing the terms and conditions of an
     Award granted pursuant to the Plan.
 
          (i) "Grant Date" shall mean the date on which the Committee formally
     acts to grant an Award to a grantee or such other date as the Committee
     shall so designate at the time of taking such formal action.
 
          (j) "Parent" shall mean a corporation, whether now or hereafter
     existing, within the meaning of the definition of "parent corporation"
     provided in Section 424(e) of the Code, or any successor thereto of similar
     import.
 
          (k) "Rule 16b-3" shall mean Rule 16b-3 as in effect under the Exchange
     Act on the effective date of the Plan, or any successor provision
     prescribing conditions necessary to exempt the issuance of securities under
     the Plan (and further transactions in such securities) from Section 16(b)
     of the Exchange Act.

<PAGE>
 
          (l) "Subsidiary" and "subsidiaries" shall mean only a corporation or
     corporations, whether now or hereafter existing, within the meaning of the
     definition of "subsidiary corporation" provided in Section 424(f) of the
     Code, or any successor thereto of similar import.
 
3.  ADMINISTRATION
 
     (a) Procedure.  The Plan shall be administered by the Board. In the
alternative, the Board may appoint a Committee consisting of not less than two
(2) members of the Board to administer the Plan on behalf of the Board, subject
to such terms and conditions as the Board may prescribe. Once appointed, the
Committee shall continue to serve until otherwise directed by the Board. From
time to time, the Board may increase the size of the Committee and appoint
additional members thereof, remove members (with or without cause) and appoint
new members in substitution therefor, fill vacancies, however caused, and remove
all members of the Committee and, thereafter, directly administer the Plan. In
the event that the Board is the administrator of the Plan in lieu of a
Committee, the term "Committee" as used herein shall be deemed to mean the
Board.
 
     Members of the Board or Committee who are either eligible for Awards or
have been granted Awards may vote on any matters affecting the administration of
the Plan or the grant of Awards pursuant to the Plan, except that no such member
shall act upon the granting of an Award to himself or herself, but any such
member may be counted in determining the existence of a quorum at any meeting of
the Board or the Committee during which action is taken with respect to the
granting of an Award to him or her.
 
     The Committee shall meet at such times and places and upon such notice as
it may determine. A majority of the Committee shall constitute a quorum. Any
acts by the Committee may be taken at any meeting at which a quorum is present
and shall be by majority vote of those members entitled to vote. Additionally,
any acts reduced to writing or approved in writing by all of the members of the
Committee shall be valid acts of the Committee.
 
     (b) Procedure After Registration of Common Stock.  Upon and after the point
in time that the Common Stock or any other capital stock of the Corporation
becomes registered under Section 12 of the Exchange Act, the Board shall take
all action necessary to cause the Plan to be administered in accordance with the
then effective provisions of Rule 16b-3, provided that any amendment to the Plan
required for compliance with such provisions shall be made in accordance with
Section 11 of the Plan.
 
     (c) Powers of the Committee.  The Committee shall have all the powers
vested in it by the terms of the Plan, such powers to include authority, in its
sole and absolute discretion, to grant Awards under the Plan, prescribe Grant
Agreements evidencing such Awards and establish programs for granting Awards.
The Committee shall have full power and authority to take all other actions
necessary to carry out the purpose and intent of the Plan, including, but not
limited to, the authority to:
 
          (i) determine the eligible persons to whom, and the time or times at
     which Awards shall be granted,
 
          (ii) determine the types of Awards to be granted,
 
          (iii) determine the number of shares to be covered by or used for
     reference purposes for each Award,
 
          (iv) impose such terms, limitations, restrictions and conditions upon
     any such Award as the Committee shall deem appropriate,
 
          (v) modify, extend or renew outstanding Awards, accept the surrender
     of outstanding Awards and substitute new Awards, provided that no such
     action shall be taken with respect to any outstanding Award which would
     adversely affect the grantee without the grantee's consent, and
 
          (vi) accelerate or otherwise change the time in which an Award may be
     exercised or becomes payable and to waive or accelerate the lapse, in whole
     or in part, of any restriction or condition with respect to such Award,
     including, but not limited to, any restriction or condition with respect to
     the vesting or exercisability of an Award following termination of any
     grantee's employment.

<PAGE>
 
The Committee shall have full power and authority to administer and interpret
the Plan and to adopt such rules, regulations, agreements, guidelines and
instruments for the administration of the Plan and for the conduct of its
business as the Committee deems necessary or advisable and to interpret same,
all within the Committee's sole and absolute discretion.
 
     (d) Limited Liability.  To the maximum extent permitted by law, no member
of the Board or Committee shall be liable for any action taken or decision made
in good faith relating to the Plan or any Award thereunder.
 
     (e) Indemnification.  To the maximum extent permitted by law, the members
of the Board and Committee shall be indemnified by the Corporation in respect of
all their activities under the Plan.
 
     (f) Effect of Committee's Decision.  All actions taken and decisions and
determinations made by the Committee on all matters relating to the Plan
pursuant to the powers vested in it hereunder shall be in the Committee's sole
and absolute discretion and shall be conclusive and binding on all parties
concerned, including the Corporation, its stockholders, any participants in the
Plan and any other employee of the Corporation, and their respective successors
in interest.
 
4.  SHARES AVAILABLE FOR THE PLAN; MAXIMUM AWARDS
 
     Subject to adjustments as provided in Section 10 of the Plan, the shares of
stock that may be delivered or purchased or used for reference purposes (with
respect to stock appreciation rights) under the Plan, including with respect to
incentive stock options intended to qualify under Section 422 of the Code, shall
not exceed an aggregate of Ten Million (10,000,000) shares of Common Stock of
the Corporation and the Corporation shall reserve said number of shares of
Common Stock for issuance pursuant to the Plan. If any Award, or portion of an
Award, under the Plan expires or terminates unexercised, becomes unexercisable
or is forfeited or otherwise terminated, surrendered or canceled as to any
shares, the shares subject to such Award shall thereafter be available for
further Awards under the Plan.
 
5.  PARTICIPATION
 
     Participation in the Plan shall be open to all employees, officers,
directors and consultants of the Corporation, or of any Parent or Subsidiary of
the Corporation, as may be selected by the Committee from time to time.
Notwithstanding the foregoing, participation in the Plan with respect to Awards
of incentive stock options shall be limited to employees of the Corporation, or
of any Parent or Subsidiary of the Corporation.
 
     Awards may be granted to such eligible persons and for or with respect to
such number of shares of Common Stock as the Committee shall determine, subject
to the limitations in Section 4 of the Plan. A grant of any type of Award made
in any one year to an eligible person shall neither guarantee nor preclude a
further grant of that or any other type of Award to such person in that year or
subsequent years.
 
6.  STOCK OPTIONS
 
     Subject to the other applicable provisions of the Plan, the Committee may
from time to time grant to eligible participants nonqualified stock options or
incentive stock options as that term is defined in Section 422 of the Code. The
stock options granted shall be subject to the following terms and conditions.
 
     (a) Grant of Option.  The grant of a stock option shall be evidenced by a
Grant Agreement, executed by the Corporation and the grantee, stating the number
of shares of Common Stock subject to the stock option evidenced thereby and the
terms and conditions of such stock option, in such form as the Committee may
from time to time determine.
 
     (b) Price.  The price per share payable upon the exercise of each stock
option ("exercise price") shall be determined by the Committee.
 
     (c) Payment.  Stock options may be exercised in whole or in part by payment
of the exercise price of the shares to be acquired in accordance with the
provisions of the Grant Agreement, and/or such rules and

<PAGE>
 
regulations as the Committee may have prescribed, and/or such determinations,
orders, or decisions as the Committee may have made. Payment may be made in cash
(or cash equivalents acceptable to the Committee) or, if approved by the
Committee, in shares of Common Stock or a combination of cash and shares of
Common Stock, or by such other means as the Committee may prescribe. The Fair
Market Value of shares of Common Stock delivered on exercise of stock options
shall be determined as of the date of exercise. Shares of Common Stock delivered
in payment of the exercise price may be previously owned shares or, if approved
by the Committee, shares acquired upon exercise of the stock option. Any
fractional share will be paid in cash. If approved by the Board of Directors,
the Corporation may make or guarantee loans to grantees to assist grantees in
exercising stock options and satisfying any related withholding tax obligations.
 
     If the Common Stock is registered under Section 12(b) or 12(g) of the
Exchange Act, the Committee, subject to such limitations as it may determine,
may authorize payment of the exercise price, in whole or in part, by delivery of
a properly executed exercise notice, together with irrevocable instructions, to:
(i) a brokerage firm designated by the Corporation to deliver promptly to the
Corporation the aggregate amount of sale or loan proceeds to pay the exercise
price and any withholding tax obligations that may arise in connection with the
exercise, and (ii) the Corporation to deliver the certificates for such
purchased shares directly to such brokerage firm.
 
     (d) Terms of Options.  The term during which each stock option may be
exercised shall be determined by the Committee; provided, however, that in no
event shall a stock option be exercisable more than ten years from the date it
is granted. Prior to the exercise of the stock option and delivery of the shares
certificates represented thereby, the grantee shall have none of the rights of a
stockholder with respect to any shares represented by an outstanding stock
option.
 
     (e) Restrictions on Incentive Stock Options.  Incentive Stock Options
granted under the Plan shall comply in all respects with Code Section 422 and,
as such, shall meet the following additional requirements.
 
          (i) Grant Date. An incentive stock option must be granted within 10
     years of the earlier of the Plan's adoption by the Board of Directors or
     approval by the Corporation's shareholders.
 
          (ii) Exercise Price and Term. The exercise price of an incentive stock
     option shall not be less than 100% of the Fair Market Value of the shares
     on the date the stock option is granted and the term of the stock option
     shall not exceed ten years. Also, the exercise price of any incentive stock
     option granted to a grantee who owns (within the meaning of Section
     422(b)(6) of the Code, after the application of the attribution rules in
     Section 424(d) of the Code) more than 10% of the total combined voting
     power of all classes of shares of the Corporation or its Parent or
     Subsidiary corporations (within the meaning of Sections 422 and 424 of the
     Code) shall be not less than 110% of the Fair Market Value of the Common
     Stock on the grant date and the term of such stock option shall not exceed
     five years.
 
          (iii) Maximum Grant. The aggregate Fair Market Value (determined as of
     the Grant Date) of shares of Common Stock with respect to which all
     incentive stock options first become exercisable by any grantee in any
     calendar year under this or any other plan of the Corporation and its
     Parent and Subsidiary corporations may not exceed $100,000 or such other
     amount as may be permitted from time to time under Section 422 of the Code.
     To the extent that such aggregate Fair Market Value shall exceed $100,000,
     or other applicable amount, such stock options shall be treated as
     nonqualified stock options. In such case, the Corporation may designate the
     shares of Common Stock that are to be treated as stock acquired pursuant to
     the exercise of an incentive stock option by issuing a separate certificate
     for such shares and identifying the certificate as incentive stock option
     shares in the stock transfer records of the Corporation.
 
          (iv) Grantee. Incentive stock options shall only be issued to
     employees of the Corporation, or of a Parent or Subsidiary of the
     Corporation.
 
          (v) Designation. No stock option shall be an incentive stock option
     unless so designated by the Committee at the time of grant or in the Grant
     Agreement evidencing such stock option.

<PAGE>
 
          (vi) Stockholder Approval. No stock option issued under the Plan shall
     be an incentive stock option unless the Plan is approved by the
     shareholders of the Corporation within 12 months of its adoption by the
     Board in accordance with the Bylaws and Articles of the Corporation and
     governing law relating to such matters.
 
     (f) Other Terms and Conditions.  Stock options may contain such other
provisions, not inconsistent with the provisions of the Plan, as the Committee
shall determine appropriate from time to time.
 
7.  STOCK APPRECIATION RIGHTS
 
     (a) Award of Stock Appreciation Rights.  Subject to the other applicable
provisions of the Plan, the Committee may at any time and from time to time
grant stock appreciation rights ("SARs") to eligible participants, either on a
free-standing basis (without regard to or in addition to the grant of a stock
option) or on a tandem basis (related to the grant of an underlying stock
option), as it determines. SARs granted in tandem with or in addition to a stock
option may be granted either at the same time as the stock option or at a later
time; provided, however, that a tandem SAR shall not be granted with respect to
any outstanding incentive stock option Award without the consent of the grantee.
SARs shall be evidenced by Grant Agreements, executed by the Corporation and the
grantee, stating the number of shares of Common Stock subject to the SAR
evidenced thereby and the terms and conditions of such SAR, in such form as the
Committee may from time to time determine. The term during which each SAR may be
exercised shall be determined by the Committee. In no event shall a SAR be
exercisable more than ten years from the date it is granted. The grantee shall
have none of the rights of a stockholder with respect to any shares of Common
Stock represented by a SAR.
 
     (b) Restrictions of Tandem SARs.  No incentive stock option may be
surrendered in connection with the exercise of a tandem SAR unless the Fair
Market Value of the Common Stock subject to the incentive stock option is
greater than the exercise price for such incentive stock option. SARs granted in
tandem with stock options shall be exercisable only to the same extent and
subject to the same conditions as the stock options related thereto are
exercisable. The Committee may, in its discretion, prescribe additional
conditions to the exercise of any such tandem SAR.
 
