Warnex Inc.
TSX : WNX

Warnex Inc.

May 13, 2008 17:00 ET

Warnex Reports First Quarter 2008 Results

LAVAL, QUEBEC--(Marketwire - May 13, 2008) - Warnex Inc. (TSX:WNX) today announced its financial results for the first quarter ended March 31, 2008.

Operating Highlights

- First quarter revenue of $6.1 million and net loss of $0.3 million

- Signed agreements in principle with Warnex's various debenture holders in order to modify the terms and conditions of the long term debentures

- Signed 10-year leases for Warnex's facilities located in Laval and Blainville

- Launched the PCA3 test for prostate cancer

- Obtained a licence from Xenomics for the NPM1 assay for acute myeloid leukemia

- Subsequent to the quarter's end, signed an agreement with the Desjardins Group for financing facilities totalling $4 million, which include a revolving line of credit of $2 million and a term debt of $2 million.

"We are pleased to have delivered solid first quarter results following the completion of our transition to a company focused on laboratory services," said Mark Busgang, President and CEO of Warnex. "With the announced agreements in principle for the restructuring of our debentures and our financing agreement with Desjardins, we are executing our strategy to reduce our debentures by $5 million and improve our balance sheet in order to better position us for future growth opportunities. We have also concluded our corporate restructuring and implemented various cost cuts as we move towards becoming a profitable CRO."

Financial Results

Revenue from continuing operations for the first quarter ended March 31, 2008, was $6,141,566, similar to last year's revenue of $6,162,011 in the first quarter. For the three-month period ended March 31, 2008, the net loss from continuing operations amounted to $286,322 or $0.01 per share (2007 - $383,115 or $0.01 per share). The net loss including discontinued operations amounted to $286,322 or $0.01 per share (2007 - $920,907 or $0.02 per share).

Earnings before interest, taxes, depreciation and amortization (EBITDA) from continuing operations for the quarter amounted to $474,649 versus $666,670 for the same quarter a year ago. Total EBITDA including discontinued operations was $474,649 for the quarter compared with $155,449 in the corresponding quarter in 2007.

Gross margins for the three-month period ended March 31, 2008, amounted to $1,591,065 or 25.9% of sales (2007 - $1,569,934 or 25.5% of sales).

Selling and administrative expenses amounted to $1,513,362 for the three-month period ended March 31, 2008 (2007 - $1,425,288). The increase of $88,074 is mainly explained by an increase in salaries. In proportion of revenue, administrative and selling expenses are higher than last year at 25% in 2008 (2007 - 23%).

Financial expenses decreased by $163,736, from $527,761 in the first quarter of 2007 to $364,025 in the first quarter of 2008, mainly due to less interest following repayments made on the long term debt and debentures.

As of March 31, 2008, the Company had $1.8 million in cash and working capital deficiency of $10.0 million since the long term debentures mature on June 25, 2008, and July 9, 2008. The debenture holders have agreed to restructure the debt as announced on March 19, 2008.

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's analytical services division provides pharmaceutical and biotechnology companies with a variety of quality control services, including traditional chemistry, chromatography, microbiology, method development and validation, and stability studies. Warnex's bioanalytical services division specializes in bioequivalence and bioavailability studies for clinical trials. Warnex's medical laboratories division focuses on genetic and biochemical testing for the healthcare industry and has extensive expertise in genetic testing for human identification, molecular diagnostics, and pharmacogenetics.

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.

Financial statement to follow.



