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Intra-Cellular Therapies, Inc.
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Smaller Reporting Company
S-1
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On the later of 10 years after the first commercial sale of a product developed using the licensed compound or upon expiration of the patent rights
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<div>
<p style="MARGIN-TOP: 18pt; TEXT-INDENT: 7%; FONT-FAMILY: Times New Roman; MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt">
<u>Recent Accounting Pronouncements</u></p>
<p style="MARGIN-TOP: 6pt; FONT-FAMILY: Times New Roman; MARGIN-BOTTOM: 0pt; MARGIN-LEFT: 7%; FONT-SIZE: 10pt">
Management does not believe that any recently issued, but not yet
effective accounting pronouncements, if adopted, would have a
material effect on the accompanying financial statements.</p>
</div>
-0.34
0.00
0.34
3720930
<div>
<p style="MARGIN-TOP: 12pt; FONT-FAMILY: Times New Roman; MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt">
Note 5 - <u>Common Stock</u></p>
<!-- xbrl,body -->
<p style="MARGIN-TOP: 6pt; FONT-FAMILY: Times New Roman; MARGIN-BOTTOM: 0pt; MARGIN-LEFT: 7%; FONT-SIZE: 10pt">
On August 29, 2012, the Company authorized one hundred million
(100,000,000) shares of common stock. On October 15, 2012, the
Company received a subscription for five million (5,000,000) shares
of common stock. On October 23, 2012, the Company received payment
of $10,000 for the subscription.</p>
</div>
<div>
<p style="MARGIN-TOP: 18pt; FONT-FAMILY: Times New Roman; MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt">
Note 6 - <u>Preferred Stock</u></p>
<!-- xbrl,body -->
<p style="MARGIN-TOP: 6pt; FONT-FAMILY: Times New Roman; MARGIN-BOTTOM: 0pt; MARGIN-LEFT: 7%; FONT-SIZE: 10pt">
The Company is authorized to issue (10,000,000) shares of $.0001
par value preferred stock with designations, voting and other
rights and preferences as may be determined from time to time by
the Board of Directors of the Company.</p>
</div>
<div>
<p style="MARGIN-TOP: 18pt; TEXT-INDENT: 7%; FONT-FAMILY: Times New Roman; MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt">
<u>Cash Equivalents</u></p>
<p style="MARGIN-TOP: 6pt; FONT-FAMILY: Times New Roman; MARGIN-BOTTOM: 0pt; MARGIN-LEFT: 7%; FONT-SIZE: 10pt">
The Company considers highly liquid financial instruments purchased
with a maturity of three months or less to be cash equivalents.
There are no cash equivalents at the balance sheet date.</p>
</div>
-5930
<div>
<p style="MARGIN-TOP: 18pt; FONT-FAMILY: Times New Roman; MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt">
Note 8 - <u>Subsequent Events</u></p>
<!-- xbrl,body -->
<p style="MARGIN-TOP: 6pt; FONT-FAMILY: Times New Roman; MARGIN-BOTTOM: 0pt; MARGIN-LEFT: 7%; FONT-SIZE: 10pt">
Subsequent to March 31, 2013, professional fees of $3,400 were paid
on behalf of the Company by Sunrise Financial Group Inc.
(“SFG”).</p>
<p style="MARGIN-TOP: 12pt; FONT-FAMILY: Times New Roman; MARGIN-BOTTOM: 0pt; MARGIN-LEFT: 7%; FONT-SIZE: 10pt">
Subsequent to March 31, 2013, the Company received approximately
$6,000 relating to the promissory note with NLBDIT 2010
Enterprises, LLC for professional fees.</p>
</div>
<div>
<p style="MARGIN-TOP: 18pt; FONT-FAMILY: Times New Roman; MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt">
Note 4 - <u>Income Taxes</u></p>
<!-- xbrl,body -->
<p style="MARGIN-TOP: 6pt; FONT-FAMILY: Times New Roman; MARGIN-BOTTOM: 0pt; MARGIN-LEFT: 7%; FONT-SIZE: 10pt">
As of March 31, 2013, the Company has net operating loss
carryforwards of approximately $32,000 to reduce future federal and
state taxable income through 2033.</p>
<p style="MARGIN-TOP: 12pt; FONT-FAMILY: Times New Roman; MARGIN-BOTTOM: 0pt; MARGIN-LEFT: 7%; FONT-SIZE: 10pt">
The Company currently has no federal or state tax examinations in
progress nor has it had any federal or state examinations since its
inception. All of the Company’s tax years are subject to
federal and state tax examination.</p>
<p style="MARGIN-TOP: 12pt; FONT-FAMILY: Times New Roman; MARGIN-BOTTOM: 0pt; MARGIN-LEFT: 7%; FONT-SIZE: 10pt">
The benefit from income taxes consists of the following:</p>
<p style="MARGIN-TOP: 0pt; MARGIN-BOTTOM: 0pt; FONT-SIZE: 12pt">
</p>
<table style="BORDER-COLLAPSE: collapse; FONT-FAMILY: Times New Roman; FONT-SIZE: 10pt" border="0" cellspacing="0" cellpadding="0" width="68%" align="center"><!-- Begin Table Head -->
<tr>
<td width="57%"></td>
<td valign="bottom" width="40%"></td>
<td></td>
<td></td>
<td></td>
</tr>
<tr style="FONT-FAMILY: Times New Roman; FONT-SIZE: 8pt">
<td valign="bottom"></td>
<td valign="bottom"></td>
<td style="BORDER-BOTTOM: #000000 1px solid" valign="bottom" colspan="2" align="center">For the Period August 29,<br />
2012 (Inception) to March 31, 2013</td>
<td valign="bottom"></td>
</tr>
<!-- End Table Head --><!-- Begin Table Body -->
<tr style="FONT-FAMILY: Times New Roman; FONT-SIZE: 10pt" bgcolor="#CCEEFF">
<td valign="top">
<p style="TEXT-INDENT: -1em; FONT-FAMILY: Times New Roman; MARGIN-LEFT: 1em; FONT-SIZE: 10pt">
Current Expense:</p>
</td>
<td valign="bottom"></td>
<td valign="bottom"></td>
<td valign="bottom"></td>
<td valign="bottom"></td>
</tr>
<tr style="FONT-FAMILY: Times New Roman; FONT-SIZE: 10pt">
<td valign="top">
<p style="TEXT-INDENT: -1em; FONT-FAMILY: Times New Roman; MARGIN-LEFT: 3em; FONT-SIZE: 10pt">
Federal and State</p>
</td>
<td valign="bottom"></td>
<td valign="bottom">$</td>
<td valign="bottom" align="right">—</td>
<td valign="bottom" nowrap="nowrap"></td>
</tr>
<tr style="FONT-FAMILY: Times New Roman; FONT-SIZE: 10pt" bgcolor="#CCEEFF">
<td valign="top">
<p style="TEXT-INDENT: -1em; FONT-FAMILY: Times New Roman; MARGIN-LEFT: 1em; FONT-SIZE: 10pt">
Deferred tax benefit:</p>
</td>
<td valign="bottom"></td>
<td valign="bottom"></td>
<td valign="bottom"></td>
<td valign="bottom"></td>
</tr>
<tr style="FONT-FAMILY: Times New Roman; FONT-SIZE: 10pt">
<td valign="top">
<p style="TEXT-INDENT: -1em; FONT-FAMILY: Times New Roman; MARGIN-LEFT: 3em; FONT-SIZE: 10pt">
Federal and State</p>
</td>
<td valign="bottom"></td>
<td valign="bottom"></td>
<td valign="bottom" align="right">11,000</td>
<td valign="bottom" nowrap="nowrap"></td>
</tr>
<tr style="FONT-FAMILY: Times New Roman; FONT-SIZE: 10pt" bgcolor="#CCEEFF">
<td valign="top">
<p style="TEXT-INDENT: -1em; FONT-FAMILY: Times New Roman; MARGIN-LEFT: 5em; FONT-SIZE: 10pt">
Valuation allowance</p>
</td>
<td valign="bottom"></td>
<td valign="bottom"></td>
<td valign="bottom" align="right">(11,000</td>
<td valign="bottom" nowrap="nowrap">)</td>
</tr>
<tr style="FONT-SIZE: 1px">
<td valign="bottom"></td>
<td valign="bottom"></td>
<td valign="bottom">
<p style="BORDER-TOP: #000000 1px solid"></p>
</td>
<td valign="bottom">
<p style="BORDER-TOP: #000000 1px solid"></p>
</td>
<td></td>
</tr>
<tr style="FONT-FAMILY: Times New Roman; FONT-SIZE: 10pt">
<td valign="top">
<p style="TEXT-INDENT: -1em; FONT-FAMILY: Times New Roman; MARGIN-LEFT: 1em; FONT-SIZE: 10pt">
Total</p>
</td>
<td valign="bottom"></td>
<td valign="bottom">$</td>
<td valign="bottom" align="right">—</td>
<td valign="bottom" nowrap="nowrap"></td>
</tr>
<tr style="FONT-SIZE: 1px">
<td valign="bottom"></td>
<td valign="bottom"></td>
<td valign="bottom">
<p style="BORDER-TOP: #000000 3px double"></p>
</td>
<td valign="bottom">
<p style="BORDER-TOP: #000000 3px double"></p>
</td>
<td></td>
</tr>
<!-- End Table Body --></table>
<p style="MARGIN-TOP: 0pt; MARGIN-BOTTOM: 0pt; FONT-SIZE: 12pt">
</p>
<p style="MARGIN-TOP: 0pt; FONT-FAMILY: Times New Roman; MARGIN-BOTTOM: 0pt; MARGIN-LEFT: 7%; FONT-SIZE: 10pt">
The income tax benefit differs from the amount computed by applying
the federal statutory income tax rate to the loss before income
taxes due to the following:</p>
<p style="MARGIN-TOP: 0pt; MARGIN-BOTTOM: 0pt; FONT-SIZE: 12pt">
</p>
<table style="BORDER-COLLAPSE: collapse; FONT-FAMILY: Times New Roman; FONT-SIZE: 10pt" border="0" cellspacing="0" cellpadding="0" width="76%" align="center"><!-- Begin Table Head -->
<tr>
<td width="62%"></td>
<td valign="bottom" width="27%"></td>
<td></td>
<td></td>
<td></td>
</tr>
<tr style="FONT-FAMILY: Times New Roman; FONT-SIZE: 8pt">
<td valign="bottom"></td>
<td valign="bottom"></td>
<td style="BORDER-BOTTOM: #000000 1px solid" valign="bottom" colspan="2" align="center">For the Period August 29,<br />
2012 (Inception) to March 31, 2013</td>
<td valign="bottom"></td>
</tr>
<!-- End Table Head --><!-- Begin Table Body -->
<tr style="FONT-FAMILY: Times New Roman; FONT-SIZE: 10pt" bgcolor="#CCEEFF">
<td valign="top">
<p style="TEXT-INDENT: -1em; FONT-FAMILY: Times New Roman; MARGIN-LEFT: 1em; FONT-SIZE: 10pt">
Statutory federal income tax rate</p>
</td>
<td valign="bottom"></td>
<td valign="bottom"></td>
<td valign="bottom" align="right">(34)%</td>
<td valign="bottom" nowrap="nowrap"></td>
</tr>
<tr style="FONT-FAMILY: Times New Roman; FONT-SIZE: 10pt">
<td valign="top">
<p style="TEXT-INDENT: -1em; FONT-FAMILY: Times New Roman; MARGIN-LEFT: 1em; FONT-SIZE: 10pt">
Valuation allowance</p>
</td>
<td valign="bottom"></td>
<td valign="bottom"></td>
<td valign="bottom" align="right">34%</td>
<td valign="bottom" nowrap="nowrap"></td>
</tr>
<tr style="FONT-SIZE: 1px">
<td valign="bottom"></td>
<td valign="bottom"></td>
<td valign="bottom">
<p style="BORDER-TOP: #000000 1px solid"></p>
</td>
<td valign="bottom">
<p style="BORDER-TOP: #000000 1px solid"></p>
</td>
<td></td>
</tr>
<tr style="FONT-FAMILY: Times New Roman; FONT-SIZE: 10pt" bgcolor="#CCEEFF">
<td valign="top">
<p style="TEXT-INDENT: -1em; FONT-FAMILY: Times New Roman; MARGIN-LEFT: 1em; FONT-SIZE: 10pt">
Effective income tax rate</p>
</td>
<td valign="bottom"></td>
<td valign="bottom"></td>
<td valign="bottom" align="right">0%</td>
<td valign="bottom" nowrap="nowrap"></td>
</tr>
<tr style="FONT-SIZE: 1px">
<td valign="bottom"></td>
<td valign="bottom"></td>
<td valign="bottom">
<p style="BORDER-TOP: #000000 3px double"></p>
</td>
<td valign="bottom">
<p style="BORDER-TOP: #000000 3px double"></p>
</td>
<td></td>
</tr>
<!-- End Table Body --></table>
</div>
<div>
<p style="MARGIN-TOP: 18pt; FONT-FAMILY: Times New Roman; MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt">
Note 7 - <u>Related Party Transactions</u></p>
<!-- xbrl,body -->
<p style="MARGIN-TOP: 6pt; FONT-FAMILY: Times New Roman; MARGIN-BOTTOM: 0pt; MARGIN-LEFT: 7%; FONT-SIZE: 10pt">
The Company utilizes the office space and equipment of its
management at no cost.</p>
<p style="MARGIN-TOP: 12pt; FONT-FAMILY: Times New Roman; MARGIN-BOTTOM: 0pt; MARGIN-LEFT: 7%; FONT-SIZE: 10pt">
On October 15, 2012, the Company issued a Promissory Note payable
(the “Note”) to NLBDIT 2010 Enterprises, LLC. The Note
bears interest at 6% and is payable upon completion of a business
combination with a private company in a reverse merger or other
transaction after which the Company would cease to be a shell
company. At March 31, 2013, there is no outstanding balance.</p>
</div>
<div>
<p style="MARGIN-TOP: 0pt; FONT-FAMILY: Times New Roman; MARGIN-BOTTOM: 0pt; MARGIN-LEFT: 7%; FONT-SIZE: 10pt">
The income tax benefit differs from the amount computed by applying
the federal statutory income tax rate to the loss before income
taxes due to the following:</p>
<p style="MARGIN-TOP: 0pt; MARGIN-BOTTOM: 0pt; FONT-SIZE: 12pt">
</p>
<table style="BORDER-COLLAPSE: collapse; FONT-FAMILY: Times New Roman; FONT-SIZE: 10pt" border="0" cellspacing="0" cellpadding="0" width="76%" align="center"><!-- Begin Table Head -->
<tr>
<td width="62%"></td>
<td valign="bottom" width="27%"></td>
<td></td>
<td></td>
<td></td>
</tr>
<tr style="FONT-FAMILY: Times New Roman; FONT-SIZE: 8pt">
<td valign="bottom"></td>
<td valign="bottom"></td>
<td style="BORDER-BOTTOM: #000000 1px solid" valign="bottom" colspan="2" align="center">For the Period August 29,<br />
2012 (Inception) to March 31, 2013</td>
<td valign="bottom"></td>
</tr>
<!-- End Table Head --><!-- Begin Table Body -->
<tr style="FONT-FAMILY: Times New Roman; FONT-SIZE: 10pt" bgcolor="#CCEEFF">
<td valign="top">
<p style="TEXT-INDENT: -1em; FONT-FAMILY: Times New Roman; MARGIN-LEFT: 1em; FONT-SIZE: 10pt">
Statutory federal income tax rate</p>
</td>
<td valign="bottom"></td>
<td valign="bottom"></td>
<td valign="bottom" align="right">(34)%</td>
<td valign="bottom" nowrap="nowrap"></td>
</tr>
<tr style="FONT-FAMILY: Times New Roman; FONT-SIZE: 10pt">
<td valign="top">
<p style="TEXT-INDENT: -1em; FONT-FAMILY: Times New Roman; MARGIN-LEFT: 1em; FONT-SIZE: 10pt">
Valuation allowance</p>
</td>
<td valign="bottom"></td>
<td valign="bottom"></td>
<td valign="bottom" align="right">34%</td>
<td valign="bottom" nowrap="nowrap"></td>
</tr>
<tr style="FONT-SIZE: 1px">
<td valign="bottom"></td>
<td valign="bottom"></td>
<td valign="bottom">
<p style="BORDER-TOP: #000000 1px solid"></p>
</td>
<td valign="bottom">
<p style="BORDER-TOP: #000000 1px solid"></p>
</td>
<td></td>
</tr>
<tr style="FONT-FAMILY: Times New Roman; FONT-SIZE: 10pt" bgcolor="#CCEEFF">
<td valign="top">
<p style="TEXT-INDENT: -1em; FONT-FAMILY: Times New Roman; MARGIN-LEFT: 1em; FONT-SIZE: 10pt">
Effective income tax rate</p>
</td>
<td valign="bottom"></td>
<td valign="bottom"></td>
<td valign="bottom" align="right">0%</td>
<td valign="bottom" nowrap="nowrap"></td>
</tr>
<tr style="FONT-SIZE: 1px">
<td valign="bottom"></td>
<td valign="bottom"></td>
<td valign="bottom">
<p style="BORDER-TOP: #000000 3px double"></p>
</td>
<td valign="bottom">
<p style="BORDER-TOP: #000000 3px double"></p>
</td>
<td></td>
</tr>
<!-- End Table Body --></table>
</div>
<div>
<p style="MARGIN-TOP: 18pt; FONT-FAMILY: Times New Roman; MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt">
Note 2 - <u>Summary of Significant Accounting Policies</u></p>
<!-- xbrl,body -->
<p style="MARGIN-TOP: 6pt; TEXT-INDENT: 7%; FONT-FAMILY: Times New Roman; MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt">
<u>Use of Estimates</u></p>
<p style="MARGIN-TOP: 6pt; FONT-FAMILY: Times New Roman; MARGIN-BOTTOM: 0pt; MARGIN-LEFT: 7%; FONT-SIZE: 10pt">
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 balance sheet
and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those
estimates.</p>
<p style="MARGIN-TOP: 18pt; TEXT-INDENT: 7%; FONT-FAMILY: Times New Roman; MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt">
<u>Cash Equivalents</u></p>
<p style="MARGIN-TOP: 6pt; FONT-FAMILY: Times New Roman; MARGIN-BOTTOM: 0pt; MARGIN-LEFT: 7%; FONT-SIZE: 10pt">
The Company considers highly liquid financial instruments purchased
with a maturity of three months or less to be cash equivalents.
There are no cash equivalents at the balance sheet date.</p>
<p style="MARGIN-TOP: 18pt; TEXT-INDENT: 7%; FONT-FAMILY: Times New Roman; MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt">
<u>Income Taxes</u></p>
<p style="MARGIN-TOP: 6pt; FONT-FAMILY: Times New Roman; MARGIN-BOTTOM: 0pt; MARGIN-LEFT: 7%; FONT-SIZE: 10pt">
The Company utilizes the accrual method of accounting for income
taxes. Under the accrual method, deferred tax assets and
liabilities are determined based on the differences between the
financial reporting basis and the tax basis of the assets and
liabilities and are measured using enacted tax rates and laws that
will be in effect, when the differences are expected to reverse. An
allowance against deferred tax assets is recognized, when it is
more likely than not, that such tax benefits will not be
realized.</p>
<p style="MARGIN-TOP: 12pt; FONT-FAMILY: Times New Roman; MARGIN-BOTTOM: 0pt; MARGIN-LEFT: 7%; FONT-SIZE: 10pt">
The Company recognizes the financial statement benefit of an
uncertain tax position only after considering the probability that
a tax authority would sustain the position in an examination.</p>
<p style="MARGIN-TOP: 12pt; FONT-FAMILY: Times New Roman; MARGIN-BOTTOM: 0pt; MARGIN-LEFT: 7%; FONT-SIZE: 10pt">
For tax positions meeting a “more-likely than-not”
threshold, the amount recognized in the financial statements is the
benefit expected to be realized upon settlement with the tax
authority. For tax positions not meeting the threshold, no
financial statement benefit is recognized. The Company recognizes
interest and penalties, if any, related to uncertain tax positions
in income tax expense. As of March 31, 2013, the Company has no
accrued interest or penalties related to uncertain tax
positions.</p>
<p style="MARGIN-TOP: 18pt; TEXT-INDENT: 7%; FONT-FAMILY: Times New Roman; MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt">
<u>Loss Per Common Share</u></p>
<p style="MARGIN-TOP: 6pt; FONT-FAMILY: Times New Roman; MARGIN-BOTTOM: 0pt; MARGIN-LEFT: 7%; FONT-SIZE: 10pt">
Basic loss per share is calculated using the weighted-average
number of common shares outstanding during each reporting period.
Diluted loss per share includes potentially dilutive securities
such as outstanding options and warrants, using various methods
such as the treasury stock or modified treasury stock method in the
determination of dilutive shares outstanding during each reporting
period. The Company does not have any potentially dilutive
instruments for the period presented.</p>
<p style="MARGIN-TOP: 18pt; TEXT-INDENT: 7%; FONT-FAMILY: Times New Roman; MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt">
<u>Emerging Growth Company</u></p>
<p style="MARGIN-TOP: 6pt; FONT-FAMILY: Times New Roman; MARGIN-BOTTOM: 0pt; MARGIN-LEFT: 7%; FONT-SIZE: 10pt">
The Company is an “emerging growth company” and has
elected to use the extended transition period for complying with
new or revised accounting standards under Section 102(b)(1) of the
JOBS Act. This election allows us to delay the adoption of new or
revised accounting standards that have different effective dates
for public and private companies until those standards apply to
private companies.</p>
<p style="MARGIN-TOP: 18pt; TEXT-INDENT: 7%; FONT-FAMILY: Times New Roman; MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt">
<u>Recent Accounting Pronouncements</u></p>
<p style="MARGIN-TOP: 6pt; FONT-FAMILY: Times New Roman; MARGIN-BOTTOM: 0pt; MARGIN-LEFT: 7%; FONT-SIZE: 10pt">
Management does not believe that any recently issued, but not yet
effective accounting pronouncements, if adopted, would have a
material effect on the accompanying financial statements.</p>
</div>
Through 2033.
<div>
<p style="MARGIN-TOP: 6pt; TEXT-INDENT: 7%; FONT-FAMILY: Times New Roman; MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt">
<u>Use of Estimates</u></p>
<p style="MARGIN-TOP: 6pt; FONT-FAMILY: Times New Roman; MARGIN-BOTTOM: 0pt; MARGIN-LEFT: 7%; FONT-SIZE: 10pt">
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 balance sheet
and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those
estimates.</p>
</div>
<div>
<p style="MARGIN-TOP: 12pt; FONT-FAMILY: Times New Roman; MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt">
Note 1 - <u>Organization and Business</u></p>
<!-- xbrl,body -->
<p style="MARGIN-TOP: 6pt; TEXT-INDENT: 7%; FONT-FAMILY: Times New Roman; MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt">
<u>Business Activity</u></p>
<p style="MARGIN-TOP: 6pt; FONT-FAMILY: Times New Roman; MARGIN-BOTTOM: 0pt; MARGIN-LEFT: 7%; FONT-SIZE: 10pt">
Oneida Resources Corp., a Development Stage Company, (“the
Company”) was incorporated in the state of Delaware on August
29, 2012 with the objective to acquire, or merge with, an operating
business.</p>
<p style="MARGIN-TOP: 12pt; FONT-FAMILY: Times New Roman; MARGIN-BOTTOM: 0pt; MARGIN-LEFT: 7%; FONT-SIZE: 10pt">
The Company was organized as a vehicle to investigate and, if such
investigation warrants, acquire a target company or business
seeking the perceived advantages of being a publicly traded
corporation. The Company’s principal business objective over
the next twelve months and beyond will be to achieve long-term
growth potential through a combination with a business rather than
immediate short-term earnings. The Company will not restrict its
potential target companies to any specific business, industry or
geographical location. The analysis of business opportunities will
be undertaken by, or under the supervision of, the officers and
directors of the Company.</p>
</div>
<div>
<p style="MARGIN-TOP: 18pt; TEXT-INDENT: 7%; FONT-FAMILY: Times New Roman; MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt">
<u>Loss Per Common Share</u></p>
<p style="MARGIN-TOP: 6pt; FONT-FAMILY: Times New Roman; MARGIN-BOTTOM: 0pt; MARGIN-LEFT: 7%; FONT-SIZE: 10pt">
Basic loss per share is calculated using the weighted-average
number of common shares outstanding during each reporting period.
Diluted loss per share includes potentially dilutive securities
such as outstanding options and warrants, using various methods
such as the treasury stock or modified treasury stock method in the
determination of dilutive shares outstanding during each reporting
period. The Company does not have any potentially dilutive
instruments for the period presented.</p>
</div>
<div>
<p style="MARGIN-TOP: 12pt; FONT-FAMILY: Times New Roman; MARGIN-BOTTOM: 0pt; MARGIN-LEFT: 7%; FONT-SIZE: 10pt">
The benefit from income taxes consists of the following:</p>
<p style="MARGIN-TOP: 0pt; MARGIN-BOTTOM: 0pt; FONT-SIZE: 12pt">
</p>
<table style="BORDER-COLLAPSE: collapse; FONT-FAMILY: Times New Roman; FONT-SIZE: 10pt" border="0" cellspacing="0" cellpadding="0" width="68%" align="center"><!-- Begin Table Head -->
<tr>
<td width="57%"></td>
<td valign="bottom" width="40%"></td>
<td></td>
<td></td>
<td></td>
</tr>
<tr style="FONT-FAMILY: Times New Roman; FONT-SIZE: 8pt">
<td valign="bottom"></td>
<td valign="bottom"></td>
<td style="BORDER-BOTTOM: #000000 1px solid" valign="bottom" colspan="2" align="center">For the Period August 29,<br />
2012 (Inception) to March 31, 2013</td>
<td valign="bottom"></td>
</tr>
<!-- End Table Head --><!-- Begin Table Body -->
<tr style="FONT-FAMILY: Times New Roman; FONT-SIZE: 10pt" bgcolor="#CCEEFF">
<td valign="top">
<p style="TEXT-INDENT: -1em; FONT-FAMILY: Times New Roman; MARGIN-LEFT: 1em; FONT-SIZE: 10pt">
Current Expense:</p>
</td>
<td valign="bottom"></td>
<td valign="bottom"></td>
<td valign="bottom"></td>
<td valign="bottom"></td>
</tr>
<tr style="FONT-FAMILY: Times New Roman; FONT-SIZE: 10pt">
<td valign="top">
<p style="TEXT-INDENT: -1em; FONT-FAMILY: Times New Roman; MARGIN-LEFT: 3em; FONT-SIZE: 10pt">
Federal and State</p>
</td>
<td valign="bottom"></td>
<td valign="bottom">$</td>
<td valign="bottom" align="right">—</td>
<td valign="bottom" nowrap="nowrap"></td>
</tr>
<tr style="FONT-FAMILY: Times New Roman; FONT-SIZE: 10pt" bgcolor="#CCEEFF">
<td valign="top">
<p style="TEXT-INDENT: -1em; FONT-FAMILY: Times New Roman; MARGIN-LEFT: 1em; FONT-SIZE: 10pt">
Deferred tax benefit:</p>
</td>
<td valign="bottom"></td>
<td valign="bottom"></td>
<td valign="bottom"></td>
<td valign="bottom"></td>
</tr>
<tr style="FONT-FAMILY: Times New Roman; FONT-SIZE: 10pt">
<td valign="top">
<p style="TEXT-INDENT: -1em; FONT-FAMILY: Times New Roman; MARGIN-LEFT: 3em; FONT-SIZE: 10pt">
Federal and State</p>
</td>
<td valign="bottom"></td>
<td valign="bottom"></td>
<td valign="bottom" align="right">11,000</td>
<td valign="bottom" nowrap="nowrap"></td>
</tr>
<tr style="FONT-FAMILY: Times New Roman; FONT-SIZE: 10pt" bgcolor="#CCEEFF">
<td valign="top">
<p style="TEXT-INDENT: -1em; FONT-FAMILY: Times New Roman; MARGIN-LEFT: 5em; FONT-SIZE: 10pt">
Valuation allowance</p>
</td>
<td valign="bottom"></td>
<td valign="bottom"></td>
<td valign="bottom" align="right">(11,000</td>
<td valign="bottom" nowrap="nowrap">)</td>
</tr>
<tr style="FONT-SIZE: 1px">
<td valign="bottom"></td>
<td valign="bottom"></td>
<td valign="bottom">
<p style="BORDER-TOP: #000000 1px solid"></p>
</td>
<td valign="bottom">
<p style="BORDER-TOP: #000000 1px solid"></p>
</td>
<td></td>
</tr>
<tr style="FONT-FAMILY: Times New Roman; FONT-SIZE: 10pt">
<td valign="top">
<p style="TEXT-INDENT: -1em; FONT-FAMILY: Times New Roman; MARGIN-LEFT: 1em; FONT-SIZE: 10pt">
Total</p>
</td>
<td valign="bottom"></td>
<td valign="bottom">$</td>
<td valign="bottom" align="right">—</td>
<td valign="bottom" nowrap="nowrap"></td>
</tr>
<tr style="FONT-SIZE: 1px">
<td valign="bottom"></td>
<td valign="bottom"></td>
<td valign="bottom">
<p style="BORDER-TOP: #000000 3px double"></p>
</td>
<td valign="bottom">
<p style="BORDER-TOP: #000000 3px double"></p>
</td>
<td></td>
</tr>
<!-- End Table Body --></table>
<p style="MARGIN-TOP: 0pt; MARGIN-BOTTOM: 0pt; FONT-SIZE: 12pt">
</p>
</div>
<div>
<p style="MARGIN-TOP: 18pt; TEXT-INDENT: 7%; FONT-FAMILY: Times New Roman; MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt">
<u>Income Taxes</u></p>
<p style="MARGIN-TOP: 6pt; FONT-FAMILY: Times New Roman; MARGIN-BOTTOM: 0pt; MARGIN-LEFT: 7%; FONT-SIZE: 10pt">
The Company utilizes the accrual method of accounting for income
taxes. Under the accrual method, deferred tax assets and
liabilities are determined based on the differences between the
financial reporting basis and the tax basis of the assets and
liabilities and are measured using enacted tax rates and laws that
will be in effect, when the differences are expected to reverse. An
allowance against deferred tax assets is recognized, when it is
more likely than not, that such tax benefits will not be
realized.</p>
<p style="MARGIN-TOP: 12pt; FONT-FAMILY: Times New Roman; MARGIN-BOTTOM: 0pt; MARGIN-LEFT: 7%; FONT-SIZE: 10pt">
The Company recognizes the financial statement benefit of an
uncertain tax position only after considering the probability that
a tax authority would sustain the position in an examination.</p>
<p style="MARGIN-TOP: 12pt; FONT-FAMILY: Times New Roman; MARGIN-BOTTOM: 0pt; MARGIN-LEFT: 7%; FONT-SIZE: 10pt">
For tax positions meeting a “more-likely than-not”
threshold, the amount recognized in the financial statements is the
benefit expected to be realized upon settlement with the tax
authority. For tax positions not meeting the threshold, no
financial statement benefit is recognized. The Company recognizes
interest and penalties, if any, related to uncertain tax positions
in income tax expense. As of March 31, 2013, the Company has no
accrued interest or penalties related to uncertain tax
positions.</p>
</div>
-32100
11000
10000
-32100
32100
10000
11000
4070
26170
10000
<div>
<p style="MARGIN-TOP: 18pt; FONT-FAMILY: Times New Roman; MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt">
Note 3 - <u>Going Concern</u></p>
<!-- xbrl,body -->
<p style="MARGIN-TOP: 6pt; FONT-FAMILY: Times New Roman; MARGIN-BOTTOM: 0pt; MARGIN-LEFT: 7%; FONT-SIZE: 10pt">
The accompanying financial statements have been prepared assuming
the Company will continue as a going concern, which contemplates
the recoverability of assets and the satisfaction of liabilities in
the normal course of business.</p>
<p style="MARGIN-TOP: 12pt; FONT-FAMILY: Times New Roman; MARGIN-BOTTOM: 0pt; MARGIN-LEFT: 7%; FONT-SIZE: 10pt">
The Company has incurred losses from inception of approximately
$32,000, and has negative working capital of approximately $22,000
at March 31, 2013, which among other factors, raises substantial
doubt about the Company’s ability to continue as a going
concern. The ability of the Company to continue as a going concern
is dependent upon management’s plan to find a suitable
acquisition or merger candidate, raise additional capital from the
sales of stock, and receive loans from related parties. The
accompanying financial statements do not include any adjustments
that might be required should the Company be unable to continue as
a going concern.</p>
</div>
<div>
<p style="MARGIN-TOP: 18pt; TEXT-INDENT: 7%; FONT-FAMILY: Times New Roman; MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt">
<u>Emerging Growth Company</u></p>
<p style="MARGIN-TOP: 6pt; FONT-FAMILY: Times New Roman; MARGIN-BOTTOM: 0pt; MARGIN-LEFT: 7%; FONT-SIZE: 10pt">
The Company is an “emerging growth company” and has
elected to use the extended transition period for complying with
new or revised accounting standards under Section 102(b)(1) of the
JOBS Act. This election allows us to delay the adoption of new or
revised accounting standards that have different effective dates
for public and private companies until those standards apply to
private companies.</p>
</div>
-32000
-32100
5000000
500
9500
0.06
<div>
<p style="MARGIN-TOP: 18pt; FONT-FAMILY: Times New Roman; MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt">
<b>4. Share-Based Compensation</b></p>
<p style="MARGIN-TOP: 6pt; FONT-FAMILY: Times New Roman; MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt">
The Company sponsors the Intra-Cellular Therapies, Inc. 2003 Equity
Incentive Plan (the Plan) to provide for the granting of stock
awards, such as stock options, restricted common stock and stock
appreciation rights to employees, directors and other individuals
as determined by the Board of Directors. The Company reserved
3,700,000 shares of common stock for issuance under the Plan. In
December 2012, the Company increased the number of shares of common
stock reserved for issuance under the plan to 5,700,000.</p>
<p style="MARGIN-TOP: 12pt; FONT-FAMILY: Times New Roman; MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt">
Stock options granted under the Plan may be either incentive stock
options (ISOs) as defined by the Internal Revenue Code, or
non-qualified stock options. The Board of Directors determines who
will receive options, the vesting periods (which are generally two
to three years) and the exercise prices. Options have a maximum
term of ten years. The exercise price of ISOs granted under the
Plan must be at least equal to the fair market value of the common
stock on the date of grant.</p>
<p style="MARGIN-TOP: 12pt; FONT-FAMILY: Times New Roman; MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt">
Total stock-based compensation expense, related to all of the
Company’s share-based awards to employees, directors and
non-employees recognized during three- and six-months ended June
30, 2013 and 2012 was comprised of the following:</p>
<p style="MARGIN-TOP: 0pt; MARGIN-BOTTOM: 0pt; FONT-SIZE: 12pt">
</p>
<table style="BORDER-COLLAPSE: collapse; FONT-FAMILY: Times New Roman; FONT-SIZE: 10pt" border="0" cellspacing="0" cellpadding="0" width="92%" align="center"><!-- Begin Table Head -->
<tr>
<td width="58%"></td>
<td valign="bottom" width="4%"></td>
<td></td>
<td></td>
<td></td>
<td valign="bottom" width="4%"></td>
<td></td>
<td></td>
<td></td>
<td valign="bottom" width="4%"></td>
<td></td>
<td></td>
<td></td>
<td valign="bottom" width="4%"></td>
<td></td>
<td></td>
<td></td>
</tr>
<tr style="FONT-FAMILY: Times New Roman; FONT-SIZE: 8pt">
<td valign="bottom"></td>
<td valign="bottom"></td>
<td valign="bottom" colspan="6" align="center"><b>Three-Months
Ended<br />
June 30</b></td>
<td valign="bottom"></td>
<td valign="bottom"></td>
<td valign="bottom" colspan="6" align="center"><b>Six-Months
Ended<br />
June 30</b></td>
<td valign="bottom"></td>
</tr>
<tr style="FONT-FAMILY: Times New Roman; FONT-SIZE: 8pt">
<td valign="bottom"></td>
<td valign="bottom"></td>
<td style="BORDER-BOTTOM: #000000 1pt solid" valign="bottom" colspan="2" align="center"><b>2013</b></td>
<td valign="bottom"></td>
<td valign="bottom"></td>
<td style="BORDER-BOTTOM: #000000 1pt solid" valign="bottom" colspan="2" align="center"><b>2012</b></td>
<td valign="bottom"></td>
<td valign="bottom"></td>
<td style="BORDER-BOTTOM: #000000 1pt solid" valign="bottom" colspan="2" align="center"><b>2013</b></td>
<td valign="bottom"></td>
<td valign="bottom"></td>
<td style="BORDER-BOTTOM: #000000 1pt solid" valign="bottom" colspan="2" align="center"><b>2012</b></td>
<td valign="bottom"></td>
</tr>
<!-- End Table Head --><!-- Begin Table Body -->
<tr>
<td height="8"></td>
<td height="8" colspan="4"></td>
<td height="8" colspan="4"></td>
<td height="8" colspan="4"></td>
<td height="8" colspan="4"></td>
</tr>
<tr style="FONT-FAMILY: Times New Roman; FONT-SIZE: 10pt" bgcolor="#CCEEFF">
<td valign="top">
<p style="TEXT-INDENT: -1em; FONT-FAMILY: Times New Roman; MARGIN-LEFT: 1em; FONT-SIZE: 10pt">
Research and development</p>
</td>
<td valign="bottom"></td>
<td valign="bottom"><b>$</b></td>
<td valign="bottom" align="right"><b>31,466</b></td>
<td valign="bottom" nowrap="nowrap"></td>
<td valign="bottom"></td>
<td valign="bottom">$</td>
<td valign="bottom" align="right">22,152</td>
<td valign="bottom" nowrap="nowrap"></td>
<td valign="bottom"></td>
<td valign="bottom"><b>$</b></td>
<td valign="bottom" align="right"><b>58,087</b></td>
<td valign="bottom" nowrap="nowrap"></td>
<td valign="bottom"></td>
<td valign="bottom">$</td>
<td valign="bottom" align="right">42,441</td>
<td valign="bottom" nowrap="nowrap"></td>
</tr>
<tr style="FONT-FAMILY: Times New Roman; FONT-SIZE: 10pt">
<td valign="top">
<p style="TEXT-INDENT: -1em; FONT-FAMILY: Times New Roman; MARGIN-LEFT: 1em; FONT-SIZE: 10pt">
General and administrative</p>
</td>
<td valign="bottom"></td>
<td valign="bottom"></td>
<td valign="bottom" align="right"><b>57,697</b></td>
<td valign="bottom" nowrap="nowrap"></td>
<td valign="bottom"></td>
<td valign="bottom"></td>
<td valign="bottom" align="right">61,418</td>
<td valign="bottom" nowrap="nowrap"></td>
<td valign="bottom"></td>
<td valign="bottom"></td>
<td valign="bottom" align="right"><b>105,146</b></td>
<td valign="bottom" nowrap="nowrap"></td>
<td valign="bottom"></td>
<td valign="bottom"></td>
<td valign="bottom" align="right">109,210</td>
<td valign="bottom" nowrap="nowrap"></td>
</tr>
<tr style="FONT-SIZE: 1px">
<td valign="bottom"></td>
<td valign="bottom"></td>
<td valign="bottom">
<p style="BORDER-TOP: #000000 1px solid"></p>
</td>
<td valign="bottom">
<p style="BORDER-TOP: #000000 1px solid"></p>
</td>
<td></td>
<td valign="bottom"></td>
<td valign="bottom">
<p style="BORDER-TOP: #000000 1px solid"></p>
</td>
<td valign="bottom">
<p style="BORDER-TOP: #000000 1px solid"></p>
</td>
<td></td>
<td valign="bottom"></td>
<td valign="bottom">
<p style="BORDER-TOP: #000000 1px solid"></p>
</td>
<td valign="bottom">
<p style="BORDER-TOP: #000000 1px solid"></p>
</td>
<td></td>
<td valign="bottom"></td>
<td valign="bottom">
<p style="BORDER-TOP: #000000 1px solid"></p>
</td>
<td valign="bottom">
<p style="BORDER-TOP: #000000 1px solid"></p>
</td>
<td></td>
</tr>
<tr style="FONT-FAMILY: Times New Roman; FONT-SIZE: 10pt" bgcolor="#CCEEFF">
<td valign="top">
<p style="TEXT-INDENT: -1em; FONT-FAMILY: Times New Roman; MARGIN-LEFT: 1em; FONT-SIZE: 10pt">
Total share-based compensation expense</p>
</td>
<td valign="bottom"></td>
<td valign="bottom"><b>$</b></td>
<td valign="bottom" align="right"><b>89,163</b></td>
<td valign="bottom" nowrap="nowrap"></td>
<td valign="bottom"></td>
<td valign="bottom">$</td>
<td valign="bottom" align="right">83,570</td>
<td valign="bottom" nowrap="nowrap"></td>
<td valign="bottom"></td>
<td valign="bottom"><b>$</b></td>
<td valign="bottom" align="right"><b>163,233</b></td>
<td valign="bottom" nowrap="nowrap"></td>
<td valign="bottom"></td>
<td valign="bottom">$</td>
<td valign="bottom" align="right">151,651</td>
<td valign="bottom" nowrap="nowrap"></td>
</tr>
<tr style="FONT-SIZE: 1px">
<td valign="bottom"></td>
<td valign="bottom"></td>
<td valign="bottom">
<p style="BORDER-TOP: #000000 3px double"></p>
</td>
<td valign="bottom">
<p style="BORDER-TOP: #000000 3px double"></p>
</td>
<td></td>
<td valign="bottom"></td>
<td valign="bottom">
<p style="BORDER-TOP: #000000 3px double"></p>
</td>
<td valign="bottom">
<p style="BORDER-TOP: #000000 3px double"></p>
</td>
<td></td>
<td valign="bottom"></td>
<td valign="bottom">
<p style="BORDER-TOP: #000000 3px double"></p>
</td>
<td valign="bottom">
<p style="BORDER-TOP: #000000 3px double"></p>
</td>
<td></td>
<td valign="bottom"></td>
<td valign="bottom">
<p style="BORDER-TOP: #000000 3px double"></p>
</td>
<td valign="bottom">
<p style="BORDER-TOP: #000000 3px double"></p>
</td>
<td></td>
</tr>
<!-- End Table Body --></table>
<p style="MARGIN-TOP: 0pt; MARGIN-BOTTOM: 0pt; FONT-SIZE: 12pt">
</p>
<p style="MARGIN-TOP: 0pt; FONT-FAMILY: Times New Roman; MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt">
The following table describes the weighted-average assumptions used
for calculating the value of options granted during the six-months
ended June 30, 2013:</p>
<p style="MARGIN-TOP: 0pt; MARGIN-BOTTOM: 0pt; FONT-SIZE: 12pt">
</p>
<table style="BORDER-COLLAPSE: collapse; FONT-FAMILY: Times New Roman; FONT-SIZE: 10pt" border="0" cellspacing="0" cellpadding="0" width="76%" align="center"><!-- Begin Table Head -->
<tr>
<td width="85%"></td>
<td valign="bottom" width="7%"></td>
<td></td>
<td></td>
<td></td>
</tr>
<tr style="FONT-FAMILY: Times New Roman; FONT-SIZE: 8pt">
<td valign="bottom"></td>
<td valign="bottom"></td>
<td style="BORDER-BOTTOM: #000000 1pt solid" valign="bottom" colspan="2" align="center"><b>2013</b></td>
<td valign="bottom"></td>
</tr>
<!-- End Table Head --><!-- Begin Table Body -->
<tr>
<td height="8"></td>
<td height="8" colspan="4"></td>
</tr>
<tr style="FONT-FAMILY: Times New Roman; FONT-SIZE: 10pt" bgcolor="#CCEEFF">
<td valign="top">
<p style="TEXT-INDENT: -1em; FONT-FAMILY: Times New Roman; MARGIN-LEFT: 1em; FONT-SIZE: 10pt">
Dividend yield</p>
</td>
<td valign="bottom"></td>
<td valign="bottom"></td>
<td valign="bottom" align="right"><b>0</b></td>
<td valign="bottom" nowrap="nowrap"><b>%</b></td>
</tr>
<tr style="FONT-FAMILY: Times New Roman; FONT-SIZE: 10pt">
<td valign="top">
<p style="TEXT-INDENT: -1em; FONT-FAMILY: Times New Roman; MARGIN-LEFT: 1em; FONT-SIZE: 10pt">
Expected volatility</p>
</td>
<td valign="bottom"></td>
<td valign="bottom"></td>
<td valign="bottom" align="right"><b>80</b></td>
<td valign="bottom" nowrap="nowrap"><b>%</b></td>
</tr>
<tr style="FONT-FAMILY: Times New Roman; FONT-SIZE: 10pt" bgcolor="#CCEEFF">
<td valign="top">
<p style="TEXT-INDENT: -1em; FONT-FAMILY: Times New Roman; MARGIN-LEFT: 1em; FONT-SIZE: 10pt">
Weighted-average risk-free interest rate</p>
</td>
<td valign="bottom"></td>
<td valign="bottom"></td>
<td valign="bottom" align="right"><b>1.40</b></td>
<td valign="bottom" nowrap="nowrap"><b>%</b></td>
</tr>
<tr style="FONT-FAMILY: Times New Roman; FONT-SIZE: 10pt">
<td valign="top">
<p style="TEXT-INDENT: -1em; FONT-FAMILY: Times New Roman; MARGIN-LEFT: 1em; FONT-SIZE: 10pt">
Expected term</p>
</td>
<td valign="bottom"></td>
<td valign="bottom"></td>
<td valign="bottom" align="right"><b>6.2 years</b></td>
<td valign="bottom" nowrap="nowrap"></td>
</tr>
<!-- End Table Body --></table>
<p style="MARGIN-TOP: 12pt; FONT-FAMILY: Times New Roman; MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt">
Information regarding the stock options activity including
employees, directors and <font style="WHITE-SPACE: nowrap">non-employees</font> as of June 30, 2013, and
changes during the period then ended, are summarized as
follows:</p>
<p style="MARGIN-TOP: 0pt; MARGIN-BOTTOM: 0pt; FONT-SIZE: 12pt">
</p>
<table style="BORDER-COLLAPSE: collapse; FONT-FAMILY: Times New Roman; FONT-SIZE: 10pt" border="0" cellspacing="0" cellpadding="0" width="92%" align="center"><!-- Begin Table Head -->
<tr>
<td width="65%"></td>
<td valign="bottom" width="5%"></td>
<td></td>
<td></td>
<td></td>
<td valign="bottom" width="4%"></td>
<td></td>
<td></td>
<td></td>
<td valign="bottom" width="5%"></td>
<td></td>
<td></td>
<td></td>
</tr>
<tr style="FONT-FAMILY: Times New Roman; FONT-SIZE: 8pt">
<td valign="bottom"></td>
<td valign="bottom"></td>
<td style="BORDER-BOTTOM: #000000 1pt solid" valign="bottom" colspan="2" align="center"><b>Number of<br />
Shares</b></td>
<td valign="bottom"></td>
<td valign="bottom"></td>
<td style="BORDER-BOTTOM: #000000 1pt solid" valign="bottom" colspan="2" align="center"><b>Weighted-<br />
Average</b><br />
<b>Exercise<br />
Price</b></td>
<td valign="bottom"></td>
<td valign="bottom"></td>
<td style="BORDER-BOTTOM: #000000 1pt solid" valign="bottom" colspan="2" align="center"><b>Weighted-<br />
Average<br />
Contractual<br />
Life</b></td>
<td valign="bottom"></td>
</tr>
<!-- End Table Head --><!-- Begin Table Body -->
<tr>
<td height="8"></td>
<td height="8" colspan="4"></td>
<td height="8" colspan="4"></td>
<td height="8" colspan="4"></td>
</tr>
<tr style="FONT-FAMILY: Times New Roman; FONT-SIZE: 10pt" bgcolor="#CCEEFF">
<td valign="top">
<p style="TEXT-INDENT: -1em; FONT-FAMILY: Times New Roman; MARGIN-LEFT: 1em; FONT-SIZE: 10pt">
Outstanding at December 31, 2012 (audited)</p>
</td>
<td valign="bottom"></td>
<td valign="bottom"></td>
<td valign="bottom" align="right">3,414,227</td>
<td valign="bottom" nowrap="nowrap"></td>
<td valign="bottom"></td>
<td valign="bottom">$</td>
<td valign="bottom" align="right">0.66</td>
<td valign="bottom" nowrap="nowrap"></td>
<td valign="bottom"></td>
<td valign="bottom"></td>
<td valign="bottom" align="right">4.4 years</td>
<td valign="bottom" nowrap="nowrap"></td>
</tr>
<tr style="FONT-FAMILY: Times New Roman; FONT-SIZE: 10pt">
<td valign="top">
<p style="TEXT-INDENT: -1em; FONT-FAMILY: Times New Roman; MARGIN-LEFT: 3em; FONT-SIZE: 10pt">
Options granted (unaudited)</p>
</td>
<td valign="bottom"></td>
<td valign="bottom"></td>
<td valign="bottom" align="right">495,200</td>
<td valign="bottom" nowrap="nowrap"></td>
<td valign="bottom"></td>
<td valign="bottom"></td>
<td valign="bottom" align="right">1.63</td>
<td valign="bottom" nowrap="nowrap"></td>
<td valign="bottom"></td>
<td valign="bottom"></td>
<td valign="bottom" align="right">6.2 years</td>
<td valign="bottom" nowrap="nowrap"></td>
</tr>
<tr style="FONT-FAMILY: Times New Roman; FONT-SIZE: 10pt" bgcolor="#CCEEFF">
<td valign="top">
<p style="TEXT-INDENT: -1em; FONT-FAMILY: Times New Roman; MARGIN-LEFT: 3em; FONT-SIZE: 10pt">
Options exercised (unaudited)</p>
</td>
<td valign="bottom"></td>
<td valign="bottom"></td>
<td valign="bottom" align="right">(362,666</td>
<td valign="bottom" nowrap="nowrap">)</td>
<td valign="bottom"></td>
<td valign="bottom"></td>
<td valign="bottom" align="right">0.54</td>
<td valign="bottom" nowrap="nowrap"></td>
<td valign="bottom"></td>
<td valign="bottom"></td>
<td valign="bottom" align="right">2.9 years</td>
<td valign="bottom" nowrap="nowrap"></td>
</tr>
<tr style="FONT-FAMILY: Times New Roman; FONT-SIZE: 10pt">
<td valign="top">
<p style="TEXT-INDENT: -1em; FONT-FAMILY: Times New Roman; MARGIN-LEFT: 3em; FONT-SIZE: 10pt">
Options canceled or expired (unaudited)</p>
</td>
<td valign="bottom"></td>
<td valign="bottom"></td>
<td valign="bottom" align="right">(5,334</td>
<td valign="bottom" nowrap="nowrap">)</td>
<td valign="bottom"></td>
<td valign="bottom"></td>
<td valign="bottom" align="right">1.49</td>
<td valign="bottom" nowrap="nowrap"></td>
<td valign="bottom"></td>
<td valign="bottom"></td>
<td valign="bottom" align="right">8.9 years</td>
<td valign="bottom" nowrap="nowrap"></td>
</tr>
<tr style="FONT-SIZE: 1px">
<td valign="bottom"></td>
<td valign="bottom"></td>
<td valign="bottom">
<p style="BORDER-TOP: #000000 1px solid"></p>
</td>
<td valign="bottom">
<p style="BORDER-TOP: #000000 1px solid"></p>
</td>
<td></td>
<td valign="bottom"></td>
<td valign="bottom">
<p style="BORDER-TOP: #000000 1px solid"></p>
</td>
<td valign="bottom">
<p style="BORDER-TOP: #000000 1px solid"></p>
</td>
<td></td>
<td valign="bottom"></td>
<td valign="bottom"></td>
<td valign="bottom"></td>
<td valign="bottom"></td>
</tr>
<tr style="FONT-FAMILY: Times New Roman; FONT-SIZE: 10pt" bgcolor="#CCEEFF">
<td valign="top">
<p style="TEXT-INDENT: -1em; FONT-FAMILY: Times New Roman; MARGIN-LEFT: 1em; FONT-SIZE: 10pt">
Outstanding at June 30, 2013 (unaudited)</p>
</td>
<td valign="bottom"></td>
<td valign="bottom"></td>
<td valign="bottom" align="right">3,541,427</td>
<td valign="bottom" nowrap="nowrap"></td>
<td valign="bottom"></td>
<td valign="bottom"></td>
<td valign="bottom" align="right">0.84</td>
<td valign="bottom" nowrap="nowrap"></td>
<td valign="bottom"></td>
<td valign="bottom"></td>
<td valign="bottom" align="right">4.8 years</td>
<td valign="bottom" nowrap="nowrap"></td>
</tr>
<tr style="FONT-SIZE: 1px">
<td valign="bottom"></td>
<td valign="bottom"></td>
<td valign="bottom">
<p style="BORDER-TOP: #000000 1px solid"></p>
</td>
<td valign="bottom">
<p style="BORDER-TOP: #000000 1px solid"></p>
</td>
<td></td>
<td valign="bottom"></td>
<td valign="bottom">
<p style="BORDER-TOP: #000000 1px solid"></p>
</td>
<td valign="bottom">
<p style="BORDER-TOP: #000000 1px solid"></p>
</td>
<td></td>
<td valign="bottom"></td>
<td valign="bottom"></td>
<td valign="bottom"></td>
<td valign="bottom"></td>
</tr>
<tr style="FONT-FAMILY: Times New Roman; FONT-SIZE: 10pt">
<td valign="top">
<p style="TEXT-INDENT: -1em; FONT-FAMILY: Times New Roman; MARGIN-LEFT: 3em; FONT-SIZE: 10pt">
Vested or expected to vest at June 30, 2013 (unaudited)</p>
</td>
<td valign="bottom"></td>
<td valign="bottom"></td>
<td valign="bottom" align="right">3,541,427</td>
<td valign="bottom" nowrap="nowrap"></td>
<td valign="bottom"></td>
<td valign="bottom"></td>
<td valign="bottom" align="right">0.84</td>
<td valign="bottom" nowrap="nowrap"></td>
<td valign="bottom"></td>
<td valign="bottom"></td>
<td valign="bottom"></td>
<td valign="bottom"></td>
</tr>
<tr style="FONT-SIZE: 1px">
<td valign="bottom"></td>
<td valign="bottom"></td>
<td valign="bottom">
<p style="BORDER-TOP: #000000 3px double"></p>
</td>
<td valign="bottom">
<p style="BORDER-TOP: #000000 3px double"></p>
</td>
<td></td>
<td valign="bottom"></td>
<td valign="bottom">
<p style="BORDER-TOP: #000000 3px double"></p>
</td>
<td valign="bottom">
<p style="BORDER-TOP: #000000 3px double"></p>
</td>
<td></td>
<td valign="bottom"></td>
<td valign="bottom"></td>
<td valign="bottom"></td>
<td valign="bottom"></td>
</tr>
<tr style="FONT-FAMILY: Times New Roman; FONT-SIZE: 10pt" bgcolor="#CCEEFF">
<td valign="top">
<p style="TEXT-INDENT: -1em; FONT-FAMILY: Times New Roman; MARGIN-LEFT: 1em; FONT-SIZE: 10pt">
Exercisable at June 30, 2013 (unaudited)</p>
</td>
<td valign="bottom"></td>
<td valign="bottom"></td>
<td valign="bottom" align="right">2,802,318</td>
<td valign="bottom" nowrap="nowrap"></td>
<td valign="bottom"></td>
<td valign="bottom">$</td>
<td valign="bottom" align="right">0.65</td>
<td valign="bottom" nowrap="nowrap"></td>
<td valign="bottom"></td>
<td valign="bottom"></td>
<td valign="bottom" align="right">3.6 years</td>
<td valign="bottom" nowrap="nowrap"></td>
</tr>
<tr style="FONT-SIZE: 1px">
<td valign="bottom"></td>
<td valign="bottom"></td>
<td valign="bottom">
<p style="BORDER-TOP: #000000 3px double"></p>
</td>
<td valign="bottom">
<p style="BORDER-TOP: #000000 3px double"></p>
</td>
<td></td>
<td valign="bottom"></td>
<td valign="bottom">
<p style="BORDER-TOP: #000000 3px double"></p>
</td>
<td valign="bottom">
<p style="BORDER-TOP: #000000 3px double"></p>
</td>
<td></td>
<td valign="bottom"></td>
<td valign="bottom"></td>
<td valign="bottom"></td>
<td valign="bottom"></td>
</tr>
<!-- End Table Body --></table>
</div>
<div>
<p style="MARGIN-TOP: 18px; MARGIN-BOTTOM: 0px"><font style="FONT-FAMILY: Times New Roman" size="2"><b>Recently Issued
Accounting Pronouncements</b></font></p>
<p style="MARGIN-TOP: 6px; MARGIN-BOTTOM: 0px"><font style="FONT-FAMILY: Times New Roman" size="2">In April 2013, the
Financial Accounting Standards (FASB) issued Accounting standards
Update (ASU) 2013-02, <i>Reporting of Amounts Reclassified Out of
Accumulated Other Comprehensive Income,</i> which amended interim
and annual reporting requirements about accumulated other
comprehensive income (AOCI). In interim periods, companies are
required to report information about reclassifications out of AOCI
and changes in AOCI balances. The provision of ASU <font style="WHITE-SPACE: nowrap">2013-02</font> became effective for the first
quarter of 2013. The adoption of ASU 2103-02 did not have a
material effect on the Company’s consolidated results of
operations, financial position or liquidity.</font></p>
</div>
<div>
<p style="MARGIN-TOP: 18px; MARGIN-BOTTOM: 0px"><font style="FONT-FAMILY: Times New Roman" size="2"><b>Share-Based
Compensation</b></font></p>
<p style="MARGIN-TOP: 6px; MARGIN-BOTTOM: 0px"><font style="FONT-FAMILY: Times New Roman" size="2">Share-based payments are
accounted for in accordance with the provisions of ASC 718,
<i>Compensation – Stock Compensation</i> (ASC 718).
The fair value of share-based payments is estimated, on the date of
grant, using the Black-Scholes-Merton option-pricing model (the
Black-Scholes model). The resulting fair value is recognized
ratably over the requisite service period, which is generally the
vesting period of the option.</font></p>
<p style="MARGIN-TOP: 12px; MARGIN-BOTTOM: 0px"><font style="FONT-FAMILY: Times New Roman" size="2">For all time vesting awards
granted, expense is amortized using the straight-line attribution
method. For awards that contain a performance condition, expense is
amortized using the accelerated attribution method. As share-based
compensation expense recognized in the statements of operations for
the three- and six-months ended June 30, 2013 and 2012 and the
year ended December 31, 2012, is based on share-based awards
ultimately expected to vest, it has been reduced for estimated
forfeitures.</font></p>
<p style="MARGIN-TOP: 12px; MARGIN-BOTTOM: 0px"><font style="FONT-FAMILY: Times New Roman" size="2">ASC 718 requires
forfeitures to be estimated at the time of grant and revised, if
necessary, in subsequent periods if actual forfeitures differ from
those estimates. Pre-vesting forfeitures are based on the
Company’s historical experience for the three- and six-months
ended June 30, 2013 and 2012 the year-ended December 31,
2012, and have not been material.</font></p>
<p style="MARGIN-TOP: 12px; MARGIN-BOTTOM: 0px"><font style="FONT-FAMILY: Times New Roman" size="2">The Company utilizes the
Black-Scholes model for estimating fair value of its stock options
granted. Option valuation models, including Black-Scholes model,
require the input of subjective assumptions, and changes in the
assumptions used can materially affect the grant date fair value of
an award. These assumptions include the risk-free rate of interest,
expected dividend yield, expected volatility and the expected life
of the award.</font></p>
<p style="MARGIN-TOP: 0px; MARGIN-BOTTOM: 0px"><font style="FONT-FAMILY: Times New Roman" size="2">Expected volatility rates
are based on historical volatility of the common stock of
comparable publicly traded entities and other factors due to the
lack of historic information of the Company’s common stock.
The expected life of stock-based options is the period of time for
which the stock-based options are expected to be outstanding. Given
the lack of historic exercise data, the expected life is determined
using the “simplified method” which is defined as the
midpoint between the vesting date and the end of the contractual
term.</font></p>
<p style="MARGIN-TOP: 12px; MARGIN-BOTTOM: 0px"><font style="FONT-FAMILY: Times New Roman" size="2">The risk-free interest
rates are based on the U.S. Treasury yield for a period consistent
with the expected term of the option in effect at the time of the
grant. The Company has not paid dividends to its stockholders since
its inception and does not plan to pay cash dividends in the
foreseeable future. Therefore, the Company has assumed an expected
dividend rate of zero.</font></p>
<p style="MARGIN-TOP: 12px; MARGIN-BOTTOM: 0px"><font style="FONT-FAMILY: Times New Roman" size="2">Given the absence of an
active market for the Company’s common stock, the exercise
price of the stock options on the date of grant was determined and
approved by the board of directors using several factors, including
progress and milestones achieved in the Company’s business
development and performance, the price per share of its convertible
preferred stock offerings and general industry and economic trends.
In establishing the estimated fair value of the common stock, the
Company considered the guidance set forth in American Institute of
Certified Public Accountants Practice Guide, <i>Valuation of
Privately-Held-Company Equity Securities Issued as
Compensation</i>.</font></p>
<p style="MARGIN-TOP: 12px; MARGIN-BOTTOM: 0px"><font style="FONT-FAMILY: Times New Roman" size="2">Under ASC 718, the
cumulative amount of compensation cost recognized for instruments
classified as equity that ordinarily would result in a future tax
deduction under existing tax law shall be considered to be a
deductible difference in applying ASC 740, <i>Income Taxes</i>. The
deductible temporary difference is based on the compensation cost
recognized for financial reporting purposes; however, these
provisions currently do not impact the Company, as all the deferred
tax assets have a full valuation allowance.</font></p>
<p style="MARGIN-TOP: 12px; MARGIN-BOTTOM: 0px"><font style="FONT-FAMILY: Times New Roman" size="2">Since the Company had net
operating loss carryforwards as of June 30, 2013 and
December 31, 2012, no excess tax benefits for the tax
deductions related to share-based awards were recognized in the
statements of operations.</font></p>
<p style="MARGIN-TOP: 12px; MARGIN-BOTTOM: 0px"><font style="FONT-FAMILY: Times New Roman" size="2">Equity instruments issued
to non-employees are accounted for under the provisions of
ASC 718 and ASC 505-50, <i>Equity/Equity-Based Payments to
Non-Employees</i>. Accordingly, the estimated fair value of the
equity instrument is recorded on the earlier of the performance
commitment date or the date the services required are
completed and are marked to market during the
service period.</font></p>
</div>
<div>
<p style="TEXT-TRANSFORM: none; MARGIN-TOP: 18pt; TEXT-INDENT: 0px; LETTER-SPACING: normal; FONT: 10pt 'Times New Roman'; WHITE-SPACE: normal; MARGIN-BOTTOM: 0pt; COLOR: rgb(0,0,0); WORD-SPACING: 0px; -webkit-text-stroke-width: 0px">
<font style="FONT-FAMILY: Times New Roman" size="2"><b>Fair Value
Measurements</b></font></p>
<p style="TEXT-TRANSFORM: none; MARGIN-TOP: 6pt; TEXT-INDENT: 0px; LETTER-SPACING: normal; FONT: 10pt 'Times New Roman'; WHITE-SPACE: normal; MARGIN-BOTTOM: 0pt; COLOR: rgb(0,0,0); WORD-SPACING: 0px; -webkit-text-stroke-width: 0px">
<font style="FONT-FAMILY: Times New Roman" size="2">The Company
applies the fair value method under ASC 820, <i>Fair Value Measurements and
Disclosures</i>. ASC 820 defines fair value, establishes a
fair value hierarchy for assets and liabilities measured at fair
value and requires expanded disclosures about fair value
measurements. The ASC 820 hierarchy ranks the quality and
reliability of inputs, or assumptions, used in the determination of
fair value and requires assets and liabilities carried at fair
value to be classified and disclosed in one of the following
categories based on the lowest level input used that is significant
to a particular fair value measurement:</font></p>
<p style="TEXT-TRANSFORM: none; MARGIN-TOP: 0pt; TEXT-INDENT: 0px; LETTER-SPACING: normal; FONT: 6pt 'Times New Roman'; WHITE-SPACE: normal; MARGIN-BOTTOM: 0pt; COLOR: rgb(0,0,0); WORD-SPACING: 0px; -webkit-text-stroke-width: 0px">
<font style="FONT-FAMILY: Times New Roman" size="2"> </font></p>
<p style="MARGIN-TOP: 0px; MARGIN-BOTTOM: 0px"></p>
<table style="TEXT-TRANSFORM: none; TEXT-INDENT: 0px; LETTER-SPACING: normal; BORDER-COLLAPSE: collapse; FONT-FAMILY: 'Times New Roman'; FONT-SIZE: 10pt; WORD-SPACING: 0px; -webkit-text-stroke-width: 0px" border="0" cellspacing="0" cellpadding="0" width="100%">
<tr>
<td width="4%"> </td>
<td valign="top" width="3%" align="left">•</td>
<td valign="top" width="1%"> </td>
<td valign="top" align="left">Level 1—Fair value is
determined by using unadjusted quoted prices that are available in
active markets for identical assets and liabilities.</td>
</tr>
</table>
<p style="TEXT-TRANSFORM: none; MARGIN-TOP: 0pt; TEXT-INDENT: 0px; LETTER-SPACING: normal; FONT: 6pt 'Times New Roman'; WHITE-SPACE: normal; MARGIN-BOTTOM: 0pt; COLOR: rgb(0,0,0); WORD-SPACING: 0px; -webkit-text-stroke-width: 0px">
<font style="FONT-FAMILY: Times New Roman" size="2"> </font></p>
<p style="MARGIN-TOP: 0px; MARGIN-BOTTOM: 0px"></p>
<table style="TEXT-TRANSFORM: none; TEXT-INDENT: 0px; LETTER-SPACING: normal; BORDER-COLLAPSE: collapse; FONT-FAMILY: 'Times New Roman'; FONT-SIZE: 10pt; WORD-SPACING: 0px; -webkit-text-stroke-width: 0px" border="0" cellspacing="0" cellpadding="0" width="100%">
<tr>
<td width="4%"> </td>
<td valign="top" width="3%" align="left">•</td>
<td valign="top" width="1%"> </td>
<td valign="top" align="left">
<p style="FONT-FAMILY: 'Times New Roman'; FONT-SIZE: 10pt" align="left">Level 2—Fair value is determined by using inputs
other than Level 1 quoted prices that are directly or indirectly
observable. Inputs can include quoted prices for similar assets and
liabilities in active markets or quoted prices for identical assets
and liabilities in inactive markets. Related inputs can also
include those used in valuation or other pricing models, such as
interest rates and yield curves that can be corroborated by
observable market data.</p>
</td>
</tr>
</table>
<p style="TEXT-TRANSFORM: none; MARGIN-TOP: 0pt; TEXT-INDENT: 0px; LETTER-SPACING: normal; FONT: 6pt 'Times New Roman'; WHITE-SPACE: normal; MARGIN-BOTTOM: 0pt; COLOR: rgb(0,0,0); WORD-SPACING: 0px; -webkit-text-stroke-width: 0px">
<font style="FONT-FAMILY: Times New Roman" size="2"> </font></p>
<p style="MARGIN-TOP: 0px; MARGIN-BOTTOM: 0px"></p>
<table style="TEXT-TRANSFORM: none; TEXT-INDENT: 0px; LETTER-SPACING: normal; BORDER-COLLAPSE: collapse; FONT-FAMILY: 'Times New Roman'; FONT-SIZE: 10pt; WORD-SPACING: 0px; -webkit-text-stroke-width: 0px" border="0" cellspacing="0" cellpadding="0" width="100%">
<tr>
<td width="4%"> </td>
<td valign="top" width="3%" align="left">•</td>
<td valign="top" width="1%"> </td>
<td valign="top" align="left">Level 3—Fair value is
determined by inputs that are unobservable and not corroborated by
market data. Use of these inputs involves significant and
subjective judgments to be made by a reporting entity –
e.g., determining an appropriate adjustment to a discount factor
for illiquidity associated with a given security.</td>
</tr>
</table>
<p style="TEXT-TRANSFORM: none; MARGIN-TOP: 12pt; TEXT-INDENT: 0px; LETTER-SPACING: normal; FONT: 10pt 'Times New Roman'; WHITE-SPACE: normal; MARGIN-BOTTOM: 0pt; COLOR: rgb(0,0,0); WORD-SPACING: 0px; -webkit-text-stroke-width: 0px">
<font style="FONT-FAMILY: Times New Roman" size="2">The Company
evaluates financial assets and liabilities subject to fair value
measurements on a recurring basis to determine the appropriate
level at which to classify them each reporting period. This
determination requires the Company to make subjective judgments as
to the significance of inputs used in determining fair value and
where such inputs lie within the ASC 820 hierarchy.</font></p>
<p style="TEXT-TRANSFORM: none; MARGIN-TOP: 12pt; TEXT-INDENT: 0px; LETTER-SPACING: normal; FONT: 10pt 'Times New Roman'; WHITE-SPACE: normal; MARGIN-BOTTOM: 0pt; COLOR: rgb(0,0,0); WORD-SPACING: 0px; -webkit-text-stroke-width: 0px">
<font style="FONT-FAMILY: Times New Roman" size="2">The Company has
no assets or liabilities that were measured using quoted prices for
similar assets and liabilities or significant unobservable inputs
(Level 2 and Level 3 assets and liabilities, respectively) as of
June 30, 2013 and December 31, 2012. The carrying value of cash
held in money market funds of approximately $1.2 million as of June
30, 2013 and December 31, 2012, is included in cash and cash
equivalents and approximates market value based on quoted market
price or Level 1 inputs.</font></p>
</div>
<div>
<p style="TEXT-TRANSFORM: none; MARGIN-TOP: 18pt; TEXT-INDENT: 0px; LETTER-SPACING: normal; FONT: 10pt 'Times New Roman'; WHITE-SPACE: normal; MARGIN-BOTTOM: 0pt; COLOR: rgb(0,0,0); WORD-SPACING: 0px; -webkit-text-stroke-width: 0px">
<font style="FONT-FAMILY: Times New Roman" size="2"><b>Revenue
Recognition</b></font></p>
<p style="TEXT-TRANSFORM: none; MARGIN-TOP: 6pt; TEXT-INDENT: 0px; LETTER-SPACING: normal; FONT: 10pt 'Times New Roman'; WHITE-SPACE: normal; MARGIN-BOTTOM: 0pt; COLOR: rgb(0,0,0); WORD-SPACING: 0px; -webkit-text-stroke-width: 0px">
<font style="FONT-FAMILY: Times New Roman" size="2">Revenue is
recognized when all terms and conditions of the agreements have
been met, including persuasive evidence of an arrangement, delivery
has occurred or services have been rendered, price is fixed or
determinable and collectability is reasonably assured. The Company
is reimbursed for certain costs incurred on specified research
projects under the terms and conditions of grants, collaboration
agreements, and awards. The Company records the amount of
reimbursement as revenues on a gross basis in accordance with ASC
605-45, <i>Revenue
Recognition/Principal Agent Considerations</i>. The Company is the
primary obligor with respect to purchasing goods and services from
third-party suppliers, is obligated to compensate the service
provider for the work performed, and has discretion in selecting
the supplier. Provisions for estimated losses on research grant
projects and any other contracts are made in the period such losses
are determined.</font></p>
<p style="TEXT-TRANSFORM: none; MARGIN-TOP: 12pt; TEXT-INDENT: 0px; LETTER-SPACING: normal; FONT: 10pt 'Times New Roman'; WHITE-SPACE: normal; MARGIN-BOTTOM: 0pt; COLOR: rgb(0,0,0); WORD-SPACING: 0px; -webkit-text-stroke-width: 0px">
<font style="FONT-FAMILY: Times New Roman" size="2">The Company
engages in transactions with delivery of more than one element.
