CHIP Verichip (MM)

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 second quarter ended June 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), Digital Angel Corporation ("Digital Angel") (AMEX: DOC), and InfoTech USA, Inc. ("InfoTech") (OTC: IFTH). The Company�s revenue for the second quarter of 2007 increased to $35.3 million, compared with $31.4 million for the first quarter of 2007. Net loss also improved in the second quarter, dropping to $2.7 million, or $0.04 loss per share, compared to $5.1 million, or $0.08 loss per share, in the first quarter of 2007. Digital Angel�s revenue increased to $19.5 million for the 2007 second quarter, compared to $16.0 million for the 2007 first quarter, reflecting an increase in GPS and radio communications revenue. VeriChip�s revenue increased to $8.2 million for the 2007 second quarter, compared to $7.4 million for the 2007 first quarter reflecting an increase in sales of VeriChip�s infant protection systems. As of June 30, 2007, the Company had cash and equivalents of $15.5 million compared to $7.3 million as of December 31, 2006. On a six month basis, revenue also increased: for the six months ended June 30, 2007, the Company�s revenue was $63.0 million, compared to $53.7 million in the six months ended June 30, 2006. The loss from continuing operations was $7.2 million, or $0.11 loss per share, compared to a loss from continuing operations of $5.2 million, or $0.08 loss per share, in the six months ended June 30, 2006. Digital Angel�s revenue increased to $34.8 million for the six months ended June 30, 2007, compared to $27.7 million for the six months ended June 30, 2006, primarily reflecting an increase in GPS and radio communications revenue. VeriChip�s revenue increased to $15.6 million for the six months ended June 30, 2007, compared to $13.5 million for the six months ended June 30, 2006, reflecting an increase in sales of VeriChip�s infant protection systems. Applied Digital�s Chief Executive Officer Michael Krawitz commented, �While not satisfied with any loss, it reflects meaningful progress that this quarter was materially better than last, and last quarter was materially better than the fourth quarter. I believe this progress comes from changes and hard work at all our divisions, and a focus on fundamentals that will serve us well in the future. We have tremendously valuable people, technologies, investments and opportunities. In my view, those sources of value will be recognized by the market only by continuing our improvements to revenue and bottom line.� The highlights for the 2007 second quarter included: Digital Angel 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. This broadens Digital Angel�s rescue beacon business to include commercial and pleasure craft. Digital Angel 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. Digital Angel 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. Digital Angel 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. Digital Angel received an order to supply the Department of Veterinary Services in Serbia with 200,000 pet identification microchips. VeriChip sold its 1,300th infant protection system and continues to be the leading provider of infant protection systems in North America. VeriChip added 78 new hospitals to its VeriMed Patient Identification System network at the Emergency Department Practice Management Association�s conference in May. 25 Alzheimer�s patients and caregivers received the VeriMed RFID implantable microchip at the Alzheimer�s Educational Conference in June. The number of hospitals enrolled in the VeriMed network increased by 24.3% from 515 at the end of the 2007 first quarter to 640 at the end of the 2007 second quarter. The number of protocol-adopted hospitals increased by 45% from 109 at the end of the 2007 first quarter to 158 at the end of the 2007 second quarter. 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 Applied Digital�s Web site at www.adsx.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 replay can be accessed through the Investor Relations section under "Audio Archives" on the Company's Web site at www.adsx.com. About Applied Digital - "The Power of Identification Technology" Applied Digital develops innovative identification and security products for consumer, commercial, and government sectors worldwide. The Company's unique and often proprietary products provide identification and security systems for people, animals, the food supply, government/military arena, and commercial assets. Included in this diversified product line are RFID applications, end-to-end food safety systems, GPS/Satellite communications, and telecomm and security infrastructure, positioning Applied Digital as the leader in identification technology. Applied Digital is the owner of majority positions in Digital Angel Corporation (AMEX: DOC) and VeriChip Corporation (NASDAQ: CHIP). This press release contains certain �forward-looking� statements (as such term is defined in the Private Securities Litigation Reform Act of 1995). Forward-looking statements included in this press release include, without limitation, those concerning expectations for strong revenue growth of our RFID and other businesses, success of the Company�s marketing and sales initiative, benefits of the merger, and expected growth in sales, earnings and improvement in gross margins. These forward-looking statements are based on the Company's current expectations and beliefs and are subject to a number of risks, uncertainties and assumption. Among the important factors that could cause actual results to differ materially from those expressed in, or implied by, the forward-looking statements are our ability to successfully implement our business strategy; uncertainty as to our working capital requirements over the next 12 to 24 months; our ability to successfully integrate the businesses of acquired companies; our ability to maintain compliance