CLEVELAND, Oct. 19, 2015 /PRNewswire/ -- DATATRAK International, Inc. (OTCQX: DTRK), the leader in developing cloud-based, unified dClinical™ technologies and delivering related services for the clinical trials industry, today responded to Arosa Investment Management's ("Arosa/Mr. Tabatabai") intent to gain control of the Company without paying DATATRAK shareholders a premium by nominating three candidates to stand for election to DATATRAK's Board of Directors at the Company's 2015 Annual Meeting of Shareholders on November 11, 2015.
The DATATRAK Board of Directors urges shareholders to vote the Company's WHITE proxy card and to discard any proxy material from Arosa/Mr. Tabatabai.
If you have any questions on how to vote your shares, please call Morrow & Co., LLC toll free at (800) 662-5200 or (203) 658-9400.
The Company is mailing a letter to shareholders to clarify the misinformation from Arosa/Mr. Tabatabai, to detail the significant progress and accomplishments achieved under the current leadership, and to share our views on why the Arosa/Mr. Tabatabai nominees are wrong for DATATRAK. Highlights of the letter include:
- The knowledge and expertise of DATATRAK's Board has enabled the Company to reemerge from a desperate financial situation and reposition itself for sustained future growth and profitability.
- The current Board and management team have a proven track record of excellence and independence.
- A change in control of the Board and management team will short circuit the continued implementation of its growth plan and jeopardize important customer and partner relationships.
- Since the appointment of Laurence Birch as CEO in 2009, and through close of market on October 13, 2015, the stock has returned 224%.
- Despite the increase in stock price over this time, the Company does not believe the market price adequately reflects the future opportunities of the Company, which we believe will only be fully realized if the Board and management team are able to see their long-term plan through to fruition.
The dissident's nominees do not add value and are not qualified for DATATRAK's Board.
- James R. Ward, commonly known as Jim Bob Ward, has no prior Board experience and has an unsuccessful prior track record at DATATRAK and is not qualified to be a Board member of DATATRAK.
- In the case of James R. Ward, commonly known as Jim Bob Ward, the Board feels strongly that Mr. Ward is unsuitable for inclusion on the Board. We base this opinion on extensive historical experience working with Mr. Ward both as a previous member of the Company's management team, as the Executive Vice President of Research and Development and Market and Client Strategy, and in his role as the CEO of ClickFind. ClickFind was acquired by DATATRAK and subsequently became the subject of lengthy and contentious litigation (which is a matter of public record).
- During Mr. Ward's tenure as a key DATATRAK executive:
- The Company failed to execute on a revenue plan, failed to maintain and advance the DATATRAK Platform,
- Accumulated $32 million in losses over a three year timeframe, and
- Saw a reduction in share price of 97%.
- DATATRAK does not believe it is positive for shareholders or the Company to trust the financial future to an individual with such a track record.
- Despite Arosa/Mr. Tabatabai's claims to the contrary – the FACT is that Mr. Ward is NOT a named inventor on ANY of the patents in DATATRAK's IP Portfolio.
- In aligning himself with Arosa/Mr. Tabatabai, Mr. Ward may have breached the terms of the previously reported December of 2008 Settlement Agreement with the Company related to claims by the Company against Mr. Ward with respect to the acquisition of ClickFind.
- Alex Tabatabai, the head of Arosa Investment Management, has no prior Board or relevant management experience and is not qualified to be a Board member of DATATRAK.
- Arosa/Mr. Tabatabai has never presented any concerns to management in prior meetings. Rather than constructively engaging with the Company, Arosa/Mr. Tabatabai has chosen to launch a costly and distracting takeover of DATATRAK that puts our shareholders at risk. Management strongly considers the views of all its shareholders and has met with Arosa/Mr. Tabatabai twice in the last few months, yet none of these assertions were raised during those meetings. In fact, Arosa/Mr. Tabatabai and two of its nominees expressed support of DATATRAK and its management team.
