SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of
the Securities Exchange Act of 1934 (Amendment No. )
Filed by the Registrant |_|
Filed by a Party other than the Registrant |_|
Check the appropriate box:
|_| Preliminary Proxy Statement
|_| Confidential, for Use of the Commission Only
(as permitted by Rule 14a-6(e)(2)
|X| Definitive Proxy Statement
|_| Definitive Additional Materials
|_| Soliciting Material Pursuant to ss.240.14a-11(c) or ss.240.14a-12
STAKE TECHNOLOGY LTD.
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(Name of Registrant as Specified In Its Charter)
- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
|X| No Fee Required
|_| Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
1. Title of each class of securities to which transaction applies:
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2. Aggregate number of securities to which transaction applies:
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3. Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (set forth the amount on which
the filing fee is calculated and state how it was determined):
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4. Proposed maximum aggregate value transaction:
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5. Total fee paid:
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|_| Fee paid previously with preliminary materials.
|_| Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identify the filing for which the offsetting fee was
paid previously. Identify the previous filing by registration number, or
the Form or Schedule and the date of its filing.
1. Amount previously paid:
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2. Form, Schedule or Registration Statement No.:
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4. Date Filed:
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STAKE TECHNOLOGY LTD.
2838 Highway 7
Norval, Ontario, Canada L0P 1K0
T:(905) 455-1990 F:(905) 455-2529
================================================================================
NOTICE OF ANNUAL and SPECIAL MEETING OF SHAREHOLDERS
TO BE HELD JUNE 14, 2001
================================================================================
To the holders of the Common Shares of Stake Technology Ltd:
Notice is hereby given that the Annual and Special Meeting of Shareholders of
STAKE TECHNOLOGY LTD. (the "Company") will be held on June 14, 2001 at 4:00 p.m.
local time, in the "Kensington Room" at Le Royal Meridien, King Edward Hotel, 37
King Street East, Toronto, Canada for the following purposes:
1. to receive the Consolidated Audited Financial Statements of the Company
for the year ended December 31, 2000 and the Auditors' Report thereon;
2. to elect eleven Directors;
3. to appoint PricewaterhouseCoopers as auditors of the Company for 2001 and
to authorize the Directors to fix their remuneration;
4. to approve the 2001 Stock Option Plan that is annexed to the Information
Circular as "Exhibit A", and
5. to consider and take action upon such other matters as may properly come
before the meeting or any adjournment or adjournments thereof.
This Notice is accompanied by a Form of Proxy, Information Circular, the Annual
Report of the Company which includes the Consolidated Audited Financial
Statements for the year ended December 31, 2000, March 31, 2001 press release of
results and Return Card for shareholders to request continued information and an
envelope to return the Proxy and Return Card.
All shareholders are cordially invited to attend the meeting.
DATED this 2nd day of May, 2001
By Order of the Board of Directors
Jeremy N. Kendall
Chairman and Chief Executive Officer
- --------------------------------------------------------------------------------
In order to be represented by proxy at the Annual and Special Meeting, you must
complete and submit the enclosed Form of Proxy or other appropriate Form of
Proxy.
- --------------------------------------------------------------------------------
PROXY
STAKE TECHNOLOGY LTD.
2838 Highway 7
Norval, Ontario, Canada L0P 1K0
Telephone: 905-455-1990
Fax: 905-455-2529
THIS PROXY IS SOLICITED ON BEHALF OF THE MANAGEMENT OF STAKE TECHNOLOGY LTD.
(the "Company").
The undersigned, a shareholder of the Company, hereby appoints Jeremy N. Kendall
or failing him, Cyril A. Ing, both officers of the Company or INSTEAD OF EITHER
OF THEM ______________________ as proxy for the undersigned with the power to
appoint a substitute, and hereby authorize them to represent and to vote, in
respect of the matters set out below, all of the Common Shares of the Company
held by the undersigned of record, at the ANNUAL MEETING OF SHAREHOLDERS TO BE
HELD ON JUNE 14, 2001 in the "Kensington Room" at Le Royal Meridien King Edward
Hotel, 37 King Street East, Toronto, Ontario, Canada at 4:00 p.m. local time, or
any adjournment thereof, in the same manner, to the same extent and with the
same powers as if the undersigned were personally present at the said meeting or
any adjournment thereof.
SHAREHOLDERS HAVE THE RIGHT TO APPOINT A PERSON (WHO NEED NOT TO BE A
SHAREHOLDER) OTHER THAN THE NOMINEES DESIGNATED ABOVE TO ATTEND AND ACT FOR THEM
ON THEIR BEHALF AND MAY EXERCISE SUCH RIGHT BY STRIKING OUT THE NAMES OF
MANAGEMENT'S NOMINEES AND INSERTING THE NAME OF THEIR NOMINEE IN THE BLANK SPACE
PROVIDED FOR SUCH PURPOSE.
Management recommends a vote for proposals 1, 2 and 3.
1. To elect eleven Directors.
VOTE for all nominees listed below WITHHOLD FROM VOTING
(except as marked to the for all nominees listed
contrary below) below
|_| |_|
(INSTRUCTION: To withhold authority to vote for any individual nominee
strike a line through the nominee's name in the list below).
Tim Bergqvist, Michael Boyd, Cyril A. Ing, Jeremy N. Kendall, James
Rifenbergh, Joseph Riz, John Taylor, Allan Routh, Katrina Houde,
Dennis Anderson, Larry (Andy) Anderson
2. To appoint PricewaterhouseCoopers as auditors of the Company for 2001 and
to authorize the Directors to fix their remuneration.
|_| FOR |_| AGAINST |_| WITHHOLD / ABSTAIN
3. To approve the 2001 Stock Option Plan for the issuance of up to 1,000,000
common shares to employees, directors and consultants of the Company as
described and annexed to the Information Circular.
|_| FOR |_| AGAINST |_| WITHHOLD / ABSTAIN
4. To consider and take action upon such other matters as may properly come
before the meeting, or any adjournment or adjournments thereof.
This Proxy, when properly executed, will be voted in the manner directed herein
by the undersigned shareholder.
IF THE OFFICERS NAMED IN THIS PROXY ARE APPOINTED BY THE UNDERSIGNED AND NO
DIRECTION IS MADE, SUCH OFFICERS WILL VOTE AND VOTE FOR PROPOSALS 1, 2 and 3. IF
A PERSON OTHER THAN THE OFFICERS NAMED IS APPOINTED AND NO DIRECTION IS MADE,
SUCH PERSON MAY VOTE SUCH SHARES AT HIS DISCRETION. IF ANY AMENDMENT OR
VARIATION TO THE MATTERS IDENTIFIED ABOVE ARE PROPOSED AT THE MEETING,
DISCRETIONARY AUTHORITY IS HEREBY CONFERRED WITH RESPECT THERETO.
When shares are held by joint tenants, both should sign. When signing as
attorney, executor, administrator, trustee or guardian, please give full title
as such and furnish evidence of authority. If a corporation, please sign in full
corporate name by President or other authorized officer. If a partnership,
please sign in partnership name by authorized person. If not dated, this Proxy
is deemed to bear the date on which it is mailed to each shareholder.
DATE , 2001
--------------------------
--------------------------------------
Signature
--------------------------------------
Signature if held jointly
PLEASE MARK, SIGN, DATE AND RETURN THIS PROXY PROMPTLY,
USING THE ENCLOSED ENVELOPE
STAKE TECHNOLOGY LTD.
2838 Highway 7
Norval, Ontario, Canada
L0P 1K0
INFORMATION CIRCULAR and PROXY STATEMENT
SOLICITATION AND REVOCATION OF PROXIES
THIS INFORMATION CIRCULAR AND PROXY STATEMENT ("Information Circular") IS
FURNISHED IN CONNECTION WITH THE SOLICITATION BY THE MANAGEMENT OF STAKE
TECHNOLOGY LTD. ("the Company") OF PROXIES FOR USE at the Annual and Special
Meeting ("the Meeting") of Shareholders to be held on June 14, 2001 at 4:00 p.m.
local time, in the "Kensington Room" at Le Royal Meridien King Edward Hotel, 37
King Street East, Toronto, Ontario, Canada and at any adjournment thereof, for
the purposes set forth in the accompanying Notice of Annual and Special Meeting
of Shareholders.
The Company expects to mail this Information Circular and the accompanying form
of Proxy on or about May 16, 2001.
Any shareholder giving such a Proxy may revoke it at any time before it is
exercised. A Proxy given pursuant to this solicitation may be revoked by
instrument in writing executed by the shareholder or his or her attorney duly
authorized in writing and deposited either at the corporate office of the
Company at 2838 Highway 7, Norval, Ontario, Canada L0P 1K0, at any time prior to
the date of the meeting at which the proxy is to be used, or by delivering it
prior to a vote to the Chairman of the meeting on the day of the meeting or any
adjournment thereof.
The persons named in the form of Proxy are Directors and Officers of the Company
and will vote the shares in respect of which they are appointed Proxy holders in
accordance with the directions of the shareholder appointing them. IN THE
ABSENCE OF SUCH DIRECTION, SUCH SHARES WILL BE VOTED FOR THE ELECTION OF
DIRECTORS, FOR THE APPOINTMENT OF PRICEWATERHOUSECOOPERS AS AUDITORS AND FOR
APPROVAL OF THE 2001 STOCK OPTION PLAN.
If a shareholder appoints some person other than the officers named in the form
of Proxy to represent him or her, such person will vote the shares in respect of
which he or she is appointed proxy holder in accordance with the directions of
the shareholder appointing him or her. In the absence of such direction, such
person may vote such shares at his or her discretion.
The enclosed form of Proxy confers discretionary authority upon the persons
named therein with respect to amendments or variations to matters identified in
the Notice of Meeting, or other matters, which may properly come before the
meeting. At the time of printing this Information Circular, the management of
the Company knows of no such amendments, variations or other matters to come
before the meeting.
The Company will bear the cost of preparing, assembling and mailing all proxy
materials that may be sent to the Shareholders in connection with this
solicitation. In addition to the solicitation of proxies by use of the mails,
officers and regular employees of the Company may solicit proxies without
additional compensation, by telephone, fax or e-mail. The Company does not
expect to pay any additional compensation for the solicitation of proxies.
The Annual Report of the Company, which contains the Audited Consolidated
Financial Statements for the fiscal year ended December 31, 2000, accompanies
this Information Circular. Receipt at the Meeting of the consolidated financial
statements of the Company for the year ended December 31, 2000 and the auditors'
report thereon will not constitute approval or disapproval of any of the matters
referred to in such reports and statements.
Unless otherwise indicated, all dollar amounts herein are expressed in Canadian
dollars. On May 4, 2001 the noon buying rate in New York City for cable
transfers in Canadian dollars as certified for customs purposes of the Federal
Reserve Bank of New York, was US$0.6445 = $1.00 CDN.
1
VOTING SECURITIES
The Board of Directors has fixed May 7, 2001 as the record date for determining
shareholders entitled to Notice of the Meeting.
Shareholders of Common Shares of record on May 7, 2001 are entitled to one vote
for each share registered in the name of the shareholder. As of May 4, 2001
there were 29,023,905 Common Shares issued and outstanding.
SECURITY OWNERSHIP OF CERTAIN OWNERS AND MANAGEMENT
The following table sets forth certain information concerning share ownership of
all persons known by the Company to own beneficially 5% or more of the Company's
outstanding Common Shares and all directors of the Company as a group as of May
4, 2001.
==================================================================================================================
Name and Address Class of Amount of Shares Percent of Class (2)
of Beneficial Holder Share Beneficially Owned
- ------------------------------------------------------------------------------------------------------------------
Dennis Anderson Common 5,356,335(a) 18.45%
2214 Geneva Road NE, Alexandria
Minnesota USA 56308
==================================================================================================================
Gruber & McBaine Capital Management Common 3,507,500(3) 12.08%
50 Osgood Place, San Francisco
California USA 94133
==================================================================================================================
All Directors and Officers Common (1) 1,786,343(a) 6.2% (a)
As a group (thirteen) after excluding Dennis
Anderson who is disclosed above (a) and not 7,142,678(b) 24.6% (b)
excluding Mr. Anderson's shares (b) and
including Ms. Leslie Markow, CFO and Mr. David
Kruse, Vice President and COO-BEI/PECAL.
==================================================================================================================
(1) For details of shares owned by and directors, see Election of Directors.
(2) Percentage ownership is calculated based on total Common Shares
outstanding at May 4, 2001 of 29,023,905. It does not include warrants or
options that have vested or have not yet vested.
(3) The Company has no knowledge of the beneficial owner of the shares held in
the name of Gruber & McBaine Capital Management, 50 Osgood Place, San
Francisco, California, USA, 94133.
ELECTION OF DIRECTORS
Eleven directors will be elected to serve until the next Annual Meeting or until
their successors are elected and qualified. There are no family relationships
among the Directors. The accompanying form of proxy will be voted for the
election as Director of the nominees listed below, unless the proxy contains
contrary instructions. Each of the nominees has consented to be named herein and
to serve as a Director. Management has no reason to believe that any of the
nominees will not be a candidate or will be unable to serve as a Director.
However, in the event that any of the nominees should become unable or unwilling
to serve as a Director, the officers named in the accompanying form of proxy
reserve the right to vote for another person at their discretion. The Board of
Directors of the Company has been established at a minimum of five and a maximum
of 15 and presently consists of eleven directors.
2
The following are management's nominees:
Information concerning the directors and officers at May 4, 2001 is set forth
below:
(a) Identification of directors and certain executive officers:
=================================================================================================================
Number of Shares
Year First Position Beneficially
Elected With Company Class of Owned/Number of % of
Name Age Director Shares Vested Options Class
- -----------------------------------------------------------------------------------------------------------------
J.N. Kendall 61 1978 Chairman of the Board, Common 301,013/358,000 (1) 2.17%
CEO & Director
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C.A. Ing 68 1984 Secretary and Director Common 66,335/57,500 (2) 0.41%
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J. Riz 53 1986 Independent Director Common 33,600/57,500 (3) 0.30%
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J.D. Taylor 48 1994 President, COO & Director Common 97,027/198,000 (4) 0.97%
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T. Bergqvist 69 1989 Independent Director Common 20,000/57,500 (5) 0.25%
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M. Boyd 49 1995 Independent Director Common 5,000/50,000 (6) 0.18%
- -----------------------------------------------------------------------------------------------------------------
J. Rifenbergh 70 1996 Director, now Common 313,448/107,500 (7) 1.38%
independent (was
formerly acting CEO of
SunRich in 1998)
- -----------------------------------------------------------------------------------------------------------------
A. Routh 50 1999 Director and President Common 553,781/80,000 (8) 2.08%
of the SunRich Food
Group, Inc.
- -----------------------------------------------------------------------------------------------------------------
D. Anderson 56 2000 Director and Vice Common 5,356,335/2,000 (9) 17.62%
President - Operations
of the Sunrich Food
Group, Inc.
- -----------------------------------------------------------------------------------------------------------------
L. Anderson 52 2000 Director and Part-time Common 367,089/1,500 (10) 1.2%
CFO of Northern Food &
Dairy, Inc.
- -----------------------------------------------------------------------------------------------------------------
K. Houde 42 2000 Independent Director Common 0 /10,000 (11) 0.03%
- -----------------------------------------------------------------------------------------------------------------
All Directors
and certain
executive Common 7,113,628/979,500 (12) 26.6%
Officers as
listed as a
group (eleven)
=================================================================================================================
Percentage ownership is calculated based on total Common Shares outstanding at
May 4, 2001 of 29,023,905 outstanding plus all Common Shares subject to an
option currently exercisable, which at May 4, 2001 total 1,381,825 of which
979,500 related to directors and officers noted above and described below and
402,325 are options vested to other employees of the Company. This calculation
does not include options that have not yet vested or warrants currently
outstanding. Therefore the % of Class is based on 30,405,730 common shares.
3
ATTENDANCE AND COMMITTEES OF THE BOARD
The Board of Directors meet four times in person and two times by telephone
during 2000. All directors participated in at least 75% of these meetings.
Audit Committee - The Company has an Audit Committee with Messrs. Riz and Boyd
and Ms. Houde as its members, all of who are independent directors. Mr. Boyd is
chairman of the Audit Committee. The Audit Committee's duties and
responsibilities include (a) providing oversight of the financial reporting
process and management's responsibility for the integrity, accuracy and
objectivity of financial reports and accounting and financial reporting
practices; (b) recommending to the Board of Directors the appointment of the
Company's auditors; (c) providing oversight of the adequacy of the Company's
system of internal controls; and (d) providing oversight of management practices
relating to ethical considerations and business conduct, including compliance
with laws and regulations.
The audit committee meets formally four times a year, once to review the annual
audited financial statements and before each quarter's earnings are filed on
Form 10Q, with the SEC/Nasdaq. Other meetings may be held as at the discretion
of the Chair of the Audit Committee, Mr. Michael Boyd. During, 2000, the audit
committee met four times. The Audit Committee has free and unfettered access to
PricewaterhouseCoopers, the Company's auditors.
Compensation Committee/Option Plan Committee - Mr. Cyril Ing and Mr. Tim
Bergqvist are members of the Compensation Committee and with Mr. Kendall, CEO,
comprise the Option Plan Committee of the Board.
The function of the Compensation Committee is to determine the compensation of
the CEO as well as to review and approve the compensation recommended by the CEO
for all other senior officers and employees of the Company on an annual basis.
The Compensation Committee meets formally in person once a year in December. In
addition, several telephone meetings are held during the year for administrative
matters connected to Option Plan Committee responsibilities.
The Company does not have an Executive Committee.
(1) Includes options to purchase 27,500 common shares, 102,500 common shares
and 228,000 common shares at US$1.063 per share pursuant to the 1993, 1996
and 1998 Stake Employee/Director Stock Option Plans respectively.
(2) Includes options to purchase 7,500 common shares, 13,750 common shares and
26,250 common shares at US$1.063 per share pursuant to the 1993, 1996 and
1998 Stake Employee/Director Stock Option Plans respectively.
Includes options to purchase 10,000 common shares at US$1.313 per share
pursuant to the 1996 Stake Employee/Director Stock Option Plan.
(3) Includes options to purchase 7,500 common shares, 13,750 common shares and
26,250 common shares at US$1.063 per share pursuant to the 1993, 1996 and
1998 Stake Employee/Director Stock Option Plans respectively.
Includes options to purchase 10,000 common shares at US$1.313 per share
pursuant to the 1996 Stake Employee/Director Stock Option Plan.
(4) Includes options to purchase 27,500 common shares, 55,000 common shares
and 115,500 common shares at US$1.063 per share pursuant to the 1993, 1996
and 1998 Stake Employee/Director Stock Option Plans respectively.
(5) Includes options to purchase 7,500 common shares, 13,750 common shares and
26,250 common shares at US$1.063 per share pursuant to the 1993, 1996 and
1998 Stake Employee/Director Stock Option Plans respectively.
Includes options to purchase 10,000 common shares at US$1.313 per share
pursuant to the 1996 Stake Employee/Director Stock Option Plan.
4
(6) Includes options to purchase 13,750 common shares and 26,250 common shares
at US$1.063 per share pursuant to the 1996 and 1998 Stake
Employee/Director Stock Option Plans respectively.
Includes options to purchase 10,000 common shares at US$1.313 per share
pursuant to the 1996 Stake Employee/Director Stock Option Plan.
(7) Includes options to purchase 21,250 common shares, 26,250 common shares
and 50,000 common shares at US$1.063 per share pursuant to the 1996, 1998
and 1999 Stake Employee/Director Stock Option Plans respectively.
Includes options to purchase 10,000 common shares at US$1.313 per share
pursuant to the 1996 Stake Employee/Director Stock Option Plan.
(8) Includes options to purchase 80,000 common shares at US$1.063 pursuant to
the 1999 Stake Employee/Director Stock Option Plan.
(9) Includes options to purchase 2,000 common shares at US$1.313 per share
pursuant to the 1999 Stake Employee/Director Stock Option Plan.
(10) Includes options to purchase 1,500 common shares at US$1.313 per share
pursuant to the 1999 Stake Employee/Director Stock Option Plan.
(11) Includes options to purchase 10,000 common shares at US$1.313 per share
pursuant to the 1996 Stake Employee/Director Stock Option Plan.
(12) Includes options to purchase 77,500 common shares at US$1.063 per share
pursuant to the 1993 Stake Employee/Director Stock Option Plan with an
expiry of December 31, 2004.
Includes options to purchase 233,750 common shares at US$1.063 per share
pursuant to the 1996 Stake Employee/Director Stock Option Plan with an
expiry of December 31, 2003.
Includes options to purchase 60,000 common shares at US$1.313 per share
pursuant to the 1996 Stake Employee/Director Stock Option Plan with an
expiry date of December 20, 2005.
Includes options to purchase 474,750 common shares at US$1.063 pursuant to
the 1998 Stake Employee/Director Stock Option Plan with an expiry date of
December 11, 2003.
Includes options to purchase 130,000 common shares of US$1.063 pursuant to
1999 Stake Employee/Director Stock Option Plan, with an expiry date of
August 1, 2004.
Includes options to purchase 3,500 common shares of US$1.063 pursuant to
1999 Stake Employee/Director Stock Option Plan, with an expiry date of
August 1, 2005.
(b) Set forth below is a biographical description of each director of the
Company:
Jeremy N. Kendall has served as a Director of the Company since September 1978.
In June 1983, he was elected Chairman of the Board and Chief Executive Officer
of the Company. He is Chairman of the Board of all of the Company's subsidiaries
except 1108176 Ontario Limited. He is also Chairman of Jemtec Inc., Easton
Minerals Ltd. and Logicsys Inc. He is also a Director of a number of private and
charitable organizations.
