WAYNE, Pa., April 19 /PRNewswire-FirstCall/ -- Encorium
Group, Inc. (Nasdaq: ENCO), a full service multinational clinical
research organization (CRO) conducting studies in over 30 countries
for many of the world's leading pharmaceutical and biotechnology
companies, today announced its financial results for the fourth
quarter and year ended December 31,
2009.
As previously announced, on July 16,
2009 the Company sold substantially all of the assets
relating to its U.S. 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 three and 12 months
ended December 31, 2009 and 2008, the
results of the U.S. business have been presented as discontinued
operations in the Company's consolidated financial statements.
2009 Fourth Quarter Financial Results
Net revenue for the fourth quarter of 2009 was $4.4 million, a decrease of 21.4% from
$5.6 million for the fourth quarter
of 2008. The decrease in net revenues was primarily
attributable to overall reductions in clinical trial activity,
approximately $491 thousand of
revenue recognized on contracts that completed in 2008 off set by
favorable foreign currency fluctuations of $480 thousand for the three months ended
December 31, 2009. The Company
had a consolidated backlog at December 31,
2009 from continuing operations of $17.1 million which included approximately
$12.3 million of new business wins in
2009 compared to a backlog of $23.8
million at December 31,
2008.
Direct expenses for the fourth quarter of 2009 were $3.3 million, or 74.9% of net revenues, compared
to $3.6 million, or 64.4% of net
revenues, for the comparable prior year period. The decrease
in direct expenses was primarily the result of reductions in staff
and subcontractors utilized on active clinical studies being
conducted and approximately $341
thousand of unfavorable foreign currency fluctuation.
Selling, general, and administrative expenses (SG&A) was
$1.7 million, or 38.5% of net
revenue, for the three months ended December
31, 2009, compared to $2.2
million, or 39.2% of net revenue, for the three months ended
December 31, 2008.
Loss from continuing operations decreased to $558 thousand or $(0.18) per diluted share for the fourth quarter
of 2009, from a net loss of $12.6
million, or $(4.92) per
diluted share, in the fourth quarter of 2008.
2009 Full Year Financial Results
Net revenue for the twelve months ended December 31, 2009 decreased to $17.9 million as compared to $22.3 million for the twelve months ended
December 31, 2008. The decrease
in revenue was primarily due to a decrease in the number of
contracts and related contract values of active clinical studies
along with $1.1 million of
unfavorable currency fluctuations.
Direct expenses for the year ended December 31, 2009 were $12.6 million compared to $14.6 million for the year ended December 31, 2008. Despite reduced staffing
and subcontractor costs and a favorable currency fluctuation of
$1.1 million, direct expenses as a
percent of net revenue increased to 70.3% from 65.6% in the prior
year due to lower net revenues. SG&A expenses for 2009
were $8.1 million, or 45.4% of net
revenue, compared to $9.0 million, or
40.5% of net revenue, for 2008. Of the $916 thousand decrease in SG&A, approximately
$581 thousand was attributable to
favorable foreign currency fluctuations, with the remainder a
result of reductions in staff and overhead.
Depreciation and amortization expense for 2009 declined to
$380 thousand compared to
$1.3 million for 2008, primarily as a
result of intangibles related to the Encorium OY acquisition
becoming fully amortized.
The Company reported a net loss from continuing operations for
the twelve months ended December 31,
2009 of $3.1 million, or
$(1.16) per diluted share, as
compared to a net loss from continuing operations of $16.9 million, or $(6.57) per diluted share for the twelve months
ended December 31, 2008.
Included in the 2008 results is a non-cash $14.4 million, or ($0.70) per share, asset impairment charge
related to the Company's intangible assets, which includes a
$1.9 million non-cash interim asset
impairment charge recorded by the Company during the third quarter
of 2008 as well as the $12.5 million
charge taken in the fourth quarter.
Financial Position, Going Concern and Potential
Delisting
Encorium's balance sheet at December 31,
2009 reflected cash and cash equivalents of $197 thousand and stockholders' equity of
$2.3 million. Our net cash used
in operations for the year ended December
31, 2009 was approximately $8.0
million. The Company's latest financials have been
prepared on a going concern basis. The report of Encorium's
independent registered public accounting firm, included in the
Company's Annual Report on Form 10-K filed with the Securities and
Exchange Commission on April 19,
2010, 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.
We anticipate that will meet our cash requirements at least into
March of 2011, assuming we are able to fully implement our current
costs cutting initiatives, we are able to win additional contracts
and we are able to maintain our current customer contracts.
In the event we are unable to do so, in order for the Company
to continue as a going concern we will be required to obtain
additional capital from external sources or significantly reduce
our operating costs, which may include the cessation of operations
in some countries.
