Forbes Medi-Tech announces Financial Results for the Year ended December 31, 2002 and First Quarter ended March 31, 2003

Meets 2002 Revenue Guidance; First Quarter Revenues up 37%

Vancouver, Canada -- Forbes Medi Tech Inc. (TSE:FMI; NASDAQ:FMTI) today announced its financial results for the year ended December 31, 2002 and for the first quarter ended March 31, 2003. In 2001, the Company changed its year-end from July 31 to December 31. Comparative periods for these statements are the twelve months ended December 31, 2002 compared to the five months ended December 31, 2001 and the three months ended March 31, 2002 compared to the three months ended March 31, 2003. All amounts are in Canadian Dollars unless otherwise noted. The Company is also proposing an increase to authorized capital and extension of its shareholder rights plan.

Fiscal Year 2002 Highlights

- Forbes, together with the Phyto-Source joint venture, secured sterols supply agreements for up to US$26 million over two years

- Reported improved net loss of $0.19 per share for the year ended December 31, 2002 from net loss of $0.30 per share for the five months ended December 31, 2001, and net loss of $0.93 per share for the year ended July 31, 2001

- Reported total revenue of $8.0 million for year ended December 31, 2002 compared to $7.9 million for year ended July 31, 2001 and $3.9 million for the five months ended December 31, 2001

- Settled the Master License Agreement with Novartis re-acquiring Reducol(tm) rights resulting in a one-time net gain of $6.0 million

- Successfully completed European Phase I clinical trial of Company's cholesterol lowering pharmaceutical, FM-VP4

- Received approval to initiate FM-VP4 Phase II clinical trial in Europe

- Reported successful clinical results on Forbes' "designer" cooking oil which showed potential weight loss and cholesterol lowering properties

- Sold the Amqui pilot plant for staged payments of $1.6 million

First Quarter 2003 Highlights

- Improved cash balance from $0.4 million as at December 31, 2002 to $1.1 million as at March 31, 2003

- Reported net income of $0.01 per share for the first quarter of 2003 compared with net loss of $0.10 per share for the first quarter 2002

- Increased revenues to $3.4 million in the first quarter of 2003 compared to $2.4 million in the first quarter of 2002

- Began shipments under major sterols agreement announced in September 2002

- Announced excellent safety profile from Phase I study on FM-VP4

- Commenced the dosing phase of the FM-VP4 Phase II clinical trial

- FDA issued health claim letter to Forbes allowing Forbes to advertise the heart-health benefits of Reducol(tm)

- Extended contract agreement with Pharmavite for the sale of

Reducol(tm)

"The initiatives taken in this past year have significantly reshaped the Company and improved its future outlook", says Charles Butt, President and CEO of Forbes Medi-Tech Inc. "I am pleased with the Company's achievements of completing key milestones in both 2002 and the first quarter of 2003. The improvement in the Company's financial position and the progress of its cholesterol-lowering pharmaceutical, FM-VP4, are testament to Forbes' perseverance and determination," said Butt.

Outlook

Based on existing sales contracts, and assuming that forecasted supply requirements will be ordered and shipped, the Company maintains its revenue guidance for 2003 for a total revenue of $12 million (US$8 million). This figure represents the Company's share of the $20 million projected revenue of the combined sales contracts of the Company and the Phyto-Source joint venture. The Company is currently in discussions with several other companies regarding possible new major sterol contracts and will review its revenue guidance throughout the year if significant supply agreements are signed.

Based on supply forecasts provided by customers pursuant to current supply agreements, other receivables, projected expenditure levels, and the recently announced divestiture of the Company's AD/ADD business (see the Company's press release dated April 29, 2003), Forbes believes it will have sufficient capital to operate and fund its core development projects through the end of 2003, however, due to cash flow timing, the Company may need to finance its receivables on an interim basis during the year. The Company is also continuing to look at various financing opportunities to further develop its pipeline of products, retire its commitments to Novartis and its convertible debenture, and to provide alternate sources of funding in the event that expenditures or receivables are not realized as planned. It will also be necessary for the Company to seek additional financing during 2003 to meet expenditures of continuing research and development work in 2004, to improve the Company's working capital position and to minimize risks to its operations.

