10-Q

UNITED STATES SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark One)

x QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended March 31, 2017

¨ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from ______ to _______

Commission File Number: 000-20190

AUTHENTIDATE HOLDING CORP.

(Exact name of registrant as specified in its charter)

Delaware	14-1673067
(State or other jurisdiction	( I.R.S. Employer
of incorporation or organization)	Identification No.)
2225 Centennial Drive	30504
Gainesville, GA 30504	(zip code)
(Address of principal executive offices)

1-888-661-0225

(Registrant’s telephone number, including area code)

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. Yes ¨ No x

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate website, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes x No ¨

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer ¨	Accelerated filer ¨
Non-accelerated filer ¨ (Do not check if a smaller reporting company)	Smaller reporting company x
	Emerging growth company ¨

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.  ¨

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ¨ No x

As of July 20, 2017 there were 7,249,370 shares of common stock, $0.001 par value per share, outstanding.

		Page
	PART I FINANCIAL INFORMATION
ITEM 1.	FINANCIAL STATEMENTS
	Condensed Consolidated Balance Sheets (unaudited)	2
	Condensed Consolidated Statements of Income (unaudited)	3
	Condensed Consolidated Statements of Shareholders’ Equity (unaudited)	4
	Condensed Consolidated Statements of Cash Flows (unaudited)	5
	Notes to Unaudited Condensed Consolidated Financial Statements (unaudited)	6
ITEM 2.	MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS	25
ITEM 3.	QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK	33
ITEM 4.	CONTROLS AND PROCEDURES	34
PART II OTHER INFORMATION
ITEM 1.	LEGAL PROCEEDINGS	35
ITEM 1A.	RISK FACTORS	35
ITEM 2.	UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS	38
ITEM 3.	DEFAULTS UPON SENIOR SECURITIES	38
ITEM 4.	MINE SAFETY DISCLOSURES	38
ITEM 5.	OTHER INFORMATION	38
ITEM 6.	EXHIBITS	38
SIGNATURES

1

PART I - FINANCIAL INFORMATION

ITEM 1.    FINANCIAL STATEMENTS.

AUTHENTIDATE HOLDING CORP. AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS

	March 31,			June 30,
	2017			2016
	(Unaudited)
Assets
Current assets
Cash and cash equivalents	$	1,155,273		$	1,414,706
Restricted cash		120,695			120,695
Accounts receivable, net		1,731,859			2,142,514
Inventory, net		46,861			337,907
Prepaid expenses and other current assets		124,933			170,944
Total current assets		3,179,621			4,186,766
Property and equipment, net		2,581,287			3,476,670
Other assets
Intangibles		1,909,733			2,188,682
Security deposits		10,211			10,211
Deferred tax asset		38,493,000			38,493,000
Goodwill		3,318,000			3,318,000
Total assets	$	49,491,852		$	51,673,329
Liabilities and Shareholders' Equity
Current liabilities
Accounts payable	$	2,874,281		$	4,329,187
Accrued expenses		956,807			1,751,234
Accrued commissions		1,288,609			1,106,555
Accrued dividends		557,726			402,000
Notes payable		2,545,197			2,977,811
Derivative liabilities		987,015			1,051,000
Total current liabilities		9,209,635			11,617,787
Deferred Rent		123,008			114,379
Total liabilities		9,332,643			11,732,166
Commitments and contingencies
Shareholders’ equity
Preferred stock, $.10 par value; 5,000,000 shares authorized, Series B, 0 and 28,000 shares,Series D, 605,000 shares and Series E 25,000 and 0 shares issued and outstanding at March 31, 2017, and June 30, 2016 , respectively		63,000			- 63,300
Common stock, $.001 par value; 190,000,000 shares authorized,7,168,384  and 5,772,258 shares  issued and outstanding on March 31, 2017, and June 30, 2016 , respectively		7,168			5,772
Additional paid-in capital		44,024,631			38,316,376
(Accumulated deficit) retained earnings		(3,935,590	)		1,555,715
Total shareholders’ equity		40,159,209			39,941,163
Total liabilities and shareholders’ equity	$	49,491,852		$	51,673,329

The accompanying notes are an integral part of the condensed consolidated financial statements.

2

AUTHENTIDATE HOLDING CORP. AND SUBSIDIARIES CONDENSED

CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED)

	Three Months Ended March 31,						Nine Months Ended March 31,
	2017			2016			2017			2016
Net revenues
Fees for services	$	5,212,634		$	5,244,059		$	15,469,366		$	27,841,500
Hosted software services		314,812			249,104			973,417			249,104
Telehealth products and services		4,364			10,105			25,916			10,105
Total net revenues		5,531,810			5,503,268			16,468,699			28,100,709
Operating expenses
Cost of revenues		908,290			2,266,891			3,203,504			5,333,436
Write-down of inventory		-			-			237,674			-
Selling, general and administrative		3,388,403			4,098,396			11,264,267			14,091,897
Depreciation and amortization		393,510			400,110			1,196,435			876,112
Total operating expenses		4,690,203			6,765,397			15,901,880			20,301,445
Operating income (loss)		841,607			(1,262,129	)		566,819			7,799,264
Other (expenses) income
Interest		(73,017	)		(93,734	)		(443,785	)		(93,734	)
Change in fair value of derivative liabilities		256,806			(340,000	)		392,407			(340,000	)
Loss on extinguishment of debt		(258,037	)		-			(258,037	)
Other		-			(25,710	)		-			(16,618	)
		(74,248	)		(459,444	)		(309,415	)		(450,352	)
Income (loss) before provision for income taxes		767,359			(1,721,573	)		257,404			7,348,912
Provision for income taxes		-			(1,017,600	)		-			(1,009,940	)
Net income (loss)	$	767,359		$	(2,739,173	)	$	257,404		$	6,338,972
Less: preferred dividends	$	(74,863	)	$	(67,082	)	$	(276,111	)	$	(67,082	)
Net income (loss) available to common shareholders	$	692,496		$	(2,806,255	)	$	(18,707	)	$	6,271,890
Earnings (loss) per share
Basic earnings (loss) per common share	$	0.10		$	(0.65	)	$	(0.00	)	$	3.04
Diluted earnings (loss) per common share	$	0.04		$	(0.65	)	$	(0.00	)	$	2.44
Weighted average number of common shares outstanding
Basic		7,168,329			4,327,990			6,312,344			2,064,951
Diluted		8,765,657			4,327,990			6,312,344			2,694,990

The accompanying notes are an integral part of the condensed consolidated financial statements.

3

AUTHENTIDATE HOLDING CORP. AND SUBSIDIARIES CONDENSED

CONSOLIDATED STATEMENT OF SHAREHOLDERS’ EQUITY (UNAUDITED)

											Additional		Retained Earnings			Total
	Number of			Preferred			Number of		Common		Paid-in		(Accumulated			Shareholders’
	Shares			Stock			Shares		Stock		Capital		Deficit)			Equity
Balance, June 30, 2016		633,000		$	63,300			5,772,258	$	5,772	$	38,316,376	$	1,555,715		$	39,941,163
Share-based compensation expense												186,753					186,753
Common dividends for earn-out								1,396,071		1,396		5,471,202		(5,472,598	)		-
Preferred dividends																	-
Series E Preferred dividend accrual														(276,111	)		(276,111	)
Conversion of Preferred Series B to Series E		(3,000	)		(300	)						50,300					50,000
Net income														257,404			257,404
Balance, March 31, 2017		630,000		$	63,000			7,168,329	$	7,168	$	44,024,631	$	(3,935,590	)	$	40,159,209

The accompanying notes are an integral part of the condensed consolidated financial statements.

4

AUTHENTIDATE HOLDING CORP. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

	Nine Months Ended
	March 31,
	(Unaudited)
	2017			2016
Cash Flow from operating activities
Net income	$	257,404		$	6,338,972
Adjustments to reconcile net income to net cash provided by operating activities
Change in fair value of derivative liabilities		(392,407	)		340,000
Loss on debt extinguishment		258,037			-
Bad debt expense		-			109,358
Depreciation and amortization		1,196,435			876,112
Deferred taxes		-			1,010,000
Share based compensation		186,753			1,476,000
Write-off of inventory		237,674			-
Changes in assets and liabilities
Accounts receivable		410,655			(2,371,274	)
Inventory		53,372			74,880
Prepaid expenses and other current assets		46,011			59,528
Accounts payable and other liabilities		(1,454,907	)		(314,738	)
Accrued expenses		(419,229	)		-
Accrued commissions		182,054			150,260
Deferred rent		8,629			57,049
Net cash provided by operating activities		570,481			7,806,147
Cash flows from investing activities
Purchases of property and equipment		(22,103	)		(1,136,196	)
Collections from notes receivable		-			50,000
Net cash used in investing activities		(22,103	)		(1,086,196	)
Cash flows from financing activities
Proceeds from note payable - related party		250,000			(8,947,023	)
Repayments of notes payable		(1,057,811	)		(200,000	)
Net cash used in financing activities		(807,811	)		(9,147,023	)
Net decrease in cash		(259,433	)		(2,427,072	)
Cash beginning of period		1,414,706			5,190,540
Cash end of period	$	1,155,273		$	2,763,468
Supplemental disclosure of cash paid for:
Interest paid	$	-		$	94,000
Income taxes paid	$	-		$	8,000
Non-cash investing and financing activities
Non-cash preferred dividends	$	276,111		$	67,082
Earn-out common dividends paid in stock	$	5,472,598		$	-
Conversion of accrued interest to notes payable	$	375,199		$	-
Derivative liability resulting from issuance of convertible notes	$	328,422		$	-

The accompanying notes are an integral part of the condensed consolidated financial statements

5

AUTHENTIDATE HOLDING CORP AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements (Unaudited)

1. Description of Business, Reverse Merger and Liquidity

Business

Authentidate Holding Corp. (“AHC”) and its subsidiaries primarily provides an array of clinical testing services to health care professionals through its wholly owned subsidiary, Peachstate Health Management, LLC d/b/a AEON Clinical Laboratories (“AEON”). AHC also continues to provide its legacy secure web-based revenue cycle management applications and telehealth products and services that enable healthcare clinical testing, organizations to increase revenues, improve productivity, reduce costs, coordinate care for patients and enhance related administrative and clinical workflows and compliance with regulatory requirements. Web-based services are delivered as Software as a Service (SaaS) to our customers interfacing seamlessly with billing, information and records management systems.

Reverse Merger

On January 27, 2016, AEON merged into a newly formed acquisition subsidiary of AHC pursuant to a definitive Amended and Restated Agreement and Plan of Merger dated January 26, 2016, as amended on May 31, 2016 and December 15, 2016 (collectively the “Merger Agreement”) (the “AEON Acquisition”). The merger certificate was filed with the Secretary of State of Georgia on January 27, 2016. AEON survived the merger as a wholly-owned subsidiary of AHC (collectively the “Company”). AEON markets to health care professionals to provide urine and oral fluid testing to patients. The four primary tests provided by AEON are Medical Toxicology, Pharmacogenomics, Cancer Genetic Testing and Molecular Microbiology. Following the completion of the reverse merger, the business conducted by AEON became primarily the business conducted by the Company.

Under accounting principles generally accepted in the United States of America (“U.S. GAAP”), the merger is treated as a “reverse merger” under the purchase method of accounting (see Note 3). The condensed consolidated financial statements reflect the historical results of AEON prior to the completion of the reverse merger since it was determined to be the accounting acquirer, and do not include historical results of AHC prior to the completion of the merger.

Going Concern

The Company’s capital requirements have been and will continue to be significant and it is expending significant amounts of capital to develop, promote and market its services. The Company’s available cash and cash equivalents as of March 31, 2017 totaled approximately $1,155,000 and the Company’s working capital deficit was approximately $6,030,000. At March 31, 2017, our current monthly operational requirement is approximately $1,300,000.

As of the filing date of this Quarterly Report on Form 10-Q, and after giving effect to the recent note exchange transaction described in Note 8 to these financial statements, there is outstanding an aggregate principal amount of $2,545,199 of senior secured convertible notes with a maturity date of March 20, 2018 and a secured note subordinated to the interests of the existing senior lenders in the principal amount of $330,000 with a maturity date of June 15, 2018. The Company expects its existing resources, revenues generated from operations, and proceeds received from other transactions being considered (of which there can be no assurance) will be sufficient to satisfy our working capital requirements for at least the next twelve months; however, no assurances can be given that we will be able to generate sufficient cash flow from operations or complete other transactions to satisfy our other obligations. These factors, among others, raise substantial doubt about our ability to continue as a going concern. The accompanying consolidated financial statements do not include any adjustments to the recoverability and classifications of liabilities that might result from the outcome of these uncertainties. If necessary, management of the Company believes that it can reduce operating expenses and/or raise additional debt financing to satisfy its working capital requirements. However, no assurances can be given that the Company will be able to support its costs or pay debt obligations through revenues derived from operations or generate sufficient cash flow to satisfy its obligations.

2. Summary of Significant Accounting Policies

Basis of Presentation

The Company’s condensed consolidated financial statements have been prepared in accordance with U.S. GAAP and following the requirements of the Securities and Exchange Commission (“SEC”) for interim reporting. As permitted under those rules, certain footnotes or other financial information that are normally required by U.S. GAAP can be condensed or omitted. These interim financial statements have been prepared on the same basis as the Company’s annual financial statements and, in the opinion of management, reflect all adjustments, consisting only of normal recurring adjustments, which are necessary for a fair statement of the Company’s financial information. These interim results are not necessarily indicative of the results to be expected for the year ending June 30, 2017 or any other interim period or for any other future year.

6

AUTHENTIDATE HOLDING CORP AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements (Unaudited)

The balance sheet as of June 30, 2016 has been derived from audited financial statements at that date but does not include all of the information required by U.S. GAAP for complete financial statements.

These condensed consolidated financial statements should be read in conjunction with the annual consolidated financial statements and notes thereto included in the Company’s Form 10-K for the fiscal year ended June 30, 2016 and the corresponding Management’s Discussion and Analysis of Financial Condition and Results of Operations.

Principles of Consolidation

The consolidated financial statements include the accounts of the Company and its wholly-owned subsidiaries. Intercompany accounts and transactions have been eliminated in consolidation.

Use of Estimates

The preparation of consolidated financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the consolidated financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.

The most sensitive accounting estimates affecting the financial statements are revenue recognition, the allowance for doubtful accounts, depreciation of long-lived assets, fair value of intangible assets and goodwill, amortization of intangible assets, income taxes and associated deferrals and valuation allowances, and commitments and contingencies.

Cash and Cash Equivalents

Cash and cash equivalents include all cash balances and highly liquid investments with maturities of three months or less.

Accounts receivable

Accounts receivable represent customer obligations due under normal trade terms, net of allowance for doubtful accounts. The allowance for doubtful accounts reflects our best estimate of probable losses inherent in the accounts receivable balance. We determine the allowance based on known troubled accounts, historical experience and other currently available evidence. The allowance for doubtful accounts was approximately $543,000 and $769,000 as of March 31, 2017 and June 30, 2016, respectively.

Inventory

Inventory amounts are stated at the lower of cost or market using the first-in, first-out basis.

Intangible Assets

Intangible assets consist primarily of trademarks and acquired technologies. The Company acquired approximately $2,344,000 of intangible assets in conjunction with the reverse merger discussed in Note 1 and Note 3. Intangible assets with finite lives are amortized on a straight-line basis over their useful lives.

Goodwill

Goodwill is not amortized, but is assessed annually for impairment. The Company evaluates the carrying value of goodwill on an annual basis and between annual evaluations if events occur or circumstances change that would more likely than not reduce the fair value of goodwill below its carrying amount. When assessing whether goodwill is impaired, management considers first a qualitative approach to evaluate whether it is more likely than not the fair value of the goodwill is below its carrying amount; if so, management considers a quantitative approach by analyzing changes in performance and market based metrics as compared to those used at the time of the initial acquisition. For the periods presented, no impairment charges were recognized.

Revenue Recognition

The Company provides laboratory testing services, web-based hosted software services, telehealth products and post contract customer support services.

7

AUTHENTIDATE HOLDING CORP AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements (Unaudited)

Billings for laboratory testing services are reimbursed by third-party payers net of allowances for differences between amounts billed and the cash receipts from such payers. In accordance with Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) ASC-605 “Revenue Recognition”, the Company recognizes revenues when there is a persuasive evidence of an arrangement, title and risk of loss have passed, product is shipped or services have been rendered, sales price is fixed or determinable and collection of the related receivable is reasonably assured.

Historically, the Company had recognized revenue for these services upon cash receipt because the criteria to recognize revenues under ASC-605 had not been met at the time test results were delivered since the fee was not fixed and determinable until the third payer remitted payment given the limited experience and history to develop a reliable estimate of the provision for contractual adjustments (that is, the difference between established rates and expected third-party payments) and discounts (that is, the difference between established rates and the amount billable). The Company has continuously reassessed its ability to develop reliable estimates of the provision for contractual adjustments and discounts and over the past year and has made investments in its systems and process around its billing system to improve the quality of information generated by the system. Given these ongoing investments and improvements and based upon the financial framework the Company uses for estimating the provision for contractual adjustments and discounts, in the second quarter of 2016, the Company concluded that it was able to reasonably estimate its provision for contractual adjustments and discounts and began recognizing revenue at the time test results are delivered, net of estimated contractual allowances.

Revenue for hosted software services, telehealth products, and customer support services are recognized when persuasive evidence of an arrangement exists, delivery has occurred, the selling price is fixed and collectability is reasonably assured. Multiple-element arrangements are assessed to determine whether they can be separated into more than one unit of accounting. A multiple-element arrangement is separated into more than one unit of accounting if all of the following criteria are met: the delivered item has value to the customer on a standalone basis; there is objective and reliable evidence of the fair value of the undelivered items in the arrangement; if the arrangement includes a general right of return relative to the delivered items, and delivery or performance of the undelivered item is considered probable and substantially in our control. If these criteria are not met, then revenue is deferred until such criteria are met or until the period over which the last undelivered element is delivered, which is typically the life of the contract agreement. If these criteria are met, we allocate total revenue among the elements based on the sales price of each element when sold separately which is referred to as vendor specific objective evidence or VSOE.

Concentrations of Credit Risk

The Company maintains its cash in bank deposit accounts which, at times, may exceed federally insured limits. Accounts are guaranteed by the Federal Deposit Insurance Corporation (FDIC) up to certain limits. At March 31, 2017 and June 30, 2016, the Company had approximately $948,000 and approximately $1,165,000, respectively, in excess of FDIC-insured limits. The Company has not experienced any losses in such accounts.

Income Taxes

The Company accounts for income taxes under an asset and liability approach that requires the recognition of deferred tax assets and liabilities for the expected future tax consequences of events that have been recognized in the Company’s financial statements or tax returns. In estimating future tax consequences, the Company generally considers all expected future events other than enactments of changes in tax laws or rates. The effect on deferred tax assets and liabilities of a change in tax rates will be recognized as income or expense in the period that includes the enactment date. A valuation allowance is established when necessary to reduce deferred tax assets to the amount expected to be realized.

Prior to the reverse merger, AEON elected to be taxed as an S Corporation for federal and certain state income tax purposes. Under this election substantially all of the profits, losses, credits and deductions of the Company are passed through to the individual shareholders. Therefore prior to the reverse merger no provision or liability for income taxes has been included in these consolidated financial statements except for state and localities where the S Corporation status has not been recognized.

Prior to the reverse merger, AHC tax benefits were fully offset by a valuation allowance due to the uncertainty that the deferred tax assets would be realized. As a result of the reverse merger a deferred tax asset was recorded since it was determined the realization of some of these assets is more likely than not, due to consolidated earnings resulting in the expected usage of net operating loss carryforwards.

Under income tax regulations in the United States AHC is the acquirer of AEON. As such the Company must file a consolidated return for both AHC and AEON for the year ending June 30, 2017.

Management considers the likelihood of changes by taxing authorities in its filed income tax returns and recognizes a liability for or discloses potential changes that management believes are more likely than not to occur upon examination by tax authorities. Management has not identified any uncertain tax positions in filed income tax returns that require recognition or disclosure in the accompanying consolidated financial statements.

8

AUTHENTIDATE HOLDING CORP AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements (Unaudited)

The Company’s policy is to include penalties and interest expense related to income taxes as a component of other expense and interest expense, respectively, as necessary.

Recent Accounting Pronouncements

In May 2014, the FASB issued Accounting Standards Update (“ASU”) 2014-09, “Revenues from Contracts with Customers” (Topic 606), which affects any entity that either enters into contracts with customers to transfer goods or services or enters into contracts for the transfer for nonfinancial assets, unless those contracts are within the scope of other standards. Under ASU 2014-09, an entity should recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. The ASU must be applied for annual periods beginning after December 15, 2017, with early application permitted for annual reporting periods beginning after December 15, 2016. The Company is evaluating the impact on the consolidated financial statements of adopting the guidance in ASU 2014-09 at year-end and does not expect adoption to have a material effect on its consolidated financial statements and disclosures.

In August 2014, the FASB issued ASU No. 2014-15, “Disclosure of Uncertainties about an Entity’s Ability to Continue as a Going Concern”. The amendments in this update state that in connection with preparing financial statements for each annual and interim reporting period, an entity’s management should evaluate whether there are conditions or events that raise substantial doubt about the entity’s ability to continue as a going concern within one year after the date that the financial statements are issued (or within one year after the date that the financial statements are available to be issued, when applicable). The amendments in this update are effective for the annual reporting period beginning after December 15, 2016 and for annual periods and interim periods thereafter. Early application is permitted. The adoption of this update is not expected to have a material impact on our consolidated financial statements.

In July 2015, the FASB issued Accounting Standards Update (“ASU”) 2015-11, “Inventory (Topic 330): Simplifying the Measurement of Inventory”. ASU 2015-11 requires inventory measured using any method other than last-in, first-out (“LIFO”) or the retail inventory method to be subsequently measured at the lower of cost or net realizable value, rather than at the lower of cost or market. Under this ASU, subsequent measurement of inventory using the LIFO and retail inventory method is unchanged. ASU 2015-11 is effective prospectively for fiscal years, and for interim periods within those years, beginning after December 15, 2016. The Company will recognize its inventory at the lower of cost or net realizable value upon adoption.

In November 2015, the FASB issued a new accounting standard that requires that the deferred tax liabilities and assets be classified as noncurrent on the consolidated balance sheet. The standard will be effective for the Company beginning July 1, 2017, with early adoption permitted. The adoption of this standard is not expected to have a material impact on the consolidated financial statements.

In February 2016, the FASB issued ASU No. 2016-2, “Leases,” which establish a right-of-use (ROU) model that requires a lessee to record and ROU asset and lease liability on the balance sheet for all leases with terms longer than 12 months. Leases will be classified as either finance or operating, with classifications affecting the pattern of expense recognition in the income statement. This ASU is effective for fiscal years beginning after December 15, 2018, including interim periods within those fiscal years. Early adoption is permitted. ASU 2016-02 requires modified retrospective adoption for all leases existing at, or entered into after, the date of initial application, with an option to use certain transition relief. We are currently evaluating the effect of adoption of this ASU.

In May 2016, the FASB issued ASU No. 2016-12, “Revenue from Contract with Customers (Topic 606): Narrow-Scope Improvements and Practical Expedients”, which clarifies certain issues identified by the FASB-International Accounting Standards Board Joint Transition Resource Group for Revenue Recognition (TRG) on assessing collectability, presentation of sales taxes and other taxes collected from customers, noncash consideration, completed contracts and contract modifications. We are currently evaluating the effect of adoption of this ASU and will report on its effect on the Company when available.

In June 2016, the FASB issued ASU No. 2016-13, “Financial Instruments-Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments”, which requires measurement and recognition of expected credit losses for financial assets held. The amendments in this update are effective for annual periods beginning after December 15, 2019, and interim periods within such annual period. Early adoption is permitted for fiscal years beginning after December 15, 2018, including interim periods within such year. The Company is currently evaluating the potential impacts of adopting the provisions of ASU No. 2016-13.

In August 2016, the FASB issued ASU No. 2016-15, “Statement of Cash Flows (topic 230): Classification of Certain Cash Receipts and Cash Payments”, which clarifies diversity in practice how the following are presented and classified in the statement of cash flows:

· Debt Prepayment of Debt Extinguishment Costs

· Settlement of Zero-Coupon Debt Instruments or Other Debt Instruments with Coupon Interest Rates That Are Insignificant in Relation to the Effective Interest Rate of the Borrowing

· Contingent Consideration Payments Made after a Business Combination

9

AUTHENTIDATE HOLDING CORP AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements (Unaudited)

· Proceeds from the Settlement of Corporate-Owned Life Insurance Policies

· Distributions Received from Equity Method Investees

· Beneficial Interests in Securitization Transactions

· Separately Identifiable Cash Flows and Application of the Predominance Principle.

This standard is effective beginning with our fiscal year ending June 30, 2018. We are currently evaluating the effect of adoption of this ASU and will report on its effect on the Company when available.

In January 2017, the FASB issued ASU 2017-04, Intangibles – Goodwill and other (Topic 350): Simplifying the Test for Goodwill Impairment (“ASU 2017-04”), which simplifies how an entity is required to test goodwill for impairment by eliminating Step 2 from the goodwill impairment test. Under ASU 2014-04 goodwill impairment will be tested by comparing the fair value of a reporting unit with its carrying amount, and recognizing an impairment charge for the amount by which the carrying amount exceeds the reporting unit’s fair value. The new guidance must be applied on a prospective basis and is effective for periods beginning after December 15, 2019, with early adoption permitted. We are currently evaluating the effect of adoption of this ASU and do believe the effect will be material on our financial statements.

3. Reverse Merger

On January 27, 2016, AHC completed the reverse merger with AEON, an expanding clinical laboratory based in Gainesville, GA. The transaction was structured as a tax-free exchange, with the former AEON members receiving shares of common stock of AHC at the closing, and potential further issuances of common stock tied primarily to the earnings of AEON during the five calendar years ending December 2019. The AEON members received an aggregate of 19.9% (958,030 shares) of the common stock of AHC effective at the closing and will receive an additional 5% (240,711 shares) of the outstanding common stock of the Company, as defined, upon approval of the merger transaction by the shareholders of the Company. On July 11, 2016, the shareholders of the Company approved the issuance of shares of common stock in connection with earn-out payments that may be payable pursuant to the Merger Agreement, and these shares were issued in December 2016. The AEON members can also earn additional shares of common stock to increase their aggregate holdings to up to 90% of the outstanding stock of AHC, as defined, based upon meeting the benchmark targets in the merger agreement, including delivering $16,000,000 in EBITDA for the calendar year ended 2015 which was achieved (1,155,414 shares approved and issued in December 2016), and $100,000,000 in aggregate EBITDA for the calendar years 2016 through 2019. Solely for accounting purposes, the additional shares issued to the former AEON members will be treated as dividends. In connection with the completion of the merger, Hanif A. (“Sonny”) Roshan, founder of AEON, became Chairman of the Company and subsequently became CEO of the Company on August 7, 2016, and Richard Hersperger, the CEO of AEON, became CEO of the Company at closing through August 7, 2016. Both Messrs. Roshan and Hersperger currently hold seats on the Board of Directors. The former AEON members will have the right to elect one director for each 10% of the outstanding shares of the Company’s common stock they hold as a group. Accordingly, the transaction was accounted for as a reverse acquisition under the provisions of ASC 805-40 Business Combinations – Reverse Acquisitions, with AEON becoming the acquirer for accounting purposes and AHC becoming the accounting acquiree. It was determined that AEON was the accounting acquirer as a result of the control over the Board of Directors of the combined company by the former AEON members, the senior management positions in the combined company held by former AEON management, and AEON’s size in comparison to AHC.

The effective consideration transferred is determined based upon the amount of shares that AEON would have had to issue to AHC shareholders in order to provide the same ownership ratios as previously discussed. The fair value of the consideration effectively transferred by AEON should be based on the most reliable measure. In this case, the quoted market price of AHC shares provide a more reliable basis for measuring the consideration effectively transferred than the estimated fair value of the shares of AEON. The fair value of AHC common stock is based upon the closing stock price on January 27, 2016, the effective date of the merger, of $4.71 per share.

The effective consideration transferred is comprised of the following:

Fair value of AHC common shares	(A)	$	22,675,000
Preferred stock outstanding	(B)		3,047,000
Stock options vested and outstanding	(C)		1,296,000
Warrants vested and outstanding	(C)		9,782,000
Consideration effectively transferred		$	36,800,000

(A) Based upon 4,814,226 AHC common shares outstanding at a fair value of $4.71 per share, which was the closing price of AHC common shares on the effective date of the merger.

(B) Represents 28,000 shares of Series B and 605,000 shares of Series D preferred stock as converted into 646,933 common shares with a fair value of $4.71 per share, which was the closing price of AHC common shares on the effective date of the merger.

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AUTHENTIDATE HOLDING CORP AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements (Unaudited)

(C) Represents outstanding and vested AHC stock options and warrants acquired in connection with the reverse merger. The fair value of these stock options and warrants was determined using the Black Scholes model, with the following assumptions:

	Options			Warrants
Number of shares		616,141			4,313,180
Weighted average exercise price	$	4.46		$	5.24
Volatility		85.10	%		85.10	%
Risk-free interest rate		1.63	%		1.63	%
Expected dividend rate		0	%		0	%
Expected life (years)		4.00			4.16
Stock price	$	4.71		$	4.71

The fair value of the assets acquired and liabilities assumed were based on management estimates. Based upon the purchase price allocation, the following table summarizes the estimated provisional fair value of the assets acquired and liabilities assumed at the date of acquisition:

Cash and cash equivalents	$	30,000
Restricted cash		121,000
Accounts receivable		174,000
Inventory		360,000
Prepaid expenses and other current assets		464,000
Property and equipment		189,000
Trade names and licensed technology		2,344,000
Deferred tax assets		38,804,000
Total assets acquired at fair value		42,486,000
Accounts payable and accrued expenses		3,860,000
Notes payable		4,078,000
Derivative liabilities		1,066,000
Total liabilities assumed		9,004,000
Net assets acquired		33,482,000
Goodwill		3,318,000
Total preliminary purchase consideration	$	36,800,000

The purchase price exceeded the fair value of the net assets acquired by approximately $3,318,000, which was recorded as goodwill and assigned to our web-based software segment.

4. Inventory

	March 31,		June 30,
	2017		2016
Laboratory testing supplies	$	46,861	$	100,233
Purchased components, net		-		31,068
Finished goods		-		206,606
Total inventory	$	46,861	$	337,907

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Notes to Condensed Consolidated Financial Statements (Unaudited)

Purchased components of approximately $32,000 and $207,000 were written down in the nine months ended March 31, 2017 to net realizable value.

5. Property and Equipment

							Estimated
	March 31,			June 30,			Useful Life In
	2017			2016			Years
Machinery and equipment	$	5,608,592		$	5,591,564		3-6
Software		392,913			392,913		5-7
Furniture and fixtures		105,043			105,043		5-7
Leasehold improvements		69,268			64,193		(1)
		6,175,816			6,153,713
Less: Accumulated depreciation and amortization		(3,594,529	)		(2,677,043	)
Property and equipment, net	$	2,581,287		$	3,476,670

(1) Lesser of lease terms or estimated useful life

Depreciation on property and equipment for three and the nine months ended March 31, 2017 was approximately $300,000 and $917,000 compared to $320,000 and $796,000 for the prior year periods.

