Warnex Inc.
TSX VENTURE : WNX

Warnex Inc.

November 28, 2012 10:14 ET

Warnex Reports Third Quarter 2012 Results

LAVAL, QUEBEC--(Marketwire - Nov. 28, 2012) - Warnex Inc. (TSX VENTURE:WNX) ("Warnex") announced today financial results for the third quarter ended September 30, 2012 and provided an update on its operations.

Third Quarter Highlights

  • During the quarter, the Company finalized the previously announced new credit facility with Persistence Capital Partners LP. This new facility provides Warnex with substantially greater operational flexibility than was available under the prior credit facility.

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

  • On September 25, 2012, the Company announced that it received court approval to delay the date of its Annual Meeting to a date which was to be no later than December 31, 2012.

  • Subsequent to the quarter, the Company announced that it entered into a binding agreement for the sale to Biotrial Research S.A.S. ("Biotrial"), an arm's length privately-owned contract research organization headquartered in Rennes, France, of its Bioanalytical Services division (the "Business"). Closing of the sale of the Business (the "Transaction") is expected to occur on or about December 10, 2012 and is subject to a number of conditions, including the approval of the Transaction by the TSX Venture Exchange and by the shareholders of Warnex. As consideration for the sale of the Business to Biotrial, Warnex will receive a base price of C$6,000,000, subject to working capital adjustments and certain other revenue and net book value-based adjustments. In addition, Warnex will be eligible to receive an additional payment equal to the amount, if any, by which the adjusted revenues of the Business during the calendar year ending December 31, 2012 exceed C$6,000,000. The Board of Directors of Warnex may terminate the Agreement upon the payment of a break fee of C$200,000 in the event that a third party makes a superior offer for the Business prior to the closing of the Transaction and Biotrial does not exercise its right under the Agreement to match such offer.

Financial Results

Consolidated revenue for the three-month period ended September 30, 2012, amounted to $2.5 million compared to $5.0 million during the same period last year, and for the nine-month period ended September 30, 2012, revenue was $7.4 million compared to $15.6 million for the same period in 2011. Revenues for the prior year included revenues from the 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 and third quarters of 2012. For the nine-month period ended September 30, 2012, revenue for the remaining Bioanalytical Services division was $5.2 million, versus $5.1 million for the same period in 2011.

Gross margins for the three-month period ended September 30, 2012, amounted to $1.1 million or 43% of revenue compared to $1.2 million or 23% of revenue for the same quarter last year. The increase in the gross margin percentage related to revenue is mainly explained by sale of the Medical and Analytical divisions combined with significant quarterly sales for the Bioanalytical division.

For the three-month period ended September 30, 2012, selling expenses amounted to $46,673 compared to $310,041 for the same period last year. For the nine-month period ended September 30, 2012, selling expenses amounted to $0.2 million compared to $0.9 million for the same period last year.

General and administrative expenses for the quarter were $0.8 million compared to $1.1 million last year. In proportion of revenue, general and administrative expenses were higher than last year at 32% (22% in 2011). For the nine-month period ended September 30, 2012, general and administrative expenses amounted to $3.1 million compared to $3.6 million for the same period last year.

Financial expenses for the quarter decreased to $50,419 from $291,333 for the same quarter in 2011. For the nine-month period ended September 30, 2012, financial expenses amounted to $0.5 million compared to $0.9 million for the same period last year.

Research and development tax credits decreased from $162,422 to a charge of $50,049 for the quarter, mainly due to prior years' proposed reassessments totaling $210,000 for 2008 to 2010. For the nine-month period ended September 30, 2012, research and development tax credits amounted to $18,251 compared to $411,422 in 2011, following the reassessments received.

