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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
------------------------
FORM 10-Q
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<C> <S>
/X/ QUARTERLY REPORT PURSUANT SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
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FOR THE QUARTERLY PERIOD ENDED: SEPTEMBER 30, 1999
OR
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/ / TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
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FOR THE TRANSITION PERIOD FROM ______________ TO ______________
COMMISSION FILE NUMBER: 0-26962
------------------------
ADAM.COM, INC.
(Exact Name of Registrant as specified in its charter)
<TABLE>
<S> <C>
GEORGIA 58-1878070
(State or other jurisdiction of (IRS Employer Identification No.)
incorporation or organization)
1600 RIVEREDGE PARKWAY, SUITE 800 30328
ATLANTA, GEORGIA (Zip Code)
(Address of principal executive
offices)
</TABLE>
770-980-0888
(Registrant's telephone number, including area code)
A.D.A.M. SOFTWARE, INC.
(Former name or former address, if changed since last report)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. YES _X_ NO ____
APPLICABLE ONLY TO CORPORATE ISSUERS:
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date.
As of November 15, 1999 there were 4,825,736 shares of the Registrant's
Common Stock, par value $.01 per share, outstanding (excluding shares held in
treasury by the Registrant).
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ADAM.COM, INC.
INDEX
PART I--FINANCIAL INFORMATION
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ITEM 1. Financial Statements
Condensed Consolidated Balance Sheet at September 30, 1999
and March 31, 1999.......................................... 3
Condensed Consolidated Statement of Operations For the Three
and Six Months Ended September 30, 1999 and 1998............ 4
Condensed Consolidated Statement of Cash Flows For the Six
Months Ended September 30, 1999 and 1998.................... 5
Statement of Changes in Shareholders' Equity For the Six
Months Ended
September 30, 1999.......................................... 6
Notes to Condensed Consolidated Financial Statements........ 7
ITEM 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations................................... 9
ITEM 3. Quantitative and Qualitative Disclosure about Market Risk... 15
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PART II--OTHER INFORMATION
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ITEM 4. Submission of Matters to a Vote of Security Holders......... 15
ITEM 6. Exhibits and Reports on Form 8-K............................ 16
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PART I: FINANCIAL INFORMATION
ITEM I: FINANCIAL STATEMENTS
ADAM.COM, INC.
CONDENSED CONSOLIDATED BALANCE SHEET
(IN THOUSANDS, EXCEPT SHARE DATA)
(UNAUDITED)
<TABLE>
<CAPTION>
SEPTEMBER 30, MARCH 31,
1999 1999
------------- ---------
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ASSETS
Current assets:
Cash and cash equivalents................................. $2,745 $2,369
Investment Securities..................................... -- 3,792
Accounts receivable (net of allowances of $114 and $373,
respectively)........................................... 755 950
Inventories............................................... 329 292
Prepaids and other........................................ 455 164
------ ------
Total current assets.................................. 4,284 7,567
Property and equipment, net................................. 1,385 644
Restricted certificate of deposit........................... 476 522
Intangible assets, net...................................... 2,092 237
Other non-current assets.................................... 180 --
------ ------
Total Assets $8,417 $8,970
====== ======
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable.......................................... $ 865 $ 332
Other accrued liabilities................................. 1,020 842
------ ------
Total current liabilities............................. 1,885 1,174
Shareholders' Equity:
Convertible preferred stock, no par value; 10,000,000 shares
authorized;
0 Series A shares issued and outstanding.................. -- --
Common Stock, $.01 par value; 20,000,000 authorized;
5,400,581 and 5,285,747 shares issued and outstanding..... 54 53
Other shareholders' equity.................................. 6,478 7,743
------ ------
Total liabilities and shareholders' equity $8,417 $8,970
====== ======
</TABLE>
The accompanying notes are an integral part of these financial statements.
3
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ADAM.COM, INC.
CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
(IN THOUSANDS, EXCEPT PER SHARE DATA)
(UNAUDITED)
<TABLE>
<CAPTION>
THREE MONTHS SIX MONTHS
ENDED SEPTEMBER 30, ENDED SEPTEMBER 30,
------------------- -------------------
1999 1998 1999 1998
-------- -------- -------- --------
<S> <C> <C> <C> <C>
Net Internet Revenues............................... $ 181 $ -- $ 213 $ --
Net Product Revenues................................ 903 1,402 1,672 3,151
------- ------ ------- ------
Total Revenues.................................. 1,084 1,402 1,885 3,151
------- ------ ------- ------
Operating expenses:
Cost of revenues.................................. 197 383 392 714
Sales and marketing............................... 824 630 1,516 1,270
Product and content development................... 1,728 239 2,890 474
General and administration........................ 1,294 538 2,449 988
------- ------ ------- ------
Total operating expenses........................ 4,043 1,790 7,247 3,446
------- ------ ------- ------
Operating loss.................................. (2,959) (388) (5,362) (295)
Interest income, net.............................. 61 108 131 223
------- ------ ------- ------
Loss before income taxes and minority
interest...................................... (2,898) (280) (5,231) (72)
Minority interest in consolidated subsidiary...... 105 -- 142 --
Income tax expense................................ -- -- -- --
------- ------ ------- ------
Net loss............................................ $(2,793) $ (280) $(5,089) $ (72)
======= ====== ======= ======
Basic and Diluted net loss per common share......... $ (0.59) $(0.06) $ (1.10) $(0.02)
======= ====== ======= ======
Weighted average number of common shares
outstanding....................................... 4,759 4,569 4,641 4,614
======= ====== ======= ======
</TABLE>
The accompanying notes are an integral part of these financial statements.
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ADAM.COM, INC.
CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS
(IN THOUSANDS)
(UNAUDITED)
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<CAPTION>
SIX MONTHS ENDED
SEPTEMBER 30,
-------------------
1999 1998
-------- --------
(IN THOUSANDS)
<S> <C> <C>
Net cash used in operating activities....................... $(4,281) $ (283)
------- -------
Investing activities
Purchases of property and equipment....................... (950) (177)
Purchases of investment securities........................ -- (13,228)
Proceeds from maturity of investment securities........... 3,762 14,380
Purchase of restricted time deposit....................... (297) --
Redemption of restricted time deposit..................... 345 --
Software development costs................................ (6) (317)
Acquisitions of intangible assets......................... (50) --
------- -------
Net cash provided by investing activities................. 2,804 658
------- -------
Financing activities
Repurchase of common stock................................ -- (618)
Proceeds from related party for interest in consolidated
subsidiary.............................................. 125 --
Proceeds from exercise of common stock options and
warrants................................................ 1,728 2
------- -------
Net cash provided by (used by) financing activities....... 1,853 (616)
------- -------
Increased (decrease) in cash and cash equivalents........... 376 (241)
Cash and cash equivalents, beginning of period.............. 2,369 704
------- -------
Cash and cash equivalents, end of period.................... $ 2,745 $ 463
======= =======
</TABLE>
The accompanying notes are an integral part of these financial statements.