     (c) Amount of Payment Upon Exercise of SARs.  A SAR shall entitle the
grantee to receive, subject to the provisions of the Plan and the Grant
Agreement, a payment having an aggregate value equal to the product of (i) the
excess of (A) the Fair Market Value on the exercise date of one share of Common
Stock over (B) the base price per share specified in the Grant Agreement, times
(ii) the number of shares specified by the SAR, or portion thereof, which is
exercised. In the case of exercise of a tandem SAR, such payment shall be made
in exchange for the surrender of the unexercised related stock option (or any
portion or portions thereof which the grantee from time to time determines to
surrender for this purpose).
 
     (d) Form of Payment Upon Exercise of SARs.  Payment by the Corporation of
the amount receivable upon any exercise of a SAR may be made by the delivery of
Common Stock or cash, or any combination of Common Stock and cash, as determined
in the sole discretion of the Committee from time to time. If upon settlement of
the exercise of a SAR a grantee is to receive a portion of such payment in
shares of Common Stock, the number of shares shall be determined by dividing
such portion by the Fair Market Value of a share of Common Stock on the exercise
date. No fractional shares shall be used for such payment and the Committee
shall determine whether cash shall be given in lieu of such fractional shares or
whether such fractional shares shall be eliminated.
 
8.  WITHHOLDING OF TAXES
 
     The Corporation may require, as a condition to the grant of any Award under
the Plan or exercise pursuant to such Award or to the delivery of certificates
for shares issued or payments of cash to a grantee pursuant to the Plan or a
Grant Agreement (hereinafter collectively referred to as a "taxable event"),
that the grantee pay to the Corporation, in cash or, if approved by the
Corporation, in shares of Common Stock, including shares acquired upon grant of
the Award or exercise of the Award, valued at Fair Market Value on the date as
of which the withholding tax liability is determined, any federal, state or
local taxes of any kind

<PAGE>
 
required by law to be withheld with respect to any taxable event under the Plan.
The Corporation, to the extent permitted or required by law, shall have the
right to deduct from any payment of any kind (including salary or bonus)
otherwise due to a grantee any federal, state or local taxes of any kind
required by law to be withheld with respect to any taxable event under the Plan,
or to retain or sell without notice a sufficient number of the shares to be
issued to such grantee to cover any such taxes.
 
9.  TRANSFERABILITY
 
     No Award granted under the Plan shall be transferable by a grantee
otherwise than by will or the laws of descent and distribution. Unless otherwise
determined by the Committee in accord with the provisions of the immediately
preceding sentence, an Award may be exercised during the lifetime of the
grantee, only by the grantee or, during the period the grantee is under a legal
disability, by the grantee's guardian or legal representative.
 
10.  ADJUSTMENTS; BUSINESS COMBINATIONS
 
     In the event of a reclassification, recapitalization, stock split, reverse
stock split, stock dividend, combination of shares, or other similar event, the
maximum number and kind of shares reserved for issuance or with respect to which
Awards may be granted under the Plan as provided in Section 4 shall be adjusted
to reflect such event, and the Committee shall make such adjustments as it deems
appropriate and equitable in the number, kind and price of shares covered by
outstanding Awards made under the Plan, and in any other matters which relate to
Awards and which are affected by the changes in the Common Stock referred to
above.
 
     In the event of any proposed Change in Control, the Committee shall take
such action as it deems appropriate and equitable to effectuate the purposes of
this Plan and to protect the grantees of Awards, which action may include, but
without limitation, any one or more of the following: (i) acceleration or change
of the exercise and/or expiration dates of any Award to require that exercise be
made, if at all, prior to the Change in Control; (ii) cancellation of any Award
upon payment to the holder in cash of the Fair Market Value of the Common Stock
subject to such Award as of the date of (and, to the extent applicable, as
established for purposes of) the Change in Control, less the aggregate exercise
price, if any, of the Award; and (iii) in any case where equity securities of
another entity are proposed to be delivered in exchange for or with respect to
Common Stock of the Corporation, arrangements to have such other entity replace
the Awards granted hereunder with awards with respect to such other securities,
with appropriate adjustments in the number of shares subject to, and the
exercise prices under, the award.
 
     The Committee is authorized to make adjustments in the terms and conditions
of, and the criteria included in, Awards in recognition of unusual or
nonrecurring events (including, without limitation, the events described in the
preceding two paragraphs of this Section 10) affecting the Corporation, or the
financial statements of the Corporation or any Subsidiary, or of changes in
applicable laws, regulations, or accounting principles, whenever the Committee
determines that such adjustments are appropriate in order to prevent dilution or
enlargement of the benefits or potential benefits intended to be made available
under the Plan.
 
     In the event the Corporation dissolves and liquidates (other than pursuant
to a plan of merger or reorganization), then notwithstanding any restrictions on
exercise set forth in this Plan or any Grant Agreement, or other agreement
evidencing a stock option or stock appreciation right: (i) each grantee shall
have the right to exercise his stock option or stock appreciation right at any
time up to ten (10) days prior to the effective date of such liquidation and
dissolution; and (ii) the Committee may make arrangements with the grantees for
the payment of appropriate consideration to them for the cancellation and
surrender of any stock option or stock appreciation right that is so canceled or
surrendered at any time up to ten (10) days prior to the effective date of such
liquidation and dissolution. The Committee may establish a different period (and
different conditions) for such exercise, delivery, cancellation, or surrender to
avoid subjecting the grantee to liability under Section 16(b) of the Exchange
Act. Any stock option or stock appreciation right not so exercised, canceled, or
surrendered shall terminate on the last day for exercise prior to such effective
date.

<PAGE>
 
     Except as hereinbefore expressly provided, issuance by the Corporation of
shares of stock of any class or securities convertible into shares of stock of
any class, for cash, property, labor or services, upon direct sale, upon the
exercise of rights or warranty to subscribe therefore, or upon conversion of
shares or obligations of the Corporation convertible into such shares or other
securities, and in any case whether or not for fair value, shall not affect, and
no adjustment by reason thereof shall be made with respect to, the number of
shares of Common Stock subject to Awards theretofore granted or the purchase
price per share of Common Stock subject to Awards.
 
11.  TERMINATION AND MODIFICATION OF THE PLAN
 
     The Board, without further approval of the stockholders, may modify or
terminate the Plan or any portion thereof at any time, except that no
modification shall become effective without prior approval of the stockholders
of the Corporation to increase the number of shares of Common Stock subject to
the Plan or if stockholder approval is necessary to comply with any tax or
regulatory requirement or rule of any exchange or Nasdaq System upon which the
Common Stock is listed or quoted (including for this purpose stockholder
approval that is required for continued compliance with Rule 16b-3 or
stockholder approval that is required to enable the Committee to grant incentive
stock options pursuant to the Plan).
 
     The Committee shall be authorized to make minor or administrative
modifications to the Plan as well as modifications to the Plan that may be
dictated by requirements of federal or state laws applicable to the Corporation
or that may be authorized or made desirable by such laws. The Committee may
amend or modify the grant of any outstanding Award in any manner to the extent
that the Committee would have had the authority to make such Award as so
modified or amended. No modification may be made that would materially adversely
affect any Award previously made under the Plan without the approval of the
grantee.
 
12.  NON-GUARANTEE OF EMPLOYMENT
 
     Nothing in the Plan or in any Grant Agreement thereunder shall confer any
right on an employee to continue in the employ of the Corporation or shall
interfere in any way with the right of the Corporation to terminate an employee
at any time.
 
13.  TERMINATION OF EMPLOYMENT
 
     For purposes of maintaining a grantee's continuous status as an employee
and accrual of rights under any Award, transfer of an employee among the
Corporation and the Corporation's Parent or Subsidiaries shall not be considered
a termination of employment. Nor shall it be considered a termination of
employment for such purposes if an employee is placed on military or sick leave
or such other leave of absence which is considered as continuing intact the
employment relationship; in such a case, the employment relationship shall be
continued until the date when an employee's right to reemployment shall no
longer be guaranteed either by law or contract.
 
14.  WRITTEN AGREEMENT
 
     Each Grant Agreement entered into between the Corporation and a grantee
with respect to an Award granted under the Plan shall incorporate the terms of
this Plan and shall contain such provisions, consistent with the provisions of
the Plan, as may be established by the Committee.
 
15.  NON-UNIFORM DETERMINATIONS
 
     The Committee's determinations under the Plan (including without limitation
determinations of the persons to receive Awards, the form, amount and timing of
such Awards, the terms and provisions of such Awards and the agreements
evidencing same) need not be uniform and may be made by it selectively among
persons who receive, or are eligible to receive, Awards under the Plan, whether
or not such persons are similarly situated.
 

<PAGE>
 
16.  LIMITATION ON BENEFITS
 
     With respect to persons subject to Section 16 of the Exchange Act,
transactions under this Plan are intended to comply with all applicable
conditions of Rule 16b-3. To the extent any provision of the Plan or action by
the Committee fails to so comply, it shall be deemed null and void, to the
extent permitted by law and deemed advisable by the Committee.
 
17.  LISTING AND REGISTRATION
 
     If the Corporation determines that the listing, registration or
qualification upon any securities exchange or upon any listing or quotation
system established by the National Association of Securities Dealers, Inc.
("Nasdaq System") or under any law, of shares subject to any Award is necessary
or desirable as a condition of, or in connection with, the granting of same or
the issue or purchase of shares thereunder, no such Award may be exercised in
whole or in part and no restrictions on such Award shall lapse, unless such
listing, registration or qualification is effected free of any conditions not
acceptable to the Corporation.
 
18.  COMPLIANCE WITH SECURITIES LAW
 
     The Corporation may require that a grantee, as a condition to exercise of
an Award, and as a condition to the delivery of any share certificate, provide
to the Corporation, at the time of each such exercise and each such delivery, a
written representation that the shares of Common Stock being acquired shall be
acquired by the grantee solely for investment and will not be sold or
transferred without registration or the availability of an exemption from
registration under the Securities Act and applicable state securities laws. The
Corporation may also require that a grantee submit other written representations
which will permit the Corporation to comply with federal and applicable state
securities laws in connection with the issuance of the Common Stock, including
representations as to the knowledge and experience in financial and business
matters of the grantee and the grantee's ability to bear the economic risk of
the grantee's investment. The Corporation may require that the grantee obtain a
"purchaser representative" as that term is defined in applicable federal and
state securities laws. The stock certificates for any shares of Common Stock
issued pursuant to this Plan may bear a legend restricting transferability of
the shares of Common Stock unless such shares are registered or an exemption
from registration is available under the Securities Act and applicable state
securities laws. The Corporation may notify its transfer agent to stop any
transfer of shares of Common Stock not made in compliance with these
restrictions. Common Stock shall not be issued with respect to an Award granted
under the Plan unless the exercise of such Award and the issuance and delivery
of share certificates for such Common Stock pursuant thereto shall comply with
all relevant provisions of law, including, without limitation, the Securities
Act, the Exchange Act, the rules and regulations promulgated thereunder, and the
requirements of any national securities exchange or Nasdaq System upon which the
Common Stock may then be listed or quoted, and shall be further subject to the
approval of counsel for the Corporation with respect to such compliance to the
extent such approval is sought by the Committee.
 
19.  NO TRUST OR FUND CREATED
 
     Neither the Plan nor any Award shall create or be construed to create a
trust or separate fund of any kind or a fiduciary relationship between the
Corporation and a grantee or any other person. To the extent that any grantee or
other person acquires a right to receive payments from the Corporation pursuant
to an Award, such right shall be no greater than the right of any unsecured
general creditor of the Corporation.
 
20.  NO LIMIT ON OTHER COMPENSATION ARRANGEMENTS
 
     Nothing contained in the Plan shall prevent the Corporation or its Parent
or Subsidiary corporations from adopting or continuing in effect other
compensation arrangements (whether such arrangements be generally applicable or
applicable only in specific cases) as the Committee in its discretion determines
desirable, including without limitation the granting of stock options, stock
awards, stock appreciation rights or phantom stock units otherwise than under
the Plan.
 

<PAGE>
 
21.  NO RESTRICTION OF CORPORATE ACTION
 
     Nothing contained in the Plan shall be construed to prevent the Corporation
or any Parent or Subsidiary from taking any corporate action which is deemed by
the Corporation or such Parent or Subsidiary to be appropriate or in its best
interest, whether or not such action would have an adverse effect on the Plan or
any Award issued under the Plan. No employee, beneficiary or other person shall
have any claim against the Corporation or any Parent or Subsidiary as a result
of such action.
 
22.  GOVERNING LAW
 
     The validity, construction and effect of the Plan, of any Grant Agreements
entered into pursuant to the Plan, and of any rules, regulations, determinations
or decisions made by the Board or Committee relating to the Plan or such Grant
Agreements, and the rights of any and all persons having or claiming to have any
interest therein or thereunder, shall be determined exclusively in accordance
with applicable federal laws and the laws of the State of Delaware without
regard to its conflict of laws rules and principles.
 
23.  PLAN SUBJECT TO ARTICLES AND BY-LAWS
 
     This Plan is subject to the Articles and By-Laws of the Corporation, as
they may be amended from time to time.
 
24.  EFFECTIVE DATE; TERMINATION DATE
 
     The Plan is effective as of the date on which the Plan was adopted by the
Board; provided that no stock options issued hereunder shall be treated as
incentive stock options, regardless of the designation in the Grant Agreement,
unless the Plan is approved by the shareholders of the Corporation as provided
in Section 6(e)(vi). No Award shall be granted under the Plan after the close of
business on the day immediately preceding the tenth anniversary of the effective
date of the Plan. Subject to other applicable provisions of the Plan, all Awards
made under the Plan prior to such termination of the Plan shall remain in effect
until such Awards have been satisfied or terminated in accordance with the Plan
and the terms of such Awards.
 
