10-K/A

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-K/A

Amendment No. 1

(Mark One)

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

For the fiscal year ended June 30, 2007

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

For the transition period from                      to                     

Commission File No. 0-20190

AUTHENTIDATE HOLDING CORP.

(Exact Name of Issuer as Specified in Its Charter)

Delaware	14-1673067
(State or other jurisdiction of incorporation or organization)	(I.R.S. Employer Identification No.)

Connell Corporate Center, 300 Connell Drive, 5^th Floor, Berkeley Heights, NJ 07922

(Address of principal executive offices) (Zip Code)

Issuer’s telephone number, including area code (908) 787-1700

Securities registered pursuant to Section 12(b) of the Exchange Act:

Title of Each Class	Name of Each Exchange on Which Registered
Common Stock, par value $.001 per share	The Nasdaq Stock Market, LLC

Securities registered pursuant to Section 12(g) of the Exchange Act: None

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.    Yes  ¨    No  x

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or 15 (d) of the Act.    Yes  ¨    No  x

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  x    No  ¨

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, or a non-accelerated filer. See definition of “accelerated filer and large accelerated filer” in Rule 12b-2 of the Exchange Act. (check one):

Large accelerated filer    ¨ Accelerated filer    x Non-accelerated filer    ¨

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K (ss.229.405 of this chapter) is not contained herein, and will not be contained, to the best of registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K.  x

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

State the aggregate market value of the voting and non-voting common equity held by non-affiliates computed by reference to the price at which the common equity was last sold, or the average bid and asked price of such common equity, as of the last business day of the registrant’s most recently completed second fiscal quarter (December 31, 2006): $53,347,000.

APPLICABLE ONLY TO CORPORATE REGISTRANTS

Indicate the number of shares outstanding of each of the registrant’s classes of common stock, as of the latest practicable date: 34,449,559 as of September 3, 2007.

DOCUMENTS INCORPORATED BY REFERENCE

List hereunder the following documents if incorporated by reference and the Part of the Form 10-K (e.g., Part I, Part II, etc.) into which the document is incorporated: (1) Any annual report to security holders; (2) Any proxy or information statement; and (3) Any prospectus filed pursuant to Rule 424(b) or (e) under the Securities Act of 1933.

None

TABLE OF CONTENTS

		PAGE
	PART II
Item 6.	Selected Financial Data	4
Item 8.	Financial Statements and Supplemental Data	5
	PART IV
Item 15.	Exhibits and Financial Statement Schedules	5
Signatures		6

2

EXPLANATORY NOTE

We are filing this Amendment No. 1 to our Annual Report on Form 10-K for the fiscal year ended June 30, 2007 as filed with the Securities and Exchange Commission (SEC) on September 13, 2007, to correct typographical errors in the selected financial data, statement of cash flows and footnote 20 to the financial statements. Our balance sheets, statements of operations and statements of shareholders’ equity are not affected by this amendment. All typographical errors related to years ended June 30, 2006, and 2005. This Form 10-K/A does not reflect events occurring after the filing of the original Form 10-K. Further, this Form 10-K/A does not modify or update the disclosures in the original Form 10-K in any way other than as required to reflect the amendments set forth below.

The following is a summary of the items of our original Form 10-K that are amended by this Form 10-K/A and a brief summary of the changes.

ITEM 6.    SELECTED FINANCIAL DATA

This Form 10-K/A amends the selected financial data contained in the original Form 10-K to correct typographical errors in the edgarized version of the filing.

ITEM 8.    FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

This Form 10-K/A amends the statement of cash flows and footnote 20 included in the financial statements contained in the original Form 10-K to correct typographical errors in the edgarized version of the filing.

ITEM 15.    EXHIBITS AND FINANCIAL STATEMENT SCHEDULES

(a) (3) This item is amended to add the following exhibits filed with this report:

23.1     Consent of Eisner LLP

31.1     Certification of Chief Executive Officer

31.2     Certification of Chief Financial Officer

32.1     Section 1350 Certification of Chief Executive Officer and Chief Financial Officer

3

ITEM 6.    SELECTED FINANCIAL DATA

The following selected financial data should be read in conjunction with the Consolidated Financial Statements, including the related notes, and “Management’s Discussion and Analysis of Financial Condition and Results of Operations.”

	Year Ended June 30,
(in thousands, except per share amounts)	2007			2006			2005			2004			2003
Statement of Operations Data:
Continuing operations:
Revenues	$	4,998		$	4,493		$	3,772		$	1,384		$	1,380
Operating expenses		23,070			24,037			24,989			13,255			11,342
Loss		(16,118	)		(17,435	)		(19,566	)		(16,781	)		(10,782	)
Net loss		(15,063	)		(17,823	)		(19,184	)		(15,669	)		(9,839	)
Basic and diluted net loss per common share		(0.44	)		(0.52	)		(0.57	)		(0.59	)		(0.50	)
Other Financial Data:
Continuing operations:
Net cash used by operating activities	$	(14,852	)	$	(13,743	)	$	(10,821	)	$	(7,629	)	$	(6,736	)
Net cash used in investing activities (1)		(2,303	)		(3,188	)		(2,337	)		(1,296	)		(368	)
Net cash provided by (used in) financing activities		(53	)		(60	)		2,072			81,046			7,126
Net increase (decrease) in cash, cash equivalents and marketable securities		(14,274	)		(16,599	)		(11,486	)		70,529			1,191
Net cash provided by (used in) discontinued operations		2,901			425			(410	)		(1,527	)		1,231
Balance Sheet Data:
Current assets	$	34,094		$	50,008		$	66,660		$	77,993		$	7,367
Current liabilities		5,379			7,970			6,654			5,435			5,444
Working capital		28,715			42,038			60,006			72,558			1,923
Total assets		48,704			64,534			79,709			94,237			25,046
Total long term liabilities		140			229			693			83			5,734	(2)
Shareholders’ equity		43,185			56,335			72,362			88,718			13,869

(1) Excludes purchases and sales of marketable securities.

(2) Long-term liabilities excluding discounts of approximately $3.1 million on convertibles debentures. The discounts pertain to beneficial feature and fair value of warrants issued with debentures.

4

ITEM 8.    FINANCIAL STATEMENTS AND SUPPLEMENTAL DATA

The Financial Statements are annexed hereto at Part IV, Item 15 of this Amendment No. 1 to the Annual Report on Form 10-K/A.

ITEM 15.    EXHIBITS AND FINANCIAL STATEMENT SCHEDULES

(a)(1) Financial Statements

The following Financial Statements of AHC are set forth below:

• Report of Independent Registered Public Accounting Firm;

• Consolidated Balance Sheets as of June 30, 2007 and 2006;

• Consolidated Statements of Operations for the years ended June 30, 2007, 2006, and 2005;

• Consolidated Statements of Shareholders’ Equity for the years ended June 30, 2007, 2006, and 2005;

• Consolidated Statements of Cash Flows for the years ended June 30, 2007, 2006, and 2005; and

• Notes to Consolidated Financial Statements

(a)(2) Financial Statement Schedules

There are no schedules required for any of the years in the three year period ended June 30, 2007 pursuant to item 15 (d)

(a)(3) Exhibits

The exhibits required by Item 15 (a) (3) are set forth in the Exhibit Index

5

Signatures

Pursuant to the requirements of Section 13 or 15(d) 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.
By:	/S/    SURENDRA B. PAI
	Surendra B. Pai Chief Executive Officer and President
By:	S/    WILLIAM A. MARSHALL
	William A. Marshall Chief Financial Officer and Principal Accounting Officer

Dated: September 14, 2007

6

EXHIBIT INDEX

The exhibits designated with an asterisk (*) are filed herewith.

Item No.	Description
23.1*	Consent of Eisner LLP
31.1*	Certification of Chief Executive Officer
31.2*	Certification of Chief Financial Officer
32*	Section 1350 Certification of Chief Executive Officer and Chief Financial Officer

7

Authentidate Holding Corp. and Subsidiaries

Index to Consolidated Financial Statements

June 30, 2007, 2006 and 2005

	Page
Reports of Independent Registered Public Accounting Firms	F-2
Consolidated Financial Statements
Balance Sheets	F-4
Statements of Operations	F-5
Statements of Shareholders’ Equity	F-6
Statements of Cash Flows	F-7
Notes to Consolidated Financial Statements	F-8

F-1

Report of Independent Registered Public Accounting Firm

To the Board of Directors and Shareholders of

Authentidate Holding Corp.

We have audited the accompanying consolidated balance sheets of Authentidate Holding Corp. and subsidiaries (the “Company”) as of June 30, 2007 and 2006, and the related consolidated statements of operations, shareholders’ equity and cash flows for each of the years in the three-year period ended June 30, 2007. These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these financial statements based on our audits.

We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

In our opinion, the financial statements referred to above present fairly, in all material respects, the consolidated financial position of Authentidate Holding Corp. and subsidiaries as of June 30, 2007 and 2006, and the consolidated results of their operations and their cash flows for each of the years in the three-year period ended June 30, 2007 in conformity with U.S. generally accepted accounting principles.

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), the effectiveness of Authentidate Holding Corp. and subsidiaries’ internal control over financial reporting as of June 30, 2007, based on criteria established in Internal Control-Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO), and our report dated September 10, 2007 expressed an unqualified opinion on management’s assessment of, and the effective operation of, internal control over financial reporting.

/s/  Eisner LLP

New York, New York

September 10, 2007

F-2

Report of Independent Registered Public Accounting Firm

To the Board of Directors and Shareholders of

Authentidate Holding Corp.

We have audited management’s assessment, included in the accompanying Management’s Annual Report on Internal Control Over Financial Reporting, that Authentidate Holding Corp. and subsidiaries (the “Company”) maintained effective internal control over financial reporting as of June 30, 2007, based on criteria established in Internal Control-Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (“COSO”). The Company’s management is responsible for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control over financial reporting. Our responsibility is to express an opinion on management’s assessment and an opinion on the effectiveness of the Company’s internal control over financial reporting based on our audit.

