Executives
Garth Russell – KCSA Strategic Communication
Benjamin O’Connell – President
William A. Marshall – Chief Financial Officer, Principal Accounting Officer & Treasurer
Analysts
Ralph Muller– UBS Financial
[John Ogrodnick] – JP Turner
David Levine – Accredited Members Incorporated
Ankit Gupta– Private Investor
[Dan Gromey] – Private Investor
Authentidate Holding Corp. (ADAT) F4Q09 Earnings Call September 24, 2009 4:30 PM ET
Operator
My name is Julianne and I will be your conference operator today. At this time I would like to welcome everyone to the Authentidate Holding Corporation’s fourth quarter fiscal year 2009 conference call. All lines have been placed on mute to prevent any background noise. After the speakers’ remarks there will be a question and answer session. (Operator Instructions) I would now like to turn the conference over to Mr. Garth Russell with KCSA Strategic Communication.
Garth Russell
Thank you for joining us for Authentidate Holding Corp. 2009 fiscal fourth quarter and year end conference call. Before we begin I must state that this conference call contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Act of 1934. When used during this call the words believe, anticipate, think, intend, plan, will be, expect and similar expresses identify such forward-looking statements.
Such statements regarding future events and/or the future financial performance of the company are subject to certain risks and uncertainties which could cause actual events or the actual future results of the company to differ materially from any forward-looking statements. Such risks and uncertainties include, among other things, the availability of any needed financing, the company’s ability to implement its business plan for various applications of its technologies, related decisions by the USPS, the impact of competition, the management of growth and other risks and uncertainties that may be detailed from time-to-time in the company’s reported filings with the Securities & Exchange Commission.
In light of such significant risks and uncertainties inherent in forward-looking statements included herein, the inclusion of such statements should not be regarded as a representation by the company or any other person that the objectives and plans of the company will be achieved. With nothing further I would now like to turn the call over to Benjamin O’Connell, President of Authentidate Holding Corp.
Benjamin O’Connell
Thank you for dialing in to our fiscal 2009 fourth quarter and yearend conference call. Joining me on today’s call is Chief Financial Officer Bill Marshall. During today’s call I will provide an update on our [inaudible] business including the progress we have made since our last call and our future plans to create additional value for shareholders. I will then turn the call over to Bill to review the results for the quarter and yearend period before opening the call for questions.
Let me start by saying we’re continuing to execute on the strategy that we put in place when I took the helm in December 2007. I’m confident that the company is moving in the right direction with a solid foundation of technology, people and customers. We have made steady progress over the past 18 months especially considering the lull in the overall economy due to the recession.
As you know, our company is largely focused here in the US in the healthcare industry. Specifically, we sell applications and systems that allow healthcare organizations to reduce the cost of administration while enabling better delivery of services. Historically, healthcare organizations have [inaudible] information technologies for a variety of reasons. These include the need to adhere to compliance guidelines and strict procedures related to patient care, a tradition of care being delivered to patients face-to-face and the high costs of many IT systems.
While all of these may have been valid reasons in the past, they US government, business leaders and customers have realized this traditional approach to healthcare delivery is in need of significant overhaul and that information technology must play a major part in any reform effort. Information technology is at the heart of government’s unprecedented plan to overhaul the healthcare system. More than $17 billion have already been allocated to help further purchase an implementation of electronic health records in physicians’ offices and hospitals.
Additional money is being made available to states to implement health information exchanges that enable the sharing of patients’ records, documents and other healthcare data. Technologies such as Telehealth and decision support systems are also being promoted as ways to keep patients healthier and out of acute care status. Increased emphasis is being placed on technology, preventative care and in home care to help reduce the cost of healthcare administration and patient care without sacrificing quality.
Over the past 18 months, we have positioned the company to be a leader in the coordination of patient care via our health information exchange Telehealth. Our products enable the delivery of healthcare services in a timely manner and Inscrybe solutions offer the necessary tools to reduce administrative costs. This strategy is well aligned with the government’s priorities and we are exploring opportunities to assist in the build out of health information exchanges and other government supported products using our Inscrybe health platform and technology.