Each required deliverable is evaluated to determine whether it
qualifies as a separate unit of accounting. For ITI this
determination is generally based on whether the deliverable has
“stand-alone value” to the customer. The Company
adopted accounts for all Multiple-Deliverable Revenue Arrangements
(MDRAs) in accordance with ASC 605-25, <i>Revenue Recognition -
Multiple Element Arrangements</i>.</font></p>
<p style="TEXT-TRANSFORM: none; MARGIN-TOP: 12pt; TEXT-INDENT: 0px; LETTER-SPACING: normal; FONT: 10pt 'Times New Roman'; WHITE-SPACE: normal; MARGIN-BOTTOM: 0pt; COLOR: rgb(0,0,0); WORD-SPACING: 0px; -webkit-text-stroke-width: 0px">
<font style="FONT-FAMILY: Times New Roman" size="2">The Company
accounts for milestone revenue in accordance with ASC Topic
605-28, <i>Milestone Method</i>. Under
this guidance, we recognize revenue contingent upon the achievement
of a substantive milestone in its entirety in the period the
milestone is achieved. Substantive milestone payments are
recognized upon achievement of the milestone only if all of the
following conditions are met:</font></p>
<p style="TEXT-TRANSFORM: none; MARGIN-TOP: 0pt; TEXT-INDENT: 0px; LETTER-SPACING: normal; FONT: 6pt 'Times New Roman'; WHITE-SPACE: normal; MARGIN-BOTTOM: 0pt; COLOR: rgb(0,0,0); WORD-SPACING: 0px; -webkit-text-stroke-width: 0px">
<font style="FONT-FAMILY: Times New Roman" size="2"> </font></p>
<p style="TEXT-TRANSFORM: none; MARGIN-TOP: 18pt; TEXT-INDENT: 0px; LETTER-SPACING: normal; FONT: 10pt 'Times New Roman'; WHITE-SPACE: normal; MARGIN-BOTTOM: 0pt; COLOR: rgb(0,0,0); WORD-SPACING: 0px; -webkit-text-stroke-width: 0px">
</p>
<table style="TEXT-TRANSFORM: none; TEXT-INDENT: 0px; LETTER-SPACING: normal; BORDER-COLLAPSE: collapse; FONT-FAMILY: 'Times New Roman'; FONT-SIZE: 10pt; WORD-SPACING: 0px; -webkit-text-stroke-width: 0px" border="0" cellspacing="0" cellpadding="0" width="100%">
<tr>
<td width="4%"> </td>
<td valign="top" width="3%" align="left">•</td>
<td valign="top" width="1%"> </td>
<td valign="top" align="left">The milestone payments are
non-refundable;</td>
</tr>
</table>
<p style="TEXT-TRANSFORM: none; MARGIN-TOP: 0pt; TEXT-INDENT: 0px; LETTER-SPACING: normal; FONT: 6pt 'Times New Roman'; WHITE-SPACE: normal; MARGIN-BOTTOM: 0pt; COLOR: rgb(0,0,0); WORD-SPACING: 0px; -webkit-text-stroke-width: 0px">
<font style="FONT-FAMILY: Times New Roman" size="2"> </font></p>
<p style="TEXT-TRANSFORM: none; MARGIN-TOP: 18pt; TEXT-INDENT: 0px; LETTER-SPACING: normal; FONT: 10pt 'Times New Roman'; WHITE-SPACE: normal; MARGIN-BOTTOM: 0pt; COLOR: rgb(0,0,0); WORD-SPACING: 0px; -webkit-text-stroke-width: 0px">
</p>
<table style="TEXT-TRANSFORM: none; TEXT-INDENT: 0px; LETTER-SPACING: normal; BORDER-COLLAPSE: collapse; FONT-FAMILY: 'Times New Roman'; FONT-SIZE: 10pt; WORD-SPACING: 0px; -webkit-text-stroke-width: 0px" border="0" cellspacing="0" cellpadding="0" width="100%">
<tr>
<td width="4%"> </td>
<td valign="top" width="3%" align="left">•</td>
<td valign="top" width="1%"> </td>
<td valign="top" align="left">Achievement of the milestone involves
a degree of risk and was not reasonably assured at the inception of
the arrangement;</td>
</tr>
</table>
<p style="TEXT-TRANSFORM: none; MARGIN-TOP: 0pt; TEXT-INDENT: 0px; LETTER-SPACING: normal; FONT: 6pt 'Times New Roman'; WHITE-SPACE: normal; MARGIN-BOTTOM: 0pt; COLOR: rgb(0,0,0); WORD-SPACING: 0px; -webkit-text-stroke-width: 0px">
<font style="FONT-FAMILY: Times New Roman" size="2"> </font></p>
<p style="TEXT-TRANSFORM: none; MARGIN-TOP: 18pt; TEXT-INDENT: 0px; LETTER-SPACING: normal; FONT: 10pt 'Times New Roman'; WHITE-SPACE: normal; MARGIN-BOTTOM: 0pt; COLOR: rgb(0,0,0); WORD-SPACING: 0px; -webkit-text-stroke-width: 0px">
</p>
<table style="TEXT-TRANSFORM: none; TEXT-INDENT: 0px; LETTER-SPACING: normal; BORDER-COLLAPSE: collapse; FONT-FAMILY: 'Times New Roman'; FONT-SIZE: 10pt; WORD-SPACING: 0px; -webkit-text-stroke-width: 0px" border="0" cellspacing="0" cellpadding="0" width="100%">
<tr>
<td width="4%"> </td>
<td valign="top" width="3%" align="left">•</td>
<td valign="top" width="1%"> </td>
<td valign="top" align="left">Substantive effort on our part is
involved in achieving the milestone;</td>
</tr>
</table>
<p style="TEXT-TRANSFORM: none; MARGIN-TOP: 0pt; TEXT-INDENT: 0px; LETTER-SPACING: normal; FONT: 6pt 'Times New Roman'; WHITE-SPACE: normal; MARGIN-BOTTOM: 0pt; COLOR: rgb(0,0,0); WORD-SPACING: 0px; -webkit-text-stroke-width: 0px">
<font style="FONT-FAMILY: Times New Roman" size="2"> </font></p>
<p style="TEXT-TRANSFORM: none; MARGIN-TOP: 18pt; TEXT-INDENT: 0px; LETTER-SPACING: normal; FONT: 10pt 'Times New Roman'; WHITE-SPACE: normal; MARGIN-BOTTOM: 0pt; COLOR: rgb(0,0,0); WORD-SPACING: 0px; -webkit-text-stroke-width: 0px">
</p>
<table style="TEXT-TRANSFORM: none; TEXT-INDENT: 0px; LETTER-SPACING: normal; BORDER-COLLAPSE: collapse; FONT-FAMILY: 'Times New Roman'; FONT-SIZE: 10pt; WORD-SPACING: 0px; -webkit-text-stroke-width: 0px" border="0" cellspacing="0" cellpadding="0" width="100%">
<tr>
<td width="4%"> </td>
<td valign="top" width="3%" align="left">•</td>
<td valign="top" width="1%"> </td>
<td valign="top" align="left">The amount of the milestone payment
is reasonable in relation to the effort expended or the risk
associated with achievement of the milestone; and</td>
</tr>
</table>
<p style="TEXT-TRANSFORM: none; MARGIN-TOP: 0pt; TEXT-INDENT: 0px; LETTER-SPACING: normal; FONT: 6pt 'Times New Roman'; WHITE-SPACE: normal; MARGIN-BOTTOM: 0pt; COLOR: rgb(0,0,0); WORD-SPACING: 0px; -webkit-text-stroke-width: 0px">
<font style="FONT-FAMILY: Times New Roman" size="2"> </font></p>
<p style="TEXT-TRANSFORM: none; MARGIN-TOP: 18pt; TEXT-INDENT: 0px; LETTER-SPACING: normal; FONT: 10pt 'Times New Roman'; WHITE-SPACE: normal; MARGIN-BOTTOM: 0pt; COLOR: rgb(0,0,0); WORD-SPACING: 0px; -webkit-text-stroke-width: 0px">
</p>
<table style="TEXT-TRANSFORM: none; TEXT-INDENT: 0px; LETTER-SPACING: normal; BORDER-COLLAPSE: collapse; FONT-FAMILY: 'Times New Roman'; FONT-SIZE: 10pt; WORD-SPACING: 0px; -webkit-text-stroke-width: 0px" border="0" cellspacing="0" cellpadding="0" width="100%">
<tr>
<td width="4%"> </td>
<td valign="top" width="3%" align="left">•</td>
<td valign="top" width="1%"> </td>
<td valign="top" align="left">A reasonable amount of time passes
between the up-front license payment and the first milestone
payment, as well as between each subsequent milestone payment.</td>
</tr>
</table>
<p style="TEXT-TRANSFORM: none; MARGIN-TOP: 0pt; TEXT-INDENT: 0px; LETTER-SPACING: normal; FONT: 12pt 'Times New Roman'; WHITE-SPACE: normal; MARGIN-BOTTOM: 0pt; COLOR: rgb(0,0,0); WORD-SPACING: 0px; -webkit-text-stroke-width: 0px">
<font style="FONT-FAMILY: Times New Roman" size="2"> </font></p>
<p style="TEXT-TRANSFORM: none; MARGIN-TOP: 0pt; TEXT-INDENT: 0px; LETTER-SPACING: normal; FONT: 10pt 'Times New Roman'; WHITE-SPACE: normal; MARGIN-BOTTOM: 0pt; COLOR: rgb(0,0,0); WORD-SPACING: 0px; -webkit-text-stroke-width: 0px">
<font style="FONT-FAMILY: Times New Roman" size="2">Determination
as to whether a payment meets the aforementioned conditions
involves management’s judgment. If any of these conditions
are not met, the resulting payment would not be considered a
substantive milestone, and therefore, the resulting payment would
be considered part of the consideration for the single unit of
accounting and be recognized as revenues in accordance with the
revenue models described above. In addition, the determination that
one such payment was not a substantive milestone could prevent us
from concluding that subsequent milestone payments were substantive
milestones and, as a result, any additional milestone payments
could also be considered part of the consideration for the single
unit of accounting and would be recognized as revenue as such
performance obligations are performed under either the proportional
performance or straight-line methods, as applicable.</font></p>
</div>
<div>
<p style="MARGIN-TOP: 18px; MARGIN-BOTTOM: 0px"><font style="FONT-FAMILY: Times New Roman" size="2"><b>5. Collaborations and
License Agreements</b></font></p>
<p style="MARGIN-TOP: 6px; MARGIN-BOTTOM: 0px"><font style="FONT-FAMILY: Times New Roman" size="2"><b>Takeda Pharmaceutical
Company Limited</b></font></p>
<p style="MARGIN-TOP: 6px; MARGIN-BOTTOM: 0px"><font style="FONT-FAMILY: Times New Roman" size="2">On February 25, 2011,
ITI entered into a license and collaboration agreement with Takeda
Pharmaceutical Company Limited (Takeda) to develop and
commercialize selective phosphodiesterase type 1 (PDE1) inhibitors,
discovered by ITI, for the treatment of cognitive impairment
associated with schizophrenia. This agreement is targeted
worldwide, but ITI has retained the option to co-promote with
Takeda in the United States.</font></p>
<p style="MARGIN-TOP: 12px; MARGIN-BOTTOM: 0px"><font style="FONT-FAMILY: Times New Roman" size="2">Upon execution of the
agreement, Takeda made a nonrefundable payment to the Company. ITI
is eligible to receive payments of approximately $500 million
in the aggregate upon achievement of certain development milestones
and up to an additional $250 million in the aggregate upon
achievement of certain sales-based milestones, along with tiered
royalty payments based on net sales by Takeda. Takeda will be
solely responsible for development, manufacturing and
commercialization of PDE1 inhibitors. ITI and Takeda have formed a
joint steering committee to coordinate and oversee activities on
which the two companies collaborate under the agreement.</font></p>
<p style="MARGIN-TOP: 0px; MARGIN-BOTTOM: 0px"><font style="FONT-FAMILY: Times New Roman" size="2">The Company evaluates all
deliverables within an arrangement to determine whether or not they
provide value on a stand-alone basis. Based on this evaluation, the
deliverables were separated into units of accounting. The
arrangement consideration that is fixed or determinable at the
inception of the arrangement was allocated to the separate units of
accounting based on their relative selling prices. We may exercise
significant judgment in determining whether a deliverable is a
separate unit of accounting, as well as in estimating the selling
prices of such unit of accounting.</font></p>
<p style="MARGIN-TOP: 12px; MARGIN-BOTTOM: 0px"><font style="FONT-FAMILY: Times New Roman" size="2">To determine the selling
price of a separate deliverable, we use the hierarchy as prescribed
in ASC Topic 605-25 based on vendor-specific objective evidence
(VSOE), third-party evidence (TPE) or best estimate of selling
price (BESP). VSOE is based on the price charged when the element
is sold separately and is the price actually charged for that
deliverable. TPE is determined based on third-party evidence for a
similar deliverable when sold separately and BESP is the price at
which we would transact a sale if the elements of collaboration and
license arrangements were sold on a stand-alone basis. We were not
able to establish VSOE or TPE for the deliverables within
collaboration and license arrangements, as we do not have a history
of entering into such arrangements or selling the individual
deliverables within such arrangements separately. In addition,
there may be significant differentiation in these arrangements,
which indicates that comparable third-party pricing may not be
available. We determined that the selling price for the
deliverables within collaboration and license arrangements should
be determined using BESP. The process for determining BESP involved
significant judgment on our part and included consideration of
multiple factors such as estimated direct expenses and other costs,
and available data.</font></p>
<p style="MARGIN-TOP: 12px; MARGIN-BOTTOM: 0px"><font style="FONT-FAMILY: Times New Roman" size="2">During the three- and
six-months ended June 30, 2013, the Company recognized revenue
of $0.8 million, and $1.6 million under this agreement,
respectively. At June 30, 2013 and December 31, 2012,
$0.8 million and $1.7 million of revenue was deferred under
this agreement.</font></p>
<p style="MARGIN-TOP: 12px; MARGIN-BOTTOM: 0px"><font style="FONT-FAMILY: Times New Roman" size="2">In May 2002, the
Company entered into a license agreement (the License) and research
agreement with a university. Under the provisions of the License,
the Company is entitled to use this organization’s patented
technology and other intellectual property relating to diagnosis
and treatment of central nervous system disorders.</font></p>
<p style="MARGIN-TOP: 0px; MARGIN-BOTTOM: 0px"><font style="FONT-FAMILY: Times New Roman" size="2">The License expires upon
expiration of the patent rights or 15 years subsequent to the first
sale of products developed through this License. The Company is
required to make future milestone payments for initiation of
clinical trials and approval of a New Drug Application (NDA).
Should the Company commercialize the technology related to this
License, the Company would be required to make royalty payments,
and would also be required to pay fees under any sublicense
agreements with third parties.</font></p>
<p style="MARGIN-TOP: 12px; MARGIN-BOTTOM: 0px"><font style="FONT-FAMILY: Times New Roman" size="2">In connection with the
License, the Company issued 800,000 shares of common stock to the
organization. Upon issuance of the shares, the Company recorded the
estimated fair value of the shares issued, approximately $120,000,
as research and development expense.</font></p>
<p style="MARGIN-TOP: 12px; MARGIN-BOTTOM: 0px"><font style="FONT-FAMILY: Times New Roman" size="2">In addition, the Company is
required to use at least $1 million annually of its resources
for the development and commercialization of the technology until
the Company submits a NDA. The Company met its spending
requirements in 2012. There were no other payments made or required
for the three- and six-months ended June 30, 2013 and 2012 and
the year ended December 31, 2012.</font></p>
<p style="MARGIN-TOP: 12px; MARGIN-BOTTOM: 0px"><font style="FONT-FAMILY: Times New Roman" size="2">In May 2005, the
Company entered into a license agreement (the Agreement) with a
company for the use of this company’s patented compounds. ITI
intends to test and use the compounds in its research and
development program as candidates for potential new
drugs.</font></p>
<p style="MARGIN-TOP: 12px; MARGIN-BOTTOM: 0px"><font style="FONT-FAMILY: Times New Roman" size="2">The Agreement expires on
the later of 10 years after the first commercial sale of a product
developed using the licensed compound or upon expiration of the
patent rights. The Company is required to make future milestone
payments for commencement of certain clinical trials and filings
with the U.S. Food and Drug Administration. Should the Company sell
products covered by the Agreement, the Company would be required to
make royalty payments. There were no payments under this Agreement
for the three- and six-months ended June 30, 2013 and 2012 and
the year ended December 31, 2012.</font></p>
</div>
<div>
<p style="MARGIN-TOP: 12pt; FONT-FAMILY: Times New Roman; MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt">
Information regarding the stock options activity including
employees, directors and <font style="WHITE-SPACE: nowrap">non-employees</font> as of June 30, 2013, and
changes during the period then ended, are summarized as
follows:</p>
<p style="MARGIN-TOP: 0pt; MARGIN-BOTTOM: 0pt; FONT-SIZE: 12pt">
</p>
<table style="BORDER-COLLAPSE: collapse; FONT-FAMILY: Times New Roman; FONT-SIZE: 10pt" border="0" cellspacing="0" cellpadding="0" width="92%" align="center"><!-- Begin Table Head -->
<tr>
<td width="65%"></td>
<td valign="bottom" width="5%"></td>
<td></td>
<td></td>
<td></td>
<td valign="bottom" width="4%"></td>
<td></td>
<td></td>
<td></td>
<td valign="bottom" width="5%"></td>
<td></td>
<td></td>
<td></td>
</tr>
<tr style="FONT-FAMILY: Times New Roman; FONT-SIZE: 8pt">
<td valign="bottom"></td>
<td valign="bottom"></td>
<td style="BORDER-BOTTOM: #000000 1pt solid" valign="bottom" colspan="2" align="center"><b>Number of<br />
Shares</b></td>
<td valign="bottom"></td>
<td valign="bottom"></td>
<td style="BORDER-BOTTOM: #000000 1pt solid" valign="bottom" colspan="2" align="center"><b>Weighted-<br />
Average</b><br />
<b>Exercise<br />
Price</b></td>
<td valign="bottom"></td>
<td valign="bottom"></td>
<td style="BORDER-BOTTOM: #000000 1pt solid" valign="bottom" colspan="2" align="center"><b>Weighted-<br />
Average<br />
Contractual<br />
Life</b></td>
<td valign="bottom"></td>
</tr>
<!-- End Table Head --><!-- Begin Table Body -->
<tr>
<td height="8"></td>
<td height="8" colspan="4"></td>
<td height="8" colspan="4"></td>
<td height="8" colspan="4"></td>
</tr>
<tr style="FONT-FAMILY: Times New Roman; FONT-SIZE: 10pt" bgcolor="#CCEEFF">
<td valign="top">
<p style="TEXT-INDENT: -1em; FONT-FAMILY: Times New Roman; MARGIN-LEFT: 1em; FONT-SIZE: 10pt">
Outstanding at December 31, 2012 (audited)</p>
</td>
<td valign="bottom"></td>
<td valign="bottom"></td>
<td valign="bottom" align="right">3,414,227</td>
<td valign="bottom" nowrap="nowrap"></td>
<td valign="bottom"></td>
<td valign="bottom">$</td>
<td valign="bottom" align="right">0.66</td>
<td valign="bottom" nowrap="nowrap"></td>
<td valign="bottom"></td>
<td valign="bottom"></td>
<td valign="bottom" align="right">4.4 years</td>
<td valign="bottom" nowrap="nowrap"></td>
</tr>
<tr style="FONT-FAMILY: Times New Roman; FONT-SIZE: 10pt">
<td valign="top">
<p style="TEXT-INDENT: -1em; FONT-FAMILY: Times New Roman; MARGIN-LEFT: 3em; FONT-SIZE: 10pt">
Options granted (unaudited)</p>
</td>
<td valign="bottom"></td>
<td valign="bottom"></td>
<td valign="bottom" align="right">495,200</td>
<td valign="bottom" nowrap="nowrap"></td>
<td valign="bottom"></td>
<td valign="bottom"></td>
<td valign="bottom" align="right">1.63</td>
<td valign="bottom" nowrap="nowrap"></td>
<td valign="bottom"></td>
<td valign="bottom"></td>
<td valign="bottom" align="right">6.2 years</td>
<td valign="bottom" nowrap="nowrap"></td>
</tr>
<tr style="FONT-FAMILY: Times New Roman; FONT-SIZE: 10pt" bgcolor="#CCEEFF">
<td valign="top">
<p style="TEXT-INDENT: -1em; FONT-FAMILY: Times New Roman; MARGIN-LEFT: 3em; FONT-SIZE: 10pt">
Options exercised (unaudited)</p>
</td>
<td valign="bottom"></td>
<td valign="bottom"></td>
<td valign="bottom" align="right">(362,666</td>
<td valign="bottom" nowrap="nowrap">)</td>
<td valign="bottom"></td>
<td valign="bottom"></td>
<td valign="bottom" align="right">0.54</td>
<td valign="bottom" nowrap="nowrap"></td>
<td valign="bottom"></td>
<td valign="bottom"></td>
<td valign="bottom" align="right">2.9 years</td>
<td valign="bottom" nowrap="nowrap"></td>
</tr>
<tr style="FONT-FAMILY: Times New Roman; FONT-SIZE: 10pt">
<td valign="top">
<p style="TEXT-INDENT: -1em; FONT-FAMILY: Times New Roman; MARGIN-LEFT: 3em; FONT-SIZE: 10pt">
Options canceled or expired (unaudited)</p>
</td>
<td valign="bottom"></td>
<td valign="bottom"></td>
<td valign="bottom" align="right">(5,334</td>
<td valign="bottom" nowrap="nowrap">)</td>
<td valign="bottom"></td>
<td valign="bottom"></td>
<td valign="bottom" align="right">1.49</td>
<td valign="bottom" nowrap="nowrap"></td>
<td valign="bottom"></td>
<td valign="bottom"></td>
<td valign="bottom" align="right">8.9 years</td>
<td valign="bottom" nowrap="nowrap"></td>
</tr>
<tr style="FONT-SIZE: 1px">
<td valign="bottom"></td>
<td valign="bottom"></td>
<td valign="bottom">
<p style="BORDER-TOP: #000000 1px solid"></p>
</td>
<td valign="bottom">
<p style="BORDER-TOP: #000000 1px solid"></p>
</td>
<td></td>
<td valign="bottom"></td>
<td valign="bottom">
<p style="BORDER-TOP: #000000 1px solid"></p>
</td>
<td valign="bottom">
<p style="BORDER-TOP: #000000 1px solid"></p>
</td>
<td></td>
<td valign="bottom"></td>
<td valign="bottom"></td>
<td valign="bottom"></td>
<td valign="bottom"></td>
</tr>
<tr style="FONT-FAMILY: Times New Roman; FONT-SIZE: 10pt" bgcolor="#CCEEFF">
<td valign="top">
<p style="TEXT-INDENT: -1em; FONT-FAMILY: Times New Roman; MARGIN-LEFT: 1em; FONT-SIZE: 10pt">
Outstanding at June 30, 2013 (unaudited)</p>
</td>
<td valign="bottom"></td>
<td valign="bottom"></td>
<td valign="bottom" align="right">3,541,427</td>
<td valign="bottom" nowrap="nowrap"></td>
<td valign="bottom"></td>
<td valign="bottom"></td>
<td valign="bottom" align="right">0.84</td>
<td valign="bottom" nowrap="nowrap"></td>
<td valign="bottom"></td>
<td valign="bottom"></td>
<td valign="bottom" align="right">4.8 years</td>
<td valign="bottom" nowrap="nowrap"></td>
</tr>
<tr style="FONT-SIZE: 1px">
<td valign="bottom"></td>
<td valign="bottom"></td>
<td valign="bottom">
<p style="BORDER-TOP: #000000 1px solid"></p>
</td>
<td valign="bottom">
<p style="BORDER-TOP: #000000 1px solid"></p>
</td>
<td></td>
<td valign="bottom"></td>
<td valign="bottom">
<p style="BORDER-TOP: #000000 1px solid"></p>
</td>
<td valign="bottom">
<p style="BORDER-TOP: #000000 1px solid"></p>
</td>
<td></td>
<td valign="bottom"></td>
<td valign="bottom"></td>
<td valign="bottom"></td>
<td valign="bottom"></td>
</tr>
<tr style="FONT-FAMILY: Times New Roman; FONT-SIZE: 10pt">
<td valign="top">
<p style="TEXT-INDENT: -1em; FONT-FAMILY: Times New Roman; MARGIN-LEFT: 3em; FONT-SIZE: 10pt">
Vested or expected to vest at June 30, 2013 (unaudited)</p>
</td>
<td valign="bottom"></td>
<td valign="bottom"></td>
<td valign="bottom" align="right">3,541,427</td>
<td valign="bottom" nowrap="nowrap"></td>
<td valign="bottom"></td>
<td valign="bottom"></td>
<td valign="bottom" align="right">0.84</td>
<td valign="bottom" nowrap="nowrap"></td>
<td valign="bottom"></td>
<td valign="bottom"></td>
<td valign="bottom"></td>
<td valign="bottom"></td>
</tr>
<tr style="FONT-SIZE: 1px">
<td valign="bottom"></td>
<td valign="bottom"></td>
<td valign="bottom">
<p style="BORDER-TOP: #000000 3px double"></p>
</td>
<td valign="bottom">
<p style="BORDER-TOP: #000000 3px double"></p>
</td>
<td></td>
<td valign="bottom"></td>
<td valign="bottom">
<p style="BORDER-TOP: #000000 3px double"></p>
</td>
<td valign="bottom">
<p style="BORDER-TOP: #000000 3px double"></p>
</td>
<td></td>
<td valign="bottom"></td>
<td valign="bottom"></td>
<td valign="bottom"></td>
<td valign="bottom"></td>
</tr>
<tr style="FONT-FAMILY: Times New Roman; FONT-SIZE: 10pt" bgcolor="#CCEEFF">
<td valign="top">
<p style="TEXT-INDENT: -1em; FONT-FAMILY: Times New Roman; MARGIN-LEFT: 1em; FONT-SIZE: 10pt">
Exercisable at June 30, 2013 (unaudited)</p>
</td>
<td valign="bottom"></td>
<td valign="bottom"></td>
<td valign="bottom" align="right">2,802,318</td>
<td valign="bottom" nowrap="nowrap"></td>
<td valign="bottom"></td>
<td valign="bottom">$</td>
<td valign="bottom" align="right">0.65</td>
<td valign="bottom" nowrap="nowrap"></td>
<td valign="bottom"></td>
<td valign="bottom"></td>
<td valign="bottom" align="right">3.6 years</td>
<td valign="bottom" nowrap="nowrap"></td>
</tr>
<tr style="FONT-SIZE: 1px">
<td valign="bottom"></td>
<td valign="bottom"></td>
<td valign="bottom">
<p style="BORDER-TOP: #000000 3px double"></p>
</td>
<td valign="bottom">
<p style="BORDER-TOP: #000000 3px double"></p>
</td>
<td></td>
<td valign="bottom"></td>
<td valign="bottom">
<p style="BORDER-TOP: #000000 3px double"></p>
</td>
<td valign="bottom">
<p style="BORDER-TOP: #000000 3px double"></p>
</td>
<td></td>
<td valign="bottom"></td>
<td valign="bottom"></td>
<td valign="bottom"></td>
<td valign="bottom"></td>
</tr>
<!-- End Table Body --></table>
</div>
<div>
<p style="MARGIN-TOP: 0px; MARGIN-BOTTOM: 0px"><font style="FONT-FAMILY: Times New Roman" size="2"><b>Comprehensive Income
(Loss)</b></font></p>
<p style="MARGIN-TOP: 6px; MARGIN-BOTTOM: 0px"><font style="FONT-FAMILY: Times New Roman" size="2">ASC 220-10, <i>Reporting
Comprehensive Income</i>, requires the presentation of the
comprehensive income or loss and its components as part of the
financial statements if comprehensive income (loss) differs from
net income (loss). For the three- and <font style="WHITE-SPACE: nowrap">six-months</font> ended June 30, 2013
and the year ended December 31, 2012, the Company’s net
loss equals comprehensive loss.</font></p>
</div>
<div>
<p style="MARGIN-TOP: 6px; MARGIN-BOTTOM: 0px"><font style="FONT-FAMILY: Times New Roman" size="2">Property and equipment
consist of the following:</font></p>
<p style="MARGIN-TOP: 0px; MARGIN-BOTTOM: 0px; FONT-SIZE: 12px">
 </p>
<table style="BORDER-COLLAPSE: collapse" border="0" cellspacing="0" cellpadding="0" width="76%" align="center">
<tr>
<td width="72%"></td>
<td valign="bottom" width="9%"></td>
<td></td>
<td></td>
<td></td>
<td valign="bottom" width="9%"></td>
<td></td>
<td></td>
<td></td>
</tr>
<tr>
<td valign="bottom"><font size="1"> </font></td>
<td valign="bottom"><font size="1">  </font></td>
<td style="BORDER-BOTTOM: #000000 1px solid" valign="bottom" colspan="2" align="center"><font style="FONT-FAMILY: Times New Roman" size="1"><b>June 30,</b></font><br />
<font style="FONT-FAMILY: Times New Roman" size="1"><b>2013</b></font></td>
<td valign="bottom"><font size="1"> </font></td>
<td valign="bottom"><font size="1"> </font></td>
<td style="BORDER-BOTTOM: #000000 1px solid" valign="bottom" colspan="2" align="center"><font style="FONT-FAMILY: Times New Roman" size="1"><b>December 31,<br />
2012</b></font></td>
<td valign="bottom"><font size="1"> </font></td>
</tr>
<tr>
<td height="8"></td>
<td height="8" colspan="4"></td>
<td height="8" colspan="4"></td>
</tr>
<tr bgcolor="#CCEEFF">
<td valign="top">
<p style="TEXT-INDENT: -1em; MARGIN-LEFT: 1em"><font style="FONT-FAMILY: Times New Roman" size="2">Computer
equipment</font></p>
</td>
<td valign="bottom"><font size="1">  </font></td>
<td valign="bottom"><font style="FONT-FAMILY: Times New Roman" size="2"><b>$</b></font></td>
<td valign="bottom" align="right"><font style="FONT-FAMILY: Times New Roman" size="2"><b>94,314</b></font></td>
<td valign="bottom" nowrap="nowrap"><font style="FONT-FAMILY: Times New Roman" size="2"><b>  </b></font></td>
<td valign="bottom"><font size="1"> </font></td>
<td valign="bottom"><font style="FONT-FAMILY: Times New Roman" size="2">$</font></td>
<td valign="bottom" align="right"><font style="FONT-FAMILY: Times New Roman" size="2">92,318</font></td>
<td valign="bottom" nowrap="nowrap"><font style="FONT-FAMILY: Times New Roman" size="2">  </font></td>
</tr>
<tr>
<td valign="top">
<p style="TEXT-INDENT: -1em; MARGIN-LEFT: 1em"><font style="FONT-FAMILY: Times New Roman" size="2">Furniture and
fixtures</font></p>
</td>
<td valign="bottom"><font size="1">  </font></td>
<td valign="bottom"><font style="FONT-FAMILY: Times New Roman" size="2"><b> </b></font></td>
<td valign="bottom" align="right"><font style="FONT-FAMILY: Times New Roman" size="2"><b>46,523</b></font></td>
<td valign="bottom" nowrap="nowrap"><font style="FONT-FAMILY: Times New Roman" size="2"><b>  </b></font></td>
<td valign="bottom"><font size="1"> </font></td>
<td valign="bottom"><font style="FONT-FAMILY: Times New Roman" size="2"> </font></td>
<td valign="bottom" align="right"><font style="FONT-FAMILY: Times New Roman" size="2">42,736</font></td>
<td valign="bottom" nowrap="nowrap"><font style="FONT-FAMILY: Times New Roman" size="2">  </font></td>
</tr>
<tr bgcolor="#CCEEFF">
<td valign="top">
<p style="TEXT-INDENT: -1em; MARGIN-LEFT: 1em"><font style="FONT-FAMILY: Times New Roman" size="2">Scientific
equipment</font></p>
</td>
<td valign="bottom"><font size="1">  </font></td>
<td valign="bottom"><font style="FONT-FAMILY: Times New Roman" size="2"><b> </b></font></td>
<td valign="bottom" align="right"><font style="FONT-FAMILY: Times New Roman" size="2"><b>2,827,136</b></font></td>
<td valign="bottom" nowrap="nowrap"><font style="FONT-FAMILY: Times New Roman" size="2"><b>  </b></font></td>
<td valign="bottom"><font size="1"> </font></td>
<td valign="bottom"><font style="FONT-FAMILY: Times New Roman" size="2"> </font></td>
<td valign="bottom" align="right"><font style="FONT-FAMILY: Times New Roman" size="2">2,824,076</font></td>
<td valign="bottom" nowrap="nowrap"><font style="FONT-FAMILY: Times New Roman" size="2">  </font></td>
</tr>
<tr>
<td valign="top">
<p style="TEXT-INDENT: -1em; MARGIN-LEFT: 1em"><font style="FONT-FAMILY: Times New Roman" size="2">Leasehold
improvements</font></p>
</td>
<td valign="bottom"><font size="1">  </font></td>
<td valign="bottom"><font style="FONT-FAMILY: Times New Roman" size="2"><b> </b></font></td>
<td valign="bottom" align="right"><font style="FONT-FAMILY: Times New Roman" size="2"><b>319,553</b></font></td>
<td valign="bottom" nowrap="nowrap"><font style="FONT-FAMILY: Times New Roman" size="2"><b>  </b></font></td>
<td valign="bottom"><font size="1"> </font></td>
<td valign="bottom"><font style="FONT-FAMILY: Times New Roman" size="2"> </font></td>
<td valign="bottom" align="right"><font style="FONT-FAMILY: Times New Roman" size="2">319,553</font></td>
<td valign="bottom" nowrap="nowrap"><font style="FONT-FAMILY: Times New Roman" size="2">  </font></td>
</tr>
<tr style="FONT-SIZE: 1px">
<td valign="bottom"></td>
<td valign="bottom">  </td>
<td valign="bottom">
<p style="BORDER-TOP: #000000 1px solid"> </p>
</td>
<td valign="bottom">
<p style="BORDER-TOP: #000000 1px solid"> </p>
</td>
<td> </td>
<td valign="bottom"> </td>
<td valign="bottom">
<p style="BORDER-TOP: #000000 1px solid"> </p>
</td>
<td valign="bottom">
<p style="BORDER-TOP: #000000 1px solid"> </p>
</td>
<td> </td>
</tr>
<tr bgcolor="#CCEEFF">
<td valign="top"></td>
<td valign="bottom"><font size="1">  </font></td>
<td valign="bottom"><font style="FONT-FAMILY: Times New Roman" size="2"><b> </b></font></td>
<td valign="bottom" align="right"><font style="FONT-FAMILY: Times New Roman" size="2"><b>3,287,526</b></font></td>
<td valign="bottom" nowrap="nowrap"><font style="FONT-FAMILY: Times New Roman" size="2"><b>  </b></font></td>
<td valign="bottom"><font size="1"> </font></td>
<td valign="bottom"><font style="FONT-FAMILY: Times New Roman" size="2"> </font></td>
<td valign="bottom" align="right"><font style="FONT-FAMILY: Times New Roman" size="2">3,278,683</font></td>
<td valign="bottom" nowrap="nowrap"><font style="FONT-FAMILY: Times New Roman" size="2">  </font></td>
</tr>
<tr>
<td valign="top">
<p style="TEXT-INDENT: -1em; MARGIN-LEFT: 1em"><font style="FONT-FAMILY: Times New Roman" size="2">Less accumulated
depreciation</font></p>
</td>
<td valign="bottom"><font size="1">  </font></td>
<td valign="bottom"><font style="FONT-FAMILY: Times New Roman" size="2"><b> </b></font></td>
<td valign="bottom" align="right"><font style="FONT-FAMILY: Times New Roman" size="2"><b>(3,231,509</b></font></td>
<td valign="bottom" nowrap="nowrap"><font style="FONT-FAMILY: Times New Roman" size="2"><b>) </b></font></td>
<td valign="bottom"><font size="1"> </font></td>
<td valign="bottom"><font style="FONT-FAMILY: Times New Roman" size="2"> </font></td>
<td valign="bottom" align="right"><font style="FONT-FAMILY: Times New Roman" size="2">(3,220,417</font></td>
<td valign="bottom" nowrap="nowrap"><font style="FONT-FAMILY: Times New Roman" size="2">) </font></td>
</tr>
<tr style="FONT-SIZE: 1px">
<td valign="bottom"></td>
<td valign="bottom">  </td>
<td valign="bottom">
<p style="BORDER-TOP: #000000 1px solid"> </p>
</td>
<td valign="bottom">
<p style="BORDER-TOP: #000000 1px solid"> </p>
</td>
<td> </td>
<td valign="bottom"> </td>
<td valign="bottom">
<p style="BORDER-TOP: #000000 1px solid"> </p>
</td>
<td valign="bottom">
<p style="BORDER-TOP: #000000 1px solid"> </p>
</td>
<td> </td>
</tr>
<tr bgcolor="#CCEEFF">
<td valign="top"></td>
<td valign="bottom"><font size="1">  </font></td>
<td valign="bottom"><font style="FONT-FAMILY: Times New Roman" size="2"><b>$</b></font></td>
<td valign="bottom" align="right"><font style="FONT-FAMILY: Times New Roman" size="2"><b>56,017</b></font></td>
<td valign="bottom" nowrap="nowrap"><font style="FONT-FAMILY: Times New Roman" size="2"><b>  </b></font></td>
<td valign="bottom"><font size="1"> </font></td>
<td valign="bottom"><font style="FONT-FAMILY: Times New Roman" size="2">$</font></td>
<td valign="bottom" align="right"><font style="FONT-FAMILY: Times New Roman" size="2">58,266</font></td>
<td valign="bottom" nowrap="nowrap"><font style="FONT-FAMILY: Times New Roman" size="2">  </font></td>
</tr>
<tr style="FONT-SIZE: 1px">
<td valign="bottom"></td>
<td valign="bottom">  </td>
<td valign="bottom">
<p style="BORDER-TOP: #000000 3px double"> </p>
</td>
<td valign="bottom">
<p style="BORDER-TOP: #000000 3px double"> </p>
</td>
<td> </td>
<td valign="bottom"> </td>
<td valign="bottom">
<p style="BORDER-TOP: #000000 3px double"> </p>
</td>
<td valign="bottom">
<p style="BORDER-TOP: #000000 3px double"> </p>
</td>
<td> </td>
</tr>
</table>
</div>
<div>
<p style="TEXT-TRANSFORM: none; MARGIN-TOP: 12pt; TEXT-INDENT: 0px; LETTER-SPACING: normal; FONT: 10pt 'Times New Roman'; WHITE-SPACE: normal; MARGIN-BOTTOM: 0pt; COLOR: rgb(0,0,0); WORD-SPACING: 0px; -webkit-text-stroke-width: 0px">
The following common stock equivalents were excluded in the
calculation of diluted loss per share because their effect would be
anti-dilutive as applied to the loss from operations as of the
three- and six- months ended June 30, 2013 and 2012:</p>
<p style="TEXT-TRANSFORM: none; MARGIN-TOP: 0pt; TEXT-INDENT: 0px; LETTER-SPACING: normal; FONT: 12pt 'Times New Roman'; WHITE-SPACE: normal; MARGIN-BOTTOM: 0pt; COLOR: rgb(0,0,0); WORD-SPACING: 0px; -webkit-text-stroke-width: 0px">
 </p>
<table style="TEXT-TRANSFORM: none; TEXT-INDENT: 0px; LETTER-SPACING: normal; BORDER-COLLAPSE: collapse; FONT-FAMILY: 'Times New Roman'; FONT-SIZE: 10pt; WORD-SPACING: 0px; -webkit-text-stroke-width: 0px" border="0" cellspacing="0" cellpadding="0" width="92%" align="center">
<tr>
<td width="48%"></td>
<td valign="bottom" width="3%"></td>
<td></td>
<td></td>
<td></td>
<td valign="bottom" width="3%"></td>
<td></td>
<td></td>
<td></td>
<td valign="bottom" width="3%"></td>
<td></td>
<td></td>
<td></td>
<td valign="bottom" width="3%"></td>
<td></td>
<td></td>
<td></td>
</tr>
<tr style="FONT-FAMILY: 'Times New Roman'; FONT-SIZE: 8pt">
<td valign="bottom"> </td>
<td valign="bottom">  </td>
<td valign="bottom" colspan="6" align="center">
<p style="MARGIN-TOP: 0pt; FONT-FAMILY: 'Times New Roman'; MARGIN-BOTTOM: 0pt; FONT-SIZE: 8pt" align="center"><b>Three-Months Ended</b></p>
<p style="MARGIN-TOP: 0pt; FONT-FAMILY: 'Times New Roman'; MARGIN-BOTTOM: 1pt; FONT-SIZE: 8pt" align="center"><b>June 30</b></p>
</td>
<td valign="bottom"> </td>
<td valign="bottom">  </td>
<td valign="bottom" colspan="6" align="center">
<p style="MARGIN-TOP: 0pt; FONT-FAMILY: 'Times New Roman'; MARGIN-BOTTOM: 0pt; FONT-SIZE: 8pt" align="center"><b>Six-Months Ended</b></p>
<p style="MARGIN-TOP: 0pt; FONT-FAMILY: 'Times New Roman'; MARGIN-BOTTOM: 1pt; FONT-SIZE: 8pt" align="center"><b>June 30</b></p>
</td>
<td valign="bottom"> </td>
</tr>
<tr style="FONT-FAMILY: 'Times New Roman'; FONT-SIZE: 8pt">
<td valign="bottom"> </td>
<td valign="bottom">  </td>
<td style="BORDER-BOTTOM: rgb(0,0,0) 1pt solid" valign="bottom" colspan="2" align="center"><b>2013</b></td>
<td valign="bottom"> </td>
<td valign="bottom">  </td>
<td style="BORDER-BOTTOM: rgb(0,0,0) 1pt solid" valign="bottom" colspan="2" align="center"><b>2012</b></td>
<td valign="bottom"> </td>
<td valign="bottom">  </td>
<td style="BORDER-BOTTOM: rgb(0,0,0) 1pt solid" valign="bottom" colspan="2" align="center"><b>2013</b></td>
<td valign="bottom"> </td>
<td valign="bottom">  </td>
<td style="BORDER-BOTTOM: rgb(0,0,0) 1pt solid" valign="bottom" colspan="2" align="center"><b>2012</b></td>
<td valign="bottom"> </td>
</tr>
<tr style="FONT-FAMILY: 'Times New Roman'; FONT-SIZE: 10pt" bgcolor="#CCEEFF">
<td valign="top"></td>
<td valign="bottom">  </td>
<td valign="bottom"></td>
<td valign="bottom"></td>
<td valign="bottom"></td>
<td valign="bottom">  </td>
<td valign="bottom"></td>
<td valign="bottom"></td>
<td valign="bottom"></td>
<td valign="bottom">  </td>
<td valign="bottom"></td>
<td valign="bottom"></td>
<td valign="bottom"></td>
<td valign="bottom">  </td>
<td valign="bottom"></td>
<td valign="bottom"></td>
<td valign="bottom"></td>
</tr>
<tr style="FONT-FAMILY: 'Times New Roman'; FONT-SIZE: 10pt">
<td valign="top">
<p style="TEXT-INDENT: -1em; FONT-FAMILY: 'Times New Roman'; MARGIN-LEFT: 1em; FONT-SIZE: 10pt">
Series A, B, and C Preferred Stock</p>
</td>
<td valign="bottom">  </td>
<td valign="bottom"> </td>
<td valign="bottom" align="right">
<b>13,09</b><b>4</b><b>,</b><b>663</b></td>
<td valign="bottom" nowrap="nowrap">  </td>
<td valign="bottom">  </td>
<td valign="bottom"> </td>
<td valign="bottom" align="right">13,094,663</td>
<td valign="bottom" nowrap="nowrap">  </td>
<td valign="bottom">  </td>
<td valign="bottom"> </td>
<td valign="bottom" align="right">
<b>13,09</b><b>4</b><b>,</b><b>663</b></td>
<td valign="bottom" nowrap="nowrap">  </td>
<td valign="bottom">  </td>
<td valign="bottom"> </td>
<td valign="bottom" align="right">13,094,663</td>
<td valign="bottom" nowrap="nowrap">  </td>
</tr>
<tr style="FONT-FAMILY: 'Times New Roman'; FONT-SIZE: 10pt" bgcolor="#CCEEFF">
<td valign="top">
<p style="TEXT-INDENT: -1em; FONT-FAMILY: 'Times New Roman'; MARGIN-LEFT: 1em; FONT-SIZE: 10pt">
Stock options</p>
</td>
<td valign="bottom">  </td>
<td valign="bottom"> </td>
<td valign="bottom" align="right">
<b>2,</b><b>360</b><b>,</b><b>333</b></td>
<td valign="bottom" nowrap="nowrap">  </td>
<td valign="bottom">  </td>
<td valign="bottom"> </td>
<td valign="bottom" align="right">2,065,513</td>
<td valign="bottom" nowrap="nowrap">  </td>
<td valign="bottom">  </td>
<td valign="bottom"> </td>
<td valign="bottom" align="right">
<b>2,</b><b>360</b><b>,000</b></td>
<td valign="bottom" nowrap="nowrap">  </td>
<td valign="bottom">  </td>
<td valign="bottom"> </td>
<td valign="bottom" align="right">2,061,135</td>
<td valign="bottom" nowrap="nowrap">  </td>
</tr>
<tr style="FONT-FAMILY: 'Times New Roman'; FONT-SIZE: 10pt">
<td valign="top">
<p style="TEXT-INDENT: -1em; FONT-FAMILY: 'Times New Roman'; MARGIN-LEFT: 1em; FONT-SIZE: 10pt">
Convertible promissory notes</p>
</td>
<td valign="bottom">  </td>
<td valign="bottom"> </td>
<td valign="bottom" align="right"><b>5,079,699</b></td>
<td valign="bottom" nowrap="nowrap">  </td>
<td valign="bottom">  </td>
<td valign="bottom"> </td>
<td valign="bottom" align="right">—  </td>
<td valign="bottom" nowrap="nowrap">  </td>
<td valign="bottom">  </td>
<td valign="bottom"> </td>
<td valign="bottom" align="right">
<b>5,065</b><b>,0</b><b>15</b></td>
<td valign="bottom" nowrap="nowrap">  </td>
<td valign="bottom">  </td>
<td valign="bottom"> </td>
<td valign="bottom" align="right">—  </td>
<td valign="bottom" nowrap="nowrap">  </td>
</tr>
</table>
<br class="Apple-interchange-newline" /></div>
<div>
<p style="MARGIN-TOP: 0px; MARGIN-BOTTOM: 0px"><font style="FONT-FAMILY: Times New Roman" size="2"><b>3. Property and
Equipment</b></font></p>
<p style="MARGIN-TOP: 6px; MARGIN-BOTTOM: 0px"><font style="FONT-FAMILY: Times New Roman" size="2">Property and equipment
consist of the following:</font></p>
<p style="MARGIN-TOP: 0px; MARGIN-BOTTOM: 0px; FONT-SIZE: 12px">
 </p>
<table style="BORDER-COLLAPSE: collapse" border="0" cellspacing="0" cellpadding="0" width="76%" align="center">
<tr>
<td width="72%"></td>
<td valign="bottom" width="9%"></td>
<td></td>
<td></td>
<td></td>
<td valign="bottom" width="9%"></td>
<td></td>
<td></td>
<td></td>
</tr>
<tr>
<td valign="bottom"><font size="1"> </font></td>
<td valign="bottom"><font size="1">  </font></td>
<td style="BORDER-BOTTOM: #000000 1px solid" valign="bottom" colspan="2" align="center"><font style="FONT-FAMILY: Times New Roman" size="1"><b>June 30,</b></font><br />
<font style="FONT-FAMILY: Times New Roman" size="1"><b>2013</b></font></td>
<td valign="bottom"><font size="1"> </font></td>
<td valign="bottom"><font size="1"> </font></td>
<td style="BORDER-BOTTOM: #000000 1px solid" valign="bottom" colspan="2" align="center"><font style="FONT-FAMILY: Times New Roman" size="1"><b>December 31,<br />
2012</b></font></td>
<td valign="bottom"><font size="1"> </font></td>
</tr>
<tr>
<td height="8"></td>
<td height="8" colspan="4"></td>
<td height="8" colspan="4"></td>
</tr>
<tr bgcolor="#CCEEFF">
<td valign="top">
<p style="TEXT-INDENT: -1em; MARGIN-LEFT: 1em"><font style="FONT-FAMILY: Times New Roman" size="2">Computer
equipment</font></p>
</td>
<td valign="bottom"><font size="1">  </font></td>
<td valign="bottom"><font style="FONT-FAMILY: Times New Roman" size="2"><b>$</b></font></td>
<td valign="bottom" align="right"><font style="FONT-FAMILY: Times New Roman" size="2"><b>94,314</b></font></td>
<td valign="bottom" nowrap="nowrap"><font style="FONT-FAMILY: Times New Roman" size="2"><b>  </b></font></td>
<td valign="bottom"><font size="1"> </font></td>
<td valign="bottom"><font style="FONT-FAMILY: Times New Roman" size="2">$</font></td>
<td valign="bottom" align="right"><font style="FONT-FAMILY: Times New Roman" size="2">92,318</font></td>
<td valign="bottom" nowrap="nowrap"><font style="FONT-FAMILY: Times New Roman" size="2">  </font></td>
</tr>
<tr>
<td valign="top">
<p style="TEXT-INDENT: -1em; MARGIN-LEFT: 1em"><font style="FONT-FAMILY: Times New Roman" size="2">Furniture and
fixtures</font></p>
</td>
<td valign="bottom"><font size="1">  </font></td>
<td valign="bottom"><font style="FONT-FAMILY: Times New Roman" size="2"><b> </b></font></td>
<td valign="bottom" align="right"><font style="FONT-FAMILY: Times New Roman" size="2"><b>46,523</b></font></td>
<td valign="bottom" nowrap="nowrap"><font style="FONT-FAMILY: Times New Roman" size="2"><b>  </b></font></td>
<td valign="bottom"><font size="1"> </font></td>
<td valign="bottom"><font style="FONT-FAMILY: Times New Roman" size="2"> </font></td>
<td valign="bottom" align="right"><font style="FONT-FAMILY: Times New Roman" size="2">42,736</font></td>
<td valign="bottom" nowrap="nowrap"><font style="FONT-FAMILY: Times New Roman" size="2">  </font></td>
</tr>
<tr bgcolor="#CCEEFF">
<td valign="top">
<p style="TEXT-INDENT: -1em; MARGIN-LEFT: 1em"><font style="FONT-FAMILY: Times New Roman" size="2">Scientific
equipment</font></p>
</td>
<td valign="bottom"><font size="1">  </font></td>
<td valign="bottom"><font style="FONT-FAMILY: Times New Roman" size="2"><b> </b></font></td>
<td valign="bottom" align="right"><font style="FONT-FAMILY: Times New Roman" size="2"><b>2,827,136</b></font></td>
<td valign="bottom" nowrap="nowrap"><font style="FONT-FAMILY: Times New Roman" size="2"><b>  </b></font></td>
<td valign="bottom"><font size="1"> </font></td>
<td valign="bottom"><font style="FONT-FAMILY: Times New Roman" size="2"> </font></td>
<td valign="bottom" align="right"><font style="FONT-FAMILY: Times New Roman" size="2">2,824,076</font></td>
<td valign="bottom" nowrap="nowrap"><font style="FONT-FAMILY: Times New Roman" size="2">  </font></td>
</tr>
<tr>
<td valign="top">
<p style="TEXT-INDENT: -1em; MARGIN-LEFT: 1em"><font style="FONT-FAMILY: Times New Roman" size="2">Leasehold
improvements</font></p>
</td>
<td valign="bottom"><font size="1">  </font></td>
<td valign="bottom"><font style="FONT-FAMILY: Times New Roman" size="2"><b> </b></font></td>
<td valign="bottom" align="right"><font style="FONT-FAMILY: Times New Roman" size="2"><b>319,553</b></font></td>
<td valign="bottom" nowrap="nowrap"><font style="FONT-FAMILY: Times New Roman" size="2"><b>  </b></font></td>
<td valign="bottom"><font size="1"> </font></td>
<td valign="bottom"><font style="FONT-FAMILY: Times New Roman" size="2"> </font></td>
<td valign="bottom" align="right"><font style="FONT-FAMILY: Times New Roman" size="2">319,553</font></td>
<td valign="bottom" nowrap="nowrap"><font style="FONT-FAMILY: Times New Roman" size="2">  </font></td>
</tr>
<tr style="FONT-SIZE: 1px">
<td valign="bottom"></td>
<td valign="bottom">  </td>
<td valign="bottom">
<p style="BORDER-TOP: #000000 1px solid"> </p>
</td>
<td valign="bottom">
<p style="BORDER-TOP: #000000 1px solid"> </p>
</td>
<td> </td>
<td valign="bottom"> </td>
<td valign="bottom">
<p style="BORDER-TOP: #000000 1px solid"> </p>
</td>
<td valign="bottom">
<p style="BORDER-TOP: #000000 1px solid"> </p>
</td>
<td> </td>
</tr>
<tr bgcolor="#CCEEFF">
<td valign="top"></td>
<td valign="bottom"><font size="1">  </font></td>
<td valign="bottom"><font style="FONT-FAMILY: Times New Roman" size="2"><b> </b></font></td>
<td valign="bottom" align="right"><font style="FONT-FAMILY: Times New Roman" size="2"><b>3,287,526</b></font></td>
<td valign="bottom" nowrap="nowrap"><font style="FONT-FAMILY: Times New Roman" size="2"><b>  </b></font></td>
<td valign="bottom"><font size="1"> </font></td>
<td valign="bottom"><font style="FONT-FAMILY: Times New Roman" size="2"> </font></td>
<td valign="bottom" align="right"><font style="FONT-FAMILY: Times New Roman" size="2">3,278,683</font></td>
<td valign="bottom" nowrap="nowrap"><font style="FONT-FAMILY: Times New Roman" size="2">  </font></td>
</tr>
<tr>
<td valign="top">
<p style="TEXT-INDENT: -1em; MARGIN-LEFT: 1em"><font style="FONT-FAMILY: Times New Roman" size="2">Less accumulated
depreciation</font></p>
</td>
<td valign="bottom"><font size="1">  </font></td>
<td valign="bottom"><font style="FONT-FAMILY: Times New Roman" size="2"><b> </b></font></td>
<td valign="bottom" align="right"><font style="FONT-FAMILY: Times New Roman" size="2"><b>(3,231,509</b></font></td>
<td valign="bottom" nowrap="nowrap"><font style="FONT-FAMILY: Times New Roman" size="2"><b>) </b></font></td>
<td valign="bottom"><font size="1"> </font></td>
<td valign="bottom"><font style="FONT-FAMILY: Times New Roman" size="2"> </font></td>
<td valign="bottom" align="right"><font style="FONT-FAMILY: Times New Roman" size="2">(3,220,417</font></td>
<td valign="bottom" nowrap="nowrap"><font style="FONT-FAMILY: Times New Roman" size="2">) </font></td>
</tr>
<tr style="FONT-SIZE: 1px">
<td valign="bottom"></td>
<td valign="bottom">  </td>
<td valign="bottom">
<p style="BORDER-TOP: #000000 1px solid"> </p>
</td>
<td valign="bottom">
<p style="BORDER-TOP: #000000 1px solid"> </p>
</td>
<td> </td>
<td valign="bottom"> </td>
<td valign="bottom">
<p style="BORDER-TOP: #000000 1px solid"> </p>
</td>
<td valign="bottom">
<p style="BORDER-TOP: #000000 1px solid"> </p>
</td>
<td> </td>
</tr>
<tr bgcolor="#CCEEFF">
<td valign="top"></td>
<td valign="bottom"><font size="1">  </font></td>
<td valign="bottom"><font style="FONT-FAMILY: Times New Roman" size="2"><b>$</b></font></td>
<td valign="bottom" align="right"><font style="FONT-FAMILY: Times New Roman" size="2"><b>56,017</b></font></td>
<td valign="bottom" nowrap="nowrap"><font style="FONT-FAMILY: Times New Roman" size="2"><b>  </b></font></td>
<td valign="bottom"><font size="1"> </font></td>
<td valign="bottom"><font style="FONT-FAMILY: Times New Roman" size="2">$</font></td>
<td valign="bottom" align="right"><font style="FONT-FAMILY: Times New Roman" size="2">58,266</font></td>
<td valign="bottom" nowrap="nowrap"><font style="FONT-FAMILY: Times New Roman" size="2">  </font></td>
</tr>
<tr style="FONT-SIZE: 1px">
<td valign="bottom"></td>
<td valign="bottom">  </td>
<td valign="bottom">
<p style="BORDER-TOP: #000000 3px double"> </p>
</td>
<td valign="bottom">
<p style="BORDER-TOP: #000000 3px double"> </p>
</td>
<td> </td>
<td valign="bottom"> </td>
<td valign="bottom">
<p style="BORDER-TOP: #000000 3px double"> </p>
</td>
<td valign="bottom">
<p style="BORDER-TOP: #000000 3px double"> </p>
</td>
<td> </td>
</tr>
</table>
<p style="MARGIN-TOP: 12px; MARGIN-BOTTOM: 0px"><font style="FONT-FAMILY: Times New Roman" size="2">Depreciation expense for
the three- and six-months ended June 30, 2013 was $4,038, and
$11,092 respectively.</font></p>
</div>
<div>
<p style="MARGIN-TOP: 18px; MARGIN-BOTTOM: 0px"><font style="FONT-FAMILY: Times New Roman" size="2"><b>Accounts
Receivable</b></font></p>
<p style="MARGIN-TOP: 6px; MARGIN-BOTTOM: 0px"><font style="FONT-FAMILY: Times New Roman" size="2">Accounts receivable that
management has the intent and ability to collect are reported in
the balance sheets at outstanding amounts, less an allowance for
doubtful accounts. The Company writes off uncollectible receivables
when the likelihood of collection is remote.</font></p>
<p style="MARGIN-TOP: 12px; MARGIN-BOTTOM: 0px"><font style="FONT-FAMILY: Times New Roman" size="2">The Company evaluates the
collectability of accounts receivable on a regular basis. The
allowance, if any, is based upon various factors including the
financial condition and payment history of customers, an overall
review of collections experience on other accounts and economic
factors or events expected to affect future collections experience.
No allowance was recorded as of June 30, 2013 and
December 31, 2012, as the Company has a history of collecting
on all accounts including government agencies and collaborations
funding its research.</font></p>
</div>
<div>
<p style="MARGIN-TOP: 18px; MARGIN-BOTTOM: 0px"><font style="FONT-FAMILY: Times New Roman" size="2"><b>Property and
Equipment</b></font></p>
<p style="MARGIN-TOP: 6px; MARGIN-BOTTOM: 0px"><font style="FONT-FAMILY: Times New Roman" size="2">Property and equipment is
stated at cost and depreciated on a straight-line basis over
estimated useful lives ranging from three to five years. Leasehold
improvements are amortized using the straight-line method over the
shorter of the estimated useful life of the assets or the term of
the related lease. Expenditures for maintenance and repairs are
charged to operations as incurred.</font></p>
<p style="MARGIN-TOP: 12px; MARGIN-BOTTOM: 0px"><font style="FONT-FAMILY: Times New Roman" size="2">When indicators of possible
impairment are identified, the Company evaluates the recoverability
of the carrying value of its long-lived assets based on the
criteria established in ASC 360, <i>Property, Plant and
Equipment</i>. The Company considers historical performance and
anticipated future results in its evaluation of potential
impairment. The Company evaluates the carrying value of those
assets in relation to the operating performance of the business and
undiscounted cash flows expected to result from the use of those
assets. Impairment losses are recognized when carrying value
exceeds the undiscounted cash flows then management must determine
the fair value of the underlying asset. No such impairment losses
have been recognized to date.</font></p>
</div>
<div>
<p style="MARGIN-TOP: 18px; MARGIN-BOTTOM: 0px"><font style="FONT-FAMILY: Times New Roman" size="2"><b>Cash and Cash
Equivalents</b></font></p>
<p style="MARGIN-TOP: 6px; MARGIN-BOTTOM: 0px"><font style="FONT-FAMILY: Times New Roman" size="2">The Company considers all
highly liquid investments with a maturity of three months or less
from the date of purchase to be cash equivalents. Cash and cash
equivalents consist of certificates of deposit with commercial
banks and financial institutions. Certificates of deposit with a
maturity date of more than three months are classified separately
on the balance sheet. Their carrying values approximate the fair
market value.</font></p>
</div>
<div>
<p style="TEXT-TRANSFORM: none; MARGIN-TOP: 0pt; TEXT-INDENT: 0px; LETTER-SPACING: normal; FONT: 10pt 'Times New Roman'; WHITE-SPACE: normal; MARGIN-BOTTOM: 0pt; COLOR: rgb(0,0,0); WORD-SPACING: 0px; -webkit-text-stroke-width: 0px">
<font style="FONT-FAMILY: Times New Roman" size="2"><b>6.
Subsequent events</b></font></p>
<p style="TEXT-TRANSFORM: none; MARGIN-TOP: 6pt; TEXT-INDENT: 0px; LETTER-SPACING: normal; FONT: 10pt 'Times New Roman'; WHITE-SPACE: normal; MARGIN-BOTTOM: 0pt; COLOR: rgb(0,0,0); WORD-SPACING: 0px; -webkit-text-stroke-width: 0px">
<font style="FONT-FAMILY: Times New Roman" size="2">On
August 29, 2013, pursuant to an Agreement and Plan of Merger
dated August 23, 2013 (the Merger Agreement) by and among
Oneida Resources Corp., a public shell company (Oneida); ITI, Inc.,
a wholly-owned subsidiary of Oneida (Merger Sub); and the Company,
Merger Sub merged with and into the Company, with the Company
remaining as the surviving entity and a wholly-owned operating
subsidiary of Oneida (the Merger). At the effective time of the
Merger (the Effective Time), the name of the Company was changed to
ITI, Inc. Immediately following the Effective Time, a newly
organized wholly-owned subsidiary of Oneida named
“Intra-Cellular Therapies, Inc.” (the Name Change
Merger Sub) merged with and into Oneida (the Name Change Merger),
with the surviving entity named Intra-Cellular Therapies, Inc.
(ITI).</font></p>
<p style="TEXT-TRANSFORM: none; MARGIN-TOP: 12pt; TEXT-INDENT: 0px; LETTER-SPACING: normal; FONT: 10pt 'Times New Roman'; WHITE-SPACE: normal; MARGIN-BOTTOM: 0pt; COLOR: rgb(0,0,0); WORD-SPACING: 0px; -webkit-text-stroke-width: 0px">
<font style="FONT-FAMILY: Times New Roman" size="2">Pursuant to the
terms of the Merger Agreement, at the Effective Time, each share of
common stock of the Company outstanding immediately prior to the
Effective Time and each share of preferred stock of the Company
outstanding immediately prior to the Effective Time was exchanged
for one-half (1/2) of a share of common stock of ITI. ITI
issued 22,134,647 shares of ITI common stock upon such exchange of
the outstanding shares of Company common stock and preferred stock.
In addition, at the Effective Time, ITI assumed the Company’s
2003 Equity Incentive Plan, as amended (the Plan), and all options
to purchase the Company’s common stock then outstanding under
the Plan, and such options became exercisable for an aggregate of
1,462,380 shares of ITI common stock. Each such outstanding option
that had been granted by the Company under the Plan became
exercisable for one-half (1/2) of a share of ITI common stock.
