Q2 Results Continue Nine Month String Of Solid Performance
CLEVELAND, Aug. 17 /PRNewswire-FirstCall/ -- DATATRAK
International, Inc. (OTCQX: DATA), a technology and services
company focused on global eClinical solutions for the clinical
trials industry, today reported its operating results for the
second quarter and first-half of 2009. For the three months ended
June 30, 2009, revenue decreased $418,000, or 19%, to $1,831,000
from $2,249,000 for the same three months in 2008. Despite the
decline in revenue, gross profit margin improved to 75% in the 2009
second quarter compared to 60% in the second quarter of last year.
Compared to the prior year second quarter, combined direct cost and
selling, general & administrative ("SG&A") expenses
decreased approximately $2.1 million, or 53%, in the second quarter
of 2009. The Company reported a net loss of only $(39,000), or
$0.00 per share on a basic and diluted basis, for the three months
ending June 30, 2009 compared to a net loss of $(16,000,000), or
$(1.17) per share on a basic and diluted basis, for the same time
period of 2008. Last year's second quarter net loss of
$(16,000,000) included $12,763,000 of asset impairment charges,
$579,000 of severance expense and a tax provision of $385,000. The
current year second quarter net loss of $(39,000) reflects the
reversal of $154,000 of severance expense as a result of a
negotiated settlement with a former executive officer of the
Company. For the six months ended June 30, 2009, DATATRAK's revenue
decreased $420,000, or 10%, to $3,917,000, from $4,337,000 in the
first half of 2008. Net loss for the first half of 2009 was
$(827,000), or $(0.06) per share on a basic and diluted basis,
compared to a net loss of $(18,232,000), or $(1.33) per share on a
basic and diluted basis, reported for the same period of 2008.
Despite the decline in revenue, gross profit margin improved to 76%
in the first six months of 2009 compared to 58% in the same period
of last year. Compared to the prior year first half, combined
direct cost and SG&A expenses decreased approximately $3.7
million, or 48%, in the first half of 2009. At June 30, 2009, the
Company's backlog was $8,551,000 compared to $9,699,000 at March
31, 2009. Backlog consists of anticipated revenue from
authorization letters to commence services, statements of work and
other signed contracts yet to be completed. Potential contracts or
authorization letters that have passed the verbal stage, but have
not yet been signed, are excluded from backlog. The June 30th
backlog figure does not reflect the previously announced signing of
a letter of intent with a leading global clinical research
organizations (CRO) for trial services on a Phase III trial awarded
to DATATRAK by the European division of a Global Top 20
Pharmaceutical company in July with an estimated backlog amount of
$745,000. During the quarter the Company's cash balance declined to
$1.63 million at June 30, 2009 compared to $2.08 million as of
March 31, 2009. Approximately 47% of the $446,000 cash decrease, or
$208,000, is attributable to the payment of severance commitments
primarily to former executive officers of the Company. Cash during
the quarter was also impacted by the timing of annual insurance
renewals and annual hardware and software license renewals which
are amortized evenly over the year for expense recognition purposes
but require a full, or at least significant, cash disbursement at
the time of renewal. Combined, these renewals were approximately
$110,000 more in the second quarter of 2009 compared to the first
quarter of 2009. Cash receipts from our clinical trials decreased
less than 1% in the second quarter of 2009 compared to the first
quarter of 2009. "With three consecutive quarters of near
break-even performance, we are pleased with the ongoing commitment
of our team to execute our strategy to drive operating results,"
commented Laurence P. Birch, Chairman of the Board and Interim
Chief Executive Officer of DATATRAK International, Inc. "If you
adjust for severance charges for the last three quarters and focus
on the underlying operational performance of the Company our net
loss from operations was only $(153,000) and $(165,000) in the
first and second quarter of this year, respectively, and was a
slight profit of $15,000 in the fourth quarter of 2008. This nine
month operating loss of $(303,000) compares to a nine month
operating loss of $(6.9) million, excluding impairment charges and
severance, for the prior year period. While our progress to date
has been substantial, we continue to keep our eye on the prize as
we believe profitability and self sustaining cash flow will be key
to DATATRAK's long-term success." Birch continued, "We continue to
look for ways to increase our current backlog, and have implemented
many new initiatives with this goal in mind. According to new
research published in July by IDC Health Insights the use of
commercial electronic data capture (EDC) solutions in the life
sciences industry continues to grow as companies seek to more
quickly and effectively collect and use clinical data to accelerate
time to market for new drugs and devices. In addition, IDC's
research states that Phase Forward and Medidata are the dominant
EDC vendors but that smaller EDC vendors can be highly competitive
with the major vendors by focusing on specific industry segments
and successfully differentiating themselves in the market. To that
end, we have recently launched the concept of DATATRAK ONE(TM),