- Arosa/Mr. Tabatabai has presented no new ideas and has no plan. No strategic alternatives have been presented to the Company that might offer a better path for its long-term success. The few items mentioned in Arosa/Mr. Tabatabai's proxy statement do not demonstrate a thorough understanding of the drivers of our business, including the significance of critical relationships between our management team and key customers. Arosa/Mr. Tabatabai's actions appear to be calculated to cause disruption and to promote its short-term investment horizon (having only acquired shares of the Company beginning in May 2015) at the expense of long term shareholders by opportunistically seeking control of the Company. These opportunistic actions not only distract the management team and employees from running the business, but also require the Company to spend operational cash needed to grow the business on advisors, legal fees and other related activities.
- Further, while we respect his military experience, Jack Jacobs does not have any clinical trial or healthcare industry experience and may be an ineligible nominee as he is beyond the age of retirement per the Company's corporate governance guidelines and is completely unknown to the Company.
The letter to shareholders appears below.
DO NOT BE MISLED! VOTE THE WHITE PROXY CARD.
October 19, 2015
Dear DATATRAK shareholders:
A Track Record of Creating Value
Six years ago, our leadership team began a journey to transform DATATRAK and rebuild the Company's reputation and financial position for the future by taking aggressive actions to deliver a new DATATRAK and build shareholder value without resorting to the highly dilutive capital measures that would have irreparably harmed our shareholders. The new leadership team took over the helm of the Company at a time when it was in a desperate financial position, was close to insolvency, and was not in a position to invest in the business or its technology. There were no quick fixes at the Company's disposal, but Laurence Birch stepped in as our new CEO to rebuild a leadership team that truly believed in our mission and worked incredibly hard to transform our business. Since the appointment of Mr. Birch as CEO in 2009, and through close of market on October 13, 2015, the stock has returned 224%. Through the successful implementation of our long-term strategy, the Company is in a favorable position today and is positioned for an exciting future.
In the midst of this progress, Arosa Investment Management (Arosa/Mr. Tabatabai), a hedge fund led by Alex Tabatabai, has launched a time-consuming and distracting proxy fight to attempt to wrest control of the board at our upcoming Annual Meeting without paying a takeover premium to shareholders. We believe that we are growing significantly and that DATATRAK is poised for continued growth in shareholder value. In his ill-advised quest to seize control of the board now, Mr. Tabatabai has aligned himself with nominees that we believe are unqualified to sit on our board and who are attempting to harvest this shareholder value for themselves at little or no cost. More importantly, Arosa/Mr. Tabatabai are clearly attempting to take effective control of DATATRAK without paying the shareholders any premium to the current share price.
DATATRAK shareholders may have recently received a letter and/or proxy statement from Arosa/Mr. Tabatabai that is riddled with misrepresentations, inaccurate data and flawed analysis to distract shareholders from the remarkable turnaround led by the new management team under the oversight of your Board.
It is imperative that you take the time to read and consider the facts so you can make an informed decision on this important matter when it is brought to a vote at our Annual Meeting on November 11, 2015. We urge you to vote the WHITE proxy card FOR the DATATRAK nominees and to discard any Blue voting form sent to you by Arosa/Mr. Tabatabai. A vote for the DATATRAK nominees is a vote for continuing our strong and proven track record.
DATATRAK's Strategy is Working. Do not be misled by Arosa/Mr. Tabatabai!
While Arosa/Mr. Tabatabai will try and to convince you otherwise, under the leadership of Mr. Birch, the Company has been established as a leader in the dClinical industry through the achievement of several key strategic goals, including:
- The Current Management Team & Board Executed a Successful Turnaround Strategy:
- Stopped the waste and cash burn driven by the poor strategy and execution by the prior management team of which Jim Bob Ward was an integral part as the Executive Vice President of Research and Development and Market and Client Strategy.
- Successes included:
- Eliminated a "Going Concern" audit qualification without raising capital/debt or diluting shareholders.
- Created a business model driven by positive cash flows from customer transactions and not highly dilutive capital raises.
- To be clear, in 2009, Mr. Birch and the management of DATATRAK were left with a Company with little cash, negative cash flow and no ability to raise capital---all as a result of actions and inactions taken by the prior leadership of DATATRAK; including Jim Bob Ward.
