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Miles
Km80.5

   

Warnex Inc. (CC:WNX) Reports Second Quarter 2010 Results


8/12/2010 9:24:42 AM

LAVAL, QUEBEC--(Marketwire - August 11, 2010) - Warnex Inc. (TSX: WNX) announced today financial results for the second quarter ended June 30, 2010.

Operating Highlights


--  Increased second quarter revenues by 18% to $6.4 million compared to
    $5.4 million last year 
--  Generated earnings before unrealized foreign exchange loss on debentures
    of $0.2 million versus a loss of $0.8 million last year, representing an
    increase of $1.0 million in operating profit 
--  Generated net earnings of $11,295 for the second quarter compared to a
    net loss of $346,660 last year 
--  Obtained a licence for a colorectal cancer blood screening test from
    Epigenomics 
--  Announced that its Bioanalytical Services division successfully passed a
    Good Clinical Practices (GCP) inspection by the Austrian Agency for
    Health and Food Safety (AGES) 
--  Appointed a new director, Dr. Richard Lacombe, who has over 30 years of
    experience in the pharmaceutical and CRO industries 

"We are pleased to have increased our quarterly revenues and to report positive net earnings for the second quarter. Both our Bioanalytical and Medical divisions showed revenue growth during the quarter while our Analytical division remained constant compared to last year," said Mark Busgang, President and CEO of Warnex. "Most notably, our operating earnings were improved by $1.0 million compared to the second quarter last year. In the coming quarter, we hope to finalize the restructuring of our balance sheet, while we continue to focus on growth in our top and bottom lines."

Financial Results

Consolidated revenue for the three-month period ended June 30, 2010, reached $6.4 million compared to $5.4 million during the same quarter a year ago, an increase of 18%. For the six-month period ended June 30, 2010, revenue amounted to $11.5 million compared to $13.0 million for the same period in 2009.

Net earnings for the quarter amounted to $11,295 or $0.00 per share compared to a net loss of $0.3 million or $0.01 per share for the same quarter in 2009. For the six-month period ended June 30, 2010, net loss totalled $0.8 million or $0.01 per share compared to net earnings of $0.8 million or $0.01 per share in 2009.

Adjusted earnings before interest, taxes, depreciation and amortization (EBITDA) for the quarter amounted to $0.9 million versus $0.1 million for the same quarter last year. For the six-month period ended June 30, 2010, adjusted EBITDA amounted to $0.5 million compared to $2.0 million in 2009.

Gross margins for the three-month period ended June 30, 2010, amounted to $1.8 million or 28% of sales compared to $1.0 million or 19% of sales for the same quarter last year. The increase of $0.8 million in gross margin is mainly explained by the increase in revenue in the Bioanalytical division compared to the same quarter last year. Gross margin for the six-month period ended June 30, 2010, amounted to $2.6 million or 23% of sales compared to $4.1 million or 32% of sales in 2009. This decrease is mainly explained by a slow first quarter in the Bioanalytical division this year compared to last year as well as the execution of high margin projects in this division during the first quarter of 2009.

Selling and administrative expenses amounted to $1.6 million for the three-month period ended June 30, 2010, compared to $1.5 million last year. The increase of $0.1 million is mainly explained by an increased investment in our sales group, professional fees related to the transition to International Financial Reporting Standards ("IFRS"), the review of our ISO certification in the Medical division and an increase in the salary expense, despite a reduction in other expenses compared to last year. In proportion of revenue, administrative and selling expenses were lower than last year at 24% (2009 - 27%). For the six-month period ended June 30, 2010, selling and administrative expenses amounted to $3.1 million compared to $3.0 million for the same period in 2009.

Financial expenses decreased by $35,249, from $313,086 in the second quarter of 2009 to $277,837 in the second quarter of 2010, mainly due to less interest following repayments made on the long term debt. For the six-month period ended June 30, 2010, financial expenses amounted to $554,393 (2009 - $624,025).

The Company has entered into agreements with certain debenture holders to modify the maturity dates. The Company is also in the process of analyzing its cash flow needs and in reviewing the alternatives between its current debenture structure, seeking new investors or other financing strategies.