6. Intangible Assets

The following table sets forth intangible assets as follows:

	March 31, 2017						June 30, 2016
	Gross Carrying Amount		Accumulated Amortization		Net Book Value		Gross Carrying Amount		Accumulated Amortization		Net Book Value		Useful Life In Years
Trademarks	$	550,000	$	91,667	$	458,333	$	550,000	$	32,738	$	517,262		7
Acquired technologies		1,794,000		342,600		1,451,400		1,794,000		122,580		1,671,420		3-7
Total	$	2,344,000	$	434,267	$	1,909,733	$	2,344,000	$	155,318	$	2,188,682

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Notes to Condensed Consolidated Financial Statements (Unaudited)

Amortization expense was approximately $93,000 and $279,000 for the three and nine months ended March 31, 2017 and $80,000 for both the three and nine months ended March 31, 2016, respectively. Amortization expense for the next five fiscal years and thereafter is expected to be as follows:

June 30,
2017 (remaining)	$	93,057
2018		372,229
2019		372,229
2020		372,229
2021		317,729
Thereafter		382,260
	$	1,909,733

7. Income Taxes

The Company’s effective tax rate for the three and nine months ended March 31, 2017 was 41.4% and 41.5%, respectively. The Company calculates income tax expense based upon an annual effective tax rate forecast, including estimates and assumptions that could change during the year. The differences between the effective tax rate and the U.S. federal statutory rate of 35% principally result from state and local taxes, graduated federal tax rate reductions, changes in the valuation allowance and non-deductible expenses.

At March 31, 2017, the Company’s net deferred tax assets amounted to approximately $38.5 million. Management has considered the realizability of the deferred tax assets and has concluded that a valuation allowance of approximately $22.0 million should be recorded, related to net operating loss carryforwards that are not anticipated to be realized. Although management determined that a valuation allowance was not required with respect to the remaining net deferred tax assets, realization of these assets is primarily dependent on achieving the forecast of future taxable income, as well as prudent and feasible tax planning strategies. Based upon the projections, the net operating loss carryforwards would be fully utilized before expiration.

8. Notes Payable

The following table sets forth the secured and unsecured notes payable:

	March 31, 2017				June 30, 2016
	Note		Interest rate		Note		Interest rate
	Payable		per annum		Payable		per annum
Secured				Secured
	$	1,056,875	5% interest paid annually		$	950,000	9% interest paid upon maturity of early redemption
		641,294	5% interest paid annually			320,000	10% interest paid annually
		255,417	5% interest paid annually			1,270,000
		591,613	5% interest paid annually	Unsecured
						532,811	20% interest paid annually
						200,000	20% interest paid annually
Total	$	2,545,199				525,000	20% interest paid annually
						450,000	20% interest paid annually
						1,707,811
				Total	$	2,977,811

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Notes to Condensed Consolidated Financial Statements (Unaudited)

Secured

The Company had outstanding a convertible note payable in the aggregate principal amount of $950,000. The note was convertible into shares of common stock at an initial conversion price of $2.25 per share, subject to adjustment. This note had a maturity date of December 17, 2016. Based on the initial conversion price, the note was convertible into up to 422,222 shares of common stock. If the Company issues or sells shares of its common stock, rights to purchase shares of its common stock, or securities convertible into shares of its common stock for a price per share that is less than the conversion price then in effect, such conversion price would be decreased to equal 85% of such lower price. This note accrued interest at 9% per annum with interest payable upon maturity or on any earlier redemption date. As described in greater detail below under the caption “Exchange Transaction”, on March 20, 2017, this note was exchanged for a new promissory note in the aggregate principal amount of $1,056,875. The new note matures twelve months following such extension date and interest accrues on the principal amount of the new note at the rate of 5% per annum. The new note is secured by a lien on all of the Company’s assets and is convertible at the initial conversion price of $2.03 per share.

The Company had outstanding a promissory note in the aggregate principal amount of $320,000. The note was due and payable on April 15, 2016, and interest accrued on the note at the rate of 10.0% per annum. The note was secured by a first priority lien on certain of our assets, as described in a security agreement entered into between the Company and the purchaser. The note was convertible into shares of common stock of the Company at an initial conversion price of $4.86 per share. The note was issued to an affiliate of J. David Luce, a former member of the Board of Directors. On September 1, 2016, the Company entered into an amendment agreement which extended the maturity date to December 1, 2016 at an interest rate of 5% per annum. In consideration for such agreement, the Company agreed that the note would be further modified so that it would be convertible into shares of common stock of the Company at a conversion price of $3.00 per share, which was equal to the most recent closing bid price of the Company’s common stock immediately prior to the execution of the amendment agreement. Based on the modified conversion price, the principal amount of the note was convertible into 106,667 shares of common stock. As described in greater detail below under the caption “Exchange Transaction”, on March 20, 2017, this note was combined with the $200,000 unsecured note held by the same entity and was exchanged for a new promissory note in the aggregate principal amount of $641,294. The new note matures twelve months following such extension date and interest accrues on the principal amount of the new note at the rate of 5% per annum. The new note is secured by a lien on all of the Company’s assets and is convertible at the initial conversion price of $2.03 per share.

Unsecured

The Company had outstanding a promissory note in the aggregate principal amount of $200,000, held by an entity affiliated with J. David Luce, a former member of the Board of Directors. The notes accrued interest at the rate of 20% per annum, payable in arrears, and was due upon the earlier of (i) August 26, 2016, or (ii) the closing of a sale of equity or debt securities of the Company, or series of closings, as part of the same transaction, of equity or debt securities within a period of 90 days, in the gross amount of at least $5,000,000 in cash proceeds. On September 1, 2016, the note was amended to extend the maturity date to December 1, 2016 and to allow the investor to elect to further extend the note for an additional 90 days. In consideration for such agreements, the Company agreed that the promissory note would be further modified so that it would be convertible into shares of common stock of the Company at an initial conversion price of $3.00 per share, which was equal to the most recent consolidated closing bid price of the Company’s common stock immediately prior to the execution of the amendment agreement. Based on the conversion price, the principal amount of the note was convertible into up to 173,333 shares of common stock. In March 2017, this note was combined with the $320,000 secured note held by the same entity and exchanged for a new promissory note in the aggregate principal amount of $641,294. The new note matures twelve months following such extension date and interest accrues on the principal amount of the new note at the rate of 5% per annum. The new note is secured by a lien on all of the Company’s assets and is convertible at the initial conversion price of $2.03 per share. Additional terms and conditions of the new note are described in greater below under the caption “Exchange Transaction”.

The Company had a promissory note in the aggregate principal amount of $450,000 to Optimum Ventures, LLC, a related party of Peachstate Health Management, LLC, through common ownership. The note was unsecured and was not convertible into equity securities of the Company. The note accrued interest at the rate of 20% per annum, payable in arrears, and was due upon the earlier of (i) October 28, 2016, or (ii) within 30 days of the closing of a sale of equity or debt securities of the Company, or series of closings, as part of the same transaction, of equity or debt securities within a period of 90 days, in the gross amount of at least $5,000,000 in cash proceeds. As described in greater detail below under the caption “Exchange Transaction”, on March 20, 2017, this note was exchanged for a new promissory note in the aggregate principal amount of $591,613. The new note matures twelve months following such extension date and interest accrues on the principal amount of the new note at the rate of 5% per annum. The new note is secured by a lien on all of the Company’s assets and is convertible at the initial conversion price of $2.03 per share.

Effective as of January 31, 2017, the Company accepted a short term loan in the aggregate principal amount of $250,000 from Hanif A. Roshan, the Company’s Chief Executive Officer and Chairman of the Board. To evidence the loan, the Company issued Mr. Roshan a promissory note (the “Note”) in the aggregate principal amount of $250,000. The Note was an unsecured obligation of the Company and was not convertible into equity securities of the Company. The Note was due and payable on the 30-day anniversary of the issue date and interest accrued on the Note at the rate of 12.0% per annum. The Note was exchanged for a new secured convertible note in the exchange transaction described below under the caption “Exchange Transaction”.

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AUTHENTIDATE HOLDING CORP AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements (Unaudited)

Exchange Transaction

On March 20, 2017, the Company entered into a note exchange agreement with the holders of an aggregate principal amount of $2,170,000 of outstanding promissory notes (the “Original Notes”), which were due and payable, pursuant to which the Company agreed to issue the holders of such notes, in consideration of the cancellation of the Original Notes, new promissory notes in the aggregate principal amount of $2,545,199, which is equal to the sum of the aggregate principal amount of the original notes plus the accrued but unpaid interest on the Original Notes (the “New Notes”). The New Notes are convertible into shares of the Company’s Common Stock at an initial conversion price of $2.03 per share. Based on the initial conversion prices, the New Notes will be convertible into up to 1,253,792 shares of common stock. If the Company issues or sells shares of its common stock, rights to purchase shares of its common stock, or securities convertible into shares of its common stock for a price per share that is less than the conversion price then in effect, such conversion price will be decreased to equal 85% of such lower price. The foregoing adjustments to the conversion price will not apply to certain exempt issuances, including issuances pursuant to certain employee benefit plans. In addition, the conversion price is subject to adjustment upon stock splits, reverse stock splits, and similar capital changes. These conversion options resulted in a derivative liability valued at $328,422. All of the New Notes have a maturity date of one year from the closing date. The New Notes were issued in consideration of the exchange of (i) an aggregate principal amount of $950,000 of Original Notes convertible at a price of $2.25 per share, (ii) an aggregate principal amount of $520,000 of Original Notes convertible at a price of $3.00 per share, and (iii) an aggregate principal amount of $700,000 of unconvertible Original Notes.

In connection with the exchange of the Original Notes for the New Notes, the Company also agreed with the holder of all of our outstanding shares of Series B Convertible Preferred Stock (the “Series B Preferred Stock”) to exchange all of its outstanding shares of Series B Preferred Stock for shares of a new series of convertible preferred stock designated as Series E Convertible Preferred Stock (the “Series E Preferred Stock”). Accordingly, on March 20, 2017, the Company also entered into a separate exchange agreement with the holder of the shares of Series B Preferred Stock, to exchange such shares for a total of 25,000 shares of Series E Preferred Stock. Each share of Series E Preferred Stock will have a stated value of $30.00 per share. Pursuant to this exchange agreement, the holder of the shares of Series B Preferred Stock agreed to waive all unpaid dividends that had accrued on the shares of Series B Preferred Stock. The shares of Series E Preferred Stock are initially convertible by the holder into an aggregate of 187,500 shares of Common Stock at the initial conversion rate of $4.00 per share. The conversion price of the new preferred stock is subject to adjustment solely in the event of stock dividends, combinations, splits, recapitalizations, and similar corporate events. The right of holders of Series E Preferred Stock to convert these securities into common stock is subject to a 4.99% beneficial ownership limitation, which beneficial ownership limitation may be increased by a holder to a greater percentage not in excess of 9.99% after providing notice to us.

The New Notes will bear interest at the rate of 5% per annum with interest payable upon maturity, the conversion of the New Notes or on any earlier redemption date. Commencing one month after the Company’s common stock is listed for trading on a national securities exchange the Company will have the right to redeem all or any portion of the outstanding principal balance of the New Notes, plus all accrued but unpaid interest at a price equal to 110% of such amount. The holders of the New Notes shall have the right to convert any or the entire amount to be redeemed into common stock prior to redemption. Subject to certain exceptions, the New Notes are senior to existing and future indebtedness of the Company and will be secured by a first priority lien on all of the Company’s assets to the extent and as provided in a Security Agreement entered into between the Company and the holders. Subject to certain exceptions, the New Notes contain customary covenants against incurring additional indebtedness and granting additional liens and contains customary events of default. Upon the occurrence of an event of default under the New Notes, the holders may require the Company to repay all or a portion of the note in cash, at a price equal to 110% of the principal, plus accrued and unpaid interest.

In accordance with ASC 470-50, “Debt – Modifications and Extinguishments”, the Company’s note exchange agreement was tested to determine whether a debt modification or debt extinguishment had occurred. Based on management’s review, debt extinguishment applied. A loss on extinguishment of $258,037 resulted from the Exchange. The loss consists of the resulting derivative liability of $328,422 from embedded conversion options in the new notes and the additional value of $50,000 of the Series E Preferred Stock compared to the Series B Preferred, offset by the waiving of the unpaid Preferred Series B dividends of $120,385.

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AUTHENTIDATE HOLDING CORP AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements (Unaudited)

9. Equity

Preferred Stock

 As of March 31, 2017, there were 25,000 shares of Series E convertible preferred stock outstanding. The shares of Series E preferred stock are initially convertible into an aggregate of 187,500 shares of Common Stock at the initial conversion rate of $4.00 per share. The conversion price of the Series E preferred stock will be subject to adjustment solely in the event of stock dividends, combinations, splits, recapitalizations, and similar corporate events and does not provide for general price-based anti-dilution adjustments. Each share of Series E preferred stock has a stated value of $30.00 per share and has the following rights and preferences: (i) each holder of the Series E preferred stock has the right, at any time, to convert the shares of Series E preferred stock into shares of common stock; (ii) the Series E preferred stock is redeemable at the Company’s option commencing one year after the original issuance date, provided that the Company’s common stock is listed on a national securities exchange at such time; and (iii) the Series E preferred stock will pay dividends at the rate of 5% per annum in cash. The shares of Series E preferred stock were issued in a transaction with the holder of the Company’s previously outstanding shares of Series B preferred stock to exchange the shares of Series B preferred stock for the shares of Series E preferred stock. Pursuant to the exchange agreement for the preferred stock, the holder of the shares of Series B Preferred Stock agreed to waive all unpaid dividends that had accrued on the shares of Series B Preferred Stock.

As of March 31, 2017, there are 605,000 shares of Series D convertible preferred stock outstanding. The Series D preferred stock can be converted by the holders into an aggregate of 619,154 shares of common stock at an initial conversion rate of $9.77139 per share. The holders of such shares have the right to convert the preferred shares at any time; however, the shares received upon conversion may not be offered or sold except pursuant to an effective registration statement or an applicable exemption from the registration requirements of the Securities Act and applicable state securities laws. The Company has the right to repurchase the outstanding Series D preferred stock at a redemption price equal to $10.00 per share, plus accrued and unpaid dividends, and to require holders to convert their Series D preferred stock beginning in June 2016. Dividends on the Series D preferred stock accrue at a rate of 5% per annum and are payable semi-annually in cash or stock at the Company’s option. At March 31, 2017, the Company has accrued dividends in the amount of approximately $557,000, which remain unpaid.

The Company’s preferred stock takes precedence over common stock but ranks below debt in the event of liquidation. In addition the Series D convertible preferred stock ranks above the Series E convertible preferred stock.

Common Stock

As discussed in Notes 1 and 3 the AEON Acquisition on January 27, 2016 has been accounted for as a reverse merger under U.S. GAAP. As such, AEON is considered the acquiring entity for accounting purposes; and therefore, legacy AEON’s historical results of operations replaced legacy AHC’s historical results of operations for all periods prior to the reverse merger. Additionally, the legacy AEON equity accounts at June 30, 2015 were retroactively restated to reflect the number of shares received in the business combination as defined by Note 3.

Earnings per Share

Earnings per share (“EPS”) is the amount of earnings attributable to each share of common stock. For convenience, the term is used to refer to either earnings or loss per share. EPS is computed pursuant to Section 260-10-45 of the FASB Accounting Standards Codification. Pursuant to ASC Paragraphs 260-10-45-10 through 260-10-45-16, basic EPS shall be computed by dividing income available to common stockholders (the numerator) by the weighted-average number of common shares outstanding (the denominator) during the period. Income available to common stockholders shall be computed by deducting both the dividends declared in the period on preferred stock (whether or not paid) and the dividends accumulated for the period on cumulative preferred stock (whether or not earned) from income from continuing operations (if that amount appears in the income statement) and also from net income. The computation of diluted EPS is similar to the computation of basic EPS except that the denominator is increased to include the number of additional common shares that would have been outstanding if the dilutive potential common shares had been issued during the period to reflect the potential dilution that could occur from common shares issuable through contingent shares issuance arrangement, stock options or warrants.

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AUTHENTIDATE HOLDING CORP AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements (Unaudited)

	Three Months Ended						Nine Months Ended
	March 31,						March 31,
	2017			2016			2017			2016
Basic earnings per share
Net (loss) income	$	767,359		$	(2,739,173	)	$	257,404		$	6,338,972
Preferred stock dividends		(74,863	)		(67,082	)		(276,111	)		(67,082	)
Net income available\to common shareholders after preferred stock dividends	$	692,496		$	(2,806,255	)	$	(18,707	)	$	6,271,890
Weighted average shares used in the computation of basic earnings per share		7,168,384			4,327,990			6,312,344			2,064,951
Earnings per share - basic	$	0.10		$	(0.65	)	$	(0.00	)	$	3.04
Dilutive earnings per share
Income available to common shareholders	$	692,496		$	(2,806,255	)	$	(18,707	)	$	6,271,890
Change in fair value of derivative liability		(392,407	)								205,360
Interest on convertible debt		29,267			-			-			19,982
Preferred stock dividends		-			-			-			67,082
Net income applicable to common shareholders plus assumed conversions	$	329,356		$	(2,806,255	)	$	(18,707	)	$	6,358,954
Weighted average shares used in the computation of basic earnings per share		7,168,329			4,327,990			6,312,344			2,064,951
Dilutive effect of options, warrants, convertible debt and  convertible preferred stock		1,597,328			-			-			630,039
Shares used in the computation of diluted earnings per share		8,765,657			4,327,990			6,312,344			2,694,990
Earnings per share - diluted	$	0.04		$	(0.65	)	$	(0.00	)	$	2.36
Anti-Dilutive Options Excluded	$	3,545,077					$	6,919,034

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AUTHENTIDATE HOLDING CORP AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements (Unaudited)

Common Stock Warrants

A schedule of common stock warrant activity is as follows:

	Number of Shares		Weighted Average Exercise Price Per Share		Weighted Average Remaining Contractual Life (Years)		Aggregate Intrinsic Value
Outstanding June 30, 2016		4,205,535	$	4.91		4.68	$	1,992,535
Issued		-
Expired		-
Outstanding March 31, 2017		4,205,535	$	4.79		4.07	$	751,173
Exercisable, March 31, 2017		4,149,979	$	4.70		4.10	$	751,173

10. Share-Based Compensation

On December 22, 2015, the Company and its owners approved a 10% pro-rata donation of members’ equity units to treasury units for no consideration. These units were used to retain and attract key members of management in contemplation of the reverse merger. During 2015, the units were committed to three key members of management. On January 12, 2016, the units were awarded with full rights and privileges. The Company has recognized approximately $1,418,000 of share based compensation based on the fair value of the units issued. The fair value of the unit based compensation was determined by using the value of AHC based on published stock values, and discounting them accordingly for lack of marketability and a probability discount associated with certain earn-outs.

On July 11, 2016, at the Special Meeting of Shareholders (the “Special Meeting”) of the Company’s shareholders approved, among other things (i) the issuance of shares of Common Stock in connection with earn-out payments that may become payable in the future to former members of AEON, (ii) an amendment to the Company’s certificate of incorporation, as amended, to change its name to “Aeon Global Health Corp.” and (iii) an amendment to the Authentidate Holding Corp. 2011 Omnibus Equity Incentive Plan to increase the number of shares of the Company’s common stock authorized for issuance thereunder by 1,000,000 shares.

As a result of the July 2016 approval of the issuance of shares of common stock in connection with earn-out payments that may become payable in the future to former members of AEON, on December 15, 2016, the Company issued to the former members of AEON an aggregate of 240,711 shares of common stock. In addition, based on the achievement of the earnings milestone under the Merger Agreement, the Company issued the former members of AEON an aggregate of 1,155,415 shares of common stock on December 15, 2016. The fair value of these shares was $5,742,598.

Stock option activity under the Company’s stock option plans for employees and non-executive directors for the period ended March 31, 2017 is as follows:

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AUTHENTIDATE HOLDING CORP AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements (Unaudited)

Employees Information	Number of Options			Weighted Average Exercise Price		Weighted Average Remaining Contractual Life (Years)		Aggregate Intrinsic Value
Outstanding June 30, 2016		159,817		$	12.46	$	6.30	$	11,864
Granted		-
Expired/Forfeited		(222	)	$	2.16	$	-	$	-
Outstanding March 31, 2017		159,595		$	12.48	$	5.27	$	-
Exercisable March 31, 2017		147,158		$	12.51	$	5.35	$	-

						Weighted
				Weighted		Average
				Average		Remaining		Aggregate
	Number of			Exercise		Contractual		Intrinsic
Non-Executive Director Information	Options			Price		Life (Years)		Value
Outstanding June 30, 2016		485,532		$	4.35		6.96	$	198,346
Granted		102,065			3.07
Expired/forfeited		(38,087	)		9.61
Outstanding and exercisable March 31, 2017		549,510		$	3.76		7.16	$	54,265

Employee options are granted at the closing price on the day of issuance and typically vest over a three-year period and non-executive director options are granted at market price and vest on the grant date. Stock based compensation was approximately $27,000 and $90,000 for the three and nine month periods ended March 31, 2017, respectively. Options and warrants were issued for services performed in lieu of payment in cash for the nine months ending March 31, 2017 of $186,753.

As of March 31, 2017, there was approximately $750 of total unrecognized compensation expense related to unvested share-based compensation arrangements that is expected to be recognized over a weighted-average period of 3 months.

As of March 31, 2017 there were approximately 35,800 restricted stock units outstanding that were granted to employees in connection with the Company’s compensation modification program. These restricted stock units vest when the Company achieves cash flow breakeven for two consecutive quarters, as defined. There were no unvested shares at June 30, 2016 and no restricted shares issued in the current period.

In December 2012, the board of directors agreed that all non-employee directors would receive all of their cash director compensation, including amounts payable for committee service, service as a committee chair and per meeting fees, in restricted shares of our common stock or stock options issued at fair value in accordance with the terms of the 2011 Plan for periods ending after December 2012. During the nine months ended March 31, 2017, the company issued 102,065 stock options (valued at approximately $313,000) to certain non-executive directors in connection with this program.

11. Fair Value Measurements

Fair Value of Financial Instruments

The Company follows ASC 820-10 “Fair Value Measurements and Disclosures”, of the FASB to measure the fair value of its financial statements and disclosures about fair value of its financial instruments. ASC 820-10 establishes a framework for measuring fair value in accounting principles general accepted in the United States of America (U.S. GAAP), and expands disclosures about fair value measurements. To increase consistency and comparability in fair value measurements and related disclosures, ASC 820-10 establishes a fair value hierarchy, which prioritizes the inputs to valuation techniques used to measure fair value into three broad levels. The three levels of fair value hierarchy defined by ASC 820-10 are described below:

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AUTHENTIDATE HOLDING CORP AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements (Unaudited)

Level 1 Quoted market prices available in active markets for identical assets or liabilities as of the reporting date.

Level 2 Pricing inputs other than quoted prices in active markets included in Level 1, which are either directly or indirectly observable as of the reporting date.

Level 3 Pricing inputs that are generally unobservable input and not corroborated by market data.

Financial assets are considered Level 3 when their fair values are determined using pricing models, discounted cash flow methodologies or similar techniques and at least one significant model assumption or input is unobservable.

The fair value hierarchy gives the highest priority to quoted prices (unadjusted) in active markets for identical assets or liabilities and the lower priority to unobservable inputs. If the inputs used to measure the financial assets and liabilities fall within more than one level described above, the categorization is based on the lowest level input that is significant to the fair value measurement of the instrument.

The carrying amounts of the Company’s financial assets and liabilities, such as cash, accounts receivable, inventory, prepaid expenses and other current assets, accounts payable and accrued expenses approximate their fair values because of the short maturity of these instruments.

In connection with the issuance of a convertible promissory note as discussed in Note 8, the Company evaluated the note agreement to determine if the agreement contained any embedded components that would qualify the agreement as a derivative. The Company identified certain put features embedded in the convertible note agreement that potentially could result in a settlement in the event of a fundamental transaction, requiring the Company to classify the conversion feature as a derivative liability.

The Company’s Level 3 financial liabilities consist of the derivative conversion features of underlying convertible debt and warrants. The Company valued the conversion features using the Black Sholes model prior to the three months ended September 30, 2016 and the Monte Carlo model for the three and nine months ended March 31, 2017. These models incorporate transaction details such as the Company’s stock price, contractual terms maturity, risk free rates and volatility as of the date of issuance and each balance sheet date.

The Company utilized the following assumptions in valuing the derivative conversion features during the three months ended March 31, 2017:

Exercise price	$	2.03 – 2.07
Risk free interest rate		1.00% - 1.85%
Expected volatility		40% - 50%
Remaining term		0.97 – 4.72 years

Fair Value of Financial Assets and Liabilities Measured on a Recurring Basis

The Company uses Level 3 of the fair value hierarchy to measure the fair value of the derivative liabilities and revalues its derivative liabilities at every reporting period and recognizes gains or losses in the statements of operations that are attributable to the change in the fair value of the derivative liabilities. The following table provides a summary of the changes in fair value, including net transfers in and /or out, of all financial assets measured at fair value on a recurring basis using significant unobservable inputs during the nine months ended March 31, 2017.

				Convertible
	Warrants			Notes			Total
Balance - June 30, 2016	$	683,858		$	367,142		$	1,051,000
Embedded conversion feature in March 2017 convertible notes		-			328,422			328,422
Change in fair value of derivative liabilities		(119,609	)		(272,798	)		(392,407	)
Balance - March 31, 2017	$	564,249		$	422,766		$	987,015

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AUTHENTIDATE HOLDING CORP AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements (Unaudited)

Changes in the unobservable input values could potentially cause material changes in the fair value of the Company Level 3 financial instruments. The significant unobservable inputs used in the fair value measurements are the expected volatility assumption. As significant increase (decrease) in the expected volatility assumption could potentially result in a higher (lower) fair value measurement.

Derivative Instruments

The Company evaluates its convertible debt, warrants or other contracts to determine if those contracts or embedded components of those contracts qualify as derivatives to be separately accounted for in accordance with ASC 815-15. The result of this accounting treatment is that the fair value of the embedded derivative is market-to-market each balance sheet date and recorded as a liability, the change in fair value is recorded in the statements of operations as other income (expense). Upon conversion or exercise of a derivative instrument, the instrument is marked to fair value at the conversion date and then that fair value is reclassified to equity.

12. Commitments and Contingencies

A complaint was filed by a former independent contractor in the State of Louisiana who was involved in the sales and marketing of the Company’s products and services. Plaintiff alleges certain commissions had not been paid in full, and the Company believes the contractor was overpaid and has asserted a counterclaim for reimbursement of such overpayments. The Company intends to vigorously defend the claim and pursue the counterclaim. The parties have completed initial discovery and the matter remains pending. The Company believes the resolution of this matter will not have a material effect on its financial statements.

The Company filed a complaint in the state of Georgia in November 2015 against its former sales director as well as an independent contractor for their improper use of a Company customer list. The complaint alleges the defendants utilized the Company’s customer list to improperly solicit business for their personal benefit. The complaint against the independent contractor has since been dismissed, and the action against the former sales director is pending. The Company believes the resolution of this matter will not have a material effect on its financial statements.

In connection with the termination of the Company’s employment relationship with certain executives, including the former Chief Executive and Chief Financial Officers of AHC, the Company has been reviewing its severance obligations to them and the vesting of other post-termination provisions. The Company believes that it has accrued all related severance costs as of March 31, 2017 related to past terminations.

Both the former CEO and CFO of AHC have commenced arbitration proceedings against AHC before the American Arbitration Association ("AAA"). A demand for arbitration was filed with the AAA on or about June 22, 2016 by the former CEO, O’Connell Benjamin, requesting payment pursuant to an employment agreement of severance compensation in the amount of $341,620 and other benefits, including the vesting of certain stock option awards, pursuant to an employment agreement.  In December, 2016, the parties opted to pursue mediation in their attempt to resolve the matter, but the Company chose to revert to utilizing arbitration in May 2017. The Company believes that it has valid defenses to Mr. Benjamin’s claims and intends to vigorously defend this matter.

Further, a demand for arbitration was filed with the AAA by the Company’s former CFO, William A. Marshall. The demand involved a request for severance compensation and other benefits, including the vesting of certain stock options, pursuant to the terms of an employment agreement. A hearing was held on March 27, 2017, and on April 24, 2017, the parties entered into a binding settlement agreement and mutual release. Pursuant to the separation agreement and general release, the Company agreed to provide the following to the former CFO: (i) cash payments totaling $170,000 to be paid over time through May 15, 2018, (ii) a lump sum severance payment of $160,000 payable on June 15, 2018, (iii) the issuance of a total of 12,835 vested shares of common stock pursuant to the terms of the restricted stock units granted in January 2013 and January 2014, and (iv) 27,388 stock options previously granted to became vested and exercisable for the duration of their original exercise periods, subject, however, to the terms of a lockup agreement executed by him prior to the closing of the merger between AHC and Peachstate Health Management, LLC d/b/a AEON Clinical Labs. Pursuant to the settlement agreement, the Company issued a secured senior promissory note, subordinated to the interests of the existing senior lenders, which provides for events of default that are customary for similar transactions. The Company also agreed to provide a general release to Marshall and indemnification from claims arising from or related to his employment with the Company to the extent permitted by applicable law, the Company’s bylaws, and his employment agreement.

The Company is a defendant in an action captioned Cogmedix, Inc. v. Authentidate Holding Corp. in the Superior Court of Worcester County, Commonwealth of Massachusetts, Case No.1685CV01318B. Suit was filed on September 6, 2016 alleging the principal amount of $227,061 remains outstanding on a purchase order dated December 6, 2013.  Based on the facts of which we are currently aware, management believes that this matter will not have a material adverse effect on our financial position, results of operations, or cash flows. However, this matter is subject to inherent uncertainties and management’s assessment may change in the future.

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AUTHENTIDATE HOLDING CORP AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements (Unaudited)

Management believes that these legal matters, individually or in aggregate, will not have a material adverse effect on our financial position, results of operations, or cash flows. However, litigation such as described above, is subject to inherent uncertainties and there can be no assurance that management’s opinion of the anticipated effect of these matters will be correct or that it will not change in the future.

On May 3, 2017 the Company received notice from the Office for Civil Rights (“OCR”) of the U.S. Department of Health and Human Services (“HHS”) informing the Company of the OCR conducting a review of the Company’s compliance with applicable Federal Standards for Privacy of Individually Identifiable Health Information and/or Security Standards for the Protection of Electronic Protected Health Information. The OCR is the division of HHS charged with enforcement of the Health Insurance Portability and Accountability Act of 1996, as amended (“HIPAA”), and the privacy, security and data breach rules which implement HIPAA (HIPAA Rules). The OCR reviewed the Company’s premises and conducted interviews on May 23, 2017. The OCR may, among other things, require a corrective action plan and impose civil monetary penalties. While the Company does not believe a loss is probable by reason of the OCR’s compliance review, the Company believes a loss is reasonably possible; however, at this time Company cannot estimate a range of probable losses because the OCR's review is at an early stage and the Company does not know if the OCR will find a violation(s) and, if so, what violation(s) and whether the OCR will with a corrective action, issue penalties, or reach a monetary settlement. Any adverse determination by the OCR that results in significant monetary penalties could have a material adverse effect on the Company's consolidated financial position, results of operations, and cash flows.

We are also subject to claims and litigation arising in the ordinary course of business. Our management considers that any liability from any reasonably foreseeable disposition of such claims and litigation, individually or in the aggregate, would not have a material adverse effect on our consolidated financial position, results of operations or cash flows.

We have entered into various agreements by which we may be obligated to indemnify the other party with respect to certain matters. Generally, these indemnification provisions are included in contracts arising in the normal course of business under which we customarily agree to hold the indemnified party harmless against losses arising from a breach of representations related to such matters as intellectual property rights. Payments by us under such indemnification clauses are generally conditioned on the other party making a claim. Such claims are generally subject to challenge by us and to dispute resolution procedures specified in the particular contract. Further, our obligations under these arrangements may be limited in terms of time and/or amount and, in some instances, we may have recourse against third parties for certain payments made by us. It is not possible to predict the maximum potential amount of future payments under these indemnification agreements due to the conditional nature of our obligations and the unique facts of each particular agreement. Historically, we have not made any payments under these agreements that have been material individually or in the aggregate. As of March 31, 2017, we are not aware of any obligations under such indemnification agreements that would require material payments.

