As Filed with the Securities and Exchange Commission on February 11, 2000
Registration No. 333-94723
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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
PRE-EFFECTIVE AMENDMENT NO. 1 TO
FORM S-3
REGISTRATION STATEMENT
Under
THE SECURITIES ACT OF 1933
APPLIED DIGITAL SOLUTIONS, INC.
(Exact name of registrant as specified in its charter)
MISSOURI 3661 43-1641533
(State or other jurisdiction of (Primary Standard Industrial (I.R.S. Employer
incorporation or organization) Classification Code Number) Identification No.)
400 Royal Palm Way, Suite 410
Palm Beach, Florida 33480
(561) 366-4800
(Address, including zip code, and telephone number,
including area code, of registrant's principal executive offices)
------------------------------------------------------
David I. Beckett, Esq. Copies of all correspondence to:
Applied Digital Solutions, Inc. Denis P. McCusker, Esq.
400 Royal Palm Way, Suite 410 Bryan Cave LLP
Palm Beach, Florida 33480 One Metropolitan Square
(561) 366-4800 211 North Broadway,
Fax: (561) 366-0002 Suite 3600 St. Louis,
(Name, address, including zip code, Missouri 63102-2750
and telephone number, (314) 259-2000
including area code, of agent for service) Fax: (314) 259-2020
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AMENDING THE PROSPECTUS
- --------------------------------------------------------------------------------
The Registrant hereby amends this Registration Statement on such date or dates
as may be necessary to delay its effective date until the Registrant shall file
a further amendment which specifically states that this Registration Statement
shall thereafter become effective in accordance with Section 8(a) of the
Securities Act of 1933 or until the Registration Statement shall become
effective on such date as the Commission, acting pursuant to said Section 8(a),
may determine.
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<PAGE>
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The information in this preliminary prospectus is not complete and may be
changed. The Selling Shareholders may not sell these securities until the
amendment to the registration statement filed with the Securities and Exchange
Commission is effective. This preliminary prospectus is not an offer to sell
these securities and we are not soliciting any offer to buy these securities in
any state where the offer or sale is not permitted.
- --------------------------------------------------------------------------------
SUBJECT TO COMPLETION, DATED FEBRUARY 11, 2000
1,467,653 Shares
[GRAPHIC OMITTED]
Common Stock
-------------------------------------
This prospectus relates to 1,467,653 shares of our Common Stock, par value
$.001 per share, which will be sold at various times by the Selling Shareholders
listed in this prospectus starting on page 9. More information about the shares
is under "Description of Capital Stock."
The Selling Shareholders may sell the shares of Common Stock in one or more
transactions (which may include "block transactions") on the Nasdaq Stock
Market, in the over-the-counter market, in negotiated transactions or in a
combination of such methods of sales, at fixed prices which may be changed, at
market prices prevailing at the time of sales, at prices related to such
prevailing market prices or at negotiated prices.
Our shares are listed on the Nasdaq Stock Market under the symbol "ADSX."
On February 7, 2000, the last reported sale price of our Common Stock was $7.50
per share. See "Price Range of Common Stock."
We will not receive any proceeds from shares sold by the Selling
Shareholders and we will bear all the expenses incurred in connection with
registering this offering of Common Stock.
The Selling Shareholders may sell the shares of Common Stock directly or
through underwriters, dealers or agents. They may also pledge some of the shares
of Common Stock. This prospectus also relates to any sale of shares of Common
Stock that might take place following any foreclosure of such a pledge. More
information about the way the Selling Shareholders may distribute the Common
Stock is under the heading "Plan of Distribution."
See the information under the heading "Risk Factors" starting on page 3,
which describes certain factors you should consider before purchasing the Common
Stock.
Our principal office is at 400 Royal Palm Way, Suite 410, Palm Beach,
Florida 33480, and our telephone number is (561) 366-4800.
-------------------------------------
Neither the Securities and Exchange Commission nor any state securities
commission has approved or disapproved of these securities, or passed upon the
adequacy or accuracy of this prospectus. Any representation to the contrary is a
criminal offense.
-------------------------------------
The date of this prospectus is [_____________], 2000.
<PAGE>
TABLE OF CONTENTS
About This Prospectus..........................................................2
Recent Developments............................................................2
Risk Factors...................................................................3
Our Business...................................................................6
Selling Shareholders...........................................................9
Description of Capital Stock..................................................11
Price Range of Common Stock...................................................11
Plan of Distribution..........................................................12
Legal Opinion.................................................................12
Experts.......................................................................12
Where You Can Find More Information
About Us................................................................12
Statements Regarding Forward-Looking
Information.............................................................14
ABOUT THIS PROSPECTUS
This prospectus is part of a registration statement that we filed with the
Securities and Exchange Commission utilizing a "shelf" registration process.
Under this shelf process, the Selling Shareholders may, from time to time, sell
their shares of our common stock in one or more offerings. This prospectus
provides you with a general description of the Common Stock being offered. You
should read this prospectus together with additional information described under
the heading "Where You Can Find More Information About Us."
The registration statement that contains this prospectus, including the
exhibits to the registration statement, contains additional information about us
and the securities offered under this prospectus. That registration statement
can be read at the Commission's offices mentioned under the heading "Where You
Can Find More Information About Us."
RECENT DEVELOPMENTS
On September 14, 1999, our subsidiary Intellesale.com, Inc. filed a
registration statement with the Securities and Exchange Commission in connection
with its proposed initial public offering. In addition to Intellesale.com
selling primary shares, we expected to sell shares of Intellesale.com stock as a
selling shareholder. On January 31, 2000, we announced that we are postponing
the proposed initial public offering of Intellesale.com stock due to market
conditions.
2
<PAGE>
RISK FACTORS
You should carefully consider the risk factors listed below. These risk
factors may cause our future earnings to be less or our financial condition to
be less favorable than we expect. You should read this section together with the
other information in, or incorporated herein by reference into, this prospectus.