Pharmaceutical Research

Forbes' pharmaceutical research program is targeting a $21 billion dollar market opportunity. In pursuing this market, Forbes is dedicated to the development of a novel therapeutic and cholesterol transport inhibitor, FM-VP4. Forbes completed a significant milestone this past year as FM-VP4 transcended from Phase I of its clinical trial program in Europe to Phase II. In January 2003, the Company announced the results of the Phase I clinical trials which reported the excellent safety profile of FM-VP4 and later announced the commencement of dosing for the Phase II trial. The development team at Forbes has worked diligently on this compound and is pleased with the initial results. The Company is currently developing a strategic partnership strategy based on preclinical and Phase I data to secure a strategic partner for the further development of FM-VP4. The Phase II trial, to date, has not experienced any significant events that would preclude the Company from continuing the clinical study.

Forbes continues its research towards development of new and innovative compounds. The FM-VPx Library of Compounds represents the next phase in clinical development for the Company. Forbes anticipates exploring cardiovascular and related indications of the FM-VPx Library including:

cholesterol and triglyceride-lowering; HDL (or good cholesterol) increasing; anti-obesity; anti-diabetic; and anti-inflammatory.

With anticipated funding from nutraceutical sales, the divestiture of AD/ADD, and additional new financing, the Company intends to focus on future development of FM-VPx Library compounds.

Nutraceutical Business

Sales of Forbes' sterols-based products have exceeded first quarter expectations. Shipments in early 2003, under the major sterols agreement announced in September 2002, allowed the Company to report strong sales figures. The Phyto-source plant in Pasadena, Texas, where the phytosterols are processed is currently operating at 80 percent of its annual capacity of 1,000 tonnes. One of the Company's key customers, Pharmavite LLC of Northridge, California has experienced a significant increase in sales of its Nature Made(r)

Cholest-Off(tm) (containing Reducol(tm)), based on the launch of a media and advertising campaign across the US.

Financial Results (000's of Cdn $)

--------------------------------------------------------------------

1st Qtr. 1st Qtr. 4th Qtr. Year 5 mos.

ended ended ended ended ended

Summary 03-31-03 03-31-02 12-31-02 12-31-02 12-31-01

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Phytosterol revenues $ 3,384 $ 2,366 $ 1,540 $ 7,793 $ 3,673

Total revenues 3,384 2,419 1,595 7,980 3,885

Total expenses (3,241) (4,530) (3,481) (17,008) (9,044)

Other income (expenses) - - (1,197) 4,908 -

--------------------------------------------------------------------

Net income (loss) $ 143 $(2,111) $(3,083) $(4,120) $(6,461)

Basic income (loss)

per share $ 0.01 $ (0.10) $ (0.14) $ (0.19) $ (0.30)

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Net income/(loss) - For the fiscal year ended December 31, 2002, the Company reported a net loss of $4.1 million ($0.19 per share) compared with a net loss of $6.5 million ($0.30 per share) for the five months ended December 31, 2001, and a net loss of $19.7 million ($0.93 per share) for the year ended July 31, 2001. Contributing to the reduced loss for the year ended December 31, 2002 of $4.1 million was a one-time net gain of $6.0 million realized on the settlement of the Reducol(tm) licensing agreement with Novartis (as discussed in the Company's June 25, 2002 news release). This gain was offset by a write-down of the Company's laboratory leaseholds and assets in the amount of $1.1 million. Reductions in general and administrative

(G&A) expenses and research and development (R&D) expenses also contributed to the improvement.

For the first quarter ended March 31, 2003, the Company reported net income of $0.1 million ($0.01 per share) compared with a net loss of $2.1 million ($0.10 per share) for the first quarter ended March 31, 2002 and compared to a net loss of $3.1 million ($0.14 per share) for the fourth quarter ended December 31, 2002. The net income resulted primarily due to (i) the Company's share of the increase in sales by the Phyto-Source joint venture as shipments under Phyto-Source's major sterols agreement commenced, (ii) continuing curtailments in the areas of administrative and non-core R&D expenditures, and (iii) the receipt of Quebec provincial investment tax credits in the amount of $0.6 million.