Cyril A. Ing was elected a Director in January 1984 and became an employee in
August 1985. He was an independent consultant specializing in engineering
projects involving the combustion of biomass from May of 1982 to August 1985.
For the previous 10 years he was President of the Conat Group, a holding
company, whose major subsidiary, Westair Systems Inc., is a distributor and
manufacturer of industrial dehumidification equipment. In March 1990, Mr. Ing
retired from full time employment.
5
Joseph Riz was elected a Director of the Company in July 1986. He is presently
managing director of Tricapital Management Ltd., a merchant banking and
financial advisory firm. From 1983 to 1985 he was an Executive Vice President of
Crowntek, Inc.
Tim Bergqvist was elected a director of the Company in January of 1989. He has
recently retired as the Chairman of Eucalyptus Pulp Mills PLC. He is currently
Chairman of Quinta da Rosa (Vinhos do Porto) Lda in Portugal.
John Taylor was elected to the Board of Directors in December 1994. He was
appointed President and Chief Operating Officer of the Company in 1991. From
1986-1991, Mr. Taylor was the Company's Vice-President of Marketing and
Planning.
Michael Boyd was elected to the Board of Directors in December 1995. Mr. Boyd is
Managing Director Merchant Banking of HSBC Capital (Canada) Inc., a
merchant-banking subsidiary of the HSBC Bank Canada.
Jim Rifenbergh was elected to the Board of Directors in April 1996. Mr.
Rifenbergh is past President and Chairman of Brown Printing Company of Waseca,
Minnesota, a large printing company with plants throughout the United States. He
is also a Director of SunRich Food Group, Inc., the Company's subsidiary and a
number of other private companies and organizations.
Allan Routh was elected to the Board of Directors in September 1999. Mr. Routh
is President of the SunRich Food Group, Inc., the Company's subsidiary.
Dennis Anderson was elected to the Board of Directors in September 2000; Mr.
Anderson is the Vice President Operations Manager of the SunRich Food Group,
Inc., the Company's subsidiary and he is the Company's largest shareholder. Mr.
Anderson was the owner of Northern Food & Dairy for five years prior to the
Company's' acquisition on Northern
Larry (Andy) Anderson was elected to the Board of Directors in September 2000.
Mr. Anderson is a CPA and acts as a part time financial officer to the SunRich
Food Group, Inc. Prior to his involvement with the SunRich Food Group, Inc., Mr.
Anderson was a partner in a Minneapolis CPA firm for more than five years prior
to the Company's acquisition of Northern.
Katrina Houde was elected to the Board of Directors in December 2000. Ms. Houde
is currently an independent consultant. For the five years prior to her election
to the Stake board; Ms. Houde was with Cuddy International Corp., a large
international poultry company with 2,200 employees worldwide. Ms. Houde held
several senior executive positions at Cuddy International Corp., and served as
president of Cuddy Food Products. Her positions at Cuddy encompassed a wide
range of responsibilities, including human resources, IT, finance, public
relations, strategic planning, and government affairs, as well as overall
accountability for all operating divisions.
INDEBTEDNESS OF DIRECTORS/OFFICERS
Mr. Kendall, Chairman & C.E.O. is indebted to the Company for $105,000 at
December 31, 2000. The majority of the loan proceeds ($73,000) were used by Mr.
Kendall for the purchase of a vehicle used by Mr. Kendall to conduct the
Company's business. A substantial part of the remaining portion of the loan is
for funds advanced to Mr. Kendall as a personal loan. Interest on these loans is
assessed as a taxable benefit to Mr. Kendall at the prescribed rate for employee
loans in Canada, which was 6% at December 31, 2000.
COMPENSATION OF DIRECTORS
In addition to annual grants of options, Directors who are not Company officers
receive a director's fee of $1,500 for each board meeting attended in person as
well as $250 for participating in committee meetings and telephone meetings and
reimbursement of travelling and administrative expenses to attend meetings and
manage their Board responsibilities. The Corporate Secretary, Mr. Ing, also
receives an additional $500 per quarter for his additional responsibilities.
6
INSURANCE
The Company's comprehensive insurance policies include coverage, which
indemnifies the directors and officers of the Company. The approximate annual
cost of this coverage is $50,000 and the policy contains a $25,000 deductible
and does not cover liability for failure to act honestly and in good faith.
EXECUTIVE COMPENSATION
The following tables set forth all remuneration paid by the Company and its
subsidiaries during the last three years ended December 31, 2000, 1999 and 1998
to its C.E.O., as well as executive officers of the Company and or its
subsidiaries earning in excess of US$100,000:
SUMMARY COMPENSATION TABLE
(STATED IN US DOLLARS)
Annual Compensation Awards Payouts
==================================================================================================================
Restricted
Name and Principal Other Stock All Other
Occupation Year Salary Bonus Annual Awards Options LTIP Compen-
Compensation SARs Pay-outs sation
- ------------------------------------------------------------------------------------------------------------------
Jeremy Kendall - C.E.O. 2000 $169,263 $45,590 $6,910 (1)
- ------------------------------------------------------------------------------------------------------------------
John D Taylor - C.O.O. 2000 $115,479 $32,870 $15,560 (1)
- ------------------------------------------------------------------------------------------------------------------
Allan Routh - President of 2000 $110,000 $20,000 $6,555 (1)
the SunRich Food Group
- ------------------------------------------------------------------------------------------------------------------
Jeremy Kendall - C.E.O. 1999 $154,478 $4,889 $17,524 (1)
- ------------------------------------------------------------------------------------------------------------------
John D Taylor - C.O.O. 1999 $112,245 $14,747 $11,494 (1) -- -- -- --
- ------------------------------------------------------------------------------------------------------------------
Jeremy Kendall - C.E.O. 1998 $159,417 $81,704 $10,415 (1) -- -- -- --
- ------------------------------------------------------------------------------------------------------------------
John Taylor - C.O.O. 1998 $110,753 $48,600 $6,033 (1)
- ------------------------------------------------------------------------------------------------------------------
(1) Represents taxable benefit of automobile, life insurance, retirement
savings contributions, short-term loans and benefit received over exercise
price of stock options exercised.
Note: Mr. Dennis Anderson's is the Vice-President of Operations of the SunRich
Food Group, and earns in excess of $100,000, however as Northern was acquired on
September 15, 2000, the compensation paid to Mr. Anderson in the three and one
half months since acquisition was US$40,400.
7
The following table contains information concerning individual grants of stock
options made during the last completed fiscal year, to the following executive
officers:
OPTION GRANTS IN PAST FISCAL YEAR
================================================================================================================
% of Total Options Exercise on Base
Name Options Granted to Employees price ($/Share) Expiration Date
Granted in Fiscal Year
- ----------------------------------------------------------------------------------------------------------------
Jeremy N. Kendall 0 N/A N/A N/A
- ----------------------------------------------------------------------------------------------------------------
John D. Taylor 0 N/A N/A N/A
- ----------------------------------------------------------------------------------------------------------------
Allan Routh 0 N/A N/A N/A
- ----------------------------------------------------------------------------------------------------------------
DECEMBER 31, 2000 OPTION VALUES
(STATED IN US DOLLARS)
===============================================================================================================
(a) (b) (c) (d) (e)
- ---------------------------------------------------------------------------------------------------------------
Number of Value of Unexercised in
Name Shares Acquired Value Realized Unexercised Options the Money Options at
on Exercise of in at 12/31/00 12/31/00
Options in 2000 ($) Vested/ Vested/
2000 (#) Not Yet Vested Not Yet Vested
- ---------------------------------------------------------------------------------------------------------------
Jeremy N. Kendall 0 N/A 358,000/4,500 $134,071/$1,685
- ---------------------------------------------------------------------------------------------------------------
John D. Taylor 10,000 $8,432 198,000/4,500 $74,151/$1,685
- ---------------------------------------------------------------------------------------------------------------
Allan Routh 0 N/A 80,000/120,000 $29,960/$44,940
- ---------------------------------------------------------------------------------------------------------------
APPOINTMENT OF AUDITORS
At the meeting, Shareholders will be called upon to appoint auditors to serve
until the close of the next Annual Shareholders Meeting and to authorize the
Board of Directors to fix the remuneration of the auditors so appointed.
The Board of Directors and management of the Company recommend that the
Shareholders vote for the appointment of PricewaterhouseCoopers, formed from the
merger in 1998 of Price Waterhouse, Chartered Accountants, and Coopers &
Lybrand, Chartered Accountants, who have been the Company's auditors since 1975.
A representative of PricewaterhouseCoopers will attend the Meeting and will have
the opportunity to make a statement if he desires to do so and will be available
to respond to appropriate questions from Shareholders in attendance.
INTEREST OF MANAGEMENT AND OTHERS IN MATERIAL TRANSACTIONS
Other than the acquisition of Northern Food & Dairy, Inc. on September 15, 2000,
no person who has been a director or an officer of the Corporation, at any time
since the beginning of its last completed financial year, or any associate of
any such director or officer, has any material interest, direct or indirect, by
way of beneficial partnership of securities or otherwise, in any matter to be
acted upon at the meeting except as disclosed in this information circular.
Please note that there is no family relationship between Mr. Dennis Anderson and
Mr. Larry (Andy) Anderson.
8
Dennis Anderson
Mr. Dennis Anderson was appointed a director of Stake following the acquisition
of Northern Food & Dairy, Inc. (Northern) on September 15, 2000. Mr. Anderson
was the principal shareholder of Northern. Mr. Anderson received 5,250,000
common shares of Stake from this transaction and warrants to acquire a further
375,000 Stake common shares at US $1.50, exercisable until September 14, 2005.
The issuance of these shares resulted in Mr. Dennis Anderson becoming the
largest shareholder of the Company.
Mr. Dennis Anderson is Executive Vice President - Operations of the SunRich Food
Group, Inc. and is party to an employment agreement with annual compensation of
US $130,000.
Larry (Andy) Anderson
Mr. Andy Anderson was appointed a director of Stake following the acquisition of
Northern on September 15, 2000. Mr. Larry Anderson was a minority shareholder in
Northern and received 350,000 common shares of Stake from this transaction and
warrants to acquire a further 25,000 Stake common shares at US $1.50,
exercisable until September 14, 2005. At the time of the acquisition of
Northern, Mr. Andy Anderson owned 10,000 Stake common shares.
Mr. Andy Anderson is a C.P.A. and the part time Chief Financial Officer of
Northern Food & Dairy, Inc. and is not party to a formal employment agreement.
2001 STOCK OPTION PLAN
At the Meeting, Shareholders will be called upon to approve the 2001 Stock
Option Plan (Plan), which was approved by the Company's Board of Directors on
March 13, 2001. This Plan provides for up to 1,000,000 common share options to
be issued to employees, directors and consultants of Stake and its subsidiaries.
No options have been granted from this 2001 Plan as at May 4, 2001.
Management believes that awarding options to these constituents is an important
component of rewarding, retaining and attracting well-educated, skilled and
trained people to the Company. Management would like to stress that options are
always issued at current market price at the time of the grant. Options
currently outstanding and the options proposed under this resolution total 9.8%
of the companies outstanding common shares at May 4, 2001. The 2001 Stock Option
Plan is annexed, as Exhibit A.
Passage of this resolution requires the affirmative vote of more than 50% of the
votes cast at the meeting.
SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Securities Exchange Act of 1934 required our Directors and
executive officers to file reports of holdings and transactions in the Company's
shares with the SEC and NASDAQ as of September 15, 2000, based on acquisition of
Northern. Based on our records and other information, we believe that in 2000
our Directors and executive officers met all applicable SEC filing requirements
except for Ms. Houde and Mr. Riz who filed their required forms late but are now
in compliance.
PROXIES RECEIVED IN FAVOUR OF MANAGEMENT WILL BE VOTED FOR THE ELECTION OF THE
NOMINATED DIRECTORS, APPROVAL OF PRICEWATERHOUSECOOPERS AS AUDITORS AND APPROVAL
OF THE 2001 STOCK OPTION PLAN UNLESS THE SHAREHOLDER HAS SPECIFIED IN THE PROXY
THAT HIS OR HER SHARES ARE TO BE VOTED AGAINST THE RESOLUTION.
SHAREHOLDERS' PROPOSALS
All proposals of Shareholders intended to be presented at the Company's Annual
Meeting of Shareholders in 2002, must be received at the Company's Executive
Office no later than February 15, 2002 for inclusion in the Information Circular
and Form of Proxy related to that meeting. The Company's next annual meeting is
planned for June 2002.
9
OTHER MATTERS
Nasdaq corporate governance rules state that the required quorum for the Annual
Meeting of Shareholders cannot be represented by less than 33 1/3% of the
outstanding common shares. Therefore shareholders of at least 9,674,635 common
shares must participate directly or be present by proxy to validate the quorum
requirements.
Stake encourages all of its shareholders to participate in the annual and
special meeting.
The management of the Company does not know of any matters other than those
stated in this Information Circular, which are to be presented for action at the
meeting. If any other matters should properly come before the meeting, proxies
will be voted on the other matters in accordance with the best judgement of the
persons voting the proxies.
The directors of the Company have approved the contents and the sending of this
Information Circular.
Dated this 4th day of May, 2001.
By Order of the Board of Directors
\s\Jeremy N. Kendall
Jeremy N. Kendall
Chairman of the Board and
Chief Executive Officer
FORM 10-KSB
The Company will provide without charge to beneficial owners of common shares of
the Company, upon written request, a copy of the Company's annual report on Form
10-KSB for the year ended December 31, 2000 including financial statements and
schedules thereto, as filed with the Securities and Exchange Commission,
Washington, D.C. Written requests should be directed to Leslie N. Markow the
Assistant Secretary of the Company, 2838 Highway 7, Norval, Ontario, Canada, L0P
1K0, or by fax at (905) 455-2529 or by e-mail at info@staketech.com.
Shareholders should note that the Form 10-KSB, as well as Form 10-QSB's and
press releases can be directly downloaded from the Company's web site
www.staketech.com.
10
EXHIBIT A
STAKE TECHNOLOGY LTD.
2001 STOCK OPTION PLAN
The purpose of the Stake Technology Ltd. 2001 Stock Option Plan (the "Plan") is
to have options available to grant to the employees, directors and consultants
of Stake Technology Ltd. and its subsidiaries. Such a Plan is vital to ensure
the long-term retention of employees, directors and consultants. Stock option
plans develop the interest and incentive of employees of the companies that
Stake Technology Ltd. ("Stake") and its subsidiaries (the "Company") may acquire
by providing them with an opportunity to purchase common shares of the Company,
thereby advancing the interests of the Company and its shareholders.
Subject to shareholder approval, the 2001 Stock Option Plan was approved by the
Board of Directors ("Board") of the Company, on March 13, 2001 at which time up
to 1,000,000 common shares ("Common Shares") of the Company were reserved for
the Plan.
The Plan
1. Purpose of the Plan
An option granted under the Plan provides an employee, director or
consultant of Stake or its subsidiaries with the opportunity to purchase
common shares of the Company.
2. Definitions
In this Plan:
"Date of Exercise" means the date upon which an Eligible Person returns a
completed Option purchase form to the Company together with payment in
full for the number of Optioned Shares such employee, director or
consultant is purchasing pursuant to such form;
"Eligible Person" means an employee, director or consultant of Stake or
its subsidiaries at the time of the grant of an option;
"Eligible Company" means Stake Technology Ltd. or any of its subsidiaries.
"Option" means the right granted under this Plan to an Eligible Person to
purchase a specified number of common shares of the Company pursuant to
the provisions of the Plan;
"Option Exercise Form" means the form required to be delivered by the
Eligible Person in order to exercise on Optioned Shares.
"Option Committee" means the committee chosen by the Board of the Company
to administer this Plan;
"Optionee" means an Eligible Person, director or consultant of the Company
who has been granted an Option pursuant to this Plan;
"Option Period" means, unless otherwise provided by the Board of Directors
of the Company, that period during which an Optionee granted an Option may
purchase Optioned Shares commencing on the date approved by Shareholders
and ending March 13, 2011.
"Option Price" means the price per share at which an Optionee may purchase
Optioned Shares;
"Optioned Shares" means those Common Shares in respect of which an Option
is granted to an Optionee under this Plan; and
"Plan" means this 2001 Stock Option Plan;
"Vested Options" means those Options that are eligible for exercise by the
Eligible Person.
3. Eligibility
The eligibility to participate in the Plan is at the discretion of the
Option Committee.
4. The number of Shares to which an Optionee is Entitled under the Plan
The Option Committee shall determine the number of Optioned Shares in
respect of which an Option is granted at the time of the grant of the
Option.
5. Purchase Price for Optioned Shares
The purchase price of Optioned Shares comprised in an Option granted under
the Plan shall be equal to 100% of the fair market of the common shares
based on the closing price on the trading day prior to the grant date as
determined by the Board of the Company at the time of the grant of the
Option in accordance with the policies of any applicable regulatory
authority.
6. Exercise of Option
Each Option granted under the Plan shall vest at such time or times as may
be determined by the Board or the Option Committee and no rights under the
Plan or any Option shall accrue to any Optionee in any Optioned Shares
forming the subject matter of an Option prior to the vesting date of such
Option.
The Option Committee will decide the vesting date of the Options granted
to the Optionee under the Plan at the time of grant pursuant to Article 12
hereof.
The right of exercise shall be cumulative and any Optionee, if still an
Eligible Person of an Eligible Company, may exercise the Option in respect
of any Optioned Shares, which have vested at any time during the Option
Period subject to the provisions of Articles 10 and 11 hereof.
In order to purchase Optioned Shares under the Plan, an Optionee shall
complete and execute an Option Exercise Form in the form of Schedule 1
attached hereto and deliver it to the Company together with a certified
cheque for the full purchase price of the Optioned Shares being acquired.
Subject to the prior vesting of Optioned Shares or as otherwise determined
by the Option Committee, an Optionee can exercise all or any part of the
Option at any time.
7. Optionee Commitment
An Optionee has no obligation to purchase any or all of the Optioned
Shares at any time but, to the extent an Optionee exercises the Option,
the full purchase price of the Optioned Shares purchased pursuant to such
exercise must be paid in full as set out under "Exercise of Option" above.
8. Share Certificates
The Company will deliver a share certificate representing the Optioned
Shares purchased pursuant to exercise of an Option as soon as reasonably
possible after the exercise thereof.
9. Transfer and Assignment
No Option or any of the rights thereunder is assignable or transferable by
an Optionee at any time during the Optionee's lifetime. Upon the exercise
of an Option, the Optionee may sell or otherwise dispose of such shares in
any manner that the Optionee wishes in any jurisdiction in which the same
are qualified for sale and subject to any regulatory authority having
jurisdiction over such sale.
10. Termination for any Reason other than Death
If an Optionee is terminated, resigns, or otherwise severs his or her
relationship with the Company at any time before the end of the Option
Period for any reason other than the death of such Optionee, such Optionee
may, at any time during the 30 day period immediately next following the
date of such termination of employment, excluding the date of termination,
purchase all or any part of the Optioned Shares which have vested to him
or her and which he or she is entitled to purchase under the Option in the
manner provided in the Plan. At 5:00 o'clock in the afternoon, local time,
on such 30th day, if such day be a business day, such Option shall fully
cease and determine and all rights of such Optionee thereunder shall
cease, or, if such day shall not be a business day at 5:00 o'clock in the
afternoon, local time, on the business day next following.
If through the operation of Article 6 hereof, none of the Optioned Shares
shall have vested in such Optionee, the provisions of Article 6 hereof
shall prevail and such Optionee shall not be entitled to purchase any
Optioned Shares notwithstanding the provisions of this Article.
2
Transfer by the Optionee to a subsidiary of the Company or any other
Company affiliated with it or from such subsidiary or affiliate to the
Company shall be deemed not to be a termination of employment under this
Article and all rights of the Optionee under such Option shall continue in
full force and effect after such transfer.
11. Termination by Reason of Death
If any Optionee shall die prior to the end of the Option Period and
subject to Article 6 herein, before such Optionee has purchased all of the
Vested Options to him or her, the exercise date, with respect to any
unexercised portion of a Vested Option provided in Article 6 hereof and
such Optionee's appointed executor or beneficiary may purchase all or any
portion of the Vested Options of such deceased Optionee as provided in
this Plan at any time during the shorter of, the Option Period or 180 days
immediately following the death of the Optionee excluding the date of
death if such day be a business day or, if such day shall not be a
business day, on the business day next following.
12. Administration of the Plan
The Option Committee shall administer the Plan. The Option Committee has
been delegated the authority by the Board of the Company to designate
those employees, consultants and directors of Sunrich or future business
interest that Stake may acquire in the near term who are to be granted
Options in the Plan, the number of Optioned Shares to be granted to each
such Optionee and otherwise to administer and interpret the Plan and the
Options granted thereunder. The Board may amend, modify or terminate the
Plan or any Option granted thereunder in respect of any Optioned Shares
which shall not have become vested in an Optionee pursuant to the
provisions of the Plan at any time without notice, but no such amendment,
modification or termination shall divest any rights under any Option which
shall have become vested in any Optionee.
Any determination of the Option Committee shall be final and conclusive,
unless the Board of the Company overrules any such determination, in which
case the decision of the Board shall be final, conclusive and binding.
The Option Committee may delegate the day to day administration of the
Plan to an officer of the Company.
