Net Loss Significantly Reduced to $195,220 in First Quarter on Cost
Cutting WAYNE, Pa., May 19 /PRNewswire-FirstCall/ -- Encorium
Group, Inc. (NASDAQ: ENCO), a full service multinational contract
research organization (CRO) that provides design, development, and
management capabilities for clinical trials and patient registries
to many of the world's leading pharmaceutical companies, today
announced its financial results for the first quarter ended March
31, 2009. Net revenue for the first quarter of 2009 was $7.0
million, a decrease of 6.1% from $7.5 million for the first quarter
of 2008. The decrease in net revenues was primarily due to an
$800,000 decrease in revenues generated by our European operations
of which approximately $668,000 was related to unfavorable foreign
currency fluctuations for the three months ended March 31, 2009
compared with the same prior year period. The Company's U.S.
operations saw a $340,000 increase in net revenues during the
quarter primarily due to a delay in recognizing revenue on a legacy
project and additional revenue resulting from a significant
increase in contract value for an ongoing clinical study that was
signed during the first quarter of 2009. The Company had a
consolidated backlog at March 31, 2009 of $31.2 million which
included approximately $3.5 million of new business wins in the
first quarter of 2009 compared to a backlog of $34.4 million at
December 31, 2008 and $40.0 million at March 31, 2008. Direct
expenses for the first quarter of 2009 were $4.4 million, or 62.2%
of net revenues, compared to $5.5 million, or 74.0% of net
revenues, for the comparable prior year period. While the decrease
in direct expenses was partially the result of approximately
$440,000 of favorable foreign currency fluctuations absorbed by the
Company's European operations in the first quarter of 2009, direct
expenses also decreased as a result of reductions in staff and
subcontractors utilized on active clinical studies being conducted
in the U.S. and Europe. Selling, general, and administrative
expenses (SG&A) decreased by 23.2% to $2.7 million, or 38.0% of
net revenue, for the three months ended March 31, 2009, compared to
$3.5 million, or 46.4% of net revenue, for the three months ended
March 31, 2008. The decrease in SG&A resulted primarily from
staff reductions and reductions in overhead expenses in the
Company's U.S. operations. Depreciation and amortization expense
decreased by 70.4% to $190,929 for the three months ended March 31,
2009 from $645,277 for the three months ended March 31, 2008
primarily as a result of certain intangible assets acquired as part
of the Remedium acquisition being fully amortized. The Company
reported a significant reduction in its net loss for the first
quarter of 2009 to $195,220, or $(0.01) per diluted share, from a
net loss of $2.0 million, or $(0.10) per diluted share in the first
quarter of 2008. Encorium has entered into two letters of intent
("LOI") with respect to the sale of the assets used to conduct its
U.S. operations and for the sale of its wholly owned European
subsidiary, Encorium Oy. Dr. David Ginsberg, Encorium Group's Chief
Executive Officer, commented, "We are very pleased with the results
of our cost cutting efforts, which significantly reduced our direct
expenses and SG&A to better align our costs to our current book
of business. We have entered into two separate LOIs to sell the
assets used in the U.S. Operations and the European Operations,
which we believe will maximize stockholder value and are in the
best interest of our stockholders, customers and employees."