which encompasses our unique, single platform technology. The
singular architecture of our DATATRAK eClinical(TM) product suite
has been embraced by clients around the globe for its ability to
effectively manage clinical trials through an integrated
multi-component, comprehensive solution. Unlike many of our
competitors, which require integration between disparate systems,
the DATATRAK eClinical (TM) product is the only solution built on a
single, unified platform. Our approach has been confirmed
externally by Phase Forward chairman and chief executive officer
Bob Weiler himself in a July 27, 2009 press release where he
states, 'Customers are increasingly looking for a broader,
end-to-end, integrated clinical research suite (ICRS) from a
single, trusted vendor.' We believe DATATRAK ONE(TM) is that
solution." The Company also announced today it has selected BDO
Seidman, LLP ("BDO Seidman") as its new independent accountants,
commencing with the audit for the fiscal year ended December 31,
2009, and thereby dismissed Ernst & Young LLP ("Ernst &
Young"). The decision to change independent accountants was
approved by the Audit Committee of the Board of Directors of
DATATRAK. Ernst & Young did submit a proposal to the Company
for its fiscal 2009 audit. A representative from Ernst & Young
will be in attendance at the Company's Annual Meeting on August 26,
2009. The reports of Ernst & Young on DATATRAK's financial
statements for the past two years ended December 31, 2008 contained
no adverse opinion or disclaimer of opinion and was not qualified
or modified as to audit scope or accounting principle. The reports
of Ernst & Young on DATATRAK's financial statements for the
past two years ended December 31, 2008 did contain explanatory
paragraphs. Ernst & Young's report on DATATRAK's fiscal 2007
financial statements included an explanatory paragraph describing a
$3,000,000 balloon payment obligation due on February 1, 2009. In
December 2008 the $3,000,000 balloon payment obligation was
forgiven by the holders of the note. Ernst & Young's report on
DATATRAK's fiscal 2008 financial statements included an explanatory
paragraph describing an uncertainty about DATATRAK's ability to
continue as a going concern. At no time did DATATRAK have any
disagreements with Ernst & Young on any matter of accounting
principle or practices, financial statement disclosure, or auditing
scope or procedure, which disagreements, if not resolved to the
satisfaction of Ernst & Young, would have caused them to make
reference thereto in their report on the financial statements for
such year. "Our audit fees have been $335,000 and $369,000 for
fiscal 2008 and fiscal 2007, respectively," stated Raymond J. Merk,
the Company's Chief Financial Officer. "By filing a Certificate and
Notice of Termination of Registration on Form 15 with the
Securities and Exchange Commission on August 13, 2009 the Company's
reporting obligations with the SEC, including annual reports on
Form 10-K, quarterly reports on Form 10-Q and current reports on
Form 8-K, were immediately suspended. In addition, compliance with
numerous Sarbanes-Oxley requirements was immediately suspended as
well. We believe relief from the various SEC reporting requirements
and SOX requirements will provide substantial cost savings as we
shift from a Big Four firm to BDO Seidman for our fiscal 2009
audit." The Company has elected to follow the Pink OTC Markets
OTCQX Guidelines for Providing Adequate Current Information, the
highest tier and most transparent level of disclosure available to
the Company. The Company's 2009 second quarter report will be
available today prior to the market opening at
http://www.pinksheets.com/ under the symbol: DATA. About DATATRAK
International, Inc. DATATRAK International, Inc. is a worldwide
technology company focused on the provision of multi-component
eClinical solutions and related services for the clinical trials
industry. We operate under the concept of DATATRAK ONE(TM), which
encompasses our unique, single platform technology. The singular
architecture of our DATATRAK eClinical(TM) product suite has been
embraced by clients around the globe for its ability to effectively
manage clinical trials through an integrated multi-component,
comprehensive solution. The Company delivers a complete portfolio
of software products that were created in order to accelerate
clinical research data from investigative sites to clinical trial
sponsors and ultimately the FDA, faster and more efficiently than
manual methods or loosely integrated technologies. DATATRAK's
eClinical(TM) software suite can be deployed worldwide through an
ASP offering or in a licensed Enterprise Transfer model that fully
empowers its clients. The DATATRAK software suite and its earlier
versions have successfully supported hundreds of international
clinical trials involving thousands of clinical research sites and
encompassing tens of thousands of patients in 59 countries.
DATATRAK International, Inc.'s product suite has been utilized in
some aspect of the clinical development of 16 drugs and one medical
device that have received regulatory approval from either the
United States Food and Drug Administration or counterpart European
bodies. DATATRAK International, Inc. has offices located in
Cleveland, Ohio, and Bryan, Texas. Visit the DATATRAK
International, Inc. web site at http://www.datatrak.net/. Except
for the historical information contained in this press release, the
statements made in this release are forward-looking statements.
