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FILED PURSUANT TO RULE 424(B)(3)
REGISTRATION NO. 333-91685
PROSPECTUS
UP TO 659,542 SHARES
ADAM.COM, INC.
COMMON STOCK
This prospectus relates to the sale of up to 659,542 shares of our common
stock which we may issue to Fusion Capital Fund I, LLC. Fusion Capital is
referred to in this prospectus as the selling shareholder. These shares consist
of the following:
- up to 600,000 shares which we currently estimate is the maximum number of
shares into which a $6,000,000 convertible debenture to be issued to
Fusion Capital will be converted
- 59,542 shares which we have issued to Fusion Capital as a commitment fee
If the debenture is actually convertible into greater than 600,000 shares, we
currently intend to redeem the debenture at 106% of its outstanding principal
balance.
The shares offered by this prospectus are being registered due to our
obligations to the selling shareholder. The selling shareholder may elect to
sell all, a portion or none of the shares described in this prospectus. We will
not receive any of the proceeds from the sale of shares of our common stock by
the selling shareholder being offered by this prospectus.
Our common stock is quoted on the Nasdaq National Market under the symbol
"ADAM." On January 27, 2000, the last reported sale price for our common stock
as reported on the Nasdaq National Market was $12.0625 per share. The shares of
common stock offered pursuant to this prospectus have been approved for trading
on the Nasdaq National Market.
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INVESTING IN THE COMMON STOCK INVOLVES CERTAIN RISKS. SEE "RISK FACTORS"
BEGINNING ON PAGE 3 FOR A DISCUSSION OF THESE RISKS.
THE SELLING SHAREHOLDER AND ANY BROKER EXECUTING SELLING ORDERS ON BEHALF OF
THE SELLING SHAREHOLDER MAY BE DEEMED TO BE AN "UNDERWRITER." COMMISSIONS
RECEIVED BY ANY BROKER MAY BE DEEMED TO BE UNDERWRITING COMMISSIONS.
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NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES
COMMISSION HAS APPROVED OR DISAPPROVED OF THESE SECURITIES OR DETERMINED IF THIS
PROSPECTUS IS TRUTHFUL OR COMPLETE. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
The date of this prospectus is January 28, 2000.
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TABLE OF CONTENTS
<TABLE>
<S> <C>
adam.com.................................................... 2
Risk Factors................................................ 3
The Financing Transaction................................... 7
Use of Proceeds............................................. 9
Selling Shareholder......................................... 10
Plan of Distribution........................................ 12
Validity of Common Stock.................................... 13
Experts..................................................... 13
About This Prospectus....................................... 13
Where You Can Find More Information......................... 14
</TABLE>
ADAM.COM
adam.com, Inc. 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 and professional markets. During our
fiscal year ended March 31, 1999, adam.com made the strategic decision to focus
the majority of its efforts on the online dissemination of consumer health
information. This change in our strategy resulted in the May 1999 launch of
WWW.ADAM.COM, our consumer health destination. In connection with this
redirected strategy, we discontinued further sales and marketing effort, as well
as product update and upgrade support for certain of our historical products.
We are incorporated under the laws of the state of Georgia. Our principal
executive offices are located at 1600 RiverEdge Parkway, Suite 800, Atlanta,
Georgia 30328. Our telephone number at that address is (770) 980-0888.
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RISK FACTORS
YOU SHOULD CAREFULLY CONSIDER THE RISKS DESCRIBED BELOW BEFORE YOU DECIDE TO
BUY OUR COMMON STOCK. IF ANY OF THE FOLLOWING RISKS ACTUALLY OCCUR, OUR
BUSINESS, FINANCIAL CONDITION OR RESULTS OF OPERATIONS WOULD LIKELY SUFFER. IN
SUCH CASE, THE TRADING PRICE OF OUR COMMON STOCK COULD DECLINE, AND YOU MAY LOSE
ALL OR PART OF YOUR INVESTMENT.
CERTAIN STATEMENTS MADE IN THIS PROSPECTUS, 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
PROSPECTUS, 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 PROSPECTUS INCLUDE DESCRIPTIONS OF OUR PLANS
AND STRATEGIES WITH RESPECT TO DEVELOPING OUR WEB SITE, OUR PLANS TO DEVELOP
ADDITIONAL STRATEGIC PARTNERSHIP, 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.
WE ARE A YOUNG COMPANY WITH A NEW INTERNET-BASED STRATEGY AND WE MAY
CONTINUE TO INCUR LOSSES.