While these activities have their own timeline, we believe that they are important steps for us as we continue to work towards being an important player in the healthcare IT space. Business relationships with both private and government entities provide us a broader view and take into how healthcare transactions are conducted.
Changing gears now and focusing on [tactics], sales of Inscrybe healthcare solutions remains steady. We started out fiscal 2009 with a strong foundation of existing customers that were still building up their use of Inscrybe healthcare. However, Liberty Medical’s decision to wind down its use of our services after completing its merger with Medco Health Solutions offset the gains in revenues from our other clients in the third and fourth quarter. While we were disappointed with Liberty’s decision we continued to pursue new opportunities with them in an effort to recover our lost revenue and grow our future business with the new organization.
On that front we have made good progress and we recently signed a new contract for Inscrybe services that has the potential to be a sizeable deal for the company. Of course, as with all of our customers, it takes time to ramp up transactions so we are cautiously optimistic about this opportunity and cannot provide any assurances as to when we will realize the potential of this arrangement. As always, we will undertake steps to promote additional usage throughout the organization and we’ll make further announcements regarding this as appropriate.
In addition, we continue to market our Inscrybe healthcare workforce solutions to new customers. However, as discussed on our last few calls the recession affected the decisions making processes for many of our target customers due to the stage of uncertainty in the economy. We also saw our revenue growth slow as retention trends impacted IT workers at customers locations where we needed their involvement to grow transaction volume. Although the pace of decision making at our targeted accounts have not been at the pace that we would have liked, we continued to add new customers and projects including recent announcements for projects with Medical Services of America, Lifecare Solutions and US Home Healthcare.
In addition, our pipeline continues to grow as more companies recognize that Inscrybe is a good alternative to their own internal manual processes [inaudible] application to managing the healthcare information and transaction. We are optimistic about our opportunities for revenue growth from our Inscrybe healthcare work force solutions business in fiscal 2010.
Moving to the Telehealth business, it was around the beginning of fiscal 2009 that we first introduces ExpressMD solutions and entered the Telehealth market and yet it has quickly become and exciting part of the Authentidate story. The purpose of this solution is to doctors continuous use of care to specific patient segments such as the elderly, special needs or pediatric patients with chronic illnesses that require regular monitoring of serious medical conditions.
While utilizing the system healthcare providers can easily view the specific patient’s vital statistics and make adjustments to the patient’s care plan via the Internet. In addition, the service provider intelligent routing to alert [inaudible] when a patient’s vital signs are outside of the practitioners’ preset ranges. Healthcare providers and health insurers are also expected to benefit by having additional tools to improve patient care and reduce overall in person doctors visits, emergency room patient visits and hospital stays.
We continue to make good progress with this solution. As we previous reported we received US FDA 510K market clearance for our Telehealth device in April 2009 which allowed us to commence sales and marketing activities. Since that time we believe we have made notable progress highlighted by the following events: We put in to place the contract manufacturer to fulfill this agreement with a manufacturer of electronics equipment. By outsourcing the manufacturing process ExpressMD has access to high quality electronics manufacturing expertise and the scalability we all hope ExpressMD will need to meet high demand.
Earlier this month we started a pilot of the ExpressMD solutions in the south Florida region to demonstrate the value of this solution and build a bridge to future sales activities in the area. We expect to pilot further demand in the coming months. Our sales pipeline continues to grow and consists of homecare companies, insurers and providers. We will announce developments regarding this as appropriate. These highlights are encouraging for us as we are now positioned to focus on our efforts on developing new business and engaging with clinicians and patients. We will keep you abreast of developments with this product as we continue to work towards additional commercial contracts.
As reported on our last call in April 2009, we also announced our new Inscrybe hospital discharge solution to further expand our addressable market and focus on the emerging needs of hospitals to better manage costs on post acute patient care. As part of the healthcare reform to date, you may have heard that approximately 20% of healthcare patients being discharged from hospitals would be readmitted for complications. This problems risks the patient’s wellbeing while adding more cost to the healthcare system.
