AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON APRIL 16, 2002
REGISTRATION NO. 333-81554
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
AMENDMENT NO. 2 TO
FORM S-3
REGISTRATION STATEMENT
UNDER THE SECURITIES ACT OF 1933
DATATRAK INTERNATIONAL, INC.
(Exact name of Registrant as Specified in its Charter)
OHIO
(State or Other Jurisdiction of Incorporation or Organization)
34-1685364
(I.R.S. Employer Identification No.)
20600 CHAGRIN BOULEVARD
CLEVELAND, OHIO 44122
(216) 921-6505
(Address, Including Zip Code, and Telephone Number, Including Area Code,
of Registrant's Principal Executive Offices)
COPY TO:
JEFFREY A. GREEN THOMAS F. MCKEE, ESQ.
PRESIDENT AND CHIEF EXECUTIVE OFFICER CALFEE, HALTER & GRISWOLD LLP
DATATRAK INTERNATIONAL, INC. 1400 MCDONALD INVESTMENT CENTER
20600 CHAGRIN BOULEVARD 800 SUPERIOR AVENUE
CLEVELAND, OHIO 44122 CLEVELAND, OHIO 44114-2688
(216) 921-6505 (216) 622-8200
(Name, Address, Including Zip Code, and Telephone Number,
Including Area Code, of Agent For Service)
Approximate date of commencement of proposed sale to the public: As
soon as practicable after the effective date of this registration statement.
If the only securities being registered on this form are being offered
pursuant to dividend or interest reinvestment plans, please check the following
box. [ ]
If any of the securities being registered on this form are to be
offered on a delayed or continuous basis pursuant to Rule 415 under the
Securities Act of 1933, other than securities offered only in connection with
dividend or interest reinvestment plans, check the following box. [X]
If this form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following box
and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering. [ ]
If this form is a post-effective amendment filed pursuant to Rule
462(c) under the Securities Act, check the following box and list the Securities
Act registration statement number of the earlier effective registration
statement for the same offering. [ ]
If delivery of the prospectus is expected to be made pursuant to Rule
434, please check the following box. [ ]
CALCULATION OF REGISTRATION FEE
============================== ============================ ======================= ======================== =======================
PROPOSED MAXIMUM PROPOSED MAXIMUM
TITLE OF SHARES AGGREGATE PRICE AGGREGATE AMOUNT OF
TO BE REGISTERED(1) AMOUNT TO BE REGISTERED PER UNIT(2) OFFERING PRICE(2) REGISTRATION FEE
------------------------------ ---------------------------- ----------------------- ------------------------ -----------------------
Common Shares, without par
value....................... 2,114,766 $3.60 $7,613,158 $725
============================== ============================ ======================= ======================== =======================
(1) Includes rights to purchase common shares under the registrant's Rights
Agreement that, prior to the occurrence of certain events, will not be
exercisable or evidenced separately from the common shares. Also
includes 192,252 common shares issuable upon the exercise of
outstanding warrants and such indeterminate number of common shares as
may be issuable pursuant to the anti-dilution provisions contained
therein.
(2) Estimated solely for the purpose of calculating the registration fee in
accordance with Rule 457(c) under the Securities Act, based on the
average of the high and low sale prices reported for the common shares
on the Nasdaq National Market on January 24, 2002.
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE
OR DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE
REGISTRANT SHALL FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT
THIS REGISTRATION STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE
WITH SECTION 8(A) OF THE SECURITIES ACT OF 1933, AS AMENDED, OR UNTIL THE
REGISTRATION STATEMENT SHALL BECOME EFFECTIVE ON SUCH DATE AS THE
SECURITIES AND EXCHANGE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(A),
MAY DETERMINE.
The information in this prospectus is not complete and may be changed. We may
not sell these securities until the registration statement filed with the
Securities and Exchange Commission is effective. This prospectus is not an offer
to sell these securities and we are not soliciting an offer to buy these
securities in any state where the offer or sale is not permitted.
PROSPECTUS
DATATRAK INTERNATIONAL, INC.
2,114,766 COMMON SHARES
The selling shareholders are offering 2,114,766 of our common shares.
Of these 2,114,766 common shares, 1,922,514 were acquired by the selling
shareholders pursuant to the share purchase agreement, dated as of December 21,
2001, among us and the selling shareholders. In addition, 192,252 common shares
may be acquired upon the exercise of warrants issued to our placement agent as a
result of the consummation of the share purchase agreement. We will not receive
any of the proceeds from the sale of the common shares by the selling
shareholders.
Our common shares trade on the Nasdaq National Market under the symbol
"DATA." On April 15, 2002, the average of the high and low sale prices of our
common shares on the Nasdaq National Market was $3.18.
The selling shareholders may sell the common shares from time to time
through public or private transactions, on or off the Nasdaq National Market, at
prevailing prices or at privately negotiated prices.
INVESTING IN OUR COMMON SHARES INVOLVES RISKS. SEE "RISK FACTORS"
BEGINNING ON PAGE 4.
NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES
COMMISSION HAS APPROVED OR DISAPPROVED OF THESE SECURITIES OR DETERMINED IF THIS
PROSPECTUS IS TRUTHFUL OR COMPLETE. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
The date of this prospectus is April __, 2002.
TABLE OF CONTENTS
Page
----
SUMMARY OF OFFERING........................................................3
RISK FACTORS...............................................................4
FORWARD-LOOKING STATEMENTS.................................................7
THE COMPANY................................................................8
THE SELLING SHAREHOLDERS...................................................8
USE OF PROCEEDS...........................................................10
PLAN OF DISTRIBUTION .....................................................10
LEGAL MATTERS.............................................................12
EXPERTS...................................................................12
WHERE YOU CAN FIND MORE INFORMATION.......................................12
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SUMMARY OF OFFERING
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This summary highlights information contained in this prospectus. This summary is not complete and does not contain all the
information that you should consider before investing in our common shares. You should read the entire prospectus carefully.