Forward-Looking Statements and Associated Risk
This prospectus, including the information incorporated herein by
reference, contains "forward-looking statements" as defined in the Private
Securities Litigation Reform Act of 1995. All such forward-looking information
involves risks and uncertainties and may be affected by many factors, some of
which are beyond our control. These factors include:
o our growth strategies,
o anticipated trends in our business and demographics,
o our ability to successfully integrate the business operations of
recently acquired companies, and
o regulatory, competitive or other economic influences.
Uncertainty of Future Financial Results
While we have been profitable for the last three fiscal years, future
financial results are uncertain. There can be no assurance that we will continue
to be operated in a profitable manner. Profitability depends upon many factors,
including the success of our various marketing programs, the maintenance or
reduction of expense levels and our ability to successfully coordinate the
efforts of the different segments of our business.
Future Sales of and Market for the Shares
As of February 7, 2000, there were 49,018,724 shares of Common Stock
outstanding. In addition, 503 shares of Common Stock are reserved for issuance
in exchange for certain exchangeable shares issued by our Canadian subsidiary.
Since January 1, 1999, we have issued an aggregate of 16,213,681 shares of
Common Stock, of which 5,928,220 shares of Common Stock were issued as earnout
payments in acquisitions, 3,343,131 shares were issued in exchange for the
exchangeable shares of our Canadian subsidiary and the exchangeable shares of
our former Canadian subsidiary, TigerTel Services Limited, 641,297 shares were
issued to acquire minority interests in three companies, 3,416,724 shares of
Common Stock were issued for acquisitions (including "price protection" shares),
1,462,584 shares have been issued upon the exercise of options, 1,241,800 shares
have been issued upon the exercise of warrants, 112,761 shares have been issued
to employees under our 1999 Employees Stock Purchase Plan, and 67,164 shares of
Common Stock were issued for services rendered, including services under
employment agreements and employee bonuses.
Although we previously announced that we intend to limit the use of stock
in future acquisitions, and to focus on cash transactions, we have effected, and
may continue to effect, acquisitions or contract for certain services through
the issuance of Common Stock or our other equity securities, as we have
typically done in the past. In addition, we have agreed to certain "price
protection" provisions in acquisition agreements which may result in additional
shares of common stock being issued to selling shareholders as of the effective
date of the registration of the shares such selling shareholder previously
received as consideration from us. Such issuances of additional securities may
be dilutive of the value of the Common Stock in certain circumstances and may
have an adverse impact on the market price of the Common Stock.
3
<PAGE>
Competition
Each segment of our business is highly competitive, and we expect that
competitive pressures will continue. Many of our competitors have far greater
financial, technological, marketing, personnel and other resources than us. The
areas which we have identified for continued growth and expansion are also
target market segments for some of the largest and most strongly capitalized
companies in the United States, Canada and Europe. There can be no assurance
that we will have the financial, technical, marketing and other resources
required to compete successfully in this environment in the future.
Risks Associated with Acquisitions and Expansion
We have engaged in a continuing program of acquisitions of other businesses
which are considered to be complementary to our lines of business, and we
anticipate that such acquisitions will continue to occur. Our total assets were
approximately $240 million as of September 30, 1999 and $124 million, $61
million, $33 million and $4 million as of December 31, 1998, 1997, 1996 and
1995, respectively. Net operating revenue was approximately $232 million for the
nine months ended September 30, 1999 and approximately $207 million, $103
million, $20 million and $2 million for the years ended December 31, 1998, 1997,
1996 and 1995, respectively. Managing these dramatic changes in the scope of our
business will present ongoing challenges to management, and there can be no
assurance that our operations as currently structured, or as affected by future
acquisitions, will be successful.
We may require substantial additional capital, and there can be no
assurance as to the availability of such capital when needed, nor as to the
terms on which such capital might be made available to us.
It is our policy to retain existing management of acquired companies, under
the overall supervision of our senior management. The success of the operations
of these subsidiaries will depend, to a great extent, on the continued efforts
of the management of the acquired companies.
We have entered into earnout arrangements with certain selling shareholders
under which they are entitled to additional consideration for their interests in
the companies they sold to us. Under these agreements, assuming that all
earnouts are achieved, we are contingently liable for additional consideration
amounting to approximately $1 million based on achieved 1999 results,
approximately $13.6 million based on achieved 2000 results, approximately $7.9
million based on achieved 2001 results, approximately $1.8 million based on
achieved 2002 results and approximately $2 million based upon achieved 2004
results.
We have entered into put options with the selling shareholders of those
companies in which we acquired less than a 100% interest. These options require
us to purchase the remaining portion we do not own after periods ranging from
four to five years from the dates of acquisition at amounts per share generally
equal to 10% - 20% of the average annual earnings per share of the company
before income taxes for, generally, a two-year period ending on the effective
date of the put multiplied by a multiple ranging from four to five. The
purchases under these put options are recorded as changes in minority interest
based upon current operating results.
4
<PAGE>
Dependence on Key Individuals
Our future success is highly dependent upon our ability to attract and
retain qualified key employees. We are organized with a small senior management
team, with each of our separate operations under the day-to-day control of local
managers. If we were to lose the services of any members of our central
management team, our overall operations could be adversely affected, and the
operations of any of our individual facilities could be adversely affected if
the services of the local managers should be unavailable. We have entered into
employment contracts with our key officers and employees and certain
subsidiaries. The agreements are for periods of one to ten years through June
2009. Some of the employment contracts also call for bonus arrangements based on
earnings.
Lack of Dividends on Common Stock; Issuance of Preferred Stock
We do not have a history of paying dividends on our Common Stock, and there
can be no assurance that such dividends will be paid in the foreseeable future.