One cause of the readmission was a lack of follow up visits and coordinated care post discharge. Our Inscrybe discharge solution is designed to help address these type of care conditions and challenges in addition to helping hospitals reduce costs and improve utilization. As part of our sales approach for this solution we signed a distribution agreement with Nortel to enable us to leverage their existing hospital client base. The complimentary capabilities of both patient [inaudible] solutions and their behind the firewall discharge solution provides significant opportunities for hospitals to reduce costs and improve operations.
The current breakup of Nortel due to its bankruptcy proceedings has slowed our progress in this area but we are continuing to work together and believe we will benefit from the final solutions of this process. It was recently announced that Avaya, a global leader in enterprise communication systems was selected by the bankruptcy court to acquire the Nortel assets that are of interest to us. We will monitor this situation to see what develops. In the meantime, we’re continuing the field direct sales opportunities and to explore other distribution arrangements.
Moving to our business in Germany, while revenue was down for the quarter, it was up approximately 8% compared to last year reflecting solid performance in both our core eBilling business and our eHealth security solutions business. We have continued to manage our expenses in Germany and expect to focus on these business areas and cost management activities as we go through 2010.
In summary, the economy’s rift on the decision making process for many of our potential customers is starting to show signs of improvement. As the bottom of the recession is in site and the recovery is on the way, we believe we’re close to recording initial sales for the ExpressMD Telehealth solution and we are optimistic about our opportunities for our discharge solution. The cost structure measures that we put in place in 2008 along with the increased usage by our customers throughout the years have helped us reduce the impact of the economic downturn and overall we are pleased with our performance.
Looking ahead to fiscal 2010 we are excited about our prospects for growth as we move towards achieving our financial targets for breakeven and profitability. With that, I’ll now turn the call over to Bill Marshall to review the results of our operations for the fiscal fourth quarter and yearend June 30, 2009
William A. Marshall
As always, I’ll start with a review of our consolidated results and offer additional comments as needed to explain the fluctuations. As Ben mentioned, our revenue growth for fiscal 2009 was impacted by poor economic conditions. Additionally, our fourth quarter results were impacted by the Medco acquisition of Liberty Medical and the related expiration of our contract with Liberty at the end of March 2009. Nevertheless, we increased revenues year-over-year and continue to see the positive impact of our strategic initiatives and expense management activities on our financial results.
Moving to the numbers, consolidated revenues for the quarter ended June 30, 2009 were approximately $1.6 million compared to $1.7 million for the same period last year. These results reflect a slight decrease of revenues from both our US and German operations at the expiration of the Liberty contract and certain project delays in Germany and stronger dollar reduced our results compared to the prior year. This offset the growth from new customers that we experienced during the fourth quarter.
Compared to the third quarter of fiscal 2009, total revenues for the quarter decreased approximately 22% reflecting the same items as the fourth quarter. Total revenue for the year ended June 30, 2009 increased 13% to approximately $6.9 million compared to $6.1 million for the same period last year. These results reflect increases of approximately 21% in US revenues and 8% in German revenues from increases in transaction volumes and new customers which were offset in part by lower fourth quarter results and the stronger dollar as our German revenues in Euros were actually up 18%.
As I mention on every call, our US revenues are primarily transaction based and increase as customers ramp up the number of transactions processed and as we add new customers. Our German revenues are derived primarily from software license and maintenance fees. As we launch our hospital discharge service we expect to generate revenues from fixed monthly service fees per location and from our Telehealth business we expect to generate revenues from hardware sales, monthly monitoring services and maintenance fees. Although both our US and German revenues can fluctuate from period-to-period based on the timing of contract closings and implementations, we believe we are well positioned for continued growth moving forward.
Cost of revenues increased to $713,000 for the quarter ended June 30, 2009 compared to $630,000 for the prior year period due primarily to higher license, maintenance and data center expenses and high consulting services for certain projects in Germany. For the full year cost of revenues increased to approximately $3 million compared to $2.2 million for fiscal 2008. This increase reflects the same trends as the quarter as well as additional software and hardware expenses for certain projects in Germany.
