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 December 31
2012 2011
$ $
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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
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----------------------------------------------------------------------------
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
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4,306,527 6,407,138
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----------------------------------------------------------------------------
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)
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1,312,854 2,920,889
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5,619,381 9,328,027
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Interim Consolidated Statements of Changes in Shareholders' Equity
(Unaudited)
Other reserves
--------------------------------------------
--------------------------------------------
Equity
components Total
Capital of Share-based other
stock debentures compensation Other reserves
$ $ $ $ $
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Balance, December 31,
2011 40,981,049 1,734,404 1,028,149 41,006 2,803,559
Share-based
compensation - - - - -
Issuance of common
shares 725,000 - - - -
Net loss and
comprehensive loss - - - - -
----------------------------------------------------------------------------
Balance,September 30,
2012 41,706,049 1,734,404 1,028,149 41,006 2,803,559
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Balance, December 31,
2010 40,981,049 1,734,404 1,028,149 41,006 2,803,559
Share-based
compensation - - - - -
Net loss and
comprehensive loss - - - - -
----------------------------------------------------------------------------
Balance, September
30, 2011 40,981,049 1,734,404 1,028,149 41,006 2,803,559
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Deficit Total
$ $
---------------------------------------------------
---------------------------------------------------
Balance, December 31,
2011 (40,863,719) 2,920,889
Share-based
compensation - -
Issuance of common
shares - 725,000
Net loss and
comprehensive loss (2,333,035) (2,333,035)
---------------------------------------------------
Balance,September 30,
2012 (43,196,754) 1,312,854
---------------------------------------------------
---------------------------------------------------
Balance, December 31,
2010 (41,350,965) 2,433,643
Share-based
compensation - -
Net loss and
comprehensive loss (1,622,417) (1,622,417)
---------------------------------------------------
Balance, September
30, 2011 (42,973,382) 811,226
---------------------------------------------------
---------------------------------------------------
Interim Consolidated Statements of Operations and Comprehensive Income
(Loss)
(Unaudited)
Three months ended Nine months ended
September 30 September 30
2012 2011 2012 2011
$ $ $ $
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----------------------------------------------------------------------------
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)
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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
----------------------------------------------------------------------------
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Interim Consolidated Statements of Cash Flow
(Unaudited)
Three months ended Nine months ended
September 30 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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FOR FURTHER INFORMATION PLEASE CONTACT:
Michael Singer
Chairman of the Board of Directors
Warnex Inc.
(514) 940-3610
msinger@thallion.com
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