CLEVELAND, Nov. 6 /PRNewswire-FirstCall/ -- DATATRAK International, Inc.
(Nasdaq: DATA), a technology and services company focused on global eClinical
solutions for the clinical trials industry, today reported its operating
results for the third quarter and first nine months of 2008.
For the three months ended September 30, 2008, revenue increased 12%
compared to the prior year third quarter and was up 5% compared to the second
quarter of this year. Revenue for the third quarter was $2,367,000 compared to
$2,116,000 and $2,249,000 in the third quarter of last year and second quarter
of this year, respectively. Gross profit margin for the three months ended
September 30, 2008, was 76% compared to 50% and 60% in the third quarter of
last year and second quarter of this year, respectively. The significant
improvement in margin reflects not only higher revenues but substantially
lower direct costs. Direct costs decreased 46% and 37% compared to the third
quarter of the prior year and the second quarter of this year, respectively.
The closure of the Company's German office and the consolidation of its Help
Desk services into the Cleveland office was a main component of the cost
savings.
DATATRAK's financial results for the third quarter of 2008 were negatively
impacted by the accounting treatment for certain cost reduction steps
undertaken during the quarter. Selling, general and administrative expenses
include a charge of $835,000 related to the Company's German office and office
equipment leases. The $835,000 represents the fair value of the entire
remaining obligation of such leases. DATATRAK is in negotiations with each
lessor. Further, severance charges of $47,000 were recorded during the quarter
relating to the elimination of six positions.
In addition, the Company's financial results for the third quarter of 2008
were negatively impacted by ongoing legal costs of approximately $234,000
associated with the previously disclosed disputes between DATATRAK and certain
of the former shareholders of ClickFind, Inc. related to the 2006 Merger
Agreement (the "Merger Agreement") between DATATRAK and ClickFind. On
September 11, 2008, the Company filed a lawsuit against certain of the former
ClickFind shareholders including a former executive officer and other current
employees of the Company who are also holders of the ClickFind Notes (the
"Indemnifying Shareholders"), claiming willful and fraudulent failure to
disclose material information in connection with the acquisition of ClickFind.
On October 10, 2008, the Indemnifying Shareholders filed their answer and
counterclaim with the court to the claims presented by the Company in its
lawsuit. For the nine months ended September 30, 2008, legal costs associated
with these disputes was approximately $526,000.
As permitted by the Merger Agreement, the Company has provided notice of
offset against the remaining $3,000,000 ClickFind Notes obligation to the
Indemnifying Shareholders as partial satisfaction of the Company's claims for
indemnification against the Indemnifying Shareholders. In addition, pursuant
to the terms of the Merger Agreement, the Company also believes it is entitled
to reimbursement of the legal fees and costs incurred related to these matters
of approximately $544,000. Consequently, the Company withheld the May 1,
2008, August 1, 2008 and November 1, 2008 interest payments, totaling
approximately $147,000. The Indemnifying Shareholders have disputed both the
Company's right to indemnification and its right to offset the interest
payments and the ClickFind Notes. As such, the attached condensed consolidated
financial statements continue to reflect the accrual of interest on the
ClickFind Notes for the third quarter and first nine months of 2008 and the
$3,000,000 obligation as of September 30, 2008. The Company believes the
outcome of these disputes with the Indemnifying Shareholders will not affect
the Company's rights to the technology purchased from ClickFind or the ability
to deliver our eClinical platform.
For the three months ended September 30, 2008, the Company reported a net
loss of $(1,599,000), or $(0.12) per share on a basic and diluted basis. The
reported net loss for the comparable period of the prior year was
$(3,506,000), or $(0.26) per share on a basic and diluted basis. The prior
year third quarter included an impairment loss of $213,000 and severance
charges totaling $386,000.
For the nine months ended September 30, 2008, DATATRAK's revenue decreased
23% to $6,704,000 compared to $8,723,000 for the first nine months of 2007.
Year-to-date gross margin was 64% for the 2008 nine month period compared to
59% for the same time period of the prior year. For the nine months ended
September 30, 2008, the Company reported a net loss of $(19,831,000), or
$(1.45) per share on a basic and diluted basis, which includes $12,763,000 of
asset impairment charges, $652,000 of severance expense and the German lease
charge of $835,000. Net loss for the comparable nine month period of 2007 was
$(8,367,000), or $(0.64) per share on a basic and diluted basis, and included
asset impairment charges of $213,000 and severance expense of $723,000.
DATATRAK's backlog at September 30, 2008 was $12.5 million and backlog
currently stands at approximately $12.1 million. This compares to a backlog
of $13.0 million at December 31, 2007. Backlog is defined as the remaining
value of signed contracts or authorization letters to commence services. The
Company does not include in its backlog potential contracts or authorization
letters that have passed the verbal stage, but have not been signed. All
contracts are subject to possible delays or cancellation or can change in
scope in a positive or negative direction. Therefore, current backlog is not
necessarily indicative of the Company's future quarterly or annual revenue.
Historically, backlog has been a poor predictor of the Company's short-term
revenue.
"Our third quarter results are an encouraging improvement and they are
starting to show the Company's return to sound business fundamentals," stated
Dr. Jeffrey A. Green, Chief Executive Officer of DATATRAK International, Inc.