Selling, general and administrative expenses decreased to $2.4 million for the quarter ended June 30, 2009 compared to $2.9 million for the same period last year. This decrease reflects the impact of our cost management activities and lower share based compensation expense offset in part by joint venture investments of approximately $68,000 for the quarter compared to $143,000 for the same period last year.
For the year ended June 30, 2009 selling, general and administrative expenses were $10.6 million compared to $16.6 million for the prior year reflecting the same trends as the quarter. This decrease was offset in part by joint venture investments of approximately $392,000 for the year and the write off of deferred deal expenses of approximately $907,000 related to the termination of the Parascript deal. The prior year period includes joint venture investments of approximately $143,000 and incremental expenses of approximately $3.8 million for legal fees and settlements, accrued severance and professional service expenses. Net of these non-operating incremental expenses, we reduced selling, general and administrative expenses by approximately $3 million period-over-period.
Product development expenses were $464,000 for the quarter ended June 30, 2009 compared to $506,000 for the prior year. Product development spending relates primarily to our investment in Inscrybe healthcare as well as support for the joint venture and the growth of our business in the US and Germany. These expenses fluctuate from period-to-period based on the amounts capitalized. Total spending for the fourth quarter including capitalized amounts decreased to $535,000 compared to $669,000 for the prior year period.
For the year ended June 30, 2009 product development expenses were $1.7 million compared to $2.8 million for the prior year. Total spending for the year was $2.2 million compared to $3.6 million for the prior year. This decrease in total product development spending of approximately $1.4 million for the year reflects our cost management activities offset in part by the use of contract employees for certain projects.
Depreciation and amortization expense was $409,000 for the quarter compared to $410,000 for the prior year. For the full year, depreciation and amortization expense decreased to $1.5 million compared to $1.6 million for the same period due primarily to reduced spending and capitalized software. Other income was $100,000 for the quarter ended June 30, 2009 compared to $94,000 for the prior year period. For fiscal 2009 other income decreased to $551,000 compared to $1.4 million for the prior year. This decrease reflects lower interest rates and lower cash and investments balances compared to the prior year as we continue to invest in our business.
Net loss for the fourth quarter of fiscal 2009 decreased to $2.3 million or $0.07 per share compared to $2.6 million or $0.08 per share for the same period last year. The decrease in net loss for the quarter reflects the cost management activities and lower share based compensation I mentioned earlier. For fiscal 2009 net loss decreased to $9.4 million or $0.27 per share compared to $15.8 million or $0.46 per share for the same period last year. This decrease reflects the same trends as the quarter as well as revenue growth during fiscal 2009 and lower incremental expenses for the current year.
Moving to the balance sheet, we remain in sound financial condition. As of June 30, 2009 cash, cash equivalents and marketable securities amounted to approximately $6.6 million. Total assets were $22.3 million and deferred revenue totaled $963,000. In addition, in September we entered in to a standby commitment with an accredited investor that provides for borrowings up to $3 million over the next 12 months in the form of senior secured convertible debentures.
Borrowings, if any, under the facility bear interest at 10% payable in cash or stock at the company’s option and are convertible in to common stock by the investor at $1.20 per share. There are currently no borrowings under the facility. I might also add that the investor is an entity affiliated with the brother of one of our directors.
In August we also filed an S3 registration statement with the Securities & Exchange Commission to register approximately $40 million of various securities. Although we have no firm agreements regarding the sale of securities, we believed it was prudent for the company to reestablish access to the capital markets.
For the year ended June 30, 2009 we used cash of approximately $7.8 million to fund operating losses, product development activities, joint venture investments and inventory, changes in working capital and capital expenditures. This amount includes capitalized software development costs of approximately $515,000; capital expenditures of $45,000; joint venture investments of $392,000; and joint venture inventory of $706,000. Both of these joint venture amounts will be recovered as we start to sell product and generate revenues.
For the year ended June 30, 2009 we also used cash of approximately $815,000 for deferred deal costs and related items, $20,000 for the final payment of accrued severance obligations and $148,000 to purchase and retire 547,000 shares of the company’s common stock. As a result of our revenue growth and cost management activities, our average monthly cash use for operations and related activities was approximately $648,000 for fiscal 2009 compared to approximately $934,000 per month for the prior year.
