Warnex Inc. Reports Third Quarter 2009 Results

LAVAL, QUEBEC--(Marketwire - November 13, 2009) - Warnex Inc. (TSX: WNX) announced today financial results for the third quarter ended September 30, 2009.

Operating Highlights

- Signed an exclusive distribution agreement with Rosetta Genomics to offer Rosetta Genomics's microRNA-based assays in Canada

- Launched test for influenza A H1N1 virus mutation associated with resistance to Tamiflu®

- Signed a distribution agreement with Biron-Laboratoire medical to promote and distribute Warnex's test for the influenza A H1N1 virus, specifically targeting industrial companies

"Our year-to-date revenues of $17.6 million are slightly below last year due to reduced volume in our Bioanalytical division. We have had an unprecedented number of cancellations and postponements of bioanalytical projects in the third quarter, which are a testament to the economic and industry conditions experienced during the summer months. The industry seems to be returning to more normal levels for the last quarter and our business development efforts are ongoing to increase our business from new and existing customers," said Mark Busgang, President and CEO of Warnex. "In addition, we are preparing for the potential outbreak of the pandemic influenza A H1N1 virus. Our test, which provides rapid turnaround times, can assist healthcare professionals in diagnosing their patients faster. We are also pleased to collaborate with Biron to offer this testing service to industrial companies, allowing them to rapidly take appropriate action to limit the spread of infection in their workforce."

Financial Results

Consolidated revenue for the three-month period ended September 30, 2009, amounted to $4.7 million compared to $6.7 million during the same period a year ago, a decrease of 30%. For the nine-month period ended September 30, 2009, revenue reached $17.6 million from $18.7 million for the same period in 2008.

Net loss for the quarter amounted to $0.8 million or $0.01 per share compared to net earnings of $0.5 million or $0.01 per share for the same quarter in 2008. For the nine-month period ended September 30, 2009, net loss totalled $26,700 or $0.00 per share compared to net earnings of $1.7 million or $0.03 per share in 2008, which included a gain on extinguishment of debt of $1.8 million.

Earnings before interest, taxes, depreciation and amortization (EBITDA) for the quarter amounted to $(0.4) million versus $1.4 million for the same quarter last year. For the nine-month period ended September 30, 2009, EBITDA amounted to $1.5 million compared to $2.1 million in 2008.

Gross margins for the three-month period ended September 30, 2009, amounted to $0.4 million or 9% of sales compared to $2.3 million or 35% of sales for the same quarter last year. The decrease of $1.9 million in gross margin is mainly explained by the lower revenue in the Bioanalytical division compared to the same quarter last year. Gross margin for the nine-month period ended September 30, 2009, amounted to $4.5 million or 26% of sales compared to $5.2 million or 28% of sales in 2008, a decrease of $0.7 million.

Selling and administrative expenses amounted to $1.3 million for the three-month period ended September 30, 2009, compared to $1.2 million last year. The increase of $0.1 million is mainly explained by a loss on foreign exchange due to the strength of the Canadian dollar compared to the U.S dollar, the cost of options and an increased investment in business development. In proportion of revenue, administrative and selling expenses were higher than last year at 28% in 2009 (2008 - 18%). For the nine-month period ended September 30, 2009, selling and administrative expenses amounted to $4.3 million compared to $4.0 million for the same period in 2008.

Financial expenses for the quarter were similar to last year at $0.3 million. For the nine-month period ended September 30, 2009, financial expenses amounted to $0.9 million (2008 - $1.0 million).

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, government regulations, laboratory facilities, suppliers, employees, key customers and business partners, foreign currency risk, credit risk, liquidity risk, volatility of share price, 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          December 31
                                               2009                 2008
------------------------------------------------------------------------
------------------------------------------------------------------------
Assets
Current
 Cash and cash equivalents               $1,375,294           $2,433,488
 Accounts receivable                      2,771,662            3,967,918
 Work-in-progress                                 -            1,356,149
 Inventory                                  145,581              121,701
 Investment tax credits receivable          237,471              186,249
 Prepaid expenses                           448,149              306,238
------------------------------------------------------------------------
------------------------------------------------------------------------
                                          4,978,157            8,371,743

Future income taxes                       1,221,000              750,000
Property, plant and equipment             7,719,655            8,309,317
Intangible assets                           368,327              243,291
Goodwill                                    937,695              937,695
------------------------------------------------------------------------

                                        $15,224,834          $18,612,046
------------------------------------------------------------------------
------------------------------------------------------------------------
Liabilities
Current
 Accounts payable                        $2,279,455           $3,860,615
 Deferred revenue                           351,080            1,358,586
 Current portion of long-term debt        1,338,300            1,267,184
------------------------------------------------------------------------
                                          3,968,835            6,486,385

