DELTAGEN, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

FOR CALENDAR YEAR 2005

(unaudited)

December 31, 2005

1.  Overview

Deltagen, Inc. ("Deltagen" or the "Company") was founded in 1997 by two former Genentech scientists in San Carlos, California.   Deltagen was incorporated in Delaware on January 28, 1997, and became a publicly-traded company on the Nasdaq stock exchange in August 2000. 

On June 27, 2003 ("Petition Date"), Deltagen filed a voluntary petition for relief under chapter 11 of the Bankruptcy Code ("Chapter 11 Case").  The Chapter 11 Case was assigned to the Honorable Dennis Montali, United States Bankruptcy Judge for the Northern District of California, San Francisco Division ("Bankruptcy Court").  After filing for bankruptcy, Deltagen continued to operate its business and manage its properties as a debtor-in-possession under sections 1107(a) and 1108 of the Bankruptcy Code.  On May 19, 2004, Deltagen caused its wholly-owned subsidiary, Deltagen Proteomics, Inc. ("DPI"), to commence a case under chapter 11 of the Bankruptcy Code.  DPI's bankruptcy case was jointly administered, for procedural purposes, with Deltagen's case.

On September 30, 2005, Deltagen and DPI filed with the Bankruptcy Court a Joint Plan of Reorganization of Deltagen, Inc., and Deltagen Proteomics, Inc. (the "Reorganization Plan"), along with a Disclosure Statement (the "Disclosure Statement").  The purpose of the Disclosure Statement was to provide creditors of Deltagen and DPI with adequate information to make an informed judgment about the Reorganization Plan before voting on the Reorganization Plan.  The Disclosure Statement included (among other things) a brief history of Deltagen and DPI, a summary of the Chapter 11 Case, a description of the claims of their creditors, a summary of the Reorganization Plan, a discussion of the Reorganization Plan's feasibility, and a liquidation analysis setting forth what claim holders would recover if Deltagen and DPI were instead to have been liquidated immediately under chapter 7 of the Bankruptcy Code. 

On November 15, 2005, the Bankruptcy Court entered its Order (1) Approving Disclosure Statement, and (2) Confirming Debtors' Joint Plan of Reorganization.  The Effective Date of the Reorganization Plan was November 29, 2005.

2.   Basis of Presentation

The accompanying consolidated financial statements as of Deltagen for the year ended December 31, 2005 are unaudited, but have been prepared in accordance with accounting principles generally accepted in the United States of America for annual financial information ("GAAP").  These consolidated financial statements have been prepared so that they present fairly, in the opinion of management, the Company's financial position and its results of operations and its cash flows for the period presented.

Under our revenue recognition policy, revenues are recognized when a definitive agreement with a determinable price exists, product delivery and/or invoicing (in each case where there is reasonable assurance of meeting customer-specified criteria) have occurred, and collectibility is reasonably assured.

Additional information about the Company's operations and major events during the Chapter 11 Case (including 2005) may be found in the Reorganization Plan and in its accompanying Disclosure Statement.  Note that while certain financials of the Company were reported to the Bankruptcy Court in the form of monthly operating reports as required during the Chapter 11 Case, those financials were not prepared in accordance with GAAP.  In addition, the Company's financial statements for calendar years 2003 and 2004 were neither consolidated nor audited.  The Company does not intend to report at any time in the future audited financial statements for these periods.

3.   Treatment of Subsidiaries

                The consolidated financial statements include activities at the company's wholly-owned subsidiaries, Deltagen Research Laboratories, L.L.C., Deltagen Europe, S.A. and Xenopharm, Inc.

4.   Subsequent Events

In January 2006, the Company received its first installment payments under the NIH contract it was awarded in September 2005.  The aggregate amount of these installment payments was $1.93 million.  These payments were made in connection with the Company's delivery to the NIH in October and November 2005 of knockout mouse materials and related phenotypic data relating to the 129 knockout mouse lines ordered by the NIH in its initial delivery order submitted on September 30, 2005.  The remaining installment payments (total amount of $3.23 million) are expected to be received in mid-2006, assuming all data and knockout mouse materials already delivered are accepted by the NIH following inspection.

As of March 27, 2006, Deltagen's plan of reorganization has been substantially consummated, with all contested claims resolved and all assets of the estate fully administered.  The Company expects its chapter 11 case will be closed on March 31, 2006.