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



11/12/2010 9:06:18 AM

LAVAL, QUEBEC--(Marketwire - November 11, 2010) - Warnex Inc. (TSX: WNX) announced today its financial results for the third quarter ended September 30, 2010.

Operating Highlights


--  Increased third quarter revenues by 19% to $5.5 million compared to
    $4.7 million last year 

--  Generated net earnings of $5,569 for the third quarter compared to a
    net loss of $782,797 last year 

--  Announced a collaboration with the Montreal Heart Institute (MHI) and
    CEPMED (The Centre of Excellence in Personalized Medicine) to develop
    a new diagnostic test for early detection of cardiovascular and
    metabolic diseases 


"Both in the second and third quarters of 2010, we have achieved an increase in revenues and net earnings compared to 2009," said Mark Busgang, President and CEO of Warnex. "We continue to work on the restructuring of our balance sheet, which we hope to finalize by year-end. As well, all of our divisions are expanding their service offerings. Our Medical division is currently focused on the launch of the Septin9 blood test for colorectal cancer, the Bioanalytical division is now offering ligand binding services and the Analytical division is expanding into the natural health products field."

Financial Results

Consolidated revenue for the three-month period ended September 30, 2010, amounted to $5.5 million compared to $4.7 million during the same quarter a year ago, an increase of 19%. For the nine-month period ended September 30, 2010, revenue reached $17.0 million compared to $17.6 million for the same period in 2009.

Net earnings for the quarter amounted to $5,569 or $0.00 per share compared to a net loss of $782,797 or $0.01 per share for the same quarter in 2009. For the nine-month period ended September 30, 2010, net loss totalled $780,300 or $0.01 per share compared to $26,700 or $0.00 per share in 2009.

Adjusted earnings before interest, taxes, depreciation and amortization (adjusted EBITDA) for the quarter amounted to $571,411 versus $(354,517) for the same quarter last year. For the nine-month period ended September 30, 2010, adjusted EBITDA amounted to $1.1 million compared to $1.7 million in 2009.

Gross margins for the three-month period ended September 30, 2010, amounted to $1.3 million or 23% of sales compared to $0.4 million or 9% of sales for the same quarter last year. The increase of $0.9 million in gross margin is mainly explained by the increase in revenue in the Bioanalytical division compared to the same period last year. Gross margin for the nine-month period ended September 30, 2010, amounted to $3.9 million or 23% of sales compared to $4.5 million or 26% of sales in 2009, a decrease of $0.6 million.

Selling and administrative expenses amounted to $1.6 million for the three-month period ended September 30, 2010, compared to $1.3 million last year. The increase of $0.3 million is mainly explained by an increased investment in our sales group, professional fees related to the transition to International Financial Reporting Standards ("IFRS"), consulting fees related to the income tax credit claims 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 similar to last year at 29% in 2010 (2009 - 28%). For the nine-month period ended September 30, 2010, selling and administrative expenses amounted to $4.7 million compared to $4.3 million for the same period in 2009.

Financial expenses for the quarter were similar to last year at $0.3 million. For the nine-month period ended September 30, 2010, financial expenses amounted to $0.8 million (2009 - $0.9 million).

Research and development tax credits for the quarter amounted to $473,235 compared to $51,222 for the same period in 2009. For the nine-month period ended September 30, 2010, research and development tax credits amounted to $799,235 compared to $51,222 in 2009, an increase of $748,013.

As a consequence of the long term debentures becoming due in July 2011, Warnex has classified this debt as a current liability on the balance sheet. The Company hopes to finalize the restructuring of this debt prior to December 31, 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 2010    December 31 2009 
--------------------------------------------------------------------------
--------------------------------------------------------------------------
Assets                                                                    
Current                                                                   
  Cash and cash equivalents                   $44,859            $894,031 
  Accounts receivable                       3,363,204           2,880,919 
  Work-in-progress                            233,595             531,142 
  Inventory                                   168,433             177,027 
  Investment tax credits                                                  
   receivable                                 715,785             712,471 
  Prepaid expenses                            441,147             388,502 
--------------------------------------------------------------------------
--------------------------------------------------------------------------
                                            4,967,023           5,584,092 

Future income taxes                         1,221,000           1,221,000 
Property, plant and equipment               6,445,874           7,375,516 
Intangible assets                             421,676             382,145 
Goodwill                                      937,695             937,695 
--------------------------------------------------------------------------

                                          $13,993,268         $15,500,448 
--------------------------------------------------------------------------
--------------------------------------------------------------------------