We conducted our audit in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects. Our audit included obtaining an understanding of internal control over financial reporting, evaluating management’s assessment, testing and evaluating the design and operating effectiveness of internal control, and performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion.

A company’s internal control over financial reporting is a process designed 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. A company’s internal control over financial reporting includes those policies and procedures that (i) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (ii) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (iii) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements.

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

In our opinion, management’s assessment that Authentidate Holding Corp. and subsidiaries maintained effective internal control over financial reporting as of June 30, 2007, is fairly stated, in all material respects, based on criteria established in Internal Control-Integrated Framework issued by the COSO. Also, in our opinion, Authentidate Holding Corp. and subsidiaries maintained, in all material respects, effective internal control over financial reporting as of June 30, 2007, based on criteria established in Internal Control-Integrated Framework issued by COSO.

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), the consolidated balance sheets of Authentidate Holding Corp. and subsidiaries as of June 30, 2007 and 2006, and the related consolidated statement of operations, shareholders’ equity, and cash flows for each of the years in the three-year period ended June 30, 2007, and our report dated September 10, 2007 expressed an unqualified opinion on those consolidated financial statements.

/s/  Eisner LLP

New York, New York

September 10, 2007

F-3

Authentidate Holding Corp. and Subsidiaries

Consolidated Balance Sheets

	June 30,
(in thousands)	2007			2006
Assets
Current assets
Cash and cash equivalents	$	8,735		$	9,366
Restricted cash		521			521
Marketable securities		22,896			36,539
Accounts receivable, net		1,543			601
Prepaid expenses and other current assets		399			203
Assets held for sale		—			2,778
Total current assets		34,094			50,008
Property and equipment, net		1,078			1,519
Note receivable, net of deferred gain of $2,000		—			—
Other assets
Software development costs, net		2,463			1,549
Goodwill		7,341			7,341
Other assets		1,609			1,278
Assets held for sale		2,119			2,839
Total assets	$	48,704		$	64,534
Liabilities and Shareholders’ Equity
Current liabilities
Accounts payable and accrued expenses	$	3,992		$	4,919
Deferred revenue		1,230			1,195
Other current liabilities		157			57
Liabilities of discontinued operations		—			1,799
Total current liabilities		5,379			7,970
Long-term deferred revenue		140			229
Total liabilities		5,519			8,199
Commitments and contingencies
Shareholders’ equity
Preferred stock $.10 par value; 5,000 shares authorized Series B, 28 shares issued and outstanding		3			3
Common stock, $.001 par value; 75,000 shares authorized, 34,430 and 34,413 issued and outstanding on June 30, 2007 and 2006, respectively		34			34
Additional paid-in capital		164,336			162,386
Accumulated deficit		(121,125	)		(105,992	)
Accumulated other comprehensive loss		(63	)		(96	)
Total shareholders’ equity		43,185			56,335
Total liabilities and shareholders’ equity	$	48,704		$	64,534

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

F-4

Authentidate Holding Corp. and Subsidiaries

Consolidated Statements of Operations

	Year Ended June 30,
(in thousands, except per share data)	2007			2006			2005
Revenues
Software licenses and support	$	3,335		$	2,478		$	2,183
Hosted software services		1,663			2,015			1,589
Total revenues		4,998			4,493			3,772
Operating expenses
Cost of revenues		2,134			1,222			1,290
Selling, general and administrative		16,843			17,887			15,146
Product development		2,594			3,575			2,704
Depreciation and amortization		1,499			1,353			1,082
Goodwill and intangible impairment		—			—			4,767
Total operating expenses		23,070			24,037			24,989
Operating loss		(18,072	)		(19,544	)		(21,217	)
Other income		1,954			2,109			1,662
Income tax expense		—			—			(11	)
Loss from continuing operations		(16,118	)		(17,435	)		(19,566	)
Income (loss) from discontinued operations, including gain on disposal in 2007 of $1,264, net		1,055			(388	)		382
Net loss	$	(15,063	)	$	(17,823	)	$	(19,184	)
Basic and diluted loss per share
Continuing operations	$	(0.47	)	$	(0.51	)	$	(0.58	)
Discontinued operations		0.03			(0.01	)		0.01
Basic and diluted loss per share	$	(0.44	)	$	(0.52	)	$	(0.57	)

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

F-5

Authentidate Holding Corp. and Subsidiaries

Consolidated Statements of Shareholders’ Equity

Year Ended (in thousands)	Preferred Stock			Common Stock			Paid-in Capital			Accumulated Deficit			Accumulated Other Comprehensive Income (Loss)			Total Shareholders’ Equity			Comprehensive Income (Loss)
	Number of Shares	$0.10 Par Value		Number of Shares	$0.001 Par Value
Balance, June 30, 2004	28	$	3	32,952	$	33	$	157,602		$	(68,846	)	$	(74	)	$	88,718		$	(15,734	)
Exercise of stock warrants				841		1		1,371									1,372
Exercise of stock options				600				824									824
Options and warrants for services								640									640
Cost to register common shares								(10	)								(10	)
Currency translation adjustment														10			10			10
Preferred stock dividends				6				62			(70	)					(8	)
Net loss											(19,184	)					(19,184	)		(19,184	)
Balance, June 30, 2005	28		3	34,399		34		160,489			(88,101	)		(63	)		72,362		$	(19,174	)
Cost to register common shares								(2	)								(2	)
Currency translation adjustment														(33	)		(33	)		(33	)
Exercise of stock options				14				30									30
Preferred stock dividends											(68	)					(68	)
Share-based compensation expense								1,869									1,869
Net loss											(17,823	)					(17,823	)		(17,823	)
Balance, June 30 2006	28		3	34,413		34		162,386			(105,992	)		(96	)		56,335		$	(17,856	)
Preferred stock dividends											(70	)					(70	)
Share-based compensation expense								1,925									1,925
Issuance of restricted common stock				17				25									25
Currency translation adjustment														33			33			33
Net loss											(15,063	)					(15,063	)		(15,063	)
Balance, June 30, 2007	28	$	3	34,430	$	34	$	164,336		$	(121,125	)	$	(63	)	$	43,185		$	(15,030	)

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

F-6

Authentidate Holding Corp. and Subsidiaries

Consolidated Statements of Cash Flows

	June 30,
(in thousands)	2007			2006			2005
Cash flows from operating activities
Net loss	$	(15,063	)	$	(17,823	)	$	(19,184	)
Adjustments to reconcile net loss to net cash used by operating activities
Income (loss) from discontinued operations		(1,055	)		388			(382	)
Depreciation and amortization		1,499			1,353			1,082
Share-based compensation		1,778			1,648			—
Warrants and options for services		—			—			640
Goodwill and other intangible asset impairment		—			—			4,767
Other		25			—			62
Changes in assets and liabilities
Accounts receivable		(942	)		(90	)		123
Prepaid expenses and other current assets		(196	)		24			149
Accounts payable, accrued expenses and other liabilities		(844	)		1,254			1,344
Deferred revenue		(54	)		(497	)		578
Net cash used in operating activities		(14,852	)		(13,743	)		(10,821	)
Cash flows from investing activities
Restricted cash		—			(379	)		223
Purchases of property and equipment		(329	)		(958	)		(934	)
Other intangible assets acquired		(444	)		(87	)		(361	)
Capitalized software development costs		(1,530	)		(1,764	)		(390	)
Investment in affiliated companies		—			—			(750	)
Net sales (purchases) of marketable securities		13,643			19,536			(7,150	)
Acquisition of business, net of cash acquired		—			—			(125	)
Net cash provided by (used in) investing activities		11,340			16,348			(9,487	)
Cash flows from financing activities
Dividends paid		(53	)		(68	)		(35	)
Stock options and warrants exercised		—			30			2,195
Principal payments on obligations under capital leases		—			(20	)		(78	)
Payment of registration costs		—			(2	)		(10	)
Net cash (used in) provided by financing activities		(53	)		(60	)		2,072
Effect of exchange rate changes on cash flows		33			(33	)		10
Net (decrease) increase in cash and cash equivalents		(3,532	)		2,512			(18,226	)
Cash flow from discontinued operations—operating activities		330			634			189
Cash flow from discontinued operations—investing activities		2,571			(277	)		(458	)
Cash flow from discontinued operations—financing activities		—			68			(141	)
Cash and cash equivalents, beginning of period		9,366			6,429			25,065
Cash and cash equivalents, end of period	$	8,735		$	9,366		$	6,429

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

F-7

Authentidate Holding Corp. and Subsidiaries

Notes to Consolidated Financial Statements

June 30, 2007, 2006 and 2005

1. Description of Business and Summary of Significant Accounting Policies

Authentidate Holding Corp. (AHC or the company) is a worldwide provider of software and web-based services that enable enterprises and individuals to securely conduct the trusted exchange of electronic content. AHC and its subsidiaries provide software applications and web-based services that address a variety of business needs for our customers, including raising service levels, reducing costs, improving productivity and enhancing compliance with regulatory requirements. Our scalable offerings are primarily targeted at enterprises and office professionals and incorporate security technologies such as electronic signing, identity management and content authentication to electronically facilitate secure and trusted transactions. The company operates its business in the United States and Germany, with technology and service offerings that address emerging growth opportunities based on regulatory and legal requirements specific to each market.

As discussed more fully in Note 4, in June 2007, the company announced that it had completed the sale of its Document Management Solutions and Systems Integration businesses, including its wholly-owned subsidiary DJS Marketing Group, Inc., to Astria Solutions Group, LLC (“Astria”). Astria is a newly formed New York limited liability company organized by members of the acquired businesses’ senior management team. Accordingly, the Document Management Solutions and Systems Integration businesses and the related assets and liabilities have been presented as discontinued operations and assets held for sale in the condensed consolidated financial statements for all periods presented. Amounts for continuing operations have been reclassified/regrouped for all periods presented to conform to a more traditional software and software services company presentation.

