CHIP Verichip (MM)

Digital Angel Corporation (Amex:DOC), an advanced technology company in the field of rapid and accurate identification, location tracking and condition monitoring of high-value assets, today announced financial results for its second quarter ended June 30, 2007. Revenue for the second quarter of 2007 was $19.5 million, a 57.3% increase, and net loss was $2.7 million, or $0.06 loss per share, compared to revenue of $12.4 million and a net loss of $2.1 million, or $0.05 loss per share, in the second quarter of 2006. In the second quarter of 2007, net loss from continuing operations was $2.4 million, or $0.05 loss per share, compared to net loss from continuing operations of $1.6 million, or $0.04 loss per share in the second quarter of 2006. The Company also announced it has appointed current Board member Barry M. Edelstein its interim Chief Executive Officer while it conducts a comprehensive search for a new CEO. Edelstein will manage all aspects of Digital Angel�s operations including controlling costs and bringing the Company to profitability. Edelstein will be responsible for maximizing Digital Angel�s leadership role in RFID technologies for animal applications including livestock and pets, leveraging its leading position in the military and commercial search and rescue beacon markets, and capitalizing on McMurdo�s leading position in the emergency position-indicating rescue beacon (EPIRB) market. Edelstein succeeds Kevin McGrath, who will transition out of the Company over the next 30 days. Mr. McGrath and the Board of Directors have determined that new leadership is in the best interests of the Company. Edelstein has been a board member of Digital Angel since June 2005, and is President and Chief Executive Officer of ScentSational Technologies, Inc. He brings significant experience to the Company in operations management and sales and marketing. From 2000 to 2002, Mr.�Edelstein was Vice President, Sales and Sales Operations for Comcast Business Communications Inc. where he managed the integration of Comcast Telecommunications Inc. with two other subsidiaries and led a team that oversaw the sales, marketing, customer care, billing operations and supplier management function of the company. From 1997 to 2000, he was Vice President, Sales and Marketing for Comcast Telecommunications Inc., a provider of long distance, internet and private network services in the mid-Atlantic region of the U.S. From 1992 to 1997, he was President and Co-Founding Principal of GlobalCom Telecommunications, a regional reseller of long distance, private network and internet services which was sold to Comcast in June�1997. Prior to that, he was an associate at Rubin, Shapiro & Wiese, a Philadelphia law firm specializing in real estate and corporate commercial litigation. Mr. Edelstein has a bachelor�s degree in business administration from Drexel University and received his law degree from Widener University School of Law, Wilmington, Delaware. Scott R. Silverman, Chairman of Digital Angel�s Board of Directors, commented, �We want to thank Kevin McGrath for his years of service to the Company. The second quarter revenue performance shows substantial growth spurred, in part, by our acquisition of McMurdo in the second quarter. We as a Board are satisfied with the top-line growth but are dissatisfied with the bottom-line performance and are clearly dissatisfied with the stock price. After much discussion with Kevin, we have all decided to initiate a search for a new CEO of Digital Angel. In the interim, Barry is intimately familiar with all aspects of Digital Angel�s operations and finances, and the Board of Directors and I are extremely comfortable with Barry taking the helm. We expect to be in a position to announce a new CEO by the end of the year. We wish Kevin well in his future endeavors and we sincerely thank him for his efforts and devotion to the Company.� Edelstein commented, �I am excited to take this Company to new heights and believe it has a very strong future. I am pleased with our continued top-line growth and the sharpened focus on improving the bottom line. We have made significant progress in this area and believe that we will see substantial improvement at the bottom line as early as next quarter. We continue to move forward with the U.S. Air Force and expect to announce additional SARBE contracts in the second half of the year. Furthermore, the performance of McMurdo, which we acquired in April, has exceeded our expectations.� The highlights for the 2007 second quarter included: The Company completed its acquisition of certain assets and customer contracts of McMurdo Ltd., the U.K.