As Filed with the Securities and Exchange Commission on March 22, 2000
Registration No. 333-__________
- --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM S-3
REGISTRATION STATEMENT
Under
THE SECURITIES ACT OF 1933
APPLIED DIGITAL SOLUTIONS, INC.
(Exact name of registrant as specified in its charter)
3661
(Primary Standard Industrial
Classification Code Number)
MISSOURI 43-1641533
(State or Other Jurisdiction of (I.R.S. Employer
Incorporation or Organization) 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)
Garrett A. Sullivan
Applied Digital Solutions, Inc.
400 Royal Palm Way, Suite 410
Palm Beach, Florida 33480
(561) 366-4800
FAX: (561) 366-0002
(Name, address, including zip code, and telephone number,
including area code, of agent for service)
Copies of all correspondence to:
David I. Beckett, Esq. Denis P. McCusker, Esq.
Applied Digital Solutions, Inc. Bryan Cave LLP
400 Royal Palm Way, Suite 410 One Metropolitan Square
Palm Beach, Florida 33480 211 North Broadway, Suite 3600
(561) 366-4800 St. Louis, Missouri 63102-2750
FAX: (561) 366-0002 (314) 259-2000
FAX: (314) 259-2020
- -------------------------------------------------------------------------------
Approximate date of commencement of proposed sale to public: From time to
time after this Registration Statement becomes effective.
If any of the securities being registered on this form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, check the following box. [X]
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following box
and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering. [ ]
If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [ ]
If this Form is a post-effective amendment filed pursuant to Rule 462(d)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [ ]
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. [ ]
CALCULATION OF REGISTRATION FEE
<TABLE>
- -----------------------------------------------------------------------------------------------------------------
<CAPTION>
Title of each class of Amount to be Proposed maximum Proposed maximum Amount of
securities to be registered registered offering price per aggregate offering registration fee
unit(1) price(1)
=================================================================================================================
<S> <C> <C> <C> <C>
Common Stock, $.001 par
value per share 3,000,000 shares $13.4688 $40,406,400 $10,667
- -----------------------------------------------------------------------------------------------------------------
</TABLE>
(1) Pursuant to Rule 457(c), the proposed offering price and registration fee
have been calculated on the basis of the average of the high and low
trading prices for the Common Stock for the five day period ended March 17,
2000 as reported on the Nasdaq National Market.
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.
- --------------------------------------------------------------------------------
<PAGE>
================================================================================
The information in this preliminary prospectus is not complete and may be
changed. We 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 MARCH 21, 2000
3,000,000 Shares
[GRAPHIC OMITTED]
Common Stock
-------------------------------------
Under this prospectus, we may offer up to 3,000,000 shares of our Common
Stock, par value $.001 per share, from time to time. We will provide specific
terms for the sale of the Common Stock in supplements to this prospectus. You
should read this prospectus and the applicable prospectus supplement carefully
before you invest. More information about the shares is under the heading
"Description of Capital Stock."
Our shares are listed on the Nasdaq Stock Market under the symbol "ADSX."
On March 17, 2000, the last reported sale price of our Common Stock was $12.1875
or $12 3/16 per share. See "Price Range of Common Stock."
See the information under the heading "Risk Factors" starting on page 2,
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 March __, 2000.
<PAGE>
TABLE OF CONTENTS
About This Prospectus..........................................................1
Recent Developments............................................................1
Risk Factors...................................................................2
Use of Proceeds................................................................5
Our Business...................................................................5
Description of Capital Stock...................................................8
Price Range of Common Stock....................................................8
Plan of Distribution...........................................................9
Legal Opinion.................................................................10
Experts.......................................................................10
Where You Can Find More Information About Us..................................10
Statements Regarding Forward-Looking Information..............................12
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, we may sell up to 3,000,000 shares of Common Stock in
one or more offerings. This prospectus provides you with a general description
of the Common Stock we may offer. Each time we sell Common Stock, we will
provide a prospectus supplement that will contain specific information about the
terms of that offering. The prospectus supplement also may add, update or change
information contained in this prospectus. You should read both this prospectus
and any prospectus supplement together with additional information described
under the heading "Where You Can Find More Information About Us." We may only
use this prospectus to sell securities if it is accompanied by a prospectus
supplement.
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 were postponing
the proposed initial public offering of Intellesale.com stock due to market
conditions.
