Revenue Recognition

In May 2014, the FASB issued ASU No. 2014-09, Revenue from Contracts with Customers (Topic 606). The new revenue recognition standard provides a five-step analysis of transactions to determine when and how revenue is recognized. The core principle is that a company should recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services.

The Company recognizes revenue based on the five criteria for revenue recognition established under Topic 606: 1) identify the contract, 2) identify separate performance obligations, 3) determine the transaction price, 4) allocate the transaction price among the performance obligations, and 5) recognize revenue as the performance obligations are satisfied.

Type of Revenue

The Company derives revenue primarily from licensing fees on sales of its wound spray product.

The Company recognizes revenue based on the five criteria for revenue recognition established under Topic ASC 606 set forth below.

The Company’s licenses provide a right to use and create performance obligations satisfied at a point in time. The Company recognizes revenue from the license when the performance obligation is satisfied through the transfer of the license. The Company will recognize royalty revenue a) when the licensee makes the subsequent sales or use that trigger the royalty, or (b) the performance obligation to which some or all of the sales-based or usage- based royalties has been allocated has been satisfied.