Revenues - For the fiscal year ended December 31, 2002 total revenues, including interest income were $8.0 million compared with $3.9 million for the five months ended December 31, 2001 and $7.9 million for the year ended July 31, 2001. Phytosterol sales for the fiscal year ended December 31, 2002 totaled $6.9 million, compared with $2.8 million for the five months ended December 31, 2001, and $3.7 million for the fiscal year ended July 31, 2001. Increased sales in the year ended December 31, 2002 and the five-month period ended December 31, 2001 is primarily as a result of the Company's share of sales of non-branded sterols from the Phyto-Source joint venture.

For the quarter ended March 31, 2003, total revenues, including interest income, were $3.4 million, compared with $2.4 million for the first quarter ended March 31, 2002 and $1.6 million for the fourth quarter ended December 31, 2002. Revenues for the quarter ended March 31, 2003 were primarily from the Company's share of sales under Phyto-Source's major sterols supply agreement announced in September 2002.

Liquidity & Capital Resources

Cash, cash equivalents and Working Capital - As at December 31, 2002, the Company's net cash and cash equivalents and short-term investments were $0.4 million compared with $6.7 million as at December 31, 2001. The Company reported a working capital deficit of $3.5 million at December 31, 2002 compared with working capital of $6.0 million at December 31, 2001. Included in the working capital deficit for the year ended 2002 are $3.2 million of royalties payable to Novartis and a $1.0 million convertible debenture due by the end of 2003. Excluding such royalties and debenture, the Company's working capital was $0.7 million.

As at March 31, 2003, the Company's net cash and cash equivalents were $1.1 million compared with $0.4 million as at December 31, 2002. The Company's working capital deficit at March 31, 2003 improved to $2.3 million from a working capital deficit at December 31, 2002, of $3.5 million due to a reduction in accounts payable and increased revenues. Excluding royalties payable to Novartis of US$2.0 million and a $1.0 million convertible debenture due by the end of 2003, working capital at March 31, 2003 was $1.6 million.

Operations - In the fiscal year 2002, cash used in operating activities was $3.8 million compared to $6.2 million in the five-month period ended December 31, 2001. The decrease in cash used primarily reflect the Company's downsized operations and the decrease in Forbes' net loss for the year ended December 31, 2002. Net changes in non-cash working capital items provided cash of $3.9 million compared to a use of cash of $1.0 million in the five-month period ended December 31, 2001.

In the first quarter of 2003, $0.9 million of cash was provided through operating activities compared with $3.9 million of cash used in operating activities in the first quarter of 2002. This improvement is primarily a result of the increase in phytosterols sales during the period, receipt of deferred revenues under the Pharmavite agreement and reduction of inventories and accounts receivable.

Investing Activities - In the fiscal year 2002, investing activities used $1.4 million in net cash compared with cash provided of $4.1 million for the five-month period ended December 31, 2001. The use of cash in investing activities in 2002 included addition of property, plant & equipment of $1.6 million relating to the completion of the Phyto-Source joint venture manufacturing facility near Houston, Texas, and further capital contributions of $1.2 million investment in the joint venture. Cash provided in the five-month period ended December 31, 2001 and the year ended July 31, 2001 was due mainly to proceeds from short-term investments used to fund on-going operations.

In the first quarter of 2003, investing activities used $0.1 million of cash mainly in the acquisition of capital assets of the Phyto-Source manufacturing plant compared with cash provided of $0.5 million in the first quarter 2002, a result primarily of proceeds from short-term investments.

Financing Activities - In the year ended December 31, 2002, net cash of $1.1 million was provided by two private placements. In 2002, the Company, through a private placement, issued 324,861 units at $0.65 per unit for net cash proceeds of $0.2 million. Each unit consisted of one common share plus .08 of a common share purchase warrant. Each whole warrant entitled the holder to purchase one common share of the Company at $1.00 per share until March 10, 2004. In September of 2002, Forbes issued 1.5 million

special warrants at a price of $0.65 per special warrant for net cash proceeds of $0.9 million. Also in fiscal 2002, a net amount of $1.2 million of cash was used to retire a US$2.0 million demand loan owed by the Phyto-Source joint venture to an unrelated third party, and to reduce notes payable. Accordingly, net cash used in / provided by financing activities was not significant for 2002, nor was it significant for the five months ended December 31, 2001. Cash provided by financing activities was $1.3 million in the year ended July 31, 2001.

