As filed with the Securities and Exchange Commission on June 3, 2003 SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 ---------------------- FORM 10-K/A NO. 2 FOR ANNUAL AND TRANSITION REPORTS PURSUANT TO SECTIONS 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 AMENDMENT NO. 2 TO ANNUAL REPORT ON FORM 10-K FOR THE YEAR ENDED DECEMBER 31, 2002 (Mark One) [X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the fiscal year ended December 31, 2002 OR [ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from to --------- --------- COMMISSION FILE NUMBER: 0-26020 APPLIED DIGITAL SOLUTIONS, INC. (Exact name of registrant as specified in its charter) MISSOURI 43-1641533 - --------------------------------- ------------------- (STATE OR OTHER JURISDICTION (I.R.S. EMPLOYER OF INCORPORATION OR ORGANIZATION) IDENTIFICATION NO.) 400 ROYAL PALM WAY, SUITE 410, PALM BEACH, FLORIDA 33480 - ---------------------------------------------------------------------------- (ADDRESS OF PRINCIPAL EXECUTIVE OFFICES) (ZIP-CODE) REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE: (561) 805-8000 EXPLANATORY NOTE The undersigned Registrant hereby amends the following item of its Annual Report on Form 10-K for the year ended December 31, 2002, filed by the Registrant on March 31, 2003, as amended on April 4, 2003, to include in Part III. Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholders Matters disclosure regarding Securities Authorized for Issuance Under Equity Compensation Plans. PART III ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS OWNERSHIP OF EQUITY SECURITIES The following table sets forth information regarding beneficial ownership our common stock by each director and by each executive officer named in the summary compensation table and by all the directors and executive officers as a group as of March 24, 2002: -------------------------------- Number of Shares of Percent of Common Stock Common Stock Beneficially Beneficially Name of Beneficial Owner Owned (1) Owned - --------------------------------------------------------------------- -------------------------------- Arthur F. Noterman 1,385,000 * Daniel E. Penni 1,849,065 * Dennis G. Rawan -- * Constance K. Weaver 1,123,000 * Scott R. Silverman 1,325,000 * Kevin H. McLaughlin 369,333 Michael E. Krawitz 1,158,781 * Evan C. McKeown 184,170 Peter Zhou 302,526 * All directors and executive officers as a group (12 persons) 8,698,480 2.4% <FN> - ------------------ * Represents less than 1% of the issued and outstanding shares of our common stock. (1) This table includes presently exercisable stock options. The following directors and executive officers hold the number of exercisable options set forth following their respective names: Arthur F. Noterman - 1,064,000; Daniel E. Penni - 1,064,000; Constance K. Weaver - 889,000; Scott R. Silverman - 1,325,000; Kevin H. McLaughlin - 358,333; Michael E. Krawitz - 1,104,000; Evan C. McKeown - 183,334; Peter Zhou - 279,000; and all directors and officers as a group - 7,204,667. PRINCIPAL STOCKHOLDER Set forth in the table below is information as of March 24, 2003, with respect to persons known to us (other than the directors and executive officers shown in the preceding table) to be the beneficial owners of more than five percent of our issued and outstanding common stock: Name and Address Number of Shares Percent Of Class Beneficially Owned - ----------------------------- ------------------------ ---------------------- Richard J. Sullivan (1) 69,633,852 (2) 19.3% <FN> (1) Pursuant to the terms of Mr. Sullivan's severance agreement dated March 24, 2003, and subject to shareholder approval, Mr. Sullivan will be issued 56.0 million shares of our common stock on or before December 31, 2003. These shares have been reflected as part of Mr. Sullivan's beneficially owned shares at March 24, 2003. (2) Includes 10,885,000 stock options owned by Mr. Sullivan and 700,000 stock options and 5,000 shares of common stock owned by Mr. Sullivan's wife. Also, includes 259,598 shares owned by The Bay Group and 367,177 shares owned by Great Bay Technology, Inc. Mr. Sullivan controls The Bay Group and Great Bay Technology, Inc. CHANGES IN CONTROL Except as provided with respect to the IBM Credit Agreement and related forbearance agreement, there are no arrangements known to us, including any pledge of our securities by any person, the operation of which may at a subsequent date result in a change in control us. SECURITIES AUTHORIZED FOR ISSUANCE UNDER EQUITY COMPENSATION PLANS During 2002, the Company granted 10,126,000 options under its 1999 Flexible Stock Plan and 1996 Non-Qualified Stock Option Plan. As of December 31, 2002, the following shares of the Company's common stock were authorized for issuance under the Company's equity compensation plans: EQUITY COMPENSATION PLAN INFORMATION (a) (b) (c) Plan Category (1) Number of securities to Weighted-average Number of securities be issued upon exercise exercise price remaining available for of outstanding options, per share of future issuance under warrants and rights outstanding equity compensation options, warrants plans (excluding and rights securities reflected in column (a)) Equity compensation plans approved by security holders 34,039,000 $0.71 7,183,000 (2)(3) Equity compensation plans not approved by security holders -- -- -- ----------------------------------------------------------------------------- Total 34,039,000 $0.71 7,183,000 - --------------------------------============================================================================= <FN> (1) A narrative description of the material terms of the Company's equity compensation plans is set forth in Note 13 to the Company's consolidated financial statements, which are set forth in the Company's Annual Report on Form 10-K/A filed with the Securities and Exchange Commission on April 4, 2003. (2) In addition to the shares available for future issuance reflected in the above table, the shares available for future issuance under the 2003 Flexible Stock Plan, if approved, would be 14,000,000. (3) Includes 6,900,000 shares available for future issuance under the Company's 1999 Employees Stock Purchase Plan. SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this amendment to be signed on its behalf by the undersigned thereunto duly authorized. DATE: JUNE 3, 2003 APPLIED DIGITAL SOLUTIONS, INC. (REGISTRANT) By: /s/ Evan C. McKeown ------------------------------------------ Evan C. McKeown, Senior Vice President and Chief Financial Officer