5
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ADAM.COM, INC.
STATEMENT OF CHANGES IN SHAREHOLDERS' EQUITY
(IN THOUSANDS, EXCEPT SHARE DATA)
(UNAUDITED)
<TABLE>
<CAPTION>
COMMON STOCK ADDITIONAL COMMON
-------------------- PAID-IN STOCK ACCUMULATED TREASURY
SHARES AMOUNT CAPITAL WARRANTS DEFICIT STOCK TOTAL
--------- -------- ---------- -------- ----------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C>
BALANCE AT MARCH 31, 1999.......... 5,285,747 $53 $33,911 $135 $(24,117) $(2,186) $7,796
Exercise of common stock options
and warrants..................... 114,834 1 1,379 (34) -- 401 1,747
Re-issuances of common stock for
acquisitions..................... -- -- 1,797 -- -- 281 2,078
Net loss........................... -- -- -- -- (5,089) -- (5,089)
--------- --- ------- ---- -------- ------- ------
BALANCE AT SEPTEMBER 30, 1999...... 5,400,581 $54 $37,087 $101 $(29,206) $(1,504) $6,532
========= === ======= ==== ======== ======= ======
</TABLE>
The accompanying notes are an integral part of these financial statements.
6
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ADAM.COM, INC.
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
SEPTEMBER 30, 1999
1. BASIS OF PRESENTATION
adam.com, Inc. ("adam.com" or the "Company"), formerly A.D.A.M. Software,
Inc., is a developer of health education content and software technologies, and
since January 1999, the Company has taken steps to become a leading provider of
health, medical and wellness information online. The Company had historically
created, published and marketed multimedia software products, content and
Internet-ready applications providing anatomical, medical and health-related
information for the education, consumer and professional markets.
The accompanying unaudited condensed consolidated financial statements have
been prepared in accordance with generally accepted accounting principles for
interim financial information, the general instructions to Form 10-Q and
Article 10 of Regulation S-X. The accompanying financial statements include the
accounts of the Company and thePort.com, Inc., an affiliated entity that the
Company controls through a financial and operational interest. Accordingly, they
do not include all information and footnotes required by generally accepted
accounting principles for complete financial statements. In the opinion of
management, all adjustments (consisting of normal recurring accruals) considered
necessary for a fair presentation have been included. Operating results for the
three-month or six-month periods ended September 30, 1999 are not necessarily
indicative of the results that may be expected for the year ended March 31,
2000. For further information, refer to the financial statements and notes
thereto included in the Company's Annual Report on Form 10-K for the year ended
March 31, 1999, which includes audited financial statements for the year ended
March 31, 1999. Certain amounts in the prior years' financial statements have
been reclassified to conform to the current year presentation.
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets, liabilities, revenues
and expenses. Actual results could differ from those estimates.
2. INTANGIBLE ASSETS
During the three months ended September 30, 1999, the Company completed the
acquisitions of certain intellectual and intangible assets from drgreene.com and
Information Medical Systems, Inc. for an aggregate amount of approximately
$2,088,000 through the issuance of 104,000 shares of common stock. The purchase
price for the two acquisitions are being amortized over the estimated useful
lives of the assets of two and five years, respectively. Prior to the current
quarter ended September 30, 1999, intangible assets consisted entirely of
capitalized software product costs. Capitalized software development costs as of
September 30, 1999 totaled approximately $157,000.
3. LOSS PER COMMON SHARE
The Company computes basic loss per share based upon the weighted average
number of issued common shares for each period. Diluted loss per share is based
upon the addition of the effect of common stock equivalents (stock options and
warrants) to the denominator of the basic loss per share calculation, using the
treasury stock method, if their effect is dilutive.
4. INVESTMENT AND RELATED PARTY TRANSACTION
In May 1999, the Company acquired a preferred stock interest in thePort.com,
for $250,000 in cash representing a 40% voting interest. The Company's chairman
also invested $125,000 in this entity for a
7
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ADAM.COM, INC.
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) (CONTINUED)
SEPTEMBER 30, 1999
4. INVESTMENT AND RELATED PARTY TRANSACTION (CONTINUED)
20% voting interest. The results of operations of this entity, which are not
significant at this time, have been accounted for as a majority owned subsidiary
and accordingly the results of operations, net of the minority interest, are
included in the condensed consolidated financial statements of the Company.
5. LEGAL PROCEEDINGS
On April 25, 1996, a class action lawsuit in Fulton County Superior Court in
Atlanta, Georgia was filed against the Company and certain of its then officers
and directors. The complaint alleges violations of sections 11, 12(2) and 15 of
the Securities Act of 1933, violations of the Georgia Securities Act and
negligent misrepresentation arising out of alleged disclosure deficiencies in
connection with the Company's initial public offering, which was completed on
November 10, 1995. The complaint seeks compensatory damages and reimbursements
for plaintiff's fees and expenses. A motion to dismiss is pending and the
Company and its officers and directors are vigorously defending against the
allegations.
6. SUPPLEMENTAL CASH FLOW INFORMATION
Cash and cash equivalents include cash on hand and on deposit and highly
liquid investments with an original maturity of three months or less. Cash
payments for the six months ended September 30, 1999 and 1998 include interest
of approximately $3,700 and $0, respectively.
7. COMPREHENSIVE INCOME
The Financial Accounting Standards Board issued Statement of Financial
Accounting Standards No. 130, "Reporting Comprehensive Income" (SFAS No. 130) to
be effective for fiscal years beginning after December 15, 1997. This statement
requires that all items which are to be recognized as components of
comprehensive income be reported in a financial statement that is displayed with
the same prominence as net income (loss). The Company's comprehensive income
(loss) is the same as its net income (loss).