On March 3, 2000, we announced that we had signed a letter of intent to
acquire Destron Fearing Corporation, a Nasdaq listed company trading under the
stock symbol "DFCO". Destron Fearing is a leading developer, manufacturer and
marketer of a broad line of electronic and visual identification devices for
companion animals, livestock, laboratory animals and wildlife. In this proposed
transaction, we will issue shares of our Common Stock in exchange for shares of
common stock of Destron Fearing. The approximately $130 million transaction is
expected to close by mid-June, 2000, subject to a number of conditions,
including the execution of a definitive acquisition agreement, completion of due
diligence, approval of both our and Destron Fearing's boards of directors and
shareholders, and approval of relevant government agencies. Under the agreement,
Destron Fearing would be merged into Digital Angel.net Inc., our wholly owned
subsidiary.
1
<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 March 17, 2000, there were 49,782,030 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 16,976,987 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),
2,225,890 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
purchased and issued under our Employee Stock Purchase Program, 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
will 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.
2
<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 $229 million as of December 31, 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 $337 million for the
year ended December 31, 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 $2.7 million based on achieved 1999 results,
approximately $12.7 million based on agreements coming due in 2000 and achieved
2000 results, approximately $7.1 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% to 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. We have entered into agreements to acquire
for approximately $3.9 million, put options in certain subsidiaries of our
subsidiary, Intellesale.com. In addition, based upon current earnings, assuming
all other put options were exercised, we are contingently liable for
approximately an additional $6.9 million in the next two years.
3
<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 $18 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 sixty
months. The employment agreements also provide that these executive officers are
entitled to supplemental compensation payments for sixty months upon termination
of employment, even if there is no change in control, unless their employment is
terminated due to a material breach of the terms of the employment agreement.
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. Finally, the employment agreements provide for a
gross up for excise taxes which are payable by these executive officers if any
payments upon a change of control are subject to such taxes as excess parachute
payments.
4
<PAGE>
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.
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
either January 1, 2000 or 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.
USE OF PROCEEDS
Unless otherwise indicated in the applicable supplement to this prospectus,
we expect to use the net proceeds we receive from the sale of shares offered by
this prospectus for general corporate purposes, which may include the funding of
future acquisitions.
OUR BUSINESS
General
Applied Digital Solutions is an emerging leader in the implementation of
business to business, e-commerce solutions for the Internet through Computer
Telephony Internet Integration. Our goal is to be a single source e-business
provider that mid-size companies can turn to for intelligently connecting their
business processes via telephone or computer, with their customers, suppliers
and partners to deliver the results expected from the emerging e-business
market. Our services integrate Web front-end applications with back-end
enterprise resources either by telephone, computer/software or both. We provide
end to end solutions that enable e-business optimization while powering
e-business initiatives via intelligent collaboration and customer interaction.
5
<PAGE>
We optimize and integrate key e-business processes through collaboration
with our four technology groups, Telecommunications, Network, Internet and
Applications. We are meeting the challenge of the fundamental way businesses
view the use of technology. Instead of looking at each of our four business
groups as distinct and separate, we regard them as seamless and interrelated.
The ubiquitous Internet Protocol is replacing the Circuit Switched network,
resulting in a shift from traditional use of telephones, computers and the
Internet into one dynamic network empowering the enterprise and eliminating all
limitations, physical, structural or geographic. 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 $336.7
million, $207.1 million, $103.2 million, $19.9 million and $2.3 million
respectively, in 1999, 1998, 1997, 1996 and 1995. Since 1994 we have completed
thirty-nine 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 four 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
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 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 disposed of the main business units comprising our
Communications Infrastructure division and dissolved this group.
Our primary businesses, other than Intellesale.com and the Non-Core
Business Group, are now organized into four business divisions:
o Telecommunications -- we are an implementer of telecommunications and
Computer Telephony Integration (CTI) solutions for e-business. We integrate
a wide range of voice and data solutions from communications systems to
voice over Internet Protocol and Virtual Private Networking (VPN). We
provide complete design, project management, cable/fiber infrastructure,
installation and on-going support for the customers we support. On December
30, 1999, we sold our interest in our Canadian subsidiary, TigerTel, Inc.
6
<PAGE>
o Network -- we are a professional services organization dedicated to
delivering quality e-Business services and support to our client partners,
providing e-Business infrastructure design and deployment, 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 -- equips our customers with the necessary tools and support
services to enable them to make a successful transition to becoming or
implementing e-business practices, ERP and CRM solutions, website design,
and application and internet access services to customers of our other
divisions.
o Applications -- 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, 1999, 1998 and 1997, revenues from these four divisions
together accounted for 38.2%, 35.9% and 40.5%, respectively, of our total
revenues.
Intellesale.com
Intellesale.com, Inc. sells refurbished and new computer equipment and
related components online, through its 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, 1999, 1998 and 1997, revenues from Intellesale.com
accounted for 43.1%, 30.3% and 40.3%, 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 were postponing the proposed initial
public offering of Intellesale.com stock due to market conditions.
The Non-Core Business Group
This group is comprised of seven individually managed companies whose
businesses are as follows:
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.
