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Securities and Exchange Commission

Washington, D.C. 20549


Form 10-Q

Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

For the Quarterly Period Ended March 31, 2003

Commission file number 000-20699

DATATRAK International, Inc.

(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 BoulevardMayfield Heights, Ohio                  |  | 44124                               
|                                                               |  |                                     
|(Address of principal executive offices)                       |  | (Zip Code)                          

(440) 443-0082

(Registrants telephone number, including area code)




---

(Former name, former address and former fiscal year, if changed since last report)


Indicate by check mark whether the registrant (1) has filed all reports
required 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. X Yes  No

Indicate by check mark whether the
registrant is an accelerated filer (as defined in Exchange Act Rule
12b-2). 
Yes 
X No

Indicate the number of shares outstanding of each of the issuers classes of
common stock, as of the latest practical date.

The number of Common Shares, without par value, outstanding as of April 30,
2003 was 5,293,836.





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TABLE OF CONTENTS



|                              |                                                                                               |  |  |  |  |  |  | 
|----------------------------- | --------------------------------------------------------------------------------------------- |  |  |  |  |  |  | 
|Part I. Financial Information
|                              | Item 1  Financial Statements                                                                
|                              | Item 2. Managements Discussion and Analysis of Results of Operations and Financial Condition
|                              | Item 3. Quantitative and Qualitative Disclosures About Market Risk                           
|                              | Item 4. Controls and Procedures                                                              
|Part II. Other Information   
|                              | Item 6. Exhibits and Reports on Form 8-K                                                     
|SIGNATURES                   
|CERTIFICATIONS               



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##### Table of Contents






Part I. Financial Information




Item 1  Financial Statements

DATATRAK INTERNATIONAL, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS

|                                               |                                                                                                                                                                                                             |  |        |                                            |   |           |           |              |   |          |           | 
|---------------------------------------------- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- |  | ------ | ------------------------------------------ | - | --------- | --------- | ------------ | - | -------- | --------- | 
|                                               |                                                                                                                                                                                                             |  |        |                                            |   |           |           |              |   | (Note A)
|                                               |                                                                                                                                                                                                             |  |        |                                            |   | March 31, |           | December 31,
|                                               |                                                                                                                                                                                                             |  |        |                                            |   | 2003      |           | 2002        
|                                               |                                                                                                                                                                                                             |  |        |                                            |   |           |           |             
|ASSETS                                         |                                                                                                                                                                                                             |  |        |                                            |   |           |           |             
|Current assets:                                |                                                                                                                                                                                                             |  |        |                                            |   |           |           |             
|                                               | Cash and cash equivalents                                                                                                                                                                                   |  | $      | 1,475,613                                  |   |           | $         | 1,682,642    |  
|                                               | Short-term investments                                                                                                                                                                                      |  |        | 785,332                                    |   |           |           | 785,277      |  
|                                               | Accounts receivable, less allowances                                                                                                                                                                        |  |        | 645,096                                    |   |           |           | 883,584      |  
|                                               | Prepaid expenses and other current assets                                                                                                                                                                   |  |        | 201,019                                    |   |           |           | 165,457      |  
|                                               |                                                                                                                                                                                                             |  |        |                                            |   |           |           |             
|                                               |                                                                                                                                                                                                             |  |        | Total current assets                       |   |           | 3,107,060 |              |   |          | 3,516,960 | 
|                                              
|Property
and equipment, at cost               
|                                               | net of accumulated depreciation and amortization                                                                                                                                                            |  |        | 1,495,258                                  |   |           |           | 1,749,065    |  
|Other assets                                   |                                                                                                                                                                                                             |  | 39,549 |                                            |   |           | 39,549    |             
|                                               |                                                                                                                                                                                                             |  |        |                                            |   |           |           |             
|                                               |                                                                                                                                                                                                             |  |        | Total assets                               |   | $         | 4,641,867 |              |   | $        | 5,305,574 | 
|                                               |                                                                                                                                                                                                             |  |        |                                            |   |           |           |             
|LIABILITIES AND SHAREHOLDERS EQUITY           |                                                                                                                                                                                                             |  |        |                                            |   |           |           |             
|Current liabilities:                           |                                                                                                                                                                                                             |  |        |                                            |   |           |           |             
|                                               | Accounts payable                                                                                                                                                                                            |  | $      | 123,554                                    |   |           | $         | 97,938       |  
|                                               | Current portion of capital lease obligation                                                                                                                                                                 |  |        | 128,635                                    |   |           |           | 138,388      |  
|                                               | Accrued expenses                                                                                                                                                                                            |  |        | 515,382                                    |   |           |           | 913,143      |  
|                                               | Deferred revenue                                                                                                                                                                                            |  |        | 1,137,749                                  |   |           |           | 901,509      |  
|                                               |                                                                                                                                                                                                             |  |        |                                            |   |           |           |             
|                                               |                                                                                                                                                                                                             |  |        | Total current liabilities                  |   |           | 1,905,320 |              |   |          | 2,050,978 | 
|                                              
|
|Capital lease obligation, less current portion |                                                                                                                                                                                                             |  |       |                                            |   |           | 23,979    |             
|Shareholders equity:                          |                                                                                                                                                                                                             |  |        |                                            |   |           |           |             
|                                               | Serial preferred shares, without par value, 1,000,000 shares
authorized, none issued                                                                                                                        |  |        |                                           |   |           |           |             |  
|                                               | Common share warrants                                                                                                                                                                                       |  |        | 357,589                                    |   |           |           | 357,589      |  
|                                               | Common shares, without par value, authorized 15,000,000
shares; issued 8,563,836 shares as of March 31, 2003
and December 31, 2002; outstanding 5,263,836
shares as of March 31, 2003 and December 31, 2002 |  |        | 53,871,996                                 |   |           |           | 53,868,303   |  
|                                               | Treasury shares, 3,300,000 shares at cost                                                                                                                                                                   |  |        | (20,188,308                                | ) |           |           | (20,188,308  | )
|                                               | Accumulated deficit                                                                                                                                                                                         |  |        | (31,226,946                                | ) |           |           | (30,732,049  | )
|                                               | Foreign currency translation                                                                                                                                                                                |  |        | (77,784                                    | ) |           |           | (74,918      | )
|                                               |                                                                                                                                                                                                             |  |        |                                            |   |           |           |             
|                                               |                                                                                                                                                                                                             |  |        | Total shareholders equity                 |   |           | 2,736,547 |              |   |          | 3,230,617 | 
|                                               |                                                                                                                                                                                                             |  |        |                                            |   |           |           |             
|                                               |                                                                                                                                                                                                             |  |        | Total liabilities and shareholders equity |   | $         | 4,641,867 |              |   | $        | 5,305,574 | 
|                                               |                                                                                                                                                                                                             |  |        |                                            |   |           |           |             



