NOTE

LONG-LIVED ASSETS

Property and Equipment

Property an

d equipment at

December 31, 2017

and

2016

consisted of the following:

Asset Descriptions	Useful Lives (years)		December 31, 2017			December 31, 2016
Computer equipment		4	$	41,839		$	41,839
Lab equipment		5		8,655			8,655
Office equipment, furniture and fixtures		5		18,302			18,302
Leasehold improvements		lease term		10,088			-
Manufacturing equipment		7		1,400,114			783,075
Subtotal				1,478,998			851,871
Less: Accumulated depreciation				(91,123	)		(67,237	)
Less: Impairment				(358,000	)		(358,000	)
Total property and equipment, net			$	1,029,875		$	426,634

Depreciation for t

he years ended

December 31, 2017

and

2016

was

$23,886

and

$3,325,

respectively.

In early

2014,

management decided to sell certain manufacturing equipment that had

not

been placed in service. The equipment had an aggregate historical cost of

$783,075.

Based on estimated cash flows from the potential sale of the equipment, an impairment loss of

$358,000

was recorded during the year ended

December 31, 2013.

Management withdrew the equipment from sale and plans to start using and depreciating the equipment during the initiation of pre-commercialization manufacturing activities in

2017.

Goodwill and

Intangible Assets

We established goodwill and other intangible assets in

2017

in connection with the Merger. Our goodwill and other intangible assets as of

December 31, 2017

are as follows:

Trademarks (definite-lived)	$	100,000
IPR&D (indefinite-lived)		2,200,000
Goodwill (indefinite-lived)		2,061,022
		4,361,022
Less: Accumulated amortization trademarks		(5,952	)
Less: Impairment – trademarks and IPR&D		(2,294,048	)
Total goodwill and intangible assets, net	$	2,061,022

The Company

’s intangible asset for trademarks was related to the Locilex brand acquired from Dipexium. After assessing its resources and corporate strategy in

November 2017,

the Company has decided that it will

longer pursue the development of additional indications for Locilex and will instead focus all of its efforts and resources on the successful commercialization of Aspertec. As a result of this decision, the Company has decided to take the following actions with respect to Locilex:

●

submit paperwork to the FDA to put the Pexiganan IND in an inactive status

;

●

abandon the DPRX domain

;

●

terminate the facility storage contract with

third

party vendor and destroy existing active pharmaceutical ingredient product; and

●

cease paying patent renewal fees, allowing patents to expire

As a result of the strategic change

not

to pursue further development of Locilex, the Company believes that its IPR&D is impaired as of

October 31, 2017

and that the IPR&D ha

zero

fair value as of that date. The Company recognized an impairment loss in the

fourth

quarter of

$2.2

million. Additionally, the Company believes that its trademarks asset is impaired as of

October 31, 2017

and that the trademarks asset had a

zero

fair value as of that date. The Company recognized an impairment loss in the

fourth

quarter of approximately

$0.1

million (carrying value).

The Company has

not

identified any events or changes in circumstances that indicate that a potential impairment

of goodwill occurred as of

October 31, 2017.

As such, the Company believes goodwill is

not

impaired.