8-K

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

Form 8-K

Current Report

Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

Date of Report (Date of earliest event reported): November 6, 2008

A.D.A.M., Inc.

(Exact name of registrant as specified in its charter)

Commission File Number: 000-26962

Georgia	58-1878070
(State or other jurisdiction of incorporation)	(IRS Employer Identification No.)

10 10^th Street NE, Suite 525

Atlanta, Georgia 30309-3848

(Address of principal executive offices, including zip code)

404.604.2757

(Registrant’s telephone number, including area code)

1600 RiverEdge Parkway, Suite 100

Atlanta, Georgia 30328

(Former name or former address, if changed since last report)

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:

¨ Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

¨ Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

¨ Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

¨ Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

Information to be included in the report

Item 2.02. Results of Operations and Financial Condition

On November 06, 2008, A.D.A.M., Inc. issued a press release announcing its financial results for the third quarter ended September 30, 2008. The press release is attached as Exhibit 99.1 to this Form 8-K. The information in this Form 8-K and the Exhibit attached hereto shall not be deemed “filed” for purposes of Section 18 of the Securities Act of 1934 and shall not be deemed incorporated by reference in any filing under the Securities Act of 1933, except as shall be expressly set forth by specific reference in such filing.

Item 9.01. Financial Statements and Exhibits

(d) The following exhibit is being furnished with this report pursuant to Item 2.02 of this Form 8-K:

Exhibit No.	Description
99.1	Press Release Regarding Financial Results for the Third Quarter Ended September 30, 2008

Signature(s)

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.

	A.D.A.M., Inc.
Date: November 6, 2008	By:	/s/ Kevin S. Noland
		Kevin S. Noland President and Chief Executive Officer

Exhibit Index

Exhibit No.	Description
EX-99.1	Press Release Regarding Financial Results for the Third Quarter Ended September 30, 2008.

EX-99.1

Exhibit 99.1

A.D.A.M., Inc. Announces Financial Results for Third Quarter 2008

Health content license revenues increase 17%; Benergy third quarter bookings double on key employer wins

ATLANTA, GA – November 06, 2008 – A.D.A.M., Inc. (NASDAQ: ADAM), a leading provider of health information and benefit technology solutions, today announced financial results for its third quarter ended September 30, 2008.

“We are very pleased with the growth we are experiencing in our health content licensing and encouraged by the level of activity and number of new contracts we secured in the third quarter,” said Kevin Noland, A.D.A.M.’s president and chief executive officer. “We more than doubled the amount of new enrollment contracts during the quarter, a direct result of our investments in our recently expanded sales force. We also believe that the market for Benergy and our health content products will continue to grow even with today’s challenging economic climate as our products are uniquely positioned to help our clients drive awareness for their services and reduce administrative costs.”

Third Quarter Financial Highlights

Licensing revenues, which include health content and Benergy products, for the third quarter ended September 30, 2008 were $6,270,000 as compared to $5,822,000 for the same period of 2007, an increase of 8%. The increase in revenues is primarily attributable to additional contracts for health content products that were sold in previous quarters.

Total revenues for the third quarter ended September 30, 2008 were $7,139,000 as compared to $6,676,000 for the same period of 2007, an increase of 7%. A.D.A.M. experienced solid growth for its health content products during the third quarter as a result of increased investment in sales, marketing and client management functions. Overall revenue growth was impacted by the Company’s education product sales. The Company is currently transitioning its line of CD ROM-based educational products to a Web-based subscription model. The Company is expected to release its first Web-based product for education during 2009. Benergy revenues experienced a modest decline in the third quarter. During the first three quarters of 2008, the Company enhanced its support services for its broker channel and expanded its sales force to address a growing market opportunity for its Benergy and enrollment solutions for larger employers. These efforts resulted in a number of new Benergy and enrollment contracts sold during the third quarter. Revenues from these new contracts will begin in the fourth quarter of 2008 and will be generally realized during the 2009 enrollment year.

Net income for the third quarter ended September 30, 2008 was $688,000 or $0.06 per share on a fully diluted basis as compared to $788,000 or $0.07 per share on a fully diluted basis for the same period of 2007.

Adjusted non-GAAP operating income for the third quarter ended September 30, 2008 was $1,323,000, or 19% of revenues, compared to $1,600,000 for the same period in

2007. Investment in expansion of the Company’s sales force and client management functions contributed to the reduction in operating income. The Company believes these investments are essential in realizing its long-term growth opportunity.

Adjusted EBITDA was $1,909,000, or 27% of revenues, for the third quarter ended September 30, 2008 as compared to $2,085,000 for the same period of 2007.