13. Related Party Transactions

Except as disclosed herein, we have not entered into any material transactions or series of similar transactions with any director, executive officer or any security holder owning 5% or more of our common stock since July 1, 2015.

Aeon leases its facilities from Centennial Properties of Georgia, LLC under a lease agreement commencing April 2014, as amended January 20, 2016. The lease provides for a term of 12 years expiring March 2026. The lease payments range from $46,500 to a maximum of $60,000. In connection with the lease agreement, as security for its rent and other obligations under the lease, AEON has provided to the landlord a first priority lien and security interest in substantially all of its assets. The landlord under the lease is Centennial Properties of Georgia, LLC, a Georgia limited liability company. Centennial is owned by Sonny Roshan, Shawn Desai, Pyarali Roy and Sohail Ali, all of whom are AEON employees and will be receiving AHC Common Stock as a result of the transaction. Mr. Roshan is the Chairman of AEON and now serves as the Chairman and CEO of Authentidate. Mr. Desai is the Chief Technology Officer of AEON. Mr. Roy is the Chief Strategy Officer of AEON. Related party rent expense for the three and nine months ending March 31, 2017 was approximately $139,500 and $418,500, respectively.

On February 27, 2017, the Company entered into a separation agreement and general release with William P. Henry, the Company’s former Chief Operating Officer, addressing post-employment compensation arrangements. The separation agreement provides that Mr. Henry will receive the following in consideration of the general release granted by him to the Company: (i) a severance payment in the amount of $160,000, payable in equal installments on each of the Company’s regular pay dates during the twelve months commencing on the first regular executive pay date after May 1, 2017; (ii) such number of shares of Common Stock of the Company which shall be determined by dividing $160,000 by the closing sales price of the Company’s Common Stock on the execution date of the separation agreement; (iii) stock option awards previously granted to Mr. Henry during his service as the chief strategy officer of the Company shall remain exercisable for the full duration of their original exercise periods; and (iv) Mr. Henry’s current health and insurance benefits will continue until February 1, 2018 and the Company shall promptly reimburse Mr. Henry for unreimbursed business expenses arising out of his service to the Company and for reasonable legal fees and costs of negotiating the Separation Agreement. Effective with the execution of the separation agreement, Mr. Henry resigned from the Company’s Board of Directors.

22

AUTHENTIDATE HOLDING CORP AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements (Unaudited)

The Company holds certain notes payables with shareholders and affiliates of board members of the Company, as described in Note 8. Interest expense relating to these notes amounted to approximately $87,000 and $286,000 for the three and nine months ended March 31, 2017, respectively.

Effective as of January 31, 2017, the Company accepted a short term loan in the aggregate principal amount of $250,000 from Hanif A. Roshan, the Company’s Chief Executive Officer and Chairman of the Board. To evidence the loan, the Company issued Mr. Roshan a promissory note (the “Note”) in the aggregate principal amount of $250,000. The Note was an unsecured obligation of the Company and was not convertible into equity securities of the Company. The Note was due and payable on the 30-day anniversary of the issue date and interest accrued on the Note at the rate of 12.0% per annum. The Note was exchanged for a new secured convertible note in the exchange transaction described above under the caption “Exchange Transaction”.

14. Segment Information

The Company is operated as two segments: laboratory testing services (legacy AEON’s services), and web-based software and related products and offerings (legacy AHC products). Laboratory testing services includes the testing of an individual’s blood, urine or saliva for the presence of drugs or chemicals and the patient’s DNA profile. Web-based software and related products and offerings provide secure web-based revenue cycle management applications and telehealth products and services that enable healthcare organizations to increase revenues, improve productivity, reduce costs, coordinate care for patients and enhance related administrative and clinical workflows and compliance with regulatory requirements. Our web-based services are delivered as Software as a Service (SaaS) to our customers interfacing seamlessly with billing, information and document management systems.

Currently, management runs each segment separately and measures profitability and operational performance based on the financial records independently maintained by two separate systems. 

Selected financial information related to the Company’s segments is presented below:

23

AUTHENTIDATE HOLDING CORP AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements (Unaudited)

	AEON			Authentidate			Total
Three Months ended March 31, 2017
Net revenues	$	5,212,634		$	319,176		$	5,531,810
Cost of revenues		855,852			52,438			908,290
Operating expenses		4,296,693			393,510			4,690,203
Operating income (loss)		915,941			(74,334	)		841,607
Nine Months ended March 31, 2017
Net revenues	$	15,469,366		$	999,333		$	16,468,699
Cost of revenues		2,999,813			203,691			3,203,504
Operating expenses		14,343,516			1,558,364			15,901,880
Operating income (loss)		1,125,850			(559,031	)		566,819
Three Months ended March 31, 2016
Net revenues	$	5,244,268		$	259,000		$	5,503,268
Cost of revenues		2,132,891			134,000			2,266,891
Operating expenses		5,925,397			840,000			6,765,397
Operating loss		(681,129	)		(581,000	)		(1,262,129	)
Nine Months ended March 31, 2016
Net revenues	$	27,841,709		$	259,000		$	28,100,709
Cost of revenues		5,199,436			134,000			5,333,436
Operating expenses		19,461,445			840,000			20,301,445
Operating income (loss)		8,380,264			(581,000	)		7,799,264
March 31, 2017
Total assets	$	5,253,797		$	44,238,055		$	49,491,852
June 30, 2016
Total assets	$	6,777,791		$	44,895,538		$	51,673,329

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ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

The following discussion and analysis should be read in conjunction with our consolidated financial statements and notes to consolidated financial statements included elsewhere in this report. Certain statements in this Report are “forward looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995. When used in this Report, words such as “may,” “should,” “seek,” “believe,” “expect,” “anticipate,” “estimate,” “project,” “intend,” “strategy” and similar expressions are intended to identify forward looking statements regarding events, conditions and financial trends that may affect the Company’s future plans, operations, business strategies, operating results and financial position. Forward-looking statements are subject to a number of known and unknown risks and uncertainties that may cause actual results, trends, performance or achievements of the Company, or industry trends and results, to differ materially from the future results, trends, performance or achievements expressed or implied by such forward-looking statements. These risks and uncertainties include:

· Changes in U.S., state, local and third party payer regulations or policies or other future reforms in the healthcare system (or in the interpretation of current regulations), new insurance or payment systems, including state, regional or private insurance cooperatives (e.g., Health Insurance Exchanges), affecting governmental and third-party coverage or reimbursement for clinical laboratory testing;

· Significant monetary damages, fines, penalties, assessments, refunds, repayments, and/or exclusion from the Medicare and Medicaid programs, among other adverse consequences, resulting from interpretations of, or future changes in, laws and regulations, including laws and regulations of Medicare, Medicaid, the U.S. False Claims Act, interpretations of such laws and regulations by U.S. or state government agencies or investigations, audits, regulatory examinations, information requests and other inquiries by state or U.S. government agencies;

· Significant fines, penalties, costs and/or damage to the Company’s reputation arising from the failure to comply with U.S. and international privacy and security laws and regulations, including the Health Insurance Portability and Accountability Act of 1996, Health Information Technology for Economic and Clinical Health Act, U.S. state laws and regulations, and laws and regulations of the European Union and other countries;

· Loss or suspension of a license or imposition of a fine or penalties under, or future changes in, or interpretations of, the law or regulations of the Clinical Laboratory Improvement Act of 1967, and the Clinical Laboratory Improvement Amendments of 1988;

· Penalties or loss of license arising from the failure to comply with the U.S. Occupational Safety and Health Administration requirements and the U.S. Needlestick Safety and Prevention Act, or similar laws and regulations of U.S., state, local or international agencies;

· Fines, unanticipated compliance expenditures, suspension of manufacturing, enforcement actions, injunctions, or criminal prosecution arising from failure to maintain compliance with current good manufacturing practice (cGMP) regulations and other applicable requirements of various regulatory agencies;

· Changes in testing guidelines or recommendations by government agencies, medical specialty societies and other authoritative bodies affecting the utilization of laboratory tests;

· Increased competition, including price competition, competitive bidding and/or changes or reductions to fee schedules and competition from companies that do not comply with existing laws or regulations or otherwise disregard compliance standards in the industry;

· Failure to obtain and retain new customers or a reduction in tests ordered, specimens submitted or services requested by existing customers;

· Customers choosing to insource services that are or could be purchased from the Company;

· Damage or disruption to the Company’s facilities;

· Failure to identify, successfully close and effectively integrate and/or manage newly acquired businesses; and

· Adverse results in litigation matters.

25

These and certain other factors are discussed in this Report and from time to time in other Company reports filed with the Securities and Exchange Commission (the “SEC”). The Company expressly disclaims any obligation to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise, except as required by law.

AEON Acquisition 

On January 27, 2016, Peachstate Health Management LLC, d/b/a AEON Clinical Laboratories (“AEON”) was merged into a newly formed acquisition subsidiary of Authentidate Holding Corp. (“AHC”) (the “AEON Acquisition”) pursuant to a definitive Amended and Restated Agreement and Plan of Merger dated January 26, 2016, as amended on May 31, 2016 and December 15, 2016 (collectively the “Merger Agreement”). The merger certificate was filed with the Secretary of State of Georgia on January 27, 2016. AEON survived the merger as a wholly-owned subsidiary of AHC (collectively, the “Company”). The AEON Acquisition requires certain Earn-out Payments (as defined and described below) to be paid to the former members of AEON upon achievement of certain financial milestones. The Earn-out Payments must be paid in shares of our common stock.

In accordance with the Merger Agreement, the members of AEON prior to the effective time of the AEON Acquisition became holders of shares of our common stock, issuable in tranches as described below. The closing of the AEON Acquisition occurred on January 27, 2016 and the Company filed a Current Report on Form 8-K on February 1, 2016 regarding the AEON Acquisition in accordance with the SEC regulations.

Pursuant to the terms of the Merger Agreement, among other things:

· Following the AEON Acquisition, AEON is operated as a separate entity.

· The former members of AEON prior to the effective time of the AEON Acquisition became holders of shares of our common stock issuable in tranches as follows (the payments referred to in (b), (c), (d) and (e) below are hereinafter be referred to as the “Earn-out Payments”):

(a)    At the closing of the AEON Acquisition, the membership interests of AEON were converted into the right to receive such number of validly issued, fully paid and non-assessable shares of our common stock as is equal to 19.9% of the issued and outstanding shares of our common stock (rounded to the nearest whole share) as of the close of business on the business day immediately prior to the closing date of the AEON Acquisition (958,030 shares of our common stock).

(b)    In December 2016, we issued to the former AEON members 240,711 shares of common stock, representing 5% of the issued and outstanding shares of our common stock as of the close of business on the business day immediately prior to the closing date of the AEON Acquisition, following the approval of our shareholders of the Earn-out Payments.

(c)    In December 2016, we issued to the former AEON members 1,155,415 shares of common stock, representing 24% of the issued and outstanding shares of our common stock as of close of business on the business day immediately prior to the closing date of the AEON Acquisition, due to the determination that AEON achieved at least $16,000,000 in EBITDA for the calendar year ending December 31, 2015.

(d)    In the event AEON achieves at least $65,900,000 in EBITDA, in the aggregate, for the three calendar years ending December 31, 2016, 2017 and 2018, then, on October 1, 2019, subject to the completion of the audited financial statements of AEON for the calendar year ending December 31, 2018, we will issue to the former AEON members such number of additional shares of our common stock as is equal to 36.1% of the issued and outstanding shares of our common stock (rounded to the nearest whole share) as of the close of business on the business day immediately prior to the closing date of the AEON Acquisition; provided, however, we will issue to the former AEON members such number of additional shares of our common stock so that the total number of shares of our common stock issuable to the former AEON members shall equal 85% of the issued and outstanding shares of our common stock on a post-issuance basis (rounded to the nearest whole share) on a Fully Diluted Basis (as defined below).

(e)    In the event AEON achieves at least $100,000,000 in EBITDA, in the aggregate, for the four calendar years ending December 31, 2019, we will issue to the former AEON members such number of shares of our common stock which equals an additional 5% of the issued and outstanding shares of our common stock on a post-issuance basis (rounded to the nearest whole share), on a Fully Diluted Basis, in addition to our common stock issued to the former AEON members under (b), (c) and (d) above (resulting in the AEON members potentially owning 90% of the issued and outstanding shares of our common stock on a post issuance basis on a Fully Diluted Basis if all the additional tranches are earned).

26

For purposes of determining the potential number of shares of our common stock which may be earned in the future, the term “Fully Diluted Basis” means the aggregate of all outstanding shares of our common stock, plus the shares of our common stock issuable upon exercise or conversion of any derivative security outstanding with a conversion or exercise price of $6.75 or less; in each case on the close of business on the business day immediately prior to the closing date of the AEON Acquisition.

The Merger Agreement provides that the former AEON members, as holders of shares of our common stock issued pursuant to the Merger Agreement, will have the right to nominate one person to our Board of Directors for each 10% of the outstanding shares of common stock beneficially owned by the former AEON members. In the event that a vacancy is created on our Board of Directors at any time due to the death, disability, retirement, resignation or removal of a director elected by the former AEON members, then the former AEON members shall have the right to nominate an individual to fill such vacancy.

Effective as of the closing of the AEON Acquisition, (i) Mr. Sonny Roshan, the former Chairman of AEON, was appointed the Chairman of the Company, which is an executive officer position at the Company, (ii) Mr. Richard Hersperger, the former Chief Executive Officer of AEON, assumed the role of Chief Executive Officer of the Company, and (iii) each of Messrs. Roshan and Hersperger were elected directors of the Company (which became effective February 16, 2016). On August 7, 2016, the employment of Mr. Hersperger, Chief Executive Officer of the Company, terminated. Mr. Roshan assumed the position of Chief Executive Officer on August 7, 2016.

Basis of Presentation

On January 27, 2016, AEON completed the transactions contemplated by the Merger Agreement with AHC under which AEON merged with a wholly-owned subsidiary of AHC and will be operated as a separate entity. The merger was accounted for as a reverse acquisition with AEON treated for accounting purposes as the acquirer. As such, the financial statements of AEON are treated as the historical financial statements of the Company. For the periods prior to the closing of the reverse acquisition the disclosure below relates to the historical business and operations of AEON.

Overview of AEON Business

Prior to the closing of the AEON Acquisition, AEON was a privately-held Georgia limited liability Company. AEON was founded in June 2010 by Hanif (“Sonny”) Roshan, our Chairman and Chief Executive Officer. AEON is based in a 28,000 square foot campus in Gainesville, Georgia. Going forward the AEON business will constitute the majority of the combined Company’s business.

AEON’s primary business focus is on the “Personalized Medicine” approach to laboratory testing. This includes the testing of an individual’s blood, urine or saliva for the presence of drugs or chemicals and the patient’s DNA profile.

AEON is an innovator in genomic testing with three established genetic tests in use today (pharmacogenomics, cancer genetic testing and women’s health testing) and a pipeline of additional genetic tests in development which it plans to bring to market over the coming eighteen months. AEON is investing to expand its genetic testing capabilities to address the rapidly increasing demand for personalized medical analysis that involves using an individual’s genetic profile to guide decisions regarding the prevention, diagnosis, and treatment of disease. AEON strives to offer unique testing specifically designed for its increased focus on personalized medicine, with superior service levels. In this effort, AEON provides advanced testing in DNA pharmacogenomics, cancer genetics and molecular microbiology. Genomic testing is more complex than conventional toxicology testing, requires unique knowledge and significantly more sophisticated equipment. As a result, genomic testing commands higher prices while enjoying significantly less competition.

Toxicology is a major component of AEON’s product mix and will continue to be an important element of AEON’s business strategy. AEON’s toxicology testing provides information about the medication and other substances in the patient’s system from either urine or oral fluid samples. This information helps guide a clinician’s treatment of a patient. In addition, this testing ensures the safe use of prescriptions and is designed to help doctors provide the highest level of care. AEON offers a comprehensive set of toxicology tests and conducts more than 13,000 tests per month.

AEON supports its national client base from its Gainesville, Georgia headquarters. AEON is focused on technology innovation and efficiency, utilizing state of the art testing equipment and its proprietary methodologies to provide some of the fastest and most reliable test results in the nation. AEON focuses on a service model that emphasizes the importance of the test result for both the client and the patient. By focusing on fast, accurate turnaround of test results and the ability to integrate directly with the electronic medical records of clients, AEON believes it is able to provide clients a unique service that larger clinical laboratories cannot match. Because of the emphasis on its service model AEON believes it is ideally positioned to be a preferred lab provider for personalized medicine. Currently the majority of AEON’s testing volume is in toxicology; however, AEON is placing particular focus and emphasis on growing its DNA pharmacogenomics and cancer genetic testing in response to rapidly growing market demand for personalized medical testing.

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Overview of AHC Business

AHC provides secure web-based revenue cycle management applications and telehealth products and services that enable healthcare organizations to increase revenues, improve productivity, reduce costs, coordinate care for patients and enhance related administrative and clinical workflows and compliance with regulatory requirements. AHC’s web-based services are delivered as Software as a Service (SaaS) to its customers interfacing seamlessly with billing and document management systems. These solutions incorporate multiple features and security technologies such as business-rules based electronic forms, intelligent routing, transaction management, electronic signatures, identity credentialing, content authentication, automated audit trails and remote patient management capabilities. Both web and fax-based communications are integrated into automated, secure and trusted workflow solutions.

AHC’s telehealth solutions provide in-home patient vital signs monitoring systems and services to improve care for patients and reduce the cost of care by delivering results to their healthcare providers via the Internet. AHC’s telehealth solutions combine its tablet or Electronic House Call™ patient vital signs monitoring appliances or our Interactive Voice Response patient vital signs monitoring solution with a web-based management and monitoring software module. Both solutions enable unattended measurements of patients’ vital signs and related health information and are designed to aid wellness and preventative care, and deliver better care to specific patient segments that require regular monitoring of medical and behavioral health conditions. Healthcare providers can easily view each specific patient’s vital statistics and make adjustments to the patient’s care plans securely via the Internet. This service provides a combination of care plan schedule reminders and comprehensive disease management education as well as intelligent routing to alert on-duty caregivers whenever a patient’s vital signs are outside of the practitioner’s pre-set ranges. Healthcare providers and health insurers are also expected to benefit by having additional tools to improve patient care and reduce in-person and emergency room patient visits and hospital readmissions.

AHC operates its business in the U.S. with technology and service offerings that address emerging growth opportunities based on the regulatory and legal requirements specific to each market. AHC’s business is engaged in the development and sale of web-based services largely based on its Inscrybe® platform and related capabilities and its telehealth products and services. In recent years AHC has focused its efforts on developing and introducing solutions for use in the healthcare information technology industry.

Outlook and Trends

The healthcare system in the United States is evolving and significant change is taking place in the system. We expect that the evolution of the healthcare industry will continue, and that industry change is likely to be extensive. There are a number of key trends that are having, and that we expect will continue to have, a significant impact on the diagnostic information services business in the United States and on our business. These trends present both opportunities and risks. However, because of the nature of the services we provide, we believe that the industry will continue to grow over the long-term and that we are well positioned to benefit from the long-term growth expected in the industry.

Consistent with the last few years, we expect reimbursement pressure for our Aeon business will continue to be experienced in fiscal 2017. Healthcare market participants, including governments, are focusing on controlling costs, including potentially by changing reimbursement for healthcare services (including but not limited to a shift from fee for service to capitation), changing medical coverage policies (e.g., healthcare benefits design), pre-authorization of laboratory testing, requiring co-pays, introducing laboratory spend management utilities and payment and patient care innovations. As health plans and government programs require greater levels of patient cost-sharing, our patient collections could be negatively impacted and adversely impact our bad debt expense. In addition, there could be a shift to capitation arrangements where we agree to a predetermined monthly reimbursement rate for each member enrolled in a restricted plan, generally regardless of the number or cost of services provided by us.

Fees for the laboratory services we provide are reimbursed by Medicare, Medicaid and commercial payors and are established in the Clinical Laboratory Fee Schedule (CLFS). Historically, these fee schedules are subject to annual adjustments. During the quarter ended March 31, 2017, approximately 40.8% of the Company’s laboratory testing revenue was reimbursed from Medicare under the CLFS with the balance of the Company’s revenue derived from commercial insurance providers and Medicaid. For the quarter ended March 31, 2017, toxicology testing represented approximately 94% of all of laboratory testing services that the Company provided. Further, during the quarter ended March 31, 2017, approximately 67.3% of the Company’s revenues from laboratory testing services were derived from the provision of toxicology testing services.

Over the past several years, the Company has experienced governmental reimbursement reductions as a direct result of the Patient Protection and Affordable Care Act (ACA) and other laws. In addition, the Protecting Access to Medicare Act (PAMA), which became law on April 1, 2014, is expected to result in a future net reduction in reimbursement revenue under the CLFS. These laws include provisions designed to control healthcare expenses reimbursed by government programs through a combination of reductions to fee schedules, incentives to physicians to participate in alternative payment models such as risk-sharing, and new methods to establish and adjust fees.

Beginning in calendar 2016, commercial and government payors focused on reducing payments to clinical laboratories by imposing more stringent payment guidelines in their adjudication processes. Additionally, effective January 2016, the Centers for Medicare and Medicaid Services (CMS) reduced the unit reimbursement rate for many of the tests typically performed by the Company, along with the number of tests that CMS would reimburse. Because Medicare and Medicaid accounts for close to 50% of our annual revenue, this reduction in reimbursement rates had a substantial negative impact on our revenue.  Comparing the maximum toxicology reimbursement rate from Medicare, there was a decrease in the rate of reimbursement between 2015 and 2016 of approximately 70%, from a rate of $733.56 per sample in 2015 to $215.23 in 2016.

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We experienced an overall increase in revenues for the quarter ended March 31, 2017, as compared to the quarter ended March 31, 2016, revenue growth generated from the increase in testing volume were offset by the reductions in reimbursement rates and the imposition of more stringent payment guidelines described above. Further, revenues for the three and nine month periods ended March 31, 2017, also reflect the adjustment of our revenue estimates based on historical experience.

Further payment reductions to Medicare, Medicaid and other government programs could have a direct adverse effect on the Company’s net earnings and cash flows. The Company cannot predict whether changes will be implemented that will result in further payment reductions. In addition to changes in reimbursement rates, the Company is also impacted by changes in coverage policies for laboratory tests. For example, CLFS coding and billing changes related to toxicology and other procedures were implemented in 2016. The Company experienced delays in the pricing and implementation of the new toxicology codes. Further coding and billing changes related to toxicology testing and other procedure types have been implemented in 2017. The Company expects delays in the pricing and implementation of these new codes, and while the impact on price and margin is currently unclear, the Company anticipates that some of that impact will be mitigated by timely negotiation with payers impacted by these changes.

The President of the United States has announced that he favors repealing the Affordable Care Act (“ACA”) in 2017, and leaders of the Republication-controlled federal legislature also have taken measures to repeal and replace the ACA. The scope and timing of any legislation to repeal, amend, replace, or reform the ACA is uncertain, but if such legislation were to become law, it could have a significant impact on the U.S. healthcare system. Uncertainty regarding the ACA prior to any such repeal, amendment, replacement or reform could create uncertainty generally in the healthcare market. Also, the trend of consolidating, converging and diversifying among our customers and payers has continued. Consolidation is increasing price transparency and bargaining power, and encouraging internalization of clinical testing.

Despite the market changes regarding reimbursement discussed above, the Company believes that the volume of clinical laboratory testing is positively influenced by several factors, including an expansion of Medicaid, managed care, and private insurance exchanges. Additional factors that may lead to future volume growth include an increase in the number and types of tests that are readily available (due to advances in technology and increased cost efficiencies) for the diagnosis of disease, and the general aging of the U.S. population.

Critical Accounting Policies

Revenue Recognition. The Company provides laboratory testing services, web-based hosted software services, telehealth products and post contract customer support services.

Billings for laboratory testing services are reimbursed by third-party payors net of allowances for differences between amounts billed and the cash receipts from such payors. In accordance with Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) ASC-605 “Revenue Recognition”, the Company recognizes revenues when there is a persuasive evidence of an arrangement, title and risk of loss have passed, product is shipped or services have been rendered, sales price is fixed or determinable and collection of the related receivable is reasonably assured.

 Historically, the Company had recognized revenue for laboratory services upon cash receipt because the criteria to recognize revenues under ASC-605 had not been met at the time test results were delivered since the fee was not fixed and determinable until the third payor remitted payment given the limited experience and history to develop a reliable estimate of the provision for contractual adjustments (that is, the difference between established rates and expected third-party payments) and discounts (that is, the difference between established rates and the amount billable). The Company has continuously reassessed its ability to develop reliable estimates of the provision for contractual adjustments and discounts and over the past year and has made investments in its systems and process around its billing system to improve the quality of information generated by the system. Given these ongoing investments and improvements and based upon the financial framework the Company uses for estimating the provision for contractual adjustments and discounts, in the second quarter of fiscal 2016, the Company concluded that it was able to reasonably estimate its provision for contractual adjustments and discounts and began recognizing revenue at the time test results are delivered, net of estimated contracted allowances.

Revenue for hosted software services, telehealth products, and customer support services are recognized when persuasive evidence of an arrangement exists, delivery has occurred, the selling price is fixed and collectability is reasonably assured. Multiple-element arrangements are assessed to determine whether they can be separated into more than one unit of accounting. A multiple-element arrangement is separated into more than one unit of accounting if all of the following criteria are met: the delivered item has value to the customer on a standalone basis; there is objective and reliable evidence of the fair value of the undelivered items in the arrangement; if the arrangement includes a general right of return relative to the delivered items, and delivery or performance of the undelivered item is considered probable and substantially in our control. If these criteria are not met, then revenue is deferred until such criteria are met or until the period over which the last undelivered element is delivered, which is typically the life of the contract agreement. If these criteria are met, we allocate total revenue among the elements based on the sales price of each element when sold separately which is referred to as vendor specific objective evidence or VSOE.

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Long-lived assets held and used by the Company are reviewed for impairment, in accordance with FASB ASC Topic 360, “Property, Plant, and Equipment”, whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. In the event that facts and circumstances indicate that the cost of any long-lived assets may be impaired, an evaluation of recoverability would be performed. At March 31, 2017 and June 30, 2016, the Company did not record any impairment charges.

Income taxes. The Company accounts for income taxes under an asset and liability approach that requires the recognition of deferred tax assets and liabilities for the expected future tax consequences of events that have been recognized in the Company’s financial statements or tax returns. In estimating future tax consequences, the Company generally considers all expected future events other than enactments of changes in tax laws or rates. The effect on deferred tax assets and liabilities of a change in tax rates will be recognized as income or expense in the period that includes the enactment date. A valuation allowance is established when necessary to reduce deferred tax assets to the amount expected to be realized.

Prior to the reverse merger, AEON elected to be taxed as an S Corporation for federal and certain state income tax purposes. Under this election substantially all of the profits, losses, credits and deductions of the Company are passed through to the individual shareholders. Therefore prior to the reverse merger no provision or liability for income taxes has been included in these consolidated financial statements except for state and localities where the S Corporation status has not been recognized.

Prior to the reverse merger, AHC tax benefits were fully offset by a valuation allowance due to the uncertainty that the deferred tax assets would be realized. As a result of the reverse merger a deferred tax asset was recorded since it was determined the realization of some of these assets is more likely than not, due to consolidated earnings resulting in the expected usage of net operating loss carryforwards.

Under income tax regulations in the United States AHC is the acquirer of AEON. As such the Company must file a consolidated return for both AHC and AEON for the year ending June 30, 2016. The return will include the operating results of AHC from July 1, 2015 through June 30, 2016, and AEON’s results from January 27, 2016 through June 30, 2016.

Management considers the likelihood of changes by taxing authorities in its filed income tax returns and recognizes a liability for or discloses potential changes that management believes are more likely than not to occur upon examination by tax authorities. Management has not identified any uncertain tax positions in filed income tax returns that require recognition or disclosure in the accompanying consolidated financial statements.

The Company’s policy is to include penalties and interest expense related to income taxes as a component of other expense and interest expense, respectively, as necessary.

Recent Accounting Pronouncements. See Note 2 of the Notes to Consolidated Financial Statements for further information of certain accounting standards that have been adopted during fiscal 2016 and the first three quarters of fiscal 2017 and certain accounting standards that we have not yet required to implement and may be applicable to our future operations.

Results of Operations

Three and Nine months ended March 31, 2017 compared to three and nine months ended March 31, 2016

Revenues were $5,531,810 for the quarter ended March 31, 2017 compared to $5,503,268 for the prior year period. Revenue for the nine months ended March 31, 2017 was $16,468,699 compared to $28,100,709 for the prior year period reflecting a 41.4% decrease compared to the prior year. These results reflect a decrease due to reductions in Medicare and Medicaid reimbursements for calendar year 2016. A discussion of reimbursement rates is included in the section labeled “Outlook and Trends” within Item 2 of this Form 10-Q.

Cost of revenues was $908,290 or 16.4% of revenue for the quarter ended March 31, 2017 compared to $2,266,891 or 41.1% for the prior year period, due primarily to cost cutting measures in hourly payroll implemented by the Company. Cost of revenue for the nine months ended March 31, 2017 decreased to $3,203,504 or 19.5% of revenue compared to $5,333,436 or 19.0% of revenue for the prior year period.

Gross margin as a percent of revenue for the quarter ended March 31, 2017 was 83.6% as compared to 58.8% for the prior year period and was 80.5% for the nine months ended March 31, 2017 compared to 81.0% for the prior year period for the reasons mentioned above. In addition, the Company wrote down the value of inventory of purchased components for approximately $32,000 and finished goods of $206,000 during the nine months ended March 31, 2017 to net realizable value.

Selling general and administrative expenses decreased to $3,388,403 or 61.3% of total revenue for the quarter ended March 31, 2017 compared to $4,098,396 or 74.5% of total revenue for the prior year period. The decrease was primarily due to changes in the commission structure, which was changed to decrease the fixed cost component and increase the variable component. Selling general and administrative expenses decreased to $11,264,267 or 68.4% of revenue for the nine months ended March 31, 2017 compared to $14,091,897 or 50.1% of revenue for the prior year period. The decrease in revenue contributed to the decrease in selling, general and administrative as a percentage of revenue in the current year quarter.

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Depreciation and amortization expense was $393,510 for the quarter ended March 31, 2017 compared to $400,110 for the prior year period and $1,196,435 for the nine months ended March 31, 2017 compared to $876,112 for the prior year period. The increase in 2017 was primarily due to a full nine months of intangible asset amortization related to the merger.

Other expense was $74,248 for the quarter ended March 31, 2017 as compared to $459,444 for the prior year period.  A $340,000 expense was incurred in the prior period for a change in fair value of derivative liabilities compared to income of $256,806 in the current period.  There was also a loss on debt extinguishment of $258,037 in the current period.  Other expense was $309,415 for the nine months ended March 31, 2017 as compared to $450,352 for the prior year period.  The previously mentioned $340,000 expense was incurred in the prior period for a change in fair value of derivative liabilities compared to income of $392,407 in the current period.  Also, the previously mentioned loss on debt extinguishment of $258,037 occurred in the current period

The provision for income taxes was zero for the quarter ended March 31, 2017 compared to a provision of $1,017,600 for the prior year period. The provision for income taxes was zero for the nine months ended March 31, 2017 compared to a provision of $1,009,940 for the prior year period. The variance between the current and prior year is primarily due to the change in net income or loss for the periods.

