WAYNE, Pa., Aug. 24 /PRNewswire/ -- 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 second quarter ended June 30, 2009.
As previously announced, on July 16, 2009 the Company sold substantially all of the assets relating to its US line of business to Pierrel Research USA, Inc., the result of which the Company no longer has any employees or significant operations in the United States. Due to this sale, for the six months ended June 30, 2009 and 2008, the results of the U.S. business have been presented as discontinued operations in the Company's consolidated financial statements.
Net revenue for the second quarter of 2009 was $4.5 million, a decrease of 23.37% from $5.9 million for the second quarter of 2008. The decrease in net revenues was primarily attributable to unfavorable foreign currency fluctuations of $1.4 million for the three months ended June 30, 2009. The Company had a consolidated backlog at June 30, 2009 from continuing operations of $19.6 million which included approximately $4.8 million of new business wins in the first half of 2009 compared to a backlog of $23.5 million at June 30, 2008.
Direct expenses for the second quarter of 2009 were $3.4 million, or 76.3% of net revenues, compared to $3.8 million, or 64.2% of net revenues, for the comparable prior year period. The decrease in direct expenses was primarily the result of approximately $541,000 of favorable foreign currency fluctuations absorbed by the Company's European operations in the second quarter of 2009, partially offset by severance and other costs of $202 thousand.
Selling, general, and administrative expenses (SG&A) decreased by 12% to $2.2 million, or 49.9% of net revenue, for the three months ended June 30, 2009, compared to $2.5 million, or 43% of net revenue, for the three months ended June 30, 2008. The decrease in SG&A was due primarily to approximately $178 thousand of favorable currency fluctuations and reduction in staff and facility costs in the Company's U.S. operations, partially offset by higher professional fee associated with the sale of the U.S. business.
Depreciation and amortization expense decreased 61.25% to $93,000 for the three months ended June 30, 2009 from $240,000 for the three months ended June 30, 2009 primarily as a result of certain intangible assets acquired as part of the Encorium Oy (formerly Remedium) acquisition being fully amortized.
Loss from continued operations increased by $604,000 for the three months to $1.3 million or $(0.06) per diluted share for the second quarter of 2009, from a net loss of $665,000, or $(0.03) per diluted share in the second quarter of 2008.
Encorium's balance sheet at June 30, 2009 reflected cash and cash equivalents of $838,696 and stockholders' equity of $1.8 million. 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.
Update on Sale of Encorium Oy
On May 11, 2009, we announced that we had entered into a non-binding letter of intent to sell our wholly-owned subsidiary, Encorium Oy, to a U.S. based clinical research organization. The terms of the transaction have not been announced and are continuing to be negotiated between the parties. The closing of the sale is subject to the completion if due diligence, execution of definitive agreements and stockholder approval. In the event the sale of Encorium Oy is consummated, the Company will no longer have any operations and the Board of Directors intend to, subject to stockholder approval, adopt a plan to liquidate and dissolve the Company and distribute liquidation proceeds, if any, to the stockholders. We anticipate the transaction will not close until the fourth quarter of 2009.
In the event the sale of Encorioum Oy is not consummated, we anticipate that will be able to meet our cash requirements through June of 2010, assuming we are able to fully implement our current cost cutting initiatives, we are able to win additional contracts during fiscal 2009 and we are able to maintain our current customer contracts. If the sale of Encorium Oy is not consummated we will continue to seek strategic alternatives, including, but not limited to attempting to secure additional financing. Our ability to obtain additional financing in the future will depend in part upon prevailing capital market conditions, as well as conditions in our business and our operating results; and those factors may affect our efforts to arrange additional financing on terms that are satisfactory to us or at all. If we are unable to secure additional financing on terms acceptable to us and on a timely basis, we may significantly reduce our operating costs, which may include the cessation of operations in some countries or seek stockholder approval to liquidate and dissolve. Any decision to liquidate and dissolve the Company may occur at any point during or before the first quarter of 2010. It is unclear whether there would be funds available for distribution to our stockholders in these instances.
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.
