(STOCK SYMBOL - CDNX, "HED")

Hedley Announces Results

for the Fourth Quarter 2001

Mississauga, Ontario (March 18, 2002) Hedley Technologies Ltd.  reports the fourth quarter results.

We have audited the consolidated balance sheet of Hedley Technologies Ltd. as at December 31, 2001 and the consolidated statements of operations and deficit and cash flows for the year then ended. These financial statements are the responsibility of the company's management. Our responsibility is to express an opinion on these financial statements based on our audit.

We conducted our audit in accordance with generally accepted auditing standards. Those standards require that we plan and perform an audit to obtain reasonable assurance whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation.

In our opinion, these financial statements present fairly, in all material respects, the financial position of the Company as at December 31, 2001 and the results of its operations and its cash flows for the year then ended in accordance with generally accepted accounting principles.

As required by the Company Act of British Columbia, we report that, in our opinion, these principles have been applied on a basis consistent with those of the preceding year.
 
 
 
 

Consolidated Financial Highlights

For the year ended December 31, 2001 and 2000
Canadian $

Hedley Technologies Ltd.

Consolidated Balance Sheet

As at December 31, 2001 and 2000

 

2001

          2000

Assets

Current

    Cash

$ 74,918

$ 62,226

    Accounts receivable

1,781,138

136,824

    Inventories

80,695

71,105

    Prepaid expenses

1,113

457

 

1,937,864

270,612

 

 

Patents, trademarks and deferred development costs(Note 3)

237,072

311,773`

 

 

Deferred market development costs(Note 4)

52,070

107,482

 

 

Capital assets(Note 5)

31,741

41,681

 

 

Long-term investment

-

      442,963

 

$ 2,258,747

$ 1,174,511

Liabilities

Current

    Accounts payable and accrued liabilities

$ 767,886

$ 464,151

    Notes payable(Note 6)

    500,000

       500,000

 

1,267,886

964,151

Shareholders' Equity

Share capital(Note 7b)

       6,440,328

       6,440,328

 

 

Contributed surplus

         23,755

            23,755

 

 

Deficit

(5,473,222)

(6,253,723)

 

990,861

210,360

 

$ 2,258,747

$ 1,174,511

 

Hedley Technologies Ltd.

Consolidated Statement of Operations and Deficit

Year ended December 31, 2001 and 2000

 

2001

        2000

Revenue

    Sales

$ 665,934

$ 887,310

    Cost of sales

260,835

293,113

    Gross profit

405,099

594,197

    Consulting revenue

    -

       -

 

405,099

594,197

Expenses

    Salaries and benefits

230,678

346,513

    Selling and marketing

145,363

148,430

    Travel and accommodation

27,507

57,493

    Communications

29,401

46,258

    Interest and bank charges

128,098

68,574

    Legal and accounting

24,927

54,132

    Office

10,971

16,339

    Rent

14,300

24,246

    Financing charge

-

2,903

    Equipment rental

2,849

8,232

    Printing

2,311

5,896

    Warehousing

8,424

4,186

    Transfer agent and filing fees

6,143

9,418

    Foreign exchange loss(gain)

(4,326)

(6,432)

    Bad debts

201

149

    Amortization

232,920

217,398

 

859,767

1,003,735

Loss from operations

(454,668)

(409,538)

Other

    Gain on settlement of debt

45,110

-

    Gain on sale of assets

1,190,059

-

    Other income

    - 

4,069

 

1,235,169

4,069

Income (Loss) for the year

780,501

(405,469)

Deficit, beginning of year

(6,253,723)

(5,848,254)

Deficit, end of year

$ (5,473,222)

$ (6,253,723)

Gain (Loss) per share

       $0.09

(0.04)

 

Hedley Technologies Ltd.