Net income for the quarter ended March 31, 2017 was $767,359 or $0.10 income per share on a primary basis and income of $0.04 on a diluted basis compared to a net loss of $2,739,173 or $0.65 per share on both a primary and diluted basis for the prior year period. Net income for the nine months ended March 31, 2017 was $257,404 or zero per share on a primary and diluted basis compared to net income of $6,338,972 or $3.04 per share on a primary basis and $2.44 on a diluted basis for the prior year period.

Liquidity and Capital Resources

Overview

Our operations and product development activities have required substantial capital investment to date. As discussed in more detail below, our recurring operating losses and capital needs, among other factors, raise substantial doubt about our ability to continue as a going concern. Our consolidated financial statements do not include any adjustments that might result from the outcome of this uncertainty.

Cash Flows

At March 31, 2017, unrestricted cash and cash equivalents amounted to approximately $1,155,000 and current assets at that date were approximately $3,180,000 compared to June 30, 2016 unrestricted cash and cash equivalents of approximately $1,415,000 and current assets of approximately $4,187,000. Our current estimated monthly operational requirements are approximately $1,300,000. Currently, our available cash and cash equivalents as of the filing date of this Quarterly Report on Form 10-Q is approximately $1,023,000. For the nine months ended March 31, 2017, net cash provided by operating activities was approximately $570,000, net cash used in investing activities was approximately $22,000, net cash used in financing activities was approximately $808,000 and total cash used was approximately $259,000, which primarily reflects repayments of notes payable during the nine months ended March 31, 2017.

Going Concern

As of the filing date of this Quarterly Report on Form 10-Q, and after giving effect to the recent note exchange transaction described in greater detail in Note 8 of the notes to Condensed Consolidated Financial Statements, there is outstanding an aggregate principal amount of $2,545,199 of senior secured convertible notes with a maturity date of March 20, 2018 and a secured note subordinated to the interests of the existing senior lenders in the principal amount of $330,000 with a maturity date of June 15, 2018. We expect our existing resources, revenues generated from operations, and proceeds received from other transactions we are considering (of which there can be no assurance) to satisfy our working capital requirements for at least the next twelve months; however, no assurances can be given, that we will be able to generate sufficient cash flow from operations, and proceeds received from other transactions we are considering (of which there can be no assurance) to satisfy our working capital requirements for at least the next twelve months; however, no assurances can be given, that we will be able to generate sufficient cash flow from operations or complete other transactions to satisfy our other obligations. These factors, among others, raise substantial doubt about our ability to continue as a going concern. The accompanying consolidated financial statements do not include any adjustments to the recoverability and classification of assets carrying amounts or the amounts and classifications of liabilities that might result from the outcome of these uncertainties. Accordingly, we need to raise additional capital and are exploring potential transactions to improve our capital position. Unless we are able to increase revenues substantially or generate additional capital from other transactions, our current cash resources will only satisfy our working capital needs for a limited period of time.

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The Company does not have a bank line of credit or other fixed source of capital reserves. We are exploring potential transactions to improve our capital position to ensure we are able to meet our financing and working capital requirements. We would expect to raise additional funds through obtaining a credit facility from an institutional lender or undertaking private debt financings. Raising additional funds by issuing equity or convertible debt securities may cause our stockholders to experience substantial dilution in their ownership interests and new investors may have rights superior to the rights of our other stockholders. Raising additional funds through debt financing or preferred stock, if available, may involve covenants that restrict our business activities and options and such additional securities may have powers, designations, preferences or rights senior to our currently outstanding securities. We may also enter into financing transactions which involve the granting of liens on our assets or which grant preferences of payment from our revenue streams, all of which could adversely impact our ability to rely on our revenue from operations to support our ongoing operating costs. Alternatively, we may seek to obtain new financing from existing security holders, which may include reducing the exercise or conversion prices of outstanding securities, or the issuance of additional equity securities. Currently, we do not have any definitive agreements with any third-parties for such transactions and there can be no assurance; however, that we will be successful in raising additional capital or securing financing when needed or on terms satisfactory to the company. If we are unable to raise additional capital when required, or on acceptable terms, we will need to reduce costs and operations substantially or potentially suspend operations, any of which would have a material adverse effect on our business, financial condition and results of operations.

Off-Balance Sheet Arrangements

We have not created, and are not party to, any special-purpose or off-balance sheet entities for the purpose of raising capital, incurring debt or operating parts of our business that are not consolidated into our financial statements. We do not have any arrangements or relationships with entities that are not consolidated into our financial statements that are reasonably likely to materially affect our liquidity or the availability of our capital resources. We have entered into various agreements by which we may be obligated to indemnify the other party with respect to certain matters. Generally, these indemnification provisions are included in contracts arising in the normal course of business under which we customarily agree to hold the indemnified party harmless against losses arising from a breach of representations related to such matters as intellectual property rights. Payments by us under such indemnification clauses are generally conditioned on the other party making a claim. Such claims are generally subject to challenge by us and to dispute resolution procedures specified in the particular contract. Further, our obligations under these arrangements may be limited in terms of time and/or amount and, in some instances, we may have recourse against third parties for certain payments made by us. It is not possible to predict the maximum potential amount of future payments under these indemnification agreements due to the conditional nature of our obligations and the unique facts of each particular agreement. Historically, we have not made any payments under these agreements that have been material individually or in the aggregate. As of March 31, 2017, we were not aware of any obligations under such indemnification agreements that would require material payments.

Other Matters

The events and contingencies described below have impacted or may impact our liquidity and capital resources.

In connection with our private placement of Series D preferred stock in June 2013, we issued 665,000 shares of Series D 5% convertible preferred stock. Presently, there are 605,000 shares of Series D preferred stock outstanding. The Series D preferred stock is convertible into 619,154 shares of our common stock at the conversion rate of $9.77139 per share. Each share of Series D preferred stock has a stated value of $10.00 per share. The Company has the right to repurchase these shares at the stated value per share, plus accrued and unpaid dividends and to require the holders to convert such securities into common stock starting in June 2016. Each holder of our Series D preferred stock has the right to convert such shares into common stock at any time commencing on the six-month anniversary date of the issue date. The Series D preferred stock pays dividends at the rate of 5% per annum, payable in cash or shares of common stock, at the Company’s option, subject however, to limitations required by the NASDAQ stock market. At March 31, 2017, the Company has accrued dividends in the amount of approximately $557,000 which remain unpaid.

On March 1, 2017, the Company extended the expiration date of an aggregate of 309,547 outstanding common stock purchase warrants which were originally issued in March and September 2012 in separate private placements of the Company’s securities. Of the warrants extended, an aggregate of 124,370 warrants would otherwise have expired on March 15, 2017 and 185,177 warrants would have expired on September 29, 2017. In both cases, the expiration date of the warrants has been extended to September 29, 2018. All of these warrants have an exercise price of $12.06 per share. Other than the extension of the term of these warrants, the provisions of the warrants remain unchanged.

On March 20, 2017, the Company entered into a note exchange agreement with the holders of an aggregate principal amount of $2,170,000 of outstanding promissory notes (the “Original Notes”), which were due and payable, pursuant to which the Company agreed to issue the holders of such notes, in consideration of the cancellation of the Original Notes, new promissory notes in the aggregate principal amount of $2,545,199, which is equal to the sum of the aggregate principal amount of the original notes plus the accrued but unpaid interest on the Original Notes (the “New Notes”). The New Notes are convertible into shares of the Company’s Common Stock at an initial conversion price of $2.03 per share. Based on the initial conversion prices, the New Notes will be convertible into up to 1,253,792 shares of common stock. If the Company issues or sells shares of its common stock, rights to purchase shares of its common stock, or securities convertible into shares of its common stock for a price per share that is less than the conversion price then in effect, such conversion price will be decreased to equal 85% of such lower price. The foregoing adjustments to the conversion price will not apply to certain exempt issuances, including issuances pursuant to certain employee benefit plans. In addition, the conversion price is subject to adjustment upon stock splits, reverse stock splits, and similar capital changes. All of the New Notes have a maturity date of one year from the closing date. The New Notes were issued in consideration of the exchange of (i) and aggregate principal amount of $950,000 of Original Notes convertible at a price of $2.25 per share, (ii) an aggregate principal amount of $520,000 of Original Notes convertible at a price of $3.00 per share, and (iii) an aggregate principal amount of $700,000 of unconvertible Original Notes. As the conversion price of the New Notes is below $2.25, the exercise price of outstanding warrants to purchase an aggregate of 825,184 shares of common stock has been adjusted from $2.70 per share to $2.07 per share.

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The New Notes bear interest at the rate of 5% per annum with interest payable upon maturity, the conversion of the New Notes or on any earlier redemption date. Commencing one month after the Company’s common stock is listed for trading on a national securities exchange the Company will have the right to redeem all or any portion of the outstanding principal balance of the New Notes, plus all accrued but unpaid interest at a price equal to 110% of such amount. The holders of the New Notes have the right to convert any or the entire amount to be redeemed into common stock prior to redemption. Subject to certain exceptions, the New Notes are senior to existing and future indebtedness of the Company and are secured by a first priority lien on all of the Company’s assets to the extent and as provided in a Security Agreement entered into between the Company and the holders. Subject to certain exceptions, the New Notes contain customary covenants against incurring additional indebtedness and granting additional liens and contains customary events of default. Upon the occurrence of an event of default under the New Notes, the holders may require the Company to repay all or a portion of the note in cash, at a price equal to 110% of the principal, plus accrued and unpaid interest.

In connection with the exchange of the Original Notes for the New Notes, the parties agreed that the holder of all of our outstanding shares of Series B Convertible Preferred Stock (the “Series B Preferred Stock”) would exchange all of its outstanding shares of Series B Preferred Stock for shares of a new series of convertible preferred stock to be designated as Series E Convertible Preferred Stock (the “Series E Preferred Stock”). Accordingly, on March 20, 2017, the Company also entered into a separate exchange agreement with the holder of the shares of Series B Preferred Stock, to exchange such shares for a total of 25,000 shares of Series E Preferred Stock. The shares of Series E Preferred Stock are initially convertible by the holder into an aggregate of 187,000 shares of Common Stock at the initial conversion rate of $4.00 per share. The conversion price of the new preferred stock will be subject to adjustment solely in the event of stock dividends, combinations, splits, recapitalizations, and similar corporate events and does not provide for general price-based anti-dilution adjustments. Each share of Series E Preferred Stock has a stated value of $30.00 per share. On March 20, 2017, we filed with the State of Delaware a Certificate of Designations, Rights and Preferences and Number of Shares of Series E Convertible Preferred Stock, referred to as the Series E Designation. The Series E Designation defines the rights and preferences of the Series E Preferred Stock and provides that each share of Series E Preferred Stock will have the following rights and preferences: (i) each holder of the Series E Preferred Stock will have the right, at any time, to convert the shares of Series E Preferred Stock into shares of common stock; (ii) the Series E Preferred Stock will be redeemable at our option commencing one year after the closing date (provided that the Company’s common stock is listed on a national securities exchange at such time); and (iii) the Series E Preferred Stock will pay dividends at the rate of 5% per annum in cash. Pursuant to the exchange agreement for the preferred stock, the holder of the shares of Series B Preferred Stock agreed to waive all unpaid dividends that had accrued on the shares of Series B Preferred Stock.

On April 24, 2017, the Company entered into a settlement and mutual release with its former chief financial officer, William A. Marshall to resolve an outstanding arbitration proceeding. A summary of the terms of the settlement agreement and resolution of the arbitration proceeding is set forth in Note 12 to the condensed consolidated financial statements.

Effects of Inflation and Changing Prices

The impact of general inflation on our operations has not been significant to date and we believe inflation will continue to have an insignificant impact on us.

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.

As of March 31, 2017, we are not exposed to significant financial market risks from changes in foreign currency exchange rates and are only minimally impacted by changes in interest rates. However, in the future, we may enter into transactions denominated in non-U.S. currencies or increase the level of our borrowings, which could increase our exposure to these market risks. We have not used, and currently do not contemplate using, any derivative financial instruments.

Interest Rate Risk

At any time, fluctuations in interest rates could affect interest earnings on our cash. We believe that the effect, if any, of reasonably possible near term changes in interest rates on our financial position, results of operations, and cash flows would not be material. Currently, we do not hedge these interest rate exposures. The primary objective of our investment activities is to preserve capital. We have not used derivative financial instruments in our investment portfolio.

At March 31, 2017, our unrestricted cash totaled approximately $1,155,000 and was in non-interest bearing checking accounts used to pay operating expenses.

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ITEM 4. CONTROLS AND PROCEDURES.

Evaluation of Disclosure Controls and Procedures

We maintain a system of disclosure controls and procedures, as defined in Rules 13a-15(e) and 15d-15(e) of the Exchange Act, that are designed to ensure that information required to be disclosed in our reports filed under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms. This information is also accumulated and communicated to management, including our Chief Executive Officer (“CEO”) and principal accounting officer (“PAO”), as appropriate, to allow timely decisions regarding required disclosure. As of the date of this report our CEO also serves as our principal financial officer. Our management, under the supervision and with the participation of its CEO and PAO, evaluated the effectiveness of the design and operation of our disclosure controls and procedures as of the end of the period covered by this Report. Our management identified material weaknesses in the control environment described below, and as a result of these material weaknesses, our CEO and PAO concluded that our disclosure controls and procedures were not effective as of March 31, 2017. Notwithstanding the foregoing, our CEO and PAO believe that the financial statements included in this report fairly present in all material respects (and in accordance with U.S. generally accepted accounting principles) our financial condition, results of operations and cash flows for the periods presented.

Our management identified the following material weaknesses:

· We do not have sufficient resources in our accounting function, which restricts the Company’s ability to gather, analyze and properly review information related to financial reporting in a timely manner. In addition, due to our size and nature, segregation of all conflicting duties may not always be possible and may not be economically feasible. However, to the extent possible, the initiation of transactions, the custody of assets and the recording of transactions should be performed by separate individuals. Management evaluated the impact of our failure to have segregation of duties on our assessment of our disclosure controls and procedures and has concluded that the control deficiency that resulted represented a material weakness.

· We have inadequate controls to ensure that information necessary to properly record transactions is adequately communicated on a timely basis from non-financial personnel to those responsible for financial reporting. Management evaluated the impact of the lack of timely communication between non-financial personnel and financial personnel on our assessment of our disclosure controls and procedures and has concluded that the control deficiency represented a material weakness.

· Due to a lack of sufficient resources within the accounting function, as referenced above, we did not establish and maintain effective controls over the identification of reduced revenue collections due to modifications of payor claims adjudication process and lack of communication between financial personnel and non-financial personnel which resulted in the overstatement of revenues and accounts receivable for the period ended March 31, 2016.

Remediation of Material Weaknesses in Internal Control over Financial Reporting

Management is committed to the planning and implementation of remediation efforts to address the material weaknesses as well as other identified areas of risk. These remediation efforts, summarized below, which are either implemented or in process, are intended to both address the identified material weaknesses and to enhance our overall financial control environment. In this regard, our initiatives include:

· Control Environment - to remediate the control environment deficiencies AEON’s leadership team, including the Chief Executive Officer for the merged company, has embarked on an initiative to reaffirm and reemphasize the importance of internal controls, including tone at the top and the control environment. In addition, we specifically:

o Will appoint a new Chief Financial Officer to replace the previous CFO who resigned in January 2017; and

o Have initiated a thorough review of the design of the procedures for the preparation of financial statements with emphasis on compliance with GAAP.

Monitoring and Control Activities - In order to further strengthen internal control over financial reporting at the process level, we have performed certain remediation actions, including performing an internal review of accounting methodologies, reporting architecture, review existing personnel and propose a specific course of action to ensure compliance in all facets of accounting and external reporting.

In addition to the actions taken above, we intend to take the following actions to address the material weaknesses described above:

· Hire additional personnel with sufficient U.S. GAAP and financial reporting experience.

· Establish formal policies and procedures in internal accounting and audit functions.

· Conduct a thorough review of the design of the procedures for the preparation of financial statements with emphasis on compliance with GAAP.

34

Until the remediation actions are fully implemented and the operational effectiveness of related internal controls validated through testing, the material weaknesses described above will continue to exist. However, when fully implemented and operational, AEON believes the measures described above will remediate the control deficiencies AEON has identified and strengthen its internal control over financial reporting. AEON is committed to continuing to improve its internal control processes and will continue to diligently and vigorously review our financial reporting controls and procedures. In addition, senior management will ensure that its resulting disclosures are subject to a rigorous review process prior to finalizing and releasing financial statements. As AEON continues to evaluate and work to improve our internal control over financial reporting, we may determine to take additional measures to address control deficiencies or determine to modify, or in appropriate circumstances not to complete, certain of the remediation measures described above.

Changes in Internal Control over Financial Reporting

Other than the ongoing remediation efforts described above, there have been no changes in our internal control over financial reporting during the quarter ended March 31, 2017 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

Restatement of 10-Q for the Period Ended March 31, 2016

On April 5, 2017, we filed an amendment to our Quarterly Report on Form 10-Q for the fiscal quarter ended March 31, 2016 (the “Amended Form 10-Q”) to restate the financial statements contained therein. As described in our Amended Form 10-Q, the restatement was necessitated due to errors in the revenue estimates employed for the quarter ended March 31, 2016. This error was caused by the changes in the claims adjudication processes utilized by payors beginning in January 2016 as well as the decision by the Centers for Medicare and Medicaid Services (CMS) in January 2016 to reduce the unit reimbursement rate for many of the tests typically performed by the Company along with the number of tests that CMS would reimburse. Because Medicare and Medicaid account for close to 50% of our annual revenue, this reduction in reimbursement rates had a substantial negative impact on our revenue and because we were still billing at 2015 rates and did not adjust our historical percentage of total billings downward to compensate for the new lower reimbursement rates. Following management’s review of these matters, we determined that our estimated collections rate for the quarter ended March 31, 2016 should have been approximately 10.41%, instead of 15.25%, resulting in a decrease in revenues for the quarter of approximately $2,113,000. Management has also concluded that the errors in accounting for the changes in payor adjudication processes and the adjustment in CMS reimbursement rates resulted from the material weaknesses in our internal control over financial reporting. The Company will augment its plan to remediate the material weaknesses in its control structure to address the factors that resulted in the restatement to its Quarterly Report for the quarter ended March 31, 2016. The condensed consolidated financial statements for the fiscal quarter ended March 31, 2017 presented in this Quarterly Report on Form 10-Q are based on the adjustments to our revenue estimates described above.

PART II - OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS.

See Item 1 of Part I, “Financial Statements — Note 12 — Commitments and Contingencies.

ITEM 1A. RISK FACTORS.

As provided for under the Private Securities Litigation Reform Act of 1995, we wish to caution shareholders and investors that the following important factors, among others discussed throughout this Quarterly Report on Form 10-Q is set forth below. Our operating results and financial condition have varied in the past and may in the future vary significantly depending on a number of factors. In addition to the risks described below and the other information set forth elsewhere in this report, you should carefully consider the factors discussed in the “Risk Factors” section in our Annual Report on Form 10-K for the year ended June 30, 2016 and in our other reports filed with the SEC for a discussion of the risks associated with our business, financial condition and results of operations. These risks have affected, and in some cases could, have a material adverse effect upon our business, results of operations, financial condition or liquidity and cause our actual results to differ materially from those contained in statements made in this report and presented elsewhere by management from time to time. The risks identified by the Company in its reports are not the only risks facing us. Additional risks and uncertainties not currently known to us or that we currently believe are immaterial also may materially adversely affect our business, results of operations, financial condition or liquidity. If any of the matters or events described in the following risks actually occurs, our business, financial condition or results of operations could be harmed. In such case, the trading price of our common stock could decline, and you may lose all or part of your investment due to any of these risks. Except as set forth below, we believe there have been no material changes in our risk factors from those disclosed in our Annual Report on Form 10-K for the fiscal year ended June 30, 2016 and our other reports subsequently filed with the SEC.

35

Our capital requirements are significant and unless our revenues can sufficiently support our operating costs, we expect to raise additional capital to finance our operations and repay outstanding debt obligations.

Our capital requirements have been and will continue to be significant. We are expending significant amounts of capital to develop, promote and market our services. Our available cash and cash equivalents as of March 31, 2017 totaled approximately $1,155,000. However, our available cash and cash equivalents as of the filing date of this Quarterly Report on Form 10-Q is approximately $1,205,000 and our estimated monthly operational requirements is approximately $1,300,000. Further, as of the filing date of this Quarterly Report on Form 10-Q, and after giving effect to the recent note exchange transaction described in greater detail above and the settlement of the arbitration proceeding with our former chief financial officer, there is outstanding an aggregate principal amount of approximately $2,875,000 of secured notes, all of which have a maturity date during the fiscal year ending June 30, 2018. We expect our existing resources, revenues generated from operations, and proceeds received from other transactions we are considering (of which there can be no assurance) to satisfy our working capital requirements for at least the next twelve months; however, no assurances can be given that we will be able to generate sufficient cash flow from operations or complete other transactions to satisfy our other obligations. These factors, among others, raise substantial doubt about our ability to continue as a going concern.  The accompanying consolidated financial statements do not include any adjustments to the recoverability and classification of assets carrying amounts or the amounts and classifications of liabilities that might result from the outcome of these uncertainties. Accordingly, we need to raise additional capital and are exploring potential transactions to improve our capital position. Unless we are able to increase revenues substantially or generate additional capital from other transactions, our current cash resources will only satisfy our working capital needs for a limited period of time.

We are exploring potential transactions to improve our capital position to ensure we are able to meet our financing and working capital requirements. We would expect to raise additional funds through obtaining a credit facility from an institutional lender or undertaking private debt financings. Raising additional funds by issuing equity or convertible debt securities may cause our stockholders to experience substantial dilution in their ownership interests and new investors may have rights superior to the rights of our other stockholders. Raising additional funds through debt financing or preferred stock, if available, may involve covenants that restrict our business activities and options and such additional securities may have powers, designations, preferences or rights senior to our currently outstanding securities. We may also enter into financing transactions which involve the granting of liens on our assets or which grant preferences of payment from our revenue streams, all of which could adversely impact our ability to rely on our revenue from operations to support our ongoing operating costs. Alternatively, we may seek to obtain new financing from existing security holders, which may include reducing the exercise or conversion prices of outstanding securities, or the issuance of additional equity securities. Currently, the Company does not have any definitive agreements with any third-parties for such transactions and there can be no assurance, however, that we will be successful in raising additional capital or securing financing when needed or on terms satisfactory to the Company. If we are unable to raise additional capital when required, or on acceptable terms, we will need to reduce costs and operations substantially or potentially suspend operations, any of which would have a material adverse effect on our business, financial condition and results of operations. Our future capital requirements will depend on, and could increase substantially as a result of many factors, including:

• our need to utilize cash to support research and development activities and to make incremental investments in our organization;

• our ability to achieve targeted revenue, gross profit margins and cost management objectives;

• the success of our sales and marketing efforts;

• our need to repay indebtedness;

• the extent and terms of any development, marketing or other arrangements; and

• changes in economic, regulatory or competitive conditions, including changes in payor reimbursement rates or claim adjudication processes.

We have identified material weaknesses in our internal control over financial reporting, which could continue to impact negatively our ability to report our results of operations and financial condition accurately and in a timely manner.

As required by Section 404 of the Sarbanes-Oxley Act of 2002, management has conducted an evaluation of the effectiveness of our internal control over financial reporting at March 31, 2017. We identified a number of material weaknesses in our internal control over financial reporting and concluded that, as of March 31, 2017, we did not maintain effective control over financial reporting based on criteria established in Internal Control-Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission. For a detailed description of these material weaknesses, see Item 4, “Controls and Procedures.” Each of our material weaknesses results in more than a remote likelihood that a material misstatement of the annual or interim financial statements that we prepare will not be prevented or detected. As a result, we must perform extensive additional work to obtain reasonable assurance regarding the reliability of our financial statements. As described in Item 4, “Controls and Procedures” we restated our Quarterly Report on Form 10-Q for the quarter ended March 31, 2016. Moreover, other material weaknesses may be identified.

We are in the process of remedying all of the identified material weaknesses, and this work will continue during fiscal 2017 and perhaps beyond. For a detailed description of our remedial efforts, see Item 4, “Controls and Procedures.” There can be no assurance as to when all of the material weaknesses will be remedied. Until our remedial efforts are completed, management will continue to devote significant time and attention to these efforts, and we will continue to incur expenses associated with the additional procedures and resources required to prepare our Consolidated Financial Statements. Certain of our remedial actions, such as hiring additional qualified personnel to implement our reconciliation and review procedures, will be ongoing and will result in our incurring additional costs even after our material weaknesses are remedied.

36

If we are unsuccessful in implementing or following our remediation plan, or fail to update our internal control over financial reporting as our business evolves or to integrate acquired businesses into our controls system, we may not be able to timely or accurately report our financial condition, results of operations or cash flows or to maintain effective disclosure controls and procedures. If we are unable to report financial information in a timely and accurate manner or to maintain effective disclosure controls and procedures, we could be subject to, among other things, regulatory or enforcement actions by the SEC, an inability for us to be accepted for listing on any national securities exchange in the near future, securities litigation and a general loss of investor confidence, any one of which could adversely affect our business prospects and the market value of our Common Stock. Further, there are inherent limitations to the effectiveness of any system of controls and procedures, including the possibility of human error and the circumvention or overriding of the controls and procedures. We could face additional litigation exposure and a greater likelihood of an SEC enforcement or other regulatory action if further restatements were to occur or other accounting-related problems emerge. In addition, any future restatements or other accounting-related problems may adversely affect our financial condition, results of operations and cash flows.

Our outstanding debt may impair our financial and operating flexibility.

As of March 31, 2017, there was an aggregate principal amount of indebtedness of approximately $2,545,000, consisting of senior secured convertible notes with a maturity date of March 20, 2018. In addition, subsequently we issued a secured note, subordinated to the interests of the existing senior lenders, in the principal amount of $330,000 to the Company’s former chief financial officer in connection with the settlement of an arbitration proceeding. All of the outstanding notes contain covenants and events of default customary for transactions of this nature and are secured by a lien on our assets. For example, the outstanding senior secured notes include restrictions against incurring additional indebtedness and granting further security interests on our assets. Accordingly, without the consent of the holders of these senior debt instruments we must comply with these restrictions. Additionally, among the defined events of default are defaults of our payment obligations, breach of any material covenant or representation of the convertible debentures or the related transaction agreements, and the commencement of proceedings under applicable U.S. federal or state bankruptcy, insolvency, reorganization or other similar laws either against us or by us. Upon the occurrence of an event of default under the notes, a holder may require us to repay all or a portion of the outstanding principal, plus interest and certain of our outstanding debt instruments also require that any repayment due to a default will require immediate repayment of the principal and accrued and unpaid interest. If we are unable to consummate an additional financing prior to the maturity date of these debt instruments, or otherwise further extend or exchange them, we will be required to repay these securities, which may have an adverse effect on our cash position. If we are unable to make the scheduled principal and interest payments on these debt instruments or comply with applicable covenants contained therein, we may be in default under one or more these securities, which would likely have a material adverse effect on our business, financial condition and results of operations. Further, if we are unable to repay the secured debt instruments when due, or upon an event of default, the holders could foreclose on our encumbered assets.

The exercise of our outstanding options and warrants, or conversion of our outstanding convertible debt and convertible preferred stock, may depress our stock price and dilute your ownership of the company.

As of March 31, 2017, the following options, restricted stock units and warrants were outstanding:

· Stock options to purchase approximately 679,000 shares of common stock at exercise prices ranging from $1.73 to $36.00 per share, not all of which are immediately exercisable. The weighted average exercise price of the outstanding stock options is $5.86 per share. These stock options are employee and non-executive director options.

· Warrants to purchase approximately 4,206,000 shares of common stock with a weighted average exercise price of $4.91 per share.

· An aggregate of approximately 28,000 unvested restricted stock units.

At March 31, 2017, there were outstanding 25,000 shares of Series E convertible preferred stock, which the holder may convert into an aggregate of 187,500 shares of our common stock at the initial conversion price of $4.00 per share. Further, there is currently outstanding 605,000 shares of Series D preferred stock, which are initially convertible into an aggregate of 619,154 shares of common stock at the initial conversion rate of $9.77139 per share (exclusive of any additional shares of common stock that we may elect to issue in lieu of paying cash dividends on the Series D preferred stock). Shares of common stock issued upon conversion of Series D or Series E preferred stock may be resold from time to time by a holder in accordance with Rule 144 under the Securities Act.

In addition, as of March 31, 2017, there was an aggregate principal amount of $2,545,199 of convertible debt, which may be convertible into a total of 1,253,792 shares of Common Stock, at a conversion price of $2.03 per share.

To the extent that these securities are exercised or converted, or we issue additional common shares, dilution to our stockholders will occur. Moreover, the terms upon which we will be able to obtain additional equity capital may be adversely affected, since the holders of these securities can be expected to exercise or convert them at a time when we would, in all likelihood, be able to obtain any needed capital on terms more favorable to us than the exercise and conversion terms provided by those securities. Further, in the event the conversion price of our outstanding convertible debentures or shares of convertible preferred stock is lower than the actual trading price on the day of conversion, the holders could immediately sell their converted common shares, which would have a dilutive effect on the value of the outstanding common shares. Furthermore, the significant downward pressure on the trading price of our common stock as preferred stock or debentures holders converted these securities and sell the common shares received on conversion could encourage short sales by the holders of preferred stock or other security holders. This would place further downward pressure on the trading price of our common stock. Even the mere perception of eventual sales of common shares issued on the conversion of the shares of preferred stock or debentures could lead to a decline in the trading price of our common stock.

37

ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS.

a) Sales of Unregistered Securities

As of March 31, 2017, we issued options to purchase an aggregate of 30,059 shares of common stock in lieu of cash fees earned for the service on our board of directors pursuant to our director compensation policy. The options were issued under the Company’s 2011 Omnibus Equity Incentive Plan. The options are exercisable for a period of ten years at an exercise price of $2.33 per share. These securities were issued pursuant to the exemption from registration provided by Section 4(a)(2) of the Securities Act of 1933, as amended.

Except as previously disclosed in reports filed with the SEC pursuant to the Securities and Exchange Act of 1934, as amended, and as described elsewhere in this Quarterly Report on Form 10-Q, including the options described above, we did not sell unregistered securities during the quarter ended March 31, 2017.

b) Not applicable

c) Repurchase of Equity Securities

We did not repurchase any of our equity securities during the three months ended March 31, 2017.

ITEM 3. DEFAULTS UPON SENIOR SECURITIES.

The Company has outstanding 605,000 shares of Series D convertible preferred stock. The Series D preferred stock bears a 5% dividend per annum, payable semi-annually in cash, or shares of common stock, at the company’s option. At March 31, 2017, the company has accrued a cumulative dividend in the amount of approximately $557,000 on the Series D preferred stock. As of the filing date of this Quarterly Report on Form 10-Q, the aggregate amount of the cumulative dividends on the Series D preferred stock which remain unpaid was approximately $641,000.

ITEM 4. MINE SAFETY DISCLOSURES.

Not applicable.

ITEM 5. OTHER INFORMATION.

As of June 30, 2017 we issued options to purchase an aggregate of 51,610 shares of common stock in lieu of cash fees earned for the service on our board of directors pursuant to our director compensation policy. The options were issued under the Company’s 2011 Omnibus Equity Incentive Plan. The options are exercisable for a period of ten years at an exercise price of $1.60 per share. These securities were issued pursuant to the exemption from registration provided by Section 4(a)(2) of the Securities Act of 1933, as amended.

ITEM 6. EXHIBITS.