|Note A: |  | The balance sheet at December 31, 2002 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.
|------- |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

See notes to condensed consolidated financial statements.

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

|                                             |                        |   |                    |        |      |   |            |        |  
|-------------------------------------------- | ---------------------- | - | ------------------ | ------ | ---- | - | ---------- | ------ | -
|                                             |                        |   | Three Months Ended
|                                             |                        |   | March 31,         
|                                             |                        |   |                   
|                                             |                        |   | 2003               |        | 2002
|                                             |                        |   |                    |        |     
|Revenue                                      |                        | $ | 1,456,584          |        |      | $ | 815,865    |       
|Direct costs                                 |                        |   | 353,882            |        |      |   | 433,940    |       
|                                             |                        |   |                    |        |      |   |            |       
|Gross profit                                 |                        |   | 1,102,702          |        |      |   | 381,925    |       
|Selling, general and administrative expenses |                        |   | 1,339,133          |        |      |   | 1,925,934  |       
|Depreciation and amortization                |                        |   | 262,068            |        |      |   | 256,227    |       
|                                             |                        |   |                    |        |      |   |            |       
|Loss from operations                         |                        |   | (498,499           | )      |      |   | (1,800,236 | )     
|Other income (expense):                      |                        |   |                    |        |      |   |            |       
|                                             | Interest income        |   |                    | 5,447  |      |   |            | 34,301 |  
|                                             | Interest expense       |   |                    | (2,540 | )    |   |            | (6,402 | )
|                                             | Other income (expense) |   |                    | 695    |      |   |            | 1,176  |  
|                                             |                        |   |                    |        |      |   |            |       
|Net loss                                     |                        | $ | (494,897           | )      |      | $ | (1,771,161 | )     
|                                             |                        |   |                    |        |      |   |            |       
|Basic and diluted net loss per share         |                        | $ | (0.09              | )      |      | $ | (0.34      | )     
|                                             |                        |   |                    |        |      |   |            |       
|Weighted average common shares outstanding   |                        |   | 5,263,836          |        |      |   | 5,156,724  |       
|                                             |                        |   |                    |        |      |   |            |       

See notes to condensed consolidated financial statements.

