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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549





FORM 10-K

(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, 2008

OR



| ̈ | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
|- | ----------------------------------------------------------------------------------------

Commission File Number 0-26962

A.D.A.M., INC.

(Exact name of registrant as specified in its charter)



|                         |  |                                     
|------------------------ |  | ------------------------------------
|Georgia                  |  | 58-1878070                          
|(State of incorporation) |  | (I.R.S. Employer Identification No.)

10 10thStreet NE, Suite 525

Atlanta, Georgia 30309-3848

(Address of Principal Executive Offices, Zip Code)

1600 RiverEdge Parkway, Suite 100

Atlanta, Georgia 30328-4696

(Former Name or Former Address, if changed since last report)

Registrants telephone number, including area code:

(404) 604-2757

Securities registered pursuant to Section 12(b) of the Act:



|                             |  |                                          
|---------------------------- |  | -----------------------------------------
|Title of each class          |  | Name of each exchange on which registered
|Common Stock, par value $.01 |  | The NASDAQ Stock Market, LLC             

Securities registered pursuant to Section 12(g) of the Act:

None.

Indicate by check mark if the
registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.    Yes   ̈    No  x

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the
Act.    Yes   ̈    No  x

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter
period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.    Yes  x    No   ̈

Indicate by check mark if
disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein and will not be contained, to the best of registrants knowledge, in definitive proxy or information statements incorporated by reference in
Part III of this Form 10-K or any amendment to this Form 10-K.  x

Indicate by check mark
whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer or a smaller reporting company. See definition of accelerated filer, large accelerated filer and smaller reporting company in Rule 12b-2
of the Exchange Act (Check one):

Large Accelerated Filer   ̈    Accelerated
Filer   ̈    Non-Accelerated Filer   ̈    Smaller Reporting Company  x

(Do not check if a smaller reporting company)

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange
Act)    Yes   ̈    No  x

The aggregate market value of the voting and non-voting common equity held by non-affiliates of the Registrant (assuming for these purposes, but without conceding, that all executive officers and directors are
affiliates of the Registrant) as of June 30, 2008 (based on the closing sale price of the Registrants common stock, as reported on the Nasdaq Global Market on such date) was $70,868,269. There were 9,882,260 shares of common
stock outstanding on March 20, 2009. Portions of A.D.A.M., Inc.s Proxy Statement for the 2009 Annual Stockholders Meeting, to be filed within 120 days after the end of the registrants fiscal year, are incorporated by reference
into Part III of this Annual Report.









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A.D.A.M., Inc.

Annual Report on Form 10-K

For the Year Ended December 31, 2008

Table of Contents



|           |  |                                                                                                              |  |     
|---------- |  | ------------------------------------------------------------------------------------------------------------ |  | ----
|           |  |                                                                                                              |  | Page
|PART I    
|           |  |                                                                                                             
|Item 1.    |  | Business                                                                                                     |  | 1   
|Item 1A.   |  | Risk Factors                                                                                                 |  | 7   
|Item 1B.   |  | Unresolved Staff Comments                                                                                    |  | 11  
|Item 2.    |  | Properties                                                                                                   |  | 12  
|Item 3.    |  | Legal Proceedings                                                                                            |  | 12  
|Item 4.    |  | Submission of Matters to a Vote of Security Holders                                                          |  | 12  
|          
|PART II   
|           |  |                                                                                                             
|Item 5.    |  | Market for Registrants Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities |  | 13  
|Item 6.    |  | Selected Financial Data                                                                                      |  | 15  
|Item 7.    |  | Managements Discussion and Analysis of Financial Condition and Results of Operations                        |  | 17  
|Item 7A.   |  | Quantitative and Qualitative Disclosures about Market Risk                                                   |  | 27  
|Item 8.    |  | Financial Statements and Supplementary Data                                                                  |  | 27  
|Item 9.    |  | Changes in and Disagreements with Accountants on Accounting and Financial Disclosure                         |  | 28  
|Item 9A.   |  | Controls and Procedures                                                                                      |  | 29  
|Item 9B.   |  | Other Information                                                                                            |  | 29  
|          
|PART III  
|           |  |                                                                                                             
|Item 10.   |  | Directors, Executive Officers and Corporate Governance                                                       |  | 30  
|Item 11.   |  | Executive Compensation                                                                                       |  | 30  
|Item 12.   |  | Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters               |  | 30  
|Item 13.   |  | Certain Relationships and Related Transactions, and Director Independence                                    |  | 30  
|Item 14.   |  | Principal Accountant Fees and Services                                                                       |  | 30  
|          
|PART IV   
|           |  |                                                                                                             
|Item 15.   |  | Exhibits and Financial Statement Schedules                                                                   |  | 31  
|           | 
|Signatures |  | 34                                                                                                          



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PART I.

Disclosure Regarding Forward Looking Statements

This
Annual Report on Form 10-K (this Report) contains forward-looking statements, within the meaning of the Securities Exchange Act of 1934, as amended (the Exchange Act) and the Securities Act of 1933, as amended (the
Securities Act) that involve risks and uncertainties. In some cases, forward-looking statements are identified by words such as believe, anticipate, expect, intend, plan,
will, may and similar expressions. You should not place undue reliance on these forward-looking statements, which speak only as of the date of this Report. All of these forward-looking statements are based on information
available to us at this time, and we assume no obligation to update any of these statements. Actual results could differ from those projected in these forward-looking statements as a result of many factors, including those identified in Risk
Factors, Managements Discussion and Analysis of Financial Condition and Results of Operations and elsewhere. We urge you to review and consider the various disclosures made by us in this Report, and those detailed from time
to time in our filings with the Securities and Exchange Commission (the SEC), that attempt to advise you of the risks and factors that may affect our future results.



|ITEM 1. | BUSINESS
|------- | --------

A.D.A.M., Inc. (Nasdaq: ADAM) primarily
provides online information and technology solutions for employers, benefits brokers, healthcare organizations and online media companies. Our solutions are divided into two categories:



| |  |  | Health information and health decision support tools that we market to healthcare organizations, online media companies, and Internet search and technology firms;
and
| | - |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | Benefits communications and decision support, human resources productivity, and benefits broker tools that we market to local and regional benefits brokers and
national agencies with employer clients having less than 500 employees, and employers with more than 500 employees.
| | - |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

Our
solutions are delivered through a Platform as a Service-type model (PaaS) that provides rapid and efficient deployment of our products and allows us to integrate third party products and services that we monetize across our network of clients and
end users.

For the end users of our solutionsconsumers, employees, patients, and health plan membersour products and services
help people to better understand their health, and the benefits plans their employers provide, and make well informed decisions about their healthcare and benefits selections. In addition, we help people understand the relationship between their
benefits and the costs associated with them. This connection between financial understanding and benefits choice and use of benefits is increasingly important as consumers are assuming more of the financial responsibilities for their healthcare. For
our brokers and employer clients, our solutions provide the platform necessary to communicate, educate and enroll in benefits plans. For our healthcare and consumer health clients, our health information platform provides a broad portfolio of health
reference products designed to promote services, build site traffic, and aid in the management of healthcare.

In addition to our health
information and benefits solutions, we also market a series of anatomy and physiology products for the K-12 and undergraduate educational market.

Health Information Solutions

Our proprietary health information products are derived from what we believe to be one of the
largest continually enhanced online consumer health reference information libraries available. The web-based information we provide includes information on diseases, symptoms, treatments, surgical procedures, specialty medicine and topics, and
alternative medicine. Our content is enhanced with visuals, animations and other new



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media providing a graphically rich environment to promote learning retention and interactivity. In addition, we offer a number of health-related
applications, such as health risk assessments and other decision support applications that are used by consumers to make informed healthcare decisions.

We market our health information solutions to a number of market segments, including:



| |  |  | Healthcare Providershospitals and hospital systems that license our products for use on their consumer and patient-facing web sites. Our products help
healthcare providers drive awareness to their services through site traffic, build brand credibility with expert health content offerings, and improve physician loyalty.
| | - |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | Health Planshealth plans use our content as part of their overall care management strategies by making our information available to members through their
member web sites. Our content helps plan members better understand their health, when to seek advice of a physician and how to live a healthier lifestyle. We also help improve members awareness and education on chronic disease conditions.
| | - |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | Online Media and Internet Search Providersnational consumer portals, online media organizations and Internet technology companies use our content to build
site traffic, enhance their brand and expand their page inventory for advertising.
| | - |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | Healthcare Information Technologyelectronic medical record providers and other healthcare technology companies integrate our content into their clinical
applications for use in making context-relevant information available to patients and plan members.
| | - |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

We provide our
clients with a flexible approach to the selection and deployment of our products. Through our proprietary content platform, our clients can choose to deploy the entire suite of our information or they can select those modules that are most relevant
to their targeted business objectives. Our proprietary health information solutions can be grouped into four categories:



| |  |  | Health Referencea collection of more than 3,600 articles and thousands of medical images that span disease information, treatment, symptoms, injuries, and
surgical procedures;
| | - |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | Interactive Decision Supporta series of tools designed to attract and engage web site visitors while helping them better understand their healthcare needs.
These products help consumers navigate to the right kind of information, assess their health, and educate themselves on health issues to make informed healthcare decisions;
| | - |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | Specialty Programsgroupings of our health information designed to help healthcare organizations promote key areas of their business. We offer a number of
specialty programs including pregnancy, heart health, chronic conditions, womens health and complementary and alternative medicine; and
| | - |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | Marketing Technologiesmany of our clients want to optimize the number and quality of visitors to their organizations web site. We help healthcare
organizations achieve a strong return on investment by providing tools and programs to assist in building and measuring site traffic associated with the deployment and use of our health information. These technologies include embedded XML metadata,
web site analytics and other technologies, including mobile.
| | - |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

Our health information is written by our team of medical
writers and editors and is subject to rigorous editorial and quality assurance standards. We use an extensive outside network of leading physicians and specialists from widely respected academic institutions and leading healthcare facilities who
review and provide updates to our content on a regular basis. Our health information is also accredited by URAC, a leading third-party accreditation organization that ensures our content meets a high standard of accuracy. We are also a founding
member of Hi-Ethics, a coalition of the most widely referenced health web sites and information providers committed to developing industry standards for the quality of consumer health information.



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Broker and Employer Solutions

Our primary product for benefits brokers and employers is Benergy, a co-branded, web-based portal for employees that communicates benefits and other company-sponsored information, improves benefits education and selection, automates benefits enrollment, manages healthcare
financial accounts, such as Flexible Spending Accounts (FSA), and provides health content and decision support tools to aid in health education and awareness. The tools, information and services offered through Benergy automate and streamline many
important human resource (HR) functions so that employers can optimize their time and reduce administrative costswhile providing employees with a high level of access to pertinent benefits and health information. Benefits brokers consider
Benergy to be an important part of their service offering to their employer clients. Brokers make available to their clients a Benergy site that is populated with that employers specific benefits plan information. In many instances they manage
the Benergy site on behalf of their employer client, providing a deeper level of client service.

Benergy is designed to address the needs
of the small-to-mid-size employer (SME) market, which we consider to be those employers employing between 10 and 5,000 employees. Benergy is marketed to benefits brokers who are marketing to employers with typically less than 500 employees, and to
employers with more than 500 employees directly through our team of direct sales executives. Brokers and employers enter into annual subscription agreements with us. The broker agreements typically are sold on a tiered, volume-based pricing scenario
with minimum annual commitments. Agreements directly with employers are typically priced on a Per Employee Per Month (PEPM) basis. Our broker customer base encompasses a network of more than 500 benefits brokers throughout the United States.

An important part of our Benergy system is automated, online benefits enrollment. With this application, which is integrated into Benergy,
employees can enroll in their benefits plans quickly, easily and online with no paper forms. Once enrolled, employees are able to view their benefits elections and confirmation statements at any time. For the employer, our enrollment application
reduces the amount of paperwork and time required by benefits personnel and improves the error rate by electronically feeding enrollment data directly to the carriers. Through the systems reporting capabilities, employers are able to manage
and view enrollment statistics and other vital employee enrollment information at any time.

Because of the PaaS model we use for Benergy,
other products and services that we may obtain from third parties can be efficiently integrated and made available through our Benergy system. Other products and services we currently offer include:



| |  |  | Tax-advantaged Health Accountsthese include FSAs, Health Savings Accounts (HSA), Health Reimbursement Accounts (HRA) and Commuter Reimbursement Accounts
(CRA);
| | - |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | COBRA Administrative Servicescomprehensive administration services for COBRA and for state benefits continuation requirements; and
| | - |  | -----------------------------------------------------------------------------------------------------------------------------------



| |  |  | Consolidated Billingassists employers with the complicated task of maintaining group health and welfare eligibility databases, disbursing payments to
carriers, and reconciling monthly bills to make sure payments are properly and timely made.
| | - |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

Broker Solutions

In addition to Benergy, we offer benefits brokers a comprehensive agency management system called
AgencyWare. With AgencyWare, brokers can manage the entire employer client lifecycle, moving prospects through each phase of the sales process, sending requests for proposals (RFPs),
preparing client presentations, managing client renewals and commissions, tracking customer service issues and organizing client data. We also offer brokers other tools that improve their communication with their respective clients:



| |  |  | Client Communitya personalized portal that allows brokers to stay in touch with their clients at all times. Through Client Community, the broker can provide
each employer 24/7 access to a variety of research tools, employee communications and other services. Client Community is also a two-way workspace where brokers and their clients can share messages and documents in a secure online
| | - |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



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| | environment. Directing all of the brokers clients to a single online space allows brokers to equip their clients HR staff with research tools
along with information and news about the brokers services;
| | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | Advisor Toolsa collection of tools that provide brokers access to research and regulatory information, benchmark reporting, broker-to-broker messaging,
regulatory reference materials, and other business tools.
| | - |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

Education

Our software application products for education include A.D.A.M. Interactive Anatomy, our primary product for the undergraduate educational market,
Interactive Physiology, also sold to the undergraduate market and which we co-market with one of our publisher partners, and a series of products designed for the K-12 market. We sell these products, which are shipped on CD-ROM or DVD media, through
our web site and direct sales force and selected educational resellers and distributors. The production of our software products includes CD-ROM/DVD-ROM pressing, assembly of purchased product components, printing of product packaging and user
manuals and shipping of finished goods, all of which is performed by third-party vendors in accordance with our specifications and forecasts.