Exhibit Number	Description
31.1	Certification Required by Rule 13a-14(a) of the Securities Exchange Act of 1934, as amended, as Adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 (*)
32.1	Certification Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (*)
101.INS	XBRL Instance Document (*)
101.SCH	XBRL Taxonomy Extension Schema (*)
101.CAL	XBRL Taxonomy Extension Calculation Linkbase (*)
101.DEF	XBRL Taxonomy Extension Definition Linkbase (*)
101.LAB	XBRL Taxonomy Extension Label Linkbase (*)
101.PRE	XBRL Taxonomy Extension Presentation Linkbase (*)

(*) Filed herewith.

38

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.

	AUTHENTIDATE HOLDING CORP.
Dated:  July 28, 2017	By:	/s/ Hanif A. Roshan
		Hanif A. Roshan
		Chief Executive Officer and interim Principal Accounting Officer

EX-31.1

EXHIBIT 31.1

CERTIFICATION OF PRINCIPAL EXECUTIVE OFFICER

PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002

I, Hanif Roshan, certify that:

1. I have reviewed this Quarterly Report on Form 10-Q of Authentidate Holding Corp.;

2. Based on my knowledge, this 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 report;

3. Based on my knowledge, the financial statements, and other financial information included in this 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 report;

4. The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

(a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, 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 report is being prepared;

(b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

(c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

(d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant’s other certifying officers and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

(a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

(b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting. 

Date:  July 28, 2017	/s/ Hanif Roshan
	Hanif Roshan
	Chief Executive Officer and interim Principal Accounting Officer (Principal Executive Officer and Principal Financial Officer)

EX-32.1

Exhibit 32.1

CERTIFICATION PURSUANT TO

18 U.S.C. SECTION 1350,

AS ADOPTED PURSUANT TO

SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the Quarterly Report on Form 10-Q of Authentidate Holding Corp. (the “Company”) for the quarterly period ended March 31, 2017, as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Hanif Roshan, Chief Executive Officer and Principal Accounting Officer of the Company, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 that, to the best of my knowledge:

(1) The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

(2) The information contained in the report fairly presents, in all material respects, the financial condition and results of operations of the Company.

July 28, 2017

/s/ Hanif Roshan

Hanif Roshan

Chief Exective Officer and interim Principal Accounting Officer

(Principal Executive Officer and Principal Financial Officer)

A signed original of this written statement required by Section 906 has been provided to the company and will be retained by the company and furnished to the Securities and Exchange Commission or its staff upon request.

XML

Document And Entity Information - shares	9 Months Ended
	Mar. 31, 2017	Jul. 20, 2017
Document Information [Line Items]
Document Type	10-Q
Amendment Flag	false
Document Period End Date	Mar. 31, 2017
Document Fiscal Year Focus	2017
Document Fiscal Period Focus	Q3
Entity Registrant Name	AUTHENTIDATE HOLDING CORP
Entity Central Index Key	0000885074
Current Fiscal Year End Date	--06-30
Entity Filer Category	Smaller Reporting Company
Trading Symbol	ADAT
Entity Common Stock, Shares Outstanding		7,249,370

XML

CONDENSED CONSOLIDATED BALANCE SHEETS - USD ($)	Mar. 31, 2017	Jun. 30, 2016
Current assets
Cash and cash equivalents	$ 1,155,273	$ 1,414,706
Restricted cash	120,695	120,695
Accounts receivable, net	1,731,859	2,142,514
Inventory, net	46,861	337,907
Prepaid expenses and other current assets	124,933	170,944
Total current assets	3,179,621	4,186,766
Property and equipment, net	2,581,287	3,476,670
Other assets
Intangibles	1,909,733	2,188,682
Security deposits	10,211	10,211
Deferred tax asset	38,493,000	38,493,000
Goodwill	3,318,000	3,318,000
Total assets	49,491,852	51,673,329
Current liabilities
Accounts payable	2,874,281	4,329,187
Accrued expenses	956,807	1,751,234
Accrued commissions	1,288,609	1,106,555
Accrued dividends	557,726	402,000
Notes payable	2,545,197	2,977,811
Derivative liabilities	987,015	1,051,000
Total current liabilities	9,209,635	11,617,787
Deferred Rent	123,008	114,379
Total liabilities	9,332,643	11,732,166
Commitments and contingencies
Shareholders’ equity
Preferred stock, $.10 par value; 5,000,000 shares authorized, Series B, 0 and 28,000 shares,Series D, 605,000 shares and Series E 25,000 and 0 shares issued and outstanding at March 31, 2017, and June 30, 2016 , respectively	63,000	63,300
Common stock, $.001 par value; 190,000,000 shares authorized, 7,168,384 and 5,772,258 shares issued and outstanding on March 31, 2017, and June 30, 2016 , respectively	7,168	5,772
Additional paid-in capital	44,024,631	38,316,376
(Accumulated deficit) retained earnings	(3,935,590)	1,555,715
Total shareholders’ equity	40,159,209	39,941,163
Total liabilities and shareholders’ equity	$ 49,491,852	$ 51,673,329

XML

CONDENSED CONSOLIDATED BALANCE SHEETS (Parenthetical) - $ / shares	Mar. 31, 2017	Jun. 30, 2016
Preferred stock, par value	$ 0.10	$ 0.10
Preferred stock, shares authorized	5,000,000	5,000,000
Common stock, par value	$ 0.001	$ 0.001
Common stock, shares authorized	190,000,000	190,000,000
Common stock, shares issued	7,168,384	5,772,258
Common stock, shares outstanding	7,168,384	5,772,258
Series B Redeemable Convertible Preferred Stock [Member]
Preferred stock, shares issued	0	28,000
Preferred stock, shares outstanding	0	28,000
Series D Preferred Stock [Member]
Preferred stock, shares issued	605,000	605,000
Preferred stock, shares outstanding	605,000	605,000
Series E Preferred Stock [Member]
Preferred stock, shares issued	25,000	0
Preferred stock, shares outstanding	25,000	0

XML

CONSOLIDATED STATEMENTS OF INCOME - USD ($)	3 Months Ended		9 Months Ended
	Mar. 31, 2017	Mar. 31, 2016	Mar. 31, 2017	Mar. 31, 2016
Net revenues
Fees for services	$ 5,212,634	$ 5,244,059	$ 15,469,366	$ 27,841,500
Hosted software services	314,812	249,104	973,417	249,104
Telehealth products and services	4,364	10,105	25,916	10,105
Total net revenues	5,531,810	5,503,268	16,468,699	28,100,709
Operating expenses
Cost of revenues	908,290	2,266,891	3,203,504	5,333,436
Write-down of inventory	0	0	237,674	0
Selling, general and administrative	3,388,403	4,098,396	11,264,267	14,091,897
Depreciation and amortization	393,510	400,110	1,196,435	876,112
Total operating expenses	4,690,203	6,765,397	15,901,880	20,301,445
Operating income (loss)	841,607	(1,262,129)	566,819	7,799,264
Other (expenses) income
Interest	(73,017)	(93,734)	(443,785)	(93,734)
Change in fair value of derivative liabilities	256,806	(340,000)	392,407	(340,000)
Loss on extinguishment of debt	(258,037)	0	(258,037)	0
Other	0	(25,710)	0	(16,618)
Total Other (expenses) income	(74,248)	(459,444)	(309,415)	(450,352)
Income (loss) before provision for income taxes	767,359	(1,721,573)	257,404	7,348,912
Provision for income taxss	0	(1,017,600)	0	(1,009,940)
Net income (loss)	767,359	(2,739,173)	257,404	6,338,972
Less: preferred dividends	(74,863)	(67,082)	(276,111)	(67,082)
Net income (loss) available to common shareholders	$ 692,496	$ (2,806,255)	$ (18,707)	$ 6,271,890
Earnings (loss) per share
Basic earnings (loss) per common share	$ 0.1	$ (0.65)	$ (0.00)	$ 3.04
Diluted earnings (loss) per common share	$ 0.04	$ (0.65)	$ (0.00)	$ 2.44
Weighted average number of common shares outstanding
Basic	7,168,329	4,327,990	6,312,344	2,064,951
Diluted	8,765,657	4,327,990	6,312,344	2,694,990

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CONSOLIDATED STATEMENT OF SHAREHOLDERS’ EQUITY - 9 months ended Mar. 31, 2017 - USD ($)	Total	Preferred Stock [Member]	Common Stock [Member]	Additional Paid In Capital [Member]	Retained Earnings (Accumulated Deficit) [Member]
Balance at Jun. 30, 2016	$ 39,941,163	$ 63,300	$ 5,772	$ 38,316,376	$ 1,555,715
Balance (in shares) at Jun. 30, 2016		633,000	5,772,258
Share-based compensation expense	186,753			186,753
Common dividends for earn-out	0		$ 1,396	5,471,202	(5,472,598)
Common dividends for earn-out (in shares)			1,396,071
Preferred dividends	0
Series E Preferred dividend accrual	(276,111)				(276,111)
Conversion of Preferred Series B to Series E	50,000	$ (300)		50,300
Conversion of Preferred Series B to Series E (in shares)		(3,000)
Net income	257,404				257,404
Balance at Mar. 31, 2017	$ 40,159,209	$ 63,000	$ 7,168	$ 44,024,631	$ (3,935,590)
Balance (in shares) at Mar. 31, 2017		630,000	7,168,329

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CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS - USD ($)	9 Months Ended
	Mar. 31, 2017	Mar. 31, 2016
Cash Flow from operating activities
Net income	$ 257,404	$ 6,338,972
Adjustments to reconcile net income to net cash provided by operating activities
Change in fair value of derivative liabilities	(392,407)	340,000
Loss on debt extinguishment	258,037	0
Bad debt expense	0	109,358
Depreciation and amortization	1,196,435	876,112
Deferred taxes	0	1,010,000
Share based compensation	186,753	1,476,000
Write-off of inventory	237,674	0
Changes in assets and liabilities
Accounts receivable	410,655	(2,371,274)
Inventory	53,372	74,880
Prepaid expenses and other current assets	46,011	59,528
Accounts payable and other liabilities	(1,454,907)	(314,738)
Accrued expenses	(419,229)	0
Accrued commissions	182,054	150,260
Deferred rent	8,629	57,049
Net cash provided by operating activities	570,481	7,806,147
Cash flows from investing activities
Purchases of property and equipment	(22,103)	(1,136,196)
Collections from notes receivable	0	50,000
Net cash used in investing activities	(22,103)	(1,086,196)
Cash flows from financing activities
Proceeds from note payable - related party	250,000	(8,947,023)
Repayments of notes payable	(1,057,811)	(200,000)
Net cash used in financing activities	(807,811)	(9,147,023)
Net decrease in cash	(259,433)	(2,427,072)
Cash beginning of period	1,414,706	5,190,540
Cash end of period	1,155,273	2,763,468
Supplemental disclosure of cash paid for:
Interest paid	0	94,000
Income taxes paid	0	8,000
Non-cash investing and financing activities
Non-cash preferred dividends	276,111	67,082
Earn-out common dividends paid in stock	5,472,598	0
Conversion of accrued interest to notes payable	375,199	0
Derivative liability resulting from issuance of convertible notes	$ 328,422	$ 0

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Description of Business, Reverse Merger and Liquidity

9 Months Ended

Mar. 31, 2017

Organization, Consolidation and Presentation of Financial Statements [Abstract]

Business Description and Basis of Presentation [Text Block]

1. Description of Business, Reverse Merger and Liquidity

Business

Authentidate Holding Corp. (“AHC”) and its subsidiaries primarily provides an array of clinical testing services to health care professionals through its wholly owned subsidiary, Peachstate Health Management, LLC d/b/a AEON Clinical Laboratories (“AEON”). AHC also continues to provide its legacy secure web-based revenue cycle management applications and telehealth products and services that enable healthcare clinical testing, organizations to increase revenues, improve productivity, reduce costs, coordinate care for patients and enhance related administrative and clinical workflows and compliance with regulatory requirements. Web-based services are delivered as Software as a Service (SaaS) to our customers interfacing seamlessly with billing, information and records management systems.

Reverse Merger

On January 27, 2016, AEON merged into a newly formed acquisition subsidiary of AHC pursuant to a definitive Amended and Restated Agreement and Plan of Merger dated January 26, 2016, as amended on May 31, 2016 and December 15, 2016 (collectively the “Merger Agreement”) (the “AEON Acquisition”). The merger certificate was filed with the Secretary of State of Georgia on January 27, 2016. AEON survived the merger as a wholly-owned subsidiary of AHC (collectively the “Company”). AEON markets to health care professionals to provide urine and oral fluid testing to patients. The four primary tests provided by AEON are Medical Toxicology, Pharmacogenomics, Cancer Genetic Testing and Molecular Microbiology. Following the completion of the reverse merger, the business conducted by AEON became primarily the business conducted by the Company.

Under accounting principles generally accepted in the United States of America (“U.S. GAAP”), the merger is treated as a “reverse merger” under the purchase method of accounting (see Note 3). The condensed consolidated financial statements reflect the historical results of AEON prior to the completion of the reverse merger since it was determined to be the accounting acquirer, and do not include historical results of AHC prior to the completion of the merger.

Going Concern

The Company’s capital requirements have been and will continue to be significant and it is expending significant amounts of capital to develop, promote and market its services. The Company’s available cash and cash equivalents as of March 31, 2017 totaled approximately $1,155,000 and the Company’s working capital deficit was approximately $6,030,000. At March 31, 2017, our current monthly operational requirement is approximately $1,300,000.

As of the filing date of this Quarterly Report on Form 10-Q, and after giving effect to the recent note exchange transaction described in Note 8 to these financial statements, there is outstanding an aggregate principal amount of $2,545,199 of senior secured convertible notes with a maturity date of March 20, 2018 and a secured note subordinated to the interests of the existing senior lenders in the principal amount of $330,000 with a maturity date of June 15, 2018. The Company expects its existing resources, revenues generated from operations, and proceeds received from other transactions being considered (of which there can be no assurance) will be sufficient to satisfy our working capital requirements for at least the next twelve months; however, no assurances can be given that we will be able to generate sufficient cash flow from operations or complete other transactions to satisfy our other obligations. These factors, among others, raise substantial doubt about our ability to continue as a going concern. The accompanying consolidated financial statements do not include any adjustments to the recoverability and classifications of liabilities that might result from the outcome of these uncertainties. If necessary, management of the Company believes that it can reduce operating expenses and/or raise additional debt financing to satisfy its working capital requirements. However, no assurances can be given that the Company will be able to support its costs or pay debt obligations through revenues derived from operations or generate sufficient cash flow to satisfy its obligations.

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Summary of Significant Accounting Policies

9 Months Ended

Mar. 31, 2017

Accounting Policies [Abstract]

Significant Accounting Policies [Text Block]

2. Summary of Significant Accounting Policies

Basis of Presentation

The Company’s condensed consolidated financial statements have been prepared in accordance with U.S. GAAP and following the requirements of the Securities and Exchange Commission (“SEC”) for interim reporting. As permitted under those rules, certain footnotes or other financial information that are normally required by U.S. GAAP can be condensed or omitted. These interim financial statements have been prepared on the same basis as the Company’s annual financial statements and, in the opinion of management, reflect all adjustments, consisting only of normal recurring adjustments, which are necessary for a fair statement of the Company’s financial information. These interim results are not necessarily indicative of the results to be expected for the year ending June 30, 2017 or any other interim period or for any other future year.

The balance sheet as of June 30, 2016 has been derived from audited financial statements at that date but does not include all of the information required by U.S. GAAP for complete financial statements.

These condensed consolidated financial statements should be read in conjunction with the annual consolidated financial statements and notes thereto included in the Company’s Form 10-K for the fiscal year ended June 30, 2016 and the corresponding Management’s Discussion and Analysis of Financial Condition and Results of Operations.

Principles of Consolidation

The consolidated financial statements include the accounts of the Company and its wholly-owned subsidiaries. Intercompany accounts and transactions have been eliminated in consolidation.

Use of Estimates

The preparation of consolidated financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the consolidated financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.

The most sensitive accounting estimates affecting the financial statements are revenue recognition, the allowance for doubtful accounts, depreciation of long-lived assets, fair value of intangible assets and goodwill, amortization of intangible assets, income taxes and associated deferrals and valuation allowances, and commitments and contingencies.

Cash and Cash Equivalents

Cash and cash equivalents include all cash balances and highly liquid investments with maturities of three months or less.

Accounts receivable

Accounts receivable represent customer obligations due under normal trade terms, net of allowance for doubtful accounts. The allowance for doubtful accounts reflects our best estimate of probable losses inherent in the accounts receivable balance. We determine the allowance based on known troubled accounts, historical experience and other currently available evidence. The allowance for doubtful accounts was approximately $543,000 and $769,000 as of March 31, 2017 and June 30, 2016, respectively.

Inventory

Inventory amounts are stated at the lower of cost or market using the first-in, first-out basis.

Intangible Assets

Intangible assets consist primarily of trademarks and acquired technologies. The Company acquired approximately $2,344,000 of intangible assets in conjunction with the reverse merger discussed in Note 1 and Note 3. Intangible assets with finite lives are amortized on a straight-line basis over their useful lives.

Goodwill

Goodwill is not amortized, but is assessed annually for impairment. The Company evaluates the carrying value of goodwill on an annual basis and between annual evaluations if events occur or circumstances change that would more likely than not reduce the fair value of goodwill below its carrying amount. When assessing whether goodwill is impaired, management considers first a qualitative approach to evaluate whether it is more likely than not the fair value of the goodwill is below its carrying amount; if so, management considers a quantitative approach by analyzing changes in performance and market based metrics as compared to those used at the time of the initial acquisition. For the periods presented, no impairment charges were recognized.

Revenue Recognition

The Company provides laboratory testing services, web-based hosted software services, telehealth products and post contract customer support services.

Billings for laboratory testing services are reimbursed by third-party payers net of allowances for differences between amounts billed and the cash receipts from such payers. In accordance with Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) ASC-605 “Revenue Recognition”, the Company recognizes revenues when there is a persuasive evidence of an arrangement, title and risk of loss have passed, product is shipped or services have been rendered, sales price is fixed or determinable and collection of the related receivable is reasonably assured.

Historically, the Company had recognized revenue for these services upon cash receipt because the criteria to recognize revenues under ASC-605 had not been met at the time test results were delivered since the fee was not fixed and determinable until the third payer remitted payment given the limited experience and history to develop a reliable estimate of the provision for contractual adjustments (that is, the difference between established rates and expected third-party payments) and discounts (that is, the difference between established rates and the amount billable). The Company has continuously reassessed its ability to develop reliable estimates of the provision for contractual adjustments and discounts and over the past year and has made investments in its systems and process around its billing system to improve the quality of information generated by the system. Given these ongoing investments and improvements and based upon the financial framework the Company uses for estimating the provision for contractual adjustments and discounts, in the second quarter of 2016, the Company concluded that it was able to reasonably estimate its provision for contractual adjustments and discounts and began recognizing revenue at the time test results are delivered, net of estimated contractual allowances.

Revenue for hosted software services, telehealth products, and customer support services are recognized when persuasive evidence of an arrangement exists, delivery has occurred, the selling price is fixed and collectability is reasonably assured. Multiple-element arrangements are assessed to determine whether they can be separated into more than one unit of accounting. A multiple-element arrangement is separated into more than one unit of accounting if all of the following criteria are met: the delivered item has value to the customer on a standalone basis; there is objective and reliable evidence of the fair value of the undelivered items in the arrangement; if the arrangement includes a general right of return relative to the delivered items, and delivery or performance of the undelivered item is considered probable and substantially in our control. If these criteria are not met, then revenue is deferred until such criteria are met or until the period over which the last undelivered element is delivered, which is typically the life of the contract agreement. If these criteria are met, we allocate total revenue among the elements based on the sales price of each element when sold separately which is referred to as vendor specific objective evidence or VSOE.

Concentrations of Credit Risk

The Company maintains its cash in bank deposit accounts which, at times, may exceed federally insured limits. Accounts are guaranteed by the Federal Deposit Insurance Corporation (FDIC) up to certain limits. At March 31, 2017 and June 30, 2016, the Company had approximately $948,000 and approximately $1,165,000, respectively, in excess of FDIC-insured limits. The Company has not experienced any losses in such accounts.

Income Taxes

The Company accounts for income taxes under an asset and liability approach that requires the recognition of deferred tax assets and liabilities for the expected future tax consequences of events that have been recognized in the Company’s financial statements or tax returns. In estimating future tax consequences, the Company generally considers all expected future events other than enactments of changes in tax laws or rates. The effect on deferred tax assets and liabilities of a change in tax rates will be recognized as income or expense in the period that includes the enactment date. A valuation allowance is established when necessary to reduce deferred tax assets to the amount expected to be realized.

Prior to the reverse merger, AEON elected to be taxed as an S Corporation for federal and certain state income tax purposes. Under this election substantially all of the profits, losses, credits and deductions of the Company are passed through to the individual shareholders. Therefore prior to the reverse merger no provision or liability for income taxes has been included in these consolidated financial statements except for state and localities where the S Corporation status has not been recognized.

Prior to the reverse merger, AHC tax benefits were fully offset by a valuation allowance due to the uncertainty that the deferred tax assets would be realized. As a result of the reverse merger a deferred tax asset was recorded since it was determined the realization of some of these assets is more likely than not, due to consolidated earnings resulting in the expected usage of net operating loss carryforwards.

Under income tax regulations in the United States AHC is the acquirer of AEON. As such the Company must file a consolidated return for both AHC and AEON for the year ending June 30, 2017.

Management considers the likelihood of changes by taxing authorities in its filed income tax returns and recognizes a liability for or discloses potential changes that management believes are more likely than not to occur upon examination by tax authorities. Management has not identified any uncertain tax positions in filed income tax returns that require recognition or disclosure in the accompanying consolidated financial statements.

The Company’s policy is to include penalties and interest expense related to income taxes as a component of other expense and interest expense, respectively, as necessary.

Recent Accounting Pronouncements

In May 2014, the FASB issued Accounting Standards Update (“ASU”) 2014-09, “Revenues from Contracts with Customers” (Topic 606), which affects any entity that either enters into contracts with customers to transfer goods or services or enters into contracts for the transfer for nonfinancial assets, unless those contracts are within the scope of other standards. Under ASU 2014-09, an entity should recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. The ASU must be applied for annual periods beginning after December 15, 2017, with early application permitted for annual reporting periods beginning after December 15, 2016. The Company is evaluating the impact on the consolidated financial statements of adopting the guidance in ASU 2014-09 at year-end and does not expect adoption to have a material effect on its consolidated financial statements and disclosures.

In August 2014, the FASB issued ASU No. 2014-15, “Disclosure of Uncertainties about an Entity’s Ability to Continue as a Going Concern”. The amendments in this update state that in connection with preparing financial statements for each annual and interim reporting period, an entity’s management should evaluate whether there are conditions or events that raise substantial doubt about the entity’s ability to continue as a going concern within one year after the date that the financial statements are issued (or within one year after the date that the financial statements are available to be issued, when applicable). The amendments in this update are effective for the annual reporting period beginning after December 15, 2016 and for annual periods and interim periods thereafter. Early application is permitted. The adoption of this update is not expected to have a material impact on our consolidated financial statements.

In July 2015, the FASB issued Accounting Standards Update (“ASU”) 2015-11, “Inventory (Topic 330): Simplifying the Measurement of Inventory”. ASU 2015-11 requires inventory measured using any method other than last-in, first-out (“LIFO”) or the retail inventory method to be subsequently measured at the lower of cost or net realizable value, rather than at the lower of cost or market. Under this ASU, subsequent measurement of inventory using the LIFO and retail inventory method is unchanged. ASU 2015-11 is effective prospectively for fiscal years, and for interim periods within those years, beginning after December 15, 2016. The Company will recognize its inventory at the lower of cost or net realizable value upon adoption.

In November 2015, the FASB issued a new accounting standard that requires that the deferred tax liabilities and assets be classified as noncurrent on the consolidated balance sheet. The standard will be effective for the Company beginning July 1, 2017, with early adoption permitted. The adoption of this standard is not expected to have a material impact on the consolidated financial statements.

In February 2016, the FASB issued ASU No. 2016-2, “Leases,” which establish a right-of-use (ROU) model that requires a lessee to record and ROU asset and lease liability on the balance sheet for all leases with terms longer than 12 months. Leases will be classified as either finance or operating, with classifications affecting the pattern of expense recognition in the income statement. This ASU is effective for fiscal years beginning after December 15, 2018, including interim periods within those fiscal years. Early adoption is permitted. ASU 2016-02 requires modified retrospective adoption for all leases existing at, or entered into after, the date of initial application, with an option to use certain transition relief. We are currently evaluating the effect of adoption of this ASU.

In May 2016, the FASB issued ASU No. 2016-12, “Revenue from Contract with Customers (Topic 606): Narrow-Scope Improvements and Practical Expedients”, which clarifies certain issues identified by the FASB-International Accounting Standards Board Joint Transition Resource Group for Revenue Recognition (TRG) on assessing collectability, presentation of sales taxes and other taxes collected from customers, noncash consideration, completed contracts and contract modifications. We are currently evaluating the effect of adoption of this ASU and will report on its effect on the Company when available.

In June 2016, the FASB issued ASU No. 2016-13, “Financial Instruments-Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments”, which requires measurement and recognition of expected credit losses for financial assets held. The amendments in this update are effective for annual periods beginning after December 15, 2019, and interim periods within such annual period. Early adoption is permitted for fiscal years beginning after December 15, 2018, including interim periods within such year. The Company is currently evaluating the potential impacts of adopting the provisions of ASU No. 2016-13.

In August 2016, the FASB issued ASU No. 2016-15, “Statement of Cash Flows (topic 230): Classification of Certain Cash Receipts and Cash Payments”, which clarifies diversity in practice how the following are presented and classified in the statement of cash flows:

⋅ Debt Prepayment of Debt Extinguishment Costs

⋅ Settlement of Zero-Coupon Debt Instruments or Other Debt Instruments with Coupon Interest Rates That Are Insignificant in Relation to the Effective Interest Rate of the Borrowing

⋅ Contingent Consideration Payments Made after a Business Combination

⋅ Proceeds from the Settlement of Corporate-Owned Life Insurance Policies

⋅ Distributions Received from Equity Method Investees

⋅ Beneficial Interests in Securitization Transactions

⋅ Separately Identifiable Cash Flows and Application of the Predominance Principle.

This standard is effective beginning with our fiscal year ending June 30, 2018. We are currently evaluating the effect of adoption of this ASU and will report on its effect on the Company when available.

In January 2017, the FASB issued ASU 2017-04, Intangibles – Goodwill and other (Topic 350): Simplifying the Test for Goodwill Impairment (“ASU 2017-04”), which simplifies how an entity is required to test goodwill for impairment by eliminating Step 2 from the goodwill impairment test. Under ASU 2014-04 goodwill impairment will be tested by comparing the fair value of a reporting unit with its carrying amount, and recognizing an impairment charge for the amount by which the carrying amount exceeds the reporting unit’s fair value. The new guidance must be applied on a prospective basis and is effective for periods beginning after December 15, 2019, with early adoption permitted. We are currently evaluating the effect of adoption of this ASU and do believe the effect will be material on our financial statements.

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Reverse Merger

9 Months Ended

Mar. 31, 2017

Business Combinations [Abstract]

Business Combination Disclosure [Text Block]

3. Reverse Merger

On January 27, 2016, AHC completed the reverse merger with AEON, an expanding clinical laboratory based in Gainesville, GA. The transaction was structured as a tax-free exchange, with the former AEON members receiving shares of common stock of AHC at the closing, and potential further issuances of common stock tied primarily to the earnings of AEON during the five calendar years ending December 2019. The AEON members received an aggregate of 19.9% (958,030 shares) of the common stock of AHC effective at the closing and will receive an additional 5% (240,711 shares) of the outstanding common stock of the Company, as defined, upon approval of the merger transaction by the shareholders of the Company. On July 11, 2016, the shareholders of the Company approved the issuance of shares of common stock in connection with earn-out payments that may be payable pursuant to the Merger Agreement, and these shares were issued in December 2016. The AEON members can also earn additional shares of common stock to increase their aggregate holdings to up to 90% of the outstanding stock of AHC, as defined, based upon meeting the benchmark targets in the merger agreement, including delivering $16,000,000 in EBITDA for the calendar year ended 2015 which was achieved (1,155,414 shares approved and issued in December 2016), and $100,000,000 in aggregate EBITDA for the calendar years 2016 through 2019. Solely for accounting purposes, the additional shares issued to the former AEON members will be treated as dividends. In connection with the completion of the merger, Hanif A. (“Sonny”) Roshan, founder of AEON, became Chairman of the Company and subsequently became CEO of the Company on August 7, 2016, and Richard Hersperger, the CEO of AEON, became CEO of the Company at closing through August 7, 2016. Both Messrs. Roshan and Hersperger currently hold seats on the Board of Directors. The former AEON members will have the right to elect one director for each 10% of the outstanding shares of the Company’s common stock they hold as a group. Accordingly, the transaction was accounted for as a reverse acquisition under the provisions of ASC 805-40 Business Combinations – Reverse Acquisitions, with AEON becoming the acquirer for accounting purposes and AHC becoming the accounting acquiree. It was determined that AEON was the accounting acquirer as a result of the control over the Board of Directors of the combined company by the former AEON members, the senior management positions in the combined company held by former AEON management, and AEON’s size in comparison to AHC.

The effective consideration transferred is determined based upon the amount of shares that AEON would have had to issue to AHC shareholders in order to provide the same ownership ratios as previously discussed. The fair value of the consideration effectively transferred by AEON should be based on the most reliable measure. In this case, the quoted market price of AHC shares provide a more reliable basis for measuring the consideration effectively transferred than the estimated fair value of the shares of AEON. The fair value of AHC common stock is based upon the closing stock price on January 27, 2016, the effective date of the merger, of $4.71 per share.

The effective consideration transferred is comprised of the following:

Fair value of AHC common shares	(A)	$	22,675,000
Preferred stock outstanding	(B)		3,047,000
Stock options vested and outstanding	(C)		1,296,000
Warrants vested and outstanding	(C)		9,782,000
Consideration effectively transferred		$	36,800,000

(A) Based upon 4,814,226 AHC common shares outstanding at a fair value of $4.71 per share, which was the closing price of AHC common shares on the effective date of the merger.

(B) Represents 28,000 shares of Series B and 605,000 shares of Series D preferred stock as converted into 646,933 common shares with a fair value of $4.71 per share, which was the closing price of AHC common shares on the effective date of the merger.

(C) Represents outstanding and vested AHC stock options and warrants acquired in connection with the reverse merger. The fair value of these stock options and warrants was determined using the Black Scholes model, with the following assumptions:

	Options			Warrants
Number of shares		616,141			4,313,180
Weighted average exercise price	$	4.46		$	5.24
Volatility		85.10	%		85.10	%
Risk-free interest rate		1.63	%		1.63	%
Expected dividend rate		0	%		0	%
Expected life (years)		4.00			4.16
Stock price	$	4.71		$	4.71

The fair value of the assets acquired and liabilities assumed were based on management estimates. Based upon the purchase price allocation, the following table summarizes the estimated provisional fair value of the assets acquired and liabilities assumed at the date of acquisition:

Cash and cash equivalents	$	30,000
Restricted cash		121,000
Accounts receivable		174,000
Inventory		360,000
Prepaid expenses and other current assets		464,000
Property and equipment		189,000
Trade names and licensed technology		2,344,000
Deferred tax assets		38,804,000
Total assets acquired at fair value		42,486,000
Accounts payable and accrued expenses		3,860,000
Notes payable		4,078,000
Derivative liabilities		1,066,000
Total liabilities assumed		9,004,000
Net assets acquired		33,482,000
Goodwill		3,318,000
Total preliminary purchase consideration	$	36,800,000

The purchase price exceeded the fair value of the net assets acquired by approximately $3,318,000, which was recorded as goodwill and assigned to our web-based software segment.