13. Changes Affecting Optioned Shares
In the case of any reorganization or recapitalization of the Company (by
reclassification of its outstanding capital stock), or its consolidation
or merger with or into another corporation, or the sale, conveyance, lease
or other transfer by the Company of all or substantially all of its
property, pursuant to any of which events the then outstanding shares of
the Company's capital are consolidated or subdivided, or are changed into
or become exchangeable for other shares or securities, the Optionee, upon
exercise of his or her Option, shall be entitled to receive in lieu of the
Optioned Shares which he or she would otherwise have been entitled to
receive upon such exercise and without any payment in addition to the
Option Price therefor, the shares or securities which the Optionee would
have received upon such reorganization, recapitalization, consolidation,
subdivision, merger, sale or other transfer, as if immediately prior
thereto he or she had owned the Optioned Shares to which such exercise of
the Option relates and had exchanged such Optioned Shares in accordance
with the terms of such reorganization, recapitalization, consolidation,
subdivision, merger, sale or other transfer.
Notwithstanding the foregoing provisions of this Article 13, no adjustment
provided for herein shall require the Company to deliver a fractional
share or other security under the Option.
14. Employment
The granting of an Option to any person under the Plan will not confer any
rights upon such Optionee other than those provided in the Plan and,
without limiting the generality of the foregoing, will not confer or be
deemed to confer upon any such Optionee any right to continue as an
employee, director or consultant of the Company, or any subsidiary or
affiliate thereof.
15. No Shareholder Right
The granting of an Option pursuant to the Plan will not confer any rights
upon any Optionee as a shareholder of the Company, nor the right to
receive notice of, attend nor vote at any meeting of shareholders of the
Company until the exercise of an Option and such rights shall extend only
to those number of Optioned Shares in respect of which the Option was
exercised.
16. Governing Law
This Plan is established under the laws of the Province of Ontario and the
rights of all parties and the construction and effect of each provision of
the Plan shall be governed by the laws of the Province of Ontario; except
in respect to any sale of any of the common
3
shares in respect of which an Option has been exercised which shall be
governed by the laws of the jurisdiction in which an Optionee proposes to
sell such shares.
17. Termination of the Plan
The Plan will terminate on March 13, 2011 unless otherwise determined by
the Option Committee unless all of the Options granted under the Plan are
exercised, in which case the Plan will terminate on the date all of the
Options granted under the Plan have been exercised.
IN WITNESS WHEREOF, subject to shareholder approval, the Company has executed
this Plan as of March 13, 2001.
STAKE TECHNOLOGY LTD.
J. N. Kendall, Chairman and CEO Leslie N. Markow, CFO and Assistant Corporate
Secretary
4
SCHEDULE 1
To the STAKE TECHNOLOGY LTD.
2001 Stock Option Plan
To: Stake Technology Ltd.
And to: American Stock Transfer and Trust Company
OPTION EXERCISE FORM
The undersigned hereby subscribes for _____________ Common Shares of Stake
Technology Ltd. (the "Company") that the undersigned is entitled to pursuant to
the provisions of the Stake Technology Ltd. 2001 Stock Option Plan.
I attach my cheque payable to the Company in the sum of $______________________,
representing the purchase price of the said Shares.
Dated at ______________________, this __________ day of ________________, 20___.
Name: SIN:
---------------------------- ------------------------------------
Address: or
----------------------------
S.S.:
---------------------------- ------------------------------------
----------------------------
Signature:
------------------------------
Please call Leslie Markow - CFO at (905) 455-1990 x 109 if you wish to exercise
any of your options.
5
April 30, 2001
As a shareholder of Stake Technology (Nasdaq: STKL), you may want to be added to
the Company's distribution lists for current news and developments. If so,
please complete and return this form to our investor relations firm listed
below. We are also asking that you consider receiving news about Stake
Technology exclusively via the more timely and efficient method of e-mail.
Return by mail, fax or e-mail to: Stephanie King / Linda Latman
The Equity Group Inc.
800 Third Avenue, 36th Floor
New York, NY 10022
Fax: (212) 421-1278
sking@equityny.com/
llatman@equityny.com
Name:
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Company:
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Address:
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Phone: Fax:
--------------------------- --------------------------------
E-mail:
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If you have any questions, please contact Stephanie King at (212) 836-9611 or
Linda Latman at (212) 836-9609
STAKETECH ANNOUNCES FIRST QUARTER RESULTS
Norval, Ontario, May 15, 2001. Stake Technology Ltd. (StakeTech) (STKL - Nasdaq)
today announced results for the first quarter of 2001. All amounts are expressed
in Canadian dollars.
Sales revenue in the first quarter of 2001 grew by 90% to $30,453,000 compared
to $16,009,000 in the same quarter of last year. Net earnings were $35,000 or
less than $.01 per common share, compared to $408,000 or $.02 per common share
for the same quarter one year earlier. First quarter revenues were affected by
adverse weather conditions, including the recent flooding of the Mississippi
River which delayed approximately $2 million of grain orders that were scheduled
for shipment in the first quarter into the second quarter. In addition, start up
costs that were expensed by Nordic Aseptic negatively impacted first quarter
pre-tax earnings by $839,000 or $.02 per common share after tax. Importantly,
the losses at the Nordic Aseptic plant have been declining in the successive
months of this year, and the Company expects Nordic to be profitable by the
third quarter of this year.
Despite lower earnings reported, cash flow for the quarter improved by 142% to
$1,342,000 or $0.05 per common share compared to $554,000 or $.03 per common
share in the first quarter of 2000.
"The first quarter is not representative of our financial performance for the
year. Our business is somewhat seasonal, and the first quarter, for weather
related reasons, is typically our weakest. However, we expect sales growth and
corresponding profits to accelerate in the remaining quarters of this year. We
are confident that the Company will reach its previously published sales target
of approximately $175 million for 2001, which is 72% ahead of last year and
earnings for the year will grow at a faster pace than sales," commented Jeremy
Kendall, Chairman and CEO of Stake Technology Ltd.
Selected financial information (Expressed in Canadian dollars)
- --------------------------------------------------------------------------------
Three Months ended Three months ended
March 31, 2001 March 31, 2000 % change
- --------------------------------------------------------------------------------
Sales $30,453,000 $16,009,000 90%
- --------------------------------------------------------------------------------
Net Earnings $35,000 $408,000 (91%)
- --------------------------------------------------------------------------------
E.P.S. $0.00 $0.02 (100%)
- --------------------------------------------------------------------------------
Cash Flow $1,342,000 $554,000 142%
- --------------------------------------------------------------------------------
Cash Flow per Share $0.05 $0.03 67%
- --------------------------------------------------------------------------------
Weighted number of shares 28,485,219 20,736,190 37%
- --------------------------------------------------------------------------------
Total assets $99,183,000 $39,620,000 150%
- --------------------------------------------------------------------------------
Shareholders' Equity $35,961,000 $18,884,000 90%
- --------------------------------------------------------------------------------
Equity per share $1.24 $0.90 38%
- --------------------------------------------------------------------------------
In other news, on April 18, 2001 the Company completed a private placement of
1,411,498 units. Each unit is comprised of one common share and a half warrant
exercisable at US$1.75 until April 30, 2004. The net proceeds of this
transaction are US$1,728,000, of which $758,000 will be used for improving
working capital and $970,000 for future business acquisitions.
(more)
Stake Technology Ltd. Page 2
May 15, 2001
Stake Technology will be holding a conference call for investors and analysts at
4:00 p.m. Eastern Daylight Time on Wednesday, May 16, 2001. Jeremy Kendall will
discuss first quarter results, as well as recent corporate developments. After
opening remarks, there will be a question and answer period. The dial in number
is: (888) 343-7268. The reservation number is 18879675. This conference call
will also be distributed live over CCBN's Investor Distribution Network to both
institutional and individual investors. Individual investors may listen to the
call via www.companyboardroom.com. Institutional investors may access the call
via www.streetevents.com. Additionally, the call may be accessed via a link at
the Company's website at www.staketech.com. To listen to the live call over the
Internet please go to one of the websites at least 15 minutes early to register,
download and install any necessary audio software. If you are unable to listen
live, the conference call will be archived and can be accessed for approximately
90 days at the websites.
Stake Technology Ltd. is an owner/operator of high-growth ethical businesses,
focused on environmental responsibility and the health and well being of its
communities. StakeTech was named by Profit magazine in its 1999 'Profit 100' as
the 5th fastest growing company in Canada over the past 5 years. Currently, the
company has three business units: the SunRich Food Group, Inc., which
specializes in identity-preserved (IP) grain products and natural food
ingredients; from seed to packaged product and supplies 55% percent of the soy
milk concentrate in the U.S.; the Environmental Industrial Group; a producer,
distributor, and recycler of industrial materials; and Steam Explosion who
markets clean pulping technologies. Each of these business units has proprietary
products and services that give it a solid competitive advantage in its sector.
For further information, please contact:
Stake Technology Ltd. Investor Relations
Jeremy N. Kendall, Chairman & C.E.O. Stephanie King 212-836-9611
John D. Taylor, President & C.O.O. sking@equityny.com
Tel: 905-455-1990 Linda Latman 212-836-9609
info@staketech.com llatman@equityny.com
Websites: www.staketech.com www.bei.ca www.sunrich.com www.steamexplosion.com
Note: This news release may contain forward-looking information. Actual future
results may differ materially. The risks, uncertainties, and other factors that
could influence actual results are described in the Company's annual report to
shareholders and in SEC reports.
[GRAPHIC OMITTED]
Stake Technology Ltd.
healthy in all aspects
annual report 2000
our
mission
[GRAPHIC OMITTED]
To continue to grow sales and profits rapidly through
internal growth and acquisitions, guided by the ethical
principles of environmental responsibility and the
health and well-being of our communities.
[GRAPHIC OMITTED]
healthy p7
growth
p10 healthy
products
healthy
markets
p15
healthy
outlook p19
healthy
financials
p21
[GRAPHIC OMITTED]
well positioned
for strong
growth
Revenue projected to grow by over 70%
to $175M in 2001.
"Healthy in all aspects" is the theme we chose for this annual report, and it
aptly describes the exuberant expansion that has occurred within Stake
Technology Ltd. (Stake) over the past year, both within each business and in our
combined financial results. Out of the seeds of some good ideas, the Company has
produced three vital and increasingly profitable operational groups that are in
turn branching out into new products and services as they grow.
Five years ago, our stated goal was to exceed $100 million in sales by the year
2000. Stake has reached this major milestone, recording revenue of $101,653,000
in fiscal 2000. This represents an increase of 115% over 1999, which in turn
exceeded the previous year by 114%. As we have announced, we expect that we will
post sales of more than $175 million in 2001, a further 72% increase, not
including any further acquisitions.
It is our belief that Stake's model has proven that you can create a financially
successful company without compromising a business philosophy that embraces
social responsibility and environmental values. In other words, health can
create wealth.
p2
Stake's consistently increasing sales have been fueled by a combination of
strong internal growth and the acquisition of seven companies since August 1999.
This has not gone unnoticed in the larger community. In 2000, Stake appeared,
once again, in Profit Magazine's "Profit 100", a list of the fastest growing
companies in Canada over the previous five years. Stake continues to climb the
chart, ranking 5th in 2000, up from 16th in 1999 and 143rd in 1998. Our strategy
of growth through acquisitions has paid off, with the majority of the Company's
growth taking place in the largest of our three operations, the SunRich Food
Group.
Because of lean operations and careful management, our healthy sales have
translated into a healthy bottom line. This is a particularly satisfying
accomplishment for a company making acquisitions at our pace.
Net earnings for 2000 increased by 121% to $3,374,000 or $0.15 per share. These
earnings were achieved despite expensing $1,104,000 of startup costs at Nordic
Aseptic Inc. (Nordic) and $707,000 of closing costs when the Company exited the
retail veggie burger business. The elimination of these non-recurring expenses
would have added a further $0.08 per share to earnings in the year 2000.
Earnings in 2001 are expected to grow at a faster rate than sales as Nordic
becomes profitable and Stake has the benefit of a full year's earnings from its
acquisitions of 2000. Assisted by strong cash flow in 2001 from each of the
companies, Stake will focus on strengthening its balance sheet and improving
debt-to-equity ratios.
The Company continues its corporate philosophy of focusing on ethically based
businesses with high growth potential in sales and earnings. Building on the
acquisition of SunRich, Inc. (SunRich) in mid-1999, year 2000 saw the evolution
of Stake into what is predominantly a natural food products and ingredients
company, although it still retains the strong profits and cash flow from the
environmental industrial business and the upside potential of the steam
explosion technology.
The most important event in the Food Group was the successful acquisition of
Northern Food and Dairy, Inc. (Northern), finalized in September. Based in
Minnesota, Northern
[The following was depicted as a bar chart in the printed material]
Revenues
(millions $)
CAGR - 82%
97 16.847
98 22.077
99 47.304
00 101.653
[The following was depicted as a bar chart in the printed material]
Net earnings for the year
(thousands $)
CAGR - 183%
97 149
98 822
99 1,524
00 3,374
[The following was depicted as a bar chart in the printed material]
Net earnings per share
($ per share)
CAGR - 147%
97 0.01
98 0.06
99 0.09
00 0.15
CAGR = Compounded Annual Growth Rate
p3
[GRAPHIC OMITTED]
supplies more than half of the US market for soymilk, and also produces dry soy
powders and other food ingredients. The Northern acquisition, in conjunction
with the acquisitions of SunRich, Nordic, Star Valley and First Light Foods -
all of which have taken place over the last twenty months - have created an
integrated entity which is unparalleled in the US. Stake's Food Group is a
unique supplier of Identity-Preserved (IP) grain products and natural food
ingredients, and oversees all stages of production from the supply of organic
seeds through to the sale of packaged soymilk.
The Environmental Industrial Group also made two acquisitions during 2000. In
February, we acquired George F. Pettinos Canada (PECAL), a direct competitor of
BEI in certain industrial mineral markets, and Canada's only producer of coated
sand for the foundry industry and nozzle sand for the steel industry. The PECAL
plant, based in Hamilton, Ontario, has operated at near capacity all year and
received ISO9002 certification in February 2001. In November, the Environmental
Industrial Group acquired Temisca, Inc., a specialty sand producer and processor
that broadened the Group's product line and marked the Group's first venture
into the production of raw materials.
Significant progress was made in 2000 towards achieving our first sale of Steam
Explosion Technology in China. The market potential for this technology in China
is estimated to be over a billion dollars and a successful first contract is
expected to lead to multiple projects both within China and in other countries
that are short on local pulp production, but long in available annually
regenerative fibres, such as straw.
In each of Stake's expanding businesses, the Company has a strong product and
position in markets that are both substantial in size and growing rapidly
themselves. To take advantage of that market growth, we will continue to seek
acquisitions that are complementary, synergistic and generate earnings for our
existing businesses. In the past year, we have maintained growing profitability
while building a uniquely diversified and flexible group of companies. Our goal
continues to be strong growth coupled with solid earnings -- healthy in all
aspects.
Many thanks are due to the people within each Group who helped to achieve these
results. In addition, we would like to extend a warm welcome to the new Board
members added to Stake over the course of the past year: Dennis Anderson, Andy
Anderson and Katrina Houde and to thank the Board of Directors, our employees,
and our many customers and suppliers for their support this past year.
Sincerely,
"Jeremy N. Kendall" "John D. Taylor"
Chairman and Chief President and Chief
Executive Officer Operating Officer
p5
[GRAPHIC OMITTED]
Our Environmental Industrial
Group's proprietary silica-free
abrasives create a safer work place.
[GRAPHIC OMITTED]
healthy
growth
Successfully integrated 6 acquisitions in 1999 - 2000.
The Company maintained an aggressive growth strategy focused on expanding
existing operations and making related acquisitions.
By any measure, Stake is growing: top line, bottom line, subsidiaries, products,
services, customers and markets. Even our share price is performing
substantially better than most of Stake's peers on the NASDAQ, although
management thinks it is not an accurate reflection of either the performance or
potential of the Company.
SALES IN 2000 REACHED $101.7 MILLION - A 115% INCREASE OVER 1999.
SunRich Food Group sales were $69,822,000 in 2000, an increase of 179% over last
year. Food Group sales accounted for 69% of total sales in 2000 as compared with
53% in 1999 and include $10,129,000 in sales from Northern for the three and a
half months since it was acquired in mid-September.
p7
Sales in our Environmental Industrial Group in 2000 were $31,286,000, an
increase of 43% over the previous year. This increase was primarily due to our
acquisition of PECAL in February 2000 and the expansion of our sales of
abrasives in the US.
EARNINGS INCREASED BY 121% TO $3.4 MILLION - EPS BY 67% TO $0.15.
The Food Group maintained profitability in 2000 in spite of incurring losses of
$1.8 million related to veggie burger closure costs and Nordic start-up costs.
This indicates that management has been successful at increasing margins in its
core business.
The acquisitions of PECAL and Temisca had a very positive impact, enabling the
Environmental Industrial Group to achieve 22% higher after-tax earnings in 2000
over 1999.
ASSETS GREW 162% TO $92.9 MILLION AND SHAREHOLDERS' EQUITY INCREASED BY 84% TO
$33.3 MILLION.
Shareholders' equity on a weighted per share basis at year-end reached $1.45, an
increase of 40% over the previous year.
[The following was depicted as a bar chart in the printed material]
Shareholders' equity
(millions $)
CAGR - 54%
97 9.060
98 10.073
99 18.098
00 33.277
[The following was depicted as a bar chart in the printed material]
Total assets
(millions $)
97 15.024
98 16.096
99 35.434
00 92.866
[The following was depicted as a bar chart in the printed material]
Shareholders' equity per share
($ per share)
CAGR - 32%
97 0.63
98 0.69
99 1.04
00 1.45
CAGR = Compounded Annual Growth Rate
p8
[GRAPHIC OMITTED]
55%
Our Food Group supplies 55% of
soymilk in the US - a market growing
at greater than 30% per annum.
[GRAPHIC OMITTED]
healthy
products
25 grams of soy protein a day, as part of a diet low
in saturated fat and cholesterol, may reduce the risk of
heart disease.
Our focus on healthy products and environmentally friendly processes is
fundamental to what we do. It governs how we operate our business units and
guides our acquisition strategy.
SunRich Food Group [GRAPHIC OMITTED] Bringing healthy soy products from field to
table.
Our Food Group sold $69,822,000 of healthy food products in 2000, more than
doubling the previous year's sales.
Stake essentially created the SunRich Food Group over the last 18 months, with
the acquisition of five companies starting with SunRich, in August 1999.
Subsequently, the purchase of Nordic in August 2000; the creation of Star Valley
during 2000; the acquisition of Northern in September 2000; and most recently,
the acquisition of First Light Foods in February 2001 established a unique
vertically integrated food company that now has a significant presence in the
growing soy market.
These acquisitions have also significantly increased the size of the Company's
balance sheet and the size of its operations. The result is that a majority of
the revenues and assets of the Company are now based in the US in 2000.
p10
[GRAPHIC OMITTED]
The Food Group supplies a full range of Identity-Preserved and organic soy
products. From special varieties of soybeans for high-end miso, soya sauce, and
tofu in Japan through to consumer packaged products for the major US soy
beverage companies. We are involved in soy production at every stage, from field
to table. In the most cost-effective way, we can guarantee the quality of our
healthy soy products.
The FDA has confirmed that diets including soy protein can reduce the risk of
heart disease.
Increasingly, soy is shown to have other beneficial characteristics as well. Soy
foods are rich in isoflavones, a unique group of phytoestrogens closely
resembling human hormones. Studies have indicated that soy foods containing
isoflavones can be beneficial in the prevention of osteoporosis, alleviate the
symptoms of menopause, and can inhibit cancer cell development.
With the acquisition of Northern in September of 2000, our Food Group became the
major producer of soymilk in the US, a market that grew by greater than 30% in
2000. To keep up with increased demand, we established Star Valley, a soymilk
production plant in Wyoming that will come on line in 2001 to supply the western
states.
[The following was depicted as a bar chart in the printed material]
Retail U.S. sales of soymilk
(millions $USD)
92 84
94 104
96 124
98 216
00 390
02 584
The benefits of soy are translating into accelerated growth in comsumption.
The Food Group established Nordic Aseptic in 2000, acquiring an aseptic
packaging facility that expanded our capability to provide consumer packaged
soymilk, as part of our integrated supplier strategy.
In September 2000, we also started up an expanded production facility in
Fosston, Minnesota, to manufacture a natural food preservative for a major
European client who is also contributing US$4.3 million over three years to the
capital cost of the new plant.
Our Food Group now has seven production facilities in Minnesota, Iowa, and
Wyoming. Our product line of healthy products includes:
o Identity-preserved (IP) specialty grains
o Soymilk in liquid and powdered forms
o Green soybeans snack foods (edamame)
o Organic flours and milled grain products
o Organic vegetable oils and sweeteners
o Powdered honey and molasses
o Custom food ingredients produced for specific clients
Environmental Industrial Group [GRAPHIC OMITTED]
Supplying industrial minerals and environmental services.
Sales of products and services in our Environmental Industrial Group reached
$31,286,000 in 2000, an increase of 43% over the previous year.
The Environmental Industrial Group supplies specialty sands to the steel and
foundry industries and provides environmental recycling services. This includes
collecting used sands, spent abrasives and other industrial wastes for a fee and
recycling them into a range of products. Our services provide these industries
with an economical, and environmental alternative to disposal in landfills.
p12
We also supply the metal finishing sector with a wide range of special abrasives
for the removal of paint and rust. Among these are a line of proprietary
abrasives based on specular hematite, as well as a copper slag from an exclusive
source. These silica-free abrasives create a safer workplace by eliminating the
risk of silicosis associated with sandblasting.
The major users of these types of abrasives are those who work in shipbuilding
and repair, bridge engineering, and industrial maintenance for facilities such
as tanks and railway cars. For example, all ships operating in a salt-water
environment must typically be sandblasted and repainted every five years.
