NOTE 7.

INTANGIBLE ASSETS

Patents

Intangible patent assets are comprised of patents acquired in October, 2005. Intangible assets, net consisted of the following at September 30, 2016 and December 31, 2015:

Intangible assets – patents	September 30, 2016			December 31, 2015
Patent - Amlexanox (Aphthasol®)	$	2,090,000		$	2,090,000
Patent - Amlexanox (OraDisc™ A)		6,873,080			6,873,080
Patent - OraDisc™		73,000			73,000
Patent - Hydrogel nanoparticle aggregate		589,858			589,858
		9,625,938			9,625,938
Less: accumulated amortization		( 7,262,084	)		(6,905,397	)
Intangible assets - patents, net	$	2,363,854		$	2,720,541

Amortization expense for intangible patents assets was $119,763 and $119,763 for the three months ended September 30, 2016 and 2015, respectively, and was $356,687 and $355,385 for the nine months ended September 30, 2016 and 2015, respectively.

The future aggregate amortization expense for intangible patent assets, remaining as of September 30, 2016, is as follows:

Calendar Years	Future Amortization Expense
2016 (Three months)	$	119,763
2017		475,148
2018		475,148
2019		475,148
2020		476,450
2021 & Beyond		342,197
Total	$	2,363,854

Licensing rights

On December 24, 2015, we entered into and closed the transaction contemplated by a License Purchase and Termination Agreement (the “Altrazeal Termination Agreement”) with Altrazeal Trading GmbH (“Altrazeal Trading”) and IPMD GmbH (“IPMD”). The Altrazeal Termination Agreement relates to the License and Supply Agreement dated January 11, 2012 (the “Altrazeal License”), under which Altrazeal Trading and its affiliates were authorized by the Company to distribute our Altrazeal® wound care product in the European Union, Australia, New Zealand, Middle East (excluding Jordan and Syria), North Africa, Albania, Bosnia, Croatia, Kosovo, Macedonia, Montenegro, and Serbia. Under the Altrazeal Termination Agreement, the Altrazeal License was assigned to the Company, thereby effecting its termination, and the Company’s 25% ownership interest in Altrazeal Trading was cancelled. In addition, the Company agreed to assume from Altrazeal Trading and certain affiliated entities rights and future obligations under sub-distribution agreements in numerous territories within the scope of the Altrazeal License and related consulting agreements.

Under the terms of the Altrazeal Termination Agreement, we agreed to pay to Altrazeal Trading a net transfer fee of €1,570,271 and to pay IPMD a transfer fee of €703,500. The net transfer fee to Altrazeal Trading includes adjustments for amounts owed by Altrazeal Trading to the Company. The Company paid the net transfer fee (a) to Altrazeal Trading by means of the issuance of 4,441,606 shares of Common Stock together with warrants to purchase 444,161 shares of Common Stock and (b) to IPMD by means of the issuance of 2,095,241 shares of Common Stock, together with warrants to purchase 209,525 shares of Common Stock. The warrants have an exercise price of $0.68 per share and a term of one-year.

Altrazeal Trading also agreed to return inventory of Altrazeal® blisters held in its possession in an amount up to €88,834 (“Inventory Payment”). To the extent Altrazeal Trading does not return the entire inventory, we may deduct from the Inventory Payment €4.20 per Altrazeal® blister not returned in usable condition. We are currently in the process of confirming with Altrazeal Trading the actual number of Altrazeal® blisters to be returned.

Under the Altrazeal Termination Agreement, we also agreed to file within twenty (20) days of closing a registration statement registering the resale of 2,500,000 shares of Common Stock issued under the Altrazeal Termination Agreement and to use all commercially reasonable efforts to cause such registration Statement to become effective. In accordance with our obligations under the Altrazeal Termination Agreement, we filed with the SEC a registration statement that was declared effective on February 16, 2016. We are required to keep the registration statement effective at all times with respect to such 2,500,000 shares, other than permitted suspension periods, until the earliest of (i) June 24, 2016, (ii) the date when Altrazeal Trading and IPMD may sell all of the registered shares under Rule 144 under the Securities Act without volume limitations, or (iii) the date when Altrazeal Trading and IPMD no longer own any of the registered shares. As of the date of this filing, shares cannot be sold under the registration statement because the associated prospectus is not current.

In connection with the Altrazeal Termination Agreement, we also entered into a Mutual Termination and Release Agreement, dated December 24, 2015, for the purpose of terminating the Binding Term Sheet dated May 12, 2015 with Altrazeal Trading and Firnron LTD (the “Term Sheet”). Under the Term Sheet, it was contemplated that the Company would acquire all of the remaining equity interests in Altrazeal Trading.

Licensing rights, net consisted of the following at September 30, 2016 and December 31, 2015:

Intangible assets - licensing rights	September 30, 2016			December 31, 2015
European Union, Australia, New Zealand, Middle East (excluding Jordan and Syria), North Africa, Albania, Bosnia, Croatia, Kosovo, Macedonia, Montenegro, and Serbia.	$	3,512,506		$	3,512,506
Less: accumulated amortization		(249,464	)		(6,271	)
Intangible assets - licensing rights, net	$	3,263,042		$	3,506,235

Amortization expense for intangible licensing rights assets was $81,955 and nil for the three months ended September 30, 2016 and 2015, respectively, and was $243,193 and nil for the nine months ended September 30, 2016 and 2015, respectively.

The future aggregate amortization expense for intangible licensing rights assets, remaining as of September 30, 2016, is as follows:

Calendar Years	Future Amortization Expense
2016 (Three months)	$	81,955
2017		325,148
2018		325,148
2019		325,148
2020		325,148
2021 & Beyond		1,880,495
Total	$	3,263,042