Applied Digital Updates Shareholders on the Status of the 510-K- Application for the Medical Use of Verichip.

DELRAY BEACH, Fla. & SO. ST. PAUL, Minn. -- Applied Digital (NASDAQ:ADSX)

As expected, the FDA has issued a letter indicating that there is no substantially equivalent device and, accordingly, a "de novo" application will immediately be filed

Applied Digital (NASDAQ:ADSX), a provider of innovative security products, announced today that Digital Angel Corporation (AMEX:DOC) has received notice from the U.S. Food and Drug Administration (FDA) stating that there is no substantially equivalent device to VeriChip currently being marketed. Accordingly, the Company will immediately file a "de novo" application for VeriChip's medical uses. Statutory guidelines provide up to 60 days for the de novo review process. Digital Angel is the manufacturer of VeriChip and has licensed the technology to VeriChip Corporation, a wholly-owned subsidiary of Applied Digital, for human applications.

"We are pleased that the FDA has issued this ruling," said Scott R. Silverman, Applied Digital's Chairman and CEO. "While we certainly would have preferred this to happen sooner, we are pleased that the FDA has made this determination. This assures the Company that the FDA will determine, in a relatively short period of time, whether we can introduce the VeriChip to the health care market in the United States. As we expected this outcome, we have already prepared our de novo application and will file it immediately."

As previously disclosed, the FDA response is the long-expected result of the Companies' 510 (K) application for the medical application of VeriChip, originally filed in October 2003.

VeriChip is the world's first implantable microchip designed for human use. Digital Angel Corporation filed the 510(K) application with the FDA in October 2003 on behalf of VeriChip seeking the agency's approval to market VeriChip's healthcare information applications in the United States.

Commenting of this expected pathway, Kevin McGrath, CEO of Digital Angel Corporation stated, "We have been preparing for this day for many months. We look forward to working with the FDA to expedite its decision-making process."

Commenting on the medical application of VeriChip, Kevin Wiley, CEO of VeriChip Corporation, stated, "We continue to market and sell VeriChip internationally primarily for the security application. As evidenced by the recent chipping of Mexico's Attorney General and his staff, the VeriChip technology provides first-of-a-kind tamper-proof and secure applications. These applications can also occur with medical records and medical device information. We look forward to the de novo process and the ultimate conclusion of the regulatory process."

About the size of a grain of rice, VeriChip is a subdermal radio frequency (RFID) microchip. Once inserted under the skin in a brief outpatient procedure, the human eye cannot see VeriChip. Each VeriChip contains a unique verification number that is captured by briefly passing a proprietary scanner over the chipping site.

In addition to healthcare applications, VeriChip can be used in a variety of security, financial and emergency identification applications. The healthcare application is the only one subject to FDA clearance.

About VeriChip(TM)

VeriChip is a subdermal, radio frequency identification (RFID) device that can be used in a variety of security, financial, emergency identification and other applications. About the size of a grain of rice, each VeriChip product contains a unique verification number that is captured by briefly passing a proprietary scanner over the VeriChip. The standard location of the microchip is in the triceps area between the elbow and the shoulder of the right arm. The brief outpatient "chipping" procedure lasts just a few minutes and involves only local anesthetic followed by quick, painless insertion of the VeriChip. Once inserted just under the skin, the VeriChip is inconspicuous to the naked eye. A small amount of radio frequency energy passes from the scanner energizing the dormant VeriChip, which then emits a radio frequency signal transmitting the verification number. In October 2002, the US Food and Drug Administration (FDA) ruled that VeriChip is not a regulated device with regard to its security, financial, personal identification/safety applications but that VeriChip's healthcare information applications are regulated by the FDA. VeriChip Corporation is a wholly owned subsidiary of Applied Digital.

About Applied Digital

Applied Digital develops innovative security products for consumer, commercial, and government sectors worldwide. Our unique and often proprietary products provide security 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 of Security Through Innovation(TM). Applied Digital is the owner of a majority position in Digital Angel Corporation (AMEX: DOC). For more information, visit the company's website at http://www.adsx.com.

About Digital Angel Corporation

Digital Angel Corporation 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 pets, fish 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.

For more information about Digital Angel, visit the company's website at www.DigitalAngelCorp.com.

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" 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 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.