For the three months ended March 31, 2003, net cash used in financing activities was $0.2 million compared with cash used of $0.8 million for the three months ended March 31, 2002. Cash used in the first quarter ended March 31, 2003 reduced notes payable and in the first quarter of 2002, reduced notes payable and demand loans. In the first quarter ended March 31, 2003 the 1.5 million special warrants issued in 2002, were converted, at no cost to the holders, into 1.575 million common shares.

At December 31, 2002, the Company was committed to invest a balance of US$1.35 million in Phyto-Source LP towards completion and operation of the manufacturing facility. The Company also had commitments under various research and development contracts for up to $0.8 million, which includes $0.6 million related to the Phase II clinical trial in Amsterdam for FM-VP4.

Expenses

--------------------------------------------------------------------

Summary

(excluding 1st Qtr. 1st Qtr. 4th Qtr. Year 5 mos.

depreciation/ ended ended ended ended ended

amortization) 03-31-03 03-31-02 12-31-02 12-31-02 12-31-01

--------------------------------------------------------------------

Cost of sales,

marketing & product

development $ 1,952 $ 1,858 $ 1,574 $ 7,247 $ 3,880

Research & development (204) 1,044 553 3,209 2,083

General & administrative 936 1,090 755 4,245 2,126

Total expenses $ 2,684 $ 3,992 $ 2,882 $14,701 $ 8,089

On an average

monthly basis $ 895 $ 1,331 $ 961 $ 1,225 $ 1,618

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Cost of sales, marketing and development - For the year ended December 31, 2002, cost of sales, marketing and product development totaled $7.2 million compared with $3.9 million for the five-month period ended December 31, 2001 and $9.7 million for the year ended July 31, 2001. Included in fiscal

2002 was an amount of approximately $0.8 million of upscaling costs for the Company's development of the fine chemical AD/ADD.

For the three months ended March 31, 2003, cost of sales, marketing and product development were $2.0 million compared with $1.9 million for the three months ended March 31, 2002 and compared with $1.6 million for the fourth quarter ended December 31, 2002. Cost of sales, marketing and product development in the first quarter of 2003, in addition to marketing, and cost of goods sold, includes $0.4 million in manufacturing overheads

from the PhytoSource joint venture manufacturing facility and have increased due to the increased level of sales.

Research and development; General and administrative - For the year ended December 31, 2002, the Company's net research and development (R&D) expenses totaled $3.2 million, compared with $2.1 million for the five months ended December 31, 2001, and $7.1 million for the year ended July 31, 2001. In the year ended December 31, 2002, on a monthly average basis, R&D expenditures have been reduced by 35% compared to the five months ended

December 31, 2001. The reduction in R&D expenditures is partly as a result of the Company's decision to focus its core research and development on cardiovascular and, specifically, cholesterol-lowering compounds such as FM-VP4. Continuing cost-cutting measures are evident from the reduction in general and administrative expenditures (G&A), from $7.0 million in the year ended July 31, 2001 to $4.2 million in the 2002 fiscal year. On an average monthly basis, G&A costs have decreased to $0.35 million per month for the year ended December 31, 2002, from $0.43 million per month for the five-month period ended December 31, 2001 and $0.58 million per month for the year ended July 31, 2001. The reductions in administrative expenses are primarily attributable to downsized operations, resulting in lower personnel costs and such expenses as legal and travel.

For the quarter ended March 31, 2003, R&D expenses showed a recovery of $0.2 million compared to R&D expenses of $1.0 million for the first quarter ended March 31, 2002 and $0.6 million in the fourth quarter ended December 31, 2002. Included in R&D for the first quarter of 2003 is an amount of $0.6 million of Quebec investment tax credits received in respect of prior years' research activities conducted in that province. As the Company no longer has manufacturing facilities or offices in Quebec, further investment tax credits from that province, if any, are expected to be minimal. Administrative expenditures in the first quarter 2003 were $0.9 million compared to $1.1 million in the first quarter of 2002 and $0.8 million in the fourth quarter of 2002. In the first quarter of 2003, administrative expenditures have decreased to $0.31 million per month compared to $0.36 million per month in the first quarter 2002. The reductions in administrative expenses are primarily attributable to downsized operations resulting in lower personnel costs and related administrative expenses. In the fourth quarter of 2002, an expense of $0.4 million was recaptured relating to an over-accrual of tenure allowance liability reducing that expense to $0.76 million.