Long-term debt                            1,231,317            1,872,557
Liability component of debentures         6,300,354            6,952,881
------------------------------------------------------------------------
                                         11,500,506           15,311,823
------------------------------------------------------------------------
------------------------------------------------------------------------

Shareholders' equity
 Capital stock                           40,981,049           40,551,049
 Equity component of debentures             312,288              312,288
 Contributed surplus                      2,465,848            2,445,043
 Deficit                                (40,034,857)         (40,008,157)
------------------------------------------------------------------------
                                          3,724,328            3,300,223
------------------------------------------------------------------------
------------------------------------------------------------------------
                                        $15,224,834          $18,612,046
------------------------------------------------------------------------
------------------------------------------------------------------------



Interim Consolidated Statements of Contributed Surplus
(Unaudited)

                            Three months ended         Nine months ended
                                  September 30              September 30
                            2009          2008         2009         2008
------------------------------------------------------------------------
------------------------------------------------------------------------
Balance, beginning 
 of period           $ 2,465,635   $ 2,548,143  $ 2,445,043  $ 1,210,708
Transfer of
 the equity
 component
 of debentures
 extinguished
 during the period             -             -            -    1,428,114
Stock-based 
 compensation                213      (104,995)      20,805     (195,674)
------------------------------------------------------------------------
Balance,
 end of period       $ 2,465,848   $ 2,443,148  $ 2,465,848  $ 2,443,148
------------------------------------------------------------------------
------------------------------------------------------------------------



Interim Consolidated Statements of Deficit
(Unaudited)

                                         Three months ended
                                               September 30
                                         2009          2008
------------------------------------------------------------
------------------------------------------------------------
Balance, beginning 
 of period                       $(39,252,060) $(41,147,119)
Net earnings (loss)                  (782,797)      511,610
------------------------------------------------------------
Balance, end of period           $(40,034,857) $(40,635,509)
------------------------------------------------------------
------------------------------------------------------------

                                           Nine months ended
                                                September 30
                                          2009          2008
------------------------------------------------------------
------------------------------------------------------------
Balance, beginning 
 of period                        $(40,008,157) $(42,381,214)
Net earnings 
 (loss)                                (26,700)    1,745,705
------------------------------------------------------------
Balance, end of period            $(40,034,857) $(40,635,509)
------------------------------------------------------------
------------------------------------------------------------



Consolidated Statements of Accumulated Other Comprehensive Income
(Unaudited)

                              Three months ended        Nine months ended
                                    September 30             September 30
                              2009          2008        2009         2008
-------------------------------------------------------------------------
-------------------------------------------------------------------------
Accumulated 
 Other Comprehensive Income     $-            $-          $-           $-
-------------------------------------------------------------------------
-------------------------------------------------------------------------



Interim Consolidated Statements of Earnings and Comprehensive Income
(Unaudited)

                            Three months ended         Nine months ended
                                  September 30              September 30

                            2009          2008         2009         2008
-------------------------------------------------------------------------
-------------------------------------------------------------------------
Revenue               $4,656,405    $6,669,833  $17,635,534  $18,669,822
Cost of goods 
 sold                  4,257,685     4,352,157   13,126,804   13,429,038
-------------------------------------------------------------------------
Gross margin             398,720     2,317,676    4,508,730    5,240,784
-------------------------------------------------------------------------
-------------------------------------------------------------------------
Operating expenses
 Selling, general 
  and administrative   1,323,933     1,221,500    4,286,844    4,044,939
 Finance charges         278,259       280,863      902,284      960,629
 Research and 
  development tax 
  credits                (51,222)            -      (51,222)           -
-------------------------------------------------------------------------
                       1,550,970     1,502,363    5,137,906    5,005,568
-------------------------------------------------------------------------
-------------------------------------------------------------------------
Earnings (loss) 
 before under 
 noted items 
 and income taxes     (1,152,250)      815,313     (629,176)     235,216
-------------------------------------------------------------------------
-------------------------------------------------------------------------
Unrealized foreign 
 exchange gain (loss)
 on debentures           369,453      (303,703)     602,476     (303,703)
Gain on extinguishment 
 of debt                       -             -            -    1,814,192
-------------------------------------------------------------------------
                         369,453      (303,703)     602,476    1,510,489
-------------------------------------------------------------------------
-------------------------------------------------------------------------
Earnings (loss) 
 before income 
 taxes                  (782,797)      511,610      (26,700)   1,745,705
-------------------------------------------------------------------------
-------------------------------------------------------------------------
Income taxes 
 recovered              (225,000)            -            -            -