- In spite of the delisting from the NASDAQ under prior management, the DATATRAK Board chose to qualify as an OTCQX Company requiring it to provide substantially all information to shareholders that a registered Company is required to submit—and has complied with those requirements fully.
- Substantially upgraded the quality and independence of DATATRAK's Board through replacing certain Board members with James Karis and Nicholas Loiacono. Both are leading life science and technology executives that provide significant governance and financial expertise and oversight for our Company.
- The Current Management Team & Board Created a Winning Strategy to Drive Growth:
- Investing in our technology. New management reversed the development neglect of the platform that occurred while Jim Bob Ward was directly responsible for the platform as the Executive Vice President of Research and Development and Market and Client Strategy. During that period, the development team developed no significant new functionality or new products.
i. Mr. Birch and his team has not only created the sophisticated NEXT generation DATATRAK ONE UX™ platform but has created significant new functionality (including the 2016 release of a completely new product, UXCTMS360™ which opens up a new $2 billion market to DATATRAK) that has caused customers to re-think their current dClinical platforms and choose DATATRAK.
- Investing in Sales and Marketing initiatives and taking the care to begin driving long term relationships and contracts with customers rather than the unscalable short term engagements during the prior management team's tenure. Results include:
- Backlog has almost tripled from $11 million to $31 million during Mr. Birch's tenure as CEO.
- Approximately 50 CROs have partnered or contracted business with DATATRAK up from virtually none during Mr. Ward's tenure. CRO revenue was less than $1 million in 2008 and has increased to over $6 million under Mr. Birch's leadership.
- Signed multiple multi-year/multi-trial engagements with large CROs and Pharma companies including in this quarter the signing of a 5 year multi-million dollar deal with the largest device Company in Europe. Enterprise agreement revenue has grown from $0 in 2009 to over $8 million.
- DATATRAK has become the thought leader in the industry and annually hosts many webinars, composes numerous industry white papers and presents at many industry conferences from virtually none when Mr. Ward was directly responsible for these areas during his tenure.
- The Current Management Team & Board Have Vigorously Protected Our Intellectual Property by Suing a Leading Competitor for Infringing our Patents
- Though expensive, the defense of our patents is a key component of ensuring proper fiduciary duty to protect the assets of our business—assets owned by shareholders. The DATATRAK Board made a decision to invest in this defense specifically to protect the rights or our shareholders.
- Despite Arosa/Mr. Tabatabai's claims to the contrary, the FACT is that Mr. Ward is NOT a named inventor on ANY of the patents in DATATRAK's IP Portfolio.
- Mr. Birch has aligned himself completely with shareholders and driven share appreciation of 224% in spite of the move from the NASDAQ to the OTCQX markets.
- Contrary to Arosa/Mr. Tabatabai's statement about reduction in share price, the opposite is in fact true. To be clear, the dates Tabatabai has chosen for his analysis included Jim Bob Ward's tenure and not, as appropriate, during the tenure beginning when Mr. Birch became CEO.
- Additionally, Mr. Birch, has aligned himself completely with fellow shareholders through the acquisition of 131,253 shares through open market purchases and stock in lieu of compensation since becoming CEO. Shares with the same rights as all other shareholders. Mr. Birch is a long term holder of stock—never selling a single share—and has been aligned with all other shareholders since the day he joined our Board.
We are more confident than ever that our Company stands at the precipice of realizing the returns on our long-term strategy and investment as we execute against our strong and growing backlog. Any impediment that slows our momentum will be detrimental to DATATRAK's ability to grow and succeed in the future. Further, any wholesale change in the Board or management risks tarnishing existing partner and customer relationships, undoing the positive momentum in the Company's business, and potentially short-circuiting the Company's well-designed plan for sustained future growth.