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

|                                                 |                                                                             |                                              |                                       |            |                              |          |           |            |         |         |  
|------------------------------------------------ | --------------------------------------------------------------------------- | -------------------------------------------- | ------------------------------------- | ---------- | ---------------------------- | -------- | --------- | ---------- | ------- | ------- | -
|                                                 |                                                                             |                                              |                                       |            | Three Months Ended March 31,
|                                                 |                                                                             |                                              |                                       |            |                             
|                                                 |                                                                             |                                              |                                       |            | 2003                         |          | 2002     
|                                                 |                                                                             |                                              |                                       |            |                              |          |          
|Operating Activities                             |                                                                             |                                              |                                       |            |                              |          |           |           
|                                                 | Net loss                                                                    |                                              | $                                     | (494,897   | )                            |          | $         | (1,771,161 | )      
|                                                 | Adjustments to reconcile net loss to net cash
used in operating activities: |                                              |                                       |            |                              |          |           |            |        
|                                                 |                                                                             | Depreciation and amortization                |                                       |            | 262,068                      |          |           |            | 256,227 |        
|                                                 |                                                                             | Other                                        |                                       |            | 6,073                        |          |           |            | (16,530 | )      
|                                                 |                                                                             | Changes in operating assets and liabilities: |                                       |            |                              |          |           |            |         |        
|                                                 |                                                                             |                                              | Accounts receivable                   |            |                              | 233,988  |           |            |         | (59,162 | )
|                                                 |                                                                             |                                              | Accounts payable and accrued expenses |            |                              | (372,145 | )         |            |         | 33,415  |  
|                                                 |                                                                             |                                              | Deferred revenue                      |            |                              | 236,240  |           |            |         | 625,679 |  
|                                                 |                                                                             |                                              | Other                                 |            |                              | (37,233  | )         |            |         | 64,881  |  
|                                                 |                                                                             |                                              |                                       |            |                              |          |           |           
|                                                 | Net cash used in operating activities                                       |                                              |                                       | (165,906   | )                            |          |           | (866,651   | )      
|Investing Activities                             |                                                                             |                                              |                                       |            |                              |          |           |           
|                                                 | Purchases of property and equipment                                         |                                              |                                       | (14,173    | )                            |          |           | (538,062   | )      
|                                                 | Proceeds from sales of property and equipment                               |                                              |                                       |           |                              |          |           | 847        |        
|                                                 | Maturities of short term investments                                        |                                              |                                       | 1,036,000  |                              |          |           | 3,035,000  |        
|                                                 | Purchases of short term investments                                         |                                              |                                       | (1,033,935 | )                            |          |           | (5,520,610 | )      
|                                                 |                                                                             |                                              |                                       |            |                              |          |           |           
|                                                 | Net cash used in investing activities                                       |                                              |                                       | (12,108    | )                            |          |           | (3,022,825 | )      
|Financing Activities                             |                                                                             |                                              |                                       |            |                              |          |           |           
|                                                 | Proceeds from issuance of common shares and stock option exercises          |                                              |                                       |           |                              |          |           | 3,838,881  |        
|                                                 | Payments under capital lease obligation                                     |                                              |                                       | (33,732    | )                            |          |           | (31,546    | )      
|                                                 | Repayment of notes receivable                                               |                                              |                                       | 1,671      |                              |          |           | 2,785      |        
|                                                 |                                                                             |                                              |                                       |            |                              |          |           |           
|                                                 | Net cash provided by financing activities                                   |                                              |                                       | (32,061    | )                            |          |           | 3,810,120  |        
|Effect of exchange rate on cash                  |                                                                             |                                              | 3,046                                 |            |                              |          | (5,867    | )         
|                                                 |                                                                             |                                              |                                       |            |                              |          |           |           
|Decrease in cash and cash equivalents            |                                                                             |                                              | (207,029                              | )          |                              |          | (85,223   | )         
|Cash and cash equivalents at beginning of period |                                                                             |                                              | 1,682,642                             |            |                              |          | 2,174,445 |           
|                                                 |                                                                             |                                              |                                       |            |                              |          |           |           
|Cash and cash equivalents at end of period       |                                                                             | $                                            | 1,475,613                             |            |                              | $        | 2,089,222 |           
|                                                 |                                                                             |                                              |                                       |            |                              |          |           |           

See notes to condensed consolidated financial statements.

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DATATRAK INTERNATIONAL, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
March 31, 2003
(Unaudited)

1. Basis of Presentation

The accompanying unaudited condensed consolidated financial statements of
DATATRAK International, Inc. and subsidiaries (DATATRAK or the Company)
have been prepared in accordance 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,
2003 are not necessarily indicative of the results that may be expected for the
year ending December 31, 2003. 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, 2002 (File No. 000-20699).