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)                                                            

                                               June 30     December 31 
                                                  2010            2009 
---------------------------------------------------------------------- 
---------------------------------------------------------------------- 
Assets                                                                 
Current                                                                
  Cash and cash equivalents              $     249,274   $     894,031 
  Accounts receivable                        3,806,093       2,880,919 
  Work-in-progress                             129,595         531,142 
  Inventory                                    106,729         177,027 
  Investment tax credits receivable            801,000         712,471 
  Prepaid expenses                             413,411         388,502 
---------------------------------------------------------------------- 
---------------------------------------------------------------------- 
                                             5,506,102       5,584,092 

Future income taxes                          1,221,000       1,221,000 
Property, plant and equipment                6,761,040       7,375,516 
Intangible assets                              437,790         382,145 
Goodwill                                       937,695         937,695 
---------------------------------------------------------------------- 

                                         $  14,863,627   $  15,500,448 
---------------------------------------------------------------------- 
---------------------------------------------------------------------- 

Liabilities                                                            
Current                                                                
  Bank indebtedness                      $     320,000   $           - 
  Accounts payable                           3,333,501       3,008,594 
  Deferred revenue                             485,987         411,599 
  Current portion of long-term debt          1,421,253       1,800,372 
  Current portion of debentures                324,177               - 
---------------------------------------------------------------------- 
                                             5,884,918       5,220,565 

Long-term debt                                 157,675         447,661 
Liability component of debentures            6,029,747       6,245,274 
---------------------------------------------------------------------- 

                                            12,072,340      11,913,500 
---------------------------------------------------------------------- 
---------------------------------------------------------------------- 

Shareholders' equity                                                   
  Capital stock                             40,981,049      40,981,049 
  Equity component of debentures               312,288         312,288 
  Contributed surplus                        2,456,224       2,466,016 
  Deficit                                  (40,958,274)    (40,172,405)
---------------------------------------------------------------------- 
                                             2,791,287       3,586,948 
---------------------------------------------------------------------- 
---------------------------------------------------------------------- 

                                         $  14,863,627   $  15,500,448 
---------------------------------------------------------------------- 
---------------------------------------------------------------------- 


Interim Consolidated Statements of Contributed Surplus                    
(Unaudited)                                                               

                               Three months ended         Six months ended
                                          June 30                  June 30
                                 2010        2009        2010         2009
--------------------------------------------------------------------------
--------------------------------------------------------------------------
Balance, beginning of                                                     
 period                   $ 2,425,012 $ 2,445,078  $2,466,016  $ 2,445,043
Stock-based compensation       31,212      20,557      (9,792)      20,592
--------------------------------------------------------------------------
Balance, end of period    $ 2,456,224 $ 2,465,635  $2,456,224  $ 2,465,635
--------------------------------------------------------------------------
--------------------------------------------------------------------------


Interim Consolidated Statements of Deficit                               
(Unaudited)                                                              

                         Three months ended             Six months ended 
                                    June 30                      June 30 
                         2010          2009           2010          2009 
-------------------------------------------------------------------------
Balance,                                                                 
 beginning of                                                            
 period          $(40,969,569) $(38,905,400)  $(40,172,405) $(40,008,157)
Net earnings                                                             
 (loss)                11,295      (346,660)      (785,869)      756,097 
-------------------------------------------------------------------------
Balance, end of                                                          
 period          $(40,958,274) $(39,252,060)  $(40,958,274) $(39,252,060)
-------------------------------------------------------------------------
-------------------------------------------------------------------------


Consolidated Statements of Accumulated Other Comprehensive Income         
(Unaudited)                                                               

                               Three months ended         Six months ended
                                          June 30                  June 30
                                 2010        2009         2010        2009
--------------------------------------------------------------------------
--------------------------------------------------------------------------
Accumulated Other                                                         
 Comprehensive Income              $-          $-           $-          $-
--------------------------------------------------------------------------
--------------------------------------------------------------------------


Interim Consolidated Statements of Earnings and Comprehensive Income      
(Unaudited)                                                               

                            Three months ended           Six months ended 
                                       June 30                    June 30 
                             2010         2009          2010         2009 
--------------------------------------------------------------------------
--------------------------------------------------------------------------
Revenue               $ 6,372,426  $ 5,421,474   $11,463,096  $12,979,129 
Cost of goods sold      4,559,151    4,378,996     8,866,902    8,869,119 
--------------------------------------------------------------------------
Gross margin            1,813,275    1,042,478     2,596,194    4,110,010 
--------------------------------------------------------------------------
--------------------------------------------------------------------------
Operating expenses                                                        
  Selling, general                                                        
   and                                                                    
   administrative       1,561,595    1,481,407     3,097,427    2,962,911 
  Finance charges         277,837      313,086       554,393      624,025 
  Research and                                                            
   development tax                                                        
   credits               (238,000)           -      (326,000)           - 
--------------------------------------------------------------------------
                        1,601,432    1,794,493     3,325,820    3,586,936 
--------------------------------------------------------------------------
--------------------------------------------------------------------------
Earnings (loss)                                                           
 before under noted                                                       
 item and income                                                          
 taxes                    211,843     (752,015)     (729,626)     523,074 
--------------------------------------------------------------------------
Unrealized foreign                                                        
 exchange gain                                                            
 (loss) on                                                                
 debentures              (200,548)     405,355       (56,243)     233,023 
--------------------------------------------------------------------------
Earnings (loss)                                                           
 before income taxes       11,295     (346,660)     (785,869)     756,097 
--------------------------------------------------------------------------
--------------------------------------------------------------------------
Income taxes                    -      (75,000)            -      225,000 
Recovery of income                                                        
 taxes due to                                                             
 utilization of                                                           
 prior years' losses            -       75,000             -     (225,000)
--------------------------------------------------------------------------
                                -            -             -            - 
--------------------------------------------------------------------------
Net earnings (loss)                                                       
 and comprehensive                                                        
 income               $    11,295  $  (346,660)  $  (785,869) $   756,097 
Basic net earnings                                                        
 (loss) per share     $      0.00  $     (0.01)  $     (0.01) $      0.01 
Fully diluted net                                                         
 earnings (loss) per                                                      
 share                $      0.00  $     (0.01)  $     (0.01) $      0.01 
Weighted average                                                          
 number of shares                                                         
 outstanding           67,117,191   64,983,858    67,117,191   64,602,905 
Weighted average                                                          
 number of fully                                                          
 diluted shares                                                           
 outstanding           67,117,191   76,113,853    67,117,191   76,113,853 
--------------------------------------------------------------------------
--------------------------------------------------------------------------