Arosa/Mr. Tabatabai is Opportunistically Seeking to Take Control of DATATRAK after Expressing Strong Support for the Management Team
As an organization, we seek to maintain an open dialogue with stockholders and have spoken with representatives of the Arosa/Mr. Tabatabai group on several occasions to understand their perspectives over the last few months. During these meetings, Arosa/Mr. Tabatabai and two of its proposed Board members expressed strong support of DATATRAK and its management team. None of the assertions made by Arosa/Mr. Tabatabai in its proxy were raised with management in very recent discussions and no strategic alternatives have been presented that might offer a better path for the Company's long-term success. Rather, Arosa/Mr. Tabatabai has chosen to spring its alleged concerns on DATATRAK in an abrupt and unconstructive manner. These practices appear to be calculated to cause disruption and to promote Arosa/Mr. Tabatabai's short-term investment horizon (having only acquired shares of the Company beginning in May 2015), as well as its self-interested agenda to opportunistically gain control of the Company by seeking a majority of our Board seats, an effective change of control with no premium paid to shareholders.
Our leadership team remains unified in our mission to create long-term value for our investors and encourages DATATRAK shareholders to weigh the long-term opportunity that stands before us as opposed to the short-term and opportunistic mentality of activists.
Arosa/Mr. Tabatabai's Nominees are NOT Qualified and Will Hinder Momentum of DATATRAK
After evaluating the three individuals put forth by Arosa/Mr. Tabatabai as director candidates, DATATRAK's Board of Directors has determined that none of them possess the particular expertise or experience that the Company is seeking in director candidates at this time. We strongly believe that replacing our highly experienced existing directors with these inexperienced candidates would set the Company back in our ability to continue to capitalize on our growth strategy and would jeopardize existing partner and customer relationships.
- While the Company commends the military experience of Jack H. Jacobs, neither he nor Alex Tabatabai has any significant clinical trial, healthcare industry, or software industry experience, nor do they possess the specific business experience DATATRAK is looking for to support our management team in pursuing key strategic initiatives including building credibility and relationships with customers. Further, based on Arosa's/Mr. Tabatabai's press release, it appears that Mr. Jacobs already sits on five other Boards and is beyond the age of retirement per the Company's corporate governance guidelines and is therefore not an eligible nominee.
- The Company is particularly concerned about the nomination of James R. Ward, commonly known as Jim Bob Ward, to the Board. Although Mr. Ward had clinical trial software experience from his work nearly a decade ago, he was the Executive Vice President of Research & Development and Market and Client Strategy, tasked with overseeing the development of the platform, and driving marketing strategies and new customer acquisitions. During his tenure, very few enhancements were made to the platform and no new products were developed while very few marketing initiatives were employed and customer acquisition was minimal resulting, to a large part, in the financial crises faced by the Company at that time. Based on the Company's extensive historical experience working with Mr. Ward both in his management capacity as an EVP of DATATRAK and as the CEO of ClickFind, which was acquired by the Company, and considering Jim Bob Ward has no prior Board experience, the Company does not feel that he is a suitable nominee for the current Board of Directors.
- In addition, in aligning himself with Arosa/Mr. Tabatabai, the Company is concerned that Mr. Ward may have breached the terms of the previously reported December 2008 Settlement Agreement with the Company relating to claims by the Company against Mr. Ward with respect to the Company's purchase of ClickFind.
- Further, contrary to Arosa/Mr. Tabatabai's proxy contention, Jim Bob Ward was not responsible for developing any of the IP currently in the Company's possession.
DATATRAK's Nominees Are Highly Qualified and Are Aligned With Shareholders
DATATRAK's Board is currently composed of five highly qualified directors, four of whom are independent and have been involved in all corporate governance decisions, whose priorities are aligned with those of shareholders. Contrary to Arosa/Mr. Tabatabai's contentions, DATATRAK's Board of Directors is well aligned with shareholders through their cumulative ownership of over 16% of the Company's stock (cumulative ownership would grow to roughly 21% with the addition of Mr. Coates).
- Laurence Birch, DATATRAK's CEO and Chairman, was appointed Interim Chief Executive Officer effective January 21, 2009, and was appointed Chief Executive Officer effective November 1, 2009. Mr. Birch has extensive experience in the healthcare industry, previously serving as President and CEO of NeoPharm, Interim President and CEO of AKSYS, Ltd, and holding various positions at Baxter Healthcare over the course of 13 years. More importantly, Mr. Birch is responsible for turning DATATRAK around from a compromising financial position in 2007 and 2008 and putting it in the favorable position it stands at today.
