Applied Digital Reports Second Quarter 2006 Financial Results.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 its second quarter ended June June: see month. 30, 2006. The highlight of the second quarter was record revenue from 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. of approximately $7.0 million. Overall, the Company's revenue was $29.9 million for the second quarter of 2006 and its revenue increased 21.33% to $62.3 million for the six-months ended June 30, 2006. The Company's consolidated financial results include the financial position, 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 second quarter of 2006 was $29.9 million compared to $29.4 million in the second quarter of 2005. The Company's wholly-owned subsidiary, VeriChip Corporation, generated revenue of approximately $7.0 million compared to approximately $3.0 million in the second quarter of 2005. VeriChip acquired two radio frequency identification See RFID. (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. ) businesses during the first half of 2005, which accounted for much of the increase. In addition, sales of the Company's proprietary service automation software from its wholly-owned subsidiary, Pacific Decision Sciences Corporation (PDSC PDSC Professional Development Support Center PDSC Parti Democrate Social Chretien (Democratic Social Christian Party, Congo) PDSC Panasonic Disc Services Corporation (Torrance, California) ), and sales of its voice, data and video telecommunications networks A telecommunications network is a of telecommunications links and nodes arranged so that messages may be passed from one part of the network to another over multiple links and through various nodes. from its 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 ), increased approximately $1.8 million in the second quarter of 2006 compared to the second quarter of 2005. Digital Angel reported revenue of approximately $13.0 million for the second quarter of 2006, compared to approximately $14.9 million for the second quarter of 2005. Digital Angel experienced a decrease in sales of its Sarbe beacon products of approximately $2.1 million in the second quarter of 2006. The decrease in Sarbe product sales is attributable to the completion of a contract with the Indian government in May 2005 and a decrease in Sarbe product sales to other Sarbe product customers, including the UK Ministry of Defense. Revenue for the six months ended June 30, 2006 was $62.3 million, compared to approximately $51.3 million in the first half of 2005. VeriChip generated revenue in the first half of 2006 of approximately $13.5 million, compared to approximately $3.0 million in the first half of 2005, resulting primarily from two acquisitions during the first half of 2005. In addition, sales of PDSC's service automation software increased approximately $1.8 million in the first half of 2006 compared to the first half of 2005, and sales at GTI increased approximately $1.1 million in the same respective periods. Digital Angel reported revenue of approximately $28.8 million in the first half of 2006, compared to approximately $28.3 million in the first half of 2005. Gross profit increased slightly to approximately $12.0 million in the second quarter of 2006 compared to approximately $11.8 million in the second quarter of 2005. Gross profit margin 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. remained constant at approximately 40.1% for each respective quarter. The Company experienced significant increases in gross profit at VeriChip and PDSC. Gross profit increased to approximately $26.0 million in the first half of 2006 compared to approximately $20.0 million in the first half of 2005, and gross profit margins increased to 41.7% in the first half of 2006 compared to gross profit margins of 39.0% in the first half of 2005. The improvement in both gross profit and margins was primarily 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 and services from VeriChip Corporation and PDSC. 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 attributable to common stockholders for the second quarter of 2006 was approximately $3.3 million, or $(0.05) per share - basic and diluted di·lute tr.v. di·lut·ed, di·lut·ing, di·lutes 1. To make thinner or less concentrated by adding a liquid such as water. 