Financial Position Encorium's balance sheet at March 31, 2009
reflected cash and cash equivalents of $2.3 million and
stockholders' equity of $3.6 million. The Company has no
outstanding debt. The Company's latest financials have been
prepared on a going concern basis. As previously disclosed,
Encorium's independent registered public accounting firm reported
that the Company's audited consolidated financial statements for
the fiscal year ended December 31, 2008, included in the Company's
Annual Report on Form 10-K filed with the Securities and Exchange
Commission on April 27, 2009, contains a paragraph that indicates
that, while the Company's financial statements have been prepared
on a going concern basis, there is substantial doubt about its
ability to continue as a going concern, and that no adjustments
have been made to the financial statements that might result from
the outcome of this uncertainty. In the event the sales described
above are not consummated, the Company anticipates it will be able
to meet its cash requirements at least into the first quarter of
2010 assuming it is able to fully implement its cost cutting
initiatives, win additional contracts during fiscal 2009 and
maintain current customer contracts. If the Company is unable to
fully implement its cost cutting initiatives, win additional
contracts during fiscal 2009 and maintain current customer
contracts, it will need additional capital, which it may not be
able to raise on terms acceptable to it or at all, and may need to
significantly reduce operating costs, which may include the
cessation of operations in some countries. About Encorium Group,
Inc. Encorium Group, Inc. is a global clinical research
organization specializing in the design and management of complex
clinical trials and Patient Registries for the pharmaceutical,
biotechnology and medical device industries. The Company's mission
is to provide its clients with high quality, full-service support
for their biopharmaceutical and medical device development
programs. Encorium offers therapeutic expertise, experienced team
management and advanced technologies. The Company has drug and
biologics development as well as clinical trial experience across a
wide variety of therapeutic areas such as infectious diseases,
cardiovascular, vaccines, oncology, diabetes
endocrinology/metabolism, gene therapy, immunology, neurology,
gastroenterology, dermatology, hepatology, women's health and
respiratory medicine. Encorium believes that its expertise in the
design of complex clinical trials, its therapeutic experience and
commitment to excellence, and its application of innovative
technologies, offer its clients a means to more quickly and cost
effectively move products through the clinical development process.
Encorium is headquartered in Wayne, Pennsylvania with its European
base of operations in Espoo, Finland. The Company has a geographic
footprint that includes over one billion people in North America,
Western/Central/Eastern Europe, Scandinavia, and the Baltics. This
press release contains forward-looking statements identified by
words such as "estimate," "project," "expect," "intend," "believe,"
"anticipate" and similar expressions regarding the potential sale
of the U.S. business and Encorium Oy and our expectations regarding
the effects of such transactions. Those statements involve risks
and uncertainties, and actual results could differ materially from
those discussed. Factors that could cause or contribute to such
differences include, but are not limited to: (i) the timing of the
closing, if any, of the transactions; (ii) the completion to the
purchasers' satisfaction of due diligence; (iii) the acquisition by
us of a fairness opinion relating to the purchase price for the
sale of Encorium Oy; (iv) our ability to negotiate definitive
agreements with the Purchasers; (v) the possibility that the
transactions may not close; and (vi) the risk that any
distributions to stockholders in connection with the transactions
will not result in a premium to the current stock price. Additional
risks and uncertainties that could affect the Company's future
operating results and financial condition generally include,
without limitation: (i) the risk that we may not have sufficient
funds to operate our business; (ii)our success in attracting new
business and retaining existing clients and projects; (iii) the
size, duration and timing of clinical trials we are currently
managing may change unexpectedly; (iv) the termination, delay or
cancellation of clinical trials we are currently managing could
cause revenues and cash-on-hand to decline unexpectedly; (v) the
timing difference between our receipt of contract milestone or
scheduled payments and our incurring costs to manage these trials;
(vi) outsourcing trends in the pharmaceutical, biotechnology and
medical device industries; (vii) the ability to maintain profit
margins in a competitive marketplace; (viii) our ability to attract
and retain qualified personnel; (ix) the sensitivity of our
business to general economic conditions; (x) other economic,
competitive, governmental and technological factors affecting our
operations, markets, products, services and prices; (xi) announced
awards received from existing and potential customers are not
definitive until fully negotiated contracts are executed by the
parties; (xii) our backlog may not be indicative of future results
and may not generate the revenues expected; (xiii) our ability to
successfully integrate the business of Remedium Oy, which we
acquired on November 1, 2006; (xiv) the performance of the combined
businesses to operate successfully and generate growth; and (xv)
uncertainties regarding the availability of additional capital and
continued listing of our common stock on Nasdaq. You should not
place undue reliance on any forward-looking statement. We undertake
no obligation to publicly release the result of any revision of
these forward-looking statements to reflect events or circumstances
after the date they are made or to reflect the occurrence of
unanticipated events. Please refer to the section entitled "Risk
Factors" in the Form 10-K for a more complete discussion of factors
which could cause our actual results and financial position to
change. You should not place any undue reliance on these
forward-looking statements which speak only as of the date of this
press release. Additional information concerning factors that might
affect our business or stock price which could cause actual results
to materially differ from those in forward-looking statements is
contained in Encorium Group's SEC filings, including its Annual
Report on Form 10-K for the year ended December 31, 2008 and other
periodic reports under the Securities Exchange Act of 1934, as
amended, copies of which are available upon request from Encorium
Group's investor relations department. ENCORIUM GROUP, INC.