Principles of Consolidation

The financial statements include the accounts of Authentidate Holding Corp. and its subsidiaries. Intercompany transactions and balances have been eliminated. Equity investments where we do not exercise significant influence over the investee are accounted for under the cost method.

Cash Equivalents

We consider all highly liquid investments with maturities of three months or less when purchased to be cash equivalents. At June 2007 and 2006 cash equivalents consisted primarily of investments in high quality short term investments such as commercial paper and overnight interest bearing deposits.

Marketable Securities

Our marketable securities are generally comprised of auction rate securities rated AAA or AA by one or more national rating agencies. The auction rate securities have contractual maturities of up to 30 years, but generally have interest rate re-set dates that occur every 7, 28 or 35 days and despite the long-term nature of their stated contractual maturities, we have the ability to quickly liquidate these securities at ongoing auctions every 35 days or less. We classify our investments in auction rate securities as “available for sale.” These investments are recorded at cost which approximates fair market value due to their variable interest rates, which typically reset every 7, 28 or 35 days. As a result, we had no cumulative gross unrealized holding gains (losses) or gross realized gains (losses) from our current investments. All income generated from these investments is recorded as interest income. Because we do not hold any auction rate security longer than one year, such securities have been classified as current assets.

F-8

Authentidate Holding Corp. and Subsidiaries

Notes to Consolidated Financial Statements—(Continued)

June 30, 2007, 2006 and 2005

Accounts Receivable

Accounts receivable represent customer obligations due under normal trade terms, net of allowances 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.

Long-Lived Assets

Long-lived assets, including property and equipment, software development costs, patent costs, trademarks and licenses are reviewed for impairment using an undiscounted cash flow approach whenever events or changes in circumstances such as significant changes in the business climate, changes in product offerings, or other circumstances indicate that the carrying amount may not be recoverable.

Property and Equipment

Property and equipment are stated at cost, net of accumulated depreciation and amortization. Depreciation and amortization are determined using the straight-line method. Estimated useful lives of the assets range from three to seven years.

Repairs and maintenance are charged to expense as incurred. Renewals and betterments are capitalized. When assets are sold, retired or otherwise disposed of, the applicable costs and accumulated depreciation or amortization are removed from the accounts and the resulting gain or loss, if any, is recognized.

Software Development Costs

Software development and modification costs incurred subsequent to establishing technological feasibility are capitalized and amortized based on anticipated revenue for the related product with an annual minimum equal to the straight-line amortization over the remaining economic life of the related products (generally three years). Amortization expense of $616,000, $295,000 and $286,000 for the years ended June 30, 2007, 2006 and 2005, respectively, is included in depreciation and amortization expense.

Goodwill

Goodwill is reviewed for impairment annually or whenever events such as significant changes in the business climate, changes in product offerings, or other circumstances indicate that the carrying amount may not be recoverable. We perform our annual goodwill impairment test at the end of each fiscal year using a discounted cash flow approach.

Income Taxes

Deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period that includes the enactment date.

F-9

Authentidate Holding Corp. and Subsidiaries

Notes to Consolidated Financial Statements—(Continued)

June 30, 2007, 2006 and 2005

Revenue Recognition

Revenue is derived from transaction fees for web-based services, software licenses, maintenance arrangements, hosting services, Electronic Postmark (EPM) sales and post contract customer support services. Revenue is recognized when persuasive evidence of an arrangement exists, delivery has occurred, the selling price is fixed and collectibility 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 stand alone 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.

Revenue from web-based services, EPM sales and post contract customer support services is recognized when the related service is provided and, when required, accepted by the customer. Software license revenue is recognized when the criteria discussed above is met. Maintenance and hosting services revenue is recognized over the period in which the service is performed. Revenue from multiple element arrangements that cannot be allocated to identifiable items is recognized ratably over the contract term which is generally one year.

Warranty Provisions

We provide a limited warranty on the software and services we sell. Warranty expense was not significant in any of the periods presented.

Advertising Expenses

We recognize advertising expenses as incurred. Advertising expense was $292,000, $400,000 and $500,000 for the years ended June 30, 2007, 2006 and 2005, respectively.

Product Development Expenses

These costs represent research and development expenses and include salary and benefits, professional and consultant fees and supplies.

Currency Translation Adjustment

Assets and liabilities of foreign operations are translated at the exchange rate on the balance sheet date. Revenues and expenses are translated at the average rates of exchange for the period. Gains or losses resulting from translating foreign currency financial statements are recorded as “Other Comprehensive Income (Loss)” and accumulated in shareholders’ equity in the caption “Accumulated Other Comprehensive Loss”.

Management Estimates

Preparing financial statements requires management to make estimates, judgments and assumptions that affect the reported amounts of assets, liabilities, revenue and expenses. Examples include estimates of loss

F-10

Authentidate Holding Corp. and Subsidiaries

Notes to Consolidated Financial Statements—(Continued)

June 30, 2007, 2006 and 2005

contingencies and product life cycles, assumptions such as elements comprising a software arrangement, including the distinction between upgrades/enhancements and new products; when technological feasibility is achieved for our products; the potential outcome of future tax consequences; and determining when investment or other impairments exist. We maintain allowances for doubtful accounts for estimated losses resulting from the inability of our customers to make required payments. We make estimates on the future recoverability of capitalized goodwill which is highly dependent on the future success of marketing and sales, we record a valuation allowance against deferred tax assets when we believe it is more likely than not that such deferred tax assets will not be realized and we make assumptions in connection with the calculations of share-based compensation expense. Actual results and outcomes may differ from management’s estimates, judgments and assumptions. We have based our estimates on historical experience and on various assumptions that are believed to be reasonable under the circumstances and we evaluate our estimates on a regular basis and make changes accordingly. Historically, our estimates relative to our critical accounting estimates have not differed materially from actual results; however, actual results may differ from these estimates under different conditions. If actual results differ from these estimates and other considerations used in estimating amounts reflected in our consolidated financial statements, the resulting changes could have a material adverse effect on our consolidated statement of operations, and in certain situations, could have a material adverse effect on liquidity and our financial condition.

Share-Based Compensation

We apply Statement of Financial Accounting Standard No. 123R, “Share Based Payment” (FAS 123R) to account for employee and director stock option plans. Share-based employee compensation expense is determined using the Black-Scholes option pricing model which values options based on the stock price at the grant date, the exercise price of the option, the expected life of the option, the estimated volatility, expected dividend payments and the risk-free interest rate over the expected life of the options.

Concentrations of Credit Risk

Financial instruments which subject us to concentrations of credit risk consist of cash and cash equivalents, marketable securities and trade accounts receivable. To reduce credit risk, we place our cash, cash equivalents and investments with several high credit quality financial institutions and typically invest in AA or better rated investments. Our credit customers are not concentrated in any specific industry or business. We establish an allowance for doubtful accounts based upon factors surrounding the credit risk of specific customers, historical trends and other information.

We have no significant off-balance sheet arrangements at June 30, 2007. At June 30, 2007, one customer represented approximately 54% of total accounts receivable. At June 30, 2006, two customers represented approximately 34% of total accounts receivable. For the year ended June 30, 2007, two customers accounted for approximately 43% of consolidated revenues. For the year ended June 30, 2006, two customers accounted for approximately 37% of consolidated revenues. For the year ended June 30, 2005, no customer accounted for more than 10% of consolidated revenues.

Investment in Affiliate

In fiscal 2005 the company invested $750,000 in an unaffiliated third party, Health Fusion, Inc. in connection with a strategic relationship established with this company. The company owns approximately 3.7% of the outstanding stock of Health Fusion and accounts for this investment using the cost method.

F-11

Authentidate Holding Corp. and Subsidiaries

Notes to Consolidated Financial Statements—(Continued)

June 30, 2007, 2006 and 2005

Present Accounting Standards Not Yet Adopted

In June 2006, the FASB issued Interpretation No. 48 (“FIN 48”), “Accounting for Uncertainty in Income Taxes,” which clarifies the accounting for uncertainty in income taxes recognized in the financial statements in accordance with FASB Statement No. 109, “Accounting for Income Taxes”. FIN 48 provides guidance on the financial statement recognition and measurement of a tax position taken or expected to be taken in a tax return. FIN 48 also provides guidance on derecognition, classification, interest and penalties, accounting in interim periods, disclosures, and transition. FIN 48 is effective for fiscal years beginning after December 15, 2006. We will adopt this provision in fiscal 2008 and do not believe such adoption will have a significant impact on our Consolidated Financial Statements.

In September 2006, the FASB issued Financial Accounting Standard (FAS) No. 157, “Fair Value Measurements”. FAS No. 157 defines fair value, establishes a framework for measuring fair value and expands disclosures about fair value. FAS No. 157 is effective for fiscal years beginning after November 15, 2007. We are currently evaluating the impact of this standard on our Consolidated Financial Statements.

In February 2007, the FASB issued Financial Accounting Standard (FAS) No. 159, “The Fair Value Option for Financial Assets and Financial Liabilities”. FAS No. 159 provides an option to report selected financial assets and financial liabilities using fair value. The standard establishes required presentation and disclosures to facilitate comparisons with companies that use different measurements for similar assets and liabilities. FAS No. 159 is effective for fiscal years beginning after November 15, 2007, with early adoption allowed only if FAS No. 157 is also adopted. We are currently evaluating the impact of this standard on our Consolidated Financial Statements.

2. Share-Based Compensation

Effective July 1, 2005, the company adopted FAS 123R which requires all share-based payments, including grants of stock options, to be recognized in the income statement as a compensation expense, based on their fair values. Under the provisions of FAS 123R, the estimated fair value of options granted under the company’s Employee Stock Option Plan and Non-Executive Director Stock Option Plan are recognized as compensation expense over the option-vesting period. The company adopted FAS 123R using the modified prospective method, in which compensation expense is recognized beginning with the effective date of adoption of FAS 123R for all share-based payments (i) granted after the effective date of adoption and (ii) granted prior to the effective date of adoption that were unvested on the date of adoption.