For the first nine months of fiscal 2009, our monthly cash use was approximately $600,000. The increase in cash used during the current quarter is due to joint venture investments and joint venture inventory expenditures. While we expect our cash use to fluctuate based on working capital changes, overall we expect it to trend downward as we grow our business and move towards cash flow breakeven.
That concludes my remarks so let me turn it over to Ben for some closing comments before we take your questions.
Benjamin O’Connell
As we look towards fiscal 2010 and beyond, we believe there are significant opportunities for us in the healthcare market. The customer interest we are experiencing for our solutions speaks to the validity of our products and services and we believe we’ll benefit from the healthcare debate in Washington. In closing, I am very pleased to be able to share our excitement and enthusiasm of the company with you today. Thank you everyone for joining us today. Now, we’ll be glad to take any questions that you might have.
Question-and-Answer Session
Operator
(Operator Instructions) Your first question comes from Ralph Muller – UBS Financial.
Ralph Muller – UBS Financial
Ben, let me ask you about Telehealth and the prospects for growth and the competitors in the industry. Do you see competitors out there and their products would they compete with yours? And, do you think you have an advantage there?
Benjamin O’Connell
Ralph, we do see competitors out there but let’s point out that this is a very exciting field. It’s an area that is burgeoning and there are some kinks in the marketplace that are being worked out around reimbursement. Those things are going to be worked out I believe in a short time but what we see is a bunch of players out there and there is really not a dominate player that has developed yet. We expect to see multiple new entrants in the marketplace but our product we believe is not only competitive but we think it’s going to be best in class and it’s also going to be able to service customers over a broad range of needs.
Let me explain a bit more about why I say that and why I think we have the advantage. There are two particular areas that we have distinct advantage, our product allows connectivity from multipoint to multipoint. By that I mean, often times in a home you may have a husband and wife situation, even in a situation where you have kids who may want to have their illness be monitored and cared for by some caregiver that is remote.
Our device allows multiple parties to log on on the same device and be able to communicate on the backend with multiple care givers. So, that’s the rational when I say multipoint to multipoint. It has the additional complexity provided for us by the patient of its interconnection to the authenticated backend which allows it to receive additional services such that services ranging from supplies to having various medications being approved by an insurance company or care being administered electronically and complete the cycle very quickly and have that patient receive the care that they need or [inaudible].
These are things that our competitors don’t as yet have and we think it will take them considerable time to get there because we actually did a joint venture because we saw it brought this complexity to the solution which will be difficult to overcome by competitors. So, it’s a long answer to give you but my feeling is that the market is about to take off. There are some competitors in there, I think you’re going to see more sophisticated competitors down the road just because of the attractiveness of the marketplace. But, I think we have the distinct advantage that is not easily overcome.
Ralph Muller – UBS Financial
Let me ask you about how big do you think the market could be over the next say five years or so?
Benjamin O’Connell
Well, I can tell you more precisely from work that has been done for example at the state University of New York where they have projected in studies that they have done that the marketplace in 2012, which is two years out not five years out is going to be about $12 billion. I expect it to grow significant from that point on because I think the discovery for many people who try this for the first time will be that the cost savings realized will be so significant that the growth will be forced upon users by the insurance companies. It will just be too attractive for them to not demand that people who can be served through Telehealth be done and be served that way.
Ralph Muller – UBS Financial
So it looks like it could be huge potential there just the small portion of the overall market. Could you talk about the savings, what the savings could be, that sort of thing?
Benjamin O’Connell
The savings could be significant. I’ll tell you again the results that we know of because some studies have been conducted. For example the VA has conducted studies in two periods over the last five years. What the VA has typically shown in their studies, and recognize that VA hospitals really is a private network of hospitals so that the cost to manage is different. But, what they have realized is about 48% savings in most typical settings for most diseases. What we have recently recognized is that it’s an attractive way to maintain and treat multiple diseases. We believe that CHF, congestive heart failure will be a major beneficiary of this kind of service and in those cases we expect the savings to be even more significant than the 48% or 50% realized in the VA studies over the past five years.
