~~Table~~Securities ofand ~~Contents~~Exchange Commission

~~Securities~~Washington, ~~and~~D.C. ~~Exchange Commission~~20549

~~Washington, D.C. 20549~~Form 10-Q

~~Form~~Quarterly Report Pursuant to Section ~~10-Q~~13 or 15(d) of the Securities Exchange Act of 1934

~~Quarterly~~For ~~Report Pursuant to Section 13 or 15(d) of~~ the ~~Securities~~Quarterly ~~Exchange~~Period ~~Act~~Ended ofMarch 31, ~~1934~~2009

~~For~~Commission ~~the~~file ~~Quarterly~~number ~~Period Ended March 31, 2007~~1-33688

~~Commission~~DATATRAK ~~file~~International, ~~number 000-20699~~Inc.

~~DATATRAK~~(Exact ~~International,~~name ~~Inc.~~ of registrant as specified in its charter)

(Exact name of registrant as specified in its charter)


Ohio		34-1685364

(State or other jurisdiction of incorporation or organization)		(I.R.S. Employer Identification No.)

6150 Parkland Boulevard Mayfield Heights, Ohio		44124

(Address of principal executive offices)		(Zip Code)

(440) 443-0082

Ohio		34-1685364
(State or other jurisdiction of incorporation or organization)		(I.R.S. Employer Identification No.)
6150 Parkland Boulevard Mayfield Heights, Ohio		44124
(Address of principal executive offices)		(Zip Code)

(Registrants telephone number, including area code)

(~~440~~Former name, former address and former fiscal year, if changed since last report) ~~443-0082~~

Indicate by check mark whether the registrant (~~Registrants~~1) has ~~telephone~~filed ~~number,~~all ~~including~~reports ~~area~~required ~~code~~to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. þ Yes o No

~~(Former~~Indicate ~~name,~~by ~~former~~check ~~address~~mark whether the registrant has submitted electronically and ~~former~~posted ~~fiscal~~on ~~year~~its corporate Web site, if ~~changed~~any, ~~since~~every ~~last~~Interactive ~~report~~Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). o Yes o No

Indicate by check mark whether the registrant ~~(1) has~~is ~~filed~~a ~~all~~large ~~reports~~accelerated ~~required~~filer, toan beaccelerated ~~filed~~filer, bya ~~Section 13~~non-accelerated filer or ~~15(d)~~a ofsmaller ~~the~~reporting ~~Securities~~company. ~~Exchange~~See ~~Act of 1934 during~~ the ~~preceding~~definitions ~~12 months~~of ~~(or~~“large ~~for~~accelerated ~~such~~filer,” ~~shorter~~“accelerated ~~period~~filer” ~~that~~and ~~the~~“smaller ~~registrant~~reporting ~~was~~company” ~~required~~in ~~to file such reports), and (2)~~Rule ~~has~~12b-2 ~~been subject~~of ~~to such filing requirements for~~ the ~~past~~Exchange ~~90 days~~Act. (Check ~~þ Yes o No~~one):

~~Indicate~~Large ~~by check mark whether the registrant is a large~~ accelerated filer, ano ~~accelerated~~Accelerated filer~~, or~~ ao ~~non~~Non-accelerated filer o(~~See~~Do ~~definition~~not ofcheck ~~“large~~if ~~accelerated~~a ~~filer”~~smaller ~~and~~reporting ~~“accelerated~~company) ~~filer”~~Smaller ~~in Exchange~~reporting ~~Act~~company ~~Rule 12b-2).~~ þ

~~Large~~Indicate ~~accelerated~~by ~~filer~~check ~~o Accelerated~~mark ~~filer~~whether ~~þ Non-accelerated~~the ~~filer~~registrant is a shell company (as defined in Exchange Act Rule 12b-2). o Yes þ No

Indicate bythe ~~check~~number ~~mark~~of ~~whether~~shares ~~the~~outstanding ~~registrant~~of iseach aof ~~shell~~the ~~company~~issuer’s ~~(as~~classes ~~defined~~of incommon ~~Exchange~~stock, ~~Act~~as ~~Rule~~of ~~12b-2).~~the olatest ~~Yes þ~~practical Nodate.

~~Indicate~~The ~~the~~ number of ~~shares~~Common ~~outstanding~~Shares, ofwithout ~~each~~par ofvalue, ~~the~~outstanding ~~issuer’s~~as ~~classes~~ of ~~common stock~~April 30, as2009 ~~of the~~was ~~latest practical date~~13,706,901.

~~The~~Part ~~number~~I. ofFinancial ~~Common Shares, without par value, outstanding as of April 30, 2007 was 13,562,437.~~Information

~~TABLE~~Item 1. OFFinancial ~~CONTENTS~~Statements

Parat I. Financial Information
	Item 1 — Financial Statements
	Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations
	Item 3. Quantitative and Qualitative Disclosures About Market Risk
	Item 4. Controls and Procedures
Part II. Other Information
	Item 1. Legal Proceedings
	Item 1A. Risk Factors
	Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
	Item 3. Defaults Upon Senior Securities
	Item 4. Submission of Matters to a Vote of Security Holders
	Item 5. Other Information
	Item 6. Exhibits
SIGNATURES
EX-31.1
EX-31.2
EX-32.1
EX-32.2

DATATRAK INTERNATIONAL, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS


	March 31,			December 31,
	2009			2008
	(Unaudited)			(Note A)
ASSETS
Current assets
Cash and cash equivalents	$	2,077,513		$	1,872,358
Restricted cash — current		—			218,276
Short-term investments		—			499,936
Accounts receivable, net		1,187,661			927,490
Deferred tax asset, net		136,500			61,700
Prepaid expenses and other current assets		193,266			158,582

Total current assets		3,594,940			3,738,342
Property and equipment
Equipment		1,933,841			2,120,621
Software, net of impairment		4,560,322			4,588,781
Leasehold improvements		655,467			660,321

		7,149,630			7,369,723
Less accumulated depreciation		6,469,827			6,584,174

Property and equipment, net		679,803			785,549
Other assets
Deferred tax asset		—			83,700
Deposit		39,549			39,549

Total other assets		39,549			123,249

Total assets	$	4,314,292		$	4,647,140

LIABILITIES AND SHAREHOLDERS’ EQUITY (DEFICIT)
Current liabilities
Accounts payable	$	477,723		$	525,293
Notes payable		138,511			195,858
Accrued expenses		1,391,915			1,104,584
Deferred revenue		1,103,807			1,053,096

Total current liabilities		3,111,956			2,878,831
Long-term liabilities
Accrued severance		196,109			—
Long-term debt		20,250			41,523
Deferred revenue		1,316,964			1,260,000
Deferred tax liability		136,500			145,400

Total long-term liabilities		1,669,823			1,446,923
Shareholders’ equity (deficit)
Serial Preferred Shares, without par value, 1,000,000 shares authorized, none issued		—			—
Common Shares, without par value, authorized 25,000,000 shares; issued 17,006,901 shares as of March 31, 2009 and 17,051,901 shares as of December 31, 2008; outstanding 13,706,901 shares as of March 31, 2009 and 13,751,901 shares as of December 31, 2008		79,939,503			79,940,507
Treasury Shares, 3,300,000 shares at cost		(20,188,308	)		(20,188,308	)
Common Share warrants		1,134,993			1,134,993
Accumulated deficit		(61,353,675	)		(60,565,806	)

Total shareholders’ equity (deficit)		(467,487	)		321,386

Total liabilities and shareholders’ equity (deficit)	$	4,314,292		$	4,647,140

~~Part~~Note I.A: ~~Financial~~The ~~Information~~ condensed consolidated balance sheet at December 31, 2008 has been derived from the audited consolidated financial statements at that date, but does not include all of the information and footnotes required by accounting principles generally accepted in the United States for complete financial statements.

~~Item 1~~See —notes ~~Financial~~to ~~Statements~~condensed consolidated financial statements.

~~DATATRAK INTERNATIONAL, INC. AND SUBSIDIARIES~~2 ~~CONDENSED CONSOLIDATED BALANCE SHEETS~~

	March 31,			December 31,
	2007			2006
	(Unaudited)			(Note A)
ASSETS
Current assets
Cash and cash equivalents	$	3,302,273		$	3,019,184
Short-term investments		9,351,703			1,996,393
Accounts receivable, net		1,874,766			2,226,317
Deferred tax asset — current		113,100			113,100
Prepaid expenses and other current assets		381,792			488,112
Total current assets		15,023,634			7,843,106
Property and equipment, at cost net of accumulated depreciation and amortization		4,476,207			4,736,233
Other assets
Restricted cash		78,785			78,005
Deferred tax asset		1,602,100			1,745,700
Deposit		39,549			39,549
Other intangible assets, net of accumulated amortization		1,688,373			1,914,206
Goodwill		10,863,383			10,863,383
		14,272,190			14,640,843
Total assets	$	33,772,031		$	27,220,182
LIABILITIES AND SHAREHOLDERS’ EQUITY
Current liabilities
Accounts payable	$	219,079		$	568,697
Current portion of long-term debt		939,756			733,548
Accrued expenses		1,680,008			1,419,065
Deferred revenue		1,051,295			988,175
Total current liabilities		3,890,138			3,709,485
Long-term liabilities
Long-term debt		3,320,572			3,811,903
Deferred tax liability		1,517,500			1,634,800
		4,838,072			5,446,703
Shareholders’ equity
Serial Preferred Shares, without par value, 1,000,000 shares authorized, none issued		—			—
Common shares, without par value, authorized 25,000,000 shares; issued 16,862,437 shares as of March 31, 2007 and 14,862,473 shares as of December 31, 2006; outstanding 13,562,437 shares as of March 31, 2007 and 11,562,473 shares as of December 31, 2006		78,500,659			70,742,073
Treasury shares, 3,300,000 shares at cost		(20,188,308	)		(20,188,308	)
Common share warrants		1,835,108			700,176
Accumulated deficit		(34,810,926	)		(32,915,699	)
Foreign currency translation		(292,712	)		(274,248	)
Total shareholders’ equity		25,043,821			18,063,994
Total liabilities and shareholders’ equity	$	33,772,031		$	27,220,182

DATATRAK INTERNATIONAL, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)

Note A: The condensed consolidated balance sheet at December 31, 2006 has been derived from the audited consolidated financial statements at that date, but does not include all of the information and footnotes required by accounting principles generally accepted in the United States for complete financial statements.


	Three Months Ended
	March 31,
	2009			2008
Revenue	$	2,086,176		$	2,088,229

Direct costs		473,862			933,879


Gross profit		1,612,314			1,154,350

Selling, general and administrative expenses		1,643,577			2,830,757

Severance expense		633,625			25,843

Depreciation and amortization		121,976			522,426


Loss from operations		(786,864	)		(2,224,676	)

Interest income		3,003			59,740

Interest expense		4,008			66,567

Other loss		—			1,382


Loss before income taxes		(787,869	)		(2,232,885	)

Income tax expense		—			—


Net loss	$	(787,869	)	$	(2,232,885	)


Net loss per share:

Basic:
Net loss per share	$	(0.06	)	$	(0.16	)

Weighted-average shares outstanding		13,741,401			13,681,901


Diluted:
Net loss per share	$	(0.06	)	$	(0.16	)

Weighted-average shares outstanding		13,741,401			13,681,901

See notes to condensed consolidated financial statements.

~~Table~~DATATRAK ofINTERNATIONAL, ~~Contents~~INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited)

DATATRAK INTERNATIONAL, INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited)


	Three Months Ended
	March 31,
	2009			2008
Operating activities
Net loss	$	(787,869	)	$	(2,232,885	)
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation and amortization		121,976			522,426
Stock-based compensation		(1,005	)		105,231
Accretion of discount on investments		(449	)		(42,031	)
Other		—			1,382
Changes in operating assets and liabilities:
Accounts receivable		(260,171	)		(321,597	)
Prepaid expenses and other current assets		183,592			75,280
Deferred taxes, net		—			15,000
Accounts payable and accrued expenses		426,334			141,424
Deferred revenue		107,675			(375,155	)

Net cash used in operating activities		(209,917	)		(2,110,925	)
Investing activities
Purchases of property and equipment		(16,230	)		(7,350	)
Maturities of short-term investments		3,000,000			18,600,000
Purchases of short-term investments		(2,499,615	)		(14,468,443	)

Net cash provided by investing activities		484,155			4,124,207
Financing activities
Payments of long-term debt		(78,620	)		(490,811	)

Net cash used in financing activities		(78,620	)		(490,811	)

Effect of exchange rate changes on cash		9,537			3,555

Increase in cash and cash equivalents		205,155			1,526,026
Cash and cash equivalents at beginning of period		1,872,358			1,919,316

Cash and cash equivalents at end of period	$	2,077,513		$	3,445,342

	Three Months Ended
	March 31,
	2007			2006
Revenue	$	3,542,095		$	4,500,868
Direct costs		1,337,471			1,171,876
Gross profit		2,204,624			3,328,992
Selling, general and administrative expenses		3,422,671			2,981,212
Depreciation and amortization		622,403			438,682
Loss from operations		(1,840,450	)		(90,902	)
Other income (expense):
Interest income		70,192			81,101
Interest expense		(98,669	)		(50,269	)
Loss before income taxes		(1,868,927	)		(60,070	)
Income tax expense		26,300			21,000
Net loss	$	(1,895,227	)	$	(81,070	)
Net loss per share:
Basic:
Net loss per share	$	(0.16	)	$	(0.01	)
Weighted average shares outstanding		11,858,949			10,845,627
Diluted:
Net loss per share	$	(0.16	)	$	(0.01	)
Weighted average shares outstanding		11,858,949			10,845,627

See notes to condensed consolidated financial statements.

~~See notes to condensed consolidated financial statements.~~4

3DATATRAK INTERNATIONAL, INC. AND SUBSIDIARIES NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS March 31, 2009 (Unaudited)

~~Table~~1. Basis of ~~Contents~~Presentation

~~DATATRAK~~ The ~~INTERNATIONAL~~accompanying unaudited condensed consolidated financial statements of DATATRAK International, ~~INC~~Inc. ~~AND~~and ~~SUBSIDIARIES~~subsidiaries (“DATATRAK” or the “Company”) have been prepared in accordance with ~~CONDENSED~~accounting ~~CONSOLIDATED STATEMENTS~~principles OFgenerally ~~CASH~~accepted ~~FLOWS~~in the United States for interim financial information and with the instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by accounting principles generally accepted in the United States for complete financial statements. In the opinion of management, all adjustments (~~Unaudited~~consisting of normal recurring accruals) considered necessary for a fair presentation have been included. Operating results for the three month period ended March 31, 2009 are not necessarily indicative of the results that may be expected for the year ending December 31, 2009. For further information, refer to the consolidated financial statements and footnotes thereto included in the Company’s Form 10-K for the year ended December 31, 2008.

	Three Months Ended
	March 31,
	2007			2006
Operating Activities
Net loss	$	(1,895,227	)	$	(81,070	)
Adjustments to reconcile net loss to net cash (used in) provided by operating activities:
Depreciation and amortization		622,403			438,682
Stock-based compensation		136,057			193,283
Accretion of discount on investments		(35,282	)		(36,558	)
Changes in operating assets and liabilities:
Accounts receivable		351,551			(21,150	)
Prepaid expenses and other current assets		106,320			41,921
Deferred taxes, net		26,300			21,000
Accounts payable and accrued expenses		(284,839	)		(127,254	)
Deferred revenue		63,120			(306,817	)
Net cash (used in) provided by operating activities		(909,597	)		122,037
Investing activities
Acquisition of business, less cash acquired		—			(3,901,381	)
Purchases of property and equipment		(47,787	)		(209,721	)
Maturities of short-term investments		4,500,000			3,000,000
Purchases of short-term investments		(11,820,028	)		(42,681	)
Net cash used in investing activities		(7,367,815	)		(1,153,783	)
Financing activities
Proceeds from exercise of stock option and warrants		30,384			50,139
Proceeds from issuance of common shares, net of paid issuance costs		8,916,105			—
Payments of long-term debt		(364,747	)		(118,184	)
Net cash provided by (used in) financing activities		8,581,742			(68,045	)
Effect of exchange rate changes on cash		(21,241	)		(16,464	)
Increase (decrease) in cash and cash equivalents		283,089			(1,116,255	)
Cash and cash equivalents at beginning of period		3,019,184			4,407,431
Cash and cash equivalents at end of period	$	3,302,273		$	3,291,176
Unpaid acquisition costs	$	—		$	824,486
Unpaid share issuance costs	$	189,028		$	—

The preparation of financial statements in conformity with accounting principles generally accepted in the United States requires management to make estimates and assumptions that might affect the amounts reported in the financial statements and accompanying notes. Actual results could differ from those estimates.

