Warnex Inc.
TSX : WNX

Warnex Inc.

November 14, 2011 17:03 ET

Warnex Reports Third Quarter 2011 Results

LAVAL, QUEBEC--(Marketwire - Nov. 14, 2011) - Warnex Inc. (TSX:WNX) announced today financial results for the third quarter ended September 30, 2011.

Operating Highlights

  • Restructured its outstanding debentures, which included extending the maturity dates to November 8, 2011, and modifying various other terms. Subsequent to the quarter, the Company announced that it is currently in advanced negotiations to extend the maturity dates of all of its outstanding convertible debentures that have become due, to modify various other terms and conditions of the debentures and to obtain additional financing to cover current operating expenses as well as certain disbursements.
  • Reorganized the operations of its subsidiary Warnex Analytical Services Inc., including the shutdown of its analytical laboratories located in Laval and consolidation all of its analytical services at its Neopharm Laboratories facility located in Blainville
  • Obtained funding from the federal government for forensic mitochondrial DNA testing
  • Launched PRO-DNA® Lead, a new forensic DNA testing service
  • Received DEQAS certification for vitamin D analysis
  • Launched new website – www.pca3.ca – for its PCA3 test for prostate cancer detection
  • Subsequent to the quarter, signed an exclusive agreement with deCODE Genetics to distribute in Canada 10 of deCODE Genetics' DNA-based tests for assessing the risk of developing certain common diseases

"The restructuring of our Analytical Services subsidiary is now complete and our efforts are ongoing to improve the efficiency of our operations and to increase our business development efforts," said Mark Busgang, President and CEO of Warnex. "At the same time, we have had achievements across all of our divisions with the vitamin D certification in Bioanalytical, the launch of the PCA3 website and the agreement with deCODE in Medical, and the launch of PRO-DNA® Lead and the government grant in our PRO-DNA Services division."

Financial Results

Consolidated revenue for the three-month period ended September 30, 2011, amounted to $5.0 million compared to $5.5 million during the same quarter a year ago, a decrease of 10%. For the nine-month period ended September 30, 2011, revenue amounted to $15.6 million compared to $17.0 million for the same period in 2010.

Net loss for the quarter amounted to $0.7 million or $0.01 per share compared to $28,436 or $0.00 per share for the same quarter in 2010. For the nine-month period ended June 30, 2011, net loss totalled $1.6 million or $0.02 per share compared to $0.9 million or $0.01 per share in 2010.

For the three-month period ended September 30, 2011, the Company had earnings before interest, taxes, depreciation and amortization (EBITDA) of $0.3 million compared to $0.6 million for the same quarter last year. For the nine-month period ended September 30, 2011, EBITDA amounted to $0.5 million compared to $1.1 million in 2010.

Gross margin for the three-month period ended September 30, 2011, amounted to $1.2 million or 23% of revenues compared to $1.3 million or 23% of revenues for the same quarter last year. Gross margin for the nine-month period ended September 30, 2011, amounted to $3.6 million or 23% of revenues compared to $3.8 million or 23% of revenues in 2010.

For the three-month period ended September 30, 2011, selling expenses remained similar to last year at $0.3 million. In proportion of revenue, selling expenses were similar to last year at 6%. For the nine-month period ended September 30, 2011, selling expenses were $0.9 million compared to $1.0 million last year.

General and administrative expenses for the quarter were $1.1 million compared to $1.3 million last year. In proportion of revenue, general and administrative expenses were lower than last year at 21% (23% in 2010). For the nine-month period ended September 30, 2011, general and administrative expenses amounted to $3.6 million compared to $3.8 million last year.

Financial expenses for the quarter remained similar to last year at $0.3 million. For the nine-month period ended September 30, 2011, financial expenses were similar to last year at $0.9 million.

Research and development tax credits for the quarter decreased to $0.2 million in 2011 from $0.5 million in 2010. For the nine-month period ended September 30, 2011, research and development tax credits amounted to $0.4 million compared to $0.8 million in 2010.

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, 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.