At the Effective Time, ITI also assumed the outstanding warrant to
purchase shares of Company common stock, and such warrant became
exercisable for 1,822 shares of ITI common stock.</font></p>
<p style="TEXT-TRANSFORM: none; MARGIN-TOP: 12pt; TEXT-INDENT: 0px; LETTER-SPACING: normal; FONT: 10pt 'Times New Roman'; WHITE-SPACE: normal; MARGIN-BOTTOM: 0pt; COLOR: rgb(0,0,0); WORD-SPACING: 0px; -webkit-text-stroke-width: 0px">
<font style="FONT-FAMILY: Times New Roman" size="2">Immediately
prior to the Merger, on August 29, 2013, the Company sold to
accredited investors approximately $60.0 million of its shares of
common stock, or 18,889,307 shares at a price of $3.1764 per share
(the Private Placement), which included $15,289,893 in principal,
plus accrued interest, of the Company’s then outstanding
convertible promissory notes (the Notes), which were converted into
shares of Company common stock at a price of $3.1764 per share. In
connection with the Private Placement, the Company granted the
investors in the Private Placement registration rights requiring
the Company or any successor to register those shares of Company
common stock (which were exchanged in the Merger for shares of ITI
common stock, along with the rest of the outstanding shares of the
Company capital stock, except for dissenting shares) for public
resale. The then existing stockholders who agreed to become parties
to the registration rights agreement also became entitled to such
registration rights, subject to specified differences in the
agreement between the rights of new investors and existing
stockholders. The existing Second Amended and Restated
Investor Rights Agreement, by and among the Company and the
investors listed therein, dated as of October 25, 2007, as
amended, was terminated at the date of the Merger.</font></p>
<p style="TEXT-TRANSFORM: none; MARGIN-TOP: 12pt; TEXT-INDENT: 0px; LETTER-SPACING: normal; FONT: 10pt 'Times New Roman'; WHITE-SPACE: normal; MARGIN-BOTTOM: 0pt; COLOR: rgb(0,0,0); WORD-SPACING: 0px; -webkit-text-stroke-width: 0px">
<font style="FONT-FAMILY: Times New Roman" size="2">In accordance
with ASC 805, “Business Combinations,” the Company is
considered the accounting acquirer in the Merger and will account
for the transaction as an exchange for one-half (<sup style="VERTICAL-ALIGN: top"> 1</sup>⁄<sub style="VERTICAL-ALIGN: bottom">2</sub>) of a share of common stock,
because the Company’s stockholders received 100% of the
voting rights in the combined entity and the Company’s senior
management represents all of the senior management of the combined
entity. Consequently, the assets and liabilities and the historical
operations that will be reflected in consolidated financial
statements of ITI will be those of the Company and will be recorded
at their historical cost bases.</font></p>
</div>
<div>
<p style="MARGIN-TOP: 18px; MARGIN-BOTTOM: 0px"><font style="FONT-FAMILY: Times New Roman" size="2"><b>Research and
Development</b></font></p>
<p style="MARGIN-TOP: 6px; MARGIN-BOTTOM: 0px"><font style="FONT-FAMILY: Times New Roman" size="2">Except for payments made in
advance of services, the Company expenses its research and
development costs as incurred. For payments made in advance, the
Company recognizes research and development expense as the services
are rendered. Research and development costs primarily consist of
salaries and related expenses for personnel and resources and the
costs of clinical trials. Other research and development expenses
include preclinical analytical testing, outside services,
providers, materials and consulting fees.</font></p>
</div>
<div>
<p style="MARGIN-TOP: 18px; MARGIN-BOTTOM: 0px"><font style="FONT-FAMILY: Times New Roman" size="2"><b>Concentration of Credit
Risk</b></font></p>
<p style="MARGIN-TOP: 6px; MARGIN-BOTTOM: 0px"><font style="FONT-FAMILY: Times New Roman" size="2">Cash equivalents are held
with major financial institutions in the United States.
Certificates of deposit held with banks may exceed the amount of
insurance provided on such deposits. Generally, these deposits may
be redeemed upon demand and, therefore, bear minimal
risk.</font></p>
</div>
<div>
<p style="TEXT-TRANSFORM: none; MARGIN-TOP: 18pt; TEXT-INDENT: 0px; LETTER-SPACING: normal; FONT: 10pt 'Times New Roman'; WHITE-SPACE: normal; MARGIN-BOTTOM: 0pt; COLOR: rgb(0,0,0); WORD-SPACING: 0px; -webkit-text-stroke-width: 0px">
<font style="FONT-FAMILY: Times New Roman" size="2"><b>2. Summary
of Significant Accounting Policies</b></font></p>
<p style="TEXT-TRANSFORM: none; MARGIN-TOP: 6pt; TEXT-INDENT: 0px; LETTER-SPACING: normal; FONT: 10pt 'Times New Roman'; WHITE-SPACE: normal; MARGIN-BOTTOM: 0pt; COLOR: rgb(0,0,0); WORD-SPACING: 0px; -webkit-text-stroke-width: 0px">
<font style="FONT-FAMILY: Times New Roman" size="2"><b>Use of
Estimates</b></font></p>
<p style="TEXT-TRANSFORM: none; MARGIN-TOP: 6pt; TEXT-INDENT: 0px; LETTER-SPACING: normal; FONT: 10pt 'Times New Roman'; WHITE-SPACE: normal; MARGIN-BOTTOM: 0pt; COLOR: rgb(0,0,0); WORD-SPACING: 0px; -webkit-text-stroke-width: 0px">
<font style="FONT-FAMILY: Times New Roman" size="2">The preparation
of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and
assumptions that affect the amounts reported in the financial
statements and accompanying notes. Although actual results could
differ from those estimates, management does not believe that such
differences would be material.</font></p>
<p style="TEXT-TRANSFORM: none; MARGIN-TOP: 18pt; TEXT-INDENT: 0px; LETTER-SPACING: normal; FONT: 10pt 'Times New Roman'; WHITE-SPACE: normal; MARGIN-BOTTOM: 0pt; COLOR: rgb(0,0,0); WORD-SPACING: 0px; -webkit-text-stroke-width: 0px">
<font style="FONT-FAMILY: Times New Roman" size="2"><b>Cash and
Cash Equivalents</b></font></p>
<p style="TEXT-TRANSFORM: none; MARGIN-TOP: 6pt; TEXT-INDENT: 0px; LETTER-SPACING: normal; FONT: 10pt 'Times New Roman'; WHITE-SPACE: normal; MARGIN-BOTTOM: 0pt; COLOR: rgb(0,0,0); WORD-SPACING: 0px; -webkit-text-stroke-width: 0px">
<font style="FONT-FAMILY: Times New Roman" size="2">The Company
considers all highly liquid investments with a maturity of three
months or less from the date of purchase to be cash equivalents.
Cash and cash equivalents consist of certificates of deposit with
commercial banks and financial institutions. Certificates of
deposit with a maturity date of more than three months are
classified separately on the balance sheet. Their carrying values
approximate the fair market value.</font></p>
<p style="TEXT-TRANSFORM: none; MARGIN-TOP: 18pt; TEXT-INDENT: 0px; LETTER-SPACING: normal; FONT: 10pt 'Times New Roman'; WHITE-SPACE: normal; MARGIN-BOTTOM: 0pt; COLOR: rgb(0,0,0); WORD-SPACING: 0px; -webkit-text-stroke-width: 0px">
<font style="FONT-FAMILY: Times New Roman" size="2"><b>Fair Value
Measurements</b></font></p>
<p style="TEXT-TRANSFORM: none; MARGIN-TOP: 6pt; TEXT-INDENT: 0px; LETTER-SPACING: normal; FONT: 10pt 'Times New Roman'; WHITE-SPACE: normal; MARGIN-BOTTOM: 0pt; COLOR: rgb(0,0,0); WORD-SPACING: 0px; -webkit-text-stroke-width: 0px">
<font style="FONT-FAMILY: Times New Roman" size="2">The Company
applies the fair value method under ASC 820, <i>Fair Value Measurements and
Disclosures</i>. ASC 820 defines fair value, establishes a
fair value hierarchy for assets and liabilities measured at fair
value and requires expanded disclosures about fair value
measurements. The ASC 820 hierarchy ranks the quality and
reliability of inputs, or assumptions, used in the determination of
fair value and requires assets and liabilities carried at fair
value to be classified and disclosed in one of the following
categories based on the lowest level input used that is significant
to a particular fair value measurement:</font></p>
<p style="TEXT-TRANSFORM: none; MARGIN-TOP: 0pt; TEXT-INDENT: 0px; LETTER-SPACING: normal; FONT: 6pt 'Times New Roman'; WHITE-SPACE: normal; MARGIN-BOTTOM: 0pt; COLOR: rgb(0,0,0); WORD-SPACING: 0px; -webkit-text-stroke-width: 0px">
<font style="FONT-FAMILY: Times New Roman" size="2"> </font></p>
<p style="MARGIN-TOP: 18px; MARGIN-BOTTOM: 0px"></p>
<table style="TEXT-TRANSFORM: none; TEXT-INDENT: 0px; LETTER-SPACING: normal; BORDER-COLLAPSE: collapse; FONT-FAMILY: 'Times New Roman'; FONT-SIZE: 10pt; WORD-SPACING: 0px; -webkit-text-stroke-width: 0px" border="0" cellspacing="0" cellpadding="0" width="100%">
<tr>
<td width="4%"> </td>
<td valign="top" width="3%" align="left">•</td>
<td valign="top" width="1%"> </td>
<td valign="top" align="left">Level 1—Fair value is
determined by using unadjusted quoted prices that are available in
active markets for identical assets and liabilities.</td>
</tr>
</table>
<p style="TEXT-TRANSFORM: none; MARGIN-TOP: 0pt; TEXT-INDENT: 0px; LETTER-SPACING: normal; FONT: 6pt 'Times New Roman'; WHITE-SPACE: normal; MARGIN-BOTTOM: 0pt; COLOR: rgb(0,0,0); WORD-SPACING: 0px; -webkit-text-stroke-width: 0px">
<font style="FONT-FAMILY: Times New Roman" size="2"> </font></p>
<p style="MARGIN-TOP: 18px; MARGIN-BOTTOM: 0px"></p>
<table style="TEXT-TRANSFORM: none; TEXT-INDENT: 0px; LETTER-SPACING: normal; BORDER-COLLAPSE: collapse; FONT-FAMILY: 'Times New Roman'; FONT-SIZE: 10pt; WORD-SPACING: 0px; -webkit-text-stroke-width: 0px" border="0" cellspacing="0" cellpadding="0" width="100%">
<tr>
<td width="4%"> </td>
<td valign="top" width="3%" align="left">•</td>
<td valign="top" width="1%"> </td>
<td valign="top" align="left">
<p style="FONT-FAMILY: 'Times New Roman'; FONT-SIZE: 10pt" align="left">Level 2—Fair value is determined by using inputs
other than Level 1 quoted prices that are directly or indirectly
observable. Inputs can include quoted prices for similar assets and
liabilities in active markets or quoted prices for identical assets
and liabilities in inactive markets. Related inputs can also
include those used in valuation or other pricing models, such as
interest rates and yield curves that can be corroborated by
observable market data.</p>
</td>
</tr>
</table>
<p style="TEXT-TRANSFORM: none; MARGIN-TOP: 0pt; TEXT-INDENT: 0px; LETTER-SPACING: normal; FONT: 6pt 'Times New Roman'; WHITE-SPACE: normal; MARGIN-BOTTOM: 0pt; COLOR: rgb(0,0,0); WORD-SPACING: 0px; -webkit-text-stroke-width: 0px">
<font style="FONT-FAMILY: Times New Roman" size="2"> </font></p>
<p style="MARGIN-TOP: 18px; MARGIN-BOTTOM: 0px"></p>
<table style="TEXT-TRANSFORM: none; TEXT-INDENT: 0px; LETTER-SPACING: normal; BORDER-COLLAPSE: collapse; FONT-FAMILY: 'Times New Roman'; FONT-SIZE: 10pt; WORD-SPACING: 0px; -webkit-text-stroke-width: 0px" border="0" cellspacing="0" cellpadding="0" width="100%">
<tr>
<td width="4%"> </td>
<td valign="top" width="3%" align="left">•</td>
<td valign="top" width="1%"> </td>
<td valign="top" align="left">Level 3—Fair value is
determined by inputs that are unobservable and not corroborated by
market data. Use of these inputs involves significant and
subjective judgments to be made by a reporting entity –
e.g., determining an appropriate adjustment to a discount factor
for illiquidity associated with a given security.</td>
</tr>
</table>
<p style="TEXT-TRANSFORM: none; MARGIN-TOP: 12pt; TEXT-INDENT: 0px; LETTER-SPACING: normal; FONT: 10pt 'Times New Roman'; WHITE-SPACE: normal; MARGIN-BOTTOM: 0pt; COLOR: rgb(0,0,0); WORD-SPACING: 0px; -webkit-text-stroke-width: 0px">
<font style="FONT-FAMILY: Times New Roman" size="2">The Company
evaluates financial assets and liabilities subject to fair value
measurements on a recurring basis to determine the appropriate
level at which to classify them each reporting period. This
determination requires the Company to make subjective judgments as
to the significance of inputs used in determining fair value and
where such inputs lie within the ASC 820 hierarchy.</font></p>
<p style="TEXT-TRANSFORM: none; MARGIN-TOP: 12pt; TEXT-INDENT: 0px; LETTER-SPACING: normal; FONT: 10pt 'Times New Roman'; WHITE-SPACE: normal; MARGIN-BOTTOM: 0pt; COLOR: rgb(0,0,0); WORD-SPACING: 0px; -webkit-text-stroke-width: 0px">
<font style="FONT-FAMILY: Times New Roman" size="2">The Company has
no assets or liabilities that were measured using quoted prices for
similar assets and liabilities or significant unobservable inputs
(Level 2 and Level 3 assets and liabilities, respectively) as of
June 30, 2013 and December 31, 2012. The carrying value of cash
held in money market funds of approximately $1.2 million as of June
30, 2013 and December 31, 2012, is included in cash and cash
equivalents and approximates market value based on quoted market
price or Level 1 inputs.</font></p>
<p style="TEXT-TRANSFORM: none; MARGIN-TOP: 18pt; TEXT-INDENT: 0px; LETTER-SPACING: normal; FONT: 10pt 'Times New Roman'; WHITE-SPACE: normal; MARGIN-BOTTOM: 0pt; COLOR: rgb(0,0,0); WORD-SPACING: 0px; -webkit-text-stroke-width: 0px">
<font style="FONT-FAMILY: Times New Roman" size="2"><b>Financial
Instruments</b></font></p>
<p style="TEXT-TRANSFORM: none; MARGIN-TOP: 6pt; TEXT-INDENT: 0px; LETTER-SPACING: normal; FONT: 10pt 'Times New Roman'; WHITE-SPACE: normal; MARGIN-BOTTOM: 0pt; COLOR: rgb(0,0,0); WORD-SPACING: 0px; -webkit-text-stroke-width: 0px">
<font style="FONT-FAMILY: Times New Roman" size="2">The Company
considers the recorded costs of its financial assets and
liabilities, which consist of cash equivalents, accounts
receivable, accounts payable and accrued liabilities, to
approximate their fair value because of their relatively short
maturities at June 30, 2013 and December 31, 2012.
Management believes that the risks associated with its financial
instruments are minimal as the counterparties are financial
institutions of high credit standing.</font></p>
<p style="TEXT-TRANSFORM: none; MARGIN-TOP: 18pt; TEXT-INDENT: 0px; LETTER-SPACING: normal; FONT: 10pt 'Times New Roman'; WHITE-SPACE: normal; MARGIN-BOTTOM: 0pt; COLOR: rgb(0,0,0); WORD-SPACING: 0px; -webkit-text-stroke-width: 0px">
<font style="FONT-FAMILY: Times New Roman" size="2"><b>Concentration of Credit Risk</b></font></p>
<p style="TEXT-TRANSFORM: none; MARGIN-TOP: 6pt; TEXT-INDENT: 0px; LETTER-SPACING: normal; FONT: 10pt 'Times New Roman'; WHITE-SPACE: normal; MARGIN-BOTTOM: 0pt; COLOR: rgb(0,0,0); WORD-SPACING: 0px; -webkit-text-stroke-width: 0px">
<font style="FONT-FAMILY: Times New Roman" size="2">Cash
equivalents are held with major financial institutions in the
United States. Certificates of deposit held with banks may exceed
the amount of insurance provided on such deposits. Generally, these
deposits may be redeemed upon demand and, therefore, bear minimal
risk.</font></p>
<p style="TEXT-TRANSFORM: none; MARGIN-TOP: 18pt; TEXT-INDENT: 0px; LETTER-SPACING: normal; FONT: 10pt 'Times New Roman'; WHITE-SPACE: normal; MARGIN-BOTTOM: 0pt; COLOR: rgb(0,0,0); WORD-SPACING: 0px; -webkit-text-stroke-width: 0px">
<font style="FONT-FAMILY: Times New Roman" size="2"><b>Accounts
Receivable</b></font></p>
<p style="TEXT-TRANSFORM: none; MARGIN-TOP: 6pt; TEXT-INDENT: 0px; LETTER-SPACING: normal; FONT: 10pt 'Times New Roman'; WHITE-SPACE: normal; MARGIN-BOTTOM: 0pt; COLOR: rgb(0,0,0); WORD-SPACING: 0px; -webkit-text-stroke-width: 0px">
<font style="FONT-FAMILY: Times New Roman" size="2">Accounts
receivable that management has the intent and ability to collect
are reported in the balance sheets at outstanding amounts, less an
allowance for doubtful accounts. The Company writes off
uncollectible receivables when the likelihood of collection is
remote.</font></p>
<p style="TEXT-TRANSFORM: none; MARGIN-TOP: 12pt; TEXT-INDENT: 0px; LETTER-SPACING: normal; FONT: 10pt 'Times New Roman'; WHITE-SPACE: normal; MARGIN-BOTTOM: 0pt; COLOR: rgb(0,0,0); WORD-SPACING: 0px; -webkit-text-stroke-width: 0px">
<font style="FONT-FAMILY: Times New Roman" size="2">The Company
evaluates the collectability of accounts receivable on a regular
basis. The allowance, if any, is based upon various factors
including the financial condition and payment history of customers,
an overall review of collections experience on other accounts and
economic factors or events expected to affect future collections
experience. No allowance was recorded as of June 30, 2013 and
December 31, 2012, as the Company has a history of collecting
on all accounts including government agencies and collaborations
funding its research.</font></p>
<p style="TEXT-TRANSFORM: none; MARGIN-TOP: 0pt; TEXT-INDENT: 0px; LETTER-SPACING: normal; FONT: 18pt 'Times New Roman'; WHITE-SPACE: normal; MARGIN-BOTTOM: 0pt; COLOR: rgb(0,0,0); WORD-SPACING: 0px; -webkit-text-stroke-width: 0px">
<font style="FONT-FAMILY: Times New Roman" size="2"> </font></p>
<p style="TEXT-TRANSFORM: none; MARGIN-TOP: 0pt; TEXT-INDENT: 0px; LETTER-SPACING: normal; FONT: 10pt 'Times New Roman'; WHITE-SPACE: normal; MARGIN-BOTTOM: 0pt; COLOR: rgb(0,0,0); WORD-SPACING: 0px; -webkit-text-stroke-width: 0px">
<font style="FONT-FAMILY: Times New Roman" size="2"><b>Property and
Equipment</b></font></p>
<p style="TEXT-TRANSFORM: none; MARGIN-TOP: 6pt; TEXT-INDENT: 0px; LETTER-SPACING: normal; FONT: 10pt 'Times New Roman'; WHITE-SPACE: normal; MARGIN-BOTTOM: 0pt; COLOR: rgb(0,0,0); WORD-SPACING: 0px; -webkit-text-stroke-width: 0px">
<font style="FONT-FAMILY: Times New Roman" size="2">Property and
equipment is stated at cost and depreciated on a straight-line
basis over estimated useful lives ranging from three to five years.
Leasehold improvements are amortized using the straight-line method
over the shorter of the estimated useful life of the assets or the
term of the related lease. Expenditures for maintenance and repairs
are charged to operations as incurred.</font></p>
<p style="TEXT-TRANSFORM: none; MARGIN-TOP: 12pt; TEXT-INDENT: 0px; LETTER-SPACING: normal; FONT: 10pt 'Times New Roman'; WHITE-SPACE: normal; MARGIN-BOTTOM: 0pt; COLOR: rgb(0,0,0); WORD-SPACING: 0px; -webkit-text-stroke-width: 0px">
<font style="FONT-FAMILY: Times New Roman" size="2">When indicators
of possible impairment are identified, the Company evaluates the
recoverability of the carrying value of its long-lived assets based
on the criteria established in ASC 360, <i>Property, Plant and
Equipment</i>. The Company considers historical performance and
anticipated future results in its evaluation of potential
impairment. The Company evaluates the carrying value of those
assets in relation to the operating performance of the business and
undiscounted cash flows expected to result from the use of those
assets. Impairment losses are recognized when carrying value
exceeds the undiscounted cash flows then management must determine
the fair value of the underlying asset. No such impairment losses
have been recognized to date.</font></p>
<p style="TEXT-TRANSFORM: none; MARGIN-TOP: 18pt; TEXT-INDENT: 0px; LETTER-SPACING: normal; FONT: 10pt 'Times New Roman'; WHITE-SPACE: normal; MARGIN-BOTTOM: 0pt; COLOR: rgb(0,0,0); WORD-SPACING: 0px; -webkit-text-stroke-width: 0px">
<font style="FONT-FAMILY: Times New Roman" size="2"><b>Revenue
Recognition</b></font></p>
<p style="TEXT-TRANSFORM: none; MARGIN-TOP: 6pt; TEXT-INDENT: 0px; LETTER-SPACING: normal; FONT: 10pt 'Times New Roman'; WHITE-SPACE: normal; MARGIN-BOTTOM: 0pt; COLOR: rgb(0,0,0); WORD-SPACING: 0px; -webkit-text-stroke-width: 0px">
<font style="FONT-FAMILY: Times New Roman" size="2">Revenue is
recognized when all terms and conditions of the agreements have
been met, including persuasive evidence of an arrangement, delivery
has occurred or services have been rendered, price is fixed or
determinable and collectability is reasonably assured. The Company
is reimbursed for certain costs incurred on specified research
projects under the terms and conditions of grants, collaboration
agreements, and awards. The Company records the amount of
reimbursement as revenues on a gross basis in accordance with ASC
605-45, <i>Revenue
Recognition/Principal Agent Considerations</i>. The Company is the
primary obligor with respect to purchasing goods and services from
third-party suppliers, is obligated to compensate the service
provider for the work performed, and has discretion in selecting
the supplier. Provisions for estimated losses on research grant
projects and any other contracts are made in the period such losses
are determined.</font></p>
<p style="TEXT-TRANSFORM: none; MARGIN-TOP: 12pt; TEXT-INDENT: 0px; LETTER-SPACING: normal; FONT: 10pt 'Times New Roman'; WHITE-SPACE: normal; MARGIN-BOTTOM: 0pt; COLOR: rgb(0,0,0); WORD-SPACING: 0px; -webkit-text-stroke-width: 0px">
<font style="FONT-FAMILY: Times New Roman" size="2">The Company
engages in transactions with delivery of more than one element.
Each required deliverable is evaluated to determine whether it
qualifies as a separate unit of accounting. For ITI this
determination is generally based on whether the deliverable has
“stand-alone value” to the customer. The Company
adopted accounts for all Multiple-Deliverable Revenue Arrangements
(MDRAs) in accordance with ASC 605-25, <i>Revenue Recognition -
Multiple Element Arrangements</i>.</font></p>
<p style="TEXT-TRANSFORM: none; MARGIN-TOP: 12pt; TEXT-INDENT: 0px; LETTER-SPACING: normal; FONT: 10pt 'Times New Roman'; WHITE-SPACE: normal; MARGIN-BOTTOM: 0pt; COLOR: rgb(0,0,0); WORD-SPACING: 0px; -webkit-text-stroke-width: 0px">
<font style="FONT-FAMILY: Times New Roman" size="2">The Company
accounts for milestone revenue in accordance with ASC Topic
605-28, <i>Milestone Method</i>. Under
this guidance, we recognize revenue contingent upon the achievement
of a substantive milestone in its entirety in the period the
milestone is achieved. Substantive milestone payments are
recognized upon achievement of the milestone only if all of the
following conditions are met:</font></p>
<p style="TEXT-TRANSFORM: none; MARGIN-TOP: 0pt; TEXT-INDENT: 0px; LETTER-SPACING: normal; FONT: 6pt 'Times New Roman'; WHITE-SPACE: normal; MARGIN-BOTTOM: 0pt; COLOR: rgb(0,0,0); WORD-SPACING: 0px; -webkit-text-stroke-width: 0px">
<font style="FONT-FAMILY: Times New Roman" size="2"> </font></p>
<p style="MARGIN-TOP: 18px; MARGIN-BOTTOM: 0px"></p>
<table style="TEXT-TRANSFORM: none; TEXT-INDENT: 0px; LETTER-SPACING: normal; BORDER-COLLAPSE: collapse; FONT-FAMILY: 'Times New Roman'; FONT-SIZE: 10pt; WORD-SPACING: 0px; -webkit-text-stroke-width: 0px" border="0" cellspacing="0" cellpadding="0" width="100%">
<tr>
<td width="4%"> </td>
<td valign="top" width="3%" align="left">•</td>
<td valign="top" width="1%"> </td>
<td valign="top" align="left">The milestone payments are
non-refundable;</td>
</tr>
</table>
<p style="TEXT-TRANSFORM: none; MARGIN-TOP: 0pt; TEXT-INDENT: 0px; LETTER-SPACING: normal; FONT: 6pt 'Times New Roman'; WHITE-SPACE: normal; MARGIN-BOTTOM: 0pt; COLOR: rgb(0,0,0); WORD-SPACING: 0px; -webkit-text-stroke-width: 0px">
<font style="FONT-FAMILY: Times New Roman" size="2"> </font></p>
<p style="MARGIN-TOP: 18px; MARGIN-BOTTOM: 0px"></p>
<table style="TEXT-TRANSFORM: none; TEXT-INDENT: 0px; LETTER-SPACING: normal; BORDER-COLLAPSE: collapse; FONT-FAMILY: 'Times New Roman'; FONT-SIZE: 10pt; WORD-SPACING: 0px; -webkit-text-stroke-width: 0px" border="0" cellspacing="0" cellpadding="0" width="100%">
<tr>
<td width="4%"> </td>
<td valign="top" width="3%" align="left">•</td>
<td valign="top" width="1%"> </td>
<td valign="top" align="left">Achievement of the milestone involves
a degree of risk and was not reasonably assured at the inception of
the arrangement;</td>
</tr>
</table>
<p style="TEXT-TRANSFORM: none; MARGIN-TOP: 0pt; TEXT-INDENT: 0px; LETTER-SPACING: normal; FONT: 6pt 'Times New Roman'; WHITE-SPACE: normal; MARGIN-BOTTOM: 0pt; COLOR: rgb(0,0,0); WORD-SPACING: 0px; -webkit-text-stroke-width: 0px">
<font style="FONT-FAMILY: Times New Roman" size="2"> </font></p>
<p style="MARGIN-TOP: 18px; MARGIN-BOTTOM: 0px"></p>
<table style="TEXT-TRANSFORM: none; TEXT-INDENT: 0px; LETTER-SPACING: normal; BORDER-COLLAPSE: collapse; FONT-FAMILY: 'Times New Roman'; FONT-SIZE: 10pt; WORD-SPACING: 0px; -webkit-text-stroke-width: 0px" border="0" cellspacing="0" cellpadding="0" width="100%">
<tr>
<td width="4%"> </td>
<td valign="top" width="3%" align="left">•</td>
<td valign="top" width="1%"> </td>
<td valign="top" align="left">Substantive effort on our part is
involved in achieving the milestone;</td>
</tr>
</table>
<p style="TEXT-TRANSFORM: none; MARGIN-TOP: 0pt; TEXT-INDENT: 0px; LETTER-SPACING: normal; FONT: 6pt 'Times New Roman'; WHITE-SPACE: normal; MARGIN-BOTTOM: 0pt; COLOR: rgb(0,0,0); WORD-SPACING: 0px; -webkit-text-stroke-width: 0px">
<font style="FONT-FAMILY: Times New Roman" size="2"> </font></p>
<p style="MARGIN-TOP: 18px; MARGIN-BOTTOM: 0px"></p>
<table style="TEXT-TRANSFORM: none; TEXT-INDENT: 0px; LETTER-SPACING: normal; BORDER-COLLAPSE: collapse; FONT-FAMILY: 'Times New Roman'; FONT-SIZE: 10pt; WORD-SPACING: 0px; -webkit-text-stroke-width: 0px" border="0" cellspacing="0" cellpadding="0" width="100%">
<tr>
<td width="4%"> </td>
<td valign="top" width="3%" align="left">•</td>
<td valign="top" width="1%"> </td>
<td valign="top" align="left">The amount of the milestone payment
is reasonable in relation to the effort expended or the risk
associated with achievement of the milestone; and</td>
</tr>
</table>
<p style="TEXT-TRANSFORM: none; MARGIN-TOP: 0pt; TEXT-INDENT: 0px; LETTER-SPACING: normal; FONT: 6pt 'Times New Roman'; WHITE-SPACE: normal; MARGIN-BOTTOM: 0pt; COLOR: rgb(0,0,0); WORD-SPACING: 0px; -webkit-text-stroke-width: 0px">
<font style="FONT-FAMILY: Times New Roman" size="2"> </font></p>
<p style="MARGIN-TOP: 18px; MARGIN-BOTTOM: 0px"></p>
<table style="TEXT-TRANSFORM: none; TEXT-INDENT: 0px; LETTER-SPACING: normal; BORDER-COLLAPSE: collapse; FONT-FAMILY: 'Times New Roman'; FONT-SIZE: 10pt; WORD-SPACING: 0px; -webkit-text-stroke-width: 0px" border="0" cellspacing="0" cellpadding="0" width="100%">
<tr>
<td width="4%"> </td>
<td valign="top" width="3%" align="left">•</td>
<td valign="top" width="1%"> </td>
<td valign="top" align="left">A reasonable amount of time passes
between the up-front license payment and the first milestone
payment, as well as between each subsequent milestone payment.</td>
</tr>
</table>
<p style="TEXT-TRANSFORM: none; MARGIN-TOP: 0pt; TEXT-INDENT: 0px; LETTER-SPACING: normal; FONT: 12pt 'Times New Roman'; WHITE-SPACE: normal; MARGIN-BOTTOM: 0pt; COLOR: rgb(0,0,0); WORD-SPACING: 0px; -webkit-text-stroke-width: 0px">
<font style="FONT-FAMILY: Times New Roman" size="2"> </font></p>
<p style="TEXT-TRANSFORM: none; MARGIN-TOP: 0pt; TEXT-INDENT: 0px; LETTER-SPACING: normal; FONT: 10pt 'Times New Roman'; WHITE-SPACE: normal; MARGIN-BOTTOM: 0pt; COLOR: rgb(0,0,0); WORD-SPACING: 0px; -webkit-text-stroke-width: 0px">
<font style="FONT-FAMILY: Times New Roman" size="2">Determination
as to whether a payment meets the aforementioned conditions
involves management’s judgment. If any of these conditions
are not met, the resulting payment would not be considered a
substantive milestone, and therefore, the resulting payment would
be considered part of the consideration for the single unit of
accounting and be recognized as revenues in accordance with the
revenue models described above. In addition, the determination that
one such payment was not a substantive milestone could prevent us
from concluding that subsequent milestone payments were substantive
milestones and, as a result, any additional milestone payments
could also be considered part of the consideration for the single
unit of accounting and would be recognized as revenue as such
performance obligations are performed under either the proportional
performance or straight-line methods, as applicable.</font></p>
<p style="TEXT-TRANSFORM: none; MARGIN-TOP: 18pt; TEXT-INDENT: 0px; LETTER-SPACING: normal; FONT: 10pt 'Times New Roman'; WHITE-SPACE: normal; MARGIN-BOTTOM: 0pt; COLOR: rgb(0,0,0); WORD-SPACING: 0px; -webkit-text-stroke-width: 0px">
<font style="FONT-FAMILY: Times New Roman" size="2"><b>Deferred
Revenue</b></font></p>
<p style="TEXT-TRANSFORM: none; MARGIN-TOP: 6pt; TEXT-INDENT: 0px; LETTER-SPACING: normal; FONT: 10pt 'Times New Roman'; WHITE-SPACE: normal; MARGIN-BOTTOM: 0pt; COLOR: rgb(0,0,0); WORD-SPACING: 0px; -webkit-text-stroke-width: 0px">
<font style="FONT-FAMILY: Times New Roman" size="2">Cash received
as prepayment on future services is deferred and recognized as
revenue as the services are performed. The Company must remit
interest on any deferred revenue related to a governmental agency.
As of June 30, 2013 and December 31, 2012, no interest
was due as the Company did not have any deferred revenue from a
government agency.</font></p>
<p style="TEXT-TRANSFORM: none; MARGIN-TOP: 18pt; TEXT-INDENT: 0px; LETTER-SPACING: normal; FONT: 10pt 'Times New Roman'; WHITE-SPACE: normal; MARGIN-BOTTOM: 0pt; COLOR: rgb(0,0,0); WORD-SPACING: 0px; -webkit-text-stroke-width: 0px">
<font style="FONT-FAMILY: Times New Roman" size="2"><b>Research and
Development</b></font></p>
<p style="TEXT-TRANSFORM: none; MARGIN-TOP: 6pt; TEXT-INDENT: 0px; LETTER-SPACING: normal; FONT: 10pt 'Times New Roman'; WHITE-SPACE: normal; MARGIN-BOTTOM: 0pt; COLOR: rgb(0,0,0); WORD-SPACING: 0px; -webkit-text-stroke-width: 0px">
<font style="FONT-FAMILY: Times New Roman" size="2">Except for
payments made in advance of services, the Company expenses its
research and development costs as incurred. For payments made in
advance, the Company recognizes research and development expense as
the services are rendered. Research and development costs primarily
consist of salaries and related expenses for personnel and
resources and the costs of clinical trials. Other research and
development expenses include preclinical analytical testing,
outside services, providers, materials and consulting
fees.</font></p>
<p style="TEXT-TRANSFORM: none; MARGIN-TOP: 18pt; TEXT-INDENT: 0px; LETTER-SPACING: normal; FONT: 10pt 'Times New Roman'; WHITE-SPACE: normal; MARGIN-BOTTOM: 0pt; COLOR: rgb(0,0,0); WORD-SPACING: 0px; -webkit-text-stroke-width: 0px">
<font style="FONT-FAMILY: Times New Roman" size="2"><b>Income
Taxes</b></font></p>
<p style="TEXT-TRANSFORM: none; MARGIN-TOP: 6pt; TEXT-INDENT: 0px; LETTER-SPACING: normal; FONT: 10pt 'Times New Roman'; WHITE-SPACE: normal; MARGIN-BOTTOM: 0pt; COLOR: rgb(0,0,0); WORD-SPACING: 0px; -webkit-text-stroke-width: 0px">
<font style="FONT-FAMILY: Times New Roman" size="2">Income taxes
are accounted for using the liability method. Deferred tax assets
and liabilities are recognized for the future tax consequences
attributable to differences between the financial statement
carrying amounts of existing assets and liabilities and its
respective tax bases. Deferred tax assets and liabilities are
measured using enacted tax rates expected to apply to taxable
income in the year in which those temporary differences are
expected to be recovered or settled.</font></p>
<p style="TEXT-TRANSFORM: none; MARGIN-TOP: 12pt; TEXT-INDENT: 0px; LETTER-SPACING: normal; FONT: 10pt 'Times New Roman'; WHITE-SPACE: normal; MARGIN-BOTTOM: 0pt; COLOR: rgb(0,0,0); WORD-SPACING: 0px; -webkit-text-stroke-width: 0px">
<font style="FONT-FAMILY: Times New Roman" size="2">The effect on
deferred tax assets and liabilities of a change in tax rates is
recognized in income in the period that includes the enactment
date. Valuation allowances are established when necessary to reduce
net deferred tax assets to the amount expected to be realized.
Income tax expense is the tax payable for the period and the change
during the period in deferred tax assets and
liabilities.</font></p>
<p style="TEXT-TRANSFORM: none; MARGIN-TOP: 12pt; TEXT-INDENT: 0px; LETTER-SPACING: normal; FONT: 10pt 'Times New Roman'; WHITE-SPACE: normal; MARGIN-BOTTOM: 0pt; COLOR: rgb(0,0,0); WORD-SPACING: 0px; -webkit-text-stroke-width: 0px">
<font style="FONT-FAMILY: Times New Roman" size="2">The Company
accounts for uncertain tax positions pursuant to ASC 740
(previously included in Financial Accounting Standards Board (FASB)
Interpretation No. 48, <i>Accounting for Uncertainty
in Income Taxes–an Interpretation of FASB Statement
No. 109)</i>. Financial statement recognition of a tax
position taken or expected to be taken in a tax return is
determined based on a more-likely-than-not threshold of that
position being sustained. If the tax position meets this threshold,
the benefit to be recognized is measured as the tax benefit having
the highest likelihood of being realized upon ultimate settlement
with the taxing authority. The Company recognizes interest accrued
related to unrecognized tax benefits and penalties in the provision
for income taxes.</font></p>
<p style="TEXT-TRANSFORM: none; MARGIN-TOP: 0pt; TEXT-INDENT: 0px; LETTER-SPACING: normal; FONT: 18pt 'Times New Roman'; WHITE-SPACE: normal; MARGIN-BOTTOM: 0pt; COLOR: rgb(0,0,0); WORD-SPACING: 0px; -webkit-text-stroke-width: 0px">
<font style="FONT-FAMILY: Times New Roman" size="2"> </font></p>
<p style="TEXT-TRANSFORM: none; MARGIN-TOP: 0pt; TEXT-INDENT: 0px; LETTER-SPACING: normal; FONT: 10pt 'Times New Roman'; WHITE-SPACE: normal; MARGIN-BOTTOM: 0pt; COLOR: rgb(0,0,0); WORD-SPACING: 0px; -webkit-text-stroke-width: 0px">
<font style="FONT-FAMILY: Times New Roman" size="2"><b>Comprehensive Income (Loss)</b></font></p>
<p style="TEXT-TRANSFORM: none; MARGIN-TOP: 6pt; TEXT-INDENT: 0px; LETTER-SPACING: normal; FONT: 10pt 'Times New Roman'; WHITE-SPACE: normal; MARGIN-BOTTOM: 0pt; COLOR: rgb(0,0,0); WORD-SPACING: 0px; -webkit-text-stroke-width: 0px">
<font style="FONT-FAMILY: Times New Roman" size="2">ASC
220-10, <i>Reporting Comprehensive
Income</i>, requires the presentation of the comprehensive income
or loss and its components as part of the financial statements if
comprehensive income (loss) differs from net income (loss). For the
three- and <font style="WHITE-SPACE: nowrap">six-months</font> ended June 30, 2013 and
the year ended December 31, 2012, the Company’s net loss
equals comprehensive loss.</font></p>
<p style="TEXT-TRANSFORM: none; MARGIN-TOP: 18pt; TEXT-INDENT: 0px; LETTER-SPACING: normal; FONT: 10pt 'Times New Roman'; WHITE-SPACE: normal; MARGIN-BOTTOM: 0pt; COLOR: rgb(0,0,0); WORD-SPACING: 0px; -webkit-text-stroke-width: 0px">
<font style="FONT-FAMILY: Times New Roman" size="2"><b>Share-Based
Compensation</b></font></p>
<p style="TEXT-TRANSFORM: none; MARGIN-TOP: 6pt; TEXT-INDENT: 0px; LETTER-SPACING: normal; FONT: 10pt 'Times New Roman'; WHITE-SPACE: normal; MARGIN-BOTTOM: 0pt; COLOR: rgb(0,0,0); WORD-SPACING: 0px; -webkit-text-stroke-width: 0px">
<font style="FONT-FAMILY: Times New Roman" size="2">Share-based
payments are accounted for in accordance with the provisions of
ASC 718, <i>Compensation—Stock
Compensation</i> (ASC 718). The fair value
of share-based payments is estimated, on the date of grant, using
the Black-Scholes-Merton option-pricing model (the Black-Scholes
model). The resulting fair value is recognized ratably over the
requisite service period, which is generally the vesting period of
the option.</font></p>
<p style="TEXT-TRANSFORM: none; MARGIN-TOP: 12pt; TEXT-INDENT: 0px; LETTER-SPACING: normal; FONT: 10pt 'Times New Roman'; WHITE-SPACE: normal; MARGIN-BOTTOM: 0pt; COLOR: rgb(0,0,0); WORD-SPACING: 0px; -webkit-text-stroke-width: 0px">
<font style="FONT-FAMILY: Times New Roman" size="2">For all time
vesting awards granted, expense is amortized using the
straight-line attribution method. For awards that contain a
performance condition, expense is amortized using the accelerated
attribution method. As share-based compensation expense recognized
in the statements of operations for the three- and six-months ended
June 30, 2013 and 2012 and the year ended December 31,
2012, is based on share-based awards ultimately expected to vest,
it has been reduced for estimated forfeitures.</font></p>
<p style="TEXT-TRANSFORM: none; MARGIN-TOP: 12pt; TEXT-INDENT: 0px; LETTER-SPACING: normal; FONT: 10pt 'Times New Roman'; WHITE-SPACE: normal; MARGIN-BOTTOM: 0pt; COLOR: rgb(0,0,0); WORD-SPACING: 0px; -webkit-text-stroke-width: 0px">
<font style="FONT-FAMILY: Times New Roman" size="2">ASC 718
requires forfeitures to be estimated at the time of grant and
revised, if necessary, in subsequent periods if actual forfeitures
differ from those estimates. Pre-vesting forfeitures are based on
the Company’s historical experience for the three- and
six-months ended June 30, 2013 and 2012 the year-ended
December 31, 2012, and have not been material.</font></p>
<p style="TEXT-TRANSFORM: none; MARGIN-TOP: 12pt; TEXT-INDENT: 0px; LETTER-SPACING: normal; FONT: 10pt 'Times New Roman'; WHITE-SPACE: normal; MARGIN-BOTTOM: 0pt; COLOR: rgb(0,0,0); WORD-SPACING: 0px; -webkit-text-stroke-width: 0px">
<font style="FONT-FAMILY: Times New Roman" size="2">The Company
utilizes the Black-Scholes model for estimating fair value of its
stock options granted. Option valuation models, including
Black-Scholes model, require the input of subjective assumptions,
and changes in the assumptions used can materially affect the grant
date fair value of an award. These assumptions include the
risk-free rate of interest, expected dividend yield, expected
volatility and the expected life of the award.</font></p>
<p style="TEXT-TRANSFORM: none; MARGIN-TOP: 12pt; TEXT-INDENT: 0px; LETTER-SPACING: normal; FONT: 10pt 'Times New Roman'; WHITE-SPACE: normal; MARGIN-BOTTOM: 0pt; COLOR: rgb(0,0,0); WORD-SPACING: 0px; -webkit-text-stroke-width: 0px">
<font style="FONT-FAMILY: Times New Roman" size="2">Expected
volatility rates are based on historical volatility of the common
stock of comparable publicly traded entities and other factors due
to the lack of historic information of the Company’s common
stock. The expected life of stock-based options is the period of
time for which the stock-based options are expected to be
outstanding. Given the lack of historic exercise data, the expected
life is determined using the “simplified method” which
is defined as the midpoint between the vesting date and the end of
the contractual term.</font></p>
<p style="TEXT-TRANSFORM: none; MARGIN-TOP: 12pt; TEXT-INDENT: 0px; LETTER-SPACING: normal; FONT: 10pt 'Times New Roman'; WHITE-SPACE: normal; MARGIN-BOTTOM: 0pt; COLOR: rgb(0,0,0); WORD-SPACING: 0px; -webkit-text-stroke-width: 0px">
<font style="FONT-FAMILY: Times New Roman" size="2">The risk-free
interest rates are based on the U.S. Treasury yield for a period
consistent with the expected term of the option in effect at the
time of the grant. The Company has not paid dividends to its
stockholders since its inception and does not plan to pay cash
dividends in the foreseeable future. Therefore, the Company has
assumed an expected dividend rate of zero.</font></p>
<p style="TEXT-TRANSFORM: none; MARGIN-TOP: 12pt; TEXT-INDENT: 0px; LETTER-SPACING: normal; FONT: 10pt 'Times New Roman'; WHITE-SPACE: normal; MARGIN-BOTTOM: 0pt; COLOR: rgb(0,0,0); WORD-SPACING: 0px; -webkit-text-stroke-width: 0px">
<font style="FONT-FAMILY: Times New Roman" size="2">Given the
absence of an active market for the Company’s common stock,
the exercise price of the stock options on the date of grant was
determined and approved by the board of directors using several
factors, including progress and milestones achieved in the
Company’s business development and performance, the price per
share of its convertible preferred stock offerings and general
industry and economic trends. In establishing the estimated fair
value of the common stock, the Company considered the guidance set
forth in American Institute of Certified Public Accountants
Practice Guide, <i>Valuation of
Privately-Held-Company Equity Securities Issued as
Compensation</i>.</font></p>
<p style="TEXT-TRANSFORM: none; MARGIN-TOP: 0pt; TEXT-INDENT: 0px; LETTER-SPACING: normal; FONT: 12pt 'Times New Roman'; WHITE-SPACE: normal; MARGIN-BOTTOM: 0pt; COLOR: rgb(0,0,0); WORD-SPACING: 0px; -webkit-text-stroke-width: 0px">
<font style="FONT-FAMILY: Times New Roman" size="2"> </font></p>
<p style="TEXT-TRANSFORM: none; MARGIN-TOP: 0pt; TEXT-INDENT: 0px; LETTER-SPACING: normal; FONT: 10pt 'Times New Roman'; WHITE-SPACE: normal; MARGIN-BOTTOM: 0pt; COLOR: rgb(0,0,0); WORD-SPACING: 0px; -webkit-text-stroke-width: 0px">
<font style="FONT-FAMILY: Times New Roman" size="2">Under ASC 718,
the cumulative amount of compensation cost recognized for
instruments classified as equity that ordinarily would result in a
future tax deduction under existing tax law shall be considered to
be a deductible difference in applying ASC 740, <i>Income Taxes</i>. The
deductible temporary difference is based on the compensation cost
recognized for financial reporting purposes; however, these
provisions currently do not impact the Company, as all the deferred
tax assets have a full valuation allowance.</font></p>
<p style="TEXT-TRANSFORM: none; MARGIN-TOP: 12pt; TEXT-INDENT: 0px; LETTER-SPACING: normal; FONT: 10pt 'Times New Roman'; WHITE-SPACE: normal; MARGIN-BOTTOM: 0pt; COLOR: rgb(0,0,0); WORD-SPACING: 0px; -webkit-text-stroke-width: 0px">
<font style="FONT-FAMILY: Times New Roman" size="2">Since the
Company had net operating loss carryforwards as of June 30,
2013 and December 31, 2012, no excess tax benefits for the tax
deductions related to share-based awards were recognized in the
statements of operations.</font></p>
<p style="TEXT-TRANSFORM: none; MARGIN-TOP: 12pt; TEXT-INDENT: 0px; LETTER-SPACING: normal; FONT: 10pt 'Times New Roman'; WHITE-SPACE: normal; MARGIN-BOTTOM: 0pt; COLOR: rgb(0,0,0); WORD-SPACING: 0px; -webkit-text-stroke-width: 0px">
<font style="FONT-FAMILY: Times New Roman" size="2">Equity
instruments issued to non-employees are accounted for under the
provisions of ASC 718 and ASC 505-50, <i>Equity/Equity-Based
Payments to Non-Employees</i>. Accordingly, the estimated fair
value of the equity instrument is recorded on the earlier of the
performance commitment date or the date the services required
are completed and are marked to market during the
service period.</font></p>
<p style="TEXT-TRANSFORM: none; MARGIN-TOP: 18pt; TEXT-INDENT: 0px; LETTER-SPACING: normal; FONT: 10pt 'Times New Roman'; WHITE-SPACE: normal; MARGIN-BOTTOM: 0pt; COLOR: rgb(0,0,0); WORD-SPACING: 0px; -webkit-text-stroke-width: 0px">
<font style="FONT-FAMILY: Times New Roman" size="2"><b>Loss Per
Share</b></font></p>
<p style="TEXT-TRANSFORM: none; MARGIN-TOP: 6pt; TEXT-INDENT: 0px; LETTER-SPACING: normal; FONT: 10pt 'Times New Roman'; WHITE-SPACE: normal; MARGIN-BOTTOM: 0pt; COLOR: rgb(0,0,0); WORD-SPACING: 0px; -webkit-text-stroke-width: 0px">
<font style="FONT-FAMILY: Times New Roman" size="2">Loss per share
is calculated under the two-class method under which all earnings
(distributed and undistributed) are allocated to each class of
common stock and participating securities based on their respective
rights to receive dividends. In the event that the Board of
Directors shall declare a dividend payable in cash or other
property on the then-outstanding shares of common stock, the
holders of the Redeemable Preferred Series A, B, and C convertible
preferred stock shall be entitled to receive the amount of
dividends per share of Preferred Stock that would be payable on the
largest number of whole shares of Common Stock into which each
share of Preferred Stock could then be converted. Therefore, the
Redeemable Preferred Series A, B, and C Preferred Stock are
participating securities.</font></p>
<p style="TEXT-TRANSFORM: none; MARGIN-TOP: 12pt; TEXT-INDENT: 0px; LETTER-SPACING: normal; FONT: 10pt 'Times New Roman'; WHITE-SPACE: normal; MARGIN-BOTTOM: 0pt; COLOR: rgb(0,0,0); WORD-SPACING: 0px; -webkit-text-stroke-width: 0px">
<font style="FONT-FAMILY: Times New Roman" size="2">Basic net loss
per common share is determined by dividing the net loss allocable
to common stockholders by the weighted-average number of common
shares outstanding during the period, without consideration of
common stock equivalents. Diluted net loss per share is computed by
dividing the net loss allocable to common stockholders by the
weighted-average number of common stock equivalents outstanding for
the period. The treasury stock method is used to determine the
dilutive effect of the Company’s stock option grants and the
if-converted method is used to determine the dilutive effect of the
Company’s Redeemable Preferred Series A, B, and C convertible
preferred stock.</font></p>
<p style="TEXT-TRANSFORM: none; MARGIN-TOP: 12pt; TEXT-INDENT: 0px; LETTER-SPACING: normal; FONT: 10pt 'Times New Roman'; WHITE-SPACE: normal; MARGIN-BOTTOM: 0pt; COLOR: rgb(0,0,0); WORD-SPACING: 0px; -webkit-text-stroke-width: 0px">
<font style="FONT-FAMILY: Times New Roman" size="2">The following common stock equivalents were excluded in
the calculation of diluted loss per share because their effect
would be anti-dilutive as applied to the loss from operations as of
the three- and six- months ended June 30, 2013 and
2012:</font></p>
<p style="TEXT-TRANSFORM: none; MARGIN-TOP: 0pt; TEXT-INDENT: 0px; LETTER-SPACING: normal; FONT: 12pt 'Times New Roman'; WHITE-SPACE: normal; MARGIN-BOTTOM: 0pt; COLOR: rgb(0,0,0); WORD-SPACING: 0px; -webkit-text-stroke-width: 0px">
<font style="FONT-FAMILY: Times New Roman" size="2"> </font></p>
<p style="MARGIN-TOP: 18px; MARGIN-BOTTOM: 0px"></p>
<table style="TEXT-TRANSFORM: none; TEXT-INDENT: 0px; LETTER-SPACING: normal; BORDER-COLLAPSE: collapse; FONT-FAMILY: 'Times New Roman'; FONT-SIZE: 10pt; WORD-SPACING: 0px; -webkit-text-stroke-width: 0px" border="0" cellspacing="0" cellpadding="0" width="92%" align="center">
<tr>
<td width="48%"></td>
<td valign="bottom" width="3%"></td>
<td></td>
<td></td>
<td></td>
<td valign="bottom" width="3%"></td>
<td></td>
<td></td>
<td></td>
<td valign="bottom" width="3%"></td>
<td></td>
<td></td>
<td></td>
<td valign="bottom" width="3%"></td>
<td></td>
<td></td>
<td></td>
</tr>
<tr style="FONT-FAMILY: 'Times New Roman'; FONT-SIZE: 8pt">
<td valign="bottom"> </td>
<td valign="bottom">  </td>
<td valign="bottom" colspan="6" align="center">
<p style="MARGIN-TOP: 0pt; FONT-FAMILY: 'Times New Roman'; MARGIN-BOTTOM: 0pt; FONT-SIZE: 8pt" align="center"><b>Three-Months Ended</b></p>
<p style="MARGIN-TOP: 0pt; FONT-FAMILY: 'Times New Roman'; MARGIN-BOTTOM: 1pt; FONT-SIZE: 8pt" align="center"><b>June 30</b></p>
</td>
<td valign="bottom"> </td>
<td valign="bottom">  </td>
<td valign="bottom" colspan="6" align="center">
<p style="MARGIN-TOP: 0pt; FONT-FAMILY: 'Times New Roman'; MARGIN-BOTTOM: 0pt; FONT-SIZE: 8pt" align="center"><b>Six-Months Ended</b></p>
<p style="MARGIN-TOP: 0pt; FONT-FAMILY: 'Times New Roman'; MARGIN-BOTTOM: 1pt; FONT-SIZE: 8pt" align="center"><b>June 30</b></p>
</td>
<td valign="bottom"> </td>
</tr>
<tr style="FONT-FAMILY: 'Times New Roman'; FONT-SIZE: 8pt">
<td valign="bottom"> </td>
<td valign="bottom">  </td>
<td style="BORDER-BOTTOM: rgb(0,0,0) 1pt solid" valign="bottom" colspan="2" align="center"><b>2013</b></td>
<td valign="bottom"> </td>
<td valign="bottom">  </td>
<td style="BORDER-BOTTOM: rgb(0,0,0) 1pt solid" valign="bottom" colspan="2" align="center"><b>2012</b></td>
<td valign="bottom"> </td>
<td valign="bottom">  </td>
<td style="BORDER-BOTTOM: rgb(0,0,0) 1pt solid" valign="bottom" colspan="2" align="center"><b>2013</b></td>
<td valign="bottom"> </td>
<td valign="bottom">  </td>
<td style="BORDER-BOTTOM: rgb(0,0,0) 1pt solid" valign="bottom" colspan="2" align="center"><b>2012</b></td>
<td valign="bottom"> </td>
</tr>
<tr style="FONT-FAMILY: 'Times New Roman'; FONT-SIZE: 10pt" bgcolor="#CCEEFF">
<td valign="top"></td>
<td valign="bottom">  </td>
<td valign="bottom"></td>
<td valign="bottom"></td>
<td valign="bottom"></td>
<td valign="bottom">  </td>
<td valign="bottom"></td>
<td valign="bottom"></td>
<td valign="bottom"></td>
<td valign="bottom">  </td>
<td valign="bottom"></td>
<td valign="bottom"></td>
<td valign="bottom"></td>
<td valign="bottom">  </td>
<td valign="bottom"></td>
<td valign="bottom"></td>
<td valign="bottom"></td>
</tr>
<tr style="FONT-FAMILY: 'Times New Roman'; FONT-SIZE: 10pt">
<td valign="top">
<p style="TEXT-INDENT: -1em; FONT-FAMILY: 'Times New Roman'; MARGIN-LEFT: 1em; FONT-SIZE: 10pt">
Series A, B, and C Preferred Stock</p>
</td>
<td valign="bottom">  </td>
<td valign="bottom"> </td>
<td valign="bottom" align="right">
<b>13,09</b><b>4</b><b>,</b><b>663</b></td>
<td valign="bottom" nowrap="nowrap">  </td>
<td valign="bottom">  </td>
<td valign="bottom"> </td>
<td valign="bottom" align="right">13,094,663</td>
<td valign="bottom" nowrap="nowrap">  </td>
<td valign="bottom">  </td>
<td valign="bottom"> </td>
<td valign="bottom" align="right">
<b>13,09</b><b>4</b><b>,</b><b>663</b></td>
<td valign="bottom" nowrap="nowrap">  </td>
<td valign="bottom">  </td>
<td valign="bottom"> </td>
<td valign="bottom" align="right">13,094,663</td>
<td valign="bottom" nowrap="nowrap">  </td>
</tr>
<tr style="FONT-FAMILY: 'Times New Roman'; FONT-SIZE: 10pt" bgcolor="#CCEEFF">
<td valign="top">
<p style="TEXT-INDENT: -1em; FONT-FAMILY: 'Times New Roman'; MARGIN-LEFT: 1em; FONT-SIZE: 10pt">
Stock options</p>
</td>
<td valign="bottom">  </td>
<td valign="bottom"> </td>
<td valign="bottom" align="right">
<b>2,</b><b>360</b><b>,</b><b>333</b></td>
<td valign="bottom" nowrap="nowrap">  </td>
<td valign="bottom">  </td>
<td valign="bottom"> </td>
<td valign="bottom" align="right">2,065,513</td>
<td valign="bottom" nowrap="nowrap">  </td>
<td valign="bottom">  </td>
<td valign="bottom"> </td>
<td valign="bottom" align="right">
<b>2,</b><b>360</b><b>,000</b></td>
<td valign="bottom" nowrap="nowrap">  </td>
<td valign="bottom">  </td>
<td valign="bottom"> </td>
<td valign="bottom" align="right">2,061,135</td>
<td valign="bottom" nowrap="nowrap">  </td>
</tr>
<tr style="FONT-FAMILY: 'Times New Roman'; FONT-SIZE: 10pt">
<td valign="top">
<p style="TEXT-INDENT: -1em; FONT-FAMILY: 'Times New Roman'; MARGIN-LEFT: 1em; FONT-SIZE: 10pt">
Convertible promissory notes</p>
</td>
<td valign="bottom">  </td>
<td valign="bottom"> </td>
<td valign="bottom" align="right"><b>5,079,699</b></td>
<td valign="bottom" nowrap="nowrap">  </td>
<td valign="bottom">  </td>
<td valign="bottom"> </td>
<td valign="bottom" align="right">—  </td>
<td valign="bottom" nowrap="nowrap">  </td>
<td valign="bottom">  </td>
<td valign="bottom"> </td>
<td valign="bottom" align="right">
<b>5,065</b><b>,0</b><b>15</b></td>
<td valign="bottom" nowrap="nowrap">  </td>
<td valign="bottom">  </td>
<td valign="bottom"> </td>
<td valign="bottom" align="right">—  </td>
<td valign="bottom" nowrap="nowrap">  </td>
</tr>
</table>
<p style="TEXT-TRANSFORM: none; MARGIN-TOP: 18pt; TEXT-INDENT: 0px; LETTER-SPACING: normal; FONT: 10pt 'Times New Roman'; WHITE-SPACE: normal; MARGIN-BOTTOM: 0pt; COLOR: rgb(0,0,0); WORD-SPACING: 0px; -webkit-text-stroke-width: 0px">
<font style="FONT-FAMILY: Times New Roman" size="2"><b>Recently
Issued Accounting Pronouncements</b></font></p>
<p style="TEXT-TRANSFORM: none; MARGIN-TOP: 6pt; TEXT-INDENT: 0px; LETTER-SPACING: normal; FONT: 10pt 'Times New Roman'; WHITE-SPACE: normal; MARGIN-BOTTOM: 0pt; COLOR: rgb(0,0,0); WORD-SPACING: 0px; -webkit-text-stroke-width: 0px">
<font style="FONT-FAMILY: Times New Roman" size="2">In
April 2013, the Financial Accounting Standards (FASB) issued
Accounting standards Update (ASU) 2013-02, <i>Reporting of Amounts
Reclassified Out of Accumulated Other Comprehensive
Income,</i> which
amended interim<i> </i>and annual reporting
requirements about accumulated other comprehensive income (AOCI).
In interim periods, companies are required to report information
about reclassifications out of AOCI and changes in AOCI balances.
The provision of ASU <font style="WHITE-SPACE: nowrap">2013-02</font> became effective for the first
quarter of 2013. The adoption of ASU 2103-02 did not have a
material effect on the Company’s consolidated results of
operations, financial position or liquidity.</font></p>
</div>
<div>
<p style="MARGIN-TOP: 0px; MARGIN-BOTTOM: 0px"><font style="FONT-FAMILY: Times New Roman" size="2">Total stock-based
compensation expense, related to all of the Company’s
share-based awards to employees, directors and non-employees
recognized during three- and six-months ended June 30, 2013
and 2012 was comprised of the following:</font></p>
<p style="MARGIN-TOP: 0px; MARGIN-BOTTOM: 0px; FONT-SIZE: 12px">
 </p>
<table style="BORDER-COLLAPSE: collapse" border="0" cellspacing="0" cellpadding="0" width="92%" align="center">
<tr>
<td width="66%"></td>
<td valign="bottom" width="3%"></td>
<td></td>
<td></td>
<td></td>
<td valign="bottom" width="3%"></td>
<td></td>
<td></td>
<td></td>
<td valign="bottom" width="3%"></td>
<td></td>
<td></td>
<td></td>
<td valign="bottom" width="3%"></td>
<td></td>
<td></td>
<td></td>
</tr>
<tr>
<td valign="bottom"><font size="1"> </font></td>
<td valign="bottom"><font size="1">  </font></td>
<td valign="bottom" colspan="6" align="center"><font style="FONT-FAMILY: Times New Roman" size="1"><b>Three-Months Ended<br />
June 30</b></font></td>
<td valign="bottom"><font size="1"> </font></td>
<td valign="bottom"><font size="1">  </font></td>
<td valign="bottom" colspan="6" align="center"><font style="FONT-FAMILY: Times New Roman" size="1"><b>Six-Months Ended<br />
June 30</b></font></td>
<td valign="bottom"><font size="1"> </font></td>
</tr>
<tr>
<td valign="bottom"><font size="1"> </font></td>
<td valign="bottom"><font size="1">  </font></td>
<td style="BORDER-BOTTOM: #000000 1px solid" valign="bottom" colspan="2" align="center"><font style="FONT-FAMILY: Times New Roman" size="1"><b>2013</b></font></td>
<td valign="bottom"><font size="1"> </font></td>
<td valign="bottom"><font size="1">  </font></td>
<td style="BORDER-BOTTOM: #000000 1px solid" valign="bottom" colspan="2" align="center"><font style="FONT-FAMILY: Times New Roman" size="1"><b>2012</b></font></td>
<td valign="bottom"><font size="1"> </font></td>
<td valign="bottom"><font size="1">  </font></td>
<td style="BORDER-BOTTOM: #000000 1px solid" valign="bottom" colspan="2" align="center"><font style="FONT-FAMILY: Times New Roman" size="1"><b>2013</b></font></td>
<td valign="bottom"><font size="1"> </font></td>
<td valign="bottom"><font size="1">  </font></td>
<td style="BORDER-BOTTOM: #000000 1px solid" valign="bottom" colspan="2" align="center"><font style="FONT-FAMILY: Times New Roman" size="1"><b>2012</b></font></td>
<td valign="bottom"><font size="1"> </font></td>
</tr>
<tr>
<td height="8"></td>
<td height="8" colspan="4"></td>
<td height="8" colspan="4"></td>
<td height="8" colspan="4"></td>
<td height="8" colspan="4"></td>
</tr>
<tr bgcolor="#CCEEFF">
<td valign="top">
<p style="TEXT-INDENT: -1em; MARGIN-LEFT: 1em"><font style="FONT-FAMILY: Times New Roman" size="2">Research and
development</font></p>
</td>
<td valign="bottom"><font size="1">  </font></td>
<td valign="bottom"><font style="FONT-FAMILY: Times New Roman" size="2"><b>$</b></font></td>
<td valign="bottom" align="right"><font style="FONT-FAMILY: Times New Roman" size="2"><b>31,466</b></font></td>
<td valign="bottom" nowrap="nowrap"><font style="FONT-FAMILY: Times New Roman" size="2"><b>  </b></font></td>
<td valign="bottom"><font size="1">  </font></td>
<td valign="bottom"><font style="FONT-FAMILY: Times New Roman" size="2">$</font></td>
<td valign="bottom" align="right"><font style="FONT-FAMILY: Times New Roman" size="2">22,152</font></td>
<td valign="bottom" nowrap="nowrap"><font style="FONT-FAMILY: Times New Roman" size="2">  </font></td>
<td valign="bottom"><font size="1">  </font></td>
<td valign="bottom"><font style="FONT-FAMILY: Times New Roman" size="2"><b>$</b></font></td>
<td valign="bottom" align="right"><font style="FONT-FAMILY: Times New Roman" size="2"><b>58,087</b></font></td>
<td valign="bottom" nowrap="nowrap"><font style="FONT-FAMILY: Times New Roman" size="2"><b>  </b></font></td>
<td valign="bottom"><font size="1">  </font></td>
<td valign="bottom"><font style="FONT-FAMILY: Times New Roman" size="2">$</font></td>
<td valign="bottom" align="right"><font style="FONT-FAMILY: Times New Roman" size="2">42,441</font></td>
<td valign="bottom" nowrap="nowrap"><font style="FONT-FAMILY: Times New Roman" size="2">  </font></td>
</tr>
<tr>
<td valign="top">
<p style="TEXT-INDENT: -1em; MARGIN-LEFT: 1em"><font style="FONT-FAMILY: Times New Roman" size="2">General and
administrative</font></p>
</td>
<td valign="bottom"><font size="1">  </font></td>
<td valign="bottom"><font style="FONT-FAMILY: Times New Roman" size="2"><b> </b></font></td>
<td valign="bottom" align="right"><font style="FONT-FAMILY: Times New Roman" size="2"><b>57,697</b></font></td>
<td valign="bottom" nowrap="nowrap"><font style="FONT-FAMILY: Times New Roman" size="2"><b>  </b></font></td>
<td valign="bottom"><font size="1">  </font></td>
<td valign="bottom"><font style="FONT-FAMILY: Times New Roman" size="2"> </font></td>
<td valign="bottom" align="right"><font style="FONT-FAMILY: Times New Roman" size="2">61,418</font></td>
<td valign="bottom" nowrap="nowrap"><font style="FONT-FAMILY: Times New Roman" size="2">  </font></td>
<td valign="bottom"><font size="1">  </font></td>
<td valign="bottom"><font style="FONT-FAMILY: Times New Roman" size="2"><b> </b></font></td>
<td valign="bottom" align="right"><font style="FONT-FAMILY: Times New Roman" size="2"><b>105,146</b></font></td>
<td valign="bottom" nowrap="nowrap"><font style="FONT-FAMILY: Times New Roman" size="2"><b>  </b></font></td>
<td valign="bottom"><font size="1">  </font></td>
<td valign="bottom"><font style="FONT-FAMILY: Times New Roman" size="2"> </font></td>
<td valign="bottom" align="right"><font style="FONT-FAMILY: Times New Roman" size="2">109,210</font></td>
<td valign="bottom" nowrap="nowrap"><font style="FONT-FAMILY: Times New Roman" size="2">  </font></td>
</tr>
<tr style="FONT-SIZE: 1px">
<td valign="bottom"></td>
<td valign="bottom">  </td>
<td valign="bottom">
<p style="BORDER-TOP: #000000 1px solid"> </p>
</td>
<td valign="bottom">
<p style="BORDER-TOP: #000000 1px solid"> </p>
</td>
<td> </td>
<td valign="bottom">  </td>
<td valign="bottom">
<p style="BORDER-TOP: #000000 1px solid"> </p>
</td>
<td valign="bottom">
<p style="BORDER-TOP: #000000 1px solid"> </p>
</td>
<td> </td>
<td valign="bottom">  </td>
<td valign="bottom">
<p style="BORDER-TOP: #000000 1px solid"> </p>
</td>
<td valign="bottom">
<p style="BORDER-TOP: #000000 1px solid"> </p>
</td>
<td> </td>
<td valign="bottom">  </td>
<td valign="bottom">
<p style="BORDER-TOP: #000000 1px solid"> </p>
</td>
<td valign="bottom">
<p style="BORDER-TOP: #000000 1px solid"> </p>
</td>
<td> </td>
</tr>
<tr bgcolor="#CCEEFF">
<td valign="top">
<p style="TEXT-INDENT: -1em; MARGIN-LEFT: 1em"><font style="FONT-FAMILY: Times New Roman" size="2">Total share-based
compensation expense</font></p>
</td>
<td valign="bottom"><font size="1">  </font></td>
<td valign="bottom"><font style="FONT-FAMILY: Times New Roman" size="2"><b>$</b></font></td>
<td valign="bottom" align="right"><font style="FONT-FAMILY: Times New Roman" size="2"><b>89,163</b></font></td>
<td valign="bottom" nowrap="nowrap"><font style="FONT-FAMILY: Times New Roman" size="2"><b>  </b></font></td>
<td valign="bottom"><font size="1">  </font></td>
<td valign="bottom"><font style="FONT-FAMILY: Times New Roman" size="2">$</font></td>
<td valign="bottom" align="right"><font style="FONT-FAMILY: Times New Roman" size="2">83,570</font></td>
<td valign="bottom" nowrap="nowrap"><font style="FONT-FAMILY: Times New Roman" size="2">  </font></td>
<td valign="bottom"><font size="1">  </font></td>
<td valign="bottom"><font style="FONT-FAMILY: Times New Roman" size="2"><b>$</b></font></td>
<td valign="bottom" align="right"><font style="FONT-FAMILY: Times New Roman" size="2"><b>163,233</b></font></td>
<td valign="bottom" nowrap="nowrap"><font style="FONT-FAMILY: Times New Roman" size="2"><b>  </b></font></td>
<td valign="bottom"><font size="1">  </font></td>
<td valign="bottom"><font style="FONT-FAMILY: Times New Roman" size="2">$</font></td>
<td valign="bottom" align="right"><font style="FONT-FAMILY: Times New Roman" size="2">151,651</font></td>
<td valign="bottom" nowrap="nowrap"><font style="FONT-FAMILY: Times New Roman" size="2">  </font></td>
</tr>
<tr style="FONT-SIZE: 1px">
<td valign="bottom"></td>
<td valign="bottom">  </td>
<td valign="bottom">
<p style="BORDER-TOP: #000000 3px double"> </p>
</td>
<td valign="bottom">
<p style="BORDER-TOP: #000000 3px double"> </p>
</td>
<td> </td>
<td valign="bottom">  </td>
<td valign="bottom">
<p style="BORDER-TOP: #000000 3px double"> </p>
</td>
<td valign="bottom">
<p style="BORDER-TOP: #000000 3px double"> </p>
</td>
<td> </td>
<td valign="bottom">  </td>
<td valign="bottom">
<p style="BORDER-TOP: #000000 3px double"> </p>
</td>
<td valign="bottom">
<p style="BORDER-TOP: #000000 3px double"> </p>
</td>
<td> </td>
<td valign="bottom">  </td>
<td valign="bottom">
<p style="BORDER-TOP: #000000 3px double"> </p>
</td>
<td valign="bottom">
<p style="BORDER-TOP: #000000 3px double"> </p>
</td>
<td> </td>
</tr>
</table>
</div>
<div>
<p style="MARGIN-TOP: 6px; MARGIN-BOTTOM: 0px"><font style="FONT-FAMILY: Times New Roman" size="2"><b>Use of
Estimates</b></font></p>
<p style="MARGIN-TOP: 6px; MARGIN-BOTTOM: 0px"><font style="FONT-FAMILY: Times New Roman" size="2">The preparation of
financial statements in conformity with generally accepted
accounting principles requires management to make estimates and
assumptions that affect the amounts reported in the financial
statements and accompanying notes. Although actual results could
differ from those estimates, management does not believe that such
differences would be material.</font></p>
</div>
<div>
<p style="MARGIN-TOP: 12px; MARGIN-BOTTOM: 0px"><font style="FONT-FAMILY: Times New Roman" size="2"><b>1.