We have experienced substantial losses of $2.1 million in the fiscal year
ended March 31, 1999 ("fiscal 1999"), $5.4 million in fiscal 1997, $3.9 million
in fiscal 1996 and $3.2 million in fiscal 1994. We may incur future losses in
connection with implementing our new Internet-based strategy. We cannot be
certain that we can obtain profitability in any future period.
WE MAY BE UNABLE TO OBTAIN SUFFICIENT CAPITAL TO PURSUE OUR NEW
INTERNET-BASED STRATEGY, WHICH WOULD HURT OUR FINANCIAL RESULTS.
Since inception we have funded operations with debt and equity capital. In
fiscal 1999, our total costs and expenses increased to $7.8 million from
$6.7 million during fiscal 1998. This increase was caused in large part by our
decision to focus on becoming an online provider of healthcare information. We
expect to continue to have significant cash needs as we continue to pursue and
expand our Internet-based strategy and offerings, and the aggregate of
$12.0 million made available by the selling shareholder may be inadequate. There
can be no assurance that additional capital will be available to us on
satisfactory terms or at all.
Under the terms of the debenture issued to the selling shareholders and
related agreements, the $6.0 million provided to us by the selling shareholder
for the purchase of the debenture has been pledged by us as security to the
selling shareholder to secure our obligations under the debenture. This
$6.0 million is initially restricted cash of adam.com. We expect that such cash
will become unrestricted and available to us at a rate of at least $1.0 million
per month as the outstanding principal balance of the debenture is reduced from
conversions of the debenture into common stock. Whether and when some or all of
this cash will become unrestricted is not assured. Even if we are able to fully
access all $12.0 million available under the debentures, we may still need
additional capital to fully implement our business, operating and development
plans.
WE MAY BE UNABLE TO COMPETE EFFECTIVELY WITH OTHER ONLINE PROVIDERS OF
HEALTHCARE INFORMATION, WHICH WOULD CAUSE OUR INTERNET-BASED STRATEGY TO BE
UNSUCCESSFUL.
The market for providing healthcare information online is intensely
competitive, and we expect competition to increase in the future. As a new
entrant into this market, we expect our sensitivity to
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competitive pressures to be especially strong until we can firmly establish
ourselves. Our current competitors include Dr. Koop.com and Healtheon/WebMD. We
may not be able to compete effectively against these companies, and if we fail
to compete effectively we may suffer reduced gross margins and loss of market
share.
Our competitors are generally larger and more established than we are and
therefore may have advantages over us because of their longer operating
histories, greater name recognition, or greater financial, technical and
marketing resources. As a result, they may be able to adapt more quickly to new
or emerging technologies and changes in customer requirements. They can also
devote greater resources to the promotion and sale of their products or services
than we can. Furthermore, mergers and acquisitions among our competitors, such
as the November 1999 merger of Healtheon, WebMD, MEDE America Corporation and
Medcast to form Healtheon/WebMD, could intensify our existing competition.
WE FACE RAPID TECHNOLOGICAL CHANGE IN THE ONLINE HEALTH INFORMATION INDUSTRY
AND OUR BUSINESS WILL SUFFER IF WE CANNOT QUICKLY ADAPT TO THIS CHANGE.
Rapid changes in technology pose significant risks to us. As a new entrant
into the market of Internet-based health information, we will be required to
adapt quickly, and without significant prior experience, to rapid changes in
technologies related to the Internet. Any failure by us to timely develop and
disseminate new content or to update and enhance our current content in the face
of changing technologies could aversely affect our ability to maintain market
share.
WE MAY BE UNABLE TO SUCCESSFULLY ACQUIRE COMPLEMENTARY BUSINESSES, WHICH
WOULD LIMIT OUR POTENTIAL GROWTH TO INTERNALLY GENERATED GROWTH ONLY.
As part of our growth strategy, we have recently acquired all of the assets
of Informational Medical Systems, Inc. and drgreen.com. We may continue to
acquire or make investments in, companies with products, technologies or
professional services that we determine to be useful in pursuing our business of
providing health-related information over the Internet. In acquiring companies
in the future, we could encounter difficulties in assimilating their personnel
and operations into our company. These difficulties could disrupt our ongoing
business, distract our management and employees, increase our expenses and
adversely affect our results of operations. Future acquisitions may also cause
us to incur expenses such as the amortization of goodwill or in-process research
and development expenses which may affect our earnings. We cannot be certain
that we will successfully overcome these risks with respect to any future
acquisitions. In addition, in the past, we have paid a portion of the
consideration for some of our acquisitions by issuing common stock. The issuance
of additional common stock or other securities convertible into common stock in
connection with future acquisitions could dilute the ownership interests of our
existing shareholders.