~~See~~2. ~~notes~~Risks toand ~~condensed consolidated financial statements.~~Uncertainties

4 On July 21, 2008, we announced we had retained Healthcare Growth Partners, LLC as a strategic and financial advisor to assist the Board of Directors in evaluating a variety of potential opportunities directed at maximizing shareholder value. These potential opportunities may include, but are not limited to, a sale, merger or other business combination of the Company; strategic partnerships or alliances; or raising of additional capital, if the Company determines it is in the best interest of its shareholders to continue as a stand alone entity. This review process is ongoing and we undertake no obligation to make any further announcement regarding the exploration of strategic alternatives unless and until the Board of Directors has approved a specific course of action. There can be no assurance that this process will result in any specific transaction or in any changes to the Company’s current direction.

~~Table~~ The Company is subject to applicable NASDAQ Capital Market requirements and failure to comply with these requirements could result in the Company’s common shares being delisted from the NASDAQ Capital Market. As of ~~Contents~~March 31, 2009, the Company was not in compliance with the NASDAQ requirements of: (i) a $1.00 minimum closing bid price (“Minimum Bid Price Rule”); and (ii) shareholders’ equity of $2.5 million, market value of publicly-held shares of $35 million, or net income from continuing operations of $500,000 in the most recently completed fiscal year or in two of the last three most recently completed fiscal years. NASDAQ had earlier notified the Company of its non-compliance with these requirements. On January 8, 2009, the Company presented its plan to the NASDAQ Listing Qualifications Panel (the “Panel”) to regain compliance with the minimum shareholders’ equity requirement and requested the maximum extension allowable for continued listing. On March 17, 2009, the Company received a letter from NASDAQ granting DATATRAK’s request for the maximum extension allowable for continued listing relating to the minimum shareholders’ equity requirement, which is June 1, 2009. The June 1, 2009 extension date represents the full extent of the Panel’s authority to grant an exception and allow continued listing while the Company remains deficient. The Company is presently evaluating alternatives in the event the Company is delisted in June.

On January 7, 2009, the Company received a letter from NASDAQ informing DATATRAK ~~INTERNATIONAL~~that NASDAQ had decided to extend the suspension of the Minimum Bid Price Rule and that enforcement of such rule is scheduled to resume on April 20, ~~INC~~2009. ~~AND~~On ~~SUBSIDIARIES~~March 25, 2009, the Company received another ~~NOTES~~letter TOfrom ~~CONDENSED~~NASDAQ ~~CONSOLIDATED~~informing ~~FINANCIAL~~DATATRAK ~~STATEMENTS~~that NASDAQ had decided to further extend the suspension of the Minimum Bid Price Rule and that enforcement of such rule is now scheduled to resume on July 20, 2009. Further, the March 3125, ~~2007~~2009 letter indicated that the Company will receive another notice prior to the resumption of the Minimum Bid Price Rule and such letter will specify the number of calendar days remaining in the Company’s compliance period and the specific date by which it needs to regain compliance with the Minimum Bid Price Rule. NASDAQ could delist the Company’s common shares at any time for failure to maintain compliance with any other continued listing requirements including the minimum shareholders’ equity requirement noted in (~~Unaudited~~ii) above.

~~1. Basis of Presentation~~5

~~The accompanying unaudited condensed consolidated financial statements of DATATRAK International, Inc~~3. ~~and~~Fair ~~subsidiaries~~Value ~~(“DATATRAK” or the “Company”) have been prepared in accordance~~Measurements with accounting principles generally accepted in the United States for interim financial information and with the instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by accounting principles generally accepted in the United States for complete financial statements. In the opinion of management, all adjustments (consisting of normal recurring accruals) considered necessary for a fair presentation have been included. Operating results for the three month period ended March 31, 2007 are not necessarily indicative of the results that may be expected for the year ending December 31, 2007. For further information, refer to the consolidated financial statements and footnotes thereto included in the Company’s Form 10-K for the year ended December 31, 2006.

On January 1, 2008, the Company adopted the provisions of Statement of Financial Accounting Standards (“SFAS”) No. 157, “Fair Value Measurements” as required for financial assets and liabilities. The ~~preparation~~adoption of SFAS No. 157 had no material impact on the Company’s financial position, ~~statements~~results inof ~~conformity~~operations ~~with~~or ~~accounting~~cash ~~principles~~flows ~~generally~~during the year ended December 31, 2008. SFAS No. 157 ~~accepted~~was ineffective January 1, 2008 for financial assets and liabilities and January 1, 2009 for non-financial assets and liabilities. On January 1, 2009, the ~~United~~Company ~~States~~adopted ~~requires~~the ~~management~~remaining provisions toof ~~make~~SFAS ~~estimates~~No. 157, as permitted by FASB Staff Position 157-2. FAS 157-2 delayed the effective date of SFAS No. 157 for all non-financial assets and ~~assumptions~~non-financial liabilities, except those that ~~might~~are recognized or disclosed at fair value in the financial statements on a recurring ~~affect~~basis (at least annually). Non-financial assets for the ~~amounts~~Company ~~reported~~include finite-lived tangible and intangible assets measured at fair value during the performance of impairment testing or assets acquired and liabilities assumed in a business combination should such a transaction occur in the future. The adoption of the required provisions of SFAS No. 157-2 on January 1, 2009 did not have a material impact on the Company’s condensed consolidated financial statements as all finite-lived assets were not deemed to be impaired using an undiscounted cash flow analysis. The standard provides guidance for establishing a frame work for measuring fair values of assets and liabilities. ~~accompanying~~Under ~~notes~~the standard, fair value refers to the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date (i.e. ~~Actual~~an ~~results~~exit price). The standard clarifies the principle that fair value should ~~could~~be ~~differ~~based ~~from~~on ~~those~~the ~~estimates~~assumptions or inputs market participants would use when pricing the asset or liability.

2 In support of this principle, SFAS No. 157 ~~ClickFind~~establishes ~~Acquisition~~a three level hierarchy for fair value measurements based on the quality or transparency of inputs used to measure the fair value of an asset or liability at the measurement date.

OnThe ~~February 13,~~three ~~2006,~~levels ~~DATATRAK~~are ~~acquired~~defined ~~all~~as ~~of the outstanding stock of ClickFind, Inc.~~follows: ~~(“ClickFind”), a technology company focused on the clinical trials industry, located in Bryan, Texas.~~

~~The~~• ~~negotiated~~Level ~~terms~~1 of (the ~~acquisition~~highest ~~were~~priority) ~~for~~— aninputs ~~aggregate~~to ~~purchase~~the ~~price~~valuation ofmethodology ~~$18,000,000, less~~are ~~approximately~~quoted ~~$328,000~~market inprices ~~certain~~(unadjusted) ~~transaction~~for ~~expenses~~identical ~~and~~financial ~~certain~~assets ~~indebtedness~~or ofliabilities ~~ClickFind. A~~in ~~component~~active ofmarkets. ~~the~~• ~~purchase~~Level ~~price~~2 ~~was~~— ~~paid~~inputs ~~with~~to ~~1,026,522~~the ~~common~~valuation ~~shares~~methodology ofinclude ~~the~~quoted ~~Company,~~market ~~priced~~prices ~~at $9.25~~for ~~per~~similar ~~share,~~assets asand ~~determined~~liabilities byin ~~the~~active ~~terms~~markets, ofand ~~the~~inputs ~~acquisition~~that ~~agreement.~~are ~~The~~observable ~~acquisition~~for ~~was recorded~~an asasset aor ~~purchase~~liability, ~~and~~either asdirectly ~~such~~or indirectly, for substantially the ~~purpose~~full term of ~~recording~~a ~~the~~financial ~~acquisition,~~instrument. ~~the~~• ~~value~~Level of3 (the ~~common~~ ~~shares~~lowest ~~used~~priority) in— ~~the~~inputs ~~acquisition~~to ~~were~~the ~~valued~~valuation atmethodology ~~$7.66~~are ~~per~~unobservable ~~share,~~and ~~based~~significant onto the ~~average~~fair ~~closing price~~value ~~per~~measurement. ~~share~~These ofinputs ~~the~~reflect ~~Company~~management’s ~~common~~own ~~shares~~assumptions ~~for~~about the ~~five~~assumptions ~~business~~a ~~day~~market ~~period~~participant ~~from~~would ~~February~~use ~~9 through~~in ~~February 15,~~pricing ~~2006~~a financial instrument.

~~Based~~A onfinancial ~~the~~instrument’s ~~common~~categorization ~~share~~within ~~valuation of $7.66 per share,~~ the ~~total~~valuation ~~recorded~~hierarchy ~~acquisition~~is ~~cost, including~~based ~~acquisition~~upon ~~related expenses of $796,000, was $16,619,000. The cash portion of~~ the ~~purchase~~lowest ~~price,~~level ~~less~~or ~~cash~~priority ~~acquired~~ of ~~$87,000,~~input ~~was~~that ~~approximately~~is ~~$4,669,000.~~significant ~~The~~to ~~remainder of~~ the ~~purchase~~ ~~price~~fair ~~consisted~~value ofmeasurement ~~$4,000,000 in notes payable and the issuance~~ of ~~approximately $7,863,000 in common shares (1,026,522 common shares), both of which are excluded from~~ the ~~Company’s~~financial ~~condensed~~asset ~~consolidated~~or ~~statement of cash flows~~liability. ~~The notes payable bear interest at prime~~ ~~plus 1%, and principal payments are due in installments of $500,000, $500,000 and $3,000,000 on February 1, 2007, 2008 and 2009, respectively.~~

The ~~acquisition~~Company’s ~~was~~only ~~accounted~~financial ~~for~~assets or liabilities subject to SFAS No. 157 as aof ~~purchase~~March 31, 2009 ~~and~~were ~~accordingly,~~investments ~~fair~~in ~~value~~cash ~~adjustments~~equivalents. to As of December 31, 2008 the ~~assets~~Company’s ~~acquired~~only ~~and~~financial assets or liabilities ~~assumed~~subject to SFAS No. 157 were ~~recorded~~investments asin cash equivalents and short-term investment instruments consisting primarily of corporate obligations in the ~~date~~form of ~~acquisition~~commercial paper, grade A1 or better. ~~The~~Following is a description of the valuation methodologies used to determine the fair value of the Company’s ~~has~~financial ~~obtained~~assets aincluding ~~third~~the ~~party~~general ~~valuation~~classification of such ~~certain~~instruments ~~tangible~~pursuant ~~and~~to ~~intangible~~the ~~assets~~valuation ~~acquired~~hierarchy.

~~DATATRAK’s~~Cash ~~acquisition~~equivalents ~~resulted~~— inThe ~~deferred~~Company ~~tax~~considers ~~liabilities~~all highly liquid investments with a maturity of three ~~$2,054,000~~months or less when purchased to be cash equivalents. The Company’s ~~will~~cash equivalents consist ~~utilize~~of ~~its~~various ~~deferred~~money ~~tax~~market ~~assets~~funds. toThe ~~offset~~money ~~its~~market ~~acquisition~~funds ~~related~~are ~~deferred~~recorded ~~tax~~based ~~liability~~on quoted market prices in active markets multiplied by the number of shares owned. The money market funds are classified in Level 1 of the valuation hierarchy.

5 Short-term investments — The Company’s short-term investments consist primarily of corporate obligations in the form of commercial paper of the highest grade which have maturities of one year or less. There is an active market for these commercial paper securities at quoted market prices determined by the issuer of the commercial paper. The short-term investments are classified in Level 1 of the valuation hierarchy.

~~Table of Contents~~6

~~DATATRAK~~ The ~~INTERNATIONAL,~~following ~~INC.~~table ~~AND~~presents ~~SUBSIDIARIES NOTES~~the TOfinancial ~~CONDENSED~~instruments ~~CONSOLIDATED~~carried ~~FINANCIAL~~at ~~STATEMENTS~~ fair value as of March 31, 2009 ~~2007~~and December 31, 2008 by caption on the consolidated balance sheet and by SFAS No. 157 ~~(Unaudited)~~valuation hierarchy as described above.

~~The~~Fair ~~following~~Value ~~table~~Measurements ~~summarizes~~at ~~the~~Reporting ~~fair~~Date ~~values of the assets acquired and liabilities assumed~~Using ~~as of the date of the acquisition.~~

Cash, accounts receivable and other current assets	$	254,000
				Quoted Prices in
Amortizable intangible assets		6,040,000
				Active Markets for		Significant Other		Significant
Goodwill		10,863,000
Description	March 31, 2009			Identical Assets		Observable Inputs		Unobservable Inputs
Accounts payable and other current liabilities		(421,000	)
				(Level 1)		(Level 2)		(Level 3)
Long-term debt		(117,000	)
Cash Equivalents — Money Market Funds	$	995,000		$	995,000	$	—	$	—
Total acquisition cost	$	16,619,000
Short-term Investments — Corporate Obligations (i.e. Commercial Paper)		—			—		—		—
Total	$	995,000		$	995,000	$	—	$	—

Goodwill decreased by $2,054,000 from the original purchase allocation as the deferred tax liabilities acquired in the acquisition are fully offset by the Company’s realizable deferred tax assets. Subsequent to the acquisition, the $117,000 of assumed long-term debt was paid in full.


			Quoted Prices in
			Active Markets for		Significant Other		Significant
Description	December 31, 2008		Identical Assets		Observable Inputs		Unobservable Inputs
			(Level 1)		(Level 2)		(Level 3)
Cash Equivalents — Money Market Funds	$	1,219,000	$	1,219,000	$	—	$	—
Short-term Investments — Corporate Obligations (i.e. Commercial Paper)		500,000		500,000		—		—

Total	$	1,719,000	$	1,719,000	$	—	$	—

The $6,040,000 of acquired amortizable intangible assets were assigned as follows: (i) $3,330,000 to the software now known as DATATRAK eClinical™; (ii) $1,160,000 to employee non-compete agreements; and (iii) $1,550,000 to contracts and customer relationships4. ~~The~~Recently ~~acquired intangible~~Issued ~~assets~~Accounting ~~are being amortized as follows: (i) the software over seven years; (ii) the~~Pronouncements ~~employee non-compete agreements over three years; and (iii) the contracts and customer relationships over three years. The $10,863,000 of goodwill is not deductible for income tax purposes.~~

InOn ~~accordance~~January 1, ~~with~~2009, ~~SFAS~~the ~~No. 142~~Company adopted the provisions of EITF 07-5, “~~Goodwill~~Determining ~~and~~Whether ~~Other~~an Instrument ~~Intangible~~(or ~~Assets,”~~Embedded ~~goodwill~~Feature) isIs ~~deemed~~Indexed to ~~have~~ an ~~indefinite~~Entity’s ~~life~~Own ~~and~~Stock.” isEITF ~~not~~07-5 ~~amortized~~was ~~but~~issued isin ~~subject~~June 2008 to anclarify ~~impairment~~how ~~test~~to atdetermine ~~least~~whether certain instruments or features were indexed to an ~~annually~~entity’s own stock under EITF Issue No. 01-6, The ~~Company~~Meaning ~~performed~~of ~~its~~“Indexed ~~initial~~to ~~annual~~a ~~goodwill~~Company’s ~~and~~Own ~~other~~Stock.” EITF ~~intangible~~07-5 ~~assets~~became ~~impairment test~~effective asfor offinancial ~~October 31,~~statements ~~2006.~~issued ~~For~~for ~~purposes~~fiscal ofyears ~~impairment~~beginning ~~testing~~after December 15, ~~the~~2008, ~~Company~~and ~~determined~~interim ~~that~~periods itwithin ~~has one~~those ~~reporting~~fiscal ~~unit~~years. The ~~Company~~consensus ~~compared~~must ~~the~~be ~~estimated~~applied ~~fair~~to all ~~value~~instruments outstanding on the date of adoption and the ~~reporting~~cumulative ~~unit~~effect toof ~~its~~applying the ~~carrying~~consensus ~~value,~~must ~~including~~be ~~goodwill.~~recognized ~~The~~as ~~fair~~an ~~value~~adjustment ofto the ~~reporting~~opening ~~unit~~balance ~~exceeded~~of ~~its~~retained ~~carrying value~~earnings at transition. ~~October 31,~~The ~~2006,~~adoption ~~and~~of ~~therefore~~EITF ~~goodwill~~07-5 ~~was~~had ~~not~~no ~~deemed~~material toimpact beon ~~impaired~~the asCompany’s financial position, results of operations or cash flows during the ~~impairment~~ ~~testing~~quarter ~~date~~ended March 31, 2009.

~~The~~In ~~operating~~December 2007, ~~results~~the ofFASB ~~ClickFind~~issued ~~have~~SFAS ~~been~~160, ~~included~~“Noncontrolling Interests in ~~the~~Consolidated Financial ~~Company’s~~Statements,” ~~consolidated~~which ~~results~~is an amendment of ~~operations~~ ~~for~~Accounting ~~all~~Research ~~periods~~Bulletin ~~subsequent~~51. toSFAS ~~February 13,~~160 ~~2006.~~clarifies that ~~Unaudited~~a ~~pro~~noncontrolling ~~forma~~interest ~~operating~~in ~~results for~~a subsidiary is an ownership interest in the ~~three~~consolidated ~~months~~entity that ~~ended~~should ~~March 31,~~be ~~2006,~~reported as ~~though~~equity in the ~~Company~~consolidated ~~had~~financial ~~acquired~~statements. ~~ClickFind~~SFAS at160 changes the ~~beginning~~way ofthe ~~2006,~~Consolidated ~~are~~Statement ~~set~~of ~~forth~~Income ~~below.~~is ~~The~~presented ~~unaudited~~thus ~~pro~~requiring ~~forma~~consolidated ~~operating~~net ~~results~~income ~~are~~to ~~not~~be ~~necessarily~~reported ~~indicative~~at ofamounts ~~what~~that ~~would~~include ~~have~~the ~~occurred~~amounts ~~had~~attributable to both parent and the ~~transaction~~noncontrolling interest. ~~taken~~SFAS ~~place~~160 is effective for fiscal years and interim periods within those fiscal years beginning on ~~January~~or after December 115, 2008. The adoption of SFAS 160 did not have an impact on the ~~2006~~Company’s financial statements.