Due in part to its strong cashflow, the Company made an early prepayment of $2,000,000 (in advance of the required repayment schedule) on its long-term note payable during the third quarter in order to reduce future interest expenses.

September Year-to-Date Results

For the nine-month period ended September 30, 2008, revenues were $21,451,000, up 6% from $20,245,000 in the same period last year. Net income for the nine-month period ended September 30, 2008 was $2,046,000, as compared to $2,115,000, for the same period last year. Increases in revenues are primarily attributable to increased sales of the Company’s health content products. Net income for the nine-month period ended September 30, 2008 was reduced by the increased investments in sales, marketing and client management functions, as compared to the same period in 2007. In 2008, net income results included a benefit or reduction of $810,000 in interest expense due to the payments made by the Company to reduce its long-term debt.

During the first nine months of 2008, A.D.A.M. generated $5,521,000 in cash flow from operations and the Company’s cash on hand was $2,388,000 at September 30, 2008.

Use of Non-GAAP Measures

To supplement our consolidated financial statements presented in accordance with GAAP, we present investors with certain non-GAAP operational measures, including adjusted operating income, adjusted net income, adjusted earnings per share and adjusted EBITDA, all of which primarily exclude the effects of amortization of intangible assets, stock-based compensation, acquisition related expenses, restructuring charges and the income tax benefits from valuation of future tax loss carryforwards.

Our management considers the total return of an investment we have made in an acquisition (i.e., operating profit generated as compared to the purchase price paid) without taking into consideration any allocations made for accounting purposes. Thus, because the purchase price for an acquisition, does not necessarily reflect the accounting value assigned to intangible assets, including customer lists and goodwill, when analyzing the return provided by the acquisition in subsequent periods, our management for planning and evaluation purposes excludes the GAAP impact of acquired intangible assets and other acquisition related expenses to our financial results. We believe that such an approach is useful in understanding the long-term return provided by an acquisition and that our investors benefit from a supplemental non-GAAP financial measure that adjusts for the accounting expense associated with acquired intangible assets.

Similarly, we believe that excluding stock-based compensation expense provides supplemental information and an alternative presentation useful to investors’ understanding of our operating results and trends, especially when comparing those results on a consistent basis to results for previous periods and anticipated results for future periods.

We also believe that, in excluding stock-based compensation expense and amortization of intangible assets, our non-GAAP financial measures provide investors with transparency into the information and basis used by management and our board of directors to measure and forecast our results of operations, to compare on a consistent basis our results of operations for the current period to that of prior periods, to compare our results of operations on a more consistent basis against that of other companies in making financial and operating decisions, and to establish targets for management incentive compensation.

We believe that the presentation of non-GAAP operational measures of adjusted operating income, adjusted net income, adjusted earnings per share and adjusted EBITDA provide important supplemental information to management and investors regarding financial and business trends relating to the company’s financial condition and results of operations. These non-GAAP operational measures have historically been used as key performance metrics by our senior management as they evaluate the performance of the consolidated financial results. These non-GAAP operational measures are reviewed individually as well as in total in measuring our performance against internal and external expectations for the period. The expectations for such key non-GAAP operational measures are the basis for any financial guidance provided by management for future periods. Management believes that the use of each of these non-GAAP financial measures provides enhanced consistency and comparability with our past financial reports. We provide this information to investors to enable them to perform additional analyses of past, present and future operating performance.

We believe that each of these operational measures is useful to investors in their assessment of our operating performance and the valuation of our company. Adjusted operating income, adjusted net income, adjusted earnings per share and adjusted EBITDA are significant measures used by management for:

• Reporting our financial results and forecasts to our board of directors;

• Evaluating the operating performance of our company;

• Managing and comparing performance internally and externally against our peers; and

• Establishing internal operating targets.

These non-GAAP operational measures, including adjusted operating income, adjusted net income, adjusted earnings per share and adjusted EBITDA are used by us as broad

measures of financial performance that encompass our operating performance, cash, capital structure, investment management, and income tax planning effectiveness. These operational measures are not calculated in accordance with GAAP, and should be considered supplemental to, and not as a substitute for, or superior to, financial measures calculated in accordance with GAAP. These operational measures have limitations in that they do not reflect all of the costs or reductions to revenues associated with the operations of our business as determined in accordance with GAAP. In addition, these operational measures may not be comparable to non-GAAP financial measures reported by other companies. As a result, one should not consider these measures in isolation or as a substitute for analysis of our results as reported under GAAP. We compensate for these limitations by analyzing current and future results on a GAAP basis as well as a non-GAAP basis, prominently disclosing GAAP results and providing reconciliations from GAAP results to operational measures. The limitations in relying on our non-GAAP financial measures include the fact that the adjusted operating income, adjusted net income, adjusted earnings per share and adjusted EBITDA operational measures do not include the impact of stock-based compensation expense or the effects of amortization of intangible assets, acquisition related expenses and restructuring charges. We expect to continue to incur expenses similar to the non-GAAP adjustments described above, and the exclusion or inclusion of these items from our non-GAAP financial measures should not be construed as an inference that these costs are unusual or infrequent.

