2.	LICENSING AND RESEARCH AND DEVELOPMENT AGREEMENTS

Vitaros^®

On January 9, 2012, the Company entered into an exclusive licensing agreement (the “Abbott License Agreement”) with Abbott Laboratories Limited (“Abbott”), granting Abbott the exclusive rights to commercialize Vitaros ® for erectile dysfunction in Canada. The product was approved by Health Canada in late 2010 and is expected to be launched in the second half of 2012. Under the Abbott License Agreement, over the lifetime of the contract, the Company has the right to receive up to approximately $16 million in up-front license fees and aggregate milestone payments if all the regulatory and sales thresholds specified in the agreement are achieved, plus tiered royalty payments based on Abbott’s sales of the product in Canada. The Company has not recognized any revenues or received any payments under this agreement in the first half of 2012 and will recognize the upfront license fee when all of the revenue recognition criteria are satisfied, which is currently expected to be in the third quarter of 2012. In anticipation of Abbott launching Vitaros ® in Canada in 2012, the Company is currently manufacturing three commercial batches of Vitaros ® at a manufacturing facility operated by Therapex, adivision of E-Z-EM Canada Inc. (“Therapex”).

On February 15, 2012, the Company entered into an exclusive license and collaboration agreement (the “Sandoz Agreement”) with Sandoz, a division of Novartis (“Sandoz”), for Sandoz to market Vitaros ^® for the treatment of erectile dysfunction in Germany. Under the Sandoz Agreement, the Company has the right to receive up to approximately €22 million ($29 million based on the exchange rate at the signing date) in up-front and aggregate milestone payments if all the regulatory and sales thresholds specified in the agreement are achieved, as well as double digit royalties on net sales by Sandoz in Germany.

On February 22, 2012, the Company entered into a Vitaros^® Cream Clinical Supply Agreement (“Supply Agreement”) with Warner Chilcott UK Limited (“Warner Chilcott”). Under the Supply Agreement, the Company will receive approximately $250,000 in exchange for the current ordered quantity of Vitaros ^®. In addition, we are currently updating the IND for Vitaros ^® in the United States with the new manufacturing currently utilized at our manufacturing partner’s facility, Therapex, a division of E-Z-EM Canada Inc. (“Therapex”). The Company has not recognized any revenues under this agreement in the first half of 2012.

On January 3, 2011, the Company entered into a license agreement (the “Elis License Agreement”) with Elis Pharmaceuticals Ltd. (“Elis”), granting Elis the exclusive rights to commercialize Vitaros ^® for erectile dysfunction in the United Arab Emirates, Oman, Bahrain, Qatar, Saudi Arabia, Kuwait, Lebanon, Syria, Jordan, Iraq and Yemen (the “Elis Territory”). Under the Elis License Agreement, the Company is entitled to receive upfront license fees and milestone payments of up to $2.1 million over the term of the Elis License Agreement. The future milestones are tied to regulatory approval and the achievement of certain levels of aggregate net sales of Vitaros ^®. Additionally, the Company is entitled to receive escalating tiered double-digit royalties on Elis’s sales of Vitaros ^® in the Elis Territory. Elis announced the pre-launch of Vitaros ^® in its territories earlier this year and is working towards a formal launch before the end of the year.

On February, 14, 2011, the Company entered into a license agreement (the “Neopharm License Agreement”) with the Neopharm Group (“Neopharm”), granting Neopharm the exclusive rights to commercialize Vitaros ^® for erectile dysfunction and when and if approved, the Company’s product for premature ejaculation in Israel and the Palestinian Territories (the “Neopharm Territory”). Under the Neopharm License Agreement, the Company is entitled to receive upfront license fees and milestone payments of up to $4.35 million over the term of the Neopharm License Agreement. The future milestones are tied to regulatory approval and the achievement of certain levels of aggregate net sales of Vitaros ^®. Additionally, the Company is entitled to receive escalating tiered double-digit royalties on Neopharm’s sales of Vitaros ^® in the Neopharm Territory.

On December 22, 2010, the Company entered into an exclusive license agreement with Bracco SpA (the “Bracco License Agreement”) for its Vitaros ^® product for erectile dysfunction. Under the terms of the Bracco License Agreement, Bracco has been granted exclusive rights in Italy to commercialize and market Vitaros ^® under the Bracco trademark, and the Company received €750,000 as an up-front payment and is entitled to receive up to €4.75 million in regulatory and sales milestone payments. Further, over the life of the agreement, the Company will receive royalties based on Bracco's sales of the product.

The Company assessed the deliverables under the authoritative guidance for multiple element arrangements. Analyzing the arrangement to identify deliverables requires the use of judgment, and each deliverable may be a right or license to use an asset, a performance obligation, or an obligation to deliver services. Once the Company identified the deliverables under the arrangement, the Company determined whether or not the deliverables can be accounted for as separate units of accounting, and the appropriate method of revenue recognition for each element. Based on the results of the Company’s analysis, the Company concluded there was one deliverable and no additional obligation associated with the license and as a result, the $200,000 in up-front payments pursuant to the Elis and Neopharm licensing agreements was earned upon the delivery of the license and related know-how, which occurred by March 31, 2011. The expected up-front payment from Bracco was received in April 2011, in the amount of $1,000,000, net of withholding taxes. Based on the results of the Company’s multiple element analysis, the Company concluded there were two deliverables. Of this amount, approximately $669,000 was recognized as license revenue in the second quarter of 2011 as there was no additional obligation associated with the license and the remaining $333,000 was deferred and will be recognized at the time that the Company receives regulatory marketing approval for the product in Europe in accordance with the Bracco License Agreement.

