Stellar Pharmaceuticals Inc.
OTCQB : SLXCF

Stellar Pharmaceuticals Inc.

May 16, 2011 11:27 ET

Stellar Pharmaceuticals Reports First Quarter 2011 Financial Results

LONDON, ONTARIO--(Marketwire - May 16, 2011) - Stellar Pharmaceuticals Inc. (OTCQB:SLXCF) ("Stellar" or "the Company"), a Canadian pharmaceutical developer and marketer of high quality, cost-effective products for select health care markets, today announced financial results for the quarter ended March 31, 2011. In this press release, all dollar amounts are expressed in Canadian currency and results are reported in accordance with United States generally accepted accounting principles (U.S. GAAP).

For the three month period ended March 31, 2011, Stellar's total revenues were $634,000 as compared to $577,900 for the same period in 2010. The Company noted that the increase in total revenues was driven by a 52.2% growth in product sales to international markets, while the Canadian market sales experienced a 1.7% decrease in product sales. Gross margin as a percentage of sales increased to 73.0% for the quarter end March 31, 2011, from 64.7% for the same period ended March 31, 2010.

Operating expenses for the first quarter of 2011, increased $161,100, to $769,000 compared with $607,900 for the first quarter of 2010. In addition to increased business development expenses, factors also contributing to the increase in operating expenses were several non-cash transactions. These non-cash transactions included the following:

  • share option expense in the first quarter of 2011 of $63,800, (includes $21,700 related to options which fully vested upon the retirement of an officer of the Company) compared to $33,900 during the same period in 2010;
  • amortization expense in the first quarter of 2011 of $12,100 compared to $26,800 during the same period in 2010;
  • warranty liability expense in the first quarter of 2011 of $39,300 related to the re-valuation of warrants, compared to $nil during the same period in 2010; and
  • foreign currency exchange expense in the first quarter of 2011 of $45,600, compared to $20,200 during the same period in 2010.

Net loss from continuing operations for the three month period ended March 31, 2011 was $302,900 or $0.01 per share, compared to $247,500 or $0.01 per share in the first quarter of 2010.

At March 31, 2011 the Company had $3.7 million in cash and cash equivalents, a decrease of $0.6 million over the December 31, 2010 balance of $4.4 million. The primary reason for the decrease was a $0.4 million retirement payout to an executive office of the Company.

Arnold Tenney, Stellar's President and Chief Executive Officer, commented, "Stellar ended the first quarter of 2011, in a strong financial position, with an increase of 9.7% in total revenues, no short or long tem debt and working capital of $4.5 million. We continue to evaluate all opportunities at supporting growth and improving our position both in Canada and international markets."

About Stellar Pharmaceuticals Inc.

Stellar has developed and is marketing direct in Canada, and in countries around the world through out-license agreements, three products based on its core polysaccharide technology: NeoVisc® and NeoVisc® Single Dose, for the symptomatic treatment of osteoarthritis; and Uracyst®, its patented technology for the treatment of interstitial cystitis (IC), an inflammatory disease of the urinary bladder wall. Both NeoVisc and Uracyst have their CE Mark certification for the European Community. Stellar also has an in-licensing agreement for NMP22® BladderChek®, a proteomics-based diagnostic test for the diagnosis and monitoring of bladder cancer. For more information, please visit the company's website at www.stellarpharma.com.

Forward-Looking Statements

This press release contains forward-looking statements as defined in the Private Securities Litigation Reform Act of 1995. Readers are cautioned not to place undue reliance on these forward-looking statements. Actual results may differ materially from those indicated by these forward-looking statements as a result of risks and uncertainties impacting the Company's business including increased competition; the ability of the Company to expand its operations, to attract and retain qualified professionals, technological obsolescence; general economic conditions; and other risks detailed from time to time in the Company's filings.