Market
Opportunity

We believe the market opportunity for our products and services is significant. Healthcare and benefits choices are
becoming increasingly more complex. Consumers are assuming more of the financial responsibilities and healthcare decision-making as employers continue to shift the rising costs of benefits to their employees. At the same time, businesses are faced
with increasing pressure to reduce administrative costs and find creative new ways to grow revenue with fewer resources.

Our health
information solutions provide our clients ways to accomplish their business objectives while providing consumers a valuable service. The interactive nature of web-based information products can create stronger affiliations between consumers and
healthcare organizations than traditional media and communication tools, at a lower cost. The primary market for our health information is the approximately 2,500 acute care, non-governmental hospitals and health systems with over 100 beds, regional
and national health plans, online media organizations, consumer portals that offer health information, and other Internet search and technology companies.

Our solution for employers, Benergy, reduces costs by making benefits and other company-sponsored information available online, automating complex HR tasks and reducing paperwork. Benergy also helps employees make
informed decisions about their health and benefits, which leads to improved productivity and employee satisfaction. Our solutions for benefits brokers provide enhanced value and service to their employer client relationships and tools to automate
and manage their agency. The market for Benergy among employers is significant. According to 2008 data, there are over 1.5 million employers in the U.S. We reach employers with less than 500 employees primarily though our benefits broker
channel. Currently we have over 500 benefits brokers under contract. We target the approximately 26,000 employers that have between 500 and 5,000 employees through a direct sales team as well as in conjunction with our brokers.

We believe that our Benergy system is uniquely positioned to take advantage of many of the macro trends occurring with employees. For example, according
to the Kaiser Family Foundation 2007 Employer Health Benefits Annual Survey, health insurance premiums grew a cumulative 78% between 2001 and 2007, outpacing cumulative wage growth of 19% over the same period. These premium cost trends together with
other business and economic factors suggest that employers will continue to look for ways to reduce costs and improve worker productivity either by shifting more of the benefits costs to their employees or adopting Consumer Driven Health Plans
(CDHP). CDHPs continue to gain traction with employers; as well-designed CDHPs can lower healthcare utilization and improve worker productivity through increased consumer engagement in their health and health



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finances. This is supported by several national studies conducted in 2007 from AON Consulting and Towers Perrin that report 11 to 12 million CDHP
membersup from an estimated 500,000 in 2003and growing 20-30% per year. According to the 2008 UBA Health Plan Survey, CDHPs increased 43% from 2007 and now comprise 13% of all plans being offered by employers. Additionally, the UBA
Survey reported that approximately 10% of employers offer wellness programs and of those more than 75% include health risk assessments. We believe that these trends toward CDHPs and consumer engagement will be a key driver of our growth over the
next several years.

We believe that our products provide the following benefits to employers:



| |  |  | improved health outcomes by providing prevention and wellness information;
| | - |  | --------------------------------------------------------------------------



| |  |  | more efficient utilization of healthcare services and benefits plans through a better understanding of treatment plans and options, and through access to
information and decision-support applications;
| | - |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | improved compliance with benefits plans and clinical guidelines;
| | - |  | ----------------------------------------------------------------



| |  |  | reduced provider costs and drug costs through better education and more informed decision-making in regard to utilization of healthcare services;
| | - |  | -------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | reduced administration costs related to benefits administration, communication and benefits education to employees; and
| | - |  | -----------------------------------------------------------------------------------------------------------------------



| |  |  | assistance in identifying at risk employee populations through risk assessment tools which provide increased opportunities to prevent adverse and catastrophic
medical conditions.
| | - |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

Customer Support and Client Services

We believe that delivering quality customer support and client services provides us with a significant opportunity to differentiate ourselves in the
marketplace. We believe that a high level of customer support is critical to our overall ability to deliver solutions to our clients. We provide customer support in two categories: (i) professional services, which include implementation and
knowledge management (or training) services, and (ii) technical support services. Additionally, we provide hosting services for all of our Benergy clients and some of our Health Information clients.



| |  |  | Professional Servicesservices we may provide our clients include implementation, requirements specification, testing, and knowledge management (or training)
services. Additionally, we provide implementation assistance and software and content customization services.
| | - |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | Customer Technical Supportwe provide comprehensive technical and product-based support to our clients online and through telephone support.
| | - |  | --------------------------------------------------------------------------------------------------------------------------------------------

Competition

The
market in which we operate is highly competitive and continually evolving. Some of our competitors have greater technical, product development, marketing, financial and other resources than we do. These organizations may have longer operating
histories, greater brand recognition and larger customer bases. We believe other competitive factors in our markets include product pricing, features, ease of implementation and use, and the quality of customer support. We cannot provide assurance
that we will be able to compete successfully against these organizations. Our competitors vary by market and type of service and are categorized as follows:



| |  |  | Private portal and consumer health content providers such as WebMD Health Corp., StayWell Custom Communications (part of MediMedia USA), EBSCO and Healthwise, Inc.;
| | - |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------



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| |  |  | Public sector, government and non-profit organizations that provide healthcare information without advertising or commercial sponsorships such as the American
Medical Association, the Mayo Clinic, the Department of Health and Human Services National Institutes of Health and the American Cancer Society;
| | - |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | Wellness and disease management providers, including Healthways, Inc., and SHPS, Inc.; and health information service offerings of health plans and their affiliates
such as United Healthcare Group and Aetna;
| | - |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | Agency management providers, including Zywave, Inc., Vertafore, Inc., and GBS, Inc.;
| | - |  | ------------------------------------------------------------------------------------



| |  |  | Benefits communication portal providers, including Enwisen, Inc., Vertafore, Inc. and Automatic Data Processing, Inc.;
| | - |  | ----------------------------------------------------------------------------------------------------------------------



| |  |  | Online benefits enrollment providers, including ADP, Benetrac, Inc. (now Paychex) and bswift;
| | - |  | ---------------------------------------------------------------------------------------------



| |  |  | Human Resource Management Systems (HRMS) providers (not direct competitors), such as Oracle, Lawson, Ceridian, Ultimate Software, Inc. and Paychex; and
| | - |  | -------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | Consulting firms such as Towers Perrin, Hewitt Associates and Watson Wyatt Worldwide.
| | - |  | -------------------------------------------------------------------------------------

Proprietary Rights and Licenses

We regard our
software applications, publications and content assets as proprietary. We rely primarily on a combination of copyright, trademark and trade secret laws and employee and third-party nondisclosure agreements to protect our proprietary rights. We have
obtained U.S. federal registrations of the trademarks and the logos for A.D.A.M. and the marks we acquired from Online Benefits Inc. (OnlineBenefits), including the service mark Benergy, as well as numerous other
trademarks, which identify our products. We have also obtained registrations of the A.D.A.M. trademark in Australia, Austria, Belgium, The Netherlands, Luxembourg, Canada, Chile, China (Peoples Republic), Denmark, France, Germany,
India, Ireland, Italy, Malaysia, New Zealand, Portugal, South Africa, Sweden, Switzerland and Taiwan. We have acquired and are using a number of registered and unregistered trademarks to identify our products. We use the A.D.A.M. mark in
Japan under license with Kataken Seiko K.K. We are also the owner of a number of domain name registrations.

We have applied for and/or
obtained numerous U.S. copyright registrations and trademarks for our software, publications and content products, including the Health Illustrated Encyclopedia, A.D.A.M. Interactive Anatomy, and Pregnancy Health Center. Additionally, we have
obtained U.S. copyright registrations and trademarks for the products we acquired from OnlineBenefits, including Benergy, ReadyEnroll, Real Value Statement and Benevents.

We do not currently hold any patents or have any patent applications pending. There can be no assurance that these protections will be adequate to
protect our intellectual property rights or that our competitors will not independently develop technologies that are substantially equivalent or superior to our technologies. We further believe that due to the rapid pace of innovation within the
multimedia and software industries, factors such as the technological and creative skills of our personnel and the quality of the content of our products are as important in establishing and maintaining a leadership position within the industry as
the various legal protections for our technology.

We believe that our products, trademarks and other proprietary rights do not infringe
upon the proprietary rights of third parties and to date no third party has filed an infringement claim against us. However, as the number of products in our industry increases and the functionality of these products overlap, content and software
providers, including A.D.A.M., may become increasingly subject to infringement claims. There can be no assurance that third parties will not assert infringement claims against us in the future with respect to current or future products, trademarks
or other works of A.D.A.M., or that any assertion will not require us to enter into royalty arrangements or result in costly litigation.



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Employees

As of December 31, 2008, we had 118 employees, 70 of which were employed at our corporate headquarters in Atlanta. Of the total employees, 63 were engaged primarily in product and content development and customer and client services,
38 in sales and marketing and 17 in information technology, finance and administration.

Our employees are not covered by a collective
bargaining agreement and we have experienced no work stoppages. We consider our employee relations to be good. We believe that our future growth and success will depend upon our ability to retain and continue to attract highly skilled and motivated
personnel in all areas of our operations.

Acquisitions

In August 2006, we acquired OnlineBenefits and its subsidiaries, a privately-held provider of web-based applications serving the benefits management needs of consumers, employers and group insurance brokers. Its
consumer solutions include employee self-service portals for benefits administration, communication and enrollment and benefit broker administration and communication tools. We have included the results of these acquisitions in our consolidated
financial statements from the date of acquisition.

Corporate Information

A.D.A.M., Inc. is a Georgia corporation that was incorporated in 1990. Our principal offices are
located at 10 10thStreet NE, Suite 525, Atlanta, Georgia 30309-3848 and our telephone number is (404) 604-2757.

Our website address is www.adam.com. Information contained on our website is not a part of, and is not incorporated into, this Report. Our filings with
the SEC are available without charge on our website as soon as reasonably practicable after filing. We make available on our website free of charge copies of materials we file, or furnish to, the Securities and Exchange Commission, or SEC, including
our Annual Reports on Form 10-K, Quarterly Reports on Form 10-Q, Current Reports on Form 8-K, and any amendments to those reports, as soon as reasonably practicable after we electronically file such materials with, or furnish them to, the SEC. In
addition to visiting our website, you may read and copy public reports we file with or furnish to the SEC at the SECs Public Reference Room at 100 F Street, N.E., Washington, D.C. 20549. You may obtain information on the operation of the
Public Reference Room by calling the SEC at 1-800-SEC-0330. The SEC maintains an Internet website that contains our reports, proxy and information statements, and other information that we file electronically with the SEC at www.sec.gov.



|ITEM 1A. | RISK FACTORS
|-------- | ------------

We operate in a rapidly changing
environment that presents numerous risks, many of which are driven by factors we cannot control or cannot always predict. The following discussions, in addition to other factors addressed elsewhere in this report, highlight some of the factors that
could cause our future results to differ materially from the past results or expected future results:



| |  |  | The markets in which we operate are intensely competitive, continually evolving and, in some cases, subject to rapid change. Some competitors have advantages over
us because of their longer operating histories, greater name recognition, or greater financial, technical and marketing resources. As a result, they may be able to adapt more quickly to new or emerging technologies and changes in customer
requirements. They could also devote greater resources to the promotion and sale of their products or services. Furthermore, mergers and acquisitions among other companies could intensify our existing competition or create new competitors with
superior marketplace positions or technology advantages.
| | - |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | Our health information services face competition from numerous other companies and organizations, including commercial content providers and not-for-profit
organizations. We also
| | - |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



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| | compete with providers of healthcare decision-support tools and online health management applications; wellness and disease management vendors; and health
management offerings of health plans and their affiliates.
| | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | Our benefits management and administrative products compete with other providers of benefits management services, including those provided through payroll and other
business outsourcers as well as human resource management systems providers.
| | - |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | Our agency management services face competition from other agency management providers and consulting firms.
| | - |  | ------------------------------------------------------------------------------------------------------------



| |  |  | We must make significant investments in our products and market development in anticipation of future market opportunities and conditions. If we are unable to make
these investments or we are unsuccessful in obtaining future revenues and customer relationships from these investments, then our future operating results could be adversely affected.
| | - |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | We may be unable to successfully identify, acquire, manage or integrate other businesses into our infrastructure. Our long-term growth strategy includes acquiring
additional businesses with complementary products, technologies or professional services. We may not be successful in acquiring other complementary businesses or assimilating the acquisitions, their personnel and their operations. These difficulties
could disrupt our ongoing business, distract our management and employees, increase our expenses and adversely affect our results of operations. Future acquisitions may also cause us to incur expenses such as in-process research and development
expenses, or write-offs of goodwill and capitalized software development costs, which may negatively affect our earnings. We cannot be certain that we will successfully overcome these risks with respect to any future acquisitions. In addition, we
have historically paid a portion of the consideration for some of our acquisitions by issuing common stock. The issuance of additional common stock or other securities convertible into common stock in connection with future acquisitions would dilute
the ownership interests of our existing shareholders.
| | - |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | Our online applications are designed to operate 24 hours a day, seven days a week, without interruption. However, we have experienced and expect that we will in the
future experience interruptions and delays in services and availability from time to time. We rely on internal systems as well as third-party vendors, including data center providers and bandwidth providers, to provide our online services. We do not
maintain redundant systems or facilities for some of these services. In the event of a catastrophic event with respect to one or more of these systems or facilities, we may experience an extended period of system unavailability, which could
negatively impact our relationship with users. To operate without interruption, both we and our service providers must guard against:
| | - |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | damage from fire, power loss and other natural disasters;
| | - |  | ---------------------------------------------------------



| |  |  | communications failures;
| | - |  | ------------------------



| |  |  | software and hardware errors, failures and crashes;
| | - |  | ---------------------------------------------------



| |  |  | security breaches, computer viruses and similar disruptive problems; and
| | - |  | ------------------------------------------------------------------------



| |  |  | other potential interruptions.
| | - |  | ------------------------------



| |  |  | Any disruption in the network access or co-location services provided by these third-party providers or any failure of or by these third-party providers or our own
systems to handle current or higher volume of use could significantly harm our business. We exercise little control over these third-party vendors, which increases our vulnerability to problems with services they provide. Any errors, failures,
interruptions or delays experienced in connection with these third-party technologies and information services or our own systems could negatively impact our relationships with users and adversely affect our brand and our business.
| | - |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | We could be subject to breach of warranty or other claims by clients if the software and systems we use to provide them contain errors or experience failures which
could result in our inability to meet
| | - |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