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Inventory

9 Months Ended

Mar. 31, 2017

Inventory Disclosure [Abstract]

Inventory [Text Block]

4. Inventory

	March 31,		June 30,
	2017		2016
Laboratory testing supplies	$	46,861	$	100,233
Purchased components, net		-		31,068
Finished goods		-		206,606
Total inventory	$	46,861	$	337,907

Purchased components of approximately $32,000 and $207,000 were written down in the nine months ended March 31, 2017 to net realizable value.

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Property and Equipment

9 Months Ended

Mar. 31, 2017

Property, Plant and Equipment [Abstract]

Property, Plant and Equipment Disclosure [Text Block]

5. Property and Equipment

					Estimated
	March 31,		June 30,		Useful Life In
	2017		2016		Years
Machinery and equipment	$	5,608,592	$	5,591,564	3-6
Software		392,913		392,913	5-7
Furniture and fixtures		105,043		105,043	5-7
Leasehold improvements		69,268		64,193	(1)
		6,175,816		6,153,713
Less: Accumulated depreciation and amortization		(3,594,529)		(2,677,043)
Property and equipment, net	$	2,581,287	$	3,476,670

(1) Lesser of lease terms or estimated useful life

Depreciation on property and equipment for three and the nine months ended March 31, 2017 was approximately $300,000 and $917,000 compared to $320,000 and $796,000 for the prior year periods.

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Intangible Assets

9 Months Ended

Mar. 31, 2017

Goodwill and Intangible Assets Disclosure [Abstract]

Intangible Assets Disclosure [Text Block]

6. Intangible Assets

The following table sets forth intangible assets as follows:

	March 31, 2017						June 30, 2016
	Gross Carrying Amount		Accumulated Amortization		Net Book Value		Gross Carrying Amount		Accumulated Amortization		Net Book Value		Useful Life In Years
Trademarks	$	550,000	$	91,667	$	458,333	$	550,000	$	32,738	$	517,262		7
Acquired technologies		1,794,000		342,600		1,451,400		1,794,000		122,580		1,671,420		3-7
Total	$	2,344,000	$	434,267	$	1,909,733	$	2,344,000	$	155,318	$	2,188,682

Amortization expense was approximately $93,000 and $279,000 for the three and nine months ended March 31, 2017 and $80,000 for both the three and nine months ended March 31, 2016, respectively. Amortization expense for the next five fiscal years and thereafter is expected to be as follows:

June 30,
2017 (remaining)	$	93,057
2018		372,229
2019		372,229
2020		372,229
2021		317,729
Thereafter		382,260
	$	1,909,733

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Income Taxes

9 Months Ended

Mar. 31, 2017

Income Tax Disclosure [Abstract]

Income Taxes [Text Block]

7. Income Taxes

The Company’s effective tax rate for the three and nine months ended March 31, 2017 was 41.4% and 41.5%, respectively. The Company calculates income tax expense based upon an annual effective tax rate forecast, including estimates and assumptions that could change during the year. The differences between the effective tax rate and the U.S. federal statutory rate of 35% principally result from state and local taxes, graduated federal tax rate reductions, changes in the valuation allowance and non-deductible expenses.

At March 31, 2017, the Company’s net deferred tax assets amounted to approximately $38.5 million. Management has considered the realizability of the deferred tax assets and has concluded that a valuation allowance of approximately $22.0 million should be recorded, related to net operating loss carryforwards that are not anticipated to be realized. Although management determined that a valuation allowance was not required with respect to the remaining net deferred tax assets, realization of these assets is primarily dependent on achieving the forecast of future taxable income, as well as prudent and feasible tax planning strategies. Based upon the projections, the net operating loss carryforwards would be fully utilized before expiration.

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Notes Payable

9 Months Ended

Mar. 31, 2017

Notes Payable [Member]

Notes Payable [Text Block]

8. Notes Payable

The following table sets forth the secured and unsecured notes payable:

	March 31, 2017				June 30, 2016
	Note		Interest rate		Note		Interest rate
	Payable		per annum		Payable		per annum
Secured				Secured
	$	1,056,875	5% interest paid annually		$	950,000	9% interest paid upon maturity of early redemption
		641,294	5% interest paid annually			320,000	10% interest paid annually
		255,417	5% interest paid annually			1,270,000
		591,613	5% interest paid annually	Unsecured
						532,811	20% interest paid annually
						200,000	20% interest paid annually
Total	$	2,545,199				525,000	20% interest paid annually
						450,000	20% interest paid annually
						1,707,811
				Total	$	2,977,811

Secured

The Company had outstanding a convertible note payable in the aggregate principal amount of $950,000. The note was convertible into shares of common stock at an initial conversion price of $2.25 per share, subject to adjustment. This note had a maturity date of December 17, 2016. Based on the initial conversion price, the note was convertible into up to 422,222 shares of common stock. If the Company issues or sells shares of its common stock, rights to purchase shares of its common stock, or securities convertible into shares of its common stock for a price per share that is less than the conversion price then in effect, such conversion price would be decreased to equal 85% of such lower price. This note accrued interest at 9% per annum with interest payable upon maturity or on any earlier redemption date. As described in greater detail below under the caption “Exchange Transaction”, on March 20, 2017, this note was exchanged for a new promissory note in the aggregate principal amount of $1,056,875. The new note matures twelve months following such extension date and interest accrues on the principal amount of the new note at the rate of 5% per annum. The new note is secured by a lien on all of the Company’s assets and is convertible at the initial conversion price of $2.03 per share.

The Company had outstanding a promissory note in the aggregate principal amount of $320,000. The note was due and payable on April 15, 2016, and interest accrued on the note at the rate of 10.0% per annum. The note was secured by a first priority lien on certain of our assets, as described in a security agreement entered into between the Company and the purchaser. The note was convertible into shares of common stock of the Company at an initial conversion price of $4.86 per share. The note was issued to an affiliate of J. David Luce, a former member of the Board of Directors. On September 1, 2016, the Company entered into an amendment agreement which extended the maturity date to December 1, 2016 at an interest rate of 5% per annum. In consideration for such agreement, the Company agreed that the note would be further modified so that it would be convertible into shares of common stock of the Company at a conversion price of $3.00 per share, which was equal to the most recent closing bid price of the Company’s common stock immediately prior to the execution of the amendment agreement. Based on the modified conversion price, the principal amount of the note was convertible into 106,667 shares of common stock. As described in greater detail below under the caption “Exchange Transaction”, on March 20, 2017, this note was combined with the $200,000 unsecured note held by the same entity and was exchanged for a new promissory note in the aggregate principal amount of $641,294. The new note matures twelve months following such extension date and interest accrues on the principal amount of the new note at the rate of 5% per annum. The new note is secured by a lien on all of the Company’s assets and is convertible at the initial conversion price of $2.03 per share.

Unsecured

The Company had outstanding a promissory note in the aggregate principal amount of $200,000, held by an entity affiliated with J. David Luce, a former member of the Board of Directors. The notes accrued interest at the rate of 20% per annum, payable in arrears, and was due upon the earlier of (i) August 26, 2016, or (ii) the closing of a sale of equity or debt securities of the Company, or series of closings, as part of the same transaction, of equity or debt securities within a period of 90 days, in the gross amount of at least $5,000,000 in cash proceeds. On September 1, 2016, the note was amended to extend the maturity date to December 1, 2016 and to allow the investor to elect to further extend the note for an additional 90 days. In consideration for such agreements, the Company agreed that the promissory note would be further modified so that it would be convertible into shares of common stock of the Company at an initial conversion price of $3.00 per share, which was equal to the most recent consolidated closing bid price of the Company’s common stock immediately prior to the execution of the amendment agreement. Based on the conversion price, the principal amount of the note was convertible into up to 173,333 shares of common stock. In March 2017, this note was combined with the $320,000 secured note held by the same entity and exchanged for a new promissory note in the aggregate principal amount of $641,294. The new note matures twelve months following such extension date and interest accrues on the principal amount of the new note at the rate of 5% per annum. The new note is secured by a lien on all of the Company’s assets and is convertible at the initial conversion price of $2.03 per share. Additional terms and conditions of the new note are described in greater below under the caption “Exchange Transaction”.

The Company had a promissory note in the aggregate principal amount of $450,000 to Optimum Ventures, LLC, a related party of Peachstate Health Management, LLC, through common ownership. The note was unsecured and was not convertible into equity securities of the Company. The note accrued interest at the rate of 20% per annum, payable in arrears, and was due upon the earlier of (i) October 28, 2016, or (ii) within 30 days of the closing of a sale of equity or debt securities of the Company, or series of closings, as part of the same transaction, of equity or debt securities within a period of 90 days, in the gross amount of at least $5,000,000 in cash proceeds. As described in greater detail below under the caption “Exchange Transaction”, on March 20, 2017, this note was exchanged for a new promissory note in the aggregate principal amount of $591,613. The new note matures twelve months following such extension date and interest accrues on the principal amount of the new note at the rate of 5% per annum. The new note is secured by a lien on all of the Company’s assets and is convertible at the initial conversion price of $2.03 per share.

Effective as of January 31, 2017, the Company accepted a short term loan in the aggregate principal amount of $250,000 from Hanif A. Roshan, the Company’s Chief Executive Officer and Chairman of the Board. To evidence the loan, the Company issued Mr. Roshan a promissory note (the “Note”) in the aggregate principal amount of $250,000. The Note was an unsecured obligation of the Company and was not convertible into equity securities of the Company. The Note was due and payable on the 30-day anniversary of the issue date and interest accrued on the Note at the rate of 12.0% per annum. The Note was exchanged for a new secured convertible note in the exchange transaction described below under the caption “Exchange Transaction”.

Exchange Transaction

On March 20, 2017, the Company entered into a note exchange agreement with the holders of an aggregate principal amount of $2,170,000 of outstanding promissory notes (the “Original Notes”), which were due and payable, pursuant to which the Company agreed to issue the holders of such notes, in consideration of the cancellation of the Original Notes, new promissory notes in the aggregate principal amount of $2,545,199, which is equal to the sum of the aggregate principal amount of the original notes plus the accrued but unpaid interest on the Original Notes (the “New Notes”). The New Notes are convertible into shares of the Company’s Common Stock at an initial conversion price of $2.03 per share. Based on the initial conversion prices, the New Notes will be convertible into up to 1,253,792 shares of common stock. If the Company issues or sells shares of its common stock, rights to purchase shares of its common stock, or securities convertible into shares of its common stock for a price per share that is less than the conversion price then in effect, such conversion price will be decreased to equal 85% of such lower price. The foregoing adjustments to the conversion price will not apply to certain exempt issuances, including issuances pursuant to certain employee benefit plans. In addition, the conversion price is subject to adjustment upon stock splits, reverse stock splits, and similar capital changes. These conversion options resulted in a derivative liability valued at $328,422. All of the New Notes have a maturity date of one year from the closing date. The New Notes were issued in consideration of the exchange of (i) an aggregate principal amount of $950,000 of Original Notes convertible at a price of $2.25 per share, (ii) an aggregate principal amount of $520,000 of Original Notes convertible at a price of $3.00 per share, and (iii) an aggregate principal amount of $700,000 of unconvertible Original Notes.

In connection with the exchange of the Original Notes for the New Notes, the Company also agreed with the holder of all of our outstanding shares of Series B Convertible Preferred Stock (the “Series B Preferred Stock”) to exchange all of its outstanding shares of Series B Preferred Stock for shares of a new series of convertible preferred stock designated as Series E Convertible Preferred Stock (the “Series E Preferred Stock”). Accordingly, on March 20, 2017, the Company also entered into a separate exchange agreement with the holder of the shares of Series B Preferred Stock, to exchange such shares for a total of 25,000 shares of Series E Preferred Stock. Each share of Series E Preferred Stock will have a stated value of $30.00 per share. Pursuant to this exchange agreement, the holder of the shares of Series B Preferred Stock agreed to waive all unpaid dividends that had accrued on the shares of Series B Preferred Stock. The shares of Series E Preferred Stock are initially convertible by the holder into an aggregate of 187,500 shares of Common Stock at the initial conversion rate of $4.00 per share. The conversion price of the new preferred stock is subject to adjustment solely in the event of stock dividends, combinations, splits, recapitalizations, and similar corporate events. The right of holders of Series E Preferred Stock to convert these securities into common stock is subject to a 4.99% beneficial ownership limitation, which beneficial ownership limitation may be increased by a holder to a greater percentage not in excess of 9.99% after providing notice to us.

The New Notes will bear interest at the rate of 5% per annum with interest payable upon maturity, the conversion of the New Notes or on any earlier redemption date. Commencing one month after the Company’s common stock is listed for trading on a national securities exchange the Company will have the right to redeem all or any portion of the outstanding principal balance of the New Notes, plus all accrued but unpaid interest at a price equal to 110% of such amount. The holders of the New Notes shall have the right to convert any or the entire amount to be redeemed into common stock prior to redemption. Subject to certain exceptions, the New Notes are senior to existing and future indebtedness of the Company and will be secured by a first priority lien on all of the Company’s assets to the extent and as provided in a Security Agreement entered into between the Company and the holders. Subject to certain exceptions, the New Notes contain customary covenants against incurring additional indebtedness and granting additional liens and contains customary events of default. Upon the occurrence of an event of default under the New Notes, the holders may require the Company to repay all or a portion of the note in cash, at a price equal to 110% of the principal, plus accrued and unpaid interest.

In accordance with ASC 470-50, “Debt – Modifications and Extinguishments”, the Company’s note exchange agreement was tested to determine whether a debt modification or debt extinguishment had occurred. Based on management’s review, debt extinguishment applied. A loss on extinguishment of $258,037 resulted from the Exchange. The loss consists of the resulting derivative liability of $328,422 from embedded conversion options in the new notes and the additional value of $50,000 of the Series E Preferred Stock compared to the Series B Preferred, offset by the waiving of the unpaid Preferred Series B dividends of $120,385.

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Equity

9 Months Ended

Mar. 31, 2017

Equity [Abstract]

Stockholders' Equity Note Disclosure [Text Block]

9. Equity

Preferred Stock

As of March 31, 2017, there were 25,000 shares of Series E convertible preferred stock outstanding. The shares of Series E preferred stock are initially convertible into an aggregate of 187,500 shares of Common Stock at the initial conversion rate of $4.00 per share. The conversion price of the Series E preferred stock will be subject to adjustment solely in the event of stock dividends, combinations, splits, recapitalizations, and similar corporate events and does not provide for general price-based anti-dilution adjustments. Each share of Series E preferred stock has a stated value of $30.00 per share and has the following rights and preferences: (i) each holder of the Series E preferred stock has the right, at any time, to convert the shares of Series E preferred stock into shares of common stock; (ii) the Series E preferred stock is redeemable at the Company’s option commencing one year after the original issuance date, provided that the Company’s common stock is listed on a national securities exchange at such time; and (iii) the Series E preferred stock will pay dividends at the rate of 5% per annum in cash. The shares of Series E preferred stock were issued in a transaction with the holder of the Company’s previously outstanding shares of Series B preferred stock to exchange the shares of Series B preferred stock for the shares of Series E preferred stock. Pursuant to the exchange agreement for the preferred stock, the holder of the shares of Series B Preferred Stock agreed to waive all unpaid dividends that had accrued on the shares of Series B Preferred Stock.

As of March 31, 2017, there are 605,000 shares of Series D convertible preferred stock outstanding. The Series D preferred stock can be converted by the holders into an aggregate of 619,154 shares of common stock at an initial conversion rate of $9.77139 per share. The holders of such shares have the right to convert the preferred shares at any time; however, the shares received upon conversion may not be offered or sold except pursuant to an effective registration statement or an applicable exemption from the registration requirements of the Securities Act and applicable state securities laws. The Company has the right to repurchase the outstanding Series D preferred stock at a redemption price equal to $10.00 per share, plus accrued and unpaid dividends, and to require holders to convert their Series D preferred stock beginning in June 2016. Dividends on the Series D preferred stock accrue at a rate of 5% per annum and are payable semi-annually in cash or stock at the Company’s option. At March 31, 2017, the Company has accrued dividends in the amount of approximately $557,000, which remain unpaid.

The Company’s preferred stock takes precedence over common stock but ranks below debt in the event of liquidation. In addition the Series D convertible preferred stock ranks above the Series E convertible preferred stock.

Common Stock

As discussed in Notes 1 and 3 the AEON Acquisition on January 27, 2016 has been accounted for as a reverse merger under U.S. GAAP. As such, AEON is considered the acquiring entity for accounting purposes; and therefore, legacy AEON’s historical results of operations replaced legacy AHC’s historical results of operations for all periods prior to the reverse merger. Additionally, the legacy AEON equity accounts at June 30, 2015 were retroactively restated to reflect the number of shares received in the business combination as defined by Note 3.

Earnings per Share

Earnings per share (“EPS”) is the amount of earnings attributable to each share of common stock. For convenience, the term is used to refer to either earnings or loss per share. EPS is computed pursuant to Section 260-10-45 of the FASB Accounting Standards Codification. Pursuant to ASC Paragraphs 260-10-45-10 through 260-10-45-16, basic EPS shall be computed by dividing income available to common stockholders (the numerator) by the weighted-average number of common shares outstanding (the denominator) during the period. Income available to common stockholders shall be computed by deducting both the dividends declared in the period on preferred stock (whether or not paid) and the dividends accumulated for the period on cumulative preferred stock (whether or not earned) from income from continuing operations (if that amount appears in the income statement) and also from net income. The computation of diluted EPS is similar to the computation of basic EPS except that the denominator is increased to include the number of additional common shares that would have been outstanding if the dilutive potential common shares had been issued during the period to reflect the potential dilution that could occur from common shares issuable through contingent shares issuance arrangement, stock options or warrants.

	Three Months Ended				Nine Months Ended
	March 31,				March 31,
	2017		2016		2017		2016
Basic earnings per share
Net (loss) income	$	767,359	$	(2,739,173)	$	257,404	$	6,338,972
Preferred stock dividends		(74,863)		(67,082)		(276,111)		(67,082)
Net income available\to common shareholders after preferred stock dividends	$	692,496	$	(2,806,255)	$	(18,707)	$	6,271,890
Weighted average shares used in the computation of basic earnings per share		7,168,384		4,327,990		6,312,344		2,064,951
Earnings per share - basic	$	0.10	$	(0.65)	$	(0.00)	$	3.04
Dilutive earnings per share
Income available to common shareholders	$	692,496	$	(2,806,255)	$	(18,707)	$	6,271,890
Change in fair value of derivative liability		(392,407)						205,360
Interest on convertible debt		29,267		-		-		19,982
Preferred stock dividends		-		-		-		67,082
Net income applicable to common shareholders plus assumed conversions	$	329,356	$	(2,806,255)	$	(18,707)	$	6,358,954
Weighted average shares used in the computation of basic earnings per share		7,168,329		4,327,990		6,312,344		2,064,951
Dilutive effect of options, warrants, convertible debt and convertible preferred stock		1,597,328		-		-		630,039
Shares used in the computation of diluted earnings per share		8,765,657		4,327,990		6,312,344		2,694,990
Earnings per share - diluted	$	0.04	$	(0.65)	$	(0.00)	$	2.36
Anti-Dilutive Options Excluded	$	3,545,077			$	6,919,034

Common Stock Warrants

A schedule of common stock warrant activity is as follows:

	Number of Shares		Weighted Average Exercise Price Per Share		Weighted Average Remaining Contractual Life (Years)		Aggregate Intrinsic Value
Outstanding June 30, 2016		4,205,535	$	4.91		4.68	$	1,992,535
Issued		-
Expired		-
Outstanding March 31, 2017		4,205,535	$	4.79		4.07	$	751,173
Exercisable, March 31, 2017		4,149,979	$	4.70		4.10	$	751,173

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Share-Based Compensation

9 Months Ended

Mar. 31, 2017

Disclosure of Compensation Related Costs, Share-based Payments [Abstract]

Share-Based Compensation [Text Block]

10. Share-Based Compensation

On December 22, 2015, the Company and its owners approved a 10% pro-rata donation of members’ equity units to treasury units for no consideration. These units were used to retain and attract key members of management in contemplation of the reverse merger. During 2015, the units were committed to three key members of management. On January 12, 2016, the units were awarded with full rights and privileges. The Company has recognized approximately $1,418,000 of share based compensation based on the fair value of the units issued. The fair value of the unit based compensation was determined by using the value of AHC based on published stock values, and discounting them accordingly for lack of marketability and a probability discount associated with certain earn-outs.

On July 11, 2016, at the Special Meeting of Shareholders (the “Special Meeting”) of the Company’s shareholders approved, among other things (i) the issuance of shares of Common Stock in connection with earn-out payments that may become payable in the future to former members of AEON, (ii) an amendment to the Company’s certificate of incorporation, as amended, to change its name to “Aeon Global Health Corp.” and (iii) an amendment to the Authentidate Holding Corp. 2011 Omnibus Equity Incentive Plan to increase the number of shares of the Company’s common stock authorized for issuance thereunder by 1,000,000 shares.

As a result of the July 2016 approval of the issuance of shares of common stock in connection with earn-out payments that may become payable in the future to former members of AEON, on December 15, 2016, the Company issued to the former members of AEON an aggregate of 240,711 shares of common stock. In addition, based on the achievement of the earnings milestone under the Merger Agreement, the Company issued the former members of AEON an aggregate of 1,155,415 shares of common stock on December 15, 2016. The fair value of these shares was $5,742,598.

Stock option activity under the Company’s stock option plans for employees and non-executive directors for the period ended March 31, 2017 is as follows:

Employees Information	Number of Options		Weighted  Average Exercise Price		Weighted Average Remaining Contractual Life (Years)		Aggregate Intrinsic Value
Outstanding June 30, 2016		159,817	$	12.46	$	6.30	$	11,864
Granted		-
Expired/Forfeited		(222)	$	2.16	$	-	$	-
Outstanding March 31, 2017		159,595	$	12.48	$	5.27	$	-
Exercisable March 31, 2017		147,158	$	12.51	$	5.35	$	-

					Weighted
			Weighted		Average
			Average		Remaining		Aggregate
	Number of		Exercise		Contractual		Intrinsic
Non-Executive Director Information	Options		Price		Life (Years)		Value
Outstanding June 30, 2016		485,532	$	4.35		6.96	$	198,346
Granted		102,065		3.07
Expired/forfeited		(38,087)		9.61
Outstanding and exercisable March 31, 2017		549,510	$	3.76		7.16	$	54,265

Employee options are granted at the closing price on the day of issuance and typically vest over a three-year period and non-executive director options are granted at market price and vest on the grant date. Stock based compensation was approximately $27,000 and $90,000 for the three and nine month periods ended March 31, 2017, respectively. Options and warrants were issued for services performed in lieu of payment in cash for the nine months ending March 31, 2017 of $186,753.

As of March 31, 2017, there was approximately $750 of total unrecognized compensation expense related to unvested share-based compensation arrangements that is expected to be recognized over a weighted-average period of 3 months.

As of March 31, 2017 there were approximately 35,800 restricted stock units outstanding that were granted to employees in connection with the Company’s compensation modification program. These restricted stock units vest when the Company achieves cash flow breakeven for two consecutive quarters, as defined. There were no unvested shares at June 30, 2016 and no restricted shares issued in the current period.

In December 2012, the board of directors agreed that all non-employee directors would receive all of their cash director compensation, including amounts payable for committee service, service as a committee chair and per meeting fees, in restricted shares of our common stock or stock options issued at fair value in accordance with the terms of the 2011 Plan for periods ending after December 2012. During the nine months ended March 31, 2017, the company issued 102,065 stock options (valued at approximately $313,000) to certain non-executive directors in connection with this program.

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Fair Value Measurements

9 Months Ended

Mar. 31, 2017

Fair Value Disclosures [Abstract]

Fair Value Measurements [Text Block]

11. Fair Value Measurements

Fair Value of Financial Instruments

The Company follows ASC 820-10 “Fair Value Measurements and Disclosures”, of the FASB to measure the fair value of its financial statements and disclosures about fair value of its financial instruments. ASC 820-10 establishes a framework for measuring fair value in accounting principles general accepted in the United States of America (U.S. GAAP), and expands disclosures about fair value measurements. To increase consistency and comparability in fair value measurements and related disclosures, ASC 820-10 establishes a fair value hierarchy, which prioritizes the inputs to valuation techniques used to measure fair value into three broad levels. The three levels of fair value hierarchy defined by ASC 820-10 are described below:

Level 1 Quoted market prices available in active markets for identical assets or liabilities as of the reporting date.

Level 2 Pricing inputs other than quoted prices in active markets included in Level 1, which are either directly or indirectly observable            as of the reporting date.

Level 3 Pricing inputs that are generally unobservable input and not corroborated by market data.

Financial assets are considered Level 3 when their fair values are determined using pricing models, discounted cash flow methodologies or similar techniques and at least one significant model assumption or input is unobservable.

The fair value hierarchy gives the highest priority to quoted prices (unadjusted) in active markets for identical assets or liabilities and the lower priority to unobservable inputs. If the inputs used to measure the financial assets and liabilities fall within more than one level described above, the categorization is based on the lowest level input that is significant to the fair value measurement of the instrument.

The carrying amounts of the Company’s financial assets and liabilities, such as cash, accounts receivable, inventory, prepaid expenses and other current assets, accounts payable and accrued expenses approximate their fair values because of the short maturity of these instruments.

In connection with the issuance of a convertible promissory note as discussed in Note 8, the Company evaluated the note agreement to determine if the agreement contained any embedded components that would qualify the agreement as a derivative. The Company identified certain put features embedded in the convertible note agreement that potentially could result in a settlement in the event of a fundamental transaction, requiring the Company to classify the conversion feature as a derivative liability.

The Company’s Level 3 financial liabilities consist of the derivative conversion features of underlying convertible debt and warrants. The Company valued the conversion features using the Black Sholes model prior to the three months ended September 30, 2016 and the Monte Carlo model for the three and nine months ended March 31, 2017. These models incorporate transaction details such as the Company’s stock price, contractual terms maturity, risk free rates and volatility as of the date of issuance and each balance sheet date.

The Company utilized the following assumptions in valuing the derivative conversion features during the three months ended March 31, 2017:

Exercise price	$	2.03 – 2.07
Risk free interest rate		1.00% - 1.85%
Expected volatility		40% - 50%
Remaining term		0.97 – 4.72 years

Fair Value of Financial Assets and Liabilities Measured on a Recurring Basis

The Company uses Level 3 of the fair value hierarchy to measure the fair value of the derivative liabilities and revalues its derivative liabilities at every reporting period and recognizes gains or losses in the statements of operations that are attributable to the change in the fair value of the derivative liabilities. The following table provides a summary of the changes in fair value, including net transfers in and /or out, of all financial assets measured at fair value on a recurring basis using significant unobservable inputs during the nine months ended March 31, 2017.

			Convertible
	Warrants		Notes		Total
Balance - June 30, 2016	$	683,858	$	367,142	$	1,051,000
Embedded conversion feature in March 2017 convertible notes		-		328,422		328,422
Change in fair value of derivative liabilities		(119,609)		(272,798)		(392,407)
Balance - March 31, 2017	$	564,249	$	422,766	$	987,015

Changes in the unobservable input values could potentially cause material changes in the fair value of the Company Level 3 financial instruments. The significant unobservable inputs used in the fair value measurements are the expected volatility assumption. As significant increase (decrease) in the expected volatility assumption could potentially result in a higher (lower) fair value measurement.

Derivative Instruments

The Company evaluates its convertible debt, warrants or other contracts to determine if those contracts or embedded components of those contracts qualify as derivatives to be separately accounted for in accordance with ASC 815-15. The result of this accounting treatment is that the fair value of the embedded derivative is market-to-market each balance sheet date and recorded as a liability, the change in fair value is recorded in the statements of operations as other income (expense). Upon conversion or exercise of a derivative instrument, the instrument is marked to fair value at the conversion date and then that fair value is reclassified to equity.

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Commitments and Contingencies

9 Months Ended

Mar. 31, 2017

Commitments and Contingencies Disclosure [Abstract]

Commitments and Contingencies [Text Block]

12. Commitments and Contingencies

A complaint was filed by a former independent contractor in the State of Louisiana who was involved in the sales and marketing of the Company’s products and services. Plaintiff alleges certain commissions had not been paid in full, and the Company believes the contractor was overpaid and has asserted a counterclaim for reimbursement of such overpayments. The Company intends to vigorously defend the claim and pursue the counterclaim. The parties have completed initial discovery and the matter remains pending. The Company believes the resolution of this matter will not have a material effect on its financial statements.

The Company filed a complaint in the state of Georgia in November 2015 against its former sales director as well as an independent contractor for their improper use of a Company customer list. The complaint alleges the defendants utilized the Company’s customer list to improperly solicit business for their personal benefit. The complaint against the independent contractor has since been dismissed, and the action against the former sales director is pending. The Company believes the resolution of this matter will not have a material effect on its financial statements.

In connection with the termination of the Company’s employment relationship with certain executives, including the former Chief Executive and Chief Financial Officers of AHC, the Company has been reviewing its severance obligations to them and the vesting of other post-termination provisions. The Company believes that it has accrued all related severance costs as of March 31, 2017 related to past terminations.

Both the former CEO and CFO of AHC have commenced arbitration proceedings against AHC before the American Arbitration Association ("AAA"). A demand for arbitration was filed with the AAA on or about June 22, 2016 by the former CEO, O’Connell Benjamin, requesting payment pursuant to an employment agreement of severance compensation in the amount of $341,620 and other benefits, including the vesting of certain stock option awards, pursuant to an employment agreement.  In December, 2016, the parties opted to pursue mediation in their attempt to resolve the matter, but the Company chose to revert to utilizing arbitration in May 2017. The Company believes that it has valid defenses to Mr. Benjamin’s claims and intends to vigorously defend this matter.

Further, a demand for arbitration was filed with the AAA by the Company’s former CFO, William A. Marshall. The demand involved a request for severance compensation and other benefits, including the vesting of certain stock options, pursuant to the terms of an employment agreement. A hearing was held on March 27, 2017, and on April 24, 2017, the parties entered into a binding settlement agreement and mutual release. Pursuant to the separation agreement and general release, the Company agreed to provide the following to the former CFO: (i) cash payments totaling $170,000 to be paid over time through May 15, 2018, (ii) a lump sum severance payment of $160,000 payable on June 15, 2018, (iii) the issuance of a total of 12,835 vested shares of common stock pursuant to the terms of the restricted stock units granted in January 2013 and January 2014, and (iv) 27,388 stock options previously granted to became vested and exercisable for the duration of their original exercise periods, subject, however, to the terms of a lockup agreement executed by him prior to the closing of the merger between AHC and Peachstate Health Management, LLC d/b/a AEON Clinical Labs. Pursuant to the settlement agreement, the Company issued a secured senior promissory note, subordinated to the interests of the existing senior lenders, which provides for events of default that are customary for similar transactions. The Company also agreed to provide a general release to Marshall and indemnification from claims arising from or related to his employment with the Company to the extent permitted by applicable law, the Company’s bylaws, and his employment agreement.

The Company is a defendant in an action captioned Cogmedix, Inc. v. Authentidate Holding Corp. in the Superior Court of Worcester County, Commonwealth of Massachusetts, Case No.1685CV01318B. Suit was filed on September 6, 2016 alleging the principal amount of $227,061 remains outstanding on a purchase order dated December 6, 2013.  Based on the facts of which we are currently aware, management believes that this matter will not have a material adverse effect on our financial position, results of operations, or cash flows. However, this matter is subject to inherent uncertainties and management’s assessment may change in the future.

Management believes that these legal matters, individually or in aggregate, will not have a material adverse effect on our financial position, results of operations, or cash flows. However, litigation such as described above, is subject to inherent uncertainties and there can be no assurance that management’s opinion of the anticipated effect of these matters will be correct or that it will not change in the future.