8
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ITEM 2: MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
GENERAL
The following information should be read in conjunction with the financial
statements and the notes thereto and in conjunction with Management's Discussion
and Analysis of Financial Condition and Results of Operations in the Company's
Annual Report on Form 10-K for the fiscal year ended March 31, 1999.
At the 1999 Annual Meeting of Shareholders, the Company's shareholders
approved an amendment to the Company's articles of incorporation to change the
Company's name from A.D.A.M. Software, Inc. to adam.com, Inc.
adam.com is a leading developer of health education content and software
technologies, and since January 1999, we have taken steps to become a leading
provider of health, medical and wellness information online. We have created,
published and marketed multimedia software products, content and Internet-ready
applications that provide anatomical, medical and health-related information for
the education, consumer, professional and online health information provider
markets.
During the fiscal year ended March 31, 1999 ("fiscal 1999"), adam.com made
the strategic decision to focus the majority of its efforts on the online
dissemination of consumer health information, resulting in the May 1999 launch
of www.adam.com, adam.com's consumer health destination (the "Web site" or
"site"). Additionally, our business-to-business syndication model provides
customized co-branded solutions to healthcare enterprises and other commercial
Web sites by providing those business partners with our unique proprietary
content to enhance the usefulness, relevance and value of their Web sites. In
connection with this redirected strategy, we decided to shift sales and
marketing efforts toward initiatives that create awareness of our ability and
intention to provide back-end content to other health information providers on
the Internet. Accordingly, we discontinued product update and upgrade support
for certain of our historical products as of April 1, 1999.
Founded in 1990, adam.com historically created visual anatomy and health
information content that was delivered to end-users through a variety of
distribution mediums, including CD-ROM, broadcast, Internet licensing and print.
Those efforts continue today, but are designed to support the growth and
development of the consumer health information Web site and business-to-business
content syndication model. adam.com is headquartered in Atlanta, Georgia, with a
significant operation in San Francisco, California.
RESULTS OF OPERATIONS
REVENUES. Total revenues decreased 23% to $1,084,000 for the three months
ended September 30, 1999 compared to $1,402,000 for the three months ended
September 30, 1998. During the three months ended September 30, 1999 we derived
83% of total revenue from product sales and licensing to education, consumer,
professional and international markets compared to 100% during the three months
ended September 30, 1998. During the three months ended September 30, 1999 we
earned approximately $181,000, or 17% of total revenue from activities related
to providing health related content over the Internet, including page view-based
advertising revenue and license fees from Internet-based third parties. Total
software product sales and licensing revenue decreased $499,000, or 35%, to
$903,000 for the three months ended September 30, 1999 compared to $1,402,000
for the three months ended September 30, 1998. This decrease is due to our
transition from a software products-based company to an Internet-based, online
content provider and the resulting reduction in our product sales force and
marketing activities.
For the six months ended September 30, 1999, total revenues decreased 40% to
$1,885,000 compared to $3,151,000 for the six months ended September 30, 1998.
During the six months ended September 30, 1999, we derived 89% of total revenue
from product sales and licensing compared to 100% during the six months ended
September 30, 1998. During the six months ended September 30, 1999 we earned
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approximately $213,000 or 11% of total revenue from activities related to
providing health-related content over the Internet. Total software product sales
and licensing revenue decreased $1,479,000, or 47%, to $1,672,000 for the six
months ended September 30, 1999 compared to $3,151,000 for the six months ended
September 30, 1998. This decrease is due to our transition from a software
products-based company to an Internet based, online content provider and the
resulting reduction in our product sales force and marketing activities.
COST OF REVENUES. Cost of revenues decreased 49% to $197,000 for the three
months ended September 30, 1999 from $383,000 for the three months ended
September 30, 1998 due to decreased software product shipments, decreased costs
of product support and reduced amortization of capitalized software development
costs. Amortization of capitalized software development costs decreased 70% to
$41,000 compared to $137,000 for the three months ended September 30, 1998 as a
result of reductions in previously recorded capitalized development costs during
fiscal 1999 to bring levels closer to expected future revenues to be generated,
or net realizable value. The reduction in net realizable value during the fourth
quarter of fiscal 1999 was the result of our decision not to support certain
products moving forward and instead to focus on development and execution of our
Internet strategies. Shipped product component costs decreased 35% to $71,000
for the three months ended September 30, 1999 compared to $110,000 for the three
months ended September 30, 1998 due to decreased unit shipments of our software
products during the three months ended September 30, 1999. As a percentage of
total software product revenues, cost of revenues decreased to 22% for the three
months ended September 30, 1999 from 27% for the three months ended
September 30, 1998.
For the six months ended September 30, 1999, cost of revenues decreased 45%
to $392,000 compared to $714,000 for the six months ended September 30, 1998 due
to decreased software product shipments, decreased costs of product support and
reduced amortization of capitalized software development costs. Amortization of
capitalized software development costs decreased 67% to $86,000 compared to
$261,000 for the six months ended September 30, 1998 as a result of reductions
in previously recorded capitalized development costs during fiscal 1999. Shipped
product component costs decreased 54% to $140,000 for the six months ended
September 30, 1999 compared to $216,000 for the six months ended September 30,
1998 due to decreased unit shipments of our software products during the six
months ended September 30, 1999. As a percentage of total software product
revenues, cost of revenues remained steady at 23% for the six months ended
September 30, 1999 compared to the six months ended September 30, 1998.
SALES AND MARKETING. Sales and marketing expenses increased 31% to $824,000
for the three months ended September 30, 1999 compared to $630,000 for the three
months ended September 30, 1998, and increased 19% to $1,516,000 for the six
months ended September 30, 1999 compared to $1,270,000 for the six months ended
September 30, 1998. All sales and marketing expenses for the three and six month
periods ended September 30, 1998 were the result of activities supporting
software product revenues, while sales and marketing expenses during the three
and six month periods ended September 30, 1999 included significant incremental
amounts to support the Company's online health information business strategy of
$594,000 and $1,011,000, respectively.