- William Coates, DATATRAK's newly proposed nominee, has been an invaluable member of the DATATRAK management team since 2006. The Company believes it would be in the best interest of both the Company and shareholders to retain his institutional knowledge as a member of the Board given his specific experience and expertise in the clinical trial software space, as well as his deep relationships with some of the Company's largest customers. Hired in July 2000 by ClickFind, Mr. Coates was the driving force responsible for the commercialization of the industry leading dClinical product sold by DATATRAK today. Mr. Coates owns over 53,725 shares in DATATRAK stock and is aligned with shareholder interests.
- Nicholas A. Loiacono has been a Director since 2013. Mr. Loiacono was formerly the Vice President and Treasurer of McKesson Corporation, a Fortune 15 corporation which delivers pharmaceuticals, medical supplies and health care information technologies to its customers. He had been with McKesson Corporation since 1997. Mr. Loiacono began his career with American Hospital Supply Corporation from 1975 to 1985. From 1992 to 1997, he was Group Vice President/Finance and Administration of Sulzer Medica USA, an international manufacturer of implantable medical devices, primarily serving the cardiovascular and orthopedic markets. Mr. Loiacono has extensive experience and relationships in the healthcare industry that are relevant and important to his position on DATATRAK's Board of Directors.
Arosa/Mr. Tabatabai's Characterization of the July 1, 2010 Privately Placed Common Shares is Inflammatory and Incorrect.
DATATRAK strongly objects to Arosa/Mr. Tabatabai's accusations that the July 1, 2010 privately placed common shares of certain members of the Board and key employees were highly dilutive to shareholders. The nominal special offering was done to reflect confidence in the business and its future and helped to better align the Company's new management team directly with shareholder interests in the long-term.
Arosa/Mr. Tabatabai Significantly Mischaracterized the Combined Cash Compensation Paid to the CEO and CFO of DATATRAK
- To be clear, the Company's Board compensation committee is composed of the independent members of our Board of Directors and establishes Officer compensation. In addition, and as stated in our Proxy, the independent compensation committee has each year since Mr. Birch has been CEO, retained Towers Watson, a well-respected, industry leading compensation consultant to assist in establishing total compensation for Mr. Birch and the Officer group as a whole. The compensation consultant provides peer group data and recommendations regarding the form, mix and appropriate levels of compensation. The resulting compensation levels of the Officers recommended by the compensation consultant and reviewed and approved by the independent compensation committee has resulted in total direct compensation between the median and the 75th percentile of public company peer group data used in the analysis.
- Further the independent compensation committee establishes a management bonus program each year based on a thorough review of the annual operating budget and establishes performance metrics based on that plan.
- The base salaries of the CEO and CFO combined were $557,000, not $1,073,737 as Arosa/Mr. Tabatabai stated in its misleading press release.
- Their additional compensation included (1) bonus earned under a Board approved executive compensation plan developed with the assistance of Towers Watson, a well-respected external executive compensation consultant, part of which the executives elected to take in stock in lieu of cash to be better aligned with shareholder interests; and (2) a 2011 Retention Bonus that came due in 2014 that the executives also took in stock instead of cash.
- For comparison, the salaries of the executive team are not out of alignment with those of past management, including that of Mr. Ward when he was an Officer of the Company, with the exception that the current compensation program is substantially more performance based with a much higher stock (non-cash) component than the highly cash-based compensation at that time.
Arosa/Mr. Tabatabai Has Made a Number of Unsubstantiated and Inaccurate Statements Regarding the Company's Governance and Disclosure Practices, BUT the Facts are Clear
- Since the appointment of Laurence P. Birch as CEO in 2009, and through close of market on October 13, 2015, the stock has returned 224.09%. Over the past one and three year periods, the stock has returned 7.69% and 45.83% respectively.
- Earlier this year, the Board created a Lead Director position to foster greater transparency and accountability amongst senior leadership. The Board determined that this individual would preside at all executive sessions of the independent directors, serve as a liaison between the Chairman of the Board and the independent directors, and facilitate communication between the Board and the Chief Executive Officer, among other responsibilities. The independent Directors elected Dr. Jerry Kaiser to serve as the Lead Director of the Board of Directors of DATATRAK.