On May 3, 2017 the Company received notice from the Office for Civil Rights (“OCR”) of the U.S. Department of Health and Human Services (“HHS”) informing the Company of the OCR conducting a review of the Company’s compliance with applicable Federal Standards for Privacy of Individually Identifiable Health Information and/or Security Standards for the Protection of Electronic Protected Health Information. The OCR is the division of HHS charged with enforcement of the Health Insurance Portability and Accountability Act of 1996, as amended (“HIPAA”), and the privacy, security and data breach rules which implement HIPAA (HIPAA Rules). The OCR reviewed the Company’s premises and conducted interviews on May 23, 2017. The OCR may, among other things, require a corrective action plan and impose civil monetary penalties. While the Company does not believe a loss is probable by reason of the OCR’s compliance review, the Company believes a loss is reasonably possible; however, at this time Company cannot estimate a range of probable losses because the OCR's review is at an early stage and the Company does not know if the OCR will find a violation(s) and, if so, what violation(s) and whether the OCR will with a corrective action, issue penalties, or reach a monetary settlement. Any adverse determination by the OCR that results in significant monetary penalties could have a material adverse effect on the Company's consolidated financial position, results of operations, and cash flows.

We are also subject to claims and litigation arising in the ordinary course of business. Our management considers that any liability from any reasonably foreseeable disposition of such claims and litigation, individually or in the aggregate, would not have a material adverse effect on our consolidated financial position, results of operations or cash flows.

We have entered into various agreements by which we may be obligated to indemnify the other party with respect to certain matters. Generally, these indemnification provisions are included in contracts arising in the normal course of business under which we customarily agree to hold the indemnified party harmless against losses arising from a breach of representations related to such matters as intellectual property rights. Payments by us under such indemnification clauses are generally conditioned on the other party making a claim. Such claims are generally subject to challenge by us and to dispute resolution procedures specified in the particular contract. Further, our obligations under these arrangements may be limited in terms of time and/or amount and, in some instances, we may have recourse against third parties for certain payments made by us. It is not possible to predict the maximum potential amount of future payments under these indemnification agreements due to the conditional nature of our obligations and the unique facts of each particular agreement. Historically, we have not made any payments under these agreements that have been material individually or in the aggregate. As of March 31, 2017, we are not aware of any obligations under such indemnification agreements that would require material payments.

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Related Party Transactions

9 Months Ended

Mar. 31, 2017

Related Party Transactions [Abstract]

Related Party Transactions Disclosure [Text Block]

13. Related Party Transactions

Except as disclosed herein, we have not entered into any material transactions or series of similar transactions with any director, executive officer or any security holder owning 5% or more of our common stock since July 1, 2015.

Aeon leases its facilities from Centennial Properties of Georgia, LLC under a lease agreement commencing April 2014, as amended January 20, 2016. The lease provides for a term of 12 years expiring March 2026. The lease payments range from $46,500 to a maximum of $60,000. In connection with the lease agreement, as security for its rent and other obligations under the lease, AEON has provided to the landlord a first priority lien and security interest in substantially all of its assets. The landlord under the lease is Centennial Properties of Georgia, LLC, a Georgia limited liability company. Centennial is owned by Sonny Roshan, Shawn Desai, Pyarali Roy and Sohail Ali, all of whom are AEON employees and will be receiving AHC Common Stock as a result of the transaction. Mr. Roshan is the Chairman of AEON and now serves as the Chairman and CEO of Authentidate. Mr. Desai is the Chief Technology Officer of AEON. Mr. Roy is the Chief Strategy Officer of AEON. Related party rent expense for the three and nine months ending March 31, 2017 was approximately $139,500 and $418,500, respectively.

On February 27, 2017, the Company entered into a separation agreement and general release with William P. Henry, the Company’s former Chief Operating Officer, addressing post-employment compensation arrangements. The separation agreement provides that Mr. Henry will receive the following in consideration of the general release granted by him to the Company: (i) a severance payment in the amount of $160,000, payable in equal installments on each of the Company’s regular pay dates during the twelve months commencing on the first regular executive pay date after May 1, 2017; (ii) such number of shares of Common Stock of the Company which shall be determined by dividing $160,000 by the closing sales price of the Company’s Common Stock on the execution date of the separation agreement; (iii) stock option awards previously granted to Mr. Henry during his service as the chief strategy officer of the Company shall remain exercisable for the full duration of their original exercise periods; and (iv) Mr. Henry’s current health and insurance benefits will continue until February 1, 2018 and the Company shall promptly reimburse Mr. Henry for unreimbursed business expenses arising out of his service to the Company and for reasonable legal fees and costs of negotiating the Separation Agreement. Effective with the execution of the separation agreement, Mr. Henry resigned from the Company’s Board of Directors.

The Company holds certain notes payables with shareholders and affiliates of board members of the Company, as described in Note 8. Interest expense relating to these notes amounted to approximately $87,000 and $286,000 for the three and nine months ended March 31, 2017, respectively.

Effective as of January 31, 2017, the Company accepted a short term loan in the aggregate principal amount of $250,000 from Hanif A. Roshan, the Company’s Chief Executive Officer and Chairman of the Board. To evidence the loan, the Company issued Mr. Roshan a promissory note (the “Note”) in the aggregate principal amount of $250,000. The Note was an unsecured obligation of the Company and was not convertible into equity securities of the Company. The Note was due and payable on the 30-day anniversary of the issue date and interest accrued on the Note at the rate of 12.0% per annum. The Note was exchanged for a new secured convertible note in the exchange transaction described above under the caption “Exchange Transaction”.

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Segment Information

9 Months Ended

Mar. 31, 2017

Segment Reporting [Abstract]

Segment Reporting Disclosure [Text Block]

14. Segment Information

The Company is operated as two segments: laboratory testing services (legacy AEON’s services), and web-based software and related products and offerings (legacy AHC products). Laboratory testing services includes the testing of an individual’s blood, urine or saliva for the presence of drugs or chemicals and the patient’s DNA profile. Web-based software and related products and offerings provide secure web-based revenue cycle management applications and telehealth products and services that enable healthcare organizations to increase revenues, improve productivity, reduce costs, coordinate care for patients and enhance related administrative and clinical workflows and compliance with regulatory requirements. Our web-based services are delivered as Software as a Service (SaaS) to our customers interfacing seamlessly with billing, information and document management systems.

Currently, management runs each segment separately and measures profitability and operational performance based on the financial records independently maintained by two separate systems. 

Selected financial information related to the Company’s segments is presented below:

	AEON		Authentidate		Total
Three Months ended March 31, 2017
Net revenues	$	5,212,634	$	319,176	$	5,531,810
Cost of revenues		855,852		52,438		908,290
Operating expenses		4,296,693		393,510		4,690,203
Operating income (loss)		915,941		(74,334)		841,607
Nine Months ended March 31, 2017
Net revenues	$	15,469,366	$	999,333	$	16,468,699
Cost of revenues		2,999,813		203,691		3,203,504
Operating expenses		14,343,516		1,558,364		15,901,880
Operating income (loss)		1,125,850		(559,031)		566,819
Three Months ended March 31, 2016
Net revenues	$	5,244,268	$	259,000	$	5,503,268
Cost of revenues		2,132,891		134,000		2,266,891
Operating expenses		5,925,397		840,000		6,765,397
Operating loss		(681,129)		(581,000)		(1,262,129)
Nine Months ended March 31, 2016
Net revenues	$	27,841,709	$	259,000	$	28,100,709
Cost of revenues		5,199,436		134,000		5,333,436
Operating expenses		19,461,445		840,000		20,301,445
Operating income (loss)		8,380,264		(581,000)		7,799,264
March 31, 2017
Total assets	$	5,253,797	$	44,238,055	$	49,491,852
June 30, 2016
Total assets	$	6,777,791	$	44,895,538	$	51,673,329

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Summary of Significant Accounting Policies (Policies)

9 Months Ended

Mar. 31, 2017

Accounting Policies [Abstract]

Basis of Accounting, Policy [Policy Text Block]

Basis of Presentation

The Company’s condensed consolidated financial statements have been prepared in accordance with U.S. GAAP and following the requirements of the Securities and Exchange Commission (“SEC”) for interim reporting. As permitted under those rules, certain footnotes or other financial information that are normally required by U.S. GAAP can be condensed or omitted. These interim financial statements have been prepared on the same basis as the Company’s annual financial statements and, in the opinion of management, reflect all adjustments, consisting only of normal recurring adjustments, which are necessary for a fair statement of the Company’s financial information. These interim results are not necessarily indicative of the results to be expected for the year ending June 30, 2017 or any other interim period or for any other future year.

The balance sheet as of June 30, 2016 has been derived from audited financial statements at that date but does not include all of the information required by U.S. GAAP for complete financial statements.

These condensed consolidated financial statements should be read in conjunction with the annual consolidated financial statements and notes thereto included in the Company’s Form 10-K for the fiscal year ended June 30, 2016 and the corresponding Management’s Discussion and Analysis of Financial Condition and Results of Operations.

Consolidation, Policy [Policy Text Block]

Principles of Consolidation

The consolidated financial statements include the accounts of the Company and its wholly-owned subsidiaries. Intercompany accounts and transactions have been eliminated in consolidation.

Use of Estimates, Policy [Policy Text Block]

Use of Estimates

The preparation of consolidated financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the consolidated financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.

The most sensitive accounting estimates affecting the financial statements are revenue recognition, the allowance for doubtful accounts, depreciation of long-lived assets, fair value of intangible assets and goodwill, amortization of intangible assets, income taxes and associated deferrals and valuation allowances, and commitments and contingencies.

Cash and Cash Equivalents, Policy [Policy Text Block]

Cash and Cash Equivalents

Cash and cash equivalents include all cash balances and highly liquid investments with maturities of three months or less.

Trade and Other Accounts Receivable, Policy [Policy Text Block]

Accounts receivable

Accounts receivable represent customer obligations due under normal trade terms, net of allowance for doubtful accounts. The allowance for doubtful accounts reflects our best estimate of probable losses inherent in the accounts receivable balance. We determine the allowance based on known troubled accounts, historical experience and other currently available evidence. The allowance for doubtful accounts was approximately $543,000 and $769,000 as of March 31, 2017 and June 30, 2016, respectively.

Inventory, Policy [Policy Text Block]

Inventory

Inventory amounts are stated at the lower of cost or market using the first-in, first-out basis.

Goodwill and Intangible Assets, Intangible Assets, Policy [Policy Text Block]

Intangible Assets

Intangible assets consist primarily of trademarks and acquired technologies. The Company acquired approximately $2,344,000 of intangible assets in conjunction with the reverse merger discussed in Note 1 and Note 3. Intangible assets with finite lives are amortized on a straight-line basis over their useful lives.

Goodwill and Intangible Assets, Goodwill, Policy [Policy Text Block]

Goodwill

Goodwill is not amortized, but is assessed annually for impairment. The Company evaluates the carrying value of goodwill on an annual basis and between annual evaluations if events occur or circumstances change that would more likely than not reduce the fair value of goodwill below its carrying amount. When assessing whether goodwill is impaired, management considers first a qualitative approach to evaluate whether it is more likely than not the fair value of the goodwill is below its carrying amount; if so, management considers a quantitative approach by analyzing changes in performance and market based metrics as compared to those used at the time of the initial acquisition. For the periods presented, no impairment charges were recognized.

Revenue Recognition, Policy [Policy Text Block]

Revenue Recognition

The Company provides laboratory testing services, web-based hosted software services, telehealth products and post contract customer support services.

Billings for laboratory testing services are reimbursed by third-party payers net of allowances for differences between amounts billed and the cash receipts from such payers. In accordance with Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) ASC-605 “Revenue Recognition”, the Company recognizes revenues when there is a persuasive evidence of an arrangement, title and risk of loss have passed, product is shipped or services have been rendered, sales price is fixed or determinable and collection of the related receivable is reasonably assured.

Historically, the Company had recognized revenue for these services upon cash receipt because the criteria to recognize revenues under ASC-605 had not been met at the time test results were delivered since the fee was not fixed and determinable until the third payer remitted payment given the limited experience and history to develop a reliable estimate of the provision for contractual adjustments (that is, the difference between established rates and expected third-party payments) and discounts (that is, the difference between established rates and the amount billable). The Company has continuously reassessed its ability to develop reliable estimates of the provision for contractual adjustments and discounts and over the past year and has made investments in its systems and process around its billing system to improve the quality of information generated by the system. Given these ongoing investments and improvements and based upon the financial framework the Company uses for estimating the provision for contractual adjustments and discounts, in the second quarter of 2016, the Company concluded that it was able to reasonably estimate its provision for contractual adjustments and discounts and began recognizing revenue at the time test results are delivered, net of estimated contractual allowances.

Revenue for hosted software services, telehealth products, and customer support services are recognized when persuasive evidence of an arrangement exists, delivery has occurred, the selling price is fixed and collectability is reasonably assured. Multiple-element arrangements are assessed to determine whether they can be separated into more than one unit of accounting. A multiple-element arrangement is separated into more than one unit of accounting if all of the following criteria are met: the delivered item has value to the customer on a standalone basis; there is objective and reliable evidence of the fair value of the undelivered items in the arrangement; if the arrangement includes a general right of return relative to the delivered items, and delivery or performance of the undelivered item is considered probable and substantially in our control. If these criteria are not met, then revenue is deferred until such criteria are met or until the period over which the last undelivered element is delivered, which is typically the life of the contract agreement. If these criteria are met, we allocate total revenue among the elements based on the sales price of each element when sold separately which is referred to as vendor specific objective evidence or VSOE.

Concentration Risk, Credit Risk, Policy [Policy Text Block]

Concentrations of Credit Risk

The Company maintains its cash in bank deposit accounts which, at times, may exceed federally insured limits. Accounts are guaranteed by the Federal Deposit Insurance Corporation (FDIC) up to certain limits. At March 31, 2017 and June 30, 2016, the Company had approximately $948,000 and approximately $1,165,000, respectively, in excess of FDIC-insured limits. The Company has not experienced any losses in such accounts.

Income Tax, Policy [Policy Text Block]

Income Taxes

The Company accounts for income taxes under an asset and liability approach that requires the recognition of deferred tax assets and liabilities for the expected future tax consequences of events that have been recognized in the Company’s financial statements or tax returns. In estimating future tax consequences, the Company generally considers all expected future events other than enactments of changes in tax laws or rates. The effect on deferred tax assets and liabilities of a change in tax rates will be recognized as income or expense in the period that includes the enactment date. A valuation allowance is established when necessary to reduce deferred tax assets to the amount expected to be realized.

Prior to the reverse merger, AEON elected to be taxed as an S Corporation for federal and certain state income tax purposes. Under this election substantially all of the profits, losses, credits and deductions of the Company are passed through to the individual shareholders. Therefore prior to the reverse merger no provision or liability for income taxes has been included in these consolidated financial statements except for state and localities where the S Corporation status has not been recognized.

Prior to the reverse merger, AHC tax benefits were fully offset by a valuation allowance due to the uncertainty that the deferred tax assets would be realized. As a result of the reverse merger a deferred tax asset was recorded since it was determined the realization of some of these assets is more likely than not, due to consolidated earnings resulting in the expected usage of net operating loss carryforwards.

Under income tax regulations in the United States AHC is the acquirer of AEON. As such the Company must file a consolidated return for both AHC and AEON for the year ending June 30, 2017.

Management considers the likelihood of changes by taxing authorities in its filed income tax returns and recognizes a liability for or discloses potential changes that management believes are more likely than not to occur upon examination by tax authorities. Management has not identified any uncertain tax positions in filed income tax returns that require recognition or disclosure in the accompanying consolidated financial statements.

The Company’s policy is to include penalties and interest expense related to income taxes as a component of other expense and interest expense, respectively, as necessary.

New Accounting Pronouncements, Policy [Policy Text Block]

Recent Accounting Pronouncements

In May 2014, the FASB issued Accounting Standards Update (“ASU”) 2014-09, “Revenues from Contracts with Customers” (Topic 606), which affects any entity that either enters into contracts with customers to transfer goods or services or enters into contracts for the transfer for nonfinancial assets, unless those contracts are within the scope of other standards. Under ASU 2014-09, an entity should recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. The ASU must be applied for annual periods beginning after December 15, 2017, with early application permitted for annual reporting periods beginning after December 15, 2016. The Company is evaluating the impact on the consolidated financial statements of adopting the guidance in ASU 2014-09 at year-end and does not expect adoption to have a material effect on its consolidated financial statements and disclosures.

In August 2014, the FASB issued ASU No. 2014-15, “Disclosure of Uncertainties about an Entity’s Ability to Continue as a Going Concern”. The amendments in this update state that in connection with preparing financial statements for each annual and interim reporting period, an entity’s management should evaluate whether there are conditions or events that raise substantial doubt about the entity’s ability to continue as a going concern within one year after the date that the financial statements are issued (or within one year after the date that the financial statements are available to be issued, when applicable). The amendments in this update are effective for the annual reporting period beginning after December 15, 2016 and for annual periods and interim periods thereafter. Early application is permitted. The adoption of this update is not expected to have a material impact on our consolidated financial statements.

In July 2015, the FASB issued Accounting Standards Update (“ASU”) 2015-11, “Inventory (Topic 330): Simplifying the Measurement of Inventory”. ASU 2015-11 requires inventory measured using any method other than last-in, first-out (“LIFO”) or the retail inventory method to be subsequently measured at the lower of cost or net realizable value, rather than at the lower of cost or market. Under this ASU, subsequent measurement of inventory using the LIFO and retail inventory method is unchanged. ASU 2015-11 is effective prospectively for fiscal years, and for interim periods within those years, beginning after December 15, 2016. The Company will recognize its inventory at the lower of cost or net realizable value upon adoption.

In November 2015, the FASB issued a new accounting standard that requires that the deferred tax liabilities and assets be classified as noncurrent on the consolidated balance sheet. The standard will be effective for the Company beginning July 1, 2017, with early adoption permitted. The adoption of this standard is not expected to have a material impact on the consolidated financial statements.

In February 2016, the FASB issued ASU No. 2016-2, “Leases,” which establish a right-of-use (ROU) model that requires a lessee to record and ROU asset and lease liability on the balance sheet for all leases with terms longer than 12 months. Leases will be classified as either finance or operating, with classifications affecting the pattern of expense recognition in the income statement. This ASU is effective for fiscal years beginning after December 15, 2018, including interim periods within those fiscal years. Early adoption is permitted. ASU 2016-02 requires modified retrospective adoption for all leases existing at, or entered into after, the date of initial application, with an option to use certain transition relief. We are currently evaluating the effect of adoption of this ASU.

In May 2016, the FASB issued ASU No. 2016-12, “Revenue from Contract with Customers (Topic 606): Narrow-Scope Improvements and Practical Expedients”, which clarifies certain issues identified by the FASB-International Accounting Standards Board Joint Transition Resource Group for Revenue Recognition (TRG) on assessing collectability, presentation of sales taxes and other taxes collected from customers, noncash consideration, completed contracts and contract modifications. We are currently evaluating the effect of adoption of this ASU and will report on its effect on the Company when available.

In June 2016, the FASB issued ASU No. 2016-13, “Financial Instruments-Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments”, which requires measurement and recognition of expected credit losses for financial assets held. The amendments in this update are effective for annual periods beginning after December 15, 2019, and interim periods within such annual period. Early adoption is permitted for fiscal years beginning after December 15, 2018, including interim periods within such year. The Company is currently evaluating the potential impacts of adopting the provisions of ASU No. 2016-13.

In August 2016, the FASB issued ASU No. 2016-15, “Statement of Cash Flows (topic 230): Classification of Certain Cash Receipts and Cash Payments”, which clarifies diversity in practice how the following are presented and classified in the statement of cash flows:

⋅ Debt Prepayment of Debt Extinguishment Costs

⋅ Settlement of Zero-Coupon Debt Instruments or Other Debt Instruments with Coupon Interest Rates That Are Insignificant in Relation to the Effective Interest Rate of the Borrowing

⋅ Contingent Consideration Payments Made after a Business Combination

⋅ Proceeds from the Settlement of Corporate-Owned Life Insurance Policies

⋅ Distributions Received from Equity Method Investees

⋅ Beneficial Interests in Securitization Transactions

⋅ Separately Identifiable Cash Flows and Application of the Predominance Principle.

This standard is effective beginning with our fiscal year ending June 30, 2018. We are currently evaluating the effect of adoption of this ASU and will report on its effect on the Company when available.

In January 2017, the FASB issued ASU 2017-04, Intangibles – Goodwill and other (Topic 350): Simplifying the Test for Goodwill Impairment (“ASU 2017-04”), which simplifies how an entity is required to test goodwill for impairment by eliminating Step 2 from the goodwill impairment test. Under ASU 2014-04 goodwill impairment will be tested by comparing the fair value of a reporting unit with its carrying amount, and recognizing an impairment charge for the amount by which the carrying amount exceeds the reporting unit’s fair value. The new guidance must be applied on a prospective basis and is effective for periods beginning after December 15, 2019, with early adoption permitted. We are currently evaluating the effect of adoption of this ASU and do believe the effect will be material on our financial statements.

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Reverse Merger (Tables)

9 Months Ended

Mar. 31, 2017

Business Combinations [Abstract]

Schedule of Business Acquisitions by Acquisition, Equity Interest Issued or Issuable [Table Text Block]

The effective consideration transferred is comprised of the following:

Fair value of AHC common shares	(A)	$	22,675,000
Preferred stock outstanding	(B)		3,047,000
Stock options vested and outstanding	(C)		1,296,000
Warrants vested and outstanding	(C)		9,782,000
Consideration effectively transferred		$	36,800,000

(A) Based upon 4,814,226 AHC common shares outstanding at a fair value of $4.71 per share, which was the closing price of AHC common shares on the effective date of the merger.

(B) Represents 28,000 shares of Series B and 605,000 shares of Series D preferred stock as converted into 646,933 common shares with a fair value of $4.71 per share, which was the closing price of AHC common shares on the effective date of the merger.

(C) Represents outstanding and vested AHC stock options and warrants acquired in connection with the reverse merger.

Schedule Of Share Based Payment Award Stock Options And Warrants Valuation Assumptions [Table Text Block]

The fair value of these stock options and warrants was determined using the Black Scholes model, with the following assumptions:

	Options			Warrants
Number of shares		616,141			4,313,180
Weighted average exercise price	$	4.46		$	5.24
Volatility		85.10	%		85.10	%
Risk-free interest rate		1.63	%		1.63	%
Expected dividend rate		0	%		0	%
Expected life (years)		4.00			4.16
Stock price	$	4.71		$	4.71

Schedule of Recognized Identified Assets Acquired and Liabilities Assumed [Table Text Block]

The fair value of the assets acquired and liabilities assumed were based on management estimates. Based upon the purchase price allocation, the following table summarizes the estimated provisional fair value of the assets acquired and liabilities assumed at the date of acquisition:

Cash and cash equivalents	$	30,000
Restricted cash		121,000
Accounts receivable		174,000
Inventory		360,000
Prepaid expenses and other current assets		464,000
Property and equipment		189,000
Trade names and licensed technology		2,344,000
Deferred tax assets		38,804,000
Total assets acquired at fair value		42,486,000
Accounts payable and accrued expenses		3,860,000
Notes payable		4,078,000
Derivative liabilities		1,066,000
Total liabilities assumed		9,004,000
Net assets acquired		33,482,000
Goodwill		3,318,000
Total preliminary purchase consideration	$	36,800,000

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Inventory (Tables)

9 Months Ended

Mar. 31, 2017

Inventory Disclosure [Abstract]

Schedule of Inventory, Current [Table Text Block]

	March 31,		June 30,
	2017		2016
Laboratory testing supplies	$	46,861	$	100,233
Purchased components, net		-		31,068
Finished goods		-		206,606
Total inventory	$	46,861	$	337,907

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Property and Equipment (Tables)

9 Months Ended

Mar. 31, 2017

Property, Plant and Equipment [Abstract]

Property, Plant and Equipment [Table Text Block]

					Estimated
	March 31,		June 30,		Useful Life In
	2017		2016		Years
Machinery and equipment	$	5,608,592	$	5,591,564	3-6
Software		392,913		392,913	5-7
Furniture and fixtures		105,043		105,043	5-7
Leasehold improvements		69,268		64,193	(1)
		6,175,816		6,153,713
Less: Accumulated depreciation and amortization		(3,594,529)		(2,677,043)
Property and equipment, net	$	2,581,287	$	3,476,670

(1) Lesser of lease terms or estimated useful life

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Intangible Assets (Tables)

9 Months Ended

Mar. 31, 2017

Goodwill and Intangible Assets Disclosure [Abstract]

Schedule of Finite-Lived Intangible Assets [Table Text Block]

The following table sets forth intangible assets as follows:

	March 31, 2017						June 30, 2016
	Gross Carrying Amount		Accumulated Amortization		Net Book Value		Gross Carrying Amount		Accumulated Amortization		Net Book Value		Useful Life In Years
Trademarks	$	550,000	$	91,667	$	458,333	$	550,000	$	32,738	$	517,262		7
Acquired technologies		1,794,000		342,600		1,451,400		1,794,000		122,580		1,671,420		3-7
Total	$	2,344,000	$	434,267	$	1,909,733	$	2,344,000	$	155,318	$	2,188,682

Schedule of Finite-Lived Intangible Assets, Future Amortization Expense [Table Text Block]

Amortization expense was approximately $93,000 and $279,000 for the three and nine months ended March 31, 2017 and $80,000 for both the three and nine months ended March 31, 2016, respectively. Amortization expense for the next five fiscal years and thereafter is expected to be as follows:

June 30,
2017 (remaining)	$	93,057
2018		372,229
2019		372,229
2020		372,229
2021		317,729
Thereafter		382,260
	$	1,909,733

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Notes Payable (Tables)

9 Months Ended

Mar. 31, 2017

Debt Disclosure [Abstract]

Schedule of Debt [Table Text Block]

The following table sets forth the secured and unsecured notes payable:

	March 31, 2017				June 30, 2016
	Note		Interest rate		Note		Interest rate
	Payable		per annum		Payable		per annum
Secured				Secured
	$	1,056,875	5% interest paid annually		$	950,000	9% interest paid upon maturity of early redemption
		641,294	5% interest paid annually			320,000	10% interest paid annually
		255,417	5% interest paid annually			1,270,000
		591,613	5% interest paid annually	Unsecured
						532,811	20% interest paid annually
						200,000	20% interest paid annually
Total	$	2,545,199				525,000	20% interest paid annually
						450,000	20% interest paid annually
						1,707,811
				Total	$	2,977,811

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Equity (Tables)

9 Months Ended

Mar. 31, 2017

Earnings Per Share [Abstract]

Schedule of Earnings Per Share, Basic and Diluted [Table Text Block]

	Three Months Ended				Nine Months Ended
	March 31,				March 31,
	2017		2016		2017		2016
Basic earnings per share
Net (loss) income	$	767,359	$	(2,739,173)	$	257,404	$	6,338,972
Preferred stock dividends		(74,863)		(67,082)		(276,111)		(67,082)
Net income available\to common shareholders after preferred stock dividends	$	692,496	$	(2,806,255)	$	(18,707)	$	6,271,890
Weighted average shares used in the computation of basic earnings per share		7,168,384		4,327,990		6,312,344		2,064,951
Earnings per share - basic	$	0.10	$	(0.65)	$	(0.00)	$	3.04
Dilutive earnings per share
Income available to common shareholders	$	692,496	$	(2,806,255)	$	(18,707)	$	6,271,890
Change in fair value of derivative liability		(392,407)						205,360
Interest on convertible debt		29,267		-		-		19,982
Preferred stock dividends		-		-		-		67,082
Net income applicable to common shareholders plus assumed conversions	$	329,356	$	(2,806,255)	$	(18,707)	$	6,358,954
Weighted average shares used in the computation of basic earnings per share		7,168,329		4,327,990		6,312,344		2,064,951
Dilutive effect of options, warrants, convertible debt and convertible preferred stock		1,597,328		-		-		630,039
Shares used in the computation of diluted earnings per share		8,765,657		4,327,990		6,312,344		2,694,990
Earnings per share - diluted	$	0.04	$	(0.65)	$	(0.00)	$	2.36
Anti-Dilutive Options Excluded	$	3,545,077			$	6,919,034

Schedule of Stockholders' Equity Note, Warrants or Rights [Table Text Block]

A schedule of common stock warrant activity is as follows:

	Number of Shares		Weighted Average Exercise Price Per Share		Weighted Average Remaining Contractual Life (Years)		Aggregate Intrinsic Value
Outstanding June 30, 2016		4,205,535	$	4.91		4.68	$	1,992,535
Issued		-
Expired		-
Outstanding March 31, 2017		4,205,535	$	4.79		4.07	$	751,173
Exercisable, March 31, 2017		4,149,979	$	4.70		4.10	$	751,173

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Share-Based Compensation (Tables)

9 Months Ended

Mar. 31, 2017

Disclosure of Compensation Related Costs, Share-based Payments [Abstract]

Schedule of Share-based Compensation, Stock Options, Activity [Table Text Block]

Stock option activity under the Company’s stock option plans for employees and non-executive directors for the period ended March 31, 2017 is as follows:

Employees Information	Number of Options		Weighted  Average Exercise Price		Weighted Average Remaining Contractual Life (Years)		Aggregate Intrinsic Value
Outstanding June 30, 2016		159,817	$	12.46	$	6.30	$	11,864
Granted		-
Expired/Forfeited		(222)	$	2.16	$	-	$	-
Outstanding March 31, 2017		159,595	$	12.48	$	5.27	$	-
Exercisable March 31, 2017		147,158	$	12.51	$	5.35	$	-

					Weighted
			Weighted		Average
			Average		Remaining		Aggregate
	Number of		Exercise		Contractual		Intrinsic
Non-Executive Director Information	Options		Price		Life (Years)		Value
Outstanding June 30, 2016		485,532	$	4.35		6.96	$	198,346
Granted		102,065		3.07
Expired/forfeited		(38,087)		9.61
Outstanding and exercisable March 31, 2017		549,510	$	3.76		7.16	$	54,265

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Fair Value Measurements (Tables)

9 Months Ended

Mar. 31, 2017

Fair Value Disclosures [Abstract]

Fair Value Measurements, Recurring and Nonrecurring, Valuation Techniques [Table Text Block]

The Company utilized the following assumptions in valuing the derivative conversion features during the three months ended March 31, 2017:

Exercise price	$	2.03 – 2.07
Risk free interest rate		1.00% - 1.85%
Expected volatility		40% - 50%
Remaining term		0.97 – 4.72 years

Fair Value, Liabilities Measured on Recurring Basis [Table Text Block]

The following table provides a summary of the changes in fair value, including net transfers in and /or out, of all financial assets measured at fair value on a recurring basis using significant unobservable inputs during the nine months ended March 31, 2017.

