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STATESVILLE, N.C., Dec. 4, 2014 /PRNewswire/ -- Bebida Beverage Company (OTC: BBDA), (BeBevCo), a developer, manufacturer and marketer of relaxation and energy drinks is pleased to announce it has signed a long term license agreement with Sparkling Drink Systems International (SDS), the Global Beverage Solution Provider.
Together SDS and BeBevCo will launch KOMA Unwind Liquid Relaxation® branded relaxation pods that are co-developed exclusively for use with ViBEration, SDS's new generation of At-Home Carbonation appliances and On-the-Go beverage solutions that use a patented powdered technology to deliver fizz, flavor and functional benefits all in one pod, and with no CO2 cylinder.
Under the agreement, the KOMA Unwind Liquid Relaxation® brand products will be offered globally, as the ViBEration products hit store shelves.
'What an amazing opportunity for us to partner with SDS,' said BeBevCo CEO Brian Weber. 'Without a doubt, they are a company that will become a leader in the industry. While the giants of the Beverage industry have partnered with competitors of SDS for their At-Home beverage appliances, I am thrilled about this partnership with SDS. I strongly believe that their 'no CO2' needed technology is the next generation of At-Home Carbonation products and will be extremely attractive to consumers worldwide.'
He added, 'This is another sign that all of the dedication and patience of our shareholders is paying off, as we have been developing not only the KOMA Unwind Liquid Relaxation® brand, but the category of Relaxation Beverages. As these license fees start producing increased revenues this will greatly help the company expedite its imminent share buyback and increase shareholder value.'
'We are all leading increasingly hectic lives and for lots of people stress and anxiety is a huge problem,' states Serge Bueno, SDS' Founder and Executive Chairman. 'Relaxation drinks are dedicated to helping consumers reduce stress and achieve relaxation through use of fully natural ingredients which calm the body and mind without any harmful side effects. KOMA Unwind Liquid Relaxation® fits perfectly within the ViBEration 'Pro-Relax' product line and we are very excited to be partnering with BeBevCo, a leader in the relaxation beverage category, to offer their flagship product under the ViBEration brand.'
Weber concluded, 'This addition over time has the potential to generate a significant source of revenue. This is again another major achievement for BeBevCo and the KOMA Unwind Liquid Relaxation® brand.'
Unite with KOMA Unwind for its 'relaxation revolution' by joining us on Facebook (Facebook.com/KOMAUnwind) and following us on Twitter @KOMAUnwindNews.
For those consumers who cannot find KOMA Unwind and our other products locally, please visit our website and Amazon.com to place an order.
Shareholders, investors and potential new distributors are invited to be added to the corporate e-mail database for the future distribution of corporate press releases and industry updates by sending an e-mail to [email protected]
About Sparkling Drink Systems International:
Sparkling Drink Systems International (SDS), the Global Beverage Solution Provider, specializes in At-Home and On-the-Go beverage solutions. The company was developed not only to supply consumers with home beverage carbonation products but, most importantly, to bring to the market their unique know- how and expertise for this category. SDS offers a range of convenient products and solutions. SDS has offices in the United States, France, Israel, Italy, England, Germany, Hong Kong, Korea and China. For more information about SDS, visit www.sparklingds.com.
About BeBevCo:
BeBevCo (Bebida Beverage Company) develops manufactures and markets liquid relaxation products including, KOMA Unwind Liquid Relaxation®, KOMA Unwind Sugar-free Liquid Relaxation®, and KOMA Unwind Liquid Relaxation Shots®, as well as POTENCIA Energy, POTENCIA BLAST Energy Shots and Relax 5 Shots.
KOMA Unwindcurrently garnishes over 75 percent of brand awareness in the rapidly expanding relaxation drink category in the United States. Additionally, KOMA Unwind has been featured in O Magazine, Bloomberg News, the Wall Street Journal, Women's Health and many other publications.
Corporate websites accessible at BeBevCo.com,Relaxfive.com and KOMAUnwind.com.