Organization</b></font></p>
<p style="MARGIN-TOP: 6px; MARGIN-BOTTOM: 0px"><font style="FONT-FAMILY: Times New Roman" size="2">Intra-Cellular Therapies,
Inc. (ITI or the Company) was incorporated in the state of Delaware
on May 22, 2001 and commenced operations in June 2002.
The Company was founded to discover and develop drugs for the
treatment of neurological and psychiatric disorders. The
Company’s technology is built on a unique and proprietary
understanding of the intracellular effects of neurotransmitters.
This know-how has allowed ITI to develop new drugs based on novel
drug targets and to create unique molecular signatures for known
neurotransmitters and drugs. This technology has also allowed ITI
to screen potential lead compounds in more specific ways than are
currently available. The Company’s technology addresses
diseases of the central nervous system, including schizophrenia,
cognition, Parkinson’s disease, anxiety, depression,
Alzheimer’s disease, sleep disorders, and those related to
women’s health.</font></p>
<p style="MARGIN-TOP: 12px; MARGIN-BOTTOM: 0px"><font style="FONT-FAMILY: Times New Roman" size="2">The Company earns its
license and collaboration revenue from its significant partnership
with Takeda Pharmaceutical Company Limited (Takeda). In order to
further its research projects and support its collaborations, the
Company will require additional financing until such time that
revenue streams are sufficient to generate consistent positive cash
flow from operations. Possible sources of funds are strategic
alliances, additional equity offerings, grants and contracts, and
research and development funding from third parties.</font></p>
</div>
<div>
<p style="TEXT-TRANSFORM: none; MARGIN-TOP: 18pt; TEXT-INDENT: 0px; LETTER-SPACING: normal; FONT: 10pt 'Times New Roman'; WHITE-SPACE: normal; MARGIN-BOTTOM: 0pt; COLOR: rgb(0,0,0); WORD-SPACING: 0px; -webkit-text-stroke-width: 0px">
<b>Loss Per Share</b></p>
<p style="TEXT-TRANSFORM: none; MARGIN-TOP: 6pt; TEXT-INDENT: 0px; LETTER-SPACING: normal; FONT: 10pt 'Times New Roman'; WHITE-SPACE: normal; MARGIN-BOTTOM: 0pt; COLOR: rgb(0,0,0); WORD-SPACING: 0px; -webkit-text-stroke-width: 0px">
Loss per share is calculated under the two-class method under which
all earnings (distributed and undistributed) are allocated to each
class of common stock and participating securities based on their
respective rights to receive dividends. In the event that the Board
of Directors shall declare a dividend payable in cash or other
property on the then-outstanding shares of common stock, the
holders of the Redeemable Preferred Series A, B, and C convertible
preferred stock shall be entitled to receive the amount of
dividends per share of Preferred Stock that would be payable on the
largest number of whole shares of Common Stock into which each
share of Preferred Stock could then be converted. Therefore, the
Redeemable Preferred Series A, B, and C Preferred Stock are
participating securities.</p>
<p style="TEXT-TRANSFORM: none; MARGIN-TOP: 12pt; TEXT-INDENT: 0px; LETTER-SPACING: normal; FONT: 10pt 'Times New Roman'; WHITE-SPACE: normal; MARGIN-BOTTOM: 0pt; COLOR: rgb(0,0,0); WORD-SPACING: 0px; -webkit-text-stroke-width: 0px">
Basic net loss per common share is determined by dividing the net
loss allocable to common stockholders by the weighted-average
number of common shares outstanding during the period, without
consideration of common stock equivalents. Diluted net loss per
share is computed by dividing the net loss allocable to common
stockholders by the weighted-average number of common stock
equivalents outstanding for the period. The treasury stock method
is used to determine the dilutive effect of the Company’s
stock option grants and the if-converted method is used to
determine the dilutive effect of the Company’s Redeemable
Preferred Series A, B, and C convertible preferred stock.</p>
<p style="TEXT-TRANSFORM: none; MARGIN-TOP: 12pt; TEXT-INDENT: 0px; LETTER-SPACING: normal; FONT: 10pt 'Times New Roman'; WHITE-SPACE: normal; MARGIN-BOTTOM: 0pt; COLOR: rgb(0,0,0); WORD-SPACING: 0px; -webkit-text-stroke-width: 0px">
The following common stock equivalents were excluded in the
calculation of diluted loss per share because their effect would be
anti-dilutive as applied to the loss from operations as of the
three- and six- months ended June 30, 2013 and 2012:</p>
<p style="TEXT-TRANSFORM: none; MARGIN-TOP: 0pt; TEXT-INDENT: 0px; LETTER-SPACING: normal; FONT: 12pt 'Times New Roman'; WHITE-SPACE: normal; MARGIN-BOTTOM: 0pt; COLOR: rgb(0,0,0); WORD-SPACING: 0px; -webkit-text-stroke-width: 0px">
 </p>
<table style="TEXT-TRANSFORM: none; TEXT-INDENT: 0px; LETTER-SPACING: normal; BORDER-COLLAPSE: collapse; FONT-FAMILY: 'Times New Roman'; FONT-SIZE: 10pt; WORD-SPACING: 0px; -webkit-text-stroke-width: 0px" border="0" cellspacing="0" cellpadding="0" width="92%" align="center">
<tr>
<td width="48%"></td>
<td valign="bottom" width="3%"></td>
<td></td>
<td></td>
<td></td>
<td valign="bottom" width="3%"></td>
<td></td>
<td></td>
<td></td>
<td valign="bottom" width="3%"></td>
<td></td>
<td></td>
<td></td>
<td valign="bottom" width="3%"></td>
<td></td>
<td></td>
<td></td>
</tr>
<tr style="FONT-FAMILY: 'Times New Roman'; FONT-SIZE: 8pt">
<td valign="bottom"> </td>
<td valign="bottom">  </td>
<td valign="bottom" colspan="6" align="center">
<p style="MARGIN-TOP: 0pt; FONT-FAMILY: 'Times New Roman'; MARGIN-BOTTOM: 0pt; FONT-SIZE: 8pt" align="center"><b>Three-Months Ended</b></p>
<p style="MARGIN-TOP: 0pt; FONT-FAMILY: 'Times New Roman'; MARGIN-BOTTOM: 1pt; FONT-SIZE: 8pt" align="center"><b>June 30</b></p>
</td>
<td valign="bottom"> </td>
<td valign="bottom">  </td>
<td valign="bottom" colspan="6" align="center">
<p style="MARGIN-TOP: 0pt; FONT-FAMILY: 'Times New Roman'; MARGIN-BOTTOM: 0pt; FONT-SIZE: 8pt" align="center"><b>Six-Months Ended</b></p>
<p style="MARGIN-TOP: 0pt; FONT-FAMILY: 'Times New Roman'; MARGIN-BOTTOM: 1pt; FONT-SIZE: 8pt" align="center"><b>June 30</b></p>
</td>
<td valign="bottom"> </td>
</tr>
<tr style="FONT-FAMILY: 'Times New Roman'; FONT-SIZE: 8pt">
<td valign="bottom"> </td>
<td valign="bottom">  </td>
<td style="BORDER-BOTTOM: rgb(0,0,0) 1pt solid" valign="bottom" colspan="2" align="center"><b>2013</b></td>
<td valign="bottom"> </td>
<td valign="bottom">  </td>
<td style="BORDER-BOTTOM: rgb(0,0,0) 1pt solid" valign="bottom" colspan="2" align="center"><b>2012</b></td>
<td valign="bottom"> </td>
<td valign="bottom">  </td>
<td style="BORDER-BOTTOM: rgb(0,0,0) 1pt solid" valign="bottom" colspan="2" align="center"><b>2013</b></td>
<td valign="bottom"> </td>
<td valign="bottom">  </td>
<td style="BORDER-BOTTOM: rgb(0,0,0) 1pt solid" valign="bottom" colspan="2" align="center"><b>2012</b></td>
<td valign="bottom"> </td>
</tr>
<tr style="FONT-FAMILY: 'Times New Roman'; FONT-SIZE: 10pt" bgcolor="#CCEEFF">
<td valign="top"></td>
<td valign="bottom">  </td>
<td valign="bottom"></td>
<td valign="bottom"></td>
<td valign="bottom"></td>
<td valign="bottom">  </td>
<td valign="bottom"></td>
<td valign="bottom"></td>
<td valign="bottom"></td>
<td valign="bottom">  </td>
<td valign="bottom"></td>
<td valign="bottom"></td>
<td valign="bottom"></td>
<td valign="bottom">  </td>
<td valign="bottom"></td>
<td valign="bottom"></td>
<td valign="bottom"></td>
</tr>
<tr style="FONT-FAMILY: 'Times New Roman'; FONT-SIZE: 10pt">
<td valign="top">
<p style="TEXT-INDENT: -1em; FONT-FAMILY: 'Times New Roman'; MARGIN-LEFT: 1em; FONT-SIZE: 10pt">
Series A, B, and C Preferred Stock</p>
</td>
<td valign="bottom">  </td>
<td valign="bottom"> </td>
<td valign="bottom" align="right">
<b>13,09</b><b>4</b><b>,</b><b>663</b></td>
<td valign="bottom" nowrap="nowrap">  </td>
<td valign="bottom">  </td>
<td valign="bottom"> </td>
<td valign="bottom" align="right">13,094,663</td>
<td valign="bottom" nowrap="nowrap">  </td>
<td valign="bottom">  </td>
<td valign="bottom"> </td>
<td valign="bottom" align="right">
<b>13,09</b><b>4</b><b>,</b><b>663</b></td>
<td valign="bottom" nowrap="nowrap">  </td>
<td valign="bottom">  </td>
<td valign="bottom"> </td>
<td valign="bottom" align="right">13,094,663</td>
<td valign="bottom" nowrap="nowrap">  </td>
</tr>
<tr style="FONT-FAMILY: 'Times New Roman'; FONT-SIZE: 10pt" bgcolor="#CCEEFF">
<td valign="top">
<p style="TEXT-INDENT: -1em; FONT-FAMILY: 'Times New Roman'; MARGIN-LEFT: 1em; FONT-SIZE: 10pt">
Stock options</p>
</td>
<td valign="bottom">  </td>
<td valign="bottom"> </td>
<td valign="bottom" align="right">
<b>2,</b><b>360</b><b>,</b><b>333</b></td>
<td valign="bottom" nowrap="nowrap">  </td>
<td valign="bottom">  </td>
<td valign="bottom"> </td>
<td valign="bottom" align="right">2,065,513</td>
<td valign="bottom" nowrap="nowrap">  </td>
<td valign="bottom">  </td>
<td valign="bottom"> </td>
<td valign="bottom" align="right">
<b>2,</b><b>360</b><b>,000</b></td>
<td valign="bottom" nowrap="nowrap">  </td>
<td valign="bottom">  </td>
<td valign="bottom"> </td>
<td valign="bottom" align="right">2,061,135</td>
<td valign="bottom" nowrap="nowrap">  </td>
</tr>
<tr style="FONT-FAMILY: 'Times New Roman'; FONT-SIZE: 10pt">
<td valign="top">
<p style="TEXT-INDENT: -1em; FONT-FAMILY: 'Times New Roman'; MARGIN-LEFT: 1em; FONT-SIZE: 10pt">
Convertible promissory notes</p>
</td>
<td valign="bottom">  </td>
<td valign="bottom"> </td>
<td valign="bottom" align="right"><b>5,079,699</b></td>
<td valign="bottom" nowrap="nowrap">  </td>
<td valign="bottom">  </td>
<td valign="bottom"> </td>
<td valign="bottom" align="right">—  </td>
<td valign="bottom" nowrap="nowrap">  </td>
<td valign="bottom">  </td>
<td valign="bottom"> </td>
<td valign="bottom" align="right">
<b>5,065</b><b>,0</b><b>15</b></td>
<td valign="bottom" nowrap="nowrap">  </td>
<td valign="bottom">  </td>
<td valign="bottom"> </td>
<td valign="bottom" align="right">—  </td>
<td valign="bottom" nowrap="nowrap">  </td>
</tr>
</table>
<br class="Apple-interchange-newline" /></div>
<div>
<p style="MARGIN-TOP: 12px; MARGIN-BOTTOM: 0px"><font style="FONT-FAMILY: Times New Roman" size="2">The following table
describes the weighted-average assumptions used for calculating the
value of options granted during the six-months ended June 30,
2013:</font></p>
<p style="MARGIN-TOP: 0px; MARGIN-BOTTOM: 0px; FONT-SIZE: 12px">
 </p>
<table style="BORDER-COLLAPSE: collapse" border="0" cellspacing="0" cellpadding="0" width="76%" align="center">
<tr>
<td width="88%"></td>
<td valign="bottom" width="5%"></td>
<td></td>
<td></td>
<td></td>
</tr>
<tr>
<td valign="bottom"><font size="1"> </font></td>
<td valign="bottom"><font size="1">  </font></td>
<td style="BORDER-BOTTOM: #000000 1px solid" valign="bottom" colspan="2" align="center"><font style="FONT-FAMILY: Times New Roman" size="1"><b>2013</b></font></td>
<td valign="bottom"><font size="1"> </font></td>
</tr>
<tr>
<td height="8"></td>
<td height="8" colspan="4"></td>
</tr>
<tr bgcolor="#CCEEFF">
<td valign="top">
<p style="TEXT-INDENT: -1em; MARGIN-LEFT: 1em"><font style="FONT-FAMILY: Times New Roman" size="2">Dividend yield</font></p>
</td>
<td valign="bottom"><font size="1">  </font></td>
<td valign="bottom"><font style="FONT-FAMILY: Times New Roman" size="2"> </font></td>
<td valign="bottom" align="right"><font style="FONT-FAMILY: Times New Roman" size="2">0</font></td>
<td valign="bottom" nowrap="nowrap"><font style="FONT-FAMILY: Times New Roman" size="2">% </font></td>
</tr>
<tr>
<td valign="top">
<p style="TEXT-INDENT: -1em; MARGIN-LEFT: 1em"><font style="FONT-FAMILY: Times New Roman" size="2">Expected
volatility</font></p>
</td>
<td valign="bottom"><font size="1">  </font></td>
<td valign="bottom"><font style="FONT-FAMILY: Times New Roman" size="2"> </font></td>
<td valign="bottom" align="right"><font style="FONT-FAMILY: Times New Roman" size="2">80</font></td>
<td valign="bottom" nowrap="nowrap"><font style="FONT-FAMILY: Times New Roman" size="2">% </font></td>
</tr>
<tr bgcolor="#CCEEFF">
<td valign="top">
<p style="TEXT-INDENT: -1em; MARGIN-LEFT: 1em"><font style="FONT-FAMILY: Times New Roman" size="2">Weighted-average risk-free
interest rate</font></p>
</td>
<td valign="bottom"><font size="1">  </font></td>
<td valign="bottom"><font style="FONT-FAMILY: Times New Roman" size="2"> </font></td>
<td valign="bottom" align="right"><font style="FONT-FAMILY: Times New Roman" size="2">1.40</font></td>
<td valign="bottom" nowrap="nowrap"><font style="FONT-FAMILY: Times New Roman" size="2">% </font></td>
</tr>
<tr>
<td valign="top">
<p style="TEXT-INDENT: -1em; MARGIN-LEFT: 1em"><font style="FONT-FAMILY: Times New Roman" size="2">Expected term</font></p>
</td>
<td valign="bottom"><font size="1">  </font></td>
<td valign="bottom"><font style="FONT-FAMILY: Times New Roman" size="2"> </font></td>
<td valign="bottom" align="right"><font style="FONT-FAMILY: Times New Roman" size="2">6.2 years</font></td>
<td valign="bottom" nowrap="nowrap"><font style="FONT-FAMILY: Times New Roman" size="2">  </font></td>
</tr>
</table>
</div>
<div>
<p style="MARGIN-TOP: 0px; MARGIN-BOTTOM: 0px"><font style="FONT-FAMILY: Times New Roman" size="2"><b>Financial
Instruments</b></font></p>
<p style="MARGIN-TOP: 6px; MARGIN-BOTTOM: 0px"><font style="FONT-FAMILY: Times New Roman" size="2">The Company considers the
recorded costs of its financial assets and liabilities, which
consist of cash equivalents, accounts receivable, accounts payable
and accrued liabilities, to approximate their fair value because of
their relatively short maturities at June 30, 2013 and
December 31, 2012. Management believes that the risks
associated with its financial instruments are minimal as the
counterparties are financial institutions of high credit
standing.</font></p>
</div>
<div>
<p style="MARGIN-TOP: 0px; MARGIN-BOTTOM: 0px"><font style="FONT-FAMILY: Times New Roman" size="2"><b>Deferred
Revenue</b></font></p>
<p style="MARGIN-TOP: 6px; MARGIN-BOTTOM: 0px"><font style="FONT-FAMILY: Times New Roman" size="2">Cash received as prepayment
on future services is deferred and recognized as revenue as the
services are performed. The Company must remit interest on any
deferred revenue related to a governmental agency. As of
June 30, 2013 and December 31, 2012, no interest was due
as the Company did not have any deferred revenue from a government
agency.</font></p>
</div>
<div>
<p style="MARGIN-TOP: 18px; MARGIN-BOTTOM: 0px"><font style="FONT-FAMILY: Times New Roman" size="2"><b>Income
Taxes</b></font></p>
<p style="MARGIN-TOP: 6px; MARGIN-BOTTOM: 0px"><font style="FONT-FAMILY: Times New Roman" size="2">Income taxes are accounted
for using the liability method. Deferred tax assets and liabilities
are recognized for the future tax consequences attributable to
differences between the financial statement carrying amounts of
existing assets and liabilities and its respective tax bases.
Deferred tax assets and liabilities are measured using enacted tax
rates expected to apply to taxable income in the year in which
those temporary differences are expected to be recovered or
settled.</font></p>
<p style="MARGIN-TOP: 12px; MARGIN-BOTTOM: 0px"><font style="FONT-FAMILY: Times New Roman" size="2">The effect on deferred tax
assets and liabilities of a change in tax rates is recognized in
income in the period that includes the enactment date. Valuation
allowances are established when necessary to reduce net deferred
tax assets to the amount expected to be realized. Income tax
expense is the tax payable for the period and the change during the
period in deferred tax assets and liabilities.</font></p>
<p style="MARGIN-TOP: 12px; MARGIN-BOTTOM: 0px"><font style="FONT-FAMILY: Times New Roman" size="2">The Company accounts for
uncertain tax positions pursuant to ASC 740 (previously included in
Financial Accounting Standards Board (FASB) Interpretation
No. 48, <i>Accounting for Uncertainty in Income Taxes–an
Interpretation of FASB Statement No. 109)</i>. Financial
statement recognition of a tax position taken or expected to be
taken in a tax return is determined based on a more-likely-than-not
threshold of that position being sustained. If the tax position
meets this threshold, the benefit to be recognized is measured as
the tax benefit having the highest likelihood of being realized
upon ultimate settlement with the taxing authority. The Company
recognizes interest accrued related to unrecognized tax benefits
and penalties in the provision for income taxes.</font></p>
</div>
<div>
<p style="MARGIN-TOP: 18pt; FONT-FAMILY: Times New Roman; MARGIN-BOTTOM: 0pt; MARGIN-LEFT: 7%; FONT-SIZE: 10pt">
<u>Recent Accounting Pronouncements</u></p>
<p style="MARGIN-TOP: 6pt; FONT-FAMILY: Times New Roman; MARGIN-BOTTOM: 0pt; MARGIN-LEFT: 7%; FONT-SIZE: 10pt">
Management does not believe that any recently issued, but not yet
effective accounting pronouncements, if adopted, would have a
material effect on the accompanying financial statements.</p>
</div>
-0.34
0.00
0.34
<div>
<p style="MARGIN-TOP: 18pt; FONT-FAMILY: Times New Roman; MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt">
Note 5 - <u>Common Stock</u></p>
<!-- xbrl,body -->
<p style="MARGIN-TOP: 6pt; FONT-FAMILY: Times New Roman; MARGIN-BOTTOM: 0pt; MARGIN-LEFT: 7%; FONT-SIZE: 10pt">
On August 29, 2012, the Company authorized one hundred million
(100,000,000) shares of common stock. On October 15, 2012, the
Company received a subscription for five million (5,000,000) shares
of common stock from NLBDIT 2010 Services, LLC. On October 23,
2012, the Company received payment of $10,000 for the
subscription.</p>
</div>
<div>
<p style="MARGIN-TOP: 18pt; FONT-FAMILY: Times New Roman; MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt">
Note 6 - <u>Preferred Stock</u></p>
<!-- xbrl,body -->
<p style="MARGIN-TOP: 6pt; FONT-FAMILY: Times New Roman; MARGIN-BOTTOM: 0pt; MARGIN-LEFT: 7%; FONT-SIZE: 10pt">
The Company is authorized to issue (10,000,000) shares of $.0001
par value preferred stock with designations, voting and other
rights and preferences as may be determined from time to time by
the Board of Directors of the Company.</p>
<p style="MARGIN-TOP: 0pt; MARGIN-BOTTOM: 0pt; FONT-SIZE: 18pt">
</p>
</div>
<div>
<p style="MARGIN-TOP: 18pt; FONT-FAMILY: Times New Roman; MARGIN-BOTTOM: 0pt; MARGIN-LEFT: 7%; FONT-SIZE: 10pt">
<u>Cash Equivalents</u></p>
<p style="MARGIN-TOP: 6pt; FONT-FAMILY: Times New Roman; MARGIN-BOTTOM: 0pt; MARGIN-LEFT: 7%; FONT-SIZE: 10pt">
The Company considers highly liquid financial instruments purchased
with a maturity of three months or less to be cash equivalents.
There are no cash equivalents at the balance sheet date.</p>
</div>
-15851
<div>
<p style="MARGIN-TOP: 0pt; FONT-FAMILY: Times New Roman; MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt">
Note 4 - <u>Income Taxes</u></p>
<!-- xbrl,body -->
<p style="MARGIN-TOP: 6pt; FONT-FAMILY: Times New Roman; MARGIN-BOTTOM: 0pt; MARGIN-LEFT: 7%; FONT-SIZE: 10pt">
As of June 30, 2013, the Company has net operating loss
carryforwards of approximately $43,000 to reduce future federal and
state taxable income through 2033.</p>
<p style="MARGIN-TOP: 12pt; FONT-FAMILY: Times New Roman; MARGIN-BOTTOM: 0pt; MARGIN-LEFT: 7%; FONT-SIZE: 10pt">
The Company currently has no federal or state tax examinations in
progress nor has it had any federal or state examinations since its
inception. All of the Company’s tax years are subject to
federal and state tax examination.</p>
<p style="MARGIN-TOP: 12pt; FONT-FAMILY: Times New Roman; MARGIN-BOTTOM: 0pt; MARGIN-LEFT: 7%; FONT-SIZE: 10pt">
The benefit from income taxes consists of the following:</p>
<p style="MARGIN-TOP: 0pt; MARGIN-BOTTOM: 0pt; FONT-SIZE: 12pt">
</p>
<table style="BORDER-COLLAPSE: collapse; FONT-FAMILY: Times New Roman; FONT-SIZE: 10pt" border="0" cellspacing="0" cellpadding="0" width="76%" align="center"><!-- Begin Table Head -->
<tr>
<td width="73%"></td>
<td valign="bottom" width="11%"></td>
<td></td>
<td></td>
<td></td>
<td valign="bottom" width="10%"></td>
<td></td>
<td></td>
<td></td>
</tr>
<tr style="FONT-FAMILY: Times New Roman; FONT-SIZE: 8pt">
<td valign="bottom"></td>
<td valign="bottom"></td>
<td style="BORDER-BOTTOM: #000000 1px solid" valign="bottom" colspan="2" align="center">For The<br />
Three<br />
Months<br />
Ended<br />
June 30,<br />
2013</td>
<td valign="bottom"></td>
<td valign="bottom"></td>
<td style="BORDER-BOTTOM: #000000 1px solid" valign="bottom" colspan="2" align="center">Cumulative<br />
From<br />
August 29,<br />
2012<br />
(Inception)<br />
to<br />
June 30,<br />
2013</td>
<td valign="bottom"></td>
</tr>
<!-- End Table Head --><!-- Begin Table Body -->
<tr style="FONT-FAMILY: Times New Roman; FONT-SIZE: 10pt" bgcolor="#CCEEFF">
<td valign="top">
<p style="TEXT-INDENT: -1em; FONT-FAMILY: Times New Roman; MARGIN-LEFT: 1em; FONT-SIZE: 10pt">
Current Expense:</p>
</td>
<td valign="bottom"></td>
<td valign="bottom"></td>
<td valign="bottom"></td>
<td valign="bottom"></td>
<td valign="bottom"></td>
<td valign="bottom"></td>
<td valign="bottom"></td>
<td valign="bottom"></td>
</tr>
<tr style="FONT-FAMILY: Times New Roman; FONT-SIZE: 10pt">
<td valign="top">
<p style="TEXT-INDENT: -1em; FONT-FAMILY: Times New Roman; MARGIN-LEFT: 3em; FONT-SIZE: 10pt">
Federal and State</p>
</td>
<td valign="bottom"></td>
<td valign="bottom">$</td>
<td valign="bottom" align="right">—</td>
<td valign="bottom" nowrap="nowrap"></td>
<td valign="bottom"></td>
<td valign="bottom">$</td>
<td valign="bottom" align="right">—</td>
<td valign="bottom" nowrap="nowrap"></td>
</tr>
<tr style="FONT-FAMILY: Times New Roman; FONT-SIZE: 10pt" bgcolor="#CCEEFF">
<td valign="top">
<p style="TEXT-INDENT: -1em; FONT-FAMILY: Times New Roman; MARGIN-LEFT: 1em; FONT-SIZE: 10pt">
Deferred tax benefit:</p>
</td>
<td valign="bottom"></td>
<td valign="bottom"></td>
<td valign="bottom"></td>
<td valign="bottom"></td>
<td valign="bottom"></td>
<td valign="bottom"></td>
<td valign="bottom"></td>
<td valign="bottom"></td>
</tr>
<tr style="FONT-FAMILY: Times New Roman; FONT-SIZE: 10pt">
<td valign="top">
<p style="TEXT-INDENT: -1em; FONT-FAMILY: Times New Roman; MARGIN-LEFT: 3em; FONT-SIZE: 10pt">
Federal and State</p>
</td>
<td valign="bottom"></td>
<td valign="bottom"></td>
<td valign="bottom" align="right">4,000</td>
<td valign="bottom" nowrap="nowrap"></td>
<td valign="bottom"></td>
<td valign="bottom"></td>
<td valign="bottom" align="right">15,000</td>
<td valign="bottom" nowrap="nowrap"></td>
</tr>
<tr style="FONT-FAMILY: Times New Roman; FONT-SIZE: 10pt" bgcolor="#CCEEFF">
<td valign="top">
<p style="TEXT-INDENT: -1em; FONT-FAMILY: Times New Roman; MARGIN-LEFT: 3em; FONT-SIZE: 10pt">
Valuation allowance</p>
</td>
<td valign="bottom"></td>
<td valign="bottom"></td>
<td valign="bottom" align="right">(4,000</td>
<td valign="bottom" nowrap="nowrap">)</td>
<td valign="bottom"></td>
<td valign="bottom"></td>
<td valign="bottom" align="right">(15,000</td>
<td valign="bottom" nowrap="nowrap">)</td>
</tr>
<tr style="FONT-SIZE: 1px">
<td valign="bottom"></td>
<td valign="bottom"></td>
<td valign="bottom">
<p style="BORDER-TOP: #000000 1px solid"></p>
</td>
<td valign="bottom">
<p style="BORDER-TOP: #000000 1px solid"></p>
</td>
<td></td>
<td valign="bottom"></td>
<td valign="bottom">
<p style="BORDER-TOP: #000000 1px solid"></p>
</td>
<td valign="bottom">
<p style="BORDER-TOP: #000000 1px solid"></p>
</td>
<td></td>
</tr>
<tr style="FONT-FAMILY: Times New Roman; FONT-SIZE: 10pt">
<td valign="top">
<p style="TEXT-INDENT: -1em; FONT-FAMILY: Times New Roman; MARGIN-LEFT: 1em; FONT-SIZE: 10pt">
Total</p>
</td>
<td valign="bottom"></td>
<td valign="bottom">$</td>
<td valign="bottom" align="right">—</td>
<td valign="bottom" nowrap="nowrap"></td>
<td valign="bottom"></td>
<td valign="bottom">$</td>
<td valign="bottom" align="right">—</td>
<td valign="bottom" nowrap="nowrap"></td>
</tr>
<tr style="FONT-SIZE: 1px">
<td valign="bottom"></td>
<td valign="bottom"></td>
<td valign="bottom">
<p style="BORDER-TOP: #000000 3px double"></p>
</td>
<td valign="bottom">
<p style="BORDER-TOP: #000000 3px double"></p>
</td>
<td></td>
<td valign="bottom"></td>
<td valign="bottom">
<p style="BORDER-TOP: #000000 3px double"></p>
</td>
<td valign="bottom">
<p style="BORDER-TOP: #000000 3px double"></p>
</td>
<td></td>
</tr>
<!-- End Table Body --></table>
<p style="MARGIN-TOP: 12pt; FONT-FAMILY: Times New Roman; MARGIN-BOTTOM: 0pt; MARGIN-LEFT: 7%; FONT-SIZE: 10pt">
The income tax benefit differs from the amount computed by applying
the federal statutory income tax rate to the loss before income
taxes due to the following:</p>
<p style="MARGIN-TOP: 0pt; MARGIN-BOTTOM: 0pt; FONT-SIZE: 12pt">
</p>
<table style="BORDER-COLLAPSE: collapse; FONT-FAMILY: Times New Roman; FONT-SIZE: 10pt" border="0" cellspacing="0" cellpadding="0" width="76%" align="center"><!-- Begin Table Head -->
<tr>
<td width="69%"></td>
<td valign="bottom" width="9%"></td>
<td></td>
<td></td>
<td></td>
<td valign="bottom" width="8%"></td>
<td></td>
<td></td>
<td></td>
</tr>
<tr style="FONT-FAMILY: Times New Roman; FONT-SIZE: 8pt">
<td valign="bottom"></td>
<td valign="bottom"></td>
<td style="BORDER-BOTTOM: #000000 1px solid" valign="bottom" colspan="2" align="center">For The<br />
Three<br />
Months<br />
Ended<br />
June 30,<br />
2013</td>
<td valign="bottom"></td>
<td valign="bottom"></td>
<td style="BORDER-BOTTOM: #000000 1px solid" valign="bottom" colspan="2" align="center">Cumulative<br />
From<br />
August 29,<br />
2012<br />
(Inception) to<br />
June 30, 2013</td>
<td valign="bottom"></td>
</tr>
<!-- End Table Head --><!-- Begin Table Body -->
<tr style="FONT-FAMILY: Times New Roman; FONT-SIZE: 10pt" bgcolor="#CCEEFF">
<td valign="top">
<p style="TEXT-INDENT: -1em; FONT-FAMILY: Times New Roman; MARGIN-LEFT: 1em; FONT-SIZE: 10pt">
Statutory federal income tax rate</p>
</td>
<td valign="bottom"></td>
<td valign="bottom"></td>
<td valign="bottom" align="right">(34</td>
<td valign="bottom" nowrap="nowrap">)%</td>
<td valign="bottom"></td>
<td valign="bottom"></td>
<td valign="bottom" align="right">(34</td>
<td valign="bottom" nowrap="nowrap">)%</td>
</tr>
<tr style="FONT-FAMILY: Times New Roman; FONT-SIZE: 10pt">
<td valign="top">
<p style="TEXT-INDENT: -1em; FONT-FAMILY: Times New Roman; MARGIN-LEFT: 1em; FONT-SIZE: 10pt">
Valuation allowance</p>
</td>
<td valign="bottom"></td>
<td valign="bottom"></td>
<td valign="bottom" align="right">34</td>
<td valign="bottom" nowrap="nowrap">%</td>
<td valign="bottom"></td>
<td valign="bottom"></td>
<td valign="bottom" align="right">34</td>
<td valign="bottom" nowrap="nowrap">%</td>
</tr>
<tr style="FONT-SIZE: 1px">
<td valign="bottom"></td>
<td valign="bottom"></td>
<td valign="bottom">
<p style="BORDER-TOP: #000000 1px solid"></p>
</td>
<td valign="bottom">
<p style="BORDER-TOP: #000000 1px solid"></p>
</td>
<td></td>
<td valign="bottom"></td>
<td valign="bottom">
<p style="BORDER-TOP: #000000 1px solid"></p>
</td>
<td valign="bottom">
<p style="BORDER-TOP: #000000 1px solid"></p>
</td>
<td></td>
</tr>
<tr style="FONT-FAMILY: Times New Roman; FONT-SIZE: 10pt" bgcolor="#CCEEFF">
<td valign="top">
<p style="TEXT-INDENT: -1em; FONT-FAMILY: Times New Roman; MARGIN-LEFT: 1em; FONT-SIZE: 10pt">
Effective income tax rate</p>
</td>
<td valign="bottom"></td>
<td valign="bottom"></td>
<td valign="bottom" align="right">0</td>
<td valign="bottom" nowrap="nowrap">%</td>
<td valign="bottom"></td>
<td valign="bottom"></td>
<td valign="bottom" align="right">0</td>
<td valign="bottom" nowrap="nowrap">%</td>
</tr>
<tr style="FONT-SIZE: 1px">
<td valign="bottom"></td>
<td valign="bottom"></td>
<td valign="bottom">
<p style="BORDER-TOP: #000000 3px double"></p>
</td>
<td valign="bottom">
<p style="BORDER-TOP: #000000 3px double"></p>
</td>
<td></td>
<td valign="bottom"></td>
<td valign="bottom">
<p style="BORDER-TOP: #000000 3px double"></p>
</td>
<td valign="bottom">
<p style="BORDER-TOP: #000000 3px double"></p>
</td>
<td></td>
</tr>
<!-- End Table Body --></table>
</div>
<div>
<p style="MARGIN-TOP: 6pt; FONT-FAMILY: Times New Roman; MARGIN-BOTTOM: 0pt; MARGIN-LEFT: 7%; FONT-SIZE: 10pt">
<u>Basis of Presentation</u></p>
<p style="MARGIN-TOP: 6pt; FONT-FAMILY: Times New Roman; MARGIN-BOTTOM: 0pt; MARGIN-LEFT: 7%; FONT-SIZE: 10pt">
The accompanying interim financial statements of the Company have
been prepared in accordance with accounting principles generally
accepted for interim financial statements presentation and in
accordance with the instructions to Regulation S-X. Accordingly,
they do not include all of the information and footnotes required
by accounting principles generally accepted in the United States of
America for complete financial statement presentation. In the
opinion of management, all adjustments for a fair statement of the
results of operations and financial position for the interim
periods presented have been included. All such adjustments are of a
normal recurring nature. The accompanying financial statements and
the information included under the heading Management’s
Discussion and Analysis of Financial Condition and Results of
Operations should be read in conjunction with the Company’s
audited financial statements and related notes included in the
Company’s Form 10-K as of March 31, 2013. Interim results are
not necessarily indicative of the results for a full year.</p>
</div>
<div>
<p style="MARGIN-TOP: 0pt; FONT-FAMILY: Times New Roman; MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt">
Note 7 - <u>Related Party Transactions</u></p>
<!-- xbrl,body -->
<p style="MARGIN-TOP: 6pt; FONT-FAMILY: Times New Roman; MARGIN-BOTTOM: 0pt; MARGIN-LEFT: 7%; FONT-SIZE: 10pt">
The Company utilizes the office space and equipment of its
management at no cost.</p>
<p style="MARGIN-TOP: 6pt; FONT-FAMILY: Times New Roman; MARGIN-BOTTOM: 0pt; MARGIN-LEFT: 7%; FONT-SIZE: 10pt">
For the three months ended June 30, 2013, professional fees of
$3,400 were paid on behalf of the Company by Sunrise Financial
Group Inc. (“SFG”). The President of SFG has control of
NLBDIT 2010 Services, LLC. As of June 30, 2013, the outstanding
balance of $3,400 is reported as loan payable - related party. The
amount is unsecured, non-interest bearing and has no stipulated
repayment terms.</p>
<p style="MARGIN-TOP: 12pt; FONT-FAMILY: Times New Roman; MARGIN-BOTTOM: 0pt; MARGIN-LEFT: 7%; FONT-SIZE: 10pt">
On October 15, 2012, the Company issued a Promissory Note payable
(the “Note”) to NLBDIT 2010 Enterprises, LLC, a company
controlled by the President of SFG. The Note bears interest at 6%
and is payable upon completion of a business combination with a
private company in a reverse merger or other transaction after
which the Company would cease to be a shell company. At June 30,
2013, the outstanding balance of $5,900 is reported as note payable
- related party. At June 30, 2013, $65 of accrued interest related
to this loan is reported as accounts payable and accrued expenses.
Subsequent to June 30, 2013, the Company borrowed an additional
$15,000.</p>
</div>
<div>
<p style="MARGIN-TOP: 12pt; FONT-FAMILY: Times New Roman; MARGIN-BOTTOM: 0pt; MARGIN-LEFT: 7%; FONT-SIZE: 10pt">
The income tax benefit differs from the amount computed by applying
the federal statutory income tax rate to the loss before income
taxes due to the following:</p>
<p style="MARGIN-TOP: 0pt; MARGIN-BOTTOM: 0pt; FONT-SIZE: 12pt">
</p>
<table style="BORDER-COLLAPSE: collapse; FONT-FAMILY: Times New Roman; FONT-SIZE: 10pt" border="0" cellspacing="0" cellpadding="0" width="76%" align="center"><!-- Begin Table Head -->
<tr>
<td width="69%"></td>
<td valign="bottom" width="9%"></td>
<td></td>
<td></td>
<td></td>
<td valign="bottom" width="8%"></td>
<td></td>
<td></td>
<td></td>
</tr>
<tr style="FONT-FAMILY: Times New Roman; FONT-SIZE: 8pt">
<td valign="bottom"></td>
<td valign="bottom"></td>
<td style="BORDER-BOTTOM: #000000 1px solid" valign="bottom" colspan="2" align="center">For The<br />
Three<br />
Months<br />
Ended<br />
June 30,<br />
2013</td>
<td valign="bottom"></td>
<td valign="bottom"></td>
<td style="BORDER-BOTTOM: #000000 1px solid" valign="bottom" colspan="2" align="center">Cumulative<br />
From<br />
August 29,<br />
2012<br />
(Inception) to<br />
June 30, 2013</td>
<td valign="bottom"></td>
</tr>
<!-- End Table Head --><!-- Begin Table Body -->
<tr style="FONT-FAMILY: Times New Roman; FONT-SIZE: 10pt" bgcolor="#CCEEFF">
<td valign="top">
<p style="TEXT-INDENT: -1em; FONT-FAMILY: Times New Roman; MARGIN-LEFT: 1em; FONT-SIZE: 10pt">
Statutory federal income tax rate</p>
</td>
<td valign="bottom"></td>
<td valign="bottom"></td>
<td valign="bottom" align="right">(34</td>
<td valign="bottom" nowrap="nowrap">)%</td>
<td valign="bottom"></td>
<td valign="bottom"></td>
<td valign="bottom" align="right">(34</td>
<td valign="bottom" nowrap="nowrap">)%</td>
</tr>
<tr style="FONT-FAMILY: Times New Roman; FONT-SIZE: 10pt">
<td valign="top">
<p style="TEXT-INDENT: -1em; FONT-FAMILY: Times New Roman; MARGIN-LEFT: 1em; FONT-SIZE: 10pt">
Valuation allowance</p>
</td>
<td valign="bottom"></td>
<td valign="bottom"></td>
<td valign="bottom" align="right">34</td>
<td valign="bottom" nowrap="nowrap">%</td>
<td valign="bottom"></td>
<td valign="bottom"></td>
<td valign="bottom" align="right">34</td>
<td valign="bottom" nowrap="nowrap">%</td>
</tr>
<tr style="FONT-SIZE: 1px">
<td valign="bottom"></td>
<td valign="bottom"></td>
<td valign="bottom">
<p style="BORDER-TOP: #000000 1px solid"></p>
</td>
<td valign="bottom">
<p style="BORDER-TOP: #000000 1px solid"></p>
</td>
<td></td>
<td valign="bottom"></td>
<td valign="bottom">
<p style="BORDER-TOP: #000000 1px solid"></p>
</td>
<td valign="bottom">
<p style="BORDER-TOP: #000000 1px solid"></p>
</td>
<td></td>
</tr>
<tr style="FONT-FAMILY: Times New Roman; FONT-SIZE: 10pt" bgcolor="#CCEEFF">
<td valign="top">
<p style="TEXT-INDENT: -1em; FONT-FAMILY: Times New Roman; MARGIN-LEFT: 1em; FONT-SIZE: 10pt">
Effective income tax rate</p>
</td>
<td valign="bottom"></td>
<td valign="bottom"></td>
<td valign="bottom" align="right">0</td>
<td valign="bottom" nowrap="nowrap">%</td>
<td valign="bottom"></td>
<td valign="bottom"></td>
<td valign="bottom" align="right">0</td>
<td valign="bottom" nowrap="nowrap">%</td>
</tr>
<tr style="FONT-SIZE: 1px">
<td valign="bottom"></td>
<td valign="bottom"></td>
<td valign="bottom">
<p style="BORDER-TOP: #000000 3px double"></p>
</td>
<td valign="bottom">
<p style="BORDER-TOP: #000000 3px double"></p>
</td>
<td></td>
<td valign="bottom"></td>
<td valign="bottom">
<p style="BORDER-TOP: #000000 3px double"></p>
</td>
<td valign="bottom">
<p style="BORDER-TOP: #000000 3px double"></p>
</td>
<td></td>
</tr>
<!-- End Table Body --></table>
</div>
<div>
<p style="MARGIN-TOP: 18pt; FONT-FAMILY: Times New Roman; MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt">
Note 2 - <u>Summary of Significant Accounting Policies</u></p>
<!-- xbrl,body -->
<p style="MARGIN-TOP: 6pt; FONT-FAMILY: Times New Roman; MARGIN-BOTTOM: 0pt; MARGIN-LEFT: 7%; FONT-SIZE: 10pt">
<u>Basis of Presentation</u></p>
<p style="MARGIN-TOP: 6pt; FONT-FAMILY: Times New Roman; MARGIN-BOTTOM: 0pt; MARGIN-LEFT: 7%; FONT-SIZE: 10pt">
The accompanying interim financial statements of the Company have
been prepared in accordance with accounting principles generally
accepted for interim financial statements presentation and in
accordance with the instructions to Regulation S-X. Accordingly,
they do not include all of the information and footnotes required
by accounting principles generally accepted in the United States of
America for complete financial statement presentation. In the
opinion of management, all adjustments for a fair statement of the
results of operations and financial position for the interim
periods presented have been included. All such adjustments are of a
normal recurring nature. The accompanying financial statements and
the information included under the heading Management’s
Discussion and Analysis of Financial Condition and Results of
Operations should be read in conjunction with the Company’s
audited financial statements and related notes included in the
Company’s Form 10-K as of March 31, 2013. Interim results are
not necessarily indicative of the results for a full year.</p>
<p style="MARGIN-TOP: 18pt; FONT-FAMILY: Times New Roman; MARGIN-BOTTOM: 0pt; MARGIN-LEFT: 7%; FONT-SIZE: 10pt">
<u>Use of Estimates</u></p>
<p style="MARGIN-TOP: 6pt; FONT-FAMILY: Times New Roman; MARGIN-BOTTOM: 0pt; MARGIN-LEFT: 7%; FONT-SIZE: 10pt">
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 balance sheet
and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those
estimates.</p>
<p style="MARGIN-TOP: 18pt; FONT-FAMILY: Times New Roman; MARGIN-BOTTOM: 0pt; MARGIN-LEFT: 7%; FONT-SIZE: 10pt">
<u>Cash Equivalents</u></p>
<p style="MARGIN-TOP: 6pt; FONT-FAMILY: Times New Roman; MARGIN-BOTTOM: 0pt; MARGIN-LEFT: 7%; FONT-SIZE: 10pt">
The Company considers highly liquid financial instruments purchased
with a maturity of three months or less to be cash equivalents.
There are no cash equivalents at the balance sheet date.</p>
<p style="MARGIN-TOP: 18pt; FONT-FAMILY: Times New Roman; MARGIN-BOTTOM: 0pt; MARGIN-LEFT: 7%; FONT-SIZE: 10pt">
<u>Income Taxes</u></p>
<p style="MARGIN-TOP: 6pt; FONT-FAMILY: Times New Roman; MARGIN-BOTTOM: 0pt; MARGIN-LEFT: 7%; FONT-SIZE: 10pt">
The Company utilizes the accrual method of accounting for income
taxes. Under the accrual method, deferred tax assets and
liabilities are determined based on the differences between the
financial reporting basis and the tax basis of the assets and
liabilities and are measured using enacted tax rates and laws that
will be in effect, when the differences are expected to reverse. An
allowance against deferred tax assets is recognized, when it is
more likely than not, that such tax benefits will not be
realized.</p>
<p style="MARGIN-TOP: 12pt; FONT-FAMILY: Times New Roman; MARGIN-BOTTOM: 0pt; MARGIN-LEFT: 7%; FONT-SIZE: 10pt">
The Company recognizes the financial statement benefit of an
uncertain tax position only after considering the probability that
a tax authority would sustain the position in an examination. For
tax positions meeting a <font style="WHITE-SPACE: nowrap">“more-likely</font> than-not”
threshold, the amount recognized in the financial statements is the
benefit expected to be realized upon settlement with the tax
authority. For tax positions not meeting the threshold, no
financial statement benefit is recognized. The Company recognizes
interest and penalties, if any, related to uncertain tax positions
in income tax expense. As of June 30, 2013, the Company has no
accrued interest or penalties related to uncertain tax
positions.</p>
<p style="MARGIN-TOP: 18pt; FONT-FAMILY: Times New Roman; MARGIN-BOTTOM: 0pt; MARGIN-LEFT: 7%; FONT-SIZE: 10pt">
<u>Loss Per Common Share</u></p>
<p style="MARGIN-TOP: 6pt; FONT-FAMILY: Times New Roman; MARGIN-BOTTOM: 0pt; MARGIN-LEFT: 7%; FONT-SIZE: 10pt">
Basic loss per share is calculated using the weighted-average
number of common shares outstanding during each reporting period.
Diluted loss per share includes potentially dilutive securities
such as outstanding options and warrants, using various methods
such as the treasury stock or modified treasury stock method in the
determination of dilutive shares outstanding during each reporting
period. The Company does not have any potentially dilutive
instruments for the period presented.</p>
<p style="MARGIN-TOP: 18pt; FONT-FAMILY: Times New Roman; MARGIN-BOTTOM: 0pt; MARGIN-LEFT: 7%; FONT-SIZE: 10pt">
<u>Emerging Growth Company</u></p>
<p style="MARGIN-TOP: 6pt; FONT-FAMILY: Times New Roman; MARGIN-BOTTOM: 0pt; MARGIN-LEFT: 7%; FONT-SIZE: 10pt">
The Company is an “emerging growth company” and has
elected to use the extended transition period for complying with
new or revised accounting standards under Section 102(b)(1) of the
JOBS Act. This election allows us to delay the adoption of new or
revised accounting standards that have different effective dates
for public and private companies until those standards apply to
private companies.</p>
<p style="MARGIN-TOP: 18pt; FONT-FAMILY: Times New Roman; MARGIN-BOTTOM: 0pt; MARGIN-LEFT: 7%; FONT-SIZE: 10pt">
<u>Recent Accounting Pronouncements</u></p>
<p style="MARGIN-TOP: 6pt; FONT-FAMILY: Times New Roman; MARGIN-BOTTOM: 0pt; MARGIN-LEFT: 7%; FONT-SIZE: 10pt">
Management does not believe that any recently issued, but not yet
effective accounting pronouncements, if adopted, would have a
material effect on the accompanying financial statements.</p>
</div>
Through 2033.
<div>
<p style="MARGIN-TOP: 18pt; FONT-FAMILY: Times New Roman; MARGIN-BOTTOM: 0pt; MARGIN-LEFT: 7%; FONT-SIZE: 10pt">
<u>Use of Estimates</u></p>
<p style="MARGIN-TOP: 6pt; FONT-FAMILY: Times New Roman; MARGIN-BOTTOM: 0pt; MARGIN-LEFT: 7%; FONT-SIZE: 10pt">
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 balance sheet
and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those
estimates.</p>
</div>
<div>
<p style="MARGIN-TOP: 12pt; FONT-FAMILY: Times New Roman; MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt">
Note 1 - <u>Organization and Business</u></p>
<!-- xbrl,body -->
<p style="MARGIN-TOP: 6pt; FONT-FAMILY: Times New Roman; MARGIN-BOTTOM: 0pt; MARGIN-LEFT: 7%; FONT-SIZE: 10pt">
<u>Business Activity</u></p>
<p style="MARGIN-TOP: 6pt; FONT-FAMILY: Times New Roman; MARGIN-BOTTOM: 0pt; MARGIN-LEFT: 7%; FONT-SIZE: 10pt">
Oneida Resources Corp., a Development Stage Company, (“the
Company”) was incorporated in the state of Delaware on August
29, 2012 with the objective to acquire, or merge with, an operating
business.</p>
<p style="MARGIN-TOP: 12pt; FONT-FAMILY: Times New Roman; MARGIN-BOTTOM: 0pt; MARGIN-LEFT: 7%; FONT-SIZE: 10pt">
The Company was organized as a vehicle to investigate and, if such
investigation warrants, acquire a target company or business
seeking the perceived advantages of being a publicly traded
corporation. The Company’s principal business objective over
the next twelve months and beyond will be to achieve long-term
growth potential through a combination with a business rather than
immediate short-term earnings. The Company will not restrict its
potential target companies to any specific business, industry or
geographical location. The analysis of business opportunities will
be undertaken by, or under the supervision of, the officers and
directors of the Company.</p>
</div>
<div>
<p style="MARGIN-TOP: 18pt; FONT-FAMILY: Times New Roman; MARGIN-BOTTOM: 0pt; MARGIN-LEFT: 7%; FONT-SIZE: 10pt">
<u>Loss Per Common Share</u></p>
<p style="MARGIN-TOP: 6pt; FONT-FAMILY: Times New Roman; MARGIN-BOTTOM: 0pt; MARGIN-LEFT: 7%; FONT-SIZE: 10pt">
Basic loss per share is calculated using the weighted-average
number of common shares outstanding during each reporting period.