	Three Months Ended
	March 31, 2006
Pro forma revenue	$	4,709,000
Pro forma net loss	$	(359,000	)
Pro forma basic loss per share	$	(0.03	)
Pro forma diluted loss per share	$	(0.03	)

In March 2008, the FASB issued SFAS 161, “Disclosures about Derivative Instruments and Hedging Activities,” an amendment of SFAS 133. SFAS 161 requires disclosures of how and why an entity uses derivative instruments, how derivative instruments and related hedged items are accounted for and how derivative instruments and related hedged items affect an entity’s financial position, financial performance and cash flows. SFAS 161 is effective for fiscal years beginning after November 15, 2008 with early adoption permitted. The adoption of SFAS 161 did not have an impact on the Company’s financial statements.

6 In May 2008, the FASB issued SFAS 162, “The Hierarchy of Generally Accepted Accounting Principles.” SFAS 162 identifies the sources of accounting principles and the framework for selecting the principles to be used in the preparation of financial statements of nongovernmental entities that are presented in conformity with generally accepted accounting principles (GAAP). SFAS 162 directs

~~Table of Contents~~7

~~DATATRAK~~the ~~INTERNATIONAL,~~GAAP ~~INC.~~hierarchy ~~AND~~to ~~SUBSIDIARIES~~the entity as the entity is responsible for selecting accounting principles ~~NOTES~~for TOfinancial ~~CONDENSED~~statements ~~CONSOLIDATED~~that ~~FINANCIAL~~are ~~STATEMENTS~~presented in conformity with GAAP. SFAS 162 was adopted in the ~~March 31,~~first ~~2007~~quarter of 2009. The adoption of SFAS 162 did not have an impact on the Company’s financial ~~(Unaudited)~~statements.

In April 2008, the FASB issued FSP 142-3, “Determination of the Useful Life of Intangible Assets” (FSP 142-3). ~~Net~~FSP ~~Loss~~142-3 ~~per~~amends ~~Share~~the factors to be considered in developing renewal and extension assumptions used to determine the useful life of a recognized intangible asset under SFAS No. 142, “Goodwill and Other Intangible Assets.” FSP 142-3 is effective prospectively for intangible assets acquired or renewed after January 1, 2009. The Company does not expect the adoption of FSP 142-3 will have a material impact on its financial position or results of operations.

~~The~~5. ~~following~~Net ~~table~~Loss ~~sets~~Per ~~forth the computation of basic and diluted net loss per share.~~Share

	Three Months Ended March 31,
	2007			2006
Net loss used in the calculation of basic and diluted earnings per share	$	(1,895,227	)	$	(81,070	)
Denominator for basic net loss per share — weighted average common shares outstanding		11,858,949			10,845,627
Effect of dilutive common share options and warrants		—			—
Denominator for diluted net loss per share		11,858,949			10,845,627
Basic net loss per share	$	(0.16	)	$	(0.01	)
Diluted net loss per share	$	(0.16	)	$	(0.01	)
Weighted average common share options and warrants excluded from the computation of diluted net loss per share because they would have an anti-dilutive effect on net loss per share		1,548,463			1,774,825

The following table sets forth the computation of basic and diluted net loss per share.

4. Comprehensive Loss


	Three Months Ended March 31,
	2009			2008
Net loss used in the calculation of basic and diluted earnings per share	$	(788,000	)	$	(2,233,000	)

Denominator for basic net loss per share — weighted-average common shares outstanding		13,741,000			13,682,000
Effect of dilutive common share options and warrants		—			—

Denominator for diluted net loss per share		13,741,000			13,682,000

Basic net loss per share	$	(0.06	)	$	(0.16	)

Diluted net loss per share	$	(0.06	)	$	(0.16	)

Weighted-average common share options and warrants excluded from the computation of diluted net loss per share because they would have an anti-dilutive effect on net loss per share		1,519,000			1,487,000

~~The~~6. ~~following~~Comprehensive ~~table sets forth comprehensive loss.~~Loss

	Three Months Ended March 31,
	2007			2006
Net loss	$	(1,895,227	)	$	(81,070	)
Foreign currency translation		(18,464	)		(13,147	)
Comprehensive loss	$	(1,913,691	)	$	(94,217	)

The following table sets forth comprehensive loss.

5. Shareholders’ Equity


	Three Months Ended March 31,
	2009			2008
Net loss	$	(788,000	)	$	(2,233,000	)
Foreign currency translation		—			(5,000	)

Comprehensive loss	$	(788,000	)	$	(2,238,000	)

~~In March of 2007, the Company completed a private placement financing with a group of institutional investors~~7. InShareholders’ ~~connection with this financing, the Company sold 1,986,322 common~~Equity shares at a price of $4.75 per share. The terms of the financing included the issuance of five-year warrants to purchase a total of 297,948 common shares at $6.00 per share to investors in the private placement, and the issuance of five-year warrants to purchase a total of 29,795 common shares at $6.00 per share to the placement agents who assisted the Company in the private placement. The net proceeds from the sale of the common shares were approximately $8,727,000 (after deducting the commissions and certain expenses of the placement agents and legal fees). The proceeds were allocated between common shares and common share warrants based on their relative fair values. All the warrants are outstanding as of March 31, 2007.

In connection with ~~the~~a March 2007 financing, we ~~have~~ granted registration rights for ~~the~~1,986,322 purchased common shares and ~~the~~for 327,743 common shares issuable upon the exercise of warrants. The proceeds were allocated between common shares and common share warrants based on their fair values. All the warrants were outstanding as of March 31, 2009 and December 31, 2008. The ~~registration~~ registration rights ~~specify~~agreement specifies filing and “effectiveness” deadlines and ~~require~~requires the Company to, except under certain limited circumstances, keep the registration statement effective until certain threshold dates. The registration rights agreement also requires the Company to maintain (e.g. maintenance requirement) a sufficient number of common shares to satisfy all the warrants if they were exercised now or in the future. DATATRAK has sufficient authorized, unregistered ~~commons~~common shares to permit exercise of the warrants. Accordingly, the Company classified the warrants as equity instruments.

7 In the event the Company fails to meet the registration maintenance requirement, DATATRAK will have to pay each holder an amount equal to 1.0% of the aggregate purchase price for each month of such failure. The aggregate amount of these “registration failure payments” will not exceed a total of 10% of the aggregate purchase price of the shares. The Company believes it is not probable that it will be required to pay a registration failure payment and thus has not recorded a liability with respect to the registration payment arrangement. The registration maintenance requirement expires in May 2009.

~~Table of Contents~~8

~~DATATRAK INTERNATIONAL, INC~~8. ~~AND~~Operating ~~SUBSIDIARIES~~Leases ~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS March 31, 2007 (Unaudited)~~

InThe ~~the event the~~ Company ~~fails~~leases tocertain ~~meet~~office aequipment ~~filing,~~and ~~effectiveness or maintenance requirement, DATATRAK shall pay each holder an amount equal to 1% of the aggregate purchase price~~space. ~~The aggregate~~Future ~~amount~~minimum oflease ~~these “registration delay~~ payments” ~~shall~~for ~~not exceed a total of 10% of~~ the ~~aggregate purchase price of the shares. The~~ Company ~~believes~~under itnon-cancelable isoperating ~~not~~leases ~~probable~~as ~~that~~of itMarch 31, ~~will~~2009 ~~be required~~are toas ~~pay a registration delay payment and thus has not recorded a liability with respect to~~follows: ~~the registration payment arrangement.~~

On April 13, 2007, the Company filed its S-3 registration statement to register sufficient common shares to cover the purchased common shares and the common shares issuable upon exercise of the warrants issued as part of the private placement financing. The Company fully expects that it will meet all applicable registration requirements.


Twelve Months ended March 31,	Amount
2010	$	264,000
2011		242,000
2012		247,000
2013		180,000
Subsequent to 2013		—

Total	$	933,000

~~There are 157,079 warrants outstanding at March 31, 2007 from prior year issuances which have original terms of 3 to 5 years and exercise prices ranging from $3.20 to $~~9.60 ~~per~~Income ~~share.~~Taxes

~~During~~Income ~~the~~tax ~~three~~expense ~~months~~consists ~~ended March 31, 2007, the holders~~ of ~~7,548 common share options, at a weighted average exercise price of $4.03, exercised~~ the ~~options and purchased 7,548 shares.~~following:

6. Operating Leases


	Three Months Ended March 31,
	2009		2008
Current — U.S.	$	—	$	(15,000	)
Deferred — foreign		—		15,000

	$	—	$	—

~~The~~A ~~Company~~reconciliation ~~leases~~of ~~certain~~income ~~office~~tax ~~equipment~~expense ~~and~~at ~~space~~the U.S. ~~Future~~federal ~~minimum~~statutory ~~lease~~rate ~~payments~~to ~~for~~ the effective ~~Company~~income ~~under~~tax ~~noncancelable~~rate ~~operating~~is ~~leases~~ as ~~of March 31, 2007 are as~~ follows:

Twelve Months ended March 31,	Amount
	Three Months Ended March 31,
2008	$	933,000
	2009			2008
2009		937,000
Income tax benefit at the United States statutory rate	$	(268,000	)	$	(759,000	)
2010		648,000
Change in valuation allowance		263,000			887,000
2011		597,000
Foreign tax credit		—			(116,000	)
2012		604,000
Change in FIN No. 48 liability		—			(15,000	)
Subsequent to March 31, 2012		351,000
Foreign taxes		—			(2,000	)
	$	4,070,000
Non-deductible permanent differences		5,000			5,000
	$	—		$	—

8 Due to uncertainty regarding the realization of the deferred tax asset resulting from its cumulative operating losses, as well as the closing of its German office, the Company provided for a full valuation allowance against all its net deferred tax assets. The deferred foreign tax provision in 2008 was primarily the result of the additional valuation reserve provided against its German deferred tax assets.

~~Table~~ During the first quarter of ~~Contents~~2008, the Company received the German tax audit report associated with the German tax audit of DATATRAK Deutschland GmbH, the Company’s German subsidiary, for the years 2003 through 2005. The report concluded that the 2003 loss was disallowed and should be classified as a constructive dividend. As a result, the Company recorded a tax assessment due to the German tax authority and corresponding FIN No. 48 liability of $115,000 which was paid in September 2008.

~~DATATRAK~~(Remainder ~~INTERNATIONAL,~~Of ~~INC.~~This ~~AND~~Page ~~SUBSIDIARIES NOTES~~Intentionally TOLeft ~~CONDENSED CONSOLIDATED FINANCIAL STATEMENTS March 31, 2007 (Unaudited~~Blank)

~~7. Income Taxes~~9

~~Income~~10. ~~tax~~Long-Term ~~expense consists of the following:~~Debt

	Three Months Ended March 31,
	2007		2006
Deferred:
Federal	$	—	$	21,000
State and local		—		—
Foreign		26,300		—
	$	26,300	$	21,000

Long-term debt at March 31, 2009 and December 31, 2008 is summarized below:

A reconciliation of income tax expense at the U.S. federal statutory rate to the effective income tax rate is as follows:


	March 31,		December 31,
	2009		2008
Financing agreement with Oracle Credit Corporation (the “Oracle Agreement”)	$	18,000	$	44,000
Capital lease agreements with Dell Financial Services (the “Dell Agreements”)		141,000		185,000
Insurance Notes payable		—		8,000

		159,000		237,000
Less current maturities		139,000		196,000

	$	20,000	$	41,000

	Three Months Ended March 31,
	2007			2006
Income tax (benefit) provision at the United States statutory rate	$	(635,400	)	$	(21,000	)
Increase in valuation allowance		587,800			—
Foreign taxes		26,300			—
Non-deductible permanent differences		47,600			42,000
	$	26,300		$	21,000

The Oracle Agreement is for the purchase of certain computer equipment. The terms of the financing agreement require DATATRAK to make 36 monthly payments of $9,000, including accrued interest, beginning in July 2006 through June 2009.

~~For~~The Dell Agreements are for the ~~three~~purchase ~~months~~of ~~ended~~certain ~~March 31,~~computer ~~2007,~~equipment. The terms of the ~~Company’s~~lease agreements ~~pretax~~require ~~loss~~DATATRAK ~~was~~to make monthly payments, currently totaling $116,~~869,~~000., ~~Due~~for tothe 36 month ~~uncertainty~~term ~~regarding~~of ~~the~~each ~~realization~~lease. Certain of ~~the~~these ~~deferred~~leases ~~tax~~include ~~asset~~bargain ~~resulting~~purchase ~~from~~options ~~this~~while ~~loss,~~the ~~DATATRAK~~more recent ~~provided~~ones ~~for~~entered ainto ~~full~~include ~~valuation~~fair ~~allowance~~value ~~against~~purchase ~~this~~options ~~deferred~~at ~~tax~~the ~~asset~~end of the lease term.

InDuring ~~July~~May ~~2006~~2008, the ~~FASB~~Company ~~issued~~entered ~~Financial~~into ~~Interpretation~~two separate financing agreements (the “~~FIN~~Insurance Notes”) ~~No. 48~~with Westfield Bank, ~~“Accounting~~FSB for ~~Uncertainty~~ inthe ~~Income~~payment ~~Taxes.”~~of ~~FIN~~the ~~No. 48~~Company’s ~~clarifies~~insurance ~~the~~premiums. ~~accounting~~The ~~for~~notes bore ~~uncertain~~interest ~~tax~~at ~~positions recognized~~6.9% inand an7.2%, ~~entity’s~~respectively, ~~financial~~and ~~statements~~were due in ~~accordance~~monthly ~~with~~installments ~~SFAS~~of ~~No. 109~~$11,000 ~~“Accounting for~~and ~~Income~~$8,000, ~~Taxes.”~~including ~~This~~accrued ~~interpretation~~interest, ~~was~~respectively. ~~effective~~At ~~for the Company on January~~March 131, ~~2007.~~2009, ~~There~~there ~~was~~were no remaining ~~impact~~amounts ~~upon~~due ~~adoption~~to Westfield Bank, FSB.

911. Restructuring Costs

~~Table~~ On January 21, 2009 the Company announced the retirement of ~~Contents~~Dr. Jeffrey Green as Chief Executive Officer of DATATRAK and also as a member of our Board of Directors. In the first quarter of 2009, the Company recorded a severance charge of $463,000 related to Dr. Green’s retirement which will be paid out over a two-year period. Also during the first quarter, the Company announced the departure of Mr. Matthew Delaney, who has served as DATATRAK’s Interim President since May 2008. In connection with his departure, the Company has recorded a severance charge of $167,000 in the first quarter of 2009 that will be paid out over a 12-month period. Reconciliations of the Company’s accrued severance balances for the first three months ended March 31, 2009 and 2008 are as follows:

DATATRAK INTERNATIONAL, INC. AND SUBSIDIARIES NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS March 31, 2007 (Unaudited)


	Accrued Severance Reconciliation
Description	2009			2008
Accrued severance at Jan 1	$	245,000		$	523,000
Charges		634,000			26,000
Payments		(151,000	)		(221,000	)

Accrued severance at Mar 31	$	728,000		$	328,000

8 The Company accounts for termination benefits in accordance with Statement of Financial Accounting Standards (“FAS”) No. 146, ~~Long-term~~“Accounting ~~Debt~~for the Cost of Exit or Disposal Activities,” which requires termination benefits for employees who will not be retained to render service beyond the minimum notification period to be recognized at the communication date.

~~Long-term~~12. ~~debt~~Restricted ~~at March 31, 2007 and December 31, 2006 is summarized below:~~Cash

	March 31,		December 31,
	2007		2006
Insurance note payable	$	—	$	74,000
Notes payable — ClickFind (the “ClickFind Notes”)		3,753,000		4,000,000
Financing agreement with Oracle Credit Corporation (the “Oracle Agreement”)		211,000		234,000
Capital lease agreements with Dell Financial Services (the “Dell Agreements”)		296,000		238,000
		4,260,000		4,546,000
Less current maturities		940,000		734,000
	$	3,320,000	$	3,812,000

Effective January 31, 2009, DATATRAK, Inc., a wholly owned subsidiary of the Company, terminated its non-exclusive Marketing Service Agreement (“Agreement”) with DATATRAK Deutschland GmbH (“Deutschland GmbH”). As of December 31, 2008, Deutschland GmbH recorded accrued expenses for lease and other obligations incurred through January 31, 2009 totaling $218,000. As a result of the termination of the Agreement, Deutschland GmbH was required under applicable German law to file a petition for voluntary bankruptcy in the German courts and had on hand $218,000, designated as restricted cash, to fund these liabilities as of December 31, 2008. The restricted cash was paid out in settlement of these liabilities during the first quarter of 2009 and there was no remaining restricted cash on hand at March 31, 2009.

