885074--9/13/2006--AUTHENTIDATE_HOLDING

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Risks Related to Our Business Failure to increase our revenue and keep our expenses consistent with revenues could prevent us from achieving and maintaining profitability. Our capital requirements are significant and we have historically financed our operations through private placements of securities. If the United States Postal Service cancels our agreement, we will need to incur additional costs in our efforts to successfully commercialize this technology. We rely to a certain extent on our products compatibility with Microsoft Corporation s products for the development of a market for the USPS EPM. We have been named as a party to several class action and derivative action lawsuits, and we may be named in additional litigation, all of which could require significant management time and attention and result in significant legal expenses. An unfavorable outcome in one or more of these lawsuits could have a material adverse effect on our business, financial condition, results of operations and cash flows. Our success is dependent on the performance and integration of our new management and the cooperation, performance and retention of our executive officers and key employees. If we lose key personnel or fail to integrate replacement personnel successfully, our ability to manage our business could be impaired. Our reported financial results could be adversely affected by changes in financial accounting standards or by the application of existing or future accounting standards to our business as it evolves. For example, accounting for employee stock options under FAS 123R has had a material impact on our consolidated results of operations and earnings per share. If the carrying value of our long-lived assets is not recoverable, an impairment loss must be recognized which would adversely affect our financial results. We have incurred significant additional costs concerning our international operations and may incur additional costs in the future. Developing and implementing new or updated products and services may take longer and cost more than expected. New or updated products and services will not become profitable unless they achieve sufficient levels of market acceptance, which may require significant efforts and costs. We do not have patents on all the technology we use, which could harm our competitive position. Because we derive a majority of our license revenues from sales of a few products, any decline in demand for these products could severely harm our ability to generate revenues. Some of our products and solutions have long and unpredictable sales cycles, which may impact our quarterly operating results. The failure to properly manage our growth could cause our business to lose money. Our software products and web site may be subject to intentional disruption. Performance problems with our systems or system failures could cause us to lose business or incur liabilities. Our security software products and solutions may not be accepted by the market, which would seriously harm our business. If we cannot continuously enhance our products in response to rapid changes in the market, our business will be harmed. If our products are not competitive, our business will suffer. Our software products are complex and are operated in a wide variety of computer configurations, which could result in errors or product failures. We depend on others for components of our products, which may result in delays and quality-control issues. We have a significant amount of net operating loss carryforwards which we may not be able to utilize in certain circumstances. Risks Related to Our Common Stock Our stock price is volatile and could decline. Since we have not paid dividends on our common stock, you may not receive income from this investment. The exercise of our outstanding options and warrants, or conversion of our outstanding shares of Series B Preferred Stock, may depress our stock price. We have sold restricted shares which may depress our stock price when they are sellable under Rule 144.

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885074--9/13/2006--AUTHENTIDATE_HOLDING_CORP