Similarly, there is a need to have rust and old paint removed from large bridges
and other metal infrastructure - BEI/PECAL abrasives are now being used to
clean most of the major bridges in New York City as well as the Holland Tunnel.
Such work is often a government focus during slower economic times, as
governments increase bridge and other sizeable repair work in order to stimulate
the economy. This helps to keep the Environmental Industrial Group healthy even
in difficult economic environments.
For the Environmental Industrial Group, this type of buffer effect has been
supplemented this year by the strength of the Canadian foundry industry, despite
the slowdown in the US economy. The lower Canadian dollar has also helped boost
BEI/PECAL and its customers' performance, as the Group furthers its penetration
into the large US market.
Both geographical reach and product range are important in expanding in the
environmental/industrial market. Fiscal 2000 saw the Group build both aspects of
the business. In February 2000, we acquired George F. Pettinos (Canada) Limited
(PECAL), a Hamilton-based supplier of industrial minerals. This widened the
range of industrial minerals supplied by the Group and substantially increased
our market penetration.
In October 2000, we acquired Temisca, Inc., a producer of sands for specialty
applications including golf courses, water filtration and frac sands for the oil
industry. This acquisition gave us both new products and new markets and
strengthened our presence in Quebec, bringing us closer to some key customers.
The purchase of Temisca represents the Company's first investment into direct
control of a raw material source.
In another product expansion, we signed an exclusive North American agreement
with a Chinese company to market their high-quality industrial garnets to the
water-jet metal-cutting and abrasive markets. We currently import these garnets
into our plants in Waterdown, Ontario and New Orleans, Louisiana as well as
selling them directly to our distributors on the US west coast.
The range of products and services supplied by our Environmental Industrial
Group, from our facilities in Waterdown and Hamilton, Ontario, New Orleans,
Louisiana and Montreal, Quebec, now includes:
o Abrasives for the metal finishing industry (including our
Barshot(TM) specular hematite, garnets from China, and our Ebony
Grit copper slag abrasive)
o Speciality sands for the steel and foundry industries (including
chromite and zircon sands)
o Resin-coated sands for the foundry industry
o Recycling services for a range of industrial mineral waste streams,
possible because of the Waterdown facility's special Ontario
government industrial recycling Certificate of Approval, one of only
two in existence.
p13
Steam Explosion Technology [GRAPHIC OMITTED]
Providing the Pulp and Paper Industry with an Environmental Alternative.
Activities in Steam Explosion focused on supporting our partner, Pacitec Inc.,
to market the first Steam Explosion Systems to China for making paper pulp from
straw. Revenues from Steam Explosion in 2000 were limited to license fees
received from Pacitec.
Steam Explosion is a proprietary technology that Stake developed for the
high-pressure steam processing of fibrous materials, such as straw and wood
chips. The Company has proven the basic technology in a variety of biomass
facilities, delivering products such as paper pulp, speciality sugars and
alcohol fuel.
In the pulp and paper application, the StakeTech process replaces the high
levels of chemicals required in standard pulping processes with high-pressure
steam. This makes pulping far more environmentally friendly.
StakeTech's process is particularly effective for the pulping of non-woody
fibres.
China has a severe shortage of trees and as a result has 75% of the world's
non-woody pulping capacity. However, the mills in China are small and cannot
afford the costly chemical recovery systems required for standard processes. As
a result, many mills are being shut down for environmental and economic reasons,
and this has intensified the need for a cost-effective solution. For these
reasons, China has become our major target market.
In August 1999, Stake sold the exclusive marketing rights for Steam Explosion
Systems for straw pulping in China to Pacitec Inc. Pacitec's US base, long
experience in China and Fortune 500 client list - it acts as sales agent for
companies such as Halliburton Energy and Kellog Brown & Root - indicated that
they were a good partner for that market.
With the help of Pacitec, Steam Explosion has substantially advanced our
marketing to China in 2000.
Highlights include:
o Assisting and supporting partners of Pacitec, who purchased a controlling
interest in an operating pulp and paper mill. This mill's straw pulping
line had been shut down for environmental reasons. The mill is now
fibre-short and must rely on local low-quality recycled paper. This
situation offers a solid opportunity for us, as Pacitec and its partners
have formulated a plan to install the StakeTech straw-pulping technology
at the mill as part of a major mill expansion;
o Receipt of approvals from local authorities;
o Submission of the project for final approval to the State Development and
Planning Committee (SDPC), the government regulatory body that must
approve such projects. Approval is expected in Q2 of 2001;
o Approval of a StakeTech Patent Cooperation Treaty application for further
patent protection of the StakeTech System, which cleared the way for an
application for patent protection in China made in Q1 of 2001.
[The following was depicted as a bar chart in the printed material]
Unbleached paperboard consumption in China
(millions of tons)
95 7.824
00 12.32
05 17.16
10 24.2
15 29.75
Annual consumption of packaging paper in China to increase by 17.4 million tons
by 2015.
p14
[GRAPHIC OMITTED]
healthy
markets
Increased awareness of environmental and health
issues is driving our markets.
Food Group's Market Experiencing Accelerating Growth [GRAPHIC OMITTED] Soy
Products Moving from Niche Market to Mass Market
Health benefits and improved taste are making soy products one of the
fastest-growing mass-market segments.
In the 90's, US soymilk consumption grew on average by 38% per year from 37
million litres in 1990 to an estimated 125 million litres in 1999. This
accelerating growth rate is expected to continue as a result of various factors:
o Concern over genetically modified foods - in the US, 27 states have
introduced bills to limit genetically modified products and Europe
and Japan have brought in strict regulations against these
genetically modified plants.
o The trend toward natural and organic products, which continues to
expand as a result of concern over pesticides, herbicides and
chemical fertilizers entering the food chain.
o Lactose intolerance which affects a large number of people - 70% of
those of East Asian and African descent, 60% Latinos and 40% of
Caucasians over 40 years of age.
o Health concerns - since the consumption of soy protein has been
demonstrated to be effective in the treatment of heart disease,
osteoporosis, early signs of menopause and some forms of cancer,
many consumers have begun to include soy products in their diets.
o Worldwide concerns over animal products because of "mad cow" and
"foot and mouth" disease.
p15
[GRAPHIC OMITTED]
Our Steam Explosion Technology
provides the pulp and paper industry
with environmental alternatives.
There are two main markets for soymilk. The first is the aseptic long-life
package with a guaranteed one-year life. In this market, SunRich Food Group
supplies concentrated soymilk by tanker-truck to aseptic packagers throughout
the US, including SunRich's own packaging company, Nordic. The second market -
smaller, but faster growing - is the extended shelf life (ESL) refrigerated
package, which is sold throughout the dairy case with a guaranteed shelf life of
90 days. Both products compete directly with milk, ESL having the added
advantage of perceived freshness.
Steady Growth in Industrial Markets [GRAPHIC OMITTED]
Increasing Market Share
Growth in the industrial minerals market has been steady at an estimated 5% per
year through the 90's. This trend is expected to continue through the current
decade.
The non-silica abrasives market is experiencing above-average growth due to
increased concerns over the risks of silicosis. Through our Ebony Grit and
Barshot(TM) products, we offer the market real cost-effective alternatives to
silica and these products are gaining acceptance in the marketplace.
The Environmental Industrial Group has captured increased market share not only
by providing improved service but through an effective acquisition strategy. The
acquisitions of PECAL in February and Temisca in October, significantly
broadened the range of products we offer to the market and allowed us to expand
our customer base. With PECAL we brought into the fold a regional competitor
that will reduce our cost of sales in our core region; with Temisca we added new
products, as well as reduced shipping costs for some products. Both these
acquisitions resulted in significant synergies and increased our competitiveness
in the marketplace.
We will continue to target acquisitions that help to build our market share and
our geographical reach, especially in the large and lucrative US market.
Accordingly, while total sales for this Group increased by 43% year-over-year,
sales in the US increased by 75%. We see the US market as being key to
increasing profitability in the longer term.
Environmental Industrial Group Sales
1997 1998 1999 2000
- --------------------------------------------------------------------------------
Canada 13,027 17,690 18,554 25,549
US 3,307 4,305 3,275 5,737
- --------------------------------------------------------------------------------
16,334 21,995 21,829 31,286
- --------------------------------------------------------------------------------
Steam Explosion Technology Target Market Growing [GRAPHIC OMITTED] China Alone
Represents a Market for Over 400 Steam Explosion Pulping Systems
China, with almost one quarter of the world's population, has insufficient wood
resources to meet its paper fibre demands. Per capita consumption of paper in
China, for 1999 was 25kg, less than the world average of 55kg and far below the
US figure of 230kg. As China's consumption of paper products continues to grow
at two to three times the world average, the country will increasingly need to
rely on non-woody sources for paper fibre, or substantially increase expensive
pulp and paper imports even beyond current high levels.
Stake's Steam Explosion pulping technology has significant advantages in the
pulping of non-woody fibres such as straw and the process for producing
unbleached pulp for packaging material is relatively simple. For these reasons,
it is this market that is being targeted in China.
From 1995 to 2000, demand for unbleached packaging paper in China grew by 10%
annually. This growth rate is forecast to continue resulting in increased demand
of 17.4 million tons over the period 2000-to-2015. This translates into a
potential market for over 400 StakeTech Systems.
p17
[GRAPHIC OMITTED]
[GRAPHIC OMITTED]
healthy
outlook
The Company is positioned to become a major provider of
healthy environmental products and services.
Our stated goal for 2001 is to exceed $175 million in revenue and to increase
profitability in all subsidiaries.
On a corporate level, we intend to maintain our low head office overhead and
rely on the strong and skilful management within our operating units.
Shareholder communications will remain a priority, with our core values of
social responsibility and environmental accountability guiding our business
decisions.
In the three groups that have evolved through the last year, we plan to continue
our lean operations while moving toward higher margin activities in each of the
businesses. In addition, integration of our acquisitions should decrease some
costs and we anticipate that our increased reach will add to our growth
momentum.
SunRich Food Group [GRAPHIC OMITTED] Management has targeted sales of over $125
million in the Food Group alone, resulting from Stake's aggressive growth and
acquisition program.
At the beginning of 2001, we incorporated a US company, SunRich Food Group,
Inc., to oversee our food group assets. They will coordinate the broader
strategies and marketing activities of the food companies, standardize on
quality and human relations policies and achieve economies of scale through
rationalizing purchasing, financing and operations.
p19
The new company has been staffed from existing personnel, adding a highly
qualified Chief Financial Officer and with the planned implementation of updated
financial and management information systems, the Food Group will be in a
position to grow rapidly to the next major benchmark of $250 million within
three years.
Key areas for expansion include the private-label soymilk market, new soy
products - including smoothies, soy puddings, soy oils and powders and soy
flour. The Company also intends to focus more on proprietary food additives
within its plants, where these additives can be marketed by the national sales
force. We also intend to explore international opportunities for both the
soymilk and food ingredient markets with emphasis on broadening our
relationships with key existing customers.
Environmental Industrial Group [GRAPHIC OMITTED]
In fiscal 2001, management sees continued growth in BEI/PECAL's sales, as our
new facilities and products enable us to reach new customers in both Canada and
the US.
At BEI/PECAL we have installed a highly sophisticated integrated computer
system, which covers all aspects of operations from accounting to sales and
production management to preventative maintenance. Key members of management are
now backed up and the Group is now ready to assume additional responsibly with
the short-term objective of $50 million in sales.
Steam Explosion Technology [GRAPHIC OMITTED]
Because of our efforts, we expect to launch the first Steam Explosion pulping
project in China in 2001. It is our intention to build rapidly on the success of
this first contract with additional projects in China and other countries, that
are deficient in local pulp production.
p20
Management's Discussion and Analysis or Plan of Operations
2000 Operations Compared with 1999 Operations
Consolidated
The Company is pleased to report net earnings of $3,374,000 or $0.15 per share
in 2000 compared to $1,524,000 or $0.09 per share in 1999, and a 115% increase
in revenue for 2000 to $101,653,000 (1999 - $47,304,000).
All operating companies were profitable with the exception of Nordic, which is
in a start-up phase of its Tetra-pak packaging facility and recorded a
$1,104,000 after-tax loss for the period. In addition, SunRich's profits were
reduced by a $707,000 after-tax loss for the year from its discontinued veggie
burger product line. The related closure costs were expensed in the year and are
included in the $707,000. Although these losses reduced earnings per share by
$0.08, earnings per share still rose by 67% for 2000 versus 1999.
The assets of the Company have grown 162% from $35,434,000 in 1999 to
$92,866,000 at December 31, 2000, and the shareholders' equity has increased
84%, from $18,098,000 to $33,277,000, while the number of shares issued has
increased 36.5% from 20,653,788 at December 31, 1999 to 28,186,972 at December
31, 2000.
The changes to the size of the Company's operations and assets are primarily a
result of the Company's acquisition strategy over the past year.
Earnings have increased 121%, and earnings per share increased 67% as earnings
per share in 2000 were based on an increased number of shares outstanding due to
the acquisition transactions in 2000. The weighted average number of common
shares in 2000 was 22,975,986 (1999 - 17,384,644).
US readers should note that due to differences between Canadian and US GAAP,
earnings for 2000 under US GAAP are $2,571,000 or $0.11 per common share (1999
- - $1,449,000 or $0.08 per common share). Note 17 to the audited financial
statements itemizes these differences.
Cost of sales increased by 117% to $87,046,000 for the year ended December 31,
2000 compared to $40,127,000 for the year ended December 31, 1999. As noted in
the revenue analysis above, the increase in cost of sales is related to the
sales increase resulting from the acquisitions made in mid 1999 and during 2000.
The Company's consolidated gross margin was 14.4% in 2000 compared to 15.2% in
1999 due to slightly lower margins in the SunRich Food Group.
Research and development costs relate to the Steam Explosion Technology Group
and were $200,000 in 2000 compared to $367,000 in 1999. The decrease in
research-based steam explosion activities in 2000 was as a result of lower
employee costs due to a more focused effort towards the marketing and sale of
the technology rather than research.
Administration and market development expenditures increased 113% in 2000 to
$10,570,000 compared to $4,953,000 for the year ended December 31, 1999. The
increase in administrative costs is due to the acquisitions made in mid 1999 and
during 2000, and the increased costs of operating a larger public company.
Amortization of patents, trademarks, licences and goodwill increased to $524,000
in 2000, compared to $183,000 in 1999 due to the amortization of new goodwill
arising on the acquisitions of Northern, Nordic and PECAL in 2000 and a full
year of amortization on the mid 1999 SunRich acquisition.
The Company's earnings from operations increased by 98% to $3,313,000 in 2000
from $1,674,000 in 1999, as a result of these previously related changes to the
Company.
Interest on long-term debt and other interest expense increased to $1,527,000 in
2000 from $361,000 in 1999, due principally to the SunRich Food Group's debt
obligations. Canadian debt held by the Environmental Industrial Group and
Corporate Office represents $416,000 of interest expense in 2000 and SunRich
Food Group's interest expense in 2000 was $1,111,000.
Interest and other income increased to $402,000 in 2000 from $181,000 in 1999
due to an increase in interest earned in the Company in 2000 over 1999,
principally due to the interest income on long-term receivables.
The gain on purchase of preference shares of $175,000 (1999 - $nil) resulted
from the purchase of the preference shares outstanding in a subsidiary company
at a value less than their carrying value.
The share of losses of equity accounted investees of $48,000 (1999 - $321,000)
and dilution gain of $140,000 (1999 - $nil) is related to the Company's 32%
equity investment in Easton Minerals Ltd. (Easton), a mining exploration company
listed on the Canadian Venture
p21
Exchange (EM-CDNX). Dilution gains resulted from the increase in equity value of
Easton due to issues of capital above Stake's carrying cost of this investment.
The market value of Easton is based on limited trading values, and while it is
unlikely that these values will be received upon the sale of this investment at
this time, sale proceeds could add to the Company's net equity and management
plans to use any cash proceeds to reduce debt and increase working capital. US
readers should note that dilution gains are not recognized as income for US GAAP
purposes due to the development stage nature of Easton, and accordingly, the
effects of this gain are reversed in Note 17 of the Company's financial
statements.
The Company's investment in Easton is carried at a book value of $382,000. The
market value of Easton at December 31, 2000 was $531,000; at March 7, 2001 the
market value was $442,000 (March 13, 2000 - $3,932,000). On June 15, 1998, the
Company's Board decided to sell its holdings in Easton as mining development and
exploration are not related to the Company's primary businesses, and has filed
appropriate notification of this intent with Easton's regulators.
Earnings before taxes increased by 134% to $2,506,000 in 2000 from $1,072,000 in
1999, as a result of these changes.
The Company recorded the benefit of previously unrecognized Canadian tax loss
carry-forwards of $1,798,000 (1999 - $635,000) and provided a tax provision of
$864,000 (1999 - $183,000) on the net earnings of the SunRich Food Group. Due
to the complex US tax structure, the Company was unable to recognize the tax
benefit of Nordic's start-up losses. The Company has since restructured the
SunRich Food Group, which provides for more effective tax strategies. The Nordic
tax loss carry-forward will be recognized when Nordic becomes profitable. The
resulting net tax recovery increased net earnings by 122% to $3,374,000 from
$1,524,000 in 1999.
Acquisition of Businesses
The acquisition of these companies has been accounted for using the purchase
method and the purchase price has been allocated to the assets acquired and the
liabilities assumed based on management's best estimate of fair values, and
described in detail in table format in Note 2 of the audited financial
statements. The consolidated financial statements include the results of
operations of the acquired business from the date of the acquisition.
PECAL - On February 29, 2000, the Company acquired 100% of the common shares of
George F. Pettinos (Canada) Limited, also know as PECAL, from US Silica for
$4,682,000 cash. The acquisition of PECAL eliminated a competitor in some
product lines and expands the products offered for sale by the Environmental
Industrial Group. The excess of the purchase price over the net assets acquired
on PECAL of $1,103,000 was allocated to goodwill and will be amortized over
twenty years, giving rise to an annual charge of $55,000.
Northern - On September 15, 2000, the Company acquired 100% of the common
shares of Northern Food & Dairy, Inc., from its three shareholders for
$11,190,000 by the issuance of 7,000,000 common shares and 500,000 common share
warrants exercisable at US$1.50 for five years, and cash consideration of
$608,000. The excess of the purchase price over the net assets acquired on
Northern of $6,341,000 was allocated to goodwill and will be amortized over
twenty years, giving rise to an annual charge of $317,000.
Nordic - On April 19, 2000, SunRich, Inc. and Northern created a corporate
joint venture to operate a soymilk packaging plant owned by Hoffman Aseptic Inc.
On August 15, 2000, Nordic acquired certain assets of Hoffman Aseptic Inc. and
assumed certain debts. The total cash cost of this acquisition at August 15,
2000 was $380,000. Upon the acquisition of Northern on September 15, 2000, the
Company owned 100% of Nordic as of September 15, 2000. The excess of the
purchase price over the net assets acquired on Nordic of approximately $157,000
was allocated to goodwill and will be amortized over twenty years, resulting in
an annual charge of $8,000.
Temisca - On October 31, 2000, the Company acquired Temisca, Inc., a private
sand deposit and manufacturing company in Ville Marie, Quebec. The purchase
price was $1,676,000 and was paid by the payment of $926,000 to the vendor as
well as acquisition costs and the issuance of a $750,000 note payable which
bears interest at 5% and is repayable over 5 years. There was no goodwill on the
acquisition of Temisca.
1997 Change to Capital Structure
A change to the Company's capital structure in 1997 was made under rules of the
Canadian Business Corporations Act, the Company's incorporating statute that
must be disclosed in its financial statements for 10 years to December 31, 2006.
In 1997, the shareholders of the Company agreed to reduce the stated capital
account of the Company's common shares by $25,026,000 through a reduction of the
deficit.
p22
Segmented Operations Information
The SunRich Food Group
The SunRich Food Group contributed 68.7% or $69,822,000 of the $101,653,000 in
total revenue (1999 - five months - $24,991,000). In 2000, SunRich sales were
$59,693,000, and Northern sales were $10,129,000, for the three and one-half
month period since acquisition on September 15, 2000. As Nordic was in
pre-operating stage until December 31, 2000 all revenues and certain operating
costs were deferred in accordance with Canadian GAAP.
The SunRich Food Group's cost of sales in 2000 was $60,721,000 (1999 - five
months - $22,340,000). The SunRich Food Group's margin in 2000 was 13% (1999 -
10.6%). The increased margin resulted from higher margins in the food processing
business of Northern.
In 2000, the SunRich Food Group's administration costs were $6,800,000 (1999 -
five months - $2,005,000). The increase in these costs is due to the twelve
versus five months of administration costs being included for SunRich, and the
administration costs of Northern and Nordic since acquisition.
Pre-tax earnings of the SunRich Food Group were $1,230,000 (1999 - five months
- - $492,000). The net earnings of the Sunrich Food Group were $366,000 (1999 -
five months - $309,000). The net earnings of the SunRich Food Group were
significantly impacted by the after-tax loss from the start-up of the Nordic
Tetra-Pak operations of $1,104,000 and a $707,000 after-tax loss from the veggie
burger business that was closed prior to December 31, 2000. The Company expects
Nordic to be profitable by the third quarter of 2001.
The Company has not recognized the benefits of the Nordic tax losses of
approximately $2,200,000. Therefore, the effective tax rate increased in 2000 to
70% compared to 37% in 1999. The benefit of a portion of these losses will be
recognized when Nordic becomes profitable. The remaining portion of the losses
relates to Northern's interest prior to the Company's acquisition of Northern
that would be applied to reduce goodwill.
