AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON JUNE _____, 2000
REGISTRATION STATEMENT NO.
================================================================================
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------
FORM S-3
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
------------------
ADATOM.COM, INC.
(Exact name of Registrant as specified in its charter)
DELAWARE 43-1771999
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification Number)
920 HILLVIEW COURT RICHARD S. BARTON
SUITE 160 CHAIRMAN
MILPITAS, CA 95035 ADATOM.COM, INC.
(408) 935-7979 920 HILLVIEW COURT
(Address, including zip code, SUITE 160
and telephone number, including area MILPITAS, CA 95035
code, of registrant's principal (408) 935-7979
executive offices) (Name, address, including zip code,
and telephone number, including
area code, of agent for service)
------------------
WITH COPIES TO:
Henry D. Evans, Esq.
McCutchen, Doyle, Brown & Enersen, LLP
Three Embarcadero Center
San Francisco, California 94111
(415) 393-2503
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: AS
SOON AS PRACTICABLE AFTER THE EFFECTIVE DATE OF THIS REGISTRATION STATEMENT.
If the only securities being registered on this form are being offered
pursuant to dividend or interest reinvestment plans, please check the following
box. [ ]
If any of the securities being registered on this Form are to be
offered on a delayed or continuous basis pursuant to Rule 415 under the
Securities Act of 1933, as amended ("the Securities Act") check the following
box: [X]
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following box
and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering: [ ]
If this Form is a post-effective amendment filed pursuant to Rule
462(c) under the Securities Act, check the following box and list the Securities
Act registration statement number of the earlier effective registration
statement for the same offering: [ ]
If delivery of the prospectus is expected to be made pursuant to Rule
434, please check the following box: [ ]
-----------------
<TABLE>
<CAPTION>
CALCULATION OF REGISTRATION FEE
===================================================================================================================================
TITLE OF SECURITIES AMOUNT TO PROPOSED MAXIMUM PROPOSED MAXIMUM AGGREGATE AMOUNT OF
TO BE REGISTERED BE REGISTERED OFFERING PRICE(1) OFFERING PRICE (1) REGISTRATION FEE
-----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Common Stock, $.01 par value ...... 2,502,500 shares(2) $1.54 $3,853,850 $1,017.42
====================================================================================================================================
<PAGE>
__________________
(1) Estimated solely for purposes of calculating the registration fee,
based upon the average of the high and low sales prices of the
common stock on the Nasdaq Small Cap Market on June 29, 2000,
pursuant to Rule 457(c) under the Securities Act.
(2) Includes 1,100,000 shares issuable upon conversion of the
registrant's Series A Convertible Preferred Stock, assuming a
conversion price of $1.00 per common share, and 1,402,500 shares
issuable upon exercise of outstanding warrants held by selling
securityholders.
</TABLE>
THIS REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR DATES
AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL FILE
A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION STATEMENT
SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) OF THE
SECURITIES ACT OF 1933, OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(A),
MAY DETERMINE.
================================================================================
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<PAGE>
Subject to Completion, Dated June _____, 2000
PRELIMINARY PROSPECTUS
2,502,500 SHARES
ADATOM.COM, INC.
COMMON STOCK
_________________
The securityholders of Adatom.com, Inc. listed in this prospectus are
offering an aggregate of 1,100,000 shares of the common stock of the Company
issuable upon conversion of outstanding shares of the Company's Series A
Convertible Preferred Stock ("Preferred Stock") held by four of the
securityholders listed in this prospectus and an aggregate of 1,402,500 shares
of the common stock of the Company issuable upon exercise of outstanding
warrants held by the four holders of Preferred Stock and by three additional
securityholders listed in this prospectus.
The Preferred Stock and the warrants were sold to the selling
securityholders in transactions exempt from registration under the Securities
Act. Adatom.com, Inc. will not receive any of the proceeds from the sale of the
common stock offered hereby although it will receive the proceeds of sales of
common stock upon exercise of the warrants (except to the extent warrants are
exercised on a net exercise basis).
The shares of common stock being offered by the selling securityholders
may be sold from time to time in transactions on the Nasdaq SmallCap Market, in
the over-the-counter market or in negotiated transactions. The selling
securityholders directly, or through agents or dealers designated from time to
time, may sell the common stock offered by them at fixed prices, at prevailing
market prices at the time of sale, at varying prices determined at the time of
sale or at negotiated prices.
Adatom.com, Inc.'s common stock is listed on the Nasdaq SmallCap Market
under the symbol "ADTM." On June 29, 2000, the last reported sale price of the
common stock on the Nasdaq SmallCap Market was $1.50 per share.
INFORMATION CONTAINED IN THIS PROSPECTUS IS SUBJECT TO COMPLETION OR AMENDMENT.
A REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR MAY
OFFERS TO BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT BECOMES
EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR THE
SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE SECURITIES
IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE UNLAWFUL PRIOR
TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS OF ANY STATE.
________________
INVESTING IN THE COMMON STOCK INVOLVES RISKS.
SEE "RISK FACTORS" BEGINNING ON PAGE 6.
________________
The Securities and Exchange Commission and state securities regulators have not
approved or disapproved these securities, or determined if this prospectus is
truthful or complete. Any representation to the contrary is a criminal offense.
________________
June ____, 2000
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TABLE OF CONTENTS
PAGE
Special Note Regarding Forward-Looking Statements....................... 2
Where You Can Find More Information About Us............................ 3
Our Company............................................................. 5
Risk Factors............................................................ 6
Use of Proceeds......................................................... 15
Selling Securityholders................................................. 16
Plan of Distribution.................................................... 19
Indemnification......................................................... 19
Legal Matters........................................................... 19
Experts................................................................. 19
________________
In this prospectus, "Adatom," the "company," "we," "us,"
and "our" refer to Adatom.com, Inc.
________________
You should rely only on the information contained in this prospectus.
We have not authorized anyone to provide you with information different from
that contained in this prospectus. We are offering to sell, and seeking offers
to buy, shares of common stock only in jurisdictions where offers and sales are
permitted. The information contained in this prospectus is accurate only as of
the date of this prospectus.
________________
SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS
Some of the statements under "Our Company," "Risk Factors" and
elsewhere in this prospectus constitute forward-looking statements. These
statements involve known and unknown risks, uncertainties, and other factors
that may cause our or our industry's actual results, levels of activity,
performance, or achievements to be materially different from any future results,
levels of activity, performance, or achievements expressed or implied by such
forward-looking statements. Such factors include, among others, those listed
under "Risk Factors" and elsewhere in this prospectus.
In some cases, you can identify forward-looking statements by
terminology such as "may," "will," "should," "expects," "plans," "anticipates,"
"believes," "estimates," "predicts," "potential," or "continue" or the negative
of such terms or other comparable terminology.
Although we believe that the expectations reflected in the
forward-looking statements are reasonable, we cannot guarantee future results,
levels of activity, performance, or achievements.
Moreover, neither we nor any other person assumes responsibility for
the accuracy and completeness of such statements. We undertake no obligation to
update or revise any of the forward-looking statements, whether as a result of
new information, future events or otherwise. In light of these risks,
uncertainties and assumptions, the forward-looking events discussed herein may
not occur.
WHERE YOU CAN FIND MORE INFORMATION ABOUT US
We file annual, quarterly and special reports, proxy statements and
other information with the Securities and Exchange Commission. You may read and
copy any document we file with the Commission at the Public Reference Room at
the Commission, at Room 1024, Judiciary Plaza, 450 Fifth Street, N.W.,
Washington, D.C. 20549. Please call 1-800-SEC-0330 for further information
concerning the Public Reference Room. The Commission also makes these documents
and other information available on its web site at http://www.sec.gov.
We have filed with the Commission a registration statement on Form S-3
under the Securities Act of 1933, as amended, relating to the common stock
offered by this prospectus. This prospectus constitutes a part of the
registration statement but does not contain all of the information set forth in
the registration statement and its exhibits. For further information, we refer
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you to the registration statement and its exhibits.
The Commission allows us to "incorporate by reference" the information
we file with it, which means that we can disclose important information to you
by referring you to another document we have filed with the Commission. The
information incorporated by reference is an important part of this prospectus
and information that we file later with the Commission will automatically update
and supersede this information. We incorporate by reference the following:
o The description of common stock contained in the Registration
Statement on Form 8-A filed with the Commission on August 5, 1997;
o Annual Report on Form 10-KSB for the fiscal year ended December 31,
1999 filed with the Commission on March 30, 2000;
o The Proxy Statement for the Annual Meeting of Stockholders to be
held on May 25, 2000 filed with the Commission on April 28, 2000;
o The Information Statement dated January 6, 2000;
o The Quarterly Report on Form 10-QSB for the quarter ended March 31,
2000 filed with the Commission on May 12, 2000;
o The Current Report on Form 8-K dated May 19, 2000
and filed with the Commission on June 30, 2000;
o Any future filings we make with the Commission until the selling
securityholders sell all of the common stock offered by them
pursuant to this prospectus.
You may request a copy of these filings, at no cost, by writing or
telephoning us at the following address or telephone number:
Adatom.com, Inc.
920 Hillview Court, Suite 160
Milpitas, CA 95035
(telephone no. 408-935-7979)
Attention: Michael M. Wheeler, Controller
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OUR COMPANY
________________
Adatom was established in October 1995 as MegaVision L.L.C., a Missouri
limited liability company ("MegaVision"). In February 1997, MegaVision merged
into HealthCore Medical Solutions, Inc., a Delaware corporation ("HealthCore").
In October 1999, Adatom, Inc., a California corporation which was established in
October 1996, merged into HealthCore, with HealthCore surviving under the name
"Adatom.com, Inc." Since the stockholders of Adatom, Inc. owned 76.4% of the
surviving company after the merger, the merger has been accounted for as a
reverse acquisition, whereby Adatom, Inc. acquired HealthCore. Our executive
offices are located at 920 Hillview Court, Suite 160, Milpitas, CA 95035
(telephone no. (408) 935-7979).
