Warnex Reports Year End 2011 Results

Marketwired

LAVAL, QUEBEC--(Marketwire -04/05/12)- Warnex Inc. (TSX: WNX.TO - News) ("Warnex") announced today financial results for the year ended December 31, 2011.

2011 Highlights

 

--  Sold the assets of its Medical Laboratories division to Gamma-Dynacare
    Medical Laboratories for gross proceeds of $7.5 million. A portion of
    these proceeds was used to reduce the Company's debt owing pursuant to
    its outstanding debentures, reducing their aggregate principal amount
    from US$4,590,277 and CDN$2,140,815 in December 2011, to approximately
    CDN$1,576,000.
--  Reorganized the operations of its subsidiary Warnex Analytical Services
    Inc., including the shutdown of its analytical laboratories located in
    Laval and consolidation all of its analytical services at its Neopharm
    Laboratories facility located in Blainville.
--  Mr. Mark Busgang resigned as President and Chief Executive Officer and
    as a director of Warnex. The former responsibilities of Mr. Busgang were
    assumed by the remaining senior officers of Warnex with oversight from
    the newly created Executive Committee of the Board of Directors of
    Warnex.
--  On December 20, 2011, the Company had announced that it had entered into
    a binding letter of intent for the sale of its Analytical Services
    division for a consideration comprising of, among other elements,
    $400,000 in cash, the refund of working capital in the amount of
    approximately $700,000 and a 15% passive equity interest in the
    purchaser. On February 14, 2012, the Company announced that this
    transaction would not proceed due to the failure of the prospective
    purchaser to perform its obligations. As a result, the Company has
    initiated certain legal measures with a view to obtaining appropriate
    compensation from the prospective purchaser. The prospective purchaser
    has responded with its own legal proceedings alleging certain defaults
    on the part of the Company and seeking redress from the court. The
    Company intends to vigorously defend against such proceedings; however,
    it is not possible to predict the outcome of these various legal
    proceedings at this time.
--  Subsequent to year end, Mr. Francois Jette, Chief Financial Officer,
    left the Company effective March 23, 2012, in order to pursue other
    career opportunities. Upon his departure, his responsibilities were
    assumed on an interim basis by Jean Vezina, who has significant relevant
    experience, having previously served as the Chief Financial Officer of a
    publicly listed pharmaceutical company.
--  Subsequent to year end, the Company announced on April 4, 2012 that it
    has reached an agreement with Persistence Capital Partners LP (PCP), the
    holder of the Debentures, regarding the conversion of a portion of the
    Debentures and the repayment of the remaining balance. The conversion of
    CDN$725,000 in principal amount of the Debentures into an aggregate of
    46,178,344 Common Shares of Warnex pursuant to a notice of conversion
    received by Warnex on March 16, 2012, will be effected on or about April
    5, 2012. As a result, PCP will own approximately 51.56% of the
    outstanding Common Shares. Furthermore, PCP has agreed to allow Warnex
    until April 13, 2012 to repay the remaining balance of approximately
    $959,420 owing under the Debentures, with the expectation that by such
    time, Warnex will be able to put into place a one-year operating line of
    credit with a financial institution of up to CDN$2,000,000 in order to
    provide Warnex with the funds necessary to repay such outstanding
    balance and to support future working capital requirements. While Warnex
    is well advanced towards putting this credit facility into place, no
    assurances can be given that Warnex will be successful in this regard.
--  Subsequent to year end, Mr. Marc Lebel has been appointed as the Interim
    Chief Executive Officer of the Company. His primary role within Warnex
    will be to ensure the integrity of the Company's operations as the Board
    of Directors continues its assessment of the strategic alternatives
    available for the Company.
--  As a result of the Company's continuing developments, the Toronto Stock
    Exchange has agreed to further extend the deadline for the delisting of
    the Common Shares of Warnex to April 16, 2012. Warnex continues to
    explore its various options in light of this scheduled delisting.
--  The Company continues to evaluate all of its options for maximizing the
    value of both its Analytical Services division and its Bioanalytical
    Services division. In this regard and subsequent to year end, the
    Company has received a number of non-binding expressions of interest
    with respect to potential transactions involving each of these
    divisions. The prospective purchasers are currently in the process of
    conducting due diligence reviews of their target operations. However,
    the Company cautions that there can be no assurance that any transaction
    will occur, or if a transaction is in fact undertaken, as to its terms
    or timing.