On November 1, 2007, the Company signed an exclusive licensing agreement with Warner Chilcott Company, Inc. (“Warner Chilcott”) for Vitaros ^® for erectile dysfunction. Under the agreement, Warner Chilcott acquired the exclusive rights in the United States to Vitaros^® and would assume all further development, manufacturing, and commercialization responsibilities as well as costs. On February 3, 2009, the Company terminated the licensing agreement and sold the U.S. rights for Vitaros ^® to Warner Chilcott. Under the terms of the Asset Purchase Agreement, the Company received an up-front payment of $2.5 million and is eligible to receive an additional payment of $2.5 million upon Warner Chilcott’s receipt of a New Drug Application (NDA) approval for Vitaros ^® from the FDA. The Company currently expects to enter into a supply agreement with Warner Chilcott if the drug is approved by the FDA.

MycoVa ^TM

On January 10, 2012, the Company entered into an exclusive licensing agreement (the “Elis Agreement”) granting Elis Pharmaceuticals (“Elis”) the exclusive rights to market MycoVa^TM (terbinafine), the Company’s drug candidate for the treatment for onychomycosis (nail fungal infection) in the Middle East and the Gulf Countries, excluding Israel.

Under the terms of the Elis Agreement, Elis has exclusive rights in part of the Middle East, including Saudi Arabia, Kuwait, Lebanon, Syria, Jordan, Iraq and Yemen, and in the Gulf Countries (United Arab Emirates, Oman, Bahrain, Qatar), excluding Israel, to commercialize and market MycoVa^TM . The Company has the right to receive up to $2.1 million in up-front license fees and aggregate milestone payments if all the regulatory and sales thresholds specified in the agreement are achieved, plus tiered double digit royalties based on Elis' sales of the product.

On December 30, 2011, the Company entered into an exclusive license agreement (the “Stellar Agreement”) with Stellar Pharmaceuticals Inc. (“Stellar”), granting Stellar the exclusive rights to market MycoVa^TM in Canada.

Under the terms of the Stellar Agreement, Stellar will assist the Company in the filing of a New Drug Submission in Canada for MycoVa^TM for the treatment of onychomycosis. If the application is approved, Stellar will have the exclusive rights to commercialize MycoVa^TM in Canada. Over the term of the Agreement, the Company has the right to receive up to approximately $8 million (Canadian) in up-front license fees and aggregate milestone payments if all the regulatory and sales thresholds specified in the agreement are achieved, plus tiered royalty payments based on Stellars’ sales of the product in Canada, after approval for commercialization.

NitroMist^tm

On February 9, 2012, the Company entered into an Asset Purchase and License Agreement (the “NovaDel Agreement”) with NovaDel Pharma, Inc. (“NovaDel”), granting the Company the right to develop and commercialize NitroMist^tm in all countries worldwide except the United States, Canada and Mexico. The purchase price of $200,000 was recorded as research and development expense as the payment is for intellectual property related to a particular research and development project (that has not reached technological feasibility in the territories covered by the license) and that has no alternative future use.

Granisol^® and Aquoral^TM

On February 21, 2012, the Company entered into the following agreements with PediatRx Inc. (“PediatRx”): (1) a Co-Promotion Agreement in the United States for Granisol ^® and Aquoral^TM (the “Co-Promotion Agreement”), (2) an assignment of PediatRx’s rights under its co-promotion agreement with Bi-Coastal Pharmaceuticals, Inc. for Aquoral^TM and (3) an Asset Purchase Agreement for Granisol ^® outside of the United States (the “Sale Agreement”). As consideration for entering into the agreements, the Company paid PediatRx $325,000 up-front and will pay PediatRx a percentage royalty on the Company’s net operating income related to sales of Granisol ^® in the U.S. The Company recorded $260,000 related to the Co-Promotion Agreement as an intangible asset and will amortize the expense over ten years, which is the life of the agreement. The remaining $65,000 was recorded as research and development expense as the payment is for intellectual property related to a particular research and development project (that has not reached technological feasibility in the territories covered by the license) and that has no alternative future use. We are currently in multiple partnership negotiations to commercialize Granisol ^® outside the United States. We have started the registration procedures for Granisol^® in multiple countries.

On June 27, 2012, the Company entered into a Termination Agreement (“Termination Agreement”) with PediatRx, Inc to terminate discussions regarding the potential merger transaction whereby Apricus would have acquired PediatRx (the “Merger”). On January 26, 2012, the Company had entered into a non-binding term sheet for the acquisition of PediatRx in a proposed merger transaction. The term sheet included an additional payment by the Company to PediatRx of $1.0 million payable in Company common stock, if the Company elected not to pursue the Merger, subject to certain conditions. On June 27, 2012, the Company issued and delivered to PediatRx 373,134 shares of common stock, which were valued at a price of $2.68 per share in settlement of the $1.0 million payable. The $1.0 million dollar payment was related to the value of the Co-Promotion Agreement and was recorded as an intangible asset and the expense will be amortized over ten years, which is the life of the agreement. In addition, the Company retained the ex US worldwide right to Granisol and is seeking commercial partnerships for Granisol^® in for multiple regions around the world.

The Company also considered whether PediatRx should be consolidated as a Variable Interest Entity (“VIE”) under ASU No. 2009-17, Consolidations (Topic 810): Improvements to Financial Reporting by Enterprises Involved with Variable Interest Entities. The Company determined that PediatRx is a VIE because it lacks sufficient equity at risk to fund its operational activities without additional subordinated financial support. The Company determined that it does not have the power to direct the activities of PediatRx, nor does it have the obligation to absorb additional losses and it will not participate in any residual revenues thus it is not the primary beneficiary of the VIE. As such, the Company will not consolidate the financial information of PediatRx.