Adatom, Inc. was incorporated in 1996 by four people. Two of the
founders were Richard S. Barton and Sridhar Jagannathan, who are two of our
directors and officers. Adatom, Inc. commenced business in 1997 as a retailer,
which had no store sites and used a mobile sales force of franchisees enabled
with a CD-ROM electronic catalogue. The total revenues from our mobile sales
force were not significant and not profitable. We discontinued this form of
retailing and launched our Internet website, WWW.ADATOM.COM, in October 1998.
Since we shifted our focus to Internet e-commerce, Adatom.com has been
continuously attempting to maximize the convenience of on-line shopping by
incorporating selection, convenience, value, guarantee, warranty, security and
customer service onto the web. By leveraging our proprietary e-commerce
infrastructure and efficient distribution system, we reach both the
business-to-consumer and business-to-business markets. In addition to owning and
operating an Internet superstore, we have developed and implemented a turnkey
e-commerce solution that will provide individuals, companies, and organizations
with "instant" e-commerce capabilities, including back-end fulfillment, web site
development and a full-scale e-commerce infrastructure. We believe that our cost
efficient business model will allow us to pass value on to consumers in the form
of increased customer service and price savings. We provide a comprehensive
product mix of name brand products for the individual, the home, and the office
in 29 product categories. We provide access through our Internet store to over 3
million Stock Keeping Units (SKUs) offered for sale. Products offered are not
limited solely to those products posted on the www.adatom.com site but can also
be sourced from virtually any manufacture or supplier.
RECENT DEVELOPMENTS
We are dependent upon raising additional capital to finance our current
operations and future plans for expansion. In March 2000, we consummated a
private placement of 2,000,000 shares of our common stock yielding gross
proceeds of $4 million. In June, we consummated a private placement of 1,100
shares of Preferred Stock yielding gross proceeds of $1.1 million. The net
proceeds of these two offerings was approximately $4,950,000. The remaining
proceeds of this capital will be exhausted within approximately one month.
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RISK FACTORS
You should carefully consider the risks described below before making
an investment decision. The risks described below are not the only ones facing
our company. Additional risks not presently, known to us or that we currently
deem immaterial may also impair our business operations.
Our business, financial condition or results of operations could be
materially adversely affected by any of these risks. The trading price of our
common stock could decline due to any of these risks and you may lose all or
part of your investment.
This prospectus also contains forward-looking statements that involve
risks and uncertainties. Our actual results could differ materially from those
anticipated in these forward-looking statements as a result of certain factors,
including the risks faced by us described below and elsewhere in the prospectus.
Forward-looking statements are not guarantees of performance. They involve
risks, uncertainties and assumptions. The future results and stockholder values
of the company may differ materially from those expressed in these
forward-looking statements. Many of the factors that will determine these
results and values are beyond our ability to control or predict. Stockholders
are cautioned not to put undue reliance on any forward-looking statements. In
addition, the Company does not have any intention or obligation to update
forward-looking statements, even if new information, future events or other
circumstances have made them incorrect or misleading. For those statements, the
Company is relying on the protection of the safe harbor for forward-looking
statements contained in the Private Securities Litigation Reform Act of 1995.
You should understand that the following important factors could affect the
future results of the company, and could cause results to differ materially from
those expressed in such forward-looking statements.
WE HAVE A HISTORY OF LOSSES AND EXPECT CONTINUED LOSSES FOR THE FORESEEABLE
FUTURE.
Adatom, Inc was incorporated in October 1996 but did not begin to
generate any Internet revenues until October 1998. Accordingly, we have had only
a limited operating history upon which to evaluate our business and prospects.
We will encounter risks and difficulties that are frequently encountered by
early stage companies in new and rapidly evolving markets. Many of these risks
are described in more detail in this section. If we are unsuccessful in
addressing these risks and uncertainties, our business, results of operations
and financial condition will be harmed. We have incurred significant losses, and
as of December 31 1999, had an approximate accumulated deficit of $14.7 million.
We incurred net losses of approximately $12.7 million for the year ended
December 31, 1999 and approximately $1.2 million for the year ended December 31,
1998. The Company incurred net losses of $2,169,000 for the quarter ended
March 31, 2000 and $398,000 for the quarter ended March 31, 1999. As of March
31, 2000, the Company had an approximate accumulated deficit of $16,821,000.
There is an uncertainty about its ability to continue as a going concern. We
anticipate our losses will increase from current levels because we intend to
substantially increase our costs and expenses related to:
o brand development, marketing and other promotional activities to
increase our revenue;
o the expansion of our inventory management and order fulfillment
infrastructure;
o the continued development of our Web site, transaction-processing
systems and network infrastructure;
o the expansion of our product offerings and Web site content; and
o strategic relationship development.
Our ability to become profitable depends on our ability to generate and
sustain substantially higher net sales while maintaining reasonable expense
levels. If we do achieve profitability, we cannot be certain that we would be
able to sustain or increase profitability on a quarterly or annual basis in the
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future. We are an early stage company and expect to incur substantial operating
losses for the foreseeable future as we incur significant operating expenses and
research and development expenses and make investments, to enhance our line of
products and services and establish Internet capabilities. We may never generate
sufficient revenues to achieve profitability. Even if we do achieve
profitability, we may not be able to sustain or increase profitability on a
quarterly or annual basis in the future.
WE WILL NEED ADDITIONAL FINANCING TO FUND OUR BUSINESS AND THE FAILURE TO OBTAIN
FINANCING WOULD MOST LIKELY RESULT IN CESSATION OF OUR BUSINESS.
We are dependent upon raising additional capital for working capital and
to finance our future plans for expansion. Based on current market conditions as
of June 29, 2000, we currently have on hand working capital to sustain our
business for approximately one month. We further estimate that we will require a
minimum of $6,000,000 to adequately implement our business plan and sustain and
expand our sales and marketing activities through December 31, 2000. We have
experienced negative cash flow from operations from our inception and expect to
experience significant negative cash flow from operations for the foreseeable
future. We need additional funds to sustain and expand our sales and marketing
activities and our marketing arrangements, particularly if there is a shift in
the type of Internet services that are developed and ultimately receive customer
acceptance. Adequate funds for these and other purposes on terms acceptable to
us, whether through additional equity financing, debt financing or other
sources, may not be available when needed or may result in significant dilution
to existing stockholders.
Failure to obtain financing would most likely result in cessation of
our business. Our lack of tangible assets to pledge has to date prevented us
from obtaining bank or similar debt financing, and will probably continue to do
so in the future. In their reports on the audits of our financial statements for
each of the years in the two-year period ended December 31, 1999, our
independent auditors included an explanatory paragraph in each of their reports
because of the uncertainty that we could continue in business as a going
concern. Any raise of additional capital will dilute all of our stockholders.
OUR COMMON STOCK PRICE MAY BE VOLATILE.
The market price for our Common Stock is likely to be highly volatile
and subject to wide fluctuations in response to factors including the following:
o actual or anticipated variations in our quarterly operating
results;
o announcements of technological innovations or new products or
services by us or our competitors;
o changes in financial estimates by securities analysts;
o conditions or trends in the Internet and/or online commerce
industries;
o changes in the economic performance and/or market valuations of
other Internet, online commerce or retail companies;
o announcements by us or our competitors of significant acquisitions,
strategic partnerships, joint ventures or capital commitments;
o additions or departures of key personnel;
o sales of additional Common Stock;
o potential litigation.
The market prices of the securities of Internet-related and online
commerce companies have been especially volatile. Broad market and industry
factors may adversely affect the market price of our Common Stock, regardless of
our actual operating performance. In the past, following periods of volatility
in the market price of their stock, many companies have been the subject of
securities class action litigation. If we were sued in a securities class
action, we could incur substantial costs and a diversion of management's
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attention and resources and would adversely affect our stock price.
IF WE CANNOT SATISFY NASDAQ'S MAINTENANCE REQUIREMENTS, IT MAY DELIST OUR COMMON
STOCK FROM ITS SMALLCAP MARKET AND WE MAY NOT HAVE AN ACTIVE PUBLIC MARKET FOR
OUR COMMON STOCK. THE ABSENCE OF AN ACTIVE TRADING MARKET WOULD LIKELY MAKE THE
COMMON STOCK AN ILLIQUID INVESTMENT.
Our common stock is quoted on the Nasdaq SmallCap Market. To continue
to be listed, we are required to maintain net tangible assets of $2,000,000
or a market capitalization of $35 million and our common stock must maintain a
minimum bid price of $1.00 per share. We may not be able to continue to satisfy
those requirements. If this occurs, trading in the common stock would be
conducted in the over-the-counter market in the so-called "pink sheets" or, if
available, the "OTC Bulletin Board Service." As a result, an investor would
likely find it significantly more difficult to dispose of, or to obtain accurate
quotations as to the value of, our shares.
The conversion of our convertible preferred stock may have consequences
that could cause Nasdaq to delist our common stock. The conversion of our
preferred stock and resale of the common stock acquired upon conversion, or the
possibility of the conversion of our preferred stock and resale of our common
stock, may depress or inhibit increases in the market price of our common stock.
As a result, the minimum bid price for our common stock may decline below $1.00.
Nasdaq also may delist our common stock if it deems it necessary to protect
investors and the public interest. If Nasdaq determines that the returns on our
convertible preferred stock are excessive compared with the returns received by
the holders of our common stock, and those excess returns were egregious, Nasdaq
could delist our common stock.
IF OUR COMMON STOCK IS DELISTED, IT MAY BECOME SUBJECT TO THE SEC'S "PENNY
STOCK" RULES AND MORE DIFFICULT TO SELL.