Recovery of income 
 taxes due 
 to utilization 
 of prior 
 years' losses           225,000             -            -            -
-------------------------------------------------------------------------
                               -             -            -            -
-------------------------------------------------------------------------
-------------------------------------------------------------------------
Net earnings 
 (loss) and 
 comprehensive 
 income                $(782,797)     $511,610     $(26,700)  $1,745,705
-------------------------------------------------------------------------
-------------------------------------------------------------------------
Basic net earnings 
 (loss) per share         $(0.01)        $0.01        $0.00        $0.03
-------------------------------------------------------------------------
-------------------------------------------------------------------------
Fully diluted net 
 earnings (loss) 
 per share                $(0.01)        $0.01        $0.00        $0.03
-------------------------------------------------------------------------
-------------------------------------------------------------------------
Weighted average 
 number of 
 shares outstanding   66,683,858    64,317,191   65,227,191   58,135,533
-------------------------------------------------------------------------
-------------------------------------------------------------------------
Weighted average 
 number of fully 
 diluted shares 
 outstanding          72,913,853    64,317,191   72,913,853   58,135,533
-------------------------------------------------------------------------
-------------------------------------------------------------------------



Interim Consolidated Statements of Cash Flows
(Unaudited)

                            Three months ended         Nine months ended
                                  September 30              September 30
                            2009          2008         2009         2008
------------------------------------------------------------------------
------------------------------------------------------------------------
Operations
Net earnings (loss)   $ (782,797)    $ 511,610    $ (26,700) $ 1,745,705
Items not affecting 
 cash:
 Amortization of 
  property, plant 
  and equipment          408,888       381,716    1,180,297    1,099,109
 Amortization of 
  intangible assets       23,049        14,972       56,011       44,532
 Loss on disposal 
  of property, plant 
  and equipment                -             -            -        1,054
 Accretion of interest    24,398        21,130       69,949      178,899
 Unrealized foreign 
  exchange loss (gain) 
  on debentures         (369,453)      303,703     (602,476)     303,703
 Gain on extinguishment 
  of debt                      -             -            -   (1,814,192)
 Foreign currency 
  fluctuation             82,912       (23,461)     223,945      (68,793)
 Compensation cost 
  for stock options          213      (104,995)      20,805     (195,674)
------------------------------------------------------------------------
                        (612,790)    1,104,675      921,831    1,294,343
 Net change in 
  non-cash working 
  capital items           68,227       289,173     (735,073)     812,232
------------------------------------------------------------------------
Net cash provided by 
 (used in) operations   (544,563)    1,393,848      186,758    2,106,575
------------------------------------------------------------------------
------------------------------------------------------------------------
Investing activities
 Decrease in long-term 
  receivables                  -       125,000            -      125,000
 Acquisition of property, 
  plant and equipment    (66,934)      (58,399)    (245,262)    (374,825)
 Acquisition of 
  intangible assets      (14,875)            -     (139,582)      (4,609)
 Proceeds on disposal of 
  property, plant 
  and equipment                -             -            -        1,725
------------------------------------------------------------------------
Net cash provided by 
 (used in) investing 
 activities              (81,809)       66,601     (384,844)    (252,709)
------------------------------------------------------------------------
------------------------------------------------------------------------
Financing activities
 Proceeds from 
  long-term debt               -             -      350,000    2,000,000
 Repayment of 
  long-term debt        (301,869)     (358,652)    (996,024)  (1,841,387)
 Repayment of 
  liability component 
  of debentures                -             -            -   (1,377,737)
------------------------------------------------------------------------
Net cash used in 
 financing 
 activities             (301,869)     (358,652)    (646,024)  (1,219,124)
------------------------------------------------------------------------
------------------------------------------------------------------------
Foreign exchange gain
 (loss) on cash held 
 in foreign 
 currencies             (123,320)        4,344     (214,084)       3,428
------------------------------------------------------------------------
------------------------------------------------------------------------
Increase (decrease) 
 in cash and 
 cash equivalents     (1,051,561)    1,106,141   (1,058,194)     638,170
Cash and cash 
 equivalents, 
 beginning of 
 period                2,426,855       548,980    2,433,488    1,016,951
------------------------------------------------------------------------
------------------------------------------------------------------------
Cash and cash 
 equivalents,
 end of period       $ 1,375,294   $ 1,655,121  $ 1,375,294  $ 1,655,121
------------------------------------------------------------------------
------------------------------------------------------------------------


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

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