Notes to Consolidated Financial Statements
(CON TINUE D)
Significant management judgment is required in determining
the level of effort required under an arrangement and the
period over which the Company is expected to complete its
performance obligations under an arrangement. In addition,
if the Company is involved in a steering committee as part
of a multiple element arrangement that is accounted for as a
single unit of accounting, the Company assesses whether its
involvement constitutes a performance obligation or a right to
participate. Steering committee services that are not inconsequential
or perfunctory and that are determined to be performance
obligations are combined with other research services
or performance obligations required under an arrangement, if
any, in determining the level of effort required in an arrangement
and the period over which the Company expects to
complete its aggregate performance obligations.
Deferred Revenue
Amounts received prior to satisfying the above revenue recognition
criteria are recorded as deferred revenue in the
accompanying consolidated balance sheets. Amounts not
expected to be recognized during the year ending December
31, 2011 are classified as long-term deferred revenue. As of
December 31, 2010, the Company has short-term deferred
revenue of US $1,951,643 (2009: US $476,500) and long-term
deferred revenue of US $2,083,333 (2009: US $0.0 million)
related to its collaborations.
Customer Concentrations
The Company has one customer in the pesticides and insecticides
segment in 2010 that represents 96% of total product
sales (2009: one customer represents 91%). Further, in 2010
one customer represented 95% of accounts receivable (2009:
two customers represented 94% of accounts receivable).
(h) Equity Based Compensation
Subsequent to January 1, 2006, stock based compensation
cost is measured at the grant date based on the fair value of
the award and is recognized as expense on a straight-line
basis over the vesting period. Compensation expense is recognized
only for those shares expected to vest, with forfeitures
based upon future expectations.
(i) Research and Technical Development
Research and technical development costs are expensed as
incurred. Research and technical development costs for the
years ended December 31, 2010 amount to US $3,050,278
(2009: US $4,393,367) after charging US $2,156,502 (2009:
US $1,680,082) to cost of sales.
(j) Income Taxes
Income taxes are accounted for under the asset and 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 their respective tax basis and operating
losses and tax credit carry forwards. Deferred tax assets
and liabilities are measured using enacted tax rates expected
to apply to taxable income in the years in which those temporary
differences are expected to be recovered or settled. 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 recorded when necessary
to reduce deferred tax assets to the amount expected
to be realized.
The Company adopted the provisions of Financial Accounting
Standards Board (FAS B) Accounting Standards Codification
(ASC ) 740, Income Taxes, on January 1, 2009. As required by
the uncertain tax position guidance of ASC 740, the Company
recognizes the financial statement benefit of a tax position
only after determining that the relative tax authority would
more-likely-than-not sustain the position following an audit.
For tax positions meeting the more-likely-than-not threshold,
the amount recognized in the financial statements is the largest
benefit that has a greater than fifty percent likelihood of
being realized upon ultimate settlement with the relevant
tax authority. At the adoption date on January 1, 2009, the
Company applied the uncertain tax position guidance of ASC
740 to all tax positions for which the statute of limitations
remained open. As of December 31, 2009 and December 31,
2010, the Company did not recognize any liability for unrecognized
tax benefits.
(k) Use of Estimates
The preparation of financial statements in conformity with US
GAA P requires management to make estimates and assumptions
that affect the amounts reported in the consolidated
financial statements and accompanying disclosures. Although
these estimates are based on management's best knowledge
of current events and actions the Company may undertake in
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