Diluted loss per share includes potentially dilutive securities
such as outstanding options and warrants, using various methods
such as the treasury stock or modified treasury stock method in the
determination of dilutive shares outstanding during each reporting
period. The Company does not have any potentially dilutive
instruments for the period presented.</p>
</div>
<div>
<p style="MARGIN-TOP: 12pt; FONT-FAMILY: Times New Roman; MARGIN-BOTTOM: 0pt; MARGIN-LEFT: 7%; FONT-SIZE: 10pt">
The benefit from income taxes consists of the following:</p>
<p style="MARGIN-TOP: 0pt; MARGIN-BOTTOM: 0pt; FONT-SIZE: 12pt">
</p>
<table style="BORDER-COLLAPSE: collapse; FONT-FAMILY: Times New Roman; FONT-SIZE: 10pt" border="0" cellspacing="0" cellpadding="0" width="76%" align="center"><!-- Begin Table Head -->
<tr>
<td width="73%"></td>
<td valign="bottom" width="11%"></td>
<td></td>
<td></td>
<td></td>
<td valign="bottom" width="10%"></td>
<td></td>
<td></td>
<td></td>
</tr>
<tr style="FONT-FAMILY: Times New Roman; FONT-SIZE: 8pt">
<td valign="bottom"></td>
<td valign="bottom"></td>
<td style="BORDER-BOTTOM: #000000 1px solid" valign="bottom" colspan="2" align="center">For The<br />
Three<br />
Months<br />
Ended<br />
June 30,<br />
2013</td>
<td valign="bottom"></td>
<td valign="bottom"></td>
<td style="BORDER-BOTTOM: #000000 1px solid" valign="bottom" colspan="2" align="center">Cumulative<br />
From<br />
August 29,<br />
2012<br />
(Inception)<br />
to<br />
June 30,<br />
2013</td>
<td valign="bottom"></td>
</tr>
<!-- End Table Head --><!-- Begin Table Body -->
<tr style="FONT-FAMILY: Times New Roman; FONT-SIZE: 10pt" bgcolor="#CCEEFF">
<td valign="top">
<p style="TEXT-INDENT: -1em; FONT-FAMILY: Times New Roman; MARGIN-LEFT: 1em; FONT-SIZE: 10pt">
Current Expense:</p>
</td>
<td valign="bottom"></td>
<td valign="bottom"></td>
<td valign="bottom"></td>
<td valign="bottom"></td>
<td valign="bottom"></td>
<td valign="bottom"></td>
<td valign="bottom"></td>
<td valign="bottom"></td>
</tr>
<tr style="FONT-FAMILY: Times New Roman; FONT-SIZE: 10pt">
<td valign="top">
<p style="TEXT-INDENT: -1em; FONT-FAMILY: Times New Roman; MARGIN-LEFT: 3em; FONT-SIZE: 10pt">
Federal and State</p>
</td>
<td valign="bottom"></td>
<td valign="bottom">$</td>
<td valign="bottom" align="right">—</td>
<td valign="bottom" nowrap="nowrap"></td>
<td valign="bottom"></td>
<td valign="bottom">$</td>
<td valign="bottom" align="right">—</td>
<td valign="bottom" nowrap="nowrap"></td>
</tr>
<tr style="FONT-FAMILY: Times New Roman; FONT-SIZE: 10pt" bgcolor="#CCEEFF">
<td valign="top">
<p style="TEXT-INDENT: -1em; FONT-FAMILY: Times New Roman; MARGIN-LEFT: 1em; FONT-SIZE: 10pt">
Deferred tax benefit:</p>
</td>
<td valign="bottom"></td>
<td valign="bottom"></td>
<td valign="bottom"></td>
<td valign="bottom"></td>
<td valign="bottom"></td>
<td valign="bottom"></td>
<td valign="bottom"></td>
<td valign="bottom"></td>
</tr>
<tr style="FONT-FAMILY: Times New Roman; FONT-SIZE: 10pt">
<td valign="top">
<p style="TEXT-INDENT: -1em; FONT-FAMILY: Times New Roman; MARGIN-LEFT: 3em; FONT-SIZE: 10pt">
Federal and State</p>
</td>
<td valign="bottom"></td>
<td valign="bottom"></td>
<td valign="bottom" align="right">4,000</td>
<td valign="bottom" nowrap="nowrap"></td>
<td valign="bottom"></td>
<td valign="bottom"></td>
<td valign="bottom" align="right">15,000</td>
<td valign="bottom" nowrap="nowrap"></td>
</tr>
<tr style="FONT-FAMILY: Times New Roman; FONT-SIZE: 10pt" bgcolor="#CCEEFF">
<td valign="top">
<p style="TEXT-INDENT: -1em; FONT-FAMILY: Times New Roman; MARGIN-LEFT: 3em; FONT-SIZE: 10pt">
Valuation allowance</p>
</td>
<td valign="bottom"></td>
<td valign="bottom"></td>
<td valign="bottom" align="right">(4,000</td>
<td valign="bottom" nowrap="nowrap">)</td>
<td valign="bottom"></td>
<td valign="bottom"></td>
<td valign="bottom" align="right">(15,000</td>
<td valign="bottom" nowrap="nowrap">)</td>
</tr>
<tr style="FONT-SIZE: 1px">
<td valign="bottom"></td>
<td valign="bottom"></td>
<td valign="bottom">
<p style="BORDER-TOP: #000000 1px solid"></p>
</td>
<td valign="bottom">
<p style="BORDER-TOP: #000000 1px solid"></p>
</td>
<td></td>
<td valign="bottom"></td>
<td valign="bottom">
<p style="BORDER-TOP: #000000 1px solid"></p>
</td>
<td valign="bottom">
<p style="BORDER-TOP: #000000 1px solid"></p>
</td>
<td></td>
</tr>
<tr style="FONT-FAMILY: Times New Roman; FONT-SIZE: 10pt">
<td valign="top">
<p style="TEXT-INDENT: -1em; FONT-FAMILY: Times New Roman; MARGIN-LEFT: 1em; FONT-SIZE: 10pt">
Total</p>
</td>
<td valign="bottom"></td>
<td valign="bottom">$</td>
<td valign="bottom" align="right">—</td>
<td valign="bottom" nowrap="nowrap"></td>
<td valign="bottom"></td>
<td valign="bottom">$</td>
<td valign="bottom" align="right">—</td>
<td valign="bottom" nowrap="nowrap"></td>
</tr>
<tr style="FONT-SIZE: 1px">
<td valign="bottom"></td>
<td valign="bottom"></td>
<td valign="bottom">
<p style="BORDER-TOP: #000000 3px double"></p>
</td>
<td valign="bottom">
<p style="BORDER-TOP: #000000 3px double"></p>
</td>
<td></td>
<td valign="bottom"></td>
<td valign="bottom">
<p style="BORDER-TOP: #000000 3px double"></p>
</td>
<td valign="bottom">
<p style="BORDER-TOP: #000000 3px double"></p>
</td>
<td></td>
</tr>
<!-- End Table Body --></table>
</div>
<div>
<p style="MARGIN-TOP: 18pt; FONT-FAMILY: Times New Roman; MARGIN-BOTTOM: 0pt; MARGIN-LEFT: 7%; FONT-SIZE: 10pt">
<u>Income Taxes</u></p>
<p style="MARGIN-TOP: 6pt; FONT-FAMILY: Times New Roman; MARGIN-BOTTOM: 0pt; MARGIN-LEFT: 7%; FONT-SIZE: 10pt">
The Company utilizes the accrual method of accounting for income
taxes. Under the accrual method, deferred tax assets and
liabilities are determined based on the differences between the
financial reporting basis and the tax basis of the assets and
liabilities and are measured using enacted tax rates and laws that
will be in effect, when the differences are expected to reverse. An
allowance against deferred tax assets is recognized, when it is
more likely than not, that such tax benefits will not be
realized.</p>
<p style="MARGIN-TOP: 12pt; FONT-FAMILY: Times New Roman; MARGIN-BOTTOM: 0pt; MARGIN-LEFT: 7%; FONT-SIZE: 10pt">
The Company recognizes the financial statement benefit of an
uncertain tax position only after considering the probability that
a tax authority would sustain the position in an examination. For
tax positions meeting a <font style="WHITE-SPACE: nowrap">“more-likely</font> than-not”
threshold, the amount recognized in the financial statements is the
benefit expected to be realized upon settlement with the tax
authority. For tax positions not meeting the threshold, no
financial statement benefit is recognized. The Company recognizes
interest and penalties, if any, related to uncertain tax positions
in income tax expense. As of June 30, 2013, the Company has no
accrued interest or penalties related to uncertain tax
positions.</p>
</div>
-42983
-42918
15000
-42983
42918
15900
3400
49
15000
-65
23732
10000
5900
<div>
<p style="MARGIN-TOP: 18pt; FONT-FAMILY: Times New Roman; MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt">
Note 3 - <u>Going Concern</u></p>
<!-- xbrl,body -->
<p style="MARGIN-TOP: 6pt; FONT-FAMILY: Times New Roman; MARGIN-BOTTOM: 0pt; MARGIN-LEFT: 7%; FONT-SIZE: 10pt">
The accompanying financial statements have been prepared assuming
the Company will continue as a going concern, which contemplates
the recoverability of assets and the satisfaction of liabilities in
the normal course of business.</p>
<p style="MARGIN-TOP: 12pt; FONT-FAMILY: Times New Roman; MARGIN-BOTTOM: 0pt; MARGIN-LEFT: 7%; FONT-SIZE: 10pt">
The Company has incurred losses from inception of approximately
$43,000, and has negative working capital of approximately $33,000
at June 30, 2013, which among other factors, raises substantial
doubt about the Company’s ability to continue as a going
concern. The ability of the Company to continue as a going concern
is dependent upon management’s plan to find a suitable
acquisition or merger candidate, raise additional capital from the
sales of stock, and receive loans from related parties. The
accompanying financial statements do not include any adjustments
that might be required should the Company be unable to continue as
a going concern.</p>
</div>
<div>
<p style="MARGIN-TOP: 18pt; FONT-FAMILY: Times New Roman; MARGIN-BOTTOM: 0pt; MARGIN-LEFT: 7%; FONT-SIZE: 10pt">
<u>Emerging Growth Company</u></p>
<p style="MARGIN-TOP: 6pt; FONT-FAMILY: Times New Roman; MARGIN-BOTTOM: 0pt; MARGIN-LEFT: 7%; FONT-SIZE: 10pt">
The Company is an “emerging growth company” and has
elected to use the extended transition period for complying with
new or revised accounting standards under Section 102(b)(1) of the
JOBS Act. This election allows us to delay the adoption of new or
revised accounting standards that have different effective dates
for public and private companies until those standards apply to
private companies.</p>
</div>
3400
-43000
22134647
0.5
3.1764
18889307
60000000
15289893
6000
3400
5051960
0.06
26888
15163004
2900000
2828322
5000216
58850
7863725
4030024
64102
7935898
386992
1896116
2687915
60894
5274886
450000
2773492
2173451
0.33
13190476
0.08
0.39
P5Y
16204666
11202990
23361959
-521245
182000
9422643
30589
62315
1034495
11094963
11092429
7200000
15
4359809
349063
11092429
280452
17825
22327464
76231
32298
1016953
4612450
1669786
2850000
4359809
3132038
35000
280452
12266996
11836841
15
321426
-4367825
7654546
1669786
64834
189186
691823
64834
0.33
13190476
1987486
11202990
4344526
11092429
6747903
0.39
11202990
4344526
11092429
6747903
166918
113534
11092429
-20832
-915174
-296000
280452
32298
1669786
-11466
-458612
22300000
0
1030000
13094663
P1Y6M
<div>
<p style="MARGIN-TOP: 18px; MARGIN-BOTTOM: 0px"><font style="FONT-FAMILY: Times New Roman" size="2"><b>5. Share-Based
Compensation</b></font></p>
<p style="MARGIN-TOP: 6px; MARGIN-BOTTOM: 0px"><font style="FONT-FAMILY: Times New Roman" size="2">The Company sponsors the
Intra-Cellular Therapies, Inc. 2003 Equity Incentive Plan (the
Plan) to provide for the granting of stock awards, such as stock
options, restricted common stock and stock appreciation rights to
employees, directors and other individuals as determined by the
Board of Directors. The Company reserved 3,700,000 shares of common
stock for issuance under the Plan. In December 2012, the
Company increased the number of shares of common stock reserved for
issuance under the plan to 5,700,000.</font></p>
<p style="MARGIN-TOP: 0px; MARGIN-BOTTOM: 0px"><font style="FONT-FAMILY: Times New Roman" size="2">Stock options granted under
the Plan may be either incentive stock options (ISOs) as defined by
the Internal Revenue Code, or non-qualified stock options. The
Board of Directors determines who will receive options, the vesting
periods (which are generally two to three years) and the exercise
prices. Options have a maximum term of 10 years. The exercise price
of ISOs granted under the Plan must be at least equal to the fair
market value of the common stock on the date
of grant.</font></p>
<p style="MARGIN-TOP: 12px; MARGIN-BOTTOM: 0px"><font style="FONT-FAMILY: Times New Roman" size="2">Total stock-based
compensation expense, related to all of the Company’s
share-based awards to employees, directors and non-employees
recognized during the years ended 2012 and 2011, was comprised of
the following:</font></p>
<p style="MARGIN-TOP: 0px; MARGIN-BOTTOM: 0px; FONT-SIZE: 12px">
 </p>
<table style="BORDER-COLLAPSE: collapse" border="0" cellspacing="0" cellpadding="0" width="76%" align="center">
<tr>
<td width="78%"></td>
<td valign="bottom" width="4%"></td>
<td></td>
<td></td>
<td></td>
<td valign="bottom" width="4%"></td>
<td></td>
<td></td>
<td></td>
</tr>
<tr>
<td valign="bottom"><font size="1"> </font></td>
<td valign="bottom"><font size="1">  </font></td>
<td valign="bottom" colspan="6" align="center"><font style="FONT-FAMILY: Times New Roman" size="1"><b>Year Ended
December 31</b></font></td>
<td valign="bottom"><font size="1"> </font></td>
</tr>
<tr>
<td valign="bottom"><font size="1"> </font></td>
<td valign="bottom"><font size="1">  </font></td>
<td style="BORDER-BOTTOM: #000000 1px solid" valign="bottom" colspan="2" align="center"><font style="FONT-FAMILY: Times New Roman" size="1"><b>2012</b></font></td>
<td valign="bottom"><font size="1"> </font></td>
<td valign="bottom"><font size="1">  </font></td>
<td style="BORDER-BOTTOM: #000000 1px solid" valign="bottom" colspan="2" align="center"><font style="FONT-FAMILY: Times New Roman" size="1"><b>2011</b></font></td>
<td valign="bottom"><font size="1"> </font></td>
</tr>
<tr>
<td height="8"></td>
<td height="8" colspan="4"></td>
<td height="8" colspan="4"></td>
</tr>
<tr bgcolor="#CCEEFF">
<td valign="top">
<p style="TEXT-INDENT: -1em; MARGIN-LEFT: 1em"><font style="FONT-FAMILY: Times New Roman" size="2">Research and
development</font></p>
</td>
<td valign="bottom"><font size="1">  </font></td>
<td valign="bottom"><font style="FONT-FAMILY: Times New Roman" size="2"><b>$</b></font></td>
<td valign="bottom" align="right"><font style="FONT-FAMILY: Times New Roman" size="2"><b>111,206</b></font></td>
<td valign="bottom" nowrap="nowrap"><font style="FONT-FAMILY: Times New Roman" size="2"><b>  </b></font></td>
<td valign="bottom"><font size="1">  </font></td>
<td valign="bottom"><font style="FONT-FAMILY: Times New Roman" size="2">$</font></td>
<td valign="bottom" align="right"><font style="FONT-FAMILY: Times New Roman" size="2">113,534</font></td>
<td valign="bottom" nowrap="nowrap"><font style="FONT-FAMILY: Times New Roman" size="2">  </font></td>
</tr>
<tr>
<td valign="top">
<p style="TEXT-INDENT: -1em; MARGIN-LEFT: 1em"><font style="FONT-FAMILY: Times New Roman" size="2">General and
administrative</font></p>
</td>
<td valign="bottom"><font size="1">  </font></td>
<td valign="bottom"><font style="FONT-FAMILY: Times New Roman" size="2"><b> </b></font></td>
<td valign="bottom" align="right"><font style="FONT-FAMILY: Times New Roman" size="2"><b>183,900</b></font></td>
<td valign="bottom" nowrap="nowrap"><font style="FONT-FAMILY: Times New Roman" size="2"><b>  </b></font></td>
<td valign="bottom"><font size="1">  </font></td>
<td valign="bottom"><font style="FONT-FAMILY: Times New Roman" size="2"> </font></td>
<td valign="bottom" align="right"><font style="FONT-FAMILY: Times New Roman" size="2">166,918</font></td>
<td valign="bottom" nowrap="nowrap"><font style="FONT-FAMILY: Times New Roman" size="2">  </font></td>
</tr>
<tr style="FONT-SIZE: 1px">
<td valign="bottom"></td>
<td valign="bottom">  </td>
<td valign="bottom">
<p style="BORDER-TOP: #000000 1px solid"> </p>
</td>
<td valign="bottom">
<p style="BORDER-TOP: #000000 1px solid"> </p>
</td>
<td> </td>
<td valign="bottom">  </td>
<td valign="bottom">
<p style="BORDER-TOP: #000000 1px solid"> </p>
</td>
<td valign="bottom">
<p style="BORDER-TOP: #000000 1px solid"> </p>
</td>
<td> </td>
</tr>
<tr bgcolor="#CCEEFF">
<td valign="top">
<p style="TEXT-INDENT: -1em; MARGIN-LEFT: 1em"><font style="FONT-FAMILY: Times New Roman" size="2">Total share-based
compensation expense</font></p>
</td>
<td valign="bottom"><font size="1">  </font></td>
<td valign="bottom"><font style="FONT-FAMILY: Times New Roman" size="2"><b>$</b></font></td>
<td valign="bottom" align="right"><font style="FONT-FAMILY: Times New Roman" size="2"><b>295,106</b></font></td>
<td valign="bottom" nowrap="nowrap"><font style="FONT-FAMILY: Times New Roman" size="2"><b>  </b></font></td>
<td valign="bottom"><font size="1">  </font></td>
<td valign="bottom"><font style="FONT-FAMILY: Times New Roman" size="2">$</font></td>
<td valign="bottom" align="right"><font style="FONT-FAMILY: Times New Roman" size="2">280,452</font></td>
<td valign="bottom" nowrap="nowrap"><font style="FONT-FAMILY: Times New Roman" size="2">  </font></td>
</tr>
<tr style="FONT-SIZE: 1px">
<td valign="bottom"></td>
<td valign="bottom">  </td>
<td valign="bottom">
<p style="BORDER-TOP: #000000 3px double"> </p>
</td>
<td valign="bottom">
<p style="BORDER-TOP: #000000 3px double"> </p>
</td>
<td> </td>
<td valign="bottom">  </td>
<td valign="bottom">
<p style="BORDER-TOP: #000000 3px double"> </p>
</td>
<td valign="bottom">
<p style="BORDER-TOP: #000000 3px double"> </p>
</td>
<td> </td>
</tr>
</table>
<p style="MARGIN-TOP: 12px; MARGIN-BOTTOM: 0px"><font style="FONT-FAMILY: Times New Roman" size="2">The following table
describes the weighted-average assumptions used for calculating the
value of options granted for the years ended
December 31:</font></p>
<p style="MARGIN-TOP: 0px; MARGIN-BOTTOM: 0px; FONT-SIZE: 12px">
 </p>
<table style="BORDER-COLLAPSE: collapse" border="0" cellspacing="0" cellpadding="0" width="76%" align="center">
<tr>
<td width="82%"></td>
<td valign="bottom" width="5%"></td>
<td></td>
<td></td>
<td></td>
<td valign="bottom" width="5%"></td>
<td></td>
<td></td>
<td></td>
</tr>
<tr>
<td valign="bottom"><font size="1"> </font></td>
<td valign="bottom"><font size="1">  </font></td>
<td style="BORDER-BOTTOM: #000000 1px solid" valign="bottom" colspan="2" align="center"><font style="FONT-FAMILY: Times New Roman" size="1"><b>2012</b></font></td>
<td valign="bottom"><font size="1"> </font></td>
<td valign="bottom"><font size="1"> </font></td>
<td style="BORDER-BOTTOM: #000000 1px solid" valign="bottom" colspan="2" align="center"><font style="FONT-FAMILY: Times New Roman" size="1"><b>2011</b></font></td>
<td valign="bottom"><font size="1"> </font></td>
</tr>
<tr>
<td height="8"></td>
<td height="8" colspan="4"></td>
<td height="8" colspan="4"></td>
</tr>
<tr bgcolor="#CCEEFF">
<td valign="top">
<p style="TEXT-INDENT: -1em; MARGIN-LEFT: 1em"><font style="FONT-FAMILY: Times New Roman" size="2">Dividend yield</font></p>
</td>
<td valign="bottom"><font size="1">  </font></td>
<td valign="bottom"><font style="FONT-FAMILY: Times New Roman" size="2"><b> </b></font></td>
<td valign="bottom" align="right"><font style="FONT-FAMILY: Times New Roman" size="2"><b>0.0</b></font></td>
<td valign="bottom" nowrap="nowrap"><font style="FONT-FAMILY: Times New Roman" size="2"><b>% </b></font></td>
<td valign="bottom"><font size="1"> </font></td>
<td valign="bottom" nowrap="nowrap"><font style="FONT-FAMILY: Times New Roman" size="2"> </font></td>
<td valign="bottom" nowrap="nowrap" align="right"><font style="FONT-FAMILY: Times New Roman" size="2">—  </font></td>
<td valign="bottom" nowrap="nowrap"><font style="FONT-FAMILY: Times New Roman" size="2">% </font></td>
</tr>
<tr>
<td valign="top">
<p style="TEXT-INDENT: -1em; MARGIN-LEFT: 1em"><font style="FONT-FAMILY: Times New Roman" size="2">Expected
volatility</font></p>
</td>
<td valign="bottom"><font size="1">  </font></td>
<td valign="bottom"><font style="FONT-FAMILY: Times New Roman" size="2"><b> </b></font></td>
<td valign="bottom" align="right"><font style="FONT-FAMILY: Times New Roman" size="2"><b>79.7</b></font></td>
<td valign="bottom" nowrap="nowrap"><font style="FONT-FAMILY: Times New Roman" size="2"><b>% </b></font></td>
<td valign="bottom"><font size="1"> </font></td>
<td valign="bottom" nowrap="nowrap"><font style="FONT-FAMILY: Times New Roman" size="2"> </font></td>
<td valign="bottom" nowrap="nowrap" align="right"><font style="FONT-FAMILY: Times New Roman" size="2">—  </font></td>
<td valign="bottom" nowrap="nowrap"><font style="FONT-FAMILY: Times New Roman" size="2">  </font></td>
</tr>
<tr bgcolor="#CCEEFF">
<td valign="top">
<p style="TEXT-INDENT: -1em; MARGIN-LEFT: 1em"><font style="FONT-FAMILY: Times New Roman" size="2">Weighted-average risk-free
interest rate</font></p>
</td>
<td valign="bottom"><font size="1">  </font></td>
<td valign="bottom"><font style="FONT-FAMILY: Times New Roman" size="2"><b> </b></font></td>
<td valign="bottom" align="right"><font style="FONT-FAMILY: Times New Roman" size="2"><b>1.2</b></font></td>
<td valign="bottom" nowrap="nowrap"><font style="FONT-FAMILY: Times New Roman" size="2"><b>% </b></font></td>
<td valign="bottom"><font size="1"> </font></td>
<td valign="bottom" nowrap="nowrap"><font style="FONT-FAMILY: Times New Roman" size="2"> </font></td>
<td valign="bottom" nowrap="nowrap" align="right"><font style="FONT-FAMILY: Times New Roman" size="2">—  </font></td>
<td valign="bottom" nowrap="nowrap"><font style="FONT-FAMILY: Times New Roman" size="2">  </font></td>
</tr>
<tr>
<td valign="top">
<p style="TEXT-INDENT: -1em; MARGIN-LEFT: 1em"><font style="FONT-FAMILY: Times New Roman" size="2">Expected term</font></p>
</td>
<td valign="bottom"><font size="1">  </font></td>
<td valign="bottom"><font style="FONT-FAMILY: Times New Roman" size="2"><b> </b></font></td>
<td valign="bottom" align="right"><font style="FONT-FAMILY: Times New Roman" size="2"><b>6.3 years</b></font></td>
<td valign="bottom" nowrap="nowrap"><font style="FONT-FAMILY: Times New Roman" size="2"><b>  </b></font></td>
<td valign="bottom"><font size="1"> </font></td>
<td valign="bottom" nowrap="nowrap"><font style="FONT-FAMILY: Times New Roman" size="2"> </font></td>
<td valign="bottom" nowrap="nowrap" align="right"><font style="FONT-FAMILY: Times New Roman" size="2">—  </font></td>
<td valign="bottom" nowrap="nowrap"><font style="FONT-FAMILY: Times New Roman" size="2">  </font></td>
</tr>
</table>
<p style="MARGIN-TOP: 0px; MARGIN-BOTTOM: 0px"><font style="FONT-FAMILY: Times New Roman" size="2">Information regarding the
stock options activity including employees, directors and
non-employees as of December 31, 2012, and changes during the
year then ended, are summarized as follows:</font></p>
<p style="MARGIN-TOP: 0px; MARGIN-BOTTOM: 0px; FONT-SIZE: 12px">
 </p>
<table style="BORDER-COLLAPSE: collapse" border="0" cellspacing="0" cellpadding="0" width="84%" align="center">
<tr>
<td width="67%"></td>
<td valign="bottom" width="5%"></td>
<td></td>
<td></td>
<td></td>
<td valign="bottom" width="5%"></td>
<td></td>
<td></td>
<td></td>
<td valign="bottom" width="5%"></td>
<td></td>
<td></td>
<td></td>
</tr>
<tr>
<td valign="bottom"><font size="1"> </font></td>
<td valign="bottom"><font size="1">  </font></td>
<td style="BORDER-BOTTOM: #000000 1px solid" valign="bottom" colspan="2" align="center"><font style="FONT-FAMILY: Times New Roman" size="1"><b>Number of<br />
Shares</b></font></td>
<td valign="bottom"><font size="1"> </font></td>
<td valign="bottom"><font size="1"> </font></td>
<td style="BORDER-BOTTOM: #000000 1px solid" valign="bottom" colspan="2" align="center"><font style="FONT-FAMILY: Times New Roman" size="1"><b>Weighted-<br />
Average</b></font><br />
<font style="FONT-FAMILY: Times New Roman" size="1"><b>Exercise<br />
Price</b></font></td>
<td valign="bottom"><font size="1"> </font></td>
<td valign="bottom"><font size="1">  </font></td>
<td style="BORDER-BOTTOM: #000000 1px solid" valign="bottom" colspan="2" align="center"><font style="FONT-FAMILY: Times New Roman" size="1"><b>Weighted-<br />
Average<br />
Contractual<br />
Life</b></font></td>
<td valign="bottom"><font size="1"> </font></td>
</tr>
<tr>
<td height="8"></td>
<td height="8" colspan="4"></td>
<td height="8" colspan="4"></td>
<td height="8" colspan="4"></td>
</tr>
<tr bgcolor="#CCEEFF">
<td valign="top">
<p style="TEXT-INDENT: -1em; MARGIN-LEFT: 1em"><font style="FONT-FAMILY: Times New Roman" size="2">Outstanding at
December 31, 2011</font></p>
</td>
<td valign="bottom"><font size="1">  </font></td>
<td valign="bottom"><font style="FONT-FAMILY: Times New Roman" size="2"> </font></td>
<td valign="bottom" align="right"><font style="FONT-FAMILY: Times New Roman" size="2">3,175,567</font></td>
<td valign="bottom" nowrap="nowrap"><font style="FONT-FAMILY: Times New Roman" size="2">  </font></td>
<td valign="bottom"><font size="1"> </font></td>
<td valign="bottom"><font style="FONT-FAMILY: Times New Roman" size="2">$</font></td>
<td valign="bottom" align="right"><font style="FONT-FAMILY: Times New Roman" size="2">0.61</font></td>
<td valign="bottom" nowrap="nowrap"><font style="FONT-FAMILY: Times New Roman" size="2">  </font></td>
<td valign="bottom"><font size="1">  </font></td>
<td valign="bottom"><font style="FONT-FAMILY: Times New Roman" size="2"> </font></td>
<td valign="bottom" align="right"><font style="FONT-FAMILY: Times New Roman" size="2">5.0 years</font></td>
<td valign="bottom" nowrap="nowrap"><font style="FONT-FAMILY: Times New Roman" size="2">  </font></td>
</tr>
<tr>
<td valign="top">
<p style="TEXT-INDENT: -1em; MARGIN-LEFT: 3em"><font style="FONT-FAMILY: Times New Roman" size="2">Options granted</font></p>
</td>
<td valign="bottom"><font size="1">  </font></td>
<td valign="bottom"><font style="FONT-FAMILY: Times New Roman" size="2"> </font></td>
<td valign="bottom" align="right"><font style="FONT-FAMILY: Times New Roman" size="2">322,200</font></td>
<td valign="bottom" nowrap="nowrap"><font style="FONT-FAMILY: Times New Roman" size="2">  </font></td>
<td valign="bottom"><font size="1"> </font></td>
<td valign="bottom"><font style="FONT-FAMILY: Times New Roman" size="2"> </font></td>
<td valign="bottom" align="right"><font style="FONT-FAMILY: Times New Roman" size="2">1.42</font></td>
<td valign="bottom" nowrap="nowrap"><font style="FONT-FAMILY: Times New Roman" size="2">  </font></td>
<td valign="bottom"><font size="1">  </font></td>
<td valign="bottom"><font style="FONT-FAMILY: Times New Roman" size="2"> </font></td>
<td valign="bottom" align="right"><font style="FONT-FAMILY: Times New Roman" size="2">6.3 years</font></td>
<td valign="bottom" nowrap="nowrap"><font style="FONT-FAMILY: Times New Roman" size="2">  </font></td>
</tr>
<tr bgcolor="#CCEEFF">
<td valign="top">
<p style="TEXT-INDENT: -1em; MARGIN-LEFT: 3em"><font style="FONT-FAMILY: Times New Roman" size="2">Options
exercised</font></p>
</td>
<td valign="bottom"><font size="1">  </font></td>
<td valign="bottom"><font style="FONT-FAMILY: Times New Roman" size="2"> </font></td>
<td valign="bottom" align="right"><font style="FONT-FAMILY: Times New Roman" size="2">(66,540</font></td>
<td valign="bottom" nowrap="nowrap"><font style="FONT-FAMILY: Times New Roman" size="2">) </font></td>
<td valign="bottom"><font size="1"> </font></td>
<td valign="bottom"><font style="FONT-FAMILY: Times New Roman" size="2"> </font></td>
<td valign="bottom" align="right"><font style="FONT-FAMILY: Times New Roman" size="2">0.47</font></td>
<td valign="bottom" nowrap="nowrap"><font style="FONT-FAMILY: Times New Roman" size="2">  </font></td>
<td valign="bottom"><font size="1">  </font></td>
<td valign="bottom"><font style="FONT-FAMILY: Times New Roman" size="2"> </font></td>
<td valign="bottom" align="right"><font style="FONT-FAMILY: Times New Roman" size="2">3.0 years</font></td>
<td valign="bottom" nowrap="nowrap"><font style="FONT-FAMILY: Times New Roman" size="2">  </font></td>
</tr>
<tr>
<td valign="top">
<p style="TEXT-INDENT: -1em; MARGIN-LEFT: 3em"><font style="FONT-FAMILY: Times New Roman" size="2">Options canceled or
expired</font></p>
</td>
<td valign="bottom"><font size="1">  </font></td>
<td valign="bottom"><font style="FONT-FAMILY: Times New Roman" size="2"> </font></td>
<td valign="bottom" align="right"><font style="FONT-FAMILY: Times New Roman" size="2">(17,000</font></td>
<td valign="bottom" nowrap="nowrap"><font style="FONT-FAMILY: Times New Roman" size="2">) </font></td>
<td valign="bottom"><font size="1"> </font></td>
<td valign="bottom"><font style="FONT-FAMILY: Times New Roman" size="2"> </font></td>
<td valign="bottom" align="right"><font style="FONT-FAMILY: Times New Roman" size="2">1.37</font></td>
<td valign="bottom" nowrap="nowrap"><font style="FONT-FAMILY: Times New Roman" size="2">  </font></td>
<td valign="bottom"><font size="1">  </font></td>
<td valign="bottom"><font style="FONT-FAMILY: Times New Roman" size="2"> </font></td>
<td valign="bottom" align="right"><font style="FONT-FAMILY: Times New Roman" size="2">7.9 years</font></td>
<td valign="bottom" nowrap="nowrap"><font style="FONT-FAMILY: Times New Roman" size="2">  </font></td>
</tr>
<tr style="FONT-SIZE: 1px">
<td valign="bottom"></td>
<td valign="bottom">  </td>
<td valign="bottom">
<p style="BORDER-TOP: #000000 1px solid"> </p>
</td>
<td valign="bottom">
<p style="BORDER-TOP: #000000 1px solid"> </p>
</td>
<td> </td>
<td valign="bottom"> </td>
<td valign="bottom">
<p style="BORDER-TOP: #000000 1px solid"> </p>
</td>
<td valign="bottom">
<p style="BORDER-TOP: #000000 1px solid"> </p>
</td>
<td> </td>
<td valign="bottom">  </td>
<td valign="bottom"></td>
<td valign="bottom"></td>
<td valign="bottom"></td>
</tr>
<tr bgcolor="#CCEEFF">
<td valign="top">
<p style="TEXT-INDENT: -1em; MARGIN-LEFT: 1em"><font style="FONT-FAMILY: Times New Roman" size="2">Outstanding at
December 31, 2012</font></p>
</td>
<td valign="bottom"><font size="1">  </font></td>
<td valign="bottom"><font style="FONT-FAMILY: Times New Roman" size="2"> </font></td>
<td valign="bottom" align="right"><font style="FONT-FAMILY: Times New Roman" size="2">3,414,227</font></td>
<td valign="bottom" nowrap="nowrap"><font style="FONT-FAMILY: Times New Roman" size="2">  </font></td>
<td valign="bottom"><font size="1"> </font></td>
<td valign="bottom"><font style="FONT-FAMILY: Times New Roman" size="2"> </font></td>
<td valign="bottom" align="right"><font style="FONT-FAMILY: Times New Roman" size="2">0.66</font></td>
<td valign="bottom" nowrap="nowrap"><font style="FONT-FAMILY: Times New Roman" size="2">  </font></td>
<td valign="bottom"><font size="1">  </font></td>
<td valign="bottom"><font style="FONT-FAMILY: Times New Roman" size="2"> </font></td>
<td valign="bottom" align="right"><font style="FONT-FAMILY: Times New Roman" size="2">4.4 years</font></td>
<td valign="bottom" nowrap="nowrap"><font style="FONT-FAMILY: Times New Roman" size="2">  </font></td>
</tr>
<tr style="FONT-SIZE: 1px">
<td valign="bottom"></td>
<td valign="bottom">  </td>
<td valign="bottom">
<p style="BORDER-TOP: #000000 1px solid"> </p>
</td>
<td valign="bottom">
<p style="BORDER-TOP: #000000 1px solid"> </p>
</td>
<td> </td>
<td valign="bottom"> </td>
<td valign="bottom">
<p style="BORDER-TOP: #000000 1px solid"> </p>
</td>
<td valign="bottom">
<p style="BORDER-TOP: #000000 1px solid"> </p>
</td>
<td> </td>
<td valign="bottom">  </td>
<td valign="bottom"></td>
<td valign="bottom"></td>
<td valign="bottom"></td>
</tr>
<tr>
<td valign="top">
<p style="TEXT-INDENT: -1em; MARGIN-LEFT: 3em"><font style="FONT-FAMILY: Times New Roman" size="2">Vested or expected to vest
at December 31, 2012</font></p>
</td>
<td valign="bottom"><font size="1">  </font></td>
<td valign="bottom"><font style="FONT-FAMILY: Times New Roman" size="2"> </font></td>
<td valign="bottom" align="right"><font style="FONT-FAMILY: Times New Roman" size="2">3,416,227</font></td>
<td valign="bottom" nowrap="nowrap"><font style="FONT-FAMILY: Times New Roman" size="2">  </font></td>
<td valign="bottom"><font size="1"> </font></td>
<td valign="bottom"><font style="FONT-FAMILY: Times New Roman" size="2"> </font></td>
<td valign="bottom" align="right"><font style="FONT-FAMILY: Times New Roman" size="2">0.69</font></td>
<td valign="bottom" nowrap="nowrap"><font style="FONT-FAMILY: Times New Roman" size="2">  </font></td>
<td valign="bottom"><font size="1">  </font></td>
<td valign="bottom"></td>
<td valign="bottom"></td>
<td valign="bottom"></td>
</tr>
<tr style="FONT-SIZE: 1px">
<td valign="bottom"></td>
<td valign="bottom">  </td>
<td valign="bottom">
<p style="BORDER-TOP: #000000 3px double"> </p>
</td>
<td valign="bottom">
<p style="BORDER-TOP: #000000 3px double"> </p>
</td>
<td> </td>
<td valign="bottom"> </td>
<td valign="bottom">
<p style="BORDER-TOP: #000000 3px double"> </p>
</td>
<td valign="bottom">
<p style="BORDER-TOP: #000000 3px double"> </p>
</td>
<td> </td>
<td valign="bottom">  </td>
<td valign="bottom"></td>
<td valign="bottom"></td>
<td valign="bottom"></td>
</tr>
<tr bgcolor="#CCEEFF">
<td valign="top">
<p style="TEXT-INDENT: -1em; MARGIN-LEFT: 1em"><font style="FONT-FAMILY: Times New Roman" size="2">Exercisable at
December 31, 2012</font></p>
</td>
<td valign="bottom"><font size="1">  </font></td>
<td valign="bottom"><font style="FONT-FAMILY: Times New Roman" size="2"> </font></td>
<td valign="bottom" align="right"><font style="FONT-FAMILY: Times New Roman" size="2">3,151,353</font></td>
<td valign="bottom" nowrap="nowrap"><font style="FONT-FAMILY: Times New Roman" size="2">  </font></td>
<td valign="bottom"><font size="1"> </font></td>
<td valign="bottom"><font style="FONT-FAMILY: Times New Roman" size="2">$</font></td>
<td valign="bottom" align="right"><font style="FONT-FAMILY: Times New Roman" size="2">0.58</font></td>
<td valign="bottom" nowrap="nowrap"><font style="FONT-FAMILY: Times New Roman" size="2">  </font></td>
<td valign="bottom"><font size="1">  </font></td>
<td valign="bottom"><font style="FONT-FAMILY: Times New Roman" size="2"> </font></td>
<td valign="bottom" align="right"><font style="FONT-FAMILY: Times New Roman" size="2">3.9 years</font></td>
<td valign="bottom" nowrap="nowrap"><font style="FONT-FAMILY: Times New Roman" size="2">  </font></td>
</tr>
<tr style="FONT-SIZE: 1px">
<td valign="bottom"></td>
<td valign="bottom">  </td>
<td valign="bottom">
<p style="BORDER-TOP: #000000 3px double"> </p>
</td>
<td valign="bottom">
<p style="BORDER-TOP: #000000 3px double"> </p>
</td>
<td> </td>
<td valign="bottom"> </td>
<td valign="bottom">
<p style="BORDER-TOP: #000000 3px double"> </p>
</td>
<td valign="bottom">
<p style="BORDER-TOP: #000000 3px double"> </p>
</td>
<td> </td>
<td valign="bottom">  </td>
<td valign="bottom"></td>
<td valign="bottom"></td>
<td valign="bottom"></td>
</tr>
</table>
<p style="MARGIN-TOP: 12px; MARGIN-BOTTOM: 0px"><font style="FONT-FAMILY: Times New Roman" size="2">The weighted-average grant
date fair value for awards granted during the year ended
December 31, 2012, was $0.99. Total intrinsic value of the
options exercised was approximately $63,000 and $35,000 in the year
ended December 31, 2012. The total fair value of shares vested
in the years ended December 31, 2012 and 2011, was
approximately $332,000 and $182,000 respectively.</font></p>
<p style="MARGIN-TOP: 12px; MARGIN-BOTTOM: 0px"><font style="FONT-FAMILY: Times New Roman" size="2">During 2012, the Company
granted options to certain scientific advisory board members of the
Company to purchase 39,000 shares of common stock at an average
exercise price of $1.42. There were no options granted during 2011.
The options vest ratably over a period of 12 to 24 months. Stock
compensation related to these grants will fluctuate with any
changes in the underlying value of the Company’s common
stock, as the performance period is not fixed.</font></p>
<p style="MARGIN-TOP: 12px; MARGIN-BOTTOM: 0px"><font style="FONT-FAMILY: Times New Roman" size="2">The unrecognized
share-based compensation expense related to employee stock option
awards at December 31, 2012, is $285,327 and will be
recognized over a weighted-average period of 1.9 years. The
unrecognized share-based compensation expense related to employee
stock option awards at December 31, 2011, is $259,899 and will
be recognized over a weighted-average period of
1.5 years.</font></p>
</div>
<div>
<p style="MARGIN-TOP: 0px; MARGIN-BOTTOM: 0px"><font style="FONT-FAMILY: Times New Roman" size="2"><b>Recently Issued
Accounting Pronouncements</b></font></p>
<p style="MARGIN-TOP: 6px; MARGIN-BOTTOM: 0px"><font style="FONT-FAMILY: Times New Roman" size="2">In June 2011, the FASB
issued ASU 2011-05, <i>Presentation of Comprehensive Income</i>.
ASU 2011-05 revises the manner in which entities present
comprehensive income in their financial statements. The recent
guidance removes the presentation options in ASC 220 and
requires entities to report components of comprehensive income in
either (1) a continuous statement of comprehensive income or
(2) two separate but consecutive statements. ASU 2011-05 did
not change the items that must be reported in other comprehensive
income. The Company adopted the provisions of ASU 2011-05 for the
year ended December 31, 2012 and elected the second option.
However, for the years ended December 31, 2012 and 2011, the
Company’s net (loss) income equals comprehensive (loss)
income, and, therefore, a separate statement of other comprehensive
income was not necessary.</font></p>
</div>
<div>
<p style="MARGIN-TOP: 18px; MARGIN-BOTTOM: 0px"><font style="FONT-FAMILY: Times New Roman" size="2"><b>Share-Based
Compensation</b></font></p>
<p style="MARGIN-TOP: 6px; MARGIN-BOTTOM: 0px"><font style="FONT-FAMILY: Times New Roman" size="2">Share-based payments are
accounted for in accordance with the provisions of ASC 718,
<i>Compensation – Stock Compensation</i> (ASC 718). The
fair value of share-based payments is estimated, on the date of
grant, using the Black-Scholes-Merton option-pricing model (the
Black-Scholes model). The resulting fair value is recognized
ratably over the requisite service period, which is generally the
vesting period of the option.</font></p>
<p style="MARGIN-TOP: 12px; MARGIN-BOTTOM: 0px"><font style="FONT-FAMILY: Times New Roman" size="2">For all time vesting awards
granted, expense is amortized using the straight-line attribution
method. For awards that contain a performance condition, expense is
amortized using the accelerated attribution method. As share-based
compensation expense recognized in the statements of operations for
the years ended December 31, 2012 and 2011, is based on
share-based awards ultimately expected to vest, it has been reduced
for estimated forfeitures.</font></p>
<p style="MARGIN-TOP: 0px; MARGIN-BOTTOM: 0px"><font style="FONT-FAMILY: Times New Roman" size="2">ASC 718 requires
forfeitures to be estimated at the time of grant and revised, if
necessary, in subsequent periods if actual forfeitures differ from
those estimates. Pre-vesting forfeitures are based on the
Company’s historical experience for the years ended
December 31, 2012, 2011 and 2010, and have not been
material.</font></p>
<p style="MARGIN-TOP: 12px; MARGIN-BOTTOM: 0px"><font style="FONT-FAMILY: Times New Roman" size="2">The Company utilizes the
Black-Scholes model for estimating fair value of its stock options
granted. Option valuation models, including Black-Scholes model,
require the input of subjective assumptions, and changes in the
assumptions used can materially affect the grant date fair value of
an award. These assumptions include the risk-free rate of interest,
expected dividend yield, expected volatility and the expected life
of the award.</font></p>
<p style="MARGIN-TOP: 12px; MARGIN-BOTTOM: 0px"><font style="FONT-FAMILY: Times New Roman" size="2">Expected volatility rates
are based on historical volatility of the common stock of
comparable publicly traded entities and other factors due to the
lack of historic information of the Company’s common stock.
The expected life of stock-based options is the period of time for
which the stock-based options are expected to be outstanding. Given
the lack of historic exercise data, the expected life is determined
using the “simplified method” which is defined as the
midpoint between the vesting date and the end of the contractual
term.</font></p>
<p style="MARGIN-TOP: 12px; MARGIN-BOTTOM: 0px"><font style="FONT-FAMILY: Times New Roman" size="2">The risk-free interest
rates are based on the U.S. Treasury yield for a period consistent
with the expected term of the option in effect at the time of the
grant. The Company has not paid dividends to its stockholders since
its inception and does not plan to pay cash dividends in the
foreseeable future. Therefore, the Company has assumed an expected
dividend rate of zero.</font></p>
<p style="MARGIN-TOP: 12px; MARGIN-BOTTOM: 0px"><font style="FONT-FAMILY: Times New Roman" size="2">Given the absence of an
active market for the Company’s common stock, the exercise
price of the stock options on the date of grant was determined and
approved by the board of directors using several factors, including
progress and milestones achieved in the Company’s business
development and performance, the price per share of its convertible
preferred stock offerings and general industry and economic trends.
In establishing the estimated fair value of the common stock, the
Company considered the guidance set forth in American Institute of
Certified Public Accountants Practice Guide, <i>Valuation of
Privately-Held-Company Equity Securities Issued as
Compensation</i>.</font></p>
<p style="MARGIN-TOP: 0px; MARGIN-BOTTOM: 0px"><font style="FONT-FAMILY: Times New Roman" size="2">Under ASC 718, the
cumulative amount of compensation cost recognized for instruments
classified as equity that ordinarily would result in a future tax
deduction under existing tax law shall be considered to be a
deductible difference in applying ASC 740, <i>Income Taxes</i>. The
deductible temporary difference is based on the compensation cost
recognized for financial reporting purposes; however, these
provisions currently do not impact the Company, as all the deferred
tax assets have a full valuation allowance.</font></p>
<p style="MARGIN-TOP: 12px; MARGIN-BOTTOM: 0px"><font style="FONT-FAMILY: Times New Roman" size="2">Since the Company had net
operating loss carryforwards as of December 31, 2012 and 2011,
no excess tax benefits for the tax deductions related to
share-based awards were recognized in the statements of
operations.</font></p>
<p style="MARGIN-TOP: 12px; MARGIN-BOTTOM: 0px"><font style="FONT-FAMILY: Times New Roman" size="2">Equity instruments issued
to non-employees are accounted for under the provisions of
ASC 718 and ASC 505-50, <i>Equity/Equity-Based Payments to
Non-Employees</i>. Accordingly, the estimated fair value of the
equity instrument is recorded on the earlier of the performance
commitment date or the date the services required are
completed and are marked to market during the
service period.</font></p>
</div>
<div>
<p style="MARGIN-TOP: 18px; MARGIN-BOTTOM: 0px"><font style="FONT-FAMILY: Times New Roman" size="2"><b>9. Commitments and
Contingencies</b></font></p>
<p style="MARGIN-TOP: 6px; MARGIN-BOTTOM: 0px"><font style="FONT-FAMILY: Times New Roman" size="2">The Company currently has
operating lease agreements with commitments for $605,000 through
2013 for laboratory and office facilities. Rent expense for the
years ended December 31, 2012 and 2011 was $809,332 and
$691,823, respectively.</font></p>
</div>
<div>
<p style="TEXT-TRANSFORM: none; MARGIN-TOP: 18pt; TEXT-INDENT: 0px; LETTER-SPACING: normal; FONT: 10pt 'Times New Roman'; WHITE-SPACE: normal; MARGIN-BOTTOM: 0pt; COLOR: rgb(0,0,0); WORD-SPACING: 0px; -webkit-text-stroke-width: 0px">
<font style="FONT-FAMILY: Times New Roman" size="2"><b>Fair Value
Measurements</b></font></p>
<p style="TEXT-TRANSFORM: none; MARGIN-TOP: 6pt; TEXT-INDENT: 0px; LETTER-SPACING: normal; FONT: 10pt 'Times New Roman'; WHITE-SPACE: normal; MARGIN-BOTTOM: 0pt; COLOR: rgb(0,0,0); WORD-SPACING: 0px; -webkit-text-stroke-width: 0px">
<font style="FONT-FAMILY: Times New Roman" size="2">The Company
applies the fair value method under ASC 820, <i>Fair Value Measurements and
Disclosures</i>. ASC 820 defines fair value, establishes a fair
value hierarchy for assets and liabilities measured at fair value
and requires expanded disclosures about fair value measurements.
The ASC 820 hierarchy ranks the quality and reliability of inputs,
or assumptions, used in the determination of fair value and
requires assets and liabilities carried at fair value to be
classified and disclosed in one of the following categories based
on the lowest level input used that is significant to a particular
fair value measurement:</font></p>
<p style="TEXT-TRANSFORM: none; MARGIN-TOP: 0pt; TEXT-INDENT: 0px; LETTER-SPACING: normal; FONT: 6pt 'Times New Roman'; WHITE-SPACE: normal; MARGIN-BOTTOM: 0pt; COLOR: rgb(0,0,0); WORD-SPACING: 0px; -webkit-text-stroke-width: 0px">
<font style="FONT-FAMILY: Times New Roman" size="2"> </font></p>
<p style="MARGIN-TOP: 0px; MARGIN-BOTTOM: 0px"></p>
<table style="TEXT-TRANSFORM: none; TEXT-INDENT: 0px; LETTER-SPACING: normal; BORDER-COLLAPSE: collapse; FONT-FAMILY: 'Times New Roman'; FONT-SIZE: 10pt; WORD-SPACING: 0px; -webkit-text-stroke-width: 0px" border="0" cellspacing="0" cellpadding="0" width="100%">
<tr>
<td width="4%"> </td>
<td valign="top" width="3%" align="left">•</td>
<td valign="top" width="1%"> </td>
<td valign="top" align="left">Level 1—Fair value is
determined by using unadjusted quoted prices that are available in
active markets for identical assets and liabilities.</td>
</tr>
</table>
<p style="TEXT-TRANSFORM: none; MARGIN-TOP: 0pt; TEXT-INDENT: 0px; LETTER-SPACING: normal; FONT: 6pt 'Times New Roman'; WHITE-SPACE: normal; MARGIN-BOTTOM: 0pt; COLOR: rgb(0,0,0); WORD-SPACING: 0px; -webkit-text-stroke-width: 0px">
<font style="FONT-FAMILY: Times New Roman" size="2"> </font></p>
<p style="MARGIN-TOP: 0px; MARGIN-BOTTOM: 0px"></p>
<table style="TEXT-TRANSFORM: none; TEXT-INDENT: 0px; LETTER-SPACING: normal; BORDER-COLLAPSE: collapse; FONT-FAMILY: 'Times New Roman'; FONT-SIZE: 10pt; WORD-SPACING: 0px; -webkit-text-stroke-width: 0px" border="0" cellspacing="0" cellpadding="0" width="100%">
<tr>
<td width="4%"> </td>
<td valign="top" width="3%" align="left">•</td>
<td valign="top" width="1%"> </td>
<td valign="top" align="left">
<p style="FONT-FAMILY: 'Times New Roman'; FONT-SIZE: 10pt" align="left">Level 2—Fair value is determined by using inputs other
than Level 1 quoted prices that are directly or indirectly
observable. Inputs can include quoted prices for similar assets and
liabilities in active markets or quoted prices for identical assets
and liabilities in inactive markets. Related inputs can also
include those used in valuation or other pricing models, such as
interest rates and yield curves that can be corroborated by
observable market data.</p>
</td>
</tr>
</table>
<p style="TEXT-TRANSFORM: none; MARGIN-TOP: 0pt; TEXT-INDENT: 0px; LETTER-SPACING: normal; FONT: 6pt 'Times New Roman'; WHITE-SPACE: normal; MARGIN-BOTTOM: 0pt; COLOR: rgb(0,0,0); WORD-SPACING: 0px; -webkit-text-stroke-width: 0px">
<font style="FONT-FAMILY: Times New Roman" size="2"> </font></p>
<p style="MARGIN-TOP: 0px; MARGIN-BOTTOM: 0px"></p>
<table style="TEXT-TRANSFORM: none; TEXT-INDENT: 0px; LETTER-SPACING: normal; BORDER-COLLAPSE: collapse; FONT-FAMILY: 'Times New Roman'; FONT-SIZE: 10pt; WORD-SPACING: 0px; -webkit-text-stroke-width: 0px" border="0" cellspacing="0" cellpadding="0" width="100%">
<tr>
<td width="4%"> </td>
<td valign="top" width="3%" align="left">•</td>
<td valign="top" width="1%"> </td>
<td valign="top" align="left">Level 3 – Fair value is
determined by inputs that are unobservable and not corroborated by
market data. Use of these inputs involves significant and
subjective judgments to be made by a reporting entity—e.g.,
determining an appropriate adjustment to a discount factor for
illiquidity associated with a given security.</td>
</tr>
</table>
<p style="TEXT-TRANSFORM: none; MARGIN-TOP: 12pt; TEXT-INDENT: 0px; LETTER-SPACING: normal; FONT: 10pt 'Times New Roman'; WHITE-SPACE: normal; MARGIN-BOTTOM: 0pt; COLOR: rgb(0,0,0); WORD-SPACING: 0px; -webkit-text-stroke-width: 0px">
<font style="FONT-FAMILY: Times New Roman" size="2">The Company
evaluates financial assets and liabilities subject to fair value
measurements on a recurring basis to determine the appropriate
level at which to classify them each reporting period. This
determination requires the Company to make subjective judgments as
to the significance of inputs used in determining fair value and
where such inputs lie within the ASC 820 hierarchy.</font></p>
<p style="TEXT-TRANSFORM: none; MARGIN-TOP: 12pt; TEXT-INDENT: 0px; LETTER-SPACING: normal; FONT: 10pt 'Times New Roman'; WHITE-SPACE: normal; MARGIN-BOTTOM: 0pt; COLOR: rgb(0,0,0); WORD-SPACING: 0px; -webkit-text-stroke-width: 0px">
<font style="FONT-FAMILY: Times New Roman" size="2">The Company has
no assets or liabilities that were measured using quoted prices for
similar assets and liabilities or significant unobservable inputs
(Level 2 and Level 3 assets and liabilities, respectively) as of
December 31, 2012. The carrying value of cash held in money market
funds of approximately $1.2 million as of December 31, 2012, is
included in cash and cash equivalents and approximates market value
based on quoted market price or Level 1 inputs.</font></p>
</div>
0.50
0.012
<div>
<p style="MARGIN-TOP: 18px; MARGIN-BOTTOM: 0px"><font style="FONT-FAMILY: Times New Roman" size="2"><b>Revenue
Recognition</b></font></p>
<p style="MARGIN-TOP: 6px; MARGIN-BOTTOM: 0px"><font style="FONT-FAMILY: Times New Roman" size="2">Revenue is recognized when
all terms and conditions of the agreements have been met, including
persuasive evidence of an arrangement, delivery has occurred or
services have been rendered, price is fixed or determinable and
collectability is reasonably assured. The Company is reimbursed for
certain costs incurred on specified research projects under the
terms and conditions of grants, collaboration agreements, and
awards. The Company records the amount of reimbursement as revenues
on a gross basis in accordance with ASC 605-45, <i>Revenue
Recognition/Principal Agent Considerations</i>. The Company is the
primary obligor with respect to purchasing goods and services from
third-party suppliers, is obligated to compensate the service
provider for the work performed, and has discretion in selecting
the supplier. Provisions for estimated losses on research grant
projects and any other contracts are made in the period such losses
are determined.</font></p>
<p style="MARGIN-TOP: 12px; MARGIN-BOTTOM: 0px"><font style="FONT-FAMILY: Times New Roman" size="2">Effective January 1,
2011, the Company adopted a new accounting standard that amends the
guidance on the accounting for arrangements involving the delivery
of more than one element. Pursuant to the new standard, each
required deliverable is evaluated to determine whether it qualifies
as a separate unit of accounting. For ITI this determination is
generally based on whether the deliverable has “stand-alone
value” to the customer. The Company adopted this new
accounting standard on a prospective basis for all
Multiple-Deliverable Revenue Arrangements (MDRAs) entered into on
or after January 1, 2011, and for any MDRAs that were entered
into prior to January 1, 2011, but materially modified on or
after that date.</font></p>
<p style="MARGIN-TOP: 0px; MARGIN-BOTTOM: 0px"><font style="FONT-FAMILY: Times New Roman" size="2">For MDRAs entered into
prior to January 1, 2011 (pre-2011 arrangements) and not
materially modified thereafter, we continue to apply our prior
accounting policy with respect to such arrangements. Under this
policy, in general, revenue from non-refundable, up-front fees
related to intellectual property rights/licenses, where we have
continuing involvement and where standalone value could not be
determined under the previous guidance, is recognized ratably over
the estimated period of ongoing involvement. In general, the
consideration with respect to the other deliverables is recognized
when the goods or services are delivered.</font></p>
<p style="MARGIN-TOP: 12px; MARGIN-BOTTOM: 0px"><font style="FONT-FAMILY: Times New Roman" size="2">The adoption of this
accounting standard did not have a material impact on our results
of operations for the years ended December 31, 2012 and 2011,
or on our financial positions as of December 31, 2012 and
2011. Our results of operations for the year ended
December 31, 2010 also would not have been materially impacted
if the accounting standard had been adopted on January 1,
2010.</font></p>
<p style="MARGIN-TOP: 12px; MARGIN-BOTTOM: 0px"><font style="FONT-FAMILY: Times New Roman" size="2">In January 2011, the
Company adopted ASC Topic 605-28, <i>Milestone Method</i>. Under
this guidance, we recognize revenue contingent upon the achievement
of a substantive milestone in its entirety in the period the
milestone is achieved. Substantive milestone payments are
recognized upon achievement of the milestone only if all of the
following conditions are met:</font></p>
<p style="MARGIN-TOP: 0px; MARGIN-BOTTOM: 0px; FONT-SIZE: 6px">
 </p>
<table style="BORDER-COLLAPSE: collapse" border="0" cellspacing="0" cellpadding="0" width="100%">
<tr>
<td width="4%"><font size="1"> </font></td>
<td valign="top" width="3%" align="left"><font style="FONT-FAMILY: Times New Roman" size="2">•</font></td>
<td valign="top" width="1%"><font size="1"> </font></td>
<td valign="top" align="left">
<p align="left"><font style="FONT-FAMILY: Times New Roman" size="2">The milestone payments are non-refundable;</font></p>
</td>
</tr>
</table>
<p style="MARGIN-TOP: 0px; MARGIN-BOTTOM: 0px; FONT-SIZE: 6px">
 </p>
<table style="BORDER-COLLAPSE: collapse" border="0" cellspacing="0" cellpadding="0" width="100%">
<tr>
<td width="4%"><font size="1"> </font></td>
<td valign="top" width="3%" align="left"><font style="FONT-FAMILY: Times New Roman" size="2">•</font></td>
<td valign="top" width="1%"><font size="1"> </font></td>
<td valign="top" align="left">
<p align="left"><font style="FONT-FAMILY: Times New Roman" size="2">Achievement of the milestone involves a degree of risk and was
not reasonably assured at the inception of the
arrangement;</font></p>
</td>
</tr>
</table>
<p style="MARGIN-TOP: 0px; MARGIN-BOTTOM: 0px; FONT-SIZE: 6px">
 </p>
<table style="BORDER-COLLAPSE: collapse" border="0" cellspacing="0" cellpadding="0" width="100%">
<tr>
<td width="4%"><font size="1"> </font></td>
<td valign="top" width="3%" align="left"><font style="FONT-FAMILY: Times New Roman" size="2">•</font></td>
<td valign="top" width="1%"><font size="1"> </font></td>
<td valign="top" align="left">
<p align="left"><font style="FONT-FAMILY: Times New Roman" size="2">Substantive effort on our part is involved in achieving the
milestone;</font></p>
</td>
</tr>
</table>
<p style="MARGIN-TOP: 0px; MARGIN-BOTTOM: 0px; FONT-SIZE: 6px">
 </p>
<table style="BORDER-COLLAPSE: collapse" border="0" cellspacing="0" cellpadding="0" width="100%">
<tr>
<td width="4%"><font size="1"> </font></td>
<td valign="top" width="3%" align="left"><font style="FONT-FAMILY: Times New Roman" size="2">•</font></td>
<td valign="top" width="1%"><font size="1"> </font></td>
<td valign="top" align="left">
<p align="left"><font style="FONT-FAMILY: Times New Roman" size="2">The amount of the milestone payment is reasonable in relation
to the effort expended or the risk associated with achievement of
the milestone; and</font></p>
</td>
</tr>
</table>
<p style="MARGIN-TOP: 0px; MARGIN-BOTTOM: 0px; FONT-SIZE: 6px">
 </p>
<table style="BORDER-COLLAPSE: collapse" border="0" cellspacing="0" cellpadding="0" width="100%">
<tr>
<td width="4%"><font size="1"> </font></td>
<td valign="top" width="3%" align="left"><font style="FONT-FAMILY: Times New Roman" size="2">•</font></td>
<td valign="top" width="1%"><font size="1"> </font></td>
<td valign="top" align="left">
<p align="left"><font style="FONT-FAMILY: Times New Roman" size="2">A reasonable amount of time passes between the up-front license
payment and the first milestone payment, as well as between each
subsequent milestone payment.</font></p>
</td>
</tr>
</table>
<p style="MARGIN-TOP: 0px; MARGIN-BOTTOM: 0px"><font style="FONT-FAMILY: Times New Roman" size="2">Determination as to whether
a payment meets the aforementioned conditions involves
management’s judgment. If any of these conditions are not
met, the resulting payment would not be considered a substantive
milestone, and therefore, the resulting payment would be considered
part of the consideration for the single unit of accounting and be
recognized as revenues in accordance with the revenue models
described above. In addition, the determination that one such
payment was not a substantive milestone could prevent us from
concluding that subsequent milestone payments were substantive
milestones and, as a result, any additional milestone payments
could also be considered part of the consideration for the single
unit of accounting and would be recognized as revenue as such
performance obligations are performed under either the proportional
performance or straight-line methods, as applicable.</font></p>
</div>
<div>
<p style="TEXT-TRANSFORM: none; MARGIN-TOP: 0pt; TEXT-INDENT: 0px; LETTER-SPACING: normal; FONT: 10pt 'Times New Roman'; WHITE-SPACE: normal; MARGIN-BOTTOM: 0pt; COLOR: rgb(0,0,0); WORD-SPACING: 0px; -webkit-text-stroke-width: 0px">
<font style="FONT-FAMILY: Times New Roman" size="2"><b>7.
Collaborations and License Agreements</b></font></p>
<p style="TEXT-TRANSFORM: none; MARGIN-TOP: 6pt; TEXT-INDENT: 0px; LETTER-SPACING: normal; FONT: 10pt 'Times New Roman'; WHITE-SPACE: normal; MARGIN-BOTTOM: 0pt; COLOR: rgb(0,0,0); WORD-SPACING: 0px; -webkit-text-stroke-width: 0px">
<font style="FONT-FAMILY: Times New Roman" size="2"><i>Takeda
Pharmaceutical Company Limited</i></font></p>
<p style="TEXT-TRANSFORM: none; MARGIN-TOP: 6pt; TEXT-INDENT: 0px; LETTER-SPACING: normal; FONT: 10pt 'Times New Roman'; WHITE-SPACE: normal; MARGIN-BOTTOM: 0pt; COLOR: rgb(0,0,0); WORD-SPACING: 0px; -webkit-text-stroke-width: 0px">
<font style="FONT-FAMILY: Times New Roman" size="2">On
February 25, 2011, ITI entered into a license and
collaboration agreement with Takeda Pharmaceutical Company Limited
(Takeda) to develop and commercialize selective phosphodiesterase
type 1 (PDE1) inhibitors, discovered by ITI, for the treatment of
cognitive impairment associated with schizophrenia. This agreement
is targeted worldwide, but ITI has retained the option to
co-promote with Takeda in the United States.</font></p>
<p style="TEXT-TRANSFORM: none; MARGIN-TOP: 12pt; TEXT-INDENT: 0px; LETTER-SPACING: normal; FONT: 10pt 'Times New Roman'; WHITE-SPACE: normal; MARGIN-BOTTOM: 0pt; COLOR: rgb(0,0,0); WORD-SPACING: 0px; -webkit-text-stroke-width: 0px">
<font style="FONT-FAMILY: Times New Roman" size="2">Upon execution
of the agreement, Takeda made a nonrefundable payment to the
Company. ITI is eligible to receive payments of approximately
$500 million in the aggregate upon achievement of certain
development milestones and up to an additional $250 million in
the aggregate upon achievement of certain sales-based milestones,
along with tiered royalty payments based on net sales by Takeda.
Takeda will be solely responsible for development, manufacturing
and commercialization of PDE1 inhibitors. ITI and Takeda have
formed a joint steering committee to coordinate and oversee
activities on which the two companies collaborate under the
agreement. ITI has the right, but not the obligation, to sit on the
joint steering committee. There are no performance, cancellation,
termination, or refund provisions in the arrangement that contain
material financial consequences to the Company.</font></p>
<p style="TEXT-TRANSFORM: none; MARGIN-TOP: 12pt; TEXT-INDENT: 0px; LETTER-SPACING: normal; FONT: 10pt 'Times New Roman'; WHITE-SPACE: normal; MARGIN-BOTTOM: 0pt; COLOR: rgb(0,0,0); WORD-SPACING: 0px; -webkit-text-stroke-width: 0px">
<font style="FONT-FAMILY: Times New Roman" size="2">The Company
evaluates all deliverables within an arrangement to determine
whether or not they provide value on a stand-alone basis. The
Company identified two deliverables in the arrangement, (1) a
license to the Company’s intellectual property, and
(2) research and development services (“R&D
services”). Based on this evaluation, the deliverables were
separated into units of accounting. The arrangement consideration
that is fixed or determinable at the inception of the arrangement
was allocated to the separate units of accounting based on their
relative selling prices. We may exercise significant judgment in
determining whether a deliverable is a separate unit of accounting,
as well as in estimating the selling prices of such unit of
accounting.</font></p>
<p style="TEXT-TRANSFORM: none; MARGIN-TOP: 12pt; TEXT-INDENT: 0px; LETTER-SPACING: normal; FONT: 10pt 'Times New Roman'; WHITE-SPACE: normal; MARGIN-BOTTOM: 0pt; COLOR: rgb(0,0,0); WORD-SPACING: 0px; -webkit-text-stroke-width: 0px">
<font style="FONT-FAMILY: Times New Roman" size="2">To determine
the selling price of a separate deliverable, we use the hierarchy
as prescribed in ASC Topic 605-25 based on vendor-specific
objective evidence (VSOE), third-party evidence (TPE) or best
estimate of selling price (BESP). VSOE is based on the price
charged when the element is sold separately and is the price
actually charged for that deliverable. TPE is determined based on
third-party evidence for a similar deliverable when sold separately
and BESP is the price at which we would transact a sale if the
elements of collaboration and license arrangements were sold on a
stand-alone basis. We were not able to establish VSOE or TPE for
the deliverables within collaboration and license arrangements, as
we do not have a history of entering into such arrangements or
selling the individual deliverables within such arrangements
separately. In addition, there may be significant differentiation
in these arrangements, which indicates that comparable third-party
pricing may not be available. We determined that the selling price
for the deliverables within collaboration and license arrangements
should be determined using BESP. The process for determining BESP
involved significant judgment on our part and included
consideration of multiple factors such as prices offered by third
parties, estimated direct expenses and other costs, and available
data. The Company was able to determine the BESP for the license
and R&D services, and thus, allocated the consideration in this
arrangement based on relative selling price of each deliverable.
The revenue allocated to the license was recognized upon the
execution of the agreement as Takeda obtained the right to use the
license upon execution of the agreement. The revenue for R&D
services is being recognized over the estimated service period of 3
years.</font></p>
<p style="TEXT-TRANSFORM: none; MARGIN-TOP: 12pt; TEXT-INDENT: 0px; LETTER-SPACING: normal; FONT: 10pt 'Times New Roman'; WHITE-SPACE: normal; MARGIN-BOTTOM: 0pt; COLOR: rgb(0,0,0); WORD-SPACING: 0px; -webkit-text-stroke-width: 0px">
<font style="FONT-FAMILY: Times New Roman" size="2">During the
years ended December 31, 2012 and December 31, 2011, the
Company recognized revenue of $3.1 million and
$22.3 million under this agreement, respectively. At
December 31, 2012 and 2011, $1.7 million and
$3.3 million of revenue was deferred under this
agreement.</font></p>
<p style="TEXT-TRANSFORM: none; MARGIN-TOP: 0pt; TEXT-INDENT: 0px; LETTER-SPACING: normal; FONT: 12pt 'Times New Roman'; WHITE-SPACE: normal; MARGIN-BOTTOM: 0pt; COLOR: rgb(0,0,0); WORD-SPACING: 0px; -webkit-text-stroke-width: 0px">
<font style="FONT-FAMILY: Times New Roman" size="2"> </font></p>
<p style="TEXT-TRANSFORM: none; MARGIN-TOP: 0pt; TEXT-INDENT: 0px; LETTER-SPACING: normal; FONT: 10pt 'Times New Roman'; WHITE-SPACE: normal; MARGIN-BOTTOM: 0pt; COLOR: rgb(0,0,0); WORD-SPACING: 0px; -webkit-text-stroke-width: 0px">
<font style="FONT-FAMILY: Times New Roman" size="2">Beginning in
2003, the Company entered into several cooperative agreements and
grants with the U.S. Army and the National Institutes of Health.
