Exhibit 99.1
Applied Digital Reports Third Quarter 2006 Financial Results
Thursday November 9, 4:00 pm ET
Nine Month Revenue increases 15.4% and Gross Profit Margin increases 22.1%
DELRAY BEACH, Fla.--(BUSINESS WIRE)--Applied Digital (Nasdaq: ADSX - News), a leading provider of identification and security technology, today reported financial results for its third quarter ended September 30, 2006. The Company’s revenue was $29.0 million for the third quarter of 2006, an increase of 4.3% compared to the year-earlier period. The Company’s wholly-owned subsidiary, VeriChip Corporation, generated revenue of approximately $6.8 million, an increase of approximately 11.5% compared to the three months ended September, 2005. The Company’s consolidated financial results include the financial position, operating results and cash flows of its majority-owned subsidiaries, Digital Angel Corporation (AMEX: DOC - News) and InfoTech USA, Inc. (OTC: IFTH - News).
Gross profit increased to approximately $12.4 million in the third quarter of 2006 compared to approximately $11.4 million in the third quarter of 2005. Gross profit margin increased to approximately 42.6% in the third quarter of 2006 compared to approximately 41.0% in the third quarter of 2005. The Company experienced a significant increase in gross profit at Pacific Decision Sciences Corporation (PDSC).
Fiscal 2006 third quarter results include revenue from the Company’s proprietary service automation software from its wholly-owned subsidiary PDSC, which increased to approximately $1.7 million in the third quarter of 2006 compared to $0.6 million in the third quarter of 2005. Digital Angel reported revenue of approximately $13.2 million for the third quarter of 2006, compared to approximately $13.8 million for the third quarter of 2005.
Revenue for the nine months ended September 30, 2006 was $91.3 million, an increase of 15.3% compared to $79.1 million in the nine months of 2005. VeriChip generated revenue in the first nine months of 2006 of approximately $20.3 million, compared to approximately $9.1 million in the first nine months of 2005, primarily attributable to two RFID businesses acquired during the first half of 2005. Sales of PDSC’s service automation software increased approximately $3.0 million, from $1.4 million in the first nine months of fiscal 2005 to $4.4 million in the first nine months of 2006 Sales at GTI increased approximately $1.2 million in the same respective periods, rising from $10.7 million to $11.9 million. Digital Angel reported revenue of approximately $42.0 million in the first nine months of 2006, compared to approximately $42.0 million in the first nine months of 2005.
Gross profit increased to approximately $38.3 million in the first nine months of 2006 compared to approximately $31.4 million in the first nine months of 2005, and gross profit margins increased to 42.0% in the first nine months of 2006 compared to gross profit margins of 39.7% in the first nine months of 2005. The improvement in both gross profit and margins was primarily as a result of a more favorable mix of business, increased sales from VeriChip (VeriChip acquired two businesses during the first half of 2005) and sales of higher margin products and services from PDSC.
The loss from continuing operations attributable to common stockholders for the third quarter of 2006 was approximately $3.6 million, or $(0.05) per share, compared to a loss from continuing operations attributable to common stockholders of approximately $2.7 million, or $(0.04) per share for the third quarter of 2005. The additional loss was primarily a result of increased sales and marketing costs related to the Company’s investment in VeriChip’s VeriMed Patient Identification business, partially offset by increases in gross profit from PDSC.
The loss from continuing operations attributable to common stockholders for the first nine months of 2006 was approximately $9.8 million, or $(0.15) per share, compared to a loss from continuing operations attributable to common stockholders of approximately $4.5 million, or $(0.08) per share, for the first nine months of 2005.
The loss was primarily due to increased sales and marketing costs related to the Company’s investment in VeriChip’s VeriMed Patient Identification business, increased amortization expense related to VeriChip’s intangible assets, which it acquired in connection with two business acquisitions during the first half of 2005, reduced gross profit as a result of the decrease in sales of Digital Angel’s Sarbe beacons, increased compensation expenses at Digital Angel, and approximately $0.4 million of IPO related expenses. Also, partially mitigating the loss during the
nine months ended September 30, 2005 was the recovery of approximately $3.2 million of interest expense due to the revaluation of certain warrants which are settleable into shares of the Digital Angel common stock owned by the Company.