Consolidated Statement of Cash Flows

Year ended December 31, 2001 and 2000

 

2001

        2000

Cash provided by(used for)

Operating activities

    Loss for the year

$ 780,501

$ (405,469)

    Item not involving cash

         Amortization

232,920

217,398

         Loss on Disposal of Asset

-

5,200

    Changes in non-cash working capital items

         Accounts receivable

(1,644,314)

(119,258)

         Inventory

(9,590)

30,473

         Prepaid expenses

(656)

1,566

         Accounts payable

303,735

144,020

Decrease from operating activities

(337,404)

(126,070)

Financing activities

    Notes payable

    -

-

    Special warrants issued(exercised), net of issue costs

  -

-

    shares issued, net of costs

  -

-

Increase from financing activities

        -

-

Investing activities

    Purchase of capital assets

-

(12,547)

    Patents, trademarks and deferred development costs

(92,867)

(111,695)

    Sale of investment

442,963

-

Increase (decrease) from investing activities

350,096

(124,242)

Increase (decrease) in cash for the year

12,692

(250,312)

Cash, beginning of year

62,226

312,538

Cash, end of year

$ 74,918

$ 62,226

1. Basis of presentation

These consolidated financial statements present the accounts of Hedley Technologies Ltd. (the "Company") and its two wholly owned subsidiaries, Hedley Technologies (USA) Inc. and HTI Agritech Inc. Hedley Technologies (USA) Inc. (formerly HTI Agritech (USA) Inc.) was incorporated on May 13, 1994 in the state of Washington, USA. HTI Agritech was incorporated on January 30, 1996 in the Province of British Columbia, Canada. Both subsidiaries commenced operations during 1996.

All intercompany transactions have been eliminated in the consolidated financial statements. The accounts of Hedley Technologies (USA) Inc. have been consolidated using the temporal method of foreign currency translation.

2. Significant accounting policies

(a) Patent, trademarks and deferred development costs

Costs related to the acquisition of rights, product development and testing, and obtaining regulatory approval, net of related grants, have been capitalized. These costs are being amortized against related revenues from commercial production and sales on a straight line basis over five years.

(b) Deferred market development costs

Certain costs related to market development in markets outside of Canada have been capitalized. These costs are being amortized against related revenues from commercial production and sales in these markets on a straight line basis over five years.

(c) Capital assets and amortization

Capital assets are stated at cost. The Company records amortization of capital assets at the following rates and methods:

Furniture

20% declining balance 

Equipment

20% declining balance 

Mould and design drawings

20% declining balance 

Computer equipment

30% declining balance 

Leasehold improvements

5 year straight line

Software

      30% straight line

Amortization is calculated at one half of the above noted rates in the year of acquisition.

(d) Inventories

Finished goods and raw materials are stated at the lower of cost and net realizable value.

(e) Foreign currency translation

Amounts denominated in foreign currencies have been translated into Canadian dollars as follows:

i.      Monetary assets and liabilities at the rate of exchange prevailing at the balance sheet date;

ii.     Non-monetary assets and liabilities at the rate of exchange prevailing at the time of acquisition of the assets or assumption of the liabilities; and

iii.     Revenue and expenses at rates approximating the rates of exchange prevailing on the transaction dateexcept for amortization, which is translated at the same rate as the assets to which it relates.

Gains or losses on translation are included in current year's operations.

(f) Use of estimates by management

The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosures of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from these estimates.

Significant areas requiring the use of estimates include the valuation of patents, trademarks and deferred development costs and deferred market development costs (Notes 3 and 4).

3. Patents, trademarks and deferred development costs

In 1992, the Company acquired the patent and distribution rights to a line of non-toxic insecticides marketed under the trade name INSECOLO™, subject to a 3% royalty on product sales. A minimum royalty of $10,000 is payable annually.

The Company holds a 50% patent ownership and 100% of the licensed rights to distribute a non-toxic insecticide marketed under the name PROTECT-ITŪ. The Company must pay a royalty of 2% of sales of the product annually.

The balance of this account is analyzed as follows:
 

 

2001

        2000

Cost

    Balance at beginning of year

$ 745,079

$ 633,385

    Additions during the year:

       Trademark and patent registration

    -

         -

       Product research and development

166,296

142,379

       Government grants

(73,401)

(30,685)

 

92,895

111,694

    Balance at end of year

837,974

745,079

Accumulated amortization

    Balance at beginning of year

433,306

284,290

      amortization expense

167,596

149,016

    Balance at end of year

600,902

433,306

Net book value

$ 237,072

$ 311,773

4. Deferred market development costs

The balance of this account is analyzed as follows:
 

 

2001

   2000

Cost

    Balance at beginning of year

$ 277,021

$ 277,021

    Additions during the year:

       Salaries and consulting fees

-

-

       Government grants

-

-

 

