Quarter Highlighted by Significant Revenue Growth and
Increased Genevision(TM) Activity -
LAVAL, QC, Aug. 12 /CNW/ - Warnex Inc. (TSX: WNX) today announced financial results for the second quarter ended June 30, 2004.
Selected Highlights
- Closed private placement and convertible debenture issue for gross
proceeds of $11.8 million;
- Completed acquisition of Adaltis Clinical Laboratory business;
- Signed Genevision contracts with three major U.S.-based food
manufacturers;
- Received AOAC Performance Tested(SM) validation for Genevision tests
for E. coli O157 and E. coli O157:H7 and subsequent to the quarter
received AOAC validation for Listeria monocytogenes and Listeria
species
- Signed U.K. marketing and distribution agreement for Genevision with
Don Whitley Scientific Limited.
Consolidated revenue for the second quarter ended June 30, 2004, was $2.6 million, more than double the consolidated revenue of $1.2 million in the corresponding quarter in 2003. On a six-month basis, revenue totalled $4.8 million compared with $3.0 million over the same period a year ago. Warnex's net loss of $1.6 million or $0.04 per share in the period was similar to the net loss of the corresponding three-month period a year earlier. For the six-month period, net loss increased from $2.8 million or $0.06 per share in 2003 to $3.2 million or $0.07 per share in 2004.
"The second quarter saw accelerated levels of activity for Warnex as we continued to add new customers, build marketing and distribution relationships and secure regulatory validations for the Genevision platform," said Mark Busgang, President and CEO of Warnex. "Coupled with the acquisition of Adaltis' Clinical Laboratory business and the completion of two financings, the Company is now well positioned to generate significant growth in the quarters ahead."
Operating Highlights
During the second quarter, Warnex significantly strengthened its balance sheet raising $5 million from a private placement and $6.8 million from the issuance of non secured convertible debentures for total gross proceeds of $11.8 million. A portion of these funds was used for the acquisition of the Clinical Laboratory division of Adaltis Inc. The purchase price of $3.2 million was paid with a combination of $2.4 million in cash and 655,738 common shares of Warnex, valued at $800,000. Among the acquired laboratory assets, Warnex obtained the exclusive license to Prenatest(R), a prenatal screening test with an annual revenue run rate in excess of $2.6 million, representing approximately 14,000 tests. The acquisition is a complementary fit with Warnex's existing service groups, expanding the range of services offered with the introduction of human clinical testing.
Over the last few months, the Company made continued progress with the commercial rollout of the Genevision platform, signing several major U.S. food manufacturers as Genevision customers. Carolina Turkeys, owners of the world's largest turkey processing plant, Gold Kist Inc., the third largest chicken producer in the U.S., and West Liberty Foods, a leading manufacturer of ready-to-eat meats and a major supplier to corporations such as Subway(R), Denny's(R), and Wal-Mart(R) will use our technology to test for the presence of Salmonella and Listeria in their products. Warnex also expanded its international marketing and distribution relationships for the Genevision technology by signing up Don Whitley Scientific Limited as its exclusive U.K. distributor. DWS is a leader in the development, production and distribution of instrumentation and associated products for microbiological applications.
In addition, the Company received its first U.S. validations for Genevision tests. Warnex's tests for the detection of E. coli O157 and E. coli O157:H7 have been granted Performance Tested(SM) status by the AOAC Research Institute, a non-profit international scientific organization that validates laboratory testing methods. Subsequent to quarter-end, the Company received AOAC validation for food safety tests for the detection of Listeria monocytogenes and Listeria species.
Finally, during the quarter, Warnex strengthened its R&D capabilities, signing a licensing agreement with IdentiGEN Ltd., based in Dublin, Ireland, to develop products incorporating IdentiGEN's proprietary know-how and Warnex's Genevision technology platform for the detection of genetically modified organisms (GMOs) and meat identification in food and feed products. In addition, the Company joined the Campden & Chorleywood Food Research Association (CCFRA), providing Warnex with access to the expertise of world- class food scientists. The CCFRA is the UK's largest independent organization carrying out research and development for the agri-food industry worldwide.
Additional Financial Review
Gross margin for the quarter was $1.0 million compared with ($8,314) in the same quarter of the previous year. For the six-month period, the gross margin increased to $1.7 million in 2004 from $466,872 in 2003. Selling, general and administrative (SG&A) expenses for the second quarter ended June 30, 2004, were $1.7 million versus $1.0 million in the corresponding quarter in 2003. For the first half of the year, SG&A expenses were $3.3 million compared with $2.0 million in 2003.
Research and development expenses in the quarter increased by 37% from $541,547 in the second quarter ended June 30, 2003, to $740,192 in the current quarter. R&D expenses continued to rise as the Company worked towards obtaining additional regulatory approvals in Canada and the U.S. for Genevision, while expanding its portfolio of markers and improving its detection platform.
As at June 30, 2004, the Company had working capital of approximately $12.0 million, including cash and cash equivalents totalling $11.9 million.
Conference Call Information
The Company will host a conference call on Friday, August 13 at 10:00 am EST. A live audio webcast of the conference call will be available through www.warnex.ca. A replay of the webcast will be available for 90 days at www.warnex.ca and at www.financialdisclosure.ca.