"We were able to attack our weak financial performance on two different fronts
during the quarter, higher revenues and lower direct cost, resulting in a
gross margin of 76%. If one backs out the German lease charge and legal costs
associated with the litigation our net loss would only have been $(530,000).
As a result of our restructuring efforts and positive changes we have made
across the Company we have significantly lowered our breakeven point and now
have strong leverage moving forward. Importantly, service levels to our
customers remain high and we continue to win new business within the United
States, European and Japanese clinical trial markets."
Green concluded, "NTT DATA in Japan has added their fourth client who has
elected to utilize our eClinical platform. During the month of October we
initiated our 18th cardiac safety study with COResearch, a Division of Duke
Medical Strategies. DATATRAK continues to be a strong technology competitor
within this global market and our management team is focused on continuing to
rebuild value within the Company."
The Company will also host a conference call today at 4:30 p.m. ET. To
participate via phone, participants are asked to dial 412-858-4600 a few
minutes before 4:30 p.m. ET. The conference call will also be available via
live web cast on DATATRAK International, Inc.'s web site by clicking the
button labeled "Click here for Live Web Cast, 3rd Quarter Earnings Call" on
the Company's homepage at www.datatrak.net a few minutes before 4:30 p.m. ET.
A replay of the phone call and web cast will each be available at
approximately 6:30 p.m. ET on November 6, 2008 and will run until 9:00 a.m. ET
on November 13, 2008. The phone replay can be accessed by dialing 412-317-0088
(access code 424446). To access the web cast replay go to the Company's
homepage at www.datatrak.net and click the button labeled "Click here for
Replay of Web Cast, 3rd Quarter Earnings Call."
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. 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
United States Food and Drug Administration (FDA), faster and more efficiently
than manual methods or loosely integrated technologies. DATATRAK's eClinical
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 FDA or counterpart European
bodies. DATATRAK International, Inc. has offices located in Cleveland, Ohio
and Bryan, Texas. Its common stock is listed on the NASDAQ Stock Market under
the ticker symbol "DATA". Visit the DATATRAK International, Inc. web site at
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; delisting of the Company's
common shares from the Nasdaq due to our failure to continue to meet
applicable Nasdaq Capital Market requirements; the infringement upon other's
intellectual property rights; the Company's success in integrating its
acquisition's operations into its own operations and the costs associated with
maintaining and/or developing two product suites; the outcome of the Company's
disputes with former shareholders of ClickFind, Inc.; the effects and outcomes
of the Company's exploration of potential opportunities directed at maximizing
shareholder value; 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.
DATATRAK International, Inc. and Subsidiaries
Condensed Consolidated Balance Sheet Data
(Unaudited)
September 30, December 31,
2008 2007
Cash and investments $2,431,711 $8,514,361
Accounts receivable, net 1,801,491 1,070,688
Deferred tax asset 154,300 1,399,000
Property and equipment, net 952,086 3,534,799
Goodwill --- 10,856,113
Other intangible assets, net --- 520,458
Other 313,212 577,792
Total assets $5,652,800 $26,473,211
Accounts payable and other current
liabilities $6,638,774 $3,971,883
Long-term liabilities 2,074,113 5,931,962
Shareholders' equity (deficit) (3,060,087) 16,569,366
Total liabilities and
shareholders' equity (deficit) $5,652,800 $26,473,211
DATATRAK International, Inc. and Subsidiaries
Condensed Consolidated Statements of Operations
(Unaudited)
For the Three Months Ended
September 30,
2008 2007
Revenue $2,367,031 $2,116,333
Direct costs 568,020 1,061,088
Gross profit 1,799,011 1,055,245
Selling, general and administrative expenses 3,135,004 3,282,508
Impairment loss --- 213,209
Severance expense 46,701 386,368
Depreciation and amortization 183,863 669,941
Loss from operations (1,566,557) (3,496,781)
Interest income 17,717 128,623
Interest (expense) (54,362) (91,121)
Other 4,317 ---
Loss before income taxes (1,598,885) (3,459,279)
Income tax expense --- 47,000
Net loss $(1,598,885) $(3,506,279)
Net loss per share:
Basic:
Net loss per share $(0.12) $(0.26)
Weighted-average shares
outstanding 13,681,901 13,634,075
Diluted:
Net loss per share $(0.12) $(0.26)
Weighted-average shares
outstanding 13,681,901 13,634,075
DATATRAK International, Inc. and Subsidiaries
Condensed Consolidated Statements of Operations
(Unaudited)
For the Nine Months Ended
September 30,
2008 2007
Revenue $6,704,165 $8,723,138
Direct costs 2,400,663 3,617,858
Gross profit 4,303,502 5,105,280
Selling, general and administrative expenses 9,044,221 10,326,314
Impairment loss 12,763,145 213,209
Severance expense 651,750 723,429
Depreciation and amortization 1,208,152 2,178,986
Loss from operations (19,363,766) (8,336,658)
Interest income 106,723 350,328
Interest expense (175,489) (285,616)
Other (13,761) (1,700)
Loss before income taxes (19,446,293) (8,273,646)
Income tax expense 385,000 93,600
Net loss $(19,831,293) $(8,367,246)
Net loss per share:
Basic:
Net loss per share $(1.45) $(0.64)
Weighted average shares outstanding 13,681,901 13,014,534
Diluted:
Net loss per share $(1.45) $(0.64)
Weighted average shares outstanding 13,681,901 13,014,534
SOURCE DATATRAK International, Inc.