Interim Consolidated Balance Sheets
(Unaudited)

March 31 December 31
2008 2007
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Assets
Current
Cash and cash equivalents $1,762,999 $1,016,951
Accounts receivable 5,282,745 5,440,231
Work-in-progress 94,103 34,798
Inventory 80,469 93,053
Investment tax credits receivable 135,283 135,283
Prepaid expenses 297,821 169,610
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7,653,420 6,889,926

Long-term receivables 125,000 125,000
Property, plant and equipment 7,509,469 7,726,464
Intangible assets 277,865 292,606
Goodwill 937,695 937,695
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$16,503,449 $15,971,691
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Liabilities
Current
Accounts payable $3,804,538 $3,575,368
Deferred revenue 1,267,472 487,045
Current portion of long-term debt 1,362,607 1,609,127
Current portion of debentures 11,261,610 11,170,730
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17,696,227 16,842,270

Long-term debt 108,546 165,964
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17,804,773 17,008,234
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Shareholders' deficiency
Capital stock 38,705,849 38,705,849
Equity component of debentures 1,428,114 1,428,114
Contributed surplus 1,232,249 1,210,708
Deficit (42,667,536) (42,381,214)
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(1,301,324) (1,036,543)
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$16,503,449 $15,971,691
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Interim Consolidated Statements of Contributed Surplus
(Unaudited)

For the three months ended March 31 2008 2007
(restated
note 2)
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Balance, beginning of period $1,210,708 $1,080,728
Compensation cost for stock options granted 21,541 65,268
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Balance, end of period $1,232,249 $1,145,996
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Interim Consolidated Statements of Deficit
(Unaudited)


For the three months ended March 31 2008 2007
(restated
note 2)
-------------------------------------------------------------------------
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Balance, beginning of period $42,381,214 $40,168,524
Adjustment to opening deficit - 615,255
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Restated balance, beginning of period 42,381,214 40,783,779
Net loss 286,322 920,907
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Balance, end of period $42,667,536 $41,704,686
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Consolidated Statements of Accumulated Other Comprehensive Income
(Unaudited)

For the three months ended March 31 2008 2007
(restated
note 2)
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Accumulated Other Comprehensive Income $- $-
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Interim Consolidated Statements of Earnings and Comprehensive Income
(Unaudited)

For the three months ended March 31 2008 2007
(restated
note 2)
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Revenue $6,141,566 $6,162,011
Cost of goods sold 4,550,501 4,592,077
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Gross margin 1,591,065 1,569,934
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Operating expenses
Selling, general and administrative 1,513,362 1,425,288
Finance charges 364,025 527,761
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1,877,387 1,953,049
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Loss from continuing operations (286,322) (383,115)
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Loss from discontinued operations - (537,792)
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Net loss and comprehensive income $(286,322) $(920,907)
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Basic and fully diluted net loss per share
from continuing operations $(0.01) $(0.01)
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Basic and fully diluted net loss per share $(0.01) $(0.02)
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Weighted average number of shares outstanding 51,973,875 51,973,875
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Interim Consolidated Statements of Cash Flows (Unaudited)

For the three months ended March 31 2008 2007
(restated
note 2)
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Operations
Net loss $(286,322) $(383,115)
Items not affecting cash:
Amortization of property, plant and equipment 373,146 479,921
Amortization of intangible assets 14,741 15,784
Accretion of interest 108,781 148,595
Loss on disposal of property, plant and
equipment 1,054 -
Foreign currency fluctuation (72,055) 23,611
Compensation cost for stock options 21,541 65,268
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160,886 350,064
Net change in non-cash working capital items 1,056,263 353,000
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Net cash provided by continuing operating
activities 1,217,149 703,064
Net cash used in discontinued operating
activities - (299,433)
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Net cash provided by operations 1,217,149 403,631
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Investing activities
Acquisition of property, plant and equipment (158,930) (21,847)
Proceeds on disposal of property, plant and
equipment 1,725 -
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Net cash used in investing activities (157,205) (21,847)
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Financing activities
Increase in bank loan - 460,000
Repayment of long-term debt (303,938) (486,025)
Repayment of liability component of debentures (17,901) (17,901)
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Net cash used in financing activities (321,839) (43,926)
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Foreign exchange gain (loss) on cash held in
foreign currencies 7,943 (2,375)
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Increase in cash and cash equivalents 746,048 335,483
Cash and cash equivalents, beginning of period 1,016,951 4,050,288
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Cash and cash equivalents, end of period $1,762,999 $4,385,771
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