Warnex Inc. (TSX VENTURE:WNX) ("Warnex") announced today financial results for
the second quarter ended June 30, 2012 and provided an update on its operations.
Second Quarter Highlights
-- On April 24, 2012, the Company announced the sale of its Analytical
Services division to NEOPHARM LABS Inc. With the sale of our Analytical
Services division and last year's sale of our Medical division, the
Company's only remaining operating business unit is its Bioanalytical
Services division.
-- On April 4, 2012, Mr. Marc Lebel, an experienced pharmaceutical services
executive, was appointed as Interim Chief Executive Officer of the
Company.
-- During the quarter Persistence Capital Partners LP ("PCP") converted a
portion of its debentures and Warnex repaid the remaining balance,
resulting in no long term debt outstanding as of the end of the quarter.
PCPs conversion of $725,000 in principal amount of debentures resulted
in the issuance of 46,178,344 shares, resulting in PCP owning
approximately 51.56% of the Company's shares outstanding.
-- During the quarter the Company completed a credit facility with Accord
Financial Inc. which allowed Warnex to repay its debentures and close
out its outstanding line of credit. Subsequent to the quarter, the
Company entered into an agreement with PCP in order to replace its
credit facility with Accord. This new facility provides Warnex with
substantially greater operational flexibility than was available under
the Accord facility.
-- On April 20, 2012, the Company announced that it continues to evaluate
its strategic options for maximizing the value of its remaining
Bioanalytical Services division. The Company continues to pursue its
previously announced discussions regarding potential transactions
involving this division.
-- Subsequent to the quarter, the Company announced that Mattie Chinks
stepped down as a director of Warnex.
Financial Results
Consolidated revenue for the three-month period ended June 30, 2012, amounted to
$1.1 million compared to $4.8 million during the same period last year, and for
the six-month period ended June 30, 2012, revenue was $4.9 million compared to
$10.6 million for the same period in 2011. Revenues for the prior year included
revenues from our 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 quarter. For the six-month period ended June
30, 2012, revenue for our remaining Bioanalytical Services division was $2.7
million, versus $3.3 million in the first half of 2011.
Gross margins for the three-month period ended June 30, 2012, amounted to
negative $0.2 million compared to $0.8 million or 17% of revenue for the same
quarter last year. The decrease of $1.0 million in gross margin is mainly
explained by decreased revenues following the sale of the Medical and Analytical
divisions.
For the three-month period ended June 30, 2012, selling expenses amounted to
$0.1 million compared to $0.3 million for the same period last year. For the
six-month period ended June 30, 2012, selling expenses amounted to $0.2 million
compared to $0.6 million for the same period last year.
General and administrative expenses for the quarter were similar to last year at
$1.2 million. In proportion of revenue, general and administrative expenses were
higher than last year at 103% (24% in 2011) due to significant and one-time
charges of professional fees for the sale of the Analytical division,
transferring from the TSX to the TSX Venture, and refinancing of the debentures
and credit facility. For the six-month period ended June 30, 2012, general and
administrative expenses amounted to $2.3 million compared to $2.5 million for
the same period last year.
Financial expenses for the quarter decreased to $0.1 million from $0.3 million
for the same quarter in 2011. For the six-month period ended June 30, 2012,
financial expenses amounted to $0.4 million compared to $0.6 million for the
same period last year.
Research and development tax credits for the quarter amounted to negative $6,000
compared to $124,500 for the same quarter last year. For the six-month period
ended June 30, 2012, research and development tax credits amounted to $69,000
compared to $249,000 for the same period in 2011.
Earnings before interest, taxes, depreciation and amortization (EBITDA) for the
quarter amounted to negative $1.3 million versus negative $0.2 million for the
same quarter last year. For the six-month period ended June 30, 2012, EBITDA
amounted to negative $1.6 million compared to $0.2 million for the same period
in 2011.