CONSOLIDATED CONDENSED STATEMENTS OF OPERATIONS (UNAUDITED) Three
Months Ended March 31, 2009 2008 Net revenue $7,025,426 $ 7,483,606
Reimbursement revenue 1,706,165 1,106,030 Total Revenue 8,731,591
8,589,636 Operating Expenses Direct (exclusive of depreciation and
amortization) 4,367,176 5,539,671 Reimbursement out-of-pocket
expenses 1,706,165 1,106,030 Selling, general and administrative
2,666,874 3,472,871 Depreciation and amortization 190,929 645,277
Total Operating Expenses 8,931,144 10,763,849 Loss from Operations
(199,553) (2,174,213) Interest Income 10,919 54,573 Interest
Expense (14,524) (3,103) Net Interest (Expense) Income (3,605)
51,470 Net Loss before Income Taxes (203,158) (2,122,743) Income
Tax Benefit (7,938) (115,363) Net Loss $(195,220) $(2,007,380) Net
Loss per Common Share Basic $ (0.01) $ (0.10) Diluted $ (0.01) $
(0.10) Weighted Average Common and Common Equivalent Shares
Outstanding Basic 20,523,883 20,603,140 Diluted 20,523,883
20,603,140 ENCORIUM GROUP, INC. CONSOLIDATED CONDENSED BALANCE
SHEETS (UNAUDITED) March 31, December 31, 2009 2008 Assets Current
Assets Cash and cash equivalents $ 2,322,266 $ 5,705,818
Investigator advances 1,239,963 1,088,768 Accounts receivable, less
allowance of $97,000 for March 31, 2009 and December 31, 2008,
respectively 4,251,154 4,624,161 Prepaid expenses and other 984,239
1,206,088 Prepaid taxes 50,203 28,290 Costs and estimated earnings
in excess of related billings on uncompleted contracts 1,508,727
1,443,427 Total Current Assets 10,356,552 14,096,552 Property and
Equipment, Net 1,077,078 1,211,929 Intangible Assets Goodwill
1,280,107 1,366,269 Other intangibles, Net 3,431,844 3,733,517
Other assets 665,687 684,666 Total Assets $16,811,268 $21,092,933
Liabilities and Stockholders' Equity Current Liabilities Accounts
payable $ 3,135,627 $ 3,624,071 Accrued expenses 2,577,778
3,004,627 Deferred taxes 130,212 206,173 Obligations under capital
leases 70,261 72,542 Billings in excess of related costs and
estimated earnings on uncompleted contracts 2,506,893 3,307,347
Customer advances 3,492,910 5,297,000 Total Current Liabilities
11,913,681 15,511,760 Long Term Liabilities Obligations under
capital leases 157,078 189,680 Deferred taxes 823,405 897,204 Other
liabilities 280,090 316,516 Total Long Term Liabilities 1,260,573
1,403,400 Total Liabilities 13,174,254 16,915,160 Stockholders'
Equity Common stock, $.001 par value 35,000,000 shares authorized,
20,834,004 shares issued and 20,523,833 shares outstanding,
respectively 20,834 20,834 Additional paid-in capital 32,473,715
32,417,250 Additional paid-in capital warrants 905,699 905,699
Accumulated deficit (29,932,650) (29,737,430) Accumulated other
comprehensive income 896,105 1,298,109 Less: 4,363,703 4,904,462
Treasury stock, at cost, 310,121 shares (726,689) (726,689) Total
Stockholders' Equity 3,637,014 4,177,773 Total Liabilities and
Stockholders' Equity $16,811,268 $21,092,933 DATASOURCE: Encorium
Group, Inc. CONTACT: Philip L. Calamia, Chief Financial Officer of
Encorium Group, Inc., +1-610-975-9533; or Alison Ziegler of Cameron
Associates, +1-212-554-5469, Web Site: http://www.encorium.com/
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