Under these research agreements, the Company uses its patented
technology to examine and characterize the effects of various
agents and drugs on the signaling pathways in the brain and the
biochemical mechanisms associated with various diseases of the
brain. These agreements were originally from one to three years in
length. The Company has not received any funding from these
agreements since 2010. For the years ended December 31, 2012
and 2011, the Company recognized revenue of approximately
$0 million and $1.03 million, respectively.</font></p>
<p style="TEXT-TRANSFORM: none; MARGIN-TOP: 12pt; TEXT-INDENT: 0px; LETTER-SPACING: normal; FONT: 10pt 'Times New Roman'; WHITE-SPACE: normal; MARGIN-BOTTOM: 0pt; COLOR: rgb(0,0,0); WORD-SPACING: 0px; -webkit-text-stroke-width: 0px">
<font style="FONT-FAMILY: Times New Roman" size="2">In
May 2002, the Company entered into a license agreement (the
License) and research agreement with a university. Under the
provisions of the License, the Company is entitled to use this
organization’s patented technology and other intellectual
property relating to diagnosis and treatment of central nervous
system disorders.</font></p>
<p style="TEXT-TRANSFORM: none; MARGIN-TOP: 12pt; TEXT-INDENT: 0px; LETTER-SPACING: normal; FONT: 10pt 'Times New Roman'; WHITE-SPACE: normal; MARGIN-BOTTOM: 0pt; COLOR: rgb(0,0,0); WORD-SPACING: 0px; -webkit-text-stroke-width: 0px">
<font style="FONT-FAMILY: Times New Roman" size="2">The License
expires upon expiration of the patent rights or 15 years subsequent
to the first sale of products developed through this License. The
Company is required to make future milestone payments for
initiation of clinical trials and approval of a New Drug
Application (NDA). Should the Company commercialize the technology
related to this License, the Company would be required to make
royalty payments, and would also be required to pay fees under any
sublicense agreements with third parties.</font></p>
<p style="TEXT-TRANSFORM: none; MARGIN-TOP: 12pt; TEXT-INDENT: 0px; LETTER-SPACING: normal; FONT: 10pt 'Times New Roman'; WHITE-SPACE: normal; MARGIN-BOTTOM: 0pt; COLOR: rgb(0,0,0); WORD-SPACING: 0px; -webkit-text-stroke-width: 0px">
<font style="FONT-FAMILY: Times New Roman" size="2">In connection
with the License, the Company issued 800,000 shares of common stock
to the organization. Upon issuance of the shares, the Company
recorded the estimated fair value of the shares issued,
approximately $120,000, as research and development
expense.</font></p>
<p style="TEXT-TRANSFORM: none; MARGIN-TOP: 12pt; TEXT-INDENT: 0px; LETTER-SPACING: normal; FONT: 10pt 'Times New Roman'; WHITE-SPACE: normal; MARGIN-BOTTOM: 0pt; COLOR: rgb(0,0,0); WORD-SPACING: 0px; -webkit-text-stroke-width: 0px">
<font style="FONT-FAMILY: Times New Roman" size="2">In addition,
the Company is required to use at least $1 million annually of
its resources for the development and commercialization of the
technology until the Company submits a NDA. The Company met its
spending requirements in 2012, 2011 and 2010. There were no other
payments made or required for the years ended December 31,
2012 and 2011.</font></p>
<p style="TEXT-TRANSFORM: none; MARGIN-TOP: 12pt; TEXT-INDENT: 0px; LETTER-SPACING: normal; FONT: 10pt 'Times New Roman'; WHITE-SPACE: normal; MARGIN-BOTTOM: 0pt; COLOR: rgb(0,0,0); WORD-SPACING: 0px; -webkit-text-stroke-width: 0px">
<font style="FONT-FAMILY: Times New Roman" size="2">In
May 2005, the Company entered into a license agreement (the
Agreement) with a company for the use of this company’s
patented compounds. ITI intends to test and use the compounds in
its research and development program as candidates for potential
new drugs.</font></p>
<p style="TEXT-TRANSFORM: none; MARGIN-TOP: 12pt; TEXT-INDENT: 0px; LETTER-SPACING: normal; FONT: 10pt 'Times New Roman'; WHITE-SPACE: normal; MARGIN-BOTTOM: 0pt; COLOR: rgb(0,0,0); WORD-SPACING: 0px; -webkit-text-stroke-width: 0px">
<font style="FONT-FAMILY: Times New Roman" size="2">The Agreement
expires on the later of 10 years after the first commercial sale of
a product developed using the licensed compound or upon expiration
of the patent rights. The Company is required to make future
milestone payments for commencement of certain clinical trials and
filings with the U.S. Food and Drug Administration. Should the
Company sell products covered by the Agreement, the Company would
be required to make royalty payments. There were no payments under
this Agreement for the years ended December 31, 2012 and
2011.</font></p>
</div>
-1.63
11215077
<div>
<p style="MARGIN-TOP: 0px; MARGIN-BOTTOM: 0px"><font style="FONT-FAMILY: Times New Roman" size="2">Information regarding the
stock options activity including employees, directors and
non-employees as of December 31, 2012, and changes during the
year then ended, are summarized as follows:</font></p>
<p style="MARGIN-TOP: 0px; MARGIN-BOTTOM: 0px; FONT-SIZE: 12px">
 </p>
<table style="BORDER-COLLAPSE: collapse" border="0" cellspacing="0" cellpadding="0" width="84%" align="center">
<tr>
<td width="67%"></td>
<td valign="bottom" width="5%"></td>
<td></td>
<td></td>
<td></td>
<td valign="bottom" width="5%"></td>
<td></td>
<td></td>
<td></td>
<td valign="bottom" width="5%"></td>
<td></td>
<td></td>
<td></td>
</tr>
<tr>
<td valign="bottom"><font size="1"> </font></td>
<td valign="bottom"><font size="1">  </font></td>
<td style="BORDER-BOTTOM: #000000 1px solid" valign="bottom" colspan="2" align="center"><font style="FONT-FAMILY: Times New Roman" size="1"><b>Number of<br />
Shares</b></font></td>
<td valign="bottom"><font size="1"> </font></td>
<td valign="bottom"><font size="1"> </font></td>
<td style="BORDER-BOTTOM: #000000 1px solid" valign="bottom" colspan="2" align="center"><font style="FONT-FAMILY: Times New Roman" size="1"><b>Weighted-<br />
Average</b></font><br />
<font style="FONT-FAMILY: Times New Roman" size="1"><b>Exercise<br />
Price</b></font></td>
<td valign="bottom"><font size="1"> </font></td>
<td valign="bottom"><font size="1">  </font></td>
<td style="BORDER-BOTTOM: #000000 1px solid" valign="bottom" colspan="2" align="center"><font style="FONT-FAMILY: Times New Roman" size="1"><b>Weighted-<br />
Average<br />
Contractual<br />
Life</b></font></td>
<td valign="bottom"><font size="1"> </font></td>
</tr>
<tr>
<td height="8"></td>
<td height="8" colspan="4"></td>
<td height="8" colspan="4"></td>
<td height="8" colspan="4"></td>
</tr>
<tr bgcolor="#CCEEFF">
<td valign="top">
<p style="TEXT-INDENT: -1em; MARGIN-LEFT: 1em"><font style="FONT-FAMILY: Times New Roman" size="2">Outstanding at
December 31, 2011</font></p>
</td>
<td valign="bottom"><font size="1">  </font></td>
<td valign="bottom"><font style="FONT-FAMILY: Times New Roman" size="2"> </font></td>
<td valign="bottom" align="right"><font style="FONT-FAMILY: Times New Roman" size="2">3,175,567</font></td>
<td valign="bottom" nowrap="nowrap"><font style="FONT-FAMILY: Times New Roman" size="2">  </font></td>
<td valign="bottom"><font size="1"> </font></td>
<td valign="bottom"><font style="FONT-FAMILY: Times New Roman" size="2">$</font></td>
<td valign="bottom" align="right"><font style="FONT-FAMILY: Times New Roman" size="2">0.61</font></td>
<td valign="bottom" nowrap="nowrap"><font style="FONT-FAMILY: Times New Roman" size="2">  </font></td>
<td valign="bottom"><font size="1">  </font></td>
<td valign="bottom"><font style="FONT-FAMILY: Times New Roman" size="2"> </font></td>
<td valign="bottom" align="right"><font style="FONT-FAMILY: Times New Roman" size="2">5.0 years</font></td>
<td valign="bottom" nowrap="nowrap"><font style="FONT-FAMILY: Times New Roman" size="2">  </font></td>
</tr>
<tr>
<td valign="top">
<p style="TEXT-INDENT: -1em; MARGIN-LEFT: 3em"><font style="FONT-FAMILY: Times New Roman" size="2">Options granted</font></p>
</td>
<td valign="bottom"><font size="1">  </font></td>
<td valign="bottom"><font style="FONT-FAMILY: Times New Roman" size="2"> </font></td>
<td valign="bottom" align="right"><font style="FONT-FAMILY: Times New Roman" size="2">322,200</font></td>
<td valign="bottom" nowrap="nowrap"><font style="FONT-FAMILY: Times New Roman" size="2">  </font></td>
<td valign="bottom"><font size="1"> </font></td>
<td valign="bottom"><font style="FONT-FAMILY: Times New Roman" size="2"> </font></td>
<td valign="bottom" align="right"><font style="FONT-FAMILY: Times New Roman" size="2">1.42</font></td>
<td valign="bottom" nowrap="nowrap"><font style="FONT-FAMILY: Times New Roman" size="2">  </font></td>
<td valign="bottom"><font size="1">  </font></td>
<td valign="bottom"><font style="FONT-FAMILY: Times New Roman" size="2"> </font></td>
<td valign="bottom" align="right"><font style="FONT-FAMILY: Times New Roman" size="2">6.3 years</font></td>
<td valign="bottom" nowrap="nowrap"><font style="FONT-FAMILY: Times New Roman" size="2">  </font></td>
</tr>
<tr bgcolor="#CCEEFF">
<td valign="top">
<p style="TEXT-INDENT: -1em; MARGIN-LEFT: 3em"><font style="FONT-FAMILY: Times New Roman" size="2">Options
exercised</font></p>
</td>
<td valign="bottom"><font size="1">  </font></td>
<td valign="bottom"><font style="FONT-FAMILY: Times New Roman" size="2"> </font></td>
<td valign="bottom" align="right"><font style="FONT-FAMILY: Times New Roman" size="2">(66,540</font></td>
<td valign="bottom" nowrap="nowrap"><font style="FONT-FAMILY: Times New Roman" size="2">) </font></td>
<td valign="bottom"><font size="1"> </font></td>
<td valign="bottom"><font style="FONT-FAMILY: Times New Roman" size="2"> </font></td>
<td valign="bottom" align="right"><font style="FONT-FAMILY: Times New Roman" size="2">0.47</font></td>
<td valign="bottom" nowrap="nowrap"><font style="FONT-FAMILY: Times New Roman" size="2">  </font></td>
<td valign="bottom"><font size="1">  </font></td>
<td valign="bottom"><font style="FONT-FAMILY: Times New Roman" size="2"> </font></td>
<td valign="bottom" align="right"><font style="FONT-FAMILY: Times New Roman" size="2">3.0 years</font></td>
<td valign="bottom" nowrap="nowrap"><font style="FONT-FAMILY: Times New Roman" size="2">  </font></td>
</tr>
<tr>
<td valign="top">
<p style="TEXT-INDENT: -1em; MARGIN-LEFT: 3em"><font style="FONT-FAMILY: Times New Roman" size="2">Options canceled or
expired</font></p>
</td>
<td valign="bottom"><font size="1">  </font></td>
<td valign="bottom"><font style="FONT-FAMILY: Times New Roman" size="2"> </font></td>
<td valign="bottom" align="right"><font style="FONT-FAMILY: Times New Roman" size="2">(17,000</font></td>
<td valign="bottom" nowrap="nowrap"><font style="FONT-FAMILY: Times New Roman" size="2">) </font></td>
<td valign="bottom"><font size="1"> </font></td>
<td valign="bottom"><font style="FONT-FAMILY: Times New Roman" size="2"> </font></td>
<td valign="bottom" align="right"><font style="FONT-FAMILY: Times New Roman" size="2">1.37</font></td>
<td valign="bottom" nowrap="nowrap"><font style="FONT-FAMILY: Times New Roman" size="2">  </font></td>
<td valign="bottom"><font size="1">  </font></td>
<td valign="bottom"><font style="FONT-FAMILY: Times New Roman" size="2"> </font></td>
<td valign="bottom" align="right"><font style="FONT-FAMILY: Times New Roman" size="2">7.9 years</font></td>
<td valign="bottom" nowrap="nowrap"><font style="FONT-FAMILY: Times New Roman" size="2">  </font></td>
</tr>
<tr style="FONT-SIZE: 1px">
<td valign="bottom"></td>
<td valign="bottom">  </td>
<td valign="bottom">
<p style="BORDER-TOP: #000000 1px solid"> </p>
</td>
<td valign="bottom">
<p style="BORDER-TOP: #000000 1px solid"> </p>
</td>
<td> </td>
<td valign="bottom"> </td>
<td valign="bottom">
<p style="BORDER-TOP: #000000 1px solid"> </p>
</td>
<td valign="bottom">
<p style="BORDER-TOP: #000000 1px solid"> </p>
</td>
<td> </td>
<td valign="bottom">  </td>
<td valign="bottom"></td>
<td valign="bottom"></td>
<td valign="bottom"></td>
</tr>
<tr bgcolor="#CCEEFF">
<td valign="top">
<p style="TEXT-INDENT: -1em; MARGIN-LEFT: 1em"><font style="FONT-FAMILY: Times New Roman" size="2">Outstanding at
December 31, 2012</font></p>
</td>
<td valign="bottom"><font size="1">  </font></td>
<td valign="bottom"><font style="FONT-FAMILY: Times New Roman" size="2"> </font></td>
<td valign="bottom" align="right"><font style="FONT-FAMILY: Times New Roman" size="2">3,414,227</font></td>
<td valign="bottom" nowrap="nowrap"><font style="FONT-FAMILY: Times New Roman" size="2">  </font></td>
<td valign="bottom"><font size="1"> </font></td>
<td valign="bottom"><font style="FONT-FAMILY: Times New Roman" size="2"> </font></td>
<td valign="bottom" align="right"><font style="FONT-FAMILY: Times New Roman" size="2">0.66</font></td>
<td valign="bottom" nowrap="nowrap"><font style="FONT-FAMILY: Times New Roman" size="2">  </font></td>
<td valign="bottom"><font size="1">  </font></td>
<td valign="bottom"><font style="FONT-FAMILY: Times New Roman" size="2"> </font></td>
<td valign="bottom" align="right"><font style="FONT-FAMILY: Times New Roman" size="2">4.4 years</font></td>
<td valign="bottom" nowrap="nowrap"><font style="FONT-FAMILY: Times New Roman" size="2">  </font></td>
</tr>
<tr style="FONT-SIZE: 1px">
<td valign="bottom"></td>
<td valign="bottom">  </td>
<td valign="bottom">
<p style="BORDER-TOP: #000000 1px solid"> </p>
</td>
<td valign="bottom">
<p style="BORDER-TOP: #000000 1px solid"> </p>
</td>
<td> </td>
<td valign="bottom"> </td>
<td valign="bottom">
<p style="BORDER-TOP: #000000 1px solid"> </p>
</td>
<td valign="bottom">
<p style="BORDER-TOP: #000000 1px solid"> </p>
</td>
<td> </td>
<td valign="bottom">  </td>
<td valign="bottom"></td>
<td valign="bottom"></td>
<td valign="bottom"></td>
</tr>
<tr>
<td valign="top">
<p style="TEXT-INDENT: -1em; MARGIN-LEFT: 3em"><font style="FONT-FAMILY: Times New Roman" size="2">Vested or expected to vest
at December 31, 2012</font></p>
</td>
<td valign="bottom"><font size="1">  </font></td>
<td valign="bottom"><font style="FONT-FAMILY: Times New Roman" size="2"> </font></td>
<td valign="bottom" align="right"><font style="FONT-FAMILY: Times New Roman" size="2">3,416,227</font></td>
<td valign="bottom" nowrap="nowrap"><font style="FONT-FAMILY: Times New Roman" size="2">  </font></td>
<td valign="bottom"><font size="1"> </font></td>
<td valign="bottom"><font style="FONT-FAMILY: Times New Roman" size="2"> </font></td>
<td valign="bottom" align="right"><font style="FONT-FAMILY: Times New Roman" size="2">0.69</font></td>
<td valign="bottom" nowrap="nowrap"><font style="FONT-FAMILY: Times New Roman" size="2">  </font></td>
<td valign="bottom"><font size="1">  </font></td>
<td valign="bottom"></td>
<td valign="bottom"></td>
<td valign="bottom"></td>
</tr>
<tr style="FONT-SIZE: 1px">
<td valign="bottom"></td>
<td valign="bottom">  </td>
<td valign="bottom">
<p style="BORDER-TOP: #000000 3px double"> </p>
</td>
<td valign="bottom">
<p style="BORDER-TOP: #000000 3px double"> </p>
</td>
<td> </td>
<td valign="bottom"> </td>
<td valign="bottom">
<p style="BORDER-TOP: #000000 3px double"> </p>
</td>
<td valign="bottom">
<p style="BORDER-TOP: #000000 3px double"> </p>
</td>
<td> </td>
<td valign="bottom">  </td>
<td valign="bottom"></td>
<td valign="bottom"></td>
<td valign="bottom"></td>
</tr>
<tr bgcolor="#CCEEFF">
<td valign="top">
<p style="TEXT-INDENT: -1em; MARGIN-LEFT: 1em"><font style="FONT-FAMILY: Times New Roman" size="2">Exercisable at
December 31, 2012</font></p>
</td>
<td valign="bottom"><font size="1">  </font></td>
<td valign="bottom"><font style="FONT-FAMILY: Times New Roman" size="2"> </font></td>
<td valign="bottom" align="right"><font style="FONT-FAMILY: Times New Roman" size="2">3,151,353</font></td>
<td valign="bottom" nowrap="nowrap"><font style="FONT-FAMILY: Times New Roman" size="2">  </font></td>
<td valign="bottom"><font size="1"> </font></td>
<td valign="bottom"><font style="FONT-FAMILY: Times New Roman" size="2">$</font></td>
<td valign="bottom" align="right"><font style="FONT-FAMILY: Times New Roman" size="2">0.58</font></td>
<td valign="bottom" nowrap="nowrap"><font style="FONT-FAMILY: Times New Roman" size="2">  </font></td>
<td valign="bottom"><font size="1">  </font></td>
<td valign="bottom"><font style="FONT-FAMILY: Times New Roman" size="2"> </font></td>
<td valign="bottom" align="right"><font style="FONT-FAMILY: Times New Roman" size="2">3.9 years</font></td>
<td valign="bottom" nowrap="nowrap"><font style="FONT-FAMILY: Times New Roman" size="2">  </font></td>
</tr>
<tr style="FONT-SIZE: 1px">
<td valign="bottom"></td>
<td valign="bottom">  </td>
<td valign="bottom">
<p style="BORDER-TOP: #000000 3px double"> </p>
</td>
<td valign="bottom">
<p style="BORDER-TOP: #000000 3px double"> </p>
</td>
<td> </td>
<td valign="bottom"> </td>
<td valign="bottom">
<p style="BORDER-TOP: #000000 3px double"> </p>
</td>
<td valign="bottom">
<p style="BORDER-TOP: #000000 3px double"> </p>
</td>
<td> </td>
<td valign="bottom">  </td>
<td valign="bottom"></td>
<td valign="bottom"></td>
<td valign="bottom"></td>
</tr>
</table>
</div>
<div>
<p style="MARGIN-TOP: 18px; MARGIN-BOTTOM: 0px"><font style="FONT-FAMILY: Times New Roman" size="2"><b>Comprehensive Income
(Loss)</b></font></p>
<p style="MARGIN-TOP: 6px; MARGIN-BOTTOM: 0px"><font style="FONT-FAMILY: Times New Roman" size="2">ASC 220-10, <i>Reporting
Comprehensive Income</i>, requires the presentation of the
comprehensive income or loss and its components as part of the
financial statements. For the years ended December 31, 2012,
2011 and 2010, the Company’s net (loss) income equals
comprehensive (loss) income.</font></p>
</div>
0.797
0.08
<div>
<p style="MARGIN-TOP: 6px; MARGIN-BOTTOM: 0px"><font style="FONT-FAMILY: Times New Roman" size="2">Property and equipment
consist of the following:</font></p>
<p style="MARGIN-TOP: 0px; MARGIN-BOTTOM: 0px; FONT-SIZE: 12px">
 </p>
<table style="BORDER-COLLAPSE: collapse" border="0" cellspacing="0" cellpadding="0" width="76%" align="center">
<tr>
<td width="72%"></td>
<td valign="bottom" width="8%"></td>
<td></td>
<td></td>
<td></td>
<td valign="bottom" width="8%"></td>
<td></td>
<td></td>
<td></td>
</tr>
<tr>
<td valign="bottom"><font size="1"> </font></td>
<td valign="bottom"><font size="1">  </font></td>
<td valign="bottom" colspan="6" align="center"><font style="FONT-FAMILY: Times New Roman" size="1"><b>December 31</b></font></td>
<td valign="bottom"><font size="1"> </font></td>
</tr>
<tr>
<td valign="bottom"><font size="1"> </font></td>
<td valign="bottom"><font size="1">  </font></td>
<td style="BORDER-BOTTOM: #000000 1px solid" valign="bottom" colspan="2" align="center"><font style="FONT-FAMILY: Times New Roman" size="1"><b>2012</b></font></td>
<td valign="bottom"><font size="1"> </font></td>
<td valign="bottom"><font size="1"> </font></td>
<td style="BORDER-BOTTOM: #000000 1px solid" valign="bottom" colspan="2" align="center"><font style="FONT-FAMILY: Times New Roman" size="1"><b>2011</b></font></td>
<td valign="bottom"><font size="1"> </font></td>
</tr>
<tr>
<td height="8"></td>
<td height="8" colspan="4"></td>
<td height="8" colspan="4"></td>
</tr>
<tr bgcolor="#CCEEFF">
<td valign="top">
<p style="TEXT-INDENT: -1em; MARGIN-LEFT: 1em"><font style="FONT-FAMILY: Times New Roman" size="2">Computer
equipment</font></p>
</td>
<td valign="bottom"><font size="1">  </font></td>
<td valign="bottom"><font style="FONT-FAMILY: Times New Roman" size="2"><b>$</b></font></td>
<td valign="bottom" align="right"><font style="FONT-FAMILY: Times New Roman" size="2"><b>92,318</b></font></td>
<td valign="bottom" nowrap="nowrap"><font style="FONT-FAMILY: Times New Roman" size="2"><b>  </b></font></td>
<td valign="bottom"><font size="1"> </font></td>
<td valign="bottom"><font style="FONT-FAMILY: Times New Roman" size="2">$</font></td>
<td valign="bottom" align="right"><font style="FONT-FAMILY: Times New Roman" size="2">107,940</font></td>
<td valign="bottom" nowrap="nowrap"><font style="FONT-FAMILY: Times New Roman" size="2">  </font></td>
</tr>
<tr>
<td valign="top">
<p style="TEXT-INDENT: -1em; MARGIN-LEFT: 1em"><font style="FONT-FAMILY: Times New Roman" size="2">Furniture and
fixtures</font></p>
</td>
<td valign="bottom"><font size="1">  </font></td>
<td valign="bottom"><font style="FONT-FAMILY: Times New Roman" size="2"><b> </b></font></td>
<td valign="bottom" align="right"><font style="FONT-FAMILY: Times New Roman" size="2"><b>42,736</b></font></td>
<td valign="bottom" nowrap="nowrap"><font style="FONT-FAMILY: Times New Roman" size="2"><b>  </b></font></td>
<td valign="bottom"><font size="1"> </font></td>
<td valign="bottom"><font style="FONT-FAMILY: Times New Roman" size="2"> </font></td>
<td valign="bottom" align="right"><font style="FONT-FAMILY: Times New Roman" size="2">42,736</font></td>
<td valign="bottom" nowrap="nowrap"><font style="FONT-FAMILY: Times New Roman" size="2">  </font></td>
</tr>
<tr bgcolor="#CCEEFF">
<td valign="top">
<p style="TEXT-INDENT: -1em; MARGIN-LEFT: 1em"><font style="FONT-FAMILY: Times New Roman" size="2">Scientific
equipment</font></p>
</td>
<td valign="bottom"><font size="1">  </font></td>
<td valign="bottom"><font style="FONT-FAMILY: Times New Roman" size="2"><b> </b></font></td>
<td valign="bottom" align="right"><font style="FONT-FAMILY: Times New Roman" size="2"><b>2,824,076</b></font></td>
<td valign="bottom" nowrap="nowrap"><font style="FONT-FAMILY: Times New Roman" size="2"><b>  </b></font></td>
<td valign="bottom"><font size="1"> </font></td>
<td valign="bottom"><font style="FONT-FAMILY: Times New Roman" size="2"> </font></td>
<td valign="bottom" align="right"><font style="FONT-FAMILY: Times New Roman" size="2">2,786,539</font></td>
<td valign="bottom" nowrap="nowrap"><font style="FONT-FAMILY: Times New Roman" size="2">  </font></td>
</tr>
<tr>
<td valign="top">
<p style="TEXT-INDENT: -1em; MARGIN-LEFT: 1em"><font style="FONT-FAMILY: Times New Roman" size="2">Leasehold
improvements</font></p>
</td>
<td valign="bottom"><font size="1">  </font></td>
<td valign="bottom"><font style="FONT-FAMILY: Times New Roman" size="2"><b> </b></font></td>
<td valign="bottom" align="right"><font style="FONT-FAMILY: Times New Roman" size="2"><b>319,553</b></font></td>
<td valign="bottom" nowrap="nowrap"><font style="FONT-FAMILY: Times New Roman" size="2"><b>  </b></font></td>
<td valign="bottom"><font size="1"> </font></td>
<td valign="bottom"><font style="FONT-FAMILY: Times New Roman" size="2"> </font></td>
<td valign="bottom" align="right"><font style="FONT-FAMILY: Times New Roman" size="2">319,553</font></td>
<td valign="bottom" nowrap="nowrap"><font style="FONT-FAMILY: Times New Roman" size="2">  </font></td>
</tr>
<tr style="FONT-SIZE: 1px">
<td valign="bottom"></td>
<td valign="bottom">  </td>
<td valign="bottom">
<p style="BORDER-TOP: #000000 1px solid"> </p>
</td>
<td valign="bottom">
<p style="BORDER-TOP: #000000 1px solid"> </p>
</td>
<td> </td>
<td valign="bottom"> </td>
<td valign="bottom">
<p style="BORDER-TOP: #000000 1px solid"> </p>
</td>
<td valign="bottom">
<p style="BORDER-TOP: #000000 1px solid"> </p>
</td>
<td> </td>
</tr>
<tr bgcolor="#CCEEFF">
<td valign="top"></td>
<td valign="bottom"><font size="1">  </font></td>
<td valign="bottom"><font style="FONT-FAMILY: Times New Roman" size="2"><b> </b></font></td>
<td valign="bottom" align="right"><font style="FONT-FAMILY: Times New Roman" size="2"><b>3,278,683</b></font></td>
<td valign="bottom" nowrap="nowrap"><font style="FONT-FAMILY: Times New Roman" size="2"><b>  </b></font></td>
<td valign="bottom"><font size="1"> </font></td>
<td valign="bottom"><font style="FONT-FAMILY: Times New Roman" size="2"> </font></td>
<td valign="bottom" align="right"><font style="FONT-FAMILY: Times New Roman" size="2">3,256,768</font></td>
<td valign="bottom" nowrap="nowrap"><font style="FONT-FAMILY: Times New Roman" size="2">  </font></td>
</tr>
<tr>
<td valign="top">
<p style="TEXT-INDENT: -1em; MARGIN-LEFT: 1em"><font style="FONT-FAMILY: Times New Roman" size="2">Less accumulated
depreciation</font></p>
</td>
<td valign="bottom"><font size="1">  </font></td>
<td valign="bottom"><font style="FONT-FAMILY: Times New Roman" size="2"><b> </b></font></td>
<td valign="bottom" align="right"><font style="FONT-FAMILY: Times New Roman" size="2"><b>(3,220,417</b></font></td>
<td valign="bottom" nowrap="nowrap"><font style="FONT-FAMILY: Times New Roman" size="2"><b>) </b></font></td>
<td valign="bottom"><font size="1"> </font></td>
<td valign="bottom"><font style="FONT-FAMILY: Times New Roman" size="2"> </font></td>
<td valign="bottom" align="right"><font style="FONT-FAMILY: Times New Roman" size="2">(3,189,712</font></td>
<td valign="bottom" nowrap="nowrap"><font style="FONT-FAMILY: Times New Roman" size="2">) </font></td>
</tr>
<tr style="FONT-SIZE: 1px">
<td valign="bottom"></td>
<td valign="bottom">  </td>
<td valign="bottom">
<p style="BORDER-TOP: #000000 1px solid"> </p>
</td>
<td valign="bottom">
<p style="BORDER-TOP: #000000 1px solid"> </p>
</td>
<td> </td>
<td valign="bottom"> </td>
<td valign="bottom">
<p style="BORDER-TOP: #000000 1px solid"> </p>
</td>
<td valign="bottom">
<p style="BORDER-TOP: #000000 1px solid"> </p>
</td>
<td> </td>
</tr>
<tr bgcolor="#CCEEFF">
<td valign="top"></td>
<td valign="bottom"><font size="1">  </font></td>
<td valign="bottom"><font style="FONT-FAMILY: Times New Roman" size="2"><b>$</b></font></td>
<td valign="bottom" align="right"><font style="FONT-FAMILY: Times New Roman" size="2"><b>58,266</b></font></td>
<td valign="bottom" nowrap="nowrap"><font style="FONT-FAMILY: Times New Roman" size="2"><b>  </b></font></td>
<td valign="bottom"><font size="1"> </font></td>
<td valign="bottom"><font style="FONT-FAMILY: Times New Roman" size="2">$</font></td>
<td valign="bottom" align="right"><font style="FONT-FAMILY: Times New Roman" size="2">67,056</font></td>
<td valign="bottom" nowrap="nowrap"><font style="FONT-FAMILY: Times New Roman" size="2">  </font></td>
</tr>
<tr style="FONT-SIZE: 1px">
<td valign="bottom"></td>
<td valign="bottom">  </td>
<td valign="bottom">
<p style="BORDER-TOP: #000000 3px double"> </p>
</td>
<td valign="bottom">
<p style="BORDER-TOP: #000000 3px double"> </p>
</td>
<td> </td>
<td valign="bottom"> </td>
<td valign="bottom">
<p style="BORDER-TOP: #000000 3px double"> </p>
</td>
<td valign="bottom">
<p style="BORDER-TOP: #000000 3px double"> </p>
</td>
<td> </td>
</tr>
</table>
</div>
<div>
<p style="margin-top:12px;margin-bottom:0px"><font style="font-family:Times New Roman" size="2">would be paid when and if
declared by the Board of Directors. At December 31, 2012 and
2011, accrued and unpaid dividends for each respective preferred
stock issuance were as follows:</font></p>
<p style="font-size:12px;margin-top:0px;margin-bottom:0px">
 </p>
<table cellspacing="0" cellpadding="0" width="76%" border="0" style="BORDER-COLLAPSE:COLLAPSE" align="center">
<tr>
<td width="73%"></td>
<td valign="bottom" width="4%"></td>
<td></td>
<td></td>
<td></td>
<td valign="bottom" width="4%"></td>
<td></td>
<td></td>
<td></td>
</tr>
<tr>
<td valign="bottom"><font size="1"> </font></td>
<td valign="bottom"><font size="1">  </font></td>
<td valign="bottom" colspan="6" align="center"><font style="font-family:Times New Roman" size="1"><b>December 31</b></font></td>
<td valign="bottom"><font size="1"> </font></td>
</tr>
<tr>
<td valign="bottom"><font size="1"> </font></td>
<td valign="bottom"><font size="1">  </font></td>
<td valign="bottom" colspan="2" align="center" style="border-bottom:1px solid #000000"><font style="font-family:Times New Roman" size="1"><b>2012</b></font></td>
<td valign="bottom"><font size="1"> </font></td>
<td valign="bottom"><font size="1">  </font></td>
<td valign="bottom" colspan="2" align="center" style="border-bottom:1px solid #000000"><font style="font-family:Times New Roman" size="1"><b>2011</b></font></td>
<td valign="bottom"><font size="1"> </font></td>
</tr>
<tr>
<td height="8"></td>
<td height="8" colspan="4"></td>
<td height="8" colspan="4"></td>
</tr>
<tr bgcolor="#CCEEFF">
<td valign="top">
<p style="margin-left:1.00em; text-indent:-1.00em"><font style="font-family:Times New Roman" size="2">Series A Preferred
Stock</font></p>
</td>
<td valign="bottom"><font size="1">  </font></td>
<td valign="bottom"><font style="font-family:Times New Roman" size="2"><b>$</b></font></td>
<td valign="bottom" align="right"><font style="font-family:Times New Roman" size="2"><b>3,325,667</b></font></td>
<td nowrap="nowrap" valign="bottom"><font style="font-family:Times New Roman" size="2"><b>  </b></font></td>
<td valign="bottom"><font size="1">  </font></td>
<td valign="bottom"><font style="font-family:Times New Roman" size="2">$</font></td>
<td valign="bottom" align="right"><font style="font-family:Times New Roman" size="2">3,029,667</font></td>
<td nowrap="nowrap" valign="bottom"><font style="font-family:Times New Roman" size="2">  </font></td>
</tr>
<tr>
<td valign="top">
<p style="margin-left:1.00em; text-indent:-1.00em"><font style="font-family:Times New Roman" size="2">Series B Preferred
Stock</font></p>
</td>
<td valign="bottom"><font size="1">  </font></td>
<td valign="bottom"><font style="font-family:Times New Roman" size="2"><b> </b></font></td>
<td valign="bottom" align="right"><font style="font-family:Times New Roman" size="2"><b>3,807,154</b></font></td>
<td nowrap="nowrap" valign="bottom"><font style="font-family:Times New Roman" size="2"><b>  </b></font></td>
<td valign="bottom"><font size="1">  </font></td>
<td valign="bottom"><font style="font-family:Times New Roman" size="2"> </font></td>
<td valign="bottom" align="right"><font style="font-family:Times New Roman" size="2">3,346,402</font></td>
<td nowrap="nowrap" valign="bottom"><font style="font-family:Times New Roman" size="2">  </font></td>
</tr>
<tr bgcolor="#CCEEFF">
<td valign="top">
<p style="margin-left:1.00em; text-indent:-1.00em"><font style="font-family:Times New Roman" size="2">Series C Preferred
Stock</font></p>
</td>
<td valign="bottom"><font size="1">  </font></td>
<td valign="bottom"><font style="font-family:Times New Roman" size="2"><b> </b></font></td>
<td valign="bottom" align="right"><font style="font-family:Times New Roman" size="2"><b>4,099,657</b></font></td>
<td nowrap="nowrap" valign="bottom"><font style="font-family:Times New Roman" size="2"><b>  </b></font></td>
<td valign="bottom"><font size="1">  </font></td>
<td valign="bottom"><font style="font-family:Times New Roman" size="2"> </font></td>
<td valign="bottom" align="right"><font style="font-family:Times New Roman" size="2">3,184,484</font></td>
<td nowrap="nowrap" valign="bottom"><font style="font-family:Times New Roman" size="2">  </font></td>
</tr>
<tr style="font-size:1px">
<td valign="bottom"></td>
<td valign="bottom">  </td>
<td valign="bottom">
<p style="border-top:1px solid #000000"> </p>
</td>
<td valign="bottom">
<p style="border-top:1px solid #000000"> </p>
</td>
<td> </td>
<td valign="bottom">  </td>
<td valign="bottom">
<p style="border-top:1px solid #000000"> </p>
</td>
<td valign="bottom">
<p style="border-top:1px solid #000000"> </p>
</td>
<td> </td>
</tr>
<tr>
<td valign="top">
<p style="margin-left:1.00em; text-indent:-1.00em"><font style="font-family:Times New Roman" size="2">Total</font></p>
</td>
<td valign="bottom"><font size="1">  </font></td>
<td valign="bottom"><font style="font-family:Times New Roman" size="2"><b>$</b></font></td>
<td valign="bottom" align="right"><font style="font-family:Times New Roman" size="2"><b>11,232,478</b></font></td>
<td nowrap="nowrap" valign="bottom"><font style="font-family:Times New Roman" size="2"><b>  </b></font></td>
<td valign="bottom"><font size="1">  </font></td>
<td valign="bottom"><font style="font-family:Times New Roman" size="2">$</font></td>
<td valign="bottom" align="right"><font style="font-family:Times New Roman" size="2">9,560,553</font></td>
<td nowrap="nowrap" valign="bottom"><font style="font-family:Times New Roman" size="2">  </font></td>
</tr>
<tr style="font-size:1px">
<td valign="bottom"></td>
<td valign="bottom">  </td>
<td valign="bottom">
<p style="border-top:3px double #000000"> </p>
</td>
<td valign="bottom">
<p style="border-top:3px double #000000"> </p>
</td>
<td> </td>
<td valign="bottom">  </td>
<td valign="bottom">
<p style="border-top:3px double #000000"> </p>
</td>
<td valign="bottom">
<p style="border-top:3px double #000000"> </p>
</td>
<td> </td>
</tr>
</table>
</div>
-1.63
<div>
<p style="TEXT-TRANSFORM: none; MARGIN-TOP: 12pt; TEXT-INDENT: 0px; LETTER-SPACING: normal; FONT: 10pt 'Times New Roman'; WHITE-SPACE: normal; MARGIN-BOTTOM: 0pt; COLOR: rgb(0,0,0); WORD-SPACING: 0px; -webkit-text-stroke-width: 0px">
The following common stock equivalents were excluded in the
calculation of diluted (loss) earnings per share because their
effect would be anti-dilutive as applied to the loss from
operations as of December 31, 2012:</p>
<p style="TEXT-TRANSFORM: none; MARGIN-TOP: 0pt; TEXT-INDENT: 0px; LETTER-SPACING: normal; FONT: 12pt 'Times New Roman'; WHITE-SPACE: normal; MARGIN-BOTTOM: 0pt; COLOR: rgb(0,0,0); WORD-SPACING: 0px; -webkit-text-stroke-width: 0px">
 </p>
<table style="TEXT-TRANSFORM: none; TEXT-INDENT: 0px; LETTER-SPACING: normal; BORDER-COLLAPSE: collapse; FONT-FAMILY: 'Times New Roman'; FONT-SIZE: 10pt; WORD-SPACING: 0px; -webkit-text-stroke-width: 0px" border="0" cellspacing="0" cellpadding="0" width="76%" align="center">
<tr>
<td width="66%"></td>
<td valign="bottom" width="4%"></td>
<td></td>
<td></td>
<td></td>
<td valign="bottom" width="4%"></td>
<td></td>
<td></td>
<td></td>
</tr>
<tr style="FONT-FAMILY: 'Times New Roman'; FONT-SIZE: 8pt">
<td valign="bottom"> </td>
<td valign="bottom">  </td>
<td valign="bottom" colspan="6" align="center"><b>Year Ended
December 31</b></td>
<td valign="bottom"> </td>
</tr>
<tr style="FONT-FAMILY: 'Times New Roman'; FONT-SIZE: 8pt">
<td valign="bottom"> </td>
<td valign="bottom">  </td>
<td style="BORDER-BOTTOM: rgb(0,0,0) 1pt solid" valign="bottom" colspan="2" align="center"><b>2012</b></td>
<td valign="bottom"> </td>
<td valign="bottom">  </td>
<td style="BORDER-BOTTOM: rgb(0,0,0) 1pt solid" valign="bottom" colspan="2" align="center"><b>2011</b></td>
<td valign="bottom"> </td>
</tr>
<tr style="FONT-FAMILY: 'Times New Roman'; FONT-SIZE: 10pt" bgcolor="#CCEEFF">
<td valign="top">
<p style="TEXT-INDENT: -1em; FONT-FAMILY: 'Times New Roman'; MARGIN-LEFT: 1em; FONT-SIZE: 10pt">
Series A, B, and C Preferred Stock</p>
</td>
<td valign="bottom">  </td>
<td valign="bottom"> </td>
<td valign="bottom" align="right">
<b>13,09</b><b>4</b><b>,</b><b>663</b></td>
<td valign="bottom" nowrap="nowrap">  </td>
<td valign="bottom">  </td>
<td valign="bottom"> </td>
<td valign="bottom" align="right">13,094,663</td>
<td valign="bottom" nowrap="nowrap">  </td>
</tr>
<tr style="FONT-FAMILY: 'Times New Roman'; FONT-SIZE: 10pt">
<td valign="top">
<p style="TEXT-INDENT: -1em; FONT-FAMILY: 'Times New Roman'; MARGIN-LEFT: 1em; FONT-SIZE: 10pt">
Stock options</p>
</td>
<td valign="bottom">  </td>
<td valign="bottom"> </td>
<td valign="bottom" align="right">
<b>2,132</b><b>,</b><b>194</b></td>
<td valign="bottom" nowrap="nowrap">  </td>
<td valign="bottom">  </td>
<td valign="bottom"> </td>
<td valign="bottom" align="right">—  </td>
<td valign="bottom" nowrap="nowrap">  </td>
</tr>
<tr style="FONT-FAMILY: 'Times New Roman'; FONT-SIZE: 10pt" bgcolor="#CCEEFF">
<td valign="top">
<p style="TEXT-INDENT: -1em; FONT-FAMILY: 'Times New Roman'; MARGIN-LEFT: 1em; FONT-SIZE: 10pt">
Convertible promissory notes</p>
</td>
<td valign="bottom">  </td>
<td valign="bottom"> </td>
<td valign="bottom" align="right"><b>834,</b><b>106</b></td>
<td valign="bottom" nowrap="nowrap">  </td>
<td valign="bottom">  </td>
<td valign="bottom"> </td>
<td valign="bottom" align="right">—  </td>
<td valign="bottom" nowrap="nowrap">  </td>
</tr>
</table>
<br class="Apple-interchange-newline" /></div>
<div>
<p style="MARGIN-TOP: 18px; MARGIN-BOTTOM: 0px"><font style="FONT-FAMILY: Times New Roman" size="2"><b>3. Property and
Equipment</b></font></p>
<p style="MARGIN-TOP: 6px; MARGIN-BOTTOM: 0px"><font style="FONT-FAMILY: Times New Roman" size="2">Property and equipment
consist of the following:</font></p>
<p style="MARGIN-TOP: 0px; MARGIN-BOTTOM: 0px; FONT-SIZE: 12px">
 </p>
<table style="BORDER-COLLAPSE: collapse" border="0" cellspacing="0" cellpadding="0" width="76%" align="center">
<tr>
<td width="72%"></td>
<td valign="bottom" width="8%"></td>
<td></td>
<td></td>
<td></td>
<td valign="bottom" width="8%"></td>
<td></td>
<td></td>
<td></td>
</tr>
<tr>
<td valign="bottom"><font size="1"> </font></td>
<td valign="bottom"><font size="1">  </font></td>
<td valign="bottom" colspan="6" align="center"><font style="FONT-FAMILY: Times New Roman" size="1"><b>December 31</b></font></td>
<td valign="bottom"><font size="1"> </font></td>
</tr>
<tr>
<td valign="bottom"><font size="1"> </font></td>
<td valign="bottom"><font size="1">  </font></td>
<td style="BORDER-BOTTOM: #000000 1px solid" valign="bottom" colspan="2" align="center"><font style="FONT-FAMILY: Times New Roman" size="1"><b>2012</b></font></td>
<td valign="bottom"><font size="1"> </font></td>
<td valign="bottom"><font size="1"> </font></td>
<td style="BORDER-BOTTOM: #000000 1px solid" valign="bottom" colspan="2" align="center"><font style="FONT-FAMILY: Times New Roman" size="1"><b>2011</b></font></td>
<td valign="bottom"><font size="1"> </font></td>
</tr>
<tr>
<td height="8"></td>
<td height="8" colspan="4"></td>
<td height="8" colspan="4"></td>
</tr>
<tr bgcolor="#CCEEFF">
<td valign="top">
<p style="TEXT-INDENT: -1em; MARGIN-LEFT: 1em"><font style="FONT-FAMILY: Times New Roman" size="2">Computer
equipment</font></p>
</td>
<td valign="bottom"><font size="1">  </font></td>
<td valign="bottom"><font style="FONT-FAMILY: Times New Roman" size="2"><b>$</b></font></td>
<td valign="bottom" align="right"><font style="FONT-FAMILY: Times New Roman" size="2"><b>92,318</b></font></td>
<td valign="bottom" nowrap="nowrap"><font style="FONT-FAMILY: Times New Roman" size="2"><b>  </b></font></td>
<td valign="bottom"><font size="1"> </font></td>
<td valign="bottom"><font style="FONT-FAMILY: Times New Roman" size="2">$</font></td>
<td valign="bottom" align="right"><font style="FONT-FAMILY: Times New Roman" size="2">107,940</font></td>
<td valign="bottom" nowrap="nowrap"><font style="FONT-FAMILY: Times New Roman" size="2">  </font></td>
</tr>
<tr>
<td valign="top">
<p style="TEXT-INDENT: -1em; MARGIN-LEFT: 1em"><font style="FONT-FAMILY: Times New Roman" size="2">Furniture and
fixtures</font></p>
</td>
<td valign="bottom"><font size="1">  </font></td>
<td valign="bottom"><font style="FONT-FAMILY: Times New Roman" size="2"><b> </b></font></td>
<td valign="bottom" align="right"><font style="FONT-FAMILY: Times New Roman" size="2"><b>42,736</b></font></td>
<td valign="bottom" nowrap="nowrap"><font style="FONT-FAMILY: Times New Roman" size="2"><b>  </b></font></td>
<td valign="bottom"><font size="1"> </font></td>
<td valign="bottom"><font style="FONT-FAMILY: Times New Roman" size="2"> </font></td>
<td valign="bottom" align="right"><font style="FONT-FAMILY: Times New Roman" size="2">42,736</font></td>
<td valign="bottom" nowrap="nowrap"><font style="FONT-FAMILY: Times New Roman" size="2">  </font></td>
</tr>
<tr bgcolor="#CCEEFF">
<td valign="top">
<p style="TEXT-INDENT: -1em; MARGIN-LEFT: 1em"><font style="FONT-FAMILY: Times New Roman" size="2">Scientific
equipment</font></p>
</td>
<td valign="bottom"><font size="1">  </font></td>
<td valign="bottom"><font style="FONT-FAMILY: Times New Roman" size="2"><b> </b></font></td>
<td valign="bottom" align="right"><font style="FONT-FAMILY: Times New Roman" size="2"><b>2,824,076</b></font></td>
<td valign="bottom" nowrap="nowrap"><font style="FONT-FAMILY: Times New Roman" size="2"><b>  </b></font></td>
<td valign="bottom"><font size="1"> </font></td>
<td valign="bottom"><font style="FONT-FAMILY: Times New Roman" size="2"> </font></td>
<td valign="bottom" align="right"><font style="FONT-FAMILY: Times New Roman" size="2">2,786,539</font></td>
<td valign="bottom" nowrap="nowrap"><font style="FONT-FAMILY: Times New Roman" size="2">  </font></td>
</tr>
<tr>
<td valign="top">
<p style="TEXT-INDENT: -1em; MARGIN-LEFT: 1em"><font style="FONT-FAMILY: Times New Roman" size="2">Leasehold
improvements</font></p>
</td>
<td valign="bottom"><font size="1">  </font></td>
<td valign="bottom"><font style="FONT-FAMILY: Times New Roman" size="2"><b> </b></font></td>
<td valign="bottom" align="right"><font style="FONT-FAMILY: Times New Roman" size="2"><b>319,553</b></font></td>
<td valign="bottom" nowrap="nowrap"><font style="FONT-FAMILY: Times New Roman" size="2"><b>  </b></font></td>
<td valign="bottom"><font size="1"> </font></td>
<td valign="bottom"><font style="FONT-FAMILY: Times New Roman" size="2"> </font></td>
<td valign="bottom" align="right"><font style="FONT-FAMILY: Times New Roman" size="2">319,553</font></td>
<td valign="bottom" nowrap="nowrap"><font style="FONT-FAMILY: Times New Roman" size="2">  </font></td>
</tr>
<tr style="FONT-SIZE: 1px">
<td valign="bottom"></td>
<td valign="bottom">  </td>
<td valign="bottom">
<p style="BORDER-TOP: #000000 1px solid"> </p>
</td>
<td valign="bottom">
<p style="BORDER-TOP: #000000 1px solid"> </p>
</td>
<td> </td>
<td valign="bottom"> </td>
<td valign="bottom">
<p style="BORDER-TOP: #000000 1px solid"> </p>
</td>
<td valign="bottom">
<p style="BORDER-TOP: #000000 1px solid"> </p>
</td>
<td> </td>
</tr>
<tr bgcolor="#CCEEFF">
<td valign="top"></td>
<td valign="bottom"><font size="1">  </font></td>
<td valign="bottom"><font style="FONT-FAMILY: Times New Roman" size="2"><b> </b></font></td>
<td valign="bottom" align="right"><font style="FONT-FAMILY: Times New Roman" size="2"><b>3,278,683</b></font></td>
<td valign="bottom" nowrap="nowrap"><font style="FONT-FAMILY: Times New Roman" size="2"><b>  </b></font></td>
<td valign="bottom"><font size="1"> </font></td>
<td valign="bottom"><font style="FONT-FAMILY: Times New Roman" size="2"> </font></td>
<td valign="bottom" align="right"><font style="FONT-FAMILY: Times New Roman" size="2">3,256,768</font></td>
<td valign="bottom" nowrap="nowrap"><font style="FONT-FAMILY: Times New Roman" size="2">  </font></td>
</tr>
<tr>
<td valign="top">
<p style="TEXT-INDENT: -1em; MARGIN-LEFT: 1em"><font style="FONT-FAMILY: Times New Roman" size="2">Less accumulated
depreciation</font></p>
</td>
<td valign="bottom"><font size="1">  </font></td>
<td valign="bottom"><font style="FONT-FAMILY: Times New Roman" size="2"><b> </b></font></td>
<td valign="bottom" align="right"><font style="FONT-FAMILY: Times New Roman" size="2"><b>(3,220,417</b></font></td>
<td valign="bottom" nowrap="nowrap"><font style="FONT-FAMILY: Times New Roman" size="2"><b>) </b></font></td>
<td valign="bottom"><font size="1"> </font></td>
<td valign="bottom"><font style="FONT-FAMILY: Times New Roman" size="2"> </font></td>
<td valign="bottom" align="right"><font style="FONT-FAMILY: Times New Roman" size="2">(3,189,712</font></td>
<td valign="bottom" nowrap="nowrap"><font style="FONT-FAMILY: Times New Roman" size="2">) </font></td>
</tr>
<tr style="FONT-SIZE: 1px">
<td valign="bottom"></td>
<td valign="bottom">  </td>
<td valign="bottom">
<p style="BORDER-TOP: #000000 1px solid"> </p>
</td>
<td valign="bottom">
<p style="BORDER-TOP: #000000 1px solid"> </p>
</td>
<td> </td>
<td valign="bottom"> </td>
<td valign="bottom">
<p style="BORDER-TOP: #000000 1px solid"> </p>
</td>
<td valign="bottom">
<p style="BORDER-TOP: #000000 1px solid"> </p>
</td>
<td> </td>
</tr>
<tr bgcolor="#CCEEFF">
<td valign="top"></td>
<td valign="bottom"><font size="1">  </font></td>
<td valign="bottom"><font style="FONT-FAMILY: Times New Roman" size="2"><b>$</b></font></td>
<td valign="bottom" align="right"><font style="FONT-FAMILY: Times New Roman" size="2"><b>58,266</b></font></td>
<td valign="bottom" nowrap="nowrap"><font style="FONT-FAMILY: Times New Roman" size="2"><b>  </b></font></td>
<td valign="bottom"><font size="1"> </font></td>
<td valign="bottom"><font style="FONT-FAMILY: Times New Roman" size="2">$</font></td>
<td valign="bottom" align="right"><font style="FONT-FAMILY: Times New Roman" size="2">67,056</font></td>
<td valign="bottom" nowrap="nowrap"><font style="FONT-FAMILY: Times New Roman" size="2">  </font></td>
</tr>
<tr style="FONT-SIZE: 1px">
<td valign="bottom"></td>
<td valign="bottom">  </td>
<td valign="bottom">
<p style="BORDER-TOP: #000000 3px double"> </p>
</td>
<td valign="bottom">
<p style="BORDER-TOP: #000000 3px double"> </p>
</td>
<td> </td>
<td valign="bottom"> </td>
<td valign="bottom">
<p style="BORDER-TOP: #000000 3px double"> </p>
</td>
<td valign="bottom">
<p style="BORDER-TOP: #000000 3px double"> </p>
</td>
<td> </td>
</tr>
</table>
<p style="MARGIN-TOP: 12px; MARGIN-BOTTOM: 0px"><font style="FONT-FAMILY: Times New Roman" size="2">Depreciation expense for
the years ended December 31, 2012, 2011 and 2010 was $47,747,
$189,186 and $386,992, respectively.</font></p>
</div>
P4Y4M24D
<div>
<p style="MARGIN-TOP: 18px; MARGIN-BOTTOM: 0px"><font style="FONT-FAMILY: Times New Roman" size="2"><b>8. Convertible
Promissory Notes</b></font></p>
<p style="MARGIN-TOP: 6px; MARGIN-BOTTOM: 0px"><font style="FONT-FAMILY: Times New Roman" size="2">In October 2012, the
Company entered into an agreement with existing investors to obtain
$15.2 million in exchange for convertible promissory notes net
of $26,888 of offering costs. The proceeds will be used to finance
research studies. The debt plus 6% accrued interest will be
converted to 5,051,960 shares at ($3.01/share) of Series D
Preferred Stock at the maturity date of October 25, 2013 or
later if amended. The Company has amortized fees associated with
the debt issuance and the balance remaining as of December 31,
2012 is $16,880.</font></p>
</div>
322200
0.15
P6Y3M18D
<div>
<p style="MARGIN-TOP: 18px; MARGIN-BOTTOM: 0px"><font style="FONT-FAMILY: Times New Roman" size="2"><b>Accounts
Receivable</b></font></p>
<p style="MARGIN-TOP: 6px; MARGIN-BOTTOM: 0px"><font style="FONT-FAMILY: Times New Roman" size="2">Accounts receivable that
management has the intent and ability to collect are reported in
the balance sheets at outstanding amounts, less an allowance for
doubtful accounts. The Company writes off uncollectible receivables
when the likelihood of collection is remote.</font></p>
<p style="MARGIN-TOP: 12px; MARGIN-BOTTOM: 0px"><font style="FONT-FAMILY: Times New Roman" size="2">The Company evaluates the
collectability of accounts receivable on a regular basis. The
allowance, if any, is based upon various factors including the
financial condition and payment history of customers, an overall
review of collections experience on other accounts and economic
factors or events expected to affect future collections experience.
No allowance was recorded as of December 31, 2012, as the
Company has a history of collecting on all accounts including
government agencies and collaborations funding its
research.</font></p>
</div>
P10Y
<div>
<p style="MARGIN-TOP: 0pt; FONT-FAMILY: Times New Roman; MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt">
Basic net (loss) income per common share is determined by dividing
the net (loss) income allocable to common stockholders by the
weighted-average number of common shares outstanding during the
period, without consideration of common stock equivalents. Diluted
net (loss) income per share is computed by dividing the net (loss)
income allocable to common stockholders by the weighted-average
number of common stock equivalents outstanding for the period. The
treasury stock method is used to determine the dilutive effect of
the Company’s stock option grants and the if-converted method
is used to determine the dilutive effect of the Company’s
Redeemable Preferred Series A, B, and C convertible preferred
stock.</p>
<p style="MARGIN-TOP: 0pt; MARGIN-BOTTOM: 0pt; FONT-SIZE: 12pt">
</p>
<table style="BORDER-COLLAPSE: collapse; FONT-FAMILY: Times New Roman; FONT-SIZE: 10pt" border="0" cellspacing="0" cellpadding="0" width="100%" align="center"><!-- Begin Table Head -->
<tr>
<td width="75%"></td>
<td valign="bottom" width="3%"></td>
<td></td>
<td></td>
<td></td>
<td valign="bottom" width="3%"></td>
<td></td>
<td></td>
<td></td>
</tr>
<tr style="FONT-FAMILY: Times New Roman; FONT-SIZE: 8pt">
<td valign="bottom"></td>
<td valign="bottom"></td>
<td style="BORDER-BOTTOM: #000000 1pt solid" valign="bottom" colspan="6" align="center"><b>Year Ended December 30</b></td>
<td valign="bottom"></td>
</tr>
<tr style="FONT-FAMILY: Times New Roman; FONT-SIZE: 8pt">
<td valign="bottom"></td>
<td valign="bottom"></td>
<td style="BORDER-BOTTOM: #000000 1pt solid" valign="bottom" colspan="2" align="center"><b>2012</b></td>
<td valign="bottom"></td>
<td valign="bottom"></td>
<td style="BORDER-BOTTOM: #000000 1pt solid" valign="bottom" colspan="2" align="center"><b>2011</b></td>
<td valign="bottom"></td>
</tr>
<!-- End Table Head --><!-- Begin Table Body -->
<tr style="FONT-FAMILY: Times New Roman; FONT-SIZE: 10pt" bgcolor="#CCEEFF">
<td valign="top">
<p style="TEXT-INDENT: -1em; FONT-FAMILY: Times New Roman; MARGIN-LEFT: 3em; FONT-SIZE: 10pt">
<b>Basic</b> <b>(loss) income</b> <b>per common share</b></p>
</td>
<td valign="bottom"></td>
<td valign="bottom"></td>
<td valign="bottom"></td>
<td valign="bottom"></td>
<td valign="bottom"></td>
<td valign="bottom"></td>
<td valign="bottom"></td>
<td valign="bottom"></td>
</tr>
<tr style="FONT-FAMILY: Times New Roman; FONT-SIZE: 10pt">
<td valign="top">
<p style="TEXT-INDENT: -1em; FONT-FAMILY: Times New Roman; MARGIN-LEFT: 5em; FONT-SIZE: 10pt">
Net (loss) income</p>
</td>
<td valign="bottom"></td>
<td valign="bottom"><b>$</b></td>
<td valign="bottom" align="right">
<b>(</b><b>16</b><b>,</b><b>590</b><b>,</b><b>827</b></td>
<td valign="bottom" nowrap="nowrap"><b>)</b></td>
<td valign="bottom"></td>
<td valign="bottom">$</td>
<td valign="bottom" align="right">11,092,429</td>
<td valign="bottom" nowrap="nowrap"></td>
</tr>
<tr style="FONT-FAMILY: Times New Roman; FONT-SIZE: 10pt" bgcolor="#CCEEFF">
<td valign="top">
<p style="TEXT-INDENT: -1em; FONT-FAMILY: Times New Roman; MARGIN-LEFT: 5em; FONT-SIZE: 10pt">
Less: Undistributed (loss) earnings allocated to participating
securities</p>
</td>
<td valign="bottom"></td>
<td valign="bottom"></td>
<td valign="bottom" align="right">
<b>(</b><b>1</b><b>,</b><b>672</b><b>,</b><b>223</b></td>
<td valign="bottom" nowrap="nowrap"><b>)</b></td>
<td valign="bottom"></td>
<td valign="bottom"></td>
<td valign="bottom" align="right">(6,747,903</td>
<td valign="bottom" nowrap="nowrap">)</td>
</tr>
<tr style="FONT-SIZE: 1px">
<td valign="bottom"></td>
<td valign="bottom"></td>
<td valign="bottom">
<p style="BORDER-TOP: #000000 1px solid"></p>
</td>
<td valign="bottom">
<p style="BORDER-TOP: #000000 1px solid"></p>
</td>
<td></td>
<td valign="bottom"></td>
<td valign="bottom">
<p style="BORDER-TOP: #000000 1px solid"></p>
</td>
<td valign="bottom">
<p style="BORDER-TOP: #000000 1px solid"></p>
</td>
<td></td>
</tr>
<tr style="FONT-FAMILY: Times New Roman; FONT-SIZE: 10pt">
<td valign="top">
<p style="TEXT-INDENT: -1em; FONT-FAMILY: Times New Roman; MARGIN-LEFT: 5em; FONT-SIZE: 10pt">
<b>Net</b> <b>(loss)</b> <b>earnings allocable to common
shares</b></p>
</td>
<td valign="bottom"></td>
<td valign="bottom"><b>$</b></td>
<td valign="bottom" align="right"><b>(18,263,050</b></td>
<td valign="bottom" nowrap="nowrap"><b>)</b></td>
<td valign="bottom"></td>
<td valign="bottom">$</td>
<td valign="bottom" align="right">4,344,526</td>
<td valign="bottom" nowrap="nowrap"></td>
</tr>
<tr style="FONT-SIZE: 1px">
<td valign="bottom"></td>
<td valign="bottom"></td>
<td valign="bottom">
<p style="BORDER-TOP: #000000 1px solid"></p>
</td>
<td valign="bottom">
<p style="BORDER-TOP: #000000 1px solid"></p>
</td>
<td></td>
<td valign="bottom"></td>
<td valign="bottom">
<p style="BORDER-TOP: #000000 1px solid"></p>
</td>
<td valign="bottom">
<p style="BORDER-TOP: #000000 1px solid"></p>
</td>
<td></td>
</tr>
<tr style="FONT-FAMILY: Times New Roman; FONT-SIZE: 10pt" bgcolor="#CCEEFF">
<td valign="top"></td>
<td valign="bottom"></td>
<td valign="bottom"></td>
<td valign="bottom"></td>
<td valign="bottom"></td>
<td valign="bottom"></td>
<td valign="bottom"></td>
<td valign="bottom"></td>
<td valign="bottom"></td>
</tr>
<tr style="FONT-FAMILY: Times New Roman; FONT-SIZE: 10pt">
<td valign="top">
<p style="TEXT-INDENT: -1em; FONT-FAMILY: Times New Roman; MARGIN-LEFT: 5em; FONT-SIZE: 10pt">
Basic weighted average common shares outstanding</p>
</td>
<td valign="bottom"></td>
<td valign="bottom"></td>
<td valign="bottom" align="right"><b>11,215,077</b></td>
<td valign="bottom" nowrap="nowrap"></td>
<td valign="bottom"></td>
<td valign="bottom"></td>
<td valign="bottom" align="right">11,202,990</td>
<td valign="bottom" nowrap="nowrap"></td>
</tr>
<tr style="FONT-SIZE: 1px">
<td valign="bottom"></td>
<td valign="bottom"></td>
<td valign="bottom">
<p style="BORDER-TOP: #000000 1px solid"></p>
</td>
<td valign="bottom">
<p style="BORDER-TOP: #000000 1px solid"></p>
</td>
<td></td>
<td valign="bottom"></td>
<td valign="bottom">
<p style="BORDER-TOP: #000000 1px solid"></p>
</td>
<td valign="bottom">
<p style="BORDER-TOP: #000000 1px solid"></p>
</td>
<td></td>
</tr>
<tr style="FONT-FAMILY: Times New Roman; FONT-SIZE: 10pt" bgcolor="#CCEEFF">
<td valign="top">
<p style="TEXT-INDENT: -1em; FONT-FAMILY: Times New Roman; MARGIN-LEFT: 5em; FONT-SIZE: 10pt">
<b>Basic</b> <b>(loss)</b> <b>earnings per common share</b></p>
</td>
<td valign="bottom"></td>
<td valign="bottom"><b>$</b></td>
<td valign="bottom" align="right"><b>(</b><b>1.</b><b>63</b></td>
<td valign="bottom" nowrap="nowrap"><b>)</b></td>
<td valign="bottom"></td>
<td valign="bottom">$</td>
<td valign="bottom" align="right">0.39</td>
<td valign="bottom" nowrap="nowrap"></td>
</tr>
<tr style="FONT-FAMILY: Times New Roman; FONT-SIZE: 10pt">
<td valign="top">
<p style="TEXT-INDENT: -1em; FONT-FAMILY: Times New Roman; MARGIN-LEFT: 3em; FONT-SIZE: 10pt">
<b>Diluted (loss) earnings per common share</b></p>
</td>
<td valign="bottom"></td>
<td valign="bottom"></td>
<td valign="bottom"></td>
<td valign="bottom"></td>
<td valign="bottom"></td>
<td valign="bottom"></td>
<td valign="bottom"></td>
<td valign="bottom"></td>
</tr>
<tr style="FONT-FAMILY: Times New Roman; FONT-SIZE: 10pt" bgcolor="#CCEEFF">
<td valign="top">
<p style="TEXT-INDENT: -1em; FONT-FAMILY: Times New Roman; MARGIN-LEFT: 5em; FONT-SIZE: 10pt">
Net (loss) Earnings</p>
</td>
<td valign="bottom"></td>
<td valign="bottom"><b>$</b></td>
<td valign="bottom" align="right">
<b>(</b><b>16</b><b>,</b><b>590</b><b>,</b><b>827</b></td>
<td valign="bottom" nowrap="nowrap"><b>)</b></td>
<td valign="bottom"></td>
<td valign="bottom">$</td>
<td valign="bottom" align="right">11,092,429</td>
<td valign="bottom" nowrap="nowrap"></td>
</tr>
<tr style="FONT-FAMILY: Times New Roman; FONT-SIZE: 10pt">
<td valign="top">
<p style="TEXT-INDENT: -1em; FONT-FAMILY: Times New Roman; MARGIN-LEFT: 5em; FONT-SIZE: 10pt">
Less: Undistributed (loss) earnings allocated to participating
securities</p>
</td>
<td valign="bottom"></td>
<td valign="bottom"></td>
<td valign="bottom" align="right">
<b>(</b><b>1</b><b>,</b><b>672</b><b>,</b><b>223</b></td>
<td valign="bottom" nowrap="nowrap"><b>)</b></td>
<td valign="bottom"></td>
<td valign="bottom"></td>
<td valign="bottom" align="right">(6,747,903</td>
<td valign="bottom" nowrap="nowrap">)</td>
</tr>
<tr style="FONT-SIZE: 1px">
<td valign="bottom"></td>
<td valign="bottom"></td>
<td valign="bottom">
<p style="BORDER-TOP: #000000 1px solid"></p>
</td>
<td valign="bottom">
<p style="BORDER-TOP: #000000 1px solid"></p>
</td>
<td></td>
<td valign="bottom"></td>
<td valign="bottom">
<p style="BORDER-TOP: #000000 1px solid"></p>
</td>
<td valign="bottom">
<p style="BORDER-TOP: #000000 1px solid"></p>
</td>
<td></td>
</tr>
<tr style="FONT-FAMILY: Times New Roman; FONT-SIZE: 10pt" bgcolor="#CCEEFF">
<td valign="top">
<p style="TEXT-INDENT: -1em; FONT-FAMILY: Times New Roman; MARGIN-LEFT: 5em; FONT-SIZE: 10pt">
<b>Net (loss) earnings allocable to common shares</b></p>
</td>
<td valign="bottom"></td>
<td valign="bottom"><b>$</b></td>
<td valign="bottom" align="right"><b>(18,263,050</b></td>
<td valign="bottom" nowrap="nowrap"><b>)</b></td>
<td valign="bottom"></td>
<td valign="bottom">$</td>
<td valign="bottom" align="right">4,344,526</td>
<td valign="bottom" nowrap="nowrap"></td>
</tr>
<tr style="FONT-SIZE: 1px">
<td valign="bottom"></td>
<td valign="bottom"></td>
<td valign="bottom">
<p style="BORDER-TOP: #000000 1px solid"></p>
</td>
<td valign="bottom">
<p style="BORDER-TOP: #000000 1px solid"></p>
</td>
<td></td>
<td valign="bottom"></td>
<td valign="bottom">
<p style="BORDER-TOP: #000000 1px solid"></p>
</td>
<td valign="bottom">
<p style="BORDER-TOP: #000000 1px solid"></p>
</td>
<td></td>
</tr>
<tr style="FONT-FAMILY: Times New Roman; FONT-SIZE: 10pt">
<td valign="top">
<p style="TEXT-INDENT: -1em; FONT-FAMILY: Times New Roman; MARGIN-LEFT: 5em; FONT-SIZE: 10pt">
Basic weighted average common shares outstanding</p>
</td>
<td valign="bottom"></td>
<td valign="bottom"></td>
<td valign="bottom" align="right"><b>11,215,077</b></td>
<td valign="bottom" nowrap="nowrap"></td>
<td valign="bottom"></td>
<td valign="bottom"></td>
<td valign="bottom" align="right">11,202,990</td>
<td valign="bottom" nowrap="nowrap"></td>
</tr>
<tr style="FONT-FAMILY: Times New Roman; FONT-SIZE: 10pt" bgcolor="#CCEEFF">
<td valign="top">
<p style="TEXT-INDENT: -1em; FONT-FAMILY: Times New Roman; MARGIN-LEFT: 5em; FONT-SIZE: 10pt">
Effect of dilutive options</p>
</td>
<td valign="bottom"></td>
<td valign="bottom"></td>
<td valign="bottom" align="right"><b>—</b></td>
<td valign="bottom" nowrap="nowrap"></td>
<td valign="bottom"></td>
<td valign="bottom"></td>
<td valign="bottom" align="right">1,987,486</td>
<td valign="bottom" nowrap="nowrap"></td>
</tr>
<tr style="FONT-SIZE: 1px">
<td valign="bottom"></td>
<td valign="bottom"></td>
<td valign="bottom">
<p style="BORDER-TOP: #000000 1px solid"></p>
</td>
<td valign="bottom">
<p style="BORDER-TOP: #000000 1px solid"></p>
</td>
<td></td>
<td valign="bottom"></td>
<td valign="bottom">
<p style="BORDER-TOP: #000000 1px solid"></p>
</td>
<td valign="bottom">
<p style="BORDER-TOP: #000000 1px solid"></p>
</td>
<td></td>
</tr>
<tr style="FONT-FAMILY: Times New Roman; FONT-SIZE: 10pt">
<td valign="top">
<p style="TEXT-INDENT: -1em; FONT-FAMILY: Times New Roman; MARGIN-LEFT: 5em; FONT-SIZE: 10pt">
Diluted weighted average common shares outstanding</p>
</td>
<td valign="bottom"></td>
<td valign="bottom"></td>
<td valign="bottom" align="right"><b>11,215,077</b></td>
<td valign="bottom" nowrap="nowrap"></td>
<td valign="bottom"></td>
<td valign="bottom"></td>
<td valign="bottom" align="right">13,190,476</td>
<td valign="bottom" nowrap="nowrap"></td>
</tr>
<tr style="FONT-SIZE: 1px">
<td valign="bottom"></td>
<td valign="bottom"></td>
<td valign="bottom">
<p style="BORDER-TOP: #000000 1px solid"></p>
</td>
<td valign="bottom">
<p style="BORDER-TOP: #000000 1px solid"></p>
</td>
<td></td>
<td valign="bottom"></td>
<td valign="bottom">
<p style="BORDER-TOP: #000000 1px solid"></p>
</td>
<td valign="bottom">
<p style="BORDER-TOP: #000000 1px solid"></p>
</td>
<td></td>
</tr>
<tr style="FONT-FAMILY: Times New Roman; FONT-SIZE: 10pt" bgcolor="#CCEEFF">
<td valign="top">
<p style="TEXT-INDENT: -1em; FONT-FAMILY: Times New Roman; MARGIN-LEFT: 5em; FONT-SIZE: 10pt">
<b>Diluted (loss) earnings per common share</b></p>
</td>
<td valign="bottom"></td>
<td valign="bottom"><b>$</b></td>
<td valign="bottom" align="right"><b>(1.63</b></td>
<td valign="bottom" nowrap="nowrap"><b>)</b></td>
<td valign="bottom"></td>
<td valign="bottom">$</td>
<td valign="bottom" align="right">0.33</td>
<td valign="bottom" nowrap="nowrap"></td>
</tr>
<!-- End Table Body --></table>
</div>
1.42
<div>
<p style="MARGIN-TOP: 18px; MARGIN-BOTTOM: 0px"><font style="FONT-FAMILY: Times New Roman" size="2"><b>4. Redeemable
Convertible Preferred Stock</b></font></p>
<p style="MARGIN-TOP: 6px; MARGIN-BOTTOM: 0px"><font style="FONT-FAMILY: Times New Roman" size="2">In 2002, the Company issued
2,900,000 shares of Series A redeemable convertible preferred stock
(Series A Preferred Stock) for proceeds of $2,828,322. In 2003, the
Company issued 1,250,000 shares of Series A Preferred Stock for
proceeds of $1,250,000.</font></p>
<p style="MARGIN-TOP: 0px; MARGIN-BOTTOM: 0px"><font style="FONT-FAMILY: Times New Roman" size="2">In 2006, the Company issued
a total of 5,000,216 shares of Series B redeemable convertible
preferred stock (Series B Preferred Stock) for proceeds of
$7,863,725, net of $58,850 in offering costs.</font></p>
<p style="MARGIN-TOP: 12px; MARGIN-BOTTOM: 0px"><font style="FONT-FAMILY: Times New Roman" size="2">In 2007, the Company issued
a total of 4,030,024 shares of Series C redeemable convertible
preferred stock (Series C Preferred Stock) for proceeds of
$7,935,898, net of $64,102 in offering costs. In 2010, the Company
issued a total of 2,687,915 shares of Series C Preferred Stock for
proceeds of $5,274,886, net of $60,894 in offering
costs.</font></p>
<p style="MARGIN-TOP: 12px; MARGIN-BOTTOM: 0px"><font style="FONT-FAMILY: Times New Roman" size="2">In connection with the
Series C Preferred Stock offering, approximately $450,000 of Series
A Preferred Stock, $2,173,451 of Series B Preferred Stock and
$1,896,116 of Series C Preferred Stock were converted to 2,773,492
shares of common stock in accordance with their respective
conversion ratios.</font></p>
<p style="MARGIN-TOP: 12px; MARGIN-BOTTOM: 0px"><font style="FONT-FAMILY: Times New Roman" size="2">Dividends are cumulative
and accrue on each outstanding share of Series A, Series B and
Series C Preferred Stock at an 8% rate per annum. These
dividends would be paid when and if declared by the Board of
Directors. At December 31, 2012 and 2011, accrued and unpaid
dividends for each respective preferred stock issuance were as
follows:</font></p>
<p style="MARGIN-TOP: 0px; MARGIN-BOTTOM: 0px; FONT-SIZE: 12px">
 </p>
<table style="BORDER-COLLAPSE: collapse" border="0" cellspacing="0" cellpadding="0" width="76%" align="center">
<tr>
<td width="73%"></td>
<td valign="bottom" width="4%"></td>
<td></td>
<td></td>
<td></td>
<td valign="bottom" width="4%"></td>
<td></td>
<td></td>
<td></td>
</tr>
<tr>
<td valign="bottom"><font size="1"> </font></td>
<td valign="bottom"><font size="1">  </font></td>
<td valign="bottom" colspan="6" align="center"><font style="FONT-FAMILY: Times New Roman" size="1"><b>December 31</b></font></td>
<td valign="bottom"><font size="1"> </font></td>
</tr>
<tr>
<td valign="bottom"><font size="1"> </font></td>
<td valign="bottom"><font size="1">  </font></td>
<td style="BORDER-BOTTOM: #000000 1px solid" valign="bottom" colspan="2" align="center"><font style="FONT-FAMILY: Times New Roman" size="1"><b>2012</b></font></td>
<td valign="bottom"><font size="1"> </font></td>
<td valign="bottom"><font size="1">  </font></td>
<td style="BORDER-BOTTOM: #000000 1px solid" valign="bottom" colspan="2" align="center"><font style="FONT-FAMILY: Times New Roman" size="1"><b>2011</b></font></td>
<td valign="bottom"><font size="1"> </font></td>
</tr>
<tr>
<td height="8"></td>
<td height="8" colspan="4"></td>
<td height="8" colspan="4"></td>
</tr>
<tr bgcolor="#CCEEFF">
<td valign="top">
<p style="TEXT-INDENT: -1em; MARGIN-LEFT: 1em"><font style="FONT-FAMILY: Times New Roman" size="2">Series A Preferred
Stock</font></p>
</td>
<td valign="bottom"><font size="1">  </font></td>
<td valign="bottom"><font style="FONT-FAMILY: Times New Roman" size="2"><b>$</b></font></td>
<td valign="bottom" align="right"><font style="FONT-FAMILY: Times New Roman" size="2"><b>3,325,667</b></font></td>
<td valign="bottom" nowrap="nowrap"><font style="FONT-FAMILY: Times New Roman" size="2"><b>  </b></font></td>
<td valign="bottom"><font size="1">  </font></td>
<td valign="bottom"><font style="FONT-FAMILY: Times New Roman" size="2">$</font></td>
<td valign="bottom" align="right"><font style="FONT-FAMILY: Times New Roman" size="2">3,029,667</font></td>
<td valign="bottom" nowrap="nowrap"><font style="FONT-FAMILY: Times New Roman" size="2">  </font></td>
</tr>
<tr>
<td valign="top">
<p style="TEXT-INDENT: -1em; MARGIN-LEFT: 1em"><font style="FONT-FAMILY: Times New Roman" size="2">Series B Preferred
Stock</font></p>
</td>
<td valign="bottom"><font size="1">  </font></td>
<td valign="bottom"><font style="FONT-FAMILY: Times New Roman" size="2"><b> </b></font></td>
<td valign="bottom" align="right"><font style="FONT-FAMILY: Times New Roman" size="2"><b>3,807,154</b></font></td>
<td valign="bottom" nowrap="nowrap"><font style="FONT-FAMILY: Times New Roman" size="2"><b>  </b></font></td>
<td valign="bottom"><font size="1">  </font></td>
<td valign="bottom"><font style="FONT-FAMILY: Times New Roman" size="2"> </font></td>
<td valign="bottom" align="right"><font style="FONT-FAMILY: Times New Roman" size="2">3,346,402</font></td>
<td valign="bottom" nowrap="nowrap"><font style="FONT-FAMILY: Times New Roman" size="2">  </font></td>
</tr>
<tr bgcolor="#CCEEFF">
<td valign="top">
<p style="TEXT-INDENT: -1em; MARGIN-LEFT: 1em"><font style="FONT-FAMILY: Times New Roman" size="2">Series C Preferred
Stock</font></p>
</td>
<td valign="bottom"><font size="1">  </font></td>
<td valign="bottom"><font style="FONT-FAMILY: Times New Roman" size="2"><b> </b></font></td>
<td valign="bottom" align="right"><font style="FONT-FAMILY: Times New Roman" size="2"><b>4,099,657</b></font></td>
<td valign="bottom" nowrap="nowrap"><font style="FONT-FAMILY: Times New Roman" size="2"><b>  </b></font></td>
<td valign="bottom"><font size="1">  </font></td>
<td valign="bottom"><font style="FONT-FAMILY: Times New Roman" size="2"> </font></td>
<td valign="bottom" align="right"><font style="FONT-FAMILY: Times New Roman" size="2">3,184,484</font></td>
<td valign="bottom" nowrap="nowrap"><font style="FONT-FAMILY: Times New Roman" size="2">  </font></td>
</tr>
<tr style="FONT-SIZE: 1px">
<td valign="bottom"></td>
<td valign="bottom">  </td>
<td valign="bottom">
<p style="BORDER-TOP: #000000 1px solid"> </p>
</td>
<td valign="bottom">
<p style="BORDER-TOP: #000000 1px solid"> </p>
</td>
<td> </td>
<td valign="bottom">  </td>
<td valign="bottom">
<p style="BORDER-TOP: #000000 1px solid"> </p>
</td>
<td valign="bottom">
<p style="BORDER-TOP: #000000 1px solid"> </p>
</td>
<td> </td>
</tr>
<tr>
<td valign="top">
<p style="TEXT-INDENT: -1em; MARGIN-LEFT: 1em"><font style="FONT-FAMILY: Times New Roman" size="2">Total</font></p>
</td>
<td valign="bottom"><font size="1">  </font></td>
<td valign="bottom"><font style="FONT-FAMILY: Times New Roman" size="2"><b>$</b></font></td>
<td valign="bottom" align="right"><font style="FONT-FAMILY: Times New Roman" size="2"><b>11,232,478</b></font></td>
<td valign="bottom" nowrap="nowrap"><font style="FONT-FAMILY: Times New Roman" size="2"><b>  </b></font></td>
<td valign="bottom"><font size="1">  </font></td>
<td valign="bottom"><font style="FONT-FAMILY: Times New Roman" size="2">$</font></td>
<td valign="bottom" align="right"><font style="FONT-FAMILY: Times New Roman" size="2">9,560,553</font></td>
<td valign="bottom" nowrap="nowrap"><font style="FONT-FAMILY: Times New Roman" size="2">  </font></td>
</tr>
<tr style="FONT-SIZE: 1px">
<td valign="bottom"></td>
<td valign="bottom">  </td>
<td valign="bottom">
<p style="BORDER-TOP: #000000 3px double"> </p>
</td>
<td valign="bottom">
<p style="BORDER-TOP: #000000 3px double"> </p>
</td>
<td> </td>
<td valign="bottom">  </td>
<td valign="bottom">
<p style="BORDER-TOP: #000000 3px double"> </p>
</td>
<td valign="bottom">
<p style="BORDER-TOP: #000000 3px double"> </p>
</td>
<td> </td>
</tr>
</table>
<p style="MARGIN-TOP: 12px; MARGIN-BOTTOM: 0px"><font style="FONT-FAMILY: Times New Roman" size="2">The Series A, Series B and
Series C Preferred Stock have a liquidation preference senior to
that of the common stock.</font></p>
<p style="MARGIN-TOP: 12px; MARGIN-BOTTOM: 0px"><font style="FONT-FAMILY: Times New Roman" size="2">Series A Preferred Stock
has a liquidation preference of $6,755,992 and $6,459,992 for
December 31, 2012 and 2011, respectively. Series B Preferred
Stock has a liquidation preference of $8,936,955 and $8,475,905 for
December 31, 2012 and 2011, respectively. Series C Preferred
Stock has a liquidation preference of $15,141,345 and $14,205,340
for December 31, 2012 and 2011, respectively.</font></p>
<p style="MARGIN-TOP: 0px; MARGIN-BOTTOM: 0px"><font style="FONT-FAMILY: Times New Roman" size="2">The Company is obligated to
redeem shares of Series A, Series B and Series C Preferred Stock,
if requested, by the majority of the holders. The beginning
redemption of Series A, B and C Preferred Stock is
February 26, 2016. The redemption for the Series A, Series B
and Series C Preferred Stock, if requested, would take
place in three equal installments over a <font style="WHITE-SPACE: nowrap">two-year</font> period.</font></p>
<p style="MARGIN-TOP: 12px; MARGIN-BOTTOM: 0px"><font style="FONT-FAMILY: Times New Roman" size="2">The redemption price shall
be equal to $1.00 per share, $1.58 per share and $1.99 per share
plus all accrued and unpaid dividends for the Series A, Series
B and Series C Preferred Stock, respectively, subject to certain
equity adjustments for specified anti-dilutive transactions
as defined.</font></p>
<p style="MARGIN-TOP: 12px; MARGIN-BOTTOM: 0px"><font style="FONT-FAMILY: Times New Roman" size="2">The holders of the Series
A, Series B and Series C Preferred Stock have the right
to convert such shares, at their option and at any time, into
shares of common stock at the then applicable conversion rate, as
defined. The initial conversion rate is one common share for each
preferred share, which is adjusted for specified anti-dilutive
transactions, as defined. At December 31, 2012, the Company
has reserved 3,700,000 shares, 3,631,898 shares and 5,762,765