~~The ClickFind Notes are held by certain former shareholders of ClickFind. They bear interest~~10 at prime plus 1% and principal payments are due in installments of $500,000, $500,000 and $3,000,000 on February 1, 2007, 2008 and 2009, respectively. Of the $3,753,000, $2,570,000 is held by an executive officer of the Company who was the founder of ClickFind. Of the remaining $1,183,000 of ClickFind Notes, $871,000 is held by other current employees of the Company

~~The Oracle Agreement is for the purchase of certain computer equipment~~13. ~~The~~Software ~~terms~~Development ~~of the~~Costs ~~financing agreement require DATATRAK to make 36 monthly payments of $9,012, including accrued interest, beginning in July 2006 through June 2009.~~

~~The~~Development ~~Dell~~costs ~~Agreements~~incurred in the research and development of new software products and enhancements to existing software products are expensed as incurred until technological feasibility has been established. After technological feasibility is established, any additional costs are capitalized in accordance with Statement of Financial Accounting Standards (“FAS”) No. 86, “Accounting for the ~~purchase~~Costs of ~~certain~~Computer ~~computer~~Software ~~equipment~~to be Sold, Leased, or Otherwise Marketed.” ~~The~~Such costs ~~terms~~are amortized over the lesser of three years or the ~~lease~~economic life of the related product. The ~~agreements~~net ~~require~~carrying ~~DATATRAK~~value tofor ~~make~~capitalized ~~monthly~~software ~~payments,~~development ~~currently~~costs ~~totaling~~was $11406,000 and $434,000 ~~for~~as ~~the~~of ~~36 month~~March ~~term~~31, 2009 and December 31, 2008, respectively. The Company performs a review of ~~each~~the ~~lease~~recoverability of such capitalized software costs when impairment indicators arise. At the time a determination is made that capitalized amounts are not recoverable based on the estimated cash flows to be generated from the applicable software, any impairment amounts are expensed.

~~The~~As ~~Oracle~~of ~~Agreement~~June 30, 2008, impairment indicators were present and the ~~Dell~~Company ~~Agreement~~performed ~~transactions~~a ~~are~~review ~~excluded~~of the ~~from~~recoverability ~~the~~of ~~Company’s condensed~~its ~~consolidated~~DATATRAK ~~statement~~eClinical software. As a result of lower expectations regarding potential future cash flows. ~~During~~associated with the ~~first~~software, ~~three~~the ~~months~~Company recorded a partial impairment loss on its DATATRAK eClinical software of ~~2007~~$1,700,000 during the second quarter of 2008. The Company used a relief from royalty methodology and determined the fair value of the software to be ~~entered~~$480,000 ~~into~~as ~~new~~of ~~Dell~~June 30, ~~Agreements~~2008. ~~totaling~~The software is being amortized over its remaining estimated life of approximately four years and is stated at $87401,000 at March 31, 2009.

InResearch ~~connection~~and ~~with~~development ~~the~~expenses ~~Datasci~~included ~~claim, as further detailed~~ in ~~Note 12 herein~~selling, angeneral ~~arrangement was~~and ~~entered~~administrative ~~into with certain former ClickFind shareholders for sharing of the~~ expenses ~~associated~~ ~~with~~were ~~that litigation. Under that arrangement, a certain portion of principal payments due under the notes would be used to offset a certain portion of the expenses related to the litigation. Of the~~ $~~500~~289,000 ~~payment~~and ~~due on February 1, 2007,~~ $~~327~~471,000 ~~was~~for ~~held by~~ the ~~Company~~three tomonths beended ~~used to satisfy these expenses as they are incurred. As of~~ March 31, ~~2007,~~2009 ~~approximately~~and ~~$74~~2008,~~000~~ ~~of the $327,000 has been used to satisfy such expenses~~respectively. ~~The remaining amount, or $253,000, will be paid to a former~~ ~~ClickFind shareholder in the second quarter of 2007. The Company is permitted to withhold additional portions of future principal payments to cover further costs associated with this claim.~~

914. ~~Restricted~~Goodwill ~~Cash~~and Finite-Lived Tangible and Intangible Assets

The Company’s ~~wholly~~determined ~~owned~~that ~~subsidiary,~~impairment ~~DATATRAK~~indicators ~~GmbH~~existed as of June 30, is2008. As required toby SFAS ~~provide~~No. 142, a“Goodwill ~~bank~~and ~~guarantee to~~Other ~~the~~Intangible ~~lessor~~Assets,” ofthe ~~its~~Company ~~office~~conducted ~~space~~a ~~equal~~two-step impairment test to ~~three~~assess ~~months~~the carrying value of ~~rent~~its goodwill. The ~~terms~~results of the ~~bank~~test ~~guarantee require~~and ~~DATATRAK~~other ~~GmbH~~qualitative factors tonegatively ~~maintain~~impacting athe ~~restricted~~Company’s ~~cash~~expected ~~balance~~future ofperformance ~~59,000~~resulted ~~euros~~in ~~with~~a ~~the~~full impairment ~~bank.~~loss ~~The~~of ~~U.S. dollar~~its ~~equivalent~~goodwill ofin ~~this~~the amount ~~was~~of $7810,~~785 at March 31~~856,000 ~~2007~~as ~~and~~of ~~$78,005 at December~~June 3130, ~~2006~~2008.

10 In accordance with SFAS No. 144, “Accounting for the Impairment of Long-Lived Assets,” the carrying values of long-lived assets are evaluated if circumstances indicate a possible impairment in value. The Company conducted impairment testing of its finite-lived tangible and intangible assets as of June 30, 2008 as well. As a result of its testing, the Company recorded an impairment loss of $144,000 on its ClickFind non-compete intangible asset, $63,000 for certain German fixed assets and $1,700,000 on its DATATRAK eClinical software as of June 30, 2008.

~~Table~~ The Company determined that impairment indicators existed as of ~~Contents~~March 31, 2009 and as of December 31, 2008. The Company conducted interim impairment testing of its DATATRAK eClinical software as of both dates and determined that no further impairment of its software had occurred as of either date.

~~DATATRAK INTERNATIONAL, INC~~15. ~~AND SUBSIDIARIES~~Reclassification ~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS March 31, 2007 (Unaudited)~~

~~10.~~ Certain ~~Software~~prior ~~Development~~year ~~Costs~~amounts have been reclassified to conform to the current year presentation.

Development costs incurred in the research and development of new software products and enhancements to existing software products are expensed as incurred until technological feasibility has been established16. ~~After technological feasibility is established, any additional costs are~~Contingencies capitalized in accordance with SFAS No. 86, “Accounting for the Costs of Computer Software to be Sold, Leased, or Otherwise Marketed.” Such costs are amortized over the lesser of three years or the economic life of the related product. The Company performs an annual review of the recoverability of such capitalized software costs. At the time a determination is made that capitalized amounts are not recoverable based on the estimated cash flows to be generated from the applicable software, any remaining capitalized amounts are expensed.

~~Research~~In ~~and~~the ~~development~~ordinary ~~expenses~~course ~~included~~of ~~in selling~~business, ~~general~~the ~~and~~Company ~~administrative~~is ~~expenses~~involved in employment related legal ~~were~~proceedings. ~~$669,000~~The ~~and~~Company ~~$596,000~~believes ~~for~~that the ~~three~~ultimate ~~months~~resolution ~~ended~~of ~~March 31,~~these ~~2007~~matters ~~and~~will ~~2006~~not have a material adverse effect on the results of operations, ~~respectively~~cash flows or the financial position of the Company.

11~~. Reclassification~~

~~Certain~~Item 2. ~~prior~~Management’s ~~year~~Discussion ~~amounts~~and ~~have~~Analysis ~~been~~of ~~reclassified~~Financial toCondition ~~conform~~and toResults ~~the~~of ~~current year presentation.~~Operations

12 The information set forth and discussed below for the three month period ended March 31, 2009 is derived from, and should be read in conjunction with, the condensed consolidated financial statements included elsewhere herein. ~~Contingencies~~The financial information set forth and discussed below is unaudited, but in the opinion of management, reflects all adjustments (consisting of normal recurring accruals) necessary for a fair presentation of such information. The Company’s results of operations for a particular quarter may not be indicative of results expected during the other quarters or for the entire year.

~~In the ordinary course of business, the Company is involved in employment related legal~~General proceedings. The Company is of the opinion that the ultimate resolution of these matters will not have a material adverse effect on the results of operations, cash flows or the financial position of DATATRAK.

OnDATATRAK ~~July 17,~~is ~~2006, Datasci, LLC (“Datasci”) filed~~ a ~~complaint~~provider ~~against~~of ~~the~~software ~~Company, ClickFind,~~ and CFother ~~Merger~~related ~~Sub~~services, ~~Inc.~~commonly ~~(“Merger~~referred ~~Sub”) alleging a patent infringement. As previously disclosed, on February 13, 2006, the Company acquired ClickFind pursuant~~ to aas ~~merger agreement between the~~an ~~Company,~~application ~~ClickFind~~service ~~and Merger Sub~~provider, aor ~~wholly owned subsidiary of the Company~~ASP. The Company ~~believes Datasci~~’s ~~claims~~customers ~~are~~use ~~without~~the ~~merit~~software ~~and~~known ~~intends~~as ~~to defend this matter vigorously. On August 14,~~DATATRAK ~~2006,~~EDC® ~~the~~and ~~Company~~DATATRAK ~~filed~~eClinical™ anto ~~answer~~collect and ~~counterclaim~~transmit ~~denying~~clinical ~~infringement~~trial ~~of the patent in suit~~data, commonly ~~asserting~~referred ~~numerous~~to ~~affirmative~~as ~~defenses~~electronic ~~and~~data ~~counterclaiming~~capture, ~~for~~or ~~a declaratory judgment of non-infringement and invalidity of the patent~~EDC. ~~Because~~The ~~the litigation is in a preliminary stage, the~~ Company’s ~~cannot~~services ~~assess~~assist ~~the~~companies ~~likelihood~~in ~~of an adverse outcome or determine whether potential~~the ~~damages~~clinical pharmaceutical, ~~if any~~biotechnology, ~~could~~contract ~~have~~research aorganization ~~material~~and ~~adverse~~medical ~~impact~~device industries ~~on the Company’s results of operations~~ in ~~a future~~accelerating ~~period or~~ the ~~Company’s~~completion ~~financial~~of ~~position~~clinical ~~or liquidity~~trials.

11 The Company had a concentration of a small number of customers that made up a significant portion of its revenue for both of the three month periods ended March 31, 2009 and 2008. Revenue from the three largest customers as a percentage of the Company’s total revenue for each three month period was 45% and 40% in 2009 and 2008, respectively.

~~Table~~ Current unfavorable market conditions caused by the global economic recession have made it more difficult for the Company to increase its backlog through the signing of ~~Contents~~new customer contracts. Our backlog decreased approximately $1.7 million from $11.4 million as of December 31, 2008 to $9.7 million as of March 31, 2009. The reduction in backlog reflects the cancellation of three trials by a significant customer totaling approximately $570,000. Other than the $800,000 enterprise license agreement signed at the beginning of 2008, most of our new customer contracts in 2008 and the first quarter of 2009 have been in the form of smaller individual trials. We believe that our sales growth of new trials has been inhibited by the poor economic climate. While the economic conditions have been difficult, the Company managed to demonstrate positive results on its cost-cutting initiatives, as it substantially reduced its operating loss in the 2009 first quarter compared to the operating loss recorded in the first quarter of 2008.

~~Item 2. Management’s Discussion and Analysis of~~ Financial ~~Condition~~Performance ~~and Results of Operations~~Improvement

~~The~~For ~~information~~the ~~set~~three ~~forth~~months ~~and~~ended ~~discussed~~March 31, ~~below~~2009, our gross profit margin improved to 77% compared to 55% for the same three month period ~~ended~~of ~~March 31,~~the ~~2007~~prior year. The improved gross margin reflects isrelatively ~~derived~~constant ~~from,~~revenue ~~and~~of ~~should~~$2.1 million befor ~~read~~each inquarter ~~conjunction~~and ~~with,~~a ~~the~~49% ~~condensed~~reduction ~~consolidated~~in ~~financial~~direct costs. ~~statements~~Selling, ~~included~~general ~~elsewhere~~and ~~herein.~~administrative ~~The~~expenses ~~financial~~decreased ~~information~~42% ~~set~~for ~~forth~~the ~~and~~three ~~discussed~~months ~~below~~ended ~~is unaudited~~March 31, 2009 ~~but~~compared into the ~~opinion~~same period of ~~management~~the prior year. Combined, ~~reflects~~direct ~~all~~costs ~~adjustments~~and ~~(consisting~~SG&A ofexpenses ~~normal~~were ~~recurring~~$1.6 million ~~accruals)~~lower ~~necessary~~ for athe ~~fair~~three ~~presentation~~month ofperiod ~~such~~ending ~~information.~~March 31, ~~The~~2009 ~~Company’s~~compared ~~results~~to the same period of the prior year. Excluding severance charges, our loss from operations for athe ~~particular~~three ~~quarter~~month ~~may~~period ended ~~not~~March 31, be2009 ~~indicative~~was of$(153,000) ~~results~~compared ~~expected~~to ~~during~~$(2,199,000) in the ~~other~~corresponding prior year ~~quarters~~period. orOur ~~for~~income from operations in the ~~entire~~fourth ~~year~~quarter of 2008, excluding severance, was $15,000.

~~General~~ German Office Closure

~~DATATRAK~~In is2008 awe ~~provider~~continued ofto ~~software~~optimize ~~and~~our ~~other~~operational ~~related~~efficiencies ~~services,~~and ~~commonly~~streamlined ~~referred~~our ~~to as an~~cost ~~application~~structure ~~service~~with ~~provider,~~the orclosure ~~ASP.~~of ~~DATATRAK’s~~our ~~customers~~German ~~use~~office and the ~~software~~transition ~~known~~of asour ~~DATATRAK EDC(R)~~global ~~and~~Help ~~DATATRAK~~Desk ~~eClinical (TM) to collect~~ and European ~~transmit~~client ~~clinical~~support ~~trial~~operations ~~data, commonly referred~~ to as ~~electronic~~our ~~data capture~~Cleveland, orOhio ~~EDC~~office. ~~The~~As ~~Company’s~~a ~~services~~result ~~assist~~of ~~companies in~~ the ~~clinical~~German office ~~pharmaceutical,~~closure ~~biotechnology,~~total ~~contract~~costs ~~research~~and ~~organization~~operating ~~and~~expenses ~~medical~~were ~~device~~approximately ~~industries~~$664,000 lower in ~~accelerating~~ the ~~completion~~first quarter of ~~clinical~~2009 ~~trials.~~as ~~Approximately~~compared ~~37%~~to of the ~~Company’s~~first ~~assets,~~quarter ~~or $12,654,000,~~of is2008. ~~held~~Effective inJanuary 31, ~~cash~~2009, ~~cash~~DATATRAK, ~~equivalents and short-term investments~~Inc., ~~and goodwill accounts~~a ~~for~~wholly ~~approximately~~owned ~~32%~~subsidiary ~~or, $10,863,000,~~ of the Company’s, ~~total~~terminated ~~assets.~~its ~~The~~non-exclusive ~~Company~~Marketing isServices ~~continuing to~~Agreement ~~enhance~~(“Agreement”) ~~and~~with ~~commercialize~~DATATRAK ~~its~~Deutschland ~~business~~GmbH ~~and~~(“Deutschland ~~software,~~GmbH”). ~~and~~As ~~anticipates~~a ~~that~~result ~~its~~of ~~operating~~the ~~results may~~termination ~~fluctuate~~of ~~significantly~~the ~~from~~Agreement, ~~period~~Deutschland toGmbH ~~period.~~was ~~There~~required ~~can~~under beapplicable noGerman ~~assurance~~law ofto ~~the~~file ~~Company’s~~a ~~long-term~~petition for ~~future~~voluntary ~~prospects~~bankruptcy in the German courts.

~~On February 13, 2006, we acquired all of the outstanding stock of ClickFind, a company focused~~12 on the application of a unified technology platform for clinical trials, located in Bryan, Texas. As a result of the acquisition, we believe we have the most extensive software suite in the clinical trials industry.

~~The~~Strategic ~~cash portion of the purchase price, less cash acquired of $87,000, was approximately~~Alternatives $4,669,000. The remainder of the purchase price consisted of $4,000,000 in notes payable and the issuance of approximately $7,863,000 in common shares (1,026,522 common shares), both of which are excluded from the Company’s condensed consolidated statement of cash flows. The notes payable bear interest at prime plus 1%, and principal payments are due in installments of $500,000, $500,000 and $3,000,000 on February 1, 2007, 2008 and 2009, respectively. In connection with the Datasci claim, an arrangement was entered into with certain former ClickFind shareholders for sharing of the expenses associated with that litigation. Under that arrangement, a certain portion of principal payments due under the notes would be used to offset a certain portion of the expenses related to the litigation. Of the $500,000 payment due on February 1, 2007, $327,000 was held by the Company to be used to satisfy these expenses as they are incurred. As of March 31, 2007, approximately $74,000 of the $327,000 has been used to satisfy such expenses. The remaining amount, or $253,000, will be paid to a certain former ClickFind shareholder in the second quarter of 2007. The Company is permitted to withhold additional portions of future principal payments to cover further costs associated with this claim.