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.

2. Net Loss per Share

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

|                                                                                                                                                                   |  |                              |           |      |  |   |            |  
|------------------------------------------------------------------------------------------------------------------------------------------------------------------ |  | ---------------------------- | --------- | ---- |  | - | ---------- | -
|                                                                                                                                                                   |  | Three Months Ended March 31,
|                                                                                                                                                                   |  |                             
|                                                                                                                                                                   |  | 2003                         |           | 2002
|                                                                                                                                                                   |  |                              |           |     
|Net loss used in the calculation of basic and
diluted earnings per share                                                                                           |  | $                            | (494,897  | )    |  | $ | (1,771,161 | )
|                                                                                                                                                                   |  |                              |           |      |  |   |            |  
|Denominator for basic and diluted net loss
per share  weighted average common
shares outstanding                                                                  |  |                              | 5,263,836 |      |  |   | 5,156,724  |  
|                                                                                                                                                                   |  |                              |           |      |  |   |            |  
|Basic and diluted net loss per share                                                                                                                               |  | $                            | (0.09     | )    |  | $ | (0.34      | )
|                                                                                                                                                                   |  |                              |           |      |  |   |            |  
|Common share options and warrants
excluded from the computation of diluted
net loss per share because they would have
an antidilutive effect on net loss per share |  |                              | 1,212,620 |      |  |   | 1,231,710  |  
|                                                                                                                                                                   |  |                              |           |      |  |   |            |  

3. Comprehensive loss

The following table sets forth comprehensive loss.

|                             |  |                              |          |      |  |   |            |  
|---------------------------- |  | ---------------------------- | -------- | ---- |  | - | ---------- | -
|                             |  | Three Months Ended March 31,
|                             |  |                             
|                             |  | 2003                         |          | 2002
|                             |  |                              |          |     
|Net loss                     |  | $                            | (494,897 | )    |  | $ | (1,771,161 | )
|Foreign currency translation |  |                              | (2,866   | )    |  |   | (9,317     | )
|                             |  |                              |          |      |  |   |            |  
|Comprehensive loss           |  | $                            | (497,763 | )    |  | $ | (1,780,478 | )
|                             |  |                              |          |      |  |   |            |  

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DATATRAK INTERNATIONAL, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
March 31, 2003
(Unaudited)

4. Restricted Cash

The Company is party to an agreement with an unaffiliated third party to
lease certain computer equipment. The lease has been recorded as a capital
lease. Terms of the lease agreement require the Company to maintain a
restricted cash balance equal to the outstanding balance payable on the lease.
The restricted cash balance was $128,635 at March 31, 2003.

In addition, the companys wholly-owned subsidiary, DATATRAK GmbH, is
required to provide a bank guarantee to the lessor of its office space equal to
three months rent. The terms of the bank guarantee require DATATRAK GmbH to
maintain a restricted cash balance of 59,082 Euros with the bank. The U.S.
dollar equivalent of this amount was $63,808 at March 31, 2003.

DATATRAKs total restricted cash balance was $192,443 at March 31, 2003.

5. Stock Based Compensation

The Company has elected to follow Accounting Principles Board Opinion No.
25, Accounting for Stock Issued to Employees (APB No. 25) and related
interpretations in accounting for its employee and director stock options.
Under APB 25 compensation expense has been recognized for all options granted
at less than the fair market value of the common shares on the date of grant.
The alternative fair value accounting provided for under Financial Accounting
Standards Board (FASB) Statement No. 123, Accounting for Stock-Based
Compensation (Statement No. 123), requires use of option valuation models
that were not developed for use in valuing employee stock options. FASB
Statement No. 148, Accounting for Stock-Based Compensation  Transition and
Disclosure (Statement No. 148) requires disclosure of compensation expense
under both APB 25 and Statement No. 123.

The following table sets stock based compensation for each period
presented.

|                                                                                   |  |                              |        |      |  |   |         | 
|---------------------------------------------------------------------------------- |  | ---------------------------- | ------ | ---- |  | - | ------- | 
|                                                                                   |  | Three Months Ended March 31,
|                                                                                   |  |                             
|                                                                                   |  | 2003                         |        | 2002
|                                                                                   |  |                              |        |     
|Actual stock compensation expense
recognized under APB 25                          |  | $                            | 3,693  |      |  | $ | 3,693   | 
|Stock compensation expense that would have
been recognized under Statement No. 123 |  | $                            | 82,429 |      |  | $ | 107,883 | 

Pro forma information regarding net income and earnings per share is
required by Statement No. 123, which also requires that the information be
determined as if the Company has accounted for its stock options granted
subsequent to December 31, 1994 under the fair value method of that Statement.

