Authentidate Holding Corp. Reports Operating Results (10-Q)
Authentidate Holding Corp. has a market cap of $32.1 million; its shares were traded at around $0.84 with and P/S ratio of 4.6. ADAT is in the portfolios of Jim Simons of Renaissance Technologies LLC.
Highlight of Business Operations: Selling general and administrative (SG&A) expenses decreased to $2,297,000 for the quarter ended March 31, 2010, compared to $2,511,000 for the prior year period. The decrease reflects our cost management activities for the period and the timing of audit and related expenses from period to period. SG&A expenses for the nine months ended March 31, 2010 decreased to $7,355,000 compared to $8,284,000 for the prior year reflecting the same trends as the quarter and lower share based compensation expense. The prior year period includes a state payroll tax credit of approximately $326,000 offset by the write off of deferred deal expenses of approximately $900,000 related to the termination of our deal with Parascript.
Product development expenses were $472,000 for the quarter ended March 31, 2010, compared to $380,000 for the prior year period. Product development spending fluctuates period to period based on the amounts capitalized. Total spending for the quarter, including capitalized amounts, was $474,000 compared to $483,000 for the prior year reflecting our cost management activities. Product development expenses for the nine months ended March 31, 2010 were $1,449,000 compared to $1,189,000 for the prior year. Total spending for the period was $1,530,000 compared to $1,633,000 for the prior year reflecting the same trends as the quarter.
Net loss for the quarter ended March 31, 2010 was $2,268,000, or $0.06 per share, compared to $2,095,000, or $0.06 per share, for the prior year period. For the nine months ended March 31, 2010 net loss was $7,200,000, or $0.20 per share, compared to $7,095,000, or $0.21 per share, for the prior year. The net loss for the periods reflects the revenue fluctuations, cost management activities and other matters discussed above.
At March 31, 2010, cash, cash equivalents and marketable securities amounted to approximately $3,076,000 and total assets at that date were $22,643,000. Since June 30, 2009 cash, cash equivalents and marketable securities have decreased by $3,488,000 as we utilized cash principally to fund operating losses, product development activities, joint venture investments, changes in working capital and capital expenditures during the nine month period ended March 31, 2010. Cash used for the period includes investments in joint venture inventory and operations of approximately $1.1 million and $361,000, respectively, and the prepayment of certain insurance premiums and maintenance contracts. We expect to continue to use cash to fund operating losses, product development activities, joint venture investments and capital expenditures for the foreseeable future.
Net cash provided by financing activities for the nine months ended March 31, 2010 was approximately $3,505,000 which was primarily due to the sale of 3,400,000 shares of our common stock and warrants to purchase 3,400,000 shares of our common stock to certain institutional and/or accredited investors in a registered direct offering in December 2009. The purchase price for each share and warrant was $1.00. The warrants were exercisable through March 10, 2010, at an exercise price of $1.00 per share. Gross proceeds from the offering and warrant exercises for 698,986 shares of common stock were approximately $4.1 million and we received approximately $3.5 million in net proceeds, after deducting the placement agents fees and estimated offering expenses. During the quarter ended March 31, 2010 we issued the warrant holders 698,986 shares of common stock and the remainder of the warrants expired on the stated expiration date. In connection with this transaction, we entered into a Placement Agency Agreement with Rodman & Renshaw, LLC and paid them a fee equal to 7.0% of the aggregate gross proceeds raised in connection with the offering, excluding warrant exercises and issued them a warrant to purchase 170,000 shares of common stock at a per share exercise price of $1.25, which warrants will be exercisable for a period of five years from the effective date of the registration statement. The shares of common stock, the warrants and the shares of common stock issuable upon exercise of the warrants were offered and sold pursuant to a base prospectus which is included in the companys shelf registration statement on Form S-3 and the related prospectus supplement filed with the Securities and Exchange Commission on December 9, 2009. In addition, in October 2009, we received approximately $5,000 in connection with the exercise of employee stock options.
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 recent federal government healthcare reforms and industry trends focused on automation and cost reduction. For the three and nine months ended March 31, 2010, the company incurred a net loss of $2,268,000 and $7,200,000, respectively. As of March 31, 2010, cash, cash equivalents and marketable securities were $3,076,000, the company had working capital of $3,996,000, an accumulated deficit of $153,697,000 and total shareholders equity of $16,607,000. These conditions indicate that the company may be unable to continue as a going concern. Based on our business plan, resources available at March 31, 2010 and estimated proceeds from the expected sale of certain assets, management of the company believes that we have sufficient working capital to fund our operations for the next twelve months. However, if the companys cash flows from operations and asset sales are less than expected, the company may need to downsize operations, incur debt or raise additional capital. There can be no assurance, however, that the company will be successful in raising additional capital, or securing financing when needed or on terms satisfactory to the company. If we raise additional funds by selling shares of common stock or convertible securities, the ownership of our existing shareholders will be diluted. Further, if additional funds are raised through the issuance of equity or debt securities, such additional securities may have powers, designations, preferences or rights senior to our currently outstanding securities. 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.
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