DATATRAK INTERNATIONAL, INC........................ We are a provider of software and other related services, commonly referred
to as an application service provider, or ASP. Our customers use our
software to collect and transmit clinical trial data electronically,
commonly referred to as electronic data capture, or EDC. Our customers are
companies in the clinical pharmaceutical, biotechnology, contract research
organization and medical device research industries. Our services assist
these companies to accelerate completion of clinical trials by streamlining
the collection of data relating to those clinical trials, improving the
quality of the data collected and thus reducing the time required to review
the results of each clinical trial.
SECURITIES OFFERED................................. DATATRAK common shares that were acquired by the selling shareholders
pursuant to the share purchase agreement, dated as of December 21, 2001, or
will be acquired upon the exercise of warrants issued to our placement agent
as a result of the consummation of the share purchase agreement.
NUMBER OF SECURITIES
OFFERED............................................ The selling shareholders are offering 2,114,766 of our common shares. Of
these 2,114,766 common shares, 1,922,514 were acquired by the selling
shareholders pursuant to the share purchase agreement, dated as of December
21, 2001, among us and the selling shareholders, and 192,252 common shares
that may be acquired upon the exercise of warrants issued to our placement
agent as a result of the consummation of the share purchase agreement.
NASDAQ TICKER SYMBOL............................... DATA
USE OF PROCEEDS.................................... All of the common shares offered under this prospectus are being sold by the
selling shareholders. We will not receive any of the proceeds from the sale
of these common shares.
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RISK FACTORS
You should carefully consider the following risk factors and other
information before deciding to invest in our common shares.
WE HAVE A LIMITED OPERATING HISTORY AND WE HAVE NOT HAD PROFITABLE OPERATIONS.
We began providing EDC services in 1997 and we have a limited operating
history upon which you may evaluate our performance. We have recognized
operating losses in each year since 1997. Our cumulative operating loss since
1997 from our EDC operations totaled $31.9 million at December 31, 2001. We may
not be profitable during future periods.
IF WE DO NOT CONTINUE TO ENHANCE OUR SOFTWARE, WE MAY NOT BE ABLE TO MEET THE
EVOLVING NEEDS OF OUR CLIENTS.
Although our proprietary DATATRAK EDC(TM)software has been used in
clinical trials, continued enhancement is necessary to provide additional
functions and services to meet the ever-changing needs and expectations of our
customers. Among the enhancements we have added to our software to date are
features including electronic signatures, single user login for added security,
and multiple user access. To date, we have had little EDC revenue from which to
support the costs of this continued enhancement. Our potential future revenue
may not be sufficient to allow us to absorb corporate overhead and other fixed
operating costs necessary for the success of the DATATRAK(R)process.
OUR QUARTERLY RESULTS FLUCTUATE SIGNIFICANTLY.
We are subject to significant fluctuations in quarterly results caused
by many factors, including
- our success in obtaining new contracts,
- the size and duration of the clinical trials in which we
participate, and
- the timing of clinical trial sponsor decisions to conduct new
clinical trials or cancel or delay ongoing trials.
As a result of our limited operating history, we do not have historical
financial data for a significant number of periods on which to base planned
operating expenses. Therefore, our expense levels are based in part on our
expectations as to future revenue and, to a certain extent, are fixed. We cannot
assure you as to our revenues in any given period, and we may be unable to
adjust expenses in a timely manner to compensate for any unexpected revenue
shortfall. As a result of our relatively small revenue base, any significant
shortfall in revenue recognized during a particular period could have an
immediate adverse effect on our results of operations and financial condition.
Volatility in our quarterly results may adversely affect the market price of our
common shares.
OUR BUSINESS STRATEGIES ARE UNPROVEN AND WE ARE IN AN EARLY STAGE OF
DEVELOPMENT.
Our efforts to establish a standardized EDC process for collection and
management of clinical research data represent a significant departure from the
traditional clinical research practices of clinical trial sponsors. The
long-term viability of our business strategy remains unproven. Our strategy may
not gain acceptance among sponsors, research sites or investigators. You should
consider our prospects in light of the risks, expenses and difficulties
frequently encountered by companies in their early stages of development, and
particularly companies in new and rapidly evolving markets.
WE MAY LOSE REVENUES IF WE EXPERIENCE DELAYS IN CLINICAL TRIALS OR IF WE LOSE
CONTRACTS.
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Although our contracts provide that we are entitled to receive revenue
earned through the date of termination, customers generally are free to delay or
terminate a clinical trial or our contract related to the trial at any time. The
length of a typical clinical trial contract varies from several months to
several years. Clinical trial sponsors may delay or terminate clinical trials
for several reasons, including
- unexpected results or adverse patient reactions to a potential
product,
- inadequate patient enrollment or investigator recruitment,
- manufacturing problems resulting in shortages of a potential
product, or
- decisions by the sponsor to de-emphasize or terminate a
particular trial or drug.
We may lose revenues if a clinical trial sponsor decides to delay or terminate a
trial in which we participate.
WE MAY LOSE REVENUES IF OUR MAJOR CUSTOMERS DECREASE THEIR RESEARCH AND
DEVELOPMENT EXPENDITURES, OR IF WE LOSE ANY OF OUR MAJOR CUSTOMERS.
