Warnex Inc.
TSX VENTURE : WNX

Warnex Inc.

August 29, 2012 14:47 ET

Warnex Reports Second Quarter 2012 Results

LAVAL, QUEBEC--(Marketwire - Aug. 29, 2012) - Warnex Inc. (TSX VENTURE:WNX) ("Warnex") announced today financial results for the second quarter ended June 30, 2012 and provided an update on its operations.

Second Quarter Highlights

  • On April 24, 2012, the Company announced the sale of its Analytical Services division to NEOPHARM LABS Inc. With the sale of our Analytical Services division and last year's sale of our Medical division, the Company's only remaining operating business unit is its Bioanalytical Services division.

  • On April 4, 2012, Mr. Marc Lebel, an experienced pharmaceutical services executive, was appointed as Interim Chief Executive Officer of the Company.

  • During the quarter Persistence Capital Partners LP ("PCP") converted a portion of its debentures and Warnex repaid the remaining balance, resulting in no long term debt outstanding as of the end of the quarter. PCPs conversion of $725,000 in principal amount of debentures resulted in the issuance of 46,178,344 shares, resulting in PCP owning approximately 51.56% of the Company's shares outstanding.

  • During the quarter the Company completed a credit facility with Accord Financial Inc. which allowed Warnex to repay its debentures and close out its outstanding line of credit. Subsequent to the quarter, the Company entered into an agreement with PCP in order to replace its credit facility with Accord. This new facility provides Warnex with substantially greater operational flexibility than was available under the Accord facility.

  • On April 20, 2012, the Company announced that it continues to evaluate its strategic options for maximizing the value of its remaining Bioanalytical Services division. The Company continues to pursue its previously announced discussions regarding potential transactions involving this division.

  • Subsequent to the quarter, the Company announced that Mattie Chinks stepped down as a director of Warnex.

Financial Results

Consolidated revenue for the three-month period ended June 30, 2012, amounted to $1.1 million compared to $4.8 million during the same period last year, and for the six-month period ended June 30, 2012, revenue was $4.9 million compared to $10.6 million for the same period in 2011. Revenues for the prior year included revenues from our Medical Laboratories and Analytical Services divisions, both of which have been sold and for which no revenues were reported for these business units during the second quarter. For the six-month period ended June 30, 2012, revenue for our remaining Bioanalytical Services division was $2.7 million, versus $3.3 million in the first half of 2011.

Gross margins for the three-month period ended June 30, 2012, amounted to negative $0.2 million compared to $0.8 million or 17% of revenue for the same quarter last year. The decrease of $1.0 million in gross margin is mainly explained by decreased revenues following the sale of the Medical and Analytical divisions.

For the three-month period ended June 30, 2012, selling expenses amounted to $0.1 million compared to $0.3 million for the same period last year. For the six-month period ended June 30, 2012, selling expenses amounted to $0.2 million compared to $0.6 million for the same period last year.

General and administrative expenses for the quarter were similar to last year at $1.2 million. In proportion of revenue, general and administrative expenses were higher than last year at 103% (24% in 2011) due to significant and one-time charges of professional fees for the sale of the Analytical division, transferring from the TSX to the TSX Venture, and refinancing of the debentures and credit facility. For the six-month period ended June 30, 2012, general and administrative expenses amounted to $2.3 million compared to $2.5 million for the same period last year.

Financial expenses for the quarter decreased to $0.1 million from $0.3 million for the same quarter in 2011. For the six-month period ended June 30, 2012, financial expenses amounted to $0.4 million compared to $0.6 million for the same period last year.

Research and development tax credits for the quarter amounted to negative $6,000 compared to $124,500 for the same quarter last year. For the six-month period ended June 30, 2012, research and development tax credits amounted to $69,000 compared to $249,000 for the same period in 2011.

Earnings before interest, taxes, depreciation and amortization (EBITDA) for the quarter amounted to negative $1.3 million versus negative $0.2 million for the same quarter last year. For the six-month period ended June 30, 2012, EBITDA amounted to negative $1.6 million compared to $0.2 million for the same period in 2011.

The consolidated net loss for the quarter amounted to $1.6 million or $0.01 per share compared to a net loss of $0.8 million or $0.01 per share for the same quarter in 2011. For the six-month period ended June 30, 2012, net loss amounted to $2.5 million or $0.03 per share compared to net loss of $0.9 million or $0.01 per share for the same period in 2011.

About Warnex

Warnex (www.warnex.ca) is a life sciences company which, through its Bioanalytical Services operations, provides bioequivalence and bioavailability studies for clinical trials at its facility located in Laval, Quebec.

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 further information identifying known risks and uncertainties, relating to financial resources, liquidity risk, key customers and business partners, credit risk, foreign currency risk, government regulations, laboratory facilities, volatility of share price, employees, suppliers, 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 statements to follow.