Date Approved by the Board: February 21, 2001
 
Date Approved by the Shareholders:
 
----------------------------
 


<PAGE>


                                                                   EXHIBIT 10.21

                         EXECUTIVE EMPLOYMENT AGREEMENT


                EMPLOYMENT AGREEMENT, made as of the 9th day of April 2001
between DANIEL S. REALE (the "Executive"), an individual residing at 16
Goodnough Road, Brookline, MA 02467, and CELSION CORPORATION (the "Company"), a
Maryland corporation with offices at 10220-1 Old Columbia Road, Columbia,
Maryland 21046-1705.


                                   WITNESSETH:

                WHEREAS, the Executive desires to be employed by the Company,
and the Company desires that the Executive shall be employed by it and render
services to it, and the Executive is willing to be so employed and to render
services, all upon the terms and subject to the conditions set forth herein.

                NOW, THEREFORE, in consideration of the mutual covenants and
agreements contained herein, and for other good and valuable consideration, the
receipt and sufficiency of which is hereby acknowledged, the parties agree as
follows:

                1.      EMPLOYMENT, DUTIES AND ACCEPTANCE.

                        1.1     The Company hereby employs Executive, and the
Executive hereby accepts employment for the term ("Term") set forth in Section 2
hereof, to render services to Company as Executive Vice President and President
of the BPH Division. The Executive represents and warrants to the Company that
he has full power
 and authority to enter into this Agreement and that he is not
under any obligation of a contractual or other nature to any person, firm or
corporation which is inconsistent or in conflict with this Agreement, or which
would prevent, limit or impair in any way the performance by Executive of his
obligations hereunder.

                        1.2     The Executive will have general supervision over
the BPH Business and such other duties and responsibilities consistent with his
position, as may reasonably be assigned to him by the Board of Directors. In
addition, the Executive will serve as a senior officer of each of the Company's
Affiliates. The Executive will report to the President and CEO of the Company.

                        1.3     The Executive shall devote all of his business
time and effort to the business and affairs of the Company, and shall use his
best efforts, skills, and abilities to promote the interests of the Company,
except for reasonable vacations and during periods of illness or incapacity, but
nothing contained in this Agreement shall prevent the Executive from engaging in
charitable, community or other business activities 



<PAGE>


provided they do not interfere with the regular performance of the Executive's
duties and responsibilities under this Agreement.

                        1.4     Unless the Executive and the Company shall
otherwise agree, the Executive's principal place of employment shall be in
Boston, Massachusetts, but the duties of the Executive shall include such
periodic visits to the Company's headquarters in Columbia, Maryland and the
Company's Affiliates, research and development partners, product and clinical
trial test sites, customers, investment and other bankers, in each case at the
expense of the Company, as the Executive and the Company mutually determine is
reasonably required in the performance of the Executive's responsibilities.

                2.      TERM.

                        2.1     The term of this Agreement will commence as of
April 9, 2001 and will terminate at the close of business on April 8, 2004,
unless sooner terminated in accordance with the provisions of this Agreement
("Initial Term"). Thereafter, the employment of the Executive shall continue for
successive one-year periods (each such one year period being hereinafter
referred to as a "Renewal Term") unless the Corporation or Executive shall give
notice to the other at least three months prior to the end of the Initial Term
or any Renewal Term of the election of the Corporation or Executive to terminate
the employment of the Executive at the end of the Initial Term or the then
current Renewal Term.

                3.      BASE SALARY.

                        3.1     For all services performed by the Executive
under this Agreement, the Executive shall be paid a base salary ("Base Salary")
for the first twelve months of the Initial Term at the annual rate of $200,000.
The Base Salary for subsequent years shall be the greatest of (i) one hundred
five percent (105%) of the Base Salary for the prior calendar year; (ii) the
product of the multiplication of the Base Salary during the calendar year
immediately preceding by the sum of (y) one hundred percent plus (z) the amount
(expressed as a percent) by which the most recently reported Consumer Price
Index ("CPI") applicable to the Washington-Baltimore Metropolitan region is
greater than the CPI for that same region for the prior twelve months; or (iii)
the sum offered by the Board of Directors after a review taking into account
corporate and individual performance, the Company's prospects and general
business conditions.

                                3.2     Base Salary shall be paid in bi-weekly
installments in keeping with the Company's standard payroll policies applicable
to its senior executives.

                4.      ANNUAL PERFORMANCE BASED BONUS

                                4.1     The Executive will be eligible for an
annual bonus payment in the range of 0 -100% of Base Salary, for the previous
financial year. 


                                      -2-

<PAGE>


Payment of the bonus is contingent on meeting or exceeding agreed upon
objectives, as determined by the Board of Directors, in its sole discretion. For
the calendar year 2001 the Executive will be paid a minimum annual bonus of
$50,000 prorated for the partial year from the date of commencement of
employment. This bonus will be paid in equal installments with the Executive's
bi-weekly salary payment.

                4.      OPTION TO ACQUIRE COMMON STOCK.

                        4.1     The Company hereby grants to Executive as a
bonus (the "Bonus Option"), a non-qualified stock option to acquire five hundred
thousand (500,000) (fully paid and non-assessable shares of common stock, par
value $0.01 per share (the "Common Stock") of the Company. The purchase price
for each share of Common Stock acquired upon exercise of the stock options
constituting the Bonus shall be $1.03/share. The options to acquire the 500,000
shares of Common Stock shall vest in accordance with the following vesting
schedule: Executive may exercise his option to acquire one hundred sixty seven
thousand (167,000) shares on or after April 9, 2001, his option to acquire one
hundred sixty-seven thousand (167,000) shares on or after April 9 2002, and his
option to acquire one hundred sixty-six thousand (166,000) shares after April 9,
2003. If the Executive is not employed by the Company on any of the three
vesting dates, he shall no longer be entitled to exercise his option(s) to
acquire Common Stock vesting on or after such date. Subject to the limitations
set forth in this Agreement, the Executive may exercise the stock options
constituting the Bonus, at any time prior to 5:00 PM (New York time) on April
9,2011 (the "Expiration Date"), upon notice to the Company at its principal
office at 10220-1 Old Columbia Road, Columbia, MD 21046-1705, Attention: Spencer
J. Volk, President and Chief Executive Officer (or at such other location as the
Company may advise the Executive in writing), after which time all unexercised
options shall expire and be of no further legal force or effect.

                        4.2     The Company shall at all times reserve for
issuance and/or delivery such number of shares of its Common Stock as shall be
required for issuance or delivery upon exercise of the Bonus Option. No
fractional shares or scrip representing fractional shares shall be issued when
the option is exercised. Common Stock issued on exercise of the Bonus Option may
not be sold or offered for sale in the absence of effective registration under
such securities laws, or an opinion of counsel satisfactory to the Company that
such registration is not required. Common Stock issued on exercise of the Bonus
Option may be sold by the Executive in transactions permitted by the provisions
of Rule 144 of the Securities Act of 1933. Common Stock issued upon exercise of
the Bonus Option shall bear an appropriate restrictive legend referring to the
provisions hereof.

                5.      ADDITIONAL PERFORMANCE BASED OPTIONS.

                        5.1     As a form of incentive compensation to
Executive, the Executive, the Company hereby grants to Executive a non-qualified
stock option to acquire from the Company, on an original issue basis, an
aggregate of four hundred thousand (400,000) fully paid and non-assessable
shares of Common Stock at the several 


                                      -3-

<PAGE>


purchase prices designated below, upon the achievement by the Company of the
several corporate accomplishments (the "Milestones") listed below (the
"Performance Option").

                        5.2     For purpose of this Section 5:

                                A.      Corporate Milestones. The Performance
                                        Option to acquire Common Stock shall
                                        vest and thereafter be available for
                                        exercise in tranches as indicated herein
                                        if, and at any time after, the Company
                                        has achieved the following Milestones:

                                        -  Satisfactory completion of enrollment
                                           for the BPH clinical trials no later
                                           than October 31, 2001. (Tranche:
                                           80,000 shares).
                                        -  Obtain pre-marketing approval from
                                           the United States Food and Drug
                                           Administration for commercialization
                                           of the Company's BPH treatment system
                                           (Tranche: 80,000 shares).
                                        -  Place 50 machines within the first
                                           year of commercialization (Tranche:
                                           80,000 shares).
                                        -  Achieve profitability goals for year
                                           I (Tranche: 80,000 shares).
                                        -  Achieve profitability goals for year
                                           II (Tranche: 80,000 shares).

                                B.      Exercise Price. The exercise price
                                        payable per share for each stock option
                                        exercised after the occurrence of a
                                        Milestone shall be as follows:

                                        Upon achieving the first Milestone,
                                           $1.12 per share; 
                                        Upon achieving the second Milestone, 
                                           $1.23 per share;
                                        Upon achieving the third Milestone,
                                           $1.32 per share; 
                                        Upon achieving the fourth Milestone, 
                                           $1.43 per share;
                                        Upon achieving the fifth Milestone, 
                                           $1.52 per share.

                                C.      Exercise of Performance Option. Subject
                                        to the limitations set forth in this
                                        Agreement, the Executive may exercise
                                        the Performance Option at any time on or
                                        after the date on which the applicable
                                        Milestone is achieved and so long as he
                                        is employed by the Company, but not
                                        later than the Expiration Date, upon
                                        notice to the Company at its 


                                      -4-

<PAGE>


                                        principal office at 10220-1 Old Columbia
                                        Road, Columbia, MD 21046-1705,
                                        Attention: Spencer J. Volk, President
                                        and Chief Executive Officer (or at such
                                        other location as the Company may advise
                                        the Executive in writing). The notice
                                        shall be executed and delivered with the
                                        Purchase Form attached hereto duly
                                        filled in and signed and upon payment in
                                        cash or cashier's check of the aggregate
                                        Purchase Price for the number of shares
                                        which Executive is acquiring determined
                                        in accordance with the provisions
                                        hereof. If such date is a day on which
                                        banking institutions are authorized by
                                        law to close, then the Expiration Date
                                        shall be on the next succeeding day
                                        which shall not be such a day. The
                                        Performance Option may be exercised
                                        without regard to the sequence in which
                                        the Milestones have been achieved. A
                                        Notice of Exercise of the Performance
                                        Option shall be submitted by the
                                        Executive to the Company's Board of
                                        Directors, identifying the Milestone
                                        achieved and the number of shares
                                        covered by the relevant tranche. The
                                        Board of Directors shall be deemed to
                                        have approved the exercise of the
                                        Performance Option unless, within
                                        seventy-two (72) hours of the submission
                                        of the Notice of Exercise, the Board
                                        adopts a resolution determining that
                                        exercise of the Performance Option is
                                        not agreed as to the Milestone
                                        identified in the Notice of Exercise. In
                                        the absence of such a disaffirming
                                        resolution, Executive may acquire Common
                                        Stock thereafter by presentation of the
                                        Notice of Exercise either to the Company
                                        or at the office of its stock transfer
                                        agent, if any, and accompanied by
                                        payment in cash or cash equivalent of
                                        the exercise price for the number of
                                        shares of Common Stock specified in such
                                        Notice of Exercise, together with all
                                        federal and state taxes applicable upon
                                        such exercise.

                                D.      Reservation of Shares. The Company
                                        hereby agrees that at all times there
                                        shall be reserved for issuance such
                                        number of shares of its Common Stock as
                                        shall be required for issuance or
                                        delivery to the Executive upon
                                        achievement of the Milestones set forth
                                        herein.


                                      -5-

<PAGE>


                                E.      Anti-Dilution Provisions.

                                        (1)   Adjustment of Number of Shares of
                                        Common Stock. Notwithstanding anything
                                        in this Section 5.2E to the contrary, in
                                        case the Company shall at any time issue
                                        Common Stock by way of dividend or other
                                        distribution on any stock of the Company
                                        or subdivide or combine the outstanding
                                        shares of Common Stock, the exercise
                                        price shall be proportionately decreased
                                        in the case of such issuance (on the day
                                        following the date fixed for determining
                                        shareholders entitled to receive such
                                        dividend or other distribution) or
                                        either decreased in the case of such
                                        subdivision or increased in the case of
                                        such combination (on the date that such
                                        subdivision or combination shall become
                                        effective).

                                        (2)   No Adjustment for Small Amounts.
                                        Anything in this Section 5.2E to the
                                        contrary, the Company shall not be
                                        required to give effect to any
                                        adjustment in the exercise price unless
                                        and until the net effect of one or more
                                        adjustments, determined as above
                                        provided, shall have require a change of
                                        the exercise price by at least one cent,
                                        but when the cumulative net effect of
                                        more than one adjustment so determined
                                        shall be to change the actual exercise
                                        price by at least one cent, such change
                                        in the exercise price shall thereupon be
                                        given effect.

                                        (3)   Number of Shares of Common Stock
                                        Adjusted. Upon any adjustment of the
                                        exercise price other than pursuant to
                                        Section 5.2E(1) hereof, the Executive
                                        shall thereafter (until another such
                                        adjustment) be entitled to purchase, at
                                        the new exercise price, the number of
                                        shares, calculated to the nearest full
                                        share, obtained by multiplying the
                                        number of shares of Common Stock
                                        initially issuable upon achieving any
                                        Milestone by the exercise price in
                                        effect on the date hereof and dividing
                                        the product so obtained by the new
                                        exercise price.