Financial Results

Consolidated revenue for the twelve-month period ended December 31, 2011, amounted to $21.3 million compared to $22.3 million for the same period of last year, a decrease of 4%. Net earnings for the twelve-month period amounted to $0.5 million or $0.01 per share in 2011 compared to a net loss of $1.7 million or $0.03 per share in 2010.

For the twelve-month period ended December 31, 2011, earnings before interests, taxes, depreciation and amortization (EBITDA) amounted to $0.2 million compared to $1.0 million for the twelve-month period ended December 31, 2010.

Gross margins for the twelve-month period amounted to $5.3 million, representing 25% of revenue, in 2011 compared to $4.8 million and 22% of revenue in 2010.

For the twelve-month period ended December 31, 2011, selling expenses were $1.3 million compared to $1.4 million in 2010. As a percentage of revenue, selling expenses were similar to last year at 6%.

General and administrative expenses amounted to $5.7 million compared to $5.2 million last year. As a percentage of revenue, general and administrative expenses were higher than last year at 26% (23% in 2010).

Financial expenses increased to $1.2 million in 2011 from $1.1 million in 2010, mainly due to more interest paid on the line of credit.

Research and development tax credits amounted to $0.2 million for the year ended December 31, 2011, compared to $0.9 million in 2010.

Operating Highlights

The Analytical division's revenues decreased by 22% from $10.5 million in 2010 to $8.1 million in 2011. This decrease is mainly due to a decrease in volume from major customers during the year. The Company announced on July 15, 2011, that it would reorganize the operations of the Warnex Analytical Services Inc. subsidiary. As part of the restructuring, Warnex shut down the operations of its analytical laboratories located in Laval, and consolidated all of its analytical services at its Neopharm Laboratories facility located in Blainville. This reorganization reflected the Company's strategy to continually improve efficiency, reduce costs related to operations and provide better service to customers. This reorganization was completed in September 2011.

The Bioanalytical division's revenues increased by 25% from $6.4 million in 2010 to $8.0 million in 2011. This increase is mainly due to the execution of more complex projects with an average price per analysis higher than last year. The business development efforts in this division are ongoing to further increase the Company's business from new and existing customers.

The Medical division's revenue decreased by 5% from $5.2 million in 2010 (12 months) to $4.9 million in 2011 (11 months). This division was sold on December 8, 2011, to Gamma-Dynacare Medical Laboratories.

About Warnex

Warnex (www.warnex.ca) is a life sciences company devoted to protecting public health by providing laboratory services to the pharmaceutical sector. 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 has two facilities located in Laval and Blainville, 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.

Consolidated Statements of Financial Position

 

                                December 31     December 31       January 1
                                       2011            2010            2010
                                          $               $               $
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Assets
Current assets
Cash and cash equivalents         1,285,236         244,456         894,031
Trade and other receivables       3,482,427       3,478,299       3,593,390
Work-in-progress                    510,171         328,289         531,142
Inventory                           273,564         355,132         177,027
Prepaid expenses                    276,337         293,636         388,502
----------------------------------------------------------------------------
                                  5,827,735       4,699,812       5,584,092

Non-current assets
Deferred income taxes                     -       1,221,000       1,221,000
Property, plant and
 equipment                        3,333,740       6,569,217       7,868,974
Intangibles                         166,552         407,185         382,145
Goodwill                                  -         937,695         937,695
----------------------------------------------------------------------------
                                  9,328,027      13,834,909      15,993,906
----------------------------------------------------------------------------
----------------------------------------------------------------------------

