Authentidate Holding Corp. Reports Operating Results (10-Q)
Authentidate Holding Corp. has a market cap of $20.3 million; its shares were traded at around $0.44 with and P/S ratio of 3. Hedge Fund Gurus that owns ADAT: Jim Simons of Renaissance Technologies LLC.
Highlight of Business Operations: Product development expenses were $396,000 for the quarter ended December 31, 2010 compared to $470,000 for the prior year period. Product development expenses fluctuate period to period based on the amounts capitalized. Total spending for the quarter, including capitalized amounts, was $396,000 compared to $512,000 for the prior year reflecting our cost management activities. Product development expenses for the six months ended December 31, 2010 were $806,000 compared to $977,000 for the prior year period. Total spending for the period, including capitalized amounts, was $807,000 compared to $1,056,000 for the prior year period reflecting the same trends as the quarter.
Interest and other income was $0 for the quarter ended December 31, 2010 compared to $85,000 for the prior year period due primarily to the sale of non-core assets discussed below. For the six months ended December 31, 2010 interest and other income was $366,000 compared to $179,000 for the prior year period. This increase reflects a gain on the sale of certain non-core assets in July 2010 of approximately $351,000 offset in part by lower interest and rental income for the period as a result of such sale. For the three and six month periods ended December 31, 2009 other expense included a non-cash expense of $533,000 to amortize deferred financing costs related to a standby financing commitment discussed more fully in Note 16 of Notes to Condensed Consolidated Financial Statements which resulted in a net expense for the periods.
Net loss for the quarter ended December 31, 2010 was $7,275,000, or $0.16 per share, compared to $2,819,000, or $0.08 per share, for the prior year period. The net loss for the period reflects higher U.S. revenues and lower expenses from our cost management activities, which were offset by the non-cash goodwill impairment charge discussed above and lower revenues from our German operations. For the six months ended December 31, 2010 net loss was $8,872,000, or $0.22 per share, compared to $4,932,000, or $0.14 per share, for the prior year period. The net loss for the period primarily reflects the same trends as the quarter and the gain on the sale of certain non-core assets discussed above.
Our operations and product development activities have required substantial capital investment to date. Our primary sources of funds have been the issuance of equity and the incurrence of third party debt. In February 2004, we sold 5,360,370 common shares in private placements pursuant to Section 4(2) of the Securities Act of 1933 and Rule 506, promulgated thereunder and received net proceeds of approximately $69,100,000 after payment of offering expenses and broker commissions. The proceeds received from this financing have been used to provide funding for our operations and product development activities. In addition, we completed a $3,400,000 registered direct offering of shares of common stock and warrants in December 2009 and received net proceeds of approximately $3,500,000 from this financing and the related warrant exercises. As described in greater detail in Notes 6 and 19, respectively, of the Notes to Condensed Consolidated Financial Statements in this Quarterly Report on Form 10-Q, in July 2010 we completed the sale of certain non-core assets and received net proceeds of approximately $2,350,000 and on October 13, 2010, the company completed the sale of $5,000,000 of its securities to institutional and accredited investors in a private placement transaction under Section 4(2) of the Securities Act of 1993, as amended, and Rule 506 of Regulation D, promulgated thereunder and received net proceeds of approximately $4,460,000 from this transaction. We are using the proceeds from these transactions for working capital and general corporate purposes, including supporting the rollout of our ExpressMD telehealth products and services.
To date we have been largely dependent on our ability to sell additional shares of our common stock or other securities to obtain financing to fund our operating deficits, product development activities, capital expenditures and joint venture activities. Under our current operating plan to grow our business, our ability to improve operating cash flow has been highly dependent on the market acceptance of our offerings. As mentioned in the Overview Section, we believe that the company will benefit from the federal government healthcare reforms and industry trends focused on automation and cost reduction. For the three and six months ended December 31, 2010, the company incurred a net loss of $7,275,000 and $8,872,000, respectively, including a non-cash goodwill impairment charge of $5,400,000. As of December 31, 2010, cash, cash equivalents and marketable securities were $4,096,000, the company had working capital of $6,214,000, an accumulated deficit of $164,491,000 and total shareholders equity of $7,797,000. These conditions indicate that the company may be unable to continue as a going concern. Based on our business plan and resources available at December 31, 2010, we believe that we have sufficient working capital to fund our operations for the next twelve months. However, no assurances can be given that we will be able to attain sales levels and support our costs through revenues derived from operations. If cash flows from operations, however, are less than expected, we may need to reduce expenses or seek additional capital. There can be no assurance that the company will be successful in raising additional capital, or securing financing if needed or on terms satisfactory to the company. Any inability to obtain required financing on sufficiently favorable terms could have a material adverse effect on our business, results of operations and financial condition.
We entered into the lease agreement for our executive offices on July 11, 2005. The lease was for a term of ten years and four months, with a commencement date of October 1, 2005 and covers approximately 19,700 total rentable square feet. The annual rent in the first year was $324,000 increasing to $512,000 in year 2 and increasing at regular intervals until year 10 when the annual rent was approximately $561,000. Effective February 1, 2010, we amended our lease to reduce the annual rent to approximately $512,000 for the remaining lease term and extended the lease term for one year through January 2017. The lease also provides us with a one-time option to renew the lease for a term of five years at the then-current market rate. As part of the lease agreement, we had posted a letter of credit securing our lease payments which was reduced to approximately $256,000.
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