Prior to July 1, 2005, the company applied APB Opinion No. 25, Accounting for Stock Issued to Employees, in accounting for its employee share-based compensation. Under the provisions of APB 25, no compensation expense was recognized when stock options were granted with exercise prices equal to or greater than market value on the date of grant.

Effective January 17, 2007, the Board of Directors amended the terms of existing stock options previously granted to the company’s current employees whereby such options expire ten years from the original grant date. The incremental share-based compensation expense related to this change is being amortized as the related options vest.

2000 Employees Stock Option Plan

In March 2001, the shareholders approved the 2000 Employees Stock Option Plan (the “2000 Plan”) which, as amended in February 2004, provides for the grant of options to purchase up to 10,000,000 shares of the

F-12

Authentidate Holding Corp. and Subsidiaries

Notes to Consolidated Financial Statements—(Continued)

June 30, 2007, 2006 and 2005

company’s common stock. The 2000 Plan expires in 2010 and replaced the 1992 Employees Stock Options Plan. Under the terms of the 2000 Plan, options granted thereunder may be designated as incentive stock options or non-qualified options.

The Plan is administered by a Compensation Committee (“Committee”) designated by the Board of Directors (“Board”). The Compensation Committee is comprised entirely of outside directors. The Board or the Committee, as the case may be, has the discretion to determine eligible employees and the times and the prices at which options will be granted, whether such options shall be ISOs or non-qualified options, the period during which each option will be exercisable and the number of shares subject to each option. Vesting generally occurs one-third per year over three years and options generally have a life of ten years. The Board or the Committee has full authority to interpret the 2000 Plan and to establish and amend rules and regulations relating thereto. Under the 2000 Plan, the exercise price of an option designated as an ISO may not be less than the fair market value of the company’s common stock on the date the option is granted. However, in the event an option designated as an ISO is granted to a ten percent shareholder, the exercise price shall be at least 110% of such fair market value. The aggregate fair market value on the grant date of shares subject to options which are designated as ISOs which become exercisable in any calendar year, shall not exceed $100,000 per optionee.

The Board or the Committee may in its sole discretion grant bonuses or authorize loans to or guarantee loans obtained by an optionee to enable such optionee to pay any taxes that may arise in connection with the exercise or cancellation of an option. As of June 30, 2007, 2006 and 2005, no loans had been granted or guaranteed. Loans may not be granted or guaranteed for executive officers.

Stock option activity under the 2000 Plan is as follows (in thousands, except per share and average life data):

	Number of Options		Weighted Average Exercise Price		Weighted Average Remaining Contractual Life (Years)	Aggregate Intrinsic Value
Outstanding, June 30, 2004	4,413		$	5.40
Granted	1,636			5.82
Exercised	(1,484	)		7.72
Forfeited	(591	)		1.37
Outstanding, June 30, 2005	3,974			5.31
Granted	1,113			4.50
Exercised	(14	)		2.15
Forfeited	(789	)		6.17
Outstanding, June 30, 2006	4,284			4.95
Granted	551			2.28
Forfeited	(505	)		4.69
Outstanding, June 30, 2007	4,330			4.64	5.52	$	16
Exercisable at June 30, 2007	3,312			4.96	4.60	$	4
Expected to vest at June 30, 2007	855			3.62	8.45	$	10

F-13

Authentidate Holding Corp. and Subsidiaries

Notes to Consolidated Financial Statements—(Continued)

June 30, 2007, 2006 and 2005

Unvested options as of June 30, 2007, and changes in such options during the year then ended are summarized below (in thousands, except per share and average life data):

	Number of Options		Weighted Average Grant Date Fair Value		Weighted Average Remaining Contractual Life (Years)	Aggregate Intrinsic Value
Unvested balance, June 30, 2006	1,820		$	1.12
Granted	551			0.71
Vested	(1,151	)		1.13
Forfeited	(202	)		1.10
Unvested balance, June 30, 2007	1,018		$	0.86	8.45	$	12

2001 Non-Executive Director Stock Option Plan

In January 2002, our shareholders approved the 2001 Non-Executive Director Stock Option Plan to replace the 1992 Non-Executive Director Stock Plan and approved an amendment to the Plan in February 2004 (the “2001 Director Plan”). Under the 2001 Director Plan, options may be granted until December 2011 to (i) non-executive directors as defined and (ii) members of any advisory board established by the company who are not full-time employees of the company or any of its subsidiaries. The 2001 Director Plan, as amended, provides that each non-executive director will automatically be granted an option to purchase 40,000 shares upon joining the Board of Directors and 10,000 shares on each September 1st thereafter, prorated based upon the amount of time such person served as a director during the period beginning twelve months prior to September 1. Additionally, non-executive directors, upon joining the Board and for a period of one year thereafter, will be entitled to purchase restricted stock from the company at a price equal to 80% of the closing price on the date of purchase up to an aggregate purchase price of $100,000. Each eligible director of an advisory board will receive, upon joining the advisory board, and on each September 1st thereafter, an option to purchase 5,000 shares of the company’s common stock, providing such person has served as a director of the advisory board for the previous 12-month period.

On January 17, 2007, the shareholders approved several amendments to the 2001 Non-Executive Director Stock Option Plan whereby non-executive director stock options expire ten years from the original date of grant, non-executive directors will have up to two years to exercise their options after leaving the board and may elect to receive up to 50% of their cash director compensation in restricted common stock of the company issued at fair value in accordance with the terms of the Plan. For the year ended June 30, 2007, the company issued 17,075 shares of restricted common stock valued at approximately $25,000 to certain non-executive directors in connection with this program.

The exercise price for options granted under the 2001 Director Plan is 100% of the fair market value of the common stock on the date of grant. The exercise price of options granted under the 2001 Director Plan must be paid at the time of exercise in cash. Options are non-qualified options, vest upon grant and generally have a life of ten years unless terminated sooner, as provided in the 2001 Director Plan. The Plan is administered by a committee of the board of directors composed of not fewer than three persons who are officers of the company (the “Committee”). The Committee has no discretion to determine which non-executive director or advisory board member will receive options or the number of shares subject to the option, the term of the option or the exercisability of the option. However, the Committee will make all determinations of the interpretation of the 2001 Director Plan.

F-14

Authentidate Holding Corp. and Subsidiaries

Notes to Consolidated Financial Statements—(Continued)

June 30, 2007, 2006 and 2005

In fiscal 2008, the company granted 70,000 options under the 2001 Director Plan at an exercise price of $1.32 per share. The company also issued 19,156 shares of restricted common stock valued at approximately $30,000 to certain non-executive directors under the program discussed above.

A schedule of director stock option activity is as follows (in thousands, except per share and average life data):

	Number of Options		Weighted Average Exercise Price		Weighted Average Remaining Contractual Life (Years)	Aggregate Intrinsic Value
Outstanding, June 30, 2004	153		$	4.87
Options granted equal to market price	117			5.60
Options exercised	(10	)		0.85
Outstanding, June 30, 2005	260			5.36
Options granted equal to market price	55			3.00
Options expired	(20	)		4.81
Options exercised	—			—
Outstanding, June 30, 2006	295			4.95
Options granted equal to market price	65			2.03
Options expired	(20	)		3.76
Options exercised	—			—
Outstanding, June 30, 2007	340		$	4.47	7.25	$	—

The effect on net loss and loss per share of utilizing the fair value method for the prior periods in comparison to the current period is as follows (in thousands, except per share data):

	Year Ended June 30,
	2007			2006			2005
Loss from continuing operations, as reported
Applicable to common shareholders	$	(16,188	)	$	(17,503	)	$	(19,637	)
Add: Total share-based compensation expense determined under fair value method		—			—			(3,321	)
Proforma loss from continuing operations	$	(16,188	)	$	(17,503	)	$	(22,958	)
Basic and diluted loss per share from continuing operations
As reported	$	(0.47	)	$	(0.51	)	$	(0.58	)
Pro forma	$	(0.47	)	$	(0.51	)	$	(0.68	)

For the years ended June 30, 2007 and 2006 the company’s net loss included $1,925,000 and $1,869,000 of share-based compensation, respectively. Had the company continued to account for share-based compensation under APB Opinion No. 25, basic and diluted loss per common share for the years ended June 30, 2007 and 2006 would have been $0.39 compared to $0.44 and $0.46 compared to $0.52, respectively.

F-15

Authentidate Holding Corp. and Subsidiaries

Notes to Consolidated Financial Statements—(Continued)

June 30, 2007, 2006 and 2005

The impact of share-based compensation expense on the Statement of Operations is as follows (in thousands, except per share data):

	Year Ended June 30,
	2007			2006			2005
Loss from continuing operations before share-based compensation expense	$	(14,340	)	$	(15,787	)	$	(19,566	)
Share-based compensation expense		(1,778	)		(1,648	)		—
Loss from continuing operations	$	(16,118	)	$	(17,435	)	$	(19,566	)
Net loss before share-based compensation expense	$	(13,138	)	$	(15,954	)	$	(19,184	)
Total share-based compensation expense		(1,925	)		(1,869	)		—
Net loss	$	(15,063	)	$	(17,823	)	$	(19,184	)
Basic and diluted loss per share
Continuing operations before share-based compensation	$	(0.42	)	$	(0.46	)	$	(0.58	)
Share-based compensation expense, continuing operations		(0.05	)		(0.05	)		—
Discontinued operations		0.03			(0.01	)		0.01
Basic and diluted loss per share	$	(0.44	)	$	(0.52	)	$	(0.57	)

Share-based compensation expense had no effect on our cash flows.