with the covenants of our credit facilities; our expectation regarding future profitability and liquidity; competitive and economic influences; market acceptance of the VeriMed system; our ability to provide uninterrupted, secure access to the VeriMed database; the relative maturity in the U.S. and limited size of the markets for our infant protection and wander prevention systems and vibration monitoring instruments; the degree of success we have in leveraging our brand reputation, reseller network and end-use customer base for our infant protection and wander prevention systems to gain inroads in the emerging market for asset/staff location and identification systems; the rate and extent of the U.S. healthcare industry�s adoption of RFID asset/staff location and identification systems; our ability to complete our efforts to integrate our infant protection, wander prevention and asset/staff location and identification systems on one technology platform; our ability to become a major player in the food source traceability and safety arena; our ability to successfully develop survival and emergency radios for the military and commercial uses; our reliance on third-party dealers and distributors to successfully market and sell our products; our ability to defend against costly product liability claims and claims that our products infringe the intellectual property rights of others; our ability to comply with current and future regulations relating to our businesses; the occurrence of any event, change or other circumstance that could give rise to the termination of the merger agreement; our inability to complete the merger due to the failure to obtain the requisite stockholder approval or the failure to satisfy other conditions to the merge; and our ability to maintain proper and effective internal accounting and financial controls. Additional information about these and other factors that could affect the Company's business is set forth in the Company's Form 10-K/A under the caption "Risk Factors" filed with the Securities and Exchange Commission on April 6, 2007, and subsequent filings with the Securities and Exchange Commission. The Company undertakes no obligation to update or release any revisions to these forward-looking statements to reflect events or circumstances after the date of this statement or to reflect the occurrence of unanticipated events, except as required by law. APPLIED DIGITAL SOLUTIONS, INC. AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS DATA (In thousands, except par value) � Assets � � June 30, December 31, 2007 2006 Current Assets (unaudited) Cash and cash equivalents $ 15,515 $ 7,271 Restricted cash 127 81 Accounts receivable and unbilled receivables, net 20,996 18,408 Inventories 16,513 13,663 Deferred taxes 376 697 Other current assets 3,870 3,827 � Current assets from discontinued operations 5,886 6,213 Total Current Assets 63,283 50,160 � Property and Equipment, net 12,620 11,751 � Goodwill, net 84,417 82,385 � Intangibles, net 19,238 20,200 � Deferred Offering Costs - 5,079 � Other Assets, net 1,265 1,104 � Other Assets from Discontinued Operations 1,170 672 � � Total Assets $ 181,993 $ 171,351 � Liabilities and Stockholders� Equity � Current Liabilities Notes payable and current maturities of long-term debt $ 13,439 $ 7,262 Accounts payable 20,184 17,424 Accrued expenses 12,492 17,330 Deferred revenue 2,072 2,418 � Current liabilities of discontinued operations 9,465 10,517 Total Current Liabilities 57,652 54,951 � Long-Term Debt and Notes Payable 12,708 14,211 Deferred Taxes 5,092 5,803 Other Liabilities 1,420 1,199 Deferred Revenue 1,660 1,189 Other Liabilities from discontinued operations 2,585 1,060 � Total Liabilities � 81,117 78,413 � Commitments and Contingencies � � � Minority Interest 56,859 47,984 Minority Interest, Discontinued Operations 904 1,090 Total Minority Interest � 57,763 49,074 � Stockholders� Equity � 43,113 43,864 � � $ 181,993 $ 171,351 APPLIED DIGITAL SOLUTIONS, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF OPERATIONS DATA (In thousands, except per share data) (unaudited) � For The Three-Months For The Six-Months Ended June 30, Ended June 30, 2007 2006 2007 2006 � Total revenue 35,330 25,766 62,995 53,687 � Total cost of products and services sold 19,386 14,588 35,320 29,459 Gross profit 15,944 11,178 27,675 24,228 � Selling, general and administrative expense 15,994 12,853 32,016 25,921 Research and development 2,631 1,756 5,351 3,532 Total operating costs and expenses 18,625 14,609 37,367 29,453 - Operating loss before other items (2,681) (3,431) (9,692) (5,225) - Interest and other income 1,047 180 2,015 400 Interest expense (1,252) (646) (2,167) (1,258) Total other (expense) income (205) (466) (152) (858) � Loss from continuing operations before taxes, minority interest and gain (loss) attributable to capital transactions of subsidiaries � (2,886) (3,897) (9,844) (6,083) � (Provision) benefit for income taxes (310) 16 (460) (5) � Loss from continuing operations before minority interest and gain (loss) attributable to capital transactions of subsidiaries (3,196) (3,881) (10,304) (6,088) � Minority interest 2,378 681 4,207 728 � Net (loss) gain on capital transactions of subsidiaries (604) 36 4,750 322 � (Loss) gain attributable to changes in minority interest as a result of capital transactions of subsidiaries (1,040) 342 (5,860) (183) - Loss from continuing operations (2,462) (2,822) (7,207) (5,221) - Loss from discontinued operations (260) (431) (664) (987) - Net loss $ (2,722) $ (3,253) $ (7,871) $ (6,208) � � Loss per common share - basic and diluted Loss from continuing operations $ (0.04) $ (0.04) $ (0.11) $ (0.08) � Loss from discontinued operations (0.00) (0.01) (0.01) (0.01) � Net loss per common share - basic and diluted � � $ (0.04) $ (0.05) $ (0.12) $ (0.09) � � Weighted average number of common shares outstanding - basic and diluted 67,567 67,395 67,353 67,197