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Financial Statements and Notes - First Quarter 2006
 

FINANCIAL STATEMENTS

DELTAGEN, INC.

CONSOLIDATED BALANCE SHEETS

(UNAUDITED)

Consolidated Balance Sheets

 

 

 

 

Unaudited

Year Ended

Quarter Ended

 

 

(In Thousands)

December 31, 2005

March 31, 2006

 

 

 

Adjusted

 

Assets

 

 

 

Current assets:

 

 

 

Cash and cash equivalents

                     11,557

               10,392

 

Receivables

                       2,487

                    532

 

Prepaid Deposits and Tax Assets

                       1,503

                 1,332

 

 

Total current assets

                     15,547

               12,256

 

 

 

 

 

Property and equipment, net

                          139

                    124

Deferred Tax Asset

                       1,000

                 1,000

 

 

Total assets

                     16,686

               13,380

 

 

 

 

 

 

 

 

Liabilities and Stockholders' Equity

 

 

Current liabilities:

 

 

 

Accounts payable

                       4,296

                 1,396

 

Accrued current liabilities

                          876

                    224

 

 

Total liabilities

                       5,172

                 1,620

 

 

 

 

 

Stockholders' equity:

 

 

 

Common stock

                            39

                      39

 

Treasury stock

                        (867)

                  (867)

 

Additional paid-in capital

                   238,648

             238,648

 

Retained Earnings

                 (226,306)

           (226,306)

 

Current year accumulated (income)/deficit

 

                    246

 

 

Total stockholders' equity

                     11,514

               11,760

 

 

 

 

 

 

 

Total liabilities and stockholders' equity

                     16,686

               13,380

The accompanying notes are an integral part of these consolidated financial statements.

DELTAGEN, INC.

CONSOLIDATED INCOME STATEMENT

(UNAUDITED)


Consolidated Income Statement and Cash Flow

Unaudited

 

 

Quarter Ended

(In Thousands)

March 31, 2006

 

 

Income Statement

 

 

 

Revenue

                 1,879

Operating Costs

                 1,548

Income From Operations

                    331

Interest Income

                    100

Net Income Before Tax Provision

                    431

Provision for Taxes

                    185

Net Income

                    246

 

 

Cash Flow

 

 

 

Sources

 

Cash From Operations

                    246

   Add Depreciation

                      15

Net Cash Provided From Ops

                    261

 

 

Change in Receivables

                 1,955

Change in Other Current Assets

                    171

Total Sources

                 2,387

 

 

Uses

 

Change in Deposits

                       -  

Reduction in Liabilities

               (3,552)

Total Uses

               (3,552)

 

 

Change in Cash

               (1,165)

Beginning Cash

               11,557

Ending Cash

               10,392

The accompanying notes are an integral part of these consolidated financial statements.


DELTAGEN, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

FOR FIRST QUARTER 2006

(unaudited)

March 31, 2006

1.  Basis of Presentation

The accompanying consolidated financial statements of Deltagen, Inc. ("Deltagen" or the "Company") for the three months ended March 31, 2006 are unaudited, but have been prepared in accordance with accounting principles generally accepted in the United States of America for interim 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.  In the opinion of management, all adjustments (consisting of normal recurring adjustments) considered necessary for a fair presentation have been included. 

Operating results for the three-month period ended March 31, 2006 are not necessarily indicative of the results that may be expected or achieved for the year ended December 31, 2006.

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.

For further information, refer to the financial statements and footnotes for the year ended December 31, 2005, as posted on the Company's website (www.deltagen.com).

2.   Treatment of Subsidiaries

                The consolidated financial statements include the accounts and activities of the Company's subsidiaries, Deltagen Research Laboratories, L.L.C., Deltagen Europe, S.A. and Xenopharm, Inc.  Intercompany transactions and balances are eliminated in consolidation.

3.  Stock-Based Compensation

                No compensation expenses were recorded for stock option grants made during the three-month period ended March 31, 2006 because the exercise price of any such stock options equaled the fair market value of the underlying stock on the date of grant. 

4.  Expected Adjustments to 2005 Financials

                The Company issued and posted on its website (www.deltagen.com) on March 28, 2006 its unaudited financial results for the year ended December 31, 2005.  Subsequently, an audit was commenced. 

During the course of the audit, which has not yet been completed, an adjustment to the 2005 consolidated balance sheet was made with respect to the settlement of a claim that had been filed in Deltagen's chapter 11 bankruptcy case relating to a lease.  On November 7, 2003, Woodside Technology Center, LLC ("Woodside") filed a proof of claim in our chapter 11 case, in which it asserted the right to payment of $3,787,600.20 on a general unsecured basis relating to a lease of real property.  On June 14, 2005, Woodside amended its claim, in which it asserted the right to payment of $2,178,429 on a general unsecured basis and $799,633 on a secured basis, for a total claim of $2,978,062.  As of December 31, 2005, we were continuing negotiations with Woodside for settlement of the Woodside claim.  On March 20, 2006, Deltagen and Woodside consensually resolved the Woodside claim, in which Deltagen agreed to make payment to Woodside before March 31, 2006 in the amount of $1,846,248 as a single allowed, general unsecured, prepetition claim.  This settlement amount, which was paid during the first quarter of 2006, was $363,000 less than had been reserved (as of December 31, 2005) within the claims pool for payment of the claim.  The adjustment is also reflected in the beginning retained earnings balance for 2006.

A second adjustment relating to the audit was the establishment of a deferred tax assets item.  The components of the net deferred tax assets as of December 31, 2005 are:

                               

 

(in Thousands)

Deferred Tax Assets:

 

 

   Net operating loss carry forwards

$

   69,195

 

   Research and Experimental credits

 

     7,308

 

   Cumulative temporary differences

 

            6

 

 

 

   Total

 

   76,509

 

 

 

Deferred Tax Liabilities:

 

 

   Capitalized Research and development

 

     3,992

 

 

 

   Net deferred tax assets

 

   72,517

 

 

 

   Valuation allowance

 

   71,066

 

 

 

 Total

 

     1,451

 

 

 

 Less: Current Portion of the Deferred Tax Assets

 

     451

 

 

 

 Non-current portion of Deferred Tax Assets

$

   1,000

                In the calculation of the deferred tax assets, the Company established a 98% valuation allowance due to uncertainties relating to future income and the realization of such deferred tax assets.  The Company currently intends to evaluate on an annual basis, based on expected income, the recoverability of the deferred tax assets and the level of the valuation allowance.

                As of December 31, 2005, the Company had federal and California net operating loss carryforwards of approximately $172,514,000 and $119,303,000 available to reduce future federal and California taxable income, respectively.  These federal and California loss carryforwards begin to expire in 2006 and 2015, respectively, if not utilized.  The extent to which these loss carryforwards can be used to offset future taxable income may be limited under Section 382 of the Internal Revenue Code and applicable state law.

                As of December 31, 2005, the Company had California tax credit carryforwards of approximately $7,308,000 and federal tax credit carryforwards of approximately $58,648,000. The federal tax credit carryforwards begin to expire in 2018, if not utilized. The California tax credit carryforwards begin to expire in 2008, if not utilized.  The extent to which these tax credit carryforwards can be used to offset future taxes may be limited under Section 383 of the Internal Revenue Code and applicable state law.

 

©2006 Deltagen, Inc. All rights reserved.