Environmental Industrial Group
The Environmental Industrial Group contributed 30.8% or $31,286,000 of 2000
consolidated sales (1999 - $21,829,000). In 2000, the Environmental Industrial
Group sales increased by 43.3% due to the purchases of PECAL in February and
Temisca in October 2000, and growth in the existing business lines. Sales
consisted of sales of abrasives, foundry sands and other products of $29,081,000
(1999 - $19,215,000); recycling revenues of $1,832,000 (1999 - $2,614,000);
and Temisca sales for two winter months of $373,000 (1999 - $nil).
Cost of sales in 2000 attributable to the Environmental Industrial Group were
$26,272,000 (1999 - $17,667,000). The Environmental Industrial Group's margin
decreased to 16% in 2000 from 19.1% in 1999, due to tight price competition in
some of the Environmental Industrial Group's principal product lines.
The Environmental Industrial Group's operations accounted for $2,253,000 of
consolidated administration costs (1999 - $1,722,000). The 30.8% increase in
these costs is due to the addition of three salesmen and the retention of
administration staff from the PECAL acquisition to create a new customer service
function for the Environmental Industrial Group, and the costs of running a
larger Group with more locations.
Pre-tax earnings from operations of the Environmental Industrial Group were
$2,579,000 (1999 - $2,058,000).
Tax expense of $66,000 (1999 - $nil) for the Environmental Industrial Group
relates to the earnings of Temisca Inc. Due to the loss carry-forwards of the
Canadian legal entity, no provision for income taxes has been recorded for the
earnings of BEI/PECAL. The benefits of these loss carry-forwards of $1,798,000
(1999 - $635,000) have been recorded in the Steam Explosion Technology Group and
Corporate segment.
Net earnings of the Environmental Industrial Group were $2,513,000 for fiscal
2000 compared to $2,058,000 for fiscal 1999.
Steam Explosion Technology Group and Corporate Activities
Of the $101,653,000 in total revenues, 0.5% or $545,000 was derived from the
Steam Explosion Technology Group and corporate sales (1999 - $484,000).
Steam Explosion Technology Group and general corporate revenues of $545,000 in
2000 were generated from steam explosion licence fee revenue and private
industry projects of $231,000 (1999 - $410,000) and other corporate revenues of
$314,000 (1999 - $74,000). No steam explosion equipment sales were made in 2000
or 1999.
Steam Explosion Technology Group's cost of sales was $53,000 (1999 - $120,000),
which primarily relates to standard amortization charges.
Steam Explosion Technology Group and corporate margins were $492,000 or 90.3% on
$545,000 of revenue (1999 - $364,000 on $484,000 of revenue or 75.2%), due to
the nature of the revenues in this Group.
p23
Steam Explosion Technology Group's marketing and demonstration and corporate
administration expenses were $1,517,000 (1999 - $1,226,000). The increase in
these costs was due to more aggressive investor relations activities, the
increased costs of insurance, salaries, and other costs of operating a larger
public company, and increased marketing and travel costs incurred towards
securing a steam explosion equipment sale in China.
The loss from operations before tax of $1,303,000 (1999 - $1,478,000) is
principally due to the additional corporate costs of operating a larger public
company being charged to this segment.
Liquidity and Capital Resources at December 31, 2000
Assets
Cash and short-term deposits decreased to $1,013,000 at December 31, 2000 from
$2,464,000 at December 31, 1999. The decrease is due to cash being used to run
the corporate office and the cash costs required to pay fees and other costs
associated with acquiring companies over the year were drawn from existing cash,
since operating groups internally use the cash they produced for their
respective businesses.
Trade accounts receivable increased to $13,111,000 at December 31, 2000 from
$7,016,000 at December 31, 1999 due largely to the acquisitions. Trade
receivables at December 31, 2000 related to the Environmental Industrial Group
were $4,836,000 (1999 - $3,375,000); SunRich Food Group were $8,250,000 (1999
- - $3,463,000); and general corporate activities and Steam Explosion Technology
Group were $25,000 (1999 - $178,000).
The note receivable of $5,186,000 and the other long-term payable of $1,651,000
are all related to an agreement signed by Northern before it was acquired with a
major European-based company to supply product. This agreement required Northern
to expand a food processing plant to the customer's specifications. In
accordance with the terms of the agreement, the customer is required to pay
Northern 36 monthly instalments of US$119,000 following the customer's
acceptance of the plant specifications. The agreement also requires Northern to
provide the customer with a product rebate beginning three years after
production at the plant commences, until US$1,720,000 is repaid.
Upon acquisition of Northern on September 15, 2000, the Company assigned fair
values of $5,534,000 to the note receivable and $1,587,000 to the product rebate
payable based on the cash flows associated with these financial instruments,
discounted at a rate of 9.5%.
During the period from September 16 to December 31, 2000, Northern received
payments of $543,000 on the note receivable from this agreement and recorded
imputed interest income of $131,000 from the note receivable, which is included
in the $402,000 of interest and other income. Imputed interest expense of
$47,000 was recorded on the product rebate payable and is included in the
$1,455,000 of interest expense on the income statement.
Inventories increased to $15,290,000 at the end of 2000 from $8,589,000 at
December 31, 1999, principally due to the acquisitions made during the year. The
SunRich Food Group inventories comprise $10,064,000 of this balance (1999 -
$5,145,000) and the Environmental Industrial Group's inventory was $5,226,000
(1999 - $3,444,000). The Steam Explosion Technology Group is not required to
carry inventory.
Future income tax assets of $954,000 at December 31, 2000 (1999 - $1,020,000)
consists of $715,000 (1999 - $635,000) of Canadian tax losses and scientific
research expenditures recorded by the Canadian entity in the current year, and
the remaining balance of $239,000 (1999 - $385,000) relates to the SunRich Food
Group's accounting reserves. The Company believes that it is more likely than
not that the tax benefit of the recorded assets will be realized.
The Company has formal capital commitments of approximately $300,000 at of
December 31, 2000, relating to normal equipment replacement at the SunRich Food
Group, the Environmental Industrial Group, in the Steam Explosion Technology
Group and corporate office.
In 2000, $667,000 (1999 - $500,000) was spent in the Environmental Industrial
Group for machinery and equipment improvements in Waterdown, establishment of
additional facilities in Louisiana, general upgrading of computers and the
acquisition of accounting software that is Year 2000 compliant. In 2000, the
SunRich Food Group spent $4,631,000 (1999 - $591,000) on capital expenditures
principally on the construction of new production facilities at Northern's plant
in Fosston connected to the agreement with the major European company and a new
grain storage bin at SunRich's location in Hope. In 2000, $55,000 (1999 -
$47,000) was spent by the Steam Explosion Technology Group and at corporate
office, primarily on computer equipment.
The Company's capital budget for 2001 is $7,660,000. The Environmental
Industrial Group's capital budget for 2001 is $1,205,000 and will be used to
improve and replace production equipment. SunRich Food Group's capital budget is
US$4,291,000, principally for production equipment expansion and replacement and
the remaining equipment needs of the Wyoming soy plant,
p24
but the largest individual component of the capital plans for 2001 is a proposal
to construct additional warehouse space attached to Nordic's plant to decrease
the dependence and costs of third-party storage and decrease the cost of moving
inventories.
There are no plans to make significant capital expenditures during 2000 at
Stake's steam explosion pilot plant. Corporate office has a capital budget of
$50,000 to make office furniture and computer upgrades. The Company's capital
needs will be provided by a combination of internal cash flow, capital leases
and new mortgages or loans.
Investments increased to $382,000 in 2000 from $281,000 in 1999 due primarily to
the dilution gain of $140,000 (1999 - $nil); by advances of $9,000 (1999 -
$37,000), and offset by the equity loss on Easton of $48,000 (1999 - $321,000).
During the year, advances of $104,000 were converted to 980,103 common shares of
Easton.
Goodwill increased to $11,231,000 at December 31, 2000 from $3,922,000 at
December 31, 1999 due to the $1,103,000 in goodwill recorded on the acquisition
of PECAL, $157,000 of goodwill acquired on the purchase of Nordic and the
$6,341,000 in goodwill recorded on the acquisition of Northern, offset by
amortization of this goodwill on these three purchases from the date of
acquisitions and goodwill recorded on BEI in 1995 and the acquisition of SunRich
in 1999.
The Company deferred $768,000 of pre-operating costs related to Nordic, which is
comprised of the portion of the operating losses from April to December 31, 2000
that were related to the start up phase of the plant. This amount will be
written off equally over the next 36 months. The Company also expensed
$1,104,000 of certain operating costs, administration expenses and interest
costs related to Nordic during 2000, which were in addition to the costs
deferred during the year. US readers should note that the $768,000 of
pre-operating costs have been expensed under US GAAP.
Patents, trademarks, licences and other assets have decreased to $432,000 from
$446,000 at December 31, 1999, due mainly to standard amortization.
Current Liabilities
Accounts payable and accrued liabilities increased to $19,359,000 in 2000 from
$10,179,000 in 1999. The increase is due to the addition of the larger balances
from the larger SunRich Food Group, which are $15,259,000 of the balance at
December 31, 2000.
Included in the accounts payable and accrued liabilities is an accrued recycling
reserve of $298,000 (1999 - $384,000), which relates to the Environmental
Industrial Group and represents the future costs to process and dispose of the
reclaimed materials that the Waterdown site, which has the Certificate of
Approval from the Ontario Ministry of the Environment and Energy, has accepted
for recycling and were on site at December 31, 2000.
Customer deposits of $1,262,000 at December 31, 2000 (1999 - $1,618,000) are
related to cash deposits made by the SunRich Food Group customers in 2000 for
year 2001 customer purchases. No recognition of revenue or accrual of costs is
booked on these transactions until the goods are shipped.
Lines of Credit
The Company has Canadian bank lines of credit of $4,300,000 and US$4,000,000. Of
these amounts, $4,000,000 is from the Company's primary Canadian banker for use
by the Environmental Industrial Group, the Steam Explosion Technology Group and
the corporate office, and is secured against a margin of accounts receivable and
inventory of BEI/PECAL. In addition, Temisca, Inc., which is part of the
Environmental Industrial Group, has an unsecured line of credit of $300,000. The
SunRich Food Group has two separate lines of credit totalling US$4,000,000 with
two different financial institutions, of which US$1,000,000 is secured against a
margin of accounts receivable and inventory of Northern and US$3,000,000 is
secured against a margin of accounts receivable and inventory of SunRich. At
December 31, 2000, US$900,000 was drawn against the US$3,000,000 facility and
US$950,000 against the US$1,000,000 facility. The Environmental Industrial Group
had not drawn against the $4,000,000 facility at December 31, 2000, and Temisca
had $125,000 drawn against the $300,000 facility at December 31, 2000.
In addition to the above cash draws against the lines of credit, at December 31,
2000, $900,000 (1999 - $1,116,000) was drawn on an off balance sheet basis
against the $4,000,000 Canadian facility for a letter of credit to the Ontario
Ministry of the Environment and Energy for the Certificate of Approval, to two
key suppliers and for security on the Louisiana lease. There were no amounts
drawn on an off balance sheet basis against the US lines of credit at December
31, 2000.
Long-Term Debt - Corporate Debt
The Company's term bank loan from the acquisition of BEI in 1995 was reduced to
$800,000 at December 31, 2000 from $1,400,000 at the end of 1999 by scheduled
payments of $600,000.
During the year, the Company borrowed an additional $4,200,000 to finance the
purchase of PECAL. Under a new payment schedule, both the $800,000 and the
p25
$4,200,000 loans each have a five-year amortization period and currently a
three-year term with payments of $300,000 per quarter being pro-rated against
both the $800,000 and $4,200,000 loans based on quarterly payments started on
January 31, 2001, with interest at the bank reference rate + 1 % or banker's
acceptances + 0.88%; the Canadian prime interest rate is currently 6.75%. Full
or partial repayment of the term bank loan is permitted based on the maturity of
the underlying debt instruments. These term loans are collateralized by first
mortgages on certain property located in Waterdown and Hamilton, Ontario and a
pledge of certain book debts, investments and other assets of the Canadian
parent company.
In December 2000, Stake the Canadian parent company advanced the SunRich Food
Group US$1,000,000 which was the proceeds of a US$1,000,000 four-year loan from
its principal Canadian bankers, which bears interest at US bank reference rate +
1% and is repayable in blended interest and principal payments of US$25,000 per
month. The US dollar term loan is collateralized by an assignment of the shares
of Northern.
Environmental Industrial Group Debt
There are three loans related to this group totalling $1,705,000 requiring
payments of $18,000 monthly and one annual payment of $150,000. The note payable
of $750,000 is unsecured and is due to the vendor of Temisca, Inc., and is
repayable over five years and bears interest semi-annually at 5%. The mortgage
payable for $491,000 bears interest at 8%, and is repayable over 60 months. The
$464,000 term loan bears interest at 7.87% on a renewable three-year term loan.
The mortgage payable and the term loan are collateralized by property, plant and
equipment of Temisca.
SunRich Food Group Debt
The SunRich Food Group has eight individually significant loans and mortgages
payable, which totalled $21,216,000 at December 31, 2000 (1999 - $2,184,000).
There are three loans secured directly against SunRich, Inc. assets, which total
$3,810,000 at December 31, 2000 (1999 - $2,184,000). These loans include a
$412,000 note payable with payments of US$3,094 through July 2013 and a note
payable of $398,000 with interest and principal payments of US$29,048 through to
November 2006. Both loans are at the US bank reference rate, which at December
31, 2000 was 8.75%.
The third note payable included in this balance is for $3,000,000 with interest
only at 9.375% to February 2002 and thereafter semi-annual principal and
interest payment of US$66,000 through February 2016. These three loans are
secured against the property, plant, equipment and intangibles of SunRich, Inc.
There are four loans directly secured against Northern's assets that totalled
$12,120,000 at December 31, 2000.
These loans include a note payable for $6,251,000 with interest at 9.45% due in
monthly payments of US$144,043 through September 2003. Collateral for this loan
consists of the Fosston production facility and equipment related to this plant
constructed under agreement for a major European company as well as an
assignment of the production contract and the note receivable. The note payable
for $4,824,000 has monthly payments of US$53,918 through September 2007 with
interest at 3% above the 30-day commercial paper rate (9.3% at December 31,
2000).
The mortgage payable of $583,000 bears interest at 10%, payable at US$6,000 per
month through October 2008 and is collateralized by equipment. The mortgage
payable of $462,000 is secured against certain property with interest only at
9.375% due August 2005, comprises the remaining balances of Northern's debt
payable. All of Northern's assets are secured under these four agreements.
Nordic has a $5,286,000 loan which bears interest at US prime + 1% which, at
December 31, 2000, was 9.5%. Monthly principal payments of US$44,048 through
August 2007 are required and the loan is collateralized by the property, plant,
equipment and intangibles of Nordic.
Northern and SunRich have co-guaranteed this loan payable by Nordic. The loan
contains restrictive financial covenants for Northern, SunRich and Nordic. As at
December 31, 2000, Nordic was not in compliance with certain of the financial
covenants. However, on April 12, 2001, the Company entered into an agreement
with the lender whereby the lender agreed to not take any action until April 15,
2002, with respect to the various covenant breaches, which existed at December
31, 2000. As part of the agreement, the Company renegotiated the financial
covenants of the bank loan payable and agreed to place US$264,000 on deposit
with the lender. This agreement is subject to the Company complying with certain
new financial covenants detailed in the agreement. As at April 12, 2001, the
Company is in compliance with the new financial covenants and expects to remain
in compliance throughout 2001. At December 31, 2000, $4,493,000 of the
$5,286,000 bank loan payable has been classified as a long-term obligation in
these financial statements.
The Company has total capital lease obligations of $859,000 principally for
production equipment in the SunRich Food Group and to a lesser extent for the
Environmental Industrial Group, which bear interest at a weighted rate of 10.25%
and are due in various instalments through 2005.
p26
There are also other loans, totalling $1,275,000, which are predominately
related to the SunRich Food Group for miscellaneous debts and car loans which
bear interest at a weighted average of 7.5% and are due in varying instalments
through to July 2007.
Substantially all of the Company's assets are pledged as collateral under
various lending agreements, with the exception of the real property at Stake's
corporate offices in Norval, and the lease and physical assets in Louisiana.
The Company considers its relationship with its principal Canadian bankers and
the various SunRich Food Group bankers to be satisfactory.
The Company believes that the cash to be generated from operations in 2001, its
current cash and cash equivalents, its available lines of credit and its ability
to secure additional financing through combining its US lines of credit in 2001,
are sufficient for the Company's operations during 2001.
Other Long-Term Liabilities
The long-term future tax liability of $1,508,000 (1999 - $579,000) relates
principally to the SunRich Food Group and is related to the values assigned in
the opening balance sheet on the acquisitions of Northern in 2000 and SunRich in
1999. These balances represent differences between accounting and tax basis of
assets and liabilities primarily related to property, plant and equipment offset
by the benefit of losses carried forward.
The short-term portion of the preference shares in subsidiary companies
increased from $240,000 in 1999 to $387,000 in 2000 due to $148,000 of
preference shares of Temisca. This balance is due when Temisca achieves certain
profit and balance sheet stability tests which management anticipates will be
achieved during fiscal 2001. The remaining balance is the scheduled yearly
payments for the preference shares related to the purchase of land in the BEI
acquisition.
The long-term portion of the preference shares of subsidiary companies was
reduced to $462,000 from $607,000 as a result of the scheduled payments in 2000,
which totalled $170,000 in cash payments.
Cash Flow
Cash flow provided by operations before working capital changes for the year
ended December 31, 2000 increased by $1,935,000 to $4,421,000 (1999 -
$2,486,000) due principally to the $1,850,000 in increased earnings in 2000 over
1999.
Cash flow provided by operations after working capital changes decreased to
$55,000 for the year ended December 31, 2000 (1999 - $5,004,000) due to a
significant use of cash required to pay acquired obligations in 2000, primarily
by Northern and PECAL.
Cash used in investment activities increased to $10,820,000 in 2000 (1999 -
$1,273,000) due principally to larger acquisitions of property, plant and
equipment in 2000 of $5,353,000 compared to 1999 of $1,138,000 due to the
greater number of locations of both the SunRich Food Group and the Environmental
Industrial Group; due to the acquisitions in the past year, as well as the
larger amount of net investment of $5,359,000 made in acquiring companies (1999
- - $24,000).
Cash provided by financing activities was $9,270,000 in 2000 (1999 - used for
financing of $1,422,000). The increase in cash from financing in 2000 is
principally due the new debt acquired to purchase PECAL and to finance certain
acquisitions of property, plant and equipment offset by scheduled debt
repayments in 2000. In 1999, the debt repayments exceeded the issuance of new
debt.
Corporate Governance
The governance of the Company is the responsibility of the Board of Directors of
Stake Technology Ltd.
The Board approves the annual Business Plan of the Company and its divisions and
reviews actual results compared to budget at quarterly Board meetings and
through monthly management reports. The plan includes an assessment of the
principle risks and opportunities facing the Company.
The Board also approves all major capital expenditures, debt obligations, share
issues and corporate acquisitions.
The Board has established an independent Audit Committee, which reviews the
audit plan, meets with the auditors and assesses the Company's internal control
and management information systems.
The Board has also established an independent Compensation Committee, which
reviews the compensation of senior officers, suggests appropriate compensation
for directors and recommends to the Board employee/director stock option plans.
p27
Financial information for US shareholders
The following is the Company's consolidated balance sheet and income statement
under Canadian generally accepted accounting principles presented in US$.
Summary Consolidated Balance Sheet
In US$ December 31, December 31,
2000 1999
- --------------------------------------------------------------------------------
US$ US$
Assets
Cash and cash equivalents 675,000 1,708,000
Accounts receivable - trade 8,740,000 4,862,000
Current portion of note receivable 1,433,000 --
Inventories 10,192,000 5,952,000
Future income taxes 636,000 707,000
Other current and assets 894,000 644,000
-----------------------------
22,570,000 13,873,000
Note receivable 2,024,000 --
Property, plant, and equipment 28,769,000 7,461,000
Goodwill 7,487,000 2,718,000
Other long-term assets 1,054,000 504,000
-----------------------------
61,904,000 24,556,000
=============================
Current liabilities
Bank indebtedness 2,270,000 --
Accounts payable and accrued liabilities 12,905,000 7,054,000
Customer deposits 841,000 1,121,000
Current portion of long-term debt and
preference shares in subsidiary companies 4,790,000 969,000
-----------------------------
20,806,000 9,144,000
Long-term debt and redeemable preference
shares in subsidiary companies 17,911,000 2,468,000
Future income taxes 1,005,000 401,000
-----------------------------
39,722,000 12,013,000
-----------------------------
Shareholders' Equity
Common shares and contributed surplus 18,182,000 10,814,000
Retained earnings 4,000,000 1,729,000
-----------------------------
22,182,000 12,543,000
-----------------------------
61,904,000 24,556,000
=============================
Summary Consolidated Statement of Earnings
In US$ December 31, December 31,
2000 1999
- --------------------------------------------------------------------------------
US$ US$
Revenues 68,443,000 31,836,000
Cost of goods sold 58,608,000 27,005,000
-----------------------------
Gross profit 9,835,000 4,831,000
Operating expenses 7,604,000 3,704,000
-----------------------------
Earnings from operations 2,231,000 1,127,000
Interest on long-term debt (980,000) (207,000)
Other income and expense 436,000 (198,000)
-----------------------------
Earnings before income taxes 1,687,000 722,000
Recovery of income taxes 584,000 304,000
-----------------------------
Net earnings for the year 2,271,000 1,026,000
=============================
Earnings per share $0.10 $0.06
=============================
p28
Management's Responsibility for Reporting
The accompanying consolidated financial statements of Stake Technology Ltd. and
all the information in the annual report are the responsibility of management,
and have been approved by the Board of Directors.