WE MAY BE UNABLE TO ATTRACT NEW PERSONNEL, WHICH WOULD ADVERSELY AFFECT
IMPLEMENTATION OF OUR NEW INTERNET-BASED STRATEGY.
In order to promote the development of our new Website, we will need to
identify, attract and retain software engineers, web designers and content
editors. We will compete with other companies both within and outside our market
for such employees and we may be unable to attract these employees. If we do not
succeed in attracting these types of new employees, we may be unable to fully
implement our new Internet-based strategy and our business will suffer.
EVEN IF OUR STOCK PRICE DECREASES, WE MAY ELECT TO CONVERT THE DEBENTURE,
CAUSING MORE SHARES TO BE OUTSTANDING AND RESULTING IN SUBSTANTIAL DILUTION.
The conversion price of the debenture issued to the selling shareholder will
fluctuate based on the closing price of our common stock. See "The Financing
Transaction--Conversion of the debenture into common stock" for a detailed
description of the conversion price.
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All shares registered in this offering are freely tradeable. We expect that
shares registered in this offering will be sold over a period of up to six
months from the date of this prospectus. The sale of a substantial number of
shares of our common stock under this offering, or anticipation of such sales
could make it more difficult for us to sell equity or equity related securities
in the future at a time and price we deem appropriate. If the debenture were
fully converted on the date of this prospectus, the conversion price would have
been $12.15625 and the debenture would have been convertible into 493,573 shares
of our common stock. Assuming the conversion of the debenture into a total of
493,573 shares of common stock on the date of this prospectus, these shares
would represent 10.1% of our outstanding common stock as of the date of this
prospectus. Although we have the right to block conversions of the debenture if
our stock is below $16.76, we may still elect to convert the debenture if our
stock price declines. The conversion of the debenture into a significant
percentage of our outstanding stock may result in substantial dilution to the
ownership interests of other holders of our common stock.
OUR STOCK PRICE IS EXTREMELY VOLATILE AND COULD DECLINE SIGNIFICANTLY.
Our common stock has been publicly traded since our initial public offering
on November 15, 1995. Since that date, the closing price of the common stock has
ranged from a low price of $1.875 per share to a high price of $40 per share,
and there has been significant volatility in the price of our common stock in
the past year. There can be no assurance that the market price of our common
stock will be maintained or that the volume of trading in our shares will not
decrease.
The stock prices for many high technology companies, especially those that
base their businesses on the Internet, recently have experienced wide
fluctuations and extreme volatility. This volatility has often been unrelated to
the operating performance of such companies, so our stock price could decline
even if our Internet-based strategy is successful. Such fluctuations have
adversely affected and may in the future adversely affect the market price of
our common stock.
Furthermore, following periods of volatility in the market price of a
company's securities, securities class action claims frequently are brought
against the subject company. To the extent that the market price of our shares
falls dramatically in any period of time, shareholders may bring claims, with or
without merit, against us. Such litigation would be expensive to defend and
would divert management attention and resources regardless of outcome.
THE SALE OF THE SHARES REGISTERED IN THIS OFFERING COULD CAUSE OUR STOCK
PRICE TO DECLINE.
All shares registered in this offering are freely tradable. It is
anticipated that shares registered in this offering will be sold over a period
of up to six months from the date of this prospectus. We may require the selling
shareholder to convert a significant portion of a debenture at one time. The
sale of a significant amount of shares registered in this offering at any given
time could cause the trading price of our common stock to decline.
MANY OF OUR SHARES ARE ELIGIBLE FOR FUTURE SALE AND ARE SUBJECT TO
REGISTRATION RIGHTS WHICH COULD ADVERSELY AFFECT THE MARKET PRICE OF OUR COMMON
STOCK.
In connection with our prior acquisitions and financings, we have granted
rights to register approximately 303,063 shares of our common stock. These
shares are currently "restricted" under the federal securities laws and may not
be resold by their holders absent registration. Upon the effectiveness of
registration statements filed as the result of the exercise of such registration
rights, these shares will be eligible for resale into the public market. In
addition, the shares offered in this prospectus will be eligible for resale upon
the conversion of the debenture as described in this prospectus. The market
price of our stock could decline significantly if the holders of these shares
sell them or are perceived by the market as intending to sell them.