Under the terms of our term and revolving credit agreement, we may declare and
pay cash dividends of up to $150,000 in any calendar year. We intend to use any
earnings which may be generated to finance the growth of our businesses. The
Board of Directors has the right to authorize the issuance of preferred stock,
without further shareholder approval, the holders of which may have preferences
over the holders of the Common Stock as to payment of dividends.
Possible Volatility of Stock Price
Our Common Stock is quoted on the Nasdaq Stock Market(R), which stock
market has experienced and is likely to experience in the future significant
price and volume fluctuations which could adversely affect the market price of
our Common Stock without regard to our operating performance. In addition, we
believe that factors such as the significant changes to our business resulting
from continued acquisitions and expansions, quarterly fluctuations in our
financial results or cash flows, shortfalls in earnings or sales below analyst
expectations, changes in the performance of other companies in our same market
sectors and the performance of the overall economy and the financial markets
could cause the price of our Common Stock to fluctuate substantially. During the
12 months preceding the date of this prospectus, the price per share of our
Common Stock has ranged from a high of $16 to a low of $1 5/8.
Termination Payments
Our employment agreements with three of our executive officers include
"change of control" provisions, under which the employees may terminate their
employment within one year after a change of control, and be entitled to receive
specified severance payments and/or continued compensation payments for 60
months. Also, the agreements for both Richard Sullivan and Garrett Sullivan
provide for certain "triggering events" which include a change in control, the
termination of Richard Sullivan's employment other than for cause, or if Richard
Sullivan ceases to hold his current positions with us for any reason other than
a material breach of the terms of his employment agreement. In that case, we
would be obligated to pay, in cash and/or in stock, $12.1 million and $3.5
million, respectively, to Richard Sullivan and to Garrett Sullivan, in addition
to certain other compensation.
Our obligations to make the payments described in this section could
adversely affect our financial condition or could discourage other parties from
entering into transactions with us which might be treated as a change in control
or triggering event for purposes of these agreements.
5
<PAGE>
Year 2000 Compliance
We have not experienced any significant Year 2000 related problems. During
1998 and 1999, we implemented a company wide program to ensure that we would be
compliant prior to the Year 2000 failure dates. We experienced no problems on
January 1, 2000 and do not anticipate experiencing any problems on February 29,
2000. However we cannot make any assurances that unforeseen problems may not
arise in the future.
Software Sold to Consumers. During 1998 and 1999 we identified what we
believe to be all potential Year 2000 problems with any of the software products
we develop and market. However, management believes that it is not possible to
determine with complete certainty that all Year 2000 problems affecting our
software products will be identified or corrected due to the complexity of these
products. In addition, these products interact with other third party vendor
products and operate on computer systems which are not under our control. For
non-compliant products, we have provided and are continuing to provide
recommendations as to how an organization may address possible Year 2000 issues
regarding that product. Software updates are available for most, but not all,
known issues. Such information is the most currently available concerning the
behavior of our products and is provided "as is" without warranty of any kind.
However, variability of definitions of "compliance" with the Year 2000 and of
different combinations of software, firmware and hardware could likely lead to
lawsuits against us. The outcome of any such lawsuits and the impact on us are
not estimable at this time.
We do not believe that the Year 2000 problem has had or will continue to
have a material adverse effect on our business, results of operations or cash
flows. The estimate of the potential impact on our financial position, overall
results of operations or cash flows for the Year 2000 problem could change in
the future. Our ability to achieve Year 2000 compliance and the level of
incremental costs associated therewith, could be adversely impacted by, among
other things, the availability and cost of programming and testing resources,
vendors' ability to modify proprietary software, and unanticipated problems
identified in the ongoing compliance review. The discussion of our efforts, and
management's expectations, relating to Year 2000 compliance are forward-looking
statements.
OUR BUSINESS
General
Applied Digital Solutions, Inc. is an e-business to business solutions
provider offering Internet, telecom, LAN and software services to a wide variety
of businesses throughout North America. We currently operate in the United
States, Canada and the United Kingdom.
The majority of our current operations are the result of acquisitions
completed during the last five years. Our net operating revenues were $207.1
million, $103.2 million, $19.9 million, $2.3 million and $0.3 million
respectively, in 1998, 1997, 1996, 1995 and 1994. Since 1994 we have completed
39 acquisitions. Management analyzes each acquisition opportunity using criteria
including profitability over a two to three year period, the strength of its
balance sheet, the strength of its customer base and the experience of its
management team. Going forward, we intend to make acquisitions that fit within
one of our five primary operating divisions. Since January 1, 1999, we have
completed six acquisitions.
Business Divisions
Prior to March 1999, our business was organized into three, and then
eventually, four business groups, or industry segments: the Services and
Solutions Group (formerly the Retail Group), the Computer Group, the
Manufacturing Group and the International Group. Each operating business was
conducted through a separate subsidiary company directed by its own management
team, and each subsidiary company had its own marketing and operations support
personnel. Each management team originally reported to our President, who was
responsible for overall corporate control and coordination, as well as financial
6
<PAGE>
planning. Later, a Group Vice President was added and the management teams
reported to the Group Vice President, who ultimately reported to our President.
The Chairman was responsible for our overall business and strategic planning.
In March 1999, we announced a corporate reorganization at which time we
named five new divisions. Each division is managed by a division president who
reports to the Senior Vice President who in turn reports to the President. Each
division either has in place or is in the process of hiring a vice president of
marketing and a financial controller. We believe we will attain increased
operating efficiencies through this reorganization and believe this structure
will facilitate the cross marketing of our products and services. In October
1999 we sold four companies in our Communications Infrastructure Division and
anticipate disposing of the remaining two entities in that division within the
next twelve months. We now consider this division to be non-core. In December
1999, we disposed of our interest in TigerTel, Inc. which was part of our
Telecommunications division.
