Stellar Pharmaceuticals Inc.
OTCQB : SLXCF
OTC Bulletin Board : SLXCF
PINK SHEETS : SLXCF

Stellar Pharmaceuticals Inc.

November 14, 2011 07:30 ET

Stellar Pharmaceuticals Reports Third Quarter 2011 Financial Results

LONDON, ONTARIO--(Marketwire - Nov. 14, 2011) - Stellar Pharmaceuticals Inc. (OTCQB:SLXCF)(OTCBB:SLXCF)(PINK SHEETS: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 period ended September 30, 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 September 30, 2011, total revenues from all sources were $689,162. This represented a decrease of 69.2% from $2,236,925 for the same period during 2010. The Company noted that the decrease in total revenues was driven primarily by the absence of licensing revenues in the third quarter of 2011, compared to $1,446,168 of license revenues being recorded in the same three-month period a year ago.

Total product sales for both domestic and international markets for the three month period ended September 30, 2011 decreased by 1.0% to $682,000 from $688,700 for the same period in 2010. Domestic product revenue growth of 3.5% was offset by a 9.4% decline in international product revenues. The decline in international product revenues was primarily the result of the 2010 third quarter being positively impacted by first-time orders from three new international distributors.

Total expenses for the three month period ended September 30, 2011 decreased 39.0% or $243,500, compared to the same period in 2010.

Stellar's net profit for the three month period ended September 30, 2011 was $112,261. This compared to a net profit of $1,380,841 in the same period a year ago. As previously noted, the Company received no license revenues in Q3 2011 versus $1,446,168 of license revenues in Q3 2010.

At September 30, 2011, Stellar had $3.5 million in cash and cash equivalents. This represents a decrease of $0.9 million from the $4.4 million balance at December 31, 2010, a significant portion of which is attributable to a $0.4 million retirement payout made to a former executive officer of the Company.

Arnold Tenney, Stellar's President and Chief Executive Officer, commented, "As our current business has continued to stabilize, with noted decreases in cost of product sales and carefully managed expenses in order to allow for future growth, Stellar has been able to maintain a strong financial position. This has left us well positioned to start taking advantage of some of the exciting opportunities that we have identified to increase our footprint and kick- start growth in both Canadian and international markets. We look forward to updating you on our progress in that regard as we move forward."