7
<PAGE>
o Americom, STC Netcom and ACT Leasing are all involved in the fabrication,
installation and maintenance of microwave, cellular and digital personal
communication services towers.
As of December 31, 1999, 1998 and 1997, revenues from this business group,
as well as the four disposed entities within our communications infrastructure
group, accounted for 19.2%, 34.7% and 21.3%, 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 the 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.
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 March 17, 2000, there were 49,782,030 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 March 17, 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 11,168,650
shares of our Common Stock at a weighted average exercise price of $2.22 per
share. All of the warrants are currently exercisable. Of the outstanding
options, 6,241,700 are now exercisable at a weighted average exercise price of
$3.54 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 1998.
High Low
---- ---
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.............. 16 1 5/8
2000
----
First Quarter (through
March 17, 2000).......... 18 6 1/2
Holders
As of March 17, 2000, there were 1,367 holders of record of our Common
Stock.
8
<PAGE>
PLAN OF DISTRIBUTION
General
We may sell the shares through underwriters or dealers, through agents or
directly to one or more purchasers. We may distribute these shares from time to
time in one or more transactions at a fixed price or prices (which may be
changed from time to time), at market prices prevailing at the times of sale, at
prices related to these prevailing market prices or at negotiated prices.
The applicable prospectus supplement will describe the terms of the
offering of the shares, including:
o the name or names of underwriters, if any;
o the purchase price of the shares and the proceeds we will receive from
the sale;
o any underwriting discounts and other items constituting underwriters'
compensation;
o any discounts or concessions allowed or reallowed or paid to dealers;
and
o any securities exchange or market on which the shares may be listed.
Only underwriters named in the prospectus supplement, if any, are underwriters
of the securities offered with the prospectus supplement.
Use of Underwriters and Agents
If underwriters are used in the sale, they will acquire the shares for
their own account and may resell them from time to time in one or more
transactions at a fixed public offering price or at varying prices determined at
the time of sale. We may offer the shares to the public through underwriting
syndicates represented by managing underwriters or by underwriters without a
syndicate. Subject to certain conditions, the underwriters will be obligated to
purchase all the shares of the series offered by the prospectus supplement. Any
public offering price and any discounts or concessions allowed or reallowed or
paid to dealers may change from time to time.
We may sell shares directly or through agents we designate from time to
time. We will name any agent involved in the offering and sale of shares and we
will describe any commissions we will pay the agent in the prospectus
supplement. Unless the prospectus supplement states otherwise, our agent will
act on a best-efforts basis for the period of its appointment.
We may authorize agents or underwriters to solicit offers by certain types
of institutional investors to purchase shares from us at the public offering
price set forth in the prospectus supplement pursuant to delayed delivery
contracts providing for payment and delivery on a specified date in the future.
We will describe the conditions to these contracts and the commissions we must
pay for solicitation of these contracts in the prospectus supplement.
Deemed Underwriters
In connection with the sale of the shares offered with this prospectus,
underwriters, dealers or agents may receive compensation from us or from
purchasers of the shares for whom they may act as agents, in the form of
discounts, concessions or commissions. The underwriters, dealers or agents which
participate in the distribution of the shares may be deemed to be underwriters
under the Securities Act and any discounts or commissions received by them and
any profit on the resale of the shares received by them may be deemed to be
underwriting discounts and commissions under the Securities Act. Anyone deemed
to be an underwriter under the Securities Act may be subject to statutory
liabilities, including Sections 11, 12 and 17 of the Securities Act and Rule
10b-5 under the Exchange Act.
9
<PAGE>
Indemnification and Other Relationships
We may provide agents and underwriters with indemnification against certain
civil liabilities, including liabilities under the Securities Act, or
contribution with respect to payments that the agents or underwriters may make
with respect to such liabilities. Agents and underwriters may engage in
transactions with, or perform services for, us in the ordinary course of
business.
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
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;
10
<PAGE>
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 on September 14, 1999);
9. Our Current Report on Form 8-K dated November 28, 1999 (filed with
the Commission on 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 or a prospectus
supplement is inconsistent with any statement that is incorporated by reference
and that was made on or before the date of this prospectus or the applicable
prospectus supplement, the statement in this prospectus or the applicable
prospectus supplement shall control. The incorporated statement shall not be
deemed, except as modified or superseded, to constitute a part of this
prospectus, the applicable prospectus supplement or the registration statement.
Statements contained in this prospectus or the applicable prospectus supplement
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
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.
11
<PAGE>
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.
12
<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 ......................................... $10,667
Accounting Fees and Expenses.................................. 10,000*
Legal Fees and Expenses....................................... 15,000*
Miscellaneous Expenses........................................ 4,333*
-------
Total ............................................ $40,000*
=======
- -------------
* Estimated
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.