Interim Consolidated Statements of Cash Flows                             
(Unaudited)                                                               

                       Three months ended June                            
                                            30   Six months ended June 30 
                             2010         2009          2010         2009 
--------------------------------------------------------------------------
--------------------------------------------------------------------------
Operations                                                                
Net earnings (loss)   $    11,295  $  (346,660)  $  (785,869) $   756,097 
Items not affecting                                                       
 cash:                                                                    
  Amortization of                                                         
   property, plant                                                        
   and equipment          346,117      389,166       691,117      771,409 
  Amortization of                                                         
   intangible assets       25,710       17,854        47,289       32,962 
  Accretion of                                                            
   interest                26,804       23,298        52,407       45,551 
  Unrealized foreign                                                      
   exchange gain                                                          
   (loss) on                                                              
   debentures             200,548     (405,355)       56,243     (233,023)
  Foreign currency                                                        
   fluctuation            (46,132)     172,174       (22,106)     141,033 
  Compensation cost                                                       
   for stock options       31,212       20,557        (9,792)      20,592 
--------------------------------------------------------------------------
                          595,554     (128,966)       29,289    1,534,621 
  Net change in non-                                                      
   cash working                                                           
   capital items         (131,731)    (399,618)     (155,376)    (803,300)
--------------------------------------------------------------------------
Net cash provided by                                                      
 (used in)                                                                
 operations               463,823     (528,584)     (126,087)     731,321 
--------------------------------------------------------------------------
--------------------------------------------------------------------------
Investing activities                                                      
  Acquisition of                                                          
   property, plant                                                        
   and equipment          (23,896)     (42,481)      (76,641)    (178,328)
  Acquisition of                                                          
   intangible assets      (38,047)     (29,221)     (102,934)    (124,707)
--------------------------------------------------------------------------
Net cash used in                                                          
 investing                                                                
 activities               (61,943)     (71,702)     (179,575)    (303,035)
--------------------------------------------------------------------------
--------------------------------------------------------------------------
Financing activities                                                      
  Increase                                                                
   (decrease) in                                                          
   operating line of                                                      
   credit                (140,000)           -       320,000            - 
  Proceeds from                                                           
   long-term debt               -      350,000             -      350,000 
  Repayment of long-                                                      
   term debt             (326,141)    (310,772)     (669,105)    (694,155)
--------------------------------------------------------------------------
Net cash provided by                                                      
 (used in) financing                                                      
 activities              (466,141)      39,228      (349,105)    (344,155)
--------------------------------------------------------------------------
--------------------------------------------------------------------------
Foreign exchange                                                          
 gain (loss) on cash                                                      
 held in foreign                                                          
 currencies                11,918     (133,934)       10,010      (90,764)
--------------------------------------------------------------------------
--------------------------------------------------------------------------
Decrease in cash and                                                      
 cash equivalents         (52,343)    (694,992)     (644,757)      (6,633)
Cash and cash                                                             
 equivalents,                                                             
 beginning of period      301,617    3,121,847       894,031    2,433,488 
--------------------------------------------------------------------------
Cash and cash                                                             
 equivalents, end of                                                      
 period               $   249,274  $ 2,426,855   $   249,274  $ 2,426,855 
--------------------------------------------------------------------------
--------------------------------------------------------------------------



Contacts:
Mark J. Busgang
President & CEO
Warnex Inc.
450-663-6724 x 310
mbusgang@warnex.ca

Catherine Sartoros
Communications Specialist
Warnex Inc.
450-663-6724 x 277
csartoros@warnex.ca



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