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| | contractual performance standards or failure to meet expectations that our clients have for them. Clients may seek compensation from us or may seek to
terminate their agreements with us, withhold payments due to us, seek refunds from us of part or all of the fees charged under those agreements or initiate litigation or other dispute resolution procedures as a result of such errors or failures. In
addition, we could face breach of warranty or other claims by clients or additional development costs as a result of such errors or failures. Our software and systems are inherently complex and, despite testing and quality control, we cannot be
certain that they are error free.
| | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | We attempt to limit, by contract, our liability to our clients for damages arising from our negligence, errors or mistakes. However, contractual limitations on
liability may not be enforceable in certain circumstances or may otherwise not provide sufficient protection to us from liability for damages. We maintain liability insurance coverage, including coverage for errors and omissions. However, it is
possible that claims could exceed the amount of our applicable insurance coverage, if any, or that this coverage may not continue to be available on acceptable terms or in sufficient amounts. Even if these claims do not result in liability to us,
investigating and defending against them would be expensive and time consuming and could divert managements attention away from our operations. In addition, negative publicity caused by these events may delay or hinder market acceptance of our
services, including unrelated services.
| | - |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | We do not currently hold any patents on our technology and do not have any patent applications pending. We rely primarily on a combination of copyright, trademark
and trade secret laws and employee and third-party nondisclosure agreements to protect our proprietary rights. There can be no assurance that these protections will be adequate to protect our intellectual property rights or that our competitors will
not independently develop technologies that are substantially equivalent or superior to our technologies. Effectively policing against the unauthorized use of our technology is time consuming and costly, and we cannot assure you that the steps taken
by us will prevent misappropriation of our technology. Our failure to adequately protect our intellectual property rights could harm our business by making it easier for others to duplicate our services.
| | - |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | As the number of products in our industry increases and the functionality of these products overlap, content providers may become increasingly subject to
infringement claims. There can be no assurance that third parties will not assert infringement claims against us in the future with respect to current or future products, trademarks or other works of A.D.A.M. A claim of infringement against us, with
or without merit, could be time consuming and expensive to litigate or settle, and could divert managements attention from our operations. An adverse determination against us could require us to enter into royalty arrangements or prevent us
from offering our services.
| | - |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | We may be unable to attract new personnel or retain existing personnel, which would adversely affect the implementation of our overall business strategy. In
order to promote the development of our target markets and retain our position in the marketplace, we will need to identify, attract and retain personnel with domain expertise in the functional areas of our business. Additionally, our success
depends upon the continued services of our executive officers, particularly our Chief Executive Officer, and other members of our executive management team. From time to time, there may be changes in our executive management team resulting from the
hiring or departure of executives, which could disrupt our business. We will compete with other companies both within and outside our markets for such employees and we may be unable to attract and retain these employees. If we do not succeed, we may
be unable to fully implement our growth and market development strategies and our business could be impacted.
| | - |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | As our business has grown, we have become increasingly subject to the risks arising from adverse changes in domestic and global economic and political
conditions. For example, the U.S. economy has recently been weakened due to many factors, including the credit market crisis, reduced credit availability, bank failures, slower economic activity, bankruptcies, increased unemployment, adverse
business conditions, concerns about inflation and fear of a recession. If weakness in the economies of the U.S. and other countries persists, many customers may delay or reduce technology purchases. This
| | - |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



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| | could result in reductions in sales of our products, longer sales cycles, slower adoption of new technologies, increased price competition, customers
purchasing fewer services than they have in the past, customers requesting longer payment terms, customers failing to pay amounts due and slower collections of accounts receivable. Any of these events would likely harm our business, results of
operations, financial condition and cash flow from operations.
| | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | The capital and credit markets have been experiencing volatility and disruption for more than a year. In recent months, the volatility and disruption has reached
unprecedented levels. In some cases, the markets have produced downward pressure on stock prices and credit availability for certain issuers without regard to those issuers underlying financial strength. If current levels of market
disruption and volatility continue or worsen, there can be no assurance that we will not experience an adverse effect, which may be material, on our ability to access capital and on our business, financial condition and results of operations.
| | - |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | The Company may have to write-down the value of its goodwill if the equity market and the market price of the Companys stock indicates the fair value of the
assets acquired in the Online Benefits acquisition in 2006 are priced above the fair value. Goodwill and other intangibles are evaluated periodically using GAAP fair value rules, which are derived from the equity market and the Companys stock
prices.
| | - |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | We may be unable to obtain sufficient capital to pursue our growth and market development strategies, which would hurt our financial results. Our market
capitalization, by its size and liquidity, may limit our ability to sell additional stock. If we are unable to raise necessary capital, our future strategies may be limited and our future results could be affected.
| | - |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | We rely on financial institutions for substantial amounts of credit financing, including both currently outstanding loans and unused line of credit facilities, to
provide funding for our operations. We may not be able to maintain these existing relations or we may not meet the existing financial covenants that would require us to significantly alter our strategies and operations and may impact our financial
results in the future.
| | - |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | We can offer no assurance that the disruption of reseller or distribution channels or the loss of any significant customer will not materially adversely affect our
business by reducing revenues, profits and cash flow.
| | - |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | The technology that we use to deliver our products is rapidly changing and we may be unable to convert our platforms to new technologies on a timely basis or be
required to incur substantial additional costs to accomplish such changes and upgrades. We rely on the Internet and on third parties to provide connections to our customers and changes in regulations, prices, tax status or availability could
adversely affect our operating results.
| | - |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | Our ability to attract new customers and increase revenue from existing customers will depend in large part on our ability to enhance and improve our existing
information services and management solutions and to introduce new features and content. The success of any enhancement or new product depends on several factors, including timely completion, introduction and market acceptance. Any new feature or
content that we develop or acquire may not be introduced in a timely or cost-effective manner and may not achieve the broad market acceptance necessary to generate significant revenue. If we are unable to successfully develop or acquire new features
or content or to enhance our existing information services and management solutions to meet customer requirements, our business and operating results will be adversely affected.
| | - |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | We face technological challenges in our ability to deliver information in the rapidly changing healthcare industry, which may limit our ability to maintain existing
customers or attract new customers. We believe that health information will become more customized to an individuals personal health management needs. As a result, we will need to have adequate technology infrastructure that will allow
us to deliver in a cost-effective manner portions of our content assets based on each customers requirements.
| | - |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



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| |  |  | We face potential risks and financial liabilities associated with obtaining and transmitting personal account information that includes social security numbers and
individual health-related information. Information may be accessed by outsiders by breaching our security systems or by inappropriate actions of our personnel. Our risks would include damage of our reputation, additional costs to address and
remediate any problems encountered as well as litigation and potential financial penalties.
| | - |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | Our stock price is extremely volatile and could decline significantly.We may not be able to meet our financial projections or market expectations of our
results on a quarterly or longer period and that could adversely affect our stock price. Since our initial public offering in 1995, there has been significant volatility in the price of our common stock. There can be no assurance that the market
price of our common stock will be maintained or that the volume of trading in our shares will not decrease. Furthermore, following periods of volatility in the market price of a companys securities, securities class action claims frequently
are brought against the subject company. To the extent that the market price of our shares falls dramatically in any period of time, shareholders may bring claims, with or without merit, against us. Such litigation would be expensive to defend and
would divert management attention and resources regardless of outcome.
| | - |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | We must comply with Section 404 of the Sarbanes-Oxley Act which requires us to incur expenses associated with the development and testing of our internal
controls. There can be no assurance that we will not have significant deficiencies or material weaknesses in our internal controls or that we will not encounter higher than anticipated disruptions and expenses associated with compliance that may
adversely affect our earnings and our share price.
| | - |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | We have adopted certain anti-takeover provisions that may deter a takeover. Our articles of incorporation and bylaws contain provisions that may deter a takeover,
including a takeover on terms that many of our shareholders might consider favorable, such as: the authority of our board of directors to issue common stock and preferred stock and to determine the price, rights (including voting rights),
preferences, privileges and restrictions of each series of preferred stock, without any vote or action by our shareholders; the existence of large amounts of authorized but unissued common stock and preferred stock; staggered, three-year terms for
our board of directors; and advance notice requirements for board of directors nominations and for shareholder proposals. The rights and preferences of any series of preferred stock could include a preference over the common stock on the
distribution of our assets upon a liquidation or sale of our company, preferential dividends, redemption rights, the right to elect one or more directors and other voting rights. The rights of the holders of any series of preferred stock that may be
issued in the future may adversely affect the rights of the holders of the common stock. We have no current plans to issue preferred stock. In addition, certain provisions of Georgia law and our stock option plan may also discourage, delay or
prevent a change in control of our company or unsolicited acquisition proposals.
| | - |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | A significant number of unissued shares are available for future sale and could adversely affect the market price of our common stock. If our shareholders, option
holders, or warrant holders exercise their rights to sell substantial amounts of our common shares in the public market, the market price of our common stock could fall. Given the unpredictable transaction volumes for our common stock, the sale of a
significant amount of these shares at any given time could cause the market price of our common stock to decline or otherwise be highly volatile. Such sales could also make it more difficult for us to sell equity or equity-related securities in the
future at a time and price when we deem conditions to be more favorable.
| | - |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|ITEM 1B. | UNRESOLVED STAFF COMMENTS
|-------- | -------------------------

None.



11



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##### Table of Contents

|ITEM 2. | PROPERTIES
|------- | ----------

Our headquarters are located in
approximately 24,000 square feet of leased office space in Atlanta, Georgia. The term of the lease ends in April 2019.

Previously, our
headquarters were located in approximately 12,000 square feet of leased office space in Atlanta, Georgia. The term of that lease extended to September 2008. Until September 2006, we sublet approximately 500 square feet of this space to a company
whose Chairman is also our Chairman, in which we collected $1,200 per month for lease payments and other shared services.

In addition, we
have leased office space of approximately 36,000 square feet in Uniondale, New York. This lease extends through June 2011. This space is sublet to unrelated third parties for $72,000 per month. The difference between our lease rate
and the income from the sublease contracts has been recorded as a liability on our accompanying consolidated balance sheet.

If additional
facilities are required, we believe that suitable facilities will be available at market rates.



|ITEM 3. | LEGAL PROCEEDINGS
|------- | -----------------

None.



|ITEM 4. | SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
|------- | ---------------------------------------------------

No matters were submitted to a vote of security holders during the fourth quarter of 2008.



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##### Table of Contents

PART II.



|ITEM 5. | MARKET FOR REGISTRANTS COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES
|------- | ------------------------------------------------------------------------------------------------------------

Market Price Information

Our common stock is traded
on the Nasdaq Global Market (Nasdaq) under the symbol ADAM. As of March 20, 2009, there were 9,882,260 holders of record of the Companys common stock.

The following table sets forth the high and low sales price of our common stock for each quarter during the last two years, as reported by Nasdaq:



|                                 |  |      |      |     |   |     
|-------------------------------- |  | ---- | ---- | --- | - | ----
|                                 |  | High |      | Low
|Year Ended December 31, 2007     |  |      |      |     |   |     
|Quarter ended March 31, 2007     |  | $    | 7.24 |     | $ | 5.75
|Quarter ended June 30, 2007      |  | $    | 6.91 |     | $ | 6.06
|Quarter ended September 30, 2007 |  | $    | 7.81 |     | $ | 6.54
|Quarter ended December 31, 2007  |  | $    | 9.62 |     | $ | 7.51
|                                 |  |     
|Year Ended December 31, 2008     |  |      |      |     |   |     
|Quarter ended March 31, 2008     |  | $    | 8.99 |     | $ | 6.24
|Quarter ended June 30, 2008      |  | $    | 7.80 |     | $ | 6.50
|Quarter ended September 30, 2008 |  | $    | 7.49 |     | $ | 4.73
|Quarter ended December 31, 2008  |  | $    | 5.48 |     | $ | 2.85

Dividends

We have never paid or declared any cash dividends on our common stock and we do not intend to pay or declare dividends on our common stock in the near future. We presently expect to retain any future earnings to fund
continuing development and growth of our business. Our payment of dividends in the future is subject to the discretion of our board of directors and will depend on our earnings, financial condition, capital requirements and other relevant factors.
Our credit facility generally prohibits us from paying dividends on our common stock.

Issuer Purchases of Equity Securities

We did not make any repurchases of our equity securities during the fourth quarter of 2008.

Stock Performance Graph

The graph below compares the cumulative 5-year total stockholder return on
our company from December 31, 2003 through December 31, 2008, with the cumulative total returns of the Nasdaq Composite index and a Research Data Group (RDG) Internet Composite Index. The graph assumes that the value of the
investment in our common stock, Nasdaq and the RDG index (including reinvestment of dividends) was $100 on December 31, 2003 and tracks it through December 31, 2008. The stock price performance on the following graph is not necessarily
indicative of future stock price performance.



13



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##### Table of Contents

The following performance graph and related information shall not be deemed soliciting
material or be filed with the SEC, nor shall such information be incorporated by reference into any future filing under the Securities Act or the Exchange Act, except to the extent that the Company specifically incorporates it by
reference into such filing.