Liabilities                                                               
Current                                                                   
  Bank indebtedness                          $340,000                  $- 
  Accounts payable                          2,908,811           3,008,594 
  Deferred revenue                            463,075             411,599 
  Current portion of long-term                                            
   debt                                     1,171,210           1,800,372 
  Current portion of debentures             6,253,168                   - 
--------------------------------------------------------------------------
                                           11,136,264           5,220,565 

Long-term debt                                 60,107             447,661 
Liability component of debentures                   -           6,245,274 
--------------------------------------------------------------------------

                                           11,196,371          11,913,500 
--------------------------------------------------------------------------
--------------------------------------------------------------------------

Shareholders' equity                                                      
  Capital stock                            40,981,049          40,981,049 
  Equity component of debentures              312,288             312,288 
  Contributed surplus                       2,456,265           2,466,016 
  Deficit                                 (40,952,705)        (40,172,405)
--------------------------------------------------------------------------
                                            2,796,897           3,586,948 
--------------------------------------------------------------------------
--------------------------------------------------------------------------

                                          $13,993,268         $15,500,448 
--------------------------------------------------------------------------
--------------------------------------------------------------------------


Interim Consolidated Statements of Contributed Surplus                    
(Unaudited)                                                               
                               Three months ended        Nine months ended
                                     September 30             September 30
                                 2010        2009        2010         2009
--------------------------------------------------------------------------
--------------------------------------------------------------------------
Balance, beginning of                                                     
 period                    $2,456,224  $2,465,635  $2,466,016   $2,445,043
Stock-based compensation           41         213      (9,751)      20,805
--------------------------------------------------------------------------
Balance, end of period     $2,456,265  $2,465,848  $2,456,265   $2,465,848
--------------------------------------------------------------------------
--------------------------------------------------------------------------


Interim Consolidated Statements of Deficit                                
(Unaudited)                                                               
                           Three months ended           Nine months ended 
                                 September 30                September 30 
                           2010          2009          2010          2009 
--------------------------------------------------------------------------
--------------------------------------------------------------------------
Balance, beginning                                                        
 of period         $(40,958,274) $(39,252,060) $(40,172,405) $(40,008,157)
Net earnings                                                              
 (loss)                   5,569      (782,797)     (780,300)      (26,700)
--------------------------------------------------------------------------
Balance, end of                                                           
 period            $(40,952,705) $(40,034,857) $(40,952,705) $(40,034,857)
--------------------------------------------------------------------------
--------------------------------------------------------------------------


Consolidated Statements of Accumulated Other Comprehensive Income         
(Unaudited)                                                               
                                      Three months ended Nine months ended
                                            September 30      September 30
                                       2010         2009  2010        2009
--------------------------------------------------------------------------
--------------------------------------------------------------------------
Accumulated Other Comprehensive                                           
 Income                                  $-           $-    $-          $-
--------------------------------------------------------------------------
--------------------------------------------------------------------------


Interim Consolidated Statements of Earnings and Comprehensive Income      
(Unaudited)                                                               
                             Three months ended         Nine months ended 
                                   September 30              September 30 
                              2010         2009         2010         2009 
--------------------------------------------------------------------------
--------------------------------------------------------------------------
Revenue                 $5,538,122   $4,656,405  $17,001,218  $17,635,534 
Cost of goods sold       4,240,500    4,257,685   13,107,403   13,126,804 
--------------------------------------------------------------------------
Gross margin             1,297,622      398,720    3,893,815    4,508,730 
--------------------------------------------------------------------------
--------------------------------------------------------------------------
Operating expenses                                                        
  Selling, general and                                                    
   administrative        1,626,886    1,323,933    4,713,174    4,286,844 
  Finance charges          278,365      278,259      832,758      902,284 
  Research and                                                            
   development tax                                                        
   credits                (473,235)     (51,222)    (799,235)     (51,222)
--------------------------------------------------------------------------
                         1,432,016    1,550,970    4,746,697    5,137,906 
--------------------------------------------------------------------------
--------------------------------------------------------------------------
Loss before under                                                         
 noted item and income                                                    
 taxes                    (134,394)  (1,152,250)    (852,882)    (629,176)
--------------------------------------------------------------------------
Unrealized foreign                                                        
 exchange gain on                                                         
 debentures                128,825      369,453       72,582      602,476 
Earnings (loss) before                                                    
 income taxes                5,569     (782,797)    (780,300)     (26,700)
--------------------------------------------------------------------------
--------------------------------------------------------------------------
Income taxes                     -     (225,000)           -            - 
Recovery of income                                                        
 taxes due to                                                             
 utilization of prior                                                     
 years' losses                   -      225,000            -            - 
--------------------------------------------------------------------------
                                 -            -            -            - 
--------------------------------------------------------------------------
--------------------------------------------------------------------------
Net earnings (loss)                                                       
 and comprehensive                                                        
 income                     $5,569    $(782,797)   $(780,300)    $(26,700)
--------------------------------------------------------------------------
--------------------------------------------------------------------------
Basic net earnings                                                        
 (loss) per share            $0.00       $(0.01)      $(0.01)       $0.00 
--------------------------------------------------------------------------
--------------------------------------------------------------------------
Fully diluted net                                                         
 earnings (loss) per                                                      
 share                       $0.00       $(0.01)      $(0.01)       $0.00 
--------------------------------------------------------------------------
--------------------------------------------------------------------------
Weighted average                                                          
 number of shares                                                         
 outstanding            67,117,191   66,683,858   67,117,191   65,227,191 
--------------------------------------------------------------------------
--------------------------------------------------------------------------
Weighted average                                                          
 number of fully                                                          
 diluted shares                                                           
 outstanding            67,117,191   72,913,853   67,117,191   72,913,853 
--------------------------------------------------------------------------
--------------------------------------------------------------------------