The financial statements have been prepared by management, in accordance with
Canadian generally accepted accounting principles. When alternate accounting
methods exist, management has chosen those it deems most appropriate in the
circumstances. Financial statements are not precise since they include certain
amounts based on estimates and judgments. Management has determined such amounts
on a reasonable basis in order to ensure that the financial statements are
presented fairly, in all material respects. Reconciliation of these policies to
U.S. accounting policies are described in note 17 to the consolidated financial
statements. Management has prepared the financial information presented in this
annual report and has ensured that it is consistent with that presented in the
financial statements.
Stake Technology Ltd., maintains systems of internal accounting and
administrative controls consistent with reasonable cost. Such systems are
designed to provide reasonable assurance that the financial information is
relevant, reliable and accurate and the company's assets are appropriately
accounted for and adequately safeguarded.
The Board of Directors is responsible for ensuring that management fulfills its
responsibilities for reviewing and approving the financial statements. The Board
carries out this responsibility principally through its Audit Committee.
The Audit Committee is appointed by the Board and all members are independent
directors. The Committee meets periodically with management, as well as the
external auditors, to discuss internal controls over the financial reporting
process, auditing matters and financial reporting issues, to satisfy itself that
each party is properly discharging its responsibilities, and to review the
annual report, the financial statements and the external auditors' report. The
Committee reports its findings to the Board for consideration when approving the
financial statements for issuance to the shareholders. The Committee also
considers the engagement or re-appointment of the external auditors for review
by the Board and approval by the shareholders.
The financial statements have been audited by PricewaterhouseCoopers LLP, the
external auditors, in accordance with generally accepted auditing standards in
Canada and the United States of America on behalf of the shareholders.
PricewaterhouseCoopers LLP has full and free access to the Audit Committee.
"Leslie N. Markow"
Chief Financial Officer
Auditors' Report
To the Shareholders of
Stake Technology Ltd.
We have audited the consolidated balance sheets of Stake Technology Ltd. as at
December 31, 2000 and 1999 and the consolidated statements of earnings, retained
earnings and cash flows for the years 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 audits.
We conducted our audits in accordance with generally accepted auditing standards
in Canada and the United States of America. 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 consolidated financial statements present fairly, in all
material respects, the financial position of the Company as at December 31, 2000
and 1999 and the results of its operations and its cash flows for the years then
ended in accordance with Canadian generally accepted accounting principles.
"PricewaterhouseCooper LLP"
Chartered Accountants
March 20, 2001, except as to note 7(a),
which is as of April 12, 2001
p29
Management's Responsibility for Reporting
The accompanying consolidated financial statements of Stake Technology Ltd. and
all the information in the annual report are the responsibility of management,
and have been approved by the Board of Directors.
The financial statements have been prepared by management, in accordance with
Canadian generally accepted accounting principles. When alternate accounting
methods exist, management has chosen those it deems most appropriate in the
circumstances. Financial statements are not precise since they include certain
amounts based on estimates and judgments. Management has determined such amounts
on a reasonable basis in order to ensure that the financial statements are
presented fairly, in all material respects. Reconciliation of these policies to
U.S. accounting policies are described in note 17 to the consolidated financial
statements. Management has prepared the financial information presented in this
annual report and has ensured that it is consistent with that presented in the
financial statements.
Stake Technology Ltd., maintains systems of internal accounting and
administrative controls consistent with reasonable cost. Such systems are
designed to provide reasonable assurance that the financial information is
relevant, reliable and accurate and the company's assets are appropriately
accounted for and adequately safeguarded.
The Board of Directors is responsible for ensuring that management fulfills its
responsibilities for reviewing and approving the financial statements. The Board
carries out this responsibility principally through its Audit Committee.
The Audit Committee is appointed by the Board and all members are independent
directors. The Committee meets periodically with management, as well as the
external auditors, to discuss internal controls over the financial reporting
process, auditing matters and financial reporting issues, to satisfy itself that
each party is properly discharging its responsibilities, and to review the
annual report, the financial statements and the external auditors' report. The
Committee reports its findings to the Board for consideration when approving the
financial statements for issuance to the shareholders. The Committee also
considers the engagement or re-appointment of the external auditors for review
by the Board and approval by the shareholders.
The financial statements have been audited by PricewaterhouseCoopers LLP, the
external auditors, in accordance with generally accepted auditing standards in
Canada and the United States of America on behalf of the shareholders.
PricewaterhouseCoopers LLP has full and free access to the Audit Committee.
"Leslie N. Markow"
Chief Financial Officer
Auditors' Report
To the Shareholders of
Stake Technology Ltd.
We have audited the consolidated balance sheets of Stake Technology Ltd. as at
December 31, 2000 and 1999 and the consolidated statements of earnings, retained
earnings and cash flows for the years 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 audits.
We conducted our audits in accordance with generally accepted auditing standards
in Canada and the United States of America. 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 consolidated financial statements present fairly, in all
material respects, the financial position of the Company as at December 31, 2000
and 1999 and the results of its operations and its cash flows for the years then
ended in accordance with Canadian generally accepted accounting principles.
"PricewaterhouseCooper LLP"
Chartered Accountants
March 20, 2001, except as to note 7(a),
which is as of April 12, 2001
p29
Consolidated Balance Sheets
-------------------------
As at December 31, 2000 and 1999 2000 1999
- -------------------------------------------------------------------------------------------------
(Expressed in Canadian dollars) $ $
Assets (note 7)
Current assets
Cash and cash equivalents 1,013,000 2,464,000
Cash held as security deposit (note 7) -- 400,000
Accounts receivable - trade 13,111,000 7,016,000
Current portion of note receivable (note 3) 2,150,000 --
Inventories (note 4) 15,290,000 8,589,000
Other receivables and prepaid expenses 1,341,000 530,000
Future income taxes (note 10) 954,000 1,020,000
-------------------------
33,859,000 20,019,000
Note receivable (note 3) 3,036,000 --
Property, plant and equipment (note 5) 43,158,000 10,766,000
Investments (note 6) 382,000 281,000
Goodwill - at cost, less accumulated amortization
of $925,000 (1999 - $516,000) 11,231,000 3,922,000
Pre-operating costs - at cost, less accumulated amortization of $nil 768,000 --
Patents, trademarks, licences and other assets - at cost, less
accumulated amortization of $1,034,000 (1999 - $925,000) 432,000 446,000
-------------------------
92,866,000 35,434,000
=========================
Liabilities
Current liabilities
Bank indebtedness (note 7) 3,405,000 --
Accounts payable and accrued liabilities 19,359,000 10,179,000
Customer deposits 1,262,000 1,618,000
Current portion of long-term debt (note 7) 6,799,000 1,158,000
Current portion of preference shares of subsidiary companies (note 8) 387,000 240,000
-------------------------
31,212,000 13,195,000
Long-term debt (note 7) 24,756,000 2,955,000
Other long-term payable (note 3) 1,651,000 --
Future income taxes (note 10) 1,508,000 579,000
Preference shares of subsidiary companies (note 8) 462,000 607,000
-------------------------
59,589,000 17,336,000
-------------------------
Shareholders' Equity
Capital stock (note 9)
Authorized
Unlimited common shares without par value
Issued
28,186,972 (1999 - 20,653,788) common shares 22,710,000 11,163,000
Contributed surplus 4,635,000 4,635,000
Retained earnings (note 9) 5,869,000 2,495,000
Currency translation adjustment 63,000 (195,000)
-------------------------
33,277,000 18,098,000
-------------------------
92,866,000 35,434,000
=========================
Approved by the Board of Directors
"Jeremy N. Kendall" "John D. Taylor"
Director Director
Commitments and contingencies (notes 7 and 12)
(see accompanying notes to consolidated financial statements)
p30
Consolidated Statements of Earnings
----------------------------
For the years ended December 31, 2000 and 1999 2000 1999
- -------------------------------------------------------------------------------------------------------------
(Expressed in Canadian dollars) $ $
Revenues 101,653,000 47,304,000
Cost of goods sold 87,046,000 40,127,000
----------------------------
Gross profit 14,607,000 7,177,000
----------------------------
Expenses
Research and development 200,000 367,000
Administration, market development and demonstration 10,570,000 4,953,000
Amortization of patents, trademarks, licences and goodwill 524,000 183,000
----------------------------
11,294,000 5,503,000
----------------------------
Earnings from operations 3,313,000 1,674,000
Interest on long-term debt (1,455,000) (308,000)
Other interest (72,000) (53,000)
Interest and other income 402,000 181,000
Foreign exchange gain (loss) 71,000 (76,000)
Gain on redemption of preference shares (note 8) 175,000 --
Gain on dilution of investment interests in equity accounted investee (note 6) 140,000 --
Share of losses of equity accounted investee (note 6) (48,000) (321,000)
Dividend on preference shares of subsidiary company (note 8) (20,000) (25,000)
----------------------------
Earnings before income taxes 2,506,000 1,072,000
----------------------------
Recovery of (provision for) income taxes (note 10)
Current (528,000) (3,000)
Future 1,396,000 455,000
----------------------------
868,000 452,000
----------------------------
Net earnings for the year 3,374,000 1,524,000
============================
Earnings per share (note 13)
Basic 0.15 0.09
============================
Fully diluted 0.14 0.09
============================
Consolidated Statements of Retained Earnings
-------------------------
For the years ended December 31, 2000 and 1999 2000 1999
- --------------------------------------------------------------------------------
$ $
Retained earnings - Beginning of year 2,495,000 971,000
Net earnings for the year 3,374,000 1,524,000
-------------------------
Retained earnings - End of year 5,869,000 2,495,000
=========================
(see accompanying notes to consolidated financial statements)
p31
Consolidated Statements of Cash Flows
--------------------------
For the years ended December 31, 2000 and 1999 2000 1999
- -------------------------------------------------------------------------------------------------
(Expressed in Canadian dollars) $ $
Cash provided by (used in)
Operating activities
Net earnings for the year 3,374,000 1,524,000
Items not affecting cash
Amortization 2,713,000 1,070,000
Share of losses of investee 48,000 321,000
Gain on redemption of preference shares (175,000) --
Gain on dilution of interest in investee (140,000) --
Gain on sale of property, plant and equipment (19,000) (5,000)
Imputed interest (59,000) 31,000
Future income taxes (1,396,000) (455,000)
Writedown of other assets 75,000 --
--------------------------
4,421,000 2,486,000
--------------------------
Change in non-cash working capital balances related to operations
Accounts receivable - trade 1,813,000 3,110,000
Inventories (2,399,000) (2,922,000)
Other receivables and prepaid expenses (470,000) 338,000
Accounts payable and accrued liabilities (2,894,000) 336,000
Customer deposits (416,000) 1,656,000
--------------------------
55,000 5,004,000
--------------------------
Investing activities
Acquisitions of companies - net of cash acquired (5,359,000) (24,000)
Acquisition of patents, trademarks, licences and other assets (81,000) (87,000)
Acquisition of property, plant and equipment (5,353,000) (1,138,000)
Proceeds on sale of property, plant and equipment 207,000 13,000
Increase in investments and advances (9,000) (37,000)
Proceeds from note receivable 543,000 --
Increase in pre-operating costs (768,000) --
--------------------------
(10,820,000) (1,273,000)
--------------------------
Financing activities
Purchase and redemption of preference shares of subsidiary companies (275,000) (170,000)
Cash held as security deposit 400,000 --
Increase in bank indebtedness 1,980,000 --
Repayment of long-term debt and notes payable (11,364,000) (3,680,000)
Issuance of long-term debt and notes payable 17,564,000 2,133,000
Issuance of common shares 965,000 295,000
--------------------------
9,270,000 (1,422,000)
--------------------------
Foreign exchange gain (loss) on cash held in a foreign currency 44,000 (26,000)
--------------------------
Increase (decrease) in cash during the year (1,451,000) 2,283,000
Cash and cash equivalents - Beginning of year 2,464,000 181,000
--------------------------
Cash and cash equivalents - End of year 1,013,000 2,464,000
==========================
Supplemental cash flow information
Interest paid 1,355,000 298,000
Income taxes paid 445,000 3,000
(see accompanying notes to consolidated financial statements)
p32
Notes to Consolidated Financial Statements
For the years ended December 31, 2000 and 1999
Expressed in Canadian dollars
1 Description of business and significant accounting policies
Stake Technology Ltd. (the Company) was incorporated under the laws of
Canada on November 13, 1973 and operates in three principal businesses.
The SunRich Food Group manufactures and sells agricultural products with a
focus on soy, soymilk and other food products. The Environmental
Industrial Group sells abrasives and industrial materials and recycles
inorganic materials. The Company also operates a division developing and
commercializing a proprietary steam explosion technology for processing of
biomass into higher value products. The Company's assets, operations and
employees at December 31, 2000 are located in Canada and the U.S.
These financial statements are prepared in accordance with accounting
principles generally accepted in Canada. Differences arising from the
application of accounting principles generally accepted in the United
States are described in note 17. The significant policies are outlined
below:
Basis of presentation
The consolidated financial statements include the accounts of the Company
and its subsidiaries, all of which are wholly owned. All significant
intercompany accounts and transactions have been eliminated on
consolidation.
Cash and cash equivalents
Cash and cash equivalents consist of unrestricted cash and short-term
deposits with a maturity at acquisition of less than 90 days.
Inventories
Raw materials, finished goods and merchandise inventory are valued at the
lower of cost and estimated net realizable value. Cost is determined on a
first-in, first-out basis.
Inventories of grain are valued at market. Changes in market value are
included in cost of sales. The SunRich Food Group generally follows a
policy of hedging its grain transactions to protect gains and minimize
losses due to market fluctuations. Hedge contracts are adjusted to market
price and gains and losses from such transactions are included in cost of
sales. The Company has a risk of loss from hedge activity if the grower
does not deliver the grain as scheduled.
Investments
Investments in companies over which the Company exercises significant
influence are accounted for by the equity method whereby the Company
includes its proportionate share of earnings and losses of such companies
in earnings.
Property, plant and equipment
Property, plant and equipment is stated at cost, less accumulated
amortization.
Amortization is provided on property, plant and equipment on the
diminishing balance or, in the case of certain U.S.-based subsidiaries,
straight-line method at rates based on the estimated useful lives of the
assets as follows: 10% to 33% for office furniture and equipment,
machinery and equipment and vehicles and 4-8% for buildings. Amortization
is calculated from the time the asset is put into use.
Interest is capitalized in connection with the construction of major
facilities. The capitalized interest is recorded as part of the asset to
which it relates. During the year, approximately $25,000 (1999 - $nil) of
interest was capitalized.
Pre-operating costs
Net costs incurred in the pre-operating stage of start-up businesses are
deferred until the business reaches commercial operation or the passage of
a certain period of time as predetermined by management. During 2000, the
Company acquired Nordic Aseptic, Inc. (Nordic), which was considered a
start-up business from the date of acquisition to December 31, 2000.
Certain operating costs, net of income earned during the pre-operating
period, have been deferred. Amortization of these net costs will commence
January 1, 2001 and will be amortized on a straight-line basis over 3
years.
Patents, trademarks, licences and other assets
Costs of acquiring or registering patents, trademarks and licences are
capitalized and amortized on a straight-line basis over their expected
lives of 10 to 20 years. Costs of renewing patents and trademarks are
expensed as incurred.
Costs incurred in connection with obtaining long-term financing are
deferred and amortized over the term of the related financing agreement.
Revenue recognition
i) Environmental Industrial Group
Revenue from the sale of industrial minerals is recognized upon
shipment.
Tipping fee revenue is recognized upon receipt of the recycling
materials. Provision is made for the net costs of processing of the
material.
p33
ii) SunRich Food Group
Grain sales are recorded at the time of shipment. Revenues from
custom drying services are recorded upon provision of services and
on completion of quality testing. All other SunRich Food Group
revenue is recognized upon the sale and shipment of a product or the
providing of a service to a customer.
iii) Steam Explosion Technology
The percentage of completion method is used to account for
significant contracts in progress when related costs can be
reasonably estimated. The Company uses costs incurred to date as a
percentage of total expected costs to measure the extent of progress
towards completion.
Revenue from consulting and contract research is recognized when the
service is completed.
Licence fees related to sales of the Company's technologies are
recorded as revenue when earned and collection is reasonably
assured.
Foreign currency translation
The SunRich Food Group is considered to be a self-sustaining operation. The
SunRich Food Group's assets and liabilities are translated at exchange rates in
effect at the balance sheet date. Revenues and expenses are translated at
average exchange rates prevailing during the year. Resulting unrealized gains or
losses are accumulated and reported as currency translation adjustment in
shareholders' equity.
Other revenues and expenses arising from foreign currency transactions are
translated into Canadian dollars using the exchange rate in effect at the
transaction date. Monetary assets and liabilities are translated using the rate
in effect at the balance sheet date. Related exchange gains and losses are
included in the determination of earnings.
Long-term monetary debt of the Company that is denominated in foreign currencies
is translated at exchange rates in effect at the balance sheet dates and the
resulting gains or losses are deferred and amortized over the period of the
debt.
Goodwill
Goodwill represents the excess of the cost of subsidiaries and businesses over
the assigned value of net assets acquired. Goodwill is amortized on a
straight-line basis over its estimated life of 20 years. The Company reviews the
recoverability of goodwill whenever events or changes in circumstance indicate
that the carrying amount may not be recoverable. The measurement of possible
impairment is based primarily on the ability to recover the balance of the
goodwill from expected future operating cash flows on an undiscounted basis.
Customer deposits
Customer deposits principally include prepayments by the SunRich Food Group's
customers for merchandise inventory to be purchased during the spring planting
season.
Income taxes
The Company follows the asset and liability method of accounting for income
taxes whereby future income tax assets are recognized for deductible temporary
differences and operating loss carry-forwards, and future income tax liabilities
are recognized for taxable temporary differences. Temporary differences are the
differences between the amounts of assets and liabilities recorded for income
tax and financial reporting purposes. Future income tax assets are recognized
only to the extent that management determines that it is more likely than not
that the future income tax assets will be realized. Future income tax assets and
liabilities are adjusted for the effects of changes in tax laws and rates on the
date of enactment or substantive enactment. The income tax expense or benefit is
the income tax payable or refundable for the period plus or minus the change in
future income tax assets and liabilities during the period.
Derivative instruments
The SunRich Food Group enters into exchange-traded commodity futures and options
contracts to hedge its exposure to price fluctuations on grain transactions to
the extent considered practicable for minimizing risk from market price
fluctuations. Futures contracts used for hedging purposes are purchased and sold
through regulated commodity exchanges. Inventories, however, may not be
completely hedged, due in part to the Company's assessment of its exposure from
expected price fluctuations. Exchange purchase and sales contracts may expose
the Company to risk in the event that a counterparty to a transaction is unable
to fulfill its contractual obligation. The Company manages its risk by entering
into purchase contracts with pre-approved producers. The Company has a risk of
loss from hedge activity if a grower does not deliver the grain as scheduled.
Sales contracts are entered into with organizations of acceptable
creditworthiness, as internally evaluated. All futures transactions are marked
to market. Gains and losses on futures transactions related to grain inventories
are included in cost of goods sold.
Earnings per share
The computation of earnings per share is based on the weighted average number of
common shares outstanding during the period.
p34
Use of estimates
The preparation of these 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
disclosure of contingent liabilities at the dates of the financial
statements and the reported amounts of revenues and expenses during the
reporting periods. Actual results could differ from those estimates.
2 Acquisitions of businesses
During 2000, the Company acquired four businesses (1999 - one business).
These acquisitions have been accounted for as purchases, and accordingly,
the financial statements include the results of operations of the acquired
businesses from the dates of acquisition.
2000
On February 29, 2000, the Company acquired 100% of the outstanding shares
of George F. Pettinos (Canada) Limited (PECAL), from US Silica Company,
for cash consideration of $4,682,000. In certain markets, PECAL was a
competitor of the Environmental Industrial Group and at the acquisition
date, management intended to amalgamate the operations of PECAL with those
of the Environmental Industrial Group. Accordingly, included in the
purchase price allocation was a restructuring reserve of $245,000. The
restructuring reserve consisted primarily of severance costs related to
the closing of PECAL's administration offices. The restructuring plan was
completed by December 31, 2000.
On September 15, 2000, the Company acquired 100% of the outstanding common
shares of Northern Food and Dairy, Inc. (Northern) for total consideration
of $11,190,000. The consideration paid consisted of the issuance of
7,000,000 common shares, 500,000 common share warrants exercisable at
US$1.50 for five years and cash consideration of $608,000. Northern is a
US-based manufacturer and supplier of soymilk and other food products and
ingredients that are produced in three production facilities in Minnesota.
In April 2000, the Company and Northern created a corporate joint venture
(Nordic) to operate an aseptic packaging plant owned by Hoffman Aseptic
Inc. (Hoffman) located in Northern Minnesota. The plant packages aseptic
soymilk. Nordic assumed management control of the plant on April 19, 2000
and on August 15, 2000, Nordic acquired the assets of Hoffman by the
assumption of certain debts and the payment of cash consideration of
$380,000. For the period of April 19, 2000 to September 15, 2000, Nordic
was a 50% owned corporate joint venture and, therefore, the results for
this period were proportionately consolidated. Upon the acquisition of
Northern on September 15, 2000, the Company acquired the remaining 50%
interest in Nordic. Accordingly, the results of Nordic have been fully
consolidated effective September 15, 2000.
On October 31, 2000, the Company acquired 100% of the outstanding shares
of Temisca, Inc. (Temisca) for cash consideration of $926,000 and the
issuance of a note payable of $750,000. The note payable bears interest at
5% and is repayable in annual installments of $150,000. Temisca is a
producer of specialty sands and owns and/or obtained mineral licences on
16 properties in Quebec.