SEC rules require brokers to provide information to purchasers of
securities traded at less than $5.00 and not traded on a national securities
exchange or quoted on the Nasdaq Stock Market. If our common stock becomes a
"penny stock" that is not exempt from these SEC rules, these disclosure
requirements may have the effect of reducing trading activity in our common
stock and making it more difficult for investors to sell. The rules require a
broker-dealer to deliver a standardized risk disclosure document prepared by the
SEC that provides information about penny stocks and the nature and level of
risks in the penny market. The broker must also give bid and offer quotations
and broker and salesperson compensation information to the customer orally or in
writing before or with the confirmation. The SEC rules also require a broker to
make a special written determination that the penny stock is a suitable
investment for the purchaser and receive the purchaser's written agreement to
the transaction before a transaction in a penny stock.
RISK OF INTERNATIONAL EXPANSION.
We plan to expand our presence in foreign markets especially China. We
have relatively little experience in purchasing, marketing and distributing
products or services for these markets and may not benefit from any first to
market advantages. It will be costly to establish international facilities and
operations, promote our brand internationally, and develop localized Web sites
and stores and other systems. We may not succeed in our efforts in these
countries. If revenues from international activities do not offset the expense
of establishing and maintaining foreign operations, our business prospects,
financial condition and operating results will suffer. As the international
online commerce market continues to grow, competition in this market will likely
intensify.
In addition, governments in foreign jurisdictions may regulate Internet
or other online services in such areas as content, privacy, network security,
encryption or distribution. This may affect our ability to conduct business
internationally.
WE FACE RISKS AND UNCERTAINTIES WITH RESPECT TO OUR PROPOSED JOINT VENTURES IN
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CHINA.
In March 2000, Adatom signed an exclusive joint venture agreement with
the CPTNC (China Product Trade Net Center) to form a US-China marketplace. The
CPTNC was formed by the Chinese government to enable the systematic and
efficient distribution of Chinese manufactured goods. A second agreement was
signed in April 2000 between Adatom and YAHIDZ (Yangling Agricultural Hi-Tech
Industrial Demonstration Zone) to develop and implement an agricultural
electronic marketplace to source and sell agricultural farm machinery, seeds,
fertilizer, pesticides and crops. Adatom has also signed a third agreement with
ShenZhen Bay Industrial, Education and Research Center (SBIERC) to develop and
facilitate an electronic marketplace with China Hi-Tech Exchange Network and
China IT Product Purchasing Net for international e-commerce. Finally, in May
2000 the Company signed a joint venture agreement with China Federation of
Industrial Economics (CFIE) to establish and develop an electronic marketplace
for a marketing, sales and distribution system between China and the U.S. CFIE
is a national organization that oversees and coordinates all Chinese trade
associations.
Our agreements with the CPTNC, YAHIDZ, SBIERC and CFIE contemplate the
formation of joint ventures in China. We may not be successful in establishing
any of these joint ventures. We may not succeed with any of these joint ventures
or in entering the China market, and each venture will be subject to all of the
risks attendant to a start-up business as well as those specific to operating in
China. The risks attendant to a start-up business are similar to those relating
to our existing business. We will be subject to various risks relating to
operating in China, including:
o various new and unfamiliar regulatory requirements;
o the risks of being subject to a different legal system in which
prior court decisions may not have as much precedential value as
in common law countries;
o the risk of inadequate or inconsistent enforcement of intellectual
property rights;
o issues relating to currency exchange;
o fluctuations in exchange rates and restrictions on repatriation of
currency;
o the risks associated with doing business in a country with a more
volatile economy;
o the effects of possible political and economic changes and disrup-
tions;
o establishment of and change in government policies and regulations
regarding the use of the internet, including taxation, censorship
and personal privacy issues;
o tariffs and other barriers;
o difficulties in staffing and managing foreign operations.
We also face the risk of diverting management and other personnel from
our existing business to development of the joint ventures. If we are
unsuccessful in addressing these risks and uncertainties, our business, results
of operations and financial condition will be harmed.
WE DEPEND HEAVILY UPON MARKETING ARRANGEMENTS. WITHOUT THEM, OUR BUSINESS WILL
BE ADVERSELY AFFECTED.
We rely heavily on certain marketing arrangements with other companies
that have websites to attract shoppers to purchase our products. We have entered
into marketing arrangements with a number of existing organizations with a
definable user base. Our ability to generate revenues from online commerce
depends, among other things, upon the increased traffic, purchases, advertising
and sponsorships that we generate through our marketing arrangements. We cannot
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be sure that other companies will continue these relationships with us, or, if
continued that they will be on terms favorable to us. Our inability to enter
into new marketing arrangements or to maintain our existing arrangements would
have a material adverse effect on us.
WE RELY ON SUPPLIERS FOR OUR RETAIL MERCHANDISE AND SHIPMENTS TO CUSTOMERS. LOSS
OF THESE RELATIONSHIPS COULD HAVE A MATERIAL ADVERSE EFFECT ON OUR BUSINESS.
Our current suppliers may not continue to sell merchandise to us on
current terms. We may not be able to maintain our current arrangements with
suppliers or be able to establish new or extend current supplier relationships
to ensure acquisition of merchandise in a timely and efficient manner and on
acceptable commercial terms. Loss of these relationships could have a material
adverse effect on us. We also rely on most of our suppliers to process and ship
merchandise directly to customers and where required to install merchandise on
our customers premises. We have limited control over the shipping procedures of
our suppliers, and shipments by these suppliers have at times been subject to
delays. If the quality of service provided by such suppliers falls below a
satisfactory standard or if our level of returns exceeds our expectations, our
business will be materially adversely affected.
OUR FUTURE OPERATING RESULTS ARE UNPREDICTABLE AND FLUCTUATIONS IN OUR QUARTERLY
RESULTS MAY CAUSE VOLATILITY IN OUR STOCK VALUATION.
As a result of our limited operating history, it is difficult to
accurately forecast our net sales and we have limited meaningful historical
financial data upon which to base planned operating expenses. We base our
current and future expense levels on our operating plans and estimates of future
net sales, and our expenses are to a large extent fixed. Sales and operating
results are difficult to forecast because they generally depend on the volume
and timing of the orders we receive. As a result, we may be unable to adjust our
spending in a timely manner to compensate for any unexpected revenue shortfall.
We may also be unable to increase our spending and expand our operations in a
timely manner to adequately meet customer demand to the extent it exceeds our
expectations. We expect to experience significant fluctuations in our future
quarterly operating results due to a variety of factors, many of which are
outside of our control which include, without limitation:
o our ability to attract new customers at reasonable cost and at a
steady rate, retain existing customers, or encourage repeat
purchases and maintain customer satisfaction;
o decreases in the number of visitors to our Web site or our
inability to convert visitors to our Web site into customers;
o seasonality;
o our ability to manage inventory levels and to manage fulfillment
operations;
o our inability to adequately maintain, upgrade and develop our Web
site, transaction-processing systems or network infrastructure;
o the announcement or introduction of new sites, services and
products by our competitors;
o price competition in the industry;
o the level of merchandise returns experienced by us;
o the level of traffic on our web site;
o fluctuations in the amount of consumer spending;
o the termination of existing, or failure to develop new, strategic
marketing relationships pursuant to which we receive exposure to
traffic on third-party Web sites;
o increases in the cost of online or offline advertising;
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o our ability to upgrade and develop our systems and infrastructure
and attract new personnel in a timely and effective manner or
retain existing personnel;
o the amount and timing of operating costs and capital expenditures
relating to expansion of our business, operations, and infrastruc-
ture;
o unexpected increases in shipping costs or delivery times,
particularly during the holiday season;
o the level of use of the Internet and online services and
increasing consumer acceptance of the Internet and other online
services for the purchase of consumer products such as those
offered by us;
o technical difficulties, system downtime or Internet brownouts;
o changes in gross profit margins or product mix;
o effects of acquisitions and other business combinations and related
integration issues;
o failure to maintain good relationships with our business partners
and suppliers;
o government regulations related to use of the Internet for commerce;
o general economic conditions and economic conditions specific to the
Internet, online commerce.
A number of factors will cause our gross margins to fluctuate in future
periods, including the mix of product sold by us, inventory management, inbound
and outbound shipping and handling costs, the level of product returns and the
level of discount pricing and promotional activity. Any change in one or more of
these factors could materially and adversely affect our gross margins and
operating results in future periods. We expect that we will experience
seasonality in our business, reflecting a combination of seasonal fluctuations
in Internet usage and traditional retail seasonality patterns. Internet usage
and the rate of Internet growth may be expected to decline during the summer.
Further, sales in the traditional retail industry are significantly higher in
the fourth calendar quarter of each year than in the preceding three-quarters.
Due to the foregoing factors, we believe that quarter-to-quarter comparisons of
our operating results are not a good indication of our future performance.
Additionally it is likely that in one or more future quarters our operating
results may fall below the expectations of securities analysts and investors. In
such event, the trading price of our common stock would likely be materially
adversely affected.
WE MAY NOT BE ABLE TO EFFECTIVELY MANAGE THE GROWTH OF OUR BUSINESS.
Our ability to successfully offer products and services and implement our
business plan in a rapidly evolving market requires an effective planning and
management process. We continue to increase the scope of our operations and have
grown the headcount substantially. At December 31, 1998, Adatom had a total of 7
employees full and part time combined; at December 31, 1999, we had a
total of 43 employees full and part time combined; and at March 21, 2000, we had
a total of 60 employees full and part time combined. This growth has placed, and
our anticipated future operations will continue to place, a strain on our
management, information systems and resources. As a result, during 2000, we
intend to increase our headcount and to install new Enterprise Resource Planning
systems with new Accounting and Financial Reporting Systems. We anticipate
expanding our financial and management information systems to accommodate new
data. If we fail to successfully implement and integrate our new financial
reporting and management information systems with our existing systems or if we
are not able to expand these systems to accommodate our growth, we may not have
adequate, accurate or timely financial information. Our failure to have such
information would hinder our ability to manage our business and operating
results. If we grow rapidly, we will face additional challenges in upgrading and
maintaining our financial and reporting systems. A failure to successfully
implement and integrate these systems would adversely affect our business. We
expect that we
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will need to continue to improve our financial and managerial controls and
reporting systems and procedures. In addition, we will need to continue to
expand, train and manage our already growing employee base. Furthermore,
we expect that we will be required to manage multiple relationships with various
vendors and other third parties. To manage the expected growth of our operations
and personnel, we will be required to improve existing and implement new
transaction-processing, operational and financial systems, procedures and
controls. Further, we will be required to maintain and expand our relationships
with various merchandise manufacturers, distributors, Internet and other online
service providers and other third parties necessary to our business. If
we are unable to manage growth effectively, our business will be materially
adversely affected.