Our primary businesses, other than Intellesale.com and the Non-Core
Business Group, are now organized into four business divisions:
o Telecommunications -- offers a wide range of communications services
including interconnect and internet and computer telephony integration. On
December 30, 1999, we sold our interest in our Canadian subsidiary,
TigerTel, Inc.
o Network Infrastructure -- provides personal computer network infrastructure
for the development of local and wide area networks as well as site
analysis, configuration proposals, training and customer support services.
o Internet -- is focused on developing electronic commerce sites for
businesses and providing internet access services to customers of our other
divisions.
o Application Technology -- provides software applications for large retail
application environments, including point of sale, data acquisition, asset
management and decision support systems and develops programs for portable
data collection equipment, including wireless hand-held devices. It is also
involved in the design, manufacture and support of satellite communication
technology including satellite modems, data broadcast receivers and
wireless global positioning systems for commercial and military
applications.
As of December 31, 1998, 1997 and 1996, revenues from these four divisions
and the four companies in the Communications Infrastructure division that were
disposed of during 1999 together accounted for 51.4%, 44.8% and 80.4%,
respectively, of our total revenues.
Intellesale.com
Intellesale.com, Inc. sells refurbished and new computer equipment and
related components online, through their website at www.Intellesale.com, and
through other Internet companies, as well as through traditional channels, which
includes sales made by Intellesale.com's sales force.
As of December 31, 1998, 1997 and 1996, revenues from Intellesale.com
accounted for 30.3%, 40.3% and 10.0%, respectively, of our total revenues.
On September 14, 1999, Intellesale.com filed a registration statement with
the Securities and Exchange Commission in connection with its proposed initial
public offering. In addition to Intellesale.com selling primary shares, we
expected to sell shares of Intellesale.com stock as a selling shareholder. On
January 31, 2000, we announced that we are postponing the proposed initial
public offering of Intellesale.com stock due to market conditions.
7
<PAGE>
The Non-Core Business Group
This group is now comprised of the remaining entities within our
communications infrastructure division, and four individually managed companies
whose businesses are as follows:
(1) Communications Infrastructure -- is involved in the fabrication,
installation, and maintenance of microwave, cellular and digital personal
communication services (PCS) towers and the construction and installation
of fiber optic, voice/data communications and switchgear systems. Effective
as of October 1, 1999, we sold four companies in this division. These
companies provided installation, service and maintenance of power
distribution systems such as lighting, standby power, alarms, security,
video systems, voice/data, network infrastructure and the installation of
fiber optics within customer premises.
o Gavin-Graham Electrical Products is a custom manufacturer of electrical
products, specializing in digital and analog panelboards, switchboards,
motor controls and general control panels. The company also provides custom
manufacturing processes such as shearing, punching, forming, welding,
grinding, painting and assembly of various component structures.
o Ground Effects, Ltd., based in Windsor, Canada, is a certified manufacturer
and tier one supplier of standard and specialized vehicle accessory
products to the automotive industry. The company exports over 80% of the
products it produces to the United States, Mexico, South America, the Far
East and the Middle East.
o Hopper Manufacturing Co., Inc. remanufactures and distributes automotive
parts. This primarily includes alternators, starters, water pumps,
distributors and smog pumps.
o Innovative Vacuum Solutions, Inc. designs, installs and re-manufactures
vacuum systems used in industry.
As of December 31, 1998, 1997 and 1996, revenues from this business group
accounted for 19.2%, 17.0% and 9.0%, respectively, of our total revenues.
We announced our intention to divest, in the ordinary course of business,
these non-core businesses at such time and on such terms as our Board of
Directors determines advisable. There can be no assurance that we will divest of
any or all of these businesses or as to the terms of any divestiture
transaction.
8
<PAGE>
Selling Shareholders
The following table sets forth information regarding the ownership of our
Common Stock by the Selling Shareholders and the shares being offered under this
prospectus.
We have issued the shares from time to time in various acquisition
transactions and in consideration for services rendered, including services
under employment agreements and employee bonuses. The registration of these
shares has been effected pursuant to agreements entered into by us with the
Selling Shareholders.
The percentage owned prior to and after the offering reflects the
outstanding common shares at the time of the registration statement. The amount
and percentage owned after the offering assumes the sale of all of the Common
Stock being registered on behalf of the Selling Shareholders.
