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.