Increase in Authorized Capital; Extension and Amendment of Shareholder Rights Plan The Board of Directors of the Company has, subject to shareholder approval, increased the Company's authorized capital from 200,000,000 common shares and 50,000,000 preferred shares to an unlimited number of common shares and an unlimited number of preferred shares, and has approved certain amendments to the Company's Shareholder Rights Plan (the "Rights Plan").

The Company currently has outstanding 23,173,700 common shares and no preferred shares. The Company's authorized capital is being increased to bring it in line with those of many other companies incorporated under the Canada Business Corporations Act, to facilitate the operation of the Company's Shareholder Rights Plan, and to allow for flexibility for the future issuance of common shares and preferred Shares related to possible acquisitions or strategic transactions or for stock splits or stock dividends without the expense and delay of holding a special shareholders meeting to authorize additional shares when the need arises. No such events or transactions are currently contemplated, and would still, in any event, be subject to compliance with applicable corporate and securities rules, including the rules of The Toronto Stock Exchange. The increase in authorized capital will not affect the rights of the holders of currently outstanding common shares, except for effects incidental to increasing the number of common shares or preferred shares outstanding, if and when additional authorized shares are in fact issued.

The Company's Shareholder Rights Plan was initially approved by shareholders at the annual meeting of the Company held on January 11, 1999. The Rights Plan, as amended, is subject to reconfirmation by shareholders at the annual meeting of the Company scheduled to be held on May 29, 2003 at 2:00 p.m. in Vancouver, otherwise the Rights Plan will expire at such meeting. If re-confirmed, Rights Plan will remain in effect until February 8, 2008, unless terminated earlier.

"The Board of Directors amended the Rights Plan in order to take into account many of the terms of similar plans recently approved by shareholders of other Canadian companies" said Charles Butt, President and Chief Executive Officer. "Although the Company is not aware of any pending or threatened take-over of the Company, the Board of Directors has determined that re-confirmation of the amended Rights Plan would be in the best interests of the Company and its shareholders".

The amendments made to the Rights Plan include modifications to the Permitted Bid Structure as follows:

- the previous threshold requirement that any person making a Permitted Bid cannot beneficially own more than 5% of the outstanding Voting Shares has been eliminated;

- the minimum period during which a bid must be open for acceptance has been reduced from 90 to 60 days;

- partial bids for more than 50% of the outstanding Voting Shares tendered by shareholders independent of the bidder, and Competing Permitted Bids, are allowed.

Other amendments would allow a shareholder of the Company to enter into a lock up agreement with a take-over bidder without triggering the Rights Plan; amend certain definitions, including to clarify that certain persons acting for others, such as pension plans, and certain activities, such as the acquisition of shares upon the exercise of previously issue convertible securities, are, under certain circumstances, exempted from the triggering effects of the Plan; allow a holder of 20% or more of the outstanding voting shares who acquired such shares through permitted acquisitions to increase such holdings by not more than 1% without triggering the Plan; and provide the Board of Directors with further time in which to redeem Rights or waive the application of the Plan to any particular event, so as to avoid inadvertent triggering of the Rights.

Shareholders may obtain the complete text of the Rights Plan (consolidated with all amendments to date) by contacting the Corporate Secretary of the Company.

Conference Call

A conference call and webcast to discuss these financial results will be held on Tuesday, May 6, 2003 at 1:30 p.m. Pacific Time. (4:30 p.m. Eastern Time). To participate in the conference call, please dial 1-416-695-9757 or 1-877-667-7774. For those investors unable to participate in the call, the live webcast can be accessed through the Company's website at www.forbesmedi.com . The call will also be available for replay until May 26, 2003 by calling 416-252-1143 or 1-866-518-1010. The webcast link will be archived on the Forbes website afterwards.

Fiscal Year Ended December 31, 2002 and First Quarter 2003 Report This news release includes by reference the Company's audited financial statements for the fiscal year ended December 31, 2002 and the Company's unaudited financial statements for the first quarter ended March 31, 2003, including the full Management Discussion & Analysis (MD&A). The MD&A and financial statements are being filed with applicable Canadian and U.S. regulatory authorities.

About Forbes Medi-Tech Inc.

