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Financial Statements and Notes - Third Quarter 2006
 

FINANCIAL STATEMENTS

DELTAGEN, INC.

CONSOLIDATED BALANCE SHEETS

(UNAUDITED)

Consolidated Balance Sheet

 

 

 

For Quarters ending 3/31/06, 6/30/06

 

 

 

& 9/30/06

Unaudited

Unaudited

Unaudited

 

 

(In Thousands)

03/31/06

06/30/06

09/30/06

 

 

 

Consolidated

Consolidated

Consolidated

Assets

 

 

 

 

Current assets:

 

 

 

 

Cash and cash equivalents

            10,434

            10,789

            11,992

 

Accounts receivable, net

              1,561

              3,380

              1,808

 

Prepaids, Deposits and Tax Assets

                 490

                 642

                 701

 

 

Total current assets

            12,485

            14,811

            14,501

 

 

 

 

 

 

Property and equipment, net

                   84

                   73

                   73

 

 

 

 

 

 

Non-current portion of deferred tax assets

                 848

                 400

                 400

 

 

 

 

 

 

 

 

Total assets

            13,417

            15,284

            14,974

 

 

 

 

 

 

 

 

 

 

Liabilities and Stockholders' Equity

 

 

 

Current liabilities:

 

 

 

 

Accounts payable

              1,539

              1,590

              909

 

Accrued expenses

                 80

                 143

                 275

 

 

Total liabilities

              1,619

              1,733

              1,184

 

 

 

 

 

 

Stockholders' equity:

 

 

 

 

Common stock

                   39

                   39

                   39

 

Treasury Stock

               (867)

               (867)

               (867)

 

Additional paid-in capital

          238,648

217,223

          217,348

 

Additional paid-in capital - Stock-based compensation

                  -

21,548

21,548

 

Retained Earnings

        (226,089)

        (224,605)

        (224,468)

 

Foreign currency translation adjustment

                   67

                 211

                 190

 

 

Total stockholders' equity

            11,798

            13,549

            13,790

 

 

 

 

 

 

 

 

Total liabilities and stockholders' equity

            13,417

            15,282

            14,974

 

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

 

DELTAGEN, INC.

CONSOLIDATED INCOME STATEMENT

(UNAUDITED)

 

Consolidated Income Statement and

Statement of Retained Earnings

For Quarters ending 3/31/06, 6/30/06 & 9/30/06

 

 

 

Unaudited

Unaudited

Unaudited

(In Thousands)

03/31/06

06/30/06

09/30/06

 

Consolidated

Consolidated

Consolidated

 

 

 

 

Revenue

              1,882

              3,749

              970

Royalty and Commission Costs

                 493

              1,125

              246

Stock-Based Compensation Expense

-

123

123

Other Operating Costs

              1,063

                 767

                 590

 

 

 

 

Income From Operations

                 327

              1,734

              11

 

 

 

 

Interest Income

                 97

                   89

                   126

Loss on disposal of assets

                 (44)

                    -  

                    -  

 

 

 

 

Total Other Income

                   53

                   89

                   126

 

 

 

 

Income before provision for income taxes

                 380

              1,823

              137

 

 

 

 

Provision for income taxes

 

 

 

   Current income tax expense

                   11

                   39

                  -    

   Deferred income tax expense

                 152

                 817

                 -

   Adjustment for valuation allowance

                    -  

               (518)

               -

 

 

 

 

Total income tax expense

                 163

                 338

                 -

 

 

 

 

Net Income (Loss)

                 217

              1,485

              137

 

 

 

 

Retained earnings at beginning of period

        (226,306)

        (226,089)

        (224,605)

 

 

 

 

Retained earnings at end of period

        (226,089)

        (224,605)

        (224,468)

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


 

DELTAGEN, INC.

CONSOLIDATED CASH FLOW

(UNAUDITED)

 

 

Consolidated Cash Flow

 

 

For Quarters ending 3/31/06, 6/30/06 & 9/30/06

 

 

 

Unaudited

Unaudited

Unaudited

(In Thousands)

03/31/06

06/30/06

09/30/06

 

Consolidated

Consolidated

Consolidated

 

 

 

 

Cash flows from operating activities:

 

 

 

 

 

 

 

   Net Income

                 217

              1,485

              137

 

 

 

 

Adjustments to reconcile net income to net cash

 

 

used by operating activities

 

 

 

     Depreciation

                   11

                   11

                   -

     Loss on disposal of fixed assets

                   44

                    -  

                    -  

     Stock-based compensation expense

-

123

123

 

 

 

 

(Increase) / Decrease in operating assets

 

 

 

     Accounts receivable

                 926

            (1,819)

1,573

     Prepaids, deposits and tax assets

              1,165

               297

               (59)

 

 

 

 

(Increase) / Decrease in operating liabilities

 

 

 

     Accounts payable

            (2,757)

51

(681)

     Accrued Expenses

               (796)

                 63

                 132

 

 

 

 

Net Increase (Decrease) in cash

            (1,190)

                 211

                 1,225

 

 

 

 

Effect of foreign exchange rate change on cash

                   67

                 144

                 (21)

 

 

 

 

Cash at beginning of period

            11,557

            10,434

            10,789

 

 

 

 

Cash at end of period

            10,434

            10,789

            11,992

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


DELTAGEN, INC.