                                G.      Adjustments in the Event of a
                                        Recapitalization or Similar Transaction.
                                        In the event of a reclassification,
                                        recapitalization, stock split, reverse
                                        stock split, stock dividend or
                                        combination of shares, 


                                      -6-

<PAGE>
                                        or other similar event, the number and
                                        class of shares issuable to the
                                        Executive upon exercise of either the
                                        Bonus Option or Performance Option shall
                                        be adjusted to reflect such event.

                                H.      Acceleration Upon Change of Control.
                                        Notwith- standing any language to the
                                        contrary contained herein, if this
                                        Agreement is in effect at the time of
                                        the occurrence of a "Change of Control"
                                        event, the Bonus Option and Performance
                                        Option shall automatically vest 100% and
                                        immediately become exercisable upon the
                                        occurrence of the Change of Control
                                        event. For purposes of this Agreement,
                                        "Change of Control" event has the
                                        meaning set forth in Section 11.1
                                        hereof.

                6.      REIMBURSEMENT FOR EXPENSES.

                        6.1     Company shall reimburse Executive for all
reasonable out-of-pocket expenses paid or incurred by him in the course of his
employment, upon presentation by Executive of valid receipts or invoices
therefore, utilizing procedures and forms for that purpose as established by
Company from time to time. In the event, at some time in the future, the Company
requests and the Executive agrees to relocate to the Baltimore/Washington area,
the Company will reimburse in full of the actual amount of all relocation
expenses incurred by the Executive in moving from his present residence to the
area in and around the headquarters of the Company. The reimbursement of
relocation expenses will be "grossed up" by such amount as is necessary to cover
the Executive's federal, state and local income tax liability arising from such
payments.

                7.      VACATIONS.

                        7.1     Executive shall be entitled to reasonable
vacations (which shall aggregate no less than four (4) weeks vacation with pay)
during each consecutive twelve (12) month period commencing on the date hereof
Executive may not accumulate any vacation days which remain unused at the end of
any year during the term hereof without the prior consent of the Company.

                8.      EMPLOYEE BENEFIT PROGRAMS, ETC.

                        8.1     The Company shall provide the Executive with a
cash allowance in the amount of $450.00 per month to cover use of the
Executive's personal automobile in the performance of Executive's duties. The
Company will also either provide or pay or reimburse the Executive for the costs
of a cellular telephone.

                        8.2     Subject to the Executive's meeting the
eligibility requirements of each respective plan, Executive shall participate in
and be covered by 


                                      -7-

<PAGE>


each pension, life insurance, accident insurance, health insurance,
hospitalization, disability insurance and any other employee benefit plan of
Company, as the case may be, made available generally from and after the date
hereof to its respective senior executives, on the same basis as shall be
available to such other executives without restriction or limitation by reason
of this Agreement.

                        8.3     Nothing contained herein shall prevent the
Company from at any time increasing the compensation provided to be paid to
Executive herein, either permanently or for a limited period, or from paying
bonuses and other additional compensation to Executive, whether or not based
upon the earnings of the business of Company, or from increasing or expanding
any employee benefit program applicable to the Executive, in the event the
Company, in its sole discretion, shall deem it advisable so to do in order to
recognize and compensate fairly Executive for the value of his services.

                9.      DEATH OR DISABILITY.

                        9.1     If Executive shall die during the term hereof,
this Agreement shall immediately terminate, except that Executive's legal
representatives or designated beneficiaries shall be entitled to receive (i) the
Base Salary due to Executive hereunder to the last day of the month following
the month in which his death occurs, payable in accordance with the Company's
regular payroll practices, (ii) all other benefits payable upon death under any
employee benefit program or other insurance covering the Executive as of the
date of death, and (iii) any stock option issued as part of the Bonus Option or
Performance Option that was exercisable at the date of death may be exercised by
the legal representative of the Executive's estate at any time or times during
the period beginning on the date of death and ending one year after the date of
death, or until the expiration of the stated term of such stock option,
whichever period is shorter, and any stock option not exercisable at the date of
death shall be forfeited.

                        9.2     In the event of the Disability of the Executive,
as hereinafter defined, the Executive shall be entitled to continue to receive
payment of his Base Salary (prorated as may be necessary) in accordance with the
terms of Section 3 hereof through the last day of the sixth month following the
month in which Executive's employment hereunder is terminated as a result of
such Disability. At any time after the date of the Notice (as hereinafter
defined) and during the continuance of the Executive's Disability, the Company
may at any time thereafter terminate Executive's employment hereunder by written
notice to the Executive. The term "Disability" shall mean physical or mental
illness or injury which prevents the Executive from performing his customary
duties for the Company for a period of thirty (30) consecutive days or an
aggregate period of ninety (90) days out of any consecutive twelve (12) months.
The date of commencement of Disability shall be the date set forth in the notice
(the "Notice") given by Company to the Executive at any time following a
determination of Disability, which date shall not be earlier than the date the
Notice is given by Company. A determination of Disability by Company shall be
solely for the purposes of this Section 9 and shall in no way affect the
Executive's status under any other benefit plan applicable to the Executive.


                                      -8-

<PAGE>


                        9.3     Upon the occurrence of a Disability, and unless
the Executive's employment shall have been terminated as provided in Section
9.2, the Executive shall, during such time as he is continuing to receive Base
Salary payment as set forth in Section 9.2, perform such services for Company,
consistent with his duties under Section 1 hereof, as he is reasonably capable
of performing in light of the condition giving rise to a Disability. All
payments due under Section 9.2 shall be payable in accordance with Company's
regular payroll practices. Any amount paid to Executive pursuant to this
Agreement by reason of his Disability, shall be reduced by the aggregate amount
of all monthly disability payments which the Executive is entitled to receive
under all workers compensation plans, disability plans and accident, health or
other insurance plans or programs maintained for the Executive by Company, by
any company controlling, controlled by, or under common control with, Company.

                        9.4     In the event the Executive's employment is
terminated due to Disability, in addition to receipt of the Base Salary payments
described in Section 9.2, any stock option issued as part of the Bonus or
Performance Option that was exercisable at the date of Disability may be
exercised by the Executive or his legal representative at any time or times
during the period beginning on the date of Disability and ending one year after
the date of Disability, or until the expiration of the stated term of such stock
option, whichever period is shorter, and any stock option not exercisable at the
date of Disability shall be forfeited.

                10.     TERMINATION FOR CAUSE.

                        10.1    The employment of the Executive may be
terminated by the Company for Cause. For this purpose, "Cause" shall mean:

                                (i)     an act constituting a felony and
resulting or intended to result, directly or indirectly, in his gain or personal
enrichment at the expense of the Company and its shareholders;

                                (ii)    dishonest acts against the Company;

                                (iii)   illegal drug use; or

                                (iv)    grossly or willfully neglecting to carry
out his duties under this Agreement resulting in material harm to the Company.

The Executive's employment shall not be terminated for Cause under clauses (ii)
or (iv) unless:

        (a)     the Executive has received at least fifteen (15) days notice of
                a meeting of the Board of Directors at which meeting the Board
                shall consider the existence of Cause, shall provide the
                Executive with an opportunity to be heard before the Board, and,
                following such consideration and hearing, the


                                      -9-

<PAGE>


                Board has determined, based upon credible evidence, that grounds
                for Cause exist; and

        (b)     the misconduct or breaches on which an assertion of Cause is
                based are not cured within thirty (30) days thereafter if such
                misconduct or breaches are capable of being cured.

                        10.2    In the event of a termination for Cause, the
Executive shall (a) be entitled to any unpaid Base Salary pro rated up to the
date of termination, and (b) any stock options not exercised prior to the date
of termination shall automatically be forfeited by the Executive, and the
Executive shall have no further rights under this Agreement. Furthermore, the
Executive shall be and remain subject to all provisions of Section 13 below for
the period indicated therein.

                11.     TERMINATION UPON CHANGE OF CONTROL OR BY COMPANY WITHOUT
        CAUSE.

                        11.1    A "Change in Control" shall occur: (A) if any
Person, or combination of Persons (as hereinafter defined), or any affiliate of
any of the above, is or becomes the "beneficial owner" (as defined in Rule l3d-3
promulgated under the Securities Exchange Act of 1934) directly or indirectly,
of securities of the Company representing twenty-five percent (25%) or more of
the total number of outstanding shares of common stock of the Company; (B) if
individuals who, at the date of this Agreement, constitute the Board (the
"Incumbent Directors") cease, for any reason, to constitute at least a majority
thereof, provided that any new director whose election was approved by a vote of
at least 75% of the Incumbent Directors shall be treated as an Incumbent
Director; or (C) the Company sells substantially all of its assets to a
purchaser other than a subsidiary. For purposes hereof, "person" shall mean any
individual, partnership, joint venture, association, trust, or other entity,
including a "group" as referred to in section 13(d)(3) of the Securities
Exchange Act of 1934.

                        11.2    If there occurs a Change in Control, and if
there subsequently occurs a material adverse change, without the Executive's
written consent, in the Executive's working conditions or status, including but
not limited to a significant change in the nature or scope of the Executive's
authority, powers, duties or responsibilities, or a reduction in the level of
support services or staff, then, whether or not such change would otherwise
constitute a breach of this Agreement by the Company, this Agreement may be
terminated by notice given by the Executive, specifying the Change of Control
and significant adverse change or changes.

                        11.3    Upon the termination of this Agreement in
accordance with Section 11.2 above, the Executive shall be entitled, without any
duty to mitigate damages, to:

                        (a)     All unpaid Base Salary pro-rated up to the date
                                of termination; and


                                      -10-

<PAGE>


                        (b)     The opportunity to exercise any stock option
                                issued as part of the Bonus Option or
                                Performance Option that was exercisable at the
                                date of termination may be exercised by the
                                Executive at any time or times during the period
                                beginning on the effective date of termination
                                and ending one year after the date of
                                termination, or until the expiration of the
                                stated term of such stock option, whichever
                                period is shorter, and any stock option not
                                exercisable upon the effective date of
                                termination shall be forfeited;

                        (c)     A severance payment equal to 2.99 times the Base
                                Salary in effect on the date of termination,
                                payable at the election of the Executive, in
                                either a lump sum payment payable immediately
                                upon termination or over the course of the year
                                immediately following the termination date; and

                        (d)     All benefits available under the Company's
                                employee benefit programs, to the extent
                                applicable to senior executives voluntarily and
                                amicably retiring from employment with the
                                Company.

                        11.4    The payments and any other compensation and
benefits to which the Executive is entitled under this Section 11 shall be made
available to the Executive no later than thirty (30) days after the date of any
termination referred to herein.

                        11.5    In the event that the Company shall actually or
constructively terminate this Agreement during the Initial Term or any Renewal
Term without cause (and with or without a Change of Control), the Executive
shall be entitled to the same payments, compensation and rights as provided in
the case of a termination by the Executive under Section 11.3.

                        11.6    In the event that Executive receives the
payments and any other compensation and benefits referred to in this Section 11,
he will be bound by the restrictive provisions of Section 13 for the period
therein provided.

                12.     TERMINATION BY EXECUTIVE.

                        12.1    If the Executive shall terminate his employment
under this Agreement during the Initial Term without the express written consent
of the Company, then, for purposes of establishing the rights of the Executive
upon such termination, such termination shall be deemed the equivalent of a
termination for Cause under Section 10.1, 


                                      -11-

<PAGE>


and the Executive shall have only those rights with regard to compensation as
are set forth in Section 12.2, and the restrictive provisions of Section 13
below shall fully apply.

                        12.2    If the Executive shall terminate his employment
under this Agreement during any Renewal Term without the express written consent
of the Company, then, for purposes of establishing the rights of the Executive
upon such termination, the Executive shall be entitled (i) to receive all unpaid
Base Salary pro-rated up to the date of termination, and (ii) for a period of
thirty (30) days following the date of termination, to exercise any unexercised
option to acquire Common Stock under either Section 4 or Section 5 hereof that
was exercisable by the Executive on the date preceding the date of termination.

                        12.3    In the case of a termination pursuant to Section
12.2, the restrictions set forth in Section 13 shall apply to Executive for the
period therein stated.

                13.     RESTRICTIVE COVENANTS; COMPENSATION.

                        13.1    During such time as this Agreement shall be in
effect, and as otherwise explicitly stated herein, for a period of three (3)
years following the termination of Executive's employment with Cause, or one (1)
year after voluntary termination of this Agreement by the Executive, and without
the Company's prior written consent (which may be withheld for any reason or for
no reason in Company's sole discretion), Executive shall not do anything in any
way inconsistent with his duties to, or adverse to the interests of, the
Company, nor shall Executive, directly or indirectly, himself or by or through a
family member or otherwise, alone or as a member of a partnership or joint
venture, or as a principal, officer, director, consultant, employee or
stockholder of any other entity, compete with Company or be engaged in or
connected with any other business competitive with that of Company or any of its
Affiliates, except that Executive may own as a passive investment not more than
five percent (5%) of the securities of any publicly held corporation that may
engage in such a business competitive with that of Company or any of its
Affiliates.