PRODUCT AND CONTENT DEVELOPMENT. Product and content development expenses
increased 623%, to $1,728,000, and 510%, to $2,890,000, respectively, for the
three and six month periods ended September 30, 1999 from $239,000 and $474,000
for the three and six month periods ended September 30, 1998, respectively. The
primary factor for the increased expenses during the three and six month periods
ended September 30, 1999, included approximately $1,368,000 and $2,194,000,
respectively, as a result of our Web site and other Internet initiative launch
costs, consisting primarily of personnel and consulting costs. As a result of
the Company's decision in fiscal 1999 to no longer develop traditional products,
capitalized software development costs were $0 and $6,000, respectively, of
development costs for the three and six month periods ended September 30, 1999
10
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compared to $178,000 and $317,000, respectively, of development costs for the
three and six month periods ended September 30, 1998. However, the Company did
capitalize $2,088,000 of acquired content from the asset purchases from
drgreen.com and Information Medical Systems, Inc. during the three months ended
September 30, 1999. These amounts are being amortized to production expense over
their estimated useful lives of two and five years, respectively. As a
percentage of total net revenues, product and content development expenses
increased to 159% and 153%, respectively, for the three and six month periods
ended September 30, 1999 compared to 17% and 15%, respectively, for the three
and six month periods ended September 30, 1998.
GENERAL AND ADMINISTRATIVE. General and administrative expenses increased
140% and 148% to $1,294,000 and $2,449,000, respectively, for the three and six
month periods ended September 30, 1999 from $538,000 and $988,000, respectively,
for the three and six month periods ended September 30, 1998 primarily due to
the additional operating costs of our San Francisco office which opened in
February 1999, increased personnel costs and increased legal costs. As a
percentage of total net revenues, general and administrative expenses increased
to 119% and 130%, respectively, for the three and six month periods ended
September 30, 1999 compared to 38% and 31%, respectively, for the three and six
month periods ended September 30, 1998.
OPERATING LOSS. As a result of the factors described above, the operating
loss increased $2,571,000 to a loss of $2,959,000 for the three months ended
September 30, 1999 from a loss of $388,000 for the three months ended
September 30, 1998. The operating loss increased $5,067,000 to a loss of
$5,362,000 for the six months ended September 30, 1999 from a loss of $295,000
for the six months ended September 30, 1998.
NET LOSS. The Company had a net loss of $2,793,000 or $.59 per share for
the three months ended September 30, 1999, compared with net loss of $280,000 or
$.06 per share for the three months ended September 30, 1998. Net loss was
$5,089,000 or $1.10 per share for the six months ended September 30, 1999,
compared with net loss of $72,000 or $.02 per share for the six months ended
September 30, 1998.
LIQUIDITY AND CAPITAL RESOURCES
As of September 30, 1999, we had cash and cash equivalents of $2,745,000 and
working capital of $2,399,000.
The Company uses working capital to finance ongoing operations, fund the
development and introduction of our new business strategy and acquire capital
equipment. Through March 31, 1999 the Company had repurchased 847,240 shares of
common stock on the open market for an average price of approximately $2.58 per
share for an aggregate purchase price of approximately $2,186,000. During the
six months ended September 30, 1999, the Company re-issued 155,457 of those
shares for total cash proceeds of approximately $998,000, and re-issued 104,000
of those shares for the purchases of drgreene.com and Informational Medical
Systems, Inc. The remaining repurchased shares represent approximately 11% of
the shares of common stock issued and outstanding as of September 30, 1999. The
Company has been authorized by its Board of Directors to purchase up to 25% of
the common shares issued and outstanding; however, management does not intend to
purchase any shares of common stock during the current fiscal year.
The Company has experienced a substantial increase in expenditures since the
launch of our San Francisco operation through the growth in those operations and
related staffing. Management anticipates that these increased expenditure levels
will continue for the foreseeable future. Management anticipates incurring
additional expenses to increase our marketing and sales efforts, for content
development and for technology and infrastructure development. Additionally, we
will continue to evaluate possible investments in businesses, products and
technologies and the expansion of our marketing and sales programs.
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Management previously disclosed that it anticipated that available cash
resources were sufficient to meet anticipated needs for working capital and
capital expenditures at least through the end of September 1999. Management
believes the Company has adequate capital resources to meet anticipated needs
for working capital and capital expenditures through the end of December 1999,
but the Company needs to enhance its capital resources in order to provide it
with sufficient cash to meet its current operating needs and to address such
needs through the end of March 2000. If the Company is unable to enhance its
capital resources, the Company will be forced to reduce its spending on capital
expenditures and product development until such financing is obtained.
The Company currently is exploring a number of alternatives, including
borrowings, the issuance of debt and/or equity securities, and other strategic
transactions to enhance its cash position. Management is optimistic that the
Company will be able to meet its liquidity needs through one or more of such
alternatives under consideration; however, there can be no assurance that any
particular alternative will be available on terms favorable to the Company, or
at all. Further, any financing or capital transaction would be subject to
customary closing conditions. If additional funds are raised by the issuance of
equity securities, our shareholders may experience dilution of their ownership
interest and these securities may have rights senior to those of the holders of
the common stock. If additional funds are raised by the issuance of debt
securities, we may be subject to certain limitations on our operations,
including limitations on the payment of dividends. The Company may also issue
equity securities for acquisitions of businesses or health information content
to use in the Company's website or other internet based product offerings. If
adequate funds are not available or not available on acceptable terms, we may be
unable to fund our expansion, successfully promote our brandname, take advantage
of acquisition opportunities, develop or enhance services or respond to
competitive pressures, any of which could have a material adverse effect on our
business, financial condition and results of operations.
YEAR 2000 COMPLIANCE
The Year 2000 issue is the result of computer programs being written using
two digits rather than four to define the applicable year. Our computer
equipment and software and devices with imbedded technology that are
time-sensitive may recognize a date using "00" as the year 1900 rather than the
year 2000. This could result in a system failure or miscalculations causing
disruptions of operations including, among other things, a temporary inability
to process transactions, send invoices, or engage in similar normal business
activities.
We have made efforts to ensure that computer equipment and software will
function properly with respect to dates in the Year 2000 and thereafter. The
term "computer equipment and software" includes systems for product development,
production and testing, accounting, data processing, telephone/PBX, contact
management, and other miscellaneous systems as well as other systems not
traditionally thought of as "computer-related" technologies such as fax
machines, copiers, or other miscellaneous equipment and software. These systems
may contain imbedded technology, which complicate our Year 2000 identification,
assessment, remediation, and testing efforts. Based upon our identification and
assessment efforts to date, we believe that our critical systems either are
currently, or are committed by our vendors to be Year 2000 compliant. We have
not directly surveyed our vendors as to Year 2000 compliance, but we plan to
avail ourselves of any remedies developed by systems vendors and/or publishers
that address current Year 2000 deficiencies, including currently known
deficiencies or those discovered prior to Year 2000. In addition, in the
ordinary course of replacing computer equipment and software, we will attempt to
obtain replacements that are Year 2000 compliant. By utilizing our internal
resources to ongoingly assess, test and remediate potential and discovered Year
2000 issues, we believe that we are on schedule with the current initiative.