Share-based compensation expense by category is as follows (in thousands):

	Year Ended June 30,
	2007		2006		2005
SG&A expenses, net	$	15,192	$	16,489	$	15,146
Share-based compensation expense		1,651		1,398		—
Total SG&A expenses	$	16,843	$	17,887	$	15,146
Product development expenses, net	$	2,474	$	3,332	$	2,704
Share-based compensation expense		120		243		—
Total product development expenses	$	2,594	$	3,575	$	2,704
Cost of revenues, net	$	2,127	$	1,215	$	1,290
Share-based compensation expense		7		7		—
Total cost of revenues	$	2,134	$	1,222	$	1,290

Under the modified prospective method of transition under FAS 123R, the company is not required to restate its prior period financial statements to reflect expensing of share-based compensation under FAS 123R. Therefore, the results for fiscal 2007 and 2006 are not directly comparable to results for fiscal 2005.

Prior to the adoption of FAS No. 123R, the company presented cash flows resulting from the tax benefits of deductions from the exercise of stock options as operating cash flows in the Statements of Cash Flows. FAS No. 123R requires cash flows resulting from the tax benefits from tax deductions in excess of the compensation cost recognized for those options (excess tax benefits) to be classified as financing cash flows. The company did not realize any tax benefits from the exercise of stock options during the years ended June 30, 2007 and 2006.

F-16

Authentidate Holding Corp. and Subsidiaries

Notes to Consolidated Financial Statements—(Continued)

June 30, 2007, 2006 and 2005

The company computed the estimated fair values of all share-based compensation using the Black-Scholes option pricing model and the assumptions set forth in the following table. The company based its estimate of the life of these options on historical averages over the past five years. The company retained a third party valuation firm to calculate expected volatility which was based on the company’s historical stock volatility and historical stock volatility of comparable companies in the industry. The assumptions used in the company’s Black-Scholes calculations for fiscal 2007, 2006 and 2005 are as follows:

	Risk Free Interest Rate	Dividend Yield		Volatility Factor	Weighted Average Option Life (Months)
Fiscal year 2007	4.2%	0	%	68.0% - 74.0%	42
Fiscal year 2006	3.3% - 4.2%	0	%	70.0%	33
Fiscal year 2005	3.0% - 3.6%	0	%	95.3%	33

The Black-Scholes option-pricing model requires the input of highly subjective assumptions. Because the company’s employee stock options have characteristics significantly different from those of traded options, and because changes in the subjective input assumptions can materially affect the fair value estimate, in management’s opinion, the existing models may not provide a reliable single measure of the fair value of share-based compensation for employee stock options. Management will continue to assess the assumptions and methodologies used to calculate estimated fair value of share-based compensation as circumstances change and additional data becomes available over time, which may result in changes to these assumptions and methodologies. Such changes could materially impact the company’s fair value determination.

As of June 30, 2007, there was approximately $1,200,000 of total unrecognized compensation expense related to unvested share-based compensation arrangements granted under the Plans. This expense is expected to be recognized over a weighted-average period of 21 months.

During the year ended June 30, 2006 the company issued 375,000 stock options to an independent consultant, exercisable at $3.25 per share. These options do not vest until the consultant realizes at least $1.0 million in sales of the company’s products; therefore no expense has been recorded as no sales have been realized to date. These options are not included in the disclosures above. These options expire at the later of seven years from the grant date or five years from the vesting date.

The total intrinsic value of options exercised was $0, $4,000 and $2,223,000 for the fiscal years ended June 30, 2007, 2006 and 2005, respectively. The weighted average grant date fair value of options granted during the fiscal years ended June 30, 2007, 2006 and 2005 was approximately $0.71, $0.79 and $1.55. The values were calculated using the Black-Scholes model.

The total fair value of shares vested was $1,376,000 $1,572,000 and $1,178,000 for the fiscal years ended June 30, 2007, 2006 and 2005, respectively.

F-17

Authentidate Holding Corp. and Subsidiaries

Notes to Consolidated Financial Statements—(Continued)

June 30, 2007, 2006 and 2005

3. Loss per Share

The following table sets forth the calculation of basic and diluted loss per share for the periods presented (in thousands, except per share data):

	Year Ended June 30,
	2007			2006			2005
Loss from continuing operations	$	(16,118	)	$	(17,435	)	$	(19,566	)
Income (loss) from discontinued operations, including gain on disposals in 2007 of $1,264		1,055			(388	)		382
Net loss		(15,063	)		(17,823	)		(19,184	)
Preferred stock dividends		(70	)		(68	)		(70	)
Net loss applicable to common shareholders	$	(15,133	)	$	(17,891	)	$	(19,254	)
Weighted average shares		34,418			34,405			33,831
Basic and diluted (loss) income per common share
Continuing operations, less preferred dividends	$	(0.47	)	$	(0.51	)	$	(0.58	)
Discontinued operations		0.03			(0.01	)		0.01
Basic and diluted loss per common share	$	(0.44	)	$	(0.52	)	$	(0.57	)

All common stock equivalents were excluded from the loss per share calculation for all periods presented because the impact is antidilutive. At June 30, 2007, options (4,670,000), warrants (714,000), performance based consultant options (375,000), and convertible preferred stock (28,000 preferred shares convertible into 500,000 common shares) were outstanding. At June 30, 2006, options (4,579,000), warrants (1,221,000), performance based consultant options (375,000) and convertible preferred stock (28,000 preferred shares convertible into 500,000 common shares) were outstanding. At June 30, 2005, options (4,234,000), warrants (1,276,000) and convertible preferred stock (28,000 preferred shares convertible into 500,000 common shares) were outstanding.

4. Discontinued Operations and Assets Held for Sale

In June 2007, the company announced that it had completed the sale of its Document Management Solutions and Systems Integration businesses, including its wholly-owned subsidiary DJS Marketing Group, Inc., to Astria Solutions Group, LLC (“Astria”). Astria is a newly formed New York limited liability company organized by members of the acquired businesses’ senior management team. Under the terms of the definitive Asset Purchase Agreement, dated as of May 31, 2007, the company received approximately $7,100,000 for the acquired businesses and related assets (including cash of $750,000). Astria paid the company $3,250,000 in cash, issued to the company a $2,000,000 seven-year note bearing an interest rate of 8.5% (“Note”), assumed approximately $1,600,000 in liabilities related to the acquired businesses, and agreed to pay the company approximately $270,000 based on the collection of deferred accounts receivable following the closing. In connection with the sale of the businesses and related assets, the company recorded a gain of approximately $1,264,000. The reported gain does not include any value for the Note. As discussed below, additional gain, if any, will be recorded as management determines that the debtor’s cash flows from operations are sufficient to repay the debt, using the guidance under staff Accounting Bulletin No. 103—Topic 5U “Gain Recognition on Sale of a Business or Operating Assets to a Highly Leveraged Entity”.

In connection with the sale, Astria also entered into a seven-year lease for a portion of the building owned by the company in Schenectady, New York where the acquired businesses are located and received a six-month

F-18

Authentidate Holding Corp. and Subsidiaries

Notes to Consolidated Financial Statements—(Continued)

June 30, 2007, 2006 and 2005

exclusive option from the company to purchase the land and building for $2,427,000. Under the terms of the lease, Astria has elected to pay all taxes and operating costs for the land and building and rent and additional rent of approximately $186,000 per year for the term of lease. Based on the company’s intention to dispose of these assets in the next year, the carrying value of the land and building is classified as assets held for sale for all periods presented.

The Note is secured by the assets of the acquired businesses sold by the company to Astria and is subordinated to the interests of the senior creditor and mezzanine lender to Astria as set forth in an intercreditor and subordination agreement among the company, Astria, and the senior creditor and mezzanine lender. The Note provides for monthly interest payments through May 2010, principal (based on a 15-year amortization) and interest payments thereafter through April 2014 and a final payment of the balance in May 2014. Based on the subordination, the extended collection period and other factors, the company has no reasonable basis for estimating the degree of collectibility of the Note. Accordingly, the company is using the guidance under staff Accounting Bulletin No. 103—Topic 5U “Gain Recognition on Sale of a Business or Operating Assets to a Highly Leveraged Entity” for the Note and will recognize the additional gain, if any, on the sale of the businesses as management determines that the debtor’s cash flows from operations are sufficient to repay the debt.

A summary of the operating results for the discontinued operations is as follows (in thousands):

	Year Ended June 30,
	2007			2006			2005
Revenues	$	9,158		$	12,079		$	13,781
Operating income (loss)	$	(209	)	$	(388	)	$	382

Assets held for sale and liabilities of discontinued operations consist of the following (in thousands):

	June 30,
	2007		2006
Current assets	$	—	$	2,778
Other assets		—		680
Land and building		2,119		2,159
Assets held for sale	$	2,119	$	5,617
Liabilities of discontinued operations	$	—	$	1,799

5. Property and Equipment

Property and equipment consists of the following (in thousands):

	June 30,						Estimated Useful Life In Years
	2007			2006
Machinery and equipment	$	3,100		$	2,990		3-6
Furniture and fixtures		321			180		5-7
Leasehold improvements		240			240		5
		3,661			3,410
Less: Accumulated depreciation and amortization		(2,583	)		(1,891	)
	$	1,078		$	1,519

F-19

Authentidate Holding Corp. and Subsidiaries

Notes to Consolidated Financial Statements—(Continued)

June 30, 2007, 2006 and 2005

Depreciation expense on property and equipment for the years ended June 30, 2007, 2006 and 2005 was approximately $770,000, $703,000, and $530,000 respectively.

