DRIVIN G ROWTH - Dr. Reddy's

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notes to financial statements
1.SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
This summary of significant accounting policies of Reddy US Therapeutics, Inc. (the Company) is presented to assist in understanding
the Company’s financial statements. The financial statements and notes are representations of the Company’s management who is
responsible for the integrity and objectivity of the financial statements. These accounting policies conform to generally accepted
accounting principles and have been consistently applied in the preparation of the financial statements.
Organisation and basis of presentation
The Company was incorporated in the State of Georgia on November 9, 1999. The Company is a subsidiary of Reddy Antilles N.V.,
a subsidiary of Dr. Reddy Laboratories Ltd. which owns 8,500,000 of the 9,500,000 shares of common stock outstanding as of
March 31, 2002. The Company was established in order to discover and develop novel pharmaceuticals to be sold or licensed. The
Company commenced operations in 2000.
Concentrations
The Company is a subsidiary of Dr. Reddy Laboratories Ltd. The company derives all of its income, exclusive of interest, from a
Research Agreement with Dr. Reddy Research Foundation, an affiliate of the Company’s parent. The current Research Agreement
commenced on June 14, 2001 and is effective for a term of five years. The agreement may be cancelled by either party for cause,
upon 180 days notice.
Cash and cash equivalents
The Company maintains cash balances at a large banking institution, where accounts are insured by the Federal Deposit Insurance
Corporation up to US$ 100,000. At March 31, 2002 the bank balances exceeded the insured amount by US$ 1,450,000.
For the purposes of the statement of cash flows, the Company considers all highly liquid debt financial instruments with maturity
of three months or less to be cash equivalents. Cash equivalents are short-term, extremely liquid investments that are both readily
convertible to known amounts and so near maturity that they present only a small risk of change in value because of short-term
changes in interest rates. The carrying value approximates fair value because of the short-term maturity on these financial
instruments.
Revenues and research and development costs
Revenues related to cost reimbursement provisions under the development contract are recognised as the costs associated with the
projects are incurred. Research and development costs are expensed as incurred. Research and development costs were
$ 2,132,041 for the year ended March 31, 2002 and $ 395,538 for the three months ended March 31, 2001.
Income taxes
Income taxes are provided for the tax effects of transactions reported in the financial statements and consist of taxes currently due
plus deferred taxes related primarily to differences between the bases of property and for financial and income tax reporting. The
deferred tax assets and liabilities represent the future tax return consequences of those differences, which will either be taxable or
deductible when the assets and liabilities are recovered or settled. Deferred taxes also are recognised for operating losses that are
available to offset future federal income taxes. A valuation allowance is provided for the amount of deferred tax assets, based on
available evidence are not expected to be realised.
Depreciation
The Company’s property and equipment are stated at cost and are depreciated using primarily the straight-line method.
Use of estimates
The preparation of financial statements in conformity with generally accepted accounting principles requires management to make
estimates and assumptions that affect certain reported amounts and disclosures. Accordingly actual results could differ from those
estimates.
REDDY US THERAPEUTICS, INC. | FINANCIALS | ANNUAL REPORT 2001-2002