Our quality assurance team has tested all internally developed products for
Year 2000 compliance. All internally developed products have been confirmed as
Year 2000 compliant; however, two products acquired by us from Mosby, Inc.
during fiscal 1998 were not Year 2000 compliant. During the quarter ended
September 30, 1999 we remedied these two products to make them Year 2000
compliant, Through
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September 30, 1999, we have sold approximately $60,000, or 8,982 units of the
non-compliant products. We estimate our total exposure to remedy, which is
limited to refunding customers their original purchase price, to be not greater
than $25,000. All future sales of these products will be the Year 2000 compliant
version.
We believe that the cost of our Year 2000 identification, assessment,
remediation and testing efforts will not exceed $50,000. These expenditures will
be funded from existing cash balances. Such amount represents less than 5% of
the actual and anticipated information system equipment, software technology,
and product production expenditures for fiscal 2000. We estimate that we have
spent approximately $25,000 as of September 30, 1999 on quality assurance
testing of our products. Other non-Year 2000 product production and system
technology efforts have not been materially delayed or impacted by the Year 2000
initiative. We presently believe that the Year 2000 issue will not pose
significant operational problems for adam.com. However, if all Year 2000 issues
are not properly identified, there can be no assurance that the Year 2000 issue
will not materially adversely impact our results of operation or adversely
affect our relationships with customers, vendors or others. Additionally, there
can be no assurance that the Year 2000 issues of other entities will not have a
material adverse impact on our systems or results of operations.
We have evaluated all systems and identified possible Year 2000 compliance
exposure for each system. As a result, we have put in place a plan that involves
testing, upgrading, replacing (when necessary) and other needed modifications to
ensure the Company's Year 2000 exposure is minimal. We have gathered cost
estimates for remediation and fully anticipate all remedies will be in place by
December 31, 1999. We believe that we have the necessary staffing resources to
monitor any changes in our state of readiness and applying remedies as needed.
Where possible vendors of mission critical applications have been contacted and
the Year 2000 compliance of these applications were verified. Where verification
is not possible, updates were obtained or the applications were replaced.
The costs of our Year 2000 identification, assessment, remediation and
testing efforts and the dates on which we believe we will complete such efforts
are based upon our best estimates, which were derived using numerous assumptions
regarding future events, including the availability of certain resources and
other factors. There can be no assurance that these estimates will prove to be
accurate and actual results could differ materially from those currently
anticipated. Specific factors that could cause such material differences
include, but are not limited to, the ability to identify, assess, and remediate
and test all relevant computer codes and embedded technology, and similar
uncertainties. In addition, variability of definitions of "compliance with Year
2000" and the myriad of different products and services, and combinations
thereof, sold by adam.com may lead to claims whose impact on adam.com is not
currently estimable. No assurance can be given that the aggregate cost of
defending and resolving such claims, if any, will not materially adversely
affect our results of operation. Although some of the our agreements and
contracts with third parties contain provisions requiring such parties to
indemnify us under some circumstances, there can be no assurance that such
indemnification arrangements will cover all of our liabilities and costs related
to claims by third parties related to the Year 2000 issue.
13
<PAGE>
DISCLOSURE REGARDING FORWARD-LOOKING STATEMENTS
Certain statements made in this report, and other written or oral statements
made by or on behalf of adam.com, may constitute "forward-looking statements"
within the meaning of the federal securities laws. When used in this report, the
words "believes," "expects," "estimates," "intends" and similar Expressions are
intended to identify forward-looking statements. Statements regarding future
events and developments and our future performance, as well as our expectations,
beliefs, plans, intentions, estimates or projections relating to the future, are
forward-looking statements within the meaning of these laws. Examples of such
statements in this report include descriptions of our plans and strategies with
respect to developing the site, our plans to develop additional strategic
partnerships, our intention to add e-commerce to our business strategy, our
continuing growth and our ability to address Year 2000 issues. All
forward-looking statements are subject to certain risks and uncertainties that
could cause actual events to differ materially from those projected. We believe
that these forward-looking statements are reasonable; however, you should not
place undue reliance on such statements. These statements are based on current
expectations and speak only as of the date of such statements. We undertake no
obligation to publicly update or revise any forward-looking statement, whether
as a result of future events, new information or otherwise.
The following are some of the factors that could cause our actual results to
differ materially from the expected results described in our forward-looking
statements:
- Our Internet operations have a limited operating history, and adam.com was
commercially launched in May 1999. Therefore, our historical operating
history provides little basis on which to evaluate our current business
and prospects. Further, we may be unable to execute our revised strategy.
- We have a history of losses and we expect to incur future losses. We
expect to incur significant expenses in connection with the site.
- We may be unable to obtain additional funding to finance our growing
business.
- We may be unable to continue to identify additional strategic partners,
which would adversely affect our ability to achieve broad brand
recognition and additional traffic to the site.
- We may be unable to manage our growing Internet business, which would
adversely affect our ability to obtain advertising dollars and our results
of operations.
- We may face shortages of personnel that have the technological training
required in our business. We may be required to increase the wages that we
pay and the benefits that we provide in order to attract and retain a
sufficient number of qualified employees. Any such increase in wages could
adversely affect our results of operations.
- We rely heavily on third parties, including Internet service providers,
for delivery of our health information through the Internet. The
performance of these third parties is not within our control. If these
Internet service providers experience difficulties, it could affect the
traffic to our site and, ultimately, our revenue from advertisers and
sponsors.
- Competition for online health information is intense, and we will compete
for advertising dollars with other companies that have more Internet
experience than we do. Our business has low barriers to entry, and our
competitors may be more successful than we are at obtaining revenue from
advertisers and sponsors.
- The Internet and related technologies could fail to develop in accordance
with the demands of the market. Because we are focusing on our Internet
strategy and discontinuing support of some of our CD-ROM products, any
failure of Internet technologies would adversely affect our business.