Liabilities
Current liabilities
Bank loan                           740,000         580,000               -
Trade and other payables          3,335,549       2,899,115       3,008,594
Provisions                           90,278               -               -
Deferred revenue                    563,071         921,532         411,599
Current portion of long-term
 debt                                42,840         894,716       1,800,372
Liability component of
 debentures                       1,635,400       6,100,181               -
----------------------------------------------------------------------------
                                  6,407,138      11,395,544       5,220,565

Long-term liabilities
Long-term debt                            -           5,722         447,661
Liability component of
 debentures                               -               -       6,187,516
----------------------------------------------------------------------------
                                  6,407,138      11,401,266      11,855,742
----------------------------------------------------------------------------
----------------------------------------------------------------------------

Shareholders' equity
Capital stock                    40,981,049      40,981,049      40,981,049
Other reserves                    2,803,559       2,803,559       2,772,306
Deficit                         (40,863,719)    (41,350,965)    (39,615,191)
----------------------------------------------------------------------------
                                  2,920,889       2,433,643       4,138,164
----------------------------------------------------------------------------
----------------------------------------------------------------------------
                                  9,328,027      13,834,909      15,993,906
----------------------------------------------------------------------------
----------------------------------------------------------------------------

Consolidated Statements of Changes in Shareholders' Equity

 

                                                              Other reserves
                          --------------------------------------------------
                          --------------------------------------------------
                                  Equity
                   Capital components of   Share-based           Total other
                     stock    debentures  compensation     Other    reserves
                         $             $             $         $           $
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Balance,
 December 31,
 2010           40,981,049     1,734,404     1,028,149    41,006   2,803,559
Share-based
 compensation            -             -             -         -           -
Net and
 comprehensive
 income                  -             -             -         -           -
----------------------------------------------------------------------------
Balance,
 December 31,
 2011           40,981,049     1,734,404     1,028,149    41,006   2,803,559
----------------------------------------------------------------------------
----------------------------------------------------------------------------


Balance,
 January 1,
 2010           40,981,049     1,734,404       996,896    41,006   2,772,306
Share-based
 compensation            -             -        31,253         -      31,253
Net and
 comprehensive
 loss                    -             -             -         -           -
----------------------------------------------------------------------------
Balance,
 December 31,
 2010           40,981,049     1,734,404     1,028,149    41,006   2,803,559
----------------------------------------------------------------------------
----------------------------------------------------------------------------



                               Deficit                    Total
                                     $                        $
----------------------------------------------------------------
----------------------------------------------------------------
Balance,
 December 31,
 2010                      (41,350,965)               2,433,643
Share-based
 compensation                        -                        -
Net and
 comprehensive
 income                        487,246                  487,246
----------------------------------------------------------------
Balance,
 December 31,
 2011                      (40,863,719)               2,920,889
----------------------------------------------------------------
----------------------------------------------------------------


Balance,
 January 1,
 2010                      (39,615,191)               4,138,164
Share-based
 compensation                        -                   31,253
Net and
 comprehensive
 loss                       (1,735,774)              (1,735,774)
----------------------------------------------------------------
Balance,
 December 31,
 2010                      (41,350,965)               2,433,643
----------------------------------------------------------------
----------------------------------------------------------------

Consolidated Statements of Operations and Comprehensive Income (Loss)

 

                                                     2011              2010
For the years ended December 31                         $                 $
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Revenue                                        21,258,262        22,250,790
Cost of goods sold                             15,959,523        17,407,733
----------------------------------------------------------------------------
Gross margin                                    5,298,739         4,843,057
----------------------------------------------------------------------------

