Applied Digital Reports 2005 Third Quarter Financial Results; VeriChip Corporation Reports Record Revenue; 62 Hospitals have Agreed to Implement VeriMed Patient Identification System.DELRAY BEACH Delray Beach, resort city (1990 pop. 47,181), Palm Beach co., SE Fla., on the Atlantic coast; settled 1895, inc. 1911. Mostly residential, Delray Beach is also the trade center for a citrus-fruit and vegetable-growing region. , Fla. -- Applied Digital (Nasdaq: ADSX ADSX Applied Digital Solutions, Inc. (stock symbol) ), a leading provider of identification and security technology, today reported financial results for the third-quarter ended September 30, 2005. The Company's consolidated financial results include the balance sheets, operating results and cash flows of its majority-owned subsidiaries majority-owned subsidiary A firm in which more than 50% of outstanding voting stock is owned by the parent company. , Digital Angel Corporation (AMEX AMEX See: American Stock Exchange : DOC See doc file and docs. 1. Doc - Directed Oc 2. doc - /dok/ Common spoken and written shorthand for "documentation". Often used in the plural "docs" and in the construction "doc file" (i.e. documentation available on-line). ) and InfoTech USA, Inc. (OTC OTC See: Over-the-counter. OTC See over-the-counter market (OTC). : IFTH IFTH Institut Français Textile-Habillement (French Textile and Apparel Institute) ). Revenue for the third quarter of 2005 was $27.8 million, compared to $27.7 million in revenue in the third quarter of 2004. The Company generated growth at its VeriChip subsidiary, where revenue was $6.1 million for the third quarter of 2005 compared to $3.0 million for the second quarter of 2005 and compared to $23,000 for the third quarter of 2004. The increase was primarily due to the additions of, and improvements with, the two acquired companies that are now part of VeriChip Corporation VeriChip Corporation, a wholly owned subsidiary of Applied Digital (Nasdaq: ADSX), markets a line of Radio Frequency Identification (RFID) Devices (including VeriChip) used in security, financial, emergency identification, and other applications. . The Company also saw an increase in revenue from its majority-owned subsidiary, Digital Angel Corporation. These increases helped to offset a decrease in revenue at the Company's wholly-owned subsidiary, Government Telecommunications Communicating information, including data, text, pictures, voice and video over long distance. See communications. , Inc. ("GTI GTI Gas Technology Institute GTI Global Taxonomy Initiative GTI Good Time Interval GTI Guelph Turfgrass Institute GTI Green Theme International GTI Gordon Training International GTI Georgia Transportation Institute GTI Group Travel Insurance "). Revenue for the nine-months ended September 30, 2005 was $79.1 million, a decrease from the $80.6 million in revenue in the first nine months of 2004. VeriChip revenue for the nine-months ended September 30, 2005 was $9.1 million compared to $0.2 million in revenue in the first nine months of 2004. This increase helped offset the revenue decrease at GTI, which was primarily attributable to the termination of a low-margin contract between GTI and the United States United States, officially United States of America, republic (2005 est. pop. 295,734,000), 3,539,227 sq mi (9,166,598 sq km), North America. The United States is the world's third largest country in population and the fourth largest country in area. Postal Service postal service, arrangements made by a government for the transmission of letters, packages, and periodicals, and for related services. Early courier systems for government use were organized in the Persian Empire under Cyrus, in the Roman Empire, and in medieval in January 2005. Excluding the impact of this contract, revenue increased from 2004 to 2005. Gross profit increased to approximately $11.5 million in the third quarter of 2005 compared to approximately $7.6 million in the third quarter of 2004, and gross profit margins Gross profit margin Gross profit divided by sales, which is equal to each sales dollar left over after paying for the cost of goods sold. gross profit margin A measure calculated by dividing gross profit by net sales. increased to 41.5% in the third quarter of 2005 compared to gross profit margins of 27.5% in the third quarter of 2004. Gross profit increased to approximately $31.5 million in the nine-months ended September 30, 2005 compared to approximately $22.9 million in the comparable 2004 period, and gross profit margins increased to 39.8% in the first nine months of 2005 compared to gross profit margins of 28.5% in the nine-months ended September 30, 2004. Gross margin in both the third quarter and first nine months of 2005 significantly improved as a result of a more favorable fa·vor·a·ble adj. 1. Advantageous; helpful: favorable winds. 2. Encouraging; propitious: a favorable diagnosis. 