COMPARISON OF 5 YEAR CUMULATIVE TOTAL RETURN*

Among A.D.A.M. Inc., The Nasdaq
Composite Index,

The RDG Internet Composite Index And The RDG Technology Composite Index

LOGO

*$100 invested on 12/31/03 in stock & index-including reinvestment of dividends.

| | Fiscal | year ending December 31.
| | ------ | ------------------------



|                         |  |         |        |         |   |         |  |         |  |         |        |         |   |        |  |   |       
|------------------------ |  | ------- | ------ | ------- | - | ------- |  | ------- |  | ------- | ------ | ------- | - | ------ |  | - | ------
|                         |  | 12/2003 |        | 12/2004 |   | 12/2005 |  | 12/2006 |  | 12/2007 |        | 12/2008
|A.D.A.M., Inc.           |  | $       | 100.00 |         | $ | 204.10  |  | 413.33  |  | $       | 311.79 |         | $ | 429.23 |  | $ | 205.13
|NASDAQ Composite         |  |         | 100.00 |         |   | 110.08  |  | 112.88  |  |         | 126.51 |         |   | 138.13 |  |   | 80.47 
|RDG Internet Composite   |  |         | 100.00 |         |   | 114.69  |  | 116.44  |  |         | 133.17 |         |   | 162.74 |  |   | 88.24 
|RDG Technology Composite |  |         | 100.00 |         |   | 104.00  |  | 106.32  |  |         | 115.97 |         |   | 132.44 |  |   | 75.00 



14



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##### Table of Contents

|ITEM 6. | SELECTED FINANCIAL DATA
|------- | -----------------------

The following selected
consolidated financial data for the years ended December 31, 2008, 2007 and 2006, and as of December 31, 2008 and 2007, has been derived from the audited consolidated financial statements included elsewhere herein and should be read in
conjunction with such consolidated financial statement and the accompanying notes. The selected financial data presented below for the years ended December 31, 2005 and 2004, and as of December 31, 2006, 2005 and 2004, has been derived
from audited financial statements not included herein. The results of operations of prior periods are not necessarily indicative of results that may be expected for any other period. The following selected financial data should be read in
conjunction with Managements Discussion and Analysis of Financial Condition and Results of Operations set forth below and the consolidated financial statements and notes thereto included elsewhere in this Annual Report on Form 10-K (this
Report).



|                                                              |  |                                       |        |   |      |   |        |      |  |   |        |   |  |      |        |   |  |   |        |  
|------------------------------------------------------------- |  | ------------------------------------- | ------ | - | ---- | - | ------ | ---- |  | - | ------ | - |  | ---- | ------ | - |  | - | ------ | -
|                                                              |  | Year Ended December 31,               |       
|                                                              |  | 2008                                  |        |   | 2007 |   |        | 2006 |  |   | 2005   |   |  | 2004 |       
|                                                              |  | (In thousands, except per share data) |       
|STATEMENT OF OPERATIONS DATA:                                 |  |                                       |        |   |      |   |        |      |  |   |        |   |  |      |        |   |  |   |        |  
|Revenues, net                                                 |  | $                                     | 28,857 |   |      | $ | 27,878 |      |  | $ | 16,505 |   |  | $    | 10,054 |   |  | $ | 8,433  |  
|Gross profit                                                  |  |                                       | 22,957 |   |      |   | 21,309 |      |  |   | 13,064 |   |  |      | 7,991  |   |  |   | 6,716  |  
|Operating income                                              |  |                                       | 1,802  |   |      |   | 4,759  |      |  |   | 3,132  |   |  |      | 1,289  |   |  |   | 1,539  |  
|Income tax benefit                                            |  |                                       |       |   |      |   | 1,510  |      |  |   |       |   |  |      | 5,500  |   |  |   |       |  
|Net income                                                    |  |                                       | 38     |   |      |   | 3,939  |      |  |   | 2,548  |   |  |      | 7,062  |   |  |   | 1,621  |  
|Basic net income per share                                    |  | $                                     | 0.00   |   |      | $ | 0.42   |      |  | $ | 0.30   |   |  | $    | 0.87   |   |  | $ | 0.21   |  
|Weighted average number of common shares outstanding, basic   |  |                                       | 9,813  |   |      |   | 9,461  |      |  |   | 8,630  |   |  |      | 8,108  |   |  |   | 7,879  |  
|Diluted net income per share                                  |  | $                                     | 0.00   |   |      | $ | 0.38   |      |  | $ | 0.25   |   |  | $    | 0.75   |   |  | $ | 0.19   |  
|Weighted average number of common shares outstanding, diluted |  |                                       | 10,642 |   |      |   | 10,442 |      |  |   | 10,074 |   |  |      | 9,468  |   |  |   | 8,742  |  
|                                                              | 
|                                                              |  | As of December 31,                    |       
|                                                              |  | 2008                                  |        |   | 2007 |   |        | 2006 |  |   | 2005   |   |  | 2004 |       
|                                                              |  | (In thousands)                        |       
|BALANCE SHEET DATA:                                           |  |                                       |        |   |      |   |        |      |  |   |        |   |  |      |        |   |  |   |        |  
|Total assets                                                  |  | $                                     | 53,146 |   |      | $ | 59,970 |      |  | $ | 60,138 |   |  | $    | 21,880 |   |  | $ | 13,244 |  
|Long-term debt                                                |  |                                       | 8,000  |   |      |   | 16,750 |      |  |   | 24,000 |   |  |      |       |   |  |   |       |  
|Total liabilities                                             |  |                                       | 21,324 |   |      |   | 30,423 |      |  |   | 36,669 |   |  |      | 4,736  |   |  |   | 4,395  |  
|Total shareholders equity                                    |  |                                       | 31,822 |   |      |   | 29,547 |      |  |   | 23,469 |   |  |      | 17,144 |   |  |   | 8,849  |  
|Working capital (deficit)                                     |  |                                       | (5,321 | ) |      |   | 1,228  |      |  |   | 3,084  |   |  |      | 8,576  |   |  |   | 4,266  |  
|                                                              | 
|                                                              |  | Year Ended December 31,               |       
|                                                              |  | 2008                                  |        |   | 2007 |   |        | 2006 |  |   | 2005   |   |  | 2004 |       
|PERCENT OF REVENUE:                                           |  |                                       |        |   |      |   |        |      |  |   |        |   |  |      |        |   |  |   |        |  
|Gross profit                                                  |  |                                       | 79.6   | % |      |   | 76.4   | %    |  |   | 79.2   | % |  |      | 79.5   | % |  |   | 79.6   | %
|Operating income                                              |  |                                       | 6.2    | % |      |   | 17.1   | %    |  |   | 19.0   | % |  |      | 12.8   | % |  |   | 18.2   | %
|Net income                                                    |  |                                       | 0.1    | % |      |   | 14.1   | %    |  |   | 15.4   | % |  |      | 70.2   | % |  |   | 19.2   | %



15



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|                                      |  |                         |       |      |   |        |      |  |      |       |  |      |        |   |  |   |       |  
|------------------------------------- |  | ----------------------- | ----- | ---- | - | ------ | ---- |  | ---- | ----- |  | ---- | ------ | - |  | - | ----- | -
|                                      |  | Year Ended December 31, |      
|                                      |  | 2008                    |       | 2007 |   |        | 2006 |  | 2005 |       |  | 2004 |       
|NON-GAAP DISCLOSURE:                  |  |                         |       |      |   |        |      |  |      |       |  |      |        |   |  |   |       |  
|Net income, GAAP                      |  | $                       | 38    |      | $ | 3,939  |      |  | $    | 2,548 |  | $    | 7,062  |   |  | $ | 1,621 |  
|Facility consolidation                |  |                         | 2,193 |      |   |       |      |  |      |      |  |      |       |   |  |   |      |  
|Loan refinance                        |  |                         | 813   |      |   |       |      |  |      |      |  |      |       |   |  |   |      |  
|Stock-based compensation              |  |                         | 903   |      |   | 758    |      |  |      | 136   |  |      | 644    |   |  |   |      |  
|Amortization of purchased intangibles |  |                         | 753   |      |   | 753    |      |  |      | 288   |  |      |       |   |  |   | 461   |  
|Severance                             |  |                         |      |      |   | 529    |      |  |      | 485   |  |      |       |   |  |   |      |  
|Income tax benefit                    |  |                         |      |      |   | (1,510 | )    |  |      |      |  |      | (5,500 | ) |  |   |      |  
|                                      |  |                         |       |      |   |        |      |  |      |       |  |      |        |   |  |   |       |  
|Net income, Adjusted Non-GAAP         |  |                         | 4,700 |      |   | 4,469  |      |  |      | 3,457 |  |      | 2,206  |   |  |   | 2,082 |  
|Interest expense (income)             |  |                         | 1,468 |      |   | 2,330  |      |  |      | 584   |  |      | (313   | ) |  |   | (82   | )
|Depreciation and amortization         |  |                         | 1,396 |      |   | 1,174  |      |  |      | 872   |  |      | 893    |   |  |   | 690   |  
|Income tax expense                    |  |                         |      |      |   |       |      |  |      |      |  |      | 100    |   |  |   |      |  
|Loss on the sale of investments       |  |                         | 296   |      |   |       |      |  |      |      |  |      |       |   |  |   |      |  
|                                      |  |                         |       |      |   |        |      |  |      |       |  |      |        |   |  |   |       |  
|EBITDA, Adjusted Non-GAAP             |  |                         | 7,860 |      |   | 7,973  |      |  |      | 4,913 |  |      | 2,886  |   |  |   | 2,690 |  
|                                      |  |                         |       |      |   |        |      |  |      |       |  |      |        |   |  |   |       |  

These non-GAAP operational measures, including adjusted net income 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 used by management to report our
financial results and forecasts to our board of directors, evaluate the operating performance of our company, manage and compare performance internally and externally against our peers, and establish internal operating targets. 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, primarily the effects of a facility consolidation, a loan refinance, stock-based compensation,
amortization of intangible assets, acquisition related expenses and the income tax benefits from valuation of future tax loss carryforwards. 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 net income and
adjusted EBITDA operational measures do not include the impact of a facility consolidation, a loan refinance, stock-based compensation, amortization of intangible assets, acquisition related expenses and the income tax benefits from valuation of
future tax loss carryforwards. 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.



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|ITEM 7. | MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
|------- | -------------------------------------------------------------------------------------

This analysis of our results of operations should be read in conjunction with the accompanying consolidated financial statements, including notes thereto,
contained in Item 8 of this Report. This Report contains certain forward-looking statements within the meaning of Section 27A of the Securities Act, and Section 21E of the Exchange Act. Statements that are predictive in nature and
that depend upon or refer to future events or conditions are forward-looking statements. Although we believe that these statements are based upon reasonable expectations, we can give no assurance that their goals will be achieved. Please refer to
the discussion of forward-looking statements included in Part I of this Report.

Overview

We provide online information and technology solutions for employers, benefits brokers, healthcare organizations and online media companies. For the end
users of our solutionsgeneral consumers, employees, patients, and health plan membersour products and services help people to better understand their health, better understand the benefits plans their employers provide, and make well
informed decisions about their healthcare and benefits selections. In addition, we help people understand the relationship between their benefits and the costs associated with them. This connection between financial understanding and benefits choice
and use of benefits is increasingly important as consumers are assuming more of the financial responsibilities for their healthcare.

Our
proprietary health information products are derived from what we believe to be one of the largest continually enhanced online consumer health reference information libraries available. The information we provide which is web-based, includes
information on diseases, symptoms, treatments, surgical procedures, specialty medicine and topics, and alternative medicine. Our content is enhanced with visuals, animations and other new media that provides a graphically rich environment to promote
learning retention and interactivity. In addition, we offer a number of health-related applications, such as health risk assessments and other decision support applications that are used by consumers to make informed healthcare decisions.

Our primary product for benefits brokers and employers is Benergy, a co-branded, web-based portal for employees that communicates benefits and other company sponsored information, improves benefits education and selection, automates benefits enrollment,
manages healthcare financial accounts such as Flexible Spending Accounts, and provides health content and decision support tools to aid in health education and awareness. The tools, information and services offered through Benergy automate and
streamline many important human resources (HR) functions so that employers can optimize their time and reduce administrative costswhile providing employees with a high level of access to pertinent benefits and health information. Benefits
brokers consider Benergy to be an important part of their service offering to their employer clients. Brokers make available to their clients a Benergy site that is populated with that employers specific benefits plan information. In many
instances they manage the Benergy site on behalf of their employer client, providing a deeper level of client service.

In addition to
Benergy, we offer benefits brokers a comprehensive agency management system called AgencyWare. With AgencyWare, brokers can manage the entire employer client lifecyclemoving prospects through each phase of the sales process, sending requests
for proposals (RFPs), preparing client presentations, managing client renewals and commissions, tracking customer service issues and organizing client data. We also offer brokers other tools that improve their communication with their
respective clients.

We sell our health information products primarily through multi-year licensing agreements to many different types of
healthcare and health-related organizations including hospitals, health plans, system integrators, pharmaceutical companies, health-oriented Internet websites, healthcare technology companies and employers. Our health content solutions are used by
our customers as part of their Web initiatives, imbedded in healthcare applications such as an electronic medical record or disease management applications, contained in a printed or CD-ROM format, or combined with other products that may be
offered to a healthcare consumer.



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##### Table of Contents

We sell our Benergy and broker management system primarily through annual licensing agreements with group
insurance brokers. Our brokers pay us a minimum annual fee for a predetermined number of end user licenses to Benergy. We also offer additional products in addition to the base Benergy product, such as online enrollment, which often times is sold by
us directly to the employer. The annual license agreements typically provide for a minimum monthly financial commitment and additional fees, if usage exceeds the minimum.

We sell our educational products, professional services and other services based on customer needs and each transaction is generally sold on an individual order basis, and revenue recognized as the product or service
is delivered.