~~The~~On ~~operating~~July 21, ~~results~~2008, ofwe ~~ClickFind~~announced ~~have~~we ~~been~~had ~~included~~retained Healthcare Growth Partners, LLC as a strategic and financial advisor to assist the Board of Directors in ~~our~~evaluating ~~consolidated~~a ~~results~~variety of potential ~~operations~~opportunities ~~for~~directed ~~all~~at ~~periods~~maximizing ~~subsequent~~shareholder value. These potential opportunities may include, but are not limited to, ~~February 13~~a sale, ~~2006~~merger or other business combination of the Company; strategic partnerships or alliances; or raising additional capital, if the Company determines it is in the best interest of its shareholders to continue as a stand alone entity. This review process is ongoing and we undertake no obligation to make any further announcement regarding the exploration of strategic alternatives unless and until the Board of Directors has approved a specific course of action. There can be no assurance that this process will result in any specific transaction or in any changes to the Company’s current direction.

12 Restructured Senior Management Team

~~Table~~ On January 21, 2009, the Company announced the retirement of ~~Contents~~Dr. Jeffrey Green as Chief Executive Officer of DATATRAK and also as a member of our Board of Directors. On March 16, 2009, the Company announced Mr. Matthew Delaney was no longer employed as the Company’s Interim President. Mr. Laurence Birch, Chairman of the Board of DATATRAK, will provide support in the interim for the functions of the Chief Executive Officer and President positions. Also on January 21, 2009, our Chief Financial Officer, Mr. Raymond J. Merk, assumed the role and responsibilities of Chief Operating Officer in addition to his Chief Financial Officer responsibilities.

~~DATATRAK recognizes revenue in accordance with Staff Accounting Bulletin 104, Revenue Recognition~~ Litigation and Emerging Issues Task Force (“EITF”) Issue No. 00-21, Revenue Arrangements with Multiple Deliverables. The Company recognizes revenue when all of the following criteria are met: persuasive evidence of an arrangement exists; delivery of the product or service has occurred; the fee is fixed or determinable; and collectibility is probable. DATATRAK’s contracts provide a fixed price for each element to be delivered, and revenue is recognized as these multiple-elements are delivered. The Company determines the price of items included in multiple-element arrangements using objective, reliable evidence of fair value. This evidence is based on the vendor-specific per element price the Company would sell an item for on a standalone basis or other methods allowable under EITF No. 00-21. DATATRAK recognizes revenue based on the performance or delivery of the following specified services or components of its contracts in the manner described below:

• On ~~Project~~February 13, ~~management and data management (design~~2006, ~~report~~in ~~and~~accordance ~~export)~~with ~~service revenue is recognized proportionally over~~ the ~~life~~provisions of athe ~~contract~~merger asagreement ~~services~~between DATATRAK ~~are performed~~International, ~~based on the contractual billing rate per hour for those services~~Inc. •and ~~Data~~ClickFind ~~items~~(the ~~revenue~~“Merger isAgreement”), ~~earned~~the ~~based~~Company onacquired aall ~~price~~of the ~~per~~outstanding ~~data~~stock ~~unit~~of ~~as data items are entered into our hosting facility~~ClickFind. •A ~~Classroom~~portion ~~training~~of ~~services~~the ~~revenue~~purchase isprice ~~recognized~~consisted asof ~~classroom training is completed~~$4,000,000 atin notes ~~rates~~payable ~~based~~(the on“ClickFind ~~the~~Notes”), ~~length~~$3,000,000 of ~~the~~which ~~training~~would ~~program.~~have •been ~~Internet-based~~due ~~training~~and ~~services~~payable ~~revenue is recognized~~ on February 1, ~~a per user basis as self-study courses are completed~~2009. ~~• Help desk revenue is recognized based on a monthly price per registered user under the contract.~~

~~Services~~As ~~provided~~previously bydisclosed, usthe ~~that~~Company ~~are~~and certain former shareholders of ClickFind (the “Indemnifying Shareholders”) were involved in ~~addition~~a dispute relating to ~~those~~certain ~~provided~~representations ~~for~~and warranties in ~~our~~the ~~contracts~~Merger ~~are~~Agreement ~~billed on~~(United aStates ~~fee~~District Court for ~~service~~the ~~basis~~Northern asDistrict ~~services~~of ~~are~~Ohio, Eastern ~~completed~~Division, Case No. 1:08CV02182) ~~Costs~~(the ~~associated~~“Lawsuit”). ~~with~~On ~~contract~~December 18, ~~revenue~~2008, ~~are~~we announced the ~~recognized~~dispute ashad ~~incurred.~~been ~~Costs~~resolved and that ~~are~~an ~~paid~~agreement ~~directly~~to bysettle ~~our~~all ~~clients,~~claims ~~and~~with ~~for~~the ~~which~~defendants wein dothe case ~~not~~had ~~bear the~~been ~~risk~~reached. ofIn ~~economic~~connection ~~loss~~with such resolution, ~~are~~the ~~excluded~~$3,000,000 ~~from~~balloon ~~revenue.~~payment ~~The~~due ~~termination~~on February 1, 2009 and accrued interest of a$180,000 ~~standard~~due ~~contract~~the ~~will~~Indemnifying Shareholders was forgiven. ~~not~~The ~~result~~Company’s incondensed aconsolidated ~~material~~balance ~~adjustment~~sheets toas of March 31, 2009 and December 31, 2008 reflect the ~~revenue~~removal orof ~~costs~~the ~~previously~~$3,000,000 ~~recognized~~obligation.

~~Backlog~~Revenue ~~consists~~Recognition ~~of anticipated revenue from authorization letters to commence services~~ and ~~signed~~ ~~contracts~~Deferred ~~yet to be completed. Potential contracts or authorization letters that have passed~~Revenue the verbal stage, but have not yet been signed, are excluded from backlog. At March 31, 2007, DATATRAK’s backlog was $13,510,000. DATATRAK’s contracts can be cancelled or delayed at anytime and, therefore, the Company’s backlog, at any point in time, is not an accurate predictor of future levels of revenue. As a result of DATATRAK’s transactional and service-based business model combined with the dynamic nature of the clinical trials market where changes in scope are common, backlog has historically not been an accurate predictor of short-term revenue.

~~Critical~~ DATATRAK recognizes revenue in accordance with Staff Accounting ~~Policies~~Bulletin 104, “Revenue Recognition” and Emerging Issues Task Force (“EITF”) Issue No. 00-21, “Revenue Arrangements with Multiple Deliverables.” The Company recognizes revenue when all of the following criteria are met: persuasive evidence of an arrangement exists; delivery of the product or service has occurred; the fee is fixed or determinable; and collectibility is probable. DATATRAK’s contracts provide a fixed price for each element to be delivered, and revenue is recognized as each multiple-element is delivered. The Company determines the price of individual elements included in multiple-element arrangements using objective, reliable evidence of fair value. This evidence is based on the vendor-specific per element price the Company would sell an item for on a standalone basis. DATATRAK recognizes revenue based on the performance or delivery of the following specified services or components of its contracts in the manner described below:

In• ~~response~~Enterprise tolicense revenue is recognized ratably over the ~~SEC’s~~life ~~Release~~of Nothe license agreement. ~~33-8040,~~ ~~“Cautionary~~• ~~Advice~~Project ~~Regarding~~management ~~Disclosure~~and ~~About Critical~~data ~~Accounting~~management ~~Policies~~(design,” ~~the~~report ~~Company~~and ~~has~~export) ~~identified~~service revenue is recognized proportionally over the ~~most~~life ~~critical~~of ~~accounting~~a ~~principles upon~~contract ~~which~~as ~~its~~services ~~financial~~are ~~status~~performed, ~~depends.~~based ~~Critical~~on ~~principles~~the ~~were~~contractual ~~determined~~billing byrate ~~considering accounting~~for ~~policies~~those ~~that~~services. ~~involve~~• ~~the~~Data ~~most~~items ~~complex~~revenue oris ~~subjective~~earned ~~decisions~~based oron ~~assessments.~~a ~~The~~price ~~most critical~~per ~~accounting~~data ~~policies~~unit ~~were~~as ~~identified~~data toitems beare ~~those~~entered ~~related~~into toDATATRAK’s hosting facility. • Classroom training services revenue ~~recognition,~~is ~~software development~~recognized ~~costs,~~as ~~stock-based~~classroom ~~compensation~~training is completed, ~~income~~at ~~taxes~~rates ~~and~~based ~~goodwill~~on ~~and~~the ~~other~~length ~~intangible~~of ~~assets~~the training program.

~~A summary of the Company’s critical accounting policies related to revenue recognition,~~13 software development costs, stock-based compensation, goodwill and other intangible assets and income taxes can be found in the Company’s Annual Report on Form 10-K, filed on March 16, 2007, (“Annual Report”) under the heading “Critical Accounting Policies” in Management’s Discussion and Analysis of Financial Condition and Results of Operations.

13 • Internet-based training services revenue is recognized on a per user basis as self-study courses are completed. • Help Desk revenue is recognized based on a monthly price per registered user or site under contract.

~~Table~~ Services provided by the Company that are in addition to those provided for in our contracts are billed on a fee for service basis as services are completed. Costs associated with contract revenue are recognized as incurred. Costs that are paid directly by our clients, and for which we do not bear the risk of ~~Contents~~economic loss, are excluded from revenue. The termination of a standard contract would not result in a material adjustment to the revenue or costs previously recognized. The Company provides a nominal reserve against revenue for potential pricing adjustments.

~~Results~~ Deferred revenue represents cash advances received in excess of ~~Operations~~revenue earned on contracts. Payment terms vary with each contract but typically include an initial payment at the time the contract is executed, with future payments dependent upon the completion of certain contract phases or targeted milestones. Generally, the cash advances or deposits are 25% of the total contract amount. The deferred revenue account is reduced monthly as revenue is recognized on each individual contract. In the event of contract cancellation, the Company is entitled to payment for all work performed through the point of cancellation. Likewise, in the event of contract cancellation prior to earning revenue equal to or greater than the initial payment, the Company is required to refund the unused portion. The Company’s deferred revenue balance including the long-term portion was $2,421,000 at March 31, 2009.

~~Three months ended March 31, 2007 compared with three months ended March 31, 2006~~Backlog

~~Revenue~~Backlog ~~for~~consists ~~the~~of ~~three~~anticipated ~~months~~revenue ~~ended~~from ~~March 31,~~authorization ~~2007~~letters ~~decreased~~to ~~$959,000,~~commence ~~or 21.3%~~services, ~~to $3,542,000,~~ asstatements ~~compared~~of towork ~~$4,501,000~~and ~~for~~other ~~the~~signed ~~three~~contracts ~~months~~yet ~~ended~~to ~~March 31,~~be ~~2006~~completed. ~~During~~Potential ~~the~~contracts ~~first quarter of~~or ~~2007,~~authorization ~~DATATRAK~~letters ~~recorded~~that ~~revenue~~have ~~related~~passed ~~to 122 contracts compared to 93 contracts during~~ the ~~three months~~verbal ~~ended March 31~~stage, ~~2006.~~but ~~For~~have ~~the~~not ~~three~~yet ~~months~~been ~~ended March 31~~signed, ~~2007,~~are ~~$3,181,000 of revenue was~~excluded ~~the~~from ~~result of contracts that were in~~ backlog. atAt ~~December~~March 31, ~~2006~~2009, ~~$119,000 was~~ the ~~result~~Company’s ofbacklog ~~new business~~was ~~signed since January 1, 2007, and~~ $~~242~~9,699,000 ~~was~~compared ~~the~~to ~~result of contracts acquired from ClickFind. For the first quarter of 2006,~~ $411,~~070~~400,000 ~~of revenue was generated from contracts that were in backlog~~ at December 31, ~~2005,~~2008. ~~$205,000~~The ofCompany’s ~~revenue~~individual ~~was~~trial ~~the~~contracts ~~result~~can ofbe ~~new~~cancelled ~~business~~or ~~signed since~~delayed ~~January 1,~~at ~~2006,~~anytime. The ~~and~~reduction ~~$226,000~~in ~~was~~backlog ~~the~~reflects ~~result of contracts acquired from ClickFind. Accounting for~~ the ~~acquisition~~cancellation of ~~ClickFind~~three astrials ~~though~~by ita ~~occurred~~significant ~~on January 1, 2006, actual revenue for the~~customer ~~three~~totaling ~~month~~approximately ~~period ended March 31~~$570,000. ~~2007~~Approximately ~~would have decreased 24.8~~79% ~~over pro forma revenue~~ of ~~$4,709,000~~ ~~for~~ the ~~three~~Company’s ~~month period ended~~ March 31, ~~2006.~~2009 ~~The~~backlog ~~reduction in revenue for the three~~is ~~months~~individual ~~ended~~contracts ~~March 31,~~and ~~2007~~subject ~~compared~~ to ~~the~~being ~~same~~cancelled ~~prior~~or ~~year~~delayed ~~three~~at ~~month~~anytime. ~~period~~The ~~was~~Company’s ~~primarily the~~individual ~~result~~contract ofbacklog, aat ~~significant~~any ~~decrease~~point ~~attributable~~in ~~to one client~~time, ~~Otsuka Research~~is ~~Institute,~~not ~~which~~an ~~accounted~~accurate ~~for 24%~~predictor of ~~our~~future ~~total~~levels of revenue. As ina ~~the~~result ~~first quarter~~ of ~~2007~~the ~~compared~~Company’s totransactional ~~51%~~and ofservice-based ~~total~~business ~~revenue~~model incombined ~~the~~with ~~first~~the ~~quarter~~dynamic nature of ~~2006. For~~ the ~~remainder~~clinical oftrials ~~2007~~market wewhere ~~expect~~changes ~~revenue~~in ~~from~~scope ~~Otsuka~~are ~~Research~~common, ~~Institute~~backlog ~~to be~~has ~~significantly~~historically ~~lower,~~not asbeen aan ~~percent~~accurate ofpredictor ~~our total revenue, compared to 2006 as a result~~ of ~~the successful~~short-term ~~early completion of several large trials~~revenue.

~~Direct~~Possible ~~costs~~Delisting of revenue, mainly personnel costs, were $1,337,000 and $1,172,000 during the three months ended March 31, 2007 and 2006, respectively. The net increase of $165,000, or 14.1%, included higher staff and other payroll cost of $268,000 offset by reductions in other direct costs. DATATRAKCompany’s ~~gross~~Common ~~margin decreased to 62.2% for the three months ended March 31, 2007~~Shares compared to 74.0% for the three months ended March 31, 2006 primarily as a result of the decrease in revenue and to a lesser extent the increase in primarily direct fixed costs. Accounting for the acquisition of ClickFind as though it occurred on January 1, 2006, actual gross margin would have decreased to 62.2% for the three month period ended March 31, 2007 from pro forma gross margin of 73.1% for the three month period ended March 31, 2006.