2. To lessen the force, strength, purity, or brilliance of, especially by admixture. , compared to a loss from continuing operations attributable to common stockholders of approximately $3.4 million, or $(0.06) per share -basic and diluted for the second quarter of 2005. The loss from continuing operations attributable to common stockholders for the second quarter of 2005 includes the impact of approximately $2.0 million in 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 beneficial conversion feature associated with the Company's 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. , which was fully converted during 2005. The loss from continuing operations attributable to common stockholders for the second quarter of 2006 included a gain of approximately $0.4 million attributable primarily to capital transactions of Digital Angel. In addition, to the dividends and accretion of the beneficial conversion feature, the loss from continuing operations attributable to common stockholders for the second quarter of 2005 included a loss of $0.4 million attributable to capital transactions of Digital Angel, a recovery of approximately $0.8 million of interest expense as a result of the 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 common stock warrants, which are settleable in shares of Digital Angel's common stock owned by Applied Digital, and legal settlement income of approximately $0.5 million. Excluding these items, the Company incurred a loss from continuing operations attributable to common stockholders for the second quarter of 2006 and 2005 of approximately $3.7 and $2.4 million, respectively. The increase in the loss was primarily due to reduced gross profit as a result of the decrease in sales of Digital Angel's Sarbe beacons and higher sales and marketing costs related to the Company's investment in VeriChip's implantable microchip (1) Another term for a microminiaturized integrated circuit (a "chip"). (2) To insert an RFID tag beneath the skin of an animal. It is expected that some day, humans will be microchipped. business. The loss from continuing operations attributable to common stockholders for the first half of 2006 was approximately $6.2 million, or $(0.09) per share - basic and diluted, compared to a loss from continuing operations attributable to common stockholders of approximately $1.8 million, or $(0.03) per share -basic ($0.04 per share -diluted), for the first half of 2005. The loss from continuing operations attributable to common stockholders for the first half of 2005 includes the impact of approximately $2.0 million in dividends and accretion of the beneficial conversion feature associated with the Company's preferred stock, which was fully converted during 2005. The loss from continuing operations attributable to common stockholders for the first half of 2006 included approximately $0.4 million in professional fees incurred in connection with VeriChip's contemplated initial public offering and a gain of approximately $0.1 million attributable primarily to capital transactions of Digital Angel. In addition to the dividends and accretion of beneficial conversion feature, the loss from continuing operations attributable to common stockholders for the first half of 2005 included a gain of $0.9 million attributable to capital transactions of Digital Angel, a recovery of approximately $3.2 million of interest expense as a result of the revaluation of certain common stock warrants, which are settleable in shares of Digital Angel's common stock owned by Applied Digital, the recovery of approximately $0.5 million on a note receivable note receivable A debt due from borrowers and evidenced by a written promise of payment. Note receivable, an entry on the asset side of many corporate balance sheets, indicates the dollar amount of loans due to be repaid by borrowers. that the Company had previously reserved and approximately $0.5 million of legal settlement income. Excluding these items, the Company incurred a loss from continuing operations for the first half of 2006 and 2005 of approximately $5.9 and $5.0 million, respectively. The increase in the loss was primarily due to reduced gross profit as a result of the decrease in sales of Digital Angel's Sarbe beacons, increased sales and marketing costs related to the Company's investment in VeriChip's implantable microchip business, increased compensation expense and acquisition expenses at Digital Angel, partially offset by increases in gross profit from Digital Angel's Animal Applications business and from PDSC. The Company ended the second quarter of 2006 with cash and cash equivalents totaling approximately $18.0 million. Some of the highlights of the second quarter and year-to-date Year-to-date (YTD) The period beginning at the start of the calendar year up to the current date. 2006 include: --Initiation of VeriChip two-year pilot program. Horizon Blue Cross Blue Shield Blue Shield A US not-for-profit health care insurer that is a reimbursement intermediary for physicians. Cf Blue Cross. of New Jersey, the largest health insurer An individual or company who, through a contractual agreement, undertakes to compensate specified losses, liability, or damages incurred by another individual. An insurer is frequently an insurance company and is also known as an underwriter. in the state, agreed to a two-year pilot program of VeriChip's VeriMed Patient Identification System in conjunction with Hackensack University Medical Center Hackensack University Medical Center (HUMC) is a 781-bed non-profit, research and teaching hospital located just seven miles west of New York City, in Hackensack, New Jersey, providing tertiary and healthcare needs for northern New Jersey and the New York metropolitan area. and its physicians. In this new test