Warnex Inc.
TSX : WNX

Warnex Inc.

November 13, 2009 08:30 ET

Warnex Reports Third Quarter 2009 Results

LAVAL, QUEBEC--(Marketwire - Nov. 13, 2009) - Warnex Inc. (TSX:WNX) announced today financial results for the third quarter ended September 30, 2009.

Operating Highlights

- Signed an exclusive distribution agreement with Rosetta Genomics to offer Rosetta Genomics's microRNA-based assays in Canada

- Launched test for influenza A H1N1 virus mutation associated with resistance to Tamiflu®

- Signed a distribution agreement with Biron-Laboratoire medical to promote and distribute Warnex's test for the influenza A H1N1 virus, specifically targeting industrial companies

"Our year-to-date revenues of $17.6 million are slightly below last year due to reduced volume in our Bioanalytical division. We have had an unprecedented number of cancellations and postponements of bioanalytical projects in the third quarter, which are a testament to the economic and industry conditions experienced during the summer months. The industry seems to be returning to more normal levels for the last quarter and our business development efforts are ongoing to increase our business from new and existing customers," said Mark Busgang, President and CEO of Warnex. "In addition, we are preparing for the potential outbreak of the pandemic influenza A H1N1 virus. Our test, which provides rapid turnaround times, can assist healthcare professionals in diagnosing their patients faster. We are also pleased to collaborate with Biron to offer this testing service to industrial companies, allowing them to rapidly take appropriate action to limit the spread of infection in their workforce."

Financial Results

Consolidated revenue for the three-month period ended September 30, 2009, amounted to $4.7 million compared to $6.7 million during the same period a year ago, a decrease of 30%. For the nine-month period ended September 30, 2009, revenue reached $17.6 million from $18.7 million for the same period in 2008.

Net loss for the quarter amounted to $0.8 million or $0.01 per share compared to net earnings of $0.5 million or $0.01 per share for the same quarter in 2008. For the nine-month period ended September 30, 2009, net loss totalled $26,700 or $0.00 per share compared to net earnings of $1.7 million or $0.03 per share in 2008, which included a gain on extinguishment of debt of $1.8 million.

Earnings before interest, taxes, depreciation and amortization (EBITDA) for the quarter amounted to $(0.4) million versus $1.4 million for the same quarter last year. For the nine-month period ended September 30, 2009, EBITDA amounted to $1.5 million compared to $2.1 million in 2008.

Gross margins for the three-month period ended September 30, 2009, amounted to $0.4 million or 9% of sales compared to $2.3 million or 35% of sales for the same quarter last year. The decrease of $1.9 million in gross margin is mainly explained by the lower revenue in the Bioanalytical division compared to the same quarter last year. Gross margin for the nine-month period ended September 30, 2009, amounted to $4.5 million or 26% of sales compared to $5.2 million or 28% of sales in 2008, a decrease of $0.7 million.

Selling and administrative expenses amounted to $1.3 million for the three-month period ended September 30, 2009, compared to $1.2 million last year. The increase of $0.1 million is mainly explained by a loss on foreign exchange due to the strength of the Canadian dollar compared to the U.S dollar, the cost of options and an increased investment in business development. In proportion of revenue, administrative and selling expenses were higher than last year at 28% in 2009 (2008 - 18%). For the nine-month period ended September 30, 2009, selling and administrative expenses amounted to $4.3 million compared to $4.0 million for the same period in 2008.

Financial expenses for the quarter were similar to last year at $0.3 million. For the nine-month period ended September 30, 2009, financial expenses amounted to $0.9 million (2008 - $1.0 million).

About Warnex

Warnex (www.warnex.ca) is a life sciences company devoted to protecting public health by providing laboratory services to the pharmaceutical and healthcare sectors. Warnex Analytical Services provides pharmaceutical and biotechnology companies with a variety of quality control services, including chemistry, chromatography, microbiology, method development and validation, and stability studies. Warnex Bioanalytical Services specializes in bioequivalence and bioavailability studies for clinical trials. Warnex Medical Laboratories provides specialized testing for the healthcare industry as well as pharmaceutical and central laboratory services. Warnex PRO-DNA Services offers DNA identification tests for paternity, maternity and other family relationships, as well as for immigration and forensic testing purposes. Warnex has three facilities located in Laval and Blainville, Quebec, and Thunder Bay, Ontario.

CAUTION REGARDING FORWARD-LOOKING STATEMENTS

Certain statements contained in this news release are forward-looking and are subject to numerous risks and uncertainties, known and unknown. For information identifying known risks and uncertainties, relating to financial resources, government regulations, laboratory facilities, suppliers, employees, key customers and business partners, foreign currency risk, credit risk, liquidity risk, volatility of share price, and other important factors that could cause actual results to differ materially from those anticipated in the forward-looking statements, please refer to the heading Risks and Uncertainties in Warnex's most recent Management's Discussion and Analysis, which can be found at www.sedar.com. Consequently, actual results may differ materially from the anticipated results expressed in these forward-looking statements.