Operator
Your next question comes from [John Ogrodnick] – JP Turner.
[John Ogrodnick] – JP Turner
You mentioned that your numbers are down a little bit because in the fourth quarter I think you said you lost a contract with Liberty and I think you said that you just resign the contract with Liberty? If you did, now long will it take you to I guess get the revenue run rates you had with Liberty before you lost the contract?
William A. Marshall
We didn’t say we lost, we said the contract expired so I guess you could say we lost that. But, we see that as a bit of a difference. We were running at about $100,000 a month so we would think over the next couple of quarters certainly by the end of the fiscal year we would be back to that level or higher. We think that there’s great potential with this contract.
Benjamin O’Connell
The attractive thing John is we are now serving a bigger customer. As you know, Liberty is a unit within Medco however, they have the responsibility for both the Medco diabetes business and the business that was previously Liberty’s by itself. Medco was approximately 75% to 80% as big as Liberty so it represents a huge opportunity for us. Also, we’re doing different things in the new contract. One of those things I would like to take a moment to point out here, you didn’t ask this question but I want to highlight it because its’ of importance to us and our focus around meeting the challenge being laid out by the administration.
We are going to have doctors who would have the capability to electronically sign. Liberty represented in fact the biggest stable of doctors that we had captured in our system. By that, we mean that the Liberty doctors are registered in our system and our address book. That will give us the ability to have those doctors who have computers and prefer to eSign, electronically sign, it increases security, it creates speeds and certain efficiencies and it makes the end of cases of electronic systems that the government is talking about more easily interfaced. So, I see us not only doing the things that we did before but doing things that are likely to grow more in importance in terms of the revenues realized in the future.
William A. Marshall
I think another point John is we were doing something different for Liberty before and now we’ve engaged for them to use our Inscrybe healthcare service. So, we think that’s a big opportunity for us.
[John Ogrodnick] – JP Turner
Just one other question, I think the patient discharge business with Nortel sounds very exciting. I know Nortel is going through some bankruptcy, do we have any idea when we might start recognizing some revenue from that side of the business?
Benjamin O’Connell
We don’t want to exactly give you this but let us give you some dynamics around what’s impacting us with respect to that. We had a plan and we had to set of identified hospitals and locations that we were going to roll with Nortel. So, we had actually provisioned our resources here and the work activity that we were involved in were directed at that. As this discussion got more complex we recognized that that will probably be delayed so we have moved in a different direction. We were always looking for additional distribution channels. We’re working to make that happen but we’re also looking to sell on our own using our sales force and we have some contacts there that we’re developing and we think it’s not going to be long before we roll this out.
Additionally, our friends at Nortel have kept in contact with us and the good news is that the initial indicators from potentially their new owner Avaya is that that deal will stay intact. They have incentive the people there to stay and we expect to be getting going with them in another month or so. So, I would say that we probably would realize revenues before the end of the year or early in to the new year.
Operator
Your next question comes from David Levine – Accredited Members Incorporated.
David Levine – Accredited Members Incorporated
Bill, did you say that the Liberty – the new contract, it would take you until the end of the fiscal year to ramp back to where you were, the $100,000 a month?
William A. Marshall
That’s what I said, right. That’s what I’m comfortable with. It could be sooner.
David Levine – Accredited Members Incorporated
But ultimately your view is that the new contract is going to be more beneficial than the old one?
William A. Marshall
Yes, and its actually more of plan of care offering which is more the referral side of the business so if I were saying best case, it could ramp very quickly but being cautious I think if we set a 12 month horizon, that’s probably conservative.
Benjamin O’Connell
An important thing David that Bill pointed out but it might have gone unnoticed in passing, is that the Liberty solution that we previously sold was a customized solution so they were off on an island and we provided a service that was dedicated for [inaudible]. The new contract that we have with them, they are using in fact the same infrastructure that we use to provision other customers so not only do we look to generate the same or bigger revenues from them but we hope to do so in an environment where we can manage our costs better because it’s a shared resource that we’ll be using.
