ADAT » Topics » Liquidity and Capital Resources

This excerpt taken from the ADAT 10-K filed Sep 26, 2008.

Liquidity and Capital Resources

STYLE="margin-top:6px;margin-bottom:0px">Overview

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. We realized gross proceeds of approximately $73,700,000 from these transactions and received net proceeds of approximately $69,100,000 after
payment of offering expenses and broker commissions. We have been using the cash raised in this financing to provide funding for our operations and product development activities since that time.

STYLE="margin-top:12px;margin-bottom:0px; text-indent:4%">Expenditures for equipment and other assets totaled approximately $550,000, software license expenditures totaled approximately $53,000 and capitalized
software development expenditures totaled approximately $804,000 for the year ended June 30, 2008. We have developed and intend to continue to develop new applications to grow our business and address new markets.

STYLE="margin-top:18px;margin-bottom:0px">Cash Flows

At June 30, 2008, cash, cash
equivalents and marketable securities, net of gross unrealized holding loss, amounted to approximately $14,818,000 and total assets at that date were $31,551,000. These amounts have decreased since June 30, 2007 by $16,813,000 and $17,153,000,
respectively, as we utilized cash principally to fund operating losses, product development activities, changes in working capital and capital expenditures for corporate infrastructure during the year ended June 30, 2008. Cash used for the
period also includes expenditures of approximately $3,485,000 for incremental legal expenses and settlements, $532,000 for board projects and $1,094,000 for payment of accrued severance obligations. We expect to continue to use cash to fund
operating losses, product development activities and capital expenditures for the foreseeable future.

Net cash used by operating
activities for the year ended June 30, 2008 was $14,903,000 compared to $14,852,000 for 2007. This increase is due primarily to the legal and severance expenditures discussed above which offset savings from expense and working capital
management activities during fiscal 2008.

Net cash used by investing activities, excluding purchases and sales of marketable securities,
was $1,398,000 for the year ended June 30, 2008, compared to $2,303,000 for 2007. This decrease relates primarily to the amount of product development spending capitalized in 2008 and lower expenditures for software licenses in 2008.

Cash flows from financing activities for the year ended June 30, 2008 and 2007 were not significant.

STYLE="margin-top:12px;margin-bottom:0px; text-indent:4%">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 and capital

 


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expenditures. 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 discussed more fully in Note 1 of Notes to the Consolidated Financial Statements our marketable securities
consist of AAA rated auction rate securities in government insured student loan issues. These investments have become less liquid then they were in the past as a result of credit market conditions. At June 30, 2008, we had approximately $10.8
million at par value invested in such securities. Although recent legal and regulatory actions have caused some improvements in these markets, we have recorded a gross unrealized holding loss of approximately $500,000 on a portion of these
investments as of June 30, 2008.

We expect to fund the merger transaction discussed in the Overview section with available cash,
long-term seller financing, New Authentidate common stock and the stock of our wholly-owned subsidiary Authentidate International AG. The combined company’s primary future recurring cash needs will be working capital, capital expenditures and
debt service. Although we will use substantially all of our available cash and marketable securities to complete the transaction, we believe that cash flows from combined company operations and available cash and borrowings of the combined company
will be sufficient to meet the combined company’s recurring cash needs for at least the next twelve months. There can be no assurance, however, that this will be the case. If the combined company’s cash flows from operations are less than
expected, Authentidate may need to incur additional debt or raise additional capital.

If we do not complete the subject transaction, we
believe we have enough cash, cash equivalents and marketable securities to support our operations for at least the next twelve months.

Our
future capital requirements (including the transactions post closing) may vary materially from those now planned. The amount of capital that we will need in the future will depend on many factors, including:

STYLE="font-size:6px;margin-top:0px;margin-bottom:0px"> 







  

our relationships with suppliers and customers;

 







  

the market acceptance of our software and services;

 







  

the levels of promotion and advertising that will be required to launch our new offerings and achieve and maintain a competitive position in the marketplace;

 







  

price discounts on our software and services to our customers;

 







  

our pursuit of strategic transactions;

 







  

our business, product, capital expenditure and research and development plans and product and technology roadmaps;

STYLE="font-size:6px;margin-top:0px;margin-bottom:0px"> 







  

the level of accounts receivable that we maintain;

 







  

capital improvements to new and existing facilities;

 







  

technological advances; and

 







  

our competitors’ response to our offerings.

SIZE="2">Financing Activities

We have not engaged in any external financing activities in fiscal 2008 and 2007.


This excerpt taken from the ADAT 10-Q filed Nov 9, 2005.

Liquidity and Capital Resources

Overview

Our primary sources of funds to date have been the issuance of equity and the incurrence of third party debt. The principal balance of long-term debt at September 30, 2005 totaled $18,000, which relates to a note payable to the Empire State Development Corporation for the repayment of a grant.

In February 2004, we sold a total of 5,360,370 common shares in private placements pursuant to Section 4(2) of the Securities Act and Rule 506, promulgated there. We realized gross proceeds of approximately $73,700,000 from these transactions and received net proceeds of approximately $69,100,000 after payment of offering expenses and broker commissions.