14
<PAGE>
- Our intellectual property rights offer only limited protection against
unauthorized use of our proprietary information. If a third party
successfully pirated our information, our licensees could be unwilling to
continue to pay for the use of our content.
- Governmental regulation of the Internet is evolving, and we cannot predict
whether new laws or regulations will be adopted that will adversely affect
our business.
- We may lose revenue or incur additional costs because of failure to
adequately address the Year 2000 issue.
- We will be affected by general economic conditions, which affect the
overall level of economy.
ITEM 3: QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
As of September 30, 1999, the Company had cash and cash equivalents of
$2.7 million invested in liquid money market funds or bank accounts with average
maturities of less than 90 days. The cash and cash equivalents are subject to
interest rate risk and we may receive higher or lower interest income if market
interest rates increase or decrease. A hypothetical increase or decrease in
market interest rates by 10 percent from levels at March 31, 1999 would not have
a material impact on our cash or cash equivalents.
PART II--OTHER INFORMATION
ITEM 4: SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
adam.com, Inc. held its 1999 Annual Meeting of Shareholders on
September 28, 1999. The following items were voted upon and the results of the
voting were as follows:
1. To elect three directors to serve on the Company's Board of Directors until
the 2002 Annual Meeting of Shareholders or until their successors have been
duly elected and qualified. The nominees, Messrs. Cramer, and McClaugherty
were elected to the Company's Board of Directors until the year 2002. There
were 3,212,640 votes for and 78,544 withheld for Mr. Cramer, and 3,212,880
votes for and 78,304 votes withheld for Mr. McClaugherty. Mr. Gatti resigned
his position with the board prior to the Annual Meeting of Shareholders.
Directors continuing in office until the 2001 Annual Meeting of Shareholders
are Ms. Linda Davis and Messrs. Daniel Howe and Francis Tedesco. Directors
continuing in office until the 2002 Annual Meeting of Shareholders are
Ms. Sally Elliot and Messrs. Gregory Swayne and Hamilton Jordon.
2. To amend Article I of the Company's articles of incorporation to result in a
change in the Company's name to adam.com, Inc. The votes of the stockholders
to ratify a change in the Company's name to adam.com, Inc. was as follows:
3,277,349 in favor, 4,865 opposed and 8,970 abstained.
3. To amend the A.D.A.M. Software, Inc. 1992 Stock Option Plan, increasing the
number of shares of common stock authorized under the plan to 3,000,000. The
votes of the stockholders to ratify an increase in the number of shares of
common stock authorized under the A.D.A.M. Software, Inc. 1992 Stock Option
Plan were as follows: 1,076,397 in favor, 193,751 opposed, 17,092 abstained,
and 2,003,944 broker non-votes.
4. To ratify the appointment of PricewaterhouseCoopers LLP as the Company's
independent auditors for the fiscal year ending March 31, 2000. The votes of
the stockholders to ratify the appointment of PricewaterhouseCoopers LLP as
the Company's independent auditors were as follows: 3,275,772 in favor,
3,892 opposed and 11,520 abstained.
15
<PAGE>
ITEM 6: EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
3.1 --Articles of Restatement of the Articles of Incorporation of
A.D.A.M. Software, Inc.
3.2 --Amendment to the Articles of Incorporation of A.D.A.M.
Software, Inc. filed September 30, 1999
27 --Financial Data Schedule (for electronic filing purposes only)
(b) Reports on Form 8-K
None
16
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the registrant has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized.
<TABLE>
<S> <C>
ADAM.COM, INC., INC.
(Registrant)
/s/ ROBERT S. CRAMER, JR.
------------------------------------------------
Robert S. Cramer, Jr.
Chairman of the Board, Co-Founder,
Chief Executive Officer
/s/ MICHAEL S. FISHER
------------------------------------------------
Michael S. Fisher
VP-Finance/Administration
(Principal financial officer)
</TABLE>
Date: November 15, 1999
17
<PAGE>
EXHIBIT 3.1
ARTICLES OF RESTATEMENT OF THE
ARTICLES OF INCORPORATION OF
A.D.A.M. SOFTWARE, INC.
Pursuant to the Georgia Business Corporation Code, A.D.A.M.
Software, Inc., a Georgia corporation (the "Corporation"), submits these
Articles of Restatement and Restated Articles of Incorporation and shows as
follows:
1.
The Corporation hereby certifies that these Articles of Restatement
and Restated Articles of Incorporation of the Corporation, as set forth in
Paragraph 3 below, were duly adopted by the Board of Directors of the
Corporation by resolution on April 22, 1994, and duly approved by the
Shareholders of the Corporation by resolution on May 4, 1994 in accordance
with Section 14-2-1003 of the Georgia Business Corporation Code.
2.
Effective upon the filing for record of these Articles of
Restatement of the Articles of Incorporation, each issued and outstanding
share of the Corporation's Class A Common Stock shall be reclassified as one
(1) fully paid and nonassessable share of the Corporation's Common Stock, par
value $.01 per share, and outstanding share certificates representing shares
of the Corporation's Class A Common Stock shall thereafter be deemed to
represent the same number of shares of the Corporation's Common Stock, par
value $.01 per share, without any further action.
3.
The Articles of Incorporation of the Corporation shall be amended
by the deletion in their entirety of Articles II through VIII, by the
addition of new Articles 2, 3, 4, 5, 6, 7, 8, and 9, and by restating all
other provisions of the Articles of Incorporation, as heretofore amended, now
in effect and not being amended by foregoing amendments, and substituting
therefor in all respects the Restated Articles of Incorporation as follows:
RESTATED ARTICLES OF INCORPORATION
1.
The name of the Corporation is A.D.A.M. Software, Inc.
<PAGE>
2.
Section 2.1. COMMON STOCK. The aggregate number of common shares
(referred to in these Articles of Incorporation as "Common Stock") which the
Corporation shall have the authority to issue is 20,000,000, with a par value
of $.01 per share. Each share of Common Stock shall have one vote on each
matter submitted to a vote of the shareholders of the Corporation. Subject to
the provisions of the applicable law and the rights of the holders of the
outstanding shares of Preferred Stock, if any, the holders of shares of
Common Stock shall be entitled to receive, when and as declared by the Board
of Directors of the Corporation, out of the assets of the Corporation legally
available therefor, dividends or other distributions, whether payable in
cash, property or securities of the Corporation. The holders of shares of
Common Stock shall be entitled to receive, in proportion to the number of
shares of Common Stock held, the net assets of the Corporation upon
dissolution after any preferential amounts required to be paid or distributed
to holders of outstanding shares of Preferred Stock, if any, are so paid or
distributed.