Interim Consolidated Statements of Financial Position
(Unaudited)
June 30
2012
$
December 31
2011
$
Assets
Current assets
Cash and cash equivalents 395,290 1,285,236
Trade and other receivables 1,154,939 3,482,427
Work-in-progress 108,293 510,171
Inventory 238,749 273,564
Prepaid expenses 236,432 276,337
2,133,703 5,827,735
Non-current assets
Property, plant and equipment 2,707,736 3,333,740
Intangibles 149,896 166,552
4,991,335 9,328,027
Liabilities
Current liabilities
Bank loan - 740,000
Trade and other payables 2,660,473 3,335,549
Provisions 94,501 90,278
Deferred revenue 1,058,173 563,071
Current portion of long-term debt - 42,840
Liability component of debentures - 1,635,400
3,813,147 6,407,138
Shareholders' equity
Capital stock 41,706,049 40,981,049
Other reserves 2,803,559 2,803,559
Deficit (43,331,420 ) (40,863,719 )
1,178,188 2,920,889
4,991,335 9,328,027
Interim Consolidated Statements of Changes in Shareholders' Equity
(Unaudited)
Other reserves
Capital
stock
$
Equity
components
of
debentures
$
Share-based
compensation
$
Other
$
Total
other
reserves
$
Deficit
$
Total
$
Balance, December 31, 2011 40,981,049 1,734,404 1,028,149 41,006 2,803,559 (40,863,719 ) 2,920,889
Share-based compensation - - - - - - -
Issuance of common shares 725,000 - - - - - 725,000
Net loss and comprehensive loss - - - - - (2,467,701 ) (2,467,701 )
Balance, June 30, 2012 41,706,049 1,734,404 1,028,149 41,006 2,803,559 (43,331,420 ) 1,178,188
Balance, December 31, 2010 40,981,049 1,734,404 1,028,149 41,006 2,803,559 (41,350,965 ) 2,433,643
Share-based compensation - - - - - - -
Net loss and comprehensive loss - - - - - (901,662 ) (901,662 )
Balance, June 30, 2011 40,981,049 1,734,404 1,028,149 41,006 2,803,559 (42,252,627 ) 1,531,981
Interim Consolidated Statements of Operations and Comprehensive Income (Loss)
(Unaudited)
Three months ended
June 30
Six months ended
June 30
2012
$
2011
$
2012
$
2011
$
Revenue 1,136,022 4,751,213 4,869,587 10,579,383
Cost of goods sold 1,345,327 3,953,430 4,569,080 8,169,594
Gross margin (209,305 ) 797,783 300,507 2,409,789
Operating expenses
Selling 114,526 308,102 173,389 628,053
General and administrative 1,170,214 1,158,417 2,261,149 2,472,993
Finance 102,681 299,684 401,640 573,683
Research and development tax credits 6,000 (124,500 ) (69,000 ) (249,000 )
1,393,421 1,641,703 2,767,178 3,425,729
Loss before under noted items (1,602,726 ) (843,920 ) (2,466,671 ) (1,015,940 )
Loss on disposal of assets (1,030 ) - (1,030 ) -
Unrealized foreign exchange gain on debentures - 10,072 - 114,278
Net loss and comprehensive loss (1,603,756 ) (833,848 ) (2,467,701 ) (901,662 )
Basic loss per share (0.01 ) (0.01 ) (0.03 ) (0.01 )
Diluted loss per share (0.01 ) (0.01 ) (0.03 ) (0.01 )
Weighted average number of shares outstanding 113,295,535 67,117,191 94,265,998 67,117,191
Weighted average number of diluted shares outstanding 113,295,535 67,117,191 94,265,998 67,117,191
Interim Consolidated Statements of Cash Flow
(Unaudited)
Three months ended
June 30
Six months ended
June 30
2012
$
2011
$
2012
$
2011
$
Operations
Net loss (1,603,756 ) (833,848 ) (2,467,701 ) (901,662 )
Items not affecting cash:
Depreciation of property, plant and equipment 166,768 320,040 414,931 634,901
Amortization of intangibles 6,454 24,612 16,656 48,712
Loss on disposal of assets 1,030 - 1,030 -
Accretion of interest on debentures - 31,514 - 71,114
Capitalized fees and interest on debentures (227,002 ) - - -
Unrealized foreign exchange gain on debentures - (10,072 ) - (114,278 )
Foreign currency fluctuation - (14,362 ) - 4,242
(1,656,506 ) (482,116 ) (2,035,084 ) (256,971 )
Net change in non-cash working capital items 2,558,107 374,560 2,627,305 250,224
Net cash provided by (used in) operations 901,601 (107,556 ) 592,221 (6,747 )
Investing activities
Acquisition of property, plant and equipment - (11,625 ) (40,639 ) (103,865 )
Disposal of property, plant and equipment 251,712 - 251,712 -
Acquisition of intangibles - (781 ) - (17,642 )
Net cash provided by (used in) investing activities 251,712 (12,406 ) 211,073 (121,507 )
Financing activities
Increase in bank loan - 260,000 210,000 560,000
Repayment of bank loan (950,000 ) - (950,000 ) -
Repayment of long-term debt (2,212 ) (278,955 ) (42,840 ) (631,399 )
Repayment of debentures (660,400 ) - (910,400 ) -
Net cash used in financing activities (1,612,612 ) (18,955 ) (1,693,240 ) (71,399 )
Foreign exchange loss on cash held in foreign currencies - (285 ) - (7,970 )
Decrease in cash and cash equivalents (459,299 ) (139,202 ) (889,946 ) (207,623 )
Cash and cash equivalents, beginning of period 854,589 176,035 1,285,236 244,456
Cash and cash equivalents, end of period 395,290 36,833 395,290 36,833

Contact Information