Our primary customers are companies in the pharmaceutical industry. Our
business is substantially dependent on the research and development expenditures
of companies in this industry. During 2001 and 2000, Quintiles accounted for 11%
and 52% of our EDC revenue, and Aventis Pharmaceuticals accounted for 22% and
27% of such revenue. Furthermore, during 2001, Control Delivery Systems
accounted for 23% of our EDC revenue and CV Therapeutics accounted for 21% of
such revenue. The extent to which we rely on revenue from one or more major
customers varies from period to period depending upon, among other things, our
ability to generate new business and the timing and size of clinical trials. In
light of our small revenue base, we are more dependent on major customers than
many of our larger competitors in the EDC industry. Our operations could be
materially and adversely affected by, among other things,
- any economic downturn or consolidations in the pharmaceutical or
biotechnology industries,
- any decrease in those industries' research and development
expenditures, or
- a change in the regulatory environment in which companies in
these industries operate.
CHANGES IN GOVERNMENT REGULATIONS RELATING TO THE HEALTH CARE INDUSTRY COULD
HAVE A MATERIAL ADVERSE EFFECT ON THE DEMAND FOR OUR SERVICES.
Demand for our services is largely a function of the regulatory
requirements associated with the approval of a new drug application by the FDA.
These requirements are stringent and are more burdensome than those imposed by
many other developed countries. In recent years, efforts have been made to
streamline the drug approval process
5
and coordinate U.S. standards with those of other developed countries. Changes
in the level of regulation, including a relaxation in regulatory requirements or
the introduction of simplified drug approval procedures, could reduce the demand
for our services. Several competing proposals to reform the system of health
care delivery in the U.S. have been considered by Congress from time to time. To
date, none of these proposals has been adopted.
The FDA's guidelines and rules related to the use of computerized
systems in clinical trials are still in the early stages of development. The
DATATRAK(R) process may not continue to comply with these guidelines and rules
as they develop, and corresponding changes to our product may be required. Any
release of FDA guidance that is significantly inconsistent with the design of
DATATRAK EDC(TM) may cause us to incur substantial costs to remain in compliance
with new or amended FDA guidance and regulations.
WE MAY NOT BE ABLE TO CAPTURE OR ESTABLISH THE MARKET PRESENCE NECESSARY TO
COMPETE IN THE EDC MARKET.
The EDC market, which is still developing and must compete with the
traditional paper method of collecting clinical trial data, is highly
fragmented. The major competitors in the EDC market include
- EDC software vendors,
- clinical trial data service companies, and
- in-house development efforts within large pharmaceutical
companies.
6
Our competitors may have substantially greater resources, greater name
recognition and more extensive customer bases that could be leveraged, thereby
gaining market share or product acceptance to our detriment. We may not be able
to capture or establish the market presence necessary to effectively compete in
this emerging sector of the clinical research industry.
WE MAY BE SUBJECT TO LIABILITY FOR POTENTIAL BREACHES OF CONTRACT OR LOSSES
RELATING TO THE UNAUTHORIZED RELEASE OF CLINICAL TRIAL DATA.
Our services are supported by telecommunications equipment, software,
operating protocols and proprietary applications for high-speed transmission of
large quantities of data among multiple locations. In addition, clinical
pharmaceutical and medical device research requires the review and handling of
large amounts of patient data. Potential liability may arise from a breach of
contract or a loss or unauthorized release of clinical trial data. If we were
forced to undertake the defense of, or were found financially responsible for,
claims based upon these types of losses or unauthorized releases, our financial
resources could be diminished. We maintain an errors and omissions professional
liability policy in the amount of $5 million per claim, with an aggregate total
coverage of $5 million per year, that we believe is sufficient to cover claims
that may be brought against us. This coverage may not be adequate, and insurance
may not continue to be available to us in the future.
THE PRICE OF OUR COMMON SHARES COULD BE ADVERSELY AFFECTED BY THE DILUTION
CAUSED BY THE SALE OF THE COMMON SHARES ISSUED TO THE SELLING SHAREHOLDERS.
In January 2002, we sold 1,922,514 of our common shares to the selling
shareholders at a price of $2.25 per share, and issued warrants to purchase an
additional 192,252 of our common shares to representatives of our placement
agent pursuant to the share purchase agreement. These 2,114,766 common shares
represent, upon issuance of the 192,252 common shares underlying the placement
agent's warrants, 39.1% of our outstanding common shares. Sales of a substantial
number of these common shares in the public market could depress the market
price of our common shares. The perceived risk resulting from the sale of these
common shares could cause some of our shareholders to sell their common shares,
thus causing the price of our common shares to further decline. In addition, the
downward pressure on the price of our common shares could cause some of our
shareholders to engage in short sales of our common shares, which may cause the
price of our common shares to decline even further.
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FORWARD-LOOKING STATEMENTS
This prospectus, and the information incorporated by reference in this
prospectus, contains "forward-looking" statements, within the meaning of federal
securities laws, about our financial condition, results of operations and
business. You can find many of these statements by looking for words like
"expects," "anticipates," "intends," "plans," "believes" and "estimates" or
similar expressions used in this prospectus. These forward-looking statements
are subject to numerous assumptions and risks and uncertainties that may cause
our actual results or performance to be materially different from any future
results or performance expressed or implied by the forward-looking statements.
These risks and uncertainties include those identified under the heading "Risk
Factors" in this prospectus. These factors include, but are not limited to,
- our ability to absorb corporate overhead and other fixed costs in
order to successfully market the DATATRAK EDC(TM) software,
- the development and fluctuations in the market for EDC
technology,
- our success in obtaining new contracts,
- the timing of payments from customers and the timing of clinical
trial sponsor decisions to conduct new clinical trials or cancel
or delay ongoing clinical trials,
- government regulations effecting us,
- the early stage of our application service provider, or ASP,
operations, and
- general economic conditions, such as the rate of employment,
inflation, interest rates and the condition of the capital
markets.