Our DJS subsidiary has a $2.5 million revolving line of credit with a financial institution collateralized by all assets of DJS and guaranteed by Authentidate Holding Corp. The agreement restricts DJS from making cash advances to AHC, without obtaining a waiver from the financial institution. The interest rate is prime plus 1.75% with a minimum prime rate of 7%. DJS may borrow on this line based on a formula of qualified accounts receivable and inventory. The outstanding balance on this line of credit is $488,730 at September 30, 2005.

Property, plant and equipment expenditures totaled $172,765 and capitalized software development expenditures totaled $608,262 for the three months ended September 30, 2005, respectively. There are no significant purchase commitments outstanding.

This excerpt taken from the ADAT 10-Q filed May 16, 2005.

Liquidity and Capital Resources

Overview

Our primary sources of funds to date have been the issuance of equity and the incurrence of third party debt. The principal balance of long-term debt at March 31, 2005 totaled $78,000, which relates to a note payable to the Empire State Development Corporation for the repayment of a grant, as more fully described below

In February 2004, we sold a total of 5,360,370 common shares in private placements pursuant to Section 4(2) of the Securities Act and Rule 506, promulgated thereunder. We realized gross proceeds of approximately $73,700,000 from these transactions and received net proceeds of approximately $69,100,000 after payment of offering expenses and broker commissions

Our DJS subsidiary has a $2.5 million revolving line of credit with a financial institution collateralized by all assets of DJS and guaranteed by Authentidate Holding Corp. The agreement restricts DJS from making cash advances to AHC, without obtaining a waiver from the financial institution. The interest rate is prime plus 1.75% with a minimum prime rate of 7%. DJS may borrow on this line based on a formula of qualified accounts receivable and inventory. The outstanding balance on this line of credit is $420,696 at March 31, 2005.

Property, plant and equipment expenditures totaled $865,207 and capitalized software development expenditures totaled $434,209 for the nine months ended March 31, 2005, respectively. There are no significant purchase commitments outstanding.

In June 1999, the Company completed construction of a new office and production facility in Schenectady, New York for approximately $2,300,000 which was financed with a $1,000,000 grant from the Empire State Development Corporation (ESDC) (an agency of New York state) and a mortgage loan from a local financial institution. The grant stipulated that the Company was obligated to achieve certain annual employment levels between January 1, 2002 and January 1, 2004 or some or all of the grant will have to be repaid. Although we did not achieved the agreed upon employment levels, we reached an agreement with the ESDC in fiscal 2004 to restructure the grant terms relating to this covenant. We agreed to repay $268,000 of the grant amount at the rate of $10,000 per month, interest free, in consideration of the ESDC’s agreement to permanently reduce our employment level requirement to 99. At March 31, 2005 the amount due ESDC was $78,000 and is included in debt on the balance sheet. As a result of this arrangement, we recorded $732,000 as other income in the Corporate Division during fiscal year ended June 30, 2004.

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This excerpt taken from the ADAT 10-Q filed Feb 9, 2005.

Liquidity and Capital Resources

Overview

Our primary sources of funds to date have been the issuance of equity and the incurrence of third party debt. The principal balance of long-term debt at December 31, 2004 totaled $108,000, which relates to a note payable to the Empire State Development Corporation for the repayment of a grant, as more fully described below. Other long term liabilities relate to severance accruals.

In February 2004, we sold a total of 5,360,370 common shares in private placements pursuant to Section 4(2) of the Securities Act and Rule 506, promulgated thereunder. We realized gross proceeds of approximately $73,700,000 from these transactions and received net proceeds of approximately $69,100,000 after payment of offering expenses and broker commissions.

Our DJS subsidiary has a $2.5 million revolving line of credit with a financial institution collateralized by all assets of DJS and guaranteed by Authentidate Holding Corp. The agreement restricts DJS from making cash advances to AHC, without obtaining a waiver from the financial institution. The interest rate is prime plus 1.75% with a minimum prime rate of 7%. DJS may borrow on this line based on a formula of qualified accounts receivable and inventory. The outstanding balance on this line of credit is $407,696 at December 31, 2004.

Property, plant and equipment expenditures totaled $510,729 and capitalized software development expenditures totaled $161,451 for the six months ended December 31, 2004, respectively. There are no significant purchase commitments outstanding.

In June 1999, the Company completed construction of a new office and production facility in Schenectady, New York for approximately $2,300,000 which was financed with a $1,000,000 grant from the Empire State Development Corporation (ESDC) (an agency of New York state) and a mortgage loan from a local financial institution. The grant stipulated that the Company was obligated to achieve certain annual employment levels between January 1, 2002 and January 1, 2004 or some or all of the grant will have to be repaid. Although we had not achieved the agreed upon employment levels, we reached an agreement with the ESDC in fiscal 2004 to restructure the grant terms relating to this covenant. We agreed to repay $268,000 of the grant amount at the rate of $10,000 per month, interest free, in consideration of the ESDC’s agreement to permanently reduce our employment level requirement to 99. At December 31, 2004 the amount due ESDC was $108,000 and is included in debt on the balance sheet. As a result of this arrangement, we recorded $732,000 as other income in the Corporate Division during fiscal year ended June 30, 2004.

 

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