CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2005
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
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
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.
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.