Because these forward-looking statements are subject to risks and
uncertainties, we caution you not to place undue reliance on these statements,
which speak only as to the date of this prospectus. We do not undertake any
responsibility to review or confirm analysts' expectations or estimates or to
release publicly any revisions to these forward-looking statements to take into
account events or circumstances that occur after the date of this prospectus. In
addition, we do not undertake any responsibility to update you on the occurrence
of unanticipated events which may cause actual results to differ from those
expressed or implied by these forward-looking statements.
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THE COMPANY
DATATRAK International, Inc. is an ASP that provides EDC and other
services to companies in the clinical pharmaceutical, biotechnology, contract
research organization and medical device research industries. Our services
assist these companies in accelerating completion of clinical trials by
streamlining the collection of data relating to clinical trials, improving the
quality of the data collected, and thus reducing the time required to review the
results of each clinical trial.
We were founded in 1991 as a site management organization. We provided
clinical research services to various clinical trial sponsors through our
clinical business, which we sold in April 1999. We currently operate as an ASP
business providing EDC and other services to the clinical research industry.
We began EDC operations in 1997. During that year, we participated in a
joint venture with IBM Global Services to develop and market a data collection
and management system for use in clinical trials. The joint venture was
subsequently terminated, and in January 1998, we purchased the software now
known as DATATRAK EDC(TM) from PadCom for $610,000. DATATRAK EDC(TM) was
developed to provide clinical research data to sponsors of clinical research
trials faster and more efficiently than other forms of information-processing.
The DATATRAK EDC(TM) software and its earlier versions have supported
more than 65 international clinical studies encompassing thousands of clinical
research sites and tens of thousands of patients in 34 countries. To date, we
have devoted most of our efforts toward further developing and improving the EDC
technology employed by the DATATRAK EDC(TM) software.
We were incorporated under the laws of the state of Ohio in July 1991.
Our principal executive office are located at 20600 Chagrin Boulevard,
Cleveland, Ohio 44122. Our telephone number at that address is (216) 921-6505.
RECENT DEVELOPMENTS
In January 2002, we received approximately $4.3 million in connection
with the consummation of a private placement of 1,922,514 of our common shares
at a purchase price of $2.25 per share. The terms of this financing included the
issuance of five-year warrants to purchase a total of 192,252 common shares at
$2.25 per share to Stonegate Securities, Inc., our placement agent for the
private placement. These 2,114,766 common shares represent, upon issuance of the
192,252 common shares underlying the placement agent's warrants, 39.1% of our
outstanding common shares. We expect to use the proceeds of the private
placement to expand our worldwide marketing and sales efforts, continue
investing in software development and for other general working capital
purposes.
By its terms, the share purchase agreement prohibits us from selling
any of our common shares, during the period ending ninety days after January 4,
2002, at a price per common share of less than $2.25, without paying the selling
shareholders an amount equal to the difference between $2.25 and the subsequent
selling price, multiplied by the number of our common shares that each selling
shareholder purchased in the January 2002 private placement. In addition to
making a series of standard representations and warranties to the selling
shareholders, we agreed to register the common shares which the selling
shareholders purchased pursuant to the share purchase agreement. Furthermore, we
agreed to amend our stock option plans to prohibit the granting of stock options
at below-market exercise prices and the reduction of the exercise price of
outstanding options. Finally, we agreed not to enter into any arrangements
concerning the sale of our common shares in a transaction in which the purchase
price of our common shares is fixed after the date of the agreement relating to
that transaction.
THE SELLING SHAREHOLDERS
The following table contains information with respect to the number of
our common shares owned or issuable upon the exercise of warrants owned by each
of the selling shareholders as of March 27, 2002. None of the selling
shareholders has, or had, any position, office or other material relationship
with us or any of our
9
affiliates beyond their investment in or receipt of our securities, except for
Robert R. Blakely, Scott R. Griffith and Jesse B. Shelmire, who are principals
of Stonegate Securities, Inc., the placement agent for the private placement.
We have filed with the Commission a registration statement, of which
this prospectus is a part, with respect to the resale of our common shares from
time to time, under Rule 415 under the Securities Act of 1933, in the
over-the-counter market, in privately negotiated transactions, in underwritten
offerings or by a combination of these methods for sale. We have agreed to keep
this registration statement effective until the earlier of (i) the date on which
the common shares are eligible for resale under Rule 144(k) under the Securities
Act or (ii) all of the common shares purchased pursuant to the share purchase
agreement have been sold pursuant to the registration statement or Rule 144 or
any other rule of similar effect.
10
The common shares offered by this prospectus may be offered from time
to time by the persons or entities named below:
SHARES BENEFICIALLY OWNED SHARES BENEFICIALLY OWNED
PRIOR TO THE OFFERING AFTER THE OFFERING(1)
--------------------------------- --------------------------------
NUMBER OF NUMBER OF
SHARES NUMBER OF SHARES
NAME AND ADDRESS OF UNDERLYING SHARES UNDERLYING
SELLING SHAREHOLDER NUMBER WARRANTS PERCENT OFFERED NUMBER WARRANTS PERCENT
---------------------------------- ---------- ------------ --------- --------- -------- ---------- ---------
80/20 Fund L.P(2)............... 88,900 0 1.7% 88,900 0 0 *
401 Wilshire Boulevard, Suite 1020
Santa Monica, CA 90401
Apollo Capital Management
Group LP(3)..................... 292,025 0 5.5% 240,000 52,025 0 *
150 2nd Avenue NE
St. Petersburg, FL 33701
Boston Partners Small Cap Value
Fund II......................... 340,000 0 6.5% 340,000 0 0 *
c/o Boston Partners Asset
Management, L.P. (4)
Compliance Department,
28 State Street, 20th Floor
Boston, MA 02109
Robert R. Blakely............... 0 64,084 1.2% 64,084 0 0 *
Stonegate Securities, Inc.
5950 Sherry Lane, Suite 410
Dallas, TX 75225
Contrarian Opportunities Fund, 106,250 0 2.0% 66,750 39,500 0 *
L.P(5)..........................
