AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON APRIL 20, 2000
REGISTRATION STATEMENT NO. 333-________
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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FORM S-3
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
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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) (Address, including zip code, and
telephone number, including area
code, of agent for service)
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WITH COPIES TO:
SETH I. TRUWIT, ESQ.
Dorsey & Whitney LLP
250 Park Avenue
New York, NY 10177
(212) 415-9200
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: [ ]
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CALCULATION OF REGISTRATION FEE
<TABLE>
<CAPTION>
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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
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<S> <C> <C> <C> <C>
Common Stock, $.01 par value ...... 2,570,802 (2) $3.6875 $9,479,833 $2503
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</TABLE>
(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 National Market on April 14, 2000, pursuant to
Rule 457(c) under the Securities Act.
(2) Includes 542,402 shares issuable upon exercise of outstanding warrants
held by three selling securityholders.
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 April 20, 2000
PRELIMINARY PROSPECTUS
2,570,802 SHARES
ADATOM.COM, INC.
COMMON STOCK
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The securityholders of Adatom.com, Inc. listed in this prospectus are
offering an aggregate of 2,570,802 shares of the common stock of the Adatom.com,
Inc. Of such shares, 2,028,400 shares were outstanding as of April 14, 2000 and
the 542,402 share balance offered hereby are issuable upon exercise of
outstanding warrants held by three of the securityholders listed in this
prospectus.
The common stock offered by this prospectus was, or, in the case of
the shares offered hereby issuable upon exercise of warrants, 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.
The shares of common stock being offered by the selling
securityholders may be sold from time to time in transactions on the Nasdaq
National 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 fixed prices.
Adatom.com, Inc.'s common stock is listed on the Nasdaq National
Market under the symbol "ADTM." On April 18, 2000, the last reported sale price
of the common stock on the Nasdaq National Market was $2.75 per share.
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INVESTING IN THE COMMON STOCK INVOLVES RISKS.
SEE "RISK FACTORS" BEGINNING ON PAGE 5.
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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.
-----------
[ ], 2000
The information in this preliminary prospectus is not complete and may be
changed. These securities may not be sold until the registration statement filed
with the Securities and Exchange Commission is effective. This preliminary
prospectus is not an offer to sell and we are not soliciting offers to buy these
securities in any jurisdiction where the offer or sale is not permitted.
<PAGE>
TABLE OF CONTENTS
PAGE
Special Note Regarding Forward-Looking Statements............. 2
Where You Can Find More Information About Us. 3
Our Company................................................... 4
Risk Factors.................................................. 5
Use of Proceeds............................................... 14
Selling Securityholders....................................... 15
Plan of Distribution.......................................... 18
Legal Matters................................................. 18
Experts....................................................... 18
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In this prospectus, "Adatom," the "company," "we," "us," and
"our" refer to Adatom.com, Inc..
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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.
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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.
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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
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
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-K for the fiscal year ended December 31,
1999 filed with the Commission of March 30, 2000; and
o Any future filings we make with the Commission until the selling
securityholders sell all of the common stock offered by them
pursuant to the 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 Wheeler, Controller
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OUR COMPANY
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Adatom was established in October 1995 as MegaVision 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 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. Recently in early March 2000,
we executed documents for a private placement of 2,000,000 shares of common
stock yielding gross proceeds of $4 million. The remaining proceeds of this
capital will be exhausted within approximately three or four months.
In addition, in March 2000 we signed an exclusive agreement with the
China Product Trade Center (CPTNC). The CPTNC and we will establish a joint
venture company located in Beijing, China to work directly with the CPTNC. The
joint venture company will seek to develop and implement the systems, Internet
applications and other services to enable the marketing and sale of industrial
and consumer goods produced in China into the U.S. as well as goods produced in
the U.S. into the Chinese marketplace exclusively through Adatom.
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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.
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 has 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.
There is an uncertainty about our ability to continue as a going concern. We
incurred net losses of approximately $12.7 million for the year ended December
31, 1999 and approximately $2 million for the year ended December 31, 1998. 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
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, we currently have on hand working capital to sustain our business
for approximately three or four months. We further estimate that we will require
a minimum of $12 million 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.
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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. Unless we
raise additional capital, we expect we will exhaust the $4 million received from
the March 2000 sale of our common stock in approximately three or four months.
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 release of lock-up on April 12, 2000 or other transfer restrictions on
our outstanding shares of Common Stock or sales of additional shares
of 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
attention and resources and would adversely affect our stock price.
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.
If we do not continue to maintain a market capitalization of $50
million or otherwise meet the continued listing requirements of the NASDAQ Small
Cap Market, our common stock risks being delisted. 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.
WE FACE RISKS AND UNCERTAINTIES WITH RESPECT TO OUR PROPOSED JOINT VENTURE IN
CHINA.
