UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
Date of Report (Date of earliest event reported): February 25, 2005
APPLIED DIGITAL SOLUTIONS, INC.
(Exact name of registrant as specified in its charter)
MISSOURI 000-26020 43-1641533
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(State or other (Commission File No.) (IRS Employer
jurisdiction of Identification No.)
incorporation)
1690 SOUTH CONGRESS AVENUE, SUITE 200
DELRAY BEACH, FLORIDA 33445
(Address of principal executive offices)
561-805-8000
(Registrant's telephone number, including area code)
Check the appropriate box below if the Form 8-K filing is intended to
simultaneously satisfy the filing obligation of the registrant under any of
the following provisions:
[ ] Written communications pursuant to Rule 425 under the Securities Act
(17 CFR 230.425)
[ ] Soliciting material pursuant to Rule 14a-12 under the Exchange Act
(17 CFR 240.14a-12)
[ ] Pre-commencement communications pursuant to Rule 14d-2(b) under the
Exchange Act (17 CFR 240.14d-2(b))
[ ] Pre-commencement communications pursuant to Rule 13e-4(c) under the
Exchange Act (17 CFR 240.13e-4(c))
SECTION 1 - REGISTRANT'S BUSINESS AND OPERATIONS
Item 1.01 - Entry into a Material Definitive Agreement(s)
On February 25, 2005, Applied Digital Solutions, Inc. (the "Company")
entered into a stock purchase agreement with Digital Angel Corporation
(AMEX:DOC), the Company's majority-owned subsidiary. Pursuant to the
agreement, the Company sold 684,543 shares of its common stock, par value
$0.01 per share, to Digital Angel Corporation in exchange for 644,140 shares
of Digital Angel Corporation common stock, par value $0.005 per share. The
value of the common stock exchanged between the Company and Digital Angel
Corporation was $3.5 million. Digital Angel Corporation used the Company's
stock that it received under the agreement as partial consideration for the
acquisition of DSD Holdings A/S and its wholly-owned subsidiaries, Daploma
International A/S and Digitag A/S, as described more fully below.
On February 28, 2005, Digital Angel Corporation completed the
acquisition of DSD Holdings A/S and its wholly-owned subsidiaries, Daploma
International A/S and Digitag A/S. Under the terms of the acquisition,
Digital Angel Corporation purchased all of the outstanding capital stock of
DSD Holdings A/S in consideration for a purchase price of seven times DSD
Holdings A/S's average annual EBITDA, as defined in the agreement, over the
next three years less outstanding indebtedness at the end of the time period
less 30% of the total compensation paid to Lasse Nordfjeld, chief executive
officer of DSD Holdings A/S, pursuant to the employment agreement described
below. An initial payment of $3.5 million was made at closing through the
delivery of the Company's common stock valued at $3.5 million which Digital
Angel Corporation acquired from the Company in exchange for $3.5 million of
Digital Angel Corporation common stock, as described more fully above.
In addition, Digital Angel Corporation loaned DSD Holdings A/S the
principal amount of $1.0 million. The loan is evidenced by a promissory note
between Digital Angel Corporation and DSD Holdings A/S dated February 28,
2005. The principal balance and any accrued but unpaid interest is due and
payable in full on May 28, 2008. Interest accrues on the note at a rate
equivalent to the higher of (i) the prime rate or (ii) the reference rate
published by Wells Fargo Bank, N.A. plus one percent or (iii) the
corresponding LIBOR based amount. Under the terms of the promissory note,
the principal and accrued interest due and payable is valued at a fixed
conversion rate of 5.75 Danish Krones per U.S. $1.00.
In connection with the acquisition of DSD Holdings A/S, Digital Angel
Corporation entered into an employment agreement dated February 28, 2005
with the chief executive officer of DSD Holdings A/S, Lasse Nordfjeld. The
term of the employment agreement is one year, which automatically renews for
successive additional one-year terms. The employment agreement provides for
a base salary of 1,200,000 Danish Krones per year (US$ 212,000 on March 3,
2005) and an annual bonus up to 50% of the base salary for each fiscal year.
Additionally, Lasse Nordfjeld will receive stock options to purchase 150,000
shares of common stock of Digital Angel Corporation as approved by the board
of directors of Digital Angel Corporation.
Digital Angel Corporation intends to operate DSD Holdings A/S and its
operating subsidiaries from their current headquarters near Copenhagen,
Denmark.
SECTION 3 - SECURITIES AND TRADING SECURITIES
Item 3.02 - Unregistered Sales of Equity Securities
The following table lists the unregistered securities sold by the
Company on February 25, 2005, to Digital Angel Corporation under a share
purchase agreement, as more fully described in Item 1.01 above. These
securities were issued in exchange for shares of Digital Angel Corporation
common stock. These securities were issued without registration in reliance
upon the exemption provided by Section 4(2) of the Securities Act of 1933,
as amended, or Rule 506 of Regulation D promulgated thereunder.
AGGREGATE AMOUNT NUMBER OF NUMBER OF
NAME/ENTITY/NATURE DATE OF SALE OF CONSIDERATION PERSONS NOTE ISSUED FOR COMMON SHARES
======================================================================================================================
Share
February 25, Purchase
Digital Angel Corporation 2005 $3,500,000 1 1 Agreement 684,543
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Total 684,543
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<FN>
(1) Represents unregistered shares issued under the terms of a share
purchase agreement between the Company and Digital Angel
Corporation in exchange for 644,140 shares of Digital Angel
Corporation common stock, which transaction was exempt from
registration pursuant to an exemption under Section 4(2) of the
Securities Act of 1933, as amended.
SECTION 9 - FINANCIAL STATEMENTS AND EXHIBITS
Item 9.01 - Financial Statements and Exhibits
(c) Exhibits
10.1 Stock Purchase Agreement dated February 25, 2005, between
Applied Digital Solutions, Inc. and Digital Angel
Corporation
10.2 Stock Purchase Agreement dated February 28, 2005, among
Digital Angel Corporation and all the shareholders of DSD
Holdings A/S
99.1 Press release, dated March 1, 2005, announcing that the
Company increased its ownership position in Digital Angel
Corporation as a result of a Share Purchase Agreement
between the Company and Digital Angel Corporation
SIGNATURES
Pursuant to the requirements of the Securities Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
APPLIED DIGITAL SOLUTIONS, INC.
(Registrant)
Date: March 3, 2005 By: Evan C. McKeown
/s/ Evan C. McKeown
Senior Vice President and Chief
Financial Officer
INDEX TO EXHIBITS
Exhibit Number Description
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10.1 Stock Purchase Agreement dated February 25, 2005,
between Applied Digital Solutions, Inc. and Digital
Angel Corporation
10.2 Stock Purchase Agreement dated February 28, 2005,
among Digital Angel Corporation and all the
shareholders of DSD Holdings A/S
99.1 Press release, dated March 1, 2005, announcing that
the Company increased its ownership position in
Digital Angel Corporation as a result of a Share
Purchase Agreement between the Company and Digital
Angel Corporation