program, participating patients suffering from chronic diseases would be provided with the VeriChip implantable microchip, to provide emergency room staff easy access to those patients' medical information, as well as to help avoid costly or serious medical errors. --Continuing adoption of the VeriMed System. In 2006, 17 additional healthcare facilities have agreed to implement the VeriMed Patient Identification System. The new hospitals bring the total healthcare facilities that have agreed to implement the System to 114. Many of the new hospitals signed up after attending the Emergency Medicine Spring Conference in Las Vegas Las Vegas (läs vā`gəs), city (1990 pop. 258,295), seat of Clark co., S Nev.; inc. 1911. It is the largest city in Nevada and the center of one of the fastest-growing urban areas in the United States. , sponsored by the American College American College is the name of:
--Expanded market opportunity for Digital Angel's animal RFID tags An electronic identification device that is made up of a chip and antenna. For reusable applications, it is typically embedded in a plastic housing, and for tracking shipments, it is usually part of a "smart" packaging label. . The market opportunity for Digital Angel's RFID tags (e.Tags(TM)) and scanning systems has expanded significantly due to its livestock livestock Farm animals, with the exception of poultry. In Western countries the category encompasses primarily cattle, sheep, pigs, goats, horses, donkeys, and mules; other animals (e.g., buffalo, oxen, or camels) may predominate in other areas. tagging system being approved by the U.S. Department of Agriculture (USDA USDA, n.pr See United States Department of Agriculture. ) for use in the National Animal Identification System (NAIS). Digital Angel is the first animal tag manufacturer to be designated as an Animal Identification (AIN Ain, in the Bible Ain (ā`ĭn), in the Bible. 1 Town, N ancient Palestine. 2 See En-rimmon. Ain, department, France Ain (ăN), department (1990 pop. ) tag manufacturer by the USDA, which signifies that its tagging system is capable of identifying livestock with the unique, lifetime animal identification number that is being established as a national standard through the NAIS. In addition, the Canadian Canadian (kənā`dēən), river, 906 mi (1,458 km) long, rising in NE New Mexico. and flowing E across N Texas and central Oklahoma into the Arkansas River in E Oklahoma. government's recently decided to extend a national program through December 2007 for the funding of livestock RFID readers A transmitter/receiver that reads the contents of RFID tags in the vicinity. Also called an "RFID interrogator." The maximum distance between the reader's antenna and the tag vary, depending on application. and scanning systems. Digital Angel experienced strong sales in Canada last fall thanks in large part to this government and industry backed program. --Formation of Digital Angel Corporation special committee. In July 2006, Digital Angel formed of a special committee of its board of directors to consider strategic alternatives to improve its capital structure and maximize shareholder value through growth and other strategic opportunities. --$3.2 million contract award with the South Carolina Army National Guard The South Carolina National Guard comprises both Army and Air National Guard components. The Constitution of the United States specifically charges the National Guard with dual federal and state missions. . Digital Angel's OuterLink subsidiary won a $3.2 million, twelve-month contract from the South Carolina Army National Guard. The pilot project will demonstrate the capability of OuterLink's satellite-based Automatic Flight Following System to communicate with helicopter and ground vehicle fleets at the McEntire National Guard Base at Eastover, SC. The Company's executives will host a conference call today to discuss these results. The conference call will take place at 4:30 PM Eastern Time today. Interested participants should call (800) 472-8309 when calling within 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. or (706) 643-9561 when calling internationally. Please use passcode 8761657. There will be a playback Playback could mean:
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 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 Litigation An action brought in court to enforce a particular right. The act or process of bringing a lawsuit in and of itself; a judicial contest; any dispute. When a person begins a civil lawsuit, the person enters into a process called litigation. Reform Act 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
CONDENSED CONSOLIDATED BALANCE SHEETS DATA
(In thousands, except par value)
Assets
June 30, December 31,
2006 2005
----------- ------------
Current Assets (unaudited)
Cash and cash equivalents $ 17,963 $ 22,417
Restricted cash 128 310
Accounts receivable 21,691 26,236
Inventories 14,126 12,317
Deferred taxes 412 422
Other current assets 3,688 3,232
--------------------------------------------- ----------- ------------
