Notes to Consolidated Financial Statements
(CONTINUED)
TYRATECH, INC. • ANNUAL REPORT 2011 • PAGE 42
The weighted average grant date fair value of SARs granted
during the year ended December 31, 2011 was US$0.3 million
(2010: US$0.7 million). During the year ended December 31,
2011 2,870,542 (2010: 754,657) SARs vested and 18,750 were
exercised (2010: none) with a fair value of US$1.1 million (2010:
$0.5 million). The SARs issued through December 31, 2011
have a maximum contract term of ten years.
As of December 31, 2011, there was US$0.4 million (2010:
US$1.2 million) of total unrecognized compensation cost related
to non-vested SAR arrangements granted under the
plan. That cost is expected to be recognized over a weighted
average period of 3.1 years. The total fair value of shares
vested during the year was US$0.4 million (2010: US$0.5 million).
The compensation recognized in operating expenses
for SARS for the year ended December 31, 2011 was US$0.7
million (2010: US$0.7 million).
The Company plans to use authorized and un issued shares to
satisfy SAR exercises.
(10) RESEARCH AND DEVELOPMENT
COLLABORATIONS
The Company has the following significant research and development
collaborative agreement outstanding at December
31, 2011 and 2010:
Kraft
Agreement Summary
On December 5, 2006, the Company entered into a technology
sublicense agreement with Kraft. Pursuant to this agreement,
Kraft was granted 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.
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. During the years ended December
31, 2011 and 2010 Kraft funded the joint project US$0.7 million
and US$2.2 million, repectively. At December 31, 2011 and
2010 the Company had a liability to Kraft for US$12,237 and
US$0.3 million for joint project funds advanced but not recognized
through project expenses.
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.
