DGEN Deltaagen Inc (CE)

Deltagen, Inc. (Pink Sheets: DGEN), a leading provider of drug discovery tools and services to the biopharmaceutical industry, today reported unaudited consolidated financial results for the three months ended June 30, 2012.

Revenues: The Company’s consolidated revenues for the three months ended June 30, 2012 totaled $0.220 million. The revenues in the second quarter of 2012 were attributable primarily to license fees associated with the provision of knockout mice and related phenotypic data pursuant to orders placed by customers under the Company’s DeltaOneTM program. The consolidated revenues for the period included $0.018 million for Benten BioServices, Inc. ("Benten BioServices") and $0.008 million for Xenopharm, Inc. (“Xenopharm”), both of which were wholly-owned subsidiaries of the Company as of June 30, 2012. The revenues for the second quarter of 2012 reflect delays in international shipments of knockout mice that had been scheduled for delivery and invoicing in the second quarter, which delays had been caused by unusually high temperatures that risked the health and viability of the knockout mice. The revenues associated with such delayed shipments, which total approximately $0.100 million, are expected to be recognized in the third quarter of 2012.

Expenses: Total consolidated expenses for the three months ended June 30, 2012 were $1.484 million. The expenses in the second quarter of 2012 were attributable primarily to labor costs and other general and administrative expenses, including expenses of $1.217 million relating to the operation of Benten BioServices (“Benten Expenses”), $0.082 million in royalty and commission expenses, and non-recurring expenses of $0.003 million associated with the royalties and prosecution and issuance of patents licensed exclusively to Xenopharm. As of June 30, 2012, the Company had incurred aggregate total royalties to Lexicon Pharmaceuticals, Inc. (“Lexicon”) of $5.645 million to a March 2005 settlement agreement between Lexicon and the Company. Under the settlement, the maximum aggregate amount of royalty payments due to Lexicon is $6.00 million. Accordingly, up to $0.355 million in contingent royalty payments remained owed to Lexicon as of June 30, 2012.

Net Income/Losses: Consolidated net losses before provision for income taxes for the three months ended June 30, 2012 were $1.263 million. Excluding Benten Expenses, the net loss before provision for income taxes for the three months ended June 30, 2012 would have been $0.065 million.

Cash, Cash Equivalents and Accounts Receivable: As of June 30, 2012, the Company had $0.354 million in consolidated cash and cash equivalents and $0.082 million in accounts receivable.

Major Events during Q2 2012 and Subsequent Events:

Benten BioServices: Benten BioServices had received an aggregate total of $2.940 million in secured bridge financing. The financing was led by Life Sciences Green House of Central Pennsylvania ("LSGH"). On August 14, 2012, the $2.940 million in bridge loans was converted into 6,134,008 shares of preferred stock of Benten BioServices ("Series A Initial Closing") at an issue price of $0.48 per share ("Series A Initial Closing Price"). Deltagen, and executives and directors of Deltagen and Benten BioServices, or entities related thereto, participated in the Series A Initial Closing. Following the Series A Initial Closing, excluding Benten BioServices' stock options, Deltagen held 43.8% of the outstanding shares of Benten BioServices, comprising 39.5% in common stock of Benten BioServices and 4.3% in preferred stock of Benten BioServices. The executives and directors of Deltagen and Benten BioServices, or entities related thereto, received in the aggregate 9.5% of the outstanding shares of Benten BioServices as preferred stock. The participants in the Series A Initial Closing received in the aggregate 60.5% of the outstanding shares of Benten BioServices as preferred stock. Benten BioServices has the authority to issue 65 million shares, comprising 50 million shares of common stock and 15 million shares of preferred stock. Under Benten BioServices' equity incentive plan, 1,381,910 shares of Benten BioServices' common stock are reserved for the issuance of stock options. After the Series A Initial Closing, Benten BioServices may sell, on the same terms and conditions, up to 4,282,659 additional shares of preferred stock. Shares of preferred stock are convertible at the option of the holder at any time into shares of common stock at an initial conversion price equal to the Series A Initial Closing Price. The preferred stock will be automatically converted into common stock at the then effective conversion price upon the approval of such conversion by at least 67% of the then outstanding shares of preferred stock or upon the closing of a public offering in which the public offering price per share is at least $1.92 and the gross cash proceeds are at least $50 million. Deltagen shall retain a seat on the board of directors of Benten BioServices solely representing Deltagen so long as it beneficially owns at least 10% of the outstanding common stock of the company. Benten BioServices will require additional capital by the fourth quarter of 2012 in order to continue to fund its operations in accordance with its business plan.

The unaudited consolidated financial statements for the second quarter of 2012, accompanying notes, and Management’s Discussion and Analysis of Financial Conditions and Results of Operations for such period will be posted on Deltagen’s website (www.deltagen.com).