These forward-looking statements are made based on management's
expectations, assumptions, estimates and current beliefs concerning
the operations, future results and prospects of the Company and are
subject to uncertainties and factors (including those specified
below) which are difficult to predict and, in many instances, are
beyond the control of the Company. Factors that may cause actual
results to differ materially from those in the forward-looking
statements include the limited operating history on which the
Company's performance can be evaluated; the ability of the Company
to continue to enhance its software products to meet customer and
market needs; fluctuations in the Company's quarterly results; the
viability of the Company's business strategy and its early stage of
development; the timing of clinical trial sponsor decisions to
conduct new clinical trials or cancel or delay ongoing trials; the
Company's dependence on major customers; government regulation
associated with clinical trials and the approval of new drugs; the
ability of the Company to compete in the emerging EDC market;
losses that potentially could be incurred from breaches of
contracts or loss of customer data; the inability to protect
intellectual property rights or the infringement upon other's
intellectual property rights; the costs associated with maintaining
and/or developing two product suites; and general economic
conditions such as the rate of employment, inflation, interest
rates and the condition of capital markets. This list of factors is
not all-inclusive. In addition, the Company's success depends on
the outcome of various strategic initiatives it has undertaken, all
of which are based on assumptions made by the Company concerning
trends in the clinical research market and the health care
industry. The Company undertakes no obligation to update publicly
or revise any forward-looking statement whether as a result of new
information, future events or otherwise. DATATRAK International,
Inc. and Subsidiaries Condensed Consolidated Balance Sheet Data
(Unaudited) June 30, 2009 December 31, 2008 -------------
----------------- Cash and investments $1,631,729 $2,372,294
Restricted cash - current - 218,276 Accounts receivable, net
801,970 927,490 Property and equipment, net 579,883 785,549
Deferred tax asset 127,600 145,400 Other 382,043 198,131 -------
------- Total assets $3,523,225 $4,647,140 ========== ==========
Accounts payable and other current liabilities $1,583,577
$1,825,735 Deferred revenue - current 1,051,571 1,053,096 Long-term
liabilities 1,373,154 1,446,923 Shareholders' equity (485,077)
321,386 --------- ------- Total liabilities and shareholders'
equity $3,523,225 $4,647,140 ========== ========== DATATRAK
International, Inc. and Subsidiaries Condensed Consolidated
Statements of Operations (Unaudited) For the Three Months Ended
June 30, ----------------------------------- 2009 2008 ---- ----
Revenue $1,830,518 $2,248,905 Direct costs 457,024 898,763 -------
------- Gross profit 1,373,494 1,350,142 Selling, general and
administrative expenses 1,422,229 3,078,459 Impairment loss -
12,763,145 Severance expense (128,616) 579,206 Depreciation and
amortization 116,062 501,864 ------- ------- Loss from operations
(36,181) (15,572,532) Interest income 1,477 29,266 Interest
(expense) (4,151) (54,561) Other - (16,696) -- -------- Loss before
income taxes (38,855) (15,614,523) Income tax expense - 385,000 --
------- Net loss $(38,855) $(15,999,523) ========= =============
Net loss per share: Basic: Net loss per share $0.00 $(1.17) =====
======= Weighted-average shares outstanding 13,696,901 13,681,901
========== ========== Diluted: Net loss per share $0.00 $(1.17)
===== ======= Weighted-average shares outstanding 13,696,901
13,681,901 ========== ========== DATATRAK International, Inc. and
Subsidiaries Condensed Consolidated Statements of Operations
(Unaudited) For the Six Months Ended June 30,
--------------------------------- 2009 2008 ---- ---- Revenue
$3,916,694 $4,337,134 Direct costs 930,886 1,832,643 -------
--------- Gross profit 2,985,808 2,504,491 Selling, general and
administrative expenses 3,065,806 5,909,217 Impairment loss -
12,763,145 Severance expense 505,009 605,049 Depreciation and
amortization 238,038 1,024,289 ------- --------- Loss from
operations (823,045) (17,797,209) Interest income 4,480 89,006
Interest expense (8,159) (121,127) Other - (18,078) -- --------
Loss before income taxes (826,724) (17,847,408) Income tax expense
(benefit) - 385,000 -- ------- Net loss $(826,724) $(18,232,408)
========== ============= Net loss per share: Basic: Net loss per
share $(0.06) $(1.33) ======= ======= Weighted average shares
outstanding 13,719,028 13,681,901 ========== ========== Diluted:
Net loss per share $(0.06) $(1.33) ======= ======= Weighted average
shares outstanding 13,719,028 13,681,901 ========== ==========
DATASOURCE: DATATRAK International, Inc. CONTACT: Raymond J. Merk,
Chief Financial Officer and Chief Operating Officer, DATATRAK
International, Inc., +1-440-443-0082 x181 Web Site:
http://www.datatrak.net/
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