STELLAR PHARMACEUTICALS INC.
CONDENSED INTERIM BALANCE SHEETS
(Expressed in Canadian dollars)
(Unaudited)
CURRENTAs at March 31,
2011
As at December 31,
2010
Cash and cash equivalents$3,738,181$4,352,285
Accounts receivable, net of allowance of $nil (2010 - $nil)355,769493,370
Inventories795,775611,676
Taxes recoverable28,233-
Loan receivable15,81415,814
Prepaids, deposits and sundry receivables120,15199,433
Total current assets5,053,9235,572,578
PROPERTY, PLANT AND EQUIPMENT, net1,543,0971,568,729
OTHER ASSETS142,142139,287
Total assets$6,739,162$7,280,594
LIABILITIES
CURRENT
Accounts payable$106,854$236,420
Accrued liabilities348,129557,735
Deferred revenues8338,645
Product returns liability112,500112,500
Total current liabilities568,316915,300
LONG TERM WARRANT LIABILITY256,069216,823
Total liabilities824,3851,132,123
CONTINGENCIES AND COMMITMENTS
SHAREHOLDERS' EQUITY
CAPITAL STOCK
AUTHORIZED
UnlimitedNon-voting, convertible redeemable and retractable preferred shares with no par value
UnlimitedCommon Shares with no par value
ISSUED
24,585,040Common Shares (2010 – 24,585,040)9,055,9829,055,982
Shares to be issued5,466-
Additional Paid-in capital options - outstanding213,293211,781
Additional Paid-in capital options - expired795,740733,517
10,070,48110,001,280
DEFICIT(4,155,704)(3,852,809)
Total shareholders' equity5,914,7776,148,471
Total liabilities and shareholders' equity$6,739,162$7,280,594
STELLAR PHARMACEUTICALS INC.
CONDENSED INTERIM STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS AND DEFICITS
(Expressed in Canadian dollars)
(Unaudited)
For the Three Month Period
Ended March 31,
20112010
PRODUCT SALES$631,276$549,510
ROYALTIES & LICENSING REVENUE2,76628,369
TOTAL REVENUE FROM ALL SOURCES634,042577,879
COST OF PRODUCTS SOLD171,396203,757
GROSS PROFIT462,646374,122
EXPENSES
Selling, general and administrative704,055567,932
Change in warranty liability39,246-
Research and development13,67826,270
Amortization of assets (non-manufacturing property, plant and equipment)12,06213,663
769,041607,865
LOSS FROM OPERATIONS(306,395)(233,743)
INTEREST AND OTHER INCOME3,5001,513
LOSS ON DISPOSAL OF EQUIPMENT-(15,308)
NET LOSS AND COMPREHENSIVE
LOSS FOR THE PERIOD
(302,895)(247,538)
DEFICIT, beginning of period(3,852,809)(4,378,517)
DEFICIT, end of period$(4,155,704)(4,626,055)
LOSS PER SHARE - Basic and diluted$(0.01)$(0.01)
WEIGHTED AVERAGE NUMBER OF COMMON
SHARES OUTSTANDING - Basic and diluted24,585,04023,480,040
STELLAR PHARMACEUTICALS INC.
CONDENSED INTERIM STATEMENTS OF CASH FLOWS
(Expressed in Canadian dollars)
(Unaudited)
For the Three Month Period
Ended March 31,
20112010
CASH FLOWS USED IN OPERATING ACTIVITIES
Net loss$(302,895)$(247,538)
Items not affecting cash
Amortization26,72226, 785
Loss on disposal of equipment15,308
Stock-based compensation63,73533,947
Change in warrant liability39,246
Issuance of equity instruments for services rendered5,466
Change in non-cash operating assets and liabilities(442,435)(140,920)
CASH FLOWS USED IN OPERATING ACTIVITIES(610,161)(312,419)
CASH FLOWS PROVIDED BY (USED IN) INVESTING ACTIVITIES
Additions to property, plant and equipment(221,853)
Increase in other assets(3,943)(8,014)
Proceeds from sale of equipment12,630
CASH FLOWS USED IN INVESTING ACTIVITIES(3,943)(217,237)
CHANGE IN CASH AND CASH EQUIVALENTS(614,104)(529,655)
CASH AND CASH EQUIVALENTS, beginning of period4,352,2852,325,212
CASH AND CASH EQUIVALENTS, end of period$3,738,181$1,795,557

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