- DATATRAK is not an SEC reporting Company but, in fact, provides disclosures in excess of what is required to be in in compliance with the OTCQX requirements for disclosure.
- The Company's proxy statement contains all required disclosures, including all relevant disclosures with respect to the backgrounds of our directors and nominees.
- The Company discloses all material information necessary to adequately inform its investors in periodic reports (or by press release in the interim as required).
- The Company does in fact have a shareholder rights plan for the exact purpose of protecting the Company's shareholders from attempts, such as the short-term, opportunistic approach seemingly contemplated by Arosa/Mr. Tabatabai and any other investors acting in concert with Arosa/Mr. Tabatabai, to gain control of the Company in a transaction or at a value that does not reflect the intrinsic value of the Company and which the Board believes is not in the long-term interest of the shareholders.
Committed to Serving the Interests of All Shareholders
As we have in the past, the Board will continue to make appropriate and informed decisions about what is best for the Company and its stakeholders and work to ensure that our interests are aligned with those of all of our shareholders. The Company, under this Board and management team, has never been more strongly positioned to deliver growth in the marketplace.
DATATRAK shareholders are reminded that their vote is important, no matter how many or how few shares they own.
DATATRAK urges shareholders to vote "FOR ALL" of DATATRAK's highly qualified, experienced director nominees: William Coates, Laurence Birch, and Nicholas Loiacono on the WHITE PROXY CARD.
These nominees have a significant track record of aligning themselves with shareholders and are the right individuals to build upon the Company's current momentum.
If you have any questions on how to vote your shares, please call Morrow & Co., LLC toll free at (800) 662-5200 or (203) 658-9400.
CAUTION: Any vote for Arosa/Mr. Tabatabai's control slate has the potential to:
1. Curtail DATATRAK's recent history of success and may place the company back into severe financial distress;
2. Inhibit important partner and customer relationships
3. Take control of the Company without paying shareholders a premium.
Do not sign or return any BLUE proxy card sent to you by Arosa/Mr. Tabatabai. Simply discard it.
The DATATRAK Board and Management Team
If you have any questions or need assistance in voting your WHITE PROXY CARD, please contact Morrow & Co., our proxy solicitor, toll-free at 800-662-5200, or via E-mail at [email protected].
DATATRAK is a worldwide technology and consulting Company delivering digital clinical solutions and related services for the clinical trials industry. The Company delivers a portfolio of software solutions through the unified dClinical™ platform, safely accelerating clinical research, from Concept to Cure®.
DATATRAK International is a worldwide technology and services Company delivering Unified dClinical™ solutions and related services for the clinical trials industry. DATATRAK built its multi-component, comprehensive solution on a single, unified platform and expanded this concept to include services delivery via DATATRAK's Clinical and Consulting Services group. The Company delivers a complete portfolio of software products designed to accelerate the reporting of clinical research data from sites to sponsors and ultimately regulatory authorities, faster and more efficiently than loosely integrated technologies. The DATATRAK ONE® software solution, deployed worldwide through an ASP or Enterprise Transfer offering, supports Phase I – Phase IV drug and device studies in multiple languages throughout the world. DATATRAK has offices located in Chicago, IL; Cary Research Triangle Park (RTP), North Carolina; Bryan, Texas; and Cleveland, Ohio. For more information, visit http://www.datatrak.com.
Except for the historical information contained in this press release, the statements made in this release are forward-looking statements. These forward-looking statements are made based on management's expectations, assumptions, estimates and current beliefs concerning the operations, future results and prospects of the Company and are subject to uncertainties and factors which are difficult to predict and, in many instances, are beyond the control of the Company, and which could cause actual results to differ materially from those contemplated in these forward-looking statements. For a list of certain factors that may cause actual results to differ materially from those contemplated in these forward looking statements, please see the Company's report filed with the OTCQX Market on March 13, 2015 announcing its results for the full year period ended December 31, 2014. The Company undertakes no obligation to update publicly or revise any forward-looking statement whether as a result of new information, future events or otherwise.
SOURCE DATATRAK International, Inc.