Total Current Assets 58,008 64,934
Property And Equipment, net 10,336 11,120
Goodwill, net 89,497 86,231
Intangibles, net 21,214 21,568
Deferred offering costs 2,596 1,140
Other Assets, net 672 995
--------------------------------------------- ----------- ------------
$ 182,323 $ 185,988
============================================= =========== ============
Liabilities and Stockholders' Equity
Current Liabilities
Notes payable and current maturities of
long- term debt $ 17,357 $ 3,645
Accounts payable 14,563 12,465
Accrued expenses 17,126 22,311
Deferred revenue 4,047 2,765
Net liabilities of Discontinued Operations 5,481 5,499
--------------------------------------------- ----------- ------------
Total Current Liabilities 58,574 46,685
Long-Term Debt and Notes Payable 3,604 15,692
Deferred Taxes 5,578 5,644
Other Long-Term Liabilities 2,668 1,659
--------------------------------------------- ----------- ------------
Total Liabilities 70,424 69,680
Commitments And Contingencies
Minority Interest 49,074 49,762
Stockholders' Equity 62,825 66,546
--------------------------------------------- ----------- ------------
$ 182,323 $ 185,988
============================================= =========== ============
APPLIED DIGITAL SOLUTIONS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS DATA
(In thousands, except per share data)
(Unaudited)
For The Three-Months For The Six-Months
Ended June 30, Ended June 30,
-------------------- -----------------
2006 2005 2006 2005
---------- --------- -------- --------
Product revenue $ 25,149 $ 25,562 $ 52,782 $ 43,695
Service revenue 4,787 3,833 9,496 7,638
------------------------------- ---------- --------- -------- --------
Total revenue 29,936 29,395 62,278 51,333
Cost of products sold 15,257 15,640 31,588 27,824
Cost of services sold 2,672 1,956 4,740 3,511
------------------------------- ---------- --------- -------- --------
Total cost of products and
services sold 17,929 17,596 36,328 31,335
------------------------------- ---------- --------- -------- --------
Gross profit 12,007 11,799 25,950 19,998
Selling, general and
administrative expense 14,043 12,798 28,465 22,130
Research and development 2,181 1,684 4,352 2,984
------------------------------- ---------- --------- -------- --------
Total operating costs and
expenses 16,224 14,482 32,817 25,114
Operating loss before other
items (4,217) (2,683) (6,867) (5,116)
Interest and other income (180) (904) (471) (1,215)
Interest expense (recovery) 704 (563) 1,375 (2,723)
------------------------------- ---------- --------- -------- --------
Total other expense
(income) 524 (1,467) 904 (3,938)
Loss from continuing operations
before taxes, minority
interest and gain (loss)
attributable to capital
transactions of subsidiaries (4,741) (1,216) (7,771) (1,178)
Benefit (provision) for
income taxes 16 (55) (5) (42)
------------------------------- ---------- --------- -------- --------
Loss from continuing
operations before minority
interest and gain (loss)
attributable to capital
transactions of subsidiaries (4,725) (1,271) (7,776) (1,220)
Minority interest 1,055 186 1,504 465
Net gain on capital
transactions of subsidiaries 41 32 327 411
Gain (loss) attributable to
changes in minority interest
as a result of capital
transactions of subsidiaries 376 (422) (263) 482
------------------------------- ---------- --------- -------- --------
(Loss) income from
continuing operations (3,253) (1,475) (6,208) 138
Change in estimate on loss on
disposal of discontinued
operations and operating
losses during the phase out
period - - - (4)
------------------------------- ---------- --------- -------- --------
Net (loss) income (3,253) (1,475) (6,208) 134
Preferred stock dividends - (1,500) - (1,500)
Accretion of beneficial
conversion feature of
Redeemable Preferred Stock -
Series D - (474) - (474)
------------------------------- ---------- --------- -------- --------
Net loss attributable to
common stockholders $ (3,253)$ (3,449)$ (6,208)$ (1,840)
=============================== ========== ========= ======== ========
Loss per common share - basic
Loss from continuing
operations $ (0.05)$ (0.06)$ (0.09)$ (0.03)
(Loss) income from
discontinued operations - - - -
------------------------------- ---------- --------- -------- --------
Net loss per common share -
basic $ (0.05)$ (0.06)$ (0.09)$ (0.03)
=============================== ========== ========= ======== ========
Loss per common share - diluted
Loss from continuing
operations $ (0.05)$ (0.06)$ (0.09)$ (0.04)
(Loss) income from
discontinued operations - - - -
------------------------------- ---------- --------- -------- --------
Net loss per common share -
diluted $ (0.05)$ (0.06)$ (0.09)$ (0.04)
=============================== ========== ========= ======== ========
Weighted average number of
common shares outstanding -
basic 67,395 62,435 67,197 59,668
Weighted average number of
common shares outstanding -
diluted 67,395 62,736 67,197 59,819
=============================== ========== ========= ======== ========
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