The consolidated net loss for the quarter amounted to $1.6 million or $0.01 per
share compared to a net loss of $0.8 million or $0.01 per share for the same
quarter in 2011. For the six-month period ended June 30, 2012, net loss amounted
to $2.5 million or $0.03 per share compared to net loss of $0.9 million or $0.01
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)
June 30 December 31
2012 2011
$ $
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Assets
Current assets
Cash and cash equivalents 395,290 1,285,236
Trade and other receivables 1,154,939 3,482,427
Work-in-progress 108,293 510,171
Inventory 238,749 273,564
Prepaid expenses 236,432 276,337
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2,133,703 5,827,735
Non-current assets
Property, plant and equipment 2,707,736 3,333,740
Intangibles 149,896 166,552
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4,991,335 9,328,027
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----------------------------------------------------------------------------
Liabilities
Current liabilities
Bank loan - 740,000
Trade and other payables 2,660,473 3,335,549
Provisions 94,501 90,278
Deferred revenue 1,058,173 563,071
Current portion of long-term debt - 42,840
Liability component of debentures - 1,635,400
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3,813,147 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 (43,331,420) (40,863,719)
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1,178,188 2,920,889
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4,991,335 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, June
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, June
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 (2,467,701) (2,467,701)
------------------------------------------------------------
Balance, June
30, 2012 (43,331,420) 1,178,188
------------------------------------------------------------
------------------------------------------------------------
Balance,
December 31,
2010 (41,350,965) 2,433,643
Share-based
compensation - -
Net loss and
comprehensive
loss (901,662) (901,662)
------------------------------------------------------------
Balance, June
30, 2011 (42,252,627) 1,531,981
------------------------------------------------------------
------------------------------------------------------------
Interim Consolidated Statements of Operations and Comprehensive Income
(Loss)
(Unaudited)
Three months ended Six months ended
June 30 June 30
2012 2011 2012 2011
$ $ $ $
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----------------------------------------------------------------------------
Revenue 1,136,022 4,751,213 4,869,587 10,579,383
Cost of goods sold 1,345,327 3,953,430 4,569,080 8,169,594
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Gross margin (209,305) 797,783 300,507 2,409,789
----------------------------------------------------------------------------
Operating expenses
Selling 114,526 308,102 173,389 628,053
General and
administrative 1,170,214 1,158,417 2,261,149 2,472,993
Finance 102,681 299,684 401,640 573,683
Research and
development tax
credits 6,000 (124,500) (69,000) (249,000)
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1,393,421 1,641,703 2,767,178 3,425,729
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Loss before under noted
items (1,602,726) (843,920) (2,466,671) (1,015,940)
Loss on disposal of
assets (1,030) - (1,030) -
Unrealized foreign
exchange gain on
debentures - 10,072 - 114,278
----------------------------------------------------------------------------
Net loss and
comprehensive loss (1,603,756) (833,848) (2,467,701) (901,662)
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Basic loss per share (0.01) (0.01) (0.03) (0.01)
Diluted loss per share (0.01) (0.01) (0.03) (0.01)
Weighted average number
of shares outstanding 113,295,535 67,117,191 94,265,998 67,117,191
Weighted average number
of diluted shares
outstanding 113,295,535 67,117,191 94,265,998 67,117,191
----------------------------------------------------------------------------
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Interim Consolidated Statements of Cash Flow
(Unaudited)
Three months ended Six months ended
June 30 June 30
2012 2011 2012 2011
$ $ $ $
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Operations
Net loss (1,603,756) (833,848) (2,467,701) (901,662)
Items not affecting
cash:
Depreciation of
property, plant and
equipment 166,768 320,040 414,931 634,901
Amortization of
intangibles 6,454 24,612 16,656 48,712
Loss on disposal of
assets 1,030 - 1,030 -
Accretion of interest on
debentures - 31,514 - 71,114
Capitalized fees and
interest on debentures (227,002) - - -
Unrealized foreign
exchange gain on
debentures - (10,072) - (114,278)
Foreign currency
fluctuation - (14,362) - 4,242
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(1,656,506) (482,116) (2,035,084) (256,971)
Net change in non-cash
working capital items 2,558,107 374,560 2,627,305 250,224
----------------------------------------------------------------------------
Net cash provided by
(used in) operations 901,601 (107,556) 592,221 (6,747)
----------------------------------------------------------------------------
Investing activities
Acquisition of property,
plant and equipment - (11,625) (40,639) (103,865)
Disposal of property,
plant and equipment 251,712 - 251,712 -
Acquisition of
intangibles - (781) - (17,642)
----------------------------------------------------------------------------
Net cash provided by
(used in) investing
activities 251,712 (12,406) 211,073 (121,507)
----------------------------------------------------------------------------
Financing activities
Increase in bank loan - 260,000 210,000 560,000
Repayment of bank loan (950,000) - (950,000) -
Repayment of long-term
debt (2,212) (278,955) (42,840) (631,399)
Repayment of debentures (660,400) - (910,400) -
----------------------------------------------------------------------------
Net cash used in
financing activities (1,612,612) (18,955) (1,693,240) (71,399)
----------------------------------------------------------------------------
Foreign exchange loss on
cash held in foreign
currencies - (285) - (7,970)
----------------------------------------------------------------------------
Decrease in cash and
cash equivalents (459,299) (139,202) (889,946) (207,623)
Cash and cash
equivalents, beginning
of period 854,589 176,035 1,285,236 244,456
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Cash and cash
equivalents, end of
period 395,290 36,833 395,290 36,833
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