Our agreement with the CPTNC contemplates the formation of a joint
venture in China. We may not be successful in establishing this joint venture.
We may not succeed with this joint venture or in entering the China market, and
will be subject to all of the risks attendant to a start-up venture 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. With respect to those
risks relating to operating in China, we will be subject to various new and
unfamiliar regulatory requirements, issues relating to currency exchange,
political and economic changes and disruptions, tariffs and other barriers, and
difficulties in staffing and managing foreign operations. We also face the risk
of diverting management
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and other personnel from our existing business to development of the joint
venture. 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
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 MERCHANDIZE 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;
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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;
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 infrastructure;
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 and at December 31, 1999, we had a
total of 43 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 ERP 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
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
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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
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
9
<PAGE>
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.
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
10
<PAGE>
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 three and one half 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
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.
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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
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.
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CREDIT CARD FRAUD.
During 1999 we suffered 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. 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 users 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
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.
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
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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 52.5% 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.
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 form sales of common stock by
the selling securityholders. The shares offered hereby include an aggregate of
542,402 shares issuable upon exercise of outstanding warrants held by three
securityholders named in this prospectus. We will receive proceeds from the
exercise of these warrants. The proceeds, if any, will be added to our working
capital and be available for general corporate purposes.
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<PAGE>
SELLING SECURITYHOLDERS
The shares of common stock being offered by the selling
securityholders, or in the case of shares being offered by selling
securityholders upon exercise of warrants, the warrants, were sold to the
selling securityholders in several separate transactions exempt from
registration under the Securities Act, as follows:
o We issued 2,000,000 shares at $2.00 per share to 13
investors in a private placement of our common stock
consummated in March 2000.
o In November 1999, we entered into an agreement with
Continental Capital & Equity Corporation for various market
advisory services and, in connection therewith, granted
Continental a warrant to purchase an aggregate of 230,000
shares, exercisable during the one year period following the
date of this prospectus as follows: 40,000 shares at $4.00
per share; 50,000 shares at $5.00 per share; 60,000 shares
at $7.50 per share; and, provided the closing price of the
common stock averages in excess of $9.10 per share for 30
consecutive trading days, 80,000 shares at $9.10 per share.
o In July and September 1999, Adatom, Inc. agreed to grant to
Jesup & Lamont Securities Corporation and Jesup & Lamont
Partners, L.L.C., as compensation for acting as placement
agent in two convertible debt financings by Adatom, Inc.
warrants, which upon consummation of the merger with
HealthCore , were converted into warrants of the surviving
corporation and entitle each such holder to purchase 56,201
shares of our common stock at an exercise price of $.99 per
share. The warrants are immediately exercisable and the
warrants issued to Jesup & Lamont Securities Corporation
expire on July 8, 2004 and those issued to Jesup & Lamont
Partners, L.L.C. expire on September 15, 2004.
o In October 1999, we issued 28,400 shares to Neal J. Polan,
the Chairman, Chief Executive Officer and a principal
stockholder of HealthCore, in consideration for his
surrender to us of a warrant to purchase 142,000 shares of
our common stock. Mr. Polan served as a director of our
company until he tendered his resignation in March 2000.
o In April 1999, HealthCore agreed to grant to Jesup & Lamont
Partners, L.L.C., as compensation for acting as financial
advisor to HealthCore, a warrant to purchase 200,000 shares
of HealthCore common stock at an exercise price of $1.00 per
share. The warrants were issued upon the merger with Adatom,
Inc. The warrants are immediately exercisable and expire
October 13, 2004.
We entered into separate Registration Rights Agreements with the
selling securityholders in connection with their acquisition of the common stock
being offered pursuant to this prospectus and issued warrants to three selling
securityholders with respect to the shares of common stock underlying those
warrants that are being offered by them pursuant to this prospectus. As part of
the foregoing transactions, we agreed to register the shares being offered by
this Prospectus.
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<PAGE>
The following table sets forth information as of April 14, 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 other than as set forth below with respect
to Neal J. Polan.
<TABLE>
<CAPTION>
Shares Owned
Shares Being Upon Completion
Name and Address Offered Of Offering
- -----------------------------------------------------------------------------------------------