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OUR PRINCIPAL SHAREHOLDERS HAVE SUBSTANTIAL INFLUENCE AND THEIR INTERESTS
MAY DIFFER FROM THOSE OF OUR REMAINING SHAREHOLDERS.
As of December 31, 1999, our executive officers, directors and persons who
beneficially more than 10% of our outstanding common stock controlled
approximately 25% of the combined outstanding voting power of our common stock.
As a result, these holders exert substantial influence with respect to all
matters submitted to a vote of holders of common stock, including election of
our directors. If our remaining shareholders have interests that differ from
these holders, their needs may not be met.
WE HAVE ADOPTED CERTAIN ANTI-TAKEOVER PROVISIONS THAT MAY DETER A TAKEOVER.
Our articles of incorporation and bylaws contain the following provisions
that may deter a takeover, including a takeover on terms that many of our
shareholders might consider favorable, such as:
- the authority of our board of directors to issue common stock and
preferred stock and to determine the price, rights (including voting
rights), preferences, privileges and restrictions of each series of
preferred stock, without any vote or action by our shareholders;
- the existence of large amounts of authorized but unissued common stock and
preferred stock;
- staggered, three-year terms for our board of directors; and
- advance notice requirements for board of directors nominations and for
shareholder proposals.
The rights and preferences of any series of preferred stock could include a
preference over the common stock on the distribution of our assets upon a
liquidation or sale of our company, preferential dividends, redemption rights,
the right to elect one or more directors and other voting rights. The rights of
the holders of any series of preferred stock that may be issued in the future
may adversely affect the rights of the holders of the common stock. We have no
current plans to issue preferred stock. In addition, provisions of Georgia law
and our stock option plan may also discourage, delay or prevent a change in
control of our company or unsolicited acquisition proposals.
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THE FINANCING TRANSACTION
GENERAL
On November 15, 1999 adam.com executed a securities purchase agreement with
Fusion Capital Fund I, LLC ("Fusion Capital") pursuant to which it agreed to
issue to Fusion Capital up to two 0% senior secured convertible debentures, each
with an aggregate principal amount of $6,000,000. The purchase price for each
debenture is $6,000,000. The debentures will not bear any interest or premium
accrual. The first debenture will be convertible into shares of common stock of
adam.com at a price equal to the lesser of (1) $16.76 or (2) a price based upon
the future performance of the common stock, without any fixed discount to the
market price. The second debenture will be convertible into shares of common
stock of adam.com at a price based upon the future performance of the common
stock without any fixed discount to the market price.
The first debenture was purchased by Fusion Capital on January 28, 2000.
This date is referred to as the "closing date." The second debenture will be
issued after delivery of an irrevocable written notice by us to Fusion Capital
stating that we elect to sell such debenture to Fusion Capital. Such notice may
be given no earlier than the sooner to occur of (1) July 1, 2000 or (2) after
the first debenture is no longer outstanding. Each debenture will mature six
months from its date of issuance. The obligation of Fusion Capital to purchase
the second debenture is subject only to customary closing conditions, all of
which are outside the control of Fusion Capital.
Each debenture will be secured by a pledge of $6,000,000 in cash by
adam.com, which will be restricted cash of adam.com. adam.com will be the legal
and beneficial owner of the cash and will also be the legal and beneficial owner
of all interest and investment income earned with respect to the proceeds while
held as restricted cash. adam.com will direct the investment of the cash. Fusion
Capital will have a security interest on customary terms in the cash. We expect
that the amount of cash subject to Fusion Capital's security interest will be
reduced at a rate of at least $1,000,000 per month as the outstanding principal
amount of the debenture is reduced upon conversion into common stock. The
corresponding amount of cash will become unrestricted cash of adam.com.
CONVERSION OF THE DEBENTURE INTO COMMON STOCK
CONVERSIONS AT FUSION CAPITAL'S DISCRETION. Subject to the limits on
conversion and the redemption rights described below, each month during the term
of the first debenture Fusion Capital has the right to convert up to $1,000,000
of the principal amount of the debenture, plus any amounts for any prior month
that have not yet been converted, into shares of our common stock at the
applicable conversion price. The conversion price per share is equal to the
lesser of:
- the closing bid price of our common stock on the day of submission of a
conversion notice by Fusion Capital; or
- the average of the two lowest closing bid prices of our common stock
during the 10 trading days prior to the submission of a conversion notice
by Fusion Capital; or
- $16.76, which is 130% of the average of the closing bid prices of our
common stock for the 10 trading days immediately preceding January 28,
2000, the closing date. This is referred to throughout this prospectus as
the "Fixed Conversion Price".