6. Accounts Payable and Accrued Expenses

Accounts payable and accrued expenses consist of the following (in thousands):

	2007		2006
Accounts payable and accrued expenses	$	3,367	$	3,479
Accrued severance		110		597
Litigation accrual		515		843
	$	3,992	$	4,919

7. Income Taxes

Income tax (benefit) expense for the years ended June 30, 2007, 2006 and 2005 consists of currently payable state and local income taxes. At June 30, 2007, the company has federal net operating loss carryforwards for tax purposes of approximately $96,000,000. These losses expire in various years between fiscal 2008 and fiscal 2027 and, because of changes in ownership during the prior years, may be subject to limitations on their utilization. At June 30, 2007, the company has a foreign loss carryforward of approximately $7,300,000 which does not expire and can be carried forward indefinitely.

Pre-tax book (loss) from foreign sources totaled approximately $(805,000), $(991,000) and $(1,289,000) for the years ended June 30, 2007, 2006 and 2005, respectively.

There is no provision for income taxes for amounts related to discontinued operations because the company is reporting a loss from continuing operations and a net loss for all periods presented. Accordingly, any income or gain from discontinued operations would be fully offset by such losses.

The provision for income taxes for continuing operations differs from the amount computed by applying the federal statutory rate of 34% as follows (in thousands):

	Year Ended June 30,
	2007			2006			2005
Computed expected tax benefit	$	(5,480	)	$	(5,928	)	$	(6,652	)
Benefit attributable to net operating loss carry forward and other deductible temporary differences not recognized		5,480			5,928			5,042
Nondeductible goodwill impairment		—			—			1,621
Income tax expense	$	—		$	—		$	11

F-20

Authentidate Holding Corp. and Subsidiaries

Notes to Consolidated Financial Statements—(Continued)

June 30, 2007, 2006 and 2005

The components of deferred tax assets and liabilities consist of the following (in thousands):

	June 30,
	2007			2006
Deferred tax asset:
Allowance for doubtful accounts	$	—		$	213
Inventories		—			77
Investments in affiliated companies		297			297
Other intangible assets		1,113			135
Deferred compensation		1,385			815
Accrued expenses and other liabilities		650			1,364
Net operating loss and tax credit carryforwards		39,719			34,109
Other		56			6
Total gross deferred tax assets		43,220			37,016
Less: Valuation allowance		(42,851	)		(35,678	)
Net deferred tax asset		369			1,338
Deferred tax liability:
Software development costs		(369	)		(772	)
Equipment, principally due to differences in depreciation methods		—			(566	)
Net deferred taxes	$	—		$	—

The company has recorded a full valuation allowance against its net deferred tax asset since it believes it is more likely than not that such deferred tax asset will not be realized. The net change in the total valuation allowance for the years ended June 30, 2007, 2006 and 2005 was an increase of approximately $7,173,000, $6,671,000 and $5,329,000, respectively.

8. Lease Commitments

The company is obligated under operating leases for facilities, vehicles and equipment expiring at various dates through the year 2015. Certain of these leases contain escalation clauses Future minimum payments are as follows (in thousands):

		Operating Leases
Year Ending June 30:	2008	$	672
	2009		581
	2010		569
	2011		543
	2012		550
	Thereafter		2,011
		$	4,926

Rental expense was approximately $706,000, $834,000 and $502,000 for the years ended June 30, 2007, 2006 and 2005, respectively. The amount of accumulated amortization for capital leases at June 30, 2007, 2006 and 2005 was approximately $0, $44,000 and $172,000, respectively. The book value of equipment financed under capital leases at June 30, 2006 was approximately $28,000.

F-21

Authentidate Holding Corp. and Subsidiaries

Notes to Consolidated Financial Statements—(Continued)

June 30, 2007, 2006 and 2005

At June 30, 2007 and 2006, restricted cash was being held as collateral for letters of credit securing certain lease payments.

9. Preferred Stock

The Board of Directors is authorized to issue shares of preferred stock, $.10 par value per share, from time to time in one or more series. The Board may issue a series of preferred stock having the right to vote on any matter submitted to shareholders including, without limitation, the right to vote by itself as a series, or as a class together with any other or all series of preferred stock. The Board of Directors may determine that the holders of preferred stock voting as a class will have the right to elect one or more additional members of the Board of Directors, or the majority of the members of the Board of Directors.

The company currently has 28,000 shares of Series B convertible preferred stock outstanding. The Series B preferred stock is convertible into 500,000 shares of common stock and is described more fully in Note 17—Private Equity Offerings.

10. Common Stock Warrants

During the fiscal year ended June 2003 the company issued warrants to purchase approximately 864,000 shares of the company’s common stock at prices ranging from $2.50 to $3.00 per share. During fiscal 2004 the company issued warrants to purchase 296,400 shares, of common stock at an exercise price of $3.00 per share. These warrants were issued in connection with the sale of convertible debentures and expire at various times through September 2008. All of these convertible debentures were converted during fiscal 2004 and all amounts related to beneficial conversion features, debt discounts and deferred financing fees were charged to operations in fiscal 2004. All warrants outstanding are entitled to be exercised on a cash-less basis.

During fiscal 2003 and 2004, the company issued warrants to purchase approximately 182,000 shares of the company’s common stock at prices ranging from $3.00 to $3.26 per share. These warrants were issued in connection with certain private equity offerings and expire at various times through September 2007.

During fiscal 2004 and 2005, the company issued warrants to purchase approximately 320,000 shares of the company’s common stock to various consultants as compensation for services provided which expire at various times through October 2008. These warrants are fully vested and have exercise prices between $3.00 and $20.00. The fair value of all of these warrants, as determined under the Black Scholes Model, was charged to operations in fiscal 2004 and fiscal 2005.

F-22

Authentidate Holding Corp. and Subsidiaries

Notes to Consolidated Financial Statements—(Continued)

June 30, 2007, 2006 and 2005

All of the outstanding warrants are exercisable. A schedule of common stock warrant activity is as follows (in thousands, except per share and average life data):

	Number of Shares		Weighted Average Exercise Price Per Share		Weighted Average Remaining Contractual Life (Years)	Aggregate Intrinsic Value
Outstanding, June 30, 2004	2,190		$	3.23
Warrants granted greater than market price	250			16.80
Warrants exercised	(865	)		1.77
Warrants expired	(299	)		2.99
Outstanding, June 30, 2005	1,276			5.88
Warrants expired	(55	)		4.59
Outstanding, June 30, 2006	1,221			5.94
Warrants expired	(507	)		3.35
Outstanding, June 30, 2007	714		$	7.77	0.83	$	—

11. Commitments and Contingencies

We were the defendant in a third party complaint filed by Shore Venture Group, LLC in the United States District Court for the Eastern District of Pennsylvania. The caption of this matter is Berwyn Capital Investments, Inc. v. Shore Venture Group, LLC et al. (defendants and Shore Venture Group, LLC as third party plaintiff) v. Authentidate Holding Corp. and Authentidate, Inc. (third party defendants). The third party complaint was filed against us on May 7, 2001 and Shore Venture was the defendant to an action commenced by Berwyn Capital. The third party complaint alleged a claim for breach of contract and indemnification. On November 13, 2006 we entered into a settlement agreement with Berwyn Capital and on January 19, 2007 we entered into a settlement agreement with Shore Venture Group and Berwyn Capital, pursuant to which each of the parties agreed to a release of judgment, withdraw their appeals and a termination of all proceedings relating to this matter, without any admissions of wrongdoing or fault on our part. On January 23, 2007 Berwyn Capital, Shore Venture Group and we filed a joint stipulation of dismissal of appeals with the United States Court of Appeals for the 3^rd Circuit and on January 24, 2007 the United States Court of Appeals for the 3^rd Circuit issued an order dismissing the appeals. On January 30, 2007 each of Berwyn Capital and Shore Venture Group filed a satisfaction of judgment with the United States District Court for the Eastern District of Pennsylvania. All amounts paid by us under these settlement agreements were recorded as an expense during the year ended June 30, 2006.

We are the defendant in a claim filed by Shore Venture Group in the federal District Court for the District of New Jersey, under the caption Shore Venture Group, LLC, et al v. Authentidate Holding Corp., Authentidate, Inc. and John T. Botti. The complaint in this case was filed on March 2, 2005 and an amended complaint was filed on or about April 26, 2005. On October 12, 2005, the parties entered into an agreement to arbitrate the claims asserted against us by Plaintiffs. On October 19, 2005, the Court approved and entered a Consent Order referring the case to arbitration by the American Arbitration Association and staying the lawsuit pending resolution of the arbitration. The plaintiffs seek additional shares of the common stock of our subsidiary, Authentidate, Inc., and rights under one or more of our patent applications. Shore Venture Group recently withdrew a number of claims in the arbitration, including a claim for damages in connection with an alleged copyright infringement. We had conducted extensive settlement negotiations with Shore Venture in an effort to resolve all claims between the parties. However, negotiations were unable to result in a mutually agreeable settlement. The lawsuit requested

F-23

Authentidate Holding Corp. and Subsidiaries

Notes to Consolidated Financial Statements—(Continued)

June 30, 2007, 2006 and 2005

damages, injunctive relief, costs and attorneys’ fees. On October 18, 2006, Shore Venture filed a demand for arbitration with the American Arbitration Association. On December 4, 2006 we filed a response to the demand and are defending the action vigorously. Discovery has closed in this matter and an arbitration hearing began during the week of September 4, 2007. Based on the facts of which we are currently aware, management believes that the resolution of this claim, in the event decided adversely to us, will not have a material adverse effect on our financial condition. However, no assurances can be given that such belief will ultimately prove to be accurate or that other facts adverse to our position currently not known to management will not be uncovered, in which case the ultimate resolution of this claim could potentially have a material adverse effect on our financial condition.