Forward-Looking Statements

The press release contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Act of 1934, as amended. The forward-looking statements are based on A.D.A.M.’s current intent, belief and expectations. These statements, especially revenue, net income, cash flow, involve a number of risks and uncertainties that could cause actual results, performance or developments to differ materially. Factors that could affect the company’s actual results, performance or developments include general economic conditions, development of the Internet as a source of health information, pricing actions taken by competitors, demand for the company’s health information, the ability to realize the anticipated benefits of the acquisition, regulatory changes in laws and regulations that impact how the company conducts its business and the other factors described in A.D.A.M.’s filings with the SEC. A.D.A.M. disclaims any obligation or duty to update any of its forward-looking statements.

Conference Call and Earnings Release Information

ATLANTA—(BUSINESS WIRE)—A.D.A.M., Inc. (Nasdaq: ADAM), will conduct its third quarter 2008 earnings conference call on November 6, 2008 at 10:00AM Eastern Time (ET). To participate in the call, please dial 866-624-3372 approximately five minutes prior to the start time. International callers may dial 706-758-3874. A digital replay will be available at 12:00 PM ET the same day by dialing 800-633-8284 or 402-977-9140 with reservation code 21397710. The telephone replay will be available until November 20, 2008. To listen to the call online, visit www.adam.com.

About A.D.A.M., Inc.

A.D.A.M. (Nasdaq: ADAM) is a leading provider of health information and benefits management solutions to healthcare organizations, employers, consumers, and educational institutions. With an industry-leading employee and benefits management platform and one of the largest consumer health information libraries in the world, A.D.A.M. empowers consumers to get smart about their health and wellness, while reducing the costs of healthcare and benefits administration. For more information, visit www.adam.com or call 1-800-408-ADAM.

###

Contact:

    A.D.A.M., Inc.

    Investor Relations

    Victor Thompson

    770-321-4326

A.D.A.M., Inc.

Consolidated Statements of Operations

Third Quarter, 2008 and 2007

(numbers in thousands, except per share data)

	Three Months Ended September 30,
	2008			% of Revenues		2007			% of Revenues		% Increase (Decrease)
Revenues, net:
Licensing	$	6,270		88	%	$	5,822		87	%	8	%
Product		368		5	%		390		6	%	-6	%
Professional services and other		501		7	%		464		7	%	8	%
Total revenues, net		7,139		100	%		6,676		100	%	7	%
Cost of Revenues:
Cost of revenues		1,116		16	%		900		13	%	24	%
Cost of revenues – amortization		491		7	%		371		6	%	32	%
Total cost of revenues		1,607		23	%		1,271		19	%	26	%
Gross Profit		5,532		77	%		5,405		81	%	2	%
Operating expenses:
Product and content development		899		13	%		1,026		15	%	-12	%
Sales and marketing		2,368		33	%		1,533		23	%	54	%
General and administrative		1,245		17	%		1,501		22	%	-17	%
Total operating expenses		4,512		63	%		4,060		61	%	11	%
Operating income		1,020		14	%		1,345		20	%	-24	%
Interest expense		318		4	%		626		9	%	-49	%
Interest income		(4	)	0	%		(69	)	-1	%	(a	)
Loss on sale of investments		—		0	%		—		0	%	(a	)
Loss on sale of assets		18		0	%		—		0	%	(a	)
Income before income taxes		688		10	%		788		12	%	-13	%
Income tax expense		—		0	%		—		0	%	(a	)
Net Income	$	688		10	%	$	788		12	%	-13	%
Earnings Per Share
Basic	$	0.07				$	0.08
Diluted	$	0.06				$	0.07
Weighted Average Common Shares Outstanding
Basic		9,867					9,575
Diluted		10,705					10,587

(a) not meaningful

A.D.A.M., Inc.