<S> <C> <C>
Michael Pruitt................................................... 560,000 --
11502 Stonebriar Drive
Charlotte, NC 28277
Stoneleigh Corporation........................................... 500,000 --
Attn. Michael Dee, Chairman
Lister House, 35 The Parade
Michael M. Cimino & Gina M. Cimino ATBE.......................... 500,000 --
4542 S. Peninsula Drive
Ponce Inlet, FL 32127
Jesup & Lamont Partners, L.L.C................................... 256,201(1) --
650 Fifth Avenue
New York, NY 10019
Jesup & Lamont Securities Corporation............................ 56,201(2) --
650 Fifth Avenue
New York, NY 10019
Continental Capital & Equity Corporation......................... 230,000
195 Wekiva Springs Road
Suite 200
Longwood, FL 32779
H.B. Quality Investments N.V. .................................. 125,000
c/o Bank of America Securities LLC
600 Montgomery Street
San Francisco, CA 94111
Bruce Goldfarb.................................................. 125,000 --
746 Marina Pl.
Daytona Beach, FL 32114
Richard I. Manning Jr. .......................................... 50,000 --
3 Primrose Ct.
Greensboro, NC 27408
</TABLE>
- -------------------------
(1) Consists of (A) warrants to purchase 56,201 shares of our common stock
at an exercise price of $.99 per share, which warrants are immediately
exercisable and expire on September 15, 2004; and (B) warrants to purchase
200,000 shares of common stock at an exercise price of $1.00 per share,
which warrants are immediately exercisable and expire October 13, 2004.
(2) Consists of warrants to purchase shares of our common stock at an
exercise price of $.99 per share, which warrants are immediately
exercisable and expire on July 8, 2004.
16
<PAGE>
<TABLE>
<CAPTION>
Shares Owned
Shares Being Upon Completion
Name and Address Offered Of Offering
- -----------------------------------------------------------------------------------------------
<S> <C> <C>
Rudi Bianchi, Trustee............................................ 37,500 --
The Rudi and Franchesca Bianchi
Living Trust Dated 9/30/93
923 Fiske St.
Pacific Palisades CA 90272
Neal J. Polan.................................................... 28,400(3) 737,250(4,5)
20 Cameron Drive
Greenwich, CT 06831
Randall Swanson.................................................. 25,000 --
1139 Black Stallion Ct.
Naperville, IL 60540
Thomas G. Bongard................................................ 25,000 --
6217 Woodlake Road
Jupiter, FL 33458
Harriette D. Davidson............................................ 15,000 --
117 Tempsford Lane
Richmond, VA 23226
Kenneth J. Mann.................................................. 12,500 --
23 E. Grauers Ln.
Philadelphia, PA 19118
Thomas A. Bivens................................................. 12,500 --
1408 Hickory Shadow Dr.
Morristown, TN 37814
Tom A. Jenkins................................................... 12,500 --
1140 Hickory View Dr.
Morristown, TN 37814
</TABLE>
- --------------------------
(3) Mr. Polan beneficially owned 765,650 shares of common stock of Adatom
as of April 14, 2000, based upon the number of outstanding shares as of
such date. Mr. Polan's beneficial ownership of shares includes the shares
held beneficially by his wife and the warrants described in note (3).
(4) Includes 118,000 shares of stock held by Mr. Polan's wife as trustee
for their children, and therefore Mr. Polan is deemed to be a beneficial
owner of such shares. Includes (i) 142,000 shares of common stock issuable
upon exercise of warrants held by Mr. Polan that are exercisable within 60
days, and (ii) 25,000 shares of common stock issuable upon exercise of
warrants held jointly by Mr. Polan and his wife that are exercisable within
60 days.
(4) Represents 4.5% of the outstanding common stock of Adatom as of April
14, 2000, calculated in accordance with Rule 13d-3.
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<PAGE>
PLAN OF DISTRIBUTION
The selling securityholders may sell the common stock being offered by
the prospectus 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. 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 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 the common stock offered hereby short
and deliver such common stock to close out such short positions, or loan 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.
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, our agreement with Continental Capital &
Equity Corporation are the warrants issued to Jesup & Lamont Securities
Corporation and Jesup & Lamont Partners, L.L.C., we have agreed to pay all costs
and expenses associated with the registration of the shares of common stock to
be sold pursuant to this prospectus under the Securities Act. In addition, the
selling securityholders may be entitled to indemnification against certain
liabilities pursuant to the Registration Rights Agreements and the warrants
issued to Jesup & Lamont Securities Corporation and Jesup & Lamont Partners,
L.L.C.
LEGAL MATTERS
The validity of the issuance of shares of common stock offered in this
offering will be passed upon for us by Dorsey & Whitney LLP, New York, New York.
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.
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<PAGE>
2,570,802 SHARES
ADATOM.COM, INC.
COMMON STOCK
---------------
PROSPECTUS
---------------
__________, 2000
<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 ...............$ 2,503
NASDAQ National Market Qualification Fee .......................... *
-------
Printing and Engraving Expenses ................................... *
-------
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 grants
corporations the power to indemnify their directors, officers, employees and
agents in accordance with the provisions thereof. Article Sixth of the
Registrant's Certificate of Incorporation 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 Delaware
General Corporation Law.