Interim Consolidated Balance Sheets
(Unaudited)

September 30 December 31
2009 2008
------------------------------------------------------------------------
------------------------------------------------------------------------
Assets
Current
Cash and cash equivalents $1,375,294 $2,433,488
Accounts receivable 2,771,662 3,967,918
Work-in-progress - 1,356,149
Inventory 145,581 121,701
Investment tax credits receivable 237,471 186,249
Prepaid expenses 448,149 306,238
------------------------------------------------------------------------
------------------------------------------------------------------------
4,978,157 8,371,743

Future income taxes 1,221,000 750,000
Property, plant and equipment 7,719,655 8,309,317
Intangible assets 368,327 243,291
Goodwill 937,695 937,695
------------------------------------------------------------------------

$15,224,834 $18,612,046
------------------------------------------------------------------------
------------------------------------------------------------------------
Liabilities
Current
Accounts payable $2,279,455 $3,860,615
Deferred revenue 351,080 1,358,586
Current portion of long-term debt 1,338,300 1,267,184
------------------------------------------------------------------------
3,968,835 6,486,385

Long-term debt 1,231,317 1,872,557
Liability component of debentures 6,300,354 6,952,881
------------------------------------------------------------------------
11,500,506 15,311,823
------------------------------------------------------------------------
------------------------------------------------------------------------

Shareholders' equity
Capital stock 40,981,049 40,551,049
Equity component of debentures 312,288 312,288
Contributed surplus 2,465,848 2,445,043
Deficit (40,034,857) (40,008,157)
------------------------------------------------------------------------
3,724,328 3,300,223
------------------------------------------------------------------------
------------------------------------------------------------------------
$15,224,834 $18,612,046
------------------------------------------------------------------------
------------------------------------------------------------------------



Interim Consolidated Statements of Contributed Surplus
(Unaudited)

Three months ended Nine months ended
September 30 September 30
2009 2008 2009 2008
------------------------------------------------------------------------
------------------------------------------------------------------------
Balance, beginning
of period $ 2,465,635 $ 2,548,143 $ 2,445,043 $ 1,210,708
Transfer of
the equity
component
of debentures
extinguished
during the period - - - 1,428,114
Stock-based
compensation 213 (104,995) 20,805 (195,674)
------------------------------------------------------------------------
Balance,
end of period $ 2,465,848 $ 2,443,148 $ 2,465,848 $ 2,443,148
------------------------------------------------------------------------
------------------------------------------------------------------------



Interim Consolidated Statements of Deficit
(Unaudited)

Three months ended
September 30
2009 2008
------------------------------------------------------------
------------------------------------------------------------
Balance, beginning
of period $(39,252,060) $(41,147,119)
Net earnings (loss) (782,797) 511,610
------------------------------------------------------------
Balance, end of period $(40,034,857) $(40,635,509)
------------------------------------------------------------
------------------------------------------------------------

Nine months ended
September 30
2009 2008
------------------------------------------------------------
------------------------------------------------------------
Balance, beginning
of period $(40,008,157) $(42,381,214)
Net earnings
(loss) (26,700) 1,745,705
------------------------------------------------------------
Balance, end of period $(40,034,857) $(40,635,509)
------------------------------------------------------------
------------------------------------------------------------



Consolidated Statements of Accumulated Other Comprehensive Income
(Unaudited)

Three months ended Nine months ended
September 30 September 30
2009 2008 2009 2008
-------------------------------------------------------------------------
-------------------------------------------------------------------------
Accumulated
Other Comprehensive Income $- $- $- $-
-------------------------------------------------------------------------
-------------------------------------------------------------------------



Interim Consolidated Statements of Earnings and Comprehensive Income
(Unaudited)