 

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

FOR THIRD QUARTER 2006

September 30, 2006

 

1.  Basis of Presentation

The accompanying consolidated financial statements of Deltagen, Inc. ("Deltagen" or the "Company") for the three months ended September 30, 2006 are unaudited, but have been prepared on an accrual basis of accounting in accordance with accounting principles generally accepted in the United States of America ("GAAP") for interim financial information. 

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. 

The preparation of consolidated financial statements in conformity with GAAP requires the Company to make estimates and assumptions that affect the amounts that are reported in the consolidated financial statements and accompanying disclosures.  Although these estimates are based on the Company's best knowledge of current events and actions that the Company may undertake in the future, actual results may differ materially from the estimates.

Operating results for the three-month period ended September 30, 2006 or any other quarter 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.

Cash and cash equivalents include cash in banks and money market mutual funds with a maturity of three months or less when purchased.

Property and equipment are recorded at cost less accumulated depreciation and amortization.  Depreciation and amortization are computed using the straight-line method over the estimated useful lives of assets ranging from three to seven years. Expenditures for major renewals and betterments that extend the useful lives of property and equipment are capitalized. Expenditures for maintenance and repairs are charged to expenses as incurred.  When an asset is sold or retired, the related cost and accumulated depreciation are removed from the accounts and any resulting gain or loss on disposition is recognized in the current year.

The Company accounts for income taxes under the liability method. Under this method, deferred tax assets and liabilities are determined based on the difference between the financial statement and tax bases of assets and liabilities using enacted tax rates in effect for the year in which the differences are expected to affect taxable income. Valuation allowances are established when necessary to reduce deferred tax assets to the amounts expected to be realized.  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 and adjust on an ongoing basis, based on expected income, the recoverability of the deferred tax assets and the level of the valuation allowance.  Based on the net income amount for the quarter ended September 30, 2006, no provision for income taxes is reflected in the accompanying financial statements and no change in the valuation allowance was made.

The Company has incurred expenditures relating to the pursuit of patent rights covering certain of its products and technologies.  These expenditures have not been capitalized because, in the Company's opinion, the probability of future benefits from such patent rights cannot at present be reasonably assessed and/or the useful life of such assets cannot be reasonably estimated.

For further information, refer to the financial statements and related notes 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.  The Company uses the U.S. dollar as the functional currency for its foreign subsidiary.  Accordingly, gains and losses from the translation of foreign currency amounts reflected on the balance sheet into U.S. dollars are included in the results of operations.  

3.   Stock-Based Compensation

The Company's stock awards are governed by its 2000 Stock Incentive Plan (a qualified stock option plan under Internal Revenue Code), as amended (the "Plan"). The exercise price of stock options under the Plan is determined by the Compensation Committee of the Board of Directors of the Company (the "Committee"). No incentive stock option is exercisable after 10 years from the date of grant.

Prior to January 1, 2006, the Company accounted for the Plan under the recognition and measurement provisions of APB Opinion No. 25, Accounting for Stock Issued to Employees and related Interpretations, as permitted by FASB Statement No. 123, Accounting for Stock-Based Compensation, which did not require that compensation cost be recognized for the Company's stock options provided the option exercise price was established at the common stock fair market value on the date of grant.

Effective January 1, 2006, the Company adopted the fair value recognition provisions of FASB Statement No. 123(R), by which the compensation cost for all stock-based payments granted subsequent to January 1, 2006 are based on the grant-date fair value estimated in accordance with the provisions of Statement 123(R).  The Company adopted this statement using the modified prospective transition method, which applies to the compensation expenses recognition provision to new awards and to any awards modified, repurchased or cancelled after the January 1, 2006 adoption date. Additionally, for any unvested awards outstanding at the option date, the company will recognize the compensation expenses over the remaining vesting period. Stock-based compensation is recognized on the straight-line basis.

On March 30, 2006, the Company issued stock options to certain directors and officers of the Company.  For more information on these stock option grants, please refer to Management's Discussion & Analysis for the first quarter of 2006, which is posted on the Company's website.

As a result of adopting Statement 123(R) on January 1, 2006, the Company's net income for the three-month period ended September 30, 2006 is approximately $123,000 lower than it would have been had the Company continued to account for stock-based compensation under APB Opinion No. 25.

 

©2006 Deltagen, Inc. All rights reserved.