<TABLE>
<CAPTION>
Number of
Ownership Prior to the Shares Offered Ownership After
Selling Shareholder Offering Hereby the Offering
- ----------------------------------------- ---------------------- -------------- ---------------
<S> <C> <C> <C> <C> <C>
Shares % Shares %
------ --- ------ ---
Bradley A. Haslett...................... 3,612 * 3,612(1) -- *
James S. Bosshart....................... 3,612 * 3,612(1) -- *
John K. Murray.......................... 301,485 * 301,485(1) -- *
Murray Limited Partnership.............. 159,250 * 159,250(1) -- *
Anat Ebenstein.......................... 15,925 * 15,925(1) -- *
Sidney L. Karp Holding
Company, Inc......................... 15,925 15,925(1) -- *
Capital Alliance Corporation............ 22,295 * 22,295(1) -- *
Kerry G. Burst.......................... 43,260 * 43,260(1) -- *
John Dixson............................. 206 * 206(1) -- *
Sherri Sheerr........................... 17,283 * 17,283(1) -- *
Edward L. Cummings...................... 1,098 * 1,098(1) -- *
Harvey H. Newman........................ 161,512 * 161,512(1) -- *
Martin D. Zuckerman..................... 142,344 * 142,344(1) -- *
Charles Newman.......................... 416 * 416(1) -- *
Albert F. Butters, Jr................... 27,905 * 27,905(1) -- *
Lawrence R. Wasielewski................. 2,498 * 2,498(1) -- *
Michael Metropolis...................... 9,114 * 9,114(2) -- *
Michelle Metropolis..................... 9,114 * 9,114(2) -- *
Joseph T. Gabriel....................... 9,114 * 9,114(2) -- *
Lance J. Umbertis....................... 16,823 * 16,823(3) -- *
Eric J. Steinmann....................... 18,001 * 18,001(4) -- *
Scott A. Capistrano..................... 1,509 * 1,509(5) -- *
Lora R. Steinmann....................... 100,000 * 100,000(6) -- *
E. Kurt Steinmann....................... 13,760 * 13,760(6) -- *
Dolores L. Franco....................... 3,840 * 3,840(6) -- *
Josef M. Steinmann...................... 16,000 * 16,000(6) -- *
Norman Bangle........................... 1,120 * 1,120(6) -- *
Robert A. Bospflug...................... 1,600 * 1,600(6) -- *
Andrea L. Downs......................... 800 * 800(6) -- *
Craig C. Gibble......................... 2,080 * 2,080(6) -- *
Pamela L. Pittman....................... 3,440 * 3,440(6) -- *
Victor S. Ahern......................... 2,000 * 2,000(6) -- *
Arie W. Bos............................. 1,600 * 1,600(6) -- *
Patricia A. Miller...................... 240 * 240(6) -- *
Heinz J. Steinmann...................... 2,240 * 2,240(6) -- *
Lance R. Steinmann...................... 2,080 * 2,080(6) -- *
</TABLE>
9
<PAGE>
<TABLE>
<CAPTION>
Number of
Ownership Prior to the Shares Offered Ownership After
Selling Shareholder Offering Hereby the Offering
- ----------------------------------------- ---------------------- -------------- ---------------
<S> <C> <C> <C> <C> <C>
Shares % Shares %
------ --- ------ ---
Daniel P. Wolfe......................... 1,200 * 1,200(6) -- *
Randy C. Zachary........................ 720 * 720(6) -- *
STC Netcom, Inc. Employees' Trust....... 212,800 * 212,800(6) -- *
John E. Kunish.......................... 119,832 * 119,832(7) -- *
------------ -------------- -------
Total 1,467,653 1,467,653 --
============ ============== =======
<FN>
- ----------------------------
* Represents ownership of less than one percent.
(1) Represents shares issued pursuant to the price protection provisions of the
Agreements of Sale.
(2) Includes (a) 487 shares issued pursuant to the price protection provisions
of the Agreement of Sale, and (b) 8,627 shares issued in connection with
the Merger of MVAK Technologies, Inc. into Innovative Vacuum Solutions,
Inc. ("IVS"). These selling shareholders are minority shareholders in IVS.
(3) Includes (a) 823 shares issued pursuant to the price protection provisions
of the Agreement of Sale, and (b) 16,000 shares issued in connection with
our acquisition of the 20% minority interest in STC Netcom, Inc. effective
as of November 1, 1999 that we did not own.
(4) Includes (a) 721 shares issued pursuant to the price protection provisions
of the Agreement of Sale, and (b) 17,280 shares issued in connection with
our acquisition of the 20% minority interest in STC Netcom, Inc. effective
as of November 1, 1999 that we did not own.
(5) Includes (a) 309 shares issued pursuant to the price protection provisions
of the Agreement of Sale, and (b) 1,200 shares issued in connection with
our acquisition of the 20% minority interest in STC Netcom, Inc. effective
as of November 1, 1999 that we did not own.
(6) Represents shares issued in connection with our acquisition of the 20%
minority interest in STC Netcom, Inc. effective as of November 1, 1999
that we did not own.
(7) Represents shares issued in connection with our acquisition of 10% of the
20% minority interest in Atlantic Systems, Inc., effective as of October
1, 1999 that we did not own.
</FN>
</TABLE>
10
<PAGE>
DESCRIPTION OF CAPITAL STOCK
Our Second Restated Articles of Incorporation authorize the issuance of up
to 80,000,000 shares of our Common Stock and up to 5,000,000 shares of preferred
stock (the "Preferred Stock"). The Preferred Stock may be issued from time to
time and on such terms as are specified by our Board of Directors, without
further authorization from our shareholders.
As of February 7, 2000, there were 49,018,724 shares of our Common Stock
outstanding. In addition, 503 shares of Common Stock are reserved for issuance
in exchange for the exchangeable shares in our Canadian subsidiary.
As of February 7, 2000 there were issued and outstanding warrants to
purchase 918,200 shares of our Common Stock at a weighted average exercise price
of $4.69 per share and options held by our employees to purchase 11,831,956
shares of our Common Stock at a weighted average exercise price of $2.46 per
share. All of the warrants are currently exercisable. Of the outstanding
options, 6,600,006 are now exercisable at a weighted average exercise price of
$3.53 per share, and the rest become exercisable at various times over the next
eight years.
PRICE RANGE OF COMMON STOCK
Our Common Stock trades on the Nasdaq Stock Market(R) under the symbol
"ADSX." The following table sets forth the high and low sale prices of the
Common Stock as reported by the Nasdaq for each of the quarters since the
beginning of 1997.
High Low
1997
First Quarter................ 5 7/8 4
Second Quarter............... 4 3/8 2 5/8
Third Quarter ............... 8 3/4 2 13/16
Fourth Quarter .............. 9 3/4 3 25/32
1998
First Quarter................ 5 1/2 4 1/32
Second Quarter............... 4 7/8 3 1/8
Third Quarter ............... 3 1/2 1 9/16
Fourth Quarter .............. 5 1/2 1 17/32
1999
First Quarter................ 4 3/16 2
Second Quarter............... 3 1/2 2
Third Quarter................ 3 3/8 1 11/16
Fourth Quarter............... 161 5/8
2000
First Quarter (through
February 7, 2000)......... 11 3/16 6 1/2
Holders
As of January 31, 2000, there were 1,257 holders of record of our Common
Stock.