                        13.2    In view of the fact that Executive will be
brought into close contact with many confidential affairs of Company and its
Affiliates not readily available to the public, Executive agrees during the Term
of this Agreement and thereafter:

                                (a)     to keep secret and retain in the
strictest confidence all non-public information about (i) research and
development, test results, suppliers, venture or strategic partners, licenses
and patents or patent applications, planned or existing products, know-how,
financial condition and other financial affairs (such as costs, pricing, profits
and plans for future development, methods of operation and marketing concepts)
of Company and its Affiliates; (ii) the employment policies and plans of the
Company and its Affiliates; and (iii) any other proprietary information relating
to the Company and its Affiliates, their operations, businesses, financial
condition and financial affairs (collectively, the "Confidential Information")
and, for such


                                      -12-

<PAGE>


time as Company or any of its Affiliates is operating, Executive shall not
disclose the Confidential Information to anyone not then an officer, director or
authorized employee of Company or its Affiliates, either during or after the
term of this Agreement, except in the course of performing his duties hereunder
or with Company' express written consent or except to the extent that such
confidential information can be shown to have been in the public domain through
no fault of Executive; and

                                (b)     to deliver to Company within ten days
after termination of his services, or at any time Company may so request, all
memoranda, notes, records, reports and other documents relating to Company or
its Affiliates, businesses, financial affairs or operations and all property
associated therewith, which he may then possess or have under his control.

                        13.3    Executive shall not at any time during the
three-year period following the termination of his employment for any reason
whatsoever, including termination resulting from the natural expiration of the
term of this Agreement, (i) employ any individual who was employed by Company or
any of its Affiliates at any time during the such period or during the twelve
(12) calendar months immediately preceding such termination, or (ii) in any way
cause, influence or participate in the employment of any such individual by
anyone else in any business that is competitive with any of the businesses
engaged in by Company or any of its Affiliates.

                        13.4    Executive shall not at any time during the
three-year period following the termination of his employment for any reason
whatsoever, including termination resulting from the natural expiration of the
term of this Agreement, directly or indirectly, either (i) persuade or attempt
to persuade any customer or client of the Company or of any of its Affiliates to
cease doing business with Company or with any Affiliate, or to reduce the amount
of business it does with Company or with any of its Affiliates, (ii) solicit for
himself or any person other than Company or any of its Affiliates, the business
of any individual or business which was a customer or client of Company or any
of its Affiliates at any time during the eighteen month period immediately
preceding such termination.

                        13.5    Executive acknowledges that the execution and
delivery by him of the promises set forth in this Section 13 is an essential
inducement to Company to enter into this Agreement, and that Company would not
have entered into this Agreement but for such promises. Executive further
acknowledges that his services are unique and that any breach or threatened
breach by Executive of any of the foregoing provisions of this Section 13 cannot
be remedied solely by damages. In the event of a breach or a threatened breach
by Executive of any of the provisions of this Section 13, Company shall be
entitled to injunctive relief restraining Executive and any business, firm,
partnership, individual, corporation or other entity participating in such
breach or attempted breach. Nothing herein, however, shall be construed as
prohibiting Company from pursuing any other remedies available at law or in
equity for such breach or threatened breach, including the recover of damages
and the immediate termination of the employment of Executive hereunder.


                                      -13-

<PAGE>


                        13.6    If any of the provisions of, or promises
contained in, this Section 13 are hereafter construed to be invalid or
unenforceable in any jurisdiction, the same shall not affect the remainder of
the provisions or the enforceability thereof in any other jurisdiction, which
shall be given full effect, without regard to the invalid portions or the
unenforceability in such other jurisdiction. If any provisions contained in this
Section 13 are held to be unenforceable in any jurisdiction because of the
duration or scope thereof, the parties hereto agree that the court making such
determination shall have the power to reduce the duration and/or scope (if such
provision, in its reduced form, shall be enforceable); provided, however, that
the determination of such court shall not affect the enforceability, duration or
scope of this Section 13 in any other jurisdiction.

                14.     RELATIONSHIP OF PARTIES.

                        Nothing herein contained shall be deemed to constitute a
partnership between or a joint venture by the parties, nor shall anything herein
contained be deemed to constitute the Executive, the Company or any Affiliates
the agent of the other except as is expressly provided herein. Neither Executive
nor Company shall be or become liable or bound by any representation, act or
omission whatsoever of the other party made contrary to the provisions of this
Agreement.

                15.     NOTICES.

                        All notices and communications hereunder shall be in
writing and delivered by hand or sent by registered or certified mail, postage
and registration or certification fees prepaid, return receipt requested, or by
overnight delivery such as Federal Express, and shall be deemed given when hand
delivered or upon three (3) business days after the date when mailed, or upon
one (1) business day after delivery to an agent for overnight delivery, if sent
in such manner, as follows:

        If to Company              Celsion Corporation
                                   10220-1 Old Columbia Road
                                   Columbia, Maryland  21046-1705
                                   Attention:   Board of Directors


        With a copy to:            Venable, Baetjer and Howard, LLP
                                   Mercantile Bank and Trust Building
                                   Two Hopkins Plaza Suite 1800
                                   Baltimore, Maryland  21201
                                   Attention:   Greg Cross


                                      -14-

<PAGE>


        If to Executive:           Mr. Daniel S. Reale

                                   ---------------------------

                                   ---------------------------

        With a copy to:

                                   ---------------------------

                                   ---------------------------

                                   ---------------------------


The foregoing address may be changed by notice given in the manner set forth in
this Section 15.

                16.     DISPUTES. The parties shall attempt in good faith to
resolve all claims, disputes and other disagreements arising hereunder by
negotiation. In the event that a dispute between the parties cannot be resolved
within thirty (30) days of written notice from one party to the other party,
such dispute shall, at the request of either party, after providing written
notice to the other party, be submitted to arbitration in Columbia, Maryland in
accordance with the arbitration rules of the American Arbitration Association
then in effect. The notice of arbitration shall specifically describe the
claims, disputes or other matters in issue to be submitted to arbitration. The
parties shall jointly select a single arbitrator who shall have the authority to
hold hearings and to render a decision in accordance with the arbitration rules
of the American Arbitration Association. If the parties are unable to agree
within ten (10) days, the arbitrator shall be selected by the Chief Judge of the
Circuit Court for Howard County. The discovery rights and procedures provided by
the Federal Rules of Civil Procedure shall be available and enforceable in the
arbitration proceeding. The written decision of the arbitrator so appointed
shall be conclusive and binding on the parties and enforceable by a court of
competent jurisdiction. The expenses of the arbitration shall be borne equally
by the parties to the arbitration, and each party shall pay for and bear the
cost of its own experts, evidence and legal counsel, unless the arbitrator rules
otherwise in the arbitration. Both parties agree to use their best efforts to
cause a final decision to be rendered with respect to the matter submitted to
arbitration within sixty (60) days after its submission.

                17.     MISCELLANEOUS.

                        17.1    This Agreement contains the entire understanding
of the parties hereto with respect to the employment of Executive by Company
during the term hereof, and the provisions hereof may not be altered, amended,
waived, terminated or discharged in any way whatsoever except by subsequent
written agreement executed by the party charged therewith. This Agreement
supersedes all prior employment agreements, understandings and arrangements
between Executive and Company pertaining to the terms of the employment of
Executive. A waiver by either of the parties of any of the terms or conditions
of this Agreement, or of any breach hereof, shall not be deemed a waiver of such
terms or conditions for the future or of any other term or condition hereof, or
of any subsequent breach hereof.


                                      -15-

<PAGE>


                        17.2    The provisions of this Agreement are severable,
and if any provision of this Agreement is invalid, void, inoperative or
unenforceable, the balance of the Agreement shall remain in effect, and if any
provision is inapplicable to any circumstances, it shall nevertheless remain
applicable to all other circumstances.

                        17.3    Company shall have the right to deduct and
withhold from Executive's compensation the amounts required to be deducted and
withheld pursuant to any present or future law concerning the withholding of
income taxes. In the event that Company makes any payments or incurs any charges
for Executive's account or Executive incurs any personal charges with Company,
Company shall have the right and Executive hereby authorizes Company to recoup
such payments or charges by deducting and withholding the aggregate amount
thereof from any compensation otherwise payable to Executive hereunder.

                        17.4    This Agreement shall be construed and
interpreted under the laws of the State of Maryland applicable to contracts
executed and to be performed entirely therein.

                        17.5    The captions and section headings in this
Agreement are not part of the provisions hereof, are merely for the purpose of
reference and shall have no force or effect for any purpose whatsoever,
including the construction of the provisions of this Agreement.

                        17.6    To the extent any provision of this Agreement
contemplates action after termination hereof or creates a cause of action or
claim on which action may be brought by either party, such provision, cause of
action or claims shall survive termination of Executive's employment or
termination of this Agreement.

                        17.7    Executive may not assign nor delegate his duties
under this Agreement; provided, however, that notwithstanding the foregoing this
Agreement shall inure to the benefit of Executive's legal representatives,
executors, administrators or successors and to the successors or assigns of
Company.

                IN WITNESS WHEREOF, the parties hereto have executed this
Agreement as of the date first above written.

                                              CELSION CORPORATION

                                              By:
                                                 -------------------------------
                                                     Spencer J. Volk, President


                                                 -------------------------------
                                                     Daniel S. Reale


                                      -16-

<PAGE>


RE:  Executive Employment Agreement


Dear            :

                In connection with your proposed Executive Employment Agreement
with the Company, we agree that, if, during the course of your employment, and,
at any time after you are entitled to exercise options granted under either
Paragraph 4 or Paragraph 5 of your Agreement, you ask the Company for assistance
in assembling resources to fund the exercise of those options, the Company will
seek to assist you in negotiating a loan from one or more of the principal
financial institutions with which the Company is then doing business (or from
another source reasonably acceptable to you) to permit you to exercise your
options to acquire either Bonus Option shares or Performance Option shares. If,
in connection with such borrowing, you are requested by the lending institution
to pledge the Bonus Option shares or the Performance Option shares that you will
be acquiring on exercise of the option as collateral security for the benefit of
the lender, your signature below confirms that you will pledge such shares to
support your borrowing.

Very truly yours,




Spencer J. Volk
President & C.E.O.


Agreed to:

------------------------------------



<PAGE>


                                                                   EXHIBIT 10.23


THE SECURITIES REPRESENTED HEREBY AND ISSUABLE UPON EXERCISE THEREOF HAVE NOT
BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "ACT"), OR
UNDER THE SECURITIES LAWS OF ANY STATE. SUCH SECURITIES ARE SUBJECT TO
RESTRICTIONS ON TRANSFERABILITY AND RESALE AND MAY NOT BE TRANSFERRED OR RESOLD
EXCEPT AS PERMITTED UNDER THE ACT AND THE APPLICABLE STATE SECURITIES LAWS,
PURSUANT TO REGISTRATION THEREUNDER OR EXEMPTIONS FROM SUCH REGISTRATION
REQUIREMENTS. INVESTORS SHOULD BE AWARE THAT THEY MAY BE REQUIRED TO BEAR THE
FINANCIAL RISKS OF THIS INVESTMENT FOR AN INDEFINITE PERIOD OF TIME. THE ISSUER
OF THESE SECURITIES MAY REQUIRE AN OPINION OF COUNSEL IN FORM AND SUBSTANCE
SATISFACTORY TO THE ISSUER TO THE EFFECT THAT ANY PROPOSED TRANSFER OR RESALE IS
IN COMPLIANCE WITH THE ACT AND ANY APPLICABLE STATE SECURITIES LAWS.


                               CELSION CORPORATION
                   WARRANT TO PURCHASE SHARES OF COMMON STOCK

                        VOID AFTER _________ _____, 200_


        1.      Warrant to Purchase Common Stock.

                1.1     Warrant to Purchase Shares. This warrant (this
"Warrant") certifies that for good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, __________________ (the "Warrant
Holder") is entitled, effective as of __________, 200_, subject to the
 terms and
conditions of this Warrant to purchase from Celsion Corporation, a Delaware
corporation (the "Company") up to a total of___________ shares of Common Stock,
par value $0.01 per share, of the Company (the "Shares") at the price of $0.60
per share (the "Exercise Price") prior to 5:00 p.m. prevailing Eastern time on
_________ _____, 200_ (the "Expiration Date"). The Warrant must be exercised, in
whole or in part, any time on or before the Expiration Date, subject to earlier
call by the Company as provided herein. Unless the context otherwise requires,
the term "Shares" shall mean and include the Common Stock of the Company and
other securities and property at any time receivable or issuable upon exercise
of this Warrant. The term "Warrant" as used herein, shall include this Warrant
and any warrants delivered in substitution or exchange therefor as provided
herein.

                1.2     Adjustment of Exercise Price and Number of Shares. The
number and character of Shares issuable upon exercise of this Warrant (or any
shares of stock or other securities or property at the time receivable or
issuable upon exercise of this Warrant) and the Exercise Price therefor, are
subject to adjustment upon occurrence of the following events:

                        (a)     Adjustment for Stock Splits, Stock Dividends,
Recapitalizations, etc. The Exercise Price of this Warrant and the number of
Shares issuable upon exercise of this Warrant each shall be proportionally
adjusted to reflect any stock dividend, stock split, reverse stock split,



<PAGE>


combination of shares, reclassification, recapitalization or other similar event
altering the number of outstanding shares of the Company's Common Stock.

                        (b)     Adjustment for Other Dividends and
Distributions. In case the Company shall make or issue, or shall fix a record
date for the determination of eligible holders entitled to receive, a dividend
or other distribution with respect to the Shares payable in securities of the
Company then, and in each such case, the Warrant Holder, on exercise of this
Warrant at any time after the consummation, effective date or record date of
such event, shall receive, in addition to the Shares (or such other stock or
securities) issuable on such exercise prior to such date, the securities of the
Company to which such Warrant Holder would have been entitled upon such date if
such Warrant Holder had exercised this Warrant immediately prior thereto (all
subject to further adjustment as provided in this Warrant).