ADAM.COM'S RIGHT TO PREVENT CONVERSIONS. If the closing sale price of our
common stock is below the Fixed Conversion Price for any three consecutive
trading days, we have the unconditional right to suspend conversions until the
earlier of (1) our revocation of such suspension and (2) when the closing sale
price of our common stock is above the Fixed Conversion Price for any three
consecutive trading days.
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ADAM.COM'S MANDATORY CONVERSION RIGHTS. We have the right to require that
Fusion Capital convert a specified principal amount of the debenture during any
specified month. We may revoke, in our sole discretion, our written request with
respect to any conversions in excess of the amount that Fusion Capital is
otherwise permitted to convert.
LIMITATION ON FUSION CAPITAL'S BENEFICIAL OWNERSHIP. Notwithstanding the
foregoing, no conversion of the debenture will be permitted if it would result
in Fusion Capital or its affiliates beneficially owning more than 4.99% of our
then aggregate outstanding common stock immediately after the proposed
conversion.
REDEMPTION
REDEMPTION AT THE OPTION OF ADAM.COM. If the closing price of our common
stock is below the Fixed Conversion Price for any 10 consecutive trading days,
then we may redeem the unconverted remaining principal balance of the debenture
for cash at a price equal to 106% of the remaining principal balance.
REDEMPTION AT THE OPTION OF FUSION CAPITAL. Upon (1) an event of default
under the debenture or (2) the maturity of the debenture, Fusion Capital may
redeem the unconverted remaining principal balance of the debenture for cash at
a price equal to 106% of the remaining principal balance.
CHANGE IN CONTROL
Upon a change in control of adam.com, we may require mandatory conversion of
the debenture or, if the market price is below the Fixed Conversion Price, we
may exercise our redemption right.
NO SHORT-SELLING OR HEDGING BY FUSION CAPITAL
Fusion Capital has agreed that neither it nor its affiliates will engage in
any direct or indirect short-selling or hedging of our common stock during any
time any debenture is or could become outstanding.
EVENTS OF DEFAULT
Generally, the debenture will become immediately due and payable at the
option of Fusion Capital upon the occurrence of any of the following events of
default:
- a default in the payment of the principal amount of the debenture when
due;
- if for any reason the shares offered by this prospectus cannot be sold
pursuant to this prospectus for a period of three consecutive trading days
or for more than an aggregate of 10 trading days in any 365-day period;
- suspension by the Nasdaq National Market of our common stock from trading
for a period of three consecutive trading days or for more than an
aggregate of 10 trading days in any 365-day period;
- our failure to satisfy any listing criteria of our principal securities
exchange or market for a period of 10 consecutive trading days or for more
than an aggregate of 45 trading days in any 365-day period;
- (1) notice from us or our transfer agent to the effect that either of us
intends not to comply with a proper request for conversion of the
debenture or (2) our failure to confirm to the transfer agent Fusion
Capital's conversion notice or (3) the failure of the transfer agent to
issue shares of our common stock upon delivery of a conversion notice;
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- if at any time more than 964,664 shares of our common stock (representing
19.99% of our outstanding common stock as of the date of the securities
purchase agreement) are issuable to Fusion Capital upon conversion of the
debenture;
- any material breach of the representations or warranties or covenants
contained in the securities purchase agreement or any related agreements
which has or which could have a material adverse affect on adam.com or the
value of the debenture, subject to a cure period of 10 trading days;
- a default of any payment obligation of adam.com in excess of $1,000,000;
or
- our participation in insolvency or bankruptcy proceedings by or against
adam.com.
ADDITIONAL SHARES ISSUED TO FUSION CAPITAL
Under the terms of the purchase agreement, in connection with the issuance
of the first debenture, Fusion Capital received 59,542 shares of our common
stock as a commitment fee. Unless an event of default occurs, these shares must
be held by Fusion Capital until the first debenture has been converted or repaid
in full. On the date of the issuance of the second debenture, Fusion Capital
will be entitled to receive a commitment fee, payable in shares of common stock,
equal to 7% of the aggregate principal amount of the second debenture.