Interim Consolidated Statements of Cash Flows                             
(Unaudited)                                                               
                               Three months ended       Nine months ended 
                                     September 30            September 30 
                                 2010        2009        2010        2009 
--------------------------------------------------------------------------
--------------------------------------------------------------------------
Operations                                                                
Net earnings (loss)            $5,569   $(782,797)  $(780,300)   $(26,700)
Items not affecting cash:                                                 
  Amortization of                                                         
   property, plant and                                                    
   equipment                  347,987     408,888   1,039,104   1,180,297 
  Amortization of                                                         
   intangible assets           26,822      23,049      74,111      56,011 
  Accretion of interest        28,069      24,398      80,476      69,949 
  Unrealized foreign                                                      
   exchange gain on                                                       
   debentures                (128,825)   (369,453)    (72,582)   (602,476)
  Foreign currency                                                        
   fluctuation                211,095      82,912     188,989     223,945 
  Compensation cost for                                                   
   stock options                   41         213      (9,751)     20,805 
--------------------------------------------------------------------------
                              490,758    (612,790)    520,047     921,831 
  Net change in non-cash                                                  
   working capital items     (258,681)     68,227    (414,057)   (735,073)
--------------------------------------------------------------------------
Net cash provided by (used                                                
 in) operations               232,077    (544,563)    105,990     186,758 
--------------------------------------------------------------------------
--------------------------------------------------------------------------
Investing activities                                                      
  Acquisition of property,                                                
   plant and equipment        (32,821)    (66,934)   (109,462)   (245,262)
  Acquisition of                                                          
   intangible assets          (10,708)    (14,875)   (113,642)   (139,582)
--------------------------------------------------------------------------
Net cash used in investing                                                
 activities                   (43,529)    (81,809)   (223,104)   (384,844)
--------------------------------------------------------------------------
--------------------------------------------------------------------------
Financing activities                                                      
  Increase in operating                                                   
   line of credit              20,000           -     340,000           - 
  Proceeds from long-term                                                 
   debt                             -           -           -     350,000 
  Repayment of long-term                                                  
   debt                      (347,611)   (301,869) (1,016,716)   (996,024)
--------------------------------------------------------------------------
Net cash used in financing                                                
 activities                  (327,611)   (301,869)   (676,716)   (646,024)
--------------------------------------------------------------------------
--------------------------------------------------------------------------
Foreign exchange loss on                                                  
 cash held in foreign                                                     
 currencies                   (65,352)   (123,320)    (55,342)   (214,084)
--------------------------------------------------------------------------
--------------------------------------------------------------------------
Decrease in cash and cash                                                 
 equivalents                 (204,415) (1,051,561)   (849,172) (1,058,194)
Cash and cash equivalents,                                                
 beginning of period          249,274   2,426,855     894,031   2,433,488 
--------------------------------------------------------------------------
Cash and cash equivalents,                                                
 end of period                $44,859  $1,375,294     $44,859  $1,375,294 
--------------------------------------------------------------------------
--------------------------------------------------------------------------



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

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


Read at BioSpace.com


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