shares of common stock for conversion of Series A, Series B and
Series C Preferred Stock, respectively.</font></p>
<p style="MARGIN-TOP: 12px; MARGIN-BOTTOM: 0px"><font style="FONT-FAMILY: Times New Roman" size="2">The Series A, Series B and
Series C Preferred Stock will automatically convert into common
stock at the then applicable conversion rate upon a majority vote
of the Series A, Series B and Series C Preferred
Stockholders or upon a public offering of the Company’s
common stock, resulting in aggregate proceeds to the Company of at
least $20 million and a price per share of at least
$5.00.</font></p>
<p style="MARGIN-TOP: 12px; MARGIN-BOTTOM: 0px"><font style="FONT-FAMILY: Times New Roman" size="2">The holders of Series A,
Series B and Series C Preferred Stock are entitled to the
whole number of votes equal to the number of shares of common stock
into which such shares could be converted.</font></p>
</div>
0.06
0.99
<div>
<p style="MARGIN-TOP: 18px; MARGIN-BOTTOM: 0px"><font style="FONT-FAMILY: Times New Roman" size="2"><b>Property and
Equipment</b></font></p>
<p style="MARGIN-TOP: 6px; MARGIN-BOTTOM: 0px"><font style="FONT-FAMILY: Times New Roman" size="2">Property and equipment is
stated at cost and depreciated on a straight-line basis over
estimated useful lives ranging from three to five years. Leasehold
improvements are amortized using the straight-line method over the
shorter of the estimated useful life of the assets or the term of
the related lease. Expenditures for maintenance and repairs are
charged to operations as incurred.</font></p>
<p style="MARGIN-TOP: 12px; MARGIN-BOTTOM: 0px"><font style="FONT-FAMILY: Times New Roman" size="2">When indicators of possible
impairment are identified, the Company evaluates the recoverability
of the carrying value of its long-lived assets based on the
criteria established in ASC 360, Property, Plant and
Equipment</font>. The Company considers historical performance and
anticipated future results in its evaluation of potential
impairment. The Company evaluates the carrying value of those
assets in relation to the operating performance of the business and
undiscounted cash flows expected to result from the use of those
assets. Impairment losses are recognized when carrying value
exceeds the undiscounted cash flows then management must determine
the fair value of the underlying asset. No such impairment losses
have been recognized to date.</p>
</div>
0.000
<div>
<p style="MARGIN-TOP: 18px; MARGIN-BOTTOM: 0px"><font style="FONT-FAMILY: Times New Roman" size="2"><b>Cash and Cash
Equivalents</b></font></p>
<p style="MARGIN-TOP: 6px; MARGIN-BOTTOM: 0px"><font style="FONT-FAMILY: Times New Roman" size="2">The Company considers all
highly liquid investments with a maturity of three months or less
from the date of purchase to be cash equivalents. Cash and cash
equivalents consist of certificates of deposit with commercial
banks and financial institutions. Certificates of deposit with a
maturity date of more than three months are classified separately
on the balance sheet. Their carrying values approximate the fair
market value.</font></p>
</div>
-18902937
0.47
<div>
<p style="MARGIN-TOP: 18px; MARGIN-BOTTOM: 0px"><font style="FONT-FAMILY: Times New Roman" size="2"><b>11. Subsequent
Events</b></font></p>
<p style="MARGIN-TOP: 6px; MARGIN-BOTTOM: 0px"><font style="FONT-FAMILY: Times New Roman" size="2">The Company evaluated
subsequent events through June 19, 2013, the date these
financial statements were issued.</font></p>
</div>
11215077
<div>
<p style="MARGIN-TOP: 0px; MARGIN-BOTTOM: 0px"><font style="FONT-FAMILY: Times New Roman" size="2"><b>6. Income
Taxes</b></font></p>
<p style="MARGIN-TOP: 6px; MARGIN-BOTTOM: 0px"><font style="FONT-FAMILY: Times New Roman" size="2">The provision (benefit) for
income taxes consists of:</font></p>
<p style="MARGIN-TOP: 0px; MARGIN-BOTTOM: 0px; FONT-SIZE: 12px">
 </p>
<table style="BORDER-COLLAPSE: collapse" border="0" cellspacing="0" cellpadding="0" width="76%" align="center">
<tr>
<td width="72%"></td>
<td valign="bottom" width="9%"></td>
<td></td>
<td></td>
<td></td>
<td valign="bottom" width="9%"></td>
<td></td>
<td></td>
<td></td>
</tr>
<tr>
<td valign="bottom"><font size="1"> </font></td>
<td valign="bottom"><font size="1">  </font></td>
<td valign="bottom" colspan="6" align="center"><font style="FONT-FAMILY: Times New Roman" size="1"><b>December 31</b></font></td>
<td valign="bottom"><font size="1"> </font></td>
</tr>
<tr>
<td valign="bottom"><font size="1"> </font></td>
<td valign="bottom"><font size="1">  </font></td>
<td style="BORDER-BOTTOM: #000000 1px solid" valign="bottom" colspan="2" align="center"><font style="FONT-FAMILY: Times New Roman" size="1"><b>2012</b></font></td>
<td valign="bottom"><font size="1"> </font></td>
<td valign="bottom"><font size="1"> </font></td>
<td style="BORDER-BOTTOM: #000000 1px solid" valign="bottom" colspan="2" align="center"><font style="FONT-FAMILY: Times New Roman" size="1"><b>2011</b></font></td>
<td valign="bottom"><font size="1"> </font></td>
</tr>
<tr>
<td height="8"></td>
<td height="8" colspan="4"></td>
<td height="8" colspan="4"></td>
</tr>
<tr bgcolor="#CCEEFF">
<td valign="top">
<p style="TEXT-INDENT: -1em; MARGIN-LEFT: 1em"><font style="FONT-FAMILY: Times New Roman" size="2">Current</font></p>
</td>
<td valign="bottom"><font size="1">  </font></td>
<td valign="bottom"><font style="FONT-FAMILY: Times New Roman" size="2"><b>$</b></font></td>
<td valign="bottom" align="right"><font style="FONT-FAMILY: Times New Roman" size="2"><b>32,921</b></font></td>
<td valign="bottom" nowrap="nowrap"><font style="FONT-FAMILY: Times New Roman" size="2"><b>  </b></font></td>
<td valign="bottom"><font size="1"> </font></td>
<td valign="bottom"><font style="FONT-FAMILY: Times New Roman" size="2">$</font></td>
<td valign="bottom" align="right"><font style="FONT-FAMILY: Times New Roman" size="2">64,834</font></td>
<td valign="bottom" nowrap="nowrap"><font style="FONT-FAMILY: Times New Roman" size="2">  </font></td>
</tr>
<tr>
<td valign="top">
<p style="TEXT-INDENT: -1em; MARGIN-LEFT: 1em"><font style="FONT-FAMILY: Times New Roman" size="2">Deferred</font></p>
</td>
<td valign="bottom"><font size="1">  </font></td>
<td valign="bottom"><font style="FONT-FAMILY: Times New Roman" size="2"><b> </b></font></td>
<td valign="bottom" align="right"><font style="FONT-FAMILY: Times New Roman" size="2"><b>(6,378,456</b></font></td>
<td valign="bottom" nowrap="nowrap"><font style="FONT-FAMILY: Times New Roman" size="2"><b>) </b></font></td>
<td valign="bottom"><font size="1"> </font></td>
<td valign="bottom"><font style="FONT-FAMILY: Times New Roman" size="2"> </font></td>
<td valign="bottom" align="right"><font style="FONT-FAMILY: Times New Roman" size="2">4,359,809</font></td>
<td valign="bottom" nowrap="nowrap"><font style="FONT-FAMILY: Times New Roman" size="2">  </font></td>
</tr>
<tr bgcolor="#CCEEFF">
<td valign="top">
<p style="TEXT-INDENT: -1em; MARGIN-LEFT: 1em"><font style="FONT-FAMILY: Times New Roman" size="2">Valuation
allowance</font></p>
</td>
<td valign="bottom"><font size="1">  </font></td>
<td valign="bottom"><font style="FONT-FAMILY: Times New Roman" size="2"><b> </b></font></td>
<td valign="bottom" align="right"><font style="FONT-FAMILY: Times New Roman" size="2"><b>6,378,456</b></font></td>
<td valign="bottom" nowrap="nowrap"><font style="FONT-FAMILY: Times New Roman" size="2"><b>  </b></font></td>
<td valign="bottom"><font size="1"> </font></td>
<td valign="bottom"><font style="FONT-FAMILY: Times New Roman" size="2"> </font></td>
<td valign="bottom" align="right"><font style="FONT-FAMILY: Times New Roman" size="2">(4,359,809</font></td>
<td valign="bottom" nowrap="nowrap"><font style="FONT-FAMILY: Times New Roman" size="2">) </font></td>
</tr>
<tr style="FONT-SIZE: 1px">
<td valign="bottom"></td>
<td valign="bottom">  </td>
<td valign="bottom">
<p style="BORDER-TOP: #000000 1px solid"> </p>
</td>
<td valign="bottom">
<p style="BORDER-TOP: #000000 1px solid"> </p>
</td>
<td> </td>
<td valign="bottom"> </td>
<td valign="bottom">
<p style="BORDER-TOP: #000000 1px solid"> </p>
</td>
<td valign="bottom">
<p style="BORDER-TOP: #000000 1px solid"> </p>
</td>
<td> </td>
</tr>
<tr>
<td valign="top">
<p style="TEXT-INDENT: -1em; MARGIN-LEFT: 1em"><font style="FONT-FAMILY: Times New Roman" size="2">Provision (benefit) for
income taxes</font></p>
</td>
<td valign="bottom"><font size="1">  </font></td>
<td valign="bottom"><font style="FONT-FAMILY: Times New Roman" size="2"><b>$</b></font></td>
<td valign="bottom" align="right"><font style="FONT-FAMILY: Times New Roman" size="2"><b>32,921</b></font></td>
<td valign="bottom" nowrap="nowrap"><font style="FONT-FAMILY: Times New Roman" size="2"><b>  </b></font></td>
<td valign="bottom"><font size="1"> </font></td>
<td valign="bottom"><font style="FONT-FAMILY: Times New Roman" size="2">$</font></td>
<td valign="bottom" align="right"><font style="FONT-FAMILY: Times New Roman" size="2">64,834</font></td>
<td valign="bottom" nowrap="nowrap"><font style="FONT-FAMILY: Times New Roman" size="2">  </font></td>
</tr>
<tr style="FONT-SIZE: 1px">
<td valign="bottom"></td>
<td valign="bottom">  </td>
<td valign="bottom">
<p style="BORDER-TOP: #000000 3px double"> </p>
</td>
<td valign="bottom">
<p style="BORDER-TOP: #000000 3px double"> </p>
</td>
<td> </td>
<td valign="bottom"> </td>
<td valign="bottom">
<p style="BORDER-TOP: #000000 3px double"> </p>
</td>
<td valign="bottom">
<p style="BORDER-TOP: #000000 3px double"> </p>
</td>
<td> </td>
</tr>
</table>
<p style="MARGIN-TOP: 12px; MARGIN-BOTTOM: 0px"><font style="FONT-FAMILY: Times New Roman" size="2">The deferred tax provision
has been entirely offset by a valuation allowance because the
Company is currently utilizing the underlying tax benefits
generated in previous years. The difference between the amounts of
income tax benefit that would result from applying domestic federal
statutory tax rates to the net loss relates to certain
nondeductible expenses, state income taxes and the valuation
allowance.</font></p>
<p style="MARGIN-TOP: 12px; MARGIN-BOTTOM: 0px"><font style="FONT-FAMILY: Times New Roman" size="2">The Company’s
deferred tax assets and liabilities were as follows:</font></p>
<p style="MARGIN-TOP: 0px; MARGIN-BOTTOM: 0px; FONT-SIZE: 12px">
 </p>
<table style="BORDER-COLLAPSE: collapse" border="0" cellspacing="0" cellpadding="0" width="76%" align="center">
<tr>
<td width="70%"></td>
<td valign="bottom" width="7%"></td>
<td></td>
<td></td>
<td></td>
<td valign="bottom" width="7%"></td>
<td></td>
<td></td>
<td></td>
</tr>
<tr>
<td valign="bottom"><font size="1"> </font></td>
<td valign="bottom"><font size="1">  </font></td>
<td valign="bottom" colspan="6" align="center"><font style="FONT-FAMILY: Times New Roman" size="1"><b>December 31</b></font></td>
<td valign="bottom"><font size="1"> </font></td>
</tr>
<tr>
<td valign="bottom"><font size="1"> </font></td>
<td valign="bottom"><font size="1">  </font></td>
<td style="BORDER-BOTTOM: #000000 1px solid" valign="bottom" colspan="2" align="center"><font style="FONT-FAMILY: Times New Roman" size="1"><b>2012</b></font></td>
<td valign="bottom"><font size="1"> </font></td>
<td valign="bottom"><font size="1"> </font></td>
<td style="BORDER-BOTTOM: #000000 1px solid" valign="bottom" colspan="2" align="center"><font style="FONT-FAMILY: Times New Roman" size="1"><b>2011</b></font></td>
<td valign="bottom"><font size="1"> </font></td>
</tr>
<tr bgcolor="#CCEEFF">
<td valign="top">
<p style="TEXT-INDENT: -1em; MARGIN-LEFT: 1em"><font style="FONT-FAMILY: Times New Roman" size="2">Deferred tax
assets:</font></p>
</td>
<td valign="bottom"><font size="1">  </font></td>
<td valign="bottom"></td>
<td valign="bottom"></td>
<td valign="bottom"></td>
<td valign="bottom"><font size="1"> </font></td>
<td valign="bottom"></td>
<td valign="bottom"></td>
<td valign="bottom"></td>
</tr>
<tr>
<td valign="top">
<p style="TEXT-INDENT: -1em; MARGIN-LEFT: 3em"><font style="FONT-FAMILY: Times New Roman" size="2">Net operating loss
carryforwards</font></p>
</td>
<td valign="bottom"><font size="1">  </font></td>
<td valign="bottom"><font style="FONT-FAMILY: Times New Roman" size="2"><b>$</b></font></td>
<td valign="bottom" align="right"><font style="FONT-FAMILY: Times New Roman" size="2"><b>8,418,507</b></font></td>
<td valign="bottom" nowrap="nowrap"><font style="FONT-FAMILY: Times New Roman" size="2"><b>  </b></font></td>
<td valign="bottom"><font size="1"> </font></td>
<td valign="bottom"><font style="FONT-FAMILY: Times New Roman" size="2">$</font></td>
<td valign="bottom" align="right"><font style="FONT-FAMILY: Times New Roman" size="2">1,118,070</font></td>
<td valign="bottom" nowrap="nowrap"><font style="FONT-FAMILY: Times New Roman" size="2">  </font></td>
</tr>
<tr bgcolor="#CCEEFF">
<td valign="top">
<p style="TEXT-INDENT: -1em; MARGIN-LEFT: 3em"><font style="FONT-FAMILY: Times New Roman" size="2">Accrued expenses</font></p>
</td>
<td valign="bottom"><font size="1">  </font></td>
<td valign="bottom"><font style="FONT-FAMILY: Times New Roman" size="2"><b> </b></font></td>
<td valign="bottom" align="right"><font style="FONT-FAMILY: Times New Roman" size="2"><b>215,865</b></font></td>
<td valign="bottom" nowrap="nowrap"><font style="FONT-FAMILY: Times New Roman" size="2"><b>  </b></font></td>
<td valign="bottom"><font size="1"> </font></td>
<td valign="bottom"><font style="FONT-FAMILY: Times New Roman" size="2"> </font></td>
<td valign="bottom" align="right"><font style="FONT-FAMILY: Times New Roman" size="2">416,268</font></td>
<td valign="bottom" nowrap="nowrap"><font style="FONT-FAMILY: Times New Roman" size="2">  </font></td>
</tr>
<tr>
<td valign="top">
<p style="TEXT-INDENT: -1em; MARGIN-LEFT: 3em"><font style="FONT-FAMILY: Times New Roman" size="2">Accrued employee
benefits</font></p>
</td>
<td valign="bottom"><font size="1">  </font></td>
<td valign="bottom"><font style="FONT-FAMILY: Times New Roman" size="2"><b> </b></font></td>
<td valign="bottom" align="right"><font style="FONT-FAMILY: Times New Roman" size="2"><b>282,268</b></font></td>
<td valign="bottom" nowrap="nowrap"><font style="FONT-FAMILY: Times New Roman" size="2"><b>  </b></font></td>
<td valign="bottom"><font size="1"> </font></td>
<td valign="bottom"><font style="FONT-FAMILY: Times New Roman" size="2"> </font></td>
<td valign="bottom" align="right"><font style="FONT-FAMILY: Times New Roman" size="2">259,638</font></td>
<td valign="bottom" nowrap="nowrap"><font style="FONT-FAMILY: Times New Roman" size="2">  </font></td>
</tr>
<tr bgcolor="#CCEEFF">
<td valign="top">
<p style="TEXT-INDENT: -1em; MARGIN-LEFT: 3em"><font style="FONT-FAMILY: Times New Roman" size="2">Capitalized research and
development costs</font></p>
</td>
<td valign="bottom"><font size="1">  </font></td>
<td valign="bottom"><font style="FONT-FAMILY: Times New Roman" size="2"><b> </b></font></td>
<td valign="bottom" align="right"><font style="FONT-FAMILY: Times New Roman" size="2"><b>27,516</b></font></td>
<td valign="bottom" nowrap="nowrap"><font style="FONT-FAMILY: Times New Roman" size="2"><b>  </b></font></td>
<td valign="bottom"><font size="1"> </font></td>
<td valign="bottom"><font style="FONT-FAMILY: Times New Roman" size="2"> </font></td>
<td valign="bottom" align="right"><font style="FONT-FAMILY: Times New Roman" size="2">108,138</font></td>
<td valign="bottom" nowrap="nowrap"><font style="FONT-FAMILY: Times New Roman" size="2">  </font></td>
</tr>
<tr>
<td valign="top">
<p style="TEXT-INDENT: -1em; MARGIN-LEFT: 3em"><font style="FONT-FAMILY: Times New Roman" size="2">Research and development
credit</font></p>
</td>
<td valign="bottom"><font size="1">  </font></td>
<td valign="bottom"><font style="FONT-FAMILY: Times New Roman" size="2"><b> </b></font></td>
<td valign="bottom" align="right"><font style="FONT-FAMILY: Times New Roman" size="2"><b>1,928,714</b></font></td>
<td valign="bottom" nowrap="nowrap"><font style="FONT-FAMILY: Times New Roman" size="2"><b>  </b></font></td>
<td valign="bottom"><font size="1"> </font></td>
<td valign="bottom"><font style="FONT-FAMILY: Times New Roman" size="2"> </font></td>
<td valign="bottom" align="right"><font style="FONT-FAMILY: Times New Roman" size="2">1,612,459</font></td>
<td valign="bottom" nowrap="nowrap"><font style="FONT-FAMILY: Times New Roman" size="2">  </font></td>
</tr>
<tr bgcolor="#CCEEFF">
<td valign="top">
<p style="TEXT-INDENT: -1em; MARGIN-LEFT: 3em"><font style="FONT-FAMILY: Times New Roman" size="2">Deferred revenue</font></p>
</td>
<td valign="bottom"><font size="1">  </font></td>
<td valign="bottom"><font style="FONT-FAMILY: Times New Roman" size="2"><b> </b></font></td>
<td valign="bottom" align="right"><font style="FONT-FAMILY: Times New Roman" size="2"><b>643,669</b></font></td>
<td valign="bottom" nowrap="nowrap"><font style="FONT-FAMILY: Times New Roman" size="2"><b>  </b></font></td>
<td valign="bottom"><font size="1"> </font></td>
<td valign="bottom"><font style="FONT-FAMILY: Times New Roman" size="2"> </font></td>
<td valign="bottom" align="right"><font style="FONT-FAMILY: Times New Roman" size="2">1,287,333</font></td>
<td valign="bottom" nowrap="nowrap"><font style="FONT-FAMILY: Times New Roman" size="2">  </font></td>
</tr>
<tr>
<td valign="top">
<p style="TEXT-INDENT: -1em; MARGIN-LEFT: 1em"><font style="FONT-FAMILY: Times New Roman" size="2">Deferred tax
liabilities:</font></p>
</td>
<td valign="bottom"><font size="1">  </font></td>
<td valign="bottom"></td>
<td valign="bottom"></td>
<td valign="bottom"></td>
<td valign="bottom"><font size="1"> </font></td>
<td valign="bottom"></td>
<td valign="bottom"></td>
<td valign="bottom"></td>
</tr>
<tr bgcolor="#CCEEFF">
<td valign="top">
<p style="TEXT-INDENT: -1em; MARGIN-LEFT: 3em"><font style="FONT-FAMILY: Times New Roman" size="2">Depreciation</font></p>
</td>
<td valign="bottom"><font size="1">  </font></td>
<td valign="bottom"><font style="FONT-FAMILY: Times New Roman" size="2"><b> </b></font></td>
<td valign="bottom" align="right"><font style="FONT-FAMILY: Times New Roman" size="2"><b>130,017</b></font></td>
<td valign="bottom" nowrap="nowrap"><font style="FONT-FAMILY: Times New Roman" size="2"><b>  </b></font></td>
<td valign="bottom"><font size="1"> </font></td>
<td valign="bottom"><font style="FONT-FAMILY: Times New Roman" size="2"> </font></td>
<td valign="bottom" align="right"><font style="FONT-FAMILY: Times New Roman" size="2">147,165</font></td>
<td valign="bottom" nowrap="nowrap"><font style="FONT-FAMILY: Times New Roman" size="2">  </font></td>
</tr>
<tr style="FONT-SIZE: 1px">
<td valign="bottom"></td>
<td valign="bottom">  </td>
<td valign="bottom">
<p style="BORDER-TOP: #000000 1px solid"> </p>
</td>
<td valign="bottom">
<p style="BORDER-TOP: #000000 1px solid"> </p>
</td>
<td> </td>
<td valign="bottom"> </td>
<td valign="bottom">
<p style="BORDER-TOP: #000000 1px solid"> </p>
</td>
<td valign="bottom">
<p style="BORDER-TOP: #000000 1px solid"> </p>
</td>
<td> </td>
</tr>
<tr>
<td valign="top">
<p style="TEXT-INDENT: -1em; MARGIN-LEFT: 3em"><font style="FONT-FAMILY: Times New Roman" size="2">Net deferred tax
asset</font></p>
</td>
<td valign="bottom"><font size="1">  </font></td>
<td valign="bottom"><font style="FONT-FAMILY: Times New Roman" size="2"><b> </b></font></td>
<td valign="bottom" align="right"><font style="FONT-FAMILY: Times New Roman" size="2"><b>11,646,556</b></font></td>
<td valign="bottom" nowrap="nowrap"><font style="FONT-FAMILY: Times New Roman" size="2"><b>  </b></font></td>
<td valign="bottom"><font size="1"> </font></td>
<td valign="bottom"><font style="FONT-FAMILY: Times New Roman" size="2"> </font></td>
<td valign="bottom" align="right"><font style="FONT-FAMILY: Times New Roman" size="2">4,949,071</font></td>
<td valign="bottom" nowrap="nowrap"><font style="FONT-FAMILY: Times New Roman" size="2">  </font></td>
</tr>
<tr bgcolor="#CCEEFF">
<td valign="top">
<p style="TEXT-INDENT: -1em; MARGIN-LEFT: 3em"><font style="FONT-FAMILY: Times New Roman" size="2">Valuation
allowance</font></p>
</td>
<td valign="bottom"><font size="1">  </font></td>
<td valign="bottom"><font style="FONT-FAMILY: Times New Roman" size="2"><b> </b></font></td>
<td valign="bottom" align="right"><font style="FONT-FAMILY: Times New Roman" size="2"><b>(11,646,556</b></font></td>
<td valign="bottom" nowrap="nowrap"><font style="FONT-FAMILY: Times New Roman" size="2"><b>) </b></font></td>
<td valign="bottom"><font size="1"> </font></td>
<td valign="bottom"><font style="FONT-FAMILY: Times New Roman" size="2"> </font></td>
<td valign="bottom" align="right"><font style="FONT-FAMILY: Times New Roman" size="2">(4,949,071</font></td>
<td valign="bottom" nowrap="nowrap"><font style="FONT-FAMILY: Times New Roman" size="2">) </font></td>
</tr>
<tr style="FONT-SIZE: 1px">
<td valign="bottom"></td>
<td valign="bottom">  </td>
<td valign="bottom">
<p style="BORDER-TOP: #000000 1px solid"> </p>
</td>
<td valign="bottom">
<p style="BORDER-TOP: #000000 1px solid"> </p>
</td>
<td> </td>
<td valign="bottom"> </td>
<td valign="bottom">
<p style="BORDER-TOP: #000000 1px solid"> </p>
</td>
<td valign="bottom">
<p style="BORDER-TOP: #000000 1px solid"> </p>
</td>
<td> </td>
</tr>
<tr>
<td valign="top">
<p style="TEXT-INDENT: -1em; MARGIN-LEFT: 1em"><font style="FONT-FAMILY: Times New Roman" size="2">Net deferred tax
asset</font></p>
</td>
<td valign="bottom"><font size="1">  </font></td>
<td valign="bottom"><font style="FONT-FAMILY: Times New Roman" size="2"><b>$</b></font></td>
<td valign="bottom" align="right"><font style="FONT-FAMILY: Times New Roman" size="2"><b>—  </b></font></td>
<td valign="bottom" nowrap="nowrap"><font style="FONT-FAMILY: Times New Roman" size="2"><b>  </b></font></td>
<td valign="bottom"><font size="1"> </font></td>
<td valign="bottom"><font style="FONT-FAMILY: Times New Roman" size="2">$</font></td>
<td valign="bottom" align="right"><font style="FONT-FAMILY: Times New Roman" size="2">—  </font></td>
<td valign="bottom" nowrap="nowrap"><font style="FONT-FAMILY: Times New Roman" size="2">  </font></td>
</tr>
<tr style="FONT-SIZE: 1px">
<td valign="bottom"></td>
<td valign="bottom">  </td>
<td valign="bottom">
<p style="BORDER-TOP: #000000 3px double"> </p>
</td>
<td valign="bottom">
<p style="BORDER-TOP: #000000 3px double"> </p>
</td>
<td> </td>
<td valign="bottom"> </td>
<td valign="bottom">
<p style="BORDER-TOP: #000000 3px double"> </p>
</td>
<td valign="bottom">
<p style="BORDER-TOP: #000000 3px double"> </p>
</td>
<td> </td>
</tr>
</table>
<p style="MARGIN-TOP: 0px; MARGIN-BOTTOM: 0px"><font style="FONT-FAMILY: Times New Roman" size="2">The net operating loss
carryforwards of approximately $21.8 million will begin to
expire in the year 2030 if unused. The use of the Company’s
net operating loss carryforwards may be restricted due to changes
in Company ownership.</font></p>
</div>
17000
<div>
<p style="MARGIN-TOP: 18px; MARGIN-BOTTOM: 0px"><font style="FONT-FAMILY: Times New Roman" size="2"><b>Research and
Development</b></font></p>
<p style="MARGIN-TOP: 6px; MARGIN-BOTTOM: 0px"><font style="FONT-FAMILY: Times New Roman" size="2">Except for payments made in
advance of services, the Company expenses its research and
development costs as incurred. For payments made in advance, the
Company recognizes research and development expense as the services
are rendered. Research and development costs primarily consist of
salaries and related expenses for personnel and resources and the
costs of clinical trials. Other research and development expenses
include preclinical analytical testing, outside services,
providers, materials and consulting fees.</font></p>
</div>
P3Y10M24D
<div>
<p style="MARGIN-TOP: 0px; MARGIN-BOTTOM: 0px"><font style="FONT-FAMILY: Times New Roman" size="2"><b>10 . Employee Benefit
Plan</b></font></p>
<p style="MARGIN-TOP: 6px; MARGIN-BOTTOM: 0px"><font style="FONT-FAMILY: Times New Roman" size="2">The Company sponsors a
defined contribution 401(k) plan covering all full-time employees.
Participants may elect to contribute up to 15% of their annual
pre-tax earnings up to the federally allowed maximum limits. The
Company makes a matching contribution of 50% on the first 6% of
contributions made by participants. Participant and Company
contributions vest immediately. During the years ended
December 31, 2012 and 2011, the Company recorded matching
contribution expense of $79,656 and $76,231,
respectively.</font></p>
</div>
66540
<div>
<p style="MARGIN-TOP: 18px; MARGIN-BOTTOM: 0px"><font style="FONT-FAMILY: Times New Roman" size="2"><b>Concentration of Credit
Risk</b></font></p>
<p style="MARGIN-TOP: 6px; MARGIN-BOTTOM: 0px"><font style="FONT-FAMILY: Times New Roman" size="2">Cash equivalents are held
with major financial institutions in the United States.
Certificates of deposit held with banks may exceed the amount of
insurance provided on such deposits. Generally, these deposits may
be redeemed upon demand and, therefore, bear minimal
risk.</font></p>
</div>
<div>
<p style="MARGIN-TOP: 18pt; FONT-FAMILY: Times New Roman; MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt">
<b>2. Summary of Significant Accounting Policies</b></p>
<p style="MARGIN-TOP: 6pt; FONT-FAMILY: Times New Roman; MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt">
<b>Use of Estimates</b></p>
<p style="MARGIN-TOP: 6pt; FONT-FAMILY: Times New Roman; MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt">
The preparation of financial statements in conformity with
generally accepted accounting principles requires management to
make estimates and assumptions that affect the amounts reported in
the financial statements and accompanying notes. Although actual
results could differ from those estimates, management does not
believe that such differences would be material.</p>
<p style="MARGIN-TOP: 18pt; FONT-FAMILY: Times New Roman; MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt">
<b>Cash and Cash Equivalents</b></p>
<p style="MARGIN-TOP: 6pt; FONT-FAMILY: Times New Roman; MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt">
The Company considers all highly liquid investments with a maturity
of three months or less from the date of purchase to be cash
equivalents. Cash and cash equivalents consist of certificates of
deposit with commercial banks and financial institutions.
Certificates of deposit with a maturity date of more than three
months are classified separately on the balance sheet. Their
carrying values approximate the fair market value.</p>
<p style="MARGIN-TOP: 18pt; FONT-FAMILY: Times New Roman; MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt">
<b>Fair Value Measurements</b></p>
<p style="MARGIN-TOP: 6pt; FONT-FAMILY: Times New Roman; MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt">
The Company applies the fair value method under ASC 820, <i>Fair
Value Measurements and Disclosures</i>. ASC 820 defines fair value,
establishes a fair value hierarchy for assets and liabilities
measured at fair value and requires expanded disclosures about fair
value measurements. The ASC 820 hierarchy ranks the quality and
reliability of inputs, or assumptions, used in the determination of
fair value and requires assets and liabilities carried at fair
value to be classified and disclosed in one of the following
categories based on the lowest level input used that is significant
to a particular fair value measurement:</p>
<p style="MARGIN-TOP: 0pt; MARGIN-BOTTOM: 0pt; FONT-SIZE: 6pt"></p>
<table style="BORDER-COLLAPSE: collapse; FONT-FAMILY: Times New Roman; FONT-SIZE: 10pt" border="0" cellspacing="0" cellpadding="0" width="100%">
<tr>
<td width="4%"></td>
<td valign="top" width="3%" align="left">•</td>
<td valign="top" width="1%"></td>
<td valign="top" align="left">Level 1—Fair value is
determined by using unadjusted quoted prices that are available in
active markets for identical assets and liabilities.</td>
</tr>
</table>
<p style="MARGIN-TOP: 0pt; MARGIN-BOTTOM: 0pt; FONT-SIZE: 6pt"></p>
<table style="BORDER-COLLAPSE: collapse; FONT-FAMILY: Times New Roman; FONT-SIZE: 10pt" border="0" cellspacing="0" cellpadding="0" width="100%">
<tr>
<td width="4%"></td>
<td valign="top" width="3%" align="left">•</td>
<td valign="top" width="1%"></td>
<td valign="top" align="left">
<p style="FONT-FAMILY: Times New Roman; FONT-SIZE: 10pt" align="left">Level 2—Fair value is determined by using inputs other
than Level 1 quoted prices that are directly or indirectly
observable. Inputs can include quoted prices for similar assets and
liabilities in active markets or quoted prices for identical assets
and liabilities in inactive markets. Related inputs can also
include those used in valuation or other pricing models, such as
interest rates and yield curves that can be corroborated by
observable market data.</p>
</td>
</tr>
</table>
<p style="MARGIN-TOP: 0pt; MARGIN-BOTTOM: 0pt; FONT-SIZE: 6pt"></p>
<table style="BORDER-COLLAPSE: collapse; FONT-FAMILY: Times New Roman; FONT-SIZE: 10pt" border="0" cellspacing="0" cellpadding="0" width="100%">
<tr>
<td width="4%"></td>
<td valign="top" width="3%" align="left">•</td>
<td valign="top" width="1%"></td>
<td valign="top" align="left">Level 3 – Fair value is
determined by inputs that are unobservable and not corroborated by
market data. Use of these inputs involves significant and
subjective judgments to be made by a reporting entity—e.g.,
determining an appropriate adjustment to a discount factor for
illiquidity associated with a given security.</td>
</tr>
</table>
<p style="MARGIN-TOP: 12pt; FONT-FAMILY: Times New Roman; MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt">
The Company evaluates financial assets and liabilities subject to
fair value measurements on a recurring basis to determine the
appropriate level at which to classify them each reporting period.
This determination requires the Company to make subjective
judgments as to the significance of inputs used in determining fair
value and where such inputs lie within the ASC 820 hierarchy.</p>
<p style="MARGIN-TOP: 12pt; FONT-FAMILY: Times New Roman; MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt">
The Company has no assets or liabilities that were measured using
quoted prices for similar assets and liabilities or significant
unobservable inputs (Level 2 and Level 3 assets and liabilities,
respectively) as of December 31, 2012. The carrying value of cash
held in money market funds of approximately $1.2 million as of
December 31, 2012, is included in cash and cash equivalents and
approximates market value based on quoted market price or Level 1
inputs.</p>
<p style="MARGIN-TOP: 18pt; FONT-FAMILY: Times New Roman; MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt">
<b>Financial Instruments</b></p>
<p style="MARGIN-TOP: 6pt; FONT-FAMILY: Times New Roman; MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt">
The Company considers the recorded costs of its financial assets
and liabilities, which consist of cash equivalents, accounts
receivable, accounts payable and accrued liabilities, to
approximate their fair value because of their relatively short
maturities at December 31, 2012 and 2011. Management believes that
the risks associated with its financial instruments are minimal as
the counterparties are various corporations, financial institutions
and government agencies of high credit standing.</p>
<p style="MARGIN-TOP: 18pt; FONT-FAMILY: Times New Roman; MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt">
<b>Concentration of Credit Risk</b></p>
<p style="MARGIN-TOP: 6pt; FONT-FAMILY: Times New Roman; MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt">
Cash equivalents are held with major financial institutions in the
United States. Certificates of deposit held with banks may exceed
the amount of insurance provided on such deposits. Generally, these
deposits may be redeemed upon demand and, therefore, bear minimal
risk.</p>
<p style="MARGIN-TOP: 18pt; FONT-FAMILY: Times New Roman; MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt">
<b>Accounts Receivable</b></p>
<p style="MARGIN-TOP: 6pt; FONT-FAMILY: Times New Roman; MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt">
Accounts receivable that management has the intent and ability to
collect are reported in the balance sheets at outstanding amounts,
less an allowance for doubtful accounts. The Company writes off
uncollectible receivables when the likelihood of collection is
remote.</p>
<p style="MARGIN-TOP: 12pt; FONT-FAMILY: Times New Roman; MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt">
The Company evaluates the collectability of accounts receivable on
a regular basis. The allowance, if any, is based upon various
factors including the financial condition and payment history of
customers, an overall review of collections experience on other
accounts and economic factors or events expected to affect future
collections experience. No allowance was recorded as of December
31, 2012, as the Company has a history of collecting on all
accounts including government agencies and collaborations funding
its research.</p>
<p style="MARGIN-TOP: 0pt; FONT-FAMILY: Times New Roman; MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt">
<b>Property and Equipment</b></p>
<p style="MARGIN-TOP: 6pt; FONT-FAMILY: Times New Roman; MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt">
Property and equipment is stated at cost and depreciated on a
straight-line basis over estimated useful lives ranging from three
to five years. Leasehold improvements are amortized using the
straight-line method over the shorter of the estimated useful life
of the assets or the term of the related lease. Expenditures for
maintenance and repairs are charged to operations as incurred.</p>
<p style="MARGIN-TOP: 12pt; FONT-FAMILY: Times New Roman; MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt">
When indicators of possible impairment are identified, the Company
evaluates the recoverability of the carrying value of its
long-lived assets based on the criteria established in ASC 360,
<i>Property, Plant and Equipment</i>. The Company considers
historical performance and anticipated future results in its
evaluation of potential impairment. The Company evaluates the
carrying value of those assets in relation to the operating
performance of the business and undiscounted cash flows expected to
result from the use of those assets. Impairment losses are
recognized when carrying value exceeds the undiscounted cash flows
then management must determine the fair value of the underlying
asset. No such impairment losses have been recognized to date.</p>
<p style="MARGIN-TOP: 18pt; FONT-FAMILY: Times New Roman; MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt">
<b>Revenue Recognition</b></p>
<p style="MARGIN-TOP: 6pt; FONT-FAMILY: Times New Roman; MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt">
Revenue is recognized when all terms and conditions of the
agreements have been met, including persuasive evidence of an
arrangement, delivery has occurred or services have been rendered,
price is fixed or determinable and collectability is reasonably
assured. The Company is reimbursed for certain costs incurred on
specified research projects under the terms and conditions of
grants, collaboration agreements, and awards. The Company records
the amount of reimbursement as revenues on a gross basis in
accordance with ASC 605-45, <i>Revenue Recognition/Principal Agent
Considerations</i>. The Company is the primary obligor with respect
to purchasing goods and services from third-party suppliers, is
obligated to compensate the service provider for the work
performed, and has discretion in selecting the supplier. Provisions
for estimated losses on research grant projects and any other
contracts are made in the period such losses are determined.</p>
<p style="MARGIN-TOP: 12pt; FONT-FAMILY: Times New Roman; MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt">
Effective January 1, 2011, the Company adopted a new accounting
standard that amends the guidance on the accounting for
arrangements involving the delivery of more than one element.
Pursuant to the new standard, each required deliverable is
evaluated to determine whether it qualifies as a separate unit of
accounting. For ITI this determination is generally based on
whether the deliverable has “stand-alone value” to the
customer. The Company adopted this new accounting standard on a
prospective basis for all Multiple-Deliverable Revenue Arrangements
(MDRAs) entered into on or after January 1, 2011, and for any MDRAs
that were entered into prior to January 1, 2011, but materially
modified on or after that date.</p>
<p style="MARGIN-TOP: 12pt; FONT-FAMILY: Times New Roman; MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt">
For MDRAs entered into prior to January 1, 2011 (pre-2011
arrangements) and not materially modified thereafter, we continue
to apply our prior accounting policy with respect to such
arrangements. Under this policy, in general, revenue from
non-refundable, up-front fees related to intellectual property
rights/licenses, where we have continuing involvement and where
standalone value could not be determined under the previous
guidance, is recognized ratably over the estimated period of
ongoing involvement. In general, the consideration with respect to
the other deliverables is recognized when the goods or services are
delivered.</p>
<p style="MARGIN-TOP: 12pt; FONT-FAMILY: Times New Roman; MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt">
The adoption of this accounting standard did not have a material
impact on our results of operations for the years ended December
31, 2012 and 2011, or on our financial positions as of December 31,
2012 and 2011. Our results of operations for the year ended
December 31, 2010 also would not have been materially impacted if
the accounting standard had been adopted on January 1, 2010.</p>
<p style="MARGIN-TOP: 0pt; MARGIN-BOTTOM: 0pt; FONT-SIZE: 12pt">
</p>
<p style="MARGIN-TOP: 0pt; FONT-FAMILY: Times New Roman; MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt">
In January 2011, the Company adopted ASC Topic 605-28, <i>Milestone
Method</i>. Under this guidance, we recognize revenue contingent
upon the achievement of a substantive milestone in its entirety in
the period the milestone is achieved. Substantive milestone
payments are recognized upon achievement of the milestone only if
all of the following conditions are met:</p>
<p style="MARGIN-TOP: 0pt; MARGIN-BOTTOM: 0pt; FONT-SIZE: 6pt"></p>
<table style="BORDER-COLLAPSE: collapse; FONT-FAMILY: Times New Roman; FONT-SIZE: 10pt" border="0" cellspacing="0" cellpadding="0" width="100%">
<tr>
<td width="4%"></td>
<td valign="top" width="3%" align="left">•</td>
<td valign="top" width="1%"></td>
<td valign="top" align="left">The milestone payments are
non-refundable;</td>
</tr>
</table>
<p style="MARGIN-TOP: 0pt; MARGIN-BOTTOM: 0pt; FONT-SIZE: 6pt"></p>
<table style="BORDER-COLLAPSE: collapse; FONT-FAMILY: Times New Roman; FONT-SIZE: 10pt" border="0" cellspacing="0" cellpadding="0" width="100%">
<tr>
<td width="4%"></td>
<td valign="top" width="3%" align="left">•</td>
<td valign="top" width="1%"></td>
<td valign="top" align="left">Achievement of the milestone involves
a degree of risk and was not reasonably assured at the inception of
the arrangement;</td>
</tr>
</table>
<p style="MARGIN-TOP: 0pt; MARGIN-BOTTOM: 0pt; FONT-SIZE: 6pt"></p>
<table style="BORDER-COLLAPSE: collapse; FONT-FAMILY: Times New Roman; FONT-SIZE: 10pt" border="0" cellspacing="0" cellpadding="0" width="100%">
<tr>
<td width="4%"></td>
<td valign="top" width="3%" align="left">•</td>
<td valign="top" width="1%"></td>
<td valign="top" align="left">Substantive effort on our part is
involved in achieving the milestone;</td>
</tr>
</table>
<p style="MARGIN-TOP: 0pt; MARGIN-BOTTOM: 0pt; FONT-SIZE: 6pt"></p>
<table style="BORDER-COLLAPSE: collapse; FONT-FAMILY: Times New Roman; FONT-SIZE: 10pt" border="0" cellspacing="0" cellpadding="0" width="100%">
<tr>
<td width="4%"></td>
<td valign="top" width="3%" align="left">•</td>
<td valign="top" width="1%"></td>
<td valign="top" align="left">The amount of the milestone payment
is reasonable in relation to the effort expended or the risk
associated with achievement of the milestone; and</td>
</tr>
</table>
<p style="MARGIN-TOP: 0pt; MARGIN-BOTTOM: 0pt; FONT-SIZE: 6pt"></p>
<table style="BORDER-COLLAPSE: collapse; FONT-FAMILY: Times New Roman; FONT-SIZE: 10pt" border="0" cellspacing="0" cellpadding="0" width="100%">
<tr>
<td width="4%"></td>
<td valign="top" width="3%" align="left">•</td>
<td valign="top" width="1%"></td>
<td valign="top" align="left">A reasonable amount of time passes
between the up-front license payment and the first milestone
payment, as well as between each subsequent milestone payment.</td>
</tr>
</table>
<p style="MARGIN-TOP: 12pt; FONT-FAMILY: Times New Roman; MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt">
Determination as to whether a payment meets the aforementioned
conditions involves management’s judgment. If any of these
conditions are not met, the resulting payment would not be
considered a substantive milestone, and therefore, the resulting
payment would be considered part of the consideration for the
single unit of accounting and be recognized as revenues in
accordance with the revenue models described above. In addition,
the determination that one such payment was not a substantive
milestone could prevent us from concluding that subsequent
milestone payments were substantive milestones and, as a result,
any additional milestone payments could also be considered part of
the consideration for the single unit of accounting and would be
recognized as revenue as such performance obligations are performed
under either the proportional performance or straight-line methods,
as applicable.</p>
<p style="MARGIN-TOP: 18pt; FONT-FAMILY: Times New Roman; MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt">
<b>Deferred Revenue</b></p>
<p style="MARGIN-TOP: 6pt; FONT-FAMILY: Times New Roman; MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt">
Cash received as prepayment on future services is deferred and
recognized as revenue as the services are performed. The Company
must remit interest on any deferred revenue related to a
governmental agency. As of December 31, 2012 and 2011, no interest
was due as the Company did not have any deferred revenue from a
government agency.</p>
<p style="MARGIN-TOP: 18pt; FONT-FAMILY: Times New Roman; MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt">
<b>Research and Development</b></p>
<p style="MARGIN-TOP: 6pt; FONT-FAMILY: Times New Roman; MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt">
Except for payments made in advance of services, the Company
expenses its research and development costs as incurred. For
payments made in advance, the Company recognizes research and
development expense as the services are rendered. Research and
development costs primarily consist of salaries and related
expenses for personnel and resources and the costs of clinical
trials. Other research and development expenses include preclinical
analytical testing, outside services, providers, materials and
consulting fees.</p>
<p style="MARGIN-TOP: 18pt; FONT-FAMILY: Times New Roman; MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt">
<b>Income Taxes</b></p>
<p style="MARGIN-TOP: 6pt; FONT-FAMILY: Times New Roman; MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt">
Income taxes are accounted for using the liability method. Deferred
tax assets and liabilities are recognized for the future tax
consequences attributable to differences between the financial
statement carrying amounts of existing assets and liabilities and
its respective tax bases. Deferred tax assets and liabilities are
measured using enacted tax rates expected to apply to taxable
income in the year in which those temporary differences are
expected to be recovered or settled.</p>
<p style="MARGIN-TOP: 0pt; MARGIN-BOTTOM: 0pt; FONT-SIZE: 12pt">
</p>
<p style="MARGIN-TOP: 0pt; FONT-FAMILY: Times New Roman; MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt">
The effect on deferred tax assets and liabilities of a change in
tax rates is recognized in income in the period that includes the
enactment date. Valuation allowances are established when necessary
to reduce net deferred tax assets to the amount expected to be
realized. Income tax expense is the tax payable for the period and
the change during the period in deferred tax assets and
liabilities.</p>
<p style="MARGIN-TOP: 12pt; FONT-FAMILY: Times New Roman; MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt">
The Company accounts for uncertain tax positions pursuant to ASC
740 (previously included in Financial Accounting Standards Board
(FASB) Interpretation No. 48, <i>Accounting for Uncertainty in
Income Taxes—an Interpretation of FASB Statement No.
109)</i>. Financial statement recognition of a tax position taken
or expected to be taken in a tax return is determined based on a
more-likely-than-not threshold of that position being sustained. If
the tax position meets this threshold, the benefit to be recognized
is measured as the tax benefit having the highest likelihood of
being realized upon ultimate settlement with the taxing authority.
The Company recognizes interest accrued related to unrecognized tax
benefits and penalties in the provision for income taxes.</p>
<p style="MARGIN-TOP: 18pt; FONT-FAMILY: Times New Roman; MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt">
<b>Comprehensive Income (Loss)</b></p>
<p style="MARGIN-TOP: 6pt; FONT-FAMILY: Times New Roman; MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt">
ASC 220-10, <i>Reporting Comprehensive Income</i>, requires the
presentation of the comprehensive income or loss and its components
as part of the financial statements. For the years ended December
31, 2012, 2011 and 2010, the Company’s net (loss) income
equals comprehensive (loss) income.</p>
<p style="MARGIN-TOP: 18pt; FONT-FAMILY: Times New Roman; MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt">
<b>Share-Based Compensation</b></p>
<p style="MARGIN-TOP: 6pt; FONT-FAMILY: Times New Roman; MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt">
Share-based payments are accounted for in accordance with the
provisions of ASC 718, <i>Compensation—Stock Compensation</i>
(ASC 718). The fair value of share-based payments is estimated, on
the date of grant, using the Black-Scholes-Merton option-pricing
model (the Black-Scholes model). The resulting fair value is
recognized ratably over the requisite service period, which is
generally the vesting period of the option.</p>
<p style="MARGIN-TOP: 12pt; FONT-FAMILY: Times New Roman; MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt">
For all time vesting awards granted, expense is amortized using the
straight-line attribution method. For awards that contain a
performance condition, expense is amortized using the accelerated
attribution method. As share-based compensation expense recognized
in the statements of operations for the years ended December 31,
2012 and 2011, is based on share-based awards ultimately expected
to vest, it has been reduced for estimated forfeitures.</p>
<p style="MARGIN-TOP: 12pt; FONT-FAMILY: Times New Roman; MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt">
ASC 718 requires forfeitures to be estimated at the time of grant
and revised, if necessary, in subsequent periods if actual
forfeitures differ from those estimates. Pre-vesting forfeitures
are based on the Company’s historical experience for the
years ended December 31, 2012, 2011 and 2010, and have not been
material.</p>
<p style="MARGIN-TOP: 12pt; FONT-FAMILY: Times New Roman; MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt">
The Company utilizes the Black-Scholes model for estimating fair
value of its stock options granted. Option valuation models,
including Black-Scholes model, require the input of subjective
assumptions, and changes in the assumptions used can materially
affect the grant date fair value of an award. These assumptions
include the risk-free rate of interest, expected dividend yield,
expected volatility and the expected life of the award.</p>
<p style="MARGIN-TOP: 12pt; FONT-FAMILY: Times New Roman; MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt">
Expected volatility rates are based on historical volatility of the
common stock of comparable publicly traded entities and other
factors due to the lack of historic information of the
Company’s common stock. The expected life of stock-based
options is the period of time for which the stock-based options are
expected to be outstanding. Given the lack of historic exercise
data, the expected life is determined using the “simplified
method” which is defined as the midpoint between the vesting
date and the end of the contractual term.</p>
<p style="MARGIN-TOP: 0pt; MARGIN-BOTTOM: 0pt; FONT-SIZE: 12pt">
</p>
<p style="MARGIN-TOP: 0pt; FONT-FAMILY: Times New Roman; MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt">
The risk-free interest rates are based on the U.S. Treasury yield
for a period consistent with the expected term of the option in
effect at the time of the grant. The Company has not paid dividends
to its stockholders since its inception and does not plan to pay
cash dividends in the foreseeable future. Therefore, the Company
has assumed an expected dividend rate of zero.</p>
<p style="MARGIN-TOP: 12pt; FONT-FAMILY: Times New Roman; MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt">
Given the absence of an active market for the Company’s
common stock, the exercise price of the stock options on the date
of grant was determined and approved by the board of directors
using several factors, including progress and milestones achieved
in the Company’s business development and performance, the
price per share of its convertible preferred stock offerings and
general industry and economic trends. In establishing the estimated
fair value of the common stock, the Company considered the guidance
set forth in American Institute of Certified Public Accountants
Practice Guide, <i>Valuation of Privately-Held-Company Equity
Securities Issued as Compensation</i>.</p>
<p style="MARGIN-TOP: 12pt; FONT-FAMILY: Times New Roman; MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt">
Under ASC 718, the cumulative amount of compensation cost
recognized for instruments classified as equity that ordinarily
would result in a future tax deduction under existing tax law shall
be considered to be a deductible difference in applying ASC 740,
<i>Income Taxes</i>. The deductible temporary difference is based
on the compensation cost recognized for financial reporting
purposes; however, these provisions currently do not impact the
Company, as all the deferred tax assets have a full valuation
allowance.</p>
<p style="MARGIN-TOP: 12pt; FONT-FAMILY: Times New Roman; MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt">
Since the Company had net operating loss carryforwards as of
December 31, 2012 and 2011, no excess tax benefits for the tax
deductions related to share-based awards were recognized in the
statements of operations.</p>
<p style="MARGIN-TOP: 12pt; FONT-FAMILY: Times New Roman; MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt">
Equity instruments issued to non-employees are accounted for under
the provisions of ASC 718 and ASC <font style="WHITE-SPACE: nowrap">505-50,</font> <i>Equity/Equity-Based
Payments to Non-Employees</i>. Accordingly, the estimated fair
value of the equity instrument is recorded on the earlier of the
performance commitment date or the date the services required are
completed and are marked to market during the service period.</p>
<p style="MARGIN-TOP: 18pt; FONT-FAMILY: Times New Roman; MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt">
<b>(Loss) Earnings Per Share</b></p>
<p style="MARGIN-TOP: 6pt; FONT-FAMILY: Times New Roman; MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt">
(Loss) Earnings per share is calculated under the two-class method
under which all earnings (distributed and undistributed) are
allocated to each class of common stock and participating
securities based on their respective rights to receive dividends.
In the event that the Board of Directors shall declare a dividend
payable in cash or other property on the then-outstanding shares of
common stock, the holders of the Redeemable Preferred Series A, B,
and C convertible preferred stock shall be entitled to receive the
amount of dividends per share of Preferred Stock that would be
payable on the largest number of whole shares of Common Stock into
which each share of Preferred Stock could then be converted.
Therefore, the Redeemable Preferred Series A, B, and C Preferred
Stock are participating securities.</p>
<p style="MARGIN-TOP: 0pt; MARGIN-BOTTOM: 0pt; FONT-SIZE: 12pt">
</p>
<p style="MARGIN-TOP: 0pt; FONT-FAMILY: Times New Roman; MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt">
Basic net (loss) income per common share is determined by dividing
the net (loss) income allocable to common stockholders by the
weighted-average number of common shares outstanding during the
period, without consideration of common stock equivalents. Diluted
net (loss) income per share is computed by dividing the net (loss)
income allocable to common stockholders by the weighted-average
number of common stock equivalents outstanding for the period. The
treasury stock method is used to determine the dilutive effect of
the Company’s stock option grants and the if-converted method
is used to determine the dilutive effect of the Company’s
Redeemable Preferred Series A, B, and C convertible preferred
stock.</p>
<p style="MARGIN-TOP: 0pt; MARGIN-BOTTOM: 0pt; FONT-SIZE: 12pt">
</p>
<table style="BORDER-COLLAPSE: collapse; FONT-FAMILY: Times New Roman; FONT-SIZE: 10pt" border="0" cellspacing="0" cellpadding="0" width="100%" align="center"><!-- Begin Table Head -->
<tr>
<td width="75%"></td>
<td valign="bottom" width="3%"></td>
<td></td>
<td></td>
<td></td>
<td valign="bottom" width="3%"></td>
<td></td>
<td></td>
<td></td>
</tr>
<tr style="FONT-FAMILY: Times New Roman; FONT-SIZE: 8pt">
<td valign="bottom"></td>
<td valign="bottom"></td>
<td style="BORDER-BOTTOM: #000000 1pt solid" valign="bottom" colspan="6" align="center"><b>Year Ended December 30</b></td>
<td valign="bottom"></td>
</tr>
<tr style="FONT-FAMILY: Times New Roman; FONT-SIZE: 8pt">
<td valign="bottom"></td>
<td valign="bottom"></td>
<td style="BORDER-BOTTOM: #000000 1pt solid" valign="bottom" colspan="2" align="center"><b>2012</b></td>
<td valign="bottom"></td>
<td valign="bottom"></td>
<td style="BORDER-BOTTOM: #000000 1pt solid" valign="bottom" colspan="2" align="center"><b>2011</b></td>
<td valign="bottom"></td>
</tr>
<!-- End Table Head --><!-- Begin Table Body -->
<tr style="FONT-FAMILY: Times New Roman; FONT-SIZE: 10pt" bgcolor="#CCEEFF">
<td valign="top">
<p style="TEXT-INDENT: -1em; FONT-FAMILY: Times New Roman; MARGIN-LEFT: 3em; FONT-SIZE: 10pt">
<b>Basic</b> <b>(loss) income</b> <b>per common share</b></p>
</td>
<td valign="bottom"></td>
<td valign="bottom"></td>
<td valign="bottom"></td>
<td valign="bottom"></td>
<td valign="bottom"></td>
<td valign="bottom"></td>
<td valign="bottom"></td>
<td valign="bottom"></td>
</tr>
<tr style="FONT-FAMILY: Times New Roman; FONT-SIZE: 10pt">
<td valign="top">
<p style="TEXT-INDENT: -1em; FONT-FAMILY: Times New Roman; MARGIN-LEFT: 5em; FONT-SIZE: 10pt">
Net (loss) income</p>
</td>
<td valign="bottom"></td>
<td valign="bottom"><b>$</b></td>
<td valign="bottom" align="right">
<b>(</b><b>16</b><b>,</b><b>590</b><b>,</b><b>827</b></td>
<td valign="bottom" nowrap="nowrap"><b>)</b></td>
<td valign="bottom"></td>
<td valign="bottom">$</td>
<td valign="bottom" align="right">11,092,429</td>
<td valign="bottom" nowrap="nowrap"></td>
</tr>
<tr style="FONT-FAMILY: Times New Roman; FONT-SIZE: 10pt" bgcolor="#CCEEFF">
<td valign="top">
<p style="TEXT-INDENT: -1em; FONT-FAMILY: Times New Roman; MARGIN-LEFT: 5em; FONT-SIZE: 10pt">
Less: Undistributed (loss) earnings allocated to participating
securities</p>
</td>
<td valign="bottom"></td>
<td valign="bottom"></td>
<td valign="bottom" align="right">
<b>(</b><b>1</b><b>,</b><b>672</b><b>,</b><b>223</b></td>
<td valign="bottom" nowrap="nowrap"><b>)</b></td>
<td valign="bottom"></td>
<td valign="bottom"></td>
<td valign="bottom" align="right">(6,747,903</td>
<td valign="bottom" nowrap="nowrap">)</td>
</tr>
<tr style="FONT-SIZE: 1px">
<td valign="bottom"></td>
<td valign="bottom"></td>
<td valign="bottom">
<p style="BORDER-TOP: #000000 1px solid"></p>
</td>
<td valign="bottom">
<p style="BORDER-TOP: #000000 1px solid"></p>
</td>
<td></td>
<td valign="bottom"></td>
<td valign="bottom">
<p style="BORDER-TOP: #000000 1px solid"></p>
</td>
<td valign="bottom">
<p style="BORDER-TOP: #000000 1px solid"></p>
</td>
<td></td>
</tr>
<tr style="FONT-FAMILY: Times New Roman; FONT-SIZE: 10pt">
<td valign="top">
<p style="TEXT-INDENT: -1em; FONT-FAMILY: Times New Roman; MARGIN-LEFT: 5em; FONT-SIZE: 10pt">
<b>Net</b> <b>(loss)</b> <b>earnings allocable to common
shares</b></p>
</td>
<td valign="bottom"></td>
<td valign="bottom"><b>$</b></td>
<td valign="bottom" align="right"><b>(18,263,050</b></td>
<td valign="bottom" nowrap="nowrap"><b>)</b></td>
<td valign="bottom"></td>
<td valign="bottom">$</td>
<td valign="bottom" align="right">4,344,526</td>
<td valign="bottom" nowrap="nowrap"></td>
</tr>
<tr style="FONT-SIZE: 1px">
<td valign="bottom"></td>
<td valign="bottom"></td>
<td valign="bottom">
<p style="BORDER-TOP: #000000 1px solid"></p>
</td>
<td valign="bottom">
<p style="BORDER-TOP: #000000 1px solid"></p>
</td>
<td></td>
<td valign="bottom"></td>
<td valign="bottom">
<p style="BORDER-TOP: #000000 1px solid"></p>
</td>
<td valign="bottom">
<p style="BORDER-TOP: #000000 1px solid"></p>
</td>
<td></td>
</tr>
<tr style="FONT-FAMILY: Times New Roman; FONT-SIZE: 10pt" bgcolor="#CCEEFF">
<td valign="top"></td>
<td valign="bottom"></td>
<td valign="bottom"></td>
<td valign="bottom"></td>
<td valign="bottom"></td>
<td valign="bottom"></td>
<td valign="bottom"></td>
<td valign="bottom"></td>
<td valign="bottom"></td>
</tr>
<tr style="FONT-FAMILY: Times New Roman; FONT-SIZE: 10pt">
<td valign="top">
<p style="TEXT-INDENT: -1em; FONT-FAMILY: Times New Roman; MARGIN-LEFT: 5em; FONT-SIZE: 10pt">
Basic weighted average common shares outstanding</p>
</td>
<td valign="bottom"></td>
<td valign="bottom"></td>
<td valign="bottom" align="right"><b>11,215,077</b></td>
<td valign="bottom" nowrap="nowrap"></td>
<td valign="bottom"></td>
<td valign="bottom"></td>
<td valign="bottom" align="right">11,202,990</td>
<td valign="bottom" nowrap="nowrap"></td>
</tr>
<tr style="FONT-SIZE: 1px">
<td valign="bottom"></td>
<td valign="bottom"></td>
<td valign="bottom">
<p style="BORDER-TOP: #000000 1px solid"></p>
</td>
<td valign="bottom">
<p style="BORDER-TOP: #000000 1px solid"></p>
</td>
<td></td>
<td valign="bottom"></td>
<td valign="bottom">
<p style="BORDER-TOP: #000000 1px solid"></p>
</td>
<td valign="bottom">
<p style="BORDER-TOP: #000000 1px solid"></p>
</td>
<td></td>
</tr>
<tr style="FONT-FAMILY: Times New Roman; FONT-SIZE: 10pt" bgcolor="#CCEEFF">
<td valign="top">
<p style="TEXT-INDENT: -1em; FONT-FAMILY: Times New Roman; MARGIN-LEFT: 5em; FONT-SIZE: 10pt">
<b>Basic</b> <b>(loss)</b> <b>earnings per common share</b></p>
</td>
<td valign="bottom"></td>
<td valign="bottom"><b>$</b></td>
<td valign="bottom" align="right"><b>(</b><b>1.</b><b>63</b></td>
<td valign="bottom" nowrap="nowrap"><b>)</b></td>
<td valign="bottom"></td>
<td valign="bottom">$</td>
<td valign="bottom" align="right">0.39</td>
<td valign="bottom" nowrap="nowrap"></td>
</tr>
<tr style="FONT-FAMILY: Times New Roman; FONT-SIZE: 10pt">
<td valign="top">
<p style="TEXT-INDENT: -1em; FONT-FAMILY: Times New Roman; MARGIN-LEFT: 3em; FONT-SIZE: 10pt">
<b>Diluted (loss) earnings per common share</b></p>
</td>
<td valign="bottom"></td>
<td valign="bottom"></td>
<td valign="bottom"></td>
<td valign="bottom"></td>
<td valign="bottom"></td>
<td valign="bottom"></td>
<td valign="bottom"></td>
<td valign="bottom"></td>
</tr>
<tr style="FONT-FAMILY: Times New Roman; FONT-SIZE: 10pt" bgcolor="#CCEEFF">
<td valign="top">
<p style="TEXT-INDENT: -1em; FONT-FAMILY: Times New Roman; MARGIN-LEFT: 5em; FONT-SIZE: 10pt">
Net (loss) Earnings</p>
</td>
<td valign="bottom"></td>
<td valign="bottom"><b>$</b></td>
<td valign="bottom" align="right">
<b>(</b><b>16</b><b>,</b><b>590</b><b>,</b><b>827</b></td>
<td valign="bottom" nowrap="nowrap"><b>)</b></td>
<td valign="bottom"></td>
<td valign="bottom">$</td>
<td valign="bottom" align="right">11,092,429</td>
<td valign="bottom" nowrap="nowrap"></td>
</tr>
<tr style="FONT-FAMILY: Times New Roman; FONT-SIZE: 10pt">
<td valign="top">
<p style="TEXT-INDENT: -1em; FONT-FAMILY: Times New Roman; MARGIN-LEFT: 5em; FONT-SIZE: 10pt">
Less: Undistributed (loss) earnings allocated to participating
securities</p>
</td>
<td valign="bottom"></td>
<td valign="bottom"></td>
<td valign="bottom" align="right">
<b>(</b><b>1</b><b>,</b><b>672</b><b>,</b><b>223</b></td>
<td valign="bottom" nowrap="nowrap"><b>)</b></td>
<td valign="bottom"></td>
<td valign="bottom"></td>
<td valign="bottom" align="right">(6,747,903</td>
<td valign="bottom" nowrap="nowrap">)</td>
</tr>
<tr style="FONT-SIZE: 1px">
<td valign="bottom"></td>
<td valign="bottom"></td>
<td valign="bottom">
<p style="BORDER-TOP: #000000 1px solid"></p>
</td>
<td valign="bottom">
<p style="BORDER-TOP: #000000 1px solid"></p>
</td>
<td></td>
<td valign="bottom"></td>
<td valign="bottom">
<p style="BORDER-TOP: #000000 1px solid"></p>
</td>
<td valign="bottom">
<p style="BORDER-TOP: #000000 1px solid"></p>
</td>
<td></td>
</tr>
<tr style="FONT-FAMILY: Times New Roman; FONT-SIZE: 10pt" bgcolor="#CCEEFF">
<td valign="top">
<p style="TEXT-INDENT: -1em; FONT-FAMILY: Times New Roman; MARGIN-LEFT: 5em; FONT-SIZE: 10pt">
<b>Net (loss) earnings allocable to common shares</b></p>
</td>
<td valign="bottom"></td>
<td valign="bottom"><b>$</b></td>
<td valign="bottom" align="right"><b>(18,263,050</b></td>
<td valign="bottom" nowrap="nowrap"><b>)</b></td>
<td valign="bottom"></td>
<td valign="bottom">$</td>
<td valign="bottom" align="right">4,344,526</td>
<td valign="bottom" nowrap="nowrap"></td>
</tr>
<tr style="FONT-SIZE: 1px">
<td valign="bottom"></td>
<td valign="bottom"></td>
<td valign="bottom">
<p style="BORDER-TOP: #000000 1px solid"></p>
</td>
<td valign="bottom">
<p style="BORDER-TOP: #000000 1px solid"></p>
</td>
<td></td>
<td valign="bottom"></td>
<td valign="bottom">
<p style="BORDER-TOP: #000000 1px solid"></p>
</td>
<td valign="bottom">
<p style="BORDER-TOP: #000000 1px solid"></p>
</td>
<td></td>
</tr>
<tr style="FONT-FAMILY: Times New Roman; FONT-SIZE: 10pt">
<td valign="top">
<p style="TEXT-INDENT: -1em; FONT-FAMILY: Times New Roman; MARGIN-LEFT: 5em; FONT-SIZE: 10pt">
Basic weighted average common shares outstanding</p>
</td>
<td valign="bottom"></td>
<td valign="bottom"></td>
<td valign="bottom" align="right"><b>11,215,077</b></td>
<td valign="bottom" nowrap="nowrap"></td>
<td valign="bottom"></td>
<td valign="bottom"></td>
<td valign="bottom" align="right">11,202,990</td>
<td valign="bottom" nowrap="nowrap"></td>
</tr>
<tr style="FONT-FAMILY: Times New Roman; FONT-SIZE: 10pt" bgcolor="#CCEEFF">
<td valign="top">
<p style="TEXT-INDENT: -1em; FONT-FAMILY: Times New Roman; MARGIN-LEFT: 5em; FONT-SIZE: 10pt">
Effect of dilutive options</p>
</td>
<td valign="bottom"></td>
<td valign="bottom"></td>
<td valign="bottom" align="right"><b>—</b></td>
<td valign="bottom" nowrap="nowrap"></td>
<td valign="bottom"></td>
<td valign="bottom"></td>
<td valign="bottom" align="right">1,987,486</td>
<td valign="bottom" nowrap="nowrap"></td>
</tr>
<tr style="FONT-SIZE: 1px">
<td valign="bottom"></td>
<td valign="bottom"></td>
<td valign="bottom">
<p style="BORDER-TOP: #000000 1px solid"></p>
</td>
<td valign="bottom">
<p style="BORDER-TOP: #000000 1px solid"></p>
</td>
<td></td>
<td valign="bottom"></td>
<td valign="bottom">
<p style="BORDER-TOP: #000000 1px solid"></p>
</td>
<td valign="bottom">
<p style="BORDER-TOP: #000000 1px solid"></p>
</td>
<td></td>
</tr>
<tr style="FONT-FAMILY: Times New Roman; FONT-SIZE: 10pt">
<td valign="top">
<p style="TEXT-INDENT: -1em; FONT-FAMILY: Times New Roman; MARGIN-LEFT: 5em; FONT-SIZE: 10pt">
Diluted weighted average common shares outstanding</p>
</td>
<td valign="bottom"></td>
<td valign="bottom"></td>
<td valign="bottom" align="right"><b>11,215,077</b></td>
<td valign="bottom" nowrap="nowrap"></td>
<td valign="bottom"></td>
<td valign="bottom"></td>
<td valign="bottom" align="right">13,190,476</td>
<td valign="bottom" nowrap="nowrap"></td>
</tr>
<tr style="FONT-SIZE: 1px">
<td valign="bottom"></td>
<td valign="bottom"></td>
<td valign="bottom">
<p style="BORDER-TOP: #000000 1px solid"></p>
</td>
<td valign="bottom">
<p style="BORDER-TOP: #000000 1px solid"></p>
</td>
<td></td>
<td valign="bottom"></td>
<td valign="bottom">
<p style="BORDER-TOP: #000000 1px solid"></p>
</td>
<td valign="bottom">
<p style="BORDER-TOP: #000000 1px solid"></p>
</td>
<td></td>
</tr>
<tr style="FONT-FAMILY: Times New Roman; FONT-SIZE: 10pt" bgcolor="#CCEEFF">
<td valign="top">
<p style="TEXT-INDENT: -1em; FONT-FAMILY: Times New Roman; MARGIN-LEFT: 5em; FONT-SIZE: 10pt">
<b>Diluted (loss) earnings per common share</b></p>
</td>
<td valign="bottom"></td>
<td valign="bottom"><b>$</b></td>
<td valign="bottom" align="right"><b>(1.63</b></td>
<td valign="bottom" nowrap="nowrap"><b>)</b></td>
<td valign="bottom"></td>
<td valign="bottom">$</td>
<td valign="bottom" align="right">0.33</td>
<td valign="bottom" nowrap="nowrap"></td>
</tr>
<!-- End Table Body --></table>
<p style="MARGIN-TOP: 12pt; FONT-FAMILY: Times New Roman; MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt">
The following common stock equivalents were excluded in the
calculation of diluted (loss) earnings per share because their
effect would be anti-dilutive as applied to the loss from
operations as of December 31, 2012:</p>
<p style="MARGIN-TOP: 0pt; MARGIN-BOTTOM: 0pt; FONT-SIZE: 12pt">
</p>
<table style="BORDER-COLLAPSE: collapse; FONT-FAMILY: Times New Roman; FONT-SIZE: 10pt" border="0" cellspacing="0" cellpadding="0" width="76%" align="center"><!-- Begin Table Head -->
<tr>
<td width="66%"></td>
<td valign="bottom" width="4%"></td>
<td></td>
<td></td>
<td></td>
<td valign="bottom" width="4%"></td>
<td></td>
<td></td>
<td></td>
</tr>
<tr style="FONT-FAMILY: Times New Roman; FONT-SIZE: 8pt">
<td valign="bottom"></td>
<td valign="bottom"></td>
<td valign="bottom" colspan="6" align="center"><b>Year Ended
December 31</b></td>
<td valign="bottom"></td>
</tr>
<tr style="FONT-FAMILY: Times New Roman; FONT-SIZE: 8pt">
<td valign="bottom"></td>
<td valign="bottom"></td>
<td style="BORDER-BOTTOM: #000000 1pt solid" valign="bottom" colspan="2" align="center"><b>2012</b></td>
<td valign="bottom"></td>
<td valign="bottom"></td>
<td style="BORDER-BOTTOM: #000000 1pt solid" valign="bottom" colspan="2" align="center"><b>2011</b></td>
<td valign="bottom"></td>
</tr>
<!-- End Table Head --><!-- Begin Table Body -->
<tr style="FONT-FAMILY: Times New Roman; FONT-SIZE: 10pt" bgcolor="#CCEEFF">
<td valign="top">
<p style="TEXT-INDENT: -1em; FONT-FAMILY: Times New Roman; MARGIN-LEFT: 1em; FONT-SIZE: 10pt">
Series A, B, and C Preferred Stock</p>
</td>
<td valign="bottom"></td>
<td valign="bottom"></td>
<td valign="bottom" align="right">
<b>13,09</b><b>4</b><b>,</b><b>663</b></td>
<td valign="bottom" nowrap="nowrap"></td>
<td valign="bottom"></td>
<td valign="bottom"></td>
<td valign="bottom" align="right">13,094,663</td>
<td valign="bottom" nowrap="nowrap"></td>
</tr>
<tr style="FONT-FAMILY: Times New Roman; FONT-SIZE: 10pt">
<td valign="top">
<p style="TEXT-INDENT: -1em; FONT-FAMILY: Times New Roman; MARGIN-LEFT: 1em; FONT-SIZE: 10pt">
Stock options</p>
</td>
<td valign="bottom"></td>
<td valign="bottom"></td>
<td valign="bottom" align="right">
<b>2,132</b><b>,</b><b>194</b></td>
<td valign="bottom" nowrap="nowrap"></td>
<td valign="bottom"></td>
<td valign="bottom"></td>
<td valign="bottom" align="right">—</td>
<td valign="bottom" nowrap="nowrap"></td>
</tr>
<tr style="FONT-FAMILY: Times New Roman; FONT-SIZE: 10pt" bgcolor="#CCEEFF">
<td valign="top">
<p style="TEXT-INDENT: -1em; FONT-FAMILY: Times New Roman; MARGIN-LEFT: 1em; FONT-SIZE: 10pt">
Convertible promissory notes</p>
</td>
<td valign="bottom"></td>
<td valign="bottom"></td>
<td valign="bottom" align="right"><b>834,</b><b>106</b></td>
<td valign="bottom" nowrap="nowrap"></td>
<td valign="bottom"></td>
<td valign="bottom"></td>
<td valign="bottom" align="right">—</td>
<td valign="bottom" nowrap="nowrap"></td>
</tr>
<!-- End Table Body --></table>
<p style="MARGIN-TOP: 18pt; FONT-FAMILY: Times New Roman; MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt">
<b>Recently Issued Accounting Pronouncements</b></p>
<p style="MARGIN-TOP: 6pt; FONT-FAMILY: Times New Roman; MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt">
In June 2011, the FASB issued ASU 2011-05, <i>Presentation of
Comprehensive Income</i>. ASU 2011-05 revises the manner in which
entities present comprehensive income in their financial
statements. The recent guidance removes the presentation options in
ASC 220 and requires entities to report components of comprehensive
income in either (1) a continuous statement of comprehensive income
or (2) two separate but consecutive statements. ASU 2011-05 did not
change the items that must be reported in other comprehensive
income. The Company adopted the provisions of ASU 2011-05 for the
year ended December 31, 2012 and elected the second option.