3.
Section 2.2. PREFERRED STOCK. The aggregate number or preferred
shares (referred to in these Articles of Incorporation as "Preferred Stock")
which the Corporation shall have authority to issue is 10,000,000, with a par
value of $.01 per share. The Preferred Stock may be issued from time to time
by the Board of Directors as shares of one or more series. The description of
shares of each series of Preferred Stock, including any designations,
preferences, conversion and other rights, voting powers, restrictions,
limitations as to dividends, qualifications, and terms and conditions of
redemption shall be as set forth in resolutions adopted by the Board of
Directors, and articles of amendment shall be filed with the Georgia
Secretary of State as required by law to be filed with respect to issuance of
such Preferred Stock, prior to the issuance of any shares of such series.
The Board of Directors is expressly authorized, at any time, by
adopting resolutions providing for the issuance of, or providing for a change
in the number of, shares of any particular series of Preferred Stock and, if
and to the extent from time to time required by law, by filing articles of
amendment which are effective without shareholder action, to increase or
decrease the number of shares included in each series of Preferred Stock, but
not below the number of shares then issued, and to set in any one or more
respects the designations, preferences, conversion or other rights, voting
powers, restrictions, limitations as to dividends, qualifications, or terms
and conditions of redemption relating to the shares of each such series. The
authority of the Board of Directors with respect to each series of Preferred
Stock shall include, but not be limited to, setting or changing the following:
-2-
<PAGE>
(i) the dividend rate, if any, on shares of such series, the
times of payment and the date from which dividends shall be
accumulated, if dividends are to be cumulative;
(ii) whether the shares of such series shall be redeemable and,
if so, the redemption price and the terms and conditions of such
redemption;
(iii) the obligation, if any of the Corporation to redeem shares
of such series pursuant to a sinking fund;
(iv) whether shares of such series shall be convertible into, or
exchangeable for, shares of stock of any other class or classes and, if
so, the terms and conditions of such conversion or exchange, including
the price or prices of the rate or rates of conversion or exchange and
the terms of adjustment, if any;
(v) whether the shares of such series shall have voting rights, in
addition to the voting rights provided by law, and, if so, to the extent
of such voting rights;
(vi) the rights of the shares of such series in the event of
voluntary or involuntary liquidation, dissolution or winding-up of the
Corporation; and
(vii) any other relative rights, powers, preferences,
qualifications, limitations or restrictions thereof relating to such
series.
Section 2.3. SHARES ACQUIRED BY THE CORPORATION. Shares of Common
Stock that have been acquired by the Corporation shall become treasury shares
and may be resold or otherwise disposed of by the Corporation for such
consideration, not less than the par value thereof, as shall be determined by
the Board of Directors, unless or until the Board of Directors shall by
resolution provide that any or all treasury shares so acquired shall
constitute authorized, but unissued shares.
3.
No shareholder shall have any preemptive right to subscribe for or
to purchase any shares of other securities issued by the Corporation.
4.
Section 4.1. PERSONAL LIABILITY OF DIRECTORS. No director of the
Corporation shall be personally liable to the Corporation or its shareholders
for monetary damages for breach of duty of care or other duty as a director,
except for liability (i) for any appropriation, in violation of the
director's duties, of any business opportunity of the Corporation, (ii) for
acts or
-3-
<PAGE>
omissions which involved intentional misconduct or a knowing violation of
law, (iii) for the types of liabilities set forth in Section 14-2-832 of the
Georgia Business Corporation Code, or (iv) for any transaction from which the
director derived an improper personal benefit. If the Georgia Business
Corporation Code is amended to authorize corporate action further eliminating
or limiting the personal liability of directors, then the liability of a
director of the Corporation shall be eliminated or limited to the fullest
extent permitted by the Georgia Business Corporation Code, as amended.
Section 4.2 EFFECT OF REPEAL OR MODIFICATION. Neither the repeal
or modification of this Article 4 nor the adoption of any provision of these
Articles of Incorporation inconsistent with these Articles shall eliminate or
adversely affect any right or protection of a director of the Corporation
existing immediately prior to such repeal, modification or adoption.
5.
Section 5.1. NUMBER OF DIRECTORS. Subject to the rights of the
holders of any series of Preferred Stock to elect additional directors under
specified circumstances, the number of directors that shall constitute the
Board of Directors of the Corporation shall be determined from time to time
exclusively by the Board of Directors pursuant to a resolution adopted by a
majority of the entire Board.
Section 5.2. CLASSIFIED BOARD. The directors of the Corporation
(other than any directors who may be elected by holders of any series of
Preferred Stock then outstanding) shall be and are divided into three
classes: Class I, Class II and Class III. The number of directors in each
class shall be as nearly equal as the then-authorized number of directors
constituting the Board of Directors permits. Each director shall serve for a
term ending on the date of the third annual meeting following the annual
meeting at which such director was elected; PROVIDED, HOWEVER, that the
directors first elected to Class I shall serve for a term ending on the date
of the annual meeting next following the end of the calendar year 1994, the
directors first elected to Class II shall serve for a term ending on the date
of the second annual meeting next following the end of the calendar year
1994, and the directors first elected to Class III shall serve for a term
ending on the date of the third annual meeting next following the end of the
calendar year 1994. Any director who may be elected by holders of any series
of Preferred Stock then outstanding shall serve for a term ending on the date
of the next annual meeting following the annual meeting at which such
director was elected.
Section 5.3. INCREASE OR DECREASE IN AUTHORIZED NUMBER OF
DIRECTORS. In the event of any increase or decrease in the authorized number
of directors:
-4-
<PAGE>
(a) Each director then serving shall nevertheless continue as a
director of the class of which he is a member until the expiration of
his term, or his prior death, retirement, resignation or removal; and
(b) Newly-created or eliminated directorships resulting from any
increase or decrease shall be apportioned by the Board of Directors
among the three classes so as to keep the number of directors in each
class as nearly equal as possible.
Section 5.4. REMOVAL. Subject to the rights of the holders of any
series of Preferred Stock then outstanding, any or all Directors may be
removed from office at any time for cause, but only by the same affirmative
vote of the shareholders required to amend this Article 5 as provided in
Section 9.2 of these Articles of Incorporation.