                        (c)     Adjustment for Capital Reorganization,
Consolidation, Merger. If any capital reorganization of the capital stock of the
Company, or any consolidation or merger of the Company with or into another
corporation, or the sale of all or substantially all of the Company's assets to
another corporation shall be effected in such a way that holders of the
Company's Common Stock will be entitled to receive stock, securities or assets
with respect to or in exchange for the Company's Common Stock, then in each such
case the Warrant Holder, upon the exercise of this Warrant at any time after the
consummation of such capital reorganization, consolidation, merger, or sale,
shall be entitled to receive, in lieu of the stock or other securities and
property receivable upon the exercise of this Warrant prior to such
consummation, the stock or other securities or property to which such Warrant
Holder would have been entitled upon such consummation if such Warrant Holder
had exercised this Warrant immediately prior to the consummation of such capital
reorganization, consolidation, merger, or sale, all subject to further
adjustment as provided in this Section 1.2; and in each such case, the terms of
this Warrant shall be applicable to the shares of stock or other securities or
property receivable upon the exercise of this Warrant after such consummation.

        2.      Manner of Exercise.

                2.1     Warrant Exercise Agreement. This Warrant may be
exercised, in whole or in part, on any business day on or prior to the
Expiration Date, subject to earlier call by the Company as provided herein. To
exercise this Warrant, the Warrant Holder must surrender to the Company this
Warrant and deliver to the Company: (a) a duly executed exercise agreement in
the form attached hereto as Exhibit A, or in such other form as may be approved
by the Company from time to time (the "Warrant Exercise Agreement"); (b) if
applicable, a spousal consent in the form attached hereto as Exhibit B; and (c)
payment in full of the Exercise Price for the number of Shares to be purchased
upon exercise hereof. If someone other than the Warrant Holder exercises this
Warrant, then such person must submit to the Company each of the items set forth
in clauses (a) through (c) of the foregoing sentence and, in addition, must
submit documentation acceptable to the Company that such person has the right to
exercise this Warrant. Upon a partial exercise, this Warrant shall be
surrendered, and a new Warrant of the same tenor for purchase of the number of
remaining Shares not previously purchased shall be issued by the Company to the
Warrant Holder. This Warrant shall be deemed to have been exercised immediately
prior to the close of business on the date of its surrender of, if such date is
not a business day, then as of the close of business on the next succeeding
business day, for exercise as provided above, and the person entitled to receive
the Shares issuable upon such exercise shall be treated for all purposes as the
holder of record of such Shares as of the close of business on such deemed
exercise date.


                                      -2-

<PAGE>


                2.2     Limitations on Exercise. This Warrant may not be
exercised as to fewer than One Hundred (100) Shares unless it is exercised as to
all Shares as to which this Warrant is then exercisable.

                2.3     Payment. The Warrant Exercise Agreement shall be
accompanied by full payment of the Exercise Price for the Shares being purchased
in cash (by certified or cashier's check or wire transfer or other immediately
available funds) or, where permitted by law and provided that a public market
for the Company's stock exists, (a) through a "same day sale" commitment from
the Warrant Holder and a broker-dealer that is a member of the National
Association of Securities Dealers (an "NASD Dealer"), whereby the Warrant Holder
irrevocably elects to exercise this Warrant and to sell a portion of the Shares
so purchased to pay for the Exercise Price and whereby the NASD Dealer
irrevocably commits, upon receipt of such Shares, to forward the Exercise Price
directly to the Company or (b) through a "margin" commitment from the Warrant
Holder and an NASD Dealer, whereby the Warrant Holder irrevocably elects to
exercise this Warrant and to pledge the Shares so purchased to the NASD Dealer
in a margin account as security for a loan from the NASD Dealer in the amount of
the Exercise Price and whereby the NASD Dealer irrevocably commits upon receipt
of such Shares to forward the Exercise Price directly to the Company.

                2.4     Tax Withholding. Prior to the issuance of the Shares
upon exercise of this Warrant, the Warrant Holder must pay or provide for any
applicable federal or state withholding obligations of the Company.

                2.5     Issuance of Shares. Provided that the Warrant Exercise
Agreement and payment have been received by the Company as provided above, the
Company shall issue the Shares (adjusted as provided herein) registered in the
name of the Warrant Holder, the Warrant Holder's authorized assignee, or the
Warrant Holder's legal representative, and shall deliver one or more
certificates representing the Shares as the Warrant Holder reasonably may
request with the appropriate legends affixed thereto.

        3.      Registration Rights. The Shares will have the registration
rights as provided for in Section 4 of the Subscription Agreement entered into
between the Company and the Warrant Holder in connection with the issuance and
purchase of this Warrant (the "Subscription Agreement").

        4.      Redemption. The Company, at its sole discretion, may, at any
time and from time to time after January 31, 2002, redeem and cancel all or any
part of the outstanding Warrants upon the payment of consideration consisting of
one cent ($0.01) for each Warrant redeemed and cancelled; provided, however,
that any such redemptions and cancellations may be made by the Company only upon
thirty (30) calendar days' prior written notice (the "Redemption Date" being the
close of business on the thirtieth (30th) day following the date the notice is
deemed to be given to Warrant Holders pursuant to Section 9 hereof) and only if
the closing sales price for a share of the Company's Common Stock as reported on
the American Stock Exchange or similar national market has been equal to or
greater than $1.50 for any period of at least ten (10) consecutive trading days
commencing on or after February 1, 2002; and provided further that the holder of
any Warrant subject to such redemption and cancellation may exercise such
Warrant at any time prior to the expiration of the thirty (30)-day notice
period; and provided further that the Company's right to redeem and cancel the
Warrant shall be suspended in the event the shelf registration statement
required under Section 4 of the Subscription Agreement is subject to a stop


                                      -3-

<PAGE>


order or is otherwise not in effect or if a Warrant Holder is advised under
Section 4(c) of the Subscription Agreement that the prospectus thereto contains
a material misstatement or omission during any portion of the thirty (30)-day
notice period, with such suspension to terminate and the Company's right to
redeem and cancel to be reinstated on the date following the date on which (i) a
registration statement covering the Shares is effective and not subject to any
stop orders and (ii) the Company has delivered to the Warrant Holder a
prospectus covering the Shares of such Warrant Holder under Section 4(c) of the
Subscription Agreement. The notice period shall then be extended for a period
equal to the number of days during the notice period during which registration
was not effective or the prospectus was not available or contained a material
misstatement or omission. If less than all of the outstanding Warrants are
redeemed and cancelled, Warrants shall be redeemed and cancelled on a pro rata
basis.

        5.      Compliance with Laws and Regulations. The exercise of this
Warrant and the issuance and transfer of Shares shall be subject to compliance
by the Company and the Warrant Holder with all applicable requirements of
federal and state securities laws and with all applicable requirements of any
stock exchange and/or over-the-counter market on which the Company's Common
Stock may be listed at the time of such issuance or transfer.

        6.      Transfer and Exchange. This Warrant and the rights hereunder may
not be transferred in whole or in part without the Company's prior written
consent, which consent shall not be unreasonably withheld, and may not be
transferred unless such transfer complies with all applicable securities laws.
If a transfer of all or part of this Warrant is permitted as provided in the
preceding sentence, then this Warrant and all rights hereunder may be
transferred, in whole or in part, on the books of the Company or its agent
maintained for such purpose at the principal office of the Company or its agent,
by the Warrant Holder hereof in person or by duly authorized attorney, upon
surrender of this Warrant properly endorsed and upon payment of any necessary
transfer tax or other governmental charge imposed upon such transfer. Upon any
permitted partial transfer, the Company will issue and deliver to the Warrant
Holder a new Warrant or Warrants of like tenor with respect to the portion of
the Warrant not so transferred. Each taker and holder of this Warrant or any
portion hereof, by taking or holding the same, consents and agrees to be bound
by the terms, conditions, representations and warranties hereof, including the
registration provisions contained in Section 4 of the Subscription Agreement,
(and as a condition to any transfer of this Warrant the transferee shall execute
an agreement confirming the same), and, when this Warrant shall have been so
endorsed, the person in possession of this Warrant may be treated by the
Company, and all other persons dealing with this Warrant, as the absolute owner
hereof for any purpose and as the person entitled to exercise the rights
represented hereby, any notice to the contrary notwithstanding; provided,
however that until a transfer of this Warrant is duly registered on the books of
the Company or its agent, the Company may treat the Warrant Holder hereof as the
owner of this Warrant for all purposes.

        7.      Privileges of Stock Ownership. The Warrant Holder shall not have
any of the rights of a shareholder with respect to any Shares until such time,
if any, as the Warrant Holder exercises this Warrant and pays the Exercise Price
in accordance with the terms hereof.

        8.      Entire Agreement. The Warrant Exercise Agreement is incorporated
herein by reference. This Warrant, the Warrant Exercise Agreement, and the
Subscription Agreement for the purposes and to the extent set forth herein,
constitute the entire agreement of the parties and supersede all prior
undertakings and agreements with respect to the subject matter hereof.


                                      -4-

<PAGE>


        9.      Notices. Any notice required to be given or delivered to the
Company under the terms of this Warrant shall be in writing and addressed to the
Secretary of the Company at its principal corporate offices. Any notice required
to be given or delivered to the Warrant Holder shall be in writing and addressed
to the Warrant Holder at the address indicated below or at such other address as
such party may designate in writing from time to time to the Company. All
notices shall be deemed to have been given or delivered: upon personal delivery;
five (5) calendar days after deposit in the United States mail by certified or
registered mail (return receipt requested) with postage thereon prepaid; one (1)
business day after deposit for next business day delivery with any return
receipt express courier (prepaid); or one (1) business day after transmission by
fax or telecopier with confirmation of transmission thereof.

        10.     Successors and Assigns. This Warrant shall be binding upon and
inure to the benefit of the successors and assigns of the Company. Subject to
the restrictions on transfer set forth herein, this Warrant shall be binding
upon the Warrant Holder and the Warrant Holder's heirs, executors,
administrators, legal representatives, successors and assigns.

        11.     Governing Law. This Warrant shall be governed by and construed
in accordance with the laws of the State of Maryland as such laws are applied to
agreements between Maryland residents entered into and to be performed entirely
within Maryland.

        12.     Acceptance. The Warrant Holder has read and understands the
terms and provisions of this Warrant, and accepts this Warrant subject to all
the terms and conditions hereof. The Warrant Holder acknowledges that there may
be adverse tax consequences upon exercise of this Warrant or disposition of the
Shares and that the Warrant Holder should consult a tax adviser prior to such
exercise or disposition.

        IN WITNESS WHEREOF, the Company has caused this Warrant to be executed
by its __________ ____, 200.

                                              CELSION CORPORATION



                                              Signed:
                                                     ---------------------------

                                              Printed:
                                                      --------------------------

                                              Title:
                                                    ----------------------------

                                              Address:
                                              10220-I Old Columbia Road
                                              Columbia, Maryland 21046-1785


[SIGNATURE PAGE TO WARRANT]



                                      -5-

<PAGE>


                                    EXHIBIT A

                               CELSION CORPORATION
                           WARRANT EXERCISE AGREEMENT


CELSION CORPORATION
10220-I Old Columbia Road
Columbia, Maryland 21046-1785
Attention: Chief Financial Officer

        The Warrant Holder hereby elects to purchase the number of shares (the
"Shares") of the Common Stock, par value $0.01 per share, of Celsion Corporation
(the "Company") as set forth below, pursuant to that certain Warrant dated as of
the date set forth below (the "Warrant"), the terms and conditions of which are
hereby incorporated by reference (please print):

Warrant Holder:
               -----------------------------------------------------------------
Social Security or Tax I.D. No.:
                                ------------------------------------------------
Address:
        ------------------------------------------------------------------------

--------------------------------------------------------------------------------
Warrant Date:
             -------------------------------------------------------------------
Date of Exercise:
                 ---------------------------------------------------------------
Exercise Price Per Share:
                         -------------------------------------------------------
Number of Shares Subject to Exercise and Purchase:
                                                  ------------------------------
Total Exercise Price:
                     -----------------------------------------------------------
Exact Name of Title to Shares:
                              --------------------------------------------------

--------------------------------------------------------------------------------

        The Warrant Holder hereby delivers to the Company the Total Exercise
Price as follows (check and complete as appropriate):

        1.      in cash in the amount of $_______, receipt of which is
                acknowledged by the Company;

        2.      through a "same-day-sale" commitment from the Warrant Holder and
                the broker named below in the amount of $_________ and
                substantially in the form attached hereto as Attachment 1; or

        3.      through a "margin" commitment from the Warrant Holder and the
                broker named below in the amount of $_________ and substantially
                in the form attached hereto as Attachment 2.

