Applied Digital Reports 2007 Third Quarter Financial Results

Business Wire, Nov 7, 2007

DELRAY BEACH, Fla. -- Applied Digital Solutions, Inc. (the "Company" or "Applied Digital") (NASDAQ:ADSX), a leading provider of identification and security technology, today reported financial results for its third quarter ended September 30, 2007. The Company's consolidated financial results include the financial position, operating results and cash flows of its majority-owned subsidiaries, VeriChip Corporation ("VeriChip") (NASDAQ:CHIP) and Digital Angel Corporation ("Digital Angel") (AMEX:DOC).

The Company's revenue for the third quarter of 2007 was $30.2 million, compared with $20.9 million for the third quarter of 2006. Net loss in the third quarter of 2007 was $11.3 million, or $0.16 loss per share, compared to $3.6 million, or $0.05 loss per share, in the third quarter of 2006. The net loss included $7.5 million in charges related to: a non-cash adjustment to goodwill for one of our discontinued companies, a non-recurring litigation settlement charge and reclassification of certain businesses as discontinued operations in anticipation of the merger with Digital Angel.

Digital Angel's revenue increased to $20.3 million for the 2007 third quarter, compared to $12.4 million for the 2006 third quarter, reflecting an increase in animal applications and GPS and radio communications revenue. VeriChip's revenue increased to $7.9 million for the 2007 third quarter, compared to $6.8 million for the 2006 third quarter, reflecting an increase in sales of VeriChip's infant protection and wander prevention systems. As of September 30, 2007, the Company had cash and equivalents of $14.4 million compared to $7.1 million as of December 31, 2006.

For the nine months ended September 30, 2007, the Company's revenue increased to $84.1 million, compared to $64.7 million in the nine months ended September 30, 2006. For the nine months ended September 30, 2007, the Company's net loss was $19.2 million, or $0.28 loss per share, compared to a net loss of $9.8 million, or $0.15 loss per share, in the nine months ended September 30, 2006. Again, the net loss included $7.5 million in charges related to: a non-cash adjustment to goodwill for one of our discontinued companies, a non-recurring litigation settlement charge and reclassification of certain businesses as discontinued operations in anticipation of the merger with Digital Angel.

Digital Angel's revenue increased to $55.2 million for the nine months ended September 30, 2007, compared to $40.1 million for the nine months ended September 30, 2006, reflecting an increase in animal applications and GPS and radio communications revenue. VeriChip's revenue increased to $23.5 million for the nine months ended September 30, 2007, compared to $20.3 million for the nine months ended September 30, 2006, reflecting an increase in sales of VeriChip's infant protection and wander prevention systems.

Applied Digital's Chief Executive Officer Michael Krawitz commented, "Our two largest assets delivered strong results in the quarter, with Digital Angel reporting record total revenue, and VeriChip reporting record sales of its infant protection and wander prevention systems in what is typically a softer quarter. In the third quarter, we made considerable progress toward completing our merger with Digital Angel, which is expected to close in December 2007, and we saw another top-notch performance out of our PDSC division. We continue to believe the merger represents significant value for all stockholders by eliminating duplicative costs in excess of $2 million per year, sharpening the focus on core businesses and facilitating the divestiture, at appropriate times, of non-strategic assets."

The highlights for the 2007 third quarter included:

* The Company entered into a merger agreement with Digital Angel whereby Applied Digital will acquire the remaining 44% minority interest it does not currently own in Digital Angel. Digital Angel stockholders other than Applied Digital will receive 1.4 shares of Applied Digital common stock for every share of Digital Angel common stock held.

* Digital Angel signed a $1.5 million contract with the UK Ministry of Defence to supply search and rescue beacon equipment (SARBE). The contract calls for deliveries to start immediately and will run over a maximum 21 months from contract award.

* Digital Angel settled its patent infringement litigation against Datamars Inc., Datamars S.A., The Crystal Import Corporation and Medical Management International, Inc.

* Digital Angel entered a distribution agreement with Data Lab S.A. of Paraguay for visual and electronic livestock identification tags. The agreement calls for purchase commitments of Digital Angel's products through 2010.

* Digital Angel's LifeChip[R] equine RFID injectable transponder was the first of its kind to be approved by the USDA for use as part of the National Animal Identification System.

* Digital Angel received an $800,000 order for C1 S-VDR (Simplified Voyage Data Recorder) float free capsules for commercial shipping.