Forbes Medi-Tech Inc. is a biopharmaceutical company dedicated to the research, development and commercialization of innovative prescription pharmaceutical and nutraceutical products for the prevention and treatment of cardiovascular and related diseases. Forbes' scientific platform is based on core sterol technology. By extracting plant sterols from by-products of the forestry industry, Forbes has developed cholesterol-lowering agents for use in pharmaceutical compounds, functional foods and dietary supplements.

For more information, please contact: Darren Seed

Manager, Investor Relations

Telephone: (604) 681-8976

E-mail:

mailto:[email protected]

Patricia E. Pracher

Acting Chief Financial Officer

Telephone: (604) 689-5899

E-mail:

mailto:[email protected]

NASDAQ and the Toronto Stock Exchange have not reviewed and do not accept responsibility for the adequacy or accuracy of the content of this News Release. This News Release contains forward-looking statements concerning anticipated developments in the Company's business and projected sales volumes, revenues, capital, and other information in future periods. Forward-looking statements are frequently, but not always, identified by words such as "revenue guidance", "anticipates," "believes", "proposing", "future", "outlook", "forecasted", "new", "projected", "will", "believes", "further", "in the event that", "planned", "opportunity", "developing", "continues", "anticipates", "would allow", "would be", "will", "subject to", "due by", "possible", "expects", "intends," "estimates," "potential", and similar expressions or variations thereon, or statements that events, conditions or results "will," "may," "could" or "should" occur or be achieved. Forward-looking statements are statements about the future and are inherently uncertain, and actual achievements of the Company and other results and occurrences may differ materially from those reflected in the forward-looking statements due to a variety of risks, uncertainties and other factors, including, without limitation, the ability to secure new contracts; the need for performance of buyers; the ability of buyers to complete sales and fulfill their contractual obligations; uncertainty as to whether the Company's anticipated sales volumes, revenues, and expenditure levels will be achieved as currently anticipated or at all; the risk of technical obsolescence, the need for regulatory approval, which may be withdrawn or not be obtained in a timely manner or at all; the need for clinical trials and further testing, the occurrence and success of which cannot be assured; intellectual property risks; marketing/manufacturing and partnership/strategic alliance risks; product liability risk; the effect of competition; the uncertainty of the size and existence of a market opportunity for the Company's products; the Company's need for additional future capital, which may not be available in a timely manner or at all; exchange rate fluctuations; government regulation; the ability of buyers to fulfill health claims of their products; the ability to obtain shareholder approval; the availability of future tax credits; and other risks and uncertainties affecting the Company and its business, as contained in news releases and filings with the United States Securities and Exchange Commission and Canadian Securities Regulatory Authorities, any of which could cause actual results to vary materially from current results or the Company's anticipated future results. Forward-looking statements are based on the beliefs, opinions and expectation of the Company's management at the time they are made, and the Company does not assume any obligation to update its forward-looking statement if those beliefs, opinions or expectations or other circumstances should change.

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Summary Consolidated Balance Sheet

(expressed in 000's of Canadian dollars)

As at As at As at

Mar 31,2003 Dec 31,2002 Dec 31,2001

--------------------------------------------------------------------

Current Assets

Cash and cash equivalents $ 1,070 $ 413 $ 6,693

Inventories 399 952 3,415

Receivables and other 4,674 4,727 4,415

------- ------- -------

$ 6,143 $ 6,092 $14,523

Long-term assets

Property, plant and equipment 11,876 11,932 14,305

Intangible and other assets 8,641 9,393 11,156

------- ------- -------

Total Assets $26,660 $27,417 $39,984

======= ======= =======

Current Liabilities

Accounts payable and

accrued liabilities $ 3,865 $ 4,740 $ 5,215

Deferred revenues and

royalties payable 3,046 3,155 1,625

Demand loans - - 1,593

Current portion of long-term debt 1,498 1,691 133

------- ------- -------

Total Current Liabilities 8,409 9,586 8,566

Long-term Liabilities

Deferred revenues 264 - 9,173

Long-term debt 186 217 1,353

Tenure allowance 614 614 878

------- ------- -------

9,473 10,417 19,970

Shareholders' Equity

Share capital 72,389 71,472 71,273

Special warrants - 887 -

Contributed surplus 34 20 -

Deficit (55,236) (55,379) (51,259)