Item 16. Exhibits.
See Exhibit Index.
II-1
<PAGE>
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 March 21, 2000.
APPLIED DIGITAL SOLUTIONS, INC.
By: /S/ DAVID A. LOPPERT
---------------------------------
David A. Loppert, Vice President,
Chief Financial Officer
POWER OF ATTORNEY
Each person whose signature appears below hereby constitutes and appoints
Garrett A. Sullivan and David A. Loppert, and each of them (with full power to
each of them to act alone), the true and lawful attorney in fact and agent for
the undersigned, to act on behalf of and in the name of the undersigned in
connection with this Registration Statement, including the authority to sign any
amendments (including post-effective amendments) to this Registration Statement,
and to file the same, with exhibits and any and all other documents filed with
respect thereto, with the Securities and Exchange Commission (or any other
governmental or regulatory authority), and each such person ratifies and
confirms all that said attorneys in fact and agents may lawfully do or cause to
be done by virtue hereof.
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed by the following persons in the
capacities and on the dates indicated.
Signature Title Date
--------- ----- ----
Chairman of the Board of
Directors, Chief Executive
/S/ Richard J. Sullivan Officer and Secretary (Principal March 21, 2000
- ------------------------- Executive Officer)
(Richard J. Sullivan)
/S/ Garrett A. Sullivan President and Director (Principal March 21, 2000
- ------------------------- Operating Officer)
(Garrett A. Sullivan)
Vice President, Chief Financial
/S/ David A. Loppert Officer (Principal Accounting March 21, 2000
- ------------------------- Officer)
(David A. Loppert)
/S/ Richard S. Friedland Director March 21, 2000
- -------------------------
(Richard S. Friedland)
/S/ Arthur F. Noterman Director March 21, 2000
- -------------------------
(Arthur F. Noterman)
/S/ Daniel E. Penni Director March 21, 2000
- -------------------------
(Daniel E. Penni)
/S/ Angela M. Sullivan Director March 21, 2000
- -------------------------
(Angela M. Sullivan)
/S/ Constance K. Weaver Director March 21, 2000
- -------------------------
(Constance K. Weaver)
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 (included in Exhibit 5.1)
24.1 Power of Attorney (included in signature page)
II-4
Exhibit 5.1
BRYAN CAVE LLP
ONE METROPOLITAN SQUARE
211 N. BROADWAY, SUITE 3600
ST. LOUIS, MISSOURI 63102-2750
(314) 259-2000
FACSIMILE: (314) 259-2020
DENIS P. MCCUSKER INTERNET ADDRESS
Direct Dial Number [email protected]
(314) 259-2455
March 21, 2000
Board of Directors
Applied Digital Solutions, Inc.
400 Royal Palm Way, Suite 410
Palm Beach, Florida 33480
Ladies and Gentlemen:
We are acting as counsel for Applied Digital Solutions, Inc., a Missouri
corporation (the "Company"), in connection with the preparation and filing of a
Registration Statement on Form S-3 (the "Registration Statement") with the
Securities and Exchange Commission under the Securities Act of 1933, as amended.
The Registration Statement relates to 3,000,000 shares of the Company's common
stock, $.001 par value per share (the "Shares").
In connection herewith, we have examined and relied without independent
investigation as to matters of fact upon such certificates of public officials,
such statements and certificates of officers of the Company and originals or
copies certified to our satisfaction of the Registration Statement, the Second
Restated Articles of Incorporation and Bylaws of the Company as amended and now
in effect, proceedings of the Board of Directors of the Company and such other
corporate records, documents, certificates and instruments as we have deemed
necessary or appropriate in order to enable us to render this opinion. In
rendering this opinion, we have assumed the genuineness of all signatures on all
documents examined by us, the due authority of the parties signing such
documents, the authenticity of all documents submitted to us as originals and
the conformity to the originals of all documents submitted to us as copies.
Based upon and subject to the foregoing, it is our opinion that the Shares
covered by the Registration Statement, when issued and sold in accordance with
the terms set forth in the Registration Statement, will be legally issued, fully
paid and non-assessable shares of Common Stock of the Company.
This opinion is not rendered with respect to any laws other than the laws
of Missouri and the Federal law of the United States. We hereby consent to the
filing of this opinion as Exhibit 5.1 to the Registration Statement.
Very truly yours,
/S/ Bryan Cave LLP
Exhibit 23.1
CONSENT OF INDEPENDENT ACCOUNTANTS
We hereby consent to the incorporation by reference in this 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
March 21, 2000
Exhibit 23.2
CONSENT OF INDEPENDENT ACCOUNTANTS
We hereby consent to the incorporation by reference in this 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
March 21, 2000