IF WE EXPERIENCE PROBLEMS WITH OUR THIRD PARTY SHIPPING SERVICES, WE COULD LOSE
CUSTOMERS.
We rely upon third-party carriers, primarily UPS, for product
shipments, including shipments to and from our warehouse. We are therefore
subject to the risks, including employee strikes and inclement weather
associated with these carriers' ability to provide delivery services to meet our
shipping needs. In addition, failure to deliver products to our customers in a
timely manner would damage our reputation and brand identity.
THE LOSS OF KEY PERSONNEL COULD HAVE A MATERIAL ADVERSE EFFECT ON US.
Our performance will be substantially dependent on the continued
services and on the performance of our senior management, particularly Richard
Barton, President, Chief Executive Officer, and Chairman of the Board, and
Sridhar Jagannathan, Chief Technical Officer and Executive Vice President. Two
of our senior management team joined us during the last half of 1999. They are
the Controller and the Vice President of Operations. Our future success depends
on these officers effectively working together with our original management
team. Other than the President, none of our officers or key employees is bound
by an employment agreement for any specific term. Our relationships with these
officers and key employees are at will. We do not have any "key person" life
insurance policies covering any of our employees. Our performance depends on our
ability to retain and motivate our officers and key employees. The loss of the
services of any of our executive officers or other key employees could have a
material adverse effect on us. Our future success also depends on our ability to
identify, attract, hire, train, retain and motivate other highly skilled
officers and technical, managerial, editorial, merchandising, marketing and
customer service personnel. Competition for such personnel is intense, and we
may not be able to successfully attract, assimilate or retain sufficiently
qualified personnel. This inability could have a material adverse effect on us.
WE MAY BE UNABLE TO PROTECT OUR TRADEMARKS AND PROPRIETARY RIGHTS, WHICH WOULD
HAVE A MATERIAL ADVERSE EFFECT ON OUR BUSINESS.
Our performance and ability to compete are dependent to a significant
degree on our proprietary technology. We regard our copyrighted material,
service marks, trademarks, trade secrets, and similar intellectual property as
critical to our success, and rely on trademark and copyright law, trade secret
protection and confidentiality and/or license agreements with our employees,
customers, partners and others to protect our proprietary rights. We have the
registered trademarks "Adatom" and "Discovering New Shopping Dimensions" in the
United States and have a trademark application pending for the mark "Adatom Home
Dimensions." We cannot be sure that we will be able to secure significant
protection for these trademarks. It is possible that our competitors or others
will adopt product or service names similar to "Adatom" and our other
trademarks, thereby impeding our ability to build brand identity and possibly
leading to customer confusion. We generally have entered into agreements
containing confidentiality and non-disclosure provisions with our employees and
consultants and limit access to and distribution of our software, documentation
and other proprietary information. We cannot be sure that the steps taken by us
will prevent misappropriation of our technology or that agreements entered into
for that purpose will be enforceable. Notwithstanding the precautions taken by
us, it might be possible for a third party to copy or otherwise obtain and use
our software or other proprietary information without authorization or to
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develop similar software independently. Policing unauthorized use of our
technology is difficult, particularly because the global nature of the Internet
makes it difficult to control the ultimate destination or security of software
or other data transmitted. The laws of other countries may afford us little or
no effective protection of our intellectual property. Effective trademark,
service mark, copyright and trade secret protection may not be available in
every country in which our products and services are made available online. In
the future, we may also need to file lawsuits to enforce our intellectual
property rights, protect our trade secrets, and determine the validity and scope
of the proprietary rights of others. Such litigation, whether successful or
unsuccessful, could result in substantial costs and diversion of resources,
which could have a material adverse effect on us. We also rely on a variety of
technology that is licensed from third parties, including our database and
Internet server software, which is used in our web site to perform key
functions. These third party technology licenses may not continue to be
available to us on commercially reasonable terms. Our loss of or inability to
maintain or obtain upgrades to any of these technology licenses could result in
delays in completing our proprietary software enhancements and new developments
until equivalent technology could be identified, licensed or developed and
integrated. Any such delays would have a material adverse effect on us.
PROTECTION OF DOMAIN NAME IS UNCERTAIN.
We currently hold various Web domain names relating to our brand,
including the "ADATOM.com" domain name. Governmental agencies and their
designees generally regulate the acquisition and maintenance of domain names.
For example, in the United States, the National Science Foundation has appointed
Network Solutions, Inc. as the current exclusive registrar for the ".com",
".net" and ".org" generic top-level domains. The regulation of domain names in
the United States and in foreign countries is subject to change. Such changes in
the United States are presently expected to include a transition from the
current system to a system that is controlled by a non-profit corporation and
the creation of additional top-level domains. Governing bodies may establish
additional top-level domains, appoint additional domain name registrars or
modify the requirements for holding domain names. As a result, we may be unable
to acquire or maintain relevant domain names in all countries in which we
conduct business. Furthermore, the relationship between regulations governing
domain names and laws protecting trademarks and similar proprietary rights is
unclear. Therefore, we may be unable to prevent third parties from acquiring
domain names that are similar to, infringe upon or otherwise decrease the value
of our trademarks and other proprietary rights.
WE MAY EXPERIENCE CAPACITY CONSTRAINTS DUE TO OUR RELIANCE ON INTERNALLY
DEVELOPED TRANSACTION-PROCESSING SYSTEMS.
If we suffer any system interruptions that result in the unavailability
of our store on the Internet or reduced order fulfillment capability, such
interruptions would reduce the volume of goods sold and the attractiveness of
our product offerings. We have experienced periodic system interruptions, which
we believe will continue to occur from time to time. The satisfactory
performance, reliability and availability of our store on the Internet,
transaction-processing systems and network infrastructure are critical to our
reputation and our ability to attract and retain customers and maintain adequate
customer service levels. Our revenues depend on the number of visitors who shop
at our store on the Internet and the volume of orders we fulfill. There will be
a significant need to upgrade the capacity of our store on the Internet in order
to handle thousands of simultaneous shoppers. Our inability to add additional
software and hardware or to develop and upgrade further our existing technology,
transaction-processing systems or network infrastructure to accommodate
increased traffic on our store on the Internet or increased sales volume through
our transaction-processing systems may cause unanticipated system disruptions,
slower response times, degradation in levels of customer service and impaired
quality and speed of order fulfillment, any of which could have a material
adverse effect on us.
OUR BUSINESS MAY SUFFER IF OUR SYSTEMS FAIL OR IF THE SYSTEMS OF OUR BUSINESS
PARTNERS FAIL.
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We presently have limited redundant systems. We do not have a complete
disaster recovery plan and carry limited business interruption insurance to
compensate us for losses that may occur. Despite our implementation of network
security measures, our servers are vulnerable to computer viruses, physical or
electronic break-ins and similar disruptions, which could lead to interruptions,
delays, loss of data or the inability to accept and fulfill customer orders. Our
ability to successfully receive and fulfill orders and provide high-quality
customer service largely depends on the efficient and uninterrupted operation of
our computer and communications hardware systems. Our systems and operations are
vulnerable to damage or interruption from fire, flood, power loss,
telecommunications failure, break-ins, earthquake and similar events. In
addition, any disruptions of those web sites or at the web sites of other
companies where we market goods or have a website link could have a material
adverse effect on us and the volume of sales generated. The occurrence of any of
the foregoing risks could have a material adverse effect on us.
IF WE ARE NOT ABLE TO SUSTAIN RAPID TECHNOLOGICAL CHANGES, OUR BUSINESS MAY
SUFFER.
We may not successfully use new technologies effectively or adapt our
proprietary technology and transaction-processing systems to customer
requirements or emerging industry standards. Our failure to adapt in a timely
manner for technical, legal, financial or other reasons, to changing market
conditions or customer requirements, could have a material adverse effect on us.
To remain competitive, we must continue to enhance and improve the
responsiveness, functionality and features of our online stores. The Internet
and the online commerce industry are characterized by rapid technological
change, changes in user and customer requirements and preferences, frequent new
product and service introductions embodying new technologies and the emergence
of new industry standards and practices that could render our existing store on
the Internet and proprietary technology and systems obsolete. Our success will
depend, in part, on our ability to license leading technologies useful in our
business, enhance our existing services, develop new services and technology
that address the increasingly sophisticated and varied needs of our prospective
customers, and respond to technological advances and emerging industry standards
and practices on a cost-effective and timely basis.
YEAR 2000 UPDATE.
Through the first six months of the calendar year 2000, we have not
experienced any significant problems associated with the Year 2000 issue.
Although it appears that the Year 2000 issue will not have a significant adverse
affect on us, we continue to monitor the Year 2000 compliance of our internal
systems. Undetected errors in our internal systems that may be discovered in the
future could have a material adverse affect on our business, operating results
or financial condition.
OUR BUSINESS STRATEGY REQUIRES CONTINUED GROWTH OF ONLINE COMMERCE. IF ON-LINE
COMMERCE DOES NOT CONTINUE TO GROW, OUR BUSINESS COULD BE MATERIALLY ADVERSELY
AFFECTED.