About Deltagen

Deltagen, Inc. is a provider of drug discovery tools to the biopharmaceutical industry, and offers access to its inventory of knockout mouse lines and related phenotypic data to enhance the efficiency of target validation and drug discovery. In addition, Deltagen offers target validation data in the areas of immunology and metabolic diseases. Deltagen's products and programs have been validated by customers and partners such as Eli Lilly & Co., GlaxoSmithKline, Merck & Co., Inc. and Pfizer Inc. Benten BioServices, Inc., based in Malvern, Pennsylvania, offers regulatory-compliant services designed to address specific requirements for critical stages in product development, including biosafety testing, raw materials testing, assay and process validation services, cell banking and characterization services, and technology platform-specific R&D support and consulting services. For more information on Deltagen, visit the Company's website at www.deltagen.com.

Safe Harbor Statement

This press release contains “forward-looking statements,” including statements about Deltagen’s future revenues, cash flows and operating results, first-party royalty obligations and first-party licenses and intellectual property, fund-raising efforts, Benten BioServices' business plans, as well as other matters that are not historical facts or information. These forward-looking statements are based on management’s current assumptions and expectations and involve risks, uncertainties and other important factors, specifically including those relating to Deltagen’s ability to achieve its operational objectives and revenue projections, that may cause Deltagen’s actual results to be materially different from any future results expressed or implied by such forward-looking statements. There are no assurances that the Company will declare any future dividends. Information identifying such important risk factors is contained in “Management’s Discussion and Analysis of Financial Conditions and Results of Operations”, which can be found at Deltagen’s website at www.deltagen.com. Deltagen undertakes no obligation to update or revise any such forward-looking statements, whether as a result of new information, future events or otherwise.

       

DELTAGEN, INC.

 

CONSOLIDATED BALANCE SHEET

(UNAUDITED)

  Consolidated Balance Sheet As of 6/30/12 Unaudited (In Thousands) 6/30/12 Consolidated Assets Current assets: Cash and cash equivalents $ 354 Accounts receivable, net 172 Prepaid expenses, deposits and deferred tax assets   278   Total current assets $ 804 Property and equipment, net 2,440

Goodwill

224

Non-current portion of deferred tax assets

  1,586   Total assets $ 5,053  

Liabilities and Stockholders' Equity

Current liabilities: Accounts payable $ 557 Accrued expenses   145   Total liabilities $ 702

Non-Current liabilities:

Deferred rent $ 791 Convertible note   -   Total long-term liabilities $ 791   Stockholders' equity: Common stock 39 Treasury Stock (867 ) Additional paid-in capital 232,533 Retained Earnings (228,548 ) Foreign currency translation adjustment   402   Total stockholders' equity $ 3,559   Total liabilities and stockholders' equity $ 5,053    

DELTAGEN, INC.

 

CONSOLIDATED INCOME STATEMENT

(UNAUDITED)

             

Consolidated Income Statements and

Statements of Retained Earnings

For Quarter ended 6/30/12

  Unaudited (In Thousands) 6/30/12 Consolidated   Revenue $ 220 Royalty and Commission Costs 82 Other Operating Costs   1,402     Income From Operations $ (1,264 )   Interest Income 1 Loss on disposal of assets   -     Total Other Income   -     Income before provision for income taxes $ (1,263 )   Provision for income taxes Current income tax expense - Deferred income tax expense - Adjustment for valuation allowance   -     Total income tax expense -   Net Income (Loss) $ (1,263 )   Retained earnings at beginning of period   (227,284 )   Retained earnings at end of period $ (228,548 )  

DELTAGEN, INC.

 

CONSOLIDATED CASH FLOW

(UNAUDITED)

  Consolidated Cash Flows For Quarter ended 6/30/12     Unaudited 6/30/12 (Dollars In Thousands) Consolidated   Cash flows from operating activities:   Net Income (Loss) $ (1,264 )   Adjustments to reconcile net income to net cash provided by operating activities: Depreciation 84 Stock-based compensation expense - Loss on disposal of fixed assets -

(Increase)/Decrease in operating assets

Accounts receivable (111 ) Prepaids, deposits and tax assets 13 Purchase of assets (34 ) Deferred tax assets - Deferred rent 227

Increase/(Decrease) in operating liabilities

Accounts payable 88 Accrued expenses   15     Change in goodwill - Issuance of convertible note (1,275 ) Dividends paid   -     Net Increase/(Decrease) in cash $ (361 )   Effect of foreign exchange rate change on cash and cash equivalents -   Cash and cash equivalents, at beginning of period   715     Cash and cash equivalents, at end of period   354