200 First Avenue North, Suite 203
St. Petersburg, FL 33701
Dolphin Offshore Partners,
L.P(6).......................... 400,000 0 7.7% 400,000 0 0 *
c/o Dolphin Asset Management Co.
129 E. 17th Street
New York, NY 10003
Scott R. Griffith............... 0 64,084 1.2% 64,084 0 0 *
Stonegate Securities, Inc.
5950 Sherry Lane, Suite 410
Dallas, TX 75225
Matador Microcap Fund, L.P.(7).. 176,650 0 3.4% 66,750 109,900 0 2.1%
103 Foulke Road, Suite 202
Wilmington, DE 19803
MidSouth Investor Fund L.P.(8).. 85,000 0 1.6% 65,000 20,000 0 *
1776 Peachtree St. NW, Suite 412N
Atlanta, GA 30309
Kaiser Permanente Retirement Plans
c/o Boston Partners Asset 60,000 0 1.2% 60,000 0 0 *
Management, L.P. (4)
Compliance Department,
28 State Street, 20th Floor
Boston, MA 02109
Jesse B. Shelmire............... 0 64,084 1.2% 64,084 0 0 *
Stonegate Securities, Inc.
5950 Sherry Lane, Suite 410
Dallas, TX 75225
11
State of Wisconsin Investment 781,670 0 15.0% 350,670 431,000 0 8.3%
Board(9)........................
121 East Watson Street
Madison, WI 53702
Gary Stein (Roth IRA)........... 51,644 0 1.0% 44,444 7,200 0 *
Gary Stein 301 East 48th Street #20F
New York, NY 10017
TexRock, Ltd.(10)............... 30,000 0 * 30,000 0 0 *
c/o White Rock Capital Partners,
L.P.
3131 Turtle Creek Blvd., Suite 800
Dallas, TX 75219
White Rock Capital
Partners, L.P.(10).............. 170,000 0 3.3% 170,000 0 0 *
3131 Turtle Creek Blvd., Suite 800
Dallas, TX 75219
------------------
* Indicates less than 1%.
(1) Assumes all of the common shares registered are sold.
(2) Dyana Marlett, as the manager of the selling shareholder, has voting and
investment power with respect to our common shares reported in the table
for this selling shareholder. Accordingly, Ms. Marlett may be deemed a
beneficial owner of our common shares. 80/20 Fund L.P. is a private
investment limited partnership that is managed by Ms. Marlett.
(3) The 292,025 common shares registered in the name of Apollo Capital
Management Group, LP ("ACMG") are beneficially owned by ACMG's general
partner Apollo Capital Corp. ("Apollo"). Kyle and Ann Krueger are each a
director, officer and shareholder of Apollo, and Mr. and Mrs. Krueger share
the power to vote and dispose of or direct the disposal of all 292,025 of
these common shares. The information provided herein, with respect to the
beneficial ownership of our common shares by Mr. and Mrs. Krueger, was
obtained solely from the Schedule 13G filed with the Commission on January
16, 2002 by Mr. Krueger. Mr. and Mrs. Krueger also share voting and
dispositive power with regard to an additional 45,194 common shares of
DATATRAK through entities other than Apollo Capital Management.
(4) Boston Partners Asset Management, L.P. acts as investment manager with
discretionary authority. Boston Partners, Inc. is the general partner of
Boston Partners Asset Management, L.P.
(5) David Fink, as the general partner of the selling shareholder, has voting
and investment power with respect to our common shares reported in the
table for this selling shareholder. Accordingly, Mr. Fink may be deemed a
beneficial owner of our common shares. Contrarian Opportunities Fund, L.P.
is a private investment limited partnership.
(6) Peter E. Salas, as the general partner of the selling shareholder, has
voting and investment power with respect to our common shares reported in
the table for this selling shareholder. Accordingly, Mr. Salas may be
deemed a beneficial owner of our common shares. Dolphin Offshore
Partnership, L.P. is a private investment partnership.
(7) Jeffrey Berg, as the general partner of the selling shareholder, has voting
and investment power with respect to our common shares reported in the
table for this selling shareholder. Accordingly, Mr. Berg may be deemed a
beneficial owner of our common shares. Matador Microcap Fund, L.P. is a
private investment limited partnership.
(8) Lyman O. Heidtke, as the general partner of the selling shareholder, has
voting and investment power with respect to our common shares reported in
the table for this selling shareholder. Accordingly, Mr. Heidtke may be
deemed a beneficial owner of our common shares. MidSouth Investor Fund L.P.
is a private investment limited partnership.
(9) John F. Nelson, as the investment director of the selling shareholder, has
voting and investment power with respect to our common shares reported in
the table for this selling shareholder. Accordingly, Mr. Nelson may be
deemed a beneficial owner of our common shares.
(10) White Rock Capital Management, L.P., as the general partner of the selling
shareholder, has voting and investment power with respect to our common
shares reported in the table for this selling shareholder. Accordingly,
White Rock Capital Management, L.P. may be deemed a beneficial owner of our
common shares. White Rock Capital, Inc. is the general partner of White
Rock Capital Management, L.P. White Rock Capital Partners, L.P. is a
private investment limited partnership.
USE OF PROCEEDS
All of the common shares offered under this prospectus are being sold
by the selling shareholders. We will not receive any of the proceeds from the
sale of these common shares.