Information regarding each of our service markets appears in Item 1 of this Report, under the caption Overview of
our Business.

Critical Accounting Policies and Estimates

Discussion and analysis of our financial condition and results of operations are based upon our consolidated financial statements, which have been prepared in accordance with generally accepted accounting principles
in the United States. The preparation of these consolidated financial statements requires us to make estimates and judgments that affect the amounts reported in the consolidated financial statements and the accompanying notes. On an on-going basis,
we evaluate our estimates, including those related to product returns, product and content development expenses, bad debts, intangible assets, income taxes and contingencies. We base our estimates on experience and on various assumptions that are
believed to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these
estimates under different assumptions or conditions.

We believe the following critical accounting policies affect our more significant
judgments and estimates used in the preparation of our consolidated financial statements.



| |  |  | Revenue Recognition
| | - |  | -------------------

We
derive revenues from the following sources: (1) electronically delivered software, which includes software license and post contract customer support (PCS) revenue, (2) hosted software, which includes software license, hosting and PCS
revenue, (3) professional services and (4) product sales. We recognize revenue when: (1) persuasive evidence of an arrangement exists; (2) delivery has occurred or services rendered; (3) the fee is fixed or determinable; and
(4) collectability is reasonably assured. When a contract includes multiple elements, such as software and services, the entire fee is allocated to each respective element based on vendor specific objective evidence of fair value, and
recognized when the revenue criteria for each element is met.

Electronically delivered software, which includes software license and PCS
revenue, is recognized in accordance with Statement of Position No. 97-2, Software Revenue Recognition, with the entire amount recognized ratably over the term of the license agreement.

Hosted software, which includes software license, hosting and PCS revenue, is recognized using GAAP principles for service revenue recognition as per
Emerging Issues Task Force (EITF) Issue No. 00-3. The entire amount of revenue is recognized ratably over the term of the license agreement, which matches the service that is being provided.

Professional service revenues are generally recognized upon completion and acceptance by the customer. For revenue arrangements in which we sell through a
reseller, we recognize revenue only after an agreement has been finalized between the customer and our authorized reseller and the content has been delivered to the customer by the reseller.

Product sales revenues are generally recognized at the time title passes to customers, distributors or resellers.



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| |  |  | Sales Returns Allowances and Allowance for Doubtful Accounts
| | - |  | ------------------------------------------------------------

Significant management judgments and estimates must be made in connection with establishing the sales returns and other allowances in any accounting period. Management must make estimates of potential future product
returns related to current period product revenue. We evaluate the adequacy of allowances for returns primarily based upon our evaluation of historical and expected sales experience and by channel of distribution. The judgments and estimates of
management may have a material effect on the amount and timing of our revenue for any given period. The allowance for returns in prior years has not been significant.

Similarly, management must make estimates of the uncollectability of accounts receivable. Management specifically analyzes accounts receivable and historical bad debts, customer concentrations, customer
credit-worthiness, current economic trends and changes in our customer payment terms when evaluating the adequacy of the allowance for doubtful accounts. If the financial condition of our customers were to deteriorate, resulting in an impairment of
their ability to make payments, additional allowances may be required.



| |  |  | Capitalized Software Product and Content Development Costs
| | - |  | ----------------------------------------------------------

We capitalize software product and content development costs in accordance with Financial Accounting Standards Board (FASB) Statement No. 86 (FAS 86), Accounting for the Costs of
Computer Software to be Sold, Leased, or Otherwise Marketed. This statement specifies that costs incurred internally in creating a computer software product shall be charged to expense when incurred as research and development until
technological feasibility has been established for the product. Technological feasibility is established upon completion of all planning, designing, and testing activities that are necessary to establish that the product can be produced to meet its
design specifications including functions, features, and technical performance requirements. We cease capitalization of internally developed software when the product is made available for general release to customers and thereafter, any maintenance
and customer support is charged to expense when related revenue is recognized or when those costs are incurred. We amortize such capitalized costs as cost of revenues on a product-by-product basis using the greater of the ratio of current product
revenue to the total of current and anticipated product revenue or on a straight line basis over the estimated life of the software, which we have determined to generally be two years. We continually evaluate the recoverability of capitalized costs
and if the successes of new product releases are less than we anticipate then a write-down of capitalized costs may be made which could adversely affect our results in the reporting period in which the write-down occurs.

We also capitalize internal software development costs in accordance with the American Institute of Certified Public Accountants Statement of
Position 98-1 (SOP 98-1), Accounting for the Costs of Computer Software Developed or Obtained for Internal Use. This statement specifies that computer software development costs for computer software intended for internal use
occurs in three stages: (1) the preliminary project stage, where costs are expensed as incurred, (2) the application development stage, where costs are capitalized, and (3) the post-implementation or operation stage, where again costs
are expensed as incurred. We cease capitalization of developed software for internal use when the software is ready for its intended use and placed in service. We amortize such capitalized costs as cost of revenues on a product-by-product basis
using the straight-line method over a period of three years. We continually evaluate the usability of the products that make up our capitalized costs and if certain circumstances arise such as the introduction of new technology in the marketplace
that management intends to use in place of the capitalized project, then a write-down of capitalized costs may be made which could adversely affect our results in the reporting period in which the write-down occurs.



| |  |  | Goodwill and Intangible Assets
| | - |  | ------------------------------

In accordance with Statement of Financial Accounting Standards (SFAS) No. 142, Goodwill and Other Intangible Assets, we evaluate goodwill and intangible assets for impairment on an annual basis.



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Additionally, goodwill is tested for impairment between annual tests if an event occurs or circumstances change that would more likely than not reduce the
fair value of an entity below its carrying value. These events or circumstances would include a significant change in the business climate, legal factors, operating performance indicators, competition, sale or disposition of a significant portion of
the business or other factors. The carrying value of goodwill is evaluated in relation to the operating performance and estimated future discounted cash flows of the entity.



| |  |  | Income Taxes
| | - |  | ------------

As part of the
process of preparing our consolidated financial statements we are required to estimate our taxes in each of the jurisdictions in which we operate. This process involves management estimating the actual tax exposure together with assessing temporary
differences resulting from differing treatment of items for tax and U.S. GAAP purposes. These differences result in deferred tax assets and liabilities, which are included within our accompanying consolidated balance sheet. We must then assess the
likelihood that deferred tax assets will be recovered from future taxable income and to the extent we believe that recovery is not likely, we must establish a valuation allowance.



| |  |  | Stock-based Compensation
| | - |  | ------------------------

We
previously accounted for stock-based compensation expense under Accounting Principles Board Opinion No. 25, Accounting for Stock Issued to Employees. Under Accounting Principles Board Opinion No. 25, we would not have recognized any
compensation cost, because our options were granted at market value. On January 1, 2006, we adopted SFAS No. 123R using the modified prospective application transition approach method. We expect to incur approximately $822,000 of expense
over a weighted average of 1.6 years for all unvested options outstanding at December 31, 2008.

RESULTS OF OPERATIONS

Year ended December 31, 2008 compared to year ended December 31, 2007

Revenues(numbers in table in thousands)



|                                |      |                        |        |          |   |        |          |   |       |   |  |       |   
|------------------------------- | ---- | ---------------------- | ------ | -------- | - | ------ | -------- | - | ----- | - |  | ----- | --
|                                |      | Year EndedDecember 31, |        | $ Change |   |        | % Change |  
|                                | 2008 |                        | 2007   |          |  
|A.D.A.M., Inc. Consolidated     |      |                        |        |          |   |        |          |   |       |   |  |       |   
|Licensing                       |      | $                      | 25,395 |          | $ | 23,563 |          | $ | 1,832 |   |  | 7.8   | % 
|Product                         |      |                        | 1,182  |          |   | 1,642  |          |   | (460  | ) |  | (28.0 | )%
|Professional services and other |      |                        | 2,280  |          |   | 2,673  |          |   | (393  | ) |  | (14.7 | )%
|                                |      |                        |        |          |   |        |          |   |       |   |  |       |   
|Total Net Revenues              |      | $                      | 28,857 |          | $ | 27,878 |          | $ | 979   |   |  | 3.5   | % 
|                                |      |                        |        |          |   |        |          |   |       |   |  |       |   

Total net revenues increased 3.5%, or $979,000, to $28,857,000, for the year ended
December 31, 2008 compared to the year ended December 31, 2007. For the periods shown above, over 85% of those revenues came from the licensing of our health information services and benefits technology solutions.

Licensing revenues are recognized on a monthly basis, either based on usage, expiration of monthly minimums, or on a straight-line basis over the life of
the contract. Therefore, fluctuation in licensing revenue is due to new contracts, customer usage levels or contract terminations. We annualize each contracts committed value and use changes to that value, from new sales or terminations, to
calculate a net client retention rate.

Our increase in licensing revenue is a result of new customer contracts and client retention from
our health information products. We derive those revenues primarily from healthcare organizations and healthcare information technology companies. The increase in new customer contracts is a result of the increased staffing in sales and marketing
personnel, product enhancements, and an increase in the demand for online consumer-focused health information.



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Revenues from product sales decreased by 28.0%, or $460,000, to $1,182,000 for the year ended
December 31, 2008 compared to the year ended December 31, 2007. Our product revenues consist primarily of CD-based product sales to the educational market. Revenues were lower in this area due to a market shift from CD-based products to
online solutions. We are planning to invest in new product development of online solutions to meet the current market requirements.

Professional services and other revenue decreased $393,000, or 14.7%, to $2,280,000 for the year ended December 31, 2008 compared to the year ended December 31, 2007. Professional services and other revenue are derived from
products such as custom implementation services, flexible spending account services, direct to consumer products, and sales of nonrecurring products such as books, publications, and medical images. In the fourth quarter last year, we recorded over
$350,000 in revenue for a professional services engagement that was nonrecurring.

Operating Costs and Expenses(numbers in table in thousands)



|                                  |  |                        |        |   |          |   |        |          |  |   |       |   |  |       |   
|--------------------------------- |  | ---------------------- | ------ | - | -------- | - | ------ | -------- |  | - | ----- | - |  | ----- | --
|                                  |  | Year EndedDecember 31, |        |   | $ Change |   |        | % Change | 
|                                  |  | 2008                   |        |   | 2007     |   |        |         
|A.D.A.M., Inc. Consolidated       |  |                        |        |   |          |   |        |          |  |   |       |   |  |       |   
|Cost of revenues                  |  | $                      | 4,201  |   |          | $ | 5,092  |          |  | $ | (891  | ) |  | (17.5 | )%
|Cost of revenuesamortization     |  |                        | 1,699  |   |          |   | 1,477  |          |  |   | 222   |   |  | 15.0  | % 
|Product and content development   |  |                        | 6,022  |   |          |   | 5,820  |          |  |   | 202   |   |  | 3.5   | % 
|Development capitalization        |  |                        | (1,725 | ) |          |   | (1,154 | )        |  |   | (571  | ) |  | 49.5  | % 
|Sales and marketing               |  |                        | 8,961  |   |          |   | 6,026  |          |  |   | 2,935 |   |  | 48.7  | % 
|General and administrative        |  |                        | 7,897  |   |          |   | 5,858  |          |  |   | 2,039 |   |  | 34.8  | % 
|                                  |  |                        |        |   |          |   |        |          |  |   |       |   |  |       |   
|Total Operating Cost and Expenses |  | $                      | 27,055 |   |          | $ | 23,119 |          |  | $ | 3,936 |   |  | 17.0  | % 
|                                  |  |                        |        |   |          |   |        |          |  |   |       |   |  |       |   

Cost of revenues consists primarily of costs associated with royalties, distribution license fees,
and personnel support for our products and services. Cost of revenues decreased $891,000, or 17.5%, to $4,201,000 for the year ended December 31, 2008 compared to the year ended December 31, 2007. This decrease is primarily the result of
lower royalty costs from the elimination or expiration of certain royalty agreements related to our healthcare products.

Cost of
revenuesamortization increased $222,000, or 15%, to $1,699,000 for the year ended December 31, 2008 compared to the year ended December 31, 2007. Cost of revenuesamortization consists of costs associated with amortization of
capitalized customer lists, software product, and content development costs. Cost of revenuesamortization for customer lists and software product related to the acquisition of OnlineBenefits was $753,000 for the year ended
December 31, 2008 and 2007. The amortization increases primarily relate to new benefit technology product releases and other product enhancements that were made in the second half of 2007.

Product and content development expenses increased $202,000, or 3.5%, to $6,022,000 for the year ended December 31, 2008 compared to the year ended
December 31, 2007. Product and content development expenses consist of salary and costs associated with engineering and developing our product and service offerings. Development capitalization increased $571,000, or 49.5%, for the year ended
December 31, 2008 compared to the year ended December 31, 2007. This increase in development is due to investments to enhance the functionality of our broker and employer solution products. Due to the increase in capitalization, the net
expense decreased $369,000 for the year ended December 31, 2008 compared to the same period in the prior year.



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Sales and marketing expenses increased 48.7%, or $2,935,000, to $8,961,000 for the year ended
December 31, 2008 compared to the year ended December 31, 2007. Sales and marketing expenses include the personnel costs of sales and marketing personnel and their related travel and support costs and the costs of our marketing and public
relations programs. This increase is primarily attributable to the hiring of additional sales and customer relations personnel and related expenses in order to expand our sales presence, pursue additional market opportunities, and enhance our
customer service levels.

General and administrative expenses increased 34.8%, or $2,039,000, to $7,897,000 for the year ended
December 31, 2008 compared to the year ended December 31, 2007. The fourth quarter 2008 includes $3,006,000 of costs associated with a facility consolidation and a loan refinance. This expense was offset by reduced personnel in the general
and administrative area resulting from our prior efforts to streamline and automate internal processes costs, controls and the consolidation of certain functions between Online Benefits and A.D.A.M. In the fourth quarter of 2007, we recorded
severance expense of $529,000.