Encorium currently fails to meet NASDAQ's $2.5 million minimum stockholders' equity
requirement for continued listing and may not be able to meet the
other listing requirements in the future. The Company
anticipates that a delisting action will be brought against it for
failure to comply with the requirement. If a delisting action
is brought, the Company may request a hearing before the NASDAQ
Listing Qualifications Panel. Such request would stay any
delisting determination by the NASDAQ Listing Qualifications Staff
and the Company's common stock would remain listed on NASDAQ
pending a formal determination by the Panel. However, there
can be no assurances that the Panel will grant such request.
Dr. Kai Lindevall, executive
chairman stated, "We are very pleased with the cost cutting
initiatives that we have put in place. While additional
financing is likely necessary, we believe our experience and
capabilities in the vaccine field coupled with the recent new
awards in this area demonstrate the long term potential we have to
grow into a leading vaccine franchise with expertise in regulatory
consultancy and strategic trial planning."
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. 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 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
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) uncertainties regarding the
availability of additional capital; and (xiv) uncertainties
regarding the 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,
2009 for a more complete discussion of factors which could
cause our actual results and financial position to change.
--financial tables to follow--
ENCORIUM GROUP,
INC
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|
CONSOLIDATED
STATEMENTS OF OPERATIONS
|
|
|
|
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|
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Three Months Ended
December 31,
|
|
Years Ended
December 31,
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2009
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|
2008
|
|
2009
|
|
2008
|
|
|
Revenue
|
|
|
|
|
|
|
|
|
|
Net revenue
|
$
4,389,075
|
|
$
5,581,974
|
|
$
17,857,117
|
|
$
22,298,938
|
|
|
Reimbursement
revenue
|
733,016
|
|
972,670
|
|
3,309,558
|
|
4,058,224
|
|
|
Total Revenue
|
5,122,091
|
|
6,554,644
|
|
21,166,675
|
|
26,357,162
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating Expenses
|
|
|
|
|
|
|
|
|
|
Direct
|
3,285,797
|
|
3,592,637
|
|
12,556,650
|
|
14,619,463
|
|
|
Reimbursement
out-of-pocket expenses
|
733,016
|
|
972,670
|
|
3,309,558
|
|
4,058,224
|
|
|
Selling, general and
administrative
|
1,688,937
|
|
2,187,486
|
|
8,068,683
|
|
9,023,951
|
|
|
Depreciation and
amortization
|
98,192
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|
98,997
|
|
380,130
|
|
1,282,678
|
|
|
Impairment
loss
|
-
|
|
12,535,809
|
|
-
|
|
14,391,992
|
|
|
Total Operating
Expenses
|
5,805,942
|
|
19,387,599
|
|
24,315,021
|
|
43,376,308
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|
|
|
|
|
|
|
|
|
|
|
|
Loss from Operations
|
(683,851)
|
|
(12,832,955)
|
|
(3,148,346)
|
|
(17,019,146)
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest
Income
|
14,271
|
|
16,409
|
|
9,315
|
|
30,165
|
|
|
Interest
Expense
|
(24,356)
|
|
3,732
|
|
(50,532)
|
|
(20,312)
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|
|
Net Interest (Expense)
Income
|
(10,085)
|
|
20,141
|
|
(41,217)
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|
9,853
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|
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|
|
|
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Other expense
|
-
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-
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-
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-
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Net Loss from continuing operations
before Income Taxes
|
(693,936)
|
|
(12,812,814)
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|
(3,189,563)
|
|
(17,009,293)
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|
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|
|
|
|
|
|
|
|
|
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Income Tax Expense
(Benefit)
|
(136,035)
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|
(163,940)
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|
(45,136)
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|
(103,671)
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|
|
|
|
|
|
|
|
|
|
|
|
Net Loss from continuing
operations
|
$
(557,901)
|
|
$
(12,648,874)
|
|
$
(3,144,427)
|
|
$
(16,905,622)
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|
|
|
|
|
|
|
|
|
|
|
|
Net loss from discontinued
operations
|
(171,250)
|
|
(1,090,418)
|
|
(725,266)
|
|
(4,167,854)
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|
|
|
|
|
|
|
|
|
|
|
|
Income Tax Expense
(Benefit)
|
-
|
|
-
|
|
-
|
|
-
|
|
|
|
|
|
|
|
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Net Loss
|
$
(729,151)
|
|
$
(13,739,293)
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|
$
(3,869,693)
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|
$
(21,073,476)
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|
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Weighted Average Common and Common
Equivalent Shares Outstanding
|
|
|
|
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|
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|
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Basic
|
3,138,713
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|
2,575,651
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|
2,709,904
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|
2,575,651
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|
|
Diluted
|
3,138,713
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|
2,575,651
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|
2,709,904
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|
2,575,651
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|
|