11
<PAGE>
PLAN OF DISTRIBUTION
The Selling Shareholders may sell the shares offered hereby in one or more
transactions (which may include "block" transactions) on the Nasdaq Stock
Market, in the over-the-counter market, in negotiated transactions or in a
combination of such methods of sales, at fixed prices which may be changed, at
market prices prevailing at the time of sale, at prices related to such
prevailing market prices or at negotiated prices. The Selling Shareholders may
effect such transactions by selling the shares directly to purchasers, or may
sell to or through agents, dealers or underwriters designated from time to time,
and such agents, dealers or underwriters may receive compensation in the form of
discounts, concessions or commissions from the Selling Shareholders and/or the
purchaser(s) of the shares of our Common Stock for whom they may act as agent or
to whom they may sell as principals, or both. The Selling Shareholders may also
pledge certain of the shares of our Common Stock from time to time, and this
prospectus also relates to any sale of shares of our Common Stock that might
take place following any foreclosure of such a pledge. The Selling Shareholders
and any agents, dealers or underwriters that act in connection with the sale of
the shares of our Common Stock might be deemed to be "underwriters" within the
meaning of Section 2(11) of the Securities Act, and any discount or commission
received by them and any profit on the resale of the shares as principal might
be deemed to be underwriting discounts or commissions under the Securities Act.
We will receive no portion of the proceeds from the sale of the shares and
will bear all of the costs relating to the registration of this offering (other
than any fees and expenses of counsel for the Selling Shareholders). Any
commissions, discounts or other fees payable to a broker, dealer, underwriter,
agent or market maker in connection with the sale of any of the shares will be
borne by the Selling Shareholders.
LEGAL OPINION
Bryan Cave LLP, St. Louis, Missouri, as our counsel, has issued an opinion
as to the legality of the Common Stock.
EXPERTS
The consolidated financial statements incorporated in this prospectus by
reference to the Annual Report on Form 10-K for the year ended December 31,
1998, 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. The consolidated financial
statements incorporated in this prospectus by reference to the Annual Report on
Form 10-K for the years ended December 31, 1997 and 1996, have been so
incorporated in reliance on the report of Rubin, Brown, Gornstein & Co. LLP,
independent accountants, given on the authority of said firm as experts in
auditing and accounting.
WHERE YOU CAN FIND MORE INFORMATION ABOUT US
We file annual, quarterly and special reports, proxy statements and other
information with the Commission. You may read and copy any document we file at
the Commission's public reference rooms at Room 1024, Judiciary Plaza, 450 Fifth
Street, N.W., Washington, D.C. 20549 and at the Commission's regional offices
located at Northeast Regional Office, Seven World Trade Center, Suite 1300, New
York, New York 10048 and Midwest Regional Office, Citicorp Center, 500 West
Madison Street, Suite 1400, Chicago, Illinois 60661. You can request copies of
these documents by writing to the Commission and paying a duplicating charge.
Please call the Commission at 1-800-732-0330 for further information on the
operation of its public reference rooms in other cities. The Commission also
makes our filings available to the public on its Internet site (http:\\
www.sec.gov). Quotations relating to our Common Stock appear on the Nasdaq
National Market, and such reports, proxy statements and other information
12
<PAGE>
concerning us can also be inspected at the offices of the National Association
of Securities Dealers, Inc., 1735 K Street, N.W., Washington, D.C. 20006.
The Commission allows us to "incorporate by reference" information from
other documents that we file with them, which means that we can disclose
important information by referring to those documents. The information
incorporated by reference is considered to be part of this prospectus, and
information we file later with the Commission will automatically update and
supersede this information. We incorporate by reference into this prospectus the
documents listed below, and any future filings we make with the Commission under
Sections 13(a), 13(c), 14 or 15(d) of the Securities Exchange Act of 1934 prior
to the termination of this offering:
1. Our Annual Report on Form 10-K for the fiscal year ended December
31, 1998;
2. Our Quarterly Report on Form 10-Q for the quarter ended March 31,
1999;
3. Our Quarterly Report on Form 10-Q for the quarter ended June 30,
1999;
4. Our Quarterly Report on Form 10-Q for the quarter ended September
30, 1999;
5. Our Current Report on Form 8-K/A dated June 8, 1998 (filed with the
Commission on March 11, 1999);
6. Our Current Report on Form 8-K dated May 25, 1999 (filed with the
Commission on June 2, 1999, and as amended on Form 8-K/A filed with the
Commission on October 5, 1999);
7. Our Current Report on Form 8-K dated June 4, 1999 (filed with the
Commission on June 11, 1999, and as amended on Form 8-K/A filed with the
Commission on August 12, 1999);
8. Our Current Report on Form 8-K dated September 14, 1999 (filed with
the Commission September 14, 1999);
9. Our Current Report on Form 8-K dated November 28, 1999 (filed with
the Commission December 13, 1999, as amended on Form 8-K/A filed with the
Commission on December 22, 1999, and as amended on Form 8-K/A filed with
the Commission on January 11, 2000); and
10. Our Registration Statement on Form 8-A filed on May 5, 1995,
registering our Common Stock under Section 12(g) of the Exchange Act,
including any amendments or reports filed for the purpose of updating such
description.
To the extent that any statement in this prospectus is inconsistent with
any statement that is incorporated by reference and that was made on or before
the date of this prospectus, the statement in this prospectus shall control. The
incorporated statement shall not be deemed, except as modified or superseded, to
constitute a part of this prospectus or the registration statement. Statements
contained in this prospectus as to the contents of any contract or other
document are not necessarily complete and, in each instance, we refer you to the
copy of each contract or document filed as an exhibit to the registration
statement.
We will provide you with copies of any of the documents incorporated by
reference into this prospectus (other than exhibits attached to those documents,
unless such exhibits are specifically incorporated by reference into the
information incorporated herein), without charge. Please direct your written or
oral request to Applied Digital Solutions, Inc., 400 Royal Palm Way, Suite 410,
Palm Beach, Florida 33480; Attention: Kay Langsford, Vice President of
Administration (telephone: (561) 366-4800).