Operating profit decreased $2,957,000 to $1,802,000 for the year ended December 31, 2008 compared to
an operating profit of $4,759,000 for the year ended December 31, 2007. This decrease is directly related to the facility consolidation and refinance of the Capital Source Loan.

Other Expenses and Income

Interest expense was $1,495,000 and $2,565,000 for the years ended
December 31, 2008 and 2007, respectively. This decrease in interest expense was primarily due to the pay down of debt from $20,000,000 at December 31, 2007 to $10,000,000 at December 31, 2008.

Interest income was $27,000 and $235,000 for the years ended December 31, 2008 and 2007, respectively. These decreases were primarily due to the
decrease in cash associated with the advance payments on the Capital Source Loan.

We recognized a loss on the sale of interest bearing
short-term investments of $296,000 during the year ended December 31, 2008 as short term investments of $2,716,000 were sold. A portion of these funds were used to make a $5,000,000 early payment on the Capital Source Loan.

Net Income

As a result of the factors described
above, net income decreased $3,901,000 to $38,000 for the year ended December 31, 2008, compared to $3,939,000 for the year ended December 31 2007.

Year ended December 31, 2007 compared to year ended December 31, 2006

Revenues(numbers in table in thousands)



|                                |  |                        |        |      |   |          |  |          |        |  |       |  
|------------------------------- |  | ---------------------- | ------ | ---- | - | -------- |  | -------- | ------ |  | ----- | -
|                                |  | Year EndedDecember 31, |        |      |   |          | 
|                                |  | 2007                   |        | 2006 |   | $ Change |  | % Change |       
|A.D.A.M., Inc. Consolidated     |  |                        |        |      |   |          |  |          |        |  |       |  
|Licensing                       |  | $                      | 23,563 |      | $ | 13,818   |  | $        | 9,745  |  | 70.5  | %
|Product                         |  |                        | 1,642  |      |   | 1,594    |  |          | 48     |  | 3.0   | %
|Professional services and other |  |                        | 2,673  |      |   | 1,093    |  |          | 1,580  |  | 144.6 | %
|                                |  |                        |        |      |   |          |  |          |        |  |       |  
|Total Net Revenues              |  | $                      | 27,878 |      | $ | 16,505   |  | $        | 11,373 |  | 68.9  | %
|                                |  |                        |        |      |   |          |  |          |        |  |       |  

A.D.A.M. acquired OnlineBenefits on August 14, 2006 and, accordingly, the results of
OnlineBenefits are included in the consolidated operating results subsequent to the acquisition. In order to facilitate the review of the year to year results, the tables below show the results of just the A.D.A.M. operating units and excludes the
amounts reported by OnlineBenefits.



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##### Table of Contents

Results of A.D.A.M. operating units excluding OnlineBenefits



|                                        |  |                        |        |      |   |          |  |          |       |  |      |  
|--------------------------------------- |  | ---------------------- | ------ | ---- | - | -------- |  | -------- | ----- |  | ---- | -
|                                        |  | Year EndedDecember 31, |        |      |   |          | 
|                                        |  | 2007                   |        | 2006 |   | $ Change |  | % Change |      
|A.D.A.M., Inc. excluding OnlineBenefits |  |                        |        |      |   |          |  |          |       |  |      |  
|Licensing                               |  | $                      | 10,111 |      | $ | 8,817    |  | $        | 1,294 |  | 14.7 | %
|Product                                 |  |                        | 1,642  |      |   | 1,594    |  |          | 48    |  | 3.0  | %
|Professional services and other         |  |                        | 828    |      |   | 650      |  |          | 178   |  | 27.4 | %
|                                        |  |                        |        |      |   |          |  |          |       |  |      |  
|Total Net Revenues                      |  | $                      | 12,581 |      | $ | 11,061   |  | $        | 1,520 |  | 13.7 | %
|                                        |  |                        |        |      |   |          |  |          |       |  |      |  

Total net revenues increased 68.9%, or $11,373,000, to $27,878,000 for the year ended
December 31, 2007 from $16,505,000 for the year ended December 31, 2006. Revenues from OnlineBenefits in 2007 accounted for $9,853,000 of the net increase. Excluding the results of OnlineBenefits, total revenue increased $1,520,000 or
13.7% from 2006 to 2007.

Licensing revenues increased 70.5%, or $9,745,000, to $23,563,000 for the year ended December 31, 2007 from
$13,818,000 for the year ended December 31, 2006. Licensing revenues are derived from licensing our products primarily to healthcare organizations, technology companies, benefit brokers, employers, and internet customers. OnlineBenefits
licensing revenue from benefit brokers and employers accounted for $8,451,000 of the total $9,745,000 increase in licensing revenue for 2007.

Excluding the results of OnlineBenefits, licensing revenue increased 14.7%, or $1,294,000, to $10,111,000, for the year ended December 31, 2007 from $8,817,000 for the year ended December 31, 2006. This growth was from increased
revenue in internet, provider, and technology customers. The internet market increased $676,000 to $1,869,000, provider companies increased $279,000 to $4,172,000, and the technology market increased $153,000 to $720,000 in 2007. As a percent of
total revenues, revenues from licensing were 80.4% in 2007 compared to 79.7% in 2006.

Revenues from product sales increased 3.0%, or
$48,000, to $1,642,000 for the year ended December 31, 2007 from $1,594,000 for the year ended December 31, 2006. The product revenues consist primarily of product sales to the educational market. This increase in 2007 was attributable to
an increase in average sale price. As a percent of total revenues, revenues from product sales were 5.9% in 2007 compared to 9.7% in 2006.

Professional services and other revenue are derived from products such as flexible spending account services, direct to consumer products, custom implementation services, and sales of nonrecurring products such as books, subscriptions, and
images. The revenue growth of 144.6%, or $1,580,000, for the year ended December 31, 2007 was mainly attributable to the results of OnlineBenefits and its related administrative service provider business. The professional services and other
revenues accounted for approximately 9.6% of total revenues for 2007 compared to 6.6% in 2006.

Operating Costs and Expenses(numbers in table in
thousands)



|                                  |  |                        |        |   |      |   |        |          |  |   |          |   |  |       |   
|--------------------------------- |  | ---------------------- | ------ | - | ---- | - | ------ | -------- |  | - | -------- | - |  | ----- | --
|                                  |  | Year EndedDecember 31, |        |   |      |   |        |          | 
|                                  |  | 2007                   |        |   | 2006 |   |        | $ Change |  |   | % Change |  
|A.D.A.M., Inc. Consolidated       |  |                        |        |   |      |   |        |          |  |   |          |   |  |       |   
|Cost of revenues                  |  | $                      | 5,092  |   |      | $ | 2,490  |          |  | $ | 2,602    |   |  | 104.5 | % 
|Cost of revenuesamortization     |  |                        | 1,477  |   |      |   | 951    |          |  |   | 526      |   |  | 55.3  | % 
|Product and content development   |  |                        | 5,820  |   |      |   | 3,677  |          |  |   | 2,143    |   |  | 58.3  | % 
|Development capitalization        |  |                        | (1,154 | ) |      |   | (973   | )        |  |   | (181     | ) |  | (18.6 | )%
|Sales and marketing               |  |                        | 6,026  |   |      |   | 2,903  |          |  |   | 3,123    |   |  | 107.6 | % 
|General and administrative        |  |                        | 5,858  |   |      |   | 4,325  |          |  |   | 1,533    |   |  | 35.4  | % 
|                                  |  |                        |        |   |      |   |        |          |  |   |          |   |  |       |   
|Total Operating Cost and Expenses |  | $                      | 23,119 |   |      | $ | 13,373 |          |  | $ | 9,746    |   |  | 72.8  | % 
|                                  |  |                        |        |   |      |   |        |          |  |   |          |   |  |       |   



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Results of A.D.A.M. operating units excluding OnlineBenefits



|                                        |  |                        |        |   |      |   |       |          |  |   |          |   |  |       |   
|--------------------------------------- |  | ---------------------- | ------ | - | ---- | - | ----- | -------- |  | - | -------- | - |  | ----- | --
|                                        |  | Year EndedDecember 31, |        |   |      |   |       |          | 
|                                        |  | 2007                   |        |   | 2006 |   |       | $ Change |  |   | % Change |  
|A.D.A.M., Inc. excluding OnlineBenefits |  |                        |        |   |      |   |       |          |  |   |          |   |  |       |   
|Cost of revenues                        |  | $                      | 1,077  |   |      | $ | 1,449 |          |  | $ | (372     | ) |  | (25.7 | )%
|Cost of revenuesamortization           |  |                        | 581    |   |      |   | 663   |          |  |   | (82      | ) |  | (12.4 | )%
|Product and content development         |  |                        | 3,221  |   |      |   | 2,320 |          |  |   | 901      |   |  | 38.8  | % 
|Development capitalization              |  |                        | (588   | ) |      |   | (802  | )        |  |   | 214      |   |  | (26.7 | )%
|Sales and marketing                     |  |                        | 2,861  |   |      |   | 1,823 |          |  |   | 1,038    |   |  | 57.0  | % 
|General and administrative              |  |                        | 4,329  |   |      |   | 3,402 |          |  |   | 927      |   |  | 27.2  | % 
|                                        |  |                        |        |   |      |   |       |          |  |   |          |   |  |       |   
|Total Operating Cost and Expenses       |  | $                      | 11,481 |   |      | $ | 8,855 |          |  | $ | 2,626    |   |  | 29.7  | % 
|                                        |  |                        |        |   |      |   |       |          |  |   |          |   |  |       |   

Cost of revenues increased 104.5%, or $2,602,000, to $5,092,000 in 2007 from $2,490,000 in 2006.
Cost of revenues consists primarily of costs associated with royalties, distribution license fees, and personnel support for the benefit and agency management systems for our licensing products. This cost also includes product components, packaging
and shipping costs related to our products and services revenue. OnlineBenefits cost of revenues, which included costs for support of our benefit and agency management systems, accounted for $4,015,000 of the total cost of revenue in 2007.
Excluding the results of OnlineBenefits, cost of revenues decreased 25.7% or $372,000 in 2007 from 2006 due to a reduction in third party content license cost. As a percentage of revenue, cost of revenues was 8.6% in 2007, compared to 13.1% in 2006.

Cost of revenuesamortization increased 55.3%, or $526,000, to $1,477,000 in 2007 from $951,000 in 2006. Cost of
revenuesamortization consists primarily of costs associated with amortization of capitalized customer list, software product, and content development costs. OnlineBenefits cost of revenuesamortization was $896,000 in 2007.
Excluding the results of OnlineBenefits cost of revenuesamortization decreased $82,000, or 12.4% in 2007 from 2006. As a percent of total revenues, cost of revenuesamortization decreased to 4.6% in 2007 from 6.0% in 2006.

Product and content development costs increased 72.6%, or $1,962,000, to $4,666,000 in 2007 from $2,704,000 in 2006. OnlineBenefits incurred product and
content development costs of $2,033,000 in 2007. The $1,962,000 increase was primarily attributable to the acquisition of OnlineBenefits. The increase attributable to OnlineBenefits product and development costs was $847,000. The remaining
$1,115,000 increase is primarily attributable to a $395,000 increase in personnel related cost due to an increase in the number of employees, $479,000 of allocated support costs, and $214,000 of developed costs expensed versus capitalized for new
product development. Excluding the results of OnlineBenefits, as a percent of total revenues, product and content development costs increased to 20.9% for 2007, compared to 13.7% in 2006.

Sales and marketing costs increased 107.6%, or $3,123,000, to $6,026,000 in 2007 from $2,903,000 in 2006. OnlineBenefits incurred sales and marketing
costs of $3,165,000 in 2007. The $3,123,000 increase was primarily attributable to the acquisition of OnlineBenefits. The increase attributable to OnlineBenefits sales and marketing costs was $2,085,000. The remaining $1,038,000 increase is
primarily attributable to a $413,000 increase from sales personnel salary costs, a $154,000 increase in recruiting and hiring costs, and a $315,000 increase in allocated support costs. Excluding the results of OnlineBenefits, as a percent of total
revenues, sales and marketing costs increased to 22.7% for 2007, compared to 16.5% in 2006.

General and administrative expenses increased
35.4%, or $1,533,000, to $5,858,000 in 2007 from $4,325,000 in 2006. OnlineBenefits accounted for $1,525,000 of the total general and administrative expense in 2007. The increase attributable to OnlineBenefits general and administrative costs was
$602,000. The remaining $927,000 increase is primarily attributable to a $622,000 increase in stock compensation expense, a $385,000 increase in salary related expense, a $392,000 increase related to Sarbanes-Oxley implementation and Board



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compensation fees, a $137,000 increase related to severance expense, and a $106,000 increase in travel related expenses related to OnlineBenefits. These
increases were partially offset by a decrease of $794,000 of allocated support costs. Excluding the results of OnlineBenefits, as a percent of total revenues, product and content development costs decreased to 34.4% for 2007, compared to 30.8% in
2006.

Other Income (Expense)

Interest
expense increased $1,463,000, to $2,565,000 in 2007 from $1,102,000 in 2006. This increase in interest expense was primarily related to the debt incurred to finance the acquisition of OnlineBenefits. Interest on the debt related to the acquisition
was $2,144,000 in 2007. Amortization of financing fees related to the acquisition was $345,000 in 2007 and $140,000 in 2006.

Interest
income decreased $283,000 to $235,000 in 2007 from $518,000 in 2006. This decrease was primarily due to the decrease in cash and short-term investments which were utilized for the acquisition of OnlineBenefits.

Income Tax Provision (Benefit)

For 2006, no
provision was recorded for income taxes as we had sufficient net operating loss carryforwards to offset taxable income and we had no change to our deferred tax asset. (see Note 10 to the consolidated financial statements). At December 31, 2007
we reevaluated the deferred tax asset balance which resulted in an additional tax benefit recognized of $1,510,000.

