ENCORIUM GROUP, INC. UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL STATEMENTS
Exhibit 99.1
ENCORIUM GROUP, INC.
UNAUDITED PRO FORMA CONDENSED COMBINED
FINANCIAL STATEMENTS
On July 6, 2006, Encorium Group, Inc. (the “Company”) (NASDAQ:ENCO) entered into an Amended and Restated Combination Agreement (the “Amended Agreement”) with Xxx Xxxxxxxxx, Xxx Xxxxx, Xxxx-Xxxx Xxxxxxx, Xxxx Xxxxxxxx, Xxxxx Xxxxxxx, Xxxxxx Xxxxxxxxx, Xxxxxx Xxxxxxx, Xxxxxx Xxxxxxxxx, and NTGLT PHARMA BVBA (the “Stockholders”), constituting all of the stockholders of Remedium Oy, a corporation organized under the laws of Finland (“Remedium”), which amends and restates the Combination Agreement entered into on March 2, 2006 (the “Agreement”), the terms of which are described in the Company’s Current Report on Form 8-K filed on July 7, 2006. The transaction closed on November 1, 2006.
The consideration paid at closing of the Amended Agreement to the Stockholders for the Shares consisted of (i) shares of Common Stock of the Company with a value of $11,000,000; and (ii) $2,500,000 in cash. On March 27, 2007, pursuant to the Amended Agreement, the Company issued the Stockholders an additional number of shares of Common Stock of the Company with a value of $2,000,000 as “earn-out shares” and paid them an additional $1,500,000 in cash. On November 1, 2007, pursuant to the Amended Agreement, the Company will issue to the stockholders an additional number of shares of Common Stock of the Company with a value of $2,000,000 as the “anniversary stock payment.”
The unaudited pro forma condensed combined financial information reflecting the combination of The Company and Remedium is provided for informational purposes only. The pro forma information is not necessarily indicative of what the companies’ results of operations actually would have been had the merger been completed at the dates indicated. In addition, the unaudited pro forma condensed combined financial information does not purport to project the future operating results of the combined company.
The unaudited pro forma financial statements include certain purchase accounting adjustments, including items expected to have a continuing impact on the consolidated results, such as increased depreciation and amortization expense on acquired tangible and intangible assets. The unaudited pro forma statements do not include the impacts of any revenue, cost or other operating synergies that may result from the merger.
The Company and its affiliates have no material relationship with Remedium, the stockholders, or their affiliates, other than pursuant to the Agreement and the Amended Agreement.
ENCORIUM GROUP, INC
UNAUDITED PRO FORMA CONDENSED COMBINED CONSOLIDATED STATEMENT OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 2006
| Encorium Group, Inc. |
Acquired Business (Jan 1 - Oct 31, 2006) |
Pro Forma Adjustments |
Note | Pro Forma Combined |
||||||||||||
| Net Revenue |
15,325,822.00 | 9,935,983.00 | $ | 25,261,805 | ||||||||||||
| Reimbursement Revenue |
2,358,691.00 | 1,099,439.00 | 3,458,130 | |||||||||||||
| Total Revenue |
17,684,513.00 | 11,035,422.00 | 28,719,935 | |||||||||||||
| Operating Expenses |
||||||||||||||||
| Direct |
9,652,920.00 | 6,210,397.00 | 15,863,317 | |||||||||||||
| Reimbursement out-of-pocket expenses |
2,358,691.00 | 1,099,439.00 | 3,458,130 | |||||||||||||
| Selling and Administration |
5,731,388.00 | 4,567,599.00 | 98,419.67 | (a | ) | 10,397,407 | ||||||||||
| Depreciation and Amortization |
699,286.00 | 104,685.00 | 1,660,632.60 | (b | ) | 2,464,604 | ||||||||||
| Total Operating Expenses |
18,442,285.00 | 11,982,120.00 | 32,183,457 | |||||||||||||
| Loss from Operations |
(757,772.00 | ) | (946,698.00 | ) | (3,463,522 | ) | ||||||||||
| Interest Income |
293,061.00 | 1,102.00 | 294,163 | |||||||||||||
| Interest Expense |
(10,883.00 | ) | (36,387.00 | ) | (47,270 | ) | ||||||||||
| Net Interest Income (Expense) |
282,178.00 | (35,285.00 | ) | 246,893 | ||||||||||||
| Loss before Income Taxes |
(475,594.00 | ) | (911,413.00 | ) | (3,216,629 | ) | ||||||||||
| Income Tax Expense |
18,817.00 | 115,946.00 | (115,946.00 | ) | (c | ) | 18,817 | |||||||||
| Net Loss |
(494,411.00 | ) | (1,027,359.00 | ) | $ | (3,235,446 | ) | |||||||||
| Loss per share—basic |
$ | (0.18 | ) | |||||||||||||
| Loss per share—diluted |
$ | (0.18 | ) | |||||||||||||
| Shares outstanding—basic |
17,498,575 | |||||||||||||||
| Shares outstanding—diluted |
17,498,575 | |||||||||||||||
Unaudited Pro Forma Adjustments to the Statement of Operations:
| (a) | To reflect additional compensation expense resulting from the employment agreement with the acquired business’ Chief Executive Officer compared with his previous salary arrangement. The new employment agreement became effective at the closing of the transaction. |
| (b) | To reflect amortization expense for acquired intangibles based on an estimated value of $6.5 million for the acquired intangibles. |
| (c) | To establish a full valuation allowance for deferred tax assets in the acquired business due to uncertainty regarding the realization of these assets. This valuation allowance is partly due to local tax laws where open tax issues exist concerning what implications a change of ownership in the acquired business will have on the carry forward of losses incurred before the combination. |