We have not authorized anyone to give any information or to make any
representation concerning this offering except the information and
representations which are contained in this prospectus or which are incorporated
by reference in this prospectus. If anyone gives or makes any other information
or representation, you should not rely on it. This prospectus is not an offer to
sell, or a solicitation of an offer to purchase, any securities other than those
to which it relates, nor does it constitute an offer to sell or a solicitation
13
<PAGE>
of an offer to purchase by any person in any circumstances in which an offer or
solicitation is unlawful. You should not interpret the delivery of this
prospectus or any sale made hereunder as an indication that there has been no
change in our affairs since the date of this prospectus. You should also be
aware that the information in this prospectus may change after this date.
STATEMENTS REGARDING FORWARD-LOOKING INFORMATION
This document and the documents incorporated in this document by reference
contain forward-looking statements within the "safe harbor" provisions of the
Private Securities Litigation Reform Act of 1995 with respect to our financial
condition, results of operations and business. Words such as "anticipates,"
"expects," "intends," "plans," "believes," "seeks," "estimates" and similar
expressions identify forward-looking statements. These forward-looking
statements are not guarantees of future performance and are subject to certain
risks and uncertainties that could cause actual results to differ materially
from the results contemplated by the forward-looking statements. The section
entitled "Risk Factors" that appears in this prospectus describe some, but not
all, of the factors that could cause these differences.
14
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
Item 14. Other Expenses of Issuance and Distribution.
The following table sets forth the expenses (other than underwriting
discounts and commissions), which other than the SEC registration fee are
estimates, payable by the Registrant in connection with the sale and
distribution of the shares registered hereby**:
SEC Registration Fee .................................. $ 3,005
Accounting Fees and Expenses........................... 12,000 *
Legal Fees and Expenses................................ 18,000 *
Miscellaneous Expenses................................. 6,995 *
----------
Total ..................................... $ 40,000 *
==========
- -------------
* Estimated
** The Selling Shareholders will pay any sales commissions or underwriting
discount and fees incurred in connection with the sale of shares
registered hereunder.
Item 15. Indemnification of Directors and Officers.
Sections 351.355(1) and (2) of The General and Business Corporation Law of
the State of Missouri provide that a corporation may indemnify any person who
was or is a party or is threatened to be made a party to any threatened, pending
or completed action, suit or proceeding by reason of the fact that he is or was
a director, officer, employee or agent of the corporation, or is or was serving
at the request of the corporation as a director, officer, employee or agent of
another corporation, partnership, joint venture, trust or other enterprise,
against expenses, judgments, fines and amounts paid in settlement actually and
reasonably incurred by him in connection with such action, suit or proceeding if
he acted in good faith and in a manner he reasonably believed to be in or not
opposed to the best interests of the corporation and, with respect to any
criminal action or proceeding, had no reasonable cause to believe his conduct
was unlawful, except that, in the case of an action or suit by or in the right
of the corporation, the corporation may not indemnify such persons against
judgments and fines and no person shall be indemnified as to any claim, issue or
matter as to which such person shall have been adjudged to be liable for
negligence or misconduct in the performance of his duty to the corporation,
unless and only to the extent that the court in which the action or suit was
brought determines upon application that such person is fairly and reasonably
entitled to indemnity for proper expenses. Section 351.355(3) provides that, to
the extent that a director, officer, employee or agent of the corporation has
been successful in the defense of any such action, suit or proceeding or any
claim, issue or matter therein, he shall be indemnified against expenses,
including attorneys' fees, actually and reasonably incurred in connection with
such action, suit or proceeding. Section 351.355(7) provides that a corporation
may provide additional indemnification to any person indemnifiable under
subsection (1) or (2), provided such additional indemnification is authorized by
the corporation's articles of incorporation or an amendment thereto or by a
shareholder-approved bylaw or agreement, and provided further that no person
shall thereby be indemnified against conduct which was finally adjudged to have
been knowingly fraudulent, deliberately dishonest or willful misconduct or which
involved an accounting for profits pursuant to Section 16(b) of the Exchange
Act.
The bylaws of the Registrant provide that the Registrant shall indemnify,
to the full extent permitted under Missouri law, any director, officer, employee
or agent of the Registrant who has served as a director, officer, employee or
agent of the Registrant or, at the Registrant's request, has served as a
director, officer, employee or agent of another corporation, partnership, joint
venture, trust or other enterprise.
Insofar as indemnification for liabilities arising under the Securities Act
of 1933 may be permitted to directors, officers or persons controlling the
Registrant pursuant to such provisions, the Registrant has been informed that in
the opinion of the Securities and Exchange Commission such indemnification is
against public policy as expressed in such Act and is therefore unenforceable.
II-1
<PAGE>
Item 16. Exhibits.
See Exhibit Index.
Item 17. Undertakings.
(a) The undersigned issuer hereby undertakes:
(1) To file, during any period in which offers or sales are being
made, a post-effective amendment to this registration statement:
(i) To include any prospectus required by Section 10(a)(3)
of the Securities Act;
(ii) To reflect in the prospectus any facts or events
arising after the effective date of this registration
statement (or the most recent post-effective amendment hereof)
which, individually or in the aggregate, represent a
fundamental change in the information set forth in this
registration statement;
(iii) To include any material information with respect to
the plan of distribution not previously disclosed in this
registration statement or any material change to such
information in this registration statement;
provided, however, that paragraphs (i) and (ii) do not apply if the
information required to be included in a post-effective amendment by
those paragraphs is contained in periodic reports filed by the
Registrant pursuant to Section 13 or Section 15(d) of the Securities
Exchange Act of 1934 that are incorporated by reference in this
registration statement.
(2) That, for the purpose of determining any liability under the
Securities Act, each such post-effective amendment shall be deemed to
be a new registration statement relating to the securities offered
therein, and the offering of such securities at that time shall be
deemed to be the initial bona fide offering thereof.