NO VARIABLE PRICED FINANCINGS BY ADAM.COM
So long as any debenture is outstanding, adam.com has agreed not to issue,
or enter into any agreement with respect to the issuance of, any variable priced
equity or variable priced equity-like securities unless it has obtained Fusion
Capital's prior written consent.
USE OF PROCEEDS
We will not receive any of the proceeds from the sale of shares of our
common stock by the selling shareholder. We are registering the shares for sale
to provide the selling shareholder with freely tradable securities, but the
registration of these shares does not necessarily mean that any of these shares
will be offered or sold by the selling shareholder.
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SELLING SHAREHOLDER
The selling shareholder is Fusion Capital Fund I, LLC. Prior to the date of
this prospectus, Fusion Capital did not own or have any interest in any shares
of our common stock. On January 28, 2000, pursuant to the securities purchase
agreement dated November 15, 1999, Fusion Capital purchased for $6,000,000 a 0%
senior secured convertible debenture in the aggregate principal amount of
$6,000,000.
MECHANICS OF CONVERSION OF DEBENTURE
Each month a portion of the debenture may be converted into shares of our
common stock. The conversion price of the debenture is described in detail under
the heading "The Financing Transaction--Conversion of the debenture into common
stock."
The following table sets forth the number of shares of our common stock that
would be issuable to Fusion Capital upon conversion of the debenture at various
conversion prices:
<TABLE>
<CAPTION>
NUMBER OF SHARES TO BE PERCENT OF OUR OUTSTANDING
ISSUED UPON COMMON STOCK AS OF
CONVERSION PRICE CONVERSION JANUARY 28, 2000(1)
- ----------------------------------- ---------------------- --------------------------
<S> <C> <C>
$10................................ 600,000 10.9%
$12.15625 the conversion price on
date of Prospectus............... 493,573 10.1%
$16.76 the Fixed Conversion
Price............................ 357,995 7.3%
$20................................ 300,000 5.8
$30................................ 200,000 3.9
$40................................ 150,000 3.0
</TABLE>
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(1) On the date of this prospectus, there were 4,908,180 shares of our common
stock outstanding.
We estimate that we will issue no more than 600,000 shares to Fusion Capital
upon conversion of the debenture, all of which are included in this offering. If
the debenture is actually convertible into greater than 600,000 shares, we
currently intend to redeem the debenture at 106% of its outstanding principal
balance.
EFFECT OF CONVERSION OF DEBENTURE ON ADAM.COM AND OUR SHAREHOLDERS
If the debenture were fully converted on the date of this prospectus, the
conversion price would have been $12.15625 per share and the debenture would
have been convertible into an aggregate of 493,573 shares of our common stock,
representing 10.1% of our outstanding common stock.
All shares registered in this offering are freely tradable. It is
anticipated that shares registered in this offering will be sold over a period
of up to six months from the date of this prospectus. The sale of a significant
amount of shares registered in this offering at any given time could cause the
trading price of our common stock to decline and to be highly volatile. Fusion
Capital may ultimately convert the entire debenture (at a rate of $1,000,000 per
month unless a greater amount is permitted by the Company) into common stock,
and it may sell all of the shares of common stock it acquires upon conversion.
Therefore, the conversion of the debenture may result in substantial dilution to
the interests of other holders of our common stock. However, we have the right
to block conversions of the debenture and to require redemption of the debenture
at a redemption price of 106% of the outstanding principal balance. We currently
intend to exercise these rights to protect our shareholders from substantial
dilution. See "The Financing Transaction."
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ADAM.COM'S ABILITY TO RESTRICT CONVERSION
The debenture provides that we may restrict conversion of the debenture if
the closing sale price of our common stock is below the Fixed Conversion Price
for any three consecutive trading days. We currently intend to so restrict
conversion to the extent practicable, so that our shareholders would be
protected from substantial dilution. Investors should be aware, however, that to
the extent adam.com needs to use the cash proceeds of the debenture for working
capital or other business purposes, we will not restrict conversion of the
debenture.
ADJUSTMENT TO CONVERSION PRICE
The conversion price of the debenture will be adjusted for any
reorganization, recapitalization, non-cash dividend, stock split or other
similar transaction occurring during the ten trading days in which the closing
bid price is used to compute the conversion price.
ADDITIONAL SHARES TO BE ISSUED TO FUSION CAPITAL
Under the terms of the purchase agreement, in connection with the issuance
of the first debenture, Fusion Capital received 59,542 additional shares of our
common stock as a commitment fee. Unless an event of default occurs, all of
these shares must be held by Fusion Capital until the first debenture has been
converted or repaid in full.