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 Jesup & Lamont
Securities Corporation and Jesup & Lamont Partners L.L.C. contain
indemnification provisions.
Registrant maintains directors' and officers' liability insurance
coverage with an aggregate policy limit of $15 million for each policy year.
<PAGE>
ITEM 16. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
(a) Exhibits
The following exhibits are filed as part of this Registration Statement:
Exhibit
Number Description
------ -----------
4.7 Warrant (restated) to purchase shares of Common Stock
issued to Jesup & Lamont Securities Corporation dated
July 8, 1999. (1)
4.8 Secured Convertible Promissory Note issued to Jesup &
Lamont Acquisition Company, LLC on July 8, 1999. (1)
4.9 Warrant (restated) to purchase shares of Common Stock
issued to Jesup & Lamont Partners, L.L.C. dated September
15, 1999. (2)
4.10 Warrant to purchase shares of Common Stock issued to Jesup
& Lamont Partners L.L.C. dated October 12, 1999. (2)
4.11 Securities Purchase Agreement among the Registrant and
various investors dated as of March 15, 2000. (3)
4.12 Registration Rights Agreement among the Registrant and
various investors dated as of March 15, 2000. (3)
4.13 Registration Rights Agreement between the Registrant and
Neal Polan dated October 12, 1999. (3)
4.14 Market Access Program Marketing Agreement Between the
Registrant and Continental Capital & Equity Corporation,
dated November 8, 1999. (3)
4.15 Warrant issuance Agreement between the Registrant and
Victor W. Nee, dated February 25, 2000. (3)
*5.1 Opinion of Dorsey & Whitney LLP regarding the validity of
the securities being registered.
23.1 Consent of Richard A. Eisner LLP. (included as page II-5)
23.2 Consent of Ireland San Filippo LLP (included as page
II-6).
*23.3 Consent of Dorsey & Whitney LLP (included in Exhibit 5.1).
24.1 Powers of Attorney (included in the signature page
hereof).
-------------------------------
* To be filed by amendment
(1) Incorporated by reference to exhibit of same number filed with
Registrant's Registration Statement on Form S-4 (file No.
33-68557) declared effective by the Securities and Exchange
Commission on September 20, 1999.
(2) Incorporated by reference to exhibit of same number filed
with Registrant's Annual Report on Form 10-KSB for the year
ended September 30, 1999.
(3) Incorporated by reference to the same numbered Exhibit filed
with Registrant's Annual Report on Form 10-KSB for the year
ended December 31, 1999.
(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.
<PAGE>
ITEM 17. UNDERTAKINGS
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.
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 (and, where applicable, each filing of an
employee benefit plan's annual report pursuant to 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.
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.
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.
<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 17th day
of April, 2000.
ADATOM.COM, INC.
By: /s/ Richard S. Barton
------------------------------------
Name: Richard S. Barton
Title:Chairman, President and Chief
Executive Officer
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 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 agent, 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 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.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
- ----------------------- --------------------------------------------- ---------------
<S> <C> <C>
/s/ Richard S. Barton
- -----------------------
Richard S. Barton Chairman, President, Chief Executive Officer, April 17, 2000
and Director
(principal executive officer)
/s/ Michael M. Wheeler
- -----------------------
Michael M. Wheeler Secretary, Principal Financial Officer, and April 17, 2000
Principal Accounting Officer
(principal financial and accounting
/s/ Sridhar Jagannathan Officer)
- -----------------------
Sridhar Jagannathan Director April 17, 2000
/s/ Ralph K. Fraiser
- -----------------------
Ralph K. Fraiser Director April 17, 2000
/s/ Victor Nee
- -----------------------
Victor Nee Director April 17, 2000
/s/ Sylvia Dresner
- -----------------------
Sylvia Dresner Director April 17, 2000
</TABLE>
CONSENT OF INDEPENDENT AUDITORS
We consent to the incorporation by reference in the Registration
Statement on Form S-3 of our report dated February 11, 2000 (with respect to
Note K February 23, 2000, with respect to Note A March 15, 2000) on the
financial statements of Adatom.com, Inc. as of and for the year ended December
31, 1999. We also consent to the reference to our firm under the caption
"Experts."
Richard A. Eisner & Company, LLP
Florham Park, New Jersey
April 17, 2000
CONSENT OF INDEPENDENT AUDITORS
As independent public accountants, we hereby consent to the
incorporation by reference in the Registration Statement on Form S-3 of our
report dated March 18, 1999, with respect to the financial statements of Adatom,
Inc. as of December 31, 1999 and for the year then ended, included in the
financial statements of Adatom.com, Inc. in its Annual Report on Form 10KSB for
the year ended December 31, 1999. We also consent to the reference to our firm
under the caption "Experts."
IRELAND SAN FILIPPO, LLP
April 17, 2000