3. mix of business, due primarily to sales of higher margin products from VeriChip Corporation. VeriChip Corporation's gross profit margins were approximately 62% during the nine-months ended September 30, 2005. The loss from continuing operations continuing operations Parts of a business that are expected to be maintained as an ongoing segment of an overall business operation. Income and losses from continuing operations are reported separately if any segments have been discontinued during the for the third quarter of 2005 was approximately $(2.7) million compared to a loss from continuing operations of $(2.8) million for the third quarter of 2004. Loss from continuing operations, after the deduction deduction, in logic, form of inference such that the conclusion must be true if the premises are true. For example, if we know that all men have two legs and that John is a man, it is then logical to deduce that John has two legs. of preferred stock Stock shares that have preferential rights to dividends or to amounts distributable on liquidation, or to both, ahead of common shareholders. Preferred stock is given preference over common stock. Holders of preferred stock receive dividends at a fixed annual rate. dividends and accretion The act of adding portions of soil to the soil already in possession of the owner by gradual deposition through the operation of natural causes. The growth of the value of a particular item given to a person as a specific bequest under the provisions of a will between the of preferred stock beneficial conversion feature, was $(2.8) million, or $(0.04) per share basic, and $(2.8) million, or $(0.05) per share basic, respectively. Included in the results for the third quarters of 2005 and 2004 was a non-cash interest expense of approximately $34,000 and $0.3 million, respectively, as a result of the quarter-to-quarter revaluation Revaluation A calculated adjustment to a country's official exchange rate relative to a chosen baseline. The baseline can be anything from wage rates to the price of gold to a foreign currency. In a fixed exchange rate regime, only a decision by a country's government (i.e. of certain of the Company's warrants. These warrants were issued to certain investors in connection with the repayment of IBM (International Business Machines Corporation, Armonk, NY, www.ibm.com) The world's largest computer company. IBM's product lines include the S/390 mainframes (zSeries), AS/400 midrange business systems (iSeries), RS/6000 workstations and servers (pSeries), Intel-based servers (xSeries) Credit, the Company's former lender. As a result of the warrants' being exchangeable into shares of the Digital Angel common stock owned by the Company, the warrants are required to be re-valued each reporting period. Fluctuations in the market price of Digital Angel's common stock result in increases/decreases in the value of the warrants, which are reflected in the Company's operating results as increases/reductions in interest expense. The warrants vested vested adj. referring to having an absolute right or title, when previously the holder of the right or title only had an expectation. Examples: after 20 years of employment Larry Loyal's pension rights are now vested. (See: vest, vested remainder) on June 30, 2003 and expire expire /ex·pire/ (ek-spi´er) 1. to exhale. 2. to die. ex·pire v. 1. To breathe one's last breath; die. 2. To exhale. on June 30, 2007. Also included for the three months ended September 30, 2005, was $0.7 million of income attributable to the reversal of certain liabilities of a business unit that we had closed during 2001. Loss from continuing operations for the first nine months of 2005 was approximately $(2.5) million compared to a loss from continuing operations of $(5.6) million for the first nine months of 2004. Loss from continuing operations, after the deduction of preferred stock dividends and accretion of preferred stock beneficial conversion feature, was $(4.6) million, or $(0.07) per share basic, and $(5.6) million, or $(0.11) per share basic, for the nine-months ended September 30, 2005 and 2004, respectively. Included in the results for the first nine months of 2005 and 2004 was an interest reduction of $3.2 million and $1.3 million, respectively, as a result of the quarter-to-quarter revaluation of the warrants discussed above. Also, included in the results for the first nine months of 2005 was income of $0.9 million attributable primarily to the increase in the Company's ownership percentage of Digital Angel during the period as compared to an expense of $0.2 million in the same period in 2004. "Applied Digital's results benefited from the growing traction Traction Definition Traction is the use of a pulling force to treat muscle and skeleton disorders. Purpose Traction is usually applied to the arms and legs, the neck, the backbone, or the pelvis. for VeriChip Corporation," said Scott R. Silverman, Applied Digital's Chairman and CEO (1) (Chief Executive Officer) The highest individual in command of an organization. Typically the president of the company, the CEO reports to the Chairman of the Board. . "In addition to strong revenue growth, the higher proportion of sales from Digital Angel and VeriChip Corporation contributed to increased operating margins Operating Margin A ratio used to measure a company's pricing strategy and operating efficiency. Calculated by: . We are also pleased by the growing number of hospitals that have adopted the VeriMed(TM) patient identification system, as 62 hospitals have agreed to implement the System, more than twice the number that we had previously indicated we hoped to sign by year-end." Some of the highlights of the third quarter included: --Rapidly increasing adoption of the VeriMed system. 