PLAN OF DISTRIBUTION
We are registering all 2,114,766 common shares on behalf of the selling
shareholders. The selling shareholders named in the table above or pledgees,
donees, transferees or other successors-in-interest selling shares received from
a named selling shareholder after the date of this prospectus may sell the
shares from time to time. The selling shareholders may also decide not to sell
all the shares they are allowed to sell under this prospectus. The sales may be
made on one or more exchanges or in the over-the-counter market or otherwise, at
prices and at terms then prevailing or at prices related to the then current
market price, or in negotiated transactions. The selling shareholders may effect
such transactions by selling the shares to or through broker-dealers. The
selling shareholders have advised us that they have not entered into any
agreements, understandings or arrangements with any underwriters or
broker-dealers regarding the sale of their common shares, nor is there an
underwriter or coordinating broker acting in connection with proposed sales of
common shares by the selling shareholders. Our common shares may be sold by one
or more of, or a combination of, the following:
- a block trade in which a broker or dealer will attempt to sell
the common shares as agent but may position and resell a portion
of the block as principal to facilitate the transaction,
- purchases by a broker or dealer as principal and resale by such
broker or dealer for its account pursuant to this prospectus,
- an exchange distribution in accordance with the rules of such
exchange,
- ordinary brokerage transactions and transactions in which the
broker solicits purchasers, and
- in privately negotiated transactions.
In addition, any common shares covered by this prospectus which qualify for sale
pursuant of Rule 144 may be sold under Rule 144 rather than pursuant to this
prospectus.
The selling shareholders may enter into hedging transactions with
broker-dealers in connection with distributions of our common shares or
otherwise. In such transactions, broker-dealers may engage in short sales of the
shares in the course of hedging the positions they assume with selling
shareholders. The selling shareholders
12
also may sell shares short and redeliver our common shares to close out such
short positions. The selling shareholders may enter into option or other
transactions with broker-dealers which require the delivery to the broker-dealer
of our common shares. The broker-dealer may then resell or otherwise transfer
such shares pursuant to this prospectus. The selling shareholders also may loan
or pledge the shares to a broker-dealer. The broker-dealer may sell our common
shares so loaned, or upon a default the broker-dealer may sell the pledged
shares pursuant to this prospectus.
The selling shareholders may effect transactions by selling common
shares directly to purchasers or to or through broker-dealers, which may act as
agents or principals. Those broker-dealers may receive compensation in the form
of discounts, concessions or commissions from the selling shareholders and/or
the purchasers of shares for whom those broker-dealers may act as agents or to
whom they sell as principal, or both (which compensation as to a particular
broker-dealer might be in excess of customary commissions). Compensation as to a
particular broker-dealer might be in excess of customary commissions and will be
in amounts to be negotiated in connection with our common shares.
The selling shareholders and any broker-dealers that act in connection
with the sale of common shares might be deemed to be "underwriters" within the
meaning of Section 2(11) of the Securities Act, and any commissions received by
those broker-dealers and any profit on the resale of the common shares sold by
them while acting as principals might be deemed to be underwriting discounts or
commissions under the Securities Act.
Because the selling shareholders may be deemed to be "underwriters"
within the meaning of Section 2(11) of the Securities Act, the selling
shareholders will be subject to the prospectus delivery requirements of the
Securities Act.
Under applicable rules and regulations under the Securities Exchange
Act of 1934, any person engaged in the distribution of our common shares may not
simultaneously engage in market-making activities with respect to our common
shares for a period of two business days prior to the commencement of such
distribution. In addition, each selling shareholder will be subject to
applicable provisions of the Exchange Act and the associated rules and
regulations under the Exchange Act, including Regulation M, which provisions may
limit the timing of purchases and sales of our common shares by the selling
shareholders. We will make copies of this prospectus available to the selling
shareholders and have informed them of the need for delivery of copies of this
prospectus to purchasers at or prior to the time of any sale of our common
shares.
We will file a supplement to this prospectus, if required, pursuant to
Rule 424(b) under the Securities Act upon being notified by a selling
shareholder that any material arrangement has been entered into with a
broker-dealer for the sale of shares through a block trade, special offering,
exchange distribution or secondary distribution or a purchase by a broker or
dealer. Such supplement will disclose:
- the name of each such selling shareholder and of the
participating broker-dealer(s),
- the number of shares involved,
- the price at which such shares were sold,
- the commissions paid or discounts or concessions allowed to such
broker-dealer(s), where applicable,
- that such broker-dealer(s) did not conduct any investigation to
verify the information set out or incorporated by reference in
this prospectus, and
- other facts material to the transaction.
Pursuant to the share purchase agreement, we have filed the
registration statement, of which this prospectus is a part, with respect to the
sale of the selling shareholders' common shares. We have agreed to pay all fees
and expenses incurred by us in connection with the registration of the common
shares pursuant to the share purchase agreement. All other expenses and fees
associated with the sale of the common shares by the selling shareholders will
be paid by the selling shareholders.
13
LEGAL MATTERS
The validity of the issuance of the common shares offered by this
prospectus will be passed upon by Calfee, Halter & Griswold LLP, Cleveland,
Ohio.
EXPERTS
Ernst & Young LLP, independent auditors, have audited our consolidated
financial statements included in our Annual Report on Form 10-K for the year
ended December 31, 2001, as set forth in their report, which is incorporated by
reference in this prospectus and elsewhere in the registration statement. Our
financial statements are incorporated by reference in reliance on Ernst & Young
LLP's report, given on the authority of such firm as experts in accounting and
auditing.
WHERE YOU CAN FIND MORE INFORMATION
We file annual, quarterly and current reports, proxy statements and
other information with the Commission. You may read and copy any document that
we file at the Commission's Public Reference Room at 450 Fifth Street, N.W.,
Washington, D.C. 20549. Please call the Commission at 1-800-SEC-0330 for further
information on the Public Reference Room. Our filings with the Commission are
also available to the public through the Commission's Internet site at
http://www.sec.gov.
We have filed a registration statement on Form S-3 with the Commission.