                Broker Name:__________________  Brokerage Firm:_________________

        Tax Consequences. THE COMPANY IS UNDER NO OBLIGATION TO REPORT THE
EXERCISE OF THIS WARRANT TO THE INTERNAL REVENUE SERVICE OR ANY TAXING AUTHORITY
OF ANY STATE, LOCAL OR OTHER JURISDICTION. THE WARRANT HOLDER UNDERSTANDS THAT
HE, SHE 



<PAGE>


OR IT MAY SUFFER ADVERSE TAX CONSEQUENCES AS A RESULT OF THE WARRANT HOLDER'S
PURCHASE OR DISPOSITION OF THE SHARES. THE WARRANT HOLDER REPRESENTS THAT HE,
SHE OR IT HAS CONSULTED WITH ANY TAX CONSULTANT(S) THE WARRANT HOLDER DEEMS
ADVISABLE IN CONNECTION WITH THE PURCHASE OR DISPOSITION OF THE SHARES AND THAT
THE WARRANT HOLDER IS NOT RELYING ON THE COMPANY FOR ANY TAX ADVICE.


                                   ---------------------------------
                                        Name of Warrant Holder


                                   ---------------------------------
                                      Signature of Warrant Holder


                                   ---------------------------------
                                             Printed Name


                                   ---------------------------------
                                                 Title







                                      -2-

<PAGE>



                                    EXHIBIT B

                                 SPOUSAL CONSENT


        The undersigned spouse of the Warrant Holder has read, understands, and
hereby approves the Warrant Exercise Agreement between the Warrant Holder and
the Company (the "Agreement"). In consideration of the Company's granting the
Warrant Holder the right to purchase the Shares as set forth in the Agreement,
the undersigned hereby agrees to be bound irrevocably by the Agreement and
further agrees that any community property interest shall similarly be bound by
the Agreement. The undersigned hereby appoints the Warrant Holder as his or her
attorney-in-fact with respect to any amendment or exercise of any rights under
the Agreement.



Date:
     -------------------------------         -------------------------------
                                             Warrant Holder's Spouse

                                             Address:
                                                     -----------------------

                                             -------------------------------

                                             -------------------------------




<PAGE>


                                  ATTACHMENT 1

                            SAME DAY SALE COMMITMENT

                            ---------------, -------


Celsion Corporation
10220-I Old Columbia Road
Columbia, Maryland 21046-1785
Attention: Chief Financial Officer

        The undersigned Warrant Holder ("Warrant Holder") desires to exercise
that certain warrant described in the attached Warrant Exercise Agreement (the
"Warrant") with respect to _________ shares of Celsion Corporation (the
"Company") Common Stock (the "Number of Shares"), and to sell immediately
_________ of the Number of Shares (the "Same-Day Sale Shares") through the
undersigned broker (the "Broker") and for the Broker to pay directly to the
Company from the proceeds from such sale $__________ (the "Exercise Price").

        Accordingly, the Warrant Holder hereby represents as follows: (i) the
Warrant Holder hereby irrevocably exercises the Warrant with respect to the
Number of Shares and (ii) the Warrant Holder hereby irrevocably elects to sell
through the Broker the Same-Day-Sale Shares and unconditionally authorizes the
Company or its transfer agent to deliver certificates representing the
Same-Day-Sale Shares to the Broker.

        The Broker hereby represents as follows: (i) the Broker is a member in
good standing of the National Association of Securities Dealers, Inc. and (ii)
the Broker irrevocably commits to pay to the Company, no more than one (1)
business day after receiving certificates representing the Same-Day-Sale Shares,
the Exercise Price by check or wire transfer to an account specified by the
Company.

WARRANT HOLDER:                         BROKER:


-------------------------------         -------------------------------
(Name)                                  (Name of Firm)


-------------------------------         -------------------------------
(Signature)                             (Signature)


-------------------------------         -------------------------------
(Printed)                               (Printed Name)


-------------------------------         -------------------------------
(Title)                                 (Title)



<PAGE>


                                  ATTACHMENT 2

                                MARGIN COMMITMENT

                             --------------, -------

CELSION CORPORATION
10220-I Old Columbia Road
Columbia, Maryland 21046-1785
Attention: Chief Financial Officer

        The undersigned Warrant Holder ("Warrant Holder") desires to exercise
that certain warrant described in the attached Warrant Exercise Agreement (the
"Warrant") with respect to _________ shares of Celsion Corporation (the
"Company") Common Stock (the "Number of Shares"), and to pledge immediately
________ of the Number of Shares (the "Margin Shares") through the undersigned
broker (the "Broker") as security for a loan from the Broker and for the Broker
to pay directly to the Company $________ (the "Exercise Price").

        Accordingly, the Warrant Holder hereby represents as follows: (i) the
Warrant Holder hereby irrevocably exercises the Warrant with respect to the
Number of Shares and (ii) the Warrant Holder hereby irrevocably elects to pledge
to the Broker the Margin Shares and unconditionally authorizes the Company or
its transfer agent to deliver certificates representing the Margin Shares to the
Broker.

        The Broker hereby represents as follows: (i) the Broker is a member in
good standing of the National Association of Securities Dealers, Inc. and (ii)
the Broker irrevocably commits to pay to the Company, no more than one (1)
business day after receiving certificates representing the Margin Shares, the
Exercise Price by check or wire transfer to an account specified by the Company.

WARRANT HOLDER:                         BROKER:


-------------------------------         -------------------------------
(Name)                                  (Name of Firm)


-------------------------------         -------------------------------
(Signature)                             (Signature)


-------------------------------         -------------------------------
(Printed)                               (Printed Name)


-------------------------------         -------------------------------
(Title)                                 (Title)





<PAGE>

                                                                   EXHIBIT 10.24

                               ADVISORY AGREEMENT


                THIS ADVISORY AGREEMENT (the "Agreement") is effective as of the
18th day of May, 2001, by and between CELSION CORPORATION, a Delaware
corporation (the "Company"), and DR. KRIS VENKAT ("Venkat"), and SUNDARI
ENTERPRISES, a New Jersey corporation (the "Advisor").

                In consideration of the mutual covenants and agreements
contained in this Agreement, the parties hereby agree as follows:

                1.      APPOINTMENT TO BOARD OF DIRECTORS; DIRECTOR'S FEES.
Venkat has been appointed to the Board of Directors of the Company effective May
18, 2001, and agrees to serve as a director of the Company. Venkat's service as
a director shall terminate at the option of the Company in its sole discretion.
Compensation as a director of the Company will be comprised of:

                        (a)     Payment of an annual director's fee in the
amount of Twenty Thousand Dollars ($20,000) payable in common stock calculated
at the closing price of the stock on the last day of the Company's fiscal year
(September 30). For fiscal year 2001, the director's fee will be prorated for
the period of service from May 18, 2001 through September 30, 2001.

                        (b)     A grant of non-qualified stock options under the
Celsion Corporation 2001 Stock Option Plan (the "Plan") entitling Venkat to
receive
 One Hundred Thousand (100,000) shares of common stock of the Company
with an exercise price of $0.92/share. These stock options will vest and become
exercisable in accordance with the terms of the Plan, and upon the following
schedule: options to acquire 50,000 shares shall vest on May 18, 2001 and
options to acquire 50,000 shares shall vest on May 18, 2002.

                2.      RETENTION OF ADVISOR; SCOPE OF SERVICES. The Company
hereby retains the Advisor and Advisor hereby agrees to provide the following
advisory services to the Company: (1) provide strategic and tactical advise to
the Company including development plans, Company positioning, contacts,
recruitment of key personnel; (2) assist the Company in developing its Heat
Activated Liposome business, including streamlining university/licensor
relationships, product development and manufacturing agreements, and the
identification and recruitment of a management team and negotiation of
appropriate strategic alliances, and development of a business plan for the Heat
Activated Liposome business to be used in attracting potential investment
partners, (3) assist the Company in developing a financial strategy and securing
equity capital and/or debt financing to fund on-going business of the Company;
and (4) identify potential investors that best meet the Company's objectives.
Venkat agrees that he shall cause Advisor to perform these services in a
professional manner.




<PAGE>

                3.      TIME OF PERFORMANCE OF ADVISORY SERVICES. The specific
time, schedule and place of the performance of the advisory services shall be
determined by the Advisor in its sole discretion. The Advisor shall devote a
minimum of sixty (60) days annually to the provision of the advisory services
contemplated hereunder. The Advisor agrees to be available to the Company during
normal business hours, on a regular basis, as necessary to ensure the timely and
professional performance of the duties of the Advisor hereunder.

                4.      COMPANY'S OBLIGATIONS. The Company shall make available
the information, resources and Company personnel and timely perform those tasks
necessary to enable Advisor to provide the services. The Company will keep the
Advisor informed on a current basis of all material developments which may
impact the financial performance of the Company, its businesses, outlook or
financial condition.

                5.      ADDITIONAL SERVICES. If mutually agreed, Advisor may
provide additional services to the Company not described herein, but Advisor
shall not be obligated to provide any such services unless the nature and terms
of such services and the compensation to be provided are mutually agreed in
advance in writing.

                6.      COMPENSATION. In consideration of the advisory services
to be provided hereunder, the Company will pay advisory fees to Venkat/Advisor
as follows:

                (a)     A cash retainer payment in the amount of Sixty Thousand
                        Dollars ($60,000) per year to the Advisor to provide the
                        advisory services contemplated hereby, provided however
                        that any payments in excess of $60,000 per year to the
                        Advisor must be approved in writing in advance by the
                        Company prior to the Advisor spending more than sixty
                        (60) days of advisory services per year. The cash fee
                        shall be payable monthly to the Advisor during the Term
                        at $5,000 per month. Advisor agrees to keep reasonably
                        appropriate records of time expended by him on behalf of
                        the Company. Advisor shall be paid an additional fee of
                        $1,000 per day for any time expended by him beyond 60
                        days per year, subject to provisions of Article 5 above.

                (b)     Subject to the terms and conditions set forth in this
                        Agreement, the Company hereby grants to Venkat
                        non-qualified stock options under the Plan entitling
                        Venkat to acquire Three Hundred Thousand (300,000)
                        shares of common stock of the Company with an exercise
                        price of $0.68/share. These options will vest and become
                        exercisable in accordance with the terms of the Plan,
                        and upon the following schedule: options to acquire
                        150,000 shares shall vest on August 1, 2001, and options
                        to acquire 150,000 shares shall vest on August 1, 2002.

                (c)     The Company also hereby grants to Venkat non-qualified
                        stock options under the Plan entitling Venkat to acquire
                        up to an additional Four Hundred Thousand (400,000)
                        shares of common stock of the Company, which will vest
                        and become exercisable in accordance with the terms of
                        the Plan, and upon the following schedule:

                        (i)     Options to acquire One Hundred Thousand
                                (100,000) shares shall vest upon completion of
                                satisfactory arrangements in streamlining
                                university/licensor relationships and product
                                development arrangements with a suitable third
                                party. The exercise price for these options
                                shall be 125% of the exercise price for the
                                options granted pursuant to Section 6(b) above.

                        (ii)    Options to acquire One Hundred Thousand
                                (100,000) shares shall vest upon Company
                                conclusion of a strategic partner alliance for



                                      -2-

<PAGE>
                                one or more of the Company's business. The
                                exercise price for these options shall be 150%
                                of the exercise price for the options granted
                                pursuant to Section 6(b) above.

                        (iii)   Options to acquire One Hundred Thousand
                                (100,000) shares shall vest upon Company
                                conclusion of Phase I clinical studies of heat
                                activated liposomes. The exercise price for
                                these options shall be 175% of the exercise
                                price for the options granted pursuant to
                                Section 6(b) above.

                        (iv)    Options to acquire One Hundred Thousand
                                (100,000) shares shall vest upon conclusion of a
                                definitive agreement with a strategic partner
                                for the sale and distribution of the Company's
                                heat activated liposomes. The exercise price for
                                these options shall be 200% of the exercise
                                price for the options granted pursuant to
                                Section 6(b) above.

                (d)     Subject to the terms, conditions and limitations set
                        forth in this Agreement and the Plan, Venkat may
                        exercise any and all stock options granted under this
                        Agreement, at any time prior to 5:00 P.M. (EST) on May
                        1, 2011, upon notice to the Company at its principal
                        office at 10220-1 Old Columbia Road, Columbia, Maryland
                        21046-1705, Attention: Spencer Volk, President (or at
                        such other location as the Company may advise the
                        Executive in writing), at which time all unexercised
                        options shall expire and be of no further force or
                        effect.

                (e)     Notwithstanding any language to the contrary contained
                        herein, if this Agreement is in effect at the time of
                        the occurrence of a "Change of Control" event, all stock
                        options granted to Venkat pursuant to Sections 1 and 6
                        hereof shall automatically vest 100% and immediately
                        become exercisable upon the occurrence of a Change of
                        Control event. For purposes of this Agreement, "Change
                        of Control" event means (A) if any Person, or
                        combination of Persons (as hereinafter defined), or any
                        affiliate of any of the above, is or becomes the
                        "beneficial owner" (as defined in Rule l3d-3 promulgated
                        under the Securities Exchange Act of 1934) directly or
                        indirectly, of securities of the Company representing
                        twenty-five percent (25%) or more of the total number of
                        outstanding shares of common stock of the Company; (B)
                        if individuals who, at the date of this Agreement,
                        constitute the Board (the "Incumbent Directors") cease,
                        for any reason, to constitute at least a majority
                        thereof, provided that any new director whose election
                        was approved by a vote of at least 75% of the Incumbent
                        Directors shall be treated as an Incumbent Director; or
                        (C) the Company sells substantially all of its assets,
                        or transfers its Liposome business or substantially all
                        of the assets related to the Liposome business, to a
                        purchaser other than a subsidiary, or enters into a
                        joint venture with a third party with respect to the
                        Liposome business in which the Company does not retain
                        voting control. For purposes hereof, "person" shall mean
                        any individual, partnership, joint venture, association,
                        trust, or other entity, including a "group" as referred
                        to in section 13(d)(3) of the Securities Exchange Act of
                        1934.