			Convertible
	Warrants		Notes		Total
Balance - June 30, 2016	$	683,858	$	367,142	$	1,051,000
Embedded conversion feature in March 2017 convertible notes		-		328,422		328,422
Change in fair value of derivative liabilities		(119,609)		(272,798)		(392,407)
Balance - March 31, 2017	$	564,249	$	422,766	$	987,015

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Segment Information (Tables)

9 Months Ended

Mar. 31, 2017

Segment Reporting [Abstract]

Schedule of Segment Reporting Information, by Segment [Table Text Block]

Selected financial information related to the Company’s segments is presented below:

	AEON		Authentidate		Total
Three Months ended March 31, 2017
Net revenues	$	5,212,634	$	319,176	$	5,531,810
Cost of revenues		855,852		52,438		908,290
Operating expenses		4,296,693		393,510		4,690,203
Operating income (loss)		915,941		(74,334)		841,607
Nine Months ended March 31, 2017
Net revenues	$	15,469,366	$	999,333	$	16,468,699
Cost of revenues		2,999,813		203,691		3,203,504
Operating expenses		14,343,516		1,558,364		15,901,880
Operating income (loss)		1,125,850		(559,031)		566,819
Three Months ended March 31, 2016
Net revenues	$	5,244,268	$	259,000	$	5,503,268
Cost of revenues		2,132,891		134,000		2,266,891
Operating expenses		5,925,397		840,000		6,765,397
Operating loss		(681,129)		(581,000)		(1,262,129)
Nine Months ended March 31, 2016
Net revenues	$	27,841,709	$	259,000	$	28,100,709
Cost of revenues		5,199,436		134,000		5,333,436
Operating expenses		19,461,445		840,000		20,301,445
Operating income (loss)		8,380,264		(581,000)		7,799,264
March 31, 2017
Total assets	$	5,253,797	$	44,238,055	$	49,491,852
June 30, 2016
Total assets	$	6,777,791	$	44,895,538	$	51,673,329

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Description of Business, Reverse Merger and Liquidity (Details Textual) - USD ($)	9 Months Ended
	Mar. 31, 2017	Jun. 30, 2016	Mar. 31, 2016	Jun. 30, 2015
Working Capital Deficit	$ 6,030,000
Cash and Cash Equivalents, at Carrying Value	1,155,273	$ 1,414,706	$ 2,763,468	$ 5,190,540
Long-term Debt	2,545,199	$ 2,977,811
Monthly Operational Requirement	1,300,000
Debt Instrument, Face Amount	$ 320,000
Senior Subordinated Notes [Member]
Debt Instrument, Maturity Date	Jun. 15, 2018
Debt Instrument, Face Amount	$ 330,000
Senior Secured Convertible Notes [Member]
Long-term Debt	$ 2,545,199
Debt Instrument, Maturity Date	Mar. 20, 2018

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Summary of Significant Accounting Policies (Details Textual) - USD ($)	Mar. 31, 2017	Jun. 30, 2016
Accounting Policies [Line Items]
Allowance for Doubtful Accounts Receivable, Current	$ 543,000	$ 769,000
Business Combination, Recognized Identifiable Assets Acquired and Liabilities Assumed, Intangible Assets, Other than Goodwill	2,344,000
Cash, Uninsured Amount	$ 948,000	$ 1,165,000

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Reverse Merger (Details)	9 Months Ended
	Mar. 31, 2017 shares
Reverse Merger [Line Items]
Consideration effectively transferred	36,800,000
Common Stock [Member]
Reverse Merger [Line Items]
Consideration effectively transferred	22,675,000	[1]
Preferred Stock [Member]
Reverse Merger [Line Items]
Consideration effectively transferred	3,047,000	[2]
Employee Stock Option [Member]
Reverse Merger [Line Items]
Consideration effectively transferred	1,296,000	[3]
Warrant [Member]
Reverse Merger [Line Items]
Consideration effectively transferred	9,782,000	[3]

[1] Based upon 4,814,226 AHC common shares outstanding at a fair value of $4.71 per share, which was the closing price of AHC common shares on the effective date of the merger.

[2] Represents 28,000 shares of Series B and 605,000 shares of Series D preferred stock as converted into 646,933 common shares with a fair value of $4.71 per share, which was the closing price of AHC common shares on the effective date of the merger.

[3] Represents outstanding and vested AHC stock options and warrants acquired in connection with the reverse merger.

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Reverse Merger (Details 1)	9 Months Ended
	Mar. 31, 2017 $ / shares shares
Employee Stock Option [Member]
Reverse Merger [Line Items]
Number of shares | shares	616,141
Weighted average exercise price	$ 4.46
Volatility	85.10%
Risk-free interest rate	1.63%
Expected dividend rate	0.00%
Expected life (years)	4 years
Stock price	$ 4.71
Warrant [Member]
Reverse Merger [Line Items]
Number of shares | shares	4,313,180
Weighted average exercise price	$ 5.24
Volatility	85.10%
Risk-free interest rate	1.63%
Expected dividend rate	0.00%
Expected life (years)	4 years 1 month 28 days
Stock price	$ 4.71

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Reverse Merger (Details 2) - USD ($)	Mar. 31, 2017	Jun. 30, 2016
Reverse Merger [Line Items]
Cash and cash equivalents	$ 30,000
Restricted cash	121,000
Accounts receivable	174,000
Inventory	360,000
Prepaid expenses and other current assets	464,000
Property and equipment	189,000
Trade names and licensed technology	2,344,000
Deferred tax assets	38,804,000
Total assets acquired at fair value	42,486,000
Accounts payable and accrued expenses	3,860,000
Notes payable	4,078,000
Derivative liabilities	1,066,000
Total liabilities assumed	9,004,000
Net assets acquired	33,482,000
Goodwill	3,318,000	$ 3,318,000
Total preliminary purchase consideration	$ 36,800,000

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Reverse Merger (Details Textual) - USD ($)		1 Months Ended		9 Months Ended
		Jul. 11, 2016	Jan. 27, 2016	Mar. 31, 2017	Jun. 30, 2016
Reverse Merger [Line Items]
Business Acquisition, Equity Interest Issued or Issuable, Number of Shares				36,800,000
Goodwill				$ 3,318,000	$ 3,318,000
Common Stock [Member]
Reverse Merger [Line Items]
Business Acquisition, Equity Interest Issued or Issuable, Number of Shares	[1]			22,675,000
Preferred Stock [Member]
Reverse Merger [Line Items]
Business Acquisition, Equity Interest Issued or Issuable, Number of Shares	[2]			3,047,000
Preferred Stock [Member] | Series B Preferred Stock [Member]
Reverse Merger [Line Items]
Business Acquisition, Equity Interest Issued or Issuable, Number of Shares			28,000
Preferred Stock [Member] | Series D Preferred Stock [Member]
Reverse Merger [Line Items]
Business Acquisition, Equity Interest Issued or Issuable, Number of Shares			605,000
Aeon Global Health Corp [Member]
Reverse Merger [Line Items]
Business Acquisition, Share Price			$ 4.71
Business Acquisition, Equity Interest Issued or Issuable, Number of Shares			240,711
Convertible Preferred Stock, Shares Issued upon Conversion			646,933
Goodwill			$ 3,318,000
Common Stock Percentage Outstanding On Approval Of Merger Transaction			5.00%
Additional Common Stock Percentage Outstanding On Approval Of Merger Transaction		90.00%
Business Combination Earnings Before Interest Taxes Depreciation And Amortization Target		$ 16,000,000
Business Acquisition Equity Interest Number Of Shares Approved For Issuance		1,155,414
Business Combination Earnings Before Interest Taxes Depreciation And Amortization Target For Next Four Fiscal Years		$ 100,000,000
Common Stock Minimum Holding Percentage For Preferential Rights		10.00%
Aeon Global Health Corp [Member] | Common Stock [Member]
Reverse Merger [Line Items]
Business Acquisition, Share Price			$ 4.71
Business Acquisition, Equity Interest Issued or Issuable, Number of Shares			4,814,226
AEON [Member]
Reverse Merger [Line Items]
Business Acquisition, Equity Interest Issued or Issuable, Number of Shares			958,030
Common Stock Percentage On Closing Of Merger Transaction			19.90%

[1] Based upon 4,814,226 AHC common shares outstanding at a fair value of $4.71 per share, which was the closing price of AHC common shares on the effective date of the merger.

[2] Represents 28,000 shares of Series B and 605,000 shares of Series D preferred stock as converted into 646,933 common shares with a fair value of $4.71 per share, which was the closing price of AHC common shares on the effective date of the merger.

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Inventory (Details) - USD ($)	Mar. 31, 2017	Jun. 30, 2016
Inventory [Line Items]
Laboratory testing supplies	$ 46,861	$ 100,233
Purchased components, net	0	31,068
Finished goods	0	206,606
Total inventory	$ 46,861	$ 337,907

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Inventory (Details Textual) - USD ($)	3 Months Ended		9 Months Ended
	Mar. 31, 2017	Mar. 31, 2016	Mar. 31, 2017	Mar. 31, 2016
Inventory Write-down	$ 0	$ 0	$ 237,674	$ 0
Purchased Components [Member]
Inventory Write-down			32,000
Finished Goods [Member]
Inventory Write-down			$ 207,000

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Property and Equipment (Details) - USD ($)		9 Months Ended
		Mar. 31, 2017	Jun. 30, 2016
Property, Plant and Equipment [Line Items]
Machinery and equipment		$ 5,608,592	$ 5,591,564
Software		392,913	392,913
Furniture and fixtures		105,043	105,043
Leasehold improvements		69,268	64,193
Property, Plant and Equipment, Gross		6,175,816	6,153,713
Less: Accumulated depreciation and amortization		(3,594,529)	(2,677,043)
Property and equipment, net		$ 2,581,287	$ 3,476,670
Machinery and Equipment [Member] | Minimum [Member]
Property, Plant and Equipment [Line Items]
Property, Plant and Equipment, Useful Life		3 years
Machinery and Equipment [Member] | Maximum [Member]
Property, Plant and Equipment [Line Items]
Property, Plant and Equipment, Useful Life		6 years
Furniture and Fixtures [Member] | Minimum [Member]
Property, Plant and Equipment [Line Items]
Property, Plant and Equipment, Useful Life		5 years
Furniture and Fixtures [Member] | Maximum [Member]
Property, Plant and Equipment [Line Items]
Property, Plant and Equipment, Useful Life		7 years
Leasehold Improvements [Member]
Property, Plant and Equipment [Line Items]
Property, Plant and Equipment, Useful Life	[1]	0 years
Software and Software Development Costs [Member] | Minimum [Member]
Property, Plant and Equipment [Line Items]
Property, Plant and Equipment, Useful Life		5 years
Software and Software Development Costs [Member] | Maximum [Member]
Property, Plant and Equipment [Line Items]
Property, Plant and Equipment, Useful Life		7 years

[1] Lesser of lease terms or estimated useful life

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Property and Equipment (Details Textual) - USD ($)	3 Months Ended		9 Months Ended
	Mar. 31, 2017	Mar. 31, 2016	Mar. 31, 2017	Mar. 31, 2016
Property, Plant and Equipment [Line Items]
Depreciation	$ 300,000	$ 320,000	$ 917,000	$ 796,000

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Intangible Assets (Details) - USD ($)	9 Months Ended
	Mar. 31, 2017	Jun. 30, 2016
Finite-Lived Intangible Assets [Line Items]
Gross Carrying Amount	$ 2,344,000	$ 2,344,000
Accumulated Amortization	434,267	155,318
Net Book Value	1,909,733	2,188,682
Trademarks [Member]
Finite-Lived Intangible Assets [Line Items]
Gross Carrying Amount	550,000	550,000
Accumulated Amortization	91,667	32,738
Net Book Value	$ 458,333	517,262
Useful Life In Years	7 years
Acquired Technologies [Member]
Finite-Lived Intangible Assets [Line Items]
Gross Carrying Amount	$ 1,794,000	1,794,000
Accumulated Amortization	342,600	122,580
Net Book Value	$ 1,451,400	$ 1,671,420
Minimum [Member] | Acquired Technologies [Member]
Finite-Lived Intangible Assets [Line Items]
Useful Life In Years	3 years
Maximum [Member] | Acquired Technologies [Member]
Finite-Lived Intangible Assets [Line Items]
Useful Life In Years	7 years

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Intangible Assets (Details 1) - USD ($)	Mar. 31, 2017	Jun. 30, 2016
Finite-Lived Intangible Assets [Line Items]
2017 (remaining)	$ 93,057
2018	372,229
2019	372,229
2020	372,229
2021	317,729
Thereafter	382,260
Net Book Value	$ 1,909,733	$ 2,188,682

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Intangible Assets (Details Textual) - USD ($)	3 Months Ended		9 Months Ended
	Mar. 31, 2017	Mar. 31, 2016	Mar. 31, 2017	Mar. 31, 2016
Finite-Lived Intangible Assets [Line Items]
Amortization expense	$ 93,000	$ 80,000	$ 279,000	$ 80,000

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Income Taxes (Details Textual) $ in Millions	3 Months Ended	9 Months Ended
	Mar. 31, 2017 USD ($)	Mar. 31, 2017 USD ($)
Income Taxes [Line Items]
Effective Income Tax Rate Reconciliation, Percent	41.40%	41.50%
Effective Income Tax Rate Reconciliation, State and Local Income Taxes, Percent		35.00%
Deferred Tax Assets, Net	$ 38.5	$ 38.5
Deferred Tax Assets, Valuation Allowance	$ 22.0	$ 22.0

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Notes Payable (Details) - USD ($)	Mar. 31, 2017	Jun. 30, 2016
Notes payable
Secured		$ 1,270,000
Unsecured		1,707,811
Total	$ 2,545,199	2,977,811
Secured Note One [Member]
Notes payable
Secured	$ 1,056,875	$ 950,000
Interest Terms	5.00%	9.00%
Secured Note Two [Member]
Notes payable
Secured	$ 641,294	$ 320,000
Interest Terms	5.00%	10.00%
Secured Note Three [Member]
Notes payable
Secured	$ 255,417
Interest Terms	5.00%
Secured Note Four [Member]
Notes payable
Secured	$ 591,613
Interest Terms	5.00%
Unsecured Debt One [Member]
Notes payable
Unsecured		$ 532,811
Interest Terms		20.00%
Unsecured Debt Two [Member]
Notes payable
Unsecured		$ 200,000
Interest Terms		20.00%
Unsecured Debt Three [Member]
Notes payable
Unsecured		$ 525,000
Interest Terms		20.00%
Unsecured Debt Four [Member]
Notes payable
Unsecured		$ 450,000
Interest Terms		20.00%

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Notes Payable (Details Textual) - USD ($)	1 Months Ended		3 Months Ended		9 Months Ended
	Mar. 20, 2017	Sep. 30, 2016	Mar. 31, 2017	Mar. 31, 2016	Mar. 31, 2017	Mar. 31, 2016	Jan. 31, 2017	Jun. 30, 2016
Debt Instrument [Line Items]
Aggregate principal amount of promissory notes			$ 320,000		$ 320,000
Debt Instrument, Convertible, Conversion Price			$ 4.86		$ 4.86
Liabilities and Equity			$ 49,491,852		$ 49,491,852			$ 51,673,329
Embedded Derivative, Loss on Embedded Derivative	$ 328,422
Convertible Preferred Stock, Beneficial Ownership Limitation, Percentage	4.99%
Preferred Stock, Par or Stated Value Per Share			$ 0.10		$ 0.10			$ 0.10
Gains (Losses) on Extinguishment of Debt			$ (258,037)	$ 0	$ (258,037)	$ 0
Stock Issued During Period, Value, Conversion of Convertible Securities					50,000
Dividends, Preferred Stock			$ 0	$ 0	$ 0	$ (67,082)
Series E Preferred Stock [Member]
Debt Instrument [Line Items]
Preferred Stock Exchanged From Series B To Series E Preferred Stock	25,000
Preferred Stock Convertible Into Common Stock	187,500				187,500
Preferred Stock Conversion Price Per Share	$ 4.00				$ 4.00
Preferred Stock, Par or Stated Value Per Share	$ 30.00
Series B Preferred Stock [Member]
Debt Instrument [Line Items]
Dividends, Preferred Stock					$ 120,385
Senior Secured Convertible Notes [Member]
Debt Instrument [Line Items]
Net proceeds from issuance of short term promissory notes		$ 106,667
Original Notes [Member]
Debt Instrument [Line Items]
Long-term Debt, Gross	$ 2,170,000
Original Notes One [Member]
Debt Instrument [Line Items]
Debt Instrument, Convertible, Conversion Price	$ 2.25
Long-term Debt, Gross	$ 950,000
Original Notes Two [Member]
Debt Instrument [Line Items]
Debt Instrument, Convertible, Conversion Price	$ 3.00
Long-term Debt, Gross	$ 520,000
Original Notes Three [Member]
Debt Instrument [Line Items]
Long-term Debt, Gross	$ 700,000
Senior Secured Promissory Note 10.0% Interest Rate [Member]
Debt Instrument [Line Items]
Debt Instrument, Convertible, Conversion Price		$ 3.00
Promissory Notes [Member]
Debt Instrument [Line Items]
Debt Instrument, Interest Rate, Stated Percentage			5.00%		5.00%
Debt Instrument, Convertible, Conversion Price		$ 3.00	$ 2.03		$ 2.03
Long-term Debt, Gross			$ 641,294		$ 641,294
Unsecured Debt, Current			320,000		320,000
Promissory Notes [Member] | Optimum Ventures, LLC [Member]
Debt Instrument [Line Items]
Aggregate principal amount of promissory notes			$ 450,000		$ 450,000
Debt Instrument, Convertible, Conversion Price	$ 2.03
Effective interest rate of notes			20.00%		20.00%
Long-term Debt, Gross	$ 591,613
Promissory Notes [Member] | J.DavidLuce [Member]
Debt Instrument [Line Items]
Debt instrument maturity date		Dec. 01, 2016
Debt Conversion, Converted Instrument, Shares Issued		173,333
Exchange Agreement [Member] | Optimum Ventures, LLC [Member]
Debt Instrument [Line Items]
Maturity date, description					(i) October 28, 2016, or (ii) within 30 days of the closing of a sale of equity or debt securities of the Company, or series of closings, as part of the same transaction, of equity or debt securities within a period of 90 days, in the gross amount of at least $5,000,000 in cash proceeds.
Exchange Agreement [Member] | J.DavidLuce [Member]
Debt Instrument [Line Items]
Debt Instrument, Interest Rate, Stated Percentage			20.00%		20.00%
Aggregate principal amount of promissory notes			$ 200,000		$ 200,000
Maturity date, description					(i)August26, 2016, or (ii)the closing of a sale of equity or debt securities of the Company, or series of closings, as part of the same transaction, of equity or debt securities within a period of 90 days, in the gross amount of at least $5,000,000 in cash proceeds.
New Promissory Notes [Member]
Debt Instrument [Line Items]
Debt Instrument, Interest Rate, Stated Percentage	5.00%
Debt Instrument, Convertible, Conversion Price	$ 2.03
Debt Conversion, Converted Instrument, Shares Issued	1,253,792
Long-term Debt, Gross	$ 2,545,199
Percentage of Accrued But Unpaid Interest Amount	110.00%
Maximum [Member]
Debt Instrument [Line Items]
Convertible Preferred Stock, Beneficial Ownership Limitation, Percentage	9.99%
Secured Promissory Note [Member]
Debt Instrument [Line Items]
Debt Instrument, Interest Rate, Stated Percentage			10.00%		10.00%
Convertible Notes Payable [Member]
Debt Instrument [Line Items]
Debt Instrument, Interest Rate, Stated Percentage	5.00%		9.00%		9.00%
Aggregate principal amount of promissory notes			$ 950,000		$ 950,000
Issuance of warrants			422,222		422,222
Debt Instrument, Convertible, Conversion Price	$ 2.03		$ 2.25		$ 2.25
Debt instrument conversion price percentage decreased					85.00%
Long-term Debt, Gross	$ 1,056,875
Embedded Derivative, Loss on Embedded Derivative					$ 328,422
Notes Payable, Other Payables [Member]
Debt Instrument [Line Items]
Debt Instrument, Interest Rate, Stated Percentage	5.00%	5.00%
Debt Instrument, Convertible, Conversion Price	$ 2.03
Long-term Debt, Gross	$ 641,294
Liabilities and Equity	$ 200,000
Notes Payable, Other Payables [Member] | Chief Executive Officer and Chairman of the Board [Member]
Debt Instrument [Line Items]
Debt Instrument, Interest Rate, Stated Percentage							12.00%
Long-term Debt, Gross							$ 250,000

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Equity (Details) - USD ($)	3 Months Ended		9 Months Ended
	Mar. 31, 2017	Mar. 31, 2016	Mar. 31, 2017	Mar. 31, 2016
Basic earnings per share
Net (loss) income	$ 767,359	$ (2,739,173)	$ 257,404	$ 6,338,972
Preferred stock dividends	(74,863)	(67,082)	(276,111)	(67,082)
Net income available\to common shareholders after preferred stock dividends	$ 692,496	$ (2,806,255)	$ (18,707)	$ 6,271,890
Weighted average shares used in the computation of basic earnings per share	7,168,329	4,327,990	6,312,344	2,064,951
Earnings per share - basic	$ 0.1	$ (0.65)	$ (0.00)	$ 3.04
Dilutive earnings per share
Income available to common shareholders	$ 692,496	$ (2,806,255)	$ (18,707)	$ 6,271,890
Change in fair value of derivative liability	(392,407)			205,360
Interest on convertible debt	29,267	0	0	19,982
Preferred stock dividends	0	0	0	67,082
Net income applicable to common shareholders plus assumed conversions	$ 329,356	$ (2,806,255)	$ (18,707)	$ 6,358,954
Weighted average shares used in the computation of basic earnings per share	7,168,329	4,327,990	6,312,344	2,064,951
Dilutive effect of options, warrants, convertible debt and convertible preferred stock	1,597,328	0	0	630,039
Shares used in the computation of diluted earnings per share	8,765,657	4,327,990	6,312,344	2,694,990
Earnings per share - diluted	$ 0.04	$ (0.65)	$ (0.00)	$ 2.44
Employee Stock Option [Member]
Dilutive earnings per share
Anti-Dilutive Options Excluded	3,545,077		6,919,034

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Equity (Details 1) - Warrants [Member] - USD ($)	9 Months Ended	12 Months Ended
	Mar. 31, 2017	Jun. 30, 2016
Number of Shares
Outstanding, Beginning balance	4,205,535
Warrants issued	0
Warrants expired	0
Outstanding, Ending balance	4,205,535	4,205,535
Exercisable, March 31, 2017	4,149,979
Weighted Average Exercise Price Per Share
Outstanding, Beginning balance	$ 4.91
Outstanding, Ending balance	4.79	$ 4.91
Exercisable, March 31, 2017	$ 4.7
Weighted Average Remaining Contractual Life (Years)
Outstanding	4 years 25 days	4 years 8 months 5 days
Exercisable, March 31, 2017	4 years 1 month 6 days
Aggregate Intrinsic Value
Outstanding	$ 751,173	$ 1,992,535
Exercisable, March 31, 2017	$ 751,173

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Equity (Details Textual) - USD ($)	1 Months Ended	9 Months Ended
	Mar. 20, 2017	Mar. 31, 2017	Jun. 30, 2016
Preferred Stock, Par or Stated Value Per Share		$ 0.10	$ 0.10
Series D Convertible Preferred Stock [Member]
Preferred Stock, Shares Outstanding		605,000
Preferred Stock, Redemption Price Per Share		$ 10.00
Dividends Payable		$ 557,000
Convertible Preferred Stock, Shares Issued upon Conversion		619,154
Convertible Preferred Stock Conversion Price Per Share		$ 9.77139
Preferred Stock, Dividend Rate, Percentage		5.00%
Series E Preferred Stock [Member]
Preferred Stock, Shares Outstanding		25,000	0
Preferred Stock, Dividend Rate, Percentage		5.00%
Preferred Stock Convertible Into Common Stock	187,500	187,500
Preferred Stock Conversion Price Per Share	$ 4.00	$ 4.00
Preferred Stock, Par or Stated Value Per Share	$ 30.00
Series E Convertible Preferred Stock [Member]
Preferred Stock, Shares Outstanding		25,000

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Share-Based Compensation (Details) - USD ($)	9 Months Ended	12 Months Ended
	Mar. 31, 2017	Jun. 30, 2016
Number of Options
Granted	102,065
Employees Information [Member]
Number of Options
Outstanding, Balance	159,817
Granted	0
Expired/forfeited	(222)
Outstanding, Balance	159,595	159,817
Exercisable, Balance	147,158
Weighted Average Exercise Price
Outstanding, Balance June 30, 2016	$ 12.46
Expired/forfeited	2.16
Outstanding, Balance March 31, 2017	12.48	$ 12.46
Exercisable, Balance	$ 12.51
Weighted Average Remaining Contractual Life (Years)
Outstanding, Balance	5 years 3 months 7 days	6 years 3 months 18 days
Exercisable, Balance	5 years 4 months 6 days
Aggregate Intrinsic Value
Outstanding June 30, 2016	$ 11,864
Expired/Forfeited	0
Outstanding March 31, 2017	0	$ 11,864
Exercisable March 31, 2017	$ 0
Non-Executive Director Information [Member]
Number of Options
Outstanding, Balance	485,532
Granted	102,065
Expired/forfeited	(38,087)
Outstanding, Balance	549,510	485,532
Exercisable, Balance	549,510
Weighted Average Exercise Price
Outstanding, Balance June 30, 2016	$ 4.35
Granted	3.07
Expired/forfeited	9.61
Outstanding, Balance March 31, 2017	$ 3.76	$ 4.35
Weighted Average Remaining Contractual Life (Years)
Outstanding, Balance		6 years 11 months 16 days
Exercisable, Balance	7 years 1 month 28 days
Aggregate Intrinsic Value
Outstanding June 30, 2016	$ 198,346
Outstanding March 31, 2017	54,265	$ 198,346
Exercisable March 31, 2017	$ 54,265

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Share-Based Compensation (Details Textual) - USD ($)				1 Months Ended	3 Months Ended	9 Months Ended
		Dec. 15, 2016	Jan. 12, 2016	Dec. 22, 2015	Mar. 31, 2017	Mar. 31, 2017	Jul. 11, 2016
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Stock options issued						102,065
Share-based Compensation Arrangement by Share-based Payment Award, Pro-rata Donation, Percentage				10.00%
Employee Service Share-based Compensation, Nonvested Awards, Compensation Cost Not yet Recognized					$ 750	$ 750
Stock Issued During Period, Value, Share-based Compensation, Gross			$ 1,418,000
Stock or Unit Option Plan Expense					$ 27,000	90,000
Issuance of Stock and Warrants for Services or Claims						186,753
Stock Granted, Value, Share-based Compensation, Gross						$ 313,000
Business Acquisition, Equity Interest Issued or Issuable, Number of Shares						36,800,000
AEON [Member]
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Stock Issued During Period, Shares, New Issues		1,155,415
Stock Issued During Period, Value, New Issues						$ 5,742,598
Aeon Global Health Corp [Member]
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Business Acquisition, Equity Interest Issued or Issuable, Number of Shares		240,711
Employee Stock Option [Member]
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Employee Service Share-based Compensation, Nonvested Awards, Compensation Cost Not yet Recognized, Period for Recognition						3 months
Business Acquisition, Equity Interest Issued or Issuable, Number of Shares	[1]					1,296,000
Restricted Stock [Member]
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Share-based Compensation Arrangement by Share-based Payment Award, Non-Option Equity Instruments, Outstanding, Number					35,800	35,800
2011 Omnibus Equity Incentive Plan [Member]
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Common stock shares available for issuance							1,000,000

[1] Represents outstanding and vested AHC stock options and warrants acquired in connection with the reverse merger.

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Fair Value Measurements (Details)	9 Months Ended
	Mar. 31, 2017 $ / shares
Maximum [Member]
Exercise Price	$ 2.07
Risk free interest rate	1.85%
Expected volatility	50.00%
Remaining term	4 years 8 months 19 days
Minimum [Member]
Exercise Price	$ 2.03
Risk free interest rate	1.00%
Expected volatility	40.00%
Remaining term	11 months 19 days

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Fair Value Measurements (Details 1)	9 Months Ended
	Mar. 31, 2017 USD ($)
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Balance - June 30, 2016	$ 1,051,000
Embedded conversion feature in March 2017 convertible notes	328,422
Change in fair value of derivative liabilities	(392,407)
Balance - March 31, 2017	987,015
Warrant [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Balance - June 30, 2016	683,858
Embedded conversion feature in March 2017 convertible notes	0
Change in fair value of derivative liabilities	(119,609)
Balance - March 31, 2017	564,249
Convertible Notes [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Balance - June 30, 2016	367,142
Embedded conversion feature in March 2017 convertible notes	328,422
Change in fair value of derivative liabilities	(272,798)
Balance - March 31, 2017	$ 422,766

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Commitments and Contingencies (Details Textual) - USD ($)	1 Months Ended	9 Months Ended
	Feb. 27, 2017	Mar. 31, 2017	Jun. 15, 2018	May 15, 2018	Sep. 06, 2016
Contingencies And Commitments [Line Items]
Loss Contingency Accrual					$ 227,061
Severance Costs	$ 160,000	$ 341,620
Share-based Compensation Arrangement by Share-based Payment Award, Options, Grants in Period, Gross		102,065
Scenario, Forecast [Member]
Contingencies And Commitments [Line Items]
Other Commitment			$ 160,000	$ 170,000
Former CFO [Member]
Contingencies And Commitments [Line Items]
Share-based Compensation Arrangement by Share-based Payment Award, Options, Grants in Period, Gross		27,388
Former CFO [Member] | Restricted Stock [Member]
Contingencies And Commitments [Line Items]
Share-based Compensation Arrangement by Share-based Payment Award, Equity Instruments Other than Options, Vested in Period		12,835

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Related Party Transactions (Details Textual) - USD ($)	1 Months Ended	3 Months Ended	9 Months Ended
	Feb. 27, 2017	Mar. 31, 2017	Mar. 31, 2017	Mar. 20, 2017	Jan. 31, 2017	Sep. 30, 2016
Percentage of Owned Common Stock By Security Holder		5.00%	5.00%
Lease Term			12 years
Lease Expiration Year			March 2026
Interest Expense, Related Party		$ 87,000	$ 286,000
Severance Costs	$ 160,000		341,620
Notes Payable, Other Payables [Member]
Long-term Debt, Gross				$ 641,294
Debt Instrument, Interest Rate, Stated Percentage				5.00%		5.00%
Chief Executive Officer and Chairman of the Board [Member] | Notes Payable, Other Payables [Member]
Long-term Debt, Gross					$ 250,000
Debt Instrument, Interest Rate, Stated Percentage					12.00%
Minimum [Member]
Operating Leases, Future Minimum Payments Due		46,500	46,500
Maximum [Member]
Operating Leases, Future Minimum Payments Due		60,000	60,000
Related Party [Member]
Operating Leases, Rent Expense		$ 139,500	$ 418,500

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Segment Information (Details) - USD ($)	3 Months Ended		9 Months Ended
	Mar. 31, 2017	Mar. 31, 2016	Mar. 31, 2017	Mar. 31, 2016	Jun. 30, 2016
Segment Reporting Information [Line Items]
Total assets	$ 49,491,852		$ 49,491,852		$ 51,673,329
Net revenues	5,531,810	$ 5,503,268	16,468,699	$ 28,100,709
Operating expenses
Cost of revenues	908,290	2,266,891	3,203,504	5,333,436
Operating expenses	4,690,203	6,765,397	15,901,880	20,301,445
Operating income (loss)	841,607	(1,262,129)	566,819	7,799,264
AEON [Member]
Segment Reporting Information [Line Items]
Total assets	5,253,797		5,253,797		6,777,791
Net revenues	5,212,634	5,244,268	15,469,366	27,841,709
Operating expenses
Cost of revenues	855,852	2,132,891	2,999,813	5,199,436
Operating expenses	4,296,693	5,925,397	14,343,516	19,461,445
Operating income (loss)	915,941	(681,129)	1,125,850	8,380,264
Authentidate [Member]
Segment Reporting Information [Line Items]
Total assets	44,238,055		44,238,055		$ 44,895,538
Net revenues	319,176	259,000	999,333	259,000
Operating expenses
Cost of revenues	52,438	134,000	203,691	134,000
Operating expenses	393,510	840,000	1,558,364	840,000
Operating income (loss)	$ (74,334)	$ (581,000)	$ (559,031)	$ (581,000)