The net assets acquired and consideration given is summarized below:
PECAL Northern Nordic Temisca Total
-----------------------------------------------------------------------
$ $ $ $ $
Net assets acquired
Cash 162,000 1,030,000 -- 45,000 1,237,000
Net working capital 1,447,000 (1,313,000) (267,000) 790,000 657,000
Long-term note receivable -- 5,534,000 -- -- 5,534,000
Property, plant and equipment 2,235,000 21,480,000 3,198,000 2,084,000 28,997,000
Other long-term assets -- 91,000 43,000 -- 134,000
Goodwill 1,103,000 6,341,000 157,000 -- 7,601,000
Bank indebtedness -- (1,410,000) -- (400,000) (1,810,000)
Long-term debt (46,000) (15,912,000) (2,751,000) (1,340,000) (20,049,000)
Other long-term payable -- (1,587,000) -- -- (1,587,000)
Redeemable preference shares -- -- -- (427,000) (427,000)
Net future income tax asset (liability) (219,000) (3,064,000) -- 924,000 (2,359,000)
-----------------------------------------------------------------------
4,682,000 11,190,000 380,000 1,676,000 17,928,000
=======================================================================
Consideration given
Common shares -- 10,552,000 -- -- 10,552,000
Warrants -- 30,000 -- -- 30,000
Long-term debt -- -- -- 750,000 750,000
Cash 4,682,000 608,000 380,000 926,000 6,596,000
-----------------------------------------------------------------------
4,682,000 11,190,000 380,000 1,676,000 17,928,000
=======================================================================
p35
1999
Effective August 2, 1999, the Company acquired 100% of the common shares
of SunRich, Inc. (SunRich) in exchange for 5,471,866 common shares of the
Company and 104,821 warrants of the Company. The warrants were exercisable
for 30 days at US$0.50, and if these warrants were exercised, the
shareholders would be entitled to another warrant exercisable at US$1.00
to December 31, 1999, rising to US$2.00 on January 1, 2000 and expiring on
December 29, 2000.
Certain shareholders of SunRich chose to exercise dissenter's rights and
received $49,000 in cash for their SunRich shares.
The net assets acquired and consideration given is summarized below:
$
----------
Net assets acquired
Cash 368,000
Net working capital 3,044,000
Property, plant and equipment 4,911,000
Goodwill 2,183,000
Notes payable (1,325,000)
Long-term debt (2,370,000)
Net future income tax liability (18,000)
----------
6,793,000
==========
Consideration
Common shares 6,346,000
Warrants 55,000
Cash 392,000
----------
6,793,000
==========
The following amounts are included in the financial statements and
represent the Company's proportionate share of earnings of Nordic for the
period from April 19, 2000 to September 15, 2000:
$
----------
Sales --
==========
Net loss for the period (192,080)
==========
Cash used in operations (1,754,000)
==========
Cash used in investing activities (1,534,000)
==========
Cash provided from financing activities 3,425,000
==========
3 Note receivable/Other long-term payable
Prior to the Company's acquisition of Northern on September 15, 2000 (note
2), Northern signed an agreement with a major European-based customer to
supply product. This required Northern to expand its food processing plant
to the customer's specifications. In accordance with the terms of the
agreement, the customer is required to pay Northern 36 monthly instalments
of US$119,000 following the customer's acceptance of the plant
specifications. The agreement also requires Northern to provide the
customer with a product rebate beginning three years after production at
the new plant commences, until US$1,720,000 is repaid.
Upon acquisition of Northern on September 15, 2000, the Company assigned
fair values of $5,534,000 to the note receivable and $1,587,000 to the
product rebate payable based on the cash flows associated with these
financial instruments, discounted at a rate of 9.5%.
During the period from September 16, 2000 to December 31, 2000, Northern
received payments of $543,000 and recorded imputed interest income of
$131,000 on the note receivable. Imputed interest expense of $47,000 was
recorded on product rebate payable.
The fair values of the note receivable and product rebate payable at
December 31, 2000 approximate their carrying amounts but could vary with
fluctuations in interest rates.
4 Inventories
2000 1999
-------------------------
$ $
Raw materials 4,991,000 2,196,000
Finished goods and merchandise 7,834,000 4,003,000
Grain 2,465,000 2,390,000
-------------------------
15,290,000 8,589,000
=========================
p36
Grain inventories consist of the following:
2000 1999
-------------------------
$ $
Company owned grain 2,208,000 2,479,000
Unrealized gain (loss) on
Contracts with producers 156,000 (172,000)
Futures contracts 101,000 83,000
-------------------------
2,465,000 2,390,000
=========================
5 Property, plant and equipment
2000
---------------------------------------
Accumulated
Cost Amortization Net
---------------------------------------
$ $ $
---------------------------------------
Land and buildings 20,531,000 2,037,000 18,494,000
Machinery and equipment 29,828,000 5,970,000 23,858,000
Office furniture and equipment 1,083,000 766,000 317,000
Vehicles 848,000 359,000 489,000
---------------------------------------
52,290,000 9,132,000 43,158,000
=======================================
1999
---------------------------------------
Accumulated
Cost Amortization Net
---------------------------------------
$ $ $
---------------------------------------
Land and buildings 8,218,000 1,790,000 6,428,000
Machinery and equipment 7,946,000 4,334,000 3,612,000
Office furniture and equipment 945,000 580,000 365,000
Vehicles 633,000 272,000 361,000
---------------------------------------
17,742,000 6,976,000 10,766,000
=======================================
Included in machinery and equipment is equipment under capital lease with
a cost of $1,096,000 (1999 - $699,000) and net book value of $773,000
(1999 - $552,000).
6 Investments
2000 1999
------------------
$ $
Easton Minerals Ltd.
32% (1999 - 35%) common share ownership 382,000 186,000
Advances -- 95,000
------------------
382,000 281,000
------------------
Easton Minerals Ltd. (Easton) is a small mining exploration company listed
on the Canadian Venture Exchange. The quoted market value of the shares
held by the Company at December 31, 2000 was $531,000 (1999 - $550,000),
however, this value is based upon limited trading volumes of the common
shares of Easton. It is unlikely that these values could be realized upon
sale of all or a portion of the Company's holdings in Easton, particularly
given the significant number of shares held by the Company.
During 2000, advances of $104,000 were converted into 980,103 common
shares of Easton.
The Company's share of losses of Easton for 2000 amounted to $48,000 (1999
- $321,000). In 2000, Easton issued 2,533,334 common shares to third
parties for cash consideration of $475,000, and a dilution gain on this
transaction of $140,000 was recognized on the reduction of the Company's
percentage ownership of Easton.
p37
7 Long-term debt and bank facilities
Long-term debt consists of the following:
2000 1999
-----------------------
$ $
SunRich
Note payable, interest at bank's reference rate (8.75% at
December 31, 2000), due in monthly payments of principal
and interest of US$3,094 through July 2013, collateralized by
property, plant and equipment 412,000 410,000
Note payable, interest at 8.75%, interest only through May 2000
and thereafter due in monthly interest and principal payments
of US$29,048 through November 2006, collateralized by
equipment and intangibles 398,000 433,000
Note payable, interest at prime, due May 31, 2000 -- 208,000
Note payable, interest at 9.375%, interest only through to
February 2002 and thereafter, due in semi-annual payments of
principal and interest of US$66,000 through February 1, 2016,
collateralized by equipment and general intangibles 3,000,000 1,133,000
Northern
Note payable, interest at 9.45%, due in monthly payments of
US$144,043 through September 2003, collateralized by plant and
equipment and assignment of a production contract 6,251,000 --
Note payable, interest at the 30-day commercial paper rate,
plus 3% (9.3% at December 31, 2000), due in monthly payments
of US$53,918 through September 2007, collateralized by equipment 4,824,000 --
Mortgage payable, interest at 10%, due in monthly payments
of US$6,000 through October 2008, collateralized by property 583,000 --
Mortgage payable, interest only at 9.375%, due August 2005,
collateralized by property 462,000 --
Nordic
Bank loan payable, U.S. prime plus 1%, due in monthly instalments
of principal of US$44,048 plus interest through August 2007,
collateralized by property, plant, equipment and intangible assets (a) 5,286,000 --
Stake Corporate
U.S. dollar term loan of US$1,000,000 payable in monthly
payments of principal and interest of US$25,000, commencing
January 31, 2001. Interest accrues at the U.S. bank reference rate
plus 1% (10% at December 31, 2000) (c) 1,500,000 --
Term loan payable in quarterly instalments of $48,000 beginning
January 31, 2001 until January 31, 2003 at which time the remaining
balance is repayable in full. Interest is payable monthly at the bank
reference rate plus 1% (8.5% at December 31, 2000) (b and c) 800,000 1,400,000
Term loan payable in quarterly instalments of $252,000, beginning
January 31, 2001 until January 31, 2003 at which time the remaining
balance is repayable in full. Interest is payable monthly at the bank
reference rate plus 1% (8.5% at December 31, 2000) (c) 4,200,000 --
Note payable, required annual payments of $150,000, interest at
5% payable semi-annually, uncollateralized 750,000 --
Temisca
Mortgage payable in 60 monthly blended interest and principal
payments of $7,000. Remaining balance is payable at maturity
on January 2002. Interest accrues at 8%, collateralized by
property, plant and equipment 491,000 --
-----------------------
Carried forward 28,957,000 3,584,000
=======================
p38
7 Long-term debt and bank facilities (continued)
2000 1999
-----------------------
$ $
Carried forward 28,957,000 3,584,000
-----------------------
Term loan payable in monthly blended interest and principal
payments of $11,000. Interest accrues at 7.87%, collateralized
by property, plant and equipment 464,000 --
Other
Other with a weighted average interest rate of 7.5%, due in varying
instalments through July 2007 (note 11) 1,275,000 179,000
Capital lease obligations due in monthly payments through
2005, with a weighted average interest rate of 10.25% 859,000 350,000
-----------------------
31,555,000 4,113,000
Less: Current portion 6,799,000 1,158,000
-----------------------
24,756,000 2,955,000
=======================
The loans and capital leases detailed above require payments as follows:
$
----------
2001 6,828,000
2002 7,035,000
2003 7,444,000
2004 2,274,000
2005 2,640,000
Thereafter 5,388,000
----------
31,609,000
Less interest on capital lease obligations with a
weighted average interest rate of 10.25% 54,000
----------
31,555,000
==========
a) Northern and SunRich have co-guaranteed a bank loan payable by
Nordic of $5,286,000. The loan contains restrictive financial
covenants for Northern, SunRich and Nordic. As at December 31, 2000,
Nordic was not in compliance with certain of the financial
covenants. However, on April 12, 2001, the Company entered into an
agreement with the lender whereby the lender agreed to forebear
taking any action until April 15, 2002, with respect to the various
covenant breaches which existed at December 31, 2000. As part of the
agreement, the Company renegotiated the financial covenants of the
bank loan payable and agreed to place US$264,000 on deposit with the
lender. As at April 12, 2001, the Company is in compliance with the
new financial covenants and expects to remain in compliance
throughout 2001. At December 31, 2000, $4,493,000 of the $5,286,000
bank loan payable has been classified as a long-term obligation in
these financial statements.
b) In the event of default under the term bank loan of $800,000 (1999 -
$1,400,000), a former director of the Company has a right to acquire
all of the common shares of a subsidiary company of the Company for
$1. The sole asset of the subsidiary is 19.2 acres of land with a
book value of $1,312,000. If this occurred, the liability in respect
of the first and second preference shares of the subsidiary company
reflected in these financial statements (note 8) would be
extinguished without payment.
c) The Company has provided a general collateral agreement representing
a first charge on all Canadian assets other than real property of
the Company as collateral for a $4,000,000 operating bank facility,
the term bank loans and the U.S. dollar term loan. The Company has
also provided first mortgages in the aggregate amount of $3,743,000
on certain land and buildings located in Waterdown and Hamilton,
Ontario, an assignment of the Northern common shares and a pledge of
certain book debts, inventories and other assets as collateral. The
Company is also required to maintain cash deposits of $nil (1999 -
$400,000) as collateral for the loan facility. As at December 31,
2000, the Company has issued letters of credit in the amount of
$900,000 on this operating facility. As at December 31, 2000, the
Company has available borrowings under the operating bank facility
of $3,100,000. The operating facility bears interest at the Canadian
bank reference rate plus 0.2%.
d) Temisca has an unsecured line of credit of $300,000 of which
$125,000 was drawn at December 31, 2000. The line of credit bears
interest at the bank reference rate plus 0.25% (8.5% at December 31,
2000).
e) SunRich maintains a line of credit with a bank, which provides for
maximum borrowings of up to US$3,000,000 based on eligible accounts
receivable and inventories, with interest at the U.S. bank's
reference rate or LIBOR rate plus 2.5% (9.5% at December 31, 2000)
and collateralized by accounts receivable and inventories at
December 31, 2000. SunRich has drawn US$900,000 (CAN$1,350,000)
against this facility at December 31, 2000.
p39
f) Northern maintains a line of credit with a bank which provides for
maximum borrowings of US$1,000,000 of eligible accounts receivable
and inventory, with an interest rate at the bank's reference rate
plus 1.5% (10.5% at December 31, 2000). Borrowings under this line
of credit are due on demand and are collateralized by accounts
receivable, inventories and certain equipment of Northern.
Borrowings under this line of credit totalled US$950,000
(CAN$1,425,000) at December 31, 2000.
g) The aggregate value of debt denominated in U.S. dollars at December
31, 2000 amounted to US$14,141,000 (1999 - US$1,513,000).
h) The fair value of the long-term debt would not be materially
different from the carrying amount. The effective interest rate at
December 31, 2000 is 9.1% (1999 - 8.1%).
8 Preference shares of subsidiary companies
2000 1999
-----------------
$ $
400,000 (1999 - 500,000) first preference shares (a) 400,000 500,000
385,834 (1999 - 455,834) second preference shares (a) 301,000 347,000
146,795 (1999 - nil) H preference shares (b) 148,000 --
-----------------
849,000 847,000
Less: Current portion of preference shares 387,000 240,000
-----------------
462,000 607,000
=================
a) First and second preference shares
The Company is required to purchase 100,000 first preference shares
issued by 1108176 Ontario Inc., its subsidiary, per annum at $1 per
share plus unpaid dividends thereon calculated at 5% per annum,
commencing December 31, 1996, until the term bank loan described in
note 7(b) is repaid. Thereafter, the Company is required to purchase
200,000 first preference shares per annum under the same terms and
conditions.
In January 2000, 100,000 first preference shares were purchased for
$100,000, and a dividend of $25,000 was paid. Payment for a further
purchase of 100,000 first preference shares and a dividend of
$20,000 was delivered in trust to the Company's lawyer in January
2001 pending receipt of the shares purchased.
The second preference shares of the subsidiary company with a stated
value of $1 per share are non-dividend bearing and are redeemable
monthly at the rate of 5,833 shares ($5,833) per month until fully
paid out. The Company is required to fund the redemption. As a
result of the fixed repayment requirements, the second preference
shares have been discounted at an imputed rate of 8%. During the
year, 70,000 (1999 - 70,000) second preference shares were redeemed.
Imputed interest on the second preference shares during the year
amounted to $24,000 (1999 - $31,000).
The Company is required to purchase all of the outstanding first
preference shares at $1 per share in the event of a change in the
current Chairman of the Company or upon the sale of BEI.
b) H preference shares
The Company is required to redeem the H preference shares issued by
Temisca, its subsidiary, plus unpaid interest thereon calculated at
3% if certain financial ratios are achieved by Temisca. Upon
acquisition of Temisca on October 31, 2000, the Company assigned a
fair value of $427,000 to the H preference shares based on the
Company's anticipated date of redemption at a discount rate of 8%.
Subsequent to the acquisition of Temisca, the Company offered to
redeem all of the H preference shares at prices ranging from $0.33
to $0.40 per share. Holders of 279,885 H preference shares accepted
the Company's offer and a gain of $175,000 was recorded. During the
period from October 31, 2000 to December 31, 2000, the Company
recorded imputed interest expense of $1,000 on these preference
shares.
c) The fair market values of the first and second preference shares and
the H preference shares would not be materially different from their
carrying amounts and could vary with fluctuations in interest rates.
9 Capital stock
a) During 1997, the shareholders of the Company agreed to reduce the
stated capital account of the Company's common shares by $25,026,000
through a reduction of the deficit.
p40
b) The following is a summary of changes in share capital during the
year.
Warrants Common shares Total
----------------------------------------------------------------
Number $ Number $ $
Balance at December 31, 1998 1,182,500 -- 14,779,718 4,467,000 4,467,000
Shares and warrants issued to
acquire SunRich (note 2) 104,821 55,000 5,471,866 6,346,000 6,401,000
4 for 1 warrant exchange (c) (849,375) -- -- -- --
Warrants exercised (402,204) (55,000) 402,204 350,000 295,000
Warrants issued 366,804 -- -- -- --
Warrants expired (71,142) -- -- -- --
----------------------------------------------------------------
Balance at December 31, 1999 331,404 -- 20,653,788 11,163,000 11,163,000
Warrants exercised (c) (234,959) -- 234,959 529,000 529,000
Warrants expired (c) (96,445) -- -- -- --
Options exercised (d) -- -- 298,225 436,000 436,000
Shares and warrants issued to
acquire Northern (note 2) 500,000 30,000 7,000,000 10,552,000 10,582,000
----------------------------------------------------------------
Balance at December 31, 2000 500,000 30,000 28,186,972 22,680,000 22,710,000
================================================================
c) At December 31, 1998, the Company had outstanding 1,182,500 warrants
to acquire common shares. Of these warrants, 650,000 were
exercisable at US$2.25 per share, and 532,500 were exercisable at
US$2.00 per share. As a result of extensions to the original expiry
dates approved in 1997 and 1998, the warrants were to expire on June
30, 1999. In December 1998, the Company offered to the warrant
holders a 4 for 1 exchange of the 1,182,500 warrants with an
exercise price of US$0.50 per share expiring on January 31, 1999.
Provided the new warrants were exercised prior to January 31, 1999,
an equivalent number of additional warrants with an exercise price
of US$1.00 to December 31, 1999, rising to US$2.00 on January 1,
2000 and expiring on December 29, 2000 would be issued.
During January 1999, 283,125 of the new warrants were exercised to
acquire 283,125 common shares for proceeds of $212,000. Accordingly,
283,125 additional warrants were issued. Of these additional
warrants, 35,400 warrants were exercised for proceeds of $38,000.
During August 1999, 83,679 of the warrants issued to acquire SunRich
were exercised to acquire 83,679 common shares for proceeds of
$45,000. Accordingly, 83,679 additional warrants were issued.
During 2000, the exercise price of the additional warrants issued in
1999 was reduced, for a 30-day period, from US$2.00 to US$1.50.
During this 30-day period, 234,959 warrants were exercised resulting
in 234,959 common shares being issued for proceeds of $529,000. The
remaining 96,445 additional warrants issued in 1999 expired on
December 29, 2000.
As at December 31, 2000, the Company had 500,000 warrants
outstanding with an exercise price of US$1.50 and an expiry date of
September 15, 2005 (note 2).
d) Director/employee option plans
The Company grants options to employees and directors from time to
time under employee/director stock option plans. The Company has
authorized 2,123,400 (1999 - 2,123,400) shares to be made available
for the stock option plans. The following is a summary of grants
during the year.
Grant date Expiry date Exercise price Number
$ of options
--------------------------------------------------------------------
January 6, 2000 December 11, 2004 US$0.91 4,000
April 4, 2000 April 4, 2005 US$1.38 41,000
June 28, 2000 April 4, 2005 US$1.41 4,000
December 20, 2000 December 20, 2005 US$1.31 246,500
-------
295,500
-------
Employee stock options granted by the company contain exercise prices,
which are equivalent to the share price on the grant date. Any
consideration paid by employees on exercise of stock options or purchase
of stock is credited to share capital.
p41
The 295,500 options granted vest as follows: 108,000 options vested in
2000, 48,300 vest in 2001, 47,300 vest in 2002, 47,300 vest in 2003 and
44,600 vest in 2004. Details of the options exercisable and changes during
the periods presented are as follows:
Balance Granted with Vested Balance
Expiry date Exercise as at immediate from prior as at
price Dec. 31, 1999 Retracted Exercised vesting year grants Dec. 31, 2000
- -----------------------------------------------------------------------------------------------------------------
March 10, 2001 US$1.06 459,250 -- (145,375) -- -- 313,875
December 11, 2003 US$0.75 to
US$1.06 672,200 -- (98,350) -- 22,100 595,950
August 2, 2004 US$1.06 131,900 (2,000) (10,000) -- 19,900 139,800
December 31, 2004 US$1.06 182,500 -- (44,500) -- -- 138,000
August 2, 2005 US$1.06 56,000 -- -- -- 34,800 90,800
April 4, 2005 US $1.38 to
US$1.41 -- (1,000) -- 9,000 -- 8,000
December 11, 2004 US $0.91 -- -- -- 1,600 -- 1,600
December 20, 2005 US $1.31 -- -- -- 97,400 -- 97,400
---------------------------------------------------------------------------------
1,501,850 (3,000) (298,225) 108,000 76,800 1,385,425
=================================================================================
Balance Granted with Vested Balance
Expiry date Exercise as at immediate from prior as at
price Dec. 31, 1998 Retracted vesting year grants Dec. 31, 1999
- ---------------------------------------------------------------------------------------------------------------
March 10, 2001 US$1.22 to US$1.75 471,250 (12,000) -- -- 459,250
December 11, 2003 US$0.75 to US$1.38 302,875 -- 65,700 303,625 672,200
August 2, 2004 US$1.06 -- -- 131,900 -- 131,900
December 31, 2004 US$1.82 182,500 -- -- -- 182,500
August 2, 2005 US$1.06 -- -- 56,000 -- 56,000
----------------------------------------------------------------------
956,625 (12,000) 253,600 303,625 1,501,850
======================================================================
The weighted average exercise price of the above outstanding options at
December 31, 2000 is US$1.09 per share (1999 - US$1.29 per share). On
January 7, 2000, all options with an option price in excess of US$1.06
were repriced to US$1.06. The weighted average price of options exercised
in the year was US$1.06 (1999 - US$nil).