Net Income

As a result of the above, we had net income of $3,939,000, or $0.42 per share (basic), for 2007, as compared to net income of $2,548,000, or $0.30 per
share (basic), for 2006.

Liquidity and Capital Resources

As of December 31, 2008, we had current assets of $6,598,000, including cash and cash equivalents of $1,377,000, and $11,919,000 in current liabilities, or a negative working capital of $5,321,000. Working
capital includes $5,995,000 in deferred revenue for which we have already received payment. While we are obligated to provide services related to those payments, in the future, we will not receive additional payments related to those services.
Excluding the deferred revenue, working capital would have been $674,000. Our working capital is affected by the timing of each period end in relation to items such as payments received from customers, payments made to vendors, and internal payroll
and billing cycles, as well as the seasonality within our business. Accordingly, our working capital, and its impact on cash flow from operations, can fluctuate materially from period to period. We use working capital to finance ongoing
operations, fund the development and introduction of new business strategies and internally developed software, acquire complementary businesses and acquire capital equipment.

Cash provided by operating activities was $5,962,000 during the year ended December 31, 2008, as compared to cash provided of $5,839,000 during the
year ended December 31, 2007. During the year ended December 31, 2008, cash provided by operating activities was primarily due to net income (net of non-cash related add-backs of depreciation and amortization, deferred financing cost
amortization and write off and stock based compensation expense) of $3,942,000.

Cash used in investing activities was $620,000 during the
year ended December 31, 2008, as compared to cash provided of $239,000 during the year ended December 31, 2007. During the year ended December 31, 2008, cash was used in software product and development costs of $1,725,000 and
purchases of property and equipment of $1,426,000 offset by $2,716,000 of cash provided from the sale of investments.



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Cash used in financing activities was $9,390,000 during the year ended December 31, 2008, as
compared to cash used of $5,099,000 during the year ended December 31, 2007. The $4,291,000 increase in cash used was primarily due to the $20,000,000 in payments made in 2008, related to the payoff of long-term debt associated with the
OnlineBenefits acquisition, over the $5,000,000 in payments made in 2007. This $15,000,000 difference in payments was offset by $10,000,000 in proceeds received in 2008 from the issuance of the new loan with RBC Bank (USA).

Commitments and Other Contractual Obligations

We
have entered into certain agreements to license content for our services from various unrelated third parties. We also have contractual obligations at December 31, 2008 relating to real estate, capital and operating lease arrangements.

Total payments due under long-term debt, license payments, real estate, operating and capital leases are listed below:



|                    |  |                |        |                   |   |                       |  |                |     |       |   |     |  |   |       
|------------------- |  | -------------- | ------ | ----------------- | - | --------------------- |  | -------------- | --- | ----- | - | --- |  | - | ------
|Year                |  | Long-term Debt |        | Real EstateLeases |   | Other OperatingLeases |  | Capital Leases |     | Total
|One year or less    |  | $              | 2,000  |                   | $ | 1,858                 |  | $              | 70  |       | $ | 69  |  | $ | 4,000 
|Two to three years  |  |                | 4,000  |                   |   | 3,649                 |  |                | 73  |       |   | 86  |  |   | 7,811 
|Four to five years  |  |                | 4,000  |                   |   | 1,476                 |  |                |    |       |   | 74  |  |   | 5,550 
|Six to seven years  |  |                |       |                   |   | 1,566                 |  |                |    |       |   |    |  |   | 1,566 
|Eight to nine years |  |                |       |                   |   | 1,662                 |  |                |    |       |   |    |  |   | 1,662 
|Ten to eleven years |  |                |       |                   |   | 1,165                 |  |                |    |       |   |    |  |   | 1,165 
|                    |  |                |        |                   |   |                       |  |                |     |       |   |     |  |   |       
|Total               |  | $              | 10,000 |                   | $ | 11,376                |  | $              | 143 |       | $ | 229 |  | $ | 21,754
|                    |  |                |        |                   |   |                       |  |                |     |       |   |     |  |   |       

We believe our cash resources from cash and a $3,000,000 revolving credit line with our lender,
together with anticipated cash flows from operations, will be sufficient to meet our working capital needs for the next twelve months. However, we may be required to raise additional funds in order to accelerate development of new and existing
services and products, to respond to competitive pressures or to possibly acquire complementary products, businesses or technologies. There can be no assurance that any required additional financing will be available on terms favorable to us, or at
all. If additional funds are raised by the issuance of equity securities, our shareholders would experience dilution of their ownership interest and these securities may have rights senior to those of the holders of the common stock. If
additional funds are raised by the issuance of debt securities, we may be subject to certain limitations on our operations, including limitations on the payment of dividends. If adequate funds are not available or not available on acceptable
terms, we may be unable to take advantage of acquisition opportunities, develop or enhance services and products or respond to competitive pressures, any of which could have a material adverse effect on our business, financial condition and
results of operations.

Off-Balance Sheet Arrangements

We do not have any material off-balance sheet arrangements.

Recent Accounting Pronouncements

For information with respect to new accounting pronouncements and the impact of these pronouncements on our consolidated financial statements, see Note 1
of the Notes to Consolidated Financial Statements.



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Income Taxes

We adopted the provisions of Financial Accounting Standards Board Interpretation No. 48, Accounting for Uncertainty in Income Taxesan Interpretation of FASB Statement No. 109 (FIN 48) on
January 1, 2007. This standard prescribes a recognition threshold that a tax position is required to meet before being recognized in the financial statements and provides guidance on derecognition, measurement, classification, interest and
penalties, accounting in interim periods, disclosure and transition issues. We recognized tax benefits from all tax positions we have taken, and there has been no material adjustment to any carryforwards, NOL or R&D credits, as a result of the
implementation of FIN 48. Therefore, there are no material unrecognized tax benefits and related FIN 48 tax liabilities at December 31, 2008 and 2007. In addition, future changes in the unrecognized tax benefits will likely have no
impact on our effective tax rate due to the existence of the valuation allowance.

As of December 31, 2008 and 2007, we have no
accrual requirement for interest or penalties related to uncertain tax positions since the tax benefits have not been included in prior income tax return filings. Accrued interest relating to uncertain tax positions would be recorded as interest
expense and penalties related to uncertain tax positions would be recorded as general and administrative expenses.

The tax years 2005 to
2008 remain open to examination by the major taxing jurisdictions to which we are subject. Additionally, upon inclusion of the NOL and R&D credit carryforward tax benefits in future tax returns, the related tax benefit for the period in which
the benefit arose may be subject to examination.



|ITEM 7A. | QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
|-------- | ----------------------------------------------------------

We do not have operations of a material nature that are subject to risks of foreign currency fluctuations, nor do we use derivative financial instruments in our operations or investment portfolio. Our exposure to risk and related changes in
interest rates relates primarily to our investment portfolio and our variable rate debt. As of December 31, 2008, we had $1,377,000 of cash and $47,000 in restricted cash. Due to the short-term nature of our investment portfolio, we believe
that even a sudden 10 percentage points change in interest rates would not have a material effect on the value of the portfolio. However, in connection with an early payment on the Capital Source Loan, we recognized a loss of $296,000 on the sale of
interest bearing short-term investments. The average yield on our cash and cash equivalents at December 31, 2008 was approximately 0.1%. The impact on our future interest income depends largely on the gross amount of our investment portfolio.
We do not expect our operating results or cash flows to be affected to any significant degree by a sudden change in market interest rates.

As of December 31, 2008, we had a total of $10,000,000 in variable rate debt at differing interest rates tied to LIBOR. If the interest rates on our existing variable rate debt were to increase by 10 percentage points over the
next twelve months, we would incur $1,000,000 of additional interest expense over a 12-month period and would potentially be in default of the long-term debt covenants.



|ITEM 8. | FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
|------- | -------------------------------------------

Our
consolidated financial statements, including notes thereto, and the reports of independent registered public accounting firms are filed as Exhibit 99.1 to this Report and incorporated herein by reference.



|                                                                                                                |  | 
|--------------------------------------------------------------------------------------------------------------- |  | 
|Reports of Independent Registered Public Accounting Firms                                                       |  | 
|Consolidated Balance Sheets at December 31, 2008 and 2007                                                       |  | 
|Consolidated Statements of Operations for the years ended December 31, 2008, 2007 and 2006                      |  | 
|Consolidated Statements of Changes in Shareholders Equity for the years ended December 31, 2008, 2007 and 2006 |  | 
|Consolidated Statements of Cash Flows for the years ended December 31, 2008, 2007 and 2006                      |  | 
|Notes to Consolidated Financial Statements                                                                      |  | 



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Quarterly Financial Information

The table below presents certain unaudited quarterly statements of operations data for each of the eight quarters beginning January 1, 2007 and ending December 31, 2008. Such information, in the opinion of
management, includes all adjustments necessary for a fair presentation of that information. The results of operations for any quarter are not necessarily indicative of the results to be expected for any future quarter. Certain reclassifications have
been made to 2007 quarterly information related to gross profit and operating income. We reclassified sales related expenses from cost of revenues to sales and marketing in the amount of $137,000 for first quarter, $204,000 for second quarter, and
$196,000 for third quarter.

In the fourth quarter of 2007, we had significant adjustments to the financial statements. A severance accrual
was recorded in the amount of $529,000 and a deferred tax benefit was recorded for $1,510,000. In the fourth quarter of 2008, we also had significant adjustments to the financial statements, including 2,193,000 for facility consolidation and 813,000
for a loan refinance.



|                            |  |                                       |       |         |   |              |  |             |       |  |   |        |  
|--------------------------- |  | ------------------------------------- | ----- | ------- | - | ------------ |  | ----------- | ----- |  | - | ------ | -
|                            |  | 2008Three Months Ended                |      
|                            |  | March 31                              |       | June 30 |   | September 30 |  | December 31 |      
|                            |  | (In thousands, except per share data) |      
|Revenues, net               |  | $                                     | 7,123 |         | $ | 7,189        |  | $           | 7,139 |  | $ | 7,406  |  
|Gross profit                |  |                                       | 5,695 |         |   | 5,803        |  |             | 5,532 |  |   | 5,927  |  
|Operating income (loss)     |  |                                       | 1,291 |         |   | 1,151        |  |             | 1,020 |  |   | (1,642 | )
|Net income (loss)           |  |                                       | 547   |         |   | 810          |  |             | 688   |  |   | (2,007 | )
|Earnings per share, basic   |  | $                                     | 0.06  |         | $ | 0.08         |  | $           | 0.07  |  | $ | (0.20  | )
|Earnings per share, diluted |  | $                                     | 0.05  |         | $ | 0.08         |  | $           | 0.06  |  | $ | (0.19  | )
|                            | 
|                            |  | 2007Three Months Ended                |      
|                            |  | March 31                              |       | June 30 |   | September 30 |  | December 31 |      
|                            |  | (In thousands, except per share data) |      
|Revenues, net               |  | $                                     | 6,546 |         | $ | 7,024        |  | $           | 6,676 |  | $ | 7,633  |  
|Gross profit                |  |                                       | 5,037 |         |   | 5,191        |  |             | 5,405 |  |   | 5,676  |  
|Operating income            |  |                                       | 1,151 |         |   | 1,437        |  |             | 1,345 |  |   | 831    |  
|Net income                  |  |                                       | 466   |         |   | 861          |  |             | 788   |  |   | 1,824  |  
|Earnings per share, basic   |  | $                                     | 0.05  |         | $ | 0.09         |  | $           | 0.08  |  | $ | 0.19   |  
|Earnings per share, diluted |  | $                                     | 0.04  |         | $ | 0.08         |  | $           | 0.07  |  | $ | 0.17   |  



|ITEM 9. | CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE
|------- | ------------------------------------------------------------------------------------

Our audit committee approved the dismissal of and dismissed Tauber and Balser, P.C. (Tauber and Balser) as our independent registered public
accounting firm on July 11, 2008.

The reports of Tauber and Balser on the consolidated financial statements of the Company as of and for
the fiscal years ended December 31, 2006 and December 31, 2007 did not contain any adverse opinion or disclaimer of opinion, nor were they qualified or modified as to uncertainty, audit scope or accounting principle. During the fiscal years ended
December 31, 2006 and December 31, 2007 and the subsequent periods through July 16, 2008, there were no disagreements with Tauber and Balser on any matter of accounting principles, financial statement disclosure, or auditing scope or procedure,
which disagreements if not resolved to the satisfaction of Tauber and Balser would have caused them to make reference thereto in Tauber and Balsers reports on the financial statements of the Company for such fiscal years. During the fiscal
years ended December 31, 2006 and December 31, 2007 and the subsequent period through July 16, 2008, there were no reportable events (as defined in Regulation S-K Item 304(a)(1)(v)), except that Tauber and Balser advised the Company of a
material weakness related to controls around the Companys accounting for stock options from the period ending June 30, 2007, which was subsequently remediated.



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Also on July 11, 2008, our audit committee appointed Grant Thornton LLP (Grant Thornton) to
serve as the Companys independent registered public accounting firm for the Companys fiscal year ended December 31, 2008. We did not consult with Grant Thornton regarding either: (a) the application of accounting principles to a
specified transaction, either completed or proposed, or the type of audit opinion that might be rendered on the Companys financial statements, nor did Grant Thornton provide written or oral advice to the Company that Grant Thornton concluded
was an important factor considered by the Company in reaching a decision as to the accounting, auditing or financial reporting issue; or (b) any matter that was either the subject of a disagreement (as defined in Regulation S-K Item
304(a)(1)(iv) and the related instructions), or a reportable event (as defined in Regulation S-K Item 304(a)(1)(v)) prior to their appointment.



|ITEM 9A. | CONTROLS AND PROCEDURES
|-------- | -----------------------

(a) Evaluation of
disclosure controls and procedures.