~~Selling,~~The ~~general~~Company ~~and~~is ~~administrative~~subject ~~expenses~~to ~~(“SG&A”)~~applicable ~~include~~NASDAQ ~~all~~Capital ~~administrative~~Market ~~personnel costs,~~requirements ~~business~~ and ~~software~~failure ~~development costs, and all other expenses not directly chargeable~~ to acomply ~~specific~~with ~~contract.~~these ~~SG&A~~requirements ~~expenses~~could ~~increased~~result byin ~~$442,000,~~the orCompany’s ~~14.8%~~common toshares ~~$3,423,000~~being delisted from ~~$2,981,000~~the ~~for~~NASDAQ ~~the~~Capital ~~three~~Market. ~~months~~As ~~ended~~of March 31, ~~2007~~2009, ~~and~~the ~~2006,~~Company ~~respectively.~~was ~~Additional~~not ~~staff~~in ~~and~~compliance ~~other~~with ~~payroll~~the NASDAQ ~~cost~~requirements ~~increases~~of: ~~accounted~~(i) a ~~for~~ $~~299,000,~~1.00 orminimum ~~67.6%,~~closing ofbid ~~the~~price ~~$442,000~~(“Minimum ~~net~~Bid ~~increase.~~Price ~~The~~Rule”); ~~increase~~and in(ii) ~~personnel~~shareholders’ ~~costs~~equity ~~was~~of ~~caused~~$2.5 million, bymarket ~~additional~~value ~~hiring~~of ~~and~~publicly-held ~~the~~shares ~~addition~~ of ~~employees~~$35 million, ~~from~~or ~~the acquisition~~net ofincome ~~ClickFind~~from ~~offset~~continuing byoperations 10of ~~terminated~~$500,000 ~~employees~~ in ~~June~~the ofmost ~~2006.~~recently ~~The~~completed ~~additional~~fiscal ~~personnel~~year ~~were~~or in two ~~necessary~~of tothe ~~bring~~last ~~certain~~three ~~development~~most ~~functions~~recently ~~in-house~~completed ~~and~~fiscal toyears. ~~allow~~NASDAQ ~~for~~had earlier notified the ~~discontinuation~~Company of ~~outsourced~~its ~~research~~non-compliance ~~and~~with ~~development~~these requirements. ~~The~~On ~~discontinuation~~January 8, of2009, ~~outsourced~~the ~~research~~Company ~~and~~presented ~~development~~its plan to ~~resulted~~the inNASDAQ aListing ~~cost~~Qualifications ~~savings~~Panel of(the ~~$199,000~~“Panel”) into ~~the~~regain ~~first~~compliance ~~three~~with ~~months~~the ofminimum shareholders’ ~~2007~~equity ~~compared~~requirement toand requested the ~~same period~~maximum ofextension ~~the~~allowable ~~prior~~for ~~year~~continued listing. ~~Also contributing~~On toMarch 17, 2009, the ~~SG&A~~Company ~~increase~~received ~~was~~a ~~higher~~letter ~~office~~from ~~rent~~NASDAQ ofgranting ~~$191,000,~~DATATRAK’s ~~resulting primarily from~~request for the ~~impact~~maximum ofextension ~~entering~~allowable ~~into~~for acontinued ~~new~~listing ~~lease~~relating ~~for~~to ~~additional~~the ~~space~~minimum atshareholders’ equity ~~our~~requirement, ~~Mayfield~~which ~~Heights~~is June 1, ~~Ohio executive~~2009. ~~office~~The ~~location~~June 1, in2009 ~~early~~extension ~~2006~~date ~~and~~represents the ~~addition~~full extent of the ~~Bryan,~~Panel’s ~~TX.~~authority ~~office.~~to ~~Higher professional~~grant ~~services~~an ~~cost~~exception and ~~higher~~allow ~~marketing~~continued ~~expense~~listing ~~aimed~~while atthe ~~additional~~Company remains ~~brand~~deficient. ~~awareness~~The ~~added to~~Company is presently evaluating alternatives in the ~~SG&A~~event ~~increase~~the Company is delisted in June.

~~Depreciation~~On ~~and~~January 7, ~~amortization~~2009, ~~expense~~the ~~increased~~Company ~~$184,000,~~received ora ~~41.9%,~~letter ~~primarily~~from asNASDAQ ainforming ~~result~~DATATRAK ofthat NASDAQ ~~the~~had ~~software~~decided ~~and~~to ~~intangible~~extend ~~assets~~the ~~acquired~~suspension inof the ~~ClickFind~~Minimum ~~acquisition.~~Bid ~~Depreciation~~Price Rule and that enforcement of such ~~amortization~~rule ~~expense~~is ~~was~~scheduled ~~$622,000~~to ~~for~~resume ~~the~~on ~~three~~April 20, ~~months~~2009. ~~ended~~On March 3125, ~~2007~~2009, ~~compared~~the toCompany ~~$439,000~~received another ~~for~~letter from NASDAQ informing DATATRAK that NASDAQ had decided to further extend the ~~three~~suspension ~~months~~of the ~~ended~~Minimum ~~March~~Bid Price Rule and that enforcement of such rule is now scheduled to resume on July 3120, ~~2006~~ 2009. ~~The~~Further, ~~first~~the ~~three~~March 25, ~~months~~2009 ofletter ~~2007~~indicated ~~includes~~that athe ~~full~~Company ~~quarter~~will receive another notice prior to the resumption of ~~depreciation~~the ~~and~~Minimum ~~amortization~~Bid ~~expense,~~Price orRule ~~$345,000,~~and onsuch letter will specify the ~~$3.3 million~~number of calendar ~~software~~days remaining in the Company’s compliance period and ~~$2.7~~the specific date by which it needs ~~million~~to ofregain ~~intangible~~compliance ~~assets~~with ~~acquired~~the inMinimum Bid Price Rule. NASDAQ could delist the ~~ClickFind~~Company’s ~~acquisition~~common ~~compared~~shares at any time for failure to ~~only~~maintain acompliance ~~partial~~with ~~quarter, or~~any ~~$197,000,~~other incontinued listing requirements including the ~~first~~shareholders’ ~~three~~equity ~~months~~requirement ofnoted ~~2006~~in (ii) above.

~~Interest expense increased 96.0%, or $48,000, to $99,000 in the first quarter of 2007 compared~~14 to

14 Critical Accounting Policies

~~Table~~ In ofresponse ~~Contents~~to the SEC’s Release No. 33-8040, “Cautionary Advice Regarding Disclosure About Critical Accounting Policies,” the Company has identified the most critical accounting principles upon which its financial status depends. Critical principles were determined by considering accounting policies that involve the most complex or subjective decisions or assessments. The most critical accounting policies were identified to be those related to revenue recognition, software development costs, stock-based compensation, goodwill and other intangible assets, restructuring costs and income taxes.

~~$50,000~~ A insummary of the ~~first~~Company’s ~~quarter~~critical ofaccounting ~~2006~~policies ~~mainly~~related asto arevenue ~~result~~recognition, software ofdevelopment ~~the~~costs, ~~ClickFind~~stock-based ~~Notes~~compensation, ~~being~~goodwill ~~outstanding~~and finite-lived tangible and ~~for~~intangible assets and income taxes can be found in the ~~entire~~Company’s ~~quarter~~Annual ~~compared~~Report ~~to only~~on aForm ~~half~~10-~~quarter~~K, infiled on March 16, 2009, (“Annual Report”) under the ~~first~~heading ~~three~~“Critical ~~months~~Accounting Policies” in Management’s Discussion and Analysis of ~~2006~~Financial Condition and Results of Operations.

~~Liquidity~~Results ~~and~~of ~~Capital Resources~~Operations

~~Since~~Three ~~its~~months ~~inception~~ended March 31, ~~the~~2009 ~~Company’s~~compared ~~principal~~with ~~sources~~three ofmonths ~~cash~~ended have been cash flow from operations and proceeds from the sale of equity securities. The Company’s investing activities primarily reflect capital expenditures and sales and purchases of short-term investments. During 2006March 31, ~~the Company used approximately $4,669,000 in cash for the ClickFind acquisition.~~2008

OnRevenue ~~March 19,~~for ~~2007,~~the wethree ~~completed~~months aended ~~private~~March 31, ~~placement~~2009 ~~financing~~remained ~~with~~relatively aconstant ~~group~~at ~~of institutional~~$2,086,000, ~~investors.~~as Incompared ~~connection~~to ~~with~~$2,088,000 ~~this~~for ~~financing,~~the wethree ~~sold~~months 1ended March 31,~~986,322~~ ~~common~~2008. ~~shares~~During atthe afirst ~~price~~quarter of ~~$4.75~~ ~~per~~2009, ~~share.~~the ~~The~~Company ~~terms~~recorded ofrevenue ~~this~~related ~~financing~~to ~~included~~96 ~~the~~contracts ~~issuance~~compared ofto ~~five-year~~93 ~~warrants~~contracts toduring ~~purchase a~~the ~~total~~three ofmonths ~~297~~ended March 31,~~948~~ ~~common shares at $6~~2008.00 ~~per~~For ~~share~~the tothree ~~investors~~months inended ~~the~~March 31, ~~private~~2009, ~~placement~~$2,032,000 ~~and~~of ~~the~~revenue ~~issuance~~was ofthe ~~five-year~~result ~~warrants~~of tocontracts ~~purchase~~that awere ~~total~~in ofbacklog 29at December 31,~~795~~ ~~common~~2008 ~~shares~~and at $~~6.00~~54,000 ~~per~~was ~~share to~~ the ~~placement~~result ~~agents~~of new ~~who~~business ~~assisted~~signed ~~the~~since ~~Company~~January 1, ~~in the private placement~~2009. ~~The~~For ~~net proceeds from~~ the ~~sale~~three ofmonths ~~the~~ended ~~common~~March 31, ~~shares~~2008, ~~was approximately~~ $81,~~727~~887,000 ~~(after deducting the commissions~~of ~~and~~revenue ~~certain~~was ~~expenses~~generated offrom ~~the~~contracts ~~placement~~that ~~agents~~were ~~and~~in ~~legal~~backlog ~~fees).~~at InDecember 31, ~~connection~~2007 ~~with~~and ~~the~~$201,000 ~~agreement~~of ~~executed~~revenue bywas the ~~parties,~~result weof ~~granted~~new ~~registration~~business ~~rights~~signed ~~for~~since ~~the~~January 1, ~~purchased common shares and the common shares issuable upon exercise of the warrants~~2008.

~~Contracts~~Direct ~~with~~costs ~~our~~of ~~customers~~revenue ~~usually~~decreased ~~require~~49.3%, afrom ~~portion~~$934,000 ofin the ~~contract~~first ~~amount~~quarter toof be2008 ~~paid at~~to ~~the~~$474,000 ~~time~~in the ~~contract~~first isquarter ~~initiated~~of 2009. ~~Additional~~The ~~payments~~consolidation ~~are~~of ~~generally~~our ~~received~~Help ~~monthly~~Desk asservices ~~work~~into onour ~~the~~corporate ~~contract~~headquarters ~~progresses.~~office Weallowed ~~record~~us ~~all~~to ~~amounts~~close ~~received~~our asGerman aoffice ~~liability~~in ~~(deferred~~2008 ~~revenue) until work has been completed~~ and ~~revenue~~reduce isthe ~~recognized. Cash receipts do not necessarily correspond to~~related direct costs ~~incurred~~by or$260,000 ~~revenue~~in ~~recognized.~~the Wefirst ~~typically~~quarter ~~receive a low volume~~ of ~~large-dollar~~2009 ~~receipts. Our~~compared ~~accounts receivable will fluctuate due~~ to the ~~timing~~same ~~and~~period ~~size~~ of ~~cash~~the ~~receipts~~prior year. ~~Our~~Additional ~~contracting and~~staff ~~collection~~reductions ~~practices~~in ~~are~~our ~~designed~~U.S. tooperations ~~maintain~~provided an ~~average~~additional ~~collection~~$110,000 ~~period~~of ~~for accounts~~cost ~~receivable~~savings ofin ~~one~~the tofirst three months. ~~Any~~of ~~increase~~2009 incompared ~~our~~to ~~normal~~the ~~collection~~same period ~~for~~in ~~accounts receivable~~2008. ~~will~~In ~~negatively~~all, ~~impact~~headcount reductions ~~our~~accounted ~~cash~~for ~~flow~~$370,000 ~~from~~of ~~operations~~the ~~and~~overall ~~our~~$460,000 ~~working~~decrease ~~capital~~in direct costs. AtThe ~~March~~Company’s ~~31,~~gross ~~2007,~~margin ~~our~~improved ~~average~~to ~~collection~~77.3% ~~period~~ for ~~accounts~~the ~~receivable~~three ~~was~~months ~~53 days~~ended ~~compared to 51~~March ~~days at December~~ 31, ~~2006.~~2009 ~~Accounts~~compared ~~receivable~~to ~~(net~~55.3% ~~of allowance~~ for ~~doubtful~~the three ~~accounts)~~months ~~was~~ended ~~$1,875,000 at~~ March 31, ~~2007~~2008. ~~and~~Our ~~$2,226,000~~ability atto ~~December 31,~~reduce ~~2006.~~direct ~~Deferred~~costs ~~revenue~~by ~~was~~almost ~~$1,051,000~~50% atwhile ~~March 31,~~servicing the ~~2007~~same ~~compared~~level of revenue led to ~~$988,000~~the atsignificant ~~December 31,~~improvement ~~2006~~in gross margin.

~~Cash and cash equivalents increased $283~~Selling,~~000~~ ~~during~~general ~~the~~and ~~three~~administrative ~~months~~expenses ~~ended~~(“SG&A”) ~~March 31,~~include ~~2007. This~~all ~~was~~administrative ~~the net result of $910~~personnel costs,~~000~~ ~~used~~business inand ~~operating~~software ~~activities,~~development $7costs,~~368,000~~ ~~used in investing activities~~ and ~~$8,582,000~~all ~~provided~~other byexpenses ~~financing~~not ~~activities.~~directly ~~Foreign~~chargeable ~~currency~~to ~~fluctuations caused~~ a ~~$21,000~~specific ~~decrease in cash and cash equivalents~~contract. ~~Cash~~SG&A ~~used~~expenses indecreased ~~operating~~by ~~activities~~a ~~was mainly the~~ net ~~result~~ ~~of our net loss of~~ $1,~~895~~187,000 ~~offset primarily by non-cash depreciation and amortization of $622~~,~~000,~~ ~~non-cash~~or ~~stock-based compensation of $136,000 and a reduction in accounts receivable of $352,000~~41. ~~Investing activities included $48~~9%,~~000~~ ~~used~~ to ~~purchase property and equipment, and net purchases of short-term investments totaling~~ $71,~~320~~644,000 ~~(primarily the net proceeds~~ from ~~our March~~ ~~19, 2007 private placement. In addition to the~~ $482,831,000 ~~used~~for ~~to purchase property and equipment we entered into lease agreements during~~ the ~~first~~ three months ofended ~~2007 to purchase $87~~March 31,~~000~~ of2009 ~~property~~ and ~~equipment~~2008, ~~which~~respectively. isOf ~~excluded from~~ the ~~Company’s consolidated statement of cash flows. Financing activities primarily consist of net proceeds of~~ $81,~~916~~187,000 reduction ~~(excluding~~approximately $~~189~~411,000, ofor ~~unpaid~~34.6%, ~~share issuance~~was ~~costs~~savings related to ~~be paid in~~ the ~~second~~closing ~~quarter~~ of ~~2007)~~our ~~from~~German office. ~~the~~The ~~March 19,~~German ~~2007~~office ~~private~~savings ~~placement, offset~~was bycomprised ~~debt~~mainly ~~repayments~~ of ~~$247~~wages,~~000~~ ~~for~~office ~~the~~rent ~~ClickFind~~and ~~Notes, $74,000 repayment of an insurance~~outside ~~note~~professional ~~and~~fees ~~$44,000~~such ~~for~~as ~~the~~legal ~~repayment of capital expenditure equipment leases~~ and ~~financing agreements~~accounting.

AtSG&A ~~March 31,~~expenses ~~2007,~~also wedeclined ~~had~~in ~~working~~the ~~capital~~first quarter of ~~$11,133,000,~~2009 ~~and~~compared ~~our~~to ~~cash,~~the ~~cash~~prior ~~equivalents~~year ~~and~~same ~~short-term~~period ~~investments~~as ~~totaled~~a ~~$12,654,000.~~result ~~Our~~of ~~working~~the ~~capital~~restructuring ~~increased~~of byour ~~$7,000,000~~Executive ~~since December 31,~~Management ~~2006~~team. ~~The~~Executive ~~increase~~Management personnel ~~was~~costs ~~primarily~~decreased $155,000 in the ~~result~~2009 offirst quarter compared to the ~~$7,355,000~~2008 ~~increase~~first inquarter. ~~our~~In ~~short-term investments~~addition, ~~caused~~several ~~mainly~~SG&A byexpense ~~the~~line ~~$8,727,000~~items ofdecreased ~~net~~due ~~proceeds~~to ~~from~~cost ~~the~~savings ~~March 19,~~initiatives ~~2007~~resulting in a ~~private~~net ~~placement~~savings of approximately $621,000.

15 During the first quarters ended March 31, 2009 and 2008, the Company recorded charges of $634,000 and $26,000, respectively, for severance benefits due to terminated employees. The severance charges recorded in the first quarter of 2009 related mainly to the retirement of Dr. Jeffrey Green, our Chief Executive Officer and the departure of Mr. Matthew Delaney, who served as Interim President since May 2008.