------- ------- -------

Total Liabilities and

Shareholders' Equity $26,660 $27,417 $39,984

====================================================================

--------------------------------------------------------------------

Summary Consolidated Statement of Operations

(expressed in 000's of Canadian dollars)

Q1 ended Q1 ended Year ended Year ended

03/31/03 03/31/02 12/31/02 12/31/02

(3 mths) (3 mths) (12 mths) (5 mths)

--------------------------------------------------------------------

Revenues

Sales $ 3,347 $ 1,895 $ 6,852 $ 2,770

Licensing 37 471 941 903

-------- -------- -------- --------

Phytosterol revenues 3,384 2,366 7,793 3,673

Interest and other - 53 187 212

-------- -------- -------- --------

3,384 2,419 7,980 3,885

Expenses

Research and development (204) 1,044 3,209 2,083

Cost of sales, marketing and

product development 1,952 1,858 7,247 3,880

General and administrative 936 1,090 4,245 2,126

Depreciation and amortization 557 538 2,307 955

-------- -------- -------- --------

3,241 4,530 17,008 9,044

Gain on settlement of licensing

arrangements - - (6,044) -

Write-down of leaseholds and

assets - - 1,136 -

Write-down of pilot facility - - - 1,302

Net income (loss)

-------- -------- -------- --------

for the period $ 143 $ (2,111) $ (4,120) $ (6,461)

Deficit, beginning of period (55,379) (51,259) (51,259) (44,798)

-------- -------- -------- --------

Deficit, end of period $(55,236) $(53,370) $(55,379) $(51,259)

======== ======== ======== ======== Basic income (loss)

per common share $ 0.01 $ (0.10) $ (0.19) $ (0.30)

======== ======== ======== ========

Weighted average number of

common shares outstanding 21,840 21,225 21,766 21,225

====================================================================

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Summary Consolidated Statement of Cash Flows

(expressed in 000's of Canadian dollars)

Q1 ended Q1 ended Year ended Year ended

03/31/03 03/31/02 12/31/02 12/31/02

(3 mths) (3 mths) (12 mths) (5 mths)

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OPERATIONS

Net Income (Loss) for

the period $ 143 $ (2,111) $ (4,120) $ (6,461)

Adjustment to reconcile

net income (loss) to cash

flow provided by operations:

Depreciation and

amortization 557 538 2,307 955

Amortization of deferred

license revenues (37) (471) (941) (903)

Gain on settlement of

licensing arrangements - - (6,044) -

Gain on disposal of

pilot facility - - (63) -

Gain on sale of investment

in joint venture - - - (167)

Loss on disposal of fixed assets - - 31 -

Write-down of leaseholds

and assets - - 1,136 -

Write-down of pilot facility - - - 1,302

Foreign exchange

translation gain (20) - - -

Stock-based

compensation expense 14 - 20 -

Changes in:

Accounts receivable 368 (452) (106) (1,658)

Inventories 553 233 2,463 1,477

Prepaid expenses and deposits (207) 28 804 (86)

Accounts payable and

accrued liabilities (875) (1,708) 837 (799)

Royalties payable (43)

Increase (decrease) in

tenure allowance in

excess of amounts funded 12 51 (233) 104

Deferred revenues 452 - - -

Other - - 95 -

-------- -------- -------- --------

917 (3,892) (3,814) (6,236)

INVESTMENTS

Acquisition of capital assets (180) (447) (1,566) (2,142)

Acquisition of

intangible & other assets - - - (3,315)

Investment in joint venture

(net of cash received) - - (1,222) -

Disposal of investment

in joint venture - - - 200

Proceeds on disposal

of pilot plant 26 - 385 -

Proceeds on disposal of

capital assets 65 - 22 185

Short-term investments - 983 983 9,155

-------- -------- -------- --------

(89) 536 (1,398) 4,083

FINANCING

Issuance of common shares 30 - 199 12

Issuance of special warrants - - 887 -

Repayment of notes payable (201) (32) 422 (51)

Demand loans - (796) (1,593) 63

-------- -------- -------- --------

(171) (828) (85) 24

Increase (decrease) in cash

and cash equivalents 657 (4,184) (5,297) (2,129)

Cash and cash equivalents,

beginning of period 413 5,710 5,710 7,839

-------- -------- -------- -------- Cash and cash equivalents,

end of period $ 1,070 $ 1,526 $ 413 $ 5,710

====================================================================

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