Our management, including our principal executive and principal financial officers, has evaluated
the effectiveness of our disclosure controls and procedures as of December 31, 2008. Our disclosure controls and procedures are designed to provide reasonable assurance that the information required to be disclosed in this annual report on
Form 10-K has been appropriately recorded, processed, summarized and reported within the time periods specified in the Securities and Exchange Commissions rules and forms, and that such information is accumulated and communicated to our
management, including our principal executive and principal financial officers, to allow timely decisions regarding required disclosure. Based on that evaluation, our principal executive and principal financial officers have concluded that our
disclosure controls and procedures are effective at the reasonable assurance level.

(b) Changes in internal control over financial
reporting.

We regularly review our system of internal control over financial reporting and make changes to our processes and
systems to improve controls and increase efficiency, while ensuring that we maintain an effective internal control environment. Changes may include such activities as implementing new, more efficient systems, consolidating activities, and migrating
processes.

There were no changes in our internal control over financial reporting that occurred during the fourth quarter of 2008 that
have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

(c)
Managements report on internal control over financial reporting.

Our management is responsible for establishing and maintaining
adequate internal control over financial reporting, as defined in Exchange Act Rule 13a-15(f). Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Therefore, even those systems
determined to be effective can provide only reasonable assurance with respect to financial statement preparation and presentation. Management conducted an evaluation of the effectiveness of our internal control over financial reporting based on the
framework in Internal ControlIntegrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission. Based on this evaluation, management concluded that our internal control over financial reporting was effective
as of December 31, 2008. Management reviewed the results of their assessment with our Audit Committee. This annual report does not include an attestation report of our registered public accounting firm regarding internal control over financial
reporting. Managements report was not subject to attestation by the Companys registered public accounting firm pursuant to temporary rules of the Securities and Exchange Commission that permit the Company to provide only
managements report in this annual report.



|ITEM 9B. | OTHER INFORMATION
|-------- | -----------------

None.



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PART III.



|ITEM 10. | DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE
|-------- | ------------------------------------------------------

The information required by this Item is incorporated herein by reference to our proxy statement for our 2009 Annual Meeting of Shareholders.



|ITEM 11. | EXECUTIVE COMPENSATION
|-------- | ----------------------

The information required by
this Item is incorporated herein by reference to our proxy statement for our 2009 Annual Meeting of Shareholders.



|ITEM 12. | SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS
|-------- | ----------------------------------------------------------------------------------------------

The information required by this Item is incorporated herein by reference to our proxy statement for our 2009 Annual Meeting of Shareholders.



|ITEM 13. | CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE
|-------- | -------------------------------------------------------------------------

The information required by this Item is incorporated herein by reference to our proxy statement for our 2009 Annual Meeting of Shareholders.



|ITEM 14. | PRINCIPAL ACCOUNTANT FEES AND SERVICES
|-------- | --------------------------------------

The
information required by this Item is incorporated herein by reference to our proxy statement for our 2009 Annual Meeting of Shareholders.



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##### Table of Contents

PART IV.



|ITEM 15. | EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
|-------- | ------------------------------------------

(a) The
following documents are filed as part of this Annual Report:

(1) Index to Consolidated Financial Statements



|                                                                                                                |  |           
|--------------------------------------------------------------------------------------------------------------- |  | ----------
|                                                                                                                |  | PageNumber
|Consolidated Balance Sheets at December 31, 2008 and 2007                                                       |  | F-1       
|Consolidated Statements of Operations for the years ended December 31, 2008, 2007 and 2006                      |  | F-2       
|Consolidated Statements of Changes in Shareholders Equity for the years ended December 31, 2008, 2007 and 2006 |  | F-3       
|Consolidated Statements of Cash Flows for the years ended December 31, 2008, 2007 and 2006                      |  | F-4       
|Notes to Consolidated Financial Statements                                                                      |  | F-5       
|Report of Independent Registered Public Accounting FirmGRANT THORNTON LLP.                                     |  | F-23      
|Report of Independent Registered Public Accounting FirmTauber & Balser, P.C.                                   |  | F-24      

(2) Financial Statement Schedules

Schedule II. Valuation and Qualifying Accounts

The following table shows an analysis of each valuation and qualifying account for years ended December 31, 2008, 2007 and 2006.



|                                           |  |                            |            |                                          |   |            |                   |  |            |           |  |                       |            |   |  |   |           
|------------------------------------------ |  | -------------------------- | ---------- | ---------------------------------------- | - | ---------- | ----------------- |  | ---------- | --------- |  | --------------------- | ---------- | - |  | - | ----------
|                                           |  | Balance atBeginning ofYear |            | Additions andDeductionsCharged toExpense |   |            | AdditionsAcquired |  | Deductions |           |  | Balance at Endof Year
|Year ended December 31, 2008               |  |                            |            |                                          |   |            |                   |  |            |           |  |                       |            |   |  |   |           
|Allowance for doubtful accounts            |  | $                          | 424,376    |                                          | $ | 53,477     |                   |  | $          |          |  | $                     | (133,329   | ) |  | $ | 344,524   
|Allowance for deferred tax asset           |  | $                          | 13,794,000 |                                          | $ | (1,224,000 | )                 |  | $          |          |  | $                     | (50,000    | ) |  | $ | 12,520,000
|Year ended December 31, 2007               |  |                            |            |                                          |   |            |                   |  |            |           |  |                       |            |   |  |   |           
|Allowance for doubtful accounts            |  | $                          | 279,753    |                                          | $ | 311,897    |                   |  | $          |          |  | $                     | (167,274   | ) |  | $ | 424,376   
|Allowance for deferred tax asset           |  | $                          | 17,953,000 |                                          | $ | (2,536,000 | )                 |  | $          | 506,000   |  | $                     | (2,129,000 | ) |  | $ | 13,794,000
|Year ended December 31, 2006               |  |                            |            |                                          |   |            |                   |  |            |           |  |                       |            |   |  |   |           
|Allowance for doubtful accounts            |  | $                          | 141,912    |                                          | $ | 54,111     |                   |  | $          | 109,616   |  | $                     | (25,886    | ) |  | $ | 279,753   
|Allowance for sales returns and allowances |  | $                          | 5,308      |                                          | $ |           |                   |  | $          |          |  | $                     | (5,308     | ) |  | $ |          
|Allowance for deferred tax asset           |  | $                          | 9,976,000  |                                          | $ | 451,000    |                   |  | $          | 8,005,000 |  | $                     | (479,000   | ) |  | $ | 17,953,000

(3) Exhibits



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EXHIBIT INDEX

The following exhibits are filed as part of, or are incorporated by reference into, this report on Form 10-K:



|            |  |                                                                                                                                                                                                                                                             
|----------- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Exhibit No. |  | Description                                                                                                                                                                                                                                                 
|3.1         |  | Restated Articles of Incorporation (incorporated by reference to Exhibit 4.1 of the Companys Registration Statement on Form S-8, File No. 333-140926, dated February 27,
2007)                                                                             
|            | 
|3.3         |  | By-Laws (incorporated by reference to the Companys Registration Statement on Form S-1, File No. 33-96864, dated September 12, 1995, as amended)                                                                                                            
|            | 
|10.1        |  | Amended and Restated 1992 Stock Option Plan (incorporated by reference to the Companys Registration Statement on Form S-1, File No. 33-96864, dated September 12, 1995, as
amended)                                                                        
|            | 
|10.2        |  | 401(k) Adoption Agreement and Trust (incorporated by reference to the Companys Registration Statement on Form S-1, File No. 33-96864, dated September 12, 1995, as amended)                                                                                
|            | 
|10.3        |  | Second Amended and Restated Employment Agreement between the Company and Robert S. Cramer (incorporated by reference to the Companys Quarterly Report on Form 10-QSB for the
quarter ended March 31, 2005)                                                 
|            | 
|10.3.1      |  | Amendment to the Second Amended and Restated Employment Agreement between the Company and Robert S. Cramer (incorporated by reference to the Companys Annual Report on Form 10-K for
the fiscal year ended December 31, 2005)                              
|            | 
|10.3.2      |  | Second Amendment to Second Amended and Restated Employment Agreement between the Company and Robert S. Cramer (incorporated by reference to the Companys Annual Report on Form 10-K for
the fiscal year ended December 31, 2005)                           
|            | 
|10.4        |  | Employment Agreement between the Company and Kevin S. Noland, dated December 21, 2001 (incorporated by reference to the Companys Annual Report on Form 10-K for the fiscal year
ended December 31, 2001)                                                   
|            | 
|10.4.1      |  | First Amendment to Employment Agreement between the Company and Kevin S. Noland (incorporated by reference to Exhibit 10.2 of the Form 8-K filed by the Company on March 18, 2005)                                                                          
|            | 
|10.4.2      |  | Modification to Compensation Arrangements with Kevin S. Noland (incorporated by reference to the Companys Quarterly Report on Form 10-QSB for the quarter ended September 30,
2005)                                                                        
|            | 
|10.4.3      |  | Second Amendment to Employment Agreement between the Company and Kevin S. Noland (incorporated by reference to the Companys Annual Report on Form 10-K for the fiscal year ended
December 31, 2005)                                                        
|            | 
|10.4.4      |  | Third Amendment to Employment Agreement between the Company and Kevin S. Noland (incorporated by reference to the Companys Annual Report on Form 10-K for the fiscal year ended
December 31, 2005)                                                         
|            | 
|10.5        |  | Bridge Note and Warrant Purchase Agreement between Union Street Partners, L.P and Robert S. Cramer, Jr. and the Company dated December 31, 1999 (incorporated by reference to the
Companys Annual Report on Form 10-K for the year ended December 31, 1999)
|            | 
|10.6        |  | Registration Rights Agreement between Union Street Partners, L.P and Robert S. Cramer, Jr. and the Company dated December 31, 1999 (incorporated by reference to the Companys
Annual Report on Form 10-K for the year ended December 31, 1999)             
|            | 
|10.7        |  | Common Stock Purchase Agreement dated May 22, 2003 between the Company and Fusion Capital Fund II, LLC (incorporated by reference to the Companys Registration Statement of
Form S-3, File No. 333-45294, dated September 7, 2000, as amended)             



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##### Table of Contents

|            |  |                                                                                                                                                                                                                                   
|----------- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Exhibit No. |  | Description                                                                                                                                                                                                                       
|10.8        |  | 2002 Stock Incentive Plan (incorporated by reference to the Companys definitive proxy statement filed on May 24, 2002 in connection with its 2002 Annual Meeting of
Shareholders)                                                
|            | 
|10.9        |  | Agreement and Plan of Merger dated August 14, 2006 by and among A.D.A.M., Inc., ADAM Merger Sub, Inc. and Online Benefits, Inc. (incorporated by reference to Exhibit 2.1 of the Form 8-K
filed by the Company on August 16, 2006)
|            | 
|10.10       |  | Employment Agreement between the Company and Mark B. Adams, dated April 10, 2006 (incorporated by reference to the Companys Quarterly Report on Form 10-Q for the quarterly period
ended June 30, 2007)                          
|            | 
|10.11       |  | Loan and Security Agreement between the Company and RBC Bank (USA), dated December 31, 2008 (incorporated by reference to Exhibit 10.1 of the Form 8-K filed by the Company on
January 7, 2009)                                   
|            | 
|10.12       |  | Form of Stock Option Agreement (filed herewith)                                                                                                                                                                                   
|            | 
|14.1        |  | Code of Ethics for Senior Officers (incorporated by reference to the Companys Annual Report on Form 10-K for the year ended December 31, 2005)                                                                                   
|            | 
|21.1        |  | Subsidiaries of the Company (filed herewith)                                                                                                                                                                                      
|            | 
|23.1        |  | Consent of Independent Registered Public Accounting FirmGRANT THORNTON LLP (filed herewith)                                                                                                                                      
|            | 
|23.2        |  | Consent of Tauber & Balser, P.C. (filed herewith)                                                                                                                                                                                 
|            | 
|31.1        |  | Certification of Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 (filed herewith)                                                                                                               
|            | 
|31.2        |  | Certification of Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 (filed herewith)                                                                                                               
|            | 
|32.1        |  | Certification pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (filed herewith)                                                                                                                                          
|            | 
|99.1        |  | Financial Statements (filed herewith)                                                                                                                                                                                             



33



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##### Table of Contents

SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be
signed on its behalf by the undersigned, thereunto duly authorized.



|                     |  |                             |  |                                                                                            
|-------------------- |  | --------------------------- |  | -------------------------------------------------------------------------------------------
|Date: March 20, 2009 |  | A.D.A.M., INC. (Registrant)
|                     |  |                            
|                     |  | By                          |  | /s/    KEVIN S.
NOLAND                                                                     
|                     |  |                             |  | Kevin S. Noland President and Chief Executive Officer (principal executive
officer)        
|                     | 
|Date: March 20, 2009 |  | A.D.A.M., INC. (Registrant)
|                     |  |                            
|                     |  | By                          |  | /s/    MARK B.
ADAMS                                                                       
|                     |  |                             |  | Mark B. Adams Chief Financial Officer and Corporate Secretary (principal financial officer)

Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed
below by the following persons on behalf of the Registrant and in the capacities indicated, on March 20, 2009.



|                                                   |  |                                                
|-------------------------------------------------- |  | -----------------------------------------------
|Signature                                          |  | Title                                          
|                                                   | 
|/s/    KEVIN S.
NOLAND Kevin S. Noland             |  | President and Chief Executive Officer          
|                                                   | 
|/s/    MARK B.
ADAMS Mark B. Adams                 |  | Chief Financial Officer and Corporate Secretary
|                                                   | 
|/s/    ROBERT S.
CRAMER, JR. Robert S.
Cramer, Jr. |  | Chairman of the Board of Directors             
|                                                   | 
|/s/    CLAY
SCARBOROUGH Clay Scarborough           |  | Director                                       
|                                                   | 
|/s/    DANIEL S.
HOWE Daniel S. Howe               |  | Director                                       
|                                                   | 
|/s/    MARK KISHEL,
M.D. Mark Kishel, M.D.         |  | Director                                       



34