RELATIONSHIP BETWEEN ADAM.COM AND FUSION CAPITAL
Fusion Capital has had no business or financial relationship with adam.com
prior to November 15, 1999. On November 15, 1999, adam.com agreed to issue to
Fusion Capital, and Fusion Capital agreed to purchase from adam.com, a 0% senior
secured convertible debenture in the aggregate principal amount of $6,000,000.
Notwithstanding the limitations on ownership set forth in the securities
purchase agreement, if the entire debenture was converted into shares of common
stock at a conversion price equal to $12.15625 per share, representing an
assumed conversion price computed as if the debenture were fully converted on
the date of this prospectus, Fusion Capital would beneficially own 10.1% of our
outstanding common stock as of the date of this prospectus.
HOLDINGS OF FUSION CAPITAL UPON TERMINATION OF THIS OFFERING
Because the selling shareholder may sell all, some or none of the common
stock offered by this prospectus, no estimate can be given as to the amount of
common stock that will be held by the selling shareholder upon termination of
the offering.
PLAN OF DISTRIBUTION
The common stock offered by this prospectus is being offered by the selling
shareholder, Fusion Capital Fund I, LLC. The common stock may be sold or
distributed from time to time by the selling shareholder, or by donees or
transferees of, or other successors in interests to, the selling shareholder,
directly to one or more purchasers or through brokers, dealers or underwriters
who may act solely as agents or may acquire such common stock as principals, at
market prices prevailing at the time of sale, at prices related to such
prevailing market prices, at negotiated prices, or at fixed prices, which may be
changed. The sale of the common stock offered by this prospectus may be effected
in one or more of the following methods:
- ordinary brokers' transactions;
- transactions involving cross or block trades or otherwise on the Nasdaq
National Market;
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- purchases by brokers, dealers or underwriters as principal and resale by
such purchasers for their own accounts pursuant to this prospectus;
- "at the market" to or through market makers or into an existing market for
the common stock;
- in other ways not involving market makers or established trading markets,
including direct sales to purchasers or sales effected through agents;
- in privately negotiated transactions; or
- any combination of the foregoing.
In order to comply with the securities laws of certain states, if
applicable, the shares may be sold only through registered or licensed brokers
or dealers. In addition, in certain states, the shares may not be sold unless
they have been registered or qualified for sale in such state or an exemption
from such registration or qualification requirement is available and complied
with.
Brokers, dealers, underwriters or agents participating in the distribution
of the shares as agents may receive compensation in the form of commissions,
discounts or concessions from the selling shareholder and/or purchasers of the
common stock for whom such broker-dealers may act as agent, or to whom they may
sell as principal, or both. The compensation paid to a particular broker-dealer
may be less than or in excess of customary commissions.
THE SELLING SHAREHOLDER AND ANY BROKER-DEALERS WHO ACT IN CONNECTION WITH
THE SALE OF THE SHARES HEREUNDER MAY BE DEEMED TO BE "UNDERWRITERS" WITHIN THE
MEANING OF THE SECURITIES ACT, AND ANY COMMISSIONS THEY RECEIVE AND PROCEEDS OF
ANY SALE OF THE SHARES MAY BE DEEMED TO BE UNDERWRITING DISCOUNTS AND
COMMISSIONS UNDER THE SECURITIES ACT.
Neither adam.com nor the selling shareholder can presently estimate the
amount of compensation that any agent will receive. adam.com knows of no
existing arrangements between any selling shareholder, any other shareholder,
broker, dealer, underwriter or agent relating to the sale or distribution of the
shares. At a time particular offer of shares is made, a prospectus supplement,
if required, will be distributed that will set forth the names of any agents,
underwriters or dealers and any compensation from the selling shareholder and
any other required information.
adam.com will pay all of the expenses incident to the registration, offering
and sale of the shares to the public other than commissions or discounts of
underwriters, broker-dealers or agents. adam.com has also agreed to indemnify
the selling shareholder and related persons against specified liabilities,
including liabilities under the Securities Act.
Insofar as indemnification for liabilities arising under the Securities Act
may be permitted to directors, officers and controlling persons of adam.com,
adam.com has been advised that in the opinion of the SEC such indemnification is
against public policy as expressed in the Securities Act and is therefore,
unenforceable.