At December 31, 2000, options to acquire an additional 472,100 common
shares at US$0.75 to US$1.38 have been granted but have not yet vested.
Options that have not vested are excluded from the above table. The
weighted average exercise price of the 472,100 (1999 - 366,400) options
granted but not vested is US$1.17 (1999 - US$1.06).
Subsequent to year-end, 2,000 options were exercised to acquire 2,000
common shares for gross proceeds of $3,000. In addition, on March 5, 2000,
the Board approved a resolution extending the exercise period of 304,375
options, from March 10, 2001 to December 31, 2003.
10 Income taxes
The effective income tax rate on consolidated earnings is influenced by
items such as available losses carried forward and non-deductible
expenses:
2000 1999
------------------------
$ $
Net earnings before income taxes 2,506,000 1,072,000
------------------------
Income taxes at Canadian statutory rates of 42% (1999 - 44%) 1,053,000 472,000
Increase (decrease) by the effects of
Current year non-capital loss not recognized 457,000 --
Application of prior year losses and scientific research
expenditures carried forward (695,000) (433,000)
Reduction in valuation allowance (1,798,000) (635,000)
Differences in foreign, capital gains and manufacturing
and processing tax rates (63,000) (20,000)
Non-taxable income/non-deductible expenses 178,000 164,000
------------------------
Recovery of income taxes (868,000) (452,000)
========================
p42
Future tax assets (liabilities) of the Company are as follows:
2000 1999
------------------------
$ $
Differences in capital assets basis (3,191,000) (608,000)
Accounting reserves not deducted for tax 239,000 278,000
Capital and non-capital losses 1,279,000 241,000
Tax benefit of scientific research expenditures 2,125,000 2,913,000
Pre-operating costs (307,000) --
Other 81,000 12,000
------------------------
226,000 2,836,000
Valuation allowance (780,000) (2,395,000)
------------------------
(554,000) 441,000
========================
2000 1999
------------------------
$ $
Future income taxes asset 954,000 1,020,000
Future income taxes liability (1,508,000) (579,000)
------------------------
(554,000) 441,000
========================
The Company has approximately $5,300,000 in Canadian scientific research
expenditures which can be carried forward indefinitely to reduce future
years' taxable income, and approximately $150,000 in scientific research
investment tax credits which can be used to reduce future years' income
taxes payable. These scientific research investment tax credits expire in
varying amounts from 2001 to 2006.
The SunRich Food Group has capital and non-capital loss carry-forwards of
approximately $2,693,000 at December 31, 2000 available to reduce future
federal and state income tax that begins to expire in 2002.
The Environmental Industrial Group has non-capital loss carry-forwards of
$139,000 at December 31, 2000 available to reduce future federal and
provincial income tax. These non-capital losses expire in varying amounts
from 2001 to 2002.
A valuation allowance of $780,000 (1999 - $2,395,000) has been recorded to
reduce the net benefit recorded in the financial statements related to the
capital and non-capital loss carry-forwards. The valuation allowance is
deemed necessary as a result of the uncertainty associated with the
ultimate realization of these future tax assets. Of this amount,
approximately $333,000 relates to the acquisition of SunRich in 1999 and
Nordic in 2000 and accordingly, any recognition of these amounts in the
future will be accounted for as a reduction of the related goodwill.
11 Related party transactions and balances
In addition to transactions disclosed elsewhere in these financial
statements, the Company entered into the following related party
transactions:
a) During 2000, the Company charged affiliated companies $66,000 for
services rendered (1999 - $66,000). Included in accounts receivable
at December 31, 2000 is $168,000 (1999 - $56,000) due from
affiliated companies. Also included in accounts receivable at
December 31, 2000 is $105,000 (1999 - $88,000) due from
officers/directors of the Company;
b) Included in other long-term debt is an uncollateralized loan of
$178,000 due to a shareholder, payable in monthly instalments of
principal and interest of US$2,543 through to August 24, 2005,
bearing interest at 8%; and
c) The Company leases certain real estate from a shareholder under
operating leases that expire in August 2010. Annual rental under
each of the leases is $2.
12 Commitments and contingencies
a) The Company has filed a claim against a former director relating to
certain actions taken when he was the President of one of the
Company's operating division. The former director has counter
claimed against the Company and its subsidiaries, the Chairman of
the Company and Easton, the Company's 32% equity investment.
It cannot be determined if there will be any recovery by the Company
at this time or if there will be any loss to the Company, and no
provision has been made in these financial statements in respect of
this matter.
b) The Company believes, with respect to both its operations and real
property, that it is in material compliance with current
environmental laws. Based on known existing conditions and the
Company's experience in complying with emerging environmental
issues, the Company is of the view that future costs relating to
environmental compliance will not have a material adverse effect on
its financial position, but there can be no assurance that
unforeseen changes in the laws or enforcement policies of relevant
governmental bodies, the discovery of
p43
changed conditions on the Company's real property or in its
operations, or changes in use of such properties and any related
site restoration requirements, will not result in the incurrence of
significant costs. No provision has been made in these financial
statements for these future costs since such costs, if any, are not
determinable at this time.
c) An irrevocable letter of credit for $750,000 has been placed with
the Ontario Ministry of Environment and Energy as a security deposit
for the Certificate of Approval granted to the Company for certain
recycling activities. This letter of credit must remain in place
indefinitely as a condition of the Certificate of Approval.
Additional letters of credit totalling $150,000 have been placed
with various third parties as security on transactions occurring in
the ordinary course of operations.
d) In the normal course of business, the SunRich Food Group holds grain
for the benefit of others. The Company is liable for any
deficiencies of grade or shortage of quantity that may arise in
connection with such grain.
e) The Company has a commitment to buy from growers at set prices and
times and also has commitments to sell to terminals at set prices
and times. To offset the risk of market movement in prices, the
Company will buy or sell future positions with commodity brokers.
The quantities of commodities of these open futures contracts at
December 31, 2000 are as follows:
Number of bushels
----------------------
Corn Soybeans
Company-owned grain 196,972 145,938
Purchase contracts 170,032 (51,260)
Sales contracts (244,559) (260,550)
Futures contracts 50,000 320,000
----------------------
Total net position (short) long 172,445 154,128
======================
f) During 1999, the Company entered into a 12-year exclusive licence
agreement related to the sales of the Company's steam explosion
equipment in China.
g) Commitments under operating leases, principally for distribution
centres and warehouse, are as follows:
$
---------
2001 1,030,000
2002 941,000
2003 883,000
2004 830,000
2005 and thereafter 1,498,000
---------
5,182,000
=========
Rent expense incurred in the year amounted to $1,038,000 (1999 -
$195,000).
13 Earnings per share
The calculation of earnings per share is based on the weighted average
number of shares outstanding of 22,975,986 (1999 - 17,384,644). Fully
diluted earnings per share reflect the dilutive effect of the exercise of
warrants and options as disclosed in note 9. The number of shares for the
fully diluted earnings per share calculation was 25,333,604 (1999 -
19,217,852). Interest on the funds, which would have been received had the
warrants and options been exercised at the beginning of the year, amounts
to $182,000 (1999 - $158,000) on an after tax bases, calculated at
Canadian bank prime.
14 Financial instruments
The Company's financial instruments recognized in the consolidated balance
sheets and included in working capital consist of accounts receivable,
other receivables and accounts payable and accrued liabilities. The fair
values of these instruments approximate their carrying value due to their
short-term maturities.
The Company's financial instruments that are exposed to credit risk
include cash and cash equivalents and accounts receivable. The Company
places its cash with institutions of high creditworthiness. The Company's
trade accounts receivable are not subject to a high concentration of
credit risk. The Company routinely assesses the financial strength of its
customers and, as a consequence, believes that its accounts receivable
credit risk exposure is limited. The Company maintains an allowance for
losses based on the expected collectibility of the accounts.
Information on the Company's other financial instruments is contained in
other notes to the consolidated financial statements.
p44
15 Segmented information
The Company operates in three industry segments: (a) Steam Explosion
Technology Group: the design, engineering, and sale of customized steam
explosion technology systems; (b) Environmental Industrial Group, which
recycles and sells or disposes of certain non-hazardous and hazardous
industrial waste and resale of inorganic minerals and (c) the SunRich Food
Group, which manufactures, markets, distributes and packages grains and
other food products with a focus on soy products. The Company's assets,
operations and employees are located in Canada and the United States.
Industry segments
2000
--------------------------------------------------------------
Steam
Explosion
Technology
Group and Environmental SunRich
Corporate Industrial Group Food Group Consolidated
--------------------------------------------------------------
$ $ $ $
External sales by market
Canada 169,000 25,549,000 397,000 26,115,000
U.S. 376,000 5,737,000 67,515,000 73,628,000
Asia -- -- 1,795,000 1,795,000
Europe -- -- 115,000 115,000
--------------------------------------------------------------
Total sales to external customers 545,000 31,286,000 69,822,000 101,653,000
==============================================================
Interest expense -- 416,000 1,111,000 1,527,000
==============================================================
Income tax expense (recovery) (1,798,000) 66,000 864,000 (868,000)
==============================================================
Segment net income 495,000 2,513,000 366,000 3,374,000
==============================================================
Identifiable assets 3,094,000 21,465,000 68,307,000 92,866,000
==============================================================
Amortization 220,000 781,000 1,712,000 2,713,000
==============================================================
Expenditures on property, plant
and equipment 55,000 667,000 4,631,000 5,353,000
==============================================================
Equity accounted investments 382,000 -- -- 382,000
==============================================================
1999
--------------------------------------------------------------
Steam
Explosion
Technology
Group and Environmental SunRich
Corporate Industrial Group Food Group Consolidated
--------------------------------------------------------------
$ $ $ $
External sales by market
Canada 85,000 18,554,000 -- 18,639,000
U.S. 399,000 3,275,000 24,481,000 28,155,000
Asia -- -- 510,000 510,000
--------------------------------------------------------------
Total sales to external customers 484,000 21,829,000 24,991,000 47,304,000
==============================================================
Interest expense -- 144,000 217,000 361,000
==============================================================
Income tax expense (recovery) (635,000) -- 183,000 (452,000)
==============================================================
Segment net income (loss) (843,000) 2,058,000 309,000 1,524,000
==============================================================
Identifiable assets 2,919,000 13,513,000 19,002,000 35,434,000
==============================================================
Amortization 257,000 477,000 336,000 1,070,000
==============================================================
Expenditures on property, plant
and equipment 47,000 500,000 591,000 1,138,000
==============================================================
Equity accounted investments 186,000 -- -- 186,000
==============================================================
p45
Geographic segments
2000 1999
----------------------------------- ------------------------------------
Canada U.S. Total Canada U.S. Total
$ $ $ $ $ $
----------------------------------- ------------------------------------
Property, plant and equipment 9,944,000 33,214,000 43,158,000 5,373,000 5,393,000 10,766,000
=================================== ====================================
Goodwill 2,774,000 8,457,000 11,231,000 1,785,000 2,137,000 3,922,000
=================================== ====================================
Total assets 21,526,000 71,340,000 92,866,000 16,219,000 19,215,000 35,434,000
=================================== ====================================
16 Subsequent event
Subsequent to year-end, the Company acquired 100% of the common shares of
Jenkins & Gournoe, Inc., which operates under the name of First Light
Foods, Inc. Consideration consisted of the issuance of 833,333 common
shares, US$300,000 in cash, a US$700,000 note payable and up to 175,000
warrants. The purchase price is subject to change contingent on the
operating results of the acquired Company.
First Light Foods, Inc., which owns several trademarked soymilk brands
that are marketed as the private label brands of a major California food
chain, will be part of the SunRich Food Group.
17 United States accounting principles differences
These consolidated financial statements have been prepared in accordance
with accounting principles generally accepted in Canada (Canadian GAAP)
which conform in all material respects applicable to the Company with
those in the United States (U.S. GAAP) during the periods presented except
with respect to the following:
Under U.S. GAAP, the gain on dilution in the amount of $140,000 in 2000
(1999 - $nil) resulting from the dilution of the Company's ownership of
the common share equity of Easton would have been excluded from income and
included as a separate component of shareholders' equity as Easton is a
development stage exploration company. Also, under U.S. GAAP, certain
development and pre-operating costs of $768,000 (1999 - $75,000) deferred
in these financial statements would be expensed. Amortization of $157,000
(1999 - $nil) related to the development and start-up costs would not have
been expensed.
During the year, the Company repriced certain options as described in note
9. As a result, $52,000 (1999 - $nil) of compensation expense would be
recognized under U.S. GAAP.
The net effect of income taxes on the above items is insignificant.
Accordingly, the following would have been reported under U.S. GAAP:
2000 1999
--------------------------
$ $
Net earnings for the year - as reported 3,374,000 1,524,000
Dilution gain (140,000) --
Development costs 157,000 (75,000)
Pre-operating costs (768,000) --
Stock option compensation expense (52,000) --
--------------------------
Net earnings for the year - U.S. GAAP 2,571,000 1,449,000
==========================
Basic and fully diluted earnings per share - U.S. GAAP 0.11 0.08
==========================
Weighted average number of common shares outstanding 22,975,986 17,384,644
==========================
Shareholders' equity - as reported 33,277,000 18,098,000
Cumulative development, start-up costs and pre-operating costs (850,000) (239,000)
Cumulative stock compensation expense (52,000) --
--------------------------
Shareholders' equity - U.S. GAAP 32,375,000 17,859,000
==========================
Comprehensive income
U.S. GAAP requires that a comprehensive income statement be prepared.
Comprehensive income is defined as "the change in equity of a business
enterprise during a period from transactions and other events and
circumstances from non-owner events". It includes all changes in equity
during a period, except those resulting from investments by owners and
distributions to owners. The comprehensive income statement reconciles the
reported net income to the comprehensive income.
The following is a comprehensive income statement (prepared in accordance
with U.S. GAAP) which, under U.S. GAAP, would have the same prominence as
other financial statements.
p46
2000 1999
-------------------------
$ $
Net earnings for the year - U.S. GAAP 2,571,000 1,449,000
Currency translation adjustment 258,000 (195,000)
-------------------------
Comprehensive income 2,829,000 1,254,000
=========================
Other U.S. GAAP disclosures
2000 1999
-------------------------
$ $
Allowance for doubtful accounts 939,000 665,000
=========================
Inventory provisions 61,000 134,000
=========================
Accrued recycling costs 298,000 384,000
=========================
Pro forma data (unaudited)
Condensed pro forma income statement, as if the acquisitions of PECAL,
Northern, Nordic and Temisca had occurred at the beginning of the previous
year, is as follows:
2000 1999
-------------------------
$ $
Revenue 134,169,000 93,727,000
=========================
Net income 1,752,000 1,550,000
=========================
Earnings per share 0.08 0.09
=========================
Employee stock compensation
Effective January 1, 1996, Financial Accounting Standards Board Statement
No. 123, "Accounting for Stock-Based Compensation" (SFAS No. 123),
encourages, but does not require, companies to include in compensation
cost at the fair value of stock options granted. The Company has decided
not to adopt the fair value method. A company that does not adopt this new
method must disclose pro forma net income and earnings per share giving
effect to the method of compensation cost described in SFAS No. 123.
The Company's stock option plan is described in note 9. Employee stock
options granted by the Company in 1999 and 2000 were granted at prices
which were at the value of stock on the grant date, vest at various dates
ranging from the date of the grants to August 2, 2004 and expire 2 to 6
years subsequent to the grant date.
The fair value of the options granted during 1999 and 2000 was estimated
using the Black-Scholes option-pricing model with the assumptions of a
dividend yield of 0% (1999 - 0%), an expected volatility of 51% (1999 -
84%), a risk-free interest rate of 5% (1999 - 4%), and an expected life of
1 to 6 years.
The total value of 295,500 (1999 - 620,000) stock options that were
granted by the Company to employees during 2000 was $260,000 (1999 -
$632,000). Of this total amount, under SFAS No. 123, the cost of stock
compensation expense for the year ended December 31, 2000 would be
$107,000 (1999 - $239,000). The unrecognized value of $153,000 (1999 -
$393,000) will be charged to pro forma net earnings in future years
according to the vesting terms of the options. Compensation expense of
options granted in 1999 and vesting in 2000 is $86,000 (1999 - $307,000).
The resulting pro forma net earnings (loss) and earnings (loss) per share
for the year ended December 31, 2000 under U.S. GAAP are $2,378,000 (1999
- ($903,000)) and $0.10 (1999 - ($0.05)), respectively.
The effects of applying SFAS No. 123 in this pro forma disclosure are not
indicative of future amounts. The Company's adoption of SFAS No. 123 for
pro forma disclosure purposes does not apply to awards prior to 1995, and
additional awards in future years are anticipated.
Recent accounting developments
In June 1998, the Financial Accounting Standards Board (FASB) issued
Statement of Financial Accounting Standards (SFAS) No. 133, Accounting of
Derivative Instruments and Hedging Activities. SFAS No. 133 requires that
all derivatives be recorded on the balance sheets at their fair value.
Changes in fair value are recorded each period in current earnings or
other comprehensive income, depending on whether a derivative is designed
as part of a hedge transaction and, if it is, the type of hedge
transaction. The impact on the Company's consolidation results of
operations, financial position or cash flow will be dependent on the level
and types of derivative instruments the Company will have entered into at
the time SFAS No. 133 is implemented.
In June 1999, FASB issued an Exposure Draft to defer the effective date of
SFAS No. 133 to all fiscal quarters of all fiscal years beginning after
June 15, 2000. As a result, the standard will be adopted by the Company in
fiscal 2001.
p47
corporate [GRAPHIC OMITTED]
information
OFFICERS AND
SENIOR MANAGEMENT
Jeremy N. Kendall *
Chairman and Chief Executive Officer
John D. Taylor *
President and Chief Operating Officer
Cyril A. Ing *(2)
Corporate Secretary
Allan Routh *
President - SunRich Food Group, Inc.
Leslie N. Markow, C.A.
Vice President, Finance and Chief Financial Officer
Larry (Andy) Anderson, C.P.A. *
Chief Financial Officer - Northern Food & Dairy, Inc.
Dennis Anderson *
Executive Vice President of Operations - SunRich Food Group, Inc.
David Kruse, C.M.A.
Vice President and Chief Operating Officer - BEI/PECAL
DIRECTORS
Phillip D. E. Bergqvist (2)
Past Chairman - Eucalyptus Pulp Mills PLC
Joseph Riz (1)
Managing Director - Tricapital Management Limited
James K. Rifenbergh
Chairman Emeritus - Brown Printing Company
Michael M. Boyd (1)
Managing Director - Merchant Banking - HSBC Capital (Canada) Inc.
Katrina Houde (1)
Independent Consultant
(*) Directors
(1) Members of Audit Committee
(2) Members of Compensation Committee
OFFICES
Corporate Head Office and Steam
Explosion Technology Group
2838 Highway 7
Norval, Ontario Canada L0P 1K0
ph: (905) 455 1990
fx: (905) 455 2529
email: info@staketech.com
www.staketech.com
Environmental Industrial Group
407 Parkside Drive
Waterdown, Ontario
Canada L0R 2H0
ph: (905) 689 6661
fx: (905) 689 0485
email: info@bei.ca
www.bei.ca
SunRich Food Group, Inc.
3824 - 93rd Street S.W.
Hope, Minnesota, 56046-0128 USA
ph: (507) 451 3316
fx: (507) 451 2910
email: info@sunrich.com
www.sunrich.com
TRANSFER AGENT
American Stock Transfer Co.
40 Wall Street, 46th Floor
New York, NY, USA 10005
ph: 1 800 937 5449
CORPORATE LEGAL COUNSEL
Dunnington, Bartholow & Miller
New York, NY
Lafleur Brown
Toronto, Ontario
AUDITORS
PricewaterhouseCoopers LLP
Mississauga, Ontario
SHAREHOLDER COMMUNICATIONS
Copies of Stake's Annual Report, Form 10-KSB and other SEC filing are available
on the Company website www.staketech.com. Paper copies are available without
charge.
Please contact:
Stephanie King / Linda Latman
The Equity Group Inc.
800 Third Avenue, 36th Floor
New York, NY 10022
ph: (212) 836 9611
fx: (212) 421 1278
email: sking@equityny.com
llatman@equityny.com
Listed on Nasdaq as STKL
p48
Except for the historical information herein, the matters discussed in this
Annual Report include forward looking statements that may involve a number of
risks and uncertainties. Future results may vary significantly based on a number
of factors, including, but not limited to, risks in market acceptance of new
products or technology, continuing product demand, the impact of competitive
products and pricing, changing economic condition, and other risk factors
detailed in the Company's December 31, 2000 10-KSB and other filings with the
Securities and Exchange Commission.
Printed in Canada
Designed & produced by Stratagem Marketing & Design o www.stratagem.on.ca
Stake Technology Ltd.
2838 Highway 7
Norval, Ontario
Canada L0P 1K0
ph: (905) 455 1990
fx: (905) 455 2529
email: info@staketech.com
www.staketech.com
Nasdaq Listed - STKL