~~Table~~ Depreciation and amortization expense decreased $400,000, or 76.7%, to $122,000 for the three months ended March 31, 2009 compared to $522,000 for the three months ended March 31, 2008. The decrease was mainly a result of ~~Contents~~a significant reduction in amortization expense related to the acquired amortizable intangible assets in the ClickFind merger and certain assets becoming fully depreciated. During the second quarter of 2008, the Company recorded a $1,844,000 impairment loss on the acquired ClickFind

~~We are party to a lease agreement that requires us to maintain a restricted cash balance. Our~~15 ~~restricted cash balance was $79,000 at March 31, 2007.~~

Weintangible ~~have~~assets. ~~established~~Amortization ~~two~~expense ~~lines~~on ofthe ~~credit~~acquired ~~with~~ClickFind ~~two~~intangible ~~separate~~assets ~~banks.~~was approximately ~~One~~$306,000 ofin the ~~lines~~first ~~allows~~quarter usof ~~to borrow~~2008 upcompared to ~~a certain percentage of our investments~~$26,000 asin ~~determined by~~ the ~~type~~first ofquarter ~~investment, held~~of ~~at the bank~~2009. The ~~line~~only ofremaining ~~credit~~intangible ~~bears~~asset ~~interest~~from atthe ~~rates~~ClickFind ~~based~~merger onis the ~~prime~~software ~~rate,~~now ~~and~~known ~~is payable on~~as ~~demand.~~DATATRAK ~~The~~eClinical ~~other~~which ~~line~~has ofan ~~credit~~adjusted ~~allows~~amortizable usvalue toof ~~borrow up to~~ $2401,000~~,000~~ at anMarch 31, ~~interest~~2009 ~~rate~~and ~~equal to~~is ~~the~~being ~~prime~~amortized ~~rate~~over ~~minus~~the ~~100~~estimated ~~basis~~remaining ~~points~~life ~~for~~of Uapproximately four years.S. ~~dollar~~In ~~borrowings~~addition, depreciation ~~and~~expense ~~the~~decreased ~~euro~~by ~~dollar~~approximately ~~rate~~$110,000 ~~plus~~due ~~125 basis~~to ~~points~~the ~~for~~increasing ~~euro~~number ~~borrowings,~~of ~~payable~~fixed assets onthat ~~demand~~became fully depreciated since March 2008. ~~The~~As ~~$2,000,000~~described in ~~available~~Note ~~borrowing~~13 ~~would be~~“Software ~~collateralized~~Development byCosts” ~~certain~~to ~~assets~~the ~~held~~condensed byconsolidated ~~us.~~financial Westatements ~~had~~above, no ~~amounts~~additional impairment ~~outstanding~~had ~~against~~occurred ~~these~~in ~~lines~~the ~~of credit~~first atquarter ~~March 31,~~of ~~2007~~2009.

AtInterest ~~December 31,~~income ~~2006,~~decreased weby ~~had a note payable of~~ $7357,~~807~~000, ~~due~~ to ~~Westfield Bank. The final payment on this note of~~ $753,~~233~~000, ~~including accrued interest, was made~~ in ~~January 2007.~~the Atfirst ~~March 31, 2007,~~quarter weof ~~had~~2009 afrom ~~note payable in the amount of~~ $~~211~~60,000 ~~to Oracle Credit Corporation, payable~~ in ~~monthly~~the ~~payments~~first quarter of ~~$9,012,~~2008 ~~including~~primarily ~~accrued~~as ~~interest~~a ~~through~~result ~~June 2009.~~of ~~Additionally,~~lower atinvestment ~~March 31,~~rates ~~2007,~~and wea ~~had~~reduction ~~various~~of ~~capital lease agreements in~~ the Company’s ~~amount~~short-term ofinvestment ~~$296,000~~balances ~~with~~which ~~Dell~~have ~~Financial Services,~~been ~~payable~~used into ~~36 monthly~~fund ~~installments~~its ~~currently totaling $11,000, including accrued interest~~operations.

~~The~~Interest ~~terms~~expense ofdecreased ~~our~~by ~~acquisition of ClickFind required us to pay approximately~~ $463,000~~,000~~ ~~of cash~~ to ~~the former shareholders of ClickFind in February 2006. We also issued notes payable to the former shareholders of ClickFind in the amount of~~ $4,000,~~000~~ ~~that~~in ~~bear~~the ~~interest~~first atquarter ~~prime plus 1.0%, and are payable in installments~~ of ~~$500,000,~~2009 ~~$500,000~~from ~~and~~ $367,000~~,000~~ ~~on February 1, 2007, 2008 and~~in ~~2009, respectively. In connection with~~ the ~~Datasci~~first ~~claim,~~quarter ~~an arrangement was entered into with certain former ClickFind shareholders for sharing~~ of ~~the~~2008 ~~expenses~~primarily ~~associated~~from ~~with that litigation. Under that arrangement, a certain portion of principal payments due under~~ the ~~notes~~settlement ~~would be used to offset a certain portion~~ of the ~~expenses~~Lawsuit ~~related~~in ~~to the litigation. Of the $500,000 payment due on February~~December 1,2008 ~~2007,~~and ~~$327,000 was held by~~ the ~~Company to be used to satisfy these expenses as they are~~ ~~incurred.~~related Asforgiveness of ~~March 31,~~the ~~2007,~~entire ~~approximately~~ $743,000 ~~of the $327~~,000 ~~has been used to satisfy such expenses. The remaining amount~~ of ~~$253,000 will be paid to a former~~ ClickFind ~~shareholder~~Notes inpayable ~~the second~~which ~~quarter~~originated ~~of 2007. The Company is permitted to withhold additional portions of future principal payments to cover further costs associated~~ with ~~this claim. Of~~ the ~~$3,753,000 of~~ ClickFind ~~Notes~~acquisition ~~outstanding~~in ~~at March 31, 2007, $2,570,000 is held by one of our executive officers who was the founder of ClickFind~~2006. ~~Of the remaining $1,183,000 of ClickFind Notes, $871,000 is held~~ ~~by other current employees of DATATRAK..~~

WeLiquidity ~~intend to continue to fund the maintenance~~ and ~~testing~~Capital ~~of the DATATRAK EDC® software, as~~Resources well as invest in the development, enhancement and testing of DATATRAK eClinical(TM). In 2007, we expect revenue from our largest customer to significantly decrease due to the successful early completion of several large trials. We expect to have negative cash flow from operations during 2007 as we transition from dependence on a major customer to a broader customer base with the expansion of our eClinical product offering. We also expect to record a net loss in 2007. We anticipate cash expenditures for property and equipment of approximately $1,000,000 during 2007, for the continued commercialization, enhancement and maintenance of our two clinical trial product offerings as well as improvements to our internal operating systems. We anticipate financing approximately 50% of the $1,000,000 of property and equipment. A portion of the anticipated property and equipment expenditures are dependent on our growth, and are therefore discretionary in nature.

WeThe ~~record~~Company’s ~~our~~principal ~~research~~sources ~~and~~of ~~development~~cash ~~expenditures~~have asbeen ~~part~~cash offlow ~~SG&A~~from ~~expenses.~~operations ~~Our~~and ~~research~~proceeds ~~and~~from ~~development~~the ~~expenditures~~sale ~~will~~of beequity ~~for~~securities. ~~the~~Contracts ~~maintenance~~with ~~and~~our ~~testing~~customers ofusually ~~our~~require ~~DATATRAK~~a ~~EDC®~~portion ~~software~~of ~~and~~ the contract ~~development,~~amount ~~enhancement~~to ~~and~~be ~~testing~~paid ofat ~~our~~the ~~DATATRAK eClinical(TM)~~time ~~software~~the ~~products~~contract is initiated. ~~For~~Additional ~~the~~payments are generally ~~three~~received ~~months~~monthly ~~ended~~as ~~March 31,~~work ~~2007,~~on wethe ~~expensed~~contract ~~approximately~~progresses. ~~$669,000~~We ~~for~~record ~~research~~all ~~and~~amounts ~~development.~~received as a liability ~~During~~(deferred ~~2007,~~revenue) weuntil ~~anticipate~~work ~~that~~has ~~our~~been ~~research~~completed and ~~development~~revenue ~~expenditures~~is ~~will~~recognized. ~~increase~~Cash ~~by approximately~~receipts ~~$200,000~~do tonot necessarily ~~$400,000~~correspond ~~compared~~ to ~~the~~costs ~~full~~incurred ~~year~~or ~~2006~~revenue ~~amount of $2,310,000~~recognized.

16 We typically receive a low volume of large-dollar receipts and our accounts receivable will fluctuate due to the timing and size of cash receipts. Any increase in our “days sales outstanding” is an indicator that our cash flow from operations and our working capital has been negatively impacted. At March 31, 2009, our “days sales outstanding” was 52 days as compared with 39 days calculated at December 31, 2008. Trade accounts receivable (net of allowance for doubtful accounts) was $1,186,000 at March 31, 2009 and $922,000 at December 31, 2008.

~~Table~~ During the first quarter of ~~Contents~~2009 our cash and investments balance decreased by approximately $294,000, from $2,372,000 at December 31, 2008, to $2,078,000 at March 31, 2009. The $294,000 decrease reflects the cash used to fund our operations as well as the payout of $151,000 in severance commitments, $16,000 for the purchase of property and equipment and $79,000 to repay capital lease related debt.

WeOur ~~expect~~audited tofinancial ~~fund~~statements ~~our~~for ~~working~~the ~~capital~~fiscal ~~requirements~~year ~~from~~ended ~~existing~~December 31, ~~cash~~2008, ~~and~~were ~~cash~~prepared ~~equivalents,~~under ~~maturities~~the ofassumption ~~short-term~~that ~~investments,~~we ~~cash~~will ~~flow~~continue ~~from~~our operations, ~~borrowings~~as ~~against our~~a ~~lines~~going ofconcern. ~~credit~~We have a history of losses and ~~the~~negative ~~net~~cash ~~proceeds~~flows from ~~our~~operations ~~March 2007~~over ~~private~~the ~~placement~~past ofthree ~~approximately $8,727,000~~years. WeAs ~~believe~~a ~~that~~result, ~~with~~our independent ~~the~~registered ~~net~~accounting ~~proceeds~~firm ~~from~~has ~~our~~issued ~~March 2007~~an ~~private~~unqualified ~~placement~~opinion, ~~our~~for ~~cash and~~the ~~cash~~year ~~equivalents~~ended December 31, ~~maturities~~2008, ofwhich ~~short-term~~includes ~~investments~~a ~~and~~paragraph ~~cash~~stating ~~flow~~that ~~from~~there ~~operations~~is ~~will~~substantial bedoubt about our ~~sufficient~~ability to ~~meet~~continue ~~our~~as ~~working~~a ~~capital~~going ~~and~~concern. ~~capital~~Continued ~~expenditure~~operations ~~requirements~~are ~~for~~dependent ~~the~~primarily ~~foreseeable future.~~on ~~However,~~three wekey factors: ~~may~~(i) our ~~need~~ability to ~~raise~~maintain ~~additional~~our ~~funds~~current tobusiness ~~offset~~already ~~delays~~under orcontract ~~cancellations~~and ofreflected in ~~contacts,~~our ~~support~~backlog ~~expansion,~~amount; ~~respond~~(ii) our ability to ~~competitive~~market ~~pressures,~~and ~~acquire~~sell ~~complementary~~new ~~businesses~~business ~~or technology~~currently ornot ~~take~~reflected ~~advantage~~in ofour backlog ~~unanticipated~~amount; ~~opportunities.~~and We(iii) our ~~may~~ability to raise additional ~~funds~~capital ~~by selling debt~~ or ~~equity~~complete ~~securities,~~one byof ~~entering~~the ~~into~~ strategic ~~relationships or through other~~ ~~arrangements.~~alternatives ~~Additional~~identified ~~capital~~earlier ~~may~~in ~~not~~this besection ~~available~~titled ~~on acceptable terms, if at all~~“Item 2. ToManagement’s ~~the~~Discussion ~~extent~~and ~~that~~Analysis ~~additional~~of ~~equity~~Financial ~~capital~~Condition isand ~~raised,~~Results itof ~~could have a dilutive effect on our existing shareholders~~Operations.”

~~Inflation~~ Without additional funding, our ability to meet short-term working capital requirements during the current fiscal year, and our ability to meet longer-term working capital requirements, will depend entirely on the cash generation of existing trials currently in backlog and our ability to sell and contract for new trials. Our existing trials are subject to delay or cancellation at any time. Because of the exposure to unforeseen delays or cancellations our ability to accurately forecast future cash receipts from existing trials is limited. We believe our ability to sell and contract for new trials with longer term durations is influenced to some degree by our current financial uncertainty. We previously believed that the uncertainty surrounding the resolution of the ClickFind litigation also impacted our ability to sell and contract for new trials. We further believe that sufficient time has not lapsed since the date of the litigation settlement and the date of this report to ultimately understand the impact of the settlement on our ability to sell and contract for new trials. Because of the uncertainty of our longer term financial stability and not knowing how the current economy will impact our clients, our ability to accurately forecast future cash receipts from new trials is limited. Because of the uncertainty that exists

~~To date, the Company believes the effects of inflation have not had a material adverse effect~~16 ~~on its results of operations or financial condition.~~

~~Information~~surrounding ~~About~~our ~~Forward-Looking~~ability ~~Statements~~to forecast cash generation from our operations, and the uncertainty of being able to raise additional funding or complete a strategic alternative, we cannot provide assurances that we will have sufficient funds to meet our working capital requirements for the next 12 months or beyond.

~~Certain~~We ~~statements~~have ~~made~~established ina ~~this~~line Form 10-Q, other SEC filings, written materials or orally by the Company or its representatives may constitute forward-looking statements that are based on management’s current beliefs, estimates and assumptions concerning the operations, future results and prospects of ~~the~~credit ~~Company~~with ~~and~~a ~~the clinical pharmaceutical research industry in general~~bank. ~~All statements~~This ~~that~~line ~~address~~only ~~operating~~allows ~~performance,~~us ~~events~~to orborrow ~~developments~~up ~~that management anticipates will occur in the future, including statements related~~ to ~~future revenue, profits, expenses, income~~a ~~and~~certain ~~earnings~~percentage ~~per~~of ~~share~~our ~~or statements expressing general optimism about future results~~investments, ~~are forward-looking~~as ~~statements~~determined ~~within~~by the ~~meaning~~type of ~~Section 21E of the Securities Exchange Act of 1934~~investment, asheld ~~amended~~at ~~(“Exchange~~the ~~Act”)~~bank. As Inof ~~addition~~March 31, ~~words such as “expects~~2009,” ~~“anticipates,”~~approximately ~~“intends~~$469,~~” “plans,”~~000 ~~“believes,”~~was ~~“estimates,”~~available ~~variations of such words, and similar expressions are intended~~ to ~~identify~~ ~~forward-looking~~be ~~statements~~borrowed. ~~Forward-looking~~The ~~statements~~line are subject to the safe harbors created in the Exchange Act. 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~~credit ~~Company to continue to enhance its software~~bears ~~products~~interest toat ~~meet~~rates ~~customer~~based 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~~prime 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 Company’s success in integrating ClickFind’s operations into its own operations and 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~~payable ~~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~~demand. ~~Any~~We ~~forward-looking~~had ~~statement~~no ~~speaks~~amounts ~~only as of the date on which such~~outstanding ~~statement~~against ~~is made and~~ the ~~Company~~line ~~does not undertake any obligation to update any statements whether as a result~~ of ~~new~~credit ~~information~~at March 31, ~~future events or otherwise~~2009.

17 We intend to continue to fund the maintenance and testing of the DATATRAK EDC® software, as well as invest in the development, enhancement and testing of our DATATRAK eClinical ™ software. Future enhancements will be focused upon those advancements that are associated with a sound business case demanded by our clients. For the first three months ended March 31, 2009, we expensed approximately $289,000 for research and development compared to $471,000 for the same time period of the prior year.

~~Table~~ We are uncertain as of ~~Contents~~the date of this report as to our ability to raise additional capital or complete any strategic alternative previously discussed. On July 21, 2008, we announced we had retained Healthcare Growth Partners, LLC as a strategic and financial advisor to assist the Board of Directors in evaluating a variety of potential opportunities directed at maximizing shareholder value. These potential opportunities may include, but are not limited to, a sale, merger or other business combination of the Company; strategic partnerships or alliances; or raising of additional capital. This review process is ongoing and we undertake no obligation to make any further announcement regarding the exploration of strategic alternatives unless and until the Board of Directors has approved a specific course of action. There can be no assurance that this process will result in any specific transaction or in any changes to the Company’s current direction. In mid-September 2008, the ongoing subprime mortgage crisis in the United States accelerated into a global financial crisis causing turmoil in the United States and world financial markets. Current financial market conditions may have an adverse impact on the Company’s ability to achieve any strategic alternatives including the raising of additional funding. We believe the December 18, 2008 settlement of the Lawsuit and forgiveness of the $3,000,000 balloon payment, originally due February 1, 2009, will have a positive impact on our strategic alternative and/or fund raising efforts. We further believe that sufficient time has not lapsed since the date of the litigation settlement and the date of this report to ultimately understand the impact of the settlement on our strategic alternative and fund raising efforts.

~~Item~~ The Company’s financial assets primarily consisted of money market funds totaling $995,000 at March 331, 2009. ~~Quantitative~~In spite of the recent credit crisis and ~~Qualitative~~disruptions ~~Disclosures~~in ~~About~~the ~~Market~~financial ~~Risk~~markets, the Company’s investment portfolio was not impaired. The underlying securities of the Company’s money market investments included various U.S. government and treasury securities and other sound securities that held their trading value at $1/share.

~~The~~We ~~Company~~may isneed ~~exposed~~ to ~~market~~raise ~~risk~~additional ~~from~~funds ~~changes~~to inoffset ~~interest~~delays ~~rates~~or ~~and~~cancellations ~~foreign~~of ~~currency~~existing contracts. ~~exchange~~We ~~rates~~may ~~since~~raise itadditional funds ~~its~~by ~~operations~~selling ~~through~~debt ~~short-term~~or ~~investments~~equity securities, ~~has~~by ~~issued~~entering ~~variable~~into strategic ~~rate~~relationships ~~debt~~or ~~and~~through ~~has~~other ~~business~~arrangements. ~~transactions~~Additional incapital ~~euros.~~may Anot ~~summary~~be ofavailable on acceptable terms, if at all. To the ~~Company’s~~extent ~~market~~that ~~risk~~additional ~~exposures~~ equity capital is ~~presented~~raised, ~~below~~it could have a dilutive effect on our existing shareholders.