        7.      REIMBURSEMENT OF EXPENSES. The Company shall reimburse the
Advisor from time to time for all reasonable and customary out-of-pocket
business expenses incurred in the performance of his duties hereunder, provided
that the Advisor has had such expenses pre-approved (either verbally or written)
and shall submit vouchers and other reasonable supporting data to substantiate
the amount of said expenses. The Company shall reimburse the Advisor for such
expenses monthly during the Term upon receipt of an invoice from the Advisor
summarizing such expenses.

        8.      TERM OF AGREEMENT AND PAYMENT UPON TERMINATION. Unless earlier
terminated in accordance with the provisions of this Section 8, the term (the
"Term") of this Agreement shall be for a two-year period commencing on the date
hereof and ending on May 18, 2003, provided however, that the Company shall have
the right, 



                                      -3-

<PAGE>

in its sole and absolute discretion, to terminate this Agreement effective as of
the one-year anniversary date of the date of this Agreement, upon written notice
to the Advisor at least thirty (30) days prior to such anniversary date (the
"Term"). The Agreement shall automatically be extended for one-year periods on
each annual anniversary date thereafter, unless either party notifies the other
party in writing of its desire to terminate this Agreement at least thirty (30)
days prior to such annual anniversary date.

                        During the Term hereof, the Company shall have the right
to terminate this Agreement effective upon delivery of written notice thereof to
the Advisor upon the occurrence of any of the following events:

                        (i)     If the Advisor has breached any provisions of
                                this Agreement and has failed to cure such
                                breach within thirty (30) days of written notice
                                from the Company describing such breach;

                        (ii)    If the Advisor fails or is unable for any reason
                                to substantially perform the duties required of
                                him hereunder due to a mental or physical
                                illness, condition, incapacity or disability,
                                for a continuous period of sixty (60) days;

                        (iii)   Upon the death of Venkat.

                        Upon termination of this Agreement for any reason, the
Advisor shall be entitled to be paid (i) an amount equal to all reimbursable
expenses the Advisor has incurred in accordance with the terms hereof, in
providing services hereunder prior to the termination date, and (ii) all fees
payable to the Advisor pursuant to Section 6(a) hereof, earned by the Advisor
with respect to the advisory services rendered prior to the date of termination,
which shall remain due and payable in full in the manner contemplated by Section
6 above. The Advisor shall render a final invoice for all reimbursable expenses.
Notwithstanding any other language to the contrary granted herein, if the
Company terminates this Agreement prior to May 18, 2003 for any reason other
than those set forth in subsections (i) - (iii) immediately above, all stock
options granted to Venkat pursuant to Sections 1(b) and 6(b) hereof, shall
automatically vest 100% and immediately become exercisable for a one-year period
after the effective date of termination. Otherwise, all unvested options shall
automatically and immediately be forfeited and null and void and of no further
legal force or effect upon termination of this Agreement. Upon termination of
this Agreement, the Advisor shall immediately return to the Company all
information, records and other materials which the Company may have provided to
the Advisor and Company shall return to the Advisor any property of the Advisor
not purchased and paid for by the Company.

        10.     NONCOMPETITION. During the Term of this Agreement, neither 
Venkat nor Advisor will engage in, carry on, consult with, or otherwise
participate in as a designing or advisory Advisor, directly or indirectly, any
business in competition with the microwave cancer treatment device or liposome
drug therapy for cancer treatment that is being designed, developed,
manufactured, marketed, distributed and sold by the 


                                      -4-

<PAGE>

Company, either for himself, as a member of a partnership, as a stockholder
(except as a stockholder of less than one percent (1%) of the issued and
outstanding stock of a publicly-held corporation whose gross assets exceed one
hundred million dollars) or as an investor, employee, officer, director,
advisor, agent, or associate of any person, partnership, corporation or other
entity (other than the Company) that is in such business.

        11.     CONFIDENTIAL INFORMATION. Venkat and the Advisor each agree that
the Company's business interests require a confidential relationship between the
Company and the Advisor and the fullest practical protection and confidential
treatment of all proprietary information, trade secrets and know-how of the
Company, including without limitation, all concepts, techniques, ideas,
protocols, formulae, devices, methods, designs, plans, procedures, programs,
inventions, innovations, and information regarding customers, costs, prices,
earnings, products, systems, sources of supply, and marketing, financial and
business budgets and plans (collectively the "Confidential Information"), which
the Company provides the Advisor access to in connection with the Advisor's
services under this Agreement. Venkat and the Advisor each agree, both during
the Term of this Agreement and thereafter for so long as any such information
remains confidential and proprietary to the Company, to keep secret and treat
confidentially all such Confidential Information, and not to disclose, divulge,
reveal, report, publish, transfer, or use or aid others in using, any such
Confidential Information. If either Venkat or the Advisor provides any of the
Company's Confidential Information to any subcontractor, the Advisor will make
certain that the subcontractor is legally obligated to maintain the
confidentiality of such information.

        Venkat and the Advisor each acknowledge and agree that all Confidential
Information relative to the Company's microwave technology and devices for
treating cancer, as well as all formulae and ideas concerning liposome drug
therapy, shall remain the sole and exclusive property of the Company, and all
improvements, enhancements or modifications to the Company's devices, technology
or drug therapy formulae and techniques developed by the Advisor or under
Advisor's supervision as part of his advisory services hereunder shall be the
sale and exclusive property of Celsion.

        The obligation to maintain the confidentiality of such information shall
not apply to any information:

                (a)     which is publicly known or generally known within the
trade;

                (b)     which becomes publicly known or generally known within
the trade without breach of any obligation of the recipient to the disclosing
party;

                (c)     which is obtained by the recipient from someone not a
party to this Agreement if the recipient is not aware of any such obligation on
the part of the person or entity providing the information to keep such
information confidential; or



                                      -5-

<PAGE>

                (d)     which is required to be disclosed by law, court order or
government regulation.

        12.     REMEDIES. Venkat and the Advisor each recognize and acknowledge
that if Venkat breaches the provisions of Sections 10 or 11, damages to the
Company would be difficult if not impossible to ascertain, and because of the
immediate and irreparable damage and loss that may be caused to the Company for
which it would have no adequate remedy, the Advisor therefore agrees that the
Company, in addition to and without limiting any other remedy or right it may
have, shall be entitled to seek an injunction or other equitable relief in any
court of competent jurisdiction, enjoining any such breach, and Venkat and the
Advisor each hereby waives any and all defenses he/it may have on the grounds of
lack of jurisdiction or competence of a court to grant such an injunction or
other equitable relief. The existence of this right shall not preclude the
applicability or exercise of any other rights and remedies at law or in equity
which the Company may have.

        13.     INDEPENDENT CONTRACTOR. In rendering services hereunder, the
Advisor is acting solely as an independent contractor and not as an agent,
employee or partner of the Company for any purpose. Neither Venkat nor the
Advisor has any authority to bind the Company in any contractual manner nor to
represent to others than the relationship between the Company and the Advisor is
other than stated herein. The Advisor shall be responsible for filing all tax
returns and paying all federal, state, local and foreign taxes (including
without limitation, income taxes, employment taxes, unemployment taxes and
self-employment taxes) due with respect to the compensation paid to the Advisor
and Venkat pursuant to Section 6 hereof. Other than the stock options granted to
Venkat pursuant to Section 6 hereof, neither Venkat nor the Advisor shall be
entitled as a result of any services provided under this Agreement to
participate in or receive any benefits from any employee benefit plan maintained
by the Company.

        14.     ARBITRATION. Subject to the provisions of Section 12, the
parties shall attempt in good faith to resolve all claims, disputes and other
disagreements arising hereunder by negotiation. In the event that a dispute
between the parties cannot be resolved within thirty (30) days of written notice
from one party to the other party, such dispute shall, at the request of either
party, after providing written notice to the other party, be submitted to
arbitration in Columbia, Maryland in accordance with the arbitration rules of
the American Arbitration Association then in effect. The notice of arbitration
shall specifically describe the claims, disputes or other matters in issue to be
submitted to arbitration. The parties shall jointly select a single arbitrator
who shall have the authority to hold hearings and to render a decision in
accordance with the arbitration rules of the American Arbitration Association.
If the parties are unable to agree within ten (10) days, the arbitrator shall be
selected by the Chief Judge of the Circuit Court for Howard County, Maryland.
The discovery rights and procedures provided by the Federal Rules of Civil
Procedure shall be available and enforceable in the arbitration proceeding. The
written decision of the arbitrator so appointed shall be conclusive and binding
on the parties and enforceable by a court of competent jurisdiction. The
expenses of the 



                                      -6-

<PAGE>

arbitration shall be borne equally by the parties to the arbitration, provided,
however, that each party shall pay for and bear the cost of its own experts,
evidence and legal counsel, unless rules otherwise in the arbitration. Both
parties agree to use their best efforts to cause a final decision to be rendered
with respect to the matter submitted to arbitration within sixty (60) days after
its submission.

        15.     REPRESENTATION BY COUNSEL. Each of the parties hereto
acknowledges that (i) it or he has read this Agreement in its entirety and
understands all of its terms and conditions, (ii) it or he has had the
opportunity to consult with any individuals of its or his choice regarding its
or his agreement to the provisions contained herein, including legal counsel of
its or his choice, and any decision not to was its or his alone, and (ii) it or
he is entering into this Agreement of its or his own free will, without coercion
from any source.

        16.     MISCELLANEOUS.

                (a)     This Agreement constitutes the entire agreement between
the parties, superseding all prior agreements, either oral or written. This
Agreement may not be amended or any provision hereof waived except by a document
signed by both parties hereto. This Agreement may not be terminated except as
provided herein.

                (b)     This Agreement shall be deemed to be made in and shall
be governed and construed in accordance with the laws of the State of Maryland,
excluding principles of conflicts of law. Any legal action to enforce any
arbitral awards under this Agreement shall be brought in the courts of the State
of Maryland.

                (c)     Any notice given under this Agreement shall be given
when delivered in person or by registered or certified mail, postage prepaid,
return receipt requested or by other delivery service providing evidence of
receipt, to the party to whom such notice is to be given at the following
address or at such other address as either party shall hereafter give notice of
to the other in writing:

               If to the Company to: Celsion Corporation
                                     10220-1 Old Columbia Road
                                     Columbia, Maryland 21046-1705
                                     Attn:  Anthony Deasey

               If to Advisor to:     Dr. Kris Venkat
                                     Sundari Enterprises
                                     c/o Morphochem, Inc.
                                     11 Deer Park Drive, Suite 116
                                     Monmouth Junction, New Jersey  08852



                                      -7-

<PAGE>

                (d)     This Agreement shall not restrict or prevent Advisor
from pursuing other business interests or providing advisory or other services
to other parties while this Agreement is in effect.

                (e)     If the Company provides Advisor any documents or records
of the Company or copies thereof in connection with the services provided by the
Advisor under this Agreement, Advisor will, at the Company's request at any
time, promptly return all of such documents and records to the Company at the
Company's expense.

                (f)     This Agreement is effective as of the date hereof and
shall be legally binding upon and inure to the benefit of, the parties hereto
and their respective heirs, personal representatives, successors and permitted
assigns. As used herein, the term "successors" shall include without limitation,
any successor by way of share exchange, merger, consolidation, sale of all or
substantially all of the assets, or similar reorganization. Neither party may
assign any of its rights or obligations hereunder without the prior written
consent of the other party.

                (g)     If any one or more of the terms or provisions of this
Agreement shall for any reason be held to be invalid, illegal or unenforceable,
in whole or in part, such provision(s) shall be deemed null and void, and the
remaining provisions of this Agreement shall remain operative and in full force
and effect.


                                      -8-

<PAGE>

        IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed by their duly authorized representatives effective as of the date
written above.


WITNESS/ATTEST:                     CELSION CORPORATION


[SIG]                               By: /s/ ANTHONY P. DEASEY             (SEAL)
--------------------------------        ----------------------------------
                                         Print Name: ANTHONY P. DEASEY
                                                     ---------------------
                                         Title: SVP/FINANCE/CFO
                                                --------------------------


                                    SUNDARI ENTERPRISES


[SIG]                               By: /s/ KRIS VENKAT                   (SEAL)
--------------------------------        ----------------------------------
                                         Print Name: K. Venkat
                                                     ---------------------
                                         Title: CHAIRMAN/CEO
                                                --------------------------


[SIG]                               /s/ KRIS VENKAT                       (SEAL)
--------------------------------    --------------------------------------
                                        Kris Venkat


                                      -9-


<PAGE>
                                                                  EXHIBIT 23.1

                                STEGMAN & COMPANY




                        CONSENT OF INDEPENDENT ACCOUNTANT



The Board of Directors
Celsion Corporation
Columbia, Maryland


                  We hereby consent to the inclusion of our report dated
November 6, 2001 relating to the statements of financial condition of Celsion
Corporation (the "Corporation") as of September 30, 2001 and 2000 and the
related statements of operations, changes in stockholders' equity and cash flows
for each of the years in the three-year period ended September 30, 2001 in the
Corporation's Form 10-K for the year ending September 30, 2001 to be filed with
the Securities and Exchange Commission.

/s/ Stegman & Company

Baltimore, Maryland
December 21, 2001