However, for the years ended December 31, 2012 and 2011, the
Company’s net (loss) income equals comprehensive (loss)
income, and, therefore, a separate statement of other comprehensive
income was not necessary.</p>
<p style="MARGIN-TOP: 0pt; MARGIN-BOTTOM: 0pt; FONT-SIZE: 18pt">
</p>
</div>
1.37
<div>
<p style="margin-top:12px;margin-bottom:0px"><font style="font-family:Times New Roman" size="2">The Company’s deferred
tax assets and liabilities were as follows:</font></p>
<p style="font-size:12px;margin-top:0px;margin-bottom:0px">
 </p>
<table cellspacing="0" cellpadding="0" width="76%" border="0" style="BORDER-COLLAPSE:COLLAPSE" align="center">
<tr>
<td width="70%"></td>
<td valign="bottom" width="7%"></td>
<td></td>
<td></td>
<td></td>
<td valign="bottom" width="7%"></td>
<td></td>
<td></td>
<td></td>
</tr>
<tr>
<td valign="bottom"><font size="1"> </font></td>
<td valign="bottom"><font size="1">  </font></td>
<td valign="bottom" colspan="6" align="center"><font style="font-family:Times New Roman" size="1"><b>December 31</b></font></td>
<td valign="bottom"><font size="1"> </font></td>
</tr>
<tr>
<td valign="bottom"><font size="1"> </font></td>
<td valign="bottom"><font size="1">  </font></td>
<td valign="bottom" colspan="2" align="center" style="border-bottom:1px solid #000000"><font style="font-family:Times New Roman" size="1"><b>2012</b></font></td>
<td valign="bottom"><font size="1"> </font></td>
<td valign="bottom"><font size="1"> </font></td>
<td valign="bottom" colspan="2" align="center" style="border-bottom:1px solid #000000"><font style="font-family:Times New Roman" size="1"><b>2011</b></font></td>
<td valign="bottom"><font size="1"> </font></td>
</tr>
<tr bgcolor="#CCEEFF">
<td valign="top">
<p style="margin-left:1.00em; text-indent:-1.00em"><font style="font-family:Times New Roman" size="2">Deferred tax
assets:</font></p>
</td>
<td valign="bottom"><font size="1">  </font></td>
<td valign="bottom"></td>
<td valign="bottom"></td>
<td valign="bottom"></td>
<td valign="bottom"><font size="1"> </font></td>
<td valign="bottom"></td>
<td valign="bottom"></td>
<td valign="bottom"></td>
</tr>
<tr>
<td valign="top">
<p style="margin-left:3.00em; text-indent:-1.00em"><font style="font-family:Times New Roman" size="2">Net operating loss
carryforwards</font></p>
</td>
<td valign="bottom"><font size="1">  </font></td>
<td valign="bottom"><font style="font-family:Times New Roman" size="2"><b>$</b></font></td>
<td valign="bottom" align="right"><font style="font-family:Times New Roman" size="2"><b>8,418,507</b></font></td>
<td nowrap="nowrap" valign="bottom"><font style="font-family:Times New Roman" size="2"><b>  </b></font></td>
<td valign="bottom"><font size="1"> </font></td>
<td valign="bottom"><font style="font-family:Times New Roman" size="2">$</font></td>
<td valign="bottom" align="right"><font style="font-family:Times New Roman" size="2">1,118,070</font></td>
<td nowrap="nowrap" valign="bottom"><font style="font-family:Times New Roman" size="2">  </font></td>
</tr>
<tr bgcolor="#CCEEFF">
<td valign="top">
<p style="margin-left:3.00em; text-indent:-1.00em"><font style="font-family:Times New Roman" size="2">Accrued expenses</font></p>
</td>
<td valign="bottom"><font size="1">  </font></td>
<td valign="bottom"><font style="font-family:Times New Roman" size="2"><b> </b></font></td>
<td valign="bottom" align="right"><font style="font-family:Times New Roman" size="2"><b>215,865</b></font></td>
<td nowrap="nowrap" valign="bottom"><font style="font-family:Times New Roman" size="2"><b>  </b></font></td>
<td valign="bottom"><font size="1"> </font></td>
<td valign="bottom"><font style="font-family:Times New Roman" size="2"> </font></td>
<td valign="bottom" align="right"><font style="font-family:Times New Roman" size="2">416,268</font></td>
<td nowrap="nowrap" valign="bottom"><font style="font-family:Times New Roman" size="2">  </font></td>
</tr>
<tr>
<td valign="top">
<p style="margin-left:3.00em; text-indent:-1.00em"><font style="font-family:Times New Roman" size="2">Accrued employee
benefits</font></p>
</td>
<td valign="bottom"><font size="1">  </font></td>
<td valign="bottom"><font style="font-family:Times New Roman" size="2"><b> </b></font></td>
<td valign="bottom" align="right"><font style="font-family:Times New Roman" size="2"><b>282,268</b></font></td>
<td nowrap="nowrap" valign="bottom"><font style="font-family:Times New Roman" size="2"><b>  </b></font></td>
<td valign="bottom"><font size="1"> </font></td>
<td valign="bottom"><font style="font-family:Times New Roman" size="2"> </font></td>
<td valign="bottom" align="right"><font style="font-family:Times New Roman" size="2">259,638</font></td>
<td nowrap="nowrap" valign="bottom"><font style="font-family:Times New Roman" size="2">  </font></td>
</tr>
<tr bgcolor="#CCEEFF">
<td valign="top">
<p style="margin-left:3.00em; text-indent:-1.00em"><font style="font-family:Times New Roman" size="2">Capitalized research and
development costs</font></p>
</td>
<td valign="bottom"><font size="1">  </font></td>
<td valign="bottom"><font style="font-family:Times New Roman" size="2"><b> </b></font></td>
<td valign="bottom" align="right"><font style="font-family:Times New Roman" size="2"><b>27,516</b></font></td>
<td nowrap="nowrap" valign="bottom"><font style="font-family:Times New Roman" size="2"><b>  </b></font></td>
<td valign="bottom"><font size="1"> </font></td>
<td valign="bottom"><font style="font-family:Times New Roman" size="2"> </font></td>
<td valign="bottom" align="right"><font style="font-family:Times New Roman" size="2">108,138</font></td>
<td nowrap="nowrap" valign="bottom"><font style="font-family:Times New Roman" size="2">  </font></td>
</tr>
<tr>
<td valign="top">
<p style="margin-left:3.00em; text-indent:-1.00em"><font style="font-family:Times New Roman" size="2">Research and development
credit</font></p>
</td>
<td valign="bottom"><font size="1">  </font></td>
<td valign="bottom"><font style="font-family:Times New Roman" size="2"><b> </b></font></td>
<td valign="bottom" align="right"><font style="font-family:Times New Roman" size="2"><b>1,928,714</b></font></td>
<td nowrap="nowrap" valign="bottom"><font style="font-family:Times New Roman" size="2"><b>  </b></font></td>
<td valign="bottom"><font size="1"> </font></td>
<td valign="bottom"><font style="font-family:Times New Roman" size="2"> </font></td>
<td valign="bottom" align="right"><font style="font-family:Times New Roman" size="2">1,612,459</font></td>
<td nowrap="nowrap" valign="bottom"><font style="font-family:Times New Roman" size="2">  </font></td>
</tr>
<tr bgcolor="#CCEEFF">
<td valign="top">
<p style="margin-left:3.00em; text-indent:-1.00em"><font style="font-family:Times New Roman" size="2">Deferred revenue</font></p>
</td>
<td valign="bottom"><font size="1">  </font></td>
<td valign="bottom"><font style="font-family:Times New Roman" size="2"><b> </b></font></td>
<td valign="bottom" align="right"><font style="font-family:Times New Roman" size="2"><b>643,669</b></font></td>
<td nowrap="nowrap" valign="bottom"><font style="font-family:Times New Roman" size="2"><b>  </b></font></td>
<td valign="bottom"><font size="1"> </font></td>
<td valign="bottom"><font style="font-family:Times New Roman" size="2"> </font></td>
<td valign="bottom" align="right"><font style="font-family:Times New Roman" size="2">1,287,333</font></td>
<td nowrap="nowrap" valign="bottom"><font style="font-family:Times New Roman" size="2">  </font></td>
</tr>
<tr>
<td valign="top">
<p style="margin-left:1.00em; text-indent:-1.00em"><font style="font-family:Times New Roman" size="2">Deferred tax
liabilities:</font></p>
</td>
<td valign="bottom"><font size="1">  </font></td>
<td valign="bottom"></td>
<td valign="bottom"></td>
<td valign="bottom"></td>
<td valign="bottom"><font size="1"> </font></td>
<td valign="bottom"></td>
<td valign="bottom"></td>
<td valign="bottom"></td>
</tr>
<tr bgcolor="#CCEEFF">
<td valign="top">
<p style="margin-left:3.00em; text-indent:-1.00em"><font style="font-family:Times New Roman" size="2">Depreciation</font></p>
</td>
<td valign="bottom"><font size="1">  </font></td>
<td valign="bottom"><font style="font-family:Times New Roman" size="2"><b> </b></font></td>
<td valign="bottom" align="right"><font style="font-family:Times New Roman" size="2"><b>130,017</b></font></td>
<td nowrap="nowrap" valign="bottom"><font style="font-family:Times New Roman" size="2"><b>  </b></font></td>
<td valign="bottom"><font size="1"> </font></td>
<td valign="bottom"><font style="font-family:Times New Roman" size="2"> </font></td>
<td valign="bottom" align="right"><font style="font-family:Times New Roman" size="2">147,165</font></td>
<td nowrap="nowrap" valign="bottom"><font style="font-family:Times New Roman" size="2">  </font></td>
</tr>
<tr style="font-size:1px">
<td valign="bottom"></td>
<td valign="bottom">  </td>
<td valign="bottom">
<p style="border-top:1px solid #000000"> </p>
</td>
<td valign="bottom">
<p style="border-top:1px solid #000000"> </p>
</td>
<td> </td>
<td valign="bottom"> </td>
<td valign="bottom">
<p style="border-top:1px solid #000000"> </p>
</td>
<td valign="bottom">
<p style="border-top:1px solid #000000"> </p>
</td>
<td> </td>
</tr>
<tr>
<td valign="top">
<p style="margin-left:3.00em; text-indent:-1.00em"><font style="font-family:Times New Roman" size="2">Net deferred tax
asset</font></p>
</td>
<td valign="bottom"><font size="1">  </font></td>
<td valign="bottom"><font style="font-family:Times New Roman" size="2"><b> </b></font></td>
<td valign="bottom" align="right"><font style="font-family:Times New Roman" size="2"><b>11,646,556</b></font></td>
<td nowrap="nowrap" valign="bottom"><font style="font-family:Times New Roman" size="2"><b>  </b></font></td>
<td valign="bottom"><font size="1"> </font></td>
<td valign="bottom"><font style="font-family:Times New Roman" size="2"> </font></td>
<td valign="bottom" align="right"><font style="font-family:Times New Roman" size="2">4,949,071</font></td>
<td nowrap="nowrap" valign="bottom"><font style="font-family:Times New Roman" size="2">  </font></td>
</tr>
<tr bgcolor="#CCEEFF">
<td valign="top">
<p style="margin-left:3.00em; text-indent:-1.00em"><font style="font-family:Times New Roman" size="2">Valuation
allowance</font></p>
</td>
<td valign="bottom"><font size="1">  </font></td>
<td valign="bottom"><font style="font-family:Times New Roman" size="2"><b> </b></font></td>
<td valign="bottom" align="right"><font style="font-family:Times New Roman" size="2"><b>(11,646,556</b></font></td>
<td nowrap="nowrap" valign="bottom"><font style="font-family:Times New Roman" size="2"><b>) </b></font></td>
<td valign="bottom"><font size="1"> </font></td>
<td valign="bottom"><font style="font-family:Times New Roman" size="2"> </font></td>
<td valign="bottom" align="right"><font style="font-family:Times New Roman" size="2">(4,949,071</font></td>
<td nowrap="nowrap" valign="bottom"><font style="font-family:Times New Roman" size="2">) </font></td>
</tr>
<tr style="font-size:1px">
<td valign="bottom"></td>
<td valign="bottom">  </td>
<td valign="bottom">
<p style="border-top:1px solid #000000"> </p>
</td>
<td valign="bottom">
<p style="border-top:1px solid #000000"> </p>
</td>
<td> </td>
<td valign="bottom"> </td>
<td valign="bottom">
<p style="border-top:1px solid #000000"> </p>
</td>
<td valign="bottom">
<p style="border-top:1px solid #000000"> </p>
</td>
<td> </td>
</tr>
<tr>
<td valign="top">
<p style="margin-left:1.00em; text-indent:-1.00em"><font style="font-family:Times New Roman" size="2">Net deferred tax
asset</font></p>
</td>
<td valign="bottom"><font size="1">  </font></td>
<td valign="bottom"><font style="font-family:Times New Roman" size="2"><b>$</b></font></td>
<td valign="bottom" align="right"><font style="font-family:Times New Roman" size="2"><b>—  </b></font></td>
<td nowrap="nowrap" valign="bottom"><font style="font-family:Times New Roman" size="2"><b>  </b></font></td>
<td valign="bottom"><font size="1"> </font></td>
<td valign="bottom"><font style="font-family:Times New Roman" size="2">$</font></td>
<td valign="bottom" align="right"><font style="font-family:Times New Roman" size="2">—  </font></td>
<td nowrap="nowrap" valign="bottom"><font style="font-family:Times New Roman" size="2">  </font></td>
</tr>
<tr style="font-size:1px">
<td valign="bottom"></td>
<td valign="bottom">  </td>
<td valign="bottom">
<p style="border-top:3px double #000000"> </p>
</td>
<td valign="bottom">
<p style="border-top:3px double #000000"> </p>
</td>
<td> </td>
<td valign="bottom"> </td>
<td valign="bottom">
<p style="border-top:3px double #000000"> </p>
</td>
<td valign="bottom">
<p style="border-top:3px double #000000"> </p>
</td>
<td> </td>
</tr>
</table>
</div>
Will begin to expire in the year 2030 if unused.
<div>
<p style="MARGIN-TOP: 12px; MARGIN-BOTTOM: 0px"><font style="FONT-FAMILY: Times New Roman" size="2">Total stock-based
compensation expense, related to all of the Company’s
share-based awards to employees, directors and non-employees
recognized during the years ended 2012 and 2011, was comprised of
the following:</font></p>
<p style="MARGIN-TOP: 0px; MARGIN-BOTTOM: 0px; FONT-SIZE: 12px">
 </p>
<table style="BORDER-COLLAPSE: collapse" border="0" cellspacing="0" cellpadding="0" width="76%" align="center">
<tr>
<td width="78%"></td>
<td valign="bottom" width="4%"></td>
<td></td>
<td></td>
<td></td>
<td valign="bottom" width="4%"></td>
<td></td>
<td></td>
<td></td>
</tr>
<tr>
<td valign="bottom"><font size="1"> </font></td>
<td valign="bottom"><font size="1">  </font></td>
<td valign="bottom" colspan="6" align="center"><font style="FONT-FAMILY: Times New Roman" size="1"><b>Year Ended
December 31</b></font></td>
<td valign="bottom"><font size="1"> </font></td>
</tr>
<tr>
<td valign="bottom"><font size="1"> </font></td>
<td valign="bottom"><font size="1">  </font></td>
<td style="BORDER-BOTTOM: #000000 1px solid" valign="bottom" colspan="2" align="center"><font style="FONT-FAMILY: Times New Roman" size="1"><b>2012</b></font></td>
<td valign="bottom"><font size="1"> </font></td>
<td valign="bottom"><font size="1">  </font></td>
<td style="BORDER-BOTTOM: #000000 1px solid" valign="bottom" colspan="2" align="center"><font style="FONT-FAMILY: Times New Roman" size="1"><b>2011</b></font></td>
<td valign="bottom"><font size="1"> </font></td>
</tr>
<tr>
<td height="8"></td>
<td height="8" colspan="4"></td>
<td height="8" colspan="4"></td>
</tr>
<tr bgcolor="#CCEEFF">
<td valign="top">
<p style="TEXT-INDENT: -1em; MARGIN-LEFT: 1em"><font style="FONT-FAMILY: Times New Roman" size="2">Research and
development</font></p>
</td>
<td valign="bottom"><font size="1">  </font></td>
<td valign="bottom"><font style="FONT-FAMILY: Times New Roman" size="2"><b>$</b></font></td>
<td valign="bottom" align="right"><font style="FONT-FAMILY: Times New Roman" size="2"><b>111,206</b></font></td>
<td valign="bottom" nowrap="nowrap"><font style="FONT-FAMILY: Times New Roman" size="2"><b>  </b></font></td>
<td valign="bottom"><font size="1">  </font></td>
<td valign="bottom"><font style="FONT-FAMILY: Times New Roman" size="2">$</font></td>
<td valign="bottom" align="right"><font style="FONT-FAMILY: Times New Roman" size="2">113,534</font></td>
<td valign="bottom" nowrap="nowrap"><font style="FONT-FAMILY: Times New Roman" size="2">  </font></td>
</tr>
<tr>
<td valign="top">
<p style="TEXT-INDENT: -1em; MARGIN-LEFT: 1em"><font style="FONT-FAMILY: Times New Roman" size="2">General and
administrative</font></p>
</td>
<td valign="bottom"><font size="1">  </font></td>
<td valign="bottom"><font style="FONT-FAMILY: Times New Roman" size="2"><b> </b></font></td>
<td valign="bottom" align="right"><font style="FONT-FAMILY: Times New Roman" size="2"><b>183,900</b></font></td>
<td valign="bottom" nowrap="nowrap"><font style="FONT-FAMILY: Times New Roman" size="2"><b>  </b></font></td>
<td valign="bottom"><font size="1">  </font></td>
<td valign="bottom"><font style="FONT-FAMILY: Times New Roman" size="2"> </font></td>
<td valign="bottom" align="right"><font style="FONT-FAMILY: Times New Roman" size="2">166,918</font></td>
<td valign="bottom" nowrap="nowrap"><font style="FONT-FAMILY: Times New Roman" size="2">  </font></td>
</tr>
<tr style="FONT-SIZE: 1px">
<td valign="bottom"></td>
<td valign="bottom">  </td>
<td valign="bottom">
<p style="BORDER-TOP: #000000 1px solid"> </p>
</td>
<td valign="bottom">
<p style="BORDER-TOP: #000000 1px solid"> </p>
</td>
<td> </td>
<td valign="bottom">  </td>
<td valign="bottom">
<p style="BORDER-TOP: #000000 1px solid"> </p>
</td>
<td valign="bottom">
<p style="BORDER-TOP: #000000 1px solid"> </p>
</td>
<td> </td>
</tr>
<tr bgcolor="#CCEEFF">
<td valign="top">
<p style="TEXT-INDENT: -1em; MARGIN-LEFT: 1em"><font style="FONT-FAMILY: Times New Roman" size="2">Total share-based
compensation expense</font></p>
</td>
<td valign="bottom"><font size="1">  </font></td>
<td valign="bottom"><font style="FONT-FAMILY: Times New Roman" size="2"><b>$</b></font></td>
<td valign="bottom" align="right"><font style="FONT-FAMILY: Times New Roman" size="2"><b>295,106</b></font></td>
<td valign="bottom" nowrap="nowrap"><font style="FONT-FAMILY: Times New Roman" size="2"><b>  </b></font></td>
<td valign="bottom"><font size="1">  </font></td>
<td valign="bottom"><font style="FONT-FAMILY: Times New Roman" size="2">$</font></td>
<td valign="bottom" align="right"><font style="FONT-FAMILY: Times New Roman" size="2">280,452</font></td>
<td valign="bottom" nowrap="nowrap"><font style="FONT-FAMILY: Times New Roman" size="2">  </font></td>
</tr>
<tr style="FONT-SIZE: 1px">
<td valign="bottom"></td>
<td valign="bottom">  </td>
<td valign="bottom">
<p style="BORDER-TOP: #000000 3px double"> </p>
</td>
<td valign="bottom">
<p style="BORDER-TOP: #000000 3px double"> </p>
</td>
<td> </td>
<td valign="bottom">  </td>
<td valign="bottom">
<p style="BORDER-TOP: #000000 3px double"> </p>
</td>
<td valign="bottom">
<p style="BORDER-TOP: #000000 3px double"> </p>
</td>
<td> </td>
</tr>
</table>
</div>
<div>
<p style="MARGIN-TOP: 6px; MARGIN-BOTTOM: 0px"><font style="FONT-FAMILY: Times New Roman" size="2"><b>Use of
Estimates</b></font></p>
<p style="MARGIN-TOP: 6px; MARGIN-BOTTOM: 0px"><font style="FONT-FAMILY: Times New Roman" size="2">The preparation of
financial statements in conformity with generally accepted
accounting principles requires management to make estimates and
assumptions that affect the amounts reported in the financial
statements and accompanying notes. Although actual results could
differ from those estimates, management does not believe that such
differences would be material.</font></p>
</div>
<div>
<p style="MARGIN-TOP: 12px; MARGIN-BOTTOM: 0px"><font style="FONT-FAMILY: Times New Roman" size="2"><b>1.
Organization</b></font></p>
<p style="MARGIN-TOP: 6px; MARGIN-BOTTOM: 0px"><font style="FONT-FAMILY: Times New Roman" size="2">Intra-Cellular Therapies,
Inc. (ITI or the Company) was incorporated in the state of Delaware
on May 22, 2001 and commenced operations in June 2002.
The Company was founded to discover and develop drugs for the
treatment of neurological and psychiatric disorders. The
Company’s technology is built on a unique and proprietary
understanding of the intracellular effects of neurotransmitters.
This know-how has allowed ITI to develop new drugs based on novel
drug targets and to create unique molecular signatures for known
neurotransmitters and drugs. This technology has also allowed ITI
to screen potential lead compounds in more specific ways than are
currently available. The Company’s technology addresses
diseases of the central nervous system, including schizophrenia,
cognition, Parkinson’s disease, anxiety, depression,
Alzheimer’s disease, sleep, and those related to
women’s health.</font></p>
<p style="MARGIN-TOP: 12px; MARGIN-BOTTOM: 0px"><font style="FONT-FAMILY: Times New Roman" size="2">The Company earns its
license and collaboration revenue from its significant partnership
with Takeda Pharmaceutical Company Limited (Takeda). For the year
ended December 31, 2011, the Company earned grant revenue
under grants awarded by U.S. government agencies and foundations.
In order to further its research projects and support its
collaborations, the Company will require additional financing until
such time that revenue streams are sufficient to generate
consistent positive cash flow from operations. Possible sources of
funds are strategic alliances, additional equity offerings, grants
and contracts, and research and development funding from third
parties.</font></p>
</div>
<div>
<p style="MARGIN-TOP: 18pt; FONT-FAMILY: Times New Roman; MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt">
<b>(Loss) Earnings Per Share</b></p>
<p style="MARGIN-TOP: 6pt; FONT-FAMILY: Times New Roman; MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt">
(Loss) Earnings per share is calculated under the two-class method
under which all earnings (distributed and undistributed) are
allocated to each class of common stock and participating
securities based on their respective rights to receive dividends.
In the event that the Board of Directors shall declare a dividend
payable in cash or other property on the then-outstanding shares of
common stock, the holders of the Redeemable Preferred Series A, B,
and C convertible preferred stock shall be entitled to receive the
amount of dividends per share of Preferred Stock that would be
payable on the largest number of whole shares of Common Stock into
which each share of Preferred Stock could then be converted.
Therefore, the Redeemable Preferred Series A, B, and C Preferred
Stock are participating securities.</p>
<p style="MARGIN-TOP: 0pt; MARGIN-BOTTOM: 0pt; FONT-SIZE: 12pt">
</p>
<p style="MARGIN-TOP: 0pt; FONT-FAMILY: Times New Roman; MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt">
Basic net (loss) income per common share is determined by dividing
the net (loss) income allocable to common stockholders by the
weighted-average number of common shares outstanding during the
period, without consideration of common stock equivalents. Diluted
net (loss) income per share is computed by dividing the net (loss)
income allocable to common stockholders by the weighted-average
number of common stock equivalents outstanding for the period. The
treasury stock method is used to determine the dilutive effect of
the Company’s stock option grants and the if-converted method
is used to determine the dilutive effect of the Company’s
Redeemable Preferred Series A, B, and C convertible preferred
stock.</p>
<p style="MARGIN-TOP: 0pt; MARGIN-BOTTOM: 0pt; FONT-SIZE: 12pt">
</p>
<table style="BORDER-COLLAPSE: collapse; FONT-FAMILY: Times New Roman; FONT-SIZE: 10pt" border="0" cellspacing="0" cellpadding="0" width="100%" align="center"><!-- Begin Table Head -->
<tr>
<td width="75%"></td>
<td valign="bottom" width="3%"></td>
<td></td>
<td></td>
<td></td>
<td valign="bottom" width="3%"></td>
<td></td>
<td></td>
<td></td>
</tr>
<tr style="FONT-FAMILY: Times New Roman; FONT-SIZE: 8pt">
<td valign="bottom"></td>
<td valign="bottom"></td>
<td style="BORDER-BOTTOM: #000000 1pt solid" valign="bottom" colspan="6" align="center"><b>Year Ended December 30</b></td>
<td valign="bottom"></td>
</tr>
<tr style="FONT-FAMILY: Times New Roman; FONT-SIZE: 8pt">
<td valign="bottom"></td>
<td valign="bottom"></td>
<td style="BORDER-BOTTOM: #000000 1pt solid" valign="bottom" colspan="2" align="center"><b>2012</b></td>
<td valign="bottom"></td>
<td valign="bottom"></td>
<td style="BORDER-BOTTOM: #000000 1pt solid" valign="bottom" colspan="2" align="center"><b>2011</b></td>
<td valign="bottom"></td>
</tr>
<!-- End Table Head --><!-- Begin Table Body -->
<tr style="FONT-FAMILY: Times New Roman; FONT-SIZE: 10pt" bgcolor="#CCEEFF">
<td valign="top">
<p style="TEXT-INDENT: -1em; FONT-FAMILY: Times New Roman; MARGIN-LEFT: 3em; FONT-SIZE: 10pt">
<b>Basic</b> <b>(loss) income</b> <b>per common share</b></p>
</td>
<td valign="bottom"></td>
<td valign="bottom"></td>
<td valign="bottom"></td>
<td valign="bottom"></td>
<td valign="bottom"></td>
<td valign="bottom"></td>
<td valign="bottom"></td>
<td valign="bottom"></td>
</tr>
<tr style="FONT-FAMILY: Times New Roman; FONT-SIZE: 10pt">
<td valign="top">
<p style="TEXT-INDENT: -1em; FONT-FAMILY: Times New Roman; MARGIN-LEFT: 5em; FONT-SIZE: 10pt">
Net (loss) income</p>
</td>
<td valign="bottom"></td>
<td valign="bottom"><b>$</b></td>
<td valign="bottom" align="right">
<b>(</b><b>16</b><b>,</b><b>590</b><b>,</b><b>827</b></td>
<td valign="bottom" nowrap="nowrap"><b>)</b></td>
<td valign="bottom"></td>
<td valign="bottom">$</td>
<td valign="bottom" align="right">11,092,429</td>
<td valign="bottom" nowrap="nowrap"></td>
</tr>
<tr style="FONT-FAMILY: Times New Roman; FONT-SIZE: 10pt" bgcolor="#CCEEFF">
<td valign="top">
<p style="TEXT-INDENT: -1em; FONT-FAMILY: Times New Roman; MARGIN-LEFT: 5em; FONT-SIZE: 10pt">
Less: Undistributed (loss) earnings allocated to participating
securities</p>
</td>
<td valign="bottom"></td>
<td valign="bottom"></td>
<td valign="bottom" align="right">
<b>(</b><b>1</b><b>,</b><b>672</b><b>,</b><b>223</b></td>
<td valign="bottom" nowrap="nowrap"><b>)</b></td>
<td valign="bottom"></td>
<td valign="bottom"></td>
<td valign="bottom" align="right">(6,747,903</td>
<td valign="bottom" nowrap="nowrap">)</td>
</tr>
<tr style="FONT-SIZE: 1px">
<td valign="bottom"></td>
<td valign="bottom"></td>
<td valign="bottom">
<p style="BORDER-TOP: #000000 1px solid"></p>
</td>
<td valign="bottom">
<p style="BORDER-TOP: #000000 1px solid"></p>
</td>
<td></td>
<td valign="bottom"></td>
<td valign="bottom">
<p style="BORDER-TOP: #000000 1px solid"></p>
</td>
<td valign="bottom">
<p style="BORDER-TOP: #000000 1px solid"></p>
</td>
<td></td>
</tr>
<tr style="FONT-FAMILY: Times New Roman; FONT-SIZE: 10pt">
<td valign="top">
<p style="TEXT-INDENT: -1em; FONT-FAMILY: Times New Roman; MARGIN-LEFT: 5em; FONT-SIZE: 10pt">
<b>Net</b> <b>(loss)</b> <b>earnings allocable to common
shares</b></p>
</td>
<td valign="bottom"></td>
<td valign="bottom"><b>$</b></td>
<td valign="bottom" align="right"><b>(18,263,050</b></td>
<td valign="bottom" nowrap="nowrap"><b>)</b></td>
<td valign="bottom"></td>
<td valign="bottom">$</td>
<td valign="bottom" align="right">4,344,526</td>
<td valign="bottom" nowrap="nowrap"></td>
</tr>
<tr style="FONT-SIZE: 1px">
<td valign="bottom"></td>
<td valign="bottom"></td>
<td valign="bottom">
<p style="BORDER-TOP: #000000 1px solid"></p>
</td>
<td valign="bottom">
<p style="BORDER-TOP: #000000 1px solid"></p>
</td>
<td></td>
<td valign="bottom"></td>
<td valign="bottom">
<p style="BORDER-TOP: #000000 1px solid"></p>
</td>
<td valign="bottom">
<p style="BORDER-TOP: #000000 1px solid"></p>
</td>
<td></td>
</tr>
<tr style="FONT-FAMILY: Times New Roman; FONT-SIZE: 10pt" bgcolor="#CCEEFF">
<td valign="top"></td>
<td valign="bottom"></td>
<td valign="bottom"></td>
<td valign="bottom"></td>
<td valign="bottom"></td>
<td valign="bottom"></td>
<td valign="bottom"></td>
<td valign="bottom"></td>
<td valign="bottom"></td>
</tr>
<tr style="FONT-FAMILY: Times New Roman; FONT-SIZE: 10pt">
<td valign="top">
<p style="TEXT-INDENT: -1em; FONT-FAMILY: Times New Roman; MARGIN-LEFT: 5em; FONT-SIZE: 10pt">
Basic weighted average common shares outstanding</p>
</td>
<td valign="bottom"></td>
<td valign="bottom"></td>
<td valign="bottom" align="right"><b>11,215,077</b></td>
<td valign="bottom" nowrap="nowrap"></td>
<td valign="bottom"></td>
<td valign="bottom"></td>
<td valign="bottom" align="right">11,202,990</td>
<td valign="bottom" nowrap="nowrap"></td>
</tr>
<tr style="FONT-SIZE: 1px">
<td valign="bottom"></td>
<td valign="bottom"></td>
<td valign="bottom">
<p style="BORDER-TOP: #000000 1px solid"></p>
</td>
<td valign="bottom">
<p style="BORDER-TOP: #000000 1px solid"></p>
</td>
<td></td>
<td valign="bottom"></td>
<td valign="bottom">
<p style="BORDER-TOP: #000000 1px solid"></p>
</td>
<td valign="bottom">
<p style="BORDER-TOP: #000000 1px solid"></p>
</td>
<td></td>
</tr>
<tr style="FONT-FAMILY: Times New Roman; FONT-SIZE: 10pt" bgcolor="#CCEEFF">
<td valign="top">
<p style="TEXT-INDENT: -1em; FONT-FAMILY: Times New Roman; MARGIN-LEFT: 5em; FONT-SIZE: 10pt">
<b>Basic</b> <b>(loss)</b> <b>earnings per common share</b></p>
</td>
<td valign="bottom"></td>
<td valign="bottom"><b>$</b></td>
<td valign="bottom" align="right"><b>(</b><b>1.</b><b>63</b></td>
<td valign="bottom" nowrap="nowrap"><b>)</b></td>
<td valign="bottom"></td>
<td valign="bottom">$</td>
<td valign="bottom" align="right">0.39</td>
<td valign="bottom" nowrap="nowrap"></td>
</tr>
<tr style="FONT-FAMILY: Times New Roman; FONT-SIZE: 10pt">
<td valign="top">
<p style="TEXT-INDENT: -1em; FONT-FAMILY: Times New Roman; MARGIN-LEFT: 3em; FONT-SIZE: 10pt">
<b>Diluted (loss) earnings per common share</b></p>
</td>
<td valign="bottom"></td>
<td valign="bottom"></td>
<td valign="bottom"></td>
<td valign="bottom"></td>
<td valign="bottom"></td>
<td valign="bottom"></td>
<td valign="bottom"></td>
<td valign="bottom"></td>
</tr>
<tr style="FONT-FAMILY: Times New Roman; FONT-SIZE: 10pt" bgcolor="#CCEEFF">
<td valign="top">
<p style="TEXT-INDENT: -1em; FONT-FAMILY: Times New Roman; MARGIN-LEFT: 5em; FONT-SIZE: 10pt">
Net (loss) Earnings</p>
</td>
<td valign="bottom"></td>
<td valign="bottom"><b>$</b></td>
<td valign="bottom" align="right">
<b>(</b><b>16</b><b>,</b><b>590</b><b>,</b><b>827</b></td>
<td valign="bottom" nowrap="nowrap"><b>)</b></td>
<td valign="bottom"></td>
<td valign="bottom">$</td>
<td valign="bottom" align="right">11,092,429</td>
<td valign="bottom" nowrap="nowrap"></td>
</tr>
<tr style="FONT-FAMILY: Times New Roman; FONT-SIZE: 10pt">
<td valign="top">
<p style="TEXT-INDENT: -1em; FONT-FAMILY: Times New Roman; MARGIN-LEFT: 5em; FONT-SIZE: 10pt">
Less: Undistributed (loss) earnings allocated to participating
securities</p>
</td>
<td valign="bottom"></td>
<td valign="bottom"></td>
<td valign="bottom" align="right">
<b>(</b><b>1</b><b>,</b><b>672</b><b>,</b><b>223</b></td>
<td valign="bottom" nowrap="nowrap"><b>)</b></td>
<td valign="bottom"></td>
<td valign="bottom"></td>
<td valign="bottom" align="right">(6,747,903</td>
<td valign="bottom" nowrap="nowrap">)</td>
</tr>
<tr style="FONT-SIZE: 1px">
<td valign="bottom"></td>
<td valign="bottom"></td>
<td valign="bottom">
<p style="BORDER-TOP: #000000 1px solid"></p>
</td>
<td valign="bottom">
<p style="BORDER-TOP: #000000 1px solid"></p>
</td>
<td></td>
<td valign="bottom"></td>
<td valign="bottom">
<p style="BORDER-TOP: #000000 1px solid"></p>
</td>
<td valign="bottom">
<p style="BORDER-TOP: #000000 1px solid"></p>
</td>
<td></td>
</tr>
<tr style="FONT-FAMILY: Times New Roman; FONT-SIZE: 10pt" bgcolor="#CCEEFF">
<td valign="top">
<p style="TEXT-INDENT: -1em; FONT-FAMILY: Times New Roman; MARGIN-LEFT: 5em; FONT-SIZE: 10pt">
<b>Net (loss) earnings allocable to common shares</b></p>
</td>
<td valign="bottom"></td>
<td valign="bottom"><b>$</b></td>
<td valign="bottom" align="right"><b>(18,263,050</b></td>
<td valign="bottom" nowrap="nowrap"><b>)</b></td>
<td valign="bottom"></td>
<td valign="bottom">$</td>
<td valign="bottom" align="right">4,344,526</td>
<td valign="bottom" nowrap="nowrap"></td>
</tr>
<tr style="FONT-SIZE: 1px">
<td valign="bottom"></td>
<td valign="bottom"></td>
<td valign="bottom">
<p style="BORDER-TOP: #000000 1px solid"></p>
</td>
<td valign="bottom">
<p style="BORDER-TOP: #000000 1px solid"></p>
</td>
<td></td>
<td valign="bottom"></td>
<td valign="bottom">
<p style="BORDER-TOP: #000000 1px solid"></p>
</td>
<td valign="bottom">
<p style="BORDER-TOP: #000000 1px solid"></p>
</td>
<td></td>
</tr>
<tr style="FONT-FAMILY: Times New Roman; FONT-SIZE: 10pt">
<td valign="top">
<p style="TEXT-INDENT: -1em; FONT-FAMILY: Times New Roman; MARGIN-LEFT: 5em; FONT-SIZE: 10pt">
Basic weighted average common shares outstanding</p>
</td>
<td valign="bottom"></td>
<td valign="bottom"></td>
<td valign="bottom" align="right"><b>11,215,077</b></td>
<td valign="bottom" nowrap="nowrap"></td>
<td valign="bottom"></td>
<td valign="bottom"></td>
<td valign="bottom" align="right">11,202,990</td>
<td valign="bottom" nowrap="nowrap"></td>
</tr>
<tr style="FONT-FAMILY: Times New Roman; FONT-SIZE: 10pt" bgcolor="#CCEEFF">
<td valign="top">
<p style="TEXT-INDENT: -1em; FONT-FAMILY: Times New Roman; MARGIN-LEFT: 5em; FONT-SIZE: 10pt">
Effect of dilutive options</p>
</td>
<td valign="bottom"></td>
<td valign="bottom"></td>
<td valign="bottom" align="right"><b>—</b></td>
<td valign="bottom" nowrap="nowrap"></td>
<td valign="bottom"></td>
<td valign="bottom"></td>
<td valign="bottom" align="right">1,987,486</td>
<td valign="bottom" nowrap="nowrap"></td>
</tr>
<tr style="FONT-SIZE: 1px">
<td valign="bottom"></td>
<td valign="bottom"></td>
<td valign="bottom">
<p style="BORDER-TOP: #000000 1px solid"></p>
</td>
<td valign="bottom">
<p style="BORDER-TOP: #000000 1px solid"></p>
</td>
<td></td>
<td valign="bottom"></td>
<td valign="bottom">
<p style="BORDER-TOP: #000000 1px solid"></p>
</td>
<td valign="bottom">
<p style="BORDER-TOP: #000000 1px solid"></p>
</td>
<td></td>
</tr>
<tr style="FONT-FAMILY: Times New Roman; FONT-SIZE: 10pt">
<td valign="top">
<p style="TEXT-INDENT: -1em; FONT-FAMILY: Times New Roman; MARGIN-LEFT: 5em; FONT-SIZE: 10pt">
Diluted weighted average common shares outstanding</p>
</td>
<td valign="bottom"></td>
<td valign="bottom"></td>
<td valign="bottom" align="right"><b>11,215,077</b></td>
<td valign="bottom" nowrap="nowrap"></td>
<td valign="bottom"></td>
<td valign="bottom"></td>
<td valign="bottom" align="right">13,190,476</td>
<td valign="bottom" nowrap="nowrap"></td>
</tr>
<tr style="FONT-SIZE: 1px">
<td valign="bottom"></td>
<td valign="bottom"></td>
<td valign="bottom">
<p style="BORDER-TOP: #000000 1px solid"></p>
</td>
<td valign="bottom">
<p style="BORDER-TOP: #000000 1px solid"></p>
</td>
<td></td>
<td valign="bottom"></td>
<td valign="bottom">
<p style="BORDER-TOP: #000000 1px solid"></p>
</td>
<td valign="bottom">
<p style="BORDER-TOP: #000000 1px solid"></p>
</td>
<td></td>
</tr>
<tr style="FONT-FAMILY: Times New Roman; FONT-SIZE: 10pt" bgcolor="#CCEEFF">
<td valign="top">
<p style="TEXT-INDENT: -1em; FONT-FAMILY: Times New Roman; MARGIN-LEFT: 5em; FONT-SIZE: 10pt">
<b>Diluted (loss) earnings per common share</b></p>
</td>
<td valign="bottom"></td>
<td valign="bottom"><b>$</b></td>
<td valign="bottom" align="right"><b>(1.63</b></td>
<td valign="bottom" nowrap="nowrap"><b>)</b></td>
<td valign="bottom"></td>
<td valign="bottom">$</td>
<td valign="bottom" align="right">0.33</td>
<td valign="bottom" nowrap="nowrap"></td>
</tr>
<!-- End Table Body --></table>
<p style="MARGIN-TOP: 12pt; FONT-FAMILY: Times New Roman; MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt">
The following common stock equivalents were excluded in the
calculation of diluted (loss) earnings per share because their
effect would be anti-dilutive as applied to the loss from
operations as of December 31, 2012:</p>
<p style="MARGIN-TOP: 0pt; MARGIN-BOTTOM: 0pt; FONT-SIZE: 12pt">
</p>
<table style="BORDER-COLLAPSE: collapse; FONT-FAMILY: Times New Roman; FONT-SIZE: 10pt" border="0" cellspacing="0" cellpadding="0" width="76%" align="center"><!-- Begin Table Head -->
<tr>
<td width="66%"></td>
<td valign="bottom" width="4%"></td>
<td></td>
<td></td>
<td></td>
<td valign="bottom" width="4%"></td>
<td></td>
<td></td>
<td></td>
</tr>
<tr style="FONT-FAMILY: Times New Roman; FONT-SIZE: 8pt">
<td valign="bottom"></td>
<td valign="bottom"></td>
<td valign="bottom" colspan="6" align="center"><b>Year Ended
December 31</b></td>
<td valign="bottom"></td>
</tr>
<tr style="FONT-FAMILY: Times New Roman; FONT-SIZE: 8pt">
<td valign="bottom"></td>
<td valign="bottom"></td>
<td style="BORDER-BOTTOM: #000000 1pt solid" valign="bottom" colspan="2" align="center"><b>2012</b></td>
<td valign="bottom"></td>
<td valign="bottom"></td>
<td style="BORDER-BOTTOM: #000000 1pt solid" valign="bottom" colspan="2" align="center"><b>2011</b></td>
<td valign="bottom"></td>
</tr>
<!-- End Table Head --><!-- Begin Table Body -->
<tr style="FONT-FAMILY: Times New Roman; FONT-SIZE: 10pt" bgcolor="#CCEEFF">
<td valign="top">
<p style="TEXT-INDENT: -1em; FONT-FAMILY: Times New Roman; MARGIN-LEFT: 1em; FONT-SIZE: 10pt">
Series A, B, and C Preferred Stock</p>
</td>
<td valign="bottom"></td>
<td valign="bottom"></td>
<td valign="bottom" align="right">
<b>13,09</b><b>4</b><b>,</b><b>663</b></td>
<td valign="bottom" nowrap="nowrap"></td>
<td valign="bottom"></td>
<td valign="bottom"></td>
<td valign="bottom" align="right">13,094,663</td>
<td valign="bottom" nowrap="nowrap"></td>
</tr>
<tr style="FONT-FAMILY: Times New Roman; FONT-SIZE: 10pt">
<td valign="top">
<p style="TEXT-INDENT: -1em; FONT-FAMILY: Times New Roman; MARGIN-LEFT: 1em; FONT-SIZE: 10pt">
Stock options</p>
</td>
<td valign="bottom"></td>
<td valign="bottom"></td>
<td valign="bottom" align="right">
<b>2,132</b><b>,</b><b>194</b></td>
<td valign="bottom" nowrap="nowrap"></td>
<td valign="bottom"></td>
<td valign="bottom"></td>
<td valign="bottom" align="right">—</td>
<td valign="bottom" nowrap="nowrap"></td>
</tr>
<tr style="FONT-FAMILY: Times New Roman; FONT-SIZE: 10pt" bgcolor="#CCEEFF">
<td valign="top">
<p style="TEXT-INDENT: -1em; FONT-FAMILY: Times New Roman; MARGIN-LEFT: 1em; FONT-SIZE: 10pt">
Convertible promissory notes</p>
</td>
<td valign="bottom"></td>
<td valign="bottom"></td>
<td valign="bottom" align="right"><b>834,</b><b>106</b></td>
<td valign="bottom" nowrap="nowrap"></td>
<td valign="bottom"></td>
<td valign="bottom"></td>
<td valign="bottom" align="right">—</td>
<td valign="bottom" nowrap="nowrap"></td>
</tr>
<!-- End Table Body --></table>
</div>
<div>
<p style="MARGIN-TOP: 12px; MARGIN-BOTTOM: 0px"><font style="FONT-FAMILY: Times New Roman" size="2">The following table
describes the weighted-average assumptions used for calculating the
value of options granted for the years ended
December 31:</font></p>
<p style="MARGIN-TOP: 0px; MARGIN-BOTTOM: 0px; FONT-SIZE: 12px">
 </p>
<table style="BORDER-COLLAPSE: collapse" border="0" cellspacing="0" cellpadding="0" width="76%" align="center">
<tr>
<td width="82%"></td>
<td valign="bottom" width="5%"></td>
<td></td>
<td></td>
<td></td>
<td valign="bottom" width="5%"></td>
<td></td>
<td></td>
<td></td>
</tr>
<tr>
<td valign="bottom"><font size="1"> </font></td>
<td valign="bottom"><font size="1">  </font></td>
<td style="BORDER-BOTTOM: #000000 1px solid" valign="bottom" colspan="2" align="center"><font style="FONT-FAMILY: Times New Roman" size="1"><b>2012</b></font></td>
<td valign="bottom"><font size="1"> </font></td>
<td valign="bottom"><font size="1"> </font></td>
<td style="BORDER-BOTTOM: #000000 1px solid" valign="bottom" colspan="2" align="center"><font style="FONT-FAMILY: Times New Roman" size="1"><b>2011</b></font></td>
<td valign="bottom"><font size="1"> </font></td>
</tr>
<tr>
<td height="8"></td>
<td height="8" colspan="4"></td>
<td height="8" colspan="4"></td>
</tr>
<tr bgcolor="#CCEEFF">
<td valign="top">
<p style="TEXT-INDENT: -1em; MARGIN-LEFT: 1em"><font style="FONT-FAMILY: Times New Roman" size="2">Dividend yield</font></p>
</td>
<td valign="bottom"><font size="1">  </font></td>
<td valign="bottom"><font style="FONT-FAMILY: Times New Roman" size="2"><b> </b></font></td>
<td valign="bottom" align="right"><font style="FONT-FAMILY: Times New Roman" size="2"><b>0.0</b></font></td>
<td valign="bottom" nowrap="nowrap"><font style="FONT-FAMILY: Times New Roman" size="2"><b>% </b></font></td>
<td valign="bottom"><font size="1"> </font></td>
<td valign="bottom" nowrap="nowrap"><font style="FONT-FAMILY: Times New Roman" size="2"> </font></td>
<td valign="bottom" nowrap="nowrap" align="right"><font style="FONT-FAMILY: Times New Roman" size="2">—  </font></td>
<td valign="bottom" nowrap="nowrap"><font style="FONT-FAMILY: Times New Roman" size="2">% </font></td>
</tr>
<tr>
<td valign="top">
<p style="TEXT-INDENT: -1em; MARGIN-LEFT: 1em"><font style="FONT-FAMILY: Times New Roman" size="2">Expected
volatility</font></p>
</td>
<td valign="bottom"><font size="1">  </font></td>
<td valign="bottom"><font style="FONT-FAMILY: Times New Roman" size="2"><b> </b></font></td>
<td valign="bottom" align="right"><font style="FONT-FAMILY: Times New Roman" size="2"><b>79.7</b></font></td>
<td valign="bottom" nowrap="nowrap"><font style="FONT-FAMILY: Times New Roman" size="2"><b>% </b></font></td>
<td valign="bottom"><font size="1"> </font></td>
<td valign="bottom" nowrap="nowrap"><font style="FONT-FAMILY: Times New Roman" size="2"> </font></td>
<td valign="bottom" nowrap="nowrap" align="right"><font style="FONT-FAMILY: Times New Roman" size="2">—  </font></td>
<td valign="bottom" nowrap="nowrap"><font style="FONT-FAMILY: Times New Roman" size="2">  </font></td>
</tr>
<tr bgcolor="#CCEEFF">
<td valign="top">
<p style="TEXT-INDENT: -1em; MARGIN-LEFT: 1em"><font style="FONT-FAMILY: Times New Roman" size="2">Weighted-average risk-free
interest rate</font></p>
</td>
<td valign="bottom"><font size="1">  </font></td>
<td valign="bottom"><font style="FONT-FAMILY: Times New Roman" size="2"><b> </b></font></td>
<td valign="bottom" align="right"><font style="FONT-FAMILY: Times New Roman" size="2"><b>1.2</b></font></td>
<td valign="bottom" nowrap="nowrap"><font style="FONT-FAMILY: Times New Roman" size="2"><b>% </b></font></td>
<td valign="bottom"><font size="1"> </font></td>
<td valign="bottom" nowrap="nowrap"><font style="FONT-FAMILY: Times New Roman" size="2"> </font></td>
<td valign="bottom" nowrap="nowrap" align="right"><font style="FONT-FAMILY: Times New Roman" size="2">—  </font></td>
<td valign="bottom" nowrap="nowrap"><font style="FONT-FAMILY: Times New Roman" size="2">  </font></td>
</tr>
<tr>
<td valign="top">
<p style="TEXT-INDENT: -1em; MARGIN-LEFT: 1em"><font style="FONT-FAMILY: Times New Roman" size="2">Expected term</font></p>
</td>
<td valign="bottom"><font size="1">  </font></td>
<td valign="bottom"><font style="FONT-FAMILY: Times New Roman" size="2"><b> </b></font></td>
<td valign="bottom" align="right"><font style="FONT-FAMILY: Times New Roman" size="2"><b>6.3 years</b></font></td>
<td valign="bottom" nowrap="nowrap"><font style="FONT-FAMILY: Times New Roman" size="2"><b>  </b></font></td>
<td valign="bottom"><font size="1"> </font></td>
<td valign="bottom" nowrap="nowrap"><font style="FONT-FAMILY: Times New Roman" size="2"> </font></td>
<td valign="bottom" nowrap="nowrap" align="right"><font style="FONT-FAMILY: Times New Roman" size="2">—  </font></td>
<td valign="bottom" nowrap="nowrap"><font style="FONT-FAMILY: Times New Roman" size="2">  </font></td>
</tr>
</table>
</div>
<div>
<p style="MARGIN-TOP: 0px; MARGIN-BOTTOM: 0px"><font style="FONT-FAMILY: Times New Roman" size="2"><b>Financial
Instruments</b></font></p>
<p style="MARGIN-TOP: 6px; MARGIN-BOTTOM: 0px"><font style="FONT-FAMILY: Times New Roman" size="2">The Company considers the
recorded costs of its financial assets and liabilities, which
consist of cash equivalents, accounts receivable, accounts payable
and accrued liabilities, to approximate their fair value because of
their relatively short maturities at December 31, 2012 and
2011. Management believes that the risks associated with its
financial instruments are minimal as the counterparties are various
corporations, financial institutions and government agencies of
high credit standing.</font></p>
</div>
<div>
<p style="MARGIN-TOP: 18px; MARGIN-BOTTOM: 0px"><font style="FONT-FAMILY: Times New Roman" size="2"><b>Deferred
Revenue</b></font></p>
<p style="MARGIN-TOP: 6px; MARGIN-BOTTOM: 0px"><font style="FONT-FAMILY: Times New Roman" size="2">Cash received as prepayment
on future services is deferred and recognized as revenue as the
services are performed. The Company must remit interest on any
deferred revenue related to a governmental agency. As of
December 31, 2012 and 2011, no interest was due as the Company
did not have any deferred revenue from a government
agency.</font></p>
</div>
<div>
<p style="margin-top:6px;margin-bottom:0px"><font style="font-family:Times New Roman" size="2">The provision (benefit) for
income taxes consists of:</font></p>
<p style="font-size:12px;margin-top:0px;margin-bottom:0px">
 </p>
<table cellspacing="0" cellpadding="0" width="76%" border="0" style="BORDER-COLLAPSE:COLLAPSE" align="center">
<tr>
<td width="72%"></td>
<td valign="bottom" width="9%"></td>
<td></td>
<td></td>
<td></td>
<td valign="bottom" width="9%"></td>
<td></td>
<td></td>
<td></td>
</tr>
<tr>
<td valign="bottom"><font size="1"> </font></td>
<td valign="bottom"><font size="1">  </font></td>
<td valign="bottom" colspan="6" align="center"><font style="font-family:Times New Roman" size="1"><b>December 31</b></font></td>
<td valign="bottom"><font size="1"> </font></td>
</tr>
<tr>
<td valign="bottom"><font size="1"> </font></td>
<td valign="bottom"><font size="1">  </font></td>
<td valign="bottom" colspan="2" align="center" style="border-bottom:1px solid #000000"><font style="font-family:Times New Roman" size="1"><b>2012</b></font></td>
<td valign="bottom"><font size="1"> </font></td>
<td valign="bottom"><font size="1"> </font></td>
<td valign="bottom" colspan="2" align="center" style="border-bottom:1px solid #000000"><font style="font-family:Times New Roman" size="1"><b>2011</b></font></td>
<td valign="bottom"><font size="1"> </font></td>
</tr>
<tr>
<td height="8"></td>
<td height="8" colspan="4"></td>
<td height="8" colspan="4"></td>
</tr>
<tr bgcolor="#CCEEFF">
<td valign="top">
<p style="margin-left:1.00em; text-indent:-1.00em"><font style="font-family:Times New Roman" size="2">Current</font></p>
</td>
<td valign="bottom"><font size="1">  </font></td>
<td valign="bottom"><font style="font-family:Times New Roman" size="2"><b>$</b></font></td>
<td valign="bottom" align="right"><font style="font-family:Times New Roman" size="2"><b>32,921</b></font></td>
<td nowrap="nowrap" valign="bottom"><font style="font-family:Times New Roman" size="2"><b>  </b></font></td>
<td valign="bottom"><font size="1"> </font></td>
<td valign="bottom"><font style="font-family:Times New Roman" size="2">$</font></td>
<td valign="bottom" align="right"><font style="font-family:Times New Roman" size="2">64,834</font></td>
<td nowrap="nowrap" valign="bottom"><font style="font-family:Times New Roman" size="2">  </font></td>
</tr>
<tr>
<td valign="top">
<p style="margin-left:1.00em; text-indent:-1.00em"><font style="font-family:Times New Roman" size="2">Deferred</font></p>
</td>
<td valign="bottom"><font size="1">  </font></td>
<td valign="bottom"><font style="font-family:Times New Roman" size="2"><b> </b></font></td>
<td valign="bottom" align="right"><font style="font-family:Times New Roman" size="2"><b>(6,378,456</b></font></td>
<td nowrap="nowrap" valign="bottom"><font style="font-family:Times New Roman" size="2"><b>) </b></font></td>
<td valign="bottom"><font size="1"> </font></td>
<td valign="bottom"><font style="font-family:Times New Roman" size="2"> </font></td>
<td valign="bottom" align="right"><font style="font-family:Times New Roman" size="2">4,359,809</font></td>
<td nowrap="nowrap" valign="bottom"><font style="font-family:Times New Roman" size="2">  </font></td>
</tr>
<tr bgcolor="#CCEEFF">
<td valign="top">
<p style="margin-left:1.00em; text-indent:-1.00em"><font style="font-family:Times New Roman" size="2">Valuation
allowance</font></p>
</td>
<td valign="bottom"><font size="1">  </font></td>
<td valign="bottom"><font style="font-family:Times New Roman" size="2"><b> </b></font></td>
<td valign="bottom" align="right"><font style="font-family:Times New Roman" size="2"><b>6,378,456</b></font></td>
<td nowrap="nowrap" valign="bottom"><font style="font-family:Times New Roman" size="2"><b>  </b></font></td>
<td valign="bottom"><font size="1"> </font></td>
<td valign="bottom"><font style="font-family:Times New Roman" size="2"> </font></td>
<td valign="bottom" align="right"><font style="font-family:Times New Roman" size="2">(4,359,809</font></td>
<td nowrap="nowrap" valign="bottom"><font style="font-family:Times New Roman" size="2">) </font></td>
</tr>
<tr style="font-size:1px">
<td valign="bottom"></td>
<td valign="bottom">  </td>
<td valign="bottom">
<p style="border-top:1px solid #000000"> </p>
</td>
<td valign="bottom">
<p style="border-top:1px solid #000000"> </p>
</td>
<td> </td>
<td valign="bottom"> </td>
<td valign="bottom">
<p style="border-top:1px solid #000000"> </p>
</td>
<td valign="bottom">
<p style="border-top:1px solid #000000"> </p>
</td>
<td> </td>
</tr>
<tr>
<td valign="top">
<p style="margin-left:1.00em; text-indent:-1.00em"><font style="font-family:Times New Roman" size="2">Provision (benefit) for
income taxes</font></p>
</td>
<td valign="bottom"><font size="1">  </font></td>
<td valign="bottom"><font style="font-family:Times New Roman" size="2"><b>$</b></font></td>
<td valign="bottom" align="right"><font style="font-family:Times New Roman" size="2"><b>32,921</b></font></td>
<td nowrap="nowrap" valign="bottom"><font style="font-family:Times New Roman" size="2"><b>  </b></font></td>
<td valign="bottom"><font size="1"> </font></td>
<td valign="bottom"><font style="font-family:Times New Roman" size="2">$</font></td>
<td valign="bottom" align="right"><font style="font-family:Times New Roman" size="2">64,834</font></td>
<td nowrap="nowrap" valign="bottom"><font style="font-family:Times New Roman" size="2">  </font></td>
</tr>
<tr style="font-size:1px">
<td valign="bottom"></td>
<td valign="bottom">  </td>
<td valign="bottom">
<p style="border-top:3px double #000000"> </p>
</td>
<td valign="bottom">
<p style="border-top:3px double #000000"> </p>
</td>
<td> </td>
<td valign="bottom"> </td>
<td valign="bottom">
<p style="border-top:3px double #000000"> </p>
</td>
<td valign="bottom">
<p style="border-top:3px double #000000"> </p>
</td>
<td> </td>
</tr>
</table>
</div>
<div>
<p style="MARGIN-TOP: 18px; MARGIN-BOTTOM: 0px"><font style="FONT-FAMILY: Times New Roman" size="2"><b>Income
Taxes</b></font></p>
<p style="MARGIN-TOP: 6px; MARGIN-BOTTOM: 0px"><font style="FONT-FAMILY: Times New Roman" size="2">Income taxes are accounted
for using the liability method. Deferred tax assets and liabilities
are recognized for the future tax consequences attributable to
differences between the financial statement carrying amounts of
existing assets and liabilities and its respective tax bases.
Deferred tax assets and liabilities are measured using enacted tax
rates expected to apply to taxable income in the year in which
those temporary differences are expected to be recovered or
settled.</font></p>
<p style="MARGIN-TOP: 0px; MARGIN-BOTTOM: 0px"><font style="FONT-FAMILY: Times New Roman" size="2">The effect on deferred tax
assets and liabilities of a change in tax rates is recognized in
income in the period that includes the enactment date. Valuation
allowances are established when necessary to reduce net deferred
tax assets to the amount expected to be realized. Income tax
expense is the tax payable for the period and the change during the
period in deferred tax assets and liabilities.</font></p>
<p style="MARGIN-TOP: 12px; MARGIN-BOTTOM: 0px"><font style="FONT-FAMILY: Times New Roman" size="2">The Company accounts for
uncertain tax positions pursuant to ASC 740 (previously included in
Financial Accounting Standards Board (FASB) Interpretation
No. 48, <i>Accounting for Uncertainty in Income Taxes—an
Interpretation of FASB Statement No. 109)</i>. Financial
statement recognition of a tax position taken or expected to be
taken in a tax return is determined based on a more-likely-than-not
threshold of that position being sustained. If the tax position
meets this threshold, the benefit to be recognized is measured as
the tax benefit having the highest likelihood of being realized
upon ultimate settlement with the taxing authority. The Company
recognizes interest accrued related to unrecognized tax benefits
and penalties in the provision for income taxes.</font></p>
</div>
3117991
34189
332000
-18263050
31081
13857
39002
-16403410
-16590827
12000000
-6378456
-48634
-16590827
295106
38957
3117991
79656
20832
-448493
4034925
15194085
1672223
17700122
-6378456
-1666659
63000
295106
19521401
1952313
193498
-554256
5661165
15486476
31081
1672223
32921
47747
809332
15163004
32921
P3Y
P6Y3M18D
P3Y
P7Y10M24D
20000000
-1.63
11215077
11215077
-18263050
-16590827
1672223
-1.63
11215077
-18263050
-16590827
1672223
39000
1.42
Vest ratably over a period of 12 to 24 months
16880
P3Y
P5Y
P3Y
P2Y
P3Y
5.00
1000000
P1Y
183900
111206
-16590827
-20832
-915173
-296000
66540
68
31013
295106
20832
1672223
-461050
3100000
0
On the later of 10 years after the first commercial sale of a product developed using the licensed compound or upon expiration of the patent rights
800000
120000
Upon expiration of the patent rights or 15 years subsequent to the first sale of products developed through this License.
0
834106
2132194
13094663
P1Y10M24D
-0.85
-0.85
11208990
1494730
-9474109
11243
-9059066
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1115351
83570
10553796
9438445
418056
8230
61418
22152
2065513
13094663
-0.76
-0.76
11454034
643264
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903406
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8691307
231756
7787901
418056
4038
-0.34
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5000000
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10818
5900
3400
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4000
-65
-2438
5900
3400
3400
-10883
57697
31466
800000
0
On the later of 10 years after the first commercial sale of a product developed using the licensed compound or upon expiration of the patent rights
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2360333
13094663
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