FUSION CAPITAL AND ITS AFFILIATES HAVE AGREED NOT TO ENGAGE IN ANY DIRECT OR
INDIRECT SHORT SELLING OR HEDGING OF ADAM.COM'S COMMON STOCK DURING THE TERM OF
THE DEBENTURES.
adam.com has advised the selling shareholder that while they are engaged in
a distribution of the shares included in this prospectus they are required to
comply with Regulation M promulgated under the Securities Exchange Act of 1934,
as amended. With certain exceptions, Regulation M precludes the selling
shareholder, any affiliated purchasers, and any broker-dealer or other person
who participates in such distribution from bidding for or purchasing, or
attempting to induce any person to bid for or purchase any security which is the
subject of the distribution until the entire distribution is complete.
Regulation M also prohibits any bids or purchases made in order to stabilize the
price of a security in connection with the distribution of that security. All of
the foregoing may affect the marketability of the shares offered hereby this
prospectus.
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This offering will terminate on the earlier of (1) the date on which the
shares are eligible for resale without restrictions pursuant to Rule 144(k)
under the Securities Act or (2) the date on which all shares offered by this
prospectus have been sold by the selling shareholder.
VALIDITY OF COMMON STOCK
The validity of the common stock offered by this prospectus will be passed
upon for us by King & Spalding, Atlanta, Georgia.
EXPERTS
The financial statements incorporated in this prospectus by reference to the
Annual Report on Form 10-K of adam.com, Inc. (formerly, A.D.A.M.
Software, Inc.) for the year ended March 31, 1999 have been so incorporated in
reliance on the report of PricewaterhouseCoopers LLP, independent accountants,
given on the authority of said firm as experts in auditing and accounting.
ABOUT THIS PROSPECTUS
This prospectus is part of a registration statement that we filed with the
Securities and Exchange Commission using a "shelf" registration process. Under
this shelf process, a company that has the right to receive shares of our common
stock (the "selling shareholder") may sell up to an aggregate of 659,542 shares
of common stock in one or more offerings. This prospectus and any applicable
prospectus supplement provided to you should be considered together with the
additional information described under the heading "Where You Can Find More
Information."
The registration statement that contains this prospectus (including the
exhibits to the registration statement) contains additional information about
our company and the securities offered by this prospectus. That registration
statement can be read at the SEC web site or at the SEC offices mentioned under
the heading "Where You Can Find More Information."
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WHERE YOU CAN FIND MORE INFORMATION
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 at the SEC's public reference rooms in Washington, D.C.,
New York, New York and Chicago, Illinois. Please call the SEC at 1-800-SEC-0330
for further information on the public reference rooms. Our SEC filings are also
available to the public from the SEC's web site at http://www.sec.gov.
The SEC allows us to "incorporate by reference" the information we file with
them, which means that we can disclose important information to you by referring
you to those documents. The information incorporated by reference is considered
to be part of this prospectus, and later information filed with the SEC will
automatically update and supersede this information. We incorporate by reference
the documents listed below and any future filings made with the SEC under
Section 13(a), 13(c), 14, or 15(d) of the Securities Exchange Act of 1934 until
our offering is completed.
- Our Annual Report on Form 10-K for the year ended March 31, 1999, filed
with the SEC on June 29, 1999;
- Our Quarterly Report on Form 10-Q for the quarter ended June 30, 1999;
- Our Quarterly Report on Form 10-Q for the quarter ended September 30,
1999;
- Our Current Report on Form 8-K dated November 15, 1999;
- Our Current Report on Form 8-K dated December 16, 1999; and
- The description of our common stock contained in our registration
statement on Form 8-A filed with the SEC on October 11, 1995, including
any amendments or reports filed for the purpose of updating such
description.
You may request a copy of these filings (other than an exhibit to a filing
unless that exhibit is specifically incorporated by reference into that filing),
at no cost, by writing or telephoning us at the following address:
Michael S. Fisher
Director of Finance/Administration
adam.com, Inc.
1600 RiverEdge Parkway, Suite 800
Atlanta, GA 30328
(770) 980-0888
You should rely only on the information incorporated by reference or
provided in this prospectus. We have authorized no one to provide you with
different information. We are not making an offer of these securities in any
state where the offer is not permitted. You should not assume that the
information in this prospectus is accurate as of any date other than the date on
the front of the document.
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ADAM.COM, INC.
UP TO 659,542 SHARES
OF
COMMON STOCK
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PROSPECTUS
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,
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