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)
CURRENT As at
September 30,
2011
As at
December 31,
2010
Cash and cash equivalents $ 3,511,390 $ 4,352,285
Accounts receivable, net of allowance of $nil (2010 - $nil) 364,792 493,370
Inventories 900,908 611,676
Taxes recoverable 38,760 -
Loan receivable 15,814 15,814
Prepaids, deposits and sundry receivables 121,047 99,433
Total current assets 4,952,711 5,572,578
PROPERTY, PLANT AND EQUIPMENT, net 1,498,114 1,568,729
OTHER ASSETS 159,212 139,287
Total assets $ 6,610,037 $ 7,280,594
LIABILITIES
CURRENT
Accounts payable $ 253,652 $ 236,420
Accrued liabilities 188,135 557,735
Deferred revenues 8,393 8,645
Product returns liability - 112,500
Total current liabilities 450,180 915,300
LONG TERM WARRANT LIABILITY 15,064 216,823
Total liabilities 465,244 1,132,123
CONTINGENCIES AND COMMITMENTS
SHAREHOLDERS' EQUITY
CAPITAL STOCK
AUTHORIZED
Unlimited Non-voting, convertible redeemable and retractable
preferred shares with no par value
Unlimited Common Shares with no par value
ISSUED
24,610,042
Common Shares (2010 – 24,585,040) 9,046,206 9,055,982
Additional Paid-in capital options - outstanding 287,885 211,781
Additional Paid-in capital options - expired 795,740 733,517
10,129,831 10,001,280
DEFICIT (3,985,038 ) (3,852,809 )
Total shareholders' equity 6,144,793 6,148,471
Total liabilities and shareholders' equity $ 6,610,037 $ 7,280,594
STELLAR PHARMACEUTICALS INC.
CONDENSED INTERIM STATEMENTS OF OPERATIONS, COMPREHENSIVE
INCOME (LOSS) AND DEFICIT
(Expressed in Canadian Dollars)
(Unaudited)
For the Three Month Period
Ended September 30
For the Nine Month Period
Ended September 30
2011 2010 2011 2010
PRODUCT SALES$683,864 $690,881 $2,381,684 $ 2,052,144
ROYALTY AND LICENSING REVENUES 5,298 1,546,044 14,226 2,018,472
TOTAL REVENUES FROM ALL SOURCES 689,162 2,236,925 2,395,910 4,070,616
COST OF PRODUCTS SOLD 201,870 235,334 634,799 719,809
GROSS PROFIT 487,292 2,001,591 1,761,111 3,350,807
EXPENSES
Selling, general and administrative 621,641 566,371 2,024,640 1,726,890
Research and development 12,196 45,606 45,966 81,560
Change in warrant liability (266,029) - (201,759)-
Amortization (non-manufacturing property, plant and equipment)12,314 11,600 36,438 38,919
380,122 623,577 1,905,285 1,847,369
INCOME (LOSS) FROM OPERATIONS 107,170 1,378,014 (144,174)1,503,438
INTEREST AND OTHER INCOME 5,091 2,827 11,945 5,949
LOSS ON DISPOSAL OF EQUIPMENT - - - (15,308)
INCOME (LOSS) AND COMPREHENSIVE INCOME FOR THE PERIOD BEFORE INCOME TAXES 112,261 1,380,841 (132,229)1,494,079
Current income tax expense - (421,300) - (435,100)
Future income tax recovery - 421,300 - 435,100
NET INCOME (LOSS) AND COMPREHENSIVE INCOME (LOSS) FOR THE PERIOD 112,261 1,380,841 (132,229)1,494,079
DEFICIT, beginning of period (4,097,299) (4,265,279) (3,852,809)(4,378,517)
DEFICIT, end of period $ (3,985,038) $ (2,884,438)$ (3,985,038)$(2,884,438)
EARNINGS (LOSS) PER SHARE – Basic $ 0.00 $ 0.06 $ (0.01)$ 0.06
WEIGHTED AVERAGE NUMBER OF COMMON SHARES OUTSTANDING – Basic 24,610,042 23,585,040 24,599,144 23,517,256
EARNINGS (LOSS) PER SHARE – Diluted $ 0.00 $ 0.06 $ (0.01)$ 0.06
WEIGHTED AVERAGE NUMBER OF COMMON SHARES OUTSTANDING – Diluted 24,610,042 23,594,579 24,599,144 23,518,390
STELLAR PHARMACEUTICALS INC.
CONDENSED INTERIM STATEMENTS OF CASH FLOWS
(Expressed in Canadian dollars)
(Unaudited)
For the Three Month Period For the Nine Month Period
Ended September 30 Ended September 30
2011 2010 2011 2010
CASH FLOWS FROM
(USED IN)
OPERATING
ACTIVITIES -
Net income (loss) for the period$112,261 $$ 1,380,841 $(132,229)$1,494,079
Items not affecting cash
Amortization 23,826 21,474 78,889 79,053
Current income tax expense (421,300) - (435,100)
Future income tax recovery 421,300 - 435,100
Loss on disposal of equipment - - - 15,308
Change in warrant liability (266,029) - (201,759) -
Issuance of equity instruments for services rendered 9,001 - 14,467 4,000
Stock-based compensation 47,330 66,689 138,327 118,079
Change in non-cash operating asset and liabilities 137,403 39,974 (686,148) (535,908)
CASH FLOWS (USED IN) OPERATING ACTIVITIES 63,792 1,508,978 (788,453) 1,174,611
CASH FLOWS FROM (USED IN) INVESTING ACTIVITIES -
Additions to property, plant and equipment - (28,052) (5,008) (290,194)
Increase to other assets (3,710) (6,000) (23,191) (16,847)
Proceeds from sale of equipment - - - 12,630
CASH FLOWS USED IN INVESTING ACTIVITIES (3,710) (34,052) (28,199) (294,411)
CASH FLOWS USED IN FINANCING ACTIVITIES -
Stock options exercised - - - 69,000
Share issuance costs (2,559) - (24,243) -
CASH FLOWS FROM (USED IN) FINANCING ACTIVITIES(2,559) - (24,243) 69,000
CHANGE IN CASH AND CASH EQUIVALENTS 57,523 1,474,926 (840,895) 949,200
CASH AND CASH EQUIVALENTS,
Beginning of period 3,453,867 1,799,486 4,352,285 2,325,212
CASH AND CASH EQUIVALENTS,
End of period$ 3,511,390 $3,274,412 $3,511,390 $3,274,412

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