Consolidated Statements of Operations

Year-to-Date, 2008 and 2007

(numbers in thousands, except per share data)

	Nine Months Ended September 30,
	2008			% of Revenues		2007			% of Revenues		% Increase (Decrease)
Revenues, net:
Licensing	$	19,028		89	%	$	17,380		86	%	9	%
Product		925		4	%		1,312		6	%	-29	%
Professional services and other		1,498		7	%		1,553		8	%	-4	%
Total revenues, net		21,451		100	%		20,245		100	%	6	%
Cost of Revenues:
Cost of revenues		2,983		14	%		3,607		18	%	-17	%
Cost of revenues – amortization		1,438		7	%		1,006		5	%	43	%
Total cost of revenues		4,421		21	%		4,613		23	%	-4	%
Gross Profit		17,030		79	%		15,632		77	%	9	%
Operating expenses:
Product and content development		3,088		14	%		3,225		16	%	-4	%
Sales and marketing		6,642		31	%		4,352		21	%	53	%
General and administrative		3,838		18	%		4,123		20	%	-7	%
Total operating expenses		13,568		63	%		11,700		58	%	16	%
Operating income		3,462		16	%		3,932		19	%	-12	%
Interest expense		1,128		5	%		1,938		10	%	-42	%
Interest income		(26	)	0	%		(125	)	-1	%	-79	%
Loss on sale of investments		296		1	%		—		0	%	(a	)
Loss on sale of assets		18		0	%		4		0	%	(a	)
Income before income taxes		2,046		10	%		2,115		10	%	-3	%
Income tax expense		—		0	%		—		0	%	(a	)
Net Income	$	2,046		10	%	$	2,115		10	%	-3	%
Earnings Per Share
Basic	$	0.21				$	0.22
Diluted	$	0.19				$	0.20
Weighted Average Common Shares Outstanding
Basic		9,792					9,404
Diluted		10,730					10,326

(a) not meaningful

A.D.A.M., Inc.

Reconciliation of Selected GAAP Measures to Non-GAAP Measures (1)

Third Quarter, 2008 and 2007

(numbers in thousands, except per share data)

	Three Months Ended September 30,
	2008 GAAP		2008 Non-GAAP		2007 GAAP		2007 Non-GAAP		% Increase/ Decrease
Reconciliation of GAAP Operating Income, Net Income and EPS to Non-GAAP measures.
GAAP Operating Income	$	1,020	$	1,020	$	1,345	$	1,345	-24	%
Stock-based compensation (2)				303				255
Non-GAAP Operating Income			$	1,323			$	1,600	-17	%
GAAP Net Income	$	688	$	688	$	788	$	788	-13	%
Stock-based compensation (2)				303				255
Amortization of purchased intangibles (3)				188				188
Non-GAAP Net Income			$	1,179			$	1,231	-4	%
Diluted Earnings Per Share	$	0.06	$	0.11	$	0.07	$	0.12
Diluted common shares outstanding		10,705		10,705		10,587		10,587
Reconciliation of GAAP Net Income to Adjusted EBITDA is as follows:
GAAP Net Income			$	688			$	788
Depreciation				113				114
Amortization of software development				303				183
Stock-based compensation (2)				303				255
Amortization of purchase intangibles (3)				188				188
Interest expense				314				557
Adjusted EBITDA			$	1,909			$	2,085	-8	%

(1) This presentation includes non-GAAP measures. Our non-GAAP measures are not meant to be considered as a substitute for comparable GAAP measures and should be read only in conjunction with our financial statements prepared in accordance with GAAP and our press release, which explains our use of non-GAAP measures.

(2) Stock-based compensation related to non-cash charges for stock options and variable stock compensation expense.

(3) Amortization of customer list and purchased software acquired with Online Benefits.

A.D.A.M., Inc.

Reconciliation of Selected GAAP Measures to Non-GAAP Measures (1)

Year-to-Date, 2008 and 2007

(numbers in thousands, except per share data)

	Nine Months Ended September 30,
	2008 GAAP		2008 Non-GAAP		2007 GAAP		2007 Non-GAAP		% Increase/ Decrease
Reconciliation of GAAP Operating Income, Net Income and EPS to Non-GAAP measures.
GAAP Operating Income	$	3,462	$	3,462	$	3,932	$	3,932	-12	%
Stock-based compensation (2)				624				495
Non-GAAP Operating Income			$	4,086			$	4,427	-8	%
GAAP Net Income	$	2,046	$	2,046	$	2,115	$	2,115	-3	%
Stock-based compensation (2)				624				495
Amortization of purchased intangibles (3)				565				565
Non-GAAP Net Income			$	3,235			$	3,175	2	%
Diluted Earnings Per Share	$	0.19	$	0.30	$	0.20	$	0.31
Diluted common shares outstanding		10,730		10,730		10,326		10,326
Reconciliation of GAAP Net Income to Adjusted EBITDA is as follows:
GAAP Net Income			$	2,046			$	2,115
Depreciation				329				330
Amortization of software development				874				441
Stock-based compensation (2)				624				495
Amortization of purchase intangibles (3)				565				565
Interest expense (income)				1,102				1,813
Loss on sale of investments (4)				296				—
Adjusted EBITDA			$	5,836			$	5,759	1	%