-

-

    Balance at end of year

     277,021 

        277,021 

Accumulated amortization

    Balance at beginning of year

169,539

114,130

      amortization expense

55,412

55,409

    Balance at end of year

224,951

169,539

Net book value

$ 52,070

$ 107,482

5. Capital assets

Capital assets consist of the following:
 

 

 

2001

 

2000

 

Cost

Accumulated
Amortization

Net book
Value

Net Book
Value

Furniture

$ 33,021

$ 24,684

$ 8,337

$ 10,422

Equipment

   25,199

18,216

6,983

8,729

Mould and design drawings

     11,700

4,879

6,821

8,526

Computer equipment

    60,650

51,514

9,136

13,052

Leasehold improvements

      1,253

873

380

630

Software

          805

724

81

322

 

$ 132,628

$ 100,890

$ 31,738

$41,681

6. Note payable

The note payable of $500,000 is due on September 15, 2000 and bears interest at the rate of 12% per annum on the outstanding principal amount. All shares of Philom Bios Inc., as described in Note 6, and all assets of the Company have been pledged as security in respect of this financing.

The Company is in default of certain covenants with respect to this financing. On November 21, 2000, the Company received a demand of payment and notice of default from the creditor.  The creditor has not exercised any of its rights provided in the loan agreement.

Subsequent to the date of the consolidated financial statements, the company paid of the loan and $ 213,376 of accrued interest.

7. Share capital

(a) The authorized share capital of the Company consists of 100,000,000 common shares without par value and 25,000,000 preferred shares without par value.

(b) The issued outstanding share capital of the Company is set out below:

 

2001

2000

 

Number
of shares

Amount

Number
of shares

Amount

Balance at beginning of year

9,170,195

$6,440,328

9,920,195

$6,440,328

 

Issued during the year

 

 

 

 

   Escrow shares(net)

-

-

-

-

   Settlement of debt

-

-

-

-

   Acquisition of investment

-

-

-

-

   Financing fee

-

-

-

-

   Special warrants exercised

-

-

-

-

     for shares(net of issue costs)

-

-

-

-

Balance at end of year

$ 9,170,195

  $ 6,440,328

  $ 9,920,195

$ 6,440,328

 (c) Stock options

The Company has granted stock options to certain directors and employees of the Company entitling them to acquire common shares of the Company as follows:

Number of shares

Exercise price

Expiry date

 

 

 

200,000

$0.10

January 17, 2006

 

200,000

$0.10

January 17, 2006

 

70,000

$0.10

January 17, 2006

 

170,000

$0.10

January 17, 2006

 

70,000

$0.10

January 17, 2006

 

20,000

$0.10

January 17, 2006

 

70,000

$0.10

January 17, 2006

 

55,000

$0.10

January 17, 2006

 

45,000

$0.10

January 17, 2006

 

 

900,000

 

 

 

 

(d) Loss per share

Loss per share is calculated based on the weighted average number of shares outstanding during the year of 9,170,195 shares.

8. Related party transaction

On June 9, 1999 the Company borrowed $500,000 from a group of investment funds holding shares in the Company. During the year, interest of $108,791 (2000 - $60,000) were charged to operations

9. Income taxes

As at December 31, 1999, the Company has accumulated operating losses for Canadian tax purposes of approximately $2,910,014 and for U.S. tax purposes of approximately $386,458, which may be carried forward to reduce taxable income in future years. The right to claim the Canadian losses expires between the years 2002 and 2007, and the U.S. losses between the years 2012 and 2016. The potential income tax benefits arising from these losses are not recorded in these financial statements.

10. Lease commitments

The company is committed under operating lease agreements for the rental of real property and certain equipment. The leases expire on January 31, 2004.

A summary of the commitments is as follows:
 

2002

$ 16,323

2003

15,566

2004

1,305

 

$ 33,194

11. Financial instruments and concentration of risk

The carrying values of cash, accounts receivable, long-term investment, accounts payable and accrued liabilities and notes payable approximate their respective fair values.

It is management's opinion that the Company is not exposed to significant interest, currency or credit risks arising from these financial statements

All figures unless otherwise noted are reported in accordance with Canadian Generally Accepted Accounting Principles.

Please visit the SEDAR home page for a more detailed account of our filings.

 mailto:hedinfo@attglobal.net
 
 


 
 



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