That’s great because it gives us flexibility in the way doctors on other network needs such as patients, hospitals are totally conversed in how they exchange health information. It’s simply [inaudible] for us. That’s an important thing that is a differentiator than what we did before for Liberty and what we’re doing now.
David Levine – Accredited Members Incorporated
Was Liberty your single largest customer?
William A. Marshall
It was initially. They were certainly our single largest customer and this year we generated under 10% of our revenues from them but they were still significant to us. It was the fourth quarter for example, revenues were down at Liberty but then still in the fold our revenues would have been up about 39%. So, it had a significant impact but we think we’re going to be able to put that back in our pocket eventually.
David Levine – Accredited Members Incorporated
Let me make sure I understand, with Liberty business would have been up 39%?
William A. Marshall
Revenues.
David Levine – Accredited Members Incorporated
I’m assuming that given the way Ben just described it that the ongoing nature of this is probably higher margin business too? Is that not accurate?
William A. Marshall
It should be.
David Levine – Accredited Members Incorporated
The other thing Bill, I thought you said something – you made a reference to Europe, that Europe would have been 18% higher in the quarter with the exception of the strength of the dollar. Did I misunderstand that?
William A. Marshall
Germany was about 8% ahead for the year. If there had been no strengthening of the dollar, they would have been up about 18%. We have the same situation in the fourth quarter where they actually showed a decrease in US dollars, they would have been about 5% ahead in Euros. So, that is definitely and impact but obviously we get that back to some degree on the expense side of things so we don’t dwell on that too much. But, when we’re talking strictly revenue it does have an impact.
David Levine – Accredited Members Incorporated
I want to kind of add on to something that Ralph had said about competition in the Telehealth space. I know what you have with ExpressMD is your own piece of hardware but, is there a scenario, a reasonable scenario out there where competition in the space and maybe people with other pieces of hardware, and I’m assuming that’s what competition generally would mean, but is it possible you could have competitors to ExpressMD, people with a hardware solution?
Benjamin O’Connell
Yes. We would love to do that and that’s one of the topics that we’ve discussed with certain competitors. The idea being when we talked about multipoint to multipoint we would not mind providing the service on the backend allowing them access to suppliers, hospitals and also taking some advantage of the sophistication of our software in order to provide their patients access. Of course, there will be a cost associated with that but to the extent that people are willing to do that we would provide an opening application that would allow them to do so and we have had discussion with various competitors.
David Levine – Accredited Members Incorporated
I mean it’s reasonable to assume that as you move forward what shows up as competition maybe to ExpressMD may be a customer to you?
Benjamin O’Connell
That’s correct.
David Levine – Accredited Members Incorporated
So, did I miss understand this in a previous release, previous call, or whatever or was there a point in the past where we were actually thinking that you might actually recognize some contribution from ExpressMD in the fourth quarter?
Benjamin O’Connell
No, you probably did remember correctly. We had experienced some delays with respect to the market clearance from the FDA. We experienced some difficulties with that and further once we got going with certain customers that we were working with we found ourselves having to work to clear up the reimbursement policy and codes and things of that nature with our customers. Those things are largely taken care of and they continue to evolve as I said earlier as the healthcare discussion moves further along that occupies a significant piece of the discussion.
But, what we’ve done with customers that we’re working with right now is we have gotten those problems worked out. Another difficulty we had was largely once you work out the reimbursement codes and customers got to understand how the device works, they immediately brought different illnesses or different types of patients that they wanted to be served by the box. It made sense, it meant interconnection to different types of peripherals. Some of those peripherals for example a chest [inaudible] that goes around a CHF’s patient chest or body, that is a very expensive peripheral device and so we would not package that with our ExpressMD solution. That has to be bought under exceptions.
So, we had to go in to the insurance and be certain that could be bought that way and so we could build the compatible software on our box that would interface with such devices and know how we can sell it to our customers. So, we encountered some delays David but our belief is we will still have some contribution before the current year is up but it’s delayed from where we expected it, it’s definitely delayed.
David Levine – Accredited Members Incorporated
It’s not likely we’ll see contribution in the first quarter then anyway?