Our future revenues and any future profits are substantially dependent
upon the widespread acceptance and use of the Internet and online services as a
significant medium of commerce by consumers. Rapid growth in the use of and
interest in the Internet and online services is a recent phenomenon, and we can
not be sure that acceptance and use will continue to develop or that a
sufficiently broad base of consumers will adopt, and continue to use, the
Internet and online services as a medium of commerce. We rely on consumers who
have historically used traditional means of commerce to purchase merchandise.
For us to be successful, these consumers must accept and utilize novel ways of
conducting business and exchanging information. Moreover, critical issues
concerning the commercial use of the Internet, such as ease of access, security,
privacy, reliability, cost and quality of service, remain unresolved and may
affect the growth of Internet use or the attractiveness of conducting commerce
online. In addition, the Internet and online services may not be accepted as a
viable commercial marketplace for reasons relating to the adequacy of
technology. To the extent that the Internet and online services continue to
experience significant growth, we can not be sure that the infrastructure of the
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Internet and online services will prove adequate to support increased user
demands. Difficulties with the telecommunications used to support the Internet
or online services also could result in slower response times and adversely
affect usage of the Internet.
OUR MARKETS ARE HIGHLY COMPETITIVE.
The online commerce market is new, rapidly evolving and intensely
competitive. We expect competition to intensify in the future. Barriers to entry
are minimal, and current and new competitors can launch new Web sites at a
relatively low cost. We currently or potentially compete with a variety of other
companies, including:
o major "brick and mortar" retailers such as Macys, J.C. Penney's,
Nordstrom's, and Target;
o online efforts of these traditional retailers, including the online
stores operated by Macy, J. C. Penny, Toys R Us, and Wal-Mart:
o catalog retailers;
o vendors or manufacturers that currently sell certain of their
products directly online, such as Mattel;
o other online retailers such as Amazon.com, Taydo.com, Furniture.
com, CDnow, Beyond.com and Reel.com;
o on line stores that have a presence on Internet portals and online
service providers that feature shopping services, such as AOL,
Yahoo!, Excite and Lycos;
o various online retailers.
Many of our current and potential traditional store-based and online
competitors have longer operating histories, larger customer or user bases,
greater brand recognition and significantly greater financial, marketing and
other resources than us. Many of these current and potential competitors can
devote substantially more resources to Web site and systems development than we
can. In addition, online retailers may be acquired by, receive investments from
or enter into other commercial relationships with larger, well-established and
well-financed companies as use of the Internet and other online services
increases. Many of our competitors may be able to secure merchandise from
manufacturers on more favorable terms, fulfill customer orders more efficiently
and adopt more aggressive pricing or inventory availability policies, and devote
greater resources to marketing than we can. Traditional store-based retailers
also enable customers to see and feel products in a manner that is not possible
over the Internet. Our online competitors are able to use the Internet as a
marketing medium to reach significant numbers of potential customers. Finally,
new technologies and the expansion of existing technologies, such as price
comparison programs that select specific titles from a variety of Web sites may
direct customers to other online retailers, and may increase competition.
Increased competition may result in reduced operating margins, loss of market
share and a diminished brand franchise. New technologies and the expansion of
existing technologies may increase the competitive pressures on us.
WE MAY ENTER NEW BUSINESS CATEGORIES.
We may choose to expand our operations by developing new departments or
product categories, promoting new or complementary products or sales formats,
expanding the breadth and depth of products and services offered or expanding
our market presence through relationships with third parties. In addition, we
may pursue the acquisition of new or complementary businesses, products or
technologies. We may not be successful in our efforts to expand our operations,
and potential customers may not react favorably to these efforts. Furthermore,
any new department or product category that is launched by us but not favorably
received by consumers could damage our brand or reputation. An expansion of our
business in this manner would also require significant additional expenses,
expose us to additional inventory risk and development, operations and editorial
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resources and would strain our management, financial and operational resources
and subject us to increased inventory risk.
WE FACE FULFILLMENT OPERATIONS RISKS.
Our success depends on our ability to rapidly scale our fulfillment
operations in order to accommodate a significant increase in customer orders.
Our current fulfillment operations are not adequate to accommodate significant
increases in customer demand that may occur during the fourth calendar quarter
of 2000. We must also be able to rapidly scale our fulfillment operations and
information systems to accommodate significant increases in demand, which may
require us to automate tasks that are currently performed manually. If we do not
successfully scale our fulfillment operations to accommodate demand generally
and, in particular, increased demand during the fourth calendar quarter of each
year, due to the seasonal nature of our business, our business will be adversely
affected.
OUR BUSINESS MAY BE MATERIALLY ADVERSELY AFFECTED IF THE SECURITY MEASURES WE
HAVE IMPLEMENTED TO PROTECT CONFIDENTIAL INFORMATION PROVE TO BE INADEQUATE.
Advances in computer capabilities, new discoveries in the field of
cryptography, or other developments may result in a compromise or breach of the
algorithms used by us to protect customer transaction data. Any compromise of
our security could have a material adverse effect on our reputation and us. We
rely on encryption and authentication technology licensed from third parties to
provide the security and authentication necessary to effect secure transmission
of confidential information, such as customer credit card numbers. A party who
is able to circumvent our security measures could misappropriate proprietary
information or cause interruptions in our operations. Furthermore, our servers
may be vulnerable to computer viruses, physical or electronic break-ins and
similar disruptions. We may be required to expend significant additional capital
and other resources to protect against such security breaches or to alleviate
problems caused by such breaches. Our business may be adversely affected if our
security measures do not prevent security breaches and we cannot assure that we
can prevent all security breaches.
CREDIT CARD FRAUD.
During 1999 we suffered losses of less than $4,000 as a result of
orders placed with fraudulent credit card data even though the associated
financial institution approved payment of the orders. From January through May
2000, fraudulent orders approximated $8,000. Under current credit card
practices, a merchant is liable for fraudulent credit card transactions where,
as is the case with the transactions we process, that merchant does not obtain a
cardholder's signature. A failure to adequately control fraudulent credit card
transactions would adversely affect our business.
GROWING CONCERNS ABOUT THE USE OF "COOKIES" AND DATA COLLECTION MAY LIMIT OUR
ABILITY TO DEVELOP USER PROFILES.
Our current technology uses small files of information, commonly known
as "cookies", on a user's hard drive to collect information about our customers'
movements through our Website. Most Internet browsers allow users to modify
their browsers settings to prevent cookies from being stored on their hard
drive, and small minorities of users are currently choosing to do so. Users can
also delete cookies from their hard drive at any time. Some Internet
commentators and privacy advocates have suggested limiting or eliminating the
use of cookies. The reduction or limitation in the use of cookies could:
o reduce the effectiveness of our technology to gather data on our
customers;
o require us to switch to other potentially less effective technology
in order to gather demographic or behavioral information; and
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o require us to expend financial and technological resources,
originally allocated to other purposes, to create alternatives
that might be unsuccessful.
WE MAY BECOME SUBJECT TO BURDENSOME GOVERNMENT REGULATION.
Due to the increasing popularity and use of the Internet and other
online services, it is possible that a number of laws and regulations may be
adopted with respect to the Internet covering issues such as user privacy,
pricing, content, copyrights, distribution and quality of products and services.
We are not currently subject to regulation by any domestic or foreign
governmental agency, other than regulations applicable to businesses generally,
and laws or regulations directly applicable to access to online commerce. The
adoption of any additional laws or regulations may decrease the growth of the
Internet or other online services, which could, in turn, decrease the demand for
our products and services and increase our cost of doing business, or otherwise
have a material adverse effect on us. Moreover, the applicability to the
Internet and other online services of existing laws in various jurisdictions
governing issues such as property ownership, sales and other taxes and personal
privacy is uncertain and may take years to resolve. In addition, as our service
is available over the Internet in multiple states and foreign countries, and as
we sell to numerous consumers residing in such states and foreign countries,
such jurisdictions may claim that we are required to qualify to do business as a
foreign corporation in each such state and foreign country. We could be subject
to taxes and penalties for failure to qualify as a foreign corporation in a
jurisdiction where we are required to do so. Any such new legislation or
regulation, the application of laws and regulations from jurisdictions whose
laws do not currently apply to our business, or the application of existing laws
and regulations to the Internet and other online services could have a material
adverse effect on us.
Congress has enacted the Children's Online Privacy Protection Act of
1998 (COPPA) and the Federal Trade Commission ("FTC") has issued rules to
implement COPPA. The main goal of COPPA and the rule is to protect the privacy
of children using the Internet. Under the FTC's rules, certain commercial Web
sites must obtain parental consent before collecting, using, or disclosing
personal information from children under 13. The statute and rule apply to
commercial websites and online services directed to, or that knowingly collect
information from, children under 13. To inform parents of their information
practices, these sites are required to provide notice on the site and a separate
notification to parents about their policies with respect to the collection, use
and disclosure of children's personal information. With certain statutory
exceptions, sites will also have to obtain "verifiable parental consent" before
collecting, using or disclosing personal information from children. Websites
have six months from the rule's April 21, 2000 effective date to comply. A
website operator must post a clear and prominent link to a notice of its
information practices on its home page and at each area where personal
information is collected from children. The notice must state the name and
contact information of all operators, the types of personal information
collected from children, how such personal information is used, and whether
personal information is disclosed to third parties. The notice also must state
that the operator is prohibited from conditioning a child's participation in
activity on the child's disclosing more personal information than is reasonably
necessary. In addition, the notice must state that the parent can review and
have deleted the child's personal information, and refuse to permit further
collection or use of the child's information. The COPPA regulations could reduce
our ability to engage in direct marketing. The cost to the Company of complying
with COPPA is not known and it is not clear what impact the regulations will
have on the Company.