~~Interest~~Fair ~~Rate~~Value ~~Risk~~Measurements

~~DATATRAK~~During ~~has~~the ~~fixed~~first ~~income~~quarter ~~investments~~of ~~consisting~~2008, ofthe ~~cash~~Company ~~equivalents~~adopted ~~and~~the ~~short-term investments,~~Statement ~~and~~of ~~short~~Financial ~~and~~Accounting Standards ~~long-term~~(“FAS”) ~~notes~~No. 157, ~~payable~~“Fair ~~which~~Value ~~may~~Measurements.” beThe ~~affected~~adoption byof ~~changes~~FAS inNo. 157 ~~market~~had no material ~~interest~~impact ~~rates.~~on ~~The~~the Company’s ~~does~~financial ~~not~~position, ~~use~~results ~~derivative~~of ~~financial~~operations ~~instruments~~or incash ~~its~~flows ~~investment~~during the year ~~portfolio~~ended December 31, 2008. ~~The~~FAS ~~Company~~No. 157 ~~places~~was ~~its~~effective ~~cash~~January 1, ~~equivalents~~2008 for financial assets and liabilities ~~short-term~~and ~~investments~~January 1, ~~with~~2009 ~~high~~for non-~~quality~~ financial ~~institutions~~assets and liabilities. On January 1, ~~limits~~2009, the Company ~~amount~~adopted the remaining provisions of ~~credit~~SFAS ~~exposure~~No. 157, toas ~~any~~permitted ~~one~~by ~~institution~~FASB ~~and~~Staff ~~has~~Position ~~established~~157-2. ~~investment~~FAS ~~guidelines~~157-2 ~~relative~~delayed tothe ~~diversification~~effective ~~and~~date ~~maturities~~of ~~designed~~SFAS toNo. 157 ~~maintain safety~~for all non-financial assets and non-financial ~~liquidity.~~liabilities, ~~Investments~~except those that are ~~reported~~recognized or disclosed at ~~amortized~~fair ~~cost,~~value ~~which~~in ~~approximates~~the financial statements on a recurring basis (at least annually). Non-financial assets for the Company include finite-lived tangible and intangible assets measured at fair value. Aduring the ~~1.0 percentage~~performance ~~point~~of ~~change~~impairment testing or assets acquired and liabilities assumed in ~~interest~~a ~~rates~~business combination ~~during~~should such a transaction occur in the ~~three~~future. ~~months~~The ~~ended~~adoption ~~March~~of the required provisions of SFAS No. ~~31,~~157-2 ~~2007~~on January 1, ~~would have~~2009 ~~resulted~~did innot have a ~~$89,000~~material ~~change~~impact inon ~~DATATRAK~~the Company’s ~~interest~~consolidated financial ~~income~~statements ~~during~~as ~~the~~all ~~period~~finite-lived assets were not deemed to be impaired using an undiscounted cash flow analysis. The standard provides guidance for establishing a frame work for measuring fair values of assets and liabilities. Under the standard, fair value refers to the price that would be received to sell an asset or paid to

~~The Company’s notes payable to certain former shareholders of ClickFind bear interest at prime~~17 plus 1%, and interest is paid quarterly. A 1.0 percentage point change in the prime rate during the three month ended March 31, 2007, would have resulted in a $10,000 change in DATATRAK’s interest expense during the period.

~~Foreign~~transfer ~~Currency~~a ~~Risk~~liability in an orderly transaction between market participants at the measurement date (i.e. an exit price). The standard clarifies the principle that fair value should be based on the assumptions or inputs market participants would use when pricing the asset or liability. In support of this principle, FAS No. 157 establishes a three level hierarchy for fair value measurements based on the quality or transparency of inputs used to measure the fair value of an asset or liability at the measurement date. For details on the Company’s adoption of FAS No. 157 for financial assets and liabilities, see Note 3 “Fair Value Measurements” to our condensed consolidated financial statements.

~~DATATRAK’s foreign results of operations are subject to the impact of foreign currency~~Inflation fluctuations through both foreign currency transaction and foreign currency translation adjustments. The Company manages its risk to foreign currency transaction adjustments by maintaining foreign currency bank accounts in currencies in which we regularly transact business. DATATRAK does not currently hedge against the risk of exchange rate fluctuations.

~~DATATRAK’s~~ To financial position and results of operations are impacted by translation adjustments caused by the conversion of foreign currency accounts and operating results into U.S. dollars for financial reporting purposes. A 1.0% fluctuation in the exchange rate between the U.S. dollar and the euro at March 31date, ~~2007, would have resulted in a $6,000 change in~~ the ~~foreign currency translation amount recorded on the~~ Company’s ~~balance~~believes ~~sheet, due to foreign currency translations. A 1.0% fluctuation in~~ the ~~average~~effects ~~exchange~~of ~~rate~~inflation ~~between the U.S. dollar and the euro for the three months ended March 31, 2007, would~~ have ~~resulted~~not inhad a ~~$12,000~~material ~~change~~adverse ~~in the Company’s net loss for~~effect ~~the~~on ~~three~~its ~~months~~results ended March 31, 2007, due to foreign currency transactions. During the three months ended March 31, 2007, the average exchange rate between the euro and the U.S. dollar increased by approximately 9.0% compared to the three months ended March 31, 2006. The conversion of ~~the Company’s foreign~~ operations ~~into~~or ~~U.S.~~financial ~~dollars upon consolidation resulted in a net loss that was approximately $96,000 more than would have been recorded had the exchange rate between the euro and the U~~condition.~~S. dollar remained consistent with 2006 rates.~~

18Information About Forward-Looking Statements

~~Table~~ Certain statements made in this Form 10-Q, other SEC filings, written materials or orally by the Company or its representatives may constitute forward-looking statements that are based on management’s current beliefs, estimates and assumptions concerning the operations, future results and prospects of ~~Contents~~the Company and the clinical pharmaceutical research industry in general. All statements that address operating performance, events or developments that management anticipates will occur in the future, including statements related to future revenue, profits, expenses, cost reductions, cash management alternatives, exploration of strategic alternatives, raising additional funds, income and earnings per share or statements expressing general optimism about future results, are forward-looking statements within the meaning of Section 21E of the Securities Exchange Act of 1934, as amended (“Exchange Act”). In addition, words such as “expects,” “anticipates,” “intends,” “plans,” “believes,” “estimates,” variations of such words, and similar expressions are intended to identify forward-looking statements. Forward-looking statements are subject to the safe harbors created in the Exchange Act. 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; delisting of Company’s common shares from the NASDAQ Capital Market due to our failure to continue to meet applicable NASDAQ Capital Market requirements; the Company’s success in integrating ClickFind’s operations into its own operations and the costs associated with maintaining and/or developing two product suites; uncertain impact on our customers and contracts as a result of the recent economic downturn; 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. Any forward-looking statement speaks only as of the date on which such statement is made and the Company does not undertake any obligation to update any statements whether as a result of new information, future events or otherwise.

Item 43. ~~Controls~~Quantitative and ~~Procedures~~Qualitative Disclosures About Market Risk

~~Evaluation~~The Company is exposed to market risk from changes in interest rates since it invests short-term excess cash in cash equivalents such as money market funds. A summary of ~~Disclosure~~the ~~Controls~~Company’s market ~~and~~risk ~~Procedures~~exposures is presented below.

~~The~~Interest ~~Company~~Rate ~~carried out an evaluation, under the supervision and with the participation of the~~Risk Company’s management, including the chief executive officer and chief financial officer, of the design and operation of the Company’s disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-14(e)) as of the end of the period covered by this report. Based upon that evaluation the Company’s management, including the chief executive officer and chief financial officer, have concluded that, as of March 31, 2007, the Company’s disclosure controls and procedures were effective to ensure that information required to be disclosed by the Company in the reports it files and submits under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms.

~~Changes~~DATATRAK has fixed income investments consisting of cash equivalents which may be affected by changes in ~~Internal~~market ~~Controls~~interest rates. The Company does not use derivative financial instruments in its investment portfolio. The Company places its cash equivalents with high-quality financial institutions, limits the amount of credit exposure to any one institution and has established investment guidelines relative to diversification and maturities designed to maintain safety and liquidity. Investments are reported at amortized cost, which approximates fair value. A 1.0 percentage point change in interest rates during the three months ended March 31, 2009 would have resulted in a $6,000 change in DATATRAK’s interest income during the quarter.

~~There were no changes in the Company’s internal controls over financial reporting that~~18 ~~occurred during the fiscal quarter covered by this report that have materially affected, or are reasonably likely to materially affect, the Company’s internal controls over financial reporting.~~

~~Part~~ Foreign ~~II.~~Currency ~~Other Information~~Risk

~~Item~~ DATATRAK’s foreign results of operations had been subject to the impact of foreign currency fluctuations through both foreign currency transaction and foreign currency translation adjustments. The Company managed its risk to foreign currency transaction adjustments by maintaining foreign currency bank accounts in currencies in which we regularly transacted business. Effective January 131, 2009, DATATRAK Inc., ~~Legal~~a ~~Proceedings~~wholly owned subsidiary of the Company, terminated its Marketing Services Agreement (“Agreement”) with DATATRAK Deutschland GmbH (“Deutschland GmbH”) and DATATRAK, Inc. In early January 2009, following the termination of the Agreement, Deutschland GmbH was required under applicable German law to file a petition for voluntary bankruptcy in the German courts. The Company has liquidated Deutschland GmbH as of December 31, 2008 and is no longer subject to foreign currency risk related to this entity.

~~On July~~Item ~~17, 2006, Datasci, LLC (“Datasci”) filed a complaint against the Company, ClickFind, Inc~~4. ~~(“ClickFind”)~~Controls and ~~CF Merger Sub, Inc. (“Merger Sub”) (Civil Docket No. 8:06-cv-01820-MJG,~~Procedures United States District Court, District of Maryland) alleging infringement of United States Patent No. 6,496,827. As previously disclosed, on February 13, 2006, the Company acquired ClickFind pursuant to a merger agreement between the Company, ClickFind and Merger Sub, a wholly owned subsidiary of the Company. Datasci seeks injunctive relief and money damages in an unspecified amount. The Company believes Datasci’s claims are without merit and intends to defend this matter vigorously. On August 14, 2006, the Company filed an answer and counterclaim denying infringement of the patent in suit, asserting numerous affirmative defenses and counterclaiming for a declaratory judgment of non-infringement and invalidity of the patent. Because the litigation is in a preliminary stage, the Company cannot assess the likelihood of an adverse outcome or determine whether potential damages, if any, could have a material adverse impact on the Company’s results of operations in a future period or the Company’s financial position or liquidity.

~~Item 1A.~~ Evaluation ~~Risk~~of ~~Factors~~Disclosure Controls and Procedures

~~There~~The ~~are~~Company nocarried ~~material~~out ~~changes~~an toevaluation, under the ~~Risk~~supervision ~~Factors~~and ~~described~~with ~~under~~the participation of the Company’s ~~title~~management, ~~“Risk~~including ~~Factors”~~the inchief executive officer and chief financial officer, of the design and operation of the Company’s ~~Annual~~disclosure ~~Report~~controls onand ~~Form~~procedures 10(as defined in Exchange Act Rules 13a-K15(e) ~~for~~and 15d-14(e)) as of the ~~fiscal~~end ~~year~~of ~~ended~~the ~~December~~period covered by this report. Based upon that evaluation the Company’s management, including the chief executive officer and chief financial officer, have concluded that, as of March 31, ~~2006~~2009, the Company’s disclosure controls and procedures were effective to ensure that information required to be disclosed by the Company in the reports it files and submits under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms.

~~Item 2.~~ Changes ~~Unregistered~~in ~~Sales~~Internal ~~of Equity Securities and Use of Proceeds~~Controls

~~The~~There ~~information~~were ~~required~~no tochanges bein ~~filed~~the ~~pursuant~~Company’s tointernal ~~this~~controls ~~Item 2~~over ~~was~~financial ~~previously~~reporting ~~included~~that occurred induring the ~~Current~~ ~~Report~~fiscal onquarter ~~Form~~covered ~~8-K~~by ~~filed~~this ~~with~~report ~~the~~that ~~Securities~~have ~~and~~materially ~~Exchange~~affected, ~~Commission~~or onare reasonably ~~March 19~~likely to materially affect, ~~2007~~the Company’s internal controls over financial reporting.

~~Item 3~~Part II. ~~Defaults~~Other ~~Upon Senior Securities~~Information

~~None~~Item 1. Legal Proceedings

~~Item 4~~ In the ordinary course of business, we are involved in employment related legal proceedings. We ~~Submission~~believe that the ultimate resolution of ~~Matters~~these tomatters will not have a ~~Vote~~material adverse effect on the results of ~~Security~~operations, ~~Holders~~cash flows or the financial position of the Company.

~~None~~Item 1A. Risk Factors

19 There are no new Risk Factors or material changes to the Risk Factors previously disclosed in the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2008.

~~Table~~Item 2. Unregistered Sales of ~~Contents~~Equity Securities and Use of Proceeds

~~Item 5~~ None. ~~Other Information~~

~~None~~Item 3. Defaults Upon Senior Securities

~~Item 6~~ None. ~~Exhibits~~

4.1		Form of Warrant, dated March 19, 2007, which is incorporated herein by reference to Exhibit 10.2 to the Company’s Current Report on Form 8-K, as filed with the Securities and Exchange Commission on March 20, 2007.
10.2		Securities Purchase Agreement by and among the Company and the Purchasers named on Schedule A(3) thereto, dated March 16, 2007, which is incorporated herein by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K, as filed with the Securities and Exchange Commission on March 20, 2007.
31.1		Rule 13a-14(a)/15d-14(a) Certification of Chief Executive Officer
31.2		Rule 13a-14(a)/15d-14(a) Certification of Chief Financial Officer
32.1		Section 1350 Certification of Chief Executive Officer
32.2		Section 1350 Certification of Chief Financial Officer

Item 4. Submission of Matters to a Vote of Security Holders

20 None.

~~Table of Contents~~19

~~SIGNATURES~~Item 5. Other Information

~~Pursuant~~The 2009 Annual Meeting of the Shareholders (the “Annual Meeting”) of DATATRAK International, Inc. (the “Company”) has been tentatively scheduled to occur in August 2009. As such, the ~~requirements~~date of the Annual Meeting will have changed by more than 30 days from the ~~Securities~~anniversary of the Company’s 2008 Annual Meeting. In accordance with Rule 14a-5(f) and Rule 14a-8(e) under the Securities Exchange Act of 1934, as amended (the ~~registrant~~“Exchange ~~has~~Act”), ~~duly~~the ~~caused~~Company will consider shareholder ~~this~~proposals ~~report~~submitted pursuant to beRule 14a-8 ~~signed~~for oninclusion ~~its~~in ~~behalf~~the Company’s proxy materials for the Annual Meeting to have been submitted in a timely fashion if such proposals are received by the Company ~~undersigned~~no ~~thereunto~~later ~~duly~~than ~~authorized~~May 26, 2009. Such proposals should be delivered to the Company’s executive offices at 6150 Parkland Boulevard, Suite 100, Mayfield Heights, Ohio 44124, Attention: Mr. Varnesh Sritharan.

		DATATRAK International, Inc.
		Registrant
Date: May 10, 2007		/s/ Jeffrey A. Green
		Jeffrey A. Green,
		President and Chief Executive Officer and a Director
		(Principal Executive Officer)
Date: May 10, 2007		/s/ Terry C. Black
		Terry C. Black,
		Vice President of Finance, Chief Financial Officer, Treasurer and Assistant Secretary
		(Principal Financial and Accounting Officer)

In addition, in light of the foregoing and in accordance with Rule 14a-5(e)(2) and Rule 14a-5(f) under the Exchange Act, in order for shareholder proposals submitted outside of Rule 14a-8 in connection with the Annual Meeting to be considered “timely” for purposes of Rule 14(a)-4(c) under the Exchange Act, such proposals must be received by the Company no later than May 26, 2009. Such proposals should be delivered to the Company’s executive offices at 6150 Parkland Boulevard, Suite 100, Mayfield Heights, Ohio 44124, Attention: Mr. Varnesh Sritharan.

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Item 6. Exhibits

31.1		Rule 13a-14(a)/15d-14(a) Certification of Chief Executive Officer

31.2		Rule 13a-14(a)/15d-14(a) Certification of Chief Financial Officer

32.1		Section 1350 Certification of Chief Executive Officer

32.2		Section 1350 Certification of Chief Financial Officer

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.


	DATATRAK International, Inc. Registrant
Date: May 13, 2009	/s/ Laurence P. Birch
	Laurence P. Birch,
	Interim Chief Executive Officer and Chairman of the Board of Directors (Principal Executive Officer)


Date: May 13, 2009	/s/ Raymond J. Merk
	Raymond J. Merk
	Vice President of Finance, Chief Financial Officer, Chief Operating Officer and Treasurer (Principal Financial and Accounting Officer)

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