Operating expenses
  Selling                                       1,261,168         1,388,957
  General and administrative                    5,720,081         5,209,167
  Finance                                       1,178,969         1,137,924
  Research and development tax credits           (204,422)         (923,735)
----------------------------------------------------------------------------
                                                7,955,796         6,812,313
----------------------------------------------------------------------------

Loss before under noted items and income
 taxes                                         (2,657,057)       (1,969,256)
Impairment of assets                           (1,825,000)                -
Gain on disposal of assets                      5,896,240                 -
Gain on extinguishment of debt                    420,727                 -
Unrealized foreign exchange gain (loss)
 on debentures                                   (126,664)          233,482
----------------------------------------------------------------------------

Earnings (loss) before income taxes             1,708,246        (1,735,774)
Deferred income taxes                           1,221,000                 -
----------------------------------------------------------------------------
Net earnings (loss) and comprehensive
 income (loss)                                    487,246        (1,735,774)
----------------------------------------------------------------------------
----------------------------------------------------------------------------

Basic earnings (loss) per share                      0.01             (0.03)
Diluted earnings (loss) per share                    0.01             (0.03)
Weighted average number of shares
 outstanding                                   67,117,191        67,117,191
Weighted average number of diluted
 shares outstanding                           107,325,191        67,117,191
----------------------------------------------------------------------------
----------------------------------------------------------------------------

Consolidated Statements of Cash Flow

 

                                                     2011              2010
For the years ended December 31                         $                 $
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Operations
Net earnings (loss)                               487,246        (1,735,774)
Items not affecting cash:
Depreciation of property, plant and
 equipment                                      1,250,562         1,488,773
Amortization of intangibles                        93,591           101,600
Impairment of property, plant and
 equipment                                      1,787,510                 -
Impairment of intangibles                          37,490                 -
Gain on disposal of assets                     (5,896,240)                -
Accretion of interest on debentures                71,114           146,147
Capitalized fees and interest on
 debentures                                       578,282                 -
Gain on extinguishment of debt                   (420,727)                -
Unrealized foreign exchange loss (gain)
 on debentures                                    126,664          (233,482)
Deferred income taxes                           1,221,000
Share-based compensation                                -            31,253
Foreign currency fluctuation                      (15,408)           70,862
----------------------------------------------------------------------------
                                                 (678,916)         (130,621)
Net change in non-cash working capital
 items                                             92,446           622,115
----------------------------------------------------------------------------
Net cash provided by (used in)
 operations                                      (586,470)          491,494
----------------------------------------------------------------------------

Investing activities
Acquisition of property, plant and
 equipment                                       (211,486)         (189,016)
Proceeds on disposal of property, plant
 and equipment                                    408,891                 -
Acquisition of intangibles                        (17,642)         (126,640)
Proceeds on disposal of intangibles               127,194                 -
Proceeds on disposal of goodwill                6,833,935                 -
----------------------------------------------------------------------------
Net cash provided by (used in) investing
 activities                                     7,140,892          (315,656)
----------------------------------------------------------------------------

Financing activities
Increase in bank loan                             160,000           580,000
Repayment of long term debt                      (857,598)       (1,347,595)
Proceeds from debentures                          600,000                 -
Repayment of debentures                        (5,420,114)                -
----------------------------------------------------------------------------
Net cash used in financing activities          (5,517,712)         (767,595)
----------------------------------------------------------------------------

Foreign exchange gain (loss) on cash
 held in foreign currencies                         4,070           (57,818)
----------------------------------------------------------------------------

Increase (decrease) in cash and cash
 equivalents                                    1,040,780          (649,575)
Cash and cash equivalents, beginning of
 year                                             244,456           894,031
----------------------------------------------------------------------------
Cash and cash equivalents, end of year          1,285,236           244,456
----------------------------------------------------------------------------
----------------------------------------------------------------------------

Contact:

Michael Singer
Chairman of the Executive Committee of the Board of Director
Warnex Inc.
(514) 940-3610
msinger@thallion.com

View Comments (0)