|
|
|
|
|
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Net Loss per Common
Share
|
|
|
|
|
|
|
|
|
|
Continuing Operations
|
$
(0.18)
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|
$
(4.92)
|
|
$
(1.16)
|
|
$
(6.57)
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|
|
Discontinued Operations
|
$
(0.05)
|
|
$
(0.42)
|
|
$
(0.27)
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|
$
(1.62)
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Net Loss per Common
Share
|
$
(0.23)
|
|
$
(5.34)
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|
$
(1.43)
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|
$
(8.19)
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ENCORIUM GROUP,
INC
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CONSOLIDATED
BALANCE SHEET
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(UNAUDITED)
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December
31,
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2009
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2008
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Assets
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Current Assets
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Cash and cash equivalents
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|
$
196,583
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|
$
5,705,818
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Investigator advances
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19,232
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|
11,971
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|
Accounts receivable, less allowance of
$412,973 and $97,000 for December 31, 2009 and 2008,
respectively
|
|
3,454,173
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3,253,617
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Prepaid expenses and other
|
|
872,722
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|
956,378
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Prepaid taxes
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|
0
|
|
-
|
|
|
Costs
and estimated earnings in excess of related billings on uncompleted
contracts
|
|
1,794,134
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|
606,260
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|
|
Debt issuance costs,
current
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|
75,400
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|
Current assets of discontinued
operations
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|
28,832
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|
3,562,508
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Total Current Assets
|
|
6,441,076
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|
14,096,552
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Property and Equipment,
Net
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|
307,552
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|
330,263
|
|
|
|
|
|
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|
|
Intangible Assets
|
|
|
|
|
|
|
Goodwill
|
|
1,389,045
|
|
1,366,269
|
|
|
Other intangibles, Net
|
|
3,508,310
|
|
3,733,517
|
|
|
Debt issuance costs,
long-term
|
|
150,800
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|
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|
|
Other assets
|
|
313,524
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|
349,357
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|
|
Long-term assets of discontinued
operations
|
|
-
|
|
1,216,975
|
|
|
|
|
|
|
|
|
|
Total Assets
|
|
$
12,110,307
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|
$
21,092,933
|
|
|
|
|
|
|
|
|
|
Liabilities and Stockholders'
Equity
|
|
|
|
|
|
Current Liabilities
|
|
|
|
|
|
|
Accounts payable
|
|
$
1,756,678
|
|
$
2,429,339
|
|
|
Note payable
|
|
334,413
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|
-
|
|
|
Credit Line
|
|
300,697
|
|
-
|
|
|
Accrued expenses
|
|
2,333,099
|
|
2,719,187
|
|
|
Deferred taxes
|
|
248,117
|
|
206,173
|
|
|
Obligations under capital
leases
|
|
54,510
|
|
44,097
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|
|
Billings in excess of related costs
and estimated earnings on uncompleted contracts
|
|
1,179,779
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|
1,262,661
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|
|
Customer advances
|
|
1,361,496
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|
2,344,486
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|
|
Current liabilities of discontinued
operations
|
|
607,552
|
|
6,505,817
|
|
|
|
Total Current
Liabilities
|
|
8,176,341
|
|
15,511,760
|
|
|
|
|
|
|
|
|
|
Long Term Liabilities
|
|
|
|
|
|
|
Notes Payable
|
|
668,826
|
|
-
|
|
|
Obligations under capital
leases
|
|
52,541
|
|
100,402
|
|
|
Deferred taxes
|
|
837,424
|
|
897,204
|
|
|
Other liabilities
|
|
104,624
|
|
200,175
|
|
|
Long-term liabilities of discontinued
operations
|
|
-
|
|
205,619
|
|
|
|
Total Long Term
Liabilities
|
|
1,663,415
|
|
1,403,400
|
|
Total Liabilities
|
|
9,839,756
|
|
16,915,160
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stockholders' Equity
|
|
|
|
|
|
Common
stock, $.001 par value 4,375,000 shares authorized, 3,426,938
and 2,604,25 shares issued at December 31, 2009 and 2008 and
3,388,173 and 2,565,486 shares outstanding at December 31, 2009 and
2008, respectively
|
3,427
|
|
2,604
|
|
|
Additional paid-in capital
|
35,142,854
|
|
32,435,480
|
|
|
Additional paid-in capital
warrants
|
299,606
|
|
905,699
|
|
|
Accumulated deficit
|
(33,607,123)
|
|
(29,737,430)
|
|
|
Accumulated other comprehensive
income
|
1,158,476
|
|
1,298,109
|
|
|
Less:
|
2,997,240
|
|
4,904,462
|
|
|
Treasury stock, at cost,
38,765 shares
|
(726,689)
|
|
(726,689)
|
|
|
Total Stockholders’
Equity
|
2,270,551
|
|
4,177,773
|
|
|
|
|
|
|
|
|
Total Liabilities and Stockholders’
Equity
|
$
12,110,307
|
|
$
21,092,933
|
|
|
|
|
|
See accompanying
notes to the consolidated financial statements.
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SOURCE Encorium Group, Inc.