56 new hospitals nationwide agreed to adopt the VeriMed(TM) patient identification system for patient identification in the third quarter, bringing the total to 62, including 4 that adopted the system in October. --New product approval for Digital Angel Corporation. The Federal Aviation Administration Federal Aviation Administration (FAA), component of the U.S. Department of Transportation that sets standards for the air-worthiness of all civilian aircraft, inspects and licenses them, and regulates civilian and military air traffic through its air traffic control approved Digital Angel's new satellite radio transceiver (TRANSmitter reCEIVER) An electronic device or circuit that transmits and receives analog or digital signals. It comes in many forms; for example, a transponder on a satellite, a network adapter in the computer or the circuits in a cellphone. , called the CommPoint 3 Satcom Data Terminal that can track a wide variety of international commercial, military aircraft and ground vehicles in any weather condition, even when other traditional communication modes are disrupted dis·rupt tr.v. dis·rupt·ed, dis·rupt·ing, dis·rupts 1. To throw into confusion or disorder: Protesters disrupted the candidate's speech. 2. . --Growing acceptance of the VeriMed system in the medical and scientific communities. VeriMed(TM) is now a component of the Hospital demonstration area of the IBM Solutions Experience Lab located in Austin, Texas. The IBM Solutions Experience Lab conducts approximately 260 tours annually for corporations and government agencies wishing to see demonstrations of functional, integrated hardware and software solutions for specific market sectors. The Company's executives will host a conference call to discuss these results. This conference call will take place at 8:30 am EST EST electroshock therapy. EST abbr. electroshock therapy today. Scott R. Silverman, Applied Digital's Chairman and Chief Executive Officer, Michael Krawitz, Executive Vice President and General Counsel and Evan Mckeown, Chief Financial Officer will host the call. Interested participants should call (800) 472-8309 when calling from the United States or (706) 643-9561 when calling internationally. Please reference Conference I.D. Number 1926168. There will be a playback Playback could mean:
This call is being webcast and can be accessed at Applied Digital's web site at www.adsx.com until December 1, 2005. The conference call can be found under the subheadings, "Investor Relations Investor relations The process by which the corporation communicates with its investors. " and then "Audio Archives." 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 diversified (di·verˑ·s product line are RFID (Radio Frequency IDentification) A data collection technology that uses electronic tags for storing data. The tag, also known as an "electronic label," "transponder" or "code plate," is made up of an RFID chip attached to an antenna. applications, end-to-end end-to-end a pattern of anastomosis in which severed ends are matched and united, in contrast with other patterns such as end-to-side or side-to-side. Usually applied to anastomosis of the intestine. 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 a majority position in Digital Angel Corporation (AMEX:DOC). Statements about the Company's future expectations, including future revenues and earnings, and all other statements in this press release other than historical facts are "forward-looking statements forward-looking statement A projected financial statement based on management expectations. A forward-looking statement involves risks with regard to the accuracy of assumptions underlying the projections. " within the meaning of Section 27A of the Securities Act of 1933, Section 21E of the Securities Exchange Act of 1934, and as that term is defined in the Private Securities Litigation Reform Act The Private Securities Litigation Reform Act of 1995 (PSLRA) implemented several significant substantive changes affecting certain cases brought under the federal securities laws, including changes related to pleading, discovery, liability, class representation and awards fees and of 1995. Such forward-looking statements involve risks and uncertainties and are subject to change at any time, and the Company's actual results could differ materially from expected results. The Company undertakes no obligation to update forward-looking statements to reflect subsequently occurring events or circumstances CIRCUMSTANCES, evidence. The particulars which accompany a fact. 2. The facts proved are either possible or impossible, ordinary and probable, or extraordinary and improbable, recent or ancient; they may have happened near us, or afar off; they are public or .