Section 5.5. VACANCIES. Subject to the rights of the holders of
any series of Preferred Stock then outstanding to fill director vacancies,
vacancies on the Board of Directors (including vacancies resulting from
retirement, resignation, removal from office or death) shall be filled
exclusively by the Board of Directors. Any director so elected shall hold
office until the next annual meeting of shareholders.
6.
In discharging the duties of their respective positions and in
determining what is believed to be in the best interests of the Corporation,
the Board of Directors, committees of the Board of Directors, and individual
directors, in addition to considering the effects of any action on the
Corporation or its shareholders, may consider the interests of the employees,
customers, suppliers and creditors of the Corporation and its subsidiaries,
the communities in which offices or other establishments of the Corporation
and its subsidiaries are located, and all other factors such directors
consider pertinent; provided, however, that this provision solely grants
discretionary authority to the directors and no constituency shall be deemed
to have been given any right to consideration hereby.
7.
Any action required or permitted to be taken at a shareholders'
meeting may be taken without a meeting if the action is taken by all of the
shareholders entitled to vote on the action, or by persons who would be
entitled to vote at a meeting those shares having voting power to cast not
less than the minimum number (or numbers, in the case of voting by groups) of
votes that would be necessary to authorize or take such actions at a meeting
at which all shares entitled to vote were present and voted. The action must
be evidenced by one or more written consents
-5-
<PAGE>
describing the action taken, signed by shareholders entitled to take action
without a meeting and delivered to the Corporation for inclusion in the
minutes or filing with the corporate records.
8.
The mailing address of the principal office of the Corporation is
1600 RiverEdge Parkway, Suite 800, Fulton County, Atlanta, Georgia 30328.
9.
Section 9.1. AMENDMENT. These Articles of Incorporation may not
be amended without the affirmative vote of at least a majority of the shares
entitled to vote generally in the election of directors, voting as a single
voting group.
Section 9.2. SUPERMAJORITY VOTE REQUIRED FOR CERTAIN AMENDMENTS.
Notwithstanding anything to the contrary in these Articles of Incorporation
or the Bylaws of the Corporation and subject to the rights of holders of any
series of Preferred Stock then outstanding (and notwithstanding that a lesser
percentage may be specified by law, these Articles of Incorporation or the
Bylaws of the Corporation), (i) the affirmative vote of the holders of at
least 75% of the shares of the Corporation entitled to vote generally in the
election of directors, voting as a single voting group, shall be required to
alter, amend or repeal, or adopt any provisions inconsistent with, Article 4,
Article 5 or this Section 9.2 of these Articles of Incorporation, and (ii)
Article II of the Bylaws of the Corporation shall not be altered, amended or
repealed, and no provision inconsistent therewith shall be adopted, without
the affirmative vote of a majority of the entire Board of Directors or of the
holders of at least 75% of the shares of the Corporation entitled to vote
generally in the election of directors, voting as a single voting group.
Said Restated Articles of Incorporation supersede the original
Articles of Incorporation as heretofore amended.
-6-
<PAGE>
IN WITNESS WHEREOF, A.D.A.M. Software, Inc. has caused these Articles of
Restatement to be executed, its corporate seal to be affixed, and its seal
and execution hereof to be attested, all by its duly authorized officers,
this 9th day of May, 1994.
A.D.A.M. SOFTWARE, INC.
By: /s/ Robert S. Cramer, Jr.
--------------------------
Name: Robert S. Cramer, Jr.
Title: Chairman of the Board
[CORPORATE SEAL]
Attest: /s/ Clay E. Scarborough
--------------------------------
Name: Clay E. Scarborough
Title: Secretary
-7-
<PAGE>
EXHIBIT 3.2
ARTICLES OF AMENDMENT
OF
ARTICLES OF INCORPORATION
OF
A.D.A.M. SOFTWARE, INC.
1.
The name of the Corporation is A.D.A.M. Software, Inc.
2.
The amendment to the Corporation's Articles of Incorporation is to
amend Article I of the Articles of Incorporation so that Article I shall
hereafter be as follows:
I.
The name of the Corportion is adam.com, Inc.
3.
In accordance with Code Sections 14-2-705 and 14-2-1003(d) of the
Georgia Business Corporation Code, the Corporation gave proper notice to each
shareholder entitled to vote on said amendment.
4.
In accordance with Code Section 14-2-1003(e) of the Georgia
Business Corporatin Code, said amendment was duly approved by a majority of
the shares entitled to be cast on the amendment by each voting group entitled
to vote on the amendment.
<PAGE>
Articles of Amendment
to Articles of Incorporation
Page 2 of 2, A.D.A.M. Software, Inc.
5.
Said amendment was approved by a majority of the shares of the
Corporation on September 28, 1999.
IN WITNESS WHEREOF, A.D.A.M. Software, Inc. has caused these
Articles of Amendment to be executed, its corporate seal to be affixed, and
its seal and the execution hereof to be attested by its duly authorized
officer, this 30th day of September, 1999.
A.D.A.M. SOFTWARE, INC.
By: /s/ Robert Cramer
-----------------------------------
Robert Cramer
Chairman and Chief Executive Officer
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
FINANCIAL STATEMENTS OF ADAM.COM,INC. FOR THE SIX MONTHS ENDED SEPTEMBER
30, 1999, AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL
STATEMENTS.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> MAR-31-2000
<PERIOD-START> APR-01-1999
<PERIOD-END> SEP-30-1999
<CASH> 2,745
<SECURITIES> 0
<RECEIVABLES> 869
<ALLOWANCES> 114
<INVENTORY> 329
<CURRENT-ASSETS> 4,284
<PP&E> 1,385
<DEPRECIATION> 0
<TOTAL-ASSETS> 8,417
<CURRENT-LIABILITIES> 1,885
<BONDS> 0
0
0
<COMMON> 54
<OTHER-SE> 6,478
<TOTAL-LIABILITY-AND-EQUITY> 8,417
<SALES> 1,885
<TOTAL-REVENUES> 1,885
<CGS> 392
<TOTAL-COSTS> 7,247
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 4
<INCOME-PRETAX> (5,231)
<INCOME-TAX> 0
<INCOME-CONTINUING> (5,231)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (5,089)
<EPS-BASIC> (1.10)
<EPS-DILUTED> (1.10)
</TABLE>