This prospectus is a part of the registration statement and does not contain all
of the information in the registration statement. Wherever a reference is made
in this prospectus to a contract or other document, please be aware that the
reference is not necessarily complete and that you should refer to the exhibits
that are a part of the registration statement for a copy of the contract or
other document. You may review a copy of the registration statement at the
Commission's Public Reference Room in Washington, D.C., as well as through the
Commission's Internet site.
The Commission allows us to "incorporate by reference" the information
we file with the Commission, which means that we can disclose important
information to you by referring you to those documents. The information
incorporated by reference is an important part of this prospectus.
Information that we file in the future with the Commission and
incorporate by reference in this prospectus will automatically update and
replace this information. We incorporate by reference the documents listed below
and any future filings made by us with the Commission under Section 13(a),
13(c), 14 or 15(d) of the Exchange Act if the filings are made before the time
that all of the common shares are sold in this offering
14
- our annual report on Form 10-K for the year ended December 31,
2001,
- our registration statement on Form 8-A, filed on May 10, 1996,
describing our common shares, and
- our registration statement on Form 8-A, filed on September 19,
1997, describing the rights to purchase our common shares.
You may request a copy of these filings at no cost by writing or telephoning us
at the following address:
DATATRAK International, Inc.
20600 Chagrin Boulevard
Cleveland, Ohio 44122
Attention: Mr. Terry C. Black
(216) 921-6505
You should rely only on the information incorporated by reference or
provided in this prospectus. We have not authorized anyone else to provide you
with different information. We are not making an offer of the common shares in
any state where the offer is not permitted. You should not assume that the
information in this prospectus is accurate as of any date other than the date of
this prospectus or the date of the documents incorporated by reference in this
prospectus.
15
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 14. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION
The registrant will bear the entire cost of the estimated expenses, as
set forth in the following table, in connection with the distribution of the
securities covered by this registration statement.
SEC registration fee................................ $ 725
Legal fees and expenses............................. 5,000
Accounting fees and expenses........................ 4,000
Nasdaq fees......................................... 20,000
Printing expenses................................... 1,000
Miscellaneous....................................... 1,000
------
Total............................................... $31,725
=======
The registrant will be responsible for the payment of any additional
expenses in connection with the preparation and filing of this registration
statement.
ITEM 15. INDEMNIFICATION OF DIRECTORS AND OFFICERS
Under Ohio law, Ohio corporations are authorized to indemnify
directors, officers, employees and agents within prescribed limits and must
indemnify them under certain circumstances. Ohio law does not provide statutory
authorization for a corporation to indemnify directors, officers, employees and
agents for settlements, fines or judgments in the context of derivative suits.
Ohio law does provide, however, that directors (but not officers, employees and
agents) are entitled to mandatory advancement of expenses, including attorneys'
fees, incurred in defending any action, including derivative actions, brought
against the director provided that the director agrees to cooperate with the
corporation concerning the matter and repay the amount advanced if it is proved
by clear and convincing evidence that his act or failure to act was done with
deliberate intent to cause injury to the corporation or with reckless disregard
to the corporation's best interests.
Ohio law does not authorize payment of judgments to a director,
officer, employee or agent after a finding of negligence or misconduct in a
derivative suit absent a court order. Indemnification is required, however, to
the extent such person succeeds on the merits. In all other cases, if a
director, officer, employee or agent acted in good faith and in a manner he
reasonably believed to be in or not opposed to the best interests of the
corporation, indemnification is discretionary, except as otherwise provided by a
corporation's articles of incorporation, code of regulations or by contract,
except with respect to the advancement of expenses of directors.
Under Ohio law, a director is not liable for monetary damages unless it
is proved by clear and convincing evidence that his action or failure to act was
undertaken with deliberate intent to cause injury to the corporation or with
reckless disregard for the best interests of the corporation. There is no
comparable provision, however, limiting the liability of officers, employees or
agents of a corporation. The statutory right to indemnification is not exclusive
in Ohio, and Ohio corporations may, among other things, procure insurance for
such persons.
The registrant's Third Amended and Restated Code of Regulations
provides that the registrant will indemnify to the fullest extent permitted by
law any director or officer made or threatened to be made a party to any action,
suit or proceeding by reason of the fact that he is or was a director or officer
of the registrant, or is or was serving as a director, officer, partner,
trustee, employee or agent at the request of the registrant of another
corporation, partnership, joint venture, trust or other enterprise, against all
expense, liability and loss, including attorneys' fees, judgments, fines, excise
taxes or penalties and amounts paid or to be paid in settlement, reasonably
incurred or suffered by such person in connection therewith.
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Under the terms of the registrant's directors' and officers' liability
and company reimbursement insurance policy, directors and officers of the
registrant are insured against certain liabilities, including liabilities
arising under the Securities Act of 1933.
ITEM 16. EXHIBITS
See Exhibit Index.
ITEM 17. UNDERTAKINGS
(a) The undersigned registrant hereby undertakes:
(1) to file, during any period in which offers or sales are
being made, a post-effective amendment to this registration statement:
(i) To include any prospectus required by Section
10(a)(3) of the Securities Act of 1933;
(ii) To reflect in the prospectus any facts or events
arising after the effective date of the registration statement
(or the most recent post-effective amendment thereof) which,
individually or in the aggregate, represent a fundamental
change in the information set forth in the registration
statement. Notwithstanding the foregoing, any increase or
decrease in volume of securities offered (if the total dollar
value of securities offered would not exceed that which was
registered) and any deviation from the low or high end of the
estimated maximum offering range may be reflected in the form
of prospectus filed with the Securities and Exchange
Commission pursuant to Rule 424(b) if, in the aggregate, the
changes in volume and price represent no more than 20 percent
change in the maximum aggregate offering price set forth in
the "Calculation of Registration Fee" table in the effective
registration statement;
(iii) To include any material information with
respect to the plan of distribution not previously disclosed
in the registration statement or any material change to such
information in the registration statement;
provided, however, that paragraphs (a)(1)(i) and (a)(1)(ii) do not
apply if the registration statement is on Form S-3, Form S-8 or Form
F-3, and the information required to be included in a post-effective
amendment by those paragraphs is contained in periodic reports filed
with or furnished to the Securities and Exchange Commission by the
registrant pursuant to Section 13 or Section 15(d) of the Securities
Exchange Act of 1934 that are incorporated by reference in the
registration statement.