In addition, governments in foreign jurisdictions may regulate Internet
or other online services in such areas as content, privacy, network security,
encryption or distribution. This may affect our ability to conduct business
internationally. For example, the European Union recently enacted its own
privacy regulations. The European Union Directive on the Protection of Personal
Data, which became effective in October 1998, fosters electronic commerce by
establishing a stable framework to ensure both a high level of protection for
private individuals and the free movement of personal data within the European
Union. The EU and the U.S. Department of Commerce are currently negotiating an
agreement under which the privacy policies of American businesses may be deemed
to be adequate under the EU Directive. Until such time as an agreement is
reached, the EU has voluntarily agreed to a moratorium on enforcement of the EU
Directive against U.S.
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businesses. The European legislation and its adoption via any agreement could
adversely affect our ability to expand our sales efforts to Europe by limiting
how information about us can be sent over the Internet in the EU and limiting
our efforts to collect information from European users.
WE MAY BE SUBJECT TO SALES AND OTHER TAXES.
We do not currently collect sales or other similar taxes for physical
shipments of goods into states other than California. However, one or more
local, state or foreign jurisdictions may seek to impose sales tax collection
obligations on us. In addition, any new operation in states outside California
could subject our shipments in such states to state sales taxes under current or
future laws. If one or more states or any foreign country successfully asserts
that we should collect sales or other taxes on the sale of our products, it
could adversely affect our business.
WE MAY BE LIABLE FOR INFORMATION RETRIEVED FROM THE INTERNET.
Due to the fact that material may be downloaded from web sites and
subsequently distributed to others, there is a potential that claims will be
made against us for negligence, copyright or trademark infringement or other
theories based on the nature and content of such material. Although we carry
general liability insurance, our insurance may not cover potential claims of
this type or may not be adequate to cover all costs incurred in defense of
potential claims or to indemnify us for all liability that may be imposed. Any
costs or imposition of liability that is not covered by insurance or in excess
of insurance coverage could have a material adverse effect on us.
INTELLECTUAL PROPERTY CLAIMS AGAINST US CAN BE COSTLY AND RESULT IN THE LOSS OF
SIGNIFICANT RIGHTS.
Other parties may assert infringement or unfair competition claims
against us. We cannot predict whether third parties will assert claims of
infringement against us, or whether any future assertions or prosecutions will
adversely affect our business. If we are forced to defend against any such
claims, whether they are with or without merit or are determined in our favor,
then we may face costly litigation, diversion of technical and management
personnel, or product shipment delays. As a result of such a dispute, we may
have to develop non-infringing technology or enter into royalty or licensing
agreements. Such royalty or licensing agreements, if required, may be
unavailable on terms acceptable to us, or at all. If there is a successful claim
of product infringement against us and we are unable to develop non-infringing
technology or license the infringed or similar technology on a timely basis, it
could adversely affect our business.
OUR PRINCIPAL STOCKHOLDERS, EXECUTIVE OFFICERS AND DIRECTORS COULD CONTROL
STOCKHOLDER VOTES AND OUR MANAGEMENT AND AFFAIRS.
Our executive officers, directors and 5% or greater stockholders, and
their respective affiliates, in the aggregate, own approximately 52.3% of our
outstanding common stock. As a result, they could act together to control all
matters submitted to stockholders for approval (including the election and
removal of directors and any merger, consolidation or sale of all or
substantially all of our assets). Accordingly, such concentration of ownership
may delay, defer or prevent a change in control, impede a merger, consolidation,
takeover or other business combination involving us or discourage a potential
acquirer from making a tender offer or otherwise attempting to obtain control of
us. This could, in turn, have an adverse effect on the market price of our
common stock.
ADDITIONAL FINANCING FOR OUR OPERATIONS COULD ADVERSELY AFFECT HOLDERS OF OUR
COMMON STOCK.
We may issue common stock or debt or equity securities convertible into shares
of common stock to obtain additional financing if required. Any additional
financing may result in substantial dilution to current holders of our common
stock.
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CONVERSION OF OUR PREFERRED STOCK, EXERCISE OF OUR OUTSTANDING WARRANTS AND
OPTIONS AND SUBSEQUENT PUBLIC SALE OF OUR COMMON STOCK WHILE ITS MARKET PRICE IS
DECLINING MAY RESULT IN FURTHER DECREASES IN ITS PRICE.
As of June 29, 2000, we had outstanding 1,100 shares of Preferred
Stock. Each share of Preferred Stock has a stated value of $1,000 per share and
is convertible into common stock at a conversion price equal to 85% of the
average of the two lowest closing bid prices of the common stock on the Nasdaq
SmallCap Market over the ten trading days preceding the date of conversion
("Market Price") subject to a maximum conversion price of 115% of the Market
Price on the issue date of June 22, 2000, or $2.03. The number of shares of
common stock that may be acquired upon conversion is determined by dividing the
stated value of the number of shares of Preferred Stock to be converted by the
conversion price. Also, certain additional amounts calculated on the basis of 6%
of the stated value from June 22, 2000, the issue date of the Preferred Stock,
to the date of conversion would also be converted into common stock using the
same formula.
Since there is no minimum conversion price, the number of shares of
common stock that holders of preferred stock may acquire upon conversion would
simply continue to increase if the stock price declines. Since upon conversion
holders of Preferred Stock acquire common stock for at least a 15% discount to
the market price, they have an incentive to sell these shares of common stock at
market price either concurrently with, or shortly after, conversion, in order to
profit from the difference between the market price and the discounted
conversion price. The holders of the preferred stock also could engage in short
sales of our common stock, after delivering a notice of conversion to us, which
could contribute to a decline in the market price of the common stock and give
them the opportunity to profit from that decrease by covering their short
position with shares acquired upon conversion for at least a 15% discount to the
prevailing market price. The conversion of the preferred stock and subsequent
sale of a large number of shares of common stock acquired upon conversion during
periods when the market price of the common stock declines, or the possibility
of such conversions and sales, may exacerbate the decline or impede increases in
the market price of the common stock.
In addition, we have other warrants and stock options exercisable at
various prices for a total of, respectively, 5,362,902 and 1,006,050 shares of
common stock.
OTHER ISSUANCES OF PREFERRED STOCK COULD ADVERSELY AFFECT EXISTING HOLDERS OF
OUR COMMON STOCK.
Under our certificate of incorporation, our Board of Directors may, without
further stockholder approval, issue up to an additional 4,998,900 shares of
preferred stock with dividend, liquidation, conversion, voting or other rights
that could adversely affect the voting power or other rights of the holders of
common stock. We could use new classes of preferred stock as a method of
discouraging, delaying or preventing a change in persons that control us. In
particular, the terms of the preferred stock could effectively restrict our
ability to consummate a merger, reorganization, sale of all or substantially all
of our assets, liquidation or other extraordinary corporate transaction without
the approval of the holders of the preferred stock. We could also create a class
of preferred stock with rights and preferences similar to those of our
outstanding convertible preferred stock, which could result in substantial
dilution to holders of our common stock or adversely affect its market price.
CONVERSION OF OUR OUTSTANDING PREFERRED STOCK AND THE EXERCISE OF OUR
OUTSTANDING WARRANTS AND STOCK OPTIONS AND SUBSEQUENT PUBLIC SALE OF OUR COMMON
STOCK WILL RESULT IN SUBSTANTIAL DILUTION TO EXISTING STOCKHOLDERS.
Existing stockholders will experience substantial dilution in their percentage
ownership of our common stock if the preferred stock is converted and warrants
and stock options are exercised.
20
<PAGE>
USE OF PROCEEDS
All of the shares of common stock offered pursuant to this prospectus
are being offered by the selling securityholders listed under "Selling
Securityholders." We will not receive any proceeds from sales of common stock by
the selling securityholders. The shares offered hereby include an aggregate of
1,402,500 shares issuable upon exercise of outstanding warrants held by the four
holders of Preferred Stock and three additional securityholders named in this
prospectus. We will receive proceeds from any exercise of these warrants. The
proceeds, if any, will be added to our working capital and be available for
general corporate purposes.
SELLING SECURITYHOLDERS
The Preferred Stock and the warrants were sold to the selling
securityholders in several separate transactions exempt from registration under
the Securities Act, as follows:
o We issued 1,100 shares of Preferred Stock at $1,000 per share to
four investors in a private placement consummated in June 2000.
o The Company also issued warrants for 275,000 shares of common
stock to the four purchasers of the Preferred Stock and warrants
for 27,500 common shares to the placement agent in that
transaction
o In March 2000, the Company issued a warrant to purchase up to
600,000 shares of common stock to Richard Seifert at $2.25 per
share, for consulting services. The warrant expires on March 1,
2004. Mr. Seifert will receive warrants for an additional 600,000
shares of common stock at the same price if the trading price of
the Company's stock exceeds $9.10 for 30 days.
o In May 2000, after receiving stockholder approval, the Company
issued a warrant to purchase 500,000 shares of common stock to Dr.
Victor W. Nee. The exercise price of the warrant is $4.375 per
share. The warrant expires on March 31, 2004. Dr. Nee assisted
with the negotiation of a joint venture agreement between the
Company and an entity in the People's Republic of China. Warrants
are issuable to Dr. Nee for up to an additional 4,500,000 shares
of common stock if and when various investment and/or
profitability benchmarks are met for the China joint venture. On
May 25, 2000, the Company's stockholders elected Dr. Nee as a
director of the Company.
As part of the foregoing transactions, we agreed to register the shares
being offered by this Prospectus.
