Prepaid Drug Product for Testing

Advance payments, including nonrefundable amounts, for goods or services that will be used or rendered for future R&D activities are deferred and capitalized. Such amounts will be recognized as an expense as the related goods are delivered or the related services are performed. The Company incurred installments to its contract drug manufacturing and raw material suppliers totaling $195,000 during 2012 pursuant to a Drug Supply Contract (See Note 10.) for the manufacture and delivery of the Company’s lead drug product for testing in a Phase I clinical trial. This amount was carried on the Balance Sheet as of December 31, 2012 at cost as Prepaid Drug Product for Testing. This product was delivered to the Company in the first quarter of 2013 and costs associated with this drug batch were expensed. Another drug batch was produced in the second quarter of 2013 and installment costs totaling $279,180 are carried on the Balance Sheet as of June 30, 2013 as Prepaid Drug Product for Testing (See Note 10.).