�s premier manufacturer of emergency location beacons, from Chemring Group Plc. The Company was awarded a $1.7 million order by the Royal Air Force of Oman to provide SARBE G2R Combat Recovery Radios to Omani Jet Fighter Pilots. The Company entered into a distribution agreement with Milburn Equine, the leading equine veterinary distributor in the United States, for its identification and Bio-Thermo temperature-sensing microchips. The Company signed a contract to supply search and rescue beacon equipment to the Dubai Air Wing, and sold and delivered search and rescue beacons to the UK Ministry of Defence Strike Command. The Company received an order to supply the Department of Veterinary Services in Serbia with 200,000 pet identification microchips. Subsequent to the 2007 second quarter, on July 2, 2007, the Company completed its previously announced sale of its wholly-owned subsidiary OuterLink to Newcomb Communications, Inc. Outerlink provides satellite-based mobile asset tracking and data messaging systems used to manage the deployment of aircraft and land vehicles. Results Conference Call Applied Digital and Digital Angel will host a joint conference call today for investors, analysts, business and trade media, and other interested parties at 8:30 a.m. EDT. Interested participants should call 866-323-2725 within the United States or 706-643-1836 internationally. Please use passcode 11949742. Alternatively, an audio-only, simultaneous Web cast of the live conference call can be accessed through Digital Angel�s Web site at www.digitalangelcorp.com. For persons unable to participate in either the conference call or the Web cast, a digitized replay will be available from August 9 at approximately 10:00 a.m. EDT to September 9 at 11.59 p.m. EDT. For the replay, dial 800-642-1687 (USA) or 706-645-9291 (international), using access code 11949742. Alternatively, a Web cast replay can be accessed through Digital Angel�s Web site at www.digitalangelcorp.com. About Digital Angel Corporation Digital Angel Corporation (www.DigitalAngelCorp.com) develops and deploys sensor and communications technologies that enable rapid and accurate identification, location tracking, and condition monitoring of high-value assets. Applications for the Company�s products include identification and monitoring of humans, pets, fish, poultry and livestock through its patented implantable microchips; location tracking and message monitoring of vehicles and aircraft in remote locations through systems that integrate GPS and geosynchronous satellite communications; and monitoring of asset conditions such as temperature and movement, through advanced miniature sensors. Digital Angel Corporation is majority-owned by Applied Digital Solutions, Inc. (NASDAQ:ADSX), which also owns a majority position in VeriChip Corporation (NASDAQ:CHIP). This press release contains �forward-looking statements� within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934. These statements concern expectations, beliefs, projections, future plans and strategies, anticipated events or trends and similar expressions concerning matters that are not historical facts. Specifically, this press release contains forward-looking statements including, but not limited to: our expectation that we will be in a position to announce a new CEO by the end of the year; our belief that we will see substantial improvement at the bottom line as early as next quarter; our expectation that we will announce additional SARBE contracts in the second half of the year and our expectations regarding the future of our business. These forward-looking statements reflect our current views about future events and are subject to risks, uncertainties and assumptions. We wish to caution readers that certain important factors may have affected and could in the future affect our actual results and could cause actual results to differ significantly from those expressed in any forward-looking statement. The most important factors that could prevent us from achieving our goals, and cause the assumptions underlying forward-looking statements and the actual results to differ materially from those expressed in or implied by those forward-looking statements include, but are not limited to, our ability to successfully locate and hire a new CEO, our ability to integrate the assets acquired in the McMurdo acquisition and realize the anticipated savings; our ability to enter into additional SARBE contracts and realize expected growth in the Animal Applications business; our ability to implement our business plan; and our ability to meet our cash obligations. The Company undertakes no obligation to revise any forward-looking statements in order to reflect events or circumstances that may arise after the date of this press release. DIGITAL ANGEL CORPORATION AND SUBSIDIARIES Condensed Consolidated Balance Sheets (in thousands, except par value) � June 30,2007 December 31,2006 (unaudited) Assets Current assets Cash $ 1,004 $ 1,521 Restricted cash 127 81 Accounts receivable, net of allowance for doubtful accounts of $183 and $203 at June 30, 2007 and December 31, 2006, respectively 10,816 9,609 Accounts receivable from VeriChip Corporation 35 425 Inventories 13,294 9,897 Other current assets 2,076 2,016 Current assets from discontinued operations 3,069 2,335 Total