Contact: 704.660.0226 or [email protected].
Logo - http://photos.prnewswire.com/prnh/20130718/PH49528LOGO
To view the original version on PR Newswire, visit:http://www.prnewswire.com/news-releases/bebevco-signs-largest-license-agreement-to-date-for-koma-unwind-relaxation-drink-300005100.html
SOURCE Bebida Beverage Company
Related Links
http://bebevco.com
By Adam Steinmetz, CPA, Irvine, Calif.
Gains & Losses
Mylan Inc., a publicly traded pharmaceutical company, filed a petition in Tax Court to challenge a $100 million tax deficiency (Mylan, Inc., T.C. Dkt. No. 16145-14, petition filed 7/11/14). The deficiency relates to a dispute between the parties regarding whether a transaction should constitute a license agreement or a sale under the tax laws.
Given the nature of the life sciences industry, including the desire of companies to share know-how and to enter into joint research agreements and other collaborative partnerships in the process of drug development, pharmaceutical companies often deal with the question of whether a transaction is a license or sale. The main tax difference between a license and a sale transaction is that license payments are taxed as ordinary income and sale proceeds are taxed as capital gains.
Other important tax differences must be considered though, especially since corporate taxpayers are taxed at the same rate for both ordinary income and capital gain. Two examples of the significant tax differences between licenses and sales are Sec. 1211, which limits the use of capital losses to offsetting capital gains only, and Sec. 1212, which limits the number of years for a capital loss to be carried forward. As such, the determination of a license versus sale may determine whether a taxpayer can use a valuable tax attribute or whether it will expire unused. The determination will also affect the timing of the tax deduction for the licensee/buyer, as license payments would typically be currently deductible to unrelated taxpayers, while sale payments would likely be required to be capitalized and amortized. The determination would also affect whether the licensor/seller would need to recognize the payments immediately or could use the installment method. As evidenced by Mylan, the difference in timing can result in large tax deficiencies.
Mylan, Inc.
In its petition, Mylan challenged the IRS's characterization of a transaction as a license. In 2001, Mylan entered into an agreement with a Belgian company to acquire the exclusive right to develop drugs containing a patented compound called nebivolol (the compound) in the United States and Canada. In 2006, Mylan transferred its rights to the compound to a third party, Forest Laboratories Inc. Initially, this agreement called for Mylan to remain active in certain marketing and development efforts with the compound, but in 2008 the agreement was amended because Mylan made a 'business decision that it would sell its exclusive license to [the compound] in order to generate cash and improve its capital structure' (Mylan Inc. Tax Court petition, p. 19). Mylan viewed this as a transfer of substantially all the rights of the compound. Mylan received an upfront payment from Forest of $370 million and subsequent installment payments. Mylan treated the transaction as a sale with the resulting gain being capital and recognized using the installment sale method.
The IRS asserted that the transaction was a license and increased Mylan's ordinary income from tax years 2008–2011, resulting in tax deficiencies of approximately $100 million.
Sec. 1235
When analyzing a license versus a sale, one must consider all the facts and circumstances. Sec. 1235, which is often referenced as a guideline to make this determination, was enacted by Congress to encourage individual investors by allowing the holder of a patent to obtain long-term capital gain treatment regardless of the holding period or the holder's status as a professional investor. For the holder to qualify, the section requires a transfer of all substantial rights to the patent. Although the section applies specifically to individual taxpayers, the framework is still applied to corporate holders (C.A. Norgren Co., 268 F. Supp. 816 (D. Colo. 1967)).