Between June and August 2005, six purported shareholder class actions were filed in the United States District Court for the Southern District of New York against our company and certain of our current and former officers and directors. Plaintiffs in those actions alleged that defendants violated Sections 10(b) and 20(a) of the Securities Exchange Act of 1934 and Sections 11 and 15 of the Securities Act of 1933. The securities law claims were based on the allegations that we failed to disclose that our August 2002 agreement with the USPS contained certain performance metrics, and that the USPS could cancel the agreement if we did not meet these metrics; that we did not disclose complete and accurate information as to our performance under, and efforts to renegotiate, the USPS agreement; and that when we did disclose that the USPS might cancel the agreement, the market price of our stock declined. On October 5, 2005 the Court consolidated the class actions under the caption In re Authentidate Holding Corp. Securities Litigation., C.A. No. 05 Civ. 5323 (LTS), and appointed the Illinois State Board of Investment as lead plaintiff under the Private Securities Litigation Reform Act. The plaintiff filed an amended consolidated complaint on January 3, 2006, which asserted the same claims as the prior complaints and also alleged that Authentidate violated the federal securities laws by misrepresenting that it possessed certain patentable technology. On July 14, 2006, the Court dismissed the amended complaint in its entirety; certain claims were dismissed with prejudice and plaintiff was given leave to replead those claims which were not dismissed with prejudice. In August 2006, plaintiff filed a second amended complaint, which does not assert any claims relating to the company’s patents or under the Securities Act of 1933, but which otherwise is substantially similar to the prior complaint. The second amended complaint seeks unspecified monetary damages. The company moved to dismiss the second amended complaint on November 13, 2006, the motion is pending before the court.

In addition to the class action complaints, four purported shareholder derivative actions were filed against certain former and current directors and officers of the company in June and July 2005 in the United States District Court for the Southern District of New York. These federal court derivative actions were based on substantially the same events and factual allegations as the original class action complaints and asserted claims that Authentidate was injured by an alleged breach of fiduciary duty, waste, mismanagement, violations of Sarbanes-Oxley, and misappropriation of inside information. The derivative complaints sought, among other things, damages, equitable relief, restitution, and payment of costs and expenses incurred in the litigation (including legal fees). Plaintiffs in the derivative actions entered into a Court-approved stipulation providing for the consolidation of their actions and the selection of Maxine Philips as the lead plaintiff. Plaintiffs filed a consolidated complaint on November 14, 2005, which defendants moved to dismiss on January 13, 2006 on the ground that plaintiffs had not made a proper demand on the Board of Directors. On March 20, 2006, before the motion to dismiss was decided, plaintiffs in the federal court derivative action voluntarily dismissed their complaint without prejudice. On April 6, 2006, the court held a hearing to confirm, among other things, that plaintiffs had not received any payment or other consideration for the dismissal of their claims. At the hearing plaintiffs agreed to file a motion seeking court approval for the dismissal. Plaintiffs filed this motion on April 18, 2006 and the court entered an order dismissing the consolidated complaint on May 5, 2006. Subsequently, on May 25, 2006, the plaintiffs sent a letter to the Board of Directors demanding that it file a derivative suit on behalf of the company which asserts the same claims as the complaint which plaintiffs voluntarily dismissed only weeks earlier.

F-24

Authentidate Holding Corp. and Subsidiaries

Notes to Consolidated Financial Statements—(Continued)

June 30, 2007, 2006 and 2005

On December 13, 2005, a purported shareholder derivative action was filed in the Supreme Court of New York, Schenectady County, entitled Elkin v. Goldman et al., No. 2005-2240. Plaintiff in that action demanded that our Board of Directors file a derivative action on behalf of the company against nine of its current and former directors and officers. The complaint asserts the same claims that are alleged in the first federal court derivative actions. The Board of Directors, following a recommendation from a committee of the Board composed of outside, non-employee directors who were advised by independent outside counsel, concluded that commencing litigation, as demanded by Elkin, is not in our best interest.

In addition, in August 2005, we were notified of the filing of a complaint in which the plaintiff alleged that our products and systems incorporating secure time stamping technology, including but not limited to the USPS Electronic Postmark system, infringes certain of the plaintiff’s patent rights. The complaint was filed in the United States District Court for the Middle District of Florida and was titled TimeCertain LLC vs. Authentidate Holding Corporation, Authentidate, Inc. and NCipher Inc. As a result of a Markman hearing to determine the meaning of the claims of the patents at issue, on December 22, 2006 the Court issued a final Order construing the claims of the patents at issue. The claim construction Order was very favorable for us and adopted the meanings that we propounded for the claim terms. On February 16, 2007, the parties entered into a settlement agreement favorable to the company pursuant to which TimeCertain agreed to dismiss all of its claims in the lawsuit with prejudice. On February 26, 2007, the Court issued a final Order dismissing all of TimeCertain’s claims with prejudice, thereby ending this lawsuit.

We are engaged in no other litigation which would be anticipated to have a material adverse effect on our financial condition, results of operations or cash flows.

We have employment agreements with our executive officers that provide for terms of either one year or two years and specify the executive’s current compensation, benefits and perquisites, the executive’s entitlements upon termination of employment, and other employment rights and responsibilities.

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, the company has not made any payments under these agreements that have been material individually or in the aggregate. As of June 30, 2007, we were not aware of any obligations under such indemnification agreements that would require material payments.

F-25

Authentidate Holding Corp. and Subsidiaries

Notes to Consolidated Financial Statements—(Continued)

June 30, 2007, 2006 and 2005

12. Supplemental Cash Flow Information

Cash Flows

The company did not pay any income taxes or interest during the fiscal years ended June 30, 2007, or 2006 and paid income taxes of approximately $1,000 and no interest for the year ended June 30, 2005.

13. Employee Benefit Plan

The company maintains a qualified defined contribution 401(k) profit sharing plan for all eligible employees and may make contributions in percentages of compensation, or amounts as determined by the company’s Board of Directors. The company did not make any contributions to the plan for the years ended June 30, 2007 and 2006 and contributed $98,000 to the plan during the year ended June 30, 2005.

14. Goodwill and Other Intangible Assets

The company performs an annual valuation of goodwill at the end of fiscal year. Any adverse development or change in our business during the year would require an interim assessment. For the year ended June 30, 2007 there were no adverse developments or changes that required such an assessment. Based on the results of our year end impairment testing, we determined the carrying amount of goodwill was not impaired. Goodwill of $7,291,000 relates to our business in Germany.

Other intangible assets consist of the following (in thousands):

	June 30,
	2007						2006
	Gross Carrying Amount		Accumulated Amortization		Net Book Value		Gross Carrying Amount		Accumulated Amortization		Net Book Value		Useful Life In Years
Patents	$	342	$	117	$	225	$	342	$	98	$	244	17
Trademarks		146		38		108		146		32		114	20
Acquired technologies		72		72		—		72		54		18	2
Licenses		1,201		672		529		750		590		160	3
Total	$	1,761	$	899	$	862	$	1,310	$	774	$	536

The company amortizes other intangible assets using the straight line method. Amortization expense was approximately $125,000, $285,000 and $214,000 for the years ended June 30, 2007, 2006 and 2005, respectively. Amortization expense for the next five fiscal years is expected to be as follows (in thousands):

2008	$	242
2009	$	148
2010	$	100
2011	$	97
2012	$	57
Thereafter	$	218

The company recorded an impairment charge of approximately $4,767,000 for the year ended June, 30, 2005 as the result of its year end impairment testing. It was determined that sales and income growth were below expectations for these years which caused us to reduce our future growth plans. These charges related primarily to our historical security software solutions business in the United States.

F-26

Authentidate Holding Corp. and Subsidiaries

Notes to Consolidated Financial Statements—(Continued)

June 30, 2007, 2006 and 2005

15. Financial Instruments

The following methods and assumptions were used to estimate the fair value of each class of financial instruments for which it is practicable to estimate that value.

Cash and Cash Equivalents, Marketable Securities, and Accounts Receivable, Other Currents Assets, Accounts, Accounts Payable and Accrued Expenses and Other Current Liabilities

The carrying amount of cash and cash equivalents, marketable securities, accounts receivable, other current assets, accounts payable, accrued expenses and other current liabilities approximates fair value because of the short maturity of these instruments.

16. Segment Information

FAS 131, Disclosures about Segments of an Enterprise and Related Information, requires certain financial and supplementary information to be disclosed about operating segments of an enterprise. Operating segments are defined as components of an enterprise about which separate financial information is available that is evaluated regularly by the chief operating decision maker, or decision making group, in deciding how to allocate resources and in assessing performance. Our chief operating decision maker is our Chief Executive Officer.

The company operates in one reportable segment in the United States and Germany. In the United States the business is engaged in the development and sale of web-based services that enable enterprises and individuals to securely conduct the trusted exchange of electronic content. In the United States we also offer our proprietary content authentication technology in the form of the USPS Electronic Postmark^® (EPM). In Germany the business is engaged in the development and sale of software applications that provide electronic signature and time stamping capabilities for a variety of corporate processes including electronic billing and archiving solutions. Our web-based services and software applications are compliant with applicable digital signature rules and guidelines. We sell our software applications and software services through a direct sales effort and reseller arrangements.

Revenues from external customers include revenues from our German operations of approximately $3,335,000, $2,478,000 and $2,183,000 for years ended June 30, 2007, 2006 and 2005, respectively. This operation had assets of approximately $2,153,000, $1,712,000, and $1,487,000 at June 30, 2007, 2006 and 2005, respectively.

17. Private Equity Offerings

In February 2004, the company completed a private sale of its common stock to certain accredited investors pursuant to Section 4(2) of the Securities Act of 1933 (the “Securities Act”), as amended and Regulation D, promulgated thereunder. The company sold a total of 5,360,370 common shares at a price of $13.75 per share and realized gross proceeds of $73.7 million. After payment of offering expenses and broker commissions the company realized $69.1 million in net proceeds. The shares of common stock issued are restricted securities and have not been registered under the Securities Act, or any state securities law, and unless so registered, may not be offered or sold in the United States absent a registration or applicable exemption from the registration requirements of the Securities Act and applicable state securities laws.

