Notes to Consolidated Financial Statements
(CON TINUE D)
(12) Research and Development Collaborati ons
The Company has the following significant research and development
collaborative agreement outstanding at December
31, 2010 and 2009:
Kraft
Agreement Summary
On December 5, 2006, the Company entered into a technology
sublicense agreement with Kraft. Pursuant to this agreement,
Kraft was granted a limited exclusive sublicense to use
the Company's know-how and related license and patents
relating to the production of "functional foods" which treat
and prevent parasites in humans through additives to foods,
beverages and dietary supplements. Kraft is required to use
commercially reasonable efforts to pursue the achievement
of milestones set out in the agreement. The project for the
development of licensed products is divided into four development
stages. Within each stage certain designated milestones
are to be accomplished in accordance with the
development and implementation priorities agreed by the
parties. The Company has the obligation to fund product
development with a portion of the product development
funded through an upfront payment and milestone payments
from Kraft. The agreement was revised in September 2009, to
better address the ongoing development plan. With completion
of the second milestone, and under the revised agreement,
TyraTech will receive a bi-annual cost reimbursement for
agreed upon development costs for what would have been
stages three and four. TyraTech will continue to receive an
exclusivity fee from Kraft Foods for each stage three and four.
The Company and Kraft agreed to negotiate a supply agreement
in "good faith" after commercial launch. In addition,
Kraft has agreed to pay the Company royalties for any product
sales related to the "functional foods" with the Company's
technology.
Accounting Summary
The Company considers its arrangement with Kraft to be a
revenue arrangement with multiple deliverables. The Company's
deliverables under this collaboration include an
exclusive license to its parasitic technologies, research and
development services and participation on a steering committee.
The Company determined that the deliverables, specifically
the license, research and development services and
steering committee participation, represented a single unit of
accounting because the Company believes that the license,
although delivered at the inception of the arrangement, does
not have stand-alone value to Kraft without the Company's
research and development services and steering committee
participation and because objective and reliable evidence of
the fair value of the Company's research and development
services and steering committee participation could not be
determined.
(13) 401(k) Plan
The Company maintains a defined contribution 401(k) plan.
The 401(k) plan is designed in accordance with the applicable
sections of the Internal Revenue Code, and is subject to
minimum 3% funding requirements as required as a safe
harbor plan. The 401(k) plan covers all eligible employees of
the Company and its subsidiaries upon completion of three
months of service. Employees may elect to contribute up to a
maximum of 60% of their salary, subject to Internal Revenue
Service limitations. The Company has a matching policy in
which the Company matches 100% of the first 4% of each
employee's compensation contributed to the 401(k) plan. For
the years ended December 31, 2010 and 2009, the Company's
contribution, including administrative expenses, amounted to
US $62,936 and US $99,611 and are charged to general and
administrative, business and development, and research and
technical development expenses in Consolidated Statements
of Operations.
(14) Income Taxes
Beginning on May 24, 2007 the Company is subject to both
federal and state income taxes. For the period prior to May
24, 2007, the Company operated as a pass through entity
for tax purposes and tax liability was the responsibility of
its members.
The difference between the "expected" tax benefit (computed
by applying the federal corporate income tax rate
of 34% to the loss before income taxes) and the actual tax
benefit is primarily due to the effect of the valuation allowance
described below.
Deferred income taxes reflect the net tax effects of temporary
differences between the carrying amounts of assets and
liabilities for financial reporting purposes and amounts utilized
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