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.