Benjamin O’Connell
Yes, that’s true.
David Levine – Accredited Members Incorporated
Bill you threw around a couple of numbers with respect to the joint venture and I assume you’re talking about ExpressMD and I’m wondering were those numbers just things that were expensed or is there some place on the balance sheet where those investments ended up?
William A. Marshall
No, the $392,000 that I talked about was expensed in 2009. The $143,000 number from the prior year was expensed so while we will recover those under our agreements, those have been expensed and we’ll bring them back through income when we recover them. The $700,000 of investment in joint venture inventory is sitting in other assets.
David Levine – Accredited Members Incorporated
That portion of it is on the balance sheet I guess then?
William A. Marshall
Right.
David Levine – Accredited Members Incorporated
With respect to the recouping of those other costs, the expense side of it is that something kind of preferential in the agreement or is that just something that’s part of the contribution?
William A. Marshall
That’s in the agreement.
David Levine – Accredited Members Incorporated
I’m assuming that going forward your share of whatever happens in ExpressMD roughly is going to be half of it?
William A. Marshall
Right. Once we recover those expenses then everything would be 50/50. However, to the extent that we’ve also paid inventory costs we would recoup those 100%.
Operator
Your next question comes from Ankit Gupta – Private Investor.
Ankit Gupta – Private Investor
I wanted to know with ExpressMD how are those trials going exactly? Does it seem like we’re going to need a revision for a year or two on the hardware or is that mostly ready for sales?
Benjamin O’Connell
What we’re doing is we’re rolling out the product and we’re trying to take a look see and see what are the problems that could develop. Our experience thus far has been good. We don’t see a need to change the hardware in a very soon timeframe because the hardware is really state of the art hardware. What will evolve is the treatment regiments. As I said, what we’re finding out is willingness of the healthcare practitioners to treat patient’s diseases that we weren’t at first anticipating.
So, what we find ourselves doing is having to change the software so that we can deal with the protocols of different kinds of interface peripherals. That software could easily be done and be easily updated. Our architecture anticipated that so we’ll always be updating the software, I don’t anticipate a major change of the hardware for quite some time.
Operator
Your next question comes from [Dan Gromey] – Private Investor.
[Dan Gromey] – Private Investor
I just wanted to talk to you about the announcement you made yesterday afternoon regarding the standby commitment with this accredited investor. When I read standby I kind of think of the word insurance, is this really an insurance policy that if for whatever reason you need the $3 million you have the opportunity to get it quickly done but for the most part it’s just standing on the outside waiting to happen but really no intent upfront to happen? Is that a good read on that announcement or am I off the mark?
William A. Marshall
I think that we put it in place in case we needed it. As I mentioned on the call, we’ve invested significant amounts in the joint venture that we expect to recover, we may continue to invest amounts in the joint venture and there come a time where we needed to have additional cash resources so we felt it was a good time to put something in place.
[Dan Gromey] – Private Investor
One other quick question, this is kind of a broad based question but I don’t know how big the sales force is out there trying to beat down these potential customers but, are you finding situations where customers are coming to you based on the information they’re reading in a trade rag or the reputation that Authentidate is getting in the marketplace? Do you see any of that happening or is it all going out and beating down the door trying to drum up new business?
William A. Marshall
I guess we have three different market segments, the intelligent workflows, we market the suppliers and the home health agencies. Then, we have the hospital sector and we have the Telehealth sector that kind of crosses over a lot of these. So, it’s a little bit of everything. We have a direct sales force, we have some distributors and we are starting to see more viral marketing if you will, coming to us and the web helping us out.
Operator
There are no further questions at this time. I’ll turn the call back over to management for any closing remarks.
Benjamin O’Connell
I would like to thank you all for joining us today. I would like to also communicate to those of you who are here and those of you anticipating in our company as shareholders that we’re taking care of your assets here, we’re working hard and we expect to add significant value in the coming months so please listen out for us. We’re energized and excited about the opportunity to work for you. Thank you very much for joining us and we look forward to talking to you a few months down the road.
Operator
Thank you all for participating in today’s conference call. You may now disconnect.
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