(3) To remove from registration by means of a post-effective
amendment any of the securities being registered which remain unsold at
the termination of the offering.
(b) The undersigned Registrant hereby undertakes that, for purposes of
determining any liability under the Securities Act of 1933, each filing of the
Registrant's annual report pursuant to Section 13(a) or 15(d) of the Securities
Exchange Act of 1934 that is incorporated by reference in this registration
statement shall be deemed to be a new registration statement relating to the
securities offered herein, and the offering of such securities at that time
shall be deemed to be the initial bona fide offering thereof.
(c) Insofar as indemnification for liabilities arising under the Securities
Act of 1933 (the "Act") may be permitted to directors, officers and controlling
persons of the Registrant pursuant to the foregoing provisions, or otherwise,
the Registrant has been advised that in the opinion of the Securities and
Exchange Commission such indemnification is against public policy as expressed
in the Act and is, therefore, unenforceable. In the event that a claim for
indemnification against such liabilities (other than the payment by the
Registrant of expenses incurred or paid by a director, officer or controlling
person of the Registrant in the successful defense of any action, suit or
proceeding) is asserted by such director, officer or controlling person in
connection with the securities being registered, the Registrant will, unless in
the opinion of its counsel the matter has been settled by controlling precedent,
submit to a court of appropriate jurisdiction the question whether such
indemnification by it is against public policy as expressed in the Act and will
be governed by the final adjudication of such issue.
II-2
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant
certifies that it has reasonable grounds to believe that it meets all of the
requirements for filing on Form S-3 and has duly caused this Registration
Statement to be signed on its behalf by the undersigned, thereunto duly
authorized, in the City of Palm Beach, State of Florida, on February 11,
2000.
APPLIED DIGITAL SOLUTIONS, INC.
By: /S/ David A. Loppert
---------------------------------------
David A. Loppert, Vice President, Chief
Financial Officer
POWER OF ATTORNEY
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed by the following persons in the
capacities and on the dates indicated.
Signature Title Date
/S/ RICHARD J. SULLIVAN * Chairman of the Board of
- -------------------------- Directors, Chief Executive February 11, 2000
(Richard J. Sullivan) Officer and Secretary
(Principal Executive Officer)
/S/ GARRETT A. SULLIVAN * President and Director February 11, 2000
- -------------------------- (Principal Operating Officer)
(Garrett A. Sullivan)
/S/ DAVID A. LOPPERT Vice President, Chief Financial
- -------------------------- Officer (Principal Accounting February 11, 2000
(David A. Loppert) Officer)
/S/ RICHARD S. FRIEDLAND * Director February 11, 2000
- --------------------------
(Richard S. Friedland)
/S/ ARTHUR F. NOTERMAN * Director February 11, 2000
- --------------------------
(Arthur F. Noterman)
/S/ DANIEL E. PENNI * Director February 11, 2000
- --------------------------
(Daniel E. Penni)
/S/ ANGELA M. SULLIVAN * Director February 11, 2000
- --------------------------
(Angela M. Sullivan)
CONSTANCE K. WEAVER * Director February 11, 2000
- --------------------------
(Constance K. Weaver)
*By: /S/ David A. Loppert
________________________________
David A. Loppert, Vice President
Attorney-in-Fact
II-3
<PAGE>
EXHIBIT INDEX
Exhibit
Number Description
4.1 Second Restated Articles of Incorporation of the Registrant
(incorporated herein by reference to Exhibit 4.1 to the Registrant's
Post-Effective Amendment No. 1 on Form S-1 to Registration Statement
(Form S-3 File No. 333-64605) filed with the Commission on June 24,
1999)
4.2 Amended and Restated Bylaws of the Registrant dated March 31, 1998
(incorporated herein by reference to Exhibit 3.1 to the Registrant's
Registration Statement on Form S-3 (File No. 333-51067) filed with the
Commission on April 27, 1998)
5.1 Opinion of Bryan Cave LLP regarding the validity of the Common Stock*
23.1 Consent of PricewaterhouseCoopers LLP
23.2 Consent of Rubin, Brown, Gornstein & Co. LLP
23.3 Consent of Bryan Cave LLP*
24.1 Power of Attorney*
- -------------
* Previously filed
Exhibit 23.1
CONSENT OF INDEPENDENT ACCOUNTANTS
We hereby consent to the incorporation by reference in this Pre-Effective
Amendment No. 1 to Registration Statement on Form S-3 of Applied Digital
Solutions, Inc. (formerly, Applied Cellular Technology, Inc.) of our report
dated February 19, 1999 relating to the financial statements of Applied Cellular
Technology, Inc. as of and for the year ended December 31, 1998 included in the
Form 10-K for the year ended December 31, 1998 of Applied Cellular Technology,
Inc. We also consent to the reference to us under the heading "Experts" in such
Registration Statement.
/S/ PricewaterhouseCoopers LLP
- -------------------------------
PricewaterhouseCoopers LLP
St. Louis, Missouri
February 11, 2000
Exhibit 23.2
CONSENT OF INDEPENDENT ACCOUNTANTS
We hereby consent to the incorporation by reference in this Pre-Effective
Amendment No. 1 to Registration Statement on Form S-3 of Applied Digital
Solutions, Inc. (formerly, Applied Cellular Technology, Inc.) of our report
dated February 24, 1998 relating to the financial statements of Applied Cellular
Technology, Inc. as of and for the years ended December 31, 1996 and 1997
included in the Form 10-K for the year ended December 31, 1998 of Applied
Cellular Technology, Inc. We also consent to the reference to us under the
heading "Experts" in such Registration Statement.
/S/ Rubin, Brown, Gornstein & Co. LLP
--------------------------------------
Rubin, Brown, Gornstein & Co. LLP
St. Louis, Missouri
February 11, 2000