During fiscal 2000, the company sold 50,000 shares of a newly created class of Series B convertible cumulative preferred stock (the “Series B preferred stock”). The Series B preferred stock was sold at $25.00 per

F-27

Authentidate Holding Corp. and Subsidiaries

Notes to Consolidated Financial Statements—(Continued)

June 30, 2007, 2006 and 2005

share for an aggregate offering price of $1,250,000. Dividends on the Series B Preferred Stock are payable at the rate of 10% per annum, semi-annually in cash. Each share of Series B preferred stock is convertible into shares of the company’s common stock or is converted into such number of shares of the common stock as shall equal $25.00 divided by the conversion price of $1.875 per share, subject to adjustment under certain circumstances. Commencing three years after the closing, the conversion price shall be the lower of $1.875 per share or the average of the closing bid and asked price of the company’s common stock for the 10 consecutive trading days immediately ending one trading day prior to the notice of the date of conversion; provided, however, that the holders are not entitled to convert more than 20% of the Series B preferred shares held by such holder on the third anniversary of the date of issuance per month. The Series B preferred stock is redeemable at the option of the company at any time commencing one year after issuance or not less than 30 nor more than 60 days after written notice at a redemption price of $25.00 per share plus accrued and unpaid dividends provided; (i) the public sale of the shares of common stock issuable upon conversion of the Series B preferred stock (the “Conversion Shares”) are covered by an effective registration statement or are otherwise exempt from registration; and (ii) during the immediately preceding 20 consecutive trading days ending within 10 days of the date of the notice of redemption, the closing bid price of the company’s common stock is not less than $3.75 per share. The Series B voting rights are limited to any issue which would adversely affect their rights.

On October 30, 2002, the company filed a Certificate of Amendment of the Certificate of Designations, Preferences and Rights and Number of Shares of Series B preferred stock with the Secretary of State of the State of Delaware. The amendment provides that the conversion rate applicable to the outstanding shares of Series B preferred stock will be fixed at $1.40. Previously, the conversion rate was equal to the lower of $1.875 and the average of the closing bid and asked prices of our common stock for the immediately preceding ten consecutive trading days ending one day prior to the notice of conversion; provided, however, that the conversion rate would not be below $0.875. Accordingly, the outstanding 28,000 shares of Series B preferred stock are presently convertible into an aggregate of 500,000 shares of the company’s common stock. Prior to the amendment, the outstanding shares of Series B preferred stock were convertible into a maximum of 800,000 shares of the company’s common stock. In consideration of obtaining the consent of the holder of the outstanding Series B preferred stock, the company agreed to defer its ability to redeem those shares for a period of two years.

As of June 30, 2007, 22,000 Series B preferred shares have been converted leaving 28,000 shares outstanding. Commencing October 2004, the Series B preferred stock is redeemable at the option of the company without regard to the closing price of the company’s common stock. During the fiscal years ended June 30, 2007 and 2006, no Series B preferred stock was redeemed.

18. Related Party Transactions

The company entered into certain loan and security arrangements involving Mr. John T. Botti, its former Chairman and Chief Executive Officer, principally relating to certain obligations to financial institutions collateralized by Mr. Botti’s stock in AHC. The company initially established these arrangements in 2001, and agreed to certain modifications in February 2002, as described below.

In January 2001, the company made a loan of $317,000 to Mr. Botti so as to enable him to avoid a margin call on the shares of AHC common stock owned by him that were held in a brokerage account as the Board of Directors believed that failing to do so would have a material adverse impact on the market price of its stock (the “2001 Loan”). The 2001 Loan was collateralized by a lien on all of the shares of AHC owned by Mr. Botti, as well as shares issuable to Mr. Botti upon the exercise of stock options granted to him. On February 14, 2002, the company agreed to loan an additional amount of $203,159 to Mr. Botti, which loan was also collateralized by a

F-28

Authentidate Holding Corp. and Subsidiaries

Notes to Consolidated Financial Statements—(Continued)

June 30, 2007, 2006 and 2005

lien on all of shares of AHC owned by Mr. Botti or issuable to him (the “2002 Loan”). The 2001 Loan bore interest at the rate of 9% per annum. The 2002 Loan bore interest at the rate of 6% per annum. These loans were paid in full in June 2003 as the result of Mr. Botti selling his 100 shares of Series A preferred stock to the company for $850,000. The Series A preferred stock had been appraised at $1,100,000 by an independent nationally recognized appraisal and valuation firm. Additionally, the company paid Mr. Botti $70,000 in cash in June 2003 and monthly installments of $15,000 to satisfy the outstanding liability related to the sale. In July 2004, the Board of Directors approved payment in full to the Chief Executive Officer during the quarter ended September 30, 2004.

On January 9, 2006, we entered into a Termination Agreement and a separate consulting agreement with John J. Waters, our Executive Vice President–Chief Administrative Officer and a member of our board of directors. Pursuant to the Termination Agreement, Mr. Waters relinquished his employment position in favor of a consulting relationship, effective as of January 1, 2006. We agreed to pay and/or provide to Mr. Waters (a) an amount of approximately $350,000, in accordance with the terms and conditions of the consulting agreement; (b) an amount of $5,000 for attorneys’ fees; and (c) the accelerated vesting of all options granted to him, along with the continuation of the exercise period for the duration of their original term. Mr. Waters continues to serve on our board of directors. The full cost of this arrangement was accrued in fiscal 2006 and paid in full by September 30, 2006.

On January 26, 2006, we entered into a Termination Agreement with Dennis H. Bunt, our Chief Financial Officer, and he resigned his position effective April 30, 2006. Pursuant to the Termination Agreement, we agreed to pay and/or provide Mr. Bunt (a) a severance payment of approximately $315,000, payable in equal installments over a period of twenty-four months; (b) an additional payment of $33,000 as additional severance and reimbursement of certain expenses; and (c) the accelerated vesting of all options granted to him and the continuation of the exercise period in which he may exercise such options. The full cost of this arrangement was accrued during the year fiscal 2006.

19. Other Income

Other income consists of the following (in thousands):

	June 30,
	2007		2006			2005
Interest and other income:
Interest income from financial institutions	$	1,929	$	2,120		$	1,620
Miscellaneous income (expense)		25		(11	)		42
Total interest and other income	$	1,954	$	2,109		$	1,662

F-29

Authentidate Holding Corp. and Subsidiaries

Notes to Consolidated Financial Statements—(Continued)

June 30, 2007, 2006 and 2005

20. Quarterly Financial Data (Unaudited)

	(in thousands)
Fiscal Year ended June 30,	First Quarter			Second Quarter			Third Quarter			Fourth Quarter
2007
Continuing operations:
Revenues	$	883		$	1,002		$	1,793		$	1,320
Operating expenses		5,842			5,509			5,536			6,183
Loss		(4,369	)		(3,999	)		(3,253	)		(4,497	)
Net loss		(4,295	)		(3,812	)		(3,381	)		(3,575	)
Loss per share	$	(0.12	)	$	(0.11	)	$	(0.10	)	$	(0.10	)
2006
Continuing operations:
Revenues	$	1,125		$	1,255		$	1,265		$	848
Operating expenses		5,323			5,356			6,204			7,154
Loss		(3,673	)		(3,545	)		(4,427	)		(5,790	)
Net loss		(3,748	)		(3,553	)		(4,601	)		(5,921	)
Loss per share	$	(0.11	)	$	(0.10	)	$	(0.14	)	$	(0.17	)
2005
Continuing operations:
Revenues	$	593		$	1,108		$	906		$	1,165
Operating expenses		3,879			6,727			4,526			9,857
Loss		(2,985	)		(5,245	)		(3,150	)		(8,186	)
Net loss		(2,906	)		(4,920	)		(2,960	)		(8,398	)
Loss per share	$	(0.09	)	$	(0.15	)	$	(0.09	)	$	(0.24	)

F-30

EX-23.1

EXHIBIT 23.1

Consent of Independent Registered Public Accounting Firm

We consent to the incorporation by reference in the Registration Statements on Form S-3 (Nos. 333-80917, 333-05445, 333-49160, 333-70880, 333-100546, 333-101354, 333-106174, 333-109626 and 333-113153) and Form S-8 (Nos. 333-23933, 333-65894, 333-91337, 333-97965 and 333-118338) of Authentidate Holding Corp. of our report dated September 10, 2007, with respect to the consolidated financial statements of Authentidate Holding Corp. and our report dated September 10, 2007 on our audit of management’s annual report on internal control over financial reporting and the effectiveness of internal control over financial reporting of Authentidate Holding Corp., which are included in the Amendment No. 1 to the Annual Report on Form 10-K/A for the year ended June 30, 2007.

/s/    Eisner, LLP

New York, New York

September 14, 2007

EX-31.1

EXHIBIT 31.1

Certification

I, Surendra B. Pai, certify that:

1. I have reviewed Amendment No. 1 to the annual report on Form 10-K/A 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 officers 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 officer(s) 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: September 14, 2007

/s/    SURENDRA B. PAI        

Surendra B. Pai,

Chief Executive Officer

EX-31.2

EXHIBIT 31.2

Certification

I, William A. Marshall, certify that:

1. I have reviewed Amendment No. 1 to the annual report on Form 10-K/A 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 officers 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 officer(s) 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: September 14, 2007

/s/    WILLIAM A. MARSHALL        

William A. Marshall,

Chief Financial Officer

EX-32

EXHIBIT 32

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 Amendment No. 1 to the Fiscal Year End Report of Authentidate Holding Corp. (the “company”) on Form 10-K/A for the period ending June 30, 2007 as filed with the Securities and Exchange Commission on the date hereof (the “Report”), the undersigned, being, Surendra B. Pai, Chief Executive Officer of the company, and William A. Marshall, Chief Financial Officer of the company, respectfully, certify, pursuant to 18 U.S.C. ss.1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that:

(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 result of operations of the company.

Dated: September 14, 2007

/s/    SURENDRA B. PAI	/s/    WILLIAM A. MARSHALL
Chief Executive Officer	Chief Financial Officer