Interim Consolidated Balance Sheets
(Unaudited)
September 30
2011
$
December 31
2010
$
January 1
2010
$
Assets
Current assets
Cash and cash equivalents 227,853 244,456 894,031
Trade and other receivables 3,345,666 3,478,299 3,593,390
Work-in-progress 459,326 328,289 531,142
Inventory 419,162 355,132 177,027
Prepaid expenses 439,389 293,636 388,502
4,891,396 4,699,812 5,584,092
Non-current assets
Deferred income taxes 1,221,000 1,221,000 1,221,000
Property, plant and equipment 5,741,414 6,569,217 7,868,974
Intangibles 351,490 407,185 382,145
Goodwill 937,695 937,695 937,695
13,142,995 13,834,909 15,993,906
Liabilities
Current liabilities
Bank loan 1,080,000 580,000 -
Trade and other payables 3,309,956 2,899,115 3,008,594
Provisions 110,853 - -
Deferred revenue 1,074,005 921,532 411,599
Current portion of long-term debt 153,470 894,716 1,800,372
Liability component of debentures 6,603,485 6,100,181 -
12,331,769 11,395,544 5,220,565
Long-term liabilities
Long-term debt - 5,722 447,661
Liability component of debentures - - 6,187,516
12,331,769 11,401,266 11,855,742
Shareholders' equity
Capital stock 40,981,049 40,981,049 40,981,049
Other reserves 2,803,559 2,803,559 2,772,306
Deficit (42,973,382 ) (41,350,965 ) (39,615,191 )
811,226 2,433,643 4,138,164
13,142,995 13,834,909 15,993,906
Interim Consolidated Statements of Changes in Equity
(Unaudited)
Other reserves
Capital
stock
$
Equity components of debentures
$
Share-based compensation
$
Other
$
Total other reserves
$
Deficit
$
Total
$
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 and comprehensive loss - - - - - (1,622,417 ) (1,622,417 )
Balance,
September 30, 2011
40,981,049 1,734,404 1,028,149 41,006 2,803,559 (42,973,382 ) 811,226
Balance,
January 1, 2010
40,981,049 1,734,404 996,896 41,006 2,772,306 (39,615,191 ) 4,138,164
Share-based compensation - - 31,253 - 31,253 - 31,253
Net and comprehensive loss - - - - - (922,188 ) (922,188 )
Balance,
September 30, 2010
40,981,049 1,734,404 1,028,149 41,006 2,803,559 (40,537,379 ) (3,247,229 )
Interim Consolidated Statements of Operations and Comprehensive Income (Loss)
(Unaudited)
Three months ended
September 30
Nine months ended
September 30
2011
$
2010
$
2011
$
2010
$
Revenue 4,978,609 5,538,122 15,557,992 17,001,218
Cost of goods sold 3,815,508 4,265,174 11,985,102 13,181,422
Gross margin 1,163,101 1,272,948 3,572,890 3,819,796
Operating expenses
Selling 310,041 321,003 938,094 950,513
General and administrative 1,084,272 1,294,744 3,557,265 3,803,665
Finance 291,233 287,697 864,916 859,623
Research and development tax credits (162,422 ) (473,235 ) (411,422 ) (799,235 )
1,523,124 1,430,209 4,948,853 4,814,566
Loss before under noted item and income taxes (360,023 ) (157,261 ) (1,375,963 ) (994,770 )
Unrealized foreign exchange gain (loss) on debentures (360,732 ) 128,825 (246,454 ) 72,582
Loss before income taxes (720,755 ) (28,436 ) (1,622,417 ) (922,188 )
Income taxes - - - -
Net loss and comprehensive loss (720,755 ) (28,436 ) (1,622,417 ) (922,188 )
Basic loss per share (0.01 ) (0.00 ) (0.02 ) (0.01 )
Diluted loss per share 0.00 0.00 (0.01 ) (0.01 )
Weighted average number of shares outstanding 67,117,191 67,117,191 67,117,191 67,117,191
Weighted average number of diluted shares outstanding 255,788,191 67,117,191 255,788,191 67,117,191
Interim Consolidated Statements of Cash Flow
(Unaudited)
Three months ended
September 30
Nine months ended
September 30
2011
$
2010
$
2011
$
2010
$
Operations
Net loss (720,755 ) (28,436 ) (1,622,417 ) (922,188 )
Items not affecting cash:
Depreciation of property, plant and equipment 320,898 372,660 955,799 1,113,123
Amortization of intangibles 24,625 26,822 73,337 74,111
Accretion of interest on debentures - 37,401 71,114 107,341
Capitalized interest on debentures 185,736 - 185,736 -
Unrealized foreign exchange loss (gain) on debentures 360,732 (128,825 ) 246,454 (72,582 )
Share-based compensation - 41 - 31,253
Foreign currency fluctuation (35,384 ) 211,095 (31,142 ) 188,989
135,852 490,758 (121,119 ) 520,047
Net change in non-cash working capital items 241,156 (258,681 ) 491,380 (414,057 )
Net cash provided by operations 377,008 232,077 370,261 105,990
Investing activities
Acquisition of property, plant and equipment (24,131 ) (32,821 ) (127,996 ) (109,462 )
Acquisition of intangibles - (10,708 ) (17,642 ) (113,642 )
Net cash used in investing activities (24,131 ) (43,529 ) (145,638 ) (223,104 )
Financing activities
Increase (decrease) in bank loan (60,000 ) 20,000 500,000 340,000
Repayment of long term debt (115,569 ) (347,611 ) (746,968 ) (1,016,716 )
Net cash used in financing activities (175,569 ) (327,611 ) (246,968 ) (676,716 )
Foreign exchange gain (loss) on cash held in foreign currencies 13,712 (65,352 ) 5,742 (55,342 )
Increase (decrease) in cash and cash equivalents 191,020 (204,415 ) (16,603 ) (849,172 )
Cash and cash equivalents, beginning of period 36,833 249,274 244,456 894,031
Cash and cash equivalents, end of period 227,853 44,859 227,853 44,859

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