The consolidated net income for the quarter amounted to $0.1 million or $0.00 per share compared to a net loss of $0.7 million or $0.01 per share for the same quarter in 2011. For the nine-month period ended September 30, 2012, net loss amounted to $2.3 million or $0.02 per share compared to net loss of $1.6 million or $0.02 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)
September 30
2012
$
December 31
2011
$
Assets
Current assets
Cash and cash equivalents 65,722 1,285,236
Trade and other receivables 1,863,144 3,482,427
Work-in-progress 471,465 510,171
Inventory 310,863 273,564
Prepaid expenses 189,487 276,337
2,900,681 5,827,735
Non-current assets
Property, plant and equipment 2,577,131 3,333,740
Intangibles 141,569 166,552
5,619,381 9,328,027
Liabilities
Current liabilities
Bank loan - 740,000
Trade and other payables 2,788,488 3,335,549
Provisions 97,908 90,278
Deferred revenue 495,131 563,071
Loan payable, corporate shareholder 925,000 -
Current portion of long-term debt - 42,840
Liability component of debentures - 1,635,400
4,306,527 6,407,138
Shareholders' equity
Capital stock 41,706,049 40,981,049
Other reserves 2,803,559 2,803,559
Deficit (43,196,754 ) (40,863,719 )
1,312,854 2,920,889
5,619,381 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 - - - - - (2,333,035 ) (2,333,035 )
Balance,September 30, 2012 41,706,049 1,734,404 1,028,149 41,006 2,803,559 (43,196,754 ) 1,312,854
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 - - - - - (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
Interim Consolidated Statements of Operations and Comprehensive Income (Loss)
(Unaudited)
Three months ended
September 30
Nine months ended
September 30
2012
$
2011
$
2012
$
2011
$
Revenue 2,491,124 4,978,609 7,360,711 15,557,992
Cost of goods sold 1,419,971 3,815,508 5,989,051 11,985,102
Gross margin 1,071,153 1,163,101 1,371,660 3,572,890
Operating expenses
Selling 45,673 310,041 219,062 938,094
General and administrative 789,646 1,084,272 3,050,795 3,557,265
Finance 50,419 291,233 452,059 864,916
Research and development tax credits 50,749 (162,422 ) (18,251 ) (411,422 )
936,487 1,523,124 3,703,665 4,948,853
Income (loss) before under noted items 134,666 (360,023 ) (2,332,005 ) (1,375,963 )
Loss on disposal of assets - - (1,030 ) -
Unrealized foreign exchange loss on debentures - (360,732 ) - (246,454 )
Net income (loss) and comprehensive loss 134,666 (720,755 ) (2,333,035 ) (1,622,417 )
Basic loss per share 0.00 (0.01 ) (0.02 ) (0.02 )
Diluted loss per share 0.00 0.00 (0.02 ) (0.01 )
Weighted average number of shares outstanding 113,295,535 67,117,191 100,655,477 67,117,191
Weighted average number of diluted shares outstanding 113,295,535 255,788,191 100,655,477 255,788,191
Interim Consolidated Statements of Cash Flow
(Unaudited)
Three months ended
September 30
Nine months ended
September 30
2012
$
2011
$
2012
$
2011
$
Operations
Net income (loss) 134,666 (720,755 ) (2,333,035 ) (1,622,417 )
Items not affecting cash:
Depreciation of property, plant and equipment 167,247 320,898 582,178 955,799
Amortization of intangibles 8,327 24,625 24,983 73,337
Loss on disposal of assets - - 1,030 -
Accretion of interest on debentures - - - 71,114
Capitalized fees and interest on debentures - 185,736 - 185,736
Unrealized foreign exchange loss on debentures - 360,732 - 246,454
Foreign currency fluctuation - (35,384 ) - (31,142 )
310,240 135,852 (1,724,844 ) (121,119 )
Net change in non-cash working capital items (1,528,166 ) 241,156 1,099,139 491,380
Net cash provided by (used in) operations (1,217,926 ) 377,008 (625,705 ) 370,261
Investing activities
Acquisition of property, plant and equipment (36,642 ) (24,131 ) (77,281 ) (127,996 )
Disposal of property, plant and equipment - - 251,712 -
Acquisition of intangibles - - - (17,642 )
Net cash provided by (used in) investing activities (36,642 ) (24,131 ) 174,431 (145,638 )
Financing activities
Increase (decrease) in bank loan - (60,000 ) 210,000 500,000
Repayment of bank loan - - (950,000 ) -
Increase in loan payable, corporate shareholder 925,000 - 925,000 -
Repayment of long-term debt - (115,569 ) (42,840 ) (746,968 )
Repayment of debentures - - (910,400 ) -
Net cash provided by (used in) financing activities 925,000 (175,569 ) (768,240 ) (246,968 )
Foreign exchange loss on cash held in foreign currencies - 13,712 - 5,742
Increase (decrease) in cash and cash equivalents (329,568 ) 191,020 (1,219,514 ) (16,603 )
Cash and cash equivalents, beginning of period 395,290 36,833 1,285,236 244,456
Cash and cash equivalents, end of period 65,722 227,853 65,722 227,853

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