Three months ended Nine months ended
September 30 September 30

2009 2008 2009 2008
-------------------------------------------------------------------------
-------------------------------------------------------------------------
Revenue $4,656,405 $6,669,833 $17,635,534 $18,669,822
Cost of goods
sold 4,257,685 4,352,157 13,126,804 13,429,038
-------------------------------------------------------------------------
Gross margin 398,720 2,317,676 4,508,730 5,240,784
-------------------------------------------------------------------------
-------------------------------------------------------------------------
Operating expenses
Selling, general
and administrative 1,323,933 1,221,500 4,286,844 4,044,939
Finance charges 278,259 280,863 902,284 960,629
Research and
development tax
credits (51,222) - (51,222) -
-------------------------------------------------------------------------
1,550,970 1,502,363 5,137,906 5,005,568
-------------------------------------------------------------------------
-------------------------------------------------------------------------
Earnings (loss)
before under
noted items
and income taxes (1,152,250) 815,313 (629,176) 235,216
-------------------------------------------------------------------------
-------------------------------------------------------------------------
Unrealized foreign
exchange gain (loss)
on debentures 369,453 (303,703) 602,476 (303,703)
Gain on extinguishment
of debt - - - 1,814,192
-------------------------------------------------------------------------
369,453 (303,703) 602,476 1,510,489
-------------------------------------------------------------------------
-------------------------------------------------------------------------
Earnings (loss)
before income
taxes (782,797) 511,610 (26,700) 1,745,705
-------------------------------------------------------------------------
-------------------------------------------------------------------------
Income taxes
recovered (225,000) - - -

Recovery of income
taxes due
to utilization
of prior
years' losses 225,000 - - -
-------------------------------------------------------------------------
- - - -
-------------------------------------------------------------------------
-------------------------------------------------------------------------
Net earnings
(loss) and
comprehensive
income $(782,797) $511,610 $(26,700) $1,745,705
-------------------------------------------------------------------------
-------------------------------------------------------------------------
Basic net earnings
(loss) per share $(0.01) $0.01 $0.00 $0.03
-------------------------------------------------------------------------
-------------------------------------------------------------------------
Fully diluted net
earnings (loss)
per share $(0.01) $0.01 $0.00 $0.03
-------------------------------------------------------------------------
-------------------------------------------------------------------------
Weighted average
number of
shares outstanding 66,683,858 64,317,191 65,227,191 58,135,533
-------------------------------------------------------------------------
-------------------------------------------------------------------------
Weighted average
number of fully
diluted shares
outstanding 72,913,853 64,317,191 72,913,853 58,135,533
-------------------------------------------------------------------------
-------------------------------------------------------------------------



Interim Consolidated Statements of Cash Flows
(Unaudited)

Three months ended Nine months ended
September 30 September 30
2009 2008 2009 2008
------------------------------------------------------------------------
------------------------------------------------------------------------
Operations
Net earnings (loss) $ (782,797) $ 511,610 $ (26,700) $ 1,745,705
Items not affecting
cash:
Amortization of
property, plant
and equipment 408,888 381,716 1,180,297 1,099,109
Amortization of
intangible assets 23,049 14,972 56,011 44,532
Loss on disposal
of property, plant
and equipment - - - 1,054
Accretion of interest 24,398 21,130 69,949 178,899
Unrealized foreign
exchange loss (gain)
on debentures (369,453) 303,703 (602,476) 303,703
Gain on extinguishment
of debt - - - (1,814,192)
Foreign currency
fluctuation 82,912 (23,461) 223,945 (68,793)
Compensation cost
for stock options 213 (104,995) 20,805 (195,674)
------------------------------------------------------------------------
(612,790) 1,104,675 921,831 1,294,343
Net change in
non-cash working
capital items 68,227 289,173 (735,073) 812,232
------------------------------------------------------------------------
Net cash provided by
(used in) operations (544,563) 1,393,848 186,758 2,106,575
------------------------------------------------------------------------
------------------------------------------------------------------------
Investing activities
Decrease in long-term
receivables - 125,000 - 125,000
Acquisition of property,
plant and equipment (66,934) (58,399) (245,262) (374,825)
Acquisition of
intangible assets (14,875) - (139,582) (4,609)
Proceeds on disposal of
property, plant
and equipment - - - 1,725
------------------------------------------------------------------------
Net cash provided by
(used in) investing
activities (81,809) 66,601 (384,844) (252,709)
------------------------------------------------------------------------
------------------------------------------------------------------------
Financing activities
Proceeds from
long-term debt - - 350,000 2,000,000
Repayment of
long-term debt (301,869) (358,652) (996,024) (1,841,387)
Repayment of
liability component
of debentures - - - (1,377,737)
------------------------------------------------------------------------
Net cash used in
financing
activities (301,869) (358,652) (646,024) (1,219,124)
------------------------------------------------------------------------
------------------------------------------------------------------------
Foreign exchange gain
(loss) on cash held
in foreign
currencies (123,320) 4,344 (214,084) 3,428
------------------------------------------------------------------------
------------------------------------------------------------------------
Increase (decrease)
in cash and
cash equivalents (1,051,561) 1,106,141 (1,058,194) 638,170
Cash and cash
equivalents,
beginning of
period 2,426,855 548,980 2,433,488 1,016,951
------------------------------------------------------------------------
------------------------------------------------------------------------
Cash and cash
equivalents,
end of period $ 1,375,294 $ 1,655,121 $ 1,375,294 $ 1,655,121
------------------------------------------------------------------------
------------------------------------------------------------------------


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