(1) This presentation includes non-GAAP measures. Our non-GAAP measures are not meant to be considered as a substitute for comparable GAAP measures and should be read only in conjunction with our financial statements prepared in accordance with GAAP and our press release, which explains our use of non-GAAP measures.

(2) Stock-based compensation related to non-cash charges for stock options and variable stock compensation expense.

(3) Amortization of customer list and purchased software acquired with Online Benefits.

(4) Recognition of loss from sale of interest bearing short term investments.

A.D.A.M., Inc.

Consolidated Balance Sheets

September 30, 2008 and December 31, 2007

(numbers in thousands)

	September 30, 2008			December 31, 2007
Assets
Current assets
Cash and cash equivalents	$	2,388		$	5,425
Short term investments		—			2,809
Accounts receivable, net		2,302			3,940
Restricted cash		46			46
Inventories, net		20			65
Prepaids and other current assets		855			839
Deferred income tax asset		793			793
Total current assets		6,404			13,917
Non-current assets
Property and equipment, net		1,756			801
Intangible assets, net		10,091			9,953
Goodwill		27,546			27,468
Other assets		152			152
Deferred financing costs, net		513			852
Deferred income tax asset		6,827			6,827
Total non-current assets		46,885			46,053
Total Assets	$	53,289		$	59,970
Liabilities and Shareholders’ Equity
Current liabilities
Accounts payables and accrued expenses	$	2,999		$	3,658
Deferred revenue		5,203			5,676
Current portion of long-term debt		11,000			3,250
Current portion of capital lease obligations		64			105
Total current liabilities		19,266			12,689
Non-current liabilities
Capital lease obligations, net of current portion		43			85
Other liabilities		795			899
Long-term debt, net of current portion		—			16,750
Total non-current liabilities		838			17,734
Stockholders’ equity
Common stock		101			100
Treasury stock		(1,088	)		(1,088	)
Additional paid-in capital		57,831			56,406
Unrealized loss on investments		—			(166	)
Accumulated deficit		(23,659	)		(25,705	)
Total stockholders’ equity		33,185			29,547
Total Liabilities and Stockholders’ Equity	$	53,289		$	59,970

A.D.A.M., Inc.

Consolidated Statements of Cash Flows

Year-to-Date, 2008 and 2007

(numbers in thousands)

	Nine Months Ended September 30, 2008			Nine Months Ended September 30, 2007
Cash flows from operating activities
Net income	$	2,046		$	2,115
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization		1,767			1,336
Deferred financing cost amortization		339			258
Loss on sale of assets		18			4
Loss on sale of investments		296			—
Stock-based compensation expense		624			495
Changes in assets and liabilities:
Accounts receivable		1,638			507
Inventories		45			(18	)
Prepaids and other assets		(16	)		667
Accounts payable and accrued liabilities		(659	)		(950	)
Deferred revenue		(473	)		1,028
Other liabilities		(104	)		(327	)
Net cash provided by operating activities		5,521			5,115
Cash flows from investing activities
Purchases of property and equipment		(1,305	)		(354	)
Proceeds from sale of property and equipment		2			7
Additional cost of previous acquisition		(77	)		(139	)
Net change in restricted cash		—			2,148
Software product and content development costs		(1,577	)		(971	)
Proceeds from sale of investments		2,716			—
Purchase of investments		(37	)		(132	)
Net cash provided by (used in) investing activities		(278	)		559
Cash flows from financing activities
Payment on note payable		—			(1,500	)
Payment on long-term debt		(9,000	)		(2,000	)
Proceeds from exercise of common stock options		802			1,089
Repayments on capital leases		(82	)		(100	)
Net cash used in financing activities		(8,280	)		(2,511	)
Increase (Decrease) in cash and cash equivalents		(3,037	)		3,163
Cash and cash equivalents, beginning of period		5,425			4,446
Cash and cash equivalents, end of period	$	2,388		$	7,609