Sec. 1235 does not define what constitutes 'all substantial rights.' The legislative history of Sec. 1235 states:
The section does not detail precisely what constitutes the formal components of a sale or exchange of patent rights beyond requiring that all substantial rights evidenced by the patent (other than the right to such periodic or contingent payments) should be transferred to the transferee for consideration. . . . To illustrate, exclusive licenses to manufacture, use, and sell for the life of the patent, are considered to be 'sales or exchanges' because, in substantive effect, all 'right, title, and interest' in the patent property is transferred.[S. Rep't No.1662, 83d Cong., 2d Sess., 439–440, 1954 U.S. Code Cong. & Admin. News 5082]
Given this legislative history, it would appear that an exclusive, perpetual agreement, whether called a license agreement or asset sale agreement, would constitute the transfer of all substantial rights to intellectual property.
IRS Coordinated Issue Paper
In October 2007, the IRS issued a Coordinated Issue Paper (CIP) for the biotech and pharmaceutical industries titled Nonrefundable Upfront Fees, Technology Access Fees, Milestone Payments, Royalties and Deferred Income Under a Collaboration Agreement (LMSB-04-1007-073). Effective Jan. 21, 2014, CIPs are no longer binding on IRS examiners, but they are still available for examiners to consult for guidance.The CIP addresses the tax treatment of upfront, milestone, and royalty payments under collaboration agreements that are between unrelated domestic parties in the pharmaceutical and biotechnology industries, generally for drug development. Collaboration agreements are defined as agreements for joint research, experimentation, or development, as well as agreements for the sharing of know-how or patents for the purpose of research, experimentation, or development.
The IRS specifies that collaboration agreements can take the form of a license agreement, an alliance agreement, a co-marketing agreement, or a functional equivalent of these. Such agreements typically contain upfront payments, which are nonrefundable payments that are due when the agreement is signed or later if the parties agree. Upfront payments are noncontingent. Collaboration agreements generally also require milestone or installment payments, which are nonrefundable payments due as the result of successful research (i.e., they are contingent).
The CIP contains two scenarios with corresponding analyses of the proper tax treatment for the upfront payments and milestone payments. Although neither scenario has facts that match exactly those in Mylan,the 'Initial Considerations'section provides interesting insight into how the IRS will treat these types of agreements. The CIP specifies that when examining these agreements, examiners should first consider whether the agreement involves the sale or license of intangible property, as 'dramatically different tax consequences' could result. The CIP goes on to state that
An initial consideration would be whether the agreement involves the sale of intangible property, rather than upfront & milestone payments under a collaboration agreement or, possibly, an agreement which is part sale and part collaboration. Typically, even where the research is clearly going to be successful, the examiner is unlikely to encounter a party that is actually selling this proven research outright, as this proven technology may be that going concern's most valuable asset and/or it may serve as the base for the development of further intangibles. If sold the sale may be on a contingency of use basis. Be that as it may, where the upfront and milestone payments represent purchase proceeds for all substantial rights to the research, the payments are for the purchase of an asset with a useful life of more than one year, and they should be capitalized under I.R.C. §263(a).
This passage seems to indicate that the IRS's initial position is that a taxpayer is unlikely to sell intellectual property outright, especially if that property is integral to the taxpayer's going concern or development of future intangibles. Nevertheless, the passage does seem to relent and specify that the transfer of all substantial rights should still be considered a sale.
Conclusion
Mylan has asserted that the 2008 amendment resulted in its giving up all substantial rights to the compound. It no longer had any remaining rights to the compound, and Forest would be the only party with exclusive, perpetual rights to the patented compound. Given the legislative history of Sec. 1235, Mylan appears to have a strong argument in this regard.
The IRS's position on what rights Mylan has retained is unclear, which is likely why Mylan has in fact stated in its petition that the IRS's position is meritless. The IRS's response to the petition should give taxpayers great insight into how the IRS frames its analysis of license versus sale, and should help to give pharmaceutical companies additional guidance when entering into such arrangements, regardless of the ultimate conclusion in this case.
EditorNotes
Greg Fairbanks is a tax senior manager with Grant Thornton LLP in Washington.
For additional information about these items, contact Mr. Fairbanks at 202-521-1503 or [email protected].
Unless otherwise noted, contributors are members of or associated with Grant Thornton LLP.