The following table sets forth information as of June 29, 2000 with
respect to the selling securityholders and the respective number of shares of
common stock beneficially owned by each selling securityholder, all of which are
offered pursuant to this prospectus. For purposes of computing the number and
percentage of shares beneficially owned by a selling securityholder on June 29,
2000, any shares which such person has the right to acquire within 60 days after
such date are deemed to be outstanding, but those shares are not deemed to be
outstanding for the purpose of computing the percentage ownership of any other
selling securityholder:
<TABLE>
<CAPTION>
Shares Owned
Shares Being Percent Owned Upon Completion Percent Owned
Name and Address Offered Before Offering Of Offering After Offering
-----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Alborz Select Opportunities
Fund(1) 812,500 4.8% 0 0%
Yasser Moustafa(2) 437,500 2.6% 0 0%
Robert DelGuercio(3) 62,500 .39% 0 0%
Pietro Gattini(4) 62,500 .39% 0 0%
Richard Seifert(5) 600,000 3.6% 0 0%
Dr. Victor W. Nee(6) 500,000 3.0% 0 0%
Astor Capital, Inc.(7) 27,500 .17% 0 0%
__________________
21
<PAGE>
(1) Consists of (a) 650,000 common shares issuable upon conversion of 650
shares of Preferred Stock based on the aggregate stated value of these
shares of $650,000 divided by an assumed conversion price of $1.00; (b)
warrants to purchase 81,250 shares of our common stock at an exercise
price of $2.295 per share, which are immediately exercisable and expire
on June 22, 2005; and (c) warrants to purchase 81,250 shares of our
common stock at an exercise price of $2.119 per share, which warrants
are immediately exercisable and expire on June 22, 2005.
(2) Consists of (a) 350,000 common shares issuable upon conversion of 350
shares of Preferred Stock based on the aggregate stated value of these
shares of $350,000 divided by an assumed conversion price of $1.00; (b)
warrants to purchase 43,750 shares of our common stock at an exercise
price of $2.295 per share, which are immediately exercisable and expire
on June 22, 2005; and (c) warrants to purchase 43,750 shares of our
common stock at an exercise price of $2.119 per share, which warrants
are immediately exercisable and expire on June 22, 2005.
(3) Consists of (a) 50,000 common shares issuable upon conversion of 50
shares of Preferred Stock based on the aggregate stated value of these
shares of $50,000 divided by an assumed conversion price of $1.00; (b)
warrants to purchase 6,250 shares of our common stock at an exercise
price of $2.295 per share, which are immediately exercisable and expire
on June 22, 2005; and (c) warrants to purchase 6,250 shares of our
common stock at an exercise price of $2.119 per share, which warrants
are immediately exercisable and expire on June 22, 2005.
(4) Consists of (a) 50,000 common shares issuable upon conversion of 50
shares of Preferred Stock based on the aggregate stated value of these
shares of $50,000 divided by an assumed conversion price of $1.00; (b)
warrants to purchase 6,250 shares of our common stock at an exercise
price of $2.295 per share, which are immediately exercisable and expire
on June 22, 2005; and (c) warrants to purchase 6,250 shares of our
common stock at an exercise price of $2.119 per share, which warrants
are immediately exercisable and expire on June 22, 2005.
(5) Consists of a warrant to purchase 600,000 shares of our common stock at
an exercise price of $2.25 per share. The warrant expires on April 4,
2003.
(6) Consists of a warrant to purchase 500,000 shares of our common stock at
an exercise price of $4.375 per share. The warrant expires on March 31,
2004.
(7) Consists of warrants to purchase 27,500 shares of our common stock at
an exercise price of $2.119 per share, which are immediately
exercisable and expire on June 22, 2005 which were issued in partial
payment of the placement agent's fee for the sale of the Preferred
Stock.
</TABLE>
PLAN OF DISTRIBUTION
The selling securityholders may sell the common stock being offered by
the prospectus from time to time directly to other purchasers, or to or through
dealers or agents. To the extent required, a prospectus supplement with respect
to the common stock will set forth the terms of the offering of the common
stock, including the name(s) of any dealer or agents, the number of shares of
common stock to be sold, the price of the common stock, any underwriting
discount or other items constituting underwriters' compensation.
The common stock offered hereby may be sold from time to time directly
by the selling securityholders or, alternatively, through broker-dealers or
agents. The selling securityholders will act independently of us in making
decisions regarding the timing, manner and size of each sale. Such common stock
may be sold in one or more transactions at fixed prices, at prevailing market
prices at the time of sale, at varying prices determined at the time of sale or
at negotiated prices. Such sales may be effected in transactions (which may
involve crosses or block transactions) (1) on any national securities exchange
for quotation services on which the common stock may be listed or quoted at the
time of sale (2) in the over-the-counter market, (3) in transactions other than
on such exchanges or services or in the over-the-counter market or (4) through
the writing of options. In connection with sales of the common stock, the
selling securityholders may enter into hedging transactions with broker-dealers,
which may
22
<PAGE>
in turn engage in short sales of such common stock in the course of hedging
the positions they assume. The selling securityholders may also sell short
the common stock offered hereby and deliver such common stock to close out such
short positions, or lend or pledge such common stock to broker-dealers that in
turn may sell such securities. Some of the common stock offered hereby also may
be sold pursuant to Rule 144 under the Securities Act.
The selling securityholders and any such brokers, dealers or agents may
be deemed "underwriters" as that term is defined by the Securities Act.
Each Selling Securityholder and any other persons participating in a
distribution of securities will be subject to applicable provisions of the
Exchange Act and the rules and regulations thereunder, including, without
limitation, Regulation M, which may restrict certain activities of, and limit
the timing of purchases and sales of securities by, Selling Securityholders and
other persons participating in a distribution of securities. Furthermore, under
Regulation M, persons engaged in a distribution of securities are prohibited
from simultaneously engaging in market making and certain other activities with
respect to such securities for a specified period of time prior to the
commencement of such distribution, subject to specified exceptions or
exemptions. All of the foregoing may affect the marketability of the securities
offered hereby.
If a dealer is used in the sale of any common stock where this
prospectus is delivered, the selling securityholders may sell such common stock
to the public at varying prices to be determined by such dealer and at the time
of resale. To the extent required, the name of the dealer and the terms of the
transaction will be set forth in the related prospectus supplement.
In connection with the sale of common stock, dealers or agents may
receive compensation from the selling securityholders or from purchasers of such
common stock for whom they may act as agents in the form of discounts,
concessions, or commissions. Agents and dealers participating in the
distribution of the common stock may be deemed to be underwriters, and any
compensation received by them and any profit on the resale of common stock by
them may be deemed to be underwriting discounts or commissions under the
Securities Act.
Pursuant to the Registration Rights Agreements entered into among us
and certain selling securityholders, and the warrants issued to Victor W. Nee
and Richard Seifert, we have agreed to pay costs and expenses associated with
the registration of the shares of common stock to be sold pursuant to this
prospectus. In addition, the selling securityholders may be entitled to
indemnification against certain liabilities pursuant to the Registration Rights
Agreements and the warrants.
We will make copies of this prospectus available to the Selling
Securityholders and have informed the Selling Securityholders of the need to
deliver a copy of this prospectus to each purchaser prior to or at the time of
such sale.
INDEMNIFICATION
Section 145 of the Delaware General Corporation Law ("GCL") grants
corporations the power to indemnify their directors, officers, employees and
agents in accordance with the provisions thereof. Article Sixth of the
Registrant's Amended and Restated Certificate of Incorporation
("Certificate")and Article V of the Registrant's By-laws provide for
indemnification of Registrant's directors, officers, agents and employees to the
full extent permissible under Section 145 of the GCL. Section 102(b)(7) of the
GCL authorizes a corporation to eliminate the liability of directors for breach
of fiduciary duty in certain cases. Article Eighth of the Certificate eliminates
such liability to the full extent permitted by the GCL.
Registrant has entered into indemnification agreements with each of
its directors and executive officers. Each such agreement provides that
Registrant will indemnify the indemnitee against expenses, including reasonable
attorneys' fees, judgments, penalties, fines and amounts paid in settlement
actually and reasonably incurred by him in connection with any civil or criminal
action or administrative proceeding arising out of the performance of his duties
as an officer, director, employee or agent of Registrant. Such indemnification
will be available if the acts
23
<PAGE>
of the indemnitee were in good faith, if the indemnitee acted in a manner
he reasonably believes to be in or not opposed to the best interest of
Registrant and, with respect to any criminal proceeding, the indemnitee had no
reasonable cause to believe his conduct was unlawful.
The Registration Rights Agreements entered into between Registrant and
certain selling securityholders, as well as the warrants held by the selling
securityholders, contain indemnification provisions.
Registrant maintains directors' and officers' liability insurance
coverage with an aggregate policy limit of $15 million for each policy year.
Insofar as indemnification for liabilities arising under the Securities
Act of 1933 (the "Act") may be permitted to directors, officers and controlling
persons of the small business issuer pursuant to the foregoing provisions, or
otherwise, the small business issuer has been advised that in the opinion of the
Securities and Exchange Commission such indemnification is against public policy
as expressed in the Act and is, therefore, unenforceable.
LEGAL MATTERS
The validity of the issuance of shares of common stock offered hereby
will be passed upon for us by McCutchen, Doyle, Brown & Enersen, LLP, San
Francisco, California.
EXPERTS
Our financial statements as of December 31, 1999 and for the year then
ended, have been incorporated by reference in this prospectus and in the
registration statement in reliance on the report of Richard A. Eisner & Company
LLP, independent auditors, given upon the authority of said firm as experts in
accounting and auditing. Our financial statements as of December 31, 1998 and
for the year then ended, have been incorporated by reference in this prospectus
and in the registration statement in reliance on the report of Ireland San
Filippo LLP, independent auditors, given upon the authority of said firm as
experts in accounting and auditing.
24
<PAGE>
2,502,500 SHARES
ADATOM.COM, INC.
COMMON STOCK
________________
PROSPECTUS
________________
June __________, 2000
25
<PAGE>
PART II
INFORMATION NOT REQUIRED IN THE PROSPECTUS
ITEM 14. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION
The estimated expenses in connection with the distribution of the
securities being registered, all of which are to be paid by the Registrant, are
as follows:
Securities and Exchange Commission Registration Fee ..............$1,017.42
Printing and Engraving Expenses .................................. *
Nasdaq Qualification Fee ......................................... *
Legal Fees and Expenses .......................................... *
Accounting Fees and Expenses ..................................... *
Miscellaneous Fees and Expenses .................................. *
-------
Total ................................................. *
=======
__________________
*To be completed by amendment.