The Company ended the third quarter of 2006 with cash and cash equivalents totaling approximately $16.1 million.
“We continue to make significant progress in gaining adoption of the VeriMed Patient Identification System among both leading hospitals and physicians,” said Scott R. Silverman, Chairman and CEO of Applied Digital. “In addition, now that we have had the opportunity to run these businesses for more than one year, we have identified ways to drive increased efficiencies, as demonstrated by our announcement earlier this week to reduce operating expenses by more than $1.5 million annually. We also remain focused on improving operations at Digital Angel, where significant potential exists in large market opportunities such as the National Identification Program for Livestock and for its Military Search and Rescue Beacon technology.”
Some of the highlights of the third quarter and year-to-date 2006 include:
| | · | Continuing adoption of the VeriMed System. In 2006, 167 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 264. Seventy-one of these facilities have been trained in the VeriMed Identification System protocol. |
| | · | First Sale of VeriTrace System for Disaster Relief and Emergency Monitoring. VeriChip Corporation announced today that the State of Florida, through the Florida Emergency Mortuary Operations Response System (FEMORS), and the State of Hawaii Department of Health, have each purchased the VeriTrace system for disaster relief and emergency management needs. VeriTrace is designed to assist state and federal agencies to plan for and manage emergency situations and disaster recovery using implantable RFID technology. |
| | · | First sale of a fully integrated system for infant protection and wander prevention. VeriChip Corporation completed the first sale, for approximately $750,000, of a system for infant protection, wander prevention, staff duress and asset protection for the new, state-of-the-art Brampton Civic Hospital, in Brampton, Ontario, scheduled to open in the Fall of 2007. |
| | · | Granting of a U.S. patent for a syringe-implanted RFID microchip. Subsequent to the end of the quarter, Digital Angel announced that it was granted a U.S. patent for a syringe-implanted RFID microchip that measures glucose concentration levels of diabetic patients. The microchip could impact the 230 million people worldwide who suffer from diabetes and will be marketed and distributed by VeriChip. |
The Company’s executives will host a conference call today to discuss these results. The conference call will take place at 4:15 PM Eastern Time today. Interested participants should call (800) 472-8309 when calling within the United States or (706) 643-9561 when calling internationally. Please use passcode 1007785.
There will be a playback available as well. To listen to the playback, please call (800) 642-1687 when calling within the United States or (706) 645-9291 when calling internationally. Please use passcode 1007785. The call will also be webcast and will be available on the Company’s web site at www.adsx.com on the Home Page of the site.
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 a majority position in Digital Angel Corporation (AMEX:DOC - News).
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.
APPLIED DIGITAL SOLUTIONS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS DATA SCHEDULE
(In thousands, except par value)
Assets
September 30, December 31,
2006 2005
-------------- ------------
Current Assets (unaudited)
Cash and cash equivalents $ 16,098 $ 22,417
Restricted cash 140 310
Accounts receivable and unbilled
receivables (net of allowance for
doubtful accounts of $865 in 2006 and
$838 in 2005) 20,197 26,236
Inventories 14,645 12,317
Deferred taxes 491 422
Other current assets 4,168 3,232
- ----------------------------------------------------------------------
Total Current Assets 55,739 64,934
Property And Equipment, net 11,321 11,120
Goodwill, net 88,980 86,231
Intangibles, net 20,707 21,568
Deferred Offering Costs 3,551 1,140
Other Assets, net 1,105 995
- ----------------------------------------------------------------------
$ 181,403 $ 185,988
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Liabilities and Stockholders' Equity
Current Liabilities
Notes payable and current maturities of
long-term debt $ 6,185 $ 3,645
Accounts payable 15,760 12,465
Accrued expenses 17,466 22,311
Deferred revenue
5,102 2,765
Net liabilities of Discontinued
Operations 5,473 5,499
----------------------------------------------------------------------
Total Current Liabilities 49,986 46,685