For purposes of pro forma disclosures, the estimated value of the options
is amortized to expense over the options vesting period. The pro forma
results are not necessarily indicative of what would have occurred had the
Company adopted Statement No. 123. The Companys pro forma information
follows:

|                                           |  |                              |          |      |  |   |            |  
|------------------------------------------ |  | ---------------------------- | -------- | ---- |  | - | ---------- | -
|                                           |  | Three Months Ended March 31,
|                                           |  |                             
|                                           |  | 2003                         |          | 2002
|                                           |  |                              |          |     
|Pro forma net loss                         |  | $                            | (573,633 | )    |  | $ | (1,875,351 | )
|Pro forma basic and diluted loss per share |  | $                            | (0.12    | )    |  | $ | (0.39      | )

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Item 2. Managements Discussion and Analysis of Results of Operations and Financial Condition

The information set forth and discussed below for the three months ended
March 3l, 2003 is derived from the Condensed Consolidated Financial Statements
included elsewhere herein. 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.

General

DATATRAK is a provider of software and other related services, commonly
referred to as an application service provider, or ASP. DATATRAKs customers
use the software known as DATATRAK EDC® to collect and transmit clinical trial
data, commonly referred to as electronic data capture, or EDC. The Companys
services assist companies in the clinical pharmaceutical, biotechnology,
contract research organization (CRO) and medical device research industries,
in accelerating the completion of clinical trials. Approximately 49% of the
Companys assets, or approximately $2,260,000, are held in cash, cash
equivalents and short-term investments. Since commencing EDC operations in
1997, the Company has experienced some growth in revenue, but continues to
record losses and negative cash flow from operations. The Company is
continuing to enhance and commercialize its business and the DATATRAK EDC®
software, and anticipates that its operating results will fluctuate
significantly from period to period. There can be no assurance of the
Companys long-term future prospects.

The Companys contracts provide a fixed price for each component or
service to be delivered, and revenue is recognized as these components or
services are delivered. Services provided by DATATRAK that are in addition to
those provided for in its contracts are billed on a fee for service basis as
completed. Generally, these contracts range in duration from one to three
years. The ultimate contract value is dependent upon the length of the
customers use of DATATRAK EDC® and the services provided by DATATRAK. As
services are performed over the life of the contract, revenue is recognized per
the specific terms of each contract. Costs associated with contract revenues
are recognized as incurred. These contracts can be terminated by the customer
with or without cause. DATATRAK is entitled to payment for all work performed
through the date of notice of termination and for recovery of some or all costs
incurred to terminate a contract. The termination of a contract will not
result in a material adjustment to revenue or costs previously recognized.

Since its purchase of the DATATRAK EDC software in January 1998, DATATRAK
has recorded revenue related to a small number of contracts. At March 31,
2003, DATATRAKs backlog was $12.7 million. Due to DATATRAKs early stage of
development and its low level of backlog, there can be no assurance as to its
future levels of revenue.

Critical Accounting Policies

In response 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 and stock based compensation.

A
summary of these critical accounting policies can be found in the
Companys Annual Report on Form 10-K, filed on March 27, 2003, under
the heading

Critical Accounting Policies in Managements Discussion
and Analysis of Financial Condition and Results of Operations.

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Results of Operations

Three months ended March 31, 2003 compared with three months ended March 31, 2002

Revenue for the three months ended March 31, 2003 increased 78.1% to
$1,460,000 as compared to $820,000 for the three months ended March 31, 2002.
The increase was due to greater acceptance of the DATATRAK EDC® software by
clinical trial sponsors, resulting in an increase in the number of clinical
trials using the DATATRAK EDC® software.

Direct costs of revenue, mainly personnel costs, were $350,000 and
$430,000 during the three month periods ended March 31, 2003 and 2002,
respectively. Staff reductions and other payroll cost savings caused personnel
costs to decrease by $80,000 during the three months ended March 31, 2003.
This reduction in direct costs combined with the Companys increased revenue,
resulted in a gross margin of 76.0% for the three months ended March 31, 2003
compared to 47.6% in the first quarter of 2002. Based on its anticipated
levels of revenue and current cost structure, DATATRAK anticipates that its
gross margin in 2003 will remain consistent with the levels achieved in the
first quarter of 2003.