ITEM 15. INDEMNIFICATION OF DIRECTORS AND OFFICERS
Section 145 of the Delaware General Corporation Law ("GCL") grants
corporations the power to indemnify their directors, officers, employees and
agents in accordance with the provisions thereof. Article Sixth of the
Registrant's Amended and Restated Certificate of Incorporation
("Certificate")and Article V of the Registrant's By-laws provide for
indemnification of Registrant's directors, officers, agents and employees to the
full extent permissible under Section 145 of the GCL. Section 102(b)(7) of the
GCL authorizes a corporation to eliminate the liability of directors for breach
of fiduciary duty in certain cases. Article Eighth of the Certificate eliminates
such liability to the full extent permitted by the GCL.
Registrant has entered into indemnification agreements with each of
its directors and executive officers. Each such agreement provides that
Registrant will indemnify the indemnitee against expenses, including reasonable
attorneys' fees, judgments, penalties, fines and amounts paid in settlement
actually and reasonably incurred by him in connection with any civil or criminal
action or administrative proceeding arising out of the performance of his duties
as an officer, director, employee or agent of Registrant. Such indemnification
will be available if the acts of the indemnitee were in good faith, if the
indemnitee acted in a manner he reasonably believes to be in or not opposed to
the best interest of Registrant and, with respect to any criminal proceeding,
the indemnitee had no reasonable cause to believe his conduct was unlawful.
The Registration Rights Agreements entered into between Registrant and
certain selling securityholders, as well as the warrants held by the selling
securityholders contain indemnification provisions.
Registrant maintains directors' and officers' liability insurance
coverage with an aggregate policy limit of $15 million for each policy year.
ITEM 16. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
(a) Exhibits
An Exhibit Index has been attached as part of this Registration
Statement and is incorporated herein by reference.
26
<PAGE>
(b) Financial Statement Schedules
Schedules are omitted because they are either not required, are not
applicable or because equivalent information has been included in the financial
statements, the notes thereto or elsewhere herein.
ITEM 17. UNDERTAKINGS
a) The undersigned registrant hereby undertakes:
(1) To file, during any period in which offers or sales are being made,
a post-effective amendment to this registration statement:
(a) To include any prospectus required by Section
10(a)(3) of the Securities Act;
(b) To reflect in the prospectus any facts or events arising
after the effective date of the registration statement (or the most recent
post-effective amendment thereof) which, individually or in the aggregate,
represent a fundamental change in the information set forth in the registration
statement;
(c) To include any material information with respect to the
plan of distribution not previously disclosed in the registration statement or
any material change to such information in the registration statement;
provided, however, that paragraphs (1)(a) and (1)(b) above do not apply if the
information required to be included in a post-effective amendment by those
paragraphs is contained in periodic reports filed with or furnished to the
Commission by the registrant pursuant to Section 13 or Section 15(d) of the
Exchange Act that are incorporated by reference in the registration statement.
(2) That, for the purpose of determining any liability under the
Securities Act, each such post-effective amendment shall be deemed to be a new
registration statement relating to the securities offered therein, and the
offering of such securities at that time shall be deemed to be the initial bona
fide offering thereof.
(3) To remove from registration by means of a post-effective amendment
any of the securities being registered which remain unsold at the termination of
the offering.
b) The undersigned registrant hereby undertakes that, for purposes of
determining any liability under the Securities Act of 1933, each filing of the
Registrant's annual report pursuant to Section 13(a) or Section 15(d) of the
Securities Exchange Act of 1934 that is incorporated by reference in the
Registration Statement shall by deemed to be a new registration statement
relating to the securities offered therein, and the offering of such securities
at that time shall be deemed to be the initial bona fide offering thereof.
c) Insofar as indemnification for liabilities arising under the Securities Act
of 1933 may be permitted to directors, officers and controlling persons of the
Registrant pursuant to the provisions described under "Item 15, Indemnification
of Directors and Officers" above, or otherwise, the Registrant has been advised
that in the opinion of the Securities and Exchange Commission such
indemnification is against public policy as expressed in the Securities Act of
1933 and is, therefore, unenforceable. In the event that a claim for
indemnification against such liabilities (other than the payment to the
Registrant of expenses incurred or paid by a director, officer or controlling
person of the Registrant in the successful defense of any action, suit or
proceeding) is asserted by such director, officer or controlling person in
connection with the securities being registered, the Registrant will, unless in
the opinion of its counsel the matter has been settled by controlling precedent,
submit to a court of appropriate jurisdiction the question whether such
indemnification is against public policy as expressed in the Securities Act and
will be governed by the final adjudication of such issue.
27
<PAGE>
d) The undersigned Registrant hereby undertakes that:
(1) For purposes of determining any liability under the Securities
Act of 1933, the information omitted from the form of
prospectus filed as part of this registration statement in
reliance upon Rule 430A and contained in a form of prospectus
filed by the Registrant pursuant to Rule 424(b)(1) or (4) or
497(h) under the Securities Act shall be deemed to be part of
this registration statement as of the time it was declared
effective.
(2) For the purpose of determining any liability under the
Securities Act of 1933, each post-effective amendment that
contains a form of prospectus shall be deemed to be a new
registration statement relating to the securities offered
therein, and the offering of such securities at that time
shall be deemed to be the initial bona fide offering thereof.
28
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the
Registrant certifies that it has reasonable grounds to believe that it meets all
of the requirements for filing on a Form S-3 and has duly caused this
Registration Statement to be signed on its behalf by the undersigned, thereunto
duly authorized, in the City of Milpitas, State of California, on the 29th day
of June, 2000.
ADATOM.COM, INC.
By: /s/ MICHAEL M. WHEELER*
-------------------------------
Name: Michael M. Wheeler
Title: Controller and Secretary
KNOWN ALL MEN BY THESE PRESENTS, that each person whose signature
appears below does hereby constitute and appoint RICHARD S. BARTON and MICHAEL
WHEELER, and each of them, with full power to act without the other, his or her
true and lawful attorney-in-fact and agent for him and in his name, place and
stead, in any and all capacities, to sign any and all amendments to this
Registration Statement including without limitation any registration statement
for the same offering that is to be effective upon filing pursuant to Rule
462(b) under the Securities Act of 1933, and to file the same, with all exhibits
thereto and other documents in connection therewith, with the Securities and
Exchange Commission, granting unto said attorneys-in-fact and agents, and each
of them, full power and authority to do and perform each and every act and thing
requisite and necessary to be done in and about the premises in order to
effectuate the same, as fully, for all intents and purposes, as he or she could
or might do in person, hereby ratifying and confirming all that said
attorneys-in-fact and agents, or any of them, may lawfully do or cause to be
done by virtue hereof.
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed below by the following persons in the
capacities and on the dates indicated.
SIGNATURE TITLE DATE
--------- ----- ----
/s/ RICHARD S. BARTON
-----------------------
Richard S. Barton Chairman of the Board, Chief June 29, 2000
Executive Officer, President,
Chief Financial Officer and Director
(principal executive and
financial officer)
/s/ MICHAEL M. WHEELER*
-----------------------
Michael M. Wheeler Controller and Secretary June 29, 2000
(principal accounting Officer)
/s/ SRIDHAR JAGANNATHAN
-----------------------
Sridhar Jagannathan Director June 29, 2000
/s/ RALPH K. FRASIER
-----------------------
Ralph K. Frasier Director June 29, 2000
29
<PAGE>
/s/ VICTOR W. NEE
-----------------------
Victor W. Nee Director June 29, 2000
*/s/ MICHAEL M. WHEELER
----------------------- Individually and as Attorney-in-Fact June 29, 2000
Michael M. Wheeler
30
<PAGE>
EXHIBIT INDEX
Exhibit
Number Description
------- -----------
4.15 Warrant issuance Agreement between the Registrant and Victor W.
Nee, dated February 25, 2000 (1)
4.16 Form of warrant to be issued to Dr. Victor W. Nee(2)
4.17 Warrant to purchase shares of Common Stock issued to Richard
Seifert dated as of April 4, 2000 (3)
4.19 Certificate of Designations relating to Series A Convertible
Preferred Stock (4)
4.20 Securities Purchase Agreement relating to Series A Convertible
Preferred Stock, dated June 22, 2000 (4)
4.21 Registration Rights Agreement relating to Series A Convertible
Preferred Stock, dated June 22, 2000 (4)
4.22 Form of A Warrant issued to purchasers of Series A Convertible
Preferred Stock and to Astor Capital, Inc. on June 22, 2000 (4)
4.22 Form of B Warrant issued to purchasers of Series A Convertible
Preferred Stock and to Astor Capital, Inc. on June 22, 2000 (4)
5 Opinion of McCutchen, Doyle, Brown & Enersen, LLP*
23.1 Consent of Richard A. Eisner LLP
23.2 Consent of Ireland San Filippo, LLP, Independent Public Auditors of
Adatom.com, Inc.
23.3 Consent of McCutchen, Doyle, Brown & Enersen, LLP*
__________________
(1) Incorporated by reference to exhibit of same number filed with Regis-
trant's Annual Report on Form 10-KSB for the year ended December 31,
1999.
(2) Incorporated by reference to Appendix A of the Registrant's Proxy
Statement dated April 27, 2000.
(3) Incorporated by reference to exhibit of same number filed with Regis-
trant's Quarterly Report on Form 10-QSB for the quarter ended March 31,
2000.
(4) Incorporated by reference to exhibit of same number filed with Regis-
trant's Current Report on Form 8-K dated May 19, 2000.
E-1