current assets 30,421 25,884 � Property and equipment, net 11,040 9,985 Goodwill 53,276 51,244 Other intangible assets, net 1,589 1,633 Other assets from discontinued operations 1,040 531 Other assets, net 615 619 Total Assets $ 97,981 $ 89,896 � Liabilities and Stockholders� Equity Current liabilities Line of credit and current maturities of long-term debt $ 9,294 $ 4,127 Accounts payable 11,666 6,024 Due to Applied Digital Solutions, Inc. 67 11 Accrued expenses and other current liabilities 3,609 2,793 Current liabilities from discontinued operations 2,266 2,448 Total current liabilities 26,902 15,403 � Long-term debt 3,790 4,036 � Other long term liabilities Derivative warrant liability 958 � Other long term liabilities 373 386 Other liabilities from discontinued operations 2,585 1,060 Total other long term liabilities 3,916 1,446 Total Liabilities 34,608 20,885 � Minority interest 409 465 � Stockholders� equity Preferred stock ($1.75 par value; shares authorized, 1,000; shares issued, nil) � � Common stock ($0.005 par value: shares authorized, 95,000: shares issued, 45,019 and 44,894: shares outstanding, 44,641 and 44,516) 226 226 Additional paid-in capital 215,027 214,509 Accumulated deficit (150,962 ) (144,753 ) Treasury stock (carried at cost, 378 shares) (1,580 ) (1,580 ) Accumulated other comprehensive income 253 144 Total Stockholders� Equity 62,964 68,546 Total Liabilities and Stockholders� Equity $ 97,981 $ 89,896 DIGITAL ANGEL CORPORATION AND SUBSIDIARIES Condensed Consolidated Statements of Operations (in thousands, except per share data) (unaudited) � For the Three MonthsEnded June 30, For the Six MonthsEnded June 30, � 2007 � 2006 � 2007 � 2006 � � Total net revenue $ 19,533 $ 12,428 $ 34,831 $ 27,747 � Cost of sales 11,855 � 7,562 � 21,509 � 16,275 � � Gross profit 7,678 4,866 13,322 11,472 � Selling, general and administrative expenses 7,763 5,685 15,277 11,631 Research and development expenses 1,585 � 727 � 2,804 � 1,522 � � Operating loss (1,670 ) (1,546 ) (4,759 ) (1,681 ) � Interest income 8 81 46 174 Interest expense (674 ) (110 ) (998 ) (206 ) Change in derivative warranty liability (105 ) ? 296 ? Other income 30 � 27 � 62 � 45 � � Loss from continuing operations before income taxes and minority interest (2,411 ) (1,548 ) (5,353 ) (1,668 ) � Income tax (provision) benefit (13 ) (11 ) (38 ) 72 Minority interest share of loss (income) 10 � (19 ) 15 � (58 ) � Net loss from continuing operations (2,414 ) (1,578 ) (5,376 ) (1,654 ) � Loss from discontinued operations (313 ) (546 ) (833 ) (1,056 ) � � � � � � � � Net loss $ (2,727 ) $ (2,124 ) $ (6,209 ) $ (2,710 ) � Earnings per common share � basic and diluted Loss from continuing operations $ (0.05 ) $ (0.04 ) $ (0.12 ) $ (0.04 ) Loss from discontinued operations � (0.01 ) � (0.01 ) � (0.02 ) � (0.02 ) Net loss $ (0.06 ) $ (0.05 ) $ (0.14 ) $ (0.06 ) � Weighted average common shares outstanding � basic and diluted 44,562 44,286 44,539 44,097 DIGITAL ANGEL CORPORATION AND SUBSIDIARIES Condensed Consolidated Statements of Cash Flows (in thousands) (unaudited) � For the Six MonthsEnded June 30, 2007 � 2006 � Cash Flows From Operating Activities Net loss $(6,209 ) $(2,710 ) Adjustments to reconcile net loss to net cash provided by (used in) operating activities: Equity-based compensation 518 288 Depreciation and amortization 1,150 925 Amortization of debt discount and financing costs 339 ? Reduction in derivative warrant liability (296 ) ? Minority interest (15 ) 58 Loss on disposal of equipment 8 4 Loss from discontinued operations 833 1,056 Change in assets and liabilities: (Increase) decrease in restricted cash (46 ) 195 (Increase) decrease in accounts receivable (1,073 ) 3,383 Decrease (increase) in accounts receivable from VeriChip Corporation 391 (45 ) Increase in inventories (1,074 ) (1,662 ) Increase in other current assets (78 ) (390 ) Decrease in deferred tax liability (12 ) (132 ) Increase (decrease) in accounts payable and accrued expenses 6,265 (2,905 ) Net cash (used in) provided by discontinued operations (295 ) 160 � Net Cash Provided by (Used in) Operating Activities 406 � (1,775 ) � Cash Flows From Investing Activities Decrease in other assets 66 214 Payments for property and equipment (886 ) (672 ) Net cash paid for acquisition (4,215 ) (1,000 ) Net cash used in discontinued operations (438 ) (175 ) Net Cash Used in Investing Activities (5,473 ) (1,633 ) � Cash Flows From Financing Activities Borrowings on line of credit 2,458 2,427 Payments on line of credit (2,413 ) (2,004 ) Borrowings on debt 6,000 ? Payments on notes payable and long-term debt (764 ) (355 ) Exercise of stock options and warrants ? 563 Payments of dividends to minority shareholder in subsidiary (53 ) (140 ) Payments for financing costs (686 ) ? � Net Cash Provided by Financing Activities 4,542 � 491 � � Effect of Exchange Rate Changes on Cash 8 � 27 � � Net Decrease In Cash (517 ) (2,890 ) � Cash - Beginning of Period 1,521 � 9,949 � � Cash - End of Period $ 1,004 � $ 7,059 