(2) That, for the purpose of determining any liability under
the Securities Act of 1933, each such post-effective amendment shall be
deemed to be a new registration statement relating to the securities
offered therein, and the offering of such securities at that time shall
be deemed to be the initial bona fide offering thereof.
(3) To remove from registration by means of a post-effective
amendment any of the securities being registered which remain unsold at
the termination of the offering.
(b) The undersigned registrant hereby undertakes that, for purposes of
determining any liability under the Securities Act of 1933, each filing of the
registrant's annual report pursuant to Section 13(a) or 15(d) of the Securities
Exchange Act of 1934 (and, where applicable, each filing of an employee benefit
plan's annual report pursuant to Section 15(d) of the Securities Exchange Act of
1934) that is incorporated by reference in the registration statement shall be
deemed to be a new registration statement relating to the securities offered
therein, and the offering of such securities at that time shall be deemed to be
the initial bona fide offering thereof.
(c) Insofar as indemnification for liabilities arising under the
Securities Act of 1933 may be permitted to directors, officers and controlling
persons of the registrant pursuant to the foregoing provisions, or otherwise,
the
II-2
registrant has been advised that in the opinion of the Securities and Exchange
Commission such indemnification is against public policy as expressed in the
Securities Act and is, therefore, unenforceable. In the event that a claim for
indemnification against such liabilities (other than the payment by the
registrant of expenses incurred or paid by a director, officer or controlling
person of the registrant in the successful defense of any action, suit or
proceeding) is asserted by such director, officer or controlling person in
connection with the securities being registered, the registrant will, unless in
the opinion of its counsel the matter has been settled by controlling precedent,
submit to a court of appropriate jurisdiction the question whether such
indemnification by it is against public policy as expressed in the Securities
Act and will be governed by the final adjudication of such issue.
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SIGNATURES
Pursuant to the requirements of the Securities Act of 1933 the
registrant certifies that it has reasonable grounds to believe that it meets all
of the requirements for filing on Form S-3 and has duly caused this registration
statement to be signed on its behalf by the undersigned, thereunto duly
authorized, in the city of Cleveland, state of Ohio, on this 16th day of April,
2002.
DATATRAK INTERNATIONAL, INC.
By: /s/ Jeffrey A. Green
---------------------------------------
Jeffrey A. Green
President and Chief Executive Officer
Pursuant to the requirements of the Securities Act of 1933, this
registration statement has been signed by the following persons in the
capacities indicated on this 16th day of April, 2002.
Signature Title
--------- -----
/s/ Jeffrey A. Green President and Chief Executive Officer
------------------------------ and Director (Principal Executive Officer)
Jeffrey A. Green
/s/ Terry C. Black Vice President of Finance, Chief
------------------------------ Financial Officer and Treasurer
Terry C. Black (Principal Financial and Accounting Officer)
/s/ Timothy G. Biro Director
------------------------------
Timothy G. Biro
/s/ Seth B. Harris Director
------------------------------
Seth B. Harris
/s/ Robert M. Stote Director
------------------------------
Robert M. Stote
/s/ Jerome H. Kaiser Director
------------------------------
Jerome H. Kaiser
/s/ Robert E. Flaherty Director
------------------------------
Robert E. Flaherty
/s/ Mark J. Ratain Director
------------------------------
Mark J. Ratain
II-4
EXHIBIT INDEX
EXHIBIT
NUMBER DESCRIPTION
------ -----------
3.1 Fifth Amended and Restated Articles of Incorporation
of the Company, filed on August 6, 1996 as Exhibit
3.1 to the Company's Form 10-Q for the quarter ended
June 30, 1996 (Commission File No. 000-20699), and
incorporated herein by reference.
3.1.1 Form of Certificate of Amendment to the Fifth
Amended and Restated Articles of Incorporation of
the Company, filed on March 17, 1999 as Appendix D
to the Company's Proxy Statement on Schedule 14A,
and incorporated herein by reference.
3.1.2 Form of Certificate of Amendment to the Fifth
Amended and Restated Articles of Incorporation of
the Company, filed on August 25, 1999 as Appendix A
to the Company's Proxy Statement on Schedule 14A,
and incorporated herein by reference.
3.2 Third Amended and Restated Code of Regulations of
the Company, effective May 2, 1996, filed on August
6, 1996 as Exhibit 3.2 to the Company's Form 10-Q
for the quarter ended June 30, 1996 (Commission File
No. 000-20699), and incorporated herein by
reference.
4.1 Specimen Certificate of the Company's Common Shares,
without par value, filed on March 28, 2000 as
Exhibit 4.1 to the Company's Form 10-K for the year
ended December 31, 1999, and incorporated herein by
reference.
4.2 Rights Agreement, dated September 2, 1997, between
the Company and National City Bank, as Rights Agent,
filed on September 19, 1997 as Exhibit 1 to Form
8-A, and incorporated herein by reference.
5 Opinion of Calfee, Halter & Griswold LLP, as to the
validity of the Company's Common Shares. * filed on
March 28, 2002 as Exhibit 5 to Form S-3/A
(Commission File No. 333-81554) and incorporated
herein by reference.
23.1 Consent of Ernst & Young LLP, Independent Auditors.*
23.2 Consent of Calfee, Halter & Griswold LLP (included
in Exhibit 5).
---------------------------
* Filed herewith.
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