APPLIED DIGITAL SOLUTIONS, INC. AND SUBSIDIARIES
BALANCE SHEETS DATA
(In thousands, except par value)
Assets
September December
30, 2005 31, 2004
--------- -----------
Current Assets (unaudited)
Cash and cash equivalents $ 20,697 $ 30,839
Restricted cash - 327
Accounts receivable and unbilled
receivables - net 19,531 16,553
Inventories 12,347 8,115
Notes receivable 330 621
Other current assets 3,404 2,237
---------------------------------------------- --------- -----------
Total Current Assets 56,309 58,692
Property And Equipment, net 10,791 7,864
Notes Receivable, net 197 263
Goodwill, net 92,123 68,194
Other Assets, net 24,511 5,175
---------------------------------------------- --------- -----------
$ 183,931 $ 140,188
============================================== ========= ===========
Liabilities and Stockholders' Equity
Current Liabilities
Notes payable and current maturities of
long-term debt $ 7,553 $ 2,044
Accounts payable 12,418 9,318
Other accrued expenses 17,304 20,811
Net liabilities of discontinued operations 5,596 5,495
---------------------------------------------- --------- -----------
Total Current Liabilities 42,871 37,668
Long-Term Debt and Notes Payable 3,714 2,288
Other Long-Term Liabilities 10,932 5,075
---------------------------------------------- --------- -----------
Total Liabilities 57,517 45,031
---------------------------------------------- --------- -----------
Minority Interest 53,026 54,313
---------------------------------------------- --------- -----------
Total Stockholders' Equity 73,388 40,844
---------------------------------------------- --------- -----------
$ 183,931 $ 140,188
============================================== ========= ===========
APPLIED DIGITAL SOLUTIONS, INC. AND SUBSIDIARIES
STATEMENTS OF OPERATIONS DATA
(In thousands, except per share data)
(Unaudited)
For The Three- For The Nine-
Months Ended Months Ended
September 30, September 30,
------------------ ------------------
2005 2004 2005 2004
-------- ------- -------- -------
Total revenue 27,805 27,726 79,138 80,565
-------------------------------- -------- ------- -------- -------
Gross profit 11,534 7,631 31,532 22,937
Selling, general and
administrative expense 12,457 8,926 33,150 25,730
Research and development 1,935 995 4,902 3,060
Depreciation and amortization 863 445 2,317 1,425
Interest and other income (1,101) (247) (2,284) (827)
Interest expense (reduction) 604 60 (2,151) (389)
-------------------------------- -------- ------- -------- -------
Loss from continuing operations
before taxes, minority interest
and gain (loss) attributable to
capital transactions of
subsidiary (3,224) (2,548) (4,402) (6,062)
(Provision) benefit for
income taxes (50) 14 (92) (105)
-------------------------------- -------- ------- -------- -------
Loss from continuing operations
before minority interest and
gain (loss) attributable to
capital transactions of
subsidiary (3,274) (2,534) (4,494) (6,167)
Minority interest 549 118 1,014 808
Net (loss) gain on capital
transactions of subsidiary - (38) 411 (1,805)
Gain (loss) attributable to
changes in minority interest as
a result of capital
transactions of subsidiary 46 (298) 528 1,593
-------------------------------- -------- ------- -------- -------
Loss from continuing
operations (2,679) (2,752) (2,541) (5,571)
Income (loss) from
discontinued operations 47 202 47 (588)
Change in estimate on loss on
disposal of discontinued
operations and operating losses
during the phase out period - 70 (4) 2,184
-------------------------------- -------- ------- -------- -------
Net loss (2,632) (2,480) (2,498) (3,975)
Preferred stock dividends (73) - (1,573) -
Accretion of beneficial
conversion feature of
Redeemable Preferred Stock -
Series D - - (474) -
-------------------------------- -------- ------- -------- -------
Net loss available to common
stockholders $ (2,705) $(2,480) $ (4,545) $(3,975)
================================ ======== ======= ======== =======
Loss per common share - basic
Loss from continuing
operations $ (0.04) $ (0.05) $ (0.07) $ (0.11)
(Loss) income from
discontinued operations (0.00) 0.00 (0.00) 0.03
-------------------------------- -------- ------- -------- -------
Net loss per common share -
basic $ (0.04) $ (0.05) $ (0.07) $ (0.08)
================================ ======== ======= ======== =======
Loss per common share - diluted
Loss from continuing
operations $ (0.04) $ (0.05) $ (0.08) $ (0.11)
(Loss) income from
discontinued operations (0.00) 0.00 (0.00) 0.03
-------------------------------- -------- ------- -------- -------
Net loss per common share -
diluted $ (0.04) $ (0.05) $ (0.08) $ (0.08)
================================ ======== ======= ======== =======
Weighted average number of
common shares outstanding -
basic 65,333 51,195 61,569 50,003
================================ ======== ======= ======== =======
Weighted average number of
common shares outstanding -
diluted 66,814 51,195 62,131 50,003
================================ ======== ======= ======== =======
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