(STOCK SYMBOL - VSE, "HED")

Hedley Announces Results

for the First Quarter 2003

Mississauga, Ontario (May 29, 2003) Hedley Technologies Ltd.  reports the first quarter results.

Dear shareholder,

In late 2002 the Company made the strategic decision to focus additional resources in the area of human health. It has identified this as an area of significant growth potential. A previously announced licensing agreement with BioLytical Laboratories Inc. of Richmond, B.C., Canada for the Insti® HIV-1/HIV-2 Rapid Antibody Test (“InstiKit”) is the first of what the company intends will be a portfolio of licensed product offerings in the area of human health.

 

The ten year agreement with BioLytical Laboratories Inc. to be master distributor responsible for global commercialization and sales of the InstiKit should provide more stability to Hedley’s base of business.  Due to the nature of our insecticidal products and their seasonal utilization, the first three months are always the slowest, combined with the fact that the Company only acquired the InstiKit less than a month ago, the first quarter results will not give a true indication of anticipated results for the current fiscal year.

 

Hedley’s first quarter gross sales revenues of $95,727 versus $22,032 in 2002, is a reflection of the Company’s previously reported long term supply arrangement with S. C. Johnson and Son, Limited to produce RAID® Earthblends™ Ant and Earwig Dust, as $88,635 of the gross sales revenue can be attributed to this product.  The margin in home and garden products is considerably lower than in Protect-It® sales, resulting in a gross margin of 26.2% through March 31, 2003 versus 60.4% for the same period last year and 68.6% for the year 2002. As sales of higher margin Protect-It® contribute a greater share of our product mix in the latter part of this year, over-all gross margin will increase. The significant increase in inventory reported for this quarter is the result of purchase of InstiKits pursuant $500,000 versus nil for last year. Receivables for the quarter end were $99,978 up from $17,550 year ago driven by a substantial increase in insecticide product sales versus the year ago period.

 

The net loss for the three months ended March 31, 2003 was $185,777 versus $177,723 for the comparable year ago period. The loss per share for the period was $0.015 versus $0.019 year ago. As explained earlier, our insecticide business, which comprises all of the sales for this reporting period, is seasonal and typically contributes proportionally more gross profit in the second and third quarters. As a result we expect an improvement in the net results for coming quarters. Due to market demand for safe home and garden insecticides, the Company sold approximately an additional $95,000 of Insecolo™ in April, subsequent to this reporting period.  The Company now exceeds its annual forecasted sales of Insecolo™ by more than 80%.

 

As of April 30, 2003 the Company has significantly reduced its expenditures on insecticide research and development. In future, R&D expenditures on insecticides will be made opportunistically, when in the opinion of management there is more certainty in realizing a gain on such investment. This action will reduce over-all cash used in R&D for the year, but has had no impact on the results reported for the quarter ended March 31, 2003. As at March 31, 2003, Hedley’s working capital stood at $726,729, an increase of $249,182 from $477,547 on December 31, 2002. However, Hedley management must continue to be vigilant on managing expenses, and meeting our sales budgets for Protect-It®, Insecolo™ and the InstiKit.    

 

On behalf of the Board,

 

René C. Goehrum

 

Chairman and Chief Executive Officer

 

 

 

Consolidated Financial Highlights

For the three months ended March 31, 2003 and 2002

Canadian $

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

 mailto:hedinfo@ibm.net

 

 

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