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 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 purchaser's 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 Purchaser; (v) the possibility that the transaction may not close; and (vi) the risk that any distributions to stockholders in connection with the transactions will not result in a premium to, and could be less than, 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; and (xiii) 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 Company Annual Report on Form 10-K for the year ended December 31, 2008 and the Company's Quarterly Report on Form 10-Q for the period ended June 30, 2009 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 STATEMENTS OF OPERATIONS (UNAUDITED) Three Months Six Months Ended Ended June 30, June 30, 2009 2008 2009 2008 Net revenue $4,483,263 $5,917,591 $9,021,436 $11,320,070 Reimbursement revenue 799,315 1,059,297 1,915,366 1,968,736 Total Revenue 5,282,578 6,976,888 10,936,802 13,288,806 Operating Expenses Direct 3,421,073 3,796,212 6,364,975 7,506,880 Reimbursement out-of-pocket expenses 799,315 1,059,297 1,915,366 1,968,736 Selling, general and administrative 2,238,562 2,546,593 4,320,868 4,800,827 Depreciation and amortization 92,877 240,229 183,375 780,275 Total Operating Expenses 6,551,827 7,642,331 12,784,584 15,056,718 Loss from Operations (1,269,249) (665,443) (1,847,782) (1,767,912) Interest Income 1,064 7,287 10,107 12,685 Interest Expense (2,059) (6,299) (14,563) (6,915) Net Interest (Expense) Income (995) 988 (4,456) 5,770 Other expense - - - - Net Loss from continuing operations before Income Taxes (1,270,244) (664,455) (1,852,238) (1,762,142) Income Tax Expense (Benefit) 11 54,766 (7,927) 68,896 Net Loss from continuing operations $(1,270,255) $(719,221) $(1,844,311) $(1,831,038) Net loss from discontinued operations (674,416) (726,230) (295,580) (1,621,793) Income Tax Expense (Benefit) - - - - Net Loss $(1,944,671) $(1,445,451) $(2,139,891) $(3,452,831) Weighted Average Common and Common Equivalent Shares Outstanding Basic 20,523,883 20,603,140 20,523,883 20,603,140 Diluted 20,523,883 20,603,140 20,523,883 20,603,140 Net Loss per Common Share Continuing Operations $ (0.06) $ (0.03) $ (0.09) $ (0.09) Discontinued Operations $ (0.03) $ (0.04) $ (0.01) $ (0.08) Net Loss per Common Share $ (0.09) $ (0.07) $ (0.10) $ (0.17) ENCORIUM GROUP, INC CONSOLIDATED BALANCE SHEET (UNAUDITED) June 30, December 31, 2009 2008 Assets Current Assets Cash and cash equivalents $ 838,696 $5,705,818 Investigator advances 0 1,088,768 Accounts receivable, less allowance of $0 and $97,000 for June 30, 2009 and December 31, 2008, respectively 2,790,665 4,624,161 Prepaid expenses and other 958,731 1,206,088 Prepaid taxes 46,117 28,290 Costs and estimated earnings in excess of related billings on uncompleted contracts 1,260,625 1,443,427 Total Current Assets 5,894,834 14,096,552 Property and Equipment, Net 314,191 1,211,929 Intangible Assets Goodwill 1,361,520 1,366,269 Other intangibles, Net 3,579,665 3,733,517 Other assets, including net assets held for sale of $2.7M 3,177,303 684,666 Total Assets $14,327,513 $21,092,933 Liabilities and Stockholders' Equity Current Liabilities Accounts payable $3,088,534 $3,624,071 Accrued expenses 2,799,343 3,004,627 Deferred taxes 272,676 206,173 Obligations under capital leases 46,076 72,542 Billings in excess of related costs and estimated earnings on uncompleted contracts 938,013 3,307,347 Customer advances 1,563,833 5,297,000 Total Current Liabilities 8,708,475 15,511,760 Long Term Liabilities Obligations under capital leases 63,444 189,680 Deferred taxes 857,458 897,204 Other liabilities, including liabilities held for sale of $2.6M 2,901,254 316,516 Total Long Term Liabilities 3,822,156 1,403,400 Total Liabilities 12,530,631 16,915,160 Stockholders' Equity Common stock, $.001 par value 35,000,000 shares authorized, 20,834,004 shares issued and 20,523,883 shares outstanding, respectively 20,834 20,834 Additional paid-in capital 32,495,771 32,417,250 Additional paid-in capital warrants 905,699 905,699 Accumulated deficit (32,916,484) (29,737,430) Accumulated other comprehensive income 2,017,751 1,298,109 Less: 2,523,571 4,904,462 Treasury stock, at cost, 310,121 shares (726,689) (726,689) Total Stockholders' Equity 1,796,882 4,177,773 Total Liabilities and Stockholders' Equity $14,327,513 $21,092,933
|SOURCE Encorium Group, Inc.|
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