Long-Term Debt and Notes Payable 13,989
0; 15,692
Deferred Taxes 5,081 5,644
Other Long-Term Liabilities 2,904 1,659
----------------------------------------------------------------------
Total Liabilities 71,960 69,680
----------------------------------------------------------------------
Commitments And Contingencies
---------------------------------------------------
- -------------------
Minority Interest 48,359 49,762
Stockholders' Equity 61,084 66,546
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$ 181,403 $ 185,988
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APPLIED DIGITAL SOLUTIONS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS DATA SCHEDULE
(In thousands, except per share data)
(Unaudited)
For The Three-Months For The Nine-Months
Ended September 30, Ended September 30,
-------------------- -------------------
2006 2005 2006 2005
&#
160; ---------- --------- --------- ---------
Product revenue $ 24,863 $ 23,922 $ 77,645 $ 67,617
Service revenue 4,169 3,883 13,665 11,521
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Total revenue 29,032 27,805 91,310 79,138
Cost of products sold 14,224 14,170 45,812 41,223
Cost of services sold &
#160; 2,444 2,242 7,184 6,524
----------------------------------------------------------------------
Total cost of products and
services sold 16,668 16,412 52,996 47,747
Gross profit 12,364 11,393 38,314 31,391
Selling, general and
administrative expense 14,183 13,180 42,648 35,327
Research and development 2,054 1,935 6,406 4,902
------------
- ----------------------------------------------------------
Total operating costs and
expenses 16,237 15,115 49,054 40,229
Operating loss before other
items (3,873) (3,722) (10,740) (8,838)
Interest and other income 221 1,070 692 2,285
Interest (expense) recovery (1,272) (572) (2,647) 2,151
----------------------------------------------------------------------
Total other (expense)
income (1,051) 498 (1,955) 4,436
Loss from continuing
operations before taxes,
minority interest and gain
(loss) attributable to
capital transactions of
subsidiaries (4,924) (3,224) (12,695) (4,402)
Benefit (provision) for
income taxes 345 (50) 340 (92)
----------------------------------------------------------------------
Loss from continuing
operations before minority
interest and gain (
loss)
attributable to capital
transactions of
subsidiaries (4,579) (3,274) (12,355) (4,494)
Minority interest 820 549 2,324 1,014
Net gain on capital
transactions of
subsidiaries - - 327 411
Gain (loss) attributable to
changes in minority
interest as a result of
capital transactions of
subsidiaries
60; 160 46 (103) 528
----------------------------------------------------------------------
Loss from continuing
operations (3,599) (2,679) (9,807) (2,541)
Income from discontinued
operations - 47 - 47
Change in estimate on loss
on disposal of discontinued
operations and operating
losses during the phase out
period - - -
(4)
----------------------------------------------------------------------
Net loss (3,599) (2,632) (9,807) (2,498)
Preferred stock dividends - (73) - (1,573)
Accretion of beneficial
conversion feature of
Redeemable Preferred Stock
- Series D - - - (474)
----------------------------------------------------------------------
Net loss available to common
stockholders $ (3,599) $ (2,705) $ (9,807) $ (4,545)
======================================================================
Loss per common share -
basic
Loss from continuing
operations $ (0.05) $ (0.04) $ (0.15) $ (0.07)
Income from discontinued
operations $ - - $ - -
----------------------------------------------------------------------
Net loss per common share -
basic &#
160; $ (0.05) $ (0.04) $ (0.15) $ (0.07)
======================================================================
Loss per common share -
diluted
Loss from continuing
operations $ (0.05) $ (0.04) $ (0.15) $ (0.08)
Income from discontinued
operations $ - - $ - -
----------------------------------------------------------------------
Net loss per common share -
diluted $ (0.05) $ (0.04) $&
#160; (0.15) $ (0.08)
======================================================================
Weighted average number of
common shares outstanding -
basic 67,726 65,333 67,375 61,569
======================================================================
Weighted average number of
common shares outstanding -
diluted 67,726 66,814 67,375 62,131
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Contact:
CEOcast, Inc.
Investors:
Dan Schustack, 212-732-4300
dschustack@ceocast.com
or
Direct Communications Group
Media:
Nicole Philbin, 202-572-6231
nphilbin@dcgpr.com