Selling, general and administrative expenses (SG&A) include all
administrative personnel costs, business development costs, and all other
expenses not directly chargeable to a specific contract. SG&A expenses
decreased by 30.6% to $1,340,000 from $1,930,000 for the three months ended
March 31, 2003 and 2002. Staff reductions and other payroll cost savings
caused personnel costs to decrease by $400,000 during the three months ended
March 31, 2003. Cost cutting in other areas resulted in additional savings of
$190,000 during the three months ended March 31, 2003.

Depreciation and amortization expense remained stable at $260,000 during
each of the three month periods ended March 31, 2003 and 2002.

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Other income decreased $30,000 during the three months ended March 31,
2003 compared to the three months ended March 31, 2002. Other income includes
interest income which decreased $30,000 for the three months ended March 31,
2003 compared to March 31, 2002, due to the Companys use of cash to fund its
operating losses and other working capital needs.

Liquidity and Capital Resources

Since its inception, the Companys principal sources of cash have been
cash flow from operations and proceeds from the sale of equity securities. The
Companys investing activities primarily reflect capital expenditures and net
purchases of short-term investments. In January 2002 the Company raised
approximately $3,840,000 in cash with the completion of its private placement
of common shares.

The Companys contracts usually require a portion of the contract amount
to be paid at the time the contract is initiated. Additional payments are
generally received upon completion of negotiated performance milestones
throughout the life of the contract. All amounts received are recorded as a
liability (deferred revenue) until work has been completed and revenue is
recognized. Cash receipts do not necessarily correspond to costs incurred or
revenue recognized. The Company typically receives a low volume of
large-dollar receipts. Accounts receivable will fluctuate due to the timing
and size of cash receipts. Accounts receivable (net of allowance for doubtful
accounts) was $650,000 at March 31, 2003 and $880,000 at December 31, 2002.
Deferred revenue was $1,140,000 at March 31, 2003 and $900,000 at December 31,
2002.

Cash and cash equivalents decreased $210,000 during the three months ended
March 31, 2003. This was the result of $170,000 used in operating activities
and $40,000 used in investing and financing activities. Cash used for
operating activities resulted primarily from the Companys net operating loss.
Investing activities included $10,000 used to purchase property and equipment.
Financing activities include capital lease payments of $30,000.

At March 31, 2003, the Company had working capital of $1,200,000 and its
cash, cash equivalents and short-term investments totaled $2,260,000. The
Companys working capital decreased by $270,000 since December 31, 2002. The
decrease was primarily the result of the $210,000 decrease in cash, cash
equivalents and short-term investments.

The Company is responsible for funding the future enhancement and testing
of the DATATRAK EDC® software. The Company will continue to invest in the
development of the DATATRAK® process. The Companys operations and the EDC
market are still in a developmental stage. DATATRAK has experienced marginal
revenue growth, however, the Company anticipates negative cash flow from
operations during 2003, as it continues to build its customer base, increase
its backlog and convert existing backlog into revenue. The Company anticipates
capital and related expenditures of approximately $230,000 through the end of
the current year for continued commercialization and product development of
DATATRAK EDC®, which the Company expects to fund from existing cash and cash
equivalents, maturities of short-term investments and cash flow from
operations. The Company believes that its cash and cash equivalents,
maturities of short-term investments and cash flow from operations, together
with its existing sources of equity, will be sufficient to meet its working
capital and capital expenditure requirements through the end of the current
year. However, at the current rates of negative cash flows, capital and
related expenditures and revenue growth, the Company may need to raise
additional funds for working capital by selling debt or equity securities or
through other arrangements. Additional capital may not be available on
acceptable terms, if at all. To the extent that additional equity capital is
raised, it could have a dilutive effect on the Companys existing shareholders.

Inflation

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

9



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Information About Forward-Looking Statements

Certain statements made in this Form 10-Q, other SEC filings or 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 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, 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 (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 ability of the Company
to absorb corporate overhead and other fixed costs in order to successfully
market the DATATRAK EDC software; the development of and fluctuations in the
market for electronic data capture technology; the degree of the Companys
success in obtaining new contracts; the timing of payments from customers and
the timing of clinical trial sponsor decisions to conduct new clinical trials
or cancel or delay ongoing trials; governmental regulation; the early stage of
the Companys ASP operations; 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 3. Quantitative and Qualitative Disclosures About Market Risk

The Company is exposed to market risk from changes in interest rates and
foreign currency exchange rates since it funds its operations through
short-term investments and has business transactions in Euros. A summary of
the Companys market risk exposures is presented below.

Interest Rate Risk

DATATRAK has fixed income investments consisting of cash equivalents and
short-term investments, which may be affected by changes in market interest
rates. The Company does not use derivative financial instruments in its
investment portfolio. The Company places its cash equivalents and short-term
investments 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% change in interest rates during the three
months ended March 31, 2003, would have resulted in a $6,000 change in
DATATRAKs interest income during the quarter.

Foreign Currency Risk

DATATRAKs foreign results of operations are subject to the impact of
foreign currency fluctuations. The Company manages its risk to foreign
currency exchange rates by maintaining foreign currency bank accounts in
currencies in which it regularly transacts business. DATATRAK does not
currently hedge against the risk of exchange rate fluctuations. A 1.0%
fluctuation in the exchange rate between United States dollars and the Euro at
March 31, 2003, would have resulted in a $8,000 change in the foreign currency
translation amount recorded on the Companys balance sheet and had a negligible
effect on its net income.

10



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##### Table of Contents






Item 4. Controls and Procedures

Within 90 days prior to the date of the filing of this report, the
Companys Chief Executive Officer and Chief Financial Officer conducted an
evaluation of the effectiveness of the design and operation of the Companys
disclosure controls and procedures pursuant to Exchange Act Rule 13a-14. Based
upon that evaluation such officers concluded that the Companys disclosure
controls and procedures are effective to ensure that information required to be
disclosed by the Company in the reports it files or submits under the Exchange
Act is recorded, processed, summarized and reported, within the time periods
specified in the Commissions rules and forms.

There have been no significant changes in the Companys internal controls
or in other factors that could significantly affect these controls subsequent
to the date of the evaluation referred to above.




Part II. Other Information



|Item 1. |       | Legal Proceedings                                  
|------- | ----- | ---------------------------------------------------
|       
|        | None. |                                                    
|       
|Item 2. |       | Changes in Securities and Use of Proceeds          
|       
|        | None. |                                                    
|       
|Item 3. |       | Defaults Upon Senior Securities                    
|       
|        | None. |                                                    
|       
|Item 4. |       | Submission of Matters to a Vote of Security Holders
|       
|        | None. |                                                    
|       
|Item 5. |       | Other Information                                  
|       
|        | None. |                                                    






|Item 6. |  | Exhibits and Reports on Form 8-K
|------- |  | --------------------------------



| |  |  | (a)    Exhibits                                                                                                            
| |  |  | ---------------------------------------------------------------------------------------------------------------------------
|
| |  |  | See the Exhibit Index at page
E-1 of this Form 10-Q.                                                                       
|
| |  |  | (b)    Reports on Form 8-K                                                                                                 
|
| |  |  | No reports were filed on form 8-K during the three months ended
March 31, 2002, other than the following:                  
|
| |  |  | Current Report on Form 8-K, dated January 28, 2003, furnishing
under item 9, a press release pursuant to Regulation FD.    
|
| |  |  | Current Report on Form 8-K, dated February 18, 2003, furnishing
under item 9, two press releases pursuant to Regulation FD.
|
| |  |  | Current Report on Form 8-K, dated March 24, 2003, furnishing under
item 9, a press release pursuant to Regulation FD.      

11



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##### Table of Contents






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: |  | 5/15/03 |  | /s/ Jeffrey A. Green
Jeffrey A. Green,
President and Chief Executive Officer
(Principal Executive Officer)                                           
|     
|Date: |  | 5/15/03 |  | /s/ Terry C. BlackTerry C. Black,
Vice President of Finance, Chief Financial Officer,
Treasurer and Assistant Secretary
(Principal Financial Officer)

12



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##### Table of Contents






CERTIFICATIONS

I, Jeffrey A. Green, Chief Executive Officer, DATATRAK International, Inc.,
certify that:



|1. |  | I have reviewed this quarterly
report on Form 10-Q of DATATRAK International, Inc.;                                                                                                                                                                                                                                           
|-- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|  
|2. |  | Based on my knowledge, this quarterly report does not contain any untrue
statement of a material fact or omit to state a material fact necessary to
make the statements made, in light of the circumstances under which such
statements were made, not misleading with respect to the period covered by
this quarterly report;
|  
|3. |  | Based on my knowledge, the financial statements, and other financial
information included in this quarterly report, fairly present in all
material respects the financial condition, results of operations and cash
flows of the registrant as of, and for, the periods presented in this
quarterly report;                   
|  
|4. |  | The registrants other certifying officers and I are responsible for
establishing and maintaining disclosure controls and procedures (as
defined in Exchange Act Rules 13a-14 and 15d-14) for the registrant and we
have:                                                                                                     



| | a) |  | designed such disclosure controls and
procedures to ensure that material information relating to
the registrant, including its consolidated subsidiaries, is
made known to us by others within those entities,
particularly during the period in which this quarterly report
is being prepared;
| | -- |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| | b) |  | evaluated the effectiveness of the registrants
disclosure controls and procedures as of a date within 90
days prior to the filing date of this quarterly report (the
Evaluation Date); and                                                                                                  
|
| | c) |  | presented in this quarterly report our
conclusions about the effectiveness of the disclosure
controls and procedures based on our evaluation as of the
Evaluation Date;                                                                                                                        



|5. |  | The registrants other certifying officers and I have disclosed, based on
our most recent evaluation, to the registrants auditors and the audit
committee of registrants board of directors (or persons performing the
equivalent function):
|-- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | a) |  | all significant deficiencies in the design or
operation of internal controls which could adversely affect
the registrants ability to record, process, summarize and
report financial data and have identified for the
registrants auditors any material weaknesses in internal
controls; and
| | -- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| | b) |  | any fraud, whether or not material, that
involves management or other employees who have a significant
role in the registrants internal controls; and                                                                                                                                        



|6. |  | The registrants other certifying officers and I have indicated in this
quarterly report whether there were significant changes in internal
controls or in other factors that could significantly affect internal
controls subsequent to the date of our most recent evaluation, including
any corrective actions with regard to significant deficiencies and
material weaknesses.
|-- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|      |  |              |  |                                                                            
|----- |  | ------------ |  | ---------------------------------------------------------------------------
|Date: |  | May 15, 2003 |  | /s/ Jeffrey A. GreenJeffrey A. Green,
President and Chief Executive Officer

13



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##### Table of Contents



I, Terry C. Black, Chief Financial Officer, DATATRAK International, Inc.,
certify that:



|1. |  | I have reviewed this quarterly
report on Form 10-Q of DATATRAK International, Inc.;                                                                                                                                                                                                                                           
|-- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|  
|2. |  | Based on my knowledge, this quarterly report does not contain any untrue
statement of a material fact or omit to state a material fact necessary to
make the statements made, in light of the circumstances under which such
statements were made, not misleading with respect to the period covered by
this quarterly report;
|  
|3. |  | Based on my knowledge, the financial statements, and other financial
information included in this quarterly report, fairly present in all
material respects the financial condition, results of operations and cash
flows of the registrant as of, and for, the periods presented in this
quarterly report;                   
|  
|4. |  | The registrants other certifying officers and I are responsible for
establishing and maintaining disclosure controls and procedures (as
defined in Exchange Act Rules 13a-14 and 15d-14) for the registrant and we
have:                                                                                                     



| | a) |  | designed such disclosure controls and
procedures to ensure that material information relating to
the registrant, including its consolidated subsidiaries, is
made known to us by others within those entities,
particularly during the period in which this quarterly report
is being prepared;
| | -- |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| | b) |  | evaluated the effectiveness of the registrants
disclosure controls and procedures as of a date within 90
days prior to the filing date of this quarterly report (the
Evaluation Date); and                                                                                                  
|
| | c) |  | presented in this quarterly report our
conclusions about the effectiveness of the disclosure
controls and procedures based on our evaluation as of the
Evaluation Date;                                                                                                                        



|5. |  | The registrants other certifying officers and I have disclosed, based on
our most recent evaluation, to the registrants auditors and the audit
committee of registrants board of directors (or persons performing the
equivalent function):
|-- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | a) |  | all significant deficiencies in the design or
operation of internal controls which could adversely affect
the registrants ability to record, process, summarize and
report financial data and have identified for the
registrants auditors any material weaknesses in internal
controls; and
| | -- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| | b) |  | any fraud, whether or not material, that
involves management or other employees who have a significant
role in the registrants internal controls; and                                                                                                                                        



|6. |  | The registrants other certifying officers and I have indicated in this
quarterly report whether there were significant changes in internal
controls or in other factors that could significantly affect internal
controls subsequent to the date of our most recent evaluation, including
any corrective actions with regard to significant deficiencies and
material weaknesses.
|-- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|      |  |              |  |                                                                                                                        
|----- |  | ------------ |  | -----------------------------------------------------------------------------------------------------------------------
|Date: |  | May 15, 2003 |  | /s/